Chris Boswell

Particle Drilling: Do Unfulfilled Promises Justify 42% Gain In Stock Price?

David:

Another very articulate article but once again your facts are inaccurate. As before, I am limited as to what I can communicate in this forum but here goes. We currently have two contracts, one with Gasco (GSX) as you have identified from the February 12, 2007 Oil and Gas journal article and a second contract with one of the top five oil and gas companies in North America. We do not believe it is in our best interest to "lie" in our press releases and therefore your assertion that we are, in fact, misleading investors is somewhat concerning. It is not uncommon for the larger Oil and Gas companies to require their name to be withheld from a contractor press release and therefore you should not be surprised by this request. If you suspect that our latest trial was again with GSX, then I challenge you to research the GSX public disclosures to determine whether or not GSX has any drilling activity in Texas or in the Travis Peak formation (the site of our most recent test). I think you will disprove your own theory by conducting such "research".

We have continued to progress the technology and have now conducted four full scale field trials (three with GSX and one with our new customer). As indicated in the investor presentation on our website, we have progressed from 19% productive drilling time to 51% productive drilling time during the past 11 months. Further, each trial has yielded an improved drilling performance in terms of footage drilled during a 24 hour period. We have gone from 76 ft in May 2006 to 212 ft in March 2007. This may not be so impressive to you but we continue to gain industry recognition and with further surface equipment enhancements, our performance should continue to improve and other "large" oil and gas companies should be compelled to deploy our technology once we have done so.

Sincerely,
J. Chris Boswell
Senior Vice President & Chief Financial Officer
Particle Drilling Technologies, Inc.

Particle Drilling Technology's CFO Responds to the 10q Detective

David:

Just to restate your valuation metrics, you are assuming the Company will need to issue an additional 10 million shares in order to enter the oilfield services market (and with your valuation, few if any of the options and warrants would be exercised). You assume no revenue until 2008 and you assume that our current funding is insufficient to enter the market. With these assumptions in place and $3 million of EBITDA for 2008, you have arrived at a valuation of approximately $1 per share.

As you state in your article, this is based on an industry EBITDA multiple of approximately 10-12. Therefore using your assumptions, if we do not issue additional shares the valuation should improve by approximatley 25%. In addition, if we are able to generate revenue before 2008 and generate 2008 EBITDA of $6 million, $9 million or even $15 million, then your valuation would improve significantly unless something changes. Is this a fair assesment of your position and your valuation?

Thanks,
Chris Boswell