EBITDAX is a supplemental financial measure used by the company’s management and by securities analysts, investors, lenders, rating agencies and others who follow the industry as an indicator of the company’s ability to internally fund exploration and development activities and to service or incur additional debt. The company also uses this measure because EBITDAX allows the company to compare its operating performance and return on capital with those of other companies without regard to financing methods and capital structure. EBITDAX should not be considered as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (“GAAP”). EBITDAX excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Therefore, the company’s EBITDAX may not be comparable to similarly titled measures used by other companies.

The table below reconciles the most directly comparable GAAP financial measure to EBITDAX.
 

Reconciliation of Net Income (Loss) to EBITDAX
 
 

For the Three Months Ended December 31,
    For the Year Ended December 31,
2011   2010 2011   2010
 
Net income (loss) as reported $ 11,482,185 $ (1,720,554 ) $ 20,845,941 $ (19,441,528 )
 
Exploration expense 23,018 473,608 596,065 1,921,943
Loss on plugging and abandonment - - 393,599 -
Dry hole costs 124,882 - 3,912,823 -
Depreciation, depletion and amortization 3,213,959 4,201,758 15,591,048 16,001,826
Impairment expense 641,791 - 641,791 -
Accretion expense 424,422 392,634 1,672,900 1,668,268
Gain on revision of asset retirement obligations (303,633 ) - (303,633 ) -
Stock-based compensation 149,824 447,227 943,119 2,570,144
Interest expense, net 4,315,916 4,659,854 17,698,849 22,469,584
Reorganization expenses 61,678 148,954 436,092 2,198,359
Loss on settlement of accounts payable - - - 990,786
Income tax provision (benefit) (6,747,749 ) (24,528 ) (6,839,117 ) 285,838
Unrealized hedging (gain) loss - - - (435,049 )
Gain on extinguishment of debt - - (7,708,486 ) -
Hurricane costs - - - -
Other development expenditures   -     -     -     -  
 
EBITDAX $ 13,386,293   $ 8,578,953   $ 47,880,991   $ 28,230,171  

PV10

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