information memorandum – ccaa sales process · companies' creditors arrangement act, rsc...

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affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

CCAA Sales Process KPMG Inc. was appointed as Monitor (the "Monitor") pursuant to an order (the "Initial

Order") issued by the Court of Queen's Bench of Alberta (the "Court") on April 10, 2019obtained by Strategic Oil & Gas Ltd. and Strategic Transmission Ltd. (together, “Strategic”,“SOG” or the "Company") under the Companies' Creditors Arrangement Act, RSC 1985 c C-36 as amended (the "CCAA").

The proceedings commenced by the Company under the CCAA will be referred to herein asthe “CCAA Proceedings”. Further background and information regarding the Company andthese CCAA Proceedings can be found on the Monitor’s website athttp://home.kpmg/ca/strategic (the “Monitor’s Website”).

KPMG Inc., as Monitor, has been directed by the Company to initiate a sales process and isseeking offers to purchase the assets or the shares of SOG.

Strategic Oil & Gas Ltd.Information Memorandum – CCAA Sales Process

Table of Contents1. Highlights2. Corporate3. Marlowe8. Cameron Hills,

Bistcho, & Larne9. Conrad & Taber10. Zama11. Tax Pools,

Reserves & ARO12. Financials14. Process15. Disclaimer

KPMG Inc.Bow Valley Square II3100, 205 5 Ave SWCalgary, Alberta T2P 4B9

Grant BrownManaging [email protected]

Mark VoddenVice [email protected]

Jon [email protected]

Tariq [email protected]

Further confidential information is available, via anelectronic dataroom, to parties who execute aconfidentiality agreement.

Offers to purchase the assets or shares are subject tothe terms and conditions outlined in the Court-approved Sales and Investment Solicitation Process(“SISP”) with binding bids due on July 26th.

Superior Offers to exceed the Stalking Horse Bid onthe Zama WI Opportunity are due on June 21st.

Any sale will be completed on an “as is, where is”basis. Offers for selected asset packages will beconsidered, however an “en bloc” sale of the assetsexcluding Zama WI is preferred.

Unless otherwise stated, all monetary figures are inCanadian dollars ($).

Corporate Highlights Strategic Oil & Gas: is a Canadian light oil exploration, production and development

company developing stacked carbonates in Northern Alberta and the Northwest Territories.As of April 2019, the Company is producing estimated sales volumes of 1,300 boe/d (85%light oil).

Light Oil Resource Play: 289,000 net acres and strategic control of the Marlowe Muskeglight oil resource play. Total estimated original oil in place (“OOIP”) of 2 billion barrels with 8to 10 MMbbl/section of 36º API light oil on 100% working interest contiguous lands.

Infrastructure in Place: Connected via oil & natural gas sales pipelines, as well as accessto highway and rail. 100% owned and operated processing facilities. Processing capacity tosupport production of up to 5,000 boe/d with sour gas and water handling on site.

Expansive Land Base with Substantial Future Development Potential: 429,000 netacres of land with multi-zone development potential in the Muskeg, Keg River, Slave Pointand Sulphur Point formations. Current booked reserves include only 15% of MarloweMuskeg acreage. 34 horizontal Muskeg wells have been drilled to date in Marlowe that haveproven the play.

Significant Drilling Inventory: Approximately 600 potential Muskeg locations in inventoryof which 46 are booked as P+P undeveloped locations in the YE2018 reserve report.Development wells have drill, complete, equip, and tie-in (“DCET”) costs of ~$3.6MM/well.

Over $550MM in Tax Pools: $337MM non-capital losses, $34MM of Canadian ExplorationExpenses and $109MM of Canadian Development Expenses.

NWTAB

Zama CityHigh Level

Marlowe

http://home.kpmg/ca/strategic



Northern Alberta light oil development opportunity with supplementary positions in Southern Alberta.Marlowe Muskeg – Core Asset April 2019 estimated production of 1,300 boe/d (85% light oil). Significant fully owned egress infrastructure in place. As of 2018 year end, the McDaniel & Associates (“McDaniel”) reserve

report states that there are 7,634 Mboe of Net 1P reserves, with a NPV10 value of $47MM.

Three year development program expected to increase production to 5,000 boe/d and operating cash flow to >$50MM by 2021.

Additional upside potential through 600 identified Marlowe Muskeg locations.

Strategic Oil & Gas Ltd.Corporate Overview

Zama – 10% WI 10% Working Interest (“WI”) in

63,465 gross acres. Remaining property is 90%

owned and operated by a related party.

Clean land base: one test well has been drilled.

$1.5MM Stalking Horse Bid. Partner Right of First Refusal.

Cameron Hills, Bistcho & Larne Production shut-in for all three properties since 2015,

however management believes that Cameron Hills has compelling upside opportunity.

Potential for 66+ horizontal wells with 1,500 meter laterals completed with multi-stage fractures.

Existing infrastructure in place. Sales pipeline connected.

Potential to reactivate ~600-800 boe/d.

Conrad & Taber (Southern Alberta) Medium oil play (23° to 27° API) capable of producing

over 50 boe/d. Taber is producing 5 bbl/d from two wells. Third party processing potential in Taber. Conrad production is shut-in. The reactivation of shut-in oil wells coupled with the

optimization of the resource pool through waterflood or a tertiary flood scheme provides additional upside.

Southern Alberta



Strategic Oil & Gas Ltd.Marlowe Asset Package

Significant accumulation of light oil in stacked carbonate reservoirs with reserve and production growth potential.

1. Upside Development Opportunities Well-established base production. Primary development from Muskeg light oil

horizontal wells with upside from other stacked formations. Large development potential available from 600

mapped Muskeg locations. Operated 100% WI asset on contiguous land base. Future waterflood potential.

2. High Quality Light Oil Reservoir Muskeg carbonate play compares favourably to

other well-established reservoirs, including the Bakken, Midale and Torquay in Saskatchewan. Large structural trap created by meteorite impact

that is charged with light oil and gas in four stacked horizons.

3. Geophysical Data Significant amount of 2D and 3D seismic data exists

across the asset, including a newly acquired high-density 3D survey available for purchase.

Key Statistics

Land 289,639 net acres

Producing Wells

37 including 20 producing Muskeg Horizontals

Current Production 1,300 boe/d (85% light oil)

Net 1P Reserves

7,634 Mboe ($47MM at NPV10)

Net 2P Reserves

15,538 Mboe ($107MM at NPV10)

Strategic Infrastructure for Production / Operations

50km high-grade roads, >400km gathering lines, two sour gas plants and two oil batteries

Infrastructure Value

$200MM of invested capital (replacement value)

LMR 1.78

4. Operational Performance Improvement Opportunities Continually refining type curve through drilling

and completion design optimization.5. Established and Fully Owned Infrastructure

All-season access for future development. Oil and gas sales fully connected to major

transmission pipelines to access markets. Alternative market access via trucking and

potential future rail terminals. Water source at Hay River.

6. Favorable Economics Shallow targets with low capital costs per well of

approximately $3.6MM. McDaniel recognizes 4 distinct type curves

across the Muskeg land base.

01-28-122-22W5 Oil Battery – Capacity: 1,800 bbl/d Marlowe Sour Gas Plant -

Capacity: 40 MMcf/d (suspended) Meter Station

09-17-122-20W5 Steen River Sour Gas Plant -

Capacity: 45 MMcf/d Oil Battery – Capacity: 8,000 bbl/d Meter Station

13-10-122-19W5 Bullet (Trucking Terminal) Potential Future Rail

Terminal

Sales Gas P/L

Sales Oil P/L

* LACT at 10-28-117-04W6



Strategic Oil & Gas Ltd.Marlowe Asset Package

Significant light oil accumulation in stacked carbonate reservoirs.

Proven Reservoir Performance & Multi-Zone Potential The Marlowe Muskeg is a regionally-deposited, structurally enhanced, light oil Devonian aged reservoir. SOG has

an estimated 2 billion barrels of OOIP on Company land. The resource is multi-zoned, oil charged and has stacked potential resulting in Marlowe being a key focus area. Reservoir porosity ranges from 4 to 20% with water saturations (Sw) of 20% to 50%. The observed permeability ranges from 1 to 68 mD. There is current Keg River production and the potential for additional Keg River wells located on structural highs. Additional development potential exists in the Slave Point and Sulphur Point, with each zone covering a prospective

100+ sections.

Due to a temporary EDM Light Differential of US$26.94 in the fourth quarter of 2018, netbacks at Marlowe averaged ($1.80)/boe.

In the first quarter of 2019 the differential recovered to US$4.85, which resulted in a Marlowe netback of $16.70/boe.

Marlowe Historical Operating Netbacks ($/boe)

$4.27

$14.98 $13.36 $12.91

$22.10 $20.70

$9.53

$18.81 $20.99 $21.68 $23.52

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2016 2017 2018

Muskeg Net Pay Marlowe Stratigraphy



Strategic Oil & Gas Ltd.Marlowe Asset Package – 12 Month $25MM Development Plan(2)

Short-term investment to optimize production and further delineate development plan.

Development Plan(1)

H2 2019 FY2020 FY2021Muskeg HZ wells drilled 2 - -DCET capital ($MM) $7 - -G&G and facilities capital ($MM) $12 - -Maintenance, abandonment & other capital ($MM) $4 $4 $4 Total capital ($MM) (a) $23 $4 $4 Cash flow ($MM) (b) $5 $11 $3 Free cash flow ($MM) (b-a) ($18) $7 ($1)Operating netback ($/boe) $15.80 $15.00 $5.00Average production (boe/d) 1,800 2,000 1,400Implied asset value @ $40,000/boed ($MM) $72 $80 $56Implied asset value @ 5x operating cash flow ($MM) $25 $55 $15

Initial Capital Expenditure - H2 2019 to Q1 2020 ($MM)

Development Item Timing CapEx3D Seismic Purchase Available for purchase $4.5West Rim Debottleneck Project October 2019 $7.0Two Horizontal Well Drill Program December 2019 $7.2Maintenance and Optimization October & November 2019 $4.0Asset Retirement Obligations Q1 2020 $2.0Total CapEx $24.7

2019 3D Program Acquired West Marlowe Debottleneck Project

(1) Pricing assumptions available on page 7.(2) The $25MM excludes $2MM of maintenance capital in FY2020 and $4MM of maintenance and abandonment capital in FY2021.

SOG 3” Oil Line

Bottleneck

Compressor addition planned at 11-18: Reduce pipeline pressure Free-water removal with in-field disposal Increase production from downstream wells

West Marlowe wells are currently constrained by high pipeline pressure

01-28-122-22W5Facility

11-18-122-22W5



Strategic Oil & Gas Ltd.Marlowe Asset Package – $125MM Development Plan

Development plan to grow to ~5,000 boe/d (76% liquids).

Capital Expenditure Breakdown ($MM)

H2 2019 FY2020 FY20213D Seismic Purchase $4.5 - -West Rim Debottleneck Project $7.0 - -Drilling Program ($3.6MM per well) $7.2 $57.6 $36.0 Maintenance and Optimization $4.0 $2.4 $2.4 Asset Retirement Obligations - $2.0 $1.5 Total $22.7 $62.0 $39.9

Development Plan (1)

H2 2019 FY2020 FY2021Muskeg Hz wells drilled 2 16 10 DCET capital ($MM) $7 $58 $36 G&G and facilities capital ($MM) $12 - -Maintenance, abandonment & other capital ($MM) $4 $4 $4 Total capital ($MM) (a) $23 $62 $40 Cash flow ($MM) (b) $5 $29 $52 Free cash flow ($MM) (b-a) ($18) ($33) $12 Operating netback ($/boe) $15.80 $24.00 $28.00Average production (boe/d) 1,800 3,200 4,900Implied asset value @ $40,000/boed ($MM) $72 $128 $196Implied asset value @ 5x operating cash flow ($MM) $25 $145 $260

Represents $25MM Development Plan

(1) Pricing assumptions available on page 7.

2

6 6

4 4

2

4

H2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2019 2020 2021

Forecast Drilling Schedule



Strategic Oil & Gas Ltd.Marlowe Asset Package – Development Plan Details

Assumptions for $25mm and $125mm development plans.

Commodity and Foreign Exchange Price Assumptions2019 2020 2021

WTI ($US/bbl) $60.00 $60.00 $60.00AECO gas ($/GJ) $1.50 $1.50 $1.50CDN/US FX rate $1.31 $1.30 $1.30EDM light diff (US$/bbl) $8.42 $10.45 $11.75

0

50

100

150

200

250

300

350

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

Oil

Prod

uctio

n (b

bl/d

)

Months

Unrisked Type 05-01 01-02

Unrisked Type Curve

Muskeg type curve = 2018 budget curve IP30: 287 bbl/d oil, 560 mcf/d sales gas IP365: 147 bbl/d oil, 287 mcf/d sales gas

0

1,000

2,000

3,000

4,000

5,000

6,000

Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21

Base Opti/Workover Debottleneck 2 Drill Program Additional 26 Drill Program

Production Forecast (boe/d)

Exit Production (boe/d)Development Item 2019 2020 2021Base Production 1,066 808 617 Plus: Optimization and work over 382 283 215 Plus: Debottleneck 548 304 211 Plus: Two well drill program 762 224 149

Total production - $25MM program 2,757 1,619 1,192 Plus: Additional 26 well drill program - 2,756 3,602

Total production - $125MM program 2,757 4,375 4,794



Strategic Oil & Gas Ltd.Cameron Hills, Bistcho & Larne

Development potential in an extensively delineated play with existing infrastructure & egress.

Cameron Hills, Northwest Territories SOG owns an 86% WI in 86,223 acres (74,207 net acres) in Cameron Hills, which is located 50 km North of the

Company’s core Marlowe assets. Production has been shut-in since 2015 due to commodity prices. Upside Potential - Sulphur Point Oil:

o Potential for over 66 Hz wells:o 60 Hz wells in low-permeability Sulphur Point regional dolostone prospect.o 6 Hz wells in high-permeability Sulphur Point karst prospect.

o Well design consists of 1,500 meter laterals, completed with multi-stage fractures.o Drilled off 4 well pads to minimize environmental impact.

Second Phase: Keg River Oil - under explored pinnacle basin with proven oil production of 160 bbl/d. Reserves Potential:

o Sulphur Point low perm regional: OOIP 60 MMbbls; Sulphur Point high perm karst: OOIP 10 MMbbls; and Keg River: OOIP 1-6 MMbbls per reef.

Bistcho and Larne, Northern Alberta The Company holds an average 89% WI in the Bistcho and Larne properties, which amounts to 41,567 net acres. Production is currently shut-in, but the area has 22 gross (16 net) wells capable of gas production.

Key Statistics

Land115,774 net acres (including 74,207 net acres in the NWT)

Producing Wells Shut-in

Current Production Shut-in

Net 1P Reserves

Cameron Hills: 291 Mboe (Dec. 31, 2015)Bistcho & Larne: 12 Mboe (Dec 31, 2014)

Net 2P Reserves

Cameron Hills: 478 Mboe (Dec. 31, 2015)Bistcho & Larne: 13 Mboe (Dec 31, 2014)


Cameron Hills: Pipeline connected oil batteryBistcho/Larne: Sour gas facility; LACT unit

Infrastructure Value

$8.0MM (Insured Value of H03 Facility)

LMR Cameron Hills: n.a.

06-32-122-02W6 Bistcho Sour Gas Plant -

Capacity: 17 MMcf/d Oil Battery –

Capacity: 1360 bbl/d Meter Station

SOG Winter Road

Cameron Hills

Bistcho

Larne

01-01-118-02W6 Larne Facility

SOG 12” effluent pipeline

H03 60-10 117-30 Cameron Hills Main

Facility Pipeline connected

to the to Bistcho 06-32 Plant

10-28-117-04W6 LACT



Strategic Oil & Gas Ltd.Conrad & Taber

Infill drill potential in mature oil plays with waterflood opportunities at both prospects.

Conrad, Southern Alberta SOG holds a 100% working interest in 30 wellbores in the Conrad area of southern Alberta. Prior to the February 2016 shut-in, the Company had 24 producing Sawtooth oil wells on the property.

o Wells are capable of producing a total of 50-75 barrels of medium gravity (23° to 24° API) oil per day. The Company has identified ten Sawtooth potential drilling opportunities. Additional upside in reactivating the shut-in oil wells followed by the optimization of the pool through implementing a

waterflood or a tertiary flood scheme. SOG holds a 100% working interest in the following equipment at its 02-04-006-15W4 facility at Conrad:

o Three water tanks, two 500 barrel oil tanks, and one 500 barrel slop tank. Net Abandonment Liability Amount of $2.8MM.Taber, Southern Alberta SOG holds a 75% working interest in a mature medium gravity (27° API) oil property. SOG owns and operates a number of Glauconitic and Ellerslie oil wells and a production facility at Taber.

o Recent production from two producing wells on the property has averaged approximately 5 bbl/d.o There are 12 suspended oil wells which are capable of production.

Identification of four infill Glauconitic drilling opportunities. Tertiary recovery schemes have recently been implemented on similar pools in the area with positive results.

All of SOG’s wells at Taber are connected by flowline to a central battery. There are three satellites, with the 05-24 test satellite currently active.

SOG’s oil flows directly into Inter Pipeline’s Bow River South Area Pipeline System. Net Abandonment Liability Amount of $3.7MM.

Key Statistics

Land Conrad: 1,885 net acresTaber: 802 net acres

Producing Wells Conrad: Shut-inTaber: 2 Producing Wells

Current Production Conrad: Shut-inTaber: 5 bbl/d

Net 1P Reserves Conrad: 98 Mboe (Dec 31, 2014)Taber: 31 Mboe (Dec 31, 2014)

Net 2P Reserves Conrad: 133 Mboe (Dec 31, 2014)Taber: 44 Mboe (Dec 31, 2014)


Three water tanks, two 500 barrel oil tanks, one 500 barrel slop tank, flowline, central battery and threesatellites, LACT unit

Infrastructure Value$1.5MM Taber Insured Value$0.3MM Conrad Insured Value

LMR Taber: 0.13Conrad: 0 (0 Deemed Asset Amount)

03-24-010-16W4M Taber Oil Battery Injection

02-04-006-15W4M

Conrad Oil Battery

InjectionConrad

Taber



Strategic Oil & Gas Ltd.Zama 10% Non-operating working interest

Exploration play with material undeveloped light oil potential and no liabilities.

Zama Exploration Opportunity SOG currently has a 10% non-operated WI in the Zama area in Northern Alberta, with a related party owning the

remaining 90%. Zama Asset has a predominantly undeveloped land base, with one test well being drilled in the Zama member by

the operator to date. SOG has approximately $3MM left in capital carry on the initial joint venture agreement with the operator.

Shekilie Opportunity SOG currently has a 50% non-operated WI in the Shekilie lands (15,360 net acres). JV agreement with related party who is the operator. Undeveloped lands located in 119-06 and 120-06W6M; 2 year mineral lease extension received.Stalking Horse Bid Zama 10% Non-operating working interest has a $1.5MM Stalking Horse Bid on asset from 90% WI partner. WI partner also has right of first refusal on sale of the asset. Fully executed copy of asset purchase agreement is made available in electronic data room. Any party wishing to bid on this asset is highly encouraged to use the form of asset purchase agreement utilized by

the Stalking Horse, a copy of which is in the electronic data room.

Key Statistics

Land

Zama: 6,330 net acres (63,305 gross acres)Shekilie: 15,360 net acres (30,720 gross acres)

Producing Wells None

Current Production None

Net 1P Reserves McDaniel has no reserves assigned to this property

Net 2P Reserves McDaniel has no reserves assigned to this property

Strategic Infrastructure for Production / Operations None

Infrastructure Value None

LMR n.a.

13-12-116-06W6 Paramount Zama Gas Plant

License Capacity: 37.3MMcf/d Oil Battery Meter Station

15-21-116-04W6 SOG 10% WI RR: 2019-03-7

Nova Transmission Line

Plains Midstream Pipeline

Zama



Strategic Oil & Gas Ltd.Corporate Tax Pools, Reserves, and ARO

Significant tax pools & 2P reserve value. ARO managed through area based closure program.

Corporate Reserves (December 31, 2018)

ReservesOil Gas Oil Equivalent BT@0% BT@5% BT@10%

(Mbbl) (MMcf) (Mboe) $M $M $MMProved Developed Producing 2,476 5,278 3,356 $30,135 $25,505 $21,541Proved Developed Non-Producing 345 905 495 $6,614 $6,367 $5,747Proved Undeveloped 2,304 8,871 3,782 $47,849 $31,173 $20,172

Total Proved 5,125 15,055 7,634 $84,598 $63,045 $47,460Total Probable 5,348 15,339 7,904 $170,798 $96,796 $59,735Total Proved + Probable 10,473 30,394 15,538 $255,396 $159,841 $107,195

An election can be filed with the CRA for the residual resource pools (CEE, CDE, COGPE) to be transferred to the purchaser if substantially all of the assets are acquired.

These “successored” pools can be used against income from acquired properties.

The CRA considers substantially all of the assets to mean ≥ 90%.

Corporate Tax Pools

Management AER ARO Planned Schedule (2019 – 2028)

Year Business Unit Prospect Est Cost Scope2020 Marlowe/Steen River Ratz $500,000 3 facilities and associated pipelines2020 Bistcho Tate $820,000 4 wells and 1 facility2021 Marlowe/Steen River Russet $1,536,000 6 wells, 5 facilities and associated pipelines2022 Marlowe/Steen River Lessard $2,090,000 12 wells, 5 facilities and associated pipelines2022 Bistcho Larne Expiries $346,000 2 wells, 1 facility and associated pipeline2022 Marlowe/Steen River Jackpot Expiries $355,000 2 wells and 1 pipeline2022 Southern AB Conrad North Expiry $147,500 1 well and 1 facility2023 Marlowe/Steen River Jackpot $1,862,000 8 wells, 6 facilities and associated pipelines2023 Bistcho Cameron Hills, AB $511,000 2 wells and 1 facility ( road to H-03 open )2023 Southern AB Conrad North Expiry $132,500 1 well and 1 facility2024 Marlowe/Steen River Dizzy $1,015,000 4 wells, 3 facilities and associated pipelines2024 Marlowe/Steen River Lutose $1,621,000 9 wells, 3 facilities and associated pipelines2025 Bistcho Bistcho North $1,070,000 4 wells, 4 facilities and associated pipelines2025 Bistcho Super West $1,870,000 6 wells, 6 facilities and associated pipelines2026 Bistcho Larne $3,280,000 18 wells, 11 facilities and associated pipelines2027 Southern AB Conrad South $3,960,000 18 wells, facilities and associated pipeline2028 Southern AB Conrad North $955,000 10 wells, single well battery2028 Southern AB Taber $1,512,500 13 wells, facilities and associated pipelineARO Total $23,583,500

2020 ARO spend of $1.3MM; AER ARO commitment expected to increase annually by ~$250M

Classification Rate Amount ($MM)

Non Capital Losses 100% $337.9Cumulative Eligible Capital 7% $0.1Canadian Exploration Expenses (CEE) 100% $34.8Canadian Development Expenses (CDE) 30% $109.7Canadian Oil & Gas Property Expenses (COGPE) 10% $14.9Undepreciated Capital Cost (UCC) Various $55.6Total $553.0



Strategic Oil & Gas Ltd.Corporate Historical Financial Performance

On November 26, 2018 the Company’s convertible debentures were converted into equity. Currently, SOG’s only secured debt is $15MM in First Lien Notes owing to GMT Capital and affiliates.

Balance Sheet – Unaudited (C$ 000’s)Year End December 31 FY2016 FY2017 FY2018

AssetsCurrent assetsCash & cash equivalents $50,802 $13,138 $12,405 Term deposits 4,667 4,522 4,472 Inventory 108 159 85 Trade & other receivables 3,580 4,011 1,636

Total Current Assets 59,157 21,830 18,598

Net Property, Plant & Equipment 175,073 155,108 112,363 Exploration & Evaluation Assets 14,438 9,651 9,364 Total Assets $248,668 $186,589 $140,325

LiabilitiesAccounts payable & accrued liabilities $5,760 $5,553 $3,580 Accrued interest on convertible debentures 2,633 2,836 -Decommissioning liabilities 3,441 3,190 6,661

Total Current Liabilities 11,834 11,579 10,241

Convertible debentures 84,489 94,323 -First Lien Notes - - 14,218 Decommissioning liabilities 49,210 59,303 62,954 Total Liabilities 145,533 165,205 87,413 Shareholder's EquityShare capital 360,073 365,466 490,726 Warrants - - 318 Equity component of convertible debentures 9,878 10,247 -Contributed surplus 11,063 13,052 14,263 Deficit (277,879) (367,381) (452,395)

103,135 21,384 52,912 Total Liabilities and Shareholder's Equity $248,668 $186,589 $140,325



Strategic Oil & Gas Ltd.Corporate Historical Financial Performance

Income Statement – Unaudited (C$ 000’s)Year End December 31 FY2016 FY2017 FY2018

RevenuePetroleum & natural gas sales $23,878 $37,867 $32,963 Royalties (3,283) (4,222) (5,701)

Revenues, net of royalties 20,595 33,645 27,262 Realized Loss on Risk Management Contracts - - (79)Finance Income 216 355 170

Total Revenue $20,811 $34,000 $27,353

ExpensesOperating $14,320 $18,714 17,875 Transportation 559 988 470 General & administrative 5,007 5,742 5,307 Finance costs 10,313 12,383 22,308 Stock‐based compensation 509 2,006 1,211 Depletion, depreciation & amortization 13,132 17,817 14,786 Impairment charge (reversal) (52,733) 58,800 45,000 Revaluation on decommissioning liabilities - 7,190 6,347 Change in fair value of conversion option 278 - -Gain on disposal of property, plant & equipment (40) - (774)

(8,655) 123,640 112,530

Operating income (loss) before taxes 29,466 (89,640) (85,177)Deferred tax recovery 3,776 138 163

Net income (loss) $33,242 ($89,502) ($85,014)

EBITDA – Unaudited (C$ 000’s)Year End December 31 FY2016 FY2017 FY2018Net Income (Loss) $33,242 ($89,502) ($85,014)Plus: Depletion, depreciation & amortization 13,132 17,817 14,786 Plus: Finance costs 10,313 12,383 22,308 Less: Deferred tax recovery (3,776) (138) (163)

EBITDA $52,911 ($59,440) ($48,083)Plus (Less): Impairment charge (Reversal) (52,733) 58,800 45,000 Plus: Revaluation on decommissioning liabilities - 7,190 6,347 Plus: Change in fair value of conversion option 278 - -Plus: Stock‐based compensation 509 2,006 1,211 Less: Gain on disposal of property, plant & equipment (40) - (774)

Normalized EBITDA $925 $8,556 $3,701



Strategic Oil & Gas Ltd.Sale and Investment Solicitation Process Guidance

Sale and Investment Solicitation Process Guidance The Company, assisted by KPMG in its capacity as Monitor pursuant to Strategic’s CCAA filing, seeks to initiate a sales process

and is seeking offers to purchase the assets or the shares of SOG. Upon receipt of a signed Confidentiality Agreement (“CA”), which has been provided in conjunction with this Information

Memorandum, access will be provided to the Project Meteor Virtual Data Room (the “VDR”). The VDR contains financial,operational, legal, geological, tax and other information relating to all assets available under the Sale and Investment SolicitationProcess.

Bidding Procedures and Timelines To facilitate the bid process, the Company’s counsel is preparing a purchase agreement template. This template reflects the

procedures outlined in the SISP and will be distributed to interested parties via the VDR. The Company encourages all interested parties to review the SISP that is available in the VDR and can also be found at:

http://home.kpmg/ca/strategic. The Company would advise that all parties familiarize themselves with the SISP document, however, some of the key

commercial aspects of the sales process are highlighted below: As Is, Where Is – the sale will be on an "as is, where is”, "without recourse” basis. Qualified Purchase Bids – all qualified bids should contain the following:

o Authorized and executed purchase agreement (from the aforementioned template);o Proof of financing;o Full disclosure on the bidding entity and any direct or indirect ownership;o Evidence of authorization and approval by board of directors;o No financing condition;o No due diligence condition;o Evidence of conditional approval from the Alberta Energy Regulator to complete the proposed transaction; and,o A Proposed target closing Date of no later than September 6th, 2019.

Bid Deadline – Qualified Purchase Bids must be received before 12:00 PM MST on July 26th, 2019 Deposits – bids must be accompanied by a refundable deposit equal to 10% of the proposed gross purchase price. Wire

instructions to the Company’s legal counsel will be made available in the VDR.Stalking Horse Bid Zama 10% non-operating working interest has a $1.5MM Stalking Horse Bid on asset from the 90% working interest partner. Working interest partner has right of first refusal on sale of the asset. Fully executed copy of Zama asset purchase agreement is available in electronic data room. Any party wishing to bid on asset is to use the asset purchase agreement template made available in VDR. Superior Proposal – A superior bid to the Stalking Horse Bid, must exceed the Stalking Horse Bid by the minimum of the sum

of:o $75,000 fee payable to the Stalking Horse Bidder (the “Break Fee”); plus,o The incremental increase amount of $150,000.

Offers for the Zama 10% non-operating working interest must be received before 12:00 PM MST on June 21st, 2019

All bids will be subject to AER Review and will ultimately require Court Approval. Further information concerning the SISP isavailable in the virtual dataroom and on the Monitor's website (http://home.kpmg/ca/strategic).If there are any discrepancies between this guidance and the SISP, the SISP should be relied upon.

Mark VoddenVice President

Tel: 403 648 [email protected]

Jon GrecuAssociate

Tel: 403 697 6879 [email protected]

Tariq SaadAnalyst

Tel: 403 691 [email protected]

ContactsGrant Brown

Managing DirectorTel: 403 648 3069

[email protected]

http://home.kpmg/ca/strategic

mailto:[email protected]






Strategic Oil & Gas Ltd.Disclaimer

This Information Memorandum (“IM” or the “Document”) related to the potential sale of assets of Strategic Oil & Gas Ltd. andStrategic Transmission Ltd. (collectively, “Strategic Oil & Gas”, “SOG” or "Company") has been compiled by KPMG Inc.(“KPMG”) solely for information purposes.

The information contained in this Document was obtained from SOG, management and from other sources. The Document is forthe use of the recipient in order to assist such recipient in deciding whether it wishes to proceed with an in-depth investigation of theCompany with a view to making a binding offer for shares or assets of the Company. The Document is not an offer to sell or asolicitation of an offer to purchase securities of the Company or any entity or to engage in any other transaction. It has beenprovided solely to assist the recipient in evaluating the Company. It is not, nor is it to be construed under any circumstances as, aprospectus, a public offering of securities, or an offering memorandum as defined under any applicable securities legislation. ThisDocument does not contain all of the information that would normally appear in an offering registered under Canadian securities lawor the United States Securities Act of 1933.

The information contained herein was prepared to assist interested parties in making their own evaluation of the Company and doesnot purport to contain all the information that prospective investors may require. Prospective investors should conduct their owninvestigation and analysis of the Company and the information contained in this Document as well as any additional informationprovided by KPMG and the Company.

This Document includes certain statements, estimates and projections with regard to the Company which reflect variousassumptions made by representatives, employees, contractors, and management of SOG concerning anticipated results which, bytheir nature, may or may not prove to be correct. None of KPMG or SOG, management, directors, officers, employees, contractors,or advisors make any representation or warranty as to the accuracy of these statements, estimates or projections.

None of KPMG or its affiliated or related partnerships and corporations or their respective directors, officers, partners, employees oragents, or SOG or its directors, officers, management, employees, contractors, advisors or agents, makes any representation orwarranty as to the accuracy or completeness of the Document and will assume no liability for any representations (express orimplied) contained in, or for any omissions from, the Document, or for any other written or oral communications transmitted toprospective investors in the course of their evaluation of the Company. An investor will only be entitled to rely on thoserepresentations and warranties contained in the definitive agreement or agreements which constitute the divestiture.

KPMG was retained by the Company to assist with a potential transaction and KPMG Inc. operates as a discretely managedfinancial advisory business of KPMG LLP.

Recipients of this Document shall not be deemed to be clients of KPMG and KPMG shall accordingly not be responsible to suchrecipients for providing the protections afforded to clients of KPMG or for providing advice in relation to any transaction orarrangement referred to herein.

All financial information in this Document is shown in Canadian dollars unless otherwise stated and no financial information hasbeen audited or subject to other form of assurance unless otherwise stated.

The prospective financial information included in the Document was not prepared with a view toward compliance with the publishedguidelines of (i) any securities regulator including the U.S. Securities and Exchange Commission, or (ii) any accounting or auditingregulatory body including Chartered Professional Accountants (“CPA”) Canada. KPMG CF has not compiled, examined, orperformed any procedures with respect to the accompanying prospective financial information, and accordingly, do not express anopinion or any other form of assurance with respect thereto. The Company and KPMG CF expressly disclaim all responsibility forthe validity, reasonableness, accuracy or completeness of such statements, estimates and projections.

Forward Looking Statements

The Document includes certain statements, estimates and projections with respect to the Company’s anticipated futureperformance. In some cases, the recipient can identify forward-looking statements by terms such as ‘may,’ ‘will,’ ‘should,’ ‘could,’‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’, “due”, or ‘continue’ or the negative ofthose forms or other comparable terms. The Company’s forward-looking statements involve known and unknown risks,uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materiallydifferent from any future results, performance or achievements expressed or implied by the forward-looking statements. As a resultof these uncertainties, the recipient of the Document should not place undue reliance on the Company’s forward-lookingstatements. The Company is under no obligation to update any of these factors or to publicly announce the result of any revisions toany of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event orotherwise.

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