Gulf Of Mexico - Deepwater

We have minority working interests in two deepwater offshore fields, Medusa and Habanero, having long-lived reserves in the deepwater region of the U.S. Gulf of Mexico. Both fields have shallow declines, require minimal capital investment and have low per-unit operating costs. Production from these fields has generated the majority of our operating cash flow and proved reserves at year-end 2009. These offshore fields provide a relatively steady source of cash for reinvesting into our onshore growth assets and we anticipate stable cash flow from them for the next 10 years.

• Medusa. We own a 15% working interest in the Medusa
  Field operated by Murphy Oil Corporation. Most of the existing eight producing wells are still in their primary completion. We and the operator believe that significant upside potential exists from behind pipe reserves that are not currently categorized as proved.
• Habanero. We own an 11.25% working interest in the Habanero Field operated by Shell Deepwater Development, Inc.
• Production. As of December 31, 2010, 35% and 14% of our total 2010 production were attributed to Medusa and Habanero, respectively.
• Our reinvestment requirements in our deepwater fields are minimal.  The low investment requirement enables us to reinvest the cash flow generated from our deepwater fields into our onshore oil drilling program.