STRATEGY

Domestic Operations   American Energy believes that significant opportunities exist for end users such as refiners and utilities to develop oil and natural gas properties with oil industry partners in mature producing areas where the infrastructure is in place to transport the production as directly as possible to the end userís facilities in order to minimize costs. Our experienced reservoir and production engineers utilize the following strategy to locate and purchase potential acquisitions on behalf of the end user partner:

  • Concentrate on both undeveloped oil and gas properties for drilling and those properties containing proved developed producing oil and natural gas reserves for purchase that have a well established history of performance.

  • Select those properties with additional upside potential, such as the possibility of increasing of producing rates and remaining reserves through workovers in existing producing zones, in addition to the drilling of horizontal recompletions in existing zones, shallower recompletions and deeper drilling potential.

  • Focus on those properties that are geographically as close as possible to the end userís facilities to minimize transportation costs.

  • Select those properties that produce directly into pipeline systems that service the end user partner to help eliminate potentially costly trades.

  • Bundle groups of properties in different fields for purchase where the effective purchase date would be approximately the same for all wells in order to simulate a larger, more efficient acquisition.

  • Utilize the companyís proprietary oil and gas well performance software that allows the user to forecast future producing rates and remaining reserves based on performance data that otherwise may be lacking in amount and quality.

  • Conduct rigorous gas well field testing, critical inspection of all records, contracts and similar documents, in addition to the close review of all legal and environmental ramifications.

  • Purchase those properties that may be financed in order to help reduce the end user partnerís cash exposure.

International Operations   Based on American Energyís successful operating experience in Russia since 1991, we are continuing to undertake the following strategy on behalf of our Western end user partners:

  • Locate potential development projects in only those mature producing areas that are serviced by an active oil pipeline system.

  • Maintain our focus only on those properties that contain discovered oil reserves that are generally partially developed, where the oil produced may be shipped to the end userís facilities, such as refineries.

  • In order to provide our investor partner the most desirable financing possible, programs may be funded by mid-term, non-recourse loans that are provided and fully guaranteed by the U.S. Export-Import Bank, the U.S. Overseas Private Investment Corporation or similar governmental institutions. Other commercial banking sources are also considered.

  • In order to provide our investor partner full investment protection, all program loans may be fully guaranteed by, and the non-loan portion of the investment may be insured by U.S. Government institutions such as the U.S. Export-Import Bank or the U.S. Overseas Private Investment Corporation.

  • Business transactions are conducted with smaller Russian oil companies that own the license to develop and produce hydrocarbons pursuant to the Russian Underground Resources Law. These companies generally do not have the funds, personnel or equipment to develop the oil properties within the time limits specified by their license.

  • The investor partner has the option to operate both the drilling and producing phases of the program.