FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Short-Term Bank Borrowings

The Company had available, through a two-bank group, a revolving line of credit of $35,000,000 at the end of 1995 and $29,000,000 at the end of 1994 bearing interest at the bank's base rate plus 0.5% (9% at both December 31, 1995, and at December 31, 1994), secured by the Company's interests in certain oil and gas properties and general partner interests. This facility also allows, at the Company's option, draws which bear interest for specific periods at the London Interbank Offered Rate ("LIBOR") plus 2.25%. There was no outstanding balance under this line of credit at December 31, 1995. At December 31, 1994, $14,000,000 of the $18,600,000 outstanding was at the LIBOR plus 2.25% rates (7.875% on $3,000,000, 8.1875% on $6,000,000, and 8.5% on $5,000,000). The outstanding amount under this facility at December 31, 1994 ($18,600,000) was borrowed primarily to fund the advance purchase of producing properties on behalf of affiliated partnerships and/or joint ventures to be subsequently reimbursed and to fund the Company's working capital and capital expenditures needs. This credit agreement is currently being restated and the facility will be unsecured with a maximum of $100,000,000. The available borrowing base currently will not change and will be redetermined periodically. Depending on the level of outstanding debt, the interest rate currently will be either the bank's base rate or the bank's base rate plus 0.25%. The LIBOR option will now vary from plus 1% to plus 1.5%.

The terms of the revolving line of credit include, among other restrictions, a limitation on the level of cash dividends (not to exceed $424,000 in any fiscal year), requirements as to maintenance of certain minimum financial ratios (principally pertaining to working capital, debt, and equity ratios) and limitations on incurring other debt. Since inception, no cash dividends have been declared on the Company's common stock. The Company presently intends to continue a policy of using retained earnings for expansion of its business. As of December 31, 1995, the Company was in compliance with the provisions of these agreements. The revolving line of credit will extend through September 30, 1999.

The Company's second credit line was an Acquisition Advance Agreement with the same two-bank group, bearing interest at the greater of (a) the bank's base rate plus 1% or (b) the Federal Funds rate plus 1.5%, to be secured by producing oil and gas properties acquired and held for transfer. At December 31, 1994, $3,629,000 had been borrowed under this agreement to fund the advance purchase of producing properties on behalf of affiliated partnerships and/or joint ventures to be subsequently reimbursed. This credit agreement expired June 15, 1995.

The Company's third credit facility is an amended and restated revolving line of credit with the lead bank for $5,000,000, bearing interest at the bank's base rate (8.5% at both December 31, 1995, and at December 31, 1994), secured by certain Company receivables. There were no outstanding amounts under this facility at December 31, 1995. At December 31, 1994, $5,000,000 was outstanding under this facility. This facility is currently being amended to $7,000,000, with interest at the bank's base rate plus 0.25%. This credit facility will extend through September 30, 1999.

In addition to interest on these credit facilities, the Company pays a commitment fee to compensate the banks for making funds available. The fee on the revolving line of credit is calculated on the average daily remainder, if any, of the commitment amount less the aggregate principal amounts outstanding, plus the amount of all letters of credit outstanding during the period. The fee on the Acquisition Advance Agreement was 0.5% of the amount of the advance. The aggregate amounts of commitment fees paid by the Company were $154,000 in 1995 and $150,000 in 1994.

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