Our corporate strategy is to focus on increasing stockholder value, specifically by creating incremental value from our core asset, the Vega Area of the Piceance Basin.

Maintain a disciplined operational focus on our core asset

During 2010, we streamlined our business to focus on our core asset, the Vega Area of the Piceance Basin. As of December 31, 2010, the Vega Area comprised approximately 84% of our proved reserves and with its undeveloped leasehold potential comprises virtually all of our long-term growth prospects. We divested of many of our non-core assets and interests in producing fields in Texas and other non-core areas which allowed us to reduce our overhead and operating expenses, while also providing capital to deploy in the Vega Area. While we retain working interests in certain fields outside our core area, they are now operated by third parties and we expect limited capital expenditures in these areas in the future. We will continue to evaluate the divestiture of our remaining working interest in these non-operated assets.

Continue to utilize superior completion methodology to maximize the reserves per well

The Piceance Basin generally has consistent and predictable geology. The consistent and predictable geology throughout the Vega Area allows us to benefit from meaningful economies of scale in both our drilling and completion activities. During the past year we have utilized a larger well completion design that has improved our initial production rates and our expected reserve recovery per well. The revision to the completion method is in the fracture stimulation procedure, which is much larger than prior fracture stimulation designs. The new fracture stimulation design is referred to as “generation four” or “Gen IV” as it is the fourth iteration of our fracture stimulation design for wells in the Vega Area. The improved frac design increased our gross average well recoveries from 1.15 Bcfe to 1.60 Bcfe. This incremental improvement in reserves per well is expected to provide for a lower finding and development cost per Mcfe, which equates to lower overall per unit operating and development costs.

Maintain lower operating and overhead costs

In the latter half of 2010 we were able to reduce both our operating and overhead costs. As a result of the divestiture of non-core assets, we were able to reduce our staff and maintain a team solely focused on the development of Vega which enabled us to reduce our general and administrative expenses. We also substantially reduced our operating costs, particularly in the fourth quarter, both on an absolute basis and on a per Mcfe basis. Much of the operating cost reduction was achieved by using the water we produce from our wells in the completion activity. Water disposal is the largest single operating expense in the Vega Area. This efficient utilization of our produced water enabled us to significantly reduce our water disposal costs for the fourth quarter. Subsequent to year end we terminated a contract with a water treatment service provider for the Vega Area, which resulted in the elimination of an ongoing future expense of approximately $500,000 per month for a ten year period in exchange for a one-time payment of $1.5 million. The termination of this contract allows us to use alternative methods of water treatment and disposal that are more suitable for the amount of water that is currently being produced at the field, and management believes that the use of subsurface injection for water disposal is a much more viable and cost effective approach at the present time. In addition to the water disposal wells we currently utilize, we anticipate converting four wells in the field to water disposal wells and possibly drilling another. The existing wells that are targeted for water disposal are old wells that have minimal or no gas production. We are currently in the process of obtaining the necessary permits to inject our produced water into the four existing wells, which will help maintain our overall operating costs at the reduced levels.

Quantify reserve potential in the deeper zones beneath the Williams Fork section

During the fourth quarter of 2010 we spud a well in the Vega Area to drill to deeper, potentially productive, zones below the Williams Fork section of the Mesa Verde formation. Our interest in testing the deeper zones originated with our understanding that other third party operators in the Piceance Basin with analogous geology had experienced successful tests in formations beneath the Williams Fork. We began completion activities on the deep test well subsequent to year end 2010. We have also spud a second well that will target the section immediately beneath the Williams Fork. As the drilling and completion activities are finished we will continue our evaluation of the reserve potential, if any, in these deeper zones.

Solidify our acreage position at the Vega Area

Our leasehold position at the Vega Area totals approximately 22,375 net acres. Over 86% of this acreage is not subject to lease expiration as it is held by production (HBP). During 2011, we have approximately 1,810 net acres subject to primary term expiration. However, approximately 1,600 net acres which are subject to 2011 expiration will be converted to HBP with the drilling and completion of a single well. We are planning on drilling this well during 2011 and will make all financially prudent efforts to limit other future lease expirations at the Vega Area.

Maximize Stockholder Value

We are currently exploring a variety of options to maximize value to our stockholders. We intend to continue to focus on increasing our reserves, production and revenues through improved frac technology and exploratory efforts at our Vega acreage, while at the same time reducing our expenses on a per unit basis. We believe that if we are able to meet these objectives, it is likely that opportunities to further increase shareholder value will become available to us, including, without limitation, access to capital markets, sales of assets for a premium or a sale of the entire company.

Experienced management and operational team

Our senior management team has, on average, over 25 years of experience in the oil and gas industry. Our management team is supported by an active board of directors with extensive experience in the capital markets and in the oil and gas industry. We retain highly experienced personnel in our production, drilling and land management teams. Our senior managers in our technical teams all have decades of experience in their respective disciplines.