christmas 2008

Christmas 2008

Block 330

• Extended production test will be underway. The production licence is imminent, was obviously due a few months ago. At the AGM the company said that there was a hold up at the ANP, someone in the licensing department was ill and was holding up the process.

• The only thing that I can think off is that there was something incorrect with the application because even in Brazil process is process. I’ve worked in Mozambique so I know what this is like. As long as you put your paperwork in, it’s filled out correctly, the approvals will follow. I am guessing this is only a matter or time and not something sinister as others are suggesting.

• This production test is also the commencement of cash flow, because every barrel produced during this extended test will create positive cash flow that will roll into the bank account exclusive of any royalties.

Block 430

Location 1 1-NORD-1-SE

• The well will have been fully tested, basement, lower carbonates and upper carbonates. Full field size will have been released, production rates from each of the sections and probably have released the field development plan. Then we can start crunching the annual revenue numbers. This will have huge implications on the share price.

• Extended production test will be underway. The production licence application will be completed correctly and submitted to the ANP as soon as the testing has been completed, that is if they haven’t started the process already. As mentioned in an announcement on 330, the production licence normally takes about 8 weeks. I think this testing will have started before Christmas 2008. Come to think of it, as soon as they knew this was a discovery, they could have commenced the application process. ( just my thoughts).

Location 2 at 430b

• I have heard quite a few times that the company thinks that 430b is bigger than 430. From what I hear, 430 is going to be bigger than first anticipated. We just don’t know how big yet. So the implications for 430b are fantastic.

• The same intervals as the first location are being targeted and the turbidite sands also. The turbidite sands are the sands that are producing in the nearby Angelim field. The carbonates are also producers 430b has the added bonus of having a potential reservoir in the basement. Drilling is scheduled to commence in early Oct. The well has to be drilled before 12th Jan 2009. I think that by Christmas we will have flow tested this sucker. Should take about two to three weeks to drill and then the same rig will be able to flow test the well. All done before Christmas. I have been told that the rig for drilling the wells and the flow testing of the wells is one and the same. I have also been told that this rig will be alternating between the drilling of the wells and the flow testing. (ie flow test 430, drill 430b, flow test 430b, then drill the 430 appraisal well, flow test the 430 appraisal well and so on. This means this rig will be drilling or flow testing wells for the next 8 months. )

Block 59

• First well to be drilled commencing early Oct. The rig has already been booked and we should be underway as scheduled. This well also has to be completed before 12th Jan 2009. I think we will have the well logging results and the flow testing possibly commencing by Christmas. There is a field within a few kilometres of this field that is tiny in size, (0.6 sq kilometres in size, Jandaia ) but producing at 4,500 barrels a day. Even the fields a few kilometres away are producing at 466 barrels a day. The company is targeting 8.6 million barrels. Also has a producing field encroaching onto the Block.

Block 138

• First well to be drilled immediately following Block 59. Probably commence early Dec 08. I think the rig has already been booked and we should be underway as scheduled. This well also has to be completed before 12th Jan 2009. I think we may get to target depth before Christmas 2008. The company is targeting 3.5 million barrels.

• The block also has a producing field protruding into the boundary of the block. If the oil is flowing only a kilometre away, there is a high probability that we could get an oil flow.

All of our prospects are within kilometres on existing oil fields and infrastructure. The only set back at 430 is the amount of time taken to fully evaluate the flow rate and the lack of patience that some of the shareholders have. Everyone has different investment philosophies but when you do your research, you have to stick with your gut.

The executives of this company have integrity, skill and knowledge that will deliver to the shareholders a ripper share price, oil production in Brazil and a pipeline of potential projects in Brazil that will turn this junior into a mid sized oil producer over the next few years. This one is a buy and hold for me.

It’s a strategy that has worked for me over the last three years with a gold junior and it will again. I am sticking with it and buying more over the next week or so. I have a lot of confidence and I don’t think that sentiment towards this stock is clouding my judgement. I have met with management, I have seen that the ship is tight and news does not leak before an announcement. These guys are experienced in Brazil and know a lot of people and how things work.

I am sticking with this one.

Hope this helps.

Regards

Kojasper