The Lawrence Field in Lawrence County, Illinois, is believed to have produced more than 400 million barrels of oil from 23 separate horizons since its discovery in 1906. The Cypress (Mississippian) and the Bridgeport (Pennsylvanian) sandstones are the major producing horizons in the field. To date, approximately 40% of the estimated one billion barrels of original oil in place has been produced.

Primary recovery refers to the first oil produced in a new field solely from natural reservoir pressure. Typically, primary recovery methods in oil fields can recover 10% to 20% of the original oil in place. Secondary recovery methods are used when there is insufficient underground pressure to move the remaining oil to the wellbore.

The most common technique, waterflooding, utilizes injector wells to introduce volumes of water under pressure into the hydrocarbon-bearing zone. As water flows through the formation toward the producing wellbore, it sweeps some of the oil it encounters along with it. This secondary recovery process was initiated in the Lawrence Field during the 1950s and is believed to have increased total recovery to approximately 40% of the original oil in place to date.

When secondary recovery reaches a point when the waterflood no longer is efficiently sweeping the remaining oil in the reservoir, an EOR project may be implemented to recover a portion of the remaining oil in place.

In Fayette County, Pennsylvania, the Company owns approximately 22,000 gross (7,330 net) acres, of which approximately 12,900 gross (3,000 net) acres are undeveloped. As of December 31, 2006, the Company owned 122 producing gas wells on its Fayette County properties with total proved reserves of 192 MMBOE.

In Westmoreland County, Pennsylvania, the Company owns a 100% working interest in approximately 73 natural gas wells and 2,100 undeveloped acres with total proved reserves of 1,180 MBOE. Since acquiring the field in 2004, the Company has drilled and completed 20 wells, with a 100% success rate. These wells target the Bradford Sands at a depth of approximately 4,000 feet at an average cost of approximately $192,000 per well.

The Company’s properties in Western Pennsylvania are located in areas where active exploration for the Marcellus Shale, by companies such as Range Resources Corporation (NYSE:RRC) and Atlas Energy Resources, LLC (NYSE: ATN), is currently occurring with encouraging results. The Marcellus Shale is a black, organic rich shale formation located at depths between 7,000 and 8,500 feet and ranges in thickness from 100 to 150 feet in Western Pennsylvania. The Company’s acreage in Western Pennsylvania totals 53,000 gross acres (38,600 net acres), 87% of which is currently held by production.

The Company’s operations in its Southwestern region include several producing oil and gas fields in Lea & Eddy Counties, New Mexico; Terrell County, Texas and other producing regions of western Texas. At December 31, 2006, the Company operated 46 wells, and owned interests in another 61 wells, in west Texas and southeast New Mexico.

Lease operating expense increased $3.5 million in Year Ended December 31, 2006 over 2005.

Interest expense increased $4.4 million to $6.1 million in Year Ended December 31, 2006 from $1.7 million in Year Ended December 31, 2005.