Exhibit
10.24.1 


 


Reserve
Report of Pinnacle Energy Services, LLC


 


 


 


March
12, 2013


 


Osage
Exploration & Development


100
Park Ave, Suite 1040


Oklahoma
City, OK 73102


Attn:
Mr. Greg Franklin


 


	RE:
    	Reserves
    & Economic Evaluation
	 	Osage
    Exploration & Development
	 	YE
    2012 - SEC Pricing


 


Executive
Summary


 


A
reserves and economic evaluation has been performed on oil and gas assets of Osage Exploration and Development ('"Osage")
as of January 1, 2013. Well names, owned and projected interests, and other well information are provided in the
attached Exhibit A. Information used in the evaluation was provided by Osage and supplemented by data gathered from public sources.
Summary results of this analysis are located below and details are presented in accompanying exhibits.


 


This
evaluation was performed using SEC standards and 2012 SEC Pricing, and includes five (5) Proved Developed Producing (PDP) properties,
three (3) Proved Developed NonProducing (PDNP) properties, nine (9) Proved Undeveloped (PUD) locations, ten (10) Probable Injection
(SWD) locations, two hundred forty-one (241) Probable Undeveloped (PRB) locations, and one hundred twenty-nine (129) Possible
Undeveloped (POSS) locations.


 


As
presented in the accompanying summary projections, the net reserves and future net cash flows as of January 1, 2013 are as follows
(Volumes in MBBLs and MMcf, Values in M$):


 


	 	 	#	 	 	Gross Rem'g Rsvs	 	 	Net Rem’g Rsvs	 	 	Net	 	 	Net	 	 	NPV	 
	Osage	 	Props	 	 	Oil	 	 	Gas	 	 	Oil	 	 	Gas	 	 	Capital	 	 	Cashflow	 	 	Disc @ 10%	 
	PDP	 	 	5	 	 	 	704	 	 	 	2,853	 	 	 	124	 	 	 	510	 	 	 	0	 	 	 	10,430	 	 	 	6,457	 
	PDNP	 	 	3	 	 	 	499	 	 	 	2,068	 	 	 	71	 	 	 	293	 	 	 	359	 	 	 	5,807	 	 	 	3,619	 
	PUD	 	 	9	 	 	 	1,485	 	 	 	6,104	 	 	 	169	 	 	 	696	 	 	 	4,605	 	 	 	10,366	 	 	 	4,743	 
	Total Proved	 	 	17	 	 	 	2,688	 	 	 	11,025	 	 	 	364	 	 	 	1,499	 	 	 	4,964	 	 	 	26,603	 	 	 	14,819	 
	SWD	 	 	10	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	2,118	 	 	 	-2,118	 	 	 	-1,959	 
	PRB	 	 	241	 	 	 	39,765	 	 	 	163,444	 	 	 	2,824	 	 	 	11,609	 	 	 	76,810	 	 	 	172,933	 	 	 	60,647	 
	POSS	 	 	129	 	 	 	21,285	 	 	 	87,486	 	 	 	1,591	 	 	 	6,541	 	 	 	43,279	 	 	 	97,447	 	 	 	29,395	 
	Total Non-Proved	 	 	380	 	 	 	61,050	 	 	 	250,930	 	 	 	4,415	 	 	 	18,150	 	 	 	122,207	 	 	 	268,262	 	 	 	88,083	 
	Grand Total	 	 	397	 	 	 	63,738	 	 	 	261,955	 	 	 	4,779	 	 	 	19,649	 	 	 	127,171	 	 	 	294,865	 	 	 	102,902	 



 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave. Oklahoma City, OK 73114


Ofc:
405-810-9151 Fax:
405-843-4700           www.PinnacleEnergy.com


  




    	 



    	 



    

 


Pricing


 


Per
SEC rules as of January 1, 2010, the SEC pricing is calculated by averaging the first-of-the-month oil and gas pricing for the
calendar year being evaluated. For 2012, the average oil and gas NYMEX Price is 94.71 $/BBl for oil (WTI Spot) and 2.757 $/MMBTU
for natural gas (Henry Hub). Both prices were held constant.


 


Based
on an evaluation of actual prices received by Osage, differentials to the SEC NYMEX prices were applied. The calculated oil price
differential was -$0.14/BBL. In order to account for the NGL value, the NGL revenue was added to the gas revenue and divided by
the gas sales volume to get an equivalent gas price. This equivalent gas price was then compared to Henry Hub NYMEX gas price.
The average price differential for this equivalent gas price was +60.4%.


 


Interests


 


Interest
information was provided by Osage for each property and undeveloped location, indicating working and net revenue interests. These
interests are shown in the attached Exhibit A.


 


Taxes


 


As
provided by statute, the severance tax for all horizontal wells is 1% for the first 48 months of production, and 7.095% thereafter.


 


Expenses


 


Operating
expenses were estimated to be $4000/well per month plus $4.00/barrel of oil produced plus $.10/barrel of water produced. These
expenses were based on experience in other Mississippian horizontal development projects and compared to the limited LOE information
provided by Osage.


 


Capital
expenditures were provided by Osage. These costs were based on current actual area drilling and completion costs. These costs
were reviewed and are considered reasonable for the work projected.


 


Property
Descriptions and Reserve Estimates


 


All
properties are horizontal Mississippian wells except the McPhail 1-19H, which is a horizontal Woodford completion.


 


Five
wells were on production as of December 31, 2012. Remaining reserves for these properties were determined by decline curve analysis.
Production plots for each well showing historical production and forecasts are included in the attachments.


 


Two
wells, McPhail 1-19H and McPhail 2-18H, were drilled and completed but not yet on production as of year-end 2012. Also, the Chambers
1-5H had been drilled but not yet completed. These three wells were classified as Proved Developed Non-Producing.


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave. Oklahoma City, OK 73114


Ofc:
405-810-9151 Fax:
405-843-4700           www.PinnacleEnergy.com



 




    	 



    	 



    

 


Nine
Proved Undeveloped (PUD) locations were identified. These PUDs are all direct east or west offsets to currently producing Mississippian
horizontal wells.


 


Gross
reserves for all non-producing properties (PDNP, PUD, PRB, and POSS) were estimated to be 165 MBO and 678 MMCF per well. This
was the average of the current PDP wells, and also compares favorably to estimates by other operators in the play. Type-well economics
and production plot are included in the attachments.


 


Future
Development and Timing


 


The
acreage map dated February 13, 2013 provided by Osage showed that Osage had an interest in 129 sections. The drilling schedule
dated February 8, 2013 provided by Osage showed that Slawson Exploration would be the operator of 70 sections, leaving 59 sections
being operated by other companies.


 


The
first two wells in each section were considered Probable (PRB) taking into account the wells already in the proved categories
above. A third well in each section was considered Possible (POSS).


 


The
drilling schedule provided by Osage listed specific locations and proposed spud dates through February 2015. These specifics were
used in the evaluation with either the well name or location as the case name. The remaining additional Slawson-operated wells
were timed as if the two rigs continued drilling wells at 30-day intervals after February 2015. These cases are named OP RIG x
{Well#x}.


 


One
non-operated rig was assumed to begin in March 2013 with a second non-operated rig beginning in January 2014. These cases are
named NON-OP RIG x {Well #x}.


 


It
was also assumed that 10 SWD wells would be drilled in 2013 and 2014 to handle the produced water.


 


Reserves


 


Remaining
recoverable reserves are those quantities of petroleum that are anticipated to be commercially recovered from known accumulations
from a given date forward. All reserve estimates involve some degree of uncertainty depending primarily on the amount of reliable
geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree
of uncertainty is conveyed by classifying reserves as Proved (highly certain) or Non-Proved (less certain). The estimated reserves
and revenues shown in this report were determined for Proved Developed Producing (PDP), Proved Developed Non-Producing (PDNP),
and Proven Undeveloped (PUD) reserve categories, as well as Probable (Prob) and Possible (Poss) Non-Proven reserve categories.


 


By
definition, PDP generally refers to existing producing properties, while PDNP refers to the additional reserves from behind pipe
(BP) intervals, activities to increase production or reserves from existing completions, or wells which have been tested and are
awaiting sales. PUD refers to development drilling locations with definable reserves using offset well and reservoir parameters.
For PNP and PUD, the activity or targeted zones must known to produce commercial hydrocarbons in quantifiable volumes and rates
and reserves can be reasonably accurately estimated based on analogies and available geological and engineering information.


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave. Oklahoma City, OK 73114


Ofc:
405-810-9151 Fax:
405-843-4700           www.PinnacleEnergy.com



 




    	 



    	 



    

 


Non-Proven
Probable and Possible reserves appear to have engineering and geologic merit and have been determined to have over 50% (Probable)
or less than 50% (Possible) likelihood to be commercially productive, but lack some aspect by definition to be considered proven,
such as proximity to commercial production, production methods not proven for a certain geological or production application,
or other geological or engineering deficiency.


 


Accuracy
of production forecasts generally depends on the amount of historical data production and pressure available and the majority
the producing wells reviewed in this evaluation had sufficient historical data to forecast future production with confidence.
Those with limited production or pressure data history were forecasted by reviewing analogy well and test data and applying this
knowledge to the available well information.


 


Future
Cashflow


 


Future
cash flow being reported is after deducting state production taxes and ad valorem taxes, but prior to deducting federal income
taxes. The future net cash flow has been discounted at an annual rate of 10 percent to determine its present worth. The present
worth is shown to indicate the effect of time on the value of money and should not be construed as being the fair market value
of the properties.


 


General


 


The
reserves and values included in this report are estimates only and should not be construed as being exact quantities. The reserve
estimates were arrived at by using accepted engineering practices and were primarily based on historical rate decline analysis
for existing producers. As additional pressure and production performance data becomes available, reserve estimates may increase
or decrease in the future. The revenue from such reserves and the actual costs related may be more or less than the estimated
amounts. Because of governmental policies and uncertainties of supply and demand, the prices actually received for the reserves
included in this report and the costs incurred in recovering such reserves may vary from the price and cost assumptions referenced.
Therefore, in all cases, estimates of reserves may increase or decrease as a result of future operations.


 


In
evaluating the information available for this analysis, items excluded from consideration were all matters as to which legal or
accounting, rather than engineering interpretation, may be controlling. As in all aspects of oil and gas evaluation, there are
uncertainties inherent in the interpretation of engineering data and such conclusions necessarily represent only informed professional
judgments. The titles to the properties have not been examined nor has the actual degree or type of interest owned been independently
confirmed. A field inspection of the properties is not usually considered necessary for the purpose of this report.


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave. Oklahoma City, OK 73114


Ofc:
405-810-9151 Fax:
405-843-4700           www.PinnacleEnergy.com



 




    	 



    	 



    

 


Information
included in this report includes the graphical decline curves for individual wells, projected production and cash flow economic
results, one-line economic result summaries for each well, and miscellaneous individual well information. Additional information
reviewed will be retained and is available for review at any time. Pinnacle Energy Services, L.L.C. can take no responsibility
for the accuracy of the data used in the analysis, whether gathered from public sources or otherwise.


 


Pinnacle
Energy Services, LLC


 


	/s/
    Richard J. Morrow	 


Richard
J. Morrow, P.E.


Petroleum Engineer


 


	Disclaimer:
    Pinnacle Energy Services, L.L.C. nor any of its subsidiaries, affiliates, officers, directors, shareholders, employees, consultants,
    advisors, agents, or representatives make any representation or warranty, express or implied, in connection with any of the
    information made available herein, including, but not limited to, the past, present or future value of the anticipated reserves,
    cash flows, income, costs, expense, liabilities and profits, if any, to be derived from the properties described herein. All
    statements, estimates, projections and implications as to future operations are based upon best judgments of Pinnacle Energy
    Services; however, there is no assurance that such statements, estimates, projections or implications will prove to be accurate.
    Accordingly, any company, or other party receiving such information will rely solely upon its own independent examination
    and assessment of said information. Neither Pinnacle Energy Services nor any of its subsidiaries, affiliates, officers, directors,
    shareholders, employees, consultants, advisors, agents, or representatives shall have any liability to any party receiving
    the information herein, nor to any affiliate, partner, member, officer, director, shareholder, employee, consultant, advisor,
    agent or representative of such party from any use of such information. The property description and other information attached
    hereto are for the sole, confidential use of the person to whom this copy has been made available. It may not be disseminated
    or reproduced in any matter whatsoever, whether in full or in part, without the prior written consent of Pinnacle Energy Services,
    L.L.C. This evaluation and all descriptions and other information attached hereto are for information purposes only and do
    not constitute an evaluation of or offer to sell or a solicitation of an offer to buy any securities.


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave. Oklahoma City, OK 73114


Ofc:
405-810-9151 Fax:
405-843-4700           www.PinnacleEnergy.com