Oil and natural gas operating expenses for 2005 increased 24% to $10.4 million from $8.4 million in 2004. Oil and natural gas operating expenses increased primarily due to higher severance taxes of $1.5 million on higher commodity prices, while higher lifting costs of $0.5 million were attributable to the increased number of producing wells and in part due to higher ad valorem taxes. Operating expenses per equivalent unit in 2005 increased to $1.09 per Mcfe from $1.01 per Mcfe in 2004. The per unit cost increased primarily as a result of the higher costs noted above.

Depreciation, depletion and amortization (“DD&A”) expense for 2005 increased 38% to $21.4 million from $15.5 million in 2004. This increase was primarily due to (1) an increase in production volumes and (2) an increase in the DD&A rate attributable to the increased land, seismic and drilling costs added to the proved property cost base and to future development costs largely related to the significant increase in Barnett Shale wells.

General and administrative (“G&A”) expense for 2005 increased 36% to $11.2 million from $8.3 million for 2004. The increase in G&A was due primarily to higher salary (due to increased headcount and annual raises) and incentive compensation costs and in part due to $0.3 million of expenses related to an integrated software migration project. Stock based compensation in 2005 increased by $1.4 million to $2.5 million compared to 2004.

Mark-to-market loss on derivatives, net was $5.9 million in 2005 comprised of (1) $2.3 million of realized loss on net settled derivatives and (2) $3.6 million of net unrealized loss on the derivatives accounted for as non-designated derivatives. Mark-tomarket gain (loss) of derivatives, net was $(0.6) million in 2004 comprised of (1) $1.0 million of realized loss on net settled derivates and (2) $0.4 million of net unrealized gain on the derivatives accounted for as fair value hedges.

We recorded a $2.5 million after tax charge, or $0.10 per fully diluted share, on our minority interest in Pinnacle for the ended year December 31, 2005. Of this charge, $0.9 million relates to a valuation allowance for federal income taxes and $1.0 million is for the mark-to-market loss on derivatives. It is likely that Pinnacle will continue to record a valuation allowance on the deferred federal tax benefit generated from the operating losses incurred during the early development stages of Pinnacle’s coalbed methane project. Concurrently, we will record valuation allowances relative to our share of Pinnacle’s financial results.

Interest income was $0.9 million for the year of 2005 compared to $0.1 million in the year of 2004. The increase is due to the significant increase in the average cash and cash equivalent balance outstanding in connection with the July 2005 debt refinancing and borrowings under the $150.0 million Second Lien Credit Facility.

Interest expense and capitalized interest in 2005 were $11.0 million and ($5.8) million, respectively, as compared to interest expense and capitalized interest of $3.6 million and ($2.9) million in 2004. These increases in 2005 are attributable to the aforementioned debt refinancing in July 2005.

Income taxes increased to $7.5 million in 2005 from $7.0 million in 2004 due to the increase in pre-tax income, including the valuation allowance for the equity in loss of Pinnacle Gas Resources, Inc.

Dividends and accretion of discount on preferred stock decreased to zero in 2005 from $0.4 million in 2004 as a result of the conversion of all of the Series B Preferred Stock into common stock during the second quarter of 2004.