proved reserves subsequent to those dates sufficiently increased the present value of our oil and natural gas assets and removed the necessity to record a write-down in these periods. Using the prices in effect and estimated proved reserves on December 31, 2001, March 31, 2003 and September 30, 2003, the after-tax write-down would have been approximately $6.3 million, $1.0 million, and $6.3 million, respectively, had we not taken into account these subsequent improvements. These improvements at September 30, 2003 included estimated proved reserves attributable to our Shady Side #1 well. Because of the volatility of oil and gas prices, no assurance can be given that we will not experience a write-down in future periods.

In connection with our year-end 2003 ceiling test computation, a price sensitivity study also indicated that a 20 percent increase in commodity prices at December 31, 2003 would have increased the pre-tax present value of future net revenues ("NPV") by approximately $28.1 million. Conversely, a 20 percent decrease in commodity prices at December 31, 2003 would have reduced our NPV by approximately $27.8 million. This would have caused our unamortized cost of proved oil and gas properties to exceed the cost pool ceiling, resulting in an after-tax write-down of approximately $7.7 million. The aforementioned price sensitivity and NPV is as of December 31, 2003 and, accordingly, does not include any potential changes in reserves due to first quarter 2004 performance, such as commodity prices, reserve revisions and drilling results.

Under the full cost method of accounting, the depletion rate is the current period production as a percentage of the total proved reserves. Total proved reserves include both proved developed and proved undeveloped reserves. The depletion rate is applied to the net book value and estimated future development costs to calculate the depletion expense.

We have a significant amount of proved undeveloped reserves, which are primarily oil reserves. We had 44.9 Bcfe of proved undeveloped reserves, representing 64% of our total proved reserves at December 31, 2003. These reserves are primarily attributable to our Camp Hill properties we acquired in 1994. This ratio of proved undeveloped reserves to total proved reserves and the producing properties that have had an average productive life of 2.25 years since our inception, compared to the average 10 year depletable life for the total proved reserves, has resulted in a relatively low historical depletion rate and depreciation expense. This has resulted in a capitalized cost basis associated with producing properties being depleted over a longer period than the associated production and revenue stream. It has also resulted in the build-up of nondepleted capitalized costs associated with properties that have been completely produced out.

We expect our low historical depletion rate to continue until the high level of nonproducing reserves to total proved reserves is reduced and the life of our proved developed reserves is extended through development drilling and/or the significant addition of new proved producing reserves through acquisition or exploration. If our level of total proved reserves and current prices were both to remain constant, this continued build-up of capitalized costs increases the probability of a ceiling test write-down.

We depreciate other property and equipment using the straight-line method based on estimated useful lives ranging from five to 10 years.

SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Intangible Assets," were issued by the FASB in June 2001 and became effective for us on July 1, 2001 and January 1, 2002, respectively. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Additionally, SFAS No. 141 requires companies to disaggregate and report separately from goodwill certain intangible assets. SFAS No. 142 establishes new guidelines for accounting for goodwill and other intangible assets. Under SFAS No. 142, goodwill and certain other intangible assets are not amortized but rather are reviewed annually for impairment.

Natural gas and oil mineral rights held under lease and other contractual arrangements representing the right to extract such reserves for both undeveloped and developed leaseholds may have to be classified separately from natural gas and oil properties as intangible assets on our consolidated balance sheets. In addition, the disclosures required by SFAS No. 141 and 142 relative to intangibles would be included in the notes to the consolidated financial statements. Historically, we, like many other natural gas and oil companies, have included these rights as part of natural gas and oil properties, even after SFAS No. 141 and 142 became effective.

As it applies to companies like us that have adopted full cost accounting for natural gas and oil activities, we understand that this interpretation of SFAS No. 141 and 142 would only affect our balance sheet classification of proved natural gas and oil leaseholds acquired after June 30, 2001 and all of our unproved natural gas and oil leaseholds. We would not be required to reclassify proved reserve leasehold acquisitions prior to June 30, 2001 because we did not separately value or account for these costs prior to the adoption date of SFAS No. 141. Our results of operations and cash flows would not be affected, since these natural gas and oil mineral rights held under lease and other contractual arrangements representing the right to extract natural gas and oil reserves would continue to be amortized in accordance with full cost accounting rules.

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