		April 4, 2016

Arete Industries, Inc.

1410 High Street

Denver, CO 80218

Attn: Mr. Tristan Farel

RE:

Reserve and Economic Evaluation

Arete Industries, Inc.

Year-End 2015 SEC Pricing

Executive Summary

Pinnacle Energy Services, LLC (“Pinnacle”) has performed a reserve and economic evaluation on certain oil and gas assets of Arete Industries, Inc. (“Arete”) as of December 31, 2015. Well names, owned interests, and other well information are provided on the attached Exhibit A. Information used in the evaluation was provided by Arete and supplemented by data gathered from public sources. Summary results of this analysis are located below and details are presented in accompanying exhibits.

This evaluation was performed using SEC reserve standards and SEC year-end pricing, and includes seventy-one (71) Proved Developed Producing (PDP) properties.

As presented in the accompanying summary projections, the net reserves and future net cash flows as of January 1, 2016 are as follows (Volumes in MBBLs and MMcf, Values in M$):

	Number of		Net Reserves						Net		Net		NPV
Reserve Class	Properties		Oil		Gas		NGL		Capital		Cashflow		Dis @ 10%
			MBBL		MMCF		MBBL		M$		M$		M$

PDP		71		275		358		0		$0		$5,025		$2,553
Total Proved		71		275		358		0		$0		$5,025		$2,553

Pricing

Per SEC rules as of January 1, 2010, the SEC pricing is calculated by averaging the first-of-the- month oil and gas pricing for the calendar year being evaluated. For 2015, the average oil and gas NYMEX Price is $50.28/BBL for oil (WTI) and $2.587/MMBTU for natural gas (Henry Hub). Both prices were held constant.

Pinnacle Energy Services, LLC

9420 Cedar Lake Ave, Oklahoma City, OK 73114

Ofc: 405-810-9151 Fax: 405-843-4700 www.PinnacleEnergy.com

Based on an evaluation of actual oil prices received by Arete in 2015, differentials to NYMEX prices were applied to each lease. The calculated oil price differentials ranged from -$3.40/bbl to -$10.77/bbl. One well, the Neil Federal 14, that produces from the Minnelusa has an oil differential of -$26.67/bbl.

Based on an evaluation of actual gas prices received by Arete in 2015, differentials to NYMEX prices were applied to each lease. The calculated gas price differentials ranged from -81% to +59%.

Interests

Interest information was provided by Arete for each property or lease. These interests are shown on the attached Exhibit A.

Taxes

Oil and gas severance tax rates vary by state, and were calculated based on the lease operating statements provided by Arete. Ad valorem taxes are included in the monthly operating expenses.

Expenses

Average monthly operating expenses for each property were calculated based on the 2015 expense data provided by Arete.

Property Descriptions and Reserve Estimates

Seventy-one (71) properties were on production as of December 31, 2015. Remaining reserves for these properties were determined by decline curve analysis and analogy. Production plots for each property showing historical production and forecasts are included in the attachments.

Reserves

Remaining recoverable reserves are those quantities of petroleum that are anticipated to be commercially recovered from known accumulations from a given date forward. All reserve estimates involve some degree of uncertainty depending primarily on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree of uncertainty is conveyed by classifying reserves as Proved (highly certain) or Non-Proved (less certain). The estimated reserves and revenues shown in this report were determined for Proved Developed Producing (PDP), Proved Non-Producing (PNP), and Proven Undeveloped (PUD) reserve categories, as well as Probable (Prob) and Possible (Poss) Non-Proven reserve categories.

By definition, PDP generally refers to existing producing properties, while PNP refers to the additional reserves from behind pipe (BP) intervals, activities to increase production or reserves from existing completions, or wells which have been tested and are awaiting sales. PUD refers to development drilling locations with definable reserves using offset well and reservoir parameters. For PNP and PUD, the activity or targeted zones must known to produce

Pinnacle Energy Services, LLC

9420 Cedar Lake Ave, Oklahoma City, OK 73114

Ofc: 405-810-9151 Fax: 405-843-4700 www.PinnacleEnergy.com

commercial hydrocarbons in quantifiable volumes and rates and reserves can be reasonably accurately estimated based on analogies and available geological and engineering information.

Non-Proven Probable and Possible reserves appear to have engineering and geologic merit and have been determined to have over 50% (Probable) or less than 50% (Possible) likelihood to be commercially productive, but lack some aspect by definition to be considered proven, such as proximity to commercial production, production methods not proven for a certain geological or production application, or other geological or engineering deficiency.

Accuracy of production forecasts generally depends on the amount of historical data production and pressure available and the majority the producing wells reviewed in this evaluation had sufficient historical data to forecast future production with confidence. Those with limited production or pressure data history were forecasted by reviewing analogy well and test data and applying this knowledge to the available well information.

Future Cashflow

Future cash flow being reported is after deducting state production taxes and ad valorem taxes, but prior to deducting federal income taxes. The future net cash flow has been discounted at an annual rate of 10 percent to determine its present worth. The present worth is shown to indicate the effect of time on the value of money and should not be construed as being the fair market value of the properties.

General

The reserves and values included in this report are estimates only and should not be construed as being exact quantities. The reserve estimates were arrived at by using accepted engineering practices and were primarily based on historical rate decline analysis for existing producers. As additional pressure and production performance data becomes available, reserve estimates may increase or decrease in the future. The revenue from such reserves and the actual costs related may be more or less than the estimated amounts. Because of governmental policies and uncertainties of supply and demand, the prices actually received for the reserves included in this report and the costs incurred in recovering such reserves may vary from the price and cost assumptions referenced. Therefore, in all cases, estimates of reserves may increase or decrease as a result of future operations.

In evaluating the information available for this analysis, items excluded from consideration were all matters as to which legal or accounting, rather than engineering interpretation, may be controlling. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering data and such conclusions necessarily represent only informed professional judgments. The titles to the properties have not been examined nor has the actual degree or type of interest owned been independently confirmed. A field inspection of the properties is not usually considered necessary for the purpose of this report.

Pinnacle Energy Services, LLC

9420 Cedar Lake Ave, Oklahoma City, OK 73114

Ofc: 405-810-9151 Fax: 405-843-4700 www.PinnacleEnergy.com

Information included in this report includes the graphical decline curves for individual wells, projected production and cash flow economic results, one-line economic result summaries for each well, and miscellaneous individual well information. Additional information reviewed will be retained and is available for review at any time. Pinnacle Energy Services, L.L.C. can take no responsibility for the accuracy of the data used in the analysis, whether gathered from public sources or otherwise.

Pinnacle Energy Services, LLC

/s/ Richard J. Morrow

Richard J. Morrow,

P.E. Petroleum Engineer

Disclaimer: Pinnacle Energy Services, L.L.C. nor any of its subsidiaries, affiliates, officers, directors, shareholders, employees, consultants, advisors, agents or representatives make any representation or warranty, express implied, in connection with any of the information made available herein, including but not limited to, the past, present or future value of the anticipated reserves, cash flows, income, costs, expense, liabilities and profits, if any, to be derived from the properties described herein. All statements, estimates, projections and implications as to future operations are based upon best judgments of Pinnacle Energy Services; however, there is no assurance that such statement, estimates projections or implications will prove to be accurate. Accordingly, any company, or other party receiving such information will rely solely upon its own independent examination and assessment of said information. Neither Pinnacle Energy Services nor any of its subsidiaries, affiliates, officer, directors, shareholders, employees, consultants, advisors, agents, or representatives shall have any liability to any party receiving the information herein, nor to any affiliate, partner, member, officer, director, shareholder, employee, consultants, advisor, agent or representative of such party from any use of such information. The property description and other information attached hereto are for the sole, confidential use of the person to whom this copy has been made available. It may not be disseminated or reproduced in any matter whatsoever, whether in full or in part, without the prior written consent of Pinnacle Energy Services. L.L.C. This evaluation and all descriptions and other information attached hereto are for information purposes only and do not constitute an evaluation of or offer to sell or a solicitation of an offer to buy any securities.