MARK
E. ANDERSEN, P.E.





RESERVE
APPRAISALS, ECONOMIC ANALYSIS, & PROSPECT EVALUATION





1221
      Arroyo Grande Drive
              fax:
      (916) 285-5271; tel: (916) 606-4090Sacramento,
      CA  95864
              e-mail:e-mail:mandersen.pe@comcast.net





January
22, 2010





Mr.
Kulwant Sandher


Chief
Financial Officer


Delta Oil
and Gas,Inc.


604
– 700 West Pender Street


Vancouver,
BC V6C 1G8


Canada





RE: Estimated
Future Reserves and Revenues for Delta Oil and Gas Inc.’s (Delta)
 interest in Sunset Exploration’s Wilson Creek 1-27 leasehold located in
the
 Willows Beehive Bend Gas Field as of December 31, 2009





Dear Mr.
Sandher:





Attached are an estimate of future
recoverable reserves and economic forecast for Delta’s interest in Sunset
Exploration’s Wilson Creek 1-27 leasehold located within the Willows Beehive
Bend Gas Field in Glenn County, California as of December 31, 2009. The purpose
of this report is to provide an independent third party estimate of the
ultimately recoverable reserves and net present worth of Delta’s interest in the
referenced leasehold. I understand Delta will include or use this report in
their required British Columbia Securities Commission annual filing. The
effective date of this report is January 22, 2010.





A cash flow projection is attached for
the proved producing zone in the Wilson Creek 1-27 well which is the only
producing well on the leasehold.  The attached cash flow is for the
proved developed producing (PDP) reserves in the well’s currently open
perforated zone.





The net present before income tax
valuation estimate of the PDP reserves as of December 31, 2009 for the specified
interest in this well is $10,469 undiscounted, and $9,982 when discounted at ten
percent. This estimated value represents gross remaining recoverable natural gas
reserves of 76,343 MCF and net PDP reserves to Delta’s interest of 3,722 MCF, as
of December 31, 2009. Gross operating revenue to Delta’s interest is estimated
to be $13,621 while total expenses are estimated at $3,152. A summary table of
reserves and economics can be found on page three.





Price/Cost
Parameters





The well head gas price of $3.66/MCF
($3.73 per MMBTU for the 980 BTU gas from the well) used in this valuation
estimate is the average of the monthly 2009 prices received by Lario Oil and Gas
Company (Lario) from January to June 2009, the operator of the well until
November 1, 2009 when Sunset Exploration (Sunset) assumed that role. Monthly gas
price averages were used because the gas sales price on the first day of each
month was not available from Lario. Likewise, 2009 operating costs were
furnished by Lario and Sunset. The gas price and operating costs are held
constant for the life of the well. Production severance taxes and ad valorem
taxes were also deducted from revenue.









Page
Two


Delta’s


Wilson
Creek 1-27 Interest








Data Used and
Assumptions





The working and net revenue interests
were furnished by Delta and they are


6.25
percent and 4.875 percent, respectively. These interests can also be found on
the bottom center of the well’s cash flow sheet. Production and pressure data
was furnished by Lario. Additional leasehold geologic data and consultation was
provided by Production Specialties Company, another working interest partner on
the property referred to the author by Delta. Offset well data was obtained
through publically available records of the California Division of Oil and
Gas.





No consideration was given to possible
changes in operating conditions or actions of government agencies affecting
prices. Interests were applied as provided by Delta. Discounting is calculated
at mid-year, compounded annually, and applied to yearly revenues and expenses.
The cost of well abandonment is assumed to be offset by the salvage value of the
well’s production and downhole equipment. No field inspection of these
properties was performed.





Reserve
Definitions





Reserve estimates comply with the
definitions of the Society of Petroleum Engineers, and the reserves and
associated economics herein are not a market valuation of the property nor are
they supplied as a loan basis or for other purposes beyond Delta’s British
Columbia Securities Commission filing.





The volumes shown in this report
represent estimates of proved developed producing recoverable reserves based on
the author’s experience and interpretation of geologic trends consistent with
offset wells or fields producing from similar formations or reservoirs and based
on the information available at the time of preparation. These projections were
applied against set economic criteria to develop the economic estimates shown in
this report.  Actual future production, could in fact, be more or less
than the estimates herein.  Reductions or additions to estimated
recoverable reserves could be due to, but not limited to, changes in state or
federal regulations, future reservoir damage or stimulation, changes in gas or
oil price, changes in lease operating costs, and delays or acceleration of the
performance of the production enhancements as presented in this
report.





Well History and Reservoir
Discussion





The currently producing upper Kione
Sand was perforated by Sunset in December 2009 after prior productive Kione
Sands were depleted as of July 2009 and isolated below a cement
retainer.  The Kione Sands previously perforated produced 198,309 MCF
gross from an estimated 28 net feet of pay visible on the well logs. At
recoverable gas in place ranging from 495 to 550 MFC per acre-foot as calculated
from the available well logs, the previously productive Kione Sands are
estimated to range from 20 to 30 acres in closure. Using an assumed areal extent
at the gas water contact of 25 acres, an estimated 10 feet of net pay in the
well bore yields a volumetrically estimated 76,343 MCF of gross recoverable
reserves. This results in estimated net recoverable reserves for Delta of 3,722
MCF. Based on the production history of the previously open Kione zones in the
well, it is estimated this pay sand in the Wilson Creek 1-27 will be exhausted
by the end of 2010. There are no additional candidate pay sands visible on the
Wilson Creek 1-27 well log, consequently there are no proved developed
non-producing (behind pipe, PBP) reserves identified in this report. Nor are
there any probable or possible reserves that are economically recoverable under
the gas price assumptions applied to the proved reserves in this
report.











Page
Three


Delta’s


Wilson
Creek 1-27 Interest





RESERVE
AND ECONOMIC SUMMARY (U.S. $)
 
 PROVED
              PDP
              PBP
              TOTALCompletions
              1
              0
              1Net
      Oil., Bbls
              0
              0
              0Net
      Gas, MCF
              3,722
              0
              3,722Revenue,
      $
              13,621
              0
              13,621Operating
      Expense, $
              2,914
              0
              2,914Production
      Taxes, $
              238
              0
              238Future
      Net Income, $
              10,469
              0
              10,469Future
      Net Income, $@10%*
              9,982
              0
              9,982*Discount
      Rate
 
 Evaluator





I, Mr. Mark E. Andersen an independent consulting engineer, prepared this
evaluation. I am a Registered Professional Engineer (California P.E. #C53890)
with over 29 years of oil and gas exploration and production experience,
primarily in California’s Sacramento-San Joaquin Valley. My experience includes
ten years with Texas Oil and Gas (TXO, 1980-1990) in progressively responsible
exploration and production positions culminating in being the company’s
California District reservoir engineer. In this position, I was a major
contributor to the risk assessment and economic analysis of the District
drilling program as well being responsible for the in-house estimates of proved,
probable, and possible reserves. While at TXO, I attended Schlumberger courses
in well log interpretation and evaluation as well as training in oil and gas
economic analyses.





Since
1991, I have developed, marketed, and sold oil and gas prospects in California’s
Central Valley.  In addition, I perform annual reserve based oil and
gas property tax valuations for several California operators and file these
statutorily required annual proved developed reserve estimates with the
appropriate counties.  I also perform independent prospect evaluations
and reserve based economic analysis.





I am a
graduate of California State University, Sacramento with a Bachelor of Science
degree in Civil/Mechanical Engineering  with significant coursework in
geology, and I am a member of the Society of Petroleum Engineers
(#1260090)





I have no direct or indirect interest,
nor do I expect to receive any such interest, in the oil and gas property
reviewed. I was contracted by Delta to provide an independent third party
assessment of the property reviewed.





Sincerely,






Mark E.
Andersen, P.E.