PETRON ENERGY, INC

CONFIDENTIAL





BUSINESS PLAN





17950 PRESTON ROAD

SUITE 960

DALLAS, TEXAS 75252

PH (877) 373-8766

FAX (972) 485-1324

PROPRIETARY STATEMENT


The material presented herein is the property
of Petron Energy, Inc. and should not be
reproduced or shared in any manner without
the expressed written consent of Petron.
















ii

1
Table of Contents

Pages
1 Table of Contents
2 Table of Exhibits
3 Mission/Vision Statement
4 Company at a Glance
5 The Opportunity Ahead
6 Introduction to the Cotton Valley Sandstone Trend
7 New Hybrid Frac Optimize Development in Sand Formations
8 Long-life, Multi-zone Production
9 Known Producing Field/Severance Tax Reduction/Horizontal
Drilling: New Developments in East Texas
10-11 New Terminology/History & Current Technology
12 Geological Summary-Cotton Valley Sandstone
Trend/Introduction
13 Technological Advancements/Opportunities/Stratigraphy
14 Stratigraphy-Rodessa/Pettit/Travis Peak/Cotton Valley
15 Industry at a Glance-National Energy Policy/Taking Stock
Energy Challenges Facing the United States/Natural Gas
16 U.S. Natural Gas Markets
17 Natural Gas Demand-Projected Natural Gas Use for Electricity
Generation Peaks in 2020
18 Natural Gas Consumption Varies with Fuel Prices and
Economic Growth/ Natural Gas Supply-Net Exports of Natural
Gas Grow in the Projections/Energy Trends to 2030
19 Unconventional Production is a Growing Source of U.S. Gas
Supply/Natural Gas Supply Projections Reflect Rates of
Technology Progress
20 Natural Gas Prices Remain Above Historical Levels/Product
21 Marketing Strategy
22 Customers/Financial Forecast
23-24 Operational Plan/Management and Organization
25-26 Economic and Future Outlook
27 Capitalization/Use of Proceeds
28 3 Year Cash Flow Projections
32 Earnings Per Share Worksheet
33 Assumptions & 5 Year Operating Projections

2

Exhibits

Page Exhibit Description

39 A New Hybrid Frac Sheet
40 B Tax Benefits Sheet
41 C C.V. Horizontal/Vertical vs. Horizontal
42 D Packer Plus IP Comparison
43 E Stratigraphic Column
44 F U.S. Energy Prices Chart
45 G Energy Consumption Chart
46 H Total Energy Supply Chart
47 I C. V. Wells Success Rate & IP
Comparison
48 J 20 Year Production History Chart
49 K 12 Month Production History Chart
50 L Natural Gas Demand Chart
51 M Schematic Diagram
52 N Well Location Map
53 O Pipeline Infrastructure
54 P Gas Well Prod. Charts A & B
55 Q Start of World Energy
56 R Mineral Lease Contract












PETRON ENERGY, INC. BUSINESS PLAN


Mission

Petron Energys mission creates a solid foundation for the company. Our
core beliefs upon which we founded the company are represented and the
basic essentials are in position for our continued success.


Mission Statement

Petron Energy is a performance based oil and gas company. We are
committed to an old fashion way of doing business which involves integrity,
diligence, honesty, trustworthiness and responsibility when developing
investor relationships and associate relationships.


Vision Statement

Petron Energy is very committed to establishing long-term relationships with
its investment partners based on our solid performance. The marketing
niche for Petron is apparent. Our company unites with our partners to
identify and capitalize on low risk drilling opportunities by working in areas
with years of proven production history. Petron is committed to integrity,
diligence, honesty, trustworthiness, and responsibility when developing
partner relationships. We feel our industry offers investors an opportunity to
participate in an investment vehicle, which provides conservative, long-term
monthly income potential and favorable tax benefits. The Cotton Valley
Trend has proven to be an area which provides conservative long-term asset
appreciation and our experiences validate the success of this area. Petron
Energys goal is to further develop the Cotton Valley Trend and other
energy properties which are congruent with our strategy.





3
Company At A Glance

Petron Energy, Inc. is a 9 year old oil and gas exploration and development
company. We have invested primarily in mineral properties in Texas and
Louisiana since the companys inception. Petron Energy has been a Texas
corporation since 1998, Mr. Floyd Smith founder, has been the sole owner
since its inception. During the companies years of operations it has
weathered challenges, such as under performing well and re-entry failures.
We have been very diligent in researching more productive locations which
provide a long-term proven history of success and display characteristics of
being an under developed asset. By applying new technologies we are able
to exploit and produce more natural gas and oil from these assets. Mr. Floyd
Smith has been involved in the industry for 15 years. He is a very detailed
oriented driven owner who knows how to set goals and initiate execution
through completion.

Our target market is the East Texas Cotton Valley Trend, which offers an
extremely high success rate with respect to developing producing wells and
it offers long term cash flow. Typical production from Cotton Valley wells
usually have a life expectancy of 10 - 25 years. The Cotton Valley Trend is
primarily a Natural Gas trend; however some wells make oil production
along with gas production. Demand for natural gas is growing at a rate of
3% per year, while supply is only growing at a rate of 1% per year. Natural
Gas is a clean burning alternative fuel and is environmentally friendly.
Petron will be known as a natural gas company because of the long term
implications of this environmentally friendly alternative fuel. We have a
unique opportunity to capitalize on the newest form of innovative
technology in the Cotton Valley Trend which involves a new process in
fracture stimulation techniques. This process allows a far more efficient
stimulation effect over a greater production area and the results have the
potential of improving production rates by 5 - 10 times in horizontal wells
versus the rate of vertical wells.

We found such an opportunity in the Cotton Valley. Petron has invested in
the development of 26 wells in the Cotton Valley Trend during the past 30
months. We developed a process that is successful in the Trend. Our wells
are producing at a higher sustained rate with conservative declines.

4
One of the challenges of the company will be securing the mineral lease
prior to becoming a public company (see Exhibit R). Our plan is to use
$1,500,000.00 of the investment capital for lease acquisitions. The mineral
leases provide the company with a firm position for future development and
improves shareholder value. In considering a more short term approach to
improved share value and company cash flow, we plan to trade shares in the
company for interest owned by investors in 3 of our earlier multiple well
projects. We will utilize our current industry relationships to acquire a 10 -
25 % industry level participation in 4 - 5 multiple well projects.

Our long-term plan is to grow the company at a rate of 5% per year thru
three approaches 1) lease acquisition and development, 2) industry level
participation through current industry partners, 3) acquisitions of small
operators in the Cotton Valley Trend and other areas which are congruent
with our methodology. Items 1 & 2 of the long-term plan should be initiated
within 12- 18 months of our successful investment capital campaign.


The Opportunity Ahead

Petron Energy is focusing on natural gas development in the U.S. because
the U.S. offers a very mature basin for oil and a virgin market with upside
for natural gas opportunities. U.S. offshore oil exploration or international
oil plays face political, environmental, operational and financial risk
whereas, the U.S. Natural Gas development offers:

Low risk opportunities
Growth opportunities
Unlimited upside profit potential with unconventional gas reserves
Completion technological improvements which increase gas
reserves

Benefits of Natural Gas over other energy sources:

Natural Gas is potentially a key solution to global warming
Clean burning Natural Gas meets critical environmental concerns
Natural Gas is the fuel of choice for industry, residential and
electricity

5
The Cotton Valley Trend encompasses a nine county area. In this nine
county area there is a vast amount of available lease acreage to develop oil
and gas production. During the last twenty years, the Cotton Valley Trend
has experienced a 98 % success rate in wells finding commercial production
in the Cotton Valley reservoir. During the last twenty four months we have
been active in developing 26 consecutive natural gas wells. All of these
wells are vertical producers. Each well was fracture stimulated for optimal
production. The initial production rate on these wells are 750 thousand cubic
feet of gas per day (mcfg/d) to 1850 million cubic feet of gas per day
(mmcfg/d), each well has additional behind pipe reserves which extends the
wells long term production and these reserves will be produced later in the
wells production life. On vertical wells, the fracture stimulation process
effects a production radius of 250 - 500 feet. around the vertical wellbore.
(see Exhibits A, M, N)


Introduction To The Cotton Valley Sandstone Trend

East Texas has long been an extremely active area of drilling, discovery and
production for over 70 years. In the counties which include Panola, Rusk,
Harrison, Gregg, Smith, Shelby, Wood & Upshur in Texas, and Caddo, Red
River, and Desoto Parishes in Louisiana, there is an extensive blanket sand
group commonly referred to as the Cotton Valley Trend. It reaches from
northeast Texas, through northwest Louisiana, and north to southwest
Arkansas. The existence of this field has been known since mid-1930, but
focused development did not truly begin until mid-1970 catalyzed by
improvements in hydraulic fracturing technology and higher gas prices.
Spacing guidelines have also changed over the years. Originally the
guidelines were one well per 640 acres. Drilling is currently occurring on 40
acre spacing due to improved reservoir engineering indicating an effective
drainage area of only 40 acres per well. Drilling and developmental activity
is nearing an all time high.

Areas of development were previously limited historically to wells that
could achieve production equal to or greater than 2 billion cubic feet of gas
(bcfg) per well. Higher prices, lower cost stimulation techniques, coupled
with the fact that there is virtually no exploration risk for this extensive
blanket-like formation. Also, the very reasonable opportunity to also
encounter the Pettit formation between 6,500-7,000 and the Travis Peak
6
formation between 7,500 8,500 in some 20% of wells drilled, makes the
Cotton Valley Trend a low risk opportunity. Transporting natural gas to
market is accomplished by using a well developed transportation pipeline
infrastructure which has been in place for over 30 years. (see Exhibit O)

New Hybrid Fracs Optimize Development In Sand Formations

When sandstone rocks contain oil or gas in commercial quantities, recovery
can be vastly improved by a process called fracturing which is used to
increase permeability to its optimum level. Basically, to fracture a formation,
a fracturing service company pumps a specifically blended fluid down the
well and into the formation under great pressure. Pumping continues until
the formation literally cracks open. Meanwhile, a special type of frac sand is
mixed into the fracturing fluid. These materials are called proppants. The
proppant enters the fractures in the formation and when pumping is stopped
and the pressure allowed to dissipate, the proppant remains in the fractures.
Since the fractures try to close back together after the pressure on the well is
released, the proppant is needed to hold or prop the fractures open. These
propped-open fractures provide passages for oil or gas to flow into the well.

A series of studies and experimentation in the design of frac treatments have
improved development and stimulation practices in the Sandstone
formations of East Texas. Advanced hydraulic fracture diagnostics and
documented production results over the first six months of well life have
been used to better understand fracture geometry and well performance. The
objective of the diagnostics is to improve fracture length and optimize
fracture treatment design. The resulting changes to completion and
stimulation design have resulted in improved well performance.

The East Texas Basin has a series of productive formations which include
the Rodessa (limestone), the Pettit (limestone), the Travis Peak (sandstone
and shale), and the Cotton Valley (sandstone and shale). The primary target
of drilling is generally to the Cotton Valley Sands at 9,000 to 11,000 in
depth.

The adoption of slick water and hybrid fracture treatments, sand
proppants, plus multi-staging the treatments in the Lower, Middle and Upper
Cotton Valley, when utilized in certain wells, may increase initial production
rates, decrease decline rates and improve total reserve recoverability. This
7
has to be determined area by area, and well by well, and may not be
appropriate in all cases.

In addition to new technology, a myriad of other variables can be applied to
produce better results. We are constantly tracking different well completion
strategies and production results to generate an approach that will yield the
following:

Higher initial flow rates
Slower decline rates
Improved recoverability

We are convinced that all three of the above goals can be achieved.

Texas oil and gas industry records as of J une 2004 in the eight Texas
counties which are listed above, indicated some 80 companies, including
Anadarko, BP America, Chevron, Devon Energy, Exxon Mobil, EOG, El
Paso Natural, Texaco, Union Oil of CA and others, have been issued
approximately 551 drilling permits. In the last year between April 2004 to
April 2005, there were 1,508 permits issued in the six primary Texas
Counties of Gregg, Harrison, Panola, Rusk, Smith and Upshur, giving rise to
higher costs and creating intense rig demand.

We have established a four star criteria for a Cotton Valley Trend drilling
location.

Onstrike and close proximity to other excellent producers
Geographic access to inter-state markets
Multi-zone potential
Favorable lease terms (high net revenue leases)

Long-life, Multi-zone Production

Typical Cotton Valley Sandstone wells continue to produce in economic
quantities from a low of 10 years, but commonly up to 25 years. Also, the
Travis Peak and Pettit Formations can add significant reserves to any Cotton
Valley well. However, unlike Cotton Valley Sandstone Formation, these
behind pipe reservoirs will not produce in every well. (see Exhibit P)


8
Known Producing Field

The proposed drilling area is part of a well known trend that extends over a
large area in the corners of northeast Texas, northwest Louisiana, and
southwest Arkansas. The fields have been known and active since mid-1930,
with earnest development occurring subsequent to mid-1970. With the
advent of spacing changes and improved technology, recent drilling in this
area is approaching an all time high.

Severance Tax Reduction

Cotton Valley production is subject to a significantly reduced Severance Tax
from the normal 7.5% to 2.1% for the first 120 months (10 years), and then
graduates up over an extended period of time. This reduction was enacted to
stimulate drilling in the Cotton Valley Trend. Typical Cotton Valley wells
continue to produce in economic quantities from 10 years, up to potentially
25 years. Decline rates are modest as viewed over an extended period of
time. (see Exhibit B)

Horizontal development is now being implemented in the Trend; this
procedure has been around for decades. However, what is new about this
drilling technique is the completion process. In years past horizontal wells
were completed like their sibling vertical wells, which lead to poor
efficiency in the completion process and well production rates.
(see Exhibit C)


Horizontal Drilling: New Developments In East Texas

Devon Energy has recently permitted, drilled and completed a horizontal
well in Panola County, in the Cotton Valley, with a 5 Stage fracture
stimulation the well produced at 6.635 million cubic feet of gas per day
(mmcfg/d) plus 105 barrels of oil per day (bo/d) on a 12/64 choke. They
have 5 more wells scheduled for horizontal drilling in that area. We have
been following and analyzing the introduction of horizontal drilling in the
Cotton Valley Trend. The major service companies associated with our
Cotton Valley operation also handled the job for Devon. It was clear that the
time had come to step-up and participate in this increased production
opportunity for our wells.
9

The key participants in the technological effort include Halliburton,
Schlumberger, as well Packer Plus Technology, including StackFrac and
RapidMatrix Multi-Stage Fracturing and Stimulation Systems, which are
designed specifically for isolated open hole fracturing of both sandstone and
carbonate reservoirs. This innovative and field proven system greatly
increases both the initial productivity, as well as the long-term recoverability
from each wellbore when utilizing the high performance RockSeal II
Packer. This system allows for precise placement of fracturing fluids for
optimum stimulation results and maximized post-fracturing productivity of
the well. When combined with newly designed advanced stimulation fluids,
you produce multiple fractures of greater effective conductivity along the
entire wellbore. This open hole fracturing and treating provides less
reservoir contamination from cement, and allows for a wider, longer frac
matrix. (see Exhibit D)

New Terminology

(TVD) Total Vertical Depth: Total depth reached as measured along a line
drawn to the bottom of the hole that is also perpendicular to the earths
surface.

(MSD) Measured Depth: Measures total distance drilled along the well
bore. (Note that in a vertical hole, (MSD) would equal (TD), Total Depth).

(HD) Horizontal Displacement: Total distance drilled along the quasi-
horizontal portion of the wellbore.

History & Current Technology

The first recorded true horizontal well, was drilled near Texon, Texas (just
west of San Angelo), and was completed in 1929. Another was drilled in
1944 in the Franklin Heavy Oil Field, Vanago County, Pennsylvania, at a
depth of 500 feet. China tried horizontal drilling as early as 1957, and later
on the Soviet Union tried as well. Generally, however, little practical
application occurred until the early 1980s, by which time the advent of
improved downhole drilling motors and the invention of other necessary
supporting equipment, materials, and technologies, particularly downhole
telemetry equipment, had brought some kinds of applications within the
imaginable realm of commercial viability.
10

A widely accepted definition of what qualifies as horizontal drilling had
yet to be written, however the following combines the essential components
of previously published definitions.

Horizontal drilling is the process of drilling and completing, for production,
a well that begins as a vertical or inclined linear bore which extends from the
surface to a subsurface location just above the target reservoir, then bears off
on an arc to intersect the reservoir at the entry point, and, thereafter,
continues at a near-horizontal angle and will substantially or entirely remain
within the reservoir until the desired bottom hole location is reached.

According to an Energy Information Administration (EIA) review of
horizontal well technology and its domestic applications, horizontal drilling
technology achieved commercial viability during the late 1980s. It has been
successfully employed in a variety of fields and formations in many
domestic geographic regions and geologic situations. Completion
and production techniques have been modified for the horizontal
environment, with more change required as the well radius decreases. The
specific geologic environment and production history of the reservoir also
determine the completions methods employed.

The technical objective of horizontal drilling is to expose significantly more
reservoir rock to the well bore surface than can be achieved via drilling of a
conventional vertical well. The two primary benefits of horizontal drilling
success are 1) increased productivity of the reservoir, as well as 2)
prolongation of the reservoirs commercial life.

An offset to the benefits provided by successful horizontal drilling is its
higher cost, but the average cost is going down. It is probable that the cost
premium associated with horizontal drilling will continue to decline as
horizontal drilling activity increases. But there is always the possibility that
new and improved technology could add additional costs in the future.

Horizontal wells have a higher productivity and pay zone contact per well
than vertical wells, and allow operators to take advantage of highly
heterogeneous or layered reservoirs, like the Cotton Valley Sandstone.
Horizontal drilling is now utilized in a variety of carbonate and sandstone
reservoirs across the country, including the Austin Chalk, J ames Lime,
Woodbine and the Barnett Shale here in Texas.
11

The new Packer Plus System has revolutionized the completion process with
regard to horizontal wells (see exhibit D). It allows for the completion job
in the horizontal leg of the hole to be customized. We are able to isolate
individual 500 feet sections and plan 5 to 7 fracture stimulation treatments
on a 2500 feet leg. This provides a greater level of effectiveness in the
stimulation process and daily production levels reflect this technological
improvement. This stimulation procedure provides a greater area of
production, usually 10 times greater production area than a vertical wells
radius. Rates have improved 5 to 10 times that of vertical wells. We feel our
niche is clearly defined, we have identified the area and this process allows
Petron an opportunity to exploit the Cotton Valley Trend and capitalize on
the vast amounts of Natural Gas Reserves in place.


Geological Summary

Cotton Valley Sandstone Trend

Introduction

The Cotton Valley sand group contains many massive, low permeability,
low porosity sands. These extend over a large area in the corners of
northeast Texas, northwest Louisiana, and southwest Arkansas. Although
this fields existence had been known since mid-1930, earnest development
did not start until mid-1970 after improvements in hydraulic fracture
technology and higher gas prices. The original spacing rules in the Cotton
Valley Field were established at one well for each 640 acres, this spacing
rule was changed in February 1981 to 320 acres per well. With the recent
stability of higher gas prices, and the most recent spacing change to 40 acres
per well, Cotton Valley drilling is approaching an all time high.

The Cotton Valley sands were deposited during the late J urassic Period. The
depositional environment is interpreted as a regressive and transgressive
sequence of shallow water, bioturbated, shoreface sediments dominated by
barrier bars with minor interbeds of tidal deltaic deposits. Each of these
shallow marine bars contain many layers of sand and shale. The sand layers
were deposited during the storms and shale layers during fair weather
periods. This is typical of a prograding barrier bar system.
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Technological Advancements

The adoption of water fracs or hybrid fracs in the Cotton Valley sandstone
has greatly reduced the fracture stimulation cost, while providing similar
production results to the massive proppant procedures previously used in the
field. The water fracs employ a polymer-free fracturing fluid composed of
water, clay stabilizers, surfactants and friction reducer. The proppant
concentrations are reduced to a maximum amount of 0.5 lbs/gal, which is
kept constant throughout the proppant laden stage. At the end of the job (last
5%) proppant concentration is ramped up to a maximum of 5 lbs/gal as a
safety measure to ensure that the near-wellbore region is propped.
Traditional fracture treatments in this area used cross-linked-fracturing
fluids with maximum proppant concentrations up to 8 lbs/gal.

Opportunities

The current interest in the Cotton Valley sandstone trend is clearly prompted
by the long-term confidence of natural gas pricing. The trend development
has historically limited itself to selected areas that could achieve greater than
2 BCF. However, with higher prices, lower cost stimulation techniques,
coupled with the fact that there is virtually no exploration risk for the Cotton
Valley, and a reasonable opportunity to also encounter a productive Travis
Peak formation, makes the Cotton Valley Trend a low risk opportunity to
build long-term gas reserves.

Stratigraphy

The producing reservoirs in the fields are of Lower Cretaceous Age
Rodessa, Pettit, and Travis Peak, ranging in depth from 6,700 to 9,000 feet,
and the Upper J urassic Age Cotton Valley ranging in depth of 9,000 to
10,800 feet. The producing zones in descending order are the Upper Gloyd,
Lower Gloyd, Upper Young, Lower Young, the Pettit E, Upper Travis
Peak, Middle Travis Peak, Lower Travis Peak, Upper Cotton Valley and
Lower Cotton Valley (Taylor).






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Rodessa

The Rodessa section is 825 feet of limestone, sand and shale. Five individual
limestone zones produce in the Trend. They are the Upper and Lower Gloyd
Deep Sand and the Upper and Lower Young. The Upper Gloyd is a
limestone interval in the upper part of the Rodessa section. The Upper Gloyd
in one area of interest is 6 to 14 feet thick.

Pettit

The Pettit is a 330 foot interval of limestone and shale. There are two to five
limestone intervals, in the Pettit reservoir. The lower limestone interval, the
Pettit E is the most productive interval. Production comes from porosity
development within the interval.

Travis Peak

The Travis Peak is a 1,730 foot interval of sand and shale. The Upper Travis
Peak is a sandstone interval comprising the top third (~550 feet) of the
Travis Peak. Production comes from multiple sands with an average pay
thickness of 7 feet and 10% porosity and 37% water saturation in one area of
interest. The Middle Travis Peak is a sandstone interval comprising the
middle third (~550 feet) of the Travis Peak. Production comes from multiple
sands with an average thickness of 8 feet and 10% porosity and 34% water
saturation in several areas of interest. The Lower Travis Peak is a sandstone
interval comprising the lower third (~550 feet) of the Travis Peak.
Production comes from multiple sands with some areas showing an average
pay thickness of 10 feet and 9% porosity and 31% water saturation. There
are the potential of 10-15 individual pay zones available in the Travis Peak
reservoir.

Cotton Valley

The Upper Cotton Valley is a 1,300 foot interval consisting of a series of
sandstones and shales. The upper 1,000 feet of the interval is productive
with scattered pay. The Lower Cotton Valley (Taylor) is a 300 foot
sandstone and shale interval above the Bossier Shale. There is the potential
of 15-30 individual pay zones available in the Cotton Valley reservoir.
(see Exhibit E, M)

14
Industry At A Glance

National Energy Policy

From the Report of the National Energy Policy Development Group May
2001, entitled Taking Stock, Energy Challenges Facing the United States

Taking Stock Energy Challenges Facing the United States

Americas current energy challenges can be met with rapidly improving
technology, dedicated leadership, and a comprehensive approach to our
energy needs. Our challenge is clear we must use technology to reduce
demand for energy, repair and maintain our energy infrastructure, and
increase energy supply.

Natural Gas

Natural gas is the third largest source of U.S. electricity generation,
accounting for 16% of generation in 2000. Under existing policy, natural gas
generation capacity is expected to constitute about 90 percent of the
projected increase in electricity generation between 1999 and 2020.
Electricity generated by natural gas is expected to grow to 33 percent in
2020 a growth driven by electricity restructuring and the economics of
natural gas power plants. Lower capital costs, shorter construction lead
times, higher efficiencies, and lower emissions give gas an advantage over
coal and other fuels for new generation in most regions of the country.
Overall, natural gas accounts for 24 percent of total U.S. energy consumed
and for all purposes 27 percent of domestic energy produced. Eighty-five
percent of total U.S. natural gas consumption is produced domestically.

Between 2000 and 2020, U.S. natural gas demand is projected by the Energy
Information Administration to increase by more than 50 percent, from 22.8
to 34.7 trillion cubic feet. More than half of the increase in overall gas
consumption will result from rising demand for electricity generation. The
projected rise in domestic natural gas production from 19.3 trillion cubic
feet in 2000 to 29.0 trillion cubic feet in 2020 may not be high enough to
meet projected demand.

The most significant long-term challenge relating to natural gas is whether
adequate supplies can be provided to meet sharply increased projected
15
demand at reasonable prices. If supplies are not adequate, the high natural
gas prices experienced over the past years could become a continuing
problem. To meet this long-term challenge, the United States not only needs
to boost production, but also must ensure that the natural gas pipeline
network is expanded to the extent necessary.

The U.S. Natural Gas market has enjoyed consistent growth for the last
several years. Current demand for natural gas product to end users has
grown at a rate of 3% per year, whereas supply has only grown at a rate of
1%. The winter of 2006 was colder later into the winter unlike winters past
and it was reflected in our price point and in our inventory levels. Prices
were low compared to the normal double digit increases we typically see
with colder winter conditions. Inventory levels were drawn down in record
amounts in February. As a result after 13 consecutive months of year-over-
year increases, February stocks dropped below the year-ago level. Stocks are
263bcf below the level at the same time last year (AEO2007). Michael
Zenker with Cambridge Energy Research Associates said I would estimate
prices would average about $7.00 mcf through 2008. The rising demand for
gas, coupled with flat production, has tripled prices in the last four years.
The Energy Information Administration (EIA), the statistical branch of the
Department of Energy has completed its comprehensive Annual Energy
Outlook 2007 Report (AEO2007), with projections to 2030. This report
presents a projection and analysis of U.S. energy supply, demand, and prices
through 2030. The projections are based on results from the EIAs national
modeling system.

U. S. Natural Gas Markets

Prices. The Henry Hub natural gas price is projected to average $7.58 per
thousand cubic feet (mcf) in 2007 compared with $6.94 in the previous
Outlook (Henry Hub Natural Gas Price). For 2008, the Henry Hub spot
price is projected to average $7.86 per mcf. ( see exhibit F)

Production. Domestic dry natural gas production is expected to increase by
2.4 percent in 2007, a slight increase from production growth in 2006, as
drilling for natural gas continues at historically high levels. Net imports of
natural gas in 2007 are projected to drop for the second consecutive year,
though a smaller decline is expected in 2007.

16
Inventories. On February 23, 2007, working gas in storage stood at an
estimated 1,733 billion cubic feet (bcf). Due to cold weather, a record
amount of natural gas was withdrawn from storage in February. As a result,
after 13 consecutive months of year-over-year increases, February stocks
dropped below the year-ago level. Stocks are 263 bcf below the level at this
time last year, but are still 179 bcf above the 5-year average (U.S. Working
Natural Gas in Storage).

Consumption. A return to normal temperatures in 2007 is expected to drive
strong year-over-year growth in residential consumption of natural gas. A
first quarter comparison of EIAs estimated residential consumption shows a
14 percent increase from 2006-2007. Taking the year as a whole, residential
consumption is expected to increase 10.8 percent in 2007. Similarly,
commercial and industrial sector consumption are expected to increase by
6.3 and 1.9 percent, respectively, in 2007 because of a return to normal
weather, lower commercial prices, and growing industrial output. Total
natural gas consumption growth for 2007 and 2008 is projected to increase
by 2.9 and 1.8 percent, respectively, after falling by 1.7 percent in 2006
(Total U.S. Natural Gas Consumption Growth.)

Natural Gas Demand

Projected Natural Gas Use for Electricity Generation Peaks in 2020
Total natural gas consumption in the United States is projected to increase
from 22.0 trillion cubic feet in 2005 to 26.1 trillion cubic feet (tcf) in 2030 in
the AEO2007 reference case (see exhibit G). Much of the growth is
expected before 2020, with demand for natural gas in the electric power
sector growing from 5.8 tcf in 2005 to a peak of 7.2 tcf in 2020.

Continued growth in residential, commercial, and industrial consumption of
natural gas is roughly offset by the projected decline in natural gas demand
for electricity generation. As a result, overall natural gas consumption is
almost flat between 2020 and 2030 in the AEO2007 reference case, and the
natural gas share of total projected energy consumption drops from 23
percent in 2005 to 20 percent in 2030.




17
Natural Gas Consumption Varies with Fuel Prices and Economic
Growth

In contrast, the price of natural gas directly affects the level of natural gas
consumption. High prices provide a direct economic incentive for users to
reduce their natural gas consumption, and low prices encourage more
consumption. The strength of the relationship between natural gas prices
and consumption depends on the short- and long-term capabilities for fuel
conservation and substitution in each consuming sector.

Natural Gas Supply

Net Exports of Natural Gas Grow in the Projections
Net exports of U.S. natural gas to Mexico are projected to decline from
nearly 400 billion cubic feet (bcf) in 2007 to 35 billion in 2019. After 2019
they are expected to increase steadily to nearly 250 bcf in 2030.

Energy Trends to 2030

Despite the rapid growth projected for biofuels and other nonhydroelectric
renewable energy sources and the expectation that orders will be placed for
new nuclear power plants for the first time in more than 25 years, oil, coal,
and natural gas still are projected to provide roughly the same 86 percent
share of the total U.S. primary energy supply in 2030 that they did in 2005.

The energy price projections for natural gas and coal in the AEO2007
reference case also are similar to those in AEO2006. The real wellhead price
of natural gas is projected to decline from current levels through 2015, when
new supplies enter the market, but it does not return to the levels of the
1990s. After 2015, the natural gas price rises to $8.27 per thousand cubic
feet in 2030. (see Exhibit H)

Natural gas consumption is projected to grow to 26.1 trillion cubic feet (tcf)
in 2030, down from the projection of 26.9 (tcf) in 2030. Total natural gas
consumption is almost flat from 2020 through 2030, when growth in
residential, commercial, and industrial consumption is offset by a decline in
natural gas use for electricity generation as a result of greater coal use.

The average U.S. natural gas in the AEO2007 reference case declines
gradually from the current level, as increased drilling brings on new supplies
18
and new import sources become available. The average price falls to just
under $6.46 per thousand cubic feet in 2015 (2005 dollars), then rises
gradually to about $8.27 per thousand cubic feet in 2030. (see Exhibit H)
In the AEO2007 reference case, the natural gas share of electricity
generation (including generation in the end-use sectors) is projected to
increase from 19 percent in 2005 to 22 percent around 2016, before falling
to 16 percent in 2030.

Total domestic natural gas production, including supplemental natural gas
supplies, increases from 18.3 trillion cubic feet in 2005 to 21.1 trillion cubic
feet in 2022, before declining to 20.6 trillion cubic feet in 2030 in the
AEO2007 reference case. In comparison, domestic natural gas production
was projected to peak at 21.6 trillion cubic feet in 2019 in the AEO2006
reference case.

Unconventional Production Is a Growing Source of U.S. Gas Supply

A large proportion of the onshore lower 48 conventional natural gas resource
base has been discovered. Discoveries of new conventional natural gas
reservoirs are expected to be smaller and deeper, and thus more expensive
and riskier to develop and produce. Accordingly, total lower 48 onshore
conventional natural gas production declines in the AEO2007 reference case
from 6.4 trillion cubic feet in 2005 to 4.9 trillion cubic feet in 2030.

Incremental production of lower 48 onshore natural gas comes primarily
from unconventional resources, including coalbed methane, tight sandstones,
and gas shales. Lower 48 unconventional production increases in the
reference case from 8.0 trillion cubic feet in 2005 to 10.2 trillion cubic feet
in 2030, when it accounts for 50 percent of projected domestic U.S. natural
gas production.

Natural Gas Supply Projections Reflect Rates of Technology Progress

Technological progress generally reduces the cost of natural gas production,
leading to lower wellhead prices, more end-use consumption, and more
production.




19
Natural Gas Prices Remain Above Historical Levels

In the AEO2007 report the natural gas prices are projected to decline from
current levels to an average of $6.91 per thousand cubic feet in 2010, then
rise to $8.27 per thousand cubic feet in 2030. (see exhibit D)

Current high natural gas prices are expected to stimulate the construction of
new LNG terminal capacity, resulting in a significant increase in LNG
import capacity. Projected natural gas prices are expected to stimulate the
construction of an Alaska natural gas pipeline (projected to begin in
operation in 2018), as well as increased unconventional natural gas
production. This is a plus for us because the Cotton Valley Trend has 25%
NGLs (natural gas liquids) which represents additional revenue from the
sell of those liquids.


Product

The petroleum industry has long been an integral thread in the fabric of the
world. It offers certain features and benefits to those of us who actively
invest. Some are listed below.

Features
Long term monthly income
Per share value appreciation
Tax incentives
Depletion allowance
Publicly traded companies offer a secondary market for exit
Multiple pay zone production
Proven historical development success
Severance tax savings

Benefits
Monthly disposable income
Estate and Net worth appreciation
Reduction in taxes
Tax free income
Flexible exit strategy through secondary market
Reduces risk of low commercial production
20
Reduction of dry hole risk
Increased monthly cash flow


Marketing Strategy

Experts look through futuristic lens and the energy industry looks bright for
a healthy pricing environment. Global demand is high, yet global
production is on the decline. We have spent the last few years strategizing
how to effectively capitalize on these unique times in our industry, and we
believe the time is right to generate a core asset base through low risk
natural gas reserves.

Our three-point approach would involve:

(1) The creation of a leasebank which would allow for acquisition of leases
in proven developmental areas. Our lease position in low risk development
areas provides us the ability to diversify into multiple wells further reducing
our risk, and more accurately predicting return on investment. In summary,
Petron Energy will be uniquely positioned to generate, develop and manage
low-risk projects with proven predictability. Through the development of
theses leases, we would be able to add value to the company from monthly
production of each well and the book value of the behind pipe reserves of
each well and puds (proved underdeveloped reserves) of the lease.

(2) The second approach would involve the continued participation with
current industry relationships. The company can achieve prime production
acreage and interest by partnering with pre-existing industry relationships
that we are familiar with and in areas were comfortably positioned. It
provides our company with an opportunity to add value by increasing our
interest in a core asset, at the same time improving the book value of our
overall reserves.

(3) The third approach would allow us to acquire pre-existing development
properties from small operators. This strategy allows the company to
quicken its pace in growing its core asset base and its position in low risk
developmental areas that are congruent with our methodology. We are able
to pick up infrastructure that is already in place and improve on reserves and
21
22
monthly cash flow from existing monthly production and future behind pipe
reserves.

We would fund programs via private placement as we have always done,
however, as a public company, our clients would have a secondary market
available as an exist strategy which allows more client flexibility when
investing in and existing out of oil and gas projects.

We will work with our trusted investor base in large part to raise the
investment capital needed for this opportunity. And we will use road shows,
trade shows, word of mouth and a network of friends and professionals to
secure investment capital.

Our two year plan beyond securing the investment capital for future funding
of projects will involve the development of broker dealer to handle the
funding requirements of our future projects and line of credits will be
incorporated long term to facilitate our growth in development wells.


Customers

Petron Energys customers would be gas marketers who presently
represents the company. Their job is to negotiate the best spot market price
for us and execute the sales contract once an agreement is completed. As the
company grows in production, we will seek to expand our customer base.
The majority of natural gas produced in the Cotton Valley Trend is
purchased by end users in the state of Texas.


Financial Forecast

This financial forecast assume several variables; the interest the company
received from trading shares in the company for investor working interest,
which will improved the companies cash flow and the investment of
$2,000,000.00 @ industry level (cost) participation, which will improve the
cash flow of the company while at the same time adding value to our
balance sheet and subsequently our share price. We are currently working
with one of our industry partners to secure a 25% interest position in 5000
production and developmental acres within the Cotton Valley Trend.
23
These highly coveted acres will allow our active participation in multiple
well projects (two vertical wells, one horizontal well or two horizontal
wells) with the horizontal well packer plus system budgeted for
implementation. This approach allows us to create value in our share price
ultimately and improve our cash flow position. Review the use of proceeds
section in our Confidential Private Placement Memorandum for breakdown
of fund allocation.


Operational Plan

We presently have adequate office space to house our operational needs. We
have a 5 year lease currently on the approximate 3000 feet space. Our
offices are positioned on a main thoroughfare in North Dallas (County)
Texas at 17950 Preston Road, Suite 960, Dallas, TX 75252. Our business
hours are 8:00 a.m. to 5:00 p.m.

Our product development involves leasing oil and natural gas minerals in the
Cotton Valley Trend in East Texas. This process is achieved by
subcontracting the service of Landmen in the various counties of interest to
us in East Texas. (see Exhibit R mineral lease contract)


Management and Organization

Mr. Floyd Smith will manage the day-to-day operations.

Mr. Floyd Smith is President of Petron Energy, Inc. He has 15 years
experience in the energy industry. As a graduate of Harding University in
Searcy, AR., Mr. Smith has a diverse background. He spent eight years with
Wal-Mart Stores (store director for five years). While there he learned the
essentials of business operations and people management. After retiring
from Wal-Mart, Mr. Smith was introduced to the energy industry, over a six-
year span; he started as an assistant broker and worked his way up to a
senior level manager. During that time he was a top producer for the
organization. He became well versed in client relations, product marketing,
log analysis, completions, drilling operations and well rework operations. In
1998 he founded Petron Energy, Inc. His efforts have been focused on
operations and investor relations of oil and gas project/properties for Petron
24
Energy investors. Through Mr. Smiths efforts, Petron Energy, Inc. has
amassed client relationships from industry partners, private estates, trusts
and individual investors. Since Petron Energys inception, it has
participated in approximately 46 wells through the funding of approximately
$14,000,000 in equity capital from its investors.

Our corporate attorney is Richard Dick Hewitt; Dick has worked with
the U.S. Securities and Exchange Commission (S.E.C.) in varying legal
positions including Chief Enforcement Attorney for 15 years prior to starting
R.M. Hewitt P.C.. During his career with the S.E.C., Mr. Hewitt investigated
numerous oil and gas fraud cases in the Southwest. He has been in private
practice of 26 years. Dick is responsible for Petron Energys security and
legal duties.

Our corporate accountant is Nathan Reeder, CPA; Nathan has been CPA
specializing in oil and gas accounting for roughly 50 years. He has been a
proven asset to our organization during our 10 year association. Nathan
attended SMU. Nathan currently performs oil and gas accounting for clients
domestically and internationally.

Petron Energy has consulted its geological and petroleum engineering works
in the past and will eventually need to hire a geologist and petroleum
engineer for its future developmental opportunities. As the company seeks
to acquire leases, it will eventually need to add a landman to its staff.

Mike Hoover has been a trusted friend and oil and gas consultant and
advisor. Mike has over 25 years of oil and gas experience in all aspects of
geological, engineering, geophysical, property management, log analysis and
well operations. He is a graduate of Abilene Christian University.

Larry Crain has been a trusted friend and consultant. Larry has over 20
years of oil and gas experience in operations and investor relations. He is a
graduate of University of Texas at Arlington.

Tom Kidd has been a trusted friend and consultant. Tom has over 35 years
of oil and gas experience in field operations, well completion, log analysis
and well operations. Tom is a graduate of Bradley University.

Robert Sparks has been a trusted friend consultant and advisor. Robert has
over 25 years of oil and gas experience in acquisition, development,
25
exploration and operation of oil and gas properties. Robert is a graduate of
Lamar University.


Economic and Future Outlook

The energy market is coming off a 2006 year which saw activity indicators
hit 21 year highs. With higher prices, company revenue grew consistently.
Oil futures have cooled down between $55 and $58/bbl for West Texas
intermediate as of mid-November. Average futures from J anuary through
September were 68.22/bbl. Operators have enjoyed very attractive revenue
for most of 2006.

Natural gas has seen softened prices due to the mild winter for 2006 verses
2005. As of November 2006, U.S. storage levels are up 7.4% from their five
year averages. Prices have cooled somewhat because of this, wellhead
prices are down 15%, 6.51mcf/d verses 7.68mcf/d in August 2005. Due to
the hurricanes of 2005, we saw a 54% decline in gas prices in comparing
October 2005 to October 2006.

Between 2000 and 2020, U.S. natural gas demand is projected by the Energy
Information Administration to increase by more than 50 percent, from 22.8
to 34.7 trillion cubic feet. More than half of the increase in overall gas
consumption will result from rising demand for electricity generation. The
projected rise in domestic natural gas production from 19.3 trillion cubic
feet in 2000 to 29.0 trillion cubic feet in 2020 may not be high enough to
meet projected demand.

The most significant long-term challenge relating to natural gas is whether
adequate supplies can be provided to meet sharply increased projected
demand at reasonable prices. If supplies are not adequate, the high natural
gas prices experienced over the past years could become a continuing
problem. To meet this long-term challenge, the United States not only needs
to boost production, but also must ensure that the natural gas pipeline
network is expanded to the extent necessary.

Consumption of natural gas worldwide increased from 95 trillion cubic feet
in 2003 to 182 trillion cubic feet in 2030 in the IEO2006 reference case.
Although natural gas is expected to be an important fuel source in the
26
electric power and industrial sectors, the annual growth rate for natural gas
consumption in the projections is slightly lower than the growth rate for coal
consumptionin contrast to past editions of the IEO. Higher world oil
prices in IEO2006 increase the demand for and price of natural gas, making
coal a more economical fuel source in the projections.
Natural gas consumption worldwide increases an average rate of 2.4 percent
annually from 2003 to 2030. Coal increases an average rate of 2.5 percent
per year and 1.4 percent per year for oil. Nevertheless, natural gas remains a
more environmentally attractive energy source and burns more efficiently
than coal, and it still is expected to be the fuel of choice in many regions of
the world. As a result, the natural gas share of total world energy
consumption (on a Btu basis) grows from 24 percent in 2003 to 26 percent in
2030.

Worldwide, the industrial and electric power sectors are the largest
consumers of natural gas. In 2003, the industrial sector accounted for 44
percent and the electric power sector 31 percent of the worlds total natural
gas consumption. In the projections, natural gas use grows by 2.8 percent
per year in the industrial sector and 2.9 percent per year in the electric power
sector from 2003 to 2030. In both sectors, the share of total energy demand
met by natural gas grows over the projection period. In the industrial sector,
natural gas overtakes oil as the dominant fuel by 2030. In the electric power
sector, however, despite its rapid growth, natural gas remains a distant
second to coal in terms of share of total energy use for electricity generation.
(see Exhibit Q)




Capitalization

We are raising $5 million dollars in working capital to be dispensed as
follows:



USE OF PROCEEDS
(200 Units)

Source of Funds:

Amount Percent
Purchase of Units consisting of Series A
Preferred Stock and Class A Warrants

$5,000,000

100%



Amount

Percent
Per
Unit
Invest In Development Gas and Oil Wells $2,000,000 40.0% $10,000
Purchase Oil and Gas Leases 1,000,000 20.0% 5,000
Legal, Accounting, and Printing Costs 25,000 .5% 125
Exchange Program
Working Capital
800,000
750,000
16.0%
15.0%
4,000
3,750
Interest Reserve 300,000 6.0% 1,500
Syndication Costs 125,000 2.5% 625
Totals: $5,000,000 100.0% $25,000

There may be some changes in the use of proceeds authorized by the Board of Directors
depending upon various factors related to the success of drilling the developmental wells
and also the availability of high quality oil and gas leases.










27
Petron Energy
3 Year Cashflow Projections
By Month
Time period
Pre Start Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-09 Oct-08 Nov-08 Dec-08
CASH
Beginning cash balance 4,075,000 3,510,009 3,445,018 3,380,027 2,865,036 2,850,045 2,835,054 2,370,063 2,405,072 2,440,081 524,590 609,099
Revenue 50,000 50,000 50,000 100,000 100,000 100,000 150,000 150,000 150,000

Total available cash 0 4,075,000 3,510,009 3,445,018 3,430,027 2,915,036 2,900,045 2,935,054 2,470,063 2,505,072 2,590,081 674,590 759,099
LESS
Cost of Goods 515,000 15,000 15,000 515,000 15,000 15,000 515,000 15,000 15,000 515,000 15,000 15,000
Operating Expenses 49,991 49,991 49,991 49,991 49,991 49,991 49,991 49,991 49,991 50,491 50,491 50,491
Land Leases 1,500,000
Purchase Shell Company 800,000
Syndication Costs 125,000





Total disbursements 925,000 564,991 64,991 64,991 564,991 64,991 64,991 564,991 64,991 64,991 2,065,491 65,491 65,491
Cash balance (925,000) 3,510,009 3,445,018 3,380,027 2,865,036 2,850,045 2,835,054 2,370,063 2,405,072 2,440,081 524,590 609,099 693,608
ADD
Line of Credit
Long-term loans
Capital stock issues 5,000,000
Total additions 5,000,000 0 0 0 0 0 0 0 0 0 0 0 0
Ending cash balance 4,075,000 3,510,009 3,445,018 3,380,027 2,865,036 2,850,045 2,835,054 2,370,063 2,405,072 2,440,081 524,590 609,099 693,608
Petron Energy
3 Year Cashflow Projections
By Month
Time period
Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09
CASH
Beginning cash balance 693,608 641,608 749,608 907,608 55,608 363,608 671,608 19,608 527,608 1,035,608 583,608 1,291,608
Revenue 1,540,000 200,000 250,000 1,740,000 400,000 400,000 1,940,000 600,000 600,000 2,140,000 800,000 800,000

Total available cash 0 2,233,608 841,608 999,608 2,647,608 455,608 763,608 2,611,608 619,608 1,127,608 3,175,608 1,383,608 2,091,608
LESS
Cost of Goods 2,530,000 30,000 30,000 2,530,000 30,000 30,000 2,530,000 30,000 30,000 2,530,000 30,000 30,000
Operating Expenses 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000
Repay Line of Credit 1,000,000







Total disbursements - 2,592,000 92,000 92,000 2,592,000 92,000 92,000 2,592,000 92,000 92,000 2,592,000 92,000 1,092,000
Cash balance 0 (358,392) 749,608 907,608 55,608 363,608 671,608 19,608 527,608 1,035,608 583,608 1,291,608 999,608
ADD
Line of Credit 1,000,000
Long-term loans
Capital stock issues
Total additions - 1,000,000 0 0 0 0 0 0 0 0 0 0 0
Ending cash balance 0 641,608 749,608 907,608 55,608 363,608 671,608 19,608 527,608 1,035,608 583,608 1,291,608 999,608
Petron Energy
3 Year Cashflow Projections
By Month
Time period
Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10
CASH
Beginning cash balance 999,608 (284,142) 417,108 1,118,358 34,608 935,858 2,062,108 1,403,358 2,727,608 4,273,858 4,035,108 5,781,358
Revenue 4,015,000 1,000,000 1,000,000 4,215,000 1,200,000 1,425,000 4,640,000 1,625,000 1,850,000 5,065,000 2,050,000 2,275,000

Total available cash 0 5,014,608 715,858 1,417,108 5,333,358 1,234,608 2,360,858 6,702,108 3,028,358 4,577,608 9,338,858 6,085,108 8,056,358
LESS
Cost of Goods 5,100,000 100,000 100,000 5,100,000 100,000 100,000 5,100,000 100,000 100,000 5,100,000 100,000 100,000
Operating Expenses 198,750 198,750 198,750 198,750 198,750 198,750 198,750 200,750 203,750 203,750 203,750 203,750








Total disbursements - 5,298,750 298,750 298,750 5,298,750 298,750 298,750 5,298,750 300,750 303,750 5,303,750 303,750 303,750
Cash balance 0 (284,142) 417,108 1,118,358 34,608 935,858 2,062,108 1,403,358 2,727,608 4,273,858 4,035,108 5,781,358 7,752,608
ADD
Line of Credit
Long-term loans
Capital stock issues
Total additions - 0 0 0 0 0 0 0 0 0 0 0 0
Ending cash balance 0 (284,142) 417,108 1,118,358 34,608 935,858 2,062,108 1,403,358 2,727,608 4,273,858 4,035,108 5,781,358 7,752,608



EARNINGS PER SHARE WORKSHEET


2008 2009 2010 2011 2012

Net Profit (3,381,396) 256,000 6,753,000 27,337,500 47,465,000




Outstanding
Shares 65,000,000 65,000,000 65,000,000 65,000,000 65,000,000




Earnings Per
Share (.05) .003 .10 .42 .73





Value of Share (.003) .05 1.50 6.30 10.95




These projections are estimates only and not to be intended as guaranteed
performances.
Petron Energy
3 Year Operating Projections
By Month
Assumptions:
Petron will do a minimum of 8 industry deals between 2008-2010. Each deal represents 3 wells. Each deal will cost $500k to participate.
Return on investment should begin in the 4th month after the investment at a monthly rate of $50k.
Petron will seek a line of credit for one half of the cost to do each industry deal of $500k.
Petron will lease 7,500 acres of land at a estimated cost of $200 per acre to pursue the drilling of vertical and horizontal wells.
The rights to the leases should be complete by the fall of 2008.
The first 8 Petron Wells will be 2 vertical wells per deal at an estimated cost of $2,000,000 per well. Petron will keep a 50% stake in each of its
deals and sell the remaining 50% in retail packages. Retail packages are turnkey in structure and have contingencies
factored into the cost of the project. Wells will begin in 2009.
Gross monthly income from Petron Wells are estimated at $375k per month. A total of 24 wells will be done over a 24 month period beginning
in 2010. Revenue should begin in the 4th month after each deal (3 wells) is done.
Each Petron well is a 3 well project consisting of 2 vertical and 1 horizontal. Vertical wells estimated operating expenses are $5k per month.
Horitzonal wells are estimated at $20k per month.
Field labor represents the following: Engineer - $65k, geologist - $65k, Land manager - $50k, executive administrator - $50k
The position for land manager will not be filled until 2009 along with other increases in field staff.
Horizontal wells will cost $5,000,000. each to do. Expected drillings for these types will begin in 2010.
Payroll for the office include the management team, administrative support, public relations coordinator, accounting, etc.
Petron Energy
3 Year Operating Projections
By Month
1 deal 1 deal 1 deal 1 deal 4 wells
Income Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Total
Industry Deals - - - 50,000 50,000 50,000 100,000 100,000 100,000 150,000 150,000 150,000 900,000
Petron Wells
Retail Packages
Total Income - - - 50,000 50,000 50,000 100,000 100,000 100,000 150,000 150,000 150,000 900,000
COGS
Field Labor 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 180,000
Petron Wells 1,500,000 1,500,000
Industry Deals 500,000 500,000 500,000 500,000 2,000,000
Total COGS 515,000 15,000 15,000 515,000 15,000 15,000 515,000 15,000 15,000 2,015,000 15,000 15,000 3,680,000
Gross Profit (515,000) (15,000) (15,000) (465,000) 35,000 35,000 (415,000) 85,000 85,000 (1,865,000) 135,000 135,000 (2,780,000)
Operating Expenses
Payroll 27,083 27,083 27,083 27,083 27,083 27,083 27,083 27,083 27,083 27,083 27,083 27,083 324,996
Payroll Tax 4,208 4,208 4,208 4,208 4,208 4,208 4,208 4,208 4,208 4,208 4,208 4,208 50,500
Advertising 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Office expenses 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Telephone 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,500 1,500 1,500 13,500
Insurance 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Legal Expenses 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000
Accounting 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Vehicle(s) 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Rent 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
Interest Expense - - - - - - - - - - - - -
Postage/Shipping 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Depreciation - - - - - - - - - - - - -
Misc 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Travel 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Equipment Rental 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Total Expenses 49,991 49,991 49,991 49,991 49,991 49,991 49,991 49,991 49,991 50,491 50,491 50,491 601,396
Net Profit b/tax (564,991) (64,991) (64,991) (514,991) (14,991) (14,991) (464,991) 35,009 35,009 (1,915,491) 84,509 84,509 (3,381,396)
Petron Energy
3 Year Operating Projections
By Month
1 deal 1 deal 1 deal 1 deal 12 wells
Income Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Total
Industry Deals 200,000 200,000 200,000 250,000 250,000 250,000 300,000 300,000 300,000 350,000 350,000 350,000 3,300,000
Petron Wells 150,000 150,000 150,000 300,000 300,000 300,000 450,000 450,000 450,000 2,700,000
Retail Packages 1,340,000 1,340,000 1,340,000 1,340,000 5,360,000
Total Income 1,540,000 200,000 200,000 1,740,000 400,000 400,000 1,940,000 600,000 600,000 2,140,000 800,000 800,000 11,360,000
COGS
Field Labor 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Petron Wells 2,000,000 2,000,000 2,000,000 2,000,000 8,000,000
Industry Deals 500,000 500,000 500,000 500,000 2,000,000
Cost of Operation 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Total COGS 2,530,000 30,000 30,000 2,530,000 30,000 30,000 2,530,000 30,000 30,000 2,530,000 30,000 30,000 10,360,000
Gross Profit (990,000) 170,000 170,000 (790,000) 370,000 370,000 (590,000) 570,000 570,000 (390,000) 770,000 770,000 1,000,000
Operating Expenses
Payroll 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 360,000
Payroll Tax 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 66,000
Advertising 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Office expenses 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Telephone 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Insurance 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400
Legal Expenses 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Accounting 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000
Vehicle(s) 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000
Rent 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
Interest Expense - - - - - - - - - - - - -
Postage/Shipping 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Depreciation - - - - - - - - - - - - -
Misc 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Travel 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
Equipment Rental 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Total Expenses 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 744,000
Net Income b/tax (1,052,000) 108,000 108,000 (852,000) 308,000 308,000 (652,000) 508,000 508,000 (452,000) 708,000 708,000 256,000
Petron Energy
3 Year Operating Projections
By Month
1 1 1 1 4
Income Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Total
Industry Deals 400,000 400,000 400,000 450,000 450,000 450,000 500,000 500,000 500,000 550,000 550,000 550,000 5,700,000
Petron Wells 600,000 600,000 600,000 750,000 750,000 975,000 1,125,000 1,125,000 1,350,000 1,500,000 1,500,000 1,725,000 12,600,000
Retail Packages 3,015,000 3,015,000 3,015,000 3,015,000 12,060,000
Total Income 4,015,000 1,000,000 1,000,000 4,215,000 1,200,000 1,425,000 4,640,000 1,625,000 1,850,000 5,065,000 2,050,000 2,275,000 30,360,000
COGS
Field Labor 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 600,000
Petron Wells 4,500,000 4,500,000 4,500,000 4,500,000 18,000,000
Industry Deals 500,000 500,000 500,000 500,000 2,000,000
Cost of Operations 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 600,000
Total COGS 5,100,000 100,000 100,000 5,100,000 100,000 100,000 5,100,000 100,000 100,000 5,100,000 100,000 100,000 21,200,000
Gross Profit (1,085,000) 900,000 900,000 (885,000) 1,100,000 1,325,000 (460,000) 1,525,000 1,750,000 (35,000) 1,950,000 2,175,000 9,160,000
Operating Expenses
Payroll 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 900,000
Payroll Tax 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 150,000
Advertising 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 20,000 20,000 20,000 20,000 200,000
Office expenses 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Telephone 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Insurance 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
Legal Expenses 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Accounting 20,000 20,000 20,000 20,000 20,000 20,000 20,000 22,000 20,000 20,000 20,000 20,000 242,000
Vehicle(s) 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 180,000
Rent 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
Interest Expense - - - - - - - - - - - - -
Postage/Shipping 750 750 750 750 750 750 750 750 750 750 750 750 9,000
Depreciation - - - - - - - - - - - - -
Misc 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Travel 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Equipment Rental 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Total Expenses 198,750 198,750 198,750 198,750 198,750 198,750 198,750 200,750 203,750 203,750 203,750 203,750 2,407,000
Net Income b/tax (1,283,750) 701,250 701,250 (1,083,750) 901,250 1,126,250 (658,750) 1,324,250 1,546,250 (238,750) 1,746,250 1,971,250 6,753,000
Petron Energy
2 Year Operating Projections
By Year
Sales Year 4 Year 5
Industry Deals 8,100,000 10,500,000
Petron Wells 30,150,000 48,150,000
Retail Packages 12,060,000 12,060,000
Total Sales 50,310,000 70,710,000
COGS
Field Labor 675,000 750,000
Petron Wells 18,000,000 18,000,000
Industry Deals 2,000,000 2,000,000
Cost of Field Operations 600,000 600,000
Total COGS 21,275,000 21,350,000
Gross Profit 29,035,000 49,360,000
Operating Expenses
Payroll 1,000,000 1,200,000
Payroll Tax 167,500 195,000
Advertising 250,000 300,000
Office expenses 20,000 25,000
Telephone 65,000 70,000
Insurance 130,000 140,000
Legal Expenses 325,000 350,000
Accounting 265,000 285,000
Vehicle(s) 200,000 200,000
Rent 175,000 200,000
Interest Expense
Postage/Shipping 10,000 12,500
Depreciation
Misc 15,000 17,500
Travel 75,000 100,000
Equipment Rental 40,000 45,000
Total Expenses 1,697,500 1,895,000
Net Income b/tax 27,337,500 47,465,000
Exhibits
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
traditional frac job
slick water only
hybrid slick water
the fracturing uid. These materials are called proppants. The proppant enters the fractures
in the formation and, when pumping is stopped and the pressure allowed to dissipate, the
proppant remains in the fractures. Since the fractures try to close back together afer the pres-
sure on the well is released, the proppant is needed to hold or prop the fractures open. These
propped-open fractures provide passages for oil or gas to ow into the well.
A series of studies and experimentation in the design of frac treatments have improved de-
velopment and stimulation practices in the Sandstone formations of East Texas. Advanced
hydraulic fracture diagnostics and documented production results over the rst six months of
well life have been used to beter understand fracture geometry and well performance. The
objective of the diagnostics is to improve fracture length and optimize fracture treatment de-
sign. The resulting changes to completion and stimulation design have resulted in improved
well performance.
New Hybrid Fracs Optimize
Development In Sand Formations
When sandstone rocks contain oil or gas in commercial quantities, recovery can be vastly
improved by a process called fracturing which is used to increase permeability to its optimum
level. Basically, to fracture a formation, a fracturing service company pumps a specically
blended uid down the well and into the formation under great pressure. Pumping continues
until the formation literally cracks open. Meanwhile, a special type of frac sand is mixed into
Exhibit A
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
Tax Benefts Of Oil And Gas Investment
For the individual investor not subject to the alternative minimum tax, there are some potentially
signicant tax advantages arising from development of domestic oil and gas prospects. These benets
are manifested in two distinct tax atributes: the election to expense intangible drilling costs and the
percentage depletion expense.
The election to expense intangible drilling costs helps the individual investor recoup the
original cash investment by oseting that expense against other ordinary income. Since a substantial
portion of the investment in an oil and gas prospect will be intangible drilling cost, this potential benet
can be very signicant depending on the investors incremental tax rate. This election creates an alternative
minimum tax preference item and its eect should be considered in advance of making this election. The
balance of a participants investment will fall into two categories: equipment and leasehold improvements,
which should be depreciated over seven years and amortized over ten years respectively.
The percentage depletion expense is an expense created upon the successful completion of a well and
the subsequent production. The gross oil and gas revenue from the well will determine this deduction.
Currently the percentage of the gross revenue used for calculating the depletion expense is 15% for light,
sweet crude. This percentage can rise for heavier oil when the price of oil drops below a specied
price. Since the deduction is based on gross revenue, the eective taxable rate on net income from the
prospect is much lower than other ordinary income. There is a potential alternative minimum tax impact
of percentage depletion that should be considered.
Simplifed Summary
1. Intangible Drilling Costs (IDC) are writen o 100% against adjusted gross income (taxable
income), thus lowering taxable income. IDC can vary from 65% to 95% of total unit cost.
2. Lease And Well Capital Costs (TDC) are principally for equipment such as pumpjacks, tankage,
wellheads, etc. and are capitalized and depreciated over seven years.
3. Lease Operating Expense (LOE) is a fully deductible business expense with the exception of
additional capitalized equipment.
4. Oil And Gas Production Income (Depletion Allowance) is 15% TAX FREE INCOME (minimum
15%) with the percentage determined annually by the IRS based on average price of crude oil and other
factors.
*This is not to be construed as tax advice. Petron recommends the use of a Certied Public Accountant competent in oil and gas maters.
Cotton Valley Trend 2006-IV 3-well Project
One Unit investment in three wells $ 45,000.00
Est. 85% Intangible Drilling Cost (IDC expense) $ 38,250.00
1st year write-o
100% IDC $ 38,250.00
1/7th TDC $ 964.00
Estimated rst year write-o $ 39,214.00
*39,214 Write-O X 35% Tax Bracket = $13,725 in Tax Savings
Exhibit B
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
Exhibit C
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net

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Exhibit D
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
30586
31894
33125
33735
30104
36120
36132
31873 33491
500ft drillinginfo.com
Haygood #11
Devon Energy
Completed 9/06
IP: 6,635 MCF
105 BOPD
Griffith #3
Completed 1995
148,895 MCF to date
IP: 518 MCF
Griffith #4
Completed 1997
540,169 MCF to date
IP: 683 MCF
Griffith #5
Completed 1998
443,712 MCF to date
IP: 434 MCF
Haygood #1
Completed 1988
1.1 BCF to date
IP: 1,111 MCF
McRae #4
Completed 1991
403,267 MCF to date
IP: 154 MCF
Harvard #1
Completed 1979
442,623 MCF to date
IP: 595 MCF
Griffith #2
Completed 1991
269,866 MCF to date
IP: 329 MCF
Initial Production Comparison
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Griffith #2 Griffith #3 Griffith #4 Griffith #5 Haygood #1 Harvard #1 McRae #4 Haygood #11
M
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Panola County, East Texas
Horizontal Well Area Map and IP Comparison Graph
Vertical Wells
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PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
Stratigraphic Column
Lower Cretaceous
Rodessa
825
Upper Gloyd
Limestone
Lower Gloyd
Limestone
Dees
Sandstone
Upper Young
Limestone
Lower Young
Limestone
Pettit
330
Upper Pettit
Limestone
Pettit E
Limestone
Travis Peak
1,730
Upper
Sandstone and shale
Middle
Sandstone and shale
Lower
Sandstone and shale
Upper Jurassic
Cotton Valley
1,945
Upper
Sandstone and shale
Lower (Taylor)
Sandstone and shale
Exhibit E
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
Cotton Valley Wells Success Rate
Cotton Valley refers to a prevalent geological
formation rich in natural gas and natural gas liquids
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IP Comparison
1977-1999
2005
Wells
Averages (IP MCF)
1977-1999 391
2005 1,010
Exhibit I
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
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8
9
1
0
1
1
1
2
1
3
1
4
1
5
1
6
1
7
1
8
1
9
2
0
Y
e
a
r
M C F
Exhibit J
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
Cotton Valley Wells Completed in August, 2004
with at least 12 Months of Production History
Most Recent Texas RRC, Dist. 6, East Texas - September, 2005
0
200
400
600
800
1,000
1,200
O
R
Y
X
-
A
K
IN
C
H
IL
D
R
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S
S
, M
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N
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9
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#
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A
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#
2
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M
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G
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F
"
M
C
F

p
e
r

D
a
y
Average 656 MCF/D
*** The above data is based on all Texas RRC, District 6, Cotton Valley Wells completed in August 2004 and have reported production through September 2005. Totals include 13.5 months of
production, as to reflect the BTU value of the gas and condensate sales. In addition, the top and bottom 10% of the data set have been excluded from all calculations. [Alpha: Left to Right/
Cotton Valley Wells Completed in August, 2004
Texas RRC, Dist. 6, East Texas - September, 2005
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
O
R
Y
X
-
A
K
IN
C
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#
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1
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#
2
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3
3
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C
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9
C
R
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M
C
M
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L
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G
O
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D
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G
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m
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l
a
t
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v
e

G
a
s

P
r
o
d
u
c
t
i
o
n
*** The above data is based on all Texas RRC, District 6, Cotton Valley Wells completed in August 2004 and have reported production through September 2005. Totals include 13.5
months of production, as to reflect the BTU value of the gas and condensate sales. In addition, the top and bottom 10% of the data set have been excluded from all calculations.
Average 239,419 Mcf/Gas-Cum.
Exhibit K
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
W
h
o

p
r
o
d
u
c
e
s

t
h
e

g
a
s
?
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d
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:
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s

P
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5

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l

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s

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%

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r

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1
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5






H
I
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T
O
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Y
















/













P
R
O
J
E
C
T
I
O
N
S
T r i l l i o n C u b i c F e e t
C
u
r
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e
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t

p
r
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e

f
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2 0 0 5
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2 0 2 0
2 0 2 5
E
N
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, IN
C
.
Exhibit L
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
R
8
K
U
C
O
U
N
T
Y
P
A
N
O
L
A
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T
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8
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N
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#
1
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#
1
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#
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~
1
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2
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M

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9
,
8
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9
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Exhibit M
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
271
259
259
Martin Lake
Lake Tyler East
Lake Cherokee
Kilgore
Smith County
Upshur County
Harrison County
Cherokee County
Gregg County
Rusk County
Panola County
Longview
Henderson
Marshall
79
79
80
80
59
20
20
Minden
Brandy Branch
Cooling Pond
Hallsville
271
Frost-Watkins #1
Choice #1
Grimes #1
Brooks #2
Brooks #1
Gramling #2
Braswell #1
Braswell #4
Braswell #3
Braswell #2
Gramling #1
3310
259
79
Henderson
225
Talley Bottoms #1
Talley Bottoms #3
Hudman #5
Hudman #4
20
Sabine River
BNSF
Talley Bottoms #2
Daniels #2
Daniels #1
Crawford #1
Rio #1
Anderson #1
Anderson #2
Hudman #6
Frost-Watkins #2H
Frost #1
5mi drillinginfo.com
Well Locations
Company Well Location
2006 Cotton Valley Permits
County Line
Cotton Valley Trend
10/19/06
Exhibit N
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
271
259
259
Lake Murvaul
Martin Lake
Lake Tyler East
Lake Cherokee
Kilgore
Smith County
Upshur County
Harrison County
Cherokee County
Gregg County
Rusk County
Panola County
Longview
Henderson
Marshall
79
79
80
80
59
20
20
Minden
Brandy Branch
Cooling Pond
Hallsville
271
5mi drillinginfo.com
Pipeline Infrastructure
Company Well Locations
Pipeline
Cotton Valley Area
Exhibit O
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
SE Longview Prospect Area 14 Year Actual
Field
Oak Hill (Coton Valley)
Operator
Anadarko E&p
Company Lp
Location
District: 6; Harrison County, Texas
Lease Name
Letourneau Gas Unit 4
Gas ID Number
135118
Cumulative (since 1990)
1,745 MMCF
Wells
203-31870 (3)

Exhibit P
www.petronenergy.net
PETRON ENERGY, INC. Cotton Valley Trend
South Henderson Prospect 25 Year Actual
Field
Pod(Coton Valley)
Operator
Kingwood
Resources, Inc.
Location
District: 6; Rusk County, Texas
Lease Name
Alexander, Cuba Gas Unit
Gas ID Number
81249
Cumulative (since 1979)
857 MMCF; 11,036 BO
Wells
401-30735 (1)
PETRON ENERGY, INC. Cotton Valley Trend
www.petronenergy.net
Exhibit Q
The State of the World Energy
Market
On World Oil Reserves:
I think they (reserves) are on the decline in the biggest oil elds in the world TODAY
T. Boone Pickens
On World Oil and Gas Prices:
We ought to see $60 per barrel oil by the end of the year (2005), and natural gas prices going
to $10 per Mcf.
T. Boone Pickens
I would estimate prices (gas) would average about $7 through 2008. The rising demand for
gas, coupled with at production, has tripled prices in the last four years.
Michael Zenker, CAER (Cambridge Energy Research Associates)
We have exhausted the supply of cheap energy.
Jerey Currie, Managing Director, Goldman Sachs & Co.
Oil (& Gas) consumption remains strong even as petroleum prices approach $60 a barrel,
sparking concern that growing demand could spur still higher prices
Wall Street Journal, June 21, 2005, Big Thirst for Oil is Unslaked
On Natural Gas Supply and Demand:
Natural Gas demand in North America is increasing at about 3% per year,
whereas supply is increasing at only about 1%.
Natural Gas Prices Historical and Forecast, Cambridge Energy Research Associates
On Natural Gas Consumption:
Natural Gas is expected to be the fastest growing component of world primary energy
consumptionConsumption of Natural Gas is projected to increase by nearly 70 percent
between 2001 and 2025.
Energy Information Administration, International Energy Outlook 2004
World Oil & Gas Prices - Current
Nymex Crude Future: $58.49/Bbl Nymex Henry Hub Future: $7.20/MMBtu
Source: Bloomberg.com Energy Prices
World Natural Gas Consumption 1970-2025
36
53
73
90
105
118
134
151
0
20
40
60
80
100
120
140
160
1970 1980 1990 2001 2010 2015 2020 2025
HISTORY / PROJECTIONS
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