Mr. Robert Kadane reports

KFG RESOURCES LTD. EXPLORATION & PRODUCTION UPDATE

KFG Resources Ltd.'s subsidiary, KFG Petroleum Corp., of Natchez, Miss., has staked a location in the Carthage Point field. The MacNeil No. 3, a 660-foot north offset to the MacNeil No. 2, is in the company's new field in the Stewart B sand. The well will be drilled in late June to 6,300 feet as soon as Mississippi River water recedes. The company has an 8-per-cent working interest in the well reverting to a 20-per-cent working interest at payout. In the LaGrange field, the company has completed an acreage block in preparation for a 6,600-foot test this summer to evaluate three Wilcox sands that produce offsetting the lease. Details will be announced before the spud date. Also in LaGrange, KFG is operating and participating for a 10-per-cent working interest in a directional hole to 6,400 feet offsetting a new discovery in the Wilson sand flowing 80 barrels of oil per day, water free.

Franklin county, Mississippi

Several areas are being leased at present. It is anticipated that all of the prospects will be completed and drilled by late fall 2013.

Jefferson county, Mississippi

At Fayette, the company plans to drill a 4,200-foot Stewart B test during the summer of 2013. The company's working interest is 74.9 per cent. If successful, there will be several offsets. Also, the reprocessed 3-D survey has highlighted another Lower Tuscaloosa anomaly at 10,000 feet, and the company is considering taking on a partner to test the new interpretation.

Amite county, Mississippi

The company is going to operate and participate in a test well to 11,300 feet for a 5-per-cent working interest. The prospect offsets a carbon dioxide flood operated by Denbury Onshore LLC. The closest well in the flood is producing over 100 barrels of oil per day and is 1,900 feet away. Details will be available prior to spud date.

Warren county, Mississippi

The company anticipates operating and re-entering a prior well to 11,400 feet to test an excellent oil show in the Rhodessa sand in the fall of 2013. Again, details will be available prior to spud date.