Fee Lands are PrairieSky’s fee simple mineral title lands prospective for petroleum, natural gas, NGL and certain other minerals. A fee
simple interest is the highest form of rights associated with land ownership, and is effectively the same as the Crown (government). Fee simple mineral title ownership is not subject to expiration,
surrender or termination and is effectively perpetual. A history of how PrairieSky came to own this acreage can be found on our
website at: prairiesky.com/history.

The Crown does not sell mineral rights, and there is a finite amount of fee simple acreage held by parties other than the Crown. PrairieSky is the single biggest owner of Fee Lands in Alberta and Saskatchewan with approximately 9.7 million acres with petroleum and natural gas rights.

GORR interests are royalty interests that are granted out of and are attached to a leasehold or working interest (a lease or license issued by the Crown or the fee simple mineral title owner).  A GORR interest is considered an “interest in land” and is therefore not subject to expiration, surrender or termination provided the underlying leasehold interest remains in good standing in accordance with its terms.

The term “overriding” refers to the fact that the royalty is paid by the lessee/working interest owner in addition to the royalty reserved to the lessor.

A GORR interest can be created in many different ways, including as a result of: (i) one party farming out the working interest rights to another party in exchange for retaining a GORR on production from the lands under the farmout agreement; (ii) one party providing capital to another party in exchange for a GORR; (iii) one party, as owner of certain Fee Lands that are in a checkerboard fashion, receiving a GORR on offsetting acreage, in exchange for allowing drilling by third parties of longer horizontal wells across sections that include portions of Fee Lands; (iv) where a third party has reviewed the Company’s seismic data and acquired a lease or license in respect of the Crown mineral rights underlying such data; or (v) various other contractual arrangements.

Substantially all PrairieSky’s 8.6 million acres of GORR interests are attached to Crown leases and licenses.

Fee Land is effectively perpetual and will never expire.  The continued existence of the Fee Lands is not contingent on the actions of a third party. By contrast, a GORR is tied to the duration of the underlying lease or license, and therefore terminates upon the expiration, surrender or termination of the underlying lease.  The continuation of a lease is typically dependent on the holder thereof continuing to produce hydrocarbons and maintain the lease in good standing.

PrairieSky owns 9.7 million acres of Fee Lands with petroleum and natural gas rights and 8.6 million acres of GORR Lands.

No, PrairieSky’s only owns the mineral titles associated with sub-surface minerals, and has no legal obligations, liabilities or entitlements associated with surface ownership.

Access to surface locations for the purpose of conducting oil and gas operations is handled by the Lessee (operator), not PrairieSky, and is typically handled through negotiation with the holder of the surface rights or obtaining a right of entry order granted by the Surface Rights Board. For more information see http://surfacerights.alberta.ca/.

As a royalty-only company, we are focused on leasing lands and are not in competition with other operators.

PrairieSky collects royalties on all production from its Fee and GORR Lands. PrairieSky holds fee simple mineral title to over 10 million stratified, leasable, undeveloped acres which we expect will be developed in the future. Because PrairieSky owns the Fee Lands in perpetuity, we expect to receive the benefit of future technological advancements and new discoveries with no associated capital investment.

Below is a chart which shows the gross production on PrairieSky Fee Lands since production data has been collected and stored with the government. This chart demonstrates the long-term nature of the asset and the value of Fee Lands and ownership in perpetuity.

Any capital investment decisions made by PrairieSky are discretionary and is limited to acquisition opportunities.

PrairieSky lease terms vary but in general range from a 1 to 5 year primary term and set out specific geological zones which the lessee can drill for oil and/or natural gas. A well is required to be drilled and producing in order for the lease to continue past the primary term. If there is no producing well, the lands are returned to PrairieSky which can then lease out the lands to another party. If a well is drilled and producing, the lessee will keep its lease for the producing zone past the primary term for as long as the well is producing and the lessee otherwise maintains the lease in good standing. These lands are “held by production”. All other zones, deeper or shallower, are returned to PrairieSky who can then lease these lands out to other parties. Because the mineral rights return to PrairieSky, Fee Lands are continually recycled.