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GeoPetro Resources Acquisition Project Goals, Analysis, Lessons Bryon Conley / Randall Connally

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GeoPetro Resources

Acquisition Project

Goals, Analysis, Lessons Bryon Conley / Randall Connally

GeoPetro Resource

Acquisition Project

• Goals of Acquisition

• Identifying Metrics

• GeoPetro’s Qualifications

• Issues at a Glance

• Solutions and Business Plan

• Acquisition Plan and Lessons

Cayman Energy Holdings LLC -- Bryon Conley

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Goals for Acquisition

• Budget - $50M and less

• High equity value compared to market cap

• Realistic ability to win shareholders’ votes

• High potential revenue base

• Realistic business strategy changes to

yield a high ROI

Cayman Energy Holdings LLC -- Bryon Conley

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Identifying Metrics

1) Shareholders’ equity ratio

2) Market Cap ratio over 3 or 4 years

3) Retained earnings ratio

4) Liabilities ratio

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Conley

Identifying Metrics:

Shareholders’ Equity

• An excellent low risk measurement

systems

• Five companies lineup

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Ticker Equity Mkt Cap Diff Equity Ratio %

GEOR 17,603 2,375 15,228 741.18%

DBLE 43,470 34,126 9,344 127.38%

GSXN 17,704 3,400 14,304 520.71%

HUSA 14,834 15,600 (766) 95.09%

SOQ 149,232 47,979 101,253 311.03%

Shareholder's Equity Ratio

Cayman Energy Holdings LLC -- Bryon Conley

Identifying Metrics:

Market Cap Ratio

• Another excellent minimum risk measurement

• Compilation of five companies as of Y2010 –

Y2013

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Ticker Mkt Cap Y2012 (K) Mkt Cap Y2010 (K) Mkt Cap Ratio %

GEOR 2,375 34,675 6.85%

DBLE 34,126 55,709 61.26%

GSXN 3,400 59,500 5.71%

HUSA 15,600 321,360 4.85%

SOQ 47,979 224,943 21.33%

Market Cap Ratio

Cayman Energy Holdings LLC -- Bryon Conley

Identifying Metrics:

Retained Earnings

• A measure of Stockholders’ satisfaction /

dissatisfaction rate

• Shows Build/Depletion of cash reserves

• Compilation of five companies as of Y2010 –

Y2013

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Ticker R.E. (K) Mtk Cap (K) R.E. Ratio %

GEOR (49,730) 2,375 -2093.89%

DBLE (3,063) 34,126 -8.98%

GSXN (244,808) 3,400 -7200.24%

HUSA (17,680) 15,600 -113.33%

SOQ (256,662) 47,979 -534.94%

Retained Earnings Ratio

Identifying Metrics:

Liabilities Ratio • Measurement of financial ‘load’

• Measures ability to recover from distressed state

• Adds to Cost of Acquisition

• Compilation of five companies as of Y2010 –

Y2013

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Ticker Liability (K) Mkt Cap (K) Ratio %

GEOR 6,117 2,375 257.56%

DBLE 77,368 34,126 226.71%

GSXN 36,151 3,400 1063.26%

HUSA 5,106 15,600 32.73%

SOQ 38,060 47,979 79.33%

Liability Ratio

Cayman Energy Holdings LLC -- Bryon Conley

GeoPetro’s Qualifications

• Market indicator ratios

• Assets and holdings

• Shareholders’ sentiments

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GeoPetro’s Qualifications:

Market Indicators These metrics indicate:

• The company is worth

more than Market Cap

• Total Liability still low, even

though cash reserve is

zero

• A largely negative Retained

Earnings Ratio indicates

high stockholders’

dissatisfaction

• Market Cap Ratio indicates

a significant trend of a

distressed company with

potentially high equity

value.

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Ticker Equity Mkt Cap Diff Equity Ratio %

GEOR 17,603 2,375 15,228 741.18%

Shareholder's Equity Ratio

Ticker Mkt Cap Y2012 (K) Mkt Cap Y2010 (K) Mkt Cap Ratio %

GEOR 2,375 34,675 6.85%

Market Cap Ratio

Ticker R.E. (K) Mtk Cap (K) R.E. Ratio %

GEOR (49,730) 2,375 -2093.89%

Retained Earnings Ratio

Ticker Liability (K) Mkt Cap (K) Ratio %

GEOR 6,117 2,375 257.56%

Liability Ratio

GeoPetro’s Assets:

MadisonVille Processing Plant

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GeoPetro’s Assets: 800 BCF Reserve

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GeoPetro’s Assets: Cook Inlet

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GeoPetro’s Assets: Lokern Project

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GeoPetro’s Assets:

Swan Hills in Alberta, CA

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Shareholders’ Sentiments 47.5M

Shares

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30.0%

9.5%

13.0%

13.0%

34.5%

GeoPetro's Shareholders

Capital Group (Idaho)

GeoPetroExecutive Board

Fresno Capital Group

GeoPetro Allies

Remaining

Financial Backing Target: $17M

17

63.64%

36.36%

Breakdown of Funding

Capital Fund

Equity Fund

Cayman Energy Holdings LLC -- Bryon Conley

GeoPetro – A Good Candidate

• Currently high equity value and relatively low

debt position

• Outstanding revenue potential with current

leasehoolds

• Favorable shareholders’ sentiments over 50%

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Issues at a Glance

• Highlighting financials

• Reviewing management shortcomings

• Analyzing projects / holdings development status

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Income Statement

• No R&D development in years resulted in lost revenues.

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Balance Sheet Items • Retained Earnings show long history of negative earnings.

• Negative Liabilities higher than operating income but less than

stockholders’ equity.

• No capital surplus to perform R&D.

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Management Shortcomings

• Lost controlling interest in Bengara Block II, and possibly

in Cooks Inlet

• Attempted to ‘save the way out’ of a gas

bubble/recession

• Lost operating and R&D capital surplus – Effectively

shutout company’s ability to develop current projects

• Failed to maintain a minimum >1.0 BOE replacement

ratio year/year in acquiring and development phases

• Sold off essential parts of infrastructures and controlling

interests

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GeoPetro’s Current Projects / Holding

Status – No Revenue

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• MadisonVille: 100 % working interest most turn-key ready.

• Cooks Inlet: 122K acres in high gas priced area. Least developed.

• Swan Hills, Canada: 4.4K acre seismic data estimating with 150M

BOE reserve, but unknown state of developed infrastructure.

• Lokern Project: 100% working interest 1240 acre high potential,

ease of infrastructure access, and projected 150M BOE.

• Bengara Block II: 2% working interest no control over schedule

with Chinese partners.

Cayman Energy Holdings LLC -- Bryon Conley

Identifying Solutions

• MadisonVille field development & production

ramp

• MadisonVille processing plant operating cost

reduction

• Debt & liability reduction

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Ramp MadisonVille Production

on $4M-$7M Investment

• 18 well sites defined, 3700 useable acre, quarter section (160 acre) per well site.

• 2 Quarters, revenue flow begins.

• Within 18 months full capacity of 22MMCF per day production.

• Based on $3.50 MCF

• Based on 22MMCF processing plant capacity.

• Based on $1.78 MCF operating cost. Note: Processing plant needs improvement in processing efficiency target at $1.2 MCF.

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Well Site Initial Capacity Q4'13 Q1'14 Q2'14#1 4.00E+06 1016 951 891

#2 4.00E+06 1016 951 891

#3 4.00E+06 1016 951 891

#4 4.00E+06 1016 951 891

#5 8.00E+06 2032 1901

#6 8.00E+06

#7 8.00E+06

#8 8.00E+06

#9 8.00E+06

#10 8.00E+06

#11 8.00E+06

#12 8.00E+06

#13 8.00E+06

#14 8.00E+06

#15 8.00E+06

#16 8.00E+06

#17 8.00E+06

#18 8.00E+06

Q. Revenue ($K) 4,065 5,782 5,465

Cost of Revenue 1,809 2,573 2,432

Solution: Reduce Operating Cost of

MadisonVille Processing Plant

• Lighting: Switch over to

Industrial LED lighting

• Improve electric motors

through DC systems and

active PFC system

• Further investigation wrt

heat exchangers, other

processing enhancements.

• Future target to $1.25 MCF

is desired.

Note: Based on initial cost

basis of 1.78 per thousand

cubic feet (MCF).

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Item Current $ Propose $ Notes

Labor 1,309 1,309 No Change

Lighting 5,874 881 LED Industrial Lighting

Electric Motors 25,454 21,763 Active PFC + DC Motors

Consumables 3,916 3,916 No Change

Other 1,849 1,849 No Change

Total 38,403 29,719

Cost $/MCF 1.75 1.35

Madison Plant Cost of Operations

Solution: Debt Reduction

• Secured debt committed on 50 cents to the dollar.

• Non negotiable secured debt – no reduction.

• Remaining unsecured debt reduced to 20 cents to the

dollar.

• Convert to 5 year note scheduled payment 3 months after

acquisition.

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Debt Type Current Target Neg. Notes

Secured 4,200 2,100 Negotiable Secured Debt at 50 %

Secured Not Neg 900 900 Non Negotiable Secured Debt

Unsecured 3,204 641 Unsecured debt target at 20%

8,304 3,641

Liability Reduction

GeoPetro Business Plan

• Ramp up GeoPetro’s earnings

• Reduce operational cost of MadisonVille

plant

• Evaluate leaseholds and prioritize projects

• Grow the business

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Plan: Ramp GeoPetro’s Production

Capacity Over 18 Months AMB • 3Q13: Workover well site #1 through #3 to reach $2.8M/Qtr

@ $3.50/MCF, $150k + $150k + $1,5M

• 4Q13: Workover well site #4 and develop #5 reach $5.1M/Qtr

@ $3.50/MCF cpst of $1.5M + $3M

• 1H14: Develop well site #6 and gather infrastructure to $5.7M/qtr

@ $4.00/MCF cost of $3M

• 2H14 onward: Develop remaining well sites as per the planning

schedule @4.50/MCF

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Plan: Reduce Operating Cost of

MadisonVille Plant 30% AMB • 1H14: Change plant industrial lighting to industrial LED system

(by CREE) 90% reduction

• 2H14: Identify power delivery systems and apply active power

factor correction technology 5% reduction

• 1H15: Change over to higher efficiency industrial processing

equipment 10% 1H15

• 2H14: Identify additional savings (10%) through improvements in

gas processing technology

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Plan: Evaluate Leasehold

Potential and Prioritize AMB • 4Q13: Evaluate value of Bengera Block II 2% working interest for

trade or disposal.

• 1H14: Evaluate deep MadisonVille reserve through existing

seismic data and research well using one existing well. $3M

• 2H14:Swan Hills Alberta, CA: Evaluate sales line, processing and

infrastructure readiness, cost, and timeline to production.

• 2H14: North Kern County Lockern Project: Evaluate method for

reserve capacity and cost for research well development and

partnership potential vs cost

• 1H15: Cooks Inlet: Identify actual working interest (12.5% vs

100%) and evaluate infrastructure accessibility and cost vs

reserve potential.

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Plan: Ramp GeoPetro Base AMB • 1Q14+ : Build Capital Surplus to 25 percent of revenue

• 2H14: Evaluate expanding MadisonVille processing to 45 MMCF

and to 65MMCF capacity and lower cost of operations

• 1H14+: Grow Madisonville production of 1.4x rate

• Y15: R&D North Kern County Lockern Prospects through

partnership (Tentative)

• Y15+: Identify new leaseholds and partnerships to grow reserve

replacement ratio at industrial median rate est 1.45x

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Acquisition Plan

• Establish a holding company under UK rule

Reserved: Cayman Energy Holdings

• Raise $17M capital

Commitment: $16.5M total capital + equity

• Achieve greater than 50% shareholder support

42% Support

13% Tentative

35.5% unknown: road show for support possible

• Increase Company shares 60% for the 16.5M cash infusion.

• Privatize the company under Cayman Energy Holdings

• Compensation package for the partners working the acquisition

process and management

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The Takeaway

• With 13% shareholder tentative Solution: Work awareness and support roadshow of the business plan with the 32% unknown pool

• The capital commit pulled out on grounds of unfavorable view of hostile acquisitions Solution: Build a capital investment pool with a charter to address hostile acquisitions as part of the strategy

• Hedge against ‘no-go’ with shares purchase and influence current GPR’s business plans

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Appendix

Randy Connally

Chief Executive Officer Northcote Energy • Prior to founding Northcote, Mr Connally participated as a strategic adviser

and shareholder of Eagle Energy Company of Oklahoma, LLC, an oil and gas company with operations in the Hunton and Mississippi Chat plays in central and northwestern Oklahoma. Eagle, having been set up in 2009 was sold to Midstates Petroleum Company Inc. in October 2012 for $650 million. Mr Connally has, between 1996 and 2005, held positions with Bank of America, N.A., Bank of America Securities, LLC, Donaldson, Lufkin & Jenrette Securities, Inc, and Credit Suisse First Boston. While at these finance groups, Mr Connally worked in the Energy Finance and Investment Banking Groups and focused on commercial lending, high yield bond offerings for mid and large capitalisation exploration and production companies in the US, public bond (investment grade and high yield) and equity underwriting as well as mergers and acquisitions for exploration, production and oil field 25 service companies in the United States. Mr Connally received his BBA degree in Finance from Texas A&M University

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Bryon G. Conley

Business plan architect and strategy development • Prior to his work with GPR acquisition project development and

other strategic analysis, Mr Conley held a limited parternership and investor of River Bend Drilling (RBI) and proposed a strategy for turning 40% loss into 1.6x gains. Mr. Conley’s experience in the Oil and Gas industry as an investor and limited partner of Steve Antry’s of Eagle Energy Hisaw shale gas play. Mr. Conley is a senior design engineer with Intel responsible for technical readiness, micro-architecture feasibility, and development of of flagship microprocessors since 1993 and introduced new design technologies for high performance designs. He has made significant contributions to over 10 well known microprocessor design projects which were critical flagship products for Intel over the past 21 years. Mr. Conley received his B.S. in Applied Mathematics, Applied Physics, and Computer Engineering at U.C. Davis, California in 1987.

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Cayman Energy Holdings LLC -- Bryon Conley