Item 8.01 Other Events.

The Company has reached an agreement with the Minerals Management Service (MMS) with respect to the MMS' request for supplemental bonds or other acceptable security related to the Company's plugging and abandonment liability for federal property in the Gulf of Mexico. The Company has provided performance bonds of approximately $11.2 million to date. The agreement requires the Company to provide additional cash or other security of approximately $36.1 million (the total of $47.3 million is reduced from the $56 million total previously requested by the MMS), with one-half ($18.0 million) to be provided as a deposit on the date of the agreement, and the remainder to be deposited into a trust for the benefit of the MMS in equal quarterly payments of approximately $1.2 million in cash, commencing March 31, 2009. The Company's deposit consisted of cash in the amount of approximately $1.3 million and a pledge of cash in the amount of approximately $16.7 million the Company is entitled to under its trust agreement signed at the time of the purchase of its East Bay property in 2000 to support the plugging and abandonment liability assumed by the Company in connection with that purchase. The Company is obligated to provide cash or additional security acceptable to the MMS in lieu of this pledge by February 27, 2009. The Company's agreement with the MMS provides that as the Company performs decommissioning work on the affected leases, the amount of the quarterly deposits required will be adjusted downward as assessed by the MMS, with reductions being applied to the last payments first.

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