The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. This report contains a number of forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, future results and events and financial performance. All statements made in this report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, including statements related to future reserves, projections, cash flows, revenues, profitability, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words "believe," "expect," "intend," " anticipate," "estimate," "may," "will," variations of such words and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking. Forward-looking statements are subject to certain risks, uncertainties and assumptions, including those discussed below and elsewhere in this report under " Risk Factors" and apply only as of the date of this report. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed elsewhere in this report, and the risks discussed in our press releases and other communications to shareholders issued by us from time to time, which attempt to advise interested parties of the risks and factors that may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

General Overview

On September 2, 2008, we completed the Voyager Acquisition, whereby Voyager was designated as our predecessor and we succeeded to substantially all of its business operations and properties, including the Duval County Properties, consisting of ownership interests in oil and natural gas lease blocks in Duval County, Texas (the "Duval County Properties") covering approximately 14,300 net acres. Since completing the Voyager Acquisition, we are engaged in the exploration, production, development and exploitation of the crude oil and natural gas reserves located in the Duval County Properties. We believe that these properties and other assets acquired in the Voyager Acquisition will provide us a number of opportunities to realize increased production and revenues. We also believe that the reserve base located in the Duval County Properties can be further developed through infill and step-out drilling of new wells, workovers targeting proved reserves and stimulating existing wells. As such, we plan to investigate and evaluate various formations therein to potentially recover additional incremental oil and natural gas reserves and to create new drilling programs to exploit the full reserve potential of the reservoirs located therein.

To date, we have performed recompletions and/or remedial workovers on seven of the wells acquired in the Voyager Acquisition. Three of the wells acquired were not producing on the date of acquisition and two of these wells have been successfully recompleted to new formations and returned to a productive status. Attempts to return the third well to a productive status were unsuccessful and we will now convert this well to a salt water disposal well with the goal of reducing our salt water disposal costs, a significant component of our lease operating expenses, by approximately $40,000 per month. Of the remaining four wells, one of the recompletion attempts was unsuccessful and three were successful. Since the date of the acquisition, we have incurred approximately $882,000 in capital expenditures on this program.

We have a 180 day drilling clause on one of our major leases with the initial well to begin drilling operations by March 31, 2009, or at our option, renew the lease by paying a significant amount for a lease renewal. Based upon our acquired 3-D seismic database, we identified a shallow, 3,000 foot prospect with potential for 0.5 Bcf of natural gas reserves. On March 26, 2009, we began drilling operations and on March 31, 2009, ran electric logs on the well and determined the target reserves had been pressure depleted. We elected to plug and abandon the well on April 1, 2009. By drilling this well, we successfully extended the large lease by 180 days. We incurred approximately $180,000 in drilling costs on this well. We believe there are additional shallow well opportunities on the acquired acreage and, with the assistance of our consulting geoscientist, are continuing to analyze the sub-surface structure. Our next drilling operations on this lease must begin within 180 days of the plugging and abandonment date, or September 29, 2009.

We intend to utilize 3-D seismic analysis from our acquired seismic database and other modern technologies and production techniques to enhance our production and returns, and, although seismic indications of hydrocarbon saturation are generally not reliable indicators of productive reservoir rock and other modern technologies such as well logs are not always reliable indicators of hydrocarbon productivity, we believe use of such technologies and production techniques in exploring for, developing and exploiting oil and natural gas properties will help us reduce drilling risks, lower finding costs and provide for more efficient production of oil and natural gas from our properties. This proprietary 3-D seismic data has been reprocessed by us and has improved the subsurface imaging over our acreage position.

We also intend to continue to review opportunities to acquire additional producing properties, leasehold acreage and drilling prospects that are located in and around the Duval County Properties, or which might result in the establishment of new drilling areas. When identifying acquisition candidates, we focus primarily on underdeveloped assets with significant growth potential. We seek acquisitions which allow us to absorb, enhance and exploit properties without taking on significant geologic, exploration or integration risk.

The implementation of our foregoing strategy will require that we make significant capital expenditures in order to replace current production and find and develop new oil and gas reserves. In order to finance our capital program, we will depend on cash flow from anticipated operations, cash or cash equivalents on hand, or committed credit facilities, as discussed below in "Liquidity and Capital Resources."

On May 5, 2009, as part of a semi-annual redetermination of the borrowing base under the Credit Facility, our senior lender notified us that our borrowing base was being reduced to $1 million, causing our outstanding loans under the Revolving Loan to exceed the new borrowing base by $10.5 million.

If we are unable to raise additional capital from conventional sources, including lines of credit and sales of stock in the future, we may be forced to curtail or cease our business operations. We may also be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. We cannot assure you, however, that financing will be available in amounts or on terms acceptable to us, or at all. This is particularly a concern in light of the current illiquidity in the credit markets, as well as the current suppressed oil and natural gas pricing levels. Even if we are able to continue our operations, the failure to obtain sufficient financing could have a substantial adverse effect on our business prospects and financial results.

Our forecasted operating needs and funding requirements, as well as our projected ability to obtain adequate financial resources, involve risks and uncertainties, and actual results could vary as a result of a number of factors.

Our business and prospects must also be considered in light of the risks and uncertainties frequently encountered by companies in the oil and gas industry. The successful development of oil and natural gas fields is highly uncertain and we cannot reasonably estimate or know the nature, timing and estimated expenses of the efforts necessary to complete the development of, or the period in which material net cash inflows are expected to commence from, any oil and natural gas production from our existing fields or other fields, if any, acquired in the future. Risks and uncertainties associated with oil and natural gas production include:

· reservoir performance and natural field decline;

· changes in operating conditions and costs, including costs of third party equipment or services such as drilling rigs and shipping;

· the occurrence of unforeseen technical difficulties, including technical problems that may delay start-up or interrupt production;

· the outcome of negotiations with co-venturers, governments, suppliers, or other third party operators;

· our ability to manage expenses successfully;

· regulatory developments, such as deregulation of certain energy markets or restrictions on exploration and production under laws and regulations related to environmental or energy security matters; and

· volatility in crude oil and natural gas prices, actions taken by the Organization of Petroleum Exporting Countries to increase or decrease production and demand for oil and gas affected by general economic growth rates and conditions, supply disruptions, new supply sources and the competitiveness of alternative hydrocarbon or other energy sources.

Revenue and Expense Drivers

Revenue Drivers

Crude Oil and Natural Gas Sales. Our revenues are generated from production of crude oil and natural gas which are substantially dependent upon prevailing prices. Our future production is impacted by our drilling and workover success, acquisitions and decline curves on our existing production. Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of or demand for oil and natural gas, market uncertainty and a variety of additional factors beyond our control. We enter into derivative instruments for a portion of our oil and natural gas production to achieve a more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of oil and natural gas.

We sell all of our oil and natural gas at current market prices determined at the wellhead. We are required to pay gathering, compression and transportation costs with respect to substantially all of our products or incur such costs to deliver our products to a sales point. We market our products in several different ways depending upon a number of factors, including the availability of purchasers for the product at the wellhead, the availability and cost of pipelines near the well, market prices, pipeline constraints and operational flexibility.

Operating Expenses

Our operating expenses primarily involve the expense of operating and maintaining our wells.

· Lease Operating. Our lease operating expenses include repair and maintenance costs, contract labor and supervision, salt water disposal costs, expense workover costs, compression, electrical power and fuel costs and other expenses necessary to maintain our operations. Our lease operating expenses are driven in part by the type of commodity produced and the level of maintenance activity. Ad valorem taxes represent property taxes on our properties.

· Production Taxes. Production taxes represent the taxes paid on produced oil and gas on a percentage of market (our price received from the purchaser) or at fixed rates established by federal, state or local taxing authorities.

· Exploration Expense. We use the successful efforts method of accounting for our oil and natural gas operations. As such, exploration costs and dry hole costs are recognized as expenses when incurred. These costs include the costs of acquiring seismic data and the interpretation of the data, delay rental payments incurred in extending leased acreage and other exploration costs.

· General and Administrative Expenses. General and administrative expenses include employee compensation and benefits, non-cash compensation expense of restricted stock awards and stock options, professional fees for legal, accounting and advisory services and corporate overhead.

· Depreciation, Depletion and Amortization. Depreciation, depletion and amortization represent the expensing of the capitalized cost of our oil and gas properties using the unit of production method and our other property and equipment using the straight-line method.

Other Income and Expenses

Other income and expenses consist of the following:

· Interest Income. We generate interest income from our cash deposits.

· Interest Expense. Our interest expense reflects our borrowings under our CIT Credit Facility, other short-term notes and amortization of debt discounts and deferred financing costs.

· Risk Management. The results of operations and operating cash flows are impacted by changes in market prices for oil and natural gas. To mitigate a portion of this exposure, we have entered into certain derivative instruments which have not been elected to be designated as cash flow hedges for financial reporting purposes. Generally, our derivative instruments are comprised of fixed price swaps as defined in the instruments. These instruments are recorded at fair value and changes in fair value, including settlements, have been reported as risk management in the consolidated statements of operations.

· Change in Fair Value of Derivatives. We mark-to-market our derivative liabilities each reporting period and record the change in the derivative liability to change in fair value of derivatives in the consolidated statements of operations.

Oil and Natural Gas Properties - Impairment

We test for impairment of our properties based on estimates of proved reserves. Proved oil and natural gas properties are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. We estimate the future undiscounted cash flows of the affected properties to judge the recoverability of the carrying amounts. This analysis is based on proved reserves. An asset would be impaired if the undiscounted cash flows were less than its carrying value. Impairments are measured by the amount by which the carrying value exceeds its fair value.

Impairment analysis is performed on an ongoing basis. In addition to using estimates of oil and natural gas reserve volumes in conducting impairment analysis, it is also necessary to estimate future oil and natural gas prices and costs, considering all available evidence at the date of review. The impairment evaluation triggers include a significant long-term decrease in current and projected prices or reserve volumes, an accumulation of project costs significantly in excess of the amount originally expected and historical and current negative operating losses. Although we evaluate future oil and natural gas prices as part of the impairment analysis, we do not view short-term decreases in prices, even if significant, as impairment triggering events.

Basis of Presentation

For management discussion and analysis purposes, the operational data for the year ended December 31, 2008 represents the mathematical addition of the results of Voyager, as predecessor, for the period January 1, 2008 through September 1, 2008 and for us, as successor, for the period September 2, 2008 through December 31, 2008, referred to as the "Combined Entity". Although this approach is not consistent with generally accepted accounting principles, we believe it is the most meaningful way to review the operational data for the year ended December 31, 2008 compared to the year ended December 31, 2007. A discussion of the partial period January 1, 2008 through September 1, 2008, separately from the period September 2, 2008 compared to the year ended December 31, 2007 would not be meaningful.

Operational Data

  Operational data follow for the years ended December 31, 2008 and 2007 follow:



                                               Years Ended December 31,
                                                 2008             2007

Oil and natural gas revenue                  $ 12,703,787     $ 11,348,577
Operating costs and expenses:
  Lease operating expenses                      2,629,448        2,464,653
  Production taxes                                804,414          836,349
  Exploration expense                              20,652            9,399
  Accretion of asset retirement obligation         61,174               --
  Depletion, depreciation and amortization      2,704,993        1,758,320
  General and administrative expense            2,030,556          970,701
    Total operating costs and expenses          8,251,237        6,039,422
Income from operations                          4,452,550        5,309,155
Other income (expense):
  Interest expense, net                        (2,531,020 )       (979,832 )
  Risk management                               2,203,749         (609,225 )
  Loss on extinguishment of debt                 (547,045 )             --
  Gain on sale of oil and gas properties               --       12,702,811
  Change in fair value of derivatives          18,235,468               --
    Total other income (expense)               17,361,152       11,113,754
Income before income taxes                     21,813,702       16,422,909
Income taxes                                      577,194        5,843,533
Net income                                   $ 21,236,508     $ 10,579,376

Years Ended December 31, 2008 and 2007

The following table represents sales of oil and natural gas and realized prices
for the years ended December 31, 2008 and 2007:

                                   Years Ended December 31,
                                     2008             2007
Net sales:
  Oil (Bbls)                           58,214           45,960
  Natural gas (Mcf)                   696,443        1,067,960

Weighted average sales prices:
  Oil ($ per Bbl)                $     100.24      $     88.26
  Natural gas ($ per Mcf)        $       9.86      $      6.83

Revenue. Revenue for the Combined Entity for the year ended December 31, 2008 was $12,703,787 compared to the Predecessor Entity revenue of $11,348,577 for the year ended December 31, 2007. This was an increase of $1,355,210, or 12%, over the 2007 period. Net production of crude oil for the 2008 period increased to 58,214 barrels (159 BOPD) compared to 45,960 (126 BOPD) for the 2007 period. During 2007, the Predecessor Entity added additional perforations to an oil zone in its Marchbanks-Cadena Well No. 115. A significant increase in production occurred and as a result, the well produced approximately 27,000 more net barrels of crude oil in 2008 when compared to 2007. The Marchbanks-Cadena Well No. 131 was drilled during the 2007 period and added net oil production of 3,552 barrels to the 2008 period. The Combined Entity experienced a decline of net production of approximately 18,000 barrels during 2008 when compared to 2007 as a result of normal production decline. Based upon our third party engineering report prepared as of December 31, 2008, we are projecting net crude oil production from our proved producing Duval County Properties for fiscal year 2009 of approximately 28,260 barrels.

The Combined Entity realized an average price for the sale of our crude oil during the 2008 period of $100.24 per barrel compared to $88.26 per barrel during the 2007 period. We have experienced a significant decrease in realized prices for the sale of our crude oil during 2009 and do not believe that the price of crude oil will return to its previous 2008 levels in the near future. Our third party engineering report was prepared using a crude oil price of $42.41 per barrel, adjusted for transportation differentials of $1.25 per barrel, on December 31, 2008.

Net production of natural gas for the 2008 period was 696,443 Mcf's (1,908 Mcf/d) compared to 1,067,960 Mcf's (2,926 Mcf/d) for the 2007 period. During 2007, our Predecessor Entity drilled the Marchbanks-Cadena Well No. 131 which added approximately 60,000 net Mcf's to our production during the 2008 period. In addition, additional perforations were added to the Hilda Parr Well No. 102 during the 2007 period which production remained the same when compared to the 2007 period. The producing zones of two wells depleted during the 2008 period. We were unable to recomplete these wells to producing zones which accounted for approximately 113,000 Mcf's of the decline in net production. The balance of the decrease of approximately 318,000 net Mcf's was due to normal production declines in the remaining producing wells. Based upon our third party engineering report prepared as of December 31, 2008, we are projecting net natural gas production from our proved producing Duval County Properties for fiscal year 2009 of approximately 398,570 Mcf's.

The Combined Entity realized an average price for the sale of our natural gas during the 2008 period of $9.86 per Mcf compared to $6.83 per Mcf during the 2007 period. As with the price of crude oil, we have experienced a significant decrease in realized prices for the sale of our natural gas during 2009 and do not believe that the price of natural gas will return to its previous 2008 levels in the near future. Our third party engineering report was prepared using a natural gas price of $6.01 per Mcf, adjusted for contract terms and Btu content, on December 31, 2008.

Lease Operating Expenses. Lease operating expenses are primarily comprised of well and lease surface and sub-surface maintenance and repair, contract labor and supervision, salt water disposal costs, natural gas compression, ad valorem taxes and other expenses necessary to maintain our operations. Lease operating expenses for the Combined Entity for the year ended December 31, 2008, were $2,629,448 compared to $2,464,653 for the year ended December 31, 2007. A significant portion of lease operating expenses for both the 2008 and 2007 periods were attributable to well workover expenses. During the year ended December 31, 2008, the Predecessor Entity incurred approximately $1,508,000 in well workover expenses. Three wells received remedial subsurface workovers in an attempt to increase production by adding perforations and fracing. All three of these workovers were deemed unsuccessful. During the 2007 period the Predecessor Entity performed well workovers on six wells and incurred workover expenses of approximately $1,628,000. The workovers primarily included adding additional perforations to existing productive zones and performing fracing operations within existing zones. Of these six workovers, three were performed successfully.

We lease four compressors to compress our natural gas and deliver to our purchaser. Natural gas compression fees are a significant component of our lease operating expenses and amounted to approximately $330,000 and $372,000 for each the years ended 2008 and 2007, respectively. We have negotiated a reduction in the rental rates for three of the four rental compressors and expect to realize a monthly savings of approximately $10,000 beginning in April 2009. Another significant component of lease operating expenses is the cost of hauling produced salt water to an offsite facility for disposal. Those costs were approximately $507,000 and $205,000 for the years ended December 31, 2008 and 2007, respectively. The increase for the 2008 period resulted from increased salt water production associated with the increased oil production from the Marchbanks-Cadena Well No. 115. We have identified a non-productive wellbore which, during fiscal 2009, we will convert to a salt water disposal well to significantly reduce our salt water disposal fees. We have filed our application for conversion of this well with the Railroad Commission of Texas and received approval on April 23, 2009. We estimate the capital cost to convert this wellbore to a salt water disposal well to be approximately $150,000.

Ad valorem taxes associated with the Duval County Properties increased from approximately $162,000 for the 2007 period to approximately $209,000 for the 2008 period. The increase was a result of increased reserve values associated with the significant increase in product prices. We believe we can reduce our ad valorem taxes for fiscal 2009 as a result of a reduction in proved producing reserves and lower product prices and are working with our ad valorem tax consultants to file the necessary renditions with the Duval County tax assessor to reduce the valuations.

Other costs of operating our Duval County Properties are the costs of daily well gauging, lease surface maintenance, chemicals and supplies. These costs for the 2008 period approximated $122,000 compared to $97,653 for the 2007 period.

Production Taxes. Production taxes are comprised of the amounts we are obligated to pay to various regulatory agencies, which taxes are based on the value we receive from the sale of our oil and natural gas. Production taxes for the Combined Entity for the year ended December 31, 2008 were $804,414 compared to $836,349 for the year ended December 31, 2007. All of our revenue is attributable to the State of Texas. Severance taxes in the State of Texas are based upon the value of crude oil sold and natural gas produced and sold. Crude oil is taxed at the rate of 4.6% of the value sold and natural gas is taxed at the rate of 7.5% of the value of the natural gas produced. The difference in the tax rates on crude oil and natural gas resulted in a decrease in production taxes for the 2008 period, even though revenue for the 2008 period was greater than the 2007 period..

Exploration Expense. Exploration expense is comprised of costs of finding and exploring for oil and natural gas and the cost of exploratory wells which do not find oil and natural gas reserves in commercial quantities. The Combined Entity reported exploration expenses of $20,652 for the year ended December 31, 2008 compared to $9,399 for the 2007 period. The 2008 period expenses were attributable to fees paid to our consulting geoscientist who is performing geophysical interpretations of our acquired 3-D seismic database. We anticipate our exploration expenses will increase in the future as we continue to analyze our 3-D seismic database for additional drilling opportunities.

Accretion of Asset Retirement Obligation. We have recorded the fair value of the asset retirement obligation relating to dismantlement and plugging and abandonment costs, excluding salvage values, of the Voyager Acquisition. Over time, accretion of this liability is recognized each period, and the capitalized cost is amortized over the useful life of the related assets. For the year ended December 31, 2008 the Combined Entity recorded accretion expense of $61,174. Our Predecessor Entity established its asset retirement obligation as of December 31, 2007, and consequently did not record accretion of its asset retirement . . .