Pegasi Energy Resources, the oil and gas developer which is currently focused on low risk, growth-oriented activity at the Company’s Cornerstone project in Marion/Cass counties of the prolific eastern Texas region, reported initial swab testing results today on the latest well at Cornerstone, the Swamp Fox #1.

Drilled to 7k feet and finished just 500 feet shy of that depth in a premium Cretaceous reservoir, the Swamp Fox #1 swab tested 82 bbls of 35.1 degree API gravity oil after a specialized fracking (with another 118 bbls of associated saltwater). This latest well represent just one step in a larger plan by PGSI to drill a series of relatively shallow (approximately 7k feet) targets at Cornerstone in order to lock down existing leases in anticipation of the planned, upcoming horizontal drilling program, which will focus on deeper targets in the 10k foot range.

President and CEO of PGSI, Michael Neufeld, noted the Company’s 28% working interest in the Swamp Fox #1 and ongoing efforts to acquire additional partnerships/capital, so as to fully exploit the rich oil and gas resources at Cornerstone. Neufeld explained that this strategy would allow for maximized shareholder value through the organic development/growth of the existing reserve base.

The Cornerstone has thus far produced in excess of 400M barrels of oil and some 2.3T cubic feet of gas, making the planned horizontal drilling extremely attractive as a future development for the Company. With the multi-stage fracking implementations devised to go along with said horizontal drilling, PGSI feels confident that the best is yet to come for Cornerstone.

The ongoing plan of shallow targeted drilling was kicked off with the previously reported Norbord # 1 (tested 55.2 bbls per day of 60 degree condensate and 12.7 mmcf of gas) and the Company is projecting the second half of 2011 will see the completion of development wells to the same targets.

The reserves at Cornerstone are substantial indeed, with some 91.4 million barrels of oil equivalent from all categories (14.3 mmboe reserves, 77.1 mmboe contingent resource, James E. Smith and Associates), meaning there is plenty of room for the aforementioned partnerships and capital infusion, as PGSI has a ton of work still to do at Cornerstone.