There are primarily three types of risks in evaluating any oil and gas investment—technical, land, and economic: Other types of risks not listed here. The following is a summarized risk/challenge assessment of oil and gas investment:

Technical

• Geoscience—predicting what’s deep in the earth is difficult even with current technology.

• Engineering—estimated hydrocarbon recovery can significantly change based both on reservoir and wellbore conditions.

• Operator—Xplora does not plan to operate; the risk is finding a good operating company to take the Xplora deal.

• Operations—drilling is a difficult process and can result in significant cost overruns or even loss or shortening of wellbore. Completion is very complex process, and the risk is the reservoir may not respond as predicted. Production has risks as well especially as wells age.

Acquisitions

• Land may not be available in areas of interest.

• Land title may be so complex that land costs increase.

• Governance may change to restrict the availability of land.

Economic

• Commodity prices fluctuate over time.

• Business climate may change and make selling the prospects difficult.

• Connections to nearby gas lines may be required.

• Complications in drilling, completion and production can cause negative changes to the expected rate-of-return (ROR).