2016 YEAR-END RESERVES

The reserves data outlined below is based upon an evaluation by Netherland, Sewell & Associates, Inc. (“NSAI”) with an effective date of December 31, 2016.  The reserves data summarizes PetroShale’s crude oil and natural gas reserves and the net present value of future net revenue for these reserves using forecast prices and costs. All references to reserves are to gross Company reserves, meaning PetroShale’s working interest reserves before consideration of royalty interests. The reserve report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in National Instrument 51‑101 (“NI 51-101”) and CSA Staff Notice 51‑324.  No attempt was made to evaluate possible reserves.  Please see PetroShale’s Annual Information Form for the year ended December 31, 2016 for complete reserves disclosure.

2016 YEAR-END RESERVES

Gross Company Interest Reserves

Reserves
Tight Oil Shale Gas BOE
Reserves Category Gross
(Mbbls)
Net
(Mbbls)
Gross
(Mmcf)
Net
(Mmcf)
Gross
(Mboe)
Net
(Mboe)
PROVED:
Developed Producing 4,143.0 3,284.4 6,570.4 5,188.2 5,238.1 4,149.1
Developed Non-Producing 58.6 46.1 5.5 4.3 59.5 46.8
Undeveloped 16,707.4 13,270.5 18,773.7 14,908.0 19,836.4 15,755.2
TOTAL PROVED 20,909.1 16,601.0 25,349.6 20,100.4 25,134.0 19,951.1
PROBABLE 5,340.6 4,239.2 5,854.4 4,644.2 6,316.3 5,013.2
TOTAL PROVED PLUS PROBABLE 26,249.6 20,840.2 31,204.0 24,744.6 31,450.3 24,964.3

Columns may not add due to rounding.
All of our shale gas reserves represent solution gas associated with our tight oil reserves.

 

Net Present Value of Future Net Revenue ($ US)

Before Income Taxes Discounted at (%/year)
Reserves Category 0%
($US 000s)
5%
($US 000s)
10%
($US 000s)
15%
($US 000s)
20%
($US 000s)
PROVED:
Developed Producing 161,655.6 115,408.1 90,270.2 74,902.9 64,639.1
Developed Non-Producing 1,277.9 972.7 767.7 626.3 525.5
Undeveloped 586,079.5 360,960.0 242,321.5 171,908.4 126,431.7
TOTAL PROVED 749,013.0 477,340.8 333,359.4 247,437.6 191,596.3
PROBABLE 169,611.6 102,436.2 66,163.4 44,665.8 31,012.0
TOTAL PROVED PLUS PROBABLE 918,624.7 579,777.0 399,522.8 292,103.4 222,608.3

Columns may not add due to rounding.

As a reporting issuer in Canada, PetroShale is required to report its reserves and NPV10 using forecast pricing and costs, as stipulated under NI 51-101. The forecast prices are reflected in the Net Present Values shown above.

 

Reserves Reconciliation

Total (Mboe)
Total Proved Total Probable Total Proved Plus
Probable
December 31, 2015 19,453.6 6,029.2 25,482.9
     Discoveries
     Extensions and Improved Recovery-
     Technical Revisions(1) 3,971.1 (340.2) 3,630.9
     Acquisitions(2) 2,972.5 680.6 3,653.1
     Dispositions (180.2) (43.5) (223.7)
     Economic Factors (488.3) (9.8) (498.1)
     Production(3) (594.8) (594.8)
December 31, 2016 25,134.0 6,316.3 31,450.3

Columns may not add due to rounding.
(1) Technical revisions include additional well locations assigned proved undeveloped and probable reserves as well as increased proved and probable reserve assignments to well locations included in the December 31, 2015 reserve report. These revisions are based on additional information gathered in 2016 from analogous wells drilled and completed near our lands and increases in the number of wells planned by operators on our lands.
(2) The acquisitions amount is the estimate of reserves at December 31, 2016.
(3) Columns may not add due to rounding.

Net Asset Value (“NAV”) per Share as at December 31, 2016

($ thousands, except share and per share amounts)
Pro-Forma Equity Financing
Proved Plus Probable Reserve Value (NPV10 Before Tax) $535,361 $535,361
Net Debt (including Decommissioning Obligation) (149,369) (43,169)
Total Net Assets $385,992 $492,192
Common Shares Outstanding 34,207,574 156,472,574
Estimated Net Asset Value per Diluted Common Share(2) $10.01 $3.08

(1)Net asset value is calculated as at a particular date and is, by its nature, historical, and may not be reflective of PetroShale’s future performance. Reflects the NPV10 of the Company’s reserves at an exchange rate of US$1.00 = Cdn$1.34.
(2)Reflects the dilutive impact of 2.0 million share purchase warrants exercisable at $0.75 per share and 2,736,736 share purchase options with an average exercise price of $0.83 per share, outstanding as at this date.