from the typical productive wells we drill in the Barnett Shale area is noteably longer-lived compared to the typical reserve profile from our wells drilled in our onshore Gulf Coast area.

We are drilling both vertical and horizontal wells in the Barnett Shale area. Typical costs to drill and complete are $550,000 for vertical wells and $1.5 to $2.5 million for horizontal wells. Our Barnett wells generally have target depths of 6,000 to 8,000 feet. During 2004, we held an average 40 percent, usually non-operated, working interest participation in the Barnett wells drilled. For wells drilled in 2005, we plan to retain larger working interests, generally ranging between 50 and 100 percent, and to operate a majority of the wells drilled.

Accordingly, we believe that continued development of producing reserves in the Barnett Shale play will have the potential to lengthen our overall average reserve life and, on balance, add a long-lived cash flow stream to help fund our future capital exploration and development program. In our Barnett Shale area through December 31, 2004, we had acquired approximately 30,717 net acres, drilled 33 gross (13.7 net) wells and increased our total proved reserves in the Barnett Shale area to 31.7 Bcfe. As of March 1, 2005, our current net production in the Barnett Shale area was estimated at 4.0 MMcfe/d and we had increased our leasehold and option position to over 35,000 net acres.

As of December 31, 2004, we operated 92 producing oil and gas wells, which accounted for 50% of the onshore Gulf Coast area producing wells in which we had an interest.

During 2001, through our wholly-owned subsidiary, CCBM, Inc. ("CCBM"), we acquired 50% of the working interests held by Rocky Mountain Gas, Inc. ("RMG") in approximately 107,000 net mineral acres prospective for coalbed methane located in the Powder River Basin in Wyoming and Montana. Subsequently, we participated in the acquisition and/or drilling of 77 gross wells (21 net) before jointly contributing with RMG a majority of our coalbed methane property interests and operations into a newly, formed company, Pinnacle Gas Resources, Inc. ("Pinnacle"). In exchange for the assets contributed, CCBM and RMG each received a 37.5% common stock ownership in Pinnacle and options to purchase additional common stock, or on a fully diluted basis, CCBM and RMG each received a 26.9% interest in Pinnacle. Simultaneously with the contribution of these assets, Credit Suisse First Boston Private Equity entities (the "CSFB Parties") contributed $17.6 million cash along with a future cash commitment to Pinnacle in exchange for common stock, warrants and preferred stock equal to a 46.2% interest on a fully diluted basis. In February 2004, the CSFB Parties contributed additional funds of $11.8 million into Pinnacle to continue funding the 2004 development program which increased their ownership to 66.7% on a fully diluted basis should we and RMG each elect not to exercise our available options. See "The Pinnacle Transaction" for more information on this transaction.

Historically, the business operations and development program of Pinnacle has not required us to provide any further capital infusion. In March 2005, Pinnacle acquired additional undeveloped acreage with an undisclosed company which would also significantly increase Pinnacle's development program budget in 2005. Accordingly, CCBM and the other Pinnacle shareholders have the option to participate in the equity contribution into Pinnacle needed to finance the acquisition and the related development program in 2005. Should we elect to maintain our proportionate ownership interest in Pinnacle, we estimate that we would be required to contribute $2.5 million. If CCBM opts not to contribute any or all of its share of the equity contribution, its fully diluted ownership in Pinnacle would be reduced. CCBM plans to contribute $2.5 million in April 2005, its share of the equity capital needed to close the acquisition and fund part of the additional development program. There can be no assurance regarding CCBM's level of participation in future equity contributions needed, if any. On March 29, 2005, we elected to participate and contribute $2.5 million to Pinnacle in exchange for warrants and preferred stock.

In addition to our interest in Pinnacle, CCBM has maintained interests in approximately 162,489 gross acres at the end of 2004 in the Castle Rock coalbed methane project area in Montana and the Oyster Ridge project area in Wyoming. During 2004, we opted to exercise our right to cancel one-half of the remaining note payable to RMG, or approximately $300,000, in exchange for assigning one-half of our mineral interest in the Oyster Ridge leases to RMG.

Certain terms used herein relating to the oil and natural gas industry are defined in "Glossary of Certain Industry Terms" below.

BUSINESS STRATEGY

Growth Through the Drillbit

Our objective is to create shareholder value through the execution of a business strategy designed to capitalize on our strengths. Key elements of our business strategy include:

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