Subsequent Events

Subsequent to the end of fiscal 2008, during July and August, 2008, the Company completed for production four wells in its Johnson Branch acreage, two of which were completed in the Bossier/Haynesville shales, bringing the Company's number of producing wells in Louisiana to 20. Also, since the end of fiscal 2008, Cubic has drilled two wells, the Estes 7-1 and the Red Oak Timber 5-1 (our fourth and fifth wells to be drilled into the Bossier/Haynesville shales), to total depth of approximately 11,950 feet into the Bossier/Haynesville shales in its Bethany Longstreet acreage. Cubic has a 35% working interest in both wells. The Estes 7-1 was drilled using a casing program with 7 5/8" pipe for the intermediate string, which will allow the Company to drill horizontally into the Bossier/Haynesville shales at a later date, after being vertically completed initially in the Cotton Valley formation.

As of September 1, 2008, the Company had successfully drilled 22 wells in northwest Louisiana with 20 having been completed as producers of hydrocarbons; the two other wells are awaiting completion. As of such date, 10 Johnson Branch wells have been completed as hydrocarbon producers in the Cotton Valley sandstones and two into the Bossier/Haynesville shales. Cubic has a 49% working interest in its Johnson Branch acreage. Seven miles to the South, in its Bethany Longstreet acreage, Cubic has eight wells producing from the Cotton Valley and Hosston formations. Cubic has a 25% working interest in seven of these producing wells, and a 35% working interest in the Estes 8-1 well. Work is ongoing at the Bethany Longstreet and Johnson Branch wells to increase the average daily production from these areas. We also anticipate that we will complete and fracture stimulate additional zones of certain Johnson Branch wells.

Given the forgoing subsequent events, the Company does not believe that the downward revisions in estimates taken in the fiscal 2008 and 2007 reserve reports (please also see Item 1. Business - "DESCRIPTION OF BUSINESS" and Item
1. Business - "OIL AND GAS RESERVES", and Notes to Financial Statements, "Note J
- Oil and gas reserves information (unaudited)") will have a material impact on the Company's future prospects.

All of the Company's Louisiana acreage lies atop the center of what is known in our industry as the "Haynesville Shale Play" (which we refer to as the "Bossier/Haynesville shales" elsewhere herein), which is believed in our industry to be one of the most prolific field discoveries in the United States. The discovery of the existence of the Bossier/Haynesville shale formations in the Company's acreage mandated that we redirect capital in fiscal 2008 to protect our rights to this formation, which took spending away from the maximization of development of the Cotton Valley formation in our Bethany Longstreet and Johnson Branch fields.

Our first round of drilling was undertaken to maximize retention of our lease rights to develop our Johnson Branch and Bethany Longstreet acreage. Infrastructure costs have required greater capital outlay than anticipated. This variance, coupled with increases in overall drilling and completion costs, had an effect on the completion techniques that we utilized in fiscal 2008. While it is in the Company's future development plans to re-complete this first round of producing wells at a later date, the Company's focus has changed from maximizing production and reserves in the first round of drilling to holding acreage and preserving capital for potentially much greater production and reserves from the emerging Haynesville Shale Play.

The majority of the Company's unproven acreage lies in our Johnson Branch field. Reservoir analysis produced by a third-party engineer for the Johnson Branch acreage indicates a prolific and economic Bossier/Haynesville shale formation and a productive and economic Cotton Valley formation. Wells drilled by the Company subsequent to the end of fiscal 2008 into the Bossier/Haynesville shale formation in our Bethany Longstreet field seem to indicate the same productive formation characteristics as compared to the wells drilled into the Bossier/Haynesville shales in our Johnson Branch acreage. Moreover, horizontal Cotton Valley formation wells drilled by our competitors in the Bethany Longstreet field have demonstrated productive characteristics.



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Accordingly, while work undertaken by the Company subsequent to the end of fiscal 2008 has allowed us to improve our completion techniques for vertical Cotton Valley wells in our Bethany Longstreet and Johnson Branch fields, going forward, the Company contemplates horizontal drilling of all its Cotton Valley and Bossier/Haynesville wells.

The redirection of the Company's focus outlined above impacted the Company's proved reserves amounts for the fiscal year ended June 30, 2008 as follows:
(i) only horizontal wells for the Cotton Valley sandstone and Bossier/Haynesville shale formations are now contemplated, which resulted in the loss of Proved Undeveloped ("PUD") reserves for certain Cotton Valley wells that had previously been allowed with a vertical drilling program; and (ii) the lack of production history information as of June 30, 2008 for horizontal Cotton Valley and horizontal Bossier/Haynesville shale wells adversely impacted assumptions regarding both initial production rates and production decline curves used in calculating the Company's reserve estimates. The Company believes that proceeding at a more measured drilling pace for fiscal 2009 will allow the Company to take advantage of improved completion techniques, and, pursuant to the data filed subsequent to the end of fiscal 2008 by our competitors with respect to productive wells in the Haynesville Shale Play, that the two wells drilled and the four wells completed subsequent to the end of fiscal 2008 (see Item 1. Business - "RECENT DEVELOPMENTS" elsewhere herein) will result in a significant increase in reserves for fiscal 2009.


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