Exhibit 10.1

 

2004 MEASUREMENT CRITERIA UNDER

ANNUAL TARGET CASH INCENTIVE PLAN

 

The funding level of the bonus pool is determined by two tests (weighted 50%
each) based on Company performance, before adjustment for non-controllable
items, as follows:

 

  •   Cash flow must equal a minimum of 2.0 times debt service, with debt
service including interest and dividends, but excluding originally scheduled
principal payments unless the Company’s total borrowing capacity is diminished
at the time of the principal repayment, and

 

  •   The Company must achieve positive earnings, after the inclusion of an
accrual for the contemplated bonus payment.

 

If either or both of these tests are met, then performance of each business unit
is based on the following achievements.

 

For the plan a business unit is defined as the East region, West region, Gulf
Coast region and Total Company. Corporate will be rewarded based on the
accomplishments of all the business units. (Canada will be included in
Corporate)

 

To measure the short-term accomplishments, each business unit is measured by its
discretionary cash flow attainment versus budget. This factor counts toward 75%
of the overall bonus.

 

  •   The business units must achieve 90% performance against its target for
adjusted discretionary cash flow.

 

  •   Certain business factors, such as oil and gas prices (including related
production taxes) and interest rates have been identified as non-controllable
items and are neutralized by the measurement criteria through the creation of a
new cash flow parameter – Adjusted Discretionary Cash Flow. This measure
provides the best assessment of production achievement and expense management
achievement.

 

Long-term value creation is measured through an assessment of overall reserve
replacement, factoring in the costs associated with adding these reserves. This
factor is 25% of the bonus, but can be adjusted between 0 and 50% based on
performance.

 

  •   The business unit must have satisfactory performance against its budgeted
reserve replacement at a cost competitive with the originally budgeted levels
and/or current market conditions.

 

  •   A discretionary factor by the CEO based on his evaluation will reward or
penalize exceptional or inefficient performance for this parameter.

 

The Compensation Committee has the discretion to adjust final results up to 25%
in either direction based on other factors it deems appropriate.