Ann: Operations Update, page-2

Icewine#2 Operations Update

Flowback commenced on the 19th June from stage 2 (upper zone). Approximately 8% of total
stimulation fluid volume was recovered until it became apparent, due to rate and pressure
observations, that the upper zone was likely in communication with the lower zone. Consequently, a
decision was made to drill out the plug between the upper and lower zones. No increase in pressure
was observed, confirming that the two zones are in effective communication. Trace hydrocarbons
were encountered whilst flowing back the upper zone prior to drilling out the plug and, as expected,
the flow rate returned to 100% stimulation fluid once the two zones were flowed back together.

Flowback, currently comprising 100% stimulation fluid, is continuing. Percentage of fluid recovered
to date is ~13% of the total fluid pumped. It is estimated that up to 30% of the stimulation fluid will
need to be recovered before hydrocarbons will be released from the reservoir.

The forward plan is to monitor pressure and flow rate and continue to draw stimulation fluid off the
reservoir. Artificial lift, using nitrogen or swab cups, may be introduced at some stage to increase the
rate of draw down of fluid. If pressure becomes too low it is possible that operations will necessitate
a shut-in to allow fluid to ‘soak’ and pressure to build up. This ‘soaking’ is not uncommon in other
shale plays as it allows stimulation fluid to be absorbed into the reservoir and can result in lower
required fluid flowback before onset of hydrocarbon flow.

Further updates will be made as and when appropriate throughout the testing program.

Managing Director, Dave Wall, commented: “We continue to monitor pressure and flowback of
stimulation fluid whilst we wait for hydrocarbons to be released from the reservoir. Given that we are
breaking new ground in relation to the HRZ formation, we need to establish the conditions under
which the hydrocarbon cut will return and then increase.

The stimulation was executed precisely as per plan with over one million lbs of proppant placed into
the formation. A little patience is now required as we give the rocks time to show us what they can
deliver.”