Risks and Uncertainties	6 Months Ended
Jun. 30, 2011
Risks and Uncertainties
Risks and Uncertainties	Note 3 — Risks and Uncertainties Our near-term operating and development plans in the Gulf of Mexico as well as our longer-term business plan are dependent on receiving additional approvals for deepwater drilling and other permits under applications which have been and will be submitted to the Bureau of Ocean Energy Management, Regulation and Enforcement of the Department of the Interior ("BOEM"). In the first quarter of 2011, we received permits to complete the drilling of the third well in Mississippi Canyon Block 941 at our Telemark Hub and to complete a well at Green Canyon Block 300. Completion activities on the third well at our Telemark Hub are underway. Also, while we believe we can satisfy the permitting requirements for the additional planned 2011 development wells, which we expect will allow us to increase significantly our production from current levels, there is no assurance that the permits will be issued or, if issued, that they will be received in time to benefit our 2011 results. Should the regulatory process in the Gulf of Mexico continue to cause delays, we believe we can continue to meet our existing obligations for at least the next twelve months based on forecasted production levels and the continuation of commodity sales prices and operating costs near current levels. A substantial portion of our current production is concentrated among relatively few wells located offshore in the Gulf of Mexico and in the North Sea, which are characterized by production declines more rapid than found in conventional onshore properties. As a result, we are particularly vulnerable to a near-term severe impact resulting from unanticipated complications in the development of, or production from, any single material well or infrastructure installation, including lack of sufficient capital, delays in receiving necessary drilling and operating permits, increased regulation, reduced access to equipment and services, mechanical or operational failures, and bad weather. Any unanticipated significant disruption to, or decline in, our current production levels or prolonged negative changes in commodity prices or operating cost levels could have a materially adverse effect on our financial position, results of operations and cash flows and our ability to meet our commitments as they come due. The size of our operations and our capital expenditures budget limit the number of properties that we can develop in any given year. We have historically obtained various other sources of funding to supplement our cash flow from operations and we will continue to pursue them in the future. There is no assurance, however, that these alternative sources will be available should these risks and uncertainties materialize. We cannot predict how the authorities will further respond to the Macondo incident in the Gulf of Mexico or whether additional changes in laws and regulations governing oil and gas operations in the Gulf of Mexico will result. New regulations already issued will, and potential future regulations or additional statutory limitations, if enacted or issued, could, require a change in the way we conduct our business, increase our costs of doing business or ultimately prohibit us from drilling for or producing hydrocarbons in the Gulf of Mexico. We cannot predict if or how the governments of other countries in which we operate will respond to the accident in the Gulf of Mexico. We incurred additional costs in 2010 caused by the deepwater drilling moratoriums and subsequent drilling permit delays and some of these additional costs are continuing into 2011 and are expected to continue. We have financed a significant portion of our development program with transactions entered into with our vendors and financial institutions that either defer payments to future periods or will be repaid based on production throughput or from the revenues or net profits generated from future production. While these financing transactions have enabled us to continue the development of our properties and preserve cash, they will significantly burden the future net cash flows from our production until these obligations are satisfied. (See Note 7, "Other Long-term Obligations," for further details.) As an independent oil and gas producer, our revenue, profitability, cash flows, and future rate of growth are substantially dependent on prevailing prices for oil and natural gas. Historically, the energy markets have been very volatile, and we expect such price volatility to continue. Any extended decline in oil or gas prices could have a materially adverse effect on our financial position, results of operations, cash flows, the quantities of oil and gas reserves that we can economically produce, and may restrict our ability to obtain additional financing or to meet the contractual requirements of our debt and other obligations. Our estimates of proved oil and natural gas reserves and the estimated future net revenues from such reserves are based upon various assumptions, including assumptions relating to oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The estimation process requires significant assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Therefore, these estimates are inherently imprecise and the quality and reliability of this data can vary. Estimates of our oil and natural gas reserves and the costs and timing associated with developing these reserves are subject to change, and may differ materially from our estimates. As of December 31, 2010, approximately 81% of our total proved reserves were undeveloped. We intend to continue to develop these reserves through the end of the year and beyond, but there can be no assurance we will be successful. Development of these reserves may not yield the expected results, or the development may be delayed or the costs may exceed our estimates, any of which may materially affect our financial position, results of operations, cash flows and our ability to meet the requirements of our financing obligations.

Note 3 — Risks and Uncertainties

Our near-term operating and development plans in the Gulf of Mexico as well as our longer-term business plan are dependent on receiving additional approvals for deepwater drilling and other permits under applications which have been and will be submitted to the Bureau of Ocean Energy Management, Regulation and Enforcement of the Department of the Interior ("BOEM"). In the first quarter of 2011, we received permits to complete the drilling of the third well in Mississippi Canyon Block 941 at our Telemark Hub and to complete a well at Green Canyon Block 300. Completion activities on the third well at our Telemark Hub are underway. Also, while we believe we can satisfy the permitting requirements for the additional planned 2011 development wells, which we expect will allow us to increase significantly our production from current levels, there is no assurance that the permits will be issued or, if issued, that they will be received in time to benefit our 2011 results. Should the regulatory process in the Gulf of Mexico continue to cause delays, we believe we can continue to meet our existing obligations for at least the next twelve months based on forecasted production levels and the continuation of commodity sales prices and operating costs near current levels.

A substantial portion of our current production is concentrated among relatively few wells located offshore in the Gulf of Mexico and in the North Sea, which are characterized by production declines more rapid than found in conventional onshore properties. As a result, we are particularly vulnerable to a near-term severe impact resulting from unanticipated complications in the development of, or production from, any single material well or infrastructure installation, including lack of sufficient capital, delays in receiving necessary drilling and operating permits, increased regulation, reduced access to equipment and services, mechanical or operational failures, and bad weather. Any unanticipated significant disruption to, or decline in, our current production levels or prolonged negative changes in commodity prices or operating cost levels could have a materially adverse effect on our financial position, results of operations and cash flows and our ability to meet our commitments as they come due.

The size of our operations and our capital expenditures budget limit the number of properties that we can develop in any given year. We have historically obtained various other sources of funding to supplement our cash flow from operations and we will continue to pursue them in the future. There is no assurance, however, that these alternative sources will be available should these risks and uncertainties materialize.

We cannot predict how the authorities will further respond to the Macondo incident in the Gulf of Mexico or whether additional changes in laws and regulations governing oil and gas operations in the Gulf of Mexico will result. New regulations already issued will, and potential future regulations or additional statutory limitations, if enacted or issued, could, require a change in the way we conduct our business, increase our costs of doing business or ultimately prohibit us from drilling for or producing hydrocarbons in the Gulf of Mexico. We cannot predict if or how the governments of other countries in which we operate will respond to the accident in the Gulf of Mexico. We incurred additional costs in 2010 caused by the deepwater drilling moratoriums and subsequent drilling permit delays and some of these additional costs are continuing into 2011 and are expected to continue.

We have financed a significant portion of our development program with transactions entered into with our vendors and financial institutions that either defer payments to future periods or will be repaid based on production throughput or from the revenues or net profits generated from future production. While these financing transactions have enabled us to continue the development of our properties and preserve cash, they will significantly burden the future net cash flows from our production until these obligations are satisfied. (See Note 7, "Other Long-term Obligations," for further details.)

As an independent oil and gas producer, our revenue, profitability, cash flows, and future rate of growth are substantially dependent on prevailing prices for oil and natural gas. Historically, the energy markets have been very volatile, and we expect such price volatility to continue. Any extended decline in oil or gas prices could have a materially adverse effect on our financial position, results of operations, cash flows, the quantities of oil and gas reserves that we can economically produce, and may restrict our ability to obtain additional financing or to meet the contractual requirements of our debt and other obligations.

Our estimates of proved oil and natural gas reserves and the estimated future net revenues from such reserves are based upon various assumptions, including assumptions relating to oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The estimation process requires significant assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Therefore, these estimates are inherently imprecise and the quality and reliability of this data can vary. Estimates of our oil and natural gas reserves and the costs and timing associated with developing these reserves are subject to change, and may differ materially from our estimates. As of December 31, 2010, approximately 81% of our total proved reserves were undeveloped. We intend to continue to develop these reserves through the end of the year and beyond, but there can be no assurance we will be successful. Development of these reserves may not yield the expected results, or the development may be delayed or the costs may exceed our estimates, any of which may materially affect our financial position, results of operations, cash flows and our ability to meet the requirements of our financing obligations.