An anonymous director reports

BI-MONTHLY CORPORATE UPDATE

The objective of Cerus Energy Group Ltd. is to build a premier energy portfolio of development interest through its proprietary CWI (carried working interest) capitalization structure.

Strategy/investment process

Cerus uses a formal development finance program (DFP) structure to enhance the management and placement of investment capital. The finance program is suitable for long- and short-term capital projects with the capability of retained expansion through the provision of rolling development options. The DFP both uses and optimizes a series of revenue-sharing mechanisms to recover investment capital and associated fees from inner corporate investments.

Event                                                 Performance

New wells spudded                                               1
New wells completed                                             0
Wells in active paying out                                      0
Wells postpayout                                                0
Active CWIs                                                     1
Performing CWIs                                                 0
Postpayout CWIs                                                 0
Drill sites under obligation                                    7
Current drill commitment                              $10,500,000
Locations under option                                        104
MOODY's rating                                            Unrated
S&P rating                                                Unrated
                                                       
PDU: proved undeveloped, CWI: carried working interest, Spudded: 
new wells that have been started.

Period of performance

The company kicked off its inaugural DFP development in the first half of November. The 101/14-15-18-17W3 location was spudded on Nov. 13, 2017. The company anticipated the reviewing of production results by end of the month. The company financed the program through the Lomac syndicate program to a non-arm's-length financier. The financier will retain 160 per cent of the total 180-per-cent penalty payout on the Pennant play, Saskatchewan. The tailing 20-per-cent and 5-per-cent gross overriding royalty with be retained by Cerus as an earned margin and retained royalty.

The first well will be drilled, completed and evaluated before the program is continued. The company based its internal cash flow models on 100 barrels per day for a successful program yield. The company remains optimistic that the test results will validate significant upside to the company's benchmark for success which is aided by the current U.S. exchange rate and price of West Texas Intermediate.