Revenue

For the three months ended December 31, 2011 (“Q4 2011”), the Company recorded $2,478,000 in oil and natural gas sales as compared to $1,528,000 in oil and natural gas sales for the three months ended December 31, 2010 (“Q4 2010”). The increase in gross revenues was due to higher oil production and realized oil prices in the current quarter.

For fiscal 2011, the Company recorded $8,824,000 in oil and natural gas sales as compared to $8,086,000 in oil and natural gas sales for the year ended December 31, 2010 (“fiscal 2010”). The increase in gross revenues was due to higher realized oil prices in 2011. This was partly offset by lower oil and gas production for the current year.

Net Loss and Operating Loss

The Company’s net loss for the current quarter was $8,430,000 or $0.069 per share, compared to a net loss of $1,857,000 or $0.018 per share for the same quarter in 2010. The increase in net loss was primarily due to the recognition of non-cash impairment losses of $5,212,000 and non-cash valuation loss of $2,044,000 from the increase in fair value of warrant liability. This was partly offset by the increase in revenues. The Company’s operating loss for the current quarter was comparable to the same quarter in prior year.

The Company’s net loss for fiscal 2011 was $11,043,000 or $0.092 per share, compared to a net loss of $5,124,000 or $0.051 per share for fiscal 2010. The increase in net loss was primarily due to the recognition of non-cash impairment losses of $6,248,000 and non-cash valuation loss of $1,580,000 from the increase in fair value of warrant liability. This was partly offset by the increase in revenues.

The Company’s operating loss for fiscal 2011 was $3,215,000, compared to $4,000,000 for fiscal 2010. The decrease was primarily due to lower amortization and depletion of property and equipment for the current year, as a result of the increased reserves in the Company’s Woodrush property.

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