9th annual Spring value investing congress

April 3, 2014 Las Vegas, NV

Pacific Rubiales Energy - An Emerging Opportunity with Dramatic Possibilities David Neuhauser, Livermore Partners

www.ValueInvestingCongress.com

Opportunistic Value Investing In A (skewed) High Growth World.

BY DAVID NEUHAUSER, FOUNDER AND MANAGING DIRECTOR, LIVERMORE PARTNERS

LIVERMORE PARTNERS STRATEGIC OPPORTUNITIES, LP

LIVERMORE PARTNERS 5 Revere Drive One Northbrook Place Suite 200 Northbrook, Illinois 60062 Telephone: 847-691-5307 Facsimile:847-691-5344 www.livermorepartners.com

Livermore-Who we are Experienced professionals with a long public track record of superior performance. Livermore manages nearly $100mm of client assets. Focus: We act as cornerstone shareholders. Providing insight and resources to management and the Board of our core portfolio companies. Deep value and Special situation driven. We engage a private-equity approach to public investing to extract full value from portfolio companies. Alignment of interest: Manage a single strategy fund and Separate Managed accounts.

Fund Objectives

To achieve maximum capital appreciation over the long term with minimal risk of permanent capital loss:
Significantly increase investors after-inflation, after-tax spending power. Outperform long-only equities. Achieve positive returns each year with moderate short-term volatility. Long-Biased approach with hedging abilities.

Our Philosophy and Competitive Advantage

Value driven opportunistic hedge fund that focuses on Energy, Industrial, and Financial sectors, but remains agnostic to value-enhancing opportunities (activism, special situations) within all sectors and market capitalization. Livermores extensive network of private equity relationships can be tapped to further increase resources and investment outside of our internal fund scope. Our partners have included: - Turnaround expert and Billionaire, Wilbur L. Ross (WL Ross & Co.) - $27B Energy Focused-private equity firm, Riverstone Holdings, LLC - Madison Dearborn Partners, $14B private equity firm Livermores David Neuhauser is an advisor to Wynnchurch Capital, a $1.1B middle market industrial private equity firm where his focus is on deal origination and oversight of public companies.

An intellectually coherent and intuitive investment methodology emphasizing capital preservation and a strong risk-adjusted rate of return, together with a consistent implementation of our strategy: no style drift.

Our Process
Engage a bottoms-up, fundamental investment analysis to determine undervalued or mispriced companies. Ability to sell-short to limit portfolio downside risk. Companies must meet our deeply undervalued or Special Situation view given current metrics(i.e. Discounted Cash Flow-DCF, Price to Book-P/B, Price to Earnings-P/E, Enterprise Value/EBITDA) as well as historical price trends. Look for catalyst generators, to help provide a timeline of the investment(Avg. hold time range: 6months-5years). We contact and meet with management to gauge the strategic plan that will drive the closure of divergence between the equity value and its true intrinsic value.

We present options to accelerate shareholder value with management, other institutional shareholders, and the companys Board of Directors.

 2013 Portfolio Highlights Volt Information Sciences(VISI) - Deep-value position in temporary staffing firm where Livermore is in talks with the mgmt. and Board to extract further value. Focus has been on right-sizing the companys operations and re-listing the shares on a major stock exchange in 2014. Livermore believed past accounting issues would be resolved in 2013(they were) and the company trades at a significant discount to its peers and intrinsic value. Equity has risen from our entry price of $6.75 to $10.05 in 2013(over 40%). Volts upside and ultimate intrinsic remains nearer to $15-$20 a share.

2013 Portfolio Highlights( Cont)

Occidental Petroleum(OXY)- Activist position and helped remove egregious
Chairman, Ray Irani at the May, 2013 AGM in Los Angeles.
(Bloomberg, Occidental's Chazen Era Begins After Irani's Ouster, May 3rd,2013). Occidental announced a slate of new governance improvements April 29 after investors questioned the

role Irani had played in the decision to replace Chazen as CEO. Shareholders including First Pacific Advisors LLC, Cambiar Investors LLC and Livermore Partners advocated that Irani should leave instead of Chazen. Said Livermores Neuhauser, who was among shareholders that voted against the longtime chairman. Im satisfied with the outcome and look forward to the companys new direction.

This helped the company re-focus and look to monetize their vast asset base in the US and Middle-East. Remains a large Livermore special situation position attractively valued along with specific 2014 corporate events. Solid 2013 return over 14%.

 2013 Portfolio Highlights (Cont) TriOil Resources(TOL.TO)-Activist position in Canadian junior energy company. Livermore pressed mgmt. to push forward with a sale of the company to a strategic suitor given the history of dilutive capital raises and further headwinds in the capital markets for small upstream energy(widening differentials, expensive capital costs). Livermore owned 1.7 percent position and realized a 22.4% IRR upon completion of a sale to Polski Koncern Naftowy Orlen SA for 2.85cdn . Positions such a Trioil will continue to be a focus for Livermore, although our preference is to work in collaboration with Mgmt and the Board.

Select Past Investments

House of Fabrics(HFAB) -Successful Risk arbitrage position in NYSE-listed retailer. Were the largest debt holder of the company. Later turned into the largest single shareholder upon completion of the reorganization and subsequently lead the Corporate sale to competitor Hancock Fabrics(HF) in a $140mm all stock transaction. Returned 3X our invested capital. Washington Federal Bank(WFBS)-13D holders(9.9%) of Chicago. Greenmailed bank and ultimately reached an agreement to sell our shares back to the banks largest shareholder and founder, the Gembara family. IRR of over 30%. Vysis(VYSY) -Large shareholder in Chgo-based laboratory products maker. Sold to Abbott Labs in an all-stock deal for $355mm as we identified the labeling process for breast cancer would include Vysiss core product. DNA and Abbott were in competition for the company. Vysis was a spin-out from British Petroleum(BP). Took advantage of the overhang which depressed the intrinsic value of VYSI. Worked closely with then CEO John Bishop, now CEO of Cepheid, a $3B drug company to identify the overlooked opportunity. Over 80% ROI.

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Background
The principals and officers of the Manager who will be involved in the investment operations of the Fund is David Neuhauser. The background of this individual appears below. David Neuhauser is the founder and Manager and is responsible for making all investment decisions for the Manager. Mr. Neuhauser has over 17 years experience in portfolio management and investment analysis and has been a strong and consistent proponent of value investing. Mr. Neuhauser, prior to joining Livermore in 2009, was President of Loren Holdings Incorporated, focusing on strategic investments across a broad group of industries including Energy, Financial services, Consumer products, and Industrial manufacturing. While managing the investment phase of the process, Mr. Neuhauser worked with numerous LBO groups and financing agents as well as large publicly traded domestic companies. Mr. Neuhauser was responsible for portfolio and investment strategies for financier Leon A. Greenblatt III(see Businessweek, The Bad Boys of Chicago Arbitrage August 6th,1996). Mr. Neuhauser was a principle and invested the firms capital in a multi-strategy approach. These included concentrated equity investment positions, activist opportunities, risk/merger arbitrage, distressed debt, and private equity. Mr. Neuhauser was a longtime member of the CME Group (NYSE:CME) as well as the National Futures Association. He received his B.A. with concentrations in Economics from Northeastern Illinois University and has conducted Graduate studies in Economics and Sociology from Roosevelt University of Chicago.

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Infrastructure
Prime Brokerage

Auditor

Administrator/Custody

Legal Counsel

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Investor Participation Onshore Fund: Delaware Limited Liability Company Fees: 2% Management fee 20% Performance fee with high water mark. Initial Commitment: One Year Contributions: Monthly

Liquidity: Quarterly

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VALUE INVESTING CONGRESS IDEA- ZARGON OIL & GAS: ZAR.TO $8.52CDN Zargon, a Canadian ASP(Alkaline Surfactant Polymer) oil exploitation company located in the Williston Basin and SE Sask, is poised to continue its uptrend as the intrinsic value remain much greater than the recent equity closing price. One of Canadas lowest decline production curves with a proven technology to increase future production, reserves, and value.

Livermore Thesis: Zargon then- Sept. 2012

First met company at Peters Conference in Sept, 2012. Out of favor, but sound technical mgmt. team. Market and analysts developed a sharply negative bias given the time lag of their $100mm Little Bow ASP project, their reduced fund flows, and an expected unsustainable dividend payout ratio(<100%). Management had lost creditability due to sharp dividend cuts as the company pressed forward with implementation of Little Bow project.

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Zargon, Today- April 3rd, 2014Company remains mis-priced based on forward metrics and defined catalysts. Livermore acquired a position beginning in November 2012. Avg equity price $6.67. Not including .06 month distributions. Total return of over 30% in 2013. Little Bow injections and project expectations on track to deliver 8-10% growth, along with a stable and consistent monthly dividend of .06 a month(8.7% yield annualized). Little Bow ASP Project fully-funded with Phase I and first oil due by year-end. Insiders continue to own a sizable stake(10%) with CEO Craig Hansen owning 5%, while acquiring the balance as Livermore built its position. Thesis of the break-up value far exceeds the past and current market price which provides the opportunistic value idea we thrive to invest in. We continue to engage in active dialogue w Management and the Board as we monitor progress and update our model. Expect Governance improvement with view the co is a possible take-out candidate given its incline of upcoming production growth from Phases II and III, and low capex once the project is fully funded.

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The ASP project in conjunction with the company's long-life low-decline conventional oil exploitation properties provides Zargon the oil production asset base that will permit Zargon to meet its long-term growth and sustainable, dividend-paying objectives. The total capital cost of phases 1 and 2 of the Little Bow ASP project has been budgeted at approximately $61 million. This is comprised of approximately $7 million of expenditures in 2012, approximately $38 million in 2013, and the remaining $16 million of the capital costs relating to the project's phase 2 implementation scheduled for 2014 and 2015. The phase 1 project's final $4 million is to be spent the first quarter of 2014, and the implementation of phase 2 is scheduled for 2015, requiring $12 million. Little Bow is not an undeveloped property with unproven oil potential. Little Bow is already a producing asset with current oil production at 400 bbl/d. Zargon's forecasts for this project are as follows:

2014 Exit: 350 bbl/d 2015 Avg: 900 bbl/d 2016 Avg: 1,500 bbl/d Without additional infill drilling, incremental production from phases 1 and 2 of the project is forecast to surpass 1,600 barrels of oil per day by the end of 2016.

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 The "heavy spend period" for the EOR project is now behind us. Based on an estimated field oil price of $68 per barrel, the ASP project is forecast to provide a field net back of approximately $50 per barrel of incremental oil production volumes. Project is also calculated to have a breakeven field oil price of $48 per barrel. This is a very low historical price and will not see in the foreseeable future. Zargon plans to develop phases 3 & 4 effective 2019 in order to enhance further Little Bow's oil production. Zargon's management is conservative by forecasting an additional recovery factor of +2%, which remains a very low growth target, given current ASP techniques should improve by 2019.

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Grossly Undervalued Per NAV Based on the company's latest NR and the most recent independent reserves report, Zargon's NAV is at C$12.29. Here is the analysis:

2P Reserves (MMboe) (Dec 2013) 2P Reserves ($ million) (PVBT 10%) Undeveloped Land ($ million) Working Capital ($ million) (Deficit) Long-Term Debt ($ million) Shares Outstanding (million) Net Asset Value Per Share ($)

27.7

468.9
17.2 (18.8) (97.5) 30.1 12.29

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Zargon EV/EBITDA Comparables

EV 2013 EV Company ($ million) ($ million) ($ million) EBITDA Bonterra 1,890 Energy 195 215 9.69 8.79 EBITDA EBITDA EBITDA (*) 2013 2014 2014 ----------------EV

DeeThree
890 Exploration Northern Oil 1,500 268 300 5.6 5 110 135 8.09 6.59

and Gas
Abraxas 420 (**) Petroleum Zargon 350 Oil 72 78 4.86 4.48 55 65 7.64 6.46

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Average

(Abraxas, Northern,
Bonterra, DeeThree)

Zargon Oil

EV/EBITDA

6.71

4.48

Based on the average metrics above, Zargon's enterprise value should be: 6.71 X $78 million = ~$523 million. To sum it up, this is Zargon's enterprise value based on the average metrics of the peers: Per 2P Reserves = $476 million. Per EV/EBITDA= $523 million. Based on these figures, the average enterprise value for Zargon would be: $500 million. Zargon's net debt is ($116) million, the market cap should be ~$384 million. Dividing this market cap with the ~30.1 million outstanding shares, we get ~$12.71/share (basic). This represents an upside of nearly ~40+% from the current levels.

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 Summation
Zargon continues to offer solid equity value and upside over time. Riskiest period and heavy capital spend behind us. Forward incline of long-life, low-decline oil profile is the perfect formula for a consistent and profitable cash generating machine. Over time, and thru Phase II, expect debt repayment, share buybacks, and further upside as Zargon will be in a very strong financial position. Based on current Canadian deal metrics, ZAR may be worth upwards of $13.00-15.00 per share.

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