Oil India (USA), Inc. The Atrium at Sugar Creek, 101 Southwestern Blvd., Suite # 136, Sugar Land, Texas 77478

Ref: OILUSA/GC/742/2017 Date: 11th January, 2017

D (HR&BD) / D (O) / D (E&D) / D (F) / CMD

Through: CGM (BD)

Sub: Monthly report of Oil India (USA), Inc. for the month of December, 2017

1. Reference above please find attached the monthly report for the month of December 2017,

pertaining to Oil India (USA), Inc.

2. For your information and record please.

(G. K. Sharma)

Country Manager

Attached: Detailed Report

OIL USA’S MONTHLY REPORT, DECEMBER 2017

1.0 CARRIZO’S DIVESTMENT OF NIOBRARA JV SHARE

Carrizo Oil & Gas Inc., (Carrizo) has decided to divest its share of interest in Niobrara JV to M/s.

Verdad Oil & Gas Corporation (Verdad), a privately owned, independent E&P company based in

Dallas, Texas. As per Carrizo’s communication, the deal is likely to be closed by mid-January, 2018

and after that Verdad will take over the charge of operation.

Visit to Verdad Office at Dallas, Texas

Although, the deal is yet to be closed between Carrizo and Verdad, OIL USA has decided to initiate

discussion with Verdad management team for understanding the company, their future development

plan and terms of operation. Accordingly a meeting with the Verdad management was held at their

office at Dallas, Texas on 19th December 2017. Initially, IOCL team was also supposed to be present

in the discussion, however, they could not attend due to last minute cancellation of their visit to

Houston and Dallas.

From Verdad management team, Mr. Philip Davis, Executive Vice President, Mr. Arthur Beecherl,

Executive Vice President and Mr. William C Beecherl, President and from OIL USA team Country

Manager and Secretary and Treasurer participated in the meeting.

Verdad is a family owned company engaged in oil & gas exploration for last 30 years. Being a

privately owned company, very limited information is available in their website. Presently they have

operation in West Texas (Permian) and Niobrara area. In Niobrara D-J Basin, Verdad is having

around 47 wells both vertical and horizontal.

The detail discussion is given as under:

Expected date of closing of the deal of Carrizo with Verdad

Verdad is expecting that the deal would likely be closed by mid-January 2017 and after that they will

take the charge of the operation from Carrizo.

Operational Plan

Verdad is planning to invest around US$ 40.00 million (Verdad share) for drilling and completion of

wells for the year 2018. The drilling operation is planned to be started from mid-summer (June/ July

2018) and completion may be started from October- November of the year 2018. Verdad is planning

to have small, mid and long lateral wells which will be ranging from 6000 ft to 10000 feet. The frac

design will be different from the frac design followed by Carrizo. The completion will be done by

Halliburton. The focus area will primarily be in area 1 as identified by Carrizo as well as area 2A and

2B. As per Verdad plan, they will adopt two stage casing for the new wells.

Focus on present producing wells

Presently, Verdad will not go for any major workover and other activities in the completed wells.

However, they will try to bring the shut-in wells into production as a primary work activity on present

wells. The reason explained by Verdad is that the casing size of the present well does not help in

carrying out workover activities and will be cost intensive.

Well cost

As intimated by Verdad, the well cost would be ranging from US$ 4.00 million for short lateral to

US$ 6.50 Million for long lateral wells. The high cost is due to detailed frac design which will need

more water and propane per feet.

Sales plan

Verdad is planning to sale oil, gas and plant product by themselves. OIL USA has requested Verdad

to look into the possibility of marketing OIL USA and IOCL USA products (oil, gas and plant

product) from other operators like Whiting and Noble Energy, which Verdad has readily agreed.

Accordingly, OIL USA has provided list of participated wells of OIL USA and IOCL USA to Vedad.

The other partner, Haimo Oil & Gas has also shown interest in joining in the aforesaid arrangement

and OIL USA has facilitated Haimo in connecting with Verdad.

Data sharing

Production data will be shared through a third party portal. Data pertaining to JIB, drilling &

completion. reserves, marketing data will be directly communicate by Verdad. Other relevant data

will be communicated on request basis.

Royalty distribution

The Royalty burden of OIL USA will be distributed by Verdad against the sale of all products.

Execution of a new PPA

Verdad has not shown interest in execution of any kind of JV agreement like existing Purchase and

Participation Agreement (PPA) between OIL USA, IOCL USA and Carrizo. Further, the existing

Joint Operating Agreements (JOA) will be directly transferred from Carrizo, once the deal is

finalized.

Tax payment and issuance of Tax Deposit Certificates (DR 0021)

Deposition of Severance Tax and Ad Valorem and issuance of tax deposit certificates will be taken

care of by Verdad.

JOA applicability

All new wells will be brought under new JOAs. However, for the old wells, the applicability of old

JOA is under scrutiny by Verdad.

Secondment Agreement

There is no scope of execution of a new Secondment Agreement with Verdad for placement of

Secondees.

Operational strength of in-house people of Verdad

Verdad has a small group of professional people. Total strength in Dallas office is around 18

professionals, which includes all disciplines. Additionally, they have an operational establishment in

Denver.

Land management

Land activities will be managed by Verdad team for their share of ownership.

Partners’ audit

Partner’s audit will be governed by the JOA and the other laws of USA. OIL USA will be eligible to

conduct audit of the wells where it is having the highest working interest in the participated wells.

Requested information regarding well study by OIL USA

It has been communicated and requested to forward Verdad’s annual plan estimate for the year 2018

and 2019 along with other related information like well design, preferential location etc. for

preparation of annual budget for the year 2018 and beyond.

Observation

The discussion was for initial communication between OIL USA and Verdad for amicable future

relationship and to make the future operation easier. There may be some issues related to receipt and

payments, JIB, data etc. at the initial stage. However, it has been assured that the issues will be taken

care of with required attention. Verdad was not willing to buy the share of other JV partners of

Niobrara JV. Since it is not a listed company it is not possible to find more financial information in

any public domain.

2.0 THE SUBSIDIARY'S (OIL USA) CONTRIBUTION AND ACHIEVEMENTS TOWARDS

PROMOTING OIL'S BUSINESS INTEREST

The Subsidiary was mandated to create a business hub in USA, not only to look after the monitoring

part of the existing asset, but, expand its business laterally as well as vertically. The Subsidiary also

envisaged being the training ground for OIL’s executives in unconventional play/tight reservoir

development. (Please refer to first Annual Report 2013-14 of OIL USA).

In later years, as the WTI price continued to be low, OIL USA has started developing new strategies

to create an environment to augment production from OIL’s matured fields in Assam through

bringing in US expertise and technology as well as collaboration with leading universities like

University of Houston (UH).

To this effect, OIL USA was instrumental in signing two MoU between OIL and UH during 2016

and 2017. This collaboration effort has started paying dividend, the results of which continuously

communicated to OIL Management by UH.

Looking into the bigger picture, Dr. Anupam Ray, CGI, Houston has recently commented –

“Significance of this collaboration between OIL and UH has resulted –

US-India Partnership in Oil & Gas Sector

US Academia-Indian PSU Collaboration

Two fold strategic benefits –

o Oil Production Enhancement through Enhanced Oil Recovery (EOR)

o CCUS Technology Implementation (Carbon Capture, Utilization & Storage) and

contribution towards controlling greenhouse effect

Progressed from knowledge transfer to pilot project in CO2 EOR - Scalable & Replicable

Houston energy capital linking with Indian PSUs in cutting edge technology

Leverage the diaspora.”

It is worthwhile to mention here that US Secretary of Energy has shown considerable interest on this

collaboration activities between OIL and UH in the field of CO2-EOR, and currently US Department

of Energy (DOE) is actively engaged with MoPNG, Indian Embassy at Washington, CGI, Houston

and UH to draft an agreement document to be executed between US Secretary of Energy and Hon’ble

Petroleum Minister of India during former’s visit to India in February’18. OIL USA is also involved

in the process and it is envisaged that OIL is likely to get prominence in the aforesaid agreement, if

materialized.

Furthermore, OIL USA has reached out to various industry leaders like US National Carbon Capture

Center (NCCC), NRG Energy Inc., Anadarko, Carrizo, IITG, etc. to promote OIL’s business interest.

NCCC has already written a letter to Hon’ble Petroleum Minister, showing interest in

collaborating on knowledge sharing and research between OIL and NCCC on carbon capture.

As a part of the initiative, a senior expert team from NRG, who are the lead developer of the

recent successful commissioning of the Petra Nova, Carbon Capture and Enhanced Oil

Recovery Project near Houston, Texas, last year visited OIL to assist in the investigation and

evaluation of potential carbon dioxide (CO2) sources near OIL’s operational areas in Assam

to utilize in CO2-EOR project in its oilfields.

OIL USA has facilitated discussion between Anadarko and CGI, Houston to apprise the LNG

project where OIL, ONGC and BPCL together holds 30% interest and a possible meeting

with Hon’ble Petroleum Minister in search of Indian offtake which Anadarko believes is in

the wider interest of India as well as the Area 1 Partnership.

OIL USA also had organized a visit by a high level team from Carrizo Oil & Gas (Operator

of Niobrara JV) to FHQ, Duliajan during 2014, to study and forward their opinion on Shale

gas prospectivity in OIL’s operational areas.

OIL USA has facilitated discussion between IIT (Guwahati) and UH for establishing a

leading EOR center at IITG with the help of UH and other US institutions. IITG is likely to

submit a request to Hon’ble Petroleum Minister very soon.

Last couple of years, OIL USA is actively pursuing to bring in best available technology in

US to solve problem related to surface logistics, drilling complications and complex geology

of Assam-Arakan Fold Belt area and met President WesternGeco, Schlumberger’s President

Land Rigs and other senior executives. Since then, Schlumberger, Houston has submitted a

proposal to OIL outlining a work program and to create a road map to address the above

challenges.

Key Takeaway

OIL USA is successful in running the Niobrara project in efficient and cost effective manner

and able to understand investment strategy to be adopted in challenging US environment, due

to WTI crude price downturn.

Two Secondees from OIL, who were actively engaged in Carrizo’s unconventional operation

and gained sufficient knowledge and experience.

Able to create an effective network amongst US expert companies and academia.

Actively involved in promoting OIL’s business interest in US and India.

OIL’s presence has been discussed at highest level within US Government, so as to say in US

Secretary level.

Successful in bringing US technology and expertise to OIL and create a collaborative

environment, which is found to be new in OIL’s operational history.

If CO2-EOR pilot project can be implemented, this will be first of its kind in India.

OIL’s executives are getting rare opportunities to work closely with US experts, and gaining

valuable experiences through job associations and training program. For information, the

experts from UH, who are working in the OIL’s current project are ex-executives of Chevron,

Shell, Conoco Philips, to name a few.

The above has become possible due to relentless efforts put forwarded by OIL USA, which

was acknowledged by Hon’ble Petroleum Minister of India, CGI, Houston, etc.

UH Team (Dr. Krishnamoorti, VC & Dr. Ganesh Thakur) in discussion with Hon’ble

Petroleum Minister and Secretary, MoPNG during their visit to Houston

3.0 OIL USA’S NIOBRARA JV - AT A GLANCE

Oil India Limited (OIL) acquired 20% interest in Carrizo Oil & Gas Inc. (Carrizo) shale assets

in Niobrara play of the Denver–Julesburg (D-J) Basin in Colorado, USA. The Purchase and

Participation Agreement (PPA) with Carrizo was signed on 4th October, 2012 and the acquisition

became effective from 1st October, 2012.

Oil India (USA), Inc. was formed as a Subsidiary of Oil India Ltd. and registered in Texas, US.

Subsidiary office in Houston started functioning from July, 2013.

There are four partners in this Asset (including Carrizo and OIL) and their working interests

(WI) are: Carrizo - 60%, OIL - 20%, IOCL - 10% and Haimo Oil

& Gas LLC - 10%.

Oil percentage is around 78%, other produce are Gas & NGL.

Niobrara formation consists of three chalk (reservoir) zones, A,

B, and C with inter-bedded marls and shale that serve as the source

rock for the reservoir zones. Popularly referred as Niobrara A, B,

and C benches.

B bench depth ranges from 5,000 ft. to 7,000 ft.

B bench is the main target zone and thickness varies from 85-115

ft.

This brittle chalk is highly fractured in some areas.

Developed using horizontal drilling technology & by multistage

hydraulic fracturing.

The average lateral length is 4500’ (1370m). The wells are completed with 3 stage casings and

average frac stages: 15 stages per well.

Initially, during 2010-11, drilling was completed within 15-17 days. Presently, the same well has

been drilled within 8-9 days.

Niobrara Shale formation is situated in NE Colorado and parts of Kansas, Wyoming and

Nebraska.

Age: Late Cretaceous; Organic matter is Type –II kerogen; TOC ranges from 1.5 - 10%;

Lithology: Interbedded calcareous shale, shaly limestone, chalk and marls.

Fine grained nature results in little porosity and permeability. Median Porosity: 7% - 12%,

Permeability: 0.1 – 3.0 Md.

Production dependent on fractures (both natural and induced).

4.0 OPERATIONAL DETAILS OF NIOBRARA JV

Carrizo Gross Oil production for the Niobrara JV

The Gross Oil production in the month of December 2017 was 51,827.6 Bbls which is 4.5% less than

the production in the month of November 2017.

Carrizo Gross Gas production for the Niobrara JV

The Gross Gas production in the month of December 2017 was 174,685.1 Mcf which is 4.9% less

than the production in the month of November 2017.

The Subsidiary (OIL USA) production share of Oil in WI/NRI (Working Interest/Net Revenue

Interest)

OIL USA total oil production in the month of December 2017 was 5,786.9 Bbls (WI) / 4,629.5 Bbls

(NRI), which is 4.1% less than the production in the month of November 2017.

The Subsidiary (OIL USA) production share of Gas in WI/NRI

OIL USA total gas production in the month of December 2017 was 19.8 MMcf (WI) / 15.9 MMcf

(NRI), which is 4.2% less than the production in the month of November 2017.

The Subsidiary (OIL USA) production in terms of BOE/day (WI/NRI)

OIL USA production in BOE for the month of December 2017 was 9,089.1 BOE (WI) / 7,271.2 BOE

(NRI), which is 4.2% less than the production in the month of November 2017.

5.0 REVENUE AND ACCOUNTS (STATUS AS ON 31ST DECEMBER, 2017)

The monthly JIBs and net revenue earning from April 2015 to July Nov 2017 is given as follows:

-

200,000.00

400,000.00

600,000.00

800,000.00

1,000,000.00

1,200,000.00

1,400,000.00

1,600,000.00

1,800,000.00

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

Dec

-16

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

Monthly Revenue vis-á-vis JIB

Monthly JIB Monthly Revenue

i) The total amount paid on Cash calls, JIBs to operators & non-operator partners till December,

2017 is US$ 92.50 Million. The break-up is as given follows:

Cash Calls & JIBS to Carrizo - US$ 74.20 Million.

Noble Energy JIB - US$ 8.00 Million.

Whiting Oil & Gas JIB- US$ 10.30 Million.

ii) Total revenue received by Subsidiary till December, 2017 is US$ 57.11 Million (cash receipt

after Severance Tax), which is about 61.72% of total amount paid against Cash Calls and

JIBs and recovered within 5 years. The break-up of revenue received from various operators

are as follows:

Carrizo - US$ 48.00 Million.

Noble Energy - US$ 5.20 Million.

Whiting Oil & Gas - US$ 3.90 Million.

Bison US$ 0.01 Million

iii) Total reinvestment in the JV from revenue generated by Subsidiary till the month of December,

2017 is about US$ 50.5 Million.

iv) Acreage sale by OIL USA is US$ 0.7 Million.

v) Total Acquisition Cost till date is US$ 66.05 Million, the break-up of which are as follows –

Niobrara JV Initial Acquisition Cost - US$ 55.00 Million

Subsequent AMI Acquisition Cost - US$ 11.05 Million

vi) Additionally, OIL USA has incurred US$ 3.02 Million on payment of interest on Bank Loan, US$

1.15 Million on General & Administrative Expenses, US$ 2.20 Million for employee benefits,

additional Severance Tax of US$ 0.302 Million and Interest paid to parent company US$ 0.21

Million, till December, 2017.

vii) Share Capital is US$ 111.10 Million. The short term credit line has been paid off in the month

of March, 2017.