RESERVE
AND ECONOMIC EVALUATION


OIL
PROPERTY








WORDSWORTH
AREA


SASKATCHEWAN














Owned
by


DELTA
OIL & GAS INC.








January
1, 2010


(December
31, 2009)

















Chapman
Petroleum Engineering Ltd.


445,
708-11th Avenue S.W., Calgary, Alberta T2R OE4 • Phone (403) 266-4141 • Fax
(403) 266-425 • www.chapeng.ob.ca






January
21, 2010




Delta Oil
& Gas Inc.


300, 1055
West Hastings St.


Vancouver,
BC


V6E
2E9




Attention:  Mr.
Kulwant Sandher




Dear
Sir:




Re:           Delta
Oil & Gas Inc.


Reserve and Economic
Evaluation - January 1, 2010




In
accordance with your authorization we have performed a reserve and economic
evaluation of oil and gas properties owned by Delta Oil & Gas Inc. (the
“Company”) for an effective date of January 1, 2010 (as of December 31,
2009).




This
evaluation has been carried out in accordance with the guidelines of Regulation
S-X, Rule 4 - 10(a) of the Securities Exchange Act, with respect to the
classification of Proved Reserves, in conjunction with the standards set out in
the Canadian Oil and Gas Evaluation Handbook, Volume 1 - Second Edition
(COGEH-1) prepared jointly by the Society of Petroleum Evaluation Engineers
(Calgary Chapter) and the Canadian Institute of Mining, Metallurgy and Petroleum
(Petroleum Society).  The report has been prepared and/or supervised
by a “Qualified Reserves Evaluator” as demonstrated on the accompanying
Certificate of Qualification of the author(s).




The SCOPE
OF REPORT contains the authorization and purpose of the report and describes the
methodology and economic parameters used in the preparation of this
report.




The
SUMMARY OF RESERVES AND ECONOMICS (SEC) contains the results of the Constant
Prices and Costs case expressed in United States dollars, as applicable for SEC
filing.




The
DISCUSSION contains a description of the interests and burdens, reserves and
geology, production forecasts, product prices, capital and operating costs and a
map of each major property.  The economic results and cash flow
forecasts (before income tax) are also presented on an entity and property
summary level.





















The
SUMMARY OF RESERVES AND ECONOMICS (SEC) contains the results of the Constant
Prices and Costs case expressed in United States dollars for the proved reserves
only, as applicable for SEC filing.




The
DISCUSSION contains a description of the interests and burdens, reserves and
geology, production forecasts, product prices, capital and operating costs and a
map of each major property.  The economic results and cash flow
forecasts (before income tax) are also presented on an entity and property
summary level.




A
REPRESENTATION LETTER from the Company, confirming that to the best of their
knowledge all the information they provided for our use in the preparation of
this report was complete and accurate as of the effective date, is enclosed
following the Glossary.




Because
the reserves data are based on judgments regarding future events, actual results
will vary and the variations may be material.  We have no
responsibility to update our report for events and circumstances which may have
occurred since the preparation date of this report.




Prior to
the public disclosure of any information contained in this report, or our name
as author, our written consent must be obtained, as to the information being
disclosed and the manner in which it is presented.  The report may not
be reproduced, distributed or made available for use by any other party without
our written consent and may not be reproduced for distribution at any time
without the complete context of the report, unless otherwise reviewed and
approved by us.




We
consent to the submission of this report, in its entirety, to securities
regulatory agencies and stock exchanges, by the Company.




It has
been a pleasure to prepare this report and the opportunity to have been of
service is appreciated.




Your very
truly,


Chapman
Petroleum Engineering Ltd.




[Original
Signed By:]




/s/ C.W.
Chapman


C.W.
Chapman P. Eng.,


President




[Original
Signed By:]




/s/ Roy A.
Collver


Roy A.
Collver, E.I.T.


Petroleum
Engineer


rac/lml/5019




Chapman
Petroleum Engineering Ltd.








CERTIFICATE
OF QUALIFICATION




I, C.W.
CHAPMAN, P. Eng., Professional Engineer of the City of Calgary, Alberta, Canada,
officing at Suite 445, 708-11th Avenue S.W., hereby certify:




1.
            THAT
      I am a registered Professional Engineer In the Province of Alberta and a
      member of the Australasian Institute of Mining and
    Metallurgy.




2.
            THAT
      I graduated from the University of Alberta with a Bachelor of Science
      degree in Mechanical Engineering in
1971.




3.
            THAT
      I have been employed in the petroleum industry since graduation by various
      companies and have been directly involved in reservoir engineering,
      petrophysics, operations, and evaluations during that
  time.




4.
            THAT
      I have in excess of 25 years in the conduct of evaluation and engineering
      studies relating to oil & gas fields in Canada and around the
      world.




5.
            That
      I participated directly in the evaluation of these assets and properties
      and preparation of this report for Delta Oil & Gas Inc., dated January
      21, 2010 and the parameters and conditions employed in this evaluation
      were examined by me and adopted as representative and appropriate in
      establishing the value of these oil and gas properties according to the
      information available to date.




6.
            THAT
      I have not, nor do I expect to receive, any direct or indirect interest in
      the properties or securities of Delta Oil & Gas Inc. its participants
      or any affiliate thereof.




7.
            THAT
      I have not examined all of the documents pertaining to the ownership and
      agreements referred to in this report, or the chain of Title for the oil
      and gas properties discussed.




8.
            A
      personal field examination of these properties was considered to be
      unnecessary because the data available from the Company’s records and
      public sources was satisfactory for our
  purposes.




[Original
Signed By:]




/s/ C.W.
Chapman


C.W.
Chapman, P. Eng.


President




Chapman
Petroleum Engineering Ltd.







CERTIFICATE
OF QUALIFICATION




I, ROY A.
COLLVER, of the City of Calgary, Alberta, Canada, officing at Suite 445, 708 -
11th Avenue S.W., hereby certify:




1.
            THAT
      I am a registered Engineer-In-Training in the Province of
      Alberta.




2.
            THAT
      I graduated from Queen’s University in Kingston, Ontario with a Bachelor
      of Science degree in Engineering Physics in
  2005.




3.
            THAT
      I participated directly in the evaluation of these assets and properties
      and preparation of this report for Delta Oil & Gas Inc., dated January
      21, 2010 and the parameters and conditions employed in this evaluation
      were examined by me and adopted as representative and appropriate in
      establishing the value of these oil and gas properties according to the
      information available to date.




4.
            THAT
      I have not, nor do I expect to receive any direct or indirect interest in
      the properties or securities of Delta Oil & Gas Inc., its participants
      or any affiliate thereof.




5.
            THAT
      I have not examined all of the documents pertaining to the ownership and
      agreements referred to in this report, or the chain of Title for the oil
      and gas properties discussed.




6.
            A
      personal field examination of these properties was considered to be
      unnecessary because the data available from the Company’s records and
      public sources was satisfactory for our
  purposes.




[Original
Signed By:]




/s/ Roy A.
Collver


Roy A.
Collver, E.I.T.


Petroleum
Engineer






Chapman
Petroleum Engineering Ltd.












































RESERVE
AND ECONOMIC EVALUATION


OIL
PROPERTY








WORDSWORTH
AREA


SASKATCHEWAN














Owned
by


DELTA
OIL & GAS INC.








January
1, 2010


(December
31, 2009)































TABLE
OF CONTENTS





Scope
of Report





Authorization


Purpose


Reserve Definitions


Barrels of oil Equivalent


Sources of Information


Product Prices


Product Sales Arrangements


Royalties


Capital Expenditures and Operating
Costs


Income Tax Parameters


Abandonment and
Restoration


Economics


Constant Price Parameters


Jurisdictional Map





Discussion





SASKATCHEWAN


Wordsworth Area





Summary
of Company Reserves and Economics





Glossary





Company
Representation Letter























SCOPE OF
REPORT




Authorization




This
evaluation has been authorized by Mr. Kulwant Sandher, on behalf of Delta Oil
& Gas Inc.  The engineering analysis has been performed during the
month of January 2010.




Purpose




The
purpose of this report was to prepare a third party independent appraisal of the
oil and gas reserves owned by Delta Oil & Gas Inc. for the Company’s
financial planning in accordance with Rule 4-10(a) of Regulation S-X of the
Securities Exchange Act.




The
values in this report do not include the value of the Company’s undeveloped land
holdings nor the tangible value of their interest in associated plant and well
site facilities they may own.




Reserve
Definitions




Proved
reserves as classified in the report have been based on the definitions found in
Rule 4-10(a) of Regulation S-X of the Securities Exchange Act, as
follows:




Classification of
Reserves




Proved Oil and Gas
Reserves




Proved
oil and gas reserves are those quantities of oil and gas, which, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to
be economically producible--from a given date forward, from known reservoirs,
and under existing economic conditions, operating methods, and government
regulations--prior to the time at  which contracts providing the right
to operate expire, unless evidence indicates that renewal is reasonably certain,
regardless of whether deterministic or probabilistic methods are used for the
estimation.  The project to extract the hydrocarbons must have
commenced or the operator must be reasonably certain that it will commence the
project within a reasonable time.




(i)  The
area of the reservoir considered as proved includes:




(A)  The
      area identified by drilling and limited by fluid contacts, if any,
      and










Chapman
Petroleum Engineering Ltd.
 - 2
-







(B)  Adjacent
      undrilled portions of the reservoir that can, with reasonable certainty,
      be judged to be continuous with it and to contain economically producible
      oil or gas on the basis of available geoscience and engineering
      data.




(ii)  In
the absence of data on fluid contacts, proved quantities in a reservoir are
limited by the lowest known hydrocarbons (LKH) as seen in a well penetration
unless geoscience, engineering, or performance data and reliable technology
establishes a lower contact with reasonable certainty.




(iii)  Where
direct observation from well penetrations has defined a highest known oil (HKO)
elevation and the potential exists for an associated gas cap, proved oil
reserves may be assigned in the structurally higher portions of the reservoir
only if geoscience, engineering, or performance data and reliable technology
establish the higher contact with reasonable certainty.




(iv)  Reserves
which can be produced economically through application of improved recovery
techniques (including, but not limited to, fluid injection) are included in the
proved classification when:




(A)  Successful
      testing by a pilot project in an area of the reservoir with properties no
      more favorable than in the reservoir as a whole, the operation of an
      installed program in the reservoir or an analogous reservoir, or other
      evidence using reliable technology establishes the reasonable certainty of
      the engineering analysis on which the project or program was based;
      and




(B)  The
      project has been approved for development by all necessary parties and
      entities, including governmental
entities.




(v)  Existing
economic conditions include prices and costs at which economic producibility
from a reservoir is to be determined.  The price shall be the average
price during the 12-month period prior to the ending date of the period covered
by the report, determined as an unweighted arithmetic average of the
first-day-of-the-month price for each month within such period, unless prices
are defined by contractual arrangements, excluding escalations based upon future
conditions.




Probable
Reserves




Probable
reserves are those additional reserves that are less certain to be recovered
than proved reserves but which, together with proved reserves, are as likely as
not to be recovered.




Chapman
Petroleum Engineering Ltd.
 - 3
-




(i)  When
deterministic methods are used, it is as likely as not that actual remaining
quantities recovered will exceed the sum of estimated proved plus probable
reserves.  When probabilistic methods are used, there should be at
least a 50% probability that the actual quantities recovered will equal or
exceed the proved plus probable reserves estimates.




(ii)  Probable
reserves may be assigned to areas of a reservoir adjacent to proved reserves
where data control or interpretations of available data are less certain, even
if the interpreted reservoir continuity of structure or productivity does not
meet the reasonable certainty criterion.  Probable reserves may be
assigned to areas that are structurally higher than the proved area if these
areas are in communication with the proved reservoir.




(iii)  Probable
reserves estimates also include potential incremental quantities associated with
a greater percentage recovery of the hydrocarbons in place than assumed for
proved reserves.




Possible
Reserves




Possible
reserves are those additional reserves that are less certain to be recovered
than probable reserves.




(i)  When
deterministic methods are used, the total quantities ultimately recovered from a
project have a low probability of exceeding proved plus probable plus possible
reserves.  When probabilistic methods are used, there should be at
least a 10% probability that the total quantities ultimately recovered will
equal or exceed the proved plus probable plus possible reserves
estimates.




(ii)  Possible
reserves may be assigned to areas of a reservoir adjacent to probable reserves
where data control and interpretations of available data are progressively less
certain.  Frequently, this will be in areas where geoscience and
engineering data are unable to define clearly the area and vertical limits of
commercial production from the reservoir by a defined project.




(iii)  Possible
reserves also include incremental quantities associated with a greater
percentage recovery of the hydrocarbons in place than the recovery quantities
assumed for probable reserves.




(iv)  The
proved plus probable and proved plus probable plus possible reserves estimates
must be based on reasonable alternative technical and commercial interpretations
within the reservoir or subject project that are clearly documented, including
comparisons to results in successful similar projects.








Chapman
Petroleum Engineering Ltd.
 - 4
-




(v)  Possible
reserves may be assigned where geoscience and engineering data identify directly
adjacent portions of a reservoir within the same accumulation that may be
separated from proved areas by faults with displacement less than formation
thickness or other geological discontinuities and that have not been penetrated
by a wellbore, and the registrant believes that such adjacent portions are in
communication with the known (proved) reservoir.  Possible reserves
may be assigned to areas that are structurally higher or lower than the proved
area if these areas are in communication with the proved reservoir.




(vi)  Pursuant
to paragraph (a)(22)(iii) of this section, where direct observation has defined
a highest known oil (HKO) elevation and the potential exists for an associated
gas cap, proved oil reserves should be assigned in the structurally higher
portions of the reservoir above the HKO only if the higher contact can be
established with reasonable certainty through reliable
technology.  Portions of the reservoir that do not meet this
reasonable certainty criterion may be assigned as probable and possible oil or
gas based on reservoir fluid properties and pressure gradient
interpretations.




Barrel
of Oil Equivalent




If at any
time in this report reference is made to “Barrels of Oil Equivalent” (BOE), the
conversion used is 6Mscf:  1STB (6 Mcf: 1bbl).




BOEs may
be misleading, particularly if used in isolation.  A BOE conversion
ratio of 6Mcf: 1bbl is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent value equivalency
at the well head.




Sources
of Information




Source of
the data used in the preparation of this report are as follows:




i)
              Ownership
      and Burdens have been derived from the Company’s land records and other
      information from the Company as required for
  clarification;
  ii)
              Production
      data is acquired from public data sources, except for very recent data or
      certain wells which are provided directly by the
  Company;
  iii)
              Well
      data is accessed from the Company’s well files and from public data
      sources;






Chapman
Petroleum Engineering Ltd.
 - 5
-




iv)
              Operating
      Costs are based on actual revenue and expense statements provided by the
      Company for established properties or from discussions with the Company
      and our experience in the area for new or non-producing
      properties.
  v)
              Price
      differentials are derived from revenue statements, compared to actual
      posted prices for the appropriate benchmark price over a period of several
      months for established properties or from discussions with the Company and
      our experience in the area for new or non-producing
      properties;
  vi)
              Timing
      of Development Plans and Capital estimates are normally determined by
      discussions with the Company together with our experience and
      judgment.


Product
Sales Arrangements




The
Company does not have any “hedge” contracts in place at this time.




Royalties




A full
provision for Crown royalties under the latest regulations and incentive
programs for the applicable provinces have been included in this
report.  Likewise, Freehold royalties, mineral taxes, gross overriding
royalties and any other burdens have been accounted for.




Saskatchewan




Oil and
natural gas produced from Crown lands in Saskatchewan is subject to Crown
royalties, which vary with production rate, product price, oil density and the
date wells were drilled.  There are several Incentive programs for
high cost wells and activity in certain areas of the
province.  Production from privately owned freehold lands are subject
to a freehold production tax (FPT) in addition to the freehold
royalty.  The FPT varies depending on rate, price and drilling date in
a similar manner to the Crown Royalties.




Exploratory
wells, deep vertical development wells and all horizontal wells drilled on or
after October 1, 2002 are subject to a royalty of 2.5 percent (0 percent FPT)
until certain volumes of oil (between 4,000 to 16,000 m3) have
been recovered.




The
fourth tier royalties (and FPT) for wells drilled since October 1, 2002 are
moderate and were designed to encourage oil and gas activity in
Saskatchewan.




Maximum
Saskatchewan Crown Royalties can approach 45 percent for high rate old oil or
gas wells.  In all other categories royalties will not exceed 35
percent.






Chapman
Petroleum Engineering Ltd.
 - 6
-




Capital
Expenditures and Operating Costs




Operating
costs and capital expenditures have been based on historical experience and
analogy where necessary and are expressed in current year dollars and escalated
as follows:




2010                      -No
Escalation


2011-2025             -1.5%
per year


Thereafter            -No
Escalation




Income
Tax Parameters




Net cash
flows after consideration of corporate income tax have been included in this
report.




The
estimated balances of the existing tax pools at December 31, 2009, as provided
by the Company, are summarized below:




_____$_____Non
      Capital Losses
              
              $
              1,103,092Capital
      Cost Allowances (CCA)
              
              $
              1,482Cumulative
      Eligible Capital (CEC)
              
              
              -Canadian
      Exploration Expenses (CEE)
              
              
              -Canadian
      Development Expenses (CDE)
              
              $
              2,411,505Canadian
      Oil & Gas Property Expenses (CPGPE)
              
              $
              884,772Total
              
              $
              4,400,851




Future
capital expenditures anticipated for this report are predominantly development
costs, and have been included as tangible or intangible costs.




The
Federal tax rates utilized in this report were 18.00% in 2010, 16.50% in 2011
and 15.00% in 2012 and thereafter.  The Saskatchewan tax rate utilized
was 12.50% in 2010, and 12% thereafter.




Abandonment
and Restoration




Abandonment
and restoration costs, net of salvage, have been included in the cash flows for
the final event of any particular well.  The abandonment cost does not
impact the economic limit and is included in the final year of production
automatically by ERGO.  For marginal wells nearing the end of their
economic life, these costs may results in a negative net present
value.






Chapman
Petroleum Engineering Ltd.
 - 7
-




For
Alberta wells we have utilized the AEUB abandonment and restoration and
liability calculation spreadsheet which has been made available to the public,
unless the Company has provided the information from their
experience.




This
method accounts for the general areas, number of zones to be abandoned, well
depth and presence of tubing and rods, etc.  Separate amounts are
determined for abandonment and lease restoration.  The abandonment
cost determined is net of salvage.




In this
report, we have account for these costs for only the wells which are being
included and have not included other shut-in or suspended wells in the Company’s
inventory or their facilities and pipelines.




Economics




The
results of the before tax economic analysis, which are presented for each entity
and property summary, are in a condensed form presented on one page for
simplicity in analyzing the cash flows, however, if for any reason more
extensive breakdown of the cash flow is required, a separate schedule can be
provided showing the full derivation and breakdown of any or all of the columns
on the summary page.




The
economic presentation shows the gross property and company gross and net (before
and after royalty) production of oil gas and each NGL product along with the
product prices adjusted for oil quality and heating value of gas.  Oil
prices also include the deduction for trucking costs where applicable for
royalty deductions.




The
second level includes revenues, royalties, operating costs, processing income,
abandonment costs, capital and cash flow of the property.  Operating
costs are presented for the gross property and the company share, split between
variable and fixed costs, and the effective cost per BOE.




Net
revenues are presented annually and as a net bak in $/BOE @ 6
Mscf/STF.  Revenue from custom processing of oil or gas is presented
separately.




The third
level of data presents the cumulative cash flow values (present worth) for
various discount rates.  Also, the net cash flow breakdown is
presented.  The project profitability criteria are summarized on the
bottom right of the page.  These data are not relevant in the case of
corporate evaluations but are useful in assessing individual capital
projects.








Chapman
Petroleum Engineering Ltd.
 - 8
-




For
corporate consolidations a second page is included, which repeats the before tax
cash flow and presents the Taxable Income, Income Tax Payable, After Income Tax
Cash Flowers and net present values After Income Tax.




Constant
Price Parameters




The price
used for each area in this report, in accordance with SEC regulation S-X rule
4-10, was the average price during the 12-month period prior to the ending date
of the period covered by the report, determined as an unweighted arithmetic
average of the first-day of-the-month- price for each month within such period,
unless prices are defined by contractual arrangements, excluding escalations
based upon future conditions.




Adjustments
for crude quality, gas heating value and NGL trucking and fractionation have
still been applied to the average prices to reflect actual prices being
received.  In addition, no escalation has been applied to either the
capital expenditures or operating costs.




The
average price shown in the cash flows may differ from year to year due to
variations in the proportionate production volumes from each property relative
to the total.




For the
purpose of US Security Exchange Commission filing, the results of the Constant
Prices and Cost case for proved and probable reserves are expressed in Canadian
dollars are presented in the Summary of Reserves and Economics
(SEC).


























Chapman
Petroleum Engineering Ltd.
 - 9
-












- 10
-





WORDSWORTH
AREA, SASKATCHEWAN


INDEX








Discussion





Ownership


Geology


Reserves


Production


Product Prices


Capital Expenditures


Operating Costs


Economics





Attachments





Figure 1:  Land and Well
Map





Table 1: Schedule of Lands, Interests
and Royalty Burdens





Table 2:  Summary of
Reserves





Figure 2:  Production History
Graphs





Proved Developed
Producing


a)  Well 91/9-14-7-3 W2M,
Alida


b)  Well 91/11-14-7-3 W2M,
Alida


c)  Well
91/14-14-7-3  W2M, Alida





Table 3:  Summary of
Anticipated Capital Expenditures


a)  Development


b)  Abandonment and
Restoration





Summary
of Company Reserves and Economics





Table 4:  Summary of Company
Reserves and Economics - ConstantPrices and Costs





Consolidated Cash
Flows


a)  Total Proved Developed
Producing


b)  Total Proved Plus
Probable Developed Producing





Individual Cash Flows


Proved Developed
Producing


c)  Well 91/9-14-7-3 W2M,
Alida


d)  Well 91/11-14-7-3 W2M,
Alida


e)  Well 91/14-14-7-3 W2M,
Alida








- 11
-





Proved Plus Probable
Developed Producing


f)  Well 91/9-14-7-3 W2M,
Alida


g)  Well 91/11-14-7-3 W2M,
Alida


h)  Well 91/14-14-7-3 W2M,
Alida








Figure 3: Production History and
Forecast - Company Share


-Proved Developed
Producing








Appendix A:  Summary of
Analog Analysis - Buffalo Head Alida Pool



































- 12
-





WORDSWORTH
AREA, SASKATCHEWAN


INDEX





Ownership





The
Company has a working Interest in 1600 gross acres of land in this area,
containing three producing horizontal oil wells as shown on the map, Figure
1.  The Company also has the option to farm-in and participate in
additional horizontal wells in this area.  Production is subject to
Crown and freehold royalties and provincial production tax on freehold
production.





A
detailed description of the wells, Interest and royalty burdens is present in
Table 1.





Geology





The
Wordsworth East area is located in southeast Saskatchewan within Township 7
Range 3 W2M.  Geologically, the area is located within the Canadian
portion of the Williston Basin, an intra-cratonic basin of Ordovician to
Tertiary age with the shape of an ellipsoidal depression about 350 miles in
diameter.  In southeast Saskatchewan, the Williston Basin is a broad
southeasterly plunging trough with a maximum thickness of over 8000 feet in the
Wordsworth East area. Oil pools in this area are predominantly Mississippian in
age and are trapped in dolomitized carbonates found at up-dip unconformity
traps.





The first
well of interest on the prospect was drilled and abandoned in 1983 at 2-14-7-3
W2M to a total depth of 4,080 feet in the Alida Beds. The often productive Alida
Beds are carbonate grain-stones and pack-stones found in the Mississippian
Mission Canyon Formation. In the Wordsworth East area, they form the
pre-Triassic unconformity. A sixty foot core was cut in the top of the Alida
Beds at 2-14-7-3 W2M and the zone were reported to be limestone with poor to
fair inter-crystalline porosity and good to patchy brown oil stain. The second
well drilled on the prospect was 10-14-7-3 W2M, drilled and abandoned to a total
depth of 6,650 feet in the Devonian Winnipegosis Formation in 1986. Log Response
and sample descriptions of the Alida Beds suggest that the zone consists of
interbedded limestone and dolomite in the upper 30 feet. The Alida Beds were not
tested in this well. A log analysis of the Alida Beds in 10-14-7-3 W2M performed
by an independent professional consultant, reported potential by-passed pay in
the zone due to very similar log responses to a producing Alida oil well in the
nearby Manor pool of Township 7 Range 1 W2M.







Chapman
Petroleum Engineering Ltd.
 - 13
-





Geological
mapping on the Mississippian unconformity surface suggested a localized high in
the Wordsworth East area. This was confirmed by a geophysical interpretation of
the Second White Speckled Shale to Mississippian interval which mapped a thin at
Wordsworth East and is illustrated on the map, Figure 1. In addition, the
seismic character at the Alicia interval has a lower velocity contrast with the
overlying Watrous shale when it consists of porous dolomite and this was also
found at Wordsworth East.





Reserves





Remaining
proved developed producing oil reserves of 234 MSTB have been estimated for the
Alida zone in the horizontal wells 91/9-14-7-3W2M, 91/11-14-7-3W2M and
91/14-14-7-3 W2M. In each case reserves were assigned based on production
decline analysis as well as analogy to long term cumulative production in the
non-marginal horizontal wells from the nearby similar Bufffalo Head Alida Pool
as shown in Appendix A, Summary of Analog Analysis.


Probable
incremental reserves of 142 MSTB have been estimated for the same wells assuming
less severe decline characteristics and a more favorable interpretation of the
analogy.





A summary
of the gross reserves is presented in Table 2.





Production





Gross
Production from this area currently averages 264 STB/d. In the proved case the
rate is expected to average 180 STB/d in 2010, 103.5 STB/d in 2011, 61.7 STB/d
in 2012, and then to assume a decline rate of approximately 15% per year
thereafter. In the proved plus probable case the rate is expected to average 200
STB/d in 2010, 143 STB/d in 2011, 102 STB/d in 2012, and then to assume a
decline rate of approximately 12% per year thereafter.





This
forecast has been based on the average decline characteristics of wells in the
Buffalo Head Alida pool, and adjusted for the rates these wells have
historically produced at.





Product
Prices





A
forecast oil price of $60.35 per STB has been estimated for this area for all
years. This price represents the average price during the 12-month period
prior










Chapman
Petroleum Engineering Ltd.
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to the
ending date of the period covered by the report, determined as an unweighted
arithmetic average of the first ­day-of-the-month price for each
month.





Capital
Expenditures





There are
no capital expenditures anticipated for this property, as presented in Table
3a.





Abandonment
and restoration costs (net of salvage) of $90,000 ($4,500 net to the Company)
have been estimated for this area as presented in Table 3b.





Operating
Costs





Fixed
operating costs of $3,000 per well per month, and variable costs of $9.00 per
STB have been estimated for this area based on information provided by the
operator and other companies operating in this area.




Economics





A summary
of the company reserves and economics for this area assuming constant prices and
costs are presented in Table 4. The results of the economic analysis performed
on this property are presented in Tables 4a through 4h.




















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Petroleum Engineering Ltd.
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graphic7

















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Table
3a





Summary
of Anticipated Capital Expenditures





Development





January
1, 2010





Delta
Oil & Gas Inc.





Wordsworth
East, Saskatchewan








Capital
              Gross
              NetInterest
              Capital
              CapitalDescription
              Date
              Operation
              %
              M$
              M$








There
are no capital expenditures anticipated for this property.














Chapman
Petroleum Engineering Ltd.
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Table
3a





Summary
of Anticipated Capital Expenditures





Abandonment
and Restoration





January
1, 2010





Delta
Oil & Gas Inc.





Wordsworth
East, Saskatchewan











Capital
              Gross
              NetInterest
              Capital
              CapitalDescription
              Well
      Parameters
              %
              M$
              M$




Light & Medium
Oil





Well
      891/9-14-7-3W2M
              Pumping
      Alida horizontal oil well
              5.000
              30
              2Well
      91/11-14-7-3W2M
              Pumping
      Alida horizontal oil well
              5.000
              30
              2Well
      91/14-14-7-3W2M
              Pumping
      Alida horizontal oil well
              5.000
              30
              2Total
      Abandonment and Restoration
              
              90
              6











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Petroleum Engineering Ltd.
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APPENDIX
A


Summary
of Analog Analysis and Well Forecast





January
1, 2010





Wordsworth
East, Saskatchewan








Analog
for





Wells     91/9-14/7-3W2M
(HZ)


91/11-14-7-3W2M (HZ)


91/14-14-7-3W2M (HZ)





Zone      Alida





Analog
      Property
              
              
              ReferenceField        
      Buffalo
      HeadPool         Alida
              
              Attachment
      1aUltimate
      reserves
              2,158
              MSTB
              Attachment
      1bNumber
      of Wells
              17
              
              Attachment
      1dAve
      Reserves/well
              127
              MSTBAverage
      Initial Rate
              200
              STB/d
              Attachment
      1 c
 Attachments





1a)           Group
Production Plot


1b)           Group
Rate vs. Cum. Plot


1c)           Normalized
Production Plot


1d)           Well
List - Analog











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Attachment
1d





Well
List - Analog Wells





1
            91/14-18-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA2
            91/02-19-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA3
            91/03-19-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA4
            91/05-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA5
            91/07-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA6
            92/07-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA7
            91/09-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA8
            91/10-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA9
            92/10-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA10
            91/12-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA11
            91/14-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA12
            91/15-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA13
            91/16-29-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA14
            93/04-32-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA15
            91/07-33-007-04
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA16
            91/10-13-007-05
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA17
            92/15-13-007-05
            W2M/00
            Field:
            15
            Formation:
            BUFFALO
      HD FROB-ALIDA














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GLOSSARY
OF TERMS


(Abbreviations
& Definitions)





General


BIT
              -
              Before
      Income TaxAIT
              -
              After
      Income TaxM$
              -
              Thousands
      of DollarsEffective
      Date
              -
              The
      date for which the Present Value of the future cash flows and reserve
      categories are established$US
              -
              United
      States DollarsWTI
              -
              West
      Texas Intermediate — the common reference for crude oil used for oil price
      comparisonsARTC
              -
              Alberta
      Royalty Tax CreditGRP
              -
              Gas
      Reference Price


Interests and
Royalties


BPO
              -
              Before
      PayoutAPO
              -
              After
      PayoutAPPO
              -
              After
      Project PayoutPayout
              -
              The
      point at which a participant’s original capital investment is recovered
      form its net revenueGORR
              -
              Gross
      Overriding Royalty - percentage of revenue on gross revenue earned (can be
      an interest or a burden)NC
              -
              New
      Crown - crown royalty on petroleum and natural gas discovered after April
      30, 1974SS
      1/150 (5%-15%) Oil
              -
              Sliding
      Scale Royalty - a varying gross overriding royalty based on monthly
      production.  Percentage is calculated as 1-150th of monthly
      production with a minimum percentage of 5% and a maximum of
      15%FH
              -
              Freehold
      Royalty





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Technical
Data


Psia
              -
              pounds
      per square inch absoluteMSTB
              -
              Thousands
      of Stock Tank Barrels of oil (oil volume at 60 F and 14.65
      psia)MMscf
              -
              millions
      of standard cubic feet of gas (gas volume at 60 F and 4.65
      psia)Bbls
              -
              barrelsMbbls
              -
              thousands
      of barrelsNGL
              -
              Natural
      Gas Liquids - hydrocarbon fluids processed from natural
  gasMMBTU
              -
              Millions
      of British Thermal Units - heating value ofnatural gasSTB/d
              -
              Stock
      Tank Barrels of oil per day - oil production rateMscf/d
              -
              thousands
      of standard cubic feet of gas per day - gas production
  rateGOR
      (scf/STb)
              -
              Gas-Oil
      Ratio (standard cubic feet of solution gas per stock tank barrel of
      oilmKB
              -
              Metres
      Kelly Bushing - depth of well in relation to the Kelly Bushing which is
      located on the floor of the drilling rig.  The Kelly Bushing is
      the usual reference for all measurements during drilling
      operations.EOR
              -
              Enhanced
      Oil RecoveryGJ
              -
              Gigajoules








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