Three Reasons to Invest in a Private Oil Company that is Going Public

A better combination of upside returns, along with tax write-offs, liquidity, and a recognized exit strategy is possible when investing with smaller independent private oil companies who have an eye of going public.

First, the main reason why any accredited investor should invest in oil & gas investment programs is because he has a gross income for tax purposes greater than $200,000 per year, and typically wants and needs tax relief. This is still possible when investing in private oil companies engaged in legitimate drilling programs in the US. Its normally possible to write-off 85% of the Intangible Drilling Costs (IDC) in the first year of an investor’s investment. This can involve a big reduction of his gross income for tax purposes, and it often makes it possible for tax preparers to adjust the taxable income, and marginal tax rate for the investor while substantially lowering the taxes an investor has to pay.

Second, when any company goes public in the US, a number of doors are opened that were previously closed to all small independent oil & gas companies who must adhere to the federal exemption rules associated with Reg 506-D private placement offerings. Marketing, and advertizing are permitted with a public company doing public offerings but not with private offerings. Investment bankers, market makers, stock brokerage firms, and stock brokers as well as private investment firms, boutiques, and hedge funds can now legally invest in a public oil & gas company. This is a huge advantage for a successful smaller oil & gas company with a good business plan, and experience at operating oil & gas properties, and which is involved in successful development operations.

Three, the liquidity associated with registered, and freely trading shares of stock cannot be overestimated. The investor can invest with a private company to take advantage of the tax write-offs, and be able to sell his share of stock at advantageous times during the companies growth curve. This is a real plus when investors want upside, and still need assurances of liquidity when they need it.

Call me with questions about the strategy of investing in a private independent oil & gas company going public.

Dear Investors, it’s been awhile since you’ve been sent an update and the news to report is positive and getting better though you might not believe so with our current stock market drop, and other economic issues we all know about.

First, we have drastically cut over-head with our companies while re-establishing consistent oil production from our Ewell lease with the needed repairs, and replacement of transfer, and water disposal pumps, and electrical connection and generator hook-ups, and after our March/April thefts of some of our field equipment at our Ewell and Doneghy leases. We are still working to repair the Doneghy leases damages. All of our issues have been previously discussed with call-in investors, and we’ve filed the appropriate sheriff and F.B.I. reports necessary to deal with the theft and vandalism problem. We’re being told this is escalating as our economy is suffering and some people get desperate. We believe a disgruntled former worker for TOG is behind the thefts, and a recent lawsuit has been filed to deal with this previous problem. We have already raised our game so to speak to keep from dealing with these less than honorable people in the future.

Mr. Phil Hammill is our new field supervisor and lives in the immediate area where our Ewell and Doneghy leases are located. Phil has been working to restore our production, and has leases and production of his own in our lease areas. Phil is using a step by step approach to get our production up to break-even where we are now, and above, and we plan to continue with his cost effective approach to sustaining production while keeping overhead down in the process. We got too aggressive with spending before we could prove production from our leases, and spent too much money and time trying to build the company, and infra-structure while buying equipment rather than drilling new wells which is always the key in proving-up production, and increasing lease values. Drilling is the key to increasing production and lease asset values at this time.

A new public company can be formed to allow us to capitalize further development operations, including drilling new wells, and acquiring even more lucrative lease opportunities being considered in our portfolio of leases, and wells. We’ve been informed we can continue raising private money with our Cutting Edge Technologies, LLC, FUND, and because of new changes or a relaxation of certain securities laws, we can do both, or raise money for the private offering, and the public company at the same time. A public company allows you access to many more sources of capital, while you can advertise, and market through the media, market makers, and others, and you can be funded by entities that ordinarily don’t fund private offerings by private companies. This added funding flexibility is very helpful when dealing with the many, and complex assortment of problems the oil & gas industry is known for and must be addressed. We will keep you posted about the progress of any public company filing, and registration, and we will send you copies of the ‘press release’ when it can be issued after S.E.C. review and the registration is ‘effective’.

There are several ways to reward private investors who brought us to this point while funding the purchase, and development of TOG’s leasehold interests. We can acquire more lucrative assets, while we build the company’s holdings, and increase the cash flow, and value of the assets with public funds, and we can offer stock at discounted prices to investors who are already owners of a percentage of TOG leases. Of course, the main value of offering shares of stock to our private investors is to create liquidity which isn’t as easily provided in private offering deals. Our private investors have already taken the tax write-offs, so a chance to sell at a profit is more easily achieved with public shares than selling at an auction in most cases.

Meanwhile, we are planning to drill a new well on our Ewell lease. This 800 acre lease with 11 producers is one of our most lucrative oil & gas assets, and we own 100% working interest. We have over 20 years of history, including public production records, and we want to drill to the Wilcox zone on the way through five other productive zones on our lease. We expect a 50-100 bopd well which will greatly increase the value of this asset. We’ll keep you posted on our progress.

P.S. My best outcome achieved in the past was with a public offering and Bank One buy-out of investors with cash, and stock to boot. At this time in 1992, the price of oil was about $18.00 per barrel, and some investors made 5 to 1 on their invested dollars, or depending on when they sold their shares of stock.

Call me with questions or comments about our company progress while going public, or to learn how to get involved as private investors.

Sincerely,

Dennis W. Stutes, Manager
Oil & Gas Cutting Edge Technologies, LLC
Owner, Elco Oil & Gas, LLC
Tar Water Oil & Gas, LLC, TOG Operator
408 975 0800 Cell: 805 701 7761
16 East 16th. Street
Ste. 401
Tulsa, Oklahoma 74119
www.oilandgasinvesting.com