COMPANY PROFILE

We have grown our production through our 3-D seismic-driven exploratory drilling program. From our inception through December 31, 2003, we participated in the drilling of 295 wells (89.9 net) with a success rate of approximately 68 percent in our onshore Gull Coast core area. Exploratory wells accounted for 97 percent of the total wells we drilled.

As a main component of our business strategy, we have acquired license5 for over 8,700 square miles of 3-D seismic data for processing and evaluation. Since 2001, we have been able to increase the size of our 3-C seismic holdings in our onshore Gulf Coast core area by approximately 75 percent to over 6,650 square miles, in large part by taking advantage of very favorable pricing available for nonproprietary data. One of our primary strengths is the experience of our management and technical staff in the development, processing and analysis of this 3-D seismic data to generate and drill natural gas and oil prospects. Our technical and operating employees have an average of over 20 years industry experience, in many cases with major and large independent oil and gas companies. Using our 3-D seismic database, our highly qualified technical staff is continually adding to and refining our substantial inventory of drilling locations.

We believe that our utilization of large-scale 3-D seismic surveys and related technology allows us to create and maintain a multiyear inventory of high- quality exploration prospects. As of December 31, 2003, we had 98,557 gross acres in Texas and Louisiana under lease or lease option, almost all of which is covered by 3-D seismic data. On this leased acreage, we have identified over 120 potential exploratory drilling locations, including over 45 additional extension opportunities, depending on the success of our initial drilling activities on those locations.

In 2003, our capital expenditures were $29.7 million, used primarily to drill 39 wells (10.2 net). In 2004, we expect capital expenditures to be approximately $45 million (a 51 percent increase over our 2003 capital expenditures). We expect to drill 36 wells (16.2 net) in the onshore Gulf Coast in 2004, 30 of which we plan to operate and substantially all of which we anticipate will be exploratory wells.

Our other interests include properties in East Texas, a coalbed methane investment in the Rocky Mountains and, recently, the Barnett Shale trend in North Texas. Additionally, in 2003 we obtained licenses to explore in the U.K. North Sea.