West Newport Oil Field C ity of Newport Beach

1. West Newport Oil Field City of Newport Beach

2. Executive Summary • The City of Newport Beach, California, as operator of the West Newport Oil Field, is exploring options to maximize the value of the City’s oil and gas assets. • The City is approaching several oil and gas companies which have a strong financial base and have demonstrated expertise in operating oil properties in an urban environment in California. • The City is seeking investment proposals from these selected companies to redevelop the existing reservoirs as well as develop any additional potential within the City’s mineral holdings. • This document provides an overview of the oil field assets. Further details will be provided to interested parties after initial meetings.

3. LA Basin Oil Fields West Newport Field

4. West Newport Field Location

5. Asset Highlights • Current Production – 65 BOPD, 40 MCFPD • 12 active producers, 1 injector, and 3 shut in wells • Two drill sites -- 1.5 acres and 2.5 acres • Production Facilities – capable of handling 2000 BPD oil, 400-500 MCFPD gas, 5,000 BPD produced water. Water treatment facilities capable of handling 5,000 BPD of injection water.

6. West Newport Oil Field Site Map

7. West Newport Oil Field Sites

8. West Newport Oil Field Well Sites and Facilities

9. West Newport Field History • Discovered in 1953 • Seventeen wells drilled from 1953 to 1958 • Peak Production in 1955 at 1050 BOPD • Cumulative Production 5.7 MMBO and 2.0 BCFG

10. West Newport Production History

11. Geologic Structure MapTop of D-5 Zone

12. Reserves • Proved Developed Producing – 295 MBO • Probable -- 209 MBO • Gas Reserves (40 MCFPDconsumed by Hoag Hospital)

13. Summary of Mineral Ownership • State of California granted title to tide and submerged lands to the City in 1919. Subject to SLC oversight. The City owns 100% working interest • The City holds exclusive mineral rights within the City limits, and note the City’s jurisdictional authority extends 3 miles out to sea. City Charter Section 1401 – limits the “location” of the drilling • Drillsite A contains Wells 1 thru 12 and 14 • Surface lease • Royalty Paid to Surface owner • Minerals belong to Armstrong Petroleum • Drillsite B contains Wells 13, 15, and 16 • Federal Assignment • Held by Production • Royalty Paid to Surface Owner • Minerals belong to Armstrong Petroleum • Pass Thru Rights – covers area between drillsites and tidelands – royalty paid to surface owners

14. Potential Surface Redevelopment(Banning Ranch EIR) • Oil Production Sites set aside in Open Spaces • Well Drilling is allowed with noise conditions • Three Production Facility Sites included in plan • Two Sites for City of Newport Beach • One 17-acre Site for West Newport Oil Company

15. Development Potential • Re-drilling of Existing wells • Horizontal Drilling in Known Reservoirs to Maximize Recovery • Enhanced Oil Recovery – the field has never had a full-scale waterflood or other EOR process • Deeper Sandstone Reservoir Potential • Deeper Producing Horizons in Underlying Shale Formations • Consolidation of Surrounding Operations • Undrilled Fault Blocks

16. Deal Structure Alternatives(see next two slides) • Production Sharing Agreement – new investor provides new development capital and after receiving a specified return on investment to offset capital cost then provides City with royalty or working interest. • New Investor guarantees the base production which the City currently owns and pursues development of additional production. City participates at increasing levels depending on success of new production – either working interest or royalty interest. • Payment to City for future base production with ORR on future development. (City must stay in base ownership position) • Open to other suggestions

17. Deal Structure - Key Criteria • City stays in base ownership position • City owns mineral rights • All required permits/approvals must be obtained • All new drilling work would require extensive community outreach

18. Deal Structure – Current Operations(existing well production) • City expects current operations including maintenance of all facilities to be maintained at current or better standards. • New investor guarantees the base production, which the City currently owns and pursues improvement for additional production. • City would participate in share of increased production – as mentioned previously.

19. Project Timetable • March and April -- initial contacts with potential investors • April 30th – City looking to receive notice of interest • May – data available for more detailed review by potential partners. • Mid-June – City to receive formal non-binding proposals from interested companies. • July/August – City reviews proposals and clarifies. City narrows field of potential partners and begins detailed negotiations • Second Half 2013 – City makes decision

20. Contact List • David B. Kilpatrick – oil and gas advisor to City Cell Phone -- 661 703-7198 • Rob Houston – Assistant to the City Manager – Office Phone – 949 644-3033 • John Kappeler – Department of Public Works – Office – 949 644-3218 • City Address – City of Newport Beach, 3300 Newport Blvd, California 92663

21. Proposal Expectations • Company Profile & Balance Sheet • References • Statement of experience working in urban/sensitive settings