S-1

As filed with the Securities and Exchange Commission on June 30, 2006

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Ascent Energy Inc.

(Exact name of registrant as specified in its charter)

Delaware	1311	72-1493233
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

4965 Preston Park Blvd., Suite 800

Plano, Texas 75093

(972) 543-3900

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Terry W. Carter

Chief Executive Officer and President

Ascent Energy Inc.

4965 Preston Park Blvd., Suite 800

Plano, Texas 75093

(972) 543-3900

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

T. Mark Kelly	J. Michael Chambers
Caroline B. Blitzer	Akin Gump Strauss Hauer & Feld LLP
Vinson & Elkins L.L.P.	1111 Louisiana Street, 44th Floor
2300 First City Tower	Houston, Texas 77002
1001 Fannin	(713) 220-5800
Houston, Texas 77002-6760
(713) 758-2222

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum         Aggregate Offering     Price (1) (2)		Amount of         Registration Fee
Common Stock, par value $0.001 per share	$	201,250,000	$	21,534

(1) Includes shares of common stock issuable upon the exercise of the underwriters’ option to purchase additional shares.

(2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated June 30, 2006

PROSPECTUS

         Shares

Common Stock

This is the initial public offering by Ascent Energy Inc. We are offering          shares of our common stock for which no public market currently exists. We currently expect the initial public offering price to be between $            and $            per share. We intend to apply to have the common stock listed on The Nasdaq National Market under the symbol “            .”

Investing in our common stock involves risks. Please read “ Risk Factors” beginning on page 13.

	Per Share	Total
Public offering price	$	$
Underwriting discount	$	$
Proceeds (before expenses) to Ascent Energy Inc.	$	$

We have granted the underwriters a 30-day option to purchase up to an additional              shares of our common stock from us on the same terms and conditions as set forth above if the underwriters sell more than              shares of our common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the shares of common stock on or about             , 2006.

Joint Book-Running Managers

LEHMAN BROTHERS JEFFERIES & COMPANY

                    , 2006

TABLE OF CONTENTS

Summary	1
Risk Factors	13
Cautionary Statement Concerning Forward-Looking Statements	26
Use of Proceeds	27
Dividend Policy	28
Recapitalization	28
Capitalization	30
Dilution	31
Unaudited Pro Forma Condensed Consolidated Financial Statements	32
Selected Consolidated Historical Financial Information	39
Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Business and Properties	68

Management	84
Related Party Transactions	94
Principal Stockholders	98
Description of Capital Stock	101
U.S. Federal Tax Considerations for Non-U.S. Holders	105
Shares Eligible for Future Sale	108
Underwriting	110
Legal Matters	115
Experts	115
Where You Can Find More Information	116
Index to Financial Statements	F-1
Glossary of Natural Gas and Oil Terms	A-1
Report of Netherland, Sewell & Associates, Inc., Reserve Engineering Firm	B-1
Report of LaRoche Petroleum Consultants, Ltd., Reserve Engineering Firm	C-1

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.

Until                     , 2006 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Non-GAAP Financial Measures

The body of accounting principles generally accepted in the United States is commonly referred to as “GAAP.” A non-GAAP financial measure is generally defined by the Securities and Exchange Commission, or SEC, as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so excluded or included in the most comparable GAAP measure. In this prospectus, we disclose EBITDAX, which is, and PV-10, which may be, a non-GAAP financial measure. See note 3 to “Summary—Summary Consolidated Historical and Pro Forma Financial Information” and note 3 to “Summary—Summary Historical Reserve and Operating Data.”

Natural Gas and Oil Information

We have provided definitions for the natural gas and oil terms used in this prospectus in the “Glossary of Natural Gas and Oil Terms” included as Appendix A. Unless otherwise indicated, all natural gas and oil statistics with respect to our proved reserves as of December 31, 2005 set forth in this prospectus are based on reserve reports prepared by Netherland, Sewell & Associates, Inc. and LaRoche Petroleum Consultants, Ltd., independent reserve engineering firms. A summary of Netherland, Sewell & Associates, Inc.’s report on our proved reserves as of December 31, 2005 is attached to this prospectus as Appendix B. A summary of LaRoche Petroleum Consultants, Ltd.’s report on our proved reserves as of December 31, 2005 is attached to this prospectus as Appendix C.

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Our Investors

Unless the context requires otherwise, references in this prospectus to “The Jefferies Investors” means Jefferies & Company, Inc. and certain of its affiliated funds and employees, all of which are our securityholders, and “Trust Company of the West” refers to certain affiliated funds that are our securityholders.

Our Financial Statements

The consolidated financial statements of Ascent Energy Inc. as of December 31, 2004 and December 31, 2005, and for each of the three years in the period ended December 31, 2005, appearing elsewhere in this prospectus and registration statement, have been audited by Ernst & Young LLP. In May 2006, Ernst & Young LLP informed us that the India member firm of E&Y Global had a business arrangement with an affiliate of Jefferies Group, Inc. in the United Kingdom that raises questions under the SEC’s auditor independence rules regarding Ernst & Young’s independence in its performance of audit services for us because Jefferies & Company, Inc., which is another affiliate of Jefferies Group, Inc., is a substantial shareholder of us. We have been advised by Ernst & Young LLP and Jefferies Group, Inc. that this business arrangement was terminated in June 2006. Please read “Experts” for additional information.

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SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus carefully, including “Risk Factors” and our consolidated financial statements and the notes to those financial statements included elsewhere in this prospectus, as well as the exhibits to the registration statement of which this prospectus forms a part. See “Where You Can Find More Information.” Some of the statements in this prospectus are forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements.”

Unless otherwise indicated, the information contained in this prospectus (i) assumes that the underwriters do not exercise their option to purchase additional shares of our common stock and (ii) gives effect to the         -for-1 reverse stock split of our common stock expected to be effected in connection with this offering. Unless the context requires otherwise, references in this prospectus to (i) ”Ascent,” “we,” “us” and “our” refer to Ascent Energy Inc., its Parent and its subsidiaries, (ii) “Parent” or “SLPH” refers to South Louisiana Property Holdings, Inc., formerly known as Forman Petroleum Corporation, which holds approximately 83% of the outstanding common stock (on a non-diluted basis) of Ascent Energy Inc. prior to the consummation of this offering and the Recapitalization and (iii) “Recapitalization” refers to a corporate recapitalization to be consummated prior to or concurrently with this offering, as further described below.

Overview

We are a growth-oriented, independent natural gas and oil company engaged in the acquisition, exploration and development of both conventional and unconventional natural gas and oil properties in Texas, Oklahoma, Louisiana and the Appalachian region. Our growth efforts are primarily directed at finding and developing natural gas reserves in unconventional shale gas areas and in known tight gas areas. We operate substantially all of our properties.

Since joining us in mid-2003, our senior management team has embarked on a strategy to acquire and develop a risk-balanced inventory of high growth opportunities, predominately in shale gas. In order to implement this strategy, our new management initially devoted a substantial portion of its efforts to improving our operational efficiency and increasing our liquidity. Since 2004, our management has successfully added unconventional shale gas acreage in four large shale gas exploration areas and entered the tight gas areas of the Cotton Valley trend in east Texas.

Our unconventional shale gas acreage acquired through March 31, 2006 consists of approximately 136,803 gross acres (84,059 net acres) located in the Woodford/Barnett shale in west Texas, the Barnett shale in north Texas, the Woodford shale and the Caney shale in Oklahoma and the Devonian shale in the Appalachian region. We have employed a strategy to acquire a meaningful position in several prospective shale gas areas to diversify risk while providing exposure to significant potential reserves.

As of March 31, 2006, most of our current production was from our approximate 64,215 gross acres (38,112 net acres) of conventional natural gas and oil properties in Texas, Oklahoma and Louisiana, which includes our acreage in the tight gas sands of the Cotton Valley trend in east Texas and the Vicksburg and Wilcox trends in south Texas. Each of these fields is characterized by established production profiles and numerous producing wells. We plan to expand our production and reserves from such conventional areas by further developing our current properties as well as acquiring additional properties that we believe can generate near-term production and cash flow.

Based on reserve reports prepared by our independent reserve engineering firms, our total proved reserves as of December 31, 2005 were approximately 106.1 Bcfe, of which 62.3% were proved developed and 60.3% were oil and NGLs. As of December 31, 2005, we had interests in approximately 110,836 net acres, including approximately

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87,816 net undeveloped acres. Our average net daily production during April 2006 was approximately 25.4 MMcfe/d. As of December 31, 2005, the related PV-10 of our proved reserves was $371.3 million. Our 2005 reserve reports do not reflect any reserves attributable to our unconventional shale gas acreage.

The following table provides certain information regarding our proved reserves as of December 31, 2005 and our April 2006 average net daily production:

Area	Bcfe	% Gas		PV-10 (1) (in millions)		April 2006 Average Net Daily Production (MMcfe/d)	Reserve Life (in years) (2)
Oklahoma	62.8	17.1	%	$	204.3	10.1	17.1
Texas	31.0	76.3	%		105.2	12.3	6.9
Louisiana	12.2	62.4	%		61.8	3.0	11.2
Total	106.1	39.7	%	$	371.3	25.4	11.5

(1) PV-10 represents the present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production expenses, discounted at 10% per annum to reflect timing of future cash flows and using pricing assumptions. See note 3 to “—Summary Historical Reserve and Operating Data” for additional information about our computation of PV-10 and its reconciliation to the standardized measure of discounted net cash flows, which is its most comparable GAAP financial measure.

(2) Reserve life is calculated by dividing our proved reserves as of December 31, 2005 by our annualized April 2006 average net daily production.

We have a 2006 capital expenditure budget of approximately $80.3 million, of which $59.7 million is targeted for drilling and workovers and $17.8 million is targeted for leasehold acquisitions. From January 1, 2006 through April 30, 2006, we spent approximately $16.1 million on the drilling of 22 gross wells and the completion of 10 producing wells. Eleven of the remaining wells were pending completion and evaluation and one well was being drilled as of April 30, 2006. During the 12 months ending December 31, 2006, we have drilled, or plan to drill, 50 to 60 wells. The following table provides certain information regarding our capital expenditure budget for 2006:

Area	Drilling and Workover		Land		Equipment and Maintenance		Seismic		Total		% of Total
	(dollars in thousands)
Unconventional shale gas:
Texas	$	6,272	$	10,434	$	—	$	872	$	17,578	21.9	%
Oklahoma		8,025		1,268		—		—		9,293	11.6	%
Appalachian region		3,734		2,292		—		25		6,051	7.5	%
Subtotal		18,031		13,994		—		897		32,922	41.0	%
East Texas		20,384		1,036		—		102		21,522	26.8	%
South Texas		15,960		2,108		—		253		18,321	22.8	%
Other		5,293		703		1,512		—		7,508	9.4	%
Total	$	59,668	$	17,841	$	1,512	$	1,252	$	80,273	100.0	%
% of Total		74.3%		22.2%		1.9%		1.6%		100.0%

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Unconventional Shale Gas

Our growth strategy is primarily directed at acquiring opportunities for reserve growth in long-lived reservoirs in unconventional shale gas areas. Typically, the exploration and development of unconventional shale gas reserves involves five stages: (i) acquisition of a significant leasehold interest, (ii) drilling and evaluation of initial test wells, (iii) development of area-specific well completion and fracturing techniques, (iv) connecting to a natural gas transportation system and (v) establishment of a drilling program that exploits a substantial portion of the leased acreage. Unlike with most conventional reservoirs, the determination whether the development of our unconventional shale gas acreage is economically viable could take one to two years from the time we assemble a significant leasehold position. Our unconventional shale gas properties are located in regions that have experienced significant increases in industry leasing and drilling activity in the past several years. We have used, or expect to use, vertical drilling for each of our initial test wells to determine the areas in which we intend to expand our drilling program. In the areas where these initial test wells are successful, we also have used, or expect to use, horizontal drilling and completion technology to further explore and develop these regions. The following is a brief description of our unconventional shale gas acreage:

West Texas Woodford/Barnett Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 79,108 gross (54,770 net) acres in this region, primarily located in Brewster County. We are currently drilling our initial test wells. We are the operator of this acreage with an average working interest of approximately 65%. We believe the depths of these formations range from 4,400 feet to 10,000 feet and the thickness ranges from 80 to 400 feet.

North Texas Barnett Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 9,474 gross (8,816 net) acres in this region. We expect to drill our initial test wells on a portion of this acreage in the second half of 2006. We are the operator of this acreage with a 100% working interest. We believe the depths of this formation range from 4,000 feet to 6,000 feet and the thickness ranges from 80 to 135 feet.

Oklahoma Woodford Shale and Caney Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 6,386 gross (2,119 net) acres in the Woodford shale and approximately 3,848 gross (2,850 net) acres in the Caney shale. We have drilled and completed our first vertical test well in the Woodford shale. Based on the initial production results of approximately 411 Mcf/d from this well, we plan to drill seven additional wells in the Woodford shale during the remainder of 2006. We have also drilled our initial horizontal well in the Caney shale and, as of April 30, 2006, were in the process of analyzing data and completing and testing this well. We are the operator of our Woodford shale acreage and our Caney shale acreage with working interests in each ranging from 50% to 80%. We believe the depths of the Woodford shale formation range from 4,500 feet to 7,500 feet and the depths of the Caney shale formation range from 3,500 feet to 5,000 feet. We believe the thickness of the Woodford shale formation ranges from 80 to 150 feet and the thickness of the Caney shale formation ranges from 40 to 150 feet.

Appalachian Devonian Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 37,987 gross (15,504 net) acres in this region. We have initiated a five-well drilling program to test for natural gas and gather data that will help us determine the most appropriate drilling and completion strategy. We expect to continue completion and testing of this area throughout 2006. We are the operator of this acreage with a 42% working interest. We believe the depths of the formation range from 3,400 feet to 4,600 feet and the thickness ranges from 280 to 325 feet.

East Texas Tight Gas

Our growth strategy also includes acquiring property in known tight gas sand areas in east Texas that has existing infrastructure to transport natural gas to market. This area is characterized by lower exploration and development risk than many of our other projects. We believe there are several offset opportunities that can be enhanced with the use of modern completion and stimulation techniques. We began acquiring leasehold interests

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and drilling in this area in the fourth quarter of 2005. As of March 31, 2006, we had drilled five wells in this area with a 100% success rate. As of March 31, 2006, we had acquired leasehold interests in approximately 5,280 gross (3,139 net) acres in the tight gas sands of the Cotton Valley trend in east Texas. We are the operator of this acreage with working interests ranging from 38% to 100%. Our year-end December 31, 2005 proved reserves from this acreage are associated with 12 proved undeveloped and proved developed producing locations.

South Texas Natural Gas

We are continuously attempting to expand our acreage in south Texas, including the Vicksburg and Wilcox trends, by acquiring property located in mature producing areas that we believe can generate near-term production and cash flow. As of March 31, 2006, we owned leasehold interests in approximately 4,816 gross (3,623 net) acres in the Vicksburg trend and approximately 4,736 gross (3,988 net) acres in the Wilcox trend, including producing acreage in the region. From January 1, 2006 to April 30, 2006, we drilled three wells in this area with a 100% success rate. We are the operator of this acreage with working interests ranging from 75% to 100%. As of March 31, 2006, we had 32 producing wells in this region. Our year-end December 31, 2005 proved reserves from this acreage are associated with 49 proved undeveloped and proved developed producing locations.

Our Strengths

High Quality Asset Base in Mature Producing Basins. Our producing properties, consisting of approximately 36,129 gross acres (23,090 net acres) as of March 31, 2006, are located in prolific producing areas of south and east Texas, Oklahoma and Louisiana, with long histories of natural gas and oil production. We support our unconventional shale gas exploration with the cash flow generated from these mature properties.

Significant Growth Opportunities. We have an attractive inventory of drilling projects, which we believe contains significant production growth opportunities. We believe our approximate two-year inventory of conventional and tight gas drilling projects will generate near-term production growth and cash flow. In addition, we have acquired acreage positions in several unconventional shale gas areas where industry drilling and production activity has increased in the past several years. If our initial unconventional shale gas drilling projects are successful, we expect to increase significantly our long-term reserves, production and drilling inventory.

Effective Risk Management. Our areas of operation provide us with geographic, geological and operational diversity. Our diversified inventory of conventional and unconventional resource drilling locations ranges from lower risk development locations to higher risk exploration locations, including most of our unconventional shale gas acreage, that expose us to opportunities for greater reserve and production growth.

Experienced, Incentivized Management Team with Strong Technical Capability. Our senior management team has considerable industry experience and technical expertise in engineering, geoscience and field operations, with on average more than 28 years of experience in the natural gas and oil industry. Our in-house technical personnel have extensive experience in geology, geophysics, engineering and drilling and completion technology, including horizontal drilling and fracturing technology. Our officers will beneficially own approximately             % of our common stock after the consummation of this offering and the Recapitalization.

Our Business Strategy

Drive Growth Through the Drillbit. We intend to create near-term reserve and production growth from our approximate two-year inventory of drilling opportunities. We anticipate most of our cash flow in the next several years will be generated from our existing producing properties and proved reserves as well as our lower-risk drilling opportunities, exploration and relatively low risk development. We intend to allocate a significant portion

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of our exploration budget to our higher-risk unconventional shale gas exploration and our tight gas sands exploration.

Focus on Growing Our Inventory of Shale Gas Opportunities. We intend to continue expanding our acreage positions in multiple shale gas areas. As of March 31, 2006, we had leasehold interests in approximately 136,803 gross (84,059 net) acres of prospective shale gas property over four areas. We have budgeted approximately $14.0 million to acquire shale gas acreage in 2006.

Pursue Tight Gas Sand Opportunities. We are pursuing multiple tight gas sand opportunities. We believe that our tight gas sand areas have significant potential reserves that have not been depleted by the use of past drilling and completion techniques. We typically pursue opportunities in known tight gas sand areas that have existing infrastructure to transport natural gas to the market. We have budgeted approximately $36.3 million to drill 17 wells in our tight gas sand operations in south and east Texas by the end of 2006.

Operate Substantially All of Our Assets. We serve as the operator of substantially all of our producing properties and intend to continue to do so in the future. Operating control enables us to better control timing and risk as well as the cost of exploration and development drilling and ongoing operations. We believe that in the competitive market for drilling rigs it is advantageous to be in a position to make longer term commitments to drilling rig operators in order to secure service.

Maintain Financial Flexibility. Following the completion of this offering and the Recapitalization, we will have increased our equity capital base by over $             million and will have approximately $         million of undrawn availability under our credit facility. We believe that future cash flow and access to the capital markets following this offering will provide us with financial flexibility that both enhances our ability to execute our business plan and allows us to selectively seek and complete acquisitions. We expect to use our commodity price risk management program to protect our ability to execute our capital expenditure program and service our debt. We may also reduce our existing derivative liability with a portion of the net proceeds of this offering, which should increase our flexibility and could increase our future cash flow.

Seek Acquisitions that Complement Our Exploration and Development Plans. We pursue acquisitions that add efficiency to our existing operations or represent attractive additions to our exploration and development prospect inventory in large, mature producing regions. We direct our acquisitions toward areas with long production histories or areas where we believe significant untapped reserve potential exists. We maintain a disciplined acquisition process to help ensure that acquisitions fit our strategic and financial objectives.

Recapitalization

Prior to or contemporaneously with this offering, we expect to consummate a corporate recapitalization as follows:

• our Parent will become a wholly owned subsidiary of Ascent Energy Inc. in a tax-free transaction that we refer to as the “Parent Merger.” We will issue an aggregate of             shares of our common stock in connection with the Parent Merger;

• we will issue an aggregate of up to             shares of our common stock (which amount is subject to reduction, as described below, to the extent, if at all, the underwriters exercise their option to purchase additional shares of our common stock) in repayment of a portion of our senior subordinated notes in a transaction that we refer to as the “Debt Exchange;” and

• holders of our Series A preferred stock will tender their shares of Series A preferred stock as consideration for the exercise of warrants to purchase an aggregate of             shares of our common

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stock in a transaction that we refer to as the “Cashless Warrant Exercise,” and in connection with the Cashless Warrant Exercise, we will issue an aggregate of             additional shares of our common stock in exchange for the accrued but unpaid dividends on the tendered shares of Series A preferred stock.

We will use the net proceeds, if any, of the underwriters’ exercise of their option to purchase additional shares of our common stock to repay a portion of our senior subordinated notes in lieu of issuing shares of our common stock in the Debt Exchange. The holders of our senior subordinated notes have agreed that we may delay the issuance in the Debt Exchange of up to      shares of our common stock, which is the number of shares subject to the underwriters’ option to purchase additional shares of our common stock, until the expiration of the underwriters’ 30-day option period. If the underwriters exercise their option to purchase additional shares of our common stock, then the number of shares issued in the Debt Exchange will be correspondingly reduced by the number of shares sold to the underwriters upon exercise of their option to purchase additional shares of our common stock.

In connection with and immediately prior to the closing of this offering, we intend to terminate our Amended and Restated Equity Incentive Plan, or 2005 Equity Incentive Plan, and the awards granted thereunder and issue awards under our 2006 Long-Term Incentive Plan to affected participants in exchange for the awards being terminated in a transaction that we refer to as the “Equity Incentive Issuance.” The holders of awards under our 2005 Equity Incentive Plan must consent to this exchange in order for us to effect the Equity Incentive Issuance.

We refer to the Parent Merger, the Debt Exchange, the Cashless Warrant Exercise and the Equity Incentive Issuance collectively as the “Recapitalization.” For additional information about the Recapitalization, please see “Recapitalization” and “Use of Proceeds.”

The Jefferies Investors and Trust Company of the West are the principal holders of our senior notes, our senior subordinated notes, our Series A preferred stock and our warrants, and will receive cash and shares of our common stock in this offering and the Recapitalization. Please see “Related Party Transactions” and “Principal Stockholders.”

Upon the consummation of this offering, the application of the net proceeds of this offering as described in “Use of Proceeds” and the consummation of the Recapitalization, our outstanding long-term indebtedness will consist solely of approximately $     million of borrowings under our credit facility which mature November 1, 2009.

Our Company

Ascent Energy Inc. is a Delaware corporation formed in 2001. Our principal executive offices are located at 4965 Preston Park Blvd., Suite 800, Plano, Texas 75093. Our telephone number at that address is (972) 543-3900. We maintain a web site at www.ascentenergy.info, which contains information about us. Our web site and the information contained on it and connected to it are not a part of, and will not be deemed incorporated by reference into, this prospectus.

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THE OFFERING

Common stock offered             shares

Underwriters’ option to purchase additional shares             shares

Common stock outstanding immediately after the completion this offering and the Recapitalization (1)             shares

Use of proceeds We estimate that the net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $         million, based on an initial public offering price of $         per share. We intend to use the net proceeds of this offering to repay a portion of the indebtedness outstanding under our credit facility, our senior notes and a portion of our senior subordinated notes, to pay cash in lieu of fractional shares of our common stock issued pursuant to a reverse stock split of the Parent’s common stock to be effected in connection with the Parent Merger and for general corporate purposes, which could include refinancing some of our derivative arrangements. See “Use of Proceeds.”

The Jefferies Investors, including Jefferies & Company, Inc., one of the underwriters in this offering, will receive a portion of the net proceeds of this offering and shares of common stock in connection with this offering and the Recapitalization. See “Use of Proceeds” and “Related Party Transactions—Recapitalization.”

Proposed Nasdaq National Market symbol “            ”

Risk factors See “Risk Factors” beginning on page 13 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

(1) The number of shares of our common stock to be outstanding after this offering and the Recapitalization excludes              shares reserved for issuance under our 2006 Long-Term Incentive Plan, of which              shares are subject to options outstanding at the time of this offering with a weighted average exercise price of $             per share.

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SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following tables present our summary consolidated historical and pro forma condensed consolidated financial information for the periods presented. The summary consolidated historical financial information as of and for the years ended December 31, 2003, December 31, 2004 and December 31, 2005 has been derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated historical financial information as of March 31, 2006 and for the three months ended March 31, 2005 and March 31, 2006 has been derived from our unaudited consolidated financial statements and related notes included elsewhere in this prospectus which, in the opinion of management, have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of this information.

The summary pro forma condensed consolidated statement of operations data for the year ended December 31, 2005 and for the three months ended March 31, 2005 and March 31, 2006 assumes that the Recapitalization, this offering and the application of the net proceeds from this offering occurred on January 1, 2005. The summary pro forma condensed consolidated balance sheet data as of March 31, 2006 assumes that the Recapitalization, this offering and the application of the net proceeds from this offering occurred on March 31, 2006. Unless otherwise indicated, the summary pro forma condensed consolidated financial information has been derived from our unaudited pro forma condensed consolidated financial statements and related notes included elsewhere in this prospectus and gives pro forma effect to the Recapitalization, this offering and the application of the net proceeds of this offering as described in “Use of Proceeds.” See “Unaudited Pro Forma Condensed Consolidated Financial Statements” for further discussion.

This information is only a summary and you should read it in conjunction with the material contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which includes a discussion of factors materially affecting the comparability of the information presented, and in conjunction with the historical and pro forma condensed consolidated financial statements and related notes included elsewhere in this prospectus.

Our historical consolidated financial statements for the years ending prior to December 31, 2005 have been restated to reflect our conversion to the successful efforts method of accounting for our investment in natural gas and oil properties and to correct our previously recorded income tax provision. Our audited historical consolidated financial statements for the years ended December 31, 2003 and December 31, 2004 have been restated to reflect our previously understated asset retirement obligation.

Prior to the Spring of 2003, we focused on the exploration and development of the reserves we acquired in connection with our formation in 2001. Since joining us in 2003, our senior management team has embarked on a strategy to acquire and develop a risk-balanced inventory of high growth opportunities. In order to implement this strategy, our management initially devoted a substantial portion of its efforts to increasing our liquidity and improving our operational efficiency. In July 2004, we completed a financial restructuring that allowed our operating subsidiaries to enter into a new credit facility and reduced our debt service obligations by permitting us to pay in kind certain interest obligations.

8

For the foregoing reasons, our summary consolidated historical and pro forma condensed consolidated financial information may not be meaningful or indicative of our future results.

	Historical															Pro Forma
	Year Ended December 31,									Three Months Ended March 31,						Year Ended December 31,	Three Months Ended March 31,	Three Months Ended March 31,
	2003			2004			2005			2005			2006			2005	2005	2006
	(Restated)			(Restated)						(Unaudited)						(Unaudited)	(Unaudited)	(Unaudited)
	(in thousands, except per share amounts)
Statement of Operations Data:
Revenues:
Oil	$	20,377		$	25,431		$	33,228		$	7,569		$	9,274
Natural gas		24,553			22,021			36,634			7,178			8,669
NGLs		2,027			3,257			3,714			893			754
Total		46,957			50,709			73,576			15,640			18,697
Expenses:
Production and ad valorem taxes		4,307			3,091			3,332			920			1,079
Lease operating expenses		11,915			12,018			11,594			2,556			3,101
General and administrative expense		10,388			8,272			8,436			1,772			2,419
Exploration expenses		5,630			854			3,460			185			55
Depreciation, depletion and amortization		21,539			31,207			20,771			5,530			5,067
Property impairments		3,802			20,711			1,254			—			69
Derivative loss		—			6,604			33,851			16,289			3,033
Total operating expenses		57,581			82,757			82,698			27,252			14,823
Income (loss) from operations		(10,624	)		(32,048	)		(9,122	)		(11,612	)		3,874
Interest and other income		7			203			561			52			20
Interest expense		(13,661	)		(16,958	)		(19,496	)		(4,497	)		(5,411	)
Loss before income taxes		(24,278	)		(48,803	)		(28,057	)		(16,057	)		(1,517	)
Income tax benefit		8,624			12,472			209			120			—
Loss before cumulative effect of change in accounting principle (1)		(15,654	)		(36,331	)		(27,848	)		(15,937	)		(1,517	)
Cumulative effect of change in accounting principle, net of income tax of $273 in 2003 (1)		262			—			—			—			—
Net loss		(15,392	)		(36,331	)		(27,848	)		(15,937	)		(1,517	)
Preferred stock dividend (2)		(3,976	)		(3,367	)		(3,358	)		(828	)		(828	)
Net loss attributable to common shares	$	(19,368	)	$	(39,698	)	$	(31,206	)	$	(16,765	)	$	(2,345	)
Net loss per common share:
Basic and diluted net loss per common share	$	(3.63	)	$	(6.67	)	$	(5.25	)	$	(2.82	)	$	(0.39	)
Basic and diluted net loss per common share (pro forma for reverse stock split)
Selected Cash Flow and Other Financial Data:
Net cash provided by operating activities	$	16,935		$	17,369		$	31,475		$	7,910		$	11,315
Net cash used in investing activities		(39,121	)		(22,584	)		(35,019	)		(9,583	)		(19,301	)
Net cash provided by financing activities		26,236			1,650			4,108			3,650			7,500
Capital expenditures		39,121			22,985			34,588			8,533			(19,317	)
EBITDAX (3)		20,354			28,658			37,342			8,963			9,715

9

	Historical															Pro Forma
	As of December 31,									As of March 31,						As of March 31,
	2003			2004			2005			2005			2006			2006
	(Restated)			(Restated)						(Unaudited)						(Unaudited)
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	4,081		$	516		$	1,080		$	2,493		$	594
Total assets		200,374			169,267			187,221			177,318			201,775
Long-term debt (4)		141,493			189,572			227,379			166,106			190,259
Preferred stock (including accrued but unpaid dividends) (5)		46,265			9,577			12,865			10,388			13,676
Stockholders’ deficit		(40,587	)		(36,060	)		(67,196	)		(52,808	)		(69,524	)
Total liabilities and stockholders’ equity		200,374			169,267			187,221			177,318			201,775

(1) Reflects adoption of Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”), effective January 1, 2003.

(2) Represents accrued but unpaid dividends on our Series A preferred stock and Series B preferred stock. In August 2003, all outstanding shares of the Series B preferred stock were converted into an aggregate of one million shares of our common stock (             shares of our common stock pro forma for the reverse stock split), and all accrued but unpaid dividends thereon were declared and paid in cash.

(3) EBITDAX is a non-GAAP financial measure. EBITDAX represents earnings before interest expense, income tax (expense) benefit, depreciation, depletion and amortization, property impairments, exploration expenses, non-cash hedging and derivative losses and cumulative effect of change in accounting principle. The following table shows our calculation of EBITDAX and reconciles it to net cash provided by operating activities, which we believe is the most comparable GAAP financial measure. EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flow as determined in accordance with GAAP or as an indicator of a company’s operating performance or liquidity. Certain items excluded from EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure and the historical costs of depreciable assets, none of which are components of EBITDAX. Our computations of EBITDAX may not be comparable to other similarly titled measures of other companies. We believe that EBITDAX is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet future debt service requirements, if any. We also believe EBITDAX assists investors in comparing a company’s liquidity on a consistent basis without regard to depreciation, depletion and amortization, property impairment and exploration expenses, which can vary significantly depending upon accounting methods. Our credit facility requires that, as of the last day of each fiscal quarter, our ratio of total debt to EBITDAX for the preceding four fiscal quarters be not greater than 2.5 to 1.0 and that our ratio of EBITDAX to cash interest expense (plus certain subsidiary dividends) for the preceding four fiscal quarters be not less than 2.5 to 1.0. As of June 26, 2006, our credit facility defines EBITDAX consistently with the definition of EBITDAX used and presented by us in this prospectus. As of March 31, 2006, our total debt to EBITDAX ratio was approximately 1.8 to 1.0 and our EBITDAX to cash interest expense ratio was approximately 8.3 to 1.0.

	Year Ended December 31,									Three Months Ended March 31,
	2003			2004			2005			2005			2006
	(Restated)			(Restated)						(Unaudited)
	(in thousands)
Net loss	$	(15,392	)	$	(36,331	)	$	(27,848	)	$	(15,937	)	$	(1,517	)
Interest expense		13,661			16,958			19,496			4,497			5,411
Income tax expense		(8,624	)		(12,472	)		(209	)		(120	)		—
Depreciation, depletion and amortization		21,539			31,207			20,771			5,530			5,067
Property impairments		3,802			20,711			1,254			—			69
Exploration expenses		5,630			854			3,460			185			55
Non-cash hedging and derivative losses		—			7,731			20,418			14,808			630
Cumulative effect of change in accounting principle		(262	)		—			—			—			—
EBITDAX		20,354			28,658			37,342			8,963			9,715
Exploration expenses		(4,604	)		(854	)		(3,460	)		(185	)		(55	)
Interest expense		(13,003	)		(2,303	)		(3,392	)		(680	)		(1,091	)
Gain on sale of assets		—			(200	)		(658	)		(43	)		(16	)
Other non-cash gains		(52	)		21			6			—			15
Income tax expense		—			—			(98	)		—			—
Changes in assets and liabilities		14,240			(7,953	)		1,735			(145	)		2,747
Net cash provided by operating activities	$	16,935		$	17,369		$	31,475		$	7,910		$	11,315

(4) Includes long-term accrued interest on our senior notes and senior subordinated notes as of December 31, 2004 and December 31, 2005.

(5) The amounts for the year ended December 31, 2003 represent the book value of our Series A preferred stock plus all accrued but unpaid dividends thereon. The amounts for all other periods presented represent only accrued but unpaid dividends on the Series A preferred stock. In December 2004, the terms of the Series A preferred stock were amended to eliminate our requirement to redeem the outstanding shares of Series A preferred stock on a specified date. The amendment resulted in a balance sheet reclassification of the book value of the Series A preferred stock to stockholders’ deficit.

10

SUMMARY HISTORICAL RESERVE AND OPERATING DATA

The following tables present summary historical operating information for the years ended December 31, 2003, December 31, 2004 and December 31, 2005 and for the three months ended March 31, 2005 and March 31, 2006. The following tables also present summary historical information regarding our estimated net proved natural gas and oil reserves as of December 31, 2003, 2004 and 2005. All calculations of estimated net proved reserves have been made in accordance with the rules and regulations of the SEC and, except as otherwise indicated, give no effect to federal or state income taxes. For additional information about our reserves, please read “Business and Properties—Proved Reserves” and the information regarding our oil and gas activities beginning on page F-32.

Upon joining us in mid-2003, our senior management team undertook a detailed review and analysis of our proved natural gas and oil reserves, which resulted in a downward revision of our estimates of proved natural gas and oil reserves by a total of 37.7 Bcfe for the year ended December 31, 2003, which included approximately 22.3 Bcfe of proved non producing and proved undeveloped reserves plus a subsequent 15.4 Bcfe reduction in underperforming producing properties, and by an additional 62.9 Bcfe during the year ended December 31, 2004. As a result of the events leading up to our July 2004 restructuring, we were forced to delay our capital expenditure program in 2004, which caused a decline in our natural gas and oil production for the year ended December 31, 2004. Hurricanes Katrina and Rita impacted our natural gas and oil production in 2005, resulting in further production declines for the year ended December 31, 2005. Our April 2006 production from our south Louisiana properties was 3.0 MMcfe/d, which is 76% of our average daily pre-hurricane production from these properties during February through July 2005. Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including “—Overview—Reserve Write Down.”

For the foregoing reasons, our summary historical reserve and operating data may not be meaningful or indicative of our future reserve and operating data.

	Year Ended December 31,						Three Months Ended March 31,
	2003		2004		2005		2005		2006
	(Restated)		(Restated)
Production data:
Oil (MBbls)		688		625		598		153		148
Natural gas (MMcf)		6,545		5,158		4,592		1,206		1,124
NGLs (MBbls)		107		120		107		30		20
Combined volumes (MMcfe)		11,318		9,630		8,826		2,304		2,132
Average prices (net of hedging):
Oil (per Bbl)	$	29.60	$	40.66	$	55.55	$	49.33	$	62.58
Natural gas (per Mcf)		3.75		4.27		7.98		5.97		7.73
NGLs (per Bbl)		21.37		27.15		34.56		29.54		37.33
Combined (per Mcfe)		4.17		5.27		8.34		6.79		8.77
Average expenses (per Mcfe):
Production and ad valorem taxes	$	0.38	$	0.32	$	0.38	$	0.40	$	0.51
Lease operating expenses		1.05		1.25		1.31		1.11		1.45
General and administrative expenses		0.92		0.86		0.96		0.77		1.13
Exploration expenses		0.50		0.09		0.39		0.08		0.03
Depreciation, depletion and amortization		1.90		3.24		2.35		2.40		2.38
Property impairments		0.34		2.15		0.14		—		0.03
Derivative loss		—		0.69		3.84		7.07		1.42

11

	As of December 31,
	2003		2004		2005
	(dollars in thousands)
Estimated net proved reserves (1):
Oil (MBbls)		13,620		9,578		9,572
Natural gas (Mcf)		80,423		37,311		42,066
NGLs (MBbls) (2)		—		1,119		1,098
Total (MMcfe)		162,141		101,491		106,089
PV-10 (3)	$	379,494	$	239,632	$	371,303
Standardized measure of discounted net cash flows (3)	$	271,715	$	190,322	$	280,298

(1) In accordance with SEC requirements, our estimated net proved reserves, PV-10 and the standardized measure of discounted net cash flows were determined using year-end posted prices for natural gas and oil:

	Year Ended December 31,
	2003		2004		2005
Natural gas (per MMBtu)	$	5.97	$	5.74	$	8.17
Oil (per Bbl)		29.95		40.00		57.75

(2) Oil reserve data as of December 31, 2003 includes NGLs.

(3) PV-10 may be considered a non-GAAP financial measure; therefore, the following table reconciles our calculation of PV-10 to the standardized measure of discounted net cash flows, which is the most comparable GAAP financial measure. PV-10 is the computation of the standardized measure of discounted net cash flows on a pre-tax basis. Management believes that the presentation of the non-GAAP financial measure of PV-10 provides useful information to investors because it is widely used by professional analysts and sophisticated investors in evaluating natural gas and oil companies. Management also believes that PV-10 is relevant and useful for evaluating the relative monetary significance of our natural gas and oil properties. Further, professional analysts and sophisticated investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies’ reserves. Management also uses this pre-tax measure when assessing the potential return on investment related to our natural gas and oil properties and in evaluating acquisition candidates. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating us. PV-10 is not a measure of financial or operating performance under GAAP, nor is it intended to represent the current market value of our estimated natural gas and oil reserves. PV-10 should not be considered in isolation or as a substitute for the standardized measure of discounted net cash flows as defined under GAAP.

	Year Ended December 31,
	2003			2004			2005
Future cash inflows	$	911,612		$	664,223		$	986,683
Less: Future production costs		(235,308	)		(199,622	)		(276,962	)
Less: Future development costs		(56,733	)		(48,002	)		(56,042	)
Future net cash flows		619,571			416,599			653,679
Less: 10% discount factor		(240,077	)		(176,967	)		(282,376	)
PV-10		379,494			239,632			371,303
Less: Undiscounted income taxes		(187,826	)		(102,131	)		(179,732	)
Plus: 10% discount factor		80,047			52,821			89,357
Discounted income taxes		(107,778	)		(49,310	)		(90,375	)
Standardized measure of discounted net cash flows	$	271,715		$	190,322		$	280,928

12

RISK F ACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the following risks and all of the other information contained in this prospectus before deciding to invest in our common stock. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently consider immaterial also may adversely affect us.

Risks Related to Our Business and Our Industry

Natural gas and oil prices are volatile and a decline in natural gas and oil prices could materially and adversely affect our financial results and impede our growth.

Our revenue, profitability and cash flow depend upon the prices and demand for natural gas and oil. Moreover, changes in natural gas and oil prices have a significant impact on the value of our reserves. The markets for these commodities are very volatile and even relatively modest drops in prices can significantly affect our financial results and impede our growth. Prices for natural gas and oil may fluctuate widely in response to a variety of additional factors that are beyond our control, such as:

• changes in global supply and demand for natural gas and oil;

• commodity processing, gathering and transportation availability;

• domestic and global political and economic conditions;

• the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

• weather conditions, including hurricanes;

• technological advances affecting energy consumption;

• domestic and foreign governmental regulations; and

• the price and availability of alternative fuels.

Lower natural gas and oil prices may not only decrease our revenue on a per share basis, but also may reduce the amount of natural gas and oil that we can produce economically. This reduction may result in our having to make substantial downward adjustments to our estimated proved reserves.

Our natural gas and oil reserves and future production and, therefore, our future cash flow and revenue, are highly dependent on our successfully developing our undeveloped leasehold acreage, including our unconventional shale gas acreage.

Approximately 81% of our net leasehold acreage as of March 31, 2006, which includes our unconventional shale gas acreage, was undeveloped. Undeveloped acreage is acreage on which wells have not been drilled or have not been completed to a point that would permit the production of commercial quantities of natural gas and oil regardless of whether such acreage contains proved reserves.

Our business strategy involves using a significant amount of our operational and financial resources and cash flow for acquiring, exploring and developing our unconventional shale gas acreage. Unconventional shale gas acreage requires greater amounts of time and capital to develop, and to determine whether commercially productive reserves exist, than conventional acreage. Although we have already dedicated a significant amount of our operational and financial resources and cash flow into acquiring, exploring and developing our unconventional shale gas acreage, we cannot assure you that we will successfully develop our undeveloped acreage on the schedule we have established, at the costs we have budgeted, or at all. If we are unsuccessful in developing our undeveloped acreage, our future cash flow and revenues could be materially and adversely affected. Our future natural gas and oil reserves and production and, therefore, our future cash flow and revenue are highly dependent on our successfully developing our undeveloped leasehold acreage.

13

If natural gas or oil prices decrease, we may be required to write down the capitalized cost of individual natural gas and oil properties.

We use the successful efforts accounting method. All property acquisition costs and costs of exploratory and development wells are capitalized when incurred pending the determination of whether proved reserves are discovered. If proved reserves are not discovered with an exploratory well, the costs of drilling the well are expensed. All geological and geophysical costs are expensed as incurred.

The capitalized costs of our natural gas and oil properties, on a field-by-field basis, may exceed the estimated undiscounted future net cash flows of that field. This may occur when natural gas or oil prices are low or if we have substantial downward adjustments to our estimated proved reserves or increases in our estimates of development costs. In such event, we would be required to record impairment charges to reduce the capitalized costs of each such field to our estimate of the field’s fair market value. Any impairment reduces our earnings and stockholders’ equity. Once incurred, an impairment charge cannot be reversed at a later date even if we experience increases in the price of natural gas or oil, or both, or increases in the amount of our estimated proved reserves. For the years ended December 31, 2005, 2004 and 2003, we recorded impairment charges of approximately $1.3 million, $20.7 million and $3.8 million, respectively, to reduce the capitalized costs of our fields to estimated fair market value.

The marketability of our production depends on gathering systems, transportation facilities and processing facilities that we do not control or that may not currently exist. If these systems and facilities become unavailable or are otherwise unable to provide services, or are not developed in areas without current infrastructure, our financial condition and results of operations could be materially and adversely affected.

The marketability of our natural gas and oil production depends in part upon the availability, proximity and capacity of pipelines, natural gas gathering systems, transportation barges and processing facilities owned by third parties. We do not control most of these facilities and they may not be available to us in the future. Alternative delivery methods could either be prohibitively expensive or available only after a period of delay, if at all, at certain well sites. We may be required to shut in wells for a lack of a market or because access to natural gas pipelines, gathering system capacity or processing facilities may be limited or unavailable. If that were to occur, we would be unable to realize revenue from those wells until production arrangements were made to deliver the production to market. As a result, if one or more transportation, gathering or processing facilities that we depend on became unavailable or otherwise unable to provide services, our revenues and, in turn, our financial condition and results of operations could be materially and adversely affected. In addition, most of the unconventional shale gas and tight gas areas in which we own acreage do not currently contain gathering systems, transportation facilities or processing facilities. If our drilling efforts are successful within these areas, we will need access to transportation and gathering facilities to deliver our production to market. Until such facilities are available, we would be unable to realize revenue from such production and, as a result, our financial condition and results of operations could be materially and adversely affected.

Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions could materially affect the quantities and present value of our reserves.

The process of estimating natural gas and oil reserves is complex and inherently imprecise. It requires interpretations of available geological, geophysical and other technical data, assumptions about matters such as natural gas and oil prices, drilling and operating expenses, capital expenditures and taxes and projections regarding production rates and development expenditures. Any significant inaccuracies in these interpretations, assumptions or projections could materially affect the estimated quantities and present value of our reserves as shown in this prospectus. In addition, actual future production, natural gas and oil prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable natural gas and oil reserves most likely will vary from our estimates. Any significant variance could materially affect the estimated quantities and present value of our reserves as shown in this prospectus.

14

You should not assume that the present values referred to in this prospectus represent the current market value of our estimated natural gas and oil reserves. The timing of our production and the expenses related to the development of our natural gas and oil properties will affect both the timing of actual future net cash flows from our proved reserves and their present value. In addition, our PV-10 estimates are based on prices and costs as of the date of the estimates. Actual future prices and costs may be materially higher or lower than the prices and costs as of the date of the estimates. Further, the effect of derivative instruments is not reflected in these assumed prices. Also, the 10% discount factor we use when calculating our PV-10 estimates may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the natural gas and oil industry in general. For example, if natural gas prices decline by $0.25 per Mcf, the PV-10 of our total proved natural gas reserves as of December 31, 2005 would decrease from approximately $371.3 million to $364.9 million, and if oil prices decline by $1.00 per Bbl, the PV-10 of our total proved oil and NGL reserves as of December 31, 2005 would decrease from approximately $371.3 million to $366.5 million.

Unless we replace our natural gas and oil reserves, our reserves and production will decline, which would materially and adversely affect our business, financial condition and results of operations.

Producing natural gas and oil reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Thus, our future natural gas and oil reserves and production and, therefore, our cash flow and revenue are highly dependent on our success in efficiently developing our current reserves and acquiring additional recoverable reserves, including additional recoverable reserves within our unconventional shale gas acreage. We may not be able to develop, find or acquire reserves to replace our current and future production at costs or other terms acceptable to us, or at all, in which case our business, financial condition and results of operations would be materially and adversely affected.

The unavailability or high cost of drilling rigs, equipment, supplies or personnel could adversely affect our ability to execute our exploration and development plans.

The natural gas and oil industry is cyclical and, from time to time, there are shortages of drilling rigs, equipment, supplies or qualified personnel. During these periods, the costs of rigs, equipment and supplies may be substantially increased and their availability may be limited. In addition, the demand for, and wage rates of, qualified personnel, including drilling rig crews, may rise as the number of rigs in service increases. If drilling rigs, equipment, supplies or qualified personnel are unavailable to us due to excessive costs or demand or otherwise, our ability to execute our exploration and development plans could be materially and adversely affected and, as a result, our financial condition and results of operations could be materially and adversely affected.

We depend on a limited number of key personnel who would be difficult to replace.

We depend on the performance of our executive officers and other key employees. The loss of any member of our senior management or other key employee, including Terry W. Carter, our President, Chief Executive Officer and Chief Operating Officer, Eddie M. LeBlanc, III, our Chief Financial Officer, and David L. McCabe, our Vice President of Exploration and Development, could negatively impact our ability to execute our strategy. We do not maintain key person life insurance policies on any of our executive officers or key employees.

We may have difficulty managing growth in our business, which could adversely affect our financial condition and results of operations.

Significant growth in the size and scope of our operations could place a strain on our financial, technical, operational and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrences of unexpected expansion difficulties, including the failure to recruit and retain experienced managers, geologists, engineers and other professionals in the natural gas and oil industry could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plans.

15

Our identified drilling locations are scheduled over several years, which makes them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling.

As part of our growth strategy, our management has identified drilling locations as an estimation of our future multi-year drilling activities on our existing acreage. As of March 31, 2006, we had identified over 800 gross drilling locations, only 98 of which were attributable to proved undeveloped reserves. Our ability to drill and develop these locations depends on a number of uncertainties, including the availability of capital, regulatory approvals, natural gas and oil prices, costs and drilling results. Because of these uncertainties, we do not know if the drilling locations we have identified will be drilled on our anticipated schedule, or at all, or if we will be able to produce oil or natural gas from these locations in commercially viable quantities. As such, our actual drilling activities may differ materially from those presently identified, which could materially and adversely affect our business financial condition and results of operations.

Prospects that we decide to drill may not yield natural gas or oil in commercially viable quantities, or at all.

A prospect is a property on which we have identified what our geoscientists and engineers believe, based on available seismic, geological and engineering information, to be indications of commercial quantities of oil and/or natural gas. Our prospects and drilling locations are in various stages of evaluation, ranging from a prospect that is ready to drill to a prospect that will require substantial additional seismic data processing and interpretation. However, the use of seismic data and other technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling and testing whether natural gas or oil will be present or, if present, whether natural gas or oil will be present in sufficient quantities to recover drilling or completion costs or to be economically viable. Even if sufficient amounts of natural gas or oil exist, we may damage the reservoir or experience mechanical difficulties while drilling or completing the well, resulting in a reduction in production from the well or abandonment of the well. From January 1, 2003 through December 31, 2005, 14% of the development wells we drilled were dry holes and 42% of the exploration wells we drilled were dry holes. If we drill wells that we identify as dry holes in our current and future prospects, our drilling success rate may decline and it may materially and adversely affect our business, financial condition and results of operations.

Drilling for and producing natural gas and oil are high risk activities with many uncertainties that could materially and adversely affect our business, financial condition and results of operations.

Our operations are subject to many risks and hazards incident to exploring and drilling for, producing, transporting, marketing and selling natural gas and oil. Many of these risks and hazards are beyond our control and unavoidable under the circumstances. Any of these risks can cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution, environmental contamination or loss of wells and other regulatory penalties. These risks and hazards include:

• unusual or unexpected geological formations;

• pressures, blowouts or fires;

• cratering and explosions;

• loss of drilling fluid circulation;

• title problems;

• facility or equipment malfunctions;

• unexpected operational events;

• pipeline accidents and failures or casing collapses;

• uncontrollable flows of natural gas, oil, brine or well fluids;

• compliance with environmental and other governmental requirements; and

• adverse weather conditions.

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If any of these risks is realized, our business, financial condition and results of operations could be materially and adversely affected.

Losses and liabilities from uninsured or underinsured drilling and operating activities could materially and adversely affect our financial condition and operations.

We ordinarily maintain insurance against various losses and liabilities arising from our operations, but insurance against every operational risk is not available at economic rates. Additionally, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. Insurance expenses have increased due to recent hurricane activity in the Gulf of Mexico. Thus, losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not fully covered by insurance could materially and adversely affect our business activities, financial condition and results of operations.

We may be unable to successfully acquire additional leasehold interests or other natural gas and oil properties, and acquisitions that we do acquire may prove to be worth less than we paid because of uncertainties in evaluating recoverable reserves and potential liabilities, which may inhibit our ability to grow our production and replace our reserves.

We expect that acquisitions will continue to contribute to our future growth. In the last several years, we have pursued and consummated leasehold or other property acquisitions that have provided us opportunities to expand our acreage position and grow our production and reserves. However, suitable acquisitions may not be available in the future on reasonable terms. If we are successfully able to acquire additional properties, these acquisitions will require an assessment of a number of factors, including estimates of recoverable reserves, exploration potential, future natural gas and oil prices, operating costs and potential environmental and other liabilities. These assessments are inexact and their accuracy is inherently uncertain. When evaluating future acquisitions, we review the properties to be acquired in a manner generally consistent with industry practices, but this review will not reveal all existing or potential problems. In addition, our review may not permit us to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities. We may not be able to negotiate contractual indemnification for pre-closing liabilities, including environmental liabilities. We may also acquire interests in properties on an “as is” basis with limited remedies for breaches of representations and warranties. As a result, we may ultimately acquire natural gas and oil properties that do not contain economically recoverable reserves, which, in turn, may materially and adversely affect our business, financial condition and results of operations.

We may not effectively consolidate and integrate acquired operations, which may materially and adversely affect our business and results of operations.

Acquisitions present operational and administrative challenges that may prove more difficult than anticipated. The failure to consolidate functions and integrate procedures, personnel and operations in an effective and timely manner may adversely affect our business and results of operations, at least temporarily. Significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties, which may have substantially different operating and geological characteristics or be in different geographic locations than our existing properties. To the extent that we acquire properties substantially different from the properties in our operating areas or acquire properties that require different technical expertise, we may not be able to realize the economic benefits of these acquisitions as efficiently as originally anticipated.

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Our derivative arrangements could result in financial losses or could materially and adversely affect our results of operations.

To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of natural gas and oil, we currently, and may in the future, enter into derivative arrangements for a portion of our natural gas and oil production. Derivative arrangements for a portion of our natural gas and oil production expose us to the risk of financial loss in some circumstances, including when:

• production is less than expected;

• the counter-party to the derivative arrangement defaults on its contract obligations; or

• there is a change in the expected differential between the underlying price in the derivative arrangement and actual prices received.

In addition, our derivative arrangements limit the benefit we would receive from increases in the prices for natural gas and oil and may expose us to cash margin requirements.

Competition in the natural gas and oil industry is intense, which may adversely affect our ability to succeed.

The natural gas and oil industry is intensely competitive, and we compete with companies that have greater resources than we do. Many of these companies not only explore for and produce natural gas and oil, but also have refining, processing and gathering operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for productive natural gas and oil properties and exploratory prospects or identify, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low natural gas and oil market prices. Our larger competitors may be able to absorb the burden of present and future federal, state, local and other laws and regulations more easily than we can. Our ability to acquire additional properties and discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Some of our competitors have been operating in Texas, Oklahoma, Louisiana and the Appalachian region much longer than we have and have demonstrated the ability to operate through industry cycles. Any of these competitive disadvantages could adversely affect our business, financial condition and results of operations.

We are subject to complex federal, state, local and other laws and regulations that could materially and adversely affect our business, financial condition and results of operations.

Our natural gas and oil exploration and production operations are subject to complex and stringent laws and regulations. In order to conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities. We may incur substantial costs in order to maintain compliance with these existing laws and regulations. In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted or if new laws and regulations become applicable to our operations. These costs could have a material and adverse effect on our business, financial condition and results of operations. Moreover, our failure to comply with these laws and regulations, as interpreted and enforced, could have a material adverse effect on our business, financial condition and results of operations.

Our operations may expose us to substantial costs and liabilities with respect to environmental, health and safety matters.

We may incur substantial costs and liabilities as a result of environmental, health and safety requirements applicable to our natural gas and oil exploration, production and other activities. These costs and liabilities could arise under a wide range of environmental and safety laws, including regulations and enforcement policies, which have tended to become increasingly strict over time. Failure to comply with environmental laws or regulations

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may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup and site restoration costs and liens, or the issuance of orders enjoining or limiting our current or future operations. Compliance with these laws and regulations also increases the cost of our operations and may prevent or delay the commencement or continuance of a given operation. In addition, claims for damages to persons or property may result from environmental and other impacts of our operations.

Strict, joint and several liability to remediate contamination may be imposed under certain environmental laws, which could cause us to become liable for, among other things, the conduct of others or for consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. New or modified environmental, health or safety laws, regulations or enforcement policies could be more stringent and impose unforeseen liabilities or significantly increase compliance costs. We cannot assure you that the costs to comply with environmental, health or safety laws or regulations or the liabilities incurred as a result of any violations of these laws or regulations will not significantly and adversely affect our business, financial condition or results of operations.

Properties in which we have interests may have title defects which materially impair their value.

We generally obtain title opinions on significant properties that we drill or acquire. However, there can be no assurance that we will not suffer a monetary loss from title defects or failure. Generally, under the terms of the operating agreements affecting our properties, any monetary loss is to be borne by all parties to any such agreement in proportion to their interests in such property. If there are any title defects or defects in assignment of leasehold rights in properties in which we hold an interest, we may suffer a monetary loss.

We may continue to incur net losses.

We realized net losses of approximately $1.5 million for the three months ended March 31, 2006 and approximately $27.8 million, $36.3 million and $15.4 million for the years ended December 31, 2005, 2004 and 2003, respectively. Our profitability is not assured and we may continue to incur net losses over the next several years. Our failure to achieve profitability in the future could adversely affect our ability to raise additional capital and, accordingly, our ability to grow our business.

Covenants in our credit facility impose significant restrictions and requirements on us.

Our credit facility contains a number of covenants imposing significant restrictions on us, including restrictions on our repurchase of, and payment of dividends on, our capital stock and limitations on our ability to incur additional indebtedness, make investments, engage in transactions with affiliates, sell assets and create liens on our assets. These restrictions may affect our ability to operate our business to take advantage of potential business opportunities as they arise and, in turn, may materially and adversely affect our business, financial condition and results of operations.

Our credit facility also requires our operating subsidiaries to achieve and maintain certain financial ratio tests. There can be no assurance that our operating subsidiaries will be able to achieve and maintain compliance with these prescribed financial ratio tests or other requirements under our credit facility. Failure to achieve or maintain compliance with the financial ratio tests or other requirements under our credit facility would result in a default and could lead to the acceleration of our obligations under our credit facility.

Substantially all of the assets of our operating subsidiaries are pledged to secure the obligations under our credit facility. Our lack of unencumbered collateral could materially and adversely affect our ability to obtain, or increase the cost of obtaining, additional financing in the future.

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The failure of one or more of our customers or counterparties to meet their contractual obligations may materially and adversely affect our financial results.

Substantially all of our accounts receivable for natural gas and oil sales result from billings to third parties in the energy industry. This concentration of customers and joint interest owners may impact our overall credit risk in that these entities may be similarly affected by changes in economic and other conditions. In addition, our natural gas and oil derivative arrangements expose us to credit risk in the event of nonperformance by counterparties. In the event one or more of our customers or counterparties fails to meet its contractual obligations, our financial condition and results of operations may be materially and adversely affected.

Our exploration and development operations require substantial capital and we may be unable to obtain needed capital on satisfactory terms, which could lead to a loss of properties and a decline in our natural gas and oil reserves.

The natural gas and oil industry is capital intensive. We make and expect to continue to make substantial capital expenditures in our business and operations for the exploration, development and acquisition of natural gas and oil reserves. Our cash flow from operations and access to capital are subject to a number of variables, including:

• our proved reserves;

• the level of natural gas and oil we are able to produce from existing wells;

• the prices at which natural gas and oil are sold; and

• our ability to acquire, locate and produce new reserves.

If our revenue decreases as a result of lower natural gas and oil prices, operating difficulties, declines in reserves or for any other reason, we may have insufficient cash flow or access to capital to sustain our operations at current or planned levels. Additionally, a decline in the condition of the capital markets, a substantial rise in interest rates or other factors could adversely affect the availability or terms of additional financing. If cash generated by operations is not sufficient to meet our capital requirements, our failure to obtain additional financing could require us to curtail our exploration and development activities, which in turn could lead to a possible loss of properties and a decline in our natural gas and oil reserves.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act of 2002, may strain our resources, increase our costs and distract management; and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company with listed equity securities, we will need to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, related regulations of the SEC and the requirements of The Nasdaq National Market with which we are not required to comply as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will increase our costs and expenses. We will need to:

• institute a more comprehensive compliance function;

• design, establish, evaluate and maintain a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board, or the PCAOB;

• comply with rules promulgated by The Nasdaq National Market;

• prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

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• establish new internal policies, such as those relating to disclosure controls and procedures and insider trading;

• involve and retain to a greater degree outside counsel and accountants in the above activities; and

• establish an investor relations function.

In addition, we also expect that being a public company subject to these rules and regulations will require us to accept less director and officer liability insurance coverage than we desire or to incur substantial costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers. As a result, compliance with the requirements of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business.

Failure by us to achieve and maintain effective internal control over financial reporting in accordance with the rules of the SEC could harm our business and operating results and/or result in a loss of investor confidence in our financial reports, which could have a material adverse effect on our business and stock price.

We are in the process of evaluating our internal controls systems to allow management to report on, and our independent auditors to audit, our internal controls over financial reporting. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We will be required to comply with Section 404 for the year ending December 31, 2007. However, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. Furthermore, upon completion of this process, we may identify control deficiencies of varying degrees of severity under applicable SEC and PCAOB rules and regulations that remain unremediated. As a public company, we will be required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A “material weakness” is a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected. If we fail to implement the requirements of Section 404 in a timely manner, we might be subject to sanctions or investigation by regulatory authorities such as the SEC. In addition, failure to comply with Section 404 or the report by us of a material weakness may cause investors to lose confidence in our consolidated financial statements, and our stock price may be adversely affected as a result. If we fail to remedy any material weakness, our consolidated financial statements may be inaccurate, we may face restricted access to the capital markets and our stock price may be adversely affected.

Risks Related to this Offering and Our Common Stock

The Jefferies Investors have relationships with us that may present a conflict of interest.

In connection with this offering and the Recapitalization, The Jefferies Investors will receive approximately $            million of the net proceeds of this offering and             shares of our common stock in exchange for the cancellation of certain indebtedness and securities held by them. Jefferies & Company, Inc. is an underwriter participating in this offering and will receive a commission for its services as an underwriter. These circumstances may present a conflict of interest because The Jefferies Investors may have an interest in the successful completion of this offering and the Recapitalization in addition to the underwriting discounts and commission Jefferies & Company Inc. expects to receive. In addition, persons associated with The Jefferies Investors are serving as our directors. Please read “Use of Proceeds,” “Recapitalization,” “Principal Stockholders” and “Related Party Transactions” for a more complete description of the interests of The Jefferies Investors in this offering and the Recapitalization.

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We have significant stockholders with the ability to influence our actions.

On a pro forma as adjusted basis giving effect to this offering, the application of the net proceeds therefrom and the Recapitalization, The Jefferies Investors will beneficially own         % of our common stock. The interests of The Jefferies Investors may differ from yours, and The Jefferies Investors may vote their interests in a manner that may adversely affect you. In addition,          of our directors are affiliated with The Jefferies Investors. Through their direct and indirect interests in us, The Jefferies Investors are in a position to control the outcome of matters requiring a stockholder vote. This concentrated ownership makes it less likely that any other holder or group of holders of common stock will be able to affect the way we are managed or the direction of our business. These factors also may delay or prevent a change in our management or voting control.

We will renounce any interest in specified business opportunities, and our non-employee directors, all of whom are affiliates of The Jefferies Investors, generally will have no obligation to offer us those opportunities.

Our amended and restated certificate of incorporation will provide that if an opportunity in our line of business is presented to any of our non-employee directors:

• they will have no obligation to communicate or present the opportunity to us;

• they will not breach any fiduciary duty to us merely because they or their affiliates pursue or acquire the opportunity; and

• they and their affiliates may pursue the opportunity as that entity or individual sees fit,

unless it was presented to such director solely in that person’s capacity as our director or is identified by such director or such director’s affiliates solely through the disclosure of information by or on behalf of us.

Our amended and restated certificate of incorporation also will permit our non-employee directors and their affiliates to engage or invest in businesses that compete with ours. Accordingly, these persons may, and in some cases of which we are aware, do engage in business activities with or invest in competing companies. We will renounce any interest in any such business activities or ventures.

These provisions of our amended and restated certificate of incorporation will be permitted to be amended only by an affirmative vote of holders of at least a majority of our total voting power. As a result of these provisions, conflicts of interest could arise between us and our significant stockholders concerning competitive business activities or business opportunities, and these conflicts could materially and adversely affect our future competitive position and growth potential.

There has been no active trading market for our common stock, and an active trading market may not develop.

Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock on The Nasdaq National Market. We do not know if an active trading market will develop for our common stock or how the common stock will trade in the future, which may make it more difficult for you to sell your shares. As described in the section of this prospectus entitled “Underwriting,” negotiations between the underwriters and us will determine the initial public offering price, which may not be indicative of the price at which our common stock will trade following the completion of this offering. You may not be able to resell your shares at or above the initial public offering price.

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If our stock price fluctuates after the initial public offering, you could lose a significant part of your investment.

The stock market has experienced extreme price and volume fluctuations that have had a significant effect on the market price of securities issued by many companies for reasons unrelated to the operating performance of these companies. The market price of our common stock could similarly be subject to wide fluctuations in response to a number of factors, most of which we cannot control, including:

• changes in securities analysts’ recommendations and their estimates of our future financial performance;

• fluctuations in broader stock market prices and volumes, particularly among securities of natural gas and oil exploration and development companies;

• additions or departures of personnel, including key personnel;

• commencement of, or our involvement in, significant litigation;

• announcements by us or our competitors of significant business developments;

• future issuances of our common stock;

• supplies and prices of and demand for natural gas and oil; and

• general market and economy.

The realization of any of these risks and other factors, whether beyond or within our control, could cause the market price of our common stock to decline significantly.

Provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law may delay or prevent our acquisition by a third party.

Certain provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws will have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control of our company. Delaware law imposes restrictions on mergers and other business combinations between us and any of our interested stockholders unless specific conditions are met. In addition, our amended and restated certificate of incorporation and bylaws will include the following provisions:

• Classified Board of Directors. Our board of directors will be divided into three classes with staggered terms of office of three years each. The classification and staggered terms of office of our directors will make it more difficult for a third party to gain control of our board of directors. At least two annual meetings of stockholders, instead of one, generally will be required to effect a change in a majority of the board of directors.

• Removal of Directors. Under our amended and restated certificate of incorporation, a director may generally be removed only for cause, only at a stockholders’ meeting called for such purpose and only by the affirmative vote of at least a majority of the total voting power of the outstanding shares of our capital stock.

• Number of Directors, Board Vacancies, Term of Office. Our amended and restated certificate of incorporation and bylaws will provide that only the board of directors may set the number of directors. We intend to elect to be subject to certain provisions of Delaware law which vest in the board of directors the exclusive right, by the affirmative vote of a majority of the remaining directors, to fill vacancies on the board even if the remaining directors do not constitute a quorum. When effective, these provisions of Delaware law, which are applicable even if other provisions of Delaware law or the charter or bylaws of a company provide to the contrary, also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of stockholders as would otherwise be the case, and until his or her successor is elected and qualifies.

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• Call of Special Meetings of Stockholders. Our amended and restated bylaws will provide that special meetings of stockholders may be called at any time only by the chairman of our board of directors or a majority of our board of directors, but not by our stockholders.

• Advance Notice Provisions for Stockholder Nominations and Proposals. Our amended and restated bylaws will require advance written notice for stockholders to nominate persons for election as directors at, or to bring other business before, any meeting of stockholders. This bylaw provision will limit the ability of stockholders to make nominations of persons for election as directors or to introduce other proposals unless we are notified in a timely manner prior to the meeting.

• Action by Written Consent of Stockholders. Our amended and restated bylaws will allow any action required or permitted to be taken at any annual or special meeting of stockholders, including the election of directors, to be taken without a meeting, prior notice or a vote, if a written consent setting forth the action to be taken is signed by holders of not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to vote thereon were present and voted.

• Amending the Bylaws. Our amended and restated certificate of incorporation will permit our board of directors to alter, amend or repeal any provision of the bylaws or to make new bylaws. Our amended and restated certificate of incorporation will also provide that our bylaws may be altered, amended or repealed and new bylaws may be adopted by the affirmative vote of holders of at least a majority of the total voting power of the outstanding shares of our capital stock.

• Authorized but Unissued Shares. Under our amended and restated certificate of incorporation, our board of directors will have authority to cause the issuance of preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of our stockholders. Nothing in our amended and restated certificate of incorporation will preclude future issuances without stockholder approval of the authorized but unissued shares of our common stock.

Future sales of substantial shares of our common stock may affect its market price.

Sales of a substantial number of shares of our common stock in the public market after this offering or the perception that these sales may occur could cause the market price of our common stock to decline. See “Shares Eligible for Future Sale” for a more detailed description of possible future sales of common stock.

After this offering and the consummation of the Recapitalization, we will have outstanding             shares of common stock. Of these shares, the             shares that we are selling in this offering, or             shares if the underwriters exercise in full their option to purchase additional shares of our common stock, and the              shares held by the owners of Ascent Energy Inc. other than its Parent prior to this offering and the Recapitalization will be freely tradable without restriction under the Securities Act of 1933, as amended, or the Securities Act, except for any shares purchased, acquired or held by our “affiliates” as defined in Rule 144 under the Securities Act. All of the other shares outstanding (a total of             shares) are “restricted securities” within the meaning of Rule 144 under the Securities Act because they were issued in the Recapitalization. We believe that substantially all of the             shares of our common stock issued in the Parent Merger will be eligible for resale under Rule 144 beginning on the first anniversary of the Parent Merger, subject to volume limitations and other restrictions contained in Rule 144 and the lock-up arrangements described below. We believe that substantially all of the other             shares of our common stock issued in the Recapitalization will be eligible for resale under Rule 144 upon the consummation of the Recapitalization, subject to volume limitations and other restrictions contained in Rule 144 and the lock-up arrangements described below. Certain holders of our shares will also have demand registration rights for four separate registrations beginning 185 days after the registration of our common stock under the Securities Act and specified piggyback registration rights, in each case in accordance with a Registration Rights Agreement that we have entered into with these holders. See “Related Party Transactions—Registration Rights.”

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In connection with this offering, we and our executive officers, directors and certain of our existing stockholders have agreed, among other things, not to, for a period of 180 days after the date of this prospectus, offer for sale, pledge or otherwise dispose of any shares of our common stock or any securities convertible into or exchangeable for shares of our common stock, other than in this offering and subject to certain exceptions, without the prior written consent of Lehman Brothers Inc. See “Underwriting” for a description of these lock-up arrangements. Upon the expiration of these lock-up arrangements,         , or          if the underwriters exercise in full their option to purchase additional shares of our common stock, will be eligible for sale in the public market under Rule 144 of the Securities Act, subject to volume limitations and other restrictions contained in Rule 144.

We may file one or more registration statements with the SEC on Form S-8 providing for the registration of up to          shares of our common stock issued or reserved for issuance under our 2006 Long-Term Incentive Plan. Subject to the exercise of unexercised options or the expiration or waiver of vesting conditions for restricted stock and the expiration of the lock-ups describe above, shares registered under these registration statements on Form S-8 will be available for resale immediately in the public market without restriction. In connection with and immediately prior to the closing of this offering, we intend to terminate our 2005 Equity Incentive Plan and the awards granted thereunder and issue awards under our 2006 Long-Term Incentive Plan to affected participants in exchange for the awards being terminated. The holders of awards under our 2005 Equity Incentive Plan must consent to this exchange in order to terminate all prior awards under our 2005 Equity Incentive Plan.

Options covering          shares of our common stock are currently outstanding under our 2006 Long Term Incentive Plan, all of which are exercisable for $         per share. As of the date of this prospectus, options to purchase          shares of our common stock were vested.

We do not intend to pay, and are restricted in our ability to pay, dividends on our common stock.

We expect to retain all future earnings and other cash resources for the future operation and development of our business. Accordingly, we do not intend to declare or pay any dividends on our common stock in the foreseeable future. Our ability to declare and pay dividends on our common stock is restricted by the terms of our credit facility and may be restricted by other loan agreements we may enter into from time to time, and is subject to the provisions of Delaware law. Any future decision to pay a dividend on our common stock and the amount of any dividend paid, if permitted, will be made at the discretion of our board of directors after taking into account many factors, including our operating results, financial condition and cash needs. As a result, any return on your investment in shares of our common stock will depend on the market price of our common stock.

You will be immediately diluted by $             per share of common stock you purchase in this offering.

Our net tangible book value as of March 31, 2006, after giving effect to adjustments relating to this offering and the Recapitalization, would have been approximately $             million, or $             per share of common stock. Based on our net tangible book value and the initial public offering price of $             per share, you will experience an immediate dilution of $             for each share of common stock that you purchase in this offering. Please read “Dilution.”

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995 that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:

• business and financial strategy;

• drilling prospects, inventories, projects and programs;

• natural gas and oil reserves;

• technology;

• realized natural gas and oil prices;

• production;

• lease operating expenses, general and administrative expenses and exploration and other expenses;

• capital expenditures;

• acquisitions;

• marketing of natural gas and oil;

• competition and government regulation;

• general economic conditions;

• future operating results; and

• plans, objectives, expectations and intentions.

All of these types of statements, other than statements of historical fact included in this prospectus, are forward-looking statements. These forward-looking statements may be found in the “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business and Properties” and other sections of this prospectus. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target” or “continue,” the negative of such terms or other comparable terminology.

The forward-looking statements contained in this prospectus are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this prospectus are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in the “Risk Factors” section and elsewhere in this prospectus. All forward-looking statements speak only as of the date on the front cover of this prospectus. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

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USE OF PROCEEDS

We estimate that the net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $             million ($             million if the underwriters’ option to purchase additional shares of our common stock is fully exercised), based on an assumed initial public offering price of $             per share. A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) the net proceeds to us from the offering by $             million, assuming no change in the number of shares offered by us as set forth on the front cover of this prospectus and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering:

• to repay $             million of indebtedness outstanding under our credit facility;

• to repay in full $             million of indebtedness outstanding under our senior notes;

• to repay $             million of indebtedness outstanding under our senior subordinated notes;

• to pay $             million in cash in lieu of fractional shares pursuant to a reverse stock split of the Parent’s common stock to be effected in connection with the Parent Merger, as further described in “Recapitalization;” and

• $             million for general corporate purposes, which could include refinancing some of our derivative arrangements.

The Jefferies Investors, including Jefferies & Company, Inc., one of the underwriters in this offering, will receive a portion of the net proceeds of this offering and shares of common stock in connection with this offering and the Recapitalization. See “Related Party Transactions—Recapitalization.”

As of March 31, 2006, we had approximately $57.2 million outstanding under our credit facility and the average interest rate on the borrowings was 7.87%. The borrowings outstanding under our credit facility mature in November 2009.

As of March 31, 2006, we had outstanding approximately $33.5 million of indebtedness under our senior notes. The senior notes bear interest at a rate of 16% per annum, which is payable in the form of additional senior notes. The senior notes are due and payable on February 1, 2010 unless automatically extended in accordance with their terms, but in no event later than February 1, 2015. The indebtedness under the senior notes was incurred in November 2005 in exchange for other senior notes that had been issued in connection with our 2004 financial restructuring. Those senior notes were issued in exchange for certain promissory notes issued in 2003 for short term liquidity needs.

As of March 31, 2006, we had outstanding approximately $99.6 million of indebtedness under our senior subordinated notes. The senior subordinated notes bear interest at a rate of 11 ³/4% per annum, which is payable in the form of additional senior subordinated notes. The senior subordinated notes are due and payable on May 1, 2010 unless automatically extended in accordance with their terms, but in no event later than May 1, 2015. The indebtedness under the senior subordinated notes was incurred in November 2005 in exchange for other senior subordinated notes that had been issued in connection with our 2004 financial restructuring. Those senior subordinated notes were issued in exchange for certain senior notes issued in 2001 in connection with the acquisition of our south Texas properties.

We have granted the underwriters an option to purchase up to an additional          shares of common stock within 30 days following the date of this prospectus. The holders of our senior subordinated notes have agreed that we may delay the issuance in the Debt Exchange of up to          shares of our common stock, which is the number of shares subject to the underwriters’ option to purchase additional shares of our common stock, until the expiration of the underwriters’ 30-day option period. If the underwriters exercise their option to purchase additional shares of our common stock, then the number of shares issued in the Debt Exchange will be correspondingly reduced by the number of shares sold to the underwriters upon exercise of their option to purchase additional shares of our common stock.

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DIVIDEND POLICY

We do not expect to declare or pay cash dividends or make any other distributions on our common stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation and expansion of our business, including exploration, development and acquisition activities. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and such other factors as our board of directors deems relevant. In addition, our ability to declare and pay future dividends on our common stock is restricted by our credit facility, may be restricted by other loan agreements we may enter into from time to time, and is subject to the provisions of Delaware law.

RECAPITALIZATION

Prior to or contemporaneously with this offering, we expect to consummate a corporate recapitalization as follows:

Parent Merger. We will merge an indirect wholly owned subsidiary of Ascent Energy Inc. with and into our Parent, with our Parent surviving the Parent Merger, in a tax-free transaction. Upon consummation of the Parent Merger, our Parent will be a wholly owned subsidiary of Ascent Energy Inc. In the Parent Merger:

• Each share of common stock of the Parent outstanding prior to the Parent Merger will be converted into              shares of our common stock, or an aggregate of              shares of our common stock; and

• Each warrant to purchase shares of common stock of our Parent outstanding prior to the Parent Merger will be converted into a warrant to purchase shares of our common stock, based on the ratio at which shares of the Parent common stock are converted into shares of our common stock.

Debt Exchange. We will issue an aggregate of up to              shares of our common stock (subject to reduction as discussed below), at the per share offering price to the public, in repayment of approximately $                 million of our senior subordinated notes. However, we will use the net proceeds, if any, of the underwriters’ exercise of their option to purchase additional shares of our common stock to repay indebtedness under our senior subordinated notes in lieu of issuing shares of our common stock in the Debt Exchange. The holders of our senior subordinated notes have agreed that we may delay the issuance in the Debt Exchange of up to              shares of our common stock, which is the number of shares subject to the underwriters’ option to purchase additional shares of our common stock, until the expiration of the underwriters’ 30-day option period. If the underwriters exercise their option to purchase additional shares of our common stock, then the number of shares issued in the Debt Exchange will be correspondingly reduced by the number of shares sold to the underwriters upon exercise of their option to purchase additional shares of our common stock.

Cashless Warrant Exercise. All of our outstanding shares of Series A preferred stock will be tendered as consideration for the exercise of warrants to purchase an aggregate of              shares of our common stock at a purchase price of $              per share. In connection with the Cashless Warrant Exercise, we will issue an aggregate of              additional shares of our common stock, at the per share offering price to the public, in satisfaction of approximately $                 of accrued but unpaid dividends on the shares of Series A preferred stock tendered in the Cashless Warrant Exercise.

Equity Incentive Issuance. In May 2005, we adopted our 2005 Equity Incentive Plan, which provides for aggregate awards of up to 13.5% of the amount by which the present value of the consideration payable to Ascent or its securityholders in connection with a defined sale of our company exceeds our consolidated funded debt, as defined in the plan. As of March 31, 2006, awards providing for 11.2% of that amount had been granted under the plan. In connection with and immediately prior to the closing of this offering, we intend to terminate our 2005 Equity Incentive Plan and the awards granted thereunder and issue awards under our 2006 Long-Term

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Incentive Plan to affected participants in exchange for the awards being terminated. The holders of awards under our 2005 Equity Incentive Plan must consent to this exchange in order to terminate all prior awards under our 2005 Equity Incentive Plan.

Upon the consummation of this offering, the application of the net proceeds of this offering as described in “Use of Proceeds” and the consummation of the Recapitalization, our outstanding long-term indebtedness will consist solely of approximately $                 million of borrowings under our credit facility which mature November 1, 2009.

The Jefferies Investors and Trust Company of the West are the principal holders of our senior notes, our senior subordinated notes, our Series A preferred stock and our warrants and will receive cash and shares of our common stock in connection with this offering and the Recapitalization. Please see “Related Party Transactions” and “Principal Stockholders.”

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CAPITALIZATION

The following table sets forth our cash and capitalization as of March 31, 2006:

• on an actual basis, other than share amounts which give pro forma effect to the reverse stock split; and

• on a pro forma as adjusted basis giving effect to the Recapitalization and the sale of the shares of our common stock in this offering at an assumed initial public offering price of $             per share and the anticipated use of the net proceeds therefrom as described under “Use of Proceeds.”

You should read this information in conjunction with “Selected Consolidated Historical Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical and pro forma consolidated financial statements and the related notes appearing elsewhere in this prospectus.

	As of March 31, 2006
	Actual			Pro Forma As Adjusted
	(in thousands)
Cash and cash equivalents (1)	$	594		$
Long-term debt:
Credit facility	$	57,215		$
Senior notes		33,492			—
Senior subordinated notes		99,552
Series A preferred stock accrued dividends		13,676			—
Interest payable (2)		6,728
Total long-term debt	$	210,663		$
Stockholders’ (deficit) equity:
Series A preferred stock, $0.001 par value; 44,100 shares authorized,              shares issued and outstanding pro forma for reverse stock split; no shares issued and outstanding, pro forma as adjusted		40,141			—
Common stock, $0.001 par value; 20,000,000 shares authorized,              shares issued and outstanding pro forma for reverse stock split;          shares authorized,          shares issued and outstanding, pro forma as adjusted		6
Additional paid-in capital (1)		23,610
Accumulated deficit		(133,281	)
Total stockholders’ (deficit) equity (1)		(69,524	)
Total capitalization (1)	$	141,109		$

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by $             million, assuming no change in the number of shares offered by us as set forth on the front cover of this prospectus and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(2) Represents accrued but unpaid interest on the senior notes and the senior subordinated notes, which interest is payable in the form of additional notes.

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DILUTION

The net tangible book value per share of our common stock is the difference between our tangible assets and our liabilities, divided by the number of shares of our common stock outstanding. For investors in our common stock, dilution is the per share difference between the initial public offering price of the common stock in this offering and the net tangible book value of our common stock immediately after completing this offering and the Recapitalization. Dilution results from the fact that the per share offering price of the common stock is substantially in excess of the book value per share attributable to our existing stockholders prior to this offering and the Recapitalization.

As of March 31, 2006, our net tangible book value was approximately $             million, or $             per share of common stock, based on              shares of common stock outstanding.

After giving effect to the sale of common stock offered by this prospectus, the receipt of the estimated net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the Recapitalization, our net tangible book value as of March 31, 2006 would have been $             per share of common stock. This represents an immediate and substantial increase in the net tangible book value of $             per share to existing stockholders and an immediate dilution of $             per share, resulting from the difference between the initial public offering price and the net tangible book value after this offering, to new investors purchasing common stock in this offering. The following table illustrates the per share dilution to new investors purchasing common stock in this offering:

Assumed initial public offering price per share of common stock	$
Net tangible book value per share of common stock as of March 31, 2006
Increase in pro forma net tangible book value per share of common stock attributable to investors in this offering
Net tangible book value per share of common stock after this offering and the Recapitalization
Dilution per share to new investors	$

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our net tangible book value by $             million, the net tangible book value per share, after giving effect to this offering and the Recapitalization, by $             per share and the dilution in net tangible book value per share to new investors in this offering by $             per share, assuming no change in the number of shares offered by us as set forth on the front cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, as of March 31, 2006, the differences between existing stockholders and the new investors with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid before deducting the underwriting discounts and commissions and our estimated offering expenses payable by us, assuming an initial public offering price of $             per share.

	Shares Purchased		Total Consideration		Average Price per Share
	Number	Percent	Amount	Percent
Existing stockholders		%	$	%	$
New investors
Total		%	$	%	$

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) total consideration paid by new investors, total consideration paid by all stockholders and the average price per share paid by all stockholders by $             million, $             million and $             million, respectively, assuming no change in the number of shares offered by us as set forth on the front cover of this prospectus, and without deducting underwriting discounts and commissions and estimated offering expenses payable by us.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements give effect to the Recapitalization, this offering and the application of the net proceeds of this offering as described under “Use of Proceeds.” The unaudited pro forma condensed consolidated balance sheet as of March 31, 2006 assumes that the Recapitalization, this offering and the application of the net proceeds from this offering occurred on March 31, 2006. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2005 and for the three months ended March 31, 2005 and March 31, 2006 assumes that the Recapitalization, this offering and the application of the net proceeds from this offering occurred on January 1, 2005. Adjustments for the Recapitalization and this offering are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. Please read the accompanying notes to the unaudited pro forma condensed consolidated financial statements for further explanation.

The unaudited pro forma condensed consolidated financial statements and accompanying notes should be read together with our historical consolidated financial statements and related notes included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial statements were derived by adjusting our historical consolidated financial statements. The adjustments are based upon currently available information and certain estimates and assumptions; therefore, the actual effects of the Recapitalization and this offering may differ from the effects reflected in the unaudited pro forma condensed consolidated financial statements. However, management believes that the assumptions used provide a reasonable basis for presenting the significant effects of the Recapitalization and this offering and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed consolidated financial statements.

The unaudited pro forma condensed consolidated financial statements do not purport to present our financial position or results of operations had the Recapitalization and this offering actually occurred as of the dates indicated. Moreover, they do not project our financial position or results of operations for any future date or period.

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Ascent Energy Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of March 31, 2006

(in thousands)

	Historical			Adjustments	Pro Forma
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	594		$	$
Oil and gas revenue receivable		8,152
Joint interest and other receivables		1,959
Prepaid expenses		478
Fair value of derivatives		425
Inventory and other assets		710
TOTAL CURRENT ASSETS		12,318
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, successful efforts method	$	348,929		$	$
Unevaluated oil and gas properties		14,294
Other property and equipment		6,326
		369,549
Less—accumulated depreciation, depletion and amortization		(181,566	)
Net property and equipment		187,983
OTHER ASSETS:
Deferred financing costs		704
Fair value of derivatives		116
Escrowed and restricted funds		654
TOTAL ASSETS	$	201,775		$	$
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable	$	6,187		$	$
Accrued liabilities		7,093
Undistributed oil and gas proceeds		4,538
Interest payable		375
Accrued abandonment cost		488
Fair value of derivatives		11,272
TOTAL CURRENT LIABILITIES		29,953
LONG-TERM LIABILITIES:
Bank credit facility		57,215
Senior notes		33,492
Senior subordinated notes		99,552
Interest payable		6,728
Fair value of derivatives		18,047
Accrued abandonment cost		10,441
Deferred income taxes		1,865
Series A preferred stock accrued dividends		13,676
Commitments and contingencies		330
STOCKHOLDERS’ (DEFICIT) EQUITY:
Series A preferred stock, par value $0.001 per share		40,141
Common stock, par value $0.001 per share		6
Additional paid-in capital		23,610
Accumulated deficit		(133,281	)
TOTAL STOCKHOLDERS’ DEFICIT		(69,524	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	201,775		$	$

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

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Ascent Energy Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Three Months Ended March 31, 2005

(in thousands, except per share data)

	Historical			Adjustments	Pro Forma
REVENUES:
Oil	$	7,569		$	$
Natural gas		7,178
NGLs		893
TOTAL REVENUES		15,640
COSTS AND EXPENSES:
Production and ad valorem taxes		920
Lease operating expenses		2,556
General and administrative expenses		1,772
Exploration expenses		185
Depreciation, depletion, and amortization		5,530
Property impairments		—
Derivative loss		16,289
TOTAL OPERATING EXPENSES		27,252
LOSS FROM OPERATIONS		(11,612	)
INTEREST AND OTHER INCOME		52
INTEREST EXPENSE		(4,497	)
LOSS BEFORE INCOME TAXES		(16,057	)
INCOME TAX BENEFIT		120
NET LOSS		(15,937	)
PREFERRED STOCK DIVIDENDS		(828	)
NET LOSS ATTRIBUTABLE TO COMMON SHARES	$	(16,765	)	$	$
NET LOSS PER COMMON SHARE:
Basic and diluted net loss per common share	$	(2.82	)		$
Basic and diluted net loss per common share, pro forma for reverse stock split	$				$
Weighted average shares		5,949
Weighted average shares pro forma for reverse stock split

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

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Ascent Energy Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Three Months Ended March 31, 2006

(in thousands, except per share data)

	Historical			Adjustments	Pro Forma
REVENUES:
Oil	$	9,274		$	$
Natural gas		8,669
NGLs		754
TOTAL REVENUES		18,697
COSTS AND EXPENSES:
Production and ad valorem taxes		1,079
Lease operating expenses		3,101
General and administrative expenses		2,419
Exploration expenses		55
Depreciation, depletion, and amortization		5,067
Property impairments		69
Derivative loss		3,033
TOTAL OPERATING EXPENSES		14,823
INCOME FROM OPERATIONS		3,874
INTEREST AND OTHER INCOME		20
INTEREST EXPENSE		(5,411	)
LOSS BEFORE INCOME TAXES		(1,517	)
INCOME TAX BENEFIT		—
NET LOSS		(1,517	)
PREFERRED STOCK DIVIDENDS		(828	)
NET LOSS ATTRIBUTABLE TO COMMON SHARES	$	(2,345	)	$	$
NET LOSS PER COMMON SHARE:
Basic and diluted net loss per common share	$	(0.39	)		$
Basic and diluted net loss per common share, pro forma for reverse stock split	$				$
Weighted average shares		5,949
Weighted average shares pro forma for reverse stock split

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

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Ascent Energy Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2005

(in thousands, except per share data)

	Historical			Adjustments	Pro Forma
REVENUES:
Oil	$	33,228		$	$
Natural gas		36,634
NGLs		3,714
TOTAL REVENUES		73,576
COSTS AND EXPENSES:
Production and ad valorem taxes		3,332
Lease operating expenses		11,594
General and administrative expenses		8,436
Exploration expenses		3,460
Depreciation, depletion, and amortization		20,771
Property impairments		1,254
Derivative loss		33,851
TOTAL OPERATING EXPENSES		82,698
LOSS FROM OPERATIONS		(9,122	)
INTEREST AND OTHER INCOME		561
INTEREST EXPENSE		(19,496	)
LOSS BEFORE INCOME TAXES		(28,057	)
INCOME TAX BENEFIT		209
NET LOSS		(27,848	)
PREFERRED STOCK DIVIDENDS		(3,358	)
NET LOSS ATTRIBUTABLE TO COMMON SHARES	$	(31,206	)	$	$
NET LOSS PER COMMON SHARE:
Basic and diluted net loss per common share	$	(5.25	)		$
Basic and diluted net loss per common share, pro forma for reverse stock split	$				$
Weighted average shares		5,949
Weighted average shares pro forma for reverse stock split

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

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Ascent Energy Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Note 1: Basis of Presentation, the Offering and the Recapitalization

The historical financial information is derived from our historical consolidated financial statements. The unaudited pro forma condensed consolidated financial statements adjust our historical consolidated financial statements to give effect to the following:

• A     -for-1 reverse stock split of our common stock.

• The issuance of      shares of our common stock to the public at the initial public offering price of $     per share resulting in aggregate gross proceeds to us of $     million.

• The payment of estimated underwriting discounts and commissions and offering expenses of $     million.

• The repayment of $     million of borrowings under our credit facility with a portion of the net proceeds of this offering.

• The repayment of all $     million of our outstanding senior notes with a portion of the net proceeds of this offering.

• The repayment of $     million of our senior subordinated notes with a portion of the net proceeds of this offering.

• The issuance of      million shares of our common stock in connection with the merger of our Parent with a wholly owned subsidiary of Ascent Energy Inc. in a tax-free reorganization that we refer to as the “Parent Merger” and the conversion of warrants to purchase shares of common stock of our Parent into warrants to purchase shares of our common stock in connection with the Parent Merger.

• The issuance of      million shares of our common stock in exchange for $     million of indebtedness under our senior subordinated notes in a transaction that we refer to as the “Debt Exchange.” The number of shares of our common stock issued in the Debt Exchange is subject to reduction as described below.

• The issuance of      shares of our Series A preferred stock and warrants to purchase      million shares of our common stock upon the exercise of warrants to purchase shares of Series A preferred stock at an exercise price of $     per share resulting in aggregate gross proceeds to us of $                    .

• The tender of      shares of our Series A preferred stock (including accrued but unpaid dividends thereon) as consideration for the exercise of outstanding warrants to purchase an aggregate of      shares of our common stock at a purchase price of $     per share in a transaction that we refer to as the “Cashless Warrant Exercise” and the issuance of      million additional shares of our common stock in exchange for the accrued but unpaid dividends on the Series A preferred stock tendered in the Cashless Warrant Exercise.

• The issuance of      shares of our common stock in connection with the surrender of outstanding awards under our 2005 Equity Incentive Plan.

We intend to use the net proceeds, if any, of the underwriters’ exercise of their option to purchase additional shares of our common stock to repay indebtedness under our senior subordinated notes in lieu of issuing shares of our common stock in the Debt Exchange. The holders of our senior subordinated notes have agreed that we may delay the issuance in the Debt Exchange of up to      shares of our common stock, which is the number of shares subject to the underwriters’ option to purchase additional shares of our common stock, until the expiration of the underwriters’ 30-day option period. If the underwriters exercise their option to purchase additional shares of our common stock, then the number of shares issued in the Debt Exchange will be correspondingly reduced by the number of shares sold to the underwriters upon exercise of their option to purchase additional shares of our common stock.

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In addition, subsequent to this offering, we anticipate incurring incremental expenses at an annual rate of approximately $     million related to being a public company, including our compliance with the Exchange Act and the Sarbanes-Oxley Act of 2002. The unaudited pro forma condensed consolidated financial statements do not include any adjustment for these estimated incremental costs.

Note 2: Pro Forma Adjustments and Assumptions

(a) Reflects estimated gross proceeds of $     million from the issuance and sale of      million shares of our common stock to the public, assuming the underwriters do not exercise their option to purchase additional shares of our common stock, at the initial public offering price of $     per share. Also reflects estimated underwriting discounts and commissions and other offering expenses of approximately $     million and the application of a portion of the net proceeds of this offering to repay approximately $     million of indebtedness under our credit facility, all $     million of the indebtedness under our senior notes and $     million of indebtedness under our senior subordinated notes.

(b) Reflects net adjustments to compensation expense in the amount of $     million in connection with the exchange of awards under the 2005 Equity Incentive Plan for awards under the 2006 Long-Term Incentive Plan.

(c) Reflects gross proceeds of $     million from the exercise of warrants to purchase      shares of our Series A preferred stock at an exercise price of $     per share. Also reflects the tender of      shares of Series A preferred stock as consideration for the exercise of warrants to purchase an aggregate of      shares of our common stock at an exercise price of $     per share in the Cashless Warrant Exercise.

(d) Reflects the issuance of      million shares of our common stock in exchange for $     million of accrued but unpaid dividends on the shares of Series A preferred stock tendered in the Cashless Warrant Exercise at an exchange ratio of $     per share.

(e) Reflects the repayment of $     million of indebtedness under our senior subordinated notes with a portion of the net proceeds of this offering and the issuance of      million shares of our common stock in exchange for $     million of indebtedness under our senior subordinated notes in the Debt Exchange at the exchange ratio of $     per share. If the underwriters exercise their option to purchase additional shares of our common stock, then the number of shares issued in exchange for our senior subordinated notes in the Debt Exchange will be correspondingly reduced by the number of shares sold to the underwriters upon exercise of their option to purchase additional shares of our common stock, and the net proceeds from any exercise of such option will be used to repay indebtedness under our senior subordinated notes.

(f) Reflects the change in interest expense resulting from the repayment of $     million under our credit facility and the repayment or exchange for common stock of all $     million of our outstanding senior notes and $     million of our senior subordinated notes in connection with this offering and the Debt Exchange. Interest expense on our credit facility assumes a rate of     %.

(g) Reflects the reduction of deferred financing costs resulting from the repayment of $     million under our credit facility and the repayment or exchange for common stock of all $     million of our outstanding senior notes and $     million of our senior subordinated notes in connection with this offering and the Debt Exchange.

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION

The following table presents our selected consolidated historical financial information for the periods presented. The selected consolidated historical financial information for each of the five years ended December 31, 2005 has been derived from our audited consolidated financial statements and related notes. The audited consolidated financial statements and related notes for each of the three years ended December 31, 2005 are included elsewhere in this prospectus. The selected consolidated historical financial information as of March 31, 2006 and for the three months ended March 31, 2005 and March 31, 2006 has been derived from our unaudited consolidated financial statements and related notes included elsewhere in this prospectus which, in the opinion of management, have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of this information.

In July 2001, the Parent contributed to Ascent Energy Inc. substantially all of its assets and liabilities. The contribution was accounted for using reorganization accounting for entities under common control which requires retroactive restatement of all periods presented as if the contribution had occurred at the beginning of the earliest period. The information presented below therefore includes the assets and liabilities of the Parent prior to the contribution.

This information is only a summary and you should read it in conjunction with the material contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which includes a discussion of factors materially affecting the comparability of the information presented, and in conjunction with the financial statements and related notes included elsewhere in this prospectus.

Our audited consolidated financial statements for the years ending prior to December 31, 2005 have been restated to reflect our conversion to the successful efforts method of accounting for our investment in natural gas and oil properties and to correct our previously recorded income tax provision. Our audited consolidated financial statements for the years ended December 31, 2003 and December 31, 2004 have been restated to reflect our previously understated asset retirement obligation.

Prior to the Spring of 2003, we focused on the exploration and development of the reserves we acquired in connection with our formation in 2001. Since joining us in mid-2003, our senior management team has embarked on a strategy to acquire and develop a risk-balanced inventory of high growth opportunities. In order to implement this strategy, our new management initially devoted a substantial portion of its efforts to increasing our liquidity and improving our operational efficiency. In July 2004, we completed a financial restructuring that allowed our operating subsidiaries to enter into a new credit facility and reduced our debt service obligations by permitting us to pay in kind certain interest obligations.

For the foregoing reasons, our selected consolidated historical financial information may not be meaningful or indicative of our future results.

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	Year Ended December 31,															Three Months Ended March 31,
	2001			2002			2003			2004			2005			2005			2006
	(Restated)			(Restated)			(Restated)			(Restated)						(Unaudited)
	(in thousands, except per share amounts)
Statement of Operations Data:
Revenues:
Oil	$	9,884		$	15,924		$	20,377		$	25,431		$	33,228		$	7,569		$	9,274
Natural gas		11,746			25,486			24,553			22,021			36,634			7,178			8,669
NGLs		(13	)		1,664			2,027			3,257			3,714			893			754
Total		21,617			43,074			46,957			50,709			73,576			15,640			18,697
Expenses:
Production and ad valorem taxes		1,422			3,508			4,307			3,091			3,332			920			1,079
Lease operating expenses		5,492			10,939			11,915			12,018			11,594			2,556			3,101
General and administrative expense		5,290			4,152			10,388			8,272			8,436			1,772			2,419
Exploration expenses		100			1,370			5,630			854			3,460			185			55
Depreciation, depletion and amortization		6,922			13,039			21,539			31,207			20,771			5,530			5,067
Property impairments		58,829			21			3,802			20,711			1,254			—			69
Derivative loss		—			—			—			6,604			33,851			16,289			3,033
Total operating expenses		78,055			33,029			57,581			82,757			82,698			27,252			14,823
Loss from operations		(56,438	)		10,045			(10,624	)		(32,048	)		(9,122	)		(11,612	)		3,874
Interest and other income		182			438			7			203			561			52			20
Interest expense		(3,707	)		(11,437	)		(13,661	)		(16,958	)		(19,496	)		(4,497	)		(5,411	)
Loss before income taxes		(59,963	)		(954	)		(24,278	)		(48,803	)		(28,057	)		(16,057	)		(1,517	)
Income tax benefit		21,163			1,495			8,624			12,472			209			120			—
Income (loss) before cumulative effect of change in accounting principle (1)		(38,800	)		541			(15,654	)		(36,331	)		(27,848	)		(15,937	)		(1,517	)
Cumulative effect of change in accounting principle, net of income tax of $273 in 2003 (1)		—			—			262			—			—			—
Net income (loss)		(38,800	)		541			(15,392	)		(36,331	)		(27,848	)		(15,937	)		(1,517	)
Preferred stock dividends (2)		(1,168	)		(3,457	)		(3,976	)		(3,367	)		(3,358	)		(828	)		(828	)
Net loss attributable to common shares	$	(39,968	)	$	(2,916	)	$	(19,368	)	$	(39,698	)	$	(31,206	)	$	(16,765	)	$	(2,345	)
Net loss per common share :
Basic and diluted net loss per common share	$	(8.07	)	$	(0.59	)	$	(3.63	)	$	(6.67	)	$	(5.25	)	$	(2.82	)	$	(0.39	)
Basic and diluted net loss per common share (pro forma for reverse stock split)
Selected Cash Flow and Other Financial Data:
Net cash provided by operating activities	$	5,149		$	4,674		$	16,935		$	17,369		$	31,475		$	7,910		$	11,315
Net cash used in investing activities		(51,662	)		(27,965	)		(39,121	)		(22,584	)		(35,019	)		(9,583	)		(19,301	)
Net cash provided by financing activities		44,856			21,251			26,236			1,650			4,108			3,650			7,500
Capital expenditures		6,993			27,965			39,121			22,985			34,588			8,533			(19,317	)
EBITDAX (3)		30,758			22,951			20,354			28,658			37,342			8,962			9,715

	As of December 31,															As of March 31,
	2001			2002			2003			2004			2005			2005			2006
	(Restated)			(Restated)			(Restated)			(Restated)						(unaudited)
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	2,072		$	31		$	4,081		$	516		$	1,080		$	2,493		$	594
Total assets		148,726			178,590			200,374			169,267			187,221			177,318			201,775
Long-term debt(4)		109,108			112,969			141,493			189,572			227,379			166,106			190,259
Preferred stock (including accrued but unpaid dividends) (5)		21,850			42,907			46,265			9,577			12,865			10,388			13,676
Stockholders’ deficit		(13,322	)		(24,340	)		(40,587	)		(36,060	)		(67,196	)		(52,808	)		(69,524	)
Total liabilities and stockholders’ deficit	$	148,726		$	178,590		$	200,374		$	169,267		$	187,221		$	177,318		$	201,775

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(1) Reflects adoption of SFAS 143 effective January 1, 2003.

(2) Represents accrued but unpaid dividends on our Series A preferred stock and Series B preferred stock. In August 2003, all outstanding shares of the Series B preferred stock were converted into an aggregate of one million shares of our common stock (                     shares of our common stock pro forma for the reverse stock split), and all accrued but unpaid dividends thereon were declared and paid in cash.

(3) EBITDAX is a non-GAAP financial measure. See note 3 to “Summary—Summary Consolidated Historical and Pro Forma Financial Information” for additional information about our calculation of EBITDAX and its reconciliation to net cash provided by operating activities, which is the most comparable GAAP financial measure.

(4) Includes long-term accrued interest on our senior notes and senior subordinated notes as of December 31, 2004 and December 31, 2005.

(5) The amounts for the years ended December 31, 2001 and December 31, 2002 represent the book value of our Series A preferred stock and our Series B preferred stock, plus all accrued but unpaid dividends thereon. In August 2003, our Series B preferred stock automatically converted into an aggregate of                     shares of our common stock (pro forma for the reverse stock split), and all accrued but unpaid dividends thereon were declared and paid in cash. The amount for the year ended December 31, 2003 represents the book value of our Series A preferred stock plus all accrued but unpaid dividends thereon. The amount for the periods ending on or after December 31, 2004 represent only accrued but unpaid dividends on the Series A preferred stock. In December 2004, the terms of the Series A preferred stock were amended to eliminate our requirement to redeem the outstanding shares of Series A preferred stock on a specified date. The amendment resulted in a balance sheet reclassification of the book value of the Series A preferred stock to stockholders’ deficit.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with our selected consolidated historical financial data and our accompanying consolidated historical financial statements and the notes to those financial statements included elsewhere in this prospectus. The following discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly the section entitled “Risk Factors.” See also “Cautionary Statement Concerning Forward-Looking Statements.”

Overview

We are a growth-oriented, independent natural gas and oil company engaged in the acquisition, exploration and development of both conventional and unconventional natural gas and oil properties in Texas, Oklahoma, Louisiana and the Appalachian region. Our growth efforts are primarily directed at finding and developing natural gas reserves in unconventional shale gas areas and in known tight gas areas. We operate substantially all of our properties.

We were formed in July 2001 to acquire natural gas and oil properties in south Texas, Oklahoma and Louisiana. Prior to the Spring of 2003, we focused on the exploration and development of the reserves we acquired in connection with our formation. Since joining us in mid-2003, our senior management team has embarked on a strategy to acquire and develop a risk-balanced inventory of high growth opportunities, predominantly in shale gas. In order to implement this strategy, our new management initially devoted a substantial portion of its efforts to improving our operational efficiency and increasing our liquidity. In July 2004, we completed a financial restructuring that allowed our operating subsidiaries to enter into a new credit facility and reduced our debt service obligations by permitting us to pay in kind certain interest obligations.

Upon joining us in mid-2003, our senior management team undertook a detailed review and analysis of our proved natural gas and oil reserves, which resulted in a downward revision of our estimates of proved natural gas and oil reserves by a total of 37.7 Bcfe for the year ended December 31, 2003, which included approximately 22.3 Bcfe of proved non producing and proved undeveloped reserves plus a subsequent 15.4 Bcfe reduction in underperforming producing properties, and by an additional 62.9 Bcfe during the year ended December 31, 2004. As a result of the events leading up to our July 2004 financial restructuring, we were forced to delay our capital expenditure program in 2004 which caused a decline in our natural gas and oil production for the year ended December 31, 2004. Hurricanes Katrina and Rita impacted our natural gas and oil production in 2005, resulting in further production declines for the year ended December 31, 2005. Our April 2006 production from our South Louisiana properties was 3.0 MMcfe/d, which is 76% of our average daily pre-hurricane production from these properties during February through July 2005.

This discussion and analysis of our financial condition and results of operations reflects the restatement of our financial statements:

• for years ending prior to December 31, 2005 to reflect our conversion to the successful efforts method of accounting for natural gas and oil properties and to correct our previously recorded income tax provision; and

• for the years ended December 31, 2003 and December 31, 2004 to reflect our previously understated asset retirement obligation.

In addition, in connection with our July 2004 financial restructuring, we entered into new derivative arrangements and no longer designated our derivative arrangements as hedges.

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This discussion does not give effect to the              -for-1 reverse stock split of our common stock expected to be effected in connection with this offering.

For the foregoing reasons, our results of operations and period-to-period comparisons of these results and certain other financial information may not be meaningful or indicative of our future results of operations.

Revenue and Expense Drivers

Revenues

Natural gas and oil sales. Our revenues are generated from sales of natural gas and oil which are substantially dependent on prevailing prices of natural gas and oil. Prices for natural gas and oil are subject to large fluctuations in response to relatively minor changes in the supply of or demand for natural gas and oil, market uncertainty and a variety of additional factors beyond our control. We enter into derivative arrangements for a portion of our natural gas and oil production to achieve a more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of natural gas and oil. Our derivative arrangements for future production prior to our July 2004 financial restructuring were designated as hedges under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), and accordingly realized gains and losses from these derivative arrangements were recorded as natural gas and oil sales and unrealized gains and losses from these derivative arrangements were not reported in earnings.

We generally sell our natural gas and oil at current market prices at the wellhead, or we transport it to “pooling points” where it is sold. We are required to pay gathering and transportation costs with respect to substantially all of our products. We market our products in several different ways depending upon a number of factors, including the availability of purchasers for the product at the wellhead, the availability and cost of pipelines near the well, market prices, pipeline constraints and operational flexibility. During the year ended December 31, 2005, we sold an average of approximately 12.6 Mmcf/d of natural gas and approximately 1.9 MBbls/d of oil and NGLs. Our revenues for the year ended December 31, 2005 benefited from a general rise in natural gas and oil prices over the year.

Expenses

Operating expenses. Our operating expenses primarily involve the expense of operating and maintaining our wells.

• Lease operating expenses. Our lease operating expenses include certain direct employment-related costs, repair and maintenance costs, electrical power and fuel costs and other expenses necessary to maintain our operations. Our lease operating expenses are driven in part by the type of commodity produced, the level of maintenance activity and the geographical location of our properties. Workover costs that improve the value of our properties are capitalized and otherwise are included in lease operating expenses.

• Production and ad valorem taxes. Production taxes represent the state taxes imposed on mineral production. Production taxes are calculated based on sales revenues or volume of sales depending on the state. Ad valorem taxes represent property taxes.

• General and administrative expenses. General and administrative expenses include employee compensation and benefits, professional fees for legal, accounting and other advisory services, corporate overhead and franchise taxes. Upon completion of this offering, we expect that our ongoing general and administrative expenses will increase as a result of significant increases in legal, accounting and other expenses associated with compliance with the Sarbanes-Oxley Act of 2002, other rules and regulations of the SEC, the listing standards of The Nasdaq National Market and otherwise being a public company.

• Exploration expenses. Exploration expenses include the geological and geophysical costs relating to our exploration efforts and costs related to unsuccessful exploratory wells.

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• Depreciation, depletion and amortization. Depreciation, depletion and amortization represent the expensing of the capitalized costs of our natural gas and oil properties and our other property and equipment.

• Property impairments. We review our natural gas and oil properties for impairment on a field-by-field basis whenever events or circumstances indicate the carrying value of those properties may not be recoverable. The impairment provision for each field is based on the excess of the carrying value of the field over its fair value.

• Derivative loss. Subsequent to our July 2004 financial restructuring, we do not designate any of our derivative arrangements relating to future production as hedges under SFAS 133. Accordingly, derivative loss represents the changes in fair market value of, and realized gains and losses related to, our derivative arrangements.

Other

Interest and other income. We also generate interest income from our cash deposits and other income (loss) from gains or losses on sales of our assets.

Interest expense. Our interest expense reflects our borrowing costs under our credit facility, our senior notes and our senior subordinated notes. Interest accrued on our senior notes and senior subordinated notes is payable in the form of additional notes. Upon consummation of the Recapitalization, this offering and the application of the net proceeds of this offering, we expect our interest expense to reflect only our borrowing costs under our credit facility.

Reserve Write Down

Upon joining us in 2003, our management undertook a detailed review and analysis of our proved natural gas and oil reserves. Netherland, Sewell & Associates, Inc., one of our reserve engineers, has performed our reserves evaluation since our formation in 2001. LaRoche Petroleum Consultants, Ltd., one of our reserve engineers, was first engaged in 2004 to prepare a report on our proved reserves located in Louisiana and Texas as of December 31, 2004. Based on reports from both of our independent reserve engineering firms, our estimates of proved natural gas and oil reserves were revised downward by a total of 37.7 Bcfe for the year ended December 31, 2003, which included approximately 22.3 Bcfe of proved non producing and proved undeveloped reserves plus a subsequent 15.4 Bcfe reduction in underperforming producing properties, and by an additional 62.9 Bcfe during the year ended December 31, 2004. The decrease primarily affected proved developed non-producing and proved undeveloped reserves that had been on our books prior to 2003. The revisions are not expected to have a material impact on our near-term production volumes. The primary reasons for the revisions were as follows:

• Two successful recompletions in the New Taiton field in south Texas during late 2002 resulted in the addition of proved developed non-producing and proved undeveloped locations throughout much of the field. This early success led our internal engineers and Netherland, Sewell & Associates, Inc., our independent reserve engineers, to believe that New Taiton’s potential development was analogous to a large, nearby field. Subsequent producing performance and failure of additional recompletions caused us to reconsider the initial conclusions. As a result, the majority of the subject reserves were removed or were moved to probable or possible status in 2003. In addition, exploration and development activity combined with disappointing well performance subsequent to our new completions caused us to determine that certain proved undeveloped locations in the La Copita field in south Texas were not economic, which resulted in a downward revision in 2003.

• A more detailed analysis of the mapping underlying our reserves undertaken in connection with our hiring of LaRoche Petroleum Consultants, Ltd. resulted in the reclassifications of certain proved undeveloped reserves in the New Taiton and La Copita fields and certain proved undeveloped reserves in Louisiana as probable or possible as of December 31, 2004.

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• In Oklahoma, prior to 2003, a large number of proved developed non-producing reserves were recognized throughout a broad area. We developed an extensive casing gas gathering system to rapidly exploit the reserves. Well performance subsequent to recompletion indicated reserve estimates of approximately 46% of the previously estimated reserves. This, along with higher costs, made many of the identified reserves uneconomic, which resulted in a significant downward revision in 2004.

We still plan to make investments in a number of the projects impacted by the revisions. If successful, a portion of the affected reserves might become proven in the future.

Asset Retirement Obligation Restatement and Tax Provision Restatement

During the fourth quarter of 2005, we determined that our initial adoption of SFAS 143 understated our asset retirement obligation. The understatement was primarily attributable to our understating the number of wells subject to future retirement obligations and associated retirement costs on certain properties. Additionally, we overstated the useful lives of a significant portion of our properties which contributed to the understatement of our asset retirement obligation because we determined the present value of the asset retirement obligation to be recorded by discounting the estimated future cash flows related to our asset retirement obligation over the useful lives of our properties.

We restated our financial statements for the years ended December 31, 2003 and December 31, 2004 to reflect the revision to our asset retirement obligation for those periods. The effect of the restatement at adoption is as follows:

	Initial adoption			Restated adoption
	(in thousands)
Natural gas and oil properties	$	1,563		$	6,033
Accumulated depreciation, depletion and amortization		(276	)		1,496
Asset retirement obligations		(1,996	)		(7,103	)
Deferred tax liability		273			(164	)
Cumulative effect of change in accounting principle, net of income tax benefit of $273 at initial adoption and income tax expense of $164 as restated	$	(436	)	$	262

The following table summarizes the restated changes to our asset retirement obligation for the years ended December 31, 2004 and December 31, 2005:

	Year Ended December 31,
	2004			2005
	(in thousands)
Asset retirement obligations at beginning of period	$	8,319		$	9,274
Accretion expense		868			991
Liabilities incurred		135			450
Liabilities settled		(48	)		(145	)
Asset retirement obligations at year-end		9,274			10,570
Less: current asset retirement obligations		85			517
Long-term asset retirement obligations	$	9,189		$	10,053

During 2005, we reviewed the tax basis of all our related assets and net operating loss carryforwards for the current year and previous four years. As a result of this review, we restated our 2003 financial statements to reduce by $5.6 million the valuation allowance previously recorded for the year ended December 31, 2003. We determined that the valuation allowance recorded during 2003 was not required because the reported gross federal deferred tax assets were more likely than not fully realizable as an offset against the recorded federal deferred tax liabilities.

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The effect of the restatement of our asset retirement obligations, net of income taxes, and our tax provision on the financial statements was an increase in retained earnings as of December 31, 2004 of $4.6 million, an increase in net loss by $0.3 million ($0.04 per basic and diluted share) for the year ended December 31, 2004 and a decrease in net loss by $5.3 million ($0.99 per basic and diluted share) for the year ended December 31, 2003.

Critical Accounting Policies

Basis of Presentation. The consolidated financial statements include our accounts and the accounts of our subsidiaries as of the respective dates of such financial statements. All inter-company balances have been eliminated. Certain prior year amounts for accounts payable and accrued liabilities have been reclassified to conform to current year presentation due to segregation of the accounts on the consolidated balance sheets. This discussion and analysis of our financial condition and results of operation are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles as presently established in the United States.

Use of Estimates in the Preparation of Financial Statements. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, equity, revenues and expenses. Our estimates include those related to natural gas and oil revenues, bad debts, natural gas and oil properties, operating expenses, natural gas and oil reserves, abandonment liabilities, contingencies; and litigation. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates used in preparation of our financial statements. In addition, alternatives can exist among various accounting methods. In such cases, the choice of accounting method can have a significant impact on reported amounts. After this offering, we will discuss the development, selection and disclosure of each of these with our audit committee. We believe the accounting policies described below reflect our more significant estimates and assumptions used in preparation of our financial statements. Please read the notes to our consolidated financial statements for a discussion of additional accounting policies and estimates made by management.

Natural Gas and Oil Reserve Estimates. Independent petroleum and geological engineers prepare estimates of our natural gas and oil reserves. Proved reserves, estimated future net revenues and the present value of our reserves are estimated based upon a combination of historical data and estimates of future activity. You should not assume that the present value of our reserves is the current market value of our estimated proved reserves. In accordance with SEC requirements, we have based our present value from proved reserves on prices on the date of the estimate. The reserve estimates are used in calculating depletion, depreciation and amortization and in the assessment of assets for impairment as further discussed below. Significant assumptions are required in the valuation of proved natural gas and oil reserves which, as described herein, may affect the amount at which natural gas and oil properties are recorded. Actual results could differ materially from these estimates.

Revenue Recognition Policy. We follow the accrual method of accounting for revenue recognition and natural gas imbalances. Oil and natural gas revenues are recognized when sales are confirmed or reasonably anticipated and collection of the sales proceeds is probable. Accrued sales are based on field or pipeline volume statements valued at purchaser contract terms. Volumes attributable to natural gas imbalances are valued at published prices for the anticipated settlement date and accrued accordingly. Recognized sales attributable to natural gas imbalances were not significant for the periods presented.

Change in Accounting Principle to Successful Efforts from Full Cost. Generally accepted accounting principles allow the option of two acceptable methods for accounting for natural gas and oil properties. The primary differences between the two methods are in the treatment of exploration costs, the computation of depreciation, depletion and amortization, and the calculation of property impairments.

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Effective January 1, 2005, we changed our accounting method for natural gas and oil properties from the full cost method to the successful efforts method. Management believes that the successful efforts method of accounting is the preferable method in the natural gas and oil industry and that the accounting change will more accurately present the results of our exploration and development activities, minimize asset write-offs caused by temporary declines in natural gas and oil prices and reflect an impairment in the carrying value of our natural gas and oil properties only when there has been a permanent decline in their fair value.

Under the successful efforts method of accounting, we capitalize all costs related to property acquisitions and successful exploratory wells, all development costs and the costs of support equipment and facilities. All costs related to unsuccessful exploratory wells are expensed. Other exploration costs, including geological and geophysical costs, are expensed as incurred.

Unproved leasehold costs are capitalized and reviewed periodically for impairment. Costs related to impaired prospects are charged to expense. If natural gas and oil prices decline in the future, some of these unproved prospects may not be economic to develop, which could lead to increased impairment expense.

Costs of development dry holes and proved leaseholds are amortized on the unit-of-production method based on proved reserves on a field basis. The depreciation of capitalized production equipment and drilling costs is based on the unit-of-production method using proved developed reserves on a field basis.

We review our proved natural gas and oil properties for impairment on a field basis. For each field, an impairment provision is recorded whenever events or circumstances indicate that the carrying value of those properties may not be recoverable. The impairment provision is based on the excess of carrying value over fair value. Fair value is defined as the present value of the estimated future net revenues from estimated future production of total proved natural gas and oil reserves based on our expectations of future natural gas and oil prices and costs. Due to the volatility of natural gas and oil prices, it is possible that our assumptions regarding natural gas and oil prices may change in the future and may result in future impairment provisions. We recorded impairment provisions related to our proved natural gas and oil properties of $3.8 million, $20.7 million and $1.3 million for the years ended December 31, 2003, December 31, 2004 and December 31, 2005, respectively. The impairment provision for 2004 resulted primarily from a downward revision of our reserves at our New Taiton field in Texas.

We retrospectively adjusted our financial statements for the periods ending prior to December 31, 2005 to give effect to our change to the successful efforts method of accounting. The effect of the retrospective application, net of income taxes, was a reduction of retained earnings as of December 31, 2004 of $56.5 million, primarily resulting from a reduction of net property, plant and equipment of $92.3 million and a reduction of deferred income tax liability of $35.8 million. The change in accounting method increased our net loss by $5.6 million ($1.05 per basic and diluted share) and $19.8 million ($3.32 per basic and diluted share) for the years ended December 31, 2003 and December 31, 2004, respectively.

Asset Retirement Obligations. Effective January 1, 2003, we adopted SFAS 143. SFAS 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost is capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. Periodic accretion of the discount of the estimated liability is recorded in the statement of operations. We determine our asset retirement obligation by calculating the present value of estimated cash flows related to the liability.

We escrow a portion of the future abandonment costs of our wells and facilities. Approximately $0.5 million is included in escrowed and restricted funds on our balance sheets as of December 31, 2004 and December 31, 2005.

Asset Retirement Obligation Restatement and Tax Provision Restatement. During the fourth quarter of 2005, we determined that our initial adoption of SFAS 143 understated our asset retirement obligation. The

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understatement was primarily attributable to our understating the number of wells subject to future retirement obligations and associated retirement costs on certain properties. Additionally, we overstated the useful lives of a significant portion of our properties which contributed to the understatement of our asset retirement obligation because we determined the present value of the asset retirement obligation to be recorded by discounting the estimated future cash flows related to our asset retirement obligation over the useful lives of our properties. During 2005, we reviewed the tax basis of all our related assets and net operating loss carryforwards for the current year and previous four years. As a result of this review, we restated our 2003 financial statements to reduce by $5.6 million the valuation allowance previously recorded for the year ended December 31, 2003. We determined that the valuation allowance recorded during 2003 was not required because the reported gross federal deferred tax assets were more likely than not fully realizable as an offset against the recorded federal deferred tax liabilities. Please see “—Overview—Asset Retirement Obligation Restatement and Tax Provision Restatement” above for additional information about these restatements.

Depletion, Depreciation and Amortization. We use estimates of proved natural gas and oil reserve quantities to estimate depletion, depreciation and amortization expense using the unit-of-production method of accounting. Depreciation of property and equipment other than natural gas and oil properties is calculated using the straight-line method over the useful lives of the assets ranging from three to seven years. Any change in reserves directly impacts the amount of depreciation, depletion and amortization expense we recognize in a given period. Assuming no other changes, as our reserves increase, depletion, depreciation and amortization expense decreases and as reserves decrease, depletion, depreciation and amortization expense increases. Changes in our estimate of proved reserves can cause material changes in our depletion, depreciation and amortization expense.

Fair Value of Financial Instruments. Our financial instruments consist primarily of cash equivalents, trade receivables, trade payables, derivative instruments and bank debt. Our cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values due to their short maturities. Our derivative instruments are reflected at fair value as provided by our counterparties. The fair value of our bank debt approximates its carrying value because the interest rate available to us is variable and reflective of market rates. Our senior notes and senior subordinated notes do not trade on any market and to determine the fair value of these financial instruments is not practicable.

Derivative Instruments. We account for our derivative arrangements under SFAS 133, as amended by Statement of Financial Accounting Standards No. 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133,” Statement of Financial Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” and Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which is more fully discussed below under “—Quantitative and Qualitative Disclosures about Market Risk—Commodity Price Risk.” Under SFAS 133, instruments qualifying for hedge accounting treatment are recorded on the balance sheet as an asset or liability measured at fair value and subsequent changes in fair value are recognized in equity through other comprehensive income until the sale of the related hedged production is recognized in earnings, at which time amounts previously recognized on other comprehensive income are recognized in earnings. Any ineffective portion of changes in fair value on derivatives qualifying for hedge accounting treatment is recognized in earnings immediately. Instruments not qualifying for hedge accounting treatment are recorded on the balance sheet at fair value and subsequent changes in fair value are recognized in earnings. Derivative instruments entered into prior to our July 2004 financial restructuring qualified for hedge accounting treatment; however, derivative instruments entered into subsequent to such restructuring were not qualified for hedge accounting treatment.

Deferred Income Taxes. We follow the asset and liability method for accounting for deferred income taxes and income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Provisions for income taxes include deferred taxes resulting primarily from temporary differences due to different reporting methods for natural gas and oil properties for financial reporting purposes and income tax purposes. As of December 31, 2005, we had a net deferred tax liability of $1.9 million. For financial reporting purposes, all development

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expenditures and certain exploratory costs on successful wells are capitalized and depreciated, depleted and amortized on the units-of-production method. For income tax purposes, only the equipment and leasehold costs relative to successful wells are capitalized and recovered through depreciation or depletion. Generally, most other exploratory and development costs are charged to expense as incurred; however, we follow certain provisions of the Internal Revenue Code of 1986, as amended, or the Code, that allow capitalization of intangible drilling costs where management deems appropriate. Other financial and income tax reporting differences occur as a result of statutory depletion and capitalization of interest expenses for income tax purposes. Beginning in 2001, we established a valuation allowance which we increased periodically to reflect the uncertainty about the realization of the deferred tax asset. In 2005 and the first quarter of 2006, we increased the valuation allowance of $6.2 million by an additional $9.8 million and $0.5 million, respectively, based on uncertainty surrounding our ability to utilize the entire balance of our deferred tax assets based on an analysis of whether we are more likely than not to receive such a benefit and if so, to what extent.

Contingencies. Contingencies are recognized upon determination of an exposure, which when analyzed indicates that it is both probable that a liability has been incurred and the amount of the liability can reasonably be determined.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123(R)”), which is a revision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation” (“SFAS 123”). SFAS 123(R) is effective for public companies for interim or annual periods beginning after December 15, 2005. SFAS 123(R) supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows.” SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in financial statements based on their fair values beginning with the first interim or annual period after December 15, 2005, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS 123 are no longer an alternative to financial statement recognition. SFAS 123(R) also requires the tax benefits in excess of recognized compensation expenses to be reported as a financing cash flow rather than as an operating cash flow as currently required. SFAS 123(R) is effective for our first annual reporting period ending after December 31, 2005. We adopted SFAS 123(R) on January 1, 2006 using a modified prospective application. Our adoption of SFAS 123(R) did not have an impact on our financial statements.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces Accounting Principles Board Opinion No. 20 “Accounting Changes,” and Statement of Financial Accounting Standards No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and requires retrospective application to prior period financial statements of voluntary changes in accounting principles unless it is impractical to determine either the period-specific effects or the cumulative effect of the change. We adopted SFAS 154 during the fourth quarter of 2005. The adoption of SFAS 154 resulted in additional disclosure requirements for our change in accounting principle from full cost to successful efforts and our restatements. See “—Critical Accounting Policies—Change in Accounting Principle to Successful Efforts from Full Cost” and “—Critical Accounting Policies—Asset Retirement Obligation Restatement and Tax Provision Restatement.”

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Results of Operations

The following table sets forth certain operating information with respect to our natural gas, oil and NGL operations for the periods presented:

	Year Ended December 31,								Three Months Ended March 31,
	2003			2004			2005		2005		2006
	(Restated)
Production data:
Oil (MBbls)		688			625			598		153		148
Natural gas (MMcf)		6,545			5,158			4,592		1,206		1,124
NGLs (Bbls)		107			120			107		30		20
Combined volumes (MMcfe)		11,318			9,630			8,826		2,304		2,132
Average prices:
Oil (per Bbl)	$	30.14		$	40.66		$	55.55	$	49.33	$	62.58
Effects of hedging		(0.54	)		—			—		—		—
Oil price (net of hedging)	$	29.60		$	40.66		$	55.55	$	49.33	$	62.58
Natural gas (per Mcf)	$	5.52		$	5.93		$	7.98	$	5.97	$	7.73
Effects of hedging		(1.77	)		(1.66	)		—		—		—
Natural gas price (net of hedging)	$	3.75		$	4.27		$	7.98	$	5.97	$	7.73
NGLs (per Bbl)	$	21.37		$	27.15		$	34.56	$	29.54	$	37.33
Combined (per Mcfe):
Price	$	5.23		$	6.15		$	8.34	$	6.79	$	8.77
Effects of hedging		(1.06	)		(0.89	)		—		—		—
Price (net of hedging)	$	4.17		$	5.27		$	8.34	$	6.79	$	8.77

	Year Ended December 31,						Three Months Ended March 31,
	2003		2004		2005		2005		2006
	(Restated)
Average expenses (per Mcfe):
Production and ad valorem taxes	$	0.38	$	0.32	$	0.38	$	0.40	$	0.51
Lease operating expenses		1.05		1.25		1.31		1.11		1.45
General and administrative expenses		0.92		0.86		0.96		0.77		1.13
Exploration expenses		0.50		0.09		0.39		0.08		0.03
Depreciation, depletion and amortization		1.90		3.24		2.35		2.40		2.38
Property impairments		0.34		2.15		0.14		—		0.03
Derivative loss		—		0.69		3.84		7.07		1.42

	As of December 31,
	2003		2004		2005
	(dollars in thousands)
Estimated net proved reserves:
Oil (MBbls)		13,620		9,578		9,572
Natural gas (MMcf)		80,423		37,311		42,066
NGLs (MBbls) (1)		—		1,119		1,098
Total (MMcfe)		162,141		101,491		106,089
PV-10 (2)	$	379,494	$	239,632	$	371,303

(1) Oil reserve data as of December 31, 2003 includes NGLs.

(2) See note 3 to “Summary—Summary Historical Reserve and Operating Data.”

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	Year Ended December 31,									Three Months Ended March 31,
	2003			2004			2005			2005			2006
	(Restated)			(Restated)						(Unaudited)
	(in thousands)
Revenues:
Oil	$	20,377		$	25,431		$	33,228		$	7,569		$	9,274
Natural gas		24,553			22,021			36,634			7,178			8,669
NGLs		2,027			3,257			3,714			893			754
Total revenues		46,957			50,709			73,576			15,640			18,697
Expenses:
Production and ad valorem taxes		4,307			3,091			3,332			920			1,079
Lease operating expenses		11,915			12,018			11,594			2,556			3,101
General and administrative expenses		10,388			8,272			8,436			1,772			2,419
Exploration expenses		5,630			854			3,460			185			55
Depreciation, depletion and amortization		21,539			31,207			20,771			5,530			5,067
Property impairments		3,802			20,711			1,254			—			69
Derivative loss		—			6,604			33,851			16,289			3,033
Total operating expenses		57,581			82,757			82,698			27,252			14,823
Income (loss) from operations		(10,624	)		(32,048	)		(9,122	)		(11,612	)		3,874
Interest and other income		7			203			561			52			20
Interest expense		(13,661	)		(16,958	)		(19,496	)		(4,497	)		(5,411	)
Loss before income taxes		(24,278	)		(48,803	)		(28,057	)		(16,057	)		(1,517	)
Income tax benefit		8,624			12,472			209			120			—
Loss before cumulative effect of change in accounting principle		(15,654	)		(36,331	)		(27,848	)		(15,937	)		(1,517	)
Cumulative effect of change in accounting principle, net of income tax of $273 in 2003		262			—			—			—			—
Net loss	$	(15,392	)	$	(36,331	)	$	(27,848	)	$	(15,937	)	$	(1,517	)

Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

Revenues. Revenues for the three months ended March 31, 2006 increased $3.1 million, or 20%, to $18.7 million as compared to $15.6 million for the three months ended March 31, 2005. This increase was primarily due to increases in the prices received for oil, natural gas and NGLs of 27%, 29% and 26%, respectively, partially offset by decreases in oil, natural gas and NGL production of 3%, 7% and 33%, respectively.

The average sales prices for oil, natural gas and NGLs for the three months ended March 31, 2006 were $62.58 per Bbl, $7.73 per Mcf and $37.33 per Bbl, respectively, as compared to average sales prices for oil, natural gas and NGLs for the three months ended March 31, 2005 of $49.33 per Bbl, $5.97 per Mcf and $29.54 per Bbl, respectively.

The 3% decrease in oil production was primarily due to production declines in Texas and Louisiana of 34% and 16%, respectively. The decline in Texas production was primarily due to natural declines and line pressure conflicts which resulted in production shut-ins, primarily in south Texas. The decline in Louisiana production is primarily due to our wells not fully recovering to pre-hurricane production levels after temporary shut-ins which resulted from Hurricanes Katrina and Rita.

The 7% decrease in natural gas production was primarily due to production declines in Louisiana, Oklahoma and Texas of 20%, 10% and 2%, respectively. Production decreases during the three months ended

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March 31, 2006 resulted primarily from natural production declines in Oklahoma and Texas, which are typical for tight gas sands, weather related shut-ins in Oklahoma, and declines in our Louisiana production due to our wells not fully recovering to pre-hurricane production levels after temporary shut-ins which resulted from Hurricanes Katrina and Rita.

The decrease of 33% in NGL production was primarily due to the declines in natural gas production as discussed above.

Lease operating expenses. Lease operating expenses for the three months ended March 31, 2006 increased $0.5 million, or 21%, to $3.1 million as compared to $2.6 million for the three months ended March 31, 2005 and increased 31% per Mcfe during the three months ended March 31, 2006 to $1.45 per Mcfe as compared to $1.11 per Mcfe during the three months ended March 31, 2005. The increase in lease operating expenses was primarily due to increased costs for well insurance, chemicals, surface and subsurface repair and maintenance. During early 2005, marginal wells in need of repair were temporarily shut-in which delayed completion of repairs. Due to the increase in crude oil and natural gas prices, many of these wells were repaired and returned to production, which resulted in increased repair and maintenance costs during the three months ended March 31, 2006 as compared to the three months ended March 31, 2005. Additionally, field employee costs during the three months ended March 31, 2006 exceeded field employee costs for the three months ended March 31, 2005 due to higher field staff bonuses during the three months ended March 31, 2006. The increase in lease operating expenses on a per Mcfe basis during the three months ended March 31, 2006 was primarily due to an 8% decline in production.

Production and ad valorem taxes. Production and ad valorem taxes for the three months ended March 31, 2006 increased $0.2 million, or 17%, to $1.1 million from $0.9 million for the three months ended March 31, 2005. The increase was primarily due to increases in revenues during the three months ended March 31, 2006 as compared to the three months ended March 31, 2005. Production and ad valorem taxes were 6% of revenues for both periods, which is lower than historical percentages due to current and retroactive exemptions granted by the State of Texas for high-cost natural gas.

General and administrative expenses. General and administrative expenses, or G&A, for the three months ended March 31, 2006 increased $0.6 million, or 37%, to $2.4 million as compared to $1.8 million for the three months ended March 31, 2005. The increase in G&A was primarily due to increases in employee-related costs and legal costs during the three months ended March 31, 2006. Employee-related costs increased primarily due to our hiring additional staff and awarding annual salary increases. Legal costs increased primarily due to an increase in legal issues arising in the normal course of business.

Exploration expenses. Exploration expenses for the three months ended March 31, 2006 decreased $130,000, or 70%, to $55,000 as compared to $185,000 for the three months ended March 31, 2005. The decrease was primarily due to a decrease in delay rental costs during the three months ended March 31, 2006 resulting from the timing of delay rental payments and the expiration of a lease during February 2006.

Depreciation, depletion and amortization. Depreciation, depletion and amortization, or DD&A, for the three months ended March 31, 2006 decreased $0.5 million, or 8%, to $5.1 million as compared to $5.5 million for the three months ended March 31, 2005. On an Mcfe basis, DD&A for the three months ended March 31, 2006 decreased to $2.38, or 1%, as compared to $2.40 for the three months ended March 31, 2005. The decrease in DD&A expense for the three months ended March 31, 2006 was primarily due a decrease in production.

Loss on derivatives. Derivative loss for the three months ended March 31, 2006 decreased $13.3 million, or 81%, to $3.0 million as compared to $16.3 million during the three months ended March 31, 2005. We recognized natural gas and oil realized derivative losses of $2.2 million, natural gas and oil unrealized derivative losses of $1.0 million and interest rate unrealized derivative gains of $0.1 million during the three months ended March 31, 2006. During the three months ended March 31, 2005, we recognized natural gas and oil realized derivative losses of $1.2 million, unrealized natural gas and crude oil and derivative losses of $15.2 million and

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interest rate unrealized derivative gains of $0.2 million. The decrease in derivative losses for the three months ended March 31, 2006 as compared to the three months ended March 31, 2005 was primarily due to a decrease in unrealized crude oil and natural gas derivative losses resulting from less significant changes in the prices of crude oil and natural gas and due to more favorable pricing under our derivative instruments during the three months ended March 31, 2006 as compared to the three months ended March 31, 2005. See”—Quantitative and Qualitative Disclosures about Market Risk.”

Interest expense. Interest expense increased $0.9 million, or 20%, to $5.4 million during the three months ended March 31, 2006 from $4.5 million for the three months ended March 31, 2005. The increase in interest expense during the three months ended March 31, 2006 was due to increased interest rates and borrowings under our credit facility and the issuance of additional senior notes and senior subordinated notes as interest paid in kind.

Income tax benefit. Based on the uncertainty about our ability to realize our deferred tax assets in future periods, we have not recorded tax benefits during the three months ended March 31, 2006 and we only recorded tax benefits related to certain jurisdictions for state tax purposes for the three months ended March 31, 2005. We established a valuation allowance for certain jurisdictions for state income tax purposes during 2001 and established a valuation allowance for federal income tax purposes during 2004.

Net loss. Due to the factors described above, a net loss of $1.5 million was recorded for the three months ended March 31, 2006 compared to a net loss of $15.9 million for the three months ended March 31, 2005.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenues. Revenues for the year ended December 31, 2005 increased $22.9 million, or 45%, to $73.6 million as compared to $50.7 million for the year ended December 31, 2004. This increase was primarily due to increases in the prices received for oil, natural gas and NGLs of 37%, 87% and 27%, respectively, partially offset by decreases in oil, natural gas and NGL production of 4%, 11% and 10%, respectively.

The average sales prices for oil, natural gas and NGLs for the year ended December 31, 2005 were $55.55 per Bbl, $7.98 per Mcf and $34.56 per Bbl, respectively, as compared to average sales prices for oil, natural gas and NGLs for the year ended December 31, 2004 of $40.66 per Bbl, $4.27 per Mcf and $27.15 per Bbl, respectively. We had no oil hedging losses during the years ended December 31, 2004 or December 31, 2005 and no natural gas hedging losses during the year ended December 31, 2005. The average sales prices for natural gas received during the year ended December 31, 2004 were net of hedging losses of $1.66 per Mcf.

The 4% decrease in oil production was primarily due to production declines during the year ended December 31, 2005 in Louisiana and Texas of 30% and 14%, respectively. The decline in Louisiana and Texas production was primarily due to a loss of production from August through December 2005 of approximately 9,200 Bbls of oil, resulting from mandatory shut-ins resulting from Hurricanes Katrina and Rita and our subsequent inability to return to pre-hurricane production rates.

The 11% decrease in natural gas production was primarily due to production declines during the year ended December 31, 2005 in Louisiana, Oklahoma and Texas of 19%, 11% and 8%, respectively. Production decreases during the year ended December 31, 2005 resulted primarily from natural production declines in Texas and Oklahoma, which are typical for tight gas sands, and decreases in production of approximately 87,000 Mcf in Louisiana due to Hurricanes Katrina and Rita. Reductions in our capital spending during the years ended December 31, 2003 and December 31, 2004 due to liquidity constraints delayed plans to offset natural declines in these areas with new production. Production during the year ended December 31, 2005 was also adversely affected by intermittent shut-ins necessary for repairs.

The decrease of 10% in NGL production was primarily due to the declines in natural gas production in Texas discussed above.

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Lease operating expenses. Lease operating expenses for the year ended December 31, 2005 decreased $0.4 million, or 4%, to $11.6 million as compared to $12.0 million for the year ended December 31, 2004 and increased 5% per Mcfe during the year ended December 31, 2005 to $1.31 per Mcfe as compared to $1.25 per Mcfe during the year ended December 31, 2004. The decrease in lease operating expenses was primarily due to cost saving measures implemented during the year ended December 31, 2004. These cost saving measures included closing our Louisiana field office, reducing our field staff and reducing costs associated with producing certain marginal wells due to curtailment of daily production. The increase in lease operating expenses on a per Mcfe basis during the year ended December 31, 2005 was primarily due to a 8% decrease in production during 2005.

Production and ad valorem taxes. Production and ad valorem taxes for the year ended December 31, 2005 increased $0.2 million, or 8%, to $3.3 million from $3.1 million for the year ended December 31, 2004. The increase was primarily due to increases in revenues during the year ended December 31, 2005 as compared to the year ended December 31, 2004. Production and ad valorem taxes were 5% of revenues for both years which is lower than historical percentages due to current and retroactive exemptions granted by the State of Texas for high-cost natural gas.

General and administrative expenses. G&A for the year ended December 31, 2005 increased $0.2 million, or 2%, to $8.4 million as compared to $8.3 million for the year ended December 31, 2004. The increase in G&A was primarily due to an increase in professional fees of $0.2 million for the year ended December 31, 2005 and increased franchise taxes of $0.3 million during the year ended December 31, 2005 primarily due to our July 2004 financial restructuring. These costs were partially offset by reduced employee-related costs of $0.3 million resulting from staff reductions, attrition and cost saving reductions made throughout the year ended December 31, 2004.

Exploration expenses. Exploration expenses for the year ended December 31, 2005 increased $2.6 million, or 305%, to $3.5 million as compared to $0.9 million for the year ended December 31, 2004. The increase was primarily due to increases in dry hole costs and geological and geophysical costs of $1.7 million and $0.6 million, respectively, during the year ended December 31, 2005 as compared to the year ended December 31, 2004.

Depreciation, depletion and amortization. DD&A for the year ended December 31, 2005 decreased $10.5 million, or 34%, to $20.8 million as compared to $31.2 million for the year ended December 31, 2004. DD&A for the year ended December 31, 2005 decreased to $2.35, or 27% on a per-Mcfe basis, as compared to $3.24 for the year ended December 31, 2004. The decrease in DD&A expenses and the DD&A rate during the year ended December 31, 2005 was primarily due a significant decrease in depletable costs on our New Taiton field in Texas resulting from a impairment of $20.3 million at December 31, 2004. Additionally we experienced a decrease in production and an increase in reserves of 8% and 4%, respectively, for the year ended December 31, 2005 as compared to the year ended December 31, 2004 which further reduced the DD&A rate for the year ended December 31, 2005, which resulted in a significantly lower depletion rate during the year ended December 31, 2005. The decrease in DD&A during the year ended December 31, 2005 was due to the lower DD&A rate per Mcfe and the decrease in production.

Property impairments. Property impairments for the year ended December 31, 2005 decreased $19.5 million, or 94%, to $1.3 million as compared to $20.7 million for the year ended December 31, 2004. Property impairments for the year ended December 31, 2004 were primarily due to a significant downward revision in reserves on our New Taiton field in Texas at year-end 2004, which resulted in a property impairment of $20.3 million. During the year ended December 31, 2005, we did not experience any significant reserve writedowns.

Loss on derivatives. Derivative loss for the year ended December 31, 2005 increased $27.2 million, or 412%, to $33.9 million as compared to $6.6 million during the year ended December 31, 2004. We recognized natural gas and oil realized losses of $11.9 million, natural gas and oil unrealized losses of $22.3 million and

54

interest rate unrealized gains of $0.4 million during the year ended December 31, 2005. During the year ended December 31, 2004, we recognized natural gas and oil realized losses of $2.0 million and unrealized losses of $4.6 million. The increase in derivative losses for the year ended December 31, 2005 as compared to the year ended December 31, 2004 is due to significant price increases in natural gas and oil during the year ended December 31, 2005, an increase in production volumes covered under derivative arrangements during the year ended December 31, 2005 and differences in the accounting treatment of derivative arrangements during the first seven months of 2004 as compared to subsequent periods. Derivative arrangements for production prior to our July 2004 financial restructuring were designated as hedges under SFAS No 133; therefore, realized gains and losses were recorded as natural gas and oil sales and unrealized gains and losses were not reported in earnings. Subsequent to our July 2004 restructuring, we did not designate any of our derivative arrangements for future production as hedges under SFAS No 133; therefore, changes in fair market value and realized losses related to those derivative arrangements are reported in earnings as gain or loss on derivatives.

Interest and other income. Interest and other income for the year ended December 31, 2005 increased $0.4 million, or 176%, to $0.6 million as compared to $0.2 million for the year ended December 31, 2004. The increase was primarily due to gains on the sales of assets during the year ended December 31, 2005.

Interest expense. Interest expense increased $2.5 million, or 15%, to $19.5 million during the year ended December 31, 2005 from $17.0 million for the year ended December 31, 2004. The increase in interest expense during 2005 was due to increased borrowing under our credit facility and the issuance of additional senior notes and senior subordinated notes as interest paid in kind. These increases were partially offset by decreased interest rates under our credit facility during the year ended December 31, 2005.

Income tax benefit. We are required to establish a net deferred tax liability or benefit calculated at the applicable federal and state tax rates resulting primarily from financial reporting and income tax reporting basis differences in natural gas and oil properties. Our effective income tax rate of approximately 38.5% reflects the combined federal statutory rate and applicable state taxes. Beginning in 2001, we established a valuation allowance which we increased periodically to reflect the uncertainty about the realization of the deferred tax asset. During 2005, we increased the valuation allowance of $6.2 million by an additional $9.8 million based on uncertainty surrounding our ability to utilize the entire balance of our deferred tax assets based on an analyses of whether we are more likely than not to receive such a benefit and if so, to what extent.

Net loss. Due to the factors described above, a net loss of $27.8 million was recorded for the year ended December 31, 2005 compared to a net loss of $36.3 million for the year ended December 31, 2004.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenues. Revenues for the year ended December 31, 2004 increased $3.8 million, or 8%, to $50.7 million as compared to $47.0 million for the year ended December 31, 2003. This increase was primarily due to increases in the prices received for oil, natural gas (net of hedging losses) and NGLs of 37%, 14% and 27%, respectively, and a 12% increase in NGL production, partially offset by decreases in natural gas and oil production of 21% and 9%, respectively.

The average sales prices received for oil, natural gas and NGLs for the year ended December 31, 2004 were $40.66 per Bbl, $4.27 per Mcf and $27.15 per Bbl, respectively, as compared to average sales prices for oil, natural gas and NGLs for the year ended December 31, 2003 of $29.60 per Bbl, $3.75 per Mcf and $21.37 per Bbl, respectively. The average sales prices received for natural gas during the year ended December 31, 2004 are net of natural gas hedging losses of $1.66 per Mcf. The average sales prices received during the year ended December 31, 2003 are net of natural gas and oil hedging losses of $0.54 per Bbl and $1.77 per Mcf, respectively.

The decreases of 9% in oil production and 21% in natural gas production during the year ended December 31, 2004 were due to several factors, including weather, repairs, natural production declines,

55

particularly in south Texas, and curtailment of capital expenditures during late 2003 and 2004 due to liquidity constraints, which prevented us from offsetting natural production declines with new production.

The 12% increase in NGL production during the year ended December 31, 2004 was primarily due to the completion of several new wells in Texas during mid to late 2004.

Lease operating expenses. Lease operating expenses for the year ended December 31, 2004 increased $0.1 million, or 1%, to $12.0 million as compared to $11.9 million for the year ended December 31, 2003 and increased 19% to $1.25 per Mcfe for the year ended December 31, 2004 from $1.05 per Mcfe for the year ended December 31, 2003. The increase on a per-Mcfe basis is due to a 15% decrease in production during the year ended December 31, 2004 as compared to the year ended December 31, 2003.

Production and ad valorem taxes. Production and ad valorem taxes for the year ended December 31, 2004 decreased $1.2 million, or 28%, to $3.1 million for the year ended December 31, 2004 from $4.3 million during 2003 and on a Mcfe basis, decreased 16% to $0.32 per Mcfe during 2004 from $0.38 per Mcfe during the year ended December 31, 2003. This decrease was primarily attributable to current and retroactive exemptions for high-cost natural gas granted by the State of Texas during the year ended December 31, 2004. Additionally, we experienced increased sales on certain Oklahoma production, which is exempt from Oklahoma severance tax.

General and administrative expenses. G&A for the year ended December 31, 2004 decreased $2.1 million, or 20%, to $8.3 million as compared to $10.4 million for the year ended December 31, 2003. On a Mcfe basis, G&A decreased 6% to $0.86 per Mcfe during the year ended December 31, 2004 from $0.92 per Mcfe for the year ended December 31, 2003. The decrease in G&A was primarily due to decreases of $1.0 million in employee related costs due to staff attrition and employee terminations during the year ended December 31, 2004 and a $1.2 million reduction in franchise taxes resulting from the application of a credit from the overpayment of franchise taxes in 2002 and a decrease in Louisiana franchise taxes primarily due to our 2004 financial restructuring.

Exploration expenses. Exploration expenses for the year ended December 31, 2004 decreased $4.8 million, or 85%, to $0.9 million as compared to $5.6 million for the year ended December 31, 2003. The decrease in exploration expenses was primarily due to a decrease in dry hole costs. During 2003, we expensed $0.5 million on unsuccessful exploratory drilling projects. During 2002 and 2003, we incurred $4.7 million in capitalized exploration costs on drilling a deep exploratory well in our New Taiton field in south Texas. During 2003, the well was determined to be unsuccessful and the capitalized costs were expensed as exploration expense.

Depreciation, depletion and amortization. DD&A for the year ended December 31, 2004 increased $9.7 million, or 45%, to $31.2 million from $21.5 million for the year ended December 31, 2003 and increased 70% on a Mcfe basis to $3.24 per Mcfe during the year ended December 31, 2004 from $1.90 per Mcfe during the year ended December 31, 2003. The increase in DD&A during the year ended December 31, 2004 was due to a 37% decline in proved reserves as of December 31, 2004 as compared to the proved reserves as of December 31, 2003, see “—Overview—Reserve Write Down” above.

Property impairments. Property impairments for the year ended December 31, 2004 increased $16.9 million, or 445%, to $20.7 million as compared to $3.8 million for the year ended December 31, 2003. Property impairments for the year ended December 31, 2004 increased primarily due to a significant downward revision in reserves on our New Taiton field in Texas at year-end 2004, which resulted in a property impairment of $20.3 million. During the year ended December 31, 2003, we recorded impairments primarily on our Manilla Village field in Louisiana due to a downward revision in reserves, which resulted in a $3.7 million property impairment.

Loss on derivatives. During July 2004 and subsequent periods, we entered into new derivative arrangements, which were not designated as hedges under SFAS No 133. Therefore, changes in fair market value and realized

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losses related to these new derivative arrangements are required to be reported in current earnings as a derivative loss. During the year ended December 31, 2004, we recorded $2.0 million in realized losses and $4.6 million in unrealized losses. In prior periods, all derivative arrangements were designated as hedges and realized gains and losses on derivative arrangements were recognized in natural gas and oil sales; therefore, no derivative gain or loss amounts were recognized as a derivative loss in such periods.

Interest and other income. Interest and other income for the year ended December 31, 2004 increased $0.2 million to $0.2 million for the year ended December 31, 2004. The increase was primarily due to gains on the sales of assets during the year ended December 31, 2004.

Interest expense. Interest expense for the year ended December 31, 2004 increased $3.3 million, or 24%, to $17.0 million from $13.7 million for the year ended December 31, 2003. The increase in interest expense was due to an increase in outstanding indebtedness during 2004 as a result of our July 2004 financial restructuring in which we issued our senior notes and senior subordinated notes in exchange for our old senior notes and senior subordinated notes, including all accrued and unpaid interest thereon. In addition, we did not incur indebtedness under our old senior notes until mid-2003 and accrued interest on those notes for only five months in 2003.

Income tax benefit. We are required to establish a net deferred tax liability calculated at the applicable federal and state tax rates resulting primarily from financial reporting and income tax reporting basis differences in natural gas and oil properties. Beginning in 2001, we established a valuation allowance which we increased periodically to reflect the uncertainty about the realization of the deferred tax asset. In 2003, we increased the valuation allowance of $0.4 million by an additional $0.6 million and during 2004, we increased the valuation allowance by an additional $5.2 million, resulting in a valuation allowance of $6.2 million as of December 31, 2004. The increases in the valuation allowance are based on uncertainty surrounding our ability to utilize the entire balance of our deferred tax assets based on an analysis of whether we are more likely than not to receive such a benefit and, if so, to what extent.

Net loss. Due to the factors described above, a net loss of $36.3 million was recorded for the year ended December 31, 2004 compared to a net loss of $15.4 million for the year ended December 31, 2003.

Liquidity and Capital Resources

Overview

Virtually all of our exploration expenditures and a significant portion of our development expenditures are discretionary expenditures that are made based on current economic conditions and expected future natural gas and oil prices. We make capital expenditures to develop existing natural gas and oil reserves as well as to acquire additional reserves through exploration or acquisition. We operate substantially all of our properties, which gives us significant flexibility in the timing of making capital expenditures on these properties. We may also choose not to participate in capital expenditures on properties operated by others. This flexibility allows us to adjust our annual exploration and development capital expenditure levels according to liquidity and the other sources of operating capital. Historically, we have financed, and we currently finance, our exploration and development programs with net cash provided by operating activities and borrowings under our credit facility. When we determine that a project involves more risk than we can accept alone or more capital than we can sensibly commit, such as certain of our exploration projects, we may take on partners.

Our cash flows from operating activities are significantly affected by changes in natural gas and oil prices. Accordingly, our cash flows from operating activities would be significantly reduced by lower natural gas and oil prices, which would also reduce our exploration and development capital expenditure levels. Lower natural gas and oil prices may also reduce our borrowing base under our credit facility and further reduce our ability to obtain funds. However, in an effort to minimize fluctuations in our cash flows and to reduce our exposure to

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adverse fluctuations in the prices of natural gas and oil, we enter into derivative arrangements for a portion of our natural gas and oil production as further discussed under “—Qualitative and Quantitative Disclosures about Market Risk—Commodity Price Risk.”

We believe that the cash we generate from operations and availability under our credit facility will be sufficient to satisfy our obligations for the foreseeable future. Our capital expenditure budget for 2006 is approximately $80.3 million, of which $59.7 million is targeted for drilling and workover and $17.8 million is targeted for leasehold acquisitions. Approximately 41% of our 2006 capital expenditure budget is allocated to acquisition, exploration and development of unconventional shale gas properties, and approximately 59% is allocated to exploration and development of our conventional resource properties, including our tight gas sands. Actual levels of capital expenditures may vary significantly due to many factors, including drilling results, natural gas and oil prices, industry conditions, participation by other working interest owners and the prices and availability of drilling rigs and other oilfield goods and services. The following table provides certain information about our 2006 capital expenditure budget:

Area	Drilling and Workover		Land		Equipment and Maintenance		Seismic		Total		% of Total
	(dollars in thousands)
Unconventional shale gas:
Texas	$	6,272	$	10,434	$	—	$	872	$	17,578	21.9%
Oklahoma		8,025		1,268		—		—		9,293	11.6%
Appalachian region		3,734		2,292		—		25		6,051	7.5%
Subtotal		18,031		13,994		—		897		32,922	41.0%
East Texas		20,384		1,036		—		102		21,522	26.8%
South Texas		15,960		2,108		—		253		18,321	22.8%
Other		5,293		703		1,512		—		7,508	9.4%
Total	$	59,668	$	17,841	$	1,512	$	1,252	$	80,273	100.0%
% of Total		74.3%		22.2%		1.9%		1.6%		100.0%

Cash flows

Operating activities. For the three months ended March 31, 2006, net cash provided by operating activities increased $3.4 million, or 43%, to $11.3 million as compared to $7.9 million of net cash provided by operating activities for the three months ended March 31, 2005. This increase was primarily the result of changes in assets and liabilities providing $2.7 million in cash for the three months ended March 31, 2006 as compared to changes in assets and liabilities using $0.1 million in cash for the three months ended March 31, 2005.

For the year ended December 31, 2005, net cash provided by operating activities increased $14.1 million, or 81%, to $31.5 million as compared to $17.4 million of net cash provided by operating activities for the year ended December 31, 2004. This increase was primarily due to an increase of $22.9 million in natural gas, oil and NGL sales and changes in operating assets and liabilities providing $1.7 million of cash for operating activities during the year ended December 31, 2005 as compared to $8.0 million of cash used for operating activities for the year ended December 31, 2004. The increase in cash provided by operating activities for the year ended December 31, 2005 was partially offset by a $10.6 million decrease in cash related to realized derivative losses which were $13.4 million during the year ended December 31, 2005 as compared to $2.8 million for the year ended December 31, 2004.

For the year ended December 31, 2004, net cash provided by operating activities increased $0.4 million, or 3%, to $17.4 million compared to $17.0 million of net cash provided by operating activities for the year ended December 31, 2003. We used $2.2 million of cash for interest expense for the year ended December 31, 2004 as compared to $13.0 million of cash used for interest expense for the year ended December 31, 2003. The reduction in cash used for interest expense for the year ended December 31, 2004 was primarily attributable to

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our July 2004 restructuring which allowed us to pay interest on our senior notes and senior subordinated notes in the form of additional notes instead of in cash. Additionally, total revenues net of total expenses (adjusted for non-cash items) increased $11.9 million for the year ended December 31, 2005 as compared the year ended December 31, 2004. The increase in cash was partially offset by a reduction in cash for changes in operating assets and liabilities using $8.0 million of cash for operating activities during the year ended December 31, 2004 compared to $14.2 million of cash provided by operating activities for the year ended December 31, 2003. Cash was used during the year ended December 31, 2004 primarily for the payment of trade payables that had not been paid during the year ended December 31, 2003 due to liquidity constraints which contributed to the $14.3 million of cash provided during the year ended December 31, 2003.

Investing Activities. Substantially all of our investing activities involve capital expenditures. For the three months ended March 31, 2006, net cash used in investing increased $9.7 million, or 101%, to $19.3 million as compared to $9.6 million of net cash used in investing activities for the three months ended March 31, 2005. This increase was primarily due to an increase in capital expenditures of $10.8 million, or 126%, to $19.3 million for the three months ended March 31, 2006 compared to capital expenditures of $8.5 million for the three months ended March 31, 2005, as further described below. Additionally, we used $1.2 million of cash during the three months ended March 31, 2005 to acquire all of the outstanding capital stock of Dyne Exploration Company.

For the year ended December 31, 2005, net cash used in investing activities increased $12.4 million, or 55%, to $35.0 million as compared to $22.6 million of net cash used in investing activities for the year ended December 31, 2004. This increase was primarily due to an increase in capital expenditures of $11.6 million, or 50%, to $34.6 million for the year ended December 31, 2005 compared to capital expenditures of $23.0 million for the year ended December 31, 2004, as further described below. Additionally, we used $1.2 million of cash during the year ended December 31, 2005 to acquire all of the outstanding capital stock of Dyne Exploration Company.

For the year ended December 31, 2004, net cash used in investing activities decreased $16.5 million, or 42%, to $22.6 million as compared $39.1 million of net cash used in investing activities for the year ended December 31, 2003. The decrease was primarily due to a decrease in capital expenditures of $16.1 million, or 41%, to $23.0 million for the year ended December 31, 2004 as compared to $39.1 million of capital expenditures for the year ended December 31, 2003, as further described below.

The following table summarizes the major components of capital expenditures for the following periods (in thousands):

	Year Ended December 31,						Three Months Ended March 31,
	2005		2004		2003		2005		2006
Unproved property acquisitions	$	5,454	$	1,045	$	127	$	138	$	5,043
Proved property acquisitions		1,748		449		1,410		821		23
Development activities		21,820		17,724		36,489		6,314		10,215
Exploration activities (1)		8,829		4,579		4,923		1,437		4,051
Other property		196		43		776		8		40
Total	$	38,047	$	23,840	$	43,725	$	8,718	$	19,372

(1) Includes capitalized and expensed costs incurred.

Financing Activities. For the three months ended March 31, 2006, net cash provided by financing activities increased $3.9 million, or 105%, to $7.5 million as compared to $3.7 million of net cash provided by financing activities for the three months ended March 31, 2005. This increase was primarily the result of borrowings under our credit facility during the three months ended March 31, 2006.

For the year ended December 31, 2005, net cash provided by financing activities increased $2.5 million, or 149%, to $4.1 million as compared to $1.7 million of net cash provided by financing activities for the year ended

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December 31, 2004. The increase was primarily due to an increase in borrowings under our credit facility during the year ended December 31, 2005.

For the year ended December 31, 2004, net cash provided by financing activities decreased $24.6 million, or 94%, to $1.7 million as compared to $26.2 million of net cash provided by financing activities for the year ended December 31, 2003. The decrease was primarily due to decreased borrowings under our credit facility and our senior notes during the year ended December 31, 2004. We had borrowings under our credit facility of $2.4 million during the year ended December 31, 2004 as compared to borrowing under our credit facility and our senior notes of $4.4 million and $24.0 million, respectively, during the year ended December 31, 2003. Additionally, we used $2.1 million of cash to pay accrued but unpaid dividends on our Series B preferred stock in connection with its mandatory conversion to common stock in August 2003.

Contractual Obligations and Commitments

The following is a summary of our contractual obligations and commitments as of December 31, 2005:

	Total		Payments due by Period
			Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
	(in thousands)
Credit facility (1)	$	64,274	$	3,798	$	7,596	$	52,880	$	—
Senior notes (2)		64,259		—		—		64,259		—
Senior subordinated notes (2)		166,004		—		—		166,004		—
Operating leases		3,237		239		896		870		1,232
Total (3)	$	297,774	$	4,037	$	8,492	$	284,013	$	1,232

(1) Represents repayments of outstanding borrowings plus estimated interest through maturity. See “Use of Proceeds.” Interest payments on floating-rate debt were estimated using December 31, 2005 interest rates applicable to the floating-rate debt. Actual payments will fluctuate as interest rates fluctuate.

(2) Represents repayments of outstanding borrowings plus estimated interest through maturity, all of which is expected to be repaid or exchanged for common stock in connection with this offering and the Recapitalization. See “Use of Proceeds” and “Recapitalization.” Interest is payable semi-annually in kind by the issuance of new notes. The issuances of new notes for payment of interest in kind are excluded from the above table until the notes mature and are included at the maturity period. Assumes no extension of the maturity dates of the notes.

(3) Does not include commitments under our natural gas, oil and interest rate derivative instruments. See “—Quantitative and Quantitative Disclosures about Market Risk.”

On a pro forma basis, after giving effect to the Recapitalization, this offering and the application of the use of proceeds to repay long-term debt, as described in “Use of Proceeds” and “Recapitalization,” our contractual obligations and commitments as of December 31, 2005 would have consisted of the following:

	Total		Payments due by Period
			Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
	(in thousands)
Credit facility (1)	$		$		$		$		$
Senior notes
Senior subordinated notes
Operating leases		3,237		239		896		870		1,232
Total (2)	$		$		$		$		$

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(1) Reflects repayment of $     million of indebtedness with a portion of the net proceeds of this offering. See “Use of Proceeds.”

(2) Does not include commitments under our natural gas, oil and interest rate derivative instruments. See “—Quantitative and Qualitative Disclosures about Market Risk.”

Credit Facility

On July 27, 2004, we completed a financial restructuring that permitted our operating subsidiaries to enter into a new credit facility with a new group of lenders. In connection with our financial restructuring, we reorganized as a holding company by transferring all of our natural gas and oil operations to certain of our operating subsidiaries. Ascent Energy Inc. is not a borrower under our credit facility, but is subject to certain restrictions thereunder. The stock of our only direct wholly owned subsidiary and substantially all of the assets of our indirect wholly owned operating subsidiaries are pledged to our bank lenders to secure the obligations of our operating subsidiaries under our credit facility.

Our credit facility provides for loans to finance our future acquisition opportunities and to assist in meeting our working capital requirements. Our lenders periodically re-determine our borrowing base by applying criteria similar to those used with similarly situated natural gas and oil borrowers.

Subject to our borrowing base (currently set at $80.0 million), our credit facility provides for borrowings of up to $115.0 million, which includes a $100.0 million revolving credit facility and a $15.0 million acquisition facility. Borrowings under our revolving credit facility mature on November 1, 2009. As of June 1, 2006, we had $14.6 million available under our revolving credit facility and $15.0 million available under our acquisition facility.

Our credit facility provides for interest periods of one, two, three or six months for LIBOR loans. We can also elect to pay interest at a base rate calculated by reference to the higher of the federal funds rate or The Chase Manhattan Bank’s prime rate. In the case of either British Bankers’ Association London Interbank Offered Rate, or LIBOR, loans or base rate loans, we are required to pay an additional interest rate margin that varies with the aggregate amount of loans and letters of credit outstanding under the line of credit. Our weighted average interest rate was 7.87% as of March 31, 2006.

Under our acquisition facility, we are permitted to borrow up to 70% of the net discounted present value of proved reserves that we acquire. Advances under the acquisition facility are required to be repaid on the later of the six-month anniversary of the advance or the three-month anniversary of the date of the first borrowing base redetermination following the advance and may be repaid in cash or converted to borrowings under our credit facility. If a conversion of an acquisition advance at its maturity would exceed our borrowing base, we are permitted to convert the amount in excess of our borrowing base to a term loan.

Our credit facility contains various covenants that, among other restrictions, limit our ability to: grant or assume liens; allow a change of control; engage in certain transactions with affiliates; enter into derivative arrangements above certain limitations; incur indebtedness; change the nature of our business; sell assets; or enter into agreements to merge or acquire assets. Our credit facility also prohibits our subsidiaries from paying any cash dividends or cash redemptions or making any other cash distributions except under certain circumstances.

Additionally, our credit agreement requires that as of the last day of any fiscal quarter:

• we have a consolidated tangible net worth of at least $170.0 million;

• our ratio of current assets (which includes remaining availability under our credit facility) to current liabilities is 1.0 to 1.0;

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• our ratio of total debt to EBITDAX for the immediately preceding four fiscal quarters be not greater than 2.5 to 1.0; and

• our ratio of EBITDAX to an amount equal to cash interest expense plus dividends, if any, from our direct subsidiary for the immediately preceding four fiscal quarters be at least 2.5 to 1.0.

EBITDAX is defined in our credit facility as earnings before interest expense; income tax (expense) benefit; depreciation, depletion and amortization; exploration expenses; any other item expensed under successful efforts accounting and capitalized under full cost accounting, such as property impairments; and any other non-cash items deducted at arriving in earnings, such as non-cash hedging and derivative losses and cumulative effect of change in accounting principle. As of March 31, 2006, we were in compliance with all of the covenants under our credit facility.

Recapitalization

Upon the consummation of this offering, the application of the net proceeds of this offering as described in “Use of Proceeds” and the consummation of the Recapitalization, our outstanding long-term indebtedness will consist solely of approximately $     million of borrowings under our credit facility. In connection with this offering and the Recapitalization, we intend to repay in cash or exchange for common stock all indebtedness outstanding under our senior notes and our senior subordinated notes and to repay $     million of borrowings outstanding under our credit facility. We also expect that all of our outstanding Series A preferred stock will be tendered as consideration for the exercise of all warrants to purchase shares of our common stock and that we will issue shares of our common stock in satisfaction of all accrued but unpaid dividends on our Series A preferred stock. The Jefferies Investors and Trust Company of the West are the principal holders of our senior notes, our senior subordinated notes, our Series A preferred stock and our warrants and will receive cash and shares of our common stock in this offering and the Recapitalization. Please see “Related Party Transactions” and “Principal Stockholders.”

Senior Notes. On November 9, 2005, we issued approximately $33.5 million aggregate principal amount of our 16% senior notes due February 1, 2010 (or such later date as automatically extended in accordance with the terms of the notes, but in no event later than February 1, 2015) in exchange for all then-outstanding principal and accrued but unpaid interest on our 16% senior notes due October 26, 2007, which we refer to as the old senior notes. The old senior notes were issued on July 27, 2004 in connection with our financial restructuring in exchange for all then-outstanding principal and accrued but unpaid interest on certain promissory notes that we issued during 2003 for short-term liquidity needs.

The senior notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries. The senior notes are effectively subordinated to all indebtedness and other liabilities of our subsidiaries, including indebtedness under our credit facility. Interest on the senior notes accrues at a rate of 16% per annum and is payable semi-annually, in the form of additional senior notes.

During each of the years 2006 through 2010, each holder of senior notes has the right, during the 30-day period beginning on September 1 of each such year, to deliver written notice to us rejecting any further extension of the maturity date of such holder’s senior notes. If the holder fails to deliver such notice on a timely basis, the maturity date of such holder’s senior notes will be automatically extended by one calendar year from the then applicable maturity date. Any senior notes that are the subject of a timely delivered notice will become due and payable at the then applicable maturity date.

Senior Subordinated Notes. On November 9, 2005, we issued approximately $99.6 million aggregate principal amount of our 11 ³/4% senior subordinated notes due May 1, 2010 (or such later date as automatically extended in accordance with the terms of the notes, but in no event later than May 1, 2015) in exchange for all then-outstanding principal and accrued but unpaid interest on our 11 ³/4% senior subordinated notes due 2008,

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which we refer to as the old senior subordinated notes. The old senior subordinated notes were issued on July 27, 2004 in connection with our financial restructuring in exchange for all then-outstanding principal and accrued but unpaid interest on our 11 ³/4% Series A senior notes due 2006 which were originally issued on June 28, 2001 in connection with our acquisition of our south Texas properties.

The senior subordinated notes are subordinate in right of payment to the senior notes and are effectively subordinated to all indebtedness and other liabilities of our subsidiaries, including indebtedness under our credit facility. Interest on the senior subordinated notes accrues at a rate of 11 ³/4% per annum and is payable semi-annually in the form of additional senior subordinated notes.

During each of the years 2006 through 2010, each holder of senior subordinated notes has the right, during a 30-day period beginning on July 15 of each such year, to deliver written notice to us rejecting any further extension of the maturity date of such holder’s senior subordinated notes. If the holder fails to deliver such notice on a timely basis, the maturity date of such holder’s senior subordinated notes will be automatically extended by one calendar year from the then applicable maturity date. Any senior subordinated notes that are the subject of a timely delivered notice will become due and payable at the then applicable maturity date.

8% Series A Preferred Stock and Warrants. As of March 31, 2006, we had outstanding 41,100 shares of our 8% Series A preferred stock, par value $0.001 per share, and warrants to purchase an additional 3,000 shares of our Series A preferred stock at an exercise price of $333.33 per share. Dividends on our Series A preferred stock accrue at the rate of 8% per annum. Accrued but unpaid dividends do not bear interest. Our board of directors has never declared or paid any dividends on the outstanding shares of Series A preferred stock. Each outstanding share of Series A preferred stock, and each share issuable upon exercise of the warrants described above, was or will be issued with a warrant to purchase 191.943 shares of our common stock at an exercise price of $5.21 per share (exercise price will be adjusted to $             per share in connection with the reverse stock split). As of March 31, 2006, we had outstanding warrants to purchase 7,888,858 shares of our common stock. On a pro forma basis, assuming the exercise of all outstanding warrants to purchase shares of our Series A preferred stock and giving effect to the reverse stock split, we would have had outstanding warrants to purchase              shares of our common stock as of March 31, 2006.

Inflation

Historically, general inflationary trends have not had a material effect on our operating revenue or expenses. However, we have experienced inflationary pressure on technical staff compensation and the cost of oilfield services and equipment due to the increase in drilling activity and competitive pressures from higher natural gas and oil prices in recent years.

Quantitative and Qualitative Disclosures about Market Risk

Commodity price risk. Our revenue, profitability and future rate of growth substantially depend upon market prices of natural gas and oil, which fluctuate widely. Natural gas and oil price decline and volatility could adversely affect our revenue, net cash provided by operating activities and profitability. For example, assuming a 10% decline in realized natural gas and oil prices, our loss for the three months ended March 31, 2006 would have increased by approximately 123% from a loss of $1.5 million to a loss of $3.4 million. If the costs and expenses of operating our properties had increased by 10% for the three months ended March 31, 2006, our loss would have increased by approximately 20% from a loss of $1.5 million to a loss of $1.8 million.

We have entered into derivative arrangements with respect to portions of our natural gas and oil production to reduce our sensitivity to volatile commodity prices. Our credit facility requires us to enter into derivative instruments covering a minimum of 50% of our production for the three-year period following the effective date of the credit facility, but not in excess of 85% for the 12-month period immediately subsequent to any fiscal quarter, of our forecast proved developed producing reserves. Our management limits the periods covered by

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derivative instruments to the term of the credit facility. Historically, our derivative arrangements have been puts, price swaps and costless collar agreements. We believe that these derivative arrangements, although not free of risk, allow us to achieve a more predictable cash flow and to reduce exposure to price fluctuations. However, derivative arrangements limit the benefit to us of increases in the prices of natural gas and oil sales. Moreover, our derivative arrangements apply only to a portion of our production and provide only partial price protection against declines in prices. Additionally, these arrangements may expose us to risk of financial loss in certain circumstances. We continuously reevaluate our derivative arrangements in light of market conditions, commodity price forecasts, capital spending and debt service requirements. We do not enter into derivative transactions for trading purposes.

Fixed price swaps typically require monthly payments by us (if prices rise) or provide payments to us (if prices fall) based on the difference between the strike price and the agreed-upon average of either New York Mercantile Exchange, or NYMEX, or other widely recognized index prices. Currently, all of our derivative arrangements are settled based on NYMEX pricing.

Collar contracts set a minimum price, or floor, and a maximum price, or ceiling, and provide payments to us if the NYMEX price falls below the floor or require payments by us if the NYMEX price rises above the ceiling.

Puts provide payment to us if the NYMEX price falls below the strike price. If the NYMEX price is above the strike price, we have no payment obligation.

Currently, our natural gas contracts settle using the near-month NYMEX prices for the next to last trading day or the last trading day of the month. Our crude oil contracts settle using the average of the near month closing price for each day of the month.

In connection with our July 2004 financial restructuring, Fortis Energy LLC assumed our then existing derivative arrangements, which we refer to as the old derivative arrangements, and replaced them with new derivative arrangements. As of that date, we had a $4.0 million liability under our old derivative arrangements representing a deferred loss which we recognized on our balance sheet as a current asset and a corresponding derivative liability. The deferred loss was amortized monthly into earnings over the related contract periods, which were August 2004 through December 2004, and settlement of the liability will occur monthly through June 2007 as the new derivative arrangements are settled. The old derivative arrangements qualified for hedge accounting treatment under SFAS 133; therefore, amortization of the deferred loss was recognized in natural gas sales.

Our new derivative arrangements are not designated as hedges under SFAS 133; therefore, changes in fair market value and realized gains and losses related to our new derivative arrangements are reported in current earnings.

As of March 31, 2006, the fair market value of our natural gas and oil derivative arrangements was a liability of $29.3 million, which includes the remaining liability of $1.4 million related to the deferred loss on the old derivative arrangements. The fair market values of our derivative arrangements as of March 31, 2006 are reflected on our balance sheet in current liabilities (fair value of derivatives) in the amount of $11.3 million and in long-term liabilities (fair value of derivatives) in the amount of $18.0 million.

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As of March 31, 2006 our natural gas and oil derivative arrangements were as follows:

Natural Gas (MMBtu)	Quantity	Ceiling		Floor		Fixed Price		Put
2006
April 1, 2006 to October 31, 2006	714,760		—		—	$	7.26		—
April 1, 2006 to October 31, 2006	121,268	$	8.20	$	5.00		—		—
April 1, 2006 to October 31, 2006	242,532		—		—		—	$	5.00
April 1, 2006 to October 31, 2006	966,343	$	8.05	$	6.25		—		—
November 1, 2006 to December 31, 2006	246,986	$	13.65	$	8.00		—		—
November 1, 2006 to December 31, 2006	176,290	$	6.75	$	4.65		—		—
November 1, 2006 to December 31, 2006	92,720	$	10.25	$	5.50		—		—
2007
January 1, 2007 to March 31, 2007	260,100	$	6.75	$	4.65		—		—
January 1, 2007 to June 30, 2007	275,120	$	10.25	$	5.50		—		—
January 1, 2007 to March 31, 2007	315,912	$	13.65	$	8.00		—		—
April 1, 2007 to June 30, 2007	234,780		—		—	$	7.26		—
April 1, 2007 to October 31, 2007	509,999	$	10.95	$	7.00		—		—
July 1, 2007 to December 31, 2007	920,000	$	9.05	$	5.00		—		—
November 1, 2007 to December 31, 2007	78,436	$	13.95	$	8.00		—		—
2008
January 1, 2008 to March 31, 2008	179,230	$	13.95	$	8.00		—		—
January 1, 2008 to December 31, 2008	1,460,000	$	9.05	$	5.00		—		—
April 1, 2008 to October 31, 2008	298,551	$	9.60	$	7.00		—		—
November 1, 2008 to December 31, 2008	56,808	$	12.25	$	8.00		—		—
2009
January 1, 2009 to March 31, 2009	154,402	$	12.25	$	8.00		—		—
January 1, 2009 to June 30, 2009	543,000	$	9.05	$	5.00		—		—
April 1, 2009 to October 31, 2009	647,304	$	8.55	$	6.75		—		—
Total	8,494,541
Oil (Bbls)	Quantity	Ceiling		Floor		Fixed Price		Put
2006
April 1, 2006 to August 31, 2006	12,210	$	60.50	$	50.00		—		—
April 1, 2006 to December 31, 2006	9,100		—		—	$	41.60		—
April 1, 2006 to December 31, 2006	109,073		—		—	$	61.56 to $64.68		—
April 1, 2006 to December 31, 2006	233,750		—		—	$	44.95		—
2007
January 1, 2007 to June 30, 2007	25,010	$	56.50	$	47.00		—		—
January 1, 2007 to June 30, 2007	135,750		—		—	$	44.95		—
January 1, 2007 to December 31, 2007	105,725		—		—	$	64.80 to $65.03		—
July 1, 2007 to December 31, 2007	147,200	$	50.00	$	42.50		—		—
2008
January 1, 2008 to December 31, 2008	255,500	$	50.00	$	42.50		—		—
January 1, 2008 to December 31, 2008	101,960		—		—	$	64.00 to $64.74		—
2009
January 1, 2009 to June 30, 2009	108,600	$	50.00	$	42.50		—		—
January 1, 2009 to October 31, 2009	154,328		—		—	$	63.37 to $63.94		—
Total	1,398,206

We also incur gains and losses on our interest rate derivative instruments. See “—Quantitative and Qualitative Disclosures about Market Risk.”

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The following table shows the effect of our natural gas and oil derivative instruments on our consolidated income statements for the periods presented (in thousands):

	Oil and Natural Gas Derivatives Designated as Hedges									Oil and Natural Gas Derivatives Not Designated as Hedges
	Cash Settlements (1)			Amortization (2)			Reduction in Oil and Gas Sales (3)			Cash Settlements (1)			Amortization of Old Derivative Arrangements (4)		Unrealized Gains (Losses)			Derivative Gains (Losses) (5)
2003
1st Quarter	$	(3,962	)	$	(122	)	$	(4,084	)	$	—		$	—	$	—		$	—
2nd Quarter		(2,941	)		(122	)		(3,063	)		—			—		—			—
3rd Quarter		(2,461	)		(122	)		(2,583	)		—			—		—			—
4th Quarter		(2,213	)		(6	)		(2,219	)		—			—		—			—
Total	$	(11,577	)	$	(372	)	$	(11,949	)	$	—		$	—	$	—		$	—
2004
1st Quarter	$	(1,645	)	$	—		$	(1,645	)	$	—		$	—	$	—		$	—
2nd Quarter		(2,168	)		—			(2,168	)		—			—		—			—
3rd Quarter		(775	)		(1,484	)		(2,259	)		(973	)		411		(7,537	)		(8,099	)
4th Quarter		—			(2,474	)		(2,474	)		(1,858	)		407		2,946			1,495
Total	$	(4,588	)	$	(3,958	)	$	(8,546	)	$	(2,831	)	$	818	$	(4,591	)	$	(6,604	)
2005
1st Quarter	$	—		$	—		$	—		$	(1,481	)	$	254	$	(15,062	)	$	(16,289	)
2nd Quarter		—			—			—			(2,494	)		469		332			(1,693	)
3rd Quarter		—			—			—			(4,654	)		475		(15,038	)		(19,217	)
4th Quarter		—			—			—			(4,779	)		332		7,457			3,010
Total	$	—		$	—		$	—		$	(13,408	)	$	1,530	$	(22,311	)	$	(34,189	)
2006
1st Quarter	$	—		$	—		$	—		$	(2,423	)	$	206	$	(966	)	$	(3,183	)
Total	$	—		$	—		$	—		$	(2,423	)	$	206	$	(966	)	$	(3,183	)

(1) Cash settlements of derivative arrangements are included in net cash provided by operating activities.

(2) Amortization during 2003 relates to premium on oil put options. Amortization during 2004 relates to deferred loss under old derivative arrangements.

(3) The ineffectiveness of these hedges was tested and determined to be immaterial.

(4) Amortization relates to cash settlement of old derivative arrangements which qualified as hedges and were expensed in the prior year as a reduction of oil and natural gas sales. The amortization period for settlement of old derivative arrangements extends through June 2007.

(5) Derivative loss for the year ended December 31, 2005 includes a $34.2 million loss on natural gas and oil derivatives and a $0.4 million gain on interest rate derivatives. Derivative loss for the quarter ended March 31, 2006 includes a $3.2 million loss on natural gas and oil derivatives and a $0.2 million gain on interest rate derivates.

Based on NYMEX crude oil futures prices as of March 31, 2006, we would expect to make future cash payments of $15.4 million to settle our crude oil derivative arrangements as they mature. If future prices of natural gas and oil were to decline by 10%, we would expect to make future cash payments under our crude oil derivative arrangements of $3.5 million, and if future prices were to increase by 10% we would expect to make future cash payments of $27.0 million.

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Interest Rate Risk. As of March 31, 2006, we had outstanding $57.2 million of floating-rate debt attributable to borrowings under our credit facility. As a result, our interest expense fluctuates based on changes in short-term interest rates. A hypothetical 10% change in the short-term interest rate (approximately 76 basis points) would have a $0.5 million impact on interest expense and a $0.5 million impact on net loss for the three months ended March 31, 2006.

We enter into derivative transactions to secure a fixed interest rate for a portion of our debt under our credit facility. The primary objective of these transactions is to reduce our exposure to the possibility of rising interest rates during the term of the derivative transactions. We currently use fixed rate interest swaps for these purposes. Fixed rate interest swaps are not designated as hedges; therefore, gains and losses resulting from these derivative arrangements are reported as they occur as derivative loss on our consolidated statements of operations. We do not enter into derivative transactions for trading purposes.

Our fixed rate interest swaps typically provide monthly payments to us (if rates rise) or by us (if rates fall) based on the difference between the strike price and the LIBOR. All of our fixed rate interest swaps are with affiliates of the financial institutions that are parties to our credit facility.

As of March 31, 2006, we had fixed rate interest swaps for $30.0 million per day for the period April 1, 2006 through July 27, 2007 at a fixed rate of 3.98%. For the three months ended March 31, 2006, we had realized gains of $0.02 million relating to these swaps, and their fair market value was a net unrealized receivable of $0.5 million of which $0.4 million was recorded on our balance sheet as a current asset (fair value of derivatives) and $0.1 million of which was recorded on our balance sheet as an other asset (fair value of derivatives).

Based on LIBOR as of March 31, 2006, we would expect to receive future cash payments of $0.3 million to settle our fixed rate interest swaps as they mature. If interest rates were to decline by 10%, we would expect to receive future cash payments under these derivative arrangements of $0.1 million, and if interest rates were to increase by 10% we would expect to receive future cash payments under these derivative arrangements of $0.5 million.

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BUSINESS AND PROPERTIES

Overview

We are a growth-oriented, independent natural gas and oil company engaged in the acquisition, exploration and development of both conventional and unconventional natural gas and oil properties in Texas, Oklahoma, Louisiana and the Appalachian region. Our growth efforts are primarily directed at finding and developing natural gas reserves in unconventional shale gas areas and in known tight gas areas. We operate substantially all of our properties.

Since joining us in mid-2003, our senior management team has embarked on a strategy to acquire and develop a risk-balanced inventory of high growth opportunities, predominately in shale gas. In order to implement this strategy, our new management initially devoted a substantial portion of its efforts to improving our operational efficiency and increasing our liquidity. Since 2004, our management has successfully added unconventional shale gas acreage in four large shale gas exploration areas and entered the tight gas areas of the Cotton Valley trend in east Texas.

Our unconventional shale gas acreage acquired through March 31, 2006 consists of approximately 136,803 gross acres (84,059 net acres) located in the Woodford/Barnett shale in west Texas, the Barnett shale in north Texas, the Woodford shale and the Caney shale in Oklahoma and the Devonian shale in the Appalachian region. We have employed a strategy to acquire a meaningful position in several prospective shale gas areas to diversify risk while providing exposure to significant potential reserves.

As of March 31, 2006, most of our current production was from our approximate 64,215 gross acres (38,112 net acres) of conventional natural gas and oil properties in Texas, Oklahoma and Louisiana, which includes our acreage in the tight gas sands of the Cotton Valley trend in east Texas and the Vicksburg and Wilcox trends in south Texas. Each of these fields is characterized by established production profiles and numerous producing wells. We plan to expand our production and reserves from such conventional areas by further developing our current properties as well as acquiring additional properties that we believe can generate near-term production and cash flow.

Based on reserve reports prepared by our independent reserve engineering firms, our total proved reserves as of December 31, 2005 were approximately 106.1 Bcfe, of which 62.3% were proved developed and 60.3% were oil and NGLs. As of December 31, 2005, we had interests in approximately 110,836 net acres, including approximately 87,816 net undeveloped acres. Our average net daily production during April 2006 was approximately 25.4 MMcfe/d. As of December 31, 2005, the related PV-10 of our proved reserves was $371.3 million. Our 2005 reserve reports do not reflect any reserves attributable to our unconventional shale gas acreage.

Our Strengths

High Quality Asset Base in Mature Producing Basins. Our producing properties, consisting of approximately 36,129 gross acres (23,090 net acres) as of March 31, 2006, are located in prolific producing areas of south and east Texas, Oklahoma and Louisiana, with long histories of natural gas and oil production. We support our unconventional shale gas exploration with the cash flow generated from these mature properties.

Significant Growth Opportunities. We have an attractive inventory of drilling projects, which we believe contains significant production growth opportunities. We believe our approximate two-year inventory of conventional and tight gas drilling projects will generate near-term production growth and cash flow. In addition, we have acquired acreage positions in several unconventional shale gas areas where industry drilling and production activity has increased in the past several years. If our initial unconventional shale gas drilling projects are successful, we expect to increase significantly our long-term reserves, production and drilling inventory.

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Effective Risk Management. Our areas of operation provide us with geographic, geological and operational diversity. Our diversified inventory of conventional and unconventional resource drilling locations ranges from lower risk development locations to higher risk exploration locations, including most of our unconventional shale gas acreage, that expose us to opportunities for greater reserve and production growth.

Experienced, Incentivized Management Team with Strong Technical Capability. Our senior management team has considerable industry experience and technical expertise in engineering, geoscience and field operations, with on average more than 28 years of experience in the natural gas and oil industry. Our in-house technical personnel have extensive experience in geology, geophysics, engineering and drilling and completion technology, including horizontal drilling and fracturing technology. Our officers will beneficially own approximately             % of our common stock after the consummation of this offering and the Recapitalization.

Our Business Strategy

Drive Growth Through the Drillbit. We intend to create near-term reserve and production growth from our approximate two-year inventory of drilling opportunities. We anticipate most of our cash flow in the next several years will be generated from our existing producing properties and proved reserves as well as our lower-risk drilling opportunities, exploration and relatively low risk development. We intend to allocate a significant portion of our exploration budget to our higher-risk unconventional shale gas exploration and our tight gas sands exploration.

Focus on Growing Our Inventory of Shale Gas Opportunities. We intend to continue expanding our acreage positions in multiple shale gas areas. As of March 31, 2006, we had leasehold interests in approximately 136,803 gross (84,059 net) acres of prospective shale gas property over four areas. We have budgeted approximately $14.0 million to acquire shale gas acreage in 2006.

Pursue Tight Gas Sand Opportunities. We are pursuing multiple tight gas sand opportunities. We believe that our tight gas sand areas have significant potential reserves that have not been depleted by the use of past drilling and completion techniques. We typically pursue opportunities in known tight gas sand areas that have existing infrastructure to transport natural gas to the market. We have budgeted approximately $36.3 million to drill 17 wells in our tight gas sand operations in south and east Texas by the end of 2006.

Operate Substantially All of Our Assets. We serve as the operator of substantially all of our producing properties and intend to continue to do so in the future. Operating control enables us to better control timing and risk as well as the cost of exploration and development drilling and ongoing operations. We believe that in the competitive market for drilling rigs it is advantageous to be in a position to make longer term commitments to drilling rig operators in order to secure service.

Maintain Financial Flexibility. Following the completion of this offering and the Recapitalization, we will have increased our equity capital base by over $             million and will have approximately $             million of undrawn availability under our credit facility. We believe that future cash flow and access to the capital markets following this offering will provide us with financial flexibility that both enhances our ability to execute our business plan and allows us to selectively seek and complete acquisitions. We expect to use our commodity price risk management program to protect our ability to execute our capital expenditure program and service our debt. We may also to reduce our existing derivative liability with a portion of the net proceeds of this offering, which should increase our flexibility and could increase our future cash flow.

Seek Acquisitions that Complement Our Exploration and Development Plans. We pursue acquisitions that add efficiency to our existing operations or represent attractive additions to our exploration and development prospect inventory in large, mature producing regions. We direct our acquisitions toward areas with long production histories or areas where we believe significant untapped reserve potential exists. We maintain a disciplined acquisition process to help ensure that acquisitions fit our strategic and financial objectives.

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Our Areas of Operation

We operate in Texas, Oklahoma, Louisiana and the Appalachian region. The following table presents descriptive information about our natural gas and oil properties based on our 2005 reserve reports prepared by our independent reserve engineering firms:

Field	Estimated Net Proved Reserves (1) (MMcfe)	PV-10 (2) (in thousands)		% Developed
Texas:
La Copita	22,323	$	72,570	44.9	%
Rosita	2,238		8,188	93.3	%
New Taiton	3,191		18,378	100.0	%
Other	3,268		6,065	36.6	%
Subtotal	31,020	$	105,201	53.2	%
Oklahoma:
Northeast Fitts	20,870	$	67,225	82.6	%
Allen	31,238		89,295	52.7	%
Other	10,726		47,792	72.1	%
Subtotal	62,834	$	204,312	66.0	%
Louisiana:
Lake Enfermer	5,546	$	32,238	53.6	%
Boutte	4,947		23,283	100.0	%
Other	1,742		6,268	10.6	%
Subtotal	12,235		61,789	66.2	%
Total	106,089	$	371,302	62.3	%

(1) In accordance with SEC requirements, our estimated net proved reserves, PV-10 and the standardized measure of discounted net cash flows were determined using year-end posted prices for natural gas and oil:

Natural gas (per MMBtu)	$	8.17
Oil (per Bbl)	$	57.75

(2) PV-10 represents the present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production expenses, discounted at 10% per annum to reflect timing of future cash flows and using pricing assumptions. See note 3 to “Summary—Summary Historical Reserve and Operating Data” for additional information about our computation of PV-10 and its reconciliation to the standardized measure of discounted net cash flows, which is its most comparable GAAP measure.

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Operating Area Production

The following table sets forth our production for the areas and periods presented:

Operating Area	Total Production for Year Ended December 31, 2005 (MMcfe)	Total Production for Quarter Ended March 31, 2006 (MMcfe)	April 2006 Average Net Daily Production (Mcfe/d)
Texas:
Cotton Valley trend	22	151	1,164
Vicksburg trend	2,578	484	7,870
Wilcox trend	1,324	305	3,266
Subtotal	3,924	940	12,300
Oklahoma:
Northeast Fitts	1,650	443	4,719
Allen Anticline	1,661	378	4,161
Other	328	91	1,091
Subtotal	3,639	912	9,971
Louisiana:
Lake Enfermer	631	146	1,550
Boutte	580	121	1,232
Other	51	13	201
Subtotal	1,262	280	2,983
Total	8,825	2,132	25,254
Unconventional shale gas:
Texas:
Woodford/Barnett shale	—	—	—
Barnett shale	—	—	—
Subtotal	—	—	—
Oklahoma:
Woodford shale	—	—	101
Caney shale	—	—	—
Subtotal	—	—	101
Appalachian region:
Devonian shale	—	—	—
Total	—	—	101

Conventional Natural Gas and Oil

As of March 31, 2006, most of our current production was from our approximate 64,215 gross acres (38,112 net acres) of conventional natural gas and oil properties in Texas, Oklahoma and Louisiana, which includes our acreage in the tight gas sands of the Cotton Valley trend in east Texas and the Vicksburg and Wilcox trends in south Texas. Each of these fields is characterized by established production profiles and numerous producing wells. We plan to expand our production and reserves from such conventional areas by further developing our current properties as well as acquiring additional properties that we believe can generate near-term production and cash flow.

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Texas

East Texas. Our growth strategy also includes acquiring property in known tight gas sand areas in east Texas that has existing infrastructure to transport natural gas to market. This area is characterized by lower exploration and development risk than many of our other projects. We believe there are several offset opportunities that can be enhanced with the use of modern completion and stimulation techniques, which we believe can be used to increase our production and proved reserves. We began acquiring leasehold interests and drilling in this area in the fourth quarter of 2005. As of March 31, 2006, we had drilled five wells in this area with a 100% success rate. As of March 31, 2006, we had acquired leasehold interests in approximately 5,280 gross (3,139 net) acres in the tight gas sands of the Cotton Valley trend. We are the operator of this acreage with working interests ranging from 38% to 100%. Our year-end December 31, 2005 proved reserves from this acreage are associated with 12 proved undeveloped and proved developed producing locations. We believe the depths of the formation range from 9,500 feet to 11,500 feet.

South Texas. We are continuously attempting to expand our acreage in south Texas, including the Vicksburg and Wilcox trends, by acquiring property that we feel is located in mature producing areas that we believe can generate near-term production and cash flow. As of March 31, 2006, we owned leasehold interests in approximately 4,816 gross (3,623 net) acres in the Vicksburg trend and approximately 4,736 gross (3,988 net) acres in the Wilcox trend, including producing acreage in the region. From January 1, 2006 to April 30, 2006, we drilled three wells in this area with a 100% success rate. We are the operator of this acreage with working interests ranging from 75% to 100%. As of March 31, 2006, we had 32 producing wells in this region. Our year-end December 31, 2005 proved reserves from this acreage are associated with 49 proved undeveloped and proved developed producing locations.

• Vicksburg Trend. The La Copita field is located in the Vicksburg trend in east-central Starr County. We are the operator of this field with working interests ranging from 53% to 100%. Cumulative production from this field, including our interests, exceeds 283.6 Bcfe. Our proved reserves in this field are associated with 11 proved undeveloped and 25 proved developed producing locations. We are working to expand our acreage in this area. We have completed a successful three-well development program, which could turn into an inventory of 8 to 15 wells. We also plan to increase our infill drilling from 40-acre to 20-acre spacing. We have 3-D seismic data over a significant portion of this field. We believe the depths of the formation range from 9,000 feet to 11,000 feet.

• Wilcox Trend. The Rosita field is located in Duval County and the New Taiton field is located in Wharton County in the Wilcox trend. We are the operator of these fields with working interests ranging from 50% to 100%. These fields are highly developed and mature, and generate capital for use in other properties. We have 3-D seismic data over a significant portion of these fields. We believe the depths of the formation in the Rosita field range from 9,500 to 14,000 feet and in the New Taiton field range from 7,000 feet to 12,500 feet. We have farmed out 50% of our deep rights to the Rosita field in exchange for a carried interest in a well drilled in this field in 2005.

Oklahoma

Northeast Fitts Field. The Northeast Fitts field is located in southern Pontotoc County. This field was unitized in the early 1980’s for a waterflood through the McAlester reservoir. In 2002, we initiated a waterflood recompletion on the Deeper Hunton Interval and began an in-fill drilling program in 2003, which should be completed by the end of 2008. We are the operator of this unit with a working interest of approximately 91%. Our proved reserves in this field are associated with 15 proved undeveloped locations. This field is highly developed and mature, and generates capital for use in other properties.

Allen Field. The Allen field is located in Pontotoc County. We also hold leasehold interests in the Byng field, the Roper Beebee field and other minor fields in Pontotoc County, which are all part of the Allen Anticline trend. We operate the wells in which we have an interest within the Allen field with working interests ranging from 50% to 100%. Our proved reserves in this area are associated with 37 proved undeveloped locations. We

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currently use our Pontotoc Gas Gathering System, operated by our wholly-owned subsidiary Pontotoc Gathering, L.L.C., to transport substantially all of our production generated from this field.

Louisiana

Lake Enfermer Field. The Lake Enfermer field is located in a marsh area on a deep, complex faulted salt structure in Lafourche Parish. Currently, we hold leasehold interests in approximately 2,372 gross acres in this field. We are the operator of this field with working interests ranging from 82% to 100%. We have 3-D seismic data over a significant portion of this field. We currently have plans to expand our exploratory drilling within this field. We also operate a small gathering line at this field to transport our production generated from this field.

Boutte Field. The Boutte field is located in St. Charles Parish. We have a 100% working interest in approximately 2,600 acres held by production.

Unconventional Shale Gas

Our growth strategy is primarily directed at acquiring opportunities for reserve growth in long-lived reservoirs in unconventional shale gas areas. We expect to invest between $30.0 million and $35.0 million in 2006 for leasehold acquisitions, drilling and testing of unconventional shale gas acreage. Typically, the exploration and development of unconventional shale gas reserves involves five stages: (i) acquisition of a significant leasehold interest, (ii) drilling and evaluation of several initial test wells, (iii) development of area-specific well completion and fracturing techniques, (iv) connecting to a natural gas transportation system and (v) establishment of a drilling program that exploits a substantial portion of the leased acreage. Unlike with most conventional reservoirs, the determination whether the development of our unconventional resource acreage is economically viable could take one to two years from the time we assemble a significant leasehold position. Our unconventional shale gas acreage is located in regions that have experienced significant increases in industry leasing and drilling activity in the past several years. We intend to acquire additional leasehold interests in unconventional shale gas regions. We have used, or expect to use, vertical drilling for each of our initial test wells to determine the areas in which we intend to expand our drilling program. In the areas where these initial test wells are successful, we also have used, or expect to use, horizontal drilling and completion technology to explore and develop these regions.

Shale gas formations are usually located in broad, contiguous geographic areas, often over hundreds of square miles or more. This characteristic allows us to acquire pieces of a resource pool over continuous acreage or acreage located within close proximity, which allows us to take advantage of operational efficiencies. Also, if unconventional shale gas exploration is successful, there is a greater likelihood that the surrounding area will produce reserves, and since we often hold continuous acreage or acreage located within a close proximity, we can establish multiple producing wells within the area. The following is a brief summary of our unconventional shale gas acreage:

West Texas Woodford/Barnett Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 79,108 gross (54,770 net) acres in this region, primarily located in Brewster County. We are currently drilling our initial test wells. We are the operator of this acreage with an average working interest of approximately 65%. We believe the depths of these formations range from 4,400 feet to 10,000 feet and the thickness ranges from 80 to 400 feet.

North Texas Barnett Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 9,474 gross (8,816 net) acres in this region. We expect to drill our initial test wells on a portion of this acreage in the second half of 2006. We are the operator of this acreage with a 100% working interest. The leasehold interests we hold in this area are located on emerging, raw acreage in the Barnett shale rather than the proven developed portion. We believe the depths of this formation range from 4,000 feet to 6,000 feet and the thickness ranges from 80 to 135 feet.

Oklahoma Woodford Shale and Caney Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 6,386 gross (2,119 net) acres in the Woodford shale and approximately 3,848 gross (2,850 net)

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acres in the Caney shale. We have drilled and completed our first vertical test well in the Woodford shale. Based on the initial production results of approximately 411 Mcf/d from this well, we plan to drill seven additional wells in the Woodford shale during the remainder of 2006. Based on recent industry activity, we expect to use horizontal drilling to explore and develop this region. We are the operator of our Woodford shale acreage with working interests ranging from 50% to 80%. We believe the depths of this formation range from 4,500 to 7,500 feet. We have also drilled our initial horizontal well in the Caney shale and, as of April 30, 2006, were in the process of analyzing data, completing and testing this well. We are also the operator of our Caney shale acreage with working interests ranging from 50% to 80%. We believe the depths of this formation range from 3,500 feet to 5,000 feet. We believe the thickness of the Woodford shale formation ranges from 80 to 150 and the thickness of the Caney Shale ranges from 40 to 150 feet.

Appalachian Devonian Shale. As of March 31, 2006, we had acquired leasehold interests in approximately 37,987 gross (15,504 net) acres in this region. We have initiated a five-well drilling program to test for natural gas and gather data that will help determine the most appropriate drilling and completion strategy. We expect to continue completion and testing of this area throughout 2006. We are the operator of this acreage with a 42% working interest. We believe the depths of the formation range from 3,400 feet to 4,600 feet and the thickness ranges from 280 to 325 feet.

Proved Reserves

Of our approximately 106.1 Bcfe of proved reserves as of December 31, 2005, 62.3% were proved developed and 60.3% were oil and NGLs. The following table presents our estimated net proved natural gas and oil reserves and the present value of our estimated net proved reserves as of December 31, 2003, 2004 and 2005 based on reserve reports prepared by our independent reserve engineering firms. All calculations of estimated net proved reserves have been made in accordance with the rules and regulations of the SEC and, except as otherwise indicated, give no effect to federal or state income taxes. For additional information regarding our reserves, please read the information regarding oil and gas activities beginning on page F-32 and “Risk Factors—Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions could materially affect the quantities and present value of our reserves.” The PV-10 and standardized measure of discounted net cash flows shown in the table are not intended to represent the current market value of our estimated market value or our estimated natural gas and oil reserves.

	As of December 31,
	2003		2004		2005
	(dollars in thousands)
Estimated net proved reserves (1):
Oil (MMBbls)		13,620		9,578		9,572
Natural gas (MMcf)		80,423		37,311		42,066
NGLs (MMBbls) (2)		—		1,119		1,098
Total (MMcfe)		162,141		101,491		106,089
PV-10 (3)	$	379,494	$	239,632	$	371,303
Standardized measure of discounted net cash flows (2)	$	271,715	$	190,322	$	280,298

(1) In accordance with SEC requirements, our estimated net proved reserves, PV-10 and the standardized measure of discounted net cash flows were determined using year-end posted prices for natural gas and oil as of the dates set forth below:

	Year Ended December 31,
	2003		2004		2005
Natural gas (per MMBtu)	$	5.97	$	5.74	$	8.17
Oil (per Bbl)	$	29.95	$	40.00	$	57.75

(2) Oil reserve data as of December 31, 2003 includes NGLs.

(3) See note 3 to “Summary—Summary Historical Reserve and Operating Data.”

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Production, Price and Expense History

The following table presents summary information concerning our production results, average sales prices and production expenses for the periods presented:

	Year Ended December 31,								Three Months Ended March 31,
	2003			2004			2005		2005		2006
Production data:
Oil (MBbls)		688			625			598		153		148
Natural gas (MMcf)		6,545			5,158			4,592		1,206		1,124
NGLs (Bbls)		107			120			107		30		20
Total (MMcfe)		11,318			9,630			8,826		2,304		2,132
Average prices:
Oil (per Bbl)	$	30.14		$	40.66		$	55.55	$	49.33	$	62.58
Effects of hedging		(0.54	)		—			—		—		—
Oil price (net of hedging)	$	29.60		$	40.66		$	55.55	$	49.33	$	62.58
Natural gas (per Mcf)	$	5.52		$	5.93		$	7.98	$	5.97	$	7.73
Effects of hedging		(1.77	)		(1.66	)		—		—		—
Natural gas price (net of hedging)	$	3.75		$	4.27		$	7.98	$	5.97	$	7.73
NGLs (per Bbl)	$	21.37		$	27.15		$	34.56	$	29.54	$	37.33
Combined (per Mcfe):
Price	$	5.23		$	6.15		$	8.34	$	6.79	$	8.77
Effects of hedging		(1.06	)		(0.89	)		—		—		—
Price (net of hedging)	$	4.17		$	5.27		$	8.34	$	6.79	$	8.77

Productive Wells

The following table sets forth information as of December 31, 2005 relating to the productive wells in which we owned a working interest as of that date. Productive wells consist of producing wells and wells capable of producing, including natural gas wells awaiting pipeline connections to commence deliveries and oil wells awaiting connection to production facilities. Gross wells are the total number of producing wells in which we have an interest, and net wells are the sum of our fractional working interests owned in gross wells.

	Natural Gas		Oil
Area	Gross Wells	Net Wells	Gross Wells	Net Wells
Oklahoma	149.0	95.7	420.0	374.8
Texas	42.0	34.5	—	—
Louisiana	8.0	6.3	14.0	13.6
Total	119.0	136.5	434.0	388.4

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Developed and Undeveloped Acreage

The following table sets forth information relating to our leasehold acreage as of December 31, 2005:

Total Acreage

	Developed Acreage (1)		Undeveloped Acreage (2)
Area	Gross (3)	Net (4)	Gross (3)	Net (4)
Louisiana	5,829	5,755	919	833
Oklahoma	27,547	15,064	23,729	8,762
Texas	2,633	2,201	91,609	63,776
Appalachian Region	—	—	34,392	14,445
Total	36,009	23,020	150,649	87,816

(1) Developed acres are acres spaced to productive wells.

(2) Undeveloped acres are acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of natural gas or oil, regardless of whether such acreage contains proved reserves.

(3) A gross acre is an acre in which a working interest is owned. The number of gross acres is the total number of acres in which a working interest is owned.

(4) A net acre is deemed to exist when the sum of the fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.

Unconventional Shale Gas Acreage

The following table sets forth information relating to our unconventional shale gas acreage as of March 31, 2006:

	Undeveloped Acreage (1)
Area	Gross (2)	Net (3)
Oklahoma	10,234	4,969
Texas	88,582	63,586
Appalachian Region	37,987	15,504
Total	136,803	84,059

(1) Undeveloped acres are acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of natural gas or oil, regardless of whether such acreage contains proved reserves.

(2) A gross acre is an acre in which a working interest is owned. The number of gross acres is the total number of acres in which a working interest is owned.

(3) A net acre is deemed to exist when the sum of the fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.

Many of the leases comprising the undeveloped acreage set forth in the tables above will expire at the end of their respective primary terms unless production from the leasehold acreage has been established prior to such date, in which event the lease will remain in effect until the cessation of production. The following table sets

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forth as of December 31, 2005, the expiration periods of the gross and net acres that are subject to leases in the undeveloped acreage summarized in the above table.

	Expiring Undeveloped Acres
Twelve Months Ending	Gross	Net
December 31, 2006	7,645	3,428
December 31, 2007	12,013	4,671
December 31, 2008	9,897	5,645
December 31, 2009 and later	121,094	74,072
Total	150,649	87,816

Drilling Results

The following table sets forth information with respect to wells completed during the periods indicated. The information should not be considered indicative of future performance, nor should it be assumed that there is necessarily any correlation between the number of productive wells drilled, quantities of reserves found or economic value. Productive wells are those that produce commercial quantities of hydrocarbons, regardless of whether they produce a reasonable rate of return.

	Year Ended December 31,
	2003		2004		2005
	Gross	Net	Gross	Net	Gross	Net
Development:
Productive	31.0	29.2	22.0	20.3	24.0	22.2
Non-productive	5.0	4.7	6.0	5.6	8.0	7.2
Exploratory:
Productive	2.0	2.0	4.0	4.0	5.0	4.3
Non-productive	4.0	3.9	3.0	2.9	1.0	1.0
Total:
Productive	33.0	31.2	26.0	24.3	29.0	26.5
Non-productive	9.0	8.6	9.0	8.5	9.0	8.2

We have identified 36 exploratory wells and 22 development wells to be drilled during 2006 and, as of April 30, 2006, we have drilled, or are drilling, 10 exploratory wells and 12 development wells. Our estimate of drilling and completion cost, net to our interest, is approximately $16.1 million. Each of these prospects is technically ready to be drilled or currently being drilled. Although we expect to drill each of these prospects this year, there can be no assurance that they will be drilled at all or within the expected time frame. Furthermore, we have identified three to five additional exploration prospects, which may be drilled in 2007 or beyond.

Marketing and Major Customers

General. We sell our natural gas and oil through various marketing companies to end users, marketers and other purchasers that have access to nearby pipeline facilities. In areas where there is no practical access to pipelines, natural gas and oil production is transported by truck or barge to storage facilities. Our marketing of natural gas and oil can be affected by factors beyond our control, the effects of which cannot be accurately predicted. For a description of some of these factors, see “Risk factors—The marketability of our production depends on gathering systems, transportation facilities and processing facilities that we do not control. If these systems and facilities become unavailable or otherwise unable to provide services, our financial condition and results of operations could be materially and adversely affected.” Although we sell the majority of our production to two customers, we do not believe that we are dependent upon one purchaser or small groups of purchasers because of the nature of natural gas and oil markets and the numerous purchasers of these commodities. All

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natural gas, oil and plant products produced from properties we operate are sold under contract, usually for terms of one year or less. We sell to multiple purchasers within each state in which we operate.

Customers. The principal customers for our natural gas and oil production are Sunoco, Inc. and Upstream Energy Services, L.P. During the year ended December 31, 2005, revenues from the sale of natural gas and oil to Sunoco, Inc. and Upstream Energy Services, L.P. accounted for 37% and 28%, respectively, of our total revenues. During 2003, 2004 and 2005, we sold our natural gas and oil production to approximately 44, 41 and 50 customers, respectively. We believe we would be able to locate alternate purchasers in the event of the loss of any one or more purchasers and that any such loss would not have a material adverse effect on our financial condition or results of operations.

Natural Gas. Approximately 66% of our natural gas is sold on the spot market by an independent marketer. All natural gas sales are based on published index prices and tied to contracts with terms that are generally no longer than one year in length and renewable at the expiration of their terms on a month-to-month basis. Realized prices are affected by minimum quantity and quality provisions. We typically gather our own natural gas for delivery into major transmission lines. Natural gas produced at certain locations in Texas is processed and all other natural gas is sold unprocessed to the respective purchasers.

Oil and Condensate. Our oil and condensate production is sold at posted prices without adjustment for product quantity or quality. Approximately 85% of our sales are tied to published NYMEX postings and the remainder to West Texas Intermediate postings. All oil and condensate sales contracts have terms of one year or less. Transportation arrangements vary by the area of production. Our Texas oil production is primarily transported by truck and our Louisiana oil production is primarily transported by barge. Approximately 60% of our Oklahoma oil production is transported by pipeline and the remaining 40% of production is transported by truck.

NGLs. The majority of our NGL sales are produced in Texas, processed at a third party natural gas processing plant and purchased by the owner of the plant. Payment terms are established by annual contract and funds are remitted to us net of processing fees. Prices paid for each product extracted are based on published indexes adjusted for quantity and quality per contract provisions.

Title to Properties

We believe that we have satisfactory title to all of our producing properties in accordance with standards generally accepted in the natural gas and oil industry. As is customary in the natural gas and oil industry, we perform only a preliminary title investigation before leasing undeveloped properties. A title opinion is typically obtained before the commencement of drilling operations and any material defects are remedied prior to the time the actual drilling of a well is commenced. Generally, under the terms of the operating agreements affecting our properties, any monetary loss is borne by all parties to any such agreement in proportion to their interests in such property. If any title defects or defects in assignment of leasehold rights in properties in which we hold an interest exist, we may suffer a monetary loss. Our properties are subject to customary royalty interests, liens for current taxes, liens of vendors and other customary burdens, which we do not believe materially interfere with the use of or affect the value of our producing properties. As is customary in the industry, we can retain our interests in undeveloped acreage by drilling activity that establishes commercial production or by payment of delay rentals during the remaining primary term. The natural gas and oil leases in which we have an interest are for varying primary terms, but most of our developed leased acreage is beyond the initial primary term and is held through producing wells.

Operations

We generally seek to be named as operator for wells in which we have acquired a significant interest, although, as is common in the industry, this typically occurs only when we own the majority of the working interests in a particular well or field. At December 31, 2005, we operated 577 (out of a total of 633) gross producing wells.

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As operator, we are able to exercise substantial influence over the development and enhancement of a well and to supervise operation and maintenance activities on a daily basis. On properties for which we act as operator, we either conduct the actual drilling of wells or engage independent contractors who are supervised by us. We employ petroleum engineers, geologists and other operation and production specialists who strive to improve production rates, increase reserves and lower the cost of operating our natural gas and oil properties.

Capital Expenditures

The following table presents information regarding our net costs incurred in natural gas and oil property acquisition, exploration and development activities for the periods presented:

	Year Ended December 31,						Three Months Ended March 31,
	2003		2004		2005		2005		2006
	(in thousands)
Property acquisitions:
Proved	$	1,410	$	449	$	1,748	$	821	$	23
Unproved		127		1,045		5,454		138		5,043
Exploration (1)		4,923		4,579		8,829		1,437		4,051
Development		36,489		17,724		21,820		6,314		10,215
Totals	$	42,949	$	23,797	$	37,851	$	8,710	$	19,332

(1) Includes capitalized and expensed costs incurred.

Competition

We operate in a highly competitive environment. We compete with major independent natural gas and oil companies for the acquisition of desirable natural gas and oil properties, as well as for the equipment and labor required to develop and operate these properties. We also compete with major independent natural gas and oil companies in the marketing and sale of natural gas and oil to marketers and end-users. Many of our competitors have financial and other resources substantially greater than ours. Competitors may be able to pay more for natural gas and oil properties and may be able to define, evaluate, bid for and acquire a greater number of properties. Our ability to acquire and develop additional properties in the future will depend on our ability to conduct operations, evaluate and select suitable properties and close transactions in this highly competitive market environment.

The marketability of our production depends upon the availability and capacity of natural gas gathering systems, pipelines and processing facilities, and the unavailability or lack of capacity thereof could result in the shut-in of producing wells or the delay or termination of development plans for properties. In addition, regulatory changes affecting natural gas and oil production and transportation, general economic conditions and changes in supply and demand could adversely affect our ability to produce and market our natural gas and oil on a profitable basis. In addition, larger competitors may be able to absorb the burden of any regulatory changes more easily than us, which would adversely affect our competitive position.

Environmental Matters and Regulation

General. We are subject to various stringent and complex federal, state and local laws and regulations governing environmental protection as well as the discharge of materials into the environment. These laws and regulations may, among other things:

• require the acquisition of various permits before drilling commences;

• require the installation of expensive pollution control equipment;

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• restrict the types, quantities and concentration of various substances that can be released into the environment in connection with natural gas and oil drilling production, transportation and processing activities;

• suspend, limit or prohibit construction, drilling and other activities in certain lands lying within wilderness, wetlands and other protected areas; and

• require remedial measures to mitigate pollution from historical and ongoing operations, such as the closure of pits and plugging of abandoned wells.

These laws, rules and regulations may also restrict the rate of natural gas and oil production below the rate that would otherwise be possible. The regulatory burden on the natural gas and oil industry increases the cost of doing business in the industry and consequently affects profitability.

Governmental authorities have the power to enforce compliance with environmental laws, regulations and permits, and violations are subject to injunction, as well as administrative, civil and even criminal penalties. The effects of these laws and regulations, as well as other laws or regulations that may be adopted in the future, could have a material adverse impact on our business, financial condition and results of operations.

The following is a summary of some of the existing laws, rules, and regulations to which our business operations are subject.

Comprehensive Environmental Response, Compensation and Liability Act. The Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, also known as the Superfund law, and comparable state laws impose joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and anyone who disposed or arranged for the disposal of a hazardous substance released at the site. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. Such claims may be filed under CERCLA as well as state common law theories or state laws that are modeled after CERCLA. In the course of our operations, we generate wastes that may fall within CERCLA’s definition of hazardous substances or that are otherwise subject to common law or state law claims. Therefore, governmental agencies or third-parties could seek to hold us responsible for all or part of the costs to clean up a site at which such substances may have been released or deposited.

Waste Handling. The Resource Conservation and Recovery Act, or RCRA, and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the federal Environmental Protection Agency, or EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced waters and most of the other wastes associated with the exploration, development and production of oil or natural gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain natural gas and oil exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our operating expenses, which could have a material adverse effect on our results of operations and financial position.

Air Emissions. The Federal Clean Air Act and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. These regulatory programs may require us to install expensive emissions abatement equipment, modify our operational practices and obtain permits for our existing operations and before commencing construction on a new or modified source of air emissions, such laws may require us to reduce emissions at existing facilities. As a result, we may be

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required to incur increased capital and operating costs. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the federal Clean Air Act and associated state laws and regulations.

Water Discharges. The Federal Water Pollution Control Act, or the Clean Water Act, and analogous state laws, impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances into waters of the United States, including wetlands. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by EPA or an analogous state agency. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations.

National Environmental Policy Act. Natural gas and oil exploration and production activities on federal lands are subject to the National Environmental Policy Act, or NEPA. NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions having the potential to significantly impact the environment. In the course of such evaluations, an agency will prepare an Environmental Assessment that assesses the potential direct, indirect and cumulative impacts of a proposed project and, if necessary, will prepare a more detailed Environmental Impact Statement that may be made available for public review and comment. All of our current exploration and production activities, as well as proposed exploration and development plans on federal lands require governmental permits that are subject to the requirements of NEPA. This process has the potential to delay our development of natural gas and oil projects.

Other Laws and Regulations. In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change entered into force. Pursuant to the Protocol, adopting countries are required to implement national programs to reduce emissions of certain gases, generally referred to as greenhouse gases, that are suspected of contributing to global warming. The Bush administration has indicated it will not support ratification of the Protocol, and Congress has not actively considered recent proposed legislation directed at reducing greenhouse gas emissions. However, there has been support in various regions of the United States for legislation that requires reductions in greenhouse gas emissions, and some states, although not those in which we currently operate, have already adopted legislation addressing greenhouse gas emissions from certain greenhouse gas emission sources, primarily power plants. Additionally, in late 2006, the U.S. Supreme Court will review the U.S. Circuit Court of Appeals for the District of Columbia’s ruling in Massachusetts, et al. v. EPA, in which the appellate court held that EPA had discretion under the Clean Air Act to refuse to regulate carbon dioxide emissions from mobile sources. A Supreme Court reversal of the appellate decision could result in federal regulation of carbon dioxide emissions and other greenhouse gases, and may affect the outcome of other climate change lawsuits pending in U.S. federal courts in a manner unfavorable to our industry. The natural gas and oil exploration and production industry is a direct source of certain greenhouse gas emissions, namely carbon dioxide and methane, and future laws, judicial rulings and regulations regarding such emissions would likely adversely impact our future operations, results of operations and financial condition. Any future laws, judicial rulings and regulations regarding greenhouse gas emissions may also restrict or decrease consumption of natural gas and oil, which would also have an adverse impact on our future operations, results of operations and financial condition. Currently, our operations are not adversely affected by existing state and local climate change initiatives and judicial rulings and, at this time, we cannot accurately predict the effect of future laws, judicial rulings and regulations regarding greenhouse gas emissions on our future operations, results of operations and financial condition.

New and more stringent laws and regulations concerning the security of industrial facilities, including natural gas and oil facilities could be adopted in the future. Our operations may in the future be subject to such laws and regulations. Presently, it is not possible to accurately estimate the costs we could incur to comply with any such facility security laws or regulations, but such expenditures could be substantial.

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Other Regulation of the Natural Gas and Oil Industry

The natural gas and oil industry is extensively regulated by numerous federal, state and local authorities. Legislation affecting the natural gas and oil industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state are authorized by statute to issue rules and regulations binding on the natural gas and oil industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the natural gas and oil industry increases our cost of doing business and, consequently, affects our profitability, these burdens generally do not affect us any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations of production.

Drilling and Production. Our operations are subject to various types of regulation at federal, state and local levels. These types of regulation include requiring permits for the drilling of wells, drilling bonds and reports concerning operations. Most states, and some counties and municipalities, in which we operate also regulate one or more of the following:

• the location of wells;

• the method of drilling and casing wells;

• the rates of production or “allowables;”

• the surface use and restoration of properties upon which wells are drilled and other third-parties;

• the plugging and abandoning of wells; and

• notice to surface owners and other third-parties.

State laws regulate the size and shape of drilling and spacing units or proration units governing the pooling of natural gas and oil properties. Some states allow forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third-parties and may reduce our interest in the unitized properties. In addition, state conservation laws establish maximum rates of production from natural gas and oil wells, generally prohibit the venting or flaring of natural gas and impose requirements regarding the ratability of production. These laws and regulations may limit the amount of natural gas and oil we can produce from our wells or limit the number of wells or the locations that we can drill. Moreover, each state generally imposes a production or severance tax with respect to the production and sale of natural gas and oil within its jurisdiction. Our drilling and production operations are in compliance with state regulations.

Natural Gas Gathering Regulation. Intrastate gas gathering service, which occurs upstream of interstate transmission services, is regulated by the states’ regulatory agencies. State regulation of gathering facilities generally includes various safety, environmental and, in some circumstances, nondiscriminatory take requirements and complaint-based rate regulation. The two gathering lines we operate are both intrastate gathering lines and are located in Louisiana and Oklahoma. Louisiana’s Pipeline Operations Section of the Department of Natural Resources’ Office of Conservation is generally responsible for regulating gathering facilities in Louisiana. In Oklahoma, the Oil and Gas Division of the Oklahoma Corporation Commission is responsible for regulating gathering facilities. These state agencies have the authority to review and authorize construction, acquisition, abandonment and interconnection of physical pipeline facilities. Our intrastate gathering lines are in compliance with state pipeline regulations.

Federal Natural Gas Regulation. Historically, federal legislation and regulatory controls have affected the price of the natural gas we produce and the manner in which we market our production. The Federal Energy Regulatory Commission, or FERC, has jurisdiction over the transportation and sale for resale of natural gas in interstate commerce by natural gas companies under the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978. Since 1978, various federal laws have been enacted which have resulted in the complete removal of all price and non-price controls for sales of domestic natural gas sold in “first sales,” which include all of our sales of our own production.

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FERC also regulates interstate natural gas transportation rates and service conditions, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas. Although we do not operate interstate gas transmission facilities, federal regulations that increase interstate transportation costs will affect the value of our product at market. Commencing in 1985, FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas. Today, interstate pipeline companies are required to provide nondiscriminatory transportation services to producers, marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company. FERC’s initiatives have led to the development of a competitive, unregulated, open access market for natural gas purchases and sales that permits all purchasers of natural gas to buy natural gas directly from third-party sellers other than pipelines. However, the natural gas industry historically has been very heavily regulated; therefore, we cannot guarantee that the less stringent regulatory approach recently pursued by FERC and Congress will continue indefinitely into the future nor can we determine what affect, if any, future regulatory changes might have on our natural gas related activities. Under FERC’s current regulatory regime, transmission services must be provided on an open-access, non-discriminatory basis at cost-based rates or at market-based rates if the transportation market at issue is sufficiently competitive. Although its policy is still in flux, FERC recently has reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which has the tendency to increase our costs of getting natural gas to point-of-sale locations. Changes in transportation costs as a result of changes in FERC regulations will effect the value of our product at market.

Legal Proceedings

We are, and from time to time in the future may be, a party to various legal proceedings and regulatory matters arising in the ordinary course of business. We do not expect the resolution of any pending or threatened proceedings to have a material adverse effect on our business, financial condition or results of operation.

Employees

As of March 31, 2006, we employed 88 people, including 52 that work in our field offices. None of our employees is covered by a collective bargaining agreement, and we believe that our relationships with our employees are satisfactory. From time to time, we use the services of independent contractors to perform various field, technical and other services.

Offices

As of the date of this prospectus, we are leasing approximately 20,700 square feet of office space in Plano, Texas at 4965 Preston Park Blvd., Suite 800, Plano, Texas 75093, where our principal offices are located. The lease for our Plano office expires in October 2013. We believe that our office facilities are adequate for our current needs and that additional office space can be obtained if necessary.

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MANAGEMENT

Executive Officers and Directors

The following table sets forth the names, ages and positions of our executive officers and directors:

Name	Age	Position
Terry W. Carter	53	President, Chief Executive Officer, Chief Operating Officer and Director
Eddie M. LeBlanc, III	57	Executive Vice President, Chief Financial Officer, Treasurer and Secretary
David L. McCabe	51	Vice President—Exploration and Development
Steve Limke	52	Vice President—Production Operations and Drilling
David A. Rice	53	Vice President—Business Development and Reserves Management
James L. Luikart	61	Chairman of the Board of Directors
Stuart B. Katz	51	Director
Robert J. Welch	42	Director

The following biographies describe the business experience of our executive officers and directors.

Terry W. Carter. Mr. Carter has been our President and Chief Executive Officer since June 2003. He was elected to the Board of Directors in September 2003. Mr. Carter joined us as Chief Operating Officer in May 2003. Prior to joining us, from January 2001 until May 2003, Mr. Carter served as Executive Vice President of Exploration and Production for Range Resources Corporation. From 1976 to 1999, Mr. Carter was employed by Oryx Energy Company and its predecessor, Sun Exploration and Production Company. While with Oryx and Sun, he held a variety of technical and management positions, including Planning Manager, Development Manager, Operations Manager, Business Unit General Manager and various technical and project management roles. Mr. Carter received a Bachelor of Science in petroleum engineering from Tulsa University.

Eddie M. LeBlanc, III. Mr. LeBlanc has been our Executive Vice President, Chief Financial Officer, Treasurer and Secretary since June 2003. From 2000 to June 2003, Mr. LeBlanc was Senior Vice President and Chief Financial Officer of Range Resources Corporation. Previously, Mr. LeBlanc was a founder of Interstate Natural Gas Company, which merged into Coho Energy in 1994. At Coho, Mr. LeBlanc served as Senior Vice President and Chief Financial Officer. Mr. LeBlanc’s 29 years of experience includes assignments in natural gas and oil subsidiaries of Celeron Corporation and Goodyear Tire and Rubber. Mr. LeBlanc received a Bachelor of Science in accounting from the University of Southwestern Louisiana and is a Certified Public Accountant and a Chartered Financial Analyst.

David L. McCabe. Mr. McCabe has served as our Vice President of Exploration and Development since August 2003. Prior to joining us in January 2002, Mr. McCabe was an independent consultant, and for the prior 12 years, he held a succession of managerial and technical positions with Oryx Energy and its predecessor, Sun Exploration and Production Company, in its onshore and offshore Gulf coast exploration and development operations. Mr. McCabe held similar positions with Atlantic Richfield Company (ARCO) prior to joining Oryx. Mr. McCabe received a Bachelor of Science in geophysics from Texas A&M University and a Masters of Business Administration from Houston Baptist University.

Steve Limke. Mr. Limke has served as our Vice President of Production Operations and Drilling since February 2005. Mr. Limke joined us in April 2002 as our Drilling Manager. Prior to joining us, Mr. Limke managed the drilling operations for Prize Energy Inc. for one year. Mr. Limke’s 26 years of experience include management, supervisory and technical positions with Oryx Energy Company and its predecessor, Sun Exploration and Production Company. Mr. Limke attended Oklahoma State University where he received a Bachelor of Science degree in agriculture and petroleum engineering technology.

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David A. Rice. Mr. Rice has served as our Vice President of Business Development and Reserves Management since August 2004. Prior to his employment with us and for five years, Mr. Rice was a Senior Vice President and Senior Petroleum Engineer at the Bank of Texas and was responsible for the technical management and analysis of energy loan commitments. Mr. Rice also was an Engineering Manager for Maynard Oil Company in 2003 and Vice President and Energy Lending Officer for Americrest Bank in 2004. He has over 31 years of diverse and comprehensive experience in petroleum engineering, including appraisals of natural gas and oil properties throughout the United States as well production and reservoir engineering experience in secondary recovery and tight gas sand properties. Mr. Rice is a registered professional engineer in Texas. He is the founding president of the ADAM (Acquisitions, Divestitures And Mergers) Energy Forum (1995 through 1998) and currently serves as a director since 1995. Mr. Rice is a member of Texas Independent Producers and Royalty Owners Association and the Society of Petroleum Engineers. Mr. Rice earned his Bachelor of Science in geological engineering at University of Missouri-Rolla and was honored with the Professional Degree of Geological Engineering in December 2001.

James L. Luikart. Mr. Luikart has been a director since September 2001 and was elected as Chairman of the Board during April 2005. Mr. Luikart is a Managing Member of Jefferies Capital Partners, the manager of a series of private equity funds, some of which are included in The Jefferies Investors. Mr. Luikart has been an Executive Vice President of Jefferies Capital Partners (and predecessor entities) for over 10 years. Prior to joining Jefferies Capital Partners, Mr. Luikart spent over 20 years with Citicorp, the last seven years of which he served as a Vice President of Citicorp Venture Capital. Mr. Luikart also serves on the board of directors of The Sheridan Group, W&T Offshore, Inc. (NYSE: WTI) and Edgen Corporation.

Stuart B. Katz. Mr. Katz has been a director since November 2005. Mr. Katz is a Managing Director of Jefferies Capital Partners. Prior to joining Jefferies Capital Partners in 2001, Mr. Katz was an investment banker with Furman Selz LLC and its successors for over sixteen years. Mr. Katz received a Bachelor of Science in engineering from Cornell University and a Juris Doctorate from Fordham Law School. Mr. Katz is a member of the bar of the State of New York. Mr. Katz also serves as a member of the boards of directors of Telex Communications, Inc., W&T Offshore, Inc. (NYSE: WTI) and various other privately owned portfolio companies of Jefferies Capital Partners.

Robert J. Welch. Mr. Welch has been a director since February 2003. Mr. Welch is a Senior Vice President of Jefferies & Company, Inc. Mr. Welch also serves as Chief Financial Officer of three hedge funds that actively invest in and trade high yield, distressed and special situation instruments. Mr. Welch has been with Jefferies & Company, Inc. for 11 years. From 1987 to 1993, Mr. Welch was employed in the compliance division of The National Association of Securities Dealers. In 1987, Mr. Welch received a Bachelor of Science in commerce and engineering from Drexel University.

Board of Directors

Our board of directors currently consists of four members,             of which are independent directors for purposes of the rules and regulations of the SEC and the rules of The Nasdaq National Market. In compliance with the requirements of the SEC rules and regulations and the rules of The Nasdaq National Market (i) at least one director on our audit, compensation and corporate governance and nominating committees will be independent at the time of quotation of our common stock on The Nasdaq National Market, (ii) at least a majority of the directors on our audit, compensation and corporate governance and nominating committees will be independent within 90 days of quotation of our common stock on The Nasdaq National Market and (iii) within one year of quotation of our common stock on The Nasdaq National Market, these committees will be fully independent and a majority of our board will be independent. If the effective date of the registration statement of which this prospectus forms a part is declared effective prior to quotation of our common stock on The Nasdaq National Market, we will satisfy the foregoing independence requirements as of such effective date.

Our board of directors is divided into three classes. The members of each class serve staggered, three-year terms. Upon the expiration of the term of a class of directors, directors in that class will be elected for three-year

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terms at the annual meeting of stockholders in the year in which their term expires. Immediately after the consummation of this offering, the classes will be composed as follows:

•                     will be a Class I director, whose term will expire at the first annual meeting of stockholders following this offering;

•                     will be Class II directors, whose terms will expire at the second annual meeting of stockholders following this offering; and

•                     will be Class III directors, whose terms will expire at the third annual meeting of stockholders following this offering.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company.

Committees of the Board of Directors

Audit committee

Prior to the closing of this offering, our audit committee will be comprised of three directors, at least one of whom will be “independent” as defined under and required by the rules and regulations of the SEC and The Nasdaq National Market rules. A majority of the directors on our audit committee will be independent within 90 days of the earlier of the effectiveness of the registration statement of which this prospectus forms a part and quotation of our common stock on The Nasdaq National Market and, within one year of such time, the committee will be fully independent. Initially, Messrs.             ,             and             will comprise our audit committee. One member of the audit committee will be designated as the “audit committee financial expert,” as defined by Item 401(h) of Regulation S-K of the Exchange Act. The audit committee will be responsible for, among other things:

• recommending annually to our board of directors the selection of our independent public accountants;

• reviewing and approving the scope of our independent public accountants’ audit activity and the extent of non-audit services;

• reviewing with management and the independent public accountants the adequacy of our basic accounting systems and the effectiveness of our internal audit plan and activities;

• reviewing our financial statements with management and the independent public accountants and exercising general oversight of our financial reporting process; and

• reviewing our litigation and other legal matters that may affect our financial condition and monitoring compliance with our business ethics and other policies.

Our board of directors will adopt a written charter for the audit committee, which will be available on our web site.

Compensation committee

Prior to the closing of this offering, our compensation committee will be comprised of three directors, at least one of whom will be independent as defined under and required by the rules and regulations of the SEC and The Nasdaq National Market rules. A majority of directors on this committee will be independent within 90 days of the earlier of the effectiveness of the registration statement of which this prospectus forms a part and quotation of our common stock on The Nasdaq National Market, and this committee will be fully independent within one

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year of such time. Initially, Messrs.             ,             and             will comprise our compensation committee. This committee’s responsibilities include, among other things:

• administering and granting awards under our 2006 Long-Term Incentive Plan;

• reviewing the compensation of our President and Chief Executive Officer and recommendations of our President and Chief Executive Officer as to appropriate compensation for our other executive officers and key personnel;

• examining periodically our general compensation structure; and

• supervising our welfare and pension plans and compensation plans.

Our board of directors will adopt a written charter for the compensation committee, which will be available on our web site.

Nominating and corporate governance committee

Prior to the closing of this offering, our nominating and corporate governance committee will be comprised of three directors, at least one of whom will be independent as defined under and required by the rules and regulations of the SEC and The Nasdaq National Market rules. A majority of directors on this committee will be independent within 90 days of the earlier of the effectiveness of the registration statement of which this prospectus forms a part and quotation of our common stock on The Nasdaq National Market, and this committee will be fully independent within one year of such time. Initially, Messrs.             ,             and             will comprise our nominating and corporate governance committee. The committee’s responsibilities include, among other things:

• to recommend to the board of directors proposed nominees for election to the board of directors by the stockholders at annual meetings, including an annual review as to the renominations of incumbents and proposed nominees for election by the board of directors to fill vacancies that occur between stockholder meetings; and

• to make recommendations to the board of directors regarding corporate governance matters and practices.

Our board of directors will adopt a written charter for the nominating and corporate governance committee, which will be available on our web site.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our board of directors or compensation committee.

Executive Compensation

The following table sets forth all compensation awarded or paid to, or earned by, our Chief Executive Officer and each of our four other most highly compensated executive officers during fiscal 2005 for services rendered to us in all capacities during fiscal years 2003, 2004 and 2005. The annual compensation amounts in the table exclude perquisites and other personal benefits because they did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for each executive officer.

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Summary Compensation Table

		Annual compensation				Other annual compensation (1)
Name and principal position	Year	Salary		Bonus
Terry W. Carter—President, Chief Executive Officer and Chief Operating Officer (2)	2005 2004 2003	$	275,000 275,000 176,042	$	110,000 —   68,929	$	8,400 8,400 —
Eddie M. LeBlanc, III—Executive Vice President, Chief Financial Officer, Treasurer and Secretary (3)	2005 2004 2003	$	231,187 225,000 112,500	$	70,000 38,769 —	$	8,400 6,174 2,625
David L. McCabe—Vice President— Exploration and Development	2005 2004 2003	$	158,045 148,000 132,675	$	70,000 21,500 27,000	$	8,400 4,458 3,600
Steve Limke—Vice President— Production Operations and Drilling	2005 2004 2003	$	149,481 133,849 127,458	$	47,000 22,000 28,750	$	7,943 4,486 3,465
David A. Rice—Vice President— Business Development and Reserves Management (4)	2005 2004 2003	$	132,031 46,474 —	$	18,000 7,500 —	$	6,301 417 —

(1) Represents 401(k) matching and awards under our 401(k) defined contribution plan. In addition, on May 20, 2005, we adopted our 2005 Equity Incentive Plan which provides for aggregate awards of up to 13.5% of the amount by which the present value of the consideration payable to Ascent or its securityholders in connection with a sale of Ascent, as defined in the plan, exceeds our consolidated funded debt, as defined in the plan. Upon such a sale of Ascent, vested awards are payable in cash or in the same form of consideration as received by Ascent or its securityholders in such sale, as determined by the committee administering the 2005 Equity Incentive Plan. Please see “—2005 Equity Incentive Plan” below. During 2005, awards providing for 11.2% of that amount had been granted, including awards of 2.8%, 1.4%, 1.4%, 1.1% and 0.9% of that amount to Messrs. Carter, LeBlanc, McCabe, Limke and Rice, respectively, which awards are 40% vested. In connection with and immediately prior to the closing of this offering, we intend to terminate our 2005 Equity Incentive Plan and the awards granted thereunder and issue awards under our 2006 Long-Term Incentive Plan to affected participants in exchange for the awards being terminated. The holders of awards under our 2005 Equity Incentive Plan must consent to this exchange in order to terminate all prior awards under our 2005 Equity Incentive Plan.

(2) Mr. Carter joined Ascent in May 2003.

(3) Mr. LeBlanc joined Ascent in June 2003.

(4) Mr. Rice joined Ascent in August 2004.

2005 Equity Incentive Plan

On May 20, 2005, we adopted an equity incentive plan for certain of our employees and directors, which we amended and restated in December 2005. We refer to this plan as the 2005 Equity Incentive Plan. The purpose of the 2005 Equity Incentive Plan is to advance our interests by encouraging and enabling a larger personal proprietary interest in us by certain key employees and directors. The 2005 Equity Incentive Plan provides for payment of aggregate awards of up to 13.5% of the amount by which the present value of the consideration payable to Ascent or its securityholders in connection with a defined sale of Ascent exceeds our consolidated funded debt, as defined in the plan.

Aggregate Plan Limit. Incentive Awards under the 2005 Equity Incentive Plan shall not exceed 13.5% of the amount by which the present value of the consideration payable to Ascent or its securityholders in connection

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with a defined sale of Ascent exceeds our consolidated funded debt. If the amount payable pursuant to an incentive award ceases to be payable for any reason, the incentive percentage under such incentive award shall again be available for future grants of incentive awards.

Eligibility. The class of persons who are potential recipients of Incentive Awards granted under the 2005 Equity Incentive Plan are our employees and directors who are designated by the committee administering the 2005 Equity Incentive Plan, and shall be an “Eligible Person.” The parties to whom incentive awards are granted under the 2005 Equity Incentive Plan, and the incentive percentage under each such incentive award, are determined by the committee administering the 2005 Equity Incentive Plan in its sole discretion, subject, however, to the terms and conditions of the 2005 Equity Incentive Plan.

Administration. The committee administering the 2005 Equity Incentive Plan shall have the authority to grant to any Eligible Person, in its sole discretion, Enterprise Appreciation Rights, as defined in the plan, which are the rights to receive a percentage of the Total Eligible Enterprise Value, as defined in the plan, upon a defined sale of us, if and to the extent provided pursuant to the 2005 Equity Incentive Plan. Except as otherwise provided in the 2005 Equity Incentive Plan, upon the sale of us, the holder of Enterprise Appreciation Rights which are then vested shall be entitled to receive payment from us of an amount equal to the then vested portion of the product obtained by multiplying (i) the Total Eligible Enterprise Value upon such sale of our company, by (ii) the incentive percentage under such holder’s incentive award. Awards are payable in cash or in the same form of consideration payable to Ascent or its securityholders in such sale, as determined by the committee administering the 2005 Equity Incentive Plan.

Terms of Awards. Except as otherwise provided in an incentive award grant agreement, incentive awards vest at the rate of 10% on the date of grant and an additional 30% on each of the first, second and third anniversaries of the date of grant provided that the holder is still employed by us or in our service on the applicable vesting date. All incentive awards granted under the 2005 Equity Incentive Plan become fully vested upon a sale of us so long as the holder is still employed by us or in our service. If the employment or service of a holder of an incentive award is terminated by reason of death, permanent disability or by us without cause, such holder shall retain such holder’s award, to the extent then vested, for a period of six months after such termination. No incentive awards shall be granted after May 20, 2015.

2006 Long-Term Incentive Plan

General. We intend to adopt our 2006 Long-Term Incentive Plan as of the date immediately prior to the closing of this offering. The purposes of the 2006 Long-Term Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to our employees and consultants, and to promote the success of our business. The 2006 Long-Term Incentive Plan primarily provides for grants of (1) incentive stock options qualified as such under U.S. federal income tax laws, (2) stock options that do not qualify as incentive stock options (i.e., “nonstatutory options”), (3) stock appreciation rights, or SARs, (4) restricted stock awards, (5) restricted stock units or (6) any combination of such awards.

The 2006 Long-Term Incentive Plan will not be subject to ERISA. For a period of time following this offering, the 2006 Long-Term Incentive Plan will qualify for an exception to the rules imposed by Section 162(m) of the Code. Therefore, awards will be exempt from the limitations on the deductibility of compensation that exceeds $1.0 million.

Shares available. The maximum aggregate number of shares of our common stock that may be reserved and available for delivery in connection with awards under the 2006 Long-Term Incentive Plan will be             . If common stock subject to any award is not issued or transferred, or ceases to be issuable or transferable for any reason, those shares of common stock will again be available for delivery under the 2006 Long-Term Incentive Plan to the extent allowable by law.

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Eligibility. Any individual who provides services to us, including non-employee directors and consultants, and is designated by the compensation committee to receive an award under the 2006 Long-Term Incentive Plan will be a “Participant.” A Participant will be eligible to receive an award pursuant to the terms of the 2006 Long-Term Incentive Plan and subject to any limitations imposed by appropriate action of the compensation committee.

Administration. Our Board of Directors has appointed the compensation committee to administer the 2006 Long-Term Incentive Plan pursuant to its terms, except in the event our Board of Directors chooses to take action under the 2006 Long-Term Incentive Plan. Our compensation committee at all times will be comprised of two or more individuals that constitute “outside directors” as defined in Section 162(m) of the Code and, in the discretion of our Board of Directors, “nonemployee directors” as defined in Rule 16b-3 under the Exchange Act. Unless otherwise limited, the compensation committee has broad discretion to administer the 2006 Long-Term Incentive Plan, including the power to determine to whom and when awards will be granted, to determine the amount of such awards (measured in cash, shares of common stock or as otherwise designated), to proscribe and interpret the terms and provisions of each award agreement, to accelerate the exercise terms of an option, to delegate duties under the 2006 Long-Term Incentive Plan, to terminate, modify or amend the 2006 Long-Term Incentive Plan (subject to ratification by the Board of Directors) and to execute all other responsibilities permitted or required under the 2006 Long-Term Incentive Plan.

Terms of options. We may grant options to eligible persons including (1) incentive stock options (only to our employees) that comply with Section 422 of the Code and (2) nonstatutory options. The exercise price for an incentive stock option must not be less than the greater of (a) the par value per share of common stock or (b) the fair market value per share as of the date of grant. The exercise price per share of common stock subject to a nonstatutory option will not be less than the par value per share of the common stock (but may be less than the fair market value of a share of the common stock on the date of grant). Options may be exercised as the compensation committee determines, but not later than ten years from the date of grant. Any incentive stock option granted to an employee who possesses more than ten percent of the total combined voting power of all classes of our shares within the meaning of Section 422(b)(6) of the Code must have an exercise price of at least 110% of the fair market value of the underlying shares at the time the option is granted, and such option may not be exercised later than five years from the date of grant.

Terms of SARs. SARs may be awarded in connection with or separate from an option. A SAR is the right to receive an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the grant price of the SAR. SARs awarded in connection with an option will entitle the holder, upon exercise, to surrender the related option or portion thereof relating to the number of shares for which the SAR is exercised, which option or portion thereof will then cease to be exercisable. Such SAR is exercisable or transferable only to the extent that the related option is exercisable or transferable. SARs granted independently of an option will be exercisable as the compensation committee determines. The term of a SAR will be for a period determined by the compensation committee but will not exceed ten years. SARs may be paid in cash, common stock or a combination of cash and stock, as provided for by the compensation committee in the Participant’s award agreement.

Restricted stock awards. A restricted stock award is a grant of shares of common stock subject to a risk of forfeiture, restrictions on transferability, and any other restrictions imposed by the compensation committee in its discretion. Except as otherwise provided under the terms of the 2006 Long-Term Incentive Plan or an award agreement, the holder of a restricted stock award may have rights as a stockholder, including the right to vote or to receive dividends (subject to any mandatory reinvestment or other requirements imposed by the compensation committee). A restricted stock award that is subject to forfeiture restrictions may be forfeited and reacquired by us upon termination of employment or services. Common stock distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, may be subject to the same restrictions and risk of forfeiture as the restricted stock with respect to which the distribution was made.

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Restricted Stock Units. Restricted stock units are rights to receive common stock, cash or a combination of both at the end of a specified period. Restricted stock units may be subject to restrictions, including a risk of forfeiture, as specified in the Participant’s award agreement. Restricted stock units may be satisfied by common stock, cash or any combination thereof determined by the compensation committee. Except as otherwise provided by the compensation committee in the award agreement or otherwise, restricted stock units subject to forfeiture restrictions will be forfeited upon termination of a Participant’s employment or services prior to the end of the specified period. The compensation committee may, in its sole discretion, grant dividend equivalents with respect to restricted stock units.

Bonus Stock and Awards in Lieu of Company Obligations. The compensation committee is authorized to grant common stock as a bonus, or to grant common stock or other awards in lieu of obligations to pay cash or deliver other property under the 2006 Long-Term Incentive Plan or under other plans or compensatory arrangements, subject to any applicable provision under Section 16 of the Exchange Act. Common stock or awards granted hereunder will be subject to such other terms as determined by the compensation committee. Any grant of common stock to one of our officers or to an officer of a subsidiary in lieu of salary or other cash compensation will be reasonable, as determined by the compensation committee.

Dividend Equivalents. The compensation committee is authorized to grant dividend equivalents to a Participant, entitling the Participant to receive cash, common stock, other awards, or other property equal in value to dividends paid with respect to a specified number of shares of common stock, or other periodic payments. Dividend equivalents may be awarded on a free-standing basis or in connection with another award. The compensation committee may provide that dividend equivalents will be payable or distributed when accrued or that they will be deemed as reinvested in additional common stock, awards, or other investment vehicles. The compensation committee will specify any restrictions on transferability and risks of forfeiture that are imposed upon dividend equivalents.

Other awards. Participants may be granted, subject to applicable legal limitations and the terms of the 2006 Long-Term Incentive Plan and its purposes, other awards related to common stock (in terms of being valued, denominated, paid or otherwise defined by reference to common stock). Such awards may include, but are not limited to, convertible or exchangeable debt securities, other rights convertible or exchangeable into common stock, purchase rights for common stock, awards with value and payment contingent upon our performance or any other factors designated by the compensation committee, and awards valued by reference to the book value of common stock or the value of securities of or the performance of specified subsidiaries. The compensation committee will determine terms and conditions of all such awards, including without limitation, the method of delivery, the consideration to be paid, the timing and methods of payment, and any performance criteria associated with an award. Cash awards may granted as an element of or a supplement to any awards permitted under the 2006 Long-Term Incentive Plan.

Performance awards. The compensation committee may designate that certain awards granted under the 2006 Long-Term Incentive Plan constitute “performance” awards. A performance award is any award the grant, exercise or settlement of which is subject to one or more performance standards. These standards may include business criteria, such as total stockholders’ return and earnings per share, for us on a consolidated basis or for specific subsidiaries or business or geographical units.

Termination of the 2005 Equity Incentive Plan

As described above, our 2005 Equity Incentive Plan provides for payment of aggregate awards of up to 13.5% of the amount by which the present value of the consideration payable to Ascent or its securityholders in connection with a defined sale of Ascent exceeds our consolidated funded debt, as defined in the plan. As of March 31, 2006, awards providing for 11.2% of that amount had been granted under the plan. In connection with and immediately prior to the closing of this offering, we intend to terminate the 2005 Equity Incentive Plan and the awards granted thereunder and issue awards under the 2006 Long-Term Incentive Plan to affected

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participants in exchange for the awards being terminated. The holders of awards under the 2005 Equity Incentive Plan must consent to this exchange in order to terminate all prior awards under 2005 Equity Incentive Plan.

401(k) Defined Contribution Plan

We have a Section 401(k) Defined Contribution Plan. The 401(k) plan is a tax-qualified retirement plan. Under the 401(k) plan, all employees with at least three months of continuous service are eligible to participate and may elect to defer up to 70% of their annual compensation on a pre-tax basis and have it contributed to the plan, subject to certain limitations under the Code. We may elect to make discretionary matching contributions to the 401(k) plan, which would be allocated on the basis of compensation. All matching contributions and discretionary contributions under the 401(k) plan are immediately vested in full.

Employment Agreements/Change of Control Agreements

We have entered into employment agreements with Messrs. Carter, LeBlanc, McCabe, Limke and Rice. These employment agreements were effective as of April 1, 2005 and amended effective as of June 26, 2006. Each employment agreement has an initial term of three years, but will automatically be extended for successive two-year terms on April 1 of each year beginning on April 1, 2007 unless either party gives not less than 90 days written notice that such party desires not to renew the employment agreement. The employment agreements provide for an annual base salary of $275,000 for Mr. Carter, $231,187.50 for Mr. LeBlanc, $157,039.87 for Mr. McCabe, $150,732 for Mr. Limke and $134,375.17 for Mr. Rice, which amounts are subject to upward (but not downward) adjustment annually by our board of directors. In addition, we pay annual insurance premiums for a one million dollar term life insurance policy and for an individual disability policy for each of Messrs. Carter and LeBlanc, both of which are transferable should either Messrs. Carter or LeBlanc leave our employment. During the period of employment under these agreements, each of the employees is entitled to additional benefits, including reimbursement of business expenses, vacation time, and participation in other company benefits, plans or programs that may be available to our other employees and is eligible to participate in our bonus, incentive compensation and other programs established by our board of directors.

If any of these officers is involuntarily terminated without cause or if the officer terminates his employment for good reason, as defined by the employment agreements, we will pay the officer his current annual rate of total compensation for the remaining term of the employment agreements, or if we elect, pay such amount in a lump sum within 30 days after the date of termination. If within one year of a change of control, as defined under the employment agreements, such officer is terminated without cause or such officer terminates his employment with us for good reason, we will pay the officer a lump sum cash payment equal to two times his then-current annual rate of total compensation in the case of Mr. Carter, and one time his then-current annual rate of total compensation in the case of Messrs. LeBlanc, McCabe, Limke and Rice, within 30 days after the date of termination. In addition to such severance payment(s), the officer may be entitled to continue to participate in certain employee benefit plans for a period of up to one year following a non-change of control involuntary termination or up to two years following an involuntary termination due to a change of control.

Any amount or benefit payable under the employment agreements that is subject to an excise tax under Section 4999 of the Code shall be reduced in a manner which results in the officer receiving the maximum amount permitted without the imposition of the excise tax under Section 4999 of the Code. In determining whether a payment or benefit would incur an excise tax, all payments and benefits under the employment agreements shall be consolidated with all other payments or benefits conferred upon the officer by us or our affiliates if they are the type that would be deemed “parachute payments” under Section 280G of the Code. However, any payment or benefit under the 2005 Equity Incentive Plan, any stock option plans, share appreciation rights or any additional current or future of our incentive plans shall not be considered “parachute payments” for purposes of the employment agreements and shall be excluded from the limitation on payments described above. If it is determined that any such excise tax would be due, the officer may elect to reduce the amounts payable to him under one or more of the agreements, plans or programs in any way he determines.

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In addition, each of these employment agreements contains provisions that prohibit, with certain limitations and subject to certain exceptions, the officer from competing with us, directly or indirectly, in the exploration for hydrocarbons or soliciting or hiring of any of our employees or inducing any of them to terminate their employment with us. This non-competition restriction continues during the term of employment and for a period of one year following termination of the employment agreement.

Indemnification Agreements

Prior to the completion of this offering, we will enter into indemnification agreements with all of our directors and some of our officers under which we will indemnify such persons against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement incurred as a result of the fact that such person, in his or her capacity as a director or officer, is made or threatened to be made a party to any suit or proceeding. These persons will be indemnified to the fullest extent now or hereafter permitted by the Delaware General Corporation Law, or DGCL. The indemnification agreements also provide for the advancement of expenses to these directors and officers in connection with any suit or proceeding.

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RELATED PARTY TRANSACTIONS

The following is a discussion of transactions between us and our officers, executive directors and beneficial owners of more than 5% of our common stock.

Recapitalization

Upon consummation of this offering, the application of the proceeds from this offering as described under “Use of Proceeds” and the Recapitalization, The Jefferies Investors and Trust Company of the West will beneficially own approximately          shares and          shares, respectively, of our outstanding common stock, representing         % and         %, respectively, of our outstanding common stock, and will beneficially own none of our other securities. In addition, persons associated with The Jefferies Investors serve as our directors. Please read “Recapitalization,” “Principal Stockholders” and “Management.”

As of March 31, 2006, The Jefferies Investors beneficially owned approximately:

•          shares of common stock of our Parent;

• warrants to purchase          shares of common stock of our Parent;

• $         million aggregate principal amount of our senior notes;

• $         million aggregate principal amount of our senior subordinated notes;

• $         million of our Series A preferred stock;

• warrants to purchase          shares of our common stock; and

• warrants to purchase          shares of our Series A preferred stock.

As of March 31, 2006, Trust Company of the West beneficially owned approximately:

•          shares of common stock of our Parent;

• warrants to purchase          shares of common stock of our Parent;

• $         million aggregate principal amount of our senior notes;

• $         million aggregate principal amount of our senior subordinated notes;

• $         million of our Series A preferred stock;

• warrants to purchase          shares of our common stock; and

• warrants to purchase          shares of our Series A preferred stock.

Senior Notes. We issued $24.0 million aggregate principal amount of senior promissory notes between May 2003 and July 2003 to The Jefferies Investors and Trust Company of the West for short-term liquidity needs and to fund our limited capital expenditure program in the third and fourth quarters of 2003. In connection with our July 2004 financial restructuring, we issued approximately $27.5 million aggregate principal amount of our 16% senior notes due October 26, 2007 and warrants to purchase up to 3,000 shares of our Series A preferred stock to The Jefferies Investors and Trust Company of the West in exchange for all then-outstanding principal and accrued but unpaid interest on our senior promissory notes. On November 9, 2005, we issued approximately $33.5 million aggregate principal amount of our senior notes to The Jefferies Investors and Trust Company of the West in exchange for all then-outstanding principal and accrued but unpaid interest on our 16% senior notes due October 26, 2007. Interest on our senior notes is payable semi-annually in the form of additional senior notes.

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As of December 31, 2003, The Jefferies Investors and Trust Company of the West held approximately $22.8 million and $1.2 million, respectively, aggregate principal amount of our senior promissory notes. As of December 31, 2004, The Jefferies Investors and Trust Company of the West held approximately $27.2 million and $1.4 million, respectively, aggregate principal amount of our 16% senior notes due October 26, 2007. As of December 31, 2005, The Jefferies Investors and Trust Company of the West held approximately $31.8 million and $1.7 million, respectively, aggregate principal amount of our senior notes.

Senior Subordinated Notes. In June 2001, we issued $75.0 million aggregate principal amount of 11 ³/4% Series A senior notes due 2006 in connection with the acquisition of our south Texas properties. In connection with our July 2004 financial restructuring, we issued approximately $85.9 million aggregate principal amount of our 11 ³/4% senior subordinated notes due 2008 to The Jefferies Investors and Trust Company of the West in exchange for all then-outstanding principal and accrued but unpaid interest on our 11 ³/4% Series A senior notes due 2006. On November 9, 2005, we issued approximately $99.6 million aggregate principal amount of our senior subordinated notes to The Jefferies Investors and Trust Company of the West in exchange for all then- outstanding principal and accrued but unpaid interest on our 11 ³/4% senior subordinated notes due 2006. Interest on our senior subordinated notes is payable semi-annually in the form of additional senior subordinated notes.

As of December 31, 2003, The Jefferies Investors and Trust Company of the West held approximately $60.7 million and $14.3 million, respectively, aggregate principal amount of our 11 ³/4% Series A senior notes due 2006. As of December 31, 2004, The Jefferies Investors and Trust Company of the West held approximately $71.7 million and $16.9 million, respectively, aggregate principal amount of our 11 ³/4% senior subordinated notes due 2008. As of December 31, 2005, The Jefferies Investors and Trust Company of the West held approximately $80.6 million and $19.0 million, respectively, aggregate principal amount of our 11 ³/4% senior subordinated notes due 2008.

8% Series A Preferred Stock and Warrants to Purchase Common Stock. In July 2001, we issued an aggregate of $21.1 million of units, each consisting of one share of our Series A preferred stock and one warrant to purchase 191.943 shares of our common stock at an exercise price of $5.21 per share (each of which will be adjusted to a warrant to purchase              shares of our common stock at a purchase price of $             per share in connection with the reverse stock split), to The Jefferies Investors and Trust Company of the West to fund part of the cash portion of our purchase price for Pontotoc Production, Inc. In August 2002, we issued an additional $20.0 million of units to The Jefferies Investors and Trust Company of the West. In connection with the August 2002 issuance, we paid Jefferies & Company, Inc. an aggregate of $1.0 million of the cash proceeds of the unit offering for its services as our advisor.

Voting Agreement. In connection with the August 2002 unit issuance, we entered into a voting agreement with SLPH and certain holders of our Series A preferred stock, which provides for a majority of our board of directors to be appointed by The Jefferies Investors and Trust Company of the West. Under the voting agreement, Jefferies & Company, Inc. and certain of its affiliates are entitled to designate two of our directors so long as they hold not less than 10% of the outstanding Series A preferred stock and other of The Jefferies Investors are entitled to designate two of our directors so long as they hold not less than 25% of the outstanding Series A preferred stock and Trust Company of the West is entitled to designate one of our directors so long as it holds not less than 10% of the outstanding Series A preferred stock. In connection with this offering and the Recapitalization, this voting agreement will be terminated.

Registration Rights

In connection with the July 2001 unit issuance, we entered into a registration rights agreement with the holders of the warrants to purchase shares of our common stock. According to the terms of the registration rights agreement, these holders are entitled to registration rights with respect to              shares of our common stock representing the shares of our common stock issuable upon exercise of the warrants to purchase our common stock. Beginning on the date 185 days after the common stock is registered under the Exchange Act, the holders of not less than a majority of such registrable securities will have the right to require us to file a registration

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statement under the Securities Act for the sale by such holders of not less than 5% of our then-outstanding shares of common stock. We will not be required to effect more than four such demand registrations under the registration rights agreement and no more than two such demand registrations during any 12-month period. The holders entitled to such demand registrations may require us to effect any such demand registration as an underwritten offering, in which case they shall have the right to select the managing underwriters, subject to our reasonable satisfaction, and any additional investment bankers and managers for the offering. In addition, the holders may participate in any public offering by us of our common stock, other than on a registration statement with respect to corporate reorganizations or other transactions under Rule 145 under the Securities Act or on a registration statement on Form S-8, unless the lead managing underwriter delivers to us a written opinion that the proposed size of the offering would materially and adversely affect the offering or offering price. We will pay all expenses in connection with any demand or piggyback registration under the registration rights agreement, other than any underwriting fees, discounts or commissions attributable to the sale of registrable securities by the holders and any other expenses of the holders. We will also pay the reasonable fees and expenses of counsel chosen by the holders of a majority of the registrable securities being sold pursuant to the registration rights agreement. Under the registration rights agreement, the holders have also agreed not to effect any public sale, including a sale pursuant to Rule 144 under the Securities Act, of any registrable securities or any securities convertible into or exchangeable or exercisable for such securities during the 14 days prior to, and during the 90 days following (or 180 days in the case of this offering), the effective date of any underwritten demand or piggyback registration.

Business Opportunities

Our amended and restated certificate of incorporation will provide that if an opportunity in our line of business is presented to any of our non-employee directors:

• they will have no obligation to communicate or present the opportunity to us;

• they will not breach any fiduciary duty to us merely because they or their affiliates pursue or acquire the opportunity; and

• they and their affiliates may pursue the opportunity as that entity or individual sees fit,

unless it was presented to such director solely in that person’s capacity as our director or is identified by such director or such director’s affiliates solely through the disclosure of information by or on behalf of us.

Our amended and restated certificate of incorporation also will permit our non-employee directors and their affiliates to engage or invest in businesses that compete with ours. Accordingly, these persons may, and in some cases of which we are aware, do engage in business activities with or invest in competing companies. We will renounce any interest in any such business activities or ventures.

These provisions of our amended and restated certificate of incorporation will be permitted to be amended only by an affirmative vote of holders of at least a majority of our total voting power.

Related Party Leases

From February 1, 2002 through April 30, 2005, we subleased a portion of rented office space in New Orleans, Louisiana to Jefferies & Company, Inc. at subrental rates equal to the proportionate share of our rental rates under the lease. For the years ended December 31, 2003, 2004 and 2005, Jefferies & Company, Inc. paid us approximately $57,000, $57,000 and $19,000, respectively, in subrent.

We lease office space under a three-year lease which expires on October 31, 2007 from a company owned by an individual who served as our Vice President until April 2005, his brother, who is one of our employees, and their father. For the years ended December 31, 2003, 2004 and 2005, we paid approximately $87,000, $86,000 and $73,000, respectively, in rent under this arrangement.

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Employment Agreements

We have entered into employment agreements with our executive officers. Please see “Management—Employment Agreements/Change of Control Agreements.”

Indemnification of Officers and Directors

Prior to the completion of this offering, we will enter into indemnification agreements with all of our directors and some of our officers. For additional information about the indemnification of our officers and directors, please read “Management—Indemnification Agreements” and “Description of Capital Stock—Limitation of Liability of Officers and Directors.”

Termination of 2005 Equity Incentive Plan

In connection with and immediately prior to the closing of this offering, we intend to terminate our 2005 Equity Incentive Plan and the awards granted thereunder and issue awards under our 2006 Long-Term Incentive Plan to affected participants in exchange for the awards being terminated. The holders of awards under our 2005 Equity Incentive Plan must consent to this exchange in order to terminate all prior awards under our 2005 Equity Incentive Plan.

Underwriting

Jefferies & Company, Inc. is an underwriter participating in this offering and will receive underwriting discounts and commissions. In addition, The Jefferies Investors, including Jefferies & Company, Inc., will receive a portion of the net proceeds of this offering and shares of common stock in connection with this offering and the Recapitalization. See “Underwriting,” “Risk Factors—Risks Related to this Offering and Our Common Stock—The Jefferies Investors have relationships with us that may present a conflict of interest” and “Recapitalization.”

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PRINCIPAL STOCKHOLDERS

The following table presents information regarding beneficial ownership of our common stock as of             , 2006 and as adjusted to reflect the Recapitalization and the sale of common stock in this offering by:

• each person who we know owns beneficially more than 5% of our common stock;

• each of our directors;

• our Chief Executive Officer and each of our four other most highly compensated executive officers during 2005; and

• all of our executive officers, directors and nominees for director as a group.

Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has the sole voting and investment power with respect to the shares indicated as beneficially owned. Under the regulations of the SEC, shares are deemed to be “beneficially owned” by a person if the holder directly or indirectly has or shares the power to vote or dispose of these shares, whether or not the holder has any pecuniary interest in these shares, or if the holder has the right to acquire the power to vote or dispose of these shares within 60 days, including any right to acquire through the exercise of any option, warrant or right. Unless otherwise indicated, the address for each person set forth in the table is c/o Ascent Energy Inc., 4965 Preston Park Blvd., Suite 800, Plano, Texas 75093.

	Shares Beneficially Owned Prior to this Offering and the Recapitalization(1)		Shares Beneficially Owned After this Offering and the Recapitalization(2)
			Number		%
Name of beneficial owner	Number	%	Assuming No Exercise of Underwriters’ Option	Assuming Full Exercise of Underwriters’ Option	Assuming No Exercise of Underwriters’ Option	Assuming Full Exercise of Underwriters’ Option
South Louisiana Property Holdings, Inc. (3)
Jefferies Group, Inc. (4)
Jefferies & Company, Inc. (5)
Jefferies Capital Partners (6)
Jefferies Partners Opportunity Fund, L.L.C.
Jefferies Partners Opportunity Fund II, L.L.C.
ING Furman Selz Investors III, L.P.
Brian P. Friedman (7)
TCW Funds (8)
Terry W. Carter
Eddie M. LeBlanc, III
David L. McCabe
Steve Limke
David A. Rice
James L. Luikart (6)
Stuart B. Katz (6)
Robert J. Welch (5)
All directors and executive officers as a group (8 persons)

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* Less than 1%.

(1) Based on an aggregate of              shares of common stock issued and outstanding after giving pro forma effect to the             -for-1 reverse stock split expected to be effected in connection with this offering.

(2) Assumes the issuance of              shares of common stock in this offering,              shares of common stock in the Recapitalization, if the underwriters do not exercise in full their option to purchase additional shares of our common stock and              shares of common stock in the Recapitalization if the underwriters exercise in full their option to purchase additional shares of our common stock. Gives effect to the             -for-1 reverse stock split expected to be effected in connection with this offering.

(3) The Jefferies Investors, which includes Jefferies & Company, Inc., Jefferies Capital Partners, Jefferies Partners Opportunity Fund, L.L.C., Jefferies Partners Opportunity Fund II, L.L.C. and ING Furman Selz Investors III, L.P. (as well as certain other affiliated funds or persons not named in the table above), and the TCW Funds beneficially own approximately 77.4% and 17.6%, respectively, of the total outstanding voting power of SLPH. In addition, The Jefferies Investors and the TCW Funds are each entitled to designate one member of SLPH’s four member board of directors.

(4) Represents              shares issuable upon exercise of immediately exercisable warrants which includes              shares issuable upon exercise of warrants held by Jefferies & Company, Inc.;              shares issuable upon exercise of warrants held by Jefferies Partners Opportunity Fund, L.L.C.;              shares issuable upon exercise of warrants held by Jefferies Partners Opportunity Fund II, L.L.C.;              shares issuable upon exercise of warrants held by Jefferies Employee Opportunity Fund, L.L.C.;              shares issuable upon exercise of warrants held by Chris Kanoff, an employee of Jefferies & Company, Inc.;              shares issuable upon exercise of warrants held by ING Furman Selz Investors III, L.P.;              shares issuable upon exercise of warrants held by ING Barings U.S. Leveraged Equity Plan LLC; and              shares issuable upon exercise of warrants held by ING Barings Global Leveraged Equity Plan Ltd. Jefferies Group, Inc. may be deemed the beneficial owner of each of these shares issuable upon exercise of warrant due to its relationship as parent or affiliate to each of the entities listed in this footnote. Also includes the shares held by SLPH because Jefferies Group, Inc. may be deemed the beneficial owner of these shares. The address for Jefferies Group, Inc. is 520 Madison Avenue, New York, New York 10022.

(5) Represents             shares issuable upon exercise of immediately exercisable warrants which includes              shares issuable upon exercise of warrants held by Jefferies Partners Opportunity Fund, L.L.C.;              shares issuable upon exercise of warrants held by Jefferies Partners Opportunity Fund II, L.L.C.;              shares issuable upon exercise of warrants held by Jefferies Employees Opportunity Fund, L.L.C; and              shares issuable upon exercise of warrants held by Chris Kanoff, an employee of Jefferies & Company, Inc. Jefferies & Company, Inc. may be deemed the beneficial owner of each of these shares issuable upon exercise of warrants due to its relationship as an affiliate to each of the entities listed in this footnote. Also includes the shares held by SLPH because Jefferies & Company, Inc. may be deemed the beneficial owner of these shares. Mr. Welch is an officer of Jefferies & Company, Inc., however, he does not have dispositive or voting power over the shares issuable upon exercise of warrants which may be deemed beneficially owned by Jefferies & Company, Inc. Therefore, the shares included in the table for Mr. Welch do not include the shares issuable upon exercise of warrants which may be deemed beneficially owned by Jefferies & Company, Inc. or the shares held by SLPH. In addition, Jefferies & Company, Inc. and its other affiliated funds contained in this footnote have an option to purchase             shares issuable upon exercise of warrants held by Jefferies Capital Partners. The address for each of Jefferies & Company, Inc. and Mr. Welch is 520 Madison Avenue, New York, New York 10022.

(6) Jefferies Capital Partners includes ING Furman Selz Investors III, L.P., ING Barings U.S. Leveraged Equity Plan Ltd. and ING Baring Global Leveraged Equity Plan Ltd., which are affiliates of each other and of the other members of The Jefferies Investors. Represents             shares issuable upon exercise of immediately exercisable warrants which includes shares issuable upon exercise of warrants held by ING Furman Selz Investors III, L.P.;             shares issuable upon exercise of warrants held by ING Barings U.S. Leveraged Equity Plan Ltd.; and             shares issuable upon exercise of warrants held by ING Baring Global Leveraged Equity Plan Ltd. Mr. Luikart may be deemed to have beneficial ownership of the shares issuable

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upon exercise of warrants held by Jefferies Capital Partners because he is one of two managing members of Jefferies Capital Partners. Mr. Katz may be deemed to have beneficial ownership of the shares issuable upon exercise of warrants held by Jefferies Capital Partners because he is an officer and managing director of Jefferies Capital Partners. The address for each of Messrs. Katz and Luikart and Jefferies Capital Partners is c/o Jefferies Capital Partners, 520 Madison Avenue, New York, New York 10022.

(7) Mr. Friedman is one of two managing members of Jefferies Capital Partners and shares voting power over the securities managed by Jefferies Capital Partners with Mr. Luikart. As a result of his relationship with Jefferies Capital Partners, the shares included for Mr. Friedman represent all shares issuable upon exercise of warrants which may be deemed beneficially owned by Jefferies Capital Partners. Mr. Friedman is also a director and executive officer of Jefferies Group, Inc. and the chairman of the executive committee of the broad of directors of Jefferies & Company, Inc.; however, he does not have dispositive or voting power over the shares issuable upon exercise of warrants or the shares held by SLPH which may be deemed beneficially owned by Jefferies Group, Inc. or Jefferies & Company, Inc. Therefore, the shares included in the table for Mr. Friedman do not include the shares issuable upon exercise of warrants which may be deemed beneficially owned by Jefferies Group, Inc. or Jefferies & Company, Inc.

(8) Represents              shares issuable upon exercise of immediately exercisable warrants, which includes              shares issuable upon exercise of warrants held by TCW Leveraged Income Trust, IV, L.P.;              shares issuable upon exercise of warrants held by TCW Shared Opportunity Fund, III, L.P.;              shares issuable upon exercise of warrants held by Shared Opportunity Fund, IIB, L.L.C.;              shares issuable upon exercise of warrants held by TCW/Crescent Mezzanine Partners, L.P.;              shares issuable upon exercise of warrants held by TCW/Crescent Mezzanine Trust; and              shares issuable upon exercise of warrants held by TCW/Crescent Mezzanine Investment Partners, L.P. The investment adviser to TCW/Crescent Mezzanine Partners, L.P., TCW/Crescent Mezzanine Trust and TCW/Crescent Mezzanine Investment Partners, L.P. is TCW/Crescent Mezzanine LLC, an SEC registered adviser. The investment adviser to TCW Leveraged Income Trust L.P., Shared Opportunity Fund IIB LLC and TCW Shared Opportunity Fund III, L.P. is TCW Asset Management Company, an SEC-registered investment adviser. As investment advisers to the TCW Funds, TCW/Crescent Mezzanine LLC and TCW Asset Management Company have authority to vote and direct the disposition of shares held by the funds they advise. The address of the TCW Funds is 11100 Santa Monica Blvd., Suite 2000, Los Angeles, California 90025.

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DESCRIPTION OF CAPITAL STOCK

The following summary of our capital stock, our amended and restated certificate of incorporation and our amended and restated bylaws is qualified in its entirety by reference to the provisions of the DGCL, and to the complete terms of our capital stock contained in the form of our amended and restated certificate of incorporation and the form of our amended and restated bylaws, both of which have been filed as exhibits to the registration statement of which this prospectus is a part.

Upon the completion of this offering and the Recapitalization, we will be authorized to issue              shares of common stock, par value $0.001 per share, and              shares of preferred stock, par value $0.001 per share, and we will have outstanding              shares of common stock and no shares of preferred stock. In addition, our board of directors will have reserved              shares of common stock for issuance under our 2006 Long-Term Incentive Plan.

Common Stock

Subject to any special voting rights of any series of preferred stock that we may issue in the future, each share of common stock has one vote on all matters voted on by our stockholders, including the election of our directors. Because holders of common stock do not have cumulative voting rights, the holders of a majority of the shares of common stock can elect all of the members of the board of directors standing for election, subject to the rights, powers and preferences of any outstanding series of preferred stock.

No share of common stock affords any preemptive rights to acquire unissued shares of common stock or is convertible, redeemable, assessable or entitled to the benefits of any sinking or repurchase fund. Holders of common stock will be entitled to dividends in the amounts and at the times declared by our board of directors in its discretion out of funds legally available for the payment of dividends. See “Dividend Policy.”

Holders of common stock will share equally in our assets on liquidation after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding. All outstanding shares of common stock are fully paid and non-assessable.

Preferred Stock

At the direction of our board of directors, we may issue shares of preferred stock from time to time. Our board of directors may, without any action by holders of the common stock, adopt resolutions to issue preferred stock in one or more classes or series, fix or change the number of shares constituting any class or series of preferred stock and establish or change the rights of the holders of any class or series of preferred stock. The rights of any class or series of preferred stock may include, among others, general or special voting rights, preferential liquidation or preemptive rights, preferential cumulative or noncumulative dividend rights, redemption or put rights and conversion or exchange rights. We may issue shares of, or rights to purchase, preferred stock, the terms of which might adversely affect voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock, discourage an unsolicited proposal to acquire us or facilitate a particular business combination involving us. Any of these actions could discourage a transaction that some or a majority of our stockholders might believe to be in their best interests or in which our stockholders might receive a premium for their common stock over its then-market price.

Anti-Takeover Provisions

General

Our amended and restated certificate of incorporation and amended and restated bylaws will contain the following additional provisions, some of which are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by our board of directors. In addition, some provisions of the DGCL, if applicable to us, may hinder or delay an attempted takeover without prior approval of our board of directors. Provisions of the DGCL and of our amended and restated certificate of

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incorporation and amended and restated bylaws could discourage attempts to acquire us or remove incumbent management even if some or a majority of our stockholders believe this action is in their best interest. These provisions could, therefore, prevent stockholders from receiving a premium over the market price for the shares of common stock they hold.

Classified Board

Our amended and restated certificate of incorporation will provide that our board of directors will be divided into three classes of directors, with the classes to be as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board. Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the number of directors will be fixed from time to time exclusively pursuant to a resolution adopted by the board; provided, however, that such number shall be not less than three and not greater than 15.

Filling Board of Directors Vacancies; Removal

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by the affirmative vote of a majority of our directors then in office, though less than a quorum. Each director will hold office until his or her successor is elected and qualified, or until the director’s earlier death, resignation, retirement or removal from office. Any director may resign at any time upon written notice to us. Our amended and restated certificate of incorporation and amended and restated bylaws will provide, in accordance with the DGCL, that, subject to the rights, powers and preferences of any outstanding series of preferred stock, the stockholders may remove directors only by a majority vote and for cause. We believe that the removal of directors by the stockholders only for cause, together with the classification of the board of directors, will promote continuity and stability in our management and policies and that this continuity and stability will facilitate long-range planning.

Call Of Special Meetings

Our amended and restated bylaws will provide that special meetings of our stockholders may be called at any time only by the board of directors acting pursuant to a resolution adopted by the board of directors or by the chairman of the board of directors, but not the stockholders.

Advanced Notice Requirements for Stockholder Proposals and Director Nominations

Our amended and restated bylaws will provide that stockholders seeking to bring business before or to nominate candidates for election as directors at an annual meeting of stockholders must provide timely notice of their proposal in writing to our corporate secretary. To be timely, a stockholder’s notice must be delivered to our corporate secretary at our principal executive offices no later than the 90th day or earlier than the 120th day before the first anniversary of the preceding year’s annual meeting. If, however, the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the stockholder in order to be timely must be delivered to our corporate secretary no later than the 90th day before the annual meeting or the tenth day following the day on which the date of the annual meeting is publicly announced, whichever is later, and no earlier than the 120^th day prior to the annual meeting. The first anniversary of our first annual meeting of stockholders will be deemed to be                     , 2007 pursuant to our amended and restated bylaws. Our amended and restated bylaws will also specify requirements as to the form and content of a stockholder’s notice. Our amended and restated bylaws will also provide advance notice requirements for stockholders to bring business before, or nominate candidates for election as directors at, our annual meeting of stockholders. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders or may discourage or defer a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of us.

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No Cumulative Voting

The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless amended and restated our certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation will not provide for cumulative voting. Under cumulative voting, a majority stockholder holding a sufficient percentage of a class of shares may be able to ensure the election of one or more directors.

Authorized but Unissued Shares

Our amended and restated certificate of incorporation will provide that the authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to various limitations imposed by The Nasdaq National Market. These additional shares may be used for a variety of corporate purposes, including future private or public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could make it more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Amendments to our Certificate of Incorporation and Bylaws

Our amended and restated certificate of incorporation will provide that it can be amended in accordance with the DGCL. Our amended and restated certificate of incorporation will permit our board of directors to adopt, amend and repeal our amended and restated bylaws. Our amended and restated bylaws will provide that our amended and restated bylaws can be amended by either our board of directors or the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of our capital stock.

Delaware Anti-Takeover Statute

Upon the completion of this offering, we will be subject to Section 203 of the DGCL, which is an anti-takeover law. In general, this section prevents us, under certain circumstances, from engaging in a “business combination” with (1) a stockholder who owns 15% or more of our outstanding voting stock, otherwise known as an “interested stockholder;” (2) an affiliate of an interested stockholder; or (3) an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder. A “business combination” includes a merger or sale of 10% or more of our assets. However, the above provisions of Section 203 do not apply if (1) prior to the time the stockholder became an interested stockholder, our board of directors approves the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (2) upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding shares owned by our officers and directors and certain employee benefit plans; or (3) at or prior to the time the stockholder became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of our stockholders (and not by written consent) by the affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder. This statute could prohibit or delay mergers or other change in control attempts, and thus may discourage attempts to acquire us.

Delaware Business Opportunity Statute

As permitted by Section 122(17) of the DGCL, our amended and restated certificate of incorporation will provide that we can renounce any interest or expectancy in any business opportunity or transaction involving the natural gas or oil business in which any of our non-employee directors and their respective affiliates participate, or seek to participate, subject to certain exceptions. Certain of our institutional investors required this provision because they have or may have other investments in entities that conduct operations in the natural gas and oil industry.

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Limitation of Liability of Officers and Directors

Our amended and restated certificate of incorporation will provide that no director shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

• any breach of the director’s duty of loyalty to us or our stockholders;

• acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

• payment of unlawful dividends and certain other actions prohibited by the DGCL; and

• any transaction from which the director derived an improper personal benefit.

The effect of these provisions is to eliminate our rights and the rights of our stockholders to recover monetary damages against a director for a breach of the fiduciary duty of care, including breaches resulting from negligent or grossly negligent behavior, except in the situations described above. This provision will not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission in the event of a breach of a director’s duty of care.

Our amended and restated bylaws will also provide that we will indemnify officers and directors against losses that they may incur in investigations and legal proceedings resulting from their services to us.

Our amended and restated bylaws will further provide that:

• we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law, subject to limited exceptions;

• we may indemnify our other employees and agents to the extent that we indemnify our officers and directors, unless otherwise required by law, our amended and restated certificate of incorporation, our amended and restated bylaws or agreements to which we are a party;

• we are required to advance expenses, as incurred, to our directors and officers in connection with a legal proceeding to the fullest extent permitted by Delaware law, subject to limited exceptions; and

• we are required to pay within 60 days reasonable amounts related to a settlement or judgment, subject to limited exceptions.

Transfer Agent and Registrar

The transfer agent and registrar of our common stock is                     .

Record Ownership

As of March 31, 2006, we had approximately 61 holders of record of our common stock.

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U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

The following is a summary of certain U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a non-U.S. holder (as defined below) as of the date hereof. Except where noted, this summary deals only with a non-U.S. holder that holds our common stock as a capital asset (generally, as an investment).

For purposes of this summary, a “non-U.S. holder” means a beneficial owner of our common stock that is not any of the following for U.S. federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

• an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

• a trust, if its administration is subject to the primary supervision of a court within the U.S. and one or more United States persons have the authority to control all of its substantial decisions, or it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.

An individual may be treated as a resident of the United States in any calendar year for U.S. federal income tax purposes, instead of a nonresident, by, among other ways, being present in the United States for at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of the 183-day calculation, all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year are counted. Residents are taxed for U.S. federal income tax purposes as if they were U.S. citizens.

This summary is based upon provisions of the Code and regulations, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income or estate tax consequences different from those summarized below. This summary does not represent a detailed description of the U.S. federal income or estate tax consequences to you in light of your particular circumstances. In addition, this discussion does not consider:

• U.S. state or local or non-U.S. tax consequences;

• all aspects of U.S. federal income and estate taxes or specific facts and circumstances that may be relevant to a particular non-U.S. holder’s tax position, including the fact that in the case of a non-U.S. holder that is an entity treated as a partnership for U.S. federal income tax purposes, the U.S. tax consequences of holding and disposing of our common stock may be affected by certain determinations made at the partner level;

• the tax consequences for the stockholders, partners or beneficiaries of a non-U.S. holder;

• special tax rules that may apply to particular non-U.S. holders, such as financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, broker-dealers, and traders in securities; or

• special tax rules that may apply to a non-U.S. holder that holds our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment.

If you are considering the purchase of our common stock, you are urged to consult your own tax adviser concerning the particular U.S. federal tax consequences to you of the ownership and disposition of the common stock, as well as the consequences to you arising under the laws of any other taxing jurisdiction, including any state, local or foreign income tax consequences.

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Dividends

We do not anticipate paying cash dividends on our common stock in the foreseeable future. See “Dividend Policy.” If dividends are paid on shares of our common stock, however, such dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by a non-U.S. holder within the United States and, where an income tax treaty applies, are attributable to a U.S. permanent establishment of the non-U.S. holder, are not subject to this withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable individual or corporate rates. Certain certification and disclosure requirements must be complied with in order for effectively connected income to be exempt from this withholding tax. Any such effectively connected dividends received by a foreign corporation may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

A non-U.S. holder of our common stock who wishes to claim the benefit of an applicable treaty rate (and avoid backup withholding as discussed below) for dividends, will be required to satisfy the relevant certification requirements. Special certification and other requirements apply to certain non-U.S. holders that are entities rather than individuals.

A non-U.S. holder of our common stock eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to gain recognized on a sale or other disposition of our common stock unless:

• the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (in which case, for a non-U.S. holder that is a foreign corporation, the branch profits tax described above may also apply), and, where a tax treaty applies, is attributable to a U.S. permanent establishment of the non-U.S. holder; in these cases, the gain will be taxed on a net income basis at the rates and in the manner applicable to United States persons, and if the non-U.S. holder is a foreign corporation, the branch profits tax described above may also apply;

• in the case of a non-U.S. holder who is an individual and holds the common stock as a capital asset, such holder is present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met; or

• we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes.

We believe that we are a United States real property holding corporation for U.S. federal income tax purposes. Generally, a corporation is a United States real property holding corporation if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. However, the tax relating to stock in a United States real property holding corporation generally will not apply to a non-U.S. holder whose holdings, direct and indirect, at all times during the applicable period, constituted 5% or less of our common stock, provided that our common stock was regularly traded on an established securities market. Non-U.S. holders that may be treated as beneficially owning more than 5% of our common stock should consult their tax advisers with respect to the U.S. federal income tax consequences of the ownership and disposition of our common stock.

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Federal Estate Tax

Common stock held by an individual non-U.S. holder at the time of death will be included in such holder’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise, and therefore may be subject to U.S. estate tax.

Information Reporting and Backup Withholding

We must report annually to the IRS and to each non-U.S. holder the amount of dividends paid to such holder and the tax withheld (if any) with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and any withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty. In addition, dividends paid to a non-U.S. holder generally will be subject to backup withholding unless applicable certification requirements are met and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined under the Code, or such holder otherwise establishes an exemption.

Payment of the proceeds of a sale of our common stock effected by or through a U.S. office of a broker is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is not a United States person (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person) or the holder otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of the proceeds of a sale of our common stock if the transaction is effected outside the United States by or through a non-U.S. office of a broker. However, if the broker is, for U.S. federal income tax purposes, a United States person, a “controlled foreign corporation,” a foreign person 50% or more of whose gross income from a specified period is effectively connected with the conduct of a trade or business in the United States, or a foreign partnership with various connections with the United States, information reporting, but not backup withholding, will apply unless the broker has documentary evidence in its records that you are a non- U.S. holder and certain other conditions are met, or you otherwise establish an exemption.

Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such holder’s U.S. federal income tax liability provided the required information is furnished to the IRS.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could cause the market price of our common stock to fall and could affect our ability to raise capital on terms favorable to us in the future.

After this offering and the consummation of the Recapitalization, we will have outstanding              shares of common stock. Of these shares, the                      shares that we are selling in this offering, or              shares if the underwriters exercise in full their option to purchase additional shares of our common stock, and the              shares held by the stockholders of Ascent other than its Parent prior to this offering, will be freely tradable without restriction under the Securities Act except for any shares purchased, acquired or held by our “affiliates” as defined in Rule 144 under the Securities Act. All of the other shares outstanding (a total of              shares) will be “restricted securities” within the meaning of Rule 144 under the Securities Act because they will be issued in the Recapitalization. Restricted securities may be sold in the public market only if the sale is registered under the Securities Act or if it qualifies for an exemption from registration, such as under Rule 144 under the Securities Act, which is summarized below. We believe that substantially all of the shares of our common stock issued in the Parent Merger will be eligible for resale under Rule 144 beginning on the first anniversary of the Parent Merger, subject to volume limitations and the other restrictions contained in Rule 144 and the lock-up arrangements described below. We believe that substantially all of the other              shares of our common stock issued in the Recapitalization will be eligible for resale under Rule 144 upon the consummation of the Recapitalization, subject to volume limitations and the other restrictions contained in Rule 144 and the lock-up arrangements described below.

All of our directors and executive officers have agreed that they will not, without the prior written consent of the representatives of the underwriters, sell or otherwise dispose of any shares of common stock or options to acquire shares of common stock during the 180-day period following the closing of this offering. See “Underwriting.”

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares that are restricted securities for at least one year, including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

• one percent of the number of shares of our common stock then outstanding, which will equal approximately             shares immediately after this offering and the Recapitalization; or

• the average weekly trading volume of the common stock on The Nasdaq National Market during the four calendar weeks preceding the filing with the SEC of a notice on Form 144 with respect to the sale.

Sales under Rule 144 also are subject to manner-of-sale provisions and notice requirements and to the availability of current public information about us.

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner except an affiliate, is entitled to sell those shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Rule 701

Rule 701 permits resales of shares in reliance on Rule 144 but without compliance with specified restrictions of Rule 144. Any of our employees, officers, directors, consultants or advisors who receives shares upon exercise of options granted prior to the offering may be entitled to rely on the resale provisions of Rule 701.

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Rule 701 permits our affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell those shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling those shares. After the expiration of that 90-day period,             shares subject to outstanding options could be sold under Rule 701.

Registration Rights

Certain holders of our shares will also have demand registration rights for four separate registrations beginning 185 days after the registration of our common stock under the Exchange Act and specified piggyback registration rights, in each case in accordance with a registration rights agreement that we have entered into with these holders. See “Related Party Transactions—Registration Rights.”

Stock Options

Following the consummation of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of common stock to be reserved for issuance under our 2006 Long-Term Incentive Plan. Based on the number of shares to be reserved for issuance under our 2006 Long-Term Incentive Plan, that registration statement would cover up to             shares issuable on exercise of options, of which options to purchase             shares will have been granted as of the date of this offering. The registration statement on Form S-8 will automatically become effective upon filing and will permit the resale of these shares by nonaffiliates in the public market without restriction under the Securities Act, upon expiration of the lock-up period described above. Shares registered under the Form S-8 registration statement held by affiliates will be subject to the Rule 144 volume limitations.

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UNDERWRITING

Lehman Brothers Inc. and Jefferies & Company, Inc. are acting as joint book-running managers and as representatives of the underwriters of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective number of shares of common stock shown opposite its name below:

Underwriters	Number of Shares
Lehman Brothers Inc.
Jefferies & Company, Inc.
Total

The underwriting agreement provides that the underwriters’ obligation to purchase shares of our common stock depends on the satisfaction of the conditions contained in the underwriting agreement, including:

• the obligation to purchase all of the shares of common stock offered hereby (other than those shares of common stock covered by their option to purchase additional shares as described below);

• the representations and warranties made by us to the underwriters are true;

• there is no material change in the financial markets; and

• we deliver customary closing documents to the underwriters.

Commissions and Expenses

The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares. The underwriting discount is the difference between the initial public offering price and the amount the underwriters pay to us for the shares.

	No Exercise	Full Exercise
Per share
Total

The representatives of the underwriters have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the front cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $             per share. After the offering, the representatives may change the offering price and other selling terms.

The expenses of the offering that are payable by us are estimated to be $             (excluding underwriting discounts and commissions).

Option to Purchase Additional Shares

We have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of              additional shares of our common stock at the public offering price less underwriting discounts and commissions. This option may be exercised if the underwriters sell more than              shares of our common stock in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriter’s percentage underwriting commitment in the offering as indicated in the table at the beginning of this “Underwriting” section.

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Lock-Up Agreements

We, all of our directors and executive offers and certain of our stockholders have agreed that, without the prior written consent of Lehman Brothers Inc., we will not directly or indirectly (1) offer for sale, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of our common stock (including, without limitation, shares of our common stock that may be deemed to be beneficially owned in accordance with the rules and regulations of the SEC and shares of our common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock, (3) make any demand for the filing of, exercise any right to have filed or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of our common stock or securities convertible, exercisable into our common stock or any of our other securities, or (4) publicly disclose the intention to do any of the foregoing for a period of 180 days after the date of this prospectus.

The 180-day restricted period described in the preceding paragraph will be extended if:

• during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event relating to us; or

• prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.

Lehman Brothers Inc., in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release the common stock and other securities from lock-up agreements, Lehman Brothers Inc. will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time.

Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated among the qualified independent underwriter, the representatives and us. In determining the initial public offering price of our common stock, the qualified independent underwriter and the representatives will consider:

• the history and prospects for the industry in which we compete;

• our financial information;

• the ability of our management and our business potential and earning prospects;

• the prevailing securities markets at the time of this offering; and

• the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and to contribute to payments that the underwriters may be required to make for these liabilities.

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Stabilization, Short Positions and Penalty Bids

The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act:

• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

• A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

• Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

• Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling

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group member is not part of, and will not be deemed incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

The Nasdaq National Market

We intend to apply to list our shares of common stock for quotation on The Nasdaq National Market under the symbol “            .”

Discretionary Sales

The underwriters have informed us that they do not intend to confirm sales to discretionary accounts without the prior written approval of the customer.

Stamp Taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the front cover of this prospectus.

Relationships

Jefferies Group, Inc., which is the parent company of Jefferies & Company, Inc., one of the underwriters in this offering, is an investor in certain funds managed by certain of The Jefferies Investors and has an interest in a portion of the incentive fees earned by certain of The Jefferies Investors. Further, the chairman of the executive committee of the board of directors of Jefferies & Company, Inc., is also a director of Jefferies Group, Inc. and a managing member of certain of The Jefferies Investors. In addition, The Jefferies Investors, including Jefferies & Company, Inc., are beneficial owners of certain of the indebtedness to be repaid with a portion of the net proceeds of this offering and of certain other securities expected to be exchanged for our common stock in the Recapitalization. As a result of these and other relationships between Jefferies & Company, Inc. and us, the National Association of Securities Dealers, Inc., or NASD, may view this offering as a participation by Jefferies & Company, Inc. in the distribution in a public offering of securities issued by a company with which Jefferies & Company, Inc. has a conflict of interest. When a member of the NASD with a conflict of interest participates as an underwriter in a public offering, Rule 2720 of the Conduct Rules of the NASD requires that the initial public offering price be no higher than that recommended by a “qualified independent underwriter,” as defined by the NASD. In accordance with this rule, Lehman Brothers Inc. is acting as a qualified independent underwriter in the offering, and the initial public offering price of the shares will not be higher than the price recommended by Lehman Brothers Inc.

Jefferies & Company, Inc. has in the past performed investment banking and advisory services for us and has received customary fees and expenses for such services. The underwriters may perform investment banking and advisory services for us from time to time for which they may in the future receive customary fees and expenses. In addition, the underwriters may, from time to time, engage in transactions with or perform services for us in the ordinary course of their business.

Foreign Selling Restrictions

United Kingdom

This prospectus is only being distributed to and is only directed (i) at persons who are outside the United Kingdom, (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order, or (iii) to high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (e) of the Order (all such persons

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together being referred to as “relevant persons”). The shares of common stock are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such common stock will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.

Each of the underwriters has represented and agreed that:

(a) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to us, and

(b) it has complied with, and will comply with, all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

• to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

• to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

• in any other circumstances which do not require the publication by Ascent of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

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LEGAL MATTERS

The validity of the issuance of the shares of common stock offered by this prospectus will be passed on for us by Vinson & Elkins L.L.P., Houston, Texas. Certain legal matters relating to the common stock offered by this prospectus will be passed on by Akin Gump Strauss Hauer & Feld LLP, Houston, Texas, as counsel for the underwriters.

EXPERTS

The consolidated financial statements of Ascent Energy Inc. at December 31, 2004 and 2005, and for each of the three years in the period ended December 31, 2005, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

In May 2006, Ernst & Young LLP informed us that the India member firm of E&Y Global, or Ernst & Young India, had a business arrangement with an affiliate of Jefferies Group, Inc. in the United Kingdom that raises questions under the SEC’s auditor independence rules regarding Ernst & Young’s independence in its performance of audit services for us because another affiliate of Jefferies Group, Inc. is a substantial shareholder of us. Commencing in 2005 and continuing through June 2006, Ernst & Young India had a business arrangement with Jefferies International Limited, or JIL, pursuant to which Ernst & Young India introduced JIL to third parties desiring to undertake capital raising transactions and also provided advisory services, along with JIL, to these third parties in connection with capital raising transactions. Three such transactions were successfully completed pursuant to this business arrangement, and Ernst & Young India received payments from JIL for certain transactions pursuant to this arrangement. We have been advised by Ernst & Young and Jefferies Group, Inc., which is the parent company of JIL, that the business arrangement between Ernst & Young India and JIL was terminated in June 2006.

Our board of directors and Ernst & Young have separately considered the impact that this business relationship may have had on Ernst & Young’s independence with respect to us. Ernst & Young has concluded that there has been no impairment of Ernst & Young’s independence with respect to us. Our board of directors has concluded that Ernst & Young has been capable of exercising objective and impartial judgment in connection with its audits of us and therefore is of the opinion that Ernst & Young was independent with respect to us. In making this determination, both our board of directors and Ernst & Young considered, among other things, the following:

• All services provided to us by Ernst & Young were permissible under the SEC’s auditor independence rules.

• Neither The Jefferies Investors nor JIL is involved in our day-to-day management or operations.

• Our management, and not The Jefferies Investors or JIL, pre-approves the selection of our auditors and our non-audit service providers.

• The business arrangement was not entered into by Jefferies Group, Inc. or The Jefferies Investors, but by Ernst & Young India and JIL, none of which had involvement with us or our Ernst & Young audit engagement team.

• JIL is not a shareholder of Ascent and its relationship with us is solely as an affiliate of Jefferies Group, Inc., which through another of its affiliates is a substantial shareholder of Ascent.

• Our Ernst & Young audit engagement team had no knowledge of the business arrangement between JIL and Ernst & Young India until recently when performing Ernst & Young’s independence procedures relating to this offering. By that time, the audit of our financial statements was substantially complete.

• We have no operations in India, and no personnel from Ernst & Young India were involved in the audits of us.

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• Ernst & Young and Jefferies Group, Inc. took prompt corrective action upon learning of the possible impact these matters in India could have had on the independence of Ernst & Young as our auditors.

In making its determination, our board of directors also relied as to factual matters on representations made to it by Jefferies Group, Inc. and Ernst & Young.

The information included in this prospectus regarding estimated quantities of proved reserves, the future net revenues from those reserves and their present value is based, in part, on estimates of the proved reserves and present values of proved reserves as of December 31, 2004 and 2005, in each case prepared or derived from estimates prepared by Netherland, Sewell & Associates, Inc., independent reserve engineering firm. The summary pages of their reports are included in this prospectus as Appendix B. These estimates are included in this prospectus in reliance upon the authority of the firm as experts in these matters.

The information included in this prospectus regarding estimated quantities of proved reserves, the future net revenues from those reserves and their present value is based, in part, on estimates of the proved reserves and present values of proved reserves as of December 31, 2004 and 2005, in each case prepared or derived from estimates prepared by LaRoche Petroleum Consultants, Ltd., independent reserve engineering firm. The summary pages of their reports are included in this prospectus as Appendix C. These estimates are included in this prospectus in reliance upon the authority of the firm as experts in these matters.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC for the common stock we are offering by this prospectus. This prospectus does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. When we complete this offering, we will be required to file annual, quarterly and special reports, proxy statements and other information with the SEC.

You can read our SEC filings, including the registration statement, over the Internet at the SEC’s web site at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by calling the Public Reference Room of the SEC at 1-800-SEC-0330.

Our website on the Internet is located at www.ascentenergy.info, and we expect to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our web site, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our web site or any other web site is not incorporated into this prospectus and does not constitute a part of this prospectus. You may also request a copy of these filings at no cost, by writing or telephoning us at the following address: Ascent Energy Inc., Attention: Chief Financial Officer, 4965 Preston Park Blvd., Suite 800, Plano, Texas 75093, (972) 543-3900.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2004 and December 31, 2005 and March 31, 2006 (unaudited)	F-3
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2005 and for the three months ended March 31, 2005 (unaudited) and March 31, 2006 (unaudited)	F-4
Consolidated Statements of Stockholders’ Deficit and Comprehensive Income (Loss) for each of the three years in the period ended December 31, 2005 and for the three months ended March 31, 2006 (unaudited)	F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2005 and for the three months ended March 31, 2005 (unaudited) and March 31, 2006 (unaudited)	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Ascent Energy Inc.

We have audited the accompanying consolidated balance sheets of Ascent Energy Inc. as of December 31, 2004 and 2005, and the related consolidated statements of operations, stockholders’ deficit and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ascent Energy Inc. at December 31, 2004 and 2005, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with U.S generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations”, and effective January 1, 2005, the Company changed its method of accounting for oil and natural gas properties from the full-cost method to the successful efforts method and retrospectively applied the change to the 2003 and 2004 consolidated financial statements. Also as discussed in Note 2, the 2003 and 2004 consolidated financial statements have been restated to correct an understatement of the income tax benefit and asset retirement obligations.

/s/ ERNST & YOUNG LLP

Dallas, Texas

June 2, 2006

F-2

ASCENT ENERGY INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

	As of December 31,						As of March 31,
	2004			2005			2006
	(Restated)						(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	516		$	1,080		$	594
Oil and gas revenue receivable		6,555			8,939			8,152
Joint interest and other receivables		1,759			877			1,959
Prepaid expenses		277			333			478
Fair value of derivatives		257			236			425
Inventory and other assets		847			776			710
TOTAL CURRENT ASSETS		10,211			12,241			12,318
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, successful efforts method		305,677			336,746			348,929
Unevaluated oil and gas properties		1,437			7,147			14,294
Other property and equipment		7,055			6,298			6,326
		314,169			350,191			369,549
Less—accumulated depreciation, depletion and amortization		(156,389	)		(176,747	)		(181,566	)
Net property and equipment		157,780			173,444			187,983
OTHER ASSETS:
Deferred financing costs		703			760			704
Fair value of derivatives		25			127			116
Escrowed and restricted funds		548			649			654
TOTAL ASSETS	$	169,267		$	187,221		$	201,775
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	3,615		$	3,841		$	6,187
Accrued liabilities		3,985			5,483			7,093
Undistributed oil and gas proceeds		3,487			5,385			4,538
Interest payable		250			343			375
Accrued abandonment cost		85			517			488
Fair value of derivatives		4,333			11,469			11,272
TOTAL CURRENT LIABILITIES		15,755			27,038			29,953
LONG-TERM LIABILITIES:
Bank credit facility		45,265			49,715			57,215
Senior notes		28,612			33,492			33,492
Senior subordinated notes		88,579			99,552			99,552
Interest payable		2,498			2,464			6,728
Fair value of derivatives		3,680			17,043			18,047
Accrued abandonment cost		9,189			10,053			10,441
Deferred income taxes		2,172			1,865			1,865
Series A preferred stock accrued dividends		9,577			12,865			13,676
Commitments and contingencies		–			330			330
STOCKHOLDERS’ DEFICIT:
Series A preferred stock, par value $0.001 per share; 44,100 shares authorized, 41,100 shares issued and outstanding; liquidation preference $1,000 per share		40,054			40,124			40,141
Common stock, par value $0.001 per share; 20,000,000 shares authorized; 5,949,026 shares issued and outstanding		6			6			6
Additional paid-in capital		23,610			23,610			23,610
Accumulated deficit		(99,730	)		(130,936	)		(133,281	)
TOTAL STOCKHOLDERS’ DEFICIT		(36,060	)		(67,196	)		(69,524	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	169,267		$	187,221		$	201,775

The accompanying notes are an integral part of these consolidated financial statements.

F-3

ASCENT ENERGY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended December 31,									Three Months Ended March 31,			Three Months Ended March 31,
	2003			2004			2005			2005			2006
	(Restated)			(Restated)						(Unaudited)
REVENUES:
Oil	$	20,377		$	25,431		$	33,228		$	7,569		$	9,274
Natural gas		24,553			22,021			36,634			7,178			8,669
NGLs		2,027			3,257			3,714			893			754
TOTAL REVENUES		46,957			50,709			73,576			15,640			18,697
COSTS AND EXPENSES:
Production and ad valorem taxes		4,307			3,091			3,332			920			1,079
Lease operating expenses		11,915			12,018			11,594			2,556			3,101
General and administrative expenses		10,388			8,272			8,436			1,772			2,419
Exploration expenses		5,630			854			3,460			185			55
Depreciation, depletion, and amortization		21,539			31,207			20,771			5,530			5,067
Property impairments		3,802			20,711			1,254			—			69
Derivative loss		—			6,604			33,851			16,289			3,033
TOTAL OPERATING EXPENSES		57,581			82,757			82,698			27,252			14,823
LOSS FROM OPERATIONS		(10,624	)		(32,048	)		(9,122	)		(11,612	)		3,874
INTEREST AND OTHER INCOME		7			203			561			52			20
INTEREST EXPENSE		(13,661	)		(16,958	)		(19,496	)		(4,497	)		(5,411	)
LOSS BEFORE INCOME TAXES		(24,278	)		(48,803	)		(28,057	)		(16,057	)		(1,517	)
INCOME TAX BENEFIT		8,624			12,472			209			120			—
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		(15,654	)		(36,331	)		(27,848	)		(15,937	)		(1,517	)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF INCOME TAX OF $273		262			—			—			—			—
NET LOSS		(15,392	)		(36,331	)		(27,848	)		(15,937	)		(1,517	)
PREFERRED STOCK DIVIDENDS		(3,976	)		(3,367	)		(3,358	)		(828	)		(828	)
NET LOSS ATTRIBUTABLE TO COMMON SHARES	$	(19,368	)	$	(39,698	)	$	(31,206	)	$	(16,765	)	$	(2,345	)
NET LOSS PER COMMON SHARE:
Basic and diluted:
Net loss per common share before cumulative effect of change in accounting principle	$	(3.68	)	$	(6.67	)	$	(5.25	)	$	(2.82	)	$	(0.39	)
Cumulative effect of change in accounting principle		0.05			—			—			—			—
Net loss per common share	$	(3.63	)	$	(6.67	)	$	(5.25	)	$	(2.82	)	$	(0.39	)
AVERAGE COMMON SHARES OUTSTANDING		5,334			5,949			5,949			5,949			5,949

The accompanying notes are an integral part of these consolidated financial statements.

F-4

ASCENT ENERGY INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

AND COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Series A Preferred Stock		Series B Preferred Stock			Common Stock		Additional Paid-in Capital		Accumulated Deficit			Other Comprehensive Income (loss)			Total
Balance, December 31, 2002	$	—	$	2,609		$	5	$	20,979	$	(9,361	)	$	(7,268	)	$	6,964
Cumulative effect on prior years of restatements		—		—			—		—		(31,303	)		—			(31,303	)
Net loss attributable to common shares		—		—			—		—		(19,368	)		—			(19,368	)
Other comprehensive income:
Net change in fair value of derivatives, net of income tax of $1,913		—		—			—		—		—			3,120			3,120
Comprehensive loss																	(16,248	)
Mandatory conversion of Series B preferred stock		—		(2,609	)		1		2,608		—			—			—
Balance, December 31, 2003	$	—	$	—		$	6	$	23,587	$	(60,032	)	$	(4,148	)	$	(40,587	)
Net loss attributable to common shares		—		—			—		—		(39,698	)		—			(39,698	)
Other comprehensive income:
Net change in fair value of derivatives, net of income tax of $2,705		—		—			—		—		—			4,148			4,148
Comprehensive loss																	(35,550	)
Issuance of warrants to purchase common stock		—		—			—		23		—			—			23
Reclassification of Series A preferred stock		40,054		—			—		—		—			—			40,054
Balance, December 31, 2004	$	40,054	$	—		$	6	$	23,610	$	(99,730	)	$	—		$	(36,060	)
Net loss attributable to common shares		—		—			—		—		(31,206	)		—			(31,206	)
Amortization of warrants to purchase common stock		70		—			—		—		—			—			70
Balance, December 31, 2005	$	40,124	$	—		$	6	$	23,610	$	(130,936	)	$	—		$	(67,196	)
Net loss attributable to common shares (unaudited)		—		—			—		—		(2,345	)		—			(2,345	)
Amortization of warrants to purchase common stock (unaudited)		17		—			—		—		—			—			17
Balance, March 31, 2006 (unaudited)	$	40,141	$	—		$	6	$	23,610	$	(133,281	)	$	—		$	(69,524	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

ASCENT ENERGY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,									Three Months Ended March 31,			Three Months Ended March 31,
	2003			2004			2005			2005			2006
	(Restated)			(Restated)						(Unaudited)
OPERATING ACTIVITIES:
Loss before cumulative effect of change in accounting principle	$	(15,654	)	$	(36,331	)	$	(27,848	)	$	(15,937	)	$	(1,517	)
Adjustments to reconcile loss before cumulative effect of change in accounting principle to net cash provided by operating activities:
Depletion, depreciation and amortization		21,539			31,207			20,771			5,530			5,067
Property impairments		3,802			20,711			1,254			—			69
Exploratory dry hole costs		1,026			—			—			—			—
Deferred income tax benefit		(8,624	)		(12,472	)		(307	)		(120	)		—
Non-cash interest expense		658			14,655			16,104			3,817			4,320
Non-cash hedging and derivative losses		—			7,731			20,418			14,808			630
Gain on sale of assets		—			(200	)		(658	)		(43	)		(16	)
Other		(52	)		21			6			—			15
Changes in assets and liabilities:
Oil and gas revenue receivable		212			(4	)		(2,347	)		(973	)		787
Other accounts receivable		2,738			(312	)		1,107			478			(1,082	)
Prepaid expenses, inventory and other assets		2,539			(28	)		16			(93	)		(94	)
Interest payable		6,194			103			93			4			32
Accounts payable and accrued liabilities		781			(7,305	)		959			272			3,956
Undistributed oil and gas proceeds		1,753			(355	)		1,675			172			(847	)
Commitments and contingencies		—			—			330			—			—
Escrowed and restricted funds		23			(52	)		(98	)		(5	)		(5	)
Net cash provided by operating activities		16,935			17,369			31,475			7,910			11,315
INVESTING ACTIVITIES:
Capital expenditures		(39,121	)		(22,985	)		(34,588	)		(8,533	)		(19,317	)
Investment in Dyne Exploration Company		—			—			(1,159	)		(1,159	)		—
Sales proceeds		—			401			728			109			16
Net cash used in investing activities		(39,121	)		(22,584	)		(35,019	)		(9,583	)		(19,301	)
FINANCING ACTIVITIES:
Proceeds on bank credit facility		10,865			3,800			9,550			4,150			7,500
Repayments on bank credit facility		(6,500	)		(1,400	)		(5,100	)		(500	)		—
Series B preferred stock dividend paid in cash		(2,129	)		—			—			—			—
Proceeds on promissory notes		24,000			—			—			—			—
Deferred financing costs		—			(750	)		(342	)		—			—
Net cash provided by financing activities		26,236			1,650			4,108			3,650			7,500
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,050			(3,565	)		564			1,977			(486	)
CASH AND CASH EQUIVALENTS—BEGINNING OF YEAR		31			4,081			516			516			1,080
CASH AND CASH EQUIVALENTS—END OF YEAR	$	4,081		$	516		$	1,080		$	2,493		$	594
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	7,247		$	2,200		$	3,299
Cash paid for income taxes	$	19		$	—		$	99

The accompanying notes are an integral part of these consolidated financial statements.

F-6

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

1. ORGANIZATION

Ascent Energy Inc. (“Ascent,” “we” or “us”) is a growth-oriented, independent natural gas and oil company engaged in the acquisition, exploration and development of both conventional and unconventional natural gas and oil properties in Texas, Oklahoma, Louisiana and the Appalachian region.

Ascent Energy Inc., a Delaware corporation, was incorporated on January 9, 2001 as a wholly owned subsidiary of South Louisiana Property Holdings, Inc., a Louisiana corporation formerly known as Forman Petroleum Corporation, which we refer to as the “Parent,” to acquire natural gas and oil properties in Louisiana, Texas and Oklahoma. In July 2001, the Parent contributed to Ascent substantially all of its assets and liabilities. In August 2001, Ascent acquired Pontotoc Production, Inc., an Oklahoma corporation, or Pontotoc, for approximately $48.5 million of cash and 5,323,695 shares of 8% Series B convertible preferred stock, $0.001 par value per share, or Series B preferred stock, of Ascent. We financed a portion of the cash purchase price for the Pontotoc acquisition with a portion of the net proceeds from the sale of $21.1 million of 8% Series A redeemable preferred stock, $0.001 par value per share, or Series A preferred stock, of Ascent. In August 2003, all of the outstanding shares of Series B preferred stock converted automatically into an aggregate of 1,000,000 shares of common stock of Ascent, and we paid all accrued but unpaid dividends in cash. Following the mandatory conversion of the Series B preferred stock, the Parent owns approximately 83% of the issued and outstanding shares of Ascent common stock.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The audited and unaudited consolidated financial statements include the accounts of Ascent and its subsidiaries. Those subsidiaries include Ascent Oil and Gas Inc., Ascent Energy Holdings, Inc., Ascent Louisiana, LLC, Ascent GP, LLC, Ascent LP, LLC, Ascent Operating, LP, Ascent Resources WV, Inc., Pontotoc Acquisition Corp., Dyne Exploration Company, Pontotoc Production Company, Inc., Oklahoma Basic Economy Corporation, Pontotoc Holdings, Inc., and Pontotoc Gathering, L.L.C. All inter-company balances have been eliminated. Certain prior year amounts have been reclassified to conform to current year presentation. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.

Unaudited Periods. The financial information with respect to the three months ended March 31, 2005 and 2006 is unaudited. In the opinion of management, this information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for interim periods are not necessarily indicative of the results of operations for the full fiscal year.

Use of Estimates in the Preparation of Financial Statements. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, equity, revenues and expenses. Our estimates include those related to natural gas and oil revenues, bad debts, natural gas and oil properties, operating expenses, natural gas and oil reserves, abandonment liabilities, contingencies and litigation. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates used in preparation of our financial statements. In addition, alternatives can exist among various accounting methods. In such cases, the choice of accounting method can have a significant impact on reported amounts.

F-7

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Natural Gas and Oil Reserve Estimates. Independent petroleum and geological engineers prepare estimates of our natural gas and oil reserves. Proved reserves, estimated future net revenues and the present value of our reserves are estimated based upon a combination of historical data and estimates of future activity. Our investors should not assume that the present value of our reserves is the current market value of our estimated proved reserves. Consistent with SEC requirements, we have based our present value from proved reserves on prices on the date of the estimate. The reserve estimates are used in calculating depletion, depreciation and amortization and in the assessment of assets for impairment as further discussed below. Significant assumptions are required in the valuation of proved natural gas and oil reserves which, as described herein, may affect the amount at which natural gas and oil properties are recorded. Actual results could differ materially from these estimates.

Revenue Recognition Policy. We follow the accrual method of accounting for revenue recognition and natural gas imbalances. Oil and natural gas revenues are recognized when sales are confirmed or reasonably anticipated and collection of the sales proceeds is probable. Accrued sales are based on field or pipeline volume statements valued at purchaser contract terms. Volumes attributable to natural gas imbalances are valued at published prices for the anticipated settlement date and accrued accordingly. Recognized sales attributable to natural gas imbalances were not significant for the periods presented.

F-8

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Financial Statements. Our audited consolidated financial statements for the years ended December 31, 2003 and December 31, 2004 have been restated to reflect our conversion to the successful efforts method of accounting for our investment in natural gas and oil properties to correct our previously recorded income tax provision and to correct our previously understated asset retirement obligation. The following tables reflect the effects of the restatements, and presents only those line items affected by the restatements. See “—Change in Accounting Principle to Successful Efforts from Full Cost” and “—Asset Retirement Obligation Restatement and Tax Provision Restatement.”

	Year Ended December 31, 2003
	As Previously Reported			Change in Accounting Principle			As Restated for Change in Accounting Principle			Other Restatements			As Restated for Change in Accounting Principle and Other Restatements
	(in thousands, except per share data)
Statements of Operations:
General and administrative expenses	$	8,942		$	1,446		$	10,388		$	—		$	10,388
Exploration expenses		—			5,630			5,630			—			5,630
Depreciation, depletion, and amortization		22,699			(1,699	)		21,000			539			21,539
Property impairments		—			3,802			3,802			—			3,802
TOTAL OPERATING EXPENSES		47,863			9,179			57,042			539			57,581
INCOME (LOSS) FROM OPERATIONS		(906	)		(9,179	)		(10,085	)		(539	)		(10,624	)
INTEREST AND OTHER INCOME (LOSS)		(4	)		—			(4	)		11			7
INTEREST EXPENSE		(13,661	)		—			(13,661	)		—			(13,661	)
LOSS BEFORE INCOME TAXES		(14,571	)		(9,179	)		(23,750	)		(528	)		(24,278	)
INCOME TAX BENEFIT (LOSS)		(90	)		3,603			3,513			5,111			8,624
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		(14,661	)		(5,576	)		(20,237	)		4,583			(15,654	)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF INCOME TAX		(436	)		—			(436	)		698			262
NET INCOME (LOSS)		(15,097	)		(5,576	)		(20,673	)		5,281			(15,392	)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHARES	$	(19,073	)	$	(5,576	)	$	(24,649	)	$	5,281		$	(19,368	)
INCOME (LOSS) PER COMMON SHARE:
Basic and diluted:
Income (loss) before cumulative change in accounting principle	$	(3.49	)	$	(1.05	)	$	(4.54	)	$	0.86		$	(3.68	)
Cumulative effect of change in accounting principle		(0.08	)		—			(0.08	)		0.13			0.05
Net income (loss) attributable to common shares	$	(3.58	)	$	(1.05	)	$	(4.62	)	$	0.99		$	(3.63	)

F-9

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

	Year Ended December 31, 2004
	As Previously Reported			Change in Accounting Principle			As Restated for Change in Accounting Principle			Other Restatements			As Restated for Change in Accounting Principle and Other Restatements
	(in thousands, except per share data)
General and administrative expenses	$	7,807		$	465		$	8,272		$	—		$	8,272
Exploration expenses		—			854			854			—			854
Depreciation, depletion, and amortization		20,755			9,821			30,576			631			31,207
Property impairments		—			20,711			20,711			—			20,711
TOTAL OPERATING EXPENSES		50,275			31,851			82,126			631			82,757
INCOME (LOSS) FROM OPERATIONS		434			(31,851	)		(31,417	)		(631	)		(32,048	)
INTEREST AND OTHER INCOME (LOSS)		221			—			221			(18	)		203
INTEREST EXPENSE		(16,958	)		—			(16,958	)		—			(16,958	)
LOSS BEFORE INCOME TAXES		(16,303	)		(31,851	)		(48,154	)		(649	)		(48,803	)
INCOME TAX BENEFIT (LOSS)		—			12,092			12,092			380			12,472
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		(16,303	)		(19,759	)		(36,062	)		(269	)		(36,331	)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF INCOME TAX		—			—			—			—			—
NET INCOME (LOSS)		(16,303	)		(19,759	)		(36,062	)		(269	)		(36,331	)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHARES	$	(19,670	)	$	(19,759	)	$	(39,429	)	$	(269	)	$	(39,698	)
INCOME (LOSS) PER COMMON SHARE:
Basic and diluted:
Income (loss) before cumulative change in accounting principle	$	(3.31	)	$	(3.32	)	$	(6.63	)	$	(0.05	)	$	(6.67	)
Cumulative effect of change in accounting principle		—			—			—			—			—
Net income (loss) attributable to common shares	$	(3.31	)	$	(3.32	)	$	(6.63	)	$	(0.05	)	$	(6.67	)

	As of December 31, 2004
	(in thousands)
Balance Sheet:
Oil and gas properties, successful efforts method	$	312,281		$	(11,547	)	$	300,734		$	4,943		$	305,677
Unevaluated oil and gas properties		2,289			(852	)		1,437			—			1,437
Other property and equipment		8,150			—			8,150			(1,095	)		7,055
Net property and equipment		322,720			(12,399	)		310,321			3,848			314,169
Less – accumulated depreciation, depletion and amortization		(79,794	)		(79,877	)		(159,671	)		3,282			(156,389	)
Net property and equipment		242,926			(92,276	)		150,650			7,130			157,780
TOTAL ASSETS		254,413			(92,276	)		162,137			7,130			169,267
Accounts payable		3,580			—			3,580			35			3,615
Accrued abandonment cost		—			—			—			85			85
TOTAL CURRENT LIABILITIES		15,635			—			15,635			120			15,755
Accrued abandonment cost		2,523			—			2,523			6,666			9,189
Deferred income taxes		42,478			(35,783	)		6,695			(4,523	)		2,172
Accumulated (deficit) equity		(48,104	)		(56,493	)		(104,597	)		4,867			(99,730	)
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY		15,566			(56,493	)		(40,927	)		4,867			(36,060	)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY		254,413			(92,276	)		162,137			7,130			169,267

F-10

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

	Year Ended December 31, 2003
	As Previously Reported			Change in Accounting Principle			As Restated for Change in Accounting Principle			Other Restatements			As Restated for Change in Accounting Principle and Other Restatements
	(in thousands)
Cash Flows:
OPERATING ACTIVITIES:
Loss before cumulative effect of change in accounting principle	$	(14,661	)	$	(5,576	)	$	(20,237	)	$	4,583		$	(15,654	)
Adjustments to reconcile loss before cumulative effect of change in accounting principle to net cash provided by operating activities
Depletion, depreciation and amortization		23,317			(1,699	)		21,618			(79	)		21,539
Property impairments		—			3,802			3,802			—			3,802
Exploratory dry hole costs		—			1,026			1,026			—			1,026
Deferred income tax benefit		—			(3,603	)		(3,603	)		(5,021	)		(8,624	)
Non-cash interest expense		—			—			—			659			658
Other		—			—			—			(52	)		(52	)
Changes in assets and liabilities:
Accounts Payable		871			—			871			(90	)		781
Net cash provided by (used in) operating activities		22,986			(6,050	)		16,936			—			16,935
INVESTING ACTIVITIES:
Capital expenditures		(45,171	)		6,050			(39,121	)		—			(39,121	)
Net cash (used in) provided by investing activities	$	(45,171	)	$	6,050		$	(39,121	)	$	—		$	(39,121	)
	Year Ended December 31, 2004
	As Previously Reported			Change in Accounting Principle			As Restated for Change in Accounting Principle			Other Restatements			As Restated for Change in Accounting Principle and Other Restatements
	(in thousands)
Cash Flows:
OPERATING ACTIVITIES:
Loss before cumulative effect of change in accounting principle	$	(16,304	)	$	(19,759	)	$	(36,063	)	$	(269	)	$	(36,331	)
Adjustments to reconcile loss before cumulative effect of change in accounting principle to net cash provided by operating activities
Depletion, depreciation and amortization		20,755			9,821			30,576			631			31,207
Property impairments		—			20,711			20,711			—			20,711
Exploratory dry hole costs		—			—			—			—			—
Deferred income tax benefit		—			(12,092	)		(12,092	)		(380	)		(12,472	)
Non-cash interest expense		14,655			—			14,655			—			14,655
Other		—			—			—			18			21
Changes in assets and liabilities:
Accounts Payable		(7,304	)		—			(7,304	)		—			(7,305	)
Net cash provided by (used in) operating activities		18,688			(1,319	)		17,369			—			17,369
INVESTING ACTIVITIES:
Capital expenditures		(24,304	)		1,319			(22,985	)		—			(22,985	)
Net cash (used in) provided by investing activities	$	(23,903	)	$	1,319		$	(22,985	)	$	—		$	(22,584	)

F-11

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Change in Accounting Principle to Successful Efforts from Full Cost. U.S. generally accepted accounting principles allow the option of two acceptable methods for accounting for natural gas and oil properties. The primary differences between the two methods are in the treatment of exploration costs, the computation of depreciation, depletion and amortization and the calculation of property impairments.

Effective January 1, 2005, we changed our accounting method for natural gas and oil properties from the full cost method to the successful efforts method. Management believes that the successful efforts method of accounting is the preferable method in the natural gas and oil industry and that the accounting change will more accurately present the results of our exploration and development activities, minimize asset write-offs caused by temporary declines in natural gas and oil prices and reflect an impairment in the carrying value of our natural gas and oil properties when there has been a permanent decline in their fair value.

We use the successful efforts method of accounting, and, as such, we capitalize all costs related to property acquisitions and successful exploratory wells, all development costs and the costs of support equipment and facilities. All costs related to unsuccessful exploratory wells are expensed. Other exploration costs, including geological and geophysical costs, are expensed as incurred.

Unproved leasehold costs are capitalized and are reviewed periodically for impairment. Costs related to impaired prospects are charged to expense. If natural gas and oil prices decline in the future, some of these unproved prospects may not be economical to develop, which could lead to increased impairment expense.

Costs of development dry holes and proved leaseholds are amortized on the unit-of-production method based on proved reserves on a field basis. The depreciation of capitalized production equipment and drilling costs is based on the unit-of-production method using proved developed reserves on a field basis.

We review our proved natural gas and oil properties for impairment on a field basis. For each field, an impairment provision is recorded whenever events or circumstances indicate that the carrying value of those properties may not be recoverable. The impairment provision is based on the excess of carrying value over fair value. Fair value is defined as the present value of the estimated future net revenues from estimated future production of total proved natural gas and oil reserves based on our expectations of future natural gas and oil prices and costs. Due to the volatility of natural gas and oil prices, it is possible that our assumptions regarding natural gas and oil prices may change in the future and may result in future impairment provisions. We recorded impairment provisions related to our proved natural gas and oil properties of $3.8 million, $20.7 million and $1.3 million for the years ended December 31, 2003, December 31, 2004 and December 31, 2005, respectively. The impairment provision for 2004 resulted primarily from a downward revision of our reserves at our New Taiton field in Texas.

We retrospectively adjusted our financial statements for the periods ending prior to December 31, 2005 to give effect to our change to the successful efforts method of accounting. The effect of the retrospective application, net of income taxes, was a reduction of retained earnings as of December 31, 2004, of $56.5 million, primarily resulting from a reduction of net property, plant and equipment of $92.3 million and a reduction of deferred income tax liability of $35.8 million. The change in accounting method increased our net loss by $5.6 million ($1.05 per basic and diluted share) and $19.8 million ($3.32 per basic and diluted share) for the year ended December 31, 2003 and the year ended December 31, 2004, respectively.

Asset Retirement Obligations. Effective January 1, 2003, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost is capitalized as part of the

F-12

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

related long-lived asset and allocated to expense over the useful life of the asset. Periodic accretion of the discount of the estimated liability is recorded in the income statement. We determine our asset retirement obligation by calculating the present value of estimated cash flows related to the liability.

We escrow a portion of the future abandonment costs of our wells and facilities. Escrowed funds of approximately $0.5 million related to future abandonment costs are included in escrowed and restricted funds on our balance sheets as of December 31, 2004 and December 31, 2005.

Asset Retirement Obligation Restatement and Tax Provision Restatement. During the fourth quarter of 2005, we determined that our initial adoption of SFAS 143 understated our asset retirement obligation. The understatement was primarily attributable to our understating the number of wells subject to future retirement obligations and associated retirement costs on certain properties. Additionally, we overstated the useful lives of a significant portion of our properties which contributed to the understatement of our asset retirement obligation.

We restated our financial statements for the years ended December 31, 2003 and December 31, 2004 to reflect the revision to our asset retirement obligation for those periods. The effect of the restatement at adoption is as follows:

	Initial Adoption			Restated Adoption
	(in thousands)
Natural gas and oil properties	$	1,563		$	6,033
Accumulated depreciation, depletion and amortization		(276	)		1,496
Asset retirement obligation		(1,996	)		(7,103	)
Deferred tax liability		273			(164	)
Cumulative effect of change in accounting principle, net of income tax benefit of $273 at initial adoption and income tax expense of $164 as restated	$	(436	)	$	262

The following table summarizes the changes to our asset retirement obligation for the periods ended December 31, 2004, December 31, 2005 and March 31, 2006:

	Year Ended December 31,						Three Months Ended March 31,
	2004			2005			2006
	(in thousands)
Asset retirement obligations at beginning of period	$	8,319		$	9,274		$	10,570
Accretion expense		868			991			253
Liabilities incurred		135			450			149
Liabilities settled		(48	)		(145	)		(43	)
Asset retirement obligations at year-end		9,274			10,570			10,929
Less: current asset retirement obligations		85			517			488
Long-term asset retirement obligations	$	9,189		$	10,053		$	10,441

During 2005, we reviewed the tax basis of all our related assets and net operating loss carryforwards for the current year and previous four years. As a result of this review, we restated our 2003 financial statements to eliminate the $5.6 million valuation allowance previously recorded for the year ended December 31, 2003. We determined that the valuation allowance recorded during 2003 was not required because the reported gross

F-13

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

federal deferred tax assets were more likely than not fully realizable as an offset against the recorded federal deferred tax liabilities.

The effect of the restatement of our asset retirement obligations, net of income taxes, and our tax provision on the financial statements was an increase in retained earnings as of December 31, 2004 of $4.6 million. The restatement decreased our net loss by $5.3 million ($0.99 per basic and diluted share) for the year ended December 31, 2003, and increased our net loss by $0.3 million ($0.04 per basic and diluted share) for the year ended December 31, 2004.

Depletion, Depreciation and Amortization. We use estimates of proved natural gas and oil reserve quantities to estimate depletion, depreciation and amortization expense using the unit-of-production method of accounting. Depreciation of property and equipment other than natural gas and oil properties is calculated using the straight line method over the useful lives of the assets, ranging from three to seven years. Any change in reserves directly impacts the amount of depreciation, depletion and amortization expense we recognize in a given period. Assuming no other changes, as our reserves increase, depletion, depreciation and amortization expense decreases, and as our reserves decrease, depletion, depreciation and amortization expense increases. Changes in our estimate of proved reserves can cause material changes in our depletion, depreciation and amortization expense.

Cash and Cash Equivalents. We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Substantially all of our cash balances as of December 31, 2004 and December 31, 2005 and March 31, 2006 are in excess of federally insured limits.

Concentration of Credit Risk and Accounts Receivable. Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash equivalents, accounts receivable and derivative instruments. We place our cash with reputable commercial banks and our derivative instruments with financial institutions and other firms that management believes have high credit ratings. A significant portion of our accounts receivable are due from purchasers of natural gas and oil, and such receivables seldom extend beyond 60 days. We do not require collateral to secure our natural gas and oil sales. In our capacity as operator of our properties, we incur drilling and operating costs that we bill to our joint interest owners based on their working interests. We have provided an allowance for doubtful accounts for certain joint interest owners when the receivable balances extend beyond 90 days. Accounts receivable are presented net of the related allowance for doubtful accounts, which totaled $0.2 million, $0.3 million and $0.3 million as of December 31, 2004, December 31, 2005 and March 31, 2006, respectively.

Major Customers. We sold oil and natural gas production representing more than 10% of our total revenues to the following customers:

	Year Ended December 31,						Three Months Ended March 31,
	2003		2004		2005		2006
Duke Energy Field Services, LP	13	%	—		—		—
Sunoco	26	%	33	%	37	%	41	%
Upstream Energy Services	23	%	27	%	28	%	30	%

Inventories. Inventories are stated at the lower of average cost or market. Inventory consists primarily of approximately $0.3 million of oil as of December 31, 2004 and December 31, 2005, and $0.5 million of materials as of December 31, 2004 and December 31, 2005. As of March 31, 2005 and March 31, 2006, inventory consisted primarily of approximately $0.3 million of oil and $0.4 million of materials, respectively.

F-14

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Deferred Financing Costs. Costs incurred in connection with the issuance of long-term debt are capitalized and amortized using the straight line amortization method over the term of the related instruments and reported as interest expense. As of December 31, 2004 and December 31, 2005, we had capitalized costs of $0.7 million and $0.8 million, respectively, relating to our issuance of long-term debt in connection with our July 2004 financial restructuring and subsequent amendments of our debt. During the years ended December 31, 2003, December 31, 2004 and December 31, 2005, we recognized associated interest expense of $0.3 million, $0.3 million and $0.2 million, respectively.

Fair Value of Financial Instruments. Our financial instruments consist primarily of cash equivalents, trade receivables, trade payables, derivative instruments and bank debt. Our cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values due to their short maturities. Our derivative instruments are reflected at fair value as provided by our counterparties. The fair value of our bank debt approximates its carrying value because the interest rate available to us is variable and reflective of market rates. Our senior notes and senior subordinated notes do not trade on any market and to determine the fair value of these financial instruments is not practicable. See note 4 for the terms of the senior notes and senior subordinated notes.

Derivative Instruments. We account for our derivative arrangements under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), as amended by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133,” SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” and SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” Under SFAS No. 133, instruments qualifying for hedge accounting treatment are recorded on the balance sheet as an asset or liability measured at fair value and subsequent changes in fair value are recognized in equity through other comprehensive income until the sale of the related hedged production is recognized in earnings, at which time amounts previously recognized on other comprehensive income are recognized in earnings. Any ineffective portion of changes in fair value on derivatives qualifying for hedge accounting treatment is recognized in earnings immediately. Instruments not qualifying for hedge accounting treatment are recorded on the balance sheet at fair value and subsequent changes in fair value are recognized in earnings. Derivative instruments entered into prior to our July 2004 financial restructuring qualified for hedge accounting treatment; however, derivative instruments entered into subsequent to such restructuring were not qualified for hedge accounting treatment.

Deferred Income Taxes. We follow the asset and liability method for accounting for deferred income taxes and income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Provisions for income taxes include deferred taxes resulting primarily from temporary differences due to different reporting methods for natural gas and oil properties for financial reporting purposes and income tax purposes.

As of December 31, 2005, we had a net deferred tax liability of $1.9 million. For financial reporting purposes, all development expenditures and certain exploratory costs on successful wells are capitalized and depreciated, depleted and amortized on the units-of-production method. For income tax purposes, only the equipment and leasehold costs relative to successful wells are capitalized and recovered through depreciation or depletion. Generally, most other exploratory and development costs are charged to expense as incurred; however, we follow certain provisions of the Internal Revenue Code that allow capitalization of intangible drilling costs where management deems appropriate. Other financial and income tax reporting differences occur as a result of statutory depletion and capitalization of interest expense for income tax purposes.

F-15

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Contingencies. Contingencies are recognized upon determination of an exposure, which when analyzed indicates that it is both probable that a liability has been incurred and the amount of the liability can reasonably be determined.

Equity Compensation. As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), we accounted for stock-based compensation under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) using the intrinsic method for periods ended prior to the first interim or annual period after December 31, 2005. Accordingly, we measured compensation cost for stock options as the excess, if any, of the quoted market price of our common stock on the date of grant over the amount an employee must pay to acquire the stock. SFAS 123 established accounting and disclosure requirements using a fair-value based method of accounting for stock-based employee compensation plans. As allowed by SFAS 123, we elected to continue to apply the intrinsic value based method of accounting described above, and we adopted the disclosure requirements of SFAS 123, which was amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosures.” In March 2002, our board of directors adopted the Ascent Energy Inc. 2002 Stock Incentive Plan under which shares of our common stock were available for awards. On May 20, 2005, we adopted the Ascent Energy Inc. Amended and Restated Equity Incentive Plan (the “2005 Equity Incentive Plan”); and, in connection therewith, each holder of options granted under our 2002 Stock Incentive Plan surrendered his or her options in exchange for an award under our 2005 Equity Incentive Plan.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”), which is a revision of SFAS 123. SFAS 123(R) is effective for public companies for interim or annual periods beginning after December 15, 2005. SFAS 123(R) supersedes APB 25, and amends SFAS No. 95, “Statement of Cash Flows.” SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in financial statements based on their fair values beginning with the first interim or annual period after December 15, 2005, with early adoption encouraged. The pro-forma disclosures previously permitted under SFAS 123 are no longer an alternative to financial statement recognition. SFAS 123(R) also requires the tax benefits in excess of recognized compensation expenses to be reported as a financing cash flow rather than as an operating cash flow as currently required. SFAS 123(R) is effective for our first annual reporting period ending after December 31, 2005. We adopted SFAS 123(R) on January 1, 2006 using a modified prospective application. Our adoption of SFAS 123(R) did not have an impact on our financial statements.

Loss Per Common Share. Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period presented.

Diluted loss per common share for the years ended December 31, 2003, December 31, 2004 and December 31, 2005 and the three months ended March 31, 2005 and March 31, 2006 does not reflect the potential dilution of dilutive stock options or dilutive warrants to purchase shares of common stock. Because we had a net loss for each of these periods, the effect of the assumed exercise of these stock options and warrants to purchase common stock would have been antidilutive.

Recent Accounting Pronouncement. In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces Accounting Principles Board Opinion No. 20 “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and requires retrospective application to prior period financial statements of voluntary changes in

F-16

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

accounting principles unless it is impractical to determine either the period- specific effects or the cumulative effect of the change. We adopted SFAS 154 during 2005. See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies—Change in Accounting Principle to Successful Efforts from Full Cost” and Note 2, “Basis of Presentation and Summary of Significant Accounting Policies—Asset Retirement Obligation Restatement and Tax Provision Restatement.”

3. DERIVATIVE ARRANGEMENTS

Commodity Price Derivatives. We adopted SFAS 133 on January 1, 2001. SFAS 133 established accounting and reporting standards that require every derivative instrument (including certain derivative instruments embedded in other contracts) to be recorded in the balance sheet as either an asset or a liability measured at its fair value and that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met.

We enter into derivative arrangements with respect to portions of our natural gas, oil and natural gas liquid production to reduce our sensitivity to volatile commodity prices. Our bank credit facility requires us to enter into derivative instruments covering a minimum of 50% for the three-year period following the effective date of the bank credit facility, but not in excess of 85% for the 12-month period immediately subsequent to any fiscal quarter, of forecast proved developed producing reserves. Historically, our derivative arrangements have been puts, price swaps and costless collar agreements. We believe that these derivative arrangements, although not free of risk, allow us to achieve a more predictable cash flow and to reduce exposure to price fluctuations. However, derivative arrangements limit the benefit of increases in the prices of natural gas and oil. Moreover, our derivative arrangements apply only to a portion of our production and provide only partial price protection against declines in prices. Additionally, these arrangements may expose us to risk of financial loss in certain circumstances. We have entered into all of our natural gas and oil derivatives with Fortis Energy LLC. We do not obtain collateral to support the agreements but monitor the financial viability of our counterparty and believe the credit risk is minimal. We continuously reevaluate our derivative arrangements in light of market conditions, commodity price forecasts, capital spending and debt service requirements. We do not enter into derivative transactions for trading purposes.

Fixed price swaps typically require monthly payments by us (if prices rise) or provide payments to us (if prices fall) based on the difference between the strike price and the agreed-upon average of either New York Mercantile Exchange, or NYMEX, or other widely recognized index prices. Currently, all of our derivative arrangements are settled based on NYMEX pricing.

Collar contracts set a minimum price, or floor, and a maximum price, or ceiling, and provide payments to us if the NYMEX price falls below the floor or require payments by us if the NYMEX price rises above the ceiling.

Puts provide payment to us if the NYMEX price falls below the strike price. If the NYMEX price is above the strike price, we have no payment obligation.

Currently, our natural gas contracts settle using the near-month NYMEX prices for the next to last trading day or the last trading day of the month. Our crude oil contracts settle using the average of the near month closing price for each day of the month.

In connection with our July 2004 financial restructuring, Fortis Energy LLC assumed our then existing derivative arrangements, which we refer to as the old derivative arrangements, and replaced them with new derivative arrangements. As of that date, we had a $4.0 million liability under our old derivative arrangements

F-17

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

representing a deferred loss which was recognized on the balance sheet as a current asset and a corresponding derivative liability. The deferred loss was amortized monthly into earnings over the related contract periods, which were August 2004 through December 2004 and settlement of the liability will occur monthly through June 2007 as the new derivative arrangements are settled. The old derivative arrangements qualified for hedge accounting treatment; therefore, amortization of the deferred loss was recognized in gas sales.

The new derivative arrangements were not designated as hedges under SFAS 133; therefore, changes in fair market value and realized losses related to the new derivative arrangements are required to be reported in current earnings.

As of December 31, 2005, the fair market value of our derivative arrangements was a liability of $28.5 million, which included the remaining liability of $1.6 million related to the deferred loss on the old derivative arrangements. The fair market values of our derivative arrangements as of December 31, 2005 are reflected on our balance sheet in current liabilities (fair value of derivatives) in the amount of $11.5 million and in long-term liabilities (fair value of derivatives) in the amount of $17.0 million.

As of December 31, 2005 our natural gas and oil derivative arrangements were as follows:

Natural Gas (MMBtus)	Quantity	Ceiling		Floor		Fixed Price		Put
2006
January 1, 2006 to March 31, 2006	384,300	$	7.00	$	5.50		—		—
January 1, 2006 to March 31, 2006	180,000	$	10.50	$	7.00		—		—
April 1, 2006 to October 31, 2006	714,760		—		—	$	7.26		—
April 1, 2006 to October 31, 2006	121,268	$	8.20	$	5.00		—		—
April 1, 2006 to October 31, 2006	242,532		—		—		—	$	5.00
November 1, 2006 to December 31, 2006	176,290	$	6.75	$	4.65		—		—
November 1, 2006 to December 31, 2006	92,720	$	10.25	$	5.50		—		—
2007
January 1, 2007 to March 31, 2007	260,100	$	6.75	$	4.65		—		—
January 1, 2007 to June 30, 2007	275,120	$	10.25	$	5.50		—		—
April 1, 2007 to June 30, 2007	234,780		—		—	$	7.26		—
July 1, 2007 to December 31, 2007	920,000	$	9.05	$	5.00		—		—
2008
January 1, 2008 to December 31, 2008	1,460,000	$	9.05	$	5.00		—		—
2009
January 1, 2009 to June 30, 2009	543,000	$	9.05	$	5.00		—		—
Total	5,604,870

F-18

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Oil (Bbls)	Quantity	Ceiling		Floor		Fixed Price		Put
2006
January 1, 2006 to March 31, 2006	9,000		—		—	$	42.70	—
January 1, 2006 to August 31, 2006	26,580	$	60.50	$	50.00		—	—
April 1, 2006 to June 30, 2005	9,100		—		—	$	41.60	—
January 1, 2006 to December 31, 2006	310,250		—		—	$	44.95	—
2007
January 1, 2007 to June 30, 2007	25,010	$	56.50	$	47.00		—	—
January 1, 2007 to June 30, 2007	135,750		—		—	$	44.95	—
July 1, 2007 to December 31, 2007	147,200	$	50.00	$	42.50		—	—
2008
January 1, 2008 to December 31, 2008	255,500	$	50.00	$	42.50		—	—
2009
January 1, 2009 to June 30, 2009	108,600	$	50.00	$	42.50		—	—
Total	1,026,990

As of March 31, 2006, the fair market value of our derivative arrangements was a liability of $29.3 million, which includes the remaining liability of $1.4 million related to the deferred loss on the old derivative arrangements. The fair market values of our derivative arrangements as of March 31, 2006 are reflected on our balance sheet in current liabilities (fair value of derivatives) in the amount of $11.3 million and in long-term liabilities (fair value of derivatives) in the amount of $18.0 million.

As of March 31, 2006 our natural gas and oil derivative arrangements were as follows:

Natural Gas (MMBtu)	Quantity	Ceiling		Floor		Fixed Price		Put
2006
April 1, 2006 to October 31, 2006	714,760		—		—	$	7.26		—
April 1, 2006 to October 31, 2006	121,268	$	8.20	$	5.00		—		—
April 1, 2006 to October 31, 2006	242,532		—		—		—	$	5.00
April 1, 2006 to October 31, 2006	966,343	$	8.05	$	6.25		—		—
November 1, 2006 to December 31, 2006	246,986	$	13.65	$	8.00		—		—
November 1, 2006 to December 31, 2006	176,290	$	6.75	$	4.65		—		—
November 1, 2006 to December 31, 2006	92,720	$	10.25	$	5.50		—		—
2007
January 1, 2007 to March 31, 2007	260,100	$	6.75	$	4.65		—		—
January 1, 2007 to June 30, 2007	275,120	$	10.25	$	5.50		—		—
January 1, 2007 to March 31, 2007	315,912	$	13.65	$	8.00		—		—
April 1, 2007 to June 30, 2007	234,780		—		—	$	7.26		—
April 1, 2007 to October 31, 2007	509,999	$	10.95	$	7.00		—		—
July 1, 2007 to December 31, 2007	920,000	$	9.05	$	5.00		—		—
November 1, 2007 to December 31, 2007	78,436	$	13.95	$	8.00		—		—

F-19

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Natural Gas (MMBtu)	Quantity	Ceiling		Floor		Fixed Price		Put
2008
January 1, 2008 to March 31, 2008	179,230	$	13.95	$	8.00		—	—
January 1, 2008 to December 31, 2008	1,460,000	$	9.05	$	5.00		—	—
April 1, 2008 to October 31, 2008	298,551	$	9.60	$	7.00		—	—
November 1, 2008 to December 31, 2008	56,808	$	12.25	$	8.00		—	—
2009
January 1, 2009 to March 31, 2009	154,402	$	12.25	$	8.00		—	—
January 1, 2009 to June 30, 2009	543,000	$	9.05	$	5.00		—	—
April 1, 2009 to October 31, 2009	647,304	$	8.55	$	6.75		—	—
Total	8,494,541
Oil (Bbls)	Quantity	Ceiling		Floor		Fixed Price		Put
2006
April 1, 2006 to August 31, 2006	12,210	$	60.50	$	50.00		—	—
April 1, 2006 to December 31, 2006	9,100		—		—	$	41.60	—
April 1, 2006 to December 31, 2006	109,073		—		—	$   $	61.56 to 64.68	—
April 1, 2006 to December 31, 2006	233,750		—		—	$	44.95	—
2007
January 1, 2007 to June 30, 2007	25,010	$	56.50	$	47.00		—	—
January 1, 2007 to June 30, 2007	135,750		—		—	$	44.95	—
January 1, 2007 to December 31, 2007	105,725		—		—	$   $	64.80 to 65.03	—
July 1, 2007 to December 31, 2007	147,200	$	50.00	$	42.50		—	—
2008
January 1, 2008 to December 31, 2008	255,500	$	50.00	$	42.50		—	—
January 1, 2008 to December 31, 2008	101,960		—		—	$   $	64.00 to 64.74	—
2009
January 1, 2009 to June 30, 2009	108,600	$	50.00	$	42.50		—	—
January 1, 2009 to October 31, 2009	154,328		—		—	$   $	63.37 to 63.94	—
Total	1,398,206

F-20

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

The following table shows the effect of our natural gas and oil derivative instruments on our consolidated income statements for the periods presented (in thousands):

	Natural Gas and Oil Derivatives Designated as Hedges									Natural Gas and Oil Derivatives Not Designated as Hedges
	Cash Settlements (1)			Amortization (2)			Reduction in Oil and Gas Sales (3)			Cash Settlements (1)			Amortization of Old Derivative Arrangements (4)		Unrealized Gains (Losses)			Derivative Loss (5)
2003
1st Quarter	$	(3,962	)	$	(122	)	$	(4,084	)	$	—		$	—	$	—		$	—
2nd Quarter		(2,941	)		(122	)		(3,063	)		—			—		—			—
3rd Quarter		(2,461	)		(122	)		(2,583	)		—			—		—			—
4th Quarter		(2,213	)		(6	)		(2,219	)		—			—		—			—
Total	$	(11,577	)	$	(372	)	$	(11,949	)	$	—		$	—	$	—		$	—
2004
1st Quarter	$	(1,645	)	$	—		$	(1,645	)	$	—		$	—	$	—		$	—
2nd Quarter		(2,168	)		—			(2,168	)		—			—		—			—
3rd Quarter		(775	)		(1,484	)		(2,259	)		(973	)		411		(7,537	)		(8,099	)
4th Quarter		—			(2,474	)		(2,474	)		(1,858	)		407		2,946			1,495
Total	$	(4,588	)	$	(3,958	)	$	(8,546	)	$	(2,831	)	$	818	$	(4,591	)	$	(6,604	)
2005
1st Quarter	$	—		$	—		$	—		$	(1,481	)	$	254	$	(15,062	)	$	(16,289	)
2nd Quarter		—			—			—			(2,494	)		469		332			(1,693	)
3rd Quarter		—			—			—			(4,654	)		475		(15,038	)		(19,217	)
4th Quarter		—			—			—			(4,779	)		332		7,457			3,010
Total	$	—		$	—		$	—		$	(13,408	)	$	1,530	$	(22,311	)	$	(34,189	)
2006
1st Quarter	$	—		$	—		$	—		$	(2,423	)	$	206	$	(966	)	$	(3,183	)
Total	$	—		$	—		$	—		$	(2,423	)	$	206	$	(966	)	$	(3,183	)

(1) Cash settlements of derivative arrangements are included in net cash provided by operating activities.

(2) Amortization during 2003 relates to premium on oil put options. Amortization during 2004 relates to deferred loss under old derivative arrangements.

(3) The ineffectiveness of these hedges was tested and was determined to be immaterial.

(4) Amortization relates to cash settlement of old derivative arrangements which qualified as hedges and were expensed in the prior year as a reduction of oil and gas sales. The amortization period for settlement of old derivative arrangements extends through June 2007.

(5) Derivative loss for the year ended December 31, 2005 includes a $34.2 million loss on natural gas and oil derivatives and a $0.4 million gain on interest rate derivatives. Derivative loss for the quarter ended March 31, 2006 includes a $3.2 million loss on natural gas and oil derivatives and a $0.2 million gain on interest rate derivates.

F-21

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Interest Rate Derivatives. As of December 31, 2005 and March 31, 2006, we had outstanding $49.7 million and $57.2 million, respectively, of floating-rate debt attributable to borrowings under our bank credit facility. As a result, our interest expense fluctuates based on changes in short-term interest rates.

We enter into derivative transactions to secure a fixed interest rate for a portion of our debt under the bank credit facility. The primary objective of these transactions is to reduce our exposure to the possibility of rising interest rates during the term of the derivative transactions. We currently use fixed rate interest swaps for these purposes. Fixed rate interest swaps are not designated as hedges; therefore, gains and losses resulting from these derivative arrangements are reported as they occur as Derivative Loss in our consolidated statements of operations. We do not enter into derivative transactions for trading purposes.

Our fixed rate interest swaps typically provide monthly payments to us (if rates rise) or by us (if rates fall) based on the difference between the strike price and the British Bankers’ Association London Interbank Offered Rate, or the LIBOR. All of the Company’s fixed rate interest swaps are with affiliates of the financial institutions that are parties to our bank credit facility.

As of December 31, 2005, we had fixed rate interest swaps for $30.0 million per day for the period January 1, 2006 through July 27, 2007 at a fixed rate of 3.98%. At December 31, 2005, we had realized losses of $0.03 million and the fair market values of our interest rate derivative instruments was a net unrealized receivable of $0.4 million which is reflected on our balance sheet in current assets (fair value of derivatives) in the amount of $0.2 million and in other assets (fair value of derivatives) in the amount of $0.1 million.

As of March 31, 2006, we had fixed rate interest swaps for $30.0 million per day for the period April 1, 2006 through July 27, 2007 at a fixed rate of 3.98%. As of March 31, 2006, the fair market value of these arrangements was a net unrealized receivable of $0.5 million, of which $0.4 million was recorded on our balance sheet as a current assets (fair value of derivatives) and $0.1 million of which was recorded on our balance sheet as an other asset (fair value of derivatives).

4. LONG-TERM DEBT

We had the following long-term debt and long-term accrued interest outstanding as of the dates presented:

	As of December 31,				As of March 31,
	2004		2005		2006
	(in thousands)
Bank credit facility	$	45,265	$	49,715	$	57,215
Senior notes		28,612		33,492		33,492
Senior subordinated notes		88,579		99,552		99,552
Interest payable		2,498		2,464		6,728
	$	164,954	$	185,223	$	196,987

Following is the principal maturity schedule for the long-term debt and long-term accrued interest outstanding as of December 31, 2005 assuming no extension of the maturing date of notes (in thousands):

2006	$	—
2007		—
2008		—
2009		49,715
2010		135,508
	$	185,223

F-22

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Bank Credit Facility. On July 27, 2004, we completed a financial restructuring that permitted our operating subsidiaries to enter into a new bank credit facility with a new group of bank lenders. In connection with our financial restructuring, we reorganized as a holding company by transferring all of our natural gas and oil operations to certain of our operating subsidiaries.

Our bank credit facility provides for a borrowing base to finance our future acquisition opportunities and to assist in meeting our working capital requirements. Our lenders periodically re-determine our borrowing base by applying criteria similar to those used with similarly situated natural gas and oil borrowers. Subject to our borrowing base limitation of $70 million, our bank credit facility provided for borrowings of up to $105.0 million as of December 31, 2005, which included a $100.0 million revolving credit facility and a $5.0 million acquisition facility. Borrowings under our revolving credit facility mature on November 1, 2009. As of December 31, 2005, we had $15.1 million available under our revolving credit facility and $5.0 million available under our acquisition facility. As of March 31, 2006, we had $7.6 million available under our revolving credit facility and $5.0 million available under our acquisition facility.

Our bank credit facility provides for interest periods of one, two, three or six months for LIBOR loans. We can also elect to pay interest at a base rate calculated by reference to the higher of the federal funds rate or The Chase Manhattan Bank’s prime rate. In the case of either LIBOR loans or base rate loans, we are required to pay an additional interest rate margin that varies with the aggregate amount of loans and letters of credit outstanding under the line of credit. Additionally, we are required to pay commitment fees that range from 0.375% to 0.5% on our unused borrowings. Our weighted average interest rate as of December 31, 2005 and March 31, 2006 was 6.6% and 7.9%, respectively.

Ascent Energy Inc. is not a borrower under our bank credit facility, but is subject to certain restrictions thereunder. The stock of our only direct wholly owned subsidiary and substantially all of the assets of our indirect wholly owned subsidiaries are pledged to our lenders to secure the obligations of our operating subsidiaries under our bank credit facility.

We are subject to various financial and other covenants, and are required to maintain specified ratios, under our bank credit facility. As of December 31, 2005, and March 31, 2006 we were in compliance with all covenants and ratios.

Our bank credit facility prohibits the subsidiaries of Ascent Energy Inc. from paying any cash dividends or cash redemptions or making any other cash distributions to Ascent Energy Inc. prior to July 27, 2006, and thereafter such cash dividends, redemptions, and distributions may be made only under certain circumstances.

We paid approximately $0.8 million of deferred financing costs in July 2004 in connection with our entering into the bank credit facility and approximately $0.3 million of deferred financing costs during the year ended December 31, 2005 in connection with amendments to our bank credit facility. These costs are being amortized on a straight-line basis over the life of the bank credit facility. During the years ended December 31, 2004 and December 31, 2005, we recognized $0.1 million and $0.2 million, respectively, of interest expense related to the amortization of deferred financing costs associated with our bank credit facility.

Senior Notes. On November 9, 2005, Ascent Energy Inc. issued approximately $33.5 million aggregate principal amount of its 16% Senior Notes due February 1, 2010 (or such later date as automatically extended in accordance with the terms of the notes, but in no event later than February 1, 2015) in exchange for all then outstanding principal and accrued but unpaid interest on its 16% Senior Notes due October 26, 2007, which we refer to as the old senior notes. The old senior notes were issued on July 27, 2004 in connection with our financial restructuring in exchange for all then outstanding principal and accrued but unpaid interest on certain promissory notes that Ascent Energy Inc. had issued during 2003 for short-term liquidity needs.

F-23

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

The senior notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries. The senior notes are effectively subordinated to all indebtedness and other liabilities of our subsidiaries, including indebtedness under our bank credit facility. Interest on the senior notes accrues at a rate of 16% per annum and is payable semi-annually, in the form of additional senior notes.

During each of the years 2006 through 2010, each holder of senior notes has the right, during the 30-day period beginning on September 1 of each such year, to deliver written notice to us rejecting any further extension of the maturity date of such holder’s senior notes. If the holder fails to deliver such notice on a timely basis, the maturity date of such holder’s senior notes will be automatically extended by one calendar year from the then applicable maturity date. Any senior notes that are the subject of a timely delivered notice will become due and payable at the then applicable maturity date. Upon maturity of the senior notes we must secure alternative financing arrangements in order to satisfy the maturing debt and accrued interest.

As of December 31, 2005 and March 31, 2006, we had outstanding $33.5 million of indebtedness under our senior notes and $0.8 million and $2.1 million of accrued interest, respectively.

Senior Subordinated Notes. On November 9, 2005, Ascent Energy Inc. issued approximately $99.6 million aggregate principal amount of its 11 ³/4% Senior Subordinated Notes due May 1, 2010 (or such later date as automatically extended in accordance with the terms of the notes, but in no event later than May 1, 2015) in exchange for all then outstanding principal and accrued but unpaid interest on its 11 ³/4% Senior Subordinated Notes due 2008, which we refer to as the old senior subordinated notes. The old senior subordinated notes were issued on July 27, 2004 in connection with our financial restructuring in exchange for all then outstanding principal and accrued but unpaid interest on its 11 ³/4% Series A Senior Notes due 2006 which were originally issued on June 28, 2001 in connection with our acquisition of our south Texas properties.

The senior subordinated notes are senior subordinated unsecured obligations and are not guaranteed by any of our subsidiaries. The senior subordinated notes are subordinate in right of payment to the senior notes and are effectively subordinated to all indebtedness and other liabilities of our subsidiaries, including indebtedness under our bank credit facility. Interest on the senior subordinated notes accrues at a rate of 11 ³/4% per annum and is payable semi-annually in the form of additional senior subordinated notes.

During each of the years 2006 through 2010, each holder of senior subordinated notes has the right, during a 30-day period beginning on July 15 of each such year, to deliver written notice to us rejecting any further extension of the maturity date of such holder’s senior subordinated notes. If the holder fails to deliver such notice on a timely basis, the maturity date of such holder’s senior subordinated notes will be automatically extended by one calendar year from the then applicable maturity date. Any senior subordinated notes that are the subject of a timely delivered notice will become due and payable at the then applicable maturity date. Upon maturity of the senior subordinated notes we must secure alternative financing arrangements in order to satisfy the maturing debt and accrued interest.

As of December 31, 2005 and March 31, 2006, we had outstanding $99.6 million of indebtedness under our senior subordinated notes and $1.7 million and $4.6 million of accrued interest, respectively.

8% Series A Preferred Stock and Warrants. As of December 31, 2005 and March 31, 2006, we had outstanding 41,100 shares of our Series A preferred stock and warrants to purchase 3,000 shares of our Series A preferred stock at an exercise price of $333.33 per share. Dividends on our Series A preferred stock accrue at the rate of 8% per annum. Accrued but unpaid dividends do not bear interest. Our board of directors has never

F-24

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

declared or paid any dividends on the outstanding shares of Series A preferred stock. Each outstanding share of Series A preferred stock, and each share issuable upon exercise of the warrants described above, was or will be issued with a warrant to purchase 191.943 shares of our common stock at an exercise price of $5.21 per share. As of December 31, 2005 and March 31, 2006, we had outstanding warrants to purchase 7,888,858 shares of our common stock and had reserved for issuance warrants to purchase 575,829 shares of our common stock. All of our warrants are, or will be, exercisable on the date of issue.

During December 2004, the terms of our Series A preferred stock were amended to eliminate our requirement to redeem the outstanding shares on a specified date, among other things. The amendment resulted in a balance sheet reclassification of the book value of the Series A preferred stock to stockholders’ deficit. Accrued but unpaid dividends on the Series A preferred stock are reflected as a liability on our balance sheet.

So long as the Series A preferred stock is outstanding, the warrants to purchase common stock must be exercised in a cashless manner by tendering shares of Series A preferred stock. The fair value of the warrants to purchase common stock is reflected as an increase in additional paid-in capital and as a reduction of the Series A preferred stock. This value of approximately $398,000 will be accreted through Series A preferred stock dividends. For each quarter during the years ended December 31, 2004 and December 31, 2005, approximately $17,000 was accreted as Series A preferred stock dividends.

If dividends are paid in respect of our common stock (other than dividends payable in common stock or in other securities or rights convertible into or exchangeable for common stock), the holders of our Series A preferred stock are entitled to participate with the holders of our common stock in the receipt of such dividends on a pro-rata basis based on the number of shares of common stock held by each holder assuming that each share of Series A preferred stock has been exchanged for a number of shares of common stock determined by dividing $1,000 by the then current exercise price of our warrants to purchase common stock. In addition, upon any voluntary or involuntary liquidation, winding up or dissolution of Ascent Energy Inc., the holders of our Series A preferred stock are entitled to receive, in preference to any payment or distribution to the holders of our common stock or any of our securities ranking junior to the Series A preferred stock, the greater of (i) $1,000 per share of Series A preferred stock plus all accrued but unpaid dividends thereon and (ii) the sum of (A) the amount such holders would have received had each share of Series A preferred stock been exchanged for a number of shares of common stock determined by dividing $1,000 by the then current exercise price of our warrants to purchase common stock and such holders participated with the holders of our common stock, on a pro rata basis, in the distribution of our assets and (B) all accrued but unpaid dividends on each such share of Series A preferred stock. As of December 31, 2005 and March 31, 2006, the exercise price of our warrants to purchase common stock was $5.21 per share.

8% Series B Convertible Preferred Stock. We issued 5,323,695 shares of our Series B preferred stock to the former holders of Pontotoc in connection with our acquisition of Pontotoc in August 2001. On or about August 14, 2003, each outstanding share of our Series B preferred stock converted automatically into 0.1878395 shares of our common stock, or an aggregate of 1,000,000 shares, and we paid cash dividends of $0.40 per share of Series B preferred stock, or an aggregate of $2.1 million in cash dividends.

5. STOCK COMPENSATION

2002 Stock Option Plan. We previously had outstanding options to purchase shares of our common stock issued pursuant to the Ascent Energy Inc. 2002 Stock Incentive Plan. On May 20, 2005, we terminated the 2002

F-25

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Stock Incentive Plan; and, in connection therewith, each holder of options surrendered his or her options in exchange for awards under our 2005 Equity Incentive Plan.

Options granted under the 2002 Stock Incentive Plan were non-qualified stock options with terms of ten years from the date of grant. Granted stock options vested over a five-year period at the rate of 20% per year or over a three-year period at the rate of 33 ¹/3% per year, in each case commencing on the first anniversary of the date of grant. A maximum of 1,500,000 shares of common stock were reserved for issuance under the 2002 Stock Option Plan.

Set forth below is a summary of stock option grants under our 2002 Stock Option Plan:

	2003				2004				2005				Three Months Ended March 31, 2005
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of year	1,150,000		$	5.21	1,516,320		$	5.21	1,054,120		$	5.21	1,054,120		$	5.21
Granted	585,000			5.21	—			—	—			—	—			—
Exercised	—			—	—			—	—			—	—			—
Cancelled	—			—	—			—	(1,054,120	)		5.21	(23,040	)		5.21
Forfeited	(218,680	)		5.21	(462,200	)		5.21	—			—	—			—
Outstanding at end of year	1,516,320		$	5.21	1,054,120		$	5.21	—			—	1,031,080			—
Options exercisable at year-end	501,997		$	5.21	461,928		$	5.21	—			—	442,232		$	5.21
Weighted-average fair value of options granted during the year	—			—	—			—	—			—	—			—

The following table summarizes relevant information about our reported results under the intrinsic method of accounting for stock awards with supplemental pro forma information as if the fair value recognition provision of SFAS 123 had been applied (in thousands, except per share data):

		Year Ended December 31,									Three Months Ended March 31,
		2003			2004			2005			2005
		(Restated)			(Restated)						(Unaudited)
Net loss available to common	As reported	$	(19,368	)	$	(39,698	)	$	(31,206	)	$	(16,765	)
	Pro forma	$	(19,588	)	$	(39,890	)	$	(31,304	)	$	(16,780	)
Basic and diluted loss per share	As reported	$	(3.63	)	$	(6.67	)	$	(5.25	)	$	(2.82	)
	Pro forma	$	(3.67	)	$	(6.71	)	$	(5.26	)	$	(2.82	)
Weighted average shares used in computation:
Basic and diluted			5,334			5,949			5,949			5,949

As required, the pro-forma disclosures above include options granted since March 6, 2002 through the date of cancellation. For purposes of pro-forma disclosures, the estimated fair value of stock-based compensation and other options was amortized to expense primarily over the vesting period.

F-26

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

The fair value of each option grant for the year ended December 31, 2003 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Expected life (years)	6
Interest rate	3.37	%
Volatility	0	%
Dividend yield	0	%

6. INCOME TAXES

The provision (benefit) for income taxes for the periods presented consisted of the following (in thousands):

	Years Ended December 31,
	2003			2004			2005
	(Restated)			(Restated)
Current:
Federal	$	—		$	—		$	—
State		—			35			98
		—			35			98
Deferred:
Federal		(8,675	)		(12,109	)		—
State		51			(398	)		(307	)
Total benefit	$	(8,624	)	$	(12,472	)	$	(209	)

We had the following deferred tax assets and liabilities recorded as of the following dates (in thousands):

	December 31,
	2004			2005
	(Restated)
Non Current Deferred Tax Assets:
Accrued Compensation	$	404		$	320
Bad Debts Reserved		—			60
Hedge Gains(Losses)		1,785			10,258
Accrued Retirement Obligations		3,613			4,114
Accrued Contingent Liabilities		—			128
Accrued Deferred Interest		—			708
Percentage Depletion Carry forwards		969			1,354
Net Operating Loss Carry forwards		26,792			32,308
Non Current Deferred Tax Assets		33,563			49,250
Valuation Allowance		(6,205	)		(15,993	)
		27,358			33,257
Non Current Deferred Tax Liabilities:
Oil & Gas Properties		(29,486	)		(35,077	)
Other		(44	)		(45	)
Non Current Deferred Tax Liabilities		(29,530	)		(35,122	)
Net Deferred Tax Liability	$	(2,172	)	$	(1,865	)

F-27

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Beginning in 2001, we established a valuation allowance which we increased periodically to reflect the uncertainty about the realization of the deferred tax asset. In 2005, we increased the valuation allowance by $9.8 million from $6.2 million to $16.0 million. During the first quarter of 2006, we increased the valuation allowance of $16.0 million by an additional $0.5 million. These increases in our valuation allowance are based on uncertainty surrounding our ability to utilize the entire balance of our deferred tax assets based on an analysis of whether we are more likely than not to receive such a benefit and if so, to what extent.

The provision for income taxes (on loss before cumulative effect of change in accounting principle) at our effective tax rate differed from the provision for income taxes at the federal statutory rate as follows for the periods presented (in thousands):

	December 31,
	2003			2004			2005
	(Restated)			(Restated)
Computed benefit at the expected federal statutory rate	$	(8,497	)	$	(17,081	)	$	(9,820	)
State taxes		51			(363	)		(210	)
Permanent Differences:
Interest on High Yield Debt Obligations Disallowed		—			—			155
Club Dues, Travel & Entertainment		18			11			17
Adjustments To Valuation Allowance (Federal Portion)		—			4,887			9,647
Other		(196	)		74			2
Income tax benefit	$	(8,624	)	$	(12,472	)	$	(209	)
Effective Tax Rate on Income Before Taxes		35.5	%		25.6	%		0.8	%

The primary cause of differences between the effective tax rate and the statutory normal tax rate in years ended December 31, 2004 and 2005 respectively relate to changes in the valuation allowance accounting for rate differences of 9.73% and 33.40% for those years respectively. Items relating to the tax impacts of other adjustments accounted for rate differences of (0.81)%, 0.15% and 0.01% for the years ended December 31, 2003, 2004 and 2005 respectively.

As of December 31, 2005, we had a net loss carryforward of approximately $87.1 million that expires from 2021 through 2025.

7. COMMITMENTS AND CONTINGENCIES

Contractual Obligations. We lease office space and equipment under lease obligations classified as operating leases. Future commitments under these leases are as follows (in thousands):

	Operating Leases
2006	$	239
2007		429
2008		467
2009		435
2010		435
2011 and thereafter		1,232
	$	3,237

F-28

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Rental expense under operating leases for the years ended December 31, 2003, December 31, 2004 and December 31, 2005 was approximately $0.5 million, $0.6 million and $0.7 million, respectively, and is recorded as general and administrative expense.

Contingent Liabilities. From time to time, we may be a party to various legal proceedings and regulatory matters arising in the ordinary course of business. Currently, we are a party to litigation arising in the ordinary course of business. While we cannot determine the ultimate liability with respect to all of these matters, management does not expect these matters to have a material adverse effect on our business, financial condition, results of operations or cash flows.

During 2005, we entered into employment agreements with our officers. The agreements initially provide for a term of three years. If the officer’s employment is terminated other than for cause (as defined in the agreement) or if the officer terminates his employment for good reason (as defined in the agreement), compensation will continue to be paid at the current rate of total compensation (as defined by the agreements) for the remaining term of the employment agreement and the officer will continue to be provided employee benefit plans offered by us for a period of time. These employment agreements generally provide for additional severance compensation based on the officer’s then current annual rate of total compensation (as defined by the agreements) in the event the officer’s employment is terminated without cause or is terminated by the officer with good reason within one year following a change in control. The additional severance compensation amount following a change of control varies by officer and ranges from 50% to 200% of total compensation. The employment agreements limit total compensation under the agreements, except for compensation under certain incentive plans, to 2.99 times the rate of total annual compensation of the officer.

In May 2005, we adopted the 2005 Equity Incentive Plan to retain and attract key employees by awarding rights to certain employees to receive in the aggregate up to 13.5% of our enterprise value (defined by the 2005 Equity Incentive Plan as the excess of the present value of the consideration payable in a sale over consolidated debt) upon a defined sale of us.

8. EMPLOYEE BENEFITS

We adopted a defined contribution retirement plan that complies with Section 401(k) of the Internal Revenue Code. Pursuant to the terms of the 401(k) Plan, all employees with at least three months of continuous service are eligible to participate and may contribute up to 70% of their annual compensation (subject to certain limitations). The 401(k) Plan provides that a discretionary match of employee contributions may be made by us in cash. For each of the years ended December 31, 2003, December 31, 2004 and December 31, 2005, we made aggregate matching contributions of approximately $0.2 million based upon each employee’s plan contributions for the respective plan year. These matching employer contributions are immediately fully vested to the employees. The amounts held under the 401(k) Plan are invested among various investment funds maintained under the 401(k) Plan in accordance with the directions of each participant. Employee contributions under the 401(k) Plan are 100% vested, and participants are entitled to payment of vested benefits upon termination of employment.

9. RELATED PARTY TRANSACTIONS

Senior Notes. We issued approximately $33.5 million aggregate principal amount of our senior notes on November 9, 2005 to Jefferies & Company, Inc. and certain of its affiliated funds and employees (“The Jefferies Investors”), all of which are our securityholders, and certain affiliated funds that we refer to as “Trust Company of the West” in exchange for all then outstanding principal and accrued but unpaid interest on our 16% senior notes due October 26, 2007.

F-29

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

We issued approximately $27.5 million aggregate principal amount of our 16% senior notes due October 26, 2007 and warrants to purchase up to 3,000 shares of our Series A preferred stock to The Jefferies Investors and Trust Company of the West in connection with our July 2004 financial restructuring. The notes and warrants were issued in exchange for all then outstanding principal and accrued but unpaid interest on our senior promissory notes.

We issued $24.0 million aggregate principal amount of senior promissory notes between May 2003 and December 2003 to The Jefferies Investors and Trust Company of the West for short-term liquidity needs and to fund our limited capital expenditure program in the third and fourth quarters of 2003.

As of December 31, 2003, The Jefferies Investors and Trust Company of the West held approximately $22.8 million and $1.2 million, respectively, aggregate principal amount of our senior promissory notes. As of December 31, 2004, The Jefferies Investors and Trust Company of the West held approximately $27.2 million and $1.4 million, respectively, aggregate principal amount of 16% senior notes due October 26, 2007. As of December 31, 2005, The Jefferies Investors and Trust Company of the West held approximately $31.8 million and $1.7 million, respectively, aggregate principal amount of our senior notes. Interest on the senior notes is payable semi-annually in the form of additional senior notes.

Senior Subordinated Notes. We issued approximately $99.6 million aggregate principal amount of our senior subordinated notes on November 9, 2005 to The Jefferies Investors and Trust Company of the West in exchange for all then outstanding principal and accrued but unpaid interest on our 11 ³/4% senior subordinated notes due 2008.

We issued approximately $85.9 million aggregate principal amount of our 11 ³/4% senior subordinated notes due 2008 to The Jefferies Investors and Trust Company of the West in connection with our July 2004 financial restructuring. The notes were issued in exchange for all then outstanding principal and accrued but unpaid interest on our 11 ³/4% Series A senior notes due 2006. The 11 ³/4% Series A senior notes due 2006 were issued on June 28, 2001 in connection with the acquisition of our south Texas properties.

As of December 31, 2003, The Jefferies Investors and Trust Company of the West held approximately $60.7 million and $14.3 million, respectively, aggregate principal amount of our 11 ³/4% Series A senior notes due 2006. As of December 31, 2004, The Jefferies Investors and Trust Company of the West held approximately $71.7 million and $16.9 million, respectively, aggregate principal amount of 11 ³/4% senior subordinated notes due 2006. As of December 31, 2005, The Jefferies Investors and Trust Company of the West held approximately $80.6 million and $19.0 million, respectively, aggregate principal amount of our senior subordinated notes. Interest on the senior subordinated notes is payable semi-annually in the form of additional senior subordinated notes.

8% Series A Preferred Stock and Warrants to Purchase Common Stock. In July 2001, we issued an aggregate of $21.1 million of units, each consisting of one share of our Series A preferred stock and one warrant to purchase 191.943 shares of our common stock at an exercise price of $5.21 per share, to The Jefferies Investors and Trust Company of the West to fund part of the cash portion of our purchase price for Pontotoc. In August 2002, we issued an additional $20.0 million of units to The Jefferies Investors and Trust Company of the West. In connection with the August 2002 issuance, we paid Jefferies & Company, Inc. an aggregate of $1.0 million of the cash proceeds of the unit offering for its services as our advisor.

F-30

ASCENT ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of March 31, 2006 and for the three months ended March 31, 2005

and March 31, 2006 is unaudited)

Voting Agreement. In connection with the August 2002 unit issuance, we entered into a Voting Agreement with South Louisiana Property Holdings, Inc. and certain holders of our Series A preferred stock, which provides for a majority of our board of directors to be appointed by certain of The Jefferies Investors and Trust Company of the West. Under the Voting Agreement, certain of The Jefferies Investors are entitled to designate two of our directors so long as they hold not less than 10% of the outstanding Series A preferred stock, certain other of The Jefferies Investors are entitled to designate two of our directors so long as they hold not less than 25% of the outstanding Series A preferred stock and Trust Company of the West is entitled to designate one of our directors so long as it holds not less than 10% of the outstanding Series A preferred stock. In connection with this offering and the Recapitalization, this Voting Agreement will be terminated.

Related Party Leases. From February 1, 2002 through April 30, 2005, we subleased a portion of rented office space in New Orleans, Louisiana to Jefferies & Company, Inc. at subrental rates equal to the proportionate share of our rental rates under the lease. For the years ended December 31, 2003, December 31, 2004 and December 31, 2005, Jefferies & Company, Inc. paid us approximately $57,000, $57,000 and $19,000, respectively, in subrent.

We lease office space under a three year lease which expires on October 31, 2007 from a company owned by an individual who served as our Vice President until April 2005, his brother, who is one of our employees, and their father. For the years ended December 31, 2003, December 31, 2004 and December 31, 2005, we paid approximately $87,000, $86,000 and $73,000 in rent under this arrangement.

F-31

OIL AND GAS ACTIVITIES (UNAUDITED)

In accordance with Statement of Financial Accounting Standards No. 69, “Disclosures About Oil and Gas Producing Activities,” we are making certain supplemental disclosures about our oil and gas exploration and production operations. While this information was developed with reasonable care and disclosed in good faith, it is emphasized that some of the data is necessarily imprecise and represents only approximate amounts because of the subjective judgments involved in developing such information. Accordingly, this information may not necessarily represent our current financial condition or our expected future results.

Capitalized Costs

Capitalized costs and accumulated depreciation, depletion, and amortization relating to our natural gas and oil producing activities, all of which are conducted within the continental United States, are summarized below for the periods presented (in thousands):

	Years Ended December 31,
	2004			2005
	(Restated)
Proved producing oil and gas properties	$	305,677		$	336,746
Unevaluated properties		1,437			7,147
Accumulated depreciation, depletion, and amortization		(152,790	)		(172,938	)
Net capitalized costs	$	154,324		$	170,955

Costs Incurred (a)

Costs incurred in oil and gas property acquisition, exploration, and development activities are summarized below for the periods presented (in thousands, except per Mcfe data):

	Years Ended December 31,
	2003		2004		2005
	(Restated)		(Restated)
Unproved acquisition costs	$	127	$	1,045	$	5,454
Proved acquisition costs		1,410		449		1,748
Exploration costs (b)		4,923		4,579		8,829
Development costs		36,489		17,724		21,820
Costs incurred	$	42,949	$	23,797	$	37,851
DD&A per Mcfe	$	1.90	$	3.24	$	2.35

(a) Includes capitalized and expensed costs incurred.

(b) Includes $4.6 million, $0.9 million and $3.5 million of exploration costs expensed in 2003, 2004 and 2005, respectively.

Proved Oil and Gas Reserves

Proved reserves are estimated quantities of natural gas and oil which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves that can reasonably be expected to be recovered through existing wells with existing equipment and operating methods. All estimates of natural gas and oil reserves are inherently imprecise and subject to change as new technical information about the properties is obtained.

F-32

Proved natural gas and oil reserve quantities and the related discounted future net cash flows before income taxes for the years ended December 31, 2004 and December 31, 2005 for our Oklahoma properties and for the year ended December 31, 2003 for our Louisiana, Oklahoma and Texas properties were prepared by Netherland, Sewell & Associates, Inc., independent reserve engineers. Proved natural gas and oil reserves and the related future net cash flows before income taxes for the years ended December 31, 2004 and December 31, 2005 for our Texas and Louisiana properties were prepared by LaRoche Petroleum Consultants, Ltd. (independent reserve engineers).

Our net ownership interests in estimated quantities of proved natural gas and oil reserves and changes in net proved reserves, all of which are located in the continental United States, are summarized below for the periods presented:

	Oil and NGLs Years Ended December 31,
	2003		2004		2005
	(MBbls)
Proved developed and undeveloped reserves:
Beginning of year	14,343		13,620		10,697
Revisions of previous estimates	(263	)	(2,894	)	567
Purchases of oil and gas properties	82		98		24
Extensions and discoveries	253		630		93
Dispositions	—		(12	)	(5	)
Production	(795	)	(745	)	(706	)
End of year	13,620		10,697		10,670
Proved developed reserves at end of year	7,283		6,043		6,371

	Natural Gas Years Ended December 31,
	2003		2004		2005
	(MMcf)
Proved developed and undeveloped reserves:
Beginning of year	118,214		80,423		37,311
Revisions of previous estimates	(36,150	)	(45,525	)	4,609
Purchases of oil and gas properties	21		30		3,991
Extensions and discoveries	4,883		7,541		747
Dispositions	—		—		—
Production	(6,545	)	(5,158	)	(4,592	)
End of year	80,423		37,311		42,066
Proved developed reserves at end of year	47,105		24,398		27,827

F-33

Standardized Measure

The table of the standardized measure of discounted future net cash flows related to our ownership interests in proved oil and gas reserves as of period end is shown below for the periods presented (in thousands):

	Years Ended December 31,
	2003			2004			2005
Future cash inflows	$	911,612		$	664,223		$	986,683
Future oil and natural gas operating expenses		(235,308	)		(199,622	)		(276,962	)
Future development costs		(56,733	)		(48,002	)		(56,042	)
Future net cash flows before income taxes		619,571			416,599			653,679
Future income taxes		(187,825	)		(102,131	)		(179,732	)
Future net cash flows		431,746			314,468			473,947
10% annual discount for estimating timing of cash flow		(160,031	)		(124,146	)		(193,019	)
Standardized measure of discounted future net cash flows	$	271,715		$	190,322		$	280,928

Future cash flows are computed by applying year-end posted prices of oil and natural gas to year-end quantities of proved oil and natural gas reserves. Future operating expenses and development costs are computed primarily by our independent reserve engineers by estimating the expenditures to be incurred in developing and producing our proved oil and natural gas reserves at the end of the year, based on year-end costs and assuming the continuation of existing economic conditions. Future income taxes are computed using our tax basis in evaluated oil and gas properties and other related tax carryforwards. The standardized measure of discounted future net cash flows does not purport, nor should it be interpreted, to present the fair value of our oil and natural gas reserves. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, a discount factor more representative of the time value of money, and the risks inherent in reserve estimates. The posted prices of oil and gas used with the above tables at December 31, 2003, 2004, and 2005 were $29.95, $40.00, and $57.75, respectively, per barrel and $5.97, $5.74, and $8.17, respectively, per Mcf. These prices are adjusted for energy content, transportation fees, and regional price differentials.

F-34

Changes in Standardized Measure

Changes in standardized measure of future net cash flows relating to proved natural gas and oil reserves are summarized below for the periods presented (in thousands):

	Years Ended December 31,
	2003			2004			2005
Changes due to current year operations:
Sales of oil and natural gas, net of oil and natural gas operating expense	$	(41,178	)	$	(44,145	)	$	(58,650	)
Extensions and discoveries, net of future production and development costs		17,612			24,440			5,765
Purchases of oil and gas properties		843			1,119			8,419
Sales of oil and gas properties		—			(124	)		(58	)
Changes due to revisions in standardized variables:
Prices and operating expenses		38,992			38,764			123,290
Revisions of previous quantity estimates		(94,695	)		(175,615	)		30,847
Estimated future development costs, net of development costs incurred during the period		24,329			20,251			3,546
Accretion of discount		41,384			37,949			23,963
Net change in income taxes		20,262			58,468			(41,064	)
Production rates, timing and other		(21,632	)		(42,500	)		(5,452	)
Net change		(14,083	)		(81,393	)		90,606
Beginning of year		285,798			271,715			190,322
End of Year	$	271,715		$	190,322		$	280,928

F-35

Appendix A

GLOSSARY OF NATURAL GAS AND OIL TERMS

The following is a description of the meanings of some of the natural gas and oil terms used in this prospectus.

3-D seismic data. Geophysical data that depict the subsurface strata in three dimensions. 3-D seismic typically provides a more detailed and accurate interpretation of the subsurface strata than 2-D, or two-dimensional, seismic.

Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in this prospectus in reference to oil or other liquid hydrocarbons.

Bcfe. Billion cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.

Btu or British thermal unit. The quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit.

Completion. The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

Condensate. Liquid hydrocarbons associated with the production of a primarily natural gas reserve.

Developed acreage. The number of acres that are allocated or assignable to productive wells or wells capable of production.

Development well. A well drilled into a proved natural gas or oil reservoir to the depth of a stratigraphic horizon known to be productive.

Dry hole. A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Environmental Assessment. An environmental assessment, a study that can be required pursuant to federal law prior to drilling a well.

Environmental Impact Statement. An environmental impact statement, a more detailed study that can be required pursuant to federal law of the potential direct, indirect and cumulative impacts of a project that may be made available for public review and comment.

Exploratory well. A well drilled to find and produce natural gas or oil reserves not classified as proved, to find a new reservoir in a field previously found to be productive of natural gas or oil in another reservoir or to extend a known reservoir.

Farm-out. An agreement under which the owner of a working interest in a natural gas and oil lease assigns the working interest or a portion of the working interest to another party who desires to drill on the leased acreage. Generally, the assignee is required to drill one or more wells in order to earn its interest in the acreage. The assignor usually retains a royalty or reversionary interest in the lease. The interest received by an assignee is a “farm-in” while the interest transferred by the assignor is a “farm-out.”

Field. An area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.

Finding and development costs. Capital costs incurred in the exploration and acquisition of proved natural gas and oil reserves divided by proved reserve additions and revisions to proved reserves.

A-1

Gross acres or gross wells. The total acres or wells, as the case may be, in which a working interest is owned.

Identified drilling locations. Total gross locations specifically identified and scheduled by management as an estimation of our multi-year drilling activities on existing acreage. Our actual drilling activities may change depending on the availability of capital, regulatory approvals, seasonal restrictions, natural gas and oil prices, costs, drilling results and other factors.

Infill drilling. The drilling of wells between established producing wells on a lease to increase reserves or productive capacity from the reservoir.

MBbls. Thousand barrels of oil or other liquid hydrocarbons.

Mcf. Thousand cubic feet of natural gas.

Mcf/d. One Mcf per day.

Mcfe. Thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.

MMBbls. Million barrels of crude oil or other liquid hydrocarbons.

MMBtu. Million British Thermal Units.

MMcf. Million cubic feet of natural gas.

MMcf/d. One Mmcf per day.

MMcfe. Million cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.

MMcfe/d. One MMcfe per day.

Net acres or net wells. The sum of the fractional working interest owned in gross acres or gross wells, as the case may be.

NGLs: Natural gas liquids, which consist primarily of ethane, propane, isobutane, normal butane and natural gasoline.

Operator. The individual or company responsible for the exploration of and/or production from a natural gas or oil well or lease.

Plugging and abandonment. Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another or to the surface. Regulations of all states require plugging of abandoned wells.

Present value of future net revenues (PV-10). The present value of estimated future revenues to be generated from the production of proved reserves, before income taxes, calculated in accordance with SEC guidelines, net of estimated production and future development costs, using prices and costs as of the date of estimation without future escalation and without giving effect to hedging activities, non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization. PV-10 is calculated using an annual discount rate of 10%.

Productive well. A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.

A-2

Prospect. A specific geographic area which, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.

Proved developed reserves. Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.

Proved reserves. The estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.

Proved undeveloped reserves. Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

PV-10. Present value of future net revenues.

Recompletion. The process of re-entering an existing wellbore that is either producing or not producing and completing new reservoirs in an attempt to establish or increase existing production.

Reservoir. A porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.

Royalty. An interest in a natural gas or oil lease that gives the owner of the interest the right to receive a portion of the production from the leased acreage (or of the proceeds of the sale thereof), but generally does not require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.

Standardized measure of discounted net cash flows. The present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production costs and future income tax expenses, discounted at 10% per annum to reflect timing of future cash flows and using the same pricing assumptions as were used to calculate PV-10. The standardized measure of discounted net cash flows differs from PV-10 because such measure includes the effect of future income taxes.

Tight gas sands. A formation with low permeability that produces natural gas with very low flow rates for long periods of time.

Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of natural gas and oil regardless of whether such acreage contains proved reserves.

Working interest. The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production and requires the owner to pay a share of the costs of drilling and production operations.

Workover. Operations on a producing well to restore or increase production.

A-3

Appendix B

March 1, 2006

Mr. David A. Rice

Ascent Energy, Inc.

Suite 450

1700 Redbud Boulevard

McKinney, Texas 75069

Dear Mr. Rice:

In accordance with your request, we have estimated the proved reserves and future revenue, as of December 31, 2005, to the Ascent Energy, Inc. (Ascent) interest in certain oil and gas properties located in Oklahoma, as listed in the accompanying tabulations. This report has been prepared using constant prices and costs, as discussed in subsequent paragraphs of this letter. The estimates of reserves and future revenue in this report conform to the guidelines of the Securities and Exchange Commission (SEC). The projections in this report are the same as in our report dated February 28, 2006, except that the February 28 report was prepared using price and cost parameters specified by Ascent.

As presented in the accompanying summary projections, Tables I through IV, we estimate the net reserves and future net revenue to the Ascent interest in these properties, as of December 31, 2005, to be:

	Net Reserves			Future Net Revenue ($)
Category	Oil (Barrels)	NGL (Barrels)	Gas (MCF)	Total	Present Worth at 10%
Proved Developed
Producing	5,251,143	95,598	4,194,816	213,400,300	107,963,900
Non-Producing	0	1,683	5,165,578	23,915,200	14,374,800
Proved Undeveloped	3,304,096	27,393	1,393,560	166,772,500	81,973,100
Total Proved	8,555,240	124,675	10,753,954	404,088,000	204,311,800

The oil reserves shown include crude oil and condensate. Oil and natural gas liquids (NGL) volumes are expressed in barrels that are equivalent to 42 United States gallons. Gas volumes are expressed in thousands of cubic feet (MCF) at standard temperature and pressure bases.

The estimates shown in this report are for proved developed producing, proved developed non-producing, and proved undeveloped reserves. In accordance with SEC guidelines, our estimates do not include any probable or possible reserves that may exist for these properties. This report does not include any value that could be attributed to interests in undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated. Definitions of all reserve categories are presented immediately following this letter. As shown in the Table of Contents, for each reserve category this report includes a summary projection of reserves and revenue along with one-line summaries of reserves, economics, and basic data by lease.

4500 THANKSGIVING TOWER • 1601 ELM STREET • DALLAS, TEXAS 75201-4754 • PH: 214-969-5401 • FAX: 214-969-5411	nsai@nsai-petro.com
1221 LAMAR STREET, SUITE 1200 • HOUSTON, TEXAS 77010-3072 • PH: 713-654-4950 • FAX: 713-654-4951	netherlandsewell.com

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Future gross revenue to the Ascent interest is prior to deducting state production taxes. Future net revenue is after deductions for these taxes, future capital costs, operating expenses, and abandonment costs but before consideration of federal income taxes. In accordance with SEC guidelines, the future net revenue has been discounted at an annual rate of 10 percent to determine its “present worth.” The present worth is shown to indicate the effect of time on the value of money and should not be construed as being the fair market value of the properties.

For the purposes of this report, we did not perform any field inspection of the properties, nor did we examine the mechanical operation or condition of the wells and their related facilities. We have not investigated possible environmental liability related to the properties; therefore, our estimates do not include any costs due to such possible liability. Our estimates of future revenue include Ascent’s estimates of the costs to abandon the wells and production facilities, net of any salvage value. Abandonment costs are included as capital costs.

Oil and NGL prices used in this report are based on a December 31, 2005, Plains West Texas Intermediate posted price of $57.75 per barrel and are adjusted by lease for quality, transportation fees, and regional price differentials. Gas prices used in this report are based on a December 31, 2005, Tennessee (zone 0) spot market price of $8.17 per MMBTU and are adjusted by lease for energy content, transportation fees, and regional price differentials. All prices are held constant in accordance with SEC guidelines.

Lease and well operating costs used in this report are based on operating expense records of Ascent. For nonoperated properties, these costs include the per-well overhead expenses allowed under joint operating agreements along with estimates of costs to be incurred at and below the district and field levels. As requested, lease and well operating costs for the operated properties include only direct lease- and field-level costs. For all properties, headquarters general and administrative overhead expenses of Ascent are not included. Lease and well operating costs are held constant in accordance with SEC guidelines. Capital costs are included as required for workovers, new development wells, and production equipment.

We have made no investigation of potential gas volume and value imbalances resulting from overdelivery or underdelivery to the Ascent interest. Therefore, our estimates of reserves and future revenue do not include adjustments for the settlement of any such imbalances; our projections are based on Ascent receiving its net revenue interest share of estimated future gross gas production.

The reserves shown in this report are estimates only and should not be construed as exact quantities. The reserves may or may not be recovered; if they are recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts. A substantial portion of these reserves are for undeveloped locations and waterflood response. Therefore, these reserves are based on estimates of reservoir volumes and recovery efficiencies along with analogies to similar production. Because such reserve estimates are usually subject to greater revision than those based on substantial production and pressure data, it may be necessary to revise these estimates as additional performance data become available. Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing this report. Also, estimates of reserves may increase or decrease as a result of future operations.

In evaluating the information at our disposal concerning this report, we have excluded from our consideration all matters as to which the controlling interpretation may be legal or accounting, rather than engineering and geologic. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geologic data; therefore, our conclusions necessarily represent only informed professional judgment.

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The titles to the properties have not been examined by Netherland, Sewell & Associates, Inc., nor has the actual degree or type of interest owned been independently confirmed. The data used in our estimates were obtained from Ascent Energy, Inc.; public data sources; and the nonconfidential files of Netherland, Sewell & Associates, Inc. and were accepted as accurate. Supporting geologic, field performance, and work data are on file in our office. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these properties and are not employed on a contingent basis.

		Very truly yours,
		NETHERLAND, SEWELL & ASSOCIATES, INC.
		By:	/s/    FREDERIC D. SEWELL, P.E.
			Frederic D. Sewell, P.E.
			Chairman and Chief Executive Officer
By:	/s/    DANNY D. SIMMONS, P.E.	By:	/s/    MIKE K. NORTON, P.G.
	Danny D. Simmons, P.E.		Mike K. Norton, P.G.
	Executive Vice President		Senior Vice President
Date Signed: March 1, 2006		Date Signed: March 1, 2006

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Appendix C

[LaRoche Petroleum Consultants, Ltd. Letterhead]

March 23, 2006

Mr. David A. Rice

Ascent Oil & Gas, Inc.

Suite 450

1700 Redbud Boulevard

McKinney, Texas 75069

Dear Mr. Rice:

At your request, LaRoche Petroleum Consultants, Ltd. (LPC) has estimated the proved reserves and future cash flow, as of December 31, 2005, to the Ascent Oil & Gas, Inc. (Ascent) interest in certain properties located in Louisiana and Texas. This report has been prepared using constant prices and costs and conforms to our understanding of the Securities and Exchange Commission (SEC) guidelines.

Summarized below are our estimates of net reserves and future net cash flow. Future net revenue is prior to deducting estimated production and ad valorem taxes. Future net cash flow is after deducting these taxes, operating expenses, future capital expenditures, and abandonment costs but before consideration of federal income taxes. The discounted cash flow values included in this report are intended to represent the time value of money and should not be construed to represent an estimate of fair market value. We estimate the net reserves and future net cash flow to the Ascent interest, as of December 31, 2005, to be:

	Net Reserves			Future Net Cash Flow ($)
Category	Oil (BBL)	Gas (MCF)	NGL (BBL)	Total		Present Worth at 10%
Proved Developed
Producing	374,840	14,129,893	368,081	$	103,569,633	$	76,988,203
Non-Producing	245,148	4,336,382	34,480		45,918,434		28,720,895
Proved Undeveloped	397,125	12,845,513	570,899		100,103,234		61,282,051
Total Proved(1)	1,017,114	31,311,787	973,460	$	249,591,281	$	166,991,125

(1) Values above reflect those shown in the economic summaries and may not add due to rounding.

The oil reserves include crude oil, condensate, and natural gas liquids. Oil and natural gas liquid reserves are expressed in barrels, which are equivalent to 42 United States gallons. Gas volumes are expressed in thousands of standard cubic feet (MCF) at the contract temperature and pressure bases.

The estimated reserves and future cash flow shown in this report are for proved developed producing reserves and, for certain properties, proved developed non-producing and proved undeveloped reserves. In accordance with SEC guidelines, our estimates do not include any value for probable or possible reserves that may exist for these properties. This report does not include any value that could be attributed to interests in undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated. Definitions of all reserve categories used in this report are presented immediately following this letter.

This report includes: (1) summary economic projections of reserves and cash flow for each reserve category and field area, (2) one-line summaries of basic economic data and reserves for each property evaluated by reserve category and state, and (3) economic projections of reserves and cash flow for each evaluated property.

Our estimates of reserves were prepared using standard geological and engineering methods generally accepted by the petroleum industry. The method or combination of methods utilized in the evaluation of each reservoir included consideration of the stage of development of the reservoir, quality and completeness of basic

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data, and production history. Recovery from various reservoirs and leases was estimated after consideration of the type of energy inherent in the reservoirs, the structural positions of the properties, and reservoir and well performance. In some instances, comparisons were made with similar properties where more complete data were available.

The estimated reserves and future income shown in this report are related to hydrocarbon prices. The prices on December 31, 2005 were used in the preparation of this report as required by SEC guidelines; however, actual future prices may vary significantly from the December 31, 2005 prices. Therefore, volumes of reserves actually recovered and amounts of income actually received may differ significantly from the estimated quantities presented in this report.

Oil prices used in this report are based on a December 31, 2005 physical crude oil price of $57.75 per barrel, as posted by Plains Marketing, L.P., adjusted by lease for gravity, transportation fees, and regional price differentials. Gas prices are referenced to a December 31, 2005 Tennessee Zone 0 (South Texas) physical composite gas price of $8.17 per MMBtu, adjusted by lease for energy content, transportation fees, and regional price differentials. Natural gas liquid prices are referenced to a December 31, 2005 physical crude oil price of $57.75 per barrel, as posted by Plains Marketing, L.P., adjusted by area for composition, quality, transportation fees and regional price differentials. Prices are held constant in accordance with SEC guidelines.

Lease and well operating expenses are based on data obtained from Ascent. Expenses for the properties operated by Ascent include allocated overhead costs as well as direct lease and field level costs. Wells operated by others include all direct expenses as well as general, administrative, and overhead costs allowed under the joint operating agreements. Lease and well operating costs are held constant in accordance with SEC guidelines.

Capital costs and timing of all investments have been provided by Ascent and are included as required for workovers, new development wells, and production equipment. Ascent’s estimates of the cost to plug and abandon the wells are included at the end of the economic life of each area for Louisiana properties and each well for Texas properties. These costs are also held constant until the date of expenditure.

We have made no investigation of possible oil and gas volume and value imbalances that may have been the result of overdelivery or underdelivery to the Ascent interest. Our projections are based on Ascent receiving its net revenue interest share of estimated future gross oil and gas production.

Technical information necessary for the preparation of the reserve estimates herein was furnished by Ascent or was obtained from state regulatory agencies and commercially available data sources. No special tests were obtained to assist in the preparation of this report. For the purpose of this report, the individual well test and production data as reported by the above sources were accepted as represented together with all other factual data presented by Ascent including the extent and character of the interest evaluated.

An on-site inspection of the properties has not been performed nor has the mechanical operation or condition of the wells and their related facilities been examined by LPC. The continued operation of uneconomic properties was not taken into account.

The evaluation of potential environmental liability from the operation and abandonment of the properties evaluated is beyond the scope of this report. In addition, no evaluation was made to determine the degree of operator compliance with current environmental rules, regulations, and reporting requirements. Therefore, no estimate of the potential economic liability, if any, from environmental concerns is included in the projections presented herein.

The reserves included in this report are estimates only and should not be construed as exact quantities. They may or may not be recovered; if recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts. These estimates should be accepted with the understanding that future

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development, production history, changes in regulations, product prices, and operating expenses would probably cause us to make revisions in subsequent evaluations. A portion of these reserves are for behind-pipe zones, undeveloped locations, and producing wells that lack sufficient production history to utilize performance-related reserve estimates. Therefore, these reserves are based on estimates of reservoir volumes and recovery efficiencies along with analogies to similar production. These reserve estimates are subject to a greater degree of uncertainty than those based on substantial production and pressure data. It may be necessary to revise these estimates up or down in the future as additional performance data become available. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geological data; therefore, our conclusions represent informed professional judgments only, not statements of fact.

This report is solely for the use of Ascent, its agents, and its representatives in their evaluation of these properties and is not to be used, circulated, quoted, or otherwise referenced for any other purpose without the express written consent of the undersigned except as required by law. Persons other than those to whom this report is addressed or those authorized by the addressee shall not be entitled to rely upon the report unless it is accompanied by such consent.

We are independent petroleum engineers, geologists, and geophysicists; we do not own an interest in these properties and are not employed on a contingent basis. Basic geologic and field performance data together with our engineering work sheets are maintained on file in our office.

Very truly yours,

LaRoche Petroleum Consultants, Ltd.

/s/ Joe A. Young

Joe A. Young

Registered Professional Engineer

State of Texas No. 62866

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             Shares

Common Stock

PROSPECTUS

                , 2006

Joint Book-Running Managers

LEHMAN BROTHERS JEFFERIES & COMPANY

Part II

Information not required in prospectus

Item 13. Other expenses of issuance and distribution

The expenses of this offering, other than underwriting discount, are estimated to be as follows:

Securities and Exchange Commission registration fee	$	21,534
NASD filing fee		20,625
Nasdaq National Market listing fee		*
Legal fees and expenses		*
Accounting fees and expenses		*
Printing expenses		*
Transfer agent fees		*
Miscellaneous		*
Total		$    *

* To be provided by amendment.

Item 14. Indemnification of directors and officers

Section 145 of the General Corporation Law of the State of Delaware (the “DGCL”) authorizes a corporation, under certain circumstances, to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that the person is or was an officer or director of such corporation, or is or was serving at the request of that corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. With respect to any criminal action or proceeding, such indemnification is available if he had no reasonable cause to believe his conduct was unlawful.

Article VI of the registrant’s Amended and Restated Bylaws (the “Bylaws”), will provide for indemnification of each person who is or was made a party to any actual or threatened civil, criminal, administrative or investigative action, suit or proceeding because such person is, was or has agreed to become an officer or director of the registrant or is a person who is or was serving or has agreed to serve at the request of the registrant as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another corporation or of a partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise to the fullest extent permitted by the DGCL as it existed at the time the indemnification provisions of the Bylaws were adopted or as may be thereafter amended. Article VI expressly provides that it is not the exclusive method of indemnification.

Section 145 of the DGCL also empowers a corporation to purchase and maintain insurance on behalf of any person who is or was an officer or director of such corporation against liability asserted against or incurred by him in any such capacity, whether or not such corporation would have the power to indemnify such officer or director against such liability under the provisions of Section 145.

Article VI of the Bylaws will also provide that the registrant may maintain insurance, at the registrant’s expense, to protect the registrant and any director, officer, employee or agent of the registrant or of another entity

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against any expense, liability, or loss, regardless of whether the registrant would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 102(b)(7) of the DGCL provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (a) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) or (d) for any transaction from which the director derived improper personal benefit. Article VII of the registrant’s Amended and Restated Certificate of Incorporation will contain such a provision.

The underwriting agreement to be entered into in connection with this offering will provide that the Underwriters shall indemnify the registrant, its directors and certain officers of the registrant against liabilities resulting from information furnished by or on behalf of the Underwriters specifically for use in the Registration Statement. See “Item 17. Undertakings” for a description of the Commission’s position regarding such indemnification provisions.

Item 15. Recent sales of unregistered securities

Ascent Energy Inc. was formed January 9, 2001. During the three years preceding the date of this registration statement, the registrant has sold the following securities without registration under the Securities Act:

The registrant issued $24,000,000 aggregate principal amount of senior promissory notes between May and December 2003 to The Jefferies Investors and Trust Company of the West for cash in reliance on the exemption from registration provided by Section 4(2) of the Securities Act.

On July 27, 2004, the registrant issued $27,465,008 aggregate principal amount of 16% senior notes due October 26, 2007 and warrants to purchase up to 3,000 shares of its 8% Series A preferred stock, $0.001 par value per share, to The Jefferies Investors and Trust Company of the West in exchange for all then outstanding principal and accrued but unpaid interest on its senior promissory notes. The 16% senior notes due October 26, 2007 and the preferred stock warrants were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act.

On July 27, 2004, the registrant issued $85,942,188 aggregate principal amount of 11 ³/4% senior subordinated notes due 2006 to The Jefferies Investors and Trust Company of the West in exchange for all then outstanding principal and accrued but unpaid interest on its 11 ³/4% Series A senior notes due 2006 which were issued on June 28, 2001. The 11 ³/4% senior subordinated notes due 2006 were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act.

On November 9, 2005, the registrant issued $33,492,207 aggregate principal amount of 16% senior notes due February 1, 2010 (or such later maturity date as automatically extended in accordance with Section 7 thereof (but in no event later than February 1, 2015)) (the “senior notes”) to The Jefferies Investors and Trust Company of the West in exchange for all then outstanding principal and accrued but unpaid interest on its 16% senior notes due October 27, 2006. The senior notes were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. Interest on the senior notes is payable semi-annually in the form of additional senior notes.

On November 9, 2005, the registrant issued $99,6551,968 aggregate principal amount of 11 ³/4% senior subordinated notes due May 1, 2010 (or such later maturity date as automatically extended in accordance with Section 7 thereof (but in no event later than May 1, 2015)) (the “senior subordinated notes”) to The Jefferies

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Investors and Trust Company of the West in exchange for all then outstanding principal and accrued but unpaid interest on the 11 ³/4% senior subordinated notes due 2006. The senior subordinated notes were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. Interest on the senior subordinated notes is payable semi-annually in the form of additional senior subordinated notes.

Item 16. Exhibits and financial statement schedules

(a) Exhibits:

*1.1	—  Form of Underwriting Agreement
3.1	—  Form of Amended and Restated Certificate of Incorporation
3.2	—  Form of Amended and Restated Bylaws
*4.1	—  Form of Common Stock Certificate
4.2	—  Registration Rights Agreement
*5.1	—  Opinion of Vinson & Elkins L.L.P.
10.1	—  Second Amended and Restated Loan Agreement
10.2	—  First Amendment to Second Amended and Restated Loan Agreement
10.3	—  Second Amendment to Second Amended and Restated Loan Agreement
10.4	—  Amended and Restated Equity Incentive Plan
*10.5	—  Form of 2006 Long-Term Incentive Plan
10.6	—  Employment Agreement of Terry W. Carter
10.7	—  Employment Agreement of Eddie M. LeBlanc, III
10.8	—  Employment Agreement of David L. McCabe
10.9	—  Employment Agreement of Steve Limke
10.10	—  Employment Agreement of David A. Rice
10.11	—  Amendment to Employment Agreement of Terry W. Carter
10.12	—  Amendment to Employment Agreement of Eddie M. LeBlanc, III
10.13	—  Amendment to Employment Agreement of David L. McCabe
10.14	—  Amendment to Employment Agreement of Steve Limke
10.15	—  Amendment to Employment Agreement of David A. Rice
21.1	—  Subsidiaries of the Company
23.1	—  Consent of Ernst & Young LLP
23.2	—  Consent of Netherland, Sewell & Associates, Inc.
23.3	—  Consent of LaRoche Petroleum Consultants, Ltd.
*23.4	—  Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1 hereto)
24.1	—  Power of Attorney (included on the signature page to this Registration Statement)

* To be filed by amendment.

(b) Consolidated Financial Statement Schedules:

All schedules are omitted because the required information is inapplicable or the information is presented in the Consolidated Financial Statements or related notes.

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Item 17. Undertakings

The undersigned Registrant hereby undertakes:

(a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(b) To provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(c) For purpose of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(d) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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Signatures

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Plano, State of Texas, on the 30th day of June, 2006.

Ascent Energy Inc.
By:	/S/    TERRY W. CARTER
	Terry W. Carter President, Chief Executive Officer, Chief Operating Officer and Director

Power of Attorney

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Terry W. Carter and Eddie M. LeBlanc, III, or each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution, from such person and in each person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Form S-1 Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and to sign and file any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities indicated on the 30th day of June, 2006.

Signature	Title
/S/    TERRY W. CARTER         Terry W. Carter	President, Chief Executive Officer, Chief Operating Officer and Director (Principal Executive Officer)
/S/    EDDIE M. LEBLANC, III         Eddie M. LeBlanc, III	Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)
/S/    JAMES L. LUIKART         James L. Luikart	Chairman of the Board of Directors
/S/    STUART B. KATZ         Stuart B. Katz	Director
/S/    ROBERT J. WELCH         Robert J. Welch	Director

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Index to Exhibits

*1.1	—  Form of Underwriting Agreement
3.1	—  Form of Amended and Restated Certificate of Incorporation
3.2	—  Form of Amended and Restated Bylaws
*4.1	—  Form of Common Stock Certificate
4.2	—  Registration Rights Agreement
*5.1	—  Opinion of Vinson & Elkins L.L.P.
10.1	—  Second Amended and Restated Loan Agreement
10.2	—  First Amendment to Second Amended and Restated Loan Agreement
10.3	—  Second Amendment to Second Amended and Restated Loan Agreement
10.4	—  Amended and Restated Equity Incentive Plan
*10.5	—  Form of 2006 Long-Term Incentive Plan
10.6	—  Employment Agreement of Terry W. Carter
10.7	—  Employment Agreement of Eddie M. LeBlanc, III
10.8	—  Employment Agreement of David L. McCabe
10.9	—  Employment Agreement of Steve Limke
10.10	—  Employment Agreement of David A. Rice
10.11	—  Amendment to Employment Agreement of Terry W. Carter
10.12	—  Amendment to Employment Agreement of Eddie M. LeBlanc, III
10.13	—  Amendment to Employment Agreement of David L. McCabe
10.14	—  Amendment to Employment Agreement of Steve Limke
10.15	—  Amendment to Employment Agreement of David A. Rice
21.1	—  Subsidiaries of the Company
23.1	—  Consent of Ernst & Young LLP
23.2	—  Consent of Netherland, Sewell & Associates, Inc.
23.3	—  Consent of LaRoche Petroleum Consultants, Ltd.
*23.4	—  Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1 hereto)
24.1	—  Power of Attorney (included on the signature page to this Registration Statement)

* To be filed by amendment.

EX-3.1

Exhibit 3.1

FORM OF

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ASCENT ENERGY INC.

The name of this corporation is “Ascent Energy Inc.” (the “Corporation”).

The original certificate of incorporation was filed with the Secretary of State of the State of Delaware on January 9, 2001.

This Amended and Restated Certificate of Incorporation (this “Certificate of Incorporation”) has been declared advisable by the board of directors of the Corporation (the “Board”), duly adopted by the stockholders of the Corporation and duly executed and acknowledged by the officers of the Corporation in accordance with Sections 103, 242 and 245 of the General Corporation Law of the State of Delaware (the “DGCL”).

The text of the certificate of incorporation of the Corporation is hereby amended and restated to read in its entirety as follows:

ARTICLE I

NAME

The name of the Corporation is “Ascent Energy Inc.”

ARTICLE II

REGISTERED AGENT

The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE IV

CAPITAL STOCK

Section 4.1. Authorized Capital Stock. The Corporation shall be authorized to issue [·] shares of capital stock, consisting of two classes: [·] shares of common stock, par value $0.001 per share (“Common Stock”), and [·] shares of preferred stock, par value $0.001 per share (“Preferred Stock”).

Section 4.2. Preferred Stock. The authorized shares of Preferred Stock may be issued in one or more series. Subject to any provision made in this Article IV fixing and determining

the designations, powers, rights and preferences of any series of Preferred Stock, the Board is hereby authorized to issue the shares of Preferred Stock in such series and to fix from time to time the number of shares to be included in any series and the designations, powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of all shares of such series, all of which shall be stated in a resolution or resolutions providing for the issuance of such Preferred Stock (a “Preferred Stock Designation”).

Subject to the rights of the holders of any series of Preferred Stock pursuant to the terms of any Preferred Stock Designation, the number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote generally in the election of directors irrespective of the provisions of Section 242(b)(2) of the DGCL. Except as otherwise provided by law or by a Preferred Stock Designation, the holders of Preferred Stock shall not be entitled to vote at or receive notice of any meeting of stockholders.

Section 4.3. Common Stock. The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. The holders of shares of Common Stock shall be entitled to one vote for each such share upon all proposals on which the holders of Common Stock are entitled to vote. Except as otherwise provided by law or by any Preferred Stock Designation, the holders of Common Stock shall have the exclusive right to vote for the members of the Board (the “Directors”) and for all other purposes (“Total Voting Power”). Cumulative voting shall not be permitted in the election of Directors or otherwise, subject to the rights of any Preferred Stock as set forth in a Preferred Stock Designation. Holders of Common Stock are entitled to receive ratably dividends if, as and when dividends are declared from time to time by the Board out of funds legally available for that purpose.

Section 4.4. Registered Owners. The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.

ARTICLE V

THE BOARD

Section 5.1. Number, Election and Terms of Directors. Subject to the rights of any Preferred Stock as set forth in a Preferred Stock Designation, the number of directors (each, a “Director,” and collectively, the “Directors”) that constitute the entire Board shall be fixed from time to time by a majority of the total number of authorized Directors, whether or not there exists any vacancy in previously authorized directorships, and the Directors (other than those Directors elected by the holders of any series of Preferred Stock pursuant to a Preferred Stock Designation (the “Preferred Stock Directors”)) shall be divided into three classes: Class I, Class II and Class III, which shall be as equal in number as possible; provided, however, that from and after the first date as of which the Corporation has a class or series of capital stock registered under the Securities and Exchange Act of 1934, as amended, the number of Directors that constitute the entire Board shall be not less than three nor more than fifteen. Each such Director shall serve for a term ending on the third annual meeting following the annual meeting of stockholders at which

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such Director was elected; provided, however, that the Directors first elected to Class I shall serve for a term expiring at the first annual meeting of stockholders following the effectiveness of this Certificate of Incorporation, the Directors first elected to Class II shall serve for a term expiring at the second annual meeting of stockholders following the effectiveness of this Certificate of Incorporation, and the Directors first elected to Class III shall serve for a term expiring at the third annual meeting of stockholders following the effectiveness of this Certificate of Incorporation. Each Director shall hold office until the annual meeting of stockholders at which such Director’s term expires and, the foregoing notwithstanding, shall serve until his or her successor shall have been duly elected and qualified or until his or her earlier death, resignation or removal.

At such annual election, other than with respect to the Preferred Stock Directors, the Directors chosen to succeed those whose terms then expire shall be of the same class as the Directors they succeed, unless, by reason of any intervening changes in the authorized number of Directors, the Board shall have designated one or more directorships whose terms then expire as directorships of another class in order to more nearly achieve equality of number of Directors among the classes.

In the event of any changes in the authorized number of Directors, each Director then continuing to serve shall nevertheless continue as a Director of the class of which he is a member until the expiration of his or her current term, or his or her prior death, resignation or removal. In case of any increase or decrease, from time to time, in the number of Directors (other than Preferred Stock Directors), the number of Directors in each class shall be apportioned as nearly equal as possible. The Board shall specify the class to which a newly created directorship shall be allocated.

Election of Directors need not be by written ballot unless the Bylaws of the Corporation (the “Bylaws”) shall so provide.

Section 5.2. Removal Of Directors. No Director, other than Preferred Stock Directors, shall be removed from office as a Director by vote or other action of the stockholders or otherwise except for cause, and then only by the affirmative vote of the holders of a majority of the voting power of all outstanding shares of capital stock of the Corporation generally entitled to vote in the election of Directors, voting together as a single class. Except as set forth in this Article V, Directors shall not be subject to removal.

Section 5.3. Vacancies. Subject to any requirements of law to the contrary, other than with respect to Preferred Stock Directors, newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board resulting from death, resignation or removal shall only be filled by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director’s successor shall have been elected and qualified or until his or her earlier death, resignation or removal. Other than with respect to Preferred Stock Directors, no decrease in the number of Directors constituting the Board shall shorten the term of any incumbent Director.

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Section 5.4. Preferred Stock Directors. During any period when the holders of any series of Preferred Stock have the right to elect additional directors pursuant to the provisions of a Preferred Stock Designation, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of Directors of the Corporation shall automatically be increased by such specified number of Directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional Director shall serve until such Director’s successor shall have been duly elected and qualified, or until such Director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, disqualification, resignation or removal. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional Directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional Directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional Directors, shall forthwith terminate and the total authorized number of Directors of the Corporation shall automatically be reduced accordingly.

ARTICLE VI

BYLAWS

In furtherance and not in limitation of the powers conferred by statute, the Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board.

ARTICLE VII

AMENDMENT OF CERTIFICATE OF INCORPORATION

Except as otherwise provided in this Certificate of Incorporation or the Bylaws or by applicable law, the Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and, except as set forth in Article IX and Article X, all rights, preferences and privileges of whatever nature conferred upon stockholders, Directors or any other person by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article.

ARTICLE VIII

STOCKHOLDER ACTION BY WRITTEN CONSENT

Except as such may be limited by a Preferred Stock Designation with respect to the rights of a series of Preferred Stock, any action required to be taken at any annual or special meeting of stockholders, or any action that may be taken at any annual or special meeting of such stockholders, including the election of directors, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the voting power of shares having not less than the minimum number of votes that would be necessary to authorize or take such action at an annual or special meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the

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taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who would have been entitled to notice of the meeting, had a meeting been held.

ARTICLE IX

LIMITED LIABILITY OF DIRECTORS

A Director shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except, if and to the extent required by the DGCL, as amended from time to time, for liability (i) for any breach of the Director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the Director derived an improper personal benefit. Neither the amendment nor repeal of this Article IX shall eliminate or reduce the effect of this Article IX in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article IX, would accrue or arise, prior to such amendment or repeal.

ARTICLE X

BUSINESS OPPORTUNITIES

Section 10.1 Definitions. As used in this Article X, the following terms shall have the following meanings:

(a) “Affiliate” shall mean, with respect to any specified person, (i) any Subsidiary (as defined below) of such person; (ii) any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person; (iii) any other person that owns, directly or indirectly, 10% or more of such specified person’s capital stock; (iv) any officer or director of (A) any such specified person, (B) any subsidiary of such specified person, or (C) any person described in clause (ii) or (iii) above; or (v) any heir or legatee or other person having a relationship with any natural person by blood, marriage or adoption not more remote than first cousin or any person directly or indirectly controlling or controlled by or under common control with such other person described in this clause (v). For purposes of this definition, (x) ”control” with respect to any specified person, means the possession of the power, whether or not exercised, to direct or cause the direction of the management or policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing and (y) the Corporation and its Subsidiaries shall not be deemed to be Affiliates of a non-employee director of the Corporation.

(b) “Corporate Opportunity” shall mean an investment or business opportunity or prospective economic advantage (i) that the Corporation is financially able, contractually permitted and legally able to undertake, (ii) that is, from its nature, the same as or similar to the Corporation’s business or the business of any Subsidiary of the Corporation, and (iii) in which the Corporation could, but for the provisions of this Article X, have an interest or expectancy.

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(c) “Subsidiary” shall mean any corporation, partnership, joint venture or other legal entity of which such person (either directly or through or together with any other Subsidiary of such person), owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or similar governing body of such corporation, partnership, joint venture or other legal entity.

Section 10.2 Competing Activities. Except as otherwise expressly agreed to in writing by the Corporation (i) any non-employee director of the Corporation, any such director’s Affiliates and any such Affiliates’ respective officers, directors, managers, agents, stockholders, members, partners and employees, may engage or invest in, independently or with others, any business activity of any type or description, including without limitation those that might be the same as or similar to the Corporation’s business or the business of any Subsidiary of the Corporation, (ii) neither the Corporation, any Subsidiary of the Corporation nor any stockholder of the Corporation shall have any right in or to such business activities or ventures or to receive or share in any income or proceeds derived therefrom; and (iii) to the extent required by applicable law in order to effectuate the purpose of this provision, the Corporation shall have no interest or expectancy, and specifically renounces any interest or expectancy, in any such business activities or ventures.

Section 10.3 Corporate Opportunities.

(a) If any non-employee director of the Corporation acquires knowledge of a potential transaction or matter which may be a Corporate Opportunity or otherwise is then exploiting any Corporate Opportunity, the Corporation shall have no interest in such Corporate Opportunity and no expectancy that such Corporate Opportunity be offered to the Corporation, any such interest or expectancy being hereby renounced, so that, as a result of such renunciation, and for the avoidance of doubt, such person (i) shall have no duty to communicate or present such Corporate Opportunity to the Corporation, (ii) shall have the right to hold any such Corporate Opportunity for such director’s (and/or such director’s Affiliates and such Affiliates’ respective officers’, directors’, managers’, agents’, stockholders’, members’, partners’ or employees’) own account or to recommend, sell, assign or transfer such Corporate Opportunity to persons other than the Corporation or any Subsidiary of the Corporation, and (iii) shall not breach any fiduciary duty to the Corporation, in such person’s capacity as a director of the Corporation or otherwise, by reason of the fact that such person pursues or acquires such Corporate Opportunity for itself, directs, sells, assigns or transfers such Corporate Opportunity to another person, or does not communicate information regarding such Corporate Opportunity to the Corporation; provided, however that the foregoing shall not apply to a Corporate Opportunity described in clauses (A) or (B) of Section 10.3(b)(1).

(b) In the event that a non-employee director of the Corporation acquires knowledge of a potential transaction or matter which may be a Corporate Opportunity for the Corporation or any of its Subsidiaries and for such non-employee director or any of such director’s Affiliates, such non-employee director shall have fully satisfied and fulfilled the fiduciary duty of such director to the Corporation and its stockholders with

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respect to such Corporate Opportunity, if such director acts in a manner consistent with the following policy:

(1) A Corporate Opportunity offered to any person who is a non-employee director of the Corporation shall belong to the Corporation if (A) such opportunity is presented to such person solely in his or her capacity as a director of the Corporation or (B) such opportunity is identified by a non-employee director or any such director’s Affiliates or any of such Affiliates’ respective directors, officers, managers, agents, stockholders, members or partners solely through the disclosure of information by or on behalf of the Corporation.

(2) Otherwise, such Corporate Opportunity shall belong to such non-employee director of the Corporation.

Section 10.4 Notice to Holders. Any person purchasing or otherwise acquiring any interest in shares of the capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article X.

Section 10.5 Amendments. Neither the alteration, amendment or repeal of this Article X nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article X shall eliminate or reduce the effect of this Article X in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article X, would accrue or arise prior to such alteration, amendment, repeal or adoption.

IN WITNESS WHEREOF, Ascent Energy Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by its President and Chief Executive Officer this day of             , 2006.

Terry W. Carter

President and Chief Executive Officer

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EX-3.2

Exhibit 3.2

FORM OF

AMENDED AND RESTATED BYLAWS

OF

ASCENT ENERGY INC.

Dated as of                     , 2006

TABLE OF CONTENTS

		Page
ARTICLE I
OFFICES AND RECORDS		1
ARTICLE II
STOCKHOLDERS
Section 2.1.	Annual Meeting	1
Section 2.2.	Special Meeting	1
Section 2.3.	Place of Meeting	1
Section 2.4.	Fixing Record Dates	1
Section 2.5.	Notice of Meeting	2
Section 2.6.	Quorum and Adjournment; Voting	2
Section 2.7.	Proxies	3
Section 2.8.	Notice of Stockholder Business and Nominations	3
Section 2.9.	Procedure for Election of Directors	6
Section 2.10.	Required Vote	6
Section 2.11.	Inspectors of Elections; Opening and Closing the Polls	6
Section 2.12.	Conduct of Meetings	6
Section 2.13.	Action by Consent of Stockholders	7
ARTICLE III
THE BOARD
Section 3.1.	General Powers	7
Section 3.2.	Number; Qualifications	7
Section 3.3.	Regular Meetings	7
Section 3.4.	Special Meetings	7
Section 3.5.	Conference Telephone Meetings	8
Section 3.6.	Quorum; Conduct of Business	8
Section 3.7.	Vacancies; Increases in the Number of Directors	8
Section 3.8.	Committees	8
Section 3.9.	Action by Consent of Board or Committee	9
Section 3.10.	Records	9
ARTICLE IV
OFFICERS
Section 4.1.	Officers	9
Section 4.2.	Election and Term of Office	10
Section 4.3.	Chairman of the Board; Chief Executive Officer	10
Section 4.4.	Chief Executive Officer	10
Section 4.5.	President	10

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Section 4.6.	Vice Presidents	10
Section 4.7.	Treasurer	10
Section 4.8.	Secretary	11
Section 4.9.	Removal	11
Section 4.10.	Vacancies	11
Section 4.11.	Delegation of Authority	11
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1.	Stock Certificates and Transfers	11
Section 5.2.	Lost, Stolen or Destroyed Certificates	12
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 6.1.	Right to Indemnification	12
Section 6.2.	Right of Claimant to Bring Suit	13
Section 6.3.	Non-Exclusivity of Rights	13
Section 6.4.	Insurance	13
Section 6.5.	Severability	13
Section 6.6.	Expenses as a Witness	14
Section 6.7.	Nature of Rights	14
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1.	Fiscal Year	14
Section 7.2.	Dividends	14
Section 7.3.	Seal	14
Section 7.4.	Waiver of Notice	14
Section 7.5.	Resignations	14
ARTICLE VIII
CONTRACTS; VOTING SECURITIES OF OTHER ENTITIES
Section 8.1.	Contracts	14
Section 8.2.	Action with Respect to Securities of Other Entities	15
ARTICLE IX
AMENDMENTS		15

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AMENDED AND RESTATED BYLAWS

OF

ASCENT ENERGY INC.

ARTICLE I

OFFICES AND RECORDS

Ascent Energy Inc. (the “Corporation”) shall maintain a registered office in Delaware and may maintain such other offices and keep its books, documents and records at such places within or without Delaware as may, from time to time, be designated by the board of directors of the Corporation (collectively, the “Board” and each director, a “Director”).

ARTICLE II

STOCKHOLDERS

Section 2.1. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on such date and at such time as may be fixed by resolution of the Board.

Section 2.2. Special Meeting. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock, as defined in the Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), as to dividends or upon liquidation, special meetings of the stockholders of the Corporation for any purpose or purposes may be called only by:

(a) the Board pursuant to a resolution stating the purpose or purposes thereof approved by a majority of the total number of authorized Directors, whether or not there exists any vacancy in previously authorized directorships (the “Whole Board”), or

(b) the Chairman of the Board.

No business other than that stated in the notice shall be transacted at any special meeting.

Section 2.3. Place of Meeting. The Board or the Chairman of the Board, as the case may be, may designate the place of meeting for any annual meeting or for any special meeting of the stockholders. If no designation is so made, the place of meeting shall be the principal office of the Corporation.

Section 2.4. Fixing Record Dates. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; and (2) in the

case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

Section 2.5. Notice of Meeting. Notice, stating the place, day and hour of the meeting and the means of remote communication, if any, by which stockholders and proxyholders may be deemed present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten calendar days nor more than 60 calendar days before the date of the meeting to each stockholder of record entitled to vote at such meeting, except as otherwise provided herein or required by law or the Certificate of Incorporation. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at such person’s address as it appears on the stock transfer books of the Corporation. Without limiting the manner by which notice otherwise may be given to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided by Section 232 of the Delaware General Corporation Law (the “DGCL”). Meetings may be held without notice if all stockholders entitled to vote are present (without being present for the purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened), or if notice is waived by those not present in accordance with Section 7.4 of these Bylaws. The Board may cancel, reschedule or postpone any previously scheduled annual or special meeting.

Section 2.6. Quorum and Adjournment; Voting. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the voting power of all outstanding shares of the Corporation entitled to vote in the election of Directors (the “Voting Stock”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series of stock voting separately as a class, the holders of a majority of the voting power of all outstanding shares of such class or series represented in person or by proxy shall constitute a quorum of such class or series for the transaction of such business. The chairman of the meeting, as determined by Article IV of these Bylaws, may adjourn the meeting from time to time, whether or not there is such a quorum. No notice of the time and place of adjourned meetings need be given if the time and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which adjournment is taken; provided, however, that if the date of any adjourned meeting is more than 30 days after the date for which notice was originally given, or if a new record date is fixed for the adjourned meeting, notice of the place, if any, date and time of the adjourned meeting and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, shall be given in conformity herewith. At any adjourned meeting, any business may be transacted that might have been transacted at the

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original meeting. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Section 2.7. Proxies. At all meetings of stockholders, a stockholder may vote by proxy executed in writing (or in such other manner permitted by the DGCL) by the stockholder or by such person’s duly authorized attorney-in-fact.

Section 2.8. Notice of Stockholder Business and Nominations.

(a) Annual Meetings of Stockholders.

(i) Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (A) pursuant to the Corporation’s notice of meeting in accordance with Section 2.5 of these Bylaws, (B) by or at the direction of the Board, or (C) by any stockholder of the Corporation who was a stockholder of record at the time the notice provided for in this Bylaw was given, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw.

(ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of Section 2.8(a)(i) hereof, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such business must be a proper matter for stockholder action under applicable law. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th calendar day prior to the first anniversary of the date of the preceding year’s annual meeting nor later than the close of business on the 90th calendar day prior to the first anniversary of the date of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 calendar days before or more than 70 calendar days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th calendar day prior to such annual meeting nor later than the close of business on the later of the 90th calendar day prior to such annual meeting or the 10th calendar day following the calendar day on which public announcement of the date of such meeting is first made by the Corporation. The first anniversary of the first annual meeting of stockholders of the Corporation shall be deemed to be [            ], 2007. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or reelection as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-11 thereunder and such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; (B) as to any other business that the stockholder proposes to bring before the meeting, a

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brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (2) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (3) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (4) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies from stockholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal or nomination at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal or nomination has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

(iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Bylaw to the contrary, in the event that the number of Directors to be elected to the Board is increased and there is no public announcement by the Corporation naming all of the nominees for Director or specifying the size of the increased Board at least 100 calendar days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Bylaw shall be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th calendar day following the day on which such public announcement is first made by the Corporation.

(b) Special Meetings of the Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting under Section 2.5 of these Bylaws. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which Directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board, or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Bylaw, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more Directors to the Board,

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any stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting pursuant to clause (ii) if the stockholder’s notice required by paragraph (a)(ii) of this Bylaw shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th calendar day prior to such special meeting, nor later than the close of business on the later of the 90th calendar day prior to such special meeting or the 10th calendar day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(c) General.

(i) Only such persons who are nominated in accordance with the procedures set forth in this Bylaw shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as Directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Bylaw (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (a)(ii)(C)(4) of this Section 2.8) and (b) if any proposed nomination or business was not made or proposed in compliance with this Bylaw, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Bylaw, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Bylaw, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, to the Secretary of the Corporation at the meeting of the stockholders.

(ii) For purposes of this Bylaw, “public announcement” shall mean any method (or combination of methods) of disclosure that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public or the furnishing or filing of any document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

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(iii) A stockholder must also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights (A) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (B) of the holders of any series of Preferred Stock to elect Directors under an applicable Preferred Stock Designation (as defined in the Certificate of Incorporation).

Section 2.9. Procedure for Election of Directors. Election of Directors at all meetings of the stockholders at which Directors are to be elected shall be by ballot unless otherwise determined by the Board prior to such meeting, and, subject to the rights of the holders of any series of Preferred Stock to elect Directors under an applicable Preferred Stock Designation, a plurality of the votes cast thereat shall elect Directors.

Section 2.10. Required Vote. Except as otherwise provided by law, the Certificate of Incorporation, any Preferred Stock Designation or these Bylaws, in all matters other than the election of Directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders.

Section 2.11. Inspectors of Elections; Opening and Closing the Polls. The Board by resolution may, or, if required by law, shall, appoint, or shall authorize an officer of the Corporation to appoint, one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspector(s) to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of the stockholders, the chairman of the meeting may, or, if required by applicable law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before discharging such person’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such person’s ability. The inspector(s) shall have the duties prescribed by law. The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.

Section 2.12. Conduct of Meetings. The Board may to the extent not prohibited by law adopt such rules and regulations for the conduct of meetings of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may to the extent not prohibited by law include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (d) restrictions on

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entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.13. Action by Consent of Stockholders. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action that may be taken at any annual or special meeting of such stockholders, including the election of directors, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the voting power of shares having not less than the minimum number of votes that would be necessary to authorize or take such action at an annual or special meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who would have been entitled to notice of the meeting, had a meeting been held.

ARTICLE III

THE BOARD

Section 3.1. General Powers. The business and affairs of the Corporation shall be managed by and under the direction of the Board. In addition to the powers and authorities expressly conferred upon the Board by these Bylaws, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders. Except as otherwise provided by law, these Bylaws or by the Certificate of Incorporation, all decisions of the Board shall require the affirmative vote of a majority of the Directors present at a meeting at which a quorum is present.

Section 3.2. Number; Qualifications. Subject to the rights of any series of Preferred Stock to elect Directors under specified circumstances, the number of the Directors constituting the entire Board shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board. A Director need not be a stockholder of the Corporation.

Section 3.3. Regular Meetings. The Board shall meet at least four times a year. Regular meetings shall be held at such place or places, and at such time or times as shall have been established by the Chairman of the Board or the Board and communicated to all Directors. A notice of each regular meeting shall not be required.

Section 3.4. Special Meetings. A special meeting of the Board may be called at the request of (a) the Chairman of the Board, (b) the President or (c) a majority of the Whole Board, and such meeting shall be held at such place, on such date, and at such time as he or she shall fix. Notice of the place, date, time and purpose of each such special meeting shall be given to each Director by whom it is not waived by mailing written notice not less than five days before the meeting or by telephone or by facsimile or electronic transmission of the same not less than 24 hours before the meeting.

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Section 3.5. Conference Telephone Meetings. Members of the Board or any committee thereof may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

Section 3.6. Quorum; Conduct of Business. A majority of the Whole Board present in person or participating in accordance with Section 3.5 shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of the Directors present may adjourn the meeting from time to time without further notice. Subject to applicable law and any provisions of these Bylaws or the Certificate of Incorporation, the act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board.

Section 3.7. Vacancies; Increases in the Number of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding and except as otherwise provided by law, resolution of the Board or in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of Directors may be filled only by vote of the majority of the Directors then in office, although less than a quorum, or a sole remaining Director (and not by the stockholders); and any Director so chosen shall hold office until the next election of the class for which such Director has been chosen and until his successor shall be duly elected and shall qualify, unless sooner displaced.

Section 3.8. Committees. (a) The Board may, subject to applicable law, establish committees of the Board and may delegate its powers and authority to such committees. Each such committee shall consist of one or more of the Directors. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member.

(b) The Board shall have an audit committee meeting the independence and experience requirements set forth in Rule 10A-3 under the Exchange Act and in the listing standards of the principal exchange or quotation system on which the Common Stock of the Corporation is traded, if any, in each case as of the date of these Bylaws for membership on the audit committee of the Board, including any transition rules that may apply. The audit committee shall establish, and the Board shall authorize and approve, a written audit committee charter in accordance with the rules of the principal exchange on which the Common Stock of the Corporation is traded, if any, as amended from time to time.

(c) The Board shall have a compensation committee meeting the independence requirements set forth in the listing standards of the principal exchange or quotation system on which the Common Stock of the Corporation is traded, if any, as of the date of these Bylaws for membership on the compensation committee of the Board, including any transition rules that may apply. The compensation committee shall establish, and the Board shall authorize and

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approve, a written compensation committee charter in accordance with the rules of the principal exchange on which the Common Stock of the Corporation is traded, if any, as amended from time to time.

(d) The Board shall have a nominating and governance committee meeting the independence requirements set forth in the listing standards of the principal exchange or quotation system on which the Common Stock of the Corporation is traded, if any, as of the date of these Bylaws for membership on the nominating and governance committee of the Board, including any transition rules that may apply. The nominating and governance committee shall establish, and the Board shall authorize and approve, a written nominating and governance committee charter in accordance with the rules of the principal exchange on which the Common Stock of the Corporation is traded, if any, as amended from time to time.

(e) Unless the Board shall otherwise provide, a majority of any committee may fix the time and place of its meetings and may determine its action. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 3.4 of these Bylaws. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any committee. Notwithstanding paragraph (a) of this Bylaw, nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not Directors; provided, however, that no such committee shall have or may exercise any authority of the Board.

Section 3.9. Action by Consent of Board or Committee. The Board and any committee thereof may act without a meeting so long as all members of the Board or committee shall have consented thereto in writing or by electronic transmission and such written consent or electronic transmission is filed with the minutes of the proceedings of the Board or committee, as appropriate.

Section 3.10. Records. The Board shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation.

ARTICLE IV

OFFICERS

Section 4.1. Officers. The officers of the Corporation shall be elected by, and serve at the pleasure of, the Board. Such officers shall have the authority and duties delegated to each of them, respectively, by these Bylaws or the Board from time to time. The officers of the Corporation may be a Chairman of the Board, a Chief Executive Officer, a President, a Secretary, a Treasurer, and such other officers (including, without limitation, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents) as the Board from time to time may deem proper. The Board may from time to time elect such other officers (including one or more Vice Presidents, Controllers, Assistant Secretaries and Assistant Treasurers) as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in these Bylaws or as may be prescribed by the Board, as the case may be. Any number of offices may

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be held by the same person. The salary of the Chief Executive Officer shall be fixed from time to time by, and the salaries of the other executive officers elected by the Board shall be recommended from time to time by, the compensation committee of the Board, if such committee is then established or, if such committee is not then established, by the Board or by such officers as may be designated by resolution of the Board.

Section 4.2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board at the regular meeting of the Board held after the annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until such person’s successor shall have been duly elected and shall have qualified or until such person’s death or until he or she shall resign or be removed pursuant to Section 4.9.

Section 4.3. Chairman of the Board. The Directors shall elect the Chairman of the Board from among the Directors. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board. He or she shall make reports to the Board and the stockholders and shall see that all orders and resolutions of the Board and of any committee thereof are carried into effect. The Chairman of the Board may also serve as President or Chief Executive Officer, if so elected by the Board. The Directors also may elect a vice-chairman to act in the place of the Chairman of the Board upon his or her absence or inability to act.

Section 4.4. Chief Executive Officer. The Chief Executive Officer shall be responsible for the general management of the affairs of the Corporation and shall perform all duties and have all powers that are commonly incidental to the office of chief executive, which may be required by law and all such other duties as are properly required of or delegated to him or her by the Board. Unless the Board has elected a vice-chairman and such vice-chairman is able to act in the place of the Chairman of the Board, the Chief Executive Officer, if he or she is also a Director, shall, in the absence, or because of the inability to act, of the Chairman of the Board, perform all duties of the Chairman of the Board and preside as chairman at all meetings of stockholders and the Board.

Section 4.5. President. The President shall act in a general executive capacity and shall assist the Chief Executive Officer in the administration and operation of the Corporation’s business and general supervision of its policies and affairs. The President shall have such other powers and shall perform such other duties as shall be properly assigned or delegated to him or her by the Board or the Chairman of the Board.

Section 4.6. Vice Presidents. Each Executive Vice President, Senior Vice President and Vice President shall have such powers and shall perform such duties as shall be properly assigned or delegated to him or her by the Board or the Chairman of the Board or such duties as are customarily performed by such officer.

Section 4.7. Treasurer. The Treasurer shall exercise general supervision over the receipt, custody and disbursement of corporate funds. The Treasurer shall cause the funds of the Corporation to be deposited in such banks as may be authorized by the Board, or in such banks as may be designated as depositories in the manner provided by resolution of the Board. The Treasurer shall, in general, perform all duties and have all powers that are commonly incident to

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the office of the Treasurer and shall have such further powers and duties and shall be subject to such directions as may be properly granted or imposed from time to time by the Board or the Chairman of the Board.

Section 4.8. Secretary. The Secretary shall keep or cause to be kept, in one or more books provided for that purpose, the minutes of all meetings of the Board, the committees of the Board and the stockholders. The Secretary shall see that all authorized notices are duly given in accordance with the provisions of these Bylaws and as required by law; shall be custodian of the records and the seal, if any, of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; and shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, shall perform all the duties and have all powers that are commonly incident to the office of Secretary and such other duties as from time to time may be assigned to the Secretary by the Board or the Chairman of the Board.

Section 4.9. Removal. Any officer elected by the Board may be removed at any time, with or without cause, by the Board whenever, in the judgment of the Board, the best interests of the Corporation would be served thereby. Any officer elected by the Board other than the Chairman of the Board, the Chief Executive Officer or the President may be removed at any time, with or without cause, by the Chief Executive Officer whenever, in the judgment of the Chief Executive Officer, the best interests of the Corporation would be served thereby.

Section 4.10. Vacancies. A newly created elected office and a vacancy in any elected office because of death, resignation or removal may be filled by the Board for the unexpired portion of the term at any meeting of the Board.

Section 4.11. Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

ARTICLE V

STOCK CERTIFICATES AND TRANSFERS

Section 5.1. Stock Certificates and Transfers. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board may from time to time prescribe. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by such person’s attorney, upon surrender for cancellation of certificates for at least the same number of shares (except where a certificate is issued in accordance with Section 5.2 below), with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. All or any of the signatures on such certificates may be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date

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of issue. Notwithstanding the foregoing provisions regarding share certificates, but subject to the requirements and limitations of applicable law, the Board may provide that some or all of any or all classes or series of the Corporation’s common or any preferred shares may be uncertificated shares.

Section 5.2. Lost, Stolen or Destroyed Certificates. No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board or any financial officer may in its or such person’s discretion require.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 6.1. Right to Indemnification. Each person who was or is made a party to or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter, a “proceeding”), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a Director or officer of the Corporation or, while a Director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, manager, employee, trustee or agent of another corporation or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is an alleged action in an official capacity as a director, officer, manager, employee, trustee or agent or in any other capacity while serving as a director, officer, manager, employee, trustee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, amounts paid or to be paid in settlement and excise taxes or penalties arising under the Employment Retirement Income Security Act of 1974, as in effect from time to time) reasonably incurred or suffered by such person in connection therewith; provided, however, that, except as provided in Section 6.2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section 6.1 shall be a contract right. The Corporation shall prepay the expenses incurred in defending any such proceeding in advance of its final disposition, any advance payments to be paid by the Corporation within 20 calendar days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however, that, if and to the extent the DGCL requires, the payment of such expenses incurred by a Director or officer in such person’s capacity as a Director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Director or officer, to repay all amounts so advanced if it shall ultimately be determined that such Director or officer is not entitled to be indemnified under this Section 6.1 or otherwise. The Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification, and rights to have the Corporation pay the expenses incurred in defending any proceeding in advance of its final disposition, to any employee, trustee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification and advancement of expenses of Directors and officers of the Corporation and may enter into indemnity agreements to such effect.

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Section 6.2. Right of Claimant to Bring Suit. If a claim under Section 6.1 of this Article VI is not paid in full by the Corporation within 60 calendar days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board, independent legal counsel or its stockholders) to have made a determination prior to the circumstances that the claimant has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 6.3. Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested Directors or otherwise. No repeal or modification of this Article VI shall in any way diminish or adversely affect the rights of any Director, officer, employee, trustee or agent of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.

Section 6.4. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee, manager, trustee or agent of the Corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 6.5. Severability. If any provision or provisions of this Article VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Article VI (including, without limitation, each portion of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (ii) to the fullest extent possible, the provisions of this Article VI (including, without limitation, each such portion of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision or provisions held invalid, illegal or unenforceable.

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Section 6.6. Expenses as a Witness. To the extent that any Director or officer of the Corporation is by reason of such position, or a position as a director, officer, manager, trustee, employee or agent with another entity at the request of the Corporation, a witness in any action, suit or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred in connection therewith.

Section 6.7. Nature of Rights. The rights conferred upon indemnitees by this Article VI shall continue as to an indemnitee who has ceased to be a Director or officer and shall inure to the benefit of such indemnitee’s heirs, executors and administrators. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1. Fiscal Year. The fiscal year of the Corporation shall begin and end on such dates as the Board at any time shall determine by resolution.

Section 7.2. Dividends. The Board may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.

Section 7.3. Seal. The corporate seal, if any, shall have inscribed thereon the words “Corporate Seal,” the year of incorporation and the word “Delaware.”

Section 7.4. Waiver of Notice. Whenever any notice is required to be given to any stockholder or Director under the provisions of the DGCL or these Bylaws, a waiver thereof by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board or any committee thereof need be specified in any waiver of notice of such meeting.

Section 7.5. Resignations. Any Director or any officer, whether elected or appointed, may resign at any time by giving written notice of such resignation to the Chairman of the Board or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board or the Secretary, or at such later time as is specified therein. No formal action shall be required of the Board or the stockholders to make any such resignation effective.

ARTICLE VIII

CONTRACTS; VOTING SECURITIES OF OTHER ENTITIES

Section 8.1. Contracts. Except as otherwise required by law, the Certificate of Incorporation, a Preferred Stock Designation or these Bylaws, any contracts or other instruments may be executed and delivered in the name and on behalf of the Corporation by such officer or officers of the Corporation as the Board may from time to time direct. Such authority may be general or confined to specific instances as the Board may determine. Unless provided otherwise

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by resolution of the Board, the Chairman of the Board, the Chief Executive Officer, the President or any Executive Vice President, Senior Vice President or Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to any restrictions imposed by the Board, the Chairman of the Board, the Chief Executive Officer, the President or any Executive Vice President, Senior Vice President or Vice President of the Corporation may delegate contractual powers to others under such person’s authority, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

Section 8.2. Action with Respect to Securities of Other Entities. Unless otherwise provided by resolution adopted by the Board, the Chairman of the Board, the Chief Executive Officer, the President or any officer authorized by one of them shall have the power to vote and otherwise act, appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock, other securities or interests in any other entity, any of whose stock or other securities or interests may be held by the Corporation, at meetings of the holders of the stock, other securities or interests, of such other entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such written proxies or other instruments as he or she may deem necessary or proper and otherwise exercise any and all rights and powers that the Corporation may possess by reason of its ownership of stock, other securities or interests in such other entity.

ARTICLE IX

AMENDMENTS

These Bylaws may be altered, amended or repealed and new Bylaws may be adopted (a) at any annual or special meeting of stockholders by the affirmative vote of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereat; or (b) by the affirmative vote of a majority of the Whole Board; provided that in the case of any such stockholder action at a special meeting of stockholders, notice of the proposed alteration, amendment, repeal or adoption of such Bylaws must be contained in the notice of such special meeting.

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CERTIFICATE BY SECRETARY

The undersigned, being the secretary of the Corporation, hereby certifies that the foregoing Bylaws were duly approved and adopted by the Board effective on [            ], 2006.

IN WITNESS WHEREOF, I have signed this certification on this [    ]th day of [            ], 2006.

[Eddie M. LeBlanc, III], Secretary

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EX-4.2

Exhibit 4.2

Execution Copy

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of July 27, 2001, by and among Ascent Energy Inc., a Delaware corporation (“Ascent”), and the purchasers named on the signature pages hereto (each a “Purchaser” and collectively, the “Purchasers”), each of whom has agreed to purchase warrants (the “Warrants”) to purchase shares (the “Warrant Shares”) of common stock, par value $0.001 per share (the “Common Stock”) of the Company.

In order to induce the Purchasers to purchase the Warrants, the Company has agreed to provide the registration rights set forth in this Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Warrant Agreement, dated July 27, 2001 (the “Warrant Agreement”), among the Company and Mellon Investor Services LLC, as Warrant Agent, relating to the Warrants.

The parties hereby agree as follows:

Section 1. Definitions. As used in this Agreement, the following terms shall have the following meanings:

“Agreement” shall have the meaning assigned to such term in the recitals hereto, as constituted on the date hereof and as amended from time to time.

“Commission” means the Securities and Exchange Commission, or any other federal agency then administering the Securities Act.

“Common Stock” shall have the meaning assigned to such term in the recitals hereto, as constituted on the date hereof, and any shares into which such Common Stock shall have been changed or any shares resulting from any reclassification of such Common Stock.

“Controlling Person” shall have the meaning given to such term in Section 7(a).

“Demand Registration” shall have the meaning given to such term in Section 3(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

“Holder” means each Purchaser named on the signature pages hereto or otherwise party to this Agreement who as of such date owns outstanding shares of Registrable Securities.

“Indemnified Party” shall have the meaning given to such term in Section 7(c).

“Indemnifying Party” shall have the meaning given to such term in Section 7(c).

“Losses” means all losses, claims, damages or liabilities (other than consequential damages or incidental lost profits) and all costs and expenses related thereto, including, without limitation, the reasonable fees and disbursements of counsel.

“Maximum Contribution Amount” shall have the meaning given to such term in Section 7(d).

“NASD” means the National Association of Securities Dealers, Inc.

“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or agency or political subdivision thereof.

“Piggyback Registration” shall have the meaning given to such term in a Section 4(a).

Proceeding” means any claim, suit, action or proceeding, including any governmental investigation or inquiry.

“Qualified Holders” means any Holder or Holders holding at any time not less than 51% of all Registrable Securities.

“Registrable Securities” means (a) the Warrant Shares and (b) any additional shares of Common Stock or other securities issued or distributed by Ascent after the date hereof to any Holder with respect to the Warrants or Warrant Shares by means of exchange, reclassification, dividend, distribution, split-up, combination, subdivision, recapitalization, merger, spin-off, reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities has become effective under the Securities Act and such securities have been disposed of in accordance with such registration statement, (ii) they have become eligible for resale pursuant to Rule 144(k) under the Securities Act or (iii) they shall cease to be outstanding.

“Securities Act” means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

“Special Counsel” means counsel chosen by the holders of a majority of the Registrable Securities being sold pursuant to a registration covered by this Agreement.

Section 2. Acknowledgement of Rights. Ascent will, upon request of any Holder, acknowledge in writing its obligations in respect of the rights to which such Holder shall be entitled under this Agreement; provided that the failure of such Holder to make any such request shall not affect the continuing obligations of Ascent to such Holder in respect of such rights.

Section 3. Demand Registration.

(a) At any time after 185 days after the date that the Common Stock is registered under Sections 12(b) or 12(g) of the Exchange Act, the Qualified Holders may at any time and from time to time make a written request for registration under the Securities Act of an amount of Registrable Securities equal to not less than 5% of the then outstanding Common Stock (a “Demand Registration”); provided that Ascent shall not be obligated to effect more than two Demand Registrations in any 12-month period or more than an aggregate of four Demand Registrations pursuant to this Section 3(a). A registration will not count as a Demand Registration until the registration statement filed pursuant to such Demand Registration has been declared effective by the Commission and remains effective for the period specified in Section 5(b).

(b) If the Qualified Holders so elect, the offering of such Registrable Securities pursuant to a Demand Registration shall be in the form of an underwritten offering. The Qualified Holders shall select the managing underwriters and any additional investment bankers and managers to be used in connection with the offering; provided that such managing underwriters must be reasonably satisfactory to Ascent.

(c) Neither Ascent nor any of its security holders (other than the Holders with respect to their Registrable Securities) shall be entitled to include any of Ascent’s securities in a registration statement initiated as a Demand Registration under this Section 3(a) without the consent of the Qualified Holders.

Section 4. Piggyback Registration.

(a) If Ascent proposes to register Common Stock under the Securities Act (other than on registration statements with respect to corporate reorganizations or other transactions under Rule 145 under the Securities Act or registration statements on Form S-8), (i) for its own account or (ii) for the account of other holders of Common Stock (other than a Demand Registration pursuant to Section 3(a)), then Ascent shall give written notice of such proposed filing to the Holders as soon as practicable (but in no event later than 20 days before the filing date) and such notice shall offer the Holders the opportunity to register such number of shares of Registrable Securities as the Holders may request within 20 days after receipt by the Holders of Ascent’s notice on the same terms and conditions as Ascent or such other holders of Common Stock (a “Piggyback Registration”). The Holders will be permitted to withdraw all or any part of their Registrable Securities from a Piggyback Registration any time prior to the date the registration statement filed pursuant to such Piggyback Registration becomes effective with the Commission.

(b) Notwithstanding anything contained herein, if the Piggyback Registration is an underwritten offering and the lead managing underwriter of such offering delivers a written opinion to Ascent that the size of the offering that Ascent, the Holders and any other Persons whose securities are proposed to be included in such offering propose to make would materially and adversely affect the offering or offering price, Ascent will include in such Piggyback Registration all of the Common Stock it proposes to offer and the Common Stock proposed to be sold by the Holders and any other Persons in the following order of priority: (i) first, all of the Registrable Securities requested by the Holders, on a pro rata basis based on the amount of securities sought to be so registered and (ii) second, securities proposed to be registered by any other Persons.

Section 5. Registration Procedures. If and whenever Ascent is required by the provisions of this Agreement to use commercially reasonable efforts to effect the registration of any of the Registrable Securities under the Securities Act, Ascent will (except as otherwise provided in this Agreement):

(a) (i) cooperate with the selling Holders and any underwriters for the selling Holders, and, in the event of any underwritten public offering, will enter into usual and customary underwriting agreements with respect thereto and take all such other reasonable actions as are necessary or advisable to permit, expedite and facilitate the disposition of such Registrable Securities in the manner contemplated by the related registration statement, and in each case to the same extent as if all the securities then being offered were for the account of Ascent, and (ii) provide to any selling Holder, any underwriter participating in any distribution thereof pursuant to a registration statement, and any attorney, accountant or other agent retained by any selling Holder or any underwriter reasonable access to appropriate Ascent officers and employees to answer questions and to supply information reasonably requested by such selling Holder, or by any such underwriter, attorney, accountant or agent in connection with such registration statement;

(b) prepare and file with the Commission a registration statement with respect to such securities and use commercially reasonable efforts to cause such registration statement to become and remain effective until the earlier to occur of the passage of 90 days from the date of effectiveness and the sale of all of the Registrable Securities registered under such registration statement; and prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the time period required pursuant to this Agreement and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the selling Holders shall desire to sell or otherwise dispose of the same;

(c) furnish to such selling Holders, who so request, (i) upon Ascent’s receipt, a copy of the order of the Commission declaring such registration statement and any post-effective amendment thereto effective, (ii) such reasonable number of copies of such registration statement and of each amendment and supplement thereto (in each case including any documents incorporated therein by reference and all exhibits), (iii) such reasonable number of copies of the prospectus included in such registration statement (including each preliminary prospectus), (iv) such reasonable number of copies of the final prospectus as filed by Ascent pursuant to Rule 424(b) under the Securities Act, in conformity with the requirements of the Securities Act, and (v) such

other documents, as any such Person may reasonably request. Ascent hereby consents to the use of the prospectus by each of the selling Holders and the underwriters or agents (if any), and dealers (if any), in connection with the offering and sale of the Registrable Securities pursuant to, such prospectus and any amendment thereto;

(d) use commercially reasonable efforts to (i) register or qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each selling Holder shall reasonably request, (ii) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions for so long as may be necessary to enable such Holder, or any such agent or underwriter to complete its distribution of the securities pursuant to such registration statement but in no event longer than two years and (iii) cooperate with such Holders and each underwriter, if any, in connection with any filings required to be made with the NASD and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that Ascent shall not be required to (A) qualify to do business as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 5(d) or (B) file any general consent to service of process;

(e) notify each selling Holder and counsel for such selling Holders identified to Ascent and, if requested by such Persons, confirm such advice in writing, (i) when the registration statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the Commission or any state securities authority for amendments and supplements to the registration statement and prospectus or for additional information after the registration statement has become effective, (iii) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of the registration statement or the initiation of any Proceedings for that purpose, (iv) if Ascent receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any Proceeding for such purpose, (v) of the happening of any event during the period a registration statement is effective which makes any statement made in such registration statement or the related prospectus untrue in any material respect or which requires the making of any changes in such registration statement or any document incorporated by reference therein in order to make the statements therein not misleading or which requires the making of any changes in the prospectus or documents incorporated by reference therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (vi) of any determination by Ascent that a post-effective amendment to the registration statement would be appropriate;

(f) use its best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement or of any order preventing or suspending the use of a prospectus or suspending the qualification (or exemption from qualification) of any of the securities for sale in any jurisdiction, and, if any such order is issued, to use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible time and provide prompt notice to each selling Holder of the withdrawal of any such order;

(g) comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, beginning with the first fiscal quarter beginning after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act);

(h) list such securities on any securities exchange or market on which any stock of Ascent is then listed, if the listing of such securities is then permitted under the rules of such exchange;

(i) if requested by the managing underwriters, if any, or the Holders of a majority of the Registrable Securities being registered, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and such Holders reasonably agree should be included therein to the extent required by applicable law and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after Ascent has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; provided, however, that Ascent will not be required to take any actions under this Section 5(i) that are not, in the opinion of counsel for Ascent, required by applicable law; and

(j) enter into such agreements (including, in the event of an underwritten offering, an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other commercially reasonable actions in connection therewith (including those reasonably required by the Holders of a majority of the Registrable Securities being sold or, in the event of an underwritten offering those requested by the managing underwriters) in order to permit the disposition of such Registrable Securities and in such connection, if the registration is an underwritten registration, (i) make such representations and warranties to the Holders of such Registrable Securities and underwriters, if any, with respect to the business of Ascent and its subsidiaries, the registration statement, the prospectus and documents incorporated by reference or deemed incorporated by reference in the registration statement, if any, in each case, in form, substance and scope if and when requested; (ii) obtain opinions of counsel to Ascent and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the Holders of a majority of the Registrable Securities being sold) addressed to such selling Holders of Registrable Securities and each of the, underwriters, if any, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters, including without limitation the matters referred to in clause (i) above; (iii) use its reasonable commercial efforts to obtain “comfort” letters and updates thereof from the independent certified public accountants of Ascent (and, if necessary, any other certified public accountants of any subsidiary of Ascent or of any business acquired by Ascent for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to each of the underwriters, if any, such letters to be in customary form and covering matters the type customarily covered in “comfort” letters in connection with underwritten offerings; and (iv) deliver such documents and certificates as may reasonably be requested by the Holders of a majority of the Registrable Securities being sold, the Special Counsel and the managing underwriters, if any, to evidence the continued validity of the representations and warranties of Ascent and its subsidiaries made pursuant to clause (i)

above and to evidence compliance with any customary conditions contained in the underwriting, agreement or similar agreement entered into by Ascent. The foregoing actions will be taken in connection with each closing under such underwriting or similar agreement as and to the extent required thereunder.

From time to time after a transfer of Registrable Securities pursuant to a registration statement, Ascent will file all reports required to be filed by it under the Securities Act and the Exchange Act. Ascent may require each Holder to agree to keep confidential any non-public information relating to Ascent received by such Holder and not disclose such information (other than to an Affiliate or prospective purchaser who agrees to respect the confidentiality provisions of this Section 5) until such information has been made generally available to the public unless the release of such information is required by law or necessary to respond to inquiries of regulatory authorities.

Section 6. Registration Expenses; Hold-Backs.

(a) In connection with any Demand Registration or any Piggyback Registration, Ascent shall pay the following expenses incurred in connection with such registration: (i) filing fees with the Commission; (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) fees and expenses incurred in connection with the listing of the Registrable Securities; (v) fees and expenses of counsel and independent certified public accountants for Ascent and (vi) the reasonable fees and expenses of any additional experts retained by Ascent in connection with such registration. In connection with the preparation and filing of a Registration Statement pursuant to Section 3(a), Ascent will also pay the reasonable fees and expenses of the Special Counsel. The Holders shall pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities and any other expenses of the Holders.

(b) No person may participate in any underwritten registered offering contemplated hereunder unless such Person (i) agrees to sell its securities on the basis provided in any underwriting agreements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and this Agreement.

(c) The Holders agree not to effect any public sale (including a sale pursuant to Rule 144 of the Securities Act) of any Registrable Securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the 90-day (180 days in the case of an initial public offering of Common Stock) period beginning on, the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (other than the Registrable Securities to be sold pursuant to such registration statement).

Section 7. Indemnification.

(a) In the event of any registration of any of its securities under the Securities Act pursuant to this Agreement, to the extent permitted by law, Ascent shall indemnify and hold harmless the Holders, the Holders’ directors, officers, partners, employees, representatives and agents, and each other person, if any, who controls any Holder within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act (a “Controlling Person”), to the fullest extent possible against any Losses, as incurred, directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or form of prospectus, or in any amendment or supplement thereto, or in any preliminary prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such Losses are based upon information relating to such Holder and furnished in writing to Ascent by such Holder expressly for use therein; provided, however, that Ascent shall not be liable to any Indemnified Party to the extent that any such Losses arise solely out of an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus if (i) such Indemnified Party or related Holder failed to send or deliver a copy of the prospectus with or prior to the delivery of written confirmation of the sale by such Indemnified Party or the related Holder to the Person asserting the claim from which such Losses arise; (ii) the prospectus would have corrected such untrue statement or alleged untrue statement or omission or alleged omission; and (iii) Ascent has complied with its obligations under Section 5(e). Ascent shall also, jointly and severally, indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution and their Controlling Persons to the same extent as provided above with respect to the indemnification of the Holders.

(b) In connection with any registration statement, prospectus or form of prospectus, any amendment or supplement thereto, or any preliminary prospectus in which a Holder is participating, such Holder shall furnish to Ascent in writing such information as Ascent reasonably requests for use in connection with any registration statement, prospectus or form of prospectus, any amendment or supplement thereto, or any preliminary prospectus and shall, without limitation as to time, indemnify and hold harmless Ascent, its Controlling Persons, and the officers, directors, partners, employees, representatives and agents of such Controlling Persons, to the fullest extent lawful, from and against all Losses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading to the extent, but only to the extent, that such untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact is contained in any information so furnished in writing by such Holder to Ascent expressly for use therein. In no event shall the liability of any selling Holder be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(c) If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the party or parties from which such indemnity is sought (individually, an

“Indemnifying Party” and, collectively, the “Indemnifying Parties”) in writing; provided, that the failure to so notify the Indemnifying Parties shall not relieve the Indemnifying Parties from any obligation or liability except to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal) that the Indemnifying Parties have been prejudiced materially by such failure. The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Party, within twenty days after receipt of written notice from such Indemnified Party of such Proceeding, to assume, at its expense, the defense of any such Proceeding; provided, that an Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but, subject to Section 6, the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnified Party; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party or any of its affiliates or Controlling Persons, and such Indemnified Party shall have been advised by counsel that there may be one or more defenses available to such Indemnified Party that are in addition to, or in conflict with, those defenses available to the Indemnifying Party or such affiliate or Controlling Person (in which case, if such Indemnified Party notifies the Indemnifying Parties in writing that it elects to employ separate counsel at the expense of the Indemnifying Parties, the Indemnifying Parties shall not have the right to assume the defense thereof and the reasonable fees and expenses of such counsel shall be at the expense of the Indemnifying Party; it being understood, however, that, the Indemnifying Party shall not, in connection with any one such Proceeding or separate but substantially similar or related Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such Indemnified Party).

No Indemnifying Party shall be liable for any settlement of any such Proceeding effected without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such Proceeding, each Indemnifying Party jointly and severally agrees, subject to the exceptions and limitations set forth above, to indemnify and hold harmless each Indemnified Party from and against any and all Losses by reason of such settlement or judgment. The Indemnifying Party shall not consent to the entry of any judgment against an Indemnified Party or enter into any settlement that imposes any obligation on any Indemnified Party that does not include as a term thereof the giving by the claimant or plaintiff to each Indemnified Party of a release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of such Proceeding for which such Indemnified Party would be entitled to indemnification hereunder (regardless of whether any Indemnified Party is a party thereto).

(d) If the indemnification provided for in this Section 7 is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section 7 would otherwise apply by its terms (other than by reason of exceptions provided in this Section 7), then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have a joint and several obligation to contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of each Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of each Indemnifying Party, on the one hand, and Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such statement or omission. The amount paid or payable by an Indemnified Party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any Proceeding, to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 7(a) or 7(b) was available to such party.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 7, an Indemnifying Party that is a selling Holder shall not be required to contribute, in the aggregate, any amount in excess of such Holder’s Maximum Contribution Amount. A selling Holder’s “Maximum Contribution Amount” shall equal the excess of (i) the aggregate proceeds received by such Holder pursuant to the sale of such Registrable Securities over (ii) the aggregate amount of damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

The indemnity and contribution agreements contained in this Section 7 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

Section 8. Rule 144. Ascent covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as any Holder may request to the extent required from time to time to enable the Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. Upon the request of a Holder, Ascent will deliver to the Holder a written statement as to whether it has complied with such reporting requirements.

Section 9. Assignment of Registration Rights. A Holder may assign its rights hereunder to a transferee or assignee at any time such Holder transfers or assigns Registrable Securities representing not less than 0.5% of all Registrable Securities subject to this Agreement to such transferee or assignee; provided, that (a) Ascent is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement by executing a counterpart signature page hereto; (c) such assignment of Registrable Securities is

made in compliance with the Securities Act; and (d) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act. This Agreement may not be assigned by Ascent without the prior written consent of the Qualified Holders.

Section 10. Miscellaneous.

(a) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, certified first-class mail (return receipt requested), next-day air courier or facsimile:

(i) if to a Holder, at the address of such Holder set forth on Ascent’s records.

(ii) if to Ascent, at:

Ascent Energy Inc.

650 Poydras Street, Suite 2200

New Orleans, LA 70130

Facsimile Number: (504) 522-1796

Attention: President

and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 10(a). All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five days after being deposited in the mail, postage prepaid, if mailed; one day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile.

(b) Amendment and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless Ascent has obtained the written consent of Holders of at least a majority of the then outstanding Registrable Securities; provided, that Section 7 shall not be amended, modified or supplemented, and waivers or consents to departures from this proviso may not be given, unless Ascent has obtained the written consent of each Holder affected thereby. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a registration statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such registration statement; provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence.

(c) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

(d) Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to rules of conflicts of laws.

(e) Filing. A copy of this Agreement and of all amendments hereto shall be filed at the principal office of Ascent.

(f) Headings and Internal References. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. References in this Agreement to “clauses” and “Sections” shall be understood to refer to clauses and sections of this Agreement unless otherwise specified.

(g) Remedies. In the event of a breach by Ascent of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Ascent agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

(h) No Inconsistent Agreements. Ascent has not entered into, as of the date hereof, and shall not enter into, after the date of this Agreement, any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

(i) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties.

(j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by Ascent in respect of the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(k) Attorneys’ Fees. In any Proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party, as determined by the courts, shall be entitled to recover reasonable attorneys’ fees in addition to its costs and expenses and any other available remedy.

(l) Third Party Beneficiary. Ascent hereby expressly agrees and acknowledges that the Holders are intended to be express third party beneficiaries of this Agreement and that each Holder shall be entitled to exercise any and all rights and remedies afforded to them under this Agreement and the laws of the relevant jurisdiction applicable to third party beneficiaries.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

ASCENT ENERGY INC., a Delaware corporation
By:	/s/ Jeffrey Clarke
	Jeffrey Clarke
	President
HOLDERS:
TCW/CRESCENT MEZZANINE PARTNERS, L.P.
By:	TCW/Crescent Mezzanine, L.L.C.
	its Investment Advisor
By:	/s/ James L. Luikart
Name:	James L. Luikart
Title:	Managing Member
TCW/Crescent Mezzanine Trust
By:	TCW/Crescent Mezzanine, L.L.C. its Investment Advisor
By:	/s/ James L. Luikart
Name:	James L. Luikart
Title:	Managing Member
TCW/CRESCENT MEZZANINE INVESTMENT PARTNERS, L.P.
By:	TCW/Crescent Mezzanine, L.L.C. its Investment Advisor
By:	/s/ James L. Luikart
Name:	James L. Luikart
Title:	Managing Member
SHARED OPPORTUNITY FUND IIB, L.L.C.
By:	TCW Asset Management Company as its Investment Adviser
By:	/s/ James L. Luikart
Name:	James L. Luikart
Title:	Managing Member
By:	/s/ James L. Luikart
Name:	James L. Luikart
Title:	Managing Member
TCW SHARED OPPORTUNITY FUND III, L.P.
By:	TCW Asset Management Company Its Investment Adviser
By:
Name:
Title:
By:
Name:
Title:

TCW LEVERAGED INCOME TRUST IV, L.P.
By:	TCW Asset Management Company As its Investment Adviser
By:
Name:
Title:
By:
Name:
Title:
By:	TCW (LINC IV), L.L.C.
	As General Partner
By:	TCW Asset Management Company
	As its Managing Member
By:
Name:
Title:
By:
Name:
Title:
JEFFERIES & COMPANY, INC.
By:	/s/ Robert J. Welch
	Robert J. Welch
	Vice President
JEFFERIES PARTNERS OPPORTUNITY FUND, L.L.C.
By:	Jefferies & Company, Inc.,
	As Manager
By:	/s/ Robert J. Welch
	Robert J. Welch
	Vice President
JEFFERIES PARTNERS OPPORTUNITY FUND II, L.L.C.
By:	Jefferies & Company, Inc.,
	As Manager
By:	/s/ Robert J. Welch
	Robert J. Welch
	Vice President
JEFFERIES EMPLOYEES OPPORTUNITY FUND, L.L.C.
By:	Jefferies & Company, Inc.,
	As Manager
By:	/s/ Robert J. Welch
	Robert J. Welch
	Vice President
JEFFERIES INVESTORS XVI, L.L.C.
By:	Jefferies & Company, Inc.,
	As Manager
By:	/s/ Jerry M. Gluck
	Jerry M. Gluck
	Executive Vice President

ING FURMAN SELZ INVESTORS III L.P.
ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC
ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD.
By:	FS PRIVATE INVESTMENTS III LLC,
	Manager
By:
Name:
Title:	Managing Member
/s/ Jeffrey Clarke Jeffrey Clarke
/s/ Larry Keller Larry Keller
/s/ Keri Clarke Keri Clarke
/s/ Michael P. Morgan Michael P. Morgan
/s/ Stephen A. Landry Stephen A. Landry

ASCENT ENERGY INC.

REGISTRATION RIGHTS AGREEMENT

This signature page is for the Registration Rights Agreement dated as of July     , 2001 (the “Agreement”), by and among Ascent and the Holders, and by execution below the undersigned agrees that it shall be attached as a signature page to such Agreement.

By:

Name:

Title:

Tax I.D. No.:

Address:

Attention:

Fax Number:

Phone Number:

EX-10.1

Exhibit 10.1

Execution Copy

SECOND AMENDED AND RESTATED

LOAN AGREEMENT

AMONG

ASCENT OIL AND GAS INC.,

SOUTH LOUISIANA PROPERTY HOLDINGS, INC.,

ASCENT ENERGY HOLDINGS, INC.,

ASCENT ENERGY LOUISIANA, LLC,

ASCENT GP, LLC,

ASCENT LP, LLC,

ASCENT OPERATING, L.P.,

PONTOTOC ACQUISITION CORP.,

PONTOTOC PRODUCTION COMPANY, INC.,

OKLAHOMA BASIC ECONOMY CORPORATION,

PONTOTOC HOLDINGS, INC.,

PONTOTOC GATHERING, L.L.C.,

DYNE EXPLORATION COMPANY, and

ASCENT RESOURCES WV, INC.,

as Borrowers

FORTIS CAPITAL CORP., as Agent

FORTIS ENERGY LLC, as Qualified Hedging Counterparty

and

the Lenders signatory hereto

As of December 19, 2005

$105,000,000.00

TABLE OF CONTENTS

		Page
1.	Definitions	1
2.	Commitment of the Lenders.	18
	(a)    Revolving Commitment	18
	(b)    Acquisition Commitment	19
	(c)    Requests for New Loans	19
	(d)    Continuations and Conversions of Existing Loans	20
	(e)    Notes	21
	(f)     Use of Proceeds	22
	(g)    Hedging Contracts	22
3.	Optional Termination or Reduction	22
4.	Payments of Principal.	22
	(a)    Payment at Maturity.	22
	(b)    Mandatory Prepayments.	22
5.	Interest.	24
	(a)    Base Rate Loans	24
	(b)    Eurodollar Loans	24
	(c)    Default Rate	24
	(d)    Calculation of Interest	24
	(e)    Recapture Rate	24
6.	Payments.	24
	(a)    Payments to the Lenders	24
	(b)    Increased Cost and Reduced Return.	25
	(c)    Funding Losses	27
	(d)    Reimbursable Taxes.	27
	(e)    Change of Applicable Lending Office	28
	(f)     Replacement of the Lenders	28
7.	Letters of Credit.	29
	(a)    LC Commitment	29
	(b)    Requesting Letters of Credit	29
	(c)    Reimbursement and Participations.	30
	(d)    Letter of Credit Fees	31
	(e)    No Duty to Inquire.	31
	(f)     LC Collateral.	32

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8.	Collateral Security.	34
	(a)    Effective Date	34
	(b)    Subsequently Acquired Oil and Gas Properties	34
	(c)    Form of Security Documents	34
	(d)    Title Work	34
	(e)    Intentionally Omitted.	35
	(f)     Release of Oil and Gas Real Properties	35
	(g)    Security for Hedging Contracts	35
9.	Borrowing Base.	36
	(a)    Initial Borrowing Base	36
	(b)    Regularly Scheduled Redeterminations of the Borrowing Base	36
	(c)    Unscheduled Redeterminations	36
	(d)    Procedure for Redetermining the Borrowing Base	36
	(e)    Failure to Furnish Information	37
	(f)     Calculation of the Borrowing Base	37
	(g)    Reduction of Borrowing Base Following Sale	37
10.	Fees.	38
	(a)    Commitment Fee.	38
	(b)    Disbursement Fee	38
	(c)    Agency and Other Fees	38
11.	Representations and Warranties	38
	(a)    No Default	38
	(b)    Organization and Good Standing	38
	(c)    Authorization	39
	(d)    No Conflicts or Consents	39
	(e)    Enforceable Obligations	39
	(f)     Financial Statements	39
	(g)    Other Obligations and Restrictions	40
	(h)    Full Disclosure	40
	(i)     Litigation	40
	(j)     Labor Disputes and Acts of God	40
	(k)    ERISA Plans and Liabilities	41
	(l)     Names and Places of Business	41
	(m)   Subsidiaries	41
	(n)    Government Regulation	41
	(o)    Insider	41
	(p)    Solvency	42
	(q)    Real Property Other Than Oil and Gas Real Properties.	42
	(r)     Oil and Gas Real Properties	42
	(s)    Title to Oil and Gas Real Properties	42
	(t)     Oil and Gas Real Properties of Restricted Persons	43
	(u)    Refund	43
	(v)    Payout Balances; Gas Balancing	43

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	(w)   Operations	44
	(x)    Plugging Status	44
	(y)    Reserve Reports.	44
	(z)    Financial and Commodity Hedging	45
	(aa)  Environmental Matters	45
	(bb)  Marketing	47
	(cc)  Net Revenue/Working Interest	47
	(dd)  Compliance with the Law	48
	(ee)  Bonds and Insurance.	48
	(ff)   Leases	48
12.	Conditions to Effectiveness of Agreement	49
	(a)    Receipt of Documents	49
	(b)    Legal Opinion	50
	(c)    Financial Statements	50
	(d)    Payment of Expenses	50
	(e)    Note Issuance	50
	(f)     Representations and Warranties	50
	(g)    No Default	50
	(h)    No Material Adverse Effect	50
	(i)     Additional Matters	50
13.	Conditions to Each Advance	50
	(a)    No Event of Default	50
	(b)    Representations and Warranties	51
	(c)    Notice of Advance	51
	(d)    Borrowing Base	51
	(e)    No Material Adverse Effect	51
14.	Affirmative Covenants	51
	(a)    Financial Statements and Reports	51
	(b)    Certificates of Compliance	52
	(c)    Accountant’s Certificate	52
	(d)    Taxes and Other Liens	52
	(e)    Compliance with Laws	53
	(f)     Further Assurances	53
	(g)    Bonds and Insurance	53
	(h)    Right of Inspection	53
	(i)     Notice of Certain Events	53
	(j)     Disclosure Reports	54
	(k)    Environmental Matters	54
	(l)     Compliance and Maintenance	54
	(m)   Compliance with Leases and Other Instruments	54
	(n)    Certain Additional Assurances Regarding Maintenance and Operations of Properties	55
	(o)    Sale of Oil and Gas Properties	55

iii

	(p)    Guaranties of the Borrowers’ Restricted Subsidiaries	55
	(q)    Production Proceeds	55
	(r)     Hedging Contracts.	56
	(s)    Title	57
15.	Negative Covenants	57
	(a)    Liens	57
	(b)    Change of Control or Ownership	57
	(c)    Indebtedness	57
	(d)    Investments	58
	(e)    Distributions	59
	(f)     Current Ratio	59
	(g)    Total Debt to EBITDA	59
	(h)    Ratio of EBITDA to Cash Interest Expense	59
	(i)     Method of Calculation	59
	(j)     Minimum Tangible Net Worth	59
	(k)    Amendments to Basic Documents	59
	(l)     Nature of Business	60
	(m)   Transactions with Affiliates	60
	(n)    Loans and Advances	60
	(o)    New Subsidiaries	60
	(p)    Limitation on Mergers, Reincorporation	60
	(q)    Permitted Redemptions of Capital Stock	61
	(r)     Sale of Oil and Gas Properties	61
16.	Events of Default and Remedies.	61
	(a)    Events of Default	61
	(b)    Remedies	64
17.	The Agent.	64
	(a)    Appointment and Authority	64
	(b)    Exculpation, the Agent’s Reliance, Etc.	65
	(c)    Credit Decisions	66
	(d)    Indemnification	66
	(e)    Non-Reliance on the Agent and Other Lenders	66
	(f)     Rights as Lender	67
	(g)    Sharing of Set-Offs and Other Payments	67
	(h)    Properties	68
	(i)     Benefit of Section 17	68
	(j)     Resignation	68
18.	Miscellaneous Provisions.	69
	(a)    Exercise of Rights	69
	(b)    Notices	69
	(c)    Expenses and Indemnity.	70
	(d)    Waivers and Amendments	71

iv

(e)    Acknowledgments and Admissions	72
(f)     Joint and Several Liability; Parties in Interest; Assignments.	73
(g)    Governing Law	75
(h)    Invalid Provisions	76
(i)     Maximum Rate of Interest	76
(j)     Confidentiality	76
(k)    Intentionally Omitted.	77
(l)     Multiple Counterparts	77
(m)   Conflict	77
(n)    Survival	77
(o)    Parties Bound	77
(p)    Other Agreements.	77
(q)    Waiver of Jury Trial	77
(r)     Amendment and Restatement	78
(s)    Release	78
(t)     USA Patriot Act Notice	78

Annexes

A. Lenders’ Percentage Shares

B. Organization Chart

C. Lending Offices

Schedules

1. Initial AEI Shareholders of Record

2. Disclosure Schedule

3. Security Schedule

4. Oil and Gas Real Properties

5. Ascent Subsidiaries

Exhibits

A Promissory Note

B Notice of Advance

C Continuation/Conversion Notice

D Assignment and Acceptance

E Joinder Agreement

v

SECOND AMENDED AND RESTATED LOAN AGREEMENT

THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT (the “Agreement”) dated as of December 19, 2005, by and among ASCENT OIL AND GAS INC., a Delaware corporation (“Ascent Oil and Gas”), SOUTH LOUISIANA PROPERTY HOLDINGS, INC., a Louisiana corporation (“SLPH”), ASCENT ENERGY HOLDINGS, INC., a Delaware corporation (“Ascent Energy Holdings”), ASCENT ENERGY LOUISIANA, LLC, a Delaware limited liability company (“Ascent Louisiana”), ASCENT GP, LLC, a Delaware limited liability company (“Ascent GP”), ASCENT LP, LLC, a Delaware limited liability company (“Ascent LP”), ASCENT OPERATING, L.P., a Delaware limited partnership (“Ascent Operating”), PONTOTOC ACQUISITION CORP., a Nevada corporation (“Pontotoc Acquisition”), PONTOTOC PRODUCTION COMPANY, INC., a Texas corporation (“Pontotoc Texas”), OKLAHOMA BASIC ECONOMY CORPORATION, an Oklahoma corporation (“OBEC”), PONTOTOC HOLDINGS, INC., an Oklahoma corporation (“Pontotoc Holdings”), PONTOTOC GATHERING, L.L.C., an Oklahoma limited liability company (“Pontotoc Gathering”), DYNE EXPLORATION COMPANY, an Oklahoma corporation (“Dyne”), ASCENT RESOURCES WV, INC., a Delaware corporation (“Resources”), Resources, together with Ascent Oil & Gas, SLPH, Ascent Energy Holdings, Ascent Louisiana, Ascent GP, Ascent LP, Ascent Operating, Pontotoc Acquisition, Pontotoc Texas, OBEC, Pontotoc Holdings, Pontotoc Gathering and Dyne, the “Borrowers,” and each a “Borrower”), FORTIS CAPITAL CORP., a Connecticut corporation, individually (“Fortis”) and as agent (the “Agent”), HIBERNIA NATIONAL BANK, a national banking association (“Hibernia”), THE ROYAL BANK OF SCOTLAND plc, a company organized under the laws of Scotland (“RBS”), STERLING BANK, a bank organized under the laws of Texas (“Sterling”), COMPASS BANK, a bank organized under the laws of Alabama (“Compass”), the other lenders which may become a party hereto (each, a “Lender” and, collectively, the “Lenders”), and FORTIS ENERGY LLC, a Delaware limited liability company (“Fortis Energy”).

WHEREAS, the Borrowers, Agent and certain lenders entered into an Amended and Restated Credit Agreement dated as of July 27, 2004 (as amended, the “Existing Loan Agreement”); and

WHEREAS, the Borrowers, the Agent and the Lenders desire to amend and restate the Existing Credit Agreement for the purpose of providing financing for the Borrowers’ oil and gas operations;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereby formally covenant, agree and bind themselves as follows:

1. Definitions. When used herein the terms “AEI,” “Agent,” “Agreement,” “Ascent Energy Holdings,” “Ascent GP,” “Ascent Louisiana,” “Ascent LP,” “Ascent Oil and Gas,” “Ascent Operating,” “Borrower,” “Borrowers,” “Compass,” “Dyne,” “Existing Credit Agreement,” “Fortis,” “Fortis Energy,” “Hibernia,” “Lender,” “Lenders,” “OBEC,” “Pontotoc Acquisition,” “Pontotoc Gathering,” “Pontotoc Holdings,” “Pontotoc Texas,” “RBS,” “Resources,” “SLPH,” and “Sterling” shall have the meanings indicated above. When used herein the following terms shall have the following meanings:

“Acquisition Commitment” means the maximum aggregate amount which the Lenders will make available to the Borrowers in the form of Advances under the Acquisition Loan, subject to the limitations and restrictions contained herein. Unless reduced pursuant to Section 3, the Acquisition Commitment shall be $5,000,000.

“Acquisition Loan” means all Advances made under the Acquisition Commitment pursuant to Section 2(b) hereof.

“Adjusted LIBOR Rate” means a rate per annum which is the LIBOR Offered Rate (determined and fixed for the duration of any Interest Period) as adjusted by the Lenders for the Eurodollar Reserve Requirement. The determination of the Adjusted LIBOR Rate shall be made by the Agent in its discretion and shall be binding and conclusive in the absence of manifest error.

“Advance” means a borrowing of new Loans of a single Type pursuant to Section 2(a) or Section 2(b).

“Affiliate” means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power

(a) to vote 20% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or

(b) to direct or cause the direction of the management and policies of such Person whether by contract, in an advisory capacity or otherwise.

“Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of Base Rate Loans and such Lender’s Eurodollar Lending Office in the case of Eurodollar Loans.

“Bank Deck Price” means, for any period, the prices for crude oil and natural gas, as applicable, utilized by the Agent in the calculation of the loan collateral value for such crude oil and natural gas in connection with the determination of the Borrowing Base for such period pursuant to Section 9 hereof, as determined by the Agent (which determination shall be binding and conclusive in the absence of manifest error).

“Base Rate” means, for any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (0.50%) and (b) the Prime Rate for such day, plus the Base Rate Margin. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate.

“Base Rate Loan” means a Loan which bears interest at the Base Rate.

2

“Base Rate Margin” means, on each day:

(a) For Revolving Loans:

(i) one-half of one percent (0.50%) per annum when the Facility Usage on such day is less than or equal to 24% of the Borrowing Base on such day,

(ii) three-quarters of one percent (0.75%) per annum when the Facility Usage on such day is greater than 24% and less than or equal to 49% of the Borrowing Base on such day,

(iii) one and one-quarter of one percent (1.25%) per annum when the Facility Usage on such day is greater than 49% and less than or equal to 74% of the Borrowing Base on such day, and

(iv) one and three-quarters of one percent (1.75%) per annum when the Facility Usage on such day is greater than 74% of the Borrowing Base on such day.

(b) For Acquisition Loans: two percent (2.00%) per annum.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America or any successor Governmental Authority.

“Borrowers’ Representative” means Ascent Oil and Gas which is authorized to act on behalf of the Borrowers under this Agreement.

“Borrowing Base” means the amount determined by the Agent and the Lenders from time to time in accordance with Section 9 hereof provided that in no event shall the Borrowing Base ever exceed the Revolving Commitment. Until the next determination of the Borrowing Base pursuant to Section 9 hereof the Borrowing Base shall be Sixty-Five Million Dollars ($65,000,000).

“Borrowing Base Deficiency” has the meaning given such term in Section 4(b)(ii).

“Business Day” means the normal banking hours during any day (other than Saturdays or Sundays or legal holidays) that banks are legally open for business in Dallas, Texas and New York City, New York.

“Cash Interest Expense” means, with respect to any fiscal period, the interest expense incurred for such period as determined in accordance with GAAP and paid in cash.

“Cash Proceeds” means, for any period, the aggregate amount of revenue paid to and received by the Borrowers or any other Restricted Person and derived from any

3

disposition of hydrocarbons produced from the Oil and Gas Real Properties and other Collateral, less all (i) amounts attributable to production, severance, excise or windfall profits taxes, or any other tax, impost, or levy on production, (ii) payments due to the owners (other than the Borrowers or any other Restricted Person) of any royalties, overriding royalty interests, net profits interests, production payments, and any other similar interests which are payable out of, are attributable to, or are a burden upon, any production of such hydrocarbons, and (iii) operating expenses and capital costs ordinary and necessary to recover such hydrocarbons during such period.

“CERCLA” has the meaning provided in Section 11(aa)(vii).

“CERCLIS” has the meaning provided in Section 11(aa)(vii).

“Change of Control” means the occurrence of the following event: the majority of the directors of Ascent Oil and Gas shall consist of Persons not nominated by AEI (not including as Board nominees any directors which the Board is obligated to nominate pursuant to shareholders agreements, voting trust arrangements or similar arrangements).

“Change of Ownership” shall occur if the Permitted Holders collectively cease to own, directly or indirectly, at least fifty percent (50%) plus one share of the outstanding voting securities or equity interests of any Restricted Person, measured by voting power (including both common stock and any preferred stock or other equity interests entitling the holders thereof to vote with the holders of common stock in elections for directors of such Restricted Person). For purposes of this definition, all SLPH shareholders shall be treated as shareholders of AEI by allocating, on a pro forma basis, all shares of AEI owned by SLPH (or any of its Subsidiaries) to SLPH’s shareholders according to their respective ownership interests in SLPH.

“Close-out Amount” means the net amount due by the Borrowers, if any, upon the designation of an Early Termination Date or its equivalent or a Termination Event or its equivalent with respect to all Hedging Contracts with a particular Qualified Hedging Counterparty under the applicable ISDA Master Agreement or its equivalent (i.e., long-form confirmations), net of the value of collateral held solely by the Qualified Hedging Counterparty and which is not collateral in which the Agent has a perfected security interest under any Security Document or any other Loan Document.

“Collateral” means all Stock Collateral, Oil and Gas Real Properties, Oil and Gas Personal Properties and the Cash Proceeds therefrom which are now or hereafter subject to a Lien in favor of the Agent on behalf of the Lenders, pursuant to Section 8 and the Security Documents.

“Commitment Margin” means:

(a) For the Revolving Commitment:

(i) .50% per annum when the Facility Usage on such day is less than or equal 49% of the Borrowing Base on such day,

4

(ii) .375% per annum when the Facility Usage on such day is greater than 49% of the Borrowing Base on such day.

(b) For the Acquisition Commitment: .50% per annum.

“Consolidated” means all of the Borrowers on a consolidated basis, in accordance with GAAP, together with their properly consolidated Restricted Subsidiaries. References herein to a Borrower’s Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Borrower and its properly consolidated Restricted Subsidiaries.

“Consolidated Assets” means Consolidated total assets, excluding any amounts resulting from the application of FASB Statement 133-Accounting for Derivative Instruments and Hedging Activities, any asset write downs, including ceiling test write downs and any amounts resulting from the application of FASB Statement 143-Accounting for Asset Retirement Obligations.

“Consolidated Liabilities” means Consolidated total liabilities, excluding any amounts resulting from the application of FASB Statement 133-Accounting for Derivative Instruments and Hedging Activities and the application of FASB Statement 143-Accounting for Asset Retirement Obligations.

“Consolidated Tangible Net Worth” means all Consolidated Assets of the Borrowers, minus intangible assets, minus the Borrowers’ Consolidated Liabilities. For purposes of this definition, “intangible assets” shall include patents, copyrights, licenses, franchises, good will, trade names, and trade secrets but shall exclude oil, gas, or other mineral leases and shall further exclude all leases required to be capitalized under GAAP.

“Continuation” means the continuation pursuant to Section 2(c) hereof of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the next Interest Period.

“Continuation/Conversion Notice” means a written or telephonic request, or a written confirmation, made by the Borrowers which meets the requirements of Section 2(c).

“Continuing 85% Test” has the meaning provided in Section 8(d).

“Continuing 95% Test” has the meaning provided in Section 8(a).

“Conversion” means a conversion pursuant to Section 2(c) or Section 6 of one Type of Loan into another Type of Loan.

“Current Assets” means the total of the Borrowers’ current assets, including the unfunded portion of the Revolving Commitment, determined in accordance with GAAP on a Consolidated basis.

5

“Current Liabilities” means the total of the Borrowers’ current liabilities as determined in accordance with GAAP on a Consolidated basis, excluding all payments on the Notes falling due within one year of the date of calculation, all payments made under any Hedge Contract and amounts resulting from the application of FASB Statement 133.

“Current Ratio” means the ratio of Current Assets divided by Current Liabilities.

“Debt” means, with respect to any Person, as of any date of determination (without duplication) (a) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services, (f) all capitalized lease obligations, (g) all obligations of others secured by any Lien on property or assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, and (h) all outstanding letters of credit issued for the account of such Person, but shall exclude: (i) current accounts payable arising in the ordinary course of business, (ii) any Permitted Hedging Debt.

“Default Rate” means the rate of interest provided for in Section 5(c).

“Determination Date” has the meaning provided in Section 9(d).

“Disclosure Report” means a notice given by the Borrowers under Section 14(j).

“Disclosure Schedule” means Schedule 2 hereto.

“Distributions” has the meaning provided in Section 15(e).

“Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” on Annex C and, with respect to the Agent, the office, branch, or agency through which it administers this Agreement.

“EBITDA” means with respect to any Person at any date of determination, the sum of (a) net income for such Person for the four (4) most recent Fiscal Quarters then ended, plus (b) interest expense deducted in arriving at such net income plus (c) Federal, state and local income taxes deducted in arriving at such net income plus (d) depreciation, amortization, depletion, and other non-cash charges deducted in arriving at net income as net income is computed and calculated in accordance with GAAP.

“Effective Date” means the date on which each of the conditions set forth in Section 12 hereof have been satisfied or waived by the Required Lenders.

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“Eligible Assignee” means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $1,000,000,000 and having deposits rated in either of the two highest generic letter rating (categories (without regard to subcategories) from either Standard & Poor’s Corporation “S&P”) or Moody’s Investors Service, Inc. (“Moody’s”); (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (“OECD”), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; and (c) any other entity approved by the Agent in its sole discretion.

“Environmental Laws” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Super Fund Amendments and Reauthorization Act of 1986, 42 U.S.C.A. § 9601, et seq., the Resource Conservation and Recovery Act, as amended by the Hazardous Solid Waste Amendment of 1984, 42 U.S.C.A. § 6901, et seq., the Clean Air Act, 42 U.S.C.A. § 1251, et seq., the Toxic Substances Control Act, 15 U.S.C.A. § 2601, et seq., and all other Laws of any Governmental Entity relating to air pollution, water pollution, noise control and/or the handling, discharge, disposal or recovery of on-site or off-site asbestos or “hazardous substances” as defined by 42 U.S.C. § 9601, et seq., as amended, as each of the foregoing may be amended from time to time.

“Environmental Liability” means any claim, demand, obligation, cause of action, order, violation, damage, injury, judgment, penalty or fine, cost of enforcement, cost of remedial action or any other costs or expense whatsoever, including reasonable attorneys’ fees and disbursements, resulting from the violation or alleged violation of any Environmental Law or the imposition of any Environmental Lien.

“Environmental Lien” means a Lien in favor of any court, governmental agency or instrumentality or any other Person (i) for any Environmental Liability or (ii) for damages arising from or cost incurred by such court or governmental agency or instrumentality or other Person in response to a release or threatened release of asbestos or “hazardous substance” into the environment.

“Environmental Permits” shall have the meaning provided in Section 11(aa)(x).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” has the meaning provided in Section 11(k).

“ERISA Plan” has the meaning provided in Section 11(k).

“Eurodollar Business Day” means the normal banking hours during any day (other than Saturdays or Sundays or legal holidays) that banks are legally open for business in Dallas, Texas, and New York City, New York, and on which day dealings in United States Dollars are conducted in the London interbank market.

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“Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurodollar Lending Office” on Annex C (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent.

“Eurodollar Loan” means a Loan which bears interest at the LIBOR Rate.

“Eurodollar Reserve Requirement” means that percentage which is in effect on any day, as provided by the Board of Governors of the Federal Reserve System (or any successor governmental body) applied for determining the reserve requirements (including, without limitation, basis, supplemental, marginal and emergency reserves) under Regulation D (12 C.F.R. Part 24), or any successor or other law or regulation relating to reserve requirements applicable to each Lender, with respect to Eurocurrency liabilities or Eurocurrency funding.

“Event of Default” means an event or circumstance described in Section 16.

“Facility Usage” means, at the time in question, the aggregate amount of outstanding Revolving Loans plus the amount of existing LC Obligations at such time.

“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of Dallas, Texas on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent.

“Financial Statements” means the balance sheets, income statements, statements of cash flow and appropriate footnotes (except for the non-year-end financial statements) and schedules, prepared in accordance with GAAP.

“Fiscal Quarter” means the quarterly periods ending March 31, June 30, September 30, and December 31.

“GAAP” means generally accepted accounting principles, consistently applied; provided, however, that for purposes of any financial calculations under Section 15(g), 15(h), and 15(j), the Borrowers shall exclude the effect of any non-cash effects resulting from (i) any ceiling test or other requirement to write down the value of the oil and gas reserves of the Borrowers and any of their Subsidiaries or (ii) the application of FASB 133 and FASB 143.

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“Good Title” has the meaning provided in Section 11(s).

“Governmental Entity” means any Tribunal, administrative agency or commission, or other governmental authority or instrumentality, foreign, domestic or supranational.

“Guarantor” means any Restricted Subsidiary which now or hereafter executes and delivers a guaranty to the Agent pursuant to Section 14(p).

“Hazardous Material” has the meaning provided in Section 11(aa)(xiii)(A).

“Hedging Contracts” means any of the following agreements or contracts entered into by a Borrower or a Restricted Subsidiary with a Qualified Hedging Counterparty: (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement, provided that any such agreement or contract has a maturity of forty-eight (48) months or less.

“Hedge Guarantees” means the guarantees made by the Borrowers of the obligations of each Borrower party to a Hedging Contract.

“Indebtedness” means any and all indebtedness for borrowed money, all obligations with respect to Hedging Contracts and any and all indebtedness (actual or contingent) under any guarantee.

“Indenture” means that certain indenture dated September 28, 2001 relating to the issuance of the Senior Subordinated Notes, together with any supplements thereto permitted hereby, including, without limitation, the Supplemental Indenture dated July 27, 2004 and the Second Supplemental Indenture dated November 9, 2005.

“Initial AEI Shareholders” means each of the shareholders of AEI listed on Schedule 1 hereto.

“Interest Period” means the period commencing on the first effective Eurodollar Business Day of an Interest Period Election and ending one, two, three, or six months thereafter, as designated by the Borrowers in their sole discretion at the time of making such Interest Period Election, provided that:

(a) if any Interest Period would otherwise end on a day which is not a Eurodollar Business Day, then such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless to do so would extend such Interest Period into a subsequent calendar month, in which event such Interest Period shall end on the next preceding Eurodollar Business Day, and

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(b) any Interest Period that begins on the last day of a calendar month, or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, shall end on the last Eurodollar Business Day of the last calendar month of such Interest Period.

Notwithstanding anything to the contrary contained herein, no Interest Period with respect to a Eurodollar Loan may end on a day which is after the Loan Maturity Date.

“Interest Period Election” means an election by the Borrowers, made in accordance with this Agreement, to have the Interest Period be for a period of one, two, three or six months.

“Investment” means, with respect to any Person, any capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any capital stock, bonds, notes, debentures or other securities or evidences of Debt issued by, any other Person, other than a loan to such Person even if such loan is evidenced by a Note.

“Law” means any law, statute, code, ordinance, order, judgment, decree, injunction, rule, regulation, or restriction of any Governmental Entity.

“LC Application” means any application for a Letter of Credit hereafter made by Borrowers to LC Issuer.

“LC Collateral” has the meaning given to such term in Section 7(f).

“LC Issuer” has the meaning given to such term in Section 7(a).

“LC Obligations” means, at the time in question, the sum of all Matured LC Obligations plus the Maximum Drawing Amount.

“Letter of Credit” means any documentary letter of credit issued by LC Issuer pursuant to this Agreement.

“LIBOR Margin” means, on each day:

(a) For Revolving Loans:

(i) one and three quarters of one percent (1.75%) per annum when the Facility Usage on such day is less than or equal to 24% of the Borrowing Base on such day,

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(ii) two and one-quarter of one percent (2.25%) per annum when the Facility Usage on such day is greater than 24% and less than or equal to 49% of the Borrowing Base on such day,

(iii) two and three-quarters of one percent (2.75%) per annum when the Facility Usage on such day is greater than 49% and less than or equal to 74% of the Borrowing Base on such day, and

(iv) three and one-quarter of one percent (3.25%) per annum when the Facility Usage on such day is greater than 74% of the Borrowing Base on such day.

(b) For Acquisition Loans: three and one-half of one percent (3.50%) per annum.

“LIBOR Offered Rate” means, with respect to each Interest Period and each Eurodollar Loan hereunder, the rate per annum (determined and fixed for the duration of such Interest Period) determined by the Agent to be the per annum rate at which dollar deposits (in amounts comparable to the principal amount of each Eurodollar Loan which will be subject to the LIBOR Rate and for a period of time equal or comparable to such Interest Period) in immediately available funds are offered (at approximately 11:00 a.m., London time) three Eurodollar Business Days prior to the first day of such Interest Period to the Agent in the London Interbank Eurodollar market for delivery on the first day of such Interest Period.

“LIBOR Rate” means the Adjusted LIBOR Rate plus the LIBOR Margin.

“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, encumbrance or lien (statutory or otherwise) of every kind and character.

“Liquidation Percentage Share” means, with respect to any Lender and any Qualified Hedging Counterparty, the percentage obtained by dividing (i) the aggregate unpaid principal balance of such Lender’s Loans at the time in question, or the Close-out Amount due to such Qualified Hedging Counterparty, as the case may be, by (ii) the sum of (a) the aggregate unpaid principal balance of all Loans at such time plus (b) the Close-out Amount at such time.

“Loan” means a Revolving Loan pursuant to Section 2(a) or an Acquisition Loan pursuant to Section 2(b).

“Loan Documents” means this Agreement, the Notes, the Security Documents, the Hedge Guarantees, LC Applications, and any and all other documents executed in connection with this Agreement and the transactions contemplated hereby.

“Loan Maturity Date” means November 1, 2009.

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“Loan Value” means the percentage of the Borrowing Base attributable to a particular Oil and Gas Real Property considered in determining the Borrowing Base as determined by the Agent in its good faith discretion pursuant to parameters and valuation models applied by the Agent to its other similarly situated customers.

“Market Hedge Price” means, from time to time, (a) in the case of a commodity price swap, the highest “Fixed Price” and (b) in the case of a commodity price collar or floor, the highest “Floor Price,” in each case quoted by a Qualified Hedging Counterparty to the Borrowers or any Restricted Subsidiary in connection with a proposed hedging transaction

“Material Adverse Effect” means any circumstances or events which might reasonably be expected to (i) have a material adverse effect on the assets or properties, liabilities, financial condition, business, operations, affairs or circumstances of the Borrowers, taken as a whole, from those reflected in the consolidated Financial Statements of AEI, dated as of December 31, 2003, or from the facts represented or warranted in this Agreement or any other Loan Document (other than any representation or warranty related solely to a different point in time), or (ii) materially impair the ability of any Restricted Person to carry out its business as it exists on the date hereof or to meet its obligations under the Notes, this Agreement or the other Security Documents or Loan Documents on a timely basis.

“Matured LC Obligations” means all amounts paid by LC Issuer on drafts or demands for payment drawn or made under or purported to be under any Letter of Credit and all other amounts due and owing to LC Issuer under any LC Application for any Letter of Credit, to the extent the same have not been repaid to LC Issuer (with the proceeds of Loans or otherwise).

“Maximum Drawing Amount” means at the time in question the sum of the maximum amounts which LC Issuer might then or thereafter be called upon to advance under all Letters of Credit which are then outstanding.

“Maximum Rate” means, at any particular time in question, the maximum lawful interest rate which may be contracted for, charged, taken, received or reserved under this Agreement or the other Loan Documents by a Lender in accordance with applicable state or federal law (whichever provides for the highest permitted rate), taking into account all items contracted for, charged or received in connection with the Obligations evidenced hereby which are treated as interest under the applicable state or federal law, as such rate may change from time to time. The Maximum Legal Rate shall be calculated in a manner that takes into account any and all fees, payments and other charges in respect of the Loan Documents that constitute interest under applicable law. Each change in any interest rate provided for herein based upon the Maximum Legal Rate resulting from a change in the Maximum Legal Rate shall take effect without notice to the Companies at the time of such change in the Maximum Legal Rate. For purposes of determining the Maximum Legal Rate under Texas law (to the extent, if any, that Texas law is relevant to the determination of Maximum Legal Rate), the applicable rate ceiling shall be: (a) the

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“weekly ceiling” described in and computed in accordance with the provisions of Section 303.003 of the Texas Finance Code, as amended; or (b) if the parties subsequently contract as allowed by Texas law, the quarterly ceiling or the annualized ceiling computed pursuant to Section 303.008 of the Texas Finance Code, as amended; provided, however, that at any time the “weekly ceiling”, the quarterly ceiling or the annualized ceiling shall be less than 18% per annum or more than 24% per annum, the provisions of Section 303.009(a) and Section 303.009(b) of the Texas Finance Code, as amended, shall control for purposes of such determination, as applicable.

“Non-Recourse Indebtedness” means Indebtedness of an Unrestricted Subsidiary of the Borrowers owing to any Person other than the Borrowers or their Restricted Subsidiaries where (a) neither the Borrowers nor any of their Restricted Subsidiaries: (i) provides any guaranty or credit support for such Indebtedness; or (ii) is directly or indirectly liable for such Indebtedness and (b) no default with respect to such Indebtedness (including any rights which the holder thereof may have to take enforcement action against such Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any Indebtedness of the Borrowers or any their Restricted Subsidiaries to declare a default on such Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.

“Notes” has the meaning given such term in Section 2(e).

“Notice of Advance” means a written or telephonic request, or a written confirmation, made by the Borrowers which meets the requirements of Section 2(c).

“Obligations” means all Debt from time to time owing by any Restricted Person to any Lender under or pursuant to any of the Loan Documents and any Hedging Contracts. For purposes of determining the amount of the Borrowers’ Obligations under a Hedging Contract, the amount of such Obligation shall be an amount equal to the Close-out Amount with respect to such Hedging Contract. “Obligation” means any part of the Obligations.

“Oil and Gas Personal Properties” means any and all interests in fixtures, equipment and machinery (including well equipment and machinery and workover, completion and drilling rigs), oil and gas production, gathering, compression, treating, processing, transmission or storage facilities (including tanks, tank batteries, pipelines and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to or necessary for the operation of the Oil and Gas Real Properties.

“Oil and Gas Properties” means, collectively, Oil and Gas Personal Properties and Oil and Gas Real Properties.

“Oil and Gas Real Properties” means any and all types of: (i) direct and indirect, current or reversionary, interests in and rights in respect of oil, gas and other minerals and hydrocarbons, including mineral leases, fee interests, surface interests, mineral rights or mineral servitudes, working interests, royalties, overriding royalties, production

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payments, net profits interests, and other non-working interests and non-operating interests and (ii) easements, rights of way, servitudes, and other similar interests appurtenant to any of the foregoing.

“Percentage Share” means, with respect to any Lender (a) when used in Section 2(a) in any Notice of Advance or when no Loans are outstanding hereunder, the percentage set forth opposite such Lender’s name on its signature page hereto, and (b) when used otherwise, the percentage obtained by dividing (i) the sum of the unpaid principal balance of such Lender’s Loans at the time in question, by (ii) the sum of the aggregate unpaid principal balance of all Loans at such time. Each Lender’s Percentage Share on the Effective Date is shown on Annex A to this Agreement.

“Permitted Hedging Debt” means any obligations incurred by a Borrower or a Restricted Subsidiary pursuant to Hedging Contracts such Borrower or such Restricted Subsidiary enters into under Section 14(r).

“Permitted Holders” means, collectively, each of the Initial AEI Shareholders and their respective Affiliates and any Person (or Affiliate of such Person) whose accounts are managed by an Initial AEI Shareholder or any of its Affiliates.

“Permitted Investments” means Investments:

(a) in open market commercial paper, maturing within 270 days after acquisition thereof, which is rated at least A-1 by S & P or P-1 by Moody’s;

(b) in marketable obligations, maturing within 12 months after acquisition thereof, issued or unconditionally guaranteed by the United States of America or an instrumentality or agency thereof and entitled to the full faith and credit of the United States of America; and

(c) in demand deposits, and time deposits (including certificates of deposit) maturing within 12 months from the date of deposit thereof, with any office of any national or state bank or trust company which is organized under the Laws of the United States of America or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose certificates of deposit are rated at least Aa3 by Moody’s or AA- by S&P.

“Permitted Liens” means:

(a) statutory Liens for taxes, assessments or other governmental charges or levies which are not yet delinquent or which are being contested in good faith by appropriate action;

(b) landlords’, operators’, carriers’, warehousemen’s, repairmen’s, mechanics’, materialmen’s, or other like Liens which do not secure Indebtedness, in each case only to the extent arising in the ordinary course of business and only to the extent securing obligations which are not delinquent or which are being contested in good faith by appropriate proceedings;

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(c) minor defects and irregularities in title to any property, so long as such defects and irregularities neither secure Indebtedness nor materially impair the value of such property or the use of such property for the purposes for which such property is held;

(d) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature (excluding appeal bonds) incurred in the ordinary course of business;

(e) Liens under the Security Documents;

(f) any servitudes, easements, rights of way, and similar rights affecting any Oil and Gas Real Properties which are normal and customary and do not render title to such Oil and Gas Real Property unmarketable;

(g) other Liens with respect to the Oil and Gas Real Properties that are exceptions to the title opinions issued in connection with existing mortgages;

(h) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of the Oil and Gas Properties covered by such Lien for the purposes for which such Oil and Gas Properties are held by the Borrowers or any Restricted Subsidiary or materially impair the value of such Oil and Gas Properties subject thereto;

(i) with respect only to Oil and Gas Properties subject to any particular Security Document, Liens burdening such Oil and Gas Properties which are expressly allowed by such Security Document;

(j) Liens securing the obligations of the Borrowers and other Restricted Persons pursuant to any Hedging Contracts required by Section 14(r) or permitted by Section 15(n);

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(k) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(l) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by Borrowers or any of their Restricted Subsidiaries to provide collateral to the depository institution; and

(m) Liens contemplated by Section 15(c)(v).

“Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Potential Event of Default” means an event or circumstance described in Section 16 which has not yet become an Event of Default but which would become an Event of Default with the passing of any period of time and/or the giving of notice or both.

“Prime Rate” means the per annum rate of interest announced from time to time by Fortis Bank S.A./N.V. as its U.S. “prime rate,” which rate may not be the lowest rate of interest charged by such bank to its customers.

“Qualified Hedging Counterparty” means Fortis Energy, Fortis, any Lender, or any Affiliate of Fortis or any Lender which executes a joinder agreement in the form of Exhibit E agreeing to be bound by all the applicable terms and conditions hereof, in its capacity as a party to any Hedging Contract.

“Reimbursable Taxes” has the meaning given such term in Section 6(d)(i).

“Release” has the meaning provided in Section 11(aa)(xiii)(B).

“Required Lenders” means (i) where there are two or fewer Lenders, the Lenders whose aggregate Percentage Share equals one hundred percent (100%) and (ii) when there are three or more Lenders, those Lenders whose aggregate Percentage Shares equal at least sixty-six and two-thirds percent (66-2/3%). The Agent’s Percentage Share as a Lender shall be included in any calculation of the Required Lenders’ consent. Notwithstanding anything to the contrary contained herein, no Qualified Hedging Counterparty shall be considered or deemed a Lender for the purposes of this definition.

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“Reserve Reports” means the reserve reports of Ascent Oil and Gas dated July 1, 2005.

“Restricted Person” means each Borrower, each Restricted Subsidiary, and AEI.

“Restricted Subsidiary” means any Subsidiary of a Borrower other than Unrestricted Subsidiaries. As of the Effective Date, the Borrowers have no Restricted Subsidiaries.

“Revolving Commitment” means the maximum aggregate amount which the Lenders will make available to the Borrowers in the form of Advances under the Revolving Loan or Letters of Credit, subject to the limitations and restrictions contained herein. Unless reduced pursuant to Section 3, the Revolving Commitment shall be $100,000,000.

“Revolving Loan” means all Advances made under the Revolving Commitment pursuant to Section 2(a) hereof.

“Securities Purchase Agreement” means the Amended and Restated Securities Purchase Agreement dated as of November 9, 2005, among AEI and the purchasers signatories thereto relating to the Senior Notes.

“Security Documents” means this Agreement, all deeds of trust, mortgages, guaranty agreements, security agreements, pledges, control agreements, assignments of production and financing statements, and other collateral documents covering certain of the Borrowers’ and their Restricted Subsidiaries’ Oil and Gas Properties, and real and personal property, equipment, oil and gas inventory and the cash proceeds of the foregoing, all such documents to be in form and substance reasonably satisfactory to the Agent and the Lenders.

“Security Schedule” means Schedule 3 hereto.

“Senior Notes” mean the 16% Senior Notes due February 1, 2010 (or such later maturity date as extended in accordance with their terms) of AEI.

“Senior Subordinated Notes” mean the 11 ³/4% Senior Subordinated Notes due May 1, 2010 (or such later maturity date as extended in accordance with their terms) of AEI.

“Sharing Event” has the meaning assigned to it in Section 17(g).

“Stock Collateral” means the Collateral described in Section 8(a)(i).

“Subordinated Indebtedness” has the meaning provided in Section 15(c)(iii).

“Subsidiary” means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent (50%) or more by such Person.

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“Termination Event” has the meaning provided in Section 11(k).

“Title Documents” means, in each instance, title opinions and other documents establishing the title and Lien status of any Oil and Gas Real Property.

“Tribunal” means any court, arbitrator, arbitration panel, administrative board, or other similar Person with jurisdiction over any Borrower, any other Restricted Person, the Agent, any of the Lenders, or any matter relating to this Agreement for the business and operations of the foregoing parties.

“Type” means, with respect to any Loans, the characterization of such Loans as either Base Rate Loans or LIBOR Loans.

“Unrestricted Subsidiary” means a Subsidiary of Ascent Oil and Gas which (i) except for Investments by and loans and advances from a Restricted Person to the extent permitted by this Agreement, is funded solely by the proceeds of a new equity issuance and/or Non-Recourse Indebtedness, and (ii) does not, directly or indirectly, own stock or securities of, and has no Investment in, any Borrower or Restricted Subsidiary.

“Unscheduled Redetermination” means a redetermination of the Borrowing Base made at any time other than on the dates set forth in Section 9(b) for the regular semi-annual redetermination of the Borrowing Base which is made (A) at the reasonable request of the Borrowers, or (B) at any time it appears to the Agent and the Required Lenders, that either (i) there has been a material decrease in the value of the Oil and Gas Properties, or (ii) an event has occurred which is reasonably expected to have a Material Adverse Effect.

Whenever this Agreement refers to the “knowledge of the Borrowers” or the “Borrowers’ knowledge,” such knowledge shall be determined by the actual knowledge of any Borrower’s principal officers.

Further, whenever this Agreement requires the financial calculation for purposes of Section 15 or any of the financial definitions in this Section 1, such calculations shall be made pursuant to the modified definition of GAAP under this Section 1.

2. Commitment of the Lenders.

(a) Revolving Commitment. Subject to the terms and conditions hereof, each Lender agrees to make revolving loans to the Borrowers (herein called such Lender’s “Revolving Loans”) upon the Borrowers’ request from time to time during the term hereof, provided that (i) all Lenders are requested to make Revolving Loans of the same Type in accordance with their respective Percentage Shares and as part of the same Advance, and (ii) after giving effect to such Revolving Loans, the Facility Usage does not exceed the Borrowing Base most recently determined prior to the date on which the

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requested Revolving Loans are to be made. The aggregate amount of all Revolving Loans in any Advance must be greater than or equal to $1,000,000 or must equal the remaining availability under the Borrowing Base. Subject to the terms and conditions hereof, the Borrowers may borrow, repay, and reborrow Revolving Loans made hereunder. The Lenders shall have no obligation to make Revolving Loans hereunder if, after giving effect to such Revolving Loan, the aggregate amount of outstanding Revolving Loans plus the amount of existing LC Obligations would exceed the Borrowing Base in effect at such time.

(b) Acquisition Commitment. Subject to the terms and conditions hereof, each Lender agrees to make loans to the Borrowers in order to finance the acquisition of Oil and Gas Properties (or the equity of any Person owning Oil and Gas Properties) (herein called such Lender’s “Acquisition Loans”) upon the Borrowers’ request from time to time during the term hereof, provided that (i) all Lenders are requested to make Acquisition Loans of the same Type in accordance with their respective Percentage Shares and as part of the same Advance, and (ii) the aggregate amount of all Acquisition Loans may not exceed sixty-five percent (65%) of the net discounted present value, determined by the Agent using the factors set forth in Section 9(f) hereof, of the proven producing Oil and Gas Properties being acquired with the proceeds of such Acquisition Loans (the “65% Test”). The aggregate amount of all Acquisition Loans in any Advance must be greater than or equal to $1,000,000. Subject to the terms and conditions hereof, the Borrowers may borrow, repay, and reborrow Acquisition Loans made hereunder. The Lenders shall have no obligation to make an Acquisition Loan hereunder if such Acquisition Loans would not satisfy the 65% Test.

(c) Requests for New Loans. The Borrowers’ Representative, on behalf of the Borrowers, must give the Agent written notice (or telephonic notice promptly confirmed in writing) of any requested Advance of new Loans to be advanced by the Lenders. Each such notice constitutes a “Notice of Advance” hereunder and must:

(i) specify whether such Loan is to be a Revolving Loan or an Acquisition Loan;

(ii) specify (x) the aggregate amount of any such Advance of new Base Rate Loans and the date on which such Base Rate Loans are to be advanced, or (y) the aggregate amount of any such Advance of new Eurodollar Loans, the date on which such Eurodollar Loans are to be advanced (which shall be the first day of the Interest Period which is to apply thereto), and the length of the applicable Interest Period; and

(iii) be received by the Agent not later than 10:00 a.m., Dallas, Texas time, on (x) the day on which any such Base Rate Loans are to be made, or (y) the third Business Day preceding the day on which any such Eurodollar Loans are to be made.

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Each such written request or confirmation must be made in the form and substance of the “Notice of Advance” attached hereto as Exhibit B, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by the Borrowers as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Notice of Advance, the Agent shall give each Lender prompt notice of the terms thereof. If all conditions precedent to such new Loans have been met, each Lender will on the date requested promptly remit to the Agent at the Agent’s office in Addison, Texas the amount of such Lender’s new Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Loans have been neither met nor waived as provided herein, the Agent shall promptly make such Loans available to the Borrowers by disbursements to the Borrowers’ Representative on behalf of the Borrowers. Unless the Agent shall have received prompt notice from a Lender that such Lender will not make available to the Agent such Lender’s new Loan, the Agent may in its discretion assume that such Lender has made such Loan available to the Agent in accordance with this section and the Agent may if it chooses, in reliance upon such assumption, make such Loan available to the Borrowers by disbursements to the Borrowers’ Representative on behalf of the Borrowers. If and to the extent such Lender shall not so make its new Loan available to the Agent, such Lender and the Borrowers severally agree to pay or repay to the Agent within three days after demand the amount of such Loan together with interest thereon for each day from the date such amount was made available to the Borrowers until the date such amount is paid or repaid to the Agent at (i) the Federal Funds Rate, if such Lender is making such payment and (ii) the interest rate applicable at the time to the other new Loans made on such date, if the Borrowers are making such repayment. If neither such Lender nor the Borrowers pays or repays to the Agent such amount within such three-day period, the Agent shall in addition to such amount be entitled to recover from such Lender and from the Borrowers, on demand, interest thereon at the rate set out pursuant to Section 5(c), calculated from the date such amount was made available to the Borrowers. The failure of any Lender to make any new Loan to be made by it hereunder shall not relieve any other Lender of its obligation hereunder, if any, to make its new Loan, but no Lender shall be responsible for the failure of any other Lender to make any new Loan to be made by such other Lender.

(d) Continuations and Conversions of Existing Loans. The Borrowers may make the following elections with respect to Loans already outstanding: to convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to Base Rate Loans on the last day of the Interest Period applicable thereto, and to continue Eurodollar Loans beyond the expiration of such Interest Period by designating a new Interest Period to take effect at the time of such expiration. In making such elections, the Borrowers may combine existing Loans of different Types or Interest Periods into one new Type or Interest Period or divide existing Loans of a single Type or Interest Period into separate new Types or Interest Periods, provided that the Borrowers may have no more than five (5) Interest Period tranches of Eurodollar Loans outstanding at any time. To make any such election, the Borrowers’ Representative must give to the Agent written notice (or telephonic notice promptly confirmed in writing) of any such Conversion or Continuation of existing Loans, with a separate notice given for each new Advance. Each such notice constitutes a “Continuation/Conversion Notice” hereunder and must:

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(i) specify the existing Loans which are to be continued or converted;

(ii) specify (x) the aggregate amount of any Base Rate Loans into which such existing Loans are to be continued or converted and the date on which such Continuation or Conversion is to occur, or (y) the aggregate amount of any Eurodollar Loans into which such existing Loans are to be continued or converted, the date on which such Continuation or Conversion is to occur (which shall be the first day of the Interest Period which is to apply to such Eurodollar Loans), and the length of the applicable Interest Period; and

(iii) be received by the Agent not later than 10:00 a.m., Dallas, Texas time, on (x) the day on which any such Continuation or Conversion to Base Rate Loans is to occur, or (y) the third Business Day preceding the day on which any such Continuation or Conversion to Eurodollar Loans is to occur.

Each such written request or confirmation must be made in the form and substance of the “Continuation/Conversion Notice” attached hereto as Exhibit C, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by the Borrowers as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Continuation/Conversion Notice, the Agent shall give each Lender prompt notice of the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and binding on the Borrowers. During the continuance of any Event of Default, the Borrowers may not make any election to convert existing Base Rate Loans into Eurodollar Loans or continue existing Eurodollar Loans. If (due to the existence of an Event of Default or for any other reason) the Borrowers fail to timely and properly give any Continuation/Conversion Notice with respect to an existing Eurodollar Loan at least three days prior to the end of the Interest Period applicable thereto, such Eurodollar Loan shall automatically be converted into a Base Rate Loan at the end of such Interest Period. No new funds shall be repaid by the Borrowers or advanced by any Lender in connection with any Continuation or Conversion of existing Loans pursuant to this section, and no such Continuation or Conversion shall be deemed to be a new Advance for any purpose; such Continuations and Conversions merely constitute a change in the interest rate applicable to already outstanding Loans.

(e) Notes. The obligation of the Borrowers to repay to each Lender the aggregate amount of all Loans made by such Lender, together with interest accruing in connection therewith, shall be evidenced by a promissory note (herein called such Lender’s “Note”) made by the Borrowers payable to the order of such Lender in the form of Exhibit A, with appropriate insertions. The amount of principal owing on any Lender’s Note at any given time shall be the aggregate amount of all Loans theretofore made by such Lender minus all payments of principal theretofore received by such Lender on such Note. Interest on each Note shall accrue and be due and payable as provided herein and therein. Each Note shall be due and payable as provided herein and therein.

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(f) Use of Proceeds. The proceeds of the Loans will be used by the Borrowers (i) to refinance the Existing Loan Agreement, (ii) to finance the future acquisition and development of Oil and Gas Properties by the Borrowers or their Restricted Subsidiaries, (iii) subject to Sections 15(d) and 15(o), Investments in or loans or advances to the Borrowers’ Unrestricted Subsidiaries, and (iv) for general corporate purposes of the Borrowers and their Restricted Subsidiaries, except that Acquisition Loans may only be used in order to finance the acquisition of Oil and Gas Properties (or the equity of any Person owning Oil and Gas Properties).

(g) Hedging Contracts. Upon execution and delivery of a Hedging Contract, Fortis Energy, as a Qualified Hedging Counterparty, and each other Qualified Hedging Counterparty, shall be deemed a “Lender” solely for the purposes of this subsection, and Sections 8, 17 and 18.

3. Optional Termination or Reduction. The Borrowers may, upon at least three (3) Business Days’ notice to the Agent (i) terminate the Revolving Commitment or the Acquisition Commitment at any time if no Revolving Loans or Acquisition Loans, as the case may be, are outstanding at such time, or (ii) reduce from time to time by an aggregate amount of One Hundred Thousand Dollars ($100,000), or in multiples of One Hundred Thousand Dollars ($100,000), the aggregate amount of all or a portion of the Revolving Commitment or the Acquisition Commitment in excess of the aggregate outstanding principal amount of the Revolving Loans or the Acquisition Loans, as the case may be. Any such reduction shall not affect the Percentage Shares of the Lenders under the remaining portion of the Revolving Commitment or the Acquisition Commitment.

4. Payments of Principal.

(a) Payment at Maturity.

(i) Except as otherwise provided in this Agreement, the outstanding principal amount of the Revolving Loans and all Matured LC Obligations shall be due and payable on the Loan Maturity Date.

(ii) Except as otherwise provided in this Agreement, the outstanding principal amount of the Acquisition Loans shall be due and payable on the earlier of (y) a date which is six months after the date of the Advance of such Acquisition Loan, or (z) the Loan Maturity Date.

(b) Mandatory Prepayments.

(i) If at any time the Facility Usage exceeds the Revolving Commitment (whether due to a reduction in the Revolving Commitment in accordance with this Agreement, or otherwise), the Borrowers shall immediately upon demand prepay the principal of the Revolving Loans in an amount at least equal to such excess.

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(ii) If at any time the Facility Usage is less than the Revolving Commitment but in excess of the Borrowing Base (such excess being herein called a “Borrowing Base Deficiency”), the Borrowers shall, within five (5) Business Days after the Agent gives notice of such fact to the Borrowers, either:

(x) prepay the principal of the Revolving Loans in an aggregate amount at least equal to such Borrowing Base Deficiency; or

(y) give notice to the Agent electing to prepay the principal of the Revolving Loans within ninety (90) calendar days of the date of such notice in an aggregate amount at least equal to such Borrowing Base Deficiency, or

(z) give notice to the Agent that the Borrowers desire to provide the Agent with deeds of trust, mortgages, chattel mortgages, security agreements, financing statements and other Security Documents in form and substance satisfactory to the Agent, granting, confirming, and perfecting first and prior liens or security interests in collateral acceptable to the Agent, to the extent needed to allow the Agent to increase the Borrowing Base (as the Agent in its reasonable discretion deem consistent with prudent oil and gas banking industry lending standards at the time) to an amount which eliminates such Borrowing Base Deficiency, and then provide such Security Documents within thirty days after the Agent specifies such collateral to the Borrowers. If, prior to any such specification by the Agent, the Agent determine that the giving of such Security Documents will not serve to eliminate such Borrowing Base Deficiency, then, the Borrowers will elect to make, within five (5) Business Days after receiving notice of such determination, and thereafter make, the prepayments specified in either of the preceding subsections (x) or (y) of this subsection (ii).

(iii) If at any time the amount of outstanding Acquisition Loans exceeds the Acquisition Commitment (whether due to a reduction in the Acquisition Commitment in accordance with this Agreement or otherwise), the Borrowers shall immediately upon demand prepay the principal of the Acquisition Loans in an amount at least equal to such excess.

(iv) If on any Determination Date, Facility Usage plus the amount of outstanding Acquisition Loans exceeds the Borrowing Base on such Determination Date, the amount of such excess shall be deemed to be a Borrowing Base Deficiency and Section 4(b)(ii) shall apply to such excess. Any resulting prepayment shall be applied first to outstanding Acquisition Loans.

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(v) Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid together with any additional amounts required pursuant to Section 6(c) herein. Any principal or interest prepaid pursuant to this Section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment and shall be applied in the manner described in Section 6(a) herein.

5. Interest.

(a) Base Rate Loans. Each Base Rate Loan shall bear interest at the rate per annum equal to the lesser of (i) the Base Rate or (ii) the Maximum Rate, subject to the terms and conditions of this Agreement. Such interest shall be payable in arrears on the last day of each Fiscal Quarter commencing September 30, 2004.

(b) Eurodollar Loans. Each Eurodollar Loan shall bear interest at the rate per annum equal to the lesser of (i) the applicable LIBOR Rate or (ii) the Maximum Rate, subject to the terms and provisions of this Agreement. Such interest shall be payable in arrears on the earlier of the last day of the applicable Interest Period or the last day of the applicable Fiscal Quarter.

(c) Default Rate. If all or a part of the principal amount of any Loan is not paid when due or upon the occurrence and during the continuance of an Event of Default, the unpaid principal balance of such Loan shall bear interest until paid at an annual rate equal to the lesser of (i) the rate that would otherwise be applicable thereto pursuant to this Section 5 plus three percent (3%), or (ii) the Maximum Rate.

(d) Calculation of Interest. Interest shall be calculated on the basis of actual days elapsed (including the first day but excluding the last day) in the year consisting of three hundred sixty (360) days.

(e) Recapture Rate. Notwithstanding the foregoing, if at any time the rate specified in Section 5(a)(i) or Section 5(b)(i) exceeds the Maximum Rate, and, therefore, the rate of interest on the Notes is limited to the Maximum Rate, then any subsequent reductions in the Base Rate or the LIBOR Rate, as applicable, shall not reduce the rate of interest on the Notes below the Maximum Rate until the total amount of interest accrued on the Notes equals the amount of interest which would have accrued thereon if the rate specified in Section 5(a)(i) or Section 5(b)(i) had at all times been in effect.

6. Payments.

(a) Payments to the Lenders. Payment of interest, principal and fees to the Lenders shall be directed by wire transfer to the Agent at JP Morgan Chase Bank, ABA #021000021, Account #001-1-624418, Reference: AEI, no later than 12:00 noon, New York City, New York, time on the day such payments or prepayments are due. If any payment of principal or interest on the Note(s) or any payment of fees shall become due on a day other than a Business Day, such payment shall be made on the next succeeding

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Business Day, and such extension of time in such case shall be included in computing interest in connection with such payment. Any payment or prepayment received by the Agent at any time after 12:00 noon New York City, New York, time on a Business Day shall be deemed to have been received on the next Business Day. Interest shall cease to accrue on any principal as of the end of the day preceding the Business Day on which any such payment or prepayment is deemed hereunder to have been received by the Agent. When the Agent collects or receives money on account of the Obligations, the Agent shall distribute all money so collected or received, and each Lender shall apply all such money so distributed, as follows:

(i) first, for the payment of all Obligations (including all Close-out Amounts, if any) which are then due (and if such money is insufficient to pay all such Obligations, first to any reimbursements due the Agent under Section 6(c) or Section 18(c) and then to the partial payment of all other Obligations then due in proportion to the amounts thereof, or as the Agent shall otherwise designate);

(ii) then for the prepayment of amounts owing under the Loan Documents (other than principal on the Notes) if so specified by the Borrowers;

(iii) then for the prepayment of principal on the Notes, together with accrued and unpaid interest on the principal so prepaid; and

(iv) last, for the payment or prepayment of any other Obligations.

All payments applied to principal or interest on any Note shall be applied first to any interest then due and payable, then to principal then due and payable with respect to Acquisition Loans, then to principal then due and payable with respect to Revolving Loans, and last to any prepayment of principal and interest in compliance with Section 4(b). All distributions of amounts described in any of subsections (ii), (iii) or (iv) above shall be made by the Agent pro rata to each Lender then owed Obligations described in such subsection in proportion to all amounts owed to all the Lenders which are described in such subsection; provided that if any Lender then owes payments to the Agent under Section 17, any amounts otherwise distributable under this section to such Lender shall be deemed to belong to the Agent, to the extent of such unpaid payments, and the Agent shall apply such amounts to make such unpaid payments rather than distribute such amounts to such Lender.

(b) Increased Cost and Reduced Return.

(i) If at any time after the date hereof, and from time to time, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit, insurance assessment or similar

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requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System but excluding any such requirement included in an applicable Eurodollar Reserve Requirement) against assets of, deposits with or for the account of, or credit extended by, any Lender or shall impose on any Lender or the London interbank market any other condition which would have the effect of (aa) increasing any Lender’s costs relating to the obligations evidenced by the Loan Documents, or (bb) reducing the yield or rate of return of such Lender on the obligations incurred under the Loan Documents to a level below that which such Lender could have achieved but for the adoption or modification of any such requirements by an amount deemed by such Lender to be material in its sole but reasonable discretion, then, within fifteen (15) days after demand by such Lender, the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction; provided that the Lender shall not be entitled to compensation under this section for any such increased cost or reduction that is the result of the withholding or payment of any taxes.

(ii) If any Lender shall have determined, in its sole but reasonable discretion, that, on or after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Lender (or its parent) as a consequence of such Lender’s obligations hereunder to a level below that which such Lender (or its parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender to be material in its sole but reasonable discretion, then from time to time, within fifteen (15) days after demand by such Lender, the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender (or its parent) for such reduction.

(iii) Each Lender will promptly notify the Borrowers of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this section and will designate a different applicable lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of Lender, be otherwise disadvantageous to such Lender. A certificate of such Lender claiming compensation under this section and setting forth the additional amount or amounts to be paid to it hereunder and the reasons therefor shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods.

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(c) Funding Losses. In addition to its other obligations hereunder, the Borrowers will indemnify each Lender against, and reimburse each Lender on demand for, any loss or expense incurred or sustained by such Lender (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by a Lender to fund or maintain Eurodollar Loans), as a result of (i) any payment or prepayment (whether authorized or required hereunder or otherwise) of all or a portion of a Eurodollar Loan on a day other than the day on which the applicable Interest Period ends, (ii) any payment or prepayment, whether required hereunder or otherwise, of a Loan made after the delivery, but before the effective date, of a Continuation/Conversion Notice, if such payment or prepayment prevents such Continuation/Conversion Notice from becoming fully effective, (iii) the failure of any Loan to be made or of any Continuation/Conversion Notice to become effective due to any condition precedent not being satisfied or due to any other action or inaction of any Restricted Person or due to the Borrowers’ failure to borrow on the day specified in a Notice of Advance, or (iv) any Conversion (whether authorized or required hereunder or otherwise) of all or any portion of any Eurodollar Loan into a Base Rate Loan or into a different Eurodollar Loan on a day other than the day on which the applicable Interest Period ends. Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity.

(d) Reimbursable Taxes.

(i) The Borrowers will indemnify each Lender against and reimburse each Lender for all present and future stamp and other taxes, levies, costs and charges whatsoever actually collected on or in respect of this Agreement or any Eurodollar Loans hereunder (whether or not legally or correctly imposed, assessed, levied or collected), excluding, however, any taxes imposed on or measured by the overall net income of the Agent or such Lender or any Applicable Lending Office of such Lender by any jurisdiction in which such Lender or any such Applicable Lending Office is located (all such non-excluded taxes, levies, costs and charges being collectively called “Reimbursable Taxes” in this section). Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity.

(ii) All payments on account of the principal of, and interest on, each Lender’s Loans and Note, and all other amounts payable by the Borrowers to any Lender hereunder, shall be made in full without set-off or counterclaim and shall be made free and clear of and without deductions or withholdings of any nature by reason of any Reimbursable Taxes, all of which will be for the account of the Borrowers. In the event of the Borrowers being compelled by law to make any such deduction or withholding from any payment to any Lender, the Borrowers shall pay on the due date of such payment, by way of additional interest, such additional amounts as are needed to cause the amount receivable by such Lender after such deduction or withholding to equal the amount which would have been receivable in the absence of such deduction or withholding. If the Borrowers should make any deduction or withholding as aforesaid, the Borrowers shall within 60 days thereafter forward to such Lender an official receipt or other official document evidencing payment of such deduction or withholding.

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(iii) If the Borrowers are ever required to pay any Reimbursable Tax with respect to any Eurodollar Loan, the Borrowers may elect, by giving to the Agent and such Lender not less than three Business Days’ notice, to convert all (but not less than all) of any such Eurodollar Loan into a Base Rate Loan, but such election shall not diminish the Borrowers’ obligation to pay all Reimbursable Taxes.

(iv) Notwithstanding the foregoing provisions of this section, the Borrowers shall be entitled, to the extent it is required to do so by Law, to deduct or withhold (and not to make any indemnification or reimbursement for) income or other similar taxes imposed by the United States of America (other than any portion thereof attributable to a change in federal income tax Laws effected after the date hereof) from interest, fees or other amounts payable hereunder for the account of any Lender, other than a Lender (i) who is a U.S. person for Federal income tax purposes or (ii) who has the Prescribed Forms on file with Agent (with copies provided to the Borrowers) for the applicable year to the extent deduction or withholding of such taxes is not required as a result of the filing of such Prescribed Forms, provided that if Borrowers shall so deduct or withhold any such taxes, it shall provide a statement to Agent and such Lender, setting forth the amount of such taxes so deducted or withheld, the applicable rate and any other information or documentation which such Lender may reasonably request for assisting such Lender to obtain any allowable credits or deductions for the taxes so deducted or withheld in the jurisdiction or jurisdictions in which such Lender is subject to tax. As used in this section, “Prescribed Forms” means such duly executed forms or statements, and in such number of copies, which may, from time to time, be prescribed by Law and which, pursuant to applicable provisions of (x) an income tax treaty between the United States and the country of residence of the Lender providing the forms or statements, or (y) the Internal Revenue Code, permit the Borrowers to make payments hereunder for the account of such Lender free of such deduction or withholding of income or similar taxes.

(e) Change of Applicable Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Sections 6(b) through (d) with respect to such Lender, it will, if requested by the Borrowers, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another Applicable Lending Office, provided that such designation is made on such terms that such Lender and its Applicable Lending Office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such section. Nothing in this section shall affect or postpone any of the obligations of the Borrowers or the rights of any Lender provided in Sections 6(b) through (d).

(f) Replacement of the Lenders. If any Lender seeks reimbursement for increased costs under Sections 6(b) through 6(d), then within ninety days thereafter—

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provided no Event of Default then exists—the Borrowers shall have the right (unless such Lender withdraws its request for additional compensation) to replace such Lender by requiring such Lender to assign its Loans and Notes and its commitments hereunder to an Eligible Assignee reasonably acceptable to the Agent and to the Borrowers, provided that: (i) all Obligations of the Borrowers owing to such Lender being replaced (including such increased costs, but excluding principal and accrued interest on the Notes being assigned) shall be paid in full to such Lender concurrently with such assignment, and (ii) the replacement Eligible Assignee shall purchase the Note being assigned by paying to such Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. In connection with any such assignment the Borrowers, the Agent, such Lender and the replacement Eligible Assignee shall otherwise comply with Section 18(f)(iii). Notwithstanding the foregoing rights of the Borrowers under this section, however, the Borrowers may not replace any Lender which seeks reimbursement for increased costs under Section 6(b) through (d) unless the Borrowers are at the same time replacing all the Lenders which are then seeking compensation for the same costs.

7. Letters of Credit.

(a) LC Commitment. Subject to the terms and conditions hereof, the Borrowers may until the Loan Maturity Date request the Agent to arrange for the issuance by Fortis or an Affiliate of Fortis acceptable to the Borrowers (the “LC Issuer”) of one or more Letters of Credit under the Revolving Commitment, provided that, after taking such Letter of Credit into account:

(i) the Facility Usage does not exceed the Borrowing Base at such time; and

(ii) the aggregate amount of LC Obligations at such time does not exceed $5,000,000.00;

(iii) the expiration date of such Letter of Credit is prior to the Loan Maturity Date;

(iv) the form and terms of such Letter of Credit are acceptable to such LC issuer in its sole and absolute discretion; and

(v) each of the conditions set forth in Section 13 hereof have been satisfied or waived.

LC Issuer will honor any such request if the foregoing conditions (i) through (v) (in the following Subsection (b) called the “LC Conditions”) have been met as of the date of issuance of such Letter of Credit. LC Issuer may choose to honor any such request for Letter of Credit that does not meet the LC Conditions, but has no obligation to do so.

(b) Requesting Letters of Credit. The Borrowers’ Representative must make written application for any Letter of Credit (“LC Application”) at least three Business

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Days before the date on which the Borrowers desire such Letter of Credit to be issued, by delivering such LC Application to the Agent. The Agent shall promptly deliver such LC Application to LC Issuer. By making any such LC Application the Borrowers shall be deemed to have represented and warranted to each Lender and LC Issuer that the LC Conditions described in Subsection (a) will be met as of the date of issuance of such Letter of Credit. Each such LC Application for a Letter of Credit must be made in writing in the form and substance acceptable to LC Issuer, the terms and provisions of which are hereby incorporated herein by reference, provided that no such LC Application may impose any fee or requirement for additional Collateral above and beyond those fees and collateral requirements imposed by this Agreement. Two Business Days after the LC Conditions for a Letter of Credit have been met as described in Subsection (a) (or if an LC Issuer otherwise desires to issue such Letter of Credit), LC Issuer will issue such Letter of Credit at LC Issuer’s office, and will provide the Agent with a specimen copy of the Letter of Credit so issued. If any provisions of any LC Application conflict with any provisions of this Agreement, the provisions of this Agreement shall govern and control.

(c) Reimbursement and Participations.

(i) Each Matured LC Obligation shall constitute an Advance by the Agent to the Borrowers. The Borrowers promise to pay to the Agent, or to the Agent’s order, on demand, the full amount of each Matured LC Obligation, together with interest thereon at the rate applicable to Base Rate Loans, accruing commencing the day after the date on which such reimbursement payment was due.

(ii) LC Issuer irrevocably agrees to grant and hereby grants to each Lender, and—to induce LC Issuer to issue Letters of Credit hereunder—each Lender irrevocably agrees to accept and purchase and hereby accepts and purchases from LC Issuer, on the terms and conditions hereinafter stated and for such Lender’s own account and risk, an undivided interest equal to such Lender’s Percentage Share of LC Issuer’s obligations and rights under each Letter of Credit issued hereunder by LC Issuer and the amount of each Matured LC Obligation paid by LC Issuer thereunder. Each Lender unconditionally and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid under any Letter of Credit for which LC Issuer is not reimbursed in full by the Borrowers in accordance with the terms of this Agreement and the related LC Application (including any reimbursement by means of concurrent Revolving Loans or by the application of LC Collateral), such Lender shall (in all circumstances and without set-off or counterclaim) pay to LC Issuer on demand, in immediately available funds at LC Issuer’s address for notices hereunder, such Lender’s Percentage Share of such Matured LC Obligation (or any portion thereof which has not been reimbursed by the Borrowers). Each Lender’s obligation to pay LC Issuer pursuant to the terms of this subsection is irrevocable and unconditional. If any amount required to be paid by any Lender to LC Issuer pursuant to this subsection is paid by such Lender to LC Issuer within three Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover

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from such Lender, on demand, interest thereon calculated from such due date at the Federal Funds Rate. If any amount required to be paid by any Lender to LC Issuer pursuant to this subsection is not paid by such Lender to LC Issuer within three Business Days after the date such payment is due, LC Issuer shall in addition be entitled to recover from such Lender, on demand, interest thereon calculated from such due date at the Default Rate applicable to Base Rate Loans.

(iii) Whenever an LC Issuer has in accordance with this section received from any Lender payment of such Lender’s Percentage Share of any Matured LC Obligation, if such LC Issuer thereafter receives any payment of such Matured LC Obligation or any payment of interest thereon (whether directly from the Borrowers or by application of LC Collateral or otherwise, and excluding only interest for any period prior to such LC Issuer’s demand that such Lender make such payment of its Percentage Share), such LC Issuer will distribute to such Lender its Percentage Share of the amounts so received by such LC Issuer; provided, however, that if any such payment received by an LC Issuer must thereafter be returned by such LC Issuer, such Lender shall return to such LC Issuer the portion thereof which such LC Issuer has previously distributed to it.

(iv) A written advice setting forth in reasonable detail the amounts owing under this section, submitted by an LC Issuer to the Borrowers or any Lender from time to time, shall be conclusive, absent manifest error, as to the amounts thereof.

(d) Letter of Credit Fees. In consideration of LC Issuer’s issuance of any Letter of Credit, the Borrowers agree to pay to the Agent, for the account of all Lenders in accordance with their respective Percentage Shares, a letter of credit fee at a rate equal to the applicable LIBOR Margin on the amount of all Letters of Credit. Each such fee will be calculated on a daily basis, on the face amount of Letters of Credit outstanding on each day at the above applicable rate and will be payable quarterly in arrears. In addition, the Borrowers will pay to LC Issuer an administrative issuance fee of $500.00 for each Letter of Credit issued by LC Issuer and an amendment fee of $500.00 for each Letter of Credit, each such fee to be payable upon issuance or amendment, respectively, of a Letter of Credit.

(e) No Duty to Inquire.

(i) LC Issuer is authorized and instructed to accept and pay drafts and demands for payment under any Letter of Credit without requiring, and without responsibility for, any determination as to the existence of any event giving rise to said draft, either at the time of acceptance or payment or thereafter. LC Issuer is under no duty to determine the proper identity of anyone presenting such a draft or making such a demand (whether by tested telex or otherwise) as the officer, representative or agent of any beneficiary under any Letter of Credit, and payment by LC Issuer to any such beneficiary when requested by any such purported officer, representative or agent is hereby authorized and approved. The

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Borrowers agree to hold LC Issuer and each Lender harmless and indemnified against any liability or claim in connection with or arising out of the subject matter of this section, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any Lender, provided only that no Lender shall be entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment.

(ii) If the maturity of any Letter of Credit is extended by its terms or by Law or governmental action, if any extension of the maturity or time for presentation of drafts or any other modification of the terms of any Letter of Credit is made at the request of the Borrowers, or if the amount of any Letter of Credit is increased at the request of the Borrowers, this Agreement shall be binding upon all Restricted Persons with respect to such Letter of Credit as so extended, increased or otherwise modified, with respect to drafts and property covered thereby, and with respect to any action taken by LC Issuer, LC Issuer’s correspondents, or any Lender Party in accordance with such extension, increase or other modification.

(iii) If any Letter of Credit provides that it is transferable, LC Issuer shall have no duty to determine the proper identity of anyone appearing as transferee of such Letter of Credit, not shall LC Issuer be charged with responsibility of any nature or character for the validity or correctness of any transfer or successive transfers, and payment by LC Issuer to any purported transferee or transferees as determined by LC Issuer is hereby authorized and approved, and the Borrowers further agree to hold LC Issuer and each other Lender harmless and indemnified against any liability or claim in connection with or arising out of the foregoing, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any Lender, provided only that no Lender shall be entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment.

(f) LC Collateral.

(i) If, after the making of all mandatory prepayments required under Section 4(b), the outstanding LC Obligations will exceed the Borrowing Base, then in addition to prepayment of the Borrowing Base Deficiency the Borrowers will immediately pay to LC Issuer an amount equal to such excess. LC Issuer will hold such amount as security for the remaining LC Obligations (all such amounts held as security for LC Obligations being herein collectively called “LC Collateral”) until such LC Obligations become Matured LC Obligations, at which time such LC Collateral may be applied to such Matured LC Obligations. Neither this subsection nor the following subsection shall, however, limit or impair any

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rights which LC Issuer may have under any other document or agreement relating to any Letter of Credit or LC Obligation, including any LC Application, or any rights which any Lender may have to otherwise apply any payments by the Borrowers and any LC Collateral under Section 6 (a).

(ii) If the Obligations or any part thereof become immediately due and payable pursuant to Section 16 then, unless Required Lenders otherwise specifically elect to the contrary (which election may thereafter be retracted by Required Lenders at any time), all LC Obligations shall become immediately due and payable without regard to whether or not actual drawings or payments on the Letters of Credit have occurred, and the Borrowers shall be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC Obligations which are then outstanding. All amounts so paid shall first be applied to Matured LC Obligations and then held by LC Issuer as LC Collateral until such LC Obligations become Matured LC Obligations, at which time such LC Collateral shall be applied to such Matured LC Obligations.

(iii) Pending application thereof, all LC Collateral shall be invested by LC Issuer in such interest-bearing investments as LC Issuer may choose in its sole but reasonable discretion. All interest on such investments shall be reinvested or applied to Matured LC Obligations. When all Obligations have been satisfied in full, including all LC Obligations, all Letters of Credit have expired or been terminated, and all of the Borrowers’ reimbursement obligations in connection therewith have been satisfied in full, LC Issuer shall release any remaining LC Collateral. The Borrowers hereby assign and grant to LC Issuer a continuing security interest in all LC Collateral paid by it to LC Issuer, all investments purchased with such LC Collateral, and all proceeds thereof to secure its Matured LC Obligations and its Obligations under this Agreement, each Note, and the other Loan Documents, and the Borrowers agree that such LC Collateral and investments and proceeds shall be subject to all of the terms and conditions of the Security Documents. The Borrowers further agree that LC Issuer shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code with respect to such security interest and that an Event of Default under this Agreement shall constitute a default for purposes of such security interest.

(iv) When the Borrowers are required to provide LC Collateral for any reason and fails to do so on the day when required, LC Issuer may without notice to the Borrowers or any other Restricted Person provide such LC Collateral (whether by application of proceeds of other Collateral, by transfers from other accounts maintained with LC Issuer, or otherwise) using any available funds of the Borrowers or any other Person also liable to make such payments. Any such amounts which are required to be provided as LC Collateral and which are not provided on the date required shall, for purposes of each Security Document, be considered past due Obligations owing hereunder, and LC Issuer is hereby authorized to exercise its respective rights under each Security Document to obtain such amounts.

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8. Collateral Security.

(a) Effective Date. To secure the performance by the Borrowers of the Obligations hereunder and under the Notes, Security Documents and Hedging Contracts, whether now or hereafter incurred, matured or unmatured, direct or contingent, including extensions, modifications, renewals and increases thereof, and substitutions therefor, the Borrowers shall, as of the Effective Date, have:

(i) caused AEI to grant and assign to the Agent, on behalf of the Lenders, a first priority Lien on all of its shares of stock in Ascent Oil and Gas and the Cash Proceeds therefrom;

(ii) granted and assigned to the Agent, on behalf of the Lenders, a first priority Lien, subject only to Permitted Liens, on not less than 95% of the Borrowers’ Oil and Gas Real Properties (the “Continuing 95% Test”) and all of Borrowers’ Oil and Gas Personal Properties, related assets and the Cash Proceeds of all of the foregoing; and

(iii) caused Pontotoc Gathering to grant and assign to the Agent, on behalf of the Lenders, a first Priority Lien, subject only to Permitted Liens, on the lease of its gas gathering system.

(b) Subsequently Acquired Oil and Gas Properties. The Borrowers and their existing and newly organized or acquired Restricted Subsidiaries shall grant security interests and mortgage Liens to the Agent, on behalf of the Lenders, in and on any subsequently acquired (either directly or through the acquisition of a Person who thereby becomes a Restricted Person) Oil and Gas Properties, including without limitation, any Oil and Gas Properties acquired with financing from Acquisition Loans, and the Cash Proceeds therefrom within thirty (30) days of the acquisition of such Oil and Gas Properties by the Person in question such that the Borrowers are in compliance with the Continuing 95% Test. If any Borrower subsequently forms or acquires any Unrestricted Subsidiaries, such Unrestricted Subsidiaries are not required to guarantee the Borrowers’ Obligations or grant the Agent or any of the Lenders security interests in or mortgage Liens on their Oil and Gas Properties or the Cash Proceeds therefrom.

(c) Form of Security Documents. The granting and assigning of such security interests and Liens by the Borrowers and each other Restricted Person shall be pursuant to the Security Documents in form and substance reasonably satisfactory to the Agent.

(d) Title Work. As of the Effective Date, the Borrowers shall have furnished to the Agent Title Documents reasonably satisfactory to the Agent with respect to the title and Lien status of at least 85% of all Oil and Gas Real Properties of the Borrowers and any Restricted Subsidiaries that are included in the Borrowing Base, considered on an aggregate basis for all such Persons and calculated according to the Loan Values

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established for such Oil and Gas Real Properties by the Agent as of such date. At or prior to the addition of any subsequently acquired Oil and Gas Real Properties to the Collateral pursuant to Section 8(b) above, the Borrowers shall furnish to the Agent Title Documents reasonably satisfactory to the Agent with respect to the title and Lien status of a sufficient number of such subsequently acquired Oil and Gas Real Properties so that the Agent shall at all times have Title Documents reasonably satisfactory to the Agent with respect to at least 85% of all Oil and Gas Real Properties of the Borrowers and the other Restricted Subsidiaries that are included in the Borrowing Base, considered on an aggregate basis for all such Persons and calculated according to the Loan Values established for such Oil and Gas Real Properties by the Agent as of the Effective Date of the addition of the subsequently acquired Oil and Gas Real Properties to the Collateral pursuant to Section 8(b) above (the “Continuing 85% Test”). If, at any time after the Effective Date, the Borrowers fail to provide Title Documents reasonably satisfactory to the Agent for a sufficient number of Oil and Gas Real Properties to meet the Continuing 85% Test, such failure shall not constitute an Event of Default, but the Agent shall reduce the Borrowing Base by written notice to the Borrowers as required to bring the Borrowers into compliance with the Continuing 85% Test until such Title Documents are provided.

Without regard to whether the Borrowers or any Restricted Subsidiary provides satisfactory Title Documents with respect to a particular Oil and Gas Real Property owned by such Person, such Oil and Gas Real Property shall, nevertheless, be encumbered by a mortgage in favor of the Agent, on behalf of the Lenders, and shall be included in the Collateral.

(e) Intentionally Omitted.

(f) Release of Oil and Gas Real Properties. Upon the Borrowers’ request, the Agent shall release any Oil and Gas Real Property and associated Oil and Gas Personal Property from all mortgages, security interests and other Liens in favor of the Agent on behalf of the Lenders in order to permit the Restricted Person that owns such Oil and Gas Property (i) to assign an interest pursuant to a farm-out of such Oil and Gas Property in the ordinary course of business or (ii) to sell such Oil and Gas Property to another Person as permitted by Section 14(o).

(g) Security for Hedging Contracts. The Agent and the Lenders agree that upon execution and delivery of the Hedging Contract required by Section 14(r) or permitted by Section 15(n) by any Qualified Hedging Counterparty, such Qualified Hedging Counterparty shall possess a pari passu Lien in the Collateral and the Cash Proceeds therefrom as security for the obligations of the Borrowers and the other Restricted Subsidiaries under the Hedging Contracts. Accordingly, the Agent, the Lenders and the Borrowers agree that each of the existing Security Documents and each new Security Document shall inure to the benefit of such Qualified Hedging Counterparty as a “Lender” under the grants described in this Section 8, in the Security Documents and under the sharing agreement more fully described in Section 17(g) below.

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9. Borrowing Base.

(a) Initial Borrowing Base. During the period from the Effective Date to the next Determination Date, the Borrowing Base shall be Sixty-Five Million Dollars ($65,000,000). Subsequent determinations of the Borrowing Base shall be made by the Agent semiannually on the dates set forth hereinbelow or as Unscheduled Redeterminations.

(b) Regularly Scheduled Redeterminations of the Borrowing Base. On or before each August 31 commencing August 31, 2006, the Borrowers’ Representative shall furnish the Agent an engineering report in form and substance satisfactory to the Agent in its reasonable discretion prepared by a representative of the Borrowers covering all of the Borrowers’ and their Restricted Subsidiaries’ Oil and Gas Real Properties. On or before each February 28 commencing February 28, 2006, the Borrowers’ Representative shall furnish the Agent an engineering report in form and substance satisfactory to the Agent in its reasonable discretion prepared by a representative of the Borrowers but audited by an independent third party engineer selected by the Borrowers and approved by the Agent covering all of the Borrowers’ and their Restricted Subsidiaries’ Oil and Gas Real Properties. All such engineering reports shall employ economic and pricing parameters used by the Agent as established from time to time but consistently applied to all similarly situated customers of the Agent, and all such engineering reports shall include such other information concerning the value of the Oil and Gas Real Properties in question as the Agent may deem necessary to determine the value of such Oil and Gas Real Properties. The engineering reports furnished August 31 and February 28 pursuant to this section shall be prepared as of the preceding June 30 and December 31, respectively.

(c) Unscheduled Redeterminations. Within thirty (30) days after either (i) receipt of notice from the Agent that the Required Lenders require an Unscheduled Redetermination, or (ii) the Borrowers’ Representative giving notice to the Agent of the Borrowers’ desire to have an Unscheduled Redetermination performed, the Borrowers’ Representative shall furnish to the Lenders an engineering report prepared by a representative of the Borrowers in form and substance satisfactory to the Agent valuing the Borrowers’ and their Restricted Subsidiaries’ Oil and Gas Real Properties using the same methodology used by the Borrowers’ representative under Section 9(b) and shall include such other information concerning the value of the Oil and Gas Real Properties in question as the Agent shall deem reasonably necessary to determine the value of such Oil and Gas Real Properties. The Agent and the Borrowers may each request no more than one Unscheduled Redetermination between regularly scheduled determinations under Section 9(b).

(d) Procedure for Redetermining the Borrowing Base. Within twenty-five (25) days after Agent’s receipt of any engineering report required under Section 9(b) or (c) above, Agent will notify the Lenders of its recommended Borrowing Base. Within fifteen (15) days following receipt of such notice, each Lender shall notify the Agent in writing stating whether or not such Lender agrees with the Agent’s recommendation. If

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at the end of such fifteen (15) days, any Lender has not communicated its approval or disapproval in writing to the Agent, such silence shall be deemed to be an approval of the recommended Borrowing Base. The Borrowing Base may be decreased from the then effective Borrowing Base with the consent of Required Lenders, but may only be increased from the then effective Borrowing Base with the consent of all of the Lenders. If the Required Lenders or all of the Lenders, as the case may be, have approved or are deemed to have approved the recommendation, then the Agent promptly shall notify the Borrowers’ Representative of the Borrowing Base as so redetermined, whereupon that redetermined value shall become effective (and shall remain effective until the Borrowing Base is again redetermined as provided in this Section 9) no later than November 1 (in the case of engineering reports due on August 31) and May 1 (in the case of engineering reports due on February 28) (November 1 and May 1, or any other date on which a redetermination of the Borrowing Base takes effect, are herein called a “Determination Date”). If Required Lenders or all of the Lenders, as the case may be, have not approved or are not deemed to have approved the Borrowing Base within the 15-day period following their receipt of the proposed amount from the Agent, the Borrowing Base shall be set at the amount of the then current Borrowing Base, and the Borrowing Base shall remain at such level until the Required Lenders or all of the Lenders, as the case may be, utilizing the procedure outlined herein, agree on a new Borrowing Base.

(e) Failure to Furnish Information. If the Borrowers do not furnish all such information, reports and data by the dates specified in this section, unless such failure is of no fault of the Borrowers, the Agent may nonetheless designate the Borrowing Base at any amount which the Agent determines in its reasonable discretion and, with the consent of the Required Lenders, may redesignate the Borrowing Base from time to time thereafter until the Agent receives all such information, reports and data, whereupon the Agent shall designate a new Borrowing Base as described above.

(f) Calculation of the Borrowing Base. The Agent and the Lenders shall determine the amount of the Borrowing Base based upon the loan collateral value which the Agent and the Lenders in their discretion (using such methodology, assumptions and discounts rates as they customarily use in assigning collateral value to oil and gas properties for similarly situated customers of the Lenders) assign to the Oil and Gas Real Properties of the Borrowers and their Restricted Subsidiaries at the time in question and based upon such other credit factors consistently applied (including, without limitation, the assets, liabilities, cash flow, business, properties, and prospects of the Borrowers and their Restricted Subsidiaries) as the Agent and the Lenders customarily consider in evaluating similar oil and gas credits.

(g) Reduction of Borrowing Base Following Sale. If at any time any of the Borrowers’ or their Restricted Subsidiaries’ Oil and Gas Properties are sold, the Borrowing Base then in effect shall be reduced as provided in Section 14(o) by an amount equal to the Loan Value formerly attributable to such Oil and Gas Properties.

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10. Fees.

(a) Commitment Fee.

(i) In consideration of each Lender’s commitment to make Revolving Loans and the Agent’s commitment to arrange for the issuance of Letters of Credit, the Borrowers will pay to the Agent for the account of each Lender a commitment fee determined on a daily basis following the Effective Date by applying a rate equal to the Commitment Margin per annum to such Lender’s Percentage Share of the unused portion of the Borrowing Base on each day, determined for each such day by deducting from the amount of the Borrowing Base at the end of such day the Facility Usage. This commitment fee shall be due and payable in arrears on the last day of each Fiscal Quarter, commencing December 31, 2005, and at the Loan Maturity Date.

(ii) In consideration of each Lender’s commitment to make Acquisition Loans, the Borrowers will pay to the Agent for the account of each Lender a commitment fee at a rate equal to the Commitment Margin per annum on such Lender’s Percentage Share of the unused portion of the Acquisition Commitment. Such commitment fee shall be calculated and be payable in the manner described in paragraph (a)(i) above.

(b) Disbursement Fee. The Borrowers agree to pay the Agent for the account of each Lender a disbursement fee equal to 0.50% of each Advance of an Acquisition Loan. Such disbursement fee shall be payable at the time of each such Advance.

(c) Agency and Other Fees. The Borrowers agree to pay to the Agent and the Lenders the fees as set forth in the fee letter dated as of the Effective Date between the Agent and the Borrowers.

11. Representations and Warranties. In order to induce each Lender to enter into this Agreement, each Borrower hereby represents and warrants to each Lender:

(a) No Default. No event has occurred and is continuing which constitutes an Event of Default.

(b) Organization and Good Standing. Each Restricted Person is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each Restricted Person is duly qualified, in good standing, and authorized to do business in all other jurisdictions within the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary. Each Restricted Person has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures desirable.

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(c) Authorization. Each Borrower is duly authorized to borrow funds hereunder. Each Restricted Person has duly taken all action necessary to authorize the execution and delivery by it of the Loan Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder.

(d) No Conflicts or Consents. The execution and delivery by the various Restricted Persons of the Loan Documents to which each is or will be a party, the performance by each of its obligations under such Loan Documents, and the consummation of the transactions contemplated by the various Loan Documents, do not and will not (a) conflict with any provision of (i) any Law, (ii) the organizational documents of any Restricted Person, or (iii) any agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person, (b) result in the acceleration of any Indebtedness owed by any Restricted Person, or (c) result in or require the creation of any Lien upon any assets or properties of any Restricted Person except as expressly contemplated or permitted in the Loan Documents. Except as expressly contemplated in the Loan Documents no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by any Restricted Person of any Loan Document or to consummate any transactions contemplated by the Loan Documents.

(e) Enforceable Obligations. This Agreement is, and the other Loan Documents when duly executed and delivered will be, legal, valid and binding obligations of each Restricted Person which is a party hereto or thereto, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors’ rights.

(f) Financial Statements. AEI has heretofore delivered to each Lender the audited Consolidated Financial Statements of AEI dated as of the fiscal year ending December 31, 2004 and the unaudited Consolidated Financial Statements of AEI dated as of the Fiscal Quarter ending September 30, 2005. Such Financial Statements fairly present AEI’s consolidated financial position at the respective date thereof and the consolidated results of AEI’s operations and consolidated cash flows for the respective period thereof, subject to, in the case of unaudited quarterly Financial Statements, normal year-end adjustments. Since the date of such Financial Statements, there has not been (i) any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Restricted Persons, except as disclosed to the Lenders in the Disclosure Schedule or a Disclosure Report, (ii) any material change by AEI in its accounting methods, principles or practices, except as required by changes in GAAP, or (iii) any revaluation by any Restricted Persons of any of its material assets, other than in the ordinary course of business. All Financial Statements were prepared in accordance with GAAP.

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(g) Other Obligations and Restrictions. No Restricted Person has any outstanding Debt of any kind (including contingent obligations, tax assessments, and unusual forward or long-term commitments) which are, in the aggregate, material to the Borrowers or material with respect to AEI’s consolidated financial condition and not shown in the Financial Statements or disclosed in the Disclosure Schedule or a Disclosure Report. Except as shown in the Financial Statements or disclosed in the Disclosure Schedule or a Disclosure Report, no Restricted Person is subject to or restricted by any franchise, contract, deed, charter restriction, or other instrument or restriction which could reasonably be expected to have a material adverse impact on such Restricted Person.

(h) Full Disclosure. No certificate, written statement or other written information delivered herewith or heretofore by any Restricted Person to any Lender in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby contains any untrue statement of a material fact or omits to state any material fact known to the Borrowers (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) necessary to make the statements contained herein or therein not misleading as of the date made or deemed made. There is no fact known to the Borrowers that has not been disclosed to the Agent in writing which could reasonably be expected to have a Material Adverse Effect. To the Borrowers’ knowledge, there are no statements or conclusions in any engineering report furnished to the Agent with respect to the Oil and Gas Real Properties which are based upon or include materially misleading information or fail to take into account material information regarding the matters reported therein, it being understood that each engineering report furnished to the Agent with respect to the Oil and Gas Real Properties is necessarily based upon professional opinions, estimates and projections and that the Borrowers do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

(i) Litigation. Except as disclosed in the Financial Statements or in the Disclosure Schedule or in a Disclosure Report: (a) there are no actions, suits or legal, equitable, arbitration or administrative proceedings pending, or to the Borrowers’ knowledge, threatened, against any Restricted Person before any court, agency or arbitral Tribunal which could reasonably be expected to have a material adverse impact on such Restricted Person, and (b) there are no outstanding judgments, injunctions, writs, rulings or orders by any such court, agency or arbitral Tribunal against any Restricted Person or, to the Borrowers’ knowledge, any Restricted Person’s stockholders, partners, directors or officers which could reasonably be expected to have a material adverse impact on such Restricted Person.

(j) Labor Disputes and Acts of God. Except as disclosed in the Disclosure Schedule or a Disclosure Report, neither the business nor the properties of any Restricted Person has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty, which could reasonably be expected to have a material adverse impact on such Restricted Person, taking into account any available insurance proceeds.

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(k) ERISA Plans and Liabilities. All currently existing plans (as defined in ERISA, each, an “ERISA Plan”) for the Restricted Persons are listed in the Disclosure Schedule or a Disclosure Report. Except as disclosed in the Financial Statements or in the Disclosure Schedule or a Disclosure Report, no termination event (as defined in ERISA, each, a “Termination Event”) has occurred with respect to any ERISA Plan and all affiliates of the Restricted Person as defined in ERISA (each, an “ERISA Affiliate”) are in compliance with ERISA in all material respects. No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any “multiemployer plan” as defined in Section 4001 of ERISA. Except as set forth in the Disclosure Schedule or a Disclosure Report: (a) no “accumulated funding deficiency” (as defined in Section 412(a) of the Internal Revenue Code) exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, and (b) the current value of each ERISA Plan’s benefits does not exceed the current value of such ERISA Plan’s assets available for the payment of such benefits by more than $500,000.

(l) Names and Places of Business. Except as set forth on the Disclosure Schedule or in a Disclosure Report, no Restricted Person has, during the preceding five years, had, been known by, or used any other trade or fictitious name. Except as otherwise indicated in the Disclosure Schedule or a Disclosure Report, the chief executive office and principal place of business of each Restricted Person are (and, except as otherwise indicated in the Disclosure Schedule or a Disclosure Report, for the preceding five years have been) located at the address of the Borrowers set out on the signature pages hereto. Except as indicated in the Disclosure Schedule or a Disclosure Report, no Restricted Person has any other executive office or principal place of business.

(m) Subsidiaries. Attached as Annex B is an organization chart showing SLPH’s and AEI’s Subsidiaries as of the Effective Date. The Borrowers do not presently have any Subsidiary or own any stock in any other corporation or association except those listed in Schedule 5 hereto or a Disclosure Report. No Borrower or Restricted Subsidiary is a member of any general or limited partnership, joint venture or association of any type whatsoever except those listed in the Disclosure Schedule or a Disclosure Report. Except as otherwise listed in a Disclosure Report, the Borrowers own, directly or indirectly, the equity interest in each of the Subsidiaries which is indicated in the Disclosure Schedule.

(n) Government Regulation. No Borrower nor any other Restricted Person owing Obligations is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Property Company Act of 1940 (as any of the preceding acts have been amended) or any other Law which regulates the incurring by such Person of Indebtedness, including Laws relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services.

(o) Insider. No Restricted Person, nor any Person having “control” (as that term is defined in 12 U.S.C. § 375b(9) or in regulations promulgated pursuant thereto) of any Restricted Person, is a “director” or an “executive officer” or “principal shareholder” (as those terms are defined in 12 U.S.C. § 375b(8) or (9) or in regulations promulgated

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pursuant thereto) of any Lender, of a bank holding company of which any Lender is a Subsidiary, or of any Subsidiary of a bank holding company of which any Lender is a Subsidiary.

(p) Solvency. Upon giving effect to the issuance of the Notes, the execution of the Loan Documents by the Borrowers and the consummation of the transactions contemplated hereby and by the Restructuring Plan, each Restricted Person will be solvent (as such term is used in applicable bankruptcy, liquidation, receivership, insolvency or similar Laws).

(q) Real Property Other Than Oil and Gas Real Properties.

(i) Except as set forth in the Disclosure Schedule or a Disclosure Report, each of the Borrowers and their Restricted Subsidiaries does not own and does not have any interest in any real property, other than Oil and Gas Real Properties or other than pursuant to a valid lease.

(ii) Except as supplemented in a subsequent Disclosure Report, the Disclosure Schedule lists and describes briefly all real property leased or subleased to each of the Borrowers and their Restricted Subsidiaries, other than Oil and Gas Real Properties. Except as supplemented in a subsequent Disclosure Report, with respect to each material lease and sublease listed in the Disclosure Schedule, all such leases and subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases or subleases, any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default) that would give rise to a material claim against the Borrowers.

(r) Oil and Gas Real Properties. As of the Effective Date, the Oil and Gas Real Properties which are owned by each Borrower are listed on Schedule 4. Each material oil or gas well included in such Oil and Gas Real Properties on the Effective Date is listed in the Reserve Reports, and, unless otherwise noted on the Disclosure Schedule or a Disclosure Report, capable of producing in paying quantities. Except as set forth in the Disclosure Schedule, on the Effective Date, all oil and gas wells included in the Oil and Gas Real Properties owned by the Borrowers or any Restricted Subsidiary will be located on, or pooled or unitized with, an oil and gas lease described in the legal description contained in a mortgage or other Security Documents which will be duly executed and delivered to the Agent on the Effective Date.

(s) Title to Oil and Gas Real Properties. Except as set forth in the Disclosure Schedule or a Disclosure Report, the Borrowers and their Restricted Subsidiaries have Good Title (as defined below) to sufficient Oil and Gas Real Properties to comply with the Continuing 85% Test, considered on an aggregate basis for all such Persons, and calculated according to the Loan Values established for such Oil and Gas Real Properties established by the Agent. For purposes of this Agreement, “Good Title” shall mean good and defensible title which is (i) evidenced by an instrument or instruments filed of record

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in accordance with the conveyance and recording laws of the applicable jurisdiction and is sufficient against competing claims of bona fide purchasers for value without notice and (ii) free and clear of all encumbrances, other than Permitted Liens and such encumbrances that a reasonably prudent purchaser of oil and gas properties and a prudent lender that is lending against such Oil and Gas Real Properties as collateral would accept in light of the value of the property affected, the improbability of assertion of the defect or irregularity, or the cost of performing curative work.

(t) Oil and Gas Real Properties of Restricted Persons. Except as set forth in the Disclosure Schedule or in a Disclosure Report: (i) there are no preferential purchase rights, first refusal rights, consent requirements, or other similar contractual rights granted to any third parties applicable to any Borrowers’ or any Restricted Subsidiary’s Oil and Gas Real Properties; (ii) no Borrower or Restricted Subsidiary has been advised by any operator, lessor or any other party of any default under any such Oil and Gas Real Properties which default has not heretofore been cured in all respects and which default could reasonably be expected to have a material adverse impact on such Restricted Person; (iii) except with respect to leases or other non-fee ownership Oil and Gas Real Properties which a Borrower or Restricted Subsidiary does not wish to maintain, all proper and timely payments (including royalties, delay rentals and shut-in royalties) due with respect to such Restricted Person’s Oil and Gas Real Properties have been timely made and paid by such Restricted Person if such Restricted Person is the operator of any such lease or other non-fee ownership Oil and Gas Real Properties; and (iv) the Borrower and the Restricted Subsidiaries are entitled to be paid, and are being paid, in all material respects, their percentage of net revenue interests included in such Restricted Person’s Oil and Gas Properties without suspense.

(u) Refund. Except as included or reflected on the Financial Statements or as set forth in the Disclosure Schedule or a Disclosure Report: (i) no Borrower or Restricted Subsidiary is obligated by virtue of a prepayment arrangement under any gas contract containing a “take or pay” or similar provision, a production payment or any other arrangement to deliver any material amount of gas or oil attributable to such Restricted Person’s Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor; and (ii) no Borrower or Restricted Subsidiary has received any funds or payments from purchasers of production of gas under gas contracts which are subject to a potential refund, the payment of which could reasonably be expected to have a Material Adverse Effect.

(v) Payout Balances; Gas Balancing. The Disclosure Schedule contains a reasonably complete and accurate list of the status, as of [September 30, 2005], with respect to wells operated by the Restricted Persons, and as of [September 30, 2005], with respect to third party operated wells, of: (a) the “payout” balance for each Oil and Gas Real Property of any Restricted Person that is subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event, other than cessation of production); and (b) all gas balancing obligations and rights for each of the Oil and Gas Real Property of any Restricted Person which is subject to a gas balancing overage or underage.

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(w) Operations. Except as set forth in the Disclosure Schedule or a Disclosure Report or where the failure to so comply could not reasonably be expected to have a material adverse impact on the Borrower or Restricted Subsidiary affected:

(i) All of the wells operated by any Borrower or the Restricted Subsidiary included in the Oil and Gas Real Properties of such Restricted Person have been drilled within the boundaries of such Oil and Gas Real Properties or within the limits otherwise permitted by contract, pooling or unit agreement, lease instrument, and by law and in accordance with generally prevailing standards of the oil and gas industry.

(ii) All drilling and completion of the wells operated by any Borrower or Restricted Subsidiary in such Oil and Gas Real Properties and all development and operations on such Oil and Gas Real Properties have been conducted in compliance in all material respects with all applicable laws, ordinances, rules, regulations and permits, and judgments, orders, and decrees of any court or governmental body or agency.

(iii) With respect to wells operated by any Borrower or Restricted Subsidiary, all equipment constituting part of the Oil and Gas Personal Properties of each such Restricted Person has been installed, maintained, and operated by such Restricted Person as a prudent operator in accordance with generally prevailing standards of the oil and gas industry, and is currently in a state of repair so as to be adequate for normal operations by such Restricted Person.

(iv) No well operated by any Borrower or Restricted Subsidiary that is included in the Borrowing Base is subject to penalties on allowables because of any overproduction (legal or illegal) which would prevent the full legal and regular allowable (including maximum permissible tolerance) as prescribed by any court or federal, state or local governmental body or agency to be assigned to any such well.

(x) Plugging Status. All wells operated by any Borrower or Restricted Subsidiary that have been permanently plugged and abandoned have been so plugged and abandoned in accordance with all applicable laws, ordinances, rules, regulations and permits, and judgments, orders, and decrees of any court or governmental body or agency, except where the failure to so comply could not reasonably be expected to have a material adverse impact on such Restricted Person.

(y) Reserve Reports.

(i) All of the Oil and Gas Real Properties owned by any Borrower or Restricted Subsidiary that will be encumbered by the Security Documents as of the Effective Date are included in the Reserve Reports.

(ii) To the Borrowers’ knowledge, the information contained in the Reserve Reports regarding the Oil and Gas Real Properties was reasonable on the

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date each such Reserve Report was prepared and did not contain materially untrue statements of fact or omit to state material facts which if completely and accurately stated would have had a net effect upon the estimated net recoverable quantities of oil and gas reflected in the Reserve Reports. To the Borrowers’ knowledge, all lease operating expenses outlined in the Reserve Reports were based upon good faith estimates of such expenses and are not materially inconsistent with currently existing related contractual obligations and currently existing legal requirements.

(iii) Since later of (x) the date of the Reserve Reports or (y) the most recent engineering report provided under Section 9, there has not been any change in the reserves described therein, other than reserve reductions due to normal production at or near the production rates set forth in the Reserve Reports or in the subsequent engineering report provided under Section 9, as the case may be.

(z) Financial and Commodity Hedging. The Disclosure Schedule accurately summarizes the outstanding hydrocarbon and financial hedging positions of the Borrowers and their Restricted Subsidiaries (including fixed price controls, collars, swaps, caps, hedges and puts) as of the date reflected on the Disclosure Schedule.

(aa) Environmental Matters. Except as disclosed in the Disclosure Schedule or in any subsequent Disclosure Report:

(i) there are no material claims, investigations or inquiries pending or threatened against any Restricted Person (or naming any Restricted Person as a potentially responsible party) based on noncompliance with any Environmental Laws at any of the properties or facilities currently or formerly owned, leased or operated by such Restricted Person;

(ii) all activities of the Restricted Persons in the conduct of the business of each Restricted Person have been conducted in compliance in all material respects with all applicable Environmental Laws except where the failure to comply could not reasonably be expected to have a material adverse impact on such Restricted Person;

(iii) no Restricted Person has, with respect to such Restricted Person’s business, filed any notice under any Environmental Laws reporting past or present treatment, storage or disposal of a Hazardous Material or reporting a Release of a Hazardous Material, which treatment, storage, disposal, or Release could reasonably be expected to have a material adverse impact on such Restricted Person;

(iv) no encumbrance in favor of any Governmental Entity for (A) any liability under Environmental Laws or (B) damages arising from or costs incurred by such Governmental Entity in response to a Release of a Hazardous Material or other substance into the environment has been filed or is attached to any property or assets of any Restricted Person;

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(v) no Restricted Person has any material contingent liability in connection with (A) the Release or threatened Release into the environment at, beneath or on any property or facility now or previously owned, leased or operated by such Restricted Person or (B) the storage or disposal of any Hazardous Material;

(vi) no Restricted Person has received any claim, complaint, notice, letter of violation, inquiry or request for information involving any material matter which remains unresolved as of the Effective Date with respect to any alleged material violation of any Environmental Laws or regarding potential material liability under any Environmental Laws relating to operations or conditions of any facility or property (including off-site storage or disposal of any Hazardous Material from such facility or property) currently or formerly owned, leased or operated by such Restricted Person;

(vii) to the Borrowers’ knowledge, no property now or previously owned, leased or operated by any Restricted Person is listed on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), or on the Comprehensive Environmental Response, Compensation and Liability Information System List (“CERCLIS”) or on any other federal or state list as a site requiring investigation or cleanup;

(viii) no Restricted Person is transporting, has transported or is arranging for the transportation of any Hazardous Material to any location which is listed on the National Priorities List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state list or, to Borrowers’ knowledge, which is the subject of federal, state or local enforcement actions or other investigations that would reasonably be expected to lead to material claims against such Restricted Person for removal or remedial work, contribution for removal or remedial work, damage to natural resources or personal injury, including claims under CERCLA;

(ix) except for routine cleanup of drilling and production sites, there are no sites, locations or operations at which any Restricted Person is currently undertaking, or has completed, any removal, remedial or response action relating to any disposal of Hazardous Materials or Release, as required by Environmental Laws;

(x) each Restricted Person has obtained all material permits, licenses, franchises, variances, authorizations, consents, certificates, exemptions, orders and approvals from all Governmental Entities (“Environmental Permits”) that are required in respect of its business or operations under any applicable Environmental Laws, and each of such Environmental Permits is in full force and effect; each Restricted Person has complied with all such Environmental Permits in all material respects, and there is no action, investigation or proceeding pending or, to the Borrowers’ knowledge, threatened regarding any Environmental Permit;

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(xi) no Restricted Person owns or operates any underground storage tanks, treatment, storage or disposal facilities under the Resource Conservation and Recovery Act, as amended, or any successor statutes or regulations promulgated thereunder, or solid waste disposal facilities; and

(xii) each Restricted Person has provided the Agent all environmental audits, tests, results of investigations and analyses that have been performed within twelve (12) months of the Effective Date with respect to any property or facility currently or formerly owned, leased or operated by such Restricted Person.

(xiii) As used herein:

(A) “Hazardous Material” means (A) any chemicals or other materials or substances that are defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “pollutants,” “contaminants,” or words of similar import under any Environmental Law, but excluding petroleum and petroleum products and byproducts and naturally occurring radioactive materials associated with production; and (B) any other chemical, material or substance, the presence of or exposure to which is prohibited, limited or regulated by any Governmental or Regulatory Authority under any Environmental Law but excluding petroleum and petroleum products and by-products and naturally occurring radioactive material associated without production.

(B) “Release” means any actual or threatened (as defined under CERCLA) release, spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the environment or any structure.

(bb) Marketing. Each Borrower’s and Restricted Subsidiary’s marketing arrangements with respect to that portion of the Oil and Gas Real Properties which are capable of producing in commercial quantities are valid, enforceable and in full force and effect.

(cc) Net Revenue/Working Interest. After giving full effect to the Permitted Liens, each Borrower or Restricted Subsidiary owns the net revenue interests in production attributable to the Oil and Gas Real Properties disclosed in Schedule 4 and covered by the mortgages and other Security Documents as is reflected in the Reserve Reports or most recently delivered engineering report under Section 9 and the ownership of such Oil and Gas Real Properties will not in any material respect obligate such Restricted Person to bear the costs and expenses relating to the maintenance, development and operations of any such Oil and Gas Real Property in an amount in excess of the working interest of each such property set forth in the Disclosure Schedule or in a subsequent Disclosure Report.

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(dd) Compliance with the Law. No Restricted Person has violated any material legal requirement or failed to obtain any material license, permit, franchise or other governmental authorization necessary for the ownership of its Oil and Gas Real Properties or the conduct of its business. Each Borrower’s or Restricted Subsidiary’s Oil and Gas Real Properties have been maintained, operated and developed in good and workmanlike manner and in material conformity with all material applicable laws and all rules, regulations and orders of duly constituted authorities having jurisdiction and in conformity in all material respects with the provisions of all leases, subleases or other contracts forming a part of such Oil and Gas Real Properties.

(ee) Bonds and Insurance.

(i) The Disclosure Schedule as supplemented from time to time by Disclosure Reports contains an accurate and complete description of all performance bonds related to operations on or pertaining to the Oil and Gas Real Properties, and all material policies of insurance owned or held by the Borrowers and each Restricted Person. All such policies are in full force and effect for the coverage periods specified on the Disclosure Schedule or Disclosure Report, all premiums with respect thereto covering all periods up to and including the Effective Date have been paid, and no notice of cancellation or termination has been received with respect to any such policy (except where such policy has been replaced by a substitute policy providing similar coverage).

(ii) Such bonds and policies are sufficient for compliance with all requirements of law and of all agreements to which any Borrower or any Restricted Person is a party; are valid, outstanding and enforceable policies; provide adequate coverage in at least such amounts and against at least such risks (but including in any event public liability) as are required by law and/or usually insured or bonded against in the same general area by companies engaged in the same or a similar business for the assets and operations of the Borrowers and each of Restricted Person; and will not in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement.

(iii) Except as disclosed in the Disclosure Schedule, no Borrower nor any Restricted Person has been refused any bonds or insurance with respect to its assets or operations, nor has its coverage been limited below usual and customary bond or policy limits, by any bonding company or insurance carrier to which it has applied for any such bond or insurance or with which it has carried insurance during the last three years except where such Borrower or other Restricted Person has been able to obtain substitute bonds or insurance providing similar coverage.

(ff) Leases. As of the date of any determination of the Borrowing Base, the oil and gas leases associated with the Oil and Gas Real Properties in the Borrowing Base

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will be in full force and effect in accordance with their respective terms, and there will exist no material defaults in the performance of any obligations thereunder or, to the Borrowers’ knowledge, any event that with notice or lapse of time, or both, would constitute a default under any such oil and gas leases.

12. Conditions to Effectiveness of Agreement. The obligation of the Lenders to make Advances to the Borrowers and the Agent’s obligation to arrange for the issuance of the Letters of Credit on behalf of the Borrowers shall be subject to the following conditions precedent:

(a) Receipt of Documents. The Agent shall have received fully executed copies of the following:

(i) This Agreement.

(ii) The Notes.

(iii) Each Security Document listed on Section II of the Security Schedule or, as appropriate, amendments thereto.

(iv) Certain certificates of the Borrowers and AEI, including:

(A) An “Omnibus Certificate” of the Secretary and of the Chairman of the Board or President of each such Person which shall contain the names and signatures of the officers of each such Person authorized to execute Loan Documents and which shall certify to the truth, correctness and completeness of the following exhibits attached thereto: (1) a copy of resolutions duly adopted by the Board of Directors of each such Person and in full force and effect at the time this Agreement is entered into, authorizing the execution of the Loan Documents delivered or to be delivered by such Person in connection herewith and the consummation of the transactions contemplated herein and therein, and (2) a copy of any and all amendments to each such Person’s charter documents and bylaws or regulations since July 27, 2004, certified by the appropriate official of the each such Person’s state of organization.

(B) A “Compliance Certificate” of the Chairman of the Board or President and of the chief financial officer of Borrower’s Representative, dated as of the Effective Date, in which such officers certify to the satisfaction of the conditions set out in subsections (a), (b) and (d) of Section 13.

(C) Certificate (or certificates) of the due formation, valid existence and good standing of each such Person in its state of organization, issued by the appropriate authorities of such jurisdiction, and certificates of such Person’s good standing and due qualification to do business, issued by appropriate officials in any states in which such Person owns property subject to Security Documents.

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(b) Legal Opinion. The Agent shall have received from the Borrowers’ counsel a legal opinion in form and substance satisfactory to the Agent.

(c) Financial Statements. The Borrowers shall have delivered to the Agent true, correct and complete copies of AEI’s unaudited (i) annual Consolidated Financial Statements for the fiscal year ending December 31, 2004 and (ii) quarterly Consolidated Financial Statements for the Fiscal Quarter ending September 30, 2005.

(d) Payment of Expenses. The Borrowers shall have paid all fees and expenses due the Agent hereunder, including reasonable attorneys’ fees incurred in connection with the preparation of the Loan Documents.

(e) Note Issuance. The Agent shall have received evidence that AEI has issued the Senior Notes and the Senior Subordinated Notes pursuant to the Indenture and the Securities Purchase Agreement, and that AEI has no other Debt outstanding other than the Senior Notes and the Senior Subordinated Notes.

(f) Representations and Warranties. Each of the representations and warranties made by each Borrower in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date (unless such representations and warranties are stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date).

(g) No Default. No Default or Event of Default shall have occurred and be continuing on such date.

(h) No Material Adverse Effect. No event or events which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect shall have occurred since December 31, 2004.

(i) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Agent, and the Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request.

13. Conditions to Each Advance. The obligation of the Lenders to make each Advance to the Borrowers and the obligation of the Agent to arrange for the issuance of each Letter of Credit shall be subject to the following conditions precedent:

(a) No Event of Default. No Event of Default shall have occurred and be continuing on the date of such Advance or Letter of Credit or would result from the making of the Advance or the issuance of such Letter of Credit;

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(b) Representations and Warranties. The representations and warranties contained in Section 11 of this Agreement and each certificate or other writing delivered to the Agent pursuant hereto shall be correct on and as of the date of such Advance or Letter of Credit as though made on and as of such date (except to the extent that such representations and warranties related solely to an earlier date);

(c) Notice of Advance. The Agent shall have received a Notice of Advance pursuant to Section 2(c) hereof with respect to such Advance or an LC Application pursuant to Section 7(b) hereof with respect to such Letter of Credit;

(d) Borrowing Base. Following such Advance, the total amount of outstanding Advances and LC Obligations will not exceed the Borrowing Base; and

(e) No Material Adverse Effect. No event shall have occurred or been disclosed to the Agent which could reasonably be expected to have a Material Adverse Effect on any Restricted Person.

14. Affirmative Covenants. Without the prior written consent of the Required Lenders, each Borrower shall at all times comply with the covenants contained in this section from the Effective Date and for so long as any part of this Agreement is in effect.

(a) Financial Statements and Reports. The Borrowers shall promptly furnish to the Agent from time to time upon request such information regarding the business and affairs and financial condition of the Borrowers, as the Agent may reasonably request, and will furnish to the Agent:

(i) Annual Audited Financial Statements. As soon as available, and in any event within one hundred twenty (120) days after the close of each fiscal year, the annual audited Consolidated Financial Statements of AEI (including a schedule of consolidation segregating AEI and Ascent Oil and Gas Consolidated) prepared in accordance with GAAP and audited by an independent accounting firm reasonably acceptable to the Agent;

(ii) Quarterly Financial Statements. As soon as available, and in any event within sixty (60) days after the end of each Fiscal Quarter of each year, except for the last Fiscal Quarter, for which the time period shall be ninety (90) days, the quarterly unaudited Financial Statements of AEI and the quarterly unaudited Consolidated Financial Statements of Ascent Oil and Gas prepared in accordance with GAAP;

(iii) Additional Information. Promptly upon request of the Agent from time to time, any additional financial information or other information that the Agent may reasonably request.

(iv) Monthly Reports. At any time the Borrowers have failed to satisfy the covenants set forth in any of Sections 15(f), 15(g), 15(h) or 15(j), as soon as possible, and in any event within forty-five (45) days after the end of each

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calendar month, and continuing until such time as Borrowers are in compliance with each of the sections set forth above, a report in such form as the Borrowers and Agent may agree on the Borrowers’ production and financial results for the previous calendar month.

All such reports, information, balance sheets and Financial Statements referred to in Section 14(a) above shall be in such detail as the Agent may reasonably request and shall be prepared in a manner consistent with the Financial Statements.

(b) Certificates of Compliance. Concurrently with the furnishing of the annual audited Financial Statements pursuant to Section 14(a)(i) hereof and each of the quarterly unaudited Financial Statements pursuant to Section 14(a)(ii) hereof, Ascent Oil and Gas will furnish or cause to be furnished to the Agent a certificate signed by its Chief Executive or Financial Officer (i) stating that each Borrower has fulfilled in all material respects its obligations under the Note(s) and the Security Documents, including this Agreement, and that all representations and warranties made herein and therein continue (except to the extent they relate solely to an earlier date) to be true and correct in all material respects (or specifying the nature of any change), or if a Potential Event of Default or an Event of Default has occurred, specifying the Potential Event of Default or Event of Default and the nature and status thereof; (ii) to the extent requested from time to time by the Agent, specifically affirming compliance of each Borrower in all material respects with any of its representations (except to the extent they relate solely to an earlier date) or obligations under said instruments; (iii) setting forth the computation, in reasonable detail as of the end of each period covered by such certificate, of compliance with Sections 15(c), (d), (e), (f), (g), (h) and (j); and (iv) containing or accompanied by such financial or other details, information and material as the Agent may reasonably request to evidence such compliance.

(c) Accountant’s Certificate. Concurrently with the furnishing of the annual audited Financial Statements pursuant to Section 14(a)(i) hereof, Ascent Oil and Gas will furnish a statement from the firm of independent public accountants which audited such Financial Statements to the effect that nothing has come to their attention to cause them to believe that there existed on the date of such statements any Event of Default and specifically calculating the Borrowers’ compliance with Sections 15(c), (d), (e), (f), (g), (h) and (j) of this Agreement.

(d) Taxes and Other Liens. Each Restricted Person will pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it which it is required to pay, or upon the income or any assets or property of such Restricted Person as well as all claims of any kind (including claims for labor, materials, supplies and rent) which, if unpaid, might become a Lien or other encumbrance upon any or all of the assets or property of such Restricted Person and which, in each instance or in aggregate, could reasonably be expected to result in a Material Adverse Effect; provided, however, that such Restricted Person shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted, levy and execution thereon have been stayed and continue to be stayed.

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(e) Compliance with Laws. Each Restricted Person will observe and comply, in all material respects, with all applicable laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, orders and restrictions relating to environmental standards or controls or to energy regulations of all Governmental Entities, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect.

(f) Further Assurances. Each Restricted Person will cure promptly any defects in the creation, issuance, execution and delivery of the Loan Documents to which it is a party. Each Borrower, at its sole expense, will promptly execute and deliver to the Agent upon its reasonable request all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements in this Agreement, or to correct any omissions in the Notes or more fully to state the obligations set out herein.

(g) Bonds and Insurance. Each Restricted Person now maintains and will continue to maintain all surface disturbance and performance bonds, and plugging bonds, as required by Law, as well as any necessary insurance with financially sound and reputable insurers. All insurance carried by each Restricted Person shall insure against such risks, have such coverage amounts, deductibles, and other terms, and be issued by such insurers as a similarly situated Person in the same industry would deem reasonable. Upon request of the Agent, each Restricted Person will furnish to the Agent a summary of its insurance coverage in form and substance satisfactory to the Agent, and, if requested, will furnish the Agent copies of the applicable policies.

(h) Right of Inspection. Each Borrower will permit any officer, employee or agent of the Agent to examine the books, records and accounts of such Borrower and its Restricted Subsidiaries, and take copies and extracts therefrom, all at such reasonable times following reasonable notices and as often as the Agent may reasonably request. The Agent will keep all such information confidential and will not without prior written consent disclose or reveal the information to any person other than the Agent’s officers, employees, legal counsel, regulatory authorities or advisors to whom it is necessary to reveal such information for the purpose of effectuating the agreements and undertakings specified herein or as otherwise required by law or in connection with the enforcement of the Agent’s rights and remedies under the Notes, this Agreement and the other Security Documents.

(i) Notice of Certain Events. The Borrowers shall promptly notify the Agent in writing if the Borrowers learn of the occurrence of (i) any event which constitutes an Event of Default together with a detailed statement by the Borrowers of the steps being taken to cure the Event of Default; or (ii) any material legal, judicial or regulatory proceedings affecting the Borrowers, of any of the assets or properties of the Borrowers; or (iii) any material dispute between any Borrower and any Person or Governmental

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Entity; (iv) any other matter which in the Borrowers’ reasonable opinion could reasonably be expected to have a Material Adverse Effect, or (v) any event which constitutes an Event of Default under and as defined by the Indenture. The Borrowers shall promptly send all correspondence and documentation relating to these events to the Agent.

(j) Disclosure Reports. In addition to the notices required under Section 14(i) above, the Borrowers shall promptly notify the Agent in writing (each, a “Disclosure Report”) if the Borrowers learn of any event, circumstance, or occurrence that renders the Disclosure Schedule or the representations and warranties under Section 11 inaccurate in any material respect.

(k) Environmental Matters. Each Borrower will deliver to the Agent (1) promptly upon its becoming available, one copy of each report sent by such Borrower or its Restricted Subsidiaries to any Governmental Entity pursuant to any Environmental Law relating to any matter which could reasonably be expected to have a Material Adverse Effect, (2) notice, in writing, promptly upon such Borrower’s receipt of such notice, of any potential or actual liability arising in connection with (x) the non-compliance with or violation of the requirements of any Environmental Law which reasonably could be expected to have a Material Adverse Effect; or (y) the release or threatened release of any toxic or hazardous waste into the environment which reasonably could be expected to have a Material Adverse Effect, or (3) written notice of the existence of any Environmental Lien on any properties or assets of such Borrower or its Restricted Subsidiaries, and such Borrower shall immediately deliver a copy of any such notice to the Agent.

(l) Compliance and Maintenance. Each Borrower and Restricted Subsidiary will (i) except with respect to Oil and Gas Properties relating to wells such Restricted Person wishes to plug and abandon or to transfer a third party, maintain its Oil and Gas Properties in good and workable condition at all times and make all repairs, replacements, and improvements to its Oil and Gas Properties and other properties as are needed and proper so that the business carried on in connection therewith may be conducted properly and efficiently at all times in the opinion of the Borrowers exercised in good faith; and (ii) take or cause to be taken whatever actions are necessary to prevent an event or condition of default by such Restricted Person under the provisions of any gas purchase or sales contract or any lease comprising a part of its Oil and Gas Real Properties or other Collateral security hereunder which default could reasonably be expected to result in a Material Adverse Effect. The Borrowers shall, however, have the right to contest in good faith by appropriate proceedings, the applicability or lawfulness of any such default, and pending such contest may defer compliance therewith, as long as such deferment shall not subject the properties or any part thereof to foreclosure or loss.

(m) Compliance with Leases and Other Instruments. Each Restricted Person will pay or cause to be paid and discharge all rentals, delay rentals, royalties, production payments, and indebtedness required to be paid by such Restricted Person, and do all things necessary to keep unimpaired the rights of the Borrowers thereunder and to

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prevent the forfeiture thereof or default thereunder; provided, however, that nothing in this Agreement shall be deemed to require the Borrowers to perpetuate or renew any oil and gas lease or other lease or to prevent the Borrowers from abandoning or releasing any oil and gas lease or other lease or well when, in the opinion of the Borrowers exercised in good faith, it is not in the best interest of the Borrowers to perpetuate the same.

(n) Certain Additional Assurances Regarding Maintenance and Operations of Properties. With respect to those Oil and Gas Real Properties which are being operated by operators other than a Borrower or Restricted Subsidiary, such Restricted Person shall not be obligated to perform any undertakings contemplated by the covenants and agreements contained in Subsections 14(g), 14(k) or 14(1) hereof which are performable only by such operators and are beyond the control of such Restricted Person; provided, however, such Restricted Person agrees to promptly take all commercially reasonable actions available under any operating agreements or otherwise to bring about the performance of any such undertakings required to be performed thereunder.

(o) Sale of Oil and Gas Properties. Between redeterminations of the Borrowing Base under Section 9, the Borrowers and their other Restricted Subsidiaries may sell up to 10% of their Oil and Gas Properties, calculated on an aggregate basis for all such Persons and pursuant to the Loan Values most recently established by the Agent as of the calculation date. Provided that no Borrowing Base Deficiency then exists, the Borrowers and the Restricted Subsidiaries in question may retain all proceeds of any such sale, and the Agent may not reduce the Borrowing Base to reflect any such sale until the Agent’s next redetermination of the Borrowing Base under Section 9. Upon the Borrowers’ request, the Agent will inform the Borrowers of the Loan Value assigned to any Oil and Gas Property the Borrowers or the Restricted Subsidiaries wish to sell.

(p) Guaranties of the Borrowers’ Restricted Subsidiaries. Each Restricted Subsidiary of the Borrowers now existing or created, acquired or coming into existence after the Effective Date shall, promptly upon request by the Agent, execute and deliver to the Agent an absolute and unconditional guaranty of the timely repayment of the Obligations and the due and punctual performance of the obligations of the Borrowers hereunder, which guaranty shall be satisfactory to the Agent in form and substance. The Borrowers will cause each of their Restricted Subsidiaries to deliver to the Agent, simultaneously with its delivery of such a guaranty, written evidence satisfactory to the Agent and its counsel that such Restricted Subsidiary has taken all corporate or partnership action necessary to duly approve and authorize its execution, delivery and performance of such guaranty and any other documents which it is required to execute.

(q) Production Proceeds. Notwithstanding that, by the terms of the various Security Documents, the Borrowers and their Restricted Subsidiaries are and will be assigning to the Agent for the benefit of the Lenders all of the “Production Proceeds” (as defined therein) accruing to the property covered thereby, so long as no Event of Default has occurred such Restricted Persons may continue to receive from the purchasers of production all such Production Proceeds, subject, however, to the Liens created under the Security Documents, which Liens are hereby affirmed and ratified. Upon the occurrence

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of an Event of Default, the Agent may exercise all rights and remedies granted under the Security Documents, including the right to obtain possession of all Production Proceeds then held by such Restricted Persons or to receive directly from the purchasers of production all other Production Proceeds. In no case shall any failure, whether purposed or inadvertent, by the Agent to collect directly any such Production Proceeds constitute in any way a waiver, remission or release of any of its rights under the Security Documents, nor shall any release of any Production Proceeds by the Agent to such Restricted Persons constitute a waiver, remission, or release of any other Production Proceeds or of any rights of the Agent to collect other Production Proceeds thereafter.

(r) Hedging Contracts.

(i) Prior to the Effective Date, one or more Borrowers shall enter into, and thereafter maintain, one or more Hedging Contracts which are designed to hedge, provide a price floor for, or swap or otherwise sell

(A) at least fifty percent (50%) of the anticipated production from proved, developed producing reserves of crude oil and natural gas of the Borrowers and their Restricted Subsidiaries for the three year period following the Effective Date, provided that if the Market Hedge Price offered by any Qualified Hedging Counterparty for any month is less than 110% of the Bank Deck Price at the end of the immediately preceding Fiscal Quarter, the minimum required percentage for such month shall be zero percent (0%); and

(B) up to eighty-five percent (85%) of the anticipated production from proved, developed, producing reserves of crude oil and natural gas of the Borrowers and their Restricted Subsidiaries for the twelve month period immediately subsequent to any Fiscal Quarter.

(ii) Each Qualified Hedging Counterparty that has concluded a Hedging Contract shall promptly notify the Agent of the Early Termination, or its equivalent, of the Hedging Contract and the Agent shall promptly notify the Lenders of the same.

(iii) The Borrower’s Representative shall furnish to Agent within sixty (60) days following the end of each Fiscal Quarter a report (in a form to be agreed upon by the Borrowers and Agent) showing for each Borrower and its Restricted Subsidiaries (y) the scheduled production for its proved developed producing reserves of crude oil and natural gas for the next succeeding twelve calendar months, and (z) the notional volumes under each commodity Hedging Contract in place for such twelve month period with respect to oil and gas.

(iv) The report described in clause (iii) above shall (x) show scheduled production and the notional volumes for the Hedging Contracts for oil and gas separately, (y) include a calculation of the notional volumes under all Hedging Contracts as a percentage of scheduled production for oil and gas separately, and (z) be certified by an officer of such Restricted Person attesting to compliance with the limitations set forth in paragraph (i) directly above.

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(s) Title. To the extent necessary to remain in compliance with the Continuing 85% Test, the Borrowers and their Restricted Subsidiaries shall, following completion of the initial title work under Section 8(d), cure all title defects or exceptions (except for Permitted Liens) affecting such Person’s Oil and Gas Real Properties which are in the Borrowing Base or substitute acceptable Collateral with no title defects or exceptions except for Permitted Liens covering Collateral of an equivalent value, within thirty (30) days after a request by the Agent to cure such defects or exceptions. If the Borrowers are unable to cure any such title defect requested by the Agent to be cured within the thirty (30) day period, such failure to cure shall not be an Event of Default, but, only if necessary to cause the Borrowers to remain in compliance with the Continuing 85% Test, the Agent shall exclude the affected Oil and Gas Real Property from the Borrowing Base until such time as title is satisfactory to the Agent. Upon each redetermination of the Borrowing Base, the Agent shall inform the Borrowers of the aggregate percentage, calculated by Loan Value, of such Restricted Persons’ Oil and Gas Real Properties with respect to which the Agent has satisfactory Title Documents.

15. Negative Covenants. Without the prior written consent of the Required Lenders, each Borrower will at all times comply with the covenants contained in this section from the Effective Date and for so long as any part of this Agreement is in effect.

(a) Liens. Except for Permitted Liens, no Restricted Person will create, assume or permit to exist any Lien upon any of the properties or assets which it now owns or hereafter acquires.

(b) Change of Control or Ownership. The Borrowers will not permit a Change of Control or a Change of Ownership.

(c) Indebtedness. No Restricted Person will in any manner owe or be liable for Indebtedness except:

(i) the Obligations;

(ii) any Indebtedness owed by a Restricted Person (other than the Borrowers) to another Restricted Person;

(iii) Indebtedness owed by the Borrowers to another Restricted Person or by any Restricted Person to a third party which Indebtedness is subordinated to the Obligations upon terms and conditions satisfactory to the Agent in its sole and absolute discretion (herein called “Subordinated Indebtedness”);

(iv) Indebtedness outstanding under the instruments and agreements described on the Disclosure Schedule, including any renewals or extensions of such Indebtedness which do not increase the principal thereof;

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(v) purchase money Indebtedness in an aggregate principal amount not to exceed the greater of (x) $3,000,000 or (y) 10% of the aggregate Loans outstanding under this Agreement at the time the purchase money Indebtedness is incurred, provided that the original principal amount of any such Indebtedness shall not be in excess of the purchase price of the asset acquired thereby and such Indebtedness shall be secured only by the acquired asset;

(vi) Permitted Hedging Debt;

(vii) Indebtedness owed by a Restricted Subsidiary subsequently acquired by the Borrowers, directly or through one of the Borrowers’ then existing Restricted Subsidiaries, which Indebtedness was not incurred in contemplation of the Borrowers’ acquisition of such Person and which Indebtedness is either unsecured or secured only by the assets of the acquired Person;

(viii) Indebtedness owed by AEI under the Senior Notes and the Senior Subordinated Notes and any refinancings thereof, on terms no less favorable to AEI than the terms of the Senior Notes and the Senior Subordinated Notes set forth in the Restructuring Plan (as determined by the Agent, which determination shall not be unreasonably withheld or delayed) except that in no event will the refinancing of the Senior Notes or the Senior Subordinated Notes result in the cash payment of interest with respect to such Notes or the occurrence of the maturity date of the Senior Notes or the Senior Subordinated Notes, in either case prior to the date that is 91 days after the Loan Maturity Date; and;

(ix) miscellaneous items of Indebtedness not described in subsections (i) through (vii) which do not in the aggregate (taking into account all such Indebtedness of all Restricted Persons) exceed $1,000,000 at any one time outstanding.

(d) Investments. No Borrower or Restricted Subsidiary will make any Investment other than:

(i) Permitted Investments;

(ii) Investments by any Borrower or Restricted Subsidiary in any other Restricted Person (other than AEI), and

(iii) Investments by the Borrowers in Unrestricted Subsidiaries up to an aggregate amount of $500,000.00. The Borrowers may make Investments in Unrestricted Subsidiaries in excess of $500,000.00 provided: (y) the Agent consents to such additional Investment, such consent not to be unreasonably withheld, and (z) at the time of such Investment an Event of Default or Borrowing Base Deficiency shall not have occurred and be continuing.

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(e) Distributions. Except for: (i) cash dividends, cash redemptions and cash distributions (collectively “Distributions”) by any Borrower or Restricted Subsidiary to another Borrower or Restricted Subsidiary or (ii) Distributions by a Borrower in connection with a permitted redemption of its capital stock pursuant to Section 15(q), no Borrower or Restricted Subsidiary may pay or make Distributions to its shareholders, members or partners before July 27, 2006, and following July 27, 2006, a Borrower or Restricted Subsidiary may only pay cash dividends (i) if the ratio of (a) EBIDTA to (b) the sum of Cash Interest Expense plus any capital expenditures plus any principal payment (calculated using the total amount outstanding under the Revolving Commitment divided by three years) is at least 1.3 to 1.0 at the end of any Fiscal Quarter, based on the four consecutive Fiscal Quarters most recently ended, and (ii) there is no then existing and continuing Event of Default or Borrowing Base Deficiency, and such payment, when contemplated, on a pro forma basis for the four consecutive Fiscal Quarters most recently ended, would not cause and is not anticipated to cause a default of any covenant hereunder.

(f) Current Ratio. The Borrowers shall not allow their ratio of Current Assets to Current Liabilities to ever be less than 1.0 to 1.0 measured as of the last day of any Fiscal Quarter.

(g) Total Debt to EBITDA. The Borrowers shall not allow their ratio of Debt to EBITDA to exceed 2.50 to 1.0 measured as of the last day of any Fiscal Quarter.

(h) Ratio of EBITDA to Cash Interest Expense. The Borrowers shall not allow their ratio of EBITDA to Cash Interest Expense plus any dividends and distributions paid by Ascent Oil and Gas to ever be less than 2.50 to 1.0 measured as of the last day of any Fiscal Quarter.

(i) Method of Calculation. The financial ratios set forth in Subsections 15(e), 15(f), 15(g) and 15(h) above shall be calculated on a Consolidated basis for the period of the last four consecutive Fiscal Quarters preceding the date of determination. If during any relevant period, any Borrower or one of the Restricted Subsidiaries has acquired or acquires another Restricted Subsidiary or has merged or merges with another Person, such calculation shall be made on a pro forma basis as if the acquisition or merger had occurred on the first day of the relevant period of four Fiscal Quarters in question.

(j) Minimum Tangible Net Worth. The Borrowers shall not permit the Consolidated Tangible Net Worth of the Borrowers and their Restricted Subsidiaries as of the end of any Fiscal Quarter to be less than $170,000,000.

(k) Amendments to Basic Documents. No Borrower or Restricted Subsidiary will amend or modify any material provision of its articles of incorporation or bylaws (except to authorize additional shares of common or preferred stock) and AEI will not amend or modify any provision of the Indenture or Senior Notes in any way that materially affects the Borrowers or any Restricted Person (in the case of amendments to or modifications of the Indenture or Senior Notes, as determined by the Agent, which

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determination shall not be unreasonably withheld or delayed), provided that no such amendment or modification of the Indenture or Senior Notes will result in the cash payment of interest with respect to such Notes or the occurrence of the maturity date of the Senior Notes or the Senior Subordinated Notes, in either case prior to the date that is [91 days] after the Loan Maturity Date.

(l) Nature of Business. No Restricted Person will permit any material change to be made in the character of its business as carried on at the Effective Date or, if the Person becomes a Restricted Person after the Effective Date, at the date on which such Person becomes a Restricted Person. For the avoidance of doubt, AEI shall not engage in any activity other than in connection with the ownership of its shares of stock in Ascent Oil and Gas, except that AEI may form and own additional Subsidiaries (which are not also Subsidiaries of Ascent Oil and Gas), and the business activities of such Subsidiaries shall not be restricted in any manner by this Section 15(l).

(m) Transactions with Affiliates. No Borrower or Restricted Subsidiary will enter into any transaction with any Affiliate, except transactions upon terms that are no less favorable to it than would be obtained in a transaction negotiated at arm’s length with an unrelated third party.

(n) Loans and Advances. No Borrower or Restricted Subsidiary shall make or permit to remain outstanding any loans or advances to any Person other than (i) loans to employees made in the ordinary course of business and not exceeding $10,000 to any single employee, (ii) loans or advances to Unrestricted Subsidiaries in an aggregate amount outstanding at any time of up to $1,000,000.00, and (iii) loans or advances to another Restricted Person as permitted under Section 15(c)(ii) and (iii).

(o) New Subsidiaries. No Borrower or Restricted Subsidiary will (i) create, or invest in, any new Restricted Subsidiaries, unless at the time of such creation or acquisition the new Restricted Subsidiary becomes a Guarantor and grants a first priority Lien in its Oil and Gas Properties in favor of the Agent on behalf of the Lenders or (ii) create or acquire an Unrestricted Subsidiary without providing 20 days’ prior notice to the Agent.

(p) Limitation on Mergers, Reincorporation. No Restricted Person will merge or consolidate with or into any other Person except that (i) any Restricted Subsidiary of any Borrower may be merged into or consolidated with another Restricted Subsidiary of any Borrower, so long as a Guarantor is the surviving business entity, (ii) any Restricted Subsidiary of any Borrower may be merged into or consolidated with any Borrower, so long as such Borrower is the surviving business entity, or (iii) any Restricted Subsidiary of any Borrower may be merged into or consolidated with another Person so long as the Restricted Subsidiary is the surviving business entity and immediately following such merger or consolidation no Event of Default exists, and provided further that the Agent receives prior written notice of any such merger or consolidation. No Borrower or Restricted Subsidiary shall reincorporate, change its state of organization, or change its entity status without thirty (30) days’ advance written notice to the Agent.

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(q) Permitted Redemptions of Capital Stock. No Borrower or Restricted Subsidiary may redeem all or any part of its capital stock unless (i) such Restricted Person provides the Agent with thirty (30) days’ advance written notice of the redemption, (ii) on the effective date of the redemption, no Event of Default or Borrowing Base Deficiency exists, (iii) the redemption is funded exclusively with the proceeds of a new equity (common, preferred, convertible preferred, or equity linked securities) issuance, and (iv) such new equity issuance does not result in a Change of Ownership.

(r) Sale of Oil and Gas Properties. No Borrower or Restricted Subsidiary may sell any of its Oil and Gas Properties except (i) obsolete Oil and Gas Personal Property no longer required for such Restricted Person’s business operations, (ii) in compliance with Section 14(o), (iii) pursuant to a farm-out agreement in the ordinary course of business, (iv) as otherwise permitted by the Agent in writing; or (v) sales of hydrocarbons in the ordinary course of business.

16. Events of Default and Remedies.

(a) Events of Default. Each of the following events constitutes an Event of Default under this Agreement:

(i) The Borrowers fail to pay any principal or interest component of any Note when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, and, in the case of interest payments only, three (3) Business Days have elapsed since such payment was due;

(ii) Any Restricted Person fails to pay any Obligation (other than the Obligations in subsection (i) above) when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, and five (5) days have elapsed since such payment was due;

(iii) Any “default” or “event of default” occurs under any Loan Document which defines either such term, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document;

(iv) Any Restricted Person fails to duly observe, perform or comply with any covenant, agreement or provision of Section 15 (other than (A) involuntary Liens created in violation of Section 15(a) or (B) Section 15(i));

(v) Any Restricted Person fails (other than as referred to in subsections (i), (ii), (iii) or (iv) above) to duly observe, perform or comply with any covenant, agreement, condition or provision of any Loan Document, and such failure remains unremedied for a period of thirty (30) days after notice of such failure is given by the Agent to the Borrowers;

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(vi) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Restricted Person in connection with any Loan Document shall prove to have been false or incorrect in any material respect on any date on or as of which made;

(vii) Any Loan Document at any time ceases to be valid, binding and enforceable as warranted in Section 11 for any reason and the Restricted Persons who are parties to such Loan Document do not cause such Loan Document to be reinstated as a valid, binding, and enforceable agreement within ten (10) days of notice from the Agent requesting such action;

(viii) Any Restricted Person fails to duly observe, perform or comply with any agreement with any Person or any term or condition of any agreement or instrument, if such agreement or instrument is materially significant to the Borrowers or to the Borrowers and their Restricted Subsidiaries on a Consolidated basis or materially significant to any Guarantor, and such failure is not remedied within the applicable period of grace (if any) provided in such agreement or instrument;

(ix) Any Restricted Person (i) fails to pay any portion, when such portion is due, of any of its Indebtedness in excess of $1,000,000, or (ii) breaches or defaults in the performance of any covenant or obligation (other than for the payment of money) in any agreement or instrument by which any such Indebtedness is issued, evidenced, governed, or secured, and any such failure, breach or default continues beyond any applicable period of grace provided therefor and such nonpayment breach or default results in the acceleration of the Indebtedness in question;

(x) Either (i) any “accumulated funding deficiency” (as defined in Section 412(a) of the Internal Revenue Code) in excess of $100,000 exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs with respect to any ERISA Plan and the then current value of such ERISA Plan’s benefit liabilities exceeds the then current value of such ERISA Plan’s assets available for the payment of such benefit liabilities by more than $100,000 (or in the case of a Termination Event involving the withdrawal of a substantial employer, the withdrawing employer’s proportionate share of such excess exceeds such amount);

(xi) Any Restricted Person:

(A) suffers the entry against it of a judgment, decree or order for relief by a Tribunal of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar Law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it which remains undismissed for a period of sixty (60) days; or

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(B) commences a voluntary case under any applicable bankruptcy, insolvency or similar Law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such Law; or makes a general assignment for the benefit of creditors; or fails generally to pay (or admits in writing its inability to pay) its debts as such debts become due; or takes corporate or other action to authorize any of the foregoing; or

(C) suffers the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its assets or of any part of the Collateral in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within sixty (60) days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or

(D) suffers the entry against it of a final judgment for the payment of money in excess of $1,000,000 (not covered by insurance satisfactory to the Agent in its reasonable discretion), unless the same is discharged within sixty (60) days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or

(E) suffers a writ or warrant of attachment or any similar process to be issued by any Tribunal against all or any substantial part of its assets or any part of the Collateral, and such writ or warrant of attachment or any similar process is not stayed or released within sixty (60) days after the entry or levy thereof or after any stay is vacated or set aside; and

(xii) there shall have occurred with respect to any Hedging Contract to which any Borrower is a party an “Event of Default,” a “Termination Event” or an “Additional Termination Date” (as defined in the applicable ISDA Master Agreement and any related Credit Support Annex or Schedule) which entitles the applicable Qualified Hedging Counterparty to terminate the Hedging Contract;

Upon the occurrence of an Event of Default described in subsections (xi)(A), (B) or (C) of this Section with respect to the Borrowers, all of the Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of

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which are hereby expressly waived by the Borrowers and each Restricted Person who at any time ratifies or approves this Agreement. Upon any such acceleration, any obligation of any Lender to make any further Loans and any obligation of the Agent to arrange for the issuance of Letters of Credit shall be permanently terminated. During the continuance of any other Event of Default, Agent, if the Event of Default occurred under Subsection (xiii) of this Section, or the Required Lenders, if any other Event of Default, at any time and from time to time may, without notice to the Borrowers or any other Restricted Person, do either or both of the following: (1) terminate any obligation of the Lenders to make Loans hereunder and any obligation of the Agent to arrange for the issuance of Letters of Credit, and (2) declare any or all of the Obligations immediately due and payable, and all such Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by the Borrowers and each Restricted Person who at any time ratifies or approves this Agreement.

(b) Remedies. If any Event of Default shall occur and be continuing, the Agent may protect and enforce the Agent’s or the Lenders’ rights under the Loan Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or agreement contained in any Loan Document, and the Agent may enforce the payment of any Obligations due to the Agent or the Lenders or enforce any other legal or equitable right which it may have. All rights, remedies and powers conferred upon the Agent under the Loan Documents shall be deemed cumulative and not exclusive of any other rights, remedies or powers available under the Loan Documents or at Law or in equity.

17. The Agent.

(a) Appointment and Authority. Each Lender hereby irrevocably authorizes the Agent, and the Agent hereby undertakes, to receive payments of principal, interest and other amounts due hereunder as specified herein and to take all other actions and to exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms hereof or thereof, together with all other powers reasonably incidental thereto. The relationship of the Agent to the other Lenders is only that of one commercial lender acting as administrative agent for others, and nothing in the Loan Documents shall be construed to constitute the Agent a trustee or other fiduciary for any Lender or any holder of any participation in a Note nor to impose on the Agent duties and obligations other than those expressly provided for in the Loan Documents. With respect to any matters not expressly provided for in the Loan Documents and any matters which the Loan Documents place within the discretion of the Agent, the Agent shall not be required to exercise any discretion or take any action, and it may request instructions from the Lenders with respect to any such matter, in which case it shall be required to act or to refrain from acting (and shall be fully protected and free from liability to all the Lenders in so acting or refraining from acting) upon the instructions of the Required Lenders (including itself), provided, however, that the Agent shall not be required to take

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any action which exposes it to a risk of personal liability that it considers unreasonable or which is contrary to the Loan Documents or to applicable Law. Upon receipt by the Agent from the Borrowers of any communication calling for action on the part of the Lenders or upon notice from any other Lender to the Agent of any Potential Event of Default or Event of Default, the Agent shall promptly notify each other Lender thereof.

Each Qualified Hedging Counterparty, hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the Security Documents with such powers as are specifically delegated to the Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto and further authorizes the Agent, and the Agent hereby undertakes, to take all actions necessary to perfect and enforce such Qualified Hedging Counterparty’s security interest and Lien in the Collateral and to take all other actions and to exercise such powers under the Security Documents as are specifically delegated to the Agent by the terms hereof or thereof, together with all other powers reasonably incidental thereto. The relationship of the Agent to such Qualified Hedging Counterparty is only that of one commercial lender acting as collateral agent for others, and nothing in the Security Documents shall be construed to constitute the Agent a trustee or other fiduciary for any Qualified Hedging Counterparty nor to impose on the Agent duties and obligations other than those expressly provided for in the Security Documents. With respect to any matters not expressly provided for in the Security Documents and any matters which the Security Documents place within the discretion of the Agent, the Agent shall not be required to exercise any discretion or take any action, and it may request instructions from such Qualified Hedging Counterparty with respect to any such matter, in which case it shall be required to act or to refrain from acting (and shall be fully protected and free from liability to such Qualified Hedging Counterparty in so acting or refraining from acting) upon the instructions of such Qualified Hedging Counterparty, provided, however, that the Agent shall not be required to take any action which exposes it to a risk of personal liability that it considers unreasonable or which is contrary to the Loan Documents or to applicable Law.

(b) Exculpation, the Agent’s Reliance, Etc.

Neither the Agent nor any of its directors, officers, agents, attorneys, or employees shall be liable for any action taken or omitted to be taken by any of them under or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that each shall be liable for its own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent (a) may treat the payee of any Note as the holder thereof until the Agent receives written notice of the assignment or transfer thereof in accordance with this Agreement, signed by such payee and in form satisfactory to the Agent; (b) may consult with legal counsel (including counsel for the Borrowers), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any other Lender and shall not be responsible to any other Lender, for any statements, warranties or representations made in or in

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connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of the Loan Documents on the part of any Restricted Person or to inspect the property (including the books and records) of any Restricted Person; (e) shall not be responsible to any other Lender, for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any instrument or document furnished in connection therewith; (f) may rely upon the representations and warranties of each Restricted Person or, Lender in exercising its powers hereunder; and (g) shall incur no liability under or in respect of the Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (including any facsimile, cable, or telex) believed by it to be genuine and signed or sent by the proper Person or Persons.

(c) Credit Decisions. Each Lender acknowledges that it has, independently and without reliance upon any other Lender, made its own analysis of the Borrowers and the transactions contemplated hereby and its own independent decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents.

(d) Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed under Section 18(c) hereof, but without limiting the obligations of the Borrowers under such section) ratably in accordance with their respective Percentage Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys’ fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by the Agent under any Loan Document (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE AGENT); provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs or expenses payable by the Borrowers under Section 18(c), to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrowers. The agreements contained in this section shall survive payment in full of the Loans and all other amounts payable under this Agreement.

(e) Non-Reliance on the Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrowers and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the

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Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Restricted Person or any of its Subsidiaries or Affiliates that may come into the possession of the Agent or any of its Affiliates.

(f) Rights as Lender. In its capacity as a Lender, the Agent shall have the same rights and obligations as any Lender and may exercise such rights as though it were not the Agent. The Agent may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with any Restricted Person or their Affiliates, all as if it were not the Agent hereunder and without any duty to account therefor to any other Lender.

(g) Sharing of Set-Offs and Other Payments. Each Lender agrees that if it shall, whether through the exercise of rights under Security Documents or rights of banker’s lien, set off, or counterclaim against the Borrowers or otherwise, obtain payment of a portion of the aggregate Obligations owed to it which, taking into account all distributions made by the Agent under Section 6(a), causes such Lender to have received more than it would have received had such payment been received by the Agent and distributed pursuant to Section 6(a), then (a) it shall be deemed to have simultaneously purchased and shall be obligated to purchase interests in the Obligations as necessary to cause all the Lenders to share all payments as provided for in Section 6(a), and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that the Agent and all the Lenders share all payments of Obligations as provided in Section 6(a); provided, however, that nothing herein contained shall in any way affect the right of any Lender to obtain payment (whether by exercise of rights of banker’s lien, set-off or counterclaim or otherwise) of indebtedness other than the Obligations. The Borrowers expressly consent to the foregoing arrangements and agrees that any holder of any such interest or other participation in the Obligations, whether or not acquired pursuant to the foregoing arrangements, may to the fullest extent permitted by Law exercise any and all rights of banker’s lien, set-off, or counterclaim as fully as if such holder were a holder of the Obligations in the amount of such interest or other participation. If all or any part of any funds transferred pursuant to this section is thereafter recovered from the seller under this section which received the same, the purchase provided for in this section shall be deemed to have been rescinded to the extent of such recovery, together with interest, if any, if interest is required pursuant to the order of a Tribunal order to be paid on account of the possession of such funds prior to such recovery. It is not the intention of the parties hereto to require the sharing between Lenders, on the one hand, and Qualified Hedging Counterparties, on the other hand, of the payments of principal and interest and customary fees charged and received in the ordinary course of the transactions contemplated hereunder and under the Hedging Contracts, only for the sharing of any proceeds received or recovered in connection with (i) the liquidation of Collateral, (ii) the exercise of remedies hereunder, under any Loan Documents or the Hedging Contracts against Collateral, or (iii) attributable to rights of set off, banker’s liens, counterclaims or otherwise.

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Upon (i) the occurrence of any Event of Default specified in Section 16(a) (other than any Event of Default under Section 16(a)(v)) or (ii) 30 days after the Agent or any Borrower has notified the Lenders of an Event of Default under Section 16(a)(v) if the Event of Default under subsection 16(a)(v) has not been cured or waived by the Lenders within such 30 day period or immediately if any time during the 30 day period referred to in this clause (ii) the Obligations have been accelerated, (each a “Sharing Event”), all amounts thereafter received or recovered under this Agreement, any other Loan Document or any Hedging Contract whether as a result of a payment by the Borrowers, the exercise of remedies by the Agent under any of the Loan Documents or the exercise of remedies by the Qualified Hedging Counterparty under any Hedging Contract, liquidation of Collateral or otherwise, shall be applied to the Borrowers’ outstanding Obligations (including the Close-out Amount, if any, then due and owing to a Qualified Hedging Counterparty under Hedging Contracts) on the basis of each Lender’s and the Qualified Hedging Counterparty’s then Liquidation Percentage Share. For the avoidance of doubt, no such amounts are to be shared with a Qualified Hedging Counterparty unless it is owed a Close-out Amount and no Qualified Hedging Counterparty is obliged to share with any other Lender (other than any amounts paid by the Borrowers to a Qualified Hedging Counterparty in reduction of its Close-out Amount) any amount received, or the proceeds of any collateral separately held by such Qualified Hedging Counterparty, under its Hedging Contracts.

(h) Properties. Whenever the Agent in good faith determines that it is uncertain about how to distribute to the Lenders any funds which it has received, or whenever the Agent in good faith determines that there is any dispute among the Lenders about how such funds should be distributed, the Agent may choose to defer distribution of the funds which are the subject of such uncertainty or dispute. If the Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if the Agent is otherwise required to invest funds pending distribution to the Lenders, the Agent shall invest such funds pending distribution; all interest on any such Property shall be distributed upon the distribution of such Property and in the same proportion and to the same Persons as such Property. All moneys received by the Agent for distribution to the Lenders (other than to the Person who is the Agent in its separate capacity as a Lender) shall be held by the Agent pending such distribution solely as the Agent for such Lenders, and the Agent shall have no equitable title to any portion thereof.

(i) Benefit of Section 17. The provisions of this Section (other than Section 17(j)) are intended solely for the benefit of the Lenders, and no Restricted Person shall be entitled to rely on any such provision or assert any such provision in a claim or defense against any Lender. The Lenders may waive or amend such provisions as they desire without any notice to or consent of the Borrowers or any Restricted Person.

(j) Resignation. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrowers. Each such notice shall set forth the date of such resignation. Upon any such resignation and after consultation with the Borrowers, the Required Lenders shall have the right to appoint a successor to the Agent. If the successor Agent is already a Lender, the Borrowers’ prior approval shall not be required

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for the appointment of the successor Agent, but, if the successor Agent is not already a Lender, the Borrowers’ approval shall be required pursuant to Section 18(f) below. A successor must be appointed for the retiring Agent, and the Agent’s resignation shall become effective when such successor accepts such appointment. If, within thirty days after the date of the retiring Agent’s resignation, no successor has been appointed and has accepted such appointment, then the retiring Agent may appoint a successor Agent, which shall be a commercial bank organized or licensed to conduct a banking or trust business under the Laws of the United States of America or of any state thereof. Upon the acceptance of any appointment as the Agent hereunder by a successor Agent, the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent’s resignation hereunder the provisions of this Section 17 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under the Loan Documents.

18. Miscellaneous Provisions.

(a) Exercise of Rights. The rights, powers and remedies of the Agent and the Lenders hereunder are cumulative and in addition to all rights, powers and remedies provided under any and all agreements between the Borrowers and the Agent and the Lenders relating hereto, at law, in equity or otherwise. Neither any delay nor any omission by the Agent and the Lenders to exercise any right, power or remedy shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise thereof or any exercise of any other right, power or remedy.

(b) Notices. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in writing (which may be by facsimile transmission) and must be delivered to the party to whom such notice or communication is directed at the address of such party as follows:

(i)     The Borrowers:	Ascent Oil and Gas Inc.
	c/o Ascent Energy Inc.
	1700 Redbud Boulevard, Suite 450
	McKinney, Texas 75069
	Attention: Eddie LeBlanc
	Telephone No.: 972-547-7159
	Facsimile No.: 972-547-6451
with a copy to:	Vinson & Elkins LLP
	2300 First City Tower
	1001 Fannin Street
	Houston, Texas 77002
	Attention: Clifton S. Rankin
	Telephone No.: 713-758-3210
	Facsimile No.: 713-615-5162

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(ii)    The Agent:	Fortis Capital Corp.
	15455 N. Dallas Parkway, Suite 1400
	Addison, Texas 75001
	Attention: Scott Myatt
	Telephone No.: (214) 866-2522
	Facsimile No.: (214) 754-5982
with a copy to:	Patton Boggs LLP
	2001 Ross Avenue, Suite 3000
	Dallas, Texas 75201
	Attention: Robert S. Rendell
	Telephone: 214-758-1514
	Facsimile: 214-758-1550

Any such notice or other communication shall be deemed to have been given (whether actually received or not) on the day it is personally delivered or delivered by facsimile as aforesaid or, if mailed, on the third day after it is mailed by certified U.S. mail, return receipt requested addressed as aforesaid. Any party may change its address for purposes of this Agreement by giving notice of such change to the other party pursuant to this section.

(c) Expenses and Indemnity.

(i) Payment of Expenses. Whether or not the transactions contemplated by this Agreement are consummated, the Borrowers will promptly (and in any event, within thirty (30) days after any invoice or other statement or notice) pay: (i) all transfer, stamp, mortgage, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Loan Documents or any other document referred to herein or therein, (ii) all reasonable costs and expenses incurred by or on behalf of the Agent (including without limitation reasonable attorneys’ fees, consultants’ fees and engineering fees, travel costs and miscellaneous expenses) in connection with (1) the negotiation, preparation, execution and delivery of the Loan Documents, and any and all consents, waivers or other documents or instruments relating thereto, (2) the filing, recording, refiling and re-recording of any Loan Documents and any other documents or instruments or further assurances required to be filed or recorded or refiled or re-recorded by the terms of any Loan Document, (3) the borrowings hereunder and other action reasonably required in the course of administration hereof, (4) monitoring or confirming (or preparation or negotiation of any document related to) the Borrowers’ compliance with any covenants or conditions contained in this Agreement or in any Loan Document, and (iii) all reasonable costs and expenses incurred by or on behalf of any Lender (including without limitation reasonable attorneys’ fees, consultants’ fees and accounting fees) in connection with the defense or enforcement of any of the Loan Documents (including this section) or the defense of any Lender’s exercise of its rights thereunder. In

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addition to the foregoing, until all Obligations have been paid in full, the Borrowers will also pay or reimburse the Agent for all reasonable out-of-pocket costs and expenses of the Agent or its agents or employees in connection with the continuing administration of the Loans and the related due diligence of the Agent, including travel and miscellaneous expenses and fees and expenses of the Agent’s outside counsel, reserve engineers and consultants engaged in connection with the Loan Documents.

(ii) Indemnity. The Borrowers agree to indemnify each Lender, upon demand, from and against any and all liabilities, obligations, claims, losses, damages, penalties, fines, actions, judgments, suits, settlements, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this section collectively called “liabilities and costs”) which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against such Lender growing out of, resulting from or in any other way associated with any of the Collateral, the Loan Documents and the transactions and events (including the enforcement or defense thereof) at any time associated therewith or contemplated therein (whether arising in contract or in tort or otherwise and including any violation or noncompliance with any Environmental Laws by any Lender or any other Person or any liabilities or duties of any Lender or any other Person with respect to Hazardous Materials found in or released into the environment).

THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER,

provided only that no Lender shall be entitled under this section to receive indemnification for that portion, if any, of any liabilities and costs which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. If any Person (including the Borrowers or any of their Affiliates) ever alleges such gross negligence or willful misconduct by any Lender, the indemnification provided for in this section shall nonetheless be paid upon demand, subject to later adjustment or reimbursement, until such time as a court of competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross negligence or willful misconduct. As used in this section the term “Lender” shall refer not only to each Person designated as such on the signature page but also to each director, officer, agent, attorney, employee, representative and Affiliate of such Person.

(d) Waivers and Amendments. No failure or delay (whether by course of conduct or otherwise) by any Lender in exercising any right, power or remedy which such Lender may have under any of the Loan Documents shall operate as a waiver

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thereof or of any other right, power or remedy, nor shall any single or partial exercise by any Lender of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of any Loan Document and no consent to any departure therefrom shall ever be effective unless it is in writing and signed as provided below in this section, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. No notice to or demand on any Restricted Person shall in any case of itself entitle any Restricted Person to any other or further notice or demand in similar or other circumstances. This Agreement and the other Loan Documents set forth the entire understanding between the parties hereto with respect to the transactions contemplated herein and therein and supersede all prior discussions and understandings with respect to the subject matter hereof and thereof, and no waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Loan Documents shall be valid or effective against any party hereto unless the same is in writing and signed by (i) if such party is a Borrower, by such Borrower, (ii) if such party is the Agent by the Agent, (iii) if such party is a Lender, by such Lender or by the Agent on behalf of the Lenders with the written consent of the Required Lenders (which consent has already been given as to the termination of the Loan Documents as provided herein and the releases of Liens under Section 8), and (iv) if such party is a Qualified Hedging Counterparty, by such Qualified Hedging Counterparty if the waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Loan Documents relates to Sections 2(e), 8, 17 and/or 18 and adversely affects such Qualified Hedging Counterparty, in such Qualified Hedging Counterparty’s reasonable discretion. Notwithstanding the foregoing or anything to the contrary herein, the Agent shall not, without the prior consent of each individual Lender, execute and deliver on behalf of such Lender any waiver or amendment which would: (1) waive any of the conditions specified in Sections 12 or 13, (2) increase the maximum amount which such Lender is committed hereunder to lend, (3) reduce any fees payable to such Lender hereunder, or the principal of, or interest on, such Lender’s Note, (4) postpone any date fixed for any payment of any such fees, principal or interest, (5) amend the definition herein of “Required Lenders” or otherwise change the aggregate amount of Percentage Shares which is required for the Agent, the Lenders or any of them to take any particular action under the Loan Documents, (6) release the Borrowers from their obligation to pay such Lender’s Note or any Guarantor from its guaranty of such payment, (7) release any collateral except pursuant to Section 8(f), (8) modify or waive Section 15(e) relating to Distributions or (9) amend this Section.

(e) Acknowledgments and Admissions. Each Borrower hereby represents, warrants, acknowledges and admits that (i) it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents to which it is a party, (ii) it has made an independent decision to enter into this Agreement and the other Loan Documents to which it is a party, without reliance on any representation, warranty, covenant or undertaking by the Agent or any Lender, whether written, oral or implicit, other than as expressly set out in this Agreement or in another Loan Document delivered on or after the Effective Date, (iii) there are no representations, warranties, covenants, undertakings or agreements by any Lender as to the Loan Documents except as expressly

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set out in this Agreement or in another Loan Document delivered on or after the Effective Date, (iv) no Lender has any fiduciary obligation toward such Borrower with respect to any Loan Document or the transactions contemplated thereby, (v) the relationship pursuant to the Loan Documents between such Borrower and the other Restricted Persons, on one hand, and each Lender, on the other hand, is and shall be solely that of debtor and creditor, respectively, (vi) no partnership or joint venture exists with respect to the Loan Documents between any Restricted Person and any Lender, (vii) the Agent is not such Borrower’s agent, but the Agent for the Lenders, (viii) without limiting any of the foregoing, such Borrower is not relying upon any representation or covenant by any Lender, or any representative thereof, and no such representation or covenant has been made, that any Lender will, at the time of an Event of Default or Potential Event of Default, or at any other time, waive, negotiate, discuss, or take or refrain from taking any action permitted under the Loan Documents with respect to any such Event of Default or Potential Event of Default or any other provision of the Loan Documents, and (ix) all the Lenders have relied upon the truthfulness of the acknowledgments in this section in deciding to execute and deliver this Agreement and to become obligated hereunder.

(f) Joint and Several Liability; Parties in Interest; Assignments.

(i) All Obligations which are incurred by two or more Restricted Persons shall be their joint and several obligations and liabilities. All grants, covenants and agreements contained in the Loan Documents shall bind and inure to the benefit of the parties thereto and their respective successors and assigns; provided, however, that no Restricted Person may assign or transfer any of its rights or delegate any of its duties or obligations under any Loan Document without the prior consent of the Required Lenders. No Restricted Person shall directly or indirectly purchase or otherwise retire any Obligations owed to any Lender nor will any Lender accept any offer to do so, unless each Lender shall have received substantially the same offer with respect to the same Percentage Share of the Obligations owed to it. If any Restricted Person at any time purchases some but less than all of the Obligations owed to all the Lenders, such purchaser shall not be entitled to any rights of any Lender under the Loan Documents unless and until such Restricted Person has purchased all of the Obligations.

(ii) No Lender shall sell any participation interest in its commitment hereunder or any of its rights under its Loans or under the Loan Documents to any Person unless the agreement between such Lender and such participant at all times provides: (i) that such participation exists only as a result of the agreement between such participant and such Lender and that such transfer does not give such participant any right to vote as a Lender or any other direct claims or rights against any Person other than such Lender, (ii) that such participant is not entitled to payment from any Restricted Person under Section 6 or Section 18(c) of amounts in excess of those payable to such Lender under such sections (determined without regard to the sale of such participation), and (iii) unless such participant is an Affiliate of such Lender, that such participant shall not be entitled

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to require such Lender to take any action under any Loan Document or to obtain the consent of such participant prior to taking any action under any Loan Document, except for actions which would require the consent of all the Lenders under Section 18(d). No Lender selling such a participation shall, as between the other parties hereto and such Lender, be relieved of any of its obligations hereunder as a result of the sale of such participation. Each Lender which sells any such participation to any Person (other than an Affiliate of such Lender) shall give prompt notice thereof to the Agent and the Borrowers, and, unless such sale is to an Affiliate of the selling Lender, such sale shall require the Borrowers’ prior approval which shall not be unreasonably withheld or delayed.

(iii) Except for sales of participations under the immediately preceding subsection, no Lender shall make any assignment or transfer of any kind of its commitments or any of its rights under its Loans or under the Loan Documents, except for assignments to an Eligible Assignee, and then only if such assignment is made in accordance with the following requirements:

(A) Unless the Assignee is an Affiliate of the assigning Lender, the Borrowers shall have given its written approval of the assignment, which approval shall not be unreasonably withheld or delayed.

(B) Each such assignment shall apply to all Obligations owing to the assignor Lender hereunder and to the unused portion of the assignor Lender’s commitments, so that after such assignment is made the assignor Lender shall have a fixed (and not a varying) Percentage Share in its Loans and Note and be committed to make that Percentage Share of all future Loans, the assignee shall have a fixed Percentage Share in such Loans and Note and be committed to make that Percentage Share of all future Loans, and the Percentage Share of the Revolving Commitment of both the assignor and assignee shall equal or exceed $5,000,000.

(C) The parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the “Register” (as defined below in this section), an Assignment and Assumption in the form of Exhibit D, appropriately completed, together with the Note subject to such assignment and a processing fee payable to the Agent of $2,500. Upon such execution, delivery, and payment and upon the satisfaction of the conditions set out in such Assignment and Assumption, then (1) the Borrowers shall issue new Notes to such assignor and assignee upon return of the old Notes to the Borrowers, and (2) as of the “Settlement Date” specified in such Assignment and Assumption the assignee thereunder shall be a party hereto and a Lender hereunder and the Agent shall thereupon deliver to the Borrowers and each Lender a schedule showing the revised Percentage Shares of such assignor Lender and such assignee Lender and the Percentage Shares of all other the Lenders.

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(D) Each assignee Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for Federal income tax purposes, shall (to the extent it has not already done so) provide the Agent and the Borrowers with the “Prescribed Forms” referred to in Section 6(d)(iv).

(iv) Nothing contained in this section shall prevent or prohibit any Lender from assigning or pledging all or any portion of its Loans and Note to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank; provided that no such assignment or pledge shall relieve such Lender from its obligations hereunder.

(v) By executing and delivering an Assignment and Assumption, each assignee Lender thereunder will be confirming to and agreeing with the Borrowers, the Agent and each other Lender that such assignee understands and agrees to the terms hereof, including Section 17 hereof.

(vi) The Agent shall maintain a copy of each Assignment and Assumption and a register for the recordation of the names and addresses of the Lenders and the Percentage Shares of, and principal amount of the Loans owing to, each Lender from time to time (in this section called the “Register”). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers and each Lender may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice.

(g) Governing Law. Except to the extent that the law of another jurisdiction is expressly elected in a Loan Document, the Loan Documents shall be deemed contracts and instruments made under the laws of the State of Texas and shall be construed and enforced in accordance with and governed by the laws of the State of Texas and the laws of the United States of America, without regard to principles of conflicts of law. Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving tri-party accounts) does not apply to this Agreement or to the Notes. Each Borrower hereby irrevocably submits itself and each other Restricted Person to the jurisdiction of the state and federal courts sitting in the State of Texas and agrees and consents that service of process may be made upon it or any Restricted Person in any legal proceeding relating to the Loan Documents or the Obligations by any means allowed under Texas or federal law. Any legal proceeding arising out of or in any way related to any of the Loan Documents shall be brought and litigated exclusively in the United States District Court for the Northern District of Texas, Dallas Division to the extent it has subject matter jurisdiction, and otherwise in the Texas District Courts sitting in Dallas County, Texas. The parties hereto hereby waive and agree not to assert, by way of motion, as a defense or otherwise, that any such proceeding is brought in an inconvenient forum or that the venue thereof is improper, and further agree to a transfer of any such proceeding to a federal court sitting in the State of Texas to the extent that it has subject matter jurisdiction, and otherwise to a state court in Dallas, Texas.

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(h) Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provisions shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of the Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.

(i) Maximum Rate of Interest. Regardless of any provisions contained in this Agreement or in any other documents and instruments referred to herein, the Lenders shall never be deemed to have contracted for or be entitled to receive, collect or apply as interest on the Note(s) any amount of interest in excess of the Maximum Rate of interest permitted to be charged by applicable law, and in the event the Lenders ever receive, collect or apply as interest any such excess, or if an acceleration of the maturities of any Note(s) or if any prepayment by the Borrowers results in the Borrowers having paid any interest in excess of the Maximum Rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance of the Note(s) for which such excess was received, collected or applied. If the principal balance of such Notes is paid in full, any remaining excess shall be paid immediately to the Borrowers. In determining whether or not the interest paid or payable under any specific contingency exceeds the Maximum Rate, the Borrowers and the Lenders shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium, rather than as interest; and (ii) exclude voluntary prepayments and the effect thereof; and (iii) amortize, prorate, allocate and spread, in equal parts, the total amount of interest throughout the entire contemplated term of the Note(s) so that the interest rate is uniform throughout the term of the Notes; provided that if the Notes are paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received during the actual period of existence thereof exceeds the Maximum Rate, the holders of the Notes shall refund to the Borrowers the amount of such excess or credit the amount of such excess against the principal amount due thereunder. In such event, no holder of the Notes will be subject to any penalties provided by any laws for contracting for, charging for or receiving interest in excess of the Maximum Rate.

(j) Confidentiality. Each Lender shall use all reasonable efforts to keep confidential, in accordance with its customary procedures for handling confidential information and safe and sound lending practices, any non-public information supplied to it by or on behalf of the Borrowers and their Subsidiaries pursuant to this Agreement, provided, that, nothing contained herein shall limit the disclosure of any such information: (i) to the extent required by statute, rule, regulation, subpoena or court order, (ii) to bank examiners and other regulators, auditors and/or accountants, (iii) in connection with any litigation to which a Lender is a party, (iv) to any assignee or participant permitted by this Agreement so long as such assignee or participant (or prospective assignee or participant) shall have first agreed in writing to treat such

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information as confidential in accordance with this Section, or (v) to counsel for to any Lender or any participant or assignee (or prospective participant or assignee) permitted by this Agreement.

(k) Intentionally Omitted.

(l) Multiple Counterparts. This Agreement may be executed in a number of identical separate counterparts, each of which for all purposes is to be deemed an original, but all of which shall constitute, collectively, one agreement. No party to this Agreement shall be bound hereby until a counterpart of this Agreement has been executed by all parties hereto.

(m) Conflict. In the event any term or provision hereof is inconsistent with or conflicts with any provision of the Loan Documents, the terms or provisions contained in this Agreement shall be controlling.

(n) Survival. All covenants, agreements, undertakings, representations and warranties made in the Loan Documents, including this Agreement, the Note(s) or other documents and instruments referred to herein shall survive all closings hereunder and shall not be affected by any investigation made by any party.

(o) Parties Bound. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, legal representatives and estates, provided, however, that the Borrowers may not, without the prior written consent of the Lenders, assign any rights, powers, duties or obligations hereunder.

(p) Other Agreements.

(i) THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

(ii) BORROWERS ACKNOWLEDGE AND AGREE THAT THE STATEMENT SET FORTH IN THIS SECTION SATISFIES THE REQUIREMENTS OF SECTION 26.02 OF THE BUSINESS AND COMMERCE CODE OF THE STATE OF TEXAS AND SHALL BE DEEMED INCORPORATED INTO THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS BY BORROWERS WITH, TO OR IN FAVOR OF BANK.

(q) Waiver of Jury Trial. To the extent permitted by Law, the Lenders and the Borrowers hereby knowingly, voluntarily, and intentionally waive any rights they may have to a trial by jury in respect of any litigation based hereon, or directly or indirectly arising out of, under, or in connection with, this Agreement or any other Loan Document, or any course of conduct, course of dealing, statements

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(whether verbal or written) or actions of such Persons or the Borrowers. This provision is a material inducement for the Lenders entering into this Agreement and the other Loan Documents.

(r) Amendment and Restatement. As of the Effective Date, this Agreement amends and restates in its entirety the Existing Loan Agreement, provided that, (a) such amendment and restatement shall operate to renew, amend and modify the rights and obligations of the parties under the Existing Loan Agreement as provided herein, but shall not act as a novation thereof, and (b) the Liens securing the Obligations under and as defined in the Existing Loan Agreement shall not be extinguished, but shall be carried forward and shall secure such obligations and indebtedness as renewed, amended, restated and modified hereby. The Borrowers hereby agree that (i) the Loans outstanding under the Existing Loan Agreement and all accrued and unpaid interest thereon, (ii) all Letters of Credit issued and outstanding under the existing Loan Agreement, and (iii) all accrued and unpaid fees under the Existing Loan Agreement shall be deemed to be outstanding under and payable by this Agreement.

(s) Release. As further consideration and to induce Agent and each Lender to enter into this Agreement, each Borrower and AEI hereby compromises, releases and discharges Agent and each Lender, and their respective directors, members, managers, officers, shareholders, agents, employees, representatives, attorneys, and their respective heirs, legal representatives, successors and assigns (collectively, the “Lending Parties”) from any and all claims, demands, causes of action, remedies, suits, judgments, damages, expenses and liabilities (collectively, “Claims”) of any nature whatsoever, whether now known, suspected or claimed, whether arising under common law, in equity, or under statute, which any Borrower or AEI has against the Lending Parties which may have arisen at any time on or prior to the Effective Date in connection with, arising out of or related to the Loans, the Existing Loan Agreement, and all instruments, documents, and agreements executed in connection therewith, or the enforcement or attempted enforcement by Lending Parties of any of their rights, remedies, or recourse related thereto.

(t) USA Patriot Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Lender in accordance with the Act.

[The remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

ASCENT OIL AND GAS INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
SOUTH LOUISIANA PROPERTY HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT ENERGY HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT ENERGY LOUISIANA, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT GP, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

ASCENT LP, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT OPERATING, L.P., as Borrower
By:	Ascent GP, LLC, its general partner
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
PONTOTOC ACQUISITION CORP. as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
PONTOTOC PRODUCTION COMPANY, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
OKLAHOMA BASIC ECONOMY CORPORATION, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

PONTOTOC HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
PONTOTOC GATHERING, L.L.C., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
DYNE EXPLORATION COMPANY, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT RESOURCES WV, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

Agreed and Accepted:

ASCENT ENERGY INC.

By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

FORTIS CAPITAL CORP., as Agent and Lender
By:	/s/ C. Roberts
Name:	C. Roberts
Title:	Managing Director
By:	/s/ Scott Myatt
Name:	Scott Myatt
Title:	Vice President

HIBERNIA NATIONAL BANK
By:	/s/ Nancy G. Moragas
Name:	Nancy G. Moragas
Title:	Vice President

THE ROYAL BANK OF SCOTLAND plc
By:	/s/ Scott L. Joyce
Name:	Scott L. Joyce
Title:	Vice President

STERLING BANK
By:	/s/ David W. Phillips
Name:	David W. Phillips
Title:	Senior Vice President

COMPASS BANK
By:	/s/ Dorothy Marchand
Name:	Dorothy Marchand
Title:	Senior Vice President

FORTIS ENERGY LLC, as Qualified Hedging Counterparty and as Lender for the purposes set forth in Sections 2(e), 8, 17 and 18 above
By:	/s/ David Jones
Name:	David Jones
Title:	President
By:	/s/ Derek Pisani
Name:	Derek Pisani
Title:	Director of Operations

ANNEX A

	Percentage Share		Revolving Commitment		Acquisition Commitment
Fortis Capital Corp.	30	%	$	30,000,000	$	1,500,000
Hibernia National Bank	20	%	$	20,000,000	$	1,000,000
The Royal Bank of Scotland plc	20	%	$	20,000,000	$	1,000,000
Sterling Bank	15	%	$	15,000,000	$	750,000
Compass Bank	15	%	$	15,000,000	$	750,000
	100	%	$	100,000,000	$	5,000,000

ANNEX B

Organization Chart

ANNEX C

Lending Offices

FORTIS CAPITAL CORP.

Domestic Lending Office:

15455 N. Dallas Parkway, Suite 1400

Addison, Texas 75001

Attention: Scott Myatt

Fax: 214-754-5982

E-mail: Scott.Myatt@fortiscapitalusa.com

Eurodollar Lending Office:

15455 N. Dallas Parkway, Suite 1400

Addison, Texas 75001

Attention: Scott Myatt

Fax: 214-754-5982

E-mail: Scott.Myatt@fortiscapitalusa.com

HIBERNIA NATIONAL BANK

Domestic Lending Office:

313 Carondolet Street

10^th Floor – Energy Maritime Department

New Orleans, Louisiana 70130

Attention: Nancy Moragas

Fax: 504/533-5434

E-mail: nmoragas@hibernia.com

Eurodollar Lending Office:

313 Carondolet Street

10^th Floor – Energy Maritime Department

New Orleans, Louisiana 70130

Attention: Nancy Moragas

Fax: 504/533-5434

E-mail: nmoragas@hibernia.com

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THE ROYAL BANK OF SCOTLAND plc

Domestic Lending Office:

101Park Avenue, 12^th Floor

New York, NY 10178

Attention: Christine Xu

Fax: 212-401-1494

E-mail: Christine.Xu@rbos.com

Eurodollar Lending Office:

101Park Avenue, 12^th Floor

New York, NY 10178

Attention: Christine Xu

Fax: 212-401-1494

E-mail: Christine.Xu@rbos.com

STERLING BANK

Domestic Lending Office:

2550 North Loop West, Suite 800

Houston, TX 77092

Attention: Cheri Allen

Fax: 713-507-7908

E-mail: Cheri.Allen@banksterling.com

Eurodollar Lending Office:

2550 North Loop West, Suite 800

Houston, TX 77092

Attention: Cheri Allen

Fax: 713-507-7908

E-mail: Cheri.Allen@banksterling.com

2

COMPASS BANK

Domestic Lending Office:

24 Greenway Plaza, Suite 1400A

Houston, TX 77046

Attention: Dorothy Marchand

Fax: 713-968-8292

E-mail: Dorothy.Marchand@compassbnk.com

Eurodollar Lending Office:

24 Greenway Plaza, Suite 1400A

Houston, TX 77046

Attention: Dorothy Marchand

Fax: 713-968-8292

E-mail: Dorothy.Marchand@compassbnk.com

FORTIS ENERGY LLC

Domestic Lending Office:

520 Madison Avenue

New York, NY 10022

Attention: Derek Pisani

Fax: 212-891-2697

E-mail: Derek.Pisani@fbfinance.com

3

EX-10.2

Exhibit 10.2

FIRST AMENDMENT TO

SECOND AMENDED AND RESTATED LOAN AGREEMENT

THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT (this “Amendment”) made as of the 1^st day of May, 2006, among ASCENT OIL AND GAS INC., a Delaware corporation (“Ascent Oil and Gas”), SOUTH LOUISIANA PROPERTY HOLDINGS, INC., a Louisiana corporation (“SLPH”), ASCENT ENERGY HOLDINGS, INC., a Delaware corporation (“Ascent Energy Holdings”), ASCENT ENERGY LOUISIANA, LLC, a Delaware limited liability company (“Ascent Louisiana”), ASCENT GP, LLC, a Delaware limited liability company (“Ascent GP”), ASCENT LP, LLC, a Delaware limited liability company (“Ascent LP”), ASCENT OPERATING, L.P., a Delaware limited partnership (“Ascent Operating”), PONTOTOC ACQUISITION CORP., a Nevada corporation (“Pontotoc Acquisition”), PONTOTOC PRODUCTION COMPANY, INC., a Texas corporation (“Pontotoc Texas”), OKLAHOMA BASIC ECONOMY CORPORATION, an Oklahoma corporation (“OBEC”), PONTOTOC HOLDINGS, INC., an Oklahoma corporation (“Pontotoc Holdings”), PONTOTOC GATHERING, L.L.C., an Oklahoma limited liability company (“Pontotoc Gathering”), DYNE EXPLORATION COMPANY, an Oklahoma corporation (“Dyne”), ASCENT RESOURCES, WV, INC., a Delaware corporation (“Resources”), Resources, together with Ascent Oil & Gas, SLPH, Ascent Energy Holdings, Ascent Louisiana, Ascent GP, Ascent LP, Ascent Operating, Pontotoc Acquisition, Pontotoc Texas, OBEC, Pontotoc Holdings, Pontotoc Gathering and Dyne, the “Borrowers,” and each a “Borrower”), FORTIS CAPITAL CORP., a Connecticut corporation, individually (“Fortis”) and as agent (the “Agent”), CAPITAL ONE, N.A., a national banking association (“Capital One”), THE ROYAL BANK OF SCOTLAND plc, a company organized under the laws of Scotland (“RBS”), STERLING BANK, a bank organized under the laws of Texas (“Sterling”), COMPASS BANK, an Alabama state chartered bank (“Compass”), and the other lenders which may become a party hereto (each a “Lender” and collectively the “Lenders”), and FORTIS ENERGY LLC, a Delaware limited liability company (“Fortis Energy”).

WHEREAS, the Borrowers, Agent and the Lenders have entered into a Second Amended and Restated Loan Agreement dated as of December 19, 2005 (as amended, the “Loan Agreement”); and

WHEREAS, the Borrowers have requested that the Lenders increase the Acquisition Commitment to $15,000,000 and make certain other changes to the Loan Agreement, and the Lenders are willing to do so;

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1. Defined Terms. All capitalized terms used but not otherwise defined in this Amendment shall have the meaning ascribed to them in the Loan Agreement. Unless otherwise specified, all section references herein refer to sections of the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Definitions (Section 1).

(a) Acquisition Commitment. The definition of “Acquisition Commitment” is amended by substituting “$15,000,000” for “$5,000,000.”

(b) AEI. The following definition is added to the Loan Agreement:

“‘AEI’ means Ascent Energy Inc., a Delaware corporation.”

(c) Base Rate Margin. Clause (b) of the definition of “Base Rate Margin” is amended to read as follows:

“(b) For Acquisition Loans: two and one-half percent (2.50%) per annum.”

(d) Effective Date of First Amendment. The following definition is added to the Loan Agreement:

“‘Effective Date of First Amendment’ means the date on which the Borrowers have satisfied the conditions to the effectiveness of the First Amendment to Second Amended and Restated Loan Agreement dated as of May 1, 2006.”

(e) LIBOR Margin. Clause (b) of the definition of “LIBOR Margin” is amended to read as follows:

“(b) For Acquisition Loans: three and three-quarters percent (3.75%) per annum.”

2.2 Section 2(b) (Acquisition Commitment). Section 2(b) is amended to read as follows:

“(b) Acquisition Commitment. Subject to the terms and conditions hereof, each Lender agrees to make loans to the Borrowers in order to finance the acquisition of Oil and Gas Properties (or the equity of any Person owning Oil and Gas Properties) (herein called such Lender’s “Acquisition Loans”) upon the Borrowers’ request from time to time during the term hereof, provided that (i) all Lenders are requested to make Acquisition Loans of the same Type in accordance with their respective Percentage Shares and as part of the same Advance, and (ii) the aggregate amount of all Acquisition Loans may not exceed seventy percent (70%) of the net discounted present value, determined by the Agent using the factors set forth in Section 9(f) hereof, of the proved Oil and Gas Properties being acquired with the proceeds of such Acquisition Loans (the “70% Test”). In determining whether the Borrowers have satisfied

2

the 70% Test: (i) if the acquisition being financed is for a consideration of $10,000,000 or more, the net discounted present value of the Oil and Gas Properties being acquired will be determined on the basis of an engineering report in form and substance satisfactory to the Agent in its reasonable discretion prepared by a representative of the Borrowers but audited by an independent third party engineer selected by the Borrowers and approved by the Agent covering the Oil and Gas Properties being acquired, and (ii) if the acquisition being financed is for a consideration of less than $10,000,000, the net discounted present value of the Oil and Gas Properties being acquired will be determined on the basis of an engineering report in form and substance satisfactory to the Agent in its reasonable discretion prepared by a representative of the Borrowers covering the Oil and Gas Properties being acquired. In either case, net discounted present value will be calculated using a predetermined price deck provided to the Borrowers by the Agent and acceptable to the Lenders. The aggregate amount of all Acquisition Loans in any Advance must be greater than or equal to $1,000,000. Except for the amount of any Acquisition Loan which may have been converted to a term loan pursuant to Section 4(a)(ii) hereof, subject to the terms and conditions hereof, the Borrowers may borrow, repay, and reborrow Acquisition Loans made hereunder. The Lenders shall have no obligation to make an Acquisition Loan hereunder if such Acquisition Loans would not satisfy the 70% Test.”

2.3 Section 4(a) (Payment at Maturity). Section 4(a)(ii) is amended to read as follows:

“(ii) Except as otherwise provided in this Agreement, the outstanding principal amount of the Acquisition Loans shall be due and payable on the later of (y) a date which is six months after the date of the Advance of such Acquisition Loan, or (z) a date which is three months after the date of the first Borrowing Base Determination Date following the Advance of such Acquisition Loan (the “Acquisition Loan Maturity Date”), provided, however, that if on the Acquisition Loan Maturity Date the Facility Usage plus the outstanding principal amount of Acquisition Loans exceeds the Borrowing Base in effect on such Acquisition Loan Maturity Date, then the amount of such excess (other than any excess attributable to a Borrowing Base Deficiency, which shall be addressed as otherwise provided in this Agreement) shall be converted into a term loan which shall be payable in not more than thirty-six (36) equal installments due on the last Business Day of each month prior to the Loan Maturity Date and, if not then paid in full, on the Loan Maturity Date. As an example for the avoidance of doubt, if the amount of such excess (other than any excess attributable to a Borrowing Base Deficiency) on an Acquisition Loan Maturity Date which is January 15, 2009 is $1,650,000, then the Borrower must make eleven (11) equal payments of $150,000 each, with ten (10) such payments being made on the last Business Day of

3

each month commencing on the last Business Day of January, 2009, and the eleventh (11^th) such payment being made on November 1, 2009, the Loan Maturity Date.“

2.4 Annex A. Annex A to the Loan Agreement is deleted and replaced by Annex A attached to this Amendment.

3. Borrowing Base. Pursuant to Section 9 of the Loan Agreement, the Agent and the Lenders have redetermined the Borrowing Base at $80,000,000, which Borrowing Base shall be effective on the Effective Date of the First Amendment. The redetermination provided for in this Section 4 shall not be treated as an Unscheduled Redetermination for purposes of the Loan Agreement.

4. Effectiveness of Amendment. This Amendment shall be effective upon receipt by the Agent of:

4.1 An executed copy of this Amendment;

4.2 A promissory note executed by the Borrowers in favor of each Lender; and

4.3 All fees due and owing by the Borrowers.

5. Further Assurances. Borrowers’ Representative, at its sole expense, will, and will cause each other Borrower to, promptly execute and deliver to the Agent upon its request all such other and further documents, agreements and instruments Agent deems necessary, in its sole discretion, in connection with the transactions contemplated hereby.

6. Ratifications, Borrower Representations and Warranties.

6.1 The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Loan Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement are ratified and confirmed and shall continue in full force and effect. The Borrowers and the Lenders agree that the Loan Agreement and the Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

6.2 To induce the Lenders to enter into this Amendment, the Borrowers ratify and confirm each representation and warranty set forth in the Loan Agreement as if such representations and warranties were made on the even date herewith, and further represents and warrants (i) that there has occurred since the date of the last financial statements delivered to the Banks no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect, (ii) that no Event of Default exists on the date hereof, and (iii) that the Borrowers are fully authorized to enter into this Amendment.

4

7. Benefits. This Amendment shall be binding upon and inure to the benefit of the Lenders and Borrowers, and their respective successors and assigns; provided, however, that Borrowers may not, without the prior written consent of the Lenders, assign any rights, powers, duties or obligations under this Amendment, the Loan Agreement or any of the other Loan Documents.

8. Construction. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas.

9. Invalid Provisions. If any provision of this Amendment is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and the remaining provisions of this Amendment shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance.

10. Entire Agreement. The Loan Agreement, as amended by this Amendment, contains the entire agreement among the parties regarding the subject matter hereof and supersedes all prior written and oral agreements and understandings among the parties hereto regarding same.

11. Reference to Loan Agreement. The Loan Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement to the Loan Agreement shall mean a reference to the Loan Agreement as amended hereby.

12. Counterparts. This Amendment may be separately executed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall be deemed to constitute one and the same agreement.

[The Remainder of this Page Intentionally Left Blank)

5

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

ASCENT OIL AND GAS INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
SOUTH LOUISIANA PROPERTY HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT ENERGY HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT ENERGY LOUISIANA, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT GP, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

6

ASCENT LP, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT OPERATING, L.P., as Borrower
By:	Ascent GP, LLC,
	its general partner
	By:	/s/ Eddie M. LeBlanc
	Name:	Eddie M. LeBlanc
	Title:	Vice President, Secretary & Treasurer
PONTOTOC ACQUISITION CORP. as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
PONTOTOC PRODUCTION COMPANY, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
OKLAHOMA BASIC ECONOMY CORPORATION, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

7

PONTOTOC HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
PONTOTOC GATHERING, L.L.C., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
DYNE EXPLORATION COMPANY, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT RESOURCES WV, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

8

FORTIS CAPITAL CORP., as Agent and Lender
By:	/s/ Irond Rokholt
Name:	Irond Rokholt
Title:	Managing Director
By:	/s/ Scott Myatt
Name:	Scott Myatt
Title:	Vice President

9

CAPITAL ONE, N.A., as Lender
By:	/s/ Nancy G. Moragas
Name:	Nancy G. Moragas
Title:	Senior Vice President

10

THE ROYAL BANK OF SCOTLAND plc, as Lender
By:	/s/ Scott L. Joyce
Name:	Scott L. Joyce
Title:	Vice President

11

STERLING BANK, as Lender
By:	/s/ Ryan K. Michael
Name:	Ryan K. Michael
Title:	Officer

12

COMPASS BANK, as Lender
By:	/s/ Dorothy Marchand
Name:	Dorothy Marchand
Title:	Compass Bank

13

FORTIS ENERGY LLC, as Qualified Hedging Counterparty and as Lender for the purposes set forth in Sections 2(e), 8, 17 and 18 of the Loan Agreement
By:	/s/ David Jones
Name:	David Jones
Title:	President
By:	/s/ Derek Pisani
Name:	Derek Pisani
Title:	Director of Operations

14

ANNEX A

	Percentage Share		Revolving Commitment		Acquisition Commitment
Fortis Capital Corp.	30	%	$	30,000,000	$	4,500,000
Capital One, N.A.	20	%	$	20,000,000	$	3,000,000
The Royal Bank of Scotland plc	20	%	$	20,000,000	$	3,000,000
Sterling Bank	15	%	$	15,000,000	$	2,250,000
Compass Bank	15	%	$	15,000,000	$	2,250,000
	100	%	$	100,000,000	$	15,000,000

15

EX-10.3

Exhibit 10.3

SECOND AMENDMENT TO

SECOND AMENDED AND RESTATED LOAN AGREEMENT

THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT (this “Amendment”) made as of the 23^rd day of June, 2006, among ASCENT OIL AND GAS INC., a Delaware corporation (“Ascent Oil and Gas”), SOUTH LOUISIANA PROPERTY HOLDINGS, INC., a Louisiana corporation (“SLPH”), ASCENT ENERGY HOLDINGS, INC., a Delaware corporation (“Ascent Energy Holdings”), ASCENT ENERGY LOUISIANA, LLC, a Delaware limited liability company (“Ascent Louisiana”), ASCENT GP, LLC, a Delaware limited liability company (“Ascent GP”), ASCENT LP, LLC, a Delaware limited liability company (“Ascent LP”), ASCENT OPERATING, L.P., a Delaware limited partnership (“Ascent Operating”), PONTOTOC ACQUISITION CORP., a Nevada corporation (“Pontotoc Acquisition”), PONTOTOC PRODUCTION COMPANY, INC., a Texas corporation (“Pontotoc Texas”), OKLAHOMA BASIC ECONOMY CORPORATION, an Oklahoma corporation (“OBEC”), PONTOTOC HOLDINGS, INC., an Oklahoma corporation (“Pontotoc Holdings”), PONTOTOC GATHERING, L.L.C., an Oklahoma limited liability company (“Pontotoc Gathering”), DYNE EXPLORATION COMPANY, an Oklahoma corporation (“Dyne”), ASCENT RESOURCES, WV, INC., a Delaware corporation (“Resources”), Resources, together with Ascent Oil & Gas, SLPH, Ascent Energy Holdings, Ascent Louisiana, Ascent GP, Ascent LP, Ascent Operating, Pontotoc Acquisition, Pontotoc Texas, OBEC, Pontotoc Holdings, Pontotoc Gathering and Dyne, the “Borrowers,” and each a “Borrower”), FORTIS CAPITAL CORP., a Connecticut corporation, individually (“Fortis”) and as agent (the “Agent”), CAPITAL ONE, N.A., a national banking association (“Capital One”), THE ROYAL BANK OF SCOTLAND plc, a company organized under the laws of Scotland (“RBS”), STERLING BANK, a bank organized under the laws of Texas (“Sterling”), COMPASS BANK, a bank organized under the laws of Delaware (“Compass”), and the other lenders which may become a party hereto (each a “Lender” and collectively the “Lenders”), and FORTIS ENERGY LLC, a Delaware limited liability company (“Fortis Energy”).

WHEREAS, the Borrowers, Agent and the Lenders have entered into a Second Amended and Restated Loan Agreement dated as of December 19, 2005, as amended by the First Amended to Second Amended and Restated Loan Agreement dated as of May 1, 2006 (as further amended from time to time, the “Loan Agreement”); and

WHEREAS, the Borrowers have requested that the Lenders make certain changes to the Loan Agreement, and the Lenders are willing to do so;

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1. Defined Terms. All capitalized terms used but not otherwise defined in this Amendment shall have the meaning ascribed to them in the Loan Agreement. Unless otherwise specified, all section references herein refer to sections of the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Section 1. The definition of “EBITDA” in Section 1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“EBITDAX” means with respect to any Person at any date of determination, the sum of (a) net income for such Person for the four (4) most recent Fiscal Quarters then ended, plus (b) interest expense deducted in arriving at such net income, plus (c) Federal, state and local income taxes deducted in arriving at such net income, plus (d) depreciation, amortization, depletion, exploration expenses and any other item expensed under successful efforts accounting and capitalized under full cost accounting, and other non-cash charges deducted in arriving at net income (including (i) any provision for the reduction in the carrying value of assets recorded in accordance with GAAP, including property impairments, and (ii) non-cash charges resulting from the requirements of SFAS 133 or 143), in each case as net income is computed and calculated in accordance with GAAP.

2.2 References to “EBITDA”. Each reference in the Agreement to the term “EBITDA” is deleted hereby and replaced with the term “EBITDAX”.

2.3 Section 18. The notice address of the Borrowers in Section 18(b)(i) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

The Borrowers:	Ascent Oil & Gas Inc.
	c/o Ascent Energy Inc.
	4965 Preston Park Blvd., Ste. 800
	Plano, TX 75093
	Attention: Eddie LeBlanc
	Telephone No.: 972-543-3905
	Facsimile No.: 972-543-3904

3. Effectiveness of Amendment. This Amendment shall be effective upon receipt by the Agent of:

3.1 An executed copy of this Amendment; and

3.2 All expenses due and owing by the Borrowers.

4. Documentation of Rights-of-Way. Borrowers have discovered and have informed the Agent and the Lenders that, with respect to the pipelines utilized for the transportation of hydrocarbons by Pontotoc Gathering in Oklahoma and by SLPH in Louisiana, not all rights of way owned or leased by Pontotoc Gathering and SLPH, respectively, are documented in a manner that evidences Pontotoc Gathering’s and SLPH’s ownership or leasehold rights in such rights of way and its right to utilize such pipelines. As soon as practicable, but in no event later than October 2, 2006, the Borrowers shall furnish to the Agent and the Lenders a report satisfactory to Agent and Lenders (a) identifying the undocumented portions of the rights of way

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for such pipelines and the oil and gas reserves of the Borrowers and any of their Subsidiaries transported through such pipelines, and (b) containing a proposal for resolution of any effects such undocumented rights of way may have on the credit facility and security documentation relating thereto, including possible curative efforts or if necessary, reduction in the Borrowing Base.

5. Further Assurances. Borrowers’ Representative, at its sole expense, will, and will cause each other Borrower to, promptly execute and deliver to the Agent upon its request all such other and further documents, agreements and instruments Agent deems necessary, in its sole discretion, in connection with the transactions contemplated hereby.

6. Ratifications, Borrower Representations and Warranties.

6.1 The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Loan Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement are ratified and confirmed and shall continue in full force and effect. The Borrowers and the Lenders agree that the Loan Agreement and the Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

6.2 To induce the Lenders to enter into this Amendment, the Borrowers ratify and confirm each representation and warranty set forth in the Loan Agreement as if such representations and warranties were made on the even date herewith, and further represents and warrants (i) that there has occurred since the date of the last financial statements delivered to the Banks no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect, (ii) that no Event of Default exists on the date hereof, and (iii) that the Borrower is fully authorized to enter into this Amendment.

7. Benefits. This Amendment shall be binding upon and inure to the benefit of the Lenders and Borrowers, and their respective successors and assigns; provided, however, that Borrowers may not, without the prior written consent of the Lenders, assign any rights, powers, duties or obligations under this Amendment, the Loan Agreement or any of the other Loan Documents.

8. Construction. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas.

9. Invalid Provisions. If any provision of this Amendment is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and the remaining provisions of this Amendment shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance.

10. Entire Agreement. The Loan Agreement, as amended by this Amendment, contains the entire agreement among the parties regarding the subject matter hereof and supersedes all prior written and oral agreements and understandings among the parties hereto regarding same.

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11. Reference to Loan Agreement. The Loan Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement to the Loan Agreement shall mean a reference to the Loan Agreement as amended hereby.

12. Counterparts. This Amendment may be separately executed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall be deemed to constitute one and the same agreement.

[The Remainder of this Page Intentionally Left Blank)

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

ASCENT OIL AND GAS INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
SOUTH LOUISIANA PROPERTY HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT ENERGY HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT ENERGY LOUISIANA, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT GP, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

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ASCENT LP, LLC, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT OPERATING, L.P., as Borrower
By:	Ascent GP, LLC,
	its general partner
	By:	/s/ Eddie M. LeBlanc
	Name:	Eddie M. LeBlanc
	Title:	Vice President, Secretary & Treasurer
PONTOTOC ACQUISITION CORP. as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
PONTOTOC PRODUCTION COMPANY, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
OKLAHOMA BASIC ECONOMY CORPORATION, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

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PONTOTOC HOLDINGS, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
PONTOTOC GATHERING, L.L.C., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
DYNE EXPLORATION COMPANY, as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer
ASCENT RESOURCES WV, INC., as Borrower
By:	/s/ Eddie M. LeBlanc
Name:	Eddie M. LeBlanc
Title:	Vice President, Secretary & Treasurer

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FORTIS CAPITAL CORP., as Agent and Lender
By:	/s/ Darrell Holley
Name:	Darrell Holley
Title:	Managing Director
By:	/s/ Scott Myatt
Name:	Scott Myatt
Title:	Vice President

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CAPITAL ONE, N.A., as Lender
By:	/s/ Nancy G. Morgas
Name:	Nancy G. Morgas
Title:	Senior Vice President

9

THE ROYAL BANK OF SCOTLAND plc, as Lender
By:	/s/ Scott L. Joyce
Name:	Scott L. Joyce
Title:	Vice President

10

STERLING BANK, as Lender
By:	/s/ David W. Phillips
Name:	David W. Phillips
Title:	Senior Vice President

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COMPASS BANK, as Lender
By:	/s/ Dorothy Marchand
Name:	Dorothy Marchand
Title:	Senior Vice President

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FORTIS ENERGY LLC, as Qualified Hedging Counterparty and as Lender for the purposes set forth in Sections 2(e), 8, 17 and 18 of the Loan Agreement
By:	/s/ David Jones
Name:	David Jones
Title:	President
By:	/s/ Alan G. Bozian
Name:	Alan G. Bozian
Title:	Managing Director

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EX-10.4

Exhibit 10.4

AMENDED AND RESTATED

EQUITY INCENTIVE PLAN

OF

ASCENT ENERGY INC.

1. Purpose. The purpose of this Amended and Restated Equity Incentive Plan (this “Plan”) is to advance the interests of the Corporation by encouraging and enabling the acquisition of a larger personal proprietary interest in the Corporation by employees and directors of the Corporation and its Subsidiaries upon whose judgment and keen interest the Corporation is largely dependent for the successful conduct of its operations and by providing such employees and directors with incentives to put forth maximum efforts for the success of the Corporation’s business. It is anticipated that the acquisition of such proprietary interest in the Corporation and such incentives will stimulate the efforts of such employees and directors on behalf of the Corporation and its Subsidiaries and strengthen their desire to remain with the Corporation and its Subsidiaries. It is also expected that such incentives and the opportunity to acquire such a proprietary interest will enable the Corporation and its Subsidiaries to attract desirable employees and directors.

2. Definitions. When used in this Plan, unless the context otherwise requires:

(a) “Board of Directors” shall mean the Board of Directors of the Corporation, as constituted at any time.

(b) “Committee” shall mean the Committee hereinafter described in Section 3.

(c) “Consolidated Funded Debt” means the amount determined by the Committee in good faith to constitute, for the Corporation and its consolidated Subsidiaries on a consolidated basis, the principal amount of all indebtedness of the Corporation and/or its Subsidiaries for borrowed money or the deferred purchase price of any property, including, without limitation, interest-bearing obligations and capitalized interest, capitalized lease obligations, guaranties and obligations similar to those constituting the Corporation’s Consolidated Funded Debt at October 31, 2004. By way of illustration and not of limitation, as of October 31, 2004, the Consolidated Funded Debt of the Corporation consisted of approximately $161,797,000 and was comprised of the following: (i) borrowings outstanding under the Corporation’s senior bank revolving credit agreement, (ii) the aggregate principal amount of the Corporation’s senior notes, (iii) long term interest accrued on the Corporation’s senior notes and (iv) the Corporation’s subordinate debt.

(d) “Corporation” shall mean Ascent Energy Inc.

(e) “Eligible Persons” shall mean those persons described in Section 4 who are potential recipients of Incentive Awards.

(f) “Enterprise Appreciation Rights” shall mean rights to receive a percentage of the Total Eligible Enterprise Value upon a Sale of the Corporation, if and to the extent provided pursuant to the Plan.

(g) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(h) “Incentive Award” shall mean an award of Enterprise Appreciation Rights granted pursuant to this Plan.

(i) “Incentive Percentage” shall mean the percentage, set forth in the agreement evidencing the grant of Enterprise Appreciation Rights, of the Total Eligible Enterprise Value to be received pursuant to such Rights.

(j) “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended.

(k) “Plan” shall mean this Equity Incentive Plan of Ascent Energy Inc., as adopted by the Board of Directors, and effective as of May 20, 2005, as such Plan from time to time may be amended.

(l) “Sale of the Corporation” shall mean the occurrence of one of the following events, whether in a single transaction or in a series of related transactions:

(i) the merger of the Corporation, the consolidation of the Corporation, or the sale or transfer of a majority of the outstanding voting securities of the Corporation, to any person or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), in each case under circumstances in which the holders of a majority in voting power of the outstanding voting securities of the Corporation, immediately prior to such transaction, own less than a majority in voting power of the outstanding voting securities of the Corporation, or the surviving or resulting corporation or acquirer, as the case may be, immediately following such transaction or series of related transactions; or

(ii) a sale of all or substantially all of the assets of the Corporation as an entirety.

(m) “Subsidiary” shall mean any corporation or limited liability company 50% or more of whose stock or membership interests having general voting power is owned by the Corporation, or by another Subsidiary as herein defined, of the Corporation or any limited partnership or limited liability company of which the Corporation or another Subsidiary is the sole general partner or manager, as the case may be.

(n) “Total Eligible Enterprise Value” shall mean the excess of the value (on a present value basis with present value being determined in accordance with customary financial practices and using a discount rate equal to the U.S. Treasury rate for instruments with comparable maturities, except that debt securities shall be valued at their face amount) of the consideration payable to the Corporation or its securityholders in a Sale of the Corporation transaction, over Consolidated Funded Debt of the Corporation ) immediately prior to the Sale of the Corporation. The Total Eligible Enterprise Value shall be adjusted to reflect, in the case of a sale of assets, the difference between current assets not sold and current liabilities not assumed.

3. Administration. The Plan shall be administered by the Board of Directors or a Committee of the Board of Directors. The members of the Committee shall be selected by the Board of Directors. Any member of the Committee may resign by giving written notice thereof to the Board of Directors, and any member of the Committee may be removed at any time, with or without cause, by the Board of Directors. If, for any reason, a member of the Committee shall cease to serve, the vacancy shall be filled by the Board of Directors. During any period of time in which the Plan is administered by the Board of Directors, all references in the Plan to the Committee shall be deemed to refer to the Board of Directors.

The Committee shall have full power and authority to administer and interpret the Plan. Determinations of the Committee as to any question which may arise with respect to the interpretation of the provisions of the Plan and Incentive Awards shall be final. The Committee may authorize and establish such rules, regulations and revisions thereof not inconsistent with the provisions of the Plan, as it may deem advisable to make the Plan and Incentive Awards effective or provide for their administration, and may take such other action with regard to the Plan and Incentive Awards as it shall deem desirable to effectuate their purpose.

4. Participants. The class of persons who are potential recipients of Incentive Awards granted under this Plan shall consist of employees and directors of the Corporation or a Subsidiary, as determined by the Committee. The parties to whom Incentive Awards are granted under this Plan, and the Incentive Percentage under each such Incentive Award, shall be determined by the Committee in its sole discretion, subject, however, to the terms and conditions of this Plan.

5. Aggregate Plan Limit. The aggregate Incentive Percentages under outstanding Incentive Awards shall not exceed 13.5%. If the amount payable pursuant to an Incentive Award ceases to be payable for any reason, the Incentive Percentage under such Incentive Award shall again be available for future grants of Incentive Awards.

6. Grant of, and Payment under, Enterprise Appreciation Rights. The Committee shall have the authority to grant to any Eligible Person, in its sole discretion, Enterprise Appreciation Rights. Except as otherwise provided in Section 10, upon the Sale of the Corporation, the holder of Enterprise Appreciation Rights which are then vested shall be entitled to receive payment from the Corporation of an amount equal to the then vested portion of the product obtained by multiplying (i) the Total Eligible Enterprise Value upon such Sale of the Corporation, by (ii) the Incentive Percentage under such holder’s Incentive Award.

Payment of the amount determined hereunder upon the Sale of the Corporation shall be paid by the Corporation to each holder of Enterprise Appreciation Rights on or before the thirtieth (30^th) day following the Sale of the Corporation, unless otherwise provided to the contrary in the Enterprise Appreciation Rights agreement applicable to such holder. Payment may be made solely in cash, or in the same form of consideration as received by the Corporation or its securityholders in such transaction, as determined by the Committee.

Enterprise Appreciation Rights shall be evidenced by an agreement executed on behalf of the Corporation and by the Eligible Person to whom the Rights are granted. The form of Enterprise Appreciation Rights agreement shall be as determined from time to time by the Committee, and need not be identical with respect to each grantee.

7. Vesting of Enterprise Appreciation Rights. Except as otherwise determined by the Committee and provided in an applicable Enterprise Appreciation Rights agreement, Enterprise Appreciation Rights, after the grant thereof, shall become vested at the rate of 10% on the date of grant, and an additional 30% on each of the first, second and third anniversaries of the date of grant provided that the holder is still in the employ or service of the Corporation or a Subsidiary on the applicable vesting date. Notwithstanding the foregoing, all Enterprise Appreciation Rights granted to any Eligible Person shall become fully vested upon the occurrence of a Sale of the Corporation while the holder of such Enterprise Appreciation Rights is still in the employ or service of the Corporation.

8. Consideration for Incentive Awards. The Corporation shall obtain such consideration for the grant of an Incentive Award as the Committee in its discretion may determine.

9. Non-Transferability of Incentive Awards. An Incentive Award shall not be transferable otherwise than by will or the laws of descent and distribution.

10. Termination of Employment or Service. Notwithstanding any other provision of the Plan to the contrary, in the event the holder is terminated by the Corporation for cause or in the event the holder voluntarily leaves the employ of the Corporation (other than death or permanent disability), prior to the time a payment(s) due holder hereunder is received, then all or any part (including any vested portion) of any Enterprise Appreciation Rights with respect to which payment was not previously made upon a Sale of the Corporation shall terminate and be forfeited immediately upon the cessation or termination of the holder’s employment, or service as a director of, the Corporation or any Subsidiary, and the holder shall not be entitled to receive any payment thereafter in connection with such Enterprise Appreciation Rights or the Incentive Award under which they were granted. A holder of Enterprise Appreciation Rights whose employment by, or service as a director of, the Corporation or a Subsidiary ceases or is terminated on account of the death or permanent disability of such holder, or as a result of termination by the Corporation without cause, shall retain such Enterprise Appreciation Rights for a period of six months following such termination of employment or service to the extent such Enterprise Appreciation Rights were vested prior to death, permanent disability or termination without cause.

11. Compliance with Securities Act. Any holder of an Incentive Award shall make such representations and furnish such information as may, in the opinion of counsel for the Corporation, be appropriate to permit the Corporation, in the light of the then existence or non-existence in respect of an effective Registration Statement under the Securities Act of 1933, as from time to time amended (the “Securities Act”), to make payment pursuant to an Incentive Award.

12. Income Tax Withholding. If the Corporation or a Subsidiary shall be required to withhold any amounts by reason of any Federal, State, local or foreign tax rules or regulations in respect of any Incentive Award, the Corporation or the Subsidiary shall be entitled to take such action as it deems appropriate in order to ensure compliance with such withholding requirements. In order to facilitate payment by the holder of an Incentive Award of his withholding obligations with respect to the Incentive Award, the Corporation or Subsidiary may, at its election, (a) deduct from any cash payment otherwise due to the holder, the appropriate withholding amount,

(b) require the holder to pay to the Corporation or Subsidiary in cash the appropriate withholding amount, or (c) permit the holder to elect to have the Corporation withhold a portion of the securities or other property to be delivered with respect to such Incentive Award, the value of which is equal to the required withholding amount.

13. Amendment of the Plan. Except as hereinafter provided, the Board of Directors or the Committee may at any time withdraw or from time to time amend the Plan as it relates to, and the terms and conditions of, any Incentive Awards not theretofore granted, and the Board of Directors or the Committee, with the consent of the affected holder of an Incentive Award, may at any time withdraw or from time to time amend the Plan as it relates to, and the terms and conditions of, any outstanding Incentive Award. Notwithstanding the foregoing, the Board of Directors or the Committee may amend the Plan and any outstanding Incentive Award, without the consent of the holder, if and to the extent required to comply with the requirements of Section 409A of the Internal Revenue Code.

14. No Right of Employment or Service. Nothing contained herein or in an Incentive Award shall be construed to confer on any employee or director any right to be continued in the employ of the Corporation or any Subsidiary or as a director of the Corporation or a Subsidiary or derogate from any right of the Corporation and any Subsidiary to retire, request the resignation of, or discharge employee or director (without or with pay), at any time, with or without cause.

15. Effective Date of the Plan. This Plan is effective as of May 20, 2005 (the “Effective Date”).

16. Final Grant Date. No Incentive Award shall be granted under the Plan after May 20, 2015; provided, however, Incentive Awards granted on or prior to that date shall continue and extend beyond that date pursuant and subject to this Plan.

EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of April 1, 2005 by and between Ascent Energy Inc., a Delaware corporation (the “Company”), and Terry W. Carter (the “Executive”).

WITNESSETH:

WHEREAS, the Executive has been providing services to the Company and the Company has been compensating the Executive; and

WHEREAS, the Company desires to continue to employ the Executive upon the terms and conditions and in the capacities set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Employment and Term of Employment. Subject to the terms and conditions of this Agreement, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company as President, Chief Executive Officer and Chief Operating Officer for a term beginning on the date hereof (the “Effective Date”) and ending on the third anniversary of such date (the “Term of Employment”). On the second anniversary date hereof and on each annual anniversary of such date thereafter (such date and each annual anniversary thereafter being referred to herein as a “Renewal Date”), the Term of Employment shall be automatically extended so as to terminate two years from such Renewal Date, unless, not less than 90 days prior to such Renewal Date, written notice is given by either the Company or the Executive that the Term of Employment shall not be so extended. In no event, however, will this Agreement extend beyond the Executive’s normal retirement date pursuant to any Company employee benefit plan in which he may be a participant.

2. Scope of Employment. During the Term of Employment, the Executive Agrees to serve as President, Chief Executive Officer and Chief Operating Officer of the Company and will perform the duties and functions as are normal and customary to such positions and that are consistent with the responsibilities contained in the Company’s bylaws and (ii) perform such other duties not inconsistent with his position as are assigned to him, from time to time, by the Board of Directors, which shall have direct supervision over the Executive. Executive also agrees to serve, if elected, as an officer or director of any subsidiary of affiliate of the Company. During the Term of Employment, Executive shall devote his full business time, attention, skill and efforts to the faithful performance of his duties hereunder. The foregoing shall not be construed to prevent the Executive from making investments in businesses or enterprises so long as such investments do not require any services on the part of the Executive in the operation of such business or enterprises and do not violate the terms and conditions of this Agreement.

3. Compensation. During the Term of Employment, in consideration of the Executive’s services hereunder, including, without limitation, service as an officer, director or member of any committee of the board of directors of the Company or of any subsidiary or

EMPLOYMENT AGREEMENT Page 1

affiliate thereof, and in consideration of the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, the Executive shall receive a salary at the rate of $275,000.00 per year (payable at such regular intervals as other employees of the Company are compensated in accordance with the Company’s employment practices), which amount shall be subject to review annually by the Board of Directors of the Company and may be adjusted at its discretion, provided that such salary may not be reduced. In addition, the Executive shall be entitled to participate in any applicable bonus, incentive compensation or other programs created by the board of directors of the Company from time to time for the benefit of such employee.

“For purposes of Section 7(c)(i) or 7(d)(i) hereof, “annual rate of total compensation” shall mean the sum of (i) the annual rate of salary set forth above, as the same may be increased from time to time as provided above; and (tt) the most recent annual bonus (whether in cash or securities) awarded the Executive; or (Hi) in the case of clause (ii)above, for purposes of Section 7(d)(i), it shall be the greater of (A) the most recent annual bonus (whether in cash or securities) awarded the Executive, (B) the last annual bonus (whether in cash or securities) awarded the Executive prior to the “Change of Control” and (C) 50% of the annual rate of salary set forth above, as the same may be increased from time to time as provided above.”

4. Additional Compensation and Benefits. As additional compensation for the Executive’s services under this Agreement, the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, during the Term of Employment, the Company agrees to provide the Executive with the non-cash benefits being provided to him on the date of this Agreement (or the equivalent of such benefits) and, without duplication, any other non-cash benefits provided by the Company to its other officers and key employees as they may exist from time to time. Such benefits shall include leave or vacation time, medical and dental insurance, life insurance, retirement and disability benefits as may hereafter by provided by the Company in accordance with its policies as well as any stock option plan or similar employee benefit program for which key executives are or shall become eligible. In addition, The Company shall pay the annual premiums for a one million dollar term life insurance policy issued by West Coast Life Insurance Company (Policy Number Z02387095) and for an individual disability policy provided by Provident Life and Accident Insurance Company (Policy Number LAR364206), both of which are transferable should Mr. Carter leave the company for any reason. The Company shall reimburse the Executive for reasonable and necessary expenses incurred by the Executive in furtherance of the Company’s business, provided that such expenses are incurred in accordance with the Company’s policies and upon presentation of the documentation in accordance with expense reimbursement policies of the Company as they may exist from time to time, and submission to the Company of adequate documentation in accordance with federal income tax regulations and administrative pronouncements.

EMPLOYMENT AGREEMENT Page 2

5. Confidentiality and Other Matters.

(a). Confidentiality. The Executive shall hold in a fiduciary capacity for the benefit of the Company all financial information, customer lists, contracts, books, records, materials, maps, data, reports, including but not limited to, results of exploration, drilling, drill cores, cuttings, and other samples, and other information relating to the business or affairs of the Company (such information being collectively referred to herein as the “Confidential Information”). During the Term of Employment and after termination of the Executive’s employment hereunder, the Executive agrees: (i) to take all such precautions as may be reasonably necessary to prevent the disclosure to any third party of any of the Confidential Information; (ii) not to use for the Executive’s own benefit any of the Confidential Information; and (Hi) not to aid any other person or entity in the use of the Confidential Information in competition with the Company. Notwithstanding any provision contained herein to the contrary, the term “Confidential Information” shall not be deemed to include any general knowledge, skills or experience acquired by the Executive or any knowledge or information known to the public in general. The Executive further agrees that upon termination of his employment for any reason, he will surrender to the Company all Confidential Information, and any copies thereof, produced by him or coming into his possession and agrees that all such materials, and copies thereof, are at all times the property of the Company. The Executive further agrees that he shall not otherwise knowingly act or conduct himself (i) to the material detriment of the Company, its subsidiaries or affiliates, or (ii) in a manner which is inimical or contrary to the interests thereof.

(b). Discoveries and Inventions. If the Executive, in the course of his employment with the Company, makes any discovery, improvement, or invention which pertains to or may be useful in the business of the Company, its subsidiaries or affiliates at the time of cessation of his employment, such discovery, improvement, or invention shall be the exclusive property of the Company. The Executive shall execute and deliver to the Company, with further compensation, any and all documents which the Company deems necessary or appropriate to more fully and more perfectly evidence the Company’s ownership thereof.

(c). Notification of Discoveries. The Executive hereby assigns to the Company all his right, title and interest in and to any and all inventions, discoveries, developments, improvements, techniques, designs, data and all other work products, whether tangible or intangible, as described in 5(b) herein, which Executive conceives, reduces to practice or otherwise creates in the course of his employment and in which the law recognizes any protectable interest. The Executive agrees to perform all acts necessary to enable the Company to learn of and to protect the right it receives hereunder, including, but not limited to, making full and immediate disclosure to the Company.

(d). Non-Solicitation. Without the prior written consent of the Company, the Employee covenants and agrees that during the term of this Agreement and for a period of one year thereafter, he shall not hire or attempt to hire for or on behalf of himself or any business organization, any officer, or employee of the Company, or encourage for or on behalf of himself or any business organization, any officer, or employee to terminate his or her relationship or employment with the Company.

EMPLOYMENT AGREEMENT Page 3

(e). Definitions; Remedies. For purposes of this Section 5, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns. In the event of a breach or threatened breach by the Executive of the provisions of this Section 5, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that the provisions of this Section 5 shall survive the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company.

6. Noncompetition.

(a). Noncompetition Activities. The Executive acknowledges that the nature of the employment under this Agreement is such as will bring the Executive in personal contact with patrons or customers of the Company and will enable him to acquire valuable information as to the nature and character of the business of the Company, thereby enabling him, by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge and thereby gain an unfair advantage. Accordingly, the Executive covenants and agrees that he will not, without the prior written consent of the Company during the Term of Employment and for the period of one year thereafter, engage directly or indirectly for himself, or as an agent, representative, officer, director or employee of others, in the exploration for hydrocarbons in fields or properties being developed, or explored by the Company during the time of his employment or prospects on which the Company worked; provided, however, that not withstanding the foregoing, the Executive may have passive investments in a competing business if such competing business is publicly traded and if such investment constitutes less than five percent (5%) of the equity of such competing business.

(b). Scope. In the event that the provisions of this Section 6 should ever be deemed to exceed the time, geographic or activity related limitations permitted by applicable law, then such provision shall be reformed to the maximum time, geographic or activity related limitations permitted by applicable law. In the event of a breach or threatened breach by Executive of the provisions of this Section 6, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that this Section 6 shall remain in effect for its full term notwithstanding the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company. For purposes of this Section 6, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns.

7. Termination.

(a). Termination by Company for Cause. The Company may terminate the Executive’s employment hereunder -with Cause (defined below) and without prior notice. If the

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Company terminates the Executive’s employment with Cause, the Executive shall only be entitled to receive (i) accrued but unpaid compensation pursuant to Section 3 of this Agreement, and (ii) those benefits under Section 4 which are required under the Executive Income Retirement Security Act of 1974, as amended (“ERISA”), or other laws. As used in this Agreement, “Cause” shall mean (i) any material failure of the Executive after written notice to perform his duties specified in Section 2 of this Agreement when such failure shall have continued for 30 days after receipt of such notice, (ii) any material failure of the Executive after written notice to follow any written direction of the Board of Directors or the President and CEO when such failure shall have continued for 30 days after receipt of such notice, (Hi) willful misconduct or negligence in the performance of his duties, including but not limited to, the diversion or taking advantage of a corporate opportunity, ftv) commission of fraud by the Executive against the Company, its affiliates or customers, (v) a material breach by the Executive of Sections 5 or 6 of this Agreement, or (vi) conviction of the Executive of a felony offense or a crime involving moral turpitude. If the Company terminates the Executive’s employment for Cause, the Term of Employment shall end upon such termination.

(b). Death or Disability. In the event of the Executive’s death or of the Executive’s sickness or disability of a permanent nature rendering the Executive unable to perform his duties hereunder for a period of 90 consecutive days or 120 days in any twelve month period during the Term of Employment, the Company shall pay to the Executive or the estate of the Executive, as applicable, in the year of death or disability or the year thereafter compensation which would otherwise be payable to the Executive pursuant to Section 3 hereof up to the end of the sixth month after his death or the expiration of the 90 consecutive day period or on the 120^ day referred to above, as the case may be, during which he was unable to perform his duties hereunder. The Term of Employment shall end upon the Executive’s death or upon the expiration of the 90 consecutive day period or the 120th day referred to above, as the case may be.

(c). Termination by Company Without Cause or by the Executive with Good Reason. If either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason (as hereinafter defined), the Company shall:

(i) pay the Executive, in accordance with the Company’s normal payroll practices, his current rate of total compensation for the remaining term of employment, as extended pursuant to Section 1, or if the Company so elects, pay the Executive such amount in lump sum form within 30 days after the date of such termination;

(ii) pay the Executive any accrued but unpaid compensation as of the date of the termination of employment; and

(iii) continue until the first anniversary of the termination of the Executive’s employment, or such longer period as any plan, program or policy or ERISA or other laws may provide, benefits to the Executive as set forth in Section 7(f) below.

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As used in this Agreement, “Good Reason” shall mean: (A) the failure by the Company to elect or re-elect or to appoint or re-appoint the Executive to the office of President, Chief Executive Officer and Chief Operating Officer of the Company without Cause; (B) a material change by the Company of the Executive’s function, duties or responsibilities that would cause the Executive’s position with the Company to become of less dignity, responsibility, importance or scope from the position and attributes thereof described in Section 2 above; (C) the Company requires the Executive to re-locate his primary office to a location that is greater than 50 miles from the location of the Company as of the date hereof, or (D) any other material breach of this Agreement by the Company and the continuance of such breach for at least 30 days.”

(d). Termination Following a Change of Control. If, within one year of a Change of Control, either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason, then, in addition to any amounts to which the Executive may otherwise be entitled hereunder, the Company shall:

(i) pay to the Executive, within 30 days after the date of such termination, a lump sum cash payment equal to an additional two (2) times the Executive’s then current annual rate of total compensation;

(e). Change of Control. As used in this Agreement, a “Change of Control” shall mean:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership of 50% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or its affiliates, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (in) hereof; or

(ii) Individuals, who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such

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individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (A) (I) all or substantially all of the persons who were beneficial owners of the Outstanding Common Stock immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction, and (2) all or substantially all of the persons who were beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (excluding (1) any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction and (2) any Person approved by the Incumbent Board) beneficially owns, directly or indirectly, 40 percent or more of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to such Corporate Transaction.

(f). Insurance and Other Special Benefits. To the extent Executive is eligible thereunder, for a period of 12 months following termination pursuant to Section 7(c), or for a period of 24 months following termination pursuant to Section 7(d) hereof, Executive shall continue to be provided life insurance, disability and long term disability policies provided to the Executive on the date hereof or such successor policies in effect at the time of Executive’s termination, and shall also continue to be covered for the applicable period by each other insurance, disability, health or other benefit program, plan or policy by which he was covered at the time of the Executive’s termination. In the event Executive is ineligible to continue to be so covered under the terms of any such life insurance, disability, long-term disability, insurance, health or other benefit program, plan or policy, the Company shall provide to Executive through other sources such benefits, including such additional benefits, as may be necessary to make the benefits applicable to Executive substantially equivalent to those in effect immediately prior to such termination, provided that (i) the costs paid by the Company for such benefit programs do not exceed the costs which it would have paid if such benefit programs were still available to such Executive or (ii) if during such period Executive should enter into the employ of another

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company or firm which provides to Executive substantially similar benefit coverage, Executive’s participation in the comparable benefits provided by the Company, either directly or through such other sources, shall cease. Nothing contained in this paragraph shall be deemed to require or permit termination or restriction of any of Executive’s coverage under any plan or program thereto to which Executive is entitled under the terms of such plan or program, whether at the end of the aforementioned 12- or 24-month period, as the case may be, or at any other time.

(g). Limitation on Payments. If any amount or benefit payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999 all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any land between the Company and the Executive if they are of a type that would be included in determining what tax, if any, is due under Section 4999. In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines and if any one agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

8. Expenses. The Company shall promptly pay or reimburse Executive for all costs and expenses, including, without limitation, court costs and attorneys’ fees, incurred by Executive as a result of any claim, action or proceeding (including, without limitation, a claim, action or proceeding by Executive against the Company) arising out of, or challenging the validity or enforceability of, this Agreement or any provision hereof, provided such Executive’s claim, action or proceeding is materially successful against the Company.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas. Venue and jurisdiction of any action relating to this Agreement shall lie in Collin County.

10. Notice. Any notice, payment, demand or communication required or permitted to be given by this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered personally or if sent by registered or certified mail, return receipt requested, postage prepaid, addressed to such party at its address set forth below such party’s signature to this Agreement or to such other address as shall have been furnished in writing by

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such party for whom the communication is intended. Any such notice shall be deemed to be given on the date so delivered.

11. Severabillty. In the event any provisions hereof shall be modified or held ineffective by any court, such adjudication shall not invalidate or render ineffective the balance of the provisions hereof.

12. Entire Agreement. This Agreement constitutes the sole agreement between the parties with respect to the employment of the Executive by the company and supersedes any and all other agreements, oral or written, between the parties. This Agreement may not be modified or amended except by a writing signed by the parties.

13. Waiver. Any waiver or breach of any of the terms of this Agreement shall not operate as a waiver of any other breach of such terms or conditions, or any other terms or conditions, nor shall any failure to enforce any provisions hereof operate as a waiver of such provision or any other provision hereof.

14. Assignment. This Agreement is a personal employment contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned or pledged. Subject to Section 7(d) hereof, the Company may assign its rights under this Agreement to (i) any entity into or with which the Company is merged or consolidated or to which the Company transfers all or substantially all of its assets or (ii) any entity, which at the time of such assignment, controls, is under common control with, or is controlled by the Company.

15. Successors. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs, executors, administrators and legal representatives. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

16. Section Headings. The section headings in this Agreement have been inserted for convenience and shall not be used for interpretive purposes or to otherwise construe this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above and intend that this Agreement have the effect of a sealed instrument.

ASCENT ENERGY INC.
By:	/s/ Terry W. Carter
Name:	Terry W. Carter
Title:	President, CEO, COO

1700 Redbud Blvd.

Suite 450

McKinney, TX 75069

EXECUTIVE

/s/ Terry W. Carter

Terry W. Carter

3308 Langley

Plano, TX 75025

Address of Executive

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EX-10.7

Exhibit 10.7

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of April 1, 2005 by and between Ascent Energy Inc., a Delaware corporation (the “Company”), and Eddie M LeBlanc (the “Executive”).

WITNESSETH:

WHEREAS, the Executive has been providing services to the Company and the Company has been compensating the Executive; and

WHEREAS, the Company desires to continue to employ the Executive upon the terms and conditions and in the capacities set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Employment and Term of Employment. Subject to the terms and conditions of this Agreement, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company as Chief Financial Officer for a term beginning on the date hereof (the “Effective Date”) and ending on the third anniversary of such date (the “Term of Employment”). On the second anniversary date hereof and on each annual anniversary of such date thereafter (such date and each annual anniversary thereafter being referred to herein as a “Renewal Date”), the Term of Employment shall be automatically extended so as to terminate two years from such Renewal Date, unless, not less than 90 days prior to such Renewal Date, written notice is given by either the Company or the Executive that the Term of Employment shall not be so extended. In no event, however, will this Agreement extend beyond the Executive’s normal retirement date pursuant to any Company employee benefit plan in which he may be a participant.

2. Scope of Employment. During the Term of Employment, the Executive Agrees to serve as Chief Financial Officer of the Company and will perform the duties and functions as are normal and customary to such positions and that are consistent with the responsibilities contained in the Company’s bylaws and (ii) perform such other duties not inconsistent with his position as are assigned to him, from time to time, by the Board of Directors and the CEO/President who shall have direct supervision over the Executive. Executive also agrees to serve, if elected, as an officer or director of any subsidiary of affiliate of the Company. During the Term of Employment, Executive shall devote his full business time, attention, skill and efforts to the faithful performance of his duties hereunder. The foregoing shall not be construed to prevent the Executive from making investments in businesses or enterprises so long as such investments do not require any services on the part of the Executive in the operation of such business or enterprises and do not violate the terms and conditions of this Agreement.

3. Compensation. During the Term of Employment, in consideration of the Executive’s services hereunder, including, without limitation, service as an officer, director or member of any committee of the board of directors of the Company or of any subsidiary or

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affiliate thereof, and in consideration of the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, the Executive shall receive a salary at the rate of $231,187.50 per year (payable at such regular intervals as other employees of the Company are compensated in accordance with the Company’s employment practices), which amount shall be subject to review annually by the Board of Directors of the Company and may be adjusted at its discretion, provided that such salary may not be reduced. In addition, the Executive shall be entitled to participate in any applicable bonus, incentive compensation or other programs created by the board of directors of the Company from time to time for the benefit of such employee.

“For purposes of Section 7(c)(i) or 7(d)(i) hereof, “annual rate of total compensation” shall mean the sum of (i) the annual rate of salary set forth above, as the same may be increased front time to time as provided above; and (ii) the most recent annual bonus (whether in cash or securities) awarded the Executive; or (iii) in the case of clause (ii)above, for purposes of Section 7(d)(i), it shall be the greater of (A) the most recent annual bonus (whether in cash or securities) awarded the Executive, (B) the last annual bonus (whether in cash or securities) awarded the Executive prior to the “Change of Control” and (Q 50% of the annual rate of salary set forth above, as the same may he increased from time to time as provided above.”

4. Additional Compensation and Benefits. As additional compensation for the Executive’s services under this Agreement, the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, during the Term of Employment, the Company agrees to provide the Executive with the non-cash benefits being provided to him on the date of this Agreement (or the equivalent of such benefits} and, without duplication, any other non-cash benefits provided by the Company to its other officers and key employees as they may exist from time to time. Such benefits shall include leave or vacation time, medical and dental insurance, life insurance, retirement and disability benefits as may hereafter by provided by the Company in accordance with its policies as well as any stock option plan or similar employee benefit program for which key executives are or shall become eligible. In addition, The Company shall pay the annual premium for a one million dollar term life insurance policy issued by West Coast Life Insurance Company (Policy Number Z02388253) and for an individual disability policy provided by UNUM Life Insurance Company of America (Policy Number LAR364206), both of which are transferable should Mr. LeBlanc leave the company for any reason. The Company shall reimburse the Executive for reasonable and necessary expenses incurred by the Executive in furtherance of the Company’s business, provided that such expenses are incurred in accordance with the Company’s policies and upon presentation of the documentation in accordance with expense reimbursement policies of the Company as they may exist from time to time, and submission to the Company of adequate documentation in accordance with federal income tax regulations and administrative pronouncements.

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5. Confidentiality and Other Matters.

(a). Confidentiality. The Executive shall hold in a fiduciary capacity for the benefit of the Company all financial information, customer lists, contracts, books, records, materials, maps, data, reports, including but not limited to, results of exploration, drilling, drill cores, cuttings, and other samples, and other information relating to the business or affairs of the Company (such information being collectively referred to herein as the “Confidential Information”). During the Term of Employment and after termination of the Executive’s employment hereunder, the Executive agrees: (i) to take all such precautions as may be reasonably necessary to prevent the disclosure to any third party of any of the Confidential Information; (ii) not to use for the Executive’s own benefit any of the Confidential Information; and (in) not to aid any other person or entity in the use of the Confidential Information in competition with the Company. Notwithstanding any provision contained herein to the contrary, the term “Confidential Information” shall not be deemed to include any general knowledge, skills or experience acquired by the Executive or any knowledge or information known to the public in general. The Executive Jurther agrees that upon termination of his employment for any reason, he -will surrender to the Company all Confidential Information, and any copies thereof, produced by him or coming into his possession and agrees that all such materials, and copies thereof, are at all times the property of the Company. The Executive Jurther agrees that he shall not otherwise knowingly act or conduct himself (i) to the material detriment of the Company, its subsidiaries or affiliates, or (ii) in a manner which is inimical or contrary to the interests thereof.

(b). Discoveries and Inventions. If the Executive, in the course of his employment with the Company, makes any discovery, improvement, or invention which pertains to or may be useful in the business of the Company, its subsidiaries or affiliates at the time of cessation of his employment, such discovery, improvement, or invention shall be the exclusive property of the Company. The Executive shall execute and deliver to the Company, with Jurther compensation, any and all documents which the Company deems necessary or appropriate to more fully and more perfectly evidence the Company’s ownership thereof.

(c). Notification of Discoveries. The Executive hereby assigns to the Company all his right, title and interest in and to any and all inventions, discoveries, developments, improvements, techniques, designs, data and all other work products, whether tangible or intangible, as described in 5(b) herein, which Executive conceives, reduces to practice or otherwise creates in the course of his employment and in which the law recognizes any protectable interest. The Executive agrees to perform all acts necessary to enable the Company to learn of and to protect the right it receives hereunder, including, but not limited to, making full and immediate disclosure to the Company.

(d). Non-Solicitation. Without the prior written consent of the Company, the Employee covenants and agrees that during the term of this Agreement and for a period of one year thereafter, he shall not hire or attempt to hire for or on behalf of himself or any business organization, any officer, or employee of the Company, or encourage for or on behalf of himself or any business organization, any officer, or employee to terminate his or her relationship or employment -with the Company.

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(e). Definitions; Remedies. For purposes of this Section 5, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns. In the event of a breach or threatened breach by the Executive of the provisions of this Section 5, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that the provisions of this Section 5 shall survive the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company.

6. Noncompetition.

(a). Noncompetition Activities. The Executive acknowledges that the nature of the employment under this Agreement is such as will bring the Executive in personal contact with patrons or customers of the Company and will enable him to acquire valuable information as to the nature and character of the business of the Company, thereby enabling him, by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge and thereby gain an unfair advantage. Accordingly, the Executive covenants and agrees that he will not, without the prior written consent of the Company during the Term of Employment and for the period of one year thereafter, engage directly or indirectly for himself, or as an agent, representative, officer, director or employee of others, in the exploration for hydrocarbons infields or properties being developed, or explored by the Company during the time of his employment or prospects on which the Company worked; provided, however, that not withstanding the foregoing, the Executive may have passive investments in a competing business if such competing business is publicly traded and if such investment constitutes less than five percent (5%) of the equity of such competing business.

(b). Scope. In the event that the provisions of this Section 6 should ever be deemed to exceed the time, geographic or activity related limitations permitted by applicable law, then such provision shall be reformed to the maximum time, geographic or activity related limitations permitted by applicable law. In the event of a breach or threatened breach by Executive of the provisions of this Section 6, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that this Section 6 shall remain in effect for its full term notwithstanding the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company. For purposes of this Section 6, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns.

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7. Termination.

(a). Termination by Company for Cause. The Company may terminate the Executive’s employment hereunder with Cause (defined below) and without prior notice. If the Company terminates the Executive’s employment with Cause, the Executive shall only be entitled to receive ft) accrued but unpaid compensation pursuant to Section 3 of this Agreement, and (it) those benefits under Section 4 which are required under the Executive Income Retirement Security Act of 1974, as amended (“ERISA”), or other laws. As used in this Agreement, “Cause” shall mean (i) any material failure of the Executive after written notice to perform his duties specified in Section 2 of this Agreement when such failure shall have continued for 30 days after receipt of such notice, (ii) any material failure of the Executive after written notice to follow any written direction of the Board of Directors or the President and CEO when such failure shall have continued for 30 days after receipt of such notice, (Hi) willful misconduct or negligence in the performance of his duties, including but not limited to, the diversion or taking advantage of a corporate opportunity, (iv) commission of fraud by the Executive against the Company, its affiliates or customers, (v) a material breach by the Executive of Sections 5 or 6 of this Agreement, or (vi) conviction of the Executive of a felony offense or a crime involving moral turpitude. If the Company terminates the Executive’s employment for Cause, the Term of Employment shall end upon such termination.

(b). Death or Disability. In the event of the Executive’s death or of the Executive’s sickness or disability of a permanent nature rendering the Executive unable to perform his duties hereunder for a period of 90 consecutive days or 120 days in any twelve month period during the Term of Employment, the Company shall pay to the Executive or the estate of the Executive, as applicable, in the year of death or disability or the year thereafter compensation which would otherwise be payable to the Executive pursuant to Section 3 hereof up to the end of the sixth month after his death or the expiration of the 90 consecutive day period or on the 12th day referred to above, as the case may be, during which he was unable to perform his duties hereunder. The Term of Employment shall end upon the Executive’s death or upon the expiration of the 90 consecutive day period or the 120th day referred to above, as the case may be.

(c). Termination by Company Without Cause or by the Executive with Good Reason. If either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason (as hereinafter defined), the Company shall:

(i) pay the Executive, in accordance with the Company’s normal payroll practices, his current rate of total compensation for the remaining term of employment, as extended pursuant to Section 1, or if the Company so elects, pay the Executive such amount in lump sum form within 30 days after the date of such termination;

(ii) pay the Executive any accrued but unpaid compensation as of the date of the termination of employment; and

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(iii) continue until the first anniversary of the termination of the Executive’s employment, or such longer period as any plan, program or policy or ERISA or other laws may provide, benefits to the Executive as set forth in Section 7(f) below.

As used in this Agreement, “Good Reason” shall mean: (A) the failure by the Company to elect or re-elect or to appoint or re-appoint the Executive to the office of Chief Financial Officer of the Company without Cause; (B) a material change by the Company of the Executive’s Junction, duties or responsibilities that would cause the Executive’s position with the Company to become of less dignity, responsibility, importance or scope from the position and attributes thereof described in Section 2 above; (C) the Company requires the Executive to re-locate his primary office to a location that is greater than 50 miles from the location of the Company as of the date hereof, or (D) any other material breach of this Agreement by the Company and the continuance of such breach for at least 30 days.”

(d). Termination Following a Change of Control. If, within one year of a Change of Control, either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason, then, in addition to any amounts to which the Executive may otherwise be entitled hereunder, the Company shall:

(i) pay to the Executive, within 30 days after the date of such termination, a lump sum cash payment equal to an additional one (1) times the Executive’s then current annual rate of total compensation;

(e). Change of Control. As used in this Agreement, a “Change of Control” shall mean:

(i) The acquisition by any individual, entity or group (within the meaning of Section I3(d)(3) or I4(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership of 50% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or its affiliates, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (Hi) hereof; or

(ii) Individuals, who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any

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individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (A) (1) all or substantially all of the persons who were beneficial owners of the Outstanding Common Stock immediately prior to such Corporate Transaction beneficially awn, directly or indirectly, more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction, and (2) all or substantially all of the persons who were beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (excluding (1) any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction and (2) any Person approved by the Incumbent Board) beneficially owns, directly or indirectly, 40 percent or more of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to such Corporate Transaction.

(f). Insurance and Other Special Benefits. To the extent Executive is eligible thereunder, for a period of 12 months following termination pursuant to Section 7(c), or for a period of 24 months following termination pursuant to Section 7(d) hereof, Executive shall continue to be provided life insurance, disability and long term disability policies provided to the Executive on the date hereof or such successor policies in effect at the time of Executive’s termination, and shall also continue to be covered for the applicable period by each other insurance, disability, health or other benefit program, plan or policy by which he was covered at the time of the Executive’s termination. In the event Executive is ineligible to continue to be so covered under the terms of any such life insurance, disability, long-term disability, insurance, health or other benefit program, plan or policy, the Company shall provide to Executive through

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other sources such benefits, including such additional benefits, as may be necessary to make the benefits applicable to Executive substantially equivalent to those in effect immediately prior to such termination, provided that ft) the costs paid by the Company for such benefit programs do not exceed the costs which it would have paid if such benefit programs were still available to such Executive or (ii) if during such period Executive should enter into the employ of another company or firm which provides to Executive substantially similar benefit coverage, Executive’s participation in the comparable benefits provided by the Company, either directly or through such other sources, shall cease. Nothing contained in this paragraph shall be deemed to require or permit termination or restriction of any of Executive’s coverage under any plan or program thereto to which Executive is entitled under the terms of such plan or program, whether at the end of the aforementioned 12- or 24-month period, as the case may be, or at any other time.

(g). Limitation on Payments. If any amount or benefit payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code, In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999 all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and the Executive if they are of a type that would be included in determining what tax, if any, is due under Section 4999. In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines and if any one agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

8. Expenses. The Company shall promptly pay or reimburse Executive for all costs and expenses, including, without limitation, court costs and attorneys’ fees, incurred by Executive as a result of any claim, action or proceeding (including, without Imitation, a claim, action or proceeding by Executive against the Company) arising out of, or challenging the validity or enforceability of, this Agreement or any provision hereof, provided such Executive’s claim, action or proceeding is materially successful against the Company.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas. Venue and jurisdiction of any action relating to this Agreement shall lie in Collin County.

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10. Notice. Any notice, payment, demand or communication required or permitted to be given by this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered personally or if sent by registered or certified mail, return receipt requested, postage prepaid, addressed to such party at its address set forth below such party’s signature to this Agreement or to such other address as shall have been furnished in writing by such party for whom the communication is intended. Any such notice shall be deemed to be given on the date so delivered.

11. Severability. In the event any provisions hereof shall be modified or held ineffective by any court, such adjudication shall not invalidate or render ineffective the balance of the provisions hereof.

12. Entire Agreement. This Agreement constitutes the sole agreement between the parties with respect to the employment of the Executive by the company and supersedes any and all other agreements, oral or written, between the parties. This Agreement may not be modified or amended except by a writing signed by the parties.

13. Waiver. Any waiver or breach of any of the terms of this Agreement shall not operate as a waiver of any other breach of such terms or conditions, or any other terms or conditions, nor shall any failure to enforce any provisions hereof operate as a waiver of such provision or any other provision hereof.

14. Assignment. This Agreement is a personal employment contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned or pledged. Subject to Section 7(d) hereof, the Company may assign its rights under this Agreement to (i) any entity into or with which the Company is merged or consolidated or to which the Company transfers all or substantially all of its assets or (ii) any entity, which at the time of such assignment, controls, is under common control with, or is controlled by the Company.

15. Successors. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs, executors, administrators and legal representatives. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

16. Section Headings. The section headings in this Agreement have been inserted for convenience and shall not be used for interpretive purposes or to otherwise construe this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above and intend that this Agreement have the effect of a sealed instrument.

ASCENT ENERGY INC.
By:	/s/ Terry W. Carter
Name:  Terry W. Carter Title:    President, CEO, COO

1700 Redbud Blvd.

Suite 450

McKinney, TX 75069

EXECUTIVE

/s/ Eddie M. LeBlanc

Eddie M. LeBlanc

Address of Executive

EMPLOYMENT AGREEMENT Page 10

EX-10.8

Exhibit 10.8

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of April 1, 2005 by and between Ascent Energy Inc., a Delaware corporation (the “Company”), and David L McCabe (the “Executive”).

WITNESSETH:

WHEREAS, the Executive has been providing services to the Company and the Company has been compensating the Executive; and

WHEREAS, the Company desires to continue to employ the Executive upon the terms and conditions and in the capacities set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Employment and Term of Employment. Subject to the terms and conditions of this Agreement, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company as Vice President Exploration and Development for a term beginning on the date hereof (the “Effective Date”) and ending on the third anniversary of such date (the “Term of Employment”). On the second anniversary date hereof and on each annual anniversary of such date thereafter (such date and each annual anniversary thereafter being referred to herein as a “Renewal Date”), the Term of Employment shall be automatically extended so as to terminate two years from such Renewal Date, unless, not less than 90 days prior to such Renewal Date, written notice is given by either the Company or the Executive that the Term of Employment shall not be so extended. In no event, however, will this Agreement extend beyond the Executive’s normal retirement date pursuant to any Company employee benefit plan in which he may be a participant.

2. Scope of Employment. During the Term of Employment, the Executive Agrees to serve as Vice President Exploration and Development of the Company and will perform the duties and functions as are normal and customary to such positions and that are consistent with the responsibilities contained in the Company’s bylaws and (ii) perform such other duties not inconsistent with his position as are assigned to him, from time to time, by the President and Chief Executive Officer, whom shall have direct supervision over the Executive. Executive also agrees to serve, if elected, as an officer or director of any subsidiary of affiliate of the Company. During the Term of Employment, Executive shall devote his full business time, attention, skill and efforts to the faithful performance of his duties hereunder. The foregoing shall not be construed to prevent the Executive from making investments in businesses or enterprises so long as such investments do not require any services on the part of the Executive in the operation of such business or enterprises and do not violate the terms and conditions of this Agreement.

3. Compensation. During the Term of Employment, in consideration of the Executive’s services hereunder, including, without limitation, service as an officer, director or member of any committee of the board of directors of the Company or of any subsidiary or

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affiliate thereof, and in consideration of the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, the Executive shall receive a salary at the rate of $157,039.87 per year (payable at such regular intervals as other employees of the Company are compensated in accordance with the Company’s employment practices), which amount shall be subject to review annually by the President and Chief Executive Officer of the Company and may be adjusted at his discretion, provided that such salary may not be reduced. In addition, the Executive shall be entitled to participate in any applicable bonus, incentive compensation or other programs created by the board of directors of the Company from time to time for the benefit of such employee.

“For purposes of Section 7(c)(i) or 7(d)(i) hereof, “annual rate of total compensation” shall mean the sum of(i) the annual rate of salary set forth above, as the same may be increased from time to time as provided above; and (ii) the most recent annual bonus (whether in cash or securities) awarded the Executive; or (Hi) in the case of clause (ii)above, for purposes of Section 7(d)(i), it shall be the greater of (A) the most recent annual bonus (whether in cash or securities) awarded the Executive, (B) the last annual bonus (whether in cash or securities) awarded the Executive prior to the “Change of Control” and (C) 50% of the annual rate of salary set forth above, as the same may be increased from time to time as provided above.”

4. Additional Compensation and Benefits. As additional compensation for the Executive’s services under this Agreement, the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, during the Term of Employment, the Company agrees to provide the Executive with the non-cash benefits being provided to him on the date of this Agreement (or the equivalent of such benefits) and, without duplication, any other non-cash benefits provided by the Company to its other officers and key employees as they may exist from time to time. Such benefits shall include leave or vacation time, medical and dental insurance, life insurance, retirement and disability benefits as may hereafter by provided by the Company in accordance with its policies as well as any stock option plan or similar employee benefit program for which key executives are or shall become eligible. The Company shall reimburse the Executive for reasonable and necessary expenses incurred by the Executive in furtherance of the Company’s business, provided that such expenses are incurred in accordance with the Company’s policies and upon presentation of the documentation in accordance with expense reimbursement policies of the Company as they may exist from time to time, and submission to the Company of adequate documentation in accordance with federal income tax regulations and administrative pronouncements.

5. Confidentiality and Other Matters.

(a). Confidentiality. The Executive shall hold in a fiduciary capacity for the benefit of the Company all financial information, customer lists, contracts, books, records, materials, maps, data, reports, including but not limited to, results of exploration, drilling, drill cores, cuttings, and other samples, and other information relating to the business or affairs of

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the Company (such information being collectively referred to herein as the “Confidential Information”). During the Term of Employment and after termination of the Executive’s employment hereunder, the Executive agrees: (i) to take all such precautions as may be reasonably necessary to prevent the disclosure to any third party of any of the Confidential Information; (ii) not to use for the Executive’s own benefit any of the Confidential Information; and (Hi) not to aid any other person or entity in the use of the Confidential Information in competition with the Company. Notwithstanding any provision contained herein to the contrary, the term “Confidential Information” shall not be deemed to include any general knowledge, skills or experience acquired by the Executive or any knowledge or information known to the public in general The Executive further agrees that upon termination of his employment for any reason, he will surrender to the Company all Confidential Information, and any copies thereof, produced by him or coming into his possession and agrees that all such materials, and copies thereof, are at all times the property of the Company. The Executive further agrees that he shall not otherwise knowingly act or conduct himself (i) to the material detriment of the Company, its subsidiaries or affiliates, or (ii) in a manner which is inimical or contrary to the interests thereof.

(b). Discoveries and Inventions. If the Executive, in the course of his employment with the Company, makes any discovery, improvement, or invention which pertains to or may be useful in the business of the Company, its subsidiaries or affiliates at the time of cessation of his employment, such discovery, improvement, or invention shall be the exclusive property of the Company. The Executive shall execute and deliver to the Company, with further compensation, any and all documents which the Company deems necessary or appropriate to more fully and more perfectly evidence the Company’s ownership thereof.

(c). Notification of Discoveries. The Executive hereby assigns to the Company all his right, title and interest in and to any and all inventions, discoveries, developments, improvements, techniques, designs, data and all other work products, whether tangible or intangible, as described in 5(b) herein, which Executive conceives, reduces to practice or otherwise creates in the course of his employment and in which the law recognizes any protectable interest. The Executive agrees to perform all acts necessary to enable the Company to learn of and to protect the right it receives hereunder, including, but not limited to, making full and immediate disclosure to the Company.

(d). Non-Solicitation. Without the prior -written consent of the Company, the Employee covenants and agrees that during the term of this Agreement and for a period of one year thereafter, he shall not hire or attempt to hire for or on behalf of himself or any business organization, any officer, or employee of the Company, or encourage for or on behalf of himself or any business organization, any officer, or employee to terminate his or her relationship or employment with the Company.

(e). Definitions; Remedies. For purposes of this Section 5, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns. In the event of a breach or threatened breach by the Executive of the provisions of this Section 5, the Company shall be entitled to an injunction restraining the Executive from violating such

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provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that the provisions of this Section 5 shall survive the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company.

6. Noncompetition.

(a). Noncompetition Activities. The Executive acknowledges that the nature of the employment under this Agreement is such as will bring the Executive in personal contact with patrons or customers of the Company and will enable him to acquire valuable information as to the nature and character of the business of the Company, thereby enabling him, by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge and thereby gain an unfair advantage. Accordingly, the Executive covenants and agrees that he will not, without the prior written consent of the Company during the Term of Employment and for the period of one year thereafter, engage directly or indirectly for himself, or as an agent, representative, officer, director or employee of others, in the exploration for hydrocarbons in fields or properties being developed, or explored by the Company during the time of his employment or prospects on which the Company worked; provided, however, that not withstanding the foregoing, the Executive may have passive investments in a competing business if such competing business is publicly traded and if such investment constitutes less than five percent (5%) of the equity of such competing business.

(b). Scope. In the event that the provisions of this Section 6 should ever be deemed to exceed the time, geographic or activity related limitations permitted by applicable law, then such provision shall be reformed to the maximum time, geographic or activity related limitations permitted by applicable law. In the event of a breach or threatened breach by Executive of the provisions of this Section 6, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that this Section 6 shall remain in effect for its full term notwithstanding the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company. For purposes of this Section 6, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns.

7. Termination.

(a). Termination by Company for Cause. The Company may terminate the Executive’s employment hereunder with Cause (defined below) and without prior notice. If the Company terminates the Executive’s employment with Cause, the Executive shall only be entitled to receive (i) accrued but unpaid compensation pursuant to Section 3 of this Agreement, and (ii) those benefits under Section 4 which are required under the Executive Income Retirement Security Act of 1974, as amended (“ERISA”), or other laws. As used in this Agreement, “Cause” shall mean (i) any material failure of the Executive after written notice to perform his duties

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specified in Section 2 of this Agreement when such failure shall have continued for 30 days after receipt of such notice, (ii) any material failure of the Executive after written notice to follow any written direction of the Board of Directors or the President and CEO when such failure shall have continued for 30 days after receipt of such notice, (Hi) willful misconduct or negligence in the performance of his duties, including but not limited to, the diversion or taking advantage of a corporate opportunity, (iv) commission of fraud by the Executive against the Company, its affiliates or customers, (v) a material breach by the Executive of Sections 5 or 6 of this Agreement, or (vi) conviction of the Executive of a felony offense or a crime involving moral turpitude. If the Company terminates the Executive’s employment for Cause, the Term of Employment shall end upon such termination.

(b). Death or Disability. In the event of the Executive’s death or of the Executive’s sickness or disability of a permanent nature rendering the Executive unable to perform his duties hereunder for a period of 90 consecutive days or 120 days in any twelve month period during the Term of Employment, the Company shall pay to the Executive or the estate of the Executive, as applicable, in the year of death or disability or the year thereafter compensation which would otherwise be payable to the Executive pursuant to Section 3 hereof up to the end of the sixth month after his death or the expiration of the 90 consecutive day period or on the 120fh day referred to above, as the case may be, during which he was unable to perform his duties hereunder. The Term of Employment shall end upon the Executive’s death or upon the expiration of the 90 consecutive day period or the 120th day referred to above, as the case may be.

(c). Termination by Company Without Cause or by the Executive with Good Reason. If either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason (as hereinafter defined), the Company shall:

(i) pay the Executive, in accordance with the Company’s normal payroll practices, his current rate of total compensation for the remaining term of employment, as extended pursuant to Section 1, or if the Company so elects, pay the Executive such amount in lump sum form within 30 days after the date of such termination;

(ii) pay the Executive any accrued but unpaid compensation as of the date of the termination of employment; and

(iii) continue until the first anniversary of the termination of the Executive’s employment, or such longer period as any plan, program or policy or ERISA or other laws may provide, benefits to the Executive as set forth in Section 7(f) below.

As used in this Agreement, “Good Reason” shall mean: (A) the failure by the Company to elect or re-elect or to appoint or re-appoint the Executive to the office of Vice President Business Exploration and Development of the Company without Cause; (B) a material change by the Company of the Executive’s function, duties or responsibilities that would cause the Executive’s position with the Company to become of less dignity, responsibility, importance

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or scope from the position and attributes thereof described in Section 2 above; (C) the Company requires the Executive to re-locate his primary office to a location that is greater than 50 miles from the location of the Company as of the date hereof, or (D) any other material breach of this Agreement by the Company and the continuance of such breach for at least 30 days.”

(d). Termination Following a Change of Control. If, within one year of a Change of Control, either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason, then, in addition to any amounts to which the Executive may otherwise be entitled hereunder, the Company shall:

(i) pay to the Executive, within 30 days after the date of such termination, a lump sum cash payment equal to an additional one (1) times the Executive’s then current annual rate of total compensation;

(e). Change of Control. As used in this Agreement, a “Change of Control” shall mean:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership of 50% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or its affiliates, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (in) hereof; or

(ii) Individuals, who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

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(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (A) (1) all or substantially all of the persons who were beneficial owners of the Outstanding Common Stock immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction, and (2) all or substantially all of the persons who were beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (excluding (1) any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction and (2) any Person approved by the Incumbent Board) beneficially owns, directly or indirectly, 40 percent or more of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to such Corporate Transaction.

(f). Insurance and Other Special Benefits. To the extent Executive is eligible thereunder, for a period of 12 months following termination pursuant to Section 7(c), or for a period of 24 months following termination pursuant to Section 7(d) hereof, Executive shall continue to be provided life insurance, disability and long term disability policies provided to the Executive on the date hereof or such successor policies in effect at the time of Executive’s termination, and shall also continue to be covered for the applicable period by each other insurance, disability, health or other benefit program, plan or policy by which he was covered at the time of the Executive’s termination. In the event Executive is ineligible to continue to be so covered under the terms of any such life insurance, disability, long-term disability, insurance, health or other benefit program, plan or policy, the Company shall provide to Executive through other sources such benefits, including such additional benefits, as may be necessary to make the benefits applicable to Executive substantially equivalent to those in effect immediately prior to such termination, provided that (i) the costs paid by the Company for such benefit programs do not exceed the costs which it would have paid if such benefit programs were still available to such Executive or (ii) if during such period Executive should enter into the employ of another company or firm which provides to Executive substantially similar benefit coverage, Executive’s participation in the comparable benefits provided by the Company, either directly or through such other sources, shall cease. Nothing contained in this paragraph shall be deemed to require or permit termination or restriction of any of Executive’s coverage under any plan or program

EMPLOYMENT AGREEMENT Page 7

thereto to which Executive is entitled under the terms of such plan or program, whether at the end of the aforementioned 12- or 24-month period, as the case may be, or at any other time.

(g). Limitation on Payments. If any amount or benefit payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999 all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and the Executive if they are of a type that would be included in determining what tax, if any, is due under Section 4999. In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines and if any one agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

8. Expenses. The Company shall promptly pay or reimburse Executive for all costs and expenses, including, without limitation, court costs and attorneys’ fees, incurred by Executive as a result of any claim, action or proceeding (including, without limitation, a claim, action or proceeding by Executive against the Company) arising out of, or challenging the validity or enforceability of, this Agreement or any provision hereof, provided such Executive’s claim, action or proceeding is materially successful against the Company.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas. Venue and jurisdiction of any action relating to this Agreement shall lie in Collin County.

10. Notice. Any notice, payment, demand or communication required or permitted to be given by this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered personally or if sent by registered or certified mail, return receipt requested, postage prepaid, addressed to such party at its address set forth below such party’s signature to this Agreement or to such other address as shall have been furnished in writing by such party for whom the communication is intended. Any such notice shall be deemed to be given on the date so delivered.

11. Severability. In the event any provisions hereof shall be modified or held ineffective by any court, such adjudication shall not invalidate or render ineffective the balance of the provisions hereof.

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12. Entire Agreement. This Agreement constitutes the sole agreement between the parties with respect to the employment of the Executive by the company and supersedes any and all other agreements, oral or written, between the parties. This Agreement may not be modified or amended except by a writing signed by the parties.

13. Waiver. Any waiver or breach of any of the terms of this Agreement shall not operate as a waiver of any other breach of such terms or conditions, or any other terms or conditions, nor shall any failure to enforce any provisions hereof operate as a waiver of such provision or any other provision hereof.

14. Assignment. This Agreement is a personal employment contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned or pledged. Subject to Section 7(d) hereof, the Company may assign its rights under this Agreement to ft) any entity into or with which the Company is merged or consolidated or to which the Company transfers all or substantially all of its assets or (ii) any entity, which at the time of such assignment, controls, is under common control with, or is controlled by the Company.

15. Successors. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs, executors, administrators and legal representatives. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

16. Section Headings. The section headings in this Agreement have been inserted for convenience and shall not be used for interpretive purposes or to otherwise construe this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above and intend that this Agreement have the effect of a sealed instrument.

ASCENT ENERGY INC.
By:	/s/ Terry W. Carter
Name:	Terry W. Carter
Title:	President, CEO, COO

1700 Redbud Blvd.

Suite 450

McKinney, TX 75069

EXECUTIVE

/s/ David L. McCabe

David L. McCabe

3333 Hulings Court

Plano, TX 75023

Address of Executive

EMPLOYMENT AGREEMENT Page 10

EX-10.9

Exhibit 10.9

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of April 1, 2005 by and between Ascent Energy Inc., a Delaware corporation (the “Company”), and Steven C. Limke (the “Executive”).

WITNESSETH:

WHEREAS, the Executive has been providing services to the Company and the Company has been compensating the Executive; and

WHEREAS, the Company desires to continue to employ the Executive upon the terms and conditions and in the capacities set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Employment and Term of Employment. Subject to the terms and conditions of this Agreement, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company as Vice President Drilling and Production Operations for a term beginning on the date hereof (the “Effective Date”) and ending on the third anniversary of such date (the “Term of Employment”). On the second anniversary date hereof and on each annual anniversary of such date thereafter (such date and each annual anniversary thereafter being referred to herein as a “Renewal Date”), the Term of Employment shall be automatically extended so as to terminate two years from such Renewal Date, unless, not less than 90 days prior to such Renewal Date, written notice is given by either the Company or the Executive that the Term of Employment shall not be so extended. In no event, however, will this Agreement extend beyond the Executive’s normal retirement date pursuant to any Company employee benefit plan in which he may be a participant.

2. Scope of Employment. During the Term of Employment, the Executive Agrees to serve as Vice President Drilling and Production Operations of the Company and will perform the duties and functions as are normal and customary to such positions and that are consistent with the responsibilities contained in the Company’s bylaws and (ii) perform such other duties not inconsistent with his position as are assigned to him, from time to time, by President and Chief Executive Officer, whom shall have direct supervision over the Executive. Executive also agrees to serve, if elected, as an officer or director of any subsidiary of affiliate of the Company. During the Term of Employment, Executive shall devote his full business time, attention, skill and efforts to the faithful performance of his duties hereunder. The foregoing shall not be construed to prevent the Executive from making investments in businesses or enterprises so long as such investments do not require any services on the part of the Executive in the operation of such business or enterprises and do not violate the terms and conditions of this Agreement.

3. Compensation. During the Term of Employment, in consideration of the Executive’s services hereunder, including, without limitation, service as an officer, director or member of any committee of the board of directors of the Company or of any subsidiary or

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affiliate thereof, and in consideration of the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, the Executive shall receive a salary at the rate of $150,732.00 per year (payable at such regular intervals as other employees of the Company are compensated in accordance with the Company’s employment practices), which amount shall be subject to review annually by the President and Chief Executive Officer of the Company and may be adjusted at his discretion, provided that such salary may not be reduced. In addition, the Executive shall be entitled to participate in any applicable bonus, incentive compensation or other programs created by the board of directors of the Company from time to time for the benefit of such employee.

“For purposes of Section 7(c)(i) or 7(d)(i) hereof, “annual rate of total compensation” shall mean the sum of(i) the annual rate of salary set forth above, as the same may be increased from time to time as provided above; and (ii) the most recent annual bonus (whether in cash or securities) awarded the Executive; or (Hi) in the case of clause (ii)above, for purposes of Section 7(d)(i), it shall be the greater of (A) the most recent annual bonus (whether in cash or securities) awarded the Executive, (B) the last annual bonus (whether in cash or securities) awarded the Executive prior to the “Change of Control” and (C) 50% of the annual rate of salary set forth above, as the same may be increased from time to time as provided above.”

4. Additional Compensation and Benefits. As additional compensation for the Executive’s services under this Agreement, the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, during the Term of Employment, the Company agrees to provide the Executive with the non-cash benefits being provided to him on the date of this Agreement (or the equivalent of such benefits) and, without duplication, any other non-cash benefits provided by the Company to its other officers and key employees as they may exist from time to time. Such benefits shall include leave or vacation time, medical and dental insurance, life insurance, retirement and disability benefits as may hereafter by provided by the Company in accordance with its policies as well as any stock option plan or similar employee benefit program for which key executives are or shall become eligible. The Company shall reimburse the Executive for reasonable and necessary expenses incurred by the Executive in furtherance of the Company’s business, provided that such expenses are incurred in accordance with the Company’s policies and upon presentation of the documentation in accordance with expense reimbursement policies of the Company as they may exist from time to time, and submission to the Company of adequate documentation in accordance with federal income tax regulations and administrative pronouncements.

5. Confidentiality and Other Matters.

(a). Confidentiality. The Executive shall hold in a fiduciary capacity for the benefit of the Company all financial information, customer lists, contracts, books, records, materials, maps, data, reports, including but not limited to, results of exploration, drilling, drill cores, cuttings, and other samples, and other information relating to the business or affairs of

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the Company (such information being collectively referred to herein as the “Confidential Information”). During the Term of Employment and after termination of the Executive’s employment hereunder, the Executive agrees: (i) to take all such precautions as may be reasonably necessary to prevent the disclosure to any third party of any of the Confidential Information; (ii) not to use for the Executive’s own benefit any of the Confidential Information; and (Hi) not to aid any other person or entity in the use of the Confidential Information in competition with the Company. Notwithstanding any provision contained herein to the contrary, the term “Confidential Information” shall not be deemed to include any general knowledge, skills or experience acquired by the Executive or any knowledge or information known to the public in general. The Executive further agrees that upon termination of his employment for any reason, he will surrender to the Company all Confidential Information, and any copies thereof, produced by him or coming into his possession and agrees that all such materials, and copies thereof, are at all times the property of the Company. The Executive further agrees that he shall not otherwise knowingly act or conduct himself (i) to the material detriment of the Company, its subsidiaries or affiliates, or (ii) in a manner which is inimical or contrary to the interests thereof.

(b). Discoveries and Inventions. If the Executive, in the course of his employment with the Company, makes any discovery, improvement, or invention which pertains to or may be useful in the business of the Company, its subsidiaries or affiliates at the time of cessation of his employment, such discovery, improvement, or invention shall be the exclusive property of the Company. The Executive shall execute and deliver to the Company, with further compensation, any and all documents which the Company deems necessary or appropriate to more fully and more perfectly evidence the Company’s ownership thereof.

(c). Notification of Discoveries. The Executive hereby assigns to the Company all his right, title and interest in and to any and all inventions, discoveries, developments, improvements, techniques, designs, data and all other work products, whether tangible or intangible, as described in 5(b) herein, which Executive conceives, reduces to practice or otherwise creates in the course of his employment and in which the law recognizes any protectable interest. The Executive agrees to perform all acts necessary to enable the Company to learn of and to protect the right it receives hereunder, including, but not limited to, making full and immediate disclosure to the Company.

(d). Non-Solicitation. Without the prior written consent of the Company, the Employee covenants and agrees that during the term of this Agreement and for a period of one year thereafter, he shall not hire or attempt to hire for or on behalf of himself or any business organization, any officer, or employee of the Company, or encourage for or on behalf of himself or any business organization, any officer, or employee to terminate his or her relationship or employment with the Company.

(e). Definitions; Remedies. For purposes of this Section 5, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns. In the event of a breach or threatened breach by the Executive of the provisions of this Section 5, the Company shall be entitled to an injunction restraining the Executive from violating such

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provisions -without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that the provisions of this Section 5 shall survive the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company.

6. Noncompetition.

(a). Noncompetition Activities. The Executive acknowledges that the nature of the employment under this Agreement is such as will bring the Executive in personal contact with patrons or customers of the Company and will enable him to acquire valuable information as to the nature and character of the business of the Company, thereby enabling him, by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge and thereby gain an unfair advantage. Accordingly, the Executive covenants and agrees that he will not, without the prior written consent of the Company during the Term of Employment and for the period of one year thereafter, engage directly or indirectly for himself, or as an agent, representative, officer, director or employee of others, in the exploration for hydrocarbons in fields or properties being developed, or explored by the Company during the time of his employment or prospects on which the Company worked ; provided, however, that not withstanding the foregoing, the Executive may have passive investments in a competing business if such competing business is publicly traded and if such investment constitutes less than five percent (5%) of the equity of such competing business.

(b). Scope. In the event that the provisions of this Section 6 should ever be deemed to exceed the time, geographic or activity related limitations permitted by applicable law, then such provision shall be reformed to the maximum time, geographic or activity related limitations permitted by applicable law. In the event of a breach or threatened breach by Executive of the provisions of this Section 6, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that this Section 6 shall remain in effect for its full term notwithstanding the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company. For purposes of this Section 6, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns.

7. Termination.

(a). Termination by Company for Cause. The Company may terminate the Executive’s employment hereunder with Cause (defined below) and without prior notice. If the Company terminates the Executive’s employment with Cause, the Executive shall only be entitled to receive (i) accrued but unpaid compensation pursuant to Section 3 of this Agreement, and (ii) those benefits under Section 4 which are required under the Executive Income Retirement Security Act of 1974, as amended (“ERISA”), or other laws. As used in this Agreement,

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“Cause” shall mean (i) any material failure of the Executive after written notice to perform his duties specified in Section 2 of this Agreement when such failure shall have continued for 30 days after receipt of such notice, (ii) any material failure of the Executive after written notice to follow any written direction of the Board of Directors or the President and CEO when such failure shall have continued for 30 days after receipt of such notice, (in) willful misconduct or negligence in the performance of his duties, including but not limited to, the diversion or taking advantage of a corporate opportunity, (iv) commission of fraud by the Executive against the Company, its affiliates or customers, (v) a material breach by the Executive of Sections 5 or 6 of this Agreement, or (vi) conviction of the Executive of a felony offense or a crime involving moral turpitude. If the Company terminates the Executive’s employment for Cause, the Term of Employment shall end upon such termination.

(b). Death or Disability. In the event of the Executive’s death or of the Executive’s sickness or disability of a permanent nature rendering the Executive unable to perform his duties hereunder for a period of 90 consecutive days or 120 days in any twelve month period during the Term of Employment, the Company shall pay to the Executive or the estate of the Executive, as applicable, in the year of death or disability or the year thereafter compensation which would otherwise be payable to the Executive pursuant to Section 3 hereof up to the end of the sixth month after his death or the expiration of the 90 consecutive day period or on the 12$ day referred to above, as the case may be, during which he was unable to perform his duties hereunder. The Term of Employment shall end upon the Executive’s death or upon the expiration of the 90 consecutive day period or the 120? day referred to above, as the case may be.

(c). Termination by Company Without Cause or by the Executive with Good Reason. If either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason (as hereinafter defined), the Company shall:

(i) pay the Executive, in accordance with the Company’s normal payroll practices, his current rate of total compensation for the remaining term of employment, as extended pursuant to Section 1, or if the Company so elects, pay the Executive such amount in lump sum form within 30 days after the date of such termination;

(ii) pay the Executive any accrued but unpaid compensation as of the date of the termination of employment; and

(iii) continue until the first anniversary of the termination of the Executive’s employment, or such longer period as any plan, program or policy or ERISA or other laws may provide, benefits to the Executive as set forth in Section 7(f) below.

As used in this Agreement, “Good Reason” shall mean: (A) the failure by the Company to elect or re-elect or to appoint or re-appoint the Executive to the office of Vice President Drilling and Production Operations of the Company without Cause; (B) a material

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change by the Company of the Executive’s function, duties or responsibilities that would cause the Executive’s position with the Company to become of less dignity, responsibility, importance or scope from the position and attributes thereof described in Section 2 above; (C) the Company requires the Executive to re-locate his primary office to a location that is greater than 50 miles from the location of the Company as of the date hereof, or (D) any other material breach of this Agreement by the Company and the continuance of such breach for at least 30 days.”

(d). Termination Following a Change of Control. If, within one year of a Change of Control, either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason, then, in addition to any amounts to which the Executive may otherwise be entitled hereunder, the Company shall:

(i) pay to the Executive, within 30 days after the date of such termination, a lump sum cash payment equal to an additional one (1) times the Executive’s then current annual rate of total compensation;

(e). Change of Control. As used in this Agreement, a “Change of Control” shall mean:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership of 50% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or its affiliates, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (Hi) hereof; or

(ii) Individuals, who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or

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removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (A) (1) all or substantially all of the persons who were beneficial owners of the Outstanding Common Stock immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction, and (2) all or substantially all of the persons who were beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (excluding (1) any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction and (2) any Person approved by the Incumbent Board) beneficially owns, directly or indirectly, 40 percent or more of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to such Corporate Transaction.

(f). Insurance and Other Special Benefits. To the extent Executive is eligible thereunder, for a period of 12 months following termination pursuant to Section 7(c), or for a period of 24 months following termination pursuant to Section 7(d) hereof, Executive shall continue to be provided life insurance, disability and long term disability policies provided to the Executive on the date hereof or such successor policies in effect at the time of Executive’s termination, and shall also continue to be covered for the applicable period by each other insurance, disability, health or other benefit program, plan or policy by which he was covered at the time of the Executive’s termination. In the event Executive is ineligible to continue to be so covered under the terms of any such life insurance, disability, long-term disability, insurance, health or other benefit program, plan or policy, the Company shall provide to Executive through other sources such benefits, including such additional benefits, as may be necessary to make the benefits applicable to Executive substantially equivalent to those in effect immediately prior to such termination, provided that (i) the costs paid by the Company for such benefit programs do not exceed the costs which it would have paid if such benefit programs were still available to such Executive or (ii) if during such period Executive should enter into the employ of another company or firm which provides to Executive substantially similar benefit coverage, Executive’s participation in the comparable benefits provided by the Company, either directly or through

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such other sources, shall cease. Nothing contained in this paragraph shall be deemed to require or permit termination or restriction of any of Executive’s coverage under any plan or program thereto to which Executive is entitled under the terms of such plan or program, whether at the end of the aforementioned 12- or 24-month period, as the case may be, or at any other time.

(g). Limitation on Payments. If any amount or benefit payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999 all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and the Executive if they are of a type that would be included in determining what tax, if any, is due under Section 4999. In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines and if any one agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

8. Expenses. The Company shall promptly pay or reimburse Executive for all costs and expenses, including, without limitation, court costs and attorneys’ fees, incurred by Executive as a result of any claim, action or proceeding (including, without limitation, a claim, action or proceeding by Executive against the Company) arising out of, or challenging the validity or enforceability of, this Agreement or any provision hereof, provided such Executive’s claim, action or proceeding is materially successful against the Company.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas. Venue and jurisdiction of any action relating to this Agreement shall lie in Collin County.

10. Notice. Any notice, payment, demand or communication required or permitted to be given by this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered personally or if sent by registered or certified mail, return receipt requested, postage prepaid, addressed to such party at its address set forth below such party’s signature to this Agreement or to such other address as shall have been furnished in writing by such party for whom the communication is intended. Any such notice shall be deemed to be given on the date so delivered.

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11. Severability. In the event any provisions hereof shall be modified or held ineffective by any court, such adjudication shall not invalidate or render ineffective the balance of the provisions hereof.

12. Entire Agreement. This Agreement constitutes the sole agreement between the parties with respect to the employment of the Executive by the company and supersedes any and all other agreements, oral or written, between the parties. This Agreement may not be modified or amended except by a writing signed by the parties.

13. Waiver. Any waiver or breach of any of the terms of this Agreement shall not operate as a waiver of any other breach of such terms or conditions, or any other terms or conditions, nor shall any failure to enforce any provisions hereof operate as a waiver of such provision or any other provision hereof.

14. Assignment. This Agreement is a personal employment contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned or pledged. Subject to Section 7(d) hereof, the Company may assign its rights under this Agreement to (i) any entity into or with which the Company is merged or consolidated or to which the Company transfers all or substantially all of its assets or (ii) any entity, which at the time of such assignment, controls, is under common control with, or is controlled by the Company.

15. Successors. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs, executors, administrators and legal representatives. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

16. Section Headings. The section headings in this Agreement have been inserted for convenience and shall not be used for interpretive purposes or to otherwise construe this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above and intend that this Agreement have the effect of a sealed instrument.

ASCENT ENERGY INC.
By:	/s/ Terry W. Carter
Name:	Terry W. Carter
Title:	President, CEO, COO

1700 Redbud Blvd.

Suite 450

McKinney, TX 75069

EXECUTIVE

/s/ Steven C. Limke

Steven C. Limke

2060 County Road 3250

Paradise, TX 76073

Address of Executive

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EX-10.10

Exhibit 10.10

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of April 1, 2005 by and between Ascent Energy Inc., a Delaware corporation (the “Company”), and David A. Rice (the “Executive”).

WITNESSETH:

WHEREAS, the Executive has been providing services to the Company and the Company has been compensating the Executive; and

WHEREAS, the Company desires to continue to employ the Executive upon the terms and conditions and in the capacities set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of-which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Employment and Term of Employment. Subject to the terms and conditions of this Agreement, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company as Vice President Business Development and Reservoir Engineering for a term beginning on the date hereof (the “Effective Date”) and ending on the third anniversary of such date (the “Term of Employment”). On the second anniversary date hereof and on each annual anniversary of such date thereafter (such date and each annual anniversary thereafter being referred to herein as a “Renewal Date”), the Term of Employment shall be automatically extended so as to terminate two years from such Renewal Date, unless, not less than 90 days prior to such Renewal Date, written notice is given by either the Company or the Executive that the Term of Employment shall not be so extended. In no event, however, will this Agreement extend beyond the Executive’s normal retirement date pursuant to any Company employee benefit plan in which he may be a participant.

2. Scope of Employment. During the Term of Employment, the Executive Agrees to serve as Vice President Business Development and Reservoir Engineering of the Company and will perform the duties and functions as are normal and customary to such positions and that are consistent with the responsibilities contained in the Company’s bylaws and (ii) perform such other duties not inconsistent with his position as are assigned to him, from time to time, by the President and Chief Executive Officer, whom shall have direct supervision over the Executive. Executive also agrees to serve, if elected, as an officer or director of any subsidiary of affiliate of the Company. During the Term of Employment, Executive shall devote his full business time, attention, skill and efforts to the faithful performance of his duties hereunder. The foregoing shall not be construed to prevent the Executive from making investments in businesses or enterprises so long as such investments do not require any services on the part of the Executive in the operation of such business or enterprises and do not violate the terms and conditions of this Agreement.

3. Compensation. During the Term of Employment, in consideration of the Executive’s services hereunder, including, without limitation, service as an officer, director or

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member of any committee of the board of directors of the Company or of any subsidiary or affiliate thereof, and in consideration of the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, the Executive shall receive a salary at the rate of $134,375.17 per year (payable at such regular intervals as other employees of the Company are compensated in accordance with the Company’s employment practices), which amount shall be subject to review annually by the President and Chief Executive Officer and the Board of Directors of the Company and may be adjusted at their discretion, provided that such salary may not be reduced. In addition, the Executive shall be entitled to participate in any applicable bonus, incentive compensation or other programs created by the board of directors of the Company from time to time for the benefit of such employee.

“For purposes of Section 7(c)(i) or 7(d)(i) hereof, “annual rate of total compensation” shall mean the sum of (i) the annual rate of salary set forth above, as the same may be increased from time to time as provided above; and (ii) the most recent annual bonus (whether in cash or securities) awarded the Executive; or (Hi) in the case of clause (ii) above, for purposes of Section 7(d)(i), it shall be the greater of (A) the most recent annual bonus (whether in cash or securities) awarded the Executive, (B) the last annual bonus (whether in cash or securities) awarded the Executive prior to the “Change of Control” and (C) 50% of the annual rate of salary set forth above, as the same may be increased from time to time as provided above.”

4. Additional Compensation and Benefits. As additional compensation for the Executive’s services under this Agreement, the Executive’s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, during the Term of Employment, the Company agrees to provide the Executive with the non-cash benefits being provided to him on the date of this Agreement (or the equivalent of such benefits) and, -without duplication, any other non-cash benefits provided by the Company to its other officers and key employees as they may exist from time to time. Such benefits shall include leave or vacation time, medical and dental insurance, life insurance, retirement and disability benefits as may hereafter by provided by the Company in accordance with its policies as well as any stock option plan or similar employee benefit program for which key executives are or shall become eligible. The Company shall reimburse the Executive for reasonable and necessary expenses incurred by the Executive in furtherance of the Company’s business, provided that such expenses are incurred in accordance with the Company’s policies and upon presentation of the documentation in accordance with expense reimbursement policies of the Company as they may exist from time to time, and submission to the Company of adequate documentation in accordance with federal income tax regulations and administrative pronouncements.

5. Confidentiality and Other Matters.

(a). Confidentiality. The Executive shall hold in a fiduciary capacity for the benefit of the Company all financial information, customer lists, contracts, books, records, materials, maps, data, reports, including but not limited to, results of exploration, drilling, drill

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cores, cuttings, and other samples, and other information relating to the business or affairs of the Company (such information being collectively referred to herein as the “Confidential Information”). During the Term of Employment and after termination of the Executive’s employment hereunder, the Executive agrees: (i) to take all such precautions as may be reasonably necessary to prevent the disclosure to any third party of any of the Confidential Information; (ii) not to use for the Executive’s own benefit any of the Confidential Information; and (in) not to aid any other person or entity in the use of the Confidential Information in competition with the Company. Notwithstanding any provision contained herein to the contrary, the term “Confidential Information” shall not be deemed to include any general knowledge, skills or experience acquired by the Executive or any knowledge or information known to the public in general. The Executive further agrees that upon termination of his employment for any reason, he will surrender to the Company all Confidential Information, and any copies thereof, produced by him or coming into his possession and agrees that all such materials, and copies thereof, are at all times the property of the Company. The Executive further agrees that he shall not otherwise knowingly act or conduct himself (i) to the material detriment of the Company, its subsidiaries or affiliates, or (ii) in a manner which is inimical or contrary to the interests thereof.

(b). Discoveries and Inventions. If the Executive, in the course of his employment with the Company, makes any discovery, improvement, or invention which pertains to or may be useful in the business of the Company, its subsidiaries or affiliates at the time of cessation of his employment, such discovery, improvement, or invention shall be the exclusive property of the Company. The Executive shall execute and deliver to the Company, with further compensation, any and all documents which the Company deems necessary or appropriate to more fully and more perfectly evidence the Company’s ownership thereof.

(c). Notification of Discoveries. The Executive hereby assigns to the Company all his right, title and interest in and to any and all inventions, discoveries, developments, improvements, techniques, designs, data and all other work products, whether tangible or intangible, as described in 5(b) herein, which Executive conceives, reduces to practice or otherwise creates in the course of his employment and in which the law recognizes any protectable interest. The Executive agrees to perform all acts necessary to enable the Company to learn of and to protect the right it receives hereunder, including, but not limited to, making full and immediate disclosure to the Company.

(d). Non-Solicitation. Without the prior written consent of the Company, the Employee covenants and agrees that during the term of this Agreement and for a period of one year thereafter, he shall not hire or attempt to hire for or on behalf of himself or any business organization, any officer, or employee of the Company, or encourage for or on behalf of himself or any business organization, any officer, or employee to terminate his or her relationship or employment with the Company.

(e). Definitions; Remedies. For purposes of this Section 5, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns. In the event of a breach or threatened breach by the Executive of the provisions of this Section 5,

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the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that the provisions of this Section 5 shall survive the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company.

6. Noncompetition.

(a). Noncompetition Activities. The Executive acknowledges that the nature of the employment under this Agreement is such as will bring the Executive in personal contact with patrons or customers of the Company and will enable him to acquire valuable information as to the nature and character of the business of the Company, thereby enabling him, by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge and thereby gain an unfair advantage. Accordingly, the Executive covenants and agrees that he will not, without the prior written consent of the Company during the Term of Employment and for the period of one year thereafter, engage directly or indirectly for himself, or as an agent, representative, officer, director or employee of others, in the exploration for hydrocarbons in fields or properties being developed, or explored by the Company during the time of his employment or prospects on which the Company worked; provided, however, that notwithstanding the foregoing, the Executive may have passive investments in a competing business if such competing business is publicly traded and if such investment constitutes less than five percent (5%) of the equity of such competing business.

(b). Scope. In the event that the provisions of this Section 6 should ever be deemed to exceed the time, geographic or activity related limitations permitted by applicable law, then such provision shall be reformed to the maximum time, geographic or activity related limitations permitted by applicable law. In the event of a breach or threatened breach by Executive of the provisions of this Section 6, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that this Section 6 shall remain in effect for its full term notwithstanding the earlier termination of the Executive’s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company. For purposes of this Section 6, the “Company” shall be defined as the Company and its affiliated companies including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns.

7. Termination.

(a). Termination by Company for Cause. The Company may terminate the Executive’s employment hereunder with Cause (defined below) and without prior notice. If the Company terminates the Executive’s employment with Cause, the Executive shall only be entitled to receive (i) accrued but unpaid compensation pursuant to Section 3 of this Agreement, and (ii) those benefits under Section 4 which are required under the Executive Income Retirement

EMPLOYMENT AGREEMENT Page 4

Security Act of 1974, as amended (“ERISA”), or other laws. As used in this Agreement, “Cause” shall mean (i) any material failure of the Executive after written notice to perform his duties specified in Section 2 of this Agreement when such failure shall have continued for 30 days after receipt of such notice, (ii) any material failure of the Executive after written notice to follow any written direction of the Board of Directors or the President and CEO when such failure shall have continued for 30 days after receipt of such notice, (Hi) willful misconduct or negligence in the performance of his duties, including but not limited to, the diversion or taking advantage of a corporate opportunity, (iv) commission of fraud by the Executive against the Company, its affiliates or customers, (v) a material breach by the Executive of Sections 5 or 6 of this Agreement, or (vi) conviction of the Executive of a felony offense or a crime involving moral turpitude. If the Company terminates the Executive’s employment for Cause, the Term of Employment shall end upon such termination.

(b). Death or Disability. In the event of the Executive’s death or of the Executive’s sickness or disability of a permanent nature rendering the Executive unable to perform his duties hereunder for a period of 90 consecutive days or 120 days in any twelve month period during the Term of Employment, the Company shall pay to the Executive or the estate of the Executive, as applicable, in the year of death or disability or the year thereafter compensation which would otherwise be payable to the Executive pursuant to Section 3 hereof up to the end of the sixth month after his death or the expiration of the 90 consecutive day period or on the 120* day referred to above, as the case may be, during which he was unable to perform his duties hereunder. The Term of Employment shall end upon the Executive’s death or upon the expiration of the 90 consecutive day period or the 120th day referred to above, as the case may be.

(c). Termination by Company Without Cause or by the Executive with Good Reason. If either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason (as hereinafter defined), the Company shall:

(i) pay the Executive, in accordance with the Company’s normal payroll practices, his current rate of total compensation for the remaining term of employment, as extended pursuant to Section 1, or if the Company so elects, pay the Executive such amount in lump sum form within 30 days after the date of such termination;

(ii) pay the Executive any accrued but unpaid compensation as of the date of the termination of employment; and

(iii) continue until the first anniversary of the termination of the Executive’s employment, or such longer period as any plan, program or policy or ERISA or other laws may provide, benefits to the Executive as set forth in Section 7(f) below.

As used in this Agreement, “Good Reason” shall mean: (A) the failure by the Company to elect or re-elect or to appoint or re-appoint the Executive to the office of Vice

EMPLOYMENT AGREEMENT Page 5

President Business Development and Reservoir Engineering of the Company without Cause; (B) a material change by the Company of the Executive’s function, duties or responsibilities that would cause the Executive’s position with the Company to become of less dignity, responsibility, importance or scope from the position and attributes thereof described in Section 2 above; (C) the Company requires the Executive to re-locate his primary office to a location that is greater than 50 miles from the location of the Company as of the date hereof, or (D) any other material breach of this Agreement by the Company and the continuance of such breach for at least 30 days.”

(d). Termination Following a Change of Control. If, within one year of a Change of Control, either the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason, then, in addition to any amounts to which the Executive may otherwise be entitled hereunder, the Company shall:

(i) pay to the Executive, within 30 days after the date of such termination, a lump sum cash payment equal to an additional one (1) times the Executive’s then current annual rate of total compensation;

(e). Change of Control. As used in this Agreement, a “Change of Control” shall mean:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership of 50% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or its affiliates, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (Hi) hereof; or

(ii) Individuals, who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an

EMPLOYMENT AGREEMENT Page 6

actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (A) (1) all or substantially all of the persons who were beneficial owners of the Outstanding Common Stock immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction, and (2) all or substantially all of the persons who were beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (excluding (1) any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction and (2) any Person approved by the Incumbent Board) beneficially owns, directly or indirectly, 40 percent or more of the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to such Corporate Transaction.

(f). Insurance and Other Special Benefits. To the extent Executive is eligible thereunder, for a period of 12 months following termination pursuant to Section 7(c), or for a period of 24 months following termination pursuant to Section 7(d) hereof, Executive shall continue to be provided life insurance, disability and long term disability policies provided to the Executive on the date hereof or such successor policies in effect at the time of Executive’s termination, and shall also continue to be covered for the applicable period by each other insurance, disability, health or other benefit program, plan or policy by which he was covered at the time of the Executive’s termination. In the event Executive is ineligible to continue to be so covered under the terms of any such life insurance, disability, long-term disability, insurance, health or other benefit program, plan or policy, the Company shall provide to Executive through other sources such benefits, including such additional benefits, as may be necessary to make the benefits applicable to Executive substantially equivalent to those in effect immediately prior to such termination, provided that (i) the costs paid by the Company for such benefit programs do not exceed the costs which it would have paid if such benefit programs were still available to such Executive or (ii) if during such period Executive should enter into the employ of another company or firm which provides to Executive substantially similar benefit coverage, Executive’s

EMPLOYMENT AGREEMENT Page 7

participation in the comparable benefits provided by the Company, either directly or through such other sources, shall cease. Nothing contained in this paragraph shall be deemed to require or permit termination or restriction of any of Executive’s coverage under any plan or program thereto to which Executive is entitled under the terms of such plan or program, whether at the end of the aforementioned 12- or 24-month period, as the case may be, or at any other time.

(g). Limitation on Payments. If any amount or benefit payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999 all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and the Executive if they are of a type that would be included in determining what tax, if any, is due under Section 4999. In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines and if any one agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

8. Expenses. The Company shall promptly pay or reimburse Executive for all costs and expenses, including, without limitation, court costs and attorneys’ fees, incurred by Executive as a result of any claim, action or proceeding (including, without limitation, a claim, action or proceeding by Executive against the Company) arising out of, or challenging the validity or enforceability of, this Agreement or any provision hereof, provided such Executive’s claim, action or proceeding is materially successful against the Company.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas. Venue and jurisdiction of any action relating to this Agreement shall lie in Collin County.

10. Notice. Any notice, payment, demand or communication required or permitted to be given by this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered personally or if sent by registered or certified mail, return receipt requested, postage prepaid, addressed to such party at its address set forth below such party’s signature to this Agreement or to such other address as shall have been furnished in writing by such party for whom the communication is intended. Any such notice shall be deemed to be given on the date so delivered.

EMPLOYMENT AGREEMENT Page 8

11. Severability. In the event any provisions hereof shall be modified or held ineffective by any court, such adjudication shall not invalidate or render ineffective the balance of the provisions hereof.

12. Entire Agreement. This Agreement constitutes the sole agreement between the parties with respect to the employment of the Executive by the company and supersedes any and all other agreements, oral or written, between the parties. This Agreement may not be modified or amended except by a writing signed by the parties.

13. Waiver. Any waiver or breach of any of the terms of this Agreement shall not operate as a waiver of any other breach of such terms or conditions, or any other terms or conditions, nor shall any failure to enforce any provisions hereof operate as a waiver of such provision or any other provision hereof.

14. Assignment. This Agreement is a personal employment contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned or pledged. Subject to Section 7(d) hereof, the Company may assign its rights under this Agreement to (i) any entity into or with which the Company is merged or consolidated or to which the Company transfers all or substantially all of its assets or (ii) any entity, which at the time of such assignment, controls, is under common control with, or is controlled by the Company.

15. Successors. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs, executors, administrators and legal representatives. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

16. Section Headings. The section headings in this Agreement have been inserted for convenience and shall not be used for interpretive purposes or to otherwise construe this Agreement.

EMPLOYMENT AGREEMENT Page 9

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above and intend that this Agreement have the effect of a sealed instrument.

ASCENT ENERGY INC.
By:	/s/ Terry W. Carter
Name:	Terry W. Carter
Title:	President, CEO, COO

1700 Redbud Blvd.

Suite 450

McKinney, TX 75069

EXECUTIVE

/s/ David A. Rice

David A. Rice

1903 Normandy Drive

Richardson, TX 75082

Address of Executive

EMPLOYMENT AGREEMENT Page 10

EX-10.11

Exhibit 10.11

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), dated as of June 20, 2006 by and between Ascent Energy, Inc. (the “Company”), and Terry W. Carter (the “Executive”).

WITNESSETH:

WHEREAS, the Executive and Company entered into an Employment Agreement dated June 20, 2006 (“Employment Agreement”); and

WHEREAS, the Executive and Company desire to amend the Employment Agreement;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Limitations on Payments. Section 7(g) of the Employment Agreement is hereby modified and amended to read as follows:

Subject to and except as otherwise provided in this Section 7(g), if any amount or benefit otherwise payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the amount or benefit otherwise payable to the Executive shall be reduced in the manner hereafter described, with the result that the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999, all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and/or any affiliate and the Executive if they are of a type that would be deemed “parachute payments”, as that term is defined in Section 280G of the Code; provided, however, any payment to or for the benefit of Executive in the nature of compensation under the Equity Incentive Plan of Ascent Energy, Inc. (the “Plan”); any replacement plans or similar, additional plans; any stock option plans; share appreciation rights; or any additional current or future incentive plans of Ascent Energy, Inc. or any affiliate, shall not be considered “parachute payments” for purposes of this Agreement and shall be excluded from the limitation on payments set forth in this Section 7(g) . In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce the amount payable to the Executive under any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines, and if any one

AMENDMENT TO EMPLOYMENT AGREEMENT Page 1

agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

2. No Other Modifications. Except as and to the extent set forth in this Amendment, the Employment Agreement is and remains unmodified and in full force and effect as originally entered into, and is hereby ratified and confirmed in all respects.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above and intend that this Amendment have the effect of a sealed instrument.

	ASCENT ENERGY, INC.
4965 Preston Park Blvd
Suite 800
Plano, TX 75093
	By:	/s/ Stuart B. Katz
	Name:	Stuart B. Katz
	Title:	Director
	EXECUTIVE
		/s/ Terry W. Carter
	Print Name:	Terry W. Carter

AMENDMENT TO EMPLOYMENT AGREEMENT Page 2

EX-10.12

Exhibit 10.12

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), dated as of June 20, 2006 by and between Ascent Energy, Inc. (the “Company”), and Eddie M. LeBlanc, III (the “Executive”).

WITNESSETH:

WHEREAS, the Executive and Company entered into an Employment Agreement dated June 20, 2006 (“Employment Agreement”); and

WHEREAS, the Executive and Company desire to amend the Employment Agreement;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Limitations on Payments. Section 7(g) of the Employment Agreement is hereby modified and amended to read as follows:

Subject to and except as otherwise provided in this Section 7(g), if any amount or benefit otherwise payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the amount or benefit otherwise payable to the Executive shall be reduced in the manner hereafter described, with the result that the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999, all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and/or any affiliate and the Executive if they are of a type that would be deemed “parachute payments”, as that term is defined in Section 280G of the Code; provided, however, any payment to or for the benefit of Executive in the nature of compensation under the Equity Incentive Plan of Ascent Energy, Inc. (the “Plan”); any replacement plans or similar, additional plans; any stock option plans; share appreciation rights; or any additional current or future incentive plans of Ascent Energy, Inc. or any affiliate, shall not be considered “parachute payments” for purposes of this Agreement and shall be excluded from the limitation on payments set forth in this Section 7(g) . In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce the amount payable to the Executive under any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines, and if any one

AMENDMENT TO EMPLOYMENT AGREEMENT Page 1

agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

2. No Other Modifications. Except as and to the extent set forth in this Amendment, the Employment Agreement is and remains unmodified and in full force and effect as originally entered into, and is hereby ratified and confirmed in all respects.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above and intend that this Amendment have the effect of a sealed instrument.

	ASCENT ENERGY, INC.
4965 Preston Park Blvd
Suite 800
Plano, TX 75093
	By:	/s/ Stuart B. Katz
	Name:	Stuart B.Katz
	Title:	Director
	EXECUTIVE
		/s/ Eddie M. LeBlanc, III
	Print Name:	Eddie M. LeBlanc, III

AMENDMENT TO EMPLOYMENT AGREEMENT Page 2

EX-10.13

Exhibit 10.13

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), dated as of June 20, 2006 by and between Ascent Energy, Inc. (the “Company”), and David L. McCabe (the “Executive”).

WITNESSETH:

WHEREAS, the Executive and Company entered into an Employment Agreement dated June 20, 2006 (“Employment Agreement”); and

WHEREAS, the Executive and Company desire to amend the Employment Agreement;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Limitations on Payments. Section 7(g) of the Employment Agreement is hereby modified and amended to read as follows:

Subject to and except as otherwise provided in this Section 7(g), if any amount or benefit otherwise payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the amount or benefit otherwise payable to the Executive shall be reduced in the manner hereafter described, with the result that the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999, all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and/or any affiliate and the Executive if they are of a type that would be deemed “parachute payments”, as that term is defined in Section 280G of the Code; provided, however, any payment to or for the benefit of Executive in the nature of compensation under the Equity Incentive Plan of Ascent Energy, Inc. (the “Plan”); any replacement plans or similar, additional plans; any stock option plans; share appreciation rights; or any additional current or future incentive plans of Ascent Energy, Inc. or any affiliate, shall not be considered “parachute payments” for purposes of this Agreement and shall be excluded from the limitation on payments set forth in this Section 7(g) . In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce the amount payable to the Executive under any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines, and if any one

AMENDMENT TO EMPLOYMENT AGREEMENT Page 1

agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

2. No Other Modifications. Except as and to the extent set forth in this Amendment, the Employment Agreement is and remains unmodified and in full force and effect as originally entered into, and is hereby ratified and confirmed in all respects.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above and intend that this Amendment have the effect of a sealed instrument.

	ASCENT ENERGY, INC.
4965 Preston Park Blvd
Suite 800
Plano, TX 75093
	By:	/s/ Stuart B. Katz
	Name:	Stuart B. Katz
	Title:	Director
	EXECUTIVE
		/s/ David L. McCabe
	Print Name:	David L. McCabe

AMENDMENT TO EMPLOYMENT AGREEMENT Page 2

EX-10.14

Exhibit 10.14

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), dated as of June 20, 2006 by and between Ascent Energy, Inc. (the “Company”), and Steve Limke (the “Executive”).

WITNESSETH:

WHEREAS, the Executive and Company entered into an Employment Agreement dated June 20, 2006 (“Employment Agreement”); and

WHEREAS, the Executive and Company desire to amend the Employment Agreement;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Limitations on Payments. Section 7(g) of the Employment Agreement is hereby modified and amended to read as follows:

Subject to and except as otherwise provided in this Section 7(g), if any amount or benefit otherwise payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the amount or benefit otherwise payable to the Executive shall be reduced in the manner hereafter described, with the result that the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999, all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and/or any affiliate and the Executive if they are of a type that would be deemed “parachute payments”, as that term is defined in Section 280G of the Code; provided, however, any payment to or for the benefit of Executive in the nature of compensation under the Equity Incentive Plan of Ascent Energy, Inc. (the “Plan”); any replacement plans or similar, additional plans; any stock option plans; share appreciation rights; or any additional current or future incentive plans of Ascent Energy, Inc. or any affiliate, shall not be considered “parachute payments” for purposes of this Agreement and shall be excluded from the limitation on payments set forth in this Section 7(g) . In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce the amount payable to the Executive under any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines, and if any one

AMENDMENT TO EMPLOYMENT AGREEMENT Page 1

agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

2. No Other Modifications. Except as and to the extent set forth in this Amendment, the Employment Agreement is and remains unmodified and in full force and effect as originally entered into, and is hereby ratified and confirmed in all respects.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above and intend that this Amendment have the effect of a sealed instrument.

	ASCENT ENERGY, INC.
4965 Preston Park Blvd
Suite 800
Plano, TX 75093
	By:	/s/ Stuart B. Katz
	Name:	Stuart B. Katz
	Title:	Director
	EXECUTIVE
		/s/ Steve Limke
	Print Name:	Steve Limke

AMENDMENT TO EMPLOYMENT AGREEMENT Page 2

EX-10.15

Exhibit 10.15

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), dated as of June 20, 2006 by and between Ascent Energy, Inc. (the “Company”), and David A. Rice (the “Executive”).

WITNESSETH:

WHEREAS, the Executive and Company entered into an Employment Agreement dated June 20, 2006 (“Employment Agreement”); and

WHEREAS, the Executive and Company desire to amend the Employment Agreement;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1. Limitations on Payments. Section 7(g) of the Employment Agreement is hereby modified and amended to read as follows:

Subject to and except as otherwise provided in this Section 7(g), if any amount or benefit otherwise payable under this Agreement is subject to the excise tax imposed under Section 4999 of the Code, the amount or benefit otherwise payable to the Executive shall be reduced in the manner hereafter described, with the result that the Executive shall receive the maximum amount permitted without the imposition of an excise tax under Section 4999 of the Code. In making a determination as to whether a payment or other benefit payable under this Agreement would cause an excise tax to be imposed under Section 4999, all payments or benefits under this Agreement shall be consolidated with the benefits provided by all other arrangements, programs, plans, agreements or understandings of any kind between the Company and/or any affiliate and the Executive if they are of a type that would be deemed “parachute payments”, as that term is defined in Section 280G of the Code; provided, however, any payment to or for the benefit of Executive in the nature of compensation under the Equity Incentive Plan of Ascent Energy, Inc. (the “Plan”); any replacement plans or similar, additional plans; any stock option plans; share appreciation rights; or any additional current or future incentive plans of Ascent Energy, Inc. or any affiliate, shall not be considered “parachute payments” for purposes of this Agreement and shall be excluded from the limitation on payments set forth in this Section 7(g) . In the event it is determined that any such excise tax would be due, the Executive shall have the right to elect to reduce the amount payable to the Executive under any one or more of the agreements, plans, programs, arrangements or understandings in any way that he determines, and if any one

AMENDMENT TO EMPLOYMENT AGREEMENT Page 1

agreement, plan, program, arrangement or understanding has more than one benefit, he may choose between benefits in order to reach the required reduction overall. The determinations required to be made under this provision shall be made by the Company’s auditors and such determinations shall be final and binding on the Company and the Executive except in the case of manifest error. Should the Company’s auditors fail or refuse to make any determination required by the provision then another accounting firm shall be selected by the mutual agreement of the Company and the Executive, and if they fail to reach an agreement, then the Company shall select one accounting firm at its expense and the Executive shall select a second accounting firm at Executive’s expense; and those two accounting firms shall select the accounting firm which shall make the determination required of the Company’s auditors above.

2. No Other Modifications. Except as and to the extent set forth in this Amendment, the Employment Agreement is and remains unmodified and in full force and effect as originally entered into, and is hereby ratified and confirmed in all respects.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above and intend that this Amendment have the effect of a sealed instrument.

	ASCENT ENERGY, INC.
4965 Preston Park Blvd
Suite 800
Plano, TX 75093
	By:	/s/ Stuart B. Katz
	Name:	Stuart B. Katz
	Title:	Director
	EXECUTIVE
		/s/ David A. Rice
	Print Name:	David A. Rice

AMENDMENT TO EMPLOYMENT AGREEMENT Page 2

EX-21.1

Exhibit 21.1

Subsidiaries of the Company

Ascent Oil and Gas Inc.

Ascent Energy Holdings, Inc.

Ascent Energy Louisiana, LLC

Ascent GP, LLC

Ascent LP, LLC

Pontotoc Acquisition Corporation

Pontotoc Production Company, Inc.

Oklahoma Basic Economy Corporation

Pontotoc Holdings, Inc.

Pontotoc Gathering, LLC

Dyne Exploration Company

Ascent Resources WV, Inc.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated June 2, 2006, in the Registration Statement (Form S-1) and related Prospectus of Ascent Energy Inc. for the registration of its common stock.

/s/ Ernst & Young LLP

Dallas, Texas

June 29, 2006

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

We hereby consent to the references to our firm in this Registration Statement on Form S-1 (including any amendments thereto and the related prospectus) filed by Ascent Energy Inc., to our estimates of reserves and value of reserves and our reports on reserves for the years ended December 31, 2003, 2004 and 2005 and to the inclusion of our report for the year ended December 31, 2005 dated March 1, 2006 as an appendix to the prospectus included in such registration statement.

NETHERLAND, SEWELL & ASSOCIATES, INC.
By:	/s/ Frederic D. Sewell
	Frederic D. Sewell
	Chairman and Chief Executive Officer

Houston, Texas

June 29, 2006

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT RESERVE ENGINEERS AND GEOLOGISTS

As independent reserve engineers and geologists, we hereby consent to the references to our firm in this Registration Statement on Form S-1 (including any amendments thereto and the related prospectus) filed by Ascent Energy Inc., to our estimates of reserves and value of reserves and our reports on reserves as of December 31, 2004 and 2005 and to the inclusion of our reserve report dated March 23, 2006 as an appendix to the prospectus included in such registration statement.

LAROCHE PETROLEUM CONSULTANTS, LTD.
By:	/s/ Joe A. Young
Name: Title:	Joe A. Young Senior Partner

June 28, 2006