Depletion

Production from oil & gas wells naturally depletes over time as the subsurface resources are slowly exhausted. In many cases, operators may drill new wells on tokenized properties in an attempt to generate new production streams which can effectively replace or offset this depletion, a phenomena referred to as “reserve replacement”. However, even with reserve replacement occurring, it is highly likely that production volumes, and therefore cash flows, will deplete over the 15 year investment term of a Mineral Vault offering.

In fact, depletion itself is one of the main reasons that the investment is term-limited to 15 years, ending the tokenization initiative before cash flows become immaterial.

Although cash flows to the tokenized SPV will likely decrease over time due to the effects of depletion, it is the intention of Mineral Vault that token price will not be effected by this. How is this accomplished?

Token Repurchase & Burn

The tokenized SPV will distribute a significant portion of profits as a standard dividend. However, for a separate portion of profits, the SPV will distribute profits by repurchasing & burning tokens rather than paying standard income. The repurchase price will be determined by Mineral Vault LLC at each distribution, accounting for token market price, value of underlying assets, the projected income, number of tokens in circulation, and other factors. The amount of tokens to be repurchased & burned each month, if any, along with the repurchase price, will be communicated on the monthly dividend declaration date, and tokens will be repurchased pro-rata from all holders of tokens based on the number of tokens they hold as of the dividend record date & time.

The SPV will repurchase & burn all tokens over the course of 15 years.

The purpose of the Token repurchase & burn initiative is twofold:

• Counteract Depletion’s Effect On Token Price: As discussed above, production from oil & gas wells naturally depletes over time, and will deplete significantly over the 15 year term of the investment. In the absence of a token repurchase & burn program (increasing each outstanding token’s representative ownership share in the SPV over time), the value of the assets held by the SPV would slowly deplete over time, which might negatively impact token price over the life of the token. By repurchasing & burning a portion of the tokens each month, the SPV intends to offset the effects of depletion on token price.

• Term-Limit Investment: The repurchase & burn procedure will eventually terminate all outstanding tokens exactly 15 years after the token offering commencement date, which ensures that the cash flow is not allowed to reach immaterially low levels where administrative costs risk overwhelming property income.