Gulf Coast

Gulf Coast Region

Our Gulf Coast operations include assets located in Texas, Louisiana and Mississippi. As of December 31, 2006, the Gulf Coast region contributed 12.6 MMBOE (18% oil) of proved reserves to our portfolio of operations, which represented 5% of our total estimated proved reserves. Approximately 80% of the proved reserves of our Gulf Coast operations are related to properties in Texas.

Stuart City Reef Trend

We have an average 65% working interest in five fields in the Stuart City Reef Trend: Word North, Yoakum, Kawitt, Sweet Home, and Three Rivers. Production in the Stuart City Reef Trend comes primarily from the Edwards, Wilcox, and Sligo Formations at depths between 7,000 and 16,000 feet.

In late 2003, we began a combination development and exploration program targeting multiple sandstone gas reservoirs within the Wilcox Formation. We have been active in this area, drilling nine wells in 2005 and three wells in 2006. In addition, we are currently planning to conduct a 40 square mile 3-D seismic program designed to expand this play into new areas. Recent success with vertical Edwards’ completions has improved the economics of this gas play. For 2007, we are planning to participate in the drilling of up to five vertical Edwards wells with the potential for Wilcox pay to be encountered in each wellbore.

Vicksburg Trend

Our non-operated holdings in the Vicksburg and Frio Trends are concentrated primarily in the South Midway field in San Patricio County, Texas and the Agua Dulce field. During 2005, we drilled or participated in eleven new wells targeting multiple gas productive sands in the Vicksburg and Frio Formations at depths between 10,000 and 14,500 feet. Results from this program encouraged us to drill seven additional wells in South Midway and one additional well in Agua Dulce during 2006.