Investment Opportunity

Figure 23 OSOCO Production Profile

(bopd) 2,500 2,000 1,500 1,000 500 0 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 SHB-5

2020

2021

2022

2023

2024

2025

SHB-1

Gamma-1

SHB sidetrack

Source: Company.

The development plan for the OSOCO 1P reserves is presented below. (Costs in 2010 terms) Year (kbopd) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Source: Company. Production (kbopd) 2.04 2.08 1.74 1.38 1.10 0.86 0.66 0.53 0.43 0.35 0.28 0.23 0.19 0.15 0.12 0.06 0.04 Opex (US$mm) 3.7 3.8 3.2 2.5 2.0 1.6 1.2 1.0 0.8 0.6 0.5 0.4 0.3 0.3 0.2 0.1 0.1 Side-Track Well (US$mm) 3.5 -----------------

Shukheir Offshore Oil Price

Oil produced from Shukheir Bay is currently benchmarked to Ras Gharib crude which has traded at a 20% discount to Brent in the 2008 - 2009 period. As of January 2010, Ras Gharib has been trading at a c. 9% discount to Brent and is expected to remain so going forward. The Company is currently awaiting approval from EGPC to benchmark a major portion of the Shukheir Bay production to Ras El Bihar crude which has traded at a 3% discount in the 2008 - 2009

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Investment Opportunity

period. The Company is expecting the Shukheir Bay crude to start trading at a 3% discount by October 2011. In order to achieve the 3% discount, the Company will have to spend US$ 1.4 million of capex in 3Q 2011. The capex will be spent on the installation of necessary pumps to accommodate for the change in the evacuation of crude. Moreover, oil produced from Gamma is currently benchmarked to Ras El Bihar crude. Figure 24 Gamma Nubia Upside Potential Figure 25 Gamma Rudeis Upside Potential

Source: Company.

Source: Company.

Gamma Upside Potential

The Company has identified upside potential in several updip areas in the Gamma Field, predominantly identified through wells GA-12, Gamma-1 and EWD-1 ST1 as described below: Well GA-12 Updip Area: An upside potential in Nubia has been identified in an updip area to the well GA-12 which encounters the top of Nubia, 57 m below the fields oil water contact (1,331.5 mss). Additional estimated resources in the Nubia reservoir, based on the current ongoing in-house reservoir engineering study is 2.65 mmbbl. An optimum location to drain the estimated reserves will be recommended upon completion of the current study. Lower Rudeis upside potential is evidenced from the oil and gas shows encountered at a downdip location in the Lower Rudeis sandstones. The upside potential is currently under evaluation. Well West Gamma-1 Updip Area: A promising area in view of the intermittent production of the West Gamma-1 well and the Lower Rudeis gas shows indicated by the GA-12 well. This Lower Rudeis upside potential is currently under evaluation before being drained by infill wells. Well East Wadi Dara Updip area: A potential Lower Rudeis sand updip area, to the east of EWD-1 well, will require a thorough evaluation of its hydrocarbon potential on receipt of the 3D seismic data currently being re-processed. The following chart illustrates the production forecast including the upside potential in SHB and Gamma Fields. The production

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Investment Opportunity

forecast takes into account the GA 12 updip scenario with respect to the Gamma Field, as the two other scenarios are currently under evaluation. Figure 26 Total OSOCO & Upside Potential Production Profile
(bopd) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013 SHB-1 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Gamma-1

SHB-5

SHB sidetrack

G12 up dip

Source: Company.

Budgeted capital/operating expenditure for the development of Gamma for the year 2010 includes the drilling of one exploratory well with an estimated cost of US$6 million (GA-12 Updip). Operating expenses are estimated at US$5 /boe. The development plan for the 1P reserves and upside from OSOCO is presented below. (Costs in 2010 terms) Year (kbopd) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Source: Company. Production (kbopd) 2.04 3.98 3.45 2.70 1.96 1.42 1.02 0.77 0.58 0.45 0.35 0.23 0.19 0.15 0.12 0.06 0.04 Opex (US$mm) 3.7 7.3 6.3 4.9 3.6 2.6 1.9 1.4 1.1 0.8 0.6 0.4 0.3 0.3 0.2 0.1 0.1 Side-Track Well (US$mm) 3.5 ----------------Exploration (US$mm) 6.0 -----------------

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Investment Opportunity

4
4.1

Overview of Exploration Concessions

North El Maghara (NEM) Exploration Concession

Concession Overview
The Company received the award letter for the NEM concession in the EGAS 2006 bid round, with an effective date of July 17, 2007. The concession covers an onshore area of 3,120 km2 in North Sinai and is bound from the south by Gabal Magharah and by the Mediterranean shore line from the north. It benefits from good infrastructure exits at the northern part of the concession, which comprises the 36 Inter-Sinai National Gas Pipeline and the national coastal asphalt road to El Arish. Moreover, EGAS has designated an area adjacent to the NEM concession where any contractor may construct their facilities, thereby significantly reducing the processing time for the permits required for the construction of facilities. The concession is covered by different seismic vintages totalling 2,828 line km of 2D seismic data. Previous operators of the concession drilled seven wells, between 1973 and 1986, of which two wells had good gas shows. Several oil and gas discoveries have been found around the concession. The nearest are the onshore Fayrouz and Rommana discoveries to the west (Gas & Condensate in Early Miocene), the onshore Raad Field to the east (Gas in Mid Cretaceous), the Thekah Offshore Field to the northwest (Gas in Pliocene), the offshore Tinah discovery (Oil in Oligocene) and the offshore Mango discovery to the NE (Oil in Early Cretaceous). Under the Production Sharing Contract (PSC), the Company has a financial commitment to invest US$8 million over the initial exploration period of three years for the following activities: reprocessing of old seismic data, acquisition of new 3D seismic and the drilling of two exploration wells. As of the effective date, the Company has carried out a detailed geological assessment of the area, a petrophysical evaluation and bio-stratratigraphy analysis of available wells (reprocessing a total of 1,887 line km) and conducted a Geosat Study (phase I). 3D seismic data covering an area of 320 km2 is in the process of being processed following survey completion in mid December 2009. It is currently envisaged that it will take approximately four months to complete the processing, with drilling of the first exploratory well scheduled for the 2nd quarter 2010. Figure 27 Geographic Location

Source: Company.

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Investment Opportunity

Exploration History and Activities

Several gas and oil discoveries were made around the concession at different stratigraphic levels, confirming the presence of active petroleum systems in both the Miocene and pre-Miocene sequences in the area. Gas discoveries have been made in nearby wells in the Pliocene and Mid Cretaceous sections and gas and condensate have been recovered from the Early Miocene. In addition, oil discoveries have been made in the offshore Mediterranean, to the north of the concession, in the Oligocene (Tineh Field) and in the Early Cretaceous (Mango-1 well).

Stratigraphy, Reservoirs and Structure

Figure 28 presents the generalised stratigraphic column of North Sinai. The main target reservoirs in concession are the Tertiary sands, comprising the Pliocene and the Late Miocene (Abu Madi) braided channels, as well as the turbidites and clastics pinch-outs within the Oligocene to Early Miocene sediments. The Late Cretaceous-Miocene carbonates also have potential for development of local high energy build-ups around the Mid-Delta Hinge Zone. Additional target reservoirs are the sands and porous carbonates within the Jurassic and Cretaceous sequences. Several stratigraphic sequences in the geological column of North Sinai, ranging from Miocene to Jurassic, are known to have good potential for active hydrocarbon generation and can act under favourable conditions as hydrocarbon generators. The region of North El Maghara was affected by several major tectonic events that created two pronounced sedimentary regimes in the concession, comprising the Tertiary Nile Delta and the Mesozoic West Desert / North Sinai sedimentary sequences. The Mid-Delta Hinge Zone, which is a steep tectonic flexure, runs across and separates the concession into northern and southern parts: The southern part is affected by the Late CretaceousMid Eocene Syrian Arc folding and thrusting and is represented by a carbonate platform of reduced Tertiary section with shallow near surface Cretaceous-Jurassic sediments. The northern part, on the other hand, is characterized by a thick deltaic Tertiary sequence of OligoceneNeogene sediments with the Cretaceous-Jurassic sequence deeply buried. Both structural and stratigraphic traps are identified in the concession. Pronounced structural traps are mainly concentrated in the southern platform area and are represented by faulted anticlines trending NE-SW; while stratigraphic traps are mainly of Tertiary age and concentrated in the northern basinal part of the concession, to the north of the Hinge Zone.

Figure 28 North Sinai Generalised Stratigraphic Column

Source: Company.

Figure 29 NEM Structure Framework

Source: Company.

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Inve estment Oppor rtunity

North El M N Maghara Identified Lead and Pros ds spect

Interpretation of old and rep I processed seism data indica mic ated the presen of several braided chann in the nort nce nels thwest part of the con p ncession at seve Pliocene a Miocene le eral and evels. The geom metric configur ration and seis smic character of the identified chan i nnels show gre similarity to those gas pro eat o oducing chann in the near Nile Delta area to the we In nels rby est. addition, gas sh a hows were rec corded in two w wells drilled clo to the ident ose tified and mapp channels. ped Indications of possible sand bars, within th Early Mioce I he ene-Oligocene sequence, and carbonate bu d uild-ups at the H Hinge Zone, within th Late Cretaceous/Eocene se Z he equence, are al reflected on several old se lso n eismic sections s. Early evaluatio of North El Maghara bid r E on round documen from 2006 r nts revealed the pr resence of six m channels at the main Late Miocene (Abu Madi) level, some of w L which are confir rmed by the re ecently reprocessed data. The gas resour T rces in place f the six Late Miocene cha for e annels are estim mated at 748 b for the Mos Likely case (P50) bcf st and 1,447 bcf for the Maxim a f mum case (P10 The above estimates do n include the potential Plio 0). not e ocene or the M to Mid Early Miocene seismic anom E e malies identified on the reproc d cessed data (shown in the figu below). ure

Figure 30 M to Early M Mid Miocene Stratigraphic Lead c

Figure 31 P Pliocene Stratigraphic Lead c

Fi igure 32 Mid to Early Miocene d St tratigraphic Le ead

Source: Compan ny.

Source: Compan ny.

So ource: Company.