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June 1, 2011

Ing. Ramiro Cazar Ayala

Secretario de Hidrocarburos
Ministerio de Recursos Naturales No Renovables
Quito, Ecuador

Re: Singue Marginal Field Consorcio Petrolero Amaznico

Dear Mr. Secretary:

RPS has been asked to establish the fair value of the Singue Marginal Field contract dated
March 12, 2008 (the Agreement). RPS has also been asked to address the valuation of the
Agreement furnished by Consorcio Petrolero Amaznico (CPA).

At the most basic level, fair value is the value that a willing buyer with reasonable knowledge of
relevant facts would pay a willing seller for the rights conveyed under the Agreement. Various
methods exist to establish this value. Selecting the appropriate valuation method requires
analysis of the parties rights and obligations under the Agreement, the development history of
the relevant property as well as the prospects for future hydrocarbon production under the
Agreement. In selecting an appropriate valuation method, external data sourcessuch as
sales data relating to comparable properties or agreementsmust also be considered.
Depending on the circumstances, more than one valuation method may be required to arrive at
a fair value determination.

Where sufficient comparable sales data is available, fair value can be established by reference
to this data. Where sufficient data regarding the future hydrocarbon production potential under
the Agreement is known, fair value can be established using a discounted cash flow (DCF)
approach. Typically, a fair value determination under the DCF approach involves the application
of several of the following specific valuation methods in combination:

Rate-of-Return Method: This method calculates fair value as that purchase price which
provides for an acceptable rate of return on investment both before and after taxes.

Payout Time Method: Using this method the fair value is equal to the cumulative
undiscounted future net cash flow before tax for the first 2 to 5 years after the investment
has been made. As a rule of thumb, one-third of the remaining life of the investment is
considered as the maximum time length considered in this valuation.

Profit-to-Investment Ratio Method: This method calculates fair value by dividing the
expected undiscounted profit by the amount of the investment. Investors typically seek a
ratio of two or three to one or better.

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Ing. Ramiro Cazar Ayala
June 1, 2011
Page 2

Specified Fraction of the Present Worth of Future Net Income Method: Here, fair
value is estimated by use of a specified percentage of the present worth of the
Agreement.

Price per Barrel of Reserves in the Ground Method ($/BOE): For this method, gas
volumes are converted to equivalent barrels of oil on either a heating value or price ratio
basis. Comparable sales are often used to arrive at a representative $/BOE value.

Present Worth at a Specified Discount Rate Method: Fair value is considered the
present worth of the investment and its future cash flow using a specific discount rate.
The discount rate is often based on a firms weighted average cost of capital (WACC)
and often includes a property-specific risk premium to account for risks other than
reserves risks. These risks can include such things as political risk. It is important to
note that the WACC by itself produces a discount rate which has no component for
specific project risk.

Going Unit Price Method: This method is based on a percentage of the future
undiscounted revenue. Fair value for this method generally ranges from 40% of the
future undiscounted revenue of newer investments to 25% for older investments.

Price per Barrel per Day of Producing Rate Method ($/BOEPD): This method uses a
specified price per barrel per day of the producing rate for the first year of the remaining
life of the investment. Comparable sales are often used to arrive at a representative
$/BOEPD value.

The following discussion presents a summary of the history of the Singue Marginal Field based
on the available information along with our opinion as to the value associated with the block. A
summary of information reviewed and relied on in preparation of this report is shown in
Attachment 1.

The analysis included in this document is subject to change should additional information, not
listed in Attachment 1, be made available to RPS. Additionally, the conclusions expressed in
this document are preliminary in nature and are subject to change upon RPS reviewing
additional information made available by CPA.

Singue Marginal Field History

The Singue Marginal Field is located about 10 miles to the southeast of the Colombia/Ecuador
border in northeast Ecuador (Figure 1). The field was originally operated by Petroecuador. Two
wells have been drilled in the field (Figure 2). The Singue-1 well was drilled in December 1990
to a measured depth of 8,114 ft. The Alama-1 well was drilled to the east-northeast, structurally
downdip and found to be wet. No other details are available for the Alama-1 well. The first
production in Singue-1 has been reported as occurring in May 1991. The Singue-1 well was
shut in in 1997 at a rate of 150 bopd. Cumulative production for the well is reported to be 477
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June 1, 2011
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mbo from 1991 through 1997. Seismic data (2D) is reported to have been acquired in the field
in 1995 and 1996. No seismic data, well logs, tests, pressure data, completion information or
core data were made available for the block.

The Republic of Ecuador tendered an offer for a Crude Oil Exploitation and Additional
Hydrocarbons Exploration Agreement (20-year term) for the Singue Marginal Field in late 2006.
In a September 15, 2006 press release, Petroecuador announced a launch of tenders for eight
marginal fields which included Singue. In a March 12, 2008 press release, Ecuadors Ministry
announced the award of the Singue Marginal Field to CPA. The field was reported to have
remaining reserves of 2.04 MMBO with a December 1997 daily production rate of 173 b/d.

A Suelopetrol E & P press release in October 2008 indicated that the Singue Field was oil
productive from the Cretaceous Napo and Hollin fluvial sandstones. The drive mechanism was
reported to be rock and fluid expansion and water drive with a reservoir depth at 7,000 to 8,000
ft. Suelopetrol has reported cumulative production of 400 mbo for the Singue-1 well. The
average oil gravity is 25 degree API.

In September 2008, CPA applied for authorization to test the Singue-1 well, but could not obtain
permission from the authorities (DINAPAH) due to a requirement for an environmental study. In
January 2009, DINAPAH indicated that an environmental study would not be required. In
February 2009, Petroecuador informed CPA that it could not receive oil and water production
from the Singue-1 well at the Sansahuari station as set out in the contract due to limited
capacity. In May 2009, however, Petroecuador indicated that it could receive production at its
Tipishca station. In July 2009, Petroecuador apparently assigned the Singue-1 well access to
the Sansahuari in order to avoid contract modification. Force majeure was declared on the
Singue Field from ________ through ______. Nothing appears to have been done in the field
or to the well prior to termination of the contract in November 2010. Also, CPA does not appear
to have made any significant investments in the Singue Field.

Reserves

Reserves for the Singue-1 well of 2.04 MMBO have been reported by CPA with the field
classified as inactive. The Ministry reports the same volume of remaining reserves. Additional
data from CPA and the Ministry supporting these or any other reserves estimates for the block
would be useful in determining fair market value for the block.

General Geologic Setting

The Singue Field lies in the Andean Cordilleran foreland basin of the Ecuadorian Oriente Basin.
The terrain is mountainous dense jungle (Figures 1 and 3). The field is situated on a northern
projection of the Fanny-Dorine-Tarapoa field north-south anticlinal trend. The block is reported
to cover an area of about 8,513 acres and the field appears to be trapped on a 4-way structural
closure based on the map in Figure 2, however, the source of details shown in the Figure 2
Ing. Ramiro Cazar Ayala
June 1, 2011
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interpreted seismic map is not known. Regional mapping indicates a depth of 7,500 ft to the
pre-Cretaceous in the Singue Field.

Details for the oil reservoir(s) in the field are not known, but very likely could be similar to the
Napo U and T to the south (Figures 3 and 4). In the vicinity of the Singue Field, regional
mapping indicates the Main T net sand has a thickness of about 70 ft, the Lower U net sand has
a thickness of about 70 ft, and the Upper U net sand has a thickness of about 15 ft. The M-1
Sand is projected to be absent due to non-deposition/erosion. The Cretaceous Hollin Sand is
estimated to be 20 to 25 feet thick, is near its up-dip eastern limit and is not apparently
productive in the Singue-1 well.

To the south in the Dorine-Fanny field area, the upper Cretaceous Napo M-1 sand erosively
overlies offshore M-1 marine shale. Published data suggests that the M-1 sand may be
channelized and discontinuous in the area. The M-1 sand is the primary oil productive
reservoir in the Dorine-Fanny field area with small accumulations tested in Tertiary Basal Tena
and Cretaceous Napo U and T sands. The fields are located on the up-thrown side of a normal
fault trap shown on a west-to-east cross section (Figure 5) and produce heavy crude (22 degree
API). These fields have a reported 53 to 60% recovery factor and a strong water drive. The M-
1 sand has a reported gross sand thickness of approximately 90 ft, average porosity of 25.2%,
water saturation of 21.8% and permeability of 1,718 md.

Future Potential

Closure against the probable fault shown on Figure 2 may trap oil, assuming that the closure is
up dip and not down dip. A review of additional data would be required to confirm this or any
other potential in the block.

Conclusions

The Agreement establishes a base curve for the Singue Marginal Field and its single well
Singue-1. Generally speaking, any production above and beyond this established base curve is
CPAs compensation under the Agreement. Data provided to RPS by the Ministry is limited,
however, there is nothing in the available information which would indicate that production in the
Singue-1 well could be improved above the base curve as set out in the Agreement. Subject to
a review of additional technical and economic data, it is RPS opinion that CPA cannot improve
production above the Agreements base curve and therefore the Agreement has no value.

In addition, RPS has been presented with no other information which would suggest that there
is additional drilling potential on the block beyond the Singue-1 well. In our opinion, any future
potential on the block is highly speculative and has little or no associated value based on the
available information.
Ing. Ramiro Cazar Ayala
June 1, 2011
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In a letter from CPA to the Secretary of Hydrocarbons dated May 3, 2011, CPA sets forth a
Singue Field settlement amount of approximately $5.3 million for lost profits and damages for
the period April 2008 through April 28, 2028. CPA has submitted no data in support of this
claim, and states that it is the result of the declaration of force majeure and the use of an
erroneous base curve in the Agreement. While RPS has no ultimate opinion as to the validity or
reasonableness of this claim due to the lack of supporting data, it is important to note that no
work had been performed on the Singue Field and no investments have been made by CPA on
that field.

The observations and conclusions presented in this report are based on information provided by
the Ministry and from public information. We invite the Ministry and CPA to provide us with any
additional information which they feel is relevant and which they would like us to consider in
arriving at our conclusions.

Very truly yours,

RPS

___________________________
Gene B. Wiggins III, P.E.
Director Consulting USA

REF:GBW/sd/R0118
Ing. Ramiro Cazar Ayala
June 1, 2011
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Attachment 1
Information Provided by the Ministry for Singue Marginal Field

1. A PowerPoint presentation for the field prepared by CPA.

2. Marginal field terms Singue base curve and investment plans for exploration and
exploitation.
3. Reserves information for the Singue Marginal Field including oil in place, cumulative
production and remaining reserves.
Ing. Ramiro Cazar Ayala
June 1, 2011
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Figure 1
Singue Field Block location Map
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Figure 2
Singue Field Structure Map-unknown Horizon and Depth
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Figure 3
Singue Field Location-Structural Trend Map
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Figure 4
Singue Field Strat Column
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Figure 5
Fanny-Dorine West-East Structure Cross Section