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(1) We expect to obtain a mezzanine project facility to finance a majority of our exploration and development program in the Barnett Shale play in 2004. Accordingly, our 2004 capital spending program in the Barnett Shale trend could increase significantly. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

For purposes of presentation, we divide our onshore Gulf Coast core region into four main producing areas: Wilcox, Frio/Vicksburg, Southeast Texas and South Louisiana. Our onshore Gulf Coast core area generally contains geologically complex natural gas objectives well-suited for drilling using 3-D seismic evaluation.

In our onshore Gulf Coast area, we have identified over 120 exploratory drilling opportunities on acreage we have under lease or have an option to lease, including over 45 additional extension opportunities, depending on the success of our initial drilling activities on those locations. We have budgeted approximately $40 to $45 million to drill approximately 35 wells (14.3 net) and to purchase and reprocess 3-D seismic surveys during 2004.

We have licenses for approximately 1,800 square miles of 3-D seismic data and 18,326 acres of leasehold in the Wilcox trend in Texas. From January 1, 2000 through December 31, 2003, we drilled and completed 32 wells (9.2 net) on 40 attempts in this area. We incurred capital expenditures of $5.5 million and drilled eight wells (2.3 net) in the Texas Wilcox area in 2003 and expect to devote approximately $7.0 million to drill eight wells (3.8 net) in this area in 2004. As of March 1, 2004, we have identified over 30 exploratory drilling locations, with an additional 22 potential extension opportunities, in the Wilcox trend over which we have licenses for 3-D seismic data and leased acreage. Approximately 18 of the 30 exploratory locations we have identified are relatively lower risk and generally shallower with the remainder being relatively higher risk and deeper with greater upside potential.

Greater Cabeza Creek. Since January 1, 2000, our exploration efforts in the Wilcox area largely have been focused in the greater Cabeza Creek area centered in Goliad, Lavaca and Dewitt Counties, where we have licenses for over 950 square miles of 3-D seismic data and 5,400 net acres of leasehold. From January 1, 2000 through December 31, 2003, we drilled 14 wells (7.1 net) with an 86% success rate in this area. Our most notable discovery was the Riverdale Field in 2001, where we have 68.8% working interest. The Riverdale Field was delineated with two extension wells. The greater Cabeza Creek area continues to be a primary focus area in the middle and lower Wilcox intervals which have relatively higher potential and risk. We have a significant acreage position to either explore ourselves or sell to third parties while retaining a promoted interest.

This combined trend area sometimes overlaps but is generally closer to the Texas Gulf Coast than the Wilcox areas discussed above. In any particular target or prospect in this area, the Frio is the shallower formation, above the deeper Vicksburg and still deeper Yegua formations. We have licenses for a total of over 2,100 miles of 3-D seismic data and 8,922 net leasehold acres over this trend.