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 $191.1 million, $123.4 million and $83.9 million (including the Barnett Shale Acquisition) for 2006, 2005 and 2004, respectively. Our efforts resulted in the apparent drilling successes comprised of 70 gross wells in 2006, including 46 gross wells in the Barnett Shale area, 65 gross wells in 2005, including 37 gross wells in the Barnett Shale area, and 65 gross wells in 2004, including 33 gross wells in the Barnett Shale area.

We have increased the development of our Camp Hill project. In August 2005, management proposed the acceleration of the Camp Hill development to our board of directors. Accordingly, a development plan was formally approved by the board for increased drilling activity in the Camp Hill Field, beginning with an initial 60-well drilling program. In February 2006, our board of directors formally approved a multi-year plan to fully develop the entire Camp Hill Field. In furtherance of this plan, we expect to drill between 25 and 30 gross wells in this area at an estimated cost of $2.3 million during 2007. To fully develop the field, we expect to drill approximately 315 wells from 2007 through 2018, at a total cost of approximately $18.8 million and total operating costs including steam of approximately $128.0 million. The precise timing and amount of our expenditures on additional well drilling and increased steam injection to develop the proved undeveloped reserves in this project will depend on several factors including the relative prices of oil and natural gas.

Off Balance Sheet Arrangements

We currently do not have any off balance sheet arrangements.

Financing Arrangements

First Lien 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 “First Lien Credit Facility”), which was to mature on September 30, 2007. The First Lien Credit Facility provided for (1) a revolving line of credit of up to the lesser of the Facility A Borrowing Base and $75.0 million and (2) a term loan facility of up to the lesser of the Facility B Borrowing Base and $25.0 million (subject to the limit of the borrowing base, which was $22.5 million at March 31, 2006). It was secured by substantially all of our assets and was guaranteed by our subsidiary. On May 25, 2006, we terminated this agreement upon entering into the Senior Credit Facility as described below.

Second Lien Credit Facility

On July 21, 2005, we entered into a Second Lien Credit Agreement with Credit Suisse, as administrative agent and collateral agent (the “Agent”) and the lenders party thereto (the “Second Lien Credit Facility”) that matures on July 21, 2010. The Second Lien Credit Facility provides for a term loan facility in an aggregate principal amount of $225.0 million. It is secured by substantially all of our assets and is guaranteed by our subsidiaries. The liens securing the Second Lien Credit Facility were second in priority to the liens securing the First Lien Credit Facility prior to its termination in May 2006, as discussed above, and are second in priority to the liens securing the Senior Credit Facility.

On December 20, 2006, the Company, entered into an amendment, effective as of December 19, 2006, to the Second Lien Credit Facility (the “December 2006 Amendment”). The amendment increased the principal amount available for borrowings under the Second Lien Credit Facility from $150 million to $225 million. The amendment also included the following, without limitation: (1) a reduction in the interest rate on each Eurodollar loan such that it is the adjusted LIBO rate plus a margin of 4.75%; (2) a reduction in the interest rate on each base rate loan such that it is (i) the greater of the Agent’s prime rate and the federal funds effective rate plus 0.5%, plus (ii) a margin of 3.75%; (3) an adjustment to the minimum quarterly interest coverage ratio such that it is 2.75 to 1.0 through and including December 31, 2007 and 3.0 to 1.0 thereafter; (4) an adjustment to the minimum quarterly proved reserve coverage ratio such that it is 1.5 to 1.0 through December 31, 2007 and 2.0 to 1.0 thereafter; and (5) a maximum total net recourse debt to EBITDA ratio of not more than 3.75 to 1.0 through December 31, 2007 and 3.25 to 1.0 thereafter.

The interest rate on each base rate loan will be the greater of the Agent’s prime rate and the federal funds effective rate plus 0.5%, plus a margin of 3.75%. The interest on each Eurodollar loan will be the adjusted LIBO rate plus a margin of 4.75%. Interest on Eurodollar loans is payable on either the last day of each period or every three months, whichever is earlier. Interest