It is believed that attractive acquisition opportunities will continue to arise in the Gulf of Mexico as the major integrated oil companies and other large independent oil and gas exploration and production companies continue to divest properties to focus on larger and more capital-intensive projects that better match their long-term strategic goals.

East Cameron 321 Field is located approximately 97 miles off the coast of Louisiana in 225 feet of water. The field’s single OCS block contains two large production platforms. High quality reservoir sands occur in faulted structural traps between 4,800 and 7,200 feet. From the first drilling to December 31, 2004, there have been 70 exploration and development wells drilled in the field and a cumulative gross production of 506 Bcfe.

Eugene Island 205 Field is located approximately 55 miles off the coast of Louisiana in 115 feet of water. Eugene Island 205 Field contains an eight block federal unit of about 36,000 acres. The Company operates all or part of seven blocks and eleven platforms. The acreage and production platforms completely encircle a large piercement salt dome.

Eugene Island 380 Field is located off the coast of Louisiana approximately 170 miles southwest of New Orleans. The single production platform is in 470 feet of water. The Eugene Island 380 Field contains the Company’s operated Eugene Island 397 Unit, which is comprised of Eugene Island Block 397 and Green Canyon Blocks 4 and 48. Eugene Island 397 Unit is located on the southeast flank of a salt ridge with multiple productive sands found from 6,000 to 10,000 feet in depth.

High Island 111 Field is located off the coast of Texas approximately 30 miles east of Galveston in 50 feet of water, consisting of two OCS blocks. The Company has two production platforms in High Island Block 110. This field is a faulted anticline trap with productive sands down to 12,500 feet. The Company recently completed re-processing the 3-D seismic dataset to help the Company identify additional development and exploration opportunities.

High Island 177 Field is located off the coast of Texas approximately 20 miles southeast of Galveston in 50 feet of water. The field is contained in a 5,000 acre OCS block, but placement of the single production platform is limited by a shipping fairway that covers the southwestern portion of the block. The field was discovered by Atlantic Richfield in 1988. As of December 31, 2004, 11 wells had been drilled to explore and develop high quality reservoir sands between 10,200 feet and 11,400 feet.

High Island A571 Field is located 111 miles off the coast of Texas in approximately 283 feet of water. The field’s single OCS block has three production platforms. The field was discovered in 1977 by CNG Producing Company. The Company accumulated its current 79.2% working interest in the field through a transaction with Burlington Resources in 2002, and by acquiring interests from Dominion in 2003, and most recently, Kerr-McGee in early 2004. The Company plans to drill one development well in this field in 2005.

Natural gas revenues increased $6.9 million and oil revenues increased $39.8 million.

Gathering and transportation cost and production taxes increased from $7.6 million in the period ended in 2003 to $10.5 million in the same period of 2004.

General and administrative expenses decreased from $19.5 million in the nine months ended September 30, 2003 to $13.3 million in the same period of 2004.

The amount of the Company’s income tax expense increased from $49.1 million in 2003 to $59.7 million in 2004 primarily due to increased taxable income. The Company’s effective tax rate for the nine months ended September 30, 2004 and 2003 was 35%.