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EX-5.1 - CROWN ENERGY FUND I LPv225541_ex5-1.htm
EX-8.1 - CROWN ENERGY FUND I LPv225541_ex8-1.htm
EX-1.1 - CROWN ENERGY FUND I LPv225541_ex1-1.htm
EX-10.1 - CROWN ENERGY FUND I LPv225541_ex10-1.htm
EX-23.2 - CROWN ENERGY FUND I LPv225541_ex23-2.htm

As filed with the Securities and Exchange Commission on June 10, 2011

Registration No. 333-164016

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

Amendment No. 3
to
FORM S-1
  
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933



 

CROWN EXPLORATION FUND I, L.P.

(Exact name of registrant as specified in its charter)

   
Texas   1381   N.A.
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (IRS Employer
Identification Number)

4024 Nazarene Drive
Carrollton, Texas 75010
(972) 395-1133

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)



 

 
Agent for Service:
Shawn Grisham
Crown Exploration Partners, Ltd.
4024 Nazarene Drive
Carrollton, Texas 75010
(972) 395-1133
  Copy to:
Albert G. McGrath, Jr.
Baker & McKenzie LLP
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201
(214) 978-3000

(Name and address, including zip code, and telephone number,
including area code, of agent for service)



 

Approximate date of commencement of proposed sale of securities to the public: From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

     
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o   Smaller reporting company x


 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 


 
 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities, in any state where the offer or sale is not permitted.

Subject to Completion. Preliminary Prospectus dated June 10, 2011

[GRAPHIC MISSING]

$1 Million (40 Units) Minimum Aggregate Subscriptions
$8,400,000 (336 Units) Maximum Aggregate Subscriptions
  
Offering Price: $25,000 per unit
Minimum Purchase: $10,000 (2/5 unit)

Up to 84 Units of Limited Partner Interests and 252 Units of Additional General Partner Interests, which will be converted to Units of Limited Partnership Interests after the end of the year in which drilling by the partnership has been completed, including fractional Units, are being offered.

Crown Exploration Partners, Ltd. (formerly known as Petro Haus Properties, Ltd. referred to as “we” or “us”) is offering to qualified investors limited partner interests and additional general partner interests in Crown Exploration Fund I, L.P., a Texas limited partnership to be formed by us. The partnership will acquire and develop interests in oil and natural gas properties located in the state of Texas. The objective of the partnership will be to generate revenue from such oil and gas properties and to distribute cash to the partners. The partnership is intended to produce the following benefits for investors: (i) cash distributions from the production of oil and natural gas; (ii) a single layer of federal income tax on partnership earnings; and (iii) tax deductions for intangible drilling costs, depreciation and depletion.

These securities involve a high degree of risk and are speculative. You should purchase these securities only if you can afford a complete loss of your investment. Before buying units, you should consider carefully the risk factors beginning on page 6 of the prospectus, which include, but are not limited to:

Because we have not yet identified or selected any properties, the partnership is a “blind pool,” and you will not be able to evaluate the partnership’s properties before making your investment decision.
Additional general partners have unlimited liability for partnership obligations.
Cash distributions are not guaranteed.
Our affiliates’ prior history demonstrates that partnership returns will be affected in the event of dry holes or unproductive wells.
Your ability to resell your units is limited due to the lack of a public market and restrictions contained in the partnership agreement.
Our affiliates and we may have conflicts of interest with you and the partnership.
The potential drilling prospects may not be geographically or geologically diversified.
The partnership agreement prohibits your participation in the partnership’s business decisions, and we will manage and control the partnership’s business.
Oil and natural gas investments are highly risky.
Prices of oil and natural gas are unstable.
The current tax treatment of exploring for and producing oil and gas may change, and such changes may reduce or eliminate the tax benefits described in this prospectus.
Because the partnership has no operating history, we have no financial or operating data upon which you may evaluate its business.
Compensation payable to us and our affiliates will affect distributions.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

     
  Per
Unit
  Minimum Offering for
Partnership
(40 Units)
  Maximum Offering for
Partnership
(336 Units)
Offering Price   $ 25,000     $ 1,000,000     $ 8,400,000  
Organization and Offering Costs, excluding Commissions   $ 1,750     $ 70,000     $ 588,000  
Commissions   $ 2,000     $ 80,000     $ 672,000  
Proceeds to the Partnership   $ 21,250     $ 850,000     $ 7,140,000  

Texas Securities, Inc., a broker-dealer affiliated with us, is the broker-dealer for this offering and is offering the units on a “best efforts minimum/maximum” basis. This means the broker-dealer must sell at least 40 units and receive subscription proceeds of at least $1 million in order for the partnership to be formed, and they must use only their best efforts to sell the remaining units in the partnership.

Subscription proceeds for the partnership will be held in an interest-bearing escrow account with First Security Bank, N.A. until $1 million has been received, without regard to units subscribed for by our affiliates or us. The offering will not extend beyond two years from the date this prospectus. If the minimum subscription proceeds are not received by the partnership’s offering termination date, then your subscription will be promptly returned to you from the escrow account with interest and without deduction for any fees.

      , 2011


 
 

TABLE OF CONTENTS

TABLE OF CONTENTS

 
  Page
PROSPECTUS SUMMARY     1  
About the Offering     1  
Investment Objectives     1  
Terms of the Offering     3  
Our Compensation     4  
Participation in Distributions, Profits, Losses, Costs and Revenues     4  
Use of Proceeds     5  
Material Federal Income Tax Consequences; Opinion of Counsel     5  
RISK FACTORS     6  
Special Risks of the Partnership     6  
Risks of Oil and Natural Gas Investments     14  
Tax Risks     18  
FORWARD-LOOKING STATEMENTS     22  
TERMS OF THE OFFERING     24  
General     24  
Offering Period     24  
Election to Purchase as Limited Partner and/or Additional General Partner     24  
Subscriptions for Units; Escrow Account     24  
Formation of the Partnership     25  
Types of Partners     26  
Termination; Waiver     27  
Investor Suitability     27  
ADDITIONAL FINANCING     30  
SOURCES OF FUNDS AND USE OF PROCEEDS     31  
Sources of Funds     31  
Use of Proceeds     31  
Subsequent Sources of Funds     31  
PARTICIPATION IN DISTRIBUTIONS, PROFITS, LOSSES, COSTS AND REVENUES     32  
Cash Distributions     32  
Profits and Losses     32  
Administrative and Direct Costs     32  
Cash Distribution Policy     33  
Termination     34  
Amendment of Partnership Allocation Provisions     34  
OUR COMPENSATION     35  
Partnership Interest     35  
Management Fee     35  
Direct and Administrative Costs     36  

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  Page
PROPOSED ACTIVITIES     37  
Overview     37  
Oil and Gas in Texas     38  
Title to Properties     40  
Drilling and Completion Phase     40  
Production Phase of Operations     41  
Insurance     42  
COMPETITION, MARKETS AND REGULATION     44  
Competition     44  
Markets     44  
Regulation     45  
MANAGEMENT     47  
General     47  
Ownership of Crown Exploration Partners, Ltd.     48  
Organizational Diagram of Crown Exploration Partners, Ltd. and Crown Exploration II, Ltd.     49  
Compensation     50  
Legal Proceedings     50  
Transactions with Management and Affiliates     50  
CONFLICTS OF INTEREST     52  
OUR FIDUCIARY RESPONSIBILITY     57  
PRIOR ACTIVITIES     58  
MATERIAL FEDERAL INCOME TAX CONSEQUENCES     78  
Partnership Status     78  
Tax Consequences to You     80  
Intangible Drilling Costs     80  
Depletion     82  
Depreciation     83  
Leasehold Costs and Abandonment     83  
Transaction Fees     83  
Geological and Geophysical Costs     84  
Domestic Production Activities     84  
Sales, Subleases and Farmouts     84  
Allocations     86  
Basis and At Risk Limitations     87  
Passive Loss Limitations     88  
Partnership Distributions     89  
Gain or Loss on Sale of Units     90  
Additional Tax on Net Investment Income     90  
Unrelated Business Taxable Income     91  

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  Page
Oil and Natural Gas Tax Credits     91  
Termination of the Partnership     91  
Alternative Minimum Tax     91  
Reportable Transaction Rules     92  
Penalty for Transactions that Lack Economic Substance     92  
Profit Motive     92  
Administrative Matters     93  
Accounting Methods and Periods     94  
Election to Adjust Tax Basis of Partnership Property     94  
Self-Employment Tax     94  
State and Local Taxes     94  
Possible Changes in Federal Tax Laws     94  
Individual Tax Advice Should Be Sought     95  
SUMMARY OF PARTNERSHIP AGREEMENT     96  
Our Responsibility     96  
Liability of General Partners     96  
Liability of Limited Partners     96  
Allocations and Distributions     96  
Voting Rights     97  
Our Retirement and Removal     97  
Term and Dissolution     98  
Indemnification     98  
Transferability     99  
Access to Partnership Records     100  
Reports to Partners     100  
Power of Attorney     101  
Return of Subscription Proceeds if Funds Are Not Invested in Twelve Months     102  
Conversion of Units by Additional General Partners and Us     102  
Other Provisions     102  
TRANSFERABILITY OF UNITS     103  
No Market for the Units     103  
Assignment of Units; Substitution     103  
PLAN OF DISTRIBUTION     103  
Distribution     103  
Compensation     103  
Our Relationship with Texas Securities     104  
Indemnification     104  
Termination     104  
Qualification to Sell     104  
Our Purchase of Units     104  

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PROSPECTUS SUMMARY

This summary highlights material information contained in this prospectus. It is not complete and may not contain all of the information that is important to you. You should read the entire prospectus carefully, including the risk factors, the financial statements and the notes to the financial statements. References to “we,” “our,” “us,” “Crown” and similar terms refer to Crown Exploration Partners, Ltd., the managing general partner of the partnership. References to “partnership” refer to Crown Exploration Fund I, L.P., the name of the limited partnership to be formed.

About the Offering

Crown Exploration Fund I, L.P. is a limited partnership to be formed to acquire and develop interests in oil and natural gas properties located in the state of Texas. The objective of the partnership will be to generate revenue from the oil and gas properties, and distribute cash to the partners. See “Proposed Activities.”

We will not operate the wells in which the partnership has an interest. The operators of the partnership’s wells will be unrelated third parties. We were formed in 2001 for the purpose of, among other things, owning and leasing property.

Investment Objectives

The partnership is intended to produce the following benefits for investors:

Cash distributions from the production of oil and natural gas.  If the partnership’s wells are successfully drilled and the partnership’s revenues exceed its expenses, you will receive periodic distributions of the partnership’s cash profits. We anticipate that cash distributions to the partners will begin approximately 15 months after the offering period for the partnership ends, assuming the minimum number of units are sold, and will be made monthly thereafter. The timing and amount of distributions will depend primarily on the partnership’s net cash receipts from oil and gas operations on its wells, and will be affected by, among other things, the acquisition of oil and gas leases, successful drilling and completion operations on the wells in which the partnership holds an interest, the price of oil and natural gas and the level of production of the wells in which the partnership holds an interest. Generally, we estimate that acquiring, drilling and completing possible oil and gas wells located in the fields discussed in the prospectus will take between five to 10 months, depending on the well depth and conditions that may arise during operations. After drilling is completed, it is expected to take between two to four months for an investor partner to receive distributions, if any, based on any production from the completed well, including the time taken for hooking the well up to existing infrastructure and engaging in related marketing activities. In addition, any distributions received by the partners may represent a return of capital.
Single layer of federal income tax on partnership earnings and tax deductions for intangible drilling costs, depreciation and depletion.  As a partner in the partnership, you will be required to include on your own federal income tax return your allocable share of the partnership’s taxable income and deductions including, under current federal tax law, deductions for intangible drilling costs, depreciation and depletion. As a result, if the partnership makes a cash distribution to you that is attributable to the partnership’s net taxable income that is, or has already been, included on your federal income tax return, the distribution should not be taxable a second time to you or the partnership for federal income tax purposes. See “Material Federal Income Tax Consequences — Tax Consequences to You,” “— Basis and At Risk Limitations” and “— Partnership Distributions.” If you invest as an additional general partner, the tax deductions from the partnership may reduce your taxable income from the partnership and potentially from other so-called “active” sources such as ordinary income from employment. If you invest as a limited partner, these deductions may reduce your taxable income from the partnership and from other so-called “passive” business activities that you may participate in, if any. See “Material Federal Income Tax Consequences — Intangible Drilling Costs” “— Depreciation” and “— Depletion.” There are, however, proposals currently pending before Congress that would change some of the U.S. federal income tax rules applicable to drilling for and producing oil and natural gas. Those proposals would, among other things, place additional limits on or eliminate the current

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deductions for intangible drilling costs and depletion. See “Risk Factors — Tax Risks — The current tax treatment of exploring for and producing oil and gas may change, and such changes may reduce or eliminate the tax benefits described in this prospectus,” and “Material Federal Income Tax Consequences — Possible Changes in Federal Tax Laws.”

For reasons we discuss in this prospectus, including under the section entitled “Risk Factors,” you may not realize some or all of these benefits. You should only invest if you can afford the loss of your entire investment.

These securities are speculative and involve a high degree of risk.  See “Risk Factors” on pages 6 to 21 of this prospectus, together with the other information in this prospectus, in evaluating an investment in the units.

Significant risks associated with the offering include, but are not limited to the following:

Because we have not yet identified or selected any properties, the partnership is a “blind pool” and you will not be able to evaluate the partnership’s properties before making your investment decision.
Additional general partners have unlimited liability for partnership obligations.
Cash distributions are not guaranteed.
Our affiliates’ prior history demonstrates that partnership returns will be affected in the event of dry holes or unproductive wells.
Your ability to resell your units is limited due to the lack of a public market and restrictions contained in the partnership agreement.
Our affiliates and we may have conflicts of interest with you and the partnership.
The potential drilling prospects may not be geographically or geologically diversified.
The partnership agreement prohibits your participation in the partnership’s business decisions, and we will manage and control the partnership’s business.
Oil and natural gas investments are highly risky.
Prices of oil and natural gas are unstable.
The current tax treatment of exploring for and producing oil and gas may change, and such changes may reduce or eliminate the tax benefits described in this prospectus.
Because the partnership has no operating history, we have no financial or operating data upon which you may evaluate its business.
Compensation payable to us and our affiliates will affect distributions.

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Terms of the Offering (see page 24)

Managing General
Partner
   
    Crown Exploration Partners, Ltd., a Texas limited partnership (“Crown”).
Securities Offered    
    We are offering up to 336 units, including fractional units, of limited and additional general partner interests in the partnership. The minimum offering amount in the partnership will be $1,000,000 (40 units), excluding the number of units we buy. As long as the minimum number of units are sold, there is no minimum number of limited or additional general partner units that must be sold.
Offering Price    
    $25,000 per unit
Minimum Investment    
    $10,000 (2/5 unit)
Offering Period    
    The offering period for the partnership began on the date of this prospectus. We may terminate the offering period at any time after the minimum number of units (40) has been subscribed for in the partnership, excluding units we buy. Unless we terminate the offering sooner, the offering period will continue until the earlier of: the acceptance of subscriptions for the maximum number of units (336) in the partnership or the second anniversary of the date of this prospectus. In certain states, we will be required to apply for registration of the offering on an annual basis.
Suitability Standards    
    Investment in the units is suitable for you only if you do not need liquidity in this investment and can afford to lose all or substantially all of your investment. Your subscription for units will be accepted only if you represent that you meet the suitability standards described below under “Terms of the Offering — Investor Suitability” on pages 27 to 29.
Description of Units    
    On subscribing for units in the partnership being offered at the time, you may elect to buy:
   

•  

units of additional general partner interests; and

   

•  

units of limited partner interests.

Plan of Distribution    
    Texas Securities, Inc. (“Texas Securities”), a broker-dealer affiliated with us, is the broker-dealer for this offering. See “Plan of Distribution — Our Relationship with Texas Securities.” It will receive a sales commission, payable in cash equal to 8% of the investor partners’ subscriptions. Texas Securities, a Financial Industry Regulatory Authority, Inc. (“FINRA”) licensed broker-dealer, is required to use its best efforts to sell the units offered. Subscription proceeds will be held in a separate interest-bearing escrow account with First Security Bank, N.A., as escrow agent until the minimum number of units has been subscribed for, without regard to units our affiliates and we buy, and may be released before the end of the partnership’s offering period. If the minimum number of units are not subscribed for prior to the termination of the partnership’s offering period, the partnership will not be formed, and the escrow agent will promptly return all subscription proceeds from your investment in the partnership to you, with interest and without deduction of any fees.
Principal Office    
    Our principal office is, and the principal office of the partnership will be, located at 4024 Nazarene Drive, Carrollton, Texas 75010, and the telephone number is (972) 395-1133. Shawn Grisham, our president, will make the investment and management decisions on behalf of the partnership.

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Our Compensation (see page 35)

The following table summarizes the compensation to be received by us from the partnership.

   
Recipient   Form of Compensation   Amount
Managing General Partner   Partnership interest (excluding any partnership interest resulting from the purchase of units)   11% interest in the partnership
Managing General Partner   Management Fee   15% of subscriptions, less commissions and other organization and offering costs fees (non-recurring fee) (estimated at $0)
Managing General Partner   Direct and administrative costs during partnership operations   Reimbursement at cost

Our “partnership interest,” as described in the table above, refers to our interest as managing general partner, including the 1% interest we will have as the result of our contribution of 1% of the capital of the partnership, but does not include the interest we will have as a result of our purchase of any units. Direct and administrative costs cannot be quantified until the partnership begins conducting business. In the event the maximum amount of funds are raised ($8,400,000), we could receive substantial management fees after deducting commissions and organization and offering costs.

Under the terms of the partnership agreement, in consideration for our services to be rendered as the managing general partner in managing the business of the partnership, we may receive a management fee. The management fee would be an amount equal to the difference between 15% of the subscriptions by the investor partners to the partnership, and all commissions payable to the broker dealer, which in no event will exceed 8% of total subscriptions (a minimum of $80,000 and a maximum of $672,000), and other organization and offering costs, which in no event will exceed 7% of total subscriptions of the investor partners in the partnership (a minimum of $80,000 and a maximum of $672,000). Because organizational and offering costs (excluding commissions) are greater than 7% of the total maximum subscriptions as of the date of this prospectus, we will not receive a management fee. We will pay 100% of any organization and offering costs, excluding sales commissions, for the partnership that, in the aggregate, exceed 7% of the proceeds from aggregate contributions. In no event will total organization and offering costs (including commissions) and the management fee exceed an amount greater than 15% of total investor subscriptions.

The management fee, if any, would be paid by the partnership from funds which would otherwise be available for distribution to the partners in the partnership, in such monthly amounts as we may determine in our discretion and until such time as the management fee has been paid in its entirety. To the extent that the partnership has insufficient distributable funds during a particular year to fully pay the amount of the management fee, then the amount of such unpaid management fee will be carried forward and payable in the following year. Although commissions and other organization and offering costs will be deducted from the capital contributions of the investor partners, our management fee, if any, will instead be paid by the partnership from funds otherwise available for distributions to the partners. Because organizational and offering costs (excluding commissions) are greater than 7% of the total maximum subscriptions as of the date of this prospectus, we will not receive a management fee

Participation in Distributions, Profits, Losses, Costs and Revenues (see page 32)

Cash distributions from operations, if any, from the partnership will be distributed 89% to the holders of units and 11% to us. See “Participation in Distributions, Profits, Losses, Costs and Revenues — Termination” for a description of distributions upon termination of the partnership.

Partnership profits will be allocated: (i) first to the extent of, in the same proportion as and in reverse order to any losses, if any, that were previously allocated to the unit holders and to us that have not previously been restored by an allocation of profits; and (ii) thereafter, 89% to the holders of units and 11% to us. We will make a contribution to the capital of the partnership for our interest as the managing general partner of the partnership in an amount equal to 1% of the total of all capital contributions to the partnership

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net of organization and offering costs (including commissions). We and/or our affiliates may, but we have no obligation to, buy additional units issued by the partnership at the offering price of $25,000 per unit less an amount equal to the organization and offering costs (including commissions) that are allocable to each unit purchased by the investor partners. The allocable organization and offering costs will be determined by dividing the total organization and offering costs that are payable from investor partners subscriptions by the total number of units that are purchased by investor partners (excluding us). This means we will pay a minimum of 85% of the offering price for each unit we purchase, if any, or $21,250 per unit. If we purchase units issued by the partnership, we and/or our affiliates will be entitled to the same ratable interest per unit purchased in the partnership as other unit holders.

Organization and offering costs up to an amount equal to 15% of the unit holders’ subscriptions (excluding the units that we subscribe to, if any) will be allocated 100% to the holders of units (excluding us). We will pay 100% of any excess organization and offering costs, without recourse, and receive 100% of the related tax allocations for those costs. The management fee, if any, will be treated as a general expense of the partnership and taken into account in determining partnership profits and losses. Partnership losses will be allocated: (i) first to the extent of, in the same proportion as and in reverse order to any undistributed profits that were previously allocated to the unit holders and to us that have not previously been offset by an allocation of losses; (ii) second, to the holders of units and to us based on our respective positive adjusted capital account balances; and (iii) thereafter, to us and the additional general partners based upon how the loss is borne pursuant to the partnership agreement.

Use of Proceeds (see page 31)

The partnership must receive minimum subscriptions of $1,000,000 to close, without regard to units bought by our affiliates and us, and the subscription proceeds for the partnership will not exceed $8,500,000, excluding units we purchase. Approximately 85% of the proceeds from the aggregate contributions to the capital of the partnership (a minimum of approximately $850,000 and a maximum of approximately $7,140,000) will be applied to the acquisition and development of oil and gas properties. Of the remaining 15% of the proceeds from aggregate contributions to partnership capital, approximately 8% (a minimum of $80,000 and a maximum of $672,000) will be used to pay sales commissions, and the remainder will pay for other organization and offering costs associated with the formation of the partnership and sale of the units. If the partnership receives subscriptions for the maximum number of units with aggregate proceeds of $8,400,000, then the partnership is expected to acquire the majority of the working interests in two to five drilling prospects, depending on the acquisition costs and anticipated development costs of the prospects. In contrast, if the partnership receives subscriptions for the minimum number of units with aggregate proceeds of $1,000,000, then the partnership will likely be able to acquire working interests in only one to two drilling prospects. As the managing general partner, we will have broad discretion in allocating a substantial portion of the proceeds from the offering and selecting properties. See “Proposed Activities.”

Material Federal Income Tax Consequences; Opinion of Counsel (see page 78)

We have received an opinion from our counsel, Baker & McKenzie LLP, concerning the discussion under the heading “Material Federal Income Tax Consequences” in this prospectus. The full text of the opinion is attached as Appendix D to this prospectus. We encourage you to read the opinion in its entirety and to read the discussion under the heading “Material Federal Income Tax Consequences” in this prospectus for a full understanding of the opinion, including the assumptions made and matters considered by Baker & McKenzie LLP in providing its opinion. However, please note that Baker & McKenzie LLP’s opinion reflects only the opinion of counsel and it and the discussion under the heading “Material Federal Income Tax Consequences” in this prospectus are not binding upon the IRS or courts of applicable jurisdiction. In addition, the discussion under the heading “Material Federal Income Tax Consequences” in this prospectus does address all of the tax aspects that might be relevant to each prospective investor in light of its own circumstances. Therefore, each prospective investor is urged to seek advice from an independent tax advisor based on the investor’s own circumstances.

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RISK FACTORS

An investment in the units involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, together with all of the other information contained in this prospectus. The risks below are not the only ones facing us or the partnership. Additional risks not currently known to us or that we currently deem immaterial may also adversely affect us or the partnership. This prospectus also contains forward-looking statements, estimates and projections that involve risks and uncertainties. The partnership’s actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks described below.

Special Risks of the Partnership

Neither we nor the partnership will be the operator on the partnership’s wells, and, therefore, we will not be able to control the timing of exploration or development efforts, associated costs, or the rate of production of any non-operated wells or prospects.  We will exclusively manage and control all aspects of the business of the partnership and will make all decisions concerning the business of the partnership. We expect that third parties will be the operators on the oil and gas wells in which the partnership holds an interest. We anticipate that the partnership will enter into arrangements with respect to future wells that result in the partnership’s wells being operated by others. As a result, we and the partnership may have limited ability to exercise influence over the operations of the wells operated by such third parties. Dependence on an operator could affect the partnership’s returns for those wells. In addition, in some instances, the partnership could acquire a less than 50% working interest in a well or property. When it acquires a minority interest in a well, the partnership will not control the selection of the operator or be able to direct operations under the terms of the applicable operating agreement. The success and timing of exploration and development activities operated by third parties will depend on a number of factors that will be largely outside of our control, including:

the timing and amount of capital expenditures;
the operator’s expertise and financial resources;
approval of other participants in drilling wells;
selection of technology; and
the rate of production of reserves, if any.

As a result, our limited ability to exercise control over the operations of our wells may cause a material adverse effect on the partnership’s results of operations and financial condition.

If you choose to invest as an additional general partner, you will have a greater level of risk than if you choose to invest as a limited partner. Additional general partners have unlimited liability for partnership obligations.  Under Texas law, the state in which the partnership will be formed, general partners of a partnership have unlimited liability for obligations and liabilities of the partnership. If you purchase units as an additional general partner you will be liable for all obligations and liabilities arising from the partnership’s operations if these liabilities exceed both the assets and insurance of the partnership, and our assets and insurance. If you convert your general partner interest into a limited partner interest, you will continue to be liable as a general partner for matters that occurred while you owned a general partner interest. Your liability as an additional general partner may exceed the amount of your subscription. Under the partnership agreement, additional general partners are liable for their proportionate share of the partnership’s obligations and liabilities. This agreement will not eliminate your liabilities to third parties if you invest as an additional general partner and you may have liabilities in excess of your proportionate share if other additional general partners do not pay their proportionate share of the partnership’s obligations and liabilities.

Also, the partnership will likely own less than 100% of the working interest in a well. If a court holds you and the other third-party working interest owners of the well liable for the development and operation of the well and some of the third-party working interest owners do not pay their proportionate share of the costs and liabilities associated with the well, then the partnership and you and the other additional general partners also would be liable for those costs and liabilities.

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As an additional general partner you may become subject to the following:

contract liability, which is not covered by insurance;
liability for pollution and other environmental damages such as the release of toxic gas, spills or uncontrollable flows of natural gas, oil or fluids, against which we cannot insure because coverage is not available or against which we may elect not to insure because of high premium costs or other reasons; and
liability for drilling hazards which result in property damage, personal injury, or death to third-parties in amounts greater than the partnership’s insurance coverage. Drilling hazards include but are not limited to well blowouts, fires, and explosions.

If the partnership’s insurance proceeds and assets, our indemnification of the additional general partners, and the liability coverage, if any, provided by major subcontractors are not sufficient to satisfy a liability, then we will call for additional funds from the additional general partners to satisfy the liability. Our ability to indemnify additional general partners is dependent upon our financial condition.

There is no guarantee of a return of your investment or any specific rate of return on your investment in the partnership.  You may not recover all of your investment in the partnership, or if you do recover your investment in the partnership, you may not receive a rate of return on your investment that is competitive with other types of investment. You will be able to recover your investment only through the partnership’s distributions of the sales proceeds from the production of oil and natural gas from productive wells. See “Risk Factors — Special Risks of the Partnership — The prior history of our affiliates demonstrates that partnership returns will be affected in the event of dry holes or unproductive wells. A significant number of our affiliates’ prior programs have resulted in wells that were sold or abandoned at a loss to the investors,” “Risk Factors — Special Risks of the Partnership — Our affiliates have sponsored ventures in the past that have produced dry holes and abandoned wells” and “Prior Activities.” The quantity of oil and natural gas in a well, which is referred to as its reserves, decreases over time as the oil and natural gas is produced until the well is no longer economical to operate. All of the distributions to you will be considered a return of capital until you have received 100% of your investment. This means that you are not receiving a return on your investment in the partnership, excluding tax benefits, until your total cash distributions from the partnership exceed 100% of your investment.

Because we have not yet identified or selected any properties, the partnership is a “blind pool” and you will not be able to evaluate the partnership’s properties before making your investment decision.  The partnership is a “blind pool” as we have not, as of the date of this prospectus, selected any oil and gas properties for acquisition by the partnership and will not select properties for the partnership until after the formation of the partnership. You will not have an opportunity before purchasing units to evaluate geophysical, geological, economic or other information regarding the properties to be selected. Delays are likely in the investment of proceeds from your subscription because the offering period for the partnership can extend for up to two years. If we select an oil and gas property for acquisition by the partnership during the offering period, we will file a prospectus supplement describing the oil and gas property and its proposed acquisition. If you subscribe for units prior to any such supplement you will not be permitted to withdraw your subscription as a result of the selection of any property. As the managing general partner, we will have broad discretion in allocating a substantial portion of the proceeds from the offering and selecting properties. See “Proposed Activities.”

Because the partnership has no operating history, we have no financial or operating data upon which you may evaluate its business.  Because the partnership will be formed upon reaching the minimum subscription level of 40 units ($1,000,000), the partnership has no operating history, and thus, we have no financial or operating data upon which you may evaluate the partnership’s business. The partnership’s ability to conduct its operations is dependent upon obtaining financing through this public offering of units. Although Crown Exploration Partners, Ltd. and Crown Exploration II, Ltd. have an operating history, the results of Crown Exploration Partners, Ltd. and Crown Exploration II, Ltd. are not indicative of the partnership’s future results. See “Prior Activities.”

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Cash distributions are not guaranteed.  Cash distributions are not guaranteed and will depend on the partnership’s future operating performance. See “Participation in Distributions, Profits, Losses, Costs and Revenues — Cash Distribution Policy.” We will review the accounts of the partnership at least monthly to determine the cash available for distribution. Distributions will depend primarily on the partnership’s cash flow from operations, which will be affected, among other things, by the following:

the price of oil and natural gas;
the level of production of the partnership’s wells;
payment of our management fee, if any;
the price and quantity of imports of foreign oil and natural gas;
the price and availability of alternative fuels;
costs and cost overruns;
remedial work to improve a well’s producing capability;
direct costs and administrative costs of the partnership;
reserves, including a reserve for the estimated costs of eventually plugging and abandoning the wells;
repayment of borrowings; and
the indemnification of us and our affiliates by the partnership for losses or liabilities incurred in connection with the partnership’s activities.

Partnership net income will be taxable to the additional general and limited partners in the year earned, even if cash is not distributed. See “Risk Factors — Risks of Oil and Natural Gas Investments” and “Participation in Distributions, Profits, Losses, Costs and Revenues — Cash Distribution Policy” and “Our Compensation.”

The prior history of our affiliates demonstrates that partnership returns will be affected in the event of dry holes or unproductive wells. A significant number of our affiliates’ prior programs have resulted in wells that were sold or abandoned at a loss to the investors.  During the period from January 1, 1999 through December 31, 2010, our affiliates sponsored 79 drilling partnerships, all of which were private partnerships and none of which were publicly-held limited partnerships. During such period, only 54 drilling partnerships were multi-well drilling partnerships. Only three of the drilling partnerships have made distributions to participants in excess of original capital contributed by participants as of December 31, 2010. Forty-nine of the oil and gas drilling partnerships formed during that period had wells which were ultimately sold or plugged and abandoned at a substantial loss of the participants’ capital contributions. Of those 79 partnerships, 12 have made no distributions to their participants and 64 have distributed amounts to participants that are less than their original capital contributions. There is no guarantee that the partnership will achieve payout. See “Prior Activities — Table One” in this prospectus.

If the minimum offering amount is not subscribed by the termination of the offering, then the partnership will not be formed.  The partnership will be formed promptly upon reaching the minimum subscription level of 40 units ($1,000,000), excluding the number of units we or our affiliates buy. Once the minimum subscription level is reached, we will file a Form 8-K with the Securities and Exchange Commission (“SEC”) describing the formation of the partnership and the disbursements of funds held in escrow into the partnership’s bank account. If the minimum subscription level is not reached prior to the termination of the offering, then we will cause all funds to be refunded promptly to the affected subscribers, with interest and without deduction of fees, within 30 days of the termination of the offering.

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The partnership’s ability to diversify risks depends upon the number of units subscribed.  We intend to spread the risk of oil and natural gas drilling and ownership of interests in oil and natural gas properties by purchasing working interests in several properties. If the partnership is subscribed at the minimum level, it will be required to purchase smaller interests in oil and gas properties and be able to participate in fewer properties, which would increase the risk to the partners. As the partnership size increases, the diversification of the partnership and the ability to acquire majority interests in properties will increase because the partnership can obtain interests in and drill on a greater number of prospects. If the partnership receives subscriptions for the maximum number of units (336) with aggregate proceeds of $8,400,000, then the partnership is expected to acquire the majority of the working interests in two to five drilling prospects, depending on the acquisition costs and anticipated development costs of the prospects. In contrast, if the partnership receives subscriptions for the minimum number of units (40) with aggregate proceeds of $1,000,000, then the partnership will able to acquire working interests in one to two drilling prospects.

Drilling prospects in one area may increase the partnership’s risk.  To the extent that prospects are drilled in one area at the same time, this may increase the partnership’s risk of loss. For example, if several wells in one area are drilled at approximately the same time, then there is a greater risk of loss if the wells are marginal or nonproductive since we will not be using the drilling results of one or more of those wells to decide whether or not to continue drilling prospects in that area or to substitute other prospects in other areas. This differs from a situation in which we drill one well and assess the drilling results before we decide to drill a second well in the same area or to substitute a different prospect in another area.

The partnership has limited external sources of funds, which could result in a shortage of working capital.  The partnership intends to utilize substantially all available capital from this offering for the acquisition of drilling prospects and the drilling and completion of wells on those prospects. The partnership will have only nominal funds available for partnership purposes until there are revenues from partnership operations. Any additional funding will have to come, if at all, from the partnership’s revenues, the sale of partnership properties or interests therein, or from borrowings.

Occasions may arise in which the partnership will need to raise additional funds in order to finance costs of:

drilling and completing wells; and
ensuring the provision of necessary production equipment and facilities to service productive oil and natural gas wells and ensuring the plugging and abandoning non-productive wells.

Additional operations requiring funding may include the acquisition of additional oil and gas leases and the drilling, completing and equipping of additional wells to further develop partnership prospects or to purchase additional prospects. The partnership agreement provides that the partnership may borrow funds only to conduct maintenance operations on the partnership properties or otherwise conduct activities necessary to preserve partnership property. The partnership agreement does not permit the partnership to borrow funds to acquire new properties or drill new wells. Furthermore, the partnership may borrow funds only if the lender agrees that it will have no recourse against individual investor partners. Any borrowings may, in our discretion, be secured by the partnership’s assets or income and may, in our discretion, be made with or without recourse to us as managing general partner. If the above-described methods of financing should prove insufficient to maintain the desired level of partnership operations, such operations could be continued through farmout arrangements with third parties, including us and/or our affiliates. These farmouts could result in the partnership giving up a substantial interest in oil and gas properties it has acquired or developed. We cannot assure you that partnership operations will be sufficient to provide the partnership with necessary additional funding or that the partnership will be able to borrow funds from third parties on commercially reasonable terms or at all. If the partnership expends all of its working capital on the acquisition and development of drilling prospects and such operations fail to generate sufficient revenues to the partnership, then there may be doubt as to the partnership’s ability to operate as a going concern.

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The operations of the partnership may not be geographically or geologically diversified.  The partnership has identified four fields in which it may acquire oil and gas interests. Depending on our analysis of possible prospects for acquisition, the available prospects, and the amount of subscriptions received by the partnership, the partnership could acquire all of its oil and gas properties in one field with the target formation. As a result, the partnership may not be geographically or geologically diversified, and the risk associated with the partnership’s drilling operations will be focused in one area or formation. As a result, cash distributions to the investors, if any, would be dependent on successful operations in one area or formation.

Your ability to resell your units is limited due to the lack of a public market and restrictions contained in the partnership agreement.  You may not be able to sell your units of partnership interests. No public market for the units exists or is likely to develop. Your ability to resell your units also is restricted by the partnership agreement. The partnership itself may continue in existence for thirty years from its formation, unless earlier terminated. As a result, you should plan on owning your units for an indefinite period. See “Transferability of Units.”

Our affiliates and we may have conflicts of interest with you and the partnership.  The continued active participation by our affiliates and us in oil and gas activities individually, and on behalf of other partnerships organized or to be organized by us, and the manner in which partnership revenues are allocated, create conflicts of interest with the partnership. Our affiliates and we have interests that inherently conflict with those of the partnership and the unaffiliated partners, including the following:

Our affiliates and we manage other oil and natural gas drilling partnerships. We will owe a duty of good faith to each of the partnerships that we manage. Actions taken with regard to other partnerships may not be advantageous to a particular partnership.
We decide which prospects the partnership will acquire. We could benefit, as a result of cost savings or reduction of risk, for instance, by assigning or not assigning particular prospects to the partnership.
The percentage of revenues we receive is greater than the percentage of costs we pay. As a result, there may be a conflict of interest concerning which wells will be drilled based on the wells’ risk and profit potential.
We serve as the tax matters partner for the partnership. If we represent the partnership before the Internal Revenue Service (“IRS”), potential conflicts may include whether we should expend partnership funds to contest a proposed adjustment by the IRS, if any, and the amount of your deduction for intangible drilling costs.
We or our affiliates will determine the terms of any acquisitions of properties we may purchase from the partnership subject to the terms of the partnership agreement.
Our purchase of units in the partnership and/or the purchase of units by us or one or more of our affiliates for a reduced price could dilute any voting rights you may have regarding your partnership.

We will attempt, in good faith, to resolve all conflicts of interest. However, any transaction with us or our affiliates may not be on terms as favorable as could have been negotiated with unaffiliated third parties.

Our legal counsel is also legal counsel to our affiliates and Texas Securities. There is no independent counsel representing the partnership.  Baker & McKenzie LLP serves as legal counsel to us, our affiliates, and Texas Securities, a broker-dealer affiliated with us. Because our affiliates have the same legal counsel as we have, there may be conflicts of interest inherent in our legal representation.

A substantial percentage of our affiliates’ revenues have been derived from three oil and gas marketers.  Our affiliates sell oil and natural gas on credit terms to refiners, pipelines, marketers, and other users of petroleum commodities. Revenues are received directly from these parties or, in certain circumstances, are paid to the operator of the property who disburses to us our percentage share of the revenues. During the year ended December 31, 2010, three marketers, Texas Energy Management Corporation, Devon Energy, and Texon, LP., accounted for approximately 90% of our affiliates’ oil and gas revenues. Despite the competitive nature of the market for oil and natural gas, the loss of any particular purchaser could

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have a material adverse impact on the partnership or us by affecting prices, delaying sales of production or increasing costs. Moreover, our reliance upon a small number of marketers to purchase our oil and natural gas poses a credit risk in the event one or more of such marketers should fail to pay in a timely manner or at all. In such event, the amount of distributions available to the investor partners could be substantially diminished, even if the partnership’s properties are successfully producing.

Our affiliates have sponsored ventures in the past that have produced dry holes and abandoned wells.  Our affiliates have sponsored 79 ventures from 1999 to December 31, 2010. All of these ventures were dedicated almost exclusively to the purchase of interests in oil and gas drilling ventures. These ventures have drilled 156 wells. Of the wells drilled by our affiliates’ ventures, 6 were exploratory wells and 149 were developmental. Nineteen of these wells were dry holes, and 21 wells were completed but were non-commercial. Of the 116 wells that were commercial, 46 are still owned by our affiliates’ ventures and producing, and 68 have been sold. Using this data, approximately 74% of the wells drilled by these ventures were completed as commercially producing and 26% were dry holes (including the 21 wells that were completed but failed to become commercial producers). Approximately 26% of the wells drilled by our ventures were subsequently abandoned. See “Prior Activities” in this prospectus.

Compensation payable to us and our affiliates will affect distributions.  We will receive compensation from the partnership throughout the term of the partnership. Our affiliates may enter into transactions with the partnership for services and will be entitled to compensation at competitive prices and terms as determined by reference to charges of unaffiliated companies providing similar services. Compensation payments to our affiliates and us will be due regardless of the partnership’s profitability and will reduce the amount of cash available to the partnership for distribution to its partners. Compensation payable to us is subject to and limited by the terms of the partnership agreement. See “Our Compensation,” “Conflicts of Interest” and “Summary of the Partnership Agreement.”

A lengthy offering period may result in delays in the investment of your subscription and any cash distributions from the partnership to you.  Because the offering period for the partnership can extend for up to two years, it is likely that there will be a delay in the investment of your subscription proceeds. See “Terms of the Offering” for a discussion of the procedures involved in the offering of the units and the formation of the partnership. This may create a delay in the partnership’s cash distributions to you, which will be paid only if there is sufficient cash available in the managing general partner’s discretion. Subscription proceeds will earn interest until they are used by partnership for its operations, and will be credited to the respective subscriber and paid to the subscriber no later than the partnership’s first cash distribution from operations.

The intended monthly distributions to investors may be reduced or delayed.  Cash distributions to you and the other investors may not be paid each month. Distributions may be reduced or deferred, in the discretion of the managing general partner, to the extent the partnership’s revenues are used for any of the following:

compensation and fees to the managing general partner;
repayment of borrowings;
cost overruns;
remedial work to improve a well’s producing capability;
direct costs and administrative costs of the partnership;
reserves, including a reserve for the estimated costs of eventually plugging and abandoning the wells; or
indemnification of the managing general partner and its affiliates by the partnership for losses or liabilities incurred in connection with the partnership’s activities.

Your subscription for units is irrevocable.  Your execution of the subscription agreement is a binding offer to buy units in the partnership. Once you subscribe for units, you will not be able to revoke your subscription.

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The management of the managing general partner and of the partnership is not subject to supervision or review by an independent board, independent officers, audit committee or compensation committee.  Our president is Shawn Grisham, and Mr. Grisham also indirectly controls a majority of our equity interests. Also, the officers of our affiliates and us are comprised entirely of employees of entities controlled by Mr. Grisham. As a result, our activities are not subject to the review and scrutiny of an independent board of directors. In addition, we do not have an audit committee or compensation committee. Thus, there is no independent supervision of the management representing the interests of the partners.

We expect to incur costs in connection with Exchange Act compliance and we may become subject to liability for any failure to comply, which will reduce our cash available for distribution.  As a result of our registration of the units with the SEC under the Securities Act of 1933 (“the Securities Act”), we will be subject to the rules and related reporting requirements of the Securities Exchange Act of 1934 (“the Exchange Act”) for at least one year after the offering and, depending upon the value of the partnership’s assets and the number of partners, possibly longer. Compliance with the reporting requirements of the Exchange Act will require timely filing of quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K, among other actions. Further, enacted and proposed laws, regulations and standards relating to corporate governance and disclosure requirements applicable to public companies, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and new SEC regulations, have increased the costs of corporate governance, reporting and disclosure practices which are now required of us. In addition, these laws, rules and regulations create new legal grounds for administrative enforcement and civil and criminal proceedings against us in case of non-compliance, which increases our risks of liability and potential sanctions. Costs related to the compliance described above will decrease the amount of cash available to distribute to the partners.

The partnership may become liable for joint activities of other working interest owners.  The partnership will likely acquire less than the full working interest in prospects and, as a result, will engage in joint activities with other working interest owners. Additionally, if the partnership receives subscriptions for less than the maximum amount, then the partnership may purchase less than a 50% working interest in the properties, with the result that someone other than the partnership or us may control such properties. The partnership could be held liable for the joint activity obligations of the other working interest owners, such as nonpayment of costs and liabilities arising from the actions of the working interest owners. Full development of the properties may be jeopardized if other working interest owners cannot pay their shares of drilling and completion costs.

Other partnerships we sponsor will compete with this partnership for prospects, contractors, and personnel.  We and our affiliates plan to offer interests in other partnerships to be formed for substantially the same purposes as those of the partnership. Therefore, multiple partnerships with unexpended capital funds, including partnerships formed before and after the formation of the partnership, may exist at the same time. Due to competition among the partnerships for suitable prospects and availability of contractors, and our personnel, the fact that partnerships previously organized by our affiliates and us may still be purchasing prospects when the partnership is attempting to purchase prospects may make the completion of prospect acquisition activities by the partnership more difficult. Furthermore, as we and our affiliates continue to sponsor more partnerships, we will need to increase our personnel in order to meet the staffing needs associated with our additional administrative responsibilities as managing partner of the partnership. If we are unable to find suitable personnel to meet such needs, our ability to effectively manage the partnership could be impacted.

Our past experience is not indicative of the results of this partnership.  Information concerning the prior drilling experience of previous partnerships sponsored by us or our affiliates, presented under the caption “Prior Activities,” does not indicate the results to be expected by this partnership. This is the first public oil and gas partnership we or our affiliates have sponsored.

Because investors bear substantially all of the partnership’s acquisition, drilling and development costs, they bear most of the risk of non-productive operations.  Under the cost and revenue sharing provisions of the partnership agreement, we will share costs with you differently than the way we will share revenues with you. Because investor partners will bear a substantial amount of the costs of acquiring, drilling and developing

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the partnership’s prospects, investor partners will bear a substantial amount and percentage of the costs and risks of drilling dry holes and marginally productive wells.

The partnership agreement prohibits your participation in the partnership’s business decisions. We will manage and control the partnership’s business.  You may not participate in the management of the partnership business. As the managing general partner of the partnership, we will manage and control the partnership’s business, including the selection of operators and oil and gas properties. Though third parties will serve as the operators of wells in which the partnership owns an interest, the partnership will be reliant upon us and our affiliates for protecting the partnership’s interests in any such wells and making decisions on behalf of the partnership relating to the wells. As the managing general partner, we will have broad discretion in allocating a substantial portion of the proceeds from the offering and selecting properties. The partnership agreement forbids you from acting in a manner harmful to the business of the partnership. If you violate the terms of the partnership agreement, you may have to pay the partnership or other partners for all damages resulting from your breach of the partnership agreement.

The partnership agreement limits our liability to you and the partnership and requires the partnership to indemnify us against certain losses.  We will have no liability to the partnership or to any partner for any loss suffered by the partnership, and will be indemnified by the partnership against loss sustained by us in connection with the partnership if:

we determine in good faith that our action was in the best interest of the partnership;
we were acting on behalf of or performing services for the partnership; and
our action did not constitute negligence or misconduct by us.

The indemnification provisions of the partnership agreement do not waive or diminish your rights under state and federal securities law.

Because our affiliates will act as general partner of several partnerships, other commitments may adversely affect our financial condition.  As a result of our affiliates’ commitments as general partner of several partnerships and because of the unlimited liability of a general partner to third parties, our net worth is at risk of reduction. Because we are primarily responsible for the conduct of the partnership’s affairs, a significant adverse financial event for us could have an adverse effect on the partnership and the value of its units, and could impair our ability to fulfill our obligation to indemnify the additional general partners for certain losses.

You should not rely on the financial status of other additional general partners as a limitation on your liability.  No financial information will be provided to you concerning any investor who has elected to invest in the partnership as an additional general partner. In no event should you rely on the financial wherewithal of other additional general partners.

Lack of an independent underwriter may reduce the due diligence investigation conducted on the partnership and us. This is a “best efforts” offering, conducted by an affiliated broker-dealer.  There has not been an extensive in-depth “due diligence” investigation of the existing and proposed business activities of the partnership or us that would be provided by independent underwriters. Our broker-dealer, Texas Securities, is owned by the Grisham 2010 Irrevocable Trust (the “Trust”). Shawn Grisham, who is our president and indirectly controls the majority of our equity interests, is the settlor of the Trust. The beneficiaries of the Trust are certain family members of Mr. Grisham. Richard Hardwick is the trustee of the Grisham 2010 Irrevocable Trust as well as the President of Texas Securities. Mr. Grisham, as settlor of the Trust, has the authority to remove and replace the trustee. As such, Texas Securities has an ongoing relationship with us and our affiliates and cannot be considered independent. Texas Securities’ due diligence examination concerning the partnership is not independent or as comprehensive as an investigation that would be conducted by a broker-dealer that is involved in selling offerings of unaffiliated companies. See “Conflicts of Interest.”

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The president of Crown Exploration Partners, Ltd. has been the subject of a disciplinary proceeding.  Shawn M. Grisham, the president of Crown Exploration Partners, Ltd., has been the subject of one proceeding brought by a state securities agency. On or about August 8, 2000, Pennsylvania issued a Summary Order to Cease and Desist, without notice, to Crown Onshore Exploration, Inc., formerly Crown Exploration, Inc. (“Crown Onshore”), Crown-Cadena Joint Venture, Shawn M. Grisham and Jeff Goerges. The Order prohibits various persons, including Mr. Grisham, the President of Crown Onshore, the general partner of the managing venturer, from offering and selling securities in Pennsylvania without compliance with the registration provisions of the Pennsylvania Securities Act or an exemption therefrom, and further prohibits such persons from offering and selling securities without being registered as a broker under the Pennsylvania statute. Texas Securities is presently registered in the state of Pennsylvania.

We may delegate or subcontract our duties under the partnership agreement to others, including our affiliates.  The partnership agreement authorizes us to delegate and subcontract our duties under the partnership agreement to others, including entities related to us. We anticipate that the staff of Crown Exploration II, Ltd. will assist us in performing our duties under the partnership agreement. Our principal executive officer, Mr. Shawn Grisham, also the principal executive officer of Crown Exploration II, Ltd., enables us to monitor Crown Exploration II, Ltd. to ensure, among other things, that it is performing the delegated duties consistent with our fiduciary duties to the partnership. In addition, Mr. Grisham will be in a position to monitor the financial condition of Crown Exploration II, Ltd. In the event it is determined by us that Crown Exploration II, Ltd.’s ability to perform the delegated or subcontracted duties is impaired as a result of its adverse financial condition, then we will assume the performance of those duties to the extent they are delegated.

Partners have a limited ability to remove the managing general partner and may encounter difficulty in finding a successor managing general partner.  We may be removed from our position as the managing general partner only by the affirmative vote of investors holding a majority of the then outstanding units of the partnership. The limited partners in certain circumstances must, in order to continue the partnership, elect a successor to the removed managing general partner if the removal of the managing general partner causes a dissolution of the partnership. There is a risk that the limited partners could not find a new managing general partner if we were to be removed from such position.

Risks of Oil and Natural Gas Investments

Oil and natural gas investments are highly risky.  The selection of prospects for oil and natural gas drilling, the drilling, ownership and operation of oil and natural gas wells, and the ownership of non-operating interests in oil and natural gas properties are highly speculative. There is a possibility you will lose all or substantially all of your investment in the partnership. We cannot predict whether any prospect will produce oil or natural gas or commercial quantities of oil or natural gas, nor can we predict the amount of time it will take to recover any oil or gas we do produce. Drilling activities may be unprofitable, not only from non-productive wells, but from wells that do not produce oil or natural gas in sufficient quantities or quality to return a profit. Delays and added expenses may also be caused by poor weather conditions affecting, among other things, the ability to lay pipelines. In addition, ground water, various clays, lack of porosity and permeability may hinder, restrict or even make production impractical or impossible.

The partnership may be required to pay delay rentals to hold drilling prospects, which may deplete partnership capital.  Oil and gas leases generally must be drilled upon by a certain date or additional funds known as delay rentals must be paid to keep the lease in effect. Delay rentals typically must be paid after the first year of entering into a lease if no production or drilling activity has commenced. If delay rentals become due on any property the partnership acquires, the partnership will have to pay its share of such delay rentals or lose its lease on the property. These delay rentals could equal or exceed the cost of the property. Further, payment of these delay rentals could seriously deplete the partnership’s capital available to fund drilling activities, if and when they do commence.

A substantial or extended decline in oil or natural gas prices may adversely affect the partnership’s business, financial condition and results of operations.  The price that the partnership receives for oil or natural gas production from wells in which the partnership has an interest will significantly affect our revenue, profitability, access to capital and future growth rate. Historically, the oil and natural gas markets have been

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volatile and will likely continue to be volatile in the future. The prices that the partnership will receive for its interests in production and the levels of production depend on numerous factors. These factors include, but are not limited to, the following:

changes in supply and demand for oil and natural gas;
the actions of the Organization of the Petroleum Exporting Countries (“OPEC”);
the price and quantity of imports of foreign oil and natural gas;
speculation as to the future prices of oil and natural gas and the speculative trading of oil or natural gas futures contracts;
global economic conditions;
political and economic conditions, including embargoes, in producing countries or affecting other production, particularly in the Middle East, Africa, Russia and South America;
the continued threat of terrorism and the impact of military and other action, including U.S. military operations in the Middle East;
the level of global oil and natural gas exploration and production activity;
the level of global oil and natural gas inventories and oil refining capacities;
weather conditions and natural disasters;
technological advances affecting energy consumption;
governmental rules and regulations and administrative orders and decisions;
proximity and capacity of oil and natural gas pipelines and other transportation facilities;
the price and availability of competitors’ supplies of oil or natural gas; and
the price and availability of alternative fuels.

Oil and natural gas prices have fluctuated dramatically in recent years and will likely continue to be volatile in the future. Lower oil or natural gas prices may not only decrease our revenues but also may reduce the amount of oil or natural gas that may be produced economically from our prospects. A substantial or extended decline in oil and natural gas prices may materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.

Increases in drilling costs could impact the profitability of the partnership’s wells and the number of partnership wells that may be drilled.  In the event that the level of drilling activity returns to the high level that the industry experienced during the first half of 2008, there could be shortages of drilling rigs, pipes and other equipment and personnel available for partnership operations. As a result, there could be an increase in the costs associated with the drilling of oil and natural gas wells. In addition, the cost of insurance relating to oil and gas operations may continue to increase. Such increases could result in limiting the number of partnership wells that may be drilled as well as the profitability of each well once completed.

Participants in the oil and gas industry are subject to complex laws that can affect the cost, manner or feasibility of doing business.  Exploration and production activities in the oil and gas industry are subject to extensive local, state, federal and international regulations. The partnership may be required to make large expenditures, directly or through the interests it owns in prospects or wells, to comply with governmental regulations, particularly in respect of the following matters:

licenses for drilling operations;
royalty increases, including retroactive claims;
drilling and development bonds;
reports concerning operations;

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the spacing of wells;
unitization of accumulations;
the adoption of required safety programs and procedures;
remediation or investigation activities for environmental purposes; and
taxation.

Under these and other laws and regulations, the partnership could be liable for personal injuries, property damage and other types of damages. Failure to comply with these laws and regulations also may result in the suspension or termination of operations of wells in which the partnership may have an interest and subject the partnership to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that could substantially increase the partnership’s costs. Any such liabilities, penalties, suspensions, terminations or regulatory changes could have a material adverse effect on the partnership’s results of operations and financial condition.

Drilling and producing operations can be hazardous and may expose the partnership to liabilities that may adversely affect the partnership and result in liability for the additional general partners.  There are numerous natural hazards involved in the drilling of oil and natural gas wells, including unexpected or unusual formations, pressures, blowouts and uncontrollable flows of natural gas, oil brine or well fluids that may cause or result in possible damages to property and third parties, surface damages, bodily injuries, damage to and loss of equipment, reservoir damage and loss of reserves. There are also hazards involved in the transportation of oil and natural gas from our wells to market. Such hazards include pipeline leakage and risks associated with the spilling of oil transported via barge instead of pipeline, either of which could result in liabilities associated with environmental cleanup. Uninsured liabilities would reduce the funds available to the partnership, may result in the loss of partnership properties and may create liability for you if you are an additional general partner. Although the partnership will maintain insurance coverage in amounts we deem appropriate, it is possible that insurance coverage may be insufficient. In that event, partnership assets would be utilized to pay personal injury and property damage claims and the costs of controlling blowouts or replacing destroyed equipment rather than for additional drilling activities.

The partnership and its future interests are subject to numerous environmental, health and safety regulations which may result in material liabilities and costs.  The partnership and its future interests will be subject to various federal, state and local environmental, health and safety laws and regulations governing, among other things, the emission and discharge of pollutants into the ground, air or water, the generation, storage, handling, use and transportation of regulated materials and the health and safety of our employees. The operator of wells in which the partnership has an interest will be required to obtain environmental permits from governmental authorities for certain operations, including drilling permits for wells. There is a risk that the holder of any such permit will not be at all times in complete compliance with these permits and the environmental laws and regulations to which the operator is subject. If the operator violates or fails to comply with these laws, regulations or permits, the operator could be fined or otherwise sanctioned by regulators, including through the revocation of permits or the suspension or termination of operations. Failure to obtain permits in a timely manner or at all (due to opposition from community or environmental interest groups, governmental delays, or any other reasons) could impede operations, which could have a material adverse effect on the partnership’s results of operations and its financial condition.

The partnership could be held liable for all environmental, health and safety costs and liabilities arising out of its actions and omissions as well as those of third-party contractors and operators. To the extent the partnership does not address these costs and liabilities or if it is otherwise in breach of applicable lease requirements, such leases could be suspended or terminated.

We expect the partnership to contract with and hire third parties to serve as operator who will perform, or cause others to perform, the majority of the drilling and other services related to wells in which the partnership has an interest. There is a risk that the partnership may contract with third parties with unsatisfactory environmental, health and safety records or that such contractors may be unwilling or unable to cover any losses associated with their acts and omissions. Accordingly, the partnership could be held liable for

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all costs and liabilities arising out of the acts or omissions of the operator and its contractors, which could have a material adverse effect on the partnership’s results of operations and financial condition.

In addition, we expect continued legislative, regulatory and judicial attention to climate change issues. Various countries and U.S. states and regions have agreed to regulate emissions of greenhouse gases, including methane (a primary component of natural gas) and carbon dioxide, a byproduct of oil and natural gas combustion. The U.S. federal government, as well as the U.S. Environmental Protection Agency, are currently considering national greenhouse gas regulation, each having proposed bills or rules which would require or result in greenhouse gas emissions reductions. Final laws or regulations could be adopted this or next year. The regulation of greenhouse gases in the areas in which we, the partnership and the end-users of oil and gas products operate could increase the partnership’s operating costs or adversely affect the demand for natural gas and oil and, as a result, adversely impact the partnership’s financial condition.

Environmental, health and safety laws are complex, change frequently and have tended to become increasingly stringent over time. Costs of complying with current and future environmental, health and safety laws, and potential liabilities arising from releases of, or exposure to, regulated substances may adversely affect the partnership’s results of operations and its financial condition.

The partnership could incur liability for liens against asserted against subcontractors.  While we do not anticipate or intend for the partnership to engage subcontractors, in the event the partnership does so, it could incur liability for liens against a subcontractor. Although we will try to determine the financial condition of nonaffiliated subcontractors, if subcontractors fail to timely pay for materials and services, the properties of the partnership could be subject to materialmen’s and workmen’s liens. In that event, the partnership could incur excess costs in discharging the liens.

Shut-in wells and delays in production may adversely affect partnership operations.  Production from wells drilled in areas remote from marketing facilities may be delayed until sufficient reserves are established to justify construction of necessary pipelines and production facilities. In addition, production from wells may be reduced or delayed due to seasonal marketing demands. Wells drilled for the partnership may have access to only one potential market. Local conditions, including closing businesses, conservation, shifting population, pipeline maximum operating pressure constraints, and development of local oversupply or deliverability problems could delay or halt sales from partnership wells.

The production and producing life of partnership wells is uncertain. Production will decline.  It is not possible to predict the life and production of any well. The actual lives and production could differ significantly from those anticipated. Sufficient oil or natural gas may not be produced for the partnership or you to receive a profit or even to recover your initial investment. In addition, production from the partnership’s oil and natural gas wells, if any, does not indicate any consistent level of future production and will decline over time. This production decline may be rapid and irregular when compared to a well’s initial production.

Delays in the transfer of title to the partnership could place the partnership at risk.  Under certain circumstances, title to partnership properties may be held by us on the partnership’s behalf. In other instances, title may not be transferred to us or the partnership until after a well has been completed. When this is the case, the partnership runs the risk that the transfer of title could be set aside in the event of the bankruptcy of the party holding title. If a transfer of title were set aside, title to the leases and the wells would revert to the creditors or trustee, and the partnership would either recover nothing or, possibly, only the amount paid for the leases and the cost of drilling the wells. Assigning the leases to the partnership after the wells are drilled and completed, however, should not affect the availability of the tax deductions for intangible drilling costs since the partnership should have an economic interest in the wells under the drilling and operating agreement before the wells are drilled. See “Proposed Activities — Title to Properties.”

Our dependence on third parties for the processing and transportation of oil and gas may adversely affect the partnership’s revenues and distributions.  We will rely on third parties to process and transport oil and gas produced by wells in which the partnership participates. In the event a third party upon which we rely is unable to provide transportation or processing services, and another third party is unavailable to provide

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such services, then the partnership will be unable to transport or process the oil and gas produced by the affected wells. In such an event, revenues to the partnership and distributions to the partners may be delayed.

Tax Risks

There are material tax risks of becoming a partner in the partnership.  There are material risks associated with the U.S. federal income tax consequences of becoming a partner in the partnership. The following paragraphs summarize some of these risks. Because the tax consequences of becoming a partner are complex and certain tax consequences may differ depending on individual tax circumstances, each investor is urged to consult with and rely on its own tax advisor regarding the tax consequences of becoming a partner. No representation or warranty of any kind is made with respect to the acceptance by the IRS or any court of law regarding the treatment of any item of income, deduction, gain, loss or credit by an investor on its tax return. Except where specifically mentioned, this prospectus does not discuss the foreign, state or local tax consequences or risks related to an investment in the partnership or the risks specifically applicable to potential investors that are subject to special federal income tax treatment such as corporations, tax exempt organizations, insurance companies, financial institutions, broker-dealers, and non-U.S. taxpayers.

The current tax treatment of exploring for and producing oil and gas may change, and such changes may reduce or eliminate the tax benefits described in this prospectus.  The tax treatment currently available with respect to oil and natural gas exploration and production may be modified or eliminated without prior notice on a retroactive or prospective basis by future legislative, judicial, or administrative actions. Recently there have been specific legislative proposals concerning the tax treatment of exploring for and producing oil and gas, and some of those proposals reduce or eliminate some of the tax benefits described in this prospectus. As part of its budget proposal for the 2011 fiscal year, the current administration has proposed to repeal a number of the tax benefits currently available for the exploration for and production of oil and gas. The changes proposed by the administration include the elimination of the current deduction of intangible drilling costs, percentage depletion for independent producers, and the working interest exception to the passive activity loss rules. The administration’s budget proposal also includes proposals to increase the amortization period for geological and geophysical costs from two years to seven years for all taxpayers (currently only major integrated oil companies are required to amortize geological and geophysical costs over seven years); exclude gross receipts from the sale of oil and natural gas from the calculation of the domestic production deduction; and eliminate certain tax credits that are potentially available in connection with the production of oil and natural gas. These changes are proposed to take effect in 2011 and, if enacted, could have an adverse impact on the U.S. oil and gas industry. The same changes were proposed by the current administration as part of its budget proposal for the 2010 fiscal year. Those proposals, however, were not enacted by Congress as part of the 2010 U.S. federal budget. At this time it is not possible to predict whether any legislative proposals, including the administration’s budget proposals, will become law. Therefore, you are urged to consult with your own tax advisor regarding the impact that a change in the U.S. federal tax law could have on your decision to invest in the partnership.

The tax treatment described in this prospectus depends upon partnership classification.  The tax treatment discussed in this prospectus applies only if the partnership is classified as a “partnership” for federal income tax purposes and not as “an association taxable as a corporation.” Under current law the partnership should be treated as a partnership for federal income tax purposes, and not as an association taxable as a corporation, so long as we do not make an election to treat the partnership as a corporation for U.S. federal income tax purposes. We do not intend to make such an election. If we did elect for the partnership to be treated as an association taxable as a corporation for federal income tax purposes or if the IRS were to successfully assert that such treatment is proper: (i) income, gains, losses, deductions and credits of the partnership would not flow through to you; (ii) the taxable income of the partnership would be subject to the federal income tax imposed on corporations at the partnership level; and (iii) distributions would be treated as corporate distributions to the partners and could be taxable as dividends or capital gain.

Your tax liability from the partnership may exceed the cash distributions that you receive from the partnership.  As a partner in a partnership for U.S. tax purposes, you will be required to include in your own return for a taxable year your share of the items of the partnership’s income, gain, loss, deduction, and credit for the year, whether or not cash proceeds are actually distributed to you. As a result, you could owe U.S. federal income taxes based on your allocable share of partnership taxable income, even though the partnership

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did not distribute cash or property to you. The partnership may not be able to make cash distributions to you to permit you to pay your tax liability. As a partner, you will have no right to demand distributions of partnership income. If your tax liability exceeds the cash you receive from the partnership, you will have to use cash from other sources to pay your tax liability.

The partnership may not meet the requirements to allow you to currently deduct intangible drilling costs.  Federal tax law places substantial limits on taxpayers’ ability to currently deduct intangible drilling costs. Generally, an “operator” is permitted to elect to currently deduct, or capitalize and deduct ratably over a 60-month period, costs that are properly characterized as intangible drilling costs that the operator incurs in connection with the drilling and development of oil and natural gas wells. For purposes of deducting intangible drilling costs, the term “operator” is generally defined by the IRS as one that owns a working or an operating interest in an oil or gas well. Although the partnership intends to acquire working interests in oil and gas properties located in Texas, the partnership’s determination that it is an “operator” with respect to its oil and gas properties for tax purposes at the time that intangible drilling costs are incurred is not binding on the IRS. The IRS may assert that the partnership is not an “operator” with respect to one or more of its oil or gas wells at the time that intangible drilling costs are incurred for the wells. If the IRS were successful in such a challenge, the partnership and, therefore, the investor partners, would not be entitled to currently deduct the intangible drilling costs incurred in connection with such wells.

The IRS may challenge the partnership’s characterization of its costs as intangible drilling costs.  Intangible drilling costs are costs that are incident and necessary for the drilling of wells and the preparation of wells for production that have no salvage value. We will make the initial determination of which costs incurred by the partnership constitute intangible drilling costs. The IRS, however, may not agree with our classification of certain costs and may assert that an item classified by us as an intangible drilling cost must be recharacterized as a cost that must be capitalized or that is not currently deductible. If the IRS is successful, you could owe additional taxes, penalties and interest for the tax years that are affected by the recharacterization. To the extent not deductible, the reclassified amounts should be included in the partnership’s basis in its mineral property and in your basis in your interest in the partnership.

The partnership’s intangible drilling costs may not be deductible in any certain year.  Intangible drilling costs are generally deductible during the tax year when the well to which the costs relate is drilled. In certain limited circumstances, however, intangible drilling costs that are paid in one year for a well that is drilled during the following year can be deducted in the tax year during which the costs are paid rather than the subsequent year when the well is drilled. In order for prepaid intangible drilling costs to be deducted in the year during which they are paid, among other things, the wells to which the prepaid intangible drilling costs relate must be spudded no later than 90 days after the end of the year during which the costs are paid or it must be reasonable to conclude at the time the costs are paid that drilling will be complete on the well within 3½ months after the prepayment. If the partnership prepays some or all of its intangible drilling costs, such prepayments may not meet the requirements to be deducted during the year in which the prepayments are made. In addition, it is possible that the partnership will not expend or contract to expend any of its capital contributions in the year in which it is formed. As a result, the partnership’s subscriptions and, therefore, your investment in the partnership, may not result in intangible drilling costs that are deductible in the year in which the partnership is formed or in any certain later year.

Your own tax circumstances may limit your ability to take depletion deductions.  If one or more of the partnership’s wells is productive, you should be able to take cost or, if you qualify, percentage depletion deductions with respect to the wells. You may claim a percentage depletion deduction only if you qualify as a so-called “independent producer” under U.S. federal tax law. Even if you qualify, only a limited amount of the partnership’s oil and gas production each year will qualify for percentage depletion. You must individually determine whether you qualify as an “independent producer.” You will also be responsible for calculating your own depletion deductions, if any. The partnership’s wells may not be productive and, therefore, you may not be eligible to take depletion deductions in connection with your investment in the partnership. If the partnership has one or more productive wells, you may not qualify for any particular method of computing depletion, including percentage depletion.

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Current deductions for intangible drilling costs, depletion and depreciation may only defer your tax liability to a later year.  Deductions for intangible drilling costs, depletion and depreciation must be recaptured as ordinary income if the partnership disposes of its oil and gas properties at a gain for tax purposes, or if you dispose of your interest in the partnership at a gain for tax purposes. Therefore, some or all of the gain on the sale of your interest in the partnership or on the partnership’s sale of an oil and gas property may be taxable at ordinary income rates. If so, then deductions in one year for intangible drilling costs, depletion and depreciation may only defer your tax liability until a later year.

The tax treatment of an investment in the partnership will differ for additional general partners and limited partners.  If you invest as a limited partner, your allocable share of the partnership’s taxable income, loss and credit should be subject to the passive activity loss rules. As a result, you will only be able to use your allocable share of partnership losses to offset your taxable income from the partnership and from other passive business activities, if any, that you participate in. If you invest directly in the partnership as an additional general partner and not through an entity that limits your liability with respect to your additional general partnership interest, your allocable share of the partnership’s taxable income, loss and credit attributable to the partnership’s working interests should not be subject to the passive activity loss rules. As a result, you should be able to use your allocable share of partnership losses while you are an additional general partner to offset your taxable income from the partnership and from other so-called “active” sources such as salary and from so-called “portfolio” income, which includes interest, dividends and royalties that are not derived from the active conduct of a trade or business. Special rules will apply once your additional general partnership interest is converted to a limited partnership interest. Because the tax treatment will differ for additional general partners and limited partners, each prospective investor is urged to consult with its own tax advisor before deciding to invest as an additional general partner or a limited partner.

A material portion of your subscription will be allocated to costs that are not currently deductible.  A material portion of your subscription will be used for costs and expenses that are not currently deductible. In addition, the IRS may not agree with the partnership’s categorization of its costs and expenses between currently deductible and non-deductible expenses. If the IRS were to successfully assert that certain costs and expenses that are initially deducted by the partners are non-deductible capital expenditures, you could owe additional taxes and be liable for penalties and interest.

Partnership borrowing may reduce the cash the partnership has available to distribute to you to allow you to pay your tax liability from the partnership.  We are authorized to cause the partnership to obtain loans from banks or other financial sources, or from us or our affiliates, if necessary for the preservation and maintenance of the partnership’s properties. Your allocable share of the partnership’s net income that is applied to repay such loans will nonetheless be included in your taxable income. As a result, your income tax liability from the partnership may exceed the cash the partnership has available to distribute to you. If this occurs, you will have to use cash from other sources to pay your tax liability. In the event the partnership borrows funds for any reason, the lender must agree that it will have no recourse against the individual investor partners. Any borrowings may, in our discretion, be secured by the partnership’s assets or income and may, in our discretion, be made with or without recourse to us as managing general partner.

The IRS may not respect the partnership’s allocation of tax items.  We intend for the partnership to allocate items of income, gain, loss, deduction and credit among the partners in accordance with the terms of the partnership agreement. The IRS, however, may not respect such allocations and may assert that the partnership’s income, gain, loss, deduction and credit should be allocated in some other manner. If the IRS successfully asserts that the partnership’s federal income tax items should be allocated in a different manner, you could owe additional taxes, penalties and interest.

The partnership may generate taxable events for you, even if you are generally exempt from taxation.  Certain entities that are otherwise exempt from federal income tax, such as individual retirement accounts and annuities (“IRAs”), qualified plans, and charitable organizations are nonetheless taxed on “unrelated business taxable income” of $1,000 or more that they earn in any taxable year. Substantially all of the income from the partnership’s operations will constitute unrelated business taxable income and may result in a tax liability for you, even if you are otherwise tax exempt. If you invest with money from your IRA, it is possible that the earnings from the partnership could be subject to tax twice: once when amounts are earned

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by the partnership and then again when funds are distributed from the IRA to you. In addition, tax exempt charitable remainder trusts and charitable remainder unitrusts will be subject to a 100% excise tax on any unrelated business taxable income that they receive. Therefore, if you are a tax exempt prospective investor, we urge you to consult your own tax advisor regarding an investment in the partnership before you invest.

Audits of the partnership’s tax returns could result in increased taxes due by the partners or audits of partners’ individual tax returns.  It is possible that the IRS will audit the partnership’s tax returns. If an audit occurs, tax adjustments might be made that would increase the amount of taxes that you owe or increase the risk of audit of your individual tax returns. If additional tax is owed, you may also owe penalties and interest in addition to the tax. The costs and expenses incurred to respond to an audit of the partnership’s returns and to contest any audit adjustments will reduce the funds the partnership otherwise has available to distribute to its partners. You may also incur costs and expenses in connection with an audit of your own tax returns. The cost of responding to audits of your own tax returns and contesting any adjustments will be borne solely by you.

State and local tax laws may result in additional tax liabilities and filing obligations for you.  You may be subject to state and local taxes on your share of partnership income in the jurisdictions in which you reside. As a result, you may have additional filing obligations with those states or localities. In addition, the discussion of the material tax consequences in this prospectus is limited to U.S. federal tax issues, and it does not address state and local tax treatment, which may differ from the federal treatment. As a result, we urge you to consult your own tax advisor regarding the state and local tax risks and consequences of becoming a partner in the partnership before you invest.

State and local taxes may reduce the partnership’s distributable cash.  The partnership intends to develop and own interests in oil and gas properties in Texas. As a result, the partnership, and not the individual partners, will be subject to Texas’ franchise tax. In addition, the partnership may be subject to various other state or local taxes associated with its intended ownership of working interests and production of oil and gas such as sales, use, severance and/or property taxes, which are payable by the partnership rather than the investor partners. These taxes will reduce the funds the partnership has available to distribute to you. As a result, your income tax liability from the partnership may exceed the cash the partnership has available to distribute to you. If this occurs, you will have to use cash from other sources to pay your tax liability.

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. You should exercise extreme caution with respect to all forward-looking statements made in this prospectus. Specifically, the following statements are forward-looking:

statements regarding our overall strategy for evaluating, selecting, acquiring and developing interests in oil and gas properties and wells;
statements estimating any number or specific type or size of interests in properties or wells we may acquire or size of the interest we may acquire;
statements regarding the state of the oil and natural gas industry and the opportunity to profit within the oil and natural gas industry, our competition, pricing, level of production, or the laws and regulations that may affect the partnership;
statements regarding our plans and objectives for future acquisitions and operations, including, without limitation, the uses of partnership funds and the size and nature of the costs we expect to incur and people and services we may employ;
statements regarding the timing of partnership distributions to investors;
any statements using the words “anticipate,” “believe,” “estimate,” “expect” and similar such phrases or words; and
any statements of other than historical fact.

Our estimates and forward-looking statements may be influenced by the following factors, among others:

uncertainties inherent in making estimates of our oil and natural gas data;
the volatility of oil and natural gas prices;
discovery and development of oil and natural gas reserves;
projected and targeted capital expenditures and other costs, commitments and revenues;
current and future government regulation of the oil and gas industry;
changes in environmental laws or the implementation of those laws;
competition;
the successful implementation of our drilling plans;
the availability and cost of drilling rigs, production equipment, supplies, personnel and related services;
the availability and cost of developing appropriate infrastructure around and transportation to our prospects;
military operations, terrorist acts, wars or embargoes;
our dependence on our key management personnel and our ability to attract and retain qualified personnel;
the cost and availability of adequate insurance coverage; and
other risk factors discussed in the “Risk Factors” section of this prospectus.

We believe that it is important to communicate our future expectations to our investors. Forward-looking statements reflect the current view of the managing general partner with respect to future events and are subject to numerous risks, uncertainties and assumptions, including, without limitation, the factors listed above in the section captioned “Risk Factors.” Although we believe that the expectations reflected in such forward-looking statements are reasonable, such expectations may not prove to have been correct. Should any one or more of these or other risks or uncertainties materialize or should any underlying assumptions prove incorrect,

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actual results are likely to vary materially from those described in this prospectus. There can be no assurance that the projected results will occur, that these judgments or assumptions will prove correct or that unforeseen developments will not occur.

We do not intend to update our forward-looking statements. All subsequent written and oral forward-looking statements attributable to persons acting on our behalf or us are expressly qualified in their entirety by the applicable cautionary statements.

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TERMS OF THE OFFERING

General

Units are being offered at an offering price of $25,000 per unit. The minimum required subscription per investor is $10,000 (2/5 unit). Additional purchases above such minimum may be made in increments of $10,000 (2/5 unit).

We will form the partnership promptly after subscriptions have been accepted for at least 40 units ($1,000,000). We will make a contribution to the capital of the partnership for our interest as the managing general partner of the partnership in an amount equal to 1% of the total of all capital contributions to the partnership net of organization and offering costs (including commissions). We and/or our affiliates may, but we have no obligation to, buy additional units issued by the partnership. These units may be either additional general partnership interests or limited partnership interests. We will not form the partnership until subscriptions have been accepted for at least 40 units, without regard to units subscribed for by our affiliates or us.

The price to be paid by us and our affiliates for additional units that any of us may subscribe for, if any, is the same price per unit to be paid by investors, net, however, of organization and offering costs (including commissions). This means we will pay a minimum of 85% of the offering price for each unit we purchase, if any, or $21,250 per unit. In addition, we will pay 100% of any organization and offering costs, excluding sales commissions, for the partnership that, in the aggregate, exceed 7% of the proceeds from aggregate contributions. We and our affiliates will be entitled to the same ratable interest per unit purchased in the partnership as other unit holders. All units purchased by our affiliates or us will be made for investment purposes only and not with a view toward redistribution or resale.

Offering Period

The offering period for the units began on the date of this prospectus and may be terminated at any time after the minimum number of units (40) has been subscribed for in the partnership, without regard to units purchased by our affiliates and us. Unless terminated sooner by us, the offering period will continue until the earlier of: the acceptance of subscriptions for the maximum number of units (336) in the partnership or the second anniversary of the date of this prospectus. In certain states, we are required to re-apply for registration of the offering on an annual basis.

Election to Purchase as Limited Partner and/or Additional General Partner

You may elect to purchase units as a limited partner and/or as an additional general partner, by purchasing units of limited partner interest or units of general partner interest. For the partnership, 75% of the units offered will be additional general partner units and 25% will be limited partner units. As long as at least a total of 40 units are sold in the partnership, and at least one of such units is a unit of limited partner interest, excluding units we or our affiliates buy, there is no minimum number of additional general partner or limited partner units that must be sold.

Subscriptions for Units; Escrow Account

Subscriptions for units are payable in cash upon subscription. Checks for units should be made payable to “First Security Bank, N.A., Escrow Agent for Crown Exploration Fund I, L.P.”, which is located at 3970 FM 2181, Suite 100, Hickory Creek, Texas 76210, or such other bank or escrow agent as we may choose and should be given to your broker for submission to the broker-dealer and escrow agent.

Your execution of the subscription agreement, or the execution of the subscription agreement by your authorized representative in the case of fiduciary accounts, constitutes a binding offer to buy units in the partnership and an agreement to hold the offer open until the subscription is accepted or rejected by us. Once you subscribe for units, you will not have any revocation rights, unless otherwise provided by state law. We will not complete the sale of units until at least five business days after you have received a copy of the final prospectus for the offering. Upon completion of the sale of your units, we will send you a written confirmation of your purchase.

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We may refuse to accept any subscription without liability to the subscriber. Subscriptions will be accepted or rejected by us within 30 days of their receipt. If a subscription is accepted, the subscriber will be admitted as a partner no later than 15 days after the release from the escrow account of the capital contributions to the partnership, and thereafter a subscriber will be admitted into the partnership not later than the last day of the calendar month in which their subscription was accepted by the partnership. We may reject a subscription if, for example, the prospective investor does not satisfy the suitability standards described below or if the subscription is received after the offering period has terminated. If a subscription is rejected, then all of the rejected subscriber’s funds will be returned to the subscriber immediately, with interest earned and without deduction for any fees. The execution of the subscription agreement and its acceptance by us also constitute the execution of the partnership agreement and an agreement to be bound by its terms as a partner, including the granting of a special power of attorney to us appointing us as the partner’s lawful representative to make, execute, sign, swear to, and file a Certificate of Formation, governmental reports, certifications, contracts, and other matters.

Subscription proceeds of the partnership will be held in a separate interest-bearing escrow account with First Security Bank, N.A., as escrow agent until at least 40 units in the partnership have been subscribed for, without regard to units subscribed for by our affiliates and us, in compliance with Rule 15c2-4 promulgated by the SEC. If the minimum number of units in the partnership is not subscribed for prior to the termination of the partnership’s offering period, the partnership will not be formed, and the escrow agent will promptly return all subscription proceeds to subscribers in full, with any interest earned on the subscriptions, in compliance with Rule 10b-9 promulgated by the SEC. In no event will investor’s funds be held in escrow for more than two years. If at least 40 units have been subscribed for during the partnership’s offering period, without regard to units our affiliates and we buy, then we may direct the escrow agent to disburse the funds in the escrow account, in whole or in part, at any time during the remainder of the partnership’s offering period, and to pay to us all funds remaining in the escrow account upon termination of the partnership’s offering period. After at least the minimum subscription proceeds are transferred to the partnership’s account, the partnership may begin its activities, including the acquisition of oil and gas properties identified in this prospectus.

Subscriptions will not be commingled with our funds or the funds of our affiliates, nor will subscriptions be subject to the claims of our creditors or those of our affiliates. Subscription proceeds will be deposited in interest-bearing accounts or invested during the offering period only in short-term highly-liquid securities where there is appropriate safety of principal, which are deemed permissible under Rule 15c2-4 promulgated by the SEC. Interest accrued on subscription funds prior to closing of the offering and funding of the partnership will be allocated pro rata to the respective subscriber. In this regard, subscription proceeds will earn interest until they are used by partnership for its operations, and will be credited to the respective subscriber and paid to the subscriber no later than the partnership’s first cash distribution from operations.

Formation of the Partnership

The partnership will be formed pursuant to those provisions of the Texas Business Organizations Code cited as the Texas Limited Partnership Law (“Texas Limited Partnership Law”) promptly upon reaching the minimum subscription level of 40 units ($1,000,000). The escrow agent will partially fund the partnership by releasing the funds held in escrow on our request after the minimum subscription level has been reached, without regard to units our affiliates and we buy, and will continue to partially fund the partnership by releasing subsequent subscription funds to the partnership on a regular basis. Once the minimum subscription level is reached, we will file a Form 8-K with the SEC describing the formation of the partnership and the disbursements of funds held in escrow into the partnership’s bank account. Upon termination of the offering period, the escrow agent will release the partnership funds and the escrow account will be closed. Once the offering period has terminated, we will file a Form 8-K with the SEC describing the termination of the offering, the final disbursement of escrowed funds, the number of investors and the amount of capital contributed to the partnership.

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Until proceeds from the offering are invested in the partnership’s operations, such proceeds may be temporarily invested in income producing short-term, highly liquid investments, where there is appropriate safety of principal, such as U.S. Treasury Bills. Any such income shall be allocated pro rata to the investor partners. Interest earned on amounts so deposited or invested will be credited to the accounts of the partnership.

We anticipate that within 12 months following the termination of the partnership’s offering period all subscriptions will have been expended or committed for partnership acquisitions and operations. Unless we determine that it is prudent for the partnership to set aside funds for working capital, contingencies, or any other matter, any unexpended and/or uncommitted subscriptions at the end of such 12-month period will be returned pro rata to the investor partners and we will reimburse such partners for organization and offering costs allocable to the return of capital.

We will file a Certificate of Formation and any other documents required to form the partnership with the Secretary of State of the State of Texas. We also will take all other actions necessary to qualify the partnership to do business as a limited partnership or cause the limited partnership status of the partnership to be recognized in any other jurisdiction where the partnership conducts business.

Types of Partners

You May Choose to Be a Limited Partner or an Additional General Partner.  You may purchase units as a limited partner or as an additional general partner. Although income, gains, losses, deductions, and cash distributions allocable to the investor partners are generally shared pro rata based upon the amount of their subscriptions for units, there are material differences in the federal income tax effects and the liability associated with these different types of units. SeeMaterial Federal Income Tax Consequences — Passive Loss Limitations.”

Each investor must indicate the number of limited partner units or additional general partner units subscribed for and fill in the appropriate line on the investor signature page of the subscription agreement. If you fail to indicate on the subscription agreement a choice between investing as a limited partner or as an additional general partner, we will not accept the subscription and will promptly return the subscription agreement and the tendered subscription funds to you.

Limited Partners.  The liability of a limited partner of the partnership for the partnership’s debts and obligations will be limited to that partner’s capital contributions, its share of partnership assets, and the return of any part of its capital contribution. Under Texas law and the partnership agreement of the partnership, a limited partner is liable for all or part of a returned capital contribution or partnership distribution if the limited partner received a partnership distribution in violation of the partnership agreement of the partnership or Texas Limited Partnership Law and such limited partner knew at the time of the distribution that the distribution violated the terms of the partnership agreement or Texas Limited Partnership Law.

General Partners.  The general partners of the partnership will consist of Crown as managing general partner and each investor purchasing units of general partner interest, referred to in this prospectus as “additional general partner interests.” Each additional general partner will be fully liable for the debts, obligations and liabilities of the partnership individually and as a group with all other general partners as provided by the Texas Limited Partnership Law to the extent liabilities are not satisfied from the proceeds of insurance, from indemnification by us, or from the sale of partnership assets. See “Risk Factors.” While the activities of the partnership will be covered by insurance policies and indemnification by us (see “Proposed Activities — Insurance” and “Summary of Partnership Agreement — Indemnification”), the additional general partners may incur personal liability as a result of the activities of the partnership that are not covered by insurance, partnership assets, or indemnification.

Conversion of Units by Additional General Partners and Us.  We will convert all units of additional general partner interest of the partnership into units of limited partner interest as soon as practicable after the end of the year in which drilling by the partnership has been completed. While we anticipate that such conversion will typically occur during the partnership’s second year, it is possible that drilling activities will continue in subsequent years, resulting in additional general partners retaining unlimited liability during such periods. Additional general partners may, however, upon written notice to us, except as provided below and in

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the partnership agreement, convert their interests into limited partner interests of the partnership at any time within the 30-day period prior to any material change in the amount of the partnership’s insurance coverage.

Upon conversion, an additional general partner of the partnership will become a limited partner of the partnership. Conversion will not be permitted if it will cause a termination of the partnership for federal income tax purposes.

Conversion of units of additional general partner interests to units of limited partner interest in the partnership will not be effective until we file an amendment to the partnership’s Certificate of Formation. We are obligated to file an amendment to the partnership’s Certificate at any time during the full calendar month after receiving the required notice of the additional general partner requesting conversion, as long as the conversion will not result in a termination of the partnership for tax purposes. A conversion made in response to a material change in the partnership’s insurance coverage will be made effective prior to the effective date of the change in insurance coverage. After the conversion of its additional general partner interest to a limited partner interest, each converting additional general partner will continue to have unlimited liability for partnership liabilities arising prior to the effective date of such conversion, and will have limited liability to the same extent as limited partners for liabilities arising after conversion to limited partner status is effected.

Except with respect to units we buy in the partnership for cash, we are not entitled to convert our interests into limited partner interests. Limited partners do not have any right to convert their units into units of additional general partnership interest.

Termination; Waiver

We reserve the right, in our sole discretion, to abandon or terminate the offering at any time during the offering period, to reject all or part of any subscription from any potential investor for any reason and, in the event that the offering is oversubscribed, to allot a lesser number of units than are subscribed by any method that we deem appropriate. We are not obligated to accept subscriptions in the order in which they are received. We also reserve the right to waive any individual subscription requirement other than investor suitability standards. If the offering is terminated without closing for any reason or if a subscriber’s subscription is not accepted, we will cause all funds to be refunded promptly to the affected subscribers, with interest and without deduction of fees, within 30 days of the termination or reception of the subscription.

Investor Suitability

We and each person selling units will make every reasonable effort to determine that the purchase of units is a suitable and appropriate investment for each prospective investor, based on the investor’s age, investment objectives, investment experience, financial situation, investment portfolio, and the investor’s income and net worth. Furthermore, the broker-dealer or we, before accepting a subscription, will make reasonable efforts to see that the prospective investor:

can reasonably benefit from the offering based on the investor’s investment objective and portfolio structure;
is able to bear the economic risk of the investment based on the investor’s overall financial situation; and
has an apparent understanding of: the fundamental risks of the investment; the risk that it may lose its entire investment; the lack of liquidity of the units; the restrictions on transferability of the units; our background and qualifications; the tax consequences associated with an investment in either additional general partner interests or limited partner interests; and the unlimited liability associated with additional general partner interests.

Each person selling units and we will maintain records regarding the suitability of investors for at least six years.

General Suitability Requirement.  Units of limited partner interests, including fractional units, will be sold only to an investor who has either:

a minimum net worth of $330,000; or
a minimum net worth of $85,000 and minimum annual gross income of at least $85,000.

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Units of additional general partner interests, including fractional units, will be sold only to an investor who has either:

a minimum net worth of $330,000, without regard to the investment in the partnership, and a minimum annual gross income of $150,000 for the current year and for the two previous years; or
a minimum net worth in excess of $1,000,000, inclusive of home, home furnishings, and automobiles; or
a minimum net worth of $750,000; or
a minimum annual gross income of $200,000 in the current year and the two previous years.

Unless otherwise specified, net worth shall be determined exclusive of home, home furnishings and automobiles. In addition, units will be sold only to an investor who makes a written representation that it is the sole and true party in interest and that it is not purchasing for the benefit of any other person, or, in the alternative, that it is purchasing for another person who meets all of the conditions set forth above.

Additional Requirements for Purchasers in Certain States.  Additional suitability requirements are applicable to residents of certain states where the offer and sale of units are being made as set forth below.

Alabama investors are not permitted to invest in the units if the dollar amount of the investment in this partnership and other similar programs is equal to or more than 10% of their liquid net worth, such net worth being defined as the portion of the purchaser’s total net worth that is comprised of cash, cash equivalents, or readily marketable securities.

California residents generally may not transfer units without the consent of the California Commissioner of Corporations. Any subsequent transfer by a California resident shall be limited to no less than a minimum unit equivalent to an initial subscription. See “Special Instructions to Subscribers” attached as Appendix C to the Prospectus.

Arizona, California, Kentucky, Michigan, Missouri, Nebraska, Oregon, and Pennsylvania investors are not permitted to invest in the units if the dollar amount of the investment is equal to or more than 10% of their net worth, exclusive of home, home furnishings and automobiles.

Iowa and Kansas investors are advised to limit their investment in the units and similar oil and natural gas partnerships to no more than 10% of their liquid net worth, such net worth being defined as “that portion of the purchaser’s total net worth that is comprised of cash, cash equivalents, or readily marketable securities.”

Oklahoma investors are not permitted to invest in the units if the dollar amount of the investment in this partnership is equal to or more than ten percent (10%) of their liquid net worth, exclusive of home, home furnishings and automobiles.

Ohio residents are not permitted to invest in the units if the aggregate dollar amount of the investment in this partnership and other partnerships sponsored by us or our affiliates is more than ten percent (10%) of their liquid net worth, exclusive of home, home furnishings and automobiles.

A resident of Tennessee who subscribes for units of limited partnership interests or additional general partnership interests must have a minimum annual gross income of $100,000 and a minimum net worth of $100,000; or a minimum net worth of $500,000.

Tennessee residents’ investment must not exceed ten percent (10%) of their liquid net worth.

Massachusetts and Vermont investors are not permitted to invest in the units if the dollar amount of the investment is equal to or more than 5% of their liquid net worth, such net worth being defined as “that portion of the purchaser’s total net worth that is comprised of cash, cash equivalents, or readily marketable securities.”

A resident of Vermont who subscribes for units must have a minimum net worth of $1,000,000, exclusive of home, home furnishings and automobiles.

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Purchasers of Units.  A resident of California who subscribes for units of limited partnership interests must meet one of the following requirements:

have net worth of not less than $250,000, exclusive of its home, home furnishings, and automobiles, and expect to have annual gross income in the year of its investment of $85,000 or more;
have net worth of not less than $500,000, exclusive of its home, home furnishings, and automobiles;
have net worth of not less than $1,000,000; or
expect to have annual gross income in the year of its investment of not less than $200,000.

A resident of California who subscribes for units of additional general partnership interests must meet one of the following requirements:

have net worth of not less than $250,000 and expect to have annual gross income in the year of its investment of $120,000 or more;
have net worth of not less than $500,000;
have net worth of not less than $1,500,000, inclusive of its home, home furnishings and automobiles; or
expect to have annual gross income in the year of its investment of not less than $200,000.

Suitability Requirements for Transferees.  Transferees of units seeking to become substituted partners must also meet the suitability requirements discussed above, as well as the requirements for transfer of units and admission as a substituted partner imposed by the partnership agreement. These requirements apply to all transfers of units, including transfers of units by a partner to a dependent or to a trust for the benefit of a dependent or transfers by will, gift or by the laws of descent and distribution.

Where any units are purchased by an investor in a fiduciary capacity for any other person, or for an entity in which such investor is deemed to be a “purchaser” of the subject units, all of the suitability standards set forth above will be applicable to such other person or entity.

You are required to execute your own subscription agreement. We will not accept your subscription agreement if it has been executed by someone other than you. In the case of fiduciary accounts, we will not accept any subscription from someone who does not have a legal power of attorney to sign on your behalf.

For details regarding how to subscribe, see “Instructions to Subscribers” attached as Appendix C.

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ADDITIONAL FINANCING

You are not required to make any capital contributions to the partnership other than the payment of the offering price for your units. At times, however, the actual costs of the partnership’s proposed activities may exceed total partnership capital contributions due to unforeseen events. In such instances, additional funds may be required to satisfy the partnership’s contractual obligations. Because the partnership agreement does not provide for assessments of the investor partners, we must obtain any necessary additional financing through either the use of partnership revenues, which will result in less overall distributions to the partners, the sale of interests in properties owned by the partnership, or borrowings made by the partnership. The partnership agreement provides that the partnership may borrow funds only to conduct maintenance operations on the partnership properties or otherwise conduct activities necessary to preserve partnership property. The partnership agreement does not permit the partnership to borrow funds to acquire new properties or drill new wells. The proceeds of the partnership’s borrowings will not be used to make distributions to the partners or to pay fees or expenses to us or our affiliates, other than to reimburse us or our affiliates for fees or expenses we have paid to third parties in the normal course of business on behalf of the partnership. In the event the partnership borrows funds for any reason, the lender must agree that it will have no recourse against the individual investor partners. Any borrowings may, in our discretion, be secured by the partnership’s assets or income and may, in our discretion, be made with or without recourse to us as managing general partner.

Such additional financing may not be available at the time needed, if at all. If we are unable to procure a source of additional financing we may have to forego further drilling, development or completion activities on partnership properties. Our inability to make required payments could also result in the loss of our interest in oil and natural gas wells, or in the sale of partnership assets to third parties or our affiliates. In such instances, the partnership may not realize the full value of its holdings. In addition, to the extent the partnership incurs indebtedness, its repayment of such borrowings will decrease the partnership’s cash available for distributions to the partners.

We will make all decisions as to how to raise any necessary additional financing and at times we may, in our discretion, loan funds to the partnership. The partnership may borrow money on a non-recourse basis from us or any of our affiliates. In the event we or one of our affiliates loans funds to the partnership, neither we nor our affiliate may receive interest in excess of our interest costs, nor may our affiliate or we receive interest in excess of the amounts which would be charged the partnership (without reference to our financial abilities or guaranties) by unrelated banks on comparable loans for the same purpose, and our affiliate or we shall not receive points or other financing charges or fees, regardless of the amount.

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SOURCES OF FUNDS AND USE OF PROCEEDS

Sources of Funds

Upon completion of the offering of units in the partnership, the sole funds available to the partnership will be the capital contributions of the partners, which will range from a minimum of $1,000,000 if the minimum subscription of 40 units is sold, without regard to purchases by our affiliates and us, to a maximum of $8,400,000 if 336 units are sold. In addition, we will make a contribution to the capital of the partnership for our interest as the managing general partner of the partnership in an amount equal to 1% of the total of all capital contributions to the partnership net of organization and offering costs (including commissions). In addition, we and our affiliates may, but we have no obligation to, purchase additional units issued in the partnership at the offering price of $25,000 per unit, net of an amount equal to the organization and offering costs (including commissions) that are allocable to the investor partners’ units. There is no limit on the number of units our affiliates and we may elect to purchase in the partnership.

The determination of the maximum amount of the offering for the partnership is based on a variety of factors including the amount of capital the managing general partner believes may be committed and utilized effectively for the acquisitions of interests and costs of partnership operations within 12 months of the termination of the offering, the price of oil and gas, and general market conditions.

Use of Proceeds

In order to form the partnership, a minimum of 40 units ($1,000,000) must be sold, without regard to purchases by our affiliates and us. The following table presents information regarding the financing of the partnership based upon the sale of 40 units ($1,000,000) and the sale of 336 units ($8,400,000), the minimum and maximum number of units, respectively, that can be sold for the partnership.

           
  Minimum
Subscription
(40 Units)
  Percent   50%
Subscription
(168 Units)
  Percent   Maximum
Subscription
(336 Units)
  Percent
Total partnership capital   $ 1,000,000       100 %    $ 4,200,000       100 %    $ 8,400,000       100 % 
Sale commissions     80,000       8 %      336,000       8 %      672,000       8 % 
Other organization and
offering costs(1)
    70,000 (2)      7 %      294,000 (2)      7 %      588,000 (2)      7 % 
Amount available for
partnership operations
    850,000       85 %      3,570,000       85 %      7,140,000       85 % 

(1) Estimated.
(2) As of the date of this memorandum, the other organization and offering costs have exceeded the above amounts. As a result, we will not receive a management fee and will be responsible for paying all other organization and offering costs in excess of 7% of the aggregate investor partner subscriptions.

If the partnership receives subscriptions for the maximum number of units with aggregate proceeds of $8,400,000, then the partnership is expected to acquire the majority of the working interests in two to five drilling prospects, depending on the acquisition costs and anticipated development costs of the prospects. In contrast, if the partnership receives subscriptions for the minimum number of units with aggregate proceeds of $1,000,000, then the partnership will likely be able to acquire working interests in only one to two drilling prospects. As the managing general partner, we will have broad discretion in allocating a substantial portion of the proceeds from the offering and selecting properties. See “Proposed Activities.”

Subsequent Sources of Funds

We anticipate that substantially all of the partnership’s initial capital will be committed or expended promptly following the offering of units in the partnership. Any future requirements for additional capital may have to be satisfied from partnership revenues or from borrowings to fund subsequent operations. See “Additional Financing” and “Risk Factors — Special Risks of the Partnership.” Alternatively, the partnership could sell interests in properties owned by the partnership.

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PARTICIPATION IN DISTRIBUTIONS, PROFITS, LOSSES, COSTS AND REVENUES

The following table summarizes the participation in the cash distributions and the allocations of certain specific items of income, gain, loss and deduction by the partnership. The columns labeled “Managing General Partner” do not include any allocations made to us based on our ownership of units in the partnership. The allocations may differ from the ratios in the table under certain circumstances described below:

   
  Units Issued by
the Partnership
  Managing
General Partner
Lease costs     99 %      1 % 
Intangible drilling costs     99 %      1 % 
Completion costs     99 %      1 % 
Partnership cash distributions     89 %      11 % 
Partnership taxable income from operations     See below       See below  
Partnership losses from operations     See below       See below  

Cash Distributions

We intend to make all cash distributions to the partners. “Distributable cash” means cash remaining after the payment of all partnership obligations and the establishment of contingency reserves for anticipated future costs, as determined by us. There is no assurance that any cash distributions will be made; however, in the event we determine there is distributable cash in the partnership from operations, it will be distributed 89% to the holders of partnership units and 11% to us as managing general partner. See “Participation in Distributions, Profits, Losses, Costs and Revenues  — Termination” for a description of distributions upon termination of the partnership. Until proceeds from the offering are invested in the partnership’s operations, distributable cash, if any, will be generated by revenues from the partnership’s short-term investments, and then, distributable cash, if any, will be generated by revenues from partnership operations. See “Terms of the Offering; Subscription for Units; Escrow Account.”

Profits and Losses

For purposes of making tax allocations, the partnership’s profits and losses will be computed without regard to the items that will be specially allocated to the investor partners and us (i.e., organization and offering costs, lease costs, intangible drilling costs and well completion costs). If it is determined that the partnership has a net profit for a period for which it is necessary to make allocations for tax purposes, the profit will be allocated: (i) first, to the extent of, in the same proportion as and in reverse order to any losses, if any, that were previously allocated to the unit holders and to us that have not previously been restored by an allocation of profits; and (ii) thereafter, 89% to the holders of units and 11% to us. If it is determined that the partnership has a net loss, the loss will be allocated: (i) first, to the extent of, in the same proportion as and in reverse order to any undistributed profits that were previously allocated to the unit holders and to us that have not previously been offset by an allocation of losses; (ii) second, to the holders of units and to us based on our respective positive adjusted capital account balances; and (iii) thereafter, to us and the additional general partners based upon how the loss is borne pursuant to the partnership agreement.

Administrative and Direct Costs

Based on our affiliates’ experience in sponsoring oil and natural gas partnerships prior to this partnership, we estimate that direct costs and administrative costs allocable to the investor partners for the initial 12 months of the partnership’s operations will be approximately $33,000 if minimum subscriptions ($1,000,000) are received (representing 3.30% of aggregate partnership capital); and approximately $62,000 if maximum subscriptions ($8,400,000) are received (representing .74% of aggregate partnership capital). Administrative costs include all customary and routine expenses incurred by the managing general partner for the conduct of partnership administration, including legal, finance, accounting, secretarial, travel, office rent, telephone, data processing and other items of a similar nature. Direct costs include actual and necessary costs directly incurred for the benefit of the partnership and generally attributable to the goods and services provided to the partnership by parties other than the managing general partner or its affiliates. Direct and administrative costs do not include any cost otherwise classified as organization and offering costs, operating costs or property costs.

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The managing general partner will bear a percentage of the direct costs and administrative costs equal to its percentage of revenue participation in the partnership. The following table describes the components of these estimated charges to the investor partners during the first year after the partnership is formed, assuming the minimum and maximum subscriptions are obtained. The costs below do not include third party costs paid for interests in properties, engineering, geological and geophysical services provided to the partnership in connection with the review and acquisition of potential prospects. The costs relating to the review and acquisition of potential prospects include fees paid to third party vendors and are allocable to the partnership and one or more other ventures sponsored by us. See “Proposed Activities.”

   
  Minimum
Subscription
(40 units)
  Maximum
Subscription
(336 units)
Administrative costs:
                 
Legal   $ 1,000     $ 2,000  
Accounting     5,000       12,000  
Geological            
Secretarial     2,000       6,000  
Travel            
Office rent            
Telephone     1,000       2,000  
Other     3,000       8,000  
Total administrative costs   $ 12,000     $ 30,000  
Direct costs:
                 
Audit and tax preparation   $ 17,000     $ 25,000  
Independent engineering reports     3,000       5,000  
Engineering            
Materials, supplies and other     1,000       2,000  
Total direct costs   $ 21,000     $ 32,000  

Cash Distribution Policy

Depending on the results and timing of the drilling operations on the partnership’s properties, we anticipate that cash distributions, if any, to the partners will begin approximately 15 months after the offering period for the partnership ends, depending on the timing and results of lease acquisition activities and the results of the drilling operations on the partnership’s wells. Generally, we estimate that acquiring, drilling and completing possible oil and gas wells located in the fields discussed in the prospectus will take between five to 10 months, depending on the well depth and conditions that may arise during operations. After drilling is completed, it is expected to take between two to four months for an investor partner to receive distributions, if any, based on any production from the completed well, including the time taken for hooking the well up to existing infrastructure and engaging in related marketing activities. Distributions, if any, will be made monthly thereafter. We may, at our discretion, make distributions less frequently. We will review the accounts of the partnership at least monthly for the purpose of determining the distributable cash available for distribution. The ability of the partnership to make or sustain cash distributions will depend upon numerous factors. No assurance can be given that any level of cash distributions to the investor partners will be attained or that any level of cash distributions can be maintained. See “Risk Factors” and “Prior Activities.”

In general, the volume of production from producing wells declines with the passage of time. The cash flow generated by the partnership’s interests in oil and natural gas wells and the amounts available for distribution to the partners from such wells will decline accordingly in the absence of significant increases in the prices that a well operator receives for its respective oil and natural gas production, or significant increases in the production of oil and natural gas from prospects resulting from the successful additional development of such prospects. See “Risk Factors  — Risks of Oil and Natural Gas Investments.”

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The partnership will distribute funds to you and the other investor partners that we, in our sole discretion, do not believe are necessary for the partnership to retain. The determination of such revenues and costs shall be made in accordance with generally accepted accounting principles, consistently applied. Distributions may be reduced or deferred to the extent partnership revenues are used for any of the following:

payment of our management fee, if any;
cost overruns;
remedial work to improve a well’s producing capability;
compensation and fees to us;
direct costs and administrative costs of the partnership;
repayment of partnership borrowings;
reserves, including a reserve for the estimated costs of eventually plugging and abandoning the wells; or
indemnification of us and our affiliates by the partnership for losses or liabilities incurred in connection with the partnership’s activities.

Also, funds will not be advanced or borrowed by the partnership for the purpose of making distributions to investor partners. Any cash distributions from the partnership to us will be made only in conjunction with distributions to investor partners in the partnership and only out of funds properly allocated to our account.

Termination

Upon termination and final liquidation of the partnership, the assets of the partnership will be distributed (i) first, 99% to the unit holders (including us if we purchase units) and 1% to us, but only to the extent that the unit holders and we have not already received distributions from the partnership equal to their and our respective capital contributions to the partnership; and (ii) thereafter, 89% to the unit holders (including us if we purchase units) and 11% to us. However, in the event of dissolution of the partnership, distributions will be made only after due provision has been made for, among other things, payment of all partnership debts and liabilities. If you have a deficit in your capital account, you will not be obligated to restore the deficit.

Amendment of Partnership Allocation Provisions

We are authorized to amend the partnership agreement if, in our sole discretion based on advice from our legal counsel or accountants, an amendment to revise the cost or revenue allocations is required or advisable for the allocations to be recognized for federal income tax purposes either because of the promulgation or amendments of Treasury Regulations or other developments in the tax law. Any new allocation provisions provided by an amendment to the partnership agreement are required to be made in a manner that would cause the amended partnership agreement to be as consistent as possible with the original allocations described above. We are also authorized to amend the manner in which capital accounts are maintained if we determine that it is necessary or prudent to comply with the applicable Treasury Regulations, provided that it is not likely to have a material effect on the amounts distributable to the partners upon the dissolution of the partnership.

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OUR COMPENSATION

The following table summarizes the items of compensation to be received by us from the partnership. Some of the compensation cannot be quantified until the partnership is conducting business.

   
Recipient   Form of Compensation   Amount
Managing General Partner   Partnership interest (excluding any partnership interest resulting from our purchase of units)   11% interest in the partnership
Managing General Partner   Management fee   15% of subscriptions, less sales commissions and all other organization and offering costs (non-recurring) (estimated at $0)
Managing General Partner   Direct and administrative costs during partnership operations   Reimbursement at cost

Partnership Interest

Our “partnership interest,” as described in the table above, refers to our interest as managing general partner, including the 1% interest we will have as the result of our contribution of 1% of the capital of the partnership, but does not include the interest we will have as a result of our purchase of any units. We will contribute 1% of the capital of the partnership and will receive an interest of 11% in the partnership. This 11% interest is not represented by partnership units that may otherwise be sold to investors. This partnership interest does not include any additional interest we may hold as a result of our purchase of units.

[GRAPHIC MISSING]

Management Fee

Under the terms of the partnership agreement, in consideration for our services to be rendered as the managing general partner in managing the business of the partnership, we may receive a management fee. The management fee would be an amount equal to the difference between 15% of the subscriptions by the investor partners to the partnership, and all commissions payable to the broker dealer, which in no event will exceed 8% of total subscriptions (a minimum of $80,000 and a maximum of $672,000), and other organization and offering costs, which in no event will exceed 7% of total subscriptions of the investor partners in the partnership. Because organizational and offering costs (excluding commissions) are greater than 7% of total

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the maximum subscriptions as of the date of this prospectus, we will not receive a management fee. We will pay 100% of any organization and offering costs, excluding sales commissions, for the partnership that, in the aggregate, exceed 7% of the proceeds from aggregate contributions. In no event will total organization and offering costs (including commissions) and the management fee exceed an amount greater than 15% of total investor subscriptions.

The management fee, if any, may be paid by the partnership from funds which would otherwise be available for distribution to the partners in the partnership, in such monthly amounts as we may determine in our discretion and until such time as the management fee has been paid in its entirety. To the extent that the partnership has insufficient distributable funds during a particular year to fully pay the amount of the management fee, then the amount of such unpaid management fee will be carried forward and payable in the following year. The actual amount of the management fee, if any, cannot be determined until total organization and offering costs for the offering are determined.

Organization and offering costs include costs of organizing and selling the offering of units in the partnership including, but not limited to, broker commissions (paid to Texas Securities, the sole broker dealer in this offering), expenses for printing, engraving, mailing, charges of transfer agents, registrars, trustees, escrow holders, depositaries, engineers and other experts, expenses of qualification of the sale of the securities under federal and state law, including taxes and fees and accountants’ and attorneys’ fees and other front-end fees.

Direct and Administrative Costs

We will be reimbursed for direct costs and all documented out-of-pocket expenses incurred on behalf of the partnership in connection with partnership operations, including administrative costs. Administrative costs and other charges for goods and services must be fully supportable as to the necessity thereof and the reasonableness of the amount charged. Direct costs shall be billed directly to and paid by the partnership to the extent practicable. Administrative costs must be reasonably allocated to the partnership on the basis of assets, revenues, time records or other methods conforming with generally accepted accounting principles. No portion of salaries, benefits, compensation or remuneration of controlling persons shall be reimbursed as administrative costs. Controlling persons include directors, executive officers and those holding 5% or more equity interest in the sponsor or a person having power to direct or cause the direction of the sponsor, whether through the ownership of voting securities, by contract or otherwise. An independent certified public accountant shall audit such allocations annually and provide written attestation annually, to be included as part of the Partnership’s annual report, that the method used to make allocations was consistent with the method described in the prospectus and that the total amount of costs allocated did not materially exceed the amounts incurred by the Managing General Partner. If the Managing General Partner subsequently decides to allocate expenses in a different manner, such change shall be reported to the Partners together with an explanation of why such change was made and the basis used for determining the reasonableness of the new allocation method.

Administrative costs include all customary and routine expenses incurred by the managing general partner for the conduct of partnership administration, including legal, finance, accounting, secretarial, travel, office rent, telephone, data processing and other items of a similar nature. Direct costs include actual and necessary costs directly incurred for the benefit of the partnership and generally attributable to the goods and services provided to the partnership by parties other than the managing general partner or its affiliates. Direct and administrative costs do not include any cost otherwise classified as organization and offering costs, operating costs or property costs. For an estimate of the anticipated direct and administrative costs during the first year of operations see the section entitled “Participation In Distributions, Profits, Losses, Costs And Revenues —  Administrative and Direct Costs” in this prospectus.

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PROPOSED ACTIVITIES

Overview

The partnership will acquire and develop oil and natural gas properties located in the state of Texas. Once the partnership commences operations, it will evaluate for acquisition and development oil and gas properties that include the Barnett Shale formation, the Canyon Sand formation, the Strawn Sand formation, the Austin Chalk formation, the Buda formation or the Woodbine formation as more fully described below. As of the date of this prospectus, we have not yet identified or selected any oil and gas properties for acquisition by the partnership. We will have broad discretion in selecting properties within the formations described below in accordance with our and our affiliates’ evaluation process.

Regardless of the location, we intend to acquire interests in, and participate in drilling operations on, oil and gas development wells, as opposed to exploratory wells. A “development well” is a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. An “exploratory well” is a well drilled to find commercially productive hydrocarbons in an unproved area, to find a new commercially productive horizon in a field previously found to be productive of hydrocarbons at another horizon, or to significantly extend a known prospect. We also intend for the partnership to acquire interests in wells in areas where natural gas pipelines and oil markets are in place.

The actual number, identity and percentage of interests in the oil and gas undeveloped properties to be acquired by the partnership will depend upon, among other things, the total amount of capital contributions to the partnership, the latest geological and geophysical data, potential title or spacing problems, availability and price of drilling services, tubular goods and services, approvals by federal and state departments or agencies, agreements with other working interest owners in properties, and continuing review of other properties that may be available. If the partnership receives subscriptions for the maximum number of units (336) with aggregate proceeds of $8,400,000, then the partnership is expected to acquire the majority of the working interests in two to five drilling prospects, depending on the acquisition costs and anticipated development costs of the prospects. In contrast, if the partnership receives subscriptions for the minimum number of units (40) with aggregate proceeds of $1,000,000, then the partnership will likely be able to acquire working interests in only one to two drilling prospects.

The due diligence and evaluation process for selecting undeveloped properties for acquisition by the partnership involves analyzing each potential acquisition’s lease structures and defined development timelines, operator capitalization and drilling strategies, and each property’s proximity to pipeline and/or transportation infrastructure to ensure that the resources produced can be brought to market without undue delay. Project evaluation methods will vary depending on the project being examined. In general, with blanket deposits like the Barnett Shale and Austin Chalk, our affiliate, Crown Exploration II, will evaluate the offset production, which entails analysis of various data relating to surrounding wells, including, but not limited to, initial daily production rates, current daily production rates, and the total production to date. Because blanket deposits, like the Barnett Shale and Austin Chalk, have little structural and thickness variation between wells, the geological interpretation of wells in close proximity can be applied to the prospect being considered. Generally, if the prospect is located in or near a group of wells with significant production from a blanket deposit, it is more likely that the prospect well has a reasonable opportunity to encounter a substantial reservoir. Likewise, drilling in an area of predominantly non- or poorly producing wells reduces the likelihood of locating a substantial reservoir.

The project evaluation method for conventional reservoirs, like the Canyon, Strawn, and Woodbine, will be similar to the evaluation method utilized in the blanket reservoirs. Initially, production data for wells in proximity to a prospect will be analyzed to determine whether the initial daily production rates, currently daily production rates, and the total production meet the partnership’s criteria. Once an area is deemed to satisfy the production evaluation criteria, the primary zone of interest will be identified. The electrical logs of the area wells will be obtained and evaluated to assist in selecting a particular prospect for possible acquisition.

Oil and gas properties will be acquired pursuant to an arrangement in which the partnership will acquire part of the working interest. For purposes of this prospectus, a working interest includes any interest, however it is referred to, which is subject to some portion of the costs of development, operation or maintenance. This working interest will be subject to landowners’ royalty interests and other royalty interests payable to

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unaffiliated third parties in varying amounts. The partnership agreement prohibits us or any of our affiliates from acquiring or retaining any overriding royalty interest in the partnership’s interest in the properties, that is, any royalty interest which would be paid out of the partnership’s working interest. The partnership will generally acquire less than 100% of the working interest in each well in which it participates. In order to comply with certain conditions for the treatment of additional general partners’ interests in the partnership as not passive activities, and not subject the additional general partners to limitation on the deduction of partnership losses attributable to such additional general partners to income from passive activities, we have represented that the partnership will acquire and hold only operating mineral interests and that none of the partnership’s revenues will be from non-working interests. We, for our sole benefit, may sell or otherwise dispose of prospect interests not acquired by the partnership or may retain a working interest in properties and participate in the drilling and development of the property on the same basis as the partnership.

In acquiring interests in oil and gas leases, the partnership may pay such consideration and make such contractual commitments and agreements as we deem fair, reasonable and appropriate. For purposes of this prospectus, the term “lease” means any full or partial interest in:

undeveloped oil and natural gas leases;
oil and natural gas mineral rights;
licenses;
concessions;
contracts;
fee rights; or
other rights authorizing the owner to drill for, reduce to possession and produce oil and natural gas.

We may acquire the leases and interests in the leases to be developed by the partnership on behalf of the partnership. All leases that we transfer to the partnership will be transferred at our cost, unless we have reason to believe that such cost is materially more than the fair market value of such property, in which case the price will not exceed the fair market value of the property. We will obtain an appraisal from a qualified independent expert with respect to sales of our properties and those of our affiliates to the partnership that were not originally acquired by us on behalf of the partnership.

Oil and Gas in Texas

Texas is the leading crude oil and natural gas producing states accounting for 21.7% of crude oil production and 32.6% of natural gas production in the U.S. in 2009, according to the U.S. Energy Information Administration. Texas crude oil reserves of 4.555 billion barrels represented almost one-fourth of the total reserves in the U.S. in 2008, and Texas natural gas reserves of 77.55 billion cubic feet accounted for more than three-tenths of total natural gas reserves in the U.S. In addition to reserves, Texas has an expansive infrastructure to refine and transport oil and natural gas. There were twenty-seven petroleum refineries in Texas that can refine more than 4.7 million barrels of crude oil per day, which accounted for more than one-fourth of total U.S. refining capacity in 2009. An expansive interstate network of natural gas pipelines connects Texas to markets from coast to coast, and Texas has more natural gas market hubs than any other state.

The Barnett Shale Formation.  We will review and analyze oil and gas properties within the Barnett Shale formation in Texas for possible acquisition and development by the partnership. The Barnett Shale is among the most significant onshore natural gas fields in North America, the largest in Texas, accounting for approximately 23% of Texas’ natural gas production in 2008 and represents the most developed shale play in the U.S. The Barnett Shale is a Mississippian-age shale located within the Fort Worth Basin across 23 counties of north-central Texas, covering approximately 5,000 square miles. The shale principally occurs at depths of 6,500 feet to 8,500 feet and is bounded by limestone formations both above (Marble Falls) and below (Viola) the shale.

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As of May 10, 2010 more than 13,000 wells had been drilled in the Barnett Shale, making it the most prominent shale gas play in the U.S. As of December 31, 2009, the Barnett Shale had produced more than 7.0 Tcf of natural gas since 1993. During the nine months ended September 30, 2009 there were more than 230 operators active in the play. As of December 31, 2009, approximately half of all of the shale gas in the U.S. was being produced from the Barnett Shale, and it is expected to continue to be an area of active, widespread drilling. Drilling activity in the Barnett Shale region increased sharply from 2004, when the Railroad Commission of Texas issued 1,112 drilling permits, through 2008, when it issued 4,145 permits. However, because of weak economic and natural gas market fundamentals, the number of drilling permits issued in the area in 2009 decreased substantially.

Modern drilling and completion technologies, such as horizontal drilling and large-volume hydraulic fracturing, were first tested and proved commercial in the Barnett Shale. While producers continue to expand their drilling operations in the Barnett Shale, developers are expected to focus more on infill drilling going forward in order to maximize the amount of natural gas recovered from existing leases. We will evaluate prospects within the Barnett Shale formation located in Wise, Tarrant, Johnson and Ellis counties in Texas for possible acquisition and development by the partnership.

The Canyon Sand and Strawn Sand Formations.  We will review and analyze oil and gas properties encompassing the Canyon Sand and Strawn Sand formations located in an area consisting of approximately 15 square miles in eastern Irion County, Texas. The Canyon Sand formation has previously produced over 1 million barrels of oil since its discovery in the 1960’s. The Canyon Sand formation is present at a depth of 6,500 feet and is a northeast to southwest trending channel system with an average reservoir thickness of 20 – 30 feet. The original field is mature and most wells are not producing and are plugged. The availability of electric logs for the area provides favorable well control so that the reservoir can be mapped more accurately and also allows additional wells to be drilled to produce remaining oil reserves. This type of venture is called “infield drilling”, which has less geological risk than a wildcat or field extension. Unlike the Barnett Shale, this area is being drilled with vertical wells and does not require horizontal drilling technology. The vertical wells are significantly less expensive than drilling horizontal wells and permits low cost development in proven areas.

In addition to the Canyon Sand, the deeper Strawn Sand is located at a depth of 6,700 feet in eastern Irion County, Texas below the Canyon Sand. The Strawn Sand consists of several separate sands with an average thickness of 10 feet. This Strawn Sand was an overlooked pay during previous development of this area since most operators stopped drilling once they penetrated the Canyon Sand.

The Austin Chalk Formation.  We will also review oil and gas properties encompassing the Austin Chalk formation. The Austin Chalk formation is a carbonate sequence approximately 160 feet in thickness that stretches from southwest Texas to east Texas, covering approximately twenty counties. Development began with vertical wells in the 1980’s. Results were mixed due to the inability to locate and hit fractures with a vertical well. However, the horizontal drilling that began in the 1990’s enabled the fractures to be intersected numerous times within a single lateral. This advancement improved the results of the Austin Chalk. Currently, 4,600 horizontal wells are producing from the Austin Chalk in Texas. This is a blanket deposit formation with numerous vertical fractures. All Austin Chalk production in Robertson County is situated along the southern edge of the county. As of February 2010, approximately 89 horizontal wells have produced approximately 16.1 million barrels of oil since horizontal wells were first used in the Austin Chalk formation. Operators in this area re-stimulate the wells about every five years and it increases production.

Below the Austin Chalk formation is a potential secondary objective, the Buda formation. The Buda formation is approximately 100 feet in thickness. This is a potential secondary objective, depending on the drilling design of the well and costs at the time of drilling.

The Woodbine Formation.  The Woodbine formation is a sand deposit that is present throughout portions of east Texas covering 140,000 acres in parts of Gregg, Rusk, Upshur, Smith, and Cherokee counties. This formation extends from the East Texas Field, which, historically, is one of the largest fields in the continental United States, to smaller fields further north of the East Texas Field. The smaller fields further north have well defined field boundaries and are generally water-drive reservoirs. Although some of the fields have ceased to

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produce due to encroachment of water from structurally down-dip limits, based on mapping of the area, several potential locations can be drilled in an updip structural position and have potential to encounter commercial oil wells.

Title to Properties

We will assign, or cause to be assigned, the partnership’s interest in any properties acquired by it directly to the partnership. However, under certain circumstances, title to partnership properties will be held by us on the partnership’s behalf. In other instances, title may not be transferred to us or the partnership until after a well has been completed. See “Risk Factors — Risks of Oil and Natural Gas Investments — Delays in the transfer of title to the partnership could place the partnership at risk.” Leases acquired by the partnership will initially and temporarily be held in our name for the benefit of the partnership to facilitate joint-owner operations and the acquisition of properties. The existence of the unrecorded assignments from the record owner will indicate that the leases are being held for the benefit of the partnership and that the leases are not subject to debts, obligations or liabilities of the record owner; however, such unrecorded assignments may not fully protect the partnership from the claims of our creditors.

Investor partners must rely on us to use our best judgment to obtain appropriate title to leases. Provisions of the partnership agreement relieve us from any mistakes of judgment with respect to the waiver of title defects. We will take such steps as we deem necessary to assure that title to leases is acceptable for purposes of the partnership. We are free, however, to use our judgment in waiving title requirements and will not be liable for any failure of title to leases transferred to the partnership. Further, neither our affiliates nor we will make any warranties as to the validity or merchantability of titles to any leases to be acquired by the partnership.

Drilling and Completion Phase

The partnership will enter into operating agreements with unaffiliated third-party operators engaged to conduct and direct and have full control of all operations on the partnership’s oil and gas properties. As the managing general partner of the partnership, we will select the operators for the oil and gas properties in which the partnership acquires a majority of the working interests. The partnership may acquire a less than 50% working interest in a well or property. When it acquires a minority interest in a well, the partnership will not control the selection of the operator or be able to direct operations under the terms of the applicable operating agreement. The operators’ duties include testing formations during drilling, and completing the wells by installing such surface and well equipment, gathering pipelines, heaters, separators, etc., as are necessary and normal in the area in which the prospect is located. The partnership will pay its allocable share of drilling and completion costs of the operators as incurred, except that we are permitted to make advance payments to an operator when dictated by valid business reasons. If drilling costs are prepaid, the operators under the terms of the operating agreements will not refund any portion of amounts paid in the event actual costs are less than amounts paid, but will apply any such amounts solely for payment of additional drilling services to the partnership. If an operator determines that the well is not likely to produce oil and/or gas in commercial quantities, the operator will plug and abandon the well in accordance with applicable regulations. The operating agreements will likely be based upon the American Association of Petroleum Landsmen Form 610-1989. Generally, under operating agreements based on this form, the operator may be removed for good cause by the affirmative vote of non-operators owning a majority of the working interest (after excluding the respective operator’s interest).The operating agreements will likely include the accounting procedures for joint operations issued by the Council of Petroleum Accountants Societies of North America. An operator could retain working interest in a well on which it is the operator. An operator’s working interests could be carried by the partnership as part of its compensation. In other words, the partnership could pay the drilling and completion costs allocable to the operators’ working interests in the applicable well. The partnership would not be responsible for paying the operators’ subsequent marketing and operating costs allocable to their working interests in the well. Because the operators will be conducting the oil and gas operations on properties held by the partnership, the partnership will utilize subscription proceeds to pay the operator for drilling and completion operations.

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Though no operators have been engaged by us or the partnership, our affiliate, Crown Exploration II, has employed certain operators in the past, and the partnership may engage one or more of these operators depending on the properties acquired and negotiation of operating agreements. Western Chief Operating, LLC, headquartered in Graham, Texas, has operated wells for our affiliates during the past 10 years. Trans Texas Energy Group, LLC, headquartered in Mineral Wells, Texas, has served as an operator for our affiliates. Each of the two principals in Trans Texas has in excess of 30 years of experience in operations, drilling and completion of oil and gas wells. Arden Energy Partners, Inc., headquartered in San Angelo, Texas, has served as operator for our affiliates. Each principal in Arden Energy has over 30 years of expertise in operations, drilling, and completion of wells.

After drilling, the operators will complete each well deemed by it to be capable of production of oil or natural gas in commercial quantities. With respect to those prospects as to which the partnership owns less than a 50% working interest, if any, it is probable that the majority owner of such prospects will select the operator for the wells drilled on such prospects. We will monitor the performance and activities of any operator, participate as the partnership’s representative in decision-making with regard to the partnership’s activities, and otherwise represent the partnership with regard to the activities of the partnership.

Production Phase of Operations

General.  Once the partnership’s wells are “completed” such that all surface equipment necessary to control the flow of, or to shut down, a well has been installed, including the gathering pipeline, production operations will commence. We will be responsible for ensuring the sale of the partnership’s oil and natural gas production. We anticipate that we will enter into arrangements with the operators of the partnership’s wells providing that the operator of each well will market and sell the partnership’s oil and gas, if any. Regardless, we will be responsible for ensuring that the oil and natural gas produced from the partnership’s wells are sold on a competitive basis at the best available terms and prices. Domestic sales of oil will be at fair market prices. We will not make any commitment of future production that does not primarily benefit the partnership. The natural gas, if any, produced from partnership wells will be sold at spot market or negotiated prices domestically, based upon a number of factors, such as the quality of the gas, well pressure, estimated reserves, prevailing supply conditions and any applicable price regulations promulgated by the Federal Energy Regulatory Commission (“FERC”). See “Competition, Markets and Regulation.”

Oil or natural gas production from partnership wells will be sold to marketers, refineries, industrial users, interstate pipelines or local utilities. Revenues from the partnership’s production will be received directly from these parties or paid to the operator of a prospect who will disburse to the partnership its percentage share of the revenues.

Expenditure of Production Revenues.  The partnership’s share of production revenue from a given well will be burdened by and/or subject to royalties and overriding royalties held by unaffiliated third parties, monthly operating charges, and other operating costs. These items of expenditure involve amounts payable solely out of, or expenses incurred solely by reason of, production operations. We intend to deduct operating expenses from the production revenue for the corresponding period.

Distributions to Investor Partners.  Once a partnership well commences production and cash, if any, is available for distributions, we, as the managing general partner, will make a determination to commence distributions to investor partners. Distributions, if any, will be made on a monthly basis, though the managing general partner may withhold distributions for the purpose of funding partnership operations. You should be aware that the amount of any distributions will decrease over time due to the declining rate of production from wells. Changes in oil and natural gas prices will decrease or increase cash distributions. Distributions will be partially sheltered by the percentage depletion allowance. See “Participation in Distributions, Profits, Losses, Costs and Revenues,” “Risk Factors,” “Prior Activities,” and “Material Federal Income Tax Consequences — Intangible Drilling Costs,” “— Depletion,” “— Partnership Distributions,” and “— Allocations.”

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The attainment of the partnership’s business objectives, including the generation of revenue from partnership operations, the distribution of cash to the partners and the provision of tax benefits, will depend upon many factors, including:

the drilling and completion of wells in an economical manner;
the successful management of prospects;
the level of oil and natural gas prices in the future;
the degree of governmental regulation over the production and sale of oil and natural gas;
the future economic conditions in the United States and throughout the world; and
changes in the federal tax laws that currently apply to exploring for and producing oil and gas in partnership form.

Accordingly, there can be no assurance that the partnership will achieve its business objectives.

Many of the activities and policies of the partnership discussed throughout this section and elsewhere in the prospectus are defined in and governed by the partnership agreement, including:

the amount of our capital contribution to the partnership;
borrowing policies;
voting rights of investor partners;
the term of the partnership; and
our compensation as managing general partner.

Other policies and restrictions upon our activities and the activities of the partnership are not contained in the partnership agreement, but instead reflect our current intention and are subject to change at our discretion. For these activities, in making a change, we will utilize our reasonable business judgment as managing general partner of the partnership and will exercise judgment consistent with our obligations as a fiduciary to the investor partners.

Insurance

We will carry blowout, pollution, public liability and workmen’s compensation insurance, but such insurance may not be sufficient to cover all liabilities. Each unit held by the additional general partners represents an open-ended liability for unforeseen events such as blowouts, lost circulation, stuck drillpipe, etc. that may result in unanticipated additional liability materially in excess of the per unit subscription amount.

We will obtain various insurance policies, as described below, and intend to maintain such policies subject to our analysis of their premium costs, coverage and other factors. In the exercise of our fiduciary duty as managing general partner, we will obtain insurance on behalf of the partnership to provide the partnership with coverage we believe is sufficient to protect the investor partners against the foreseeable risks of drilling and production. We will review the partnership’s insurance coverage prior to commencing drilling operations and periodically evaluate the sufficiency of insurance. We will obtain and maintain insurance coverage for the partnership equal to the lesser of $17,000,000 or twice the capitalization of the partnership, provided that in no event will the partnership maintain public liability insurance of less than $10,000,000. Subject to the foregoing, we may, in our sole discretion, increase or decrease the policy limits and types of insurance from time to time as we deem appropriate under the circumstances, which may vary materially. We are the beneficiary under each policy and pay the premiums for each policy. The following types and amounts of insurance are expected to be maintained:

General liability insurance, including bodily injury liability and property damage liability insurance, each with a limit of $1,000,000;
Energy exploration and development liability (including well control, environmental and pollution liability) insurance coverage with limits of not less than $5,000,000 for land wells and $10,000,000 for wet wells;

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Umbrella liability insurance (excess of the general liability) with a limit of $17,000,000;
Our affiliate, Crown Exploration II, will maintain:
Workmen’s compensation insurance in full compliance with the laws of the State of Texas, which will also be obtained for any other jurisdictions where the partnership conducts its business; and
Employer’s liability insurance with a limit of not less than $1,000,000.

We will notify all additional general partners of the partnership at least 30 days prior to any material change in the amount of the partnership’s insurance coverage. Within this 30-day period, additional general partners have the right to convert their units into units of limited partnership interest by giving us written notice. Additional general partners will have limited liability as a limited partner for any partnership operations conducted after their conversion date, effective upon the filing of an amendment to the Certificate of Formation of the partnership. At any time during this 30-day period, upon receipt of the required written notice from the additional general partner of its intent to convert, we will amend the partnership agreement and will file the amendment with the State of Texas prior to the effective date of the change in insurance coverage. This amendment to the partnership agreement will effect the conversion of the interest of the additional general partner to that of a limited partner. Effecting conversion is subject to the express requirement that the conversion will not cause a termination of the partnership for federal income tax purposes. However, even after an election of conversion, an additional general partner will continue to have unlimited liability regarding partnership activities while it was an additional general partner. See “Terms of the Offering.”

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COMPETITION, MARKETS AND REGULATION

Competition

There are many companies and individuals engaged in the purchase and sale of producing oil and natural gas properties. Accordingly, we will encounter strong competition from independent operators and major oil companies in acquiring properties that meet our acquisition criteria and disposing of properties that no longer meet our criteria. Many of these companies have financial and technical resources and staffs considerably larger than those available to us.

The national supply of natural gas is widely diversified. As a result of deregulation of the natural gas industry by U.S. Congress and the FERC, natural gas prices are generally determined by competitive forces. Prices of crude oil, condensate and natural gas liquids are not currently regulated and are generally determined by competitive forces.

Markets

The marketing of any oil and natural gas produced by the wells in which the partnership will own interests will be affected by a number of factors that are beyond our control and whose exact effect cannot be accurately predicted. These factors include:

the amount of crude oil and natural gas imports;
the availability and cost of adequate pipeline and other transportation facilities;
the success of efforts to market competitive fuels, such as coal and nuclear energy;
the effect of federal and state regulation of production, refining, transportation and sales of oil and natural gas; and
other matters affecting the availability of a ready market, such as fluctuating supply and demand.

The supply and demand balance of crude oil and natural gas in world markets has caused significant variations in the prices of these products over recent years. The North American Free Trade Agreement eliminated trade and investment barriers in the United States, Canada and Mexico, resulting in increased foreign competition for domestic natural gas production. New pipeline projects recently approved by, or presently pending before, FERC, as well as nondiscriminatory access requirements, could further substantially increase the availability of gas imports to certain U.S. markets. These imports could have an adverse effect on both the price and volume of gas sales from wells in which the partnership owns an interest.

Members of the OPEC establish prices and production quotas for petroleum products from time to time with the intent of reducing the current global oversupply and maintaining or increasing certain price levels. We are unable to predict what effect, if any, those actions will have on the amount of or the prices received for oil produced and sold from the wells in which the partnership owns an interest.

In several initiatives, FERC has required pipelines to develop electronic communication and to provide standardized access via the Internet to information concerning capacity and prices on a nationwide basis, so as to create a national market. Parallel developments toward an electronic marketplace for electric power, mandated by FERC, are serving to create multi-national markets for energy products generally. These systems will allow rapid consummation of natural gas transactions. Although this system may initially lower prices due to increased competition, it is anticipated to expand natural gas markets and to improve their reliability.

The demand for natural gas in domestic markets fluctuates from year-to-year and even from season-to-season due to economic factors, weather, conservation, fluctuating prices for alternative energy sources and other factors. This fluctuating demand has been reflected on the production side by increased competitive pressure. Occasionally pipeline companies reduce their takes from producers below the amount that, by contract, the companies are obligated to take or pay for. Pipeline companies have also claimed that conditions of force majeure or commercial impracticability have relieved them of contractual obligations relating to pricing and takes of natural gas. In order to sell their production, many producers, at times, have accepted prices on the spot market that are lower than those contained in their contracts. In addition, the fluctuation of demand has forced many pipeline companies to reduce or cease their purchases of new natural gas.

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In view of the many uncertainties affecting the supply and demand for oil, natural gas and refined petroleum products, it is not possible to predict future oil and natural gas prices or the overall effect, if any, that a decline in demand for or an oversupply of such products will have on you or the partnership.

Regulation

Operations regarding the partnership properties will be affected from time to time in varying degrees by domestic and foreign political developments, federal laws and the laws of the states in which the properties are to be located.

Production.  Various agencies of the state of Texas, including the Railroad Commission of Texas, regulate aspects of the production of oil and natural gas, setting allowable rates of production and otherwise controlling the conduct of oil and natural gas operations. Among the ways that the state of Texas controls production is through regulations that establish the spacing of wells or limit the number of days in a given month during which a well can produce.

Environmental.  Operations regarding the partnership properties will also be subject to environmental protection regulations established by federal, state, and local agencies that in turn may necessitate significant capital outlays that would materially affect the operations of the partnership’s interests in the properties. These regulations, enacted to protect against waste, conserve natural resources and prevent pollution, could necessitate spending funds on environmental protection measures, rather than on production operations.

Natural Gas Transportation and Pricing.  FERC regulates the rates for interstate transportation of natural gas as well as the terms for access to natural gas pipeline capacity. Pursuant to the Wellhead Decontrol Act of 1989, however, FERC may not regulate the price of gas. Deregulated gas production may be sold at market prices determined by supply and demand, Btu content, pressure, location of wells and other factors. We anticipate that all of the gas produced by the wells in which the partnership owns interests will be considered price decontrolled gas and that the gas will be sold at fair market value.

Hydraulic Fracturing.  Hydraulic fracturing is commonly used in completing natural gas and oil wells drilled today in the United States. Certain environmental and other groups have suggested that additional federal, state and local laws and regulations may be needed to more closely regulate the hydraulic fracturing process. We cannot predict whether any such federal, state or local laws or regulations will be enacted and, if so, what actions any such laws or regulations would require or prohibit. If additional levels of regulation or permitting requirements were imposed through the adoption of new laws and regulations, the partnership’s business and operations could be subject to delays, increased operating and compliance costs and process prohibitions.

Other Future Regulation.  From time to time, legislative proposals are considered in U.S. Congress and in the legislatures of various states, which, if enacted, might significantly and adversely affect the petroleum and natural gas industries. Such proposals involve, among other things, the imposition of price controls on all categories of natural gas production, the imposition of land use controls, such as prohibiting drilling activities on certain federal and state lands in roadless wilderness areas, as well as other measures. In addition, there are proposals in the U.S. Congress to, among other things, limit the disposal of waste water from wells and to impose federal laws on hydraulic fracturing of wells. At the present time, it is impossible to predict what proposals, if any, will actually be enacted by U.S. Congress or the various state legislatures and what effect, if any, such proposals will have on the operations of wells in which interests are owned.

No prediction can be made as to what additional federal, state or local legislation or regulations may be proposed, if any, affecting the competitive status of an oil and gas producer, restricting the prices at which a producer may sell its oil and/or gas, or the market demand for oil and/or gas, nor can it be predicted which proposals, including those presently under consideration, if any, might be enacted, nor when any such proposals, if enacted, might become effective.

On December 19, 2007, President Bush signed into law the Energy Independence and Security Act (“EISA”), a law targeted at reducing national demand for oil and increasing the supply of alternative fuel sources. While we do not anticipate that EISA will directly impact the partnership’s operations or cost of doing business, its impact on the oil and gas industry in general is uncertain.

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The Kyoto Protocol to the United Nations Framework Convention on Climate Change (the “Protocol”) became effective in February 2005. Under the Protocol, participating nations are required to implement programs to reduce emissions of certain gases, generally referred to as greenhouse gases that are suspected of contributing to global warming. The United States is not currently a participant in the Protocol. However, the U.S. Congress is considering proposed legislation directed at reducing greenhouse gas emissions. In addition, there has been support in various regions of the country for legislation that requires reductions in greenhouse gas emissions, and some states have adopted legislation addressing greenhouse gas emissions from various sources, primarily power plants. The natural gas and oil industry is a direct source of certain greenhouse gas emissions, namely carbon dioxide and methane, and future restrictions on such emissions could impact the operations on partnership wells. At this time, it is not possible to accurately estimate how potential future laws or regulations addressing greenhouse gas emissions would impact the partnership’s business.

The preceding discussion of regulation of the oil and natural gas industry is not intended to constitute a complete discussion of the various statutes, rules, regulations or governmental orders to which well operations may be subject.

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MANAGEMENT

General

We are a Texas limited partnership formed in 2001 for the purpose of owning and leasing property, among other things. We are an affiliate of Crown Onshore, which was organized in 1997 to engage in oil and gas exploration and development activities. Since 1997, Crown Onshore, along with its affiliated entities, Crown Exploration, Ltd. and Crown Exploration II, Ltd., has been engaged continuously in the business of exploring for, developing and producing oil and natural gas within the continental United States through joint ventures it has formed.

Under the partnership agreement, we will be expressly authorized to manage the partnership, and will have authority to act on behalf of the partnership in significant matters affecting its business and affairs. Under the partnership agreement, partner investors will have no participation in any of the day-to-day business operations of the partnership. As the managing general partner, we will be responsible for collecting revenues, making distributions to investor partners, delivering reports and supervising the operation of the oil and natural gas wells in which the partnership acquires interests.

Our officers will supervise performance of our duties under the partnership agreement. Our officers are also officers and employees of Crown Exploration II, Ltd. (“Crown Exploration II”), and Crown Exploration II will provide services to us in our performance of partnership duties. Shawn Grisham, our president, oversees all aspects of property acquisition and development. Crown Exploration II employs an in-house geologist to identify and evaluate prospects with a focus on opportunities within proven producing areas. Prospects are identified and evaluated by the in-house geologist through utilization of a variety of analytical and evaluation methods. We also may retain subcontractors and consulting companies. These may include geologists, geophysicists, petrophysicists, reservoir engineers, landmen, surveyors, legal experts and other specialists with expertise in the development and day to day operations associated with petroleum and natural gas production.

If the maximum amount of capital is subscribed in the partnership, then we intend for the partnership to acquire a majority working interest in the properties acquired by it, enabling the partnership to make decisions regarding who will act as operator for any wells in which the partnership has an interest. In the event only the minimum amount of capital in the partnership is subscribed, the choice of who will act as operator may be made by parties owning a greater percentage of the particular property’s working and other interests. Neither we nor any of our affiliates will serve as operator for any of the properties in which the partnership has an interest.

As of the date of this prospectus, Crown Exploration II has 11 full-time employees and on-going relationships with one consulting engineer and engage several contract field personnel. Those individuals will likely be providing services to us. Crown Exploration Partners, Ltd. has two officers who are also officers and employees of Crown Exploration II:

Shawn M. Grisham, 44, has been the President of Crown Exploration Partners, Ltd., which will be the managing general partner of the partnership, since December 2001, the Chairman of the Board of Directors of Crown Onshore Exploration, Inc., the general partner of Crown Exploration II, Ltd., since February 1997, and a founder of Crown Exploration II, Ltd since its inception in October 2008. He graduated from Texas Tech University in 1988 where he received a Bachelor of Business Administration degree in Finance. Mr. Grisham also holds, but which are currently inactive, Series 7, 63 and 39 licenses from FINRA. Since February 1997, Mr. Grisham has served as President of the managing partner for 73 partnerships that have participated in the drilling of approximately 150 wells. In 2002, Mr. Grisham founded Texas Securities, Inc., and served as its President until August 2010.

Randal F. Smith, 54, is the Chief Financial Officer of Crown Exploration Partners, Ltd. and Crown Exploration II, Ltd. and has been employed by Crown Exploration II, Ltd. and its predecessor, Crown Exploration, Ltd. since November 2002. Mr. Smith became Chief Financial Officer of Crown Exploration II, Ltd. in October 2009, and prior to that, Mr. Smith served as Controller. Mr. Smith received a B.B.A. degree in Accounting from Midwestern State University in 1979, and is a Texas Certified Public Accountant. Mr. Smith

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also holds Series 28 and 63 licenses from the National Association of Securities Dealers, Inc. Mr. Smith has worked in public accounting as an employee and an accounting firm partner and owner, and has worked in the oil and gas industry since 1977.

Olen Wilson, 51, is the Staff Geologist and Project Manager of Crown Exploration II, Ltd. and has been employed by Crown Exploration II, Ltd. since February 2006. Mr. Wilson received a B.S. degree in Geology from West Texas State University in 1980, and is a Certified Petroleum Geologist and a member of the American Association of Petroleum Geologists Board of Professional Geoscientists. From November 1984 to January 2001, Mr. Wilson served as an independent geologist on various oil and gas projects primarily in northwest Oklahoma and the Texas Panhandle region of the Anadarko Basin. From January 2001 to October 2005, Mr. Wilson served as project manager for the Llano Group, LLC in Amarillo, Texas and was primarily responsible for supervising drilling and completions.

Shane B. Shanafelt, 41, has been the Chief Executive Officer and a director of Crown Onshore Exploration, Inc. since February 1997, the Chief Executive Officer and founder of Crown Exploration, Ltd. since its inception in April 2001, and the Chief Executive Officer of Crown Exploration II, Ltd since October 2008. Mr. Shanafelt has also been employed by Texas Securities, Inc. as Field Liaison since January 2002. Mr. Shanafelt attended Texas Tech University majoring in business. Mr. Shanafelt holds Series 22 and 63 licenses from the Financial Industry Regulatory Authority. Since February 1997, Mr. Shanafelt has served as the Chief Executive Officer of the managing partner for 73 partnerships that have participated in the drilling of approximately 150 wells.

Ownership of Crown Exploration Partners, Ltd.

The following table contains information regarding the ownership interests in Crown Exploration Partners, Ltd. that are owned by each person who owns beneficially 5% or more of the outstanding interests, by all members individually, and by all members and executive officers of Crown Exploration Partners, Ltd. as a group.

 
Name and Address   Percent of
Class
Petro Share Management, LLC (sole general partner)
c/o Crown Exploration II, Ltd.
4024 Nazarene Drive
Carrollton, Texas 75010
    1 % 
Shanafelt Family Irrevocable Trust
c/o Crown Exploration II, Ltd.
4024 Nazarene Drive
Carrollton, Texas 75010
    29.7 % 
Shawn and Danice Grisham Irrevocable Trust
c/o Crown Exploration II, Ltd.
4024 Nazarene Drive
Carrollton, Texas 75010
    69.3 % 
Members and executive officers as a group (3 persons)     100 % 

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Set forth below is an organizational diagram of Crown Exploration Partners, Ltd. and its affiliates. Also included is an organizational diagram of Crown Exploration II, Ltd.

Organizational Diagram of Crown Exploration Partners, Ltd. and Crown Exploration II, Ltd.

[GRAPHIC MISSING]

[GRAPHIC MISSING]

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Compensation

None of our officers, managers, directors or employees will receive any direct remuneration or other compensation from the revenues generated by properties owned by the partnership.

Legal Proceedings

We are currently not subject to any legal proceedings. From time to time, we may become subject to legal proceedings and claims that arise in the ordinary course of its business. On or about August 8, 2000, Pennsylvania issued a Summary Order to Cease and Desist, without notice, to Crown Onshore, Crown-Cadena Joint Venture, Shawn M. Grisham and Jeff Goerges. The Order prohibits various persons, including Mr. Grisham, the president of Crown Onshore, the general partner of the managing venturer, from offering and selling securities in Pennsylvania without compliance with the registration provisions of the Pennsylvania Securities Act or an exemption therefrom, and further prohibits such persons from offering and selling securities without being registered as a broker under the Pennsylvania statute. Texas Securities is presently registered in the state of Pennsylvania.

Transactions with Management and Affiliates

The partnership’s policies and procedures for reviewing, approving or ratifying related party transactions with the managing general partner are set forth in the partnership agreement, and the material terms of those policies and procedures are discussed in greater detail in “Conflicts of Interest.” In this regard, the partnership considers related party transactions to be certain transactions between the partnership and the managing general partner or its affiliates as identified in the partnership agreement. Section 5.7 “Certain Transactions” of the partnership agreement addresses transactions between the partnership and the managing general partner and its affiliates. Those include the following:

the transfer of leases from the managing general partner to the partnership concerning the amount of acreage that must be transferred in the prospect to the partnership, including the transfer of an equal proportionate interest;
the possible subsequent enlargement of the prospect;
the transfer to the partnership of less than the managing general partner’s and its affiliates’ entire interest in the prospect;
the limitations on sale of undeveloped and developed leases by the partnership to the managing general partner;
the limitations on activities of the managing general partner and its affiliates on leases acquired by the partnership;
the transfer of leases between affiliated limited partnerships;
the sale of all of the partnership’s assets;
the providing of services to the partnership by the managing general partner and its affiliates at competitive rates;
loans from the managing general partner to the partnership and the prohibition of loans from the partnership to the managing general partner or its affiliates;
farmouts to and from the managing general partner and the partnership;
commitments of the partnership’s future production;
advance payments from the partnership to the managing general partner;
the partnership participating in other partnerships;
the requirement that transactions between the partnership and the managing general partner must be fair and reasonable;
roll-up limitations, see “Conflicts of Interest” for a more complete discussion; and

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the compensation and reimbursement of expenses to be paid by the partnership to the managing general partner and its affiliates, see “Our Compensation” for a more complete discussion.

Our officers are responsible for applying the partnership’s policies and procedures set forth in the partnership agreement with respect to transactions between the partnership and us and our affiliates, just as they are responsible for applying all of the other provisions of the partnership agreement.

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CONFLICTS OF INTEREST

Our interests and the interests of our affiliates differ in certain respects from those of the partnership and the investor partners. You should recognize that relationships and transactions of the kinds described below involve inherent conflicts between our interests, our affiliates’ interests and the interests of the partnership, and that the risk exists that such conflicts will not always be resolved in a manner that favors the partnership.

Our Prior and Future Partnerships.  We and our affiliates expect to organize and manage oil and natural gas drilling partnerships in the future that will have substantially the same investment objectives as the partnership. Our affiliates and we currently manage other drilling partnerships for investors and operate oil and natural gas properties for investors in such other drilling partnerships. We will decide whether a prospect will be retained or acquired for the account of the partnership or for other drilling partnerships that our affiliates or we may presently manage or manage in the future. As a result, the partnership will compete with such other partnerships for suitable prospects, equipment, contractors and personnel.

To resolve conflicts, we will initially examine the funds available to each partnership and the time limitations on the investment of such funds to determine whether the partnership or another partnership should acquire a potential prospect. We believe that the possibility of conflicts of interest between the partnership and prior partnerships is minimized by the fact that substantially all the funds available to prior drilling partnerships in which we or an affiliate of ours serves as general partner have been committed to a specific drilling project.

Our Fiduciary Responsibility.  We are a fiduciary and have a duty to exercise good faith and to deal fairly with the investor partners in handling the partnership’s affairs. We will owe such a duty to other partnerships we may manage in the future. Because we must deal fairly with the investors in all of our partnerships, if conflicts between the interest of the partnership and such other partnerships do arise, they may not in every instance be resolved to the maximum advantage of the partnership, and our actions could fall short of the full exercise of our fiduciary duty to each partnership. In the event we breach our fiduciary duty, you would be entitled to an accounting and to recover any economic losses caused by such breach only after either proving a breach in court or reaching a settlement with us.

Property Transactions — Acquisitions from Our Affiliates and Us.  The partnership agreement permits sales of prospects to the partnership by our affiliates or us. These sales may be from existing inventory we hold at the time the partnership is acquiring prospects. In order to minimize conflicts of interest, however, the partnership agreement places certain restrictions on the pricing and terms of these transactions. Our or our affiliates’ cost will be the purchase price in any purchase of an interest in a prospect (or of any other property) from our affiliates or us. Further, if the seller has reasonable grounds to believe that the fair market value of any property is less than the seller’s cost, the sale must be made at a price of not more than its fair market value.

Neither our affiliates nor we may sell an interest in a prospect to the partnership unless the partnership acquires an equal proportionate interest in all leases comprising the prospect owned by our affiliates or us.

The partnership agreement prohibits the sale to the partnership of less than all of our or our affiliates’ interest in any prospect unless:

the interest retained by our affiliates or us is a proportionate working interest;
our obligations and those of the partnership or our affiliates are substantially the same immediately after the sale of the interest; and
our or our affiliates’ interest in revenues does not exceed an amount proportionate to the retained working interest.

Neither our affiliates nor we are permitted to retain any overriding royalty interests or other burdens on lease interests conveyed to the partnership.

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If we determine that less than all of our or our affiliates’ interest in a prospect should be acquired by the partnership, our affiliate or we may either retain a proportionate interest in the prospect or transfer such interest to third parties. Since the partnership will not have expended any funds with respect to the interest transferred by our affiliate or us, any profit realized from the transfers will be solely for our affiliate’s or our account.

Property Transactions — Farmouts.  We expect that the partnership will develop substantially all of its leases and will farmout few, if any. However, the decision to make farmouts and the terms of making farmouts involve conflicts of interest. A farmout may permit us to achieve cost savings and to reduce our risk. Further, in the event of a farmout to an affiliate, either our affiliates or we will represent both related entities.

The partnership agreement limits farmouts by providing that the partnership will acquire only those leases reasonably expected to meet the stated purposes of the partnership. The partnership will not acquire any lease for the purpose of a subsequent sale or farmout unless the acquisition is made after a well has been drilled to a depth sufficient to indicate that such an acquisition would be in the partnership’s best interest. Further, the partnership may not farmout, sell or otherwise dispose of leases unless we, exercising the standard of a prudent operator, determine that:

the partnership lacks sufficient funds to drill on the lease and cannot obtain suitable financing;
downgrading subsequent to the partnership’s acquisition has rendered drilling undesirable;
drilling would concentrate excessive funds in one location creating undue risk to the partnership; or
the best interests of the partnership, based on the standard of a prudent operator, would be served by such disposition.

Any farmout to one of our affiliates must be on terms no less favorable to the partnership than those obtainable in the geographic area of operations. Under no circumstances will we farmout a lease for the primary purpose of avoiding our costs relating to the lease.

Property Transactions — Transfers to Affiliated Partnerships and Us.  The partnership agreement permits our affiliates and us, including other partnerships sponsored by our affiliates or us, to purchase or acquire property from the partnership. In order to minimize conflicts of interest, however, the partnership agreement places restrictions on the pricing and terms of these transactions. In all cases, these transactions must be fair and reasonable to the investor partners in the partnership. In addition:

A sale or transfer of undeveloped property, including a farmout, from the partnership to an affiliate of ours or us (other than an affiliated partnership) must be made at the higher of cost or fair market value.
A sale or transfer of developed property from the partnership to an affiliate of ours or us (other than an affiliated partnership in which our interest is similar to or less than our interest in the transferring partnership) can only be made at fair market value in connection with a liquidation of the transferring partnership.
Generally, a sale or transfer of undeveloped property to an affiliated partnership may be made at cost if we believe the transaction is in the best interests of the partnership, unless the partnership has held the property for at least two years, in which case the sale or transfer must be made at fair market value. This restriction does not apply to farmouts or joint ventures in which our affiliates’ or our compensation associated with the property and any interest in the property does not exceed the lower of the compensation and ownership interest it or we could receive if the property were separately owned by either one of the partnerships.
Generally, a sale or transfer of property from the partnership to an affiliated production purchase or income partnership must be made at fair market value if the property has been held for more than six months or if significant expenditures have been made by the partnership in connection with the property. Otherwise, the sale or transfer may be made at cost, adjusted for intervening operations, if we believe the transaction is in the best interests of the partnership. This restriction does not apply

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to farmouts or joint ventures in which our affiliates’ or our compensation associated with the property and any interest in the property does not exceed the lower of the compensation and ownership interest it or we could receive if the property were separately owned by either one of the partnerships.

Generally, the partnership may not purchase properties from or sell properties to affiliated partnerships. This restriction does not apply, however, to:

transactions among affiliated partnerships by which property is transferred from one to another in exchange for the transferee’s obligation to conduct drilling activities on the property; or
joint ventures among affiliated partnerships.

In each case, however, the obligations and revenue sharing of all parties to the transaction must be substantially the same, and our or our affiliate’s compensation arrangement or other interest must be the same in each affiliated partnership, or must be reduced in one partnership to reflect the lower compensation arrangement.

Property Transactions — Properties Within Prospect Limits.  From time to time, we may cause partnership prospects to be enlarged on the basis of geological data that defines the productive limits of any pool discovered. If an affiliate of ours owns or we own a separate property interest in the enlarged area and the activities of the partnership were material to establishing the existence of undeveloped reserves on such property, the interest shall be sold to such partnership. The partnership is not required, however, to expend additional funds for the acquisition of the property unless such acquisition can be made from capital contributions. In the event such property is not acquired by the partnership, the partnership may lose a promising prospect. Such prospect might be acquired by our affiliate or us or other drilling partnerships conducted by our affiliate or us.

In addition, our exercise of our discretion in deciding which prospects to transfer to the partnership could result in another partnership sponsored by us acquiring property adjacent to partnership property. Such other partnership could gain an advantage over the partnership by reason of the knowledge gained through the partnership’s prior experience in the area. Neither our affiliates nor we will retain undeveloped acreage adjoining the partnership prospect in order to use partnership funds to “prove up” the acreage owned for our own account.

If an affiliate of ours proposes or we (other than an affiliated partnership in which our interest or the interest of our affiliates is identical or less than our or their interest in the partnership) propose to acquire an interest in a prospect in which the partnership already owns an interest or in a prospect abandoned by the partnership within one year preceding such proposed acquisition, such affiliate or we will offer an equivalent interest in such prospect to the partnership. If cash or financing is not available to the partnership to enable it to consummate a purchase of an equivalent interest in such property, neither our affiliates nor we will acquire such interest. The term “abandon” means the termination, either voluntarily or by operation of the lease or otherwise, of all of the partnership’s interest in a prospect. These limitations will not apply after the lapse of five years from the date of formation of the partnership.

Other Arrangements.  The partnership agreement provides that:

partnership funds will not be commingled with those of any other entity, although the managing general partner may establish a master fiduciary account pursuant to which separate subtrust accounts are maintained for the benefit of affiliated programs, provided, the partnership’s funds are protected from the claims of such other programs and their creditors;
all benefits from marketing arrangements or other relationships affecting our property or the property of our affiliates and the partnership will be fairly and equitably apportioned according to the respective interests of each; and
no loans may be made by the partnership to any of our affiliates or us.

In addition, the partnership agreement prohibits advance payments by the partnership to us, except where necessary to secure tax benefits of prepaid drilling costs. These payments, if any, shall not include

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nonrefundable payments for completion costs prior to the time that a decision is made that the well or wells warrant a completion attempt. Furthermore, no rebates or give-ups may be received by us or any of our affiliates, nor may we or any affiliate participate in any reciprocal business arrangements that would circumvent this restriction. In addition, the partnership agreement prohibits us from taking any action, or permitting any other person to take any action, with respect to the assets or property of the partnership that does not benefit the partnership, including, among other things, utilization of funds of the partnership as compensating balances for our own benefit or the commitment of future production.

The partnership agreement further limits our affiliates and us in the compensation we may receive from providing any oil field, equipage or other services to the partnership or for selling or leasing any equipment or related supplies to the partnership. Unless such person is engaged, independently of the partnership and as an ordinary and ongoing business, in the business of rendering such services or selling or leasing such equipment and supplies to unaffiliated persons in the oil and gas industry, then the compensation, price or rental will be the lesser of the cost of such services, equipment or supplies to such person or the competitive rate that could be obtained in the area. The partnership agreement further provides that neither our affiliates nor we may profit under any circumstances by drilling in contravention of fiduciary obligations to the investor partners. Any services not otherwise described in this prospectus for which any of our affiliates or we are to be compensated will be embodied in a written contract that precisely describes the services to be rendered and the compensation to be paid. No turnkey drilling contracts shall be made between the partnership and us or our affiliates.

While not anticipated, if the partnership participates in other partnerships or joint ventures (multi-tier arrangements), the terms of any such arrangements shall not result in the circumvention of any of the requirements or prohibitions contained in the partnership agreement, including the following:

(i) There will be no duplication or increase in organization and offering costs, our compensation, partnership expenses or other fees and costs;
(ii) There will be no substantive alteration in the fiduciary and contractual relationship between us and the investor partners; and
(iii) There will be no diminishment in the voting rights of the investor partners.

Our Interest.  Although we believe that our interests in the partnership’s profits, losses, and cash distributions are equitable (see “Participation in Distributions, Profits, Losses, Costs and Revenues”), such interests were not determined by arm’s-length negotiation.

Receipt of Compensation Regardless of Profitability.  We are entitled to receive the management fee and reimbursement for certain costs from the partnership, regardless of whether the partnership operates at a profit or loss. See “Our Compensation.” These fees and reimbursements will decrease the unit holders’ share of any cash flow generated by operations of the partnership or increase losses if operations should prove unprofitable. Because organizational and offering costs (excluding commissions) are greater than 7% of the total maximum subscriptions as of the date of this prospectus, we will not receive a management fee.

Time and Services of Common Management.  Our officers and manager are also officers, directors or employees of our affiliates. As a result, they do not intend to devote their entire time to the partnership. Management is required to devote to the business and affairs of the partnership so much time as is, in their judgment, necessary to conduct such business and affairs in the best interest of the partnership.

Legal Representation.  Counsel to our affiliates, and Texas Securities, a broker-dealer affiliated with us, and to us in connection with this offering are the same. Such dual representation will continue in the future.

Due Diligence Review.  Texas Securities, the broker-dealer of the offering, is owned by the Grisham 2010 Irrevocable Trust (the “Trust”). Shawn Grisham, who is our president and indirectly controls the majority of our equity interests, is the settlor of the Trust. The beneficiaries of the Trust are certain family members of Mr. Grisham. Richard Hardwick is the trustee of the Grisham 2010 Irrevocable Trust as well as the President of Texas Securities. Mr. Grisham, as settlor of the Trust, has the authority to remove and replace the trustee. As such, Texas Securities has an ongoing relationship with us and our affiliates and cannot be considered independent. Texas Securities’ due diligence examination concerning the partnership is not

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independent or as comprehensive as an investigation that would be conducted by a broker-dealer that is involved in selling offerings of unaffiliated companies. See “Conflicts of Interest.”

Other Relationships.  Both our affiliates and we will have relationships on an ongoing basis with companies and other entities engaged in the oil and gas industry, including operators, petroleum engineers, consultants and financial institutions. Such relationships could influence us to take actions, or forbear from taking actions, which we might not take or forbear from taking in the absence of these relationships.

Independent Activities.  Except as limited by our fiduciary duty to the partners as described below and by the partnership agreement, we and our affiliates may pursue business opportunities that are consistent with the partnership’s investment objectives for their own account only after they have reasonably determined that such opportunity either cannot be pursued by the partnership because of insufficient funds or because it is not appropriate for the partnership under the existing circumstances.

Policy Regarding Roll-Ups.  It is possible at some indeterminate time in the future that the partnership may become involved in a roll-up. In general, a roll-up means a transaction involving the acquisition, merger, conversion, or consolidation of a partnership with or into another partnership, corporation or other entity, and the issuance of securities by the roll-up entity to you and the other investors. A roll-up will also include any change in the rights, preferences, and privileges of you and the other investors in the partnership. These changes could include the following:

increasing the compensation of the managing general partner;
amending your voting rights;
listing the units on a national securities exchange or on NASDAQ;
changing the partnership’s fundamental investment objectives; or
materially altering the partnership’s duration.

If a roll-up should occur in the future, the partnership agreement provides various policies which include the following:

an independent expert must appraise all partnership assets as discussed in Section 5.07(l)(1) of the partnership agreement, and investor partners must receive a summary of the appraisal in connection with a proposed roll-up;
In connection with a proposed roll-up, investor partners who vote “no” on the proposal shall be offered the choice of:
accepting the securities of the roll-up entity; or
remaining as investor partner in the partnership and preserving their interests therein on the same terms and conditions as existed previously; or
receiving cash in an amount equal to the investor partners’ pro-rata share of the appraised value of the partnership’s net assets; and
the partnership will not participate in a proposed roll-up:
unless approved by at least 66 2/3% in interest of the investor partners;
which would result in the diminishment of investor partners’ voting rights under the roll-up entity’s chartering agreement;
which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the roll-up entity (except to the minimum extent necessary to preserve the tax status of the roll-up entity);
in which investor partners’ right of access to the records of the roll-up entity would be less than those provided by the partnership agreement; or
in which any of the transaction costs would be borne by the partnership if the proposed roll-up is not approved by the investor partners.

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OUR FIDUCIARY RESPONSIBILITY

Fiduciary Duty.  We are accountable to the partnership as a fiduciary and consequently must exercise good faith and integrity in handling partnership affairs. In this regard, we are required to supervise and direct the activities of the partnership prudently and with that degree of care, including acting on an informed basis, which an ordinarily prudent person in a like position would use under similar circumstances. Moreover, we have a responsibility for the safekeeping and use of all funds and assets of the partnership, whether or not in our control, and we may not employ or permit another to employ such funds or assets in any manner except for the exclusive benefit of the partnership.

Generally, courts have held that a limited partner may institute legal action on behalf of itself and all other similarly situated limited partners to recover damages for a breach by a general partner of its fiduciary duty, or on behalf of the partnership to recover damages from third parties. In addition, limited partners may have the right, subject to procedural and jurisdictional requirements, to bring partnership class actions in federal courts to enforce their rights under the federal securities laws. Further, limited partners who have suffered losses in connection with the purchase or sale of their interests in the partnership may be able to recover such losses from a general partner where the losses result from a violation by the general partner of the antifraud provisions of the securities laws. The burden of proving such a breach, and all or a portion of the expense of such lawsuit, would have to be borne by the limited partner bringing such action. In the event of a lawsuit for a breach of our fiduciary duty to the partnership and/or the investor partners, we may, depending upon the particular circumstances involved, be able to raise various affirmative defenses to the lawsuit. For example, we may be able to claim that the:

partner’s improper actions with respect to the lawsuit bar the partner from bringing the lawsuit;
partner brought the lawsuit too late and therefore, the suit should be barred; or
partner bringing suit engaged in conduct associated with the suit that was inequitable, unfair and deceitful.

If you have questions concerning our responsibilities, you should consult your own counsel.

Indemnification.  The partnership agreement provides for indemnification of us against liability for losses arising from our action or inaction if:

we, in good faith, determine that such course of conduct was in the best interests of the partnership;
we were acting on behalf of or performing services for the partnership; and
such course of conduct did not constitute negligence or misconduct by us.

We will not, however, be indemnified for liabilities arising under federal and state securities laws unless:

there has been a successful adjudication on the merits of each count involving securities law violations;
such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or
a court of competent jurisdiction approves a settlement of such claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the position of any state securities regulatory authority in which securities of the partnership were offered or sold as to indemnification for violations of securities laws.

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A successful claim for indemnification would deplete partnership assets by the amount paid. As a result of such indemnification provisions, you may have a more limited right of legal action than you would have if such provision were not included in the partnership agreement. To the extent that the indemnification provisions purport to include indemnification for liabilities arising under the Securities Act, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.

The partnership agreement also provides that the partnership shall not incur the cost of the portion of any insurance that insures any party against any liability as to which such party is prohibited from being indemnified.

PRIOR ACTIVITIES

We were formed in 2001 for the purposes of, among other things, owning and leasing property. We have not sponsored a public or private offering but our affiliates, Crown Exploration II, Ltd. and Crown Exploration, Ltd., have acted as the managing venturer for 79 joint ventures and have raised approximately $341 million from outside investors. It should not be assumed that investor partners will have either success or failure comparable to those experienced by participants in other prior offerings sponsored by our affiliates. We further believe that rates of return and/or production, or lack thereof, related to the prior partnerships are not material or indicative of our future performance. Each oil and gas well has unique characteristics, and we believe that a prospective investor cannot predict future performance of any given well based upon the performance of a prior well, even if the prior well was drilled in the same area. All wells decline over time, some more frequently and drastically than others. For several reasons, including the unpredictability of oil and gas pricing and development and differences in partnership structure, property location, partnership size and economic conditions, operating results obtained by any prior partnership or offering should not be considered as indicative of the results obtainable by you or the partnership. The results of the prior partnerships or offerings should be viewed only as a measure of the level of activity and experience of us and our affiliates with respect to drilling partnerships or offerings.

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Table One sets forth the capital contributions to and cumulative distributions from each partnership since the date of such partnership’s formation, as well as the total distributions from each partnership during the quarter ended December 31, 2010.

TABLE ONE
Experience in Raising Funds
as of December 31, 2010

               
     Date
Operations
Began
  Number of
Investors
  Investor
Capital
  Managing
Venturer
Capital
  Cumulative Distributions   Distributions – Quarter
Ended December 31, 2010
Joint Venture Name   to Investors   to
Managing
Venturer(1)
  to Investors   to
Managing
Venturer(1)
Crown Brierton Joint Venture     1/18/1999       44     $ 626,936     $     $     $     $     $  
Crown Mann No. 1 Joint Venture     3/11/1999       35     $ 517,263     $     $     $              
Crown Annabelle No. 1 Joint Venture     6/1/1999       55     $ 1,124,387     $     $     $              
Crown Kolodzey No. 1 Joint Venture     10/1/1999       53     $ 882,298     $     $ 552,825     $ 67,686              
Crown Arco No. 1 Joint Venture     1/1/2000       93     $ 1,414,617     $ 7,564     $     $              
Crown Weber No. 1 Joint Venture     4/15/2000       77     $ 1,883,483     $ 6,944     $ 1,453,828     $ 44,161              
Crown Weber No. 2 Joint Venture     5/23/2000       66     $ 497,312     $     $ 41,785     $ 1,096              
Crown Cadena No. 1 Joint Venture     6/10/2000       74     $ 1,189,183     $     $     $              
Crown Briscoe No. 1 Joint Venture     8/18/2000       87     $ 1,162,500     $     $ 789,774     $ 50,830       6,602        
Crown Weber No. 3 Joint Venture     10/2/2000       62     $ 1,000,378     $ 3,050     $ 89,684     $ 9,327              
Crown Clipp No. 1 Joint Venture     10/31/2000       33     $ 584,000     $ 1,500     $ 302,295     $ 9,375              
Crown Briscoe No. 2 Joint Venture     12/20/2000       103     $ 2,033,671     $ 53,936     $ 1,045,260     $ 64,571       3,521       11  
Crown Midway No. 1 Joint Venture     2/14/2001       67     $ 1,185,050     $     $     $              
Crown Baldinger No. 1 Joint Venture     3/26/2001       66     $ 1,302,325     $ 13,250     $ 354,725     $ 17,651              
Crown Briscoe No. 3 Joint Venture     5/1/2001       93     $ 2,265,801     $ 22,850     $ 1,100,602     $ 116,673       8,465       20  
Crown Briscoe No. 4 Joint Venture     7/18/2001       85     $ 2,301,225     $ 27,150     $ 1,441,500     $ 83,996       25,735        
Crown Briscoe No. 5 Joint Venture     10/1/2001       127     $ 2,402,200     $ 69,670     $ 848,193     $ 60,686       3,693       14  
Crown Briscoe No. 6 Joint Venture     10/29/2001       123     $ 2,433,250     $ 35,820     $ 1,084,806     $ 56,867       11,089       86  
Crown McCutchin No. 1 Joint Venture     12/3/2001       120     $ 2,508,000     $ 25,080     $ 475,146     $ 51,198              
Crown Weber Sub Ops Joint Venture     12/6/2001       14     $ 194,000     $ 1,980     $ 117,322     $ 59,053              
Crown Briscoe No. 7 Joint Venture     2/1/2002       201     $ 5,122,728     $ 128,118     $ 1,337,251     $ 177,781       5,790       85  
Crown Baldinger No. 2 Joint Venture     4/1/2002       158     $ 4,884,000     $ 48,840     $ 3,404,636     $ 375,391              
Crown Baldinger No. 3 Joint Venture     6/1/2002       110     $ 3,747,750     $ 37,500     $ 1,178,807     $ 174,100              
Crown Riley No. 1 Joint Venture     7/25/2002       74     $ 3,832,875     $ 49,750     $ 1,070,008     $ 138,569              
Crown Newton No. 1 Joint Venture     10/28/2002       105     $ 3,557,333     $ 381,865     $ 5,524     $ 3,518              
Crown Riley No. 2 Joint Venture     8/26/2002       83     $ 3,878,000     $ 39,000     $ 1,450,809     $ 108,737              

59


 
 

TABLE OF CONTENTS

TABLE ONE
Experience in Raising Funds
as of December 31, 2010

(continued)

               
  Date
Operations
Began
  Number of
Investors
  Investor
Capital
  Managing
Venturer
Capital
  Cumulative Distributions   Distributions – Quarter
Ended December 31, 2010
Joint Venture Name   to Investors   to
Managing
Venturer(1)
  to Investors   to
Managing
Venturer(1)
Crown Baldinger No. 4 Joint Venture     12/1/2002       54     $ 1,248,000     $ 12,608     $ 425,834     $ 52,079              
Crown Briscoe North No. 1 Joint Venture     1/3/2003       96     $ 2,651,875     $ 26,788     $ 1,390,335     $ 86,649              
Crown Neilson No. 1 Joint Venture     2/3/2003       141     $ 3,950,000     $ 39,899     $ 1,506,284     $ 33,040              
Crown Angel No. 1 Joint Venture     3/24/2003       125     $ 3,962,923     $ 68,149     $ 726,736     $ 18,154              
Crown Broussard No. 1 Joint Venture     4/28/2003       136     $ 3,110,250     $ 40,950     $ 54,005     $ 545              
Crown Ashley No. 1 Joint Venture     6/7/2003       124     $ 4,312,075     $ 43,557     $ 4,094,302     $ 215,968              
Crown Shepard No. 1 Joint Venture     7/1/2003       126     $ 3,948,900     $ 50,600     $ 4,713,108     $ 91,365              
Crown Green No. 1 Joint Venture     9/8/2003       90     $ 2,640,000     $ 26,675     $ 1,530,181     $ 15,462              
Crown Ferguson No. 1 Joint Venture     10/1/2003       74     $ 4,058,094     $ 50,932     $ 3,035,742     $ 76,615              
Crown Austin No. 1 Joint Venture     11/3/2003       103     $ 3,703,090     $ 42,345     $ 982,672     $ 34,179              
Crown Vinson No. 1 Joint Venture     1/2/2004       144     $ 4,250,000     $ 42,930     $ 433,231     $ 10,510              
Crown Duncan No. 1 Joint Venture     1/16/2004       148     $ 4,250,000     $ 42,930     $ 1,071,332     $ 15,032              
Crown Johnson No. 1 Joint Venture     3/29/2004       108     $ 3,145,000     $ 31,768     $ 123,817     $ 1,699              
Crown Moody Tucker No. 1 Joint Venture     4/26/2004       139     $ 4,250,000     $ 42,930     $ 417,691     $ 17,591              
Crown Ashley No. 2 Joint Venture     6/14/2004       146     $ 5,185,690     $ 96,822     $ 2,571,501     $ 62,424              
Crown Garland No. 1 Joint Venture     7/19/2004       117     $ 4,483,062     $ 76,927     $ 129,147     $ 2,374              
Crown RLM No. 1 Joint Venture     9/6/2004       138     $ 4,500,000     $ 45,455     $ 3,292,168     $ 33,213              
Crown Carr No. 1 Joint Venture     10/1/2004       182     $ 4,275,000     $ 43,182     $ 392,206     $ 3,969       4,499       45  
Crown Angel No. 2 Joint Venture     11/15/2004       94     $ 2,700,000     $ 27,273     $ 1,810,178     $ 18,257              
Crown Duncan No. 2 Joint Venture     12/6/2004       160     $ 5,000,001     $ 50,504     $ 2,325,293     $ 23,512              
Crown Cox No. 1 Joint Venture     1/24/2005       138     $ 5,775,000     $ 58,340     $ 6,751,131     $ 68,174              
Crown Sisk No. 1 Joint Venture     2/28/2005       150     $ 6,050,000     $ 61,111     $     $              
Crown Fortenberry No. 1 Joint Venture     4/22/2005       135     $ 6,050,000     $ 61,111     $ 3,612,009     $ 36,497              
Crown McCutchin South No. 1 Joint Venture     6/27/2005       169     $ 6,952,500     $ 77,804     $ 1,901,728     $ 25,390       45,397       607  
Crown Angel No. 3 Joint Venture     8/22/2005       167     $ 7,020,000     $ 70,909     $ 4,606,519     $ 47,498              
Crown Foster No. 1 Joint Venture     9/26/2005       170     $ 6,775,500     $ 144,701     $ 4,697,952     $ 105,216              
Crown Spinler No. 1 Joint Venture     12/1/2005       191     $ 9,000,000     $ 90,909     $ 585,514     $ 5,873       10,112       102  
Crown Bergman No. 1 Joint Venture     2/1/2006       208     $ 9,360,000     $ 94,545     $ 799,879     $ 8,065              

60


 
 

TABLE OF CONTENTS

TABLE ONE
Experience in Raising Funds
as of December 31, 2010

(continued)

               
  Date
Operations
Began
  Number of
Investors
  Investor
Capital
  Managing
Venturer
Capital
  Cumulative Distributions   Distributions – Quarter
Ended December 31, 2010
Joint Venture Name   to Investors   to
Managing
Venturer(1)
  to Investors   to
Managing
Venturer(1)
Crown Allen No. 1 Joint Venture     3/1/2006       38     $ 1,938,035     $ 31,662     $     $              
Crown Cooper No. 1 Joint Venture     4/17/2006       210     $ 8,450,000     $ 85,354     $ 314,639     $ 3,220              
Crown Browder No. 1 Joint Venture     6/1/2006       238     $ 8,497,519     $ 85,768     $ 403,292     $ 4,394       13,967       141  
Crown Harrison No. 1 Joint Venture     8/15/2006       192     $ 8,450,000     $ 85,354     $ 424,010     $ 4,426       2,840       29  
Crown Perkins No. 1 Joint Venture     11/1/2006       208     $ 9,787,500     $ 98,864     $ 3,503,648     $ 53,869       90,888       2,528  
Crown Williams No. 1 Joint Venture     1/15/2007       214     $ 8,836,398     $ 355,417     $ 330,326     $ 12,403              
Crown Bakken Shale No. 1 Joint Venture     3/1/2007       143     $ 6,750,000     $ 68,182     $ 255,498     $ 2,886       13,646       163  
Crown Dodson No. 1 Joint Venture     5/28/2007       113     $ 4,970,000     $ 50,202     $ 5,133,607     $ 51,883       162,890       1,645  
Crown McCutchin South No. 2 Joint Venture     8/20/2007       155     $ 9,490,000     $ 95,858     $ 844,336     $ 8,637