In the current oil and gas market, where price of the commodities has risen so fast and so high within the past 2 years, other definitive advantages are more important. The roller-coaster ride upward on prices may not be the free ride that so many companies used in the past 2 years to justify acquisitions. The Company has several distinct competitive advantages in the industry. These areas are size, experience, and contacts. These competitive advantages are brought to the company in the form of its technical and management personnel, and the short-term focus established by management at this point in time.

As to size, it forms 2 important guidelines for the company. First, being a small company looking for small acquisitions is a decided advantage in the oil and gas industries today. Larger companies, and most mid-size companies, are searching for large acquisitions to make a successful increase in the size of company. However, large acquisitions go for a premium; and are difficult to locate. Even smaller acquisitions are expensive; but a good deal on a smaller acquisition is easier to find than one on a larger acquisition.

Experience is the most important factor in the location of acquisitions, in evaluating the acquisitions, and in the cleanup and improvement of the acquisitions. You make money now in the oil and gas industry by finding a good acquisition, at a good price, with the potential for improvement. You make the improvement possible with talent and expertise to evaluate the improvement needed, to know the method of improvement, and to have the ability to implement the work over programs. Lucas Energy has this expertise available to it.

Management in the oil and gas industry is critical. The most important management factor for a small company is the hands-on experience to manage wells at the field level. The improvement and protection of assets for a small oil and gas company is essential. Breakdown of equipment, formation hydraulics, and oil field theft are all part of the management day, and the Company has the management experience to make this work.

Lucas Energy reported record fiscal 3rd quarter revenues increased 310% to $396,367, up from $96,725 for the same 3-month period in 2005. EBITDA for the 3rd fiscal quarter was $207,640, up over 300% from $50,649 for the same 3-month period in 2005. The increase is the result of purchases of additional producing oil and gas properties and the revitalization of production of existing wells. Lucas Energy reported record net income increased 234% to $166,467 for the 3 months ended December 31, 2006. The company also announced that it has completed its 8th acquisition in the last 6 months with the lease of 411 acres of land in Gonzales County, Texas. The tight geographic focus allows Lucas to maintain the lowest possible overhead, greatly reducing its portfolio risk through careful screening.

Corporate Developments
Lucas Energy Performing Assets and Portfolio

• Lucas Energy Reports Record Quarter Revenues and Earnings - Revenue Climbs 310%; Earnings Improve 466%
• Lucas Energy Acquires 411 Acres in Gonzales-Austin Chalk Region
• Lucas Energy Acquires 7th Gonzales Oil and Gas Property
• Lucas Completes 6th Acquisition Property within the Gonzales - Austin Chalk Region
• Lucas Energy Acquires Delphic Property Assets
• Lucas Energy Returning 500,000 Shares to Treasury
• Lucas Energy Reports Record Quarter Revenues and Earnings
• Acquired September 2006 - Lucas Energy Acquires 2 Properties on 127 Acres in Gonzales County, Texas. This includes 2 oil and gas properties: the Zavadil and the Canion Unit.
• Acquired August 2006 - Griffen Oil Unit No. 2 well. Lucas Energy successfully revitalized the well, resulting in increased annual profit of approximately $500,000 within the well’s first year of operation.
• Acquired August 2006 - 9 producing properties from the Wilson Oil and Gasâ„¢ company by a $2.3 million debt offering and common stock.
• Acquired July 2006 - Jessie Perkinsâ„¢ No. 1 well, which was successfully revitalized by Lucas Energy and is now consistently producing oil. Lucas’ revitalization team replaced all the equipment, added approximately 60 feet of perforations above the existing perforations, and acidized the well.
• Acquired June 2006 - Mahlmann Lease Prospect (Big Creek Dome Area), Fort Bend County, a 100.86 acre oil and gas property originally discovered by Gulf Oilâ„¢ and The Texas Companyâ„¢ (Texaco). Estimates point toward re-entry that could produce an initial 80,000 Bbls of oil.
• Since inception, Lucas Energy has recorded 7 consecutive profitable quarters.
• As of February 2007, the company operates 34 wells.
• Lucas Energy’s fiscal strength is extremely favorable compared to the industry with typical payback periods of less than 12 months (compared to 3-5 years).
• The combination of low overhead and strict management controls allow us to deploy most of the capital raised directly into cash flowing assets.