Results of Operations

For the nine months ended September 30, 2009, we had a net loss of $2,014,612 compared to a net income of $1,206,261 during the first nine months of 2008, a $3,220,873 difference. Total revenues for the first nine months of 2009 were $4,780,283, a decrease of $7,878,863 or 62.2% from the total revenues of $12,659,146 during the period in 2008. This decrease in revenues was the result of decreases in oil and natural gas commodity prices affecting our oil and natural gas production revenues. The decline in revenues was also the result of lower turnkey drilling revenues due to lower direct working interest sales for the period in 2009. For the quarter ended September 30, 2009 our net loss was $828,825 compared to a net profit of $1,373,491, again as a result of lower oil and natural gas prices and lower turnkey drilling revenues.

In the first nine months of 2009, revenues from oil and gas production decreased $3,699,857 or 63.4% to $2,135,421 from 2008 revenues of $5,835,278, due to lower prices received for our oil and natural gas production. The net sales volume of natural gas for the nine months ended September 30, 2009, was approximately 460,675 Mcf with an average price of $3.96 per Mcf, versus 535,777 Mcf with an average price of $9.13 per Mcf for the first nine months of 2008. This represents a decrease in net sales volume of 75,102 Mcf or 14%, mainly due to the natural declines in production from existing wells. For the quarter ended September 30, 2009, we produced 137,885 Mcf with an average price of $3.94 per Mcf versus 158,323 Mcf produced during the same quarter in 2008 with an average price of $8.31 per Mcf, which represents a 20,438 Mcf or 12.9% decrease in net sales volume. The net sales volume for oil and condensate (natural gas liquids) was 6,403 barrels with an average price of $48.55 per barrel for the first nine months of 2009, compared to 9,029 barrels at an average price of $104.77 per barrel for the first nine months in 2008. This represents a decrease in net sales volume of 2,626 barrels, or 29.1%. For the third quarter of 2009, oil and condensate produced decreased 578 barrels, or 22%, from 2,623 barrels produced in 2008 to 2,045 barrels produced in the same period in 2009. This decrease was mainly due to the natural declines in production from existing wells.