We have budgeted capital expenditures in 2004 of approximately $45.0 million, of which $39.8 million is expected to be used for drilling activities in our project areas and the balance is expected to be used to fund 3-D seismic surveys, land acquisitions and capitalized interest and overhead costs. We have budgeted to drill approximately 35 gross wells (14.3 net) in the Gulf Coast region and 13 gross wells (9.4 net) in our East Texas area and Barnett Shale trend in 2004. We expect to obtain a mezzanine project facility to finance a majority our acquisition, exploration and development program in the Barnett Shale trend in 2004. Assuming we are successful in obtaining this facility, our capital expenditures in the trend could be between $20 and $30 million in 2004. The actual number of wells drilled and capital expended is dependent upon available financing, cash flow, availability and cost of drilling rigs, land and partner issues and other factors.

We have continued to reinvest a substantial portion of our cash flows into increasing our 3-D prospect portfolio, improving our 3-D seismic interpretation technology and funding our drilling program. Oil and gas capital expenditures were $38.2 million, $26.7 million and $33.4 million for 2001, 2002 and 2003, respectively. Our drilling efforts resulted in the successful completion of 20 gross wells (5.9 net) in 2001, 17 gross wells (6.0 net) in 2002 and 35 gross wells (9.4 net) in 2003 in the Gulf Coast region. Of the 77 gross wells (29.0 net) drilled or acquired by CCBM, a majority have been contributed to Pinnacle.

CCBM spent $4.6 million for drilling costs through December 2003, 50% of which would be spent pursuant to an obligation to fund $2.5 million of drilling costs on behalf of RMG. Through December 31, 2003, CCBM has satisfied $2.3 million of its drilling obligations on behalf of RMG. Pinnacle has reported that it drilled 124 gross wells during the second half of 2003 and completed just under half of them by year-end 2003. Pinnacle reportedly added approximately 10.0 Bcf of net proved reserves through development drilling through December 31, 2003. Its gross operated production has increased by approximately 70% since its inception (to approximately 8.2 MMcf/d), and its total well count stands at 369 gross operated wells, according to Pinnacle.

FINANCING ARRANGEMENTS

Hibernia Credit Facility

On May 24, 2002, we entered into a credit agreement with Hibernia National Bank (the "Hibernia Facility") which matures on January 31, 2005, and repaid our existing facility with Compass Bank (the "Compass Facility"). The Hibernia Facility provides a revolving line of credit of up to $30.0 million. It is secured by substantially all of our assets and is guaranteed by our subsidiary.

The borrowing base will be determined by Hibernia National Bank at least semi-annually on each October 31 and April 30. The initial borrowing base was $12.0 million, and the borrowing base as of January 31, 2004 was $16.0 million. Each party to the credit agreement can request one unscheduled borrowing base determination subsequent to each scheduled determination. The borrowing base will at all times equal the borrowing base most recently determined by Hibernia National Bank, less quarterly borrowing base reductions required subsequent to such determination. Hibernia National Bank will reset the borrowing base amount at each scheduled and each unscheduled borrowing base determination date.

On December 12, 2002, we entered into an Amended and Restated Credit Agreement with Hibernia National Bank that provided additional availability under the Hibernia Facility in the amount of $2.5 million which is structured as an additional "Facility B" under the Hibernia Facility. As such, the total borrowing base under the Hibernia Facility as of December 31, 2002 and 2003 was $15.5 million and $19.0 million, respectively, of which $8.5 and $7.0 million, respectively, were drawn as of such dates. The Facility B bore interest at LIBOR plus 3.375%, was secured by certain leases and working interests in oil and natural gas wells and matured on April 30, 2003. We used proceeds from our offering in February 2004 to repay the outstanding balance under the Hibernia Facility. As of March 29, 2004, no amounts were drawn under the Hibernia Facility.

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