2009 Drilling Activity and Guidance Update

The Company has resumed drilling and currently is operating two rigs in Cinco Terry. During the fourth quarter of 2009, the Company plans to drill 11 gross (5.5 net) wells in Cinco Terry. We also have begun our previously announced 3-D seismic operations in Cinco Terry. We plan to move one rig into Ozona Northeast in November 2009 and drill four gross (four net) wells before year end. Given the anticipated increase in activity during the remainder of 2009, we expect that our capital expenditures for the year ending December 31, 2009, including these projects but excluding any acquisitions, will not exceed $30 million. The Company expects to fund remaining 2009 capital expenditures with internally-generated cash flows. The 2009 capital budget is subject to change depending upon a number of factors, including economic and industry conditions at the time of drilling, prevailing and anticipated prices for oil and gas, the results of our development and exploration efforts, the availability of sufficient capital resources for drilling prospects, our financial results, the availability of leases on reasonable terms and our ability to obtain permits for the drilling locations.

The table below sets forth the Company's revised 2009 financial and operational guidance. Guidance for lease operating, severance and production taxes and depletion, depreciation and amortization expenses is unchanged from prior guidance.