on base rate loans is payable quarterly. On December 31, 2006, the interest rate was approximately 10.11%, excluding the impact of interest rate swaps on the Company’s outstanding borrowings under the Second Lien Credit Facility.

We are subject to certain covenants under the amended terms of the Second Lien Credit Facility. These covenants include, but are not limited to, the maintenance of the following financial covenants: (1) a minimum current ratio of 1.0 to 1.0 including availability under the borrowing base under the Senior Credit Facility; (2) a minimum quarterly interest coverage ratio of 2.75 to 1.0 through December 31, 2007 and 3.0 to 1.0 thereafter; (3) a minimum quarterly proved reserve coverage ratio of 1.5 to 1.0 through December 31, 2007 and 2.0 to 1.0 thereafter; and (4) a maximum total net recourse debt to EBITDA (as defined in the Second Lien Credit Facility) ratio of not more than 3.75 to 1.0 through December 31, 2007 and 3.25 to 1.0 thereafter.

The Second Lien Credit Facility also places restrictions on additional indebtedness, dividends to shareholders, liens, investments, mergers, acquisitions, asset dispositions, repurchase or redemption of our common stock, speculative commodity transactions, transactions with affiliates and other matters.

The Second Lien Credit Facility is subject to customary events of default. Subject to certain exceptions, if an event of default occurs and is continuing, the Agent may accelerate amounts due under the Second Lien Credit Facility (except for a bankruptcy event of default, in which case such amounts will automatically become due and payable). If an event of default occurs under the Second Lien Credit Facility as a result of an event of default under the Senior Credit Facility, the Agent may not accelerate the amounts due under the Second Lien Credit Facility until the earlier of 45 days after the occurrence of the event resulting in the default and acceleration of the loans under the Senior Credit Facility.

As of December 31, 2006, we had $147.8 million of borrowing outstanding under the Second Lien Credit Facility. In January 2007, the Company drew the additional $75.0 million in borrowings and received net proceeds of $72.1 million related to the December 2006 Amendment.

Senior Secured Revolving Credit Facility

On May 25, 2006, we entered into a Senior Secured Revolving Credit Facility (“Senior Credit Facility”) with JPMorgan Chase Bank, National Association, as administrative agent that matures on May 25, 2010. The Senior Credit Facility provides for a revolving credit facility up to the lesser of the borrowing base and $200.0 million. It is secured by substantially all of our assets and is guaranteed by our subsidiaries. The liens securing the Senior Credit Facility are first in priority to the liens securing the Second Lien Credit Facility.

As of December 31, 2006, we had $41.0 million of borrowings outstanding on a borrowing base availability of $65.0 million.

On December 20, 2006, the Company amended its Senior Credit Facility (the “Senior Credit Amendment”) in connection with the aforementioned December 2006 Amendment. On January 3, 2007, the Company drew the $75.0 million of additional borrowings from its Second Lien Credit Facility, using a portion of the net proceeds to repay the $41.0 million of outstanding borrowings under the Senior Credit Facility.

Following the repayment of the outstanding borrowings on January 3, 2007, the amended and undrawn borrowing base was $54.25 million, with a conforming borrowing base of $46.75 million and subject to monthly reductions of $1.69 million commencing May 1, 2007 and continuing on the first day of each month thereafter until the borrowing base is redetermined. We may request one unscheduled borrowing base determination subsequent to each scheduled determination, and the lenders may request unscheduled determinations at any time. In the event the outstanding principal balance of indebtedness under the Second Lien Credit Facility exceeds $225.0 million, the borrowing base under the Senior Credit Facility will be reduced $1.00 for every $4.00 of such additional indebtedness under the Second Lien Credit Facility.

If the outstanding principal balance of the revolving loans under the Senior Credit Facility exceeds the borrowing base at any time, we have the option within 30 days to take any of the following actions, either individually or in combination: make a lump sum payment curing the deficiency, pledge additional collateral sufficient in the lenders' opinion to increase the borrowing base and cure the deficiency or begin making equal monthly principal payments that will cure the deficiency within the ensuing sixmonth period. Those payments would be in addition to any payments that may come due as a result of the quarterly borrowing base reductions. Otherwise, any unpaid principal or interest will be due at maturity.

The annual interest rate on each base rate borrowing will be (1) the greatest of the Agent’s Prime Rate, the Base CD Rate plus 1.0% and the Federal Funds Effective Rate plus 0.5%, plus (2) a margin between 0.25% and 1.75% (depending on the current level of borrowing base usage). The interest rate on each Eurodollar Loan will be the adjusted LIBOR Rate plus a margin between 1.5% to 3.0% (depending on the current level of borrowing base usage).