Horn Indago Petroleum Report 201005 - Final

IND AG O P E T RO L E U M
R ESEARCH & A NALYSIS , O CTOBER 2005
E X E C U T I V E S U M M A RY
T H E C O M PA N Y
Indago Petroleum (Indago) is a new company that intends to list on AiM in November 2005.
Indago was formed through a management buy-out of the United Arab Emirates (UAE) and Omani assets of Novus
Petroleum (Novus), an oil company previously listed on the ASX. Novus was acquired by PT Medco Energi (Medco),
the Indonesian oil company, in a hostile take-over in 2004.
The acquisition of Indago was financed by Meridian Capital which owns 69% of the company. Crosby Capital and the
management team respectively own 21% and 10% of the company.
THE MANAGEMENT
The management of Indago have been in place for over 9 years and have built an attractive exploration portfolio using
their strengths in field mapping and integration.
Indago's management have established a reputation in the region as a competent partner through their operatorship
of the offshore Bukha gas and condensate field (Block 8, Oman). In addition, in the same block, they have taken the West
Bukha well through appraisal to development phase.
A S S E T P O RT F O L I O
Indago have focused on developing an understanding of the fold-belt fairway of the Northern Arabia Peninsula, in Oman
and the UAE. They have integrated surface geology with improved seismic imaging to generate a suite of attractive
exploration prospects. All reservoir targets have established analogous regional producers.
Indago has developed a mature prospect inventory with Hagil and Ash Sham in the UAE (Onshore RAK); Jebel Hafit
(Block 31), and Adam and Izz (Block 47) in Oman.
There are also several follow-up leads in each of the blocks to enable Indago to build on any exploration success in the
current drillable prospects. Indago also has a number of opportunities in the region which may enable it to grow the
portfolio further in the event of exploration success.
WORK PROGRAM
Indago is expected to raise up to US$ 120 million (m) at its IPO to be applied to debt repayment, project development,
the drilling of 5 wells, exploration and the finalisation of new projects.
The US$ 60 m West Bukha development well is underway. The US$ 16.7 m Hagil well spudded at the start of October 2005.
Thereafter, Indago expects to spud a US$ 11.4 m well at Adam in May 2006, followed by a US$ 24.8 m well at Jebel Hafit
in September/October 2006. A US$ 10.2 m well at Izz will be spudded either before or after drilling starts at Hafit,
with a US$ 5.4 m well at Ash Sham scheduled for August 2006.
V A L U AT I O N
With a target reserve base of 1.93 billion (bn) barrel of oil equivalent (boe), with a gross adjusted probability value
of US$ 1.6 bn, Indago has a range of high impact exploration opportunities.
The estimated unrisked recoverable Gas Initially In Place (GIIP) of the Prospect portfolio is 6.2 trillion cubic feet of gas
(Tcf) gas. Using a 1 in 5 probability, and a fixed gas price of US$ 1.20 and US$ 1.40/MMbtu for the Oman and the
UAE respectively, the value is approximately US$ 403 m.
The estimated unrisked Condensate Initially In Place (CIIP) plus LPG volume from the current prospect inventory
is 789 MMboe. 82% of condensate potential is contained with two prospects, Jebel Hafit and Hafit. On a risked basis
at a West Texas Intermediate (WTI) oil price equivalent of US$ 30/bbl, the value of this condensate portfolio
is approximately US$ 1.2 bn.
The expected volume from the current lead inventory is 212 Bcf gas and 4.7 MMboe condensate plus LPG. Using a 1 in 20
probability at the fixed gas prices noted above and a WTI of US$ 30/bbl, the value of the gas, condensate and LPG Lead
portfolio is approximately US$ 7.4 m. This valuation only reflects those leads valued by Petrenel, the technical consultant.
In addition, Indagos management have developed a portfolio of leads to which no value has as yet been attributed
Adjusting for possible back-in's, a 30% weighting of the calculated value of Jebel Hafit and Hagil, and a deduction
of 25% from the adjusted value for various risk factors; within a WTI price range of US$ 30/bbl to US$ 54/bbl, an indicative
valuation for Indago is between US$ 427 m to US$ 701 m.
Indago Petroleum would like to thank NASA for providing the cover image for this Report.
CONTENTS
THE COMPANY
OVERVIEW
STRATEGY
NON-EXECUTIVE DIRECTORS
EXECUTIVE DIRECTORS
OPERATING STRUCTURE
CORPORATE GOVERNANCE
2
2
4
5
7
8
10
THE UNITED ARAB EMIRATES AND OMAN
12
REGIONAL ENERGY SUPPLY AND DEMAND
16
ASSET PROFILE
PRODUCTION
DEVELOPMENT
PROSPECTS
LEADS
OPPORTUNITY
18
22
24
26
32
38
WORK SCOPE & FINANCING
40
RISKS
44
FINANCIAL ANALYSIS
48
VALUATION
54
GLOSSARY
62
APPENDIX 1: OVERVIEW
OF THE
ENERGY SECTOR
64
RATINGS SYSTEM & CERTIFICATION
69
RESEARCH DISCLOSURES
70
DISCLAIMER
71
I NDAGO P ETROLEUM
T H E C O M PA N Y
O VERVIEW
Indago Petroleum (Indago) intends to list on the London AiM market
in November 2005.
Indago is a focused oil and gas Exploration and Production (E&P)
company with a portfolio of opportunities, which vary in risk and maturity.
Indago was formed through a management buy-out of the United Arab
Emirates (UAE) and Sultanate of Oman (Oman) assets of Novus
Petroleum (Novus).
Novus was acquired by PT Medco Energi (Medco), the Indonesian oil
company, in a hostile take-over in 2004.
The buy-out of the assets of Indago was financed by Meridian Capital
which on a pre-money basis owns 69% of the company. Silk Route
Petroleum, a company controlled by Crosby Capital, and the management
currently own 21% and 10% of the company respectively.
Indago is the 100% owner of subsidiary companies Indago Technical
Services Ltd, Indago Oman Ltd (IOL) and Indago Al Khaleej Ltd (IAK).
These companies hold its interests in a producing gas-condensate field
(Bukha), and an approved gas-condensate development (West Bukha),
which is expected to come in stream in late 2007. Both of these assets are
located off the Musandam Peninsula in Omani waters.
In addition, Indago has 5 drillable prospects (Jebel Hafit, Block 31; Hagil
and Ash Sham, Ras Al Khaimah; Adam and Izz, Block 47) and plans to drill
5 exploration wells prior to 2007.
Indago is an active explorer and in addition to its portfolio of Prospects,
it has several Leads in different stages of development.
The company is also actively evaluating a number of new venture
opportunities.
M IRABAUD S ECURITIES , M. H ORN & C O .
Source: Indago Petroleum
I NDAGO P ETROLEUM
T H E C O M PA N Y
S TRATEGY
Indago aims to become a leading producer of natural gas in Oman and the
UAE in order to satisfy a significant forecast regional supply/demand
imbalance.
This objective will be achieved through:
Development of existing fields
Exploration in existing licenses held by the company
Acquisition of related acreage and existing undeveloped discoveries.
Indago has a significant amount of license acreage in the UAE and Oman,
and is strategically well placed with strong political and working
relationships in the region.
COMPANY STRUCTURE
Silk Route
Petroleum Ltd
Meridian
Middle East Inv. Ltd
21%
Management
69%
10%
Indago Petroleum Ltd

100%
Indago Oman
Block 30 Ltd
100%
Indago
Al Khaleej Ltd
100%
Oman
Block 30
100%
100%
RAK
Onshore
100%
Indago Technical
Services Ltd
Indago
Oman Ltd
40%
Oman
Block 17
50%
Atlantis
100%
100%
Oman
Block 31
40%
Oman
Block 47
10%
Oman
Block 8
50%
Heritage
Petroleum
LG
10%
Heritage
Petroleum
BVI
Bermuda
Cayman Islands
Petroleum Concession Incl. Indago Interest
Guernsey
Non Indago Companies
N ON -E XECUTIVE D IRECTORS
The Rt. Hon. Tim Eggar
CHAIRMAN, NON-EXECUTIVE
The Rt. Hon. Tim Eggar Chairman, Non-Executive. Mr. Eggar worked
at Hambros Bank before spending 8 years with European Banking
Company. In 1979, he was elected to the UK parliament. From 1985,
he served in several UK ministerial positions and ultimately was Minister
for Industry and Energy from 1992 to 1996. Since leaving government,
he has served as a director of a number of companies, including Chairman
of MW Kellogg Limited and of Agip UK Limited. He was Chief Executive
Officer of Monument Oil and Gas plc. From 2000 to 2004, Mr. Eggar was
Global Head of ABN AMRO's Global Energy Corporate Finance Group
and, most recently, Chairman of UK Client Coverage. Mr. Eggar
is currently a Non-Executive Director of Anglo Asian Mining and Expro
Group International. He is President of the Russo-British Chamber
of Commerce. He was the Chairman of the Anglo-Azeri Society.
Barry Goldberg
DIRECTOR
Mr Goldberg is a principal of Genuity Capital Markets. Mr. Goldberg has
extensive public company advisory experience. Prior to joining Genuity
Capital Markets, from 1998 to 2005 Mr. Goldberg was a Managing Director
at BMO Nesbitt Burns where he was the Head of Restructuring. From
1996 to 1998, Mr. Goldberg was a partner at the law firm Heenan Blaikie.
From 1990 to 1996 he was a partner at the law firm Osler Hoskin and
Harcourt. Mr. Goldberg has an undergraduate degree, a Bachelor of Civil
Law, and a Bachelor of Common Law from McGill University.
He is a member of the Ontario Bar.
Rod Perry
DIRECTOR
Mr Perry is global head of Venture Capital for 3i plc. He is a member of the
board of 3i Group plc and a member of both the Executive Committee and
the Investment Committee. Between 1997 and 2001, Rod was responsible
for the 3i investment business in Asia Pacific. Rod has a B.Sc. in Physics
and is a member of the Institution of Electrical Engineers.
I NDAGO P ETROLEUM
T H E C O M PA N Y
Paul Alexander Marchand

DIRECTOR
Mr. Marchand is General Counsel of Meridian Securities (UK) Limited.
Mr. Marchand was formerly a partner of White & Case LLP,
an international law firm. Prior to joining White & Case LLP, Mr. Marchand
was a solicitor at Linklaters, an international law firm. Mr. Marchand
is a member of the Law Society of England and Wales and holds
a Bachelor of Civil Law degree from the University of Oxford (Corpus
Christi College), an LL.B from the University of Stellenbosch and
a Bachelor of Commerce and Masters in Taxation Laws from the
University of the Witwatersrand.
Dr Robert Charles Williams

DIRECTOR
Dr. Williams has degrees in geology from the Universities of Manchester
and Cambridge, England. He joined British Petroleum plc in early 1976,
where he worked in their international staff. In 1987 he became General
Manager and a Director of Oil Search Limited. In 1994, Dr. Williams
formed and led the team that created Novus Petroleum Limited, Australia's
largest IPO of an upstream oil and gas company. Dr. Williams was also the
Non-Executive Chairman of Nido Petroleum Limited. Dr. Williams became
a Fellow of the Australian Institute of Company Directors and is also
a Fellow of the Geological Society. He has served on a number of industry
committees in various countries. He is a member of the Advisory Board
of the Energy and Geoscience Institute, a division of the University of Utah
affiliated with Imperial College, London.
Dr. David Lawson Bremner

DIRECTOR
Dr. Bremner joined British Petroleum plc in 1977, where he worked in their
international staff in London, Aberdeen, Alaska and San Francisco.
He resigned from BP in 1984 to become Exploration Manager of Merlin
Petroleum, a small start-up exploration company, based in San Francisco.
After the sale of Merlin Petroleum in 1989 and a successful role
in international petroleum consultancy, in 1995 he joined Monument Oil and
Gas plc, based in London, as Exploration Manager. In 1997, Dr. Bremner
was appointed Exploration Director for Monument, a role which he held until
that company was sold in 1999. Since that time Dr Bremner has been
engaged in international petroleum consultancy with a particular emphasis
on new business development and has been active in exploration
consultancy in the domestic United States. Dr. Bremner holds an honours
degree and a Ph.D. in geology from the University of Glasgow, Scotland.
E XECUTIVE D IRECTORS
Peter Sadler
CHIEF EXECUTIVE OFFICER
Mr. Sadler is a graduate of Oxford University and London Imperial College.
He commenced work with Schlumberger in 1978 and after obtaining his
MSc, he joined Unocal as a petroleum engineer. Prior to being appointed
as the Head of Engineering in 1996 by Novus (the forerunner of Indago),
Mr. Sadler worked with companies such as Texas Eastern, Exxon,
Fletcher Challenge, Agip and Shell. In 2000 he was appointed by Novus
as Regional Manager Middle East. Mr. Sadler also sat on the Executive
Committee of Novus.
John Hurst
EXPLORATION DIRECTOR
Mr. Hurst obtained a B.Sc in geology from Hull University and a D. Phil and
D.Sc in geology from Oxford University. In 1976 he joined the Greenland
Survey mapping and exploration teams in Copenhagen. In 1983 he joined
British Petroleum in London and was initially involved in regional
exploration projects. He subsequently became Manager of the Basin
Studies Group. He resigned from BP in 1992 and joined Total in Paris
as Exploration and Production Adviser in carbonate petroleum systems
to the Exploration Manager. In 1996 he joined Novus as a roving
Exploration Consultant. He has managed since 1999 Novus' (and now
Indago's) Middle East exploration group.
I NDAGO P ETROLEUM
T H E C O M PA N Y
O PERATING S TRUCTURE
Peter Sadler and John Hurst are based in Dubai and are responsible for
the day to day operations of Indago.
Indago employs 6 senior staff and several contractors.
Indago Oman Limited on behalf of the Bukha Joint Venture Partners
operates the offshore facilities.
A Production Operations Manager, 3 technicians and an office assistant,
all based in Ras Al Khaimah, are responsible for the day-to-day activities.
A Petroleum Engineer located in the Muscat office is responsible for
reservoir and production monitoring.
General management is provided by Indago's Dubai Office.
INDAGO PETROLEUM ORGANISATIONAL STRUCTURE (SEPT 2005)
Peter Sadler
Chief Executive Officer
Miguel Soto
John Hurst
Chief Financial Officer

(acting)
Exploration Director
Gracia Valladian
Executive Secretary
& Office Co-ordinator
Joseph Yue
Office Assistant
Shelley Watson
Appointed*
Jamie Parry
Paula Pedler
Commercial Manager
WB Dev. Project Man.
Regional Ops Manager
Snr Petroleum Engineer
Abduljalil Al Farsi
Ops Manager
Onshore Oman
Mick McNaney
David Moore*
Production Manager
Drilling Manager
Lois Kape
Azhar Ahsan
Khaled Al Hashmi
Hamid Al Hajri
Maria Fernandez
Geologist
Accounts Administrator
PRO
Ops & Maint Tech
Drilling Sec
John Brown
Salim Al Salmi
Halima Al Balushi
Ramsey Cabunoc
Steve Hendry*
Ops Geologist
Accounts Administrator
Admin Secretary
Ops & Maint Tech
Snr Drilling Engineer
Appointed
Laith Albehacee
Manuel Del Rosario
Ben Hennessy*
Snr Geophysicist
Accounts Admin & PRO
Ops & Maint Tech
Snr Drilling Supervisor
Daniela Garrad
Jacob Philip
Snr Geophysicist
Office Assistant
Thomas Lagler
Technical Assistant
Gary Morrison*
Materials/Logistics
Supervisor
Morris Ferris*
Employees: 26
*Contractors: 6
Snr Completions
& Welltest Engineer
I NDAGO P ETROLEUM
T H E C O M PA N Y
C ORPORATE G OVERNANCE
BOARD GOVERNANCE
AUDIT COMMITTEE
The Audit Committee will be chaired by Barry Goldberg. The Audit
Committee will be responsible for monitoring the quality of internal controls
and for ensuring that the financial performance of the Company is properly
monitored, controlled and reported on.
REMUNERATION COMMITTEE
The Remuneration Committee will be chaired by Tim Eggar. The
Remuneration will review the performance of the executive Directors and
set the scale and structure of their remuneration and the basis of their
service agreements with due regard to the interests of Shareholders.
NOMINATION COMMITTEE
The Nomination Committee will be chaired by Tim Eggar. The Nomination
Committee will be responsible for reviewing the structure, size and
composition of the Board, preparing a description of the role, capabilities
required for a particular appointment, identifying and nominating
candidates to fill Board positions, as and when they arise.
10
HEALTH, SAFETY AND
THE
ENVIRONMENT
Indago has inherited safety attitudes and operational documentation from

its original Australian parent. Prudent operating practices along with
fit-for-purpose, current oil spill contingency plans and environmental
assessments will continue to be implemented in excess of existing
government requirements. These procedures will be updated to reflect
changing operational needs and industry practice.
In addition, following Admission, the Company intends to adopt practices
to comply, so far as practicable and appropriate for a company of its size,
with the main provisions of the Combined Code.
The Company has adopted a share dealing code, based on the Model
Code for Directors and relevant employees in accordance with the AIM
Rules and will take proper steps to ensure compliance by the Directors
and those employees.
CONTRACTING AND PROCUREMENT

In Oman there is an oversight committee with the Ministry of Oil and Gas
(MOG) which requires a tender exercise for all contract awards over
US$100,000.
Following a pre-qualification phase, separate, sealed technical and
commercial bids are sought and subsequently assessed by the
committee. An evaluation is made by the operator and submitted for
approval to the MOG.
This process provides good transparency and accountability. The
committee has been flexible when confronted with logical justification.
A similar internal procedure is carried out in jurisdictions which do not have
prescribed government controls.
11
I NDAGO P ETROLEUM
T H E U N I T E D A R A B E M I R AT E S
The United Arab Emirates (UAE)

and The Sultanate of Oman
(Oman), enjoy a reputation for
peace, prosperity and economic
development. Unlike many of
the nations in the region,
political
risk
and
major
acts of terrorism have been
non-existent for decades.
AND
OMAN
U NITED A RAB E MIRATES

POLITICAL STRUCTURE
The UAE is a federation of seven emirates - Abu Dhabi, Dubai, Sharjah,
Ajman, Fujairah, Ras Al-Khaimah and Umm Al-Quwain. Political power
is concentrated in Abu Dhabi, which controls the vast majority of the UAE's
economic and resource wealth. The two largest emirates - Abu Dhabi and
Dubai - provide over 80% of the UAE's income.
There is a high level of political and economic autonomy within the
individual emirates. Each emirate has its own ruler, controls its own natural
resources and regulates much of its own commercial activity. The rulers
of the emirates each serve as members of the Federal Supreme Council
of the UAE incorporating both legislative and executive powers.
The Council ratifies federal laws and decrees, and plans general policy.
The Council of Ministers or Cabinet is described in the Constitution as "the
executive authority" of the federation is headed by the Prime Minister who
is chosen by the President in consultation with his colleagues on the
Supreme Council. In June 1996, the UAE's Federal National Council
approved a permanent constitution for the country.
The current head of state, Sheikh Khalifa bin Zayed Al-Nahyan, took office
in November 2004, following the death of his father Sheikh Zayed bin
Sultan Al-Nahyan.
12
ECONOMY
The overall performance of the UAE's economy is heavily dependent
on oil exports, which account for over 30% of total gross domestic product
(GDP). Growth in real GDP was 6.4% in 2004, partially due to higher crude
oil prices. For 2005, real GDP growth is projected to reach 6.5 %. The
non-oil segment of the UAE's economy also is experiencing strong growth,
particularly the petrochemicals and financial services sectors.
The UAE is the 3rd largest economy in the Middle East with GDP of US$
85.5 bn in 2004. The UAE's GDP has risen by 55% over the past 5 years,
giving a growth rate of 10.9% per annum. The UAE has the highest per
capita income after Qatar in the Arab world largely due to its oil and gas
reserves. Since the early 1970's, the UAE has transformed itself into
a highly prosperous economy.
The UAE is mid-way through a 20 year economic diversification plan away
from primary oil production. Currently, there are several major projects
underway throughout the Emirates in various sectors including refinery
and petrochemicals, tourism, aviation and airports, re-export commerce,
and telecommunications.
13
I NDAGO P ETROLEUM
T H E U N I T E D A R A B E M I R AT E S
AND
OMAN
O MAN
POLITICAL STRUCTURE
Oman has been ruled by Sultan Qaboos bin Said Al Busaidi since 1970,
when he deposed his father in a bloodless coup. All power is concentrated
in the hands of the Sultan, who also holds the top positions in the finance,
defence, and foreign affairs ministries.
Rules governing the succession to the throne were formalized in the 1996
Basic Law. There is no Omani legislative assembly, though there are two
consultative bodies called the Majlis Al-Dawla and the Majlis Al-Shura.
Together, the two chambers form the Council of Oman. The Majlis
Al-Dawla is appointed, while the Majlis Al-Shura is elected. The last
election was held in October 2003.
Constitutional reforms in Oman have been part of the ongoing process
of modernisation. The Basic Statute of the State, announced in November
1996, deals with every aspect of State legislation and human rights.
It guarantees equality of all citizens before the law, freedom of religion,
freedom of speech, the free press, the right to a fair trial and the right
to form nationally based associations. It lays down the framework for
all future legislation and provides for the succession. The Basic Statute
also barred ministers from holding interests in companies doing business
with the government.
14
ECONOMY
Oman's macroeconomic environment currently is strong, despite recent
declines in oil production. Real GDP growth was 3.3% in 2004 and
is projected to rise to 3.5% in 2005. Inflation was only 0.8% for 2004.
Oman is heavily dependent on oil revenues, which account for around
75% of the country's export earnings and almost 40% of its GDP.
Due to the maturation of its oil fields and the volatility of oil prices, the
Omani government has made diversifying the country's economy a top
policy priority. In the 1980s, this effort hinged on developing a domestic
manufacturing base, but more recent initiatives have focused on the
exploitation of Oman's other natural resources, particularly its natural
gas reserves.
Oman has large mineral and metal deposits, including silica, dolomite,
copper and gold. In September 2003, the government announced that
it was reviving a five-year-old plan to build a US$ 2.5 bn aluminium
smelter, which is to begin operation in 2007.
Oman's efforts to diversify the economy also include "Omanization",
a program designed to increase the percentage of Omani citizens working
in the private sector. At present, Omani nationals constitute only 10%
of private sector employment.
The government also has continued to attempt to attract foreign
investment, particularly in light industry, tourism, and electric power
generation. Foreign investment incentives include a 5-year tax holiday for
companies in certain industries, an income tax reduction for publicly held
companies with at least 51% Omani ownership, and soft loans to finance
new and existing projects. The process of privatizing some state-owned
industries is to be accelerated under a decree issues in July 2004, which
will allow foreign ownership up to 100% in power generation and water.
Oman became a member of the World Trade Organization (WTO)
in October 2000. Movement continues towards an eventual customs union
amongst the Gulf Co-operation Council (GCC) states.
15
I NDAGO P ETROLEUM
R E G I O N A L E N E R G Y S U P P LY
AND
DEMAND
The key factors governing the growth of natural gas demand in the region are:
Increased use of natural gas for re-injection to boost declining

oilfield production.
Numerous gas-export related industries such as LNG schemes and

petrochemical plants are now competing with domestic natural gas
requirements. In particular growth in LNG demand on the Indian
subcontinent is expected to underpin new gas export schemes.
Substitution of natural gas for existing diesel-fired operations allows

a greater proportion of refined products to be freed up for export.
Gas-intensive industries such as cement manufacture, aluminium

smelting and ceramic manufacturing have grown to take advantage
of the confluence of cheap energy, a benign tax environment, and
an abundance of cheap labour.
Electricity demand has grown as economies have grown leading

to corresponding growth in natural gas fired generation. The harsh
climate requires extensive use of desalination and air conditioning
which are energy hungry end-use applications.
As such, despite the regions hydrocarbon resources there are

opportunities to supply gas into its markets.
There are shortfalls of natural gas supply evident today, and this
is forecast to grow.
16
M EDIUM T ERM O PPORTUNITIES

There is an opportunity to supply gas to the Federal Electricity and Water
Authority (FEWA) power stations in the Northern Emirates which are
burning significant volumes of liquid fuels due to a gas shortfall.
Sharjah Electricity and Water Authority (SEWA) is expected to be short
of gas by summer 2005, unless a new source materialises. This is due
to declining gas production from the Sajaa field, which has also caused
a reduction in the amount of Sharjah gas supplies to the growing Dubai
market. SEWA is currently buying gas from Iran through a new UAE listed
company, Dana Gas.
Oman has developed its gas-based industry over the past few years and,
although new gas fields and infrastructure are being developed, Qatari gas
imports (via the Dolphin project) are required to make-up the shortfall that
would otherwise occur within 2 to 4 years.
L ONGER T ERM O PPORTUNITIES

In addition to these short to medium term opportunities, there
is a requirement for a project such as Dolphin to supply large volumes
of gas to the UAE and Oman by 2007.
Although the Dolphin Gas project has the potential to flood the market
in the northern emirates and Oman, actual gas deliveries are still many
years away and the cost of delivered gas will have to compete with
cheaper gas from local fields.
C ONCLUSION
Oman will face difficulty in filling a 9 to 16 Tcf shortfall without importing
relatively expensive Qatari gas via the UAE.
Within the UAE gas demand is likely to grow further beyond the forecast
8.2 Tcf deficit as soon as industrial users have security of supply. The
estimated available market over the next 20 years is approximately 15 Tcf.
17
I NDAGO P ETROLEUM
ASSET PROFILE
N ORTHERN A RABIAN G AS - CONDENSATE P LAY

Indago has created a portfolio of drilling opportunities distributed along
a trend which they call the "North Arabian Gas Condensate Play" (NAGP).
Indago believes that its NAGP prospects have the scale to contain several
Tcf of gas.
The Oman mountain range stretches from the Musandam Peninsula
in a southwards arc towards Muscat in Oman. These mountains have
been created through the collision of the Arabian plate with an Island Arc
complex, and this has created a foreland thrust belt.
Typically, mountain regions such as these, and in particular the buried
frontal deformation zone, are natural focal points for hydrocarbon migration.
The Omani mountains are to some extent an extension of the Iranian
Zagros Mountains. They formed at the same time and have many of the
same geological elements which are so productive in Iran.
The western mountain foreland area has few oil and gas fields as it has
been relatively under-explored.
In the north there are a number of gas-condensate fields such as Bukha,
West Bukha-Hengam offshore Oman/Iran, and the Saja'a, Moveyiid, Khaif,
Margham and Khubai fields in onshore U.A.E. At the south of the mountain
arc there are other gas-condensate discoveries such as Hafar, Al Sahwa,
Nadir and Hamrat Duru south-west of Muscat.
Although separated by hundreds of km these fields are similar in terms
of the geological elements that make them work. Indago believes that they
are part of a continuous geological system that stretches along the
mountain front. If the petroleum systems throughout the entire length
of the fold belt are the same, then there is likely to be more gas awaiting
discovery in the under explored area between the proven fields in the
north and the south.
18
This geological insight is nothing new and many of the major oil
companies that explored the Middle East recognised that this was
a potentially prolific gas play. But there was no economic incentive
to explore for gas at that time and the acreage lay dormant. Recently the
economic incentives for gas exploration have changed. Many of the Gulf
countries now consume large quantities of natural gas and are prepared
to pay for the security of additional long-term supplies.
19
I NDAGO P ETROLEUM
ASSET PROFILE
O VERVIEW
There are 4 concessions in Oman and 1 in the UAE in which Indago holds
working interests.
Indago Oman Limited (IOL) holds a 40% working interest and
operatorship in Oman Block 8 which contains the Bukha and West Bukha
fields. Other partners in this block include LG (50%) and Heritage (10%).
LG is a large Korean company and Heritage is a Canadian listed oil and
gas company.
IOL holds a 40% working interest and operatorship in Oman Block
17. Other partners in this block include Atlantis (50%) and Heritage (10%).
Atlantis was originally formed as an E&P subsidiary of the seismic
company PGS, but is now owned by the Chinese company Sinochem.
IOL and Indago Al Khaleej Limited (IAKL) hold a 100% working interest
and operatorship in all other blocks.
L EGAL T ITLE
There are a number of agreements in place between the relevant
government authorities and the Indago group of companies.
These include:
The Exploration and Production Sharing Agreements (EPSA's) which

detail the fiscal terms and work requirements for the Omani blocks;
The Joint Operating Agreements (JOAs) which detail the conduct of joint
venture operations for blocks where there is more than one partner.
A Heads of Agreement for gas sales from the West Bukha field into the
northern emirate of Ras Al Khaimah.
20
E XPLORATION P ORTFOLIO P ROFILE

An overview of the Indago portfolio, which sets out the Expected Ultimate
Recoverable Reserves as agreed by Petronel, the independent technical
consultant, and which form the basis of our valuation of the company,
is set out below.
INDAGO PETROLEUM LTD COMPETENT PERSON'S REPORT

INDEPENDENT VOLUMETRIC ESTIMATE OF ASSETS
Risked Expected Remaining Hydrocarbon Recovery
Block
Asset
Block 8
Bukha
Block 8
West Bukha (Oman)
RAK
Hagil
RAK
Hagil Lias/Trias
RAK
Ash Sham (part)
RAK
Digdaga
Block 17
Ash Sham/Ghumdah
Block 31
Jebel Hafit (Oman)
Block 31
Qumaira
Block 31
Jebel Wa'Bah
Block 47
Izz
Block 47
Izz Deep
Block 47
Adam
Block 47
Block 47
Block 47
Dham
Total
Unrisked
Recovery
Mid
Mid
(bcf) (mmb)
POS
Prospect
POS
WetGas
100%
Sales Gas
(bcf)
100%
Cond+LPG
(mmb)
IPL Share
Sales Gas
(bcf)
IPL Share
Cond+LPG
(mmb)
Economics (100%)
Unrisked
Risked
NPV
EMV
NPV (10%)
EMV (10%)
(US$m)
(US$m)
Economics (IPL share)

Unrisked
Risked
NPV
EMV
NPV (10%)
EMV (10%)
(US$m)
(US$m)
52.4
3.4
1.00
1.00
0.0
2.0
0.0
0.8
10.5
9.7
4.2
3.9
226.5
27.7
0.70
1.00
65.7
19.0
26.3
2.8
103.0
68.4
41.2
27.4
1,586.9
233.7
0.20
0.65
330.0
32.5
330.0
32.5
1,044.2
128.1
1,044.2
128.1
780.1
117.0
0.12
0.65
95.5
9.5
95.5
9.5
557.6
38.2
557.6
38.2
757.7
109.4
0.09
0.50
34.1
4.9
34.1
4.9
325.7
4.1
325.7
4.1
0.00
0.00
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
480.8
69.4
0.09
0.50
8.9
1.3
3.5
0.5
127.2
5.1
50.9
2.0
2,058.9
310.3
0.29
0.75
283.6
28.4
283.6
28.4
1,235.4
261.5
1,235.4
261.5
0.00
0.00
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.00
0.00
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
378.9
54.3
0.24
0.20
9.5
1.4
9.5
1.4
198.3
3.5
198.3
3.5
83.4
0.9
0.15
0.20
6.9
0.3
6.9
0.3
77.87
0.5
77.9
0.5
439.9
68.0
0.19
0.70
31.1
4.6
29.5
4.3
238.5
22.1
226.6
21.0
Sadood
67.5
10.4
0.11
0.20
0.0
0.0
0.0
0.0
26.8
-6.0
26.8
-6.9
Kabshat
54.6
7.5
0.57
0.10
19.4
0.4
19.4
0.4
33.3
0.1
33.3
0.1
0.00
0.00
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
6,968
1012
884.6
92.3
838.3
85.9
3,951.5
541.4
3,795.2
490.3
Source: Technical Consultant
21
I NDAGO P ETROLEUM
ASSET PROFILE
P RODUCTION
BUKHA
Indago is the operator of Bukha, Oman's only offshore producing field.

Bukha has produced since 1994 but is now in decline.
As estimated by Petrenel, the field contains an initial GIIP of 326 Bcf.
Petrenel estimate that proven plus probable reserves of gas remain
at 48.19 Bcf, 4.60 MMbbl condensate and 1.0 MMbbl of LPG.
The Bukha field fluids are contained in two zones known as the Thamama
and the Mauddud. Both reservoirs are fractured carbonates which
augment permeability and provide good flow rates from otherwise low
porosity-permeability rocks. The reservoir has little aquifer support and
depletes as a normal retrograde condensate field, with condensate
dropping out in the reservoir as pressure declines and hence decreasing
the condensate-gas ratio with time.
22
This field derives its revenue from the sale of condensate and LPG.
Bukha 1, a sub-sea completion, is connected back to the platform
by a 1,186 metre, 6-inch flexible flow line with separate service and control
umbilical. Bukha 2 is a surface completion.
Produced fluids are exported from the platform by natural drive,
via a 34km, 16 inch diameter pipeline to the Ras Al Khaimah Gas
Commission (RAKGAS) processing facility, located at Khor Khwair in Ras
AI Khaimah, UAE. No processing of produced fluids is carried out on the
platform as this is all carried out at the RAKGAS plant.
The field is mature and on a predicted decline, nevertheless it is expected
to continue producing for 5 years or more. The projected economic limit
of the field continues to be extended with the prevailing high oil price
environment. Current end of field life is expected in 2011.
Production, net to Indago during 2004 averaged 870 barrels
of condensate and LPG per day and 13.9 MMscfd of gas. It is fiscally
linked to West Bukha (in the same EPSA) and hence 90% of the liquids
revenue after operating cost is available to recover costs incurred through
the development of West Bukha.
Bukha is not material in the context of the valuation of Indago.
Nevertheless, as an asset operated by Indago it has established the
credibility of the company in the region.
23
I NDAGO P ETROLEUM
ASSET PROFILE
D EVELOPMENT
WEST BUKHA
West Bukha is the Omani portion of the West Bukha-Hengam field that
straddles the Oman/Iran border in the Straits of Hormuz. The field
is located within Oman Block 8 which also contains the existing Bukha
field 22 km to the south-east.
The Bukha Joint Venture (BJV) has been given permission by the
government of Oman to develop the field, initially through a single well and
wellhead jacket tied in through Bukha.
The wellhead platform will have 6 available well slots to ensure that further
upside could be accessed if suitable drilling locations can be identified.
24
As estimated by Petrenel, West Bukha contains an estimated initial

GIIP of 525 Bcf and CIIP of 54 MMbbl.
West Bukha development is scheduled to commence as soon as possible
with drilling of phase I commencing in late 2005. First gas is scheduled for
late 2007 and phase II continuing in 2008.
Development costs are estimated at around US$ 62 m for a single well
development and US$ 88 m for 2 wells. A successful, 2 well development,
if the simulation profile is achieved, would using NPV10 have a value
of approximately US$120 m, equivalent to US$48 m net to Indago
at a WTI price of US$ 30/bbl.
It is proposed that the development costs will be two-thirds funded from
project finance, though a more conservative estimate would be 50%
project finance. The development plan for phase 1 consists of:
Drilling and testing of 1 development well, West Bukha-2 (US$20.4 m)
Installation of wellhead platform and pipeline tied to Bukha (US$34.8 m)
Tie back and completion of West Bukha-2 (US$6.2 m)
The main producing formation, the Mauddud - Mishrif is expected to be

a low porosity fractured limestone and hence the main risk is reservoir
effectiveness. Break even reserves are as estimated by management,
25 Bcf at an assumed WTI oil price of US$24/bbl for the initial
development of phase I.
Based on the operating expectations of management West Bukha
is considered to be a robust project.
25
I NDAGO P ETROLEUM
ASSET PROFILE
P ROSPECTS
BLOCK 31
JEBEL HAFIT
At Jebel Hafit, Indago is targeting estimated mean reserves of 2.7 Tcf

of gas, and 344 MMboe of condensate and LPG. This is a significant prospect.
The Jebel Hafit prospect, named after the prominent mountain that
juts out of the desert above this prospect, straddles the border between
Oman and Abu Dhabi. The geological interpretation shows that the
mountain is actually the surface expression of a deeper structure.
It is a compressional anticline beneath a prominent surface mountain.
The difficulty in readying this prospect for drilling arose from the former lack
of interest in gas and the necessity of organising co-operation between the
UAE and Omani governments to assemble the technical data, including
conducting seismic surveys, across an international border.
26
Nevertheless, in 2003 Indago acquired state-of-the-art seismic data which

confirmed the size and integrity of the subsurface structure. Jebel Hafit
appears to be geologically analogous to the producing Margham and
Sajaa field to the north in UAE.
The imaging from the reprocessed seismic data is fair. The main reservoir
target is in the Cretaceous (Natih/Shuaiba) carbonates at circa 5,000m
depth. A gas condensate seep has been discovered by Indago field
geologists on the mountain. Indago is targeting two working reservoirs,
Mauddud and Thamama.
Indago expects to be able to spud a US$ 24.8 well, including testing,
at Jebel Hafit in September/October 2006.
Structural Cross-Section a-a;

North Jabal Hafit
Structural Cross Section a-a; North Jabal Hafit and the adjacent Oman (UAE) Foreland Basin
by
by Daniel Schelling
Daniel Schelling
Scale = 1:50,000
Scale = 1:50,000
(No Vertical Exaggeration)

Structural Geology of Exploration Block 31;
Central Oman Thrust Belt
Enclosure # 5
October, 2003
S 68
N 68
Structural Geology International, LLC

576 E South Temple
Salt Lake City, Utah 84102
(801) 322-1685
L E G E N D
SEISMIC LINE IQS-54
OMAN
MOUNTAINS
P O S T- E M P L A C E M E N T S E Q U E N C E S
Qal
Tf
North
Taj
Up
pe
r
Ts
Tdu
Lo
we
r
Tdm
Tdl
Tr
20
30
80
Tur
80
30
Qal
Qal
Qal
Tdu
Tdl
Ks
Tdu
Ta
Td
Tf
Tf
Td
Tr
Tu Ks
H AWA S I N A / S U M E I N I A C C R E T I O N A RY W E D G E
Kf
Haw
Taj
Undifferentiated Sumeini Group and Hawasina Complex (Permian-Cretaceous)
Taj
Tsn
Tdu
Tdm
Tdl
Tsn
Tdu
Tur
S U B - T H R U S T S T R AT I G R A P H I C S E C T I O N
Tdm
Tdl
Seismic
no-data zone
Tr
Tr
Tur
Ks
Ks
J.
Kf
Fiqa Fm., including "Juweiza" Member (Upper Cretaceous)
Ku
Undifferentiated Cretaceous, Sumeini Group "slope" sediments
Kn
Natih Fm. (Wasia Group) (Middle Cretaceous)
Kf
Sumeini
Frontal
Thrust
Kf
Knu
Sum
Khsr
Kn
Knu
Ksk
Kn
Knu
Ksk
Js
TR m
Kl
Khsr
Kl
Pk
Carbonate Platform
Margin?
Ksk
Kl
Khsr
Js
Js
Twc
Pzh
Sahtan Group (Jurassic)

Mayhah Fm., slope facies limestones (Middle-Upper Jurassic)
Twc
Khsr
Js
Carbonate Platform
Margin?
Kf
Jabal Wasa Fm. conglomerates ? (Upper Triassic)
TR m
Mahil Fm. (Triassic)
Pk
Khuff Fm. and Haushi group, undifferentiated (Permo-Carboniferous)
Pzh
Haima Group (Paleozoic)
Ev
Evaporites (Infracambrain-Cambrian)
Undifferentiated Precambrian, including basement
PCu
TR m
TR m
Shuaiba and Kharaib Fms. (Kahmah Group) (Lower Cretaceous)

Lekhwair Fm. (Kahmah Group) (Lower Cretaceous/Upper Jurassic )
Jmh
Kf
Kl
Habshan Fm., Salil Fm., and Rayda Chert (Lower Cretaceous/Upper Jurassic )
Js
Sum
Ksk
Kf
Kl
Khsr
Frontal Sumeini
Accretionary Wedge
Kn
Knu
Nahr Umr Fm. (Wasia Group) (Middle Cretaceous)
Ksk
Sumeini
Accretionary Wedge
Kf
Zone of Ductile
Deformation
Ku
Ev?
Pk
Pk
Pzh
Jmh
Pk
Ev?
PCu
PCu
Thrust Fault
TR m
Pzh
Ev?
Normal Fault
Ev?
Pzh
25
PCu
Note: Mesozoic stratigraphy changes across interpreted
Triassic extensional fault and Jurassic-Cretaceous
structural hinge-line
60
Apparent dip in
line of section
Apparent dip of
overturned beds
in line of section
Seismic reflectors
27
I NDAGO P ETROLEUM
ASSET PROFILE
RAS AL KHAIMAH
HAGIL
Ras Al Khaimah (RAK) is the northern most Emirate of the United Arab
Emirates. Currently the Emirate has limited oil and gas fields over which it can
lay claim, and is dependent upon its neighbours for both gas and oil. However,
Indago has a very promising prospect in Ras Al Khaimah called Hagil.
The Hagil prospect contains 6 target reservoir horizons in two closures
on separate thrust sheets. In the hanging wall of the Rahaba Thrust the Lias
(Neyriz), Milaha, Upper Bih and Lower Bih (Khuff) are prospective, whereas
in the hanging wall of the Tibat Thrust only the Upper Bih and Lower Bih are
expected to be present. A well location has been chosen such that it will
intersect all of these horizons in a reasonably crestal position.
At Hagil, according to Petrenel, Indago is targeting estimated mean
reserves of 2 Tcf of gas, and 294 MMboe of condensate and LPG. This
is also a significant prospect.
Seismic was acquired over Hagil in 2003 and this confirmed the presence
of a significant structure. The geological interpretation suggests that Hagil
is a faulted dip closed structure at Permo-Trias level, which is beneath the
main thrust front. The Trap imaging has been much improved by recent
specialist reprocessing of the seismic. The main reservoir target is Khuff
carbonates which will be encountered first at 2,700 m and again at 4,200 m.
The US$ 16.7 m, including testing, Hagil well is expected to spud at the start
of October 2005.
28
ASH SHAM
Ash Sham is located 4 km north-east of the Hagil prospect. It is a dip closed

anticline above a thrust fault. The anticline is exposed at surface and
2 seismic lines located over the crest confirm its subsurface expression.
The well will target lower Permian clastic reservoirs at 2 km. Although
these reservoirs have not been tested locally they are important
hydrocarbon bearing reservoirs in offshore Abu Dhabi and onshore Oman.
The younger reservoirs in the exposed surface anticline were once
gas condensate bearing. Due to uplift and exposure the hydrocarbons
have dissipated.
At Ash Sham, Indago is targeting an estimated gas recovery of 655 Bcf, and
80 MMbbl condensate. Indago expects to start drilling the US$ 5.4 m,
including testing, Ash Sham well in August 2006 and will use the same drill
team as used at Izz.
29
I NDAGO P ETROLEUM
ASSET PROFILE
BLOCK 47
ADAM & IZZ
30
ADAM
Adam is 40 km from the PDO Cambrian discovery at Kauther-1 which
flowed at 49 MMscfd/4,000 bpd.
This prospect is a Cambrian closure beneath small Cretaceous gas pool.
The reservoir target is Cambrian Amin sandstone formation at circa
4,200 m depth.
Indago expects to spud a US$ 11.4 m well, including testing, at Adam
in May 2006.
IZZ
Further to the south in Block 47 are a number of prospects where
2D seismic was acquired in 2003.
One of these is the Izz prospect which has a more subtle surface
expression which is best seen on satellite imagery. The acquisition
of 2D seismic has confirmed the presence of a large buried structure.
Izz is a Cretaceous closure over a salt pillow updip from the Khatmah
gas discovery.
The reservoir target is Cretaceous Natih/Sabsab carbonates at circa
2,500m depth.
There are secondary targets in the Jurassic Hafina and Permian Khuff carbonates.
Indago expects to spud a US$ 10.2 m well, including testing, at Izz either
before or after drilling starts at Hafit.
31
I NDAGO P ETROLEUM
ASSET PROFILE
L EADS
Indago has an inventory of Leads some of which are nearly advanced
to Prospect status; others are still in the early phase of definition. These
Leads are briefly described below.
RAK
UNRISKED RECOVERABLE
Digdaga
* Management's preliminary estimates.
Depth
Gas (bcf)
Cond (mmb)
2,500
565*
19*
Source: M. Horn & Co.
DIGDAGA
This Lead is a Hagil analogue. It is of comparable size and focused on the
same reservoirs. There is a weak methane seep on top of it. It is located
30 km from Sajaa, the largest gas condensate field in the region. There
is seismic covering the west side. This lead has been worked up to the
stage where seismic now needs to be shot on the eastern limb to complete
the definition of the Lead.
As the seismic over the this lead is not complete, it has not been included
in the valuation.
32
33
I NDAGO P ETROLEUM
ASSET PROFILE
BLOCK 31
Depth
Gas (bcf)
Cond (mmb)
Qumaira
2,000
716*
37*
Jebel WaBah
2,500
835*
44*
Yanqul
2,500
871*
45*
QUMAIRA
This Lead is 30 km east-south-east of Jebel Hafit. It is cored by Cambrian
salt which has associated bitumen and condensate bearing rocks. Indago
has seismic on this Lead, which is currently being processed. Surface
geology indicates a large closure. Seismic processing has proven
challenging because of image problems derived from the signal/noise
ratio. Results, however, are due in the next 3 months. If the seismic does
not clearly define the crest of the structure, then alternative methods
of definition will be required.
It has not been included in the valuation.
JEBEL WABAH
This Lead is a very large surface anticline cored by an undoubted deeper
structure. There is currently no seismic for this Lead, though the seismic
scouting is complete. A decision now needs to be made as to whether
to shoot seismic. The decision to shoot seismic at Jebel WaBah will be
driven by the experience at Qumaira. If the problem with the signal/noise
ratio can not be satisfactory resolved, then the expense of seismic will not
be justified and other techniques of definition will be considered.
As there is no seismic over this Lead, it has not been included in the valuation.
34
YANQUL
This Lead is located north-east of WaBah. There is structural relief
at a depth of circa 2km. What is required is a determination of the extent
of the closure.
35
I NDAGO P ETROLEUM
ASSET PROFILE
BLOCK 47
Depth
Gas (bcf)
Cond (mmb)
Sadood
2,200
395*
0*
Kabshat
900
50*
0*
Dham
2,500
575*
0*
Izz Deep
3,900
260*
0*
SADOOD
This Lead is located 10km north-east of the Hamrat Duru gas field. The
surface geology indicates that there is a sub-surface structure, and this
is supported by the reconnaissance seismic. Several new seismic lines
are now required to map the closure. This is expected to be a dry gas lead.
KABSHAT
Indago believes that Kabshat is a satellite to the Hamrat Duru gas field.
It is covered by seismic. It could be drilled now and therefore technically
is a prospect, but Indago wants to shoot one seismic line to determine the
position of any saddle between it and Hamrat Duru. As such, it has been
valued as a Lead.
DHAM
The surface geology indicates the presence of a large sub-surface
structure. Offset seismic 20 km to the south indicates that this is good
sub-surface imaging terrain. The seismic line scouting has finished, and
a decision to shoot seismic is pending. The signal to noise issue
is mitigated somewhat by benign surface conditions.
36
IZZ DEEP
This Lead is covered by seismic. The seismic is currently being
reprocessed for a better image at deeper horizons. It is a Khuff play, one
of the main gas bearing reservoirs in the Middle East. Two nearby wells
have gas and bitumen in the Khuff. The Yibal Khuff field is some 40 km
to the south-west.
37
I NDAGO P ETROLEUM
ASSET PROFILE
O PPORTUNITY
COMMERCIAL ACTIVITIES AND
MARKETING
Indago, in parallel with its exploration and development activity,

will undertake several commercial initiatives:
Negotiation of a Gas Sales Agreement (GSA) for West Bukha gas with
RAKGAS.
Negotiation of a cost sharing Memorandum of Understanding for Jebel

Hafit with the Abu Dhabi National Oil Company (ADNOC).
38
NEW VENTURE OPPORTUNITIES

Indago is also currently pursuing several possible new venture
opportunities within its area of focus.
The Board has agreed to date expenditure of US$ 2.37 m. However, if any
of the new projects identified below come to fruition, further expenditure
proposals will need to be put to the Board and they will need to be
appraised in the light of available funds.
There are four possible new ventures which have been identified and include:
Acquisition of a block contiguous with Indago's existing acreage.

If Indago were to acquire this asset, it would expect to spend US$ 5 m
in the next 2 years on its development. This spend will cover signature
bonus, seismic reprocessing and ancillary studies. At this stage, from
what is known of this asset, a 75% probability of a drillable structure
is predicted.
Acquisition of a 2nd contiguous block* from a competitor. This block

has proven reserves. The cost of acquisition and the drilling of one well
is estimated to cost up to US$ 4.5 m. The block has sunk costs
of US$ 34 m which can be recovered when development and
production from a field commences.
In joint venture with the Ras Al Khaimah government, Indago intends

to spend approximately US$ 750,000 to reprocess seismic and
to produce a development plan for a discovered field that already has
3 wells drilled in it. A well on structure has already tested for oil and gas
condensate. Indago expects to be a 40% joint venture partner if any
development subsequently were to take place. The fiscal terms
as outlined are attractive.
Evaluation of a "farm-in". This will cost US$ 100,000. The budgeted

"farm-in" evaluation is one of several evaluation opportunities.
39
* Indago is in the process of concluding

an agreement with Anadarko for the
purchase of their interests in Block 30,
which lies immediately to the south-west
of Block 47. This block has not been
assigned any value. The block contains
four
comparatively
small
gas
discoveries in Cretaceous carbonates.
Anadarko has stated that the
discoveries have potential to hold
around 300 Bcf of sales gas reserves
in total, though this is probably
an over-optimistic estimate. There
is some uncertainty as to whether the
discoveries might be commercial
as they stand currently. Indago may
seek to commercialise this modest gas
resource through integration with
potential future gas discoveries in the
area. Evaluation of this opportunity
will require a detailed re-evaluation
of the discoveries.
I NDAGO P ETROLEUM
W ORK S COPE
Key objectives of the Budgeted Work Programme until the end of 2007 include:
Phase 1 development of the West Bukha field.
This is currently underway. The cost of drilling the well is circa US$ 20 m
with further development costs of US$ 40 m, giving a total cost
of approximately US$ 60 m. Indago's share is 40% of these costs. Indago
believes that it can project finance 50% of its share of the costs, giving
a cash requirement of US$ 12.0 m.
Drilling 5 wells in the Northern Arabian Gas-condensate Play.
HAGIL
This well is due to spud at the start of October 2005. Drilling will be for
82 days plus 1 month testing. Drilling costs are US$ 11.8 m, and testing
is expected to cost US$ 4.9 m, giving a total cost for the well
of US$ 16.7 m. Hagil is being drilled first is due to contractual
commitments and the prospect location being located only 2.5 km from the
RAKGAS plant. In the event of success, Hagil could be brought on-stream
through the currently underutilised RAKGAS facilities in as little as a year.
It is conservatively estimated that first gas could be achieved in 2007.
ADAM
Indago aims to spud Adam in May 2006. Drilling and testing will take
4 months. Drilling costs are US$ 8.4 m, and testing is expected to cost
US$ 3 m, giving a total cost for the well of US$ 11.4 m.
JEBEL HAFIT
Indago aims to spud Jebel Hafit in September/October 2006. This
is a deep well and the intention is to use the rig used at Adam. Drilling and
testing will take 6 months. Drilling costs are US$ 17.2 m, and testing
is expected to cost US$ 7.6 m, giving a total cost for the well of US$ 24.8 m.
40
IZZ
Indago may start Izz in April 2006 or in the period between the spudding
of Adam and Jebel Hafit. Drilling will take 30 days and testing will take
5 days. Drilling costs are US$ 6 m, and testing is expected to cost
US$ 4.2 m, giving a total cost for the well of US$ 10.2 m.
ASH SHAM
Indago expects to start drilling Ash Sham in August 2006 and will use the
same rig as used at Izz. Drilling will take 30 days and testing will take
5 days. Drilling costs are US$ 3.5 m, and testing is expected to cost
US$ 1.9 m, giving a total cost for the well of US$ 5.4 m.
The gross budgeted value of the Exploration drill programme is therefore
US$ 69.1 m including roll-up testing.
In addition, an appraisal well for Hagil is expected to be drilled
at an estimated cost of US$ 16.9 m.
If this appraisal well is taken into account the total prospect drill budget
is US$ 86 m.
Shoot seismic over leads so as to turn them into mature prospects

ready to drill, by late 2006, early 2007.
The total budgeted cost of this programme is US$ 5.5 m.
New ventures: secure additional prospective acreage in the United

Arab Emirates and Oman.
As discussed in the previous section, the objective is to acquire acreage

which form part of the same play fairway. Indago will also target existing
discoveries of a marginal nature that might be commercialised through
applied technology or synergies with its existing portfolio.
The total budgeted cost of this programme is US$ 10.3 m.
41
I NDAGO P ETROLEUM
F INANCING
WORK SCOPE BUDGET
The gross value of the work programme as currently budgeted
is approximately US$ 125 m. This will be reduced by US$ 23 m of cash
derived from the Burkha assets, giving a net capital required of approximately
US$ 102 m at the time of the IPO for the budgeted Work Scope.
Indago will also require financing for general corporate purposes, including
the evaluation of other opportunities, which has been provisionally estimated
at US$ 2.4 m, giving an estimated financing need of approximately US$ 105 m.
Meridian provided a bridging facility to cover inter-company debt owed
to Medco at the time of the acquisition. This facility will need to be repaid
at the time of the IPO. There is also a contingent loan facility provided
by Meridian, which has been used to fund exploration expenditure and
general corporate purposes since the acquisition, which will also need
to be repaid. The total amount to be repaid is US$ 34 m.
As such, the total amount of money that Indago may need
is approximately US$ 139 m.
PROBABILITY ADJUSTED BUDGET

The Work Scope Budget is one that assumes that all drilled prospects are
successful, and that all exploration work results in a decision to proceed
to the next phase. It also assumes that all new venture negotiation,
are successfully concluded.
This result is unlikely.
Therefore, the Work Scope Budget has been adjusted to reflect a "most
likely" cash requirement in terms of drilling. It has postponed the decision
on the Hagil appraisal well until a more informed decision can be taken.
A similar approach has been taken to the new venture opportunities,
where the budget reflects that spend which has current Board approval.
As such, the Probability Adjusted Budget shows a capital requirement
of US$ 87.45 m.
As there is a reasonable probability that Indago may need additional
capital to complete its Work Scope, Meridian has agreed to provide
a 3 year "back-up" loan facility of US$20 m, at a 10% interest rate, with
a 1% commitment fee on the undrawn amount.
42
Work Scope
Budget
Probability
Adjusted Budget
US$ 23.53 m*
US$11.73 m**
Exploration
US$ 69.1 m
US$54.76 m
Hagil
US$ 16.7 m
Adam
US$ 11.4 m
Jebel Hafit
US$ 24.8 m
Izz
US$ 10.2 m
Project
West Bukha - Phase 1
* Not assuming any financing.

Net, after contribution first half 2005.
** Assuming 50% financing.
Asham
Hagil appraisal well
US$ 10.3 m
US$2.37 m
US$ 125.33 m
US$ 73.86 m
- Bukha revenue
US$ 22.92 m.
US$ 22.92 m
Net Budget
US$ 102.41m
US$ 50.94 m
US$ 2.41 m
US$2.41 m
+ Debt Repayment
US$ 34.10 m
US$ 34.10 m
Capital Required:
US$ 138.92 m.
US$ 87.45 m
Gross Budget
+ General Corporate
The decision to drill an appraisal well

in Hagil is still dependant on the
outcome of further appraisal work. If a
decision is made to proceed its
financing will be covered by the
Meridian back-up loan facility.
As approved by the Board.
As approved by the Board.
US$ 16.9 m
US$5.0 m
New Ventures
Not all the wells will be successful.

As such, not all will be tested.
The budget has been adjusted on a
probability basis.
US$ 5.4 m
US$ 5.5 m
Leads - seismic shoots
Revenue is based on the forward

curve. It is US$ 11.15 at a flat WTI
US$ 30/bbl.
43
I NDAGO P ETROLEUM
RISKS
The risk factors listed below are some important risks, however the list
is not exhaustive, and investors must assure themselves that taking these
risk factors into account, that Indago is an appropriate investment
considering their specific requirements.
POLITICAL RISK
The countries of Oman and the UAE are considered to be the most stable
in the region. Nevertheless, there are the political risks associated with
any developing economy. In addition, there are well known regional
political risks.
OIL & GAS INDUSTRY

The Oil & Gas Industry is subject to operating hazards, economic
changes, industry competition, and operating cost variations. Indago's
activities are speculative by their nature and involve a high degree of risk.
The Oil and Gas business is subject to a number of factors beyond
Indago's control. An adverse change in any of these factors could result
in the Indago not meeting its business objectives.
REGULATION
Indago may become subject to burdensome Governmental regulation and
permit requirements. Exploration, development and the extraction of oil
and gas are subject to extensive laws, regulations and permitting.
No assurances can be given that any licenses, permits or approvals that
may be required will be given or that existing ones will not be revoked.
RESERVE QUANTITIES
Success of the company will depend on the discovery of reserves
in commercially viable quantities. Substantial expenditures are required
to establish reserves through drilling and analysis. No assurance can
be given that the contained minerals will be discovered in sufficient
quantities to justify commercial operations or that the funds required for
development can be obtained on a timely basis.
44
EXPLORATION
RISK
From a technical perspective exploration risk can be broken down into

separate geological components. The main categories of geological
risking are reservoir, seal, source/timing and trap. Of these, source/timing
represents the lowest risk as there are at least 3 documented source rocks
throughout the fold belt and numerous fields and discoveries. Seal and
reservoir presence has been addressed through extensive stratigraphic
and structural work. The 2D seismic acquisition programme conducted
in 2003 and early 2004 aimed to address the uncertainties with trap
definition. The programme has returned highly promising results in what
is a very difficult seismic acquisition environment.
The greatest risk common to all prospects is that of reservoir quality.
It is very difficult to predict the porosity and in particular permeability of the
reservoir ahead of drilling. Reservoir quality will remain a risk that
is a challenge to reduce. However, all offset discoveries in the different
reservoirs produce sufficient volumes per well to suggest that the
prospects should be equally effective.
INERT
COMPONENTS IN THE GAS COMPOSITION
The Tibat discovery by Indago contained a high proportion of nitrogen

which increased the potential development costs to a level that rendered
it sub-commercial. These prospects as they are significantly larger, will not
necessarily be sub-commercial if they contain a similar volume of inert gas.
DEVELOPMENT
RISK
Many aspects of development risk are similar to exploration risk but are
commensurately lower due to the well control that is available. With West
Bukha the main risks is again reservoir quality and effectiveness. At West
Bukha, reservoir quality has been addressed using a combination
of geological facies modelling and 3D seismic attribute analysis.
Development well locations have been chosen not simply on the basis of
structural location but where reservoir development is predicted to be best.
45
I NDAGO P ETROLEUM
RISKS
PRODUCTION
RISK
The Bukha field has been producing steadily for over a decade and there
have been no major surprises in the production performance to date.
Material balance calculations are regularly carried out, and actual well
performance has always closely matched the predicted performance.
Thus there is a negligible risk associated with continued production. Well
performance is continually monitored should the need to take remedial
action ever arise.
RESERVE CALCULATION
Calculation of reserves is subject to uncertainty. Until reserves are
processed, the quantity of reserve data must be considered as estimates.
FINANCIAL RISK
Indago has had limited revenues to date and has consolidated
accumulated net losses. Indago intends to invest in developing its
business, as such; further losses and negative cash flows will be incurred.
Indago will require a significant amount of cash to pursue its business
strategy, to meet its liquidity needs and to service its debt obligations.
If Indago can not raise additional finance it may be forced to reduce
or delay its capital expenditure programme, to refinance all or a portion of
its existing debt, to sell some of its assets or to obtain additional financing.
The ability of Indago to arrange additional financing and the cost
of financing depends upon many factors, including, amongst others,
economic and capital markets conditions, investor confidence in both the
oil and gas industry and in the company, regulatory developments and
credit availability from banks and other lenders.
If Indago is unable to comply with the restrictions and covenants under
certain terms of the existing financing instruments, there could be a default
under the terms of these instruments, which could result in the
acceleration of repayments of funds that the Group has borrowed
or termination of such instruments.
Indago has partially offset some of its financial risk by agreeing the
US$ 20 m "back-up" loan facility.
46
EQUITY DILUTION
There is significant risk of dilution as Indago will require further capital in future.
'GOING CONCERN' ASSUMPTION

Indago's consolidated financial statements have been prepared assuming
the Company will continue on a "going-concern" basis; however unless
additional funding is obtained this assumption will have to change and
Indago's assets may have to be written down to asset prices realizable
in insolvency or distress circumstances.
CONFLICT OF INTEREST
Directors and Officers may serve on Boards of other exploration
companies and situations may arise where these directors and officers will
be in direct competition with the Company.
In addition, Indago has two significant shareholders, and their interests
may conflict with the interest of minority shareholders.
ATTRACTION AND
RETENTION OF KEY EMPLOYEES
The Group is dependent upon the industry contacts and expertise

of a limited number of its senior management team and accordingly the
loss of the services of any of the senior management team could affect the
business and profitability of the Group. There is no assurance that the
Group will be able to retain such key executives or senior management.
The Company has entered into service contracts with the relevant
individuals to minimise this risk.
47
I NDAGO P ETROLEUM
F I N A N C I A L A N A LY S I S
Indago's 2005 interim accounts

are presented hereafter. They
reflect the position of Indago
just prior to its management
buy-out, supported by Meridian.
P ROFIT & L OSS
Though Indago has prepared

three year historic accounts,
it must be recognised that these
accounting statements will be
of limited use as a guide to the
future performance of the
business.
At the end of 2004 the Bukha field had largely exhausted its cost recovery
pool. In early 2005 Bukha exited cost recovery and is now into a profit
sharing arrangement with the government.
Though revenue from Bukha

and West Bukha will cover
operating expenses going
forward,
Indago
is
an
exploration and development
company, and it will need to
raise further funds in due course
to finance its activities.
The main source of revenue for the foreseeable future will be the Bukha
field, and in due course the West Bukha field will contribute to revenue.
The West Bukha well would add to the cost recovery pool in Block 8 and
in the event of failure all drilling costs could be cost recovered against
Bukha production. Thus the economic impact of a failure is much lower
than if no cost recovery were available.
Net G&A costs of US$1.5 m per annum are forecast going forward.
On the basis of actual revenues and expenditures the business is currently
breaking even.
However, the current forecast anticipates that expenditure on NAGP
exploration and West Bukha development will commence towards the end
of 2005.
48
CONSOLIDATED PROFIT AND LOSS ACCOUNTS*

6 months ended
Year ended
Year ended
Year ended
30/06/05
31/12/04
31/12/03
31/12/02
Turnover
1,975,002
15,754,771
7,696,871
9,798,216
Cost of sales
(686,077)
(7,305,506)
(2,671,369)
(4,578,405)
(1,240,929)
(4,845,864)
(19,165,948)
(4,407,748)
47,996
3,603,400
(14,140,446)
812,063
(1,628,814)
(3,137,135)
(2,340,162)
(1,732,797)
1,127,192
1,947,772
(882,014)
(2,619,579)
(39,858)
(100,187)
(2,462,832)
(2,153,313)
(15,393,274)
926,851
2,750,723
(2,462,832)
(2,153,313)
(15,393,274)
3,677,574
(2,552)
(3,134)
(2,285)
(2,433)
(2,464,384)
(2,156,447)
(15,395,559)
3,675,141
(228,000)
Profit/(loss) on ordinary activities after taxation
(2,692,384)
(2,156,447)
(15,395,551)
3,675,141
Retained profit/(loss) for the period
(2,692,384)
(2,156,447)
(15,395,559)
3,675,141
US$
Exploration costs written off

Gross profit/(loss)
General and administration expenses
Other income
Other expenses
Operating profit/(loss)
Debt forgiveness
Operating profit/(loss) after exceptional items
Interest payable and similar charges
Profit/(loss) on ordinary activities before taxation
Tax on profit/(loss) on ordinary activities
* Management Accounts still subject to Audit review

49
I NDAGO P ETROLEUM
B ALANCE S HEET
Indago had Current Assets of US$ 5.9 m as at the 30th June 2005,
reflecting the contribution of Bukha and short-term loans drawn to fund
current financial commitments.
The US$ 2.5 m from related parties refers to loans due from its former
parent Medco.
US$ 5.58 m of the Fixed Assets relates to Oil and Gas properties.
The total Assets of Indago as at the 30th June 2005 were US$ 12.1 m.
Indago has current liabilities of US$ 1.8 m, excluding the inter-company
loan made by Medco.
The US$ 28.5 million reflect a loan extended by Medco. That loan was
repaid to Medco by Meridian at the time of the management buy-out, and
is now due to Meridian.
50
CONSOLIDATED BALANCE SHEETS*

US$
30/06/05
31/12/04
31/12/03
31/12/02
568,922
Tangible fixed assets
5,582,628
6,234,588
7,829,836
9,818,432
Total Fixed Assets
6,151,550
6,234,588
7,829,836
9,818,432
908,282
6,570
1,317,754
Trade & other receivables
1,065,547
151,308
200,349
1,971,720
Due from related parties
2,552,834
961,953
2,987,331
13,066,620
Other current assets
143,018
1,321,186
901,229
589,375
Prepayments and accrued income
115,085
2,739
74,353
92,012
Cash at bank and in hand
1,208,945
1,069,365
309,032
345,291
Total Current Assets
5,993,711
3,513,121
5,790,048
16,065,018
12,145,261
9,747,709
13,619,884
25,883,450
1,379,700
1,953,165
3,336,842
561,629
478,470
199,420
35,730
28,000
Due to related parties
28,486,916
23,489,783
23,985,524
23,636,474
Total Creditors
30,345,086
25,642,368
27,358,096
24,226,103
(388,218)
6,889
6,889
6,889
6,889
Profit and loss account
(18,594,932)
(15,901,548)
(13,745,101)
1,650,458
Equity shareholders' funds
(18,588,043)
15,894,659
(13,738,212)
1,657,347
12,145,261
9,747,709
13,619,884
25,883,450
Fixed assets
Intangible fixed assets
Current assets
Inventories
Total Assets
Creditors - amounts falling due within one year

Trade creditors and other payables
Accrued expenses and other liabilities
Tax payable
Provision for liabilities and charges

Employee gratuities
Capital and reserves

Called up share capital
Additional paid in capital
Total Liabilities

51
I NDAGO P ETROLEUM
CONSOLIDATED STATEMENT OF CASH FLOWS*

6 months ended
Year ended
Year ended
Year ended
30/06/05
31/12/04
31/12/03
31/12/02
(3,208,179)
1,870,568
(11,533,740)
(575,844)
(380)
(58,051)
(96,879)
Additions to oil and gas properties
(58,113)
(54,062)
Net cash provided/(used) in investing activities
(58,493)
(54,062)
(58,051)
(96,879)
(3,266,272)
1,816,506
(11,591,791)
(672,723)
Receipts from related undertakings
3,740,295
11,868,911
24,169,474
8,037,298
Payments made to related undertakings
(334,043)
(12,925,479)
(12,613,940)
(7,152,273)
Net cash provided/(used) by financing activities
3,406,252
(1,056,568)
11,555,534
885,025
139,580
759,938
(36,257)
212,302
US$
Net cash (outflow)/inflow from operating activities
Capital expenditure and financial investment

Additions to property, plant and equipment
Net cash outflow before liquid resources & financing management
Financing
Net increase/(decrease) in cash & cash equivalents

52
53
I NDAGO P ETROLEUM
V A L U AT I O N
P ROBABILITY P ORTFOLIO VALUATION

When valuing Indago, you are valuing a portfolio of assets. The assets
include a producing field, an advanced development, a portfolio of drillable
Prospects, and an inventory of Leads.
A conventional Net Present Value of Discounted Cash Flows methodology
can be applied to the producing field of Bukha and to the development
at West Bukha.
The overwhelming value attributable to Indago, however, is to be found
in its exploration portfolio of Prospects and Leads.
The valuation of Prospects and Leads is technically more challenging than
the valuation of a producing or late development project.
The methodology deployed to value Prospects and Leads is probability
based. The valuation of and the investment in exploration portfolio's using
probability should be done only by experienced and sophisticated investors.
This valuation methodology depends on the input of data from a number
of professionals. Most notably it is derived from data provided by the
geologists and other technical consultants who calculate in the first
instance the size of the "target" structure and an estimate of recoverable
oil, gas, condensate and other liquids. For the sake of clarification, these
are not "proved" nor are they "probable" reserves, these are "target"
reserves. That is to say, these "reserves" are what it is hoped will
be established in due course as "proven" or "probable", but until then
these "reserves" are merely "best estimates" by someone who
is recognised as being technically competent to make such an estimate.
Despite a significant amount of money spent on these technical reports,
it must be recognised that they are only a "best guess". Until a hole has
been drilled into the reservoir you do not know if there is anything down
there, whether it is oil, gas or simply water. You do not know whether
it is sweet or sour. You do not know whether it is commercial or not. Even
if it flows, it is still uncertain as to how much will be extractable. You do not
know the price you will get, nor do you know your costs. As such, oil
exploration and development is a very high risk activity. You can, and most
explorers do drill "dry holes", that is to say despite the extensive geological
reports they do not find anything. Even when they do they often have
to shut-in and plug the hole for a variety of reasons, and the money spent
drilling that hole is therefore wasted.
54
Recognising these difficulties and limitations, having established

an estimate of recoverable oil, gas, condensate or other liquids, the next
step is to calculate an estimate of "net back". Briefly, this is another "best
guess" which seeks over the life of field to estimate after capital,
development, operating, royalty and tax costs the dollars returned
to an investor for every barrel of oil produced at different price levels.
In effect it the net margin per barrel of oil.
With a target recoverable reserve estimate and an estimated "net back",
a gross value for each field is then calculated. By its self this gross value
is meaningless; it assumes a 100% success rate which never occurs
in an exploration portfolio.
Each asset is then risk appraised, and a probability value is assigned
to reflect varying degrees of confidence in the probability that the target
reserves will indeed be proven, and the forecast net back will be realised.
Probabilities range from 1/20 for early phase Leads, and typically progress
to 1/10, 1/5 and 1/2. When moving beyond a 1/2 probability, a Prospect
is then normally sufficiently well advanced and there is a high degree
of confidence in the operating parameters for it to be viewed
as a development project and for it to be valued according to conventional
DCF methodology.
With regards to the assignment of probabilities, it should be bourn in mind
that exploration is a very expensive business, as such in each phase of its
progress towards development every Lead and Prospect faces a new
"spend or drop" decision. These decisions therefore serve as a rough
indicator of the probability to be assigned to each Lead or Prospect.
Ultimately, this assignment is a matter of experience and judgement, and
it normally follows a discussion either with management, the consulting
geologist or technical consultant. A probability methodology is best applied
when there is a rich and varied exploration portfolio and the objective
is to determine the trade-off between an acceptable degree of risk and
expected return.
As such, no number is taken as an absolute - it is always subject
to revision, it must always be questioned, it is simply a starting point for an
informed discussion. It simply sets the parameters for a view on valuation,
and any number calculated is open to further scrutiny and adjustment, and
can be revised up or down as new factors are taken into account.
The strength of this valuation methodology is that it establishes a very
clear and simple map of critical inflection points which may move
a company's share price sharply up or down. As such, it is a robust and
dynamic valuation methodology well suited to the oil and gas E&P sector.
55
I NDAGO P ETROLEUM
V A L U AT I O N
VALUATION
OF
I NDAGO
NET PRESENT VALUE

BUKHA
Bukha production is expected to continue until 2011 and West Bukha
production will commence in 2007. Sustained production of over 3 MMboe
should be achievable for 4 years following West Bukha startup.
Bukha generates steady revenue from LPG sales which averages
US$99,084 per month. Condensate lifting's occur roughly twice per year.
Using a discount rate of 10 % and the established cost and revenue
metrics, Indago's 40% interest in Bukha is valued at US$ 2.3 m using
a WTI price of US$ 30/bbl.
WEST BUKHA
Indago has undertaken an economic evaluation of West Bukha using the
results of the reservoir simulation model. The West Bukha development
is robust since even at low oil prices of US$18/bbl and using a low
reserves scenario of 45 Bcf the project will break even. The downside
is limited through the cost recovery mechanism of Bukha production which
is contained within Block 8.
Using a discount rate of 10 % and the forecast cost and revenue metrics,
Indago's 40% interest in West Bukha is valued at US$ 40 m.
NAGP EXPLORATION VALUATION

PROSPECTS
Based on the calculated recoverable gas, condensate and LPG target for
recoverable reserves, and a net back calculated for each Prospect, and
using fixed contract gas prices and a WTI of US$ 30/bbl, the value
of Indago's Prospect portfolio is as shown.
56
PROSPECT PORTFOLIO
Reserves*
Gross Value
Risked
Hagil - Khuff
452,698,246
2,209,718,596
441,943,719
Hagil - Lias/Trass
203,907,018
1,658,363,158
165,836,316
Ash Sham
195,012,281
1,139,788,070
113,978,807
Jebel Hafit
820,189,474
3,560,637,895
712,127,579
Izz
100,014,035
413,270,175
82,654,035
Adam
116,026,316
461,918,421
92,383,684
1,887,847,368
9,443,696,316
1,608,924,140
43.4%
37.7%
44.3%
Total
Jebel Hafit
* On a boe basis.
At US$ 30/bbl WTI and fixed contract

gas prices.
At 1 in 5, except Hagil - Lias/Trias and

Ash Sham which are risked at 1 in 20.
The estimated unrisked recoverable Gas Initially In Place (GIIP) of the

Prospect portfolio is 6.2 Tcf gas. Using a 1 in 5 probability, and a fixed gas
price of US$ 1.20 and US$ 1.40/MMbtu for the Oman and the
UAE respectively, the value is approximately US$ 403 m.
The estimated unrisked Condensate Initially In Place (CIIP) plus
LPG volume from the current prospect inventory is 789 MMboe.
Of this, 44% of condensate potential is in a single prospect, Jebel Hafit,
which on a combined basis accounts for 42% of targeted Reserves, and
for 44% of the estimated monetary value of those targeted reserves. Hagil
is also a significant asset, and accounts for 37% of condensate potential.
On a combined basis, Hagil accounts for 34% of targeted Reserves, and
for 38% of the estimated monetary value of those targeted reserves.
On a combined basis, Jebel and Hafit represent 82% of the estimated
value of Indago.
Using a risked probability at a West Texas Intermediate (WTI) oil price
equivalent of US$ 30/bbl, the value of this condensate portfolio
is approximately US$ 1.2 bn.
57
I NDAGO P ETROLEUM
V A L U AT I O N
LEADS
Based on the competent persons report, the value of Indago's Lead
portfolio is shown below. Only those Leads where there is seismic have
been taken into account for purposes of valuation. The valuation thereafter
has been calculated on the same basis as the Prospect portfolio.
However, though there are some relatively advanced Leads which may
well deserve a 1/10 or 1/5 probability weighting, nevertheless the portfolio
has been valued on an uniform 1/20 basis.
LEAD PORTFOLIO
Reserves*
Gross Value
1 in 20
Digdaga
Quimara +
Jebel WaBah + Yanqul
Sadood + Kabshat
+ Dham + Izz Deep
48,192,982
148,923,754
7,446,188
Total
48,192,982
148,923,754
7,446,188
* On a boe basis.
At US$ 30/bbl WTI.
The expectation volume from the current Lead inventory is 212 Bcf gas
and 4.7 MMboe condensate plus LPG.
Using a 1 in 20 probability at a WTI oil price equivalent of US$ 30/bbl,
the value of the gas, condensate and LPG Lead portfolio is approximately
US$ 7.4 m.
58
GROSS EXPLORATION PORTFOLIO VALUATION

With a target reserve base of 1.93 bn boe, with a gross adjusted
probability value of approximately US$ 1.6 bn, Indago has a range of high
impact exploration opportunities.
GROSS EXPLORATION PORTFOLIO VALUATION
Prospects
Leads
Total
Block 31
Jebel Hafit+Leads
RAK
Hagil + Hagil L/T
Reserves*
Gross Value
Adj.
1,887,847,368
9,443,696,316
1,608,924,140
48,192,982
148,923,754
7,446,188
1,936,040,351
9,592,620,070
1,616,370,328
820,189,474
3,560,637,895
712,127,579
42.4%
37.1%
44.1%
656,605,263
3,868,081,754
607,780,035
33.9%
40.3%
37.6%
* On a boe basis.
In US$ calculated at US$ 30/bbl WTI.
Probability at 1 in 5 for Prospects and

1 in 20 for Leads.
59
I NDAGO P ETROLEUM
V A L U AT I O N
MATRIX ADJUSTED PORTFOLIO VALUATION

We have set out below a Matrix that shows the valuation of Indago's
portfolio at various WTI/bbl oil prices, and breaks it into its constituent
parts of Production, Prospects and Leads. Within Prospects and Leads the
value attributed to gas and condensate target reserves is also broken out.
Gas sales are calculated at a fixed gas price of US$ 1.20 and
US$ 1.40/MMbtu for the Oman and the UAE respectively.
VALUATION MATRIX IN US$

Production
US$24 US$30 US$36 US$42 US$48 US$54 US$60 US$66
Producing
Development
Total
1.40
2.30
3.30
4.20
5.10
6.00
6.90
7.80
33.90
40.00
46.00
52.00
58.10
64.10
70.20
76.30
35.3
42.3
49.3
56.2
63.2
70.1
77.1
84.1
Prospects
- Gas
403
403
403
403
403
403
403
403
- Condensate
963
1,206
1,468
1,724
1,987
2,250
2,512
2,771
1,366
1,609
1,871
2,128
2,391
2,653
2,915
3,174
- Gas
- Condensate
10
Total
Leads
Total
10
11
12
13
1,408
1,659
1,929
2,193
2,464
2,734
3,004
3,271
Back-in rights 10.0%
141
166
193
219
246
273
300
327
Hafit + Hagil
785
924
1,076
1,223
1,375
1,526
1,678
1,828
482
569
660
751
843
935
1,026
1,115
10.0%
48
57
66
75
84
93
103
112
- Management 2.5%
12
14
16
19
21
23
26
28
- Financial
5.0%
24
28
33
38
42
47
51
56
- Technical
2.5%
12
14
16
19
21
23
26
28
- Other
5.0%
24
28
33
38
42
47
51
56
Total Risk Adj.25.0%
120
142
165
188
211
234
256
279
Adj. Risked Valuation
361
427
495
563
632
701
769
837
Gross Portfolio Value

Portfolio Adjustments
30.0%
Adj. Portfolio
Risk Adjustments
- Political
60
Within a US$ 30/bbl to US$ 54/bbl WTI the Gross Probability Value of the
Indago portfolio ranges from US$ 1.6 bn to US$ 2.7 bn.
The Gross Probability Value of the Indago portfolio has then been adjusted by:
a. Assuming that all "back-in" rights by Medco are exercised thereby
reducing the economic value by an estimated 10%. Indago, however,
is seeking to negotiate the buy-back of these rights.
b. Acknowledging the concentration of probability value in Jebel Hafit and
Hagil, and so as to be prudent that value has been discounted by 70%.
This results an Adjusted Portfolio Valuation that within a US$ 30/bbl
to US$ 54/bbl WTI ranges from US$ 569 m to US$ 935 m.
In order to be conservative, that value has been further discounted by 25%
to reflect a number of possible risk factors.
As such, within a WTI price range of US$ 30/bbl to US$ 54/bbl,
the calculated indicative valuation for Indago is between US$ 427 m
to US$ 701 m.
61
I NDAGO P ETROLEUM
G L O S S A RY
bbl(s)
Barrel(s)
bcpd
Barrels of condensate per day
BCFE
One billion cubic feet of gas equivalent
boe
Barrels of oil equivalent, 1 bbl of oil is the energy equivalent of 6000 scf of natural gas
bopd
Barrels of Oil per Day
scfd
Standard Cubic Feet per Day
Bcf
One billion cubic feet
MM
One million
MMbbl
One million barrels of oil
MMcf
One million cubic feet of gas
MMcfd
One million cubic feet of gas per day
MMcfde
One million standard cubic feet of gas per day equivalent
MMbtu
One million British thermal units
Tcf
One trillion cubic feet of gas
WI
The right and interest, expressed as a percentage, which obligates the holder to meet expenses.
62
63
I NDAGO P ETROLEUM
APPENDIX 1:
O V E RV I E W O F E N E R G Y S E C T O R
UAE
OIL
The UAE is important to world energy markets because it contains 97.8 bn
barrels, or nearly 8%, of the worlds proven oil reserves. Abu Dhabi holds
94% of this amount, or about 92.2 bn barrels. Dubai contains an estimated
4.0 bn barrels, followed by Sharjah and Ras Al-Khaimah, with 1.5 bn and
100 MMboe of oil, respectively.
The majority of the UAE's crude oil is considered light, with gravities in the
32o to 44o API range. Abu Dhabi's Murban 39o and Dubai's Fateh 32o
blends are the UAE's primary export crude streams, though Dubai's
production is been falling in recent years due to the decline of its
modest reserves.
Most of the UAE's oil fields have been producing since the 1960s or early
1970s. Proven oil reserves in Abu Dhabi have roughly doubled in the last
decade, mainly due to significant increases in rates of recovery and the
discover new oil-rich structures in existing fields.
Although Abu Dhabi joined OPEC in 1967, Dubai does not consider itself
part of OPEC or bound by its quotas. The UAE's total production capacity
is 2.50 m bbl/d, so it does not have any spare capacity at the current level
of production.
ADNOC brought in ExxonMobil in June 2004 as a strategic partner in the
development of the Upper Zakhum field, with a 28% ownership stake.
ExxonMobil is seeking to upgrade the Upper Zakhum field to raise its
capacity from the current 550,000 bbl/d to 750,000 bbl/d by 2008, and
to 1.2 m bbl/d by 2010.
A project to increase the capacity of the onshore Bu Hasa seeks
to increase sustainable production capacity to 730,000 bbl/d from the
present 550,000 bbl/d by the end of 2006. A natural gas reinjection project
also is planned for the onshore Bab field, which is expected to increase
capacity to 300,000 bbl/d from the current 200,000 bbl/d.
64
Upgrades planned for the onshore Asab field are set to raise capacity from
the current 280,000 bbl/d to 310,000 bbl/d by then end of 2006. Three
small fields, Al-Dabb-iya, Rumaitha, and Shanaget, also are under
development, and are expected to add a total of around 100,000 bbl/d
to production capacity in 2006.
The UAE had a total refining capacity at the end of 2002 of 580,000 bbl/d,
of which 514,000 bbl/d was located in Abu Dhabi. Consumption in the UAE
is estimated to be to 430,000 bbl/d in 2004.
GAS
The UAE's natural gas reserves of 212 Tcf are the world's 5th largest after
Russia, Iran, Qatar, and Saudi Arabia. The largest reserves of 196.1 Tcf
are located in Abu Dhabi. Sharjah, Dubai, and Ras Al-Khaimah contain
smaller reserves of 10.7 Tcf, 4.1 Tcf, and 1.2 Tcf, respectively.
In Abu Dhabi, the non-associated Khuff natural gas reservoirs beneath the
Umm Shaif and Abu Al-Bukhush oil fields rank among the worlds largest.
Current natural gas reserves are projected to last for about 150-170 years.
Increased domestic consumption of electricity and growing demand from
the petrochemical industry have provided incentives for the UAE
to increase its use of natural gas. Over the last decade, natural gas
consumption in Abu Dhabi has doubled, and it currently stands at nearly
4 Bcf/d. In 2005 Dubai alone will demand an average 810 MMcfd.
The past few years have seen the UAE embark on a massive program
of investment in its natural gas sector including a shift toward natural
gas-fired power plants and the transformation of the Taweelah commercial
district into a natural gas-based industrial zone.
Much of the natural gas development in the UAE itself involves the
extraction of natural gas liquids (NGLs) and reinjection of the gas
to maintain pressure in oilfields.
65
I NDAGO P ETROLEUM
APPENDIX 1:
The 2nd phase of the UAE's US$1 bn onshore natural gas development
program (OGD-2) at the Habshan complex located directly over the Bab
oil and natural gas field was completed in early 2001. This 2nd phase
included the construction of 4 trains to process 1 Bcf/d of natural gas,
300-500 tons per day (t/d) of natural gas liquids (NGLs), 35,000-55,000 t/d
of condensate and up to 2,100 t/d of sulphur. Additional capacity
expansion is planned in the 3rd phase, OGD-3, and will involve the
construction of 2 additional natural gas processing trains.
Most of the UAE's increased natural gas needs in the next decade are
to be satisfied with imported natural gas from Qatar. The Dolphin Project
aims to develop links between the natural gas infrastructures of Qatar, the
UAE, and Oman. It will allow the export of non-associated natural gas from
Qatar's massive offshore North Dome field. Natural gas supplies from
Dolphin are expected to start in late 2006.
Estimated to cost US$8- US$10 bn over the next decade, the project will
begin as a sub sea pipeline from Ras Laffan in Qatar to a landfall in Abu
Dhabi, which will then be extended to Dubai and northern Oman. In its
initial phase, the pipeline is to carry 3 Bcf/d of Qatari natural gas to the
UAE and Oman, accounting for nearly 10% of total world natural gas
supplies shipped by pipeline.
In October 1999, UAE Offsets Group (UOG) and ADNOC issued a joint
declaration dividing up natural gas distribution between them. Natural gas
from the Dolphin Project will be the exclusive supply for natural gas-fired
power plants, except in the Western Region of Abu Dhabi, and will also
supply natural gas for ADNOC contracts with Dubai. Natural gas from the
Dolphin Project will use the ADNOC distribution network until the project
develops its own network.
Oman already has a natural gas pipeline to Fujairah in the UAE, and until
supplies from Qatar become available, Fujairah is importing natural gas
from Oman, under a contract held by Dolphin Energy. Supplies of 135
MMcf/d of Omani natural gas commenced in January 2004 - the first
natural gas transmission across national borders on the Arabian
Peninsula. Eventually, Qatari natural gas will be supplied to Fujairah.
66
O MAN
OIL
Oman's current proven reserves amount to 5.5 bn barrels, which are
located mainly in the country's northern and central areas. The largest and
traditionally most reliable fields are in the north. These fields, which
include Yibal, Fahud, Al-Huwaisah, and several others, are now mature
and face future declines in production. Oman's total production figure fell
sharply from its height of 972,000 bbl/d in 2000 to 784,000 bbl/d in 2003.
Oman's oil fields are generally smaller, more widely scattered, less
productive, and more costly per barrel than in other Persian Gulf countries.
The average well in Oman produces only around 400 bbl/d, about
one-tenth the volume per well of those in neighbouring countries.
To compensate, Oman uses a variety of enhanced oil recovery (EOR)
techniques. While these raise production levels, they increase the cost.
Per barrel lifting costs rose from US$4.79 in 2002 to US$6.35 in 2003.
Petroleum Development Oman (PDO) is the country's second largest
employer after the government. The company is a consortium comprised
of the Omani government (60%), Shell (34%), Total (4%), and Partex
(2%). It holds over 90% of the country's oil reserves, and accounts for
about 94% of production.
PDO's main hopes of stemming its decrease in production involve
increasing recovery rates, and discovering and exploiting new fields,
particularly in the south. Among its southern prospects, PDO has the most
hope for a cluster of fields that includes Ghafeer, Sarmad, and Harweel.
In this "carbonate stringer play," PDO estimates there may be reserves
of 250 m barrels, with a potential maximum production level of 100,000 bbl/d.
Oman has an 85,000 bbl/d refinery at Mina Al Fahal and a 75,000 bbl/d
refinery together with port facilities in Sohar. Most of Oman's crude oil
exports go to Asia.
67
I NDAGO P ETROLEUM
APPENDIX 1:
NATURAL GAS.
Natural gas has become the chief focus of Oman's economic diversification
strategy. Intense exploration has raised proven natural gas reserves from
12.3 Tcf in 1992 to 29 Tcf in 2004. Most of Oman's reserves are
in PDO-owned areas, and the company is Oman's biggest natural gas
producer. Most gas in Oman is associated with oil, but even that which
is non-associated is often located close to the country's oil fields. More than
10 Tcf of Oman's non-associated natural gas is located in deep geological
structures. In 2002, Oman is estimated to have produced 530 Bcf of natural gas.
Gas consumption in Oman has experienced rapid growth in recent years
as a result of dramatic economic growth. There has been a push towards
investment in gas for domestic consumption to free more oil for export.
Growth in LNG exports should further contribute to gas production in Oman.
Expanded utilization of natural gas is central to Omani diversification
plans, both for export as well as for domestic use. Construction work
on the country's new liquefied natural gas (LNG) facility is progressing,
with production on schedule to begin in 2006. Oman has also commenced
work on many gas-based industrial projects. Other projects are under
negotiation and are likely to be finalized soon.
The LNG plant located at Qalhat, near Sur, is supplied by non-associated
gas from the Saih Nihayda, Saih Rawl and Barik gas fields. The plant
currently has two 2 trains with a 3rd under construction and due
to be operational late 2005. LNG is currently exported to Korea, Japan and
India. Oman is one of the participants in the US$3.5 bn Dolphin project
being led by Dolphin Energy Limited.
68
R AT I N G S S Y S T E M & C E R T I F I C AT I O N
R ATINGS S YSTEM
BUY
The stock is expected to generate risk-adjusted returns of over

10% during the next 12 months.
HOLD The stock is expected to generate risk-adjusted returns

of 0-10% during the next 12 months.
SELL
The stock is expected to generate negative risk-adjusted returns

during the next 12 months.
Risk Qualifier: SPECULATIVE

Stocks bear significantly higher risk that typically cannot be valued
by normal fundamental criteria. Investments in the stock may result
in material loss.
I NVESTMENT A NALYST C ERTIFICATION

All research is issued under the regulatory oversight of M. Horn & Co.
Each Investment Analyst of M. Horn & Co. whose name appears as the
Author of this Investment Research hereby certifies that the
recommendations and opinions expressed in the Investment Research
accurately reflect the Investment Analyst's personal, independent and
objective views about any and all of the Designated Investments
or Relevant Issuers discussed herein that are within such Investment
Analyst's coverage universe.
69
I NDAGO P ETROLEUM
RESEARCH DISCLOSURES
COMPANY: INDAGO PETROLEUM.

DISCLOSURE: 1, 2, 3
AND
9.
1. This is a commissioned and/or a non-objective research note/comment.

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70
DISCLAIMER
ISSUED BY M. HORN & CO*. AND MIRABAUD SECURITIES**, COMPANIES

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Securities (Asia) is the trading name of Mirabaud Securities (Asia) Limited.
71
I NDAGO P ETROLEUM
AUTHOR
Mark P. M. Horn
This report was written by Mark P. M. Horn, Chief Executive of M. Horn & Co
Ltd, an independent corporate finance and research boutique authorised
by the FSA as the Appointed Representative of Lakeshore Capital.
Mark has 18 years of City experience, 10 years as a Fund Manager and
8 as an Analyst and Corporate Adviser. Mark has worked as a European
and International Fund Manager for the CIS, Globe Investment Trust,
Rockefeller & Co and Kleinwort Benson Investment Management.
Subsequently, he was Head of Research at Canaccord Capital (Europe)
Ltd, and has been an Extel and Reuters rated natural resource analyst.
Mark has undertaken a wide range of Corporate Finance and Advisory
projects throughout Europe, North America, Asia and Africa.
Mark holds a BA (Hons) (First Class), MA (Rhodes), LLB (Hons) (London),
Dip B Admin (Manchester), FSI (Dip). He also qualified as a Barrister
of the Honourable Society of Lincoln's Inn.
72
C O N TA C T D E TA I L S
MIRABAUD SECURITIES
James Leahy
T +44 (0) 20 7878 3410

E j l @ m i r a b a u d . c o . u k
Jonathan Colville
T +44 (0) 20 7878 3386

E jcc@mirabaud.co.uk
Pav Sanghera
T +44 (0) 20 7873 3380

E pa v. s a n g h e r a @ m i r a b a u d . c o . u k
Harry Baker
T + 44 (0) 20 7878 3401

E h a r r y. b a k e r @ m i r a b a u d . c o . u k
21 St James's Square, London SW1Y 4JP UK
T +44 (0) 20 7321 2508
F +44 (0) 20 7930 4439
M. H ORN & C O
M a r k P. M . H o r n
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E m a r k @ h o r n . c o . u k
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T +44 (0) 1733 375 954

E r o g e r @ h o r n . c o . u k
Tesla Court, 8 Innovation Way, Peterborough Business Park, Peterborough PE2 6FL United Kingdom
T +44 (0)845 676 2020
F +44 (0)845 676 202
E corporate@horn.co.uk
MIRABAUD SECURITIES
Mirabaud Securities is authorised and regulated in the United Kingdom by the
Financial Services Authority. Mirabaud Securities is part of the Mirabaud Group
of Switzerland, and the Group provides a range of financial services to institutional
and private clients.
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IND AG O P E T RO L E U M

R ESEARCH & A NALYSIS , O CTOBER 2005

THE UNITED ARAB EMIRATES AND OMAN

REGIONAL ENERGY SUPPLY AND DEMAND

WORK SCOPE & FINANCING

RATINGS SYSTEM & CERTIFICATION

M IRABAUD S ECURITIES , M. H ORN & C O .

Source: Indago Petroleum

Development of existing fields

Exploration in existing licenses held by the company

Acquisition of related acreage and existing undeveloped discoveries.

Indago Petroleum Ltd

Petroleum Concession Incl. Indago Interest

Non Indago Companies

Source: Indago Petroleum

M IRABAUD S ECURITIES , M. H ORN & C O .

Paul Alexander Marchand

Dr Robert Charles Williams

Dr. David Lawson Bremner

M IRABAUD S ECURITIES , M. H ORN & C O .

M IRABAUD S ECURITIES , M. H ORN & C O .

INDAGO PETROLEUM ORGANISATIONAL STRUCTURE (SEPT 2005)

Chief Financial Officer

WB Dev. Project Man.

Regional Ops Manager

Snr Petroleum Engineer

Ops & Maint Tech

Ops & Maint Tech

Snr Drilling Engineer

Manuel Del Rosario

Accounts Admin & PRO

Ops & Maint Tech

Snr Drilling Supervisor

Source: Indago Petroleum

M IRABAUD S ECURITIES , M. H ORN & C O .

HEALTH, SAFETY AND

Indago has inherited safety attitudes and operational documentation from

CONTRACTING AND PROCUREMENT

The United Arab Emirates (UAE)

U NITED A RAB E MIRATES

M IRABAUD S ECURITIES , M. H ORN & C O .

M IRABAUD S ECURITIES , M. H ORN & C O .

Increased use of natural gas for re-injection to boost declining

Numerous gas-export related industries such as LNG schemes and

Substitution of natural gas for existing diesel-fired operations allows

Gas-intensive industries such as cement manufacture, aluminium

Electricity demand has grown as economies have grown leading

As such, despite the regions hydrocarbon resources there are

M IRABAUD S ECURITIES , M. H ORN & C O .

M EDIUM T ERM O PPORTUNITIES

L ONGER T ERM O PPORTUNITIES

N ORTHERN A RABIAN G AS - CONDENSATE P LAY

M IRABAUD S ECURITIES , M. H ORN & C O .

Source: Indago Petroleum

M IRABAUD S ECURITIES , M. H ORN & C O .

The Exploration and Production Sharing Agreements (EPSA's) which

E XPLORATION P ORTFOLIO P ROFILE

INDAGO PETROLEUM LTD COMPETENT PERSON'S REPORT

West Bukha (Oman)

Ash Sham (part)

Jebel Hafit (Oman)

Economics (IPL share)

Source: Technical Consultant

Source: Indago Petroleum