About Royale Engery

(0:06 – 0:21)
This winter, some areas expect up to a 70% increase in utility bills. Part of the shortage is due to
the increased popularity of natural gas power plants as an energy source. California companies
will continue developing new techniques to expand production of this increasingly valuable
resource.
(0:23 – 0:42)
Natural gas really is the fuel of the future. Not only does an investment carry the cash return, but
it’s an investment in our country, developing energy here at home. America’s economy and drive
for energy independence will be fueled by oil and natural gas reserves that are yet to be
discovered.
(0:43 – 1:10)
Much of these energy resources wait deep below the Earth’s surface, within established fields,
which are already proven to be productive. The government gives strong tax incentives to those
who work to explore and deliver these new sources of oil and natural gas. But, unlike the
wildcatting days of old, today’s successful strikes depend on knowledge, experience, and the
skillful application of advanced exploration technology.
(1:11 – 1:38)
That’s why, for over 20 years, Royal Energy has made discoveries that rank it among the leading
producers of oil and natural gas in the United States. We started from the very beginning bringing
wells together in a group. We know the risk in the industry for drilling, and Harry, my father, when
he started the business, used to have a saying, one well is gambling, two to three wells is
speculation, four or more wells is an investment.
(1:39 – 2:24)
Headquartered in California, Royal Energy is an exploration and production company focused on
exploring, discovering, extracting, and delivering proven reserves of natural gas and oil. Since
1993, the company has production in three major natural gas and oil states, California, Utah, and
Texas, and markets natural gas to its customers. Incorporated under the laws of the state of
California, Royal continues to explore and develop fields in the San Joaquin and Sacramento
basins of California, and now has properties covering over 32,000 acres and over 67 oil and
natural gas wells in operation.
(2:24 – 2:54)
Royal Energy’s California natural gas production accounts for 78% of its total volume. In 2004,
Royal Energy completed 3D seismic imaging of over 22 square miles in the Rocky Mountains
Uinta Basin, the fastest growing supply of onshore natural gas in the lower 48 states. Natural gas
production is predicted to climb 56% respectively from 2007 through 2011 in this region.
(2:56 – 3:31)
As operators in most of their producing wells, Royal employs experienced personnel that make
daily visits to the individual well sites, making sure the wells produce to their fullest capabilities.
The company works with investors in two ways, as shareholders and as direct financial
participants in the drilling of its wells, an investment which brings significant tax advantages to
high net worth and high income individuals. A publicly traded company since 1994, the company
has grown through profitability and a focus on earnings.
(3:32 – 3:52)
This has resulted in Royal Energy’s stock being listed on the highest level of NASDAQ. A national
market company, the company’s stock symbol is R-O-Y-L. The strongest testimony to the
company’s strength is made by confident reinvestors who fund over 75% of the company’s new
projects.
(3:53 – 4:15)
And what makes Royal Energy unique is that we allow the investor ownership in our wells to
50%. This means our interests are exactly matched with the interests of our investors. In recent
years, these investors have seen Royal Energy achieve a 70% success rate in the drilling of oil
and gas wells.
(4:16 – 4:47)
This strong performance in the fields is a direct result of our ability to apply the cutting edge
technology to oil and natural gas exploration and drilling. These 3D seismic surveys have
revolutionized the oil and natural gas industry because they help pinpoint the most productive
spot to drill a well. Before we drill, modern three-dimensional seismic imaging devices look deep
below the Earth’s surface to better assess the potential of striking oil and natural gas.
(4:47 – 5:13)
This expert use of 3D seismic bright spots and ABO analysis help Royal Energy technicians to
extract additional gas reserves from developed fields. Our skill in the use of 3D seismic surveys
lowers exploration and development costs by reducing the risk of dry holes or unproductive wells.
These cost reductions help increase earnings and revenue distribution for our investors.
(5:14 – 5:38)
Royal Energy has acquired an underground seismic picture of many of its producing fields,
including Moon Canyon, Bowerbank, Victor Ranch, McCormick, and others. And more seismic
surveys are planned for continued growth. The result of this painstaking work is a growing
inventory of drillable prospects within our extensive 3D seismically mapped areas.
(5:39 – 6:14)
This means Royal Energy is uniquely positioned to offer a sizable number of tax-advantaged
investment opportunities in U.S. oil and natural gas exploration and production. The value of
these investments is heightened by the fact that demand for natural gas is at its all-time high and
growing more rapidly than any fossil fuel or other energy source. Due to the Clean Air Act and
National Energy Act, consumption of natural gas is projected to grow at an average rate of 1%
per year between 2003 and 2025.
(6:15 – 6:38)
According to the Energy Information Administration, that means U.S. demand for natural gas is
forecast to top 35 trillion cubic feet by 2025. And there’s a good reason why. Natural gas is the
cleanest fuel available to meet America’s ever-increasing energy needs and reduces our
dependence on foreign oil supplies.
(6:39 – 7:19)
Seven out of ten homes in America are equipped to use natural gas for cooking, heating, cooling,
and hot water for bathing and laundry needs. Worldwide, consumption of natural gas is projected
to increase by an average of 2.8% annually, far more than the projected annual growth rates of
1.8% for oil consumption and 1.5% for coal. The largest increase in U.S. natural gas consumption
is expected to occur in the electricity generation sector, which alone is projected to top 10 trillion
cubic feet in 2025.
(7:20 – 7:42)
That’s because, as nuclear power plants are phased out, natural gas is increasingly the fuel of
choice to produce the nation’s electricity. Natural gas fires turbines whose spinning blades drive
the generators that produce electricity. We can generate electricity from natural gas with no
secondary effects, with no significant emissions.
(7:43 – 8:09)
And so we’re seeing natural gas as a very highly desired product, as a new fuel. Royal Energy’s
strong financial position allows the company to continue its solid growth. The company is
consistently recognized by the nation’s leading energy publication, such as Oil & Gas Journal,
Hartz Exploration & Production, Oil & Gas Investor, and Platz Energy News.
(8:10 – 8:23)
Oil & Gas Journal has also ranked Royal Energy No. 9 in return on equity for all publicly traded oil
and natural gas companies. The company was also on Oil & Gas Journal’s fastest growing
companies list.
(8:23 – 8:45)
Hartz Exploration & Production highlighted Royal Energy for its excellence in exploration and
drilling. Oil & Gas World named various Royal-operated natural gas wells Well of the Month in
five different issues. And the company’s Pinhero Well was named Play of the Month and Best
New Well of the Year for the Pacific region.
(8:46 – 9:08)
Business Week profiled Royal Energy as one of the country’s top price-performing companies
within its category. In addition to owning stock in Royal Energy, there is the investment
opportunity of participating in the company’s drilling projects. These investments combine the
possibility of generous financial returns with strong tax advantages.
(9:09 – 9:38)
The Tax Reform Act encourages domestic energy production to help reduce U.S. dependence on
foreign energy supplies. So, qualified individuals who directly participate in the drilling of Royal
Energy wells can take full advantage of up to 100% in federal and state tax deductions. This
benefit, provided for individuals in high tax brackets, provides federal and state income tax
savings of up to 50% of invested capital.
(9:38 – 10:07)
Investors may also benefit from the depletion allowance, which allows up to a 15% gross tax
deduction on their monthly revenue distribution. This is an active deduction that can be taken
against all forms of income, including capital gains, mandatory IRA or 401k withdrawal. This
generous deduction also qualifies for the independent producer exemption related to the
Alternative Minimum Tax, or AMT.
(10:08 – 10:43)
In other words, money you would pay out to federal and state income taxes can be used to build
an energy portfolio. Unlike many oil and gas companies, Royal Energy and its direct drilling
investors are diversified in terms of the geology of its drilling prospects. Maintaining up to 50%
ownership of each well encourages Royal to work diligently to produce high returns by making full
use of state-of-the-art technology to increase success rates, maximize reserves, and reduce
overhead.
(10:44 – 11:16)
Our investment structure is also simplified because there are no complicated K-1 forms to file or
partnership agreements, and Royal Energy’s drilling investment structure is turnkey before
production with no carries or back-ins after payout to burden you, the investor. Because we
regard our investors as a direct partner, we believe in maintaining open communication. We
publish an informative quarterly newsletter, The Royal Report, for our shareholders and investors.
(11:17 – 11:39)
This newsletter provides our view of the energy industry and an update of Royal Energy’s
operations and activities. And to give investors an in-depth view of the exciting drilling process,
Royal Energy hosts regular field trips to various drilling sites. The oil and gas professionals of
Royal Energy are proud of their track record.
(11:40 – 12:00)
We remain open for independent review, due diligence, and scrutiny. As a publicly traded
company, quarterly financial statements are available for public review. While current industry
conditions have benefited the company, it is our 20 years of solid experience that has set Royal
Energy’s course for the future.
(12:00 – 12:15)
The company is dedicated to its continued contribution to America’s energy independence
through the profitable development, operation, and marketing of oil and natural gas wells within
established fields in the United States.