Our corporate strategy remains focused on increasing stockholder value, as follows:

Pursue development of our core areas independently and through joint ventures or other industry partnerships

Although our capital expenditure budget was reduced dramatically in 2009 due to significant declines in commodity prices and our capital availability, and remains limited in 2010 by our capital availability and by the limitations imposed under the Second Amendment, our financial condition has improved and Rockies gas prices have recently begun to return to more attractive levels supporting additional development. We are unable to accurately predict our anticipated capital expenditures for fiscal year 2010, primarily due to the uncertainty relating to any Potential Strategic Transaction, including the likelihood of such a transaction occurring, the type of transaction and the timing of any such transaction. In addition, future redeterminations of our borrowing base under our credit facility, including the scheduled redetermination currently in process, may affect our liquidity available for capital expenditures making it difficult to accurately determine such amounts at the current time. We expect to announce our 2010 drilling plans once our strategic alternatives evaluation process and borrowing base redetermination are complete. It is our current belief that our 2010 capital deployment will be focused in the Rockies, which we believe will allow us to maintain approximately 90% of our 2009 production levels in 2010 until improved commodity prices and capital availability are able to support more aggressive drilling and completion activity.

In view of current market conditions and our capital expenditure constraints, we intend to more actively utilize joint ventures or other similar industry partnerships or participation arrangements to develop our asset base. In 2008, we announced the sale of 50% of our working interests in our Columbia River Basin acreage and are continuing to evaluate, among other alternatives, a joint venture or similar industry partnership transaction or transactions with the assistance of our Strategic Advisors. We are currently engaged in other joint venture focused discussions regarding development of several of our other unproved leasehold areas.

Achieve reserve growth through repeatable development

In 2009 we experienced a decrease in reserves due to the exclusion of our Piceance Basin proved undeveloped reserves given low Rockies gas prices over the course of the year as factored into the new SEC rules on pricing for yer- end reserve calculations. Prior to 2009, however, for a four-year period we experienced significant reserve growth through a combination of acquisitions and drilling successes. Although prior to 2006 the majority of our reserve and production growth came through acquisitions, in 2007 and 2008 we achieved reserve and production increases as a result of our drilling program. In 2009, we successfully focused on the efficient deployment of available capital to maintain production levels and experienced a decline of 11% in 2009 volumes relative to 2008. We anticipate that the majority of our future reserve and production growth will come through the execution of our development drilling program in our Piceance Basin projects, which contain a development drilling inventory generally consisting of locations in fields that demonstrate low variance in well performance, leading to predictable and repeatable field development.

Our reserve estimates change continuously and we evaluate such reserve estimates on a quarterly basis, with an independent engineering evaluation completed on an annual basis. Deviations in the market prices of both crude oil and natural gas and the effects of acquisitions, dispositions and exploratory development activities have a significant effect on the quantity and present and future values of our reserves.

Maintain high percentage ownership and operational control over our asset base

As of December 31, 2009, we controlled approximately 797,000 net undeveloped acres, representing approximately 98% of our total net acreage position. We retain a high degree of operational control over our asset base, as we generally have a high average working interest or act as the operator in our areas of significant activity. This provides us with controlling interests in a multi-year inventory of drilling locations, positioning us for reserve and production growth through our drilling operations when we are able to increase our drilling activity. This level of ownership and control also enables us to seek joint ventures or industry partnerships on the acreage. We plan to maintain this advantage to allow us to control the timing, level and allocation of our drilling capital expenditures and the technology and methods utilized in the planning, drilling and completion process, though our ability to control these matters may be diminished by the terms of joint venture or partnership arrangements we may enter into. We believe this flexibility to opportunistically pursue exploration and development projects relating to our properties is particularly valuable in view of the current lower commodity price and limited capital availability environment. We also have a 49.8% interest in DHS, as well as a contractual right of priority access to 18 drilling rigs owned by DHS.

Maintain and/or monetize acreage positions in high potential resource plays

We anticipate that like 2009 our exploratory drilling efforts during 2010 will be much more limited than in prior years. Although, we believe that our ongoing development of reserves in our core areas should be supplemented with exploratory efforts that may lead to new discoveries in the future, we will devote the vast majority of our capital resources to development of our existing core areas and seek carried, farmout or joint venture arrangements in pursuing exploratory opportunities. We continually evaluate our opportunities and pursue attractive potential opportunities that take advantage of our strengths. We have significant undeveloped, unproved acreage positions in the Columbia River Basin of Washington and Oregon, the Haynesville and Eagleford shales in Texas, and the Central Utah Hingeline, each of which has gained substantial interest within the exploration and production sector due to their relatively unexplored nature and the potential for meaningful hydrocarbon recoveries. There are other mid-size and large independent exploration and production companies conducting drilling activities in these plays. With increased commodity prices or the addition of joint venture partners to fund a portion or all of the drilling cost, our plans for 2010 could change with respect to these potentially rewarding exploratory plays.

Pursue a disciplined acquisition and disposition strategy

Historically we have been successful at growing through targeted acquisitions. Although our multi-year drilling inventory provides us with the opportunity to grow reserves and production organically without acquisitions, we continue to evaluate acquisition opportunities, primarily in our core areas of operation. In addition, as we did in the latter half of 2009 in particular, we will continue to look to divest of assets located in fully developed or non-core areas.

Maintain an active hedging program

We manage our exposure to commodity price fluctuations by hedging meaningful portions of our expected production through the use of derivatives. The level of our hedging activity and the duration of the instruments employed depend upon our view of market conditions, available hedge prices and our operating strategy. We use hedges to limit the risk of fluctuating cash flows used to fund our capital expenditure program. We also typically use hedges in conjunction with acquisitions to achieve expected economic returns during the payout period. During March 2009, we entered into derivative contracts that originally established a commodity floor price for our anticipated production of 40% for the last two quarters of 2009, 70% for the calendar year 2010 and 50% for the calendar year 2011. Depending upon the outcome of our assessment of Potential Strategic Transactions, we would expect to further evaluate our commodity price risks for the next 12 to 36 month period and periodically enter into derivative contracts to manage such risks.

Experienced management and operational team

Our senior management team has, on average, over 25 years of experience in the oil and gas industry, and has a proven track record of creating value both organically and through strategic acquisitions. Our management team is supported by an active board of directors with extensive experience in the oil and gas industry. Our experienced technical staff utilizes sophisticated geologic and 3-D seismic models to enhance predictability and reproducibility over significantly larger areas than historically possible. We also utilize multi-zone, multi-stage artificial stimulation (“frac”) technology in completing our wells to substantially increase near-term production, resulting in faster payback periods and higher rates of return and present values. Our team has successfully applied these techniques in the completions of our wells in our Rocky Mountain natural gas fields.