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IFG WEALTH MANAGEMENT FORUM THE PREMIER EVENT FOR NORTH AMERICAN FAMILY OFFICES

April 23-24, 2012, The Ritz-Carlton, Phoenix, Arizona

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Profiting from Oil and Gas Investments

Over the last 100 years, producing oil and gas properties

have proven to be very strong and stable components to

private wealth investment portfolios, as they have

historically been highly uncorrelated to financial indices,

according to Arthur N. Budge, Jr, President and Chief

Executive Officer, and Thomas V. Costantino, Chief Financial

Officer of Five States Energy Company LLC. However, it is

not a sector where passive investment is enough, they add.

Five States Energy Company LLC is a private equity

investment group that will be present at the IFG Wealth

Management Forum 2012 in Phoenix, Arizona, April 23-24.

Ahead of the event, Budge and Costantino talk about the oil

and gas sector, and how high net worth individuals can profit.

IFG - What is unique about the Five States’ approach

to investing?

Budge - Unlike many institutional funds, Five States takes a

long-term value approach to investing in acquisitions, more

like an active oil and gas company than a purely financially-

oriented investment group. We do a bottom-up valuation

using traditional metrics, expecting to earn our return from

current income derived from ownership and operation of oil

and gas properties. We are not exclusively IRR focused. Our

investment approach is more aligned with the family office

model. We use discounted cash flow models in project

valuation, but also focus on achieving strong long-term

cash-on-cash returns. Our investors tend to prefer long-term

investments which pay stable or growing cash dividends,

rather than a highly volatile and unpredictable earnings

stream. Over the last 27 years we have consistently

generated double-digit cash-on-cash distributions.

IFG - Why oil and gas properties, and how do you

identify good deals in this sector?

Budge - The oil and gas sector can provide a uniquely

stabilizing function within a portfolio. Over the long-term

producing oil and gas properties have been non-correlated

to most other financial indices. Oil and gas investments can

generate a high current yield and are not dependent on

appreciation for a return. However, high yields are not

earned in a passive manner in this sector. Success requires

active participation by an experienced investor with a

seasoned technical staff. Besides providing capital, Five

States adds investment value to our business partners with

our understanding of the oil and gas transactions, and our

in-house geologists and engineers who can identify

attractive investment opportunities.

Costantino - We don’t make investments in tax shelters.

However, there are tax benefits associated with oil and gas

limited partnerships which enhance the returns of these

investments versus other investments. Oil and gas

partnerships receive two favorable tax treatments in the US

tax code. First, the percentage depletion allowance provides

for the deduction of up to 15 per cent of gross revenue,

even after the cost basis is fully depleted. Second,

intangible drilling costs, the cost of drilling new wells, can

be expensed rather than capitalized. Fortunately, in the

current market, a lot of the value enhancement of oil and

gas properties revolves around the development of

additional wells in existing fields to increase total

production and income.

IFG - What is your outlook on this market?

Budge - There is a huge overhang of natural gas production

in North America, so I am somewhat bearish on the

prospects for natural gas prices. But this makes it a good

time for value investors to make acquisitions. We have not

made a natural gas investment since 2004, and Five States

sold all of our natural gas properties in 2007. However,

given the pressure that declining prices has put on the

natural gas market, the value proposition is shifting us back

into the buy mode, and we are once again actively soliciting

natural gas investments.

Costantino - The fundamentals on the oil side are much

stronger. That said, we are very defensive right now with

regard to the near term oil price. We are 80 per cent

hedged on our near term production. Our current fund is

hedged at a little over $100 a barrel for the next three

years. Last year we were able to make investments based

on an $85 pro forma, as the market trading range of oil

prices moved between $80 and $100. By having an effective

hedge program, we locked-in additional margin, rather than

speculating on the short-term performance of oil prices.

Our actions eliminated the price risk from our near-term

return on capital, without impacting returns if in the

intermediate to long term, oil prices go up.

Arthur N. Budge, Jr and

Thomas V. Costantino of

Five States Energy

Company LLC, discuss their

unique approach to

investing in the lucrative oil

and gas sector. Five States

is a private equity

investment group that will

be present at the upcoming

IFG Wealth Management

Forum 2012.

Arthur N. Budge, Jr

Chief Executive Officer

Five States Energy

Company LLC

Thomas V. Costantino

Chief Financial Officer

Five States Energy

Company LLC

FOR IMMEDIATE RELEASE

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IFG WEALTH MANAGEMENT FORUM THE PREMIER EVENT FOR NORTH AMERICAN FAMILY OFFICES

April 23-24, 2012, The Ritz-Carlton, Phoenix, Arizona

www.ifgwealthmanagement.com

Salpi Balian, Press Manager – IFG, pressifg@ifgemea.com

The IFG Wealth Management Forum 2012

IFG’s Wealth Management Forum 2012 will take place at the Ritz-Carlton, in Phoenix, Arizona, April 23-24, and provides a unique platform for investment

decision makers from single and multi-family offices to engage in vibrant benchmarking sessions and gain practical solutions and best practices to achieve

optimal portfolio returns.

For more information please send an email to pressifg@ifgemea.com or visit the event website at www.ifgwealthmanagement.com

The International Forum Group

International Forum Group is a world-leading business information company, organizing exclusive, invitation-only gatherings of business leaders across multiple

industry sectors.

Providing a platform for senior executives to build mutually beneficial business partnerships, International Forum Group has designed an unparalleled system

for matching the core buying needs of the world’s largest organizations with the best solutions available in the global marketplace. Empowering all our clients

with the knowledge they need to lead in their respective fields is a fundamental goal of all our forums.

For more information, please visit: www.internationalforumgroup.com

Five States Energy Company LLC

The motto of Five States Energy is “Money Well Invested.” We take pride in being prudent guardians of the capital our investors entrust with us. Since our

founding by Jim Gibbs in 1985, Five States has expanded from a focus on oil and gas investments to a broader platform by providing opportunities in energy,

real estate and private equity.

www.fivestates.com

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