Tenth Avenue Petroleum Corp.

Suite 203, 221 – 10th Avenue SE, Calgary, Alberta Canada T2G 0V9

Alberta, Canada

Alberta –
Gething-Dunvegan Gas Production
Ellerslie Gas Production
Viking Oil Production

Waskahigan, Alberta Area

On July 31, 2017, TAPC completed the purchase of certain oil and gas producing assets in the Waskahigan area of Alberta (the “Waskahigan Assets“). The present value before tax of the Waskahigan Assets as prepared by GLJ Petroleum Consultants Ltd. (“GJL Consultants“) was $5,128,000 for total proved plus probable with a discount rate of 10% effective December 31, 2018. The acquisition included 8 wells and associated production of approximately 1,800 mcf/day and 20 barrels of natural gas liquids per day. TAPC acquired mineral rights to 22 gross sections (15.19 net sections) (14,080 gross acres 9,726 net acres). The majority of the mineral rights are above Bullhead Bullhead Group formation (primarily Dunvegan, Notikewin and Gething formation) near Fox Creek, Alberta.

On July 31, 2017, the Company entered into a Loan and Participation Agreement with Smoky Oil & Gas Corp (“Smoky“) and Batoche Oil & Gas Exploration Ltd. (“Batoche“). Pursuant to the terms of the Loan and Participation Agreement (“LPA”), Smoky lent the Company the sum of $1,326,593 to make the acquisition of the Waskahigan Assets. The interest rate on the loan principal is 6% per annum. All obligation owing are secured by a general security agreement charging all of the assets of the Company. Subject to an agreed upon general and administrative expense payment, Smoky shall be entitled to all net cash flow from the Waskahigan Assets until the loan is repaid. While loans are outstanding, the Company shall be restricted to charging general and administrative costs to a maximum of $75,000 per year for administration of the Waskahigan Assets and charging general and administrative costs to a maximum of $75,000 per year for administration of the Waskahigan Participation Assets (as defined below). The LPA was amended to delay Smoky’s entitlement to all net cash flows from the Waskahigan assets until January 1, 2019. In addition, the restriction on charging general and administrative costs to a maximum of $75,000 per year for the administration of the Waskahigan Assets has been delayed and will commence on January 1, 2019.

The loan is a related party loan and the interest rate charged on the loan was deemed to be below the interest market rate which was estimated to be 15%. The expected future cash flows from the loan were discounted by 15% and the resulting difference of $491,920 between the fair value of the loan and the face value was charged to contributed surplus when the loan was initially recognized. Annual interest is accruing at the market rate of 15% however the accounting treatment does not change the legal obligation of the Company to repay $1,325,810 with interest at 6%. The “discount” will reverse over the life of the loan giving rise to interest expense as follows: 2017 – $52,170, 2018 – $133,030, 2019 – $135,580, 2020 – $102,670 and 2021 – $68,470. A 1% change in the interest rate used to discount the loan would result in a $23,135 change to the value of the loan.

On July 31, 2017, the Company had agreed to farmout to Batoche the Waskahigan Assets (other than existing wells and applicable spacing units) (“Waskahigan Participation Assets”). By amending agreement, the Company and Batoche agreed to terminate the farm in rights effective July 31, 2017.

Pursuant to the original LPA, as additional consideration, Smoky was entitled to receive post payout of the loan: (a) 80% of net cash flow from the Waskahigan Assets (less agreed general and administrative expenses) until December 31, 2021 (subject to farmout rights); (b) 80% of net sale proceeds of Waskahigan Assets (subject to farmout rights); (c) right to compel the Company to buy Smoky’s right to 80% of the net cash flow from the Waskahigan Assets (subject to farmout rights) for 2.5 times net cash flow; and (d) right to compel the Company to buy Smoky’s right to 24% of the net cash flow from the Waskahigan Participation Assets (subject to farmout rights) for 2.5 times net cash flow from the Waskahigan Participation Assets (hereinafter called the “Post Payout Additional Consideration”).

Pursuant to the LPA, the Company had the right to compel Smoky to sell its right to Post Payout Additional Consideration for 2.5 times net cash flow on trailing 12 month basis. This amount was $1.00 for the fiscal period ended December 31, 2018. The Company exercised its right to buyout the right of Smoky to the Post Payout Additional Consideration.

The major constraints of TAPC to development of this property in the immediate future are: (a) historically high spread between NYMEX and AECO; (b) NOVA Pipeline takeaway capacity; and (c) access to reasonably prices compression and processing charges. The positives are: (a) NYMEX (Henry Hub) price has remained at 2016 levels; (b) TCPL is in process of doubling the NOVA Pipeline takeaway capacity by 2020; (c) Alliance is increasing its takeaway capacity by 50% by 2020; and (d) with the development of the Duvernay formation by Encana, Chevron, Murphy and Shell), midstream companies (Keyera and Pembina) have agreed to spend significant capital to increase the area capacity within next two years. It is expected that within 2 years lower compression and processing costs will be available because of the excess midstream capacity in the area.

Crossfield, Alberta  Area

In August 2008, TAPC entered into a farm-in agreement for lands located in the Crossfield, Alberta area Ellerslie gas well was drilled at 10-29-030-03W5.

TAPC has a 35% working interest in the well, subject to a 12.5% lessor’s royalty and 6% farmor royalty. TAPC’s 35% working interest in such well includes all rights from the base of the Cardium zone to the base of the Manville zone, including the petroleum and natural gas rights in the Viking zone. In 2011, TAPC farmed out its 35% interest in the Viking formation. A well 12-29-030-03-W5th was drilled. TAPC owns a 7% net working interest subject to the overriding royalty.

Wapiti Area

In November 2006, TAPC entered into a farm-in arrangement for interests located in the Wapiti area to drill a Dunvegan test well (01-22-065-08W6) which was completed and placed on stream. TAPC participated in the drilling of the well and earned a 9.75% working interest therein. In 2008, Jadela acquired a further 6.5% working interest.