FAX
      (303) 623-4258





621
SEVENTEENTH STREET   SUITE 1550     DENVER,
COLORADO 80293 TELEPHONE (303) 623-9147





May 4, 2010





Rancher
Energy Corporation


999
18th
Street, Suite 3400


Denver,
Colorado 80202





Gentlemen:





At your
request, Ryder Scott Company (Ryder Scott) has prepared an estimate of the
proved reserves, future production, and income attributable to certain leasehold
and royalty interests of Rancher Energy Corporation (Rancher Energy) as of March
31, 2010.  The subject properties are located in the state of
Wyoming. The reserves and income data were estimated based on the
definitions and disclosure guidelines of the United States Securities and
Exchange Commission (SEC) contained in Title 17, Code of Federal Regulations,
Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in
the Federal Register (SEC regulations).  Our third party study,
completed on May 4, 2010 and presented herein, was prepared for public
disclosure by Rancher Energy in filings made with the SEC in accordance with the
disclosure requirements set forth in the SEC regulations. The results of our third
party study, completed on May 3, 2010, are presented herein.  The
properties reviewed by Ryder Scott represent approximately 100 percent of the
total net proved liquid hydrocarbon reserves of Rancher Energy.





The
estimated reserves and future net income amounts presented in this report, as of
March 31, 2010 are related to hydrocarbon prices.  The hydrocarbon
prices used in the preparation of this report are based on the average prices
during the 12-month period prior to the ending date of the period covered in
this report, determined as unweighted arithmetic averages of the prices in
effect on the first-day-of-the-month for each month within such period, unless
prices were defined by contractual arrangements as required by the SEC
regulations.  Actual future prices may vary significantly from the
prices required by SEC regulations; therefore, volumes of reserves actually
recovered and the amounts of income actually received may differ significantly
from the estimated quantities presented in this report.  The results
of this study are summarized below.





SEC
PARAMETERS


Estimated
Net Reserves and Income Data


Certain
Leasehold and Royalty Interests of


Rancher
Energy Corporation


As of
March 31, 2010







ProvedDeveloped
                      
                      
                      
                      
                      
                      TotalProducing
                      
                      
                      Non-Producing
                      
                      
                      Undeveloped
                      
                      
                      ProvedNet Remaining Reserves*Oil/Condensate
      – Barrels
                      
                      
                      815,138
                      
                      
                      
                      36,041
                      
                      
                      
                      0
                      
                      
                      
                      851,179Plant
      Products – Barrels
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0Gas
      – MMCF
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0Income DataFuture
      Gross Revenue
                      
                      $
                      49,199,214
                      
                      
                      $
                      2,234,753
                      
                      
                      $
                      0
                      
                      
                      $
                      51,433,967Deductions
                      
                      
                      30,130,425
                      
                      
                      
                      1,464,669
                      
                      
                      
                      0
                      
                      
                      
                      31,595,094Future
      Net Income (FNI)
                      
                      $
                      19,068,789
                      
                      
                      $
                      770,084
                      
                      
                      $
                      0
                      
                      
                      $
                      19,838,873Discounted
      FNI @ 10%
                      
                      $
                      9,299,449
                      
                      
                      $
                      450,903
                      
                      
                      $
                      0
                      
                      
                      $
                      9,750,352


* Reserves
have been adjusted for the 10% Net Profit Interest





100
      LOUISIANA, SUITE 3800
              HOUSTON,
      TEXAS 77002-5218
              TEL
      (713) 651-9191
              FAX
      (713) 651-0849530
      8TH  AVENUE, S.W., SUITE 1200
              CALGARY,
      ALBERTA T2P 3S8
              TEL
      (403) 262-2799
              FAX
      (403) 262-2790








Rancher
Energy Corporation


May 4,
2010


Page
2





Liquid hydrocarbons are expressed in
standard 42 gallon barrels.  All gas volumes are reported on an as
“sold basis” expressed in millions of cubic feet (MMCF) at the official
temperature and pressure bases of the areas in which the gas reserves are
located.





The
estimates of the reserves, future production, and income attributable to
properties in this report were prepared using the economic software package
PHDWin Petroleum Economic Evaluation Software, a copyrighted program of TRC
Consultants L.C The program was used solely at the request of Rancher
Energy.  Ryder Scott has found this program to be generally
acceptable, but notes that certain summaries and calculations may vary due to
rounding and may not exactly match the sum of the properties being
summarized.  Furthermore, one line economic summaries may vary
slightly from the more detailed cash flow projections of the same properties,
also due to rounding.  The rounding differences are not
material.





The
future gross revenue is after the deduction of production taxes.  The
deductions incorporate the normal direct costs of operating the wells, ad
valorem taxes, development costs and a 10% net profits interest. The expenses
attributed to the net profits interest are shown as “Other Deductions”. The net
profit interest is determined after deduction of the normal direct costs of
operating the wells and ad valorem taxes from the future gross revenue. The
future net income is before the deduction of state and federal income taxes and
general administrative overhead, and has not been adjusted for outstanding loans
that may exist nor does it include any adjustment for cash on hand or
undistributed income.  Liquid hydrocarbon reserves account for 100
percent of total future gross revenue from proved reserves.





The
discounted future net income shown above was calculated using a discount rate of
10 percent per annum compounded monthly.  Future net income was
discounted at four other discount rates which were also compounded
monthly.  These results are shown in summary form as
follows.





Discounted
      Future Net IncomeAs
      of March 31, 2010Discount
      Rate
                      
                      TotalPercent
                      
                      Proved5
                      
                      $
                      12,999,6828
                      
                      $
                      10,823,50912
                      
                      $
                      8,876,83115
                      
                      $
                      7,830,855





The
results shown above are presented for your information and should not be
construed as our estimate of fair market value.





Reserves
Included in This Report





The
proved reserves included herein conform to the definition as set forth in the
Securities and Exchange Commission’s Regulations Part 210.4-10(a).  An
abridged version of the SEC reserves definitions from 210.4-10(a) entitled
“Petroleum Reserves Definitions” is included as an attachment to this
report.





The
various reserve status categories are defined under the attachment entitled
“Petroleum Reserves Definitions” in this report.





Rancher
Energy Corporation


May 4,
2010


Page
3





No
attempt was made to quantify or otherwise account for any accumulated gas
production imbalances that may exist.  The gas volumes included herein
do not attribute gas consumed in operations as reserves.





Reserves
are those estimated remaining quantities of petroleum which are anticipated to
be economically producible, as of a given date, from known accumulations under
defined conditions.  All reserve estimates involve some degree of
uncertainty.  The uncertainty depends chiefly 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
may be conveyed by placing reserves into one of two principal classifications,
either proved or unproved.  Unproved reserves are less certain to be
recovered than proved reserves and may be further sub-classified as probable and
possible reserves to denote progressively increasing uncertainty in their
recoverability.  At Rancher Energy’s request, this report addresses
only the proved reserves attributable to the properties evaluated
herein.





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.  The reserves
included herein were estimated using deterministic methods.





Reserves
estimates will generally be revised as additional geologic or engineering data
become available or as economic conditions change.  Moreover,
estimates of reserves may increase or decrease as a result of future operations,
effects of regulation by governmental agencies or geopolitical or economic
risks.  As a result, the estimates of oil and gas reserves have an
intrinsic uncertainty.  The reserves included in this report are
therefore estimates only and should not be construed as being exact
quantities.  They may or may not be actually recovered, and if
recovered, the revenues therefrom, and the actual costs related thereto, could
be more or less than the estimated amounts.





Rancher
Energy’s operations may be subject to various levels of governmental controls
and regulations.  These controls and regulations may include matters
relating to land tenure, drilling, production practices, environmental
protection, marketing and pricing policies, royalties, various taxes and levies
including income tax and are subject to change from time to
time.  Such changes in governmental regulations and policies may cause
volumes of reserves actually recovered and amounts of income actually received
to differ significantly from the estimated quantities.





The
estimates of reserves presented herein were based upon a detailed study of the
properties in which Rancher Energy owns an interest; however, we have not made
any field examination of the properties.  No consideration was given
in this report to potential environmental liabilities that may exist nor were
any costs included for potential liabilities to restore and clean up damages, if
any, caused by past operating practices.





Estimates
of Reserves





The estimation of reserves involves two
distinct determinations.  The first determination results in the
estimation of the quantities of recoverable oil and gas and the second
determination results in the estimation of the uncertainty associated with those
estimated quantities in accordance with the definitions set forth by the
Securities and Exchange Commission’s Regulations Part
210.4-10(a).  The process of estimating the quantities of recoverable
oil and gas reserves relies on the use of certain generally accepted analytical
procedures.  These analytical procedures fall into three broad
categories or methods: (1) performance-based methods, (2) volumetric-based
methods and (3) analogy.  These methods may be used singularly or in
combination by the reserve evaluator in the process of estimating the quantities
of reserves.  The reserve evaluator must select the method or
combination of methods which in their professional judgment is most appropriate
given the nature and amount of reliable geoscience and engineering data
available at the time of the estimate, the established or anticipated
performance characteristics of the reservoir being evaluated and the stage of
development or producing maturity of the property.





Rancher
Energy Corporation


May 4,
2010


Page
4





In many cases, the analysis of the
available geoscience and engineering data and the subsequent
interpretation of this data may indicate a range of possible outcomes in an
estimate irrespective of the method selected by the evaluator.  When a
range in the quantity of reserves is identified, the evaluator must determine
the uncertainty associated with the incremental quantities of the
reserves.  If the reserve quantities are estimated using the
deterministic incremental approach, the uncertainty for each discrete
incremental quantity of the reserves is addressed by the reserve category
assigned by the evaluator.  Therefore, it is the categorization of
reserve quantities as proved, probable and/or possible that addresses the
inherent uncertainty in the estimated quantities reported.  All
quantities of reserves within the same reserve category have the same level of
uncertainty under the SEC definitions.





Estimates of reserves quantities and
their associated reserve categories may be revised in the future as additional
geoscience or engineering data become available.  Furthermore,
estimates of reserves quantities and their associated reserve categories may
also be revised due to other factors such as changes in economic conditions,
results of future operations, effects of regulation by governmental agencies or
geopolitical or economic risks as previously noted herein.





The reserves for the properties
included herein were estimated by performance methods.  100 percent of
the proved producing reserves attributable to producing wells and/or reservoirs
were estimated by performance methods.  These performance methods used
are limited to decline curve analysis which utilized extrapolations of
historical production data.  The data utilized in this analysis were
supplied to Ryder Scott by Rancher Energy and were considered sufficient for the
purpose thereof.





To estimate economically recoverable
oil and gas reserves and related future net cash flows, we consider many factors
and assumptions including, but not limited to, the use of reservoir parameters
derived from geological, geophysical and engineering data which cannot be
measured directly, economic criteria based on current costs and SEC pricing
requirements, and forecasts of future production rates.  Under the SEC
regulations 210.4-10(a)(22)(v) and (26), proved reserves must be anticipated to
be economically producible from a given date forward based on existing economic
conditions including the prices and costs at which economic producibility from a
reservoir is to be determined.  While it may reasonably be anticipated
that the future prices received for the sale of production and the operating
costs and other costs relating to such production may increase or decrease from
those under existing economic conditions, such changes were, in accordance with
rules adopted by the SEC, omitted from consideration in making this
evaluation.





Rancher Energy has informed us that
they have furnished us all of the material accounts, records, geological and
engineering data, and reports and other data required for this
investigation.  In preparing our forecast of future production and
income, we have relied upon data furnished by Rancher Energy with respect to
property interests owned, normal direct costs of operating the wells or leases,
other costs such as transportation and/or processing fees, ad valorem and
production taxes, development costs, and product prices based on the SEC
regulations.  Ryder Scott reviewed such factual data for its
reasonableness; however, we have not conducted an independent verification of
the data supplied by Rancher Energy.  We consider the factual data
used in this report appropriate and sufficient for the purpose of preparing the
estimates of reserves and future net revenues herein.





Rancher
Energy Corporation


May 4,
2010


Page
5





Future
Production Rates





Our
forecasts of future production rates are based on historical performance from
wells currently on production.  Test data and other related
information were used to estimate the anticipated initial production rates for
those wells or locations that are not currently producing.  If no
production decline trend has been established, future production rates were held
constant, or adjusted for the effects of curtailment where appropriate, until a
decline in ability to produce was anticipated.  An estimated rate of
decline was then applied to depletion of the reserves.  If a decline
trend has been established, this trend was used as the basis for estimating
future production rates.  For reserves not yet on production, sales
were estimated to commence at an anticipated date furnished by Rancher
Energy.





The
future production rates from wells currently on production may be more or less
than estimated because of changes in market demand or allowables set by
regulatory bodies.  Wells or locations that are not currently
producing may start producing earlier or later than anticipated in our
estimates.





Hydrocarbon
Prices





As previously stated, the hydrocarbon
prices used herein are based on SEC price parameters using the average prices
during the 12-month period prior to the ending date of the period covered in
this report, determined as the unweighted arithmetic averages of the prices in
effect on the first-day-of-the-month for each month within such period, unless
prices were defined by contractual arrangements.  For hydrocarbon
products sold under contract, the contract prices, including fixed and
determinable escalations, exclusive of inflation adjustments, were used until
expiration of the contract.  Upon contract expiration, the prices were
adjusted to the 12-month unweighted arithmetic average as previously
described.  Product prices which were actually used for each property
reflect adjustment for gravity, quality, local conditions, and/or distance from
market.





The
effects of derivative instruments designated as price hedges of oil and gas
quantities are not reflected in our individual property
evaluations.





Costs





Operating
costs for the leases and wells in this report are based on the operating expense
reports of Rancher Energy and include only those costs directly applicable to
the leases or wells. The operating costs include a portion of general and
administrative costs allocated directly to the leases and wells. For operated
properties, the operating costs include an appropriate level of corporate
general administrative and overhead costs.  The operating costs for
non-operated properties include the COPAS overhead costs that are allocated
directly to the leases and wells under terms of operating
agreements.  No deduction was made for loan repayments, interest
expenses, or exploration and development prepayments that were not charged
directly to the leases or wells.





Development
costs were furnished to us by Rancher Energy and are based on authorizations for
expenditure for the proposed work or actual costs for similar
projects.  Rancher Energy’s estimates of zero abandonment costs after
salvage value for onshore properties were used in this report.  Ryder
Scott has not performed a detailed study of the abandonment costs or the salvage
value and makes no warranty for Rancher Energy’s estimate.





Rancher
Energy Corporation


May 4,
2010


Page
6





Because
of the direct relationship between volumes of proved undeveloped reserves and
development plans, we include in the proved undeveloped category only reserves
assigned to undeveloped locations that we have been assured will definitely be
drilled.  Rancher Energy has assured us of their intent and ability to
proceed with the development activities included in this report, and that they
are not aware of any legal, regulatory, political or economic obstacles that
would significantly alter their plans.





Current
costs used by Rancher Energy were held constant throughout the life of the
properties.





Standards
of Independence and Professional Qualification





Ryder
Scott is an independent petroleum engineering consulting firm that has been
providing petroleum consulting services throughout the world for over seventy
years.  Ryder Scott is employee-owned and maintains offices in
Houston, Texas; Denver, Colorado; and Calgary, Alberta, Canada.  We
have over eighty engineers and geoscientists on our permanent
staff.  By virtue of the size of our firm and the large number of
clients for which we provide services, no single client or job represents a
material portion of our annual revenue.  We do not serve as officers
or directors of any publicly-traded oil and gas company and are separate and
independent from the operating and investment decision-making process of our
clients.  This allows us to bring the highest level of independence
and objectivity to each engagement for our services.





Ryder Scott actively participates in
industry-related professional societies and organizes an annual public forum
focused on the subject of reserves evaluations and SEC
regulations.  Many of our staff have authored or co-authored technical
papers on the subject of reserves related topics.  We encourage our
staff to maintain and enhance their professional skills by actively
participating in ongoing continuing education.





Prior to becoming an officer of the
Company, Ryder Scott requires that staff engineers and geoscientists have
received professional accreditation in the form of a registered or certified
professional engineer’s license or a registered or certified professional
geoscientist’s license, or the equivalent thereof, from an appropriate
governmental authority or a recognized self-regulating professional
organization.





We are independent petroleum engineers
with respect to Rancher Energy.  Neither we nor any of our employees
have any interest in the subject properties and neither the employment to do
this work nor the compensation is contingent on our estimates of reserves for
the properties which were reviewed.





The results of this study, presented
herein, are based on technical analysis conducted by teams of geoscientists and
engineers from Ryder Scott.  The professional qualifications of the
undersigned, the technical person primarily responsible for overseeing the
evaluation of the reserves information discussed in this report, are included as
an attachment to this letter.





Rancher
Energy Corporation


May 4,
2010


Page
7





Terms
of Usage





The results of our third party study,
presented herein, were prepared in accordance with the disclosure requirements
set forth in the SEC regulations and intended for public disclosure as an
exhibit in filings made with the SEC by Rancher Energy.  We have
provided our written consent for such use as a separate exhibit to the filings
made with the SEC by Rancher Energy.





We have
provided Rancher Energy Energy, Inc. with a digital version of the original
signed copy of this report letter.  In the event there are any
differences between the digital version included in filings made by Rancher
Energy Energy, Inc. and the original signed report letter, the original signed
report letter shall control and supersede the digital version.





The data and work papers used in the
preparation of this report are available for examination by authorized parties
in our offices.  Please contact us if we can be of further
service.





Very
      truly yours,RYDER
      SCOTT COMPANY, L.P.TBPE
      Firm Registration No. F-1580\s\James
      L. BairdJames
      L. Baird, P.E.Colorado
      P.E. License No. 41521Senior
      Vice President


[SEAL]








Professional
Qualifications of Primary Technical Person





The
conclusions presented in this report are the result of technical analysis
conducted by teams of geoscientists and engineers from Ryder Scott Company L.P.
James Larry Baird was the primary technical person responsible for overseeing
the estimate of the reserves.





Mr.
Baird, an employee of Ryder Scott Company L.P. (Ryder Scott) since 2006, is a
Senior Vice President and also serves as Manager of the Denver office,
responsible for coordinating and supervising staff and consulting engineers of
the company in ongoing reservoir evaluation studies worldwide.  Before
joining Ryder Scott, Mr. Baird served in a number of engineering positions with
Gulf Oil Corporation, Northern Natural Gas and Questar Exploration &
Production. For more information regarding Mr. Baird’s geographic and job
specific experience, please refer to the Ryder Scott Company website at
www.ryderscott.com/Experience/Employees.





Mr. Baird
earned a earned a Bachelor of Science degree in Petroleum Engineering from the
University of Missouri at Rolla in 1970 and is a registered Professional
Engineer in the States of Colorado and Utah. He is also a member of the Society
of Petroleum Engineers.





In
addition to gaining experience and competency through prior work experience, the
Colorado and Utah Board of Professional Engineers recommend continuing education
annually, including at least one hour in the area of professional ethics, which
Mr. Baird fulfills. As part of his 2009 continuing education hours, Mr. Baird
attended an internally presented sixteenhours of formalized
training as well as a day long public forum. Mr. Baird attended the 2009 RSC
Reserves Conference, a two day Oil and Gas Reserves Course: New SEC Reporting
Rules by Dr. John Lee, and various professional society presentations
specifically on the new SEC regulations relating to the definitions and
disclosure guidelines contained in the United States Securities and Exchange
Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas
Reporting, Final Rule released January 14, 2009 in the Federal
Register.  Mr. Baird attended an additional sixteen hours of
formalized in-house training as well as three days of formalized external
training during 2009 covering such topics as the SPE/WPC/AAPG/SPEE Petroleum
Resources Management System, reservoir engineering, geoscience and petroleum
economics evaluation methods, procedures and software and ethics for
consultants. Mr. Baird was a keynote speaker, presenting the Changing Landscape
of the SEC Reporting, at the 2009 Unconventional Gas International Conference
held in Fort Worth, Texas.





Based on
his educational background, professional training and more than 40 years of
practical experience in the estimation and evaluation of petroleum reserves, Mr.
Baird has attained the professional qualifications as a Reserves Estimator and
Reserves Auditor set forth in Article III of the “Standards Pertaining to the
Estimating and Auditing of Oil and Gas Reserves Information” promulgated by the
Society of Petroleum Engineers as of February 19, 2007.





100
      LOUISIANA, SUITE 3800
              HOUSTON,
      TEXAS 77002-5218
              TEL
      (713) 651-9191
              FAX
      (713) 651-0849530
      8TH  AVENUE, S.W., SUITE 1200
              CALGARY,
      ALBERTA T2P 3S8
              TEL
      (403) 262-2799
              FAX
      (403) 262-2790