In 2007, Fidelity Exploration & Production Company produced 77 billion cubic feet equivalent of natural gas and oil, an overall increase of 4 percent from 2006.  Fidelity continues to be the largest producer of natural gas in Montana. Fidelity also expanded its natural gas and oil reserves to 707 Bcfe.

The majority of Fidelity's production - 74 percent in 2007 - comes from the Rocky Mountain Region.  Fidelity continues to develop its long-held Baker and Bowdoin fields, and applies technology to maximize production from existing wells. In the coalbed natural gas area of Montana and Wyoming, Fidelity expanded its use of commingling - a drilling method that accesses multiple coal seams through a single well. This reduces the number of wells that need to be drilled, while accessing the same reserve potential and reducing costs. Fidelity increased production and reserves in the Mid-Continent and Gulf States Region through the continued development of its interests in South Texas. Production in this region comprised 18 percent of total production in 2007.

New areas show promise
In 2007, Fidelity expanded operations into southeastern Utah with an acreage acquisition and subsequent exploratory drilling in the Paradox Basin. Fidelity's first well began producing in November, with promising initial production volumes. The company plans to drill additional wells in this area in 2008. Fidelity also has been active in the Bakken play in North Dakota, which is receiving a lot of industry interest as a high-potential production area. Fidelity drilled an initial operated well in 2007 and is ramping up its drilling efforts in this emerging play with its own operated activities and through participation in nonoperated wells. Early in 2008, Fidelity completed a major acquisition with the purchase of 97 Bcfe of proven reserves and additional reserve potential in East Texas. Fidelity will operate these assets and expects to drill additional wells to further develop the properties.

Opportunities for growth
Fidelity's three-prong growth strategy provides opportunities to manage risk while growing production and reserves. This approach blends development of existing assets mainly in the Rocky Mountain and South Texas areas, exploration opportunities such as the Bakken play and the Paradox Basin, and acquisitions such as the newly acquired properties in East Texas.

Darwin Subart
President
April 2008