Baron says that oil production from its lease in Borden County, Texas is continuing upward due to an adjacent waterflood.

Management Comments Ronnie L. Steinocher, President and CEO, commented, "Our August production report for our Johnson Lease in Borden County shows that production is continuing to increase monthly due to the impact of an adjacent waterflood."

Mr. Steinocher also noted, "So far we have only seen production increases in the Johnson-3 well and not the Johnson-1. If the waterflood continues, we may begin to see positive response in the Johnson-1 before much longer. The Johnson wells are producing from the Spraberry Formation and are on 80 acre spacing."

Baron owns a non-operated 27.25% working interest (20.4375% net royalty interest) in this lease. The property includes two producing wells and 160 acres.

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