Our strategy is to grow reserves, production, cash flow and net asset value through successful implementation of the following strategy:

•     Exploit and Develop Existing Property Base.  We seek to maximize the value of our existing assets by developing and exploiting our properties with the lowest risk and the highest production and reserve growth potential. We intend to concentrate on developing our multi-year inventory of drilling locations in the Cotton Valley Trend. Our Cotton Valley Trend inventory is currently estimated to include approximately 2,300 probable and possible drilling locations, based on 20 acre spacing on vertical wells only at Beckville, South Henderson, and the Southeast portion of Minden; 40 acre spacing on vertical wells only at Bethany-Longstreet; 40 acre spacing for Travis Peak vertical wells at Cotton South and Bethune prospects of the Angelina River Trend; and, 160 acre spacing for horizontal James Lime wells on Cotton prospect in Angelina River Trend. We are continually performing field studies of our existing properties and reevaluating exploration and development opportunities using advanced technologies.

•     Expand Acreage Position in the Cotton Valley Trend. We have increased our acreage position from approximately 45,000 gross acres at December 31, 2004 to 195,000 gross (128,000 net) acres as of June 30, 2008. We concentrate our efforts in areas where we can apply our technical expertise and where we have significant operational control or experience. To leverage our extensive regional knowledge base, we seek to acquire leasehold acreage with significant drilling potential in East Texas and North Louisiana which exhibit similar characteristics to our existing properties. We continually strive to rationalize our portfolio of properties by selling marginal properties in an effort to redeploy capital to exploitation, development and exploration projects which offer a potentially higher overall return.

•     Focus on Low Operating Costs.  We continually seek ways to minimize lease operating expenses and overhead expenses. We will continue to seek to control costs to the greatest extent possible by controlling our operations. As we continue to develop our Cotton Valley Trend properties, our overall operating costs per Mcfe are expected to decrease due to economies of scale and a recently completed low pressure gathering system, which will allow us to dispose of our produced salt water more economically.

•     Maintain an Active Hedging Program.  We actively manage our exposure to commodity price fluctuations by hedging meaningful portions of our expected production through the use of derivatives, typically fixed price swaps and costless collars. The level of our hedging activity and the duration of the instruments employed depend upon our view of market conditions, available hedge prices and our operating strategy.