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The Company

British Acadian has been engaged in the acquisition, development and disposal of producing oil and gas properties in the offshore Gulf of Mexico since 1987. During this period, the Company has been highly successful in purchasing oil and gas properties with significant remaining, producing reserves, all of which have had major potential for the realization of additional reserves through subsequent development, enhanced operation and the drilling of low-risk exploration wells - In many cases, the final development of these properties has resulted in the ultimate recovery of total reserves significantly greater than those predicted from producing reserves at the time of acquisition.

 In the last twelve years, the Company has spent nearly two hundred million dollars U.S. ($200,000,000 U.S.) on these properties. By the end of 2003, the accumulated properties have generated a rate of return on investment of approximately 25.0 percent. Most of the acquisitions have returned at least three times the cash invested, and all of the properties are still producing.

 It can be determined that the results of investing with British Acadian over the last decade have been better than investing in cash instruments, real estate or the stock market. An investment with British Acadian provided returns of approximately 50 percent more than the most successful of the alternative investments.

 The Company usually participates in the acquisition of the properties with independent oil and gas operating companies of varying sizes, with the inclusion of a small percentage of individual investors.  Most of the acquisitions have come from major U.S. oil and gas operating companies. 

The Company has typically purchased properties with an acquisition cost of between fifteen (15) and twenty (20) million dollars U.S., but has completed larger acquisitions and is generally seeking large acquisitions in the future.  Reserves associated with the acquisitions of these Properties vary, but generally the average cost of the acquisition has been approximately $6.00 per barrel of oil equivalent for proved reserves at the time of acquisition.  This is drastically less than the cost of purchasing a barrel of produced crude oil on the open market.

British Acadian has typically concentrated its activities in the Gulf of Mexico Area, particularly in the offshore, for the following reasons. The Gulf of Mexico is one of the last domestic oil and gas provinces where large reserves can be found.  The area is adjacent to the largest market for oil and gas products in the world and, has the largest refining capacity, petrochemical plants and pipeline transportation system in the world. Many refining companies, utilities, petrochemical companies and other large industrial users are located along the Texas-Louisiana gulf coast. Oil and gas reservoirs in the Gulf of Mexico have greater predictability compared to most onshore domestic oil and gas provinces, which give greater confidence in predicting reserves and reservoir performance.  For the same reasons, the offshore production tax regime is simple and easily managed. In addition, compared to many international regimes, the U.S. government has demonstrated that it rarely changes production taxes, which allows for confidence in purchasing producing properties. 

From an economic viewpoint, the important geological considerations for the area compared to many other petroleum provinces can be generalized as follows. The stratigraphic horizons that contain the predominantly sandstone reservoirs continue for a considerable lateral extent and are therefore easier to correlate than many onshore environments (e.g. limestone reefs, near shore or terrestrial deposits).  Reservoirs are, in geological terms, young and thus retain good porosity and permeability unlike older rocks that are more likely to show tight reservoir characteristics.  Structurally, the area has been subject only to the effects of sediments slumping into a deep basin and to salt diapirs, and not to the excessive compression or heating of the rocks. Thus, although the structural setting of reservoirs may be complicated, they retain relatively good porosity and permeability compared to other geological provinces.  The area is a mature, proven hydrocarbon province with an abundance of source rocks and reservoirs that have produced very significant volumes of oil and gas in the last fifty years.  Over the life of the Company’s activities, it has become apparent that, in comparison to other normal investment opportunities, the Company has proved itself capable of earning rates of return that are far in excess of more conventional investments which may be perceived as being less risky. The track record of the management team in selecting top quality producing properties with development potential, has reduced the risk normally assumed to be associated with investment in oil and gas production.



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