Warren Resources Inc.

California Oil Projects

Wilmington Townlot Unit

Our Wilmington Townlot Unit, or WTU, is located in the Wilmington field within the Los Angeles Basin of California. The Wilmington field has produced over 2.5 billion barrels of oil since its discovery in the 1930s. Since that time, the WTU, a unitized oil field consisting of 1,440 gross (1,418 net) acres, has produced more than 149 million barrels of oil from primary and secondary production. All the working interests in the WTU are subject to the terms and provisions of a unit operating agreement. We hold an approximate 98.9% undivided working interest in the WTU. Estimated proved reserves as of December 31, 2010 for the WTU were 9.9 MMbbls gross (8.0 MMbbls net), of which 75% are proved developed producing ("PDP") and 25% are proved undeveloped ("PUD"). We seek to develop our PUD reserves using directional and horizontal drilling and secondary recovery techniques, such as a waterflood recovery. Further, as of December 31, 2010, there were 98 gross (97 net) producing wells.

North Wilmington Unit

The North Wilmington Unit, or NWU, in the Wilmington oil field is adjacent to the WTU. Since its discovery in the 1930s, the NWU unitized oil field consisting of approximately 1,036 gross and net acres has produced more than 37.6 million barrels of oil. All working interests in the NWU are subject to the terms and provisions of a unit operating agreement. We own a 100% working interest and an approximate 84.7% net revenue interest in the NWU, including existing wells, certain equipment and certain surface properties. Estimated proved reserves as of December 31, 2010 for the NWU were 2.6 MMbbls gross (2.2 MMbbls net), of which 60% are PDPs and 40% are PUDs..

Rocky Mountain Projects in the Washakie Basin, Wyoming

Coalbed Methane Natural Gas

The Washakie Basin is located in the southeast portion of the Greater Green River Basin in southwestern Wyoming and represents our largest acreage position. As of December 31, 2010, we owned 126,054 gross (67,860 net) acres prospective for CBM development in this area, of which 55,901 net acres are undeveloped. This area contains approximately 530 gross identified drilling locations primarily on 80-acre well spacing. As of December 31, 2010 estimated gross recoverable proved reserves for the 240 CBM wells drilled and their 70 well offsets in our core CBM project area in this basin were 216 Bcf gross (62 Bcf net) on 80-acre well spacing.

Niobrara Oil Shale

Warren owns deep rights below its Atlantic Rim project which includes an approximate 80,000 net acre position that is potentially prospective for the Niobrara Shale. The acreage is located in the eastern Washakie Basin in Wyoming. Warren estimates that its Niobrara Shale formation is at depths of 4,000 to 10,000 feet. The Company plans to drill one exploratory oil well in 2011. Successful Niobrara Shale oil wells that have been developed in southern Wyoming and northern Colorado are typically drilled horizontally with multiple-stage fracing.

Coalbed Methane Compared to Traditional Natural Gas

The primary component of commercial natural gas is methane. Methane can also be found in coal deposits, as it is created by the same biological and geological forces that transform organic material into coal. Methane is stored in coal seams in four different ways:

as freely trapped gas within the pore spaces and natural fractures of the coal;
as dissolved gas in the water within the coal seam;
as adsorbed gas on the surface of the coal; and
as adsorbed gas held within the molecular structure of the coal itself.

Methane stored in coal deposits by all four of these methods is released upon the removal of water from coal seams. The removal of water reduces the amount of pressure on free and dissolved gas in the coal allowing it to be produced. As a result, coalbed methane wells typically produce significant amounts of water when they are first drilled, often for the first one or two years of a generally projected eight to twelve year well life. During this de-watering phase, water production typically decreases while gas production typically increases. After this initial production phase, gas production typically declines over the remaining producing life of the wells.

While traditional natural gas wells and coalbed methane wells require largely the same infrastructure and produce the same end product, coalbed methane production differs from traditional natural gas production in the following ways:

Other than dehydration and compression, coalbed methane typically needs no other processing after extraction prior to entering a pipeline, reducing production costs;
Although certain structural features such as fractures enhance production of coalbed methane, such structural features are generally not necessary for production, making the discovery of coalbed methane reserves less expensive;
Methane bearing coals exist at much shallower depths than the formations that traditionally contain natural gas, allowing coalbed methane to be produced from shallower wells using more readily available equipment, such as water well rigs, thereby reducing drilling costs; and
Since the location of coal seams is typically known through prior mining activity or from data provided by existing wells drilled to deeper formations, extensive geophysical or seismic data is not required to drill a coalbed methane well.

It should be noted that coalbed methane reservoirs require a cleat system to be productive. Cleats are formed during the coalification process and provide the path for the methane to travel to the wellbore. The size and number of the cleats determines the permeability and productubility of the coalbed reservoir.