Operations

East Texas/North Louisiana

East Texas/North Louisiana

East Texas/North Louisiana is our largest producing region with operations focused in the Haynesville and Bossier shales. Our acreage position consists of 97,800 net acres primarily located in DeSoto and Caddo Parishes in Louisiana and in Harrison, Panola, Shelby, San Augustine and Nacogdoches Counties in Texas and is predominantly held-by-production.

Primary targets in the region include the Haynesville and Bossier shales. The Haynesville shale is located at depths of 12,000 to 14,500 feet and is being developed with horizontal wells that typically have 4,000 to 6,000 foot laterals in the Holly area of North Louisiana and 6,000 to 8,000 foot laterals in the Shelby area of East Texas. The Bossier shale lies just above the Haynesville shale and also contains rich deposits of natural gas.

At June 30, 2015, we operated three drilling rigs focused on the Haynesville and Bossier shales. Total net production from the region for the quarter ending June 30, 2015 was 271 Mmcfe per day from 503 producing wells.

Shelby area

Our position in the Shelby area of East Texas consists of 46,100 net acres and is 72% held-by-production. As of June 30, 2015, we had a total of 89 gross operated horizontal wells flowing to sales. Total net production from the area for the quarter ending June 30, 2015 was 40 Mmcfe per day.

In 2014, we drilled eight key wells in this area with a modified plan that included more proppant, more restricted choke and longer laterals. The results from our 2014 drilling program are yielding strong well performance and the 2015 drilling program builds on the success of the 2014 program and provides attractive rates of return even in a low commodity price environment. Our proved undeveloped Haynesville reserves in the area increased by 15% from 1.3 Bcf per 1,000 feet of lateral at year-end 2014 to 1.5 Bcf per 1,000 feet of lateral at June 30, 2015 and we believe we can realize additional increases to our reserves in the future.

We have an inventory of approximately 180 operated undeveloped locations in this area which provide a platform for future growth.

Holly area

Our position in the Holly area of North Louisiana consists of 51,700 net acres and is 100% held-by-production. As of June 30, 2015, we had a total of 414 gross operated horizontal wells flowing to sales. Total net production from the area for the quarter ending June 30, 2015 was 231 Mmcfe per day.

The Holly area is our largest producing area representing 64% of our total net production. We have successfully delivered 414 horizontal wells to sales in this area and continue to make improvements in well construction, efficiency, drilling times and cost reductions. We recently completed a re-frac testing program, including six wells that were restimulated with a second fracture stimulation treatment and successfully completed a test well in the Bossier shale formation in DeSoto Parish utilizing similar completion methods that have proven to be successful in our recent Haynesville shale development.

We are not currently drilling in this area, but when we do re-engage, we expect to pump larger completions and change the well spacing to four wells per section. We have additional potential in this area that we fully expect to realize with larger completions and longer cross-unit laterals. In addition to our remaining inventory of undrilled Haynesville locations, we also have 270 potential re-frac opportunities and the entire Bossier formation to develop which could result in over 300 additional drilling locations.

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