Business Strengths

We believe the following six characteristics distinguish our past performance and differentiate our future growth potential from other independent producers:

Consistent track record of reserve additions and production growth. From 2004 to 2008, we have grown proved reserves and production by a compounded annual growth rate of 12% and 22%, respectively. We have achieved this through a combination of drilling and acquisition success. Our reserve replacement ratio, which reflects our reserve additions from acquisitions, extensions and discoveries, and improved recoveries in a given period stated as a percentage of our production in the same period, has averaged 599% per year since 2002. We replaced approximately 1,165%, 372%, and 200% of our production in 2006, 2007, and 2008, respectively.

Our average fully developed FD&A cost over the period 2006 through 2008 was $7.21 per Mcfe. Excluding the effects from downward price revisions and reduced future development costs that occurred during 2008, our three-year average fully developed FD&A cost was $3.73 per Mcfe.

Disciplined approach to proved reserve acquisitions. We have a dedicated team that analyzes all of our acquisition opportunities. This team conducts due diligence with reserve engineering on a well-by-well basis to determine whether assets under consideration meet our acquisition criteria. We typically target properties where we can identify enhancements that we believe will increase production rates and extend the producing life of the well. The large number of acquisition opportunities we review allows us to be selective and focus on properties that we believe have the most potential for value enhancement. In 2006, 2007 and 2008, our capital expenditures for acquisitions of proved properties were $484.4 million, $41.7 million and $39.2 million, respectively. These acquisition capital expenditures represented approximately 73%, 18%, and 13%, respectively, of our total capital expenditures and approximately 94%, 13%, and 17%, respectively, of our increase in reserves related to purchases of minerals in place, extensions and discoveries and improved recoveries for those periods. As part of our plan to keep capital expenditures within cash flow, we have not budgeted any significant amounts for acquisitions in 2009.

Property enhancement expertise. Our ability to enhance acquired properties allows us to increase their production rates and economic value. Our typical enhancements include the repair or replacement of casing and tubing, installation of plunger lifts and pumping units, installation of coiled tubing or siphon strings, compression, workovers and recompletion to new zones. Minimal amounts of investment have significantly enhanced the value of many of our properties.

Inventory of drilling locations. Based on the December 31, 2008 prices of $44.60 per Bbl of oil and $5.62 per Mcf of gas, we had an inventory of over 644 proved developmental drilling locations. Utilizing management’s estimated prices of $60.00 per Bbl of oil and $6.00 per Mcf of gas, we had an inventory of 1,921 additional potential drilling locations, which combined represent over 16 years of drilling opportunities based on our 2009 drilling rate.

Identified drilling locations represent total gross drilling locations identified by our management as an estimation of our multi-year drilling activities on existing acreage. As more fully discussed in the section “Risk Factors,” our actual drilling activities may change depending on the availability of financing and capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, drilling results and other factors. We have experienced a high historical drilling success rate of approximately 98% on a weighted average basis during 2006, 2007 and 2008. For the year ended December 31, 2008, we spent $176.1 million of developmental drilling and exploration costs to drill 80 (73 net) operated wells and to participate in 246 (6 net) wells operated by others, representing 78% of our additions to reserves. For 2009, we have budgeted $38.0 million to drill more than 40 operated wells and to participate in more than 100 wells operated by others.

Enhanced oil recovery expertise and asset. Beginning in 2000, we expanded our operations to include CO₂ EOR. CO₂ EOR involves the injection of CO₂, which mixes with the remaining oil in place in the producing reservoir, followed by the injection of water in cycles to drive the hydrocarbons to producing wells. We have a staff of six engineers that have substantial expertise in CO₂ EOR operations, and we also have specific software for modeling CO₂ EOR. We own a 29% interest in and operate a large CO₂ EOR unit in southern Oklahoma and installed and operate a second CO₂ EOR unit with a 54% interest in the Oklahoma panhandle. At December 31, 2008, our proved reserves included six properties where CO₂ EOR recovery methods are used, which comprise approximately 6% of our total proved reserves. In addition, we operate a polymer EOR flood in the North Burbank unit. This unit is in the early phases of a polymer EOR flood which was proven up by Phillips Petroleum Company through a pilot program in the mid 1980’s before being shut down due to low prevailing oil prices. We initiated polymer injection in this unit in a pilot program in December 2007. In the pilot area, we believe we are seeing production response as production has increased from 90 Bbls of oil per day to 130 Bbls of oil per day. We plan to expand this polymer EOR program and ultimately introduce CO₂ injection into this unit.

Experienced management team. Mark A. Fischer, our Chief Executive Officer and founder who beneficially owns 42.5% of our outstanding common stock, has operated in the oil and gas industry for 36 years after starting his career at Exxon as a petroleum engineer. Joe Evans, our Chief Financial Officer, has over 29 years of experience in the oil and gas industry. Individuals in our 23-person management team have an average of over 29 years of experience in the oil and gas industry.