# Reserves and Resources

## Reserves

Valeura’s reserves in Turkey as at December 31, 2016 are summarized below in Table 1. The Company engaged DeGolyer and MacNaughton ("D&M") to prepare a report ("D&M Reserves Report") dated March 14, 2017, relating to the Company’s reserves in Turkey. These reserves exclude the TBNG reserves acquired effective February 24, 2017.

### Table 1 Valeura Working Interest Reserves at December 31, 2016

D&M is in the process of completing a reserves report for year-end 2017, which is expected to be released before March 31, 2018.

## Prospective Resources

Valeura’s prospective resources in the Thrace Basin of Turkey as at December 31, 2017 are summarized below. The Company engaged D&M to prepare a report ("the D&M Resources Report") dated February 6, 2018.

The D&M Resources Report was prepared using the guidelines outlined in the Canadian Oil and Gas Evaluation Handbook ("COGEH") and in accordance with NI 51-101 and is valid at December 31, 2017. D&M evaluated the unconventional prospective resources attributable to the Teslimkoy/Kesan basin-centered gas prospect on Valeura’s lands in the Thrace Basin of Turkey. The working interest lands included comprise the deep formations (generally below 2,500 m depth) on the Corporation’s Banarli licenses (50% working interest), TBNG JV West Thrace lands (31.5% working interest), and TBNG JV South Thrace lands (81.5% working interest).

Table 2 below summarizes D&M's estimates of Valeura's working interest prospective natural gas resources (defined as "conventional natural gas" under NI 51-101). These numbers as reported by D&M are for the complete gas stream and explicitly include condensate resources (defined as "natural gas liquids" under NI 51-101) which are entrained in the natural gas. Sales gas volumes would be nominally lower than those presented in Table 1. Table 3 shows the amount of condensate that would be recovered associated with the production of the natural gas volumes shown in Table 2.

### Table 2 Valeura Working Interest Natural Gas Prospective Resources at December 31, 2017^{(6)(7)(8)(9)(10)}

The broad range of recoverable gas from 3.2 to more than 20 Tcf is a function of the uncertainty in the various components of the assessment including recovery factor. There has been very limited stimulation and production testing from the over-pressured Teslimkoy and Kesan formations in the Thrace Basin, and as yet there is no production data. To determine potential recovery factors, D&M have utilized their experience in analogous basins. The prospective resources in Table 2 and 3 assume a low recovery factor estimate of approximately 25%, a best and mean estimate of 40% and high estimate of 55%. Significantly more delineation drilling, stimulation, and testing will be required to confirm that gas can be commercially recovered from the prospect, and to generate type curves that can be used in a predictive sense. All of Valeura's prospective resources were sub-classified into the project maturity subclass of 'prospect'.

### Table 3 Valeura Working Interest Natural Gas Liquids Prospective Resources at December 31, 2017^{(6)(7)(8)(9)(10)}

D&M has assigned a chance of discovery of 70%. This high chance is driven by: (1) the hundreds of legacy wells drilled in the Thrace Basin which support the geological model for the Teslimkoy and Kesan Formations; (2) the over-pressured natural gas which was encountered and tested at Yamalik-1, and (3) the seven legacy wells surrounding the basin which all encountered over-pressured gas below 2,500 m.

D&M has assigned a chance of development of the natural gas prospective resources of approximately 74%, which is a product of the probability of threshold economic field size and probability of development. This high chance of development reflects that existing hydraulic fracturing technology is being applied, well depths and costs are not expected to be excessive, sales pipeline infrastructure already exists in the area and there are ready domestic markets in Turkey for domestic natural gas and condensate sales. This results in an overall chance of commerciality of 51.1% which is the product of chance of discovery and chance of development. The resulting risked mean estimates of conventional natural gas prospective resources are shown in Table 2, as risked for chance of commerciality.

### Footnotes to Table 2 and 3

**(1)** Valeura's working interest in the lands (exploration licences and production leases) that are encompassed (all or a portion thereof) in the basin-centered gas prospect in the Teslimkoy/Kesan formation is as follows: Banarli 50%, West Thrace 31.5% and South Thrace 81.5%.

**(2)** The low estimate is the P90 quantity. P90 means there is a 90% chance that the estimated quantity will be equaled or exceeded.

**(3)** The best estimate is the P50 quantity. P50 means there is a 50% chance that the estimated quantity will be equaled or exceeded.

**(4)** The high estimate is the P10 quantity. P10 means there is a 10 % chance that the estimated quantity will be equaled or exceeded.

**(5)** The mean estimate is the probability-weighted average (expected value).

**(6)** The totals are the arithmetic summation of probabilistic estimates. Arithmetic summation may produce invalid results except for the mean.

**(7)** Unconventional prospective resources, as prepared by D&M, are those quantities of petroleum that are estimated, at a given date, to be potentially recoverable from undiscovered unconventional accumulations by application of future development projects. Unconventional prospective resources may exist in petroleum accumulations that are pervasive throughout a large potential production area and would not be significantly affected by hydrodynamic influences (also called continuous-type deposits). Typically such accumulations (once discovered) require specialized extraction technology (e.g. massive fracturing programs for tight gas). Tight gas occurs within low permeability reservoir rocks, which are rocks with matrix porosity of 10 percent or less and permeability of 0.1 millidarcies or less, exclusive of fractures. Tight gas can be regionally distributed (e.g. the basin-centered gas prospect in the Thrace Basin evaluated herein), rather than accumulated in a readily producible reservoir in a discrete structural closure as in a conventional gas field.

**(8)** Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of the unconventional prospective resources estimated herein will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the unconventional prospective resources evaluated. Estimates of the unconventional prospective resources should be regarded only as estimates that may change as additional information becomes available. Not only are such unconventional prospective resources estimates based on that information which is currently available, but such estimates are also subject to uncertainties inherent in the application of judgmental factors in interpreting such information. Unconventional prospective resources should not be confused with those quantities that are associated with contingent resources or reserves due to the additional risks involved. Because of the uncertainty of commerciality and the lack of sufficient exploration drilling, the unconventional prospective resources estimated herein cannot be classified as contingent resources or reserves. The quantities that might actually be recovered, should they be discovered and developed, may differ significantly from the estimates herein.

**(9)** The unconventional prospective resources estimates contained in the D&M Resources Report are expressed as gross and working interest unconventional prospective resources. Table 1 and 2 summarizes Valeura's working interest unconventional prospective resources, which incorporate the fraction of potential hydrocarbon pore volume owned or partially owned by Valeura and Valeura's working interest ownership, before deduction of any associated royalty burdens. Recovery efficiency is applied to unconventional prospective resources in Table 1 and 2.

**(10)** The estimation of resources quantities for a prospect is subject to both technical and commercial uncertainties and, in general, may be quoted as a range. The range of uncertainty reflects a reasonable range of estimated potentially recoverable quantities. Estimates of petroleum resources herein are expressed using the terms low estimate, best estimate, high estimate and mean estimate (unrisked and risked) to reflect the range of uncertainty.

**(11)** The chance of commerciality is defined as the product of the chance of discovery and the chance of development. Chance of discovery is defined in COGEH as the estimated probability that exploration activities will confirm the existence of a significant accumulation of potentially recoverable petroleum. Chance of development is the estimated probability that, once discovered, a known accumulation will be commercially developed. Chance of discovery in the D&M Resources Report is referred to as the probability of geologic success (Pg), which is defined as the probability of discovering reservoirs that flow hydrocarbons at a measureable rate. The Pg is estimated by quantifying with a probability, each of the following geologic chance factors: trap, source, reservoir and migration. The product of the probabilities of these four chance factors is Pg. Pg is predicated and correlated to the minimum case prospective resources gross recoverable volume(s). Consequently, the Pg is not linked to economically viable volumes, economic flow rates or economic field size distributions. In the D&M Resources Report, two factors have been considered in determining the chance of development as follows: Chance of development = Ptefs (probability of threshold economic field size) x Pd (probability of development) D&M defines Ptefs as the probability of discovering an accumulation that is large enough to be economically viable. Ptefs is estimated by using the prospective resources potential recoverable quantities distribution in conjunction with the threshold economic field size (TEFS). TEFS is the minimum amount of the producible petroleum required to recover the total capital and operating expenditure used to establish the potential accumulation as having a potential present worth at 10% equal to zero using the most likely price scenario. D&M defines Pd as the probability that a given discovery will be a viable development project. It takes into account the chance that the discovered target zone will flow the predicted hydrocarbon phase(s) at a commercial rate. It also considers the chance that the target zone can be mechanically completed and appraised in a reasonable time and in compliance with the projected cost schedule. The Pd is estimated by the quantification and product of these two chance factors.

**(12)** The risked mean estimate of conventional natural gas prospective resources = the unrisked mean estimate x chance of discovery x chance of development.

**(13)** The conventional natural gas (raw gas in the D&M Resources Report) is the total gas produced from the reservoir prior to processing or separation and includes all nonhydrocarbon components as well as any gas equivalent of condensate.

**(14)** The natural gas liquids prospective resources are included in the conventional natural gas prospective resources.