March 20, 2013 Turnkey Agreement Sale Analysis
Information Requested by Staff Location
Funding received Table 1 (Sale Amounts)
| Revenues recognized | Table 1 – Predrilling. All pre-drilling revenue is recognized in the year received. For example, 2009 pre-drilling revenue is composed of Project 2008B ($439,579), Project 2009A ($1,639,731), and Project 2009B ($247,999), for a total of $2,327,309 (See Table 2) |
| Contract dates | Table 1 (Contract Date Range) |
| Drilling dates | Table 1 (Date Drilled) |
| Amounts designated as drilling and | Table 1 (Pre-Drilling and Drilling) |
| Revenue recognized each period | Table 2 (Annual Totals – Income Statement) |
| Underlying properties & reserve status | Table 3 |
Royale Energy, Inc.
Turnkey Agreement Sale Analysis
For the three years ended December 31, 2011
Table 1
| | Sale Amount | Working Interest Recognized | |
| Project/Wells | Contracts Date Range | Date Drilled | Prior to 2009 | 2009 | 2010 | 2011 | Total Sales Thru 2011 | Prior to 2009 | 2009 | 2010 | 2011 | Total Interest Recognized | Retained by Royal |
| | | | | | | | | | | | | |
| Project - 2008B | Jul '08 - Sept '09 | | | | | | | | | | | |
| Well #1 | | 12/18/2009 | $589,639 | $286,695 | | | $876,334 | 29.56% | 14.25% | | | 43.81% | 55.88% |
| Well #2 | | 10/28/2009 | $539,090 | $262,117 | | | $801,207 | 29.56% | 14.25% | | | 43.81% | 53.82% |
| Well #3 | | 9/1/2010 | $573,880 | $279,032 | | | $852,912 | 29.56% | 14.25% | | | 43.81% | 55.88% |
| Well #4 | | 5/31/2010 | $637,890 | $310,156 | | | $948,046 | 29.56% | 14.25% | | | 43.81% | 55.88% |
| | | | | | | | | | | | | | |
| TOTAL | $2,340,500 | $1,138,000 | | | $3,478,500 | | | | | | |
| | | | | | | | | | | | |
| Pre-drilling @ 38.63% | | $439,579 | | | | | | | | | |
| Deferred Drilling @ 61.37% | | $698,421 | | | | | | | | | |
| | | | | | | | | | | | | |
| Project - 2009A | Apr '09 - Dec '09 | | | | | | | | | | | |
| Well #1 | | 4/16/2010 | | $1,062,280 | | | $1,062,280 | | 57.14% | | | 57.14% | 40.21% |
| Well #2 | | 7/28/2010 | | $1,179,017 | | | $1,179,017 | | 57.14% | | | 57.14% | 41.19% |
| Well #3 | | 9/4/2011 | | $467,520 | | | $467,520 | | 17.14% | | | 17.14% | 81.68% |
| Well #4 | | 7/23/2010 | | $1,096,182 | | | $1,096,182 | | 57.14% | | | 57.14% | 12.23% |
| | | | | | | | | | | | | | |
| TOTAL | | $3,805,000 | | | $3,805,000 | | | | | | |
| | | | | | | | | | | | |
| Pre-drilling @ 43.094% | | $1,639,731 | | | | | | | | | |
| Deferred Drilling @ 56.906% | | $2,165,269 | | | | | | | | | |
| | | | | | | | | | | | | | |
| Project - 2009B | Dec '09 - Aug '10 | | | | | | | | | | | |
| Well #1 | | 11/11/2010 | | $255,595 | $647,285 | | $902,880 | | 13.67% | 34.61% | | 48.28% | 49.09% |
| Well #2 | | 9/9/2010 | | $239,713 | $607,065 | | $846,778 | | 13.67% | 34.61% | | 48.28% | 50.03% |
| Well #3 | | 3/4/2011 | | $236,296 | $598,412 | | $834,708 | | 13.67% | 34.61% | | 48.28% | 50.06% |
| Well #4 | | 6/19/2011 | | $230,896 | $584,738 | | $815,634 | | 13.67% | 34.61% | | 48.28% | 49.65% |
| | | | | | | | | | | | | | |
| TOTAL | | $962,500 | $2,437,500 | | $3,400,000 | | | | | | |
| | | | | | | | | | | | | | |
| Pre-drilling @ 25.766 | | $247,999 | $628,050 | | | | | | | | |
| Deferred Drilling @ 74.234% | | $714,501 | $1,809,450 | | | | | | | | |
| | | | | | | | | | | | | | |
| Project - 2010A | Jul '10 - Feb '11 | | | | | | | | | | | |
| Well #1 | | 11/20/2011 | | | $986,567 | $6,277 | $992,844 | | | 54.02% | 0.37% | 54.39% | 43.96% |
| Well #2 | | To be drilled | | | $518,368 | $3,298 | $521,666 | | | 43.40% | 0.30% | 43.70% | 56.00% |
| Well #3 | | 9/27/2011 | | | $1,157,071 | $7,362 | $1,164,433 | | | 54.02% | 0.37% | 54.39% | 44.22% |
| Well #4 | | 12/2/2012 | | | $925,656 | $5,890 | $931,546 | | | 54.02% | 0.37% | 54.39% | 45.24% |
| | | | | | | | | | | | | | |
| TOTAL | | | $3,587,662 | $22,827 | $3,610,489 | | | | | | |
| | | | | | | | | | | | | | |
| Pre-drilling @ 27.874% | | | | $1,000,013 | $6,363 | | | | | | | |
| Deferred Drilling @ 72.126% | | | | $2,587,649 | $16,464 | | | | | | | |
| | | | | | | | | | | | | | |
Turnkey Agreement Sale Analysis
Royale Energy, Inc.
For the three years ended December 31, 2011
| | Sale Amount | Working Interest Recognized | |
| Project/Wells | Contracts Date Range | Date Drilled | Prior to 2009 | 2009 | 2010 | 2011 | Total Sales Thru 2011 | Prior to 2009 | 2009 | 2010 | 2011 | Total Interest Recognized | Retained by Royal |
Project - 2010B | Oct '10 - Nov '10 | | | | | | | | | | | |
| Well #1 | | 11/30/2010 | | | $445,874 | | $445,874 | | | 19.79% | | 19.79% | 75.99% |
| Well #2 | | 1/29/2011 | | | $445,874 | | $445,874 | | | 19.79% | | 19.79% | 76.71% |
| | | | | | | | | | | | | | |
| TOTAL | | | $891,747 | | $891,747 | | | | | | |
| | | | | | | | | | | | |
| Pre-drilling @ 39.138% | | | $349,015 | | | | | | | | |
| Deferred Drilling @ 60.862% | | | $542,732 | | | | | | | | |
| | | | | | | | | | | | |
| Project - 2010C | Dec '10 - Jul '11 | | | | | | | | | | | |
| Well #1 | | 10/31/2011 | | | $87,867 | $985,545 | $1,073,412 | | | 4.05% | 45.42% | 49.47% | 49.23% |
| Well #2 | | 12/31/2012 | | | $89,824 | $1,007,493 | $1,097,316 | | | 4.05% | 45.42% | 49.47% | 50.22% |
| Well #3 | | To be drilled | | | $76,021 | $852,674 | $928,695 | | | 4.86% | 54.54% | 59.40% | 40.23% |
| Well #4 | | To be drilled | | | $71,288 | $799,594 | $870,882 | | | 4.05% | 45.42% | 49.47% | 50.22% |
| | | | | | | | | | | | | | |
| TOTAL | | | $325,000 | $3,645,306 | $3,970,306 | | | | | | |
| | | | | | | | | | | | |
| Pre-drilling @ 27.659% | | | $89,892 | $1,008,255 | | | | | | | |
| Deferred Drilling @ 72.341% | | | $235,108 | $2,637,051 | | | | | | | |
| | | | | | | | | | | | | | |
| Project - 2011A | Jul '11 - Aug '12 | | | | | | | | | | | |
| Well #1 | | To be drilled | | | | $680,585 | $680,585 | | | | 30.25% | 30.25% | 48.90% |
| Well #2 | | To be drilled | | | | $680,585 | $680,585 | | | | 30.25% | 30.25% | 48.90% |
| Well #3 | | To be drilled | | | | $556,380 | $556,380 | | | | 30.25% | 30.25% | 48.90% |
| Well #4 | | To be drilled | | | | $542,144 | $542,144 | | | | 30.25% | 30.25% | 48.90% |
| Well #5 | | To be drilled | | | | $564,806 | $564,806 | | | | 30.25% | 30.25% | 48.90% |
| | | | | | | | | | | | |
| TOTAL | | | | $3,024,500 | $3,024,500 | | | | | | |
| | | | | | | | | | | | | | |
| Pre drilling @ 26.805 | | | | | $810,712 | | | | | | | |
| Deferred Drilling @ 73.195 | | | | | $2,213,788 | | | | | | | |
Turnkey Agreement Sale Analysis
Royale Energy, Inc.
For the three years ended December 31, 2011
Table 2
| | Sale Amount | Working Interest Recognized | |
| Project/Wells | Contracts Date Range | Date Drilled | Prior to 2009 | 2009 | 2010 | 2011 | Total Sales Thru 2011 | Prior to 2009 | 2009 | 2010 | 2011 | Total Interest Recognized | Retained by Royal |
| |
| Deferred Drilling Recognition – Completion of Obligations under Turnkey Agreement | | | | | | | | |
| |
| 2006A – Well #2 | | 1/31/2009 | | $422,157 | | | | | | | | | |
| 2007A – Well #1 | | 1/31/2009 | | $502,304 | | | | | | | | | |
| 2008B – Well #2 | | 10/28/2009 | | $491,718 | | | | | | | | | |
| 2008A – Well #3 | | 11/4/2009 | | $780,472 | | | | | | | | | |
| 2008B – Well #1 | | 12/18/2009 | | $537,829 | | | | | | | | | |
| 2009A – Well #1 | | 4/16/2010 | | | $604,500 | | | | | | | | |
| 2006B – Well #1 | | 5/31/2010 | | | $1,103,980 | | | | | | | | |
| 2008B – Well #4 | | 5/31/2010 | | | $581,828 | | | | | | | | |
| 2009A – Well #4 | | 7/23/2010 | | | $623,792 | | | | | | | | |
| 2009A – Well #2 | | 7/28/2010 | | | $670,930 | | | | | | | | |
| 2008B – Well #3 | | 9/1/2010 | | | $523,440 | | | | | | | | |
| 2009B – Well #2 | | 9/9/2010 | | | $627,039 | | | | | | | | |
| 2004A – Well #5 | | 9/30/2010 | | | $122,569 | | | | | | | | |
| 2009B – Well #1 | | 11/11/2010 | | | $671,833 | | | | | | | | |
| 2010B – Well #1 | | 11/30/2010 | | | $271,366 | | | | | | | | |
| 2010B – Well #2 | | 1/29/2011 | | | | $271,366 | | | | | | | |
| 2009B – Well #3 | | 3/4/2011 | | | | $617,350 | | | | | | | |
| 2009B – Well #4 | | 6/19/2011 | | | | $607,729 | | | | | | | |
| 2009A – Well #3 | | 9/4/2011 | | | | $266,047 | | | | | | | |
| 2010A – Well #3 | | 9/27/2011 | | | | $847,972 | | | | | | | |
| 2010C – Well #1 | | 10/31/2011 | | | | $782,410 | | | | | | | |
| 2010A – Well #1 | | 1/31/2009 | | | | $714,947 | | | | | | | |
| | | | | | | | | | | | | | |
| Deferred Drilling Recognized | | | $2,734,479 | $5,801,276 | $4,107,822 | | | | | | | |
Turnkey Agreement Sale Analysis
Royale Energy, Inc.
For the three years ended December 31, 2011
| Annual Totals – Income Statement | 2009 | 2010 | 2011 | 2009-2011 Total |
| | Pre-drilling | | $2,327,309 | $2,066,969 | $1,825,329 | $6,219,608 |
| | Deferred Drilling Recognized as Revenue | | $2,734,479 | $5,801,276 | $4,107,822 | $12,643,577 |
| Total Turnkey Drilling Revenue | | | | | |
| | Per Above Schedule | | $5,061,789 | $7,868,246 | $5,933,151 | $18,863,185 |
| | Per Financial Stmts | | $5,061,804 | $7,868,273 | $5,933,065 | $18,863,142 |
| | Difference | | -$15 | -$27 | $86 | $43 |
| | | | | | | |
| Annual Totals | | | | | |
| | Total Receipts | | $5,905,500 | $7,241,909 | $6,692,633 | $19,840,042 |
| | | | | | | |
| | Total Spoilage Costs | | $98,042 | $201,883 | $12,959 | $312,884 |
| | Total Marketing Costs | | $1,171,511 | $1,175,049 | $1,284,575 | $3,631,185 |
| | Total Lease Costs – Unproved Property Only | | $17,327 | $133,534 | $85,444 | $236,305 |
| | Total Other Land Costs – Unproved Property Only | | $37,788.40 | $150,067.80 | $78,523.57 | $266,380 |
| | Total Intangible Drilling Costs | | $3,685,931 | $4,491,656 | $6,552,776 | $14,730,362 |
| | Total Tangible Drilling Costs | | $531,016 | $671,762 | $794,967 | $1,997,746 |
| | Total Costs | | $5,541,615 | $6,823,952 | $8,809,245 | $21,174,812 |
| | | | | | | |
| | Total Recipts less Total Costs | | $363,885 | $417,957 | -$2,116,612 | -$1,334,771 |
| | | | | | | |
| | Percentage of Lease Costs of Total Costs | | 0.31% | 1.96% | 0.97% | 1.12% |
Turnkey Agreement Sale Analysis – Drilled Property Description
Royale Energy, Inc.
For the three years ended December 31, 2011
Table 3
| | | | | Original Property Description | | | Drilled Property Description | | |
| Project/Wells | Contracts Date Range | Date Drilled | | Location | | Reserve Status | | Substitution of Original Location | Location | Reserve Status | | Successful Well |
| | | | | | | | | | | | | |
| Project - 2008B | Jul '08 - Sept '09 | | | | | | | | | | | |
| | Well #1 | | 12/18/2009 | | Colusa County, CA | | Unproved | | YES | Colusa County, CA | Unproved | | Dry Hole |
| | Well #2 | | 10/28/2009 | | Colusa County, CA | | Unproved | | NO | | | | Proved |
| | Well #3 | | 9/1/2010 | | Kern County, CA | | Unproved | | NO | | | | Dry Hole |
| | Well #4 | | 5/31/2010 | | To be determined | | Unknown | | N/A | Sacramento County, CA | Unproved | | Dry Hole |
| Project - 2009A | Apr '09 - Dec '09 | | | | | | | | | | | |
| | Well #1 | | 4/16/2010 | | Colusa County, CA | | Unproved | | NO | | | | Proved |
| | Well #2 | | 7/28/2010 | | Colusa County, CA | | Unproved | | NO | | | | Proved |
| | Well #3 | | 9/4/2011 | | San Joaquin County, CA | | Unproved | | NO | | | | Proved |
| | Well #4 | | 7/23/2010 | | To be determined | | Unknown | | N/A | Tehema County, CA | | | Proved |
| Project - 2009B | Dec '09 - Aug '10 | | | | | | | | | | | |
| | Well #1 | | 11/11/2010 | | Colusa County, CA | | Unproved | | NO | | | | Proved |
| | Well #2 | | 9/9/2010 | | Tehama County, CA | | Unproved | | NO | | | | Dry Hole |
| | Well #3 | | 3/4/2011 | | Colusa County, CA | | Unproved | | YES | Colusa, County, CA | Unproved | | Dry Hole |
| | Well #4 | | 6/19/2011 | | To be determined | | Unknown | | N/A | Colusa, County, CA | Unproved | | Dry Hole |
| Project - 2010A | Jul '10 - Feb '11 | | | | | | | | | | | |
| | Well #1 | | 11/20/2011 | | Colusa County, CA | | Unproved | | YES | Colusa, County, CA | Unproved | | Dry Hole |
| | Well #2 | | To be drilled | | Tehama County, CA | | Unproved | | N/A | | | | |
| | Well #3 | | 9/27/2011 | | Colusa County, CA | | Unproved | | NO | | | | Proved |
| | Well #4 | | 12/2/2012 | | To be determined | | Unknown | | N/A | Colusa, County, CA | Unproved | | Dry Hole |
| Project - 2010B | Oct '10 - Nov '10 | | | | | | | | | | | |
| | Well #1 | | 11/30/2010 | | Colusa County, CA | | Proved | | NO | | | | Proved |
| | Well #2 | | 1/29/2011 | | Colusa County, CA | | Proved | | NO | | | | Proved |
| Project - 2010C | Dec '10 - Jul '11 | | | | | | | | | | | |
| | Well #1 | | 10/31/2011 | | Colusa County, CA | | Unproved | | No | | | | |
| | Well #2 | | 12/31/2012 | | Colusa County, CA | | Unproved | | YES | Colusa, County, CA | Unproved | | Proved |
| | Well #3 | | To be drilled | | Solana County, CA | | Unproved | | N/A | | | | |
| | Well #4 | | To be drilled | | To be determined | | Unknown | | N/A | | | | |
| Project - 2011A | Jul '11 - Aug '12 | | | | | | | | | | | |
| | Well #1 | | To be drilled | | Colusa County, CA | | Unproved | | N/A | | | | |
| | Well #2 | | To be drilled | | Colusa County, CA | | Unproved | | N/A | | | | |
| | Well #3 | | To be drilled | | Colusa County, CA | | Unproved | | N/A | | | | |
| | Well #4 | | To be drilled | | Colusa County, CA | | Unproved | | N/A | | | | |
| | Well #5 | | To be drilled | | Solana County, CA | | Unproved | | N/A | | | | |
