Executive Summary

1901 Petroleum is developing approximately 3,000 acres in Fisher County, Texas. The company’s broader development plan includes additional future drilling, while EB-5 capital is being used only to fund the initial eight horizontal oil wells and one company-owned saltwater disposal well.

The project has received USCIS approval, secured congressional support, and raised nearly $30 million through the EB-5 program. A limited number of additional members may participate by providing a $1 million standby letter of credit, or SBLC, rather than making a traditional cash investment.

The SBLC may often be obtained using qualifying collateral, including real estate, cash, securities, bonds, or other assets acceptable to the issuing bank. The member’s collateral remains with the issuing bank, and no cash is contributed directly to 1901 Petroleum.

Participating members receive:

• 1000 units Equity ownership in 1901 Petroleum and all of its assets, including its wells and leasehold acreage.
• A $1 million net operating loss allocation reported on Schedule K-1, estimated to produce a $370,000 cash tax benefit based on a 37% tax rate.
• A $40,000 annual guaranteed payment.
• Pro rata participation in future company distributions and appreciation.
• No direct cash contribution into 1901 Petroleum.

Based on the current illustrative valuation assumptions, a Year 3 exit could produce approximately $2.99 million in total nominal benefits per $1 million SBLC commitment, or approximately $3.08 million in accumulated value if the tax benefit and annual payments are reinvested at 10% through the end of Year 3. Treating the tax benefit and guaranteed payments as interim cash flows, the projected return is approximately a 53% IRR on committed SBLC capital, with no cash invested directly into the company—only the SBLC commitment required.

Separately, assuming the estimated $370,000 first-year tax savings is realized during Year 1 and reinvested at 10% annually through the end of Year 6, and each $40,000 annual payment is similarly reinvested upon receipt, the accumulated value of those benefits would be approximately $904,500. This illustration assumes no company distributions and no sale of the company.

Under those assumptions, if the full $1 million SBLC were drawn at maturity in a default scenario, the illustrated net economic shortfall after accounting for the accumulated tax and payment benefits would be approximately $95,500.

This opportunity is unique because members receive the tax benefits and annual payments early in the term, allowing those benefits to be retained and potentially compounded over time, while the SBLC has no interim drawdown. The SBLC remains under the control of the issuing bank and specifically provides that it cannot be drawn before the end of the six-year term. Any potential draw exposure is therefore deferred until maturity and would arise only as an absolute last resort, after the other collateral and available remedies have been exhausted, subject to the final loan and SBLC documents.

All returns, tax benefits, loss allocations, reinvestment results, valuations, and timing are illustrative only and are not guaranteed. Actual results will depend on company performance, final transaction documents, bank requirements, market conditions, applicable tax law, and each member’s individual financial and tax circumstances. Prospective members should consult their own legal, tax, and financial advisors.