Ann: Reserves Update , page-6

Phoneman,

I hear what your saying.

I must admit I to was looking for more from the McDaniels CPR numbers, I'd say your 40-50 million number was what I'd been expecting to.

On the RES method I was expecting/hoping for the 100 million number just as I had talked about it months ago in a very detailed posting. That was achieved and the C1+C2 number is important, as that's where you should get to when you've drilled enough wells.

So from that point of view, I'm very happy although I would have expected the C1 number to be a bit higher, nearer 35 million than 20 million.

So lets look at why the numbers don't match our expectations. The McDaniels report only covers the T2B, not the Z sands or the T2A. That explains some of it.

The other key point is the re-mapping of the Akkar East field, as seen in the July presentation. Compared to the previous versions, the original J50, J51, J52 compartment of the T2B section is now much smaller than it was. Thus the area around the J-52 well has been reduced considerable from a reserves point of view in a CPR.

This has now been included in the new J-53 compartment which is much bigger than the 10 million barrel estimate from before, it looks to me like we're talking 20-25 million barrels now for it. There-in lies the problem, as you said, they have not achieved commercial production from that well because of the water issue they've had, so they can't get any reserves credited to it in a CPR currently.

The good news is that at least they are able to work on that well, since it does have a trial production licence, unlike J-55 or J-59, so hopefully they can come up with a workable plan soon, ie a fix, a side track of the well through the T2B or production from the Z sands which were meant to be reasonable going by the well logs etc.

Getting a commercial result from J-53, could see 10 million barrels added to the McDaniel P1/P2 number virtually instantly.

As for WZ, we will have to wait until they get their trial production permits before we know much more about J-55 and J-59, it took them a while to crack the code on J-50 originally, the same might apply here. Certainly they tried to do too much to quickly with WZ and lost a lot of the 90 day windows, with them overlapping so much.

I don't mind you not being able to have it on test for the 90 days or doing commercial production until the TPL is granted, its not being able to fix or work on the well at all until you get the TPL that is so annoying once its reached TD, that's the big time waster.

That new map sure does add to the possible prospectivity of block 31, there could be another 100 million barrels to find in it.

I'm sure the 100 million C1+C2 number is causing some interest from the bigger players especially when there could be double that in the block as a whole.

Right now J-53 looks to be the value key, get commercial production from it and it would add another $100 million to the company's value virtually overnight.

Hopefully the Q3 report in October will tell us more, :) :)

Keep your chin up Phoneman, we both know this is a multi-bagger, either through the company's continued exploration/development of AE & WZ, or from a 3rd party offer.

LOTM