chris hopkins of iop q&a

Please find below Chris Hopkinson's response to a series of questions I asked him. he said he was happy for the answers to be shared on the bulletin boards. am glad to have been put right on a few misconceptions I had - reason for decline on well 52 is particularly encouraging:

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Henry,

Thank you for contacting me. More than happy to answer your questions. Please find my answers below:

Best regards

Chris Hopkinson

From: XXXXXXXXXXXXXXXXXXX
Sent: 01 May 2013 13:03
To: Christopher Hopkinson
Subject: A Few IOP Operational Questions

Dear Chris
I am a private investor with a significant (for me anyway!) holding in Range Resources. I am excited about the potential merger between the 2 companies and would like to know a little more about IOPs operations:

1. Why can the pipeline to Y-S and Z-N only be built in the winter? Is this because it is an overground pipe and the piles need to be anchored to the permafrost when it is at its most solid?

CH: There is no road access during the summer. This part of West Siberia is the biggest swamp in the world. Starting December we construct the winter roads and then can move the pipe trenching/welding/laying equipment to site. The pipe will be buried.

2. How long is it forecast that the 16km pipe will take to construct and in what month do you anticipate the work will start?

CH: We forecast to start in mid January (when the winter roads can take 30 Ton trucks) and should complete within the month. Design and permits are of course in place.

3. The 10 Y-S and Z-N wells in the winter programme – Peter Landau has confirmed in a Q&A that all wells have been fracked – under normal procedure this would mean that all of the wells have been flow-tested post–frack meaning the 3-4,000bopd is an actual flow-test result rather than a forecast – can you please confirm?

CH: All wells were limited tested to temporary tanks. Extended tests were not possible due to absence of an export route. Our production forecast is based on this testing.

4. Could you please confirm what the fiscal arrangements and netbacks are for Y-S and Z-N?

CH: Netback for YS will be through pipe at approx. 24 $/bbl and for ZN by truck at approx. 18$/bbl.

5. Is there no opportunity to truck oil to market before the pipeline is built or does the business case for storage not stack up? Or is it simply logistics with the nearest head road being 11km away?

CH: We will truck oil from the wellheads during the pipe build but the volumes we achieve will be dependent on temporary storage and logistics as you rightly point out. Every effort will be made to produce the maximum we can.

6. In your quarterlies you stated that the production from well 52 had been sold to local offtakers- would you suggest that 120 barrels a day saturates this local offtake market?

CH: Well 52 originally produced at 99% oil @ 450 bbls/day until the last couple of months when the pump wear has decreased the rate. There is a huge local market and many local offtakers servicing the many refineries in the region.

7. Why has the flow rate of well 52 declined since being put into production and why has it been suspended. When do you anticipate it coming back online?

CH: We need to replace the pump. We are currently looking at how we can do that effectively during the summer. It is currently the melt season and the whole territory is under a couple of meters of water so we will have to wait for that to go down.

8. Please confirm how it is planned that IOP’s near-term debt (<18 months) is to be serviced.

CH: We plan to service the debt initially through the loan that Range has announced and are looking jointly with Range at how the merged entity will settle the remainder. There are a number of opportunities available to us and we are assessing which will be most cost effective for the company and shareholders. Please also understand that these are primarily costs payable to our service providers who started a three well drilling program early last winter in YS. When it became evident that IOP had difficulties in raising further funding, last years winter had already ended and cancellation of this contract would have cost more than continuing. Lifting a rig out of the swamp in the summer is a very expensive operation. The upside is that we have three new wells with a production potential of 1500 bbls/day instead of a bigger debt for nothing!

Best wishes and good luck with the new expanded role – I sincerely hope to see your operational influence in Trinidad where the potential is colossal but operational frustrations have been many.

CH: I am also excited by Trinidad. With funding in place and a new set of eyes looking at it I am confident that we can start to deliver quickly. I hope I answered your questions satisfactorily.