Working Capital

Cash and cash equivalents at June 30, 2010 were $10,156,000, a decrease of $1,648,000 from $11,804,000 at December 31, 2009. Working capital at June 30, 2010 decreased to $14,125,000 from $18,176,000 at December 31, 2009.

The decrease in cash and cash equivalents of $1,648,000 was attributable to cash used in operating activities and investing activities (primarily for capital expenditures, including payment of prior year‟s accounts payable incurred for petroleum and natural gas properties) of $4,178,000 and $3,087,000, respectively, offset by cash provided by financing activities (primarily from the Falcon Australia private placement and the release of restricted cash) and the effect of exchange rates on cash of $5,579,000 and $38,000, respectively.