Market Overview

Earthstone Energy Announces New Horizontal Project and Commencement of Operations

Earthstone Energy (Nasdaq: ESTE) reported today that it is participating in a new exploration project targeting the Ratcliffe formation in the Rush Mountain Field, Sheridan County, Montana. The project contains a total of 2,280 gross acres (171 net) that could eventually be developed on 160 acre spacing. Included in the project is a 4.5% working interest in an existing vertical Ratcliffe producing oil well: the Federal #22-5. Earthstone acquired these leasehold and well interests for approximately $170,000. The project was developed by a Billings, Montana geologic consortium, but will be operated by Vess Oil Corporation, a private, unrelated third party.

In conjunction with this exploration project, Earthstone has committed to participate in the drilling of at least two horizontal Ratcliffe wells on this acreage. The Company estimates that its share of drilling and completion costs on these two wells will be an additional $1,000,000. Drilling has commenced on the first well in the project: the Federal #1-5H. The well, now at approximately 7,950 feet, is currently drilling the curve to land horizontally in the Ratcliffe.

With landing, setting intermediate casing and drilling approximately 5,000 feet of horizontal lateral still to be accomplished, the well is expected to complete drilling operations by mid-January. Earthstone plans to fund all the above efforts with existing cash, its cash flow from operations and, if necessary, bank financing.

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