2011: Building the foundation for lasting success

The first oil drilling in Canada occurred on the Gaspé Peninsula during the second half of the 19th century. Attracted by the natural oil seepage that had always been apparent, the first explorers came up against a geology not terribly inclined to yield oil. The technologies of the day did not allow for the extraction of the resource from the substratum or for the location of reservoirs that would have allowed oil exploration to continue.

The evolution of technology has made it possible to envisage tapping into reservoirs with a porosity and permeability that led the first explorers to abandon the territory. Additionally, technological advances in geophysics now make it possible to identify potential pitfalls that could not be identified at the time.

Pétrolia’s mission is to discover oil accumulations in Quebec and bring them into production as soon as possible, in order to increase its autonomy and allow it to control its development in the long term. As a result, the Company’s strategy is a long-term one, and its objective is to position itself as a fully-fledged oil company with the technical and financial resources to successfully accomplish every aspect of its projects.

By relying on advanced technologies for the detection of potential pitfalls and the development of unconventional reservoirs, Pétrolia has set itself the mission of meeting 5% of the demand in Quebec. This demand is currently met in its entirety through imports, more than 90% of which come from overseas.

The goal is not to promote the increased use of this non-renewable resource, but rather to take advantage of domestic demand for oil to help create wealth through the development of a natural resource. While the quest for greater energy efficiency and the better use of energy (oil in particular) is a noble one and should be encouraged, the fact remains that Quebec will continue to consume oil for a few decades yet. This is why Pétrolia believes it is preferable to produce the resource locally rather than to count exclusively on imports to meet the needs of Quebecers.

For Pétrolia, controlling its development, building alliances with the community, and entering into partnerships that protect the environment where its activities take place promote acceptance and maximize the long-term benefits of developing this resource. Since its beginnings, the Company has devoted itself to extending its expertise, maintaining relations with the community and seeking out partners who share its vision for developing the Company and its resources. This is why Pétrolia believes it can contribute to building an industry that will benefit us all.

Pétrolia has been guided by its desire to build the foundations for lasting success in its decisions and actions this year.

The $15,2-million agreement signed with Québénergie is the end result of Pétrolia’s efforts to find a partner for developing the deposit. Québénergie meets Pétrolia’s criteria: it is a partner that wants to exploit the deposit in a manner that respects both the surrounding environment and principles of sustainable development, while ensuring that Pétrolia will continue to play a major role in the development of the project and leases covered by the agreement.

Since it began operations, Pétrolia has known that its success is intimately tied to the community’s acceptance of its activities. Regardless of the rights and privileges conferred upon Pétrolia by the Mining Act, the fact remains that the Company’s operations occur in an environment where many activities are already taking place. Pétrolia’s operations have to blend harmoniously into the environment so that they can contribute to the region’s economic and social progress. Respect, receptiveness, information and transparency are all fundamental factors that guide the Company’s activities. The past year has been no exception to this.

The Company’s activities have included:

• an open house day during the Tar Point drilling, which gave over 300 Gaspesians the opportunity to witness and understand different aspects of this type of operation;
• a number of press conferences in Gaspé and press releases to update the public about the progress of the Company’s work;
• regular field visits by Company executives and meetings with local authorities, which were an opportunity to share information about Pétrolia’s activities and better identify community concerns;
• the publication of a series of columns in local weeklies to provide information about the territory’s geology, the stages of exploration, the nature of the work, the techniques used, etc.;
• the production of a number of videos to illustrate the stages of drilling, from transport to the operations themselves, to foster a better understanding the oil industry. These videos are available in the production section of the Web site www.petroliagaz.com/en/production/.

Over the course of the coming year, Pétrolia intends to pursue and step up similar initiatives.

Island possessing a recognized oil potential, the 2010 Anticosti campaign did not allow discovery. Nevertheless, the results of the samples from the Macasty Formation are known and were the object of a press release issued on February 9th, 2011.

At the end of 2009, prevailing stock market conditions were favourable to Pétrolia. On December 4, 2009, the Company issued close to eight million shares in exchange for $7.13 million. In addition to contributing to its working capital, these funds have largely been allocated to executing the year’s work.

The agreement with Québénergie, signed on December 20th 2010, provides Pétrolia payment in the amount of $6.7 million. Québénergie is also committed to handling expenditures for the work in the amount of $8.5 million for a maximum of two years. The financial contribution resulting from the signature of this agreement as well as commitments from its partner provides Pétrolia with the security necessary to be able to meet its commitments and obligations and to pursue the development of its projects.