producing trend of the onshore Gulf Coast area and industry-proven trend of the Barnett Shale area. We continue to evaluate and acquire acreage in new emerging resource project areas. In 2007, we added approximately 588 square miles of newly released or proprietary 3-D seismic data. We believe our utilization of large-scale 3-D seismic surveys and related technology provides us with the opportunity to maximize our exploration success in the Gulf Coast, Barnett Shale, and new resource project areas. As of December 31, 2007, we had accumulated licenses for approximately 12,385 square miles of 3-D seismic data (including 10,786 square miles in our significant project areas) and identified over 953drilling locations and extension opportunities (comprised of 817 locations in the Barnett Shale area and 136 locations in the Gulf Coast area). We believe our use of 3-D seismic surveys reduces, but does not eliminate, the risk of drilling.
   
• Maintain a Balanced Exploration Drilling Portfolio. We seek to balance our drilling program between projects with relatively lower risk and moderate potential and drilling prospects that have relatively higher risk and substantial potential. We believe we have furthered this strategy through the expansion of the Barnett Shale operations in which our wells generally have longer-lived reserves and generally lower risk/lower reward than our average onshore Gulf Coast area wells. We will continue to expand our exploratory drilling portfolio, including lease acquisitions with exploration potential.
   
• Manage Risk Exposure by Market Testing Prospects and Optimizing Working Interests. We seek to limit our financial and operating risks by varying our level of participation in drilling prospects with differing risk profiles and by seeking additional technical input and economic review from knowledgeable industry participants regarding our prospects. Additionally, we rely on advanced technologies, including 3-D seismic analysis, to better define geologic risks, thereby enhancing the results of our drilling efforts. The use of 3-D seismic analysis does not guarantee that hydrocarbons are present or, if present, that they can be recovered economically. We also seek to operate our projects in order to better control drilling costs and the timing of drilling.
   
• Retain and Incentivize a Highly Qualified Technical Staff. We employ 36natural gas and oil professionals, including geophysicists, petrophysicists, geologists, petroleum engineers and production and reservoir engineers and technical support staff, who have an average of over 20 years of experience. This level of expertise and experience gives us an in-house ability to apply advanced technologies to our drilling and production activities, including our extensive experience in fracturing and horizontal drilling technologies. Our technical staff is granted stock-based awards and participates in an incentive bonus pool based on production resulting from our exploratory successes.
   

 

  
 

Exploration Approach

In the Barnett Shale area, our exploration strategy has been to accumulate significant leasehold positions with known shale thickness and thermal maturity in the proximity of known or emerging pipeline infrastructures, followed by the acquisition and processing of 3-D seismic data.

In the onshore Gulf Coast area, our exploration strategy has generally been to accumulate large amounts of 3-D seismic data along primarily prolific, producing trends after obtaining options to lease areas covered by the data. We typically seek to explore in locations within our areas of expertise that we believe have numerous accumulations of normally pressured reserves at shallow depths and in geologic traps that are difficult to define without the interpretation of 3-D seismic data or the potential for large accumulations of deeper, over-pressured reserves.

In emerging resource project areas, our strategy has been to acquire acreage positions in plays that exhibit geologic and economic characteristics that meet our criteria described in the preceding paragraphs. We strive to achieve a balance between acquiring acreage and timely project evaluation through the drillbit to ensure that we minimize the costs to test for commercialreserves while building a significant lease position.

As a result of the increased availability of economic onshore 3-D seismic surveys and the improvement and increased affordability of data interpretation technologies, we have relied almost exclusively on the interpretation of 3-D seismic data in our exploration strategy. We generally do not invest any substantial portion of the drilling costs for an exploration well without first interpreting 3-D seismic data. The principal advantage of 3-D seismic data over traditional 2-D seismic analysisis that it affords the geoscientist the ability to interpret a three dimensional cube of data as compared to interpreting between widely separated two dimensional vertical profiles. Consequently, the geoscientist is able to more fully and accurately evaluate prospective areas, improving the probability of drilling commercially successful wells in both exploratory and development drilling.

  
     
 
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