OPERATIONAL UPDATE

The Company conducted drilling operations on 15 gross (9 net) wells in the quarter, with 8 gross (4 net) wells added to production, with a 100% success rate. As of June 30, 2010, the Company's backlog of net wells drilled and waiting on completion increased sequentially to 14 gross (7 net) wells.

Haynesville Shale - Shelby Trough

The Company has drilled and logged its SW Henderson 1H (100% WI) well in Angelina County, Texas, with an estimated 215 feet of Haynesville Shale and 200 feet of Bossier Shale prospective in the well. The Company is currently drilling the lateral and is anticipating completing the well in early September.

The Company has also drilled and logged its R Dean 1H (80% WI) well in Shelby County, Texas, with an estimated 126 feet of Haynesville Shale and 188 feet of Bossier Shale prospective. The Company has reached total depth on the lateral in the Haynesville Shale and is currently moving the rig to drill its R Dean 2H (80% WI), which it anticipates will be its initial Bossier Shale completion.

MANAGEMENT COMMENTS

Commenting on the second quarter results, Walter G. "Gil" Goodrich, Vice-Chairman and CEO stated, “During the second quarter, we made tremendous progress on almost every front. Our initial delineation efforts in both the Eagle Ford Shale and Shelby Trough are extremely encouraging and we anticipate positive follow-on results in the coming months. Our core Haynesville Shale activities again delivered outstanding results, which lead to very strong production growth in the quarter. In addition, we had an exceptional quarter on reducing per unit operating costs across the board, led by a 16% sequential decline in lease operating expense and an 11% decline in DD&A due primarily to our attractive finding cost in the Haynesville Shale. Even in the current environment, we are confident we will deliver solid growth and additional asset value creation in the second half of the year.”

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