43350--3/31/2010--Energy

related topics

{gas, price, oil}

{debt, indebtedness, cash}

{acquisition, growth, future}

{stock, price, share}

{tax, income, asset}

{condition, economic, financial}

{operation, natural, condition}

{interest, director, officer}

{personnel, key, retain}

{control, financial, internal}

{loss, insurance, financial}

{cost, regulation, environmental}

{investment, property, distribution}

Storing and transporting natural gas involves inherent risks that could cause us to incur significant financial losses. Our earnings and cash flow are sensitive to decreases in customer consumption resulting from warmer than normal temperatures and customer conservation. The increased cost of purchasing natural gas during periods in which natural gas prices are rising significantly could adversely impact our earnings and cash flow. The loss of a major commercial or industrial gas customer to which we provide natural gas may negatively impact our profitability. Volatility in the price of natural gas could result in customers switching to alternative energy sources which could reduce our revenues, earnings and cash flow. The gas industry is intensely competitive and competition has increased in recent years as a result of changes in the price negotiation process within the supply and distribution chain of the gas industry, both of which could negatively impact earnings. Earnings and cash flow may be adversely affected by downturns in the economy. Changes in the regulatory environment and events in the energy markets that are beyond our control may reduce our earnings and limit our access to capital markets. We acquired interests in our natural gas wells by quitclaim deed and cannot guarantee that we hold clear title to our interests or that our interests will not be challenged in the future. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price. Our actual results of operations could differ from estimates used to prepare our financial statements. We are subject to numerous environmental laws and regulations that may increase our cost of operations, impact our business plans and expose us to environmental liabilities. We have a net deferred tax asset of 14.0 million and we cannot guarantee that we will be able to generate sufficient future taxable income to realize a significant portion of this net deferred tax asset, which could lead to a writedown (or even a loss) of the net deferred tax asset and adversely affect our operating results and financial position. Changes in the market price and transportation costs of natural gas could result in financial losses that would negatively impact our results of operations. Risks Related to Our Acquisition Strategy We face a variety of risks associated with acquiring and integrating new business operations. To the extent we are successful in making an acquisition, we may be exposed to a number of risks. Subsequent to the consummation of an acquisition, we may be required to take write-downs or write-offs, restructuring and impairment charges or other charges that could have a significant negative impact on our financial condition, results of operations and our stock price. Risks Related to Our Common Stock Our ability to pay dividends on our common stock is limited. The possible issuance of future series of preferred stock could adversely affect the holders of our common stock. Organization, Structure and Management Risks Our credit facilities contain restrictive covenants that may reduce our flexibility, and adversely affect our business, earnings, cash flow, liquidity and financial condition. Our primary assets are our operating subsidiaries, and our subsidiaries credit facilities include financial covenants that limit our ability to obtain revenue from those subsidiaries, which may limit our ability to pay dividends to shareholders. In acquiring the Ohio Companies, we incurred $20.9 million in additional debt, $8.2 million of which will mature in the last quarter of 2010. Our short term debt and high degree of leverage limit our flexibility in managing our business, and our inability to satisfy debts and comply with other financial covenants in the short or long term could materially and adversely affect our business, earnings, cash flow, liquidity and financial condition. Our performance depends substantially on the performance of our executive officers and other key personnel and the ability of our new management team to fully implement our business strategy. We have entered a limited liability operating agreement with third parties to develop and operate oil, gas and mineral leasehold estates, which exposes us to the risk associated with oil, gas and mineral exploration as well as the risks inherent in relying upon third parties in business ventures and we may enter into similar agreements in the future. We have entered into certain transactions with persons who are our directors and may enter into additional transactions in the future.

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43350--3/31/2010--Energy_Inc.