March 10, 2011

Greg
Franklin

Osage Energy Corporation

100 Park Avenue, Suite 1040

Oklahoma City, OK 73102



Dear
Mr. Franklin:

As
requested we have prepared an economic and reserve appraisal report of Proved Developed Producing (PDP-Water Flood) & Proved
Behind Pipe (BP) reserves to the interests of Osage Energy Corporation in Hopper-Osage Lease (Twin Creek Field), Osage
County, Oklahoma. A summary based on Unescalatcd pricing case effective December 31, 2010 is as follows:



|EFFECTIVE
    DATE | RESERVE
    TYPE            | NETBBLS | NET'
    MCF | FUTURE
    NET REVENUE ($) | DISCOUNTED
    FNR($)@10%
|------------------ | --------------------------- | ------- | ------------ | -------------------------- | -------------------------
|12/31/2010         | Proved
    producing (PDP)  | 59,514  | -0-          | 3,318.40                   | 2,261,054                
|(Water
    Hood)  
|12/31/2010         | Proved
    Behind Pipe (BP) | 66,929  | 200,771      | 5,134,166                  | 3,921,406                
|TOTAL              |                             | 126,443 | 200,771      | 8,452,563                  | 6,182,460                



EVALUATION
METHODOLOGY

GENERAL:

Detailed
results of our evaluation for new wells is presented in the form of a summary report with One Line Well Information showing Gross/Net
Oil & Gas Production, Future Cash Flow, Lease Operating Expenses, Production taxes, Discounted Cash Flow at 10%. Individual
lease/well economic sheets provide detail economics, remaining reserves, production curves and also the location of the lease/well
and other pertinent data.

This
report has been prepared on a Before Income Tax basis and does not give consideration to salvage value, depletion or taxes other
than those specifically mentioned. Also no encumbrances against or debits owed on the properties have been considered. All ownership
interests, Lease Operating Expenses and product pricing have been furnished by Osage Energy Corporation.



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OSAGE ENERGY CORPORATION



RESERVES AND APPRAISAL REPORT

OF

PRODUCING PROPERTIES

&

BEHIND PIPE RESERVES

IN

OKLAHOMA



EFFECTIVE DATE 12-31-2010



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ENGINEERING:

Oil
and gas reserves were estimated by use of production performance curves and material balance calculations where applicable. If
insufficient production history available to evaluate by curves, estimates were made by using analogous, nearby producing reservoirs,
and/or volumetric calculations. Verbal production information provided by Osage Energy Corporation is used in the evaluation.
Perforated interval and proposed BP zone interval is marked on the logs where available and log calculations were made. Drainage
areas were estimated based on the well density in the sections where wells arc completed. BTTP data is gathered from offset wells
producing from similar reservoir. For all the Behind Reserves, we have assumed a production start date and estimated work over
costs. Reserves estimated in this report are very subjective and should be revised up/down based on all the information including
any production history after completion. All methods used to project reserves are industry accepted petroleum reservoir evaluation
methods.

OIL,
CAS PRICING AND LEASE OPERATING EXPENSES:

An
Oil Price of $80.00/BBL, Gas Price of $3.50/MCF and current Lease Operating Expenses arc used in this report. Prices and Lease
Operating Expenses are not escalated.

Every
effort was made to forecast the best possible estimate of future producible oil and gas reserves. However, the accuracy of any
reserve estimate is a function of the quality of available data and of judgment. While reserve estimates presented in this report
are believed to be reasonable, they should be accepted with the understanding that future operations or subsequent reservoir performance
or more accurate data received subsequent to the preparation of this report may justify a revision of these estimates either upward
ordownward.

All
descriptions, information and other materials ("DATA") included in this report are solely for convenience purposes and
any reliance on or use of such data is at your own risk and you should conduct your own due diligence. The Reddy Petroleum Company
and its associates make no warranties or representations, express or implied, as to the accuracy or correctness of data presented
in this report or to the quality or quantity of the hydrocarbon reserves attributed to the Behind Pipe and Incremental Reserves,
or the ability of any property to produce hydrocarbons.

We
appreciate the opportunity of preparing this evaluation and, if you have any questions or necd additional information, please
advice.

Respectfully
submitted,

REDDY
PETROLEUM COMPANY



|By: | /s/ Raja P. Reddy    | 
|--- | -------------------- | 
|    | Raja P. Reddy        | 
|    | Petroleum Consultant | 
|    | Petroleum Engineer   | 







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