shares, or        shares if the underwriters exercise their option to purchase additional shares of the Company’s common stock in full.

The Company estimates that the net proceeds from the offering will be approximately $75.4 million after deducting underwriting discounts and commissions and estimated offering expenses, or approximately $86.7 million if the underwriters’ option to purchase additional shares is exercised in full.

The Company intends to use the net proceeds from this offering to fund the consideration for the previously announced acquisition of approximately 10,746 net (12,901 gross) oil and gas leasehold acreage located in Eddy and Lea counties in New Mexico for approximately $75.2 million (the “Acquisition”) and to use the remaining proceeds for working capital and general corporate purposes. Prior to these uses, however, the Company may use some or all of the net proceeds from this offering to repay borrowings under its revolving credit facility. The Company may at any time reborrow amounts repaid under its revolving credit facility subject to the covenants thereunder limiting its ability to incur secured indebtedness.

On May 20, 2015, the Company’s stockholders approved a 1-for-20 reverse stock split of the issued and outstanding shares of common stock, which resulted in the number of shares of common stock being reduced from 110,814,458 shares to approximately 5,540,722 shares of common stock.

The number of shares of the Company’s outstanding common stock excludes approximately 433,836 shares that may be issued pursuant to outstanding stock options, warrants and restricted stock units, approximately 863,247 shares that may be issued upon the conversion of our 2.00% Convertible Senior Notes due 2019 (the “Convertible Notes”) and approximately 557,079 shares available for issuance under the Company’s 2011 Equity Incentive Plan, as amended.

No later than May 26, 2015, the Company intends, subject to definitive documentation and NYSE MKT approval, to enter into privately negotiated exchange agreements with four separate holders (the “Noteholders”) of the Convertible Notes to exchange upon completion of the offering (the “Exchange Transactions”) approximately $32.0 million in aggregate principal amount of the Convertible Notes (plus accrued and unpaid interest to the exchange date) for (a) approximately $8.0 million in shares of the Company's common stock to be issued at the issue price of the offering and (b) approximately $24.0 million in shares of Series C Convertible Preferred Stock (“Preferred Stock”), provided that the shares of common stock issued in the Exchange Transactions do not exceed 19.9% of the Company’s issued and outstanding common stock upon the completion of the offering.

Upon closing of the offering, the Noteholders will exchange their Convertible Notes for a number of shares of the Company’s common stock, which shall not exceed 19.9% of the Company’s issued and outstanding common stock, or approximately               million shares of common stock and approximately              million shares of Preferred Stock, based upon the price to the public of the common stock in the offering.

Upon completion of the offering, the Company intends to designate approximately          shares as “Series C Convertible Preferred Stock,” which will have a par value of $0.001 per share and a liquidation preference equal to the issue price per share of the common stock in the offering. Each share of Preferred Stock will be convertible into one share of common stock at a conversion price equal to the issue price per share of common stock in this offering for a period of 180 days following the approval of the issuance of the underlying shares of common stock by the stockholders of the Company, and all shares of Preferred Stock that are not converted within the 180-day period will be cancelled by the Company. Assuming an offering price of $6.79 per share, which was the last reported sales price of our common stock on the NYSE MKT on May 22, 2015, the Company will issue approximately 1,178,203 shares of common stock and shares of Preferred Stock convertible into approximately 3,534,609 shares of common stock pursuant to the Exchange Transactions.

If the stockholders of the Company do not approve the issuance of the underlying common stock upon conversion of the Preferred Stock on or before September 1, 2015, (a) the holders of the Preferred Stock will be entitled to receive quarterly cash dividends when declared by the Company’s board of directors at a rate of 15% per annum from the date of issue and (b) the Company will have the right to redeem the Preferred Stock at the liquidation preference of the Preferred Stock beginning on January 1, 2017. If any Preferred Stock remains outstanding on or after the date that is five years from the date of issuance of the Preferred Stock, the holders of the Preferred Stock will have the right to redeem the outstanding shares of Preferred Stock at the liquidation preference at any time thereafter. The holders of the Preferred Stock will not have any voting rights other than as required by law, except that the approval of the holders of at least 50% of the Preferred Stock, voting as a separate class, will be required with respect to certain matters, including (i) the authorization, creation or increase of authorized amount of any class or series of senior equity securities or (ii) amendments to the Certificate of Incorporation of the Company that adversely affect the rights, preferences, privileges or voting powers of the Preferred Stock.

As a result of the consummation of the Exchange Transactions, the total indebtedness of the Company will be reduced by approximately $32.0 million and annual interest payments will be reduced by approximately $0.6 million. The Exchange Transactions reflect the continued focus of the Company on reducing the amount outstanding of its Convertible Notes and it intends to execute further such exchanges in the future. Following the Exchange Transactions, approximately $119.5 million aggregate principal amount of the Convertible Notes will remain outstanding.

No later than May 26, 2015, the Company intends, subject to definitive documentation and NYSE MKT approval, to enter into a privately negotiated agreement with four of the holders of its Convertible Notes, pursuant to which the Company intends to grant the option to each holder to exchange up to $49.2 million aggregate principal amount of Convertible Notes for either (a) shares of the Company’s common stock to be issued at the issue price of the offering or (b) a newly issued note that will (i) bear interest at a rate of 2.00% per annum, (ii) be convertible into shares of common stock at a price equal to the issue price of the offering, and (iii) mature no earlier than five years from the date of the exchange, provided that the holder will not be permitted to exchange all or any portion of its Convertible Notes to the extent that, after exchanging such Convertible Notes, (A) the holder would beneficially own more than 9.9% of the issued and outstanding common stock of the Company following such exchange or (B) the Company would issue more than 19.9% of its outstanding common stock at the time of such exchange without first obtaining the approval of the stockholders of the Company.

In the event that the Company is unable to obtain approval to issue shares of common stock or convertible notes upon the exercise of the option on or before January 1, 2016, the option holder will have the right to receive, in lieu of receipt such shares of common stock or notes, an amount in cash equal to the dollar amount of such security, as determined by multiplying (i) the number of shares of common stock to be issued, on an as converted basis otherwise deliverable to the option holder by (ii) the closing price of the common stock on the trading day immediately prior to the date of delivery of a notice to exercise the option. Such cash amount will be due and payable within two business days of the notice from the option holder.

March 31, 2015

Actual

As Adjusted