FREQUENTLY ASKED QUESTIONS

WHY DO OWNERS SELL?

As the oil business expands and contracts, thousands of properties and
fractional oil & gas interests change hands each month. Numerous owners
sell because they cannot keep up with new drilling programs. Others
desire to take flush production return and seek to monetize their
investments to pursue other opportunities.

Many private treaty interests come on the market because of estate issues.
Another source is portfolio and company buyouts where the acquiring
company will purchase small non-operated interests that don’t fit their
investment criteria to get a few really valuable properties that they wish
to own.

These non-operated working interests, overriding interests, and mineral
interests are where a great opportunity exists for Oil States Trading.

WHAT ARE YOUR PRODUCING PROPERTY GUIDELINES?

These are general guidelines used by OST to purchase oil and gas properties
and manage the portfolio. The portfolio will be monitored and adjustments
will be made to keep the proper risk profile. When a new property or group
of properties is added, then additional acquisitions or divestitures will be
needed to keep the overall blend at desired levels. OST has full control to
manage the assets of the fund.

Individual properties should not comprise more than 5% of the total fund
(with a 10% allowance).

Fund will be distributed between oil and gas taking into account the
current economic conditions.

Fund will weigh the size of each working interest acquired as it relates to
risk and benefits for the entire portfolio. In general a cap of 15% working
interest in any one property will be observed.

In large production units, where expenditures could be authorized in
groups, interest size will be limited below 10% to protect against a depletion
of cash reserves.

Consideration will be given to properties with undeveloped reserves.

Properties held by the fund will be dispersed throughout various states
to avoid having all properties under one governmental jurisdiction.

Longevity of the property’s producing life will be one primary goal in
property selection.

Properties will be avoided where lease operated expenses are an excessive
percentage of monthly revenue, helping to protect the portfolio from drops in
commodity prices.

Properties will be traded/ sold/replaced that do not enhance the fund’s
overall risk profile.

WHAT STRATEGY AND RESEARCH RESOURCES ARE USED?

Private Offers
The best way to purchase oil & gas interests is through a private sale
negotiated with the owner. Oil States has many contacts with
companies and individuals that routinely sell properties. OST conducts
ongoing research uses public data and our private databases to analyze
potential acquisitions on a monthly basis.

Through our research we identify areas that have attractive production
characteristics. We then assemble a list of properties and operators to find
possible target properties. At this time basic evaluation and telephone calls
will begin to focus on our efforts on properties in which we have a
possibility of a successful acuisition. We routinely will have many of these
soft efforts underway and may cultivate a lead for months or years before
it becomes fruitful.

Public Auctions
Investment funds, financial institutions, estates, and owners routinely
place petroleum properties on the public auction block. Oil States Trading
monitors these auctions, conducts ongoing research, and routinely bids on
working interests and