Production & Reserves

Overview
Tri-Valley holds both producing and exploration acreage for natural gas. Current production is modest as the company has focused on oil in recent years, but natural gas activity is now being included in Tri-Valley’s 2008 projects. While production has declined over the past three years, reserves have increased and Tri-Valley expects this trend to continue as it begins drilling prospects in its Great Valley Ranch Gas Complex, which is thought to hold a potential in the range of 500 billion cubic feet.

Tri-Valley’s natural gas reserves are calculated by an independent engineering firm qualified to compile reports for filing with the SEC. Only proved developed reserves are listed in our filings, although properties typically have additional upside in other categories used by the industry such as proved undeveloped, probable, and possible. Commodity price is a material factor since higher prices tend to permit higher cost reserves yet to be produced. Conversely, low prices can halt the production of high cost reserves, and lower the amount of producible reserves.

Using year-end oil and gas prices and current levels of lease operating expenses, the estimated present value of the future net revenue to be derived from our proved developed and undeveloped oil and gas reserves, discounted at 10%, was $12,324,390 at December 31, 2007, $6,121,295 at December 31, 2006, and $7,056,072 at December 31, 2005.  The unaudited supplemental information attached to the consolidated financial statements provides more information on oil and gas reserves and estimated values.

Natural Gas Production
The following table sets forth the net quantities of natural gas that we produced during:

2007 Natural Gas (MCF)  45,928
2006 Natural Gas (MCF)  86,177
2005 Natural Gas (MCF)  128,602

Natural Gas Reserves
Our estimated future net recoverable natural gas reserves from proved developed properties as of December 31, 2007, 2006, and 2005 were as follows:

December 31, 2007 Natural Gas (MCF)  791,128
December 31, 2006 Natural Gas (MCF)  787,017
December 31, 2005 Natural Gas (MCF)  779,598