TAMING THE WILDCAT

the following is not authorized for use as an offer of sale or a solicitation of an offer to buy securities of royal resources exploration incorporated and let's proceeded or accompanied by a current perspective which contains information concerning the company and the current public offering of the securities by it it's a lonely land that it's a difficult length for what vegetation and animal life exists the Spanish pass through this country the Pioneers trekked west over and around these undulating do few settle the rolling drifting surface promise little fan doesn't nourish crops so sustain cattle if there wasn't much promise it's not there was below and it had lain below for centuries geographers call this West Texas geologists petroleum geologists know it is the Permian Basin these are the stirrings of a new well this well was going in not far from Monaghan's in Winkler County West Texas in the course of this film we'll come back here from time to time to watch the derrick go up and the drill string go down lubricated with a hope and expectations only oilfield adventurers know helped on its way by the Braun the know-how and yes the language of the Roughnecks colorful practitioner of the native art of wild cattle what this particular well is not of itself important to our story it is representative symbolic our story concerns rather a broad area of wildcatting but quest for natural resource riches and unproven territories a hardy craft accounting for the early fortunes of the Rockefellers Sinclair the Phillips Brothers of Jay paul Getty and HL hunt ours is the story of oil resources exploration incorporating of a burgeoning national demand for more petroleum and the dwindling supplies from known reservoirs it is a story of bold exciting investment possibilities you the investing public have a place in this story [Music] in the 110 years and the birth of the oil industry in the United States companies and independent operators have had to expand continuously to meet the energy demands of our highly industrialized society oil and/or natural gas are now produced in 32 states and offshore locations today three billion barrels of crude oil spring annually for more than five hundred eighty nine thousand wells in this country still it isn't enough to serve the sophisticated petrochemical industry which is responsible for so many modern-day necessities and luxury items and the server nation on the move fueled for more than two hundred eleven thousand service station [Music] the United States is by far the world's leading producer and consumer of oil the three billion barrels from under American soil represents 26% of the globe's yearly eleven point nine billion barrels in 1966 Americans consume more than 4.3 billion barrels of petroleum which accounted for 35 percent of the total world demand studies have indicated the United States will require three-fourths more energy in the 1965 to 1980 period than in the 15 years immediately preceding the same studies break this down to two-thirds more oil than we now use and 100 percent more natural gas in a word despite the vigorous growth of nuclear energy coal and water power oil and natural gas will be called upon to satisfy more than 70 percent of the nation's total energy requirements in the period up to 1980 petroleum exploration and production is expensive tremendously expensive the oil industry spends roughly 500 million annually on research a complete drilling rig may represent an investment of $500,000 or more on land and up to 12 million dollars for an offshore installation in the petroleum industry the bulk of its dollars amounting to approximately 19 billion dollars each year is expended in developing resources already in hand within the next decade the industry must have another 9 to 10 billion to develop property interests alone Larry's profit and response to national commitment in stepped-up petroleum exploration oil resources exploration incorporated was established to engage in imaginative exploration prospects embracing the thesis that the as high-risk and potential profit commensurate with that risk in Wildcat investments in oil gas and other minerals it is the goal of this company in which the individual investor can enjoy the tax shelter provided major petroleum companies to spread broadly the risk and offer exposure to possible major discoveries of resources through vision and diversification the single investor is in an unlikely position to drill a successful Wildcat the individual or group of investors may be hard pressed to retain the geological and engineering expertise necessary to reduce the risk of failure in Wildcat oil is most often found in the beds of ancient seeds these fees once covered much of the continental land area we now know in the organic Theory oil began with the remains of countless tiny creatures and plants that lived in the sea or washed down into it with mud and silt from streams prehistoric animals fell victim this residue settled to the bottom of the ancient seas and piled up layer atop layer as the old layers became buried deeper they were compressed by the tremendous weight gathering above them under this pressure heat was generated other factors chemical bacterial and radioactive entered into the process together these gradually transformed the organic matter into the compounds of hydrogen and carbon that we know as petroleum in the last century the cowboy and the Indian didn't always get along out here in West Texas as the story goes the Indians would on occasion ride out of these dunes to raise a little Ned with a folks in town then they'd split and head back into the Sand Hill the boys in blue would give chase but stop short overwhelmed by the sea of sand stretching to the horizon finally one shavetail destined to go far with the cavalry reason that if the Indians could survive in these trackless wastes he could too he's heard old paint on and found the Indians living the good life amid a series of freshwater lakes it seems despite the apparent desolation that the water table was not far below the surface a little digging an old yellowtail had himself a fine waterhole water is necessary in drilling oil and gas wells this paradoxical near-surface source in West Texas was a boon to the tool-pushers derrick men lead Tong jarheads and Roughnecks assigned to drill a wildcat for royal resources the risk of not hitting paydirt here or anywhere may be great the risk is reduced when you assemble an experienced energetic staff supported by a Board of Directors reflecting an all-american cross-section of able mines and careers let us introduce team members of royal resources exploration and its management company royal Resources Corporation Paul d-bag well of Detroit is chairman of the board for 23 years he was a teacher and administrator of Michigan State University mr. Bagwell has been active in petroleum exploration financing and management since 1961 the president of oil resources is an experienced oilman George C harden jr. a native of Oakwood Texas mr. Hardin has compiled 27 years of oil and gas geological exploration and production work in his tour as worldwide exploration supervisor for the kerr-mcgee corporation of Oklahoma City the firm's net oil production rose 127 percent its gas production increased 31.8% and its total production with gas converted to oil grew by 70 point 8 percent his goal for oil resources is simply stated I am primarily an operations man and even though I have some knowledge of the tax bills a benefit that an investor might retreat from oil I'm primarily interested in operating royal at a hard dollars profit we will put together an exploration team that is second to none in direct relation business the exploration efforts will be widespread both geographically and economically we will explore in the archer area of the Gulf of Mexico where wells are very expensive and the words are appropriately large we will be exploring in some of the relatively shallow areas of Oklahoma Kansas infected we will also be exploring in WoW areas the Rocky Mountains in Canada we accept the help a fairly large number of prospects in each program so that says the investor can get as great a spread statistically as possible however our primary objective and royal is to find what we might elephant ride you're feels pretty article through the fans large all against fields that will return many times as much as a hundred and more times but the initial risk for this project was when we're going to find those I can't sell and neither can anyone else we will be drilling a series of prospects that held the potential to produce this amount of returns and a great many memos we drive but some of them will be productive I think that the people who put their money in royal or are the people who are looking for a much larger return than simply a an investment with some tax shelter in other words we are looking at Wildcat prospects from the standpoint of how much money are we spending what they would have a chance to find and what is the risk for finding it members of the board of directors of royal resources include dr. Edward our Annis of Miami Florida past president of the American Medical Association JL Burke of coastal Oklahoma former president and chief executive officer of the pipeline subsidiary of Standard Oil Company of Indiana Meyer Feldman Washington attorney and former counsel to the President of the United States Joseph J Fox of Scottsdale Arizona television producer Congressional Medal of Honor winner former governor of South Dakota and former commissioner of the American Football League Stanley C hope of New York City is chairman of the board of Strutters thermal flood corporation and former president of Essos Standard Oil Company Arthur J C Underhill of New York was a partner in Arthur wiesen burger & Company for 12 years before his retirement in 1967 chairman Bagwell a past president of the United States Junior Chamber of Commerce is an enthusiastic spokesman for royal resources for the hearing memory royal resources exploration program to make money for our investors now we do this in several ways one is we provide investors with an excellent opportunity to invest income dollars that they would ordinarily have to pay out in taxes into a PAC sheltered investment where they get a tax write-off this is an earned tax write-off under the tax laws passed for the Congress of the United States mr. Bagwell touched on the tax laws which afford advantages for oil gas and other natural resources exploration how do these laws read what are they well they are not new and this may come as a surprise to many persons the federal tax laws incentive laws or remember we desperately need more and more petroleum reserves and our government fully realizes this these laws stem from the Revenue Act of 1926 in the authoritative book oil and gas federal income taxation the passage reads for all practical purposes the option to expense or capitalize intangible drilling and development expenditures as existed since the first income tax statute regulations section 1.6 11-1 issues under the 1954 code states in part annual depletion deductions are allowed only to the owner of an economic interest in mineral deposits an economic interest is possessed in every case in which the taxpayer has acquired by investment any interest in mineral in place with royal resources it is anticipated that at least 80% of each investment will be deductible from the plan holders gross taxable income within 12 calendar months after investment if we are going to learn the legal language governing the oil industry perhaps we should also be exposed to the language of the fields that West Texas oil field it is best understood that no drill string goes down without well out in the Sandhills it's strictly West Texas spoken here there we've been awful to go beyond it no more thing about is a big way with we're going within Iran maybe that's a foreign tongue language you don't fathom but for straight talk private oil resources is a vital progressive exploration companies affording a unique opportunity for tax dollars to help create wide exposure to possible discoveries of oil gas and other natural resources a program which if successful will produce growth of capital that is partially tax free and while we're talking about capital growth that liquid running out of one of our wells is what makes it happen the torch of fires flown into the flowing oil burns up accumulated gas preventing the possibility of a later explosion standard procedure is some colorful West Texas language followed by a handshake it's a fascinating exciting business let us tell you about it sometime [Music]