Briefly, our approach is to form a corporation based in a business-friendly European Union member country. Once legally formed, the corporation (the Euro company) can then qualify to sell shares in its host and by extension -- under the new rules of the EU -- throughout the 15 member nations. Note that these are the shares of a new European company - not shares in the operator’s company.

Working with the European Sponsor (a Master Broker) to sell the shares, we assist in preparing the offering documents, sales literature, help engage financial intermediaries and groups of financial intermediaries, and assist in conducting mailings and numerous "roadshows" to market the stock. Once the shares are sold, the Euro company is ready to invest in US oil and gas projects presented by our clients, the operators. These investments are made through a US subsidiary of the Euro company. As the projects earn profits, the American subsidiary sends dividends to the Euro company, which in turn distributes them to its shareholders.

Who bears these costs?
Previously, one operator promoting one program would have borne all of these costs of forming the company, qualifying the offering, and marketing the shares. Under our new multi-operator format, however, these costs are shared pro-rata by up to four US operators. Because they share equally in the marketing costs, they also share equally in the use of funds for approved projects, by pre-agreement with the US subsidiary of the Euro company. In effect, the four operators have employed a kind of sophisticated marketing co-op to raise capital.

What is a Sponsor?
A Sponsor is a European broker or other financial intermediary who plays a key role in bringing a program to market. Usually, the Sponsor is instrumental in the actual development of the program, having its own clients in mind for at least part of the program sales. Further, the Sponsor plays the role of Master Broker, recruiting a selling group of brokers and other financial intermediaries who each place part of the offering with their clients. The reputation and marketing strength of the Sponsor are critical to the success of the offering.

The Host Country
The advantages of forming the company and qualifying the offering in a small, business-friendly EU member nation are substantial by comparison with the larger European countries. First, small nations usually have not evolved the intricate bureaucratic controls over business and securities that most other countries have. The one we have chosen, in fact, is a kind of "business haven," to say nothing of being a "tax haven." The result is that one can organize a corporation there and qualify its stock for sale quickly and at much less expense than in most other countries.

Other advantages are also critically important. Although the majority of business people speak several other languages, English is the principal business language of our host country, a fact which greatly facilitates communication. Equally important, support and administrative services and personnel are readily available at reasonable cost. Corporate income and franchise taxes are low. And finally, this country has financial services firms that can provide entrée to large numbers of Independent Financial Advisors and brokers located throughout Europe, the agents who sell the shares to individual investors.

Is the operator making an offering?
No, it is not. The offering is made by the Euro company, which is not owned by any of the operators. For this reason, the operators bear no risk of having securities problems.

Are the four operators partners?
Actually, no. They merely provide funding for the Euro corporation to be formed and market the offering. They have no partnership or joint venture relationship or other legal relationship with each other.

Is this a reporting burden?
No. Although the Euro company could have hundreds or thousands of shareholders, the US operator interfaces only with the American subsidiary of the Euro company, since it is the Euro company itself that provides the funds to invest in the operator's projects. The US operator issues reports and assigns interests only to the American subsidiary, not to a mass of individuals.

How does the Euro company finance the operator's projects?
The Euro company, through its American subsidiary, will participate with the operator in whatever way an investor normally would - as a working interest owner, as a joint venture partner, as a limited partner, as a shareholder in a Limited Liability Corporation, or whatever format is fair and appropriate, depending upon the project. Essentially, the American subsidiary of the Euro company is treated as an industry partner by the operators.

What kinds of projects can be financed using this mechanism?
Virtually any kind, depending upon the charter of the specific Euro company involved. One such company will participate only in non-drilling aspects of the oil and gas business - leasebanks, pipelines, gas gathering and process systems, acquisition of producing properties, or other energy related ventures. Another Euro company will participate in
low to medium risk drilling ventures - infill and development drilling, low risk step-outs, reworks, and recompletions.

What safeguards will be required?
To provide a comfort level for the Europeans, the capital from the Euro company is paid into an escrow account of the American subsidiary in the US. The escrow agent is an experienced oil and gas CPA who will disburse the funds to the appropriate operator on the basis of a pre-agreed procedure. Revenues from the ventures will also be paid into the escrow account and used to pay any joint interest expenses - where this is applicable - and for distribution to the Euro company.

What exactly is IEN's role in the multi-operator type offerings?
IEN performs a number of functions to initiate each program and shepherd it to a successful conclusion. First, IEN arranges for experienced professionals to form the company and qualify the offering for sale in host country and throughout the EU. Next, we identify and negotiate a marketing arrangement with an established "Sponsor," a financial services firm that functions somewhat like a "master broker" or "lead broker," and whose responsibility it is to recruit a broad sales force of independent financial advisors across the EU. IEN then prepares information as to each operator and each project, so that the financial intermediaries can develop all of the offering documentation as well as the collateral sales material and broker training materials. We also provide the necessary interface between European legal and financial professionals on the one hand and the US operators on the other, to facilitate communication and make certain that information is correctly presented in all documentation. Next, IEN works with the financial intermediary group to develop a series of mailings and roadshows (seminars) to be held in various cities to interest brokers and Independent Financial Intermediaries in selling the shares. Throughout this process, IEN must provide coordinating services and input, to keep the project on track. (Firms interested in the Multi-Operator Format should contact us.)

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