We have planned capital expenditures in 2005 of approximately $85 to $90 million, of which $70.0 million is expected to be used for drilling activities in our project areas and the balance is expected to be used to fund 3-D seismic surveys, land acquisitions and capitalized interest and overhead costs. We plan to drill approximately 34 gross wells (14.4 net) in the onshore Gulf Coast area and 37 gross wells 24.0 net in our Barnett Shale and nine gross well (7.7 net) in our East Texas areas in 2005. As described above, we expect to seek additional financing to fund a portion of our acquisition, exploration and development program in 2005. If we are not successful in obtaining this financing, our capital expenditures could be reduced by $15 to $20 million in 2005. The actual number of wells drilled and capital expended is dependent upon available financing, cash flow, availability and cost of drilling rigs, land and partner issues and other factors. The planned capital expenditures do not include the additional contributions to Pinnacle as described under "- General Overview - Pinnacle Gas Resources, Inc."

We have continued to reinvest a substantial portion of our cash flows into increasing our 3-D prospect portfolio, improving our 3-D seismic interpretation technology and funding our drilling program. Oil and gas capital expenditures were $23.3 million, $31.9 million and $82.6 (including the Barnett Shale Acquisition) for 2002, 2003 and 2004, respectively. Our drilling efforts resulted in the successful completion of 17 gross wells (6.0 net) in 2002, 35 gross wells (9.4 net) in 2003, including six gross wells (2.1 net) in the Barnett Shale area, and 65 gross wells (23.6 net) in 2004 including 33 gross wells (13.7 net) in the Barnett Shale area . We also expect to make an additional $2.5 million equity contribution to Pinnacle. See "-Overview-Pinnacle Gas Resources, Inc."

Since its inception, CCBM has spent $5.0 million for drilling costs through the end of 2004, 50% of which was applied pursuant to an obligation to fund $2.5 million of drilling costs on behalf of RMG. By December 31, 2004, CCBM had satisfied all of its drilling obligations on behalf of RMG.

Through the end of 2004, Pinnacle has reported that it has drilled 241 gross wells since inception and estimates that 97% of these wells have been completed. Pinnacle reportedly added approximately 16.2 Bcfe of net proved reserves through development drilling through December 31, 2004, excluding the 10.6 Bcfe contributed or acquired at inception. Its gross operated production has increased by approximately 170% since its inception (to approximately 13 MMcf/d at December 31, 2004), and its total well count stands at 485 gross operated wells, according to Pinnacle. Because of the nature of coalbed methane wells that require an extended dewatering period before significant natural gas production, Pinnacle has not been able to complete its determination on commerciality of all of these wells.

OFF BALANCE SHEET ARRANGEMENTS

We currently do not have any off balance sheet arrangements.

FINANCING ARRANGEMENTS

Credit Facility

On September 30, 2004, we entered into a Second Amended and Restated Credit Agreement with Hibernia National Bank and Union Bank of California, N.A. (the "Credit Facility"), maturing on September 30, 2007. The Credit Facility amended, restated and extended our prior credit facility with Hibernia National Bank, amended and restated on December 12, 2002 (such prior facility herein referred to as the "Prior Credit Facility"). The Credit Facility provides for (1) a revolving line of credit of up to the lesser of the

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