ANNUAL INFORMATION FORM. For the Year Ended December 31, 2012

ANNUAL INFORMATION FORM For the Year Ended December 31, 2012 April 1, 2013 TABLE OF CONTENTS Page GLOSSARY ...........................................
Author: Aubrie Little
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ANNUAL INFORMATION FORM For the Year Ended December 31, 2012

April 1, 2013

TABLE OF CONTENTS Page GLOSSARY .............................................................................................................................................................. iii ABBREVIATIONS AND TECHNICAL TERMS ..................................................................................................xi Abbreviations ..................................................................................................................................xi Technical Terms .............................................................................................................................xi INTERPRETATION.................................................................................................................................................xi FORWARD-LOOKING STATEMENTS ...............................................................................................................xi INCORPORATION AND ORGANIZATION ........................................................................................................ 1 Intercorporate Relationships .......................................................................................................................... 2 BUSINESS OF THE CORPORATION ................................................................................................................... 3 General ........................................................................................................................................................... 3 Relevant Three Year History ......................................................................................................................... 3 Business of the Corporation ........................................................................................................................... 5 General Description of the Principal Assets................................................................................................... 5 Reserves ......................................................................................................................................................... 7 Contingent and Prospective Resources .......................................................................................................... 7 Detailed Description of the Principal Properties ............................................................................................ 9 Corporate Social Responsibility, Community Relations and the Oando Foundation................................... 21 Environmental, Health, Safety, Security and Quality .................................................................................. 21 Employees .................................................................................................................................................... 21 THE NIGERIAN OIL AND GAS INDUSTRY AND REGULATORY FRAMEWORK .................................. 21 Introduction .................................................................................................................................................. 21 Constitution, Government and Political Parties ........................................................................................... 22 Area, Population and Infrastructure Overview of Nigeria ........................................................................... 22 The Nigerian Economy ................................................................................................................................ 23 Petroleum Industry ....................................................................................................................................... 23 Petroleum Regulatory Framework ............................................................................................................... 26 Production Sharing Contracts ...................................................................................................................... 26 STATEMENT OF RESERVES AND RESOURCES DATA AND OTHER OIL AND GAS INFORMATION ...................................................................................................................................................... 29 RISK FACTORS ...................................................................................................................................................... 29 DIRECTORS AND OFFICERS OF OER ............................................................................................................. 42 Orders........................................................................................................................................................... 43 Bankruptcies ................................................................................................................................................ 43 Penalties and Sanctions ................................................................................................................................ 43 Conflicts of Interest ...................................................................................................................................... 43 PROMOTER ............................................................................................................................................................ 43 AUDIT COMMITTEE ............................................................................................................................................ 44 Composition of the Audit Committee and Mandate .................................................................................... 44 Pre-Approval Policies and Procedures ......................................................................................................... 45 Auditors’ Fees .............................................................................................................................................. 45 DESCRIPTION OF SHARE CAPITAL ................................................................................................................ 46 Common Shares ........................................................................................................................................... 46 C$1.50 Warrants and C$2.00 Warrants ....................................................................................................... 46

DIVIDENDS AND DISTRIBUTIONS ................................................................................................................... 46 MARKET FOR SECURITIES ............................................................................................................................... 46 Trading Price and Volume ........................................................................................................................... 46 Escrowed Securities ..................................................................................................................................... 48 LEGAL PROCEEDINGS AND REGULATORY ACTIONS.............................................................................. 48 Legal Proceedings ........................................................................................................................................ 48 Regulatory Actions ...................................................................................................................................... 49 CORPORATE GOVERNANCE DISCLOSURE .................................................................................................. 49 Board of Directors........................................................................................................................................ 49 Board Mandate ............................................................................................................................................. 50 Position Descriptions ................................................................................................................................... 51 Orientation and Continuing Education ......................................................................................................... 51 Ethical Business Conduct ............................................................................................................................. 52 Nomination of Directors .............................................................................................................................. 52 Compensation .............................................................................................................................................. 52 Other Board Committees ............................................................................................................................. 53 Assessments ................................................................................................................................................. 53 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS .................................. 54 TRANSFER AGENT AND REGISTRAR ............................................................................................................. 54 MATERIAL CONTRACTS .................................................................................................................................... 54 INTEREST OF EXPERTS ...................................................................................................................................... 56 ADDITIONAL INFORMATION ........................................................................................................................... 56 SCHEDULE A - FORM 51-101F1 STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION SCHEDULE B - FORM 51-101F2 REPORT ON RESERVES DATA AND REPORT ON RESOURCES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR OR AUDITOR SCHEDULE C - 51-101F3 REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE SCHEDULE D - AUDIT COMMITTEE CHARTER SCHEDULE E - CHARTER OF THE BOARD OF DIRECTORS

iii

GLOSSARY In this Annual Information Form, unless otherwise defined, the following words and terms shall have the following meanings: Abo or Abo Field

means the field on OML 125.

Acquisition

means the acquisition of the Oando E&P Division by the Corporation from Oando as more particularly described under the heading “Business of the Corporation Relevant Three Year History - Acquisition of Interests in Oando E&P Subsidiaries”.

AGRA

means the Associated Gas Re-Injection Act (Nigeria), 1984.

AIF or Annual Information Form

means this Annual Information Form.

Akepo

means Oando Akepo Limited, a company incorporated under the Nigerian CAMA and an Operating Associate.

Akepo (OML 90)

means the Akepo field situated in OML 90.

Akepo Farm-In Agreement

means the farm-in agreement between the Oando E&P Division (through OEPL) and Exile Nigeria dated December 26, 2008.

Akepo Marginal Field FarmOut Agreement

means the marginal field farm-out agreement dated March 18, 2004 between the NNPC, Chevron and Sogenal.

Arrangement

means the plan of arrangement under Section 192 of the CBCA between the Corporation and Oando as more particularly described under the heading “Business of the Corporation - Relevant Three Year History - Acquisition of Interests in Oando E&P Subsidiaries”.

Bahamas IBCA

means the International Business Companies Act 2000 of the Commonwealth of the Bahamas.

Bilabri & Owanare (OML 122)

means the Bilabri & Owanare field situated in OML 122.

Bilabri & Owanare (OML 122) Finance and Service Agreement

means the finance and service agreement dated April 2, 2005, between Peak and EEL 122 BVI relating to, amongst other things, the provision of services in respect of Bilabri & Owanare (OML 122).

Bilabri Settlement Agreement

means the settlement agreement dated September 13, 2007 entered into between EEL 122 and Peak relating to the settlement between EEL 122 BVI and Peak following the termination of the Bilabri & Owanare (OML 122) Finance and Service Agreement.

BP Energy Outlook

means the BP Energy Outlook 2030 report, dated January 2012.

BP Report

means the BP Statistical Review of World Energy, dated June 2012.

BVI

means the British Virgin Islands.

BVI CA

means BVI Business Companies Act (no 16 of 2004).

CBCA

means Canada Business Corporations Act and the regulations thereunder, as amended from time to time.

CG Committee

means the Corporation’s Corporate Governance Committee.

Chevron

means Chevron Nigeria Limited.

iv Class A Share

means, in respect of an Operating Associate, a share of such Operating Associate designated as a Class A Share with voting rights, but no right to receive distributions or dividends from such Operating Associate or any of the assets (save nominal capital) upon a liquidation or winding-up of the Operating Associate.

Class B Share

means, in respect of an Operating Associate, a share of such Operating Associate designated as a Class B Share with voting rights and rights to receive distributions and dividends from such Operating Associate, as well as the right to all of the assets (save nominal capital in respect of the Class A Shares of such Operating Associate) upon a liquidation or winding-up of the Operating Associate.

Code

means the Corporate Code of Business Conduct and Ethics, adopted by OER and applicable to all directors, officers, managers, employees and business partners.

Common Shares

means the common shares of the Corporation.

Comp Committee

means the Corporation’s Compensation Committee.

Consolidation

means the consolidation of all of the Old Shares on the basis of one Common Share for every approximate 16.28 Old Shares.

Constitution

means the Constitution of the Federal Republic of Nigeria, adopted in May 1999 (following many years of military rule) and modelled on the US constitution.

Contractor

means the Contractor, as defined in a PSC, together with the other parties (excluding NNPC) to such PSC.

COP

means ConocoPhillips Company, a company organized and existing under the laws of the state of Delaware, U.S.A. and the proposed seller of COP’s Nigerian Business pursuant to the Proposed COP Acquisition.

COP’s Nigerian Business

means the onshore and offshore business conducted in Nigeria by COP through Phillips Oil Company Nigeria Limited, Phillips Deepwater Exploration Nigeria Limited, Phillips (Brass) Limited and Conoco Exploration and Production Nigeria Limited.

Corporation or OER

means Oando Energy Resources Inc., a corporation existing under the CBCA.

C$1.50 warrant

means one share purchase warrant exercisable to acquire one Common Share of the Corporation at an exercise price of C$1.50 per share for a period of 12 months from the date of issue.

C$2.00 warrant

means one share purchase warrant exercisable to acquire one Common Share of the Corporation at an exercise price of C$2.00 per share for a period of 24 months from the date of issue.

CPF

means the Agip Beniboye Crude Processing Facility, leased by Akepo, Exile Nigeria and Sogenal.

CSR

means corporate social responsibility, as more particularly described under the heading “Business of the Corporation - Corporate Social Responsibility”.

DPR

means the Nigerian Department of Petroleum Resources, a subdivision of the Nigerian Ministry of Petroleum.

Ebendo (OML 56)

means the Ebendo Obodeti/Obodugwa).

EEL

means Equator Exploration Limited, a company incorporated under the BVI CA, of which 81.5% of the shares are owned by the Corporation, and the holder of all of the share capital of EEL 122 BVI, EEL 321, EEL 323, EEL JDZ 2, EEL 12,

field

situated

in

OML

56

(formerly

known

as

v EEL 5 and EEL Nigeria. EEL 12

means Equator Exploration STP Block 12 Limited, a company incorporated under the International Business Companies Act 2000 of the Commonwealth of the Bahamas, and a wholly-owned subsidiary of EEL.

EEL 122

means Equator Exploration Nigeria OML 122 Limited, a company incorporated under the Nigerian CAMA, in respect of which 99.9% of its shares are owned by EEL 122 BVI and the remaining 0.01% are owned by a nominee shareholder on behalf of EEL 122 BVI.

EEL 122 BVI

means Equator Exploration (OML 122) Limited, a company incorporated under the BVI CA, and a wholly-owned subsidiary of EEL.

EEL 321

means Equator Exploration Nigeria 321 Limited, a company incorporated under the Nigerian CAMA, in respect of which 99.9% of its shares are owned by EEL and the remaining 0.01% are owned by a nominee shareholder on behalf of EEL.

EEL 323

means Equator Exploration Nigeria 323 Limited, a company incorporated under the Nigerian CAMA, in respect of which 99.9% of its shares are owned by EEL and the remaining 0.01% are owned by a nominee shareholder on behalf of EEL.

EEL 5

means Equator Exploration STP Block 5 Limited, a company incorporated under the BVI CA, and a wholly-owned subsidiary of EEL.

EEL JDZ 2

means Equator Exploration JDZ Nigeria Block 2 Limited, a company incorporated under the Nigerian CAMA, in respect of which 99.9% of its shares are owned by EEL and the remaining 0.01% are owned by a nominee shareholder on behalf of EEL.

EEL Nigeria

means Equator Exploration Nigeria Limited, a company incorporated under the Nigerian CAMA, in respect of which 99.9% of its shares are owned by EEL and the remaining 0.01% are owned by a nominee shareholder on behalf of EEL.

Elf

means Elf Petroleum Nigeria Limited.

EHS Policy

means the Corporation’s Environmental, Health and Safety Policy.

EHSSQ

means Environmental, Health, Safety, Security and Quality.

Energia

means Energia Limited.

Equity

means Equity Financial Trust Company, the Corporation’s transfer agent.

Escrowed Securities

means the securities held by Equity as depositary pursuant to an escrow agreement between the Corporation, Equity and Oando dated July 24, 2012.

Exile Nigeria

means Exile Resources Nigeria Limited..

FIRS

means the Nigerian Federal Inland Revenue Service.

FPSO

means floating, production, storage and offloading unit.

GDP

means gross domestic product.

HoldCo 1

means Oando Netherlands Holdings 1 Cooperatief U.A., a Dutch cooperative and an indirectly wholly-owned subsidiary of the Corporation.

HoldCo 2

means Oando Netherlands Holding 2 BV, a Dutch B.V. wholly-owned by HoldCo 1 and the holder of the Class B Shares of Akepo.

vi HoldCo 3

means Oando Netherlands Holding 3 BV, a Dutch B.V. wholly-owned subsidiary by HoldCo 1 and the holder of the Class B Shares of OPDC2.

HoldCo 4

means Oando Netherlands Holding 4 B.V., a Dutch B.V. wholly owned by HoldCo 1, and the company incorporated to acquire the Class B shares of Oando Qua Ibo Limited, upon, and assuming, completion of the Proposed Qua Ibo Acquisition.

HoldCo 5

means Oando Netherlands Holding 5 B.V., a Dutch B.V. wholly owned by HoldCo 1 and the company incorporated to acquire the Class B shares of Oando Reservoir and Production Services Limited, upon, and assuming, completion of the Proposed Qua Ibo Acquisition.

HoldCo 6

means Oando OML 60, 61, 62 &63 Holding B.V., a Dutch B.V. wholly owned by HoldCo 1 and the company incorporated to acquire the Class B shares of Phillips Oil Company Nigeria Limited, upon, and assuming, completion of the Proposed COP Acquisition.

HoldCo 7

means Oando OPL 214 Holding B.V., a Dutch B.V. wholly owned by HoldCo 1 and the company incorporated to acquire the Class B shares of Phillips Deepwater Exploration Nigeria Limited, upon, and assuming, completion of the Proposed COP Acquisition.

HoldCo 8

means Oando Brass Holding B.V., a Dutch B.V. wholly owned by HoldCo 1 and the company incorporated to acquire all of the shares of Phillips (Brass) Limited, upon, and assuming, completion of the Proposed COP Acquisition.

HoldCo 9

means Oando OML 131 Holding B.V., a Dutch B.V. wholly owned by HoldCo 1 and the company incorporated to hold all of the shares of Conoco Exploration and Production Nigeria Limited, upon, and assuming completion of, the Proposed COP Acquisition.

HoldCo Associates

collectively, HoldCo 1, HoldCo 2, HoldCo 3, Oando 125&134 BVI, and “HoldCo Associate” means any one of them.

IMF

means the International Monetary Fund.

IMO

means the International Maritime Organization.

Indigenous Bill

means the Indigenous Oil Companies (Regulations and Fiscal Terms) Bill 2011, a revised draft of a bill previously sponsored by Senator Lee Maeba of the 6th National Assembly, which was passed by both arms of the National Assembly in 2007 but was not assented to by the President of Nigeria and therefore never came into force.

IOC

means an international oil company that is not owned or controlled by a government.

IPC

means Indigenous Petroleum Companies.

JDZ

means the Joint Development Zone of Nigeria-São Tomé and Príncipe.

JOA

means a joint operating agreement.

KNOC

means in the case of OPL 321, KNOC Nigerian West Oil Company Limited, and, in the case of OPL 323, KNOC Nigerian East Oil Company Limited.

Licenses

means OMLs and OPLs, or interests therein, held through production sharing contracts as well as concessions granted under the Marginal Field Development Program, as the case may be.

vii Local Content Act

The Nigerian Oil and Gas Industry Content Development Act 2010 (Nigeria).

Marginal Field Development Program

The program of initiatives implemented by the Nigerian Government through its local content policy, aimed at increasing the participation of Nigerian companies in oil exploration and production, as more particularly described under the heading “The Nigerian Oil and Gas Industry and Regulatory Framework”.

Marginal Field

means a field defined as a “marginal field” in the Petroleum Act and that the President of Nigeria may, from time to time, identity as a marginal field under the Petroleum Act.

MEND

means the Movement for the Emancipation of the Niger Delta.

MOU

means Memorandum of Understanding.

NAE

means Nigeria Agip Exploration Limited.

NAOC

means Nigeria Agip Oil Company Limited.

NDDC

means the Nigeria Delta Development Commission.

Netherlands/Nigeria BIT

means the agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Federal Republic of Nigeria.

NI 51-101

means National Instrument 51-101 of the Canadian Securities Administrators Standards of Disclosure for Oil and Gas Activities.

NI 51-102

means National Instrument 51-102 of the Canadian Securities Administrators Continuous Disclosure Obligations.

NI 52-110

means National Instrument 52-110 of the Canadian Securities Administrators Audit Committees.

NI 58-101

means National Instrument 58-101 of the Canadian Securities Administrators Disclosure of Corporate Governance Practices.

Niger Delta

means the Niger Delta Basin, which covers an area of more than 75,000 km2 of land, swamp and offshore shallow water leading to a deepwater frontier up to 150 km offshore.

Nigeria

means the Federal Republic of Nigeria.

Nigerian CAMA

means the Companies and Allied Matters Act of 1990 of Nigeria.

Nigerian Government

means the government of Nigeria.

NNOC

Nigerian National Oil Company.

NNPC

means the Nigerian National Petroleum Corporation, the Nigerian state-owned oil company.

NP 58-201

means National Policy 58-201 of the Canadian Securities Administrators Corporate Governance Guidelines.

Oando

means Oando PLC, a corporation existing under the laws of Nigeria, whose shares trade on the Nigerian Stock Exchange and the JSE Limited, and the holder of the Class A Shares of Akepo, Oando 125&134 and OPDC2.

Oando 125&134

means Oando OML 125&134 Limited, a company incorporated under the laws of Nigeria and an Operating Associate.

viii Oando 125&134 BVI

means Oando OML 125&134 BVI Limited, a company incorporated under the BVI CA and a wholly-owned subsidiary of HoldCo 1 and the holder of the Class B Shares of Oando 125&134.

Oando E&P Division

means the division acquired by OER from Oando pursuant to the Restructuring which carries out the oil and gas exploration, development and production business in Nigeria and the JDZ.

Oando Loan

means the US$345 million loan advanced to OER from Oando to finance the deposit required in connection with the Proposed COP Acquisition, as more particularly described herein.

OEL

means an Oil Exploration License, a non-exclusive license to explore for petroleum by surface geological and geophysical methods for a limited period. The typical size of an OEL is 13,000 km2.

OEPL

means Oando Exploration & Production Limited, a company incorporated under the Nigerian CAMA in respect of which 99.9% of its shares are owned by Oando and the remaining 0.01% is owned by a nominee shareholder on behalf of Oando, and which does not form part of the OER Group.

OEPL Deed of Transfer

means the deed of transfer dated April 1, 2009 between OEPL and Akepo relating to OEPL’s transfer of interest in Akepo (OML 90).

OER

means the Corporation and is the Corporation’s trading symbol on the TSX.

OER Group

means, collectively, the Corporation, together with the HoldCo Associates, the Operating Associates, HoldCo 4, HoldCo 5, HoldCo 6, HoldCo 7, HoldCo 8, HoldCo 9, 0901887 B.C. Ltd., OPDC, EEL, EEL 122, EEL 122 BVI, EEL 321, EEL 323, EEL JDZ 2, EEL 12, EEL 5, EEL Nigeria, the Servicecos, Exile Resources (BVI) Ltd., Exile Resources Services Ltd., Exile Nigeria, Exile Resources (Luxembourg) S.a.r.l., Exile Resources (Zambia) Limited, Exile Resources (Luxembourg) Ankara Turkiye Subesi and Exile Holdings (Luxembourg) S.a.r.l.

Old Shares

means the common shares of the Corporation issued and outstanding prior to the Consolidation.

OML

means an oil mining lease, which grants exclusive rights to explore, produce and transport petroleum from the leased area subject to the Petroleum Act and other relevant legislation as more particularly described under the heading “The Nigerian Oil and Gas Industry and Regulatory Framework - Petroleum Regulatory Framework”.

OML 56 Farm-Out Agreement

means the marginal field farm-out agreement dated September 30, 2004, among NNPC, Elf, Energia and OPDC (formerly known as Unipetrol Production and Development Company Limited).

OPDC

means Oando Production & Development Company Limited, a company incorporated under the Nigerian CAMA and in respect of which OPDC2 owns 95% of the shares.

OPDC2

means Oando Petroleum Development Company Limited, a company incorporated under the Nigerian CAMA and the holder of 95% of the shares of OPDC and an Operating Associate.

OPEC

means the Organization of the Petroleum Exporting Countries.

Operating Associates

means collectively, Akepo, OPDC2 and Oando 125&134, respectively, and “Operating Associate” means any one of them.

ix OPL

means an oil prospecting license, which confers exclusive rights of surface and subsurface exploration for petroleum, as more particularly described under the heading “The Nigerian Oil and Gas Industry and Regulatory Framework Petroleum Regulatory Framework”.

Partial Award

means the partial award issued in favour of NAE and Oando 125&134 by the arbitral tribunal in relation to OML 125, the OER dispute with the NNPC in relation to certain liftings done by the NNPC in 2008 and 2009 and which, in the view of OER and NAE, the operator of OML 125, exceeded the NNPC’s entitlement.

PDP

means the People’s Democratic Party, the ruling party in Nigeria since 1999.

Peak

means Peak Petroleum Industries Nigeria Limited.

Petrenel

means the Petroleum and Renewable Energy Company Limited, an independently qualified reserves evaluator based in the United Kingdom.

Petrenel Report

means the independent engineering evaluation titled “Independent Annual Review of Petroleum Resources for Oando Energy Resources Inc.” prepared by Petrenel in accordance with NI 51-101, dated March 21, 2013, effective as of December 31, 2012.

Petroleum Act

means the Petroleum Act, Cap P.10, Laws of the Federation of Nigeria, 2004.

PIB or Petroleum Industry Bill

Pillar PPT

Proposed COP Acquisition

Proposed Qua Ibo Acquisition

means the Petroleum Industry Bill (Nigeria), as further described under the heading “The Nigerian Oil and Gas Industry and Regulatory Framework”. means Pillar Oil Limited. means Petroleum Profits Tax, as imposed under the Petroleum Profits Tax Act, Cap P10 LFN 2004. means the proposed acquisition by the OER Group of COP’s Nigerian Business through the acquisition of the shares of Phillips Oil Company Nigeria Limited, Phillips Deepwater Exploration Nigeria Limited, Phillips (Brass) Limited and Conoco Exploration and Production Nigeria Limited, as announced by OER in a press release dated December 20, 2012, as more particularly described herein. means the proposed acquisition by the OER Group from Oando of the Class B shares of Oando Qua Ibo Limited and Oando Reservoir and Production Services Limited, each a company governed under the laws of Nigeria, as announced by OER in a press release dated September 17, 2012, updated in a press release dated March 27, 2013, and as more particularly described herein.

PSC

means a production sharing contract.

PwC

means PricewaterhouseCoopers, Chartered Accountants, the auditor of the Corporation.

Referral and Non-Competition Agreement

means the agreement entered into between the Corporation and Oando dated July 24, 2012, relating to, amongst other things, the referral and non-competition obligations of Oando from the effective date of the Arrangement.

Restructuring

means the restructuring completed pursuant to the Arrangement between the Corporation and Oando, as more particularly described under the heading “Business of the Corporation - Relevant Three Year History - Acquisition of Interests in Oando E&P Subsidiaries”.

ROFO Agreement

means the Right of First Offer Agreement dated as of September 27, 2011 between Oando and the Corporation.

x SEDAR

means the System for Electronic Document Analysis and Retrieval at www.sedar.com.

Serviceco1

means Oando Servco Netherlands B.V., a company incorporated under the laws of the Netherlands and an indirect wholly-owned subsidiary of the Corporation.

Serviceco2

means Oando Servco Nigeria Limited, a company incorporated under the laws of Nigeria and an indirect wholly-owned subsidiary of the Corporation.

Serviceco3

means Oando Servco UK Limited, a company incorporated under the laws of England and Wales and an indirect wholly-owned subsidiary of the Corporation.

Servicecos

collectively, Serviceco1, Serviceco2 and Serviceco 3.

Shareholder Agreements

means, collectively, the shareholder agreements entered into on July 24, 2012 between Oando, on the one hand, and HoldCo 2, HoldCo 3 and Oando 125&134 BVI, on the other hand, in respect of Akepo, OPDC2 and Oando 125&134, respectively.

Sogenal

means Sogenal Limited.

STP

means the Democratic Republic of Sao Tome and Principe.

Trust Acknowledgment Agreement

means the Trust Acknowledgment Agreement dated October 12, 2011 between Akepo and OEPL pursuant to which OEPL and Akepo confirm that, since the date of the OEPL Deed of Transfer, OEPL has been holding Akepo (OML 90) in trust for Akepo.

TSX

means the Toronto Stock Exchange.

TSXV

means the TSX Venture Exchange.

Tulip

means Tulip Energy Resources Nigeria Limited.

USEIA

means the United States Energy Information Administration.

Warrants

means the C$1.50 Warrants and the C$2.00 Warrants.

Certain other terms used herein but not defined herein are defined in NI 51-101 and, unless the context otherwise requires, shall have the same meanings herein as in NI 51-101.

xi

ABBREVIATIONS AND TECHNICAL TERMS Abbreviations Oil and Natural Gas Liquids

Natural Gas

Bbl or bbl Bbls or bbls Mbbls Mmbbls Mstb Bbls/d or bbls/d

Mcf or mcf Mmcf Mcf/d or mcf/d Mmcf/d Bcf or bcf GJ

Barrel Barrels thousand barrels million barrels thousand stock tank barrels barrels per day

thousand cubic feet million cubic feet thousand cubic feet per day million cubic feet per day billion cubic feet Gigajoule

Technical Terms BOE or boe

barrel of oil equivalent of natural gas and crude oil on the basis of 6 Mcf of natural gas for 1 Bbl of crude oil. Disclosure provided herein in respect of boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of oil as compared to natural gas is significantly different from six to one utilizing a boe conversion ratio of 6 Mcf:1Bbl would be misleading as an indication of value.

BOE/D, boe/d or boepd

barrel of oil equivalent per day INTERPRETATION

References to “management” mean the management of the OER Group. Any statements in this AIF made by or on behalf of management are made in such persons’ capacities as managers within the OER Group and not in their personal capacities. References to “C$” and “Canadian dollars” are to Canadian dollars, references to “$”, “US$”, “dollars” and “U.S. dollars” are to United States dollars and references to “Naira” and “₦” are to Nigerian Naira, the official currency of Nigeria. Amounts are stated in U.S. dollars unless otherwise indicated. The interest of the OER Group in a License sometimes refers to an interest in a field or an area of land within the legal boundaries of a License, such as interests held by the OER Group in fields acquired pursuant to the Marginal Field Development Program. See “The Nigerian Oil and Gas Industry and Regulatory Framework - Petroleum Industry Marginal Field Development Program”. Unless otherwise noted, the average daily production volumes and production disclosed in this AIF are based on the OER Group’s working interest (operating or non-operating) share of production before deduction of royalties paid to others, including the Nigerian Government. FORWARD-LOOKING STATEMENTS This Annual Information Form contains certain information that may constitute “forward looking information” and “forward looking statements” within the meaning of applicable securities legislation. Forward looking statements are necessarily based on a number of estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies. All statements other than statements which are reporting results, as well as statements of historical fact set forth or incorporated herein by reference, are forward looking statements that may involve a number of known and unknown risks, uncertainties and other factors; many of which are beyond the Corporation’s ability to control or predict. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “should”, “believe”, “intend”, “forecast”, “plans”, “guidance” and similar expressions is intended to identify forward-looking statements or information. More particularly and without limitation, this Annual Information Form contains forward-looking statements and information relating to the following:

xii •

the completion of the Proposed COP Acquisition;



the completion of the Proposed Qua Ibo Acquisition;



the Corporation’s expectation that it will commence continuous production in the fourth quarter with respect to Akepo (OML 90);



the ability of each of the Corporation and its partners to fund ongoing exploration and development activities to meet existing and future License and contractual obligations;



the performance characteristics of the Corporation’s properties;



exploration work plans, conceptual development plans, marketing plans and business or strategy plans;



the plans for completion or acquisition of any seismic data;



the timing, depth, placement, or nature of any well drilling and chances of success;



expected timing for and production rate of wells currently being drilled and completed;



the reserve and resource potential of the Corporation’s License areas;



the ultimate recoverability of the Corporation’s reserves and resources;



oil and natural gas future production levels;



expected cash flows, operating expenses, capital expenditures and revenues of the Corporation for future financial periods;



access to the Licenses to complete work, including the building of any facilities;



ability to prevent theft or sabotage of oil or infrastructure;



expectations concerning unitization or the resulting interest in a unitized block;



expectations regarding any PSC, JOA or other contractual negotiations;



future shedding of land or reduction of License areas;



renewals or extensions of Licenses;



supply and demand for oil and gas;



projections of market prices and costs;



treatment under governmental regulatory regimes and royalty laws, including any preferential treatment as an indigenous company;



the political, economic, regulatory and business stability of the jurisdictions in which the Corporation operations;



the amount, nature, timing and effects of the Corporation’s capital expenditures;



expectations regarding the ability to raise capital or future sources of capital;



expectations as to the ability of the Corporation to continually add to reserves through acquisitions and development; and



receipt of required regulatory approvals;

xiii The forward-looking statements and information contained in this Annual Information Form and in the documents incorporated by reference herein are based on certain key expectations and assumptions made by the Corporation, including expectations and assumptions relating to prevailing commodity prices and exchange rates, applicable royalty rates and tax laws, future well production rates, the performance of existing wells, the success of drilling new wells, the availability of capital to undertake planned activities and the availability and cost of labour and services. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general, such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition, the ability to access sufficient capital from internal and external sources, changes in tax, royalty and environmental legislation. Those risks and others are described or referred to below, under the heading “Risk Factors” in this Annual Information Form. Statements relating to “reserves” or “resources” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated, and can be profitably produced in the future. Readers are cautioned that the foregoing list of factors and risks is not exhaustive. The forward-looking statements and information contained in this Annual Information Form and in the documents incorporated by reference herein are made as the date of this AIF and, unless so required by applicable law, the Corporation undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise. The forward-looking statements and information contained in this Annual Information Form and in the documents incorporated by reference herein are expressly qualified by this cautionary statement.

1

INCORPORATION AND ORGANIZATION Oando Energy Resources Inc. was incorporated under the Canada Business Corporations Act (the “CBCA”) on August 9, 2005 as “Exile Resources Inc.”. Effective September 20, 2011, Articles of Amendment were filed to change the Corporation’s registered office from the Municipality of Metropolitan Toronto, Ontario to the Province of Alberta. On July 24, 2012, Articles of Arrangement were filed to, among other things, change the Corporation’s name from “Exile Resources Inc.” to “Oando Energy Resources Inc.” pursuant to the terms of a plan of arrangement under Section 192 of the CBCA between the Corporation and Oando. For further details on the Arrangement, see “Business of the Corporation - Relevant Three Year History”. The common shares of the Corporation were listed, and commenced trading, on the TSX Venture Exchange (the “TSXV”) on November 7, 2005 under the symbol “ERI”. Following the closing of the Arrangement, the Common Shares were listed, and commenced trading, on the Toronto Stock Exchange (the “TSX”) on July 30, 2012 under the symbol “OER”. In addition, warrants of the Corporation are listed and trade on the TSX under the symbol OER.WT (in the case of the C$1.50 Warrants) and OER.WT.A (in the case of the C$2.00 Warrants, each as defined herein). The Corporation’s head office is located at 10th Floor Banker’s Hall, West Tower 1000, 888 3rd Street S.W., Calgary, Alberta, T2P 5C5 The Corporation’s registered office is located at 3400, 350 – 7th Avenue S.W., Calgary, Alberta T2P 3N9.

2

Intercorporate Relationships Set forth below is a corporate chart indicating the names, jurisdictions of existence and inter-corporate relationships of the OER Group. Unless otherwise indicated, each subsidiary on the below chart is wholly-owned by its direct parent. Ovals represent interests in an OML, OPL or block, as applicable. Oando currently holds Class A shares in the companies indicated in red, as described in more detail under “Material Contracts - Shareholder Agreements”.

(1)

HoldCo 1 is a Dutch cooperative, of which 99.99% of its membership rights are held by OER and the remaining 0.01% by 0901887 B.C. Ltd., a wholly-owned subsidiary of OER.

(2)

Each of HoldCo 2 and Oando OML 125&134 BVI hold Class B Shares entitling them to 40% voting rights with 100% dividend rights in respect of each of Oando Akepo and Oando OML 125&134, respectively. HoldCo 3’s voting rights in respect of OPDC are effectively 38% and its dividend rights are 95% (through Class B Shares of OPDC2) while the government of Delta State owns 5% voting and 5% dividend rights of OPDC. Each of HoldCo 2, HoldCo 3 and Oando OML 125&134 BVI, entered into a Shareholders Agreement dated July 24, 2012 with Oando regarding management and voting of Oando Akepo, OPDC2 and Oando OML 125&134, respectively.

(3)

Oando holds Class A Shares entitling Oando to 60% voting rights with 0% dividend rights in respect of each of Oando Akepo and Oando OML 125&134 with 57% voting rights and 0% dividend rights in respect of OPDC.

(4)

The remaining 18.5% shares are held by minority shareholders.

(5)

The remaining 5% is held by the government of Delta State.

(6)

In compliance with the Nigerian CAMA which requires at least two shareholders for the formation of a company in Nigeria, 0.01% of the shares of this company are owned by a nominee shareholder, who holds such shares on behalf of the 99.9% shareholder.

(7)

HoldCo 4 and HoldCo 5 have been established for purposes of the Proposed Qua Ibo Acquisition.

(8)

HoldCo 6, HoldCo 7, HoldCo 8 and HoldCo 9 have been established for purposes of the Proposed COP Acquisition.

For a more detailed description of the corporate structure of the OER Group and the risks associated therewith, see “Material Contracts - Shareholder Agreements” and “Risk Factors - Oando will continue to exercise significant control over the affairs of OER”.

3 BUSINESS OF THE CORPORATION General The OER Group is focused on the acquisition of prospective oil and natural gas properties for production, exploration and development in Nigeria and the Gulf of Guinea. The OER Group has been specifically structured to take advantage of current opportunities for indigenous companies in Nigeria, which currently has the largest population in Africa and one of the largest oil and gas resources in Africa. OER believes that it qualifies as an indigenous company and, as such, it will be in a position to benefit from opportunities to acquire Licenses in Nigeria. Effective on December 31, 2012, the OER Group’s oil and gas assets produced approximately 4,800 barrels of oil per day. Relevant Three Year History Since incorporation, OER has concentrated on the acquisition of properties which are prospective for oil and natural gas resources. The primary business objectives of the OER Group are to create a diversified portfolio of property holdings and achieve rapid growth through the exploration and development of its holdings. In furtherance of these objectives, the Corporation currently holds interests in OML 125, Ebendo (OML 56) (formerly Obodeti/Obodugwa (OML 56)), Akepo (OML 90), OML 134, Bilabri & Owanare (OML 122), OPL 321, OPL 323, and EEZ Block 5, as described in more detail below at “Detailed Description of the Principal Properties”. All of these interests, other than Akepo (OML 90) (in respect of which OER had a 10% working interest prior to the Acquisition and, following the Acquisition, holds a 40% working interest), were acquired pursuant to the Acquisition, as described in more detail below, which completed on July 24, 2012. In January 2009, the Corporation entered into an agreement to acquire a 10% working interest in Akepo (OML 90). As a result of the Acquisition, amongst other things, the Corporation increased its working interest in Akepo (OML 90) to 40%. Additional information about Akepo (OML 90) is provided below under “Detailed Description of the Principal Properties - Assets Under Development and Appraisal - Akepo (OML 90)”. Acquisition of Interests in Oando E&P Subsidiaries On September 27, 2011, the Corporation entered into a definitive master agreement with Oando providing for, among other matters, the acquisition (the “Acquisition”) by the Corporation of certain shareholding interests in various Oando subsidiaries holding, directly or indirectly, various OMLs and OPLs in the upstream exploration and production division of Oando for consideration of 100,339,052 Common Shares (the “Restructuring”). The Restructuring was completed pursuant to a plan of arrangement (the “Arrangement”) which involved, among other matters: •

the consolidation of all of the Old Shares on the basis of one Common Share for every approximate 16.28 Old Shares;



the issuance to shareholders of the Corporation immediately prior to the Arrangement of two share purchase warrants for every approximate 16.28 Old Shares of the Corporation held immediately prior to the Arrangement: one share purchase warrant exercisable to acquire one Common Share of the Corporation at an exercise price of C$1.50 per share for a period of 12 months, and the second share purchase warrant exercisable to acquire one Common Share of the Corporation at an exercise price of C$2.00 per share for a period of 24 months; and



the change of name of “Exile Resources Inc.” to “Oando Energy Resources Inc.”

The Restructuring and Arrangement were approved by shareholders of the Corporation at a special meeting of shareholders of the Corporation held on December 29, 2011 and closed on July 24, 2012. For further details of the Restructuring, and the Arrangement, please refer to the news releases of OER dated August 3, 2011, October 13, 2011, December 29, 2011, January 30, 2012, January 31, 2012, July 18, 2012, July 24, 2012 and July 27, 2012. The news releases are available on SEDAR at www.sedar.com at OER’s profile. Following the implementation of the Arrangement, the principal business of the Corporation became the Oando E&P Division. EEZ Block 5 and EEZ Block 12 EEL 5 signed a PSC for EEZ Block 5 in the Democratic Republic of Sao Tome & Principe (“STP”) on April 18, 2012, which was ratified by the Prime Minister of STP five days later. EEL 5 paid a US$2 million signature bonus. A PSC for EEZ Block 12 is currently being negotiated and EEL understands that a signature bonus will be payable once the PSC is concluded.

4 Proposed Qua Ibo Acquisition On March 26, 2013, OER signed binding documentation (“Final Documentation”) with Oando providing for the acquisition by OER of Oando’s 40% participating interest in the Qua Ibo Field within Oil Mining Lease 13 located onshore Nigeria. Pursuant to the Referral and Non-Competition Agreement dated July 24, 2012 between Oando and OER, amongst other things, OER is entitled to a right of first offer for certain interests or options acquired by Oando and the Qua Ibo Field is such an interest. Pursuant to the terms of the Referral and Non-Competition Agreement and the Final Documentation, the purchase price for the Proposed Qua Ibo Acquisition will consist of all of the properly documented and commercially reasonable expenses incurred by Oando up to the closing date of the Proposed Qua Ibo Acquisition solely in connection with Oando’s acquisition of the Qua Ibo interest, plus an administrative fee of 1.75%. The closing of the Proposed Qua Ibo Acquisition is expected to be on or about April 12, 2013. The Proposed Qua Ibo Acquisition is subject to the approval of the TSX. For detailed information on the Proposed Qua Ibo Acquisition, please see the news releases of the Corporation dated September 17, 2012 and March 27, 2013 located on SEDAR at www.sedar.com. Ebendo (OML 56) Temporary Shut-In On November 12, 2012, OER was informed by NAOC of evidence of leakages on the 10 inch Kwale-Akri oil delivery line, causing NAOC to temporarily close the pipeline. NAOC was unable to inspect the line to determine the extent of damage, as flooding due to bad weather caused the area to be inaccessible. All production evacuated through this pipeline was temporarily shut in pending NAOC’s ability to access, inspect and repair the line. On December 11, 2012, OER announced that assessment efforts had revealed that the pipeline would require a partial replacement. Production and injection re-commenced on December 24, 2012 and continued through to February 14 2013, when it had to be stopped again due to rupture in the pipeline. All efforts to effect repairs have not been successful to date and NAOC formally declared a force majeure on March 21, 2013. It is expected that this will be in effect until at least the second week of April. Production from the Ebendo Field (OML 56) is evacuated through this pipeline to the Brass export terminal. Proposed COP Acquisition On December 20, 2012, OER entered into an agreement with COP to acquire COP’s Nigerian businesses for a total cash consideration of approximately US$1.79 billion subject to customary adjustments (the “Proposed COP Acquisition”). COP’s Nigerian businesses consist of:

a)

b)

The Onshore Business •

Phillips Oil Company Nigeria Limited (“POCNL”), which holds a 20% in the NAOC joint venture (“NAOC JV”). The operator of the NAOC JV, and also the holder of a 20% interest therein, is Nigerian Agip Oil Company Limited (“NAOC”), a subsidiary of the Eni Group. The NAOC JV holds non-operating interests in OMLs 60, 61, 62, and 63, the Brass River Terminal and the Kwale-Okpai Independent Power Plant, as well as related infrastructure and facilities. The other partner in the NAOC JV is the NNPC with a 60% interest.



Phillips (Brass) Limited (“PBL”), which holds a 17% shareholding interest in Brass LNG Limited. Brass LNG Limited is developing the Brass LNG project, a greenfield project to develop a two-train, 10 million ton per year, liquefied natural gas (“LNG”) facility in Bayelsa State, Nigeria. The other partners are NNPC (49%); Eni International N.A.N.V. S.a.r.l. (17%) and Total (17%).

The Offshore Business •

Conoco Exploration and Production Nigeria Limited (“CEPNL”), which holds a 95% operating interest in OML 13.. The other partner is Medal Oil Company Limited (5%). As well, there are efforts underway to unitize OML 131 with an adjacent OML (135, which is operated by Shell) and, if completed, it is expected that CEPNL’s interest in the unitized block will fall to a nonoperating 48.5%.



Phillips Deepwater Exploration Nigeria Limited (“PDENL”), which holds a 20% non-operating interest in OPL 214. The other partners are ExxonMobil (20% and operator), Chevron Nigeria Deepwater B Limited (20%), Svenska Nigeria Exploration and Production Limited (20%),

5 Nigerian Petroleum Development Company Limited (15%) and Sasol Exploration and Production Nigeria Limited (5%). Pursuant to the Proposed COP Acquisition, it is expected that OER will indirectly purchase all of the issued share capital of POCNL, PBL, CEPNL and PDENL. In connection with the Proposed COP Acquisition, OER was required to pay a deposit of US$435 million as partial payment of the shares proposed to be acquired. The payment of the deposit was funded by the Oando Loan in the amount of US$345 million, as described in more details under “Material Contracts - Oando Loan” as well as secured loans from two Nigerian banks in the aggregate amount of US$90 million, each of which is guaranteed by Oando. For further details with respect to the Proposed COP Acquisition, see the Corporation’s press release dated December 20, 2012 and filed on the Corporation’s SEDAR profile at www.sedar.com. See also “Material Contracts - Proposed COP Acquisition - Share Purchase Agreements” in this AIF. Business of the Corporation The Restructuring and Arrangement materially changed the existing business of the Corporation. Following the Restructuring and Arrangement, the principal business of the Corporation is further developing the assets previously comprised in the Oando E&P Division, which is described as follows. The business acquired by OER commenced in 2003 through the acquisition of a 42.75% working interest (net of minority interest) in Ebendo (OML 56) (formerly known as Obodeti/Obodugwa). In 2008, a 15% working interest in each of OML 125 and OML 134 was acquired, as well as a 30% working interest in Akepo (OML 90). In 2009, Oando acquired 78% of the shares of EEL (a company which, until 2009, had its shares listed on the AIM Market). In September 2011, Oando’s ownership of EEL increased to 81.5%. Pursuant to the Acquisition, the Corporation acquired all of the shares of EEL. As a result of the EEL holding, the OER Group has working interests of 30% (24.45% net of minority interest) in each of OPL 321 and OPL 323, a net carried interest in oil production from Bilabri & Owanare (OML 122) of 5% (4.08% net of minority interest) and a participating interest in gas production from Bilabri & Owanare (OML 122) of 12.5% (10.19% net of minority interest). The Corporation also holds certain non-material assets in Turkey and Zambia. The Corporation is currently seeking a buyer for these assets and expects to complete a sale by the end of 2013. General Description of the Principal Assets The Corporation’s business covers the full oil and gas field life cycle with production, development and appraisal, and exploration opportunities. OER’s key assets are located in the Niger Delta region, onshore and in the shallow and deep offshore. The Niger Delta depositional system extends from onshore Nigeria into deep water. OER’s producing assets, OML 125 and Ebendo (OML 56), are in water depths of between 100 and 1,200 metres (deep offshore) and onshore, respectively. Akepo (OML 90), where OER expects to commence continuous production in the fourth quarter of 2013, is located in shallow water of less than 20 metres.

6 Information about OER’s Licenses, as at the date hereof, is set out below:

Block/ Field

Type

Working Interest (net of minority interest) (%)

Area (km2)

Water Depth (m)

Partners

Operator

Producing Assets OML 125

Oil

15.00(2)

1,220

100 - 1,200

NAE

NAE

Ebendo (OML 56)

Oil

42.75(3)

69

Onshore

Energia

Energia

Assets under Development and Appraisal Akepo (OML 90)

Oil

40.00(4)

26

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