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## ITEMS 1 and 2. BUSINESS AND PROPERTIES 

We are engaged in the acquisition, development, production and exploration of oil and natural gas. Our common stock is listed and traded on the New York Stock Exchange. In May 2013, we divested all of our oil and gas properties in West Texas and, accordingly, the discussion which follows pertains solely to our continuing oil and gas operations. 

Our oil and gas operations are concentrated in Texas and Louisiana. Our oil and natural gas properties are estimated to have proved reserves of 585 Bcfe with an estimated PV 10 Value of $1.1 billion as of December 31, 2013 and a standardized measure of discounted future net cash flows of $0.8 billion. Our proved oil and natural gas reserve base is 77% natural gas and 23% oil and are 73% developed as of December 31, 2013. 

Our proved reserves at December 31, 2013 and our 2013 average daily production are summarized below: 

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## Strengths 

High Quality Properties. Our operations are currently focused in two operating areas: East Texas/ North Louisiana and South Texas. Our properties have an average reserve life of approximately 8.4 years and have extensive development and exploration potential. In response to the low natural gas price environment in recent years, we have focused our drilling activity primarily on oil projects and limited our natural gas drilling to wells required to hold acreage. Our Eagleville field includes 31,755 acres (25,316 net to us) located in the oil window of the Eagle Ford shale in South Texas. In 2013 94% of our drilling and completion expenditures were related to our Eagleville field development. During 2013, we acquired acreage in two additional areas that are prospective for oil, including 33,624 acres (21,034 net to us) in the oil window of the Eagleford shale in or near Burleson County, Texas, and 53,470 acres (51,017 net to us) in Mississippi and Louisiana that are prospective for development in the Tuscaloosa Marine shale. Our properties in the East Texas/North Louisiana region, which are primarily prospective for natural gas, include 84,875 acres (72,232 net to us) in the Haynesville or Bossier shale formations. 

Successful Exploration and Development Program. In 2013 we spent $481.1 million on exploration and development activities. We spent $338.0 million on drilling and completing wells in 2013. We drilled 77 wells (53.6 net to us) and completed 67 wells (44.1 net to us). We also spent $137.1 million in 2013 to acquire additional leasehold, $0.4 million to acquire seismic data and $5.6 million for recompletions, workovers, abandonment, and production facilities. Of our 2013 capital expenditures, 95% were directed towards oil projects. Our drilling activities in 2013 added 13.2 MMBOE to our proved reserves and increased our oil production in 2013 by 29% from 2012’s oil production. 

Efficient Operator. We operated 95% of our proved reserve base as of December 31, 2013. As operator we are better able to control operating costs, the timing and plans for future development, the level of drilling and lifting costs and the marketing of production. As an operator, we receive 

