BEACON EQUITY RESEARCH

Analyst: Lisa Springer, CFA

Initial Report
July 1st, 2008

MNLU daily 6/30/2008

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5
Mainland Resources, Inc.
17314 SH 249, Suite 306 1.0
Houston, Texas 77064
volume
800
1-866-590-6589

Thousands
600

info@mainlandresources.com 400

200
www.mainlandresources.com
0
April May June

Market Data Company Overview

Mainland Resources, Inc. (OTCBB: MNLU) acquires, explores and
Symbol MNLU
Exchanges OTC BB
develops oil and gas properties in the U.S. The Company’s explora-
Current Price $4.08 tion efforts are currently focused on its leases in the East Holly Field
Price Target $7.00 of De Soto Parish in Northwest Louisiana, a region which includes the
Rating Speculative Buy Haynesville Shale, Cotton Valley and Hosston formations.
Outstanding Shares 41.7 Million
Market Cap. $169 Million
Average 3-m Volume 52,700
Discovered only about four months ago, Haynesville Shale may well be
North America’s largest and most significant new onshore natural gas
play. In March 2008, J.P. Morgan published a report indicating Haynes-
Source: Pink sheets and Analyst estimates ville Shale horizontal gas wells should be capable of producing more
than 5 billion cubic feet (bcf) of natural gas. Chesapeake Energy an-
nounced a major natural gas discovery and indicated that Haynesville
Shale may be potentially more important than any other play in which
it has participated, including the well-known Barnett Shale. Another
exploration company, Winchester, recently completed a vertical test
well in the Haynesville Shale about four miles from Mainland’s leases
that was only tested 600,000 cubic feet to date. It is important to stress
that the Haynesville was there. There has not been any success in the
vertical completions to date. The list of majors scrambling to secure
leaseholds in the Haynesville Shale reads like a “Who’s Who” of inde-
pendent exploration companies and includes Anadarko, Berry, Cabot
Oil and Gas, Devon Energy, Forest Oil, Noble Energy, Shell Western
and St. Mary Land and Exploration to name a few.
 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Mainland has approximately 2,695 acres under lease within DeSoto Parish in northwestern Louisiana. At the
time the Company acquired its leases from Kingsley Resources, Mainland was targeting the Hosston and Cotton
Valley formations in this region and the initial wells drilled by the Company were in the De Soto Parish field
in the Hosston formation. However, the discovery of major natural gas resources in the Haynesville Shale by
other major companies about four months ago was a fortuitous, unexpected event that occurred after Mainland
leased its land. Many energy analysts are already predicting that the Haynesville Shale may be the largest, most
significant natural gas discovery in North America, larger even then the Barnett Shale.

Mainland holds working interest in four contiguous sections of the East Holly Field. It has a 100% stake in the
first section, a 98% stake in the second section and approximately a 75% stake in the two remaining sections. The
Company also owns a 16.67% working interest in two other sections. Chesapeake Energy Corporation holds the
remaining 83.33% stake of the two sections. Based on well bore analysis, actual production tests, mud logging
and other measures from wells located around its leases, Mainland anticipates its test wells in the East Holly
Field will be productive. Historically, gas volumes from surrounding wells have ranged from 2 bcf to a high of
32 bcf per section.

In June 2008, the Company staked the location of its initial Haynesville Shale test well to be drilled to a depth
of 12,500 feet. Mainland has hired the OPS Group of Houston as its operator and has directed OPS to proceed
with permitting. Schlumberger’s new Haynesville Shale evaluation software will be used to help select the in-
terval that will be penetrated and then developed by drilling a 4,000 foot horizontal leg off of the vertical well.
The Company has approved budget expenditures of $8.5 million to cover the cost of drilling, completing and
commencing production from its first well. Mainland has already raised $4 million through an equity private
placement and is in the process of raising another $5 million through a debt financing. Drilling on the first well,
known as the Griffith #1-H well and located in the East Holly Field, is scheduled to begin in July 2008.

Mainland Resources, Inc. (OTCBB: MNLU) 2

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Investment Highlights

Haynesville Shale may be the largest natural gas find in North American history

The Haynesville Shale, Cotton Valley and Hosston formations are emerging as major new resource plays for
North American drilling operators. Chesapeake Energy, one of the largest operators with 200,000 acres of leases
in this area straddling the border between Texas and Louisiana, estimates that the Haynesville Shale contains 7.5
trillion to 20 trillion cubic feet of natural gas. According to initial reviews of the Haynesville Shale by leading
research firms (including J.P. Morgan), Haynesville Shale wells have the potential to produce 3 to 5 billion cubic
feet of natural gas per well.

Mainland may be one of the only junior companies positioned to participate in Haynesville Shale
discoveries

A major land consolidation is underway in the Haynesville Shale that will exclude most junior companies from
participating. To date, about 21 major public companies have acquired leases in the Lower Bossier/Haynesville
Shale. While it is difficult to ascertain and verify specifically what operators are paying for leases to private
landowners, State of Louisiana lease sale data shows that the lease bonus/acre has escalated rapidly in 2008 from
$100-200/acre in January to in excess of $17,000/acre in June, indicating the industry’s keen interest in drilling
this new discovery. Only those that already have leases will be able to participate and Mainland is in the envi-
able position of having secured its leases at pre-discovery prices averaging around $270 per acre.

Rapid progress on Mainland’s drilling program

Mainland has contracted with OPS Group to be its drilling operator in DeSoto Parish, within Haynesville Shale,
and secured funding for the drilling of a test well in the East Holly Field. Drilling operations are scheduled to
begin in July. The Company also plans to use Schlumberger’s Haynesville Shale evaluation software to select the
intervals to be penetrated and then developed by drilling a 4,000 feet, 7 7/8 inch OD lateral, horizontal leg off of
the vertical hole. Horizontal drilling led to the discovery of the Haynesville Shale and is a technology that has
dramatically improved the economics of drilling in the U.S.

If successful in the Haynesville Shale, Mainland could become an immediate target for joint venture development
of additional properties or as a takeover candidate. (Author would need to elaborate if this point is included)

Energy demand and soaring prices drive new exploration

Global oil consumption is forecast to reach 90.7 million barrels of oil equivalent per day (boepd) by 2010 and
117.6 million boepd by 2030 . Worldwide natural gas consumption is projected to exceed 115.9 trillion cubic feet
by 2010 and 163.2 trillion cubic feet by 2030. Rising energy demand, a weak U.S. dollar and geopolitical tensions
have all contributed to steep rises in oil prices from around $96 per barrel at the beginning of 2008 to $140 per
barrel in June. With oil and gas prices unlikely to decline anytime soon, junior exploration companies such as
Mainland can reap huge windfalls by exploring, drilling and developing new low risk oil and gas discoveries.

Experienced management team

Mainland Resources, Inc. (OTCBB: MNLU) 3

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

The Company is led by an experienced management team with proven skills in oil and natural gas develop-
ment. President/CEO Mike Newport has more than 30 years of oil and gas industry experience, has held senior
management positions with Amoco, Greenhill Petroleum and Harkins, and understands the geology and drill-
ing prospects of the targeted areas in Texas and Louisiana. Director David Urquhart has more than 35 years of
equipment fabrication and hydrocarbon industries experience and has held various strategic positions with
Suncor Inc., Hexagon Gas Limited, Petroleum Technologies and Finex Capital Corporation.

Haynesville Shale Formation

Horizontal drilling activities have led to the discovery of several major new unconventional gas plays in recent
years, including the Haynesville Shale. Discovered just four months ago and believed by many analysts to be
North America’s most significant new onshore natural gas find, the Lower Bossier/Haynesville Shale play in
northwest Louisiana and East Texas has had the shortest development timeline of any unconventional shale gas
resource play since it was officially unveiled and an all out land grab began that remains in full swing today.
While there has been some exploration activity in the Haynesville Shale area in recent years, recent announce-
ments of major finds by Petrohawk Energy Corporation, which was followed by Chesapeake Energy Corpo-
ration’s declaration that Haynesville Shale “could potentially have a larger impact on the company than any
other play in which it has participated to date” led to the current land rush. More recently, EnCana Corporation
disclosed regarding its Haynesville Shale leases that it has the “potential to ultimately achieve production levels
approaching 1 bcf/d net.” Tristone Capital analysts estimate at least 12-15 rigs are actively drilling wells in the
Haynesville Shale today and anticipate 23-25 rigs by year-end and another 50-100 rigs working in 2009.

The Bossier Shale, located below the Cotton Valley rocks and above the Cotton Valley and Smackover Limestone
formations, is divided into upper and lower members. The lower members, referred to as the Lower Bossier
Shale in East Texas and the Haynesville Shale in northwest Louisiana, are the primary targets for drilling activi-
ties.

Mainland Resources, Inc. (OTCBB: MNLU) 4

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Exhibit 1: Lower Bossier/Haynesville Shale Play Timeline

3/12 – HK unveils Haynes- 4/8 – HK acquires addi-

ville Shale play at analyst 3/24 – CHK announces tional lease hold interests,
meeting, 780 bcfe of net Haynesville Shale dis- increasing acreage position
potential on 30,000 net covery, plans to acquire to over 70,000 net acres
acres 500,000 net acres

Mar - 08 Apr - 08

3/28 – QBIK receives independent

report estimating OGIP for Bossier/
Haynesville Shales ranging from 217
to 245 BCF/section

5/30 PVA reports 8 m mcf/d
IP rate from first hz Lower
Bossier/Haynesville well;
expected 10-15 m mcf/d
production rate
6/4 COG acquires 25,000
gross acres in ETX with
Haynesville exposure for
$602mm
6/10 – BRY acquires 4,500
net acres in ETX with
Haynesville exposure for
$620mm
6/16 – ECA unveils 325,000
net acre position, “could ulti-
mately achieve… levels ap-
proaching 1 bcfe/d net”; first
hz well IP rate >8mmcf/d

Mar - 08 June- 08

5/8 – HK’s prospective
Haynesville leasehold
increased to 150,000 net
acres, sees 6.1 Tcfe of net
potential
6/2 – HK plans to ramp up
rig count in Haynesville to
10 rigs by YE (up from 8)
6/10 – XTO acquires Hunt
Petroleum, increase pro-
spective Haynesville acre-
age to 100,000 net acres
6/16 – GDP and CHK an-
nounce Haynesville Shale JV
on 10,250 net acres in North
LA, 440 hz wells planned,
implies 80 acre spacing

5/29 – GDP acquires ad-
ditional 3,250 net acres in
Haynesville. Reported initial
vertical well in Bethany-
Longstreet field showed
IP of 1 mmcf/d
6/6 – CHK achieves initial
500,000 net acres leasehold
goal, electing to continue
leasehold acquisition efforts; 12
operated rigs by year-end ’08
and 30 by year-end ’09
6/10 – STR discloses
29,500 net acres prospec-
tive for Haynesville in North
Louisiana

Source: Tristone Capital report

Mainland Resources, Inc. (OTCBB: MNLU) 5

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Huge recoverable resource potential

Based on evaluations of nearly 2.1 million net acres of land across the Lower Bossier/Haynesville Shale, Tristone
Capital estimates potential risked unbooked net recoverable resources may exceed 60 trillion cubic feet and
potential net unrisked, unbooked recoverable resources may approach 120 trillion cubic feet. To date, about 21
major public companies have acquired leases in the Lower Bossier/Haynesville Shale.

Exhibit 2: Major operators within the Haynesville Shale

Area of Chesapeake operations

- 500K Net Acres
- 11 Wells permitted
- 5 Rigs running
GMX Resources - 6 Horizontal wells completed
- Reported 19 vertical Camterra, Questar, JW
Haynesville Completions - Permits

Area of Petrohawk operations

- 3 Wells drilling
- 19 Permitted
- Petrohawk estimates 45-55 BCF/section

Penn Virginia
-Lower Bossier Completions
-Vertical Wells
-8 MMCFED Fogle #5H Well
Goodrich
- 2 Vertical Wells
- 1s Horizontal planned for Q3/08
Cubic Energy Encana/Shell
Anadarko -4 Vertical Wells - 3 Vertical Wells
Berry
Cabot - 2 Horizontal
Chsapeake - 2 Rigs Currently Open
Comstock - 5 Rigs by Year-End
Cubic Energy
Devon
El Paso
Encana/Shell
ExTO Resources
Forell
GMX
Goodrich
Noble Energy
Penn
Petrohawk
Questar
St. Mary
XTO

Source: Tristone Capital report

Exhibit 3: Lower Bossier/Haynesville Shale lease bonuses

State of Louisiana Lower Bossier/Hay nesville Shale Lease

$20,000 Bonus/Acre

$15,000

$10,000

$5,000

$0
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08

Average Min Max

Source: Louisiana Department of Natural Resources

Mainland Resources, Inc. (OTCBB: MNLU) 6

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Reflecting the industry’s huge interest in this major new natural gas find, Haynesville Shale lease prices have es-
calated rapidly in 2008. Lease bonuses have increased from $100-200/acre on average at the beginning of 2008 to
more than $13,000/acre on average in June. Mainland believes that its leases, located in the heart of the Haynes-
ville Shale, offer exceptional prospects for commercially viable quantities of natural gas.

Exhibit 4: Lower Bossier/Haynesville Shale gas royalty rates

26.4%

26.0%

25.6%

25.2%

24.8%

24.4%
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08

Average Min Max

Source: Louisiana Department of Natural Resources

Exhibit 5: Recent Haynesville Shale lease transactions

Transaction $ Value per

Buyer Seller Location Date Net acres
value ($ million) acre

Goodrich Petroleum Private Longwood Field, N. LA 29-May-08 3,250 $9,846

$32
Cobot Oil and Gas Private Minden Field, E. TX 5-Jun-08 24,250 $7,464
$181
Berry Petroleum Private Harrison and Limestone 10-Jun-08 4,500 $3,056
$14
Counties, E. TX
Chesapeake Goodrich Bethany-Longstreet and 16-Jun-08 $178 10,250 $17,366
Longwood Fields, N. LA

Source; Tristone Capital report

An analysis of recent public transactions suggests that prices for lease rights within the Lower Bossier/Haynes-
ville Shale currently range between $3,000 and $17,400 per acre. Mainland was able to acquire its leases for ap-
proximately $270 per acre.

Eight to ten wells per section

The Lower Bossier/Haynesville Shale is estimated to contain nearly 200-245 bcf of gas in place and 45-55 bcf of

Mainland Resources, Inc. (OTCBB: MNLU) 7

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

recoverable gas per section. Initially, horizontal development based on 60-acre spacing (10 wells per section)
was anticipated in the Haynesville Shale. However, operators are now focusing on 80-acre spacing (8 wells per
section) to gain the benefits of potentially larger effective drainage areas per well.

Mainland has decided to drill a 12,500-foot test well through the Haynesville Shale formation which will also
evaluate the Hosston, and Cotton Valley formations. The Company is also continuing to negotiate for additional
leases in the area. Mainland’s business development strategy is two-pronged: it plans to develop its existing
leases while also pursuing new lease acquisitions.

Developing current leases: The Company is currently evaluating its leaseholds in the East Holly Field with
plans to begin drilling a test well in July. The $4 million in proceeds from a recent equity sale will provide initial
funding for this project and Mainland is in the process of raising another $5 million through a debt offering.

OPS Group of Houston will serve as the operator for the planned drill program. OPS is currently finalizing the
purchase of the necessary tubulars for well completion and will begin construction of an access road and the drill
site itself once a drilling permit is issued by the oil and gas division of the Louisiana Office of Conservation. OPS
is also negotiating potential drilling windows with several area rig drilling contractors.

New lease acquisition: The Company plans to acquire new leases if it fails to confirm the presence of commer-
cial quantities of natural gas during the first six months of operations in the East Holly Field.

Oil & Gas Industry Outlook

According to Datamonitor, the global oil and gas industry generated revenues totaling $4.3 trillion in 2007 and
has grown 17.7% annually since 2003. Exploration and production represented 36.7% of this $4.3 trillion mar-
ket.

Increasing global energy demand

At present, the world consumes more than 85 million barrels of oil per day (Source: EIA). According to the U.S.
Census Bureau, the world’s population will grow from 6.7 billion currently to 8.4 billion in 2030 and world
economic grow will average around 4% annually over the same period. Population and economic growth are
expected to drive increased energy consumption from 446.7 quadrillion British thermal units (Btu) in 2004 to
701.6 quadrillion Btu in 2030.

Mainland Resources, Inc. (OTCBB: MNLU) 8

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Exhibit 6: Global energy consumption (in quadrillion Btu)

750

600
In Quadrillion Btu

450

300

150

0 1999 2003 2004 2010 2015 2020 2025 2030

Total Energy Consumption Oil Natural Gas

Source: Energy Information Administration

Petroleum consumption by the transportation sector will continue to rise in the absence of suitable alternative
energy sources. By 2030, out of the total projected increase in oil demand, 56% will come from the transportation
sector and 31% will come from the industrial sector.

Exhibit 7: Fuel consumption by sector, 2004-2030

500

400
Quadrillion Btu

300

200

100

0
2004 2010 2015 2020 2025 2030
Residential Commercial Industrial
Transportation Electricity Total

Source: Energy Information Administration

Mainland Resources, Inc. (OTCBB: MNLU) 9

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

The United States is the largest consumer of energy

The U.S. has a huge appetite for energy and spends over $500 billion annually on energy bills. Domestic oil
consumption averages around 20.69 million barrels per day and represents about 23.9% of global energy con-
sumption. Slowed growth and rising crude oil prices are expected to reduce U.S. oil consumption by about
290,000 barrels per day in 2008 but consumption is forecast to rise again by 140,000 barrels per day in 2009 as the
domestic economy strengthens.

Exhibit 4: Global consumption by region, 2007

30.0% 23.9%

US

Rest of North America

(excluding US)
4.8%
South & Central America

Europe & Eurasia

3.5% 6.4%
Middle East
7.4%
24.0%

Source: BP Statistical Review 2008

U.S. natural gas consumption is expected to rise 2.2% in 2008 and 0.9% in 2009. Natural gas consumption by the
industrial sector is forecast to rise 1.3% in 2008 and 0.4% in 2009 while consumption for electricity generation is
expected to increase 2.5% in 2009.

Dependence on oil imports

Oil production in the U.S. has declined steadily over the last few years from 5.82 million barrels per day in 2000
to 5.10 million barrels per day in 2007. In contrast, domestic consumption rose to 20.70 million barrels per day in
2007 from 19.70 million barrels per day in 2000.

Mainland Resources, Inc. (OTCBB: MNLU) 10

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Exhibit 9: Oil production and consumption (2000-2009)

75

60
In Million barrels per day

45

30

15

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Oil Production Oil Consumption

Source: Energy Information Administration

Production of natural gas has increased slightly to 55.21 billion cubic feet per day in 2007 from 55.18 billion cubic
feet per day in 2000 whereas consumption has fallen marginally to 63.17 billion cubic feet per day in 2007 from
63.76 billion cubic feet per day in 2000. Despite reduced consumption, natural gas demand continues to exceed
supply by a wide margin.

Exhibit 10: Natural gas production and consumption (2000-2009)

75
In Billion Cubic Feet per day

60

45

30

15

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Natural gas production
Natural gas consumption

Source: Energy Information Administration

Mainland Resources, Inc. (OTCBB: MNLU) 11

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

To meet demand, the U.S. relies heavily on energy imports from the Gulf countries. In 2007, the U.S. imported
9.9 million barrels of oils and 10.36 bcf of natural gas per day. Any major new oil and gas discoveries in the U.S.
would be readily absorbed by the domestic market.

Supply/demand imbalance fuels price hikes

Crude oil prices are determined by supply and demand factors on a worldwide basis. The recent rise in crude
prices was largely driven by higher consumption, a reduced supply outlook for non-OPEC countries, and low
surplus production capacity. Supply disruptions from Nigeria and ongoing geopolitical concerns in several pro-
ducing countries, including Venezuela and Iran, have contributed to oil price volatility. Natural disasters also
impact the price outlook; EIA expects production of about 11.3 million barrels of crude oil and 78 billion cubic
feet of natural gas to be shut down during the 2008 hurricane season.

Exhibit 11: Prices trends for crude oil and natural gas

160 12

$ per thousand cubic feet

120 9
$ per barrel

80 6

40 3

0 0
2004 2005 2006 2007 2008e
Crude Oil Prices - West Texas Intermediate Spot Average
Natural Gas – Henry Hub Spot

Source: Energy Information Administration

Crude oil prices have risen sharply in 2008, surging from below $100 per barrel at the beginning of the year to
$140 per barrel in June. West Texas Intermediate (WTI) crude oil prices, which averaged $72 per barrel in 2007,
are now projected to average $122 per barrel in 2008 and $126 per barrel in 2009. Regular-grade gasoline is ex-
pected to average $3.78 per gallon in 2008, or 97 cents higher than the 2007 average price. Gasoline prices are
hovering around $4 per gallon in June and are projected to peak at $4.15 per gallon in August. The overall picture
indicates strong demand and tight supply and supports an outlook for sustainably high oil and gas prices.

High prices encourage new exploration activity in the U.S.

Rising prices coupled with declining U.S. oil production are encouraging new domestic exploration. Exhibit 8
shows a steady increase in the number of gas and oil rigs working in the U.S. and indicates increased domestic
drilling activity.

Mainland Resources, Inc. (OTCBB: MNLU) 12

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Exhibit 8: Working oil and gas rigs in the US

1,600

1,400

1,200
Number of rigs

1000

800

600

400

200

0
1/14/2000 1/14/2001 1/14/2002 1/14/2003 1/14/2004 1/14/2005 1/14/2006 1/14/2007 1/14/2008

Crude Oil Natural Gas

Source: Baker Hughes North American Rig Report

Mainland Business Strategy

Mainland intends to become a major oil and gas exploration and development company and build a significant
reserve base through drilling initiatives, joint ventures and acquisitions or mergers. The Company has a major
advantage compared to other junior exploration players in that it already holds lease positions in the highly
desirable Haynesville Shale area. Another Mainland advantage is its lean overhead structure, which will allow
Mainland to plough back revenues generated from its initial Haynesville Shale wells into new drill projects.
The Company’s key growth initiatives include:

• Acquiring more strategic land positions in existing and developing fields within North Louisiana;
• Targeting undeveloped oil and gas prospects;
• Maintaining a strong reserve base and cash flow;
• Re-investing cash flows into new projects;
• Acquiring non-operating stakes in potential revenue opportunities, and
• Focusing on unconventional oil and gas plays.

As energy demand builds and prices rise, the need becomes urgent for increased oil and gas exploration and de-
velopment in the domestic market. Mainland plans to exploit this opportunity by acquiring and developing low
risk, non-conventional domestic energy prospects. The Company maintains strict control over project costs and
success rates by developing low risk, good quality prospects, hiring qualified contract consultants and deploy-
ing state-of-the-art drilling technologies. The services of outside contractors such as OPS Group are utilized to
reduce overall operating expenses and maximize business flexibility.

Mainland Resources, Inc. (OTCBB: MNLU) 12

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Oil and Gas Industry Competitiors

Mainland competes for leases, resources and capital with other oil and gas exploration and production com-
panies operating in Texas, Louisiana and the surrounding area. More than 20 major public energy companies
have acquired leaseholds in the Haynesville Shale area, including Anadarko, Berry, Cabot Oil and Gas, Devon
Energy, Forest Oil, Noble Energy, Shell Western and St. Mary Land and Exploration. Petrohawk Energy and
Chesapeake have already announced major natural gas discoveries in the Haynesville Shale. A few of these
competitors are described below:

Questar E&P Company (STR)

Questar Market Resources, Inc. (Market Resources), a natural gas-focused energy company and part of Questar
Corporation. This subsidiary acquires, explores, develops and produces gas and oil in the Rocky Mountain
region of Wyoming, Utah and Colorado and the Midcontinent region of Oklahoma, Texas and Louisiana. The
company’s exploration offices are located in Denver, Tulsa and Oklahoma City.

At year-end 2006, Questar had proved reserves of 1,631.4 billion cubic feet of natural gas. Production totaled
129.6 bcf in 2006 and was up 13% over the previous year. The company drilled 572 gross wells and had a 95% net
success rate. Questar recently paid $655 million for two new properties that it estimates will add about 276 bcf
of natural gas to net proved reserves.

Petrohawk Energy Corporation (HK)

Petrohawk Energy Corporation, founded in 1997 and based in Houston, Texas, has oil and gas properties in
North Louisiana (Haynesville Shale, Elm Grove field and Terryville field), Arkansas (Fayetteville Shale), East
Texas, Oklahoma and the Permian basin. At year-end 2007, Petrohawk had proved reserves totaling 1.062 trillion
cubic feet of natural gas. The company is currently producing 261 mcf/day and achieved initial production of
16.5 mcf/day from its most recently completed well.

Goodrich Petroleum Corporation (GDP)

Goodrich Petroleum Corporation, headquartered in Houston, Texas, produces oil and natural gas from proper-
ties located in the Cotton Valley Trend of East Texas and Northwest Louisiana and in the transition zone of South
Louisiana. The company has working interests in 233 active oil and gas wells located in 25 fields across three
states. Estimated proved reserves total approximately 1.7 million barrels of oil and 291.7 bcf of natural gas.

Chesapeake Energy Corporation (CHK)

Chesapeake Energy Corporation, founded in 1989 and headquartered in Oklahoma City, Oklahoma, is an impor-
tant player in the Haynesville Shale, with approximately 300,000 acres of leaseholds in this area. The company
also explores for oil and gas in 23 other U.S. states. At year-end 2007, Chesapeake had proved reserves totaling
10.879 trillion cubic feet and interests in some 38,500 producing oil and natural gas wells. Chesapeake recently
recognized the Haynesville Shale as the most important new natural gas play in the company’s 19-year history.

Mainland Resources, Inc. (OTCBB: MNLU) 13

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Financial Analysis

Mainland is still early in the exploration stage and has yet to record any oil and gas production and revenues.
The Company recorded a net loss totaling $144,523 in the fiscal year ended February 28, 2008, up from losses
totaling $11,256 in the prior fiscal year. Net losses in FY 2007-08 reflect costs for taking the Company public,
acquisition costs for leases purchased from Kingsley, modest general and administrative expenses and costs of
raising capital. Mainland purchased its leases from Kingsley for a total amount of $687,596, or approximately
$270 per acre.

Exhibit 13: Operating expenses

180,000

44,526
150,000

120,000
in US $

90,000

60,000

30,000
11,256
0
2007 2008
Operating Expenses

Source: 2008 Annual Report

Liquidity and capital resources

Mainland raised proceeds totaling $20,452 from a private placement financing in October 2007 and $4.0 million
from a private placement financing completed in May 2008. The Company is in the process of raising an ad-
ditional $5 million through debt financing. Total costs associated with drilling, completing and commencing
production from its first well are estimated at around $8.5 million and the Company has plans for a second well
in late 2008.

In May 2008, the Company announced a forward stock dividend. Shareholders received 1.5 shares for every
share issued and outstanding prior to the dividend date. The forward dividend increased the fully diluted share
count to approximately 41.7 million as of June 2008.

Mainland Resources, Inc. (OTCBB: MNLU) 14

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Profitability Outlook and Valuation

J.P. Morgan analysts estimate the average Haynesville Shale well should be capable of producing 5 bcf of gas,
and other analysts have estimated this area may suport 60 acre well spacing. With nearly 2,700 acres of lease-
holds in the Haynesville Shale, Mainland could potentially develop 45 wells. Assuming each well produces 5 bcf
of gas, Mainland’s Haynesville Shale resource based on existing leases could easily exceed 225 bcf.

The Company will commence drillng of its first test well in July 2008 and anticipates drilling a second well in the
fourth quarter of 2008. Assuming six months production from the first well and two months production from
the second well, initial production rates of 10 million cubic feet per day and gas prices averaging $10.50 per mcf,
we anticipate Mainland’s 2008 revenues will fall in a $22 million range.

Mainland’s drill plan calls for drilling as many as 12 new Haynesville Shale wells per year over the next five
years and acquiring additional drilling acreage and successful well programs.

Projected Revenues $ in millions

400
350
300
250
200
150
100
50
0
2008E 2009E 2010E 2011E 2012E
Year

Based on our conversations with management and our own assessment of the resource opportunities associated
with Haynesville Shale, we forecast growth in Mainland’s gas revenues to $75 million in 2009, $150 million in
2010 and $250 million in 2011. Because of its lean operating structure and comparatively low drilling costs, we
predict the Company will turn profitable in 2009.

Valuation

Other oil and gas companies with a presence in the Hayesville Shale were recently trading at Price/Sales mul-
tiples ranging from 4.4 times revenues for Chesapeake Energy to 9.0 times revenues for Petrohawk Energy. We
think Mainland warrants a premium valuation relative to the peer group due to the location of its leases in the
heart of what may be the nation’s largest, most significant natural gas plays and the rapid rampup in revenues
likely to result from its extended drill program. We also believe Haynesville Shale wells are relatively low cost
and low risk. Mainland anticpates re-couping all of its per well drill costs within the first four months of pro-
duction.

Mainland Resources, Inc. (OTCBB: MNLU) 15

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

We value Mainland at a 9 times Price/Sales multiple and a 5 times forward Price/Sales multiple. We derive a
$7.00 price target for Mainland shares by multiplying our $75 million 2009 revenue estimate by a 5 times for-
ward Price/Sales multiple, then dividing the resulting amount by 75 million shares outstanding. We expect the
Company to sell equity to finance its drill program, resulting in an increase in the fully diluted share count from
around 42 million to 75 million in 2009.

We are initiating coverage of Mainland Resources with a Speculative Buy rating and a $7.00 price target. We
think these shares present an excellent vehicle for investing in a major new North American energy play. We
caution investors, however, that Mainland faces many challenges in achieving its production and revenue tar-
gets. Securing financing on favorable terms may be a challenge. We estimate the Company must raise at least
$20 million in additional financing to fully implement its 2008 drill plan. Additional risk factors are discussed in
the following section.

Risk Factors

Limited operating history

Mainland has a limited operating history and has yet to generate revenues from oil and gas production. The lack
of a track record makes it difficult to evaluate the Company’s business plan. In addition, although other opera-
tors have made successful discoveries in the Haynesville Shale, there is no guarantee that Mainland’s lease areas
will produce commercially viable quantities of natural gas.

Highly speculative business

Oil and gas exploration is a highly speculative business. Failure rates are high and many new wells fail to pro-
duce commercial quantities of oil or natural gas. Oil and gas exploration is subject to numerous risks, includ-
ing:

• Unforeseen ground conditions and geological problems

• Weather problems or unusual operating conditions
• Lower-than-expected reserve quantities
• Delays in obtaining (or failure to obtain) necessary government permits
• Government permit restrictions and regulation restrictions
• Unavailability or failure of materials and equipment
• Degree of volatility in crude oil prices

Threat from big players

Mainland is a relatively new player in the oil and gas exploration market and must compete with larger, more
established players for leases, resources and access to capital. Many of its competitors in the Haynesville Shale
area are multi-billion dollar market cap public companies with significant reserve positions, superior access to
capital and a successful track record for oil and natural gas discoveries.

Mainland Resources, Inc. (OTCBB: MNLU) 16

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Management
Mike Newport Mike Newport was appointed President and Chief Executive Officer of the
President and Chief Executive Officer Company on February 28, 2008. Mr. Newport has more than 30 years experi-
ence in the oil and gas industry. He received a BA in Finance in 1977, a MBA
in 1978 and a Petroleum Land Management degree in 1979, all from the Uni-
versity of Oklahoma.

Mr. Newport began his career with Amoco in May 1979, where he was primar-
ily responsible for supervising brokers and writing land contracts for North
and South Louisiana, Mississippi, Alabama and Florida. He then joined Har-
kins & Company as a District Landman, where he was in charge of assembling
drilling prospects and land activities associated with operations in Mississip-
pi, Alabama, Florida, Louisiana, Oklahoma and Arkansas.

Mr. Newport then became the Land Manager of Greenhill Petroleum in 1989,
where he was responsible for acquisitions and divestitures and other land
management activities. Prior to joining Mainland, Mr. Newport spent nearly
13 years managing brokers for West Texas, South Texas, East Texas, Oklahoma
and North Louisiana and was involved in land management activities for vari-
ous operators.

Robert D. Fedun Robert Fedun became Mainland’s Chief Financial Officer in February 28, 2008.
Chief Financial Officer Mr. Fedun, who is also the President and CFO of Dynamic Resources Corp.,
has 40 years experience in the oil and gas industry.

Between 1965 and 1975, Mr. Fedun worked for Amco Petroleum (formerly Pan
American Peotrleum) and Home Oil Corporation as an engineering techni-
cian. From 1975 to 1985, he was employed with Gardner Denver Corporation
as a sales representative for oil field equipment such as gas compressors, high
pressure plunger pumps and high volume industrial air compressors.

Between 1985 and 1991, he served as Vice President, Sales, Engineering and
Manufacturing for Power Application and Manufacturing Company (PAM-
CO). Mr. Fedun has also worked for Shell Canada and the Alberta Oil and Gas
Conservation Board.

David Urquhart David Urquhart is a Canadian Professional Engineer with more than 35 years
Director experience in the equipment fabrication and hydrocarbon industries.

Mr. Urquhart completed his Bachelor of Science in Mathematics from Dal-

housie University and Bachelor of Engineering in Mining from Nova Scotia
Technical College. He is the founder and owner of Westhampton Ltd., which
provides services to mining and petroleum companies across the U.S., Cana-
da, Algeria, Africa, Russia, Tunisia, China and the Middle East.

From the 1960s through 1983, Mr. Urquhart held senior managerial positions
with Suncor Inc. (1968-1977); Hexagon Gas Limited (1977-1983) and Petro-
leum Technologies (1983-1987). He also served as Vice President of the energy
group for Calgary-based Finex Capital Corporation.

Mainland Resources, Inc. (OTCBB: MNLU) 17

 Analyst: Lisa Springer, CFA
Initial Report
July 1st, 2008

Disclaimer
Beacon Equity Research (otherwise known as BER) is an independent research firm specializing in small and micro capitalization companies.
BER has no investment banking or consultation conflicts thereby minimizing the inherent conflicts of interest between the research analysts and
the companies they cover. BER is not a registered investment advisor or broker dealer. No information in this report should be construed as an
endorsement to either buy or sell any securities mentioned in this report. The analyst(s) who prepared this report rely on publicly avail¬able
information which neither the analyst, nor BER, can guarantee to be error-free or factually accurate. All conclusions in this report are deemed
reasonable and appropriate by the author. The Private Securities Litigation Reform Act of 1995 provides investors a “safe harbor” in regard
to forward-looking statements. To fully comply with the requirements of this law, BER cautions all investors that such forward-looking state-
ments in this report are not guarantees of future performance. Unknown risk, uncertainties, as well as other uncontrollable or unknown factors
may cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-look¬ing
statements. Investors should exercise good judgment and perform adequate due-diligence prior to making any investment. Beacon Equity
Resources and its affiliates have been compensated a total of nine thousand five hundred dollars directly from the company for enrollment
of MNLU in its research program and other services. Ratings and price targets in this report should not be construed as recommendations or
stock price predictors. Readers of this report are urged to use due-diligence in any purchase of security listed herein. Readers should consult the
Company’s SEC filings as well as our initial report on the firm to better understand the inherent risks associated with this security. There may
be many uncontrollable or unknown factors which may cause actual results to materially differ from the results, performance or expectations
expressed or implied by such forward-looking statements. Investors should exercise good judgment and perform adequate due-diligence prior
to making any investment.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Lisa Springer, CFA, the author of this report, certify that the material and views presented herein represent my personal opinion regarding
the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation
been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or
securities in any of the companies featured in this report.

Lisa Springer, MBA, CFA - Senior Analyst

Lisa serves Beacon Research Partners as a research analyst. She brings to the company over 15 years experience in equity research and invest-
ment marketing. Prior to joining Beacon, Lisa worked as an equity analyst for an independent research provider. She has also held positions as
investor relations officer for a NYSE-listed company and director of financial analysis for a large consulting firm. Lisa earned an MBA from the
University of Chicago and is a Chartered Financial Analyst (CFA).

Mainland Resources, Inc. (OTCBB: MNLU) 18