HISTORY AND DEVELOPMENT
During October of 2003, the founders conceived a business plan and named the Company Maxim Energy, Inc. On September 23, 2004 Maxim Energy, Inc. merged into Maxim TEP, Inc., a Texas corporation, which resulted in Maxim TEP, Inc. now known as Conquest Petroleum Inc., as the surviving entity headquartered in The Woodlands, Texas. The founders began to acquire oil and natural gas properties during 2004 with its first acquisition being a property in Oklahoma. Acquisition of properties continued in 2005 and 2006 and the Company now owns fields in Louisiana, Arkansas, Kentucky and New Mexico.
The Company has a three phases of development:
- Phase One – Acquisition Phase: Acquire property and oil and natural gas leases as budgets would allow while carefully selecting targeted properties that met the Company's long range objectives.
- Phase Two – Development Phase: Drill development wells in careful "step outs" from known reserve areas to raise likelihood of productive new wells and enhance existing wells. The goal is to drill, complete and produce as much oil and natural gas as possible thereby increasing proved reserves and cash flows so as to support Phase Three.
- Phase Three – Expansion Phase: During this phase, the Company would continue to expand and replace production that it is selling into the market, offset historic decreases in production and monetize fields at appreciated values from their original purchase price.
Phase One – Acquisition Phase
The Company's fundamental belief was premised on the proposition that oil prices would increase because world supplies were diminishing while worldwide demand was increasing. The founders are believers in "Peak Oil", a belief that recognizes that since the production and extraction of oil and natural gas has grown almost every year and production is likely to start a decline so we will have "peaked", a theory first espoused by M. King Hubbert in the 1950's who predicted the peak to occur between 1965-1970 and actually did occur in the lower 48 states in 1970-1971. Mr. Hubbert believed in the 1950's, the world would use more than half its supply in the near future, then the industry would shift from a buyers' market to a sellers' market since oil production would more than likely stop growing and start a decline. The founders held that this decline would lead to higher prices and attention towards secondary and tertiary oil and gas recovery from older fields. By acquiring fields first, the belief was that prices would be lower than when the market realized the importance of older fields. Hence, many oil and natural gas fields were inexpensive as they were not economical, given the then-oil-and-gas prices. Nevertheless, these fields could become economical if oil and natural gas prices rose, giving the owner the potential to eventually monetize at higher energy prices.
The Company sought financing for its Phase One. Conquest Petroleum secured initial funding from several accredited investors, and set out to acquire fields, and now currently owns the rights to oil and natural gas leases in Kentucky, Louisiana, Arkansas and New Mexico. In buying existing oil and natural gas fields, the Company set out to extensively study the fields, the formations in which oil and natural gas were found, the history of sales from the field and the history of all surrounding fields, and their production. From this information, a better assessment could be made as to the value of the target property.
Phase Two – Development Phase
Phase Two is the monetization of the Company's fields by working over existing wells that were not on production and developing the fields through drilling of the undeveloped acreage that existed. The Company has a substantial inventory of wells to be worked over and extensive acreage for development drilling. Through certain acquisitions, the Company has acreage that is not considered proved under current definitions. This acreage is deemed exploratory and the Company will farm-out the acreage to industry parties for drilling. The Company will have a "carried" ownership interest in the wells eventually drilled.
Phase Three – Expansion Phase
In the Phase Three development of the Company, an effort will be made to replace the oil and natural gas reserves currently being produced in fields owned by the Company. This will be done through continuation of the work-over and development drilling in Phase Two. The Company will also seek additional acquisitions using the same criteria as in Phase One. Further, the Company may move up the risk spectrum by drilling acreage that is not proved.
