16.

CRUDE OIL AND NATURAL GAS PROPERTY INFORMATION

Results of Operations from Oil and Gas Producing Activities

The following table sets forth the results of the Company’s operations from oil producing activities from the Company’s Sawn Lake oil sands properties located in Alberta, Canada, for the periods ending June 30, 2015 and 2014 and for the year ended September 30, 2014:

	June 30, 2015			June 30, 2014		September 30, 2014
Oil sales after royalties	$	425,635		$	–	$	47,116

Production (Operating) expenses		(425,635	)		–		(47,115	)
Exploration expenses		(27,356	)		–		(47,182	)
Depreciation, accretion and depletion		(62,907	)		–		(97,646	)
Oil sales less expenses		(90,263	)		–		(144,827	)

Income tax expenses		–			–		–
Results of operations from producing activities	$	(90,263	)	$	–	$	(144,827	)

For the periods ending June 30, 2015 and June 30, 2014, the Company booked oil revenue in the amount of $425,635 and $Nil, respectively, after deduction of royalties. For the periods ending June 30, 2015 and June 30, 2014, the volumes of oil delivered were booked to be 17,043 and Nil barrels, respectively, net to the Company, before royalties, with an average oil sales price of $26.35 per barrel for the period ending June 30, 2015. Operating expenses are zero since at this time they were paid for under the Farmout Agreement. Transportation costs are included in these operating costs. The total share of the material costs and operating expenses of the Company’s joint SAGD Project, has been funded in accordance with the Farmout Agreement, at a net cost to the Company of $Nil. As required by the Farmout Agreement, the Farmee has since paid Cdn $22.8 million to the operator of the SAGD Project for the Farmee’s share and the Company’s share of the capital costs and start-up operating expenses of the SAGD Project up to June 30, 2015. These costs include the capital costs of the drilling of the SAGD well pair; the purchase and transportation of equipment; installation and construction of the steam plant facility; testing and commissioning; the purchase of the water source and disposal wells and expenditures to connect these water wells with pipelines to the steam plant facility along with a fuel source tie-in pipeline; emulsion treatment package; Phase 2 front end costs; and the start-up operating expenses associated with the steaming and production of the SAGD well pair up to June 30, 2015.

Steam Assisted Gravity Drainage Demonstration Project

On July 30, 2013, the Company entered into a Steam Assisted Gravity Drainage Demonstration project (“SAGD Project”) to jointly participate in an AER approved SAGD Project on one section of land where the Company now has a 25% working interest (after the execution of the Farmout Agreement as defined below). The SAGD Project is located on section 30-91-12W5 of the Company’s Peace River oil sands properties located in North Central Alberta, Canada (also known as the Sawn Lake heavy oil reservoir). On August 15, 2013, and in accordance with the SAGD Project Agreement and the Amendment, the Company served notice (“Notice of Election”) to of the operator of the Company’s election to participate in the SAGD Project. Upon signing the Notice of Election the Company was required to pay in full the cash calls for the Company’s initial share of the capital costs of the SAGD Project and in accordance with a Farmout Agreement dated July 31, 2013 the Company has since paid all cash calls in full to the operator of the SAGD Project.

SAGD Project Phase 1 - The SAGD Project started with the first phase (“Phase 1”) consisting of the drilling and completion of one SAGD well pair, the construction of a facility for steam generation, water handling and oil treating, plus water source and disposal facilities, and pipelines to connect the source wells and fuel tie-in to the SAGD facility. This first phase included start-up steam operations of the SAGD facility with production commencing on September 16, 2014. The estimated capital costs to complete the SAGD Project steam plant facility with one SAGD well pair has been estimated by the operator to be Cdn $32.8 million on a 100% working interest basis, of which the Company’s share is covered under the Farmout Agreement (this estimate does not include start-up operating expenses to produce bitumen from the first SAGD well pair).

SAGD Project Phase 2 - The Phase 2 front end work includes preliminary engineering design, regulatory approval, environmental approval work and determining regulatory requirements sufficient to define the work program, schedule and estimated cost of this second phase which is anticipated to include the drilling of two additional SAGD well pairs and the associated expansion of the current SAGD steam plant.

Capitalized Costs Relating Specifically to the SAGD Project

The Company entered into a Farmout Agreement dated July 31, 2013, whereby the Company’s operating costs of the SAGD Project are paid in full by the Farmee in accordance with the Farmout Agreement; therefore the Company has not capitalized any of the capital costs and operating expenses paid by the Farmee to the operator of the SAGD Project. See Note 4 herein “Capitalization of Costs Incurred in Oil and Gas Activities”.

Costs Incurred in Oil and Gas Property Acquisition, Exploration, and Development

See Note 5 herein “Exploration Activities”.