ROK Resources Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2019

The following is management’s discussion and analysis (“MD&A”) of the operating and financial results of ROK Resources Inc. (“ROK” or the “Company”), formerly Petrodorado Energy Ltd., for the three months and year ended December 31, 2019, as compared to the three months and year ended December 31, 2018, as well as information and expectations concerning the Company’s outlook based on currently available information.

This MD&A should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2019 (collectively, the “Financial Statements”) prepared in accordance with IFRS (as defined below), together with the accompanying notes.

This MD&A contains forward‐looking information about our current expectations, estimates, projections and assumptions. Additional information on the Company, its financial statements, this MD&A and other factors that could affect the Company’s operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

All dollar values are expressed in Canadian dollars, unless otherwise indicated, and are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”).

This MD&A is prepared as of April 29, 2020.

NON‐IFRS MEASURES

Funds used in operations include all cash used in operating activities and are calculated before the change in non‐ cash working capital. A reconciliation of cash used in operating activities to funds used in operations for the three months and year ended December 31, 2019 and 2018, are as follows:

Funds used in operations ($)	Q4 2019	Q4 2018	Year 2019	Year 2018
Cash used in operating activities	(220,815)	(13,915)	(383,179)	(492,893)
Change in non‐cash working capital	13,652	(36,203)	26,509	17,521
Funds used in operations	(207,163)	(50,118)	(356,670)	(475,372)

The non‐IFRS measure referred to above does not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures used by other companies. Management uses this non‐IFRS measurement for its own performance measures and to provide its shareholders and investors with a measurement of the Company’s efficiency and of its ability to fund a portion of its future growth expenditures.

BUSINESS PROFILE AND STRATEGY

The Company’s head office is located in Regina, Saskatchewan, Canada, and the Company’s shares are traded on the TSX Venture Exchange (“TSXV”) under the trading symbol “ROK”. In recent years, the Company underwent a strategic reassessment which resulted in the disposal of all foreign operations and associated exploration blocks wherein the Company had a participating interest. In 2019, the Company completed the asset acquisition of certain

Saskatchewan land leases with prospective mineral rights (see further below) and is currently formulating a strategic plan for the Company’s future operations.

Even though these events have improved the financial condition of the Company, the lack of cash inflow from operations may mean that any future strategic opportunities for the Company may require additional financing to execute. The Board of Directors and management have continued to review all potential transactions available to the Company with the mission to identify viable and lucrative opportunities that may provide the best future for the Company and the shareholders with the goal to maximize shareholder value.

ROK RESOURCES INC. ACQUISITION

In November 2019, the Company completed the acquisition of ROK Resources Inc., a private Saskatchewan oil and gas company (the “Private Company”), pursuant to which the Company acquired all of the issued and outstanding shares of the Private Company. Under the terms of the Transaction, former Private Company shareholders were issued an aggregate of 20,000,000 Class B Shares of the Company as consideration valued at $1.1 million. Upon completion of this transaction, the current business of the Private Company became the primary business of the Company (the “Transaction”). By way of the Transaction, the Company holds interests in certain undeveloped land located in Saskatchewan on which it intends to conduct petroleum and natural gas exploratory work. Subsequently, with the completion of the Transaction, the Company changed its name to “ROK Resources Inc.”.

COVID‐19 PANDEMIC

In early 2020, there was a global outbreak of COVID‐19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID‐19 outbreak may have on the Company as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus. While the extent of the impact is unknown, we anticipate this outbreak may cause reduced customer demand, supply chain disruptions, staff shortages, and increased government regulations, all of which may negatively impact the Company’s business and financial condition.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s approach to managing liquidity is to ensure a balance between expenditure requirements and cash used in operations and working capital. As at December 31, 2019, the Company had working capital of $1.2 million (down from $1.4 million at December 31, 2018) comprised mostly of cash and cash equivalents. Changes in working capital have been primarily due to general and administrative costs of the Company incurred over time. While the Company has acquired undeveloped land interests located in Saskatchewan by way of the Transaction on which it intends to conduct petroleum and natural gas exploratory work, the Company still has no positive cash flow generating operations.

As the Company has no assets capable of generating cash flow, it will continue to exhaust its remaining financial resources to fund administrative costs and the development of its oil and gas properties. These conditions indicate the existence of a material uncertainty that casts significant doubt about the Company’s ability to continue as a going concern. There is no guarantee that the Company will be successful in raising the capital required to fund ongoing operations and exploration and evaluation activities or that the terms of a financing, if any, will be acceptable to the Company. The decline of commodity pricing in March of 2020, the COVID‐19 global pandemic and

its impact on the economy further increases the risk associated with obtaining the capital necessary to develop the Company’s oil and gas properties. Management continues to make deliberate efforts to conserve Company finances while assessing existing opportunities.

Other than accounts payable and severance obligations within long‐term liabilities, the Corporation does not otherwise have any significant commitments and has not pledged any of its assets as security for loans, or otherwise and is not subject to any debt covenants. Based on current information, the Company anticipates that its working capital is sufficient to meet its expected ongoing obligation for the coming year.

PETROLEUM AND NATURAL GAS PROPERTIES

ROK has an acreage position of 2,572 net acres within the Florence area of Southeast Saskatchewan. The land, which is currently undeveloped, is located within a larger area of historical production targeting both the Midale and Frobisher beds. High flow rates and cumulative oil recoveries from multiple cycles within both the Midale and Frobisher beds have been demonstrated on lands directly adjacent to the undeveloped ROK acreage. Mapping of the regionally dominant SW to NE structural highs that are preferential to the deposition of high‐quality reservoir within this area has allowed for the identification of multiple high‐quality drilling targets.

The recent successful application of hydraulic fracture stimulation within the Glen Ewen area has created an opportunity to apply similar completion techniques to the Midale formation throughout the Glen Ewen and Florence project areas. The Midale cycles within the Florence area are comparable to those of the Midale cycles within producing areas of the Glen Ewen area. Optimal production occurs along NE‐SW trending structural noses in Florence and Glen Ewen. Although the Midale has historically been produced within the Florence area, the interbedded nature of the rock suggests that better results would be achieved through the use of horizontal fracturing technology.

In addition to horizontal fracture exploitation of the Midale formation, the Company plans to target the Halbrite and Huntoon cycles of the Frobisher beds which have been successfully produced within the Florence area. The Florence lands are on trend with multiple NE‐SW trending Frobisher cycles and there are vertical wells on the Florence lands that have previously produced from the Halbrite. While not regionally extensive like the Midale beds, the Frobisher shoaling events create high permeability reservoirs which can provide high initial productive rates and favourable short term economics with payouts in less than a year in many cases. The ROK management team has extensive geological, geophysical and operational experience in the development of this play. The team has identified high‐ quality prospects targeting these prolific reservoirs. Core data, log analysis, structure mapping, and existing offsetting production makes the Florence lands highly prospective for both the Halbrite and Huntoon cycles of the Frobisher beds.

PRODUCTION ASSET ACQUISITION

On April 22, 2020, the Company entered into a purchase agreement (the “Purchase Agreement”) to acquire certain producing oil and gas assets in Southeastern Saskatchewan. Closing of the acquisition is expected to occur on June 30, 2020 with an effective date of June 1, 2020, subject to the completion of a diligence review on the assets as well as the receipt of any necessary regulatory approvals. The total purchase price for the assets is $70,000. The Company has paid a deposit of $50,000 in connection with entering into the Purchase Agreement.

The acquisition properties are located within the Glen Ewen area of Southeast Saskatchewan, targeting the Midale and Frobisher formations. Production from these assets was approximately 85 Bopd (150 Boepd) from 13 wells for the month of March 2020. The acquired assets also include associated facilities and undeveloped land directly adjacent to the Company’s existing land base within the project area. This contiguous area now allows for cost

effective development of ROK’s previously undeveloped lands utilizing existing processing capacity, water disposal and pipeline infrastructure.

As part of the Purchase Agreement, ROK has also entered into a third‐party processing agreement with the seller for a portion of the volumes on a fee basis. The acquisition package also contains associated liabilities, including future abandonment obligations and 27 suspended wells and 11 inactive facility sites, which will be evaluated for future reactivation.

OUTLOOK

Management’s primary objective in 2020 is to move the Company forward towards an increased value for shareholders. There will be two components to this strategy. The ultimate goal is to utilize management’s extensive experience in oil and gas development to identify a larger scale, high netback property that will provide long term value growth for the Company well into the future. Management is currently evaluating various opportunities within this low commodity price period with the belief that good value can be found at this time.

As an initial step, the Company has levered the management team’s deep experience within the Southeast Saskatchewan region to identify and develop a high netback producing property. Following ten years of operational experience building three private companies in and around the Glen Ewen and Florence areas, the ROK management team has identified a high‐quality prospect area targeting both the Midale and Frobisher beds. This prospect area has extensive historical production but appears to be under‐developed with respect to the application of horizontal drilling and fracturing within the Midale beds. In addition, several high‐quality Frobisher bed prospects remain undrilled within this area. Over the past ten years the team has successfully drilled and developed similar pools within the Glen Ewen area and it has now secured 2,572 net acres of prospective land. This land allows for the drilling of up to eight one‐mile long fractured horizontal wells targeting the Midale beds and two half‐mile long horizontal wells targeting the Frobisher beds. As oil prices recover through the end of 2020 and into 2021, two of these locations are expected to be drilled in order to assess the reserves and to allow for the strategic development of production infrastructure.

As previously mentioned, on April 22, 2020, the Company entered into an agreement to purchase producing wells, production facilities, 3D seismic data, pipeline infrastructure and undeveloped land on an existing Glen Ewen pool directly offsetting the existing Florence land base. The close of this purchase agreement on June 30, 2020 remains subject to standard industry due diligence and the removal of related conditions. Upon completion of this agreement, and with a modest investment in two miles of gathering pipelines, the Company would have sufficient capacity to process emulsion, dispose of water and conserve gas for the planned development of the Florence land base. This creates a significant savings compared to greenfield construction of this infrastructure. Historical capacity of this infrastructure allowed previous owners to process up to 6,000 barrels of fluid and 1,000 barrels of sales oil. This level of capacity gives the Company a significant economic advantage in the development of this area and allows it to pursue additional opportunities which previously would have been uneconomic due to the infrastructure development expense. The acquisition is expected to add approximately 150 Boepd of production with numerous optimization and development opportunities which can be pursued if oil prices recover in the future. It is expected that this production may be shut in for the short term in order to preserve the remaining reserve barrels for a future production period with more attractive netbacks. The expense to maintain this property during the shut‐in period is estimated to be in the range of $10,000‐$15,000 per month. Additional details regarding this acquisition will be available once detailed due diligence is completed, conditions have been removed and the deal has been closed.

The Company continues to evaluate these properties for additional upside and expects to raise additional capital in the future in order to facilitate the profitable development of these assets.

COMMITMENT SUMMARY UPDATE

A summary of the Company’s estimated financial commitments is as follows:

Office space agreement up to April 2020 constituting a financial commitment of approximately $12,000 for the 2020 year.
Fees and taxes related to the existing mineral leases held in Saskatchewan that equate to a total financial commitment of no more than $3,000 per year between 2020 and 2025 during the current exploration phase. Fees or royalties on production would only be derived once development of the existing mineral leases is realized and production has commenced.

The expenditures above represent the Company’s estimated cost to satisfy contract requirements and are based on the latest possible data available for each contract.

DISCUSSION OF OPERATING RESULTS

General and Administrative Expenses

General and administrative expenses (“G&A”) for the three months and year ended December 31, 2019 were $287,525 and $438,235, respectively ($51,435 and $147,963 for the three months and year ended December 31, 2018, respectively). The increase in G&A is primarily due to increased wages and salaries in 2019, including severance expenses of $160,000 to a departing officer.

expenses of $160,000 to a departing officer.
General and Administrative Expenses ($)	Q4 2019	Q4 2018	Year 2019	Year 2018
Professional Fees	35,327	10,359	46,864	64,880
Wages & Salaries	217,298	33,425	317,539	33,425
Fees, Rent, Investor Relations and Other	34,900	7,651	73,832	49,658
Total	287,525	51,435	438,235	147,963

Business Development Expenses

Business development expenses relate to business initiatives towards the promotion, development, and growth of the Company’s operations and assets outside the normal course of the Company’s day‐to‐day endeavors. For the year ended December 31, 2019, the Company incurred business development expenses of $34,349 relating to efforts towards a strategic acquisition.

For the year ended December 31, 2018, costs incurred in relation to a terminated amalgamation transaction with Western Atlas Resources Inc. (“WAR”) were recognized as part of business development expenses. These costs included, among other costs, a $250,000 payment to WAR upon termination of the amalgamation agreement in March 2018. Pursuant to the termination of the amalgamation agreement, the Company made the payment of $250,000 to WAR, with no further commitments or responsibilities existing between the two parties thereafter.

Foreign Exchange Loss

The Company incurred a foreign exchange loss of $5,733 and a foreign exchange gain of $6,849 for the years ended December 31, 2019 and 2018, respectively. Foreign exchange losses are due to a decrease in the value of the US dollar when compared to the Canadian dollar within a specific period. Conversely, foreign exchange gains are due to an increase in the value of the US dollar when compared to the Canadian dollar within a specific period.

Stock‐Based Compensation

For the year ended December 31, 2019, the Company recorded stock‐based compensation expense of $102,379 ($37,549 for the year ended December 31, 2018). New options were granted in Q3 2018 and Q4 2019, with the vesting of these options accounting for the majority of stock‐based compensation expense in each respective year.

Funds used in Operations

For the three months and year ended December 31, 2019, the Company used funds in operations of $207,163 and $356,670, respectively (funds used in operations of $50,118 and $475,372 for the comparative periods to December 31, 2018). The increase in funds used in operations relates primarily to the increase in general and administrative expenses when compared to 2018 while also taking into account the greater business development expenses incurred in 2018.

FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS

The carrying values of the Company’s financial instruments, consisting of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities, approximate their fair values due to the short‐term maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

SHAREHOLDERS’ EQUITY

Common shares

At December 31, 2019, the Company was authorized to issue an unlimited number of Class B Shares, with no par value, with holders of Class B Shares entitled to two votes per share and to dividends, if declared. Outstanding Class B Shares as of December 31, 2019, are as follows:

B Shares as of December 31, 2019, are as follows:
	Common shares		Amount
Balance, December 31, 2018	23,274,268	$	86,110,218
Shares issued as part of the Transaction	20,000,000		1,100,000
Balance, December 31, 2019	43,274,268	$	87,210,218

In November 2019, the Company issued 20,000,000 Class B Shares to the former shareholders of the Private Company as consideration for 100% of the outstanding shares of the Private Company in accordance with the terms of the Transaction. The newly issued Class B Shares were valued at $0.055 per share for a total value of $1,100,000 based upon the market price of the Company’s Class B Shares on November 28, 2019.

Warrants

Pursuant to the non‐brokered private placement of units in June 2017, the Company issued 6,666,667 share purchase warrants. The warrants are exercisable immediately at a price of C$0.15 per share until June 2022. A fair value of $40,004, net of issue costs, was recognized for the issuance of the share purchase warrants.

Stock options

The Company has adopted a formal rolling stock option plan whereby options can be granted from time to time to directors, officers, employees and consultants at the discretion of the Board of Directors. The number of options

that can be granted is limited to 10% of the total shares issued and outstanding. A summary of the changes in stock options is presented below:

		Weighted average	Weighted average
	Stock options	exercise price
Balance, December 31, 2017	668,000	$	0.65
Options issued	1,500,000		0.10
Balance, December 31, 2018	2,168,000		0.27
Expired options	(108,000)		3.50
Options issued	1,850,000		0.15
Balance, December 31, 2019	3,910,000	$	0.12
Exercisable, December 31, 2019	2,176,666	$	0.11

In July 2018, the Company granted 1,500,000 options to acquire common shares to certain directors and officers of the Company at a price of $0.10 per common share. The options are for a five‐year term, expiring in July 2023, and vesting one‐third on date of grant, one‐third on the first anniversary date and one‐third on the second anniversary date from the date of grant.

In December 2019, the Company granted 1,850,000 options to acquire common shares to certain officers and employees of the Company at a price of $0.15 per common share. The options are for a five‐year term, expiring in December 2024, and vesting one‐third on date of grant, one‐third on the first anniversary date and one‐third on the second anniversary date from the date of grant.

Options granted in July 2018 and December 2019 were allocated an estimated fair value using the Black‐Scholes option pricing model to estimate the fair value with the following weighted average assumptions:

	December 2019	July 2018
Expected forfeiture rate	10%	10%
Risk‐free interest rate	1.48%	1.92%
Expected dividend yield	0%	0%
Expected stock price volatility	136%	137%
Expected option life	5 years	5 years
Fair value of optionsgranted	$0.122	$0.037

The following summarizes information about stock options outstanding as at December 31, 2019:

	Number of options	Weighted average term to	Number of options
Exercise prices (C$)	outstanding	expiry (years)	exercisable
0.10	2,060,000	3.09	1,560,000
0.15	1,850,000	4.93	616,666
	3,910,000	3.96	2,176,666

During the year ended December 31, 2019, the Company recognized $102,379 (December 31, 2018 ‐ $37,549) in stock‐based compensation expense. Recognized stock‐based compensation is recorded as an expense and as contributed surplus.

As of the date of this MD&A, the Company maintained balances of 43,274,268 Class B Shares, 6,666,667 warrants, and 3,910,000 stock options.

USE OF ESTIMATES AND JUDGMENTS

The timely preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities and income and expenses. Accordingly, actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant estimates and judgments made by management in the preparation of these financial statements are outlined below.

Critical judgments in applying accounting policies

The following are the critical judgments that management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognized in the financial statements:

i) Identification of cash‐generating units

The Company’s assets are aggregated into cash‐generating units, for the purpose of calculating impairment, based on their ability to generate largely independent cash flows. By their nature, these estimates and assumptions are subject to measurement uncertainty and may impact the carrying value of the Company’s assets in future periods.

ii) Exploration and evaluation assets

The application of the Company’s accounting policy for exploration and evaluation assets requires management to make certain judgments as to future events and circumstances as to whether economic quantities of reserves have been found in assessing economic and technical feasibility.

iii) Income taxes

Judgments are made by management to determine the likelihood of whether deferred income tax assets at the end of the reporting period will be realized from future taxable earnings. To the extent that assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as the amounts recognized in profit or loss in the period in which the change occurs.

Key sources of estimation uncertainty

The following are the key assumptions concerning the sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing adjustments to the carrying amounts of assets and liabilities, where applicable.

i) Business combinations

In a business combination, management makes estimates of the fair value of assets acquired and liabilities assumed as part of the acquisition transaction.

ii) Share‐based payments

All equity‐settled, share‐based awards issued by the Company are recorded at fair value using the Black‐Scholes option‐pricing model. In assessing the fair value of equity‐based compensation, estimates have to be made regarding the expected volatility in share price, option life, dividend yield, risk‐free rate and estimated forfeitures at the initial grant date.

iii) Tax provisions

Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in profit or loss both in the period of change, which would include any impact on cumulative provisions, and in future periods. Deferred tax assets (if any) are recognized only to the extent it is considered

probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse.

NEW ACCOUNTING STANDARDS

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for accounting periods beginning on or after January 1, 2019 or later periods.

IFRS 16: Leases

On January 1, 2019, the Company adopted IFRS 16 “Leases” to replace the existing guidance of IAS 17 “Leases”. The standard establishes principles and disclosures related to the amount, timing and uncertainty of cash flows arising from a lease. Given that the Company has no contractual obligations that would be determined as leases, no adjustments were required from the adoption of this standard.

PRINCIPAL BUSINESS RISKS

The Company’s business and results of operations are subject to a number of risks and uncertainties which include, but are not limited to, the following:

Going Concern

The Company has included a “going concern” qualification in the notes to the Company’s consolidated financial statements for the year ended December 31, 2019 (see “Going Concern” under Note 2). Current cash resources of the Company may not be sufficient to continue its business activities. In the event that the Company is unable to raise additional capital and/or attain sufficient revenues from its operations, as to which in each case there can be no assurance, the Company may not be able to continue its operations.

Crude Oil and Natural Gas Development

Exploration, development, production of oil and natural gas involves a wide variety of risks which include but are not limited to the uncertainty of finding oil and gas in commercial quantities, securing markets, commodity price fluctuations, exchange and interest rate exposure and changes to government regulations, including regulations relating to prices, taxes, royalties and environmental protection. The oil and gas industry is intensely competitive and the Company competes with a large number of companies with greater resources.

The Company’s ability to obtain reserves in the future will depend not only on its ability to develop its current properties but also on its ability to acquire new prospects and producing properties. The acquisition, exploration and development of new properties also require that sufficient capital from outside sources will be available to the Company in a timely manner. The availability of equity or debt financing is affected by many factors many of which are beyond the control of the Company.

Addition of Reserves and Resources

The Company’s future crude oil and natural gas reserves, production, and cash flows to be derived therefrom are highly dependent on the Company successfully discovering and developing or acquiring new reserves and resources. The addition of new reserves and resources will depend not only on the Company’s ability to explore and develop properties but also, in the case of reserves, on its ability to select and acquire suitable producing properties or prospects. There can be no assurance that the Company’s exploration, development or acquisition efforts will result in the discovery and development of commercial accumulations of oil and natural gas.

Reserve Estimates

There are numerous uncertainties inherent in estimating quantities of reserves, including many factors beyond the control of the Company. Estimates of reserves depend in large part upon the reliability of available geological and engineering data and require certain assumptions to be made in order to assign reserve volumes. Geological and engineering data is used to determine the probability that a reservoir of oil and/or natural gas exists at a particular location, and whether, and to what extent, such hydrocarbons are recoverable from the reservoir. Accordingly, the ultimate reserves discovered by the Company may be significantly less than the total estimates.

Exploration Risks

The exploration of the Company’s properties may from time to time involve a high degree of risk that no production will be obtained or that the production obtained will be insufficient to recover drilling and completion costs. The costs of seismic operations and drilling, completing and operating wells are uncertain to a degree. Cost overruns can adversely affect the economics of the Company’s exploration programs and projects. In addition, the Company’s seismic operations and drilling plans may be curtailed, delayed or cancelled as a result of numerous factors, including, among others, equipment failures, weather or adverse climate conditions, shortages or delays in obtaining qualified personnel, shortages or delays in the delivery of or access to equipment, necessary governmental, regulatory or other third party approvals and compliance with regulatory requirements.

Key Personnel

The Company’s success depends in large part on the ability of its executive management team to deal effectively with complex risks and relationships and execute the Company’s business plan. The members of the management team contribute to the Company’s ability to obtain, generate and manage opportunities. There can be no assurance that the Company’s present key personnel and directors will remain with the Company. The departure of any such key person or director may materially affect the Company’s business, financial condition, results of operations, and the value of the Class B Shares.

Public Market Risk

There can be no assurance that an active trading market in the Company’s securities will be sustained. The market price for the Company’s securities could be subject to wide fluctuations. Factors such as commodity prices, government regulation, interest rates, share price movements of the Company’s peer companies and competitors, as well as overall market movements, may have a significant impact on the market price of the securities of the Company. The stock market has from time to time experienced extreme price and volume fluctuations, which may be unrelated to the operating performance of particular companies.

Dividends

To date, the Company has not paid regular dividends on its outstanding securities and does not anticipate paying any dividends in the foreseeable future. There are no restrictions in the Company’s articles or elsewhere which would prevent the Company from paying dividends. It is not contemplated that any dividends will be paid on the Class B Shares in the immediate future as it is anticipated that all available funds will be invested to finance the growth of the Company’s business. The directors of the Company will determine if, and when, dividends will be declared and paid in the future from funds properly applicable to the payment of dividends based on the Company’s earnings, financial position and other conditions at the relevant time. All of the Class B Shares are entitled to an equal share in any dividends declared and paid.

Failure to Maintain Listing of the Class B Shares

The Class B Shares are currently listed for trading on the facilities of the TSXV. The failure of the Company to meet the applicable listing or other requirements of the TSXV in the future may result in the Class B Shares ceasing to be

listed for trading on the TSXV, which would have a material adverse effect on the value of the Class B Shares. There can be no assurance that the Class B Shares will continue to be listed for trading on the TSXV.

Structure of the Company

From time to time, the Company may take steps to organize its affairs in a manner that minimizes taxes and other expenses payable with respect to the operation of the Company and its subsidiaries. If the manner in which the Company structures its affairs is successfully challenged by a taxation or other authority, the Company and the holders of Class B Shares may be adversely affected.

Management’s Report on Internal Control over Financial Reporting

In connection with National Instrument 52‐109 ‐ Certification of Disclosure in Issuer’s Annual and Interim Filings (“NI 52‐109”) adopted by each of the securities commissions across Canada, the Chief Executive Officer and Chief Financial Officer of the Company are required to file a Venture Issuer Basic Certificate with respect to the financial information contained in the unaudited interim financial statements and the audited annual financial statements and respective accompanying Management’s Discussion and Analysis. The Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52‐ 109.

CAUTION REGARDING FORWARD‐LOOKING INFORMATION

This MD&A offers an assessment of the Company’s future plans and operations as of the date hereof and may contain forward‐looking information. All statements other than statements of historical fact are forward‐looking statements. Such information is generally identified by the use of words such as "anticipate", "continue", "estimate", "expect", "may", "plan", "will", "project", “should", "believe" and similar expressions. Statements relating to "reserves" or "resources" are also 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 that the resources and reserves described can be profitably produced in the future. All such statements involve known and unknown risks, uncertainties and assumptions.

Management believes that the expectations reflected in the forward‐looking information are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward‐looking information included in this MD&A should not be unduly relied upon as the plans, assumptions, intentions or expectations upon which it is based may not occur. Actual results or events may vary from the forward‐looking information.

In particular, this MD&A may contain forward‐looking information pertaining to the following:

the potential of the Company’s assets,
the Company’s growth strategy and opportunities,
performance characteristics of the Company's oil properties and estimated capital commitments and probability of success,
crude oil production and recovery estimates and targets,
the existence and size of the oil reserves and resources,
capital expenditure programs and estimates, including the timing of activity,
plans for, and results of, exploration and development activities,
projections of market prices and costs,
the supply and demand for oil,
expectations regarding the ability to raise equity and debt capital on acceptable terms, including the ability to negotiate and complete any agreements contemplated,
the timing for receipt of regulatory approvals, and

treatment of the Company under governmental regulatory regimes and tax laws.

The purpose of providing any financial outlook in this MD&A is to illustrate how the business of the Company might develop without the benefit of specific historical financial information. Readers are cautioned that this information may not be appropriate for other purposes.

The forward‐looking information herein is based on certain assumptions and analysis by the management of the Company in light of its experience and perception of historical trends, current conditions and expected future developments and other factors that it believes are appropriate and reasonable under the circumstances. The forward‐looking information herein is based on a number of assumptions, including but not limited to:

the availability on acceptable terms of funds for capital expenditures,
the availability in a cost‐efficient manner of equipment and qualified personnel when required,
the stability of the regulatory framework governing taxes and environmental matters in any jurisdiction in which the Company may conduct its business in the future,
continuing strong demand for oil,
the ability to market production of oil successfully to customers,
future production levels and oil prices,
the applicability of technologies for recovery and production of oil reserves,
the existence and recoverability of any oil reserves,
geological and engineering estimates in respect of resources and reserves in which the Company has an interest,
the geography of the areas in which the Company has an interest, and
the impact of increasing competition on the Company.

The actual results, performance and achievements of the Company could differ materially from those anticipated in these forward‐looking statements as a result of the risks and uncertainties set forth elsewhere in the MD&A and the following risks and uncertainties:

global financial conditions,
general economic, market and business conditions,
volatility in market prices, the stock market, foreign exchange and interest rates,
risks inherent in oil and gas operations, exploration, development and production,
the failure by counterparties to make payments or perform their operational or other obligations to the Company in compliance with the terms of contractual arrangements between the Company and such counterparties,
risks related to the timing of completion of the Company’s projects and plans,
uncertainties associated with estimating oil and natural gas reserves and resources,
competition for, among other things, capital, acquisitions of resources, and skilled personnel,
the ability to hold existing leases through drilling or lease extensions or otherwise,
incorrect assessments of the value of acquisitions,
claims made in respect of the Company’s properties or assets,
geological, technical, drilling and processing problems, including the availability of equipment and access to properties,
environmental risks and hazards,
the inaccuracy of third parties’ reviews, reports and projections,
rising costs of labour and equipment,
the failure to engage or retain key personnel,
changes in income tax laws or changes in tax laws and incentive programs, and
other factors discussed under “Principal Business Risks” in this MD&A.

Readers are cautioned that the foregoing lists of assumptions, risks and uncertainties are not exhaustive. The forward‐looking information contained in this MD&A is expressly qualified by this cautionary statement. The forward‐looking information speaks only as of the date of this MD&A, and the Company does not undertake any obligation to publicly update or revise any forward‐looking information except as required by applicable securities laws.

KEY FINANCIAL RESULTS

The following table summarizes the Company’s key financial results over the past three years:

Annual Financial Results ($)	Year 2019	Year 2018	Year 2017
Net income (loss):
Continuing Operations	(562,889)	(505,928)	(546,667)
Discontinued Operations	‐	‐	100,527
Total	(562,889)	(505,928)	(446,140)
Income (loss) per share ‐ basic and diluted
Continuing Operations	(0.02)	(0.02)	(0.03)
Discontinued Operations	‐	‐	0.00
Total	(0.02)	(0.02)	(0.03)
Working capital	1,227,674	1,406,430	1,874,809
Total assets	2,201,075	1,440,220	1,927,148
Total non‐current liabilities	100,000	‐	‐

As of December 31, 2019, the Company’s financial position is primarily constituted by short‐term financial assets and liabilities and long‐term liabilities consisting of owed severance. Beyond this, the Company has minimal financial commitments for the foreseeable future. Fluctuations in annual financial results have been primarily influenced by general and administrative expenses and business development expenses.

SELECTED QUARTERLY INFORMATION

The following table sets out selected unaudited quarterly financial information of the Company and is derived from unaudited quarterly financial data prepared by management in accordance with IFRS.

Quarterly Results ($)	Q4 2019	Q3 2019	Q2 2019	Q1 2019
Total revenue	4,120	4,481	4,540	4,666
Net loss	(393,755)	(51,596)	(58,834)	(58,704)
Net loss per share (basic & diluted)	(0.01)	(0.00)	(0.00)	(0.00)

Quarterly Results ($)	Q4 2018	Q3 2018	Q2 2018	Q1 2018
Total revenue	4,636	4,096	4,964	4,987
Net loss	(54,486)	(35,738)	(75,121)	(340,583)
Net loss per share (basic & diluted)	(0.00)	(0.00)	(0.00)	(0.01)

The net loss in each of the quarters is the result of general and administrative expenses, business development expenses, stock‐based compensation expense, and foreign exchange losses or gains incurred in each respective quarter.