Mid-Continent

The Mid-Continent Area is the larger of our two core areas and, as of December 31, 2008, accounted for 72% of our proved reserves and 68% of our PV-10 value. We own a working interest in 5,393 producing wells in the Mid-Continent Area, of which we operate 2,024. The Mid-Continent Area has fifteen of our top twenty largest properties in terms of PV-10 value. During the year ended December 31, 2008, our net average daily production in the Mid-Continent Area was approximately 77.6 MMcfe per day, or 67% of our total net average daily production. This area is characterized by stable, long-life, shallow decline reserves. We produce and drill in most of the basins in the region and have significant holdings and activity in the areas described below.

 North Burbank Unit—Osage County, Oklahoma. The North Burbank Unit is our largest property. The unit was developed in the early 1920’s, is 23,080 acres in size and has cumulative production of approximately 317 MMBbl of oil (primary and secondary). The North Burbank Unit accounted for 47,113 MMcfe of our proved reserves, $27.9 million of our PV-10 value as of December 31, 2008 and 3,316 (2,726 net) MMcfe of our year ended December 31, 2008 production. The producing zones are the Red Fork and Bartlesville and occur at a depth of 3,000 feet. We own 99.25% of the field and are also the operator. As of December 31, 2008, the field was producing 1,510 (1,242 net) Bbls of oil per day from 277 producing wells. There are also 187 active injection wells and 483 temporarily abandoned wells at December 31, 2008. Upside potential exists in restoring a majority of the temporarily abandoned wells to production and in reinstituting the polymer EOR program that Phillips Petroleum Company instituted in the field from 1980-1986 as a project on 1,440 acres. Production increased from 500 Bbls of oil per day to 1,200 Bbls of oil per day in this project area as a result of the polymer injection program. The project was shut down in 1986 due to low oil prices. We reinstituted a polymer flood on 485 acres adjacent to Block A on a 19-well pattern in December 2007. Production has increased in this pilot area from 90 Bbls of oil per day to 130 Bbls of oil per day as of December 31, 2008. Since taking over the field on November 1, 2006, we have returned 70 temporarily abandoned wells to production with initial rates of production ranging between 6 and 25 Bbls of oil per day. We believe that this field also may have upside with the injection of CO₂.

South Burbank Unit—Osage County, Oklahoma. The South Burbank Unit is the southward extension of the “Stanley Stringer” sand development and lies to the south of the North Burbank Unit and covers 4,386 acres. It was discovered in 1934 and unitized in 1935. The South Burbank Unit has produced 56.7 MMBbls of oil from the Burbank Sand from both primary and waterflood recovery efforts. The Burbank Sand occurs at a depth of 2,850 feet. Recently, we have been drilling infill and stepout locations in the unit area for both the deeper Mississippi Chat, which occurs some 50 feet below the shallower Burbank Sand, and to the shallower Burbank Sand. It is currently estimated that the Mississippi Chat may be productive under a significant portion of the southern half of the South Burbank Unit. Four wells have been drilled and completed in the Mississippi Chat and are proving successful with initial potentials as high as 87 Bbls of oil per day. Three wells have been drilled and completed in the shallower Burbank Sand and are also proving successful with initial potentials ranging between 17 and 30 Bbls of oil per day. We drilled five of these wells in this area in 2008. We currently have a Company-owned drilling rig working full time in this area and expect to drill ten wells in 2009. Any well drilled inside the South Burbank Unit is being developed with a pattern and spacing plan that will maximize any future EOR efforts.

Camrick area—Beaver and Texas Counties, Oklahoma and Ochiltree County, Texas. The Camrick area represented approximately 4% of our proved reserves and 3% of our PV-10 value (29,433 MMcfe and $30.2 million, respectively) at December 31, 2008. This area consists of three unitized fields, the Camrick Unit, which covers 9,080 acres, the NW Camrick Unit, which covers 4,080 acres and the Perryton Unit, which covers 2,040 acres. We currently operate these three fields with an average working interest of 54%. Production in the Camrick area is from the Morrow reservoir that occurs at a depth of approximately 6,800 feet. The three units have produced approximately 16.6 MMBbls of primary reserves and approximately 13.1 MMBbls of secondary reserves. There were 47 active producing wells in this area that produced 3,019 (1,475 net) MMcfe during the year ended December 31, 2008. Currently, CO₂ injection operations are continuing in the Phase I, II and III areas of the Camrick Unit and the Perryton Unit. CO₂ injection has improved the gross production in the Camrick Area from approximately 115 Bbls of oil (690 Mcfe) per day in 2001 from 11 wells to approximately 1,435 (775 net) Bbls of oil (8,610 Mcfe) per day as of December 31, 2008 from 47 producing wells. We plan to continue expansion of CO₂ injection operations across all of the units.

Southwest Antioch Gibson Sand Unit (SWAGSU)—Garvin County, Oklahoma. SWAGSU represented 6% of our proved reserves and 8% of our PV-10 value (38,472 MMcfe and $77.9 million, respectively) at December 31, 2008. SWAGSU encompasses approximately 9,520 acres with production from the Gibson Sand, which occurs between the depths of 6,500 and 7,200 feet. We currently operate this unit with an average working interest of 99%. The field has produced approximately 40.3 MMBbls of oil and 260.2 Bcf of natural gas since its discovery in 1946. The field was unitized in 1948 and began unitized production as a pressure maintenance operation, utilizing selective production (based on gas/oil ratios) and gas injection. Water injection began in 1952. Gas injection ceased in 1960 without significant blowdown of the injected gas. Field shutdown and plugging activities began in 1966, and all water injection ceased in 1970. A program is currently underway to re-enter abandoned wells and drill new wells to produce the injected gas. We have 34 active producing wells in this unit as of December 31, 2008. We are scheduled to drill five wells in 2009.

Cleveland Sand Play—Ellis County, Oklahoma and Lipscomb County, Texas. The Cleveland Sand Play accounted for 20,508 MMcfe of our proved reserves and $41.9 million of our PV-10 value as of December 31, 2008. We own approximately 6,600 net acres in the Cleveland Sand Play. The Cleveland Sand occurs at 8,300 feet and is considered a tight gas sand reservoir. As of December 31, 2008, we own interests in 31 Cleveland Sand producing wells. We drilled five wells in 2007 and four wells in 2008. We employed horizontal drilling technology in most of our drilled wells in this area. We expect that future wells will also utilize horizontal technology.

Granite Wash Horizontal Play—Washita County, Oklahoma. The objective target of this play is the Des Moinesian Granite Wash “A”, “B” and “C” zones at an average depth of approximately 12,500 feet. To date, this play has encompassed an area approximately three townships in size. The Granite Wash is a quartz rich alluvial wash containing high concentrations of feldspar that results in reducing permeability and therefore reducing ultimate recoveries. Conventional vertical well bores in this area have recovered on average approximately 1.5 Bcfe. The technological advances of horizontal drilling allow maximum exposure of this tight gas filled reservoir to the well bore (most horizontal wells utilize a lateral drilled up to 4,000 feet horizontally in the Granite Wash), resulting in substantially improved recoveries that are currently estimated to be up to three to four times the recoveries of the typical vertical well in this play. We recently drilled a new well, the Roxanne 1-17H, in which we have a 25% working interest, which came on line at rates of 3,906 (793 net) Mcf of natural gas per day and 365 (74 net) Bbls of oil per day. We participated in six wells in this play in 2008 and we expect to drill and/or participate in the drilling of an additional three Granite Wash horizontal wells in 2009.

Anadarko Basin Woodford Shale Play-Western Oklahoma. As of December 31, 2008, we have a significant acreage position in the emerging Woodford Shale Resource Play of western Oklahoma. We own and control approximately 380,000 gross acres and 77,700 net acres, which primarily are held by production from other formations. The Woodford Shale beneath our acreage ranges in thickness from approximately 80 to 280 feet thick at depths from 11,500 feet to 16,000 feet. The horizontal development of this non-conventional resource play began in 2007 in Canadian County and has expanded to include the nearby counties of Blaine, Grady and Caddo with over 30 Woodford targeted wells drilled to date. Gas in place is estimated to be between 145 to 200 Bcf per section with initial development well density to be four wells per section. The average recovery is expected to be five to eight Bcf per well at an average cost of seven to nine million dollars. Operators in the play have reported initial daily production rates in the range of five to eight MMcf of gas per day per well.

Velma Sims Unit CO₂ Flood—Stephens County, Oklahoma. The EVWB Sims Sand Unit, which covers approximately 1,300 acres, was discovered in 1949 and unitized in 1962. We currently operate this unit with an average working interest of 29%. Hydrocarbon gas injection into the Sims C2 Sand was initiated in the top of the structure in 1962. This unit accounted for 12,397 MMcfe of our proved reserves and $8.9 million of our PV-10 value as of December 31, 2008. Waterflood operations began in 1972. Hydrocarbon gas injection ended around 1977 and a miscible CO ₂ injection program was initiated in 1982. This miscible CO₂ injection was first begun in the updip portion of the reservoir and in 1990 expanded into the mid-section area of the Sims C2 reservoir. In 1996, miscible CO₂ injection began in the downdip section of the Sims C2. As of December 31, 2008, we had 47 active producing wells in this unit.

Fox Deese Springer Unit—Carter County, Oklahoma. The Fox Deese Springer Unit, which is 2,335 acres, was discovered in 1915 and unitized in 1977. This unit had proved reserves of 1,684 MMcfe and a PV-10 value of $1.2 million at December 31, 2008. We operate this unit with a working interest of 82%. Producing zones include the Deese, Sims, and Morris, which occur at depths between 3,300 and 5,500 feet. Cumulative production is 14 MMBbls of oil and, as of December 31, 2008, the unit has 64 producing wells and 46 active injection wells. The unit is currently producing 370 (247 net) Bbls of oil per day.

Sivells Bend Unit—Cooke County, Texas. The Sivells Bend Unit is 3,863 acres in size, produces primarily from the Strawn, which occurs at a depth of 9,000 feet, and has recovered 39 MMBbls of oil to date. This unit represents 8,764 MMcfe of our proved reserves and $7.6 million of our PV-10 value at December 31, 2008. There are currently 26 producing wells and 13 active injection wells, with current production of approximately 236 (137 net) Bbls of oil per day. We operate the field with a working interest of 64%. Upside potential exists in increased density drilling from 80 acres to 40 acres in the Strawn. The only 40-acre increased density well drilled in the unit has recovered over 390 MBbls of oil. Additional potential exists in deeper Ellenburger, as an Ellenburger well tested approximately 193 Bbls of oil per day in 1964 in the adjacent East Sivells Bend Unit and one well in our unit tested 104 Bbls of oil per day for a short time. 3-D seismic will be required to better define the fault blocks for an Ellenburger test. We own approximately 1,000 acres of fee minerals in this Sivells Bend Unit and own approximately half of the rights below the Strawn, which includes the Ellenburger.

CO₂ EOR—Various counties, Oklahoma, Kansas, New Mexico and Texas. We plan to initiate CO₂ injection in three Booker units in 2009 and in our NW Camrick Unit in 2010. On December 31, 2008, we had in place transportation and supply agreements to provide the necessary CO₂ for these projects. We have accumulated 61 properties in Oklahoma, Kansas, New Mexico and Texas that meet the criteria for CO₂ EOR operations. We have a 100% ownership in our 86-mile Borger CO₂ pipeline, own a 29% interest in the 120-mile Enid to Purdy CO₂ pipeline, own a 58% interest in and operate the 23-mile Purdy to Velma CO₂ pipeline, and own a 100% interest in approximately 126 miles of pipeline located between Liberal, Kansas and Booker, Texas. We have installed compression facilities to capture approximately 16 MMcf per day of CO₂ from the Arkalon ethanol plant and expect to initiate injection of this CO₂ into the Booker area fields in the second quarter of 2009. Arrangements to secure additional sources of CO₂ are currently in process. The U.S. Department of Energy-Office of Fossil Energy provided a report in April 2005 estimating that significant oil reserves could be technically recovered in the State of Oklahoma through CO₂ EOR processes. With our infrastructure, we believe that we will be well positioned to participate in the exploitation of these reserves. 

Mid-Continent
Proved Reserves
Oil (MMbl)		40,449
Natural gas (MMcf)		244,062
Total (MMcfe)		486,756
PV-10 value ($mm)		$636.7
Average daily production (MMcfe)		77.6
Drilling locations
Identified proved undeveloped drilling locations		489
Identified other potential drilling locations		1,026
Well count
Gross wells		5,393
Net wells		2,043
Operated wells		2,024
Acreage
	Gross	Net
Developed	898,743	383,168
Undeveloped	77,704	66,041