My OilPods Investment Journal

Last month was a very disturbing month. We received a letter and the “Notice of Foreclosure Sale” documents from Magnus Oil & Gas Corporation addressed to Oilpods. Here’s the content of the letter:

“This letter is sent to you as a Non-Operator in the above referenced Operating Agreement. As you are aware, notice has been given of the impending Nonjudicial Foreclosure Sale of the property described in the Operating Agreement scheduled for Jul 1, 2008. Please be advised that Magnus has instructed the undersigned to send you a Corrected Notice of Foreclosure sale to correct certain erroneous statements contained in the original notice. Enclosed is a copy of the Corrected Notice of Foreclosure Sale for the sale of the property subject to the security interest granted in the Operating Agreement. If the amounts owing under the terms of the Operating Agreement are not paid before that time, the security interest will be foreclosed on the time and date and at the place provided in the Corrected Notice of Foreclosure Sale.”

After checking with the consultant that served us, we were informed that PWDR owed Magnus some money before they sold their Working Interest to Oilpods. I’m very surprised that Mark Chang, being one of the ex-BOD was not aware of it.

Yesterday, we received a letter from Oilpods stating that their PWDR has filed an application for Temporary restraining order, Temporary and Permanent Injunction against Magnus. The foreclosure is hence temporary on hold, pending a hearing on July 10th 2008.

Looks like there’s nothing much we can do now but to wait for the result. Meanwhile, if you happened to be an investor of Oilpods, please drop me an email. Perhaps we can all get connected and discuss what other alternatives we may have as a group.

Just received a letter from OilPods stating that the application is successful, and the Sales & Purchase Agreement and Assignment of Lease Ownership will be registered at the local county office.

Found this blog that found my blog.

According to the blog, this person has bought:

• 2 units of Brookshire Salt Dome project in Mar-07
• 1 unit of Biamante project in Sep-07

… and is consistently receiving payouts since Sep-07.

Have signed the Sales and Purchase Agreement with OilPods to purchase 0.018095% of the Working Interest in the Biamante project in Texas for US$10k last Saturday, 5th April 2008.

According to the agreement, we will begin to receive US$75 per month of “Pre-Production Payment” starting from Sep-08, till Jan-09. Beginning in Feb-09, we’ll be receiving a fixed “Monthly Capital Recovery Payment” of US$100 and another variable “Quarterly Capital Recovery Payment” from US$132 to US$472 progressively.

When the US$10k capital is recovered, we’ll be receiving a monthly cash flow of US$94 till the gas field is no longer economical for production, i.e. approximately another 10 years.

In summary:

Pre-production: US$75 x 5 = US$375
Capital Recovery: US$10k
Cash Flow: US$94 per month for ~10yrs

Here are some earlier forum discussions that clearly shows a lack of understanding of this company:

• WallStraits Forum
• Another thread from WallStraits Forum
• sgfunds.com Forum
• HardwareZone Forum
• Another thread from HardwareZone Forum
• RichDad Forum

Found some more discussions in VR-Zone forum.

Here’s my observations so far:
- People who criticized are those who have not invested
- Those who have invested all said they do get monthly payout according to contract

After googling for several days, this is by far the only site that presents an objective view of OilPods.

Have instructed the OilPods Investment Consultant to bank in my cheque today. The cool-off period is 7 days. I’ve another 4 more days to perform more thorough due diligence research.

Have asked the Investment Consultant why Mark Chang left PWDR, and was told that he left so that there will not be a conflict of interest in PWDR’s board, as OilPods is moving away as simply a marketing agent to owning and managing the lease independently.

From the same FORM 8-K that I’ve found Mark Chang resignation from PWDR board, I’ve found this alarming news as well …

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

In the course of our audit of financial statements for the fiscal year ended December 31, 2007, we have determined that our previously published financial statements as included in our quarterly reports on Forms 10-QSB for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 cannot be relied on and must be restated. The restatement is due to the incorrect categorization and recording on the balance sheets of certain payments as “Other Assets, Prepaid production payments” instead of as expenses on the statements of operations. The categorization relates to the payment to holders of working interests in certain of our properties. Each working interest in a particular property provides the holder with a pro-rata percentage of production revenues. However, regardless of production generated from the property, we guarantee a minimum annual payment of at least 9% of the holder’s investment until the initial investment has been repaid. In most instances, this means that to date we have paid amounts to working interest holders that are well in excess of the pro-rata percentage of production revenues on properties where development has been slower and/or production less than we anticipated. Previously, we recorded payments to holders in excess of the actual production percentage as, in effect, an early pre-payment or credit to us. On further examination of the actual contracts for the purchase of working interests, there is no provision for such a credit and, accordingly, we are conforming our reporting to the terms of the contracts.

We are working to complete the restatements and will file them as quickly as possible. The effect of this re-categorization will be to decrease Total assets by approximately $489,713, $664,723, and $2,473,963 for the first, second and third quarters of fiscal 2007, respectively, increase Total expenses by approximately $489,713, $664,723, and $2,473,963, respectively, and decrease Net Revenues by $489,713, $664,723, and $2,473,963, respectively, for the same three quarters.

Our CFO has discussed this information with our independent accountants and informed them of our intention to restate in a meeting on March 18, 2008.
…

Don’t think this news has any impact to the ‘Working Interest’ holder as it is pretty clear that they’re being paid. I guess the share holder of PWDR will suffer most as the EPS will be affected by this restatement. Not sure whether this news is linked to Mark Chang’s resignation from the board.