F. SUPPLEMENTAL FINANCIAL INFORMATION ON OIL AND NATURAL GAS EXPLORATION, DEVELOPMENT AND PRODUCTION ACTIVITIES

Capitalized Costs

The following table presents information regarding USE's net costs incurred in the purchase of proved and unproved properties, and in exploration and development activities:

	(In thousands)
	Year Ended December 31,
	2011		2010
Oil & Gas properties
Unproved oil and gas properties	$	17,098	$	17,926
Wells in progress		2,909		3,694
Proved oil and gas properties		99,496		63,317
Total capitalized costs	$	119,503	$	84,937

USE's DD&A per equivalent BOE was $31.64 in 2011, $23.64 in 2010 and $21.72 in 2009.

Undeveloped properties as of December 31, 2011 include costs incurred in the following years:

	(In thousands)
	Acquisitions		Exploration		Exploration		Total

2010	$	8,131	$	--	$	--	$	8,131
2011		8,967		2,909		--		11,876
Total	$	17,098	$	2,909	$	--	$	20,007

Costs Incurred

Costs incurred in oil and natural gas property acquisition, exploration and development activities are summarized below:

	(In thousands)
	For the years ending December 31,
	2011		2010		2009
Property acquisition costs:
Proved	$	1,288	$	--	$	--
Unproved		10,679		14,237		560
Exploration costs		32,787		35,899		21,107
Development costs		4,550		4,846		--
Total capitalized costs	$	49,304	$	54,982	$	2,1667

Results of Operations

Results of operations from oil and natural gas producing activities are presented below:

	(In thousands)
	For the years ending December 31,
	2011			2010			2009
Oil and gas revenues	$	30,958		$	26,548		$	7,581
Realized (loss) from risk management activities		(1,974	)		(156	)		--
Unrealized gain (loss) from risk management activities		1,126			(1,725	)		--
		30,110			24,667			7,581
Operating expenses		11,552			6,073			1,085
Depreciation, depletion and amortization		13,997			10,610			3,571
Impairment		--			--			1,468
		25,549			16,683			6,124
Operating income	$	4,561		$	7,984		$	1,457

Oil and Natural Gas Reserves (Unaudited)

Proved reserves are estimated quantities of oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are reserves that can reasonably be expected to be recovered through existing wells with existing equipment and operating methods.

Proved oil and natural gas reserve quantities at December 31, 2011 and the related discounted future net cash flows before income taxes are based on the estimates prepared by Cawley, Gillespie & Associates, Inc., Ryder Scott Company, L.P and Netherland, Sewell & Associates, Inc. The reserve reports for the periods ended December 31, 2010 and 2009 were prepared by Cawley, Gillespie & Associates, Inc., Ryder Scott Company, L.P. Such estimates have been prepared in accordance with guidelines established by the Securities and Exchange Commission.

USE's net ownership interests in estimated quantities of proved oil and natural gas reserves and changes in net proved reserves, all of which are located in the continental United States, are summarized below:

December 31, 2011	Oil (BBLS)	Natural Gas or NGL (MCFE)
Beginning of year	1,546,446	2,450,968
Revisions of previous quantity estimates	4,913	(864,513)
Extensions, discoveries and improved recoveries	1,516,797	2,004,535
Purchase of reserves in place	48,615	49,065
Sales of reserves in place	(78,477)	(43,716)
Production	(300,325)	(852,211)
End of Year	2,737,969	2,744,128

Proved developed reserves at end of year	1,884,068	1,983,581

December 31, 2010	Oil (BBLS)	Natural Gas or NGL (MCFE)
Beginning of year	811,789	1,646,482
Revisions of previous quantity estimates	(55,450)	(234,852)
Extensions, discoveries and improved recoveries	1,093,540	1,911,867
Sales of reserves in place	--	--
Production	(303,433)	(872,529)
End of Year	1,546,446	2,450,968

Proved developed reserves at end of year	1,362,733	2,311,682

Standardized Measure (Unaudited)

The standardized measure of discounted future net cash flows relating to USE's ownership interests in proved oil and natural gas reserves as of year-end is shown below:

	(In thousands)
	Year Ended December 31,
	2011			2010			2009
Future cash inflows	$	259,533		$	124,629		$	51,024
Future costs:
Production		(77,813	)		(36,299	)		(14,025	)
Development		(42,972	)		(6,774	)		(104	)
Future income tax expense		(19,790	)		(11,622	)		(8,273	)
Future net cash flows		118,958			69,934			28,622
10% discount factor		(56,767	)		(25,281	)		(8,638	)
Standardized measure of discounted future net cash flows	$	62,191		$	44,653		$	19,984

Future cash flows are computed by applying average prices per barrel of oil and per MMbtu of natural gas at the first day of each month in the 12-month period prior to the end of the reporting period to year-end quantities of proved oil and natural gas reserves. Prices used in computing year end 2011, 2010 and 2009 future cash flows were $96.19/barrel, $79.43/barrel and $61.18/barrel, respectively, for oil and $4.12/MMbtu, $4.38/MMbtu and $3.87/MMbtu for natural gas, respectively, in each case adjusted for regional price differentials and other factors. Future operating expenses and development costs are computed primarily by USE's petroleum engineers by estimating the expenditures to be incurred in developing and producing USE's proved oil and natural gas reserves at the end of the year, based on year end costs and assuming continuation of existing economic conditions.

Future income taxes are based on year-end statutory rates, adjusted for the tax basis of oil and gas properties and available applicable tax assets. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair market value of USE's oil and natural gas properties. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.

Change in Standardized Measure (Unaudited)

Changes in standardized measure of future net cash flows relating to proved oil and natural gas reserves are summarized below:

	(In thousands)
	Year Ended December 31,
	2011			2010			2009
Balance at beginning of period	$	44,653		$	19,984		$	3,318
Sales of oil and gas, net of production costs		(19,406	)		(20,476	)		(6,496	)
Net change in prices and production costs		1,401			3,895			297
Extensions and discoveries		26,574			40,011			26,721
Purchase of reserves in place		3,082			--			--
Sale of reserves in place		(1,947	)		--			--
Revisions of previous quantity estimates		(3,158	)		(2,519	)		1,586
Development costs incurred during year		14,930			--			--
Previously estimated development costs incurred		(2,719	)		--			--
Net change in income taxes		(4,270	)		(2,138	)		(4,385	)
Accretion of discount		5,207			2,576			531
Changes in production rates, timing and other		(2,156	)		3,320			(1,588	)
Balance at end of period	$	62,191		$	44,653		$	19,984

Sales of oil and natural gas, net of oil and natural gas operating expenses, are based on historical pretax results. Extensions and discoveries and the changes due to revisions in standardized variables are reported on a pretax discounted basis.