Investor Presentation

1. Investor Presentation
July 2012
1

2. Forward Looking Statements
In the interest of providing potential investors with information regarding Shona Energy Company, Inc. (“Shona"), including management's assessment of the future plans and operations of Shona, certain
statements contained in this corporate presentation constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation.
Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook",
"potential", "target" and similar words suggesting future events or future performance In addition statements relating to "reserves" are deemed to be forward looking statements as they involve the implied
potential target performance. addition, reserves forward-looking
assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. Forward looking statements
or information in this presentation include, but are not limited to, statements or information with respect to: the expected closing date and use of proceeds from the financing; potential reserves and future
production with respect to current assets business strategy and objectives; development plans; exploration and drilling plans; reserve quantities and the discounted present value of future net cash flows from
such reserves; future production levels; wells drilled (gross and net); capital expenditures; cash flow; debt levels; operating and other costs; royalty rates and taxes.
With respect to forward-looking statements contained in this corporate presentation, Shona has made assumptions regarding, among other things: future capital expenditure levels; future oil and natural gas
prices; future oil and natural gas production levels; future exchange rates and interest rates; ability to obtain equipment in a timely manner to carry out development activities; ability to market oil and natural
gas successfully to current and new customers; the impact of increasing competition; the ability to obtain financing on acceptable terms; and ability to add production and reserves through development and
exploitation activities. Alth
l it ti ti iti Although Sh
h Shona b li
believes th t th expectations reflected i th f
that the t ti fl t d in the forward l ki statements contained i thi corporate presentation, and th assumptions on which such f
d looking t t t t i d in this t t ti d the ti hi h h forward-looking
d l ki
statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in
this corporate presentation, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking
statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will
not occur, which may cause Shona's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by
such forward-looking statements. These risks and uncertainties include, among other things, the ability of management to execute its business plan; general economic and business conditions; the risk of
instability affecting the jurisdictions in which Shona operates; the risks of the oil and natural gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas and
market demand; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; risks and uncertainties involving geology of oil and natural gas deposits;
the uncertainty of reserves estimates and reserves life; the ability of Shona to add production and reserves through acquisition, development and exploration activities; Shona's ability to enter into or renew
leases; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to production (including decline
rates), costs and expenses; fluctuations in oil and natural gas prices, foreign currency exchange rates and interest rates; risks inherent in Shona's marketing operations, including credit risk; uncertainty in
amounts and timing of royalty payments; health, safety and environmental risks; risks associated with existing and potential future law suits and regulatory actions against Shona; uncertainties as to the
availability and cost of financing; and financial risks affecting the value of Shona’s investments. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties.
Any financial outlook or future oriented financial information in this corporate presentation, as defined by applicable securities legislation, has been approved by management of Shona. Such financial outlook
or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on
such information may not be appropriate for other purposes.
The forward-looking statements contained in this corporate presentation speak only as of the date of this corporate presentation. Except as expressly required by applicable securities laws, Shona does not
undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this
corporate presentation are expressly qualified by this cautionary statement.
The information contained in this corporate presentation does not purport to be all-inclusive or to contain all information that a prospective investor may require. Prospective investors are encouraged to
conduct their own analysis and reviews of Shona, and of the information contained in this corporate presentation. Without limitation, prospective investors should consider the advice of their financial, legal,
accounting, tax and other advisors and such other factors they consider appropriate in investigating and analyzing Shona.
2

3. Forward Looking Statements
For the purposes of the following, “Misrepresentation” means an untrue statement of a material fact, or an omission to state a material fact that is required to be stated, or that is necessary to make a
statement not misleading in light of the circumstances in which it was made. If this presentation contains a Misrepresentation, a purchaser in Ontario who purchases securities of Shona has, without regard
to whether the purchaser relied on the Misrepresentation, a statutory right of action for rescission or, alternatively, for damages against Shona, provided that no action shall be commenced to enforce a right
of action more than (a) in the case of an action for rescission, 180 days after the date of the transaction that gave rise to the cause of action; or (b) in the case of any action, other than an action for
rescission, the earlier of (i) 180 days after the purchaser first had knowledge of the facts giving rise to the cause of action, or (ii) three years after the date of the transaction that gave rise to the cause of
action.
action
Shona will not be liable if it proves that the purchaser purchased the securities with knowledge of the Misrepresentation. In an action for damages, Shona will not be liable for all or any portion of those
damages that it proves do not represent the depreciation in value of the securities as a result of the Misrepresentation. In no case will the amount recoverable exceed the price at which the securities were
sold to the purchaser. Investors should refer to the applicable provisions of the securities legislation of their respective provinces or territories for the particulars of these rights or consult with a legal advisor.
Forecast capital expenditures are based on Shona’s current budgets and development plans which are subject to change based on commodity prices, market conditions, drilling success, potential timing
delays and access to cash, cash flow, available credit and third party participation. Shona’s capital budget has been prepared based upon anticipated costs for equipment and services which are subject to
fluctuation based upon market conditions, availability and potential changes or delays in capital expenditures.
Additionally, forecast capital expenditures do not include capital required to pursue future acquisitions. Anticipated production growth has been estimated based on (i) the proposed drilling program with a
success rate based upon historical drilling success and an evaluation of the particular wells to be drilled and has been risked, and (ii) current production and anticipated decline rates. Although the forward-
looking information contained herein is based upon assumptions which Management believes to be reasonable, Shona cannot assure investors that actual results will be consistent with this forward-looking
information.
“Best Estimate” is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best
estimate. If probabilistic methods are used, there should be at least a 50 Percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
“High Estimate” is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If
probabilistic methods are used there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate
used, estimate.
“Low Estimate” is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic
methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
“Mean Estimate” is the statistical mean resource value for each exploration prospect. The statistical mean is dependent on the estimated probabilistic distribution of recoverable resources and is not the
same as the “best estimate” or P50 resource volume. These values can be arithmetically summed to obtain a total mean estimate for a group of prospects.
“Management Estimates” means the evaluation conducted by qualified reserves evaluators of the Shona technical team, effective 01 January 2012.
“Prospective Resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.
Prospective resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with
recoverable estimates assuming their discovery and development and may be subclassified based on project maturity. Unless otherwise indicated herein, the Prospective Resources set out in this
presentation are unrisked, meaning that they are not risked for chance of development or chance of discovery.
Estimates of unrisked Prospective Resources are pursuant to Management Estimates. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will
be commercially viable to produce any portion of the resources. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no certainty as to the timing of such
development.
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the
wellhead.
wellhead
Analogous Information
Certain noted drilling and completion data provided in this document may constitute "analogous information", such as mapping information obtained in geographical proximity to prospective exploratory lands
to be held by Shona. Such information has been obtained from government sources, regulatory agencies or other industry participants. Management of Shona believes the information is relevant as it helps
to define the reservoir characteristics in which Shona may hold an interest. Shona is unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor or in
accordance with the COGE Handbook and therefore, the reader is cautioned that the data relied upon by Shona may be in error and/or may not be analogous to such lands to be held by Shona.
3

4. Corporate History & Overview
• Shona Energy Company, Inc. (“Shona”) – based in Houston, founded in January 2005, focused on oil & gas exploration
and development in Colombia and Peru
Esperanza development and exploration block in Colombia with production, reserves and resource potential to support expanded gas marketing efforts
in Colombia
3 exploration blocks in Colombia located in the country’s prolific heavy oil belt
1 exploration block in Peru located in the prolific Maranon Basin
• Shona is a registered British Columbia company listed on the TSX Venture Exchange under the symbol “SHO” and on
the OTCQX International under the symbol “SHOAF”
• We have an experienced management team that has produced significant shareholder value throughout their careers
and an independent B
d i d d t Board of Di
d f Directors with interests directly aligned with shareholders
t ith i t t di tl li d ith h h ld
• Our shareholder base is reasonably concentrated with several large shareholders
January 1 2012 N t R
J 1, Net Reserves*
* EBITDA
P1 64 BCF 2011 ($10.8 million)
P2 31 BCF 2012 (proj.) $16 million
P3 78 BCF
Total 173 BCF
*Per Collarini Associates January 01, 2012 Reserves Report
4

5. Capitalization Structure & Financial Highlights
Common Shares 232,675,283
Preferred Shares 190,796
Warrants 40,145,993
Stock Options 7,880,000
As of June 01, 2012:
Share Price (CAD) $0.31
52 Week Range (CAD) $0.20 - $0.75
Market Capitalization (CAD) $72.1 million
Cash at March 31 2012 (USD)
31, $16.9
$16 9 million
5

6. Value Creation & Growth Strategy
Esperanza Block – Colombia
Existing firm gas sales of 14 mmcfd going to 15.5 mmcfd on January 01, 2014
Expanded marketing opportunities under evaluation supported by reserves and resource base
− Additional 30 mmcfd available from existing wells, development and low-risk exploration projects
− Supplementary reserves and deliverability from prospects identified in 3-D seismic programs
Strategic Financial Planning
Prudent and conservative expenditure program
Common stock buyback program
Potential restructuring of debt
Serrania,
Serrania Los Picachos and Macaya Blocks – Colombia
Fault trap look-alike prospect to offsetting Capella Field (2.2 billion barrels OOIP)
Very large, four-way closure
Anticipated drilling in 2013
Block 102 – Peru
Focus exploration activity on trends having larger reserve potential
Corporate Development
Merger and acquisitions
New projects
6

7. Overview of Assets
Esperanza
Block
VENEZUELA
SHONA GROSS NET
PROPERTY OPERATOR Serrania COLOMBIA
W.I. ACRES ACRES
Block
Los Pi
L Picachos
h
Esperanza Block Shona Block
100% 60,002 60,002
(Colombia) (Geoproduction)
Macaya
Serrania Block ECUADOR
Block
Hupecol 37.5% 110,769 41,538
(Colombia)
PERU
Los Picachos Block
Hupecol 37.5% 52,771 19,789
(Colombia)
Block 102 BRAZIL
Macaya Block
Hupecol 37.5% 195,254 73,220
(Colombia)
Block 102
Pluspetrol 36.5% 313,023 114,253
(Peru)
TOTAL 731,819 308,803
BOLIVIA
7

8. Esperanza Block - Overview
Proven exploration concept with 3D
seismic and AVO anomalies
January 1, 2012 Net Reserves*
P1 64 BCF
P2 31 BCF
P3 78 BCF
Total 173 BCF
Potential 100 BCF (unrisked) on existing
prospects that have AVO anomalies
Currently evaluating five areas identified
y g
in the 2012 seismic program which have
AVO anomalies
Will make a gas marketing decision in
Q3 2012 based on updated reserve
potential
8 *Gross reserves as per Collarini Associates NI 51-101 compliant reserves report effective January 1, 2012

9. Esperanza Block – Time Structure Map
 3D seismic indicates
that the Nelson
structure has an
Kite or Palmer Extension aerial extent of 1,600
1 600
(7 BCF)** acres
Nelson-5
Development Well
 Three wells capable
Nelson-4 of 25 MMCFPD for
Development Well
five years
y
Nelson-2
Discovery Well  Five wells should
allow for full field
Nelson-3 development of 40
Confirmation Well MMCFPD, depending
on additional gas
dditi l
Nelson-1 sales contracting
Palmer Prospect
Development Well
(30 BCF)**
 Palmer prospects
AVO Outline
show similar seismic
Nelson Field characteristics as
(163 BCF)* Nelson field
*Gross reserves as per Collarini Associates NI 51-101 compliant reserves report effective January 1, 2012
**Management estimates based upon area of AVO (seismic ) anomaly
9

10. Esperanza Block – Technical Details
Nelson-2 Seismic, Log, and Pressure Plot
 Nelson-2 Discovery well
• Tested 8 5 MMCFPD from two upper intervals (48 ft of pay) 36/64” choke FTP 2 520 psi
8.5 ft. pay), 36/64 choke, 2,520
• Calculated potential flow (“CAOF”) of 77 MMCFPD
• 135’ net pay in 470’ gas column
• 22-26% porosity, 600-700 millidarcies
• Confirmed 3D seismic Type III gas AVO and flat spot, confirmed height of the gas column
10

11. Esperanza Block – Reserve Potential
(Post 2012 Seismic Program)
11

12. Esperanza Block – Infrastructure & Marketing
Alternatives
Potential Sales
Project Timeline
Increase
Additional Sales to Current
5 mmcfd 2012
Customers
18-24
Micro LNG Plant 17 mmcfd
months
th
Proposed Promigas Pipeline 18-24
20 mmcfd
Loop months
Co-Gen or Power 18-24
26 mmcfd
Generation months
18-24
End-User Pipeline TBD
months
18-24
Export ??
months
18-24
Large End-Users ??
months
12

13. Esperanza Block – Monetization
RESERVES, BCF PROJECT ECONOMIC IMPACT
Existing Contracts
E i ti C t t
Producing Fields 14 mmcfd (52 BCF) $16 MM/year CF
Add’l Contracts
70 BCF 5 mmcfd (18 BCF) $6 MM/year CF
Micro LNG Plant (17 mmcfd)
Producing Fields and/or
Pipeline Loop (20 mmcfd) $32 MM/year CF
120 BCF or 30 mmcfd and/or
End-User Pipeline (TBD mmcfd)
Prospect Inventory Co-Gen (26 mmcfd)
Palmer and/or
Power Plant (TBD mmcfd)
N. Tablon-11
and/or $22 MM/year CF
Others Export (?? mmcfd)
and/or
100 BCF or 20 mmcfd Large End-User (?? mmcfd)
2012 Seismic Program
TBD TBD
(TBD) BCF
*Assumes future gas sales at $5.00/mcf and 10 year contracts
13

14. Esperanza Block – Growth Profile
Cumulative Capital Expenses
100
90
80
70
$MM USD 60 14mmcfd
50 5mmcfd
40
30mmcfd
30 fd
$
30
20 20mmcfd
10
0
Cumulative Cash Flow*
1000.0
800.0
14mmcfd Assumes f t
A future gas sales at
l t
MM $USD
600.0 $5.00/mcf and 10 year contracts
5mmcfd
400.0 30mmcfd
200.0 20mmcfd
TBD
0.0
00
*After Tax, Before Financing and Capital
14

15. Prolific Andean Foreland Basin
Shona’s oil prospects are located within VENEZUELA
the Andean Foreland Basin – a region of
significant oil discovery
Serrania,
Serrania COLOMBIA
− Efficient oil generation and migration Los Picachos,
& Macaya Llanos Basin
systems Blocks
− Excellent quality reservoirs Putumayo
Basin
− L
Low relief structures trap oil
li f t t t il
Oriente Basin
− Over 3 billion barrels of recoverable oil
have been found in these basins ECUADOR
− All these basins continue to be
actively explored Maranon
Basin
PERU
BRAZIL
Existing Oilfields
15

16. Southern Colombian Heavy Oil Belt
Llanos
Basin
Macaya
Block
Rubiales Field
Serrania
Block
Heavy Oil
Belt
Los Picachos
Block
Caguan Basin
Orito Field
Capella Field
> 230 MMBO
2.2 BBO OOIP
produced
Exploration Blocks
Production Area
Serrania Block
Heavy Oil Belt
Natural Reserves
Putumayo Basin
16

17. Caguan Basin Assets – Overview
Serrania, Los Picachos & Macaya Blocks
• Working Interests: Shona 37.5%, Hupecol (Operator)
50.0%, Houston American Energy 12.5%
• Large acreage position on trend with Capella Field
358,794 gross acres
134,547 net acres
• Serrania Licensed in 2008 and Los Picachos and Macaya
Licensed in 2011: 6 years exploration, 24 years
production
8% royalty up to 5,000 BOPD up to 20% at 125,000 BOPD
• Application pending for suspension of License terms
due to security concerns
• Exploratory well planned 2013
• Significant potential
In management’s opinion, acreage contains one of largest
management s opinion
undrilled 4-way closure structures in northern South America
with 150 MMBO potential
Serrania targets Mirador formation; production potential
should be similar to the Capella Field which has potential
recoverable reserves of 200 MMBLS of 10°- 12°API oil
Two fault trap prospects with 50 MMBO potential (each) on
Serrania and Los Picachos Blocks
17

18. Caguan Basin Assets – Seismic
Serrania Fault Trap Prospect
Line Y-1973-08 Line S-2009-08
Serrania Fault Trap Prospect
Capella Field
Mirador SS
18

19. Caguan Basin Assets – Seismic
Serrania Four-Way Closure Prospect
Line S-2009-02
Serrania Four-way Closure Prospect
19

20. Caguan Basin Assets - Summary
If Successful, It Has Major Upside Potential
In management’s opinion, more than 250 MMBO gross recoverable potential
Additional 300,000 gross acres with significant upside
Low royalty with no X-factor
Low “Ante”
Approximately $5MM total (net to Shona) for two exploration wells
Synergy with Capella Field Development
Larger reserve base helps justify construction of a pipeline to the area
Reduced CapEx and OpEx through sharing of service companies
Major Value Creator for Shona
Significant long-life reserves
Constant cash flow
20

21. Prolific Andean Foreland Basin
Shona’s oil prospects are located within VENEZUELA
the Andean Foreland Basin – a region of
significant oil discovery
COLOMBIA
− Efficient oil generation and migration
Llanos Basin
systems
− Excellent quality reservoirs Putumayo
Basin
− L
Low relief structures trap oil
li f t t t il
Oriente Basin
− Over 3 billion barrels of recoverable oil
have been found in these basins ECUADOR
− All these basins continue to be Block 102
actively explored Maranon
Basin
PERU
BRAZIL
Existing Oilfields
21

22. Block 102 - Overview and Targets
Working Interests: Shona 36.5%, Pluspetrol
g , p
(Operator) 51%, Andean Oil & Gas 12.5%
Located in prolific Peruvian Maranon Basin
313,023 gross acres
114,253
114 253 net acres
Licensed in 2006: 7 year exploration
term and 30 year oil production term
Royalties:
0 to 5,000 BOPD 5%
5,001 to 100,000 BOPD 5-20%
Reevaluating potential for long-term test on
Boa Oeste-1X well drilled in Dec 2011
Future exploration
Focus activity on Capahuari and Macusari
trends with higher reserve potential
22

23. Shona Energy Company
Summary of Current Situation
Producing gas asset in Colombian Lower Magdalena Basin
OpEx is low and will decrease dramatically on a unit basis with any new production
Solid 7-10 year contracts for 14 mmcfd increasing to 15.5 mmcfd in two years
Initiating aggressive gas marketing solution by the end of July
Three blocks with oil potential in the Colombian Caguan Basin
Minimal capital requirements to get to development phases
If successful, development capital should be easily financed
One block with oil potential in the Peruvian Maranon Basin
Exploration focus on geological trends with larger reserve potential
Synergy with offsetting block having large infrastructure and oil pipeline
23

24. Why Invest?
24

25. Why Invest?
Value Creation
25

26. Why Invest?
Value Creation Through Exploration
Demonstrated success at Esperanza
D t t d tE
Significant exploration potential following 2012 3-D seismic on Esperanza
Exposure to a potential major oil discovery at minimal capital cost
Maranon Basin in Peru provides modest to large reserve potential
26

27. Why Invest?
Value Creation Through Exploration
Demonstrated success at Esperanza
D t t d tE
Significant exploration potential following 2012 3-D seismic on Esperanza
Exposure to a potential major oil discovery at minimal capital cost
Maranon Basin in Peru provides modest to large reserve potential
Value Creation Through Marketing
Current asset base capable of supporting 3x production levels with minimum capital investment
Current asset base and prospect inventory capable of supporting 5x production levels with additional capital investment
2012 seismic survey can provide possible upside
Capital used for increased gas sales are high ROR projects
27

28. Why Invest?
Value Creation Through Exploration
Demonstrated success at Esperanza
D t t d tE
Significant exploration potential following 2012 3-D seismic on Esperanza
Exposure to a potential major oil discovery at minimal capital cost
Maranon Basin in Peru provides modest to large reserve potential
Value Creation Through Marketing
Current asset base capable of supporting 3x production levels with minimum capital investment
Current asset base and prospect inventory capable of supporting 5x production levels with additional capital investment
2012 seismic survey can provide possible upside
Capital used for increased gas sales are high ROR projects
Value Creation Through Investment
Consolidation of South American E&P companies
With existing Cash Flow and Balance Sheet, able to do smaller M&A activity and/or new projects
Reduce equity base through Corporate Buyback of Stock
Potential for restructuring debt
28

29. Questions?
29