11. Preferred Stock

Series A Preferred Stock

In connection with the Company’s acquisition of its Mississippian Lime properties, on September 28, 2012, the Company designated 325,000 shares of Series A Mandatorily Convertible Preferred Stock (the “Series A Preferred Stock”) with an initial liquidation preference of $1,000 per share and an 8% per annum dividend, payable semiannually at the Company’s option in cash or through an increase in the liquidation preference. The Series A Preferred Shares are currently convertible in whole but not in part and at the option of the holders of a majority of the outstanding shares of Series A Preferred Stock, into a number of shares of the Company’s common stock calculated by dividing the then-current liquidation preference by the conversion price of $135.00 per share and, if not previously converted, are mandatorily convertible at September 30, 2015 into shares of the Company’s common stock at a conversion price no greater than $135.00 per share and no less than $110.00 per share, with the ultimate conversion price dependent upon the volume weighted average price of the Company’s common stock during the 15 trading days immediately prior to September 30, 2015. The conversion prices for the Series A Preferred Shares were automatically adjusted to reflect the reverse stock split and the resulting decrease in the number of shares of common stock outstanding. The Series A Preferred Stock was issued on October 1, 2012.

On March 30, 2015, the Company elected to pay the $13.0 million semi-annual dividend due on that date through an increase in the Series A Preferred Stock liquidation preference to $1,241 per share. It is the Company’s intention for the foreseeable future to pay Series A Preferred Share dividends through an adjustment to the liquidation preference. Therefore, for the three months ended June 30, 2015, the $7.9 million Series A Preferred Stock dividend, which the Company intends to pay through the adjustment to the liquidation preference, is based upon the estimated fair value of 71,893 common shares that would have been issued had the Series A Preferred Stock dividend for the three months been converted into common shares at a conversion price of $110.00 per share.

As a result, the Company will be obligated to issue between 580,151 and 712,004 additional shares of common stock upon conversion of the Series A Preferred stock, with the ultimate number of shares dependent upon the conversion price then in effect as described above.

The following table demonstrates the number of shares to be issued upon conversion through June 30, 2015 at the respective conversion rates based upon the current liquidation preference:

	Conversion at $135.00/share	Conversion at $110.00/share

Number of Common Shares Issuable Upon Conversion	2,987,558	3,666,549