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<!-- Begin Block Tagged Note 2 - us-gaap:SignificantAccountingPoliciesTextBlock-->
<div align="left" style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note B. </b><b><i>Summary of significant accounting policies</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Principles of consolidation. </i></b>The consolidated financial statements of the Company include the
accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Use of estimates in the preparation of financial statements. </i></b>Preparation of financial
statements in conformity with generally accepted accounting principles in the United States of
America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates. Depletion of oil and natural
gas properties is determined using estimates of proved oil and natural gas reserves. There are
numerous uncertainties inherent in the estimation of quantities of proved reserves and in the
projection of future rates of production and the timing of development expenditures. Similarly,
evaluations for impairment of proved and unproved oil and natural gas properties are subject to
numerous uncertainties including, among others, estimates of future recoverable reserves and
commodity price outlooks. Other significant estimates include, but are not limited to, asset
retirement obligations, fair value of derivative financial instruments, purchase price allocations
for business combinations and fair value of stock-based compensation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Interim financial statements. </i></b>The accompanying consolidated financial statements of the
Company have not been audited by the Company’s independent registered public accounting firm,
except that the consolidated balance sheet at December 31, 2009 is derived from audited
consolidated financial statements. In the opinion of management, the accompanying consolidated
financial statements reflect all adjustments necessary to present fairly the Company’s financial
position at September 30, 2010, its results of operations for the three and nine months ended
September 30, 2010 and 2009 and its cash flows for the nine months ended September 30, 2010 and
2009. All such adjustments are of a normal recurring nature. In preparing the accompanying
consolidated financial statements, management has made certain estimates and assumptions that
affect reported amounts in the consolidated financial statements and disclosures of contingencies.
Actual results may differ from those estimates. The results for interim periods are not necessarily
indicative of annual results.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Certain disclosures have been condensed or omitted from these consolidated financial
statements. Accordingly, these consolidated financial statements should be read with the audited
consolidated financial statements and notes thereto included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Deferred loan costs. </i></b>Deferred loan costs are stated at cost, net of amortization, which is
computed using the effective interest and straight-line methods.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Future amortization expense of deferred loan costs at September 30, 2010 was 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="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>(in thousands)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </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">Remaining 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,232</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td> </td>
<td align="right">4,973</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">5,057</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">3,433</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">1,132</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Thereafter
</div></td>
<td> </td>
<td> </td>
<td align="right">3,717</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,544</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>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Intangible assets. </i></b>The Company capitalized certain operating rights acquired in 2008. The
gross operating rights, which have no residual value, are amortized over the estimated economic
life of approximately 25 years. Impairment will be assessed if indicators of potential impairment
exist or when there is a material change in the remaining useful economic life. The following table
reflects the gross and net intangible assets at September 30, 2010 and December 31, 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="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>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>(in thousands)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>2009</b></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">Gross intangible — operating rights
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">38,717</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">38,717</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated amortization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,357</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,195</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:30px; text-indent:-15px">Net intangible — operating rights
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">35,360</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">36,522</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>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The following table reflects amortization expense for the three and nine months ended
September 30, 2010 and 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="7"><b>Three Months Ended</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Nine 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>September 30,</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>(in thousands)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></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>
<td> </td>
<td colspan="7" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization expense
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">388</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">387</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,162</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,168</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" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The following table reflects the estimated aggregate amortization expense for each of the
periods presented below at September 30, 2010:
</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="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>(in thousands)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </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">Remaining 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">386</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td> </td>
<td align="right">1,549</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">1,549</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">1,549</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">1,549</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Thereafter
</div></td>
<td> </td>
<td> </td>
<td align="right">28,778</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">35,360</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>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Oil and natural gas sales and imbalances. </i></b>Oil and natural gas revenues are recorded at the
time of delivery of such products to pipelines for the account of the purchaser or at the time of
physical transfer of such products to the purchaser. The Company follows the sales method of
accounting for oil and natural gas sales, recognizing revenues based on the Company’s share of
actual proceeds from the oil and natural gas sold to purchasers. Oil and natural gas imbalances are
generated on properties for which two or more owners have the right to take production “in-kind”
and, in doing so, take more or less than their respective entitled percentage. Imbalances are
tracked by well, but the Company does not record any receivable from or payable to the other owners
unless the imbalance has reached a level at which it exceeds the remaining reserves in the
respective well. If reserves are insufficient to offset the imbalance and the Company is in an
overtake position, a liability is recorded for the amount of shortfall in reserves valued at a
contract price or the market price in effect at the time the imbalance is generated. If the Company
is in an undertake position, a receivable is recorded for an amount that is reasonably expected to
be received, not to exceed the current market value of such imbalance.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The following tables reflect the Company’s natural gas imbalance positions at September 30,
2010 and December 31, 2009 as well as amounts reflected in oil and natural gas production expense
for the three and nine months ended September 30, 2010 and 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> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>September 30,</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>December 31,</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>(dollars in thousands)</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" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td colspan="9">
<div style="margin-left:15px; text-indent:-15px">Natural gas imbalance receivable (included in other assets)
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">432</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">444</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Undertake position (Mcf)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96,002</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">98,584</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" style="background: #cceeff">
<td colspan="9">
<div style="margin-left:15px; text-indent:-15px">Natural gas imbalance liability (included in asset retirement obligations and other
long-term liabilities)
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">512</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">533</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Overtake position (Mcf)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96,483</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">101,278</td>
<td> </td>
</tr>
<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>Nine 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>September 30,</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>(dollars in thousands)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>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">
<td>
<div style="margin-left:15px; text-indent:-15px">Value of net undertake arising during the period decreasing
oil and natural gas
production expense
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(14</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(49</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net undertake position arising during the period (Mcf)
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,221</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,882</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,213</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(11,951</td>
<td nowrap="nowrap">)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Treasury stock. </i></b>Treasury stock purchases are recorded at cost. Upon reissuance, the cost of
treasury shares held is reduced by the average purchase price per share of the aggregate treasury
shares held.
</div>
<!-- Folio -->
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</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>General and administrative expense</i></b><b>. </b>The Company receives fees for the operation of jointly
owned oil and natural gas properties and records such reimbursements as reductions of general and
administrative expense. Such fees totaled approximately $3.5 million and $3.2 million for the three
months ended September 30, 2010 and 2009, respectively, and $10.0 million and $8.6 million for the
nine months ended September 30, 2010 and 2009, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Recent accounting pronouncements.</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Various topics. </i>In February 2010, the Financial Accounting Standards Board (the “FASB”) issued
an update to various topics, which eliminated outdated provisions and inconsistencies in the
Accounting Standards Codification (the “Codification”), and clarified certain guidance to reflect
the FASB’s original intent. The update is effective for the first reporting period, including
interim periods, beginning after issuance of the update, except for the amendments affecting
embedded derivatives and reorganizations. In addition to amending the Codification, the FASB made
corresponding changes to the legacy accounting literature to facilitate historical research. These
changes are included in an appendix to the update. The Company adopted the update effective January
1, 2010, and the adoption did not have a significant impact on the Company’s consolidated financial
statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Accounting for extractive activities. </i>In April 2010, the FASB issued an amendment to a
paragraph in the accounting standard for oil and natural gas extractive activities accounting. The
standard adds to the Codification the SEC’s <i>Modernization of Oil and Gas Reporting </i>release. The
Company adopted the update effective April 20, 2010, and the adoption did not have a significant
impact on the Company’s consolidated financial statements.
</div>
</div>
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-Number 22
-Paragraph 8
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