Common use of Future Production Clause in Contracts

Future Production. Revenues are derived principally from uncollateralized sales to customers in the oil and gas industry. The concentration of credit risk in a single industry affects the business’s overall exposure to credit risk because customers may be similarly affected by changes in economic and other conditions. Although not a current risk in the case of the program assets, some refiners have filed for bankruptcy protection, which has caused the affected producers to not receive payment for the production that was delivered. If economic conditions deteriorate, it is likely that additional, similar situations will occur which will expose the Company to added risk of not being paid for oil or gas that they deliver. It is difficult to predict what impact the financial difficulties of any of the previous owner’s purchasers may have on the Company’s future results of operations and liquidity.