Overview

Over the past five years, the Company has acquired a 100% working interest in approximately 123,000 acres onshore in Cook Inlet, Alaska. On March 1, 2010, the Company announced the sale of its Cook Inlet Project to Linc Energy (Alaska) Inc. The Company will receive as consideration U.S. $1.0 million upon approval of the assignments of the Alaska leases to Linc. In addition, the company will receive a U.S. $4.0 million payment from the proceeds from any oil and gas production from the Alaska leases. GeoPetro will also receive 10% 8/8ths overriding royalty interest on the Alaska leases. Linc has also agreed to drill the LEA #1 exploration well to evaluate a conventional natural gas prospect. This acreage is believed to be prospective for conventional gas production. The 123,000 acre lease position consists of two separate target areas that have been selected for exploration. These areas are called the Point MacKenzie and Trading Bay Blocks, respectively.

The Point MacKenzie Block is located six miles northwest of Anchorage. The Trading Bay Block is located 50 miles west of Anchorage across the Cook Inlet. The Cook Inlet basin contains a thick section of terrestrial tertiary rocks which includes shales, sandstones, and coals. The coals occur in seams which are commonly 20 feet thick and can be as thick as 70 feet. The source of the conventional gas in the Cook Inlet is most likely the coal beds. Cook Inlet has been subjected to both compression and extension, making the production of fractures very likely.

Historically, gas in the Cook Inlet has been produced from well defined anticlinal traps containing porous, gas charged sandstones. This non-associated gas is almost entirely biogenic in origin being derived either from bacterial action within Tertiary coals and/or from the decay of massive gas hydrates. In either case significant gas generation has taken place in the Cook Inlet.

Markets for natural gas in the Cook Inlet area include power generation, heating, fertilizer production and liquefied natural gas exports. An extensive pipeline system supplies these facilities and crosses the Point MacKenzie and Trading Bay lease Blocks. These pipelines are only partially filled with gas and could accommodate additional production.

Preliminary log analysis and seismic data indicate the Point MacKenzie and Trading Bay lease Blocks may contain conventional accumulations of natural gas reserves in Tertiary sandstones. Structural anticlines and/or domes occur on the lease blocks and probably contain large un-drilled gas reservoirs. Sandstone units also pinch-out toward the margins of the basin and may have formed stratigraphic traps on the lease blocks. In the past, exploration has focused on oil production and anticlinal gas traps. Stratigraphic accumulations remain unexplored and/or under-explored in the Cook Inlet.