Xun Energy, Inc. (fka XNRG)

[4on4off]

XNRG CEO UPDATE:


A personal thank you to XNRG CEO Jerry Mikolajczyk for the recent update on the DOZEN ORDERS IN PLAY.

Looks like big business has been hard at it behind the scenes as expected. Looking forward to the orders in play being closed on and XNRG banking some capital.

Xun Oil Marketing Division

Orders

The Xun Oil Marketing Division (XOM) is very active with several suppliers, funders and buyers working to close on a dozen orders that are in play. These orders are broken down into two categories, (a) reselling products after purchase and (b) facilitating either the purchase or the sale of products. Due to confidentiality agreements with the parties, the Company is restricted from disclosing the parties or the pricing of the orders. However, we can disclose that 3 orders are for the reselling of products and 9 orders are for facilitating the orders. Table 1 below provides details of the 12 orders in play at the time of writing.

These orders are fluid in nature and have many variables that require reworking during the period of negotiation in or to reach a consensus transaction. Any disruption in the process may cause the order to be delayed or cancelled, as we have encountered numerous times since the Board actuated XOM. A typical order from start to close may take from a couple of weeks to several weeks for a successful close. Each order where a buyer or seller is new to XOM, many hours are consumed in due diligence, as due diligence involves international communications, translations, and vetting of many documents. Once parties to an order reach a preliminary consensus, many more hours are needed to draft and circulate documents before final agreements are ready for signatory and notarization.

Below are transactions XOM is providing the expertise and buyer and seller sources, right now:

In addition to the great news above, XNRG CEO Jerry Mikolajczyk touches on the current status of the late filings:

Administration

Quarterly reports for November 30, 2014 and February 28, 2015 are with the auditors. On July 8, 2015, the Company put the reviews on a temporary hold as the shareholders of Idria Xun Enterprises Limited are amending the FINANCING AND PROFIT SHARING AGREEMENT (F&PSA) dated December 17, 2014 that will affect the consolidated financial statements.

The status of rice #15 (albeit not much):

Oil and Gas Division

Reclamation work for Rice #3, Rice #4, Rice #6 and Rice #14 has been completed subject to final report from the Operator confirming acceptance by the landowner. Rice #15 is back in production with an average daily production of 0.5 to 1 barrel per day with an average water production to crude oil of 5:1.

XNRG CEO Jerry Mikolajczyk also details the JV0006 amendment:

JV006 Amendment

JV006 is an incorporated collaboration between XOM, Idria Group of Companies (IDRIA) and Onken International Limited (ONKEN). JV006 incorporated IDRIA XUN ENTERPRISES LIMITED (IXEL) as a Hong Kong corporation on November 6, 2014 with XOM having a 50% interest, Mr. Pascal P. Mahvi having a 25% interest and Onken having a 25% interest. As we previously discussed on the Xun Forum, the chief objectives of JV006 are as follows:

•To collaborate the efforts of the counterparties to finance the purchase of the high quality petroleum products and to market the high quality petroleum products to the EXIT BUYERS.

•Profits will be shared net of financing and common costs on a transaction by transaction basis.

•XOM will administer 100% of IXEL.

On January 3, 2015, JV006 executed the Financing and Profit Sharing Agreement (F&PSA) effective December 17, 2014. The intent was for all three parties to actively participate in IXEL with each party bringing in suppliers, funding and exit buyers whereby IXEL would take title to the product and sell the product with the net profits distributed to the three shareholders on an equal basis, 33.33% each. Since XOM is administering IXEL, it passed the tests for accounting purposes to be consolidated in the books of the parent company, Xun Energy, Inc. (XNRG). The F&PSA allowed each party (Transacting Party) to flow through their own order (Transaction) without having to share their profits with the other parties. Each Transaction flowing through IXEL using IXEL’s name required majority, 75%, of IXEL board approval. This procedure caused administrative bottlenecks and exposed IXEL to book liabilities in its records that are liabilities of the Transacting Party. On a consolidation basis, XNRG would be reporting liabilities that it is not liable for with any benefit to XNRG. This came to light in June, when the auditors were working on the November 30, 2014 quarterly reports, on a Transaction that is outside of IXEL that IXEL is signatory to the liability even though the transacting parties indemnified IXEL and XOM.

The shareholders of IXEL have reviewed the F&PSA and are amending F&PSA as follows:

•F&PSA changed to LICENSING AND OPERATING AGREEMENT (L&OA) effective December 17, 2014.

•Each shareholder agrees to brand “IDRIA XUN ENTERPRISES LIMITED” or “IDRIA XUN ENTERPRISES” (collectively “IXE”) under license.

•A license will be granted to the shareholder upon the shareholder indemnifying IXEL and non participating shareholders of any liabilities and losses.

•Each licensed shareholder is entitled to buy, finance, take title and market the high quality petroleum products individually under the trade name of IXE.

•Each licensed shareholder and its affiliates will have licensing rights to use IXE as a trade name as long as they are a shareholder of IXEL.

•Each licensed shareholder will manage and carry the cost of their own transaction.

•Each shareholder agrees that IXEL shall be managed as a flow through corporation with no liabilities, no assets and no profits.

•IXEL, as a corporation, may purchase and sell high quality petroleum products subject to IXEL board approval of 3 of the 4 board members.

•A licensed IXEL shareholder does not require board approval to use IXE in purchasing and selling high quality petroleum products.

The shareholders of IXEL believe that the amended operating agreement will allow each licensed shareholder to transact at their own speed and not be impeded by the requirement to have the IXEL board assemble and approve each transaction. Time is of the essence on spot orders and XOM does not wish to lose an opportunity due to seeking or awaiting IXEL board approval.

The amended operating agreement benefits XNRG as liabilities of other parties or transactions that do not earn XNRG revenue, will not be recorded in the books of XNRG, thus providing for accurate financial statements. With the amended operating agreement, IXEL should not meet the tests of being controlled by XNRG and therefore should not be included in the consolidated financial statements of XNRG. This will save time and money on quarterly reviews and yearly audits.

XNRG