Shawnee #2 Field ProspectPottawatomie County, Oklahoma

Oil & Gas Exploration and Production

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

Section I: Location

•LocatorMap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

•Shawnee#1WellPictures . . . . . . . . . . . . . . . . . . . . . . 4

SectionII:Geology

•GeologicalWriteUp . . . . . . . . . . . . . . . . . . . . . . . . . 5-8

SectionIII:Maps/Revenue

•StructureTopViolaMap . . . . . . . . . . . . . . . . . . . . . . . 9

•StructurePawhuskatoHuntonMap . . . . . . . . . . . . . 10

•StructureTopHuntonMap . . . . . . . . . . . . . . . . . . . . . 11

•Seismic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

•SchematicMap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

•Shawnee#2WellPictures . . . . . . . . . . . . . . . . . . . . . 14

•Shawnee#3WellPictures . . . . . . . . . . . . . . . . . . . . . 15

•ProductionSummary . . . . . . . . . . . . . . . . . . . . . . . . . 16

•RunStatementSummary . . . . . . . . . . . . . . . . . . . . 17-24

SectionIV:CompanyVerification/References

•CertificateofAuthority . . . . . . . . . . . . . . . . . . . . . . . 25

•OklahomaCorporationCommission . . . . . . . . . . . . . . 26

•FranchiseTaxAccountStatus . . . . . . . . . . . . . . . . . . . 27

•CertificateofFact . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

•IndustryReferences . . . . . . . . . . . . . . . . . . . . . . . . . . 29

SectionV:Contracts

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Executive Summary

Shawnee #2 Field Prospect

Well Type Vertical

Hydrocarbon Type Oil, Natural Gas

True Vertical Depth 6,500’ (+,-)

Geological Support 2-D Seismic; Sub-surface geology; Electro-Telluric testing; Radio-Metrics imaging

Primary Target Horizon Hunton Dolomite

Secondary Target Horizon Wilcox Sands, Viola Limestone, Red Fork Sandstone, and Simpson Dolomite

Lease Description 80 Acre lease in Section 7 in Pottawatomie County, Oklahoma

Total Working Interest 90%

Lease Net Revenue Interest 75%

No. of Units 20

W/I Per Unit 4.5%

NRI Per Unit 3.375%

Price Per Unit $150,000 Drill+Test (turnkey)

$70,500 Completion (turnkey)

$220,500 TOTAL (turnkey)

Total Raise $4,410,000

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Shawnee #2 Field Prospect

With the recent success of the Shawnee Field Prospect and the first 3 completed wells in the field, Cannon Operating has decided to release an adjacent field prospect to perspective investment partners. The previous field, located in Pottawatomie County, Oklahoma near the town of Pink is merely one section to the South of the new Shawnee #2 Field Prospect, and

with the geological similarities, we anticipate this new field to produce in similar fashion to the original Shawnee Field. The prospected field lies in Pottawatomie County, Oklahoma directly east of the city of Norman, Oklahoma.

The Shawnee #2 and #3 wells are situated on the west side of a fault line discovered in the original Shawnee Field prospect that has proven a great success for Cannon Operating and its investment partners. Although the first well drilled on the Shawnee prospect was on the east side of the fault and is only producing approximately 5-6 barrels a day, the subsequent two wells drilled have had approximate initial production numbers of 195 BOPD and 311 BOPD respectively. Each of these two wells have continued to produce at massive rates. Upon reviewing the seismic and telluric data, our geologist feels this new field is a duplicate of the original Shawnee field, and we anticipate similar results.

Cannon will offer a 90% working interest to perspective investment partners pursuant to the attached executive summary. The working interest will be based on a two-well project whereby investment in the project will be equal ownership in each of two wells. We feel this ability to offer the prospect in multiple wells will lower risk for our partners while allowing for opportunities for great success.

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Oil & Gas Explorationand Production

Shawnee #2 Field Prospect Locator

Pottawatomie County, Oklahoma

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Summary

Located approximately 20 miles Southeast of Oklahoma City in section 7 of T9N- R2E, this prospect is structurally positioned on the west dipping flank of the Hunton Arch. The success of finding petroleum in this Prospect depends mostly on the entrapment of oil to be found in a topographic high created during the post-Hunton hiatus prior to burial by the overlying Woodford formation which is both a good source and a seal rock. This Prospect is analogous to the Hunton production in the Shawnee #1 and South Pink field located in the W/2 of Section 30-9N-2E and SE2 of 18-T9N-R2E, south of the proposed drill sites. The cumulative production from the Hunton in the South Pink field (which extends from section 30 into section 25-09N-01E, extends into Cleveland County) is 1,014,950 barrels through December 2013 from 6 wells. The Followill lease in the NW/4 of Section 30 has produced 502,633 barrels from two wells.

We, Cannon Operating, have drilled 3 wells in the last 2 years in the N/2 of the Southeast Qtr. of section 18-09N-02E. The Shawnee -1 is a marginal well with an IP of 20 BOPD and a current production rate of 3 BOPD. The Shawnee -2 was drilled in November 2013 approximately 1000 feet to the west and had an IP of 195 BOPD. This well sustained a 185 BOPD average for 5 months, then began a slow decline to approximately 35 BOPD. The Shawnee -3 was drilled in August 2014, and while this well had a higher IP rate of 311 BOPD than the Shawnee-2, it declined at a rapid rate to 100 BOPD then slowly declined to 25 BOPD at its present. These three wells have generated $5,388,847 in revenue in 14 months. In section 7 of 09N-02E, we have another high very similar to the Shawnee 1, 2, 3 wells. Our prospect is trapped by a topographic high on the Hunton surface with some additional low relief folding which further enhances the closure on top of the Hunton surface.

Geology

Seismic profiles were made in the prospect area by digitally processing 100% seismic data. The original records and processing have produced very satisfactory seismic profiles which imbues strong confidence in the interpretation of the seismic data. The structure contours on top of the Hunton and Viola were hung from the shallow Pawhuska datum. Although the Viola has modest vertical anticlinal closure, the Bois D’Arc member of the Hunton has more closure because of the high topographic relief created by erosion. The Woodford marine shale was deposited on top of this surface and probably became the source of the Hunton oil as well as providing the critical impermeable barrier for this updip porosity pinchout trap. It is possible that vertical closure on the Hunton surface was greater prior to regional west tilting of the formations. This idea is partly supported by the nearly 80 feet of thickening in the Pawhuska to Hunton interval on the east side of the closure. Thinning of this interval over the prospect is supporting evidence of closure favorable hydrocarbons entrapment (I also believe the thinning plays an important part in defining drill locations).

In as much as the Viola shows some anticlinal closure, a test to the Second Wilcox is justified because drilling the additional potential pays will improve the odds of finding an oil field. Traps in reservoirs above the Woodford formation will require stratigraphic entrapment boundaries, as there does not appear to be structural closure in these rocks.

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Hunton Structure

In section 7-09N-02E, a northwest to southeast anticlinal closure has been mapped with seismic data on top of the Hunton formation (there is some well control west in sections 6 and 5 that helps define the closure.) The maximum closure is in the NE-SE-NE of section 7-8.

Primary Reservoir

Bois D’Arc Member of Hunton Group (5500’ approx.)

Hopefully, this limestone reservoir will produce reserves comparable to those in the aforementioned Pink and Shawnee Fields where there is 40-50 feet of porous limestone shown on the micro log. The effective boundary of the Hunton production indicates approximately 200 acres at the most which would be an average of 5,212 barrels of oil per acre. It would certainly seem possible that 200,000 barrels of oil could be produced on a 40 acre spacing unit from the Bois D’Arc in these prospects.

Hunton Producers - South Pink Field

DATE/PROD. Section 30-T9N-R2E CUM

1959-13 Kerr McGee no. 1Tyner, NW NE SW 338,709 flowed/180 BO + 60 BWPD

1962-71 Geo. 0. Folk no. 1Gibson C NW SW 34,361 P25 BOPD

1974-90 Petrol Reserve Corp. No. 1Gibson 17,094 NE NW SW Eldon Stark (current operator)

1962-85 Geo. 0. Folk No. 1 Followill E/2 SW NW Clyde M. Becker (current operator)

1952-08 Clyde M. Becker No.3 Followill IP 47 BOPD open hole 485,539

DATE/PROD. Section 25-T9n-R2E CUM

1967-85 Geo. 0. Folk No. 1 Mack NE NE NE flowed/262 BOPD 139,577

TOTAL 1,014,950

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Secondary Reservoirs

Red Fork Sand (5390’)

The Red Fork sand is anticipated on top of the closure where the first well is planned. This sand is a fluvial channel trending north-south and could possibly exist immediately east of the structural high. The seismic data, with some assurance from regional subsurface mapping, supports a Pennsylvanian thick just east of the high. These lower Pennsylvanian thicks are considered a favorable condition for fluvial channels. A Red Fork Field about 10 miles east near Shawnee and Tecumseh has produced 50 million barrels of oil. If a developmental drilling program is initiated and moves north and east, it is hoped that this secondary reservoir proves oil productive.

Bartlesville Sand (5,450’)

This sand has produced 15,635 barrels through December 1985 from a well located south of the proposed locations. As with the Red Fork, it’s productivity depends on favorable lithological conditions which are difficult to predict.

Simpson Dolomite

There are considerable changes in the Simpson Dolomite and First Wilcox sand within the prospect area. A stratigraphic trapping condition can be expected in either reservoir especially in the Simpson Dolomite. Oil production from the Simpson Dolomite exists in the East Pink Field south and east of the proposed locations.

First Wilcox Sand (6,020’); Second Wilcox Sand (6,140’)

These two reservoirs have not yielded significant reserves in the region which is probably due to lack of sufficient anticlinal closure (thus far the usual necessary trapping mechanism.) The low relief anticline mapped on the Viola surface is definitely a plus for these reservoirs hydrocarbon potential. Experience has shown the lithological controlled traps in the First Wilcox can also produce oil in the prospect area.

Recommendation

Two test wells should be drilled to 6,250’ Second Wilcox test is proposed in the NE-SE-NE of section 7-09N-02E. The Bois D’Arc is the primary objective reservoir and the other five secondary potentially productive reservoirs should also be evaluated very carefully while being drilled.

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Reserves

This prospect is considered to be analogous to the Hunton production in the Shawnee #1 Field and the Pink Field located in Sections 18-09N-02E and 30-9N-2E, south of our proposed location. Cumulative production from the Hunton in the Pink Field is 1,014,950 barrels of oil through December 2013 from six (6) wells. The Followill lease in the NW/4 of Section 30 has produced 502,633 barrels of oil from two (2) wells. We expect to encounter approximately 40-50 feet of porous limestone at our proposed location, which could yield an average of 4,864 barrels of oil per acre. This would compare to the Pink Field located in Section 30-9N-2E. It is certainly reasonable to expect that 200,000 barrels of oil together with 150,000,000 cubic feet of gas could be produced on forty (40) acre spacing from the Bois D’Arc on this prospect. Secondary reserves would include the following potential reservoirs:

RESERVOIR DEPTH OIL GAS

Red Fork Sand 5,390’ 100,000 110,000,000

Bartlesville Sand 5,450’ 40,000 45,000,000

Simpson Dolomite 6,000’ 65,000 70,000,000

First Wilcox Sand 6,020’ 80,000 50,000,000

Second Wilcox 6,140’ 80,000 50,000,000

The Bois D’Arc is the primary objective reservoir and the other five secondary potentially productive reservoirs should also be evaluated very carefully while being drilled.

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Oil & Gas Explorationand Production

Shawnee #2 Field ProspectSeismic-Structure

Top ViolaPottawatomie County, Oklahoma

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Oil & Gas Explorationand Production

Shawnee #2 Field ProspectSeismic-Structure

Pawhuska to HuntonPottawatomie County, Oklahoma

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Oil & Gas Explorationand Production

Shawnee #2 Field ProspectSeismic-Structure

Top HuntonPottawatomie County, Oklahoma

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Oil & Gas Explorationand Production

Shawnee #2 Field Prospect Seismic

Pottawatomie County, Oklahoma

13

Oil & Gas Explorationand Production

Shawnee #2 Field Prospect Schematic Map

Pottawatomie County, Oklahoma

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Industry & Vendor References

Katz Drilling Vernon L. Smith & Associates

3850 West Mac Arthur P.O. Box 720053

Shawnee, Oklahoma 74801 Norman, Oklahoma 73070

Hughes Surveying Company LLC Smyth Land Services

4334 N. W. Expressway 6216 S. Lewis Ave

Oklahoma City, Oklahoma 73116 Tulsa, Oklahoma 74136

Professional References

Attorney at Law CPA

Andrew B. Nichols Kepner & Co., CPA

2730 N. Stemmons Fwy 5956 Sherry Lane

Suite 1000 Suite 1300

Dallas, Texas 75207 Dallas, Texas 75225

Engineering North Texas Oil & Gas Association

Coman Services 801 Petroleum Building

Dusty Smith 726 Scott Street

Wichita Falls, Texas 76301

Bank of America

Bank of America

Contact: Robert Swift

Contact information available upon request

3200 Broadway blvd, Suite 520 • Garland, Texas 75043 • P: 972.941.4218 • F: 972.905.5048

Shawnee #2 Field ProspectPottawatomie County, Oklahoma