PROSPECTUS. Joint Lead Managers. Corporate Advisor

Transcription

1 PROSPECTUS 2013 A PROSPECTUS 2013 Prospectus for the issue of 33,333,333 CDIs to be offered for subscription at $0.30 each to raise approximately $10,000,000 (Minimum Subscription), payable in full on application. Oversubscriptions of up to a further 33,333,333 CDIs to be offered for subscription at $0.30 each to raise up to a further $10,000,000 may be accepted. Joint Lead Managers Strata-X Energy Limited (Incorporated in British Columbia, Canada with incorporation company registration number C ) ARBN This Document is important and it should be read in its entirety. If you are in any doubt as to the contents of this document, you should consult your broker, solicitor, professional adviser, banker or accountant without delay. The securities offered by this Prospectus are considered to be speculative. This Prospectus is issued pursuant to section 710 of the Corporations Act 2001 (Cwlth). Corporate Advisor

2 Important information This Prospectus seeks to raise approximately $10,000,000 by offering for subscription 33,333,333 CDIs at an issue price of $0.30 cents each (Minimum Subscription), payable in full on application. Oversubscriptions of up to a further 33,333,333 CDIs to be offered for subscription at $0.30 each to raise up to a further $10,000,000 may be accepted. This Prospectus is dated 21 December 2012 and was lodged with the ASIC on that date. Neither the ASIC, TSX nor ASX takes any responsibility for the contents of this Prospectus. No CDIs will be allotted or issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. No person has been authorised to provide information or to make any representation in connection with the Offer. Any such information or representation that is not contained in this Prospectus may not be relied upon as having been authorised by the Company. This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe such restrictions. Additional information in relation to foreign selling restrictions is set out in Section Any failure to comply with such restrictions may constitute a violation of applicable securities laws. Applications can only be made by completing the Application Form in full, in accordance with instructions contained on the reverse of the form. This Prospectus has been prepared in accordance with the requirements of securities laws in Australia. All reserves and resources estimates included in this Prospectus were originally prepared in accordance with, and comply with, Canadian National Instrument Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators ( NI ) and the Canadian Oil and Gas Evaluation ( COGE ) handbook. NI is a rule developed by the Canadian Securities Administrators that governs the standard of disclosure for Canadian reporting issuers engaged in upstream oil and gas activities. Technical reports on the Company s oil and gas projects have been prepared for Strata-X Energy in compliance with NI Copies of each of these reports have been filed and are available electronically on the System for Electronic Document Analysis and Retrieval (SEDAR) in Canada at www. sedar.com. The Reserves included in this Prospectus have been estimated as at the date set forth in the respective technical report concerning such Reserves. Glossary Certain words and terms used in this Prospectus have defined meanings which appear in Section 14. A glossary of technical terms used in this Prospectus appears in the Independent Experts Reports in Section 10. Exposure Period In accordance with Chapter 6D of the Corporations Act, this Prospectus is subject to an Exposure Period at 7 days from the date of lodgement of the Prospectus with the ASIC. Given that a national holiday occurs during the initial 7 day period, it is expected that the 7 day Exposure Period will be extended by ASIC by a further period of up to 7 days. The purpose of providing an Exposure Period is to enable examination of this Prospectus by market participants prior to the raising of funds. Applications received during the Exposure Period will receive no priority and will not be processed until after the Exposure Period, when they will be treated as having been received simultaneously on the Opening Date. A paper copy of this Prospectus will be made available upon request during the Exposure Period. The Prospectus (without the Application Form) may also be viewed online at during the Exposure Period. After the Exposure Period, the Prospectus with an accompanying Application Form may be viewed online. Investors who wish to apply for CDIs using the electronic version of the Application Form must download and read the entire Prospectus. The Offer is only available to persons receiving an electronic version of this Prospectus in Australia. Persons who receive a copy of this Prospectus in electronic form at are entitled to obtain a paper copy of the Prospectus which will be provided free of charge upon request by contacting Duncan Cornish on or by at dcornish@strata-x.com. How to use this Prospectus This Prospectus provides information for investors who wish to invest in Strata-X Energy. It should be read in its entirety in order to make an informed assessment of the assets and liabilities, financial position and performance, profits and losses and prospects of Strata-X Energy and the rights and liabilities attaching to the CDIs. Potential investors should take these factors into account and consider whether this is an appropriate investment in view of their personal circumstances. If in doubt investors should seek advice from their professional advisor before deciding whether to invest. There is no guarantee that the CDIs offered under this Prospectus will make a return on capital investment, that dividends will be paid on the underlying Shares, or that there will be any increase in the value of the CDIs in the future. Investors who wish to subscribe for CDIs should complete the Application Form included in this Prospectus. The CDIs offered under this Prospectus should be considered speculative. The past performance of the Company is not a guide to future performance. Forward-looking statements Certain statements in this Prospectus and in certain documents incorporated by reference into this Prospectus constitute forward looking statements. The use of any of the words anticipate, continue, estimate, expect, may, will, project, should, believe and similar expressions are intended to identify forward-looking information. Investors should note that these statements are inherently subject to uncertainties in that they may be affected by a variety of known and unknown risks, variables and other factors which could cause actual values or results, performance or achievements to differ materially from anticipated results, implied values, performance or achievements expressed, projected or implied in the statements. These risks, variables and factors include, but are not limited to, the matters described in Section 5. Strata-X Energy believes that the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information included in, or incorporated by reference into, this Prospectus should not be unduly relied upon. Strata-X Energy gives no assurance that the anticipated results, performance or achievements expressed or implied in those forward-looking statements will be achieved. In particular, this Prospectus and the documents incorporated by reference contain forward-looking information pertaining to the following: the quantity of reserves and resources relating to Strata-X Energy and its assets; crude oil and natural gas production levels and sources of their growth; size and value of crude oil and natural gas reserves and resources; capital expenditure programs and other expenditures; commodity prices, foreign currency exchange rates and interest rates; projections of market prices and costs; supply and demand for crude oil and natural gas; expectations regarding the ability to raise capital and to continually add to reserves through acquisitions, exploration and development; treatment under governmental regulatory and taxation regimes; schedules and timing of certain projects and the Company s strategy for growth; Strata-X Energy s future operating and financial results;

3 the sale, farming in, farming out or development of certain exploration properties using third party resources; drilling plans; and realisation of the anticipated benefits of acquisitions and dispositions. Strata-X Energy s actual results could differ materially from those anticipated in such forward-looking information as a result of the risk factors set forth below and elsewhere in this Prospectus and the documents incorporated by reference: volatility in markets, prices and marketing of crude oil and natural gas; liabilities and risks inherent in crude oil and natural gas exploration, development and production; uncertainties associated with estimating reserves; insurance and environmental risks; substantial capital requirements; availability of competition for, among other things, capital, reserves, equipment, undeveloped lands and skilled personnel; incorrect value assessments of the value of acquisitions; geological, technical, drilling and processing problems; aboriginal claims; title defects; permitting and licensing; access restrictions and cost inflation; fluctuations in foreign exchange and/or interest rates and stock market volatility; government regulation, taxation and changes to tax laws and incentive programs relating to the oil and gas industry; and the other factors discussed under Risk Factors in this Prospectus. These factors are not, and should not be construed as being, exhaustive. Statements relating to reserves and resources are deemed to be forwardlooking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. The forward-looking information contained in this Prospectus and the documents incorporated by reference are expressly qualified by this cautionary statement. Strata-X Energy does not undertake any obligation to publicly update or revise any forward-looking information after the date of this Prospectus to conform such information to actual results or to changes in Strata-X Energy expectations except as otherwise required by applicable securities legislation. Disclaimer The Offer does not take into account the investment objectives, financial situation and particular needs of investors. It is important that investors read this Prospectus in its entirety before deciding to invest in the Company and, in particular, in considering the prospects for the Company, that they consider the risk factors that could affect the performance of the Company. Investors should carefully consider these factors in the light of their personal circumstances (including financial and taxation issues) and seek professional guidance from their professional financial adviser before deciding whether to invest. Some risk factors that investors should consider are outlined in Section 5. No person is authorised to give any information or to make any representation in connection with the Offer and issue of CDIs described in this Prospectus, which is not contained in this Prospectus. Any information or representation not so contained may not be relied upon as having been authorised by the Company in connection with the Offer. Neither the Company nor any of its Directors or any other party associated with the preparation of this Prospectus guarantee that any specific objective of the Company will be achieved or that any particular performance of the Company or of its securities, including those offered by this Prospectus, will be achieved. Privacy The privacy obligations and policy relating to this Prospectus are contained in the privacy disclosure statement in Section Currency Monetary amounts shown in this Prospectus are expressed in Australian Dollars unless otherwise stated. The USD/AUD exchange rate used in this Prospectus is approximately $0.98 unless otherwise stated and the CAD/USD exchange rate used is approximately $0.98. Information in relation to the risks associated with exchange rates is set out in Section 5.2. Important Information for New Zealand Investors This Offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8D of the Corporations Act and Corporations Regulations. In New Zealand, this is Part 5 of the Securities Act 1978 and the Securities (Mutual Recognition of Securities Offerings Australia) Regulations This Offer and the content of the offer document are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act and Corporations Regulations set out how the offer must be made. There are differences in how securities are regulated under Australian law. For example, the disclosure of fees for collective investment schemes is different under the Australian regime. The rights, remedies, and compensation arrangements available to New Zealand investors in Australian securities may differ from the rights, remedies, and compensation arrangements for New Zealand securities. Both the Australian and New Zealand securities regulators have enforcement responsibilities in relation to this offer. If you need to make a complaint about this offer, please contact the Securities Commission, Wellington, New Zealand. The Australian and New Zealand regulators will work together to settle your complaint. The taxation treatment of Australian securities is not the same as for New Zealand securities.if you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser. The Offer may involve a currency exchange risk. The currency for the securities is not New Zealand dollars. The value of the securities will go up or down according to changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant. If you expect the securities to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars. If the securities are able to be traded on a securities market and you wish to trade the securities through that market, you will have to make arrangements for a participant in that market to sell the securities on your behalf. If the securities market does not operate in New Zealand, the way in which the market operates, the regulation of participants in that market, and the information available to you about the securities and trading may differ from securities markets that operate in New Zealand. Company s Website Any references to documents included on the Company s website, www. strata-x.com, are provided for convenience only and none of the documents or other information on the website is incorporated by reference as content of this Prospectus.

4 2 STRATA-X ENERGY Corporate Directory Board of Directors Ron Prefontaine (Chairman) Tim Hoops (Managing Director) Tim Bradley (CFO/Director) Bohdan (Don) Romaniuk (Director) Don Schurman (Director) Company Secretaries Duncan Cornish (Proposed) (Australia) Doug Walker (Canada) Head Office Strata-X Energy Ltd 225 Union Boulevard Suite 450, Lakewood, CO Phone: Web: Australian Office Corporate Administration Services Level 5, 10 Market Street Brisbane QLD 4000 Ph: Fax: Web: dcornish@corpservices.com.au Corporate Advisor Bizzell Capital Partners Pty Ltd Level 9, Waterfront Place 1 Eagle Street Brisbane QLD 4000 Phone: Fax: Web: admin@bizzellcapital.com Joint Lead Managers to the Issue BBY Ltd Level 17, 60 Margaret Street Sydney NSW 2000 Ph: / Fax: Web: corporateexecution@bby.com.au Helmsec Global Capital Limited Level 17, 15 Castlereagh Street Sydney NSW 2000 Phone: Fax: Website: info@helmsec.com.au Auditor CANADA Collins Barrow Edmonton LLP Commerce Place, Suite Street NW Edmonton, Alberta Canada, T5J 4G8 Ph: Fax: Web: edmonton@collinsbarrow.com Independent Accountant AUSTRALIA Pitcher Partners Level 30, Central Plaza Queen Street Brisbane QLD 4000 Ph: Fax: Web: info@pitcherpartners.com.au Solicitors to the Issue CANADA Armstrong Simpson Suite Hornby Street Vancouver, British Columbia Canada, V6Z 1S4 Ph: Fax: Web: shartman@armlaw.com AUSTRALIA HopgoodGanim Level 8, Waterfront Place 1 Eagle Street Brisbane QLD 4000 Ph: Fax: Web: contactus@hopgoodganim.com.au Australian Share Registry Link Market Services Ltd Level 15, ANZ Building 324 Queen Street Brisbane QLD 4000 Ph: Fax: Web: registrars@linkmarketservices.com.au Canadian Share Registry Olympia Trust Company th Ave SE Calgary, Alberta T2G 0P6 Ph: Fax: Web: cssinquiries@olympiatrust.com Independent Geological Consultants AWT International 27 Douglas Street Milton QLD 4064 Ph: Fax: Web: contacteast@awtinternational.com

5 PROSPECTUS Contents Corporate Directory 2 1. Key Offer Information 4 2. Investment Summary 8 3. Company Overview Industry Overview Investment Risks Details of The Offer Key People, Interests and Benefits Historical and Pro-forma Financial Information Independent Accountant s Report Independent Geologist s Reports Solicitors Reports on Tenements Summary of Material Contracts Additional Information Glossary of Defined Terms 190 Application Form 194

6 4 STRATA-X ENERGY Key offer information

7 PROSPECTUS Key Dates Date of this Prospectus 21 December 2012 Offer Opening Date 14 January 2013 Offer Closing Date 8 February 2013 Allotment of New Shares 14 February 2013 Despatch of Holding Statements 15 February 2013 Anticipated Date of Trading on ASX 20 February 2013 The above dates are indicative only and may change without notice. The Company in consultation with the Joint Lead Managers reserves the right to vary the dates and times of the Offer, including the Closing Date, without prior notice. Applicants are encouraged to submit their Application Forms as soon as possible after the Offer opens Key Statistics Minimum Subscription Maximum Subscription Offer Price per CDI (representing one Share) $0.30 $0.30 CDIs available under the Offer 33,333,333 66,666,666 Shares on issue prior to the Offer (1)(8) 80,461,105 80,461,105 Options on issue prior to the Offer 2,960,000 2,960,000 Warrants on issue prior to the Offer (2)(3)(8) 36,371,525 (4) 37,371,525 (5) Fully paid Shares on issue following completion of the Offer (8) 113,794, ,127,771 Estimated costs of the Offer $1,291,700 $1,940,700 Market Capitalisation of Shares at the Offer Price (8) $34,138,331 $44,138,331 Estimated cash on completion of the Offer (before Offer costs) (6) ~$13,100,00 ~$23,100,000 Short-term loan (7) $2,000,000 $2,000,000 Enterprise value (8) $24,330,031 $24,979,031 (1) Includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) Includes 8,362,000 Warrants to be issued on conversion of the Convertible Notes, as described in Section (3) Includes 200,000 Warrants to be issued as finder s fees subject to documentation for the issue being finalised, as described in Section (4) Includes 1,000,000 Warrants to be issued to the JLMs based on the JLMs raising the Minimum Subscription and Completion of the Offer, as detailed in Section (5) Includes 2,000,000 Warrants to be issued to the JLMs based on the JLMs raising the Maximum Subscription and Completion of the Offer, as detailed in Section (6) Estimate based on a pro-forma balance reduced by ordinary expenses incurred since 30 June (7) A short-term loan provided by Prepet Pty Ltd (an entity associated with Ron Prefontaine, a Director of the Company), as described in Section (8) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued.

8 6 STRATA-X ENERGY Letter from the Chairman Dear Investor, On behalf of the Board of Strata-X Energy Ltd, I take pleasure in presenting this Prospectus for the Company s initial public offering on the ASX and invite you to become a Shareholder in the Company. Strata-X Energy is an independent energy company that listed on the TSX-V in December The Company s strategy is to offer high growth potential opportunities for its Shareholders by acquiring large and meaningful working interests in highly prospective petroleum acreage with relatively low entry costs then explore, appraise and develop those petroleum interests. In line with this strategy, a portfolio of high growth potential petroleum projects located in the USA and Australia with 100% direct working interest in the majority of the acreage of its four key projects are included in this offering. The high interest and operatorship of our key projects allows Strata-X Energy to have complete control over the pace and scope of exploration and development of these projects. In the USA, the Company has projects in California, North Dakota, Illinois and Texas with a combined area covering over 230,000 net acres. Our USA projects are characterised by unconventional oil shale, conventional oil and shallow gas targets located in established proven petroleum basins with petroleum infrastructure and services readily available. The Maverick Oil Project is located on the Eagle Ford shale fairway quite possibly the largest single economic development in the history of the state of Texas. Strata-X Energy has a 100% interest in the majority of 10,945 net acres and is the operator of the Project. The Maverick Oil Project overlies the condensate to light oil transition boundary and has one of the thickest and shallowest Eagle Ford shale oil target zones within the Eagle Ford shale fairway. Up to 900 million barrels of oil in place net to Strata-X is estimated in the Eagle Ford shale of the Maverick Oil Project. The main challenge is determining optimal completion methods to commercially extract the oil and condensate and once established, development of the field may proceed to generate significant early cash flow for the Company. Strata-X Energy is the first mover on the Vail Oil Project where the Company has identified a light oil accumulation extending over 1,350 km 2 within the prolific oil-producing Illinois Basin, USA. The Company has acquired a 100% working interest in 45,400 net acres over the interpreted oil accumulation and intends to use the latest horizontal drilling and stimulation techniques to prove commercial production from the oil accumulation. In Australia, the Company was the successful bidder for 100% of a 1.4 million acre application located in the highly prospective Laurel shale fairway in the Canning Basin, WA. The Laurel shale is interpreted as the primary unconventional target over most of the application. Recently gas, condensate and oil have been discovered in the Laurel shale along a similar geological fairway as Strata-X Energy s application. Strata-X Energy has an option to acquire 100% working interest in the 175,000 acre Sleeping Giant Project in the Williston Basin, North Dakota. The Sleeping Giant Project has shallow gas targets similar to analogue fields making it suitable for a potential low cost gas operation. The Company plans to carry out proof of concept wells with the goal to establish reserves and commercial gas sales. While targeting substantial growth in petroleum reserves and production from our current projects, Strata-X Energy will continue to pursue other high growth opportunities to expand its portfolio. Strata-X Energy has a strong board of directors and management team with extensive experience in exploration, discovery and development of petroleum projects. Specifically, I have been the managing director and executive director of two ASX-listed start-up companies, Arrow Energy and Bow Energy which were taken over for $3.5 billion and $550 million, respectively. I believe my past successes were primarily due to having the right growth projects and the right people to manage those projects. I see the same ingredients for success in Strata-X Energy. Tim Hoops, the Managing Director of Strata-X Energy, has an extensive 33 year career in petroleum exploration, operations and management. Tim has an intimate working knowledge of the productive USA and Australia petroleum basins and a keen sense of early recognition of petroleum growth projects. I am confident that our talented technical and management team can extract the significant potential of our petroleum projects and consider the substantial personal investment I have made in Strata-X Energy demonstrates the degree of my confidence in the assets of the Company and its team. On behalf of my fellow directors, I invite you to review this Prospectus and join me in subscribing to the Offer. Ron Prefontaine Chairman 21 December 2012

9 PROSPECTUS I believe my past successes were primarily due to having the right growth projects and the right people to manage those projects. I see the same ingredients for success in Strata-X Energy. Ron Prefontaine, Chairman

10 8 STRATA-X ENERGY Investment summary

11 PROSPECTUS Summary of Strata-X Energy and its Projects Strata-X Energy Limited (Strata-X Energy) is a TSX-V listed independent oil and gas exploration company. Registered in British Columbia, Canada, Strata-X Energy has a diversified portfolio of petroleum projects which offers high growth potential opportunities for Shareholders. The Company s strategy is to acquire meaningful acreage positions with large working interests that have relatively low entry costs then explore, appraise and develop these petroleum interests which combine to offer the potential for high growth for its Shareholders. Strata-X Energy currently owns or has rights to approximately 6,779 km 2 (1,675,160 net acres) in petroleum assets located in the USA and Australia. The Company is primarily targeting near term growth conventional and unconventional oil resources in the USA. Longer term growth is offered in the Company s successful strategic application for 5,820 km 2 (1,438,120 acres) in the Canning Basin, Western Australia. Strata-X Energy owns and operates 100% of the majority of the acreage of its four key projects which provides the Company with flexibility in terms of timing and approach to exploration and any subsequent development of delineated oil and gas reserves. The Company also has interests in several other petroleum projects in the USA. Further details on Strata-X Energy and its projects are in Section Key Investment Attributes The Directors consider that the key attributes of Strata-X Energy will provide Shareholders with an attractive investment opportunity with exposure to a diverse portfolio of potentially high reward projects. The Company has a 100% working interest in the majority of its key project acreage which provide flexibility around the planned exploration and potential development program over the next 12 to 18 months. The Company s US projects have drill ready targets and are situated in known oil and gas producing basins providing near term upside potential. Further, Strata-X Energy boasts a strong Board and Management team with a track record for delivering results and substantial shareholder returns. An investment in the Company is not without risk. A summary of the key risks is set out in Sections 2.7 and 5 of this Prospectus Purpose of the Offer and Proposed Work Program The purpose of the Offer is to raise funds to use with existing funds to: Explore the Company s oil and gas projects described in this Prospectus; Acquire further high reward potential opportunities; Pay the expenses of the Offer; and Provide ongoing working capital for general and administration expenses. The Directors of Strata-X Energy are satisfied that upon completion of the Offer, when combined with its existing cash, the Company will have sufficient funds to meet its stated objectives. A summary of how the funds will be used is as follows: Sources Minimum Subscription Maximum Subscription Estimated cash on completion of the Offer (before Offer costs) (1) $3.10 million $3.10 million Gross proceeds of the Offer $10.00 million $20.00 million Total available cash $13.10 million $23.10 million Use of Funds Amount Amount Exploration and drilling (2) $5.28 million $13.10 million Land acquisitions $0.39 million $1.09 million Corporate, financial and administration $1.60 million $2.38 million Expenses of the Offer $1.29 million $1.94 million Repayment of short-term loan (3) $2.04 million $2.04 million Remaining working capital $2.50 million $2.55 million Total $13.10 million $23.10 million (1) Estimate based on pro-forma balance reduced by ordinary expenses incurred since 30 June (2) The exploration program and budget is described in Section 3.5 of this Prospectus. (3) A short-term loan provided by Prepet Pty Ltd (an entity associated with Ron Prefontaine, a Director of the Company), as described in Section 12.9.

12 10 STRATA-X ENERGY 2.4. Offer of CDIs The Company is incorporated in Canada, which does not recognize the CHESS system of holding securities or electronic transfer of legal title to shares. Therefore successful Applicants under the Offer will be issued with CHESS Depositary Interests (CDIs), rather than Shares, which will trade on the ASX in a similar manner to shares and trade under its SXA code. The Company s Shares will continue to trade on TSX-V under its SXE code. Each CDI represents one underlying Share. The main difference between holding CDIs and Shares is that CDI holders hold the beneficial ownership in the Shares instead of legal title. The Shares underlying the CDIs will be registered in the name of CHESS Depository Nominees Pty Ltd and will be held on behalf of and for the benefit of the CDI holder. The Company will proceed to issue and allot CDIs as soon as possible after the close of the Offer. As the Shares offered under this Prospectus will trade on the ASX in the form of CDIs, all allotments of Shares under the Offer will be affected through the issue of CDIs Capital Structure The capital structure of the Company following completion of the Offer is summarised below: Description Minimum Subscription Maximum Subscription Shares currently on issue (1)(4) 80,461,105 80,461,105 Proposed CDIs to be issued under the Offer (2)(3) 33,333,333 66,666,666 Fully paid Shares on issue (4) 113,794, ,127,771 (1) This includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) As described in Section 2.4, each CDI will represent one underlying Share which will be issued and held for the benefit of the CDI holder. (3) To the extent that the Company extends the Offer to eligible Canadian investors (outside of this Prospectus), the Company may seek to offer Shares to those investors rather than CDIs. If this occurs the number of CDIs on issue following completion of the Offer will reduce accordingly. (4) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued. An overview of the Strata-X Energy ownership structure immediately prior to and on listing will be as follows: Pre-Offer Post-Offer Post-Offer Shareholder % Minimum Subscription % Maximum Subscription % Directors (1)(2) Other Existing Shareholders (1)(3) New CDI Holders (1) This includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section Directors may subscribe for CDIs (or Shares) under the Offer. (2) This excludes any additional Shares, Warrants and CDIs that may be issued to entities associated with Ron Prefontaine as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest to entities associated with Ron Prefontaine will total approximately $CAD35,069, resulting in an additional 140,276 Shares and 70,138 Warrants being issued to entities associated with Ron Prefontaine. (3) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued.

13 PROSPECTUS In addition, the Company has the following securities on issue: 2,960,000 outstanding Options (refer to Section 13.7 for further details); 37,371,525 outstanding Warrants (Including 8,362,000 warrants to be issued on conversion of the Convertible Notes, 200,000 Warrants to be issued as finder s fee Warrants and up to 2,000,000 Warrants to be issued to the JLMs on completion of the Offer. Refer to Section 12.6 and for further details) Industry Outlook Strata-X Energy s focus as detailed in this Prospectus is on the exploration and development of its USA and Australian oil and gas projects. The outlook for oil and gas demand is strong based on the outlook for global growth. While increasing oil consumption, continuing political tensions in the Middle East and persistently low OPEC spare capacity will support forecast higher oil prices. In 2013, economic activity is assumed to pick-up and world oil consumption is forecast to increase by 1.4% to an average of 91.1 MMbbls a day, or 33 Bbbls a year. Growth in global gas consumption will be supported by Asia which will be the fastest growing gas consuming region, driven primarily by China which should emerge as the third largest gas user by In 2010 fossil fuels accounted for more than 80% of all the energy consumed in the USA of which petroleum and other liquids account for 37%. By 2035 petroleum consumption is expected to have declined slightly, while the USA is expected to become a net exporter of gas by The proportion of production of shale gas in the USA is also expected to more than double by In Australia, oil is generally priced at either premium or discount to benchmarks such as the Tapis or Brent price which are driven by the global oil dynamics. Gas on the other hand is generally sold at spot prices or under longer term contracts Summary of Key Risks An investment in the CDIs being offered under this Prospectus is not risk free. Exploration and evaluation for oil and gas is generally considered a high-risk activity. The Company s activities are subject to a number of risks which have the potential to adversely impact on its future performance, financial position, exploration and development projects and the price of its listed securities. Before investing, prospective investors are advised to consider the risk elements, the most significant of which are summarised below and described in greater detail in Section 5. Exploration and Development Strata-X Energy is engaged in oil and gas exploration, appraisal and development which is inherently speculative and involves a significant degree of risk. There can be no assurance that Strata-X Energy s planned exploration, appraisal and development activities will be successful, nor that if oil and gas resources are identified, it will be economic to extract these resources. Operational Risks Oil and gas exploration and development activities involve a wide range of operational risks which may result in, injury, death, loss of property, damage to private property or environmental damage. The occurrence of any of these risks could result in substantial financial losses to Strata-X Energy. Although the Directors of the Company will endeavour to anticipate, identify and manage the risks inherent in the Company s activities, with the aim of eliminating, avoiding and mitigating the impact of such, no assurance can be given that the Directors will be successful in these endeavours. Financing, future capital needs and additional funding risk As identified in Section 3, assuming only the Minimum Subscription amount is raised, Strata-X Energy proposes a program of works comprising approximately 12 months of field activities. If further funds are raised under this Offer, this program may be extended or additional activities may be added to the program. In any event, the Company may be required to raise additional funds to enable it to continue as a going concern after the end of its budgeted program. Additionally, depending on the Company s exploration success and new opportunities that may become available, the Company is likely to require further capital in the future to continue its activities and facilitate growth. There can be no assurance that any such equity or debt funding will be available to Strata-X Energy on reasonable terms or at all. Failure to obtain appropriate financing on a timely basis or reasonable terms may result in a loss of business opportunity and excessive funding costs. If Strata-X Energy raises additional funds through the issue of equity securities, this may result in dilution to the existing shareholders and/or a change of control of Strata-X Energy. Geological and Technical Whilst independent expert AWT International has independently assessed Prospective Resource estimates in Strata-X Energy s portfolio, these resources represent estimates only and the Company has independently certified oil and gas reserves in

14 12 STRATA-X ENERGY its granted tenements. There is significant risk that Strata-X Energy s Prospective Resources will not convert to Reserves, and that actual production with respect to Reserves may vary from such estimates. Such variances could be material to Strata-X Energy and its future profitability. Changes in commodity prices Strata-X Energy s potential future earnings, profitability, and growth are likely to be closely related to the price of oil and gas which have historically been volatile and have fluctuated in response to changes in the supply of and demand for oil and gas, economic uncertainty, and a variety of additional factors beyond the control of Strata-X Energy. Title Risk It is customary that full title opinions of oil and gas leases in the United States are not rendered until a company proposes to conduct a drilling operation or expend significant amounts of money on a particular lease or leases. As Strata-X Energy has adopted this approach, there is a possibility that third parties may hold or claim mineral rights adverse to Strata-X Energy s interests in the lease. Strata-X Energy s interest in the Canning Basin Project is via an application. Whilst the Company has been offered the permit subject to compliance with native title procedures, there can be no guarantee that the permit will ultimately proceed to grant Key Offer Statistics Minimum Subscription Maximum Subscription Offer Price per CDI (representing one Share) $0.30 $0.30 CDIs available under the Offer 33,333,333 66,666,666 Shares on issue prior to the Offer (1)(8) 80,461,105 80,461,105 Options on issue prior to the Offer 2,960,000 2,960,000 Warrants on issue prior to the Offer (2)(3)(8) 36,371,525 (4) 37,371,525 (5) Fully paid Shares on issue following completion of the Offer (8) 113,794, ,127,771 Estimated costs of the Offer $1,291,700 $1,940,700 Market Capitalisation of Shares at the Offer Price (8) $34,138,331 $44,138,331 Estimated cash on completion of the Offer (before Offer costs) (6) ~$13,100,00 ~$23,100,000 Short-term loan (7) $2,000,000 $2,000,000 Enterprise value (8) $24,330,031 $24,979,031 (1) Includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) Includes 8,362,000 Warrants to be issued on conversion of the Convertible Notes, as described in Section (3) Includes 200,000 Warrants to be issued as finder s fees subject to documentation for the issue being finalised, as described in Section (4) Includes 1,000,000 Warrants to be issued to the JLMs based on the JLMs raising the Minimum Subscription and Completion of the Offer, as detailed in Section (5) Includes 2,000,000 Warrants to be issued to the JLMs based on the JLMs raising the Maximum Subscription and Completion of the Offer, as detailed in Section (6) Estimate based on a pro-forma balance reduced by ordinary expenses incurred since 30 June (7) A short-term loan provided by Prepet Pty Ltd (an entity associated with Ron Prefontaine, a Director of the Company), as described in Section (8) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued.

15 PROSPECTUS Board and Management Experience and Expertise Board and Management Ron Prefontaine (Chairman) Experience, Qualifications and Expertise Mr Prefontaine has over 33 years of experience in the oil and gas industry. He previously worked for Santos and Oil Company of Australia on their Cooper, Surat, Bowen and Canning Basin projects. Between 1994 and 2001, while consulting to the industry, he acquired several petroleum permits in his private companies which he sold or farmed out to Oilex, Arrow Energy, Bow Energy and QGC. He served as an Executive Director of Arrow Energy from 2001 until late It was taken over in 2010 for $3.5 billion. He was also co-founder and Managing/Executive Director of Bow Energy from 2005 until it was taken over in 2011 for $550 million. His strengths are the early recognition of growth assets and the management of corporate growth. Tim Hoops (Managing Director) Mr Prefontaine holds a Bachelor of Science in Geophysics from the University of British Columbia. Mr Hoops has over 33 years experience in the petroleum industry and has been President of Peak Resource Management Inc., a private oil and gas exploration company, since He previously served as President and Director of Kestrel Energy Inc., a NASDAQ listed company, from 1992 to 2005, and as a director of Victoria Petroleum NL (now Senex Energy Ltd), an ASX listed company, from 1988 to He was Exploration Manager at Royal Resources and managed the company s exploration activities in the Canning Basin from 1984 to 1986 and previously worked for Amoco Production Company. His strengths include the early recognition of growth petroleum assets, resource valuation and project management. Tim Bradley (CFO/Director) He has a Bachelor of Science in Geological Engineering from the Colorado School of Mines and a Master of Science in Global Energy Management from the University of Colorado. Mr Bradley has management experience spanning 30 years which includes the oil and gas industry and has been CEO of Bradley Consulting Group, PC in Colorado since His professional emphasis is in business consulting and he specialises in succession planning for the purposes of mergers and acquisitions, and other financial service products. Bohdan (Don) Romaniuk (Director) Mr Bradley is a Certified Public Accountant licensed in Colorado, a member of the American Institute of Certified Public Accountants and the Colorado Society of Certified Public Accountants. Mr Romaniuk is an attorney, economist and business executive. He has held a number of senior executive positions in both small and very large enterprises over a business career spanning nearly 30 years. He has served on the Boards of several publicly listed companies and is currently the Chairman of the Board and Audit Committee of Acceleware Corp., a TSX-V listed company. On 3 October 2012, Mr Romaniuk was appointed a part-time Commissioner of the Alberta Utilities Commission pursuant to an Order-in-Council of the Government of Alberta. Don Schurman (Director) He remains active in several private business ventures focused on developing technology for stem cell research and related medical and commercial applications. Mr Schurman has served in senior executive and corporate director roles for more than 40 years and is an independent director for Strata-X Energy. He served as a senior executive for a variety of health care organizations including serving as the Executive Vice President of Extendicare, a TSX listed company, and 8 years as the President and CEO of the University of Alberta Hospital.

16 14 STRATA-X ENERGY Board and Management David Hettich (Controller & Land Manager) Duncan Cornish (Proposed Company Secretary) ASX Doug Walker (Company Secretary) TSX-V Experience, Qualifications and Expertise Mr Schurman has served as a director and board chair of two TSX listed companies: Liberty Mines, a nickel mining company; and Isotechnika Inc., a drug development company. Mr Schurman has a Bachelor of Commerce degree from the University of Saskatchewan and a Masters of Health Administration degree from the University of Alberta. Mr Hettich is the Land Manager and Controller for Strata-X Energy. He has many years project management experience in the oil and gas industry. Mr Hettich earned a Bachelor of Business Administration in Banking and Financial Economics from the University of North Dakota and is an active member in multiple North American oil and gas associations. Mr Cornish is an accomplished and highly regarded corporate administrator and manager. He has many years experience in pivotal management roles in capital raisings and stock exchange listings for numerous companies on the ASX, AIM Market of the London Stock Exchange and the Toronto Stock Exchange. He is currently Company Secretary and CFO of other listed companies on the ASX and TSX-V where he has assisted in their listing and capital raisings. Mr Walker has been President of Capital West Ventures Inc., a private consulting company since He has provided corporate advisory services to companies in the health care, technology, oil and gas and mining sectors. He was awarded his ICD.D from the Institute of Corporate Directors in 2008 and received his Bachelor of Commerce from the University of Saskatchewan in Directors Interests in the Company At the date of this Prospectus, the Directors and their associated entities hold the following interests in the Company: Name Ordinary Shares/CDIs Pre-Offer Post-Offer Post-Offer Ordinary Shares/CDIs (%) Minimum Subscription Ordinary Shares/CDIs (%) Maximum Subscription Ordinary Shares/CDIs (%) Options (2) Warrants (3)(4) Ron Prefontaine (5) 13,356, % 11.74% 9.08% 200,000 5,700,000 Tim Hoops 9,624, % 8.46% 6.54% 1,300,000 4,812,000 Tim Bradley 2,376, % 2.09% 1.61% 300,000 1,188,000 Don Romaniuk 410, % 0.36% 0.28% 150,000 - Don Schurman 360, % 0.32% 0.24% 100,000 - Directors Total (1) 25,926, % 22.96% 17.76% 2,050,000 11,700,000 (1) Includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) The terms of the Options held by Directors and their associated entities are set out in Section 7.6 (3) The terms of the Warrants held by Directors and their associated entities are set out in Section 7.6. (4) Includes 8,362,000 Warrants to be issued on conversion of the Convertible Notes, as described in Section (5) This excludes any additional Shares, Warrants and CDIs that may be issued to entities associated with Ron Prefontaine as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest to entities associated with Ron Prefontaine will total approximately $CAD35,069, resulting in an additional 140,276 Shares and 70,138 Warrants being issued to entities associated with Ron Prefontaine.

17 PROSPECTUS Related Party Transactions Since incorporation, the Company has entered into a number of transactions with related parties. The transactions are: a) The grant of a 2.5% overriding royalty interest (ORRI) to Peak Resources Management, Inc. (an entity controlled by Tim Hoops, Managing Director of Strata-X Energy) of any gross proceeds from the sale of all oil, gas and other hydrocarbons, derived from any lands which Strata-X Energy is able to acquire in the Sleeping Giant area in North Dakota. The ORRI was granted to Peak Resources Management, Inc. in 2010 (prior to Strata-X Energy acquiring the project) and is only active after Strata-X Energy has recovered all funds expended in the project. b) The grant of a 1% overriding royalty interest to Peak Resources Management, Inc. (an entity controlled by Tim Hoops, Managing Director of Strata-X Energy) of any gross proceeds from the sale of all oil, gas and other hydrocarbons, derived from any lands which Strata-X Energy is able to acquire in the Vallecitos Project. The ORRI was granted to Peak Resources Management, Inc. in 2008 (prior to Strata-X Energy acquiring the project) and is only active after Strata-X Energy has recovered all funds expended in the project. c) Issue of Shares on incorporation to Ron Prefontaine, Don Romaniuk and Don Schurman or entities and persons associated with them, at an issue price of CAD$0.05 per share. d) Issue of Shares and Warrants to each former shareholder of Strata-X Inc., (which included Tim Hoops, Ron Prefontaine and Tim Bradley and entities and persons associated with them) pursuant to a share exchange agreement as part of the Qualifying Transaction. e) Issue of Shares and Warrants to certain investors (which included Ron Prefontaine) pursuant to private placements on 22 September 2011, 29 June 2012 and 13 July The issue price for the Shares placed under the private placement on 22 September 2011 was CAD$0.30 per Share and CAD$0.25 for the Shares placed under the private placement on 29 June 2012 and 13 July f) Issue of convertible notes in the Company to certain investors (which included Ron Prefontaine) on 29 June 2012 and 13 July 2012 and the subsequent issue of Shares and Warrants on conversion of those convertible notes on 21 December The issue price paid for the convertible notes was CAD$0.25 per note which entitled the holder to 1 Share and 1 half Warrant on conversion. g) Issue of Convertible Notes in the Company to certain investors (which included Ron Prefontaine) on 29 October The issue price paid for the Convertible Notes was CAD$0.25 per note which entitled the holder to 1 Share and 1 half Warrant on conversion. h) Issue of Options to Directors under the Share Option Plan as outlined in Section 13.7 (and the subsequent issue of Shares pursuant to the exercise of those Options). i) A loan agreement with Prepet Pty Ltd, an entity controlled by Ron Prefontaine, pursuant to which Prepet Pty Ltd will lend the Company up to a maximum of AUD$2,000,000. A summary of the key terms of the loan agreement is set out in Section A total of 9,500,000 Shares and 4,330,000 Warrants issued to related parties of the Company are subject to continuing escrow arrangements under the requirements of the TSX-V. Full details of these transactions, including the escrow arrangements, are outlined in section Total Remuneration of Directors Under existing agreements with all executive and nonexecutive directors, a total remuneration of approximately $446,000 per annum is payable as at the date of this Prospectus. Each Non-Executive Director is entitled to an annual fee of between approximately $30,000 to $50,000. Tim Hoops, President and Director, is entitled to US$240,000 per annum and Tim Bradley, CFO, is entitled to US$96,000 per annum under their respective executive service agreements. For details see Section 7. For details of the remuneration payable to other key management see Section Financial Position Strata-X Energy s present financial position and its financial position following completion of the Offer is set out in Section Cost of Issue The total estimated costs of the Offer, including capital raising fees and commissions, ASIC and ASX fees, prospectus printing and miscellaneous expenses will be approximately $1,291,700 if the Minimum Subscription is raised and approximately $1,940,700 if the Maximum Subscription is raised.

18 16 STRATA-X ENERGY Questions and Answers Question Answer Relevant Section Who is the issuer of this Strata-X Energy, an entity incorporated in British Columbia, Canada Section 2.1 prospectus? What is Strata-X Energy and what does Strata-X Energy do? Strata-X Energy is an oil and gas exploration company with a portfolio of US and Australian projects. The Company has a management team with over 80 years of combined experience in the oil and gas industry. The Chairman and Managing Director, Ron Prefontaine and Tim Hoops respectively, have successfully grown public companies in the energy sector. The Board also consists of CFO Tim Bradley and two Albertabased independent directors, Don Romaniuk and Don Schurman, both of whom have extensive experience in the Canadian public arena in addition to their successful private business interests. Section 3 What is being offered? The Company s strategy is to acquire meaningful acreage positions with large working interests that have relatively low entry costs then explore, appraise and develop these petroleum interests which combine to offer the potential for high growth for its Shareholders. The Offer is an initial public offering of between 33,333,333 and 66,666,666 CDIs in Strata-X Energy. Section 6 Note, to the extent the Company raises part of the Offer proceeds in Canada via the issue of Shares, the total number of CDIs issued may be reduced accordingly. What is the Offer price? The offer price is $0.30 per CDI. Section 6 What is a CDI and the difference between Shares? Each CDI represents one underlying Share. However, the main difference between holding CDIs and Shares is that the holder of CDIs has beneficial ownership of the Shares instead of legal title. CHESS Depositary Nominees Pty Ltd ( CDN ) holds the legal title to the underlying Shares. The Shares which are the subject of CDIs will be registered in the name of CDN and will be held on behalf of and for the benefit of the CDI holder. Section 6.11 How will the proceeds of the Offer be used? What is the minimum/ maximum application under the Offer? Is the Offer underwritten? What will the market capitalisation of the Company be upon listing on the ASX? Trading in CDIs holdings is no different from trading in other CHESS approved securities. Funds raised from the Offer will be used with existing funds to: Explore and reduce risk at the Company s oil and gas projects described in this Prospectus; Acquire further acreage positions; Pay the expenses of the Offer; and Provide ongoing working capital for corporate, financial and administration expenses. The minimum application amount is for 6,667 CDIs ($2,000). Additional CDIs can be applied for in multiples of 1,667 CDIs ($500). Section 3.6 Section 6.7 There is no maximum amount that may be applied for in respect of the Offer. The Company reserves the right to accept or reject Applications in full or in part. No Section 6 The market capitalisation of the Company on listing is expected to be approximately $34.1 million if the Minimum Subscription is raised and approximately $44.1 million if the Maximum Subscription is raised. Section 6

19 PROSPECTUS Question Answer Relevant Section What are the benefits of investing in the Company? An investment in Strata-X Energy offers investors exposure to a diverse portfolio of potentially high reward projects. The Company has a 100% working interest in the majority of its key project acreage providing it with flexibility around exploration, potential development and financing. The Company s US projects have drill ready targets and are situated in known producing basins providing near term upside potential. Further, Strata-X Energy boasts a strong Board and Management team with a track record for delivering results driving their 12 to 18 month work program. Section 3 What are the key risks of investing in the Company? Exploration and evaluation for oil and gas is generally considered a highrisk activity. Amongst others, the Company considers the following to be the most significant: Exploration and Development; Operational Risks; Financing, future capital needs and additional funding risk; Geological and technical; Changes in commodity prices; and Title Risk. Section 5 What are the costs of the Offer? When will I receive dividends? What are the tax implications of investing in the Company? What is the Offer structure? What are the key dates of the Offer? A summary of certain key risks are set out in Section 5. The total estimated costs of the Offer, which will be borne by the Company, are estimated at approximately $1,291,700 if the Minimum Subscription is raised and approximately $1,940,700 if the Maximum Subscription is raised and include ASIC and ASX fees, prospectus printing costs and miscellaneous expenses. The Company does not intend to declare a dividend in the coming financial year. It is the present intention of the Directors to apply surplus cash flow to fund the exploration of the Company s project portfolio and any resultant development or production and generate new opportunities, rather than distributing these moneys in the form of dividends. The taxation implications of investing in CDIs will depend on an investor s individual circumstances. Applicants should obtain their own tax advice or financial planning advice prior to investing. The Offer comprises: the Broker Firm Offer; and the Institutional Offer which consists of an invitation to bid for CDIs (or in certain cases, Shares) made to Institutional Investors, including private placements to Institutional Investors in certain foreign countries as contemplated in Section In addition the Company proposes to issue 16,724,000 Shares and 8,362,000 Warrants pursuant to this Prospectus on conversion of the Convertible Notes. The Offer opens at 10 am (AEST) on 14 January The Offer closes at 5pm (AEST) on 8 February The CDIs are expected to be issued on 14 February 2012 and holding statements are expected to be despatched on or about 15 February The CDIs are expected to commence trading on the ASX under the code SXA on 20 February These dates are indicative only. The Company, in consultation with the Joint Lead Managers, reserves the right to alter any of the dates relating to the Offer without notice. Investors are encouraged to submit their Applications as soon as possible after the opening of the Offer. Section 6 Section 6 Section 6 Section 6 Section 6

20 18 STRATA-X ENERGY Company overview

21 PROSPECTUS Company profile Company history and background Strata-X Energy Ltd (TSX-V code: SXE) (proposed ASX code: SXA) and its wholly owned subsidiaries, Strata-X Inc. and Strata-X Australia Pty Ltd (collectively referred to as Strata-X Energy or the Company) is an independent oil and gas exploration company listed on the TSX-V. Based in British Columbia, Canada, Strata-X Energy has a portfolio of petroleum projects which provides a diversified collection of potential high growth opportunities for Shareholders. The Company s strategy and goals are to discover and develop oil and gas opportunities with relatively low entry costs, a meaningful acreage position and a large working interest which combine to create the potential for substantial growth for Shareholders. The Company was incorporated as Ozcapital Ventures Inc. on 18 June 2007 in the Province of Alberta, Canada under the Alberta Business Corporations Act. On 3 December 2010, the Company was admitted to trading on TSX-V under the name Ozcapital Ventures Inc., a capital pool company. On 26 September 2011, the Company acquired Strata-X Inc., a company incorporated in Colorado, USA with activities primarily focussed on the acquisition, exploration and development of oil and gas in the USA. At the time of acquisition the Company changed its name to Strata-X Ltd and has traded on the TSX-V under the symbol SXE since that date. Following the acquisition of Strata-X Inc., the Company has continued to expand its oil and gas project portfolio by acquiring a 100% interest in the Vail Oil Project, purchasing a 100% interest in the majority of the Maverick Oil Project acreage in the USA and through its successful bid for 100% of a 1.4 million acre application in the Canning Basin, Australia. On 18 September 2012, the Shareholders of the Company approved a special resolution to approve a continuation of the Company out of the province of Alberta and into the province of British Columbia and change the name of the Company from Strata-X Ltd to Strata-X Energy Ltd. On 11 October 2012, the Company formally continued out of the province of Alberta and into the province of British Columbia. Figure 1: Corporate Structure Strata-X Energy Ltd TSX-Venture Exchange Listed Proposed ASX Listing under this Prospectus Strata-X Inc Maverick Oil Project Vail Oil Project Sleeping Giant Project Vallecitos Project Eagle Field Project Margarita Project Strata-X Australia Pty Ltd Canning Project

22 20 STRATA-X ENERGY 3.2. Company structure The capital structure of the Company following completion of the Offer is summarised below: Description Minimum Subscription Maximum Subscription Shares currently on issue (1)(4) 80,461,105 80,461,105 Proposed CDIs to be issued under the Offer (2)(3) 33,333,333 66,666,666 Fully paid Shares on issue (4) 113,794, ,127,771 (1) This includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) As described in Section 2.4, each CDI will represent one underlying Share which will be issued and held for the benefit of the CDI holder. (3) To the extent that the Company extends the Offer to eligible Canadian investors (outside of this Prospectus), the Company may seek to offer Shares to those investors rather than CDIs. If this occurs the number of CDIs on issue following completion of the Offer will reduce accordingly. (4) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued. An overview of the Strata-X Energy ownership structure immediately prior to and on listing will be as follows: Pre-Offer Post-Offer Post-Offer Shareholder % Minimum Subscription % Maximum Subscription % Directors (1)(2) Other Existing Shareholders (1)(3) New CDI Holders (1) This includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) This excludes any additional Shares, Warrants and CDIs that may be issued to entities associated with Ron Prefontaine as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest to entities associated with Ron Prefontaine will total approximately $CAD35,069, resulting in an additional 140,276 Shares and 70,138 Warrants being issued to entities associated with Ron Prefontaine. (3) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued. In addition, the Company has the following securities on issue: 2,960,000 outstanding Options (refer to Section 13.7 for further details); 37,871,525 outstanding Warrants (Including 8,362,000 Warrants to be issued on conversion of the Convertible Notes, 200,000 Warrants to be issued as finder s fee Warrants and up to 2,000,000 Warrants to be issued to the JLMs on completion of the Offer. Refer to Section 12.6 and for further details) Summary of Company s exploration portfolio Across its projects, Strata-X Energy currently has interests or is the successful bidder in approximately 6,779 km 2 (1,675,160 net acres) in petroleum prospective area located in the USA and Australia. The Company is primarily targeting conventional and unconventional oil and gas resources in the USA and Australia. Strata-X Energy has 100% working interests in the majority of its key project acreage and operates those projects which provides the Company with flexibility in terms of timing and approach to exploration and any subsequent development of delineated oil and gas reserves. The Company s strategy is to capture emerging petroleum exploration, development and production opportunities that have the following characteristics: a sound geological framework with substantial untapped or unrecognised petroleum potential, low entry costs, meaningful acreage positions and high net revenue interests. The company also has smaller varying interests in several other projects targeting unconventional oil and gas. Strata-X Energy plans to fund its 12 to 18 month work program from the proceeds of the Offer and existing cash. This includes plans to drill multiple wells, both vertial and horizontal, and where applicable, carry out multistage

23 PROSPECTUS fracture stimulations across its USA projects. Other work will include seismic, geological and geophysical reviews and prospect mapping. For further details on the proposed work program refer to Section 3.6. Project Location Interest Net km 2 Net acres Maverick Oil (1) Texas, USA 100% 44 10,945 Vail Oil Illinois, USA 100% ,400 Canning Western Australia 100% 5,820 1,438,120 Sleeping Giant North Dakota, USA 100% ,000 Vallecitos California, USA 22.5% 19 4,725 Eagle California, USA 20% Margarita Texas, USA 37.5% Total 6,779 1,675,160 (1) Strata-X Energy has a 100% interest in most of the project area however pursuant to the Maverick Agreement (described in Section 12.1) has a 75% interest in other acreage and in the AMI. It also has a 15% interest in one 660 acre area. Figure 2: Project Location Overview 3.4 Resource and Reserve Summary Project Strata-X Energy ownership Oil gross to Strata-X (thousand barrels) Gas gross to Strata-X (Bcf) 1P Reserve (Chapman 2012) Vallecitos AMI, California, USA 22.5% 4 minor 2P Reserve (Chapman 2012) Vallecitos AMI, California, USA Producing Non-producing Eagle Field, California, USA Best estimate prospective resources Maverick, Texas, USA (1) Vail, Illinois Basin, USA Sleeping Giant, North Dakota, USA Canning Basin, WA Vallecitos AMI, California, USA Margarita AMI, Texas, USA 22.5% 22.5% 20.0% % 100% 100% 100% 22.5% 37.5% ,000 20,900 nil 51, minor minor 50 minor minor minor (1) Strata-X Energy has a 100% interest in most of the project area however pursuant to the Maverick Agreement (described in Section 12.1) has a 75% interest in other acreage and in the AMI. It also has a 15% interest in one 660 acre area.

24 22 STRATA-X ENERGY The high interest and operatorship of our key projects allows Strata-X Energy to have complete control over the pace and scope of exploration and development of these projects. Ron Prefontaine, Chairman 3.5. Detailed overview of the Company s exploration portfolio Maverick Oil Project Project highlights Located in proven oil producing basin (Eagle Ford shale, Texas) and recent exploration success within project area Nearby wells (not owned by the Company) with flows of up to 896 bbls of oil per day 100% working interest in the majority of the Maverick Oil Project area, net 44 km 2 (10,945 acres) Estimated Prospective Resource of 34 MMbbls of oil and 50 BCF of gas net to Strata-X Energy Investment Rationale The Eagle Ford shale fairway is one of the largest single economic developments in the history of the state of Texas and one of the most active oil and gas exploration and development markets in the USA. Oil and gas was first commercially produced in 2008 and since then, thousands of wells have been drilled. Commercial flow rates have been achieved by other operators in the fairway by using proven and evolving vertical and horizontal multi-stage fracture stimulation technology and new improved completion methods. Approximately 250 rigs currently operate in the trend with estimated total capital expenditures of US$25 billion per year. This project is an example of Strata-X Energy s mandate to be the first or early mover into low risk but high potential oil areas. By being the first or early mover, land can be acquired at significantly lower costs, thereby allowing the Company to purchase a larger land position which can offer substantial shareholder growth on success. Drilling first commenced in the eastern region of the Eagle Ford shale fairway trend and has been progressively moving west. The Maverick Oil Project is located in the western region of the trend in Texas and recent drilling within and around the Maverick Project area demonstrates the Eagle Ford light oil fairway extends into the area. Other players in the western region include Anadarko, KNOC, Newfield, SM Energy, Sanchez Energy, Mitsui and EnCana. Strata-X Energy s technical team carried out a detailed review of the Maverick Project as part of the due diligence prior to offering to purchase 75% of the project from a small Canadian listed company based in Calgary. A well drilled in 2011 by the previous operator had 55 metres of net oil pay, shallow target depths of around 1,300 metres, light oil and gas and the project has an estimated 900 MMbbls OOIP within the net acres being purchased. The primary risk was to prove commercial production. The well drilled by the previous operator in 2011 included a eight stage fracture stimulation of which six were successful over approximately 550 metres of a horizontally drilled well versus the current 18 or more staged fracture stimulations over 1,500 or more metres being applied to the most recent successful wells on the fairway. Despite having less than an adequate horizontal fracture stimulation by recent standards, as well as other operational issues, the operator reported average flows of 175 bbls of oil and 1.8 MMCF of gas per day over a 12 day test period. Unfortunately, incompatible fluids used on the completion permanently damaged the well and it cannot be revived. This well has provided important technical data on the play s net oil and oil quality which, when combined with advances in fracture stimulation techniques, suggests that Strata-X Energy s land position contains commercial quantities of oil with which to build a robust oil project. Operating on the premise that properly executed horizontal multi-stage fracture stimulated wells similar to those being successfully completed by other operators on the Eagle Ford fairway would be commercial in the Maverick Project, Strata-X Energy purchased 75% of the project and was appointed the operator. The purchase price per acre was much lower than others have paid on the Eagle Ford shale fairway. Strata-X Energy has leveraged off exploration activity near the Maverick Oil Project area. For example, Sanchez Energy announced oil flows of approximately 900 bbls of oil per day of black oil and very low gas rates from a nearby well located northeast of the Maverick area in the heavier oil window. Generally, wells producing within the light oil with gas window, as in the Maverick area, would have better flow rates than wells within the thicker black oil and low gas areas. Strata-X Energy believes the results of this well further enhance its rationale for purchasing a large equity stake in the Project. On 1 December 2012, Strata-X Energy acquired the remaining 25% of the majority of the project acreage for $962,500 cash and renewed the majority of the acreage for 3 years.

25 PROSPECTUS Project summary Strata-X Energy has a 100% working interest in the majority of the Maverick Oil Project acreage which is situated in Eagle Ford shale Fairway in southern Texas and covers 44 km 2 (10,945 acres). Strata-X Energy s exploration efforts will be targeting light shale oil and associated gas and condensates. The project is nearby a recently completed successful shale oil well called Sanchez Mark and Sandra-2H (not owned by the Company) which initially flowed 896 bbls of oil per day. Additionally, within the Maverick Oil Project area, a recently drilled well, called El Indio-1H, flowed 175 bbls of oil and 1.8 MMCF of gas per day over a 12 day test period despite a less than adequate fracture stimulation and testing program by the previous operator. The project is located nearby to gas pipelines and infrastructure. Geological overview and history The first commercial discovery in the Eagle Ford shale Fairway was made in 2008 and encouraged a significant increase in drilling activity and further commercial discoveries. Active drilling then started in the deeper dry gas to wet gas window and has progressively moved westward and up dip into the oil window. The structurally uncomplicated Eagle Ford shale underlies much of southern Texas and dips towards the southeast. At the Maverick Oil Project location the formation is approximately 1,300 m deep and the Cretaceous oil and gas zone is approximately 122 m thick with 55 m of net oil pay interpreted. The hydrocarbon saturated shale from within the Maverick Oil Project has demonstrated the capacity to flow oil and gas at El Indio-1H with other recent well drilling activity providing evidence of a continuous oil field. Although the reservoir has very low permeability, it is over pressured and contains gas The Maverick Oil Project overlies the condensate to light oil transition boundary and has one of the thickest and shallowest Eagle Ford shale oil target zones within the Eagle Ford shale fairway. Ron Prefontaine, Chairman which benefits hydrocarbon extraction. The source rock lies within the oil generating window and has a TOC content of 4 to 15%. There is an estimated Prospective Resource of 34 MMbbls of oil and 50 BCF of gas net to Strata-X Energy. Planned exploration, drilling program and permit status Strata-X Energy plans to initially drill a vertical well to conduct additional tests on the lower Eagle Ford zone. This Figure 3: Maverick Oil Project Location

26 24 STRATA-X ENERGY The Company intends to use the latest horizontal drilling and stimulation techniques to prove commercial production from the oil accumulation. Ron Prefontaine, Chairman will include fully coring the Eagle Ford shale and desorption analysis of the shales to be followed by a multi-stage vertical stimulation and production testing. The Company will assess the geological results and outcomes of the vertical well and, if the well results are as expected and funding is available, the plan is to drill a horizontal well which will be a multistage fracture stimulated test. The following table sets out the proposed work program for the Maverick Oil Project and the budgeted cost to the Company. Program Year 1 (2013) One vertical well to depths $2,000,000 of 1,500m with multi-stage fracture stimulation Optional: One horizontal well to a depth of 1,500m and horizontal length of 1,000m completed and multistage fracture stimulated (1) H1 Year 2 (2014) $7,000,000 (1) This well may be drilled depending on the results of the initial vertical well and the ability to source additional funding. It is not budgeted for completion if only the Minimum Subscription is raised. Commercialisation plans Strata-X Energy has the opportunity to truck oil off site and sell it to the USA domestic oil market, while gas may be brought to market via existing pipelines located nearby. Vail Oil Project Project highlights: Vail Oil Project targeting a 1,350 km 2 (333,440 acres) unconventional oil accumulation identified by Strata-X Energy Currently Strata-X Energy has a 100% holding in 184 km 2 (45,400 net acres) Low acreage acquisition costs, excellent net margins Application of new technology to unlock oil potential Estimated Prospective Resource of 20.9 MMbbls of oil net to Strata-X Investment Rationale This project is an example of Strata-X Energy s mandate to be the first or early mover into low risk but high potential oil areas. By being the first or early mover, land can be acquired at significantly lower costs, thereby allowing the Company to purchase a larger land position which can offer substantial shareholder growth on success. In 2011, the Company carried out an internal review to find oil areas in the USA with the potential for overlooked or historic oil fields which may have been sub-commercial at the time and can now be exploited using the latest multistage horizontal fracture technology. The Illinois Basin in Illinois became the focus since it has a source rock interpreted to have generated over 300 billion barrels of oil. With 4.3 billion barrels produced from mostly very shallow conventional oil fields, there was the potential for sizeable remaining or overlooked oil fields. Further, not only have very few exploration wells been drilled in the Illinois Basin since the 1980s, to the Company s knowledge no multi-stage horizontal fracture wells have ever been drilled there. Commencing later in 2011, Strata-X Energy s geological team used the digital data from thousands of wells to complete a detailed regional geological analysis of the Illinois Basin. The results of that work revealed a continuous unconventional oil field the team called the Vail oil accumulation. The accumulation has a dolomitic reservoir extending over 1,350 square kilometres at shallow depths of between 1,100 to 1,500 metres. Oil recoveries of 37 degree API light oil from 33 wells that were tested, along with interpreted oil saturations in the 120 vertical wells which intersected the reservoir were used to map the extent of the Vail oil accumulation. The Vail Oil Project area has many attributes similar to the Elm Coulee Bakken oil field in the Williston Basin in Montana. Both are similar in size, age and reservoir type, have similar oil generating attributes and, in both cases, the oil accumulations were considered sub-commercial and secondary targets when first intersected in historic vertical wells. Starting about a decade ago, early technology multistage fracture stimulation wells were used at Elm Coulee which resulted in commercial production. Since then production from the field has risen to over 30,000 bbls of oil per day and in excess of 123 million barrels of oil have been produced. Strata-X Energy believes similar

27 PROSPECTUS Figure 4: Vail Oil Project Location results are likely if the latest multi-stage horizontal fracture stimulation technology is used to develop the Vail oil accumulation. In March 2012, Strata-X Energy commenced purchasing 100% working interests in land over the Vail oil accumulation. As of 31 October 2012, the Company had a total of 45,400 net acres, interpreted to contain about 210 million barrels OOIP net to Strata-X Energy. The Company was able to purchase this land for significantly less than the average currently being paid by others in the basin. Additionally, the Company was able to secure good margins with an average 15% royalty issued to the land owners. The Company believed that this royalty rate is one of the best for any shale play in the USA. Project summary The Vail Oil Project is located in the Illinois Basin onshore USA which has produced 4.3 Bbbls from historical vertical wells drilled in conventional reservoirs. Strata-X Energy has a 100% interest in 184 km 2 (45,400 net acres) situated

28 26 STRATA-X ENERGY The Company was the successful bidder for 100% of a 1.4 million acre application located in the highly prospective Laurel shale fairway. Ron Prefontaine, Chairman over an interpreted unconventional oil accumulation identified from previous well data, which represents roughly 15% of the oil accumulation. The primary risk is to determine an appropriate commercial completion technique. Strata-X Energy intends to drill horizontal multistage fracture stimulated wells to target commercial oil flows. Geological overview and history Using data from over 200 wells drilled in the Vail Oil Project area, Strata-X Energy has identified a 1,350 km 2 unconventional oil accumulation within a porous dolomitic limestone at a depth of 950 to 1,500 m. The well data indicates the dolomitic limestone reservoir has an average thickness of 3 metres and very low permeability. The geology of the Vail Oil Project is comparable to the highly successful northern US Elm Coulee Bakken Play in the Williston Basin. The source rock in the project area is the thick carbonaceous New Albany shale which overlays the reservoir limestone. The New Albany shale lies in the oil generation window and has a TOC content of 2.5 to 12.7%. The area has proven hydrocarbon generation and is estimated to have generated billions of barrels of oil. There is an estimated Prospective Resource of 20.9 MMbbls of oil over the 45,400 leased acres net to Strata-X Energy. Planned exploration, drilling program and permit status The Vail Oil Project currently consists of a 184 km 2 (45,400 net acres) position and Strata-X Energy is targeting to increase its lease holding to 202 km 2 (50,000 net acres). Strata-X Energy is budgeting to commit $2.5m to the Vail Oil Project over an 12 to 18 month period and plans to drill a fracture stimulated horizontal well. The acreage is generally leased on three year terms and there can be a continual roll-off and roll-on of acreage over time. Strata-X Energy also has the option to extend the leases in this area for a period of either two or three years. Lease holdings can be retained indefinitely while production and royalty payments to leaseholders continue. The following table sets out the proposed work program for the Vail Oil Project and the budgeted cost to the Company. Program Year 1 (2013) One horizontal well to $2,500,000 a depth 950m with a 1,000m horizontal section which will be completed and multistage fracture stimulated Optional: One horizontal well to a depth 950m with a 1,000m horizontal section which will be completed and multistage fracture stimulated (1) H1 Year 2 (2014) $2,500,000 (1) This well may be drilled depending on the results of the initial vertical well and the ability to source additional funding. It is not budgeted for completion if only the Minimum Subscription is raised. Commercialisation plans Initially oil is to be trucked off site to the nearby oil pipeline hub or to a nearby oil refinery and sold to the domestic northern USA oil market. Gas could be sold into the extensive nearby pipeline system. Canning Project Project highlights Strata-X Energy was the successful bidder for a 100% interest in an application for a large permit area of 5,820 km 2 (1,438,120 net acres) Recent oil and gas discoveries have established primary targets in the Laurel Formation of the Canning Basin. This Formation extends over the greater part of the application Previous oil shows in areas neighbouring the Laurel Formation Estimated Prospective Resource of 51 MMbbls of oil and 277 BCF of gas net to Strata-X Energy (based on 30% of the area of the application) Long six year lease with minimum work commitments starting after grant of permit Investment Rationale Following successes in the Canning Basin, WA by Buru Energy with the Valhalla and Yularoo wet gas discoveries within the Laurel shale formation, Strata-X Energy decided to bid on three permits in the Canning Basin call for tenders. Strata-X Energy specifically targeted permits with

29 PROSPECTUS Figure 5: Canning Project Location the Laurel shale as the primary target and where it was mature for oil to wet gas generation. The bid for tenders closed on 7 October Fortuitously, on 18 October 2011 Buru announced the Ungani-1 exploration well tested 37 degree API oil at peak rates of 1,647 bbls per day. This new discovery is estimated by the operator to contain up to 20 million barrels of oil. On 22 February 2012, Strata-X Energy was informed it was the successful bidder for L11-3 which was later renamed STP-EPA The permit is mapped within the oil to wet gas window of the primary Laurel shale at depths between approximately 550 and 2,100 metres. The Canning Basin has also attracted major global players with recent deals including ConocoPhillips farm-in to New Standard Energy, Mitsubishi s farm-in to Buru Energy and Hess acquisition of the Kingsway permits from a local holder. No significant vacant acreage remains in the main play fairways and corporate or farm-in deals may now be the only entry point. The US Energy Information Administration has given the Canning Basin an estimated upside of 227 TCF of

30 28 STRATA-X ENERGY The Company plans to carry out proof of concept wells with the goal to establish reserves and commercial gas sales. Ron Prefontaine, Chairman project area. The application, STP-EPA-0048, was won in a competitive acreage release round based on a competitive work program. Due to the application status of the project, current budget committed work is limited to Native Title negotiations, prospect mapping and possibly the reprocessing of seismic data prior to granting. The granting of the application is conditional upon Strata-X Energy complying with the Native Title Act of 1993 which is expected to take up to 12 months. If the application is granted, and depending on the exploration and drilling success at Strata-X Energy s other projects, the Company may seek to reallocate funds to proceed with the planned work program at the Canning Basin Project. Further detail on this work program can be found in the Independent Geological Report in Section 10. Commercialisation plans gas double Australia s estimated offshore conventional reserves of 140 TCF, and has identified the region as the most prospective basin for unconventional gas outside the United States. Project summary Strata-X Energy was the successful applicant for the STP- EPA-0048 permit located in the Laurel Formation in the north eastern part of the Canning Basin. The application covers approximately 5,820 km 2 (1,438,120 net acres) and targets conventional and unconventional shale oil and gas. The application area lies in an arid region and has several access roads. Early stage hydrocarbon exploration and recent discoveries of oil and gas fields by other parties in the Laurel Formation demonstrates that the Laurel shale is a prolific source rock. Geological overview and history Strata-X Energy s Canning Basin acreage overlies parts of the Gregory Trough. There are major faults within this area creating a variety of play types with potential for source rock and reservoirs at multiple depths. The Laurel Formation, which extends over the greater part of the permit, is known to contain good potential source rocks within the lower section. Within the application area, this source rock is believed to be the origin of previous oil shows and minor recoveries and is interpreted to lie within the oil to wet gas window. Shales in the Laurel Formation have TOCs of 0.5 to 3.0% and are rated as good oilprone source rocks. AWT has assigned an undiscovered Prospective Resource of 51 MMbbls of oil and 277 BCF of gas to Strata-X Energy s Canning Basin application. Planned exploration and drilling program and permit status The Western Australian government has conditionally awarded Strata-X Energy 100% rights to explore the Oil could be trucked off site as it is for the current producing fields in the Canning Basin. The gas recovered will require the building of major pipelines such as the proposed Great Northern Pipeline which would provide access to the WA gas market. The total scope of this infrastructure is unknown at this time but may include access to the planned third party gas pipelines and LNG facilities. Sleeping Giant Project Project highlights: Large land lease of approximately 708 km 2 (175,000 acres) Niobrara Formation target which has historically produced more than 2 Bbbls of oil and 1 TCF of gas from other fields in the USA Rolling agricultural land with existing infrastructure intersected by two interstate gas pipelines Prospective Resource of 318 BCF of gas at shallow depths net to Strata-X Energy in three prospects of the 23 leads and prospects identified Investment Rationale The Sleeping Giant area was recognised as an analog to gas fields which have commercially produced gas for decades from very porous Niobrara chalk primary reservoirs. There are 23 leads and prospects mapped in the Strata-X Energy Sleeping Giant area which have target depths of 400 to 500 meters. Biogenic gas with very high methane content (close to 100%) has been intersected in wells drilled off structure and mini fracture stimulation is expected to substantially improve gas flow rates. Gas can be transported to the nearby Northern Border and Williston Basin pipeline to mainly Chicago area gas markets. With low drilling and completion costs, large reserve potential for high methane content gas, long field life and nearby pipeline infrastructure, the Sleeping Giant Gas

31 PROSPECTUS Figure 6: Sleeping Giant Project Location project is likely to be a much lower cost gas production project than deeper shale gas reservoirs being targeted by other operators. Project summary The Sleeping Giant Project is located in the Williston Basin, North Dakota and Strata-X Energy has an option to own 100% of the acreage. The Company plans to drill proof of concept wells across its leased position of approximately 708 km 2 (175,000 acres) and will target shallow biogenic gas. As the 100% project owner and operator, Strata-X Energy will have complete control over the pace and scope of exploration and potential development. Geological overview and history The Sleeping Giant Project is situated over a large northwest to south-east trending anticline on the eastern margin of the Williston Basin. The basin has a significant history of oil and gas production from both conventional and unconventional reservoirs. The targeted reservoir consists of the tight but very porous chalk within the Niobrara Formation. Wireline log analysis and lost circulation has also indicated fractured zones in some areas. The source rock has high TOC content of up to 4% while bacterial activity has produced biogenic gas accumulations which is trapped in structural highs. There has been relatively little drilling in the Sleeping Giant prospect area. However, drilling off structure targeting Cretaceous and Paleozoic zones has previously produced gas flares and small flows from the Niobrara. Despite these gas shows and small flares reported from wells drilled in the mid-2000s, the Niobrara Formation in this area has been almost entirely overlooked. Planned exploration, drilling program and permit status Initially Strata-X Energy plans to drill proof of concept pilot wells to demonstrate gas charge and commercial gas flows. Given the shallow target depths and

32 30 STRATA-X ENERGY the availability of drilling, completion, testing and fracture stimulating equipment in the region, costs for drilling and stimulating the Sleeping Giant Project are substantially less than those experienced in much deeper shale drilling projects in other parts of the USA. Strata-X Energy believes the Sleeping Giant project has the potential to be a relatively low cost gas producing area. The following table sets out the proposed work program for the Sleeping Giant Project and the budgeted cost to the Company. Program Year 1 (2013) Four vertical wells completed and $600,000 fracture stimulated Commercialisation plans The Sleeping Giant Project is intersected by two large interstate pipelines providing access to the domestic USA gas market. Strata-X Energy also has the option to use produced gas to generate electricity on site for supply to the local grid. North Dakota provides a favourable legislative environment for such remote gas discoveries. Depending on exploration success and the price of gas on the USA market (Henry Hub), the Company will determine the economic viability of its project as either gas sales into pipelines or sales into local electric power generation. Other projects Vallecitos Project Strata-X Energy has a 22.5% working interest in approximately 85 km 2 (21,000 gross acres) in the Vallecitos area, California, on which several exploration and development prospects have been identified. This interest will be subject to a 20% royalty and a county property tax of 2%. Leases in the project are held for a duration of five to seven years, with start dates varying. Oil production was established in the Vallecitos field from eight pools between 1948 and These pools have produced approximately 5 Mbbls of oil and 5.6 BCF of solution and associated gas as reported by the operator. The Vallecitos project is an extension of the San Joaquin Basin in San Benito County, California. The area has year round access and roads and infrastructure associated with the existing production. The majority of the project is located in the basin floor with little relief and with the remainder in low lying hills. Successful vertical wells are expected to flow up to approximately 270 bbls of oil per day. Strata-X Energy has an estimated total 2P Reserve of 69,000 bbls net to the Company with additional upside oil potential in several leads and prospects mapped using a recently reprocessed 3D seismic survey. Eagle Field Project Strata-X Energy has a 20% interest in approximately 21 km 2 (5,160 gross acres) in the discovered but undeveloped Eagle Oil Field, California. The Company has identified one proved but undeveloped location at which it proposes to begin development of this oil pool. The project is subject to a 20% royalty and a 2% county property tax. The leases are held for a duration of one to three years and the Company has the option to extend the leases if desired. The Eagle Field Project is situated in agricultural land within the San Joaquin Valley and is adjacent to bitumen roads and petroleum infrastructure. Supplies and services are readily available and no unusual operational or environmental difficulties are anticipated. One well was drilled and abandoned by Exxon in this area in Royal Resources took over the well in 1986 and deepened it, encountering good oil shows in the Eocene Age Gatchell sands that tested up to 192 bbls of oil per day and 427,000 standard cubic feet of gas per day. Although light oil was recovered, the well was considered to be non-commercial at the time due primarily to formation damage by heavy drilling mud and cement squeezing. Subsequent activity on the prospect was met with mechanical issues despite continuing indications of oil shows in the primary target. The Gatchell sands have produced over 1 Bbbls of oil in the Coalinga area approximately 32 km west and north-west of the Eagle Field Project. There is an estimated 2P Reserve of 50,785 bbls of oil net to Strata-X Energy at the Eagle Field Project with additional exploration upside potential mapped within the larger Eagle stratigraphic trap. The Eagle joint venture group plans to drill a single well at a net cost of $556,000 to the Company. Margarita Project Strata-X Energy has a 37.5% interest in the 1.8 km 2 (430 gross acres) area of the Margarita Project, located in southern Texas. The project is operated by Wandoo Energy with partner Sun Resources N.L., focussing on existing commercially available 3D seismic surveys. Strata-X Energy will pay 50% of the exploration and drilling costs of the first well in an identified prospect to earn a 37.5% working interest in the event of a discovery. The budgeted cost to Strata-X Energy for the one well and prospect mapping is $317,000. The exploration effort is targeting a shallow oil prospect with reserves between 300,000 and 500,000 bbls of oil. The best estimate Prospective Resource net to Strata-X Energy is 131,250 bbls of oil. The land in the area is criss-crossed by bitumen roads and the acreage position is on nearly flat farming land. For this reason, access is relatively easy and there are minimal landholder issues. The main reservoir is a sandstone of the Oligocene basal Frio Formation, the same sand as in the downthrown Laura Thomson field. The reservoir sandstone is

33 PROSPECTUS approximately 3.6 m thick and the main risk relates to development of target sand on the growth structure. There are three other stacked sandstones in the Frio Formation that may also contain oil and/or gas that will be tested by the initial well which will also test the top of the Vicksburg Formation Exploration budget and work program The Company intends to fund its exploration work program over the next 12 to 18 months from existing financial resources and the proceeds of the Offer. Exploration activities will follow a systematic approach, which will be tailored specifically for each project area and is summarised in Figure 7 and 8. The proposed budget is subject to ongoing review and amendment depending on exploration results, market conditions and other factors (including the risk factors outlined in Section 5). Strata-X Energy will assess new projects and joint venture opportunities as they arise, and funding may be reallocated on this basis. The Directors consider that following completion of the Offer, the Company will have sufficient working capital to achieve its objectives set out in this Prospectus. Depending on the Company s exploration success and new opportunities that may become available, the Company is likely to require further capital in the future to continue exploration and facilitate growth. For these and other reasons, an investment in the Company is speculative and investors are advised to read the risk factors in Section Other oil and gas prospects In addition to focusing on the development of its prospective petroleum assets and permit applications in California, North Dakota, Texas, Colorado, Illinios and the Canning Basin identified above, Strata-X Energy intends to utilise its management expertise and knowledge to pursue other oil and gas opportunities. In the event that Strata-X Energy determines that any such other oil and gas opportunities are technically and economically prospective and offer substantial growth potential, Strata-X Energy may seek to invest in such opportunities.

34 32 STRATA-X ENERGY Figure 7: 12 to 18 Month Work Program (Minimum Subscription) Q Q Q Q Q Q Total Project/Work J F M A M J J A S O N D J F M A M J ($million) Maverick Oil Land acquisition 0.07 Drilling 2.00 Vail Oil Land acquisition 0.05 Drilling 2.50 Canning Basin Native Title 0.18 Sleeping Giant Lease renewals 0.27 Drilling 0.60 Corporate, financial and administration 1.60 Costs of the Offer 1.29 Repayment of short-term loan (1) 2.04 Remaining working capital 2.50 Total ($ million) (1) A short-term loan provided by Prepet Pty Ltd (an entity associated with Ron Prefontaine, a Director of the Company), as described in Section Figure 8: 12 to 18 Month Work Program (Maximum Subscription) Q Q Q Q Q Q Total Project/Work J F M A M J J A S O N D J F M A M J ($million) Maverick Oil Land acquisition 0.50 Drilling 9.00 Vail Oil Land acquisition 0.27 Drilling 2.50 Canning Basin Native Title 0.18 Sleeping Giant Lease renewals 0.32 Drilling 0.60 Eagle Drilling 0.56 Margaita Drilling 0.27 Corporate, financial and administration 2.38 Costs of the Offer 1.94 Repayment of short-term loan (1) 2.04 Remaining working capital 2.55 Total ($ million) (1) A short-term loan provided by Prepet Pty Ltd (an entity associated with Ron Prefontaine, a Director of the Company), as described in Section 12.9.

35 PROSPECTUS

36 34 STRATA-X ENERGY Industry overview

37 PROSPECTUS Key Products Markets Outlook World oil and gas Economic activity is projected to pick-up in 2013 with world oil consumption forecast to increase by 1.4% to an average of 91.1 MMbbls a day, or 33 Bbbls a year. Increases in non-oecd consumption are expected to offset moderate declines in OECD consumption. Oil consumption in non-oecd economies is forecast to increase by 3% in 2013 and average 46.1 MMbbls a day. Most of this growth is attributed to rising Chinese oil consumption which is forecast to grow by 4% in Average global gas demand is forecast to increase by 2.7% per year over the period 2011 to Projections for global gas consumption in 2013 are 6% greater than Asia will be by far the fastest growing gas consuming region, driven primarily by China which should emerge as the world s third largest gas user by Figure 9: World oil consumption OECD mbd Non-OECD mbd Source: BREE United States product markets US oil In 2010 fossil fuels accounted for more than 80% of all the energy consumed in the United States. Petroleum and other liquids (including oil) accounted for 37% of all energy consumed. By 2035 it is forecast to decline to 32%. In 2011, the states of California, Colorado, North Dakota, Illinois and Texas produced 2.54 MMbbls of oil per day accounting for 45% of US oil production. Strata-X Energy s projects are located in these states giving the Company the ability to leverage off existing infrastructure. The world oil market has remained strong in recent years despite a slight contraction in the US demand for oil and petroleum products coincident with the slow down in the broader market and economy. In 2010, US demand was approximately 19 MMbbls per day, roughly twice the total US oil production of 10 MMbbls per day. US gas The US consumed more natural gas than it produced in 2010, importing 2.6 TCF from other countries. However, it is forecasted that domestic natural gas production will outgrow consumption and, as a result, the US is expected to become a net exporter of natural gas by By 2035 net exports of natural gas from the US are expected to total about 1.4 TCF. Consumption of natural gas in the US is expected to grow at a rate of 0.4% per year from 2010 to 2035, increasing by 2.5 TCF to 26.6 TCF per year by the end of that period This growth is dependent upon many factors, including the rate of economic growth and the delivered prices of natural gas and other fuels. The prospects for future US natural gas exports are also uncertain and depend on many factors that are difficult to anticipate, such as the development of new natural gas production capacity in foreign countries. It is also projected that natural gas production will increase from 2010 to 2035 primarily from the continued development of shale gas resources. Shale gas is forecast to be the largest contributor to production growth, with relatively little change in production levels from tight formations, coalbed methane deposits, and offshore fields. In 2010, shale gas accounted for 23% of total US natural gas production and is expected to more than double to 49% by 2035.

38 36 STRATA-X ENERGY Figure 10: Primary energy use by fuel, (quadrillion Btu) Figure 12: Natural gas production by source, (trillion cubic feet) 120 History Projections 30 History Projections Renewables (excluding biofuels) Natural Gas 7% 1% 25% Liquid biofuels 11% 4% 26% Shale gas 60 Nuclear 9% 9% Coal 21% 20% 10 Tight gas 20 Petroleum and other liquids 37% 32% Source: EIA Lower 48 onshore conventional 5 Alaska Lower 48 offshore 0 Coal bed methane Source: EIA Figure 11: Total US petroleum and other liquids production, consumption and net imports, (million barrels per day) Figure 13: Total US natural gas production, consumption and net imports, (trillion cubic feet) 25 History Projections 30 History Projections 5% net exports 20 Consumption 15 49% net imports 36% net imports 25 11% net imports Consumption 10 Domestic production 60% net imports 20 Henry Hub spot market natural gas prices (2010 dollars per million Btu) 10 5 Domestic production Source: EIA Source: EIA

39 PROSPECTUS Australian product markets Western Australian oil Oil in Western Australia is generally priced at a premium or discount to oil price benchmarks (generally the Tapis or Brent price), depending on the composition and properties. Oil recovered by Strata-X Energy could be easily delivered by truck to nearby oil refineries including the BP refinery at Kwinana, subject to reaching appropriate commercial terms. Western Australian gas Gas in Western Australia is sold at spot prices or under longer term contracts. Delivering the gas to market depends critically on the existence of infrastructure that extends to end users. In Western Australia pipeline construction has recently focused on supplying gas to industrial users. However, the current number of gas field development proposals has meant that pipeline construction in the state is leaning towards linking gas fields with existing infrastructure. While Western Australia already relies heavily on the North West Shelf for its gas needs, a number of other developments that will spur the construction of pipelines have been planned for the resource-rich area. In particular, LNG developments continue to progress, with Woodside s $12 billion Pluto Gas Project being the largest of all major, advanced energy projects. A number of other very large LNG projects including the Browse, Gorgon, Ichthys and Sunrise projects also continue to advance. In addition, Buru Energy has proposed the construction of the 630km Great Northern Pipeline (GNP) that will run from the area east of Broome to the Pilbara, delivering gas from the onshore Canning Basin to the Western Australian domestic and industrial gas markets. Further capital expenditure on pipeline infrastructure would be required to connect Strata-X Energy s Canning Project to the GNP. Figure 14: Historical Oil price US$ per bbl Source: IRESS Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Tapis Sep 09 Dec 09 Mar 10 WTI Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12

40 38 STRATA-X ENERGY Investment risks

41 PROSPECTUS Introduction An investment in the CDIs being offered under this Prospectus is not risk free. Strata-X Energy is an oil and gas exploration company that is focused on exploring for oil and gas resources globally. Exploration and evaluation for oil and gas is generally considered a high-risk activity, and in the event of a worst case scenario most, or all, of the investment could be lost. Accordingly, whilst the Directors recommend the Offer, it should be considered speculative. The future performance of Strata-X Energy and the future investment performance of the CDIs may be influenced by a range of factors, many of which are outside the control of the Board. Prior to making any decision to accept the Offer, investors should read this Prospectus in its entirety, carefully consider the following risk factors applicable to Strata-X Energy, and consult with their professional advisers. Careful consideration should be given to the following risk factors, as well as the other information contained in this Prospectus, before an investment decision is made. Potential investors should also have regard to their own knowledge and make appropriate inquiries with their personal investment advisors. Some of the risks may be mitigated by Strata-X Energy employing safeguards and appropriate systems and by taking certain other actions. Other risks may be outside the control of Strata-X Energy and not be capable of mitigation. There are also general risks associated with any investment in CDIs. The risks described below are not to be taken as exhaustive. The specific risks considered and others not specifically referred to may, in the future, materially affect the financial performance of Strata-X Energy and the value of the CDIs offered under this Prospectus. These risks apply to fully owned Strata-X Energy projects or any joint venture projects Risks specific to an investment in Strata-X Energy In addition to the general market and economic risks noted in Section 5.3, investors should be aware of the major risks specific to an investment in Strata-X Energy. The key risks are described below. Exploration and development The future value of Strata-X Energy will depend on its ability to find and develop oil and gas resources that are economically recoverable within Strata-X Energy s granted exploration permits. Hydrocarbon exploration and development is inherently highly speculative and involves a significant degree of risk. There can be no assurance that Strata-X Energy s planned exploration, appraisal and development activities will be successful. Even if oil and gas resources are identified, there is no guarantee that it will be economic to extract these resources or that there will be commercial opportunities available to monetise these resources. The proposed exploration and drilling program could experience cost overruns that reduce the Company s ability to complete the planned exploration and drilling program in the time expected. Oil and gas exploration may involve drilling operations and exploration activities which do not generate a positive return on investment. This may arise from dry wells, but also from wells that are productive but do not produce sufficient revenues to return a profit after accounting for drilling, operating and other associated costs. The production from successful wells may also be adversely affected by various operating conditions, including insufficient storage or transportation capacity, or other geological and mechanical conditions. In addition, managing drilling hazards or environmental damage and pollution caused by exploration and development operations could greatly increase the associated cost and profitability of individual wells. Operational risk Oil and gas exploration and development activities involve numerous operational risks. These include encountering unusual or unexpected geological formations, mechanical breakdowns or failures, human errors and other unexpected events which occur in the process of drilling and operating oil and gas wells. The occurrence of any of these risks could result in substantial financial losses to Strata-X Energy due to injury or loss of life, damage to or destruction of property, natural resources or equipment, environmental damage or pollution, clean-up responsibilities and regulatory investigation, amongst other types of loss, harm or damage. Damages occurring to third parties as a result of such events may give rise to claims against Strata-X Energy which may not be covered fully by insurance or at all. Even where Strata-X Energy is insured, such incidents or damage to property or equipment could delay Strata-X Energy s operations with the result that it might fail to meet its stated objectives. Strata-X Energy has limited operating history and there can be no assurances that it will be able to commission or sustain successful operation and commercial exploitation of its projects. The Directors and Management of Strata-X Energy will, to the best of their knowledge, experience and ability (in conjunction with senior management) endeavour to anticipate, identify and manage the risks inherent in the activities of the Company, with the aim of eliminating, avoiding and mitigating the impact of risks on the performance of Strata-X Energy and its business operations. The ability of the Directors and Management to do so may be affected by matters outside their control and no assurance can be given that the Directors and Management of Strata-X Energy will be successful in these endeavours.

42 40 STRATA-X ENERGY Financing, future capital needs and additional funding risk As identified in Section 3, assuming only the Minimum Subscription amount is raised, Strata-X Energy proposes a program of works comprising approximately 12 months of field activities. If further funds are raised under this Offer, this program may be extended or additional activities may be added to the program. In any event, the Company may be required to raise additional funds to enable it to continue as a going concern after the end of its budgeted program. Additionally, depending on the Company s exploration success and new opportunitites that may become available, the Company is likely to require further capital in the future to continue exploration and facilitate growth. Strata-X Energy has finite financial resources and no cash flow from producing assets and therefore will likely require additional financing in the future. Strata-X Energy s ability to effectively implement its business strategy over time may depend in part on its ability to raise additional funds. There can be no assurance that any such equity or debt funding will be available to Strata-X Energy on reasonable terms or at all. Failure to obtain appropriate financing on a timely basis or reasonable terms may result in a loss of business opportunity and excessive funding costs. If Strata-X Energy raises additional funds through the issue of equity securities, this may result in dilution to the existing shareholders and/or a change of control of Strata-X Energy. Evaluation and resource estimation risk Accumulations of hydrocarbons will be classified according to the system designed by the Society of Petroleum Engineers through the Petroleum Resources Management System (SPE-PRMS) and in accordance with ASX Guidelines. The SPE-PRMS system is described in Figure 15, which shows the classifications with respect to a matrix of uncertainty and chance of commerciality. Whilst there are numerous pathways through this matrix from Prospective Resources to Contingent Resources and then to Reserves, the process is defined by the three stages of exploration, appraisal and development. Whilst AWT International has independently calculated a mean Prospective Resource estimate of 645 BCF of gas and 106 Mbbls of oil at Strata-X Energy s permits, these Resources represent estimates only. The Company also has independently certified oil and gas Reserves in its granted exploration tenements. Prospective Resources are defined as those quantities of oil and gas which are estimated on a given date to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. However, as they are undiscovered they carry significant exploration risk. An exploration program will be undertaken by Strata-X Energy to discover these notional Resources and reclassify Figure 15: Resource classification Production Total petroleum initially in place (PIIP) Discovered PIIP Commercial Sub-commercial Undiscovered PIIP Proved 1P 1C Low Estimate Probable Reserves 2P Contingent resources 2C Unrecoverable Prospective resources Best Estimate Unrecoverable Possible 3P 3C High Estimate Increasing chance of commerciality Range of uncertainty

43 PROSPECTUS them to Contingent Resources, which are defined as those quantities of oil and gas estimated on a given date to be potentially recoverable from known accumulations but are not currently proven to be economic. If the exploration programme is successful in discovering sufficient quantities of Contingent Resources, an appraisal programme will be undertaken to prove them commercially viable and thereby re-classify them as Reserves, which are defined as those quantities of oil and gas anticipated to be economically recoverable from discovered Resources. There is a different process for the conversion of Resources to Reserves between conventional (high permeability) reservoirs and unconventional (low permeability) reservoirs. For conventional reservoirs this is done via relatively short term flow tests in the appraisal wells. For the unconventional reservoirs which often contain much larger accumulations covering large areas, a number of longer term production pilots may be required to demonstrate commerciality and quantification of Reserves. In general, estimates of economically recoverable oil and gas Reserves and Resources are based upon a number of variable factors and assumptions, such as comparisons with production from other producing areas, the assumed effects of regulation by governmental agencies, assumptions regarding future oil and gas prices and future operating costs, all of which may vary considerably from actual results. Actual production with respect to Reserves may vary from such estimates and such variances could be material. The estimation of oil and gas Resources (and Reserves) involves subjective judgments and determinations based on geological, technical, contractual and economic information. It is not an exact calculation. Estimates may change because of new information from production or drilling activities or changes in economic factors. They may also change because of acquisitions and disposals, new discoveries and extensions of existing fields as well as the application of improved recovery techniques. Published Resources and Reserves estimates may also be subject to correction in the application of published rules and guidance (such as the SPE-PRMS). There is a risk that Strata-X Energy s Prospective Resources will not convert to Reserves, and also that actual production with respect to Reserves may vary from such estimates. Such variances could be material to Strata-X Energy and its future profitability. Changes in commodity prices Strata-X Energy s possible future revenues will be derived mainly from the sale of oil and gas. Consequently, Strata-X Energy s potential future earnings, profitability, and growth are likely to be closely related to the price of oil and gas. Oil and gas prices historically have been volatile and are likely to continue to be volatile in the future. Historically, oil and gas prices have fluctuated in response to changes in the supply of and demand for oil and gas, economic uncertainty, and a variety of additional factors beyond the control of Strata-X Energy. Such influencing factors include economic conditions in Australia and abroad, government regulation and sanctions, the actions of the Organization of Petroleum Exporting Countries (OPEC), political instability in the Middle East and elsewhere and the availability of alternative fuel sources. In the event that Strata-X Energy becomes a producer, any substantial and extended decline in the market price of oil and gas could have an adverse effect on Strata-X Energy s future revenues, profitability, cash flow from operations, carrying value of future reserves, and borrowing capacity amongst other measures of its financial performance and economic viability. If the market price of oil and gas sold by Strata-X Energy were to fall below the costs of production and remain at such a level for any sustained period, Strata-X Energy would experience losses and might have to curtail or suspend some or all of its proposed activities. In such circumstances, Strata-X Energy would also have to assess the economic impact of any sustained lower commodity prices on the feasibility of advancing its projects to production and the commercial recoverability of any existing reserves. Title risk Many of Strata-X Energy s tenements are in the United States, where the legal regime regarding ownership of minerals and petroleum is materially different from that in Australia. When the initial land grants (patents) were made in the USA, the sovereign (government) did not always reserve the minerals and petroleum. Thus, in some patents, the patentee obtained some or all of the undivided rights to the minerals and petroleum in addition to the surface of the land. Over time, the minerals and petroleum may have been severed, by grant or reservation in deed, from the surface rights. Securing all of the oil and gas rights to a particular tract of land requires that the Company determine mineral and petroleum ownership and then conduct negotiations to acquire leases from these owners. In order to independently verify that the parties with whom a company is dealing are the correct and sole holders of the mineral and petroleum rights and to analyse the full rights and restrictions applying to the interest held by those parties, requires that a company obtain detailed title opinions from qualified title attorneys licensed to practice in the state in which the property is located (Title Attorney Opinion). This is typically a lengthy and potentially expensive process. In particular, given the passage of time since the original land grants from the government, the ownership of most land will have passed both through inheritance to numerous descendents and through conveyances to third parties, resulting in a high probability of fractional ownership.

44 42 STRATA-X ENERGY Accordingly, the final title opinions may contain numerous qualifications and curative requirements. It is therefore customary that such title opinions are not rendered until the company proposes to conduct a drilling operation or expend significant amounts of money on a particular lease or leases. Strata-X Energy has adopted this customary approach and, accordingly, will not obtain title opinions on its leases until the drilling of a well is proposed. As a consequence there is a possibility that third parties may hold or claim mineral rights adverse to the claim of the lessors under the leases that have been taken. This is an acceptable risk that companies are willing to take, as long as adequate industry standard leasing procedures were followed. Accordingly, Strata-X Energy may need to obtain a Title Attorney Opinion prepared by a qualified title attorney for each project prior to the commencement of the drilling of a well or undertaking significant exploration. In the event that, at such time, marketable title cannot be determined for the drill site, then drilling on that tract within the prospect may be delayed until marketable title can be obtained, either by meeting the curative requirements or by acquiring additional leases. In the event that it is not possible to cure the defect or acquire an additional lease or leases, Strata-X Energy s activities may be materially adversely affected. Independent landmen and brokers have been engaged by Strata-X Energy to acquire the Sleeping Giant, Vail, Eagle and Vallecitos projects. These independent specialists have undertaken a rigorous examination of the records prior to acquiring the leases and nothing came to their attention which would adversely affect the right, title and interest of Statra-X Energy to those projects. However, there is still a risk that some of the properties may be subject to prior unregistered agreements or transfers or native or indigenous peoples land claims and that title may be affected by undetected defects. Accordingly, without the Title Attorney Opinion no assurance can be given that title defects do not exist. Further details with respect to the risks associated with title in the United States are set out in the US Legal Report in Section 11. In addition, Strata-X Energy s interest in the application in the Canning Basin is subject to various conditions, obligations and regulations imposed by the Western Australian Department of Mines and Petroleum. If the necessary approvals are refused, Strata-X Energy will suffer a loss of the opportunity to undertake further exploration, or development, of the tenement. Strata-X Energy currently knows of no reason to believe that current applications will not be approved, granted or renewed. Further details with respect to the relevant application are set out in the Australian Legal Report in Section 11. Reliance on key personnel Strata-X Energy relies to a large extent on its executives and senior personnel to pursue the day-to-day operations and strategic management of the business, as well as its exploration and evaluation programmes within the time frames and within the cost structure as currently envisaged. Accordingly, the loss of existing key personnel and/or a failure to secure and retain additional key personnel as Strata-X Energy s exploration programme develops could have a material adverse effect on the Company. The resulting impact from such loss would depend upon the quality and timing of the employee s replacement. Although the key personnel of Strata-X Energy have a considerable amount of experience and have previously been successful in their pursuits of acquiring, exploring and evaluating oil and gas projects, there is no guarantee or assurance that they will be successful in their objectives pursuant to this Prospectus. Hydraulic Fracturing Due to significant current public debate surrounding the environmental impacts of hydraulic fracturing, the industry is subject to substantial public and regulatory scrutiny and to rigorous public environmental approval and monitoring processes. The implementation of future regulations or approval processes in the oil and gas industry may lead to additional cost or require changes to the way the Company proposes to operate or explore and as a result may have an adverse effect on the financial performance of the Company. Exploration Maps and Diagrams Strata-X Energy has commissioned and produced numerous diagrams and maps in this Prospectus to help identify and describe the tenements and the targets sought by Strata-X Energy on those tenements. Maps and diagrams should only be considered an indication of the current intention of the Directors in relation to targets and potential areas for exploration and drilling, which may change. Commercialisation and infrastructure access risks Strata-X Energy s potential future earnings, profitability, and growth are likely to be dependent upon the Company being able to successfully implement some or all of its commercialisation plans detailed in Section X. The ability of Strata-X Energy to do so is further dependent upon a number of factors, including matters which may be beyond the control of the Company. Strata-X Energy may not be successful in securing identified customers or market opportunities. Sales of natural gas, if applicable, will be affected by the availability, terms and costs of transportation. Strata-X Energy s ability to sell and market its natural gas production will be negatively affected should it be unable to secure adequate transportation and processing facilities. Further, access will depend on the proximity and capacity of pipelines and processing facilities. Strata-X Energy may be required to develop its own pipeline infrastructure or secure access to third party pipeline infrastructure in order to

45 PROSPECTUS deliver gas to key markets or customers. The development of its own pipeline infrastructure will be subject to Strata-X Energy obtaining relevant approvals including pipeline licences. In Australia, access to third party infrastructure cannot be guaranteed given that the pipelines may not be developed with an open access regime. In the United States, the Federal Energy Regulatory Commission (FERC) has implemented regulations intended to increase competition within the gas industry by making gas transportation more accessible to gas buyers and sellers on an open-access, non-discriminatory basis. However any changes to those regulations may adversely affect the Company s ability to access transportation on acceptable terms. Contractual risk Strata-X Energy is a party to various contracts, including but not limited to those summarised in Section 12. Whilst Strata-X Energy will have various contractual rights in the event of non-compliance by a contracting party, no assurance can be given that all contracts to which Strata-X Energy is a party will be fully performed by all contracting parties. Additionally, no assurance can be given that if a contracting party does not comply with any contractual provisions, Strata-X Energy will be successful in enforcing compliance. In addition, whilst the Company has agreed to provide certain finders fee consideration to consultants who assisted in securing the Company s Canning Basin assets, as discussed in Section 12.10, these agreements have not yet been executed. This may lead to future disputes with the counterparties over their entitlement to consideration for services rendered. Exchange rate risk The revenues, expenses, earnings, assets and liabilities of Strata-X Energy, as well as the listed price of the CDIs and, accordingly, your investment in Strata-X Energy, may be exposed adversely to exchange rate fluctuations. A majority of the Company s expected expenditure will be in USD. In the event that Strata-X Energy achieves commercial production, some of the Company s possible future revenues may be derived from USD sales. Any appreciation of the AUD against the USD effectively reduces the AUD value of that revenue. Further, any appreciation of USD against AUD will have a detrimental impact on the use of AUD funds raised for the puroposes of US expenditure. Strata-X Energy does not presently engage in currency hedging to offset any risk of currency fluctuations, but intends to hold the majority of funds raised under the Offer in a US bank account in order to minimise the impact of exchange rate fluctuations on its expenditure. Environmental risk Strata X Energy s operations are subject to numerous stringent and complex laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection in both the United States and Australia. Such regulation can increase the cost of planning, designing, installing and operating industrial facilities for use by operators. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and the imposition of injunctions to force future compliance (such as requiring companies to make substantial modifications to their physical plant to reduce air emission sources). Additionally, some environmental laws provide for joint and several strict liability (meaning that the liabilities can be assessed 100% against any party deemed to be involved, and that the mere fact of violation is sufficient to assess a penalty without regard to fault or to any potentially mitigating circumstances which might usually apply) for remediation of releases of hazardous substances. American State statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. In addition, there are state statutes, rules and regulations governing conservation matters, including the unitisation or pooling of oil and gas properties, establishment of maximum rates of production from oil and gas wells and the spacing, plugging and abandonment of such wells. Such statutes and regulations may limit the rate at which oil and gas could otherwise be produced from Strata X Energy s properties and may restrict the number of wells that may be drilled on a particular lease or in a particular field. Additionally, some states and local governments are considering restrictions or complete bans on the use of hydrofracturing when completing oil and gas wells. Companies involved in the production of hydrocarbons may generate wastes, including hazardous wastes, that are subject to the US Resource Conservation and Recovery Act (RCRA) and comparable state statutes. The EPA has limited the available options which can be used for the disposal of certain wastes that are designated as hazardous substance under RCRA (Hazardous Wastes). Furthermore, it is possible that certain wastes generated by oil and gas operations which may be currently exempt from treatment as a Hazardous Waste could in the future be designated as Hazardous Wastes, and therefore be subject to more rigorous and costly operating and disposal requirements. This would have a material adverse effect on Strata-X Energy if it advances to production. Seasonal conditions and weather Some of Strata-X Energy s projects are located in areas which can be difficult to access during the winter and early spring. During this period, costs associated with the Company carrying on its operations may significantly increase and exceed the amount allocated in the Company s budget, and in certain circumstances may

46 44 STRATA-X ENERGY prevent the Company from being able to conduct its drilling or significant operations on the relevant lands. In addition, natural events, such as hurricanes, floods, and fire which are beyond the control of Strata-X Energy could prevent access to its leases or otherwise affect the Company s ability to undertake planned exploration (and potentially production) and, as a result, could have a material adverse effect on Strata X Energy. Insurance risk Strata-X Energy s operations are subject to all of the risks and hazards typically associated with the exploration for oil and gas. Strata-X Energy intends to ensure that insurance is maintained within ranges of coverage that Strata-X Energy believes to be consistent with industry practice and having regard to the nature of activities being conducted. No assurance however, can be given that Strata-X Energy will be able to obtain such insurance coverage at reasonable rates or that any coverage it arranges will be adequate and available to cover any such claims. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of Strata-X Energy. Insurance of all risks associated with exploration and development is not always available and where available the costs may be prohibitive. Land access and cultural heritage risk Strata-X Energy requires land access in order to perform exploration and development activities, which can be affected by land ownership and require related compensation arrangements with landowners or occupiers. The Company s operations may be adversely affected or delayed in the event of a dispute with a land owner or if there is any other difficulty obtaining land access. Strata-X Energy s project areas may contain sites of cultural significance, which would need to be avoided when carrying out field programs and project development. Geopolitical, regulatory and sovereign risk Exploration for and development, exploitation, production and sale of oil and natural gas is subject to extensive laws and regulations, including complex tax laws and environmental laws and regulations. Existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations could adversely affect Strata X Energy. The majority of Strata X Energy s assets are located in the United States. As a result, they are subject to different environmental laws and regulatory requirements than in Australia. In particular, in the United States each state generally imposes a production or severance tax with respect to the production and sale of oil, natural gas and natural gas liquids within its jurisdiction. Additionally, some local governments also impose property taxes on oil and natural gas interests, production equipment, and production revenues. This may have an adverse effect on Strata-X Energy particularly if it achieves commercial production. Carbon tax In 2011, the Australian Parliament enacted the Clean Energy Act (CEA) to introduce a mandatory emissions trading scheme (or carbon tax) with effect from 1 July Under the CEA, emitters of greenhouse gases who emit in excess of set thresholds are liable to purchase and relinquish carbon units for each equivalent tonne of carbon dioxide released into the atmosphere. Additionally, retailers of natural gas are liable for the relinquish carbon units for the potential greenhouse gas emissions of the gas they supply. Although the Company is not likely to be directly affected by the CEA at this early stage of its development, it is possible that the Company may be indirectly affected by increased operating costs for work undertaken on its Canning Project, as a result of CEA compliance and permit costs being passed through by suppliers. There may also be an unquantifiable impact on the wholesale or retail gas price and markets. Terrorist attack or other sustained armed conflicts Terrorist activities, anti-terrorist efforts or other armed conflict involving the United States or Australia or their interests abroad may adversely affect the United States, Australia and global economies. If events of this nature occur and persist, the associated political instability and societal disruption could reduce overall demand for oil and gas potentially putting downward pressure on prevailing oil and gas prices and adversely affect the Company s activities as noted in Section 3. Oil and gas production facilities, transportation systems and storage facilities could be direct targets of terrorist attacks, and Strata X Energy s operations could be adversely affected if any infrastructure or property integral to its operations (particularly if Strata-X Energy is a producer) is destroyed or damaged by such an attack. Insurance coverage may become more difficult to obtain, if available at all. Native Title risk The effect of the Native Title Act is that the permit applications held by the Company in the Canning Basin may be affected by native title claims and procedures. The requirement to comply with the Native Title Act has the potential to significantly delay the grant of exploration permits and other petroleum tenements in Australian jurisdictions.

47 PROSPECTUS Whilst Strata-X Energy has not undertaken the historical, legal or anthropological research and investigations at the date of this Prospectus that would be required to form an opinion as to whether any existing or future claim for native title could be upheld over its permit applications, investigations to date reveal the existence of a number of native title claims. The Company s present intention is to endeavour to secure similar agreement with the relevant native title parties. There is a potential risk that a satisfactory agreement cannot be reached with relevant native title parties in which case Strata-X Energy will need to comply with procedures under the Native Title Act in order to be granted its permit. There is also potential risk that a determination could be made that native title exists in relation to land that is the subject of the permit applications. This, in turn, could affect the operation of Strata-X Energy s business and development activities. In the event that it is determined that native title does exist or a native title claim is registered, Strata-X Energy may need to comply with procedures under the Native Title Act in order to carry out its operations or to be granted any additional rights such as a production lease. Such procedures may take considerable time, involve the negotiation of significant agreements, involve a requirement to negotiate for access rights, and require the payment of compensation to those persons holding or claiming native title in the land which is the subject of the permit applications. The administration and determination of native title issues may have a material adverse impact on the position of Strata-X Energy and its business. Competitor risk Strata-X Energy faces competition from established entities having greater financial and technical resources which may hinder the Company s ability to compete for future business opportunities, acquire and exploit additional attractive natural resource properties or procure equipment or services, necessary to conduct its operations in line with its stated objectives. Many of Strata-X Energy s competitors not only explore for and produce oil and gas, but also carry out downstream operations on these and other products on a worldwide basis. There can be no assurance that Strata-X Energy can compete effectively with these companies. Occupational health and safety risk The oil and gas industry is subject to occupational health and safety laws and regulations which change from time to time and may result in increased compliance costs or the potential for liability. It is Strata-X Energy s intention to mitigate this risk by operating to the highest occupational health and safety standards. Foreign Entity/Dual Listing risk Strata-X Energy Ltd is incorporated in British Columbia, Canada rather than Australia, and its Shares are traded on the TSX-V. The CDIs are intended to be traded on the ASX. This may result in certain market and corporate related complications from the perspective of an Australian investor, particularly in relation to corporations law and listing rule regulatory requirements. There is a risk for Australian investors who subscribe for CDIs under the Offer that they will be subject to the regulatory regime of the TSX-V in Canada. In particular, investors should be aware that an investment in CDIs under this Prospectus provides only an indirect, beneficial interest in Shares and that certain Australian legal concepts which investors may be familiar with via investments in Australian companies, may not apply to Strata-X Energy at all or may exist in a different form in British Columbia. See Section 6.12 for further information. Enforcement of judgements in Canada As Strata-X Energy Ltd is incorporated in British Colombia, Canada, the rights of CDI holders will be governed by Canadian law. Some of the named advisors in this Prospectus are not residents of Australia. As a result it may be difficult for CDI holders to obtain service of process of those persons in Australia or Canada or to enforce in Australia or Canada judgments obtained in the respective countries courts against Strata-X Energy or those persons who may be liable under Australian or Canadian law General risks A summary of the major general risks are described below. CDI (and underlying Share) market risk The market price of CDIs (and the underlying Shares) can be expected to rise and fall in accordance with general market conditions and factors specifically affecting the United States and Australian resources sector, Canadian and Australian listed entities and exploration companies in particular. There are a number of factors (both national and international) that may affect the CDI market price and neither Strata-X Energy nor its Directors have control over those factors. Factors that could affect the trading price that are unrelated to Strata-X Energy s performance include domestic and global commodity prices and economic outlook, fiscal and monetary policies, currency movements, and market perceptions of the attractiveness of particular industries. The CDIs carry no guarantee in respect of profitability, dividends, return on capital, price or degree of liquidity with which they may trade once listed on the ASX. There can be no guarantee that an active trading market for the CDIs will develop and investors may not be able to resell the CDIs purchased under this Prospectus.

48 46 STRATA-X ENERGY General economic conditions Changes in the general economic climate in which Strata-X Energy operates may adversely affect its financial performance, its exploration and development activities, and its ability to fund those activities. Factors that may contribute to that economic climate include changes in global and/or domestic economic conditions, the general level of economic activity, movements in interest rates and inflation, currency exchange rates and other economic factors. The price of commodities and level of activity within the mining industry will also be of particular relevance to Strata-X Energy. Neither Strata-X Energy nor the Directors warrant the future performance of the Company or any return on an investment in Strata-X Energy. Labour Strata-X Energy will require skilled labour workers and engineers in order to operate its activities. Industrial disruptions, work stoppages and accidents in the course of the Company s operations could result in losses and delays, which may adversely affect profitability. Legislative change Changes in government regulations and policies may adversely affect the financial performance or the current and proposed operations generally of Strata-X Energy. The Company is not aware of any current or proposed material changes in relevant regulations or policy. Unforeseen expenses While Strata-X Energy is not aware of any expenses that may need to be incurred that have not been taken into account, if such expenses were subsequently incurred, the expenditure proposals of Strata-X Energy may be adversely affected General Any combination of the above factors may materially affect any individual oil and gas project s assets, operations or the financial performance of Strata-X Energy and the value of its securities. To that extent the CDIs (and the underlying Shares) offered in this Prospectus are subject to significant risk and uncertainty with respect to return or preservation of capital, the price (if any) at which the CDIs (and the underlying Shares) may trade and the payment of dividends in any future time. Directors of Strata-X Energy will, to the best of their knowledge, experience and ability (in conjunction with their management) endeavour to anticipate, identify and manage the risks inherent in the activities of Strata-X Energy, but without assuming any personal liability for the same, with the aim of eliminating, avoiding and mitigating the impact of risks on the performance of Strata-X Energy and its security.

49 PROSPECTUS

50 48 STRATA-X ENERGY Details of the offer

51 PROSPECTUS The Offer The Offer comprises the issue of 33,333,333 CDIs to be offered for subscription at $0.30 each to raise approximately $10,000,000 (Minimum Subscription), payable in full on application. Oversubscriptions of up to a further 33,333,333 CDIs to be offered for subscription at $0.30 each to raise up to a further $10,000,000 may be accepted. To the extent that the Company extends the Offer to eligible Canadian investors (outside of this Prospectus), the Company may seek to offer Shares to those investors rather than CDIs. If this occurs, the number of CDIs on issue following completion of the Offer will reduce accordingly. The Offer includes: the Broker Firm Offer, which is open only to Australian resident Retail Investors who have received a firm allocation from their Broker; and the Institutional Offer, which consists of an invitation to bid for CDIs (or Shares) made to Institutional Investors in Australia and other selected jurisdictions. No general public offer will be made. The allocation of CDIs between the Broker Firm Offer and the Institutional Offer will be determined by the Joint Lead Managers in consultation with the Company, having regard to the allocation policy outlined in section 6.7. On completion of the Offer, the CDIs offered under this Prospectus will represent approximately 55% and 65% of the issued capital of the Company on an undiluted basis. As the Company is incorporated in Canada, which does not recognise the CHESS system of holding securities or electronic transfer of legal title to Shares, Applicants will be issued CDIs rather than Shares, where each CDI represents one Share. Further information about CDIs is provided in Section In addition, the Company proposes to issue 16,724,000 Shares and 8,362,000 Warrants pursuant to this Prospectus on conversion of the Convertible Notes. Details of the Convertible Notes are set out in Section Date of this Prospectus 21 December 2012 Offer Opening Date 14 January 2013 Offer Closing Date 8 February 2013 Allotment of New Shares 14 February 2013 Despatch of Holding Statements 15 February 2013 Anticipated Date of Trading on ASX 20 February 2013 The above dates are indicative only and may change without notice. The Company in consultation with the Joint Lead Managers reserves the right to vary the dates and times of the Offer, including the Closing Date, without prior notice. Applicants are encouraged to submit their Application Forms as soon as possible after the Offer opens.

52 50 STRATA-X ENERGY Minimum Subscription Maximum Subscription Offer Price per CDI (representing one Share) $0.30 $0.30 CDIs available under the Offer 33,333,333 66,666,666 Shares on issue prior to the Offer (1)(8) 80,461,105 80,461,105 Options on issue prior to the Offer 2,960,000 2,960,000 Warrants on issue prior to the Offer (2)(3)(8) 36,371,525 (4) 37,371,525 (5) Fully paid Shares on issue following completion of the Offer (8) 113,794, ,127,771 Estimated costs of the Offer $1,291,700 $1,940,700 Market Capitalisation of Shares at the Offer Price (8) $34,138,331 $44,138,331 Estimated cash on completion of the Offer (before Offer costs) (6) ~$13,100,00 ~$23,100,000 Short-term loan (7) $2,000,000 $2,000,000 Enterprise value (8) $24,330,031 $24,979,031 (1) Includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) Includes 8,362,000 Warrants to be issued on conversion of the Convertible Notes, as described in Section (3) Includes 200,000 Warrants to be issued as finder s fees subject to documentation for the issue being finalised, as described in Section (4) Includes 1,000,000 Warrants to be issued to the JLMs based on the JLMs raising the Minimum Subscription and Completion of the Offer, as detailed in Section (5) Includes 2,000,000 Warrants to be issued to the JLMs based on the JLMs raising the Maximum Subscription and Completion of the Offer, as detailed in Section (6) Estimate based on a pro-forma balance reduced by ordinary expenses incurred since 30 June (7) A short-term loan provided by Prepet Pty Ltd (an entity associated with Ron Prefontaine, a Director of the Company), as described in Section (8) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued Purpose of the Offer The purpose of the Offer is to enable Strata-X Energy to raise funds that will be used together with the Company s existing funds to continue land acquisitions and begin drilling in the Company s oil and gas projects. Strata-X Energy will be focused on those areas and projects detailed in the work program in Section 3. In addition, listing on the ASX will provide the Company s Shareholders with: additional financial flexibility to pursue growth opportunities and improve access to capital markets; and a liquid market for CDIs to trade and an opportunity for others to invest in the Company. The proceeds from the Offer will be reduced by the amount of the costs of the Offer and any other obligations of Strata-X Energy to be paid on completion of the Offer (net of tax refunds and deductions). This is further detailed in Section Minimum Subscription The Minimum Subscription under the Offer is 33,333,333 CDIs representing approximately $10,000,000 in Application Moneys. However, the Company may seek to offer Shares (as opposed to CDIs) to certain Institutional Investors in Canada. In the event that this occurs, the Minimum Subscription for CDIs under this Prospectus will be reduced by the amount of Applications for Shares by those Canadian Institutional Investors (with the net result being that the minimum amount of cash to be raised via the issue of CDIs and Shares will be approximately $10,000,000). If the Minimum Subscription level is not reached by the Closing Date of this Prospectus, then the Offer will not proceed and all Application Moneys will be refunded without interest Sources and Uses of Funds The Company intends to use its current funds and funds raised under the Offer as follows:

53 PROSPECTUS Sources Minimum Subscription Maximum Subscription Estimated cash on completion of the Offer (before Offer costs) (1) $3.10 million $3.10 million Gross proceeds of the Offer $10.00 million $20.00 million Total available cash $13.10 million $23.10 million Use of Funds Amount Amount Exploration and drilling (2) $5.28 million $13.10 million Land acquisitions $0.39 million $1.09 million Corporate, financial and administration $1.60 million $2.38 million Expenses of the Offer $1.29 million $1.94 million Repayment of short-term loan (3) $2.04 million $2.04 million Remaining working capital $2.50 million $2.55 million Total $13.10 million $23.10 million (1) Estimated based on a pro-forma balance reduced by ordinary expenses incurred since 30 June (2) The exploration program and budget is described in Section 3.5 of this Prospectus. (3) A short-term loan provided by Prepet Pty Ltd (an entity associated with Ron Prefontaine, a Director of the Company), as described in Section Capital structure The capital structure of the Company following completion of the Offer is summarised below: Description Minimum Subscription Maximum Subscription Shares currently on issue (1)(3) 80,461,105 80,461,105 Proposed CDIs to be issued under the Offer (2) 33,333,333 66,666,666 Fully paid Shares on issue (3) 113,794, ,127,771 (1) This includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) As described in Section 2.4, each CDI will represent one underlying Share which will be issued and held for the benefit of the CDI holder. (3) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued. An overview of the Strata-X Energy ownership structure immediately prior to and on listing will be as follows: Pre-Offer Post-Offer Post-Offer Shareholder % Minimum Subscription % Maximum Subscription % Directors (1)(2) Other Existing Shareholders (1)(3) New CDI Holders (1) This includes 16,724,000 Shares to be issued on conversion of the Convertible Notes, as described in Section (2) This excludes any additional Shares, Warrants and CDIs that may be issued to entities associated with Ron Prefontaine as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest to entities associated with Ron Prefontaine will total approximately $CAD35,069, resulting in an additional 140,276 Shares and 70,138 Warrants being issued to entities associated with Ron Prefontaine. (3) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued.

54 52 STRATA-X ENERGY In addition, the Company will have the following securities outstanding on completion of the Offer: Options Number Exercise price (CAD$) Expiry Date 160, November ,600, September , January ,000, September ,960,000 Warrants Number Exercise price (CAD$) Expiry Date 16,812, March ,155, June ,060, June ,600, June , July , July ,989,800 (1) October , October ,000 (2) September ,000,000 (3) February ,371,525 (4) (1) These Warrants will be issued on conversion of the Convertible Notes as described in Section (2) These Warrants will be issued as finder s fees subject to documentation for the issue being finalised as detailed in Section (3) These Warrants to be issued to the JLMs on completion of the Offer, as detailed in Section (4) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued. Further details in relation to the Options and Warrants outstanding are set out in Section 13. Convertible Notes On 29 October 2012 the Company issued 16,724,000 Convertible Notes to sophisticated and institutional investors which will automatically convert to 16,724,000 Shares and 8,362,000 Warrants in Strata-X Energy upon ASX confirming that the Company will be admitted to the official list of ASX (subject to conditions which the Company considers, acting reasonably, are capable of being achieved). Refer to Section 12.6 for a summary of the terms of the Convertible Notes Structure of the Offer The Offer comprises the issue of 33,333,333 CDIs to be offered for subscription at $0.30 each to raise approximately $10,000,000 (Minimum Subscription), payable in full on application. Oversubscriptions of up to a further 33,333,333 CDIs to be offered for subscription at $0.30 each to raise up to a further $10,000,000 may be accepted. To the extent that the Company extends the Offer to eligible Canadian investors (outside of this Prospectus), the Company may seek to offer Shares to those investors rather than CDIs. If this occurs, the number of CDIs on issue following completion of the Offer will reduce accordingly. The Offer comprises: the Broker Firm Offer, which is open only to Australian resident Retail Investors who have received a firm allocation from their Broker; and

55 PROSPECTUS the Institutional Offer, which consists of an invitation to bid for CDIs (or Shares) made to Institutional Investors in Australia and other selected jurisdictions. The Company, in consultation with the Joint Lead Managers, will determine the allocation of CDIs. All CDIs offered for subscription under this Prospectus rank equally with each other. Broker Firm Offer Who can apply for the Broker Firm Offer? The Broker Firm Offer is open only to Australian resident Retail Investors who have received a firm allocation from their Broker. How to apply for the Broker Firm Offer In order to receive their firm allocation, Applicants under the Broker Firm Offer must lodge their Application Form and Application Monies with their Broker, in accordance with their Broker s instructions. Applicants under the Broker Firm Offer are reminded not to send their Application Forms to the Registry. If you elect to participate in the Broker Firm Offer, your Broker will act as your agent in submitting your Application Form and Application Monies to the Registry (which receives them on behalf of the Company. It will be your Broker s responsibility to ensure that your Application Form and Application Monies are received by the Registry by 5.00pm (AEST time) on the Broker Firm Offer Closing Date or any earlier closing date as determined by your Broker. The Company, the Registry and the Joint Lead Managers take no responsibility for any acts or omissions by your Broker in connection with your Application, Application Form or Application Monies. The Broker Firm Offer closes at 5.00pm (AEST) on 8 February The Institutional Offer The Institutional Offer consists of an invitation to certain Institutional Investors in Australia and a number of other eligible jurisdictions to apply for CDIs (or Shares), see Section Additional Information Foreign selling restrictions. The Joint Lead Managers have separately advised Institutional Investors of the Application procedures for the Institutional Offer. Institutional Offer Process The Company will invite certain Institutional Investors to bid for CDIs (or Shares) under the Institutional Offer. The Institutional Offer will be conducted by a bookbuild process managed by the Lead Manager. Full details of how to participate, including bidding instructions, will be provided to Institutional Offer participants by the Lead Manager. The allocation of CDIs among Applicants in the Institutional Offer will be determined by the Joint Lead Managers in consultation with Strata-X Energy. The Lead Manager, in consultation with Strata-X Energy, will have absolute discretion regarding the basis of allocation of CDIs (or Shares) among Institutional Investors, and there is no assurance that any Institutional Investor will be allocated any CDIs (or Shares), or the number of CDIs (or Shares) for which it has bid. The allocation policy will be influenced, but not constrained by, the following factors: the number of CDIs bid for by particular bidders; the timeliness of the bid by particular bidders; and any other factors that the Company, in consultation with the Joint Lead Managers, considers appropriate, at its sole discretion Allocation Policy The Company, in consultation with the Joint Lead Managers, has discretion regarding the allocation of CDIs between the Broker Firm Offer and the Institutional Offer, subject to any firm allocation for the Broker Firm Offer, and may reject any Application, or allocate a lesser amount of CDIs than those applied for, in its absolute discretion. CDIs which have been allocated to Brokers for allocation to their Australian resident Retail Investors will be issued to Broker Firm Applicants nominated by those Brokers. It will be a matter for Brokers to allocate firm stock among their Retail Investors, and they (and not the Company or the Lead Manager) will be responsible for ensuring that Retail Investors who have received a firm allocation from them receive the relevant CDIs. Broker Firm Applicants will be able to confirm their firm allocations through the Broker from whom they received those allocations. However, Applicants in the Broker Firm Offer who sell CDIs before receiving an initial statement of holding do so at their own risk, even if they have obtained details of their holding from their Broker Application and payment for CDIs An application constitutes an offer by you to subscribe for CDIs on the terms and conditions as contained in the Offer. An application to subscribe for CDIs can only be made on the Application Form contained in this Prospectus. Applications must be for a minimum of 6,667 CDIs representing a minimum investment of $2,000 and thereafter in multiples of 1,667 CDIs ($500). If you decide to apply for CDIs, you must complete the enclosed Application Form and pay the application monies by cheque drawn on and payable at any Australian bank in Australian dollars. An application for CDIs can only be made by: completing and lodging the Application Form for CDIs contained at the end of this Prospectus; or

56 54 STRATA-X ENERGY completing a paper copy of the relevant Application Form which accompanies the electronic version of this Prospectus, both of which can be downloaded from The Application Form contains detailed instructions on how it is to be completed. An Application Form must be accompanied by a cheque in Australian dollars, crossed not negotiable and made payable to Strata-X Energy Ltd. Payment for the CDIs must be made in full at the issue price of $0.30 cents for each CDIs subscribed. Applications for CDIs must be for a minimum of 6,667 CDIs ($2,000) and then in multiples of 1,667 CDIs ($500). Applications received by the Company that do not meet these requirements may be refused at the discretion of the Directors. Subject to the minimum subscription of the Issue being achieved for the CDIs as well as permission of the ASX for the CDIs to be listed for official quotation, the Directors will allot the CDIs as soon as possible after the closing date of the Issue. An application for CDIs may be accepted in full, for any lesser number or rejected by the Company. If any application is rejected, in whole or in part, the relevant Application Moneys will be repaid without interest Allotment Allotment of the CDIs under this Prospectus will take place as soon as practicable after the closing date of the Issue. Application moneys will be held in a subscription account until allotment. This account will be established and kept by the Company in trust for each applicant. Any interest earned on the application moneys will be for the benefit of the Company and will be retained by the Company irrespective of whether allotment takes place. Where the number of CDIs allotted is less than the number applied for, the surplus monies will be returned by cheque within 30 days of the closing date for applications. Where no allotment is made, the amount tendered on application will be returned in full by cheque within 30 days of the closing date for applications. Interest will not be paid on monies refunded. The CDIs will be allotted and CDI entitlement notices dispatched to holders as soon as possible after determination by the Company of entitlements ASX listing of CDIs Application will be made within 7 days of the date of this Prospectus to the ASX for the CDIs issued pursuant to this Prospectus to be granted official quotation by the ASX. The fact that the ASX may admit the Company to its Official List is not to be taken in any way as an indication of the merits of the Company or of the CDIs now offered for subscription. Quotation, if granted, of the CDIs offered by this Prospectus will commence as soon as practicable after the issue of holding statements to allottees. The ASX takes no responsibility for the contents of this Prospectus including the experts reports which it contains. In the event that the ASX does not grant permission for the official quotation of the CDIs within 3 months after the date of issue of this Prospectus, none of the CDIs offered by this Prospectus will be allotted or issued unless the ASIC grants the Company an exemption permitting the allotment or issue. If no allotment or issue is made, all moneys paid on application for the CDIs will be refunded without interest within the time period set out under the Corporations Act Application for quotation of Shares on TSX-V Application will also be made to TSX-V for all Shares underlying the CDIs issued under the Offer to be admitted for quotation for trading on the TSX-V. However, in order to trade on the TSX-V, Australian resident investors will be required to convert their CDIs tradeable on the ASX into Shares tradeable on TSX-V CHESS Depository Interests (CDIs) The jurisdiction in which the Company is incorporated does not recognise the CHESS system of holding securities or electronic transfer of legal title. In accordance with the Listing Rules, the Company will offer Shareholders CDIs as an alternative to holding certificates in the Company in certificated form. No share certificates will be issued in Australia. Trading in Australia on the ASX will be by way of CDIs. CDIs are frequently used for trading foreign company shares on the ASX. CDIs are traded in a manner similar to shares. CDIs will trade on the ASX, but not on TSX-V. Shares will continue to trade on TSX-V. Each CDI represents one underlying Share. However, the main difference between holding CDIs and Shares is that the holder of CDIs has beneficial ownership of the Shares instead of legal title. CHESS Depositary Nominees Pty Ltd (CDN) holds the legal title to the underlying Shares. The Shares which are the subject of CDIs will be registered in the name of CDN and will be held on behalf of and for the benefit of the CDI holder. CDIs will be CHESS approved from the date of Official Quotation in accordance with the Listing Rules and the ASX Settlement Operating Rules. The Company will operate a certificated Canadian register of Shares, an uncertificated issuer sponsored subregister of CDIs which will be maintained by Link Market Services Limited and an uncertificated CHESS subregister of CDIs in Australia. The certificated register is the register of legal title (and will reflect that CDN is the legal owner of Shares underlying the CDIs) and

57 PROSPECTUS the two uncertificated CDI subregisters combined will make up the register of beneficial title to the Shares underlying the CDIs. If Shareholders hold their Shares as CDIs, they will receive a holding statement either: from the Company which sets out the number of CDIs held on the issuer sponsored sub-register which is maintained by Computershare Investor Services Ltd; or from CHESS (acting on behalf of the depositary nominee) which sets out the number of CDIs held on the CHESS subregister. Shareholders will receive an initial holding statement upon transferring a holding of Shares to CDIs. Thereafter, a holding statement will only be provided to a CDI holder at the end of any subsequent month during which the balance of the Shareholder s holding changes. Holders are also able to request additional statements at any time, although fees may be charged by either the Company or CHESS for the provision of such additional statements. The ASX Settlement Operating Rules contain provisions to ensure that holders of CDIs have all the direct economic benefits of holding Shares. With the exception of voting arrangements, CDI holders have all the same rights as Shareholders whose Shares are registered in their own name. Further details regarding the rights of CDI holders are set out in Section Conversion of CDIs to Shares Holders of CDIs can choose to have their CDIs converted to a direct holding of Shares. However, if they do so, they will no longer be able to trade their CDIs on the ASX, but may trade the Shares on TSX-V. If a holder of CDIs wishes to convert their holding to Shares tradeable on TSX-V, they may do so in the following ways: for CDIs held through the issuer sponsored sub register, by contacting Link Market Services Limited directly to obtain the applicable conversion request form; or for CDIs held on the CHESS sponsored sub register, by contacting their controlling participant (who will usually be a stockbroker) who will liaise with Link Market Services Limited. Upon receipt of the conversion request the relevant number of CDIs will be cancelled and the Shares underlying the CDIs will be transferred from CDN to the name of the Shareholder via a share certificate or to a market participant electronically in CDS. Upon conversion to Shares, the Shares will be tradeable on TSX-V; however trading of the shares on ASX will not be possible. The Directors expect that this conversion process will be completed on the day on which a valid conversion request is received. Holders of Shares may also convert their Shares to CDIs by contacting Olympia Trust Company of Canada or their stockbroker (or applicable controlling participant). In this case, the Shares will be transferred from the Shareholder s name into the name of CDN and a holding statement will be issued for the CDIs. Upon conversion, the CDIs will be tradeable on ASX. However, no trading of CDIs on TSX-V will be possible. The ASX Settlement Operating Rules require the conversion process to be completed within three business days of receipt of the conversion request Dual listing At the successful completion of the Offer, the Company will be listed on both the ASX and TSX-V. Shareholders will continue to be able to trade their Shares on TSX-V. Those Shareholders who wish to continue trading their Shares on TSX-V should consult their lawyer or professional advisor for further information Escrow Arrangements An escrow is a restriction on, or the encumbering of, the sale, disposal, or certain other dealings in respect of, the securities concerned for the period of the escrow, subject to any exceptions in the escrow arrangement concerned. Pursuant to the requirements of the TSX-V, 11,060,000 Shares and 4,330,000 Warrants on issue are subject to escrow (TSX-V Imposed Escrow). In accordance with the terms of the TSX-V Imposed Escrow, the release of the securities is scheduled as follows: Saturday, 23 March 2013 Monday, 23 September 2013 Sunday, 23 March 2014 Tuesday, 23 September 2014 Shares 2,765,000 2,765,000 2,765,000 2,765,000 11,060,000 Warrants 1,082,500 1,082,500 1,082,500 1,082,500 4,330,000 Total

58 56 STRATA-X ENERGY In addition, pursuant to the terms of the Maverick Agreement (as summarised in Section 12.1) 3,000,000 Shares issued to El Indio Investment Corp (EIIC) are subject to escrow. In accordance with the terms of the escrow, the Shares shall be released on the earlier of 30 November 2013, or the occurrence of one of the following events: a) a change of control of the Company; b) the sale of all or substantially all of the assets of the Company to a third party; c) Ron Prefontaine or Tim Hoops resigning as directors of the Company or ceasing to be directors of the Company for any reason; d) Capitalisation of the Company of CAD$100,000,000; or e) the Company becomes insolvent. The ASX may, as a condition of granting the Company s application for official quotation of its CDIs, classify certain CDIs of the Company as restricted securities. If so, prior to official quotation of the Company s CDIs, the holders of the CDIs that are to be classified as restricted securities will be required to enter into appropriate escrow agreements with the Company Conversion of Convertible Notes The Company presently has on issue 16,724,000 Convertible Notes. Pursuant to their express terms, the Convertible Notes will convert into 16,724,000 Shares and 8,362,000 Warrants (as described more fully in Section 12.6) upon the Company receiving conditional approval for admission to the ASX. These Shares and Warrants will also be issued under this Prospectus. Further details of the terms of the Convertible Notes are set out in Section Dividend policy It is the present intention of the Directors to apply surplus cash flow to fund the exploration of the Company s project portfolio and any resultant development or production and generate new opportunities, rather than distributing these moneys in the form of dividends. It is the Directors intention to review this policy from time to time and commence the payment of a regular dividend once the Company is able to generate a substantial and sustainable level of cash flow, after allowing for capital expenditure and other commitments. The Directors can give no assurance as to the amount, timing, franking or payment of any future dividends by the Company. The capacity to pay dividends will depend on a number of factors including future earnings, capital expenditure requirements and the financial position of the Company Restrictions on the distribution of this Prospectus The distribution of this Prospectus outside the Commonwealth of Australia may be restricted by law. This Prospectus is not intended to, and does not, constitute an offer of securities in any place which, or to any person to whom, the making of such offer would not be lawful under the laws of any jurisdiction outside Australia. Applicants resident in countries outside Australia should consult their professional advisers as to whether any governmental or other consents are required, or other formalities need to be observed to enable them to apply for CDIs. The failure to comply with any applicable restrictions may constitute a violation of securities law in those jurisdictions Electronic Prospectus The Offer constituted by this Prospectus in electronic form is available only to persons receiving this Prospectus within Australia or New Zealand. Persons who receive a copy of this Prospectus in electronic form at are entitled to obtain a paper copy of the Prospectus (including any relevant accompanying Application Form) free of charge, during the Offer period, by contacting the Company on or by at dcornish@strata-x.com Non-Underwritten This Offer is not underwritten.

59 PROSPECTUS

60 58 STRATA-X ENERGY Key people, interests and benefits

61 PROSPECTUS Board of Directors The Directors of Strata-X Energy have a wide range of skills and over 80 years combined of relevant experience. Ron Prefontaine (Chairman) Ron Prefontaine has over 33 years of experience in the oil and gas industry. He received his Bachelor of Science in Geophysics from the University of British Columbia in 1979 and worked in Calgary until he was head hunted by Santos in At Santos, he worked on their Cooper, Surat, Bowen and Canning Basin projects until Over the next 10 years he held senior and management positions for Pancontinential Petroleum and Oil Company of Australia. Between 1994 and 2001, while consulting to the industry, he acquired several petroleum permits in his private companies which he sold or farmed out to Oilex, Arrow Energy, Bow Energy and QGC. He served as an Executive Director of Arrow Energy until 2005 and was a co-founder and Managing Director of Bow Energy. Arrow Energy was taken over in 2010 for $3.5 billion, while Bow was taken over in 2011 for $550 million. Mr Prefontaine s strengths are the early recognition of growth assets and the management of corporate growth. In 2009 Ron received a lifetime achievement award in recognition of his services to the Australian petroleum industry. Tim Hoops (Managing Director) Tim Hoops has over 33 years experience in the petroleum industry and has been President of Peak Resource Management Inc., a private oil and gas exploration company, since He was also President and Director of Kestrel Energy Inc., a NASDAQ listed company, from 1992 to 2005, and a director of Victoria Petroleum NL (now Senex Energy Ltd), an ASX listed company, from 1988 to Mr Hoops served as a key member of the asset acquisition team of Santa Fe Energy which operated in the Green River Basin, Wyoming and the Paradox Basin, Colorado/Utah. He was Exploration Manager at Royal Resources and managed the company s exploration activities in the Canning Basin from 1984 to 1986 and previously worked for Amoco Production Company. Mr Hoops strengths include the early recognition of growth petroleum assets, resource valuation and project management. He has a Bachelor of Science in Geological Engineering from the Colorado School of Mines and Master of Science in Global Energy Management from the University of Colorado. He is also a member of the American Association of Petroleum Geologists, Rocky Mountain Association of Geologists and is a Wyoming Certified Petroleum Geologist.

62 60 STRATA-X ENERGY Tim Bradley (CFO/Director) Tim Bradley has been CEO and a principal of Bradley Consulting Group, PC in Lakewood, Colorado since 1983, and is a Director of Strata-X Energy in addition to serving as the Company s CFO. His professional emphasis is in business consulting, including investment and retirement planning. He specialises in succession planning for the purposes of mergers and acquisitions, shareholder dissents, buy/sell agreements, estate planning and wealth management. He particularly focuses on these services for owner-managed and family-owned businesses. Industry experience includes oil and gas, construction, professional service organizations, manufacturing, wholesale and retail distributors and real estate development. Mr Bradley is a Certified Public Accountant licensed in Colorado, a member of the American Institute of Certified Public Accountants and the Colorado Society of Certified Public Accountants. He received his Bachelor of Science in Accounting from the University of Northern Colorado. Bohdan (Don) Romaniuk (Director) Bohdan (Don) Romaniuk is an attorney, economist and business executive and serves as an independent director for Strata-X Energy. He has held a number of senior executive positions in both small and very large enterprises over a business career spanning nearly 30 years. Mr Romaniuk has extensive Board and Audit Committee experience with both public and private companies and continues to serve as Chairman of the Board and Audit Committee of Acceleware Corp., a TSXV-listed company engaged in developing and supplying high performance computing applications for the oil & gas and computer engineering markets. He remains active in several private business ventures focused on developing technology for stem cell research and related medical and commercial applications. On 3 October 2012, Mr Romaniuk was appointed a parttime Commissioner of the Alberta Utilities Commission pursuant to an Order-in-Council of the Government of Alberta. Mr Romaniuk has a BA (Hon.) in Economics from the University of Alberta, an MA in Economics and Ph.D. (a.b.d.) in Economics from Queen s University in Kingston, Ontario and an LL.B from the University of Toronto.

63 PROSPECTUS The composition of Strata-X Energy s Board committees and a summary of its key corporate governance policies are set out in Section 7.7. a) Constraints on availability Save as noted in this Prospectus, each Director has confirmed to Strata-X Energy that he anticipates being available to perform his duties as Director of Strata-X Energy without constraint from other commitments. Don Schurman (Director) Donald Schurman has served in senior executive and corporate director roles for more than 40 years and is an independent director for Strata-X Energy. Between 1971 and 1998 Mr Schurman served as a senior executive for a variety of health care organisations including serving as the Executive Vice President of Extendicare, a TSX listed company, and 8 years as the President and CEO of the University of Alberta Hospital. In 1999 he became a founding Partner of a Canadian general management consulting company which was sold in 2006 and he has continued to provide strategic advice to consulting clients since this time. Mr Schurman also has significant experience as a corporate director having served as a director and Board chair of two TSX listed companies: Liberty Mines, a nickel mining company; and Isotechnika Inc., a drug development company. He also currently serves as the board chair of a private company, Rx Canada in Toronto. Mr Schurman has a Bachelor of Commerce degree from the University of Saskatchewan and a Masters of Health Administration degree from the University of Alberta. b) Independence of Directors The Board considers that Don Schurman and Don Romaniuk are free from any business or any other relationship that could materially interfere with, or reasonably be perceived to interfere with, the independent exercise of their judgment and are able to fulfil the role of an Independent Director for the purposes of the ASX Corporate Governance Principles and Recommendations (second edition). Tim Hoops, Ron Prefontaine and Tim Bradley are not currently considered by the Board to fulfil the role of Independent Directors. Tim Hoops is the Managing Director and President of Strata-X Energy and expects to hold on Listing approximately between 6.54% and 8.46% of the Shares of the Company. Ron Prefontaine is the Chairman of the Company and expects to hold a relevant interest in approximately between 9.08% and 11.74% of the Shares in the Company on completion of the Offer. Tim Bradley is the CFO of the Company and expects to hold a relevant interest in approximately between 1.61% and 2.09% on completion of the Offer.

64 62 STRATA-X ENERGY 7.2. management and key personnel Management Tim Hoops (Managing Director) David Hettich (Controller & Acting Land Manager) Duncan Cornish (Proposed Company Secretary ASX) Doug Walker (Company Secretary TSX) Experience, Qualifications and Expertise Refer to Section 7.1. David Hettich is the Controller and acting Land Manager for Strata-X Energy and has many years project management experience in the oil and gas industry. Mr Hettich earned a Bachelor of Business Administration in Banking and Financial Economics from the University of North Dakota and is an active member in multiple North American oil and gas associations. Mr Cornish is an accomplished and highly regarded corporate administrator and manager. He has many years experience in pivotal management roles in capital raisings and stock exchange listings for numerous companies on the ASX, AIM Market of the London Stock Exchange and the Toronto Stock Exchange. Highly skilled in the areas of company financial reporting, company regulatory, secretarial and governance areas, business acquisition and disposal due diligence, he has worked with Ernst & Young and PricewaterhouseCoopers both in Australia and the UK. Mr Cornish is currently Company Secretary and CFO of other listed companies on the ASX and TSX-V where he has assisted in their listing and capital raising. He is supported by a small experienced team of accountants and administrators. Doug Walker serves as Strata-X Energy s Canadian Company Secretary. He has been President of Capital West Ventures Inc., a private consulting company since1993 and in this capacity has provided corporate advisory services to companies in the health care, technology, oil and gas and mining sectors. Prior to this he worked for Peat Marwick Thorne and Deloitte & Touche in the Corporate Finance and Financial Advisory Groups. Mr Walker was awarded his ICD.D from the Institute of Corporate Directors in 2008 and received his Bachelor of Commerce from the University of Saskatchewan in Interests and benefits This Section and Section 13 sets out the nature and extent of the interests and fees of certain persons involved in the Offer. Other than as set out in this Prospectus, no: Director or proposed Director of Strata-X Energy; Person named in this Prospectus and who has performed a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus; Promoter of Strata-X Energy; or Stockbroker or underwriter (but not a sub-underwriter) to the Offer, holds at the time of lodgement of this Prospectus with ASIC, or has held in the two years before lodgement of this Prospectus with ASIC, an interest in: The formation or promotion of Strata-X Energy; Property acquired or proposed to be acquired by Strata-X Energy in connection with its formation or promotion, or in connection with the Offer; or The Offer, and no amount (whether in cash, Shares or otherwise) has been paid or agreed to be paid, nor has any benefit been given or agreed to be given to any such persons for services in connection with the formation or promotion of Strata-X Energy or the Offer or to any Director or proposed Director to induce them to become, or qualify as, a Director of Strata-X Energy Directors and Management s interests and remuneration The Company has entered into executive employment agreements with Tim Hoops, Tim Bradley, and David Hettich. Details of the interests, benefits and key terms under these agreements are set below:

65 PROSPECTUS Tim Hoops Tim Bradley David Hettich Position Managing Director CFO / Director Land Manager / Controller Gross salary package/ US$204,000 per annum US$96,000 per annum US$98,400 per annum remuneration Benefits US$36,000 per annum in lieu of contributions to a defined pension plan or retirement account, or the provision of medical, dental and vision insurance No benefits US$14,400 per annum in lieu of contributions to a defined pension plan or retirement account, or the provision of medical, dental and vision insurance Stock Options and Incentive Plans Subject to the terms of the Stock Option Plan (described in Section 13.7), the grant of Options in number and on terms determined by the Board from time to time Subject to the terms of the Stock Option Plan (described in Section 13.7), the grant of Options in number and on terms determined by the Board from time to time Subject to the terms of the Stock Option Plan (described in Section 13.7), the grant of Options in number and on terms determined by the Board from time to time Salary review Reviewed annually Reviewed annually Reviewed annually Term Three (3) years commencing on 1 November 2012 and ending on 31 October 2015 with the ability to be extended for successive terms of one year on approval by the Board One (1) year commencing on 1 November 2012 and ending on 31 October 2013 with the ability to be extended for successive terms of one year on approval by the Board One (1) year commencing on 1 November 2012 and ending on 31 October 2013 with the ability to be extended for successive terms of one year on approval by the Board Termination Tim may resign as Chief Executive Officer by giving one (1) month notice. Strata-X Energy may terminate Tim s engagement: a) at any time for cause; b) at any time without cause by paying 12 months salary and compensation equivalent to the number of months remaining under the agreement. Where there is a Change of Control (described below) and either Tim terminates the agreement or his employment is terminated by Strata-X Energy without cause, Strata-X Energy will pay Tim a termination payment equivalent to 12 months salary and all outstanding options issued to Tim under the Stock Option Plan will immediately vest. Tim may resign as CFO by giving one (1) month notice. Strata-X Energy may terminate Tim s engagement: a) at any time for cause; b) at any time without cause by paying 3 months salary and compensation equivalent to the number of months remaining under the agreement. David may resign as Land Manager by giving one (1) month notice. Strata-X Energy may terminate David s engagement: a) at any time for cause; b) at any time without cause by paying 3 months salary and compensation equivalent to the number of months remaining under the agreement.

66 64 STRATA-X ENERGY Tim Hoops Tim Bradley David Hettich For the purposes of the agreement, a change of control will occur where: A merger or arrangement takes place where a third party acquires at least 50% of the voting rights of Strata-X Energy and the directors prior to the transaction constitute less than 50% of the Board s members following the transaction; A person, or combination of people acting in concert acquire(s) more than 25% of the voting rights of Strata-X Energy; A person, or combination of people acting in concert acquire(s) the right to appoint a majority of Directors; Strata-X Energy sells substantially all of its assets Directors remuneration The Articles of the Company provides that the non executive Directors are entitled to remuneration as determined by the Company in a general meeting to be apportioned among them in such manner as the Directors agree and, in default of agreement, equally. The aggregate maximum remuneration currently determined by the Company is CAD$350,000 per annum (subject to exchange rate movements). Additionally, non executive Directors will be entitled to be reimbursed for properly incurred expenses. At present, the Board of the Company comprises two executive Directors and three non executive Directors. Each executive Director has been engaged by the Company pursuant to employment agreements, the terms of which are summarised in Section 7.4 of this Prospectus. The Board has agreed that executive Directors shall not be paid Director s fees in addition to their salary packages set forth in their respective service contracts and that upon Listing the non-executive directors shall be paid as shown in the table below. If a non executive Director performs extra services, which in the opinion of the Directors are outside the scope of the ordinary duties of the Director, the Company may remunerate that Director by payment of a fixed sum determined by the Directors. However, no payment can be made if the effect would be to exceed the maximum aggregate amount payable to non-executive Directors. A non executive Director is entitled to be paid travelling and other expenses properly incurred by them in attending Director s or General Meetings of the Company or otherwise in connection with the business of the Company. The remuneration of any executive Director may from time to time be fixed by the Directors. The remuneration may be by way of salary or commission or participation in profits but may not be by commission on, or a percentage of, operating revenue. Except as disclosed in Section 7.4, no remuneration will be payable to executive Directors. Non-Executive Director Previous Annual Fee Annual fee upon Listing Ron Prefontaine Nil $50,000 Don Schurman Nil CAD$30,000 Don Romaniuk Nil CAD$40,000

67 PROSPECTUS Directors Shareholdings Directors are not required under the Articles to hold any Shares in the Company. The Directors (and their associates) are entitled to apply for CDIs in the Offer. The Directors holdings as at the date of this Offer are set out in the following tables: Ordinary Shares Name Ordinary Shares/ CDIs Pre-Offer Ordinary Shares/ CDIs (%) Minimum Subscription Ordinary Shares/ CDIs (%) Post-Offer Maximum Subscription Ordinary Shares/ CDIs (%) Ron Prefontaine (1) 13,356, % 11.74% 9.08% Tim Hoops 9,624, % 8.46% 6.54% Tim Bradley 2,376, % 2.09% 1.61% Don Romaniuk 410, % 0.36% 0.28% Don Schurman 360, % 0.32% 0.24% Directors Total 25,926, % 22.96% 17.76% Note: Includes those Shares to be issued to Mr Prefontaine and associated persons or entities on the conversion of the Convertible Notes as described in Section (1) This excludes any additional Shares, Warrants and CDIs that may be issued to entities associated with Ron Prefontaine as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest to entities associated with Ron Prefontaine will total approximately $CAD35,069, resulting in an additional 140,276 Shares and 70,138 Warrants being issued to entities associated with Ron Prefontaine. As at the date of this Offer, Shares held by Directors and their associates are subject to TSX-V imposed escrow. Further information in relation to the Shares subject to escrow is set out in Section Options Pre/Post-Offer Name Options Exercise Price (CAD$) Expiry Date Ron Prefontaine 200, September 2021 Tim Hoops 1,000, September , September 2022 Tim Bradley 200, September , September 2022 Don Romaniuk 50, January , September 2022 Don Schurman 50, January , September 2022 Directors Total 2,050,000 All Options issued to Directors were issued under the Company s Stock Option Plan, a summary of which is detailed in Section 13.7.

68 66 STRATA-X ENERGY Warrants Pre/Post-Offer Name Warrants Exercise Price (CAD$) Expiry Date Ron Prefontaine (1) 883, March ,316, March ,000, June ,500, October 2016 Tim Hoops 3,000, March ,812, March 2013 Tim Bradley 1,188, March 2013 Directors Total 11,700,000 (1) This excludes any additional Shares, Warrants and CDIs that may be issued to entities associated with Ron Prefontaine as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest to entities associated with Ron Prefontaine will total approximately $CAD35,069, resulting in an additional 140,276 Shares and 70,138 Warrants being issued to entities associated with Ron Prefontaine. Details of the transactions pursuant to which the Directors (or person or entities associated with them) are set out in Section As at the date of this Offer, 4,330,000 Warrants held by Directors and their associates are subject to TSX-V imposed escrow. Further information in relation to the Shares subject to escrow is set out in Section Corporate Governance Incorporation of corporate governance material For the purposes of this Prospectus, the Company relies upon the provisions in Section 712 of the Corporations Act, which enables the Company to incorporate material by reference into this Prospectus. Accordingly, rather than include herein the very detailed documentation relating to the Company s corporate governance practices, this Prospectus will instead incorporate by reference the Corporate Governance Charter of Strata-X Energy lodged with ASIC on 21 December The Corporate Governance Charter can be obtained, at no cost, from the Company s registered office and is also available on the Company s website, The following summary is provided pursuant to Section 712(2) of the Corporations Act. Synopsis of material incorporated into this Prospectus The Directors are responsible for protecting the rights and interests of the Shareholders through the implementation of sound strategies and action plans and the development of an integrated framework of controls over the Company s resources, functions and assets. The Board will regularly review and monitor the performance of the Board and the Company and implement changes as required. General The Company will have formally constituted committees of the Board of Directors. The Directors consider that the Company is of a size, and that its affairs are of sufficient complexity, as to justify the formation of one or more special or separate committees. At the same time, the Board as a whole is able to address the governance aspects of the Company s activities and ensure that it adheres to appropriate ethical standards. The information below outlines the main corporate governance policies which the Directors have adopted. Composition of the Board The Board comprises five Directors. The names, qualifications and relevant experience of each Director are set out in Section 7 of this Prospectus. There is no requirement that Director s own Shares in the Company. Board policy is that the Board will regularly review and monitor its performance. As the Company s operations expand in size, nature and scope, the size of the Board will be reviewed periodically and the Board may seek to appoint persons who, in the opinion of the Board will provide specialist expertise required for the Board to adequately perform its role.

69 PROSPECTUS Board membership The Board acts as a nomination committee. Members of the Board have been brought together to provide a blend of qualifications, skills and national and international experience required for managing a company operating within the oil and gas industry. Appointment and retirement of Directors The Company s Articles provide that Directors are subject to retirement by rotation, by order of length of appointment. Retiring Directors are eligible for re election by Shareholders at the annual general meeting of the Company. Duties of Directors Directors are expected to accept all duties and responsibilities associated with the running of a public company, to act in the best interests of the Company and to carry out their duties and responsibilities with due care and diligence. Directors are required to take into consideration conflicts when accepting appointments to other Boards. Accordingly, Directors wishing to accept appointment to other Boards must first seek approval from the Board, approval of which will not be unreasonably withheld. Independent professional advice The Board has determined that individual Directors may, in appropriate circumstances engage outside advisers at the Company s expense. The engagement of an outside adviser is subject to the prior approval of the Board, which will not be unreasonably withheld. Compensation arrangements and remuneration committee The maximum aggregate amount payable to non executive Directors as Directors fees has been set at CAD$350,000 per annum. The Articles provide that Director s fees can only change pursuant to a resolution at a general meeting. The Company has established a remuneration committee comprising Messrs Schurman, Romaniuk and Hoops with the objective of maintaining and reviewing the Company s remuneration policies and practices and reporting to the Board on such matters. An extract of the Remuneration Committee Charter is available on the Company s website, The Board is responsible for reviewing and negotiating the compensation arrangements of senior executives and consultants. Audit and risk management committee The Board presently has an audit and risk management committee comprising Messrs Romaniuk, Schurman and Bradley. The Company has adopted an Audit & Risk Management Charter setting out the composition, purpose, powers and scope of the audit and risk management committee as well as reporting requirements to the Board as a whole. An extract of this Charter is available at the Company s website, Internal management controls The Company s main assets are located in the United States. Control over the operations is exercised by the exploration and operation managers. The Board also monitors the performance of outside consultants engaged from time to time to complete specific projects and tasks. Identifying significant business risks The Board regularly monitors the operational and financial performance of the Company. In conjunction with the audit and risk management committee, it monitors and receives advice on areas of operation and financial risk and considers strategies for appropriate risk management. All operational and financial strategies adopted are aimed at improving the value of the Company s Shares, however, the Directors recognise that oil and gas exploration and evaluation is inherently risky. Corporate Governance charter The Company has adopted a Corporate Governance Charter in order to implement and maintain a culture of good corporate governance both internally and in its external dealings. In adopting the Corporate Governance Charter the Board is mindful of the Corporate Governance Principles and Recommendations 2nd Edition (Corporate Governance Principles and Recommendations) released by the ASX Corporate Governance Council (Council) in August 2007 (as amended in 2010). The Corporate Governance Charter also takes into consideration the existing charters and policies adopted by the Company under its listing on the TSX-V. The Corporate Governance Charter in full will be posted on the Company s website, The following table briefly addresses the recommendations set out in the Corporate Governance Principles and Recommendations. Where the Company s corporate governance practices do not correlate with the practices recommended by the Council, the Company will work towards compliance where feasible. In this regard, the Company is of the view that not all recommended practices or procedures are appropriate or feasible, especially given its current size and the limited scale of its operations to date.

70 68 STRATA-X ENERGY ASX Guidelines Principle One Lay solid foundations for management and oversight Summary of Strata-X Energy s position The Company s Corporate Governance Charter sets out the functions, powers and responsibilities of the Board. The Managing Director is responsible for running the affairs of the Company under delegated authority from the Board. In the absence of a formally constituted Nominations Committee, the full Board is responsible for the proper oversight of the Board, the Directors and senior management. The Board shall upon the Company reaching the requisite corporate and commercial maturity, approve the constitution of a Nominations Committee to assist the Board in relation to the appointment of Directors and senior management. Principle Two Structure Board to Add Value Principle Three Promote Ethical and Responsible Decision Making The Company will report and address any departures from any of Recommendations 1.1, 1.2 and 1.3 (if any) in future annual reports. A statement of functions, powers and responsibilities of the Board are set out in the Company s Corporate Governance Charter. The Company has two independent directors (Messrs Don Romaniuk and Don Schurman) and a Board with extensive public company experience. The Company has adopted both: A Corporate Ethics Policy regulating the duties of directors and their deals with the company (and Shares) both internally and externally; and A Corporate Code of Conduct regulating the Company s external dealings and dealings with Shareholders. Principle Four Safeguard Integrity in Financial Reporting Principle Five Make Timely and Balanced Disclosure Principal Six Respect the Rights of Shareholders Principle Seven Recognise and Manage Risk Principle Eight Remunerate Fairly and Responsibly The Company has elected, due to its size and nature of operations, not to adopt a Diversity Policy at this time. The Board shall, when the Company has reached the requisite corporate and commercial maturity, adopt a Diversity Policy with the objective of promoting diversity in the Company and measurable objectives for achieving diversity to be assessed annually and disclosed in the annual reports. In the interim, the Company acknowledges that it respects the benefits of employment diversity and will employ the best staff available irrespective of gender or background. The Company has established a separately constituted Audit Committee. The Committee comprises Messrs Romaniuk, Schurman and Bradley. The Company has defined, under its Corporate Ethics Policy, an internal protocol for the reporting of material information to Shareholders and ASX. The Company is committed to all Shareholders and stakeholders having equal and timely access to material information regarding the operations and results of the Company. The Company will make regular ASX announcements and make these available on its website. The Audit Committee has under its Charter responsibility for overseeing the Company s risk management and internal control framework and implementation of the processes to undertake and assess risk management and internal control compliance. A Corporate Governance and Compensation Committee has been established which is charged with making recommendations as to all aspects of executive and non-executive director and management and committee remuneration packages. The Committee comprises Messrs Schurman, Romaniuk and Bradley.

71 PROSPECTUS Trading Policies The Directors, executives and employees of the Company are subject to the trading policy adopted by the Company (Trading Policy). The Trading Policy imposes a number of restrictions in relation to them dealing in Shares of the Company. As a general policy, and in accordance with the instructions from the Company, Directors, executives and employees cannot deal in Shares in the Company at any time unless they have first given notice of the intended transaction to the Chairman of the Board and received clearance from the Chairman. Clearance can be provided if the Restricted Person is not in possession of inside information and either the dealing is an identified excluded dealing or exceptional circumstances exist. The Trading Policy also outlines statutory notification requirements for an extended category of officers, employees and shareholders who are potential insiders and who must notify the relevant authorities that they hold these positions with the Company. The Trading Policy can be obtained, at no cost, from the Company s registered office and is also available on the Company s website

72 70 STRATA-X ENERGY Historical and pro-forma financial information

73 PROSPECTUS Introduction This section sets out the historical financial information and pro-forma financial information. The basis for preparation and presentation is set out below. The Directors of the Company are responsible for the preparation and presentation of the historical and proforma statements of financial position including the determination of the pro-forma adjustments which have been prepared in accordance with Australian Accounting Standards and Interpretations and other mandatory professional reporting requirements in Australia ( AGAAP ), which ensure compliance with International Financial Reporting Standards ( IFRS ). Pitcher Partners has prepared an Independent Accountant s Report in respect of the historical and pro-forma financial information. A copy of the report is included in Section 9 of this Prospectus. The historical and pro-forma statements of financial position included in the Prospectus are presented in an abbreviated form and do not include all the disclosures required by AGAAP, applicable to annual financial reports prepared in accordance with the Corporations Act Historical Statements of Financial Position The audited historical statements of financial position of the Company as at 30 June 2012 and of Strata-X, Inc. as at 30 June 2011 are set out on the following pages of this Section. The 30 June 2012 historical statement of financial position is the last publicly reported (audited) financial position of the Company. The 30 September 2012 interim condensed statement of financial position has been published subsequent to the 30 June 2012 statement of financial position, although these statements have not been reviewed or audited. The historical statements of financial position have been presented in $US which is the functional currency of the Company. Pro-Forma Statement of Financial Position The reviewed pro-forma statement of financial position of the Company as at 30 June 2012 is also set out in the following pages. The pro-forma statement of financial position has been presented in both the functional currency of the Company ($US) and $A. Refer to Note 3 for details relating to currency exchange rates utilised.

74 72 STRATA-X ENERGY Historical Consolidated Statement of Financial Position Historical audited as at 30 June 2011 (1) US$ Historical audited as at 30 June 2012 (2) US$ ASSETS Current assets Cash and cash equivalents 212,075 2,283,006 Accounts receivable 187, ,353 Subscription receivable - 1,120,001 Prepaids and other 31,996 33,390 Total Current Assets 431,809 3,747,750 Non-current Assets Investments 175, ,452 Exploration and evaluation assets 979,400 3,481,188 Property and equipment 1,951, ,358 Total Non-current Assets 3,105,537 3,817,998 Total Assets 3,537,346 7,565,748 LIABILITIES Current liabilities Accounts payable and accrued liabilities 501,525 1,335,644 Convertible debentures - 2,705,442 Derivative financial liability - 258,404 Amounts due to related parties 192, ,639 Derivative warrants - 503,322 Total Current Liabilities 694,438 5,001,451 Non-current Liabilities Accrued liabilities 47,000 12,000 Derivative warrants - 52,307 Decommissioning provisions 672, ,719 Total Non-current Liabilities 719, ,026 Total Liabilities 1,414,354 5,637,477 Net Assets 2,122,992 1,928,271 EQUITY Share capital 2,797,000 7,893,217 Share based compensation reserve - 376,506 Warrant reserve - 586,304 Contributed surplus 22,066,879 22,066,879 Other reserves - 22,501 Accumulated losses (22,740,887) (29,017,136) Total Equity 2,122,992 1,928,271 (1) The historical statement of financial position as at 30 June 2011 has been extracted from the audited financial statements of Strata-X, Inc. as at 30 June (2) The historical consolidated statement of financial position as at 30 June 2012 has been extracted from the audited financial statements of the Company as at 30 June 2012.

75 PROSPECTUS Pro-Forma Consolidated Statement of Financial Position Note Reviewed Pro-forma post offer of Minimum Subscription as at 30 June 2012 (1) US$ Reviewed Pro-forma post offer of Maximum Subscription as at 30 June 2012 (1) US$ Reviewed Pro-forma post offer of Minimum Subscription as at 30 June 2012 (2) A$ Reviewed Pro-forma post offer of Maximum Subscription as at 30 June 2012 (2) A$ ASSETS Current assets Cash and cash equivalents 4 12,612,215 22,184,832 12,320,230 21,671,230 Accounts receivable 311, , , ,145 Subscription receivable Prepaids and other 33,390 33,390 32,617 32,617 Total Current Assets 12,956,958 22,529,575 12,656,992 22,007,992 Non-current Assets Investments 175, , , ,390 Exploration and evaluation assets 5 10,046,475 10,046,475 9,813,890 9,813,890 Property and equipment 161, , , ,622 Total Non-current Assets 10,383,285 10,383,285 10,142,902 10,142,902 Total Assets 23,340,243 32,912,860 22,799,894 32,150,894 LIABILITIES Current liabilities Accounts payable and accrued liabilities 6 763, , , ,737 Convertible debentures Derivative financial liability Amounts due to related parties 198, , , ,040 Borrowings related party 2,047,399 2,047,399 2,000,000 2,000,000 Derivative warrants 9 188, , , ,962 Total Current Liabilities 3,197,772 3,197,772 3,123,739 3,123,739 Non-current Liabilities Accrued liabilities 6 12,000 12,000 11,722 11,722 Derivative warrants 9 1,497,264 1,497,264 1,462,601 1,462,601 Decommissioning provisions 571, , , ,483 Total Non-current Liabilities 2,080,983 2,080,983 2,032,806 2,032,806 Total Liabilities 5,278,755 5,278,755 5,156,545 5,156,545 Net Assets 18,061,488 27,634,105 17,643,349 26,994,349 EQUITY Share capital 10 24,019,235 33,571,378 23,463,165 32,794,165 Share based compensation reserve 662, , , ,804 Warrant reserve 9 645, , , ,187 Contributed surplus 22,066,879 22,066,879 21,556,009 21,556,009 Other reserves 22,501 22,501 21,980 21,980 Accumulated losses (29,354,379) (29,354,379) (28,674,796) (28,674,796) Total Equity 18,061,488 27,634,105 17,643,349 26,994,349 (3) The Company pro-forma consolidated statement of financial position as at 30 June 2012 in US Dollars reflects the application of the funds from the Offer less the costs associated with the Offer, along with the other pro-forma transactions as set out in Note 3. As discussed in Note 3, the Offer is reflected under two potential scenarios, one representing an issuance of 33,333,333 shares (minimum subscription) and the second representing an issuance of 66,666,666 shares (maximum subscription). (4) The translation of the pro-forma consolidated statement of financial position as at 30 June 2012 in US Dollars into Australian Dollars at the rate of US$1 = A$ under minimum and maximum scenarios. The statement of financial position should be read in conjunction with the following notes set out in this section.

76 74 STRATA-X ENERGY Note 1 Summary of Significant Accounting Policies The historical and pro-forma statements of financial position have been prepared in accordance with the measurement and recognition requirements, but not all of the disclosure requirements of the Corporations Act 2001 including applicable Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board for the presentation of financial information for inclusion in a Prospectus for Australia. Basis of preparation The historical statements of financial position are presented in U.S. dollars, the functional currency of the Company and the pro-forma statements of financial position are presented in U.S. and Australian dollars. The statement as at 30 June 2012 covers Strata-X Energy Ltd. which is a public company, incorporated and domiciled in Canada, and includes the financial positions of the legal subsidiaries, Strata-X, Inc. and Strata-X Australia Pty Ltd. The statement as at 30 June 2011 is of Strata-X, Inc. The preparation of the historical and pro-forma statements of financial position are in conformity with AGAAP and requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. There have been no new Australian Accounting Standards and Australian Accounting Interpretations which have been issued or amended, but which are not mandatory as at 30 June 2012, which are applicable to the Company which would have a material effect on the historical or pro-forma statements of financial position. The following is a summary of the material accounting policies adopted by the Company in the preparation of the historical and pro-forma statement of financial position. The accounting policies have been consistently applied. Accounting Policies a) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Strata-X Energy Ltd ( company or parent entity ) as at 30 June 2012 and the results of all subsidiaries for the year then ended. Strata-X Energy Ltd and its subsidiaries together are referred to as the Group or the consolidated entity. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. As discussed in Note 2, the Company completed a qualifying transaction effective 22 September 2011, acquiring all of the issued and outstanding common shares of Strata-X, Inc., a company incorporated under the laws of the State of Colorado in the United States. The qualifying transaction was considered a reverse acquisition for accounting purposes, with Strata-X, Inc. identified as the acquirer. As such, the consolidated statement of financial position as at 30 June 2012 includes the results of Strata-X, Inc. for the entire period along with the results of Strata-X Energy Ltd. for the period from the date of the qualifying transaction through to 30 June The share capital account reflects capital activity related to Strata-X, Inc. up to the date of the qualifying transaction. As of the date of the qualifying transaction, the share capital account was effectively recapitalised, reflecting the share capital structure of Strata-X Energy Ltd. from the date of the qualifying transaction onward. The comparative statement as at 30 June 2011 reflects the financial position and results of Strata-X, Inc. based on its position as the acquiring company for accounting purposes in the qualifying transaction. b) Cash and Cash Equivalents Cash and cash equivalents consist of amounts on deposit with banks, term deposits and other similar short-term highly liquid investments with maturities of 90 days or less at the date of issue. c) Exploration and Evaluation Assets Pre-licence expenditures incurred before the Company has obtained legal rights to explore an area are expensed. Exploration and evaluation costs include the costs of acquiring licences, exploratory drilling, geological and geophysical activities, acquisition of mineral and surface rights and technical studies. Exploration and evaluation costs are capitalised as exploration and evaluation assets when the technical feasibility and commercial viability of extracting oil and natural gas reserves have yet to be determined. Exploration and evaluation assets are measured at cost and are not depleted or depreciated.

77 PROSPECTUS Exploration and evaluation assets, net of any impairment loss, are transferred to property and equipment when proved and/or probable reserves are determined to exist. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Exploration and evaluation assets are also assessed for impairment upon their reclassification to property and equipment. The impairment of exploration and evaluation assets and any eventual reversal thereof, is recognised in the profit or loss of the Company. Exchanges or swaps that involve only exploration and evaluation assets are accounted for at cost. Any gains or losses from the divestiture of exploration and evaluation assets are recognised in profit or loss. d) Property and Equipment a) Oil and Gas Properties All costs directly associated with the development and production of oil and natural gas interests are capitalised on a field basis as oil and natural gas interests and are measured at cost less accumulated depletion and depreciation and net impairment losses. These costs include expenditures for fields where technical feasibility and commercial viability has been determined. These costs include property acquisitions with proved and/or probable reserves, development drilling, completion, gathering and infrastructure, decommissioning liabilities and transfers from exploration and evaluation assets. Costs of replacing parts of property and equipment are capitalised only when they increase the future economic benefits of the specific asset to which they relate. All other expenditures are recognised in profit or loss as incurred. The carrying amount of any replaced or sold component is derecognised. The costs of day-to-day servicing of property and equipment are recognised in profit or loss as incurred. Exchanges or swaps of property and equipment are measured at fair value unless the transaction lacks commercial substance or neither the fair value of the asset received nor the asset given up can be readily estimated. When fair value is not used, the cost of the acquired asset is measured at the carrying amount of the asset given up. Any gains or losses from the divestiture of property and equipment are recognised in profit or loss. b) Computer Equipment and Software Computer equipment and software is stated at cost less accumulated amortisation. Amortisation of computer equipment and software is calculated using the straightline method over the estimated useful lives of the assets, ranging from 3 years to 5 years. e) Depletion and Depreciation of Oil and Gas Properties Oil and natural gas interests are depleted using the unitof-production method based on the ratio of production in the period to the related proved and probable reserves, taking into account estimated future development costs. Production and reserves of natural gas are converted to equivalent barrels of crude oil on the basis of six thousand cubic feet of gas to one barrel of oil. Changes in estimates used in prior periods, such as proved and probable reserves, that affect the unit-of-production calculations do not give rise to prior period adjustments and are dealt with on a prospective basis. Related well equipment will be depleted using the unit-ofproduction method along with the related reserves when the assets are designed to have a life similar to the reserves of the related wells with little to no residual value. Where different vintages or kinds of equipment have differing useful lives, they are depreciated separately on a straightline basis over the estimated useful life of the equipment and other related components. f) Impairment of Non-Financial Assets The carrying amount of the Company s non-financial assets, other than exploration and evaluation assets, is reviewed for indicators of impairment at each reporting date. If indicators of impairment exist, the recoverable amount of the asset is estimated. Exploration and evaluation assets are assessed for impairment when they are reclassified to property and equipment and if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purpose of assessing impairment, exploration and evaluation assets and property and equipment are grouped into respective CGU s, each of which is typically defined as a geographical field of development. Exploration and evaluation assets are tested with the producing CGU for which the activity can be attributed or separately where a producing CGU does not exist for the exploration and evaluation activity. The recoverable amount of a CGU is the greater of its fair value less costs to sell and its value in use. Fair value is defined as the amount for which the asset could be sold in an arm s length transaction between knowledgeable and willing parties. Fair value less costs to sell is determined using discounted future net cash flows of proved and probable reserves using forecast prices and costs and including future development costs. The cash flows are discounted at an appropriate discount rate which would be applied by a willing market participant. Value in use is determined by estimating the present value of the future net cash flows to be derived from the continued use of the cash-generating unit in its present form. These cash flows are discounted at a rate based on the time value of money and risks specific to the CGU. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. An impairment loss recognised in respect of a CGU is allocated to reduce the carrying amount of the assets in a CGU on a pro rata basis. Impairment losses are recognised in net earnings. Impairment losses recognised in prior years or periods are assessed at each reporting date for any indications that

78 76 STRATA-X ENERGY the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation or amortisation, if no impairment loss had been recognised. g) Decommissioning Provisions Decommissioning provisions are recognised for decommissioning and restoration obligations associated with the Company s exploration and evaluation assets and property and equipment. The best estimate of the expenditure required to settle the present obligation at the balance sheet date is recorded on a discounted basis using a determined pre-tax risk-free interest rate. The future cash flow estimates are adjusted to reflect the risks specific to the liability. The value of the obligation is added to the carrying amount of the associated exploration and evaluation or property and equipment asset and is depleted or amortised over the useful life of the asset. The provision is accreted over time through charges to profit or loss with actual expenses charged against the accumulated liability. Changes in the future undiscounted cash flows or the discount rate are recognised as changes in the decommissioning provision and related asset. Actual decommissioning expenditures incurred up to the amount of the recorded liability are charged against the liability provision as the costs are incurred. Any differences between the recorded liability provision and the actual costs incurred are recorded as a gain or loss. h) Foreign Currency Transactions Transactions in foreign currencies are translated to the functional and presentation currenciesof the Company, United States dollars, at exchange rates at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. i) Stock-Based Compensation Plan The Company has a Stock Option Plan and stock options granted to directors, officers, employees and consultants of the Company are accounted for using the fair value method under which compensation expense is recorded based on the estimated fair value of the options at the grant date using the Black-Sholes option pricing model. Each tranche in an award is considered a separate award with its own vesting period and grant date fair value. Compensation cost is expensed over the vesting period with a corresponding increase in contributed surplus. When stock options are exercised, the cash proceeds along with the amount previously recorded in the share-based payments reserve are recorded as share capital. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest. j) Jointly Controlled Assets A portion of the Company s exploration and development activities is conducted jointly with others. Accordingly, these financial statements reflect only the Company s proportionate interest in such activities, including the Company s share of these jointly controlled assets and the relevant revenue and related costs. k) Revenue Recognition Revenue from the sale of oil and gas is recognised when title passes to an external party and is based on volumes delivered to customers at contractual delivery points and rates. The costs associated with the delivery, including operating and maintenance costs, transportation and production-based royalty expenses, are recognised during the same period in which the related revenue is earned and recorded. l) Equity Instruments The Company s common shares, finders warrants and stock options are classified as equity instruments. Incremental costs directly attributable to the issue of common shares are recognised as a deduction from equity, net of any tax effects. m) Financial Instruments Classification and Measurement Financial instruments are measured at fair value on initial recognition of the instrument. Measurement in subsequent periods depends on whether the financial instrument has been classified as fair value through the statement of profit or loss, loans and receivables, available-forsale, held-to-maturity, or financial liabilities measured at amortised cost as defined in IAS 39, Financial Instruments: Recognition and Measurement. Financial assets and financial liabilities at fair value through the statement of profit or loss are either classified as held for trading or designated at fair value through the statement of profit or loss and are measured at fair value with changes in fair value recognised in profit or loss. Transaction costs are expensed when incurred. The Company has designated cash and cash equivalents and investments as designated at fair value through the statement of profit or loss. Financial assets and financial liabilities classified as loans and receivables, held-to-maturity, or financial liabilities measured at amortised cost are measured at amortised cost using the effective interest method of amortisation subsequent to initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Heldto-maturity financial assets are non-derivative investments that an entity has the positive intention and ability to hold to maturity. Financial liabilities measured at amortised cost are those financial liabilities that are not designated as fair value through the statement of profit or loss and that are not derivatives. The Company has designated accounts receivable and subscription receivable as loans

79 PROSPECTUS and receivables and accounts payable, accrued liabilities, convertible debentures and amounts due to shareholders as financial liabilities measured at amortised cost. Financial assets classified as available-for-sale are measured at fair value, with changes in fair value recognised in other comprehensive income. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Derivative Financial Liabilities Derivative instruments, including embedded derivatives, are recorded at their fair value on the date the derivative contract is entered into. They are subsequently re-measured at their fair value at each statement of financial position date, and the changes in the fair value are recognised in profit or loss. Fair values for derivative instruments are determined using valuation techniques, with assumptions based on market conditions existing at the consolidated statement of financial position date. Warrants denominated in a foreign currency different from the functional currency of the Company meet the definition of a derivative financial liability and are fair valued at each statement of financial position date using the Black-Scholes option pricing model, with changes in the fair value recognised in profit or loss. Impairment The Company assesses at each balance date whether there is objective evidence that financial assets, other than those designated as fair value through the statement of profit or loss are impaired. When impairment has occurred, the cumulative loss is recognised in the profit or loss. For financial assets carried at amortised costs, the amount of the impairment loss recognised is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate. When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to the profit or loss in the period. n) Income Taxes Income tax expense comprises current and deferred tax. Income tax expense is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences and carry-forward of unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences and carry-forward of unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised on the initial recognition of assets or liabilities in a transaction that is not a business combination. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. o) Contributed Surplus Contributed surplus consists of amounts contributed by the former parent of Strata-X, Inc. over a period of years to fund exploration and development activities. The contribution was considered to be a net investment in Strata-X, Inc. and classified as equity. Note 2 Share Capital Reverse Acquisition Transaction and Recapitalisation of Share Capital On 22 September 2011, the Company completed a qualifying transaction pursuant to the policies of the TSX Venture Exchange in Canada. Pursuant to the transaction the Company entered into a share exchange agreement with Strata-X, Inc., acquiring all of the 14,985,000 issued and outstanding common shares of Strata-X, Inc. in exchange for the issuance of 19,980,000 units of the Company, with each unit representing one common share and one-half of a common share purchase warrant, each whole warrant entitling the holder to acquire one share of common stock of the Company at C$0.50 per share for a period of 18 months from the date of the transaction. As a result of the qualifying transaction, Strata-X, Inc. became a wholly-owned subsidiary of the Company from a legal standpoint. As the Company was deemed a non-operating public enterprise, the transaction has been accounted for as a share capital transaction in accordance with IFRS. From an accounting standpoint, under guidance provided by IFRS 3, Business Combinations, Strata-X, Inc. was identified as the acquirer in the transaction, and the transaction was considered a reverse acquisition for accounting purposes under IFRS, but was not considered a business combination of the two entities based on

80 78 STRATA-X ENERGY further guidance from IFRS 3. As such, the acquisition was accounted for under guidance provided by IFRS 2, Share-based Payment, resulting in the acquisition of the net assets of the Company by Strata-X, Inc. at fair value, measured as of the date of the transaction and discussed further in the following paragraph, and a recapitalisation of the share capital of Strata-X, Inc. to reflect the share capital structure of Strata-X Energy Ltd. as at 22 September Since the value attributed to the Company was in excess of the net assets received by Strata-X, Inc. for accounting purposes, IFRS 2 would indicate the difference be recognised as a transaction cost in the profit or loss. As the qualifying transaction was a reverse acquisition for accounting purposes, the acquisition date fair value of the consideration transferred by Strata-X Inc. for its interest in Strata-X Energy Ltd is based on the number of equity interests Strata-X Inc. would have had to issue to give the owners of Strata X Energy Ltd the same percentage equity interest in the combined entity that results from the reverse acquisition. The fair value of the number of equity interest calculated in that way can be used as the fair value of consideration transferred. As Strata-X Inc. was a private company, its fair value was not reliably determinable. Therefore the fair value was based on the fair value of the common share issued by Strata-X Energy Ltd in the private placement closed in conjunction with the reverse acquisition, and the number of share held by the original Strata-X Energy Ltd shareholders. The fair value of the purchase consideration was estimated to be US$2,500,000 based on 10,000,000 common shares at a fair value of US$0.25 per share. The total purchase consideration has been allocated to the common shares (US$2,114,150) and warrants (US$385,850). Based on the statement of financial position of Strata-X Energy Ltd. at the time of the reverse acquisition, the net assets that were acquired were US$387,266 and resulting transaction costs charged to the profit or loss for the Company are as follows: US$ Consideration 2,500,000 Less: Net assets required 387,266 Transaction costs 2,112,734 Common Stock Offerings In connection with the qualifying transaction noted above, the Company completed a private placement of common stock and stock purchase warrants effective 22 September The Company issued 12,328,156 units at a price of C$0.30 per unit for total gross proceeds of US$3,591,933 as of the effective date of the placement. Each unit is comprised of one common share and one-half of a common share purchase warrant, with one warrant exercisable at C$0.50 per share to acquire one common share of the Company until 22 March 2013, at which time the warrants expire. The gross proceeds of US$3,037,555 and US$554,378 have been allocated to the common shares and warrants, respectively. Share issuance costs of US$288,895 and US$51,056 have also been allocated to the common shares and warrants, respectively. Warrants were valued using the Black Scholes option pricing model. The warrants have been classified as a derivative financial liability since the exercise price is fixed in Canadian dollars and the functional currency is US dollars. In addition, finders warrants with a fair value of US$53,704 have been recorded as share issuance costs under warrant reserve in the equity section of the Company. As at 29 June 2012, the Company completed a private placement of common stock, stock purchase warrants and convertible debentures (the debentures ). The Company issued 2,075,000 units at a price of C$0.25 per unit with each unit being comprised of one common share and onehalf of a common share purchase warrant, with one warrant exercisable at C$0.60 per share to acquire one common share of the Company until 29 June 2014, at which time the warrants expire. The gross proceeds of US$449,342 and US$58,099 have been allocated to the common shares and warrants, respectively. Share issuance costs of US$45,584 and US$5,792 have also been allocated to the common shares and warrants, respectively. Warrants were valued using the Black Scholes option pricing model. The warrants have been classified as a derivative financial liability since the exercise price of the warrants is fixed in Canadian dollars and the functional currency is US dollars. In addition, finders warrants with a fair value of US$146,750 have been recorded as share issuance costs under warrant reserve in the equity section of the Company. As part of the private placement, C$3,030,000 in unsecured debentures were issued bearing interest at 5% per annum, compounded semi-annually. The debentures mature on 29 June 2013 and are convertible into units at the earlier of the maturity date or the approval by the board of directors of the listing of shares of the Company on the Australian Securities Exchange. The debentures convert on the basis of one unit for each C$0.25 of the principal amount of debenture and accrued interest. Each unit issued upon conversion is comprised of one common share and one-half of a common share purchase warrant, with one warrant exercisable at C$0.50 per share to acquire one common share of the Company until 29 June 2014, at which time the warrants expire. Since the convertible debentures are denominated in Canadian currency which is different from the functional currency of the Company, the conversion feature of a foreign currency convertible debenture is a derivative financial liability. The derivative financial liability is measured using the Black-Scholes model and the residual value is allocated to the convertible debentures. The derivative financial liability is subsequently accounted for at fair value through profit or loss. Note 3 Pro-Forma Adjustments The following conversion rates were obtained as at 30 June 2012 and have been utilised to present the pro-forma adjustments initially in the functional currency, which is

81 PROSPECTUS the U.S. dollar, and subsequently in Australian dollars. One Canadian dollar is assumed to equal U.S. dollars. One U.S. dollar is assumed to equal Australian dollars. The pro-forma statement of financial position has been prepared to illustrate the effects of the Offer and the other transactions as described below. The pro-forma impact of the Offer has been reflected under two scenarios, one reflecting an offering of 33,333,333 CDIs (Minimum Subscription) and a second scenario reflecting an offering of 66,666,666 CDIs (Maximum Subscription). The proforma statement of financial position of the Company assumes the completion of the Offer as reflected under both scenarios and is based on the assumption that the following transactions and events contemplated in the Prospectus, referred to as the pro-forma adjustments, which are to take place on or before the completion of the Offer as if they had occurred on or before 30 June 2012: Private Placement Offerings The issue of 300,000 units in a private placement dated 13 July 2012 as an extension of the initial private placement dated 29 June 2012 with each unit issued at a price of C$0.25 per unit and consisting of one common share of stock and one-half of a common share purchase warrant. Total consideration for the placement was A$71,664 (C$ 75,000). A whole purchase warrant will entitle the holder to purchase one common share at A$0.58 (C$0.60) per share for a period of two years from the date of the closing of the private placement. An amount of A$7,587 has been classified as a derivative warrant liability since the exercise price is fixed in Canadian dollars and the functional currency is US dollars. As at 13 July 2012, the issue of convertible debenture notes for total consideration of A$191,104 (C$200,000). The notes are convertible into units at A$0.24 (C$0.25) with each unit representing one common share of stock and one-half of a common share purchase warrant. A whole purchase warrant will entitle the holder to purchase one common share at A$0.48 (C$0.50) per share for a period of two years from the date of closing of the private placement. The debentures mature on 13 July 2013 and are convertible into units at the earlier of the maturity date or immediately prior to the lodgement of the Prospectus with ASIC. Since the convertible debenture is denominated in Canadian currency which is different from the functional currency of the Company, the conversion feature of the foreign currency convertible debentures is considered a derivative financial liability. An amount of A$14,016 has been recorded as a derivative liability related to the value of the conversion feature. Subscription amounts receivable related to the private placement dated 29 June 2012 were included in the audited consolidated historical financial statements as at 30 June 2012 and are reflected as collected with the pro-forma adjustments. The issue of convertible debenture notes in a private placement dated 30 October 2012 for total gross proceeds of A$3,995,034 (C$4,181,000). The notes are convertible into units at A$0.24 (C$0.25) with each unit representing one common share of stock and one-half of a common share purchase warrant. A whole purchase warrant will entitle the holder to purchase one common share at A$0.48 (C$0.50) per share for a period of four years from the date of closing of the private placement. The debentures mature on 30 October 2014 and are convertible into units at the earlier of the maturity date or the approval by the Board of Directors of the listing of shares by the Company on the Australian Securities Exchange. Since the convertible debentures are denominated in Canadian currency which is different from the functional currency of the Company, the conversion feature of the foreign currency convertible debentures is considered a derivative financial liability. An amount of A$673,975 has been recorded as a derivative liability related to the value of the conversion feature. Placement fees of A$186,326 (C$195,000) are netted from the gross proceeds with A$152,884 (C$160,000) expensed in general and administrative expenses and A$33,442 (C$35,000) allocated to the derivative financial liability. The issue of 1,255,600 units in a private placement dated 31 October 2012 as an extension of the initial private placement dated 30 October 2012 with each unit issued at a price of A$0.24 (C$0.25) per unit and consisting of one common share of stock and one-half of a common share purchase warrant. Total consideration for the placement was A$299,938 (C$313,900). A whole purchase warrant will entitle the holder to purchase one common share at A$0.48 (C$0.50) per share for a period of four years from the date of the closing of the private placement. An amount of A$109,758 has been classified as a derivative warrant liability since the exercise price is fixed in Canadian dollars and the functional currency is US dollars. Acquisition of Development Interests The purchase of 660 acres and the acquisition of the option to acquire a 75% working interest in approximately 21,000 net acres for exploration and development of shale oil in Texas in the United States. Total consideration per the agreement is A$2,317,404 inclusive of certain expenditures incurred by the seller. A$716,641 of the purchase price is paid through the issuance of 3 million common shares of the Company at a deemed price of A$0.24 (C$0.25) per share. The subsequent conversion of options to acquire full exploration leases covering 8,846 net acres in the shale oil development located in Texas in the United States. Total consideration for this transaction is A$2,926,216 (US$2,995,566). The exercise of an extension of a previously executed agreement to acquire options to develop certain

82 80 STRATA-X ENERGY mineral interests located in North Dakota. The extension agreement calls for the issuance of stock of the Company in an aggregate value of $A95,141 on or before July 31, ,349 common shares of stock were issued at a deemed value of A$0.198 (C$0.206) per share. The acquisition of lease rights to approximately 45,000 gross acres located in the Illinois Basin in the United States and costs related to exploration and evaluation activity on other proprties. The total cost of the acquisition of the rights and other E&E costs is estimated to be A$1,074,534 (US$1,100,000). Proceeds from Borrowings Related Party The utilisation of funds as at 30 November 2012 provided through a loan agreement with Prepet Pty Ltd. ATF The Jarat Trust, a company owned and controlled by the Chairman of the Company, providing a total loan facility of up to A$2,000,000. Outstanding amounts bear interest at 6.5% per annum payable when the principle is payable under the agreement, with any outstanding amounts due on the earlier of 9 November 2014 or ten business days following the listing of the Company s stock on the ASX. Outstanding amounts drawn under the loan agreement are secured by substantially all of the assets of the Company. The entire loan balance of A$2,000,000 (US$2,047,399) was utilised to partially fund the acquisition of leases in the shale oil development in Texas in the United States. Accrued interest of A$27,123 (US$27,768) as calculated for the period from 30 November 2012 to 15 February 2013 is reflected as an increase to accounts payable and accrued liabilities. Capital Raising The issue of 33,333,333 CDIs at A$0.30 amounting to A$10,000,000 pursuant to the Minimum Subscription scenario of the Offer. The Maximum Subscription scenario of the Offer reflects the issue of 66,666,666 shares at A$0.30 amounting to approximately A$20,000,000. Expenses associated with the offer (including advisory, legal, accounting and administrative fees as well as printing, advertising, broker commissions and other expenses, but excluding warrants issued to Joint Lead Managers) estimated to be A$1,291,700 under the Minimum Subscription scenario of the Offer based on 33,333,333 CDIs issued and A$1,940,700 under the Maximum Subscription scenario of the Offer based on 66,666,666 CDIs issued. The expenses have been charged against share capital in both cases. Conversion of Convertible Debentures Issued in Private Placements The conversion of the outstanding convertible debentures originally issued pursuant to the private placements dated 29 June 2012, 13 July 2012 and 30 October A total of 29,644,000 units are issued on conversion of the debentures, with each unit comprising one common share of stock and one-half of a common share purchase warrant. A total amount of A$7,176,381 (US$7,346,459) representing the recorded value of the outstanding convertible debentures and the related fair value of the derivative financial liability is reclassified. An amount of A$1,281,950 (C$1,341,623) has been classified as a derivative warrant liability since the exercise price of the share purchase warrants is fixed in Canadian dollars and the functional currency is US dollars. The remaining balance was reclassified to share capital. Refer to Issuance of Share Purchase Warrants for further details. Issuance of Share Based Compensation As at 25 September 2012, the issuance of 1,000,000 stock options to certain of its officers, directors and consultants to acquire up to 1,000,000 common shares of the Company. Each stock option is exercisable at A$0.32 (C$0.34) per share. The options vest immediately and expire on 22 September The fair value of the stock options of A$279,012 (C$292,000) is measured using the Black-Scholes model and is expensed in general and administrative costs and included as a component of share based compensation reserve in equity. Issuance of Share Purchase Warrants The issuance of 200,000 finder common share purchase warrants to consultants to the Company for services related to permitting and exploration activities on property in western Australia. Each finder warrant is exercisable at A$0.32 (C$0.34) per share for a period of three years from the date of issuance. The fair value of the share purchase warrants of A$37,456 (C$39,200) is measured using the Black-Scholes model and is expensed in production and exploration costs and included as a component of warrant reserve in equity. An additional 3,500 finder common share purchase warrants were issued related to the 31 October 2012 private placement, with each warrant exercisable at A$0.48 (C$0.50) per share for a period of four years from the date of issuance. The issuance of 14,822,000 common share purchase warrants on the conversion of the outstanding convertible debentures at the date of admission to the ASX. Each warrant is exercisable at A$0.48 (C$0.50) per share and expire at dates between 29 June 2014 to 30 October The collective fair value of the share purchase warrants of A$1,281,950 (C$1,341,623) is measured using the Black-Scholes model and is recorded as a derivative warrant liability since the exercise price is fixed in Canadian dollars and the functional currency is US dollars. The issuance of finder common share purchase warrants to the joint lead managers of the Offer

83 PROSPECTUS transaction related to services of arranging and managing the Offer. An amount of 1,000,000 share purchase warrants are reflected pursuant to the minimum subscription scenario of the Offer and an amount of 2,000,000 share purchase warrants are reflected pursuant to the maximum subscription scenario of the Offer. Each finder warrant is exercisable at A$0.34 (C$0.36) per share for a period of three years from the date of issuance. The fair value of the share purchase warrants of A$20,000 and A$40,000 under the minimum subscription and maximum subscription scenario, respectively, is included as a component of offer costs deducted from share capital and is included as a component of warrant reserve in equity. Exercise of Stock Options The exercise of 1,087,500 stock options resulting in proceeds of A$103,913 (C$108,750). Derivative Financial Liability and Derivative Warrants Valuation adjustment of an increase of A$128,454 (US$131,500) to the derivative financial liability representing the equity conversion feature on placements of convertible debentures denominated in Canadian dollars to reflect the balance of the derivative financial liability at fair value. Valuation adjustment of a decrease of A$295,498 (US$302,500) to the derivative warrants representing the value of stock purchase warrants on private placements of units denominated in Canadian dollars to reflect the balance of the derivative warrants at fair value. Decrease of Accounts Payable and Accrued Liabilities Adjustment to the balance of accounts payable and accrued liabilities of A$586,109 (US$600,000) to reflect a net reduction to accounts payable 30 June Note 4 Cash and Cash Equivalents The pro-forma cash position has been calculated as follows: Pro-forma based on offer of Minimum Subscription US$ Pro-forma based on offer of Maximum Subscription US$ Pro-forma based on offer of Minimum Subscription A$ Pro-forma based on offer of Maximum Subscription A$ Cash and cash equivalents at 30 June ,283,006 2,283,006 2,230,152 2,230,152 Pro-forma transactions: Proceeds from receipt of subscription amounts 1,120,001 1,120,001 1,094,072 1,094,072 due from 29 June 2012 private placement of convertible debentures Proceeds from units and convertible debentures 268, , , ,768 issued through private placement on 13 July 2012 Execution of purchase and sale agreement for (1,638,700) (1,638,700) (1,600,762) (1,600,762) acquisition of shale oil development interests in United States Proceeds from borrowings related party 2,047,399 2,047,399 2,000,000 2,000,000 Acquisition of full operating leases in shale oil (2,995,566) (2,995,566) (2,926,216) (2,926,216) development interests in United States Purchase of additional development interests (1,100,000) (1,100,000) (1,074,534) (1,074,534) in Illinois Basin located in the United States and costs related to other development interests Exercise of stock options 106, , , ,913 Proceeds from private placement of convertible 3,898,974 3,898,974 3,808,708 3,808,708 debentures on 30 October 2012, net of placement fees Proceeds from private placement of units on 307, , , , October 2012 Paydown of existing trade payables (600,000) (600,000) (586,109) (586,109) Pro-forma cash prior to the offer 3,697,533 3,697,533 3,611,930 3,611,930 Proceeds from share issue 10,236,996 20,473,993 10,000,000 20,000,000 Payment of the offer costs (1,322,314) (1,986,694) (1,291,700) (1,940,700) Pro-forma cash and cash equivalents 12,612,215 22,184,832 12,320,230 21,671,230

84 82 STRATA-X ENERGY Note 5 Exploration and Evaluation Assets The pro-forma exploration and evaluation asset balance has been calculated as follows: Pro-forma US$ Pro-forma A$ Exploration and evaluation assets at 30 June ,481,188 3,400,595 Pro-forma transactions: Acquisition of shale oil development interests in United States 2,372,325 2,317,404 Acquisition of full operating leases in shale oil development 2,995,566 2,926,216 interests in United States Acquisition of additional development interests in Illinois Basin 1,100,000 1,074,534 located in United States and interests related to other properties Extension of purchase and sale agreement for options to 97,396 95,141 development interests in North Dakota in the United States Pro-forma exploration and evaluation assets 10,046,475 9,813,890 Note 6 Accounts Payable and Accrued Liabilities Pro-forma US$ Pro-forma A$ Accounts payable and accrued liabilities at 30 June ,347,644 1,316,445 Pro-forma transactions: Paydown of existing trade payables (600,000) (586,109) Accrued interest on borrowings related party 27,768 27,123 Pro-forma accounts payable and accrued liabilities 775, ,459 Disclosed as: Current liabilities 763, ,737 Non-current liabilities 12,000 11, , ,459 Note 7 Convertible Debentures The pro-forma amount of convertible debentures has been calculated as follows: Pro-forma US$ Pro-forma A$ Convertible debentures at 30 June ,705,442 2,642,808 Pro-forma transactions: Convertible debentures issued through private placement 181, ,088 on 13 July 2012 Private placement of convertible debentures on 30 October ,399,768 3,321,060 Pro-forma convertible debentures prior to offer 6,286,495 6,140,956 Conversion of convertible debentures to share capital and (6,286,495) (6,140,956) warrants Pro-forma convertible debentures - -

85 PROSPECTUS Note 8 Derivative Financial Liability The pro-forma amounts of the derivative financial liability have been calculated as follows: Pro-forma US$ Pro-forma A$ Derivative financial liability at 30 June , ,422 Pro-forma transactions: Derivative financial liability related to conversion feature of 14,348 14,016 convertible debentures issued on 13 July 2012 Derivative financial liability related to conversion feature of 655, ,533 convertible debentures issued on 30 October 2012, net of allocated placement fees Fair value adjustment for derivative financial liability 131, ,454 Pro-forma derivative financial liability prior to offer 1,059,964 1,035,425 Conversion of convertible debentures and related derivative (1,059,964) (1,035,425) financial liability to share capital and warrants Pro-forma derivative financial liability - - Note 9 Share Warrants The pro-forma amounts of derivative warrants and warrant reserve and the number of share warrants outstanding has been calculated as follows: Pro-forma US$ Pro-forma A$ Derivative warrants at 30 June , ,766 Pro-forma transactions: Warrants issued through private placement on 13 July ,767 7,587 Warrants issued through private placement on 31 October , ,758 Fair value adjustment to balance of derivative warrants (302,500) (295,498) Pro-forma derivative warrants prior to offer 373, ,613 Warrants issued on conversion of convertible debentures 1,312,331 1,281,950 Pro-forma derivative warrants 1,685,586 1,646,563 Disclosed as: Current liabilities 188, ,962 Non-current liabilities 1,497,264 1,462,601 1,685,586 1,646,563 Pro-forma based on offer of Minimum Subscription US$ Pro-forma based on offer of Maximum Subscription US$ Pro-forma based on offer of Minimum Subscription A$ Pro-forma based on offer of Maximum Subscription A$ Warrant reserve at 30 June , , , ,731 Pro-forma transactions: Finder warrants issued to outside consultants 38,344 38,344 37,456 37,456 Pro-forma warrant reserve prior to Offer 624, , , ,187 Finder warrants issued to Joint Lead Managers 20,474 40,948 20,000 40,000 Pro-forma warrant reserve 645, , , ,187

86 84 STRATA-X ENERGY Pro-forma no. of warrants based on offer of Minimum Subscription Pro-forma no. of warrants based on offer of Maximum Subscription Number of share warrants at 30 June ,568,231 19,568,231 Pro-forma transactions: Warrants issued through private placement on 13 July , ,000 Warrants issued through private placement on 31 October , ,800 Finders warrants issued to outside consultants 200, ,000 Finders warrants issued on 31 October ,500 3,500 Pro-forma number of warrants issued prior to offer 20,549,531 20,549,531 Finder warrants issued to Joint Lead Managers 1,000,000 2,000,000 Warrants issued on conversion of convertible debentures (1) 14,822,000 14,822,000 Pro-forma number of warrants 36,371,531 37,371,531 (1) Comprising 6,460,000 Warrants on lodgement of the Prospectus with ASIC and 8,362,000 Warrants on ASX admission. Note 10 Share Capital The pro-forma share capital has been calculated as follows: Pro-forma based on offer of Minimum Subscription US$ Pro-forma based on offer of Maximum Subscription US$ Pro-forma based on offer of Minimum Subscription A$ Pro-forma based on offer of Maximum Subscription A$ Share capital at 30 June ,893,217 7,893,217 7,710,481 7,710,481 Pro-forma transactions: Execution of purchase and sale agreement for 733, , , ,642 acquisition of shale oil development interests in Texas in United States Execution of amendment to purchase and 97,396 97,396 95,141 95,141 sale agreement for options to development interests in North Dakota in United States Share capital issued through private placement 65,596 65,596 64,077 64,077 on 13 July 2012 Share capital from exercise of stock options 106, , , ,913 Share capital issued through private placement 194, , , ,180 on 31 October 2012 Pro-forma share capital prior to offer 9,090,899 9,090,899 8,880,434 8,880,434 Share capital issued on conversion of convertible 6,034,128 6,034,128 5,894,431 5,894,431 debentures Proceeds from share issue 10,236,996 20,473,993 10,000,000 20,000,000 Finder warrants issued to Joint Lead Managers (20,474) (40,948) (20,000) (40,000) of the Offer Payment of the offer costs (excluding finder (1,322,314) (1,986,694) (1,291,700) (1,940,700) warrants) Pro-forma share capital 24,019,235 33,571,378 23,463,165 32,794,165

87 PROSPECTUS Pro-forma no. of shares based on offer of Minimum Subscription Pro-forma no. of shares based on offer of Maximum Subscription Number of shares issued at 30 June ,690,656 44,690,656 Pro-forma transactions: Shares issued pursuant to execution of purchase and sale 3,000,000 3,000,000 agreement for acquistion of shale oil development interests in United States Shares issued pursuant to execution of amendment to purchase and 483, ,349 sale agreement for options to develop interests in United States Shares issued through private placement on 13 July , ,000 Shares issued from exercise of stock options 1,087,500 1,087,500 Shares issued through private placement on 31 October ,255,600 1,255,600 Pro-forma number of shares prior to the Offer 50,817,105 50,817,105 Shares issued upon conversion of convertible debentures (1) 29,644,000 29,644,000 Shares issued in share offer 33,333,333 66,666,666 Pro-forma number of shares 113,794, ,127,771 (1) Comprising 12,920,000 Shares on lodgement of the Prospectus with ASIC and 16,724,000 Shares on ASX admission.

88 86 STRATA-X ENERGY Independent accountant s report

89 PROSPECTUS December 2012 The Directors Strata-X Energy Limited 225 Union Blvd Suite 450 Lakewood CO Dear Sirs, INDEPENDENT ACCOUNTANT S REPORT ON HISTORICAL AND PRO-FORMA FINANCIAL INFORMATION 1. Introduction 1.1 We have reviewed the historical and pro-forma financial information of Strata-X Energy Limited ( Strata-X or the Company ) as at 30 June 2011 and 2012 for inclusion in the Prospectus to be dated on or about 21 December The Prospectus seeks to raise A$10,000,000 (minimum subscription) before the expenses of the offer through the issue of 33,333,333 CHESS Depositary Interests ( CDIs ) representing 33,333,333 shares at A$0.30 (30 cents) per share ( the Offer ). Oversubscriptions of up to a further 33,333,333 CDIs to be offered for subscription at A$0.30 each to raise up to a further A$10,000,000 may be accepted. 1.3 Expressions and terms defined in the Prospectus have the same meaning in this report. 2. Background Information 2.1 The Company is a TSX-Venture Exchange ( TSX-V ) listed oil and gas exploration company. The Company was incorporated on 18 June 2007 and on 3 December 2010 was admitted to trading on TSX-V under the name of Ozcapital Ventures Inc, a capital pool corporation. Ozcapital Ventures Inc. had no commercial operations with a primary business purpose of identification and evaluation of businesses suitable for a qualifying transaction. 2.2 Ozcapital Ventures Inc. completed a qualifying transaction effective 22 September 2011, acquiring all the issued common shares of Strata-X Inc., a company incorporated in the United States whose business activities are directed primarily towards acquisition, exploration and development of oil and gas properties in the states of Texas, California, North Dakota and Colorado within the United States. Concurrent with this qualifying transaction, Ozcapital Ventures Inc. changed its name to Strata-X Ltd, and subsequently to Strata- X Energy Ltd. 2.3 The qualifying transaction was considered a reverse acquisition for accounting purposes with Strata-X Inc. identified as the accounting acquirer. As such, the consolidated financial statements as at 30 June 2012 and for the year then ended include the results of Strata-X Inc. during the period along with the results of Strata-X Energy Ltd from the date of acquisition on 22 September 2011 through to 30 June On 21 November 2011, the Company incorporated a wholly owned Australian subsidiary, Strata-X Australia Pty Ltd, for the purpose of facilitating development of certain projects in Western Australia. 2.5 At the completion of the Offer, the Company will be listed on both the ASX and the TSX-V.

90 88 STRATA-X ENERGY 2 3. Scope 3.1 Pitcher Partners has been requested to review the following financial information included in the Prospectus: Historical financial information comprising the audited Statements of Financial Position as at 30 June 2011 and 2012, as detailed in Section 8, with the applicable financial reporting framework used in its preparation, being the recognition and measurement principles contained in Australian Accounting Standards and the accounting policies adopted by the Company; and Pro-Forma financial information comprising the Pro-Forma Statements of Financial Position of the Company, as detailed in Section 8, reflecting the historical financial position as at 30 June 2012 adjusted for the pro-forma adjustments, as detailed in Section 8 Note 3. The stated basis of preparation of the pro-forma financial information is the recognition and measurement principles contained in Australian Accounting Standards applied to the historical financial information, the accounting policies adopted by the Company and pro-forma adjustments, as described in Section 8 Note 3 of the Prospectus, as if those adjustments had occurred as at the date of the historical financial information. Due to its nature, the pro-forma financial information does not represent the company s actual financial position. 3.2 The historical financial information set out in Section 8 of the Prospectus has been extracted from the audited financial reports of Strata-X Inc. as at 30 June 2011 and the Company as at 30 June 2012, which were audited by Collins Barrow Edmonton LLP in accordance with Canadian generally accepted auditing standards. Collins Barrow Edmonton LLP issued an unmodified audit opinion on the 30 June 2011 financial report and an unmodified audit opinion (with emphasis of matter regarding going concern) on the 30 June 2012 financial report. 3.3 The historical financial information is presented in the prospectus in an abbreviated form, insofar as it does not include all the disclosures required by Australian Accounting Standards applicable to year-end financial reports prepared in accordance with the Corporations Act This report does not address the rights attaching to the CDIs to be issued in accordance with the Prospectus, the risks associated with the investment, nor form the basis of an expert s opinion with respect to a valuation of the Company or a valuation of the CDI issue price of A$0.30 each. 3.5 Pitcher Partners has not been requested to consider the prospects for the Company, the shares on offer and related pricing issues, nor the merits and risks associated with becoming a shareholder and accordingly have not done so, nor purports to do so. Pitcher Partners accordingly takes no responsibility for those matters nor for any matter or omission in the Prospectus, other than responsibility for this report. Risk factors are set out in the Section 5 of the Prospectus. 4. Directors Responsibility 4.1 The directors of the Company are responsible for the preparation of the historical and pro-forma financial information, including a determination of the pro-forma adjustments made to the historical financial information. This responsibility includes establishing and maintaining internal control relevant to the preparation of the historical and pro-forma financial information that is free from material misstatement, whether due to fraud or error.

91 PROSPECTUS Our Responsibility 5.1 Historical Financial Information Our responsibility is to express a conclusion on the historical financial information based on our review. We have conducted our engagement in accordance with the applicable Australian Standards on Assurance Engagements in order to state whether, on the basis of the procedures described, anything has come to our attention that causes us to believe that the historical financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework, as described in the scope section of this report. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 5.2 Pro-forma Financial Information 6. Conclusion Our responsibility is to express a conclusion on the pro-forma financial information based on our review. We have conducted our engagement in accordance with the applicable Australian Standards on Assurance Engagements in order to state whether, on the basis of the procedures described, anything has come to our attention that causes us to believe that the pro-forma financial information is not prepared, in all material respects, in accordance with the stated basis of preparation, as described in the scope section of this report. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 6.1 Historical Financial Information Based on our review, which is not an audit, nothing has come to our attention which would cause us to believe the historical financial information as at 30 June 2011 and 2012, as set out in Section 8 of the Prospectus, is not presented fairly, in all material respects, in accordance with the applicable accounting framework, as described in the scope section of this report. 6.2 Pro-Forma Financial Information Based on our review, which is not an audit, nothing has come to our attention which would cause us to believe the pro-forma financial information as at 30 June 2012, as set out in Section 8 of the Prospectus, is not presented fairly, in all material respects, in accordance with the stated basis of preparation as described in the scope section of this report.

92 90 STRATA-X ENERGY 4 7. Subsequent Events 7.1 Apart from the matters dealt with in this report, and having regard to the scope of our report, to the best of our knowledge and belief no material transactions or events outside of the ordinary business of the Company have come to our attention that would require comment on, or adjustment to, the historical and pro-forma financial information referred to in our report or that would cause such financial information to be misleading or deceptive. 8. General Advice Warning 8.1 This report has been prepared, and included in the Prospectus, to provide investors with general information only and does not take into account the objectives, financial situation or needs of any specific investor. It is not intended to take the place of professional advice and investors should not make specific investment decisions in reliance on the information contained in this report. Before acting or relying on any information, an investor should consider whether it is appropriate for their circumstances having regard to their objectives, financial situation or needs. 9. Declarations 9.1 Pitcher Partners does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in this matter. The partners of Pitcher Partners do not hold nor have any interest in any ordinary shares or options of the Company. 9.2 The Company has agreed to indemnify Pitcher Partners and its partners and staff from any claims arising out of any misstatement or omission in any material supplied by the Company. 9.3 Pitcher Partners has consented to the inclusion of this report in the Prospectus in the form and content in which it is included. At the date of this report, this consent has not been withdrawn. Yours faithfully J. J. EVANS PITCHER PARTNERS Partner Brisbane

93 PROSPECTUS

94 92 STRATA-X ENERGY Independent geologist s reports 0

95 PROSPECTUS Strata-X Energy Ltd Independent Expert Report Effective Date: 18 December 2012

96 94 STRATA-X ENERGY In the case of undiscovered resources or a subcategory of undiscovered resources, or disclosure of Prospective Resources: There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. Note that when referring to Prospective Resources they are as yet undiscovered. Note that with any resource volumes are stated in the report are on a before risk basis. For the various other smaller petroleum assets in the USA, a compliant report is used and referenced: Chapman Petroleum Engineering Ltd (2011): Reserve and Economic Evaluation and Resource Assessment, Oil and Gas Properties, California and North Dakota. Prepared for Ozcapital Ventures, Inc, January 1, All currency is quoted in Australian Dollars ($A). As the amounts quoted in this document are estimates, parity with US Dollars ($US) has been assumed.

97 PROSPECTUS INTRODUCTION On 7 August 2012, Strata-X Energy, Ltd ( Strata-X ) commissioned AWT International (AWT) to prepare an Independent Expert Report (IER) for inclusion in a prospectus for a Secondary Offering on the Australian Stock Exchange (ASX), creating a dual listing in Strata-X on both the Toronto Stock Exchange (TSX) and the ASX. The new shares are to be listed on the ASX. Strata-X requested that AWT provide an independent expert report (IER), relating to the petroleum exploration assets in the following large unconventional oil and gas projects and smaller conventional oil projects located in the United States of America (USA) and Australia: a) Vail Project (100% working interest), Illinois, USA b) Maverick Project (75-100% working interest) Maverick County, Texas, USA c) Sleeping Giant Project (100% working interest) North Dakota, USA d) Canning Basin Laurel Shale (100% working interest) Western Australia (WA), and e) Various other smaller petroleum assets in the USA. The report addresses the following topics: 1. The exploration plays including: a) Pertinent geology; b) Hydrocarbon Prospective Resources (as defined in Section 6); c) Hydrocarbon composition; d) Expected well production; and e) Analogues where applicable. 2. Government commitments (or similar); and 3. Work Program and budget and suitability to explore the plays. 1.1 Summary Strata-X operates and owns a 75% to 100% interest in four unconventional oil and gas projects located in the USA and WA (Figure 1). The company also participates in an Area of Mutual Interest (AMI) in the Gulf Coast Basin located in South Texas (Margarita Project), an AMI in the Vallecitos Trough in California (Vallecitos Project), and a shut-in oil field in the San Joaquin Basin, California (Eagle Oil Field). These projects are summarised below. The estimated Reserves and Prospective Resources are included in Table 1. The forward work program is outlined in Tables 2 and 3 respectively depending on the level of capital raising. The proposed 18 month program is projected to cost between A$7.2 and A$16.5 million, as summarised in Tables 4 and 5, depended upon the level of funds raised. This is to be covered by the current proposed capital raising of between A$10 million and A$20 million and the Strata-X current working capital. Reserves in this report were calculated by Chapman (2011 and 2012). Other resources were calculated by Strata-X, AWT, Wandoo and Chapman (2011) and have been reviewed and adopted by AWT. For definitions relating to Reserves and Resources, please refer to Section 6 which includes those used by Chapman in their 2011 and 2012 reports. This report has been prepared with effective date of 18 December 2012.

98 96 STRATA-X ENERGY In this report, to satisfy Canadian vernacular, the term net when applied to reserve or resource volumes or values exclusively means after royalty. The term gross working interest share or gross company share is used to refer to the company s entitlement before royalties. "After Royalty" includes both landowners royalty as well as any existing overriding royalty that might exist on the property. The reports by Chapman have used a 20% royalty in their calculation of net volumes for the Eagle Oil and Vallecitos properties Maverick Project (75%-100% working interest (small area at 15%)), USA The Maverick Project is located in the Maverick County within the Eagle Ford Shale play, Texas. The basin is a proven oil and gas province. Strata-X has approximately a net 44km 2 (10,945 acres) under lease. Within the leased acreage, the previous operator drilled a horizontal well which flowed at peak rates in excess of 200boepd. The well had issues, which Strata-X believes limited the well's performance. Strata-X has assumed operations in the majority of the project as of October 1, 2012 except the 2.7km 2 (660 acre) area where a 15% working interest was acquired. The Maverick Project has an estimated Prospective Resource of 34.0 million barrels of oil (mmbo) and 50Bcf of gas gross to Strata-X (Table 1). Gas can be taken to market through gas pipelines and oil will be trucked to market initially. Hydrocarbons have been discovered in Strata-X s area. The Maverick JV plans to initially drill, core and fracture stimulate a vertical control well and is planning to drill and test at least one horizontal well with multi-stage hydraulic fracture stimulations. This will allow the estimation of the likely initial flow rates, average economic ultimate recoveries per well and the oil and gas mix to help determine the commerciality of the project Vail Project (100% working interest), Illinois, USA The Vail Project is located in the mature Illinois Basin oil province. The exact location cannot be revealed at this time due to competitive reasons associated with leasing activity in the Vail Project area. Strata-X has a significant advantage by being a first mover on the project and disclosing its exact location would dilute Strata-X s competitive advantage. The play is located in the Illinois Basin, a proven oil basin which has historical oil production from conventional fields in excess of 4 billion barrels (Higley, et al., 2001). The target and extent of the Vail Project is derived from analysis of several oil fields that have been produced from historical vertical wells with conventional completions, as well as data from over 100 other wellbore penetrations by previous operators. It is interpreted that they are part of a large stratigraphic trap, making up a single giant oil pool estimated over an area of 1350km 2 (333,600 acres). It is Strata-X s intention to explore this oil accumulation using horizontal wells and multi-stage fracture stimulations. To date Strata-X has 184km 2 (45,400 acres) under lease and is in negotiations to lease an additional 20km 2 (5,000 acres). Strata-X is the operator of the Vail Project. Within Strata-X s current leasehold of 184km 2 (45,400 acres), there is an estimated Prospective Resource of 20.9mmbo. Strata-X is planning to drill and test two horizontal wells using multi-stage fracture stimulations located within the stratigraphic trap to estimate initial flow rates and ultimate economic recoveries per well to help determine the commerciality of the project.

99 PROSPECTUS Sleeping Giant Project (100% working interest), North Dakota, USA The Sleeping Project is located in the Williston Basin and is a shallow biogenic gas play in the Niobrara Chalk in North Dakota. It has an analogue in the Eastern Denver-Julesburg Basin, also in the Niobrara Formation which has produced about 1.5TCF of gas to date. In the Sleeping Giant area, there are good gas shows, including gas flows to surface from several historic wells that provide strong evidence that gas is generated and trapped. Strata-X has an option on 931km 2 (230,000 acres) gross, 708km 2 (175,000 acres) net under lease. The best estimate of Prospective Resource in the three primary prospects within the current 364km 2 (90,000 gross acres (73,000 net acres)) is 318Bcf. Additionally, Strata-X has 567km 2 (140,000 gross acres (102,000 net acres)) on prospects similar to the primary prospects. There is a large interstate gas pipeline that transects the project area with sufficient available capacity. Alternatively, in the short term, Strata-X is exploring the possibility of using natural gas to generate electricity in an expanding power market in North Dakota. It is likely that development of gas from this project will be delayed until gas prices in the USA recover and the timing of this is uncertain. Strata-X plans to drill and stimulate four pilot wells on the primary structures and test them for commercial flow rates. The exploration program will determine if gas is present, the ultimate average recovery per well and the trapping integrity of the project Canning Basin Laurel Shale (100% working interest), WA The Canning Basin Project is located in the Canning Basin in Western Australia and is very much an exploration play. Strata-X has recently acquired the hydrocarbon exploration permit STP-EPA-0048 through competitive bid. The permit covers an area of 5,820km 2 (1,438,120 acres). The primary target in this permit is an unconventional shale oil and gas play in the Laurel Formation. Secondary conventional targets could exist in the Grant Group and Anderson Formation, as well as in Devonian-aged carbonates. The Laurel Formation is known to contain good potential source rocks within the lower section with Total Organic Carbon (TOC) ranging from 0.5% to 3%. Hydrocarbon exploration in the Laurel Formation in its infancy and is currently being actively explored by a number of operators. A proposed Laurel Formation basin-centred play around the Valhalla discovery has recently been publically released by Buru Energy Limited (Buru). Due to the small number of wells drilled to date, the unconventional petroleum plays in the Canning Basin are not as well understood or known when compared to the USA examples in which thousands of wells have been drilled and long-term production has been established. Regardless, the presence of a few small oil and gas fields, including more recent larger potential discoveries is proof that a source rock exists and hydrocarbons have been generated. The Best Estimate of this Prospective Resource in the Strata-X permit area is in the order of 51 million barrels of oil and 277Bcf gas. Following studies and seismic acquisition, Strata-X plans to drill a vertical exploration well. This may be cored and samples taken to determine the shale gas/oil potential. The well may be hydraulically fracture stimulated if warranted.

100 98 STRATA-X ENERGY The early exploration program will determine if a shale oil/gas play is present, and/or the presence of a basin-centred gas play exists. Strata-X may also test one or two conventional structural traps later in the permit s six year initial term Vallecitos AMI (22.5% interest), California, USA Strata-X has a 22.5% interest in a study group which is focussed on certain areas in the Vallecitos Basin in California, described as an AMI (Area of Mutual Interest). Currently the AMI has leased approximately 85km 2 gross (21,000 acres), with approximately 19km 2 (4,725 acres) net to Strata-X. Included are the mature F & I oil field and several prospects and leads interpreted from a recent 3D seismic survey. The field and prospects are hosted by the Eocene Yokut, San Carlos and Domengine Sandstones of the prolific onshore San Joaquin Basin. Approximately 3.7mmbo (Gross to the 100% WI) have been produced from the F & I oil field since its discovery in the 1950s. A further 69,000 barrels, (gross to Strata-X) of 1P and 2P developed and undeveloped oil Reserves are estimated to remain in poorly drained pockets (Chapman, 2012). In addition, five prospects evaluated by Chapman are estimated to contain a Prospective Resource of approximately.929mmbo, before risk (Gross to Strata-X) (Chapman, 2011) Eagle Field (20% interest), California, USA Strata-X has an interest in a Joint Venture surrounding the Eagle Oil Field, which lies in the central San Joaquin Basin. The area is approximately 20km 2 (5,160 acres), with approximately 3.6km 2 (880 acres) net to Strata-X. Strata-X is operator of the project which includes the discovered and previously tested Eagle Oil Field. The field is contained in sandstones of the Eocene Gatchell Formation within the prolific onshore San Joaquin Basin. The pool is proven, having produced approximately 10,000 barrels of oil (Gross to the 100% WI) at a rate of up to 192bopd and 427mcfd gas during testing in the 1980s. There is an estimated 51,000 barrels (gross to Strata-X) of probable undeveloped reserves (Chapman, 2012). Current oil prices and improved drilling and completion techniques are expected to bring about renewed and commercial production of the field. The Joint Venture plans to drill the proposed Shannon-1 well to further appraise and develop the field. Two previous attempts to exploit the field by Kestrel Energy and Victoria Petroleum had encountered significant drilling problems using slim-hole drilling, which resulted in well abandonment. Consequently drilling issues are considered the project's primary risk. Strata-X is taking a more conservative route in the drilling of the Shannon-1 well and plans to drill the well as a conventional vertical well thus avoiding the problems associated with the slim-hole horizontal drilling of previous wells in the area Margarita AMI (37.5% Interest), Texas, USA Strata-X has a 37.5% working interest in a study group operated by Wandoo Energy (a private company). The group focuses on certain areas of South Texas and uses existing 3D seismic surveys to target shallow, low risk, potential oil accumulations. Within the AMI, Strata-X pays 50% of the exploration costs through the drilling of the first well on each prospect to earn its 37.5% working interest. Most prospects target shallow oil

101 PROSPECTUS accumulations with reserves generally less than 1 million barrels. Two prospects have been mapped to date, including La Capilla described below. A recent review of the La Capilla prospect by Wandoo Energy has estimated a Prospective Resource, of between 98,000 and 165,000 barrels of oil gross to Strata-X, plus an unspecified volume of associated gas in the primary target sand in the Frio Formation. These calculations are considered reasonable. Figure 1: Location of Strata-X projects Table 1: 2P Reserve and Prospective Resources Gross to Strata-X PROJECT 1P Reserve (Chapman 2012) Vallecitos AMI, California, USA 2P Reserve (Chapman 2012) STRATA-X OWNERSHIP OIL GROSS TO STRATA-X (thousand barrels) GAS GROSS TO STRATA-X (Bcf) 22.5% 4 minor Vallecitos AMI, California, USA Producing Non-Producing 22.5% 22.5% 7 61 minor Eagle Field, California, USA 20.0% 51 minor BEST ESTIMATE PROSPECTIVE RESOURCES Maverick, Texas, USA % 34, Vail, Illinois Basin, USA 100% 20,900 minor Sleeping Giant, North Dakota, USA 100% nil 318 Canning Basin, WA 100% 51, Vallecitos AMI, California, USA 22.5% 737 minor Margarita AMI, Texas, USA 37.5% 131 minor

102 100 STRATA-X ENERGY Table 2: Proposed 18 Month Work Program - $10 million Raise PROJECT MAVERICK VAIL SLEEPING GIANT CANNING EAGLE MARGARITA (LA CAPILLA) 2013 PROGRAM 1 vertical well to depths of 1,500m (4,900ft) with multistage fracture stimulation 1 horizontal well to a depth 950m (3,120ft) with a 1,000m (3,300ft) horizontal section. Completed and fracture stimulated 4 x vertical wells completed and fracture stimulated Geological and geophysical review None None 2014 PROGRAM (through June 2014) Work program contingent upon results of 2013 program and future financings Work program contingent upon results of 2013 program and future financings Work program contingent upon results of 2013 program and future financings Geological and geophysical review Work program contingent upon future financings Work program contingent upon future financings Table 3: Proposed 18 Month Work Program- $20 million Raise PROJECT MAVERICK VAIL SLEEPING GIANT CANNING EAGLE MARGARITA (LA CAPILLA) 2013 PROGRAM 1 vertical well to depths of 1,500m (4,900ft) with multistage fracture stimulation 1 horizontal well to a depth 950m (3,120ft) with a 1,000m (3,300ft) horizontal section. Completed and fracture stimulated 4 x vertical wells completed and fracture stimulated Geological and geophysical review Seismic reprocessing Drill one development well: proposed Shannon-1 Drill proposed La Capilla-1 Prospect mapping of other leads 2014 PROGRAM (through June 2014) 1 horizontal well to a depth of 1,500m (4,900ft) and horizontal length of 1,000m (3,300ft) completed and fracture stimulated Work program contingent upon results of 2013 program and future financings Work program contingent upon results of 2013 program and future financings Geological and geophysical review Drill/test one exploration well post June 2014 Work program contingent upon results of 2013 program and future financings Work program contingent upon results of 2013 program and future financings

103 PROSPECTUS Table 4: Proposed 18 Month Exploration Budget Net to Strata-X ($10mm Raise) PROJECT EXPLORATION AREA Q1 (Jan-Mar) 2013 Q2 (Apr-Jun) 2013 Q3 (Jul-Sep) 2013 Q4 (Oct- Dec) 2013 Q1 (Jan- Mar) 2014 Q2 (Apr-Jun) MONTH TOTAL ($A 000) ($A 000) ($A 000) ($A 000) ($A 000) ($A 000) ($A 000) LAND MANAGEMENT NEW LEASES RENEW & RENTALS Maverick Vail Others Sleeping Giant Others DRILLING Maverick 2, Vail 2,500 2,500 Sleeping Giant Eagle* Vallecitos * Margarita* OTHER WORK EP GENERAL & ADMINISTRATIVE ,570 COST OF RAISING LOAN REPAYMENT 2,030 2,030 TOTALS 5,776 2, ,000 * Note the Eagle, Vallecitos and Margarita projects are discussed within this report, however, no expenditures have been budgeted for the period indicated above in this scenario.

104 102 STRATA-X ENERGY Table 5: Proposed 18 Month Exploration Budget Net to Strata-X ($20mm Raise) PROJECT EXPLORATION AREA Q1 (Jan-Mar) 2013 Q2 (Apr-Jun) 2013 Q3 (Jul-Sep) 2013 Q4 (Oct- Dec) 2013 Q1 (Jan- Mar) 2014 Q2 (Apr-Jun) MONTH TOTAL ($A 000) ($A 000) ($A 000) ($A 000) ($A 000) ($A 000) ($A 000) LAND MANAGEMENT NEW LEASES RENEW & RENTALS Maverick Vail Others Sleeping Giant Others DRILLING Maverick 2,000 7,000 9,000 Vail 2,500 2,500 Sleeping Giant Eagle Vallecitos * Margarita OTHER WORK EP GENERAL & ADMINISTRATIVE ,300 COST OF RAISING 1,400 1,400 LOAN REPAYMENT 2,030 2,030 TOTALS 7,026 2,738 1,171 1,057 7, ,000 * Note the Vallecitos project is discussed within this report; however, no expenditures have been budgeted for the period indicated above in this scenario.

105 PROSPECTUS PROJECT REVIEWS 2.1 Maverick (Strata-X 75% -100% Operating Interest (small area at 15%)) Overview The Maverick Project is located in west central Maverick County within the proven Eagle Ford Shale hydrocarbon fairway of southern Texas (Figure 2). From a drilling development perspective, this is the most advanced play in the Strata-X portfolio. According to the Texas Railroad Commission, as of May 2012 there were close to 2000 oil and gas wells completed in the Eagle Ford Shale, and another 4000 wells targeting the Eagle Ford in various stages of permitting across a 23 county area. As of April 2012, the Energy Information Administration (EIA) quotes crude and condensate production from the play as averaging more than 500,000 bopd, compared to the 182,000bopd average production during first-quarter Strata-X owns 75% to 100% working interest in the project, and plans to target oil, gas and condensate from the lower Eagle Ford Shale. One horizontal well, Jadela El Indio 1-H has been drilled in the Maverick Project area. Based on the recovery of 40 API oil from the lower Eagle Ford Shale in the Jadela El Indio 1-H well, Strata-X anticipates that the Maverick Project lies within the light oil (high API gravity) window of the Eagle Ford play. Strata-X's acreage acquisition lies 42km (26 miles) west of a successful well drilled within the heavier oil window by Sanchez Energy, who in August announced that the Mark & Sandra #2H in Zavala County had a 24-hour initial production rate 931boepd (96% oil) from a 1670 metre (5,476 foot) 19- multi stage stimulated horizontal well. Within Strata-X s Maverick Project area, the El Indio-1H well drilled by Jadela Oil Corporation in 2011 was an 853 metre (2800 foot), 6-stage gas-fracture stimulated horizontal well. Despite a less than optimum stimulation and testing program, the well flowed 175bopd with 1.8mmcfd of gas over a 12 day test period. Following a failed completion attempt, the well flowed at very low rates of about 15bopd due to completion fluid incompatibility issues and cannot be rejuvenated. There is developed infrastructure around the Maverick Project. Produced oil will be trucked to market and the separated gas will be sold into the pipeline and gas handling infrastructure in and near the project area. The understanding of the oil and wet gas fairways has been evolving since oil was discovered in the Eagle Ford Formation. The Maverick Project area was previously considered to be within the heavy (Low API gravity) oil region where the oil production and total recoveries have been historically quite low from the Eagle Ford Formation. Recent drilling and published studies have revised the location of the Maverick project to be near the light oil and condensate boundary greatly improving the economic oil potential of the Maverick Project. Strata-X will need to demonstrate that oil and gas can be produced commercially in the Maverick Project area.

106 104 STRATA-X ENERGY Figure 2: Maverick Project Eagle Ford Play

107 PROSPECTUS Land Position Strata-X currently has under lease 44.3km 2 (10,945 acres) net in the project area, (Table 6). Strata-X 75%-100% working interest in the project entitles Strata-X to acquire 75% WI in any new leases acquired in the project area. Strata-X also has a 15% working interest in a small area in which the El Indio well was drilled. The project area is shown in Figure 2. MAVERICK PROJECT STRATA-X INTEREST Table 6: Strata-X Maverick Acreage Position GROSS ACREAGE (acres) GROSS ACREAGE (km 2 ) JOINT VENTURE NET ACREAGE* (acres) STRATA-X NET ACREAGE* (acres) 100% 12, ,846 75% -** -** 2,666 2,000 15% Total 13, ,326 10,945 *In some leases Strata-X has less than a 75% WI. **Gross acres figures were not listed for this interest as the land generally is covered in other listed Gross acres figures and listing it here would result in double counting figures The landholder system in the USA is completely different to the Australian system. In Australia, the Crown owns the mineral rights, where the onshore permits are administered by the various states. In the USA the landholder, or farmer in many cases, often holds the mineral and petroleum rights. Dealing with private landholders is considered preferable to dealing with state and federal governments in the USA due to less regulation and a more robust turnover of the available lands. Because of this situation, fields are often not fully covered by the land position and a patchwork of many small leases arises. In the USA, Landmen are employed to manage the landholdings, negotiate and monitor surface use and joint operating agreements. The numerous leases in the Maverick Project are held for a duration of three years. If production is established, each successful horizontal well can indefinitely hold an area up to 4km 2 (1,000 acres) as long as oil is produced in paying quantities from the wells located within each producing tract. The start date for the leases will be 30 November 2012, and there can be a continual roll-off of acreage and roll-on of new acreage as they are added and expire over time. Landholder royalties are fixed at between 20 and 25%. The land in the area is criss-crossed by bitumen roads and the acreage position is on near flat farming and ranching land. For this reason, access is relatively easy to obtain and there are minimal landholder issues History The first commercial Eagle Ford Shale gas discovery was made by Petrohawk in 2008 at Petrohawk STS-1H (Figure 2). The discovery well flowed at a rate of more than 7.5mmscf/d from a 10-stage, fracture-stimulated section. This saw the commencement of a burst of drilling activity and numerous subsequent commercial discoveries. Over 20 fields now produce from the Eagle Ford Shale Play. The recoverable oil in the play has been estimated in literature to be in excess of 3 billion barrels of oil. Drilling activity commenced in the deeper dry gas to wet gas window and has progressively moved westwards and up-dip into the wet gas/oil window because of economic considerations

108 106 STRATA-X ENERGY arising from the current price differential between dry gas, natural gas liquids (NGL) and oil. According to the Texas Railroad Commission as of May 2012 there were close to 2,000 oil and gas wells completed in the Eagle Ford Shale and another 4,000 wells targeting the Eagle Ford in various stages of permitting across a 23 county area. About 240 rigs are currently directed to drill for the Eagle Ford Play. In the Maverick area, the Jadela El Indio-1H well discovered light oil and gas with overpressuring (0.55psi/ft), suggesting that the Maverick Prospect is near the transition from the oil zone to the gas condensate fairway. It also shows that there is still good potential for new discoveries in parts of the play where the drilling density is relatively low Data Most well data is generally available through the open file database run by the Texas Railroad Commission. However, information considered confidential by many operators can be held tight for up to a two year period. There is a large volume of literature in the public domain that describes the play. Strata-X has carried out geologic and engineering studies in the area through its consultants Freestone Energy LLC and APEX Petroleum Engineering, Inc. and continues to gather additional publicly available data as it is made available Geological Structure The Eagle Ford Shale Play underlies much of southern Texas. It is structurally uncomplicated and dips gently (1 o ) to the southeast. The Maverick Project is situated to the west of the Chittum Arch which trends northwest to southeast in the Maverick Basin. The project area is within the light oil to wet gas hydrocarbon generation window. The aim of the Maverick Project is to extract oil commercially from the Eagle Ford Shale, a proven oil and gas zone of approximately 30 to 100m (100 to 350 feet) thick. It is Late Cretaceous in Age (approximately 90 to 95 million years ago) and unconformably overlies the Buda Formation. It is unconformably overlain by the Austin Chalk. The Eagle Ford Shale was deposited in a marine environment in water depths of about 100 meters (330 feet), probably 20 to 50 kilometres from the shoreline at the time. The fauna suggest the waters were calm and within the photic zone. It is divided into lower transgressive and upper regressive layers. The upper (regressive) Eagle Ford Shale has a higher carbonate and lower clay content than the lower (transgressive) Eagle Ford. The lower has a higher clay and total organic content and consists of organic-rich, pyritic, and fossiliferous marine shale, laid down in the time of maximum water depth. The overall thickness of the undivided Eagle Ford Group in Maverick County is 60 to 90 meters (200 to 300 feet) thick. The top of the primary target formation lies at a depth of approximately 1,300m (4,300 feet). The shale contains 4 to 15% porosity most of which is found in the organic matter. Permeability is very low and averages less than 0.13 milli-darcies (md). Natural microfracturing is developed during the thermal maturation process as kerogen expands and is converted to oil. The shale which contains a high amount of carbonate is brittle making it more likely that the production of oil and gas will be enhanced by massive hydraulic fracturing. The

109 PROSPECTUS formation is over-pressured at about 0.55psi/ft (normal pressure gradient is 0.43psi/ft) aiding and enhancing hydrocarbon production Seal and Trapping Mechanism Since the Maverick Project is a shale gas and oil play, it is self-sourcing, self-sealing and selftrapping. Oil is held in place by hydrostatic and pore pressure Source Rock and Charge The Eagle Ford Shale is an excellent source rock. It provides the charge for large conventional fields in the overlying Austin Chalk and the East Texas field. The formation has TOC of between 4 and 15%. The kerogen of the lower cycle is considered to be oil prone and those of the upper cycle may be more gas prone. Within the project area, the Eagle Ford lies within the oil generation window. Since the shale is self-sourcing, it is expected to have very high hydrocarbon saturation (perhaps 80%) Well Performance Recently, the Jadela Oil El Indio 1H well, located in the Maverick Project area, flowed oil at 175bopd and 1.8mmcfd over a 12 day test period from an eight stage waterless gel liquefied petroleum gas (LPG) fracture stimulation. A subsequent completion and stimulation review commissioned by Strata-X and conducted by APEX Petroleum Engineering concluded that only 75% of the well was effectively stimulated, proppant volumes were insufficient and the well was shut in for too long of a period before flowing back. Fluid introduced after the completion was incompatible and subsequently damaged the wellbore whereby production rates were deemed uneconomic. Eagle Ford play-wide average well profiles are shown in Figure 3. The average well produces more than 600 barrels of oil equivalent a day at peak rates within two months of being flowed back and produces and declines to about a half of the peak rate after 12 months. The figure also shows that development over time has shifted to areas of higher liquid content and that well production has improved with improving completion designs. Excellent flow potential of predominantly oil is demonstrated by the recent 1,670m (5,476 foot) lateral, 19-multi-stage fracture stimulated horizontal well drilled by Sanchez Energy some 42km (26 miles) away. This well flowed 34 API gravity oil at a reported 896bopd and 210mcfd (931boepd). Though the suitability of the lower Eagle Ford Shale for fracture stimulation is well established in other areas, in order to be economic it will be necessary to prove that wells can flow at sufficient and sustained commercial rates in the Maverick Project area. Strata-X is evaluating possible drilling alternatives to determine the best method to extract the largest amount economically possible from the Eagle Ford shale.

110 108 STRATA-X ENERGY Prospective Resource Figure 3: Eagle Ford Shale Play-wide Average Well Performance Strata-X has estimated the original oil in place (OOIP) to be approximately 862 billion barrels of oil in the Maverick Project. Strata-X estimates a Prospective Resource of 57mmbo with gross prospective potential to Strata-X of 43.1 million (Table 7). This equates to about 3,900 barrels/acre and 2.5million barrels/640 acres. If fully developed Strata-X estimates it may take as many 160 horizontal wells on 0.3km 2 (75 acre) spacing to effectively drain this prospective resource. The calculation of Prospective Resource was reviewed and appears reasonable given the current knowledge of the play in the Maverick Project area. An alternative concept was considered by AWT where the production may include 80% oil and 20% gas in the production stream (on a boe basis). A portion of the porosity in the rock has been allocated gas charge in the geologic model. In this case AWT has speculated that a higher recovery may be achieved by the increased gas volume and increased gas expansion drive. This has been adopted here as the Best Estimate.

111 PROSPECTUS PARAMETER Table 7: Maverick Project Area Prospective Resource STRATA-X BEST ESTIMATE (100% oil) AWT BEST ESTIMATE (80% Oil, 20% Gas) Area (net) 10,945 acres (44.3km 2 ) Expected average mix in Thickness 150 feet (45m) the Maverick Project area. Porosity 11% Hydrocarbon Saturation (1-Sw) 80% Bo 1.3 FVF 200 Conversion acre feet to barrels 7758 acre ft/bbl OOIP(STB) = A*h*7758*Porosity*(1-Sw)*(1/Bo) 862 million barrels 424 million barrels oil and 619Bcf gas + OGIP (Bcf) = A*h*Porosity*(1- Sw)*FVF Recovery Factor 5% 8% Prospective Resource 43.1 million barrels 34 million barrels oil and 50Bcf gas Approximate Gross to Strata-X 43.1 million barrels 34 million barrels oil and 50Bcf gas Program and Budget In order to prove the concept that fracture stimulated wells can provide initial commercial flow rates of production from the Eagle Ford Shale in the Maverick Project area; Strata-X plans to drill a vertical well to conduct additional petrophysical tests on the lower Eagle Ford zone. This will include desorption analysis of the shales and will be followed by a multi-stage vertical fracture stimulation and production testing. Depending on the results of the vertical well, the program may be followed by a horizontal well with a multi-stage fracture stimulation.

112 110 STRATA-X ENERGY Table 8 and 9 shows the likely sequence of exploration and appraisal drilling. This would be a significant test of the play s viability in the project area. There is considerable drilling, completion, testing, fracturing and other equipment in the play area. The costs and timing described here have been provided by Strata-X. If the initial work is successful, appraisal drilling will be undertaken. Should this also prove promising, it will be followed by rapid expansion with continuous drilling operations and multistage fracture stimulation completions. It may ultimately require an estimated 16 horizontal wells for Strata-X to hold the entire lease block by production. These wells would need to be drilled prior to 30 November 2015.

113 PROSPECTUS Table 8: Maverick Project Area Program and Budget - $10 million Raise YEAR Year 1 (2013) Year 2 (2014) Year 3 (2015) PROGRAM 1 vertical well to depths of 1500m (4,900 feet) with multi-stage fracture stimulation 1 x horizontal well to a depth of 1500m (4,900 feet) and horizontal length of 1000m (3,300 feet) completed and fracture stimulated If successful, appraisal drilling of PROPOSED EXPLORATION COST ($A) NET COST TO STRATA-X ($A) 2,000,000 2,000,000 Dependent upon success 10 or more horizontal wells Dependent upon Trigger of extension of certain success leases if not all of them. Table 9: Maverick Project Area Program and Budget - $20 million Raise YEAR Year 1 (2013) Year 2 (2014) Year 3 (2015) Market PROGRAM 1 vertical well to depths of 1500m (4,900 feet) with multistage fracture stimulation 1 x horizontal well to a depth of 1500m (4,900 feet) and horizontal length of 1000m (3,300 feet) completed and fracture stimulated If successful, appraisal drilling of 10 or more horizontal wells Trigger of extension of certain leases if not all of them. PROPOSED EXPLORATION COST ($A) NET COST TO STRATA-X ($A) 2,000,000 2,000,000 7,000,000 7,000,000 Dependent upon success Oil is to be trucked off site and sold to the into the USA oil market, while gas may be brought to market using existing gas pipelines. Access to the Mexican gas market may be provided by a large gas pipeline currently being constructed to take Eagle Ford Shale gas into northern Mexico of which construction is set to be completed by 2014.

114 112 STRATA-X ENERGY 2.2 Vail Project (Strata-X 100%) Overview The Vail Project targets a 1350km 2 (333,440 acres) unconventional shallow carbonate oil accumulation in the Illinois Basin. The play concept is illustrated in log, cross-section and map view by Figure 4. Based on historical well control (black dots), the interpreted lateral extent of the carbonate oil play is shown in dark green in the map view. The project is situated within the prolific Illinois Basin, which has seen over 4 billion of barrels of historical oil production (Higley, et al., 2001). The actual location has not been revealed here as Strata-X is still acquiring and leasing acreage with 166km 2 (45,400 acres) (net) acquired to date and does not wish to create undue competition to that process until after it has reached a minimum target of 202 km 2 (50,000 acres) (net) over the interpreted oil accumulation. The project aims to exploit oil stratigraphically trapped in a porous, dolomitic limestone unit within tight limestone, overlain and charged by the organic-rich New Albany shale source rock. A similar type of play has been highly successful in the analogous 90km (55 mile) long, 15km (10 mile) wide Elm Coulee Field in the Montana portion of the Williston Basin. In this play, the Devonian middle Bakken member is charged by the upper Bakken shale. The Vail play is an unconventional play-type in that it is a 80km (50 mile) long, 25km (15 mile) wide, widespread (essentially continuous), organic shale/ tight carbonate couplet on par with the size and shape of the Elm Coulee Field and similarly will require horizontal drilling and multi-stage hydraulic fracture stimulations of the zone of interest to unlock the resource. Several existing oil pools substantiate oil charge within the zone of interest further supporting the existence of the play. Strata-X will be one of the first companies to attempt to apply horizontal drilling technology used in other unconventional plays in this area of the Illinois Basin. The company intends to purchase one of the currently producing oil fields in the area and drill a horizontal, multi-stage hydraulically fractured well to determine the potential to greatly improve the oil flow rates and recoveries.

115 PROSPECTUS Figure 4: Vail Project Primary Target (dark green)

116 114 STRATA-X ENERGY Land Position In the Vail Project area, Strata-X currently holds over 184km 2 (45,400 acres) (net), and is in negotiations to acquire an additional 20km 2 (5,000 acres) (net). The interpreted area of interest where the oil accumulation is interpreted is within the dark green area in Figure 4. The red rectangle encompasses the current buy area. 202km 2 (50,000 acres) (net) of leases will cover about 15% of the prospective porosity trend. Since the company is still acquiring acreage in the highly competitive USA market, AWT is not at liberty to show the actual acreage position. AWT is privy to the location of the acreage and play. Should the target acreage position be obtained as planned, Strata-X will hold the acreage noted in Table 10. VAIL PROJECT STRATA-X INTEREST Table 10: Strata-X Vail Acreage Position GROSS ACREAGE (acres) GROSS ACREAGE (km 2 ) NET ACREAGE (acres) NET ACREAGE (km 2 ) CURRENT 100% 47, , TARGET 100% 55, , The acquired leases for this project are held for a duration of three years and contain either a two or three year option to extend the lease at the sole election of Strata-X. The start date for leases varies and there can be a continual roll-off of acreage and roll-on of new acreage as they are added and expire over time. The lease holdings can be retained indefinitely while production of oil and/or gas and payment to the leaseholder of the royalty due continues. Landholder royalties are fixed at between 12.50% and 15.25%. The land in the area is criss-crossed by farming and bitumen county roads and the acreage position is on near flat farming land. For this reason, access is relatively easy to obtain and since the area has a long history of oil exploration and production, access requirements for exploration are typically already understood by the landowner and there are minimal landholder issues History The Illinois Basin has a significant history of oil production with billions of barrels of oil produced. Oil was first discovered in In 1905 several large, shallow fields were discovered and developed. An early peak in hydrocarbon production occurred prior to 1910 as the result of surface mapping of anticlinal structures. With the advent of seismic, a second peak in production occurred in the late 1930s and early 1940s. A third peak in production, although not in discovery, occurred in the mid-1950s with the application of hydraulic fracturing and the water-flooding of reservoirs. A small rise in production occurred in the early 1980s as a result of intensified exploration spurred by high oil prices. Since then, there has been little new activity and the area has seen little exploration for decades. The landscape is dotted with oil wells many of which have been plugged and abandoned. Numerous oil pipelines and gas pipelines are in the area (Figure 4). It is believed that at least some of these are still functional and that there is significant spare capacity.

117 PROSPECTUS Data There is a voluminous amount of well data including over 200 penetrations of the target formation in the Vail play. Well data and logs are generally available through the open file process run by the Illinois State geological commission, after a period of confidentiality. Strata- X has provided to AWT an in-depth report compiled by Freestone Energy LLC that includes a full geological overview of the project area and log analysis of over 300 wells to identify the primary reservoir target Geological Structure The project is located on the basin margin on a gently dipping monocline with many small structural noses or closed anticlinal features. Depth to the target reservoir is about 950 to 1500m (3120 to 4920 feet) with over 366m (1200 feet) of stratigraphic closure across the target reservoir. The broad structural geology and distribution of the target reservoir are well defined by the well data Reservoir During the Devonian age, many areas of current day onshore USA were inundated by rising sea levels. Amongst the deposits is the limestone and dolomite limestone of the Vail Project play and the overlying organic-rich marine shales. The Bakken and New Albany shales were deposited at nearly the same geologic time and under similar conditions. Mapping of the porous interval in the limestone deposits resulted in identifying a regionally extensive zone of porosity, which is well defined by the many intersections and pinches out in all directions. Although there are no core analyses available through the target reservoir, sample descriptions and photo-electric (PE) curves suggest that the reservoir is dolomitic. Based on a dolomitic limestone matrix of 2.79g/cc, porosity from the target reservoir ranges from 7%-19%. Otherwise, the available neutron-density and photoelectric logs suggest a limestone matrix outside of the target porosity trend and that limestone porosity approaches zero percent. Core analysis from a few samples of one core through the zone underlying the target zone reports porosity of 4% to 5% and permeability from 0.8mD to less than 0.1mD. The dolomitic limestone reservoir targeted in the Vail project is the primary target and has been intersected by approximately 200 wells. This target reservoir lithology extends about 80km (50 mile) long, 25km (15 mile) wide over an area of 1347km 2 (333,000acres) and pinches out in all directions. The reservoir has an average thickness of approximately 3 meters (10 feet), an average porosity of 11% and about 65% oil saturation based on log analysis. There are several small historic oil fields that still produce oil from this reservoir at very low rates of less than 10bopd from vertical wells. The low rates are assumed to be due to the low permeability and near bore depletion. Based on its stratigraphic position juxtaposed to the rich, thermally mature New Albany source rock, stratigraphic closure due to porosity pinchout in all directions and structural configuration, the reservoir is analogous in many ways to the successful Elm Coulee Bakken Oil Field Seal and Trapping Mechanism The numerous well intersections in the project area indicate that the porous dolomitic reservoir limestone pinches out in all directions to impermeable limestone. The reservoir is overlain by impermeable shale that is also the source rock. Studies of the Bakken in the Williston Basin

118 116 STRATA-X ENERGY suggest a geologic model in which fractures formed by the expulsion of oil and gas from the source rock as kerogen expands and is converted to oil due to thermal maturation. A similar model is proposed for the target reservoir in which oil and gas is expelled from the overlying organic-rich shale into the underlying dolomitic limestone reservoir through fractures created during the maturation process. The trap and seal is proven, at least in several locations, by the presence of oil fields, hydrocarbon flows from production and formation tests and sample shows within the target reservoir Source Rock and Charge The New Albany Shale, the source rock in the Vail project area, is a very thick, carbonaceous shale of Upper Devonian age which overlies the limestone and dolomitic limestone reservoirs. It lies in the oil generation window above a large part of the Vail play and has a TOC content of 2.5% to 12.7%. These rocks have a proven hydrocarbon generation and expulsion history, and are estimated to have generated and expelled many hundreds of billions of barrels of oil. This is evidenced by the numerous and large volume of overlying conventional oil fields. A portion of the expelled oil is expected to have been driven into the underlying limestone and dolomitic limestone through fractures caused by the thermal expansion during the hydrocarbon generation process. Charge of the dolomitic limestone is proven by the presence of several producing oil fields, hydrocarbon shows from production and formation tests, sample shows and interpreted oil saturations from log analysis conducted on historic wells drilled in the target reservoir. There are four structural oil fields, trapped in younger formations, that have produced almost 1300mmbo from the Devonian and shallower formations, lying just updip or near the play area. Also, in the area, two other fields have produced close to 200mmbo each and another, 100mmbo. Based on oil/source typing these fields and the Vail play are charged by the same oil-prone source rock Well Performance Several acid-stimulated vertical wells currently produce from the Vail dolomitic limestone primary reservoir in small structural fields located within the reservoir trend. These wells flowed between 40 and 200bopd initially. It is anticipated that horizontally drilled and fracture stimulated wells will attain significantly higher flow rates. To Strata-X s knowledge, there have been no horizontal wells or horizontal hydraulically fractured wells drilled in the play so far, so that it is not possible to know what the well performance will be. The results of analog fields such as Elm Coulee Field in Montana have been applied to estimate an outcome. It is believed by AWT that at least some gas will be required in the formation to provide a drive mechanism to extract oil at high rates. Because of a lack of infrastructure and low prices during the heyday of oil production in the basin, gas was typically flared or used to run pumping units. The state does not require operators to report gas production as a byproduct to oil production so it is uncertain what amount of gas was produced or what, if any, gas cap existed in any of the fields. However, the source rock has been the subject of many research studies on the gas generative capacity and there seems to be little doubt that gas has been generated, based on the formation tests and production tests in the play area, some of which did report gas production. Therefore, it is likely that the reservoir will contain enough solution gas to provide the necessary drive mechanism to extract the oil from the formation.

119 PROSPECTUS Prospective Resource Note that Prospective Resources are as yet undiscovered. Freestone Energy (August 6, 2012) calculated original-oil-in-place (OOIP) of approximately 1.6 billion barrels in just the primary target reservoir (upper dolomite zone only, excluding any potential secondary zones). This equates to 120,000barrels/km 2, and 3,035,000 barrels/640acre (Table 11). If fully developed Strata-X estimates it may take as many 150 wells on 160 acre spacing to effectively drain this prospective resource. The calculation of Prospective Resource was reviewed and appears reasonable given the current knowledge of the play. Table 11: Vail Project Area Prospective Resource PARAMETER STRATA-X BEST ESTIMATE (100% oil) Area 45,400 acres (184km 2 ) Thickness 10 feet (3.2m) Porosity 11% Hydrocarbon Saturation (1-Sw) 65% Bo 1.2 Conversion acre feet to barrels 7758 acre ft/bbl OOIP (STB) = A*h*7758*Porosity*(1-Sw)*(1/Bo) 209 million barrels Recovery Factor 10% Prospective Resource Gross to Strata-X 20.9 million barrels Program and Budget In order to prove the concept that horizontal fracture stimulated wells can provide short-term, high rates of production from the dolomitic limestone Strata-X plans to drill 1 core hole for desorption, and vertical frac trials, followed by a horizontal, hydraulically fractured well if justified (Table 9). The company is also in negotiations to purchase an existing oil field which produces from the primary target. Control provided by the close spaced wells in the field will be used to guide the drilling of a horizontal within the target dolomitic limestone.

120 118 STRATA-X ENERGY Table 12 shows the likely sequence of exploration and appraisal. This would be a significant test of the play s viability. The costs and timing are provided by the directors of Strata-X. If successful, additional appraisal drilling will be undertaken and if this is also promising, it will be followed by rapid expansion of horizontal fracture stimulated production wells. Strata-X would also trigger the extension of certain leases if not all of them.

121 PROSPECTUS Table 12: Vail Project Area Program and Budget - $10 million or $20 million Raise YEAR Year 1 (2013) Year 2 (2014) Year 3 (2015) Market PROGRAM 1 x horizontal well to a depth 950m (3120 feet) with a 1000m (3,300 feet) horizontal section. Completed and fracture stimulated I x horizontal well to a depth 950m (3120 feet) with a 1000m (3,300 feet) horizontal section. Completed and fracture stimulated If successful, appraisal drilling of 10 or more horizontal well pilot Trigger of extension of certain leases if not all of them. PROPOSED EXPLORATION COST ($A) NET COST TO STRATA-X ($A) 2,500,000 2,500,000 Dependent upon success Dependent upon success Initially oil is to be trucked off site to the nearby oil hub or to a nearby oil refinery and sold to the domestic northern USA oil market. Gas will be sold into the extensive pipeline system, which is believed to have capacity.

122 120 STRATA-X ENERGY 2.3 Sleeping Giant (Strata-X 100%) Overview The Sleeping Giant Project is located in the Williston Basin of North Dakota. The play is shallow biogenic gas in the Niobrara Chalk, trapped within a conventional anticlinal structure. Biogenic gas is nearly entirely methane and contains little to no petroleum liquids. The reservoir has excellent porosity, though very low permeability and will require vertical hydraulically fracture stimulated wells to produce the gas. Historically, wells down dip of the mapped structural closure had good gas shows and suggest that there is a good chance that multiple, smaller gas pools, or a single large pool exists. The play concept is described in Figure 5 and could contain up to 1.5TCF of natural gas. Up to 23 leads and prospects have been identified in Strata-X's area of interest. An estimate of the Prospective Resources for the acreage Strata-X holds over the main three prospects is provided in section The analog to the Sleeping Giant Project is a large complex of structurally trapped shallow biogenic gas in the Niobrara Chalk in the Denver-Julesburg Basin, primarily located in Colorado (Figure 5). Over 40 gas fields have been discovered at the analog, located on low relief domal structures with structural closure of 15 to 60m (50 to 200 feet). One of these fields, the Beecher Island Gas Field, was studied by Chapman (2011) and provides basic parameters used to assess the Sleeping Giant play. With the current focus of the petroleum industry on oil plays, Strata-X has been able to acquire a single-company position and as such, controls the vast majority of the lands over the area and therefore the outcome. Exploration wells are planned initially in the hope of discovering new gas pools. Even if successful, development will likely be delayed until gas prices in the USA improve.

123 PROSPECTUS Figure 5: Three of the main prospects and leads in the Sleeping Giant Shallow Niobrara Gas Play

124 122 STRATA-X ENERGY Land Position Strata-X holds a 100% working interest in approximately 710km 2 (175,000 net acres) of the project area (Table 13). As noted under the Maverick Project, the landholder system is completely different in the USA to the Australian system. Since the company is still acquiring acreage in the highly competitive USA market, AWT is not able to show the actual acreage position, though AWT is privy to the location of the acreage and play. SLEEPING GIANT PROJECT STRATA-X INTEREST Table 13: Strata-X Sleeping Giant Acreage Position GROSS ACREAGE (acres) GROSS ACREAGE (km 2 ) NET ACREAGE (acres) NET ACREAGE (km 2 ) 100% 230, , Prospects - Beaver Creek, Moscow and Moscow NE 90, , The numerous leases are held by making annual delay rental payments (payments for delaying drilling under the terms of the leases) with remaining lease duration terms varying from 1 to 5 years. The yearly delay rental payments are $1/net acre. The start date for leases varies and there can be a continual roll-off of acreage and roll-on of new acreage during this period which may be added over time. The lease holdings can be retained indefinitely while production of oil and/or gas and payment to the leaseholder of the royalty due continues. Strata-X has an 80% net revenue interest on the properties. The land in the area is criss-crossed by all-weather roads and is sparsely populated with the general topography consisting of rolling farming land. For this reason, access is relatively easy to obtain and there are minimal landholder issues History The Williston Basin has a significant history of oil and gas production from both conventional and unconventional reservoirs. Nearly two (2) billion barrels of oil and 470Bcf of gas have been produced to date from the North Dakota portion of the basin. However, the shallow chalk reservoir in the Sleeping Giant Project area has seen very little exploration, despite the presence of gas shows and small flares in wells drilled outside of structural closure. Four nearby historic wells were drilled by other operators into the chalk of the Niobrara Formation in and had good gas shows. Two of them flowed small volumes of gas to surface (Figure 5). These wells were not located on the structural highs which is interpreted as a critical factor for a commercial gas accumulation Data The Niobrara chalk has not been extensively tested and most of the data available comes from petroleum wells that are offset from the shallow structural feature as they were drilled for deeper hydrocarbon plays. Numerous (175) shallow water wells are available and were used to define the structure Geological Structure The Sleeping Giant Project lies within a large NW to SE trending anticlinal structure on the eastern margin of the Williston Basin. The anticline is 80km (50 miles) long and has 110m

125 PROSPECTUS (350 feet) of interpreted closure. Depth to the target reservoir is approximately 400m (1300 feet). There are several local four-way-dip closed features, including the Moscow, North-East Moscow and Beaver Creek prospects (shown on the map in Figure 5). There is potential for the whole structure to be a single trap. The quality of the interpretation of the structure was not assessed by AWT. Magnetics mapping was also compared with the mapped structure. Magnetic anomalies reflect the deep Cretaceous structures in the area and these appear to coincide with the structure predicted by the mapping of the well data. Further evidence includes a present-day topographic high that coincides with the mapped structures. Formations outcrop to the east and are the likely entry point for the fresh water and bacteria that form the gas Reservoir The Niobrara Chalk is of Late Cretaceous age and was deposited during widespread marine transgression. The epicontinental sea included thick siltstones and shales in deep and distal parts of the basins, sandstones on the shorelines and carbonate deposition in the form of chalk and calcareous shale on gentle ramps. Chalk is a soft, easily crumbled fine-grained limestone. It is composed largely of coccoliths and coccolith fragments derived from certain types of planktonic brown algae. Additional carbonate material is derived from mollusc shells and foraminifera. The porosity averages 40%. However, it is poorly connected and is tight (very low permeability). Lost circulation in some wells and analysis of wireline log suggests the presence of naturally fractured zones Seal and Trapping Mechanism The Ardmore Bentonite is expected to provide an excellent top seal over the simple structures Source Rock and Charge The Niobrara Chalk has a high TOC content (average of 4.2% and up to 8%). Bacterial activity centred on the organic material within the chalk and acting on the organic matter in overlying shales may have produced a biogenic gas. This would then have accumulated within local structural highs. Depending on the volumes of gas generated, the highs may or may not be filled to spill. Charge of the main Sleeping Giant Structure is suggested by the presence of gas flares in wells drilled off the main structure (Figure 5). In 2006 and 2007, three wells were drilled into the Niobrara Formation. All had good gas shows with two causing gas to flow to surface while being completed. All three wells were located off the interpreted geologic structure. Welch-1 lies 215m (700 feet) downdip from the crest of the sleeping Giant structure and flowed a small volume of gas from the Niobrara Formation. The gas included 97.4% methane and 1.7% ethane and 0.9% propane. Shallow biogenic gas production from the Niobrara Formation is found on the eastern edge of the Denver Basin and provides an analogue for Sleeping Giant. Over 40 gas fields have been discovered which are located on low relief domal structures with structural closure of 15 to 60 m (50 to 200 feet). The gas is 97% to 99% methane and is believed to be generated by bacterial decomposition of the organic matter in the reservoir itself.

126 124 STRATA-X ENERGY Biogenic activity of this type produces a near-pure methane gas, with very low liquids component Well Performance The low reservoir pressure encountered at the shallow depths and the tight nature of the reservoir chalk mean that fracture stimulation programs will be required to produce gas commercially. Wells from the analogous Beecher Island field suggest an average peak flow rate of about 160mscf/d. The fields will have low pressure at these shallow depths and are not expected to produce at very high rates. Well spacing can be as close as 400m (160 acres), depending on gas price Prospective Resource Chapman (2011) and Walt King (2010) have provided a Prospective Resource for several main prospects by using a variety of average well rates from the Beecher Island field analogue and 0.65km 2 (160 acre) well spacing. Using the Chapman (2011) and Walt-King (2010) reports, reservoir parameters were selected and a prospective volume has been calculated by AWT for the acreage Strata-X holds over the three main prospects only (Table 14). Walt King (2010) determined from well performance analysis an average recoverable gas volume of 0.004Bcf/acre at the Beecher Island analogue. This would equate to about 292Bcf if applied to the three main prospects at Sleeping Giant. This compares with the 318Bcf calculated by AWT using geological parameters. There are as many as 23 leads and prospects in all, of varying sizes, which add significant upside in the event of a discovery at any of the three prospects reviewed. AWT did not carry out any mapping. Table 14: Sleeping Giant Project Prospective Resource of the Three Main Prospects PARAMETER STRATA-X BEST ESTIMATE (100% gas) Area (Beaver Creek, Moscow and Moscow NE) 73,000 acres (2965 km 2 ) Thickness 90 feet (27.4m) Porosity 40% Geometric Factor 0.8 Hydrocarbon Saturation (1-Sw) 65% FVF (gas expansion factor) 30 OGIP (Bcf) = A*h GF*Porosity*(1-Sw)*FVF 398Bcf Recovery Factor 80% Prospective Resource Gross to Strata-X 318Bcf Program and Budget Strata-X intends to drill two pilot wells to determine if any of the three main prospects are charged with gas. At this stage there are no plans for appraisal or development of any discoveries until the gas price in the USA recovers. In order to prove the concept that horizontal fracture stimulated wells can provide short-term, high rates of production from the Niobrara in the Sleeping Giant Project area, Strata-X plans to drill 2 pilot wells to determine the gas potential and productive flow rate. Table 15 shows the

127 PROSPECTUS likely sequence of exploration drilling. This would be a significant test of the play s viability in the project area. There is considerable drilling, completion, testing, fracturing and other equipment in the play area. This means that costs are much lower than experienced in Australia. The costs and timing described here have been provided by the directors of Strata-X. Table 15: Sleeping Giant Project Program and Budget - $10 million or $20 million Raise YEAR Year 1 (2013) Year 2 (2014) Year 3 (2015) PROGRAM 4x vertical wells completed and fracture stimulated 4x vertical wells completed and fracture stimulated If successful, appraisal drilling of 10 or more horizontal well pilot Trigger of extension of certain leases if not all of them. PROPOSED EXPLORATION COST ($A) NET COST TO STRATA-X ($A) 600, ,000 Dependent upon success and future gas price Dependent upon success Dependent upon success and future gas price Dependent upon success Market Two large interstate gas pipelines may provide a route to the USA domestic gas market. In the absence of economic gas prices, Strata-X has the option to use produced gas to generate electricity on site for supply to the local grid. North Dakota provides a favourable legislative environment for such remote gas discoveries. The equivalent gas price obtained by onsite electricity generation is estimated by Strata-X to be $4.26/mcf. Depending on the success of the exploration work and the price of gas on the USA market (Henry Hub), Strata-X will be able to determine the economic viability of its project as either gas sales into pipelines or sales into local electric power generation.

128 126 STRATA-X ENERGY 2.4 Canning Basin Laurel Formation Play (Strata-X 100%) Overview Strata-X was the successful bidder in March 2012 for a competitive tender on hydrocarbon exploration permit STP-EPA The permit lies in north-eastern Canning Basin of Western Australia (Figure 6). The primary target in this permit is an unconventional shale oil and gas play in the Laurel Formation. Secondary conventional targets could exist in the Grant Group, Anderson Formation and in Devonian-aged carbonates. The Lower Carboniferous Laurel Formation is of shallow marine origin and includes fossiliferous limestone, siltstone, shale and sandstone deposits. The Laurel Formation is known to contain good potential source rocks within the lower section with TOC of 0.5% to 3%. Exploration for hydrocarbons in the Laurel Formation is in its infancy and is being explored actively by a number of operators. A proposed Laurel Formation basin-centred play around the Valhalla discovery has recently been publically released by Buru Energy Limited (Buru). Little is known when compared to the USA unconventional/shale resource plays, though the presence of a few small oil and gas fields, including recent discoveries is proof that a source rock exists. Following studies and seismic acquisition, Strata-X plans to drill a vertical exploration well. The well may be cored and samples taken to determine the shale gas/oil potential and also hydraulically fracture stimulated if warranted.

129 PROSPECTUS Figure 6: Canning Basin Project - Laurel Formation Play

130 128 STRATA-X ENERGY Land Position STP-EPA-0048, covers approximately 5,820km 2 (1,438,120 acres) in remote northern onshore Western Australia. The acreage position is described in Table 16. This lies in an arid region, dominated by active longitudinal dune fields, and low hills and breakaways of predominantly Permian to Triassic rocks. The permit lease was won by Strata-X through a competitive bid process, based upon the proposed work program, held by the Western Australian government. It is held under lease for a six (6) year term (see program and budget section below). CANNING BASIN STRATA-X INTEREST Table 16: Strata-X Canning Basin Acreage Position GROSS ACREAGE (acres) GROSS ACREAGE (km 2 ) NET ACREAGE (acres) NET ACREAGE (km 2 ) 100% 1,438,120 5,820 1,438,120 5, History Petroleum exploration activity began in the Canning Basin in the early 1920s. Since then, nearly 250 wells have been drilled and 78,000km (48,467 miles) of onshore seismic data has been acquired. Up until the mid-1980s, exploration largely focused on the northern and central parts of the Canning Basin. The primary exploration targets were the Devonian and Permian Carboniferous strata. Many exploration wells recorded hydrocarbon shows, especially of oil, though few yielded commercial hydrocarbons. The basin is substantially under-explored, with few wells, of which only a small percentage are considered to have been valid structural tests. Past significant discoveries occurred at Blina and Sundown oil fields. The Blina Oil Field, flowed 35.7 o API oil at 905bopd in Blina-1 from fractured carbonates of the Nullara Limestone and 37 o API oil at 36 bopd from porous dolostone of the Yellow Drum Formation. Geochemical studies have indicated that the Blina oils have been sourced from the Gogo Formation. The Blina Field has produced over 1.9mmbo, and is still producing. The Sundown Field, located approximately 25km north-west of the Blina Field produces light oil from Permo-Carboniferous Grant Group sandstones. The oil is interpreted to be sourced from shales of the Laurel Formation. Recent exploration has included the discoveries of the Yulleroo, Ungani and Valhalla fields, which have increased evidence of a significant source rock and prospectivity of the Canning Basin Data There is a moderate density of previously acquired regional and detailed 2D seismic lines across the central part of STP-EPA Two petroleum exploration wells, Lake Betty-1 and Lanagan-1, have been drilled within STP-EPA The only other petroleum-related drilling within the area was a shallow Government-sponsored stratigraphic hole, BMR Crossland-1, which penetrated only the Permian strata. Lake Betty-1 recorded minor gas shows were encountered in the Laurel Formation of the Fairfield Group. Lanagan 1 reached a total depth of 1530m (5000 feet) at the top of the Upper Devonian Knobby Sandstone without encountering significant hydrocarbons. The operator considered that lack of hydrocarbon migration (well sited in a migration shadow or bypass zone) was more likely than lack of closure or seal. 37

131 PROSPECTUS Drilling just outside STP-EPA-0048 includes Jones Range-1 on the Jones Arch, and Atrax-1, Olios-1 and Bindi-1 on the Betty Terrace. Selenops-1 was drilled on the nearby edge of the Balgo Terrace Geological Structure STP-EPA-0048 covers parts of the Gregory Sub-Basin, the Jones Arch and the Betty and Balgo Terraces. There are major faults within the permit which creates a variety of play types. The very thick successions in the Gregory Sub-basin could include source rock and reservoirs at multiple levels, particularly in the Laurel Formation. On the Betty Terrace the Laurel Formation is locally absent (as at Atrax-1) or lies at progressively shallower depths. In the Gregory basin it is down faulted to in excess of 2000m (6,550 feet) and dips gently to the south to depths of up to 4000m (13,000 feet) (estimated) Reservoir The Lower Carboniferous Laurel Formation is of shallow marine origin and includes fossiliferous limestone, siltstone, shale and sandstone deposits. There is little yet known about the shale gas/oil reservoir properties of the Laurel. Havord et al. (1996) have reported core analyses of clastic and carbonate samples of the Laurel Formation in seven wells. They quote porosities of between 1 and 15%, with an average porosity of 7.3%. The quoted permeabilities of these samples were all less than 2mD, with an average of 0.23mD. Log-derived porosities in this study were generally less than 10%. There are secondary conventional reservoirs that form a stacked sequence from the Poole Sandstone to the Anderson Formation, which were deposited as fluvio-deltaic sandstones. The Betty Formation (within the Grant Group) was deposited in a shallow marine to glacial environment Seal and Trapping Mechanism The unconventional play in the Laurel Formation is expected, like other source rock/shale gas rocks, to be self-sourcing and self-sealing. The stacked secondary conventional plays can be sealed by a number of formations. The regressive sequence of continental red bed deposits for the Upper Anderson Formation contains a 30m (100 foot) thick shale, which is interpreted to be a regional seal because of the salinity contrast observed between the saline waters below this shale and the fresh waters above. The shallow marine to lacustrine claystone within the Winifred Formation, 40m (130 feet) thick in Cycas 1, form the seal for the Betty Formation. The marine shales of the Noonkanbah Formation, 195m (640 feet) thick in Cycas 1, are expected to provide an effective seal for the Poole Sandstone Source Rock and Charge The Laurel Formation is known to contain good potential source rocks within the lower section. This unit is believed to be the source for the oil recovered in the Sundown and Ungani Fields. It is inferred to lie within the oil window across much of the Betty Terrace, and the gas window in adjacent parts of the Gregory Sub-basin. Marine shales of the Laurel Formation have total organic content of 0.5% to 3.0% in Lake Betty-1 and are rated as good oil-prone source rocks within the Fitzroy Trough. The thermal

132 130 STRATA-X ENERGY maturity (VRo) in the permit, as interpreted by Strata-X, is shown in Figure 6. This is based upon only a few data points and the depth map and is a reasonable interpretation. The Olios-1 well, located on the north-eastern margin of STP-EPA-0048 recorded oil fluorescence from the Laurel Formation. Three DSTs were run though no hydrocarbons were produced. The Valhalla Basin Centred Gas Accumulation, as described by Buru energy, is situated on the central-northern margin of the Fitzroy Trough. It has been defined by a gas-saturated Laurel Formation. The Valhalla-1, Valhalla-2, Valhalla North-1 and Paradise-1 wells have confirmed the accumulation in this area. Yulleroo-3 well has indications of at least 1100 metres (3610 feet) of wet gas-charged Laurel Formation. There is potential for the Laurel Formation at this location to be part of a large basin-centred gas accumulation. Oil shows from the Laurel Formation were observed in the Meda-1 well. Formation cuttings and sidewall cores of porous dolomitic sandstone contained fluorescent oil staining in the interval 1561 to 1565m (5,121 to 5,135 feet) and a DST of this interval produced approximately 25 litres of crude oil and salty water Well Performance At this stage this is unknown. New core wells will improve any assessment that may be made of well performance Prospective Resource In the absence of other calculations, AWT has made an estimate of the Prospective Resource (Table 17). Only a best estimate value has been considered. Prospective Resources are as yet undiscovered. AWT has included 30% of the permit area in the calculation. Due to the thermal maturity it is expected that any produced gas would have about 50% oil and 50% gas on a boe basis. Table 17: STP-EPA-0048 Laurel Formation Prospective Resource PARAMETER BEST ESTIMATE (50% Oil, 50% Gas) Area (30% of permit) 333,440 acres (1750km 2 ) Thickness 32 feet (10m) Porosity 7% Hydrocarbon Saturation 80% Bo 1.2 FVF 200 Conversion acre feet to barrels 7758 acre ft/bbl OOIP (STB) = A*h*7758*Porosity*(1-Sw)*(1/Bo) + OGIP (Bcf) = A*h*Porosity*(1-Sw)*FVF 1,000 million barrels oil and 5,537Bcf gas Recovery Factor 5% Prospective Resource 51 million barrels oil and 270Bcf gas Gross Strata-X (100%) is about 51 Million Barrels and 277Bcf gas

133 PROSPECTUS Program and Budget Where it is possible to do so, exploration well tests will be carried out on mapped four-way closures and/or conventional traps, which are also coincident with thicker Laurel oil/gas shale sequences. Using this approach the conventional and unconventional petroleum plays in an area can be tested with each exploration well. Strata-X believes this approach is an efficient way to explore the area. Table 18 includes the program proposed to the Western Australian government in order to win the permit by competitive bid. This is a work program bid concept and costs of the program are only indicative. Following the successful negotiation of a Native Title Agreement, expected to take up to 12 months, the first year program will consist of prospect mapping using all available existing data to high grade areas where 150km (93 miles) of new seismic data will be acquired. Seismic reprocessing will be carried out as well. A vertical exploration well is included in the year 1 plan. This may be cored and samples taken to determine the shale gas/oil potential and also fracture stimulated if warranted. Exploration results in this year are likely to determine whether Strata-X continues into the following years. Though it is required that the work program be carried out essentially as proposed to the government, the permit can be relinquished at any time without penalty. The second year (Year 2) will consist of drilling of at least one exploration well which would have combined unconventional and secondary conventional targets. Years 3 to 6 will include new prospect mapping and integration of new data. There is planned to be further reprocessing of 300km (186 miles) of vintage seismic, acquisition of 150km (93 miles) of new seismic and a minimum of one (1) well in each year. Where possible, each well will target to test combined conventional and non-conventional plays in an area.

134 132 STRATA-X ENERGY Table 18: STP-EPA-0048 Work Program and Indicative Cost for Government Application YEAR WORK PROGRAM*** INDICATIVE EXPENDITURE ($A) Geological and geophysical review 180, km new Seismic+300km Seismic 750,000 Year 1 Reprocessing Drill/test/frac* one (1) exploration well 3,000,000 * Year 1 Indicative Total 3,900,000 Geological and geophysical review 150,000 Year 2 Drill/test/frac* one (1) exploration well 3,000,000** Year 2 Indicative Total 3,150,000 Geological and geophysical review 150, km new seismic and 300km seismic 750,000 Year 3 reprocessing Drill/test/frac* one (1) exploration well 3,000,000** Year 3 Indicative Total 3,900,000 Geological and geophysical review 150,000 Year 4 Drill/test/frac* one (1) exploration well 3,000,000** Year 4 Indicative Total 3,150,000 Geological and geophysical review 150, km new seismic and 300km seismic 750,000 Year 5 reprocessing Drill/test/frac* one (1) exploration well 3,000,000** Year 5 Indicative Total 3,900,000 Geological and geophysical review 150,000 Year 6 Drill/test/frac* one (1) exploration well 3,000,000** Year 6 Indicative Total 3,150,000 6 Year Total 6 new wells and 450km of new 2D seismic 21,150,000 *Hydraulic fracture stimulation will be undertaken only if warranted. **Indicative costs of drilling testing and fracture stimulation are low and real costs are likely to be over $A5,000,000 if coring is undertaken and over $A8,000,000 if coring and fracture stimulation are undertaken. ***There is scope to alter the program from year to year and the permit can be relinquished in part or in full at any time Market The area is very remote. Oil is to be trucked off site as it is for the current producing fields by other operator in the Canning Basin. Gas production will require the building of major pipelines. It is anticipated that the current industry will begin building infrastructure in the region following their developmental success. The total scope of this infrastructure is unknown at this time but it may include a gas pipeline and /or a LNG terminal.

135 PROSPECTUS Vallecitos AMI (Strata-X 22.5% working interest) San Benito County California Overview Strata-X has a 22.5% interest in a Joint Venture (JV) which is focussed on certain areas in the Vallecitos Basin in California, described as an area of mutual interest (AMI). The other two parties in the study group are privately held companies. Currently the AMI has leased approximately 85km 2 (21,000 acres) gross with approximately 19km 2 (4,725 acres) net to Strata-X. Included are the mature F & I oil field and several identified prospects and leads (Figure 7). The field and prospects are hosted by the Eocene Yokut, San Carlos and Domengine Sandstones of the prolific onshore San Joaquin Basin. Approximately 3.7 million barrels (Gross to 100% WI) has been produced from the F & I oil field since its discovery in the 1950s, and a further 4,000 barrels of 1P & 69,000 barrels of 2P reserves (Strata-X Gross WI Share) is estimated to remain in poorly drained pockets (Chapman, 2012). In addition, the six prospects are estimated to contain a Prospective Resource of approximately 4.5 million barrels (Gross to the 100% WI) (Chapman, 2011). The JV has identified up to seven (7) development wells in the F & I oil field, and several exploration prospects. The JV intends to drill one exploration target in the next 18 months.

136 134 STRATA-X ENERGY Figure 7: Vallecitos Trough F&I and Eagle Field locations within the San Joaquin Basin

137 PROSPECTUS Land Position Strata-X has a 22.5% interest in approximately 85km 2 (21,000 gross acres), with approximately 19km 2 (4,725 net acres) (Table 19). As noted under the Maverick project, the landholder system is completely different in the USA to the Australian system. Since the company is still acquiring acreage in the highly competitive USA market, AWT is not able to show the actual acreage position, though AWT is privy to the location of the acreage and play. The exact land position is not shown, but may be made available to securities regulators or certain qualified individuals under confidentiality. Strata-X holds the acreage noted in Table 19. VALLECITOS BASIN STRATA-X INTEREST Table 19: Strata-X Vallecitos Basin Acreage Position GROSS ACREAGE (acres) GROSS ACREAGE (km 2 ) NET ACREAGE (acres) NET ACREAGE (km 2 ) 22.5% 21, , The Vallecitos AMI is governed by a Joint Operating Agreement between partners Strata-X, and two private companies. Numerous leases are held for a duration of 5-7 years The start date for leases varies and there can be a continual roll-off of acreage and roll-on of new acreage which may be added over time. The lease holdings can be retained indefinitely while production of oil and/or gas is produced on the lease and payment to the leaseholder of the royalty due continues. The project is subject to a 20% royalty History The San Joaquin Basin, adjacent to the Vallecitos Sub-Basin, is the most prolific onshore hydrocarbon basin in California. It forms an asymmetric elongated trough and has produced billions of barrels of oil. The basin began as a fore-arc basin in the Mesozoic, and transitioned to a strike-slip basin in the Tertiary, due to movement along the San Andreas Fault. It contains over 12km (40,000 feet) of clastic sediment (Figure 7). The Vallecitos Sub-basin is associated with a tear fault resulting from the San Andreas transform fault. Exploration and production of hydrocarbons has continued in the San Joaquin Basin for over 100 years. The basin is extensively drilled and densely covered by seismic. Since 1948, the Vallecitos area has produced over 5mmbo from eight pools at depths between 150m and 1,700m (500ft and 5,500ft). The F & I field is the largest discovered pool and first began production in Ten successful development wells were drilled between 1956 and 1963 with three still on production Data A 3D seismic survey was acquired by the Joint Venture (JV) in 2008 and has been reprocessed in Well logs from historical wells are available from the State of California and other public venues Geologic Structure Based on the D survey, five prospects have been identified - Fox, Caribou, Xeme, Watsui and Yak as well as several other leads. These have an aggregate best estimate Prospective Resource of approximately 4.5mmbo (Chapman, 2012).

138 136 STRATA-X ENERGY The Fox Prospect is to be drilled by a deviated well to intersect steeply-dipping Yokut and Domengine formation at the pinch-out edges of the formations, as well as the fault-terminated San Carlos Sandstones. The Caribou Prospect will be drilled by a vertical well to target San Carlos Sandstones, which terminate against a large thrust fault. The Xeme, Watsui and Yak prospects are interpreted from 3D seismic to be small and each confined to a separate fault block Source Rocks and Charge Charge is likely to emanate from the Eocene Kreyenhagen Formation or Cretaceous Moreno Formation Expected Well Performance Successful vertical wells are expected to flow approximately 68 to 270bopd, based on analogs from the F & I field. Chapman (2012) has assigned the three remaining producing wells of the F & I Field a 2P Reserve of barrels of oil as outlined in Table 20. Table 20: F & I Field 2P Reserve (Chapman 2012) FIELD Strata-X Gross (22.5%) volume PROVEN DEVELOPED PRODUCING RESERVE (barrels) PROBABLE DEVELOPED PRODUCING RESERVE (barrels) PROBABLE UNDEVELOPED RESERVE (barrels) TOTAL 2P RESERVE (barrels) 4,000 3,000 61,000 69,000 The aggregate Best Estimate Prospective Resource for the five prospects is estimated at 3,276,000 barrels (Gross to the 100% WI) (Chapman 2011) (Table 21). AWT has not recreated this evaluation. PROSPECT Table 21: Vallecitos AMI Prospective Resource (Chapman 2011) LOW ESTIMATE PROSPECTIVE RESOURCE (barrels) BEST ESTIMATE PROSPECTIVE RESOURCE (barrels) HIGH ESTIMATE PROSPECTIVE RESOURCE (barrels) Fox 513,000 1,092,000 1,671,000 Caribou 513,000 1,092,000 1,671,000 Watsui 171, , ,000 Xeme 171, , ,000 Yak 171, , ,000 Total 1,539,000 3,276,000 5,013,000 Strata-X Net (22.5%) 346, ,100 1,127,925

139 PROSPECTUS Program and Budget The Vallecitos Joint Venture has committed to drilling one exploration well in the next 18 months (Table 22). Depending on the results of that well additional wells may be drilled. YEAR Table 22: Vallecitos AMI Program and Budget PROGRAM PROPOSED EXPLORATION COST ($A) NET COST TO STRATA-X (22.5%) ($A) 1 deviated well drilled to 1450m Year 1 (2013) (4,700ft) $2,100,000 $475,000 * Total $475,000 * Well is expected to be drilled in 2013 however the Company has not made an election to participate in the well as of the time of this Prospectus Market The Vallecitos area is a mature oil producing province, such as at the nearby North Kettleman Dome and East Coalinga fields, which have produced hundreds of millions of barrels of oil. Oil can be trucked to the facilities there for piping to refineries in the southern California area. 2.6 Eagle Field, California Overview Strata-X has taken up an interest in a small area surrounding the Eagle Oil Field, which lies in the central San Joaquin Basin. The area is approximately 120km 2 (5,160 acres) gross and 3.6km 2 (880 acres) net to Strata-X and includes the discovered, and previously developed and produced Eagle Oil Field (Figure 7). The field is contained in sandstones of the Eocene Gatchell Formation within the prolific onshore San Joaquin Basin. The pool is proven, having produced approximately 10,000 barrels of oil at a rate of up to 192bopd and 427mcfd gas during testing in the 1980s and has 51,000 barrels (Strata-X Gross share) of remaining 2P Reserve (Chapman 2012). Current oil prices and improved drilling and completion techniques are expected to bring about renewed and commercial production of the field. The Joint Venture plans to drill the proposed Shannon-1 well to further appraise and develop the field. Two previous attempts to exploit the field by Kestrel Energy and Victoria Petroleum USA with slim-hole horizontal wells encountered significant drilling problems, which resulted in well abandonment. Consequently drilling issues are considered the project's primary risk. The Company plans to drill the Shannon-1 as a vertical well to avoid the problems encountered by the slim-hole horizontal wells Land Position Strata-X has a 20% interest in approximately 20km 2 (5,160 acres), with a net of approximately 3.6km 2 (880 acres) (Table 23). As noted under the Maverick Project, the landholder system is completely different in the USA to the Australian system.

140 138 STRATA-X ENERGY EAGLE FIELD STRATA-X INTEREST Table 23: Strata-X Eagle Field Acreage Position GROSS ACREAGE (acres) GROSS ACREAGE (km 2 ) NET ACREAGE (acres) NET ACREAGE (km 2 ) 20% 5, The Eagle Joint Venture consists of Lakes Oil, NL, First Australian Resources, and Empyrean Energy PLC in addition to Strata-X as operator. Numerous leases are held for a duration of one to three years and are extended by Strata-X when possible. The start date for leases varies and there can be a continual roll-off of acreage and roll-on of new acreage which may be added over time. The lease holdings can be retained indefinitely while production of oil and/or gas on the lease and payment to the leaseholder of the royalty due continues. The project is subject to a 20% royalty. The land in the area is criss-crossed by bitumen roads and the acreage position is on near flat farming land. For this reason, access is relatively easy to obtain and there are minimal landholder issues History The Eagle Oil Field was discovered in 1986 when Royal Resources deepened the existing Mary Bellochi-1 well, drilled and abandoned by Exxon in The well flowed 192bopd and 427mcfd from sandstones of the Eocene Gatchell Formation. At the time it was deemed uneconomic. In 2001 Kestrel Energy re-entered the well and attempted a slim-hole horizontal wellbore. However, as a result of stuck tools it was unsuccessful in its attempt to drill a lateral offshoot. The well did encounter significant oil shows over the length of Gatchell Formation intersected. The same problem was encountered in 2007 in an attempt by Victoria Petroleum USA to drill an appraisal well. Victoria was able to drill a horizontal well in the Gatchell formation but could not complete the well when the perforating guns became stuck in the wellbore Data There is sufficient 2D seismic coverage and previous wells to give good confidence that the proposed Shannon-1 well is positioned in a reasonable location to intersect and drain significant oil volumes Geological Structure From 2D seismic data, the Eagle Field is interpreted to cover an area of approximately 0.6km 2 (148 acres) (Figure 7). The eastern extent is defined by a normal fault with approximately 30m (100 feet) of throw, while the western side is stratigraphically truncated by an incised valley fill Reservoir It is hosted by Sandstones of the Eocene Gatchell Formation. The reservoir sandstone contains approximately 8m (26 feet) of pay. Log analysis indicates that the pay intervals average 8% porosity and 60% oil saturation. The estimated recovery factor is 20% of the remaining oil in place.

141 PROSPECTUS Seal and Trapping Mechanism The top and lateral (incised valley fill and cross-fault) are proven by the discovery of the field Source Rocks and Charge Charge is proven for this structure. Oils may be from the Eocene Kreyenhagen Formation or equivalent Expected Well Performance Vertical production wells are expected for flow at about 150bbl/day, in line with the results from the first vertical well previously drilled. However, deviated and fracture stimulated wells could be expected to flow at higher rates Reserves A recent review of the field by Chapman (2012), has assigned the Eagle Field a 2P Undeveloped Reserve of 253,926 barrels (Gross to the 100% WI) (Table 24). This is based on seismic and well data and existing production tests. Table 24: Eagle Field Reserve (Chapman 2012) FIELD 2P UNDEVELOPED RESERVE (barrels) Eagle field 253,926 Strata-X Gross (20%) volume 51, Program and Budget The current Joint Venture plans to drill the proposed Shannon-1 well to further appraise and develop the field if sufficient funds are raised. A single well (proposed Shannon-1) is to be drilled at an expense of $A2,782,000 with $A556,000 net to Strata-X (Table 25 and 26). The costs and timing described here have been provided by the directors of Strata-X. Table 25: Eagle Field Program and Budget - $10 million Raise YEAR PROGRAM PROPOSED EXPLORATION COST (100%) ($A) NET COST TO STRATA-X (20%) ($A) Year 1 (2013) Drill one (1) development well proposed Shannon-1 Deferred until funds are available -- Table 26: Eagle Field Program and Budget - $20 million Raise YEAR Year 1 (2013) PROGRAM Drill one (1) development well proposed Shannon-1 PROPOSED EXPLORATION COST (100%) ($A) NET COST TO STRATA-X (20%) ($A) $2,782,000 $556,000

142 140 STRATA-X ENERGY Market The Eagle Field is located within 32km (20 miles) of the North Kettleman Dome and East Coalinga fields which have produced over 1 billion barrels of oil. Oil can be trucked to the facilities there for transport to refineries throughout California, USA. 2.7 Margarita AMI - Gulf Coast Basin, Texas Overview Strata-X has a 37.5% interest in a study group operated by Wandoo Energy with partner Sun Resources NL, focussing on existing commercially available 3D seismic surveys in South Texas, and focused on the Frio and adjacent formations (Figure 8). Strata-X pays 50% of the exploration costs and drilling costs of the first well in an identified prospect and then has a 37.5% working interest in the event of a discovery. The exploration effort is targeting shallow oil prospects with reserves between 300,000 to 500,000 barrels La Capilla Prospect The La Capilla prospect has been defined by using a reprocessed 3D seismic data set tied to nearby fields and good well control with the target depth at approximately 1,680m (5,500ft).

143 PROSPECTUS Figure 8: La Capilla Prospect within the Margarita Exploration Project

144 142 STRATA-X ENERGY Land Position Strata-X has a 37.5% working interest in approximately 1.8km 2 (gross acres), with approximately 0.36km 2 (90 acres) net to Strata-X (Table 27). As noted under the Maverick project, the landholder system is completely different in the USA to the Australian system. Since the company is still acquiring acreage in the highly competitive USA market, AWT is not able to show the actual acreage position, though AWT is privy to the location of the acreage and play. The exact land position is not shown, but may be made available to securities regulators or certain qualified individuals under confidentiality. Should all leases be obtained as planned Strata-X will hold the acreage noted in Table 27. STRATA-X INTEREST Table 27: Strata-X La Capilla Acreage Position GROSS ACREAGE (acres) GROSS ACREAGE (km 2 ) NET ACREAGE (acres) NET ACREAGE (km 2 ) 37.5% A single lease was acquired in 2012 and is for a period of 3 years. The lease holdings can be retained indefinitely while production of oil and/or gas on the lease and payment to the leaseholder of the royalty due continues. The project is subject to a 20% royalty. The land in the area is criss-crossed by bitumen roads and the acreage position is on near flat farming land. For this reason, access is relatively easy to obtain and there are minimal landholder issues History The Gulf Coast Basin has proved to be a highly successful hydrocarbon province, and the vast untapped volume of both oil and gas ensures that the basin will continue as a major player for decades to come, both onshore and offshore. It is one of the world's great petroleum megaprovinces, with a hydrocarbon producing history stretching more than 100 years. More than 230Bboe had been discovered in the Gulf by the early 1990s. By geologic age, the young Cenozoic fill has proven the most prolific host, yielding 130Bboe. Next are Cretaceous units, with more than 85Bboe. Last, though still significant, is the Jurassic section, the oldest rocks in the basin, with 15Bboe discovered reserves. Current estimates are that another 100Bboe remain to be discovered. The Joint Venture has concentrated its efforts on the Frio and adjacent formations due to extensive data available and the highly prospective nature of the Frio Formation. The Laura Thomson Field lies within a kilometre (half mile) of the La Capilla prospect and provides a good analogue. It is a stratigraphic trap in the basal Frio sand, with cumulative oil production of 2.1mmbo and 2.2Bcf of gas. The average pay is 3.6m (12 feet) Data There is 3D seismic coverage and several wells in very close proximity to the prospect. Some of the nearby wells have oil shows downdip to give good confidence that the proposed La Capilla prospect is confidently mapped and the proposed well is positioned in a reasonable location to intersect and drain significant oil volumes.

145 PROSPECTUS Geological Structure There is 3D seismic coverage and wells give good confidence that the proposed La Capilla prospect is confidently mapped and the proposed well with prognosed TD of 1,800m (5,900ft) is positioned in a reasonable location to intersect and drain significant oil volumes. The structure grew during Vicksburg to Lower Frio time Reservoir The main reservoir is sandstone of the Oligocene basal Frio Formation, the same sand as in the down-thrown Laura Thomson field. The reservoir sandstone is approximately 3.6m (12 ft) thick. The main risk relates to development of target sand on growth structure. There are 3 other stacked sandstones in the Frio Formation that may also contain oil and/or gas that will be tested by the initial well as well as the top of the Vicksburg Formation Seal and Trapping Mechanism The top and 3-way dip lateral is proven by the discovery of Laura Thomson field. Fault seal is not considered to be a significant risk Source Rocks and Charge Charge is of oil and/or gas is fairly assured Expected Well Performance Vertical production wells are expected for flow about 80 to 150bbl of oil/day, in line with the results from the surrounding wells Prospective Resource A recent review of the prospect by Wandoo Energy has estimated a Prospective Resource, of the primary target horizons of between 260,000 to 440,000 barrels gross (97,500 to 165,000 gross) plus an unspecified volume of associated gas (Table 28). The middle prospective volume may be estimated as 131,250 barrels. These calculations are considered reasonable. No estimate has been given for the other zones in the Frio and Vicksburg. PROSPECT Table 28: La Capilla Prospective Resource (Wandoo Energy 2012) LOW CASE PROSPECTIVE RESOURCE BEST ESTIMATE PROSPECTIVE RESOURCE HIGH CASE PROSPECTIVE RESOURCE La Capilla 260, , ,000 Strata-X Gross (37.5%) 97, , ,000 volume

146 144 STRATA-X ENERGY Program and Budget The current Joint Venture plans to drill the proposed La Capilla-1 exploration well at an expense of $A534,000 with $A267,000 net to Strata-X (Table 29 and 30). As of the effective date the Company has not elected to participate in the drilling of the well and that will be determined if sufficient funds are raised. Table 29: La Capilla Prospect Program and Budget - $10 million Raise YEAR Year 1 (2013) PROGRAM Drill Proposed La Capilla-1 Prospect mapping of other leads PROPOSED EXPLORATION COST ($A) Deferred until funds are available Deferred until funds are available NET COST TO STRATA-X (50%) ($A) - - Table 30: La Capilla Prospect Program and Budget - $20 million Raise YEAR Year 1 (2013) PROGRAM PROPOSED EXPLORATION COST ($A) NET COST TO STRATA-X (50%) ($A) Drill Proposed La Capilla-1 $534,000 $267,000 Prospect mapping of other leads $100,000 $50, Market Oil can be trucked to a nearby pipeline or a refinery.

147 PROSPECTUS REFERENCES Cadman, S. J., Pain, L., Vuckovic, V. & le Poidevin, S. R., 1993 Canning Basin, W.A. Bureau of Resource Sciences, Australian Petroleum Accumulations Report 9, Chapman Petroleum Engineering Ltd (2011): Reserve and Economic Evaluation and Resource Assessment, Oil and Gas Properties, California and North Dakaota. Prepared for Ozcapital Ventures, Inc, January 1, Chapman Petroleum Engineering Ltd (2012): Reserve and Economic Evaluation Oil and Gas Properties, California. Prepared for Strata-X Energy, Inc., July 1, Freestone Energy, Vail Project Report, August 6, Haines, P.W., Geology and petroleum prospectivity of State Acreage Release Areas L11-1, L11-2, and L11-3, Canning Basin, Western Australia: Geological Survey of Western Australia, 12p. Havord, P.J., Apak, S.N. and Carlsen, G.M., Permo-Carboniferous Petroleum Reservoir Data, Selected Wells, Canning Basin, Western Australia. Geological Survey of Western Australia: Record 1996/11. Wandoo Energy, La Capilla Prospect, August 17, 2012 Higley, D.K., M.E. Henry, M.D. Lewan, and J.K. Pittman, 2003, The New Albany Shale Petroleum System, Illinois Basin Data and map image archive from the materialbalance assessment: United States Geological Survey Open File Report , 27 p. Walt King, Statistical and Economic Analysis, Beecher Island and Bonnie Fields, Yuma County, CO, Niobrara (Gas) Formation, May 28, 2010.

148 146 STRATA-X ENERGY 4 STATEMENTS AND LIMITATIONS AWT has primarily relied on data supplied by Strata-X and on several independent reports commissioned by Strata-X and/or Operators of permits that Strata-X holds interests in. Other data has included interpreted technical studies and technical reports. These were compiled and written by various industry and government bodies as well as consultants. The material was reviewed for its quality, accuracy and validity and was considered to be acceptable. In addition, farm-in agreements and other pertinent material pertaining to the permits were provided by Strata-X, either in full or in part. It is believed that the information received is reliable and there is no reason to believe that any material facts have been withheld. However, the level of review of the information provided to us does not amount to an audit, verification or due diligence, save to the extent necessary to satisfy ourselves that it is reasonable for us to rely on that information and no warranty can be given that this review has analysed all of the matters which a more extensive examination might reveal. AWT has not been required to check the status of Strata-X s interests in the permits. No warranty can be given that this review has analysed all of the matters, which an extensive examination might reveal. This report or any reference thereto, may not be included in any other document or distributed for any other purpose without the prior written consent of AWT to the purpose of such distribution and to the form and context in which the report or reference appears. The opinions and statements in this report are made in good faith and in the belief that such opinions and statements are not misleading Independence This report is our genuine opinion and the product of our professional judgment. AWT has not had and, at the date of this report, does not have any relationship with Strata-X or its subsidiary companies that could be regarded as capable of affecting AWT s ability to provide an unbiased opinion in relation to this report. In particular (i) the author of this report is not an officer or related party of (ii) neither the author of this report, or any director or senior employee of AWT involved in preparing the report has a substantial interest in or is a substantial creditor of or has any material financial interest in the transaction and (iii) AWT has not participated in any strategic planning work for Strata-X Fees and other benefits A fee will be received for the preparation of this report. Payment of the fee is not contingent on any matter. We have obtained an indemnity from Strata-X in respect of claims made by a third party against us as a result of (i) reliance by us on information provided by Strata-X which was incomplete, inaccurate, out of date or otherwise erroneous; (ii) failure by Strata-X to provide us with material information; and (iii) other claims related to or arising out of our provision of the report (except as a result of our negligence). This indemnity is a contractual arrangement between AWT and Strata-X which does not affect or limit AWT s liability to third parties in connection with this report. AWT will receive no other benefit for the preparation of this report. The author of this report has no pecuniary or other interest which could be regarded as capable of affecting his ability to provide an unbiased opinion in relation to this report.

149 PROSPECTUS Changes in facts or circumstances Advance copies of this report were provided to the Directors of Strata-X and minor changes were made as a consequence. There have been no material changes made to the report. We confirm that there has been no material change of circumstances or available information that we are aware of since this report was compiled and we are not aware of any significant matters arising from our evaluation that are not covered by this report which might be of a material nature Currency of Report This report has been prepared based on information available up to and including the date shown to be the valuation date. It has been prepared in accordance with the VALMIN Code applicable to the valuation of Mineral and Petroleum Assets and Securities Consent for use AWT has given and not withdrawn its written consent to the inclusion of this report in the Strata-X Prospectus Qualifications of the Authors Doug Barrenger received a BSc degree (geology) from the Australian National University and a Graduate Diploma in Computing Science from the Queensland University of Technology. He has more than 35 years of experience in the petroleum industry and has undertaken all facets of geological work, from wellsite and operations geology to prospect evaluation, risk analysis, reserve assessment, basin analysis, portfolio valuation and project management for both operated permits and new-venture roles and for development and exploration projects. He has worked on all Australian petroleum basins, including coal seam gas, and has overseas experience in SE Asia and Italy as an employee and as a consultant and has written numerous Independent Expert Reports and acreage Valuations. Doug is a founding partner of MBA Petroleum Consultants, which merged with AWT in 2009, a member of the Petroleum Exploration Society of Australia (PESA), the Society of Petroleum Engineer (SPE) and a twenty-year, Active Member of the American Association of Petroleum Geologists (number ). Doug Barrenger Technical Director

150 148 STRATA-X ENERGY 5 ABBREVIATIONS Bcf Bo boe Bboe bopd boepd COSg COSe DST EMV ft OR JV Lead Billion Cubic Feet Barrels of oil Barrels of oil equivalent Billion barrels of oil equivalent Barrels of oil per day Barrels of oil equivalent per day Geological Chance of Success Economic Chance of Success Drill Stem Test Expected monetary value Foot / feet Joint Venture Potential hydrocarbon trap that requires further work to determine if it might become a prospect. µm micrometre (or microns), which is 1 millionth of a metre or 1 thousandth of a millimetre m ma mm mcfd mmcfd mmbo NPV OOIP psi Prospect P1 or 1P P2 2P P3 3P TOC Metre Mega Anna (millions of years) million thousand cubic feet per day million cubic feet per day million barrels of oil Net Present Value Original oil in place Pounds per square inch Potential hydrocarbon trap that is ready to drill - exploration Proven category of a hydrocarbon volume Probable category of a hydrocarbon volume Proven plus Probable Possible category of a hydrocarbon volume Proven plus Probable plus Possible Total organic carbon

151 PROSPECTUS DEFINITIONS (AS USED IN THE 2011 CHAPMAN REPORT) Reserve Definitions a. Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. b. Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved + probable reserves. c. Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved + probable + possible reserves. d. Developed Reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low e. Developed Producing Reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty. f. Developed Non-Producing Reserves are those reserves that either have not been on production, or have previously been on production, but are shut-in and the date of resumption of production is unknown. g. Undeveloped Reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g., when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned. In multi-well pools, it may be appropriate to allocate total pool reserves between the developed and undeveloped categories or to sub-divide the developed reserves for the pool between developed producing and developed nonproducing. This allocation should be based on the estimator's assessment as to the reserves that will be recovered from specific wells, facilities and completion intervals in the pool and their respective development and production status. Resource Definitions a. Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be subclassified based on project maturity. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

152 150 STRATA-X ENERGY Solicitors report on tenements 1

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166 164 STRATA-X ENERGY Summary of material contracts 2

167 PROSPECTUS A summary of the material contracts and agreements to which the Company is a party is set out below: Maverick Agreement Background Strata X Energy and its wholly owned US subsidiary, Strata X Inc., have entered into a purchase sale and exploration agreement dated 23 August 2012 (Maverick Agreement) with: Jadela Oil (US) operating LLC (Jadela); El Indio Investment Corp (EIIC); and Gregory Leia (Leia), Under the Maverick Agreement, Jadela and EIIC (collectively Sellers) sold and Strata X Inc. purchased a percentage of working interest in the following assets and contractual rights described as: 660 Acre Assets; and the Option Assets. Asset Description The 660 Acre Assets comprise: certain oil and gas mineral rights derived from oil and gas mineral leases from certain mineral owners within a prescribed area within Maverick County, Texas (660 Acre); related machinery and equipment; data, records, licenses and permits relating to the 660 Acre Assets; and related contractual arrangements. The Option Assets comprise certain options to acquire rights to oil and gas mineral leases and, option contracts to acquire rights to oil and gas mineral leases including: 16,069 Acre Option Agreement; 4,916 Acre Option Agreement (collectively the Option Lands); and any mineral interest ratifications or options to acquire leases from the date of the Maverick Agreement which the Sellers may acquire in or around the Option Lands. Consideration In consideration for the acquisition of the following working percentage interest in the 660 Acre Assets and Option Assets, Strata X Inc. has paid the Sellers the following consideration: Seller description Working interest % Asset description Purchase Price Paid Form of consideration Jadela 35% Option Assets $US1,000,000 Cash EIIC 22.5% Option Assets $CAD650,000 2,600,000 (1) Shares in Strata X Energy (at the deemed issue price of US$0.25 per share) EIIC 15% 660 Acre Assets $CAD100, ,000 (1) Shares in Strata X Energy (at the deemed issue price of US$0.25 per share) Jadela 17.5% Option Assets $US532,000 Cash Total 75% Option Assets 15% 660 Acre Assets $2,297,000 (converted to US$) Cash $US1,532,000 Shares 3,000,000 (1) The Shares issued to EIIC above are subject to escrow for a period of 12 months from the date of completion of the Maverick Agreement pursuant to an escrow agreement between EIIC and an escrow agent appointed by the Company (Escrow Agent), the terms of which are summarised in this Section. In addition, to the above consideration, Strata X Inc. has assumed its obligations and liabilities (in proportion to its interest in the 660 Acre Assets) arising from: the Joint Venture Operating Agreement governing the operations of the 660 Acre Assets; and Strata X Inc s working percentage ownership of the 660 Acre Assets, (collectively 660 Acre Assumed Obligations). Grant of further option Option Assets Strata X Energy and Jadela have the right (but not the obligation) to pay bonus consideration ($50/net acre) to complete the payment of the option consideration under the 4,916 Acre Option Agreement in the following proportions: Strata X Inc. 57.5%; and Jadela 42.5%,

168 166 STRATA-X ENERGY up to an estimated aggregate option consideration (in total) of US$184, (Strata X Energy US$105, and Jadela US$78, respectively). Both of these additional option payments have been made by Strata-X, Inc.. Exercise of certain Option Assets Pursuant to the terms of the Maverick Agreement, Strata-X Energy exercised rights to acquire certain interests in a parcel of leases forming part of the 16,069 Acre Option Agreement and 4,916 Acre Option Agreement (Option Exercise Lands). By letter dated 14 November 2012 provided to the Company, Jadela (holding a 25% interest in the above option agreements) notified the Company that it would not fund or participate in the exercise of options relating to the Option Exercise Lands. As a result, the Company now holds a 100% interest in the Option Exercise Lands. General Strata X Inc. is liable for all related land transfer taxes, federal excise taxes, authorisations and related taxes, duties, fees and charges associated with the transactions contemplated under the Maverick Agreement. The Maverick Agreement contains warranties given by the Sellers for the benefit of Strata X Inc. that each has the requisite title, authority and capacity to undertake the transactions contemplated pursuant to the Maverick Agreement and that, in the case of Jadela, it has conducted operations on the 660 Acre property in compliance with applicable laws. Strata X Inc. and Strata X Energy have provided corresponding warranties for the benefit of the Sellers that each has the requisite right, title, authority and capacity to discharge their respective obligations under the Maverick Agreement. Each of the parties has agreed to indemnify the others for any obligations, loss, costs or damage suffered arising out of the Maverick Agreement (other than a 660 Acre Assumed Obligation up to US$1 million). Area of Mutual Interest Jadela and Strata X Energy agreed to enter into an Area of Mutual Interest (AMI) agreement covering the Maverick, Dimmitt and Zavala Counties in Texas (Area of Interest) for a period extending to December 21, 2013 (Mutual Interest Period). The AMI obliges any party acquiring an interest during the Mutual Interest Period in any oil and gas lease, mineral interest, farming agreement or similar right (Acquired Interest) in the Area of Interest to notify and offer the other party a right to acquire a proportionate share of the Acquired Interest (based on the proportionate rights that Strata X Energy and Jadela have, at the time of offer in the Option Assets, currently Strata-X Energy 75% and Jadela 25%) (Acquisition Notification). On receipt of the Acquisition Notification, the recipient party is entitled to acquire its proportionate share of the Acquired Interest in consideration for its proportionate share of the actual cost to initially acquire the Acquired Interest. Any Acquired Interests jointly held within the Area of Interest shall be the subject of a Joint Operating Agreement between Strata X Inc. and Jadela. Escrow Arrangements The Sellers have agreed pursuant to separate escrow arrangements (Escrow Agreement) to hold any Shares issued under the Maverick Agreement (see the Consideration Table above) in escrow for a period of 12 months from completion of the Maverick Agreement. The Shares may be released from the escrow upon the happening of one of the following trigger events: a) a change of control in the Company; b) the sale of the entire Company to a third party; c) a sale by Ron Prefontaine and Tim Hoops of their or their related parties shareholding in the Company; d) the resignation of Ron Prefontaine and Tim Hoops as directors of the Company; e) the capitalisation of the Company reaching $100 million by way of share equity or debt; or f) an insolvency event of the Company Sleeping Giant Agreement On 31 March 2011 the Company s wholly owned US subsidiary, Strata-X, Inc, entered into a Purchase and Sale Agreement and Area of Mutual Interest (as amended) with White Eagle Exploration Inc, Hendricks & Associates Inc, Fischer Oil & Gas Inc and Cody Oil & Gas Corporation (Sellers) to acquire an option (Option) to acquire 628 leases covering 173,193 net mineral acres which comprise the Sleeping Giant Project in North Dakota (Leases). Option over current Leases The Option can be exercised at any time before 31 October 2013 (Option Period) upon satisfaction of the following outstanding conditions: payment of US$200,000 before March 2013; payment of US$200,000 in cash or the equivalent value in shares of the Company on or before 31 March 2013; and commence drilling of 4 wells before 30 September 2013 (Required Wells). The Option can be exercised over all or a portion of the Leases, and exercised on multiple occasions for nominated parts of

169 PROSPECTUS the Leases prior to the expiration of the Option Period, with the consideration payable for the exercise of the Option being US$4 per net mineral acre for each Lease or portion thereof. At the election of Strata-X, Inc., the exercise price can be paid in cash or by the issue of shares in the Company provided that a minimum of 50% of the exercise price is paid in cash. Upon the exercise of the Option, the Leases nominated will be transferred to Strata-X, Inc. subject to an overriding royalty interest to be determined as follows: if existing landowner royalties (Existing Royalties) are less than 17.5% of production from the relevant Leases the difference between 17.5% and the Existing Royalties; or if Existing Royalties are equal to or more than 17.5% of production from the relevant Leases 1% of production from the relevant Leases. If the Options are not exercised and Strata-X, Inc. has commenced the Required Wells, Strata-X, Inc. is liable for plugging and reinstatement of the Required Wells and indemnifying the Sellers against any losses associated with the Required Wells. Once Strata-X, Inc. has notified the Sellers of the proposed location of the Required Wells, the Sellers must immediately transfer to Strata-X, Inc. the Leases containing the Required Wells. These Leases must be transferred back to the Sellers if the Sleeping Giant Agreement is terminated due to default by Strata-X, Inc. or if Strata-X, Inc. does not exercise the Option. New Leases The Sleeping Giant Agreement also contains arrangements between the parties where Strata-X, Inc. or the Seller obtain additional oil and gas leases (New Leases) within a specified area of mutual interest approximate to the Leases (AMI) during and up to 5 years following the expiration of the Option Period. These arrangements are as follows: a) If the Sellers obtain New Leases within the AMI they must offer to assign the New Leases to Strata-X, Inc. at a price equal to the acquisition cost plus a fee of US$1.00 per net mineral acre, which Strata-X, Inc. can refuse or accept at its discretion, with the Seller to retain an overriding royalty interest being the greater of: the difference between 17.5% and the aggregate of all Existing Royalties; or 1% of production under the New Leases; b) If Strata-X, Inc. obtains New Leases within the AMI, Strata-X, Inc. must: pay the Sellers a fee equal to US$1.00 per net mineral acre; and grant to the Sellers a royalty determined in the same manner as in (a) above. At the end of the 5 year period, the obligations with respect to the AMI will continue except that the area of the AMI will be reduced to 1 mile from the boundary of the Leases and New Leases in existence at that time. This arrangement will then continue until the expiration of one year after those Leases and New Leases have expired. If Strata-X, Inc. elects to release or not make payment of delayed rental on any of the Leases or New Leases, the Company must notify the Sellers and, if requested by the Sellers, assign the relevant Lease or New lease to the Sellers for no cost. If the Sleeping Giant Agreement is terminated due to default by Strata-X, Inc. or if Strata-X, Inc. fails to exercise the Option, any New Leases already obtained by Strata-X, Inc. must be assigned to the Sellers at no cost. Royalty Deed On 1 June 2010, Strata-X Inc. entered into an Agreement with Peak Resource Management Inc., (a company owned by Tim Hoops, a Director of the Company, and his spouse), pursuant to which the Company agreed to assign an overriding royalty interest (ORRI) of two and a half per cent of the gross proceeds from the sale of all oil, gas and other hydrocarbons, produced and marketed from the Sleeping Giant Project (details of which are set out in Section 3.5) in consideration for its services in identifying oil and gas leasehold interests and lands comprising the Vallecitos Project. The ORRI is only active after Strata-X Energy has recovered all funds expended in the project Eagle Prospect Operating Agreement Strata-X Energy, through its US subsidiary Strata-X Inc. entered into the Eagle Oil Pool Development Project Operating Agreement dated 1 November 2005 with First Australian Resources, Inc., Lakes Oil Inc., Sun Alpha LLC, Empyrean Energy PLC and Conley P Smith, LLC for the development of the Eagle Field Project in Kings County California (Eagle Operating Agreement). Strata-X Inc. has been appointed as operator of the joint venture. Interests Subject to the existing landowner royalties of up to 20%, the interests of the parties in the joint venture are as follows: Strata-X Inc 20% First Australian Resources, Inc 15% Lakes Oil Inc 15% Empyrean Energy PLC 38.5% Conley P Smith, LLC 1.5% Sun Alpha LLC 10%

170 168 STRATA-X ENERGY Conduct of Joint Operations The participants may, by election, participate in the costs of drilling wells on the joint venture area, or rework, sidetrack, deepen, recomplete or plug back a dry hole or a well no longer capable of producing in paying quantities, in proportion to their respective interests in the joint venture. In the event that a party (or parties) elects not to participate in the proposed exploration or appraisal of a nominated well, then the remaining parties may undertake the project and will be entitled to receive, in proportion to their respective interests, all of the non-participating party s interest in the well and share of production until the proceeds of such sale equals: 100% of each non-consenting party s share of the cost of acquiring equipment and operating the well; and 1000% of the portion of costs that the non-consenting party would have paid had they participated in the exploration and development of the well. Lien and Security Interest Each party grants to the other party a lien and security interest over its joint venture interests and shares of petroleum produced in order to secure their respective obligations under the Eagle Operating Agreement. Default A party that fails to pay, when due, its share of expenditure is a defaulting party. A defaulting party shall not be entitled to be notified of any proposed operation or to participate in any operation while remaining in default. In the event that a default is not cured within 30 days of delivery of a notice of default, the non-defaulting parties may require advance payment of the defaulting party s anticipated share of any item of expense that would have otherwise been payable under the Eagle Operating Agreement. Rights of Operator Strata-X Inc. is responsible for the conduct of the joint operations and may resign as operator at any time, or may be removed by the other participants 90 days after its failure to rectify a default under the agreement. Besides its direct charges, as operator of the joint operations Strata-X Inc. is entitled to charge a fee of 5% on the first US$1 million, 3% on the next US$3 million, and 1% of all further annual expenditures under approved budgets for drilling and producing operations. In addition, for any major construction over US$50,000 Strata-X Inc. is entitled to charge a fee of 5% of the first $100,000 in expenditures, 3% of costs in excess of US$100,000 and 1% of costs in excess of US$1,000,000. Participation Agreements In addition to the Eagle Prospect Operating Agreements, Strata-X Inc. is a party to a participation agreement with Conley P Smith, Empyrean Energy PLC and Lakes Oil Inc. (Participation Agreements). Pursuant to the Participation Agreements Strata-X Inc. holds in trust for each participant leasehold rights on the leases subject to the Eagle Operating Agreement. The Participation Agreements also provide that the interests are subject to any and all prior royalty burdens (including a 3% royalty payable to Black Coral Limited Liability Company that reduces to 2% upon prospect payout) and obliges the parties to enter into Area of Mutual Interest arrangements that require any party that acquires an additional lease within the Eagle Field Project to offer the other parties the opportunity to participate in the acquisition Vallecitos Operating Agreement Strata-X Energy, through its US subsidiary Strata-X Inc. entered into an Operating Agreement with Tyee Production Company LLC and Patriot Resources on 8 February 2008 for the Vallecitos Project (Vallecitos Operating Agreement). Patriot Resources has been appointed as operator of the project. Interests Subject to the existing landowner royalties of up to 20%, the interests of the parties in the joint venture are as follows: Strata-X Inc 22.5% Tyee Production Company LLC 38.75% Patriot Resources 38.75% Conduct of Joint Operations The participants may, by election, participate in the costs of drilling wells on the joint venture area, or rework, sidetrack, deepen, recomplete or plug back a dry hole or a well no longer capable of producing in paying quantities, in proportion to their respective interests in the joint venture. In the event that a party (or parties) elects not to participate in the proposed exploration or appraisal of a nominated well, then the remaining parties may undertake the project and will be entitled to receive, in proportion to their respective interests, all of the non-participating party s interest in the well and share of production until the proceeds of such sale equal: 100% of each non-consenting party s share of the cost of acquiring equipment and operation of the well; and 300% of the portion of costs that the non-consenting party would have paid had they participated in the exploration and development of the well.

171 PROSPECTUS Lien and Security Interest Each party grants to the other party a lien and security interest over its joint venture interests and shares of petroleum produced in order to secure their respective obligations under the Vallecitos Operating Agreement. Default A party that fails to pay, when due, its share of expenditure is a defaulting party. A defaulting party shall not be entitled to be notified of any proposed operation or participate in any operation while remaining in default. In the event that a default is not cured within 30 days of delivery of a notice of default, the non-defaulting parties may require advance payment of the defaulting party s anticipated share of any item of expense that would have otherwise been payable under the Vallecitos Operating Agreement. Rights of Operator As operator, Patriot Resources is responsible for the conduct of the joint operations. The operator may resign as operator at any time, or may be removed by the other participants 90 days after its failure to rectify a default under the agreement, Termination The Agreement remains in place for so long as any of the leases subject to the agreement are remain or are continued in force as to any part of the area subject to the agreement. Black Coral Royalty and Work-In Interest The interests of the parties in the joint venture are subject to an agreement with Black Coral Limited Liability Company (Black Coral) which grants Black Coral a 2% royalty interest in the project area and surrounding leases, which Black Coral may elect to convert to a 1% royalty interest and a 7.5% working interest in the project. Royalty Deed On 1 September 2008, Strata-X Inc. entered into an agreement with Peak Resource Management Inc., (a company owned by Tim Hoops, a Director of the Company, and his spouse), pursuant to which the Company agreed to assign an overriding royalty interest (ORRI) of one per cent of the gross proceeds from the sale of all oil, gas and other hydrocarbons, produced and marketed from the Vallecitos Project (details of which are set out in Section 3.5) in consideration for its services in identifying oil and gas leasehold interests and lands comprising the Vallecitos Project. The ORRI is only active after Strata-X Energy has recovered all funds expended in the project. At the time the royalty was granted to Peak Resource Management Inc., Strata-X (formerly Victoria Petroleum USA Inc) was a subsidiary of Victoria Petroleum N.L, an ASX listed company. As Mr Hoops was a director of Victoria Petroleum USA Inc. and a former director of Victoria Petroleum N.L., shareholder approval was obtained by Victoria Petroleum N.L.at its Annual General Meeting on 12 November 2008 to pay the royalty to Peak Resource Management Inc Margarita AMI The Company s subsidiary, Strata-X Inc and Sun Beta LLC (collectively Sun Group) entered into a study group with Wandoo Energy, LLC on 5 December 2005 (as extended) (Participation Agreement). Pursuant to the terms of the Participation Agreement Wandoo is to provide and evaluate 2D and 3D onshore seismic data of the Texas Gulf Coast (Area of Mutual Interest) and Sun Group has the first right of refusal to earn working interests in wells on any prospect generated within the Area of Mutual Interest (subject to the Net Revenue Interest (NRI) described below). In the event the parties agree to explore a prospect in the Area of Mutual Interest, Wandoo will deliver to Sun Group a minimum 77% NRI in mineral rights to underlying prospect lands. The acquisition costs will be paid by Sun Group: Sun Group s working interests on the first and subsequent wells are as follows: First well Sun Group will pay 100% of the authorised expenditure of the first well to completion to the tank battery or gas sales line meter to earn a 95% working interest. Upon production Sun Group s ongoing well working interest will reduce to 80% once it recovers its share of drilling completion and tie in costs to the tank battery or gas sales line (APO Working Interest); Second and Subsequent Wells If a second or subsequent well is called on a prospect Sun Group will have a 75% working interest and Wandoo will have a 25% working interest. In the event Sun Group does not wish to explore a prospect in the 3D data set presented by Wandoo and Sun Group declines to fund land costs Wandoo may explore the prospect and the only interest Sun Group will have is a royalty or carried working interest which the parties agree will be dependent on then market conditions and negotiated in good faith: Unless otherwise extended, the Participation Agreement expires on 31 December Convertible Notes On 29 October 2012 (Closing Date) the Company issued 16,724,000 million convertible notes (Convertible Note)

172 170 STRATA-X ENERGY pursuant to a Convertible Note Agreement. Each Convertible Note has a conversion price of CAD$0.25 (Conversion Price) and on conversion requires the Company to issue a Share and a half Warrant exercisable at CAD$0.50 on or before 29 October 2016 (together referred to as a Unit). Key provisions of the Convertible Note Agreement are as follows: the Convertible Notes may be converted at any time at the option of the holder into Units; the Convertible Notes will automatically convert immediately following the Company receiving notice from the ASX that the Company will be admitted to the Official List (CDI Conversion Event). In the event that the Convertible Notes are redeemed as a result of the CDI Conversion Event, the subscriber agrees to have applied pursuant to this Prospectus for Shares and Warrants issued and will do all things necessary to transfer the issued Shares to CDIs; the Convertible Notes are not secured; the Conversion Price will be subject to proportional adjustment for stock splits, stock dividends, and recapitalizations; the Convertible Notes will not be listed on the TSX-V; the Convertible Notes will mature two years from the Closing Date; the Convertible Notes will not carry a right to vote at meetings of shareholders of the Corporation; and a finders fee of 5% cash of the dollar value of Convertible Notes issued to subscribers and Warrants equal to 5% of the Units underlying the Convertible Notes raised will be paid to the finder Joint Lead Manager Mandate Agreement Strata-X Energy has entered into a joint lead manager mandate letter agreement (Mandate Agreement) with BBY Ltd (BBY) and Helmsec Global Capital Limited (Helmsec) for the purposes of appointing BBY and Helmsec as joint lead managers to undertake, arrange and manage the Offer (Services). Fee Payable to Joint Lead Managers In consideration for the provision of the Services, Strata-X Energy has agreed to pay the Joint Lead Managers: a) a commission of 5% (plus GST) of the funds raised under the Offer from clients of the Joint Lead Managers and parties introduced by the Joint Lead Managers; b) the issue of up to 2,500,000 Warrants with an exercise price of $0.36 and a 3 year exercise term. The number of Warrants to be issued to the Joint Lead Managers will be calculated at the ratio of 1 new Warrant for every $10 raised from clients of the Joint Lead Managers and parties introduced by the Joint Lead Managers; and c) a management fee of 1.00% (plus GST) of the funds raised under the Offer (Management Fee), (in total the JLM Fee), In addition, Strata-X Energy shall reimburse the Joint Lead Managers for all reasonable expenses incurred by the Joint Lead Managers in connection with its engagement under the Mandate Agreement. Opportunity to Conduct Additional Engagements Strata-X Energy has agreed to offer the Joint Lead Managers a first right of refusal to act as lead managers or joint lead managers to any further equity raisings by the Company for a period of 12 months following the quotation of the CDIs issued under the Offer on the ASX. Termination The Mandate Agreement may be terminated by the Company on 30 days written notice. In the event the Company terminates the Mandate Agreement prior to completion of the Offer and subsequently secures capital from a party introduced by the Joint Lead Managers during the 12 month period from date of termination, the Company must pay to the Joint Lead Managers the JLM Fee. This payment is not payable if the party was already known to the Company and the relationship does not exists as a result of a previous introduction made by the Joint Lead Managers. In addition, if the Company terminates the Mandate without cause and subsequently resolves to raise capital by way of equity or hybrid securities from a party introduced by the Joint Lead Managers during the 12 month period from date of termination, the Company must offer the Joint Lead Managers a first right of refusal for the lead role in arranging such capital raisings, subject to competitive terms. Indemnity The Mandate Agreement contains an indemnity granted by the Company in favour of the Joint Lead Managers, from and against any and all loss liability or costs arising out of the Mandate Agreement, the Services provided by the Joint Lead Managers or the Offer generally Financial Advisory Services Agreement Strata-X Energy has entered into a financial advisory services agreement dated 14 May 2012 (Financial Advisory Services Agreement) with Bizzell Capital

173 PROSPECTUS Partners Pty Ltd (BCP) for the purposes appointing BCP as financial advisor to the Issue and to assist with the appointment of the lead managers and other participants to the Issue (Financial Advisory Services). In consideration for the provision of the Financial Advisory Services, Strata-X Energy has agreed to pay BCP: a retainer fee of $10,000 per month from the date of the letter until completion of the Issue (this fee is to be rebated against the Issue Success Fee); and a commission of 0.75% of the funds raised under the Issue (Issue Success Fee). In addition, Strata-X Energy shall reimburse BCP for all reasonable expenses incurred by BCP in connection with its engagement under the Financial Advisory Service Agreement Loan Agreement and General Security Agreement The Company has entered into a loan agreement dated 26 November 2012 with Prepet Pty Ltd (Prepet), an entity associated with Ron Prefontaine. The key terms of the loan agreement are as follows: Amount The Company may borrow up to a maximum of AUD$2,000,000 from Prepet, which can be drawn down in AUD$500,000 increments upon the Company providing Prepet 5 days written notice. As at the date of this Prospectus, the loan has been fully drawn down. Interest Interest will accrue on the outstanding balance of the loan at a rate of 6.5% per annum, compounded annually. Term Any outstanding balance of the loan, including principal and accrued interest, will be immediately due and payable by the Company on the earlier of: 9 November 2014; ten (10) Business Days of the Company being admitted to the official list of the ASX on an unconditional basis; and the occurrence of any specified event of default. Covenants and Undertakings Under the loan agreement the Company provides various covenants and undertakings that create obligations with respect to: creating any mortgages, charges, liens or encumbrances that rank equal to or in priority to the security interest of Prepet over the assets of the Company; issuing shares in any subsidiary of the Company other than to Prepet; declaring or providing for any dividends or other payments based on share capital; redeeming or purchasing any of its shares; selling or disposing of any substantial or material part of the business, assets or undertaking, including its interest in the shares or assets of any subsidiary outside the ordinary course of business; paying out any shareholders loans or other indebtedness to non-arm s length parties; guaranteeing the obligations of any person; and entering into a contract which will result in a financial commitment of greater than AUD$500,000 without the written consent of Prepet, whose consent will not be unreasonably withheld. General Security Agreement Pursuant to the terms of the loan agreement, the Company entered into a General Security Agreement with Prepet on 26 November 2012, under which it provided in favour of Prepet a security interest in all of its present and after-acquired personal property and undertaking and any proceeds from the sale or other disposition thereof (excluding consumer goods) Canning Basin Finder s Fee Agreements The Company proposes to enter into agreements with certain consultants who have assisted in securing the Company s Canning Basin application, pursuant to which the Company will agree to: a) issue in aggregate, 200,000 Warrants (on the terms described in Section 13.6); and b) in the event of a proposed transfer of the Canning Basin permit (once granted), impose a 0.5% gross overriding royalty on the sale of gas and other hydrocarbons produced, saved marketed from by virtue of the permit. Whilst the Company has agreed to provide the consideration above, these agreements have not been finalised or executed as at the date of this Prospectus Employment Agreements The Company has entered into employment agreements with Tim Hoops, Tim Bradley and David Hettich that govern, amongst other things, their duties, remuneration

174 172 STRATA-X ENERGY and entitlements. Further details of these agreements are set out in Section Non-Executive Letters of Appointment The Company has entered into letters of appointment and consulting agreements with Ron Prefontaine, Bohdan (Don) Romaniuk and Donald Schurman (and their respective service entities) in respect of their appointments as Non- Executive Directors of the Company. The agreements are each in standard form and detail the nature of each Non- Executive Director s appointment, their duties and their remuneration entitlements (as set out in section 7.4) Indemnity Deeds Each of the Directors of the Company has entered into an Indemnity Agreement with the Company whereby the Company has agreed at the Company s discretion, to effect and maintain insurance in respect of Directors and Officers liability. The Company has also agreed to provide certain indemnities to each of the Directors, to the fullest extent permitted by law. Each Deed is governed by and construed in accordance with the laws of the province of British Columbia, Canada.

175 PROSPECTUS

176 174 STRATA-X ENERGY Additional information 3

177 PROSPECTUS Applicable Canadian Laws The Company is incorporated in Canada under the Business Corporations Act, British Columbia. As such, the rights of existing Shareholders and holders of Warrants and Options and new Shareholders, Warrant and Option holders, will continue to be governed by provisions pertaining to the Company under applicable Canadian laws Application of TSX-V Rules and Listing Rules As the Company is a reporting issuer in British Columbia, Alberta, and Ontario and is listed on TSX-V, the Company is subject to the Securities Act and the rules and policies of the TSX-V. The Company will continue to be subject to the rules and policies of the TSX-V whilst the Company remains listed on TSX-V, notwithstanding the admission of the Company to the Official List of the ASX. Additionally, upon admission to the Official List, the Company will become subject to the Listing Rules. Whilst the Company is listed on both the ASX and TSX-V the Company shall be subject to the following provisions: a) even if contrary to a provision in the Articles of the Company, if the Listing Rules prohibit an act being done, the act shall not be done; b) no provision contained in the Articles of the Company can prevent an act being done that the Listing Rules require to be done; c) if the Listing Rules require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be); d) if the Listing Rules require the Articles of the Company to contain a provision which is omitted, the Articles of the Company are deemed to contain that provision; e) if the Listing Rules require the Articles of the Company to omit a provision which is in the Articles of the Company, the Articles of the Company are deemed not to contain that provision; and f) if any provision of the Articles of the Company is or becomes inconsistent with the Listing Rules, the Articles of the Company are deemed not to contain that provision to the extent of the inconsistency. Additionally the Articles of the Company provide that in the event that the Company s securities are admitted to trading on a foreign stock exchange (Foreign Exchange), including without limitation the ASX, then so long as the Company s securities are admitted to trading on the Foreign Exchange it shall comply with the rules and regulations of the Foreign Exchange except to the extent that such rules are contrary to or inconsistent with the Listing Rules of the TSX or TSX V Articles The current Articles of the Company were adopted by a special resolution passed on 18 September The Articles were amended to comply with the ASX Listing Rules, and the ASX has provided an in principle confirmation that the form of the Articles of Association are consistent with the ASX Listing Rules. The following is a summary of the key provisions of the Articles and principal rights and restrictions of Shareholders. This summary does not purport to be exhaustive or constitute a definitive statement of the rights and liabilities of the Shareholders: a) Voting Subject to any special rights or restrictions as to voting attached to any Shares or class of Shares, on a show of hands every member who, being an individual, is present in person or, being a corporation, is present by a duly authorised representative, shall have one vote, and on a poll every holder of Shares who is present in person or by proxy shall have one vote for every Share held by him. b) Dividends The Board may from time to time declare and pay dividends. All dividends on shares of any class must be declared and paid according to the number of shares held. Dividends shall not bear interest against the Company. c) Issue of Shares, Warrants and Options The Directors may (subject to Business Corporations Act of British Columbia, Canada) allot or issue further Shares, Options and Warrants in the Company on such terms as they see fit. d) General Meetings Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act (of British Columbia, Canada), the Company must hold an annual general meeting at least once per calendar year and not more than 15 months after the last annual general meeting. The meeting may be held anywhere in North America or Australia. e) Directors The number of Directors of the Company is that number as set out by ordinary resolution which must not be less than three. A Director is not required to hold any shares of the Company to be qualified but must meet the requirements of the Business Corporations Act. All Directors are required to retire at each annual general meeting of the Company. All such Directors, however, are eligible for re-election or re-appointment at such meeting. f) Restrictions on voting by Directors A Director who holds a disclosable interest in a contract or transaction into which the Company proposes to

178 176 STRATA-X ENERGY enter and who is present at the meeting of Directors at which the contract or transaction is considered may be counted in the quorum for the meeting but must abstain from voting on the contract or transaction unless all of the Directors have a disclosable interest in the contract or transaction. g) Remuneration of Directors Directors are entitled to remuneration for acting as a Director of the Company, as the Directors may, from time to time, determine. The Company must reimburse Directors for reasonable expenses incurred that are related to the business of the Company. If a Director performs any professional services or other services to the Company outside the ordinary duties of a Director, he or she may be paid additional remuneration as fixed by the Board. Investors should note that they will be issued with CDIs under this Prospectus. With the exception of voting arrangements, holders of CDIs will have the same rights as holders of Shares, which are legally registered in their own name. Please refer to Section 13.4 below for a summary of the rights afforded to CDI holders Rights Attaching to CDIs in the Company The ASX Settlement Operating Rules contain provisions designed to ensure that holders of CDIs have all the direct economic benefits of holding shares. With the exception of voting arrangements, CDI holders have all the same rights as Shareholders whose shares are registered in their own name. Further details regarding the rights of CDI holders are set out below. a) Voting As holders of CDIs do not appear on the Company s share register, they are not entitled to vote personally at Shareholder meetings. However the ASX Settlement Operating Rules require the Company to send notices of Shareholder meetings to each CDI holder at the address recorded on the CDI register if any Shareholder meeting is convened. This notice must include a form permitting the CDI holder to direct CDN to cast proxy votes according to the wishes of the CDI holder for whom it holds Shares. The Company is obliged to collect and process these directions. CDN is required to vote in accordance with the instructions it receives from CDI holders. If a CDI holder wishes to vote in person at a meeting of Shareholders (whether on a show of hands or on a poll), he or she will first need to convert his or her CDIs into Shares. b) Dividends and other entitlements The ASX Settlement Operating Rules ensure that CDI holders have the right to receive dividends, rights issues and bonus issues as Shareholders. Where a dividend or any other cash distribution is made in a currency other than Australian dollars, the Company s Australian registry (acting as CDN s agent) will convert the dividend or distribution into Australian dollars. The payment will then be made to CDI holders in Australian dollars in accordance with each CDI holder s entitlement. c) Takeovers If any takeover bid is made in respect of any of the Shares of which CDN is the registered holder, CDN is prohibited from accepting the offer made under the takeover bid except to the extent that acceptance is authorised by the CDI holders in accordance with the ASX Settlement Operating Rules. CDN must accept a takeover offer if a holder of CDIs instructs it to do so in respect of the Shares underlying those CDIs Shares on Issue As at the date of this Prospectus, the Company has 80,461,105 Shares on issue (1) (including 16,724,000 Shares to be issued on conversion of the Convertible Notes as described in Section 12.6). These Shares have been issued progressively since incorporation as follows: a) Shares on incorporation on incorporation in June 2007 the Company issued 4,000,000 Shares at CAD$0.05 each to seed investors. b) Canadian Initial Public Offering (IPO) in December 2010 the Company issued 6,000,000 Shares under its initial public offering at a price of CAD$0.10 per Share. c) IPO Agent Options the Company issued 600,000 Options to arms length parties as agent for the Company s initial public offering. The Company has issued 555,000 Shares pursuant to the exercise of these Options and the remaining 45,000 unexercised Options have since expired. d) Qualifying Transaction pursuant to th Share Exchange Agreement executed on 26 September 2011, the Company issued 19,980,000 Shares in exchange for all of the Shares on issue in Strata-X Inc. e) Qualifying Transaction Placement concurrently with the Qualifying Transaction, the Company conducted a private placement pursuant to which it issued 12,328,156 Shares at an issue price of CAD$0.30 per Share. (1) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued.

179 PROSPECTUS f) July 2012 Placement on 13 July 2012 the Company finalised a private placement (which initially closed on 29 June 2012 but was subsequently extended by 2 weeks with the consent of the TSX-V) pursuant to which it issued: 2,375,000 Shares at an issue price of CAD$0.25 per Share; and 12,920,000 convertible notes which converted to 12,920,000 Shares on 21 December The issue price of the convertible notes was CAD$0.25 per note. g) Sleeping Giant Project pursuant to the terms of the sale and purchase agreement dated 31 March 2012, the Company issued 483,349 Shares on 11 September 2011 to the vendors of the Sleeping Giant Project h) Maverick Oil Project pursuant to the terms of the purchase sale and exploration agreement dated 23 August 2012, the Company issued 3,000,000 Shares on 26 September 2012 to the vendors of the Maverick Oil Project. i) Exercise of Directors Options pursuant to the exercise of options issued under the Company s Stock Option Plan, the Company issued 520,000 Shares on 5 October 2012 and 320,000 Shares on 7 November j) October 2012 Placement on 29 October 2012 the Company finalised a private placement pursuant to which it issued 1,255,600 Shares at an issue price of CAD$0.25 per Share. k) October 2012 Convertible Note on 29 October 2012 the Company issued 16,724,000 Convertible Notes (the Convertible Notes) which will automatically convert to 16,724,000 Shares and 8,362,000 Warrants immediately following the Company receiving notice from the ASX that the Company will be admitted to the Official List. Further details in relation to the Convertible Notes are set out in Section Rights attaching to Warrants on Issue A warrant issued in Canada is a similar form of security to an option issued in Australia in that it is a right to purchase a Share of the Company at a set price until a particular future date. As at the date of this Prospectus (on a pro-forma basis assuming Maximum Subscription), the Company has 37,371,525 Warrants outstanding exercisable over Shares, as follows: Description Expiry Date Exercise price (CAD$) Qualifying Transaction (QT) Warrants QT Placement Warrants July 2012 Private Placement Warrants (4) October/November 2012 Private Placement Warrants October 2012 Convertible Note Warrants (1)(4) Number Granted Number Outstanding 22 March ,990,005 9,990, March March June June June June July July October November November ,164, ,653 1,037, ,000 6,060,000 1,600, , , , ,000 3,500 6,164, ,653 1,037, ,000 6,060,000 1,600, , , , ,000 3, October ,362,000 8,362,000 Canning Basin 25 September , ,000 Warrants (2) JLM Warrants (3) 3 years from the date of issue ,000,000 2,000,000 (1) Warrants to be issued on conversion of the Convertible Notes, as described in Section (2) Warrants to be issued as finder s fees subject to documentation for the issue being finalised, as described in Section (3) A maximum of 2,000,000 Warrants will be issued to the Joint Lead Managers on completion of the Offer as described in Section (4) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued.

180 178 STRATA-X ENERGY Qualifying Transaction Warrants In addition to the 19,980,000 Shares (described in Section 13.5(d)), the Company issued 9,990,005 Warrants to the vendors of Strata-X Inc. pursuant to the Share Exchange Agreement. Each Warrant has an exercise price of CAD$0.50 and an expiry date of 22 March QT Placement Warrants The Company issued 6,164,067 Warrants with an exercise price of CAD$0.50 and an expiry date of 22 March In addition, 658,653 warrants with an exercise price of CAD$0.50 and an expiry date of 22 March 2013 were issued to arm s length finders. July 2012 Private Placement Warrants On 13 July 2012 the Company finalised a private placement (which initially closed on 29 June 2012 but was subsequently extended by 2 weeks with the consent of the TSX-V) pursuant to which it issued: 1,037,500 Warrants with an exercise price of CAD$0.60 and an expiry date of 29 June 2014; and 150,000 Warrants with an exercise price of CAD$0.60 and an expiry date of 13 July In conjunction with the placement on 13 July 2012, the Company issued 12,920,000 Convertible Notes which on 21 December 2012 converted into 12,920,000 Shares and 6,460,000 Warrants with an exercise price of CAD$0.50 and an expiry date of 29 June and 13 July In addition, 1,600,000 Warrants with an exercise price of CAD$0.40 and an expiry date of 29 June 2014 and 118,000 Warrants with an exercise price of CAD$0.60 and an expiry date of 13 July 2014 were issued to arms length finders in connection with the placement. October/November 2012 Private Placement Warrants The Company issued 527,800 Warrants on 30 October 2012 and 100,000 Warrants on 5 November 2012 to investors who participated in a private placement of Shares. The Warrants have an exercise price of CAD$0.50 and an expiry date four years from the date they were issued. In addition, 3,500 Warrants with an exercise price of CAD$0.50 and an expiry date of 31 October 2016 were issued to an arms length finder in connection with the placement. October 2012 Convertible Note Warrants On 29 October 2012 the Company issued 16,724,000 Convertible Notes (the Convertible Notes) which will automatically convert to 16,724,000 Shares and 8,362,000 Warrants immediately following the Company receiving notice from the ASX that the Company will be admitted to the Official List. Further details in relation to the Convertible Notes are set out in Section Canning Basin Finder s Fee Warrants The Company proposes to issue 200,000 Warrants with an exercise price of CAD$0.34 and an expiry date of 25 September 2015 to consultants in consideration for services provided in relation to the Canning Project (Finder s Fee Warrants). The agreement relating to the Finder s Fee Warrants have not yet been finalised or executed. JLM Warrants The Company has agreed to issue up to a maximum of 2,000,000 Warrants to the JLMs as described in section 12.7 of this Prospectus. Terms and Conditions The key terms of the existing Warrants are as follows: a) The Warrants were issued for nil consideration; b) The Shares issued as a result of the exercise of any Warrant will rank pari passu in all respects with previously issued Shares of the Company; c) Warrants are exercisable by completing and lodging the required notice of exercise form and payment of the Exercise Price with the Company on or before the Expiry Date; d) In the event of reconstruction (including consolidation, subdivision, reduction or payment of a dividend ) of issued capital of the Company, the number of Warrants and the exercise price of Warrants shall be reconstructed in the same proportion as the issue capital of the Company is reconstructed and in a manner which will not result in any additional benefits being conferred on the Warrant holders which are not conferred on Shareholders of the Company, but in all other respects the terms for the exercise of the Warrants shall remain unchanged; e) If the Company amalgamates, consolidates or merges with another company before the exercise of any Warrant, the Company must take all steps necessary to ensure that the Warrant holders rights are not materially prejudiced; f) If the Company is to be liquidated, dissolved or woundup, the right to exercise the Warrants will terminate ten days before the first day fixed for payment of any distribution amount in respect of the Shares and the holder shall be given written notice at least 30 days before the first day fixed for such payment. g) No voting rights or dividend rights attach to the Warrants.

181 PROSPECTUS Options Strata-X Energy Stock Option Plan The Company has adopted a Stock Option Plan (summarised below) (Stock Option Plan). At the date of this Prospectus, the Company has outstanding 2,960,000 Options that were issued under the Stock Option Plan. Of this number, 2,050,000 have been issued to Directors (or persons or entities associated with them) on terms set out in Section 7.6. The remaining 910,000 incentive stock options have been issued to non directors of the Company as follows: Name Options Exercise Price (CAD$) Expiry Date Doug Walker 160, ,000 David Hettich 100, ,000 $0.10 $0.30 $0.30 $ November September January September 2022 Larry Kellison 100,000 $ September 2022 Greg Livin 50,000 $ September 2022 Heidi Eng 50,000 $ September 2022 Total 910,000 The key terms of the Stock Option Plan are as follows: a) Options granted pursuant to the Company s Stock Option Plan will not exceed a term of ten years and are granted at an option price and on other terms which the Directors determine are necessary to achieve the goal of the Option Plan while according with regulatory policies. b) The option price may be at a discount to the prevailing market price, which discount will not, in any event, exceed that permitted by any stock exchange on which Strata-X Energy Shares are listed for trading. c) The aggregate number of Strata-X Energy Shares reserved for issuance under the Option Plan may not exceed 10% of the issued and outstanding Strata-X Energy Shares from time to time. In addition, the aggregate number of Strata-X Energy Shares so reserved for issuance in any 12-month period to any one person shall not exceed 5%, or to any one consultant or any one employee conducting investor relations activities shall not exceed 2%, of the issued and outstanding Strata-X Energy Shares from time to time. d) Should a participant be dismissed as an officer or key employee by Strata-X Energy, or Strata-X Energy cancels or rescinds for breach of contract the agreement pursuant to which the participant was to provide consulting or related services, all unexercised option rights of that participant will immediately terminate, notwithstanding the original term of the option granted to such participant. If a participant ceases to be a Director, officer, key employee or consultant of Strata-X Energy as a result of: a) disability or illness preventing the participant from performing the duties routinely performed by such participant; b) retirement at the normal retirement age prescribed by any pension plan Strata-X Energy may adopt; c) resignation; or d) such other circumstances as may be approved by the Board of Directors; such participant shall have the right for a reasonable period as set out in his or her option agreement (the Expiry Period ) following the date of ceasing to be a Director, an officer, key employee or consultant (or, if earlier, until the expiry date of the option rights of the participant pursuant to the terms of the option agreement) to exercise all options held by such participant to the extent they were exercisable on the date of ceasing to be a Director, an officer, key employee or consultant. Upon the expiration of such Expiry Period, unless already expired pursuant to the terms of the option agreement, all unexercised option rights of that participant shall immediately terminate and shall lapse notwithstanding the original term of the option granted to such participant under the Option Plan Differences between Canadian and Australian corporate law position The Company is incorporated under the laws of Canada. This section contains a summary of certain Canadian and Australian corporate laws to assist in understanding the regulatory regime which the Company is currently, and will be, subject to. The comparison below is only an overview and should not be viewed as an exhaustive statement of either the relevant Canadian or Australian laws.

182 180 STRATA-X ENERGY Canadian Position Australian Position Share Issues The Company must comply with both the Canadian and Australian position Neither the Business Corporations Act (British Columbia) (BCA) nor the British Columbia Securities Act (Securities Act) impose any restrictions on the issue of Shares (subject to compliance with the prospectus requirements or exemptions from such requirements available under the Securities Acts), but in the event of issuance of more than 50% of the issued capital of the Company in combination with a change in control, such share issuance will be deemed a reverse takeover under the TSX-V Listing Rules and the TSX-V Listing Rules may require shareholder approval of issuance. The Articles do not contain any requirement for an offer of new Shares to be made to existing shareholders prior to making an offer to persons who are not currently shareholders of the Company. Substantial Shareholders Shareholders need only comply with the Canadian position The Securities Acts provide that a shareholder is an insider (as defined under the Securities Acts) if that person has (and that person s associates have) a relevant interest in 10% or more of the voting shares in the Company. The Securities Acts require a shareholder who is an insider in a reporting company to file insider reports in the prescribed form with the Securities Commission of each jurisdiction in which the Company is a reporting issuer. In addition, within two days after the person becomes aware that they have become an insider, an early warning report in the prescribed form must be filed with such Securities Commission. Similar notification requirements apply in the event that a shareholder s substantial holding increases or decreases by more than 2% of the total votes in a company or where a person ceases to have a substantial holding. Takeovers Shareholders need only comply with the Canadian position The Securities Acts govern takeovers of reporting issuers in Canada. The acquisition of more than 20% of a company s issued capital is considered to be a takeover bid. The Securities Acts set out certain exceptions which apply to these rules, such as where securities are acquired from less than five holders. Takeover bids must treat all shareholders alike and must not involve collateral benefits. Various restrictions on conditional offers apply and there are also substantial restrictions on the ability of an offer or to withdraw or suspend a takeover offer. The BCA and Securities Acts also permit compulsory acquisition by 90% holders The Listing Rules permit Directors to allot equity securities without shareholder approval up to a maximum number in any 12 month period equivalent to 15% of the issued capital of the company prior to the date of issue. The Listing Rules do not contain any requirement for an offer of new Shares to be made to existing shareholders prior to making an offer to persons who are not currently shareholders of the Company. Pursuant to a series of new Listing Rules, provided certain requirements are met (including prior shareholder approval) a company may issue a further 10% of its capital (beyond the 15% described above). The Corporations Act provides that a shareholder has a substantial holding if that person has (and that person s associates have) a relevant interest in 5% or more of the voting shares in the Company. The Corporations Act requires a shareholder who is a substantial shareholder in a listed company to give written notice in the prescribed from to the company and ASX within 2 business days or, if there is a takeover bid for the company, by 9:30a.m. on the next trading day of the ASX, after the person becomes aware that they have become a substantial shareholder. Similar notification requirements apply in the event that a shareholders substantial holding increases or decreases by more than 1% of the total votes in a company or where a person ceases to have a substantial holding. The Corporations Act governs a takeover of certain listed and unlisted companies registered in Australia. The Corporations Act provides generally that a person must not acquire a relevant interest in issued voting shares in a company, if because of the transaction a person s voting power in the company: Increases from 20% or below to above 20%; or Increases from a starting point which is above 20% but less than 90%. The Corporations Act sets out certain exceptions which apply to these rules, such as acquisitions of relevant interests in shares where that acquisition is a creeping acquisition of not more than 3% in any 6 month period.

183 PROSPECTUS Canadian Position Australian Position Takeover bids must treat all shareholders alike and must not involve collateral benefits. Various restrictions on conditional offers apply and there are also substantial restrictions on the ability of an offer or to withdraw or suspend a takeover offer. The Corporations Act also permits compulsory acquisitions by 90% holders Application of Corporations Act As the Company was not incorporated in Australia, it is not subject to the provisions of Chapters 6, 6A, 6B and 6C of the Corporations Act. These provisions deal with the acquisition of shares, including substantial holdings and takeovers. Further details with respect to a number of these provisions are set out above in Section However, as the Company is registered as a foreign company in Australia pursuant to Part 5B.2 of the Corporations Act it is subject to the provisions of Part 5B.2 of the Corporations Act. Further, as the Company was not incorporated under the Corporations Act 2001 (Cth), Chapter 2E of the Corporations Act (relating to financial benefits to related parties) does not apply to the Company Litigation The Company is not engaged in any litigation which has or would be likely to have a material adverse effect on either the Company or its business ASX Waivers The Company has applied for a number of the following in-principle determinations from ASX, as described below. Whilst the in-principal determinations have not been formally granted as at the date of this Prospectus, ASX have indicated they may be minded to grant the following waivers: a) that the ASX would be likely to grant a waiver of Listing Rule 1.1, Condition 6 to the extent necessary to permit the Company to apply for quotation of only those CDIs issued pursuant to the Offer subject to the conditions that the Company applies for quotation of new CDIs issued into the Australian market on a monthly basis, the Company provides to the market a monthly update of the net changes of CDIs over its Shares and that the Company releases details of this wavier as pre-quotation disclosure; b) that the ASX would be likely to grant a waiver from Listing Rule 1.1 Condition 11 to the extent necessary to permit the Company to have on issue 1,307,500 Options that have an exercise price of CAD$0.10; c) that the ASX would be likely to grant a waiver from Listing Rule 2.4 to the extent necessary to permit the Company to apply for quotation only of those CDIs issued pursuant to the Offer, subject to the conditions that the Company applies for quotation of CDIs issued into the Australian market on a monthly basis, the Company provides to the market a monthly update of the net changes of CDIs over its Shares and that the Company releases details of this wavier as pre-quotation disclosure; d) that the ASX would be likely to grant a waiver of Listing Rules 6.16, 6.19, 6.21, 6.22 and regarding the rights and obligations that apply to Options to the extent necessary to permit the Company to have and implement the terms of the Stock Option Plan that do not comply with Listing Rules 6.16, 6.19, 6.21, 6.22 and on the condition that the Company does not issue any further securities under the Stock option Plan without amendments, releases the Stock Option Plan to the market as pre-quotation disclosure, and undertakes to obtain ASX approval for any future issue of Options and before the implementation of any future employee or director option plans; e) that the ASX would be likely to grant a waiver of Listing Rules 6.16, 6.19, 6.21, 6.22 and to the extent necessary to permit the Company to have Warrants on issue that were issued in compliance with the Business Corporations Act (Alberta), the Securities Act (Alberta), the Securities Act (British Columbia) and the Securities Act (Ontario), and the TSX V Manual; f) that on receipt of an application for admission to the Official List of the ASX by the Company, the ASX would be likely to form the view that : a. the restrictions in clauses 1, 3, 7, 8 and 9 of Appendix 9B apply to the Company as if it were admitted to the Official List of the ASX on 26 September 2011; b. the restrictions in Appendix 9B to unrelated seed investors who are not subject to escrow under the TSX-V do not apply; c. the restrictions in Appendix 9B to unrelated Convertible Note holders and who are subject to escrow under the TSX-V would apply as if the Convertible Note holders are seed investors and that:

184 182 STRATA-X ENERGY a 12 month escrow period would be imposed; and. the cash formula relief would apply if the Convertible Notes are converted to CDI s prior to admission of the Company on ASX; and d. the restrictions in Appendix 9B would be applied to any future issue of securities of the Company on a case by case basis. No waivers of the Listing Rules have as yet been granted to the Company by the ASX and any waivers of the Listing Rules granted by the ASX will only be granted after application for admission of the Company to the Official List of the ASX is made as part of the ASX s determination on the listing application of the Company. The Company cannot give any assurance that the ASX will grant the waivers that the Company will apply for on the above terms Trading History Set out below is an overview of the Company s trading history during the three months prior to the lodgement of the Prospectus on 21 December 2012 from 20 September 2012 to 20 December 2012: High: CAD$0.44 Median: CAD$0.35 Low: CAD$ Subsequent events There has not arisen, at the date of this Prospectus any item, transaction or event of a material or unusual nature not already disclosed in this Prospectus which is likely, in the opinion of the Directors of the Company to affect substantially: a) the operations of the Company; b) the results of those operations; or c) the state of affairs of the Company Liability of other persons named in this Prospectus Notwithstanding that they may be referred to elsewhere in this Prospectus: HopgoodGanim Lawyers are named in the Corporate Directory as Solicitors to the Offer. They were involved in the preparation of the Australian Legal Report set out in Section 11 of this Prospectus and they have been involved in the process of reviewing this Prospectus for consistency with the material contracts. In doing so, they have placed reasonable reliance upon information provided to them by the Company and other third parties. They do not make any other statement in this Prospectus. HopgoodGanim will be paid for work performed in accordance with usual time based charge out rates and estimate their professional costs at $200,000 (excluding disbursements and GST), at the date of this Prospectus. Armstrong Simpson are named in the Corporate Directory as Solicitors to the Offer. They were involved in the process of reviewing this Prospectus for consistency with the relevant summaries and application of the Canadian legislative and general legal environment. In doing so, they have placed reasonable reliance upon information provided to them by the Company and other third parties. They do not make any other statement in this Prospectus. Armstrong Simpson will be paid for work performed in accordance with usual time based charge out rates and estimate their professional costs at CAD$60,0000 (excluding disbursements and GST), at the date of this Prospectus. Mr Barry W. Spector was involved in the preparation of the US Legal Report, which is set out in Section 11. Mr Barry W. Spector has given his written consent for the inclusion of the US Legal Report in the Prospectus and to be named be in the form and context in which he is named, and has not withdrawn his consent prior to lodgement of this Prospectus with ASIC. In doing so, he has placed reasonable reliance upon information provided to him by the Company and other third parties. He does not make any other statement in this Prospectus. Mr Barry W. Spector will be paid for work performed in accordance with usual time based charge out rates and estimate their professional costs at US$500 (excluding disbursements and GST), at the date of this Prospectus. AWT International are named in the Corporate Directory as Independent Geological Consultants to the Company. They were involved in the preparation of the Independent Geological Report, which is set out in Section 10. AWT International have given consent for the inclusion of the Independent Geological Report in the Prospectus and to named be in the form and context in which it is named, and has not withdrawn their consent prior to lodgement of this Prospectus within ASIC. In doing so, they have placed reasonable reliance upon information provided to them by the Company and other third parties. They do not make any other statement in this Prospectus. They will be paid for work performed in accordance with usual time based charge out rates and estimate their professional costs at $85,000 (excluding disbursements and GST) at the date of this Prospectus. Pitcher Partners is named in the Corporate Directory as Independent Accountants to the Company. They were involved in the preparation of the Independent Accountant s Report set out in Section 9 Pitcher Partners have given their written consent for the inclusion of the Independent Accountant s Report in the prospectus and to named be in the form and context in which they are named, and have not withdrawn their consent prior to lodgement of this Prospectus within ASIC. In doing so, they have placed reasonable reliance upon information provided to them by the Company and other

185 PROSPECTUS third parties. They do not make any other statement in this Prospectus. Pitcher Partners will be paid for work performed in accordance with usual time based charge out rates and estimate their professional costs at $30,000 (excluding disbursements and GST), at the date of this Prospectus. Collins Barrow Edmonton, LLP are named in the Corporate Directory as Auditors to the Company. Collins Barrow Edmonton, LLP have given their written consent to be named as Auditors to the Company in the form and context in which they are named and have not withdrawn their consent prior to lodgement of this Prospectus with ASIC. Collins Barrow Edmonton, LLP has not authorised or caused the issue of this Prospectus and does not make or purport to make any statement in this Prospectus. Link Market Services Limited has given its written consent to be named as the Registry in the form and context in which it is named and has not withdrawn its consent prior to lodgement of this Prospectus with ASIC. Link Market Services Limited has had no involvement in the preparation of any part of the Prospectus other than being named as the Share Registry to the Company. Link Market Services Limited has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for, any part of the Prospectus. Olympia Trust Company has given its written consent to be named as the Registry in the form and context in which it is named and has not withdrawn its consent prior to lodgement with ASIC. Olympia Trust Company has had no involvement in the preparation of any of part of the Prospectus other than being named as the Share Registry to the Company. Olympia Trust Company has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for any part of the Prospectus. BBY Ltd is named in the Corporate Directory as a Joint Lead Manager to the Offer. BBY Ltd has given its written consent to be named as a Joint Lead Manager to the Offer in the form and context in which it is named and has not withdrawn its consent prior to lodgement of this Prospectus with ASIC. BBY Ltd has not authorised or caused the issue of this Prospectus and does not make or purport to make any statement in this Prospectus. In consideration of BBY Ltd role as a Joint Lead Manager to the Offer it will receive a fee as set out in Section Helmsec Global Capital Limited is named in the Corporate Directory as a Joint Lead Manager to the Offer. Helmsec Global Capital has given its written consent to be named as a Joint Lead Manager to the Offer in the form and context in which it is named and has not withdrawn its consent prior to lodgement of this Prospectus with ASIC. Helmsec Global Capital Limited has not authorised or caused the issue of this Prospectus and does not make or purport to make any statement in this Prospectus. In consideration of Helmsec Global Capital Limited s role as a Joint Lead Manager to the Offer it will receive a fee as set out in Section Bizzell Capital Partners Pty Ltd is named in the Corporate Directory as Corporate Advisor to the Offer. Bizzell Capital Partners Pty Ltd has given its written consent to be named as Corporate Advisor to the Offer in the form and context in which it is named and has not withdrawn its consent prior to lodgement of this Prospectus with ASIC. Bizzell Capital Partners Pty Ltd has not authorised or caused the issue of this Prospectus and does not make or purport to make any statement in this Prospectus. In consideration of Bizzell Capital Partners Pty Ltd s role as Corporate Advisor to the Offer it will receive a fee as set out in Section There are a number of persons referred to elsewhere in this Prospectus who are not experts and who have not made statements included in this Prospectus nor are there any statements made in this Prospectus on the basis of any statements made by those persons. These persons did not consent to being named in the Prospectus and did not authorise or cause the issue of the Prospectus Consent of experts HopgoodGanim Lawyers,, Mr Barry W. Spector, AWT International and Pitcher Partners have acted as experts and have given, and have not before the lodgement of this Prospectus, withdrawn their written consent to the issue of this Prospectus, with the statement purporting to be made by them or to be made on a statement by them, included in the form and context in which it is included. To the extent permitted by law, they each disclaim any responsibility for any misleading statements or omissions in this Prospectus Inspection of documents Copies of the following documents may be inspected free of charge at the registered office of the Company and at the offices of HopgoodGanim Lawyers, Level 8, 1 Eagle Street, Brisbane during normal business hours: a) the Articles of Association of the Company; b) the consents referred to in the Prospectus; and c) The Company s Corporate Governance Charter Costs of the Issue If the Issue proceeds, the total estimated costs of the Issue including capital raising fees and commissions, advisory, ASIC and ASX fees, prospectus printing and miscellaneous expenses will be approximately $1,291,700 if the Minimum Subscription is raised and approximately $1,940,700 if the Maximum Subscription is raised.

186 184 STRATA-X ENERGY Interests of experts and advisers The nature and extent of the interests (if any) that: a) a person named in the Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of the Prospectus; b) a promoter of the Company; or c) a stockbroker or underwriter (but not a sub-underwriter) to the Issue; d) holds, or held at any time during the last two years in: e) the formation or promotion of the Company; f) property acquired or to be acquired by the Company in connection with: a. its formation or promotion; or b. the Offer, is set out in Section 7 and this Section Related Party Transactions Strata-X Energy has been listed on TSX-V since 3 December Strata-X Energy is incorporated in British Columbia, Canada and therefore not subject to the provisions of Chapter 2E of the Corporations Act which governs related party transactions with respect to public companies. Notwithstanding this, a summary of transactions entered into since incorporation by Strata-X Energy with related parties including directors and entities controlled by directors is set out below. Incorporation Upon the incorporation of the Company, 4,000,000 Shares were issued at a share price of CAD$0.05 per share (Seed Shares), with 1,400,000 of these Shares issued to related parties in the following manner: a) Prepet Pty Ltd, a wholly owned company of Ron Prefontaine 1,000,000; b) Don Schurman 200,000; c) Alberta Ltd, a wholly owned company of the Romaniuk Family Trust, which is an entity associated with Bohdan (Don) Romaniuk 200,000. As the issue price of the Seed Shares was lower than the price of the shares issued under the Canadian initial public offering (which were issued at CAD$0.10), pursuant to requirements of the TSX-V all Seed Shares were placed in escrow pursuant to a CPC Escrow Agreement dated 15 July 2008 between the Company, its share registry Olympia Trust Company and the holders of the Seed Shares. Of the 1,400,000 Seed Shares issued to related parties, 840,000 remain subject to the CPC Escrow Agreement and will be released as follows: 23 March September March September 2014 Prepet Pty Ltd 150, , , ,000 Don Schurman 30,000 30,000 30,000 30, Alberta Ltd. 30,000 30,000 30,000 30,000 Qualifying Transaction As part of the process for listing on the TSX-V, the Company entered into the Qualifying Transaction with Strata-X Inc. so as to enable the Company to acquire all of the issued share capital of Strata-X Inc.. Under the Share Exchange Agreement dated 29 August 2011 between the Company, Strata-X, Inc. and all of the shareholders of Strata-X, Inc., the Company agreed to issue to the shareholders of Strata-X, Inc. 19,980,000 Shares and 9,990,000 Warrants with an exercise price of CAD$0.50 and an expiry date of 22 March Under these arrangements, a total of 14,433,335 Shares and 7,216,670 Warrants were issued to related parties in the following manner: a) Peak Resources Management, Inc, (Peak) a company owned by Tim Hoops and his spouse 9,624,000 Shares and 4,812,000 Warrants; b) R&M Oil & Gas, LLLP (R&M Oil & Gas) a company owned by Peak (60.4%) and Tim Bradley (39.6%) 2,376,000 Shares and 1,188,000 Warrants; c) Prepet Pty Ltd (Prepet) a wholly owned company by Ron Prefontaine 1,766,667 Shares and 883,334 Warrants; and d) Immediate family members of Tim Hoops 666,668 Shares and 333,336 Warrants. Pursuant to requirements of the TSX-V, in connection with the Qualifying Transaction, all 14,433,335 Shares and 7,216,670 Warrants issued to related parties were placed in escrow pursuant to an escrow agreement dated 11 September As of the date of this Prospectus, 8,660,000 Shares and 4,330,000 Warrants issued to related parties in connection with the Qualifying Transaction remain subject to escrow and will be released in accordance with the table below:

187 PROSPECTUS March September March September 2014 Shares Warrants Shares Warrants Shares Warrants Shares Warrants Peak 900, , , , , , , ,000 R&M Oil & Gas 900, , , , , , , ,000 Prepet 265, , , , , , , ,500 Family of Tim Hoops 100,000 50, ,000 50, ,000 50, ,000 50,000 Qualifying Transaction Placement A private placement occurred in conjunction with the Qualifying Transaction, with 12,328,156 Units issued (representing 12,328,156 Shares and 6,164,067 Warrants with an exercise price of CAD$0.50 and an expiry date of 22 March 2013) at a price of CAD$0.30 per Unit. Ron Prefontaine, through his wholly owned entity Prepet Pty Ltd purchased 2,633,333 Shares and 1,316,667 Warrants under this placement. July 2012 Placement A second private placement occurred on 13 July 2012, with the issue of: a) 2,375,000 Units (representing 2,375,000 Shares and 1,187,500 Warrants with an exercise price of CAD$0.60 per share and an expiry date of 29 June 2014) at a price of CAD$0.25 per Unit; and b) 12,920,000 convertible notes, which subsequently converted into 12,920,000 Units at a deemed price of CAD$0.25 per Unit (and which represented, upon conversion, 12,290,000 Shares and 6,460,000 Warrants with an exercise price of CAD$0.50 per share and an expiry date of 29 June 2014). (1) Ron Prefontaine (or person or entities associated with him) purchased 4,000,000 convertible notes, which converted into 4,000,000 Shares and 2,000,000 Warrants with an exercise price of CAD$0.50 per share and an expiry date of 29 June (2) October 2012 Convertible Notes On 30 October 2012 the Company issued 16,724,000 Convertible Notes which are convertible into 16,724,000 Units at a deemed price of CAD$0.25 per Unit (and which represent upon conversion, 16,724,000 Shares and 8,362,000 Warrants with an exercise price of CAD$0.50 per Share and an expiry date of 29 October 2016). A summary of the Convertible Notes is set out in Section Ron Prefontaine (or person or entities associated with him) purchased 3,000,000 Convertible Notes, convertible into 3,000,000 Shares and 1,500,000 Warrants with an exercise price of CAD$0.50 per share and an expiry date of 29 October Stock Option Plan Under its Stock Option Plan, the Company has in total issued 3,800,000 Options, of which 2,890,000 Options have been issued to related parties. A table setting out the Options issued to related parties under the Stock Option Plan is set out in the table on the following page. Loan Agreement and General Security Agreement On 26 November 2012 the Company entered into loan agreement with Prepet Pty Ltd (Prepet), an entity controlled by Ron Prefontaine, pursuant to which Prepet agreed to lend the Company up to AUD$2,000,0000. In order to secure the loan, the Company entered into a General Security Agreement with Prepet on 26 November 2012, under which it provided in favour of Prepet a security interest in all of its present and after-acquired personal property and undertaking and any proceeds from the sale or other disposition thereof (excluding consumer goods). As at the date of this Prospectus, the loan was fully drawn down. A summary of the material terms of the loan agreement is set out at Section (1) This excludes any additional Shares, Warrants and CDIs that may be issued as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest will total approximately $CAD139,287, resulting in an additional 557,150 Shares and 278,575 Warrants being issued. (2) This excludes any additional Shares, Warrants and CDIs that may be issued to entities associated with Ron Prefontaine as a result of the conversion of interest (into Shares and Warrants) accrued but not paid (and which continues to accrue) under certain convertible notes issued in July 2012 (described in Section 13.5(f)) and the Convertible Notes (described in Section 12.6). The total amount of this interest cannot be quantified as at the date of this Prospectus as the interest on the Convertible Notes continues to accrue until the Convertible Notes are converted prior to Listing. As a result, the total number of Shares and Warrants to be issued cannot be definitively determined. On the basis that the accrued interest will be converted to Shares and Warrants on or about 14 February 2013, accrued interest to entities associated with Ron Prefontaine will total approximately $CAD35,069, resulting in an additional 140,276 Shares and 70,138 Warrants being issued to entities associated with Ron Prefontaine.

188 186 STRATA-X ENERGY Related Party Expiry Date Exercise price (CAD$) Ron Prefontaine, Director 29 November September 2021 Tim Hoops. Director 22 September September 2022 Tim Bradley, Director 22 September September 2022 Don Schurman, Director Don Romaniuk, Director 29 November January September November January September 2022 $0.10 $0.30 $0.30 $0.34 $0.30 $0.34 $0.10 $0.30 $0.34 $0.10 $0.34 $0.34 Number Granted 520, ,000 1,000, , , , ,000 50,000 50, ,000 50, ,000 Number Exercised 520, , ,000 Sleeping Giant Royalty The grant of a 2.5% overriding royalty interest ( ORRI ) to Peak Resources Management, Inc. (an entity controlled by Tim Hoops, Managing Director of Strata-X Energy). of any gross proceeds from the sale of all oil, gas and other hydrocarbons, derived from any lands which Strata-X Energy is able to acquire in the Sleeping Giant area in North Dakota. The ORRI was granted to Peak Resources Management, Inc in 2010 (prior to Strata-X Energy acquiring the project) and is only active after Strata-X Energy has recovered all funds expended in the project. Vallecitos Royalty The grant of a 1% overriding royalty interest ( ORRI ) to Peak Resources Management, Inc. (an entity controlled by Tim Hoops, Managing Director of Strata-X Energy) of any gross proceeds from the sale of all oil, gas and other hydrocarbons, derived from any lands which Strata-X Energy is able to acquire in the Vallecitos Project. The ORRI was granted to Peak Resources Management, Inc in 2008 (prior to Strata-X Energy acquiring the project) and is only active after Strata-X Energy has recovered all funds expended in the project Director s interests The nature and extent of the interest (if any) that the Directors of the Company hold, or held at any time during the last two years in: a) the formation or promotion of the Company; b) property acquired or to be acquired by the Company in connection with: a. its formation or promotion; or b. the Offer, is set out in Section 7 and Section 13. The amount (if any) that anyone has paid or agreed to pay, or the nature and the value of any benefit anyone has given or agreed to give to a Director of the Company, or proposed Director of the Company: a) to induce them to become, or to qualify as, a Director of the Company; or b) for services provided by a Director in connection with: a. the formation of the Company; or b. the Offer, is set out in Section 7 and Section Privacy By submitting an Application Form for Shares you are providing to the Company personal information about you. If you do not provide complete and accurate personal information, your application may not be able to be processed. The Company maintains the register of members of the Company through Link Market Services Limited, an external service provider. The Company requires Link Market Services Limited to comply with the National Privacy Principles with performing these services. The Company s register is required by law to maintain certain personal information about you such as your name and address and number of securities held. In addition the Company collects personal information from members including contact details, bank accounts, membership details and tax file numbers. This information is used to carry out registry functions such as payment of dividends, sending annual and half yearly reports, notices of meetings, newsletters and notifications to the Australian Taxation Office. In addition, contact information will be used from time to time to inform members of new initiatives concerning the Company.

189 PROSPECTUS The Company understands how important it is to keep your personal information private. The Company will only disclose personal information we have about you: a) when you agree to the disclosure; b) when used for the purposes for which it was collected; c) when disclosure is required or authorised by law; d) to other members of the Strata-X Energy group of companies; e) to your broker; f) to external service suppliers who supply services in connection with the administration of the Company s register such as mailing houses and printers, Australia Post and financial institutions. You have the right to access, update and correct your personal information held by the Company and Link Market Services Limited except in limited circumstances. If you wish to access, update or correct your personal information held by Link Market Services Limited or by the Company please contact our respective offices. If you have any questions concerning how the Company handles your personal information please contact the Company Electronic Prospectus An electronic version of this Prospectus is available from the Company at the following address The Application Form may only be distributed attached to a complete and unaltered copy of the Prospectus. The Application Form included with this Prospectus contains a declaration that the investor has personally received the complete and unaltered Prospectus prior to completing the Application Form. The Company will not accept a completed Application Form if it has reason to believe that the investor has not received a complete paper copy or electronic copy of the Prospectus or if it has reason to believe that the Application Form or electronic copy of the Prospectus has been altered or tampered with in any way. While the Company believes that it is extremely unlikely that in the Issue period the electronic version of the Prospectus will be tampered with or altered in any way, the Company cannot give any absolute assurance that it will not be the case. Any investor in doubt concerning the validity or integrity of an electronic copy of the Prospectus ought to immediately request a paper copy of the Prospectus directly from the Company or a financial adviser Consent to lodgement Each of the Directors of the Company has consented to the lodgement of this Prospectus with the ASIC Foreign selling restrictions Hong Kong WARNING: This document has not been, and will not be, registered as a prospectus under the Companies Ordinance (Cap. 32) of Hong Kong (the Companies Ordinance), nor has it been authorised by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the SFO). No action has been taken in Hong Kong to authorise or register this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the CDIs have not been and will not be offered or sold in Hong Kong by means of any document, other than to professional investors (as defined in the SFO). No advertisement, invitation or document relating to the CDIs has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to CDIs that are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors (as defined in the SFO and any rules made under that ordinance). No person allotted CDIs may sell, or offer to sell, such securities in circumstances that amount to an offer to the public in Hong Kong within six months following the date of issue of such securities. The contents of this document have not been reviewed by any Hong Kong regulatory authority. You are advised to exercise caution in relation to the offer. If you are in doubt about any contents of this document, you should obtain independent professional advice. By submitting an Application Form, each Applicant represents and warrants as follows (and will be taken to have done so if a person makes a bid in the Institutional Offer): If you (and any person for whom you are acquiring the CDIs) are in Hong Kong, you (and any such person) are a professional investor as defined under the SFO. Singapore This document and any other materials relating to the CDIs have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document or materials in connection with the Offer or sale, or invitation for subscription or purchase, of CDIs, may not be issued, circulated or distributed, nor may the CDIs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore except pursuant to and in accordance

190 188 STRATA-X ENERGY with exemptions in Subdivision (4) Division 1, Part XIII of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), or as otherwise pursuant to, and in accordance with the conditions of any other applicable provisions of the SFA. This document has been given to you on the basis that you are (i) an existing holder of the Company s shares, (ii) an Institutional Investor (as defined in the SFA) or (iii) a Relevant Person (as defined under section 275(2) of the SFA). In the event that you are not an investor falling within any of the categories set out above, please return this document immediately. You may not forward or circulate this document to any other person in Singapore. Any offer is not made to you with a view to the CDIs being subsequently offered for sale to any other party. There are on-sale restrictions in Singapore that may be applicable to investors who acquire CDIs. As such, investors are advised to acquaint themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly. European Economic Area Belgium, Denmark, Germany, Luxembourg and Netherlands The information in this document has been prepared on the basis that all offers of CDIs will be made pursuant to an exemption under the Directive 2003/71/EC (Prospectus Directive), as implemented in Member States of the European Economic Area (each, a Relevant Member State), from the requirement to produce a prospectus for offers of securities. An offer to the public of CDIs has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State: a) to legal entities that are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; b) to any legal entity that satisfies two of the following three criteria: (i) balance sheet total of at least 20,000,000; (ii) annual net turnover of at least 40,000,000 and (iii) own funds of at least 2,000,000 (as shown on its last annual unconsolidated or consolidated financial statements); c) to any person or entity who has requested to be treated as a professional client in accordance with the EU Markets in Financial Instruments Directive (Directive 2004/39/EC, MiFID ); or d) to any person or entity who is recognised as an eligible counterparty in accordance with Article 24 of the MiFID France This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L of the French Monetary and Financial Code (Code monétaire et financier) and Articles et seq. of the General Regulation of the French Autorité des marches financiers (AMF). The CDIs have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. This document and any other offering material relating to the CDIs have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France. Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L II-2 and D to D.411-3, D , D and D of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d investisseurs) acting for their own account, as defined in and in accordance with Articles L II-2 and D.411-4, D.744-1, D and D of the French Monetary and Financial Code and any implementing regulation. Pursuant to Article of the General Regulation of the AMF, investors in France are informed that the CDIs cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L and L to L of the French Monetary and Financial Code. United Kingdom Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (FSMA) has been published or is intended to be published in respect of the CDIs. This document is issued on a confidential basis to qualified investors (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the CDIs may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom. Any invitation or inducement to engage in investment activity (within the meaning of s.21 FSMA) received in connection with the issue or sale of the CDIs has only been communicated, and will only be communicated, in the United Kingdom in circumstances in which s.21(1) FSMA does not apply to the Company. In the United Kingdom, this document is being distributed only to, and is directed at, persons:

191 PROSPECTUS a) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (FPO); b) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO; or c) to whom it may otherwise be lawfully communicated (together relevant persons). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. By submitting an Application Form, each Applicant represents and warrants as follows (and will be taken to have done so if a person makes a bid in the Institutional Offer): c) within the categories of persons referred to in Article 19(5) (investment professionals) or Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO, as amended. United States This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. Any securities described in this document have not been, and will not be, registered under the US Securities Act 1933 (US Securities Act) and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws. Signed on behalf of the Company by: a) If you (and any person for whom you are acquiring the CDIs) are in the United Kingdom, you (and any such person) are: b) a qualified investor within the meaning of Section 86(7) of the FSMA; and Ron Prefontaine Chairman

192 190 STRATA-X ENERGY Glossary 4 of terms

193 PROSPECTUS $ Australian dollars (unless stated otherwise) A$ or AUD$ Australian dollars 2P Reserve AEST AEDT AMI Applicants Proven plus Probable Reserves Australian Eastern Standard Time Australian Eastern Daylight Savings Time Area of mutual interest a person applying for CDIs offered by this Prospectus. Application Form the application form enclosed with and forming part of this Prospectus for use by investors. Application Money Amounts paid by subscribers for CDIs offed under this Prospectus. ARBN Australian Registered Business Number Articles Articles of the Company as amended from time to time. ASIC Australian Securities and Investments Commission. ASX Settlement Operating Rules Settlement rules of the ASX Settlement, as amended from time to time. ASX ASX Limited ABN Australian Legal Report The report set out in Section 11. Bbbls billion barrels bbl(s) barrel(s) BCF billion cubic feet Board Board of Directors of the Company Broker(s) An ASX participating organisation Broker Firm Offer The invitation under this Prospectus to Australian resident retail clients of Brokers who have received a firm allocation from their Broker to apply for CDIs, as described in Section 6.6 Broker Firm Offer Applicants Applicants offered a firm allocation of CDIs by their Broker under the Broker Firm Offer Broker Firm Offer Closing Date The date on which the Broker Firm Offer closes, being 8 February 2013 (subject to the right of the Company to close the Offer earlier or to extend this date without notice, in consultation with the Joint Lead Managers). Broker Firm Offer Opening Date The date on which the Broker Firm Offer opens, being 14 January 2013 (subject to the right of the Company to vary this date, without notice, in consultation with the Joint Lead Managers). Business Day(s) has the meaning ascribed to it in the ASX Listing Rules. C$ or CAD$ Canadian dollars Canadian Securities Administrators The entity or entities responsible for securities regulations of all provinces of Canada. CDI CHESS Depositary Interest, being a unit of beneficial ownership in a Principal Financial Product (as defined in the ASX Settlement Operating Rules) and Depositary Interests shall be construed accordingly. CDN CHESS Depositary Nominees Pty Ltd ABN (a wholly owned subsidiary of the ASX) CHESS Clearing House Electronic Subregister System operated by ASTC Company or Strata-X Energy Strata-X Energy Limited Incorporated in British Columbia with company registration number C Corporations Act the Corporations Act 2001 (Commonwealth). Convertible Notes Convertible notes on issue in the Company, convertible into Shares, on the terms described in Section 12.6 of this Prospectus.

194 192 STRATA-X ENERGY Corporate Advisor Bizzell Capital Partners Pty Ltd ACN Director DST Existing Shareholders Exposure Period Group a Director of the Company. Drill Stem Test all holders of Shares in the Company at the date of this Prospectus. the 7 day period from the date of lodgement of the Prospectus. Strata-X Energy and its subsidiaries Independent Accountant s Report The Report in Section 9. Independent Geologist s Report The Report in Section 10. Institutional Investors Institutional Offer Institutional Offer Closing Date Institutional Offer Opening Date Joint Lead Managers or JLMs km km 2 Listing LNG m Mbbls MMbbls MMCF Management Maximum Subscription or Oversubscriptions Minimum Subscription Native Title Act Offer Offer Closing Date An investor to whom offers or invitations in respect of CDIs can be made without disclosure under the Corporations Act. The invitation to Institutional Investors in Australia and other selected jurisdictions other than the United States, as described in Section The date on which the Institutional Offer closes, being 8 February 2013 (subject to the right of the Company to close the Offer earlier or to extend this date without notice, in consultation with the Joint Lead Managers). The date on which the Institutional Offer opens, being 14 January 2013 (subject to the right of the Company to vary this date, without notice, in consultation with the Joint Lead Managers). BBY Ltd and Helmsec Global Capital Limited kilometre square kilometre Official quotation of CDIs for trading on the ASX Liquefied Natural Gas natural gas cooled to 162 c, a liquid form for effective transportation. metre or metres thousand barrels million barrels million cubic feet the management team of the Company Up to a further 33,333,333 CDIs, in addition to the Minimum Subscription, representing approximately $10,000,000 of Application Moneys. 33,333,333 CDIs, representing approximately $10,000,000 of Application Moneys. Native Title Act 1993 (Cth) the issue or offer of a minimum of 33,333,333 CDIs and a maximum of 66,666,666 CDIs at $0.30 each under this Prospectus. 8 February 2013 (or such other date as determined by the Board) and the Broker Firm Offer Closing Date and Institutional Offer Closing Date as the context requires. Offer Opening Date 14 January 2013 Official Quotation quotation on the Official List of ASX. OOIP Original Oil In Place, is defined as that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of OOIP includes production, reserves and contingent resources; the remainder is defined as unrecoverable. Options Options to subscribe for Shares Other Existing Shareholders Existing Shareholders excluding Directors and Management

195 PROSPECTUS Prepet Loan The related party loan entered into with Prepet Pty Ltd (an entity associated with Ron Prefontaine, a director of the Company) as described in Section Prospective Resource Those quantities of petroleum which are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations. Prospectus this Prospectus which is dated 21 December 2012 Qualifying Transaction The transaction effective 22 September 2011, pursuant to which the Company acquired all of the issued capital of Strata-X Inc. Reserves Those quantities of oil and gas anticipated in to be economically recoverable from discovered resources. Retail Investors An investor who is not an Institutional Investor. Securities Act The Securities Act in those relevant Canadian jurisdictions Share Registry Link Market Services Shareholders holders of Shares in the Company and, where the context requires, includes holders of CDIs. Share fully paid common (ordinary) share in the capital of the Company Share Exchange Agreement The agreement entered into with shareholders of Strata-X Inc. to implement the Qualifying Transaction. Strata-X Energy or the Company Strata-X Energy Limited (Incorporated in British Columbia, Canada with incorporation company registration number C ) TCF Trillion cubic feet TOC Total Organic Content, being the amount of carbon bound in an organic compound. It measures the richness of the source rock. TSX-V The Toronto Venture Exchange TSX-V Listing Rules The official listing rules of TSX-V from time to time Unit In the context of a security means a Share and a designated proportion of a Warrant US United States US Legal Report The Report set out in Section 11. US$ or USD United States dollars WA Western Australia Warrants Warrants to subscribe for Shares References in this Prospectus to Sections and paragraphs are to Sections and paragraphs of this Prospectus.

196 194 STRATA-X ENERGY Application form

197 STRATA-X EnERGY LIMITED ARBN Broker Code Adviser Code Broker Firm Offer Application Form This is an Application Form for CDIs in Strata-X Energy Limited under the Broker Firm Offer on the terms set out in the Prospectus dated 21 December You may apply for a minimum of 6,667 CDIs and multiples of 1,667 thereafter. This Application Form and your cheque or bank draft must be received by your Broker by the deadline set out in their offer to you. If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker or other professional adviser. The Prospectus contains information relevant to a decision to invest in CDIs and you should read the entire Prospectus carefully before applying for CDIs. A C CDIs applied for Price per CDI Application Monies,, at A$0.30 B A$,,. (minimum 6,667, thereafter in multiples of 1,667) PLEASE COMPLETE YOUR DETAILS BELOW (refer overleaf for correct forms of registrable names) Applicant #1 Surname/Company Name Title First Name Middle Name Joint Applicant #2 Surname Title First Name Middle Name Designated account e.g. <Super Fund> (or Joint Applicant #3) D TFN/ABN/Exemption Code First Applicant Joint Applicant #2 Joint Applicant #3 TFN/ABN type if NOT an individual, please mark the appropriate box Company Partnership Trust Super Fund E PLEASE COMPLETE ADDRESS DETAILS PO Box/RMB/Locked Bag/Care of (c/-)/property name/building name (if applicable) Unit Number/Level Street Number Street Name Suburb/City or Town State Postcode address (only for purpose of electronic communication of CDIholder information) F CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here) X Please note: that if you supply a CHESS HIN but the name and address details on your Application Form do not correspond exactly with the registration details held at CHESS, your Application will be deemed to be made without the CHESS HIN and any CDIs issued as a result of the Offer will be held on the issuer sponsored sub-register. Telephone Number where you can be contacted during Business Hours G ( ) Contact Name (PRINT) Cheques or bank drafts should be drawn up according to the instructions given by your Broker. H Cheque or Bank Draft Number BSB Account Number - Total Amount A$,,. LODGEMEnT InSTRUCTIOnS You must return your application so it is received by your Broker by the deadline set out in their offer to you. SXA BRO001

198 Your Guide to the Application Form Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form. The CDIs to which this Application Form relates are Strata-X Energy Limited CDIs. Further details about the CDIs are contained in the Prospectus dated 21 December 2012 issued by Strata-X Energy Limited. The Prospectus will expire 13 months after the date of this Prospectus. While the Prospectus is current, Strata-X Energy Limited will send paper copies of the Prospectus, any supplementary document and the Application Form, free of charge on request. The Australian Securities and Investment Commission requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant Prospectus. This Application Form is included in the Prospectus. The Prospectus contains important information about investing in the CDIs. You should read the Prospectus before applying for CDIs. a b C Insert the number of CDIs you wish to apply for. The Application must be for a minimum of 6,667 CDIs and thereafter in multiples of 1,667. You may be issued all of the CDIs applied for or a lesser number. Insert the relevant amount of Application Monies. To calculate your Application Monies, multiply the number of CDIs applied for by the issue price. Amounts should be in Australian dollars. Please make sure the amount of your cheque or bank draft equals this amount. Write the full name you wish to appear on the register of CDIs. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title. Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, Strata-X Energy Limited will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments. e F g Please enter your postal address for all correspondence. All communications to you from Strata-X Energy Limited and the CDI Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered. If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. If the name or address recorded on CHESS for this HIN is different to the details given on this form, your CDIs will be issued to Strata-X Energy Limited s issuer sponsored subregister. Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your Application. Please complete the details of your cheque or bank draft in this section. The total amount of your cheque or bank draft should agree with the amount shown in section B. If you receive a firm allocation of CDIs from your Broker make your cheque payable to your Broker in accordance with their instructions. D H CorreCt Forms of registrable Names Note that ONLY legal entities are allowed to hold CDIs. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below. type of investor Correct Form of registration incorrect Form of registration individual Use given names in full, not initials Mrs Katherine Clare Edwards K C Edwards Company Use Company s full title, not abbreviations Liz Biz Pty Ltd Liz Biz P/L or Liz Biz Co. Joint Holdings Use full and complete names trusts Use the trustee(s) personal name(s) Deceased estates Use the executor(s) personal name(s) minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation Partnerships Use the partners personal names Mr Peter Paul Tranche & Ms Mary Orlando Tranche Mrs Alessandra Herbert Smith <Alessandra Smith A/C> Ms Sophia Garnet Post & Mr Alexander Traverse Post <Est Harold Post A/C> Mrs Sally Hamilton <Henry Hamilton> Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith <Fred Smith & Son A/C> Peter Paul & Mary Tranche Alessandra Smith Family Trust Estate of late Harold Post or Harold Post Deceased Master Henry Hamilton Fred Smith & Son long Names Mr Hugh Adrian John Smith-Jones Mr Hugh A J Smith Jones Clubs/Unincorporated bodies/business Names Mr Alistair Edward Lilley Vintage Wine Club Use office bearer(s) personal name(s) <Vintage Wine Club A/C> superannuation Funds Use the name of the trustee of the fund XYZ Pty Ltd <Super Fund A/C> XYZ Pty Ltd Superannuation Fund Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

199 STRATA-X EnERGY LIMITED ARBN Broker Code Adviser Code Broker Firm Offer Application Form This is an Application Form for CDIs in Strata-X Energy Limited under the Broker Firm Offer on the terms set out in the Prospectus dated 21 December You may apply for a minimum of 6,667 CDIs and multiples of 1,667 thereafter. This Application Form and your cheque or bank draft must be received by your Broker by the deadline set out in their offer to you. If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker or other professional adviser. The Prospectus contains information relevant to a decision to invest in CDIs and you should read the entire Prospectus carefully before applying for CDIs. A C CDIs applied for Price per CDI Application Monies,, at A$0.30 B A$,,. (minimum 6,667, thereafter in multiples of 1,667) PLEASE COMPLETE YOUR DETAILS BELOW (refer overleaf for correct forms of registrable names) Applicant #1 Surname/Company Name Title First Name Middle Name Joint Applicant #2 Surname Title First Name Middle Name Designated account e.g. <Super Fund> (or Joint Applicant #3) D TFN/ABN/Exemption Code First Applicant Joint Applicant #2 Joint Applicant #3 TFN/ABN type if NOT an individual, please mark the appropriate box Company Partnership Trust Super Fund E PLEASE COMPLETE ADDRESS DETAILS PO Box/RMB/Locked Bag/Care of (c/-)/property name/building name (if applicable) Unit Number/Level Street Number Street Name Suburb/City or Town State Postcode address (only for purpose of electronic communication of CDIholder information) F CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here) X Please note: that if you supply a CHESS HIN but the name and address details on your Application Form do not correspond exactly with the registration details held at CHESS, your Application will be deemed to be made without the CHESS HIN and any CDIs issued as a result of the Offer will be held on the issuer sponsored sub-register. Telephone Number where you can be contacted during Business Hours G ( ) Contact Name (PRINT) Cheques or bank drafts should be drawn up according to the instructions given by your Broker. H Cheque or Bank Draft Number BSB Account Number - Total Amount A$,,. LODGEMEnT InSTRUCTIOnS You must return your application so it is received by your Broker by the deadline set out in their offer to you. SXA BRO001

200 Your Guide to the Application Form Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form. The CDIs to which this Application Form relates are Strata-X Energy Limited CDIs. Further details about the CDIs are contained in the Prospectus dated 21 December 2012 issued by Strata-X Energy Limited. The Prospectus will expire 13 months after the date of this Prospectus. While the Prospectus is current, Strata-X Energy Limited will send paper copies of the Prospectus, any supplementary document and the Application Form, free of charge on request. The Australian Securities and Investment Commission requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant Prospectus. This Application Form is included in the Prospectus. The Prospectus contains important information about investing in the CDIs. You should read the Prospectus before applying for CDIs. a b C Insert the number of CDIs you wish to apply for. The Application must be for a minimum of 6,667 CDIs and thereafter in multiples of 1,667. You may be issued all of the CDIs applied for or a lesser number. Insert the relevant amount of Application Monies. To calculate your Application Monies, multiply the number of CDIs applied for by the issue price. Amounts should be in Australian dollars. Please make sure the amount of your cheque or bank draft equals this amount. Write the full name you wish to appear on the register of CDIs. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title. Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, Strata-X Energy Limited will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments. e F g Please enter your postal address for all correspondence. All communications to you from Strata-X Energy Limited and the CDI Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered. If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. If the name or address recorded on CHESS for this HIN is different to the details given on this form, your CDIs will be issued to Strata-X Energy Limited s issuer sponsored subregister. Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your Application. Please complete the details of your cheque or bank draft in this section. The total amount of your cheque or bank draft should agree with the amount shown in section B. If you receive a firm allocation of CDIs from your Broker make your cheque payable to your Broker in accordance with their instructions. D H CorreCt Forms of registrable Names Note that ONLY legal entities are allowed to hold CDIs. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below. type of investor Correct Form of registration incorrect Form of registration individual Use given names in full, not initials Mrs Katherine Clare Edwards K C Edwards Company Use Company s full title, not abbreviations Liz Biz Pty Ltd Liz Biz P/L or Liz Biz Co. Joint Holdings Use full and complete names trusts Use the trustee(s) personal name(s) Deceased estates Use the executor(s) personal name(s) minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation Partnerships Use the partners personal names Mr Peter Paul Tranche & Ms Mary Orlando Tranche Mrs Alessandra Herbert Smith <Alessandra Smith A/C> Ms Sophia Garnet Post & Mr Alexander Traverse Post <Est Harold Post A/C> Mrs Sally Hamilton <Henry Hamilton> Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith <Fred Smith & Son A/C> Peter Paul & Mary Tranche Alessandra Smith Family Trust Estate of late Harold Post or Harold Post Deceased Master Henry Hamilton Fred Smith & Son long Names Mr Hugh Adrian John Smith-Jones Mr Hugh A J Smith Jones Clubs/Unincorporated bodies/business Names Mr Alistair Edward Lilley Vintage Wine Club Use office bearer(s) personal name(s) <Vintage Wine Club A/C> superannuation Funds Use the name of the trustee of the fund XYZ Pty Ltd <Super Fund A/C> XYZ Pty Ltd Superannuation Fund Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

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