Re: Update to CPR (January 20th) with regard to progress in the Danica Resources 1/08 Licence, onshore/offshore Denmark.

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1 411 North Sam Houston Parkway East, Suite 400, Houston, Texas USA T F W William Kelleher: Chairman and CEO Georges Sztyk: Executive Director, Finance Peter Sztyk: Executive Director New World Oil & Gas Plc Ogier House St. Helier Jersey JE4 9WG UK Nominated Advisor: Beaumont Cornish Attn: Roland Cornish 2nd Floor, Bowman House 29 Wilson Street London EC2M 2SJ 31 st December 2012 Dear Sirs, Re: Update to CPR (January 20th) with regard to progress in the Danica Resources 1/08 Licence, onshore/offshore Denmark. In November 2012, RPS Energy ( RPS ) was requested by New World Oil & Gas Plc ( New World ) to provide an update to the Competent Persons Report ( CPR ) dated 20 th January 2012 which took the form of a formal Letter of Opinion ( Letter ) regarding the prospectivity and future exploration program of the Danica Resources 1/08 Licence, onshore/offshore Denmark. This update considers the progress made since the CPR, namely seismic acquisition, processing, interpretation and the formal assignment to New World of working interest in the licence. New World is an AIM listed company and, as such, the Letter has been written in accordance with the requirements of the AIM Guidance Note for Mining, Oil and Gas Companies dated June 2009 (the AIM Guidance Note ). In accordance with your instructions to us and the requirements of the AIM Guidance Note, we confirm that we: 1. are professionally qualified and a member in good standing of a self-regulatory organisation of engineers and/or geoscientists including SPE, SPEE, EI, AAPG, Geological Society and EAGE; 2. have at least five years relevant experience in the estimation, assessment and evaluation of oil and gas assets; 3. are independent of the Company, its directors, senior management and advisers; 4. will be remunerated by way of a time-based fee and not by way of a fee that is linked to the Admission or value of the Company; 5. are not a sole practitioner; 6. have the relevant and appropriate qualifications, experience and technical knowledge to appraise professionally and independently the assets, being all assets, licences, joint ventures, farmouts, or other arrangements owned by the Company and its subsidiary undertakings (the Group ) or proposed to be exploited or utilised

2 by it ( Assets ) and liabilities, being all liabilities, royalty payments, contractual agreements and minimum funding requirements relating to the Group s work programme and Assets ( Liabilities ); and 7. consider that the scope of this Update is appropriate, given the Group s Assets and Liabilities and includes and discloses all information required to be included therein and was prepared to a standard expected in accordance with the AIM Guidance Note; and, 8. Save as disclosed in this Update, there has been no material change in the data and information provided herein. Neither RPS, nor any of its directors, staff or sub-consultants who contributed to this report has any interest in the Company; or any of the advisers to the Company; or the Assets; or the outcome of the Offer. In compiling this Letter we have used the definitions and guidelines set out in the Petroleum Resources Management System ( PRMS ) by the SPE/WPC/AAPG/SPEE in 2007 as the internationally recognised Standard required by the AIM Guidance Note as above. 1. BACKGROUND The 20 th January 2012 CPR described the general prospectivity of the Danica Resources licence which, at that time, were 80% owned by Danica Resources ( DR ). The CPR also presented the terms and intended timing of New World s farm-in and take-up of Operatorship of the licence. The purpose of this update is to report on the seismic operations and progress made since the original CPR. The content of the original CPR will not be repeated here and it is assumed that the reader of this update is familiar with the previous CPR. 2. DESCRIPTION OF OPERATIONS AND LICENCE STATUS New World Resources ApS ( NWOG Resources ) is a wholly owned subsidiary of New World Oil & Gas Plc ( NWOG or New World ) and completed Phase 1 of their seismic obligation (including interpretation) to Danica Resources ApS in November New World Resources Operations ApS is now operator of the 1/08 licence, which has been approved by the Government and partner, Danish North Sea Fund. Danica Resources ApS is a Danish company formed for the purpose of obtaining and exploring the northern fringe of the Southern Permian Basin covered by licence 1/08 in southern Denmark along trend to the west of proven oil and gas fields in a similar geological setting in Poland and Germany. The licence covers an area million acres (~6,420 km 2 ) and Danica Resources originally had an 80% working interest ( WI ) with a single partner, Danish North Sea Fund, entitled to the remaining 20%. Danica Resources is a sister company to Danica Jutland, with whom New World is already partnering on the 1/09 and 2/09 licences a few miles to the north-west of licence 1/08. The farm-in terms are similar to those that were successfully negotiated and fulfilled for the Danica Jutland licences. Under the terms of a farm-out agreement (the Danica Resources FOA ) New World will acquire Danica Resource s entire WI and immediately assumed Operatorship as described above in the following stages: Achieved: New World has completed the permitting, acquisition and processing of the order of ~166 km of 2D seismic. This work was completed in return for which New World received 12.5% WI effective 12 th August

3 In progress: As of 1 st October 2012, Phase 2b commenced and New World will complete the permitting, acquisition, processing and interpretation of further 2D and/or 3D if needed to retain the hydrocarbon prospective onshore and offshore areas of the licence, the size and design of which has been mutually agreed between Danica Resources and New World. This work is to be completed by 30 th September 2013 in return for which New World will receive a further 12.5% WI in the licence. The Phase 3 work program (see below) requires an exploration well to be drilled by 30 th September 2015 ( drill or drop option). In accordance with the Danica Resources FOA, if New World elects to drill a well on the licence, the well must be drilled by 30 th September 2014 in return for which New World shall receive the remaining 55% WI in the licence. The Danica Resources FOA specifies that a further well will be drilled by 30 th September 2015, provided a further drillable seismic-based prospect can be defined. Once New World has assumed Danica Resources 80% WI, Danica Resources shall remain entitled to a 5% overriding royalty from any production of hydrocarbons. In addition, a further staged cash and share payment of $500,000 has been agreed between New World and Danica Resources to cover previous sunk costs. $250,000 of these costs are to be paid in cash and $250,000 are to be paid in New World shares. The licence was granted to Danica Resources on 31 st March 2008 with a 6 year exploration period with provisions for extension. The minimum work program required by the Danish government is as follows: Years 1 & 2 ( Phase 1 ) Collate available data, conduct geochemical soilsurvey and create geological model using available seismic and literature references. This phase has been successfully completed albeit after an 18 month extension and one prospect has been developed called the Als Prospect. Years 3 & 4 ( Phases 2a & 2b ) Acquire 2D to better delineate certain leads (both onshore and offshore) followed by a 2D or 3D survey over selected leads. At the end of year 4 (30 th September 2013 after the extension to Phase 1) a drill or drop decision must be made. Years 5 & 6 ( Phase 3 ) A well must be drilled on the license by the end of year six (30 th September 2015). A summary of the assets in question is shown as Table 1 below. Licence Operator Working Interest Status Licence Expiry Licence Area Comments 1/08 New World % 2 Exploration 30 th Sept. 6,420 sq km Current commitments are seismic and/or the drilling of a well on the license Notes 1 Subject to approval by the Danish government and partner, Danish North Sea Fund, New World will be granted Operatorship upon the completion of the transaction between New World and Danica Resources. 2 New World plans to acquire up to 100% of Danica Resources working interest (80%) in the licence in accordance with a staged timetable which is established for the completion of certain work commitments required by the government. New World was assigned 12.5% WI in the licence as of 12 th August In return for the next phase of seismic a further 12.5% WI will be awarded by 30 th September 2013 (at the latest) and 80% WI once the licence has been drilled. 3 Provisions for extension exist. Table 1: Summary Table of Assets 3

4 3. REVIEW OF PHASE 1 SEISMIC 3.1. Location and Acquisition Details The 1/08 licence is located onshore/offshore southern Denmark consisting of part of Blocks 5410, 5411 and 5412 (see Figure 1). The licence is situated on the northern flank of the Southern Permian Basin ( SPB ) just to the south of the Ringkøbing-Fyn High ( RKH ) where the early Zechstein cycles are prognosed to contain reef and shoal trends similar to those seen on the northern flank of the Southern Permian Basin in Poland and Germany which have proven to be effective and productive oil and gas reservoirs. In addition to the Zechstein potential NWR has identified four leads in the underlying Rotliegendes and sixteen Triassic gas prospects in the Bunter Sandstone. The D survey was designed to confirm that features seen on the old 2D data were repeatable in the Zechstein and increase confidence in the presence of a trap at each level. More detail on the general hydrocarbon geology and prospectivity analysis is presented in the 20 th January 2012, CPR. Figure 1: Regional Location Map Source: Danica Resources The 2012 survey consists of eleven 2D seismic lines measuring a total of km in length (Figure 2). Figure 3 shows the 2012 survey in the context of the originally available 2D data on which the original leads were identified. The 2012 data was acquired by Tesla Exploration International beginning August 14, 2012 and completed on September 3, Processing was carried out by Denver based Excel Geophysical Services and completed on September 25, The data were acquired using Vibroseis and are of good quality particularly when compared to the previous vintages. Three active vibrators were used during the acquisition of each line generating a linear seismic sweep of Hz. The receiver spread was 240 channels in a split-spread configuration with 25 m receiver spacing. 4

5 Figure 2: 2012 Survey 2D line locations in pink Source: NW / DR Figure 3: Basemap showing all 2D line locations and leads Source: NW / DR 3.2. Leads and Prospects NWOG Resources has now identified seven Zechstein leads and one prospect based on available seismic data, surface soil geochemistry, some well data and a number of academic papers. These coincide with a feature on seismic that has the characteristics often associated with a carbonate build-up of some kind. In addition to the Zechstein potential, four Rotliegendes and sixteen Triassic (Bunter Sandstone) leads have been identified but some are based on very sparse data coverage. 5

6 Zechstein Leads Figure 4: All Zechstein Leads In the case of the Zechstein prospect and leads (Figure 4), the purpose of the 2012 survey was to confirm the presence of the Zechstein seismic character and begin the process of better defining the extent and shape of the features. Given the likely geomorphology of the Zechstein reservoir facies, the new data interpreted by New World could indicate reefal build-ups, although they look somewhat different to the reef character that is seen in the Jutland license (Northern Permian Basin). However, all the previously identified seismic based leads have been maintained in one form or other. The additional 2D lines that have been shot allowed New World to add four Zechstein leads. While some of these new leads already had existing seismic data, the new data offers better data quality to make an interpretation as discussed above. Figure 5 below shows the new Zn-5 lead with an old line on the left and the new one on the right. Figure 5: Zn-5 Old vs New Line 6

7 Lead Zn-6 is currently only defined by one seismic line and therefore more data is needed before RPS can assign any potential. On Langeland Island a new line was shot north-south but the Zechstein lead, Zn-7, has no seismic to demonstrate west-east extent. Two old north-south lines which have navigation data defining Zn-7, do not have associated trace data for one and poor data quality on the other. Figure 6 below demonstrates the difference in data quality between the old and new line. Zn-8 is defined by three older vintage lines which show a possible carbonate mound. One of these lines has not been migrated which would alter the size of the current area given to the lead and make it smaller. Figure 6: Zn-7 Old vs New Line This is a large license, and should a discovery be made on drilling a well-defined Zechstein prospect, then the area would offer significant further exploration potential Als Prospect Figure 7: Als Prospect Bunter (blue), Zechstein (orange), and Rotliegendes (red) 7

8 The lines over the Als Prospect have generally firmed up the presence of the western bounding fault causing the proposed north-south palaeo-high ridge which juts out from the interpreted platform edge (running ESE to WNW) at the far west of the licence. The palaeo-high sets up the opportunity for a carbonate build-up within the Zechstein which may or may not require a bounding fault to the north to counter the pronounced up-tonorth dip as the Southern Permian Basin shallows to the north. An under-lying Rotliegendes lead has been proposed which relies entirely on a significant fault being present to the north of the structure to counter the general up-to-the north dip described above. Unfortunately, the new data has not illuminated this fault any more than the previous data and this remains a key risk for the Rotliegendes target. If no significant throw exists, the roll-over seen on a nearby roughly north-south older line (see Figure 8) suggests a much smaller closure may be possible but it is unlikely that the volume of gas such a closure could hold would be commercial. In such an instance, the Als Prospect would need to stand-alone based on the potential hydrocarbons that might be present in the Zechstein alone. Figure 8 shows 2D Line which demonstrates the potential for limited closure if the northern bounding fault is not proved up (particularly at the Rotlegendes level). Figure 8: Line

9 Rotliegendes Leads Figure 9: All Rotliegendes Leads Of the three previously identified Rotliegendes leads (R1, R2, and R3), no new seismic data was shot with the exception of a small portion of the northwest corner of R1 which is also part of the Als Zechstein Prospect (Figure 9). The new Rotliegendes lead, R4, underlies the Zn-5 Zechstein lead area on Lolland Island and is defined by a reasonable grid of older 2D lines and one new line. Several faults have been identified on the new 2D line which were poorly imaged on the older vintage lines (Figure 10). These faults could provide a trapping mechanism for the dry gas (or oil as proposed by NWR) usually associated with other Rotliegendes fields on trend. Figure 10: R4 Old Line vs New Line The Roedby-2 well, which is a dry hole in the Rotliegendes, is located down-dip of the structure as currently mapped and relies on partial fill for the R4 prospect to be valid. As 9

10 a result, NWR has taken their prospective area at a shallower closing contour (see Figure 11 below) Triassic Leads Figure 11: R4 Lead In the original work reviewed by RPS, fifteen Triassic gas leads were identified and it was noted that most of the leads require further seismic work to become drillable prospects. Seismic coverage was minimal over many of the leads. One lead was added onshore overlying the R4 and Zn-5 lead areas where one of the new lines was shot. This is the only new 2D line that has been shot over a Triassic lead. All of the current leads have been identified by structurally high areas based on a time structure map. A quick depth conversion was done by RPS in Kingdom by creating a velocity map using calculated average velocities at the available well control and applied to the Bunter SS time horizon and grid. Most of the leads maintained their original architecture with a few becoming smaller or closure becoming questionable, especially the B14 lead as seen in Figure 12 below. Additional 2D would help to reduce the risk of this lead. 10

11 Figure 12: B14 Bunter Offshore Lead Time vs Depth Structure 3.3. Indicative Volumetric Assessments The majority of the leads and prospects are still very immature and require further delineation. The Als Prospect is more mature but is still poorly delineated on its northern edge as described in Section RPS has included the calculated volumetrics on the Als Prospect from the previous report as no changes have been made at this time. The input parameters used for the volumetrics along with the outcomes for the Als Prospect are summarized in Table 2 below: Variable Zechstein Rotliegendes P90 P50 P10 P90 P50 P10 Area 10.8 km 2 Not input 28.8 km km 2 Not input 53.7 km 2 Thickness 30 m 45 m 60 m 60 m 80 m 100 m Porosity 10% 15% 20% 14% 17% 20% Sw 35% 30% 25% 35% 30% 25% Bo / FVF OIIP/GIIP 212 MMbo 495 MMbo 928 MMbo 775 Bcf 1877 Bcf 4444 Bcf Rec. Factor 15% 20% 25% 65% 75% 85% Recoverable Oil / Gas 40 MMbo 97 MMbo 192 MMbo 575 Bcf 1401 Bcf 3380 Bcf Table 2: Input parameters and results for volumetrics Als Prospect 3.4. Geological Risking In the previous report, RPS assigned a geological risk at the Als Prospect of 1 in 8 to the current likelihood of discovering an oil accumulation in the Zechstein in the 1/08 licence and 1 in 9 to the current chance of discovering a gas in the Rotliegendes. For all other Triassic, Zechstein and Rotliegendes leads the GPoS was determined to be 1 in 12. This was based largely on bench-marking against Otis and Schneidermann s Rule of Thumb for Geological Risk Assessment 1 assigns a range of risk of between 1 in 8 to 1 1 Otis, R.M. & Schneidermann, N A Process for Evaluating Exploration Prospects, AAPG Bulletin 81 (7) pp

12 in 16 as an appropriate level of risk for a proven play in an unproved area. The data over the Zechstein leads has confirmed some interesting seismic character but has not (nor was it designed to) significantly clarified likely trap or reservoir presence. Consequently, RPS believes that the risk originally assigned to the Zechstein leads (and other reservoirs) remains appropriate Indicative Economics No update has been run on indicative economics which remain as per 20 th January 2012 report. 4. CONCLUSIONS New World Resources ApS is a wholly owned subsidiary of New World Oil & Gas Plc. New World Resources ApS currently has earned a 12.5% working interest ( WI ) in licence 1/08, onshore/offshore Denmark and has the option to earn up to 80% WI in return for completing the work commitments defined in the Danica Resources FOA. New World Resources Operations ApS became Operator in October 2011 after Government and partner approval. The licence covers a large portion of onshore/onshore Denmark and is located in an under-explored area and is on trend to existing plays further to the southeast of the Southern Permian Basin. As reported in our January 2012 report, the terms and forward commitments for the licences are reasonable, manageable and appropriately scaled to high grade the existing leads into drillable prospects should the results prove positive. The recent acquisition, processing and interpretation of approximately 166 km of 2D seismic met the Company s first phase of work obligations and are of better quality than previous vintages. However, the new grid has not supplemented the original data coverage sufficiently to de-risk the previously identified leads and prospects. The new data has provided sufficient encouragement to embark on the next phase of activity. This will require further targeted 2D data and possibly 3D seismic surveys on Falster and Lolland Islands over the Zn-2, 3 and 4 leads. The plan to acquire more seismic is an essential next step to identify a robust prospect (or prospects) but elements of the remaining geological risk will only be mitigated by drilling one or more wells. Key risks in all three plays are trap, source, and migration. The latest planned acquisition of seismic is shown in Figure 13 and was agreed with Danish North Sea Fund at the recent technical committee meeting ( TCM ) held on 12 th December New World Resources Operations ApS, as operator for license 1/08, has by letter dated December 19, 2012 submitted a request to the Danish Energy Agency to conduct a 2D seismic survey on Lolland and Falster in the license area. According to the exploration program the data acquisition will take place on land within the license area. According to the application, the survey will take approximately 4 weeks and is planned to be conducted in February and March 2013, with expected startup February 15, The acquisition of the survey is dependent upon favourable weather and road conditions in this time period. 12

13 According to the application it is planned to acquire 38.5 kilometers of 2D seismic data. The acquisition will use vibroseis equipment and will primarily be conducted on existing roads. New World Resources Operations ApS has since received approval from the Danish Energy Agency to conduct the planned seismic survey. Upon completion of this work, New World s working interest in the licences will increase to 25%. Figure 13: Forward plan - new 2D seismic lines (pink) Source: New World Indicative volumetrics based on the currently available data demonstrate a suitably wide range of uncertainty on the potentially in-place and recoverable hydrocarbons. New World has run screening economics based on the range of outcomes and concludes that in the event of discovery the projects are likely to be commercially attractive. RPS has reviewed the assumptions and other input parameters for the screening economics and finds them to be reasonable. Qualifications RPS is an independent consultancy specialising in petroleum reservoir evaluation and economic analysis. Except for the provision of professional services on a fee basis, RPS does not have a commercial arrangement with any other person or company involved in the interests that are the subject of this report. Andy Kirchin, Executive Vice President Consulting with RPS s Houston office, has evaluated the previous reports and data available to form this opinion. Mr Kirchin has 25 years of oil and gas experience. Other RPS employees involved in this work hold at least a degree in geology, geophysics, petroleum engineering or a 13

14 related subject and have at least five years of relevant experience in the practice of geology, geophysics or petroleum engineering. Consent RPS will not unreasonably withhold consent for the use of this Letter or information extracted from this Letter, provided that New World and/or its advisors comply the with extraction of information paragraph above and in accordance with Clause 7 of the Letter of Engagement covering this assignment. For the purposes of paragraph (a) of Schedule 2 of the AIM Rules, RPS accepts responsibility for the information contained in the Letter. This Letter relates specifically and solely to the subject assets and is conditional upon various assumptions that are described herein. This Letter must therefore be read in its entirety. Yours sincerely, Andy Kirchin RPS 14

15 APPENDIX A: GLOSSARY OF TECHNICAL TERMS AAPG AIM Guidelines AVO B bbls DHI EAGE EI Km m M MM Mstb MMstb MMscf/d MMstb sq km stb scf SPE SPEE TD TVD TVDSS WPC American Association of Petroleum Geologists Guidance covering the preparation of documentation for Disclosure purposes for Mining, Oil and Gas Companies dated June 2009 (the AIM Guidance Note ) Amplitude variation with offset Billion Barrels Direct hydrocarbon indicator European Association of Geoscientists and Engineers The Energy Institute Kilometre metres Thousand Million Thousand stock tank barrels Million stock tank barrels Millions of standard cubit feet per day Million stock tank barrels Square kilometres Stock tank barrels Standard cubic feet Society of Petroleum Engineers Society of Petroleum Evaluation Engineers Total Depth True vertical depth True vertical depth (sub-sea) World Petroleum Council 15