1015293--2/28/2007--HOUSTON_EXPLORATION

related topics

{gas, price, oil}

{loss, insurance, financial}

{debt, indebtedness, cash}

{operation, natural, condition}

{cost, regulation, environmental}

{acquisition, growth, future}

The volatility of natural gas and oil prices may affect our financial results. Our ability to replace revenues generated from the sale of substantially all of our Gulf of Mexico properties depends upon market conditions, restrictions under the pending merger agreement and numerous uncertainties. A significant increase in our level of indebtedness may limit our financial flexibility. We may be required to take significant writedowns if natural gas and oil prices decline. Lower natural gas and oil prices could negatively impact our ability to borrow. Our hedging activities have resulted in significant financial losses and may continue to do so in the future. The high-rate production characteristics of our properties subject us to high reserve replacement needs and require significant capital expenditures to replace our reserves at a faster rate than companies whose reserves have longer-life production profiles. Rising finding and development costs may impair our profitability. The success of our business depends upon our ability to find, replace, develop and acquire natural gas and oil reserves. Estimates of proved reserves and future net revenue may change if the assumptions on which such estimates are based prove to be inaccurate. We may not be able to meet our substantial capital requirements. Our business involves many operating risks that can cause substantial losses; insurance may not protect us against all these risks. Our reserves, production and cash flow are highly dependent upon operations that are concentrated in a small number of areas. Drilling natural gas and oil wells is a high risk activity and subjects us to a variety of factors that we cannot control. The availability and cost of rigs, equipment, and personnel could adversely affect our profitability and level of operations. Our business depends on oil and natural gas transportation facilities that are owned by others. Any acquisition and investment activities may be unsuccessful and costly. We could lose certain leasehold rights if we do not drill all the wells that are necessary to hold our acreage, especially in the Rocky Mountains, before the initial lease terms expire. We may incur substantial costs to comply with costly and stringent environmental and other governmental laws and regulations.

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1015293--2/28/2007--HOUSTON_EXPLORATION_CO