2007 - 2008

Looking forward, our East Texas Development Program should continue to yield long-term benefits for our company. Acquisition of core lease positions in the six counties that comprise the currently very active, 50+ year-old Cotton Valley Trend field of East Texas, has grown to over 9,000 acres.

The Cotton Valley Trend is one of the most active onshore drilling plays in the United States. Currently, over 100 rigs are running in the trend.

Highlights

• Successful completion rates have averaged 98% for the past 20 years.
• Changes in well spacing requirements have contributed to increased drilling activity.
• Access to interstate gas markets.
• Cotton Valley wells can produce for 15-20 years or more.
• Initial production rates can be over 1,500,000 cubic feet of gas per day.
• Good BTU value of gas.
• Cotton Valley sandstone wells can recover 1 billion + cubic feet of gas.
• Wells can also produce from the Pettit, Travis Peak & Cotton Valley lime zones and can add significant reserve potential.