gg's response

I received an email response from Guy Goudy this morning. My queries related to the program for drilling the 2nd Pathfinder well but more over, the apparent discrepancy in the flow rate 12/24 hr results.

There is nothing market sensitive in his responses so I feel free to post the relevant excerpts below as SH may draw some comfort.

"The reality of this well is it is still early stages and we are still testing and monitoring the well. The flow is still flowing oil under natural pressure which we never expected from this project. The figures we are reporting is exactly what the well is doing - we are just reporting facts. A lot of people have asked why we just didn't double the 12 hour flow and our answer is because that is not what the well did. Perhaps some companies may report like that but we are trying to build credibility in the market place and ultimately that is done through the balance sheet equalling reported production numbers.

This is certainly a good problem to have and any natural lift that a well can have is a huge plus - particularly when the total length of the well bore is 10,000ft. Like any unconventional well, the well will settle and production will stabilise when we put it on pump and we are preparing for that as we speak.

With regards to your question on the two wells at Pathfinder, we "skidded" the rig and drilled a second well as a horizontal. This meant that we saved a considerable amount of funds on rig mobilisation and demobilisation charges whilst at the same time we met our work commitment/obligation of drilling a second well. Our engineers will monitor our current horizontal well and will optimise production before we return to complete the other well."

MY TAKE on the above is thus:

-There was no error in reporting

-The well is producing beyond expectations but in a sufficiently erratic way that the two duration/results where significantly different.

-The well needs to be on pump for ONE REASON ONLY...to manage, control and report constant flow rates. NOT TO ENCOURAGE OR ESTABLISH FLOW! Natural pressure is gangbusters.

–As previously announced, the 2nd Pathfinder well will be re-visited and completed once the engineers have installed all the necessary equipment to handle (I assume) both the currently producing well and the pending 2nd well from the same pad. The tone from Guy's email was that the performance from the current well has surprised to the extent that earlier preparations were inadequate (also previously advised) and they are now moving to establish production capacity capable of handling a 2-well pad, at quite a clip. I reiterate, these are my interpretations from this response.

I hope this is of assistance to shareholders.