Ann: Borba Gas Shows Continue in Key Target Formations, page-212

Government Royalty and Overriding Royalty Interests – The Project Peregrine leases (“Leases”)
are situated in the National Petroleum Reserve – Alaska (NPR-A) and are administered by the US
Department of the Interior - Bureau of Land Management (BLM). All leases issued by BLM are subject
to a royalty and 88E’s Leases are subject to a 12.5% government royalty. In addition, the Leases are
subject to an overriding royalty of 1.5% payable to non-related parties of the Company. The net
economic interest to 88E has therefore been calculated as 86% and the Net Entitlement Prospective
Resources have been adjusted to reflect this