U.S. Oil and Gas Interests

During the third quarter 2008, both Hurricane Gustav and Hurricane Ike (the “Hurricanes”) hit the Gulf Coast of Mexico effectively shutting in most oil & gas production in the Texas and Louisiana coastal area. Production from our operated oil and gas properties (Main Pass 35, Lake Raccourci and Point a la Hache) along with most of our non-operated properties was shut-in during late August and September and certain
of our pre-storm production currently remains curtailed. We are continuing to repair damage to our operations that remain shut-in which include Lake Raccourci and our non-operated properties at Branville Bay. Restoration of remaining curtailed production is also dependent on resumption of downstream infrastructure and the availability of service and equipment contractors necessary for over-water transportation and repairs.

Our net loss for the third quarter of 2008 reflects both decreased revenue, due to the interruption of production, and non-capitalizable net repair costs related to the Hurricanes both totaling approximately
$3.0 million. Total gross direct damage costs to repair and rebuild the damaged properties are estimated at approximately $3.0 million ($2.0 million net of partner’s share) but could be higher as actual repairs and restoration efforts are completed during the remainder of 2008. In connection with our oil and gas properties, we have property damage insurance, but not business interruption coverage. We expect our fourth quarter 2008 financial results to reflect the subsequent continued decline in oil and gas commodity pricing and the residual effects of curtailed production from certain of our operated and non-operated properties which remain shut-in after the Hurricanes.

The following field data updates the status of our operations through September 30, 2008:

Oil and Gas Production Update

Main Pass, Plaquemines Parish – Louisiana
We have a 90% interest in Main Pass and are the field operator. This field contains a seven-platform facility complex including separation, injection, compression, processing and transportation terminals for oil, water and gas. The field also contains 67 wellbores (60 oil and 7 injection wells), of which 33 are active, and an eight mile oil transport line with pump/metering facilities. Our Main Pass 35 facility is located approximately six miles offshore in state waters off the Gulf Coast of Louisiana. During 2008, a third-party engineering firm completed evaluation and documentation of additional recompletion targets, a geological and geophysical study and wellbore utilization plan. We currently have license to 21 square miles of 3D seismic data covering the area held by productive leases. Gross production during the third quarter 2008 averaged approximately 327 boe per day. Following the hurricanes, production from Main Pass 35 was restored in late September 2008 as repairs still continue and are expected to be completed early fourth quarter 2008.

Lapeyrouse Field, Terrebonne Parish – Louisiana
We hold an average non-operated working interest of approximately 18% in the production from nine wells in this field. Gross field production averaged approximately 265 boe per day for the third quarter 2008. A total of 25 field wide producing days were lost due to storm related problems. Currently, only two wells have been restored to production. Evaluation efforts are still ongoing with additional diagnostic work planned by the operator to address the field pressure decline and to utilize all available wellbores.

Lake Raccourci Field, Lafourche Parish – Louisiana
We hold an average 40% operated working interest in each of our Lake Raccourci wells. Gross production for this field averaged 201 boe per day for the third quarter 2008. Efforts to secure additional compression and to upgrade gas lift equipment to address production decline in the field were put on hold as Hurricane Gustav hit the platform facilities followed immediately by Hurricane Ike. There was considerable damage to the platform facilities which currently remain shut-in under repair through the end of the third quarter 2008. Completion of hurricane repairs and re-start of the field production is anticipated by mid fourth quarter 2008.

Point-a-la-Hache Field, Plaquemines Parish – Louisiana
We maintain a 25% operated working interest in one producing well in this field. Average gross production for the third quarter 2008 was approximately 34 boe per day, until Hurricane Gustav struck in late August 2008. Production was shut in for the remainder of the third quarter while repairs to the production facility were carried out, but production was restored in early October 2008.

Creole Field, Terrebonne Parish – Louisiana
We hold an average 15% non-operated working interest in this offshore field. In January 2008, we acquired interest in adjoining acreage and facilities which will ensure the availability of gas lift gas and improved salt water disposal. Upgrades to surface facilities and flowlines and the drilling of a SWD well were completed in 2008. Gross daily production from the wells (six completions) was approximately 509 boe per day during the third quarter 2008. Two additional wells were spud in the third quarter 2008. Both wells logged multiple stacked pays. Three completions in the two new wells are expected to be put on production in the fourth quarter 2008. Hurricanes Gustav and Ike hampered drilling operations, but the existing wells and facilities sustained only minimal damage. Production was shut in for a total of fifteen days due to the hurricanes.

East Lake Verret, Assumption Parish – Louisiana
We have an average 5% non-operated working interest in this field. Two development wells on this project were successfully completed and placed into production in 2007. Gross daily production from both wells was approximately 862 boe per day during the third quarter 2008. Hurricane damage was minimal and accounted for only three days of shut-in time.

Point-au-Fer Field, Terrebonne Parish – Louisiana
We own a 12.5% non-operated working interest in this approximate 56 square mile area. Gross production for this field was approximately 77 boe per day for the third quarter 2008. Several prospects have been identified in the area, and we expect to have additional drilling and workover activity in the last part of 2008.

Branville Bay Field, St. Bernard Parish – Louisiana
We own a 12.5% non-operated working interest in two state leases in the Branville Bay area of Chandeleur Sound Block 71. Gross production for this field was approximately 169 boe per day for the third quarter 2008 prior to Hurricane Gustav. The production barge which was located on another lease held by the operator was blown off its location by three miles during the storm. The operator anticipates that production will be restored in late October or early November.

BP 2D Texas Gulf Coast Project, Various Counties – Texas
The first shallow Yegua well in the project, the Boquillas # 1, was spud in late 2007 and put on gas production during the first quarter 2008. Well performance of the Boquillas #1 has been very encouraging. Gross production from this well was approximately 139 boe per day for the third quarter 2008. Higher than expected location and drilling costs coupled with falling commodity prices has caused a proposed project to fall below our economic criteria necessary for drilling. We have elected not to participate in that prospect at this time. A decision will be reached in the fourth quarter 2008 with respect to continued efforts in this project.

NW Speaks Field, Lavaca County – Texas
We own approximately 2% to 10% in various leases in the NW Speaks area. This year we have participated in two successful Lower Wilcox wells. A third well was spud in late third quarter 2008, and is expected to reach total depth in fourth quarter 2008. At least one other location has been identified which is currently scheduled to spud in early 2009. Current gross production for this field averaged approximately 977 boe per day during the third quarter 2008 from two wells.

Allen Ranch Field, Colorado County – Texas
We own an 11.25% non-operated working interest in this area. Gross production for this field was approximately 105 boe per day during the third quarter of 2008 primarily from the initial well, the Hancock Gas Unit # 1, which is the only well currently producing from the field. After demonstrating significant commercial production in several horizons, the Hancock Gas Unit #2, was damaged in the course of a remedial workover. The operator has temporarily abandoned operations on this well, and may recommend plugging operations at a future date. Another development location has been identified, and a drilling proposal is expected from the operator in early 2009.

Raymondville Field, Willacy County – Texas
We own a 27% non-operated working interest in this area. Current gross production for this field averaged approximately 875 boe per day during the third quarter 2008. Well work during 2008 netted successful recompletions and was followed by three more successful recompletions in the third quarter 2008.

Lucky Field, Matagorda County – Texas
We own a 7.5% non-operated working interest in this area. The Dawdy Luck #1 well was completed and started producing during 2007. Current gross production for this field averaged approximately 66 boe per day during the third quarter of 2008.

Coalbed Methane Prospects – Indiana and Ohio
We hold three significant exploration and development agreements in Indiana and Ohio, of which two prospects provide for an area of mutual interest of approximately 400,000 acres, and one provides for approximately 20,000 acres. The agreements provide for a phased delineation, pilot and development program, with corresponding staged expenditures. Contracted third parties with a long track record in successful Coalbed Methane development provide expert advice for these projects.

On the Indiana Posey Prospect, we completed Phase I – Core Samples work on the Indiana Prospect, which consisted of obtaining and analyzing coal samples. Based on the positive outcome of the coring analysis, we elected into Phase II, which consists of exploratory work. During 2007, all five pilot producing wells were drilled, completed and put on pump-down production for gas desorption via newly installed pumps, lines and facilities. In addition, a produced water disposal well was drilled and completed to service the pilot wells. Some gas production has begun and is being used throughout the field for fuel gas needs. The extent of water influx is under evaluation to enhance desorption efforts. In 2008, chemical treatments to enhance well fluid productivity was begun with fracture stimulation under evaluation as desorption pump-down continues. Also in 2008, a fracture stimulation was performed to increase desorption pumpdown rates. Alternative design stimulations are under evaluation as pumpdown continues as the initial fracture treatments are evaluated.

We elected to proceed with a second pilot well project. A monitor well was drilled, completed and tested for permeability determination in late 2007. During the first three quarters of 2008, five pilot producers and the water disposal well were completed with fracture stimulation continuing and expected to be complete early fourth quarter 2008. Upon completion of the fracturing program, pumpdown for desorption of the second Posey pilot will begin. Following an evaluation period of these two pilot areas, we will evaluate a Phase III – Development election and funding of a development well program as contemplated by the agreements.

On the Ohio Cumberland Prospect, we have completed Phase I – Core Samples work on the Ohio Prospect, which consisted of obtaining and analyzing coal samples. With regard to Phase II, we made an additional $500 thousand prospect acquisition payment and intend to fund a $1.28 million project in late 2008 or early 2009 for the first of two pilot well projects on the Cumberland Prospect.

On the Triangle Prospect Area in Ohio, the Phase I – Core work was successfully completed during 2007 with core samples being desorbed, and analyzed in late 2007. In addition, one of the core holes was permeability tested, and based upon the permeability and saturation trends, in July 2008, we elected not to proceed with Phase II development. As a result of our election and the term of the applicable agreement, our participation in this project was terminated effective July 2008.