As of June 30, 2006, approximately 76% of the proved reserves attributable to the underlying properties and 62% of the net acres included in the underlying properties are located in the El Dorado Area, which is located in southeastern Kansas, and in the Northwest Kansas Area. The underlying properties are all located in mature fields that are characterized by long histories and numerous additional development opportunities to help reduce the natural decline in production from the underlying properties. Approximately 99% of the future production from the underlying properties is expected to be oil and the remaining production is expected to be natural gas and natural gas liquids.

As of June 30, 2006, proved reserves attributable to the underlying properties in the El Dorado Area were 6.1 MMBoe. The underlying properties in this area cover approximately 15,405 gross acres (15,393 net acres) in southeastern Kansas. The underlying properties are located in the El Dorado, Augusta and Valley Center Fields. The El Dorado Area has produced more than 370 MMBbls of oil since 1914. Wells in this area produce from a variety of productive zones and primarily from formations of less than 3,000 feet in depth. During the six months ended June 30, 2006, the average net daily production for the underlying properties in this area was approximately 886 Bbls of oil.

As of June 30, 2006, proved reserves attributable to the underlying properties in the Northwest Kansas Area were 8.2 MMBoe. The underlying properties in this area cover approximately 11,885 gross acres (11,840 net acres) in the Bemis-Shutts, Trapp, Ray and Hansen Fields located in Ellis, Russell and Phillips Counties, Kansas. These fields have produced more than 530 MMBbls of oil since 1928. Wells in this area produce from a variety of productive zones and primarily from formations of less than 4,500 feet in depth. During the six months ended June 30, 2006, the average net daily production for the underlying properties in this area was approximately 1,253 Bbls of oil.

The Company has utilized new techniques and technologies to more completely develop the reserves attributable to the underlying properties. Recently, the Company undertook a 3-D seismic survey of one of the fields that constitutes the underlying properties. As a result of this survey, the Company has identified multiple well sites where it intends to pursue further development activities. In addition to using 3-D seismic technology, the Company is working on other programs to use developing technology such as its work with the Petroleum Technology Transfer Council concerning the application of gelled polymers in certain reservoirs to increase oil production and reduce water production, its work with the Department of Energy studying the injection of carbon dioxide to recover oil otherwise lost in the production process and gas gun stimulation technology.

Under the terms of the operating agreement of the Company, Vess Oil and Murfin Drilling operate on a contract basis the properties held by the Company for which it is designated as the operator. Vess Oil is an independent oil and gas operating company and, according to the 2005 Kansas Geological Survey, is the largest operator of oil in Kansas. From its inception, Vess Oil has focused on acquiring, developing, and managing oil and natural gas properties in Kansas. Initially focused on exploration activities, Vess Oil has for the past ten years concentrated on acquisitions in addition to the development and exploitation of its existing reserve base. Vess Oil currently operates over 1,200 oil, natural gas and service wells located primarily in Kansas, with growing operations in Texas.

Murfin Drilling is an independent oil and gas operation company and, according to the 2005 Kansas Geological Survey, is the third-largest oil operator in Kansas. A family-owned business originally formed in El Dorado, Kansas in 1926 and incorporated in 1990, Murfin Drilling has expanded in the past 80 years into the greater western Kansas area, southwest Nebraska, eastern Colorado and the Oklahoma Panhandle. Murfin Drilling balances exploration and production management and exploitation and acquisitions with contract drilling and well service operations. Murfin Drilling currently operates approximately 800 producing and service wells nationwide.

Hedging and other derivative activities expense increased from $5.2 million for the three months ended March 31, 2005 to $6.9 million for the three months ended March 31, 2006.

Direct operating expenses increased from $3.8 million for the three months ended March 31, 2005 to $4.2 million for the three months ended March 31, 2006.