Puntland-SomaliaDharoor and Nugaal Valley BlocksThe Company and...

Puntland-Somalia

Dharoor and Nugaal Valley Blocks

The Company and Denovo Capital Corp. ("Denovo") have entered into a letter of intent dated May 11, 2011 for the creation of a new Puntland focused oil exploration company to be named Horn Petroleum Corp. ("Horn Petroleum"). Horn Petroleum will be created as a result of the sale, to Denovo, of the subsidiaries of the Company that hold its oil and gas properties in Puntland Somalia. Certain management and technical services are expected to be provided to Horn Petroleum by the Company under a service contract.

On August 2, 2011 Horn Petroleum completed a $40.98 million private placement financing, with assistance from Africa Oil. These proceeds will be used to fund Horn Petroleum's share of costs associated with the drilling of two exploratory wells in the Dharoor Valley Block. Africa Oil subscribed for $10 million of the private placement and will have an approximately 50% interest in Horn Petroleum when the transaction completes. Completion of the acquisition of Africa Oil's interest in Puntland, Somalia by Horn Petroleum remains subject to, amongst other things, TSX Venture Exchange approval.

The Company is currently in final preparations to commence the two well drilling campaign in the Dharoor Valley Block, with the first well planned to spud in the fourth quarter of 2011. Drilling locations have been selected over two robust prospects targeting gross best estimated prospective resources of over 300 million barrels each based on internal estimates. Contracts for a drilling rig and third party services are in advanced stages of negotiations with contract execution scheduled for early August.

The Puntland Government and Dharoor Valley communities are fully supportive of the drilling project and have ensured they will do all to allow the project to move forward safely and expeditiously. Specific milestone target dates have been adjusted by the Puntland Government allowing the Company and partners to move the drilling start-up to the fourth quarter of 2011. In addition, partial relinquishments in both the Dharoor Valley and Nugaal Valley agreements have been finalized and approved. The Puntland Government has also given its approval for the formation of Horn Petroleum and the impending transaction with the Company.