Energy Exploration International - EEI Inc

Frequently Asked Questions

• What are my risks?
• How do I assess an opportunity?
• Is oil and gas really a profitable investment?
• Is the oil and gas industry regulated?
• How do I know the company I’m dealing with is legitimate?
• How do I get paid?
• Where does my money go?
• How can I be sure that a company is giving me the best possible chance to receive profits from oil and natural gas production?
• Is the current trend in oil prices sustainable?
• How can I get more information on Oil & Gas investments?

 

What are my risks?

The most significant risk for any oil exploration company is an unprofitable well. A dry well is an exploratory or development well which is found to be incapable of producing either oil or gas in sufficient quantities to justify completion. This would mean all partners would lose their investment. In a multi-well lease offering, all of the wells would have to be non-commercial or non-producing to threaten/jeopardise a partner’s initial investment.

How do I assess an opportunity?

When investing in oil and gas there are many aspects of the industry to consider before determining a safe investment. Three of the main features are:

1. Your investment acumen.
2. Investment objectives.
3. What type of investment vehicle?

1) Investment Acumen: Investment acumen means your personnal insight or judgment. In other words, as an investor you need to have the knowledge to be able to ask the right questions and understand what is the right answer. In that way, you will be able to make much better investment decisions. Safe decisions of where to invest or who to invest with are the first prerequisite to profitable investing.

2) Investment Objectives: Your investment goals, or potential returns, accompanied with the appropriate amount of risk can only be determined by you, the investor. As an example, if you are concerned about the potential loss of your investment funds, you would be much better off investing in "blue chip" major oil company stocks. However, if you could accept a larger degree of risk, or in other words, a potential loss of these investment funds, you may consider investing in projects that offer a higher rate of return with monthly cash generation benefits. This leads us into our next category.

3) Investment Vehicles: These vehicles may be a stock, an investment fund, a drilling fund, a private placement, commodities trading, or some combination of all of the above.

Is oil and gas really a profitable investment?

Yes. Oil & gas can be a very profitable investment. After all, some of the largest companies in the world are oil and gas companies. Investing in oil and gas can be accomplished in many ways; from purchasing stock in large public companies to partcipating in private, independent projects. You can invest directly in oil and gas exploration, refineries and service companies and you can invest through mutual funds or derivatives such as commodities futures. All of these investment areas in oil and gas are potentially profitable. However, as an investor you should try to analyze their varying degrees of risk and reward. One of the first factors of investing properly is trying to determine what your investment goals or objectives may be. As an example, it may be that you are looking to receive a 7 to 12 percent annual return. This type of return can be easily obtained with the purchase of stock from most of the well-known major or independent oil companies. Or, you may be looking for a rate of return in the 20 to 50 percent range. This can be accomplished by purchasing stock in aggressive small independents or by investing with service companies expanding into new markets. There is also potential to receive much higher rates of return - some exceed 100 percent - depending upon your ability as an investor to accept higher degrees of risk. Investing with independent operating companies on a direct participation investment is one option. This is similar to what the major companies do when they invest with each other in developing projects. Yes, investing in the oil and gas industry can be very profitable. However, it is very important to have a good understanding of the type of programs, their structures, and your own level of risk. (See - What are my risks?)

Is the oil and gas industry regulated?

Yes. Every state has its own regulatory agency. In Texas, the industry is regulated by the Railroad Commission of Texas (Texas RRC). With more than one million oil and gas wells in Texas, this agency plays a key role in industry regulation. All leases must be registered with the Railroad Commission. In addition, through its ten district offices, field inspectors visit the wells and facilities across the state to ensure compliance with Commission rules and regulations.

How do I know the company I’m dealing with is legitimate?

All investors must take responsibility for their own due diligence. Following are some simple precautions to apply when assessing a proposal:

• Ensure the company is legally registered to conduct business.
• Ask for industry references from the company. These should routinely be made available on request.

Texas Controller Certificate of Account Status

EEI References (*secure)

*Secure: You will need a user name and password from your account executive:

How do I get paid?

You are paid directly by the operating company. This operating company will distribute all profits to investors, and is completely independent from EEI. Your payment will be issued after 60 days from end of first month when the first barrel of oil is produced or 90 days from end of first month for gas sales. You will then receive a profit payment every 30 days until the well stops producing. In the surrounding region of Texas, the average well produces for 9-15 years.

Where does my money go?

Your money is sent directly to a dedicated project bank account, established in Texas in the company’s name, and held specifically for securely managing payments for a particular lease, or project.

How can I be sure that a company is giving me the best possible chance to receive profits from oil and natural gas production?

Make sure that the company has proven management and field experience, and that the geologists or engineers are aptly qualified and utilize the latest seismic technology to ensure the best chance for profitability. Energy Exploration International, Inc. contracts with highly skilled and experienced contractors and has formed strategic partnerships with the best geologists, experienced in particular geology and areas.

Is the current trend in oil prices sustainable?

These past twenty-five years have been tumultuous ones for the industry. They have witnessed the steady decline of domestic oil production in the United States to historically low levels. Domestic demand for petroleum products, however, has increased to the current consumption level of seven billion barrels per year. This country is also consuming natural gas at the rate of approximately 1.8 trillion cubic feet every month, or twenty trillion cubic feet per year.

How are we going to keep up with this insatiable demand for oil and gas in the United States?

Independent of social and political tensions in the Middle East, it is clear that demand for domestic supplies will continue to increase incrementally. The spate of terrorist attacks on the World Trade Center and the Pentagon, as well as our military operations in Afghanistan and Iraq, only serve to emphasize our vulnerability to instability in the Middle East. EEI advisors believe that our government will be compelled to continue to increase the already significant incentives for domestic exploration and production of oil and gas; such incentives will probably focus initially on tax credits and similar economic assistance. In the meantime, the diminishing capability of the world's petroleum exporters to meet increases in global demand will invariably cause oil prices to stay high for the forseeable future. Observers need only monitor China’s insatiable demand for oil, gas and steel to predict future price trends.

How can I get more information on Oil & Gas investments?

There are a few books that are specific to oil and gas investments. They are "The Why's and How's of Investing in Oil and Gas" by Lewis Mosburg, Jr. and "Money in the Ground" by John Orban. Our industry tends to focus more on the specific disciplines rather than the different types of investment vehicles. Because of the diversity of the industry and its investment characteristics, as well as the fact that we are recovering oil and gas from traps located several thousand feet from the surface of the ground, our industry has always held a certain mystique and aura. This is why it has always been misunderstood and why it is vital to thoroughly educate yourself before investing.

If you are interested in learning more about investing in the energy business and being a part of the largest industry in the world, please feel free to contact EEI at investor@eei-inc.com.