Bengal Energy Ltd T.BNG

Wellington Report On Bengal

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Investment Summary and Outlook

Bengal Energy (BNG) is an emerging international exploration and

production company poised to evaluate high impact exploration and lower

risk development opportunities in underexploited, proven producing basins

within Australia and India. In our view, the Company offers investors exposure

to a compelling mix of assets on the risk and reward spectrum with a massive

land base offering both immediate production and high impact exploration

potential. Since inception in February 2008, the company has more than tripled

its undeveloped land base and substantially increased operatorship to 89% in

proven producing basins in onshore and offshore Australia and India. Bengal’s

near term focus is on the exploration of their 100% owned and controlled

654,321 acre Tookanooka onshore block (ATP 732P) in Australia, which lies in

close proximity to producing fields and is prospective for 7 different plays for

both oil and gas in the Jurasic, Cretaceous and Permian formations. The

Company’s JV partner, Santos Ltd. (STO-AU) will operate the company’s lower

interest onshore Australian assets including the producing Barta property, while

Bengal’s high impact offshore assets in both Australia and India are likely to be

farmed-out to larger partners (national oil companies or major integrated

companies) to accelerate the pace of exploration while minimizing the amount of

capital at risk. To date, the Company has strategically partnered with 5 national

oil companies and is continuously seeking strong and experienced partners to

explore significant potential on its onshore & offshore acreages.

We are initiating coverage with a $3.50 target price and a Speculative Buy

rating. Given Bengal is an early-stage company just starting to become active

with the drill bit in 2011, we focus our valuation on the Company’s Australian

onshore assets in the Cooper Basin where we see the greatest near-term value

proposition. Based on our analysis, we estimate a net risked EMV/sh of ~$16

within six onshore blocks in the Cooper Basin, with an additional ~$40/sh in

upside potential over four remaining blocks in India and Australia with what we

consider to be conservative risking across the board in terms of chance of success

on its exploration-type plays of ~10% and a farm-out of 50% W.I. on the

majority of its offshore acreage. As the company executes high impact

exploration and makes discoveries, significant shareholder value could be

unlocked across Bengals’s 2.2 million net undeveloped acres. We believe

Bengal shares represent a compelling opportunity for investors looking to gain

exposure to an emerging international E&P with a sizeable acreage position and

significant resource potential in areas with attractive fiscal regimes, along with a

well-diversified mix of assets.

Bengal Energy Ltd.

Kevin Shaw, P.Eng [phone]; [e-mail] February 8, 2011- 3

Wes Swanson, ASA [phone]; [e-mail]

Investment Highlights

Poised to Explore Massive, Prospective Land Position

Bengal has amassed 2.2 million net acres of land and is well positioned to

evaluate significant resource potential over multiple basins. The company has

more than tripled its undeveloped land position over the past 2 years with success

at recent international bid rounds and now holds more acreage than every

publicly traded junior and intermediate E&P company operating in Western

Canada. Its acreage position is highly prospective with significant resource in

place in proven, producing basins in onshore and offshore India and Australia,

which offer attractive fiscal terms and a stable political situation with British

common law. The asset portfolio includes a diversified mix of low to medium

risk onshore opportunities (Australia and India) and game changing offshore

exploration (Australia and India) plays, which the company plans to explore with

larger partners.

Offsetting Discoveries and Multi-zone Plays De-risk Prospects

Several of Bengal’s blocks have offsetting discoveries with most wells

targeting multiple zones. These asset characteristics help define the block’s play

types and raise the chance of success (COS) on future exploratory wells. In

Australia, of BNG’s 3 core onshore blocks, one has already had an initial oil

discovery (Cuisiner-1 at Barta) with two follow-up wells drilled recently to

appraise step-out acreage with upcoming completions / testing operations

planned in Q1’11. A second onshore block is directly west of a large existing gas

field (Barrolka). Offshore, the company’s Katandra block in the Timor Sea is on

trend with the Jabiru and Challis oilfields. In India, the Cauvery basin is home to

several encouraging oil and gas discoveries including a 1 Tcf gas field

development play led by Hindustan Oil, and has produced several solid test

results, including a recent Reliance well that tested at over 30 mmcf/d with 1,200

bbl/d of liquids and a recent Hardy Oil well that tested 10 mmcf/d. The company

is targeting multiple zones on the vast majority of its leads/prospects, which in

our view further reduces exploration risk within these underexploited, proven

producing basins.

Several Catalysts on the Horizon for 2011…

Test results, multiple drills (onshore & offshore), focused exploration

activities and a resource report on tap in onshore Australia. Farm out of

“game changing” offshore AC/P 47 block in the Timor Sea by ~May and

potential strategic partnership on offshore India. In 2011, the Company plans

to delineate resource & reserves potential by exploiting lower to medium risk

onshore plays in Australia, while progressing seismic and/or strategic farm-outs

on the remainder of the assets. In terms of near term catalysts, Bengal’s Barta

North 1 and Cuisiner 2 appraisal wells in the Cooper Basin in Australia were

cased in late 2010 and are expected to test multi-zone potential seen on logs

sometime in Q1/11 and three more wells are to be drilled in the Cooper Basin for

the remainder of 2011, including a 4th well on the Company’s Barta block and 2

wells at Wompi. The Company’s 100% W.I. Tookanooka block will be be a key

part of BNG’s growth strategy towards the end of 2011 / beginning of 2012 with

a 5-8+ well program (our assumption) targeting seven plays over multiple

formations in the Cooper Basin. We expect other exploration efforts to include

Bengal Energy Ltd.

Kevin Shaw, P.Eng [phone]; [e-mail] February 8, 2011- 4

Wes Swanson, ASA [phone]; [e-mail]

the drilling the first high impact offshore well to test an independent feature on

the same block as the 48 degree API Katandra oil discovery in Australia

sometime in H1/11 which could prove to be significant. Bengal is targeting to

farm out its “game changing” 100% W.I. AC/P 47 block in the Timor Sea by

May of this year, and may strategic partner to help accelerate the Company’s

exploration efforts in offshore India by year end. Lastly, seismic shoots and a

resource report on a number of Bengal’s onshore Australian assets is expected to

be released in Q1/10.

Australian Offshore Exploration Targets Drive Risked EMV/sh of ~$34

Over the longer-term we believe Bengal’s offshore assets in Australia and

India have the potential to unlock significant value for shareholders. In our

analysis we assume a 50% farm-out of the vast majority of Bengals high impact

offshore exploration targets in both countries and use relatively conservative

assumptions in terms of both recoverability and chance of success on each of its

identified targets to arrive at a risked EMV/sh of ~$34 (259 mmboe of net

recoverables), with $32/sh in value attributed to the company’s Australian

offshore assets in the Timor Sea and the remainder attributed to the offshore

portion of its Cauvery Basin assets.

Valuation and Summary Recommendation

We are initiating coverage on Bengal Energy with a Speculative Buy rating

and a $3.00 target. We believe Bengal offers investor’s exposure to significant

upside through both lower to medium risk development type plays in proven,

producing basins as well as high-impact, exploration targets with “game

changing” offshore opportunities. The company has developed a capital efficient

and strategic plan to partner with five national oil companies on a number of its

onshore plays and seeks experienced, large farm partners to explore its offshore

prospectivity.

Exhibit 1: Summary Valuation Table – Bengal Energy

Valuation Matrix Forecast

Target

Multiple Value Weighting

Weighted

Value

Core NAV (B.C. Non-core Assets @ Kaybob & Net Working Capital) $ 0.39 1.0 $ 0.39 80% $ 0.31

Asset EMV/share (Australia Onshore Prospective Resource Potential Only) $ 16.05 1.0 $ 16.05 20% $3.21

Asset EMV/share (Australia Offshore & India Onshore and Offshore) $39.93 1.0 $ 39.93 0%
.00

Source: Wellington West Capital Markets, Company Reports 12-month derived target price $ 3.52

Attractive Valuation – Free Offshore Exploration Upside on Tap

Bengal is trading at a very small fraction of our risked EMV/sh estimate –

offering free call options on a portion of its onshore exploration blocks and

100% of its offshore exploration & appraisal potential. The company has

amassed a sizeable inventory of potential game changing plays which could drive

significant shareholder value. Given the early stage of exploration efforts we are

only considering Australian onshore assets in formulating our target price as this

will be the primary area of focus for the next 12 months. We believe

accumulating shares of Bengal at current levels provides investors exposure to an

exciting, early stage international story with an attractive risked-adjusted

opportunity ahead of several near term catalyst