Memorandum (LOI) For West Texas Acquisition

The Company has executed a Letter of Intent for the acquisition of a 75% Working Interest (WI) and a corresponding 56.25% net revenue interest (NRI) in 13 oil and gas leases covering 1,935.38 acres in West Texas. The properties are currently producing 30bbls/day with a planned initial 12 well rehabilitation plan expected to increase production to 60-80 barrels of oil per day. Total acquisition and rehabilitation costs are projected at $1.6 million. The drilling of up to six new additional wells is also contemplated at an estimated total cost of $1.0 million. The acquisition includes 59 total wells with 17 currently producing; 22 wells awaiting recompletion or repairs (12 wells require equipment replacement) and 8 Injection Wells. All existing wells are producing from formations at or above 2,500 feet. Additionally, a number of promising deeper formations are yet to be fully evaluated.

The Company also retains certain development participation rights in the J.B. Tubb Properties, located in the Amoco Crawar field, Ward County Texas.