PROSPECTUS QUESTERRE ENERGY CORPORATION

Transcription

1 PROSPECTUS QUESTERRE ENERGY CORPORATION A public corporation amalgamated under the Business Corporations Act pursuant to the laws of the Province of Alberta, Canada Listing of 15,200,000 Private Placement Shares issued in the Private Placement and a Subsequent Offering and listing of up to 3,000,000 Offer Shares at a Subscription Price of NOK 3.00 per Offer Share with Subscription Rights for Eligible Shareholders This prospectus (the "Prospectus") relates to, and has been prepared in connection with: (i) the listing on the Oslo Stock Exchange of 15,200,000 Common Shares (the "Private Placement Shares") in Questerre Energy Corporation ("Questerre" or the "Company", and together with its subsidiaries and partnership interests on a consolidated basis, the "Group") in connection with a private placement completed on 7 November 2016 (the "Private Placement"), and (ii) a subsequent offering (the "Subsequent Offering") and listing on the Oslo Stock Exchange of up to 3,000,000 Common Shares in the Company (the "Offer Shares") at a subscription price of NOK 3.00 per Offer Share (the "Subscription Price"). The Company's Common Shares are listed on the Toronto Stock Exchange and the Oslo Stock Exchange under the ticker code "QEC". The Company's shareholders as of 4 November 2016, as documented by the shareholder register in the Norwegian Central Securities Depository (the "VPS") as of 8 November 2016 (T+2) (the "Record Date"), and who are not resident in a jurisdiction where such offering would be unlawful, or would (in jurisdictions other than Norway) require any prospectus filing, registration or similar action, will receive non-transferable subscription rights (the "Subscription Rights") based on their shareholding as of that date ("Eligible Shareholders"). Each Eligible Shareholder will be granted Subscription Rights for each Common Share registered as held by such Eligible Shareholder as of the Record Date rounded up to the nearest whole Subscription Right. Each Subscription Right will, subject to applicable securities laws, give the right to subscribe for and be allocated one (1) Offer Share. The subscription period for the Subsequent Offering commences on 24 January 2017 and expires at 16:30 hours, Oslo time, on 3 February 2017 (the "Subscription Period"). The Subscription Rights are non-transferable. Subscription Rights not used to subscribe for Offer Shares before the expiry of the Subscription Period will have no value and will lapse without compensation to the holder. The distribution of this Prospectus and the Subsequent Offering and the sale of the Offer Shares and the issue of Subscription Rights may in certain jurisdictions be restricted by law. Accordingly, this Prospectus may not be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. The Company and the Managers (as defined below) require persons in possession of this Prospectus, in possession of Subscription Rights and/or considering to subscribe for Offer Shares to inform themselves about, and to observe, any such restrictions. Investing in the Company and the securities covered by the Prospectus (including but not limited to the Offer Shares) involves material risks and uncertainties. See Section 2 "Risk Factors" and Section 4.3 "Cautionary Note Regarding Forward-Looking Statements". Managers The date of this Prospectus is 20 January 2017

2 IMPORTANT INFORMATION This Prospectus has been prepared in order to provide information about Questerre and its business in relation to the listing of the Private Placement Shares and the offering and listing of Offer Shares in the Subsequent Offering, and to comply with the Norwegian Securities Trading Act of June 29, 2007 no 75 (the "Norwegian Securities Trading Act") and related secondary legislation, including the Commission Regulation (EC) no. 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 regarding information contained in prospectuses (the "EU Prospectus Directive") as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements (as amended) (hereafter "EC Regulation 809/2004"). This Prospectus has been prepared solely in the English language. The Norwegian Financial Supervisory Authority (the "Norwegian FSA") has reviewed this Prospectus in accordance with Sections 7-7 and 7-8, cf. Section 7-3 of the Norwegian Securities Trading Act, and has approved this Prospectus on 20 January The Norwegian FSA has not controlled or approved the accuracy or completeness of the information given in this Prospectus. The approval given by the Norwegian FSA only relates to the Company's descriptions pursuant to a pre-defined check list of requirements. The Norwegian FSA has not made any form of control or approval relating to corporate matters described in or otherwise covered by this Prospectus. All inquiries relating to this Prospectus must be directed to the Company. No other person is authorised to give any information about, or to make any representations on behalf of, the Company in connection with the listing of the Private Placement Shares or the Subsequent Offering. If any such information is given or made, it must not be relied upon as having been authorised by the Company. The information contained herein is as of the date hereof and is subject to change, completion and amendment without further notice. In accordance with Section 7-15 of the Norwegian Securities Trading Act, significant new factors, material mistakes or inaccuracies relating to the information included in this Prospectus, which are capable of affecting the assessment of the Shares between the time when this Prospectus is approved and the date of listing of the Private Placement Shares and the Offer Shares on the Oslo Stock Exchange, will be included in a supplement to this Prospectus. Neither the publication nor distribution of this Prospectus, nor any sale of Offer Shares made hereunder, shall under any circumstances create any implication that there has been no change in the Group's affairs or that the information herein is correct as of any date subsequent to the date of this Prospectus. The contents of this Prospectus shall not be construed as legal, business or tax advice. Each reader of this Prospectus should consult its own legal, business or tax advisor as to legal, business or tax advice. If you are in any doubt about the contents of this Prospectus, you should consult your stockbroker, bank manager, lawyer, accountant or other professional adviser. The distribution of this Prospectus, the Subsequent Offering and sale of the Offer Shares may be restricted by law in certain jurisdictions. This Prospectus does not constitute an offer of, or an invitation to purchase, any of the Offer Shares in any jurisdiction in which such offer or sale would be unlawful. No one has taken any action that would permit a public offering of Shares to occur outside of Norway. Accordingly, neither this Prospectus nor any advertisement or any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. The Company and the Managers require persons in possession of this Prospectus to inform themselves about and to observe any such restrictions. The Private Placement Shares and the Offer Shares are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable securities laws and regulations. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period of time. For further information on the manner of distribution of the Private Placement Shares and the Offer Shares and the selling and transfer restrictions to which they are subject, see Section 6 "Selling and Transfer Restrictions". Any reproduction of this Prospectus, in whole or in part is prohibited.

3 This Prospectus and the terms and conditions of the Subsequent Offering as set out herein shall be governed by and construed in accordance with Norwegian law. The courts of Norway, with Oslo as legal venue, shall have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Subsequent Offering or this Prospectus. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. NOTICE TO INVESTORS IN THE UNITED STATES Because of the following restrictions, prospective investors are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the Offer Shares. The Offer Shares have not been and will not be registered under the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction in the United States and may not be offered, sold, pledged or otherwise transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in compliance with any applicable state securities laws. All offers and sales in the United States will be made only to QIBs as defined in Rule 144A or in other transactions exempt from registration requirements under the U.S. Securities Act. All offers and sales outside the United States will be made in reliance on Regulation S. Prospective purchasers are hereby notified that the Company as seller of Offer Shares may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act provided by Rule 144A under the U.S. Securities Act. See Section "United States". Any Offer Shares offered or sold in the United States will be subject to certain transfer restrictions as set forth under Section "United States". The securities offered hereby have not been recommended by any United States federal or state securities commission or regulatory authority. Further, the foregoing authorities have not passed upon the merits of the Subsequent Offering or confirmed the accuracy or determined the adequacy of this Prospectus. Any representation to the contrary is a criminal offense under the laws of the United States. In the United States, this Prospectus is being furnished on a confidential basis solely for the purposes of enabling a prospective investor to consider purchasing the particular securities described herein. The information contained in this Prospectus has been provided by the Company and other sources identified herein. Distribution of this Prospectus to any person other than the offeree specified by the Managers or their representatives, and those persons, if any, retained to advise such offeree with respect thereto, is unauthorised and any disclosure of its contents, without prior written consent of the Company, is prohibited. This Prospectus is personal to each offeree and does not constitute an offer to any other person or to the public generally to purchase Offer Shares or subscribe for or otherwise acquire any Shares. NOTICE TO INVESTORS IN THE UNITED KINGDOM This Prospectus is only being distributed to and is only directed at (i) persons who are outside the United Kingdom (the "UK") or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000

4 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). The Offer Shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Shares 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. Each of the Managers has represented, warranted and agreed (i) that it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection with the issue or sale of the Offer Shares in circumstances in which section 21(1) of the FSMA does not apply to the Company and (ii) that it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Offer Shares in, from or otherwise involving the UK. NOTICE TO INVESTORS IN THE EEA In any member state of the European Economic Area (the "EEA") that has implemented the EU Prospectus Directive, other than Norway (each, a "Relevant Member State"), this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the EU Prospectus Directive. The Prospectus has been prepared on the basis that all offers of Offer Shares outside Norway will be made pursuant to an exemption under the EU Prospectus Directive from the requirement to produce a prospectus for offer of shares. Accordingly, any person making or intending to make any offer within the EEA of Offer Shares which is the subject of the Subsequent Offering contemplated in this Prospectus within any EEA member state (other than Norway) should only do so in circumstances in which no obligation arises for the Company or any of the Managers to publish a prospectus or a supplement to a prospectus under the EU Prospectus Directive for such offer. Neither the Company nor the Managers have authorised, nor do they authorise, the making of any offer of Shares through any financial intermediary, other than offers made by Managers which constitute the final placement of Offer Shares contemplated in this Prospectus. Each person in a Relevant Member State other than, in the case of paragraph (a), persons receiving offers contemplated in this Prospectus in Norway, who receives any communication in respect of, or who acquires any Offer Shares under, the offers contemplated in this Prospectus will be deemed to have represented, warranted and agreed to and with the Managers and the Company that: a) it is a qualified investor as defined in the EU Prospectus Directive; and b) in the case of any Offer Shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) such Offer Shares acquired by it in the Subsequent Offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the EU Prospectus Directive, or in circumstances in which the prior consent of the Managers has been given to the offer or resale; or (ii) where such Offer Shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those Offer Shares to it is not treated under the EU Prospectus Directive as having been made to such persons. For the purposes of this provision, the expression an "offer to the public" in relation to any of the Offer Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Offer Shares to be offered so as to enable an investor to decide to purchase any of the Offer Shares, as the same may be varied in that Relevant Member State by any measure implementing the EU Prospectus Directive in that Relevant Member State, and the expression "EU Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

5 See Section 6 "Selling and Transfer Restrictions" for certain other notices to investors. ENFORCEMENT OF CIVIL LIABILITIES The Company is a public corporation amalgamated under the Business Corporations Act ("ABCA") pursuant to the laws of the Province of Alberta, Canada. As a result, the rights of holders of the Company's Shares are governed by Canadian and Alberta law as well as the Company's articles of amalgamation (the "Articles") and by-laws (the "By-Laws"). The rights of shareholders under Canadian and Alberta law may differ from the rights of shareholders of companies incorporated in other jurisdictions. The members of the Company's board of directors (the "Board Members" and the "Board" or "Board of Directors", respectively) and the members of the Company's senior management (the "Management") are not residents of the United States, and a substantial portion of the Company's assets are located outside the United States. As a result, it may be difficult for investors in the United States to enforce judgments obtained in U.S. courts against the Company or those persons, including judgments based on the civil liability provisions of the securities laws of the United States or any State or territory within the United States.

6 TABLE OF CONTENTS 1 SUMMARY RISK FACTORS RESPONSIBILITY FOR THE PROSPECTUS GENERAL INFORMATION THE PRIVATE PLACEMENT AND THE SUBSEQUENT OFFERING SELLING AND TRANSFER RESTRICTIONS INDUSTRY AND MARKET OVERVIEW BUSINESS OF THE GROUP THE ASSETS OF THE GROUP REGULATORY FRAMEWORK CAPITALISATION AND INDEBTEDNESS SELECTED FINANCIAL AND OTHER INFORMATION INVESTMENTS, CAPITAL RESOURCES AND BORROWINGS BOARD OF DIRECTORS, MANAGEMENT AND EMPLOYEES RELATED PARTY TRANSACTIONS DIVIDENDS AND DIVIDEND POLICY DESCRIPTION OF THE SHARE CAPITAL SECURITIES TRADING TAXATION ADDITIONAL INFORMATION DEFINITIONS AND GLOSSARY OF TERMS APPENDICES APPENDIX A SUBSCRIPTION FORM FOR THE SUBSEQUENT OFFERING... A1

7 2 1 SUMMARY Summaries are made up of disclosure requirements known as "Elements". These elements are numbered in Sections A E (A.1 E.7). This summary contains all the Elements required to be included in a summary for this type of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of "not applicable". Section A Introduction and Warnings A.1 Introduction and warnings This summary should be read as an introduction to the Prospectus. Any decision to invest in the Shares should be based on consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the relevant European Union member states, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities. A.2 Consent to the use of the Prospectus by financial intermediaries Not applicable; no consent is granted by the Company to the use of the Prospectus for subsequent resale or final placement of the Shares. Section B Issuer B.1 Legal and commercial name B.2 Domicile and legal form, legislation and country of incorporation B.3 Current operations, principal activities and markets Questerre Energy Corporation ("Questerre" or the "Company"). The Company is a public corporation amalgamated under the Business Corporations Act ("ABCA") pursuant to the laws of the Province of Alberta, Canada. Questerre is actively engaged in the acquisition, exploration, and development of oil and gas projects, in specific non-conventional projects such as tight oil, oil shale, shale oil and shale gas. Questerre holds assets in Alberta, Saskatchewan, British Columbia, Manitoba, Quebec and Jordan.

8 3 Alberta: In Alberta, the Company's activities are focused in the Kakwa- Resthaven area, in which Questerre holds a 60% working interest in 9 square kilometers, including a 100% working interest and operatorship in 2 square kilometers. The Kakwa-Resthaven area is situated approximately 75 kilometers south of Grande Prairie in west central Alberta. Among other zones of interest, the area is prospective for condensate-rich natural gas in the deep, over-pressured fairway of the Montney formation, at a depth of approximately 3,100 meters to 3,600 meters. Economics are enhanced by relatively high liquids content, particularly condensate, and Crown royalty incentives for new deep horizontal gas wells with initial royalty rates of up to 5%. The Company has a 25% working interest in 19 gross wells on its joint venture acreage and a 100% interest in one well on its operated acreage. For the nine months ended September 30, 2016, production from the Kakwa-Resthaven area averaged 1,060 boe/d. The majority of activity in 2014 onwards was on its joint venture acreage at Kakwa where the Company holds a 25% working interest. In 2016, Questerre has participated in two (0.50 net) wells drilled on the joint venture acreage. The wells have benefitted from further improvements in completions where sand concentrations used have increased by approximately 20%. The Company also participated in the expansion of additional infrastructure including a sweetening system and construction of a central water facility. For 2017, the operator has proposed a gross capital budget of CAD 100 million including 8 (2.0 net) new wells and further infrastructure expansion. Questerre's share of the capital budget is 25%. Questerre intends to fully participate in this capital program, subject to commodity prices and continued results. Saskatchewan: In Saskatchewan, the Company holds an average 72% working interest in 5.5 square kilometers, split approximately equally between Crown and freehold leases. The Company also holds a 100% interest in approx. 10 square kilometers of land in Saskatchewan for oil shale acreage in the Pasquia Hills area. The majority of the Company's producing acreage is in the Antler area. The Antler area is approximately 200 kilometres southeast from Regina in southeast Saskatchewan. The primary target is high quality light oil from the Bakken/Torquay formation. The Company holds an average 56% working interest in 63 gross producing wells that have been identified and assigned crude oil reserves. Future drilling locations have been identified and assigned undeveloped reserves and the Company continues to establish a pilot waterflood. Production is light oil approximately 41 degrees API with little to no solution gas.

9 4 New wells are estimated to cost approximately CAD 1.5 million. For the nine months ended 30 September 2016, production from Saskatchewan was 217 boe/d. In 2015, activities at Antler focused on optimization of existing production and the pilot waterflood to increase recovery of the oil in place. The waterflood pilot consists of four horizontal wells on two sections injecting approximately 1,100 bbl/d of water into the oil pool. Injection pressures were increased during the year and initial responses suggest potential improvement in production rates from offsetting horizontal and vertical wells. Readers are cautioned that these responses are not necessarily indicative of long-term performance or ultimate recovery. The Company currently plans to increase injection volumes to further accelerate the production response and continue work to optimize production. British Columbia: In British Columbia, the Company holds an average 54% working interest in 2 square kilometres of Crown leases. The acreage is located primarily in the Midway area, approximately 75 kilometres east of Fort Nelson. The Company owns a 50% working interest in 2 producing wells from the Jean Marie Formation. For the nine months ended 30 September 2016, production from British Columbia averaged 13 boe/d. No wells have been drilled since The Company has no plans for further development in this area. Manitoba: In Manitoba, the Company holds an average 35% working interest in 2 square kilometers of Crown leases. The acreage is located in the Pierson area, approximately 15 kilometres north of the state of North Dakota. The Company lands directly offset other development by industry. The primary target is the Triassic Spearfish Formation with production of light oil from 10 (3.5 net) wells. The Company has identified two additional drilling locations which may be drilled subject to improving commodity prices. New wells are estimated to cost approximately CAD 1.2 million. For the nine months ended 30 September 2016, production from the area was 47 boe/d. No wells have been drilled since Quebec: In Quebec, the Company holds an average 18.50% working interest in 32 exploration permits for the exclusive right to explore over approximately 5,800 gross square kilometers in the St. Lawrence

10 5 Lowlands. The exploration potential of the Lowlands is complemented by proximity to one of the largest natural gas markets in North America and a well-established distribution network. The area is prospective for natural gas in several horizons with the primary target being the Utica shale. Secondary targets include the shallower Lorraine shale and the deeper Trenton Black-River carbonate. Following a successful vertical test well program in 2008 and 2009, Questerre and its partner, Repsol, began a pilot horizontal well program to assess commerciality of the Utica shale in In the fall of 2010, the pilot program was suspended while the provincial government initiated an environmental assessment. Over the subsequent years, the government conducted a series of environmental assessments. In 2015, the government of Quebec published the majority of the studies from its most recent environmental assessment. In the summer of 2016, the government introduced Bill 106 to implement its 2030 Energy Policy and amend various legislative provisions, including modernizing hydrocarbon legislation in the province. Bill 106 was enacted on December 10, Bill 106 enacts or amends various pieces of legislation relating to clean energy and oil and gas exploration in the Québec, including the Petroleum Resources Act (Québec), which sets out a comprehensive new regime governing petroleum exploration and development in Québec. Questerre expects that further operations will remain deferred pending introduction and approval of the hydrocarbon regulations and social acceptability. Jordan: In Jordan, the Company holds a Memorandum of Understanding ("MOU") with the Ministry of Energy and Mineral Resources for the exclusive right to evaluate and appraise the oil shale potential over approximately 388 square kilometers of land. The acreage is located in the Isfir-Jafr area, approximately 200 kilometers south of the capital, Amman. The initial term of the MOU is two years, expiring in May 2017, and it may be extended. The Company estimates its work program and related financial investment for the MOU to range between CAD 3-5 million over the initial term. Questerre has compiled existing topographic, geologic, and geophysical data, augmenting the data with field surveying and mapping to develop topographic and geologic base mapping for the project. This was followed with the drilling, sampling and analysis of five additional core holes. The primary objective of the Company's

11 6 work was to further characterize quality and extents of the oil shale deposits within the MOU, and identify area(s) within the MOU to retain for future development and areas that can be relinquished as part of the MOU process leading towards issuance of a concession agreement. Subject to results, the Company intends to develop a subsequent work program that would be conducted during the initial phase of a subsequent concession agreement. In 2016, the Company continued the appraisal of its Jordanian oil shale assets. The two main objectives are the evaluation of the scale and nature of the resource and the feasibility of commercial development. The economic feasibility includes the assessment of multiple retorting processes, including two processes that have been proven at commercial scale. In conjunction, the Company has commissioned three engineering studies for the mining, preparation of ore and upgrading of the produced oil. Two additional studies for utilities and infrastructure and the marketing of produced oil are scheduled for early The Company anticipates incorporating the results from these studies in an update of its resource assessment in early B.4a Significant recent trends There are a number of trends that have been developing in the oil and gas industry during the past several years that appear to be shaping the near future of the Company's business. The first trend is the volatility of commodity prices. Crude oil prices are influenced by the world economy. Natural gas prices are influenced by supply and demand factors primarily in North America. The impact on the oil and gas industry from commodity price volatility is significant. During periods of high prices, producers generate sufficient cash flows to conduct active exploration programs without external capital. Increased commodity prices frequently translate into very busy periods for service suppliers triggering premium costs for their services. Purchase prices for properties and land similarly increase during these periods. During low commodity price periods, acquisition costs drop, as do internally generated funds to spend on exploration and development activities. With decreased demand, the prices charged by the various service suppliers also declines. A second trend affecting the oil and gas industry is the impact on capital markets caused by investor uncertainty in the energy sector. The Company must compete with numerous companies when accessing new capital. The competitive nature of the oil and gas industry will cause opportunities for financings to be selective. Some companies will have to rely on internally generated funds to conduct their exploration and developmental programs.

12 7 A third trend affecting the oil and gas industry is regulations governing greenhouse gas emissions and hydraulic fracturing. B.5 Description of the Group The Canadian/United States' currency exchange rate also influences commodity prices for Canadian producers as there is a high correlation between Canadian and United States' oil and natural gas prices. The Group consists of the Company and two direct wholly-owned subsidiaries: Canada Inc., which was incorporated under the Canada Business Corporations Act and Questerre Energy Corporation/Jordan incorporated under the laws of Jordan. The Company owns 100% of the voting rights for these subsidiaries. The Group's activities are conducted at the parent level and in the Company's subsidiary Questerre Energy Corporation/Jordan. Below is a description of the companies in the Group: Questerre Energy Corporation: Questerre is the parent company of the Group. Name of subsidiary: Questerre Energy Corporation/Jordan is a wholly-owned subsidiary of the Company and holds the Memorandum of Understanding for oil shale acreage in Jordan. It is incorporated under the laws of the Kingdom of Jordan. Name of subsidiary: Canada Inc. is a wholly-owned subsidiary of the Company and has no material assets. B.6 Interests in the Company and voting rights As of 13 January 2017, the Company had 6,049 shareholders in the VPS, all of which are holding Common Shares. There are no differences in voting rights between the Common Shares. Based on the distribution of its meeting materials for its 2016 Annual General Meeting, the Company estimates there are an additional 3,700 shareholders outside the VPS. In accordance with the disclosure obligation under the Norwegian Securities Trading Act, shareholders acquiring ownership to or control over more than 5% of the share capital of a company listed on the Oslo Stock Exchange must notify the stock exchange immediately. As of the date of this Prospectus, the Company is not aware of any persons or entities who have an interest in the Company's capital or voting rights which is notifiable pursuant to the aforementioned disclosure rules other than the following: JO Hambro Capital Management, which as of 13 January 2017 was registered with Common Shares in the VPS, or 6.25% of the number of issued Common Shares of the Company Mr. Michael Binnion (and related parties), who as of 13 January 2017 was registered with Common Shares in the VPS, or 5.10% of the number of issued Common Shares of the Company

13 8 The Company is not aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. The Company is not aware of any measures in place to ensure that such control is not abused. B.7 Selected historical key financial information The selected condensed financial information set forth in this Prospectus should be read in conjunction with the relevant financial statements and the notes to those statements which can be found on the Company's webpage, The selected financial data presented in this section has been derived from the Company's unaudited consolidated financial statements for the three and nine months ended 30 September 2016 and 2015, and the Company's audited consolidated financial statements for the years ended 31 December 2015 and The presented data are in accordance with IFRS. Consolidated statements of net profit or loss and comprehensive income or loss The table below sets out selected data from the Company's consolidated statements of net profit or loss and comprehensive income or loss for the years ended 31 December 2015 and 2014 (audited), and the three and nine month periods ended 30 September 2016 and 2015 (unaudited). Unaudited Unaudited Unaudited Unaudited Audited Audited Three months ended September 30, Nine months ended September 30, December 31, December 31, (CAD thousands, except per share amounts) Revised 1) Revised 1) Revised 1) Revenue Petroleum and natural gas sales 4,095 6,528 12,546 16,704 22,015 28,577 Royalties (197) (472) (743) (967) (1,246) (2,279) Petroleum and natural gas revenue, net of royalties 3,898 6,056 11,803 15,737 20,769 26,298 Expenses Direct operating 2,071 2,194 5,984 5,838 8,067 5,641 General and administrative ,954 2,774 3,546 4,756 Depletion and depreciation 2,193 2,945 6,923 6,968 9,730 8,476 Impairment of assets 2 20, ,370 69,620 47,628 Loss on sale of property, plant and equipment ,928 Loss (gain) on risk management contracts (356) 31 (402) (40) (468) (628) Share based compensation (recovery) 43 (19) (54) (2,057) Accretion of asset retirement obligation Interest (income) expense ,487 (504) Other (income) expense (15) Loss before taxes (984) (20,819) (3,482) (21,571) (71,413) (40,402) Deferred tax expense (recovery) 23 (2,650) 23 (4,079) 2,121 (3,664) Net loss (1,007) (18,169) (3,505) (17,492) (73,534) (36,738)

14 9 Other comprehensive income (loss), net of tax Foreign currency translation adjustment 5 - (46) Gain (loss) on foreign exchange on investments 4 1,037 (24) 2,067 2,422 3,645 Reclass to net income (loss) on investment impairment - (1,940) - (2,067) (2,363) (7,776) 9 (903) (70) - 81 (4,131) Total comprehensive loss (998) (19,072) (3,575) (17,492) (73,453) (40,869) Net loss per share Basic and diluted - (0.07) (0.01) (0.07) (0.28) (0.14) 1) The Company revised its 31 December 2014 financial statements to reflect an overstatement of its share based payment liability of CAD 5.19 million and an overstatement of its share based compensation expense and capitalized share based payment of CAD 3.3 million and CAD 1.89 million, respectively. The Company assessed the materiality of this adjustment and concluded that it was not material to any of the previously issued consolidated financial statements. As a result, the Company revised these statements for these changes. The factors that it considered when assessing materiality were that there was no cash or credit facility impact to these changes and that there were no changes in amounts paid to employees upon exercise of options. For more information on the effect of this correction on individual line items within the Company's comprehensive loss, changes in equity and cash flow please see Note 1 to the financial statements for the three and nine months ended 30 September 2016 and Note 2 to the financial statements for the year ended 31 December 2015, incorporated by reference into this Prospectus (Section 20.3). These notes also include certain presentation changes to the cash flow statement to better reflect its cash flow from operations. Consolidated balance sheet The table below sets out selected data from the Company's consolidated balance sheet as at 31 December 2015 and 2014 (audited), and as at 30 September 2016 (unaudited). Unaudited Audited Audited Nine months ended September 30, December 31, December 31, (CAD thousands) Revised 1) Assets Current Assets Cash and cash equivalents ,005 Accounts receivable 4,135 2,668 2,607 Current portion of risk management contracts - 1, Deposits and prepaid expenses ,248 4,625 15,149 Investments ,541 Property, plant and equipment 88,437 87,547 96,007 Exploration and evaluation assets 49,643 47,917 81,900 Goodwill 2,346 2,346 2,346 Deferred tax assets 18,830 18,827 20, , , ,770 Liabilities Current Liabilities Accounts payable and accrued liabilities 7,589 10,529 23,648 Current portion of unrealized risk management contracts Current portion of share based compensation liability Flow-Through share obligation 919 Credit facilities 18,909 14,542-27,639 25,071 23,894 Unrealized risk management contracts

15 10 Asset retirement obligation 9,331 8,752 8,133 Share based compensation liability ,214 34,441 32,129 Shareholders' Equity Share capital 351, , ,345 Contributed surplus 17,198 16,951 16,686 Accumulated other comprehensive income Deficit (240,557) (237,052) (163,518) Shareholders' Equity 127, , ,641 Total Shareholders' Equity and Liabilities 165, , ,770 1) The Company revised its 31 December 2014 financial statements to reflect an overstatement of its share based payment liability of CAD 5.19 million and an overstatement of its share based compensation expense and capitalized share based payment of CAD 3.3 million and CAD 1.89 million, respectively. The Company assessed the materiality of this adjustment and concluded that it was not material to any of the previously issued consolidated financial statements. As a result, the Company revised these statements for these changes. The factors that it considered when assessing materiality were that there was no cash or credit facility impact to these changes and that there were no changes in amounts paid to employees upon exercise of options. For more information on the effect of this correction on individual line items within the Company's comprehensive loss, changes in equity and cash flow please see Note 1 to the financial statements for the three and nine months ended 30 September 2016 and Note 2 to the financial statements for the year ended 31 December 2015, incorporated by reference into this Prospectus (Section 20.3). These notes also include certain presentation changes to the cash flow statement to better reflect its cash flow from operations. Consolidated statement of changes in equity The table below sets out selected data from the Company's statement of changes in equity for the years ended 31 December 2015 and 2014 (audited) and for the nine month period ended 30 September 2016 (unaudited). September 30, December 31, December 31, (CAD thousands) Revised 1) Share Capital Balance, beginning of period 347, , ,059 Issue of common shares 2, Issue of warrants 876 Share issue costs (net of tax) (62) - (64) Balance, end of period 351, , ,345 Contributed Surplus Balance, beginning of period 16,951 16,686 16,659 Share based compensation Balance, end of period 17,198 16,951 16,686 Accumulated Other Comprehensive Income Balance, beginning of period ,259 Other comprehensive loss (70) 81 (4,131) Balance, end of period Deficit Balance, beginning of period (237,052) (163,518) (126,780) Net loss (3,505) (73,534) (36,738) Balance, end of period (240,557) (237,052) (163,518) Total Shareholders' Equity 127, , ,641 1) The Company revised its 31 December 2014 financial statements to reflect an overstatement of its share based payment liability of CAD 5.19 million and an overstatement of its share based compensation expense and capitalized share based payment of CAD 3.3 million and CAD 1.89 million, respectively. The Company assessed the materiality of this adjustment and concluded that it was not material to any of the previously issued consolidated financial statements. As a result, the Company revised these statements for these changes. The factors that it considered when assessing materiality were that there was no cash or credit facility impact to

16 11 these changes and that there were no changes in amounts paid to employees upon exercise of options. For more information on the effect of this correction on individual line items within the Company's comprehensive loss, changes in equity and cash flow please see Note 1 to the financial statements for the three and nine months ended 30 September 2016 and Note 2 to the financial statements for the year ended 31 December 2015, incorporated by reference into this Prospectus (Section 20.3). These notes also include certain presentation changes to the cash flow statement to better reflect its cash flow from operations. Consolidated statement of cash flow The table below sets out selected data from the Group's consolidated statement of cash flows for the years ended 31 December 2015 and 2014 (audited), and for the three and nine month periods ended 30 September 2016 and Unaudited Unaudited Unaudited Unaudited Audited Audited Three months ended September 30, Nine months ended September 30, December 31, December 31, (CAD thousands) Revised 1) Revised 1) Revised 1) Operating Activities Net income (loss) (1,007) (18,169) (3,505) (17,492) (73,534) (36,738) Adjustments for: Depletion and depreciation 2,193 2,945 6,923 6,968 9,730 8,476 Impairment of assets 2 20, ,370 69,620 47,628 Loss on sale of property, plant and equipment ,928 Unrealized (gain) loss on risk management contracts (63) (1,201) Share based compensation (recovery) 43 (19) (54) (2,057) Accretion of asset retirement obligation Deferred tax expense (recovery) 23 (2,650) 23 (4,079) 2,121 (3,664) Interest (income) expense ,487 (504) Other items not involving cash 5 - (47) - 19 (24) Abandonment expenditures (2) (45) (13) (49) (60) (89) Cash flow from operations 1,447 3,182 5,102 7,511 9,778 14,890 Interest (paid) received (231) (100) (585) (93) (225) 504 Change in non-cash working capital (499) (243) (596) (1,146) Net cash from operating activities 1,591 3,362 4,018 7,175 8,957 14,248 Investing Activities Property, plant and equipment expenditures (1,288) (400) (1,519) (2,134) (2,241) (2,865) Exploration and evaluation expenditures (2,770) (5,813) (7,438) (17,377) (18,283) (60,710) Sale of property, plant and equipment ,929 Change in non-cash working capital 1 (1,089) (4,104) (9,792) (13,637) 5,848 Net cash used in investing activities (4,057) (7,302) (13,061) (29,303) (34,161) (50,798) Financing Activities Proceeds from issue of share capital 4,751-4, Share issue costs (85) - (85) - - (88) Increase in credit facilities 6,126 11,261 21,667 23,571 33,767 - Repayment of credit facilities (8,400) (7,102) (17,300) (12,212) (19,225) - Net cash from financing activities 2,392 4,159 9,033 11,359 14, Change in cash and cash equivalents (74) 219 (10) (10,769) (10,662) (36,454) Cash and cash equivalents, beginning of period ,005 11,005 47,459 Cash and cash equivalents, end of period ,005 1) The Company revised its 31 December 2014 financial statements to reflect an overstatement of its share based payment liability of CAD 5.19 million and an overstatement of its share based compensation expense and capitalized share based payment of CAD 3.3 million and CAD 1.89 million, respectively. The Company assessed the materiality of this adjustment and concluded that it was not material to any of the previously issued consolidated financial statements. As a result, the Company revised these statements for these changes. The factors

17 12 that it considered when assessing materiality were that there was no cash or credit facility impact to these changes and that there were no changes in amounts paid to employees upon exercise of options. For more information on the effect of this correction on individual line items within the Company's comprehensive loss, changes in equity and cash flow please see Note 1 to the financial statements for the three and nine months ended 30 September 2016 and Note 2 to the financial statements for the year ended 31 December 2015, incorporated by reference into this Prospectus (Section 20.3). These notes also include certain presentation changes to the cash flow statement to better reflect its cash flow from operations. B.8 Selected key pro forma financial information Not applicable. There is no pro forma financial information. B.9 Profit forecast or estimate Not applicable. No profit forecast or estimate is made. B.10 Audit report qualifications Not applicable. There are no qualifications in the audit reports. B.11 Working Capital The Company is of the opinion that the working capital available to the Group is sufficient for the Group's present requirements, for the period covering at least 12 months from the date of this Prospectus. For the sake of good order, the term "working capital" in the context above shall be understood as the Group's ability to access cash and other available liquid resources in order to meet its liabilities as they fall due. Section C Securities C.1 Type and class of securities admitted to trading and identification number The Private Placement Shares and the Offer Shares are Common Shares in the Company, delivered electronically in registered bookentry form in the VPS. The Private Placement Shares are issued with a separate ISIN number and will subsequently be transferred to the ordinary ISIN of the Company in the VPS system, being ISIN CA74836K1003. The Offer Shares will be registered with the VPS under the ordinary ISIN of the Company. C.2 Currency of issue Norwegian kroner (NOK). C.3 Number of shares in issue and par value C.4 Rights attaching to the securities As at the date of this Prospectus, 308,274,040 Common Shares, no Preferred Shares and no Class "B" Shares are issued and outstanding. The Shares have no par value. The Private Placement Shares and Offer Shares carry rights in all respects equal to the Company's Common Shares. The Private Placement Shares and Offer Shares will rank pari passu with existing Common Shares in all respects from the time of issuance. The holders of Private Placement Shares / Offer Shares are entitled to receive notice of and to attend at and to vote one vote per Private Placement Share / Offer Share at meetings of shareholders of the Company, except meetings at which only holders of a specified class of shares, other than Private Placement Shares / Offer Shares, are entitled to vote. In addition, the holders of Private Placement Shares / Offer Shares are entitled to receive dividends declared on the Common Shares, subject to the rights of the holders of shares ranking

18 13 prior to the Common Shares. Holders of Private Placement Shares / Offer Shares are entitled to receive pro rata the remaining property of the Company upon dissolution in equal rank with the holders of other Common Shares and Class "B" Shares. C.5 Restrictions on transfer Except where required or permitted by law, the TSX Listing Rules or the TSX Company Manual, there is no restriction on the transfer of Shares. The Common Shares issued in the Private Placement and the Subsequent Offering are subject to certain resale restrictions in Canada and cannot be traded in Canada or to the benefit of a Canadian resident for four months and a day from the distribution date. C.6 Admission to trading The Common Shares are listed on the Toronto Stock Exchange (primary listing) and the Oslo Stock Exchange (secondary listing) under the ticker "QEC". First day of listing of the Private Placement Shares and the Offer Shares on the Oslo Stock Exchange is expected to be on or about 25 January and 10 February 2017 respectively. C.7 Dividend policy Questerre has not paid any dividends or made any distributions on its Common Shares since incorporation. Dividends or distributions on its Common Shares will be paid solely at the discretion of Questerre's Board of Directors after taking into account the financial condition of Questerre and the economic environment in which it is operating. No dividends or distributions are expected to be paid in the foreseeable future. Section D Risks D.1 Key risks specific to the Company or its industry Recent market events and conditions, including global excess oil and natural gas supply, recent actions taken by the Organization of the Petroleum Exporting Countries ("OPEC"), slowing growth in China and other emerging economies, market volatility and disruptions in Asia, and sovereign debt levels in various countries, have caused significant decrease in the valuation of oil and gas companies and a decrease in confidence in the oil and gas industry. Lower commodity prices may affect the volume and value of the Group's reserves especially as certain reserves become uneconomic. In addition, lower commodity prices have reduced the Group's cash flow leading to a reduction in funds available for capital expenditures. Any decrease in value of the Group's reserves may reduce the borrowing base under the Group's credit facilities, which, depending on the level of the Group's indebtedness, could result in the Group having to repay all or a portion of its indebtedness. Oil and natural gas are commodities whose prices are determined based on world demand, supply and other factors, including geo political events, all of which are beyond the control of Questerre. Oil and natural gas exploration involves a high degree of risk