Conventional pressure transient models strictly apply to areally homogeneous reservoirs. Yet, core and log data indicate this assumption is often not justified. This paper describes a model for heterogeneous reservoirs and supporting field data from the Grayburg/ San Andres formations in southeastern New Mexico. Conventional models fail to match these field data. Instead, a model for a heterogeneous reservoir with a fractal structure provides a quantitative analysis. The fractal reservoir model reduces to the conventional solution in the case of a homogeneous reservoir.