Our strategy is to increase stockholder value by growing our reserves, production, cash flow and earnings using a balanced program of (1) developing existing properties, (2) exploring and exploiting undeveloped properties, (3) completing strategic acquisitions and (4) maintaining financial flexibility. The following are key elements of our strategy:

• Continue to develop our existing West Texas properties. We intend to develop further the significant remaining potential of our West Texas properties, where we have identified 889 drilling locations. From 2004 through 2007, we drilled over 300 wells in our West Texas fields, making us one of the 11 most active drillers in West Texas and the second most active driller in the Canyon Sands during that time period.

• Pursue unconventional gas and oil opportunities. With our East Texas, New Mexico, Kentucky and Western Canada prospects, we have over 243,000 gross acres of unexplored tight gas and shale gas and oil inventory to explore and produce. We seek to add proved reserves and production from these properties through the application of advanced technologies, including horizontal drilling and advanced completion techniques.

• Increase our land holdings, reserves and production through farm-ins and drilling ventures. Our participation in farm-ins and a joint drilling venture has allowed us to grow our acreage position and reserves in Ozona Northeast (43,716 gross and 43,116 net acres and 137.7 Bcfe of proved reserves), North Bald Prairie (10,300 gross and 4,850 net acres and 21.3 Bcfe of proved reserves) and Northeast British Columbia (28,860 gross and 6,865 net acres). Farm-ins, joint drilling or "drill-to-earn" ventures and similar agreements can allow us to develop strategic, unconventional gas and oil properties for a substantially lower initial investment than an acquisition of the property itself could cost.

• Acquire strategic assets. We continually review opportunities to acquire producing properties, undeveloped acreage and drilling prospects. We focus particularly on opportunities where we believe our reservoir management and operational expertise in unconventional gas and oil properties will enhance value and performance. We remain focused on unconventional resource opportunities, but also look at conventional opportunities based on individual project economics.

• Operate our properties as a low-cost producer. We strive to minimize our operating costs by concentrating our assets within geographic areas where we can consolidate operating control and thus create operating efficiencies. We are the operator of substantially all of our producing properties and plan to continue to operate substantially all of our producing properties in the future. Operating control allows us to better manage timing and risk as well as the cost of exploration and development, drilling and ongoing operations.