Property Divestiture January 2018

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Violet Greer
6 years ago
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Significant land holdings comprised of proven and stacked plays.

1 Aldon Oils Ltd. ( Aldon ) has initiated a process to divest non-core assets located in Southeast Saskatchewan. Asset Overview: Properties include assets from Bryant, Morrisview, Bemersyde and Ingoldsby, all of which are operated by Aldon. Significant land holdings comprised of proven and stacked plays. Extensive inventory of low risk, horizontal drilling locations for further development. Average gross production over the last three (3) months from these properties is 100 bbl/d of oil. Established infrastructure.

Bryant Property Township 5, Ranges 6-7 W2 Bryant property in orange, with Frobisher producers highlighted green and Midale producers highlighted red.

Frobisher Halbrite Drilling Activity Shoaling during the deposition of the Frobisher resulted in porous, oolitic packstone and grainstone being deposited in a wide band trending from northeast to

2 Bryant Property Township 5, Ranges 6-7 W2 Bryant property in orange, with Frobisher producers highlighted green and Midale producers highlighted red. The Bryant Property includes two wells which currently produce ~62 bbl/d of oil, a facility with a Mannville disposal well, and 400 acres of PNG rights. Frobisher Halbrite Drilling Activity Shoaling during the deposition of the Frobisher resulted in porous, oolitic packstone and grainstone being deposited in a wide band trending from northeast to southwest. Typically, horizontal wells drilled in this Frobisher shoal see initial production of ~100 to ~130 bbl/d of oil, and some wells have initial production upwards of 300 bbl/d of oil. A flurry of drilling activity in the past year has resulted in twelve new wells within a 3km radius of this prospect. Aldon believes up to six more Frobisher wells can be drilled in the Halbrite on this property as shown on the accompanying map. Additionally, the Frobisher Huntoon has shown it can also be a viable target, as evidenced by production to the northeast along the same shoaling trend. The high structure with apparent four-way closure over lsd s 1,2 of appears to be an excellent location to drill for oil in the Huntoon. Bryant Frobisher upside indicated by blue lines. State A structure contours with intervals at 5m. Frobisher producers highlighted green and Midale producers highlighted red.

3 Logs from the W2 type well. Upper and lower Halbrite porosity streaks highlighted green. Core analysis over the Frobisher Halbrite and Huntoon on the W2 type well.

$well to sand-fracture treatments.$ $frac and initial production rates were as high as 300 bbl/d of oil.$

4 Midale Upside This property lies adjacent to the Steelman and Bryant oil pools. Recent completions around the Steelman oil pool have demonstrated that the Midale reacts well to sand-fracture treatments. In May 2017, Astra Oil Corporation completed their 102/ W2 Hz with a 5 ton/18-stage frac and initial production rates were as high as 300 bbl/d of oil. It is possible a similar result could be achieved across this property. Bryant property in relation to the Bryant and Steelman Midale oil pools, in green. Midale producers highlighted red.

Morrisview Property Township 6, Range 6 W2 The Morrisview property is located in the southeastern Viewfield

The property includes one well currently producing ~28 bbl/d of oil from the Herald Formation, a facility with

Optimization opportunities exist with the Red River well.

and has been a hot spot of activity in recent crown land sales. Since late 2016, 21.

5 Morrisview Property Township 6, Range 6 W2 The Morrisview property is located in the southeastern Viewfield area of SE Saskatchewan. The property includes one well currently producing ~28 bbl/d of oil from the Herald Formation, a facility with a Mannville disposal well and 800 acres of PNG rights from surface to the base of the Red River Formation. Optimization opportunities exist with the Red River well. The property is located in an area with active exploration in the Frobisher beds (Mission Canyon Formation), and has been a hot spot of activity in recent crown land sales. Since late 2016, 21.5 quarters of crown land have been leased, totaling $1,447,000 for an average of ~$420/acre. Morrisview property in orange, with Frobisher wells highlighted green and Bakken wells highlighted light blue. Morrisview prospect in relation to recent drilling, licencing and land sale activity.

6 m LOWER th an stra t dolic anh y: Property Divestiture January 2018 R7 R6W T T T T R7 Kilometres R6W2 Aldon Oils Miles Frobisher Huntoon / Griffin Potential Licensed to : Aldon Oils By : Date : 2016/07/27 Scale = 1:44000 Project : Mike's Saskatchewan Contours on the Mississippian subcrop based on well control and 3D seismic (contour interval at 5m). Dark blue lines indicate locations where the Huntoon pay is expected to be above the interpreted oil/water contact of m SS. Frobisher Huntoon/Griffin Prospect To the north of this property lies the Morrisview oil pool with production coming from the Frobisher Huntoon and Griffin beds. The oil/water contact appears to be m subsea, and contour mapping of the area indicates potential for three or four horizontal wells to be drilled on the property above this subsea. A good oil show can be seen in cuttings and geophysical logs from the vertical portion of the 191/ W2 horizontal well where the Huntoon porosity was recorded at m to m. An additional, untested show was noted in the Griffin beds in the vertical portion of the 191/ W2 horizontal well (approximately m subsea), with a gas spike rising to nearly 10%. More recent Frobisher exploration to the east has been extending towards the property, with the final ~250m of the 121/ W2 leg exhibiting fair to good intercrystalline porosity with 70% to 90% light brown oil stain and consistent 15% to 20% gas.

The vertical portion of the 191/4-32-6-6 W2 well, exhibits shows of oil stained vuggy porosity with a 3% gas spike in the Huntoon.

7 The vertical portion of the 191/ W2 well, exhibits shows of oil stained vuggy porosity with a 3% gas spike in the Huntoon. Additional Upside In cores and cuttings from wells surrounding this property there are additional hydrocarbon shows in the Frobisher State A and Halbrite intervals. T7 R7 R6W2 T7 The W2 vertical well tested the State A and produced a cumulative total of 7,332 bbl of oil and 5,662 bbl of water. The vertical well produced at low rates, however economic production could be achieved by targeting the State A porosity with a horizontal well to increase inflow. T T6 The nearest Halbrite production is the 191/ W2 horizontal well, just over one mile to the west. Analyzing the interplay between the Halbrite porosity and its subcrop (which runs across the property) may reveal improved drilling locations. 24 R7 19 Kilometres Miles Red circles highlight State A shows, blue triangles highlight Halbrite shows in cores and cuttings. R6W2 Aldon Oils State 'A' shows with red circles Halbrite shows with blue triangles Licensed to : Aldon Oils By : Date : 2016/07/27 Scale = 1:27500 Project : Mike's Saskatchewan

Bemersyde Property Property Divestiture January 2018 Township 12-13, Range 8 W2 The Bemersyde property includes 2,960 Gross acres (1,480 Net acres) of PNG rights and Net 13 bbl/d of oil production.

Reactivating both Red River verticals could produce an additional 16 bbl/d of oil (Net 8 bbl/d of oil) bringing the potential production at this property to ~33 bbl/d of oil (Net ~23 bbl/d of oil).

Red River Upside Several opportunities to increase oil production have been identified at Bemersyde where six wells delineate a structural high in the Red River formation.

8 Bemersyde Property Property Divestiture January 2018 Township 12-13, Range 8 W2 The Bemersyde property includes 2,960 Gross acres (1,480 Net acres) of PNG rights and Net 13 bbl/d of oil production. The 191/ W2 HZ will be reactivated January 2018, and is expected to produce an additional 4 bbl/d of oil (Net 2 bbl/d of oil). Reactivating both Red River verticals could produce an additional 16 bbl/d of oil (Net 8 bbl/d of oil) bringing the potential production at this property to ~33 bbl/d of oil (Net ~23 bbl/d of oil). All wells, including the disposal well, are flowlined to the facility located at W2. Red River Upside Several opportunities to increase oil production have been identified at Bemersyde where six wells delineate a structural high in the Red River formation. Production from the 191/ W2 horizontal well currently averages ~13 bbl/d of oil. This well appears to have a substantial fluid level, indicating the deliverability exceeds the current rate of production. In addition to the possibility of speeding up the well to increase oil production, it could be re-entered to drill a second leg, gaining more exposure to the formation and further increasing inflow. Once a pumpjack is set at the 111/ W2 vertical well, it is expected to be capable of producing 4 bbl/d of oil. Fluid production rates from this well (structurally the highest of the six) were less than half of the 131/ W2 vertical, at least in part due to the fact the lower perforations were isolated with a cement retainer during the initial completion. By recompleting the well in the Yeoman C Burrowed porosity, or by acidizing the uppermost perforations, it is expected that oil production would be improved substantially.

The 131/05-34-012-08 W2 vertical well has been abandoned, however, could be capable of producing 9 bbl/d of oil.

Finally, geological mapping of this structurallydriven play points to an undrilled location in NW 34-12-8 W2.

9 The 131/ W2 vertical well has been abandoned, however, could be capable of producing 9 bbl/d of oil. With a new drilling licence, the well could be re-entered and put back on production to access these underexploited reserves. Finally, geological mapping of this structurallydriven play points to an undrilled location in NW W2. The highest point of this prospect discovered so far is at the 111/ W2 vertical well, and the top of the pay at the 131/ W2 vertical well is still 11.0 to 15.0m above the oil/water contact. A new horizontal well running from to would appear to run along the strike of this prospect and be expected to achieve an IP of 100 bbl/d of oil or more. Map of the area with Lake Alma Anhydrite structure contours at 5.0m intervals. Potential Red River location in dark blue.

Ingoldsby Property Township 4, Range 31 W1 Aldon holds 160 acres of PNG rights at Ingoldsby, where the target is an erosional remnant along the

One horizontal well was drilled on the property based on fair reservoir present in the adjacent 141/4-25-4-31 W1M well.

successful if directed downwards into the underlying limestones and dolostones.

There is significant open crown acreage in the area across this and other nearby erosional remnants, meaning there is room to expand and explore

10 Ingoldsby Property Township 4, Range 31 W1 Aldon holds 160 acres of PNG rights at Ingoldsby, where the target is an erosional remnant along the Mississippian subcrop edge (Alida beds, Mission Canyon Formation). One horizontal well was drilled on the property based on fair reservoir present in the adjacent 141/ W1M well. Aldon believes the horizontal well was drilled mostly in the anhydritic Mississippian cap and a re-entry of the existing wellbore would be successful if directed downwards into the underlying limestones and dolostones. Wells of the Ingoldsby East field one mile to the south are drilled into the same target, and often IP at rates of 150 to 200 bbl/d of oil. There is significant open crown acreage in the area across this and other nearby erosional remnants, meaning there is room to expand and explore out from this property. This is a great opportunity for a company looking for relatively shallow, conventional reservoirs. Map of the area with the Ingoldsby property highlighted by the cross-hatched square. Frobisher-Alida production is indicated with green bubbles and demonstrates good correlation with remnant Alida thickness over ~15m.

11 Core analysis for W1M Map of the area with the Ingoldsby property highlighted in yellow. Structure contours of the Mississippian subcrop outline the structural high across W1M.

SPE Copyright 2012, Society of Petroleum Engineers

SPE Copyright 2012, Society of Petroleum Engineers SPE 152530 Impact of Completion System, Staging, and Hydraulic Fracturing Trends in the Bakken Formation of the Eastern Williston Basin Randy F. LaFollette, SPE, William D. Holcomb, SPE, and Jorge Aragon,