Form 10-K for Fiscal Year Ended December 31, 2010

Commodity Risk. Our major market risk exposure is the commodity pricing applicable to our oil and natural gas production. Realized commodity prices received for such production are primarily driven by the prevailing worldwide price for crude oil and spot prices applicable to natural gas. Significant declines in oil and natural gas prices began in the last half of 2008, and such pricing volatility has continued through 2009 with some improvement during the last half of 2009 and into 2010.

Our price-risk management policy permits the utilization of agreements and financial instruments (such as futures, forward contracts, swaps and options contracts) to mitigate price risk associated with fluctuations in oil and natural gas prices. We do not utilize these agreements and financial instruments for trading and only enter into derivative agreements with banks in our credit facility.  Below is a description of the financial instruments we have utilized to hedge our exposure to price risk.

Price Floors – Between October and December 2010 we entered into additional natural gas price floors. These price floors cover natural gas production for January to April 2011 of 4,250,000 MMBtu with strike prices ranging between $3.77 and $4.30 per MMBtu.

Interest Rate Risk. Our senior notes and senior subordinated notes both have fixed interest rates, so consequently we are not exposed to cash flow risk from market interest rate changes on these notes. At December 31, 2010, we had no borrowings under our credit facility, which bears a floating rate of interest and therefore is susceptible to interest rate fluctuations. The result of a 10% fluctuation in the bank’s base rate would constitute 33 basis points and would not have a material adverse effect on our 2010 cash flows.

Income Tax Carryforwards.  As of December 31, 2010, the Company has net tax carryforward assets of $23.1 million for federal net operating losses, $2.1 for federal alternative minimum tax credits and $7.8 million, net of a $1.7 million valuation allowance, for state tax net operating loss carryforwards which in management’s judgment will more likely than not be utilized to offset future taxable earnings. The Internal Revenue Service (IRS) commenced an examination of the Company’s 2008 U.S. income tax returns in October 2010.

The Company’s New Zealand subsidiaries have local income tax loss carryovers which are available if any future income is generated by these entities.  As of December 31, 2010 the estimated U.S. dollar value of these loss carryover assets is $34.2 million.  In management’s judgment it is less than more likely than not that the remaining carryover assets will be utilized. Accordingly, these carryover assets have been fully offset by a valuation allowance.

Fair Value of Financial Instruments. Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, bank borrowings, and senior notes. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the highly liquid or short-term nature of these instruments. The fair values of the bank borrowings approximate the carrying amounts as of December 31, 2010 and 2009, and were determined based upon variable interest rates currently available to us for borrowings with similar terms. Based upon quoted market prices as of December 31, 2010 and 2009, the fair value of our senior notes due 2017, was 254.7 million, or 101.9% of face value, and $239.1 million, or 95.6% of face value, respectfully. Based upon quoted market prices as of December 31, 2010 and 2009, the fair value of our senior notes due 2020, which were issued in November 2009, was $242.3 million, or 107.7% of face value and $234.0 million, or 104% of face value, respectively. The carrying value of our senior notes due 2017 was $250.0 million at December 31, 2010 and 2009, while the carrying value of our senior notes due 2020 was $221.6 million and $221.4 million at December 31, 2010 and 2009, respectively.

Customer Credit Risk. We are exposed to the risk of financial non-performance by customers. Our ability to collect on sales to our customers is dependent on the liquidity of our customer base. Continued volatility in both credit and commodity markets may reduce the liquidity of our customer base. To manage customer credit risk, we monitor credit ratings of customers from certain customers we also obtain letters of credit, parent company guaranties if applicable, and other collateral as considered necessary to reduce risk of loss.  Due to availability of other purchasers, we do not believe the loss of any single oil or natural gas customer would have a material adverse effect on our results of operations.

(Continue to Item 8. Financial Statements and Supplementary Data or back to Table of Contents.)