0000858470
2008-01-01
2008-12-31
0000858470
2007-12-31
0000858470
2009-06-30
0000858470
2008-12-31
0000858470
2008-06-30
0000858470
2009-07-24
0000858470
2009-04-01
2009-06-30
0000858470
2008-04-01
2008-06-30
0000858470
2008-01-01
2008-06-30
0000858470
2009-01-01
2009-06-30
iso4217:USD
xbrli:shares
xbrli:shares
iso4217:USD
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</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. FINANCIAL STATEMENT PRESENTATION</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During interim periods, Cabot Oil & Gas Corporation (the Company) follows the same accounting
policies used in its 2008 Annual Report to Stockholders and its Annual Report on Form 10-K for the
year ended December 31, 2008 (Form 10-K) filed with the Securities and Exchange Commission (SEC).
The interim financial statements should be read in conjunction with the notes to the financial
statements and information presented in the Form 10-K. In management’s opinion, the accompanying
interim condensed consolidated financial statements contain all material adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement. The results for any interim
period are not necessarily indicative of the expected results for the entire year. Subsequent
events have been evaluated through July 30, 2009, which is also the date that the financial
statements were issued.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">With respect to the unaudited financial information of the Company for the three and six month
periods ended June 30, 2009 and 2008, PricewaterhouseCoopers LLP reported that they have applied
limited procedures in accordance with professional standards for a review of such information.
However, their separate report dated July 30, 2009 appearing herein states that they did not audit
and they do not express an opinion on that unaudited financial information. Accordingly, the
degree of reliance on their report on such information should be restricted in light of the limited
nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited
financial information because that report is not a “report” or a “part” of the registration
statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and
11 of the Act.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Recently Adopted Accounting Standards</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In February 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP)
No. FAS 157-2, “Effective Date of FASB Statement No. 157,” which granted a one year deferral (to
fiscal years beginning after November 15, 2008, and interim periods within those fiscal years) for
certain non-financial assets and liabilities measured on a nonrecurring basis to comply with SFAS
No. 157. Effective January 1, 2009, the Company applied the provisions of Statement of Financial
Accounting Standards (SFAS) No. 157 covered under FSP No. FAS 157-2 which did not have a material
impact on the Company’s financial statements. For further information, please refer to Note 7 of
the Notes to the Condensed Consolidated Financial Statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, the Company adopted FSP No. Emerging Issues Task Force (EITF) 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities” which did not have a material impact on the Company’s financial statements. For
further information, please refer to Note 5 of the Notes to the Condensed Consolidated Financial
Statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133.” The Company adopted SFAS No. 161 as of
January 1, 2009. The principal impact was to require the expansion of its disclosure regarding its
derivative instruments. For further information, please refer to “Derivative Instruments and
Hedging Activity” in Note 7 of the Notes to the Condensed Consolidated Financial Statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not
Orderly,” which provides additional guidance in accordance with SFAS No. 157. If an entity
determines that either the volume or level of activity for an asset or liability has significantly
decreased from normal conditions, or that price quotations or observable inputs are not associated
with orderly transactions, increased analysis and management judgment will be required to estimate
fair value. The objective in fair value measurement remains unchanged from what is prescribed in
SFAS No. 157 and should be reflective of the current exit price. Disclosures in interim and annual
periods must include inputs and valuation techniques used to measure fair value, along with any
changes in valuation techniques and related inputs during the period. In addition, disclosures for
debt and equity securities must be provided on a more disaggregated basis than what was required in
FAS No. 157. FSP No.
FAS 157-4 became effective for interim and annual reporting periods ending after June 15, 2009.
FSP No. FAS 157-4 did not have a material impact on the Company’s financial position, results of
operations or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued FSP No. FAS 107-1 and Accounting Principles Bulletin (APB) No. 28-1,
“Interim Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair
value of financial instruments for publicly traded companies for both interim and annual periods.
Historically, these disclosures were only required annually. The interim disclosures are intended
to provide financial statement users with more timely and transparent information about the effects
of current market conditions on an entity’s financial instruments that are not otherwise reported
at fair value. FSP No. FAS 107-1 became effective for interim reporting periods ending after June
15, 2009, and the Company has provided interim disclosures regarding the fair value of debt
instruments in Note 4 of the Notes to the Condensed Consolidated Financial Statements. Comparative
disclosures are only required for periods ending after the initial adoption. FSP No. FAS 107-1 did
not have a material impact on the Company’s financial position, results of operations or cash
flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments,” which amends the other-than-temporary impairment guidance for
debt securities to make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in the financial
statements. FSP No. FAS 115-2 and FAS 124-2 does not amend existing recognition and measurement
guidance for equity securities, but does establish a new method of recognizing and reporting for
debt securities. Disclosure requirements for impaired debt and equity securities have been
expanded significantly and are now required quarterly, as well as annually. FSP No. FAS 115-2 and
FAS 124-2 became effective for interim and annual reporting periods ending after June 15, 2009.
Comparative disclosures are only required for periods ending after the initial adoption. FSP No.
FAS 115-2 and FAS 124-2 did not have a material impact on the Company’s financial position, results
of operations or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009, the FASB issued SFAS No. 165, “Subsequent Events,” which requires entities to
disclose the date through which they have evaluated subsequent events and whether the date
corresponds with the release of their financial statements. In addition, a new concept of
financial statements being “available to be issued” was introduced. SFAS No. 165 is effective for
interim and annual periods ending after June 15, 2009. SFAS No. 165 did not have any impact on the
Company’s financial position, results of operations or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Recently Issued Accounting Pronouncements</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In July 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles” as the sole source of authoritative
non-governmental U.S. generally accepted accounting principles (GAAP). The Codification is not
intended to change U.S. GAAP; however, references to various accounting pronouncements and
literature will differ from what is currently being used in practice. As of July 1, 2009, the FASB
no longer issues Statements, Interpretations, Staff Positions or EITF Abstracts. All guidance in
the Codification has an equal level of authority. SFAS No. 168 will be effective for financial
statements that cover interim and annual periods ending after September 15, 2009. Once effective,
it will supersede all accounting standards in U.S. GAAP, aside from those issued by the SEC. There
will be no impact on the Company’s financial position, results of operations or cash flows as a
result of the Codification.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets.” SFAS
No. 166 revises SFAS No. 140 and will require entities to provide more information about sales of
securitized financial assets and similar transactions, particularly if the seller retains some risk
to the assets. SFAS No. 166 will be effective at the beginning of the first fiscal year beginning
after November 15, 2009. As the Company does not anticipate having any of these types of
transactions in the near future, SFAS No. 166 is not expected to have any impact on its financial
position, results of operations or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In December 2008, the SEC issued Release No. 33-8995, “Modernization of Oil and Gas Reporting,”
which amends the oil and gas disclosures for oil and gas producers contained in Regulations S-K and
S-X, as well as adding a section to Regulation S-K (Subpart 1200) to codify the revised disclosure
requirements in Securities Act Industry Guide 2, which is being phased out. The goal of Release
No. 33-8995 is to provide investors with a more meaningful and comprehensive understanding of oil
and gas reserves. Energy companies affected by Release No. 33-8995 will be required to price
proved oil and gas reserves using the unweighted arithmetic average of the price
on the first day of each month within the 12-month period prior to the end of the reporting period,
unless prices are defined by contractual arrangements, excluding escalations based on future
conditions. SEC Release No. 33-8995 is effective beginning January 1, 2010. The Company is
currently evaluating what impact Release No. 33-8995 may have on its financial position, results of
operations or cash flows.
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. PROPERTIES AND EQUIPMENT, NET</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Properties and equipment, net are comprised of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">2008</td>
<td> </td>
</tr>
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<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unproved Oil and Gas Properties
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>298,714</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">315,782</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Proved Oil and Gas Properties
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,936,345</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,813,014</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gathering and Pipeline Systems
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>269,868</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">274,192</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Land, Building and Other Equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>70,212</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68,606</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,575,139</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,471,594</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated Depreciation, Depletion and Amortization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(1,420,386</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,335,766</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>3,154,753</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,135,828</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
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</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At June 30, 2009, the Company did not have any projects that had exploratory well costs that were
capitalized for a period of greater than one year after drilling.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the Company sold its Canadian properties to a private Canadian company. Total
consideration received from the sale was $84.4 million, consisting of $64.3 million in cash and
$20.1 million in common stock of the Canadian company (included on the Condensed Consolidated Balance Sheet as Investment in Equity Securities at June 30,
2009). The common stock investment is being accounted for using the cost method. The total net
book value of the Canadian properties sold was $95.0 million. At December 31, 2008, the Company
recorded 40.4 Bcfe of proved reserves (two percent of total proved reserves) related to these
properties.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognized a $3.9 million aggregate loss on sale of assets in the first half of 2009.
During the quarter ended June 30, 2009, the Company recorded a $10.5 million (net of taxes of $6.1
million) loss on sale of assets, primarily due to the sale of the Canadian properties described
above. During the first quarter of 2009, the Company recognized a $12.7 million gain on sale of
assets primarily related to the sale of Thornwood properties in the East region. Cash proceeds of
$11.4 million were received from the sale of the Thornwood properties.
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. ADDITIONAL BALANCE SHEET INFORMATION</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain balance sheet amounts are comprised of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">ACCOUNTS RECEIVABLE, NET
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Trade Accounts
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>47,957</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">94,164</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Joint Interest Accounts
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>8,598</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,454</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Current Income Tax Receivable
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">526</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Accounts
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,779</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,987</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>58,334</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,131</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Allowance for Doubtful Accounts
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(3,813</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,518</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>54,521</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">109,613</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">INVENTORIES
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas in Storage
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>10,865</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">27,478</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Tubular Goods and Well Equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>18,200</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,439</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Pipeline Imbalances
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>449</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,760</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>29,514</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">45,677</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">OTHER CURRENT ASSETS
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Drilling Advances
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>2,774</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,869</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Prepaid Balances
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>9,651</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,631</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>140</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>12,565</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12,500</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">OTHER ASSETS
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Rabbi Trust Deferred Compensation Plan
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>9,440</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,651</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred Charges for Credit Agreements
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>13,779</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,847</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Accounts
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,240</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,245</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>24,459</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">14,743</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">ACCOUNTS PAYABLE
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Trade Accounts
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>10,744</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">44,088</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas Purchases
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,233</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,346</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Royalty and Other Owners
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>31,900</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,349</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Capital Costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>63,123</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">117,029</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Taxes Other Than Income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,150</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,617</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Drilling Advances
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,098</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,289</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Wellhead Gas Imbalances
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,090</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,354</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Accounts
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,054</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,913</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>127,392</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">222,985</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">ACCRUED LIABILITIES
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Employee Benefits
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>5,849</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10,807</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Current Liability for Pension Benefits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>245</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">245</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Current Liability for Postretirement Benefits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>642</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">642</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Taxes Other Than Income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>23,581</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,582</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Payable
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>19,863</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,684</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Accounts
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,163</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,591</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>52,343</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">50,551</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">OTHER LIABILITIES
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Rabbi Trust Deferred Compensation Plan
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>16,510</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">14,531</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accrued Plugging and Abandonment Liability
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28,807</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,978</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Accounts
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,457</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,717</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>50,774</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">47,226</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
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<!-- Begin Block Tagged Note 4 - us-gaap:LongTermDebtTextBlock-->
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. LONG-TERM DEBT</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company’s debt consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">2008</td>
<td> </td>
</tr>
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<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Long-Term Debt</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">7.19% Notes
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>20,000</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">7.33% Weighted-Average Fixed Rate Notes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>170,000</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">170,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">6.51% Weighted-Average Fixed Rate Notes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>425,000</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">425,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">9.78% Notes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>67,000</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">67,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Credit Facility
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>133,000</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">185,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Current Maturities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">7.19% Notes
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(20,000</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(20,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Credit Facility
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(15,857</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Total Current Maturities</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(20,000</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(35,857</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Long-Term Debt, excluding Current Maturities</b>
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>795,000</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">831,143</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
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</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the Company entered into a new revolving credit facility and terminated its prior
credit facility. The credit facility provides for an available credit line of $500 million and
contains an accordion feature allowing the Company to increase the available credit line to $600
million, if any one or more of the existing banks or new banks agree to provide such increased
commitment amount. The term of the facility expires in April 2012. In conjunction with entering
into the new credit facility, the Company incurred $10.4 million of debt issuance costs which were
capitalized and will be amortized over term of the facility.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The credit facility is unsecured. The available credit line is subject to adjustment from time to
time on the basis of (1) the projected present value (as determined by the banks based on the
Company’s reserve reports and engineering reports) of estimated future net cash flows from certain
proved oil and gas reserves and certain other assets of the Company (the “Borrowing Base”) and (2)
the outstanding principal balance of the Company’s senior notes. Under the credit facility, the
Borrowing Base is initially set at $1.35 billion, to be periodically redetermined as described
above. While the Company does not expect a reduction in the available credit line, in the event
that it is adjusted below the outstanding level of borrowings in connection with scheduled
redetermination or due to a termination of hedge positions, the Company has a period of six months
to reduce its outstanding debt in equal monthly installments to the adjusted credit line available.
Interest rates under the credit facility are based on Euro-Dollars (LIBOR) or Base Rate (Prime)
indications, plus a margin. These associated margins increase if the total indebtedness under the
credit facility and the Company’s senior notes is greater than 25%, greater than 50%, greater than
75% or greater than 90% of the Borrowing Base, as shown below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
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<tr valign="bottom">
<td width="20%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="2%"> </td>
<td width="4%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="2%"> </td>
<td width="4%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="2%"> </td>
<td width="4%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="2%"> </td>
<td width="4%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="2%"> </td>
<td width="4%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Debt Percentage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 1pt" valign="bottom">
<td colspan="21" style="border-top: 1px solid #000000"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td style="border-BOTTOM: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-BOTTOM: 1px solid #000000"><i><25%</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-BOTTOM: 1px solid #000000"><i><font style="font-family: Symbol">³</font> 25% <50%</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-BOTTOM: 1px solid #000000"><i><font style="font-family: Symbol">³</font> 50% <75%</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-BOTTOM: 1px solid #000000"><i><font style="font-family: Symbol">³</font> 75% <90%</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-BOTTOM: 1px solid #000000"><i><font style="font-family: Symbol">³</font> 90%</i></td>
</tr>
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<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Eurodollar Margin
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">2.000</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">2.250</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">2.500</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">2.750</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">3.000</td>
<td nowrap="nowrap" valign="top">%</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Base Rate Margin
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">1.125</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">1.375</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">1.625</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">1.875</td>
<td nowrap="nowrap" valign="top">%</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">2.125</td>
<td nowrap="nowrap" valign="top">%</td>
</tr>
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</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The credit facility provides for a commitment fee on the unused available balance at annual rates
of 0.50%.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The credit facility contains various customary restrictions, which include the following:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">(a) Maintenance of a minimum annual coverage ratio of operating cash flow to interest expense for
the trailing four quarters of 2.8 to 1.0.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">(b) Maintenance of an asset coverage ratio of the present value of proved reserves plus working
capital to debt of 1.5 to 1.0.
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">(c) Maintenance of a current ratio, as defined in the agreement, of 1.0 to 1.0.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">(d) Prohibition on the merger or sale of all, or substantially all, of the Company’s or any
subsidiary’s assets to a third party, except under certain limited conditions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In addition, the credit facility includes a customary condition to the Company’s borrowings under
the facility that there has not occurred a material adverse change with respect to the Company.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At June 30, 2009, the Company had $133 million of borrowings outstanding under its revolving credit
facility at a weighted-average interest rate of 3.9%.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company believes it is in compliance in all material respects with its debt covenants.
</div>
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. EARNINGS PER COMMON SHARE</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, the Company adopted FSP No. EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” Under this
FSP, unvested share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents, whether they are paid or unpaid, are considered participating securities and
should be included in the computation of earnings per share pursuant to the two-class method. FSP
No. EITF 03-6-1 became effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. In addition, all prior period earnings
per share data presented are required to be retrospectively adjusted. Upon adoption of FSP No.
EITF 03-6-1, basic earnings per share (EPS) is required to be computed using the two-class method
prescribed in SFAS No. 128, “Earnings per Share.” The two-class method is an earnings allocation
formula that treats a participating security as having rights to earnings that would otherwise have
been available to common shareholders. SFAS No. 128 defines participating securities as
“securities that may participate in dividends with common stocks according to a predetermined
formula.” FSP No. EITF 03-6-1 provides that its provisions need not be applied to immaterial
items. The Company has concluded that there are no material items to consider for purposes of its
shares outstanding and EPS calculations, and the treasury stock method will continue to be used, as
described below.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Basic EPS is computed by dividing net income (the numerator) by the weighted-average number of
common shares outstanding for the period (the denominator). Diluted EPS is similarly calculated
except that the denominator is increased using the treasury stock method to reflect the potential
dilution that could occur if stock options and stock awards outstanding at the end of the
applicable period were exercised for common stock.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following is a calculation of basic and diluted weighted-average shares outstanding for the
three and six months ended June 30, 2009 and 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Six Months Ended</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<!-- End Table Head -->
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<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-Average Shares — Basic
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>103,639,938</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">98,467,311</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>103,580,755</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">98,091,641</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Dilution Effect of Stock Options and
Awards at End of Period
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,174,872</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,014,070</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>731,091</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">872,358</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-Average Shares — Diluted
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>104,814,810</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">99,481,381</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>104,311,846</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">98,963,999</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-Average Stock Awards and Shares
Excluded from Diluted Earnings per Share
due to the Anti-Dilutive Effect
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>220,489</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>752,204</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">274,854</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
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<div style="font-family: 'Times New Roman',Times,serif">
</div>
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<head></head>
<body>
<!-- Begin Block Tagged Note 6 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>6. COMMITMENTS AND CONTINGENCIES</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Contingencies</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is a defendant in various legal proceedings arising in the normal course of its
business. All known liabilities are accrued based on management’s best estimate of the potential
loss. While the outcome and impact of such legal proceedings on the Company cannot be predicted
with certainty, management believes that the resolution of these proceedings through settlement or
adverse judgment will not have a material adverse effect on the Company’s condensed consolidated
financial position or cash flow. Operating results, however, could be significantly impacted in
the reporting periods in which such matters are resolved.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Commitment and Contingency Reserves</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">When deemed necessary, the Company establishes reserves for certain legal proceedings. The
establishment of a reserve involves an estimation process that includes the advice of legal counsel
and subjective judgment of management. While management believes these reserves to be adequate, it
is reasonably possible that the Company could incur approximately $0.9 million of additional loss
with respect to those matters in which reserves have been established. Future changes in the facts
and circumstances could result in the actual liability exceeding the estimated ranges of loss and
amounts accrued.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">While the outcome and impact on the Company cannot be predicted with certainty, management believes
that the resolution of these proceedings through settlement or adverse judgment will not have a
material adverse effect on the condensed consolidated financial position or cash flow of the
Company. Operating results, however, could be significantly impacted in the reporting periods in
which such matters are resolved.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Firm Gas Transportation Agreements</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company has incurred, and will incur over the next several years, demand charges on firm gas
transportation agreements. These agreements provide firm transportation capacity rights on
pipeline systems in the West and East regions. The remaining terms on these agreements range from
less than one year to approximately 20 years and require the Company to pay transportation demand
charges regardless of the amount of pipeline capacity utilized by the Company. If the Company does
not utilize the capacity, it can release it to others, thus reducing its potential liability. The
agreements that the Company previously had in place on pipeline systems in Canada were transferred
in April 2009 to the buyer in connection with the sale of our Canadian properties (discussed in
Note 2).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As previously disclosed in the Form 10-K, obligations under firm gas transportation agreements in
effect at December 31, 2008 were $94.7 million. As of June 30, 2009, obligations under firm gas
transportation agreements were $90.7 million. For further information on these future obligations,
please refer to Note 7 of the Notes to the Consolidated Financial Statements in the Form 10-K.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Drilling Rig Commitments</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the Form 10-K, the Company disclosed that it had total commitments of $44.3 million on eight
drilling rigs in the Gulf Coast that are under contracts with initial terms of greater than one
year. The Company entered into a new drilling rig commitment of approximately $8 million in the
first half of 2009. As of June 30, 2009, the total commitment for nine drilling rigs was $53.8
million. For further information on these future obligations, please refer to Note 7 of the Notes
to the Consolidated Financial Statements in the Form 10-K.
</div>
</div>
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<head></head>
<body>
<!-- Begin Block Tagged Note 7 - cog:DerivativeInstrumentsAndHedgingActivitiesFairValueMeasuresAndDisclosuresTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. FINANCIAL INSTRUMENTS</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Fair Value Measurements</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In February 2008, the FASB issued FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157,”
which granted a one year deferral (to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years) for certain non-financial assets and liabilities measured on a
nonrecurring basis to comply with SFAS No. 157. Effective January 1, 2009, the Company applied the
provisions of FAS No. 157 covered under FSP No. 157-2 which
did not have a material impact on the Company’s financial statements. In the future, areas that
could cause an impact would primarily be limited to asset impairments including long-lived assets,
asset retirement obligations and assets acquired and liabilities assumed in a business combination,
if any.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No. 157, “Fair Value Measurements,” established a formal framework for measuring fair values
of assets and liabilities in financial statements that are already required by United States
generally accepted accounting principles to be measured at fair value. As defined in SFAS No.
157, fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date (exit
price). The transaction is based on a hypothetical transaction in the principal or most
advantageous market considered from the perspective of the market participant that holds the asset
or owes the liability.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company utilizes market data or assumptions that market participants who are independent,
knowledgeable and willing and able to transact would use in pricing the asset or liability,
including assumptions about risk and the risks inherent in the inputs to the valuation technique.
These inputs can be readily observable, market corroborated or generally unobservable. The Company
attempts to utilize valuation techniques that maximize the use of observable inputs and minimize
the use of unobservable inputs. The Company is able to classify fair value balances based on the
observability of those inputs. SFAS No. 157 establishes a formal fair value hierarchy based on the
inputs used to measure fair value. The hierarchy gives the highest priority to level 1
measurements and the lowest priority to level 3 measurements, and accordingly, level 1 measurements
should be used whenever possible. For further information regarding the fair value hierarchy and
SFAS No. 157, refer to Note 11 of the Notes to the Consolidated Financial Statements in the Form
10-K.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with SFAS No. 157, the Company has classified its assets and liabilities into these
levels depending upon the data relied on to determine the fair values. The fair values of the
Company’s natural gas and crude oil price collars and swaps are designated as Level 3. The
following fair value hierarchy table presents information about the Company’s assets and
liabilities measured at fair value on a recurring basis as of June 30, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Quoted Prices in</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Significant</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Active Markets for</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Significant</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Identical Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Observable</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Unobservable</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance as of</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>(Level 1)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Inputs (Level 2)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Inputs (Level 3)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>June 30, 2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Rabbi Trust Deferred Compensation Plan
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">9,440</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>9,440</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivative Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">297,388</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>297,388</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total Assets
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">9,440</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">297,388</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>306,828</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Rabbi Trust Deferred Compensation Plan
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">16,510</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,510</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivative Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total Liabilities
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">16,510</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,510</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company’s investments associated with its Rabbi Trust Deferred Compensation Plan consist of
mutual funds that are publicly traded and for which market prices are readily available. In
addition, the Rabbi Trust Deferred Compensation Liability includes the value of deferred shares of
the Company’s common stock which is publicly traded and for which current market prices are readily
available.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The determination of the fair values above incorporates various factors required under SFAS No.
157. These factors include not only the credit standing of the counterparties involved in
transactions with the Company resulting in receivables on the Company’s Condensed Consolidated
Balance Sheet, but also the impact of the Company’s nonperformance risk on its liabilities.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth a reconciliation of changes for the three and six month periods
ended June 30, 2009 and 2008 in the fair value of financial assets and liabilities classified as
Level 3 in the fair value hierarchy:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(In thousands)</i></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at beginning of period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>405,186</b></td>
<td nowrap="nowrap"><sup style="font-size: 85%; vertical-align: text-top"><b>(1)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(85,387</td>
<td nowrap="nowrap">)<sup style="font-size: 85%; vertical-align: text-top">(2)</sup></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>355,202</b></td>
<td nowrap="nowrap"><sup style="font-size: 85%; vertical-align: text-top"><b>(3)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">7,272</td>
<td nowrap="nowrap"><sup style="font-size: 85%; vertical-align: text-top">(4)</sup></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Gains or (Losses) (Realized or
Unrealized):
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Included in Earnings <sup style="font-size: 85%; vertical-align: text-top">(5)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>106,802</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(28,326</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>196,837</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(29,348</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Included in Other Comprehensive
Income
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(107,672</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(194,476</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(58,629</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(287,135</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Purchases, Issuances and Settlements
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(106,928</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">25,418</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(196,022</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">26,440</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Transfers In and/or Out of Level 3
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance at end of period</b>
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>297,388</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(282,771</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>297,388</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(282,771</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(1)</sup></td>
<td> </td>
<td>Balance was entirely comprised of derivative assets.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(2)</sup></td>
<td> </td>
<td>Balance was comprised of derivative liabilities of $85.8 million and derivative
assets of $0.4 million.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(3)</sup></td>
<td> </td>
<td>Balance was entirely comprised of derivative assets.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(4)</sup></td>
<td> </td>
<td>Balance was comprised of derivative assets of $12.7 million and derivative
liabilities of $5.4 million.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(5)</sup></td>
<td> </td>
<td>A loss of $0.1 million and a gain of $0.8 million for the three and six months ended
June 30, 2009, respectively, was
unrealized and included in Natural Gas Production Revenues in the Statement of Operations for the
three months and six
months ended June 30, 2009. All gains included in earnings for the three and six months ended June
30, 2008 were realized.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The derivative contracts were measured based on quotes from the Company’s counterparties. Such
quotes have been derived using a Black-Scholes model that considers various inputs including
current market and contractual prices for the underlying instruments, quoted forward prices for
natural gas and crude oil, volatility factors and interest rates, such as a LIBOR curve for a
similar length of time as the derivative contract term. Although the Company utilizes multiple
quotes to assess the reasonableness of its values, the Company has not attempted to obtain
sufficient corroborating market evidence to support classifying these derivative contracts as Level
2. The Company measured the nonperformance risk of its counterparties by reviewing credit default
swap spreads for the various financial institutions in which it has derivative transactions. The
resulting reduction to the net receivable derivative contract position was $1.8 million. In times
where the Company has net derivative contract liabilities, the nonperformance risk of the Company
is evaluated using a market credit spread provided by the Company’s bank.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Fair Market Value of Financial Instruments</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The estimated fair value of financial instruments is the amount at which the instrument could be
exchanged currently between willing parties. The carrying amounts reported in the Condensed
Consolidated Balance Sheet for cash and cash equivalents, accounts receivable and accounts payable
approximate fair value. The fair value of long-term debt is the estimated cost to acquire the
debt, including a credit spread for the difference between the issue rate and the period end market
rate. The credit spread is the Company’s default or repayment risk. The credit spread (premium or
discount) is determined by comparing the Company’s fixed-rate notes to new issuances (secured and
unsecured) and secondary trades of similar size and credit statistics for both public and private
debt. The fair value of all of the notes, excluding the credit facility, are based on interest
rates currently available to the Company. The credit facility approximates fair value because this
instrument bears interest at rates based on current market rates.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company uses available market data and valuation methodologies to estimate the fair value of
debt. This disclosure is presented in accordance with SFAS No. 107, “Disclosures about Fair Value
of Financial Instruments” as well as SFAS No. 157, “Fair Value Measurements” and does not impact
the Company’s financial position, results of operations or cash flows.
</div>
<!-- Keep Ignore Comment, per XBRLMARK -->
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<!-- Keep Ignore Comment, per XBRLMARK -->
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2008</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Carrying</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Estimated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Carrying</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Estimated</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amount</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fair Value</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td nowrap="nowrap">
<div style="margin-left:15px; text-indent:-15px">Long-Term Debt
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>815,000</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>816,698</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">867,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">807,508</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current Maturities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(20,000</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(20,682</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(35,857</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(35,796</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-Term Debt, excluding Current Maturities
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>795,000</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>796,016</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">831,143</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">771,712</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Derivative Instruments and Hedging Activity</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133.” SFAS No. 161 requires entities to provide
greater transparency about how and why the entity uses derivative instruments, how the instruments
and related hedged items are accounted for under SFAS No. 133 and how the instruments and related
hedged items affect the financial position, results of operations and cash flows of the entity.
The Company adopted SFAS No. 161 effective January 1, 2009. A tabular format including the fair
value of derivative instruments and their gains and losses, disclosure about credit risk-related
derivative features and cross-referencing within the footnotes are also new requirements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company periodically enters into derivative commodity instruments to hedge its exposure to
price fluctuations on natural gas and crude oil production. The Company’s credit agreement
restricts the ability of the Company to enter into commodity hedges other than to hedge or mitigate
risks to which the Company has actual or projected exposure or as permitted under the Company’s
risk management policies and not subjecting the Company to material speculative risks. All of the
Company’s derivatives are used for risk management purposes and are not held for trading purposes.
As of June 30, 2009, the Company had 26 cash flow hedges open: 14 natural gas price collar
arrangements, 10 natural gas price swap arrangements and two crude oil price swap arrangements.
During the first half of 2009, the Company entered into six new derivative contracts covering
anticipated natural gas production for 2012. These natural gas basis swaps did not qualify for
hedge accounting under SFAS No. 133. These natural gas basis swaps mitigate the risk associated
with basis differentials that may expand or increase over time, thus reducing the exposure and risk
of basis fluctuations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, the Company had the following outstanding commodity derivatives:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="9%"> </td>
<td width="3%"> </td>
<td width="13%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Weighted-Average</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Contract</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="LEFT" style="border-bottom: 1px solid #000000">                     <b>Commodity</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Type</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Contract Price</b><sup style="font-size: 85%; vertical-align: text-top"><b>(1)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Volume</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Period</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives designated as Hedging</b>
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Instruments under Statement 133</b>
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas
</div></td>
<td> </td>
<td align="center" valign="top">Collar</td>
<td> </td>
<td align="center" valign="top">$12.39 / $9.40</td>
<td> </td>
<td align="center" valign="top" nowrap="nowrap">per Mcf</td>
<td> </td>
<td> </td>
<td align="right">23,820</td>
<td> </td>
<td> </td>
<td colspan="3" align="right">Mmcf</td>
<td> </td>
<td align="center" valign="top">2009</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas
</div></td>
<td> </td>
<td align="center" valign="top">Swap</td>
<td> </td>
<td align="center" valign="top">$11.43</td>
<td> </td>
<td align="center" valign="top">per Mcf</td>
<td> </td>
<td> </td>
<td align="right">19,295</td>
<td> </td>
<td> </td>
<td colspan="3" align="right">Mmcf</td>
<td> </td>
<td align="center" valign="top">2010</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas
</div></td>
<td> </td>
<td align="center" valign="top">Swap</td>
<td> </td>
<td align="center" valign="top">$12.18</td>
<td> </td>
<td align="center" valign="top">per Mcf</td>
<td> </td>
<td> </td>
<td align="right">8,106</td>
<td> </td>
<td> </td>
<td colspan="3" align="right">Mmcf</td>
<td> </td>
<td align="center" valign="top">2009</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Crude Oil
</div></td>
<td> </td>
<td align="center" valign="top">Swap</td>
<td> </td>
<td align="center" valign="top">$125.25</td>
<td> </td>
<td align="center" valign="top">per Bbl</td>
<td> </td>
<td> </td>
<td align="right">184</td>
<td> </td>
<td> </td>
<td colspan="3" align="right">Mbbl</td>
<td> </td>
<td align="center" valign="top">2009</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Crude Oil
</div></td>
<td> </td>
<td align="center" valign="top">Swap</td>
<td> </td>
<td align="center" valign="top">$125.00</td>
<td> </td>
<td align="center" valign="top">per Bbl</td>
<td> </td>
<td> </td>
<td align="right">365</td>
<td> </td>
<td> </td>
<td colspan="3" align="right">Mbbl</td>
<td> </td>
<td align="center" valign="top">2010</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives not qualifying as Hedging</b>
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Instruments under Statement 133</b>
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas
</div></td>
<td> </td>
<td align="center" valign="top">Basis Swap</td>
<td> </td>
<td align="center" valign="top">$(0.27)</td>
<td> </td>
<td align="center" valign="top">per Mcf</td>
<td> </td>
<td> </td>
<td align="right">16,123</td>
<td> </td>
<td> </td>
<td colspan="3" align="right">Mmcf</td>
<td> </td>
<td align="center" valign="top">2012</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><b>(1)</b></sup></td>
<td> </td>
<td>For collar derivatives, the amounts in this column represent the ceiling and floor
prices.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The change in the fair value of derivatives designated as hedges that is effective is initially
recorded to Accumulated Other Comprehensive Income / (Loss) in Stockholders’ Equity in the Balance
Sheet. The ineffective portion of the change in the fair value of derivatives designated as
hedges, and the change in fair value of all other derivatives, are recorded currently in earnings
as a component of Natural Gas Production and Crude Oil and Condensate Revenue, as appropriate.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following schedules reflect the fair values of derivative instruments on the Company’s
condensed consolidated financial statements as of June 30, 2009:
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Effect of derivative instruments on the Condensed Consolidated Balance Sheet</i></b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="3%"> </td>
<td width="35%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="4%"> </td>
<td width="1%"> </td><!-- VRule -->
<td width="1%"> </td>
<td width="1%"> </td>
<td width="20%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>Asset Derivatives</b></td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Liability Derivatives</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b><i>(In thousands)</i></b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Balance Sheet Location</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Balance Sheet Location</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives designated as Hedging</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Instruments under Statement 133</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas Commodity Contracts
</div></td>
<td> </td>
<td align="left" valign="top">Current Derivative Contracts</td>
<td> </td>
<td align="left">$</td>
<td align="right">223,870</td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="center">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas Commodity Contracts
</div></td>
<td> </td>
<td align="left" valign="top">Long-Term Derivative Contracts</td>
<td> </td>
<td> </td>
<td align="right">43,420</td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="center">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Crude Oil Commodity Contracts
</div></td>
<td> </td>
<td align="left" valign="top">Current Derivative Contracts</td>
<td> </td>
<td> </td>
<td align="right">20,504</td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="center">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Crude Oil Commodity Contracts
</div></td>
<td> </td>
<td align="left" valign="top">Long-Term Derivative Contracts</td>
<td> </td>
<td> </td>
<td align="right">8,779</td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="center">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>296,573</b></td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives not qualifying as Hedging</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Instruments under Statement 133</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas Commodity Basis Contracts
</div></td>
<td> </td>
<td align="left" valign="top">Long-Term Derivative Contracts</td>
<td> </td>
<td> </td>
<td align="right">815</td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="center">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>297,388</b></td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td style="border-right: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At June 30, 2009, a $296.6 million ($186.3 million, net of tax) unrealized gain was recorded in
Accumulated Other Comprehensive Income / (Loss). For the natural gas commodity basis contracts
that were not designated as hedging instruments, a $0.8 million unrealized gain was recorded in the
Condensed Consolidated Statement of Operations as a component of Natural Gas Production Revenue for
the six months ended June 30, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Effect of derivative instruments on the Condensed Consolidated Statement of Operations</i></b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="36%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="35%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amount of</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amount of Gain</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of Gain</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gain</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Reclassified</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Recognized in</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Recognized</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>from</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Income on Derivative</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>in OCI on</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>(Ineffective Portion</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Derivative</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of Gain Reclassified from</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>OCI into Income</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>and Amount Excluded</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(Effective</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Accumulated OCI into Income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(Effective</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>from Effectiveness</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b><i>(In thousands)</i></b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Portion)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>(Effective Portion)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Portion)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Testing)</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives designated as Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Instruments under Statement 133</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas Commodity Contracts
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">267,290</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Natural Gas Production Revenues</td>
<td> </td>
<td align="left">$</td>
<td align="right">182,666</td>
<td> </td>
<td> </td>
<td align="center" valign="top">N/A</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Crude Oil Commodity Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">29,283</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Crude Oil and Condensate Revenues</td>
<td> </td>
<td> </td>
<td align="right">13,356</td>
<td> </td>
<td> </td>
<td align="center" valign="top">N/A</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>296,573</b></td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>196,022</b></td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="49%"> </td>
<td width="5%"> </td>
<td width="38%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Amount of Gain</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Recognized in</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of Gain Recognized in</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Income on</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b><i>(In thousands)</i></b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Income on Derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Derivative</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives not qualifying as Hedging</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Instruments under Statement 133</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="center" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Natural Gas Commodity Contracts
</div></td>
<td> </td>
<td align="left" valign="top">Natural Gas Production Revenues</td>
<td> </td>
<td align="center" valign="top"><b>$815</b></td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Based upon estimates at June 30, 2009, the Company would expect to reclassify from Other
Comprehensive Income to the Condensed Consolidated Statement of Operations over the next 12 months
$153.5 million in after-tax income associated with its commodity hedges. This reclassification
represents the net short-term receivable (after the impact of taxes) associated with open positions
currently not reflected in earnings at June 30, 2009 related to anticipated 2009 and 2010
production.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 8 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. COMPREHENSIVE INCOME / (LOSS)</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Comprehensive Income / (Loss) includes Net Income and certain items recorded directly to
Stockholders’ Equity and classified as Accumulated Other Comprehensive Income / (Loss). The
following tables illustrate the calculation of Comprehensive Income / (Loss) for the three and six
month periods ended June 30, 2009 and 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated Other Comprehensive
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td NOWRAP>
<div style="margin-left:30px; text-indent:-15px">Income / (Loss) — Beginning of Period
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>216,684</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(60,872</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net Income
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>25,502</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">54,625</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other Comprehensive Income / (Loss), net
of taxes:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Reclassification Adjustment for
Settled Contracts, net of taxes of
$40,182 and
$(9,404), respectively
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(66,746</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,014</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in Fair Value of Hedge
Positions, net of taxes of $277
and $81,249, respectively
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(467</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(138,645</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Defined Benefit Pension and
Postretirement Plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of Net Obligation at
Transition, net of taxes of $(59) and
$(58), respectively
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>99</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">100</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of Prior Service Cost, net
of taxes of $(67) and $(93),
respectively
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>112</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">157</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of Net Loss, net
of taxes of $(358) and
$(172), respectively
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>606</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>817</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">294</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">551</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign Currency Translation
Adjustment, net of taxes of
$(4,751) and $(189),
respectively
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,985</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Other Comprehensive Loss
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(58,411</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(58,411</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(121,730</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(121,730</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive Loss
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(32,909</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(67,105</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated Other Comprehensive
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income / (Loss) — End of Period
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>158,273</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(182,602</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated Other Comprehensive
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td NOWRAP>
<div style="margin-left:30px; text-indent:-15px">Income / (Loss) — Beginning of Period
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>186,426</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(894</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net Income
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>73,082</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">100,600</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other Comprehensive Income / (Loss), net
of taxes:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Reclassification Adjustment for Settled
Contracts, net of taxes of $73,413 and $(9,783),
respectively
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(122,609</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,657</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in Fair Value of Hedge Positions, net of
taxes of $(51,604) and $116,027, respectively
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>85,789</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(197,548</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Defined Benefit Pension and Postretirement Plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of Net Obligation at Transition,
net of taxes of $(118) and $(117), respectively
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>198</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">199</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of Prior Service Cost, net of taxes
of $(134) and $(186), respectively
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>225</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">315</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of Net Loss, net of taxes of $
(717) and $(300), respectively
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,210</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,633</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">512</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,026</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign Currency Translation Adjustment, net of
taxes of $(4,167) and $1,169, respectively
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,034</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,843</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Other Comprehensive Loss
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(28,153</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(28,153</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(181,708</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(181,708</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive Income / (Loss)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>44,929</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(81,108</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated Other Comprehensive
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income / (Loss) — End of Period
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>158,273</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(182,602</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Changes in the components of Accumulated Other Comprehensive Income / (Loss), net of taxes, for the
six months ended June 30, 2009 were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Defined Benefit</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Foreign</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Net Gains on</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Pension and</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Currency</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Accumulated Other Comprehensive Income, net</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Cash Flow</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Postretirement</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Translation</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>of taxes</b><i> (In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Hedges</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Plans</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Adjustment</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">223,068</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(29,608</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7,034</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">186,426</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net change in unrealized gain on cash flow
hedges, net of taxes of $21,809
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,820</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,820</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net change in defined benefit pension and
postretirement plans, net of taxes of $
(969)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,633</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,633</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Change in foreign currency translation
adjustment, net of taxes of $(4,167)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,034</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,034</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance at June 30, 2009</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>186,248</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(27,975</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>158,273</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 9 - us-gaap:PensionAndOtherPostretirementBenefitsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>9. PENSION AND OTHER POSTRETIREMENT BENEFITS</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of net periodic benefit costs for the three and six months ended June 30, 2009 and
2008 were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td colspan="6" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Qualified and Non-Qualified Pension Plans</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current Period Service Cost
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>861</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">828</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,722</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,657</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest Cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>928</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">818</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,856</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,636</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected Return on Plan Assets
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(671</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(884</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(1,342</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,767</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of Prior Service Cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>13</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>26</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of Net Loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>794</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">294</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,588</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">587</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net Periodic Pension Cost
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,925</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,069</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>3,850</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,138</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Postretirement Benefits Other than Pension Plans</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current Period Service Cost
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>320</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">307</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>640</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">541</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest Cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>398</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">382</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>797</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">690</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of Prior Service Cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>167</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">238</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>333</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">476</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of Net Loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>169</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">171</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>338</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">224</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of Net Obligation at Transition
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>158</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">158</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>316</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">316</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Postretirement Benefit Cost
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,212</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,256</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>2,424</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,247</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Employer Contributions</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The funding levels of the pension and postretirement plans are in compliance with standards set by
applicable law or regulation. The Company does not have any required minimum funding obligations
for its qualified pension plan in 2009. The Company previously disclosed in its financial
statements for the year ended December 31, 2008 that it expected to contribute $0.3 million to its
non-qualified pension plan and $0.8 million to the postretirement benefit plan during 2009. It is
anticipated that these contributions will be made prior to December 31, 2009. In May 2009, the
Company made a contribution of $10 million to its qualified pension plan.
</div>
</div>
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<head></head>
<body>
<!-- Begin Block Tagged Note 10 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>10. STOCK-BASED COMPENSATION</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Compensation expense charged against income for stock-based awards (including the supplemental
employee incentive plans) during the first half of 2009 and 2008 was $11.3 million and $39.3
million, respectively, and is included in General and Administrative Expense in the Condensed
Consolidated Statement of Operations. Stock-based compensation expense in the second quarter of
2009 and 2008 was $6.2 million and $21.7 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As disclosed in the Form 10-K, the Company realized a $10.7 million tax benefit during the year
ended December 31, 2008 related to the 2007 federal tax deduction in excess of book compensation
cost for employee stock-based compensation. In accordance with SFAS No. 123(R), the Company is
able to recognize this tax benefit only to the extent it reduces the Company’s income taxes
payable. Such income tax benefit related to the stock-based compensation was recorded in 2008 as
the Company carried back net operating losses concurrent with the 2007 tax return filing. For
regular tax purposes, the Company was in a net operating loss position in 2008 and estimates that
it will be in a net operating loss position in 2009; thus, the entire tax benefits related to 2009
and 2008 employee stock-based compensation will be recorded only when the tax net operating loss is
utilized to reduce income taxes payable or claim a refund of taxes paid in prior years.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For further information regarding Stock-Based Compensation or the Company’s Incentive Plans, please
refer to Note 10 of the Notes to the Consolidated Financial Statements in the Form 10-K.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Restricted Stock Awards</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first half of 2009, the Compensation Committee granted 10,800 restricted stock awards
with a weighted-average grant date per share value of $29.33. The fair value of restricted stock
grants is based on the average of the high and low stock price on the grant date. During the first
half of 2009, 31,240 restricted stock awards vested with a weighted-average grant date per share
value of $23.80.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Compensation expense recorded for all unvested restricted stock awards for the first six months of
2009 and 2008 was $0.4 million and $1.0 million, respectively. Compensation expense recorded for
all unvested restricted stock awards for the second quarter of 2009 and 2008 was $0.2 million and
$0.3 million, respectively. The Company used an annual forfeiture rate ranging from 0% to 7.1%
based on approximately ten years of the Company’s history for this type of award to various
employee groups.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Restricted Stock Units</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the six months ended June 30, 2009, 33,150 restricted stock units were granted to
non-employee directors of the Company with a grant date per share value of $22.63. The fair value
of these units is measured at the average of the high and low stock price on grant date and
compensation expense is recorded immediately. These units immediately vest and are paid out when
the director ceases to be a director of the Company. The compensation cost, which reflects the
total fair value of these units, recorded in the first half of 2009 and 2008 was $0.8 million in
each period. There was no expense recorded in the second quarter of either 2009 or 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Stock Appreciation Rights</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first half of 2009, the Compensation Committee granted 221,780 stock appreciation rights
(SARs) to employees. These awards allow the employee to receive the intrinsic value over the
$22.63 grant date market price that may result from the price appreciation on a set number of
common shares during the contractual term of seven years. As these SARs are paid out in stock,
rather than in cash, the Company calculates the fair value in the same manner as stock options, by
using a Black-Scholes model.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The assumptions used in the Black-Scholes fair value calculation for SARs are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Six Months Ended</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>June 30, 2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-Average Value per Stock Appreciation Right
Granted During the Period
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>9.35</b></td>
<td> </td>
</tr>
<tr>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Assumptions
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Stock Price Volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>50.5</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Risk Free Rate of Return
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>1.7</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Expected Dividend
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>0.5</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Expected Term (in years)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4.5</b></td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Compensation expense recorded during the first half of 2009 and 2008 for SARs was $1.3 million and
$1.2 million, respectively. Included in these amounts were $0.7 million and $0.5 million in the
first half of 2009 and 2008, respectively, related to the immediate expensing of shares granted in
2009 and 2008 to retirement-eligible employees. Compensation expense in the second quarter of 2009
and 2008 was $0.3 million and $0.4 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Performance Share Awards</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During 2009, the Compensation Committee granted three types of performance share awards to
employees for a total of 785,350 performance shares. The performance period for two of the three
types of these awards commenced on January 1, 2009 and ends December 31, 2011. Both of these types
of awards vest on January 1, 2012.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">Awards totaling 207,730 performance shares are earned, or not earned, based on the comparative
performance of the Company’s common stock measured against sixteen other companies in the Company’s
peer group over a three year performance period. The grant date per share value of the equity
portion of this award was $17.63. Depending on the Company’s performance, employees may receive an
aggregate of up to 100% of the fair market value of a share of common stock payable in common stock
plus up to 100% of the fair market value of a share of common stock payable in cash.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Awards totaling 376,510 performance shares are earned, or not earned, based on the Company’s
internal performance metrics rather than performance compared to a peer group. The grant date per
share value of this award was $22.63. These awards represent the right to receive up to 100% of
the award in shares of common stock. The actual number of shares issued at the end of the
performance period will be determined based on the Company’s performance against three performance
criteria set by the Company’s Compensation Committee. An employee will earn one-third of the
award granted for each internal performance metric that the Company meets at the end of the
performance period. These performance criteria measure the Company’s average production, average
finding costs and average reserve replacement over three years. Based on the Company’s probability
assessment at June 30, 2009, it is considered probable that these three criteria will be met.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The third type of performance share award, totaling 201,110 performance shares, with a grant date
per share value of $22.63, has a three-year graded vesting schedule, vesting one-third on each
anniversary date following the date of grant, provided that the Company has $100 million or more of
operating cash flow for the year preceding the vesting date. If the Company does not have $100
million or more of operating cash flow for the year preceding a vesting date, then the portion of
the performance shares that would have vested on that date will be forfeited. As of June 30, 2009,
it is considered probable that this performance metric will be met for 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For all performance share awards granted to employees in 2009 and 2008, an annual forfeiture rate
ranging from 0% to 5.2% has been assumed based on the Company’s history for this type of award to
various employee groups.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For awards that are based on the internal metrics (performance condition) of the Company and for
awards that were granted prior to the adoption of SFAS No. 123(R) on January 1, 2006, fair value is
measured based on the average of the high and low stock price of the Company on grant date and
expense is amortized over the three year vesting period. To determine the fair value for awards
that were granted after January 1, 2006 that are based on the Company’s comparative performance
against a peer group (market condition), the equity and liability components are bifurcated. On
the grant date, the equity component was valued using a Monte Carlo binomial model and is amortized
on a straight-line basis over three years. The liability component is valued at each reporting
period by using a Monte Carlo binomial model.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The four primary inputs for the Monte Carlo model are the risk-free rate, volatility of returns,
correlation in movement of total shareholder return and the expected dividend. An interpolated
risk-free rate was generated from the Federal Reserve website for constant maturity treasuries for
two and three year bonds (as of the reporting date) set equal to the remaining duration of the
performance period. Volatility was set equal to the annualized daily volatility for the remaining
duration of the reporting period ending on the reporting date. Correlation in movement of total
shareholder return was determined based on a correlation matrix that was created which identifies
total shareholder return correlations for each pair of companies in the peer group, including the
Company. The paired returns in the correlation matrix ranged from approximately 49% to
approximately 88% for the Company and its peer group. The expected dividend is calculated using
the total Company annual dividends expected to be paid ($0.12 per share) divided by the June 30,
2009 closing price of the Company’s stock ($30.64). Based on these inputs discussed above, a
ranking was projected identifying the Company’s rank relative to the peer group for each award
period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following assumptions were used as of June 30, 2009 for the Monte Carlo model to value the
liability components of the peer group measured performance share awards. The equity portion of
the award was valued on the date of grant using the Monte Carlo model and this portion was not
marked to market.
</div>
<!-- Keep Ignore Comment, per XBRLMARK -->
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<!-- Keep Ignore Comment, per XBRLMARK -->
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Risk Free Rate of Return
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td nowrap="nowrap" align="right"><b>0.4% — 1.4</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock Price Volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td nowrap="nowrap" align="right"><b>63.6% — 78.1</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected Dividend
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>0.4</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Monte Carlo value per share for the liability component for all outstanding market condition
performance share awards ranged from $11.59 to $14.20 at June 30, 2009. The long-term liability
for market condition performance share awards, included in Other Liabilities in the Condensed
Consolidated Balance Sheet, at June 30, 2009 and December 31, 2008 was $1.1 million and $0.3
million, respectively. The short-term liability, included in Accrued Liabilities in the Condensed
Consolidated Balance Sheet, at June 30, 2009 and December 31, 2008, for market condition
performance share awards was $0.9 million and $2.5 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first half of 2009, 332,642 performance shares vested. As discussed in Note 10 of the
Notes to the Consolidated Financial Statements in the Form 10-K, the performance period ended on
December 31, 2008 for two types of performance shares awarded in 2006. A total of 105,800 shares
measured based on the Company’s performance against a peer group (valued at $1.7 million) were
awarded in addition to cash of $1.8 million. A total of 155,800 shares measured based on internal
performance metrics of the Company (valued at $3.8 million) were also awarded. During the first
quarter of 2009, 60,740 shares vested (valued at $2.5 million) which represents one-third of the
three-year graded vesting schedule performance share awards granted in 2008 and 2007 with a grant
date per share value of $48.48 and $35.22, respectively. These awards met the performance criteria
that the Company had positive operating income for 2008 and 2007. During the second quarter of
2009, 10,302 performance shares vested as a result of early vesting schedules for certain
employees.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, 256,400 shares of the Company’s common stock representing vested performance
share awards were deferred into the Rabbi Trust Deferred Compensation Plan. For the first half of
2009, an increase to the rabbi trust deferred compensation liability of $1.2 million was
recognized, representing the increase in the closing price of all shares from December 31, 2008 to
June 30, 2009. This increase in stock-based compensation expense was included in General and
Administrative expense in the Condensed Consolidated Statement of Operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Total compensation cost recognized for both the equity and liability components of all performance
share awards as well as expense related to the shares deferred into the rabbi trust during the six
months ended June 30, 2009 and 2008 was $8.8 million and $20.5 million, respectively. Total
compensation cost recognized for both the equity and liability components of all performance share
awards as well as expense related to the shares deferred into the rabbi trust during the second
quarter of 2009 and 2008 was $5.7 million and $9.7 million, respectively.
</div>
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<!-- Begin Block Tagged Note 11 - cog:IncreaseInAuthorizedSharesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>11. INCREASE IN AUTHORIZED SHARES</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the stockholders of the Company approved an increase in the authorized number of
shares of common stock from 120 million to 240 million shares. The Company also decreased the
number of shares of Series A Junior Participating Preferred Stock reserved for issuance from
1,200,000 to 800,000. The shares of Series A Junior Participating Preferred Stock are issuable
pursuant to the Company’s Preferred Stock Purchase Rights Plan.
</div>
<!-- Folio -->
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40127000
22636000
48552000
23073000
N/A
false
--12-31
2009-06-30
10-Q
0000858470
103644436
Yes
Large Accelerated Filer
6999000000
CABOT OIL & GAS CORPORATION
No
Yes
222985000
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