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 Quarter Ended March 31,
2012   2011
Net income (loss) as reported $ (1,219,074) $ 358,237
Exploration expense 57,396 381,432
Loss on plugging and abandonment 1,612,290 -
Dry hole costs 89,874 -
Depreciation, depletion and amortization 4,937,152 3,174,770
Accretion expense 555,504 424,422
Stock-based compensation 261,783 290,684
Interest expense, net 4,407,795 4,553,320
Reorganization expenses 43,205 110,012
Income tax provision (benefit)   (735,743)   32,500
EBITDAX $ 10,010,182 $ 9,325,377

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