Document:

EX-10.6

 Exhibit 10.6 (1 of 2) 

DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 
 SUITE 800 EAST

 DALLAS, TEXAS 75244 
  

 
  
  

This is a digital representation of a DeGolyer and MacNaughton report. 

This file is intended to be a manifestation of certain data in the subject report and as such are subject to the same
conditions thereof. The information and data contained in this file may be subject to misinterpretation; therefore, the signed and bound copy of this report should be considered the only authoritative source of such information. 

 
  
  

 

 

      

  

       

DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 

SUITE 800 EAST 

DALLAS, TEXAS 75244 

April 17, 2017 

Ing. J. Javier Hinojosa Puebla 

Director General Pemex Exploración y Producción 

Avenida Marina Nacional 329 

Torre Ejecutiva, Piso 41 

Col. Verónica Anzures, C.P. 11300 

Del. Miguel Hidalgo, Ciudad de México 

Dear Ing. Hinojosa, 

Pursuant to your request, we have conducted a reserves audit of the net proved oil, gas, condensate, and oil
equivalent reserves, as of January 1, 2017, of certain properties that PEMEX Exploración y Producción (PEP) has represented are owned by the United Mexican States in the Burgos area of Mexico. This audit was completed on February 27,
2017. PEP has represented that these properties account for 2.1 percent on a net oil equivalent barrel basis of the net proved reserves assigned to PEP, as of January 1, 2017, and that the net proved reserves estimates have been prepared in
accordance with the reserves definitions of Rules 4-10(a) (1)-(32) of Regulation S-X of the Securities and Exchange Commission (SEC) of the United States. At the request
of PEP, we have also included in this report estimates prepared by PEP of its natural gas liquids (NGL) reserves; however, PEP has represented that PEP’s management of the properties stops at the inlet of the gas processing plants. PEP has
represented that all subsurface hydrocarbons belong to the United Mexican States, and has further represented that PEP has received a 100-percent assignment in these properties by the United Mexican States;
therefore, gross reserves are equal to net reserves and are defined as the total estimated petroleum to be produced from these properties after December 31, 2016. We have reviewed information provided to us by PEP that it represents to be PEP’s
estimates of the net proved reserves, as of January 1, 2017, for the same properties as those which we audited. This report was prepared in accordance with guidelines specified in Item 1202 (a)(8) of Regulation
S-K and is to be used for inclusion in certain SEC filings by PEP. 

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 Based on Mexico’s Energy Reform of 2014, PEP has
represented that its estimates of the net proved reserves assigned to PEP presented in this report correspond to 99.6 percent of the total net proved reserves of the Burgos area assigned to PEP, on an oil equivalent basis. 

Reserves estimates included herein are expressed as net reserves as represented by PEP. Gross reserves are
defined as the total estimated petroleum to be produced from these properties after December 31, 2016. Net reserves are defined as that portion of the gross reserves attributable to the interests owned by the United Mexican States after deducting
all interests owned by others. 
 Estimates of oil, gas, condensate, NGL, and oil equivalent reserves
should be regarded only as estimates that may change as further production history and additional information become available. Not only are such reserves estimates based on that information which is currently available, but such estimates are also
subject to the uncertainties inherent in the application of judgmental factors in interpreting such information. 

Data used in this audit were obtained from reviews with PEP personnel, from PEP files, from records on file
with the appropriate regulatory agencies, and from public sources. In the preparation of this report we have relied, without independent verification, upon such information furnished by PEP with respect to property interests, production from such
properties, current costs of operation and development, current prices for production, agreements relating to current and future operations and sale of production, and various other information and data that were accepted as represented. A field
examination of the properties was not considered necessary for the purposes of this report. 
 Methodology and Procedures 

Estimates of reserves were prepared by the use of appropriate geologic, petroleum engineering, and evaluation
principles and techniques that are in accordance with practices generally recognized by the petroleum industry as presented in the publication of the Society of Petroleum Engineers entitled “Standards Pertaining to the Estimating and Auditing
of Oil and Gas Reserves Information (Revision as of February 19, 2007).” The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, quality and
completeness of basic data, and production history. 

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 Based on the current stage of field development, production
performance, the development plans provided by PEP, and analyses of areas offsetting existing wells with test or production data, reserves were classified as proved. 

When applicable, the volumetric method was used to estimate the original oil in place (OOIP) and the original
gas in place (OGIP). Structure and isopach maps were constructed to estimate reservoir volume. Electrical logs, radioactivity logs, core analyses, and other available data were used to prepare these maps as well as to estimate representative values
for porosity and water saturation. When adequate data were available and when circumstances justified, material balance and other engineering methods were used to estimate OOIP or OGIP. 

Estimates of ultimate recovery were obtained after applying recovery factors to OOIP or OGIP. These recovery
factors were based on consideration of the type of energy inherent in the reservoirs, analyses of the petroleum, the structural positions of the properties, and the production histories. When applicable, material balance and other engineering
methods were used to estimate recovery factors. In such cases, an analysis of reservoir performance, including production rate, reservoir pressure, and gas-oil ratio behavior, was used in the estimation of
reserves. 
 For depletion-type reservoirs or those whose performance disclosed a reliable decline in
producing-rate trends or other diagnostic characteristics, reserves were estimated by the application of appropriate decline curves or other performance relationships. In the analyses of production-decline curves, reserves were estimated only to the
limits of economic production. 
 Gas quantities estimated herein are expressed as marketable gas and sales
gas at a temperature base of 20 degrees Celsius (°C) and at a pressure base of 1 atmosphere. Marketable gas is defined as the total gas in the reservoirs to be produced after shrinkage resulting from field separation and flare. Marketable
gas includes fuel. Sales gas is defined as the total gas to be produced from the reservoirs, measured at the point of delivery, after reduction for injection, fuel usage, flare, and shrinkage resulting from field separation and plant processing.
Oil, condensate, and NGL reserves estimated herein are expressed in terms of 42 United States gallons per barrel. Oil and condensate reserves estimated herein are to be recovered by normal field separation. PEP has represented that its NGL reserves
have been estimated on the basis of the quantities of liquids recovered from gas delivered to a gas plant for processing, and can include propane, butane, and C5+ fractions.

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 Definition of Reserves 

Petroleum reserves estimated by PEP included in this report are classified as proved. Only proved reserves
have been evaluated for this report. Reserves classifications used by PEP in this report are in accordance with the reserves definitions of Rules 4–10(a) (1)–(32) of Regulation S–X of the SEC. Reserves are judged to be economically
producible in future years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. In the analyses of
production–decline curves, reserves were estimated only to the limit of economic rates of production under existing economic and operating conditions using prices and costs consistent with the effective date of this report, including
consideration of changes in existing prices provided only by contractual arrangements but not including escalations based upon future conditions. The petroleum reserves are classified as follows: 

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 (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.

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 (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. 

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 Developed oil and gas reserves – Developed oil and
gas reserves are reserves of any category that can be expected to be recovered: 
 (i) Through existing
wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and 

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves
estimate if the extraction is by means not involving a well. 
 Undeveloped oil and gas reserves –
Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. 

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas
that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. 

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has
been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. 

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for
which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in [section 210.4–10
(a) Definitions], or by other evidence using reliable technology establishing reasonable certainty. 

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 Primary Economic Assumptions 

The following economic assumptions were used for estimating existing and future prices and costs, expressed
in United States dollars (U.S.$): 
 Condensate Prices 

PEP has represented that the condensate prices were based on a reference price, calculated as the
unweighted arithmetic average of the first-day-of-the-month price for each month within
the 12-month period prior to the end of the reporting period. As represented by PEP, the reference price utilized is the Mexican Mix reference price, which is composed of the Istmo, Maya, and Olmeca reference
prices and is calculated based on a formula that includes the West Texas Sour, Light Louisiana Sweet, Brent, Oman, and Dubai reference prices. PEP supplied differentials by field to an average Mexican Mix reference price of U.S.$37.44 per barrel and
the prices were held constant thereafter. The volume-weighted average adjusted price attributable to estimated proved reserves for the fields that were audited was U.S.$36.19 per barrel for condensate. These prices were not escalated for inflation.

 Gas Prices 

PEP has represented that the gas prices were based on a 12-month
average price, calculated as the unweighted arithmetic average of the
first-day-of-the-month price for each month within the
12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements. Each field’s calorific value, which includes NGL, was used to determine each field’s
gas price. The volume-weighted average adjusted price for the fields that were audited was U.S.$2.41 per thousand cubic feet. These prices were not escalated for inflation. 

Operating Expenses, Capital Costs, and Abandonment Costs 

Operating expenses and capital costs, based on information provided by PEP, were used in estimating future
costs required to operate the properties. In certain cases, future costs, either higher or lower than existing costs, may have been used because of anticipated changes in operating conditions. These costs were not escalated for inflation.
Abandonment costs were provided by PEP. 

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 While the oil and gas industry may be subject to regulatory
changes from time to time that could affect an industry participant’s ability to recover its oil and gas reserves, we are not aware of any such governmental actions which would restrict the recovery of the January 1, 2017, estimated oil, gas,
condensate, and NGL reserves. 
 PEP has represented that its estimated net proved reserves attributable to
the reviewed properties are based on the definition of proved reserves of the SEC. PEP represents that its estimates of the net proved reserves attributable to these properties, which represent 2.1 percent of PEP’s reserves on a net oil
equivalent basis, are as follows, expressed in millions of barrels (MMbbl), billions of cubic feet (Bcf), and millions of barrels of oil equivalent (MMboe): 
  

																									
	 	 	Estimated by PEP
Net Proved Reserves
as of
January 1, 2017	 
	 	 	Oil
 (MMbbl) 	 	 	Marketable
Gas
(Bcf)	 	 	    Sales    
Gas
(Bcf)	 	 	Condensate
(MMbbl)	 	 	NGL
 (MMbbl) 	 	 	Oil
  Equivalent  
(MMboe)	 
							
	 Properties Reviewed by DeGolyer and MacNaughton
	 				 				 				 				 				 			
	 Burgos Area
	 				 				 				 				 				 			
							
	 Total Proved
	 	 	0.000	 	 	 	877.298	 	 	 	788.111	 	 	 	15.395	 	 	 	16.283	 	 	 	178.020	 

 Notes: 

1. Oil equivalent is calculated based on oil, marketable gas, and condensate quantities. 

2. Marketable gas is converted to oil equivalent on a
field-by-field basis using an energy equivalent factor reflecting the reservoir gas composition of each field. 

In our opinion, the information relating to estimated proved reserves of oil, condensate, natural gas
liquids, and gas contained in this report has been prepared in accordance with Paragraphs 932-235-50-4, 932-235-50-6,
932-235-50-7, and
932-235-50-9 of the Accounting Standards Update
932-235-50, Extractive Industries – Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures (January 2010) of the Financial Accounting
Standards Board and Rules 4–10(a) (1)–(32) of Regulation S–X and Rules 302(b), 1201, and 1202(a) (1), (2), (3), (4), (8) of Regulation S–K of the Securities and Exchange Commission; provided, however, that estimates of proved
developed and proved undeveloped reserves are not presented at the beginning of the year. 

 

 

      

  

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    DEGOLYER AND MACNAUGHTON

 

  

      

  

 To the extent the above-enumerated rules, regulations, and
statements require determinations of an accounting or legal nature, we, as engineers, are necessarily unable to express an opinion as to whether the above-described information is in accordance therewith or sufficient therefor. 

In comparing the detailed net proved reserves estimates prepared by us and by PEP, we have found differences,
both positive and negative, resulting in an aggregate difference of 8.6 percent when compared on the basis of net oil equivalent barrels. It is our opinion that the net proved reserves estimates prepared by PEP on the properties reviewed by us
and referred to above, when compared on the basis of net oil equivalent barrels, in aggregate, are considered reasonable. 

DeGolyer and MacNaughton is an independent petroleum engineering consulting firm that has been providing
petroleum consulting services throughout the world since 1936. DeGolyer and MacNaughton does not have any financial interest, including stock ownership, in PEP. Our fees were not contingent on the results of our evaluation. This letter report has
been prepared at the request of PEP. DeGolyer and MacNaughton has used all assumptions, data, procedures, and methods that it considers necessary and appropriate to prepare this report. 

 

							
		 		 	Submitted,	 	
			
		 		 	

 
		 		 	DeGOLYER and MacNAUGHTON	 	
		 		 	Texas Registered Engineering Firm F-716	 	
			
	     

 
  
	 		 	
	 		 	 

	 	
		 	     	 	Michael J. Callahan, P.E.	 	
		 		 	Vice President	 	
		 		 	DeGolyer and MacNaughton	 	

 
 

 

      

  

  
     

    DEGOLYER AND MACNAUGHTON

 

  

      

  

 CERTIFICATE of QUALIFICATION 

I, Michael J. Callahan, Petroleum Engineer with DeGolyer and MacNaughton, 5001 Spring Valley Road, Suite 800
East, Dallas, Texas, 75244 U.S.A., hereby certify: 
  

	 	1.	 That I am a Vice President of DeGolyer and MacNaughton, which company did prepare the letter report addressed
to PEP dated April 17, 2017, and that I, as Vice President, was responsible for the preparation of this letter report. 
	 

  

	 	2.	 That I attended the University of Missouri at Rolla, and that I graduated with a degree in Petroleum
Engineering in the year 1978; that I am a Registered Professional Engineer in the State of Texas; that I am a member of the International Society of Petroleum Engineers; and that I have in excess of 36 years of experience in the oil and gas
reservoir studies and reserves evaluations. 
	 

  
  

							
	   

 
	 		 	

 	 	
		 		 	  
	 	
		 		 	Michael J. Callahan, P.E.	 	
		 		 	Vice President	 	
		 		 	DeGolyer and MacNaughton	 	

 
 

 Exhibit 10.6 (2 of 2) 

 
 DEGOLYER AND
MACNAUGHTON 
 5001 SPRING VALLEY ROAD 

SUITE 800 EAST 

DALLAS, TEXAS 75244 
  

 
  
  

This is a digital representation of a DeGolyer and MacNaughton report. 

This file is intended to be a manifestation of certain data in the subject report and as such are subject to the same
conditions thereof. The information and data contained in this file may be subject to misinterpretation; therefore, the signed and bound copy of this report should be considered the only authoritative source of such information. 

 
  
  

 

 

      

  

  

DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 

SUITE 800 EAST 

DALLAS, TEXAS 75244 

April 17, 2017 

Ing. J. Javier Hinojosa Puebla 

Director General Pemex Exploración y Producción 

Avenida Marina Nacional 329 

Torre Ejecutiva, Piso 41 

Col. Verónica Anzures, C.P. 11300 

Del. Miguel Hidalgo, Ciudad de México 

Dear Ing. Hinojosa, 

Pursuant to your request, we have conducted a reserves audit of the net proved oil, gas, condensate, and oil
equivalent reserves, as of January 1, 2017, of certain properties that PEMEX Exploracion y Produccion (PEP) has represented are owned by the United Mexican States in the Veracruz area of Mexico. This audit was completed on February 27,
2017. PEP has represented that these properties account for 1.5 percent on a net oil equivalent barrel basis of the net proved reserves assigned to PEP, as of January 1, 2017, and that the net proved reserves estimates have been prepared
in accordance with the reserves definitions of Rules 4-10(a) (1)-(32) of Regulation S-X of the Securities and Exchange Commission (SEC) of the United States. At the
request of PEP, we have also included in this report estimates prepared by PEP of its natural gas liquids (NGL) reserves; however, PEP has represented that PEP’s management of the properties stops at the inlet of the gas processing plants. PEP
has represented that all subsurface hydrocarbons belong to the United Mexican States, and has further represented that PEP has received a 100-percent assignment in these properties by the United Mexican
States; therefore, gross reserves are equal to net reserves and are defined as the total estimated petroleum to be produced from these properties after December 31, 2016. We have reviewed information provided to us by PEP that it represents to
be PEP’s estimates of the net proved reserves, as of January 1, 2017, for the same properties as those which we audited. This report was prepared in accordance with guidelines specified in Item 1202 (a)(8) of Regulation S-K and is to be used for inclusion in certain SEC filings by PEP. 

 

 

      

  

 2 

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 Based on Mexico’s Energy Reform of 2014, PEP has
represented that its estimates of the net proved reserves assigned to PEP presented in this report correspond to 100 percent of the total net proved reserves of the Veracruz area assigned to PEP, on an oil equivalent basis. 

Reserves estimates included herein are expressed as net reserves as represented by PEP. Gross reserves are
defined as the total estimated petroleum to be produced from these properties after December 31, 2016. Net reserves are defined as that portion of the gross reserves attributable to the interests owned by the United Mexican States after
deducting all interests owned by others. 
 Estimates of oil, gas, condensate, NGL, and oil equivalent
reserves should be regarded only as estimates that may change as further production history and additional information become available. Not only are such reserves estimates based on that information which is currently available, but such estimates
are also subject to the uncertainties inherent in the application of judgmental factors in interpreting such information. 

Data used in this audit were obtained from reviews with PEP personnel, from PEP files, from records on file
with the appropriate regulatory agencies, and from public sources. In the preparation of this report we have relied, without independent verification, upon such information furnished by PEP with respect to property interests, production from such
properties, current costs of operation and development, current prices for production, agreements relating to current and future operations and sale of production, and various other information and data that were accepted as represented. A field
examination of the properties was not considered necessary for the purposes of this report. 
 Methodology and Procedures 

Estimates of reserves were prepared by the use of appropriate geologic, petroleum engineering, and evaluation
principles and techniques that are in accordance with practices generally recognized by the petroleum industry as presented in the publication of the Society of Petroleum Engineers entitled “Standards Pertaining to the Estimating and Auditing
of Oil and Gas Reserves Information (Revision as of February 19, 2007).” The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, quality and
completeness of basic data, and production history. 

 

 

      

  

 3 

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 Based on the current stage of field development, production
performance, the development plans provided by PEP, and analyses of areas offsetting existing wells with test or production data, reserves were classified as proved. 

When applicable, the volumetric method was used to estimate the original oil in place (OOIP) and the original
gas in place (OGIP). Structure and isopach maps were constructed to estimate reservoir volume. Electrical logs, radioactivity logs, core analyses, and other available data were used to prepare these maps as well as to estimate representative values
for porosity and water saturation. When adequate data were available and when circumstances justified, material balance and other engineering methods were used to estimate OOIP or OGIP. 

Estimates of ultimate recovery were obtained after applying recovery factors to OOIP or OGIP. These recovery
factors were based on consideration of the type of energy inherent in the reservoirs, analyses of the petroleum, the structural positions of the properties, and the production histories. When applicable, material balance and other engineering
methods were used to estimate recovery factors. In such cases, an analysis of reservoir performance, including production rate, reservoir pressure, and gas-oil ratio behavior, was used in the estimation of
reserves. 
 For depletion-type reservoirs or those whose performance disclosed a reliable decline in
producing-rate trends or other diagnostic characteristics, reserves were estimated by the application of appropriate decline curves or other performance relationships. In the analyses of production-decline curves, reserves were estimated only to the
limits of economic production. 
 Gas quantities estimated herein are expressed as marketable gas and sales
gas at a temperature base of 20 degrees Celsius (°C) and at a pressure base of 1 atmosphere. Marketable gas is defined as the total gas in the reservoirs to be produced after shrinkage resulting from field separation and flare. Marketable
gas includes fuel. Sales gas is defined as the total gas to be produced from the reservoirs, measured at the point of delivery, after reduction for injection, fuel usage, flare, and shrinkage resulting from field separation and plant processing.
Oil, condensate, and NGL reserves estimated herein are expressed in terms of 42 United States gallons per barrel. Oil and condensate reserves estimated herein are to be recovered by normal field separation. PEP has represented that its NGL reserves
have been estimated on the basis of the quantities of liquids recovered from gas delivered to a gas plant for processing, and can include propane, butane, and C5+ fractions. 

 

 

      

  

 4 

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 Definition of Reserves 

Petroleum reserves estimated by PEP included in this report are classified as proved. Only proved reserves
have been evaluated for this report. Reserves classifications used by PEP in this report are in accordance with the reserves definitions of Rules 4–l0(a) (1)–(32) of Regulation S–X of the SEC. Reserves are judged to be economically
producible in future years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. In the analyses of production-decline
curves, reserves were estimated only to the limit of economic rates of production under existing economic and operating conditions using prices and costs consistent with the effective date of this report, including consideration of changes in
existing prices provided only by contractual arrangements but not including escalations based upon future conditions. The petroleum reserves are classified as follows: 

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 (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.

 

 

      

  

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  DEGOLYER AND MACNAUGHTON

 

  

      

  

 (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. 
 Developed oil and gas
reserves – Developed oil and gas reserves are reserves of any category that can be expected to be recovered: 

(i) Through existing wells with existing equipment and operating methods or in which the cost of the
required equipment is relatively minor compared to the cost of a new well; and 
 (ii) Through installed
extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

 

 

      

  

 6 

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 Undeveloped oil and gas reserves – Undeveloped oil
and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. 

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas
that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. 

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has
been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. 

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for
which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in [section 210.4-10 (a) Definitions], or by other evidence using reliable technology establishing reasonable certainty.

 

 

      

  

 7 

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 Primary Economic Assumptions 

The following economic assumptions were used for estimating existing and future prices and costs, expressed
in United States dollars (U.S.$): 
 Oil and Condensate Prices 

PEP has represented that the oil and condensate prices were based on a reference price, calculated as the
unweighted arithmetic average of the first-day-of-the-month price for each month within
the 12-month period prior to the end of the reporting period. As represented by PEP, the reference price utilized is the Mexican Mix reference price, which is composed of the Istmo, Maya, and Olmeca reference
prices and is calculated based on a formula that includes the West Texas Sour, Light Louisiana Sweet, Brent, Oman, and Dubai reference prices. PEP supplied differentials by field to an average Mexican Mix reference price of U.S.$37.44 per barrel and
the prices were held constant thereafter. The volume-weighted average adjusted prices attributable to estimated proved reserves for the fields that were audited were U.S.$34.43 per barrel for oil and U.S.$36.19 per barrel for condensate. These
prices were not escalated for inflation. 
 Gas Prices 

PEP has represented that the gas prices were based on a 12-month
average price, calculated as the unweighted arithmetic average of the
first-day-of-the-month price for each month within the
12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements. Each field’s calorific value, which includes NGL, was used to determine each field’s
gas price. The volume-weighted average adjusted price for the fields that were audited was U.S.$2.85 per thousand cubic feet. These prices were not escalated for inflation. 

Operating Expenses, Capital Costs, and Abandonment Costs 

Operating expenses and capital costs, based on information provided by PEP, were used in estimating future
costs required to operate the properties. In certain cases, future costs, either higher or lower than existing costs, may have been used because of anticipated changes in operating conditions. These costs were not escalated for inflation.
Abandonment costs were provided by PEP. 

 

 

      

  

 8 

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 While the oil and gas industry may be subject to regulatory
changes from time to time that could affect an industry participant’s ability to recover its oil and gas reserves, we are not aware of any such governmental actions which would restrict the recovery of the January 1, 2017, estimated oil,
gas, condensate, and NGL reserves. 
 PEP has represented that its estimated net proved reserves
attributable to the reviewed properties are based on the definition of proved reserves of the SEC. PEP represents that its estimates of the net proved reserves attributable to these properties, which represent 1.5 percent of PEP’s reserves
on a net oil equivalent basis, are as follows, expressed in millions of barrels (MMbbl), billions of cubic feet (Bcf), and millions of barrels of oil equivalent (MMboe): 
  

																									
	 	 	Estimated by PEP
Net Proved Reserves
as of
January 1, 2017	 
	 	 	Oil
(MMbbl)	 	 	Marketable
Gas
(Bcf)	 	 	Sales
Gas
(Bcf)	 	 	Condensate
(MMbbl)	 	 	NGL
(MMbbl)	 	 	Oil
Equivalent
(MMboe)	 
							
	 Properties Reviewed by DeGolyer and MacNaughton
	 				 				 				 				 				 			
	 Veracruz Area
	 				 				 				 				 				 			
							
	 Total Proved
	 	 	47.985	 	 	 	424.212	 	 	 	415.631	 	 	 	0.496	 	 	 	0.767	 	 	 	128.856	 

 Notes: 

1. Oil equivalent is calculated based on oil, marketable gas, and condensate quantities. 

2. Marketable gas is converted to oil equivalent on a field-by-field basis using an energy equivalent factor reflecting the reservoir gas composition of each field. 

In our opinion, the information relating to estimated proved reserves of oil, condensate, natural gas
liquids, and gas contained in this report has been prepared in accordance with Paragraphs 932-235-50-4, 932-235-50-6,
932-235-50-7, and
932-235-50-9 of the Accounting Standards Update
932-235-50, Extractive Industries – Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures (January 2010) of the Financial Accounting
Standards Board and Rules 4–10(a) (1)–(32) of Regulation S–X and Rules 302(b), 1201, and 1202(a) (1), (2), (3), (4), (8) of Regulation S–K of the Securities and Exchange Commission; provided, however, that estimates of proved
developed and proved undeveloped reserves are not presented at the beginning of the year. 

 

 

      

  

 9 

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 To the extent the above-enumerated rules, regulations, and
statements require determinations of an accounting or legal nature, we, as engineers, are necessarily unable to express an opinion as to whether the above-described information is in accordance therewith or sufficient therefor. 

In comparing the detailed net proved reserves estimates prepared by us and by PEP, we have found differences,
both positive and negative, resulting in an aggregate difference of 6.9 percent when compared on the basis of net oil equivalent barrels. It is our opinion that the net proved reserves estimates prepared by PEP on the properties reviewed by us
and referred to above, when compared on the basis of net oil equivalent barrels, in aggregate, are considered reasonable. 

DeGolyer and MacNaughton is an independent petroleum engineering consulting firm that has been providing
petroleum consulting services throughout the world since 1936. DeGolyer and MacNaughton does not have any financial interest, including stock ownership, in PEP. Our fees were not contingent on the results of our evaluation. This letter report has
been prepared at the request of PEP. DeGolyer and MacNaughton has used all assumptions, data, procedures, and methods that it considers necessary and appropriate to prepare this report. 

 

			
		  	Submitted,
		
		  	

		  	DeGOLYER and MacNAUGHTON
		  	Texas Registered Engineering Firm F-716

  

 
  

											
		  	

	  		 	

	 	
		  		  		 		 	  
	 	
		  		  		 		 	Michael J. Callahan, P.E.	 	
		  		  		 		 	Vice President	 	
		  		  		 		 	DeGolyer and MacNaughton	 	

 
 

 

      

  

       

  DEGOLYER AND MACNAUGHTON

 

  

      

  

 CERTIFICATE of QUALIFICATION 

 I, Michael J. Callahan, Petroleum Engineer with DeGolyer and MacNaughton, 5001 Spring Valley Road,
Suite 800 East, Dallas, Texas, 75244 U.S.A., hereby certify: 
  

	 	1.	 That I am a Vice President of DeGolyer and MacNaughton, which company did prepare the letter report addressed
to PEP dated April 17, 2017, and that I, as Vice President, was responsible for the preparation of this letter report. 
	 

  

	 	2.	 That I attended the University of Missouri at Rolla, and that I graduated with a degree in Petroleum
Engineering in the year 1978; that I am a Registered Professional Engineer in the State of Texas; that I am a member of the International Society of Petroleum Engineers; and that I have in excess of 36 years of experience in the oil and gas
reservoir studies and reserves evaluations. 
	 

  
  

 

											
		  	 

  
  
	  		 	

	  	
		  	  	 		 	  
	  
		  	  	 		 	 Michael J. Callahan, P.E.
 Vice
President
 DeGolyer and MacNaughtonEX-10.1

EX. 10.1

NEITHER THE ISSUANCE AND SALE OF THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR OTHER EXEMPTION UNDER SAID ACT.

THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS PROHIBITED EXCEPT IN ACCORDANCE WITH THE
SECURITIES ACT OF 1933, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.

VIASPACE INC.

SENIOR CONVERTIBLE PROMISSORY NOTE

$15,000.00 April 25, 2017

FOR VALUE RECEIVED, VIASPACE INC., a Nevada corporation (“Company”), promises to pay to Kevin
Schewe (“Holder”), or its registered assigns, in lawful money of the United States of America the
principal sum of FIFTEEN THOUSAND Dollars ($15,000.00), or such other amount as shall equal the
outstanding principal amount hereof, together with interest from the date of this Note on the
unpaid principal balance at a rate equal to eight percent (8.0%) per annum, computed on the basis
of the actual number of days elapsed and a year of 365 days. Unless converted into Common Stock of
Company as set forth in Section 3 and/or Section 8 below, all unpaid principal, together with any
then unpaid and accrued interest, shall be due and payable on the earlier of (i) April 25, 2018
(the “Maturity Date”), (ii) upon prepayment of all amounts due and payable under this Note in
accordance with the terms hereof, or (iii) when, upon or after the occurrence of an Event of
Default (as defined below), such amounts are declared due and payable by Holder or made
automatically due and payable in accordance with the terms hereof. Immediately prior to the
issuance of this Note by Company, Holder acknowledges that it has delivered to Company the sum of
FIFTEEN THOUSAND Dollars ($15,000.00) reflecting the principal amount under this Note.

This Note is one of a series of notes (the “Notes”) having like tenor and effect (except for
variations necessary to express the name of the holder, the principal amount of each of the Notes
and the date on which each Note is funded) in an aggregate principal amount of up to $100,000
issued or to be issued by Company on or about the period from February 23, 2017 to February 23,
2019 (or such other period as agreed upon by the Company and the Holder) pursuant to the terms of a
Loan Agreement, dated as of February 23, 2017, by and between Company and the Holder (or his
designees) of the Notes (the “Loan Agreement”). The Notes shall rank equally without preference or
priority of any kind over one another, and all payments on account of principal and interest with
respect to any of the Notes shall be applied ratably and proportionately on the outstanding Notes
on the basis of the principal amount of the outstanding indebtedness represented thereby.

The following is a statement of the rights of Holder and the conditions to which this Note is
subject, and to which Company by issuance of this Note, and Holder by the acceptance of this Note,
agree:

1. Definitions. As used in this Note, the following capitalized terms have the
following meanings:

(a) “Common Stock” shall mean the Company’s Common Stock, par value $0.0001.

(b) “Company” includes the corporation initially executing this Note and any Person which
shall succeed to or assume the obligations of Company under this Note.

(c) “Conversion Notice” has the meaning given in Section 7(e) hereof.

(d) “Conversion Period” shall mean the period from the date of the Note and ending on the
Maturity Date.

(e) “Conversion Price” has the meaning given in Section 7(b) hereof

(f) “Event of Default” has the meaning given in Section 6 hereof.

(g) “Holder” shall mean the Person specified in the introductory paragraph of this Note or any
Person who shall at the time be the registered holder of this Note. “Holders” shall mean the
Persons collectively specified in the introductory paragraph of this Note and the other Notes or
any Persons who shall at the time be the registered holders of this Note and the other Notes.

(h) “Majority Holders” shall mean Holders holding a majority of the aggregate principal amount
of the Notes then outstanding.

(i) “Note” shall mean this Senior Convertible Promissory Note.

(j) “Obligations” shall mean and include all loans, advances, debts, liabilities and
obligations owed by Company to Holder of every kind and description, now existing or hereafter
arising under or pursuant to the terms of this Note including, all interest, fees, charges,
expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by
Company hereunder.

(k) “Person” shall mean and include an individual, a partnership, a corporation (including a
business trust), a joint stock company, a limited liability company, an unincorporated association,
a joint venture or other entity or a governmental authority.

(l) “Prepayment Amount” has the meaning given in Section 3 hereof

(m) “Prepayment Notice” has the meaning given in Section 3 hereof.

(n) “Sale Transaction” shall mean a transaction or series of related transactions involving
(i) the consolidation or merger of Company with another Person, (ii) a sale of all or substantially
all of the assets of Company, (iii) a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of capital stock of Company, (iv) the
consummation of a stock purchase agreement or other business combination with another Person
whereby such other Person acquires more than the 50% of the outstanding capital stock of Company.

(o) “Securities Act” has the meaning given in Section 5(b) hereof.

(p) “Loan Agreement” has the meaning in the second introductory paragraph of this Note.

(q) “Successor Entity” has the meaning given in Section 10 hereof.

Capitalized term not otherwise defined shall have the meaning set forth in the Loan Agreement.

2. Interest. Unless converted into Common Stock of Company as set forth in Section 8
below, or unless prepaid or converted as set forth in Section 3 below, accrued interest on this
Note shall be payable on the Maturity Date.

3. Prepayment. During the Conversion Period, Company may, at any time and from time
to time, prepay all or any portion of the principal due under this Note, together with accrued
interest, without penalty. Company shall effect such prepayment by providing Holder twenty (20)
days written notice prior to the date of such prepayment (such notice, a “Prepayment Notice”)
indicating the amount of principal and accrued interest Company desires to prepay (the “Prepayment
Amount”). Notwithstanding the foregoing, Holder shall have 10 days following receipt of such
Prepayment Notice to notify Company in writing of its election to convert the Prepayment Amount
into shares of Common Stock, in which case such Prepayment Amount shall be converted into shares of
Common Stock in accordance with the conversion procedures set forth in Section 8(e) hereof
(provided that, with respect to conversions effected pursuant to this Section 3, any references to
the Conversion Amount in Section 8(e) shall refer to the Prepayment Amount). Should Holder elect
to convert the Prepayment Amount into shares of Common Stock, the number of shares of Common Stock
into which such Prepayment Amount will be converted shall be determined by dividing the Prepayment
Amount by the then applicable Conversion Price.

4. Representations and Warranties of Holder. Holder represents and warrants to Company
as follows:

(a) Binding Obligation. Holder has full legal capacity, power and authority to execute
and deliver this Note and to perform his obligations hereunder. This Note is a valid and binding
obligation of Holder, enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the enforcement of
creditors’ rights generally and general principles of equity.

(b) Securities Law Compliance. Holder has been advised that this Note has not been
registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state
securities laws and, therefore, cannot be resold unless they are registered under the Securities
Act and applicable state securities laws or unless an exemption from such registration requirements
is available. Holder is aware that Company is under no obligation to effect any such registration
with respect to this Note, or the Common Stock issuable or issued pursuant to the conversion of
this Note, or to file for or comply with any exemption from registration. Holder has not been
formed solely for the purpose of making this investment and is purchasing this Note for its own
account for investment, not as a nominee or agent, and not with a view to, or for resale in
connection with, the distribution thereof. Holder has such knowledge and experience in financial
and business matters that Holder is capable of evaluating the merits and risks of such investment,
is able to incur a complete loss of such investment and is able to bear the economic risk of such
investment for an indefinite period of time.

(c) Accredited Investor. Holder is an “accredited investor” within the meaning of SEC
Rule 501 of Regulation D of the Securities Act, as presently in effect.

(d) Restricted Securities. Holder understands that this Note is a “restricted
security” under the federal securities laws inasmuch as it is being acquired from Company in a
transaction not involving a public offering and that under such laws and applicable regulations
such Note may be resold without registration under the Securities Act only in certain limited
circumstances. In the absence of an effective registration statement covering the Note or an
available exemption from registration under the Securities Act, the Note must be held indefinitely.
Holder represents that it is familiar with SEC Rule 144, and understands the resale limitations
imposed thereby and by the Securities Act.

(e) Access to Information. Holder acknowledges that Company has given Holder access
to the corporate records and accounts of Company and to all information in its possession relating
to Company, has made its officers and representatives available for interview by Holder, and has
furnished Holder with all documents and other information required for Holder to make an informed
decision with respect to the purchase of this Note.

5. Events of Default. The occurrence of any of the following shall constitute an
“Event of Default” under this Note:

(a) Failure to Pay. Company shall fail to pay (i) when due any principal or interest
payment on the due date hereunder or (ii) any other payment required under the terms of this Note
on the date due, and (in either case) such payment shall not have been made within twenty (20) days
of Company’s receipt of Holder’s written notice to Company of such failure to pay;

(b) Failure to Perform. Company fails to perform any obligation under this Note and
does not cure that failure within twenty (20) days of Company’s receipt of Holder’s written notice
to Company of such failure to perform; or

(c) Voluntary Bankruptcy or Insolvency Proceedings. Company shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined
or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such
relief or to the appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose
of effecting any of the foregoing; or

(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment
of a receiver, trustee, liquidator or custodian of Company or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization
or other relief with respect to Company or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an order for relief entered or
such proceeding shall not be dismissed or discharged within thirty (30) days of commencement.

6. Rights of Holder upon Default. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in Sections 6(c) and 6(d)) and at any time
thereafter during the continuance of such Event of Default, the Majority Holders may, by written
notice to Company, declare all outstanding Obligations payable by Company under the Notes to be
immediately due and payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived. Upon the occurrence or existence of any Event of Default
described in Sections 6(c) and 6(d), immediately and without notice, all outstanding Obligations
payable by Company under the Notes shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are hereby expressly
waived. In addition to the foregoing remedies, upon the occurrence or existence of any Event of
Default, Holder may exercise any other right power or remedy permitted to him by law, either by
suit in equity or by action at law, or both.

7. Conversion.

(a) Conversion. Holder shall have the right to convert, at any time during the
Conversion Period, all or any portion of the principal amount, together with any unpaid and accrued
interest, then outstanding under this Note into fully paid and non-assessable shares of Common
Stock at a conversion price per share equal to the Conversion Price (as defined below). The number
of shares of Common Stock into which such principal and interest then outstanding under this Note
will be converted shall be determined by dividing the amount of principal, together with all unpaid
and accrued interest, then outstanding under this Note to be converted (the “Conversion Amount”) by
the Conversion Price. The holder will not convert the note into a number of common shares that
would exceed the number of available authorized common shares calculated as of the date of
conversion as follows: the number of authorized shares of common stock less the number of issued
and outstanding shares of common stock less the number of shares of common stock issuable under all
other outstanding convertible instruments of the Company.

(b) Conversion Price. Subject to Section 8(c), the “Conversion Price” shall be equal
to twenty per cent (20%) of the Average Closing Price as reported by the principal trading exchange
on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date
of the Note.

(c) Adjustments to Conversion Price. The Conversion Price shall be subject to
proportional adjustments for stock splits, stock dividends, combinations, consolidations,
reclassifications and the like.

(d) Conversion Procedure. Before Holder shall be entitled to convert the Conversion
Amount then outstanding under this Note into shares of Common Stock, Holder shall surrender this
Note at the office of this Company, and shall give written notice (a form of which is attached to
this Note, the “Conversion Notice”) to Company at its principal corporate office, of the election
to convert the same and shall state therein the total Conversion Amount. Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion
unless (i) Holder executes and delivers to Company the Conversion Notice for the converted shares
and (ii) this Note is delivered to Company. Company shall, as soon as practicable after such
delivery, issue and deliver certificates (bearing such legends as are required by applicable state
and federal securities laws in the opinion of counsel to Company and required by this Note and the
Loan Agreement), representing the number of fully paid and non-assessable shares of the Common
Stock into which the Conversion Amount will be converted in accordance with the provisions herein,
and a new promissory note having like tenor as this Note for the principal amount and interest then
outstanding under this Note that are not being so converted. Any conversion pursuant to this
Section 8 shall be deemed to have been made immediately prior to the close of business on the date
of Company’s receipt of the Conversion Notice, so that the rights of Holder under this Note to the
extent of the Conversion Amount shall cease at such time and Holder shall be treated for all
purposes as having become the record holder of such shares of Common Stock at such time.

(e) Fractional Shares; Effect of Conversion. No fractional shares shall be issued
upon conversion of this Note. In lieu of Company issuing any fractional shares to Holder upon the
conversion of this Note, Company shall pay to Holder an amount equal to the product obtained by
multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous
sentence. Upon conversion of this Note in full and the payment of the amounts specified in this
Section 9(f), Company shall be forever released from all its obligations and liabilities under this
Note.

(f) Reservation of Stock Issuable Upon Conversion. Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of this Note such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of this Note.

8. Reserved

9. Effect of Sale Transaction. Upon the occurrence of any Sale Transaction, the
Successor Entity (as defined below) shall succeed to, and be substituted for the Company (so that
from and after the date of such Sale Transaction, the provisions of this Note referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every right and power of
the Company and shall assume all of the obligations of the Company under this Note with the same
effect as if such Successor Entity had been named as the Company herein. Upon consummation of the
Sale Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be
issued upon conversion of this Note at any time after the consummation of the Sale Transaction, in
lieu of the shares of the Common Stock purchasable upon the conversion of the Notes prior to such
Sale Transaction, such shares of common stock (or other securities, cash, assets or other property)
of the Successor Entity. The provisions of this Section shall apply similarly and equally to
successive Sale Transactions and shall be applied without regard to any limitations on the
conversion of this Note. As used in this Section 10, “Successor Entity” means the Person, which
may be the Company, formed by, resulting from or surviving any Sale Transaction, or the parent
entity of such Person, as applicable.

10. Successors and Assigns. Subject to the restrictions on transfer described in
Sections 12 and 13 below, the rights and obligations of Company and Holder of this Note shall be
binding upon and benefit the successors, assigns, heirs, administrators and transferees of the
parties.

11. Waiver and Amendment. Any term of this Note may be amended or waived only with
the written consent of Company and the Majority Holders; provided, however, that any such amendment
or modification which by its terms would not apply equally to all holders of the Notes shall not be
applicable to any holder whose rights under the Notes would be adversely affected by such amendment
or modification in a different manner than other holders thereof without such adversely affected
holder’s written consent.

12. Transfer of this Note or Securities Issuable on Conversion Hereof. With respect
to any offer, sale or other disposition of this Note or securities into which such Note may be
converted, Holder will give written notice to Company prior thereto, describing briefly the manner
thereof, together with a written opinion of Holder’s counsel, or other evidence if reasonably
satisfactory to Company, to the effect that such offer, sale or other distribution may be effected
without registration or qualification (under any federal or state law then in effect). Upon
receiving such written notice and reasonably satisfactory opinion, if so requested, or other
evidence, Company, as promptly as practicable, shall notify Holder that Holder may sell or
otherwise dispose of this Note or such securities, all in accordance with the terms of the notice
delivered to Company. If a determination has been made pursuant to this Section 12 that the
opinion of counsel for Holder, or other evidence, is not reasonably satisfactory to Company,
Company shall so notify Holder promptly after such determination has been made. Each Note thus
transferred and each certificate representing the securities thus transferred shall bear a legend
as to the applicable restrictions on transferability in order to ensure compliance with the
Securities Act, unless in the opinion of counsel for Company such legend is not required in order
to ensure compliance with the Securities Act. Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by or on behalf of
Company. Prior to presentation of this Note for registration of transfer, Company shall treat the
registered Holder hereof as the owner and Holder of this Note for the purpose of receiving all
payments of principal and interest hereon and for all other purposes whatsoever, whether or not
this Note shall be overdue and Company shall not be affected by notice to the contrary.

13. Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be to the respective addresses or facsimile
numbers of the parties as set forth in the Loan Agreement, or at such other address or facsimile
number as such parties shall have furnished in writing.

14. Usury. In the event any interest is paid on this Note which is deemed to be in
excess of the then legal maximum rate, then that portion of the interest payment representing an
amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.

15. Waivers. Company hereby waives notice of default, presentment or demand for
payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to
this instrument.

16. Governing Law and Forum. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with the laws of the
State of Colorado, United States of America, without regard to the conflicts of law provisions of
the State of Colorado, or of any other state. All disputes or controversies relating to or arising
from this Note shall be adjudicated in the state and federal courts located in the state of
Colorado. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION
WITH RESPECT TO THIS NOTE AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER. The Convention on Contracts for the International Sale of Goods shall not apply to this
Note.

[Remainder of Page Intentionally Left Blank]

1

IN WITNESS WHEREOF, Company has caused this Note to be issued as of the date first written
above and Holder agrees to the terms and conditions of this Note.

VIASPACE INC.

By:/S/ HARIS BASIT

Name: Haris Basit

Its: CEO

KEVIN SCHEWE

/S/ KEVIN SCHEWE

NOTICE OF CONVERSION

(To be executed by the Registered Holder in order to convert the Note)

The undersigned hereby elects to convert $15,000.00 of the principal and $0.00 of the interest
due on the Note issued by VIASPACE Inc. on April 25, 2017 into Shares of Common Stock of VIASPACE
Inc. (the “Borrower”) according to the conditions set forth in such Note, as of the date written
below.

Date of Conversion:       April 25, 2017      

Conversion Price:      $0.000310      

Shares To Be Delivered:      48,387,097      

Signature:      /S/ KEVIN SCHEWE—

Print Name:       Kevin Schewe—

Address:      

2

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