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 maynot 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.

In January 2007, we drew an additional $75.0 million in borrowings under the Second Lien Facility and received net proceeds of $72.1 million. As of December 31, 2007, we had $220.5 million of borrowings outstanding under the Second Lien Credit Facility. Maturities of the Second Lien Credit Facility are $2.25 million in 2008 and 2009 and the remaining balance isdue in 2010.

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 lienssecuring the Second Lien Credit Facility.

As of December 31, 2007, we had $34.0 million of borrowings outstanding on a borrowing base availability of $145.0 million.

On September 11, 2007, we entered into the Second Amendment (the “Second Amendment”) to the Senior Credit Facility. The Second Amendment provides that in the event the scheduled redetermination of the borrowing base is not made on or prior to January 1, 2008 as a result of our failure to comply with the requirement to deliver required engineering reports, theborrowing base will be reduced by $3.0 million commencing on January 1, 2008 and continuing on the first day of each month thereafter until the borrowing base is redetermined. The conforming and non-conforming borrowing bases (as defined in the Senior Credit Facility) were amended to be $100.0 million and $17.0 million, respectively. In connection with the Second Amendment, a second bank was added to the credit agreement. In addition, the Second Amendment increased the amount of investments in unrestricted subsidiaries that we may make.

On December 20, 2007, we entered into the Third Amendment (the “Third Amendment”) to the Senior Credit Facility. The conforming and non-conforming borrowing bases were amended to be $125.0 million and $20.0 million, respectively. In connection with the Third Amendment, the co-lending group was expanded to four banks and the $3.0 million borrowing base reduction associated with the delivery of engineering reports at January 1, 2008 was removed.

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 alump 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 six-month 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 LIBO rate plus a marginbetween 1.5% to 3.0% (depending on the current level of borrowing base usage).

We are subject to certain covenants under the amended terms of the Senior Credit Facility which include, but are not limited to, the maintenance of the following financial ratios: (1) a minimum current ratio of 1.0 to 1.0; and (2) a maximum total net debt to Consolidated EBITDAX (as defined in the Senior Credit Facility) of 3.75 to 1.0 for the fiscal quarters throughand including December 31, 2007 and 3.25 to 1.0 thereafter. The Senior Credit Facility also places restrictions on