Since 1999, we have focused primarily in Matagorda County, the location of the Providence Field, and in Brooks County, the location of the Encinitas Field.

As of March 1, 2004, we have identified over 23 exploratory drilling locations with an additional 12 potential extension opportunities (depending on the success of our initial drilling activities on those locations) in the Frio/ Vicksburg trend area over which we have licenses for 3-D seismic data and leased acreage. Approximately 15 of the 23 exploratory locations we have identified are relatively lower risk and generally shallower with the remaining eight being relatively higher risk and deeper with greater upside potential.

From January 1, 2000 through December 31, 2003, we drilled and completed 38 wells (10.0 net) in 45 attempts in this trend. We incurred capital expenditures of $6.6 million and drilled 16 wells (3.4 net) in the Frio/ Vicksburg trend area in 2003 and expect to devote approximately $11.6 million to drill 14 wells (5.4 net) in this area in 2004.

Providence Field. We have licenses for over 540 square miles of 3-D data (including 450 square miles of newly reprocessed data delivered in 2003) in and surrounding the Providence Field we discovered in 2001. Since the discovery well commenced production in January 2002, five wells have been drilled and successfully completed. Four of the wells had average production rates ranging from 14,309 to 17,669 Mcfe per day per well during the first 90 full days of production. The field has cumulative production as of December 31, 2003 of 11.3 Bcfe. We have working interests ranging from 35% to 45% in the leases in this field and operate three of the six wells. We anticipate participating in two additional extension wells (1.0 net) in the field in second quarter 2004.

Encinitas Field. This field, the site of our first 3-D seismic survey in 1995, has 24 wells currently producing. Since 1996, we have participated in the drilling of 24 wells (4.0 net) in this area, 22 (3.5 net) of which were successfully completed. During 2003, we participated in the drilling of nine wells, all of which were successfully completed. We expect to drill between four and eight wells in 2004, with an additional six to 10 well locations to be drilled thereafter. We will have a 27.5% working interest in those wells.

SOUTHEAST TEXAS AREAS

The Southeast Texas area contains similar objective levels found in the Frio/Vicksburg/Yegua trend area. We separate this as a focus area because of the geographic concentration of our 3-D seismic data and because reservoirs in this area can display seismic amplitude anomalies. Seismic amplitude anomalies can be interpreted as an indicator of hydrocarbons, although these anomalies are not necessarily reliable as to hydrocarbon presence or productivity. We have acquired licenses for approximately 834 square miles of 3-D data (including 400 square miles of newly released data delivered in 2003) over our Southeast Texas project area which is focused primarily on the Frio, Yegua, Cook Mountain and Vicksburg formations. The project area is split into the Cedar Point and Liberty County areas.

As of March 1, 2004, we have identified over 15 exploratory drilling locations with an additional 10 potential extension locations in the Southeast Texas area over which we have licenses for 3-D seismic data. Approximately 12 of the 15 exploratory locations we have identified are relatively lower risk and generally shallower with the remaining three being relatively higher risk and deeper with greater upside potential.

From January 1, 2000 to December 31, 2003, we participated in the drilling and completion of 12 wells (4.3 net) in 17 attempts in this area. We incurred capital expenditures of $4.5 million and drilled five wells (1.3 net) in the Southeast Texas area in 2003 and expect to devote approximately $9.8 million and drilled nine wells (3.6 net) in this area in 2004. The Liberty Project Area and Cedar Point Project Area have proven to be successful for us, and we expect that the Liberty Project Area will constitute a significant portion of our drilling program for 2004.

Cedar Point

The Cedar Point Project Area is located in Chambers County, Texas, adjacent to Trinity Bay. The 30-square-mile 3-D survey targets the lower Frio and Vicksburg formations. Since 1999, five of six wells drilled have been successful. In 2003, we drilled one well that produced an average of 15,789 Mcfe per day during the first 90 full days of production. In December 2003, we completed an extension well that encountered approximately 41 feet of logged pay. Our working interest in leases in this project area is approximately 28% in the first well drilled in 2003 and 25% in the extension well.

Liberty

We have identified and leased prospects ranging from the Frio to the Cook Mountain formations within the 500 square miles of 3-D seismic data in the Liberty Project Area which, along with 290

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