operations update, page-9

The likelihood of gas saturation in the B-24/25 is high as long as the well location is not outside the pinch out area.

All 6 wells drilled on or near the licence have recorded gas saturation in the B24/25.

Australia's RISC performed the petrophysical analysis in the 2010 prospectus and evaluated the Chernetska B24-25 reservoir using data from three wells (Lak-2, Lak-7 and Slob-3).

These three wells flowed gas, though over very short intervals and were never properly evaluated. Timeframes for flow testing were 5-20 mins. Slob-3 is close to the current well and flowed 0.78 mmcfd. These Visean carbonates are tight and prompted Hawkley to perform fracture network studies in 2010 to determine optimal well locations and development options.

You won't know much until this reservoir is actually logged and/or open hole tested.

Finding the gas there doesn't add much value to the company. The fact is to obtain value from Ukrainian leases one must know how to make these tight carbonate reservoirs flow gas at commercial production rates.

Regal petroleum had proven close to 1 TCF of gas reserves on their licenses, but that means nothing if you cannot get that gas to flow at rates above the break-even level.

I have always said the make or break well is the Sorochynska well that enters the B24/25 for evaluation of gas. Its one thing to have contingent resources of 200-300 Bcf, its another to prove that they are recoverable and flow rates are above the break-even rates to be deemed commercial.

A positive B-24/25 evaluation at Chernetska could be the much needed kick HOG needs to adopt a more aggressive development strategy and get a multi-well program underway.