International Energy Network U.S. Brokers

Having worked extensively with NASD brokers, we know that many firms hesitate to get involved in oil and gas because they do not have the familiarity and "feel" for the industry that is necessary to select quality projects and effectively market them. This is understandable, since the NASD firm is not made up of oil and gas people and the clients, on the other hand, are not venture capitalists - their goal is a rate of return and they do not want surprises. From our hard-won experience, we have evolved a definite strategy and philosophy with respect to oil and gas programs to be offered to investors:

The project must have basic merit - that is, it must have a likelihood of success and profitability. The cost structure must be reasonable for the area and in line with potential production. Preferably, there should be more than one well, and more than one area, to diversify risk. A multi-operator program is even better. And finally, the operator must have the management/administrative capability and track record to manage the program.

The program must offer the investor a fair deal and maximize the investor’s tax benefits. Assuring that these factors are in place and correctly crafted involves looking at tax, legal and accounting considerations. We coordinate this process, using high quality professionals who have agreed to work with us on a negotiated fee basis, to control costs.

There must be a program of marketing support and broker training already in place before the NASD broker gets involved. We began as a marketing organization, and this is the area where we make a profound impact, by helping assure that the program gets sold and closed out on a timely basis.

Whether you are a small brokerage house with a few clients or a large syndicator, we can help. IEN is located in Dallas, in the heart of the oil patch, and we have on staff geologists, finance experts and marketing professionals.

We are business development consultants, and with respect to programs that we provide, our fees are paid by our client, the operator. Our services include: (1) market-ready programs along with marketing and other vital support functions; (2) private label programs for large firms and syndicators.; and (3) assistance with projects that you are already involved in.

Assistance We Offer to NASD Firms

MARKET READY PROGRAMS
We have programs that are market ready, that can fit a variety of investment objectives - long term capital gains, current income, and tax benefits, to name a few. These programs are managed by oil and gas professionals who have a track record of success and who understand the needs of the investors.

These programs have undergone rigorous due diligence and we are prepared to assist as a conduit between the oil and gas professionals and your firm.

PRIVATE LABEL PROGRAMS
If you have a special category of clientele, or if you wish to be the prime financial intermediary organizing selling groups of other firms - then you may be interested in having us create a custom program that you can sponsor. In this case, we can start from square one, define particular needs, assist in developing a creative structure that provides the investment criteria you want, and coordinate the process of packaging and marketing the program.

SPECIAL SUPPORT SERVICES
If you already have involvement with an oil and gas program but would like a higher level of comfort with the industry, we can provide an expert interface between yourselves and the oil and gas companies and we can perform high quality, in-depth due diligence to give assurance that you are representing programs of merit to your investors. We can also assist in situations where a program you are already involved in has developed problems, by providing an objective analysis of the situation and the courses of action that are available, including specific recommendations.

Types of Programs
IEN can provide a number of types of programs depending upon the needs to the selected investor group.

Drilling programs
Drilling programs designed for low risk and predictable returns are available. Currently, such programs focus on the development of natural gas reserves, in such proven areas as Northwestern Pennsylvania, which has numerous fields with extremely high success rates. This kind of program is usually referred to as a development program, meaning that it is designed to further develop an already producing reservoir or geologic formation.

We also have balanced risk drilling programs, which feature a majority of low-risk projects mixed with a smaller percentage of moderate-risk prospects - giving the investor the assurance of downside protection with the possibility of higher-than average upside potential.

Non-Drilling Programs
We have programs that do not depend upon drilling for a return on capital invested. These include programs organized to purchase existing producing properties, some of which have the potential to be further developed by drilling additional locations on the properties, or upgraded by improving the existing wells.

Other non-drilling programs include projects for reworking existing wells that are now marginal. Reworking usually means replacing old equipment, removing the build-up of paraffin or other matter in the well, or other measures that can be taken by a petroleum engineer. Such reworking projects can be accomplished for much less money than drilling a new well and can result in a rapid payback of capital invested.

Lease banks are a little known alternative to drilling program, usually available only to oil and gas insiders. A lease bank is a program organized to purchase mineral rights to a particular property and hold them for an operator prior to drilling. A lease bank allows the operator to conserve working capital while preparing a drilling program; when the drilling program is funded, by other capital sources, the operator repurchases the lease from the bank. The lease bank receives back its cost plus a premium equal to an interest payment, and keeps an interest in any oil and gas production that occurs on the leasehold.

Equipment leasing programs involve leasing such items as well completion equipment and gas gathering, gas processing and pipelines to operators. The operator purchases or leases such items only after a well or wells have been completed and are ready for production - in other words, the risks associated with drilling have already been taken.

Further, we provide valuable support for the broker's selling efforts. We fully recognize that the broker's most valuable asset is the customer base, and our activities are geared to fit the broker's comfort level - we support without disrupting relationships in any way. Additionally, we can assist in setting up the proper reporting mechanism so that all parties stay adequately informed as to the progress of the investment
after funding.

Specific Services
Any projects that we provide have undergone the following steps:

Project Identification
Because of our extensive network of contacts within the US oil and gas industry, patiently cultivated over many years, IEN can quickly identify and vet oil and gas projects that may fit the needs of your firm’s clients.

Due Diligence
On behalf of financial intermediaries and investors, we perform extensive due diligence on a project before it is formally structured and packaged. The project may be one that we have identified for you, or one that is presented to your firm by a third party. Because we are in the industry and have extensive contacts with experts around the country, we can rapidly give a project a preliminary look to see if it may have merit and if the basic elements are in line with industry data. If we go further, we do an in-depth analysis of the company and the project it is offering. In this phase, we coordinate the work of financial analysts, tax professionals, geologists, and engineers. This research will indicate the economic merits of the project and the capability and trustworthiness of the company that will manage the project. The due diligence folder is available for financial intermediaries to review prior to undertaking a selling effort.

Structuring the Project for Sale to Investors
Any given project may be structured in a number of ways. Our role is to coordinate tax, accounting and legal aspects, using high-quality, recognized professionals in these fields, to create a structure for the offering that meets the objectives of the target group of investors in an efficient manner.

Interface Between Operator and Broker
One of the most important elements in marketing an oil and gas program is the flow of accurate and understandable information between the company managing the project in the US, which usually has a technical and operating cast of mind, and the marketer of the project, who of course is financially and marketing oriented. To keep the relationship on track and to keep information flowing in a productive manner, we act as an interface between the two parties. This is our natural role, since our background is both marketing and the oil and gas business.

Financial Safeguards
Although we do not manage the investment program ourselves, nevertheless we can be certain that appropriate safeguards and procedures are in place so that the integrity of the investment is maintained. The offering itself, of course, must have a bank escrow account. After the offering is closed, however, we take the process one step further, with an operating escrow account, a specially designated account which receives the investment capital and the revenues from the oil and gas wells, and which is controlled by an escrow agent who is both a Certified Public Accountant and a person familiar with the oil and gas industry from long experience. This escrow account is maintained at a major US bank, and all disbursements are handled by the escrow agent. A further important safeguard is the establishment of strict and regular reporting procedures, so that the operator must provide timely information on a regular basis to the investors and their representatives.

Sales Assistance
To facilitate the sale of the program to investors, we can assist in the creation of the basic program documents, in the development of sales literature, in roadshows, in broker training, and related matters. Our participation in this phase of the marketing effort is based upon years of experience in working directly with brokers and other financial intermediaries to market oil and gas programs.

If your firm would like to take a fresh look at oil and gas as an investment avenue, or if you would like to expand your oil and gas involvement, or if you would like assistance with an existing program, please contact us for a full package of information.

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