Michigan

Michigan Region

Production in Michigan can be divided into two groups. The majority of the reserves are in non-operated Antrim Shale wells located in the northern part of the state. The remainder of the Michigan reserves are typified by more conventional oil and gas production located in the central and southern parts of the state. We also operate the West Branch and the recently acquired Reno gas processing plants. These plants are in good mechanical condition and capable of handling additional production. The West Branch Plant gathers production from the Clayton, West Branch and other smaller fields.

Antrim Production

In northern Michigan, we own an interest in over 50 multi-well Antrim Shale gas projects with proved producing reserves and ongoing development drilling. During 2006, we participated in the drilling and completion of 20 Antrim Shale wells. In 2007, we plan to continue to pursue similar development drilling opportunities.

Conventional Production

Our conventional production is primarily from the Prairie du Chien, Glenwood and Trenton Black River Formations, located in central and southern Michigan. We own interests in 49 fields in this area, of which we operate 24.

In August 2006, we closed on an acquisition of 65 wells producing a total of 638 net Bopd. The acquisition was 99% proved producing reserves, of which 55% was oil. Based on our evaluation of the properties and our experience in Clayton Unit, we are optimistic about the potential upside that may exist in these mature fields.

During late 2005, we drilled two Glenwood/Prarie du Chien (“PdC”) wells in the Clayton Unit. The target reservoir was the upper PdC, which historically had been the pay interval in the field. Both of these wells encountered hydrocarbons in the Middle interval of the PdC, which had not previously produced. The initial completion in both of these wells was in the middle PdC and both wells still have the original target reservoir behind pipe. We have been encouraged by the results. We assisted a local drilling contractor with the financing necessary to assemble another drilling rig capable of drilling to the PdC. This rig is now drilling the first well in a multi-year drilling program.