Project - San Joaquin

GEOLOGICAL REPORT ON CONSOLIDATED BEACON'S INTEREST IN THE SAN JOAQUIN EAST SIDE PROJECT, SAN JOAQUIN BASIN, CALIFORNIA PREPARED BY RICHARD J. HAWES, P.GEOL.
6TH DECEMBER 2006

DESCRIPTION OF THE SAN JOAQUIN EAST SIDE PROJECT

1. The business arrangement with the Joint Venture Partners

In March 2006, Beacon entered into an agreement with Nomad Hydrocarbons Ltd. and jointly formed Nomad LLC. Nomad LLC is engaged in the business of acquiring: oil prospects that cover an Area of Mutual Interest (the "AMI") in the San Joaquin Basin, California. A management committee made up of members from Beacon and its partners are responsible for the overall management of the AMI.

Nomad LLC has a 50% working interest in the San Joaquin East Side Project. Its partner is Daybreak Oil and Gas Inc. (originally 50% working interest) which has farmed out 25% of its 50% to Monarch Gulf Exploration Inc. Aspire Capital Inc. has recently acquired Nomad Hydrocarbons Ltd. (but not the Nomad LLC); this has not affected the partners' working interests.

The three technical originators of the Project, Messrs Chet Pohle, Brian Hirst and Randy Metz (all of Bakersfield), have a 3% gross overriding royalty on the Project.

To date, Beacon has earned a 19.23% interest in Nomad LLC. The interest applies to exploration within the AMI. The interest applies to a 50 / 50 exploration joint venture between Nomad and another company within the AMI, California Oil and Gas Ltd. ("COGC"). As a result of the agreement with Nomad LLC, Beacon thus presently has a net interest in the AMI equal to approximately 9.615%.

2. The need for financing

The new management of Beacon has been informed that there is an opportunity to increase its interest in Nomad LLC to 50% from 19.23% (and in the project as a whole from 9.615% to 25%) by paying US$ 1.1 million / Cdn$ 1.222 million, and also to convert to a net working interest.

Beacon will be funding this, and other working capital requirements, in two tranches, the first of $0.5 million and the second of $2.0 million. The first tranche is expected to close in December 2006, and the second in January 2007.

3. Proposed Use of Funds

The proposed and combined use of funds from both tranches is set out below.

Items	US$	Cdn$
3-D seismic program on AMI	$200,000	$222,222
Land acquisition	$100,000	$111,111
Increase interest from 9.65% to 25.00% in the AMI,	$800,000	$888,889
for prior land and seismic expenses
Subtotal exploration budget, 2006Q4 and 2007Q1	$1,100,000	$1,222,222
Working capital		$427,778
Pay off debenture		$600,000
Financing fees	10%	$250,000
Total financing requirements		$2,500,000
Exchange rate	$1.00	$0.90

Table 1 . Proposed Use of Funds

4. Future financings

Additionally, the company has 6,000,000 warrants at $0.10 each that expire on 17 th January 2007, some or all which may be exercised, depending upon the company's share price at the time.

The company is also planning additional financing to support its exploration and drilling program, early in 2007.

5. Outline Exploration Program

The 3-D seismic program is expected to be carried out in the spring of 2007, with the interpretation following immediately. The drilling program, for targets identified by the seismic program, is expected to be carried out in the summer of 2007.

6. Project outline

The Area of Mutual Interest is shown in Figure 1 below:

Figure 1 . Location of the Area of Mutual Interest for the "San Joaquin East Side" project .

7. Why the San Joaquin Basin

The San Joaquin Basin of Central California is targeted for oil exploration for several reasons:

• It is a very prolific oil-prone area, in those areas that have been explored and developed.
• There has been no significant exploration on the eastern flanks of the San Joaquin Basin since the 1960's.
• The American major oil companies controlled large land positions in the basin until the late 1980's before selling them off as non-core assets, and small producers / operators were unable to gain significant land positions.
• No 3-D seismic has been shot to date in the AMI.
• Older production methods are still employed; newer production techniques should improve rates of production.
• The basin is very close to major markets, and has infrastructure and services in place

8. The Size of the Potential Resources in the San Joaquin Basin

The United States Geological Survey ("USGS") has recently (2004) estimated that the remaining undiscovered resources in the San Joaquin Basin are a mean (P50) of 1.7 Tcf undiscovered natural gas, 393 million barrels undiscovered oil, and 59 million barrels undiscovered natural gas liquids. The USGS publication referred to is "Assessment of Undiscovered Oil and Gas Resources of the San Joaquin Basin Province of California", National Assessment of Oil and Gas Fact Sheet, and is found at: http://pubs.usgs.gov/fs/2004/3043/FS-2004-3043-508.pdf

Caveat regarding USGS Remaining Undiscovered Resource estimation

The USGS Estimates of Remaining Resources are believed not to have been prepared by a qualified reserves evaluator or auditor as per NI 51-101. However, these resource estimates can be considered to be correct to a reasonable and plausible degree of accuracy.

9. Why the Bakersfield area?

The San Joaquin Basin in Central California is a prolific oil producing area with a very long history of oil production. As described below, the total production in the AMI immediately to the north of Bakersfield to date is approximately 2.64 billion barrels.

The Joint Venture is targeting thick Pliocene Vedder Sand oil-bearing reservoirs at depths of up to 3000 feet, in sand reservoirs draped over small structural highs that are identifiable on 3-D seismic, i.e. the structural play, not the hydro-dynamic play that is responsible for the Kern River Super Giant oil field.

As described in Section 7 below, four principal large oil fields, Kern Front, Mount Poso. Poso Creek and Round Mountain have between them produced 701 million barrels. The California Division of Oil, Gas and Geothermal Resources estimates that there are 84 million barrels remaining in these four fields.

10. Oil Production to Date in the Area of Mutual Interest.

The cumulative oil production volumes and estimated remaining reserves, according to the Government of the State of California, Division of Oil, Gas and Geothermal Resources, Annual Reports of the State Oil & Gas Supervisor, 2005, at the following website: http://www.consrv.ca.gov/dog/pubs_stats/annual_reports/annual_reports.htm

The cumulative oil production volumes and estimated remaining reserves are reported on a field-by-field basis in Section 6 of the above report, Production by Field (pages 89 to 114) at: ftp://ftp.consrv.ca.gov/pub/oil/annual_reports/2005/0104prod_05.pdf

The cumulative oil production volumes and estimated remaining reserves in the Area of Mutual Interest according to California Division of Oil, Gas and Geothermal Resources, effective 1 st January 2005, are abstracted from this report and are summarised below:

	Wells		Oil and condensate			Natural gas
Field	Producing wells	Shut in wells	Production, 2005, BOPD	Cumulative production, MM bbls	Estimated remaining reserves, MM bbls	Production, 2005 (MMcf/d)	Cumulative production (Bcf)	Estimated remaining reserves (Bcf)
Hydrodynamic play
Kern River	8,974	1,599	94,413	1,945	506	-	11	9
Structural play
Kern Front, including Etchagoin	737	503	4,323	207	24	-	21	-
Mount Poso	620	414	1,674	298	16	-	2	-
Poso Creek, including McVan	419	378	1,350	84	2	0	8	n.a.
Round Mountain, including Pyramid and Sharktooth	199	141	4,522	109	42	1	2	0
Jasmin	39	25	58	4	0.1	-	-	-
Subtotal structural play, Joint Venture's targets	2,014	1,461	11,927	701	84	1	35	0
Total AMI	10,988	3,060	106,340	2,646	590	1	46	9

2 . Oil and gas historical production and reserves to date in the Area of Mutual Interest

"The Hydrodynamic play is characterised by sandstone reservoirs in the reservoirs in the Upper Miocene to Pliocene Kern River and Chanac Formations, and the Structural Play is characterised by sandstone reservoirs in the Upper Miocene Jewett Sand, Freeman Silt, and Vedder Sand".

The Joint Venture is targeting smaller fields in structural targets identified on seismic in the Area of Mutual Interest, which are expected to be comparable in the order of magnitude of volume to the following fields:

	Wells		Oil and condensate			Natural gas
Selected analogous fields to Joint Venture's targets	Producing wells	Shut in wells	Production, 2005, BOPD	Cumulative production, MM bbls	Estimated reserves, MM bbls	Production, 2005 (MMcf/d)	Cumulative production (Bcf)	Estimated reserves (Bcf)
Etchagoin	18	-	161	56	n.a.	-	-	-
Jasmin	39	25	58	4	0.1	-	-	-
McVan	113	46	616	8	0.3	-	-	-
Pyramid	14	9	10	7	3.8	-	-	-
Sharktooth	-	33	-	5	-	-	-	-
Total small pools	184	113	845	80	4	-	-	-

3 . Selected small fields, analogous to the Joint Venture's targets in the AMI.

This data is also quoted from Section 6, Production by Field (pages 89 to 114), at: ftp://ftp.consrv.ca.gov/pub/oil/annual_reports/2005/0104prod_05.pdf

The Estimates of Remaining Reserves (in Tables 2, 3 and 4) have been carried out by geologists of the California Division of Oil, Gas and Geothermal Resources, based upon aggregated information provided over time to the Division by producing oil companies, and also upon the Division's internal records.

As such the Estimated Remaining Reserves quoted in Tables 2, 3 and 4 are believed not to have been prepared by a qualified reserves evaluator or auditor as per NI 51-101.

It is believed that this estimate comprises Developed and Undeveloped, Proved, Probable and Possible Reserves, according to the COGPE Oil and Gas Evaluation Handbook, Volume 1 June 2002 and Volume 2, November 2005. These Government of California reserve estimates have not been verified by the author of this report.

However, these Government of California reserve estimates can be considered to be correct to a reasonable and plausible degree of accuracy.

11. The potential exploration drilling targets for 2007

The geotechnical team based in Bakersfield, California, has identified several prospect areas within the AMI that are prospective for shallow oil exploration between depths of 100 feet to 3000 feet. The Joint Venture is focusing on four of the prospects, as a water-well has been very recently drilled on the fifth prospect, and it encountered oil; another company is now exploring this prospect.

12. The acreage presently held

As of 15 th September 2006, over 13,000 gross acres / 11,750 net acres in four of the five blocks have been acquired at very attractive lease rates (US$ 50 to US$ 250 per acre) in the first four prospect areas in the AMI. The leases are for 5-year periods.

As of 1 st December 2006, the Joint Venture is negotiating with two major landowners to obtain a significant lease in the fifth area, and effectively gain control of that block.

13. Exploration methodology

Three 3-D seismic programs covering a total of 25 square miles have been designed for the three active prospect areas. Seismic acquisition companies in the area have been contacted, and the first bids were made to the Joint Venture by the end of July 2006. The operator anticipates that seismic acquisition will begin as soon as seismic equipment is available, with drilling to start only after the seismic has been processed and interpreted.

14. Petroleum Geology

USGS Paper http://certmapper.cr.usgs.gov/data/noga95/prov10/text/prov10.pdf "San Joaquin Basin Province" (Larry A. Beyer, (1995) divides the San Joaquin Basin Province into nine confirmed plays and one hypothetical play. The Area of Mutual Interest is in the Southeast Stable Shelf Confirmed Play.

"The San Joaquin Basin Province, which occupies the southern half of the Great Valley of California, is an asymmetrical structural trough filled in places with more than 36,000 feet of Upper Cretaceous and Cainozoic clastic sedimentary rocks." The southern area, in which the Joint Venture is working, subsided and was compressed during Neogene time in response to plate movement along the active California margin.

Southeast Stable Shelf Confirmed Play (USGS Basin 1002)

"The confirmed (oil-prone) stratigraphic and structural-stratigraphic play consists of oil and minor gas accumulations in Oligocene to Pleistocene marine to non-marine sandstones and fractured pre-Cenozoic basement rocks located on the relatively stable southeast basin margin. The play is distinctive because its traps are mostly characterised by low dip angles and gentle folds or normal faults, and its reservoirs consist mainly of upper slope and marine shelf and non-marine sandstones."

"The western play boundary generally coincides with the average position of the marine shelf edge / slope during Upper Miocene and Pliocene time. This western boundary generally excludes the deep water Upper Miocene Stevens Sandstones from this play. The southern play boundary is the White Wolf Fault Zone, and the eastern boundary is the on-lap edge of Neogene sediments on the basement rocks of the Sierra Nevada. The northern play boundary is drawn somewhat arbitrarily to include the small discovered accumulations as far north as the Deer Creek field."

Reservoirs

"Discovered accumulations occur in Oligocene (and minor older) to Pleistocene sandstone reservoirs in practically every formation, but they are most prolific in the Upper Miocene to Pliocene Kern River and Chanac Formations, and Upper Miocene Jewett Sand, Freeman Silt, and Vedder Sand."

"These upper-slope, shelf and non-marine sandstones extend from the vicinity of the Jasmin Field (at the northern margin of the AMI) southwards to the White Wolf Fault Zone some 30 miles to the south of the AMI. Reservoirs tend to wedge out or to be overlapped to the east, and to pass into deepwater facies to the west. Limited production occurs in the non-marine Walker Formation of Eocene Age in one part of the Edison Field. Fractured metamorphic rocks form reservoirs in selected areas of the Edison and Mountain View fields, (thus making it essential that the exploration program must be designed to drill to basement). Undiscovered accumulations may occur in any of the above formations. Discovered reservoirs generally have good to excellent porosity and permeability."

Source Rocks

"The Middle Miocene Fruitvale and Round Mountain Shales are the dominant source rocks; these are the eastern equivalent of the McDonald, Devilwater and Gould Shales on the west side of the San Joaquin Basin. Distinctive oils in selected reservoirs along the down-dip western margin of the play (especially north of the Bakersfield Arch) may come from one of more of the Eocene to Lower Miocene shales of the Kreyenhagen and Freeman Formations and their equivalents. Source rocks are most deeply buried and are most likely to be mature in the western play area and further west."

Timing and Migration

"Generation and migration from Eocene to Lower Miocene shales probably began as early as Middle Miocene time. Generation and migration from Middle Miocene shales probably began in Late Pliocene time. Upper Miocene and younger source rocks probably are probably in the early stages of oil generation in the structurally lowest areas of the play. Trap formation and destruction has occurred intermittently since Late Oligocene time."

Traps

"Traps are commonly generated by high-angle extension (down-to-the-east) faults that put west-dipping sandstone reservoirs in contact with sealing mudstone or shale. Lenses and lenticular pods of sandstone form stratigraphic traps. Pinch-outs, truncations, tar seals and permeability barriers are also present along the eastern play margin. Gentle anticlines, some intensely faulted, apparently formed by pre-Miocene compression also form traps. Multiple periods of extensional faulting are documented by extensive drilling in this play."

"An atypical but singularly important trapping mechanism is the hydrodynamic trap of the super-giant Kern River field."

"Diagenetic traps may occur at greater depths in the western part of the play." However, the Joint Venture is focussing on an area of the play where depth to basement is of the order of only 3000 feet, so it is not anticipated that any diagenetic traps will be encountered.

Exploration maturity

"Exploration is very mature along the up-dip margin east and southeast of the Bakersfield Arch. Down-dip areas to the west, and the area northeast of the Bakersfield Arch, the focus of the AMI, are comparatively less well drilled by local standards."

The larger oil reserves in the Southeast Stable Shelf Confirmed Play (including the super-giant Kern River oilfield) with the discovery year and cumulative production are set out in the table below. (The data in Table is taken from State of California, Division of Oil, Gas and Geothermal Resources, Annual Reports of the State Oil & Gas Supervisor, 2005 at: ftp://ftp.consrv.ca.gov/pub/oil/annual_reports/2005/0104prod_05.pdf, and, although believed to be reasonably correct, must be read with the Caveat noted above)

The reserves in the area all have very low Gas : Oil Ratios, averaging 77:1; consequently, the joint Venture is not expecting any significant volume of non-associated gas. Additionally, the last major discovery in the area was the Racetrack and Joppi areas of the Edison Field, in 1933, or more than 70 years ago.

Field	Discovery year	Cumulative production plus Estimated Reserves (to 2005)
		Oil (MM bbls)	Gas (Bcf)	GOR
Kern River	1899	2,450	20	8
Mount Poso	1926	313	2	6
Kern Front	1915	231	21	91
Fruitvale,	1928	124	41	332
Edison	1932	153	72	471
Round Mountain	1927	113	2	18
Poso Creek	1919	88	9	103
Mountain View	1933	92	63	688
Total		3,562	230	65
Oldest	1899
Youngest	1933

Table 4 . Super-Giant and Large oil fields in the Southeast Stable Shield Play (including the area of the Area of Mutual Interest)

"There has been very little serious exploration in the area for a very long time. Recently, the focus has been on increasing recovery factors from the larger fields by various Enhanced Oil Recovery technologies and well patterns."

To date, 2.64 billion barrels have been produced from the area of the AMI. The Joint Venture has reason to believe that the deeper horizons remain unexplored (and basement is at a maximum depth of ~3000 feet), even in the more mature part of the basin.

"In the play as a whole, undiscovered oil is likely to have API gravities in the range 12 o API to 43 o API." No natural gas reservoirs have been discovered in the AMI or are expected.

Resource Potential

"The complexity of basin-margin facies changes and faulting suggest that more, mostly small accumulations will continue to be found, and this is the focus of the Joint Venture's exploration program. Discoveries with resources up to several million barrels are likely; discoveries of accumulations with recoverable resources substantially greater than 10 million barrels is considered unlikely."

New discoveries are most probable in down-dip areas that have not been exhaustively drilled along the western part of the play, particularly for Vedder sands.

According to Beyer (1995 USGS op. cit.), "the combination of inadequate nearby volumes of mature source rocks, mostly thin reservoir units, and generally small traps, limits the potential for large amounts of undiscovered oil. Mostly small accumulations, principally in subtle stratigraphic traps or combination traps, remain to be discovered in this comparatively low potential play. "

Lillis and McGoon (2004) in USGS Open File Report 2004-1037

(http://pubs.usgs.gov/of/2004/1037/OFR2004-1037.pdf) "Oil-oil correlations to establish a basis for mapping petroleum systems, San Joaquin Basin, California," have mapped the three principal and one minor oil systems in the San Joaquin Basin. These are:

• Cretaceous Moreno (minor oil system)
• Eocene Kreyenhagen (not expected in the AMI)
• Eocene Tumey (potential in the AMI)
• Miocene Monterey (expected in the AMI)

Figure 2 . Map of Cretaceous Moreno oil locality in the San Joaquin Basin (Coalinga oil field)

Figure 2 shows the location of the only known Cretaceous Moreno sourced oil in the Basin, at Coalinga. The Joint Venture does not expect to discover any Cretaceous Moreno oil in the AMI.

Figure 3 . Map of Eocene Kreyenhagen oil localities, San Joaquin Basin

Figure 3 shows the extent of Eocene Kreyenhagen-sourced oils in the Basin. The Joint Venture does not expect to discover any Eocene Kreyenhagen oil in the AMI.

Figure 4 . Map of Eocene Tumey oil localities in the San Joaquin Basin

Figure 4 shows the extent of Eocene Tumey-sourced oils in the Basin.

According to Hunt (Petroleum Geochemistry and Geology, 1986, p. 237) "Within more permeable sequences, hydrocarbons can and probably do migrate very long distances. The Athabaska Oil Sands must be the result of fluid drainage extending over hundreds of miles. The Pleistocene production of the Gulf Coast, except for biogenic methane, almost certainly had to migrate from older and deeper beds or from the deeply buried Pleistocene bathyal facies beneath the continental slope. This could entail migration distances of 50 to 100 miles. The fact that hydrocarbons can migrate with fluids long distances through permeable beds means that geochemists must be cautious in condemning a section because it is too shallow and too cool to generate hydrocarbons. If this non-generating section is connected to a more deeply buried source rock through continuous sandstones, unconformities, fracture-fault systems, or continental facies, it can contain commercial hydrocarbons."

The Joint Venture may potentially encounter some Eocene Tumey-source oils in its exploration program.

Figure 5 . Map of Miocene Monterey oil localities in the San Joaquin Basin, including the concentration in the AMI.

Figure 5 shows the extent of Miocene Monterey-sourced oils in the Basin. The Joint Venture expects that all oils discovered in the AMI will be sourced from Monterey Shales, except at its northern margin where the oils could be mixed Tumey + Monterey in origin. .

15. Joint Venture Exploration Strategy in the AMI

The Joint Venture is targeting, at depths of 2000 feet to 3000 feet,

• The Vedder Sands.
• The Pyramid Hill Sands overlying the basement.
• And additionally, any shallower oil bearing sands that may be encountered.

The Joint Venture is expecting to encounter a number of smaller but still prolific reservoirs, containing oil-in-place of the order of 0.5 million to 2 million barrels.

16. Joint Venture's Present Reserves and Production

The Joint Venture presently has no oil reserves or production from its properties.

17. Oil markets in the San Joaquin Basin

Production will initially be trucked to a refinery in Bakersfield, or to a terminal for pipeline transportation to refineries in Los Angeles. The three refineries in Bakersfield are:

• Big West of California LLC, 66,000 BOPD capacity.
• Kern Oil and Refining Co., 25,000 BOPD capacity.
• San Joaquin Refining Co. Ltd., 24,000 BOPD capacity

18. Expected oil prices

The oil produced is expected to be 12 o to 22 o API gravity. Medium-heavy oil prices in the San Joaquin Valley normally track WTI, with an approximate US$ 3 / bbl discount. San Joaquin oil prices are presently trading at a zero discount against WTI, because of the delivery problems presently being experienced in Alaska. Figure 6 shows Sproule October 2006 WTI price forecast, reverting to a $3 / bbl discount from 2008 onwards.

Figure 6 . Expected oil prices in the San Joaquin Valley, based upon Sproule, 5th October 2006 WTI price forecast

19. Certification of Qualifications

I, Richard J. Hawes, a Professional Geologist, of #407, 4510 Valiant Drive NW, Calgary, Alberta, T3A 0X9, hereby certify that:

• I an a consultant geologist, of Calgary, Alberta, and I evaluated the San Joaquin East Side Project in the Bakersfield, California, area, in which Consolidated Beacon Resources Ltd. has an interest.
• I was appointed a Director of Consolidated Beacon on 24 th August 2006, and was subsequently appointed Company Secretary. At present, I have no shares or options for shares in Consolidated Beacon Resources Ltd.
• I attended Sir John Cass College, London, England from 1968 to 1971, and graduated with an Upper Second Honours Degree in Geography and Geology (External London degree). I subsequently attended University of Calgary from 1971 to 1974, and graduated in 1977 with a Master's Degree in Geography. (I also attended University of Alberta from 1977 to 1980, passed all of the course requirements for a Ph.D. in Geology, but was injured carrying out field work and did not finish my Doctorate Degree). I attended University of Calgary from 1988 to 1990 and graduated with a Master's Degree in Business Administration, specialising in Finance.
• I have been a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta since June 1991 (Member number M-51928), of American Association of Petroleum Geologists since 1985, and the Canadian Society of Petroleum Geologists since 1981.
• I have over 28 years experience in the practice of petroleum geology, in Western Canada, Eastern Canada onshore and offshore, the United States, the Former Soviet Union, and other overseas petroleum basins.
• I carried out a personal inspection of the properties in September 2006. I have also reviewed information provided to me by the Company's partners, and from the appropriate California state and United States Federal authorities.