This annual report describes the progress during the second year of a project on Reservoir Characterization of Pennsylvanian Sandstone Reservoirs. The report is divided into three sections: (i) reservoir description and scale-up procedures; (ii) outcrop investigation; (iii) in-fill drilling potential. The first section describes the methods by which a reservoir can be characterized, can be described in three dimensions, and can be scaled up with respect to its properties, appropriate for simulation purposes. The second section describes the progress on investigation of an outcrop. The outcrop is an analog of Bartlesville Sandstone. We have drilled ten wells behind the outcrop and collected extensive log and core data. The cores have been slabbed, photographed and the several plugs have been taken. In addition, minipermeameter is used to measure permeabilities on the core surface at six inch intervals. The plugs have been analyzed for the permeability and porosity values. The variations in property values will be tied to the geological descriptions as well as the subsurface data collected from the Glen Pool field. The third section discusses the application of geostatistical techniques to infer in-fill well locations. The geostatistical technique used is the simulated annealing technique because of its flexibility. One of the important reservoir data is the production data. Use of production data will allow us to define the reservoir continuities, which may in turn, determine the in-fill well locations. The proposed technique allows us to incorporate some of the production data as constraints in the reservoir descriptions. The technique has been validated by comparing the results with numerical simulations.