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The
principal elements of our business strategy are designed to generate
growth in oil and gas reserves, production volumes and cash flow at a
positive return on invested capital. We plan to focus on the
following:
Exploit Existing Properties
Through the Drillbit. We intend to increase our
proved reserves by drilling numerous locations identified on our Wilmington field and Rocky
Mountain CBM properties. As of December
2010, we have identified a total of 200 drilling locations in our Wilmington oil field properties and 530 drilling locations in our Rocky
Mountain CBM properties. In addition, we also have zoning approval to drill up to 540 new wells in
the WTU. We have constructed two "environmentally friendly" drilling cellars that each allow for 140 new wells to be drilled from our WTU central facility. Increase Our
Working Interest in Future Wells. We plan to
significantly increase our level of participation in future wells
drilled by investing more of our own capital to drilling operations in
our high growth areas. We believe this will enable us to accelerate our
growth in production, reserves and cash flow. Pursue
Selective Acquisitions and Joint Ventures. We
believe we are well positioned, given our asset base and technical
expertise, to pursue selected acquisitions and attract industry joint
venture partners. We expect to pursue further acquisitions of natural
gas and oil properties in areas where we have specific technical
knowledge and experience. We also plan to enter into additional joint
ventures to increase our acreage and develop our reserves.
Reduce Costs Through Economies of Scale and Efficient
Operations. As we continue to increase our
production and develop our existing properties, we expect that our unit
cost structure will benefit from economies of scale. With respect to our
Wilmington oil and CBM operations, we anticipate reducing unit costs by greater utilization
of our existing infrastructure. We seek to exert greater control over
costs and timing in our exploration, development and production
activities through our operating activities and relationships with our
joint venture partners. As a result of the following
strengths, we believe we are well positioned to execute our business
strategy:
Balanced High Quality Asset Portfolio.
Since 1999, we have grown our asset base and diversified
our production through California oil property acquisitions in the Los Angeles Basin
and natural gas properties in the Rocky Mountains that have significant growth potential.
Our diverse asset base provides us with the flexibility to reallocate capital among our assets
depending on fluctuations in natural gas and oil prices as well as area economics.
Long-Lived Proved Reserves with Stable Production Characteristics.
Our properties generally have long reserve lives and reasonably stable and predictable well
production characteristics with a ratio of total proved reserves to production of approximately 13
years.
Low-Risk Multi-Year Drilling Inventory in Established Resource Plays.
Most of our drilling locations are located in proven resource plays that possess low geologic risk
leading to predictable drilling results. Our California assets where we have identified
approximately 200 gross drilling locations have an average depth of less than 4,000 feet and are
located in areas where we are an established driller and producer.
Substantial Rocky Mountain
Undeveloped Acreage Position. We believe that the
Rocky Mountain region is one of the few remaining high potential natural
gas provinces in North America. We have assembled a substantial
undeveloped acreage position of 150,203 gross (80,413 net) acres
containing 530 identified drilling locations. Our estimated total net
proved reserves are located on approximately 20% of our net acreage.
Technical Expertise. Since the
beginning of our CBM operations in 1996, we have gained
considerable
expertise in advanced CBM drilling, completion and re-entry techniques.
Additionally, we have considerable expertise in directional and
horizontal drilling relating to our waterflood recovery program in the
Wilmington unit. Incentivized Management
Ownership. The equity ownership of our management
team is strongly aligned with that of our stockholders. As of March 31,
2011, our 15 directors and executive officers beneficially owned
4,813,695 shares of common stock.
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