UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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CRIMSON EXPLORATION INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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CRIMSON EXPLORATION INC.
717 TEXAS AVENUE, SUITE 2900
HOUSTON, TEXAS 77002
(713) 236-7400

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 2011

Dear Crimson Stockholder:		April 15, 2011

     We are pleased to invite you to attend the 2011 Annual Meeting of Stockholders of Crimson Exploration Inc. The Annual Meeting will be held on Tuesday, May 17, 2011, at 9:30 a.m., local time, at our principal executive offices, which are located at 717 Texas, Suite 2900, Houston, TX 77002.

     The enclosed Notice of Annual Meeting and the accompanying proxy statement describe the various matters to be acted upon during the Annual Meeting. In addition, there will be a report on the state of our business and an opportunity for you to ask questions of our management.

     You may vote your shares by submitting a proxy by Internet, by telephone or by completing, signing, dating and returning the enclosed proxy card or by voting your shares in person at the Annual Meeting. The proxy card describes your voting options in more detail. Our annual report to the stockholders, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, also accompanies the proxy statement.

     The Annual Meeting gives us an opportunity to review our business results and discuss the steps we have taken to position our company for the future. We appreciate your ownership of Crimson’s common stock, and I hope you will be able to join us at the Annual Meeting.

CRIMSON EXPLORATION INC.
717 TEXAS AVENUE, SUITE 2900
HOUSTON, TEXAS 77002
(713) 236-7400

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 2011

     The 2011 Annual Meeting of Stockholders of Crimson Exploration Inc., a Delaware corporation, will be held at 9:30 a.m., local time, on Tuesday, May 17, 2011 at our principal executive offices, which are located at 717 Texas Avenue, Suite 2900, Houston, Texas 77002, for the following purposes:

	(1)		the election of seven directors to our Board until the 2012 Annual Meeting of Stockholders;
	(2)		the approval of Amendment #1 to the Amended and Restated 2005 Stock Incentive Plan;
	(3)		the approval of Amendment #2 to the Amended and Restated 2005 Stock Incentive Plan;
	(4)		ratifying the appointment of Grant Thornton LLP as our independent registered public accounting firm; and
	(5)		transacting such other business as may arise that can properly be conducted at the Annual Meeting or any adjournment or postponement thereof.

     Our Board of Directors has fixed the close of business on Friday, March 25, 2011 as the record date (the “Record Date”) for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment(s) or postponement(s) thereof. Only stockholders of record at the close of business on the Record Date are entitled to notice of and to vote at the Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting will be available for examination at our offices for 10 calendar days prior to the Annual Meeting. The list will also be available during the Annual Meeting for inspection by stockholders.

     EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ACCOMPANYING ENVELOPE OR USE THE TELEPHONE OR INTERNET VOTING.

CRIMSON EXPLORATION INC.

PROXY STATEMENT

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING			1
CORPORATE GOVERNANCE AND OUR BOARD			6
EXECUTIVE OFFICERS			11
COMPENSATION DISCUSSION AND ANALYSIS			13
COMPENSATION COMMITTEE REPORT			24
EXECUTIVE COMPENSATION			25
Grants of Plan-Based Awards			26
Outstanding Equity Awards at Fiscal Year-End			29
Option Exercises and Stock Vested			30
Potential Payments upon Termination or Change of Control			30
EQUITY COMPENSATION PLAN INFORMATION			35
DIRECTOR COMPENSATION			36
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			37
TRANSACTIONS WITH RELATED PERSONS			37
PROPOSAL 1: ELECTION OF DIRECTORS			38
PROPOSAL 2: APPROVAL OF AMENDMENT #1 TO THE AMENDED AND RESTATED 2005 STOCK INCENTIVE PLAN			41
PROPOSAL 3: APPROVAL OF AMENDMENT #2 TO THE AMENDED AND RESTATED 2005 STOCK INCENTIVE PLAN			50
PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP			51
AUDIT COMMITTEE REPORT			52
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			53
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			54
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2012 ANNUAL MEETING			55
OTHER BUSINESS			56
ANNUAL REPORT			56

CRIMSON EXPLORATION INC.
717 TEXAS AVENUE, SUITE 2900
HOUSTON, TEXAS 77002
(713) 236-7400

PROXY STATEMENT

FOR

THE 2011 ANNUAL MEETING OF STOCKHOLDERS

     Unless the context requires otherwise, references in this proxy statement to “Crimson,” “we,” “us” and “our” are to Crimson Exploration Inc., a Delaware corporation, and its consolidated subsidiaries. Unless the context otherwise requires, references to the “stockholders” are to the holders of shares of our common stock, par value $0.001 per share (“Common Stock”).

     The accompanying proxy is solicited by the Board of Directors of Crimson (our “Board”) to be voted at our 2011 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Tuesday, May 17, 2011, at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders (the “Notice”) and at any adjournment(s) or postponement(s) thereof.

     This proxy statement and accompanying form of proxy are being mailed to our stockholders on or about April 15, 2011. Our Annual Report to Stockholders covering the fiscal year ended December 31, 2010 (the “2010 Annual Report”) is enclosed, but does not form any part of the materials for solicitation of proxies.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

What is the purpose of the Annual Meeting?

     At the Annual Meeting, our stockholders will act upon the matters outlined in the Notice, including (1) the election of seven directors to our Board, each for a term ending on the date of the 2012 Annual Meeting of Stockholders, (2) the approval of Amendment #1 to the Amended and Restated 2005 Stock Incentive Plan; (3) the approval of Amendment #2 to the Amended and Restated 2005 Stock Incentive Plan, (4) the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm (this proposal is referred to as the “Ratification of Grant Thornton”), and (5) the transaction of such other business as may arise that can properly be conducted at the Annual Meeting or any adjournment or postponement thereof. Also, management will report on our performance during the last fiscal year and respond to questions from our stockholders.

What is a proxy?

     A proxy is another person that you legally designate to vote your stock. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card.

What is a proxy statement?

     It is a document that regulations of the Securities and Exchange Commission (the “SEC”) require that we give to you when we ask you to sign a proxy card to vote your stock at the Annual Meeting.

What is “householding” and how does it affect me?

     One copy of the Notice, this proxy statement and the 2010 Annual Report (collectively, the “Proxy Materials”) will be sent to stockholders who share an address, unless they have notified us that they want to continue receiving multiple packages. This practice, known as “householding,” is designed to reduce duplicate mailings and save significant printing and postage costs. If you received a householded mailing this year and you would like to have

additional copies of the Proxy Materials mailed to you or you would like to opt out of this practice for future mailings, we will promptly deliver such additional copies to you if you submit your request in writing to our Investor Relations department, Attn: Josh Wannarka, at 717 Texas Avenue, Suite 2900, Houston, Texas 77002, or call at (713) 236-7571. You may also contact us in the same manner if you received multiple copies of the Annual Meeting materials and would prefer to receive a single copy in the future. The Proxy Materials are also available at www.proxyvote.com.

What should I do if I receive more than one set of voting materials?

     Despite our efforts related to householding, you may receive more than one set of voting materials, including multiple copies of the proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. Similarly, if you are a stockholder of record and hold shares in a brokerage account, you will receive a proxy card and a voting instruction card. Please complete, sign, date and return each proxy card and voting instruction card that you receive to ensure that all your shares are voted at the Annual Meeting.

What is the record date and what does it mean?

     The record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting is the close of business on March 25, 2011 (the “Record Date”). The Record Date is established by our Board as required by Delaware law. On the Record Date, we had 45,193,354 shares of Common Stock issued and outstanding.

What is a quorum?

     A quorum is the presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the outstanding shares of our Common Stock as of the Record Date. There must be a quorum for the Annual Meeting to be held. If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is reached. Proxies received but marked as abstentions or broker non-votes will be included in the calculation of votes considered to be present at the Annual Meeting.

Who is entitled to vote at the Annual Meeting?

     Subject to the limitations set forth below, stockholders at the close of business on the Record Date may vote at the Annual Meeting.

What are the voting rights of the stockholders?

     Each holder of Common Stock is entitled to one vote per common share on all matters to be acted upon at the Annual Meeting. Neither our Certificate of Incorporation, as amended, nor our By-laws allow for cumulative voting rights.

What is the difference between a stockholder of record and a “street name” holder?

     Most stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned in street name.

	•		Stockholder of Record. If your shares are registered directly in your name with Continental Stock Transfer & Trust Company, our transfer agent, you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to grant your voting proxy directly or to vote in person at the Annual Meeting.
	•		Street Name Stockholder. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name.” As the beneficial owner, you have the right to direct your broker or nominee how to vote and are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote these shares in person at

the Annual Meeting unless you obtain a signed proxy from the record holder giving you the right to vote the shares.

How do I vote my shares?

     Stockholders of Record: Stockholders of record may vote their shares or submit a proxy to have their shares voted by one of the following methods:

	•		By Internet. You may submit a proxy electronically on the Internet by following the instructions provided on the enclosed proxy card. Please have the proxy card in hand when you log onto the website. Internet voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on May 16, 2011.
	•		By Telephone. If you request paper copies of the proxy materials by mail, you may submit a proxy by telephone (from U.S. and Canada only) using the toll-free number listed on the proxy card. Please have your proxy card in hand when you call. Telephone voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on May 16, 2011.
	•		By Mail. You may indicate your vote by completing, signing and dating your proxy card and returning it in the enclosed reply envelope.
	•		In Person. You may vote in person at the Annual Meeting by completing a ballot; however, attending the Annual Meeting without completing a ballot will not count as a vote.

     Street Name Stockholders: Street name stockholders may generally vote their shares or submit a proxy to have their shares voted by one of the following methods:

	•		By Mail. You may indicate your vote by completing, signing and dating your proxy card or other information forwarded by your bank, broker or other holder of record and returning it in the enclosed reply envelope.
	•		By Methods Listed on Proxy Card. Please refer to your proxy card or other information forwarded by your bank, broker or other holder of record to determine whether you may submit a proxy by telephone or electronically on the Internet, following the instructions on the proxy card or other information provided by the record holder.
	•		In Person with a Proxy from the Record Holder. You may vote in person at the Annual Meeting if you obtain a legal proxy from your bank, broker or other nominee. Please consult the voting form or other information sent to you by your bank, broker or other nominee to determine how to obtain a legal proxy in order to vote in person at the Annual Meeting.

Can I revoke my proxy?

     Yes. If you are a stockholder of record, you can revoke your proxy at any time before it is exercised by:

	•		submitting written notice of revocation to our company, Attn: Joseph Grady, 717 Texas Avenue, Suite 2900, Houston, Texas, 77002, no later than May 16, 2011;
	•		submitting another proxy with new voting instructions by mail, telephone or the Internet voting system; or
	•		attending the Annual Meeting and voting your shares in person.

     If you are a street name stockholder and you vote by proxy, you may change your vote by submitting new voting instructions to your bank, broker or nominee in accordance with that entity’s procedures.

May I vote confidentially?

     Yes. We treat all stockholder meeting proxies, ballots and voting tabulations confidentially if the stockholder has requested confidentiality on the proxy or ballot.

     If you so request, your proxy will not be available for examination nor will your vote be disclosed prior to the tabulation of the final vote at the Annual Meeting except (1) to meet applicable legal requirements or (2) to allow the independent election inspectors to count and certify the results of the vote. The independent election inspectors may, however, at any time inform us whether or not a stockholder has voted.

What is the effect of broker non-votes and abstentions and what vote is required to approve each proposal?

     If you hold your shares in “street name,” you will receive instructions from your broker or other nominee describing how to vote your shares. If you do not instruct your broker or nominee how to vote your shares, they may vote your shares as they decide as to each matter for which they have discretionary authority under the rules of The NASDAQ Stock Market LLC (“NASDAQ”).

     There are also non-discretionary matters for which brokers and other nominees do not have discretionary authority to vote unless they receive timely instructions from you. When a broker or other nominee does not have discretion to vote on a particular matter, you have not given timely instructions on how the broker or other nominee should vote your shares and the broker or other nominee indicates it does not have authority to vote such shares on its proxy, a “broker non-vote” results. Although any broker non-vote would be counted as present at the Annual Meeting for purposes of determining a quorum, it would be treated as not entitled to vote with respect to non-discretionary matters.

     Abstentions occur when stockholders are present at the Annual Meeting but fail to vote or voluntarily withhold their vote for any of the matters upon which the stockholders are voting.

     If your shares are held in street name and you do not give voting instructions, the record holder will not be permitted to vote your shares with respect to Proposal 1 (Election of Directors), Proposal 2 (Amendment #1 to the Amended and Restated 2005 Stock Incentive Plan), Proposal 3 (Amendment #2 to the Amended and Restated 2005 Stock Incentive Plan), and your shares will be considered “broker non-votes” with respect to these proposals. If your shares are held in street name and you do not give voting instructions, the record holder will nevertheless be entitled to vote your shares with respect to Proposal 4 (Ratification of Grant Thornton) in the discretion of the record holder.

	•		Proposal 1 (Election of Directors): To be elected, each nominee for election as a director must receive the affirmative vote of a plurality of the votes cast by the holders of our Common Stock, present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. This means that director nominees who receive the most votes are elected. Votes may be cast in favor of or withheld from the election of each nominee. Votes that are withheld from a director’s election will be counted toward a quorum, but will not affect the outcome of the vote on the election of a director. Broker non-votes will not be counted as votes cast, and, accordingly, will have no effect on the outcome of the vote for directors.
	•		Proposal 2 (Amendment #1 to the Amended and Restated 2005 Stock Incentive Plan): Pursuant to our Bylaws and NASDAQ rules, approval of this proposal requires the affirmative vote of the holders of a majority of the votes cast by the holders of our Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions and broker non-votes will not be voted either for or against this proposal, and, accordingly, will not affect the outcome of this proposal.
	•		Proposal 3 (Amendment #2 to the Amended and Restated 2005 Stock Incentive Plan): Pursuant to our Bylaws and NASDAQ rules, approval of this proposal requires the affirmative vote of the holders of a majority of the votes cast by the holders of our Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions and broker non-votes will not be voted either for or against this proposal, and, accordingly, will not affect the outcome of this proposal.
	•		Proposal 4 (Ratification of Grant Thornton): Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011 requires

the affirmative vote of the holders of a majority of the votes cast by the holders of our Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions and broker non-votes will not be voted either for or against this proposal, and, accordingly, will not affect the outcome of this proposal.

     Our Board has appointed Allan D. Keel and E. Joseph Grady as the management proxy holders for the Annual Meeting. If you are a stockholder of record, your shares will be voted by the management proxy holders in accordance with the instructions on the proxy card you submit by mail, or the instructions provided for any proxy submitted by telephone or Internet, as applicable. For stockholders who have their shares voted by duly submitting a proxy by mail, telephone or Internet, the management proxy holders will vote all shares represented by such valid proxies as our Board recommends, unless a stockholder appropriately specifies otherwise.

     Our Board recommends a vote:

	•		FOR each of the nominees for director;
	•		FOR approval of Amendment #1 to the Amended and Restated 2005 Stock Incentive Plan;
	•		FOR approval of Amendment #2 to the Amended and Restated 2005 Stock Incentive Plan; and
	•		FOR the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011.

What happens if additional proposals are presented at the Annual Meeting?

     Other than the matters specified in the Notice, we do not expect any matters to be presented for a vote at the Annual Meeting. If you grant a proxy, the management proxy holders will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. Under our By-Laws, the deadline for notifying us of any additional proposals to be presented at the Annual Meeting has passed and, accordingly, stockholders may not present proposals at the Annual Meeting.

Who will bear the cost of soliciting votes for the Annual Meeting?

     We will bear all expenses of soliciting proxies. We have engaged Broadridge Financial Solutions to aid in the distribution of proxy materials and to provide voting and tabulation services for the Annual Meeting for a fee of approximately $5,000, plus reimbursement for reasonable out-of-pocket expenses. Our directors, officers and employees may also solicit proxies in person or by other means of communication. Such directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. In addition, we may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of our Common Stock for their reasonable expenses in forwarding solicitation material to such beneficial owners.

May I propose actions for consideration at the 2012 Annual Meeting of Stockholders or nominate individuals to serve as directors?

     You may submit proposals for consideration at future stockholder meetings, including director nominations. Please read “Stockholder Proposals and Director Nominations for the 2012 Annual Meeting” for information regarding the submission of stockholder proposals and director nominations for consideration at next year’s annual meeting.

CORPORATE GOVERNANCE AND OUR BOARD

General

     Under our Certificate of Incorporation and By-Laws, the number of directors at any one time is set by resolution of our Board. Our Board currently consists of seven members. Our Certificate of Incorporation and By-Laws provide for the annual election of directors. At each annual meeting of stockholders, our directors will be elected for a one-year term and serve until their respective successors have been elected and qualified.

     Our Board held seven meetings during 2010 and acted three times by unanimous written consent. During the last fiscal year only one director, Cassidy J. Traub, attended fewer than 75% of the total number of meetings of our Board and committees on which that director served.

     We encourage, but do not require, our directors to attend annual meetings of stockholders. At our 2010 Annual Meeting of Stockholders, four out of the then six serving members of our Board attended.

Board Independence

     As required under the listing standards of NASDAQ, a majority of the members of our Board must qualify as independent, as affirmatively determined by our Board. Our Board evaluated all relevant transactions and relationships between each director, or any of his or her family members, and our company, senior management and independent registered accounting firm. Based on this evaluation, our Board has determined that Messrs. Backsen, Ford, McCain, Pierce, Traub and Ni are each an independent director, as that term is defined in the listing standards of NASDAQ. In making its independence determinations, our Board noted in particular the following at the time of determination:

	•		Mr. Ford was a managing director and both Messrs. Pierce and Traub were vice presidents of Oaktree Capital Management, LP (“Oaktree Capital Management”), which, through its affiliates OCM GW Holdings, LLC (“Oaktree Holdings”) and OCM Crimson Holdings, LLC (“OCM Crimson”), owns a significant amount of our Common Stock and has been a holder of a significant amount of our debt, which could result in the interests of Messrs. Ford, Pierce and Traub becoming misaligned with those of our stockholders.
	•		Prior to our public offering of 20,000,000 shares of Common Stock in December 2009, Oaktree Holdings and OCM Crimson together beneficially owned 8,427,884 shares of our Common Stock, 76,710 shares of our Series G Preferred Stock, and Oaktree Holdings beneficially owned 2,000 shares of our Series H Convertible Preferred Stock, par value $0.01 per share. Immediately prior to the closing of the public offering, all shares of both series of preferred stock, including those held by Oaktree Holdings and OCM Crimson, were converted into Common Stock. Upon the closing of the public offering, in which Oaktree affiliates acquired 2,000,000 shares of Common Stock, and upon conversion of the preferred stock, Oaktree Capital Management and its affiliates owned, and still own, 15,537,344 shares of Common Stock, which represented 34.6% of our outstanding shares of Common Stock as of December 31, 2010.
	•		Oaktree Holdings was recently the payee of an unsecured subordinated promissory note made by our company in the aggregate principal amount of $2.0 million, which was repaid in full in December 2010 in conjunction with the closing of our new second lien credit agreement.
	•		An affiliate of Oaktree Holdings was a holder of a significant amount of our debt under our existing second lien credit agreement and was repaid in full when we entered into our new second lien term loan in December 2010. An affiliate of Oaktree is also currently a holder of a significant amount of our debt through its 28.6% participation in our new $175 million second lien term loan.
	•		Mr. Ni is Chairman and Chief Executive Officer of America Capital Energy Corporation (“ACEC”), which acquired 6,000,000 shares of our Common Stock, or 13.4% of all issued and outstanding shares of our Common Stock in a two step transaction in the fourth quarter of 2010, at the conclusion of which he was appointed to our Board. This significant ownership position could result in the interests of Mr. Ni becoming misaligned with those of our smaller stockholders.

     Our Board noted that NASDAQ does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding. Our Board also noted that Oaktree Capital Management was comprised of nine principals and approximately 600 employees with offices in 14 cities worldwide, had its headquarters in Los Angeles and had over $72 billion in assets under management. Our Board determined that none of the above factors caused any of Messrs. Ford, Pierce or Traub, or Mr. Ni to have a relationship with our company that would impair their independence.

Board Committees

     Our Board has the authority to appoint committees to perform certain management and administrative functions. Our Board has established a Compensation Committee, Audit Committee and Nominating and Governance Committee. Our Board, in its business judgment, has determined that each committee is comprised entirely of independent directors as currently required under the listing standards of NASDAQ and applicable rules and requirements of the SEC. The Board may also delegate certain duties and responsibilities to the committees it establishes; for example, the Board may delegate the duty of determining appropriate salaries for our executive officers from time to time.

Audit Committee

     The Audit Committee was established to review and appraise the audit efforts of our independent registered public accounting firm, and monitor our accounts, procedures and internal controls. During 2010, the Audit Committee consisted of Mr. McCain, Mr. Pierce and Mr. Traub. The Audit Committee met four times in 2010. Our Board has determined that Mr. McCain, the Chairman of our Audit Committee, is an “audit committee financial expert” as defined under applicable rules and regulations of the SEC and is considered “independent” as described above. Our Audit Committee has adopted a charter, which is posted on our website www.crimsonexploration.com under “Corporate Governance.”

Compensation Committee

     The function of the Compensation Committee is to recommend for approval by our Board the annual salaries and other compensation for our executive officers and key employees. Our Compensation Committee consists of Messrs. Ford and Backsen. The Compensation Committee met three times in 2010. Our Compensation Committee has adopted a charter, which is posted on our website www.crimsonexploration.com under “Corporate Governance.” Pursuant to its charter, the Compensation Committee has the following authority and responsibilities:

	•		To establish and review our overall compensation philosophy;
	•		To review and approve corporate goals and objectives relevant to our executive officers’ compensation, evaluate the performance of such officers and recommend for approval by our Board, the benefits, direct and indirect, of our executive officers based on this evaluation;
	•		To review and recommend to our Board for approval all our equity compensation plans that are not otherwise subject to the approval of the stockholders;
	•		To review and make recommendations to our Board for approval of all equity awards;
	•		To review and monitor all employee pension, profit-sharing and benefit plans, if any; and
	•		To make recommendations to our Board with regard to our compensation and benefit programs and practices for all employees.

     To the extent permitted by applicable law, the Compensation Committee may form and delegate some or all of its authority to subcommittees when it deems such action appropriate. The Compensation Committee is not prohibited from delegating certain functions, and the Compensation Committee has done so on a limited basis in the past, and it may consider senior management’s recommendations regarding appropriate compensation for members of management reporting to them. For example, in 2010, the Compensation Committee determined that the delegation of recommending certain executive compensation decisions to Mr. Keel and Mr. Grady with respect to

the compensation of our executive officers other than themselves was appropriate, as Mr. Keel and Mr. Grady directly work with those executives and are thoroughly informed of the level of performance that the executive officers have achieved, as well as the duties the executive officers are tasked with, on a daily basis. The Compensation Committee’s interaction with management in order to set and administer the executive compensation program is discussed in more detail under “Compensation Discussion and Analysis” below.

Nominating and Governance Committee

     The Nominating and Governance Committee identifies and recommends nominees to our Board and oversees compliance with our corporate governance guidelines. The Nominating and Governance Committee consists of three members of our Board, including Mr. Ford, who serves as chairman, Mr. McCain and Mr. Backsen. The Nominating and Governance Committee did not hold any meetings in 2010. The Nominating and Governance Committee has adopted a written charter, which is posted on our website www.crimsonexploration.com under “Corporate Governance.”

     The principal functions of the Nominating and Governance Committee include:

	•		To actively seek individuals qualified to become Board members, consistent with criteria approved by our Board, for recommendation to our Board;
	•		To recommend director nominees to our Board for each committee of our Board;
	•		To advise our Board about the appropriate composition of our Board and its committees;
	•		To develop and recommend to our Board all new corporate governance principles and practices for our company;
	•		To assist our Board in implementing our existing governance guidelines and any new governance principles and practices;
	•		To oversee compliance with our corporate governance guidelines, including to conduct regular reviews of the governance guidelines and recommend to our Board any changes to the governance guidelines;
	•		To lead our Board in its annual review of the performance of our Board, its committees and senior management; and
	•		To perform such other functions as our Board may assign to the Nominating and Governance Committee from time to time.

     Our Board currently does not have a formal process in place for identifying and evaluating nominees for directors. Instead, the Nominating and Governance Committee uses its network of contacts to identify potential candidates. The Nominating and Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of our Board. The Nominating and Governance Committee meets to discuss and consider such candidates’ qualifications and then select a nominee for recommendation to our Board by a majority vote.

     Although we do not have a separate diversity policy relating to the identification and evaluation of nominees for director, the Nominating and Governance Committee informally considers each candidate’s background, ability, judgment, skills and experience in the context of the needs of the Board when evaluating director nominees. The Nominating and Governance Committee believes it is important for Board members to possess skills and knowledge in the areas of leadership of complex organizations, finance, strategic planning, legal, government relations and relevant industries, especially the oil and gas industry. These considerations help our Board as a whole to have the appropriate mix of characteristics, skills and experiences for the optimal functioning of our Board in its oversight of our company. The Nominating and Governance Committee assesses the effectiveness of this approach by reviewing from time to time the composition of our Board on an individual basis and as a whole. Candidates for director are reviewed in the context of the current composition of our Board, our operating requirements and the long-term interests of our stockholders. The Nominating and Governance Committee believes that candidates for director

should have certain minimum qualifications, including being able to read and understand financial statements and having the highest personal integrity and ethics.

     To assist it with its evaluation of the director nominees for election at this (or any) annual meeting, the Nominating and Governance Committee took into account the factors listed above. Under the heading “Proposal 1: Election of Directors,” we provide an overview of each nominee’s principal occupation, business experience and other directorships of publicly-traded companies, together with the qualifications, experience, key attributes and skills the Nominating and Governance Committee and our Board believe will best serve the interests of our Board, our company and our stockholders.

     Because the Nominating and Governance Committee believes that director nominees should be considered on a case-by-case basis on each nominee’s merits, regardless of who recommended the nominee, it has not adopted a formal policy with regard to the consideration of any director candidates recommended by stockholders. For a description of the procedures that stockholders must follow in order to timely nominate director candidates, please see “Stockholder Proposals and Director Nominations for the 2012 Annual Meeting.”

Code of Ethics

     We have adopted a “code of ethics” as defined by the applicable rules of the SEC, and it is posted on our website: www.crimsonexploration.com under “Corporate Governance.”

Board Leadership Structure

     Our Board does not have a lead director or a Chairman. Our Chief Executive Officer and President serves as a director on our Board, sets the agenda for each of our Board meetings and generally presides over the meetings of our Board. However, each of our directors is expected to provide leadership for our Board in the areas where they have particular expertise and each of our Board members from time to time suggests topics for inclusion on the agenda for future Board meetings. We believe that our leadership structure is appropriate because it strikes an effective balance between management and non-employee director participation in our Board process. The role of our Chief Executive Officer and President helps to ensure communication between management and the non-employee directors, but also encourages each non-employee director to participate and contribute to our Board process, while also capitalizing on each director’s particular area of expertise as needed. It also increases the non-employee directors’ understanding of management decisions and our operations.

Board Risk Assessment and Control

     Our risk management program is overseen by our Board and its committees, with support from our management. Our Board oversees an enterprise-wide approach to oil and gas industry risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance stockholder value. A fundamental part of risk management is a thorough understanding of the risks a company faces, understanding of the level of risk appropriate for our company and the steps needed to manage those risks effectively. As an example, we actively manage commodity price and interest rate risk by entering into appropriate hedge agreements with approved counterparties. Our Board takes an active role in determining the types and levels of hedging activity to be pursued. Together with management’s recommendations, our Board approves the counterparties with whom we enter into hedge agreements and the commodity levels hedged. The involvement of the full Board in setting our business strategy is a key part of its overall responsibilities and together with management determines what constitutes an appropriate level of risk for our company. Our Board believes that the practice of including all members of our management team in our risk assessments allows the Board to more directly and effectively evaluate management capabilities and performance, allows the Board to more effectively and efficiently communicate its concerns and wishes to the entire management team and provides all members of management with a direct communication avenue to the Board.

     While our Board has the ultimate oversight responsibility for the risk management process, other committees of our Board also have responsibility for specific risk management activities. In particular, the Audit Committee focuses on financial risk, including internal controls, and oversees compliance with regulatory requirements. In setting compensation, the Compensation Committee approves compensation programs for the officers and other key employees to encourage an appropriate level of risk-taking behavior consistent with our business strategy.

Communications with our Board

     Stockholders desiring to communicate with our Board, or any director in particular, may do so by mail addressed as follows: Attn: Board of Directors, Crimson Exploration Inc., 717 Texas Avenue, Suite 2900, Houston, Texas 77002. Our Chief Executive Officer or our Chief Financial Officer review each such communication received from stockholders and other interested parties and will forward the communication, as expeditiously as reasonably practicable, to the Board (or individual director) if: (1) the communication complies with the requirements of any applicable policy adopted by us relating to the subject matter; or (2) the communication falls within the scope of matters generally considered by our Board.

EXECUTIVE OFFICERS

     The following table sets forth the names, ages and titles, as of April 15, 2011, of each of our executive officers. Our executive officers are elected annually by our Board and serve one-year terms or until their death, resignation or removal by our Board. There are no family relationships between any of our directors and executive officers. In addition, there are no arrangements or understandings between any of our executive officers and any other person pursuant to which any person was selected as an executive officer.

								Year First
Name		Age				Position		Elected Officer
Allan D. Keel			51			President, Chief Executive Officer and Director			2005
E. Joseph Grady			58			Senior Vice President and Chief Financial Officer			2005
A. Carl Isaac			47			Senior Vice President—Operations			2010
Jay S. Mengle			57			Senior Vice President—Engineering			2005
Tracy Price			52			Senior Vice President—Land/Business Development			2005
Thomas H. Atkins			52			Senior Vice President—Exploration			2005

     Allan D. Keel’s biographical information may be found on page 39 of this proxy statement.

     E. Joseph Grady was appointed Senior Vice President and Chief Financial Officer on February 28, 2005. Mr. Grady has over 30 years of financial, operational and administrative experience, including over 20 years in the oil and gas industry. Mr. Grady was managing director of Vision Fund Advisors, Inc. (“Vision Fund”), a financial advisory firm which he co-founded in 2001, until its dissolution in June 2008. He was formerly Senior Vice President-Finance and Chief Financial Officer of Texas Petrochemicals Holdings, Inc. from April 2003 to July 2004, Vice President-Chief Financial Officer and Treasurer of Forcenergy Inc. from 1995 to 2001 and held various financial management positions with Pelto Oil Company from 1980 to 1990, including Vice President-Finance from 1988 to 1990. Mr. Grady received a Bachelor of Science degree in Accounting from Louisiana State University.

     A. Carl Isaac appointed Senior Vice President of Operations on May 10, 2010. Mr. Isaac has more than 20 years of international and domestic experience in the oil and gas industry with previous senior management roles in engineering, operations and risk management. From 2007 to 2010, he was Executive Vice President of Beryl Resources, an oil and gas exploration and production company with operations in the Gulf of Mexico. Prior to joining Beryl Resources, Mr. Isaac served as the operating manager of oil and gas exploration and production for Equitable Production from August 1998 to April 2000, and he has previously served in operations management roles at Westport Resources, Kerr McGee and Enduring Resources. Mr. Isaac received a Bachelor of Science degree in Petroleum Engineering from Texas A&M University in 1987 and has served on its Industry Advisory Board since 2005.

     Jay S. Mengle was appointed Senior Vice President—Operations and Engineering on April 1, 2005 and served in that position until May 24, 2010, at which time he was appointed Senior Vice President—Engineering. Mr. Mengle joined us after serving as the Shelf Asset Manager-Gulf of Mexico for Kerr-McGee Corporation subsequent to its 2004 merger with Westport Resources Corporation (“Westport”). Mr. Mengle was with Westport Resources from 1998 to 2004, where he started Westport’s Gulf Coast/Gulf of Mexico drilling and production operations. Prior to joining Westport, Mr. Mengle also served in various drilling, production and marketing management capacities at Norcen Energy Resources, Kirby Exploration and Mobil Oil Corp. Mr. Mengle received his Bachelor of Science degree in Petroleum Engineering from the University of Texas.

     Tracy Price was appointed Senior Vice President—Land/Business Development on April 1, 2005. Mr. Price served as the Senior Vice President—Land and Business Development for The Houston Exploration Company from 2001 until joining us. Prior to his tenure at The Houston Exploration Company, Mr. Price served as Manager of Land and Business Development for Newfield Exploration Company between 1990 and 2001. From 1986 to 1990, Mr. Price was Land Manager for Apache Corporation. Prior to Apache, Mr. Price served in similar land management capacities at Challenger Minerals Inc. and Phillips Petroleum Company. Mr. Price received a Bachelor of Business Administration degree in Petroleum Land Management from the University of Texas.

     Thomas H. Atkins was appointed Senior Vice President—Exploration on April 1, 2005. Mr. Atkins served as the General Manager—Gulf of Mexico for Newfield Exploration Company where he was employed from 1998 until

joining us. Prior to his tenure at Newfield, Mr. Atkins served in various exploration capacities with EOG Resources and its predecessor companies from 1984 to 1998, including prospect generator, development geologist and finally as Exploration Manager. Mr. Atkins also worked at the Superior Oil Company from 1981 through 1984. Mr. Atkins received a Bachelor of Science degree in Geology from the University of Oklahoma.

COMPENSATION DISCUSSION AND ANALYSIS

     The following Compensation Discussion and Analysis contains statements regarding future individual and company performance targets and goals. These targets and goals are disclosed in the limited context of our executive compensation program and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution stockholders not to apply these statements to other contexts.

Introduction

     This Compensation Discussion and Analysis (1) provides an overview of our compensation policies and programs; (2) explains our compensation objectives, policies and practices with respect to our executive officers; and (3) identifies the elements of compensation for each of the individuals identified in the following table, whom we refer to in this proxy statement as our “named executive officers.”

Name		Principal Position
Allan D. Keel		Chief Executive Officer and President
E. Joseph Grady		Senior Vice President and Chief Financial Officer
Jay S. Mengle		Senior Vice President—Engineering
A. Carl Isaac		Senior Vice President—Operations
Thomas H. Atkins		Senior Vice President—Exploration

Objectives and Philosophy of Our Executive Compensation Program

     Due to an aging of the industry employee base, and a shortage of new entrants into the industry, competition for high-caliber personnel experienced in the oil and gas industry has become very intense. Accordingly, the objective of our compensation program is to establish a competitive compensation program with appropriate compensation packages for the wide variety of duties performed by our named executive officers. In addition, we have sought to establish a competitive compensation program that motivates all of our employees, including our executive officers, to enhance long-term stockholder value.

     Recognizing that attracting, retaining and motivating our executive officers to successfully perform demanding roles is critical to meeting our strategic business and financial goals, our compensation philosophy is that the compensation paid to our executive officers should be directly and materially linked to our achievement of our specific annual, long-term and strategic goals and to each officer’s individual contribution to the attainment of those goals. We believe our overall compensation strategy of offering a balanced combination of annual and long-term compensation to our executive officers based upon corporate and individual performance helps maximize stockholder return and helps to assure our executive officer team is retained in an extremely competitive market for experienced executive level oil and gas professionals.

     To achieve these objectives, we have historically evaluated the compensation paid to our executive officers based upon the following factors:

	•		the appropriate mix of salary, cash incentives and equity incentives;
	•		company growth and financial and operational performance, as well as individual performance; and
	•		market analysis of the compensation packages of our executive officers compared to the compensation packages of executive officers at other oil and gas industry companies that are similar to ours in their operations, among other factors.

     Except as otherwise noted below, we do not assign relative weights or rankings to these factors. Instead, the Compensation Committee makes subjective determinations of compensation levels based upon a consideration of all of these factors.

Setting Executive Compensation

     On behalf of our Board, the Compensation Committee reviews and evaluates all compensation for our executive officers, including our compensation philosophy, policies and plans. The Board will have final approval of all compensation decisions made by the Compensation Committee with respect to our senior executive officers, unless and to the extent that a certain decision or element of compensation has been fully delegated to the Compensation Committee. Our Chief Executive Officer and Chief Financial Officer also play important roles in the executive compensation process, including evaluating the other executive officers and assisting in the development of performance target goals. For example, at least once each year the Chief Executive Officer and Chief Financial Officer present to the Compensation Committee their evaluation of each of the other named executive officers (including, the Chief Executive Officer’s evaluation of the Chief Financial Officer), which includes a review of contribution and performance over the past year, strengths, weaknesses, development plans and succession potential. Following these presentations and a review of all relevant data, the Compensation Committee makes its own assessments and recommends to our Board approval of the compensation for each named executive officer. Although the Chief Executive Officer and the Chief Financial Officer each may make recommendations to the Compensation Committee regarding his own compensation, to the extent events or circumstances are applicable to all of our named executive officers as a group regarding compensation decisions, all final decisions regarding executive compensation remain with our Board, although the Compensation Committee’s recommendations to our Board have historically been largely accepted and approved by the Board. The Compensation Committee does take into consideration our named executive officers’ total compensation, including base salary, annual incentives and long-term incentives, both cash and equity, when considering market based adjustments to our named executive officers’ compensation.

     With respect to general compensation practices applicable to all officers, the Compensation Committee makes comparisons of our executive compensation program to the compensation paid to executives of other companies within the oil and gas industry through the use of energy industry compensation surveys from Effective Compensation Inc. (“ECI”). ECI surveys are utilized as they are specific to the energy industry and derive their data from direct contributions from a large number of participating companies that we consider to be our peers. The ECI surveys compile data from most companies that we currently consider to be in our peer group, as well as companies somewhat larger than us but with which we compete for talent. The surveys were used to compare our executive compensation program against companies (the “Peer Group”) that have comparable market capitalization, revenues, capital expenditure budgets, geographic focus and number of employees.

     In January 2008, the Compensation Committee first retained Longnecker & Associates, an experienced compensation consulting firm that specializes in the energy industry and that has access to national compensation surveys and our compensation information, to conduct a company-wide review of our compensation policies and programs to determine our level of competitiveness in the oil and gas industry and advise the Compensation Committee as to whether modifications should be adopted in order to attract, motivate and retain key employees. After our acquisition of the STGC Properties from EXCO in 2007, which significantly increased the size of our company, we felt that it had become increasingly important, given our growing need for highly skilled and experienced management and technical personnel in a highly competitive labor market, to take additional measures to ensure that we were appropriately compensating our key employees and rewarding performance in a manner consistent with similar employers of a similar size and with whom we compete. Additionally, the initial terms of the employment contracts for Messrs. Keel and Grady were set to expire in 2008, and the initial terms of the employment contracts for Messrs. Mengle and Atkins had expired in 2007. Accordingly, for these reasons we felt that it was appropriate to engage a compensation consultant at the beginning of 2008 to assist the Compensation Committee in its compensation review. The Compensation Committee utilized the results of that review and the latest ECI surveys using data from the selected peer group to determine and modify the executive compensation levels for fiscal 2008. Following the detailed analysis of, and changes made in, our compensation program in 2008 and the general economic uncertainty impacting the entire industry, the Compensation Committee determined that changes were unnecessary during the 2009 year.

     The Compensation Committee engaged Longnecker & Associates again during the 2010 year for the purpose of getting information and recommendations regarding the compensation packages of Messrs. Keel and Grady, as well as for the more specific purpose of providing the Compensation Committee with recommendations regarding “underwater” stock options (or stock options that have an exercise price that is higher than the current market price

for the underlying stock) held by certain employees which is discussed in greater detail below. With respect to the compensation packages for Messrs. Keel and Grady, Longnecker & Associates again provided the Compensation Committee with survey data and information regarding industry trends and practices. The Compensation Committee took this information, along with the ECI survey data, and determined that slight increases were warranted with respect to both Messrs. Keel and Grady’s 2010 packages in order to bring the executives in line with the compensation packages that were commonly found at the peer companies for which we compete for executive talent. The increases that occurred in any specific element of compensation are discussed in greater detail below.

     The Compensation Committee determined that no significant changes to executive compensation levels for the remaining named executive officers were necessary for fiscal 2010; however, minor base salary increases were implemented following the recommendation of Messrs. Keel and Grady as salaries for these officers appeared to be slightly lower than salaries within our Peer Group for 2010. The Compensation Committee also used compensation information applicable to our Peer Group when determining the appropriate compensation package for Mr. Isaac when he began his employment with us in May 2010 and we entered into a new employment agreement with him, which is substantially identical in form to the employment agreements entered into with Messrs. Atkins and Mengle.

     With respect to general compensation decisions made in 2010, the selected Peer Group for 2010 included Comstock Resources, Inc., Continental Resources, Inc. Energy XXI, PetroQuest Energy, Inc., Concho Resources, Inc., Callon Petroleum Company, Delta Petroleum Corp., Goodrich Petroleum Corporation, Dune Energy, Inc., Gastar Exploration Limited and Swift Energy Company. The Compensation Committee regularly reviews and refines the Peer Group as appropriate. When we refer to “peers,” “peer group” or “peer companies” or similar phrases, we are referring to this list of companies, as it may be updated by the Compensation Committee from time to time. The Peer Group was selected based upon the comparability of several quantitative metrics including oil and gas reserve base, production volumes, comparable market capitalization, revenues, capital expenditure budgets, geographic focus and number of employees. Our actual base compensation levels for 2009, which were held substantially constant for 2010, were situated between the mid-point and the 75th percentile of the actual results of our Peer Group.

     We believe that each element of compensation has been designed to complement the other components and, when considered together, to meet our compensation objectives; however, we do not have a policy or target for the allocation between short-term and long-term or cash and non-cash incentive compensation. In order to ensure that we maintain an effective long-term incentive and retention program, the Compensation Committee determined that it would be appropriate to seek Longnecker & Associates guidance regarding certain outstanding stock options held by a number of our employees, including our named executive officers. These stock options are considered “underwater,” meaning that the exercise price of the award was significantly higher than the value of the underlying stock for the award, and therefore they no longer provided meaningful incentive value to the holders, or retention value for the company, even though most were fully vested awards. Toward the end of the 2010 year, the Compensation Committee requested Longnecker & Associates to review the terms and conditions of our outstanding stock option awards and our equity plan, and to provide us with a comparative analysis regarding stock option exchanges that had been conducted at peer companies. Following the Compensation Committee’s review of Longnecker & Associates recommendations and peer company studies, the Compensation Committee voted to allow the employees that held underwater stock option awards to exchange them for unvested stock option awards with a lowered exercise price. The exercise price of the new options was to be determined as the higher of (1) the closing stock price on the expiration of the exchange offer; and (2) $5.00 per share. As the closing price at the expiration was $3.98 per share, the new price was set at $5.00 per share, or 26% higher than the then-current market price of our Common Stock on the day the exchange offer expired, we believe the exchange will be effective in restoring the value, retention and incentivizing purpose of granting such awards under our compensation program. This exchange did not occur until February 2011, and will not impact the values for previous awards or in the following compensation tables that are based upon the 2010 year, nor will it impact the level of potential future grants.

Elements of Our Executive Compensation Program

     General

     The principal components of our executive compensation program include:

•

base salary;

	•		performance-based cash incentive compensation;
	•		performance-based long-term equity based incentive compensation;
	•		discretionary cash incentive compensation;
	•		discretionary long-term equity-based incentive compensation;
	•		overriding royalty interest plan compensation until its termination in February 2010;
	•		severance benefits; and
	•		other health and fringe benefits.

     Base Salary

     We provide base salaries to our executive officers to compensate them for services rendered during the year at levels that we believe are competitive in the oil and gas industry and that are designed to allow us to attract, motivate and retain executive officers. Base salaries are a major component of the total annual cash compensation paid to our executive officers and are reviewed annually by the Compensation Committee. Base salary determinations are made by our Board taking into consideration salary recommendations from the Compensation Committee. The Compensation Committee considers senior management’s recommendations as to appropriate compensation for members of management reporting to them.

     All of our executive officers are subject to employment agreements that provide for a fixed base salary. These salaries were determined after taking into account many factors, including:

	•		the historic salary structure within our company,
	•		the responsibilities of the officer;
	•		the scope, level of expertise and experience required for the officer’s position;
	•		the strategic impact of the officer’s position;
	•		the potential future contribution and demonstrated individual performance of the officer; and
	•		salaries paid for comparable positions at similarly-situated companies.

     At the time the employment agreements were entered into in 2005, we set base salaries at the base salary comparables at or near the 50th percentile of salaries of comparable executive officers of our Peer Group, and held those base salary levels of our executive officers constant during fiscal years 2006 and 2007. In early 2008, we approved increases to the annual base salaries of our named executive officers due to the dramatic increase in the size of our company and the tightening of the labor market. In addition, in 2008 our Board approved and we entered into amended and restated employment agreements with our named executive officers to reflect the 2008 base salary increases and to, among other things, modify provisions relating to the federal income tax treatment of certain arrangements in order to meet the December 31, 2008 deadline for compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), reflect other market-based changes in compensation approved in early 2008 by the Compensation Committee and provide for new terms of the agreements, since the initial terms of the existing employment agreements expired. This Code section governs the treatment of deferred compensation which is broadly defined and thus has the potential to impact numerous types of compensation arrangements between us and our employees. If violated, Section 409A can result in adverse tax consequences to the employee. The Section 409A amendments to our compensation arrangements were intended to prevent any such adverse tax result on our employees. See “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Employment Agreements.” Due to reduced capital availability, and its impact on our growth goals, no increases to annual base salaries of the executive officers were made during fiscal 2009.

     For 2010, our Board, based on the recommendation of the Compensation Committee, approved minor increases to annual base salaries of our executive officers other than Mr. Isaac as noted below. The Compensation Committee recommended these increases for each of these named executive officers based on recommendations by Messrs. Keel and Grady for the officers other than themselves. The annual base salaries of these executive officers were increased slightly in 2010 in order to recognize their efforts navigating the company through a turbulent 2009 for our company, the industry and the global economy, repositioning our company to continue our growth strategy and to remain competitive with salaries paid executive officers within our peer group within the oil and gas industry. An increase in base salary was necessary to assure the retention of our team of executive officers and to appropriately compensate them for their responsibilities and anticipated contributions during 2010. In February 2011, the Compensation Committee again considered the ECI surveys for all executive officers, and recommendations from Longnecker and Associates for Messrs. Keel and Grady, and the contribution of each in 2010, in granting salary increases for 2011 in the amounts noted below for certain executive officers. Mr. Isaac did not receive an increase in salary for the 2010 year due to the fact that we set his 2010 salary at a level that was competitive with market trends when he joined us during the middle of the 2010 year and his salary was still in line with those market levels for the 2011 year.

Name		2009				2010				2011
Allan D. Keel		$	370,000			$	379,250			$	450,000
E. Joseph Grady		$	340,000			$	348,500			$	365,000
Jay S. Mengle		$	220,000			$	230,000			$	230,000
Thomas H. Atkins		$	200,000			$	207,500			$	220,000
A. Carl Isaac			N/A			$	230,000			$	230,000

     Performance-Based Cash Incentive Compensation

     Our named executive officers are eligible to participate in an annual, performance-based cash incentive compensation plan that is designed to reward all employees on the basis of our company attaining pre-determined performance measures. As a result of anticipated low commodity prices during the 2009 year and the corresponding negative impact on revenues, a reduced capital expenditure budget, and the resulting impact on the ability to formulate meaningful performance goals for the plan for 2009, upon the recommendation of the Compensation Committee, our Board suspended the performance-based cash incentive compensation plan for the executive officers and all other company employees for the fiscal year ended December 31, 2009. However, due to improved financial flexibility and improving general market conditions in early 2010, the Compensation Committee approved the reinstatement of the Performance Based Cash Incentive Plan for the 2010 fiscal year and each of our named executive officers participated in this plan during the year. Following the temporary suspension of the bonus plan in 2009, the Compensation Committee determined that our philosophy with respect to the Performance Based Cash Incentive Plan should be modified in 2010 in order to provide the Compensation Committee with more flexibility to adjust the final awards for all employees, including our named executive officers, to better recognize their general contributions to the company’s success, individual strengths and individual efforts that each individual officer may have exerted on our behalf during the fiscal year. Thus, for the 2010 year, the Compensation Committee determined that it was appropriate to exercise discretion with respect to the bonus award amounts that could potentially be earned pursuant to the Performance Based Compensation Plan if the Compensation Committee determined that all facts and circumstances did not warrant a payment of the full calculated bonus amount. This discretion could be exercised at the sole discretion of the Compensation Committee, and could be based on the individual’s achievement or non-achievement, as applicable, of individual goals that the Compensation Committee felt were essential to any individual’s role or duties with our company. The Compensation Committee did not have the authority to increase the bonus over the calculated amount under the Performance Based Compensation Plan for such individual performance goals, however, in certain cases, additional discretionary amounts were awarded in recognition of specific contributions unrelated to the targets set for the Performance Based Compensation Plan.

     Amounts potentially earned under the Performance Based Cash Incentive Plan are set at certain percentages of the participant’s base salary. Percentages set for the 2010 year are detailed in the footnotes to the “Grants of Plan-Based Awards” for Fiscal Year Ended December 31, 2010” below.

     Generally speaking, the Compensation Committee annually approves the quantitative performance goals that will make up the Performance Based Cash Incentive Plan award for five separate categories under the plan, usually

within the first two months of the plan year. The categories are reviewed annually by the Compensation Committee with input from our executive officers and adjusted, as needed, in order to reflect our current structure and operations. Typically, and including the 2010 year, the categories consist of the following:

	•		Oil and Gas Production Levels (“Production”). The Production goal is based on targeted performance levels for the fiscal year.
	•		Earnings Before Interest, Taxes, Depreciation, Amortization and Exploration Expenses (“EBITDAX”). EBITDAX is a non-GAAP measure we use as an approximation of cash flow from operations before tax. Our definition of EBITDAX may differ from that of other companies and excludes Exploration (“Geological & Geophysical”) expenses, Exploration Dry Hole Costs (“DHC”) and other non-cash charges normally considered expenses by oil and gas companies utilizing successful efforts method of accounting.
	•		Replacement of Oil and Natural Gas Reserves Depleted by Production (“Reserve Replacement”). Reserve Replacement is a measure of our ability to replace oil and gas reserves over and above equivalent reserves depleted by oil and gas production during the fiscal year.
	•		Finding and Development Costs (“F&DC”). F&DC measures the cost to locate prospects, acquire production rights, drill and complete wells and install or construct production equipment and facilities per equivalent unit of proved reserves added ($/Mcfe) during the fiscal year, inclusive of revisions of prior year reserve estimates.
	•		Cash Return on Invested Capital (“ROIC”). ROIC is a measure of cash earnings before taxes (but excludes certain cash and non-cash expenses, including a specified portion of Geological and Geophysical expenses, depletion, depreciation and amortization expenses, DHC, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, “Compensation — Stock Compensation” (“FASB ASC Topic 718”) expenses, gains/losses from mark to market accounting on derivatives and gains/losses from asset impairment), divided by average invested capital reflected in stockholders’ equity for the year (consisting of the par value of our capital stock plus additional paid-in capital and retained earnings).

     Each performance category was selected based on the Compensation Committee’s belief that it most accurately measures our corporate performance in relation to comparable oil and gas companies within our peer group.

     Each year, the Compensation Committee establishes the “minimum,” “target” and “maximum” performance levels for each of the five performance categories and their appropriate weighting. For each executive officer, the Compensation Committee determines the appropriate percentage allocation to be assigned for each category. In most cases, when determining an executive officer’s bonus, the Compensation Committee gives equal weight to each category except when a particular performance category bears a more direct relationship to the executive officer’s areas of responsibility, in which case a particular performance category may be more heavily weighted. For the 2010 year, the weighting of each of our named executive officers for each of the categories above is as follows:

Category		Mr. Keel				Mr. Grady				Mr. Isaac				Mr. Mengle				Mr. Atkins
Production			20	%			20	%			20	%			20	%			20	%
EBITDAX			20	%			20	%			20	%			20	%			20	%
Reserve Replacement			20	%			20	%			20	%			20	%			20	%
F&DC			20	%			20	%			20	%			20	%			20	%
ROIC			20	%			20	%			20	%			20	%			20	%

     Should our financial and operating results meet or exceed either the pre-determined “minimum,” “target” and “maximum” values assigned a particular performance category (with linear interpolations between each level), then each executive officer is paid an annual bonus that is a percentage of their annual salary. The Compensation Committee retains the right to make what it determines to be appropriate adjustments to actual performance results for the year, to the extent it believes that adjustments are warranted. For example, in determining the actual level of EBITDAX and ROIC for a particular year, it may exclude the effects of certain non-cash income/expense items such

as the mark to market benefit/charge to our results of operations required by FASB ASC Topic 815, “Derivatives and Hedging,” non-cash charges to our results of operations related to FASB ASC Topic 718 for stock options or the variance in EBITDAX and ROIC caused by the variance in realized oil and gas prices compared to those incorporated into the performance goals (since prices are largely not within management’s control).

     The percentage of annual salary potentially paid to an executive officer under this performance-based bonus award is dependent upon the extent to which pre-determined performance goals are met. Payment of annual cash incentive bonuses to our executive officers is not guaranteed and is dependant upon our actual performance during the fiscal year, including meeting at least the “minimum” performance targets.

     Bonuses under the Performance Based Cash Incentive Plan are typically paid out in cash during the first quarter of the year following the fiscal year in which they are earned. The 2010 Performance Based Cash Incentive Plan awards were paid in late February 2011.

     Typically, after giving consideration to past company performance and peer performance, the Compensation Committee set these performance levels so that the attainment of the targets is not assured and requires significant effort by our executives. We believe that the disclosure of performance targets would result in competitive harm to us and are therefore omitted since we are engaged in a highly competitive business, we may pursue opportunities in areas without first publicly disclosing our intention to do so and disclosure of these targets might enable our competitors to determine our strategic areas of interest and priorities throughout the year. We also believe that disclosure of our performance targets would undermine our on-going efforts to retain officers and other employees in a competitive employment atmosphere. Our business is highly dependent on attracting and keeping qualified, skilled employees. We believe that public disclosure of the performance targets used to determine the named executive incentive compensation would materially increase the ability of competitors to track current year bonus potential and tailor compensation packages designed to persuade officers and other employees to leave our company. In addition, it would give our competitors an unfair informational advantage with respect to competing for prospective employees.

     At this time the Compensation Committee has not yet set performance goals and levels and assigned their respective weightings for fiscal year 2011, but we do anticipate that the Performance Based Cash Incentive Plan will be utilized during 2011 for all of our employees, including the named executive officers, and that performance goals or metrics will be similar to those used for the 2010 year.

     Discretionary Cash Incentive Compensation

     As one way of accomplishing our executive compensation program objectives, the Compensation Committee has the ability to award discretionary cash bonuses to our executive officers for their contribution to our financial and operational success. These amounts are in addition to amounts awarded under our annual performance-based cash incentive compensation plan, if any, and are typically awarded in cases where awards under our performance incentive plans are not commensurate with the performance and contribution of any individual executive.

     In March 2010, the Compensation Committee awarded discretionary cash bonuses of $259,000 to Mr. Keel, $238,000 to Mr. Grady, $85,000 to Mr. Mengle, and $70,000 to Mr. Atkins. As these awards were related to service during the 2009 year, Mr. Isaac did not receive a bonus at this time. As no bonuses were awarded for 2009 under the Performance Based Cash Incentive Plan, the discretionary cash bonuses were awarded to reflect the respective contributions of each officer to our company meeting the strategic and operational goals for 2009 rather than 2010 performance. For 2010 performance, the Compensation Committee met in January 2011 and approved discretionary bonuses of $16,000 to Mr. Mengle, $20,000 to Mr. Atkins and $58,000 to Mr. Isaac. The significant decrease in discretionary awards for the 2010 year compared to those awarded for the 2009 year, where applicable, reflect the Compensation Committee’s decision to utilize the Performance Based Cash Incentive Plan again for the 2010 year and the achievement by the company of our performance targets that provided bonuses under that plan for the year. The discretionary awards granted to Messrs. Mengle, Atkins and Isaac for the 2010 year were in addition to their Performance Based Cash Incentive Plan award and were related to their contribution to the company’s success at validating certain of its resource plays, implementing practices to lower drilling costs, and developing plans for further reserve and production growth by attracting joint venture partners for certain drilling projects to de-risk those projects.

     Long-Term Equity-Based Incentive Compensation

     We grant equity awards to give our executive officers a longer-term stake in our company. The equity awards act as a long-term retention tool and align employee and stockholder interests by increasing compensation as stockholder value increases. In addition, the Compensation Committee occasionally grants equity awards in recognition of outstanding service to our company. To achieve these objectives, the Compensation Committee has generally relied on the issuance of restricted stock and stock options.

     General

     We believe that stock options reduce immediate stockholder dilution, conserve shares available under our stock plans, align employees’ compensation goals with the creation of stockholder value and encourage our executive officers to take necessary and appropriate steps to increase our stock price. We believe that restricted stock encourages our executive officers to adopt a view towards long-term value while providing a retention incentive even in the event of a decline in the stock price. Our Board believes that the combination of stock options and restricted stock awards are an effective incentive for executive officers, managers and other key employees to create value for us and our stockholders since the value of restricted stock and options bear a direct relationship to appreciation in our stock price. In addition, by using stock-based compensation, we can focus much needed cash flow, which would otherwise be paid out as bonus compensation, on the daily operations of our business.

     No stock options were granted to our executive officers in fiscal 2007, 2008, 2009 or 2010. We chose to provide equity compensation in the form of restricted stock during those periods rather than stock options because restricted stock awards better incentivize our executive officers to build long-term value for our stockholders and provide a greater retention incentive in the current economic environment and at this stage of our development. In line with our goal of providing the potential to create long-term value for our employees (and all shareholders) in an unfavorable market, the Compensation Committee determined that the outstanding underwater stock options held by certain employees, including our named executive officers, were not providing the value to our employees for which they were intended, and so certain stock options that were granted prior to 2007 became eligible for an exchange program that we initiated and completed in 2011.

     As part of our compensation review process, we make changes from time to time to our long-term equity-based incentive compensation. We make changes to improve the retention incentives for our executive officers and to provide better incentives for the creation of long-term value for our stockholders.

     LTIP

     Our Compensation Committee and Board also approved in 2008 a performance-based long-term incentive plan (the “LTIP”) designed to reward employees with equity based compensation on the basis of our company attaining pre-determined performance measures, similar to our performance-based cash incentive compensation plan. All grants made under the LTIP are performance based, are calculated as a percentage of base salary earned during the plan year and are to be made in the form of restricted stock and stock option grants under, and within the limits of, the 2005 Stock Incentive Plan. All restricted stock awards and stock options granted pursuant to this plan vest over four years at a rate of 25% each year.

     In 2008 we amended the 2005 Stock Incentive Plan to increase the maximum aggregate number of shares of Common Stock which may be issued upon exercise of all awards under that plan by one million shares, and among other things, to accommodate LTIP awards, to make other changes to conform the 2005 Stock Incentive Plan’s provisions to the final regulations under Section 409A of the Code and for certain other conforming and clarifying changes. In connection with this Annual Meeting, we have also requested that the maximum aggregate number of shares of our Common Stock available for issuance under the 2005 Stock Incentive Plan be increased by two million shares and that the annual limit for granting awards to any one participant be increased; Proposals No. 2 and 3 below detail these proposed amendments to the 2005 Stock Incentive Plan.

     The pre-determined performance measures are the same as the measures under the performance-based cash incentive compensation plan and consistent with our existing criteria for performance awards under our 2005 Stock Incentive Plan: (1) Production; (2) EBITDAX; (3) Reserve Replacement; (4) F&DC; and (5) ROIC.

     The Compensation Committee sets these performance levels so that the attainment of the targets is not assured and requires significant effort by our executives. For fiscal 2009 and 2010, equity grants under the LTIP were suspended at the recommendation of the Compensation Committee, and therefore, there were no regular LTIP distributions to either the executive officers or any other company employee in 2010. The 2010 LTIP was again suspended at the beginning of the 2010 year partially as a safeguard for security law purposes, as the number of shares that could be issued under our 2005 Stock Incentive Plan were very low, and we did not want to risk noncompliance with any securities law requirements for that plan. The Compensation Committee granted certain one-time discretionary grants of restricted stock awards during the 2010 year under the 2005 Stock Incentive Plan to Messrs. Keel, Grady and Mengle, and certain other key employees following the Compensation Committee’s analysis and confirmation that such grants would not jeopardize our 2005 Stock Incentive Plan. These grants were in recognition of the efforts of those individuals during late 2009 and 2010 in improving the financial flexibility of the company during a turbulent period and in positioning the company to commence an active 2010 drilling program.

     Mr. Isaac received grants of restricted Common Sock and options to purchase Common Stock in connection with the execution of his employment agreement with us on May 10, 2010. These equity-based compensation awards were granted pursuant to our 2005 Stock Incentive Plan.

Overriding Royalty Interest Plan Compensation

     We compensated certain employees through our Overriding Royalty Interest Plan (the “ORRI Plan”), which was designed to reward the efforts of employees who were successful in exploring for oil and natural gas on our behalf. The program was available only to those employees that were directly involved in oil and natural gas exploration efforts, including Mr. Atkins, our Senior Vice President—Exploration, who was the only named executive officer entitled to benefits under this plan. To be able to participate in the plan, a potential candidate must be recommended for participation by our president and approved by the Compensation Committee. Under the ORRI Plan, the participants shared a portion of the gross revenue interest attributable to the original working interest held by us in certain of the oil and natural gas producing properties generated by the exploration program. Pursuant to the ORRI Plan, we paid Mr. Atkins $43,045 in 2008, $2,897 in 2009 and $15,719 in 2010 (with $3,704 of the $15,719 attributable to amounts paid by third party operators to Mr. Atkins for production from properties subject to ORRI Plan).

     The ORRI Plan was terminated by our Board effective February 3, 2010 as to all oil and gas leases acquired subsequent to that date except with regard to the previous overriding royalty interest awards made to Mr. Atkins covering the Haynesville unconventional resource play. The ORRI Plan was terminated because the focus of our exploration efforts shifted to unconventional resource plays that were not qualified projects under the provisions of the ORRI Plan.

Severance Benefits

     Each of the employment agreements to which our executive officers are subject provide for severance and change of control payments upon a termination or change of control. Payments that are payable upon a termination or change of control are included in the respective employment agreement between the executive officer and our company. We believe that the executive officers should be provided an incentive to consummate a change of control that would generate attractive returns for our stockholders. Without such an incentive, the executive officers may not diligently pursue such opportunities. In addition, severance provisions were included as a means of attracting and retaining executives and to provide replacement income if their employment is terminated because of a termination, except in certain circumstances. Each employment agreement contains similar but not identical provisions regarding payments upon termination or change of control and relevant provisions of those agreements are provided in the section titled “Executive Compensation—Potential Payments upon Termination or Change of Control.”

Other Benefits

     In addition to base salaries, incentive compensation, equity awards, overriding royalty interest plan compensation and severance benefits, we provide other forms of compensation that are periodically reviewed by the Compensation Committee. Except as otherwise indicated, these benefits are available to all employees, including

our named executive officers, and are offered for the purpose of providing competitive compensation and benefits to attract new employees and secure the continued employment of current employees.

	•		401(k) Plan. We have a defined contribution 401(k) Plan that is designed to assist our executive officers and employees in providing for their retirement. Effective June 1, 2008, upon the recommendation of the Compensation Committee, our Board approved an amendment to our 401(k) Plan to provide for 100% matching of each participant’s deferral contributions up to 6% of the participant’s compensation. Effective January 1, 2009, we began matching 100% of each participant’s deferral contributions up to 6% of the participant’s compensation, and we made an aggregate contribution of $53,713 to the accounts of our named executive officers during 2010.
	•		Health and Welfare Benefits. As with all of our employees generally, our executive officers are eligible to participate in medical, dental, vision, life insurance and accidental death and disability to meet their health and welfare needs. These benefits are provided so as to assure that we are able to maintain a competitive position in terms of attracting and retaining officers and other employees. This is a fixed component of compensation and the benefits are provided on a non-discriminatory basis to all of our employees.
	•		Perquisites and Other Personal Benefits. We believe that the total mix of compensation and benefits provided to our executive officers is competitive and perquisites should generally not play a large role in our executive officers’ total compensation. As a result, the perquisites and other personal benefits we provide to our executive officers are limited and typically do not exceed $10,000 per person in any fiscal year.

Other Matters

     Tax and Accounting Treatment of Executive Compensation Decisions

     We consider the anticipated tax treatment of our executive compensation program when setting levels and types of compensation. Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation in excess of $1.0 million per person paid in any year to a company’s chief executive officer or any of its three other most highly compensated executive officers (other than the chief financial officer and the chief executive officer), with certain “performance-based compensation” being specifically exempt from this deduction limit. During fiscal year 2010, none of our employees subject to this limit received Section 162(m) compensation in excess of $1.0 million. Consequently, the requirements of Section 162(m) did not affect the tax deductions available to us in connection with our senior executive compensation program for fiscal year 2010.

     We account for stock-based awards based on their grant date fair value, as determined under FASB ASC Topic 718. In connection with its approval of stock-based awards, the Compensation Committee is cognizant of and sensitive to the impact of such awards on stockholder dilution. The Compensation Committee also endeavors to avoid stock-based awards made subject to a market condition, which may result in an expense that must be marked to market on a quarterly basis. The accounting treatment for stock-based awards does not otherwise impact the Compensation Committee’s compensation decisions.

     Stock Ownership Guidelines and Hedging Prohibition

     We do not currently have ownership requirements or a stock retention policy for our named executive officers. We do not have a policy that restricts our executive officers from limiting their economic exposure to our stock. We will continue to periodically review best practices and re-evaluate our position with respect to stock ownership guidelines and hedging prohibitions.

     Risk Considerations in our Overall Compensation Program

     We believe that our compensation program is structured in such a way as to discourage excessive risk-taking. In making this determination, we considered various aspects of our compensation program, including the mix of fixed and performance-based compensation for management and other key employees. The company’s performance-based compensation awards are designed to reward both short- and long-term performance. By linking a portion of total compensation to our long-term performance, we mitigate any short-term risk that could be detrimental to our

long-term best interests and the creation of shareholder value. Our equity-based performance awards are subject to multi-year vesting periods and derive their value from our total performance, which we believe further encourages decision-making that is in the long-term best interests of us and our shareholders. We believe that in the aggregate, our compensation program discourages any risk-taking that could be detrimental to the long-term interests of our company, our performance, or our stock price. In conclusion, we believe that our compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on the company.

COMPENSATION COMMITTEE REPORT

     The Compensation Committee of the Board of Directors of Crimson Exploration Inc. has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

EXECUTIVE COMPENSATION

Summary Compensation Table

     The following table sets forth the aggregate compensation awarded to, earned by or paid to our named executive officers for services rendered in all capacities during the fiscal years ended December 31, 2008, 2009 and 2010.

Summary of Compensation Table for the Fiscal Years Ended December 31, 2008, 2009 and 2010

																		Option				Non-Equity
														Stock				Awards				Incentive Plan				All Other
Name and						Salary				Bonus(1)				Awards(2)				(2)(3)				Compensation(4)				Compensation(6)				Total
Principal Position		Year				($)				($)				($)				($)				($)				($)				($)
Allan D. Keel			2010				377,708				—				146,308				—				335,000				45,273				904,289
Chief Executive			2009				370,000				259,000				296,302				—				—				50,742				976,044
Officer and President			2008				370,000				—				991,279				—				—				37,795				1,399,074
E. Joseph Grady			2010				347,083				—				134,300				—				308,000				54,373				843,756
Senior Vice President			2009				340,000				238,000				215,518				—				—				59,247				852,765
and Chief Financial Officer			2008				340,000				—				330,426				—				—				40,919				711,345
A. Carl Isaac (7)			2010				148,173				58,000				75,001				227,373				97,000				20,863				626,410
Senior Vice President— Operations
Jay S. Mengle			2010				230,000				16,000				173,800				—				133,000				36,148				588,948
Senior Vice President—			2009				220,000				85,000				114,785				—				—				44,335				464,120
Operations and Engineering			2008				220,000				—				165,213				—				—				29,523				414,737
Thomas H. Atkins			2010				206,250				20,000				—				—				151,719	(5)			28,773				406,724
Senior Vice President—			2009				200,000				70,000				106,154				—				10,897	(5)			28,742				415,793
Exploration			2008				200,000				—				140,798				—				43,045	(5)			34,503				418,346

						Matching 401(k) Contributions				Insurance Premiums				Total
						(a)($)				(b)($)				($)
Allan D. Keel			2010				16,500				28,773				45,273
E. Joseph Grady			2010				16,500				37,873				54,373
A. Carl Isaac			2010				6,900				13,963				20,863
Jay S. Mengle			2010				13,813				22,335				36,148
Thomas H. Atkins			2010				—				28,773				28,773

Grants of Plan-Based Awards

     The following table provides information concerning each grant of an award made to our named executive officers under any plan, including awards, if any, that have been transferred during the fiscal year ended December 31, 2010.

Grant of Plan-Based Awards for Fiscal Year Ended December 31, 2010

										Estimated Possible Payouts Under Non-
										Equity Incentive Plan Awards(1)
																						All Other								Grant Date
																						Stock				Exercise				Fair Value of
																						Awards:				Price of				Stock and
						Approval				Threshold				Target				Maximum				Number of				Option				Option
Name		Grant Date				Date				($) (2)				($)				($)				Shares (#)				Awards ($)				Awards ($)(3)
Allan D. Keel			5/18/2010				5/10/2010				189,000				321,000				453,000				46,300				—				146,308
E. Joseph Grady			5/18/2010				5/10/2010				174,000				295,000				416,000				42,500				—				134,300
A. Carl Isaac			5/10/2010				5/10/2010				59,000				104,000				148,000				22,659				2.27				302,324
Jay S. Mengle			—								92,000				161,000				230,000				55,000				—				173,800
Thomas H. Atkins			—								83,000				144,000				206,000				—				—				—

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

     The following is a discussion of material factors necessary to an understanding of the information disclosed in the Summary Compensation Table and the Grants of Plan-Based Awards Table.

     We entered into amended and restated employment agreements with our then-current executive officers during 2008. The compensation provisions of the employment agreements were designed with input from Longnecker & Associates and ECI and contain a compensation package designed to motivate and retain the executive officers.

     Between December 29 and 31, 2008, we entered into amended and restated employment agreements with each of our then-named executive officers. The employment agreement we entered into with Mr. Isaac is similar to the amended and restated employment agreements maintained with the remaining executive officers.

     The previous agreements were entered into to, among other things, modify provisions relating to the federal income tax treatment of certain arrangements in order to meet the December 31, 2008 deadline for compliance with Section 409A of the Code, reflect market-based changes in compensation approved in mid-2008 by the Compensation Committee and our Board and provide for new terms of the agreements, since the initial terms of the existing employment agreements expired. In addition, the amended and restated employment agreements were entered into to provide an incentive for consistent, longer-term performance and achievement of strategic objectives, to compensate our named executives for the value of their contributions, to provide total compensation that is flexible enough to respond to changing market conditions, to align compensation with performance, provide total compensation that will motivate and retain our executive officer, and support an internal culture of company loyalty and dedication to our interests.

     The agreements entered into with Messrs. Keel and Grady each provide for a term of three years and the agreements entered into with Messrs. Mengle, Atkins and Isaac each provide for a term of two years. Each agreement provides for automatic yearly extensions of the term, after the initial term, unless we or the officer elects not to extend the agreement. We are currently in the process of extending the terms of each of these agreements.

     Each agreement provides for a base salary (which is subject to increase at the discretion of our Board or a committee thereof) and participation in our Annual Cash Incentive Bonus Plan and LTIP. The initial base salaries of the executive officers for 2010 were as follows: Mr. Keel, $379,250; Mr. Grady, $348,500; Mr. Mengle, $230,000; Mr. Atkins, $207,500 and Mr. Isaac, $230,000.

     Under our Annual Cash Incentive Bonus Plan, the executives are eligible to receive cash bonuses contingent upon attainment of annual personal and corporate goals established by our Board or a committee thereof. The agreements entered into with Messrs. Keel and Grady provide that each executive is eligible to receive a bonus based upon “minimum,” “target” and “maximum” award levels of no less than 50%, 85% and 120%, respectively, of such executive’s base salary, and the agreements entered into with Messrs. Mengle, Atkins and Isaac provide that each executive is eligible to receive a bonus based upon “minimum,” “target” and “maximum” award levels of no less than 40%, 70% and 100%, respectively, of such executive’s base salary. No cash awards are paid under this plan if the corporate performance criteria for at least the “minimum” award level are not met.

     Under our LTIP, the executives are eligible to receive stock options and restricted stock awards contingent upon attainment of annual personal and corporate goals established by our Board or a committee thereof. Upon the recommendation of the Compensation Committee our Board suspended the LTIP for all employees, including executive officers, for 2009, 2010 and 2011.

     The employment agreements also contain provisions for payment of severance benefits upon termination of employment. A discussion of applicable severance benefits is provided below under “—Potential Payments upon Termination or Change of Control.”

     Stock Awards

     On May 18, 2010, upon recommendation of the Compensation Committee, the Board approved discretionary stock bonus awards of restricted Common Stock to Messrs. Keel, Grady, and Mengle and other key company employees. Mr. Keel received approval for 46,300 shares, Mr. Grady received approval for 42,500 shares, and Mr. Mengle received approval for 55,000 shares. In February 2011, the Compensation Committee also approved awards of restricted Common Stock of 85,000, 58,000, 24,667, 38,000 and 45,883 for Messrs. Keel, Grady, Isaac, Mengle and Atkins, respectively. The 2011 awards were granted, in part, for performance of the officers in the 2010 year and for retention and incentive purposes, and will be reflected in the Grants of Plan Based Awards table for 2011.

Salary and Cash Incentive Awards in Proportion to Total Compensation

     The following table sets forth the percentage of each named executive officer’s total compensation that we paid in the form of base salary and annual cash incentive awards.

						Percentage of Total Compensation Paid in
Name		Year				Base Salary and Annual Incentive Awards
Allan D. Keel			2010				78.81	%
E. Joseph Grady			2010				77.64	%
A Carl Isaac			2010				48.40	%
Jay S. Mengle			2010				64.35	%
Tommy H. Atkins			2010				92.93	%

Outstanding Equity Awards at Fiscal Year-End

     The following table provides information concerning unexercised options, stock that has not vested, and equity incentive plan awards for our named executive officers as of December 31, 2010.

Outstanding Equity Awards as of December 31, 2010

		Option Awards(7)																Stock Awards
		Number of				Number of												Number of				Market Value
		Securities				Securities												Shares or				of Shares or
		Underlying				Underlying												Units of Stock				Units of Stock
		Unexercised				Unexercised				Option				Option				That Have Not				That Have Not
		Options (#)				Options (#)				Exercise Price				Expiration				Vested				Vested
Name		Exercisable(1)				Unexercisable				($)				Date				(#)(5)				($)(6)
Allan D. Keel			270,000				—				9.70				2/28/2015				11,000	(2)			46,860
			405,000				—				12.50				2/28/2015				202,500	(3)			862,650
																			92,594	(4)			394,450
																			46,300	(8)			197,238
E. Joseph Grady			90,000				—				9.70				2/28/2015				11,000	(2)			46,860
			135,000				—				12.50				2/28/2015				67,500	(3)			287,550
																			67,349	(4)			286,907
																			42,500	(8)			181,050
A. Carl Isaac							100,000				3.31				5/9/2020				22,659	(9)			96,527
Jay S. Mengle			45,000				—				11.60				4/1/2015				11,000	(2)			46,860
																			33,750	(3)			143,775
																			35,870	(4)			152,806
																			55,000	(8)			234,300
Thomas H. Atkins			38,300				—				11.60				4/1/2015				11,000	(2)			46,860
																			28,762	(3)			122,526
																			33,173	(4)			141,317

Option Exercises and Stock Vested

     The following table provides information concerning each vesting of stock, including restricted stock, restricted stock units and similar instruments, during the fiscal year ended December 31, 2010 on an aggregated basis with respect to each of our named executive officers. During this time, no named executive officers exercised any stock option awards.

Option Exercises and Stock Vested During the Fiscal Year Ended December 31, 2010

		Stock Awards
		Number of Shares				Value Realized
Name		Acquired on Vesting (#)				on Vesting ($)
Allan D. Keel			30,865				106,793				(1	)
			11,000				34,100				(2	)
			33,750				89,437				(3	)
Total			75,615				230,330
E. Joseph Grady			22,450				77,677				(1	)
			11,000				34,100				(2	)
			11,250				29,811				(3	)
Total			44,700				141,588
Jay S. Mengle			11,957				41,371				(1	)
			11,000				34,100				(2	)
			5,625				14,905				(3	)
Total			28,582				90,376
Thomas H. Atkins			11,058				38,261				(1	)
			11,000				34,100				(2	)
			4,794				12,704				(3	)
Total			26,853				85,065

Potential Payments upon Termination or Change of Control

     Payments that would have been payable to executive officers having employment agreements with us upon a termination or change of control are included in the respective employment agreement between the executive officer and us. Each employment agreement contains similar but not identical provisions regarding payments upon termination or change of control and relevant provisions of those agreements are described above under the Summary Compensation Table, as well as below.

     Each of the employment agreements provides for severance and change of control payments in the event we terminate an officer’s employment without “Cause” or if the officer terminates for “Good Reason” or due to his death or disability. The employment agreements also provide for acceleration of vesting of equity awards if we terminate an officer without “Cause” or if an officer terminates for “Good Reason,” if such awards are not subject to performance-based vesting, or upon death or disability.

     “Cause” generally means (A) continued failure by the executive officer to perform substantially the executive’s duties and responsibilities (other than a failure resulting from permanent disability) that is materially injurious to our company and that remains uncorrected for 10 days after receipt of appropriate written notice from our Board; (B)

reliable evidence of engagement in willful, reckless or grossly negligent misconduct that is materially injurious to our company or any of its affiliates, monetarily or otherwise; (C) except as provided by (D), the indictment of the executive with a crime involving moral turpitude or a felony, provided that if the criminal charge is dismissed with prejudice or if executive is acquitted at trial or on appeal, the executive will be deemed to have been terminated without Cause; (D) the indictment of the executive with an act of criminal fraud, misappropriation or personal dishonesty, provided that if the criminal charge is subsequently dismissed with prejudice or the executive is acquitted at trial or on appeal then the executive will be deemed to have been terminated without Cause; or (E) a material breach by the executive of any provisions of the employment agreement that is materially injurious to our company and that remains uncorrected for 10 days following written notice of such breach by our company to the executive identifying the provision of the employment agreement that we determined has been breached.

     “Good Reason” generally means one or more of the following conditions arising not more than six months before the executive’s termination date without the executive’s consent: (A) a material breach by us of any provision of the employment agreement; (B) assignment by our Board or a duly authorized committee thereof to the executive of any duties that materially and adversely alter the nature or status of the executive’s position, job descriptions, duties, title or responsibilities from those of such executive officer’s prior position, or eligibility for our compensation plans; (C) requirement by us for the executive officer to relocate anywhere other than the greater Houston, Texas metropolitan area, except for required travel on company business to an extent substantially consistent with his obligations under their employment agreement; (D) a material reduction in the executive officer’s base salary in effect at the relevant time; or (E) exclusion of the executive officer from eligibility for our active bonus or benefits plan as described above. Notwithstanding anything in the executive’s employment agreement to the contrary, Good Reason will exist only if the executive provides notice to us of the existence of the condition otherwise constituting Good Reason within 90 days of the initial existence of the condition, and we fail to remedy the condition on or before the 30th day following its receipt of such notice.

     “Change of Control” means the occurrence of any one or more of the following events:

     (i) We are not the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of any entity other than a previously wholly-owned subsidiary of ours), or in the case of a reverse merger in which our management and the executive officer do not assume control of the surviving entity;

     (ii) We sell or exchange in a single transaction or in a series of related transactions occurring in the 12-month period ending on the date of the most recent sale or exchange, assets having a gross fair market value equal to 40% or more of the total gross fair market value (determined without regard to any liabilities associated with such assets) of all of our assets immediately before such transfer or transfers, to any other person or entity (other than to (A) an entity controlled by us immediately after the transfer, (B) a stockholder of our company (immediately before the transfer) in exchange for or with respect to its stock, (C) a person or entity that directly or indirectly owns 50% or more of the total value or voting power of all of our outstanding stock immediately after the transfer, (D) an entity, 50% or more of the total value or voting power of which is directly or indirectly owned by us immediately after the transfer);

     (iii) Any person or entity, including a “group” as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than Oaktree Capital Management or its affiliates, or any other person, entity or group that is considered to own more than 50% of the outstanding shares of our voting stock (based upon voting power), acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the outstanding shares of our voting stock (based upon voting power); or

     (iv) As a result of or in connection with a contested election of directors, a majority of members of our Board is replaced by directors whose election is not endorsed by a majority of members of our Board before the date of the election.

     Severance Payments

     Assuming termination or a change of control of our company on December 31, 2010, each named executive officer would have been entitled to the payments provided below. These numbers could not be determined with any certainty unless or until the applicable scenario below actually occurred, thus the amounts are solely estimates and the actual payout to each executive officer in the event of one of these scenarios below is subject to change.

		Termination								Termination
		by								by
		Employee								Employee				Termination				Termination
		Without								For Good				Without				upon Change				Death or
		Good				Termination				Reason				Cause				of Control				Permanent				Change of
Name		Reason				For Cause				(4,5,7)				(4,5,7)				(4,5,7)				Disability (6)				Control (8)
Allan D. Keel
• Severance Payments(1,3)		$	—			$	—			$	1,908,368			$	1,908,368			$	1,908,368			$	1,441,150			$	—
• Health Insurance Continuation(9)			—				—				86,319				86,319				86,319				86,319				—
Unvested & Accelerated
• Restricted Stock Units			—				—				1,501,198				1,501,198				1,501,198				1,501,198				1,501,198
• Stock Options			—				—				—				—				—				—				—
E. Joseph Grady
• Severance Payments(1,3)		$	—			$	—			$	1,753,635			$	1,753,635			$	1,753,635			$	1,324,300			$	—
• Health Insurance Continuation(9)			—				—				113,619				113,619				113,619				113,619				—
Unvested & Accelerated
• Restricted Stock Units			—				—				802,367				802,367				802,367				802,367				802,367
• Stock Options			—				—				—				—				—				—				—
A. Carl Isaac
• Severance Payments(2,3)		$	—			$	—			$	460,000			$	460,000			$	460,000			$	851,000			$	—
• Health Insurance Continuation(9)			—				—				57,546				57,546				57,546				57,546				—
Unvested & Accelerated
• Restricted Stock Units			—				—				96,527				96,527				96,527				96,527				96,527
• Stock Options			—				—				95,000				95,000				95,000				95,000				95,000
Jay S. Mengle
• Severance Payments(2,3)		$	—			$	—			$	650,000			$	650,000			$	650,000			$	851,000			$	—
• Health Insurance Continuation(9)			—				—				44,670				44,670				44,670				44,670				—
Unvested & Accelerated
• Restricted Stock Units			—				—				577,741				577,741				577,741				577,741				577,741
• Stock Options			—				—				—				—				—				—				—
Tommy H. Atkins
• Severance Payments(2,3)		$	—			$	—			$	550,000			$	550,000			$	550,000			$	767,500			$	—
• Health Insurance Continuation(9)			—				—				57,546				57,546				57,546				57,546				—
Unvested & Accelerated
• Restricted Stock Units			—				—				310,703				310,703				310,703				310,703				310,703
• Stock Options			—				—				—				—				—				—				—

     Non-Compete and Non-Solicitation Provisions

     The agreements generally require that each executive officer not engage in competition with us in any geographic area in which we own a material amount of oil, gas or other mineral properties, during the period commencing upon execution until the date ending: (A) on the date of termination if terminated by us for Cause, or (B) in all other cases of termination, at the end of a period of consecutive months following the date of termination equivalent to 50% of the number of months for which the executive officer is entitled to receive severance benefits assuming (if applicable) the executive officer will give the required notice as described in the employment agreement. Each executive officer is also subject to non-solicitation provisions during the term of the non-compete provisions prohibiting the executive officer from inducing or soliciting any other executive or officer of ours to terminate their employment with us.

     Gross Up Payments

     Pursuant to the respective employment agreements, if it is determined that any payment, award, benefit or distribution (or an acceleration of any payment, award, benefit or distribution) to an executive officer by us or by another entity in the event of a Change of Control is subject to the imposition of an excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by the executive officer with respect to such excise tax, we will pay the executive officer an additional payment in an amount equal to that required to result in the executive officer receiving, after application of the excise tax, a net amount that would have been received by the executive officer had the excise tax not applied.

EQUITY COMPENSATION PLAN INFORMATION

     The following table sets forth certain information regarding our equity compensation plans as of December 31, 2010.

Number of securities

remaining available for

future issuance under

Number of securities to

Weighted-average

equity compensation

be issued upon exercise

exercise price of

plans (excluding

of outstanding options,

outstanding options,

securities reflected in

warrants and rights

warrants and rights

Column (A))

Plan Category

(A)

(B)

(C)

Equity compensation plans approved by security holders

1,731,543

$

8.87

406,360

Total

1,731,543

$

8.87

406,360

     Our equity compensation plan with outstanding options that has been approved by our stockholders to date is our Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”).

     As of December 31, 2010, we had outstanding options and awards for 1,731,543 shares of Common Stock at a weighted-average exercise price of $8.87 per share under our 2005 Plan. As of December 31, 2010, the aggregate number of shares of our Common Stock that may be issued and outstanding pursuant to the exercise of awards under our 2005 Plan may not exceed 3,852,500 shares.

     Awards covering a total of 406,360 shares of Common Stock were currently available to be issued under our 2005 Plan as of December 31, 2010. During the first quarter 2011, we issued restricted stock awards for 366,633 shares of Common Stock to employees and 10,493 shares issued under the 2005 Plan were forfeited as a result of employees leaving our employment prior to full vesting of the shares. Pursuant to the provisions of the 2005 Plan the forfeited shares were available for issuance under the 2005 Plan. As a result, we have 67,759 shares available to be awarded pursuant to the 2005 Plan as of March 28, 2011.

DIRECTOR COMPENSATION

General

     Each year, the Compensation Committee reviews the total compensation paid to our non-employee directors. The purpose of the review is to ensure that the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform our Board’s duties and to fairly compensate directors for their service. The review includes the consideration of qualitative and comparative factors. To ensure directors are compensated relative to the scope of their responsibilities, the Compensation Committee considers: (1) the time and effort involved in preparing for Board, committee and management meetings and the additional duties assumed by committee chairs; (2) the level of continuing education required to remain informed of broad corporate governance trends and material developments and strategic initiatives within our company; and (3) the risks associated with fulfilling their fiduciary duties.

     The following table sets forth a summary of the compensation we paid to our non-employee directors during the fiscal year ended December 31, 2010. Directors who are our full-time employees receive no compensation for serving as directors.

Director Compensation for the Year Ended December 31, 2010

		Fees Earned or				Stock Awards ($)
Name		Paid in Cash ($)				(1)				Total ($)
B. James Ford		$	32,500				—			$	32,500
Lon McCain		$	41,625			$	50,000			$	91,625
(Chairman of Audit Committee)
Lee B. Backsen		$	36,500			$	50,000			$	86,500
(Chairman of Compensation Committee)
Adam C. Pierce		$	34,500				—			$	34,500
Cassidy J. Traub		$	17,000				—			$	17,000
Ni Zhaoxing (2)			—				—				—

Retainer/Fees and Equity Compensation

     Upon the recommendation of the Compensation Committee, on November 21, 2008 our Board approved an amended compensation plan for non-employee directors (the “Plan”) that provides for a $30,000 annual retainer, with a $2,000 meeting attendance fee ($1,000 if by telephone) for each full board, Audit and Compensation Committee meeting. The chairmen of the Audit and Compensation Committees are entitled to receive an annual retainer of $13,500 and $6,000, respectively.

     Under the Plan, each non-employee director receives $50,000 of restricted Common Stock for his first year of service subject to a three-year vesting schedule. Upon re-election, each non-employee director receives $50,000 in restricted Common Stock, subject to a one-year vesting requirement. The number of shares to be awarded is determined based on the fair market value of our Common Stock as of the close of trading on the date of grant. Messrs. Ford, Pierce and Traub, as employees of Oaktree Capital Management, have elected not to receive stock awards.

     In addition, the Plan provides for reimbursement of expenses for all directors in the performance of their duties, including reasonable travel expenses incurred attending meetings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Messrs. Ford and Backsen served on the Compensation Committee during fiscal year 2010. None of the directors who served on the Compensation Committee during fiscal year 2010 has ever served as one of our officers or employees. During fiscal year 2010, none of our executive officers served as a director or member of the Compensation Committee (or other committee performing similar functions) of any other entity of which an executive officer served on our Board or the Compensation Committee.

TRANSACTIONS WITH RELATED PERSONS

Policies and Procedures

     We have not formally adopted policies or procedures for approval of related person transactions. Our Board annually reviews related person transactions with respect to directors as part of their annual assessment of director independence. Other related person transactions are disclosed to our Board or a Board committee and are addressed on a case-by-case basis. In general, transactions with our directors, executive officers, principal stockholders or affiliates must be at terms that are no less than favorable to us than those available from third parties and must be approved in advance by a majority of disinterested members of our Board. Under our Code of Business Conduct and Ethics, situations that present a potential conflict between personal interests and the interests of our company are to be avoided and prompt disclosure in writing to our Senior Vice President and Chief Financial Officer of any fact or circumstance that may involve an actual or potential conflict of interest as well as any information necessary to determine the existence or likely development of conflicts of interest is required.

Transactions

     Since January 1, 2010, we have participated in (or proposed to participate in) the following transactions with related persons:

     On December 22, 2010, our Board appointed Mr. Ni Zhaoxing as a director in connection with a private placement transaction with America Capital Energy Corporation, a New York Corporation (“ACEC”), a private company indirectly controlled by Mr. Ni., in which we sold to ACEC 4,250,000 shares of our Common Stock for cash consideration of $21,250,000 and an option by which ACEC had the right to acquire an additional 1,750,000 shares of a newly created series of preferred stock convertible into an equal number of shares of Common Stock and providing ACEC with the right to designate a member of our Board. The option to purchase the preferred shares was exercised by ACEC in December 2010 and Mr. Ni was appointed to the Board. Subsequent to the appointment of the Mr. Ni to the Board the preferred shares automatically converted to shares of Common Stock, giving ACEC an approximate 13.4% ownership in the outstanding Common Stock of the company.

     On December 27, 2010, we borrowed $175 million pursuant to a new second lien credit agreement to, among other things, pay in full all of our outstanding indebtedness under our existing second-lien term loan and to pay off a $2.0 million subordinated promissory note. Affiliates of Oaktree Capital Management, our principal stockholder, and holders of a portion of our existing second-lien term loan and the subordinated promissory note, were repaid with the proceeds from the new second-lien term loan. Affiliates of Oaktree Capital Management also participated in the new second-lien term loan.

PROPOSAL 1:
ELECTION OF DIRECTORS

General

     Our Board consists of seven directors. Directors are elected annually and hold office until the next annual meeting or until their successors are duly elected and qualified.

     Based on recommendations from the Nominating and Governance Committee, our Board has nominated each of the directors listed below for re-election as directors to serve until the 2012 Annual Meeting of Stockholders and until their successors have been elected and qualified, or until their earlier resignation or removal. We did not pay any third-party fees to assist in the process of identifying or evaluating candidates nor did we receive any stockholder nominations for director. Each nominee is currently a director and was previously elected to our Board by the stockholders in 2009 with the exception of Mr. Ni (as described in more detail below). Each nominee has consented to being named as a nominee in this proxy statement and has indicated a willingness to serve if elected.

     Stockholders may not cumulate their votes in the election of our directors. We have no reason to believe that the nominees will be unable or unwilling to serve if elected. However, if a nominee should become unable or unwilling to serve for any reason, proxies may be voted for another person nominated as a substitute by our Board, or our Board may reduce its size.

Information About Director Nominees

     The following table sets forth the names and ages, as of April 15, 2011, of our current directors, each of whom is a director nominee for re-election at the Annual Meeting. Mr. Ni Zhaoxing was appointed to the Board pursuant to ACEC’s exercise of its right to appoint a member of the Board under the terms of the newly created series of preferred stock purchased by ACEC as part of a private placement transaction between Crimson and ACEC in December 2010. There are no family relationships between any of our directors and executive officers. In addition, there are no other arrangements or understandings between any of our directors and any other person pursuant to which any person was selected as a director.

Name		Age				Position		Year First Elected Director
Allan D. Keel			51			President, Chief Executive Officer and Director			2005
Lee B. Backsen			70			Director			2005
B. James Ford			42			Director			2005
Lon McCain			63			Director			2005
Adam C. Pierce			32			Director			2008
Cassidy J. Traub			29			Director			2009
Ni Zhaoxing			54			Director			2010

     Allan D. Keel was appointed Chief Executive Officer and President and joined our Board on February 28, 2005. Before joining us, Mr. Keel was Vice President/General Manager of Westport Resources, Houston office, during 2004. In this role he was responsible for its Gulf of Mexico operations including acquisitions, development and exploration. In 2003, Mr. Keel served as a consultant to both domestic and international companies in building their presence in the Gulf of Mexico. From mid-2000 until mid-2001, Mr. Keel served as a Vice President at Enron Energy Finance where he worked on private equity transactions and volumetric production payments. From mid-2001 through 2002, Mr. Keel served as President and CEO of Mariner Energy Company (“Mariner”), a majority owned affiliate of Enron. Subsequent to Enron’s bankruptcy and its decision to sell Mariner, Mr. Keel partnered with Oaktree Capital Management in an effort to acquire Mariner. From 1996 until mid-2000, Mr. Keel was Vice President/General Manager for Westport, where he established and built the Gulf of Mexico division. From 1984 to 1996, Mr. Keel was with Energen Resources where he directed the company’s exploration, joint venture and acquisition activities. Mr. Keel was initially appointed to our Board in 2005 by the holders of our Series G Convertible Preferred Stock, par value $0.01 per share (the “Series G Preferred Stock”), pursuant to the rights granted the holders of such stock as set forth in the Certificate of Designations for such stock. The majority of shares of Series G Preferred Stock were formerly held by OCM GW Holdings, LLC (“Oaktree Holdings”), an affiliate of Oaktree Capital Management, prior to the conversion of all such preferred stock in December 2009. Mr. Keel has been re-elected to our Board each year since his initial appointment. He received a Bachelor of Science

degree and a Master of Science degree in Geology from the University of Alabama and a Masters of Business Administration degree from the Owen School of Management at Vanderbilt University.

     As our Chief Executive Officer and President, Mr. Keel gives our Board insight and in-depth knowledge of our industry and our specific operations and strategies. He also provides leadership skills, executive management experience and knowledge of our local community and business environment, which he has gained through his long career in the oil and gas industry.

     Lee B. Backsen became a member of our Board on June 1, 2005. Mr. Backsen is an oil and gas exploration consultant with 47 years experience in the industry holding senior exploration management positions with Burlington Resources Inc., UMC Petroleum Corporation, General Atlantic Gulf Coast Inc., Kerr-McGee Corporation, Pelto Oil Company, Spectrum Oil and Gas Company and Shell Oil Company. From 2004 to 2008, Mr. Backsen was Vice President—Exploration for Andex Resources, LLC, a private oil and gas producing company, and was responsible for sourcing exploration joint ventures. From 2000 to 2009, Mr. Backsen was a consulting geologist for Andex Resources, LLC, Continental Land & Fur Co., Inc., Drilling Risk Management Inc and Grant Geophysical, Inc., for whom he screened exploratory prospects in the Texas and Louisiana Gulf Coast Basins. Mr. Backsen has been re-elected to our Board each year since his initial appointment. He earned a Bachelor of Science degree and Masters of Science degree in Geology from Iowa State University.

     Mr. Backsen provides our Board with broad oil and gas exploration and operational experience through his many years of service in the industry. Mr. Backsen also brings to our Board geological and geophysical, general engineering, management and corporate governance expertise.

     B. James Ford became a member of our Board on February 28, 2005. Mr. Ford is a Co-Portfolio Manager and Managing Director of Oaktree Capital Management. Before joining Oaktree Capital Management in June 1996, Mr. Ford was a consultant with McKinsey & Co., and a financial analyst in the Investment Banking Department of PaineWebber Incorporated. He currently serves as a director of EXCO Resources, Inc. (“EXCO”), and Cequel Holdings. Mr. Ford serves on the Board for several privately-held companies in which Oaktree Capital Management has invested. He also serves as an active member of the Children’s Bureau Board and as trustee of the Stanford Graduate School of Business Trust. Mr. Ford was initially appointed to our Board in 2005 by the holders of our Series G Preferred Stock pursuant to the rights granted the holders of such stock as set forth in the Certificate of Designations for such stock. The majority of shares of Series G Preferred Stock were formerly held by Oaktree Holdings prior to the conversion of all such preferred stock in December 2009. Mr. Ford has been re-elected to our Board each year since his initial appointment. He earned a Bachelor of Arts degree in Economics from the University of California at Los Angeles and a Masters of Business Administration degree from the Stanford University Graduate School of Business.

     Mr. Ford has extensive historical knowledge about our company through his role at Oaktree Capital Management. Through his role at Oaktree Capital Management and his service as a director of multiple public and private companies, Mr. Ford also brings to our Board investment and financial experience, experience analyzing risks and strategy of energy investments, and guidance regarding corporate governance matters.

     Lon McCain became a member of our Board on June 1, 2005. Between July 2009 and August 2010, Mr. McCain served as the Chief Financial Officer and Executive Vice President of Ellora Energy, Inc, an independent oil and gas exploration and production company. Before joining Ellora Energy Inc. in 2009, he previously served as Vice President, Treasurer and Chief Financial Officer of Westport, a large, publicly traded exploration and production company, from 2001 until the sale of that company to Kerr-McGee Corporation in 2004. From 1992 until joining Westport, Mr. McCain was Senior Vice President and Principal of Petrie Parkman & Co., an investment banking firm specializing in the oil and gas industry. From 1978 until joining Petrie Parkman, Mr. McCain held senior financial management positions with Presidio Oil Company, Petro-Lewis Corporation and Ceres Capital. He currently serves as a director of the publicly held Cheniere Energy Partners L.P. and Continental Resources Inc. Mr. McCain was an Adjunct Professor of Finance at the Daniels College of Business of the University of Denver from 1982 to 2004. Mr. McCain has been re-elected to our Board each year since his initial appointment. He received a Bachelor of Science degree in Business Administration and a Masters of Business Administration/Finance from the University of Denver.

     Mr. McCain provides our Board with extensive investment and financial experience in the oil and gas industry as well as accounting and audit experience. He also provides leadership skills, corporate governance expertise and knowledge of our business environment, which he has gained through his long career in the oil and gas industry. Mr. McCain brings years of public company management and board experience, including serving on audit committees of various energy and energy-related companies.

     Adam C. Pierce was appointed to our Board on January 24, 2008. Mr. Pierce is a Senior Vice President of Oaktree Capital Management. Prior to joining Oaktree Capital Management in 2003, he was an investment banker with J.P. Morgan Chase & Company. Mr. Pierce does not serve on any other boards of directors of a publicly traded company. Mr. Pierce was initially appointed to our Board in 2008 by the holders of our Series G Preferred Stock pursuant to the rights granted the holders of such stock as set forth in the Certificate of Designations for such stock. The majority of shares of Series G Preferred Stock were formerly held by Oaktree Holdings prior to the conversion of all such preferred stock in December 2009. Mr. Pierce has been re-elected to our Board each year since his initial appointment. Mr. Pierce received a Bachelor of Arts degree in Economics with a focus on Business Administration from Vanderbilt University.

     Mr. Pierce provides our Board financial market insight through his experiences in the investment banking industry. As a director of several private companies, Mr. Pierce brings to our Board leadership skills including investment and financial experience, and experience analyzing risks and strategy for energy investments.

     Cassidy J. Traub was appointed to our Board effective December 7, 2009 pursuant to a resolution adopted by our Board, which increased the number of board members to a total of six directors. Mr. Traub is a Vice President of Oaktree Capital Management. Prior to joining Oaktree Management in 2005, Mr. Traub served as an Analyst at UBS Investment Bank, from July 2003 to July 2005, where he was involved in various aspects of mergers and acquisitions, leveraged buyouts, initial public offerings and debt financings. Mr. Traub does not service on any other boards of directors of a publicly traded company. Mr. Traub was re-elected to our Board in 2010. Mr. Traub received an A.B. degree in Economics with an emphasis in Finance from Princeton University.

     Mr. Traub provides our Board experience in finance and investment banking as well as valuable strategic insight.

     Ni Zhaoxing became a member of our Board on December 22, 2010. In 2007, Mr. Ni established ACEC, a company focused on investment in oil and gas exploration projects and companies in the U.S. In 1992, Mr. Ni founded ACEC’s parent company, Shanghai Zhong Rong Property Group, Ltd. (“Zhong Rong Group”), a private multi-faceted Shanghai-based company with operations in real estate, energy, mining, commercial property management and financial investments. Mr. Ni currently serves as Chairman and Chief Executive Officer of both Zhong Rong Group and ACEC. He also serves as an as a Member of the World Trade Center Association, Vice-Chairman of the World Eminence Chinese Business Association, and Deputy Director of the Market Committee of China General Chamber of Commerce. Mr. Ni was initially appointed to our Board in 2010 by ACEC in its capacity as holder of our Series I Preferred Stock pursuant to the rights granted the holders of such stock as set forth in the Certificate of Designations for such stock. All of the shares of Series I Preferred Stock were formerly held by ACEC prior to the conversion of all such preferred stock in December 2010. Mr. Ni earned a Master’s degree in Archaeology at the Central Academy of Fine Arts in China.

     Through his role at ACEC and his experience with both U.S. and international investments in oil and gas exploration, Mr. Ni brings to our Board investment and financial experience including making and managing energy investments, and analyzing risks and strategy of individual energy projects.

OUR BOARD RECOMMENDS A VOTE “FOR” THE ELECTION
OF EACH OF THE NOMINEES FOR DIRECTOR.

PROPOSAL 2:
APPROVAL OF AMENDMENT #1 TO THE
AMENDED AND RESTATED 2005 STOCK INCENTIVE PLAN

Overview and Reason for Amendment

     We currently sponsor and maintain the Amended and Restated 2005 Stock Incentive Plan (the “Plan”), as last amended and approved by our stockholders in 2008, for purposes of providing our employees, directors and consultants with an opportunity to earn or purchase our equity securities and to provide incentives to such individuals which are linked directly to the increase in our stock value.

     The Plan was last approved by our stockholders in 2008, with reservation of 3,852,500 shares of our Common Stock to be used in connection with the granting of awards pursuant to the Plan. On March 1, 2011 our Board approved a first amendment to the Plan which would authorize an additional 2,000,000 shares of our Common Stock to be utilized for awards pursuant to the Plan (the “First Amendment”). Accordingly, we request that our stockholders approve an increase in the maximum number of shares of Common Stock that may be granted as equity incentive awards under the Plan from 3,852,500 to 5,852,500. If our stockholders approve this Proposal No. 2 and First Amendment to the Plan, we intend to file, pursuant to the Securities Act of 1933, as amended, a registration statement on Form S-8 to register the additional shares available for issuance under the Plan.

     The use of equity-based awards under the Plan has been a key component of our compensation program since we implemented the plan in 2005 (as described below). The awards granted under the Plan assist us in attracting and retaining capable, talented individuals to serve in the capacity of employees, officers and directors. Plan awards also align employees’ interests with those of the shareholders in enhancing shareholder value. The Plan authorized us to issue up to 3,852,500 shares of Common Stock. As of March 31, 2011, only 67,759 shares were available for issuance as awards under the Plan, meaning that substantially all of the authorized and available shares have now been issued under the Plan. Accordingly, our Board has determined that there are not sufficient shares available for issuance under the Plan to meet our needs for future grants during the coming years, and an increase in available shares is necessary to continue granting incentive performance and retention awards to eligible participants to assist us in retaining a competitive edge in today’s volatile business environment.

     Our stockholders are only voting to approve the increase in the number of shares of Common Stock approved for issuance under the Plan in this Proposal No. 2. The Plan shall continue regardless of the outcome of the stockholder vote. Further, failure of our stockholders to approve this Proposal No. 2 will not affect the rights of existing award holders under the Plan or under any previously granted awards under the Plan. However, if this Proposal No. 2 is not approved, we do not expect to be able to issue further meaningful or valuable equity-based incentive awards pursuant to the Plan. As such awards have traditionally been a fundamental element of our compensation philosophy of “pay for performance,” and we believe that such awards further our goal of providing a long-term incentive for our employees and directors by motivating them to increase our Common Stock’s value, we will be required to reevaluate our compensation program in general.

Summary of the Terms of the Plan

     The following is a summary of the principal terms and provisions of the Plan. The full text of the Plan is attached to this proxy statement as Exhibit A. Please refer to Exhibit B for the full text of the First Amendment.

     Summary of the Plan

     The purpose of the Plan is to enable us and our parent and subsidiary corporations to obtain and retain the services of the types of employees, directors, and consultants who will contribute to our long-range success, and to provide share value-related incentives to advance our interests, and those of our stockholders.

     GulfWest Energy Inc., a Texas corporation (“GulfWest”), our predecessor corporation, adopted the GulfWest Energy Inc. 2005 Stock Incentive Plan, effective February 28, 2005. A majority of GulfWest’s stockholders

approved the Plan on June 1, 2005. In connection with GulfWest’s Delaware reincorporation and merger with and into us, GulfWest’s wholly owned subsidiary, we assumed GulfWest’s obligations under the Plan.

     The Plan provides for the grant of the following:

	•		stock options, including both incentive stock options (“ISOs”) within the meaning of Section 422 of the Code, and options not intended to qualify as ISOs (referred to as nonstatutory stock options (“NSOs”));
	•		restricted stock awards;
	•		unrestricted stock awards;
	•		performance awards;
	•		stock appreciation rights (“SARs”); and
	•		dividend equivalent rights.

We refer to these collectively as “Awards.” Awards may not be granted under the Plan after February 24, 2015.

     The Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended, and is not a qualified plan under Section 401(a) of the Code.

     Shares Subject to the Plan

     If this Proposal No. 2 is approved, the maximum aggregate amount of our Common Stock that may be issued upon exercise of all Awards under the Plan, including ISOs, may not exceed 5,852,500 shares. No employee may currently be granted options covering more than 500,000 shares of Common Stock during any calendar year.

     As of March 31, 2011, the Plan covers up to a maximum of 3,852,500 shares of our Common Stock, 3,784,741 shares of our Common Stock were subject to outstanding awards under our Plan, and 67,759 shares of Common Stock were available for future awards. Of the shares of our Common Stock available for issuance, the full number would be eligible to be granted as Options, SARS, or any other Award available for issuance under the Plan. As of March 31, 2011, the closing price of a share of our Common Stock was $4.08.

     Shares of Common Stock available under the Plan may be authorized but unissued shares of Common Stock or reacquired Common Stock bought on the market or acquired pursuant to any repurchase right or other forfeiture provision of an Award. If any Awards expire, are forfeited or terminate, the shares may be added back into the Plan pool and reissued under the Plan. The Plan provides that the Administrator (defined below) will make appropriate proportionate adjustments to reflect any change in the number of issued shares of Common Stock or change in the value of the Common Stock resulting from any change in our outstanding Common Stock due to any of the following:

•		merger
•		consolidation
•		reorganization
•		recapitalization
•		reincorporation
•		stock split
•		liquidating dividend
•		stock dividend
•		dividend in property other than cash
•		combination of shares
•		exchange of shares
•		change in corporate structure or other transaction not involving the receipt of consideration by us

     The Plan does not require such adjustments be made on account of the conversion of securities convertible into or exchangeable for shares of our Common Stock.

     Eligibility

     We may grant Awards to employees, consultants and directors of us or our parent or subsidiary corporations as selected by the Administrator, although only employees of us or our parent or a subsidiary may receive ISOs. We currently have two directors, excluding Mr. Keel, our President, six officers and approximately 58 employees eligible to participate in the Plan; we do not have any consultants participating in the Plan at this time.

     Administration

     Our Compensation Committee (the “Administrator”) will administer the Plan. The Compensation Committee serves at the discretion of the Board. The Administrator will have the authority to determine the terms and conditions of any agreements evidencing any Awards and to adopt, alter and rescind rules and regulations relating to the Plan. The Administrator will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, who will be granted Awards and the types of Awards that may be granted, the time or times at which the Awards may be exercised, and whether and under what circumstances an Award may be exercised.

     Amendment and Termination

     The Administrator may amend or terminate the Plan at any time, provided that any amendment requiring stockholder approval under applicable law or any Nasdaq or other securities exchange listing rules will not be effective unless approved by the stockholders. No action of the Administrator will impair any Award previously granted under the Plan without the Award holder’s consent. Unless terminated earlier by the Board, the Plan will terminate automatically on February 24, 2015.

     Stock Options

     The Plan authorizes the grant of ISOs and NSOs (referred to collectively as “Options”), both of which are exercisable for shares of our Common Stock. The Administrator will determine the price that must be paid to purchase Common Stock upon exercise of an Option, subject to adjustment as explained under “Securities Subject to the Plan.” The exercise price of an ISO may not be less than 100% of the Common Stock’s fair market value at the time of grant. If an ISO is granted to an employee who holds more than 10% of the total combined voting power or value of all classes of our stock (including our parent corporation and any of our subsidiaries), the Option’s exercise price may not be less than 110% of the fair market value per share of the Common Stock at the time of grant. The exercise price of an NSO may not be less than 35% of the Common Stock’s fair market value at the time of the grant. If the exercise price of an NSO is less than the fair market value per share of the Common Stock on the date of the Option grant, the NSO will be considered “nonqualified deferred compensation” within the meaning of Section 409A of the Code and will be subject to additional requirements. See “Certain Federal Income Tax Consequences” below for a more detailed explanation of Section 409A of the Code. Although the Plan permits granting NSOs at less than fair market value, we anticipate granting only Options with an exercise price at least equal to the fair market value of our Common Stock on the date of grant. If, however, the exercise price of an Option is less than fair market value or the Option is modified at a time when fair market value is higher than the stated exercise price, the Plan imposes additional restrictions that are intended to satisfy federal tax requirements applicable to nonqualified deferred compensation.

     Upon exercise of an Option, the holder may pay all or a portion of the Option’s exercise price in cash (including certified check or bank check), or in the discretion of the Administrator:

	•		by surrendering (or attesting to the ownership of) shares of Common Stock already owned by the holder;
	•		by a broker-assisted cashless exercise;

	•		by full recourse promissory note (although applicable law may require payment of the Common Stock’s par value in cash); or
	•		in any other form of legal consideration acceptable to the Administrator.

     The Administrator will determine the period during which the holder may exercise an Option. The Option period for an ISO may not be more than 10 years from the date of grant. However, if the Option holder possesses more than 10% of the total combined voting power or value of all classes of our stock (including its parent corporation and subsidiaries), the Option period may not exceed five years from the date of grant.

     The agreement evidencing the grant of each Award under the Plan will set forth the terms and conditions applicable to the Award upon termination of continuous service with us. Unless otherwise determined by the Administrator, or as otherwise provided in the Option agreement or an employment agreement approved by the Administrator, any unvested portion of any outstanding Option held by a participant at the time of termination of his or her employment or other service for any reason other than cause will be forfeited and will expire upon the close of business on the date of termination. However, subject to the discretion of the Administrator, upon termination of an Option holder’s employment or service for any reason other than cause, the holder (or his or her beneficiary) generally may exercise the Option, to the extent vested and exercisable as of the date of such termination, until the earliest of:

	•		one year after the date of the Option holder’s termination of employment or service by reason of death or disability;
	•		three months after the date of the Option holder’s termination of employment or service for any reason other than cause, death or disability;
	•		if the Option holder resigns from employment and is then employed by a competitor of ours, then the later of (1) the 30th day after such termination or (2) his or her commencement of employment with such competitor; or
	•		the last day of the Option period.

     Notwithstanding the foregoing, if an Option holder’s employment or service is terminated for cause, all outstanding Options held by the holder will be forfeited (whether or not vested) and expire as of the beginning of business on the date of such termination.

     Restricted Stock Awards

     The Plan authorizes the grant of restricted stock awards, which are awards of shares of Common Stock subject to forfeiture and transferability restrictions for a specified period. The Administrator may award or sell restricted stock awards at a purchase price determined by the Administrator. The participant may pay the consideration for such Common Stock in cash at the time of purchase, or in any other form of legal consideration acceptable to the Administrator in its discretion that the Administrator determines equals the fair market value of such Common Stock. The recipient becomes vested and the shares of restricted stock become nonforfeitable and transferable pursuant to the terms and conditions of the restricted stock agreement. The Administrator has the authority to establish the terms and conditions of restricted stock awards, including the period over which such Awards will vest and become nonforfeitable and whether we have the right to reacquire or repurchase the shares upon termination of the recipient’s service. Generally, to the extent that a participant is not vested in the shares subject to a restricted stock award before termination of employment, death or disability, the participant will forfeit such shares or the Administrator, in its discretion, may repurchase unvested shares for an amount equal to the lesser of any purchase price paid by the participant (other than services) or the current fair market value. The Administrator, in its sole discretion, may grant a concurrent cash award payable in an amount equal, in whole or in part, to the estimated after-tax amount required to satisfy applicable federal, state or local tax withholding obligations arising from the receipt and deemed vesting of restricted stock for which an election under Section 83(b) of the Code may be required. See “Certain Federal Income Tax Consequences” below.

     Unrestricted Awards

     The Plan authorizes the Administrator, in its sole discretion, to grant unrestricted awards, pursuant to which the recipient may receive shares of our Common Stock free of vesting and transfer restrictions. Such Awards may be granted or sold for past services or other valid consideration, or in lieu of cash compensation. Unless the recipient elects to defer receipt, the recipient will receive the beneficial ownership rights of our Common Stock no later than 2 1/2 months after either the recipient’s or our taxable year for which the recipient provided services rendered as consideration.

     Performance Awards

     The Plan authorizes the Administrator, in its sole discretion, to grant performance awards, either independent of or in conjunction with the granting of other awards. A performance award entitles the recipient to receive Common Stock or hypothetical common share units upon the attainment of specified performance goals. Unless otherwise provided by the Administrator, the recipient’s rights in all such performance awards will cease upon termination of employment or service. The Administrator in its sole discretion will determine the performance goals applicable to each performance award with reference to one or more of the following:

•		revenue
•		production;
•		earnings before interest, taxes,
		depreciation and amortization (EBITDA);
•		earnings before interest, taxes,
		depreciation, and exploration expenses (EBITDAX);
•		funds from operations;
•		funds from operations per share;
•		operating income;
•		pre or after tax income;
•		cash available for distribution;
•		cash available for distribution per share;
•		net earnings;
•		earnings per share;
•		return on equity;
•		return on assets;
•		return on invested capital;
•		share price performance;
•		improvements in our
		attainment of expense levels;
•		implementing or completion of critical projects;
•		improvement in cash-flow (before or after tax)

     Stock Appreciation Rights

     A stock appreciation right (“SAR”) is an Award that gives a participant the right at some specific time in the future to receive a payment equal to the appreciation in the value of a certain number of shares of Common Stock. In general, a SAR is settled in stock, cash, or a combination thereof. The Administrator may grant SARs independently of any Option or in conjunction with all or any part of an Option granted under the Plan, upon such terms and conditions as the Administrator may determine. Upon exercise, an SAR entitles the holder to receive a payment equal to the positive difference between the fair market value of the shares of Common Stock covered by the SAR on the date the SAR is exercised and the exercise price for such shares of Common Stock as stated in the SAR agreement. The exercise price of a SAR will not be less than 100% of the fair market value of the Common Stock on the grant date, or will equal the exercise price of the Option granted in connection with such SAR. SARs that do not provide for the deferral of compensation under Section 409A of the Code will be settled in shares of Common Stock, valued at fair market value on the exercise date. Such payment with respect to other SARs will be made as specified in the applicable SAR agreement and the Plan, in the form of Common Stock, cash or a combination of both, as determined by the Administrator.

     Dividend Equivalent Rights

     The Plan authorizes the Administrator, in its sole discretion, to grant a dividend equivalent right, which allows the eligible recipient to receive credits based on cash dividends that would be paid on the shares of our Common Stock as specified in the grant. A dividend equivalent right may be granted independently or in conjunction with other Awards.

     Transferability, Dividend and Voting Rights

     The Plan provides that ISOs are not transferable other than by will or the laws of descent and distribution. NSOs may not be transferred other than by will, the laws of descent and distribution or, at the discretion of the Administrator, to certain permitted transferees. Other Awards (other than performance awards that are not transferable) are generally transferable at the discretion of the Administrator and as set forth in the applicable Award agreement. A holder of an Award will not have dividend rights unless the recipient’s Award includes a dividend equivalent right.

     Withholding

     The Plan provides that, in addition to our right to withhold from any compensation payable to a participant and subject to the discretion of the Administrator, a participant may pay all required local, state and federal withholding taxes associated with the exercise of an Award in cash, by surrendering shares already owned, by our withholding shares otherwise issuable pursuant to the Award being exercised, or by executing a recourse promissory note, unless the Award agreement provides otherwise.

     Corporate Transaction

     In the event of a “Change in Control” (as defined in the Plan), our dissolution or liquidation or any corporate separation or division, to the extent permitted by applicable law (but otherwise in the sole discretion of the Administrator), we may provide for:

	•		the continuation of outstanding Awards by us (if we are the surviving entity);
	•		the assumption of the Plan and outstanding Awards by the surviving entity or its parent;
	•		the substitution by the surviving entity or its parent of substantially similar awards;
	•		cancelling outstanding Awards in exchange for cash, stock or any combination of both;
	•		in the case of a Change in Control, accelerated vesting and exercisability of Awards on the effective date of such Change in Control; or
	•		cancelling outstanding Awards without payment of any consideration, subject to a right to exercise before such cancellation.

U.S. Federal Income Tax Consequences

     The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under the Plan and the disposition of shares acquired pursuant to the exercise of such Awards and is intended to reflect the current provisions of the Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local or payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.

     Stock Options

     A participant will not recognize taxable income upon grant of an NSO or an ISO and we will not be entitled to a tax deduction with respect to such grant. On exercise of an ISO, the Option holder will not recognize any income and we will not be entitled to a deduction. However, the amount by which the fair market value of the shares on the exercise date of an ISO exceeds the exercise price generally will constitute an item of adjustment for alternative minimum tax purposes and may therefore result in alternative minimum tax liability to the Option holder. Generally, upon exercise of an NSO the excess of the fair market value of our Common Stock on the date of exercise over the exercise price will be taxable as ordinary income to the Option holder. Subject to any deduction

limitation under Section 162(m) of the Code (which is discussed below), we will be entitled to a federal income tax deduction in the same amount and at the same time as the Option holder recognizes ordinary income (or if we comply with applicable income reporting requirements, when the Option holder should have reported the income). The Option holder’s tax basis for the acquired shares will be the sum of the Option exercise price and the taxable income recognized. An Option holder will recognize long or short term capital gain or loss on the subsequent disposition of shares acquired upon exercise of an NSO in an amount equal to the difference between the amount realized and the tax basis of such shares.

     The disposition of shares acquired upon exercise of an ISO will ordinarily result in capital gain or loss. However, if the holder disposes of such shares within two years after the date of grant of the ISO or one year after the date of exercise (a “disqualifying disposition”), the holder generally will recognize ordinary income in the amount of the excess of the fair market value of the shares on the date the Option was exercised over the Option exercise price. Any excess of the amount realized by the holder on the disqualifying disposition over the fair market value of the shares on the date of exercise of the Option will generally be capital gain. We will generally be entitled to a tax deduction equal to the amount of ordinary income recognized by a holder.

     If an Option is exercised through the use of shares previously owned by the holder, such exercise generally will not be considered a taxable disposition of the previously owned shares and thus no gain or loss will be recognized with respect to such shares upon such exercise. However, if the Option is an ISO, and if the previously owned shares were acquired on the exercise of an ISO or other tax-qualified stock option and the holding period requirement for those shares is not satisfied at the time they are used to exercise the Option, such use will constitute a disqualifying disposition of the previously owned shares resulting in the recognition of ordinary income in the amount described above. The value of vested shares received in excess of the number of surrendered shares will be taxable as ordinary income to the Option holder, and we will be entitled to a corresponding tax deduction. If an Option holder pays all or part of the exercise price of an NSO by tendering shares owned by the Option holder, the tax consequences described above for NSOs apply except that the shares received upon such exercise which are equal in number to the shares surrendered will have the same tax basis and holding periods as the surrendered shares. The additional shares received upon such exercise will have a tax basis equal to the amount of ordinary income recognized on such exercise and a holding period commencing on the day following the date of recognition of such income.

     Generally, the shares received on exercise of an Option under the Plan are not subject to restrictions on transfer or risks of forfeiture and, therefore, the holder will recognize income on the date of exercise of an NSO. Special rules may apply to treat shares acquired by an Option holder who is subject to restrictions under Section 16 of the Exchange Act as subject to a substantial risk of forfeiture.

     Restricted Stock Awards and Unrestricted Stock Awards

     Shares granted under the Plan may, as determined by the Administrator, be subject to rights of repurchase and other transfer restrictions. The tax consequences of shares granted under the Plan depend on whether the shares are subject to restrictions and, if so, whether the restrictions are deemed to create a “substantial risk of forfeiture” under Section 83 of the Code. For example, shares that are subject to our right to repurchase the shares at a price lower than fair market value, which right lapses over a period of continued employment, are considered subject to a substantial risk of forfeiture under Section 83.

     If shares are not subject to a substantial risk of forfeiture, the recipient will recognize taxable ordinary income equal to the fair market value of the shares in the year of grant (or receipt if deferred) less any amount paid for the shares. If the shares are subject to a substantial risk of forfeiture, the recipient normally will recognize taxable ordinary income as and when the substantial risk of forfeiture lapses, in the amount of the fair market value at that time of the shares no longer subject to the substantial risk of forfeiture, less any amount paid for such shares.

     A recipient of shares subject to a substantial risk of forfeiture may make an election under Code Section 83(b), referred to as a “Section 83(b) election,” to recognize ordinary income in the year the recipient purchases or receives the restricted shares, rather than waiting until the substantial risk of forfeiture lapses. If the recipient makes a Section 83(b) election, the recipient will recognize as ordinary income in the year the recipient purchases the

shares the difference, if any, between the fair market value of the shares on the purchase date and the purchase price paid. The recipient will then not be required to recognize any income when the substantial risk of forfeiture lapses.

     Generally, with respect to employees, we are required to withhold from compensation an amount based on the ordinary income recognized. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a business expense deduction equal to the taxable ordinary income realized by the recipient. Upon disposition of the shares, the recipient will recognize a capital gain or loss equal to the difference between the amount received and the sum of the amount paid for the shares plus any amount recognized as ordinary income upon grant or vesting of the shares. The gain or loss will be long or short-term depending on how long the recipient held the shares.

     Performance Awards

     Performance awards will generally be treated in the same manner as restricted stock for federal income tax purposes. However, no Section 83(b) election is permitted with respect to performance awards granted in the form of units.

     Section 162(m) of the Code

     Section 162(m) of the Code generally disallows a federal income tax deduction to any publicly held corporation for compensation paid in excess of $1.0 million in any taxable year to a “covered employee.” The Internal Revenue Service recently issued guidance under which it interprets the term “covered employee” as an employee who, as of the last day of the taxable year, is our chief executive officer or one of our three highest compensated executive officers for the taxable year (other than our chief executive officer or our chief financial officer). For this purpose, compensation attributable to Awards under the Plan is included in the $1.0 million limitation. Section 162(m) provides an exception, however, for “performance-based compensation,” the material terms of which are disclosed to and approved by our stockholders. We have structured and intend to implement and administer the Plan so that compensation resulting from Options, SARs and performance awards can qualify as “performance-based compensation.” However, we have not requested a ruling from the Internal Revenue Service or an opinion of counsel on this issue, and the Plan gives the Administrator discretion to grant Awards that do not constitute performance-based compensation.

     Section 280G of the Code

     Under certain circumstances, the accelerated vesting or exercise of Options or SARs or the accelerated lapse of restrictions with respect to other Awards in connection with a Change in Control might be deemed an “excess parachute payment” to certain participants for the purposes of the golden parachute tax provisions of Sections 280G and 4999 of the Code. To the extent it is so considered, the participant may be subject to a 20% excise tax and we may be denied a federal income tax deduction.

     Section 409A of the Code

     Section 409A of the Code imposes restrictions on non-qualified deferred compensation plans. These requirements include restrictions on the timing of elections to defer and the timing of distributions, and prohibitions on the acceleration of distributions. Failure to satisfy these requirements could result in the immediate taxation of the arrangement, the imposition of an additional 20% income tax on the participant and the possible imposition of interest and penalties on the unpaid tax. Treasury regulations generally provide that the type of equity incentives provided under the Plan will not be considered non-qualified deferred compensation. However, some Awards could be covered by Section 409A of the Code. For example, the grant or modification of an Option or SAR with an exercise price below than the fair market value of the underlying Common Stock at grant could constitute non-qualified deferred compensation, as could unrestricted stock awards that have been deferred by the participant. We make no representation as to whether any Award granted under the Plan will be subject to these rules.

New Plan Benefits

     Awards will generally be made at the sole discretion of our Administrator, the Compensation Committee. Under our Plan, we may issue options to acquire Common Stock and shares of Common Stock pursuant to restricted stock awards pursuant to any terms under which we deem appropriate, and we may grant such awards in amounts and at times at which we deem appropriate. Therefore the Awards that may be issued to any one individual or any group pursuant to the Plan can not be determined with any certainty at this time.

OUR BOARD RECOMMENDS A VOTE “FOR”
APPROVAL OF AMENDMENT #1.

PROPOSAL 3:
APPROVAL OF AMENDMENT #2 TO THE
AMENDED AND RESTATED 2005 STOCK INCENTIVE PLAN

Overview and Reason for Amendment

     We currently sponsor and maintain the Amended and Restated 2005 Stock Incentive Plan (the “Plan”), as last approved by our stockholders in 2008, for purposes of providing our employees, directors and consultants with an opportunity to earn or purchase our equity securities and to provide incentives to such individuals which are linked directly to the increase in our stock value.

     In order to comply with Section 162(m) of the Code, the Plan must contain a limitation on the number of underlying shares of Common Stock that may relate to a grant of an Award (as defined in Proposal No. 2 above) to any one individual during a single calendar year (the “Annual Limitation”). The Plan currently has an Annual Limitation of 500,000 shares. On January 20, 2011 our Compensation Committee approved, and on March 1, 2011, the Compensation Committee recommended that the Board approve, and our Board did approve a second amendment to the Plan which would authorize us to increase this Annual Limitation to 750,000 shares of Common Stock per individual during any single calendar year (the “Second Amendment”). Accordingly, we request that our stockholders approve an increase in the Annual Limitation from 500,000 to 750,000.

     The Awards granted under the Plan assist us in attracting and retaining capable, talented individuals to serve in the capacity of employees, officers and directors. In recognition of the sizable increase in the number of outstanding shares of Common Stock in the company since 2009, our Board has determined that the current Annual Limitation of 500,000 no longer allows us to appropriately and competitively compensate certain executive officers with valuable equity-based awards. In light of the competitive nature of our business and the compensation packages for certain executives at peer companies at which we compete for executive talent, the Board has determined that an increase in the Annual Limitation is appropriate and necessary at this time.

     Our stockholders are only voting to approve the increase in the number of shares of Common Stock subject to the Annual Limitation in this Proposal No. 3. The Plan shall continue regardless of the outcome of the stockholder vote. Further, failure of our stockholders to approve this Proposal No. 3 will not affect the rights of existing award holders under the Plan or under any previously granted awards under the Plan. However, if this Proposal No. 3 is not approved, we anticipate that we will not be able to provide a meaningful equity-based compensation element to certain executive officers in the future.

Summary of the Terms of the Plan

     For a summary of the terms of the Plan, including, without limitation, information regarding Awards, shares of Common Stock available under the Plan, and eligibility for participation in the Plan, please see the summary information above in Proposal No. 2. The full text of the Plan is attached to this proxy statement as Exhibit A. Please refer to Exhibit C for the full text of the Second Amendment.

U.S. Federal Income Tax Consequences

     For a description of the tax consequences to both participants in the Plan and to us, please see the summary information above in Proposal No. 2.

New Plan Benefits

     Please see the section above in Proposal No. 2 titled “New Plan Benefits.”

OUR BOARD RECOMMENDS A VOTE “FOR”
APPROVAL OF AMENDMENT #2.

PROPOSAL 4:
RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP

     With authority granted by our Board, the Audit Committee has appointed Grant Thornton LLP as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2011. Although stockholder ratification of the selection of Grant Thornton LLP is not required, the Audit Committee and our Board consider it desirable for our stockholders to vote upon this selection. Even if the selection is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it believes that such a change would be in the best interests of our stockholders and us.

     Representatives from Grant Thornton will be present at the Annual Meeting. These representatives will have the opportunity to make a statement if they so desire, and they are expected to be available to respond to appropriate questions.

Principal Accountant Fees and Services

     The following is a summary billed for 2009 and 2010 for audit and other professional services provided to us by Grant Thornton.

		2009				2010
Audit Fees(1)		$	548,134				392,586
Audit-Related Fees			—
Tax Fees			—
All Other Fees(2)
Total		$	548,134				392,586

     The Audit Committee pre-approved all of Grant Thornton’s fees for 2009 and 2010 through a formal engagement letter. The policy of the Audit Committee and our Board, as applicable, is to pre-approve all services by our independent registered public accounting firm. The Audit Committee has adopted a pre-approval policy that provides guidelines for the audit, audit-related, tax and other non-audit services that may be provided by our independent registered public accounting firm. The policy (a) identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the independent registered public accounting firm’s independence is not impaired; (b) describes the audit, audit-related, tax and other services that may be provided and the non-audit services that are prohibited; and (c) sets forth the pre-approval requirements for all permitted services. Under the policy, all services to be provided by our independent registered public accounting firm must be pre-approved by the Audit Committee.

OUR BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF GRANT THORNTON AS
OUR INDEPENDENT AUDITORS FOR THE 2011 FISCAL YEAR.

AUDIT COMMITTEE REPORT

     The Audit Committee is appointed by the Board of Directors of Crimson Exploration Inc. to assist the Board in fulfilling its oversight responsibilities relating to Crimson Exploration Inc.’s accounting policies, reporting policies, internal controls, compliance with legal and regulatory requirements, and the integrity of Crimson Exploration Inc.’s financial reports. The Audit Committee manages Crimson Exploration Inc.’s relationship with its independent registered public accounting firm, which is ultimately accountable to the Audit Committee.

     The Audit Committee has reviewed and discussed with management and with Grant Thornton LLP, the independent registered public accounting firm, Crimson Exploration Inc.’s audited financial statements as of and for the year ended December 31, 2010. The Audit Committee has also discussed with Grant Thornton LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees).

     Grant Thornton LLP submitted to the Audit Committee the written disclosures and the letter required by Rule 3526 of the Public Company Accounting Oversight Board, Communication with Audit Committees Concerning Independence. The Audit Committee discussed with Grant Thornton LLP such firm’s independence. The Audit Committee has also considered whether the provision of non-audit services to Crimson Exploration Inc. by Grant Thornton LLP is compatible with maintaining their independence.

     Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements referred to above be included in Crimson Exploration Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011, for filing with the SEC.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information as of March 25, 2011 regarding the beneficial ownership of Common Stock by each person known to us to own beneficially more than 5% of the outstanding Common Stock, each director, each director nominee, our named executive officers, and our directors and executive officers as a group. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock owned by them, unless otherwise noted.

     Beneficial ownership is determined in accordance with the rules of the SEC. For the purpose of calculating the number of shares of Common Stock beneficially owned by a stockholder and the percentage ownership of that stockholder, shares of Common Stock subject to options that are currently exercisable or exercisable within 60 days of March 25, 2011 by that stockholder are deemed outstanding.

		Amount and Nature of
Name and Address of Beneficial Owner		Beneficial Ownership				Percent
Allan D. Keel(1,2)			852,715				2.0
E. Joseph Grady(2,3)			326,549				1.0
A. Carl Isaac (2, 4)			62,326				*
Jay S. Mengle(2,5)			264,610				*
Thomas H. Atkins(2,6)			176,082				*
B. James Ford(7,8)			—				*
Adam C. Pierce(7,8)			—				*
Cassidy J. Traub(7,8)			—				*
Lee B. Backsen(2,9)			65,204				*
Lon McCain(2,9)			45,204				*
Ni Zhaoxing (12,13,14)
All current directors and officers as a group (11 persons)(10)			1,982,491				4.3
Oaktree Holdings(8,11)			15,537,344				34.4
America Capital Energy Corporation(13,15)			6,000,000				13.3

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

     Based solely on a review of the copies of Forms 4 and 5 furnished to us, or written representations from reporting persons that all reportable transactions were reported, we believe that during 2010 all of our executive officers, directors and greater than 10% holders filed the reports required to be filed under Section 16(a) on a timely basis under Section 16(a), other than (1) Form 4s due on August 17, 2010 reporting the grant of restricted shares of Common Stock to Messrs. Grady, Keel, Mengle, Price, Isaac and Atkins, (2) a Form 4 due on August 17, 2010 reporting the grant of stock options to Mr. Isaac, (3) Form 4s due on August 26, 2010 and September 2, 2010 reporting the purchases of Common Stock by Mr. Backsen, (4) a Form 4 due on March 2, 2010 reporting the withholding of shares to satisfy tax obligations upon the vesting of restricted shares for Mr. Grady and (5) Form 4s due on March 2, 2010 and August 3, 2010 reporting the withholding of shares to satisfy tax obligations upon the vesting of restricted shares for Mr. Atkins.

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
FOR THE 2012 ANNUAL MEETING

     Pursuant to the rules promulgated by the SEC, stockholders interested in submitting a proposal for inclusion in our proxy materials and for presentation at the 2012 Annual Meeting of Stockholders may do so by following the procedures set forth in Rule 14a-8 under the Exchange Act. In general, to be eligible for inclusion in our proxy materials, stockholder proposals must be received by us no later than December 19, 2011.

     In addition to the requirements of Rule 14a-8, and as more specifically provided for in our By-Laws, in order for a nomination of persons for election to our Board or a proposal of business to be properly brought before our annual meeting of stockholders, it must be either specified in the notice of the meeting given by or at the direction of our Board or by a stockholder entitled to vote and who complies with the notice procedures set forth in our By-Laws. A stockholder making a nomination for election to our Board or a proposal of business for the 2012 Annual Meeting of Stockholders must deliver proper notice to us at least 90 days but not more than 120 days prior to the anniversary date of the 2011 Annual Meeting of Stockholders. In other words, for a stockholder nomination for election to our Board or a proposal of business to be considered at the 2012 Annual Meeting of Stockholders, it should be properly submitted to us no earlier than January 18, 2012 and no later than February 17, 2012.

     For each individual that a stockholder proposes to nominate as a director, the stockholder’s written notice to us must include the candidate’s name, contact information, biographical information and qualifications. The request must also include the potential candidate’s written consent to being named in our proxy statement as a nominee and to serving as a director if nominated and elected. From time to time, the Nominating and Governance Committee may request additional information from the nominee or the stockholder. For additional information about the notice requirements for director nominations, see Section 3.2 of our By-Laws. For any other business that a stockholder desires to bring before an annual meeting, the stockholder notice must provide a brief description of such business, the reasons for conducting the business and any material interest in the business of the stockholder and any beneficial owner on whose behalf the stockholder has made the proposal. For additional information about the notice requirements for other stockholder business, see Section 2.7 of our By-Laws.

     Under Rule 14a-4(c) of the Exchange Act, our Board may exercise discretionary voting authority under proxies solicited by it with respect to any matter properly presented by a stockholder at the 2012 Annual Meeting of Stockholders that the stockholder does not seek to have included in our proxy statement if (except as described in the following sentence) the proxy statement discloses the nature of the matter and how our Board intends to exercise its discretion to vote on the matter, unless we are notified of the proposal on or before March 1, 2012, and the stockholder satisfies the other requirements of Rule 14a-4(c)(2). If we first receive notice of the matter after March 1, 2012, and the matter nonetheless is permitted to be presented at the 2012 Annual Meeting of Stockholders, our Board may exercise discretionary voting authority with respect to the matter without including any discussion of the matter in the proxy statement for the meeting. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with the requirements described above and other applicable requirements.

OTHER BUSINESS

     Our Board knows of no matter other than those described herein that will be presented for consideration at the Annual Meeting. However, should any other matters properly come before the Meeting or any adjournments thereof, it is the intention of the person(s) named in the accompanying Proxy to vote in accordance with their best judgment in the interest of our company and our stockholders.

ANNUAL REPORT

     A copy of the Annual Report on Form 10-K for the fiscal year ended December 31, 2010, but not including exhibits, is available at www.crimsonexploration.com. A copy of our Form 10-K, excluding exhibits, will be furnished at no charge to each person to whom a proxy statement is delivered upon the request of such person. Exhibits to the Annual Report on Form 10-K are available upon payment of a reasonable fee, which is limited to our expenses in furnishing the requested exhibit. Such requests should be directed to our Investor Relations department, Attn: Josh Wannarka, at 717 Texas Avenue, Suite 2900, Houston, Texas 77002, or call at (713) 236-7571

By Order of the Board of Directors,

Houston, Texas April 15, 2011		Allan D. Keel President and Chief Executive Officer

Exhibit A

CRIMSON EXPLORATION INC.

2005 STOCK INCENTIVE PLAN

Amended and Restated Effective as of August 15, 2008

1. Purpose; Eligibility.

     1.1 General Purpose. The name of this plan is the Crimson Exploration Inc. 2005 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to enable Crimson Exploration Inc., a Delaware corporation (the “Company”), and any Affiliate to obtain and retain the services of the types of Employees, Consultants and Directors who will contribute to the Company’s long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all Shareholders of the Company.

     1.2 Eligible Award Recipients. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates.

     1.3 Available Awards. The purpose of the Plan is to provide a means by which eligible recipients of Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of one or more of the following Awards: (a) Incentive Stock Options, (b) Nonstatutory Stock Options, (c) Restricted Awards, (d) Unrestricted Awards, (e) Performance Awards, (f) Stock Appreciation Rights and (g) Dividend Equivalent Rights.

2. Definitions.

     2.1 “409A Award” means a grant or an award that is considered “nonqualified deferred compensation” within the meaning of Section 409A of the Code and Section 8 of this Plan.

     2.2 “Administrator” means the Board or the Committee appointed by the Board in accordance with Section 3.5.

     2.3 “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

     2.4 “Award” means any right granted under the Plan, including an Option, a Restricted Award, an Unrestricted Award, a Performance Award, a Stock Appreciation Right and a Dividend Equivalent Right.

     2.5 “Award Agreement” means a written agreement between the Company and a holder of an Award evidencing the terms and conditions of an individual Award grant. Each Award Agreement shall be subject to the terms and conditions of the Plan.

     2.6 “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

     2.7 “Board” means the Board of Directors of the Company.

     2.8 “Cause” means, (a) with respect to any Participant who is a party to an employment or service agreement or employment policy manual with the Company or its Affiliates and such agreement or policy manual provides for a definition of Cause, as defined therein and (b) with respect to all other Participants, (i) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate, (ii) conduct tending to bring the Company into substantial public disgrace, or disrepute, or (iii) gross negligence or willful misconduct with respect to the Company or an Affiliate. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause.

     2.9 “Change in Control” means

     (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders;

     (b) the adoption of a plan relating to the liquidation or dissolution of the Company;

     (c) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as such terms are used in Section 13(d) of the Exchange Act) other than Permitted Holders, becomes the Beneficial Owner directly or indirectly of more than 50% of the voting power of the Company; or

     (d) Incumbent Directors cease for any reason to constitute at least a majority of the Board; and

     (e) The foregoing notwithstanding, a transaction shall not constitute a Change in Control if (1) its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction or (2) it constitutes an initial public offering or a secondary public offering that results in any security of the Company being listed (or approved for listing) on any securities exchange or designated (or approved for designation) as a national market security on an interdealer quotation system.

     2.10 “Code” means the Internal Revenue Code of 1986, as amended.

     2.11 “Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 3.5.

     2.12 “Common Stock” means the Common Stock, $0.001 par value per share, of the Company.

     2.13 “Company” means Crimson Exploration Inc., a Delaware corporation.

     2.14 “Consultant” means any person, including an advisor, (a) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or who provides bona fide services to the Company or an Affiliate pursuant to a written agreement or (b) who is a member of the Board of Directors of an Affiliate; provided that, except as otherwise permitted in Section 5.4 hereof, such person is a natural person and such services are not in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.

     2.15 “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an

Affiliate or a Director will not constitute an interruption of Continuous Service. The Administrator or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.

     2.16 “Covered Employee” means the chief executive officer and the three other highest compensated officers of the Company (other than the chief executive officer and the principal financial officer) for whom total compensation is required to be reported to Shareholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code, as such term may be amended or modified by the Internal Revenue Service from time to time.

     2.17 “Date of Grant” means the date on which the Administrator adopts a resolution expressly granting and fixing the relevant terms of an Award to a Participant or, if a different date is set forth in such resolution as the Date of Grant, then such date as is set forth in such resolution.

     2.18 “Deferral Eligible Participant” means a Participant who is employed by the Company or an Affiliate as a key executive, managerial or highly compensated employee and who is determined by the Administrator to qualify for inclusion in a “select group of management or highly compensated employees” as described in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), who is designated by the Administrator in its discretion to be eligible to make an elective Unrestricted Stock deferral election pursuant to Section 7.2(b).

     2.19 “Director” means a member of the Board of Directors of the Company.

     2.20 “Disability” means that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant to Section 6.12 hereof, the term Disability shall have the meaning ascribed to it under Code Section 22(e)(3). The determination of whether an individual has a Disability shall be determined under procedures established by the Plan Administrator. Except in situations where the Plan Administrator is determining Disability for purposes of the term of an Incentive Stock Option pursuant to Section 6.12 hereof within the meaning of Code Section 22(e)(3), the Plan Administrator may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates.

     2.21 “Dividend Equivalent Right” means an Award granted pursuant to Section 7.5.

     2.22 “Effective Date” means February 28, 2005, the date the Board originally adopted the Plan. This amendment and restatement of the Plan is effective on the date it is approved by the Board.

     2.23 “Employee” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

     2.24 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     2.25 “Fair Market Value” means, as of any date, the value of the Common Stock as determined in good faith by the Administrator; provided, however, that (i) if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“Nasdaq”), the Fair Market Value on any given date shall not be less than the average of the highest bid and lowest asked prices of the Common Stock reported for such date or, if no bid and asked prices were reported for such date, for the last day preceding such date for which such prices were reported or (ii) if the Common Stock is admitted to trading on a national securities exchange or the Nasdaq National Market or Nasdaq Small Cap Market, the Fair Market Value on any date shall not be less than the closing price reported for the Common Stock on such exchange or system for such date or, if no sales were reported for such date, for the last date preceding the date for such a sale was reported.

     2.26 “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     2.27 “Incumbent Directors” means individuals who, on the Effective Date, constitute the Board, provided that any individual becoming a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be an Incumbent Director. No individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director.

     2.28 “Listing Date” means the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.

     2.29 “Non-Employee Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.