HOUSTON ENERGY RESOURCES, LLC

1-800-871-0074

MERCHANT FIELD SUN FEE B LEASE WELLS B-3 AND B-5 A TEXAS JOINT VENTURE
200+- ACRE LEASE LOCATION: LIBERTY COUNTY, TEXAS

EXISTING PRODUCTION WELLS

PRIVATE PLACEMENT NON SECURITY

NOTE: THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT AND WILL NOT BE REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OF THE UNITED STATES OF AMERICA OR ANY STATE OR LOCAL SECURITES AGENCY. THIS MEMORANDUM IS PRIVATE FOR INDIVIDUAL OR OIL INDUSTRY VIEWING PER REQUEST AND NOT A PUBLIC OFFERING OF ANY NATURE OR AN OFFER FOR SALE. THIS MEMORANDUM IS NOT A DIRECT OR INDIRECT OFFER BY SOLICITATION BY TELEPHONE, FACSMILE OR U.S. MAIL. ALL PARTIES ARE REQUIRED TO BE CREDITED INVESTORS TO ENTER ANY OIL AND GAS PROGRAM ACCORDING TO ANY SEC REGULATORY AGENCY. THIS IS NOT A TRADEABLE SECURITY.

THE MERCHANT FIELD B-3 AND B-5 PROJECT

LIBERTY COUNTY, TEXAS LOCATION HISTORY Houston Energy Resources, LLC (H.E.R.) has obtained mineral leases from Anadarko Petroleum covering 200+- acres in the Merchant oil field located in Liberty County, Texas in the North Western portion of the Hull Field approximately one mile north west of the Hull Town Site. The field was created in 1952 by the transfer of the Yegua wells on the NW flank of the FIELD SUMMARY old Hull Field. The leases are surrounded by active oil wells dating Sun Fee theLease and many are still Units were discovered The back to B 1950 and the Compton producing from their same zones for over 20+-in the early 1950s on the North West by Sun Oil Company years. flank of the Hull Field Salt Dome. These wells were drilled to a total depth of +/- 10,000 and intercepted several productive formations in the Yega and Cook Mountain Formations. Sun Oil continued to operate and produce these wells up to the 1980s and then eventually divested to a smaller company. Over the next several years ownership changed hands several times. In 1990 these wells were acquired by Transoil Inc. witch produced them at marginal rates due to low oil prices and without proper maintenance. Then in 1998 the GEOLOGY US Annual average price of oil was only $8.91 per barrel which The Merchant Field - Liberty County, Texas: This field is located on the North West Flank was Hull Fieldmain into the classification of Yegua Salt- abandoned the included of the the and falls factor Transoil Inc. Dome Flanks. Reservoirs leases. in the play are closely associated production Piercement salt domes in Liberty and Hardin After reviewing the with a band of data H.E.R. has gathered on Counties. These reservoirs occur within fault blocks tilted moderately to st eeply outward on the these some of we come to the conclusion that there were flanks of wells the have several zones prematurely abandoned and several that were completely bypassed because of more attractive production rates from the zones above. Last know production on these leases was in the 900+ barrels per month range.

Page ~ 2
Continued Merchant Field Geology

Salt-Domes. This field is located at the seaward edge of the Yegua delta system in South East Texas. The reservoirs are generally thin, laterally continuous, delta- front sandstones. However, some of the reservoirs pinch out up dip toward the dome and with sand-body geometry that is locally complex. Because steep dips are common around the flanks of salt domes, fields of this play are characterized by thick oil columns that approach 1,000 ft. efficient gravity segregation that is aided by PROJECT water The Merchant Field SUMMARY efficiencies. (6) oil wells influx results in high recovery have seven Attic and project leases Cellar recovery techniques can be used in heads reservoirs, just as with some having pumping units, well some with polish rods in small, heads only. H.E.R. has broken downthe Piercement and well structurally segmented reservoirs of this lease into salt-domes.projects consisting of two (2) wells each and a three (3) proportional interest in the field Saltwater Disposal well. H.E.R. feels that this plan will keep the cost of each project in line with Project A: This first project its potential reserves will consist ofgivewells that will return on investment and also two the best be reworked and returned to production. Also included in this project is a proportional interest in the Salt Water Disposal Well that services investors. for our the field. Sun Fee B-3 and B-5 wells are located on the Southern portion of our leases and contains a 20 acre production unit per well for a Project 40 acres. will consist of the same as number of wells and total of B: This acreages. Wells will be Sun Fee B-1 and B-6 and share the disposal well for the will consist of thetwo well are located on Project C: This field leases. These same as both A & B the Middle portion of the leases.

projects including the disposal well. Wells Sun Fee B-2 and Compton Unit 4 are located on the Northern portion of the leases. All three projects will share the maintenance of the disposal well including royalty to mineral owner. H.E.R. has the right to change procedure of the projects without consent of investors at any moment.

Page ~ 3 Continued Merchant Field

PROJECT A
H.E.R. has put together a plan of action beginning with testing the current completions of both wells. Sun Fee B-5: Well still has a pumping unit on the well. This was probably one of the last producers when the wells were abandoned. The current completion could produce as much as 40 50 bopd of flush production and settle around 25- 30 bopd. After this completion becomes uneconomical t o produce, we will continue with our recompletion strategy. B-5 Recompletion: Pull and inspect all tubing, rods and pump. Replace if necessary. Have pump rebuilt. RIH w/ wash assembly and wash over to recover the screen. Squeeze current perforations. Drill out cement thats lef t in the casing. Test squeeze to 1000psi. Continue to clean out well as deep as possible. Test any open perforations and squeeze as necessary. Perforate new zone and produce well. Sun Fee B-3: The pumping unit for this well is has been removed, but the rods, tubing and down hole pump are still in the well. First would be to bring in a work over rig and work to the rods and see if the well will produce at its current completion. If it will not produce then we will pull and inspect the tubing, rods and bottom hole pump. If obvious problems are found then we will re run the tubing and perform a swab test on the well before continuing with a full blown recompletion project. From our field inspection the well has a good blow on the tubing and casing which is a good indication that the well is still productive and could produce as much as the B-5 Well to start. B-3 Recompletion: Repeat B-5 Well Recompletion procedure. Disposal Well: Will need to re-work well and replace all motors and connection and surface equipment. This is very important to have this well in top running order to not have to haul salt water from the leases.

RESERVES ESTIMATIONS
H.E.R. has identified 12+- productive sands in the Yegua/Cook Mountain formations on the projects leases that either tested and/cored Oil. H.E.R. is using a very conservative numbers for the Original Hydrocarbons In Place (OHIP). We are using 500 bbls / Ac.ft. for Oil. Although there will be some solution gas coming from these formations there will not be enough establish gas sales at this time.

Page ~ 4 Continued Merchant Field Reserves We have identified 238 of GROSS / 119 NET PRODUCTIVE SANDS in B-3 and B-5 wells. For our reserves estimations we will be using the Net Productive Sand this is the CLEANEST PORTION of the formations and the most PRODUCTIVE. MENU ESTIMATION TABLE:
1. 119 Net X 500BBLS Per Acre of OHIP (Original Hydrocarbons In Place) 2. X 40 total+acres = 2,380,000 bbls of OHIP. 3. Using 2,380,000 bbls X 40% Recovery Factor = 952,000 bbls Recoverable 4. Total Produced from B-3 & B-5 Wells = 300,000 bbls Produced 5. Total Recoverable Remaining (Estimated) +652,000 bbls

ESTIMATED PRODUCTION H.E.R., LLC is estimating production from both B-3 & B-5 wellsDaily Production from current open zone is estimated at 70 100 bbls per as: 1. *Data from some of the new un-perforated zone have produced up forwards of 200 bbls per day of initial production. If one of these Sweet Spots occurred, the production figures would increase dramatically. Once again, no natural gas sales are expected on these leases. ECONOMICS AND INITIAL PRODUCTION AND CASH FLOW ESTIMATION OF
The Merchant Field Project A project is classified as an oil well(s) with the Railroad Commission of Texas. A conservative estimate of the reserves on project A of the B-3 and B-5 wells are 652,000 bbls of oil. Therefore the estimated total value of these reserves at present day prices after mineral owners interest is approximate $45,640,000 using $70.00 per barrel of oil. The net revenue interest of the project is 70% Participation of 3% Fractional Undivided Working Interest (W.I) equals one (1) Unit in the Merchant Field Sun Fee B-3 & B-5 project. Each Unit is $61,500.00 and only 23 units are available in the project for a total amount of $1,414,500.00. One (1) percent (W.I.) in the project is $20,500.00. This is a turnkey project to the first attempt after well(s) is tested and evaluated. Project is subject to Cash Call(s) day.* 2. Monthly production of some 2100 3000 bbls.*

Page ~ 5 Continued ~ Economics & Initial only after the first production zone is non-commercial or depleted. Cash Calls are figured on a pro-rata basis only. Project has a 70% net revenue interest to all Working Interest owners.

CASH FLOW: Average between 100 & 70 bbls per day = 85 bpd 85 bbls per day X 30 days = 2,550 per month 2,550 bbls X $70.00 = $178,500.00 per month Anticipated Gross Monthly Income = $178,500.00
This project should be tax exempt f or the first ten (10) years from paying Texas State Severance Tax of 4.60% for oil if project obtains approval by RRCT. Participation Cost Includes:
1. Land and legal 2. New electrical service for pumping units and disposal well 3. Lease roads rebuilt 4. Pumping unit for B-3 well and motor plus pipe & rods 5. Lease clean up 6. Rig time and fuel 7. Supervision & Engineering 8. Tool rental 9. Logging & Perforating 10. Trucking

RISK
Oil and Gas projects are risky and all investment capital could be lost in the Merchant Field Sun Fee B-3 & B-5 project and any other program. Successful oil and gas projects can return many times the cost of the venture. This project is low risk due to recompleting the present oil/gas

Page ~ 6 Continued ~ Risk zones. The degree of risk in this project comes in the form of possible mechanical failure and not from drilling a $4-5 million dollar dry hole. Remember, this well has produced several hundred thousand barrels of oil from the OPERATIONS current zones with an estimated LLC will barrels Houston Energy Resources, 652,000+- be the possible remaining in place monthly regulatory operator and is responsible for without taking high reports drilling a dryRailroad Commission. Houston risk of to the Texas hole.
Energy Resources, LLC is in complete control of daily operations to maintain the utmost production of the Merchant Field wells. H.E.R. holds a 99 well bond with the RRC of Texas Houston Energy Resources, CONCLUSION LLC Merchant Field project should be the Secretary from State is registered through a successful project of being The (Texas) and respective open is: 800976535. productive in theirfile numberoil pay zones. We could see production in the
70-100+- bopd if the B-3 & B-5 wells are placed back into production if both will pump from their present open oil zones. Salt domes will produce a lot of oil when well have been shut in for a period of time. This lease has been shut in since 1998 and has a good blow from present zones. Keep in mind that the last know production on these leases was between 900-1000+- bbls per month. Production had to be from the two wells with pumping units still attached to the wells in this Merchant Field. Salt Dome production can last for many decades especially with multi-oil pays stacked on top to each other like here on these leases. Proving my point is the first oil field in theses United States in Beaumont, Texas. This field is called Spindletop with one of the largest Salt Domes in the state of Texas discovered in 1901 with wells drilled within a few feet from each other and never missing with a dry hole. Spindletop has produce 100s of millions of barrels of oil and still

Page ~ 7 Continued Conclusion producing and some companies are still drilling Flank wells just like the Merchant Field Project in Liberty County, Texas. Another Salt dome field here in Houston, Texas was discovered around 1940 called Pierce Junction. This large dome had Flank Production on the south side of the Houston Astrodome parking lot and made millions of barrels for the WWII effort. Humble Oil Companys name (Exxon) came from the Salt dome discovered in Humble, Texas Energy Resources, LLC around the same time as Submitted by: Edward Lippincott, CEO Houston Spindletop in Beaumont, Texas.
DISCLAIMER:
All figures in this Memora ndum are based on production from actual drilled and completed wells in the field area of Liberty County, Texas . Houston Energy Resources, LLC cannot guarantee or be held responsible for the accuracy of any figures contained in this memorandum or any other material related to this project. Houston Energy Resources, LLC d oes not guarantee any information or figures contained in this memorandum to be true or accurate. Houston Energ y Resources, LLC cannot be held responsible for accurate reserves estimation, daily production, price of oil/gas and average monthly cash flow. All figures in this Memorandum are based on production numbers from the Railroad Commission o f Texas. This is not a solicitation or offer for sale and this Private Placement is no t and will not be registered with the SEC or any state or local agency. This is not being offered as a tradable security in any form. Houston Energy Resources, LLC has the right to transfer any and all funds raised in the Mercha nt Field project into another project from any legal problem of title or leases. The arbitration clause is acceptable by participants.