In 2001, the Company agreed to sell its interest in MPC pursuant to an agreement between MPC and its shareholders for the sale of a majority interest in MPC to Calpine Natural Gas Company. The Company expects to receive total cash proceeds of between $5.5 and $5.7 million, of which $5.5 million was paid to the Company during the third quarter of 2001, resulting in a financial statement gain of $3.9 million being reflected in the third quarter 2001 financial results.

4. PROPERTY AND EQUIPMENT

At December 31, 2000 and 2001, property and equipment consisted of the following:

     Oil and natural gas properties not subject to amortization consist of the cost of unevaluated leaseholds, seismic costs associated with specific unevaluated properties, exploratory wells in progress, and secondary recovery projects before the assignment of proved reserves. These unproved costs are reviewed periodically by management for impairment, with the impairment provision included in the cost of oil and natural gas properties subject to amortization. Factors considered by management in its impairment assessment include drilling results by the Company and other operators, the terms of oil and natural gas leases not held by production, production response to secondary recovery activities and available funds for exploration and development. Of the $44,416,146 of unproved property costs at December 31, 2001 being excluded from the amortizable base, $4,231,137, $4,498,294 and $11,251,050 were incurred in 1999, 2000 and 2001, respectively. The Company expects it will complete its evaluation of the properties representing the majority of these costs within the next two to five years.

5. INCOME TAXES

All of the Company's income is derived from domestic activities. Actual income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate rate of 35 percent to pretax income as follows: