“Swartz #2”

Dale Consolidated Oil Field, McLeansboro, Hamilton County, Illinois, USA.

Sunset Oil and Gas Partners LLC | George N. Mitchell Drilling Inc.

Contents

Page 1: WTI Information Guide

Page 6: Opportunity Prospectus “Swartz #2”

Page 11: Swartz #2 Geology Report

Page 14: Navigating the Illinois Geological Survey Website

Page 18: Risks

Page 21: Final Word and Contact Details

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WTI Information Guide

What is WTI?

West Texas Intermediate (WTI) is a grade of Crude Oil used as a benchmark for Oil prices in the

United States. WTI is also known as “Texas light sweet” because of its low density characteristics,

and sweet because of its low sulphur content. It is considered both lighter and sweeter than its

European counterpart Brent Crude. Crude Oil is used in a near endless amount of products in

modern day society including plastic, tyres, and the very roads you drive on. However, “Crude” is the

term for the Oil which comes straight out of the ground and has minimal uses until it is refined. Due

to its low sulphur content WTI is predominantly processed into gasoline before being piped across

America for consumption.

How is it located?

Oil accumulates between layers of the subsurface and porous rock. Therefore, the method for

locating oil is to identify the optimum underground locations that would be necessary to form a pool

of oil. This is generally the job of a Geologist who will study maps, aerial photographs and satellite

images to find the above ground tell-tale signs that Oil is located in the ground below. To increase

the probability of success, it can be considered wise to focus on known producing areas such as

existing Oil fields in which previous drilling data can also be examined and locational patterns

established.

Another method is to use 2D and 3D seismic imaging, using seismology. This involves transmitting

artificially produced seismic waves into the ground, which are then reflected back to the surface in

different directions, by varying rock formations below. This data is then fed into a computer which

generates 2D and 3D images of the ground below. These images are then analysed by Geophysicists

and Natural Gas Engineers to determine the most effective strategy of extracting the Oil and Gas

below.

How is Oil extracted?

After the initial location and planning stage, the proposed Oil well must be drilled and completed

before it can produce Oil.

A well is initially created by drilling a hole, which can be up to 50 inches in diameter, into the earth

using a drill pipe and drill bit. Drilling “mud”, which consists of water, clay and chemicals, is pumped

down through the centre of the drill pipe to cool and lubricate the drill bit whilst also helping to

stabilise the drill pipe and carry the rock fragment cuttings to the surface.

Drilling continues thousands of feet down, usually between 1000 and 5000 feet, past the

groundwater level. The drill pipe and bit are then removed and steel tubing, known as surface

casing, is set inside the well. This stabilises the well’s sides creating a protective barrier, particularly

to any underground fresh water reservoirs. Cement is then pumped through and out of the casing,

removing any remaining rock fragments and drilling mud whilst permanently securing the casing in

place. This cement creates a seal to protect the fresh groundwater from contamination. This is then

pressure tested, to ensure nothing can escape, and then repeated several times to create a thick and

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stable well construction. A perforating tool is then lowered into the well to create small perforations

in the part of the steel casing located in the production zone. This provides a path to allow Oil to

flow from the surrounding rock into the production casing. After this, acids or fracturing fluids may

be pumped into the rock to stimulate the reservoir for optimum oil production.

Usually the natural pressure of the subsurface Oil reservoir is high enough to create a constant flow,

of Oil and Gas, to the surface. When this is the case, the top of the well is fitted with a collection of

valves called a “Christmas Tree” or “Production Tree” which is used to regulate well pressure. Oil

flows and can be connected to both an Oil pipeline and tanks to supply the Crude Oil to the

refineries or export terminals. As the pressure of the underground reservoir decreases an artificial

extraction method will be used. The most common of these is the installation of a Pumpjack, also

known as a “Nodding Donkey”.

The entire process usually takes 6 to 8 weeks and well production can last for 20 to 40 years.

WTI Crude Oil market overview.

Today, fossil fuels still dominate global energy consumption with a market share of 87%, of which Oil

enjoys a 33.1% share, as shown below. In 2011 global Oil consumption grew by 0.7% to reach 88

million b/d while global production increased by 1.3%, 1.1 million b/d.

Focusing on the US, at the end of 2011 the USA was the world’s largest single country producer of

Oil with an 8.8% total share of production. However, North America as a whole only produced

around half as much as the Middle East which enjoyed a 32.6% share of total production, according

to the BP Statistical Review of World Energy 2012. In terms of consumption, the US was also by far

the world’s largest Oil consumer, with a total share of 20.5%. Particularly impressive when compared

to the total consumption of Europe and Eurasia was 22.1%.

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Historically, the price of WTI Crude and Brent Crude were very similar. In 2011, however, the two

benchmarks began to diverge from one another. This was mostly due to increased production in the

mid-US and Canada where there was limited access to refining centres due to pipeline and

transportation constraints. However, according to the United States Energy Information

Administration, as such constraints are removed over the coming months; it is likely that the

divergence will be removed as WTI crude increases in value while the value of Brent Crude is

forecasted to remain relatively constant, as shown below.

WTI Market Projections

In the short term, many projections are focused on WTI closing its current divergence from Brent

Crude. The US Energy Information Administration forecasts, in their Short Term Energy Outlook

2013, that this divergence will shrink from $18 in 2012, to $16 in 2013, to $8 in 2014. This is mainly

due to an expected reduction in transport costs from an increase in pipeline capacity. An example of

this is the Seaway Pipeline, which transports Oil between Cushing, Oklahoma and the vast refinery

complex along the Gulf Coast near Huston, Texas. The pipeline had initial capacity of 150,000b/d,

which was increased to a capacity of 400,000b/d following the additions and modifications to

pumping stations. Capacity is now expected to increase further to a total of 850,000b/d, by Q1 2014,

as a twin pipeline is built next to the existing Seaway pipeline.

In 2012 world liquid fuel consumption grew by 0.9 million b/d to reach 8.2 million b/d by the year

end. The US Energy Information Administration forecasts this growth rate to remain constant

throughout 2013, before accelerating in 2014 following a global economic recovery. Current

consumption forecasts are 90.1 million b/d for 2013 and 91.5 million b/d for 2014 with most of this

being generated in non-OECD Asia. North America is also expected to see an increase in

consumption, over the next 12 months, as their national economic situation is unlikely to

deteriorate. On the production side, US crude production averaged 6.4 million b/d in 2012, an

increase of 0.8 million b/d on the previous year. This figure is projected to increase to an average of

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7.3 million b/d in 2013 and 7.9 million b/d in 2014. This will mean the US will have achieved it’s

highest level of recorded production since 1988. As a result of prices are expected to remain

relatively constant over the next 24 months, averaging between $90/b and $95/b.

Considering a longer timeframe, over the next 20 years until 2030, the production and consumption

of WTI will be impacted by four main factors:

1) Global population change.

Over the last 20 years the global population has increased by 1.6 billion people. Over the

next 20 years it is projected there will be a population growth of 1.4 billion (0.9% per

annum).

2) Global income.

Global GDP growth is widely forecasted to increase by around 3.7% per annum over the next

20 years. This will be driven by current low and medium income economies.

3) Energy Efficiency

As country’s become more energy efficient it is expected that energy consumption will

increase at a more restrained rate to population growth.

4) Transport

The transport fuel market is currently, and will remain to be, dominated by Oil which is

forecasted to hold a market share of 87% in 2030, compared to Biofuels accounting for 7%,

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Natural Gas accounting for 4% and electricity 1%. This is predominantly because of the

global vehicle fleet, which is forecasted to increase by 60% over the next 20 years. However,

due to increases in vehicle and engine efficiency, combined with the tightening of global CO2

limits, transport energy consumption is forecasted to grow at the lesser rate of 26% by 2030.

This is by no means an exhaustive list and there are other factors which could have an impact on Oil

over the next 20 years. Over the timeframe, despite remaining an important fuel, perhaps only

second to Coal, Oil is expected to be the slowest growing fuel. However, global liquid fuel demand

(including Oil and Biofuel) is likely to rise by 16 million b/d, exceeding 103 million b/d by 2030,

according to the BP Energy Outlook 2030 report. The results of this are clearly seen in the increases

in both consumption and production, as shown below.

As shown above, both consumption and production of liquid energy (Oil and Biofuels) are projected

to increase in a generally steady manner over the next 20 years. However, notice that the trend of

the past 20 years is broken and consumption is forecasted to increase more than production. As with

supply and demand of any product, this will have clear price implications for the future.

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Opportunity Prospectus: “Swartz #2”, McLeansboro, Hamilton County, Illinois, USA.

Sunset Oil and Gas Partners LLC | George N. Mitchell Drilling Inc.

__________________ is proud to offer clients the opportunity to purchase contractual rights

ownership of the “Swartz #2” Oil well. This is the

second of the Swartz wells, which covers an area

of 640 acres in the Dale Consolidated Oil Field, a

known producing area in the Illinois Basin, USA.

Project Coordinators, Sunset Oil and Gas LLC,

along with Drilling Contractor, George N. Mitchell

Drilling Inc, have many years of experience

operating together within the Illinois Basin. By

focusing on known producing areas, we are able

to limit risk and extend returns making this a

highly attractive opportunity to both experienced

Oil and Gas investors, and those looking to gain

involvement for the very first time. Swartz #2 is

also “WellCheck registered”, meaning purchasers

are able to access verified information, regarding the well, through their own personal WellCheck

account.

Name: Swartz #2. Location: Dale Consolidated Oil Field, South McLeansboro, Hamilton County, Illinois, USA. Section Township and Range: se1/4 of the sw 1/4 of Section 26 T5S, R6E, Hamilton Co. IL Project Coordinators: Sunset Oil and Gas LLC. Drilling Contractor: George N. Mitchell Drilling Company, inc. Geologist: Mr John Upcraft. Certified Professional Geologist (AIPG-CPG 8459). Purchaser: Bi-Petro Inc. Stage: Post Survey. Second Well. Direction: Vertical Drilling. Area: 640 acres. Area Average: 120-150b/d. Availability: 1.3655% x30. Exit: Buyout by NGI or Sunset Oil and Gas Partners LLC. Returns: Monthly. Lifespan: 20 years (approx) Price: £10,000.00

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Location.

The project is taking place in the Dale Consolidated Oil Field, south of McLeansboro, Hamilton County, Illinois, USA. Township section and range: se1/4 of the sw 1/4 of Section 26 T5S, R6E, Hamilton Co. IL. The area can be seen in greater detail on the Illinois Geographical Survey website (instructions page 14) and on Google Earth. The map below is taken from the Illinois Geological Survey website, with the known Oil and Gas field shown as the green area. The project itself is located in the northern area of the Oil field, better shown on the image taken from Google Earth.

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Note: The area available to Sunset Oil and Gas Partners LLC is identified above by the red box.

Hamilton County, Illinois.

About Sunset Oil and Gas LLC

Sunset Oil and Gas Partners is an independent Oil and Gas producer in the state of Illinois, USA. By

focusing on known producing areas they are able to develop high impact projects whilst maintaining

a well-diversified portfolio of Oil and Gas prospects. The management team of Sunset Oil and Gas

Partners boasts a combined experience of over 75 years with an enviable track record of returning

profit to their partners within a 12 month timeframe and continuing that margin for many years

thereafter.

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About George N. Mitchell Drilling Company Inc.

George N. Mitchell Drilling operates one of the finest fleets of rotary and service rigs in the Illinois

Basin and is proud to hold the reputation of “the preferred drilling company”. The company was

conceived in 1939 and now has over 70 years of experience. Knowledge of the geology of the Illinois

Basin is ingrained within the company and its employees from their Engineers to Geologists, Rig

Managers to Production Technicians. With Mitchell Drilling serving so many Oil producers with

efficient Oil and Gas drilling, over so many years, we couldn’t be more confident in their ability and

the benefits they bring to this opportunity.

About the Geologist

Mr John Upcraft is a Certified Professional Geologist (AIPG-CPG 8485) with more than 30 years

industry experience, much of which has been spent in the exploration of Oil and Gas in the Illinois

Basin. He has completed the geographical survey (page 11), on behalf of Sunset Oil and Gas Partners

LLC, using state of the art geological surveying techniques and is, without doubt, a highly valued

asset to this project.

About Bi-Petro Inc.

Bi-Petro has been serving independent Oil producers in the Illinois Basin for over 30 years. Founded

in 1973, Bi-Petro has always focused on their producers as their main priority. They purchase Oil and

Gas at a very competitive rate, all of which is transparently shown on their website, then transport

this to the refinery companies. This enables producers to concentrate on their job of production

while knowing they always have a buyer in place ready to offer the most competitive price available.

The Illinois Basin

The Illinois Basin is relatively mature reservoir which still boasts an abundance of opportunities for

both primary and advanced recovery techniques. Estimate calculations show that around two thirds

of the reservoirs remain below the surface, despite over 70 years of extraction. The basin itself

covers 59,000 square miles through Illinois, Indiana and Kentucky and is known for is high gravity,

low sulphur Oil which is highly coveted.

The average pay zones in the area range between 1000 feet and 5000 feet deep, with an average of

3000 feet. Deeper pay zones, however, are showing extensive promise, especially the Warsaw and

Salem formations, both of which are targeted in the available well.

Entry

Allocation size: 1.3655% Available allocations: 30 per well. Contract: Individual contract / documents with each allocation. Entitlement: 1.3655% of all produce. Price: £10,000.00

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Exit

Returns: Paid monthly as per contract. Pay out: 7328 barrels. Pay out: 2 years, 2 months. Monthly return: $365.30 (£231.82). Average lifespan: 20 years. Potential earnings: 10 times. Buy out: Yes, by NGI or Sunset Oil and Gas.

Note: The above is calculated off 10b/d for 20 years on 12/11/2012 pricing. Please use project

calculator, to calculate more precisely.

Explanation

Each client has to buy into a well assuming that well will only produce 10b/d for approximately 20

years.

10b/d x $88.00 $880.00/d x 1.3655% = $12.02/d. $10.53 x 365 days = $4387.30 (£2786.47) per year. $3836.15 x 20 years = $76869 (£55729.40) over average well life.

As can be seen above, from 10b/d, a single allocation would earn $4387.30 per year for

approximately 20 years. Over a twenty year period this would result in a total profit of

approximately ten times the original purchase price.

Despite assuming each well will only produce 10b/d, it is important to take into consideration the

other wells drilled in the area by Sunset Oil and Gas Partners. In general, a producing well will have a

high IP (initial production) and then drop down to a production of around 10b/d over time, where it

will remain for much of its lifetime.

Sunset Oil and Gas Partners are currently enjoying the following averages from the wells they

already have in operation in the area. Firstly, all wells were paid out in less than 1 year. Average

production on all wells is between 120b/d and 150b/d. Their last drilled well (02/11/2012) had an IP

of 38b/h (912b/d) for the first 48 hours (1824 barrels in two days). The production has now fallen to,

and steadied at, 12b/h (288b/d). The well currently remains at this production level and is located

600 feet from the well on offer. Their longest producing well is currently in its 36th year of

production. All of the above wells were assumed to produce 10b/d in exactly the same way as the

wells available to clients.

All market prices quoted are considered correct as of 08/02/2013. $/£ conversion rates should not

be considered available, despite being accurate at time of writing.

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SWARTZ #2

Prepared for

SUNSET OIL AND GAS PARTNERS LLC

Prepared by

John Upcraft, LPG, CPG

November 17, 2012

The Swartz lease is located in Section 26 of Township 5 South, Range 6 East of the Third Principal Meridian in Hamilton County, Illinois. Since the initial discovery in 1940, the Dale Consolidated Field has produced in excess of 170,000,000 barrels of oil. Many wells nearby to the project acreage have produced in excess of 100,000 barrels of oil in ten years or less and produced for forty years or more. The majority of the production has been from Mississippian Sandstones known as the Benoist and Aux Vases. Other significant production has been from Mississippian Limestones known as the O’Hara, Rosiclare, McClosky, and Salem. Some lessor production has been derived from the Cypress Sandstone in the Mississippian. The majority of the wells in and nearby the project acreage has been produced and abandoned. Production in the early years of the field was through primary production. As the field matured and water flooding techniques were developed a significant increase in production occurred in the Aux Vases. Water was also injected into many other Mississippian Sandstones including the Benoist and Cypress. However, the potential for productive wells still exists within the project acreage. The complexity of portions of the reservoir allows for the opportunity to establish economic production in the Mississippian Sandstones that produced nearby or upon the project acreage. The geological mapping of the Base of the Barlow Limestone, Top of the Benoist Sandstone, Base of the Renault Limestone, and the Top of the Karnak Limestone indicate many similarities. The interpretation of the structure within the nearby region indicates a significant structure, with production on the apex of the structure as well as along the flanks of the structure. Much of the structural apex acreage is held by production by decades old water floods. However the flanks and remaining apparent structural closure areas hold the opportunity to pursue both stratigraphic and structural related reservoirs. Recent deeper discoveries and deeper shows of oil support the need to pursue an exploration program in the project acreage. The use of a map representing deeper structure was not completed due to the absence of data. However, regional mapping of the New Albany Shale indicates the presence of a structure associated with that of the shallower formations. The deeper exploration in the project acreage would not be associated with any proven known adjacent production.

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Within the region and a few miles to the west considerable activity has generated some quality production in the St. Louis, Salem, and Warsaw Limestones. Nearby the project acreage, Salem production was discovered in 1981 with a well reported to initially produce 648 barrels of oil per day. Based upon the current rate of production for this well, a conservative cumulative production of 100,000 barrels of oil can be anticipated. Upon the structure associated with this project, a few wells have been drilled to the Salem with several producing oil from one or more of the known producing formations. In recent activity, a few miles to the west, the Devonian has been drilled, resulting in shows of oil. Two wells were tested but not deemed viable to produce. However the presence of oil in the Devonian is encouraging. The recent exploration, new production and deeper shows of oil support the need to pursue an exploration program in the project acreage. It is recommended that eventually a well be drilled to explore the Devonian. Those potentially productive zones are known as the Dutch Creek, Clear Creek, and Grassy Knob. However, discussions with Sunset Oil and Gas Partners, LLC have led to the understanding that the depth of the well terminate in the Warsaw. The Swartz lease has an opportunity to benefit from adjacent proven productive formations located upon and adjacent to a significant structure. Acreage associated with the lease appears to have structurally favourable locations. As part of the exploration plan, drilling beyond the adjacent known productive formations may discover significant oil reserves. The drilling to approximately 4,100 feet has the potential to evaluate the Cypress Sandstone, Benoist Sandstone, Aux Vases Sandstone, Aux Vases Limestone, O’Hara Limestone, Rosiclare Sand/Limestone, Upper McClosky Limestone, Middle McClosky Limestone, Lower McClosky Limestone, Upper St. Louis Limestone, Lower St. Louis Limestone, Upper Salem Limestone, Middle Salem Limestone, Lower Salem Limestone, and Upper Warsaw Limestone. The first potential productive formation anticipated to be encountered is the Cypress Sandstone. Several shows of oil exist on the Swartz lease with good shows of oil reported 330 feet north and 330 feet south of the proposed location. As much as 43 feet of sandstone is anticipated with the potential of a productive oil column in the upper portion. The Aux Vases Sandstone has produced on the Swartz lease and as much as 30 feet of sandstone may be present with the potential of a productive oil column in the upper portion. The O’Hara Limestone is known to have produced in a well approximately a half mile to the Northwest of the proposed location. Several shows of oil have been encountered in the wells drilled into or through the O’Hara formation. As much as 8 feet of porosity may be encountered. The Rosiclare formation is known to produce in a well approximately a half mile to the Northwest of the proposed location with good production known to have existed north of the proposed location approximately 1 mile. As much as 6 feet of porosity may be encountered. The McClosky Limestone when drilled has had shows of oil from as many as 4 porosity intervals. Although there is no known McClosky production adjacent to the lease, there is a well approximately a half mile to the West that produced and is still productive from the McClosky. As much as 3 to 4 intervals may be encountered with thicknesses know to be from 5 to 12 feet.

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The St. Louis Limestone has only a few holes drilled deep enough to test the potential of the St. Louis. The majority of the wells drilled through the St. Louis have reported shows of oil. However, no known production has been developed. The lack of data hinders the completeness of the evaluation of the St. Louis. At the proposed location shows of oil are anticipated. With sufficient porosity, permeability, and oil, the St. Louis may be productive. The Salem Limestone has fewer wells drilled deep enough to test the potential. However, less than a half mile to the west is a well that reported production at 648 barrels of oil per day. No other wells have been found closer to the proposed location than the 648 barrel per day well. The lack of additional development to the east provides for an opportunity to evaluate the Salem Limestone. With sufficient porosity, permeability, and oil, the Salem may be productive. The Warsaw Limestone has no data to support any evaluation of the productive potential. Therefore the Warsaw is a new potential in and around the subject lease. The drilling by a reputable experienced drilling contractor utilizing mud rotary drilling techniques is recommended. I strongly urge the use of drill stem testing to evaluate formations of interest upon drilling. A quality mud program is important for the stability of the hole and the evaluation of the rock cuttings. Upon completion of the drilling portion of the project a quality logging program is recommended. Due to the existence of excellent historical production in the adjacent leases, favourable potential structural position, shows of oil, and insufficiently explored deeper potential it is my recommendation that a well be drill to approximately 4,100 feet or a sufficient depth to adequately test the Upper Warsaw Limestone. This report is provided for the recommendation of drilling to evaluate and potentially discover oil production from as many as fifteen locally known oil producing formations. It does not represent a guarantee or warrantee that oil will be produced. It does recommend that a well be drilled to evaluate the known and suspected potentially producing formations. Therefore I recommend the permitting of the Swartz #2 located in the West Half of the Southwest Quarter of the Southwest Quarter of Section 26 in Township 5 South Range 6 East in Hamilton County, Illinois. Respectfully Submitted, John Upcraft, LPG, CPG

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How to navigate the Illinois State Geological Survey website

1) Enter the following web address into your web browser.

www.isgs.illinois.edu

2) Click on the “ILOIL” tab.

3) Click on “ILOIL Version 2”. (This may take a while to load).

4) This page will then appear. Simply click the “x” button to continue.

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5) You will then see a map of the state of Illinois on your screen. The area in green towards the

bottom of the map indicates known producing Oil and Gas fields. Look at the menu on the

right of your screen and select the “Find” tab.

6) Click “Find County”.

7) Using the dropdown menu select “Hamilton”.

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8) In the centre of the map you will then see Hamilton County, Illinois, USA. Just as before, the

green areas indicate known producing Oil and Gas fields. On the left side of the map you will

see “+” and “-“buttons. Click “+” twice to zoom in until the grey area in the centre of the

map shows the label “McLeansboro”.

9) In the centre of the map you will see McLeansboro, Hamilton County, Illinois, USA. You

can move around the map by selecting the hand tool found on the left hand side of the map.

You can also apply a base map by clicking the “basemap” button and selecting an option

from the menu. The “Imagery” option has been selected below to show an aerial image of

the area. You can also select the “legend” tab on the right hand side for greater

understanding.

10) It is the area in green, just south of McLeansboro which is of particular interest as this

shows a large existing and known producing Oil and Gas field. Upon zooming in further, its

size becomes more apparent. Each individual black dot represents an Oil well which is either

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currently producing, or has previously produced oil and is now plugged. The small clear

diamond shapes represent attempted Oil wells which were dry. The ratio is quite apparent.

It is for this very reason that Sunset Oil and Gas Partners LLC is able to uphold its success ratio, by concentrating on known producing areas, focusing on areas in which they have the most operating experience. It is for this very reason that we have every confidence in Sunset Oil and Gas Partners and share their view that this will be their highest producing project yet.

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Risks Risks Inherent in Oil and Gas exploration: Oil and Gas drilling involves a high degree of risk, and is marked by unprofitable efforts, not only from dry holes, but from wells which, though productive, do not produce Oil and Gas in sufficient quantities to return a profit on the amounts expended. The results of any well cannot be determined in advance. A purchase of units involves a degree of risk and the units should be purchased only by persons who can afford the loss of their entire investments. Prospective investors should carefully consider the following risk factors, among others, in making their investment decisions. The selection of leases and drill sites and the drilling of wells are not exact sciences and the results of such drilling cannot be predicted. In fact, the industry ratio of productive oil and gas wells has been low compared to the total number of wells drilled. Even though a well may be drilled in an area adjacent to known and existing production there is no assurance that such drilling will locate the oil and/or gas sands or formations or that such sands or formations, if located, will have the attributes necessary for commercial production sufficient to recoup the capital expended in placing such well in production. A well may also be ruined or rendered dry or non-commercial during either during drilling or completion due to technical or mechanical difficulties. Should a well be successfully drilled to the required depth, and tests thereafter indicated hydrocarbon bearing formations with sufficient porosity and permeability to warrant completions, there is still no assurance that production will be obtained or that any of all sums expended thereon will be recouped through production. The extent and value of a well, any underlying reservoir of oil and gas, and the amount and rate of future production cannot be determined with reasonable accuracy unless and until the well has a history of continuous production of a period of sufficient time to provide a reservoir engineer with date upon which an evaluation may be reasonably based. Use of Initial Production Figures in Geological Reports and Maps: the potential productivity of a well as determined by a test which is run following Completion (“initial Potential” tests) and will not always be determinative of “actual” production and should not be considered indicative of the amount of oil or gas a well can be expected to produce on a sustained basis. Generally, initial production of oil wells is closer to Initial Potential determined on the basis of the tests that are run. Prospective purchasers, when viewing Initial Potential Figures as an indication of the extent to which a well may actually produce, or has produced, should keep in mind that actual production is generally less than the “Initial Potential” figured reported to the state agencies. Marketing Gas and Oil: The price at which oil and gas may be sold is dependent upon the availability of a ready market for and the actual marketing of any oil and gas produced. The price of production affects the rate of return of capital invested, and, in some instances, affects whether a well, and its production at that price, may be deemed commercial or profitable. The availability of a ready market and the actual marketing depend upon numerous factors beyond the control of the Company, the effect of which factors cannot be predicted. These non-controllable factors which affect the price and amount production of oil and gas are imports, allowable production, new discoveries, pollution controls, weather conditions, the marketing and competitive position of other fuels, the availability and carrying capacity of pipeline or trucking facilities, and the fluctuation of supply and demand. Hazards: Operational and Environmental. Hazards such as unusual formations, pressures, and other unforeseen conditions are sometimes encountered in drilling wells. The Operator is required to carry appropriate insurance coverage. There is, however, no assurance that the insured risks or the level of insurance coverage to be obtained by the Operator will be sufficient to cover all potential liability incurred by the Operator, the Company and the Participants.

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Additional Participant Risk: It is contemplated that Participants, which will include the Company, will pay all expenses, overhead and costs associated with the programme. Under the company’s agreement, should such costs be less than, or equal to, returns produced then costs shall be deducted. Should costs be greater than returns at any time, Participants, which will include the company, will be required to pay such costs. Assessment for Operating Costs: After production, if any, is established, the Participants, as Working Interest Owners, will be liable for their share of Operating Costs, and may be billed for such items in the event their share of the proceeds from the sale of Products, after deduction of taxes are insufficient to pay their share of Operating Costs. Assessment for Subsequent Operations: If the Well is completed as a commercial Well, and assuming that additional remedial work, or other Operations are determined, in the discretion of the Operator, to be necessary and essential, the Operator will call for assessments from each Participant to pay for such remedial work. The amount of each Participant’s assessment shall be determined on the basis of his interest in the well. The amount of such assessment must be paid to the company within ten (10) business days after notice is given for such remedial work to be performed. However, should a Participant not wish to participate they are able to initiate the buyout clause. Delay in Receipt of Income: The Company will be engaged in the exploration for and possible development of oil and gas reserves. Unavailability of or delay in obtaining necessary materials for Operations may delay the receipt of income, if any, for significant periods after discovery. Unavailability of or delay in connection with pipelines or other transportations systems, delays in obtaining satisfactory contracts and connections for oil and/or gas wells, and other foreseen or unforeseen circumstances, may also postpone the distribution of income. Other delays, such as problems with pipeline connections and transportations systems may also be experiences and may cause delays in the receipt of income. Regulation and Marketability of Gas or Oil discovered: The availability of a ready market for any gas or oil which may be produced from the Wells and the price obtained therefore will depend upon numerous factors, including the extent of domestic production and foreign imports of oil and/or gas, the proximity, capacity and availability of pipelines, intrastate and interstate market demands, the extend and effect of federal and state regulations on the sale of natural gas and/or oil in interstate and intrastate commerce, and other government regulations affecting the production and transportation of gas and/or oil. Possible Shortages: In the past, increased drilling activities have, from time to time, created shortages of certain equipment necessary in the development of oil and gas leases. Due to a shortage of such equipment and previous inflationary trends, the prices at which equipment was available escalated during such periods. Although a fairly recent nationwide decrease in drilling activity has resulted in a reduction in demand and a lowering of the price at which some of such equipment is available, there is a possibility that price escalations, either nationally or locally, will increase the costs associated with production, thus reducing the distributions, if any, to participants.

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Disputes with Vendors – Effect of Liens: The Operator and the Company shall contract with various providers of goods and/or services necessary to drill, test and operate the Well. From time to time disputes with vendors with whom they contract for goods and/or services may arise for a variety of reasons. For example, the Operator or the Company, may dispute certain charges reflected on invoices tendered by a vendor, question the workmanlike manner in which the services were performed, or challenge the quality of the goods or the equipment provided. When a dispute cannot be resolved amicably, a lawsuit may be filed to resolve the dispute. Vendors who have provided goods and/or rendered services could be permitted, under applicable law, to file materialsmen’s and mechanic’s liens with respect to the well, the filing of which have been required in order to perfect a lien claim pended resolution of the disputes. Title to Lease: In no event shall investor funds be committed to the programme unless and until the Company is satisfied that title to the leases in question has been obtained sufficiently to withstand any adverse claim of ownership that might or could be asserted. The company will cure material title defects, if any exist, which may affect the working interest. The “prudent operator” standard will be adhered to in assessing the validity to the Prospect, which may include obtaining a legal opinion as to title to the Prospect, to the extent that a prudent operator would do so. Dependency upon the Company: In the event that the Company or the Operator becomes unavailable to direct the management and the operation of the Program, the Program and the Participants could be adversely affected. Improper reliance on Promises, Projections or Opinions: Opinions of possible future events are based on various subjective determinations and assumptions. All projections by their very nature are inherently subject to uncertainty, and a prospective investor should understand that written projections if provided may not be achieved, that underlying assumptions may prove inaccurate, that historical production levels may not be sustained, and that Operations may be unprofitable, in the aggregate, because oil and/or gas is not produced in Commercial Quantities.

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Final Word Thank you for reading the Swartz #2 Information Guide and Prospectus. We hope the information contained within will be sufficient for your decision making process, however, should you require any further information please find all of the relevant contact information below. We are currently accepting orders on the Swartz #2 well.