Due Diligence ReportCub Energy Due Diligence Report (Based on 2018 Year End Results Released March 2019) Financials + MD&A All Information Found On Sedar Price: $0.045 Common Shares: 314,215,355 Insider/Institutional Holdings: 172,466,105 or 55% of common shares Options: 15.3 million Recent Fact Sheet: https://www.cubenergyinc.com/_resources/factsheet/factsheet.pdf?v=1 Recent Company Presentation: https://www.cubenergyinc.com/_resources/corporate-presentation.pdf?v=1 Financials All Numbers Are Expressed In US Dollars. ASSETS Cash & Equivalents: $7,236,000 Prepaid Expenses & Inventory: $1,607,000 Trade & Receivables: $771,000 Equity Investments: $7,967,000 Property & Equipment: $3,588,000 Non-Current Receivables: $919,000 TOTAL ASSETS: $22,088,000 (2017 - $19,827,000) LIABILTIIES Trade Payables: $5,318,000 Shareholder Loans(Portion): $498,000 Loan from KUB-gas: $3,591,000 Shareholder Loans: $2,000,000 Provisions: $458,000 TOTAL LIABILITIES: $11,865,000 (2017 - $14,036,000) Asset/Debt Ratio: 1.86 Q1 2019 results will be released end of April. Below are results from 2017 and 2018 sales. 2017 All USD Gas Sales: $24,000 Gas Trading: $13,099,000 Royalty Expense: ($7,000) Income From Equity Investment: $6,767,000 Operating Expenses (Total): $34,218,000 - $16 million one time impairment included Loss: $14,869,000 Should have been a profit with one time expense removed 2018 All USD Gas Sales: $142,000 Gas Trading: $20,428,000 Royalty Expense: ($38,000) Income From Equity Investment: $6,121,000 Operating Expenses (Total): $23,573,000 Income Tax Expense: $2,000 Foreign Currency Gain: $52,000 Income: $ 3,130,000 Earnings Per Share In 2018: $3,130,000 USD X 1.3344 CDN (Exchange Rate March 31 2019) = $4,176,672 **Canadian Company, Therefore earnings must be converted to reflect true share value** $4,176,672 / 314,215,355(common shares) = $0.133 EPS MD&A Highlights From 2018 Results The Company is a publicly-traded, international energy company engaged in exploration and development of onshore oil and gas properties in Ukraine. Key to success in this region is the Companys strong local relationships, key operating partnerships and a history of management experience operating in-country. Current production is driven by a 35% interest in KUB-Gas LLC (KUB-Gas) in eastern Ukraine and the Companys 100% operated interest in western Ukraine in Tysagaz LLC (Tysagaz). The Company also holds a 50% interest in CNG Holdings Netherland B.V. (CNG Holdings) which in turn owns CNG LLC (CNG LLC) to jointly explore a production licence in western Ukraine. As at December 31, 2018, the Company had an effective 35% ownership interest in KUB-Gas, a Ukrainian company which owns assets representing a substantial portion of the Companys core operating properties, income and cashflow. The Company also owns 100% ownership of Tysagaz, whose producing assets are in western Ukraine but have been suspended since April 1, 2016 other than minor production from RK-1. In addition, the Company has an effective 50% ownership interest in CNG LLC, a Ukrainian company with a production licence in western Ukraine that has no current production but the Company expects to drill exploratory wells in 2019. Highlights Kub-Gas successfully recompleted the Olgovskoye-3 (O-3) well to a behind pipe pay zone designated as the Bashkirian-1b (B1b). The well initially tested at higher rates and put into production at a stabilized rate at 1.4 million cubic feet per day (MMcf/d) in the fourth quarter of 2018. Kub-Gas also recompleted the Olgovskoye-9 (O-9) well to the zone designated as the Bashkirian-3 (B3). During a standard multi-rate test, the zone was tested up to 2.5 million cubic feet per day (MMcf/d) and was put into production at a stable rate of 1.7 MMcf/d during the second half of 2018. The Company reported income from equity investment of $6,121,000 during the year ended December 31, 2018 as compared to income of $6,767,000 in 2017. The Company reported net income of $3,078,000 or $0.01 per share during the year ended December 31, 2018 as compared to a net loss of $14,342,000 or $0.05 per share during 2017 when the Company recorded one-time impairment charges. During the year ended December 31, 2018, the Company received $5,676,000 in dividends from KUB Holdings as compared to $4,134,000 in dividends in 2017. The Company made a loan repayment of $1,067,000 to KUB-Gas during 2018 in conjunction with its maturity. In addition, the Company received $300,000 from Kub Holdings in conjunction with a longterm loan repayment. Production averaged 836 boe/d (97% weighted to natural gas and the remaining to condensate) for the year ended December 31, 2018 as compared to 977 boe/d for 2017. Netbacks of $29.33/boe or $4.88/Mcfe for the year ended December 31, 2018 as compared to netback of $25.19/Boe or $4.20/Mcfe for 2017. Achieved average natural gas price of $7.94/Mcf and condensate price of $70.47/bbl during the year ended December 31, 2018 as compared to $6.50/Mcf and $69.56/bbl for 2017. On January 1, 2018, the royalties on new wells drilled in Ukraine after January 1, 2018 were reduced to 12% from 29% for a minimum period of five years. On March 1, 2018, a new law was passed in Ukraine intended to simplify regulatory procedures for the oil and gas sector which should increase the speed and efficiency of approvals. The new Nitrogen Rejection Unit (NRU) is nearing completion and is planned to be operational in 2019. However, due to continued construction delays, on November 19, 2018, the Company filed a claim with American Arbitration Association (AAA), seeking $300,000 (plus interest and attorney fees) from the NRU manufacturer in contractual delay damages. The Company and its partner plan to start a three well exploration program at Uzhgorod in mid 2019, dependent on timing of permitting and weather conditions in the field. The well costs are expected to be incurred 100% by our partner. Eastern Ukraine KUB-Gas Assets (35%) Kub-Gas has successfully recompleted the O-3 and O-9 wells in 2018. There are ten other wells with behind pipe pays that may be attractive recompletion opportunities in the Olgovskoye License. As the currently producing intervals deplete, the production team can recomplete these additional zones in the existing wells. Opportunities such as these generate above average returns for shareholders, particularly given the current gas price in Ukraine. The North Yatskivska #3 (NY-3) well on the West Olgovskoye (WO) licence was drilled to a total depth of 2,300 metres and evaluated several prospective horizons. Test results indicated the well encountered noncommercial gas shows. The well was drilled based on 2D seismic and the Company believes the commencement of a 3D seismic program later this year should improve the probability of success of future exploration wells. Western Ukraine Tysagaz Assets (100% Interest) The RK field was temporarily suspended on April 1, 2016 because the nitrogen concentration exceeded the allowable limit stipulated by the gas pipeline operator. While the Company waitsfor the nitrogen rejection unit (NRU) that can extract nitrogen from natural gas from the shallower sands, the Company began selling a nominal amount of rich gas from a deep well to evaluate the Mesozoic formation. The Company is purchasing a new NRU to re-commence production on the RK field. The new NRU is being manufactured in the United States. The new NRU is planned to be operational in 2019. Western Ukraine CNG Assets (50% Interest) During 2017, CNG LLC completed a 118 square kilometre 3D seismic survey on the Uzhgorod production licence in western Ukraine. The results were interpreted and identified multiple drill targets. The Company and its partner plan to start a three well exploration program at Uzhgorod in mid 2019, dependent on timing of the permitting and weather conditions in the field. The well costs are expected to be incurred 100% by our partner. Ukraine Gas Prices and Currency The Ukrainian exchange, the Hryvnya (UAH) rate versus the USD was 27.76 UAH/USD at December 31, 2018, which was relatively flat as compared to the 28.1 UAH/USD at December 31, 2017. During the year ended December 31, 2018, gas pricesrealized were $7.94/Mcf which was higher than the 2017 price of $6.50/Mcf. The Company believes gas prices in 2018 were higher than 2017 because of a longer colder winter in Europe this year and lack of inventory. The future of natural gas prices in Ukraine is currently subject to a high degree of uncertainty and it is unknown what the future prices the Company will receive on its Ukraine production. Outlook The Company is participating with KUB-Gas to complete additional recompletion operations given the success of the O-3 and O-9 recompletions, one of which is underway at the time of this report with another 3 in the permitting phase. Kub-Gas may drill one additional well in 2019 and kickoff a 3D seismic program on the WO licence to delineate known structures found from 2D seismic. In western Ukraine, the Company is purchasing a new NRU with a plan to resume production at the RK field in 2019. The Company and its partner plan to start a three well exploration program in the Uzhgorod license in mid 2019 on structures defined by 3D seismic. The well costs are expected to be incurred 100% by our partner.