Energy Exchange

The Oldest Energy Property Clearinghouse and

the First Website in the Petroleum Industry

John Z. Lin, Vice President, Asia Affairs bywin8@gmail.com

1-832-681-1188

3Dec091

Connecting projects with funding sources since 1983

Energy Exchange Presents:

WINDOWS OF OPPORTUNITYIN ENERGY

• Oil & gas industry• Wind & Solar• Biofuel & Power Plant• Eco-Energy Saving Technology

Three Parts• The Energy Exchange

• Opportunities in Energy

• Select Projects

What is the Energy Exchange?

• An energy consulting firm

www.ERCO-EnergyResources.com

• An association of engineers, geologists, and financial professionals

• Not a brokerage firm

Our Purpose

To connect energy projects with funding sources

To make the “win-win” deal for the owner & investor

The Energy Exchange

• Initially Modeled after Real Estate’s MLS

• Oldest energy clearing house (1983)

• Petroleum industry's first website (1994)

www.enex.com

The Energy Exchange

• Hundreds of projects available

• From $10 thousand to $10 billion

The Energy Exchange

• A Technical Network (ERCO)

• A Financial Network

We close the gap between technical community and the financial community.

The Energy Exchange

Oil Company

Engineer

Geologist

Broker Dealer

Venture Capital

Institutional Investor

Project A1

Project A2

Energy Exchange

$

$

$

$Rep.

Rep

Rep.

Rep

Rep.

Rep

Project B1

Project B2

Project C1

Project C2

$

$

$

$

$

$

$

$

Shoe Store Analogy XYZ Shoe Store EnEx Shoe Store

Energy Store Analogy

One Project Store Energy Exchange Store

Oil

Natural Gas

Geo-thermal

Wind

Solar

Coal

Nuclear

Bio-Fuels (Bio-diesel)

Bio-Mass Fuel Cells

Who are we?

Technical AssociatesDavid H. Mangum, P.E. - Petroleum Engineer, Geologist, MBABill Olson - Geologist, Geophysicist, MBA, AttorneyCesar Abeigne, PhD – V. P. International, Geo scientist, Speaks 5 languagesBelkis Fernandez – Petroleum Engineer, Reservoir Modeling, From VenezuelaVladimir Ingerman, Ph.D. – Geophysicist, From RussiaCharles Mangum, P.E. – Civil Engineer, Drilling Rig DesignerDennis McMurdie – M.S., Geologist, Salt Lake CityBob Oberndorf, Geologist, DenverEdwin Tillman – Computer Systems EngineerDaniel Mangum, Petroleum LandmanD. Grady Mangum – Information SystemsD. B. Mangum – Field Operations, OklahomaKhalid Al-Ruwaili – Petroleum Engineer, Saudi ArabiaJim Evans – GeophysicistMany Others Nationwide & Worldwide

David H. Mangum, President

• Over 35 years petroleum experience

with five Fortune-100 energy companies

(Mobil, Shell, Schlumberger, Tenneco, and Coastal)

• Geology, Mississippi State University • B.S. in Petroleum Engineering, University of Texas • M.B.A., Pepperdine University • Professional Engineering, Real Estate and Securities

Licenses (Expired)

Legal Professionals

Bob Olson, Esq. – Attorney, Geologist, Geophysicist, MBA

George Nama, Esq. – International Law

Darin Mangum, Esq. – Securities, Former SEC

Financial Associates

John Lin, Asia Business DevelopmentJanson Durney, West Point Military AcademyAlex Westwood, Finance Rick Veale, Product Trading Alan Tomkow, Business DevelopmentGerald Avery, Administration Hector Escamilla, Jr.Gwen O. Pearson, African Business DevelopmentDennis Timpe, Oil and Gas Production Contracts Darin H. Mangum, Esq., Legal Counsel

Many More Nationwide & Worldwide

Part II

WHY INVEST IN ENERGY?

WHY INVEST IN ENERGY?• Inflation Hedge• High Financial Rewards• Cash Flow (Mail Box Money)• Diversification• Tax Benefits• Competition• Lease Costs• Drilling Prospect Availability• Demand / Consumption• Oil Production Trend • Price Forecasts• Drilling Costs• Technology• Environment• Government Endorsement• Money Crunch

That Sinking Feeling

Three Boogie Men

• Inflation – (As the government spends its

way out of the current economic downturn.)

• Demand – rapidly increasing

• Supply -- rapidly decreasing

“If you think $140 oil was bad, wait until exploding Asian demand overwhelms global markets and America's suppliers cut us off.”

Weiss Research, Inc.

Two Strategies - Gold or Oil (Natural Gas or Silver)

• Purchase gold at a retail price and sell it later at a wholesale price.

(If the price remains flat – you lose money.)

• Purchase oil at a wholesale price and sell it later at a retail price.

(If the price remains flat – you make a profit.)

HIGH FINANCIAL REWARDS

• Producing Wells – 10-20% Cash-on-Cash Return

• Developmental Wells – 85% success

25% to 100% Annualized Return on Investment

• Exploratory Wells (Wildcats) - 10% to 50% Success

100 to one Return-on-Investment

Purchase Proven Natural Gas (Project 9085)

• 27% Actual Cash on Cash – 2008• 11% if price remains flat for 6 years• 16% if price is average of past 10 years• 46% if price goes to previous high• 5% if price declines to zero

(Worst possible case)

RISK

• Drilling is becoming less risky.

• Several projects have a probability of success

better than 90%.

• Many projects would be economically attractive

even if oil or gas prices would fall 50%.

COMPETITION

The big money has gone offshore, because there are “too few easy-to-find big oil fields” remaining onshore in the USA.

– Over 10,000 oil companies have left the arena since 1982.

Average Oil Well Producing RatesProducingOil Wells

Average Barrels of Oil Per Day

8,7298,339

4,709

1,304

766

243

180

82

40

14

IranSaudi Arabia

United Kingdom

Nigeria

Mexico

Indonesia

Venezuela

China

Canada

United States

221

592

528

1,127

3,263

5,729

9,971

31,875

36,955

635,015

DRILLING PROSPECT QUALITY

Because the big oil companies are pulling out of the USA, the quality of small drilling prospects are getting better.

LEASE COSTS

Oil companies are not as anxious to renew leases.

(so lease costs are low)

Demand / Consumption

• U.S. consumes 25% of world’s petroleum.• Asians are taking lessons from the USA.• China and India will consume more energy

than that of USA.

China is buying up world oil reserves

•Venezuela•Angola•Canada•USA (Better)

5 Year Oil Price History

OIL PRODUCTION TREND

• USA output is at 35 year low

• Over two-thirds of USA onshore oil wells are “marginal”. (Less than 10 barrels

per day)

Oil Imports

• Yesterday – 30% During Embargo (1970)

• Today – 67% (All Time High)

• Tomorrow – 73% within 20 years. The U.S. Office of Technology

Assessment says that “This will Bankrupt the U.S.A.”

America’s Dangerous Addiction: IMPORTED OIL

• Oil imports have exceeded 67% of U.S. consumption!• We pay over $51 a barrel just to maintain a military presence in the Middle East

DRILLING COSTS

Rig activity is low,

so drilling costs are low.

TECHNOLOGY

Recent advances in oil finding technology have reduced risk and improved recovery.

Some companies report 85% success on wildcat wells.

ENVIRONMENT

Sierra Club endorses natural gas, wind, solar, and geothermal. (Combustion by-products of gas are carbon dioxide and water).

GOVERNMENT

• Encourages domestic drilling with special tax breaks.

• Mandates natural gas usage over oil and coal.

• Natural gas is now deregulated.

TAX BENEFITS

• Drilling is the best tax advantaged investment (Newsweek)

• Congress gives tax breaks to individual investors that are not available to large companies.

• 100% tax deductible ... 65 to 80% can be written off in first year

• Up to 100% tax-free income.

MONEY CRUNCH

Traditional sources of drilling money are not as available. – Big Oil Companies– Banks– Mezzanine Financing

CONGRESSIONAL TAX INCENTIVES

• Domestic Oil and Natural Gas makes our country more energy self-sufficient by reducing our dependence on foreign imports.

• Congress provides tax incentives to stimulate domestic petroleum production financed by private sources.

• These incentives are not "Loop Holes" -- they were placed in the Tax Code by Congress to make participation in oil and gas ventures one of the best tax advantaged investments.

Well Work-over Tax Incentive (Texas)

Tax exempt for the first 10 years from paying the 4.6 % Texas State Severance Tax on oil and the 7.5 % on natural gas.

ACTIVE VS. PASSIVE INCOME

The Tax Code prohibits the offsetting of losses from Passive activities against income from Active businesses.

The Tax Code specifically states that a Working Interest in an oil and gas well is not a "Passive" Activity,

therefore, deductions can be offset against income from active stock trades, business income, salaries, etc. (See Section 469(c)(3) of the Tax Code).

SMALL PRODUCERS TAX EXEMPTION

The 1990 Tax Act provided special tax advantages for small companies and individuals. This tax incentive, known as the "Percentage Depletion Allowance", is specifically intended to encourage small company and individual participation in oil and gas drilling. This tax benefit is not available to large oil companies The "Small Producers Exemption" allows 15% of the Gross Income (not Net Income) from an oil and gas producing property to be tax-free.

(See Section 613A of the Tax Code.)

ALTERNATIVE MINIMUM TAX (AMT)

The Tax Code specifically exempts Intangible Drilling Cost (IDC) as a

Tax Preference Item. "Alternative Minimum Taxable Income" generally consists of adjusted gross income, minus allowable AMT itemized deductions, plus the sum of tax preference items and adjustments. "Tax Preference Items" are preferences existing in the Code to greatly reduce or eliminate regular income taxation. Included within this group are deductions for excess Intangible Drilling and Development Costs and the deduction for depletion allowable for a taxable year over the adjusted basis in the Drilling Acreage and the wells thereon.

Green Tax Breaks

• 2.1 cents per kWh for first 10 years• Full depreciation in 5 years• Federal Cash Grants (30%)

federal cash grants avail that replace the capital cost tax credit with cash in the amount of 30% of the project's qualifying cost

• 50% Depreciation (2009)

• MACRS – (Modified Accelerated Cost-Recovery System) • Bonus Depreciation (2009)

• ITC (Energy Investment Tax Credit)(10% Geothermal, 30% for solar, fuel cells, small wind systems)

Why Invest in Oil and Gas?• High Financial Rewards• Risk• Tax Benefits• Competition• Lease Costs• Drilling Prospect Availability• Demand / Consumption• Oil Production Trend • Price Forecasts• Drilling Costs• Technology• Environment• Government Attitude• Money Crunch

Energy Project Overviews

63

Connecting projects with funding sources since 1983

Sample Projects

• Purchase Proven Producing Natural Gas (#9085)

• Purchase Proven Producing Crude Oil (#9084)

• Gulf Coast Well Work-over Program (#9022)

• Texas Over-thrust Exploration Venture (#9019)

• Domestic Refinery Expansion (#9048)

• Well Enhancement Drilling With Water Jets (#9049)

• Cayce Drilling Venture (#9028)

• Geo-thermal Electrical Generation (#9020)

• Diesel Emissions Control (#9098) • Nuclear Power Plant (90xx)

• Biofuels Electrical Power Generation (#9023)

“Hundreds of other projects available”

Projects #9085 and #9084

Direct Ownership of Energy

• Oil

• Natural Gas

Natural Gas (Project #9085)

• Purchase a quantity of Proven Producing Natural Gas at a wholesale price ($2.50/MCF)

• Sell it into the pipeline over the next 6 years at the market retail price (i.e., $5.00)

• You earn the difference, less 25% for overhead.

Crude Oil (Project #9084)

• Purchase a quantity of Proven Producing Crude Oil at a wholesale price (i.e., $25)

• Sell it into the pipeline over the next 6 years at the market retail price (i.e., $70)

• You earn the difference, less 25% for overhead.

From Field to Furnace

•Operator Cost $1 per Mcf•Financier $2 per Mcf•Pipeline $4 per Mcf•Utility Company $8 per Mcf•Consumer $16 per Mcf

Direct Purchase of Natural Gas

• Benefits of Natural Gas?• Who are earning profits?• Why you can earn profits?• How can you earn profits?• What profits can be earned?• When is this opportunity available?• Where is this wholesale Natural Gas?

Benefits of Natural Gas

It’s Clean – “Green Energy”

• Fuels energy efficient vehicles• Generates our electricity • Warms our homes• Cools our homes• Heats our hot water• Cooks our food It’s a “necessity” for our survival …

Who are Earning Profits

• Accredited Investors• Engineers • Geologists• Military & Civilian Personal• Professional & Blue Collar Workers

People Like You and Me - Worldwide

Why is this available?

Billions of BOE were “left behind”

• Proven Producing Oil and Gas Fields• The fields were never fully developed • Dormant for decades• The operator is selling his oil so he can revive old wells and get more producing oil.

Operator Choices

• Bank• Another Oil Company• Private Funds• General Partners

How Do I Earn Profits?Buy Wholesale – Sell Retail

(Buy Low - Sell High)• You buy gas at a low fixed price ($2 per MCF)• Your gas is continuously sold into the pipeline• Your gas is sold at market price ($4 per MCF)• The production company handles everything (25%)• You don’t have to do any work• You own the company that owns the gas.

Standard Natural Gas Purchase

• Purchase Amount $100,000

• Unit Purchase Price - $2.00 per MCF (1000 Cubic Feet)

• Total Natural Gas Purchased - 50,000 MCF

• All Closing Costs/Fees - Paid By Selling Company

How is Your Natural Gas Sold

Continuously sold into the pipeline everyday You receive market Price, less 25% overhead Production company handles operations Production company handles all headaches You receive Checks/Bank Wire every 90 days Mail-box money Continuously for 6 Yrs (Thru 2016)

What Profits Were Earned in 2008?

Actual Average Price Was $8.88 per MCF

• Investors actually received $6,660 quarterly • Which is $74.00 daily• $2,220 monthly• $26,640 yearly• $319,680 in 6 Years

(at that rate)

Their Cash-on-Cash Return was 27%

What Potential Profits Will You Earn?

Assuming Average Price of $6 per MCF over next 6 years

• You Will Receive $9,375 Quarterly

• Which is $103.50 daily, • $3,126 monthly, • $37,500 yearly, • $225,000 in 6 years

($100,000 purchase)

• Your cash-on-cash return will be 18.75%

Where is this Oil and Gas?

This Oil and Gas is from:• Numerous wells • In multiple oil and gas fields• In multiple states

– Oklahoma, Pawnee County– Colorado– Kansas

Texas Oklahoma

Kay and Pawnee Counties

Pawnee County, Oklahoma

Producing Horizons

Oil Reserves, Pawnee Co., Okla.

The Field Operating Company

• Joseph Britton, CEO, Global Tec Intellectual Properties

• Dr. Charles Harris, Ph.D. – Former Exxon Geologist

• Jerry MacKay, Sr. VP, Partner

• Dennis Tempe – VP Business Development

• Frank Britton, Vice President

• Francine Britton, CFO

• Don B. Britton, Owns patent on investment vehicle

Operator’s Intent

It is the Operator’s intention to provide the purchaser with a Cash-on-Cash Return of about 20% if the price of oil and gas were to remain flat for the next 6 years.

Liquidity

At any time you may sell your unsold gas to any other person for any price.

How Long Will This Opportunity Be Available?

Until the Operator has sufficient cash flow to fund his new wells.

What Will Gas Prices do over the next 6 years?

Gas Price Historical Statistics ($/MCF)• $5.00 Approximate price - January 2010

– “We are currently at historically low energy prices”

• $5.15 Average price for the past 10 yrs• $8.88 Average price for 2008• $13.19 High during 2008• $15.00 High during the past 10 years

What is your guess?

The average price of Natural Gas over the next 6 yrs will be ________ $/MCF.

What % increase do you expect in your energy costs - Oil, Gasoline, Natural Gas, Etc.

What Will Be My Cash-on-Cash Return?(Basis $2/MCF)

If Average Gas Price Over Next 6 Years is:• $3.00 = 9.38% (Approximate low price in 2009 )

• $5.15 = 16.06 % (Average price for the past 10 yrs)

• $8.88 = 27.75% (Average price for 2008)

• $13.19 = 41.22 % (High during 2008)

• $15.00 = 46.88% (High during the past 10 years)

• _______________ = _______________ % (Your Guess)

Your guess:

The average price of Natural Gas over the next 6 yrs will be ________ $/MCF.

Oil Price Chart

Summary (Projects 9085, 9084)

• Buy Wholesale – Sell Retail• Earn handsome profits• Protect yourself from inflation• Smile as energy prices increase• Virtually work & worry free• Automatic payments to your bank• Liquidity – Sell everything at any time• Help our country be energy independent• Rescue abandoned oil and natural gas • “Mail-box money” for the next 6 years

The Oldest Energy Property Clearinghouse and

The First Website in the Petroleum Industry.

93

Connecting projects with funding sources since 1983

Thanks!

Houston, Capital of World Energy

Gulf Coast Well Work-over Program (Project 9022)

GeoThermal - Free Piston Engine –

(Linear Engine)

• The Energy Exchange

• Opportunities in Energy

• Select Projects

High Risk Exploratory Wells (#9028)

Gulf Coast Well Work-over Program (Project 9022)

COMPETITION

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1980

1981

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Drilling Operators of Record

Source: Energy Information Administration, eia.doe.gov

Morgan County, Colorado

Where will our oil come from?

Projections are up.

Producing Oil Field

Oil Prices

Lateral Jet Drilling (Project 9049)