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10 months ago

Project Ozona Economic & Technical Review[8167]

Fénix Proposed

Fénix Proposed Acquisition: General Overview Project Ozona Overview ■ ■ ■ ■ ■ Project Ozona is an asset that has been operated poorly and lacked sufficient developmental capital; as such, it meets Fénix’s strategic criterion ▬ Breakeven price for new wells is ~$15 per flowing barrel of oil (1) ▬ Lots of low cost opportunities to enhance field through a robust maintenance program, new drilling and secondary recovery effort Currently negotiating the definitive purchase and sale agreement Ozona asset overview: ▬ ▬ ▬ ~6000 net acres located in Crockett County, Texas 30 active producing wells with 3 disposal wells & 7 shut-ins ~65 bbl/d of oil production (majority of production from the San Andres) The robust asset includes 5 significant hydrocarbon-bearing formations producing and/or identified within the lease area: ▬ ▬ ▬ ▬ ▬ Queen Greyburg San Andres Wolfcamp Ellenburger Asset highlights include: ▬ ▬ ▬ ▬ Significant inventory of additional San Andres drilling locations (at least 30 new wells currently planned) • Major areas on structure have NOT been drilled – substantially mitigating depletion risk • Offset waterflood has more than doubled oil produced and can be replicated across the Ozona asset Additional upside from Queen and Grey burg formations Potential to acquire additional acreage providing extensive exposure to the aforementioned formations and additional drilling locations Shallow nature of producing formations (San Andres at ~1,400 ft.) keeps drilling and completion costs low • Anticipate drilling, completion and facilities costs at or below $150,000 per well Queen Greyburg San Andres Wolfcamp Ellenburger Asset Location: Crockett County, TX Crockett County Stratigraphy Column 1. This assumes a conservative 30 mbo EUR, which is well below EUR performance from offset producing wells 4

Fénix Proposed Acquisition: General Overview Project Level Economic Overview (1) Date 2017 Q1 Q2 Q3 Q4 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Well Count Current Wells On-line 42 42 42 42 42 42 42 42 42 42 42 42 42 42 42 PUD Wells On-line 0 9 18 27 30 21 30 30 30 30 30 30 30 30 30 Total Wells On-line 42 51 60 69 72 63 72 72 72 72 72 72 72 72 72 Gross Production (Bbl/d) PDP Production (Bbls/d) 59.7 58.8 57.9 57.1 56.2 57.5 54.1 51.0 48.0 45.2 42.6 40.1 37.7 35.5 33.5 Net Revenue Interest 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 75% Net PDP (Bbls/d) 44.8 44.1 43.4 42.8 42.2 43.1 40.6 38.2 36.0 33.9 31.9 30.1 28.3 26.7 25.1 PUD Production (Bbls/d) - 111.2 283.0 433.8 512.3 335.1 412.3 308.9 283.3 266.7 251.2 236.5 222.7 209.7 197.4 Net Revenue Interest 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 75% Net PUD Production (Bbls/d) - 83.4 212.3 325.3 384.2 251.3 309.3 231.7 212.4 200.0 188.4 177.4 167.0 157.3 148.1 Total Net Production (Bbls/d) 44.8 127.5 255.7 368.1 426.4 294.4 349.9 269.9 248.5 233.9 220.3 207.4 195.3 183.9 173.2 Oil Price $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 Differential (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) (3.00) Realized Oil Price 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 42.00 Net Revenue $173,012 $483,234 $977,397 $1,420,994 $1,647,591 $4,529,216 $5,359,678 $4,148,709 $3,808,280 $3,585,964 $3,376,625 $3,188,417 $2,993,896 $2,819,121 $2,654,549 Lease Operating Expense (126,000) (143,000) (171,000) (198,000) (216,000) (728,000) (864,000) (864,000) (864,000) (864,000) (864,000) (864,000) (864,000) (864,000) (864,000) Production Taxes (9,040) (25,249) (51,069) (74,247) (86,087) (236,652) (280,043) (216,770) (198,983) (187,367) (176,429) (166,595) (156,431) (147,299) (138,700) Net Operating Income $37,972 $314,985 $755,328 $1,148,747 $1,345,505 $3,564,565 $4,215,635 $3,067,939 $2,745,298 $2,534,597 $2,336,196 $2,157,822 $1,973,465 $1,807,822 $1,651,849 Drilling & Completion Expense (581,250) (1,395,000) (1,395,000) (1,240,000) (38,750) (4,068,750) - - - - - - - - - EBITDA $(543,278) $(1,080,015) $(639,672) $(91,253) $1,306,755 $(504,185) $4,215,635 $3,067,939 $2,745,298 $2,534,597 $2,364,721 $2,157,822 $1,973,465 $1,807,822 $1,651,849 Net Income to Investor $28,570 $246,938 $594,048 $904,148 $1,059,186 $2,804,322 $3,316,499 $2,410,997 $2,156,442 $1,990,204 $1,833,671 $1,692,939 $1,547,486 $1,416,798 $1,293,739 Yield to Investor 37.3% 44.1% 32.0% 28.7% 26.4% 24.4% 22.5% 20.6% 18.8% 17.2% Estimated IDC Value to Investors $406,875 $2,848,125 Investor Break-even 34 months Project Level IRR IRR 55% MOIC 3.5x Investor IRR IRR 38% MOIC 2.7x Assumptions ■ 30-Day Initial Production Rate: 20 bbls/d ■ Production Decline: 35% initial decline for first 24 months, followed by a 6% terminal decline ■ Price Deck: $45.00 flat with a $3.00 differential inclusive of transportation expense ■ $1000/mo/well lease operating expense ■ Project Level Working Interest: 100% ■ Project Level Net Revenue Interest: 75% ■ Investor Non-operated Working Interest: 80% ■ FPG Working Interest Carried by Investor: 20% ■ 30 well drilling program that begins December, 2017 ▬ ▬ Spud-to-spud: 10 days Spud-to-sales: 30 days Source and Uses Sources Equity Contribution $7,525,750 Total Sources $7,525,750 Uses Asset Acquisition $2,200,000 Additional Equity Requirement $5,325,750 Drilling & Completion Expense 4,650,000 Field Remediation 300,000 (2) Deal Expense 375,750 Total Uses $7,525,750 1. Model does not include the positive impact the intangible drilling cost deduction will have on individual investor returns 2. Includes legal, title and environmental diligence expense & capital to meet bonding requirement and fees associated with capital raise 5

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