Q.I know that the fund is only new, but I am interested to know when you feel that the company is going to be making a profit and hence pay dividends.
R.Although the intention of the fund is to purchase projects for it’s own balance sheet, in the initial stages 3-6 months, if the required funds are not received to obtain our own project, we have a fall back plan. One of the advantages of having Sterling Energy as our strategic partner is that the funds received can be placed within projects that Sterling control, and hence these funds can begin providing a return. This is one of the main reasons, our minimum subscription figure is so low. This allows the board the flexibility to make sure investor funds, don’t sit idle. Following this reasoning it is anticipated that returns could be paid for the Production Quarter of Oct – Dec 2005.
Dividends
Q.The nature of the fund is such that it generates revenue constantly and in your email you state one of the benefits as quarterly dividends, how is this structured? Is it on a calendar quarter or quarterly from issue of shares?
R. The dividend payment structure is described in section "Shareholder Returns" of this webiste.
Capital Growth vs Income
Q.Is the company/fund looking for capital growth as well as being an income fund or will it be an income only fund.
R. As stated in the prospectus, at the time of writing this prospectus the director’s did not have an intention to float. However, there is a desire and intention to build up the asset base of the company so that we have the ability to consider all options open to us later on. This would have an inherent effect on the eventual share price, for either a float or take over opportunity. In the foreseeable future, the company will behave as an income generating fund.
Transfer of Shares
Q.What are ones options (and ascotiated costs) if I was to decide to sell the shares?
R.There are no entry and exit fees in this investment. However, please refer to the transfer policy in the "Investment Terms" section of this website for more information.
Sterling Energy – The real value of Oil and Natural Gas “The Big Rollover” –
Q.How many producing Oil and Gas wells does Sterling Group either own or lease AND how much further oil and gas can be extracted from existing Sterling wells and fields?
R.Sterling Energy manages two publicly unlisted companies in Australia and an offshore energy fund. We manage assets oil and natural gas assets in the states of Louisiana, Oklahoma and Texas. Assets managed consists of over 13 separate fields and over 60 wells in total and growing at a rate of 4-6 new wells per month that are being drilled and developed and managed by Sterling Energy. Each well has at least two producible formations behind pipe and some have anywhere up to 6 or 7 that each take a timeframe of 10 to 25 years to deplete.
Sleeping Giant – China
Q.Can Sterling’s exploration in the U.S. have a purchasing impact on the expanding Chinese marketplace and it’s needs?
R. Absolutely. Oil and natural gas is driven by worldwide demand and the expanding Chinese markets and consequent demand will certainly drive the price of oil and natural gas upwards along with services. China is taking strategic positions in oil and natural gas worldwide, although all of the oil and natural gas will be used on US shores. It is unlikely that the Chinese will be making acquisitions on US soil through. The increasing daily deficit in the United States in production and media coverage and rising prices puts pressure on the local oil and gas market as more and more people become interested in the market. Like housing booms property prices can escalate along with services. The experience and expertise of Sterling Energy and most importantly its relationships with on the ground drillers, operators, sellers and purchasers gives our clients an absolute advantage over the competition when bidding for properties.
Use of Subscriptions
Q.What is the development component of the 74% of all subscription funds being used for “existing property acquisition and development”?
R. There isn’t, as each amount of funds available per quarter will be evaluated against what project could be bought versus which projects do we own that could be developed further. In each case we’ll be focusing on the best return for the company and the shareholders, while also taking into consideration projections of further subscriptions.
Sterling's Current Projects
Q. How much land does Sterling currently own or have under an exploration lease?
R. Sterling has approximately 90,000 acres available to Genesis Energy to buy into at the time of writing this response. This further equates to US$30,000,000 that could be placed into the acquisition of projects right now with a further $35,000,000 that could be placed into these acquisitions through further developing and drilling.
Development Funds
Q. How does the Development funds use as shown under “exploration and development” ($5,585,698.00) differ from the development funds use shown under “existing property acquisition and development” in description One?
R. The difference is in the fundamental difference between the words “exploration” and “acquisition”. Exploration means going to fields with no current producing wells, and based on analytical evaluations you drill test wells to try and find a deposit of some sorts. Once this is achieved you develop that fields further, obviously this is higher risk. Acquisition means purchasing existing fields that have producing wells and drilling more in the same area, hence this type of development is lower risk.
Consumption Rate
Q. In terms of Gas consumption from 2000 – 2020 (graph P.14) what percentage of that usage do either Genesis or Sterling anticipate being produced by Sterling Energy Pty Ltd.
R. The amount of gas wells that Sterling will manage on behalf of Genesis will not even rate a mention on that graph. The graph is used to purely illustrate that each year the USA is in deficit with their natural gas needs and it is growing yearly.
Average life of a well
Q.What is the average life of a ‘successful’ completion well?
R. 10-25 years depending on how many formations or zones behind pipe. Can be a lot longer.
Proposed Development
Para 1: “It is the intention of the Company …………. etc”
Q. What is the time line for this proposed development?
R. Its based on a project by project basis, which will be dictated by how much and how quickly funds are raised as to which project will be purchased and then developed. Again the development will be evaluated against various factors, which in some cases may result in no further development, just acquisition.
The Model Form Operating Agreement
Q. How confident are Genesis that this agreement model will be accepted and who is in control of the negotiating activity? Given that Sterling has been using these contracts for a few years, and it is the standard operating mode in the US, Genesis is has no reservations. Sterling as the appointed operator of record would perform the negotiations. It is part of the management agreement between Genesis and Sterling.
R. This is a standard document used in the USA oil and gas industry. If the project does not have one or someone is opposed to one than Sterling is not interested in the deal and we would walk away from the project before it even began. Call any credible oil producer and they will know what it is and tell you they use them.
Board of Directors
Q. Why would investors, the majority of whom may have little or no industry knowledge, trust three (3) Directors (Genesis) without any apparent Oil/Gas industry experience or knowledge?
R. Please consider the following points:
The directors are businessmen and investors, their primary focus and skill sets as detailed in the profiles is in running the “business”. The commodity could be any service or product.
The required knowledge of the “product” (being Oil and Gas in this case), is why the skill set has been contracted to Sterling, similar to the accounting being contracted to an accountant, and not being placed “in-house”
The director’s have been meticulous, in setting up a structure, and processes which minimise overheads, increase efficiencies, and provide the best returns possible for the investors.
The director’s role is one of functionally manageability, and corporate governance, not operational. The operational duties, skill set and knowledge is why Genesis has partnered with Sterling.
The Director’s have also implemented various financials controls and mechanisms, which highlight the integrity and intentions of the board.
