We believe that there are a multitude of acquisition targets in the natural gas market. The current pricing levels have left many small, over leveraged, independent producers looking to sell their natural assets. We believe that by acquiring these assets during the downturn of the market, they will provide for strong returns once the market recovers. We believe that by utilizing our tight field and operational controls we can acquire natural gas assets and maximize their reserves and cash flow.

Low Natural Gas Prices

Natural gas prices are low for good reasons. In the past few years the new technologies of horizontal drilling and hydraulic fracturing in oil/gas shales has released a voluminous supply into the market -- driving prices sharply down. But with the price of oil steadily rising, environmentally friendly natural gas is more and more becoming the fuel of choice. Gas is now making inroads into electrical generation, vehicular use, and other applications traditionally handled by oil or coal.

Two Trends

First, oil production worldwide is dropping as easy oil becomes increasingly scarce. British Petroleum (BP) doesn't drill 5 miles down below the ocean to win awards -- they do it because that is what they have to do to keep finding oil. Second: As mentioned above, we suddenly have lots of inexpensive gas. These two opposing trends -- price of oil up, price of gas down -- will inevitably shift energy markets to gas.

Please CLICK HERE for video information regarding the Burns Oil & Gas Lease Agreement Project

Our Operations in Kentucky are held in our wholly owned subsidiary, American Resources, Inc. We believe that Kentucky provides the Company low risk, developmental drilling and predictable production. We generate our own geological prospects in this region, where we have established expertise and a long track record of success. Our seasoned management team identifies, evaluates and acquires leasehold properties in Kentucky that are under performing, shut in, plugged and abandoned or underdeveloped. These properties are then revitalized by extensive re-working and re-entry procedures, complimented by developmental in-fill drilling programs.

By utilizing tight field and operating management controls, together with having a comprehensive understanding of the production characteristics of its leasehold formations, the Company believes that it can increase reserves, improve production and maximize cash flow while avoiding most of the high risks of typical exploration projects.

We currently control 87.5 mineral acres, held by mineral lease in Daviess County, Kentucky. The lease contains Four (4) producing oil wells, One (1) water injection well, and One (1) water supply well. The field was originally drilled and developed in the late 1970's. The property is currently being water flooded for enhanced recovery of the hydrocarbons.

We have analyzed the leasehold and have determined that the current water injection is injecting on the high-side of the reservoir, resulting in poor water flooding, and therefore poor collection of the oil. Our independent geologist and engineers believe that a new injection well be more effective in collecting the remaining hydrocarbons within the reservoir. Once we drill the new water injection well and bring it online, we will convert the old injection well into a producing oil well. Part of the proceeds from this memorandum will be used to drill the water injection well.