estimated oil and natural gas reserves owned by us. For further information concerning the present value of future net revenue from these proved reserves, see Note 15 of Notes to Consolidated Financial Statements.

No estimates of proved reserves comparable to those included herein have been included in reports to any federal agency other than the Securities and Exchange Commission (the "Commission"). The reserve data set forth in this Annual Report on Form 10-K represent only estimates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Our reserve data and estimated discounted future net cash flows are estimates based on assumptions that may be inaccurate and are based on existing economic and operating conditions that may change in the future."

Our future oil and natural gas production is highly dependent upon our level of success in finding or acquiring additional reserves. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--We depend on successful exploration, development and acquisitions to maintain reserves and revenue in the future." Also, the failure of an operator of our wells to adequately perform operations, or such operator's breach of the applicable agreements, could adversely impact us. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--We cannot control the activities on properties we do not operate and are unable to ensure their proper operation and profitability."

OIL AND NATURAL GAS RESERVE REPLACEMENT

Finding and developing sufficient amounts of natural gas and crude oil reserves at economical costs are critical to our long-term success. Given the inherent decline of hydrocarbon reserves resulting from the production of those reserves, it is important for an exploration and production company to demonstrate a long-term trend of more than offsetting produced volumes with new reserves that will provide for future production. Management uses the reserve replacement ratio, as defined below, as an indicator of our ability to replenish annual production volumes and grow our reserves, thereby providing some information on the sources of future production. We believe reserve replacement information is frequently used by analysts, investors and others in the industry to evaluate the performance of companies like ours. The reserve replacement ratio is calculated by dividing the sum of reserve additions from all sources (revisions, extensions, discoveries, and other additions and acquisitions) by the actual production for the corresponding period. The values for these reserve additions are derived directly from the proved reserves table above. We do not use unproved reserve quantities in calculating our reserve replacement ratio. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. As an annual measure, the ratio is limited because it typically varies widely based on the extent and timing of new discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not take into consideration the cost of timing of future production of new reserves, it cannot be used as a measure of value creation. The ratio does not distinguish between changes in reserve quantities that are producing and those that will require additional time and funding to begin producing In that regard, it might be noted that percentage of reserves that were producing varied from 13.6% in 2002, to 11.2% in 2003 to 17.2% in 2004. Set forth below is our reserve replacement ratio for the year ended December 31, 2004, 2003 and 2002.

11