Exhibit 10-31



 


OSAGE
EXPLORATION & 


DEVELOPMENT,
INC.


 


RESERVES
AND ECONOMIC EVALUATION


YEAR
END 2013


 


Effective:
December 31, 2013 


SEC
Pricing


 


Prepared:
March 4, 2014


 


By:


Richard
J. Morrow, P.E.


 


 


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave, Oklahoma City, OK 73114


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



 




    	 



    	 



    


 


Table
of Contents


 


Osage
Exploration & Development, Inc.


Year-End
2013 Reserves & Economic Report


 


	1	 	Report
    and Property Listing	 
	 	 	Executive
    Summary (6 pages)	 
	 	 	Exhibit
    “A” – Well List with Interests and Well Information (7 pages)	 
	 	 	 	 
	2	 	Economic
    and Reserve Evaluation Results – All Cases	 
	 	 	Reserves
    and Economic Details by Reserve Category (8 pages)	 
	 	 	One-Line
    Reserves and Economic Results (12 pages)	 
	 	 	 	 
	3	 	Economic
    and Reserve Evaluation Results – PDP Detail	 
	 	 	Reserves
    and Economics by Well for PDP Properties (41 pages)	 
	 	 	Decline
    Curves by Well for PDP Properties (40 pages)	 
	 	 	 	 
	4	 	Economic
    and Reserve Evaluation Results – Undeveloped Locations	 
	 	 	Economics
    and Production Graph for Mississippian Type Well (2 pages)	 
	 	 	Economics
    and Production Graph for Woodford Type Well (2 pages)	 


 




    	 



    	 



    


 


 





 


	 	 	March
    10, 2014
	 	 	 
	Osage
    Exploration & Development, Inc.	 	 
	2445
    Fifth Avenue, Suite 310	 	 
	San
    Diego, CA 92101	 	 
	Attn:
    Mr. Kim Bradford		
	 	RE:	Reserves
    and Economic Evaluation
	 	 	Osage
    Exploration & Development
	 	 	As
    of December 31, 2013


 


Executive
Summary


 


A
reserve and economic evaluation has been performed on oil and gas assets of Osage Exploration and Development, Inc. (“Osage”)
as of December 31, 2013. Well names, owned and projected interests, and other well information are provided on the
attached Exhibit A. All properties are located in Logan County, Oklahoma. 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 reserve standards and SEC pricing as of December 31, 2013. The report includes forty (40) Proved
Developed Producing (PDP) properties, two (2) Proved NonProducing (PNP) properties, fifty-two (52) Proved Undeveloped (PUD) locations,
five (5) SWD properties, one hundred sixty-nine (169) Probable Undeveloped (PROB) locations, and one hundred thirty-four (134)
Possible Undeveloped (POSS) locations.


 


As
presented in the accompanying summary projections, the net reserves and future net cash flows as of December 31, 2013 are as follows
(Volumes in MBBLs and MMcf, Values in M$):


 


	 	 		 	 	Gross
    Reserves	 	 	Net
    Reserves	 	 	Net	 	 	Net	 	 	NPV	 
		 	Number of	 	 	Oil	 	 	Gas	 	 	NGL	 	 	Oil	 	 	Gas	 	 	NGL	 	 	Capital	 	 	Cashflow	 	 	Disc @ 0%	 
	Reserve
    Class	 	Properties	 	 	MBBL	 	 	MMCF	 	 	MBBL	 	 	MBBL	 	 	MMCF	 	 	MBBL	 	 	MS	 	 	M$	 	 	M$	 
	PDP	 	 	40	 	 	 	4,120	 	 	 	20,118	 	 	 	422	 	 	 	441	 	 	 	1,940	 	 	 	22	 	 	$	0	 	 	$	33,193	 	 	$	19,635	 
	PNP	 	 	2	 	 	 	266	 	 	 	1,707	 	 	 	103	 	 	 	19	 	 	 	65	 	 	 	11	 	 	$	0	 	 	$	1,688	 	 	$	1,111	 
	PUD	 	 	52	 	 	 	7,265	 	 	 	31,467	 	 	 	268	 	 	 	1,049	 	 	 	4,360	 	 	 	10	 	 	$	35,500	 	 	$	50,891	 	 	$	20,139	 
	Total
    Proved	 	 	94	 	 	 	11,651	 	 	 	53,292	 	 	 	794	 	 	 	1,508	 	 	 	6,365	 	 	 	43	 	 	$	35,500	 	 	$	85,773	 	 	$	40,885	 
	SWD	 	 	5	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	$	8,000	 	 	($	8,000	)	 	($	7,395	)
	PROB	 	 	169	 	 	 	21,480	 	 	 	88,943	 	 	 	480	 	 	 	4,207	 	 	 	16,727	 	 	 	25	 	 	$	156,379	 	 	$	189,650	 	 	$	64,342	 
	POSS	 	 	134	 	 	 	17,755	 	 	 	75,068	 	 	 	682	 	 	 	3,065	 	 	 	12,331	 	 	 	37	 	 	$	110,478	 	 	$	141,882	 	 	$	43,770	 
	Total
    Non-Proved	 	 	308	 	 	 	39,235	 	 	 	164,011	 	 	 	1,163	 	 	 	7,271	 	 	 	29,058	 	 	 	62	 	 	$	274,857	 	 	$	323,532	 	 	$	100,716	 
	Grand
    Total	 	 	402	 	 	 	50,886	 	 	 	217,303	 	 	 	1,956	 	 	 	8,780	 	 	 	35,423	 	 	 	105	 	 	$	310,357	 	 	$	409,304	 	 	$	141,601	 



 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave, Oklahoma City, OK 73114


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


 




    	 



    	 



    


 


The
two reservoirs being developed across the Osage acreage are the Mississippian and the Woodford. Below is a breakdown of reserves
and value by reservoir.


 


MISSISSIPPIAN


 


	 	 		 	 	Gross
    Reserves	 	 	Net
    Reserves	 	 	Net	 	 	Net	 	 	NPV	 
		 	Number of	 	 	Oil	 	 	Gas	 	 	NGL	 	 	Oil	 	 	Gas	 	 	NGL	 	 	Capital	 	 	Cashflow	 	 	Disc @ 10%	 
	Reserve
    Class	 	Properties	 	 	MBBL	 	 	MMCF	 	 	MBBL	 	 	MBBL	 	 	MMCF	 	 	MBBL	 	 	M$	 	 	M$	 	 	M$	 
	PDP	 	 	34	 	 	 	3,638	 	 	 	18,465	 	 	 	422	 	 	 	420	 	 	 	1,870	 	 	 	22	 	 	$	0	 	 	$	31,869	 	 	$	18,715	 
	PNP	 	 	2	 	 	 	266	 	 	 	1,707	 	 	 	103	 	 	 	19	 	 	 	65	 	 	 	11	 	 	$	0	 	 	$	1,688	 	 	$	1,111	 
	PUD	 	 	41	 	 	 	5,945	 	 	 	26,166	 	 	 	163	 	 	 	924	 	 	 	3,893	 	 	 	3	 	 	$	30,504	 	 	$	45,531	 	 	$	18,604	 
	Total
    Proved	 	 	77	 	 	 	9,849	 	 	 	46,338	 	 	 	689	 	 	 	1,363	 	 	 	5,828	 	 	 	36	 	 	$	30,504	 	 	 	S79,087	 	 	$	38,429	 
	SWD	 	 	5	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	$	8,000	 	 	($	8,000	)	 	($	7,395	)
	PROB	 	 	48	 	 	 	6,960	 	 	 	30,634	 	 	 	0	 	 	 	1,582	 	 	 	6,683	 	 	 	0	 	 	$	51,910	 	 	$	78,481	 	 	$	32,946	 
	POSS	 	 	67	 	 	 	9,715	 	 	 	42,759	 	 	 	387	 	 	 	1,677	 	 	 	7,025	 	 	 	21	 	 	$	55,239	 	 	$	83,094	 	 	$	29,808	 
	Total
    Non-Proved	 	 	120	 	 	 	16,675	 	 	 	73,393	 	 	 	387	 	 	 	3,258	 	 	 	13,708	 	 	 	21	 	 	$	115,149	 	 	$	153,575	 	 	$	55,358	 
	Grand
    Total	 	 	197	 	 	 	26,524	 	 	 	119,731	 	 	 	1,076	 	 	 	4,621	 	 	 	19,536	 	 	 	57	 	 	$	145,653	 	 	$	232,663	 	 	$	93,787	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WOODFORD	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 		 	 	Gross
    Reserves	 	 	Net
    Reserves	 	 	Net	 	 	Net	 	 	NPV	 
		 	Number of	 	 	Oil	 	 	Gas	 	 	NGL	 	 	Oil	 	 	Gas	 	 	NGL	 	 	Capital	 	 	Cashflow	 	 	Disc @ 10%	 
	Reserve
    Class	 	Properties	 	 	MBBL	 	 	MMCF	 	 	MBBL	 	 	MBBL	 	 	MMCF	 	 	MBBL	 	 	M$	 	 	M$	 	 	M$	 
	PDP	 	 	6	 	 	 	482	 	 	 	1,653	 	 	 	0	 	 	 	20	 	 	 	70	 	 	 	0	 	 	$	0	 	 	$	1,325	 	 	$	921	 
	PNP	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	$	0	 	 	$	0	 	 	$	0	 
	PUD	 	 	11	 	 	 	1,320	 	 	 	5,301	 	 	 	105	 	 	 	125	 	 	 	467	 	 	 	7	 	 	$	4,996	 	 	$	5,361	 	 	$	1,535	 
	Total
    Proved	 	 	17	 	 	 	1,802	 	 	 	6,953	 	 	 	105	 	 	 	145	 	 	 	537	 	 	 	7	 	 	$	4,996	 	 	$	6,685	 	 	$	2,456	 
	SWD	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	$	0	 	 	$	0	 	 	$	0	 
	PROB	 	 	121	 	 	 	14,520	 	 	 	58,310	 	 	 	480	 	 	 	2,625	 	 	 	10,045	 	 	 	25	 	 	$	104,469	 	 	$	111,169	 	 	$	31,396	 
	POSS	 	 	67	 	 	 	8,040	 	 	 	32,309	 	 	 	295	 	 	 	1,388	 	 	 	5.306	 	 	 	16	 	 	$	55,239	 	 	$	58,788	 	 	$	13,962	 
	Total
    Non-Proved	 	 	188	 	 	 	22,560	 	 	 	90,618	 	 	 	775	 	 	 	4,013	 	 	 	15,350	 	 	 	41	 	 	$	159,708	 	 	$	169,956	 	 	$	45,358	 
	Grand
    Total	 	 	205	 	 	 	24,362	 	 	 	97,572	 	 	 	880	 	 	 	4,158	 	 	 	15,887	 	 	 	48	 	 	$	164,704	 	 	$	176,641	 	 	$	47,814	 



 


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 2013, the average oil and gas NYMEX Price is $96.94/BBL for oil and $3.670/MMBTU for natural
gas (Henry Hub). Both prices were held constant.


 


Based
on an evaluation of actual prices received by Osage, differentials to NYMEX prices were applied. The calculated oil price differential
was -$0.19/BBL. The average gas price differential was + 24%.


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave, Oklahoma City, OK 73114


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


 




    	 



    	 



    


 


Based
on the Lease Operating Statements, several of the leases are being credited with NGLs. For the wells on these leases NGL yields,
gas shrinkage, and tailgate gas BTUs were calculated and applied in their evaluations.


 


Osage
has hedged some of their oil production as follows:


 


January
2014 to December 2014 - 6000 bbl/month @ $85.00/bbl


January
2015 to December 2015 - 6000 bbl/month @ $80.00/bbl 


 


Based
on the SEC pricing these hedges have no effect.


 


Interests


 


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


 


Taxes


 


As
provided by statute, the Oklahoma state severance tax for all horizontal wells is 1.095% for the first 48 months of production,
and 7.095% thereafter.


 


Expenses
and Capital Costs


 


Gross
and net monthly lease operating expenses for each producing well were provided by Osage. Based on analysis of this data, average
per-well operating expenses were estimated to be $5000/month fixed cost and $10.00/barrel of oil variable cost.


 


Based
on the most recent AFE supplied by Osage the future capital cost used for all undeveloped locations is 3.745 MM$ per well.


 


Property
Descriptions and Reserve Estimates


 


All
properties are either horizontal Mississippian wells or horizontal Woodford wells, and are identified with either an ‘MH’
(Mississippian Horizontal) or ‘WH’ (Woodford Horizontal) in their name.


 


Forty
(40) wells were on production as of December 31, 2013. 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
(2) wells have been drilled but not yet on production. These wells were classified as Proved Non-Producing (PNP).


 


Fifty-two
(52) Proved Undeveloped (PUD) locations were identified. These PUDs are all direct offsets to currently producing Mississippian
or Woodford horizontal wells. Twenty-six of these PUDs are increased density Mississippian wells, the second well in the section.


 


Gross
reserves for all undeveloped Mississippian properties (PUD, PRB, and POSS) were estimated to be 145 MBO and 638 MMCF per well.


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave, Oklahoma City, OK 73114


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


 




    	 



    	 



    


  


Gross
reserves for all undeveloped Woodford properties (PUD, PRB, and POSS) were estimated to be 120 MBO and 482 MMCF per well


 


Future
Development and Timing


 


The
acreage position provided by Osage as of February 4, 2014 showed that Osage had an interest in 73 sections. Nine of the sections
would be operated by Osage, twenty-nine by Slawson Exploration, eleven by Devon Energy, and the remaining twenty-four by other
operators. Four of the sections along the western side of 17N-4W were deemed to have no drilling potential at the current time.
The remaining sixty-nine (69) sections were deemed to have potential in both the Mississippian and Woodford.


 


For
all sections, 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).


 


Osage
plans to spud their first well in March 2014 and pick up a second rig in June 2014, with each rig drilling one well per month.
Except for two planned Woodford wells it was assumed for this report that all Mississippian wells would be drilled first before
beginning a Woodford drilling program. This results in all Mississippian wells on Osage-operated sections being drilled by July
2015 and all Woodford wells drilled by July 2016.


 


It
was assumed that Slawson would begin drilling the Mississippian with one rig beginning in September 2014 and adding a second rig
in January 2015 to drill the Woodford. This results in all Mississippian wells in the Slawson-operated sections being drilled
by June 2019 and all Woodford wells drilled by February 2022.


 


It
was assumed that all other operators combined would run three rigs. This results in all Mississippian wells on other-operated
sections being drilled by February 2017 and all Woodford wells drilled by February 2020.


 


It
was assumed that five SWD wells would be drilled in 2014 and 2015 to handle the produced water. The capital costs for future SWD
wells is estimated to be 1.6 MM$/well.


 


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 Non-Producing (PNP), and Proven
Undeveloped (PUD) reserve categories, as well as Probable (Prob) and Possible (Poss) Non-Proven reserve categories.


 


Pinnacle
Energy Services, LLC


9420
Cedar Lake Ave, Oklahoma City, OK 73114


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


  




    	 



    	 



    


 


By
definition, PDP generally refers to existing producing properties, while PNP 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.


 


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