PrimeEnergy (PNRG)

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors consists of Messrs. Gimbel, Hurt and Smeets, none of whom is an employee of the Company. The Company believes that each member of the Compensation Committee meets applicable regulatory independence requirements. The Compensation Committee makes all decisions concerning compensation of executive officers who receive salary and bonus in excess of $100,000 annually and determines the total amount of bonuses to be paid annually. The Compensation Committee’s policy is to offer executive officers competitive compensation packages that will permit the Company to attract and retain highly qualified individuals and to motivate and reward such individuals on the basis of the Company’s performance.

The compensation of the Principal Executive Officer and Principal Financial Officer is largely dependent upon the overall performance of the Company. For the year ended December 31, 2009, the base salary of the Principal Executive Officer of the Company, Charles E. Drimal, Jr., has increased to $360,500 from $350,000 and the base salary of the Principal Financial Officer, Beverly A. Cummings, has increased to $360,500 from $350,000. For the year ended December 31, 2009, the base salary of the Principal Accounting Officer of the Company, Lynne Pizor, has increased to $180,250 from $150,478. For the year ended December 31, 2008, a cash bonus award of $1,250,000 was paid to Mr. Drimal, $500,000 was paid to Ms. Cummings and $40,000 was paid to Ms. Pizor.

This report of the Compensation Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors consists of Messrs. Gimbel, Hurt and Smeets, none of whom is an employee of the Company. The Company believes that each member of the Compensation Committee meets applicable regulatory independence requirements. The Compensation Committee makes all decisions concerning compensation of executive officers who receive salary and bonus in excess of $100,000 annually and determines the total amount of bonuses to be paid annually. The Compensation Committee’s policy is to offer executive officers competitive compensation packages that will permit the Company to attract and retain highly qualified individuals and to motivate and reward such individuals on the basis of the Company’s performance.

The compensation of the Principal Executive Officer and Principal Financial Officer is largely dependent upon the overall performance of the Company. For the year ended December 31, 2008, the base salary of the Principal Executive Officer of the Company, Charles E. Drimal, Jr., has increased to $350,000 from $279,753 and the base salary of the Principal Financial Officer, Beverly A. Cummings, has increased to $350,000 from $279,753. For the year ended December 31, 2007, a cash bonus award of $1,100,000 was paid to Mr. Drimal and a cash bonus award of $440,000 was paid to Ms. Cummings.

This report of the Compensation Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.