Operations: USA

Arsenal operates in North Dakota in three prospect areas, two of which (Stanley and Lindahl) are considered development properties and one (Rennie Lake) that is considered exploratory. At Stanley and Lindahl, the Bakken and Three Forks formations provide high net back sweet oil with a number of infill wells to be drilled to fully develop the Company’s acreage. Rennie Lake is considered exploratory acreage with no producing wells on Company lands.

At Stanley, horizontal wells into the Bakken formation cost approximately $8.5 million to drill, complete, equip and tie-in and are typically drilled on two section spacing units approximately 9,200 feet vertically and approximately 9,500 feet horizontally and are completed utilizing multi stage frac technology. Once fraced, wells demonstrate with initial production rates of approximately 1,000 boe/d, decline rapidly (within six months) to approximately one third of the initial rate followed by an extended low-decline profile to recover (depending on the size of the spacing unit) a total of approximately 500,000 barrels of light oil. Arsenal has a number of additional development locations in future inventory.   Arsenal is continuing to develop its Bakken reserves at Stanley with the current drilling of 2 gross, 1.25 net wells planned for 2013.

At Lindahl, wells being drilled from an “EcoPad” cost approximately $8.0 million to drill, complete, equip and tie-in and generally target the Three Forks formation. The wells are drilled to a vertical depth of 9,800 feet and then horizontally 9,200 feet over the two section spacing unit. Wells commence production at approximately 1,000 boe/d, decline rapidly (within six months) to approximately one third of the initial rate and are followed by an extended low-decline profile to recover (depending on the size of the spacing unit) a total of between 475,000 barrels of light oil. Arsenal has 3 net development locations in future inventory. Arsenal participated in the drilling of 4 wells drilled from eco pads in which Arsenal has a working interest of approximately 6.3% in each well. These wells were completed and put on stream in Q1 2013. Arsenal expects the operator in the area to drill four additional eco pad wells (.025 net) in 2013.

At Rennie Lake / Black Slough, the Company has 5,195 net mineral acres also prospective for Bakken production. As a result of Arsenal adding to its acreage position in the area and competitor drilling offsetting our lands continuing to occur, the risk on our lands is reduced.