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Property and Equipment

6 Months Ended

Jun. 30, 2011

Note 2 - Property and Equipment

Property and equipment included the following at the dates indicated below:

				June 30,		December 31,
				2011		2010
Oil and gas properties under the full cost method:
	Subject to amortization		$	455,001	$	389,575
	Not subject to amortization:
		Acquired in 2011		89,902		-
		Acquired in 2010		63,555		67,612
		Acquired in 2009		29,204		31,134
		Acquired prior to 2009		58,375		62,684
				696,037		551,005
Computers, furniture and fixtures				4,620		4,222
	Total property and equipment			700,657		555,227

Accumulated depreciation, depletion and amortization				(201,164)		(190,550)

Net property and equipment			$	499,493	$	364,677

The costs not subject to amortization relate to unproved properties and properties being made ready to be placed into service, which are excluded from amortizable capital costs until it is determined whether or not proved reserves can be assigned to such properties. We capitalized $4.1 million and $1.2 million in interest related to exploration activities for the quarters ended June 30, 2011 and 2010, respectively. For the six months ending June 30, 2011 and 2010, we capitalized $5.9 million and $1.9 million, respectively, in interest related to exploration.

For the second quarter of 2011, we did not have an impairment of oil and gas properties, pre-tax, through the application of the full cost ceiling test at the end of the quarter. The prices used in the application of the full cost ceiling test were $90.27 per barrel for oil and $4.24 per Mcf for gas for our U.S. properties, and $95.90 per barrel for oil and $8.26 per Mcf for gas for our U.K. properties.

Assets Acquisition

On February 23, 2011, we closed our acquisition of an additional 20% working interest in the Bacchus field for approximately $9.2 million in cash payable at closing and approximately $6.2 million in cash payable at the earlier of three months after first oil is produced or the end of 2011. In addition, we paid capital costs incurred by the seller of $9.4 million. Following the acquisition, we hold an aggregate 30% working interest.

Pending Acquisition

In July 2011, we entered into purchase and sale agreements to acquire certain leasehold and producing interests in the Marcellus shale in north central Pennsylvania, as well as a pipeline and related facilities for aggregate consideration of $110 million. The transaction is expected to close by the fourth quarter of 2011. Additional discussion of this acquisition can be found in Note 11 “Subsequent Events.”

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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