Operations OVERVIEW

Arsenal operates and has production in both Canada and the US. Canadian production which generates approximately 48% of corporate funds from operations is 64% crude oil and NGL’s and 36% natural gas and represents approximately 62% of corporate production. US production which generates approximately 52% of corporate funds from operations is 95% crude oil and NGL’s and represents approximately 38% of corporate production. In Canada, the Company operates under Arsenal Energy Inc. Production in Canada averaged 2,452 Boe per day for Q4 2012. In the US, the Company operates under its 100% owned subsidiary Arsenal Energy USA Inc. Production in the US averaged 1,482 Boe per day for Q4 2012.