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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 Commission file number: 001-32997
 
 Magnum Hunter Resources Corporation
  DELAWARE
    
    86-0879278(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 777 Post Oak Boulevard, Suite 910, Houston, Texas 77056
 Registrants telephone number including area code: (832) 369-6986
 Securities registered under Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registered$0.01 par value Common Stock 
10.25% Series C Cumulative Perpetual Preferred Stock
    
    NYSE Amex
NYSE Amex
 Securities registered under Section 12(g) of the Act:
None
 Yes o No þ
 Yes o No þ
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2009
MAGNUM HUNTER RESOURCES CORPORATION
 Item
    
    PagePART I1. Business
    
    
    51A. Risk Factors
    
    
    151B. Unresolved Staff Comments
    
    
    282. Properties
    
    
    293. Legal Proceedings
    
    
    384. Submission of Matters to a Vote of Security Holders
    
    
    39PART II5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    466. Selected Financial Data
    
    
    477. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    487A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    628. Financial Statements and Supplementary Data
    
    
    639. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    669A(T). Controls and Procedures
    
    
    669B. Other Information
    
    
    67PART III10. Directors, Executive Officers and Corporate Governance
    
    
    6811. Executive Compensation
    
    
    6812. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    6813. Certain Relationships and Related Transactions, and Director Independence
    
    
    6814. Principal Accountant Fees and Services
    
    
    6815. Exhibits and Financial Statement Schedules
    
    
    68Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 23.3Exhibit 23.4Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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CAUTIONARY NOTICE
  
 
    
    adverse economic conditions in the United States and globally;
    
    difficult and adverse conditions in the domestic and global capital and credit markets;
    
    changes in domestic and global demand for oil and natural gas;
    
    volatility in the prices we receive for our oil and natural gas;
    
    the effects of government regulation, permitting, and other legal requirements;
    
    future developments with respect to the quality of our properties,
including, among other things, the existence of reserves in economic
quantities;
    
    uncertainties about the estimates of our oil and natural gas reserves;
    
    our ability to increase our production and oil and natural gas income through exploration and development;
    
    our ability to successfully apply horizontal drilling techniques and tertiary recovery methods;
    
    the number of well locations to be drilled, the cost to drill, and the time frame within which they will be drilled;
    
    drilling and operating risks;
    
    the availability of equipment, such as drilling rigs and transportation pipelines;
    
    changes in our drilling plans and related budgets;
    
    the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity;
    
    other factors discussed under Risk Factors in Item 1A of this report.
    3




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SPECIAL NOTE REGARDING THE REGISTRANT
  www.MagnumHunterResources.com www.sec.gov
 Industry terms used in this report are defined in the Glossary of Oil and Natural Gas Term located at the end of Part 1.
  4




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PART I
 
 Item 1. BUSINESS
 Overview
 1
  Significant Developments and Achievements
 Triad Acquisition.
 
    
    $55 million for the repayment of Triads senior debt, which $55 million was borrowed
by the Company pursuant to the terms of the new Restated Credit Agreement discussed
below;
    
    $15 million of our Series B Redeemable Convertible Preferred Stock, issued to certain
banks that were secured creditors of Triad;
    
    $8 million in cash; and
    
    Assumption of approximately $3 million of equipment indebtedness.
    
    The Fair Value of the
consideration approximated its $81 million face value.
  
 1
    
    Magnum Hunter Resources, Inc. was a NYSE-listed oil and
gas exploration and production company, unrelated to the Company, that was
acquired by Cimarex Energy Corporation in June 2005.  5




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Bank of Montreal Credit Facilities.
 Acquisition of Sharon Resources, Inc.
 Equity
Financings.
 
    
    $15.2 million of common equity financings throughout the course of the fourth
quarter.
    
    $5.4 million in gross proceeds from the issuance of our 10.25% Series C
Cumulative Perpetual Preferred Stock, (Series C Preferred Stock) at a price of
$25.00 per share in the fourth quarter of 2009
 Summary of Proved Reserves, Wells and Production
 SEC Case Reserve Summary (1)
 At December 31, 20092009 AverageProved
    
    
    
    
    
    
    %
    
    
    Productive Wells
    
    
    Daily ProductionArea
    
    Reserves (a)
    
    
    PV10% (b)(c)
    
    
    Oil
    
    
    Gross
    
    
    Net
    
    
    Volumes (d)(MMboe)
    
    
    ($MMs)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (boe)North Dakota
    
    
    3.098
    
    
    $
    45.70
    
    
    
    96
    %
    
    
    146
    
    
    
    65.7
    
    
    
    335West Texas
    
    
    2.199
    
    
    
    12.20
    
    
    
    62
    %
    
    
    87
    
    
    
    8.7
    
    
    
    302South Texas / Gulf Coast
    
    
    0.841
    
    
    
    7.50
    
    
    
    33
    %
    
    
    10
    
    
    
    2.9
    
    
    
    33Other
    
    
    0.031
    
    
    
    0.20
    
    
    
    0
    %
    
    
    5
    
    
    
    0.5
    
    
    
    33Total
    
    
    6.169
    
    
    $
    65.60
    
    
    
    74
    %
    
    
    248
    
    
    
    77.8
    
    
    
    703
 Pro Forma SEC Case Reserve Summary (2)
 Pro Forma At December 31, 2009 *2009 AverageProved
    
    
    
    
    
    
    %
    
    
    Productive Wells
    
    
    Daily ProductionArea
    
    Reserves (a)
    
    
    PV10% (b)(c)
    
    
    Oil
    
    
    Gross
    
    
    Net
    
    
    Volumes (d)(MMboe)
    
    
    ($MMs)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (boe)Appalachian Basin
    
    
    5.129
    
    
    $
    56.40
    
    
    
    65
    %
    
    
    2,074
    
    
    
    1,970.3
    
    
    
    1,000North Dakota
    
    
    3.098
    
    
    
    45.70
    
    
    
    96
    %
    
    
    146
    
    
    
    65.7
    
    
    
    335West Texas
    
    
    2.199
    
    
    
    12.20
    
    
    
    62
    %
    
    
    87
    
    
    
    8.7
    
    
    
    302South Texas / Gulf Coast
    
    
    0.841
    
    
    
    7.50
    
    
    
    32
    %
    
    
    10
    
    
    
    2.9
    
    
    
    33Other
    
    
    0.031
    
    
    
    0.20
    
    
    
    0
    %
    
    
    5
    
    
    
    0.5
    
    
    
    33Total
    
    
    11.298
    
    
    $
    122.00
    
    
    
    70
    %
    
    
    2,322
    
    
    
    2,048.1
    
    
    
    1,703
 *
    
    Pro forma information related to the Triad acquisition, which closed February 12, 2010, was prepared by the Companys internal
engineers.(1)
    
    Does not include reserves related to our recent acquisition of Triad located in the Appalachian Basin, as the transaction was
completed in February of 2010. (2)
    
    Includes reserves related to our recent acquisition of Triad located in the Appalachian Basin, which closed in February of 2010.(a)
    
    MMBoe is defined as one million barrels of oil equivalent determined using the ratio of six Mcf of natural gas to one Bbl of
crude oil, condensate or natural gas liquids.(b)
    
    The prices used to calculate this measure were $61.18 per barrel of oil and $3.866 per MMbtu of natural gas. The prices
represent the average prices per barrel of oil and per MMbtu of natural gas at the beginning of each month in the 12-month
period prior to the end of the reporting period. These prices were adjusted to reflect applicable transportation and quality
differentials on a well-by-well basis to arrive at realized sales prices used to estimate our reserves at this date.(c)
    
    The standardized measure for our proved reserves at December 31, 2009 was $47.4 million. See Item 2. Properties for a
definition of pre-tax PV10% and a reconciliation of our standardized measure to our pre-tax PV10% value.(d)
    
    Average daily production volumes calculated based on 360 day year.  6




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NYMEX Futures Strip Case Reserve Summary
 At December 31, 20092009 AverageProved
    
    
    
    
    
    %
    
    
    Productive Wells
    
    
    Daily ProductionArea
    
    Reserves (e)
    
    
    PV10% (f)
    
    
    Oil
    
    
    Gross
    
    
    Net
    
    
    Volumes (g)(MMboe)
    
    
    ($MMs)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (boe)North Dakota
    
    
    3.339
    
    
    $
    81.5
    
    
    
    95
    %
    
    
    146
    
    
    
    66
    
    
    
    335West Texas
    
    
    2.337
    
    
    $
    27.7
    
    
    
    62
    %
    
    
    87
    
    
    
    9
    
    
    
    302South Texas / Gulf Coast
    
    
    0.896
    
    
    $
    9.0
    
    
    
    32
    %
    
    
    10
    
    
    
    3
    
    
    
    30Other
    
    
    0.038
    
    
    $
    0.3
    
    
    
    0
    %
    
    
    5
    
    
    
    1
    
    
    
    36Total
    
    
    6.610
    
    
    $
    118.5
    
    
    
    75
    %
    
    
    248
    
    
    
    79
    
    
    
    703
 (e)
    
    MMBoe is defined as one million barrels of oil equivalent determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.(f)
    
    The prices used to calculate this measure were the NYMEX futures strip prices as of December
31, 2009.(g)
    
    Average daily production volumes calculated based on 360 day year.  7




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Pro Forma NYMEX Futures Strip Case Reserve Summary (2) *
 2009 AverageProved
    
    
    
    
    
    
    %
    
    
    Productive Wells
    
    
    Daily ProductionArea
    
    Reserves (e)
    
    
    PV10% (f)
    
    
    Oil
    
    
    Gross
    
    
    Net
    
    
    Volumes (g)(MMboe)
    
    
    ($MMs)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (boe)Appalachian Basin
    
    
    5.725
    
    
    $
    119.0
    
    
    
    66
    %
    
    
    2,074
    
    
    
    1,970
    
    
    
    1,000North Dakota
    
    
    3.339
    
    
    
    81.5
    
    
    
    95
    %
    
    
    146
    
    
    
    66
    
    
    
    335West Texas
    
    
    2.337
    
    
    
    27.7
    
    
    
    62
    %
    
    
    87
    
    
    
    9
    
    
    
    302South Texas / Gulf Coast
    
    
    0.896
    
    
    
    9.0
    
    
    
    32
    %
    
    
    10
    
    
    
    3
    
    
    
    30Other
    
    
    0.038
    
    
    
    0.3
    
    
    
    0
    %
    
    
    5
    
    
    
    1
    
    
    
    36Total
    
    
    12.335
    
    
    $
    237.5
    
    
    
    70
    %
    
    
    2,322
    
    
    
    2,049
    
    
    
    1,703
 *
    
    Pro forma information related to the Triad acquisition, which closed February 12, 2010, was
prepared by the Companys internal engineers.(2)
    
    This table includes reserves related to our recent acquisition of Triad located in the
Appalachian Basin, which closed in February of 2010.(e)
    
    MMBoe is defined as one million barrels of oil equivalent determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.(f)
    
    The prices used to calculate this measure were the NYMEX futures strip prices as of December
31, 2009.(g)
    
    Average daily production volumes calculated based on 360 day year.  8




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Business Strategy
  Focus on Unconventional Resource Plays
 Strategic Acquisitions
 Focus on Acquisition and Development of Oil Assets
 Operating Control
 Employment of Advanced Technologies 
 Leveraging the Experience of our Management Team
 Development of Pipeline and Infrastructure Assets 
 Competitive Strengths
  Experienced Management Team
 Balanced Long-Lived Asset Base with Substantial Oil Reserves 
  9




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Acreage Position and Drilling Inventory in Core Resource Areas
 Marcellus Infrastructure Assets 
 2010 Capital Budget
  
    
    Approximately $17.1 million to be deployed for activities in the Appalachian Basin,
including $10 million to complete the initial phase of the Eureka Hunter Pipeline project
and approximately $7.1 million to drill two horizontal wells targeting the Marcellus Shale
formation.
 
    
    Approximately $6.95 million towards operations in the Eagle Ford Shale of South Texas,
including the leasing of additional acreage and the drilling of two horizontal wells in the
Eagle Ford Shale formation.
 
    
    Approximately $950,000 for other projects including Cinco Terry.
 
    
    Because of the volatility of commodity prices and the risks involved in our industry, we
believe in remaining flexible in our capital budgeting process. When appropriate, we may
defer existing capital projects to seize an attractive acquisition opportunity or
reallocate capital towards projects where we believe we can generate higher rates of return
on capital employed. We also believe in maintaining a strong balance sheet and using
commodity hedging. This allows us to be more opportunistic in lower commodity price
environments as well as providing more consistent financial results in the long-term.
  10




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Marketing and Pricing
    
    
    changes in global supply and demand for oil and natural gas;
    
    the actions of the Organization of Petroleum Exporting Countries, or OPEC;
    
    the price and quantity of imports of foreign oil and natural gas;
    
    acts of war or terrorism;
    
    political conditions and events, including embargoes, affecting oil-producing activity;
    
    the level of global oil and natural gas exploration and production activity;
    
    the level of global oil and natural gas inventories;
    
    weather conditions;
    
    technological advances affecting energy consumption; and
    
    the price and availability of alternative fuels.
  
    
    our production and/or sales of natural gas are less than expected;
    
    payments owed under derivative hedging contracts come due prior to receipt of
the hedged months production revenue; or
    
    the counter party to the hedging contract defaults on its contract obligations.
   11




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4Q09
    
    
    1Q10
    
    
    2Q10
    
    
    3Q10
    
    
    4Q10
    
    
    2010
    
    
    2011
    
    
    2012Natural Gas HedgesFloorsVolume (MMbtu/d)
    
    
    652
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/APrice per MCF
    
    $
    7.75
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ACollarsVolume (MMbtu/d)
    
    
    N/A
    
    
    
    667
    
    
    
    659
    
    
    
    652
    
    
    
    652
    
    
    
    658
    
    
    
    548
    
    
    
    329Floor Price per MCF
    
    
    N/A
    
    
    $
    5.69
    
    
    $
    5.69
    
    
    $
    5.69
    
    
    $
    5.69
    
    
    $
    5.69
    
    
    $
    5.00
    
    
    $
    5.00Ceiling Price per MCF
    
    
    N/A
    
    
    $
    7.26
    
    
    $
    7.26
    
    
    $
    7.26
    
    
    $
    7.26
    
    
    $
    7.26
    
    
    $
    8.39
    
    
    $
    9.82Total Gas Volume Hedged
    
    
    60,000
    
    
    
    60,000
    
    
    
    60,000
    
    
    
    60,000
    
    
    
    60,000
    
    
    
    240,000
    
    
    
    199,980
    
    
    
    120,000Total PDP
    
    
    141,504
    
    
    
    73,887
    
    
    
    74,708
    
    
    
    75,529
    
    
    
    75,529
    
    
    
    299,653
    
    
    
    249,230
    
    
    
    217,343Total % Natural Gas
Volume Hedged
    
    
    42
    %
    
    
    81
    %
    
    
    80
    %
    
    
    79
    %
    
    
    79
    %
    
    
    80
    %
    
    
    80
    %
    
    
    55
    %Oil HedgesFloorsVolume (Bbls/d)
    
    
    33
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/APrice per bbl
    
    $
    110.00
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ASwapsVolume (Bbls/d)
    
    
    170
    
    
    
    213
    
    
    
    187
    
    
    
    185
    
    
    
    185
    
    
    
    192
    
    
    
    162
    
    
    
    N/APrice per bbl
    
    $
    87.43
    
    
    $
    88.84
    
    
    $
    102.64
    
    
    $
    102.64
    
    
    $
    102.64
    
    
    $
    99.19
    
    
    $
    103.67
    
    
    
    N/ACollarsVolume (MMbtu/d)
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    137Floor Price per MCF
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    $
    80.00Ceiling Price per MCF
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    $
    100.00Total Oil Volume Hedged
    
    
    18,367
    
    
    
    19,160
    
    
    
    17,010
    
    
    
    17,010
    
    
    
    17,010
    
    
    
    70,226
    
    
    
    59,225
    
    
    
    50,000Total PDP
    
    
    47,336
    
    
    
    27,893
    
    
    
    28,203
    
    
    
    28,513
    
    
    
    28,513
    
    
    
    113,123
    
    
    
    98,692
    
    
    
    86,489Total % Oil Volume Hedged
    
    
    39
    %
    
    
    69
    %
    
    
    60
    %
    
    
    60
    %
    
    
    60
    %
    
    
    62
    %
    
    
    60
    %
    
    
    58
    %
  12




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Competition
  Operating Hazards and Risks
   Governmental Regulation
   Climate Change
   13




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##### Table of Contents



Formation
  Employees
  Facilities
  Website Access
 www.MagnumHunterResources.com
  14




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##### Table of Contents



Item 1A. RISK FACTORS
  Risks Related to Our Business
 Future economic conditions in the U.S. and global markets may have a material adverse impact on our
business and financial condition that we currently cannot predict.
  Volatility in oil and natural gas prices may adversely affect our business, financial condition or
results of operations and our ability to meet our capital expenditure obligations and financial
commitments.
 
 
    
    the current uncertainty in the global economy;
    
    changes in global supply and demand for oil and natural gas;
    
    the condition of the U.S. and global economy;
    
    the actions of certain foreign countries;
    
    the price and quantity of imports of foreign oil and natural gas (LNG);
    
    political conditions, including embargoes, war or civil unrest in or affecting other oil producing activities of certain countries;
    
    the level of global oil and natural gas exploration and production activity;
    
    the level of global oil and natural gas inventories;
    
    production or pricing decisions made by the Organization of Petroleum Exporting Countries (OPEC);
    
    weather conditions;
    
    technological advances affecting energy consumption; and
    
    the price and availability of alternative fuels.
   15




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##### Table of Contents



We have limited experience in drilling wells to the Eagle Ford Shale, Marcellus Shale, and Bakken
Shale and limited information regarding reserves and decline rates in the Eagle Ford Shale,
Marcellus Shale and Bakken Shale. Wells drilled to the Eagle Ford Shale, Marcellus Shale and Bakken
Shale are more expensive and more susceptible to mechanical problems in drilling and completion
techniques than wells in the other conventional areas.
  If our access to oil and gas markets is restricted, it could negatively impact our production, our
income and ultimately our ability to retain our leases. Our ability to sell natural gas and/or
receive market prices for our natural gas may be adversely affected by pipeline and gathering
system capacity constraints.
    Certain federal income tax deductions currently available with respect to oil and natural gas
exploration and development may be eliminated as a result of future legislation.
  
    
    the repeal of the percentage depletion allowance for oil and gas properties;
 
    
    the elimination of current deductions for intangible drilling and development costs;
 
    
    the elimination of the deduction for certain U.S. production activities; and
 
    
    an extension of the amortization period for certain geological and geophysical
expenditures. It is unclear, however, whether any such changes will be enacted or how soon
such changes could be effective.
   16




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We depend on a relatively small number of purchasers for a substantial portion of our revenue. The
inability of one or more of our purchasers to meet their obligations may adversely affect our
financial results.
  Our results of operations and cash flow may be adversely affected by risks associated with our oil
and gas financial derivative activities, and our oil and gas financial derivative activities may
limit potential gains.
   If oil and natural gas prices decline, we may be required to take additional write-downs of the
carrying values of our oil and natural gas properties, potentially triggering
earlier-than-anticipated repayments of any outstanding debt obligations and negatively impacting
the trading value of our securities.
      17




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##### Table of Contents



Drilling for and producing oil and natural gas are high risk activities with many uncertainties
that could adversely affect our business, financial condition and results of operations.
 
 
    
    delays imposed by or resulting from compliance with regulatory requirements;
    
    unusual or unexpected geological formations;
    
    pressure or irregularities in geological formations;
    
    shortages of or delays in obtaining equipment and qualified personnel;
    
    equipment malfunctions, failures or accidents;
    
    unexpected operational events and drilling conditions;
    
    pipe or cement failures;
    
    casing collapses;
    
    lost or damaged oilfield drilling and service tools;
    
    loss of drilling fluid circulation;
    
    uncontrollable flows of oil, natural gas and fluids;
    
    fires and natural disasters;
    
    environmental hazards, such as natural gas leaks, oil spills, pipeline ruptures and discharges of toxic gases;
    
    adverse weather conditions;
    
    reductions in oil and natural gas prices;
    
    oil and natural gas property title problems; and
    
    market limitations for oil and natural gas.
  Our proved reserves and related PV-10 as of December 31, 2009 have been reported under new SEC
rules that went into effect on January 1, 2010. The estimates provided in accordance with the new
SEC rules may change materially as a result of interpretive guidance that may be subsequently
released by the SEC.
  We may be limited in our ability to book additional proved undeveloped reserves under the new SEC
rules.
   18




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##### Table of Contents



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 may materially affect
the quantities and present value of our reserves.
   
 
    
    actual prices we receive for oil and natural gas;
    
    actual cost of development and production expenditures;
    
    the amount and timing of actual production;
    
    supply of and demand for oil and natural gas; and
    
    changes in governmental regulations or taxation.
  Prospects that we decide to drill may not yield oil or natural gas in commercially viable
quantities.
   19




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We cannot control activities on properties that we do not operate and are unable to control their
proper operation and profitability.
 
 
    
    nature and timing of drilling and operational activities;
    
    timing and amount of capital expenditures;
    
    expertise and financial resources;
    
    the approval of other participants in drilling wells; and
    
    selection of suitable technology.
 Unless we replace our oil and natural gas reserves, our reserves and production will decline, which
would adversely affect our business, financial condition and results of operations.
  Our future acquisitions may yield revenue or production that varies significantly from our
projections.
  Our development and exploration operations require substantial capital, and we may be unable to
obtain needed capital or financing on satisfactory terms, which could lead to a loss of properties
and a decline in our oil and natural gas reserves.
  
    
    our proved reserves;
    
    the amount of oil and natural gas we are able to produce from existing wells;
    
    the prices at which oil and natural gas are sold; and
    
    our ability to acquire, locate and produce new reserves.
   20




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##### Table of Contents



Restrictive covenants in our senior credit facility may restrict our ability to pursue our business
strategies.
  
    
    incur indebtedness;
 
    
    grant liens;
 
    
    make certain payments;
 
    
    change the nature of our business;
 
    
    dispose of all or substantially all of our assets or enter into mergers, consolidations
or similar transactions;
 
    
    make investments, loans or advances;
 
    
    pay cash dividends, unless certain conditions are met and are subject to a basket of
$2.5 million per year available for payment of dividends on preferred stock; and
 
    
    enter into transactions with affiliates.
  
    
    an EBITDAX to interest ratio of not less than 2.5 to 1.0;
 
    
    a debt to EBITDAX ratio of not more than (a) 4.5 to 1.0 for the fiscal quarters ending
March 31, 2010, June 30, 2010, and September 30, 2010, and (b) 4.0 to 1.0 for each fiscal
quarter ending thereafter; and
 
    
    a ratio of consolidated current assets to consolidated current liability of not less
than 1.0 to 1.0. We are also required to enter into certain commodity price hedging
agreements pursuant to the terms of the credit facilities.
  Our substantial indebtedness could adversely affect our financial condition and our ability to
operate our business.
  
    
    it may be difficult for us to satisfy our obligations, including debt
service requirements under our credit agreements;
 
    
    our ability to obtain additional financing for working capital, capital
expenditures, debt service requirements, and other general corporate purposes
may be impaired;
 
    
    a significant portion of our cash flow is committed to payments on our
debt, which will reduce the funds available to us for other purposes, such as
future capital expenditures;
 
    
    we are more vulnerable to price fluctuations and to economic downturns and
adverse industry conditions and our flexibility to plan for, or react to,
changes in our business or industry is more limited;
 
    
    our ability to capitalize on business opportunities, and to react to
competitive pressures, as compared to others in our industry, may be limited
 Our obligations under our Senior Credit Facility are secured by substantially all of our assets,
and any failure to meet our debt obligations would adversely affect our business and financial
condition
    21




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##### Table of Contents



The unavailability or high cost of drilling rigs, equipment, supplies, personnel and oil field
services could adversely affect our ability to execute on a timely basis our exploration and
development plans within our budget.
  We depend on pipelines owned by others to transport and sell our natural gas production. Disruption
of, capacity constraints in, or proximity to pipeline systems could limit sales of our natural gas.
  New technologies may cause our current exploration and drilling methods to become obsolete.
  We may incur substantial losses and be subject to substantial liability claims as a result of our
oil and natural gas operations, and we may not have enough insurance to cover all of the risks that
we may ultimately face.
  
 
    
    environmental hazards, such as uncontrollable flows of oil, natural
gas, brine, well fluids, toxic gas or other pollution into the
environment, including groundwater and shoreline contamination;
    
    abnormally pressured formations;
    
    mechanical difficulties, such as stuck oil field drilling and service tools and casing collapses;
    
    fires and explosions;
    
    personal injuries and death; and
    
    natural disasters.
  We have completed several recent acquisitions, and there is no assurance that we will be able to
satisfy our contractual and financial obligations thereunder.
   22




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##### Table of Contents



We do not have a significant operating history and, as a result, there is a limited amount of
information about us on which to make an investment decision.
  We have a history of losses and cannot assure you that we will be profitable in the foreseeable
future.
  The acquisition and integration of the Triad operating interests and other assets may divert
management from other important business activities. This diversion, together with other
difficulties in integrating Triads business and properties, may have a material adverse effect on
our business, financial condition and results of operations.
  We have limited management and staff and will be dependent upon partnering arrangements.
  
    
    the possibility that such third parties may not be available to us as and when needed;
and
 
    
    the risk that we may not be able to properly control the timing and quality of work
conducted with respect to our projects.
   23




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##### Table of Contents



Our business may suffer if we lose key personnel.
  We are subject to complex laws and regulations that can adversely affect the cost, manner or
feasibility of doing business.
 
 
    
    the location and spacing of wells;
    
    the unitization and pooling of properties;
    
    the method of drilling and completing wells;
    
    the surface use and restoration of properties upon which wells are drilled;
    
    the plugging and abandoning of wells;
    
    the disposal of fluids used or other wastes generated in connection with our drilling operations;
    
    the marketing, transportation and reporting of production; and
    
    the valuation and payment of royalties.
  We must obtain governmental permits and approvals for our drilling operations, which can be a
costly and time consuming process, which may result in delays and restrictions on our operations.
  Our operations expose us to substantial costs and liabilities with respect to environmental
matters.
   24




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##### Table of Contents



Federal and state legislation and regulatory initiatives relating to hydraulic fracturing could
result in increased costs and additional operating restrictions or delays.
  Climate change legislation or regulations restricting emissions of greenhouse gases could result
in increased operating costs and reduced demand for the oil, natural gas and NGLs that we produce.
    The adoption of derivatives legislation by Congress and related regulations could have an adverse
impact on our ability to hedge risks associated with our business.
   25




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##### Table of Contents



Competition in the oil and natural gas industry is intense, which may adversely affect our ability
to compete.
  Risks Related to Our Equity Securities
 Since being listed on the NYSE Amex (formerly, the American Stock Exchange) in August of 2006, the
price of our common stock has fluctuated substantially and may fluctuate substantially in the
future.
 
 
    
    changes in oil and natural gas prices;
    
    variations in quarterly drilling, recompletions, acquisitions, and operating results;
    
    changes in financial estimates by securities analysts;
    
    changes in market valuations of comparable companies;
    
    additions or departures of key personnel;
    
    the level of our overall indebtedness;
    
    future issuances of our stock; and
    
    the other risks and uncertainties described in this Risk Factors section and elsewhere in this report.
  The market for our common stock is limited and may not provide investors with either liquidity or a
market based valuation of our common stock.
  We will likely issue additional common stock in the future, which would dilute our existing
stockholders.
   26




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##### Table of Contents



We may issue additional Series C Preferred stock in the future, which could dilute our existing
holders of our outstanding Series C Preferred Stock.
   Our amended and restated certificate of incorporation, amended and restated bylaws, and Delaware
law contain provisions that could make it more difficult for a third party to acquire us without
the consent of our board of directors, our Chairman and other executive officers, who collectively
beneficially own approximately 10% of the fully diluted outstanding shares of our common stock as
of March 29, 2010.
 
 
    
    the ability of our board of directors to issue shares of our common
stock and preferred stock without stockholder approval;
    
    the ability of our board of directors to make, alter, or repeal our bylaws without further stockholder approval;
    
    the requirement for advance notice of director nominations to our
board of directors and for proposing other matters to be acted upon at
stockholder meetings;
    
    the prohibition on stockholders taking action by written consent;
    
    requiring that special meetings of stockholders be called only by our
Chairman, by a majority of our board of directors, by our Chief
Executive Officer or by our President; and
    
    allowing our directors, and not our stockholders, to fill vacancies on
the board of directors, including vacancies resulting from removal or
enlargement of the board of directors.
     27




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##### Table of Contents



Because we have no plans to pay dividends on our common stock, stockholders must look solely to
appreciation of our common stock to realize a gain on their investments.
  We are able to issue shares of preferred stock with greater rights than our common stock.
  Our assets are subject to liquidation preferences in favor of the holders of our Series B and
Series C Preferred Stock, which will impact the rights of holders of our common stock if we
liquidate.
    Our outstanding Warrants which are exercisable into our common stock, may be exercised, which would
dilute our existing common stockholders.
  The market price of our common stock could be adversely affected by sales of substantial amounts of
our common stock and securities convertible into, or exchangeable for, shares of our common stock
in the public markets and the issuance of shares of common stock and securities convertible into,
or exchangeable for, shares of our common stock in future acquisitions.
   
 Item 1B. UNRESOLVED STAFF COMMENTS
   28




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##### Table of Contents



Item 2. PROPERTIES
 PROPERTIES
 Appalachian Basin / Marcellus Shale
      North Dakota-Williston Basin / Madison Group / Bakken Shale
    29




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##### Table of Contents



South Texas / Eagle Ford Shale
       30




---



##### Table of Contents



South Louisiana / East Chalkley
  West Texas / Cinco Terry
  Other Properties
 East Texas / Surprise 
 Other
 Reserves
    31




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##### Table of Contents



Proved Reserves
  Net Reserves (SEC Prices at 12/31/09)Category
    
    Oil
    
    
    NGL
    
    
    Gas
    
    
    PV-10(Barrels)
    
    
    (Barrels)
    
    
    (Mcf)
    
    
    ($MM)Proved Developed
    
    
    1,693,973
    
    
    
    361,557
    
    
    
    5,055,269
    
    
    $
    35.0Proved Undeveloped
    
    
    2,127,115
    
    
    
    425,933
    
    
    
    4,512,127
    
    
    $
    30.5Total Proved
    
    
    3,821,088
    
    
    
    787,490
    
    
    
    9,567,396
    
    
    $
    65.5
  Net Reserves (Based on Futures Prices at 12/31/09)Category
    
    Oil
    
    
    NGL
    
    
    Gas
    
    
    PV-10(Barrels)
    
    
    (Barrels)
    
    
    (Mcf)
    
    
    ($MM)Proved Developed
    
    
    1,880,794
    
    
    
    384,076
    
    
    
    5,304,369
    
    
    $
    61.3Proved Undeveloped
    
    
    2,178,966
    
    
    
    457,002
    
    
    
    4,719,557
    
    
    $
    64.2Total Proved
    
    
    4,059,760
    
    
    
    841,078
    
    
    
    10,023,926
    
    
    $
    125.5
   Pro Forma Net Reserves (SEC Prices at 12/31/09)*Category
    
    Oil
    
    
    NGL
    
    
    Gas
    
    
    PV-10(Barrels)
    
    
    (Barrels)
    
    
    (Mcf)
    
    
    ($MM)Proved Developed
    
    
    3,799,567
    
    
    
    361,000
    
    
    
    11,949,768
    
    
    $
    76.8Proved Undeveloped
    
    
    3,367,568
    
    
    
    426,000
    
    
    
    8,112,153
    
    
    $
    45.2Total Proved
    
    
    7,167,135
    
    
    
    787,000
    
    
    
    20,061,921
    
    
    $
    122.0
 Pro Forma Net Reserves (Based on Futures Prices at 12/31/09)*Category
    
    Oil
    
    
    NGL
    
    
    Gas
    
    
    PV-10(Barrels)
    
    
    (Barrels)
    
    
    (Mcf)
    
    
    ($MM)Proved Developed
    
    
    4,397,991
    
    
    
    384,076
    
    
    
    13,436,040
    
    
    $
    143.1Proved Undeveloped
    
    
    3,422,341
    
    
    
    457,002
    
    
    
    8,375,001
    
    
    $
    101.4Total Proved
    
    
    7,820,332
    
    
    
    841,078
    
    
    
    21,811,041
    
    
    $
    244.5
 *
    
    Pro forma information related to the Triad acquisition, which closed February 12, 2010, was
prepared by the Companys internal engineers.  32




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##### Table of Contents



2009
    
    
    2008
    
    
    2007DescriptionProved Developed ReservesOil (Bbls)
    
    
    1,694,700
    
    
    
    1,092,730
    
    
    
    1,522,500NGLs (Bbls)
    
    
    361,000
    
    
    
    301,577
    
    
    
    0Natural Gas (Mcf)
    
    
    4,952,500
    
    
    
    2,549,496
    
    
    
    1,261,300Proved Undeveloped ReservesOil (Bbls)
    
    
    2,126,800
    
    
    
    769,309
    
    
    
    847,000NGLs (Bbls)
    
    
    426,000
    
    
    
    245,636
    
    
    
    0Natural Gas (Mcf)
    
    
    4,411,700
    
    
    
    1,703,450
    
    
    
    820,700Total Proved Reserves (Boe) (1)(2)
    
    
    6,169,200
    
    
    
    3,118,076
    
    
    
    2,716,500PV-10 Value ($MMs) (3)
    
    $
    65.6
    
    
    $
    21.0
    
    
    $
    9.4Standardized Measure ($MMs)
    
    $
    47.4
    
    
    $
    15.6
    
    
    $
    40.1
 (1)
    
    The estimates of reserves in the table above conform to the guidelines of the SEC. Estimated recoverable proved
reserves have been determined without regard to any economic impact that may result from our financial derivative
activities. These calculations were prepared using standard geological and engineering methods generally accepted
by the petroleum industry. The reserve information shown is estimated. The certainty of any reserve estimate is a
function of the quality of available geological, geophysical, engineering and economic data, the precision of the
engineering and geological interpretation and judgment. The estimates of reserves, future cash flows and present
value are based on various assumptions, and are inherently imprecise. Although we believe these estimates are
reasonable, actual future production, cash flows, taxes, development expenditures, operating expenses and
quantities of recoverable oil and natural gas reserves may vary substantially from these estimates.(2)
    
    We converted crude oil and NGLs to Mcf equivalent at a ratio of one barrel to six Mcfe.(3)
    
    Represents the present value, discounted at 10% per annum (PV-10), of estimated future cash flows before income
tax of our estimated proved reserves. The estimated future cash flows set forth above were determined by using
reserve quantities of proved reserves and the periods in which they are expected to be developed and produced
based on prevailing economic conditions. The estimated future production is priced based on the 12-month
unweighted arithmetic average of the first-day-of-the-month price for the period January through December 2009,
using $61.18 per bbl and $3.866 per MMBtu and adjusted by lease for transportation fees and regional price
differentials. 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 oil and natural gas companies. For an explanation of why we show PV-10 and a reconciliation of PV-10
to the standardized measure of discounted future net cash flow. Please read Item 1A. 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 may materially affect the quantities and present value of our
reserves. Marcellus Infrastructure Assets
  Eureka Hunter Pipeline
  33




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##### Table of Contents



Drilling Rigs and Oilfield Service Equipment
 Salt Water Disposal Facility
 Recent SEC Rule-Making Activity
 
 
    
    Commodity Prices: Economic producibility of reserves and discounted
cash flows are now based on a 12-month average commodity price unless
contractual arrangements designate the price to be used.
    
    Disclosure of Unproved Reserves: Probable and possible reserves may be disclosed separately on a voluntary basis.
    
    Proved Undeveloped Reserve Guidelines: Reserves may be classified as
proved undeveloped if there is a high degree of confidence that the
quantities will be recovered and they are scheduled to be drilled
within the next five years, unless the specific circumstances justify
a longer time.
    
    Reserves Estimation Using New Technologies: Reserves may be estimated
through the use of reliable technology in addition to flow tests and
production history.
    
    Reserves Personnel and Estimation Process: Additional disclosure is
required regarding the qualifications of the chief technical person
who oversees the reserves estimation process. We are also required to
provide a general discussion of our internal controls used to assure
the objectivity of the reserves estimate.
    
    Non-Traditional Resources: The definition of oil and gas producing
activities has expanded and focuses on the marketable product rather
than the method of extraction.
   34




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##### Table of Contents



Effect of Adoption .
  Proved Undeveloped Reserves (PUDs)
  
    
    Successful drilling of 23 PUD locations in West Texas
    
    Successful drilling of 2 PUD locations in the Mohall Madison Unit in North Dakota and
the re-drill of a Probable Undeveloped location in the East Flaxton Madison Unit in North
Dakota.
    
    Successful re-pressurization results associated with two fields in North Dakota
    For the Year EndedProved Developed Reserves (Mboe)
    
    December 31, 2009Proved Reserves  Beginning of year
    
    
    3,118.1Revisions of previous estimates
    
    
    1,335.9Improved recovery
    
    
    0.0Extensions and discoveries
    
    
    1,330.2Production
    
    
    (256.6
    )Purchases of reserves in place
    
    
    661.3Sales of reserves in place
    
    
    (19.7
    )Proved Reserves  End of year
    
    
    6,169.2Proved developed reserves  Beginning of year
    
    
    1,819.2Proved developed reserves  End of year
    
    
    2,880.7
  35




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##### Table of Contents



Reserve Estimation.
   Acreage and Productive Wells Summary
  Developed
    
    
    UndevelopedAcreage (1)
    
    
    Acreage (2)
    
    
    Total AcreageGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetNorth Dakota
    
    
    15,200
    
    
    
    6,536
    
    
    
    3,411
    
    
    
    1,116
    
    
    
    18,611
    
    
    
    7,652West Texas
    
    
    10,318
    
    
    
    1,032
    
    
    
    39,963
    
    
    
    3,996
    
    
    
    50,281
    
    
    
    5,028South Texas / Gulf Coast
    
    
    1,471
    
    
    
    485
    
    
    
    10,527
    
    
    
    4,811
    
    
    
    11,998
    
    
    
    5,296Other
    
    
    185,014
    
    
    
    31,730
    
    
    
    0
    
    
    
    0
    
    
    
    185,014
    
    
    
    31,730Total
    
    
    212,003
    
    
    
    39,783
    
    
    
    53,901
    
    
    
    9,923
    
    
    
    265,904
    
    
    
    49,706
 (1)
    
    Developed acreage is the number of acres allocated or assignable to producing wells or wells capable of production.(2)
    
    Undeveloped acreage is lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of
oil and natural gas, regardless of whether such acreage includes proved reserves.  Pro Forma Developed
    
    
    Pro Forma UndevelopedAcreage (1)
    
    
    Acreage (2)
    
    
    Pro Forma Total AcreageGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetAppalachia
    
    
    67,000
    
    
    
    60,000
    
    
    
    35,602
    
    
    
    21,449
    
    
    
    102,602
    
    
    
    81,449North Dakota
    
    
    15,200
    
    
    
    6,536
    
    
    
    3,411
    
    
    
    1,116
    
    
    
    18,611
    
    
    
    7,652West Texas
    
    
    10,318
    
    
    
    1,032
    
    
    
    39,963
    
    
    
    3,996
    
    
    
    50,281
    
    
    
    5,028South Texas / Gulf Coast
    
    
    1,471
    
    
    
    485
    
    
    
    10,527
    
    
    
    4,811
    
    
    
    11,998
    
    
    
    5,296Other
    
    
    185,014
    
    
    
    31,730
    
    
    
    0
    
    
    
    0
    
    
    
    185,014
    
    
    
    31,730Total
    
    
    279,003
    
    
    
    99,783
    
    
    
    89,503
    
    
    
    31,372
    
    
    
    368,506
    
    
    
    131,155
 (1)
    
    Developed acreage is the number of acres allocated or assignable to producing wells or wells capable of production.(2)
    
    Undeveloped acreage is lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and
natural gas, regardless of whether such acreage includes proved reserves.  36




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Pro FormaProducing
    
    
    Pro FormaProducing
    
    
    Pro FormaTotal ProducingOil Wells
    
    
    Gas Wells
    
    
    Oil and Gas WellsGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetAppalachia
    
    
    800.0
    
    
    
    760.0
    
    
    
    1,274.0
    
    
    
    1,210.3
    
    
    
    2,074.0
    
    
    
    1,970.3North Dakota
    
    
    0.0
    
    
    
    0.0
    
    
    
    146.0
    
    
    
    65.7
    
    
    
    146.0
    
    
    
    65.7West Texas
    
    
    87.0
    
    
    
    8.7
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    87.0
    
    
    
    8.7South Texas / Gulf Coast
    
    
    8.0
    
    
    
    1.1
    
    
    
    2.0
    
    
    
    1.2
    
    
    
    10.0
    
    
    
    2.3Other
    
    
    5.0
    
    
    
    0.5
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    5.0
    
    
    
    0.5Total
    
    
    900
    
    
    
    770
    
    
    
    1,422
    
    
    
    1,277
    
    
    
    2,322
    
    
    
    2,048
   ExpiringYear Ending
    
    AcreageDecember 31,
    
    Gross
    
    
    Net2010
    
    
    858
    
    
    
    3372011
    
    
    9,200
    
    
    
    6,2992012
    
    
    750
    
    
    
    6102013
    
    
    10,000
    
    
    
    7,509Total
    
    
    20,808
    
    
    
    14,755
 Drilling Results
  2009
    
    
    2008
    
    
    2007Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetExploratory Wells:Productive
    
    
    3
    
    
    
    0.70
    
    
    
    25
    
    
    
    2.45
    
    
    
    15
    
    
    
    2.11Unproductive
    
    
    1
    
    
    
    0.10
    
    
    
    11
    
    
    
    2.20
    
    
    
    6
    
    
    
    0.93Total
    
    
    4
    
    
    
    0.80
    
    
    
    36
    
    
    
    4.65
    
    
    
    21
    
    
    
    3.04Developmental Wells:
    
    
    27
    
    
    
    3.80
    
    
    
    8
    
    
    
    1.41
    
    
    
    4
    
    
    
    1.96Total Wells:Productive
    
    
    30
    
    
    
    4.50
    
    
    
    33
    
    
    
    3.86
    
    
    
    19
    
    
    
    4.07Unproductive
    
    
    1
    
    
    
    0.10
    
    
    
    0
    
    
    
    0.00
    
    
    
    6
    
    
    
    0.93Total
    
    
    31
    
    
    
    4.60
    
    
    
    33
    
    
    
    3.86
    
    
    
    25
    
    
    
    5.00Success Ratio (1)
    
    
    96.8
    %
    
    
    97.8
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    76.0
    %
    
    
    81.4
    %
 (1)
    
    The success ratio is calculated as follows: (total wells drillednon-productive
wellswells awaiting completion) / (total wells drilledwells awaiting completion).  37




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##### Table of Contents



Oil and Gas Production, Prices and Costs
  Years EndedDecember 31,2009
    
    
    2008Oil and Gas Production:Oil (Mbbl)
    
    
    140
    
    
    
    132NGL (Mbbl)
    
    
    40
    
    
    
    20Gas (MMcf)
    
    
    458
    
    
    
    341Oil Equivalent (Mboe)
    
    
    256
    
    
    
    209Average Sales PriceOil ($/bbl)
    
    $
    53.59
    
    
    $
    87.11NGL ($/bbl)
    
    $
    28.52
    
    
    $
    44.54Gas ($/Mcf)
    
    $
    3.01
    
    
    $
    6.21Oil Equivalent ($/boe)
    
    $
    39.10
    
    
    $
    69.43Lease Operating Expense ($/boe)
    
    $
    16.45
    
    
    $
    20.38
 Title to Properties
 
 
    
    customary royalty interests;
    
    liens incident to operating agreements and for current taxes;
    
    obligations or duties under applicable laws;
    
    development obligations under oil and gas leases;
    
    net profit interests;
    
    overriding royalty interests;
    
    non-surface occupancy leases; and
    
    lessor consents to placement of wells.
 
 Item 3. LEGAL PROCEEDINGS
   38




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##### Table of Contents



Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Executive Officers of the Registrant
  Name
    
    Age
    
    PositionGary C. Evans
    
    
    52
    
    
    Chairman and Chief Executive OfficerRonald D. Ormand
    
    
    51
    
    
    Executive Vice President and Chief Financial OfficerJames W. Denny, III
    
    
    62
    
    
    Executive Vice President  OperationsH.C. Ferguson, III
    
    
    44
    
    
    Executive Vice President  ExplorationM. Bradley Davis
    
    
    50
    
    
    Senior Vice President of Capital MarketsDon Kirkendall
    
    
    52
    
    
    Senior Vice President of Marketing and AdministrationDavid S. Krueger
    
    
    60
    
    
    Senior Vice President and Chief Accounting OfficerBrian
G. Burgher
    
    
    47
    
    
    Vice President of LandDavid Lipp
    
    
    28
    
    
    Vice President of Business Development and LegalVictor Ponce de Leon
    
    
    41
    
    
    Vice President of Finance and Treasurer
 Gary C. Evans
 Ronald D. Ormand
 James W. Denny, III
 H.C. Kip Ferguson, III
 M. Bradley Davis
  39




---



##### Table of Contents



David S. Krueger
 Don Kirkendall
 Brian Burgher
 David Lipp
 Victor Ponce de León
  40




---



##### Table of Contents



Glossary of Oil and Natural Gas Terms
  bbl
 bcf
 boe.
 boe/d. boepd
 Completion
 Condensate
 Development well
 Drilling locations
 Dry hole
 Exploratory well
 Field
 Formation
 Lease
 Leasehold
 mbbls
 mbblspd
 mboe.
 mboepd
 mcf.
 mcfpd
 mcfe
  41




---



##### Table of Contents



mcfepd
 mmbbls
 mmblspd
 mmboe.
 mmboepd
 mmbtu
 mmbtupd
 mmcf
 mmcfpd
 Net acres, net wells, or net reserves
 NYMEX.
 ngl.
 Overriding royalty interest
 Plugging and abandonment
 Present value of future net revenues (PV-10
 Production
 Proved oil and gas reserves
    42




---



##### Table of Contents



Proved developed oil and gas reserves.
 Proved undeveloped reserves
 Probable Reserves.
  Possible Reserves.
  43




---



##### Table of Contents



Productive well
 Project
 Prospect
 Proved developed producing reserves
 Proved reserves
 Proved undeveloped reserves
 Recompletion
 Reserves
 Reservoir
 Secondary Recovery
 Shut-in
  44




---



##### Table of Contents



Standardized measure
 Successful
 Undeveloped acreage
 Water flood
 Working interest
  45




---



##### Table of Contents



PART II
 
 Item 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 Recent Market Prices
   High
    
    
    Low2009:First quarter
    
    $
    0.65
    
    
    
    0.21Second quarter
    
    
    0.84
    
    
    
    0.20Third quarter
    
    
    1.43
    
    
    
    0.54Fourth quarter
    
    
    2.24
    
    
    
    1.202008:First quarter
    
    $
    2.15
    
    
    $
    1.27Second quarter
    
    
    3.50
    
    
    
    1.30Third quarter
    
    
    3.30
    
    
    
    0.93Fourth quarter
    
    
    1.15
    
    
    
    0.29
  Holders
  Dividends
    46




---



##### Table of Contents



Securities Authorized for Issuance Under Equity Compensation Plans
  Number of SecuritiesRemaining Available forNumber of Securities
    
    
    Weighted-Average
    
    
    Future Issuance Underto be Issued Upon
    
    
    Exercise Price of
    
    
    Equity CompensationExercise of
    
    
    Outstanding Options,
    
    
    Plans (ExcludingOutstanding Options,
    
    
    Warrants and
    
    
    Securities Reflected inWarrants and Rights (a)
    
    
    Rights (b)
    
    
    Column (a)) (c)Equity compensation
plans approved by
security holders
    
    
    3,117,000
    
    
    $
    0.93
    
    
    
    2,883,000Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    3,117,000
    
    
    $
    0.93
    
    
    
    2,883,000
 Recent Sales of Unregistered Securities
  
 Item 6. SELECTED FINANCIAL DATA
   47




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##### Table of Contents



Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  General and Business Overview
 2
 2009 Recap and 2010 Outlook
 Triad Acquisition.
 
    
    $8 million in cash;
    
    $15 million of our Series B Redeemable Convertible Preferred Stock, issued to certain
banks who were secured creditors of Triad in its Chapter 11 proceedings;
    
    $55 million repayment of Triad senior debt via drawing under the new Restated Credit
Facility discussed below; and
    
    Assumption of approximately $3 million of equipment indebtedness.
 Bank of Montreal Credit Facilities.
 Acquisition of Sharon Resources, Inc.
 
 2
    
    Magnum Hunter Resources, Inc. was a NYSE-listed oil and
gas exploration and production company, unrelated to the Company, that was
acquired by Cimarex Energy Corporation in June 2005.  48




---



##### Table of Contents



Equity Financings.
 
    
    $15.2 million of common equity financings throughout the course of the fourth
quarter.
 
    
    $5.4 million in gross proceeds from the issuance of our 10.25% Series C
Cumulative Perpetual Preferred Stock, at a price of $25.00 per share completed in
the fourth quarter of 2009
 Appalachian Basin / Marcellus Shale
  North Dakota-Williston Basin / Madison Group / Bakken Shale
  South Texas / Eagle Ford Shale
   West Texas / Cinco Terry
  Other Properties
 South Louisiana / East Chalkley 
  49




---



##### Table of Contents



East Texas / Surprise 
 Other
 Marcellus Infrastructure Assets
  Eureka Hunter Pipeline
 Drilling Rigs and Oilfield Service Equipment
 Salt Water Disposal Facility
 Critical Accounting Policies and Estimates
   50




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##### Table of Contents



Oil and Gas Activities  Successful Efforts
  
    
    geological and geophysical evaluation costs are expensed as incurred;
 
    
    dry holes for exploratory wells are expensed, and dry holes for
developmental wells are capitalized; and
 
    
    capitalized costs related to proved oil and gas properties, including
wells and related equipment and facilities, are evaluated for
impairment based on an analysis of undiscounted future net cash flows
in accordance with ASC 360, Accounting for the Impairment or Disposal
of Long Lived Assets. If undiscounted cash flows are insufficient to
recover the net capitalized costs related to proved properties, then
we recognize an impairment charge in income from operations equal to
the difference between the net capitalized costs related to proved
properties and their estimated fair values based on the present value
of the related future net cash flows.
 Proved Reserves
 Modernization of Oil and Gas Reporting
 
    
    Commodity prices.Economic producibility of reserves is now based on
the unweighted, arithmetic average of the closing price on the first
day of the month for the 12-month period prior to fiscal year end,
unless prices are defined by contractual arrangements;
 
    
    Undeveloped oil and gas reserves.Reserves may be classified as
proved undeveloped for undrilled areas beyond one offsetting
drilling unit from a producing well if there is reasonable certainty
that the quantities will be recovered;
 
    
    Reliable technology.The rules now permit the use of new technologies
to establish the reasonable certainty of proved reserves if those
technologies have been demonstrated empirically to lead to reliable
conclusions about reserves volumes;
 
    
    Unproved reserves.Probable and possible reserves may be disclosed
separately on a voluntary basis;
 
    
    Preparation of reserves estimates.Disclosure is required regarding
the internal controls used to assure objectivity in the reserves
estimation process and the qualifications of the technical person
primarily responsible for preparing reserves estimates; and
 
    
    Third party reports.We are now required to file the report of any
third party used to prepare or audit our reserve estimates.
    51




---



##### Table of Contents



Derivative Instruments and Commodity Derivative Activities
       52




---



##### Table of Contents



Asset Retirement Obligation
   Share-Based Compensation
  Valuation of Property and Equipment
 Accounting for the Impairment or Disposal of Long-Lived Assets
   Revenue Recognition
    53




---



##### Table of Contents



Income Taxes
 Income Taxes
  .
 Recently Issued Accounting Pronouncements
 Business
Combinations Consolidation
 Derivatives and Hedging
 Derivatives and Hedging
 Modernization of
the Oil and Gas Reporting Requirements Oil and Gas Reserve Estimation and Disclosure
  54




---



##### Table of Contents



Subsequent
Events
 Generally Accepted Accounting Principles
 Measuring Liabilities at
Fair Value, Fair Value Measurements and Disclosures
 Effects of Inflation
   55




---



##### Table of Contents



Results of Operations
 Years Ended December 31, 2009 and 2008
  Years EndedDecember 31,2009
    
    
    2008Revenues (in thousands)Oil
    
    $
    7,513
    
    
    $
    11,471Gas
    
    
    1,377
    
    
    
    2,118NGLs
    
    
    1,145
    
    
    
    897Total oil and gas sales
    
    $
    10,035
    
    
    $
    14,486ProductionOil (MBbls)
    
    
    140
    
    
    
    132Gas (MMcfs)
    
    
    458
    
    
    
    341NGLs (MBbls)
    
    
    40
    
    
    
    20Total (MBoe)
    
    
    257
    
    
    
    209Total (Boe/d)
    
    
    703
    
    
    
    570Average pricesOil (per Bbl)
    
    $
    53.59
    
    
    $
    87.11Gas (per Mcf)
    
    
    3.01
    
    
    
    6.21NGLs (per Bbl)
    
    
    28.52
    
    
    
    44.54Total average price (per Boe)
    
    $
    39.10
    
    
    $
    69.43Costs and expenses (per Boe)Lease operating
    
    $
    16.45
    
    
    $
    20.38Severance tax and marketing
    
    
    4.12
    
    
    
    5.40Exploration
    
    
    3.49
    
    
    
    35.22Impairment of properties
    
    
    2.47
    
    
    
    9.46General and administrative (see Note)
    
    
    33.09
    
    
    
    19.00Depletion, depreciation and accretion
    
    
    17.53
    
    
    
    36.82
 Note: General and administrative
includes acquisition related expenses
of $4.04 per Boe in 2009 and none in
2008 and non-cash stock compensation of
$12.03 per Boe in 2009 and $7.61 per Boe
in 2008. Oil
and gas production.
 il and gas sales.
  56




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##### Table of Contents



Other income.
 Lease operating expense.
 Severance taxes and marketing.
 Exploration.
 Impairment of oil and gas properties.
 Depletion, depreciation and accretion.
 General and administrative.
 Interest expense, net.
  57




---



##### Table of Contents



Loss on debt extinguishment.
 Commodity derivative activities.
 Net loss attributable to non-controlling interest.
 Dividends on Preferred Stock.
 Liquidity and Capital Resources
        58




---



##### Table of Contents



Years Ended December 31,2009
    
    
    2008(In thousands)Cash flows provided by operating activities
    
    $
    3,372
    
    
    $
    3,437Cash flows used in investing activities
    
    
    (16,624
    )
    
    
    (10,378
    )Cash flows provided by (used in) financing activities
    
    
    9,413
    
    
    
    (2,338
    )Net decrease in cash and cash equivalents
    
    $
    (3,839
    )
    
    $
    (9,279
    )
  Years Ended December 31,2009
    
    
    2008(In thousands)Borrowing base
    
    $
    25,000
    
    
    $
    17,000Cash and cash equivalents
    
    
    2,282
    
    
    
    6,120Long-term debt
    
    
    (13,000
    )
    
    
    (6,500
    )Liquidity
    
    $
    14,282
    
    
    $
    16,620
  Operating Activities
  Investing Activities
   59




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##### Table of Contents



Financing Activities
   2010 Capital Expenditures
  Year EndingDecember 31,2010(In thousands)Appalachian BasinEureka Hunter Pipeline
    
    $
    10,000Marcellus Shale drilling
    
    
    7,100Exploratory  Eagle Ford Shale leases and drilling
    
    
    6,950Other
    
    
    950Total capital expenditures
    
    $
    25,000
  Revolving Credit Facility
       60




---



##### Table of Contents



Amended and Restated Credit Facility
   Covenants
    Contractual Commitments
     61




---



##### Table of Contents



Less than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong-term debt(1)
    
    $
    13,000
    
    
    $
    
    
    
    $
    13,000
    
    
    $
    
    
    
    $
    Interest on long-term debt(2)
    
    
    1,226
    
    
    
    423
    
    
    
    803
    
    
    
    
    
    
    
    Operating lease obligations(3)
    
    
    807
    
    
    
    397
    
    
    
    380
    
    
    
    30
    
    
    
    Asset retirement obligations(4)
    
    
    2,032
    
    
    
    
    
    
    
    686
    
    
    
    104
    
    
    
    1,242Employment agreements with executive officers
    
    
    1,127
    
    
    
    1,127
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    18,192
    
    
    $
    1,947
    
    
    $
    14,869
    
    
    $
    134
    
    
    $
    1,242
 (1)
    
    See Note 7 to our consolidated financial statements for a discussion of our revolving credit facility.(2)
    
    Interest payments have been calculated by applying the interest rate of 3.26% at December 31, 2009, to
the outstanding long-term debt of $13.0 million at December 31, 2009.(3)
    
    Operating lease obligations are for office space and equipment.(4)
    
    See Note 6 to our consolidated financial statements for a discussion of our asset retirement obligations. Off-Balance Sheet Arrangements
  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   62




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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm  2009
    
    
    64Report of Independent Registered Public Accounting Firm  2008
    
    
    65Balance Sheets at December 31, 2009 and 2008
    
    
    F-1Statements of Operations for the years ended December 31, 2009 and 2008
    
    
    F-2Statements of Shareholders Equity for the years ended December 31, 2009 and 2008
    
    
    F-3Statements of Cash Flows for the years ended December 31, 2009 and 2008
    
    
    F-4Notes to Financial Statements
    
    
    F-5
  63




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64




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##### Table of Contents



/s/ MALONE & BAILEY, PCwww.malone-bailey.comHouston, TexasMarch 30, 2009
  65




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##### Table of Contents



MAGNUM HUNTER RESOURCES CORPORATION
(FORMERLY PETRO RESOURCES CORPORATION)
 
 CONSOLIDATED BALANCE SHEETS
 December 31,December 31,
    
    
    20082009
    
    
    RevisedASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,281,568
    
    
    $
    6,120,402Accounts receivable
    
    
    3,236,043
    
    
    
    1,038,973Prepaids
    
    
    94,113
    
    
    
    75,406Derivative assets
    
    
    1,261,534
    
    
    
    2,944,997Total current assets
    
    
    6,873,258
    
    
    
    10,179,778PROPERTY AND EQUIPMENT:Oil and natural gas properties, successful efforts accountingUnproved
    
    
    11,887,483
    
    
    
    18,415,117Proved properties, net
    
    
    43,995,567
    
    
    
    27,264,790Advances
    
    
    1,474,704
    
    
    
    147,815Furniture and fixtures, net
    
    
    180,878
    
    
    
    110,499Total property and equipment
    
    
    57,538,632
    
    
    
    45,938,221OTHER ASSETS:Derivative Assets
    
    
    1,092,152
    
    
    
    4,338,832Deferred financing costs, net of amortization of $35,831 and $129,200, respectively
    
    
    1,012,756
    
    
    
    1,197,780Deposits
    
    
    67,253
    
    
    
    10,257Total Assets
    
    $
    66,584,051
    
    
    $
    61,664,868LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    4,852,221
    
    
    $
    2,617,034Accrued liabilities
    
    
    885,622
    
    
    
    106,592Revenue payable
    
    
    342,585
    
    
    
    Payable on sale of partnership
    
    
    
    
    
    
    754,255Dividend payable
    
    
    25,654
    
    
    
    Note payable
    
    
    44,157
    
    
    
    19,527Derivative liability
    
    
    69,136
    
    
    
    Total current liabilities
    
    
    6,219,375
    
    
    
    3,497,408Payable on sale of partnership
    
    
    640,695
    
    
    
    Revolving credit borrowings
    
    
    13,000,000
    
    
    
    6,500,000Term loan
    
    
    
    
    
    
    15,000,000Asset retirement obligation
    
    
    2,032,306
    
    
    
    1,589,197Total liabilities
    
    
    21,892,376
    
    
    
    26,586,605COMMITMENTS AND CONTINGENCIES (Note 13)Redeemable Preferred StockSeries C
Convertible Preferred Stock cumulative, dividend rate 10.25% per
annum, 214,950 shares outstanding at December 31, 2009, with
liquidation preference of $25.00 per share
    
    
    5,373,750
    
    
    
    SHAREHOLDERS EQUITY:Common stock, $0.01 par value; 100,000,000 shares authorized, 50,591,610 and 36,768,172 shares issued and
outstanding as of December 31, 2009 and December 31, 2008 respectively
    
    
    505,916
    
    
    
    367,682Additional paid in capital
    
    
    71,936,306
    
    
    
    51,311,502Accumulated deficit
    
    
    (33,135,693
    )
    
    
    (17,985,830
    )Deposit on Triad
    
    
    (1,310,357
    )
    
    
    Total Magnum Hunter Resources Corporation shareholders equity
    
    
    37,996,172
    
    
    
    33,693,354Noncontrolling interest
    
    
    1,321,753
    
    
    
    1,384,909Total Shareholders Equity
    
    
    39,317,925
    
    
    
    35,078,263Total Liabilities and Shareholders Equity
    
    $
    66,584,051
    
    
    $
    61,664,868
   F-1




---



##### Table of Contents



MAGNUM HUNTER RESOURCES CORPORATION
(FORMERLY PETRO RESOURCES CORPORATION)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year EndedDecember 31,20082009
    
    
    RevisedREVENUE:Oil and gas sales
    
    $
    10,035,033
    
    
    $
    14,486,478Other income
    
    
    222,668
    
    
    
    200,000Gain on sale of property
    
    
    14,000
    
    
    
    1,196,963Total revenue
    
    
    10,271,701
    
    
    
    15,883,441EXPENSES:Lease operating expenses
    
    
    4,220,345
    
    
    
    4,252,835Severance taxes and marketing
    
    
    1,057,818
    
    
    
    1,126,156Exploration
    
    
    896,337
    
    
    
    7,348,778Impairment of oil & gas properties
    
    
    633,953
    
    
    
    1,973,015Depreciation, depletion and accretion
    
    
    4,499,611
    
    
    
    7,682,293General and administrative
    
    
    8,490,364
    
    
    
    3,964,664Total expenses
    
    
    19,798,428
    
    
    
    26,347,741LOSS FROM OPERATIONS
    
    
    (9,526,727
    )
    
    
    (10,464,300
    )OTHER INCOME (EXPENSE):Interest income
    
    
    959
    
    
    
    188,932Interest expense
    
    
    (3,336,346
    )
    
    
    (2,771,858
    )Loss on debt extinguishment
    
    
    
    
    
    
    (2,790,829
    )Gain (loss) on derivative contracts
    
    
    (2,325,251
    )
    
    
    7,311,255Net loss
    
    
    (15,187,365
    )
    
    
    (8,526,800
    )Less: Net loss attributable to non-controlling interest
    
    
    63,156
    
    
    
    1,640,466Net loss attributable to Magnum Hunter Resources Corporation
    
    
    (15,124,209
    )
    
    
    (6,886,334
    )Dividend on Series A Convertible Preferred
    
    
    
    
    
    
    (734,406
    )Dividend on Series C Preferred
    
    
    (25,654
    )
    
    
    Net loss to attributable to common shareholders
    
    $
    (15,149,863
    )
    
    $
    (7,620,740
    )Weighted average number of common shares outstanding, basic and diluted
    
    
    38,953,834
    
    
    
    36,714,489Net loss per common share, basic and diluted
    
    $
    (0.39
    )
    
    $
    (0.21
    )
   F-2




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##### Table of Contents



MAGNUM HUNTER RESOURCES CORPORATION
(FORMERLY PETRO RESOURCES CORPORATION)
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Number
    
    
    
    
    
    
    
    
    
    
    Additionalof Shares
    
    
    Deposit
    
    
    Common
    
    
    Paid in
    
    
    Noncontrolling
    
    
    Accumulated
    
    
    Totalof Common
    
    
    on Triad
    
    
    Stock
    
    
    Capital
    
    
    Interest
    
    
    Deficit
    
    
    EquityBALANCE, December 31, 2007
    
    
    36,599,372
    
    
    $
    
    
    
    $
    365,994
    
    
    $
    49,723,515
    
    
    $
    3,025,375
    
    
    $
    (10,365,090
    )
    
    $
    42,749,794Dividends on Series A Convertible Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (734,406
    )
    
    
    (734,406
    )Restricted stock issued to employees and directors
    
    
    168,800
    
    
    
    
    
    
    
    1,688
    
    
    
    341,782
    
    
    
    
    
    
    
    
    
    
    
    343,470Stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,246,205
    
    
    
    
    
    
    
    
    
    
    
    1,246,205Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,640,466
    )
    
    
    (6,886,334
    )
    
    
    (8,526,800
    )BALANCE, December 31, 2008
    
    
    36,768,172
    
    
    $
    
    
    
    $
    367,682
    
    
    $
    51,311,502
    
    
    $
    1,384,909
    
    
    $
    (17,985,830
    )
    
    $
    35,078,263Restricted stock issued to employees and directors
    
    
    1,886,200
    
    
    
    
    
    
    
    18,862
    
    
    
    1,361,719
    
    
    
    
    
    
    
    
    
    
    
    1,380,581Stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,710,753
    
    
    
    
    
    
    
    
    
    
    
    1,710,753Issued 2,294,474 shares for acquisition of Sharon
Resources, Inc.
    
    
    2,294,474
    
    
    
    
    
    
    
    22,944
    
    
    
    2,661,591
    
    
    
    
    
    
    
    
    
    
    
    2,684,535Issued 214,950 shares of Series C Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (418,205
    )
    
    
    
    
    
    
    
    
    
    
    (418,205
    )Issued 8,881,112 shares of Common Stock
    
    
    8,881,112
    
    
    
    
    
    
    
    88,811
    
    
    
    14,006,206
    
    
    
    
    
    
    
    
    
    
    
    14,095,017Dividends on Series C Convertible Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,654
    )
    
    
    (25,654
    )Issued 761,652 shares as deposit on Triad Acquisition
    
    
    761,652
    
    
    
    (1,310,357
    )
    
    
    7,617
    
    
    
    1,302,740
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,156
    )
    
    
    (15,124,209
    )
    
    
    (15,187,365
    )BALANCE, December 31, 2009
    
    
    50,591,610
    
    
    $
    (1,310,357
    )
    
    $
    505,916
    
    
    $
    71,936,306
    
    
    $
    1,321,753
    
    
    $
    (33,135,693
    )
    
    $
    39,317,925
   F-3




---



##### Table of Contents



MAGNUM HUNTER RESOURCES CORPORATION
(FORMERLY PETRO RESOURCES CORPORATION)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year EndedDecember 31,2009
    
    
    2008Cash flows from operating activitiesNet loss
    
    $
    (15,124,209
    )
    
    $
    (6,886,334
    )Adjustments to reconcile net income to net cash
provided by operating activities:Noncontrolling interest
    
    
    (63,156
    )
    
    
    (1,640,466
    )Depletion, depreciation, and accretion
    
    
    4,499,611
    
    
    
    7,682,293Stock-based compensation
    
    
    3,091,334
    
    
    
    1,589,675Impairment
    
    
    633,953
    
    
    
    1,973,015Gain on asset retirement obligation
    
    
    
    
    
    
    (16,837
    )Exploratory costs
    
    
    647,001
    
    
    
    7,140,013Gain on sale of assets
    
    
    (14,000
    )
    
    
    (1,196,963
    )Loss on extinguishment of debt
    
    
    
    
    
    
    2,790,829Unrealized (gain) loss on derivative contracts
    
    
    7,700,129
    
    
    
    (9,116,145
    )Amortization of deferred financing cost
    
    
    1,233,611
    
    
    
    1,737,458Changes in operating assets and liabilities:Accounts receivable and accrued revenue
    
    
    (1,908,945
    )
    
    
    (114,366
    )Prepaid expenses
    
    
    (16,313
    )
    
    
    (49,887
    )Accounts payable
    
    
    1,571,108
    
    
    
    (631,563
    )Revenue payable
    
    
    342,585
    
    
    
    Accrued liabilities
    
    
    779,030
    
    
    
    176,607Net cash provided by operating activities
    
    
    3,371,739
    
    
    
    3,437,329Cash flows from investing activitiesCapital expenditures
    
    
    (13,274,656
    )
    
    
    (16,222,790
    )Change in advances
    
    
    (1,326,889
    )
    
    
    Cash received in purchase of Sharon Resources, Inc.
    
    
    235,023
    
    
    
    Proceeds from sale of assets
    
    
    500,000
    
    
    
    7,843,962Purchase of Derivatives
    
    
    (2,700,850
    )
    
    
    Change in deposits
    
    
    (56,246
    )
    
    
    Investment in partnership
    
    
    
    
    
    
    (1,999,800
    )Net cash used in investing activities
    
    
    (16,623,618
    )
    
    
    (10,378,628
    )Cash flows from financing activitiesNet proceeds from sale of common stock and warrants
    
    
    14,095,017
    
    
    
    Net proceeds from sale of preferred shares
    
    
    4,955,545
    
    
    
    Principal payments on debt
    
    
    (34,193,566
    )
    
    
    (2,253,861
    )Proceeds from debt borrowings
    
    
    25,718,196
    
    
    
    9,354,295Payment on payable on sale of partnership
    
    
    (113,560
    )
    
    
    Payment of deferred financing costs
    
    
    (1,048,587
    )
    
    
    (1,471,545
    )Redemption of preferred stock
    
    
    
    
    
    
    (7,966,735
    )Net cash provided by (used in) financing activities
    
    
    9,413,045
    
    
    
    (2,337,846
    )Net decrease in cash and cash equivalents
    
    
    (3,838,834
    )
    
    
    (9,279,145
    )Cash and cash equivalents, beginning of year
    
    
    6,120,402
    
    
    
    15,399,547Cash and cash equivalents, end of year
    
    $
    2,281,568
    
    
    $
    6,120,402Cash paid for interest
    
    $
    2,142,454
    
    
    $
    1,554,484Noncash transactionsCapitalized interest in oil and gas properties
    
    $
    
    
    
    $
    1,080,177Property and equipment included in accounts payable
    
    $
    
    
    
    $
    1,527,440Stock issued for acquisition of Sharon Resources, Inc.
    
    $
    2,684,535
    
    
    $
    Refinancing of Petrobridge loan
    
    $
    
    
    
    $
    16,239,152
   F-4




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##### Table of Contents



NOTE 1  ORGANIZATION AND NATURE OF OPERATIONS
   NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation and Presentation
    Cash and cash equivalents
  Financial Instruments
   F-5




---



##### Table of Contents



Oil and Gas Properties
 Capitalized Costs
 
 December 31,2009
    
    
    2008Mineral interests in properties:Unproved properties
    
    $
    12,490
    
    
    $
    18,563Proved properties
    
    
    59,897
    
    
    
    39,266Total costs
    
    
    72,387
    
    
    
    57,977Less accumulated depreciation, depletion and impairment
    
    
    (16,504
    )
    
    
    (12,149
    )Advances
    
    
    1,475
    
    
    
    148Net capitalized costs
    
    $
    57,358
    
    
    $
    45,828
     Accounting for the Impairment or Disposal of Long-Lived Assets
   F-6




---



##### Table of Contents



Estimates of Proved Oil and Gas Reserves
  
    
    the quality and quantity of available data;
    
    the interpretation of that data;
    
    the accuracy of various mandated economic assumptions;
    
    and the judgment of the persons preparing the estimate.
     Oil and Gas Operations
 Accounts Receivable
   Revenue Payable
   F-7




---



##### Table of Contents



Advances from Non-Operators
  Production Costs
   Dependence on Major Customers
  Dependence on Suppliers
  Other Property
   Deferred financing costs
  Derivative Financial Instruments
   F-8




---



##### Table of Contents



Share Based Compensation
  Income Taxes
 Income Taxes
  .
 Loss per Common Share
   Reclassification of Prior-Year Balances
   F-9




---



##### Table of Contents



Recently Issued Accounting Pronouncements
 Business
Combinations Consolidation
 Derivatives and Hedging
 Derivatives and Hedging
 Modernization of
the Oil and Gas Reporting Requirements Oil and Gas Reserve Estimation and Disclosure
 Subsequent
Events
 Generally Accepted Accounting Principles
  F-10




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##### Table of Contents



Measuring Liabilities at
Fair Value, Fair Value Measurements and Disclosures
 NOTE 3  FAIR VALUE OF FINANCIAL INSTRUMENTS
 Fair Value measurements
and Disclosures
  
    
    Level 1  Quoted prices (unadjusted) for identical assets or liabilities in active markets
    
    Level 2  Quoted prices for similar assets or liabilities in active markets; quoted
prices for identical or similar assets or liabilities in markets that are not active; and
model-derived valuations whose inputs or significant value drivers are observable
    
    Level 3  Significant inputs to the valuation model are unobservable
  Level 2 Classification:
 Derivative Instruments
    F-11




---



##### Table of Contents



Fair value measurements on a recurring basisDecember 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3Commodity derivatives
    
    $
    
    
    
    $
    2,353,686
    
    
    $
    Total assets as fair value
    
    $
    
    
    
    $
    2,353,686
    
    
    $
    Commodity derivatives
    
    $
    
    
    
    $
    69,136
    
    
    $
    Total liabilities at fair value
    
    $
    
    
    
    $
    69,136
    
    
    $
    
 Fair value measurements on a recurring basisDecember 31, 2008Level 1
    
    
    Level 2
    
    
    Level 3Commodity derivatives
    
    $
    
    
    
    $
    7,283,829
    
    
    $
    Total assets as fair value
    
    $
    
    
    
    $
    7,283,829
    
    
    $
    Commodity derivatives
    
    $
    
    
    
    $
    
    
    
    $
    Total liabilities at fair value
    
    $
    
    
    
    $
    
    
    
    $
    
 NOTE 4  FINANCIAL INSTRUMENTS AND DERIVATIVES
   Commodity
    
    Type
    
    Volume/Month
    
    Duration
    
    Price
    
    
    Fair Market ValueOil
    
    Swap
    
    2,212 Bbls
    
    Jan 10  Feb 10
    
    $
    65.40
    
    
    $
    (69,136
    )Oil
    
    Swap
    
    670 Bbls
    
    Jan 10  Dec 10
    
    $
    81.65
    
    
    
    (5,139
    )Oil
    
    Swap
    
    4,660 Bbls
    
    Jan 10  Dec 11
    
    $
    105.45
    
    
    
    2,293,729Oil
    
    Swap
    
    435 Bbls
    
    Jan 11  Dec 11
    
    $
    85.25
    
    
    
    (4,339
    )Natural Gas
    
    Collar
    
    5,000 Mmbtu
    
    Feb 10  Dec 10
    
    $
    5.50  7.75
    
    
    
    18,028Natural Gas
    
    Collar
    
    15,000 Mmbtu
    
    Feb 10  Dec 10
    
    $
    5.75  7.10
    
    
    
    59,342Natural Gas
    
    Collar
    
    12,500 Mmbtu
    
    Jan 11  Dec 11
    
    $
    5.00  8.20
    
    
    
    (13,671
    )Natural Gas
    
    Collar
    
    4,165 Mmbtu
    
    Jan 11  Dec 11
    
    $
    5.00  8.95
    
    
    
    1,435Natural Gas
    
    Collar
    
    10,000 Mmbtu
    
    Jan 12  Dec 12
    
    $
    5.00  9.82
    
    
    
    4,301Natural Gas
    
    Purchase Put
    
    5,000 Mmbtu
    
    Feb 10  Dec 10
    
    $
    5.00
    
    
    
    19,167Natural Gas
    
    Sold Put
    
    5,000 Mmbtu
    
    Feb 10  Dec 10
    
    $
    5.00
    
    
    
    (19,167
    )Natural Gas
    
    Purchased Put
    
    15,000 Mmbtu
    
    Feb 10  Dec 10
    
    $
    5.00
    
    
    
    57,502Natural Gas
    
    Sold Put
    
    15,000 Mmbtu
    
    Feb 10  Dec 10
    
    $
    5.00
    
    
    
    (57,502
    )$
    2,284,550
   F-12




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##### Table of Contents



NOTE 5  ACQUISITIONS AND DIVESTITURES
    Business Combinations
 AssetsCash
    
    $
    235,023Accounts receivable
    
    
    288,125Prepaid expenses
    
    
    2,394Deposits
    
    
    750Oil and gas properties
    
    
    2,972,534Liabilities and equityAccounts payable
    
    
    (664,080
    )Asset retirement obligation
    
    
    (150,211
    )Net assets acquired
    
    $
    2,684,535
 NOTE 6  ASSET RETIREMENT OBLIGATIONS
   2009
    
    
    2008Asset retirement obligation at beginning of period
    
    $
    1,589,197
    
    
    $
    1,434,114Purchased in Sharon Resources acquisition
    
    
    150,211
    
    
    
    Liabilities incurred
    
    
    150,822
    
    
    
    93,154Liabilities settled
    
    
    (22,914
    )
    
    
    (17,012
    )Accretion expense
    
    
    164,990
    
    
    
    138,772Revisions in estimated liabilities
    
    
    
    
    
    
    (59,831
    )Asset retirement obligation at end of period
    
    $
    2,032,306
    
    
    $
    1,589,197
  F-13




---



##### Table of Contents



NOTE 7  NOTES PAYABLE
  2009
    
    
    2008Note payable due February 1, 2010, 4.75%
    
    $
    44,157
    
    
    $
    Note payable due January 1, 2008, 4.057%
    
    
    
    
    
    
    19,527Revolving credit borrowing due September 9, 2011, 5.5%
    
    
    
    
    
    
    6,500,000Term loan due September 9, 2012, 10%
    
    
    
    
    
    
    15,000,000Senior revolving credit facility due November
23, 2012, 3.255% at December 31, 2009
    
    
    13,000,000
    
    
    
    $
    13,044,157
    
    
    $
    21,519,527Less: current portion
    
    
    (44,157
    )
    
    
    (19,527
    )Total Long-Term Debt
    
    $
    13,000,000
    
    
    $
    21,500,000
  2010
    
    $
    44,1572011
    
    
    2012
    
    
    13,000,0002013
    
    
    Thereafter
    
    
    $
    13,044,157
 Notes Payable
   Revolving Credit Borrowing and Term Loan
     F-14




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##### Table of Contents



Senior Revolving Credit Facility
    
    
    an alternate base rate (ABR) equal to the greater of the prime
rates, the federal funds effective rate plus 0.5% or the LIBOR rate
plus 1.0%, plus in each such case an applicable margin ranging from
1.5% to 2.5% depending on borrowing base utilization; or
 
    
    an adjusted LIBOR rate equal to the product of (i) the LIBOR rate
multiplied by (ii) the statutory reserve rate (a fraction of which the
numerator is 1 and the denominator is the aggregate of the maximum
reserve percentages required for Eurocurrency funding), plus in each
case an applicable margin ranging from 2.5% to 3.5% based on borrowing
base utilization.
     F-15




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##### Table of Contents



NOTE 8  SHARE BASED COMPENSATION
        F-16




---



##### Table of Contents



boe
 Black-Sholes
    
    
    LatticeExpected volatility
    
    108
    %
    
    61.5% to 337%Expected dividend yield
    
    0
    
    
    0Risk free rate
    
    1.39
    %
    
    0.49% to 2.23%
   Expected volatility
    
    189% to 337%Expected dividend yield
    
    0Risk free rate
    
    0.49% to 2.23%
     F-17




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##### Table of Contents



Black-Sholes
    
    
    LatticeExpected volatility
    
    110
    %
    
    48.2% to 434.4%Expected dividend yield
    
    0
    
    
    0Risk free rate
    
    1.41
    
    
    0.17% to 4.30%
     F-18




---



##### Table of Contents



Expected volatility
    
    112% to 250.44%Expected dividend yield
    
    0Risk free rate
    
    2.38%
    2009
    
    
    2008Weighted Average
    
    
    
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    1,035,000
    
    
    $
    3.11
    
    
    
    1,125,000
    
    
    $
    3.68Granted
    
    
    6,107,000
    
    
    $
    0.56
    
    
    
    310,000
    
    
    $
    1.90Exercised, forfeited, or expired
    
    
    (25,000
    )
    
    $
    2.50
    
    
    
    (400,000
    )
    
    $
    3.80Outstanding at end of year
    
    
    7,117,000
    
    
    $
    0.93
    
    
    
    1,035,000
    
    
    $
    3.11Exercisable at end of year
    
    
    4,776,750
    
    
    $
    0.98
    
    
    
    902,500
    
    
    $
    3.56
 
 Non-vested Options
    
    2009
    
    
    2008Non-vested at beginning of year
    
    
    432,500
    
    
    
    575,000Granted
    
    
    6,107,000
    
    
    
    310,000Vested
    
    
    (4,174,250
    )
    
    
    (352,500
    )Forfeited
    
    
    (25,000
    )
    
    
    (100,000
    )Non-vested at end of year
    
    
    2,340,250
    
    
    
    432,500
   F-19




---



##### Table of Contents



Year Ended December 31,2009 (1)
    
    2008(1)Weighted average value per option granted during the period (2)
    
    0.37
    
    1.36Assumptions (3):Stock price volatility
    
    108  263%
    
    104  105%Risk free rate of return
    
    1.36  2.53%
    
    1.87  2.69%Weighted average expected term
    
    4.23 years
    
    3.25 years
 (1)
    
    Our estimated future forfeiture rate is zero.(2)
    
    Calculated using the Black-Scholes fair value based method for service
based options and Lattice Model fair value based method for
performance and market based options.(3)
    
    The Company does not pay dividends on our common stock.  2009
    
    
    2008Non-vested Shares
    
    Shares
    
    
    Price Per Share
    
    
    Shares
    
    
    Price Per ShareNon-vested at beginning of year
    
    
    215,000
    
    
    $
    2.04
    
    
    
    75,000
    
    
    $
    2.50Granted
    
    
    4,168,181
    
    
    $
    0.33
    
    
    
    240,000
    
    
    $
    1.90Vested
    
    
    (2,048,181
    )
    
    $
    0.43
    
    
    
    (100,000
    )
    
    $
    2.04Forfeited
    
    
    (25,000
    )
    
    $
    2.50
    
    
    
    
    
    
    $
    Non-vested at end of year
    
    
    2,310,000
    
    
    $
    0.44
    
    
    
    215,000
    
    
    $
    2.04
  NOTE 9  SHAREHOLDERS EQUITY
 Common Stock
     F-20




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##### Table of Contents



Series A Convertible Preferred Stock
  Series C Preferred Stock
 Series C Preferred Stock
  F-21




---



##### Table of Contents



Noncontrolling Interests
  2009
    
    
    2008Noncontrolling interest at beginning of period
    
    $
    1,384,909
    
    
    $
    3,025,375Loss to noncontrolling interest
    
    $
    (63,156
    )
    
    $
    (1,640,466
    )Noncontrolling interest at end of period
    
    $
    1,321,753
    
    
    $
    1,384,909
 Common Stock Warrants
    2009
    
    
    2008Weighted-Average
    
    
    
    
    
    
    Weighted-AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    6,838,962
    
    
    $
    2.15
    
    
    
    6,838,962
    
    
    $
    2.15Granted
    
    
    1,738,726
    
    
    $
    2.50
    
    
    
    
    
    
    $
    Exercised, forfeited, or expired
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Outstanding at end of year
    
    
    8,577,688
    
    
    $
    2.22
    
    
    
    6,838,962
    
    
    $
    2.15Exercisable at end of year
    
    
    6,838,962
    
    
    $
    2.15
    
    
    
    6,838,962
    
    
    $
    2.15
  NOTE 10  INCOME TAXES
   2009
    
    
    2008(in thousands)Statutory tax expense (benefit)
    
    $
    (5,142
    )
    
    $
    (2,341
    )Effect of permanent differences
    
    
    6
    
    
    
    544Change in valuation allowance
    
    
    5,136
    
    
    
    1,797Total Tax Expense
    
    $
    
    
    
    $
    
  F-22




---



##### Table of Contents



2009
    
    
    2008(in thousands)Deferred tax assets:Net operating loss carryforwards
    
    $
    15,302
    
    
    $
    10,551Asset retirement obligations
    
    
    691
    
    
    
    540Share based compensation
    
    
    2,412
    
    
    
    1,397Depletion carry forwards
    
    
    455
    
    
    
    Deferred tax liability:Property and equipment
    
    
    (2,593
    )
    
    
    (4,992
    )Net deferred tax assets
    
    
    16,267
    
    
    
    7,496Valuation allowances
    
    
    (16,267
    )
    
    
    (7,496
    )Net deferred tax
    
    $
    
    
    
    $
    
  NOTE 11  OTHER INFORMATION
 Quarterly Data (Unaudited)
  Quarter Ended
    
    
    TotalMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31
    
    
    Year2009Total revenue
    
    $
    1,917,036
    
    
    $
    2,528,891
    
    
    $
    2,320,514
    
    
    $
    3,505,260
    
    
    $
    10,271,701Loss from operations
    
    
    (1,476,141
    )
    
    
    (1,007,912
    )
    
    
    (2,569,806
    )
    
    
    (4,472,868
    )
    
    
    (9,526,727
    )Net loss attributable to common shareholders
    
    
    (1,371,283
    )
    
    
    (3,393,576
    )
    
    
    (3,052,222
    )
    
    
    (7,332,782
    )
    
    
    (15,149,863
    )Basic and diluted loss per common share
    
    $
    (0.04
    )
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.18
    )
    
    $
    (0.39
    )2008Total revenue
    
    $
    3,158,001
    
    
    $
    4,368,442
    
    
    $
    5,964,896
    
    
    $
    2,392,102
    
    
    $
    15,883,441Income (loss) from operations
    
    
    (455,522
    )
    
    
    1,477,730
    
    
    
    757,021
    
    
    
    (12,243,529
    )
    
    
    (10,464,300
    )Net loss attributable to common shareholders
    
    
    (1,634,205
    )
    
    
    (1,882,826
    )
    
    
    (535,538
    )
    
    
    (3,568,171
    )
    
    
    (7,620,740
    )Basic and diluted loss per common share
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.01
    )
    
    $
    (0.10
    )
    
    $
    (0.21
    )
 Supplemental Oil and Gas Disclosures (Unaudited)
  2009
    
    
    2008Unproved oil and gas properties
    
    $
    12,490,362
    
    
    $
    18,562,932Proved oil and gas properties
    
    
    59,896,627
    
    
    
    39,414,36172,386,989
    
    
    
    57,977,293Accumulated depletion, depreciation and impairment
    
    
    (16,503,939
    )
    
    
    (12,149,571
    )$
    55,883,050
    
    
    $
    45,827,722
  F-23




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##### Table of Contents



2009
    
    
    2008Purchase of non-producing leases
    
    $
    2,602,387
    
    
    $
    1,410,023Purchase of producing properties
    
    
    3,288,174
    
    
    
    Exploration costs
    
    
    3,794,254
    
    
    
    5,796,608Development costs
    
    
    6,798,142
    
    
    
    11,607,005Asset retirement obligation
    
    
    278,119
    
    
    
    93,153$
    16,716,076
    
    
    $
    18,906,789
 Oil and Gas Reserve Information
  Total Proved Reserves
 Crude oil and Condensate
    
    
    Natural Gas(Mbbl)
    
    
    (Mcf)Balance December 31, 2007
    
    
    2,369.7
    
    
    
    2,082.0Extensions, discoveries and other additions
    
    
    698.0
    
    
    
    2,655.9Revisions of previous estimates
    
    
    (506.6
    )
    
    
    (143.8
    )Production
    
    
    (151.8
    )
    
    
    (341.1
    )Balance December 31, 2008
    
    
    2,409.3
    
    
    
    4,253.0Extensions, discoveries and other additions
    
    
    982.3
    
    
    
    2,087.3Revisions of previous estimates
    
    
    1,330.2
    
    
    
    34.2Purchases of reserves in place
    
    
    83.4
    
    
    
    3,468.0Sales of reserves in place
    
    
    (16.4
    )
    
    
    (20.5
    )Production
    
    
    (180.3
    )
    
    
    (457.7
    )Balance December 31, 2009
    
    
    4,608.5
    
    
    
    9,364.2Developed reserves, included aboveDecember 31, 2008
    
    
    1,394.3
    
    
    
    2,549.5December 31, 2009
    
    
    2,055.3
    
    
    
    4,952.5
 Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves
     F-24




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##### Table of Contents



Years Ended December 31,2009
    
    
    2008Future cash flows
    
    $
    262,758
    
    
    $
    109,100Future production costs
    
    
    (93,078
    )
    
    
    (48,972
    )Future development costs
    
    
    (33,245
    )
    
    
    (15,342
    )Future income tax expense
    
    
    (30,858
    )
    
    
    (11,541
    )Future net cash flows
    
    
    105,577
    
    
    
    33,24510% annual discount for estimated timing of cash flows
    
    
    (58,189
    )
    
    
    (17,624
    )Standardized measure of discounted future net cash flows
    
    $
    47,388
    
    
    $
    15,621
  Changes in Standardized Measure of Discounted Future Net Cash Flows
  Years Ended2009
    
    
    2008Balance, beginning of period
    
    $
    15,621
    
    
    $
    40,112Net change in sales and transfer prices and in production
(lifting) costs related to future production
    
    
    12,387
    
    
    
    (35,731
    )Changes in estimated future development costs
    
    
    (18,755
    )
    
    
    (9,458
    )Sales and transfers of oil and gas produced during the period
    
    
    (4,757
    )
    
    
    (9,107
    )Net change due to extensions, discoveries and improved recovery
    
    
    17,578
    
    
    
    10,334Net change due to revisions in quantity estimates
    
    
    17,654
    
    
    
    (4,807
    )Previously estimated development costs incurred during the period
    
    
    6,798
    
    
    
    8,738Accretion of discount
    
    
    2,614
    
    
    
    4,011Purchase of minerals in place
    
    
    8,739
    
    
    
    Sale of minerals in place
    
    
    (262
    )
    
    
    Other
    
    
    (3,609
    )
    
    
    Net change in income taxes
    
    
    (6,623
    )
    
    
    11,529Standardized measure of discounted future net cash flows
    
    $
    47,385
    
    
    $
    15,621
  F-25




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##### Table of Contents



2009
    
    
    2008Oil (per Bbl)
    
    $
    54.96
    
    
    $
    40.33Natural gas liquids (per Bbl)
    
    $
    27.20
    
    
    $
    23.00Gas (per Mcf)
    
    $
    3.35
    
    
    $
    5.04
 NOTE 12  RELATED PARTY TRANSACTIONS
   NOTE 13  COMMITMENTS AND CONTINGENCIES
 Accumulated Production Floor Payments
  Payable on Sale of Partnership
  Operational Contingencies
    F-26




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##### Table of Contents



NOTE 14  SUBSEQUENT EVENTS
       
    
    $8 million in cash ($4 million net of cash on hand at Triad);
    
    $15 million of our Series B Redeemable Convertible Preferred Stock, issued to Allied Irish
Banks, P.L.C., Capital One, N.A., and Citibank N.A., who were secured creditors of Triad in
its Chapter 11 proceedings;
    
    $55 million repayment of Triad senior debt via drawing under the new Revolving Credit
Facility discussed below; and
    
    Assumption of approximately $3 million of equipment indebtedness
    
    The fair value of the consideration approximated its $81 million face value
  F-27




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##### Table of Contents



F-28




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##### Table of Contents



Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
      
 Item 9A(T). CONTROLS AND PROCEDURES
   66




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##### Table of Contents



Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control over Financial Reporting
 Managements Report on Internal Control over Financial Reporting
 
 Item 9B. OTHER INFORMATION
   67




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##### Table of Contents



PART III
 
 Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   
 Item 11. EXECUTIVE COMPENSATION
  
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  PART IV
 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    1.
    
    Consolidated Financial Statements: See Index to Financial Statements on page F-1.2.
    
    No schedules are required.3.
    
    Exhibits:
   68




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##### Table of Contents



ExhibitNumber
    
    Description3.1
    (1)
    
    Certificate of Incorporation of the Registrant, as amended3.1.1
    (6)
    
    Certificate of Amendment to Certificate of Incorporation of the Registrant dated May 10, 20073.1.2
    (12)
    
    Certificate of Ownership and Merger of Magnum Hunter Resources Corporation into Petro Resources
Corporation, effective July 14, 2009.3.2
    (1)
    
    Amended and Restated Bylaws of the Registrant dated April 14, 20063.2.1
    (2)
    
    Amendment to Bylaws of the Registrant3.2.2
    (7)
    
    Amendment to Bylaws of the Registrant dated October 12, 20064.1
    (3)
    
    Certificate of Designations of Preferences and Rights of Series A Preferred Stock4.2
    (21)
    
    Certificate of Designation for Series B Redeemable Convertible Preferred Stock4.3
    (19)
    
    Certificate of Designation of Rights and Preferences of Series C Preferred Stock10.1
    (1)
    
    Form of Registration Rights Agreement dated August 1, 200510.2
    (1)
    
    Form of Warrant sold as part of August 2005 private placement10.3
    (1)
    
    Lease Purchase Agreement dated January 10, 2006 between Petro Resource Corporation and The
Meridian Resource & Exploration, LLC10.4
    (1)
    
    2006 Stock Incentive Plan*10.5
    (1)
    
    Form of Registration Rights Agreement dated February 17, 200610.6
    (1)
    
    Form of Warrant sold as part of February 2006 private placement10.7
    (2)
    
    Subscription Agreement for Hall-Houston Exploration II, L.P.10.8
    (2)
    
    Amended and Restated Agreement of Limited Partnership dated as of April 21, 2006 for Hall-Houston
Exploration II, L.P.10.9
    (4)
    
    Purchase and Sale Agreement dated December 11, 2006 with Eagle Operating, Inc.10.10
    (4)
    
    Credit Agreement dated February 16, 2007 between PRC Williston LLC and D.B. Zwirn Special
Opportunities Fund, L.P., as administrative agent10.11
    (4)
    
    Security Agreement dated February 16, 2007 Between PRC Williston, LLC and D.B. Zwirn Special
Opportunities Fund, L.P., as administrative agent10.12
    (4)
    
    Guaranty and Pledge Agreement dated February 16, 2007 between Petro Resource Corporation and
D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent10.13
    (4)
    
    Lease dated September 30, 2006 with Gateway Ridgecrest Inc.10.14
    (3)
    
    Securities Purchase Agreement dated April 3, 200710.15
    (3)
    
    Registration Rights Agreement dated April 3, 200710.16
    (5)
    
    Letter Agreement dated May 25, 2007 between Petro Resource Corporation and Harry Lee Stout*10.17
    (6)
    
    Letter Agreement dated August 14, 2007 between PRC Williston LLC and D.B. Zwirn Special
Opportunities Fund, L.P., as administrative agent10.18
    (7)
    
    Letter Agreement dated September 19, 2007 between PRC Williston LLC and D.B. Zwirn Special
Opportunities Fund, L.P., as administrative agent10.19
    (8)
    
    First Amendment dated May 13, 2008 to Credit Agreement dated February 16, 2007 between PRC
Williston LLC and D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent10.20
    (9)
    
    Credit Agreement dated as of September 9, 2008, among Petro Resources Corporation, CIT Capital
USA Inc., as administrative agent, and the lenders party thereto10.21
    (20)
    
    First Amendment to Credit Agreement dated March 19, 2009 among Petro Resources Corporation, CIT
Capital USA Inc., as administrative agent, and the lenders party thereto10.22
    (9)
    
    Second Lien Term Loan Agreement dated as of September 9, 2008, on March 19, 2009 among Petro
Resources Corporation, CIT Capital USA Inc., as administrative agent, and the lenders party
thereto10.23
    (20)
    
    First Amendment to Second Lien Term Loan Agreement dated March 19, 2009 among Petro Resources
Corporation, CIT Capital USA Inc., as administrative agent, and the lenders party thereto10.24
    (9)
    
    Guaranty and Collateral Agreement dated as of September 9, 2008 among Petro Resources
Corporation, PRC Williston LLC, and CIT Capital USA Inc., as administrative agent
  69




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##### Table of Contents



ExhibitNumber
    
    Description10.25
    (9)
    
    Second Lien Guaranty and Collateral Agreement dated as of September 9, 2008 among Petro Resources
Corporation, PRC Williston LLC, and CIT Capital USA Inc., as administrative agent10.26
    (10)
    
    Partnership Interest Purchase Agreement dated September 26, 2008, as amended on September 29,
2008, between Petro Resources Corporation and PRC HHEP II, LP10.27
    (11)
    
    Employment Agreement dated May 22, 2009 between Gary C. Evans and Petro Resources Corporation*10.28
    (11)
    
    Stock Option Agreement dated May 22, 2009 between Gary C. Evans and Petro Resources Corporation*10.29
    (11)
    
    Restricted Stock Agreement dated May 22, 2009 between Gary C. Evans and Petro Resources
Corporation*10.30
    (11)
    
    Employment Agreement dated May 22, 2009 between Ronald D. Ormand and Petro Resources Corporation*10.31
    (11)
    
    Stock Option Agreement dated May 22, 2009 between Ronald D. Ormand and Petro Resources
Corporation *10.32
    (11)
    
    Restricted Stock Agreement dated May 22, 2009 between Ronald D. Ormand and Petro Resources
Corporation *10.33
    (13)
    
    Agreement and Plan of Merger, dated September 9, 2009, by and among Magnum Hunter Resources
Corporation, Sharon Hunter, Inc., Sharon Resources, Inc. and Sharon Energy Ltd.10.34
    (13)
    
    Purchase and Sale Agreement, dated September 14, 2009, between Centurion Exploration Company,
LLC and Magnum Hunter Resources Corporation.10.35
    (14)
    
    Asset Purchase Agreement dated as of October 28, 2009 among Magnum Hunter Resources Corporation
and Triad Energy Corporation.10.36
    (15)
    
    Form of Warrant sold as part of November 2009 offering.10.37
    (15)
    
    Form of Securities Purchase and Registration Rights Agreement as part of November 2009 offering.10.38
    (16)
    
    Form of Warrant sold as part of November 2009 offering with Canaccord Adams, Inc. as the
Placement Agent.10.39
    (16)
    
    Placement Agency Agreement, dated as of November 10, 2009, by and between Magnum Hunter Resources
Corporation and Canaccord Adams Inc. for the sale of up to an aggregate of 3,903,720 Units.10.40
    (16)
    
    Placement Agency Agreement, dated as of November 11, 2009, by and between Magnum Hunter Resources
Corporation and Canaccord Adams Inc. for the sale of up to an aggregate of 2,500,000 Units.10.41
    (17)
    
    Credit Agreement, dated as of November 23, 2009, as amended on November 30, 2009, by and among
the Company, Bank of Montreal, as administrative agent, BMO Capital Markets, as Lead Arranger and
Bookrunner, and the lenders party thereto.10.42
    (18)
    
    Underwriting Agreement, dated December 9, 2009, between Magnum Hunter Resources Corporation and
Wunderlich Securities, Inc.10.44
    (26)
    
    Employment Agreement dated May 27, 2008 between Petro Resources Corporation and Wayne P. Hall.*10.45
    (26)
    
    Employment Agreement dated May 27, 2008 between Petro Resources Corporation and Donald L.
Kirkendall.*10.46
    (26)
    
    Employment Agreement dated May 27, 2008 between Petro Resources Corporation and James W. Denny. *10.47
    (26)
    
    First Amendment to Credit Agreement dated March 19, 2009 among Petro Resources Corporation, CIT
Capital USA Inc., as administrative agent, and the lenders party thereto10.48
    (26)
    
    First Amendment to Second Lien Term Loan Agreement dated March 19, 2009 among Petro Resources
Corporation, CIT Capital USA Inc., as administrative agent, and the lenders party thereto10.49
    (22)
    
    Second Amendment to Credit Agreement, dated as of January 25, 2010, by and among the Company,
Bank of Montreal, as administrative agent, and the guarantors and lenders party thereto10.50
    (23)
    

Amended
and Restated Credit Agreement, dated as of February 12, 2010, by and among the Company, Bank of Montreal, as
Administrative Agent, Capital One, N.A. as Syndication Agent, BMO Capital Markets and Capital
One, N.A., as Co-Arrangers and Joint Bookrunner, and the lenders party thereto
  70




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##### Table of Contents



ExhibitNumber
    
    Description10.53
    (24)
    
    At The Market Issuance Sales Agreement with Wm. Smith & Co. for Series C Preferred Stock10.54
    (25)
    
    At Market Issuance Sales Agreement with Wm. Smith & Co. for Common Stock21.1
    
    
    List of Subsidiaries23.1
    
    
    Consent of Hein & Associates LLP23.2
    
    
    Consent of Malone & Bailey, PC23.3
    
    
    Consent of Cawley Gillespie & Associates, Inc23.4
    
    
    Consent of DeGolyer & MacNaughton31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of the Chief Executive Officer and Chief Financial Officer provided pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 *
    
    The referenced exhibit is a management contract, compensatory plan or arrangement.(1)
    
    Incorporated by reference from Petro Resource Corporations Registration Statement on Form SB-2
filed on March 21, 2006.(2)
    
    Incorporated by reference from Petro Resource Corporations Amendment No. 1 to Registration
Statement on Form SB-2 filed on June 9, 2006.(3)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on April 4, 2007.(4)
    
    Incorporated by reference from Magnum Hunter Resources Corporations annual report on Form 10-KSB
for the year ended December 31, 2006, filed on April 2, 2007.(5)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on June 1, 2007.(6)
    
    Incorporated by reference from Magnum Hunter Resources Corporations quarterly report on Form
10-QSB filed on August 14, 2007.(7)
    
    Incorporated by reference from Magnum Hunter Resources Corporations Amendment No. 1 to
Registration Statement on Form SB-2 filed on September 21, 2007.(8)
    
    Incorporated by reference from the Magnum Hunter Resources Corporations quarterly report on Form
10-Q filed on May 15, 2008.(9)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Forms 8-K
filed on September 11, 2008 and March 30, 2009.(10)
    
    Incorporated by reference from Magnum Hunter Resources Corporations quarterly report on Form
10-Q filed on November 13, 2008.(11)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on May 28, 2009.(12)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on July 14, 2009.(13)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on September 15, 2009.(14)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on October 29, 2009.(15)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on November 6, 2009.(16)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on November 13, 2009.(17)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Forms 8-K
filed on November 27, 2009 and November 30, 2009.(18)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on December 11, 2009.  71




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##### Table of Contents



(19)
    
    Incorporated by reference from Magnum Hunter Resources Corporations Registration Statement Form
8-A filed on December 10, 2009.(20)
    
    Incorporated by reference from Magnum Hunter Resources Corporations quarterly report on Form
10-Q filed on May 11, 2009.(21)
    
    Incorporated by reference from Magnum Hunter Resources Corporations Registration Statement Form
8-A filed on February 16, 2010.(22)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on January 28, 2010.(23)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on February 19, 2010.(24)
    
    Incorporated by reference from Magnum Hunter Resources Corporations current report on Form 8-K
filed on January 6, 2010.(25)
    
    Incorporated by reference from Magnum Hunter Resources Corporations Form S-3/A filed on October
14, 2010.(26)
    
    Incorporated by reference
from Magnum Hunter Resources Corporations annual report on
Form 10-K filed on March 31, 2009.  72




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##### Table of Contents



SIGNATURES
  PETRO RESOURCES CORPORATIONDate:  March 31, 2010
    By:
    /s/ Gary C. EvansGary C. EvansChairman of the Board
and Chief Executive Officer

(Authorized Signatory)  Signature
    
    Title
    
    Date/s/ Gary C. Evans

Gary C. Evans
    
    Chairman of the Board and
Chief Executive Officer

(Principal Executive Officer)
    
    March 31, 2010/s/ Ronald D. Ormand

Ronald D. Ormand
    
    Executive Vice President and Chief
Financial Officer

(Principal Financial Officer)
    
    March 31, 2010/s/ David S. Krueger

David S. Krueger
    
    Senior Vice President and Chief
Accounting Officer

(Principal Accounting Officer)
    
    March 31, 2010/s/ Wayne P. Hall

Wayne P. Hall
    
    Vice Chairman of the Board, Director
    
    March 31, 2010/s/ J. Raleigh Bailes, Sr.

J. Raleigh Bailes, Sr.
    
    Director
    
    March 31, 2010/s/ Brad Bynum

Brad Bynum
    
    Director
    
    March 31, 2010/s/ Gary L. Hall

Gary L. Hall
    
    Director
    
    March 31, 2010/s/ Joe L. McClaugherty

Joe L. McClaugherty
    
    Director
    
    March 31, 2010/s/ Steven A. Pfeifer

Steven A. Pfeifer
    
    Director
    
    March 31, 2010/s/ Jeff Swanson

Jeff Swanson
    
    Director
    
    March 31, 2010
  73