LETTER TO SHAREHOLDERS, continued

NATURAL GAS GROWTH

The balance of 2008’s $295 million capital budget, or approximately $120 million, will be invested in our Piceance and DJ assets to pursue the development of our natural gas resources.

In 2008 we intend to double our production from the Piceance to 21.6 MMcf/D. We expect to have four drilling rigs active year-round in 2008 and may add a fifth rig depending on results of our program. We estimate that our Piceance acreage has nearly 850 billion cubic feet of proved and probable reserves and 1,000 drilling locations on 10-acre spacing. This resource provides us the long-term natural gas growth we desire.

Although the terrain and weather in the Piceance can make operations challenging, we continue to develop the infrastructure to support our growing production. We have completed building one service road up to our western mesa drilling locations and are beginning construction on a second road on the eastern acreage. We have invested in expanded gas-gathering and water-handling systems to handle the anticipated increases in production and we have acquired firm transportation contracts on the Rockies Express Pipeline that provide significant takeaway capacity for our production over the next decade.

Our DJ gas assets in eastern Colorado are such that we can quickly increase our development pace if we see natural gas markets continue to improve in the near term. Our plan is to pace production to replace our reserves in this asset and grow as we see opportunities. Henry Hub natural gas prices have improved in the first few months of 2008 and in the western Rockies we are also seeing improving basis differentials.