Ann: Trading Halt, page-6

Hi mate, thanks for the complement

If this sounds a bit uncharitable, then I apologise , but this raise should not be a surprise to anyone who has invested in SHE.

For SHE, this is exactly what they are in the business for, spending money to develop the BRK assets on a well bore only basis and receive the production revenue..... at 2 cents, the $3 million raise is basically the catch up of what should have occurred 2 years ago when they relisted . As mentioned before, had SHE listed with SOI of 600 million shares and $8 million cash 2 years ago, the Jewell well would have already been drilled, the SHE equity would have been at least 50 % and if the well came in as modeled, who knows where the share price would be now.

So if I was a SHE holder I would be jumping out of my skin with excitement, considering around 3 months ago, SHE was in a position of market obscurity and trading below 1 cent and raising this cash would have been a lot more painful. The market has given SHE a second chance to raise this capital.

This will get SHE ~30% of the Jewell well , and set them up as a significant producer, albeit with a steep decline as per the predicted production curve below



The base case has an IP rate of 1300 BOEPD , made up of 800 BOPD and 3mmcfcfgpd...the oil rate drops off quite quickly as can be seen but at the well payout, ( at prices below current) is projected to be less than 2 years. The high case is an IP of 1800 BOEPD and this is achievable considering the results of offset operators in the neighbouring DSU's

The share price rerate that hopefully will occur will allow SHE to raise at much higher prices ( eg oppie exercise) and allow them to participate at higher equity positions in the other BRK DSU's , Rangers and Flames which will have similar but slightly lower metrics to the Jewell well, where each participation will come with significant initial flush production allowing rapid capital recoupment and the a longer , shallower tail production that will be added to the previous wells building up a base of long term production.


As a BRK holder, I am not enthralled with the fact that we are heavily diluting, I would rather dilute the jewell asset and give away more of the PUD position, and production cashflow to get the well drilled without a massive BRK raising which is a permanent dilution of the WHOLE asset base..... but that is not possible in the current climate. As the market has not rewarded BRK for it's asset build and kept it's SP down, along with the fact that there are no free carries being funded in the USA means , to get the well drilled, both companies need to raise cash. For SHE , that is the business model, for BRK, it is a reluctant necessity.

Basically, Jewell participation is the enabling asset for both BRK , and SHE, which should initiate a rerate of both companies, will be repeated as the cash comes in to fund the other DSU's in the BRK book and the drilling cascade should proceed at a pace not restricted by lack of capital.

Cheers

Dan