Mid-Continent

Mid-Continent Region

Our Mid-Continent operations include assets in Oklahoma, Arkansas and Kansas. As of December 31, 2006, the Mid-Continent region contributed 53.5 MMBOE (88% oil) of proved reserves to our portfolio of operations, which represented 22% of our total estimated proved reserves. The majority of the proved value within our Mid-Continent operations is related to properties in the Postle field.

Postle Field

The Postle field, located in Texas County, Oklahoma, includes five producing units and one producing lease covering a total of approximately 25,600 gross acres (24,225 net) with working interests of 94% to 100%. Three of the units are currently active CO2 enhanced recovery projects. As of December 31, 2006, there were 127 producing wells and 107 injection wells completed in the Morrow zone at 6,100 feet. The Postle field is the largest Morrow oil field in the U.S. The Postle properties produced at an estimated average net daily rate of 4,112 Bopd (including NGLs) and 930 Mcf/d of gas during the month of December 2006. In the Postle field, the estimated proved reserves as of December 31, 2006 were 40% PDP, 26% PDNP and 34% PUD.

The Postle field was initially developed in the early 1960’s and unitized for waterflood in 1967. Enhanced recovery projects using CO2 were initiated in 1995 and continue in three of the five units. Operations are underway to expand CO2 injection into the rest of the units, with four drilling rigs and three workover rigs in the field. These expansion projects include the restoration of shut-in wells and the drilling of new producing and injection wells.

We are the sole owner of the Dry Trails Gas Plant located in the Postle field. This gas processing plant separates CO2 gas from the produced wellhead mixture of hydrocarbon and CO2 gas, so that the CO2 gas can be reinjected into the producing formation. Construction began in mid-2006 to increase the plant capacity from its current capacity of 40,000 Mcf/d to 80,000 Mcf/d by the fourth quarter of 2007 to support the expanded CO2 injection projects.

In addition to the producing assets and processing plant, we have a 60% interest in the 120 mile TransPetco operated CO2 transportation pipeline, thereby assuring the delivery of CO2 to the Postle field at a fair tariff. A long-term CO2 purchase agreement was executed in 2005 to provide the necessary CO2 for the expansion planned in the field.