INFORMATION ON BUSINESS SEGMENTS

6 Months Ended

Jun. 30, 2011

NOTE 8 - INFORMATION ON BUSINESS SEGMENTS

The Company operates in three business segments: Pipeline, Oil and Gas Property Management, and Exploration and Production.

Pipeline

Gulfstar LLC has built and currently operates a 16-mile nature gas pipeline located in Western Kentucky for the transportation of natural gas. The pipeline operations transport gas to a burner tip processing plant located near Bowling Green, Kentucky where it is sold pursuant to a gas purchase agreement. Pipeline revenue is recognized upon delivery of the gas to its customer. The pipeline has a throughput capacity of 18 Million Cubic Feet per day (MMcf/d). The pipeline is currently not operating at full capacity as it transported an average of 83 and 81 Mcf/d respectively of natural gas during the three and six months ended June 30, 2011 and an average of 102 and 51 Mcf/d, respectively, of natural gas during the three and six months ended June 30, 2010.

Oil and Gas Property Management (“O&G Property Mgmt”)

Gulfstar LLC is the manager and operator of 20 wells in Western Kentucky. Gulfstar LLC offers working interests in the properties on behalf of the leaseholders. Using these funds, Gulfstar LLC pays for the costs incurred in drilling, reworking and development of the wells. Gulfstar LLC holds an overriding royalty interest of approximately 12.5% and holds mineral rights on approximately 9,000 acres of leased land. Gulfstar collects revenues on behalf of the working interest holders and distributes each working interest holders’ share of revenue when collected. A receivable is recorded for oil and gas revenue when earned and a related payable due to interest holders is recorded net of the 12.5% revenue interest and direct costs due to Gulfstar LLC.

Exploration and Production (“E&P”)

During the fourth quarter of 2010, Gulfstar LLC began drilling a horizontal well located in Warren County, Kentucky with total capitalized costs of $320,980 as of June 30, 2011. Gulfstar LLC owns a working interest of 64.0% and a net revenue interest of 48.0% in this well and anticipates completion of this well by the end of 2011. After completion, the well will be connected to Gulfstar LLC’s pipeline for delivery of gas. Also, Gulfstar LLC own a similar working and net revenue interest in an offset well that produces oil. During the three and six months ended June 30, 2011, this well produced net revenue of $7,407 and $26,940, respectively.

The following data is presented for the Company's three operating segments: Pipeline, O&G Property Management and E&P.

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011	2010	2011	2010
Net Revenue
Pipeline	$ 18,539	$ 28,245	$ 35,661	$ 28,245
O&G Property Management	10,729	4,889	19,766	9,058
E&P	7,407	-	26,940	-
Total Net Revenues	36,675	33,134	82,367	37,303
Operating Income (Loss)
Pipeline	(69,341)	16,903	(137,670)	16,903
O&G Property Management	10,729	4,889	19,766	9,058
E&P	(360,962)	-	(341,429)	-
Corporate	(379,873)	(427,361)	(855,635)	(625,200)
Total Operating (Loss)	(799,447)	(405,569)	(1,314,968)	(599,239)
Other Income (Expense)	1,232,964	1,988	1,232,049	233,353
(Loss) Before Income Taxes	$ 433,517	$ (403,581)	$ (82,919)	$ (365,886)

	June 30, 2011		December 31, 2010
Total Assets
Pipeline	$	4,230,922	$	4,213,512
O & G Property Management		18,145		3,758
E &P		417,479		706,893
Corporate		475,148		170,456
Total Assets	$	5,141,694	$	5,076,669

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8595-108599

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Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 131
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef
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+ Details

GulfStar Energy Corp 10-Q