from the horses mouth

Thanks for your email

I think there are a few factors impacting us:

1. The pure exploration end of the market has really suffered over the past 6-8 months driven by the overall market down turn and the collapse in the oil price and general sentiment against risk. Stocks that do not have a clear roadmap forward showing how they will more into a drilling program are being ignored. Showing a way forward is proving extremely hard as the equity market is no longer supporting capital raisings for exploration plays so the only real source of funds is via a farm in and trying to find farm in partners can be a real challenge in this market - esp with oil dropping to its recent low levels. The good news is that oil has shown some sign of strength in recent weeks and this has flushed out some parties that have been trying to pick the bottom of the market before commtting to farm ins. If you can show the market you have a way forward then a quick re rating is there - see the recent share price rallies of both ADX and KIK on the back of farmout announcements.

2. We have been awaiting the completion of 3D on the permit and now this is done I am actively talking to interested parties about a farm in based on the comprehensive data we now have. In Australia it has been difficult to find companies that want to be involved in Kazak plays and for that reason I am now in Kazakhstan talking with companies that are already over here and comfortable with the environment. The response this week has been good and I will update the market on my return regarding what we see as our next steps

3. I believe that once we have secured a path forward in terms of drilling at least one well and showing that the oil reserves we believe exist on Block 31 are real, we will be faced with a much more supportive market. We believe we have a 25 mmbbls prospect and that is significant in terms of the Australian market - we just need to produce the evidence that supports our belief and the rest will follow. To put this in perspective, a 25 mmbbls base puts us in the league of CVN who currently have reserves of c 20 mmbbls

4. I am very aware of our share price and the fact that any significant raising at these levels will be very dilutionary. We have had one major shareholder exit the register over the past 3-4 months and this was the main reason for the drop in price - a big seller and no buyers. That holder is now out and the share price has moved back to the mid-high 2's and from there I want to build the story and see it get stronger before we look at raising any funds. Clearly the objective is to farm out and get the initial drilling program funded by others so we dont need to raise funds in the short term but of course this will come at a cost in that we will no longer hold 100% of the permit. The issue of dilution in terms of shares vs % of permit needs to be managed in light of all the issues discussed above.However, even if we move to a 50% holding and therefore our reserve base is more like 12-13 mmbbls than 25 mmbbls, this will still be a significant prospect for us


Hopefully this is useful in terms of setting the current scene and on my return from Kazakhstan next week I hope to have a positive update for shareholders in terms of the progress we are making here

Cheers

Geoff