Hi all,

So now we have a brief understanding of the history of SXN and a pretty good understanding of where we are as a result of the merger, so lets get into the interesting stuff.

But first, while putting together part 3 I found it quite funny that when Sovereign Chief (SCV.V) is talked about it is referred to as a "shell" company. Maybe thats why we have seen a revaluation of our share price?? For those unfamiliar with this term it is basically a corporation that files and reports and does the necessary work to maintain their interests in leases, etc, but essentially "shells" are just that, shells of a company with no "company maker" assets.

Foundation:

Long story short we didn't really have much prior to the merger, and IMO not much after the merger with respect to "company maker" assets. Rich soon changed that and his vision is not based on hype, it is based on proven reserves in areas with infrastructure to bring wells on-line quickly and he has already doubled production and looks to quadruple production by Feb 2008.

Currently we have working interests in about 110 wells of which approximately 30 we are operator's on. Workovers in both fields in New Mexico have been going very well and we have increased production from basically nothing to something worth collecting revenue from. This combined with currently producing wells, other ongoing workovers and completion efforts I think we are sitting slightly higher then 200BOE/day (not including the recent wells as per News release).

The issue seems to be with our working interests and the back-in rights on many of our older wells by Western O&G. Is Rich going to hit his target of 320BOE/day by month end? I think he has a good chance, but the 2nd cotton valley well isn't going to be drilled until Q2 08 and we only a few more wells to complete (Bittel (10.9%) Eumont (20%)).

Of the remaining completions, the Eumont sounds the most promising from the 3D seismic data they were using and I am expecting good things from this well and future offset wells of which 6 have been identified already. There is also the North Echols in New Mexico which produced 100BOE/day but due to mechanical failure prior to acquisition by SXN it was taken offline. SXN is going to use the casing already in place and sidetrack at nearly a horizontal entry (70 - 80') to get things back up and running.

Additional info on Foundation:

Cotton Valley: (ie Arnold Rust wells)

The Cotton Valley in Texas is low risk with great success rates on wells drilled (nearly 100%). SXN currently owns working interest in eight producing wells (now 9) in this field, all operated by Comstock. They will be drilling another in Q2 08 and I expect similiar results to the last one.

An example of lower risk, low-key “drill bit” profitibility is Goodrich Petroleum. Goodrich is years ahead of Saxon as it develops gas wells in the Texas Cotton Valley trend and this area is not SXN's focus, but it is a great example of what can be accomplished in this field. When Goodrich started drilling at the Cotton Valley in 2003 its shares were around $2. They are now at $34.

As of June 2007 Goodrich Petroleum Corporation has drilled 203 wells in the Cotton Valley Trend with 99.5% success, with the only miss being a mechanical/technical failure and not a geological one.

The Cotton Valley formation is predominately natural gas with 8% to 10% porosity. Wells drilled in the Cotton Valley Trend typically exhibit the following characteristics:

• Predominately natural gas
• High probability of success
• Significant development potential and repeatability
• Additional upside in the Pettit and Travis Peak

For the wells completed to date in the Cotton Valley Trend by Goodrich, the average initial gross production rate per well was approximately 1,700 Mcfe per day.

(Check for "links" to additional Cotton Valley info on left hand side that I will post shortly)

Permian Basin Info:

There are many companies out there within the permian basin, but since Saxon took at 20% stake in AleAnna I played close attention to all activity in the area and came across one very interesting company with some Helium (like SXN in Kansas) upside to it, and also found a HUGE deal in the area interesting as consolidation starts to take place.

Enhanced Oil Resources (EOR.V) - I'll post about it in more detail in the off topic forum, but have a look at their website and latest presentation. Very interesting strategy and in a way similar to what SXN is doing with our pipeline system in Kansas, but they are doing it with Co2, which they will be shipping to the Permian Basin for stimulation of depleted fields that they are picking up for pennies onteh dollar. http://www.enhancedoilres.com/

The $3.6 billion deal that sparked my interest was with Plains Exploration & Production Company (NYSE: PXP) merging with POGO. Normally I don't follow the largecap stuff, but I was following the permian basin closely and Pogo had drilled 57 fourth quarter wells in the Permian Basin and Texas panhandle areas, completing 54 of them as producers.

"Following the acquisition, pro forma PXP will have a proved reserve base of approximately 635 million barrels of oil equivalent and a total estimated reserve potential of 1.4 billion barrels of oil equivalent (proved, probable and possible). At year-end 2006 pro forma for asset sales, Pogo reported 219 million barrels of oil equivalent proven reserves."

Clearly there is upside potential in the areas SXN's foundation is built upon and maybe we can continue to take small % working interests like we have been to slowly build up cashflows. Because at the end of the day it is ITALY and KANSAS that are the "company makers"

Kansas & Italy: (UPDATED TOMORROW)

Part 3 to be continued.

Cheers,

cvac01