Onshore Gulf Coast Area

For purposes of presentation, we divide our onshore Gulf Coast area into four main producing areas: Wilcox, Frio/Vicksburg, Southeast Texas and South Louisiana. Our onshore Gulf Coast area generally contains geologically complex natural gas objectives well-suited for drilling using 3-D seismic evaluation.

In our onshore Gulf Coast area, we have a total inventory of 106 leased exploratory drillsites, 55 of which are field extension wells based on initial drilling success. We are pursuing acreage on an additional 85 seismically defined prospects. We plan to spend approximately $24.7 million on drilling expenditures in 2007, comprised of approximately 15 wells (7.0 net). We also plan to spend $3.1 million to purchase and reprocess 3-D seismic surveys during 2007.

Texas - Wilcox Areas

We have licenses for approximately 2,278 square miles of 3-D seismic data and 12,976 net acres of leasehold in the Wilcox trend in Texas. From January 1, 2003 through December 31, 2006, we drilled and completed 27 wells (8.8 net) on 30 attempts in this area. We incurred capital drilling expenditures of $4.9 million and drilled six wells (1.5 net) in the Texas Wilcox area in 2006 and expect to devote approximately $4.0 million to drill three gross wells (0.8 net) in this area in 2007. In the Wilcox area 43 exploratory drillsites have been leased, 30 of which are field extension wells based on results of initial drilling. We are pursuing acreage on an additional 38 seismically defined prospects.

Texas Frio/Vicksburg/Yegua Areas

This combined trend area sometimes overlaps but is generally closer to the Texas Gulf Coast than the Wilcox areas discussed above. In any particular target or prospect in this area, the Frio is the shallower formation, above the deeper Vicksburg and still deeper Yegua formations. We have licenses for a total of over 2,271 miles of 3-D seismic data and 11,045 net leasehold acres over this trend. Our current focus is primarily in Brooks County, the location of the Encinitas Field.

We have an inventory of 14 leased exploratory drillsites in the Frio/Vicksburg trend, four of which are field extension wells based on success of initial drilling. We are pursing acreage on an additional 19 seismically defined prospects.

From January 1, 2003 through December 31, 2006, we drilled and completed 38.0 wells (9.0 net) in 42 attempts in this trend. We incurred capital drilling expenditures of $5.3 million and drilled two wells (0.6 net) in the Frio/Vicksburg trend area in 2006 and expect to devote approximately $1.7 million to drill three wells (0.9 net) in this area in 2007.