Drilling for oil and natural gas involves the possibility of commercially unproductive wells; however it is the opinion of the Directors that the following enhances the prospects of the Company:
a)
Purchase existing, producing oil, natural gas and Coal Bed Methane (CBM) properties throughout the United States. This involves evaluating the cash flow versus expenses, ability to sell gas from the field direct to a warranty buyer and the potential for further development to increase cash flow.
b)
Drilling wells on existing sites over two energy classes such as oil and CBM, while addressing any market price fluctuation in the prices of those streams, along with an average of the production curves of each resource.
c)
By diversifying the Company’s funds across several wells and areas of interest throughout the United States, such as Northwest Shelf of the Arkoma Basin, Oklahoma, the Wilcox Basin, Louisiana and the Barnett Shale, Texas.
d)
Through the utilization of modern drilling and exploration techniques employed by the respective Operators.
e)
By funding a manageable percentage of many wells, the Company can further diversify Shareholder funds increasing the chances of successful wells.
f)
Conducting activities in areas with geology that is characterized by multiple, or “stacked” pay formations that can be penetrated by a single well bore. Areas with such stratigraphy are less risky and more cost-effective because a single well bore can access a number of different potentially productive zones. This is significantly more cost effective than drilling a new test each time to a single objective, thereby moderating the risk that is normally inherent in the oil & gas business .
Evaluation of Projects
The contracted project manager performs the evaluation and selection of opportunities that are available to the Company throughout the United States. Set out below is a summary of the evaluation process which is undertaken by the project manager prior to advising the Company of the option to participate and perform additional due diligence.
Step 1 – Selection of project areas
The Company will only participate in projects that satisfy the following criteria:
a)
The project must be in a known oil or gas-producing province, such as the Wilcox Basin, Arkoma Basin and the Barnett Shale, Texas. They have been producing commercial quantities of oil ( Wilcox Basin) and gas ( Arkoma Basin) for decades.
b)
The geological and geophysical principles underlying the selection of oil and gas objectives must be sound and derived from the latest earth science technologies. The project manager, is responsible for this review and determination of suitability for participation by the Company.
c)
The producing oil or gas province must have existing well production histories characterized by long life, an absence or low incidence of toxic fractions such as hydrogen sulphide or sulphur and be characterized by comparatively low production expense.
d)
There must be a competent local operator who is responsible for the establishment and management of the day-to-day drilling and production and who has a track record of controlling the costs of production.
e)
There must be an oil or gas purchaser in the reasonable proximity of each project, in order to keep the cost of taking the oil and gas to market to a minimum. Typically, these purchasers will be companies listed on the New York Stock Exchange.
Diversification Strategies...
