1015293--3/3/2006--HOUSTON_EXPLORATION

related topics

{gas, price, oil}

{loss, insurance, financial}

{cost, regulation, environmental}

{operation, international, foreign}

{acquisition, growth, future}

{debt, indebtedness, cash}

We may be required to take 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 financial losses and reduced our income 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. Our acquisition and investment activities may be unsuccessful and costly. Our ability to maximize tax efficiencies with tax free asset exchange transactions following the pending sale of our Gulf of Mexico assets is uncertain. Our investments in the Rocky Mountains may not be successful. We may incur substantial costs to comply with costly and stringent environmental and other governmental laws and regulations.

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1015293--3/3/2006--HOUSTON_EXPLORATION_CO