Note

Related Party Transactions

The Company’s officers, directors, affiliates and certain employees have frequently participated, and will likely continue to participate in the future, as working interest owners in wells in which the Company has an interest. Frequently, the Company has loaned the funds necessary for certain employees to participate in the drilling and development of such wells. Initial terms of the unsecured loans call for repayment of all principal and accrued interest at the end of

four

years, however, the loan amounts are reduced from payments made by employees and as production proceeds attributable to the employees’ working interests are

not

remitted to the employees but rather used to reduce the amounts owed by the employees to the Company. If an outstanding balance remains after the initial

four

-year term, the Company and employee shall, acting in good faith, agree upon further repayment terms.

Employees remain obligated for the entire loan amount regardless of a dry-hole event or otherwise insufficient production. The loans carry

loan forgiveness provisions, and

loans have ever been forgiven. The loans accrue interest at the prime rate, which was

5.0%

June 30, 2018.

In accordance with the Sarbanes-Oxley Act of

2002,

the Company has

not

extended any loans to officers or directors since

2002.

June 30, 2018,

the Company has extended various loans, evidenced by notes, to

two

employees with origination dates of

December 2017.

Employees’ notes receivable, including accrued interest, amounted to

$8,911

and

$46,742

June 30, 2018

and

December 31, 2017,

respectively.

The Company collects and holds operational advances from employees, including officers and directors, who own working interests in wells of which the Company operates (see Note

). Operational advances held on behalf of employees, including officers and directors, as of

June 30, 2018

and

December 31, 2017

were approximately

$252,100

and

$180,300,

respectively.