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Bid Date: November 16th, 2017 

Gear Energy Ltd. 2017 Property Offering

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Gear Energy Ltd. (“Gear”) has retained CB Securities Inc. (“CB Securities”) as its exclusive advisor for this sale (the “Offering”).  This is an invitation to submit a Non-Binding Bid by November 16, 2017.

Vermilion Property 

  • Operating Results for 7 months in 2017
    • $44.25/Bbl average price received ($4.80 less than WCS average)
      • WCS recently averaging only $10/Bbl less than Edmonton Light
    • 144 Bbls/day average oil rate
    • 4.8% royalties
    • $29.50/Bbl operating costs
      • $23.45/Bbl is expected going forward
      • Includes costs for all the non-producing wells
    • $12.65/Bbl netback (would have been $18.70/Bbl with go-forward operating costs)
    • $664 thousand of annualized net operating income
    • Only $3.15/Bbl of capital expenditures over past 3 years
  • Current production is 127 Bbls/day, of which 87% is from five (5) 100% working interest wells
  • Property LMR with all producing and non-producing wells is 0.84 ($7.32 million deemed assets and $8.74 million deemed liabilities)
    • Gear is flexible on the deemed liabilities that would be included in a transaction
  • Mostly 100% working interests in 4,120 acres of land
  • Upside includes:
    • 10 identified recompletions in the Sparky, Dina, and General Petroleums ($28 thousand of capital each)
    • 4 identified Sparky drilling locations ($440 thousand of capital each)
    • Waterflood implementation in west side of Sparky pool (57 MMBbls of OOIP)
    • Horizontal development of the Dina pool in Section 18-50-05 W4M (26 MMBbls of OOIP)
      • Well rates of 100 Bbls/day are typical using current technology

Islay Property

  • Operating Results for 7 months in 2017
    • $44.25/Bbl average price received ($4.80 less than WCS average)
      • WCS recently averaging only $10/Bbl less than Edmonton Light
    • 64 Bbls/day average oil rate
    • 7.8% royalties
    • $14.35/Bbl operating costs
      • Includes costs for all the non-producing wells
      • Costs are in $11 to $12/Bbl range for the producing wells
    • $26.45/Bbl netback
    • No capital required to date in 2017
    • $622 thousand of annualized net operating income
  • Current production is 69 Bbls/day from three (3) 100% working interest wells
  • Shallow ~8% declining production
  • Property LMR with all producing and non-producing wells is 2.58 ($2.80 million deemed assets and $1.09 million deemed liabilities)
    • Gear is flexible on the deemed liabilities that would be included in a transaction
  • Mostly 100% working interests in 3,040 acres of land
  • Upside includes:
    • Identified Sparky drilling location ($440 thousand of capital)
    • Waterflood implementation in the Sparky pool (13.6 MMBbls of OOIP)
    • Clean out of 1 identified interest well to resume Sparky production
    • Horizontal development of the Lloydminster pool (30 MMBbls of OOIP)
      • Well rates of 100 Bbls/day are typical using current technology

Lloydminster Property

  • Operating Results for 7 months in 2017
    • $43.20/Bbl average price received ($5.85 less than WCS average)
      • WCS recently averaging only $10/Bbl less than Edmonton Light
    • 30 Bbls/day average oil rate
    • 0.5% royalties
    • $44.90/Bbl operating costs
      • Includes significant fixed operating costs for all the non-producing wells
      • Operating costs are in the $20 to $22/Bbl range for the producing wells
    • $-1.95/Bbl netback
    • Only $3 thousand of capital required to date in 2017
  • Current production is 26 Bbls/day from four (4) 100% working interest wells
  • Shallow ~8% declining production
  • Property LMR with all producing and non-producing wells is 0.43 ($1.20 million deemed assets and $2.82 million deemed liabilities)
    • Gear is flexible on the deemed liabilities that would be included in a transaction
    • Gear is willing to entertain small or large offers on assets in this property that has a scattered land and well base
  • Mostly scattered 100% working interests in 1,720 acres of land
  • Upside includes:
    • Six (6) identified vertical Sparky drilling locations ($300 thousand of capital each)
    • Two (2) identified horizontal Sparky drilling locations
    • Four (4) identified vertical General Petroleums drilling locations
    • Five (5) identified Sparky recompletions (and likely more)
    • One (1) identified Colony recompletion
    • One (1) Cummings recompletion 

British Columbia Minors Property

The British Columbia Minors is comprised of land in 2 areas, specifically Cache and Ekwan, offered as single package. The Cache area is developed with a single long producing life well producing ~300 Mcf/day of net sales gas at a 65% working interest, and 100% working interests in the Ekwan exploration area.

Gear land holdings include 65% to 100% working interests in 5 sections within Cache, 100% working interests in 2 sections within Buick, 50% working interests in 2 sections within Bubbles, 100% working interests in 1 section within Medana, and 100% working interests in 8 exploratory sections of land centered on B/94-I-15 with 5 wellbores that are prospective for Jean Marie gas production.

An attachment provides selected play maps demonstrating the existing  production and opportunities on these properties.

Please click link above to see attachment

Additional detailed information on the properties is provided in the Offering Circular that is available for review by clicking on the link above.

Execution of a Confidentiality Agreement will allow potential purchasers access to the Virtual Data Room. Which can also be viewed by following the Offering Circular link above, or by contacting us at info@cbsecurities.com.


Offering Procedure

Each interested party is asked to submit a Non-Binding Bid by noon on Thursday, November 16th, 2017 to the attention of CB Securities.  From the Non-Binding Bids received Gear will identify the parties with whom to work toward concluding a transaction.

Gear and CB Securities make no representation or warranty as to the accuracy or completeness of the information provided in connection with this Offering.  Each potential purchaser should rely on its own investigation and due diligence to satisfy itself as to all matters relating to this Offering.  Only those representations or warranties expressly agreed to in an executed Purchase and Sale Agreement between Gear and the successful purchaser shall be binding on Gear.

Gear and CB Securities reserve the right to modify the timing, procedures, and terms and conditions of this Offering, or to terminate this Offering at any time. Gear also reserves the right to accept or reject any or all offers at its sole discretion for any reason whatsoever.

Prospective purchasers wishing to participate in this Offering are requested to direct their inquiries to Darryl Derouin at (403) 781-7041 or email at info@cbsecurities.com.