VIRGINIA HILLS OIL CORP VFGGF

RE:RE:RE:Corporate Presentation

[ofirme]

There is something wrong with your assumptions: waterflooding increases production (vs end of year 2)...
If you assume that at the end of year two, you should have 30 bopd per well and that the next 12 month of
 pressure build up will arrest the decline and reverse it towards 60 (closer to 80+, but lets assume...) you 
 will get different results. $60 netback is built on $90C price (it is now $100C + -  how does that influence
 your numbers?).
It is nice that you try to put actuall numbers into excel, but if your assumptions were true, nobody would 
 have ever invested in oil in slave point... the money in that area will be made thru waterflooding. 
 waterflooding works by repressuring the system and increasing the flow at over 150% compared to before
 the flooding started. that is why you are willing to sacrifice 20%-25% of your producing wells and make them 
 into injectors. initial signs about the july waterfloodings were according to expectations. lets hope they still
 are. the november ones are the next ones to warry about (17 wells after conversions + 14 wells after
conversion in july). you are basing all your assumptions on 22 producers, while there are 53 today and
 four more projects which will start in 2014 if everything goes well with the ones before.
Try plugging those numbers. I think you will find your peak production will be over 3000 bopd in 2015 and 
 with decline rates of 25%-30% per year (until the next cycle of waterflooding, which should be much 
 cheaper). also, if you increase the base production your netback will increase.
Just a few comments.