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AIX Energy LLC

FOURTH PLAN OF DEVELOPMENT & PLAN OF OPERATIONS KENAI LOOP GAS FIELD PRODUCING LEASE ADL391094 _____________________________________________________________________________________ AIX Energy LLC, Operator

May 7, 2018 - May 6, 2019

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Table of Contents

Section Page

1.0 Introduction………………………………………………………………………………………………………………………. 3

2.0 Field Development History………………………………………………………………………………………………… 3

3.0 Field Status………………………………………………………………………………………………………………………… 4

4.0 Summary of Activities-Third Plan of Operations (May 7, 2017 - May 6, 2018)………….…………. 5

4.1 Administrative………………………………………………………………………………………………………….. 5 4.2 Regulatory Compliance…………………………………………………………………………………………….. 6 4.3 Field Operations……………………………………………………………………………………………………….. 6 4.4 Facilities……………………………………………………………………………………………………………………. 6 4.5 Reservoir Management…………………………………………………………………………………………….. 6 4.6 Development Drilling……………………………………………………………………………………………….… 7

5.0 Proposed Fourth Plan of Development & Plan of Operations (May 7, 2018 - May 6, 2019)... 7

5.1 Administrative…………………………………………………………………………………………………………... 7 5.2 Regulatory Compliance……………………………………………………………………………………………... 7 5.3 Field Operations………..……………………………………………………………………………………………... 8 5.4 Facilities………………………………………………………………………………………………………………….... 8 5.5 Reservoir Management…………………………………………………………………………………………..... 8 5.6 Drilling Plans…………………………………………………………………………………………………………….. 8

Attachments _____

Attachment 1: Location Map Attachment 2: Lease Ownership/Well locations Attachment 3: KL No. 1 Pad Site Layout and Access Attachment 4: P/Z Plot Updated July 15, 2017

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1.0 Introduction

AIX Energy LLC (“AIX”) became the operator of the Kenai Loop Gas Field (“KLGF”) on November 10, 2014, retroactively effective to October 1, 2014. This document is the fourth annual Plan of Development and Plan of Operations for the KLGF submitted to the Alaska Department of Natural Resources, Division of Oil and Gas by AIX. This Plan of Development and Plan of Operations is required to be updated annually by May 7 of each year. The effective plan period for this submittal is May 7, 2018 through May 6, 2019. This plan covers development activities for the KLGF. Assumptions that formed the basis for this plan are consistent with the current business climate. Changes in business conditions, applications of new technologies, new insights into reservoir performance or other changes may alter the timing, scope or feasibility of one or more components of this plan.

2.0 Field Development History

Fall 2010 Initial State of Alaska leases acquired by Buccaneer. Early 2011 Mental Health Trust Land Office leases acquired. May 2011 Completed discovery well KL 1-1 at a flow rate of 10 MMCFD from the 9700’ Tyonek

sand. Sept. 2011 Drilled well KL 1-2 (dry hole). Current AOGCC status is “suspended”. April 2012 Completed 23 square mile 3D seismic survey. July 2012 Seismic data processed; subsequent wells drilled on basis of Buccaneer’s 3D seismic

interpretation. Nov. 2012 Drilled and completed Well KL 1-3 as a 9700’ sand producer, 300’ structurally deeper

than KL 1-1. Oct. 2013 Drilled and completed Well KL 1-4 in 9700’ sand, 100’ shallower than KL 1-1; well tested

at 2.5 MMCFD but was determined to be in the same reservoir as KL 1-1 and KL 1-4. KL 1-4 has not been tied into the production system and has been used to monitor reservoir pressure.

Nov. 2014 AIX becomes field operator, retroactive to October 1, 2014. Feb. 2015 AIX finalizes lease agreements with stakeholders. June 2017 AIX decommissions Pad #2 and releases surface lease to Mental Health Trust Land

Office.

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3.0 Field Status

The following information describes the status of the field as of March 31, 2018, and forms the basis of the Fourth Plan of Development and Plan of Operations. A map showing the general location of the KLGF is included as Attachment 1. A map showing lease boundaries and well locations is included as Attachment 2.

AIX has made no major changes to the facilities in place.

The KLGF is currently developed from one drill pad, KL-1, as depicted in Attachment 3. A second pad was constructed in 2012, never used in operations, and decommissioned in June 2017.

The KLGF has four wells: KL 1-1 (Active Producer) KL 1-2 (temporarily suspended, possible future utility as a disposal well) KL 1-3 (Active Producer) KL 1-4 (Shut-in Producer, currently not tied into production system)

Cumulative gas produced (3/31/18): 18.71 BCF

Cumulative water produced (3/31/18): 7044 bbls

Cumulative Condensate produced (3/31/18): 2253 bbls Figure 1 shows total field average daily production since startup in January 2012. Figure 1: Kenai Loop Gas Field Average Daily Gas Production (MCFD)

Source: Alaska Oil and Gas Conservation Commission

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Kenai Loop Gas Field Production

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Figure 2 shows a graphical representation of the currently projected gas sales profile. The graph reflects actual sales through March 31, 2018 and a profile of current firm sales commitments.

AIX’s marketing goals are to continue to pursue value-added, near-term gas sales opportunities (to align with existing and future production capacity), while maintaining pricing discipline. Figure 2: Projected Gas Sales Profile

4.0 Summary of Activities – Third Plan of Operations (May 7, 2017 - May 6, 2018)

AIX is committed to a safe and environmentally sound operation. All designs and operations meet or exceed regulatory agency requirements, the standards specified by applicable state or national codes, the recommended practices of the relevant advisory organizations, and/or the time-proven practices of prudent operators. This summary accounts for field activities from May 31, 2017 through May 31, 2018. 4.1 Administrative AIX management, their Alaska based representatives and field personnel completed the following administrative tasks.

Met with regulatory and oversight agencies (AOGCC, ADNR, ADOR, City of Kenai, Kenai Peninsula Borough)

o AOGCC-received final approval after detailed well status review of all wells in the KLGF

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4.2 Regulatory Compliance AIX has all permits required to operate the KLGF.

DOT pipeline manual review and update

Pipeline Class Location Survey

DOT Pipeline Public Awareness Program

Annual PHMSA (Pipeline and Hazardous Materials Safety Administration) reports filed for operations, Random Drug Testing and NPMS (National Pipeline Mapping System)

SPCC (Spill Prevention, Control and Countermeasure) manual review and update

Emergency Response Plan

Annual HAZWOPER refresher courses for all field personnel Field personnel also performed the annual inspection of the field fire/ gas system and fire extinguishers, and conducted regular safety meetings and drills. Field Superintendent assisted USDOT/PHMSA with detailed pipeline integrity audit. AIX initiated the mandatory risk assessment for the Kenai Loop pipeline. Anticipated completion is early May 2018.

4.3 Field Operations During the Third Plan of Operations, AIX personnel conducted the following activities.

Function tested ESD (Emergency Shut Down) and Fire/Gas/Alarm/PSV Systems per required schedules.

Completed the replacement of SCADA equipment to maintain reliability, warranty and maintenance agreements (June 2017).

4.4 Facilities The KLGF facilities include industry standard separation, dehydration, heating, testing and metering equipment. During the past twelve months, AIX has made no material changes to the facilities. Eventually the KLGF will require compression to maximize reserve recovery. AIX estimates that under current market conditions, gas compression may be required by the fall of 2018, and has continued compression evaluation and sourcing options. In June 2017, AIX decommissioned Pad #2 and ended the surface lease with the Mental Health Trust Land Office. 4.5 Reservoir Management It is AIX’s objective to maximize field recovery and net present value by aligning production capacity with commercial opportunities.

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During the Third Plan of Development and Plan of Operations, AIX obtained static reservoir pressures on KL 1-1 and KL 1-3 and updated the material balance estimates of gas in place and reserves. Extended flowing and shut-in data was used to update nodal analysis and systems models, resulting in a high level of confidence that under current market conditions compression could be deferred until the fall of 2018. The P/Z Plot updated July 15, 2017 is included as Attachment 4 and has been provided to Enstar under our existing gas sales agreement. AIX requests that any reserve information be kept confidential. 4.6 Development Drilling/Rate Enhancing Opportunities During the Third Plan of Development and Plan of Operations, AIX continued to evaluate geologic and geophysical data to improve its understanding of the Kenai Loop reservoir.

5.0 Proposed Fourth Plan of Development & Plan of Operations (May 7, 2018 - May 6, 2019)

This section provides an overview of the projects and strategies that comprise the development and operating program for the KLGF for the period May 7, 2018 - May 6, 2019. AIX is committed to full compliance with all lease agreements, a safe and environmentally sound operation and an open and transparent relationship with all stakeholders. All facility and equipment designs, as well as field operating procedures, will continue to meet or exceed regulatory agency requirements, the standards specified by applicable state or national codes, the recommended practices of the relevant advisory organizations, and/or the time-proven practices of prudent operators. It is AIX’s objective to maximize field recovery, and to align production capacity with commercial opportunities while maintaining operational integrity and reliability. Assumptions that form the basis for this development and operations plan are consistent with the current business climate and the current understanding of the KLGF reservoir. Changes in business conditions and/or new insights into the reservoir may alter the feasibility of lease plans. 5.1 Administrative Pending new drilling and development activity, AIX may hire additional support staff. 5.2 Regulatory Compliance AIX will perform the following required annual regulatory activities:

Pipeline transportation inspections and annual reports (DOT)

Tank and containment inspections (SPCC)

Semi-annual safety valve testing (AOGCC)

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Safety equipment inspection and testing (fire and gas system, fire extinguishers, system alarms, pressure relief valves, etc.)

Annual HAZWOPER refresher courses AIX will finalize the Kenai pipeline risk assessment and implement the appropriate integrity management plan. 5.3 Field Operations Planned activities for the Fourth Plan of Development and Plan of Operations include the following:

Well work (see Section 5.5 Reservoir Management and Section 5.4 Facilities)

Conduct Kenai Loop pipeline integrity assessment (see Section 5.2 Regulatory Compliance)

Compression (see Section 5.4 Facilities) 5.4 Facilities During the Fourth Plan of Development and plan of Operations, AIX anticipates finalizing the field compression evaluation. AIX currently estimates that field compression may be required by the fall of 2018. As part of our compression evaluation, AIX will also evaluate the cost/benefit of tying in KL 1-4 to the production system to provide increased deliverability, to provide redundancy to meet firm gas sales obligations and to possibly increase ultimate recovery. AIX will also evaluate recompleting wells to provide additional deliverability. Kenai Loop pipeline integrity assessment (Smart pigging, hydro-test, or direct assessment/dig) is scheduled for summer of 2018. The purpose of the assessment is to ensure safe and reliable operation of the Kenai Loop pipeline. 5.5 Reservoir Management During the Fourth Plan of Development and Plan of Operations, AIX anticipates obtaining static reservoir pressures on KL 1-1 and KL 1-3 to update the material balance estimates of gas in place and reserves. Since this will require a complete field shut-down of 72 hours, AIX will attempt to shelter the work during planned pipeline or facility maintenance. Flowing and shut-in data will be used to update nodal analysis and systems models to assist with gas marketing, deliverability and compression evaluation. AIX will continue to evaluate geologic and geophysical data to improve its understanding of the Kenai Loop reservoir. 5.6 Drilling Plans

To date, AIX has not identified any drilling opportunities within the producing lease for the proposed Fourth Plan of Development and Plan of Operations.