• Seismic area over the prospect is approximately 22 kilometers x 37 kilometers (13.7 miles x 23 miles)

Click to enlarge

Click to enlarge

• 13 shallow drill targets identified (Canol and Devonian Bear Rock Prospect)

• 3 secondary medium depth targets identified (Basal Cambrian Sand/Top Pre-Cambrian Prospect)

• Massive structures clearly identified on seismic and through gravity studies

• Substantial closure, excellent source and reservoir characteristics

• Three potential zones identified:

  • Devonian Bear Rock Prospect

  • Basal Cambrian Sand / Top Precambrian Prospect

  • Canol Prospect

• Deeper, large structure is indicated at 4,500 meter range -- has not been considered in the evaluation

• Infill drilling, enhanced recovery or solution gas conservation are not included

Discussion of Little Chicago (EL413)

• Kodiak will reassess its go forward options for Little Chicago.

• The continued depressed conditions for financing an exploration program in this area and of this size is currently not favorable.

• The confidential siesmic has value.

• Economic considerations:




1. Unfavorable dilution of stock

• With the current market conditions and the unit price of Kodiak stock -- this type of equity financing would be "extremely dilutive" to existing shareholders.




2. Marked reduction of exploration and development activity in the area

• Majority of drilling rigs and associated service equipment have moved out of the area due to exploration and development programs being cancelled or placed on hold. With a reduction of equipment in the area, timeframe and cost to mobilize equipment have increased.

• Many majors are facing the potential of losing exploration license deposits as a result of cancelling work programs and defaulting on commitments.

• Projects with proven reserves have been placed on hold, and some up for sale.




3. Lack of JV partners

• Kodiak actively searched for JV partners.

• To date, no JV partner has formally agreed to participate.




4. Area infrastructure update

• Little Chicago is a gas and oil play.

• The status of the Mackenzie Valley pipeline continues to be uncertain and unresolved.

• The Mackenzie Valley Joint Review Panel (JRP) report was delayed from the original target date of Fall 2007 to December 2009. The report was released at the end of December 2009.

  Report of the joint review panel for the Mackenzie Gas Project - Dec 2009 (PDF)

• The recommendations of the JRP as contained in the report are for review by the National Energy Board (NEB), with final round of hearings anticipated to take place in April 2010. Based on the hearings, the NEB will decide if the Mackenzie Gas Project can proceed. The NEB's decision will then be submitted to the Canadian Federal Government cabinet for final approval. It is likley that other groups and stakeholders will submit formal comments for consideration. The recommendations related to the pipeline at this point are unknown.

• Current commodity prices are still unstable and uncertain. In particular, this type of exploration expenditure with associated risk is difficult to justify at current commodity prices, including oil.

• Gas prices are at low levels making gas exploration even riskier with poorer potential. The gas could be stranded for years with the questionable pipeline status.

Conclusion

• Low commodity prices and lack of clarity for the pipeline have resulted in most of the major players in the area and Delta placing their projects on hold, or up for sale.

• Some of the majors have chosen to lose their license deposits rather than proceed with work programs.

• Others have proven reserves and have placed their projects on hold.

• Exploration licence expired Sept 17, 2010

• Our confidential high resolution seismic over the area - continues to have value.

• Government and Industry involvement and commitments to infrastructure in the MGP associated developments will change the economics as they exist today.

• Kodiak Management will continue to monitor developments in the area to best monetize our investment in that seismic whether by reposting the land in future land auctions when exploration costs can be rationalized to the opportunity or divesting the seismic to another operator to recover the investment - potentially by several times the acquired cost.

  
  
  

  This information on this website or discussion documents contains the terms "estimated reserves based on escalating pricing" and "contingent resources". The Company advises investors that although these terms are recognized and required by Canadian securities regulations (under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities), the US Securities and Exchange Commission does not recognize these terms. . In addition, "estimated reserve value" has an amount of uncertainty as to their existence, and economic and legal feasibility In addition, "prospective or contingent resources" have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that any part of a prospective or contingent resource will ever be upgraded to a higher category. Under Canadian rules, estimates of prospective or contingent resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except for a "preliminary assessment" as defined under National Instrument 51-101. CAUTIONARY NOTE TO U.S. INVESTORS - The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions and constant pricing. We use certain terms on this management discussion, such as prospective resource or economic forecast based on escalating pricing, that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 10K. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
  
  
  
  
  
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  Last Updated Sept 22, 2010