"Summary and Recommendation. We are lowering our rating and 12-month price target to Market Perform and $20.50/share from Outperform and $23.50/share, respectively. Our revised opinion is based on lower than expected 2003 NAV growth and an increase in 2004 operating cost guidance. Our new price target is based on the stock trading in line with our 2003 NAV estimate. This compares to the previous price target based on a 15% premium to NAV. We have lowered our capitalization rate due to disappointing 2003 operating results and 2004 guidance. We note that the comparable peer group trades in line with NAV. Key Points: Lowering 2004 EPS/CFPS estimates. We are lowering our 2004 EPS/CFPS estimate to $1.09/$5.17, from $1.57/$5.51, to reflect higher operating cost guidance. We note that the decrease in 2004 EPS/CFPS is despite an increase in our 2004 production growth estimate, to 10% from 6%, assumed previously. Disappointing 2003 reserve replacement resulted in minimal NAV growth. The company replaced 124% of 2003 production at an F&D cost of $2.69/Mcfe. Driven by anemic reserve replacement and, adjusting for guidance of higher than originally modeled operating costs, our year-end 2003 NAV grew minimally to $20.60 from $20.54/share at year-end 2002. These results compare with our expectation of $1.75/Mcfe F&D and NAV growth to $24.00/share. Impact of exploratory wells in progress, but high degree of success necessary to grow NAV meaningfully. The company is targeting 15% reserve growth in 2004. If one assumes an ultimate 150 Bcfe exploratory program, the company would have to record a high 46% success rate to meet its target. We note that, even if the reserve growth target is achieved, NAV will grow only (valuing reserve additions @$2.25/Mcfe) to $23.15/share at YE04, from $20.60/share at YE03."