Good morning. My name is Heather and I will be yourconference operator today. At this time, I would like to welcome everyone toSt. Mary Land and Exploration's Third Quarter 2007 Earnings Conference Call. All lines have been placed on mute to prevent any backgroundnoise. After the speaker's remarks, there will be a question and answer session(Operator Instructions). Thank you. Mr. Collins, you may begin your conference.

Thank you, Heather. Good morning to all of you joining us byphone and on line for St. Mary Land and Exploration Company's third quarter2007 earnings conference call. Before we start, I would like to advise you thatwe will making forward-looking statements during this call about our plans, expectationsand assumptions regarding our future performance. These statements involve risks, which may cause our actualresults to differ materially from the results expressed or implied in ourforward-looking statements. For a discussion of these please refer toinformation about forward looking statements in our earnings press release andthe risk factors section of our 2006 form 10-K and subsequent 10-Q filed withthe SEC. We'll also discuss non-GAAP financial measures that webelieve are useful in evaluating our performance. A reconciliation of thosemeasures to the most directly comparable GAAP measures and other informationabout these non-GAAP measures are included in our earnings press release fromlast night. Lastly, we may use the terms probable, possible and keep youreserves in this call. Probable reserves are untrue of preserves, which aremore likely than not to be recoverable. Possible reserves are less likely to berecoverable than probable reserves. Estimates of probable and possible reserves, which maypotentially be recoverable through additional drilling or recovery techniquesprovide our nature more uncertain than estimates of crude reserves andaccordingly are subject to substantially greater risk of not actually beingrealized by the company. The company officials on the call this morning are TonyBest, President and Chief Executive Officer; Jay Ottoson, Executive VP andChief Operating Officer; Dave Honeyfield, Senior VP and Chief FinancialOfficer, Jerold Hertzler, Vice President of Business Development, DennisZubietta, Manager of Reservoir Engineering; and Brent Collins, Director ofInvestor Relations. I'll now turn the call over to Tony.

Good morning and thank you for joining us for our thirdquarter 2007 earnings conference call. After a few opening remarks, I'll turnthe call over to Dave Honeyfield, our CFO for a view of our financial results.Jay Ottoson, our COO, will then provide an update of our operations. AfterJay's discussion, we'll turn the call over for questions. The third quarter was another successful quarter for St.Mary. It marked the seventh consecutive quarter that we have grown productionand we set a new quarterly production record with over 298 million cubic feetequivalent per day. The performance of our regional drilling programs as well asintegrating and building upon our recent acquisitions are responsible for thisincrease in production. As a result, in our third quarter operations update, weincreased our full year 2007, production guidance range to 106 to 107 Bcfequivalent. Our 40% production waiting to crude oil allowed us tobenefit from the run up in crude oil prices during the quarter and our hedgingprogram protected us from some of the softening gas prices that also occurredin the third quarter. During the quarter, we announce the $153 million acquisitionof oil and gas properties at the Gold River Field in South Texas, which targetsthe Olmos gas formation. This transaction closed on October 4, 2007 as planned.These properties are adjacent to the Olmos properties the Catarine Field thatwe closed on in June of this year. Our Gulf Coast team in Houston is now busy integrating thesetwo acquisitions and we are very pleased to have another multi year, highlyrepeatable drilling program in our portfolio. The model of entering the play on the small scale and thenexpanding our presence as we improve our understanding is one that we havesuccessfully used twice during the past year in the Wolfberry as well as in theOlmos. It is a model that we intend to replicate going forward. In the third quarter, we also announced our planneddivestiture of non-core oil and gas assets, the majority of which are locatedin Mid Continent and Rocky Mountain regions. We expect bid by the middle ofNovember and plan to close the transaction by year-end. This planned divestiture will allow us to rationalize ourportfolio and will allow our people to focus their time and efforts on projectsthat will provide the most growth potential for St. Mary. The proceeds from the sale of these properties will alsobenefit our cash flow and allow us to pay down bank borrowings. I will now turn the call over to Dave for review of ourquarterly financial results.

Thank you, Tony. As presented in our press release lastnight, St. Mary reported quarterly net income for the third quarter of 2007 of$57.7 million or $0.89 per diluted share. This compares to $55.9 million or$0.88 per diluted share for the same period last year. Adjusting for non-cash and nonrecurring items, our adjustednet income for the third quarter of 2007 was $57.8 million or $0.89 per dilutedshare compared to $53 million or $0.83 per diluted share for the third quarterin 2006. Discretionary cash flow for the third quarter was $162.3million, that's up 16% from the $140.5 million in the comparable period lastyear. On the financial highlights release with yesterday's press releaseprovide additional detail on our financial results. Additionally, our form 10-Qwill be filed later in the day today. I'll now touch on a couple of significant items for thequarter. First, revenues for the quarter were $246.7 million, an increase of25% from the $198 million in the prior year's quarter. The increase is due to a 19% increase in equivalentproduction volumes between periods combined with strong realized prices.Revenue from realized oil and gas hedges was $10.2 million during the quarter,up from $4.8 million for the same period last year. The current periods realize hedge gains were due tofavorable natural gas derivative settlements offsetting realized losses on ouroil derivative contracts. Our net realized equivalent price for the quarter was $8.69per MMCFE/d, which was up 4% from the $8.33 per MMCFE/d we realized in the thirdquarter of 2006. Including the effects of hedging, the realized gas price wasdown 2% from the same period a year ago to $7.03 while our realized oil priceincreased 10% to $67.56 per barrel. One note regarding our gas price realization for hedging,several of our regions produced higher BTU gas that scripted with MGLs. Thepercentage of our gas production that…

Thank you, Dave. In our October 15th press release, we provideda detailed overview of our activity in each of our regional areas. I'll referto listeners on this call to that press release for specific regional operatingstatistics and focus my remarks on our highlight plays in each region. Starting in the Arklatex, we continue to see excellentresults in the operator James Lime play. We have two solid wells in SpiderField, the Weyerhaeuser 11-2 and Weyerhaeuser 12-2, both of which are 100%working interest wells. Wells had initial 10-day sales rate averages of $3million a day and $3.2 million a day respectively. These wells continued a successful development of ourestablished production basin and the James Lime trend. In our last earningscall, we discussed two successful operated wells, which expand the play alongthe 75 miles long trend from Northern Louisiana into Eastern Texas. These wells, the Middlebrook 1-H and the George Smith 1 aremeeting the company's expectations and we're currently drilling more wells inthese extension areas. The James Lime is clearly an area we are all excitedabout and we're working to expand our acreage in the area. In the two Cotton Valley programs operated by others, we'repleased with pace and results of development. In Elm Grove, there are threenon-operated rigs operating on acreage in which we have an interest. Ouroperating partners continue to examine 20-acre increased density drilling andare examining whether horizontal development may be applicable in the field. At Terryville, two rigs are operating on acreage where thecompany has an interest. Recent drilling results have been consistent with ourexpectations. In the Mid-Continent, St. Mary continues to make strides in ourhorizontal Woodford program and the Arkoma Basin. Our recent wells drilled and completed utilizing a largerpipe size and high volume crack simulation for Duncan Shores 1-1 in which wehave an 81% working interest, the…

Thank you, Jay. I'm pleased with our operating and financialresults for the third quarter and I'm excited to see the progress we're makingto improve and expand our drilling inventory. We continue to see encouragingresults in a number of our key resource plays, such as the James Lime, theWoodford shale, and the Wolfberry. Our recent South Texas Olmos acquisitionswere done at attractive financial metrics and give us several years of drillinginventory. While our company continues to grow, both organically andthrough acquisitions, we intend to maintain our financial and operatingdiscipline as well as our commitment to NAV per share growth. We'll now turnthe call over for questions.

(Operator instructions) Your first question comes from EllenHannan with Bear Stearns.

Good morning.

Good morning, Ellen.

Just the few questions for you here. First, on the pricerealizations on your oil volumes. Your guidance for the third quarter was arealization $3 to $4 a barrel of WTI and you came in actually pretty close toWTI, yet you're looking for an even wider basis differential in the firstquarter. Maybe you can talk about that a little bit.

Ellen, this is Dave. I think we might actually want todouble-check the realizations on the oil. Let me pull that up real quick here.For the third quarter before hedging, we were at $71.68, net of hedging it was$67.56 and we had the NYMEX prices at about $75.38.

Okay. I have the NYMEX price as $71.08 so that must be thedifference.

Okay.

The drilling complete cost on your Woodford wellsyear-to-date. Can you tell us what that's running?

The last couple we drilled, this is Jay and we drilled inthe low fives. I think the potential, the last one we drilled was in the mid tohigh fours and we think the potential is probably mid-fours. Duncan Shores Ithink was 5.2 in that range.

And over to the James Lime program that you talked about.And then, in your mid-quarter operating update, you mentioned a couple ofwells. One was the first 10 days result of the 800 a day. Is that not on thelow end of what you would expect a James Lime well to be producing?

I think if you look at these wells, they come in prettystrong and then they'll decline to around a million a day and they'll staypretty flat right in there. So you get a lot of decline initially. That's whywe always quote 10-day rates or 30-day rates for these wells and don't give youthe first hour of production. It tends to a hike the wells to much. If you're thinking about a million a day flat for a while onthese wells, it's probably reasonable. Reserve-wise, we haven't really changedour view on the reserves on the wells even though the initial rates haveincreased.

What are you currently looking for an EUR on the well; on atypical James Lime well?

I think it's about 2B.

A for cost of…

One and a half to two is what we said in all our publicinformation.

And for cost of what?

They're about $3 million.

Just a point of clarification. In the operations update thatyou're referencing those were not the initial 10-day IP rates. Those were kindof current sales rates. Those were completed in August. So what we're trying todo is give you an update in terms of how the wells we're preparing after theinitial IP rate, which is within our expectations. Those were not IPs for thoseJames Lime wells.

Those wells IP'd, said one of them might be over 4 million aday. I think the expectation is you're going to get a very hyperbolicperformance and they're going to level out around that million a day number.Those are pretty reasonable numbers.

I actually got the figures here. George Smith, it's a 10-daysales rate, 3.6, and that upper up was 4.5. So we were just trying to give anindication of what the well is performing at.

Thanks. I’ll cover another question. On your Sweetie Peckwhere you talked about transitioning the drilling program in house. Can youtalk about what you mean by that and what you hope to accomplish there?

Well, when we started the program up, we didn't have adrilling staff in Midland and we basically have been using contract staff forengineering drilling management. In general, just the entire operation has beencontracted. We noted in a report, we had the couple rigs we decided tolay down this quarter. We were having a number of operational issues with acouple of the rigs. I think, it was a combination of some crewing issues. Thecrew issues out in the Permian Basin were really tough. We weren't happy with the crews we had on the rigs. Weweren't particularly happy with the supervision either. It wasn't that thesupervision was necessarily bad; it was just that we feel like we need a higherlevel of attention to some of the details of the operation. We've been out for a while looking for drilling and internaldrilling and engineering support for there and drilling supervision anyway. Wedecided to go ahead and lay those two rigs down and get our internal resourceson board and then as we go forward we'll be picking up some additional rigs andresorting our rig fleet there to try to get a better performance and I think weare going to focus more internal attention just on the daily operations on therig. We don't want to impugn anybody. We're doing the best wecould with the people we had. Frankly, we just weren't satisfied that thatperformance was adequate. We're going to meet our rate expectations at SweetiePeck anyway. Anyway, we're going to be, actually, our wells are performing ator above where we expected to be and we're able to pick up some activity in ournon-operated properties there that we hadn't planned on. So, on a net basis we're going to end up better off than weexpected to be this year. Obviously, it's a little disappointing. We were at abuy rig program and we were excited about that, but we started to have somesafety issues. We were starting to have some real performance issues with acouple of these and just decided the right answer from a net asset valueperspective was to lay them down.

Ellen, what was, this is Tony. One of the things that wasvery telling to me was the drilling contractor actually stated he thanked usfor laying down the two rigs because he was having a very difficult timefinding qualified crews to man his rigs. So it's not very often you hear adrilling contractor thanking you for laying down rigs, but they are reallystretched in that particular region.

Okay. Thanks. One final question for me and I think youaddressed it briefly. In terms of the outlook for your CapEx for ‘08, I think,Tony, you mentioned within cash flows. When do you plan to set that budget fornext year?

We actually are in the process of working our plans andbudget for next year. We expect to have that completed and up for boardapproval by year-end and would expect to get some guidance on that in Januarysometime, early January, late in the year.

That's it for me. Thank you very much.

Thanks, Ellen.

Your next question comes from David Tameron with Wachovia.

Hi. Good morning.

Good morning, David:

A couple questions. James Lime, can we dig into exactly whatyou're doing there and how you complete these loads? Are you cracking them? Areyou doing dual lateral, horizontal, vertical? Can you just talk more into that?I know you did it last quarter, but can you hit that again for me?

Sure. In general, we're completing these wells with long7,000-foot laterals with a packers-plus type completion. Some of the individualsections will be cracked. Some will just be pumped in. Some will be broken downin other ways, but generally they're cracked jobs. But, it's a packers-pluslong lateral. We we're not really advocates of dual laterals in these. Wehave one we just did recently due to some mechanical problems we had and weended up with a dual lateral, but it wasn't something we really intended to do.We really believe that a stimulated packers-plus completion is probably bestpractice at this point.

Are you guys hitting a lot of water bearing, arewater-bearing faults an issue out there?

Yes, they're an issue. You've got to stay away from them.You don't want to cut wet faults and that's probably the biggest risk in theplay and there isn't a huge amount of 3D out here over a lot of this acreage,so you may see us picking up and shooting some. We've been pretty fortunate so far and I've heard commentsfrom people about wet faults and drilling wet fault. It can happen. That is oneof the risks of the play.

All right. And remind me, what formation, I mean you hittingthe Rodessa the James…

It's the James Lime is the section we're in. It's about 200foot thick. We have a particular portion of it we'd like to be in. Where youland the wells we think is important, but this is basically a James Lime play.

It is? Okay. A lot people were referring to James Lime as awhole. I just wanted to confirm that. Going to production growthquarter-over-quarter, it looks like fourth quarter is going to be flat versusthird quarterly suspect the guidance. I guess maybe this is a Tony question.How do you think about the production growth into '08 if you're staying withincash flow?

Actually, Dave has a couple of comments he's going to shareand then I'll comment.

I think, Dave, in terms of fourth quarter, we mentioned thecouple of deferrals that we had in the Rockies and then also having toconstrain a little bit of the Hanging Woman production. Those were kind ofOctober items. So that's a little bit of the reason why you're not seeing thatcontinued growth. We also have a couple of projects that are in our Gulf Coastregion that we just haven't factored in at this point in time. The timing ofthose coming on line is just not precise in our minds, so rather thandisappoint folks, we brought that out. If they come on line and we think they'regoing to push us beyond the top of the range, we'll certainly update guidanceat that point. And then going into 2008, I don't know that we're ready toreally talk about that right now. We certainly have been pleased with theability to grow production over the last seven quarters and that continues tobe the goal. This is really not something that we're touching on right now.

And again, getting back to kind of our planning andbudgeting efforts, Dave will be focused on that over the next few weeks andthen obviously that will drive our forecast into production next year.

All right. Thanks.

Your next question comes from Stephen Berman with PritchardCapital.

Good morning. Just a clarification. On the Gulf Coastthere's two exploration discoveries I believe you said would come ontoproduction near the end of 2008 in a press release as from mid-October of 2007.Can you just clarify that please?

We're talking about Amber Jack, it was a couple smalldiscoveries that we made. Elm Grove we made earlier this year. It should be onin the first quarter. Amber Jack should be subsequent to that. I know that wesaid 2008. I think we're being pretty conservative about that timing.

There's a couple of exploration discoveries that we expectto bring on, like Jay mentioned, either late this year or very early next yearand then there are a couple of other discoveries that are longer term and thoseare the ones being referred to for late 2008. There are different discoveriesbeing brought on.

Okay. Thank you.

Your next question comes from Stephen Beck with Jefferiesand Company.

Good morning, everyone.

Good Morning:

You had mentioned earlier that some of your Sweetie Pecknon-Op properties were performing better than expected. I was wondering if youcould talk a little bit about your operating properties at Sweetie Peck and howthey're performing?

Yes, I mentioned it earlier. I think in general we're doingat our expectations or little better in terms of rates. Well costs, we've beencoming in pretty close to where we said, again, and we talked about our rigissues earlier. Those are driving our cost up some. That's probably the reasonwe've elected to lay down a couple rigs there. We expect that to come in line. We've had some pretty nicerates early on in some of our wells at Sweetie Peck that's actually put us overour production budget. So performance has been very good and we just need toget really consistent and happy with our drilling program there. We need to distinguish between; Sweetie Peck is our operatedproperty. Half East is our non-operated properly. Half East is operated by avery fine operator down there and at the beginning of the year this year, we hadgotten ourselves into Half East we had budgeted about 15 wells. There were some questions about some of the area there andwhether some of it might have been a little wet. As we've gone through theyear, we set some of those at figured out its better than we thought. We wereable to expand that program and accelerate it. It kind of offset our shortfallin drilling at Sweetie Peck.

Half East is operated by Henry Petroleum and these are thefolks that we acquired the Sweetie Peck assets from. We know them very well;very capable operator and the Half East was a field that was basically pushingout the play. So we were waiting to see actual results, and like Jay said,based on the productivity we've seen, we're now expanding that play.

Okay. In the Woodford, I know that you said you moved to alarger pipe. I think last quarter you mentioned about the idea of testing a7-inch pipe. I was wondering if you have done that and if so, how that is performingrelative to the 5-inch pipe?

We haven't tested 7 inch yet. I haven't been able toconvince the guys in the region that it's worth the extra cost. They'reprobably right. I think somebody in the trend will test it. We'll see how thatworks out. Right now we think we can apply as much horsepower as we need to the5.

Okay. How many acres do you have in the Woodford now? Net?

We doubled that year to year. Right now it's right around40,000 acres. The acreage in the Woodford is pretty well tied up at this point.There's not a lot of potential to increase that position.

Okay.

Although, I will say during late last year we were able totake advantage before some of the acreage got taken out and we're able to, likeyou said, expand our position there by double.

On average, how long does it take for you to drill a well atWoodford now?

I think, we're right at 40 something days and then you'vegot a completion on top of that. You can probably figure a 60-day well perwell. If you look at it from that standpoint, that's probably reasonable.

Okay. Given the results of your last several wells, I waswondering if you could talk about the geographic dispersion of your wells. Arethe better performing wells kind of clumped together or are you having or arethey rather dispersed across your acreage?

Well, we've kind of been focusing on one area because that'swhere we had 3 D. We've got a bunch of 3-D coming in, in the fourth quarterthat we'll be using for next year. All these wells have been in a relativelyclose proximity. I think there's a lot to learn yet about the Woodford and whathappens geographically. I hear a number of our competitors talking about that issue.I've heard people talking about sweet spots. We've had a couple wells that areclearly better than others. If you look at the play and you look at all thepublic data on the play, there's a very you can make a very strong correlationon initial rates in the play. It falls right along the probability curve. I think if you look at that, the 50% point of theprobability curve out there is a well that will come on at about 1.8 million aday. We certainly had a number several wells above that. There are some wellsout there that are significantly better, but it kind of argues that it's fairlystatistical. You're going to have some wells, some good wells and somenot so good wells and the trick here is going to be getting to the point whereyour average well is going to be astronomic and we think that at that 1.8million a day rate you can't make an economic well here. So, we've had several good ones in kind of an area and thenwe've had at least one that's kind of out of the area that's been good. We'vehad some wells in the same general area that haven't been so good. I will tellyou there's a lot more to drilling these then just where you're drilling. Where you land the well is important. How much sand you getin it is important. Steering is real important. There's a lot of complexity tothis. We've seen some variability in our results as a result. I would commentone of, the Wanda, the well that we talked about last time we had attemptedthat peak completion system and we ended up making a well out of Wanda. Even the peak system wouldn't work and you end up going andin cracking it and perforating it and cracking it conventionally and we stillmade a well. So we were real happy with the way that turned out after messingaround with that peak system for the time period we did. I think it's stillreally early days. No matter how many wells we all drill, we're still realearly in this play, but there's clearly a statistical aspects to it at thispoint based on what we can see.

Going over to the Atoka. This will be my final question. Youmentioned about high grading the project. I was wondering if you could expand alittle bit more on that and give us a flavor for what you're thinking in termsof rig counts going forward and timing of expanding that?

I think Mayfield is an interesting asset. You've got Atokaand then Granite Wash on top. The Granite Wash wells that we've done havebetter economics than the Atoka. And so we've been looking at the Atoka and ourcosts, of course, have gone up dramatically out there along with the rest ofthe industries. So you have the play. It's a relatively high cost to play,but is generally during periods of high prices good economics, because you getalmost 50% of production in these wells in the first year. So the trick to these is there a way to get our costs down,is there a way and specifically then a lot of the costs in the completion, canwe focus our completion and reduce our completion costs by making sure we'reonly perforating and completing in the intervals that are the most productive. So we're doing some technical work looking at okay, let'sreally look at this. Is there a way we can really work on getting our crackcosts down here? Meanwhile, we're really focusing a lot of effort on theGranite Wash where we think the economics are better. If we can get our costs down substantially, especially ourcrack costs in the utopia, it opens up a lot more opportunity for us there. Asit stands, we're high grading locations. We're offsetting wells that werebetter wells, looking for sweet spots and our activity level has come downsome. I would expect that in 2008, our activity level at Mayfieldwill be lower than it was this year as a result of that. Unless, we can reallybreak open the cost aspect. So I think, declining activity level based on ourcurrent results, high grading of the program to try and get the economicslooking better and then a real focus on costs. If we can get the costs, where we need to get them there's alot of potential out there, but right now with the cost where they are, it'shard to get really excited.

Thank you.

As Jay mentioned, I mean, we have a lot of running roomhere. We've got over 500 3P locations. It's important right now to really getas efficient with these wells as we can.

Great. Thank you very much.

Thank you.

Your next question comes from Rehan Rashid with Friedman,Billings, Ramsey.

Good morning. I'm going to -- real quick. The 20-acre andhorizontal, could you just kind of walk us through maybe the time line, whenyou figure out if this is going to work or not and is this included in your 173upside on end grow (ph)?

The 20 acres are in the 3P number. And we do think the 20sare going to work. They're already drilling 20's, we're doing some 20-acre workout there already. It's an AFB for a number of them and lot of the other partof the field is already being developed on 20. So, I feel pretty comfortable with 20 there. Horizontally,it's very interesting. There's been a couple of the operators that have drilledhorizontal wells out there just in the last couple of months. We really don't have a lot of results on them yet. I thinkthe horizontal play is just is inevitable in my view in a lot of these fields.There's clearly sections of the Cotton Valley that were tighter than othersections on initial completion that are not depleted. And I think you're going to have the opportunity to comeback into some of these places, where you may have produced or gone down forsome period of time and drilled horizontally in some of these non-depletedsections and make good wells. So I think, we're very optimistic about the applicability ofhorizontal drilling to some of these bigger assets that we own there. Ingeneral, I'm very optimistic about horizontal Cotton Valley drilling in all ofEast Texas and Northern Louisiana. I think it's a great play and we're lookinghard at it.

Okay. Shifting to the Wolfberry play. Could you kind of walkus through in terms of your acreage position, how much running room do you seethere? And maybe walk me through what exactly are you seeing from an economicstandpoint for Wolfberry here?

Well, it's really two major assets. Half East is one and theOnona (ph) property we talked about. We have about a 9,000 acre gross positionthere 5,400 net. Total 3P locations is about 67 and that would include 40'sthere. We're at about 60 wells at this point. It's about double our currentwell count. Sweetie Peck is about 13,500 gross acres, 13,200 net. Again,248 total 3P locations, we're at about 160 right now so add another 80, 90wells to that. Again, we're at 80 on that; '40's are potential and the 3Plocations include 40. So, we're drilling some 40's late this year, early nextyear. We'll get some results on that. We're pretty convinced that 40's aregoing to work on a large part of the acreage position, maybe not all of it, buta large part of it. Typical well costs $1.6 to $1.8. Typical reserves about160,000 barrels, so it's basically about a Bcf reserves so about $1.60, $1.80.I think if you look at our total costs you're probably going to have findingcost in the $2 range.

But is this separate from your Spraberry targets in thefield?

I guess we ought to talk about this a little bit. I meanthere's a real misperception. Anytime somebody says the word Spraberry, folksthink, "Oh, Spraberry. That's that that stuff out there in the middle ofthe basin. It's sort of pseudo economic. It's been drilled for 50 years. This is not Spraberry. Okay. This is closer to the shelf. Weinclude the Spraberry in the crack; because it's there and some of Spraberry inhere is good, but this is the whole section, Wolf Camp through Spraberry,bottom to top. It's a big pile of limestone and it's not as some peoplelike to say, it's not your father's Spraberry. We call it and I think people inthe industry, especially in Midland, call us the Wolfberry play, but basicallyit's a big pile of rock, including the Spraberry section cracked essentiallyall at the same time. There’s a large crack job 9, 10 stage crack jobs. It getsback. It's really the technology that being developed in all thesebig pile of tight rock plays in which we opened the whole thing up and so it'svery different than the old conventional Spraberry stuff that people have intheir minds. It's a very economic play. I mean at these prices, it's veryeconomic, obviously. And it's a great repeatable play and we're very encouragedabout what we've seen so far on our rates. We think we're coming in right wherewe thought. Process has been a bit of an issue for us, although wereally have been drilling in that 1.6, to 1.8 range, we talk about. We justwant to make sure it stays there and that's part of the reason we're shufflingour rig fleet.

Okay. Last one on your Hanging Woman Basin, the deeper coalsthe same thoughts there in terms of what's the progression. Have you completedanything there? How many more before you get a better feel for what you have?

Yeah, we have for horizontals completed in there now. We'regoing to drill about five more here in the fourth quarter, early 2008 toincrease density and look at some completion technique issues. I think, quite frankly, it's going to be a while yet. We hadkind of been saying we'd know something here at the end of this year. I'm notsure, that we're going to be able to make any real decision that early. I thinkit will probably late next year, frankly, before we really are convinced weknow what we've got in the deep. It just takes a lot of time to dewater these wells and lookat them, but we'll have nine wells in a pilot area there hopefully by the firstpart of the year that we'll be able to watch. It's a real important program to us. The deep is a lot ofthe reserves, the 3P reserves out there. But it's also, if you look at it froma risk standpoint, it's clearly possible reserves at this point. I think, we'renot convinced that it's going to work, but we're not convinced yet that isn't.We're going to need to drill these wells and get some more data.

Okay. Thank you.

Thanks Rehan.

Your next question comes from Phillip Dodge with SanfordGroup.

Good morning, everybody. Thanks for the comments. A questionon Sweetie Peck, how your estimate or evaluation of recoverable reservescompares now with the time of the acquisition.

We're right, where we thought we'd be. Our initial rateshave actually been a little higher than we thought they we're going to be. Sothat's been encouraging, but we haven't changed our long-term view of it. Weare still in the same ballpark that I just mentioned.

Okay. I'll show will power and limit myself to one question.Thanks very much.

Thanks.

Your next question comes from Larry Busnardo with TristoneCapital.

Good morning.

Good morning, Larry.

Just in regards to the Gulf Coast region there in SouthTexas, both Catarina and the Gold River Field. How is the integration of thosetwo assets going? Can you just give us an update on that and how soon you thinkuntil they're fully integrated?

Yes. So far so good. I think everything is going real well.We had a big advantage in here in that the two acquisition areas both happen tobe operated by the same contract management firm. So we're basically able totake the two assets over and maintain the current operators, so we didn't haveto staff up to do it. We didn't really have to shuffle people and the guys whooperate there have been in there, been in South Texas been in those assets fora long time. So, really no hiccups at all in terms of transitioning theoperation.

Will it remain contract operators or do you plan to bringthat in house at some point as well? Just given what you talked about atSweetie Peck…?

Yes. I think it's important to distinguish here. South Texasis a completely different labor market than Midland. I don't want to - I'velived in Midland. I love Midland, but I will tell you right now theunemployment rate in Midland is 2.3%. Everybody who can possibly work isworking. I was down there just a few weeks ago and it's hard to get service inrestaurants. People are every store there has a "for hire" signor "looking for people" sign in the door. And frankly, they're justgetting a lot people out on drilling rigs out there who are not the kind ofquality people that we necessarily want to be working with. South Texas is a very different situation. A lot of familiesworking together down in South Texas. There's more availability of rigs. Moreavailability of crew. Much more stable group of people. In general, we've beenvery pleased with the people we work with down there. So, I think Midland's in a mini boom right now and labor isreally tight and frankly that is the rationale and the reason why we had to laythose rigs down. It really was a crewing issue, not that the equipment was bad,not that opportunities were bad, it was just a people thing. South Texas,again, is very different. I think the contract operations, if I could bring alloperations under the same tent and have everybody work for us, we'd do that,but it's not practical to do that. And the frankly, the South Texas operationsare very well run. They've got a good, consistent group of people. If we triedto hire them, it would probably ruin their business model and we'd end up worseoff at this point. There may be a point in the future where we entertainsomething like that, but not right now.

Remind me on the two sales. They're fairly similar, right,geologically?

Yes. Very, very similar.

Larry, there is one other transition issue and that'sprobably more on the technical side in terms of building staff with our Houstongroup and they are pursuing that to make sure that first of all we're doing thetechnical homework for the play and able to work that going forward.

This is going to be an area of focus going forward. Do youthink by, as you get through the remainder of this year and start heading intonext, at that point you're ready to really get ramped up and have the program whereyou want to be?

Yes. We have a lot of activity planned for next year inthese assets. As we continue to drill and prove up some of what we hope to bethere, there's going to be additional opportunity, especially in the Gold Riveracquisition. There's quite a bit of acreage that we bought with that. And I think it's another one of those great places in theworld where there's a lot of multi-pay opportunity and there's other things wecan look at and do. It's a great core area, which is something we really neededin that Gulf Coast region. It was a core area that we can really focus onon-shore. We're excited about it.

And just one final one in Sweetie Peck. When you talk aboutthe 40 acres, has there been any 40-acre wells drilled up to this point?

No. I don't think we drilled a 40 yet. We've got one down.We don't have any real information yet on it, but we had one down and we'redrilling a few more. It's going to take a little while, probably six months orso, looking at the results of those wells to really have a feeling for are westealing from the parent when we complete the daughter well. I doubt it will be a significant economic issue. Again, mostof the value of these wells is up front, so if you get pretty decent ratesupfront the economics will look pretty good (ph) so that really more of afinding cost issue longer term, but I think we are pretty optimistic about the40's.

Larry, that one well we drilled, it's been there for a whileand so far we haven't seen any interference, but again that's one well.

How long has that been out?

It's been out close to a year I believe, but it looks likeit's holding up just like the other offsetting wells so we haven't seen anyoffset decline.

Okay. All right, that's it. Thanks guys.

Thanks, Larry.

There are no further questions at this time.

Thank you very much. We appreciate those calling in thismorning.

Thank you. This does conclude today's conference call. Youmay now disconnect.