some light reading while we wait

Hi All,

Some light reading while we wait for information.

While doing additional research on MANAS PETROLEUM CORP (OTC BB:MNAP), a company I hold in the US, I came across the information below that just adds to the information we already have on the Oil & Gas potential in Kyrgyz for MHL.

BTW Santos is MANAS PETROLEUM JV partner in Kyrgyz.

Cheers,
Brantley


http://www.undiscoveredequities.com/member-only/stock_picks.html

This is our introductory Manas Petroleum report and as a consequence it is the most comprehensive.

We first started looking at Manas Petroleum last winter as it began its move from $3 to $6.40. It was brought to our attention via Clarion Finanz, who are major Manas Investors and are InterOil's original financial backers.

We were impressed with Manas management's resume and its apparent ability to acquire giant projects through-out the former Soviet Union but later worried (correctly) that its shares may have, despite its great promise, moved too far too fast. Since then its shares have first corrected along with the market and we note that market has ignored some highly significant accomplishments in Central Asia and Eastern Europe, something we will talk about later.

The company's CEO Dr Alexander Becker was one of the Soviet's top (award winning) geologists and the company has obvious connections to numerous powerful oilmen including until his recent death (from cancer) Farman Salmanov who is considered the father of the Soviet oil industry (for example he headed the committee that awarded ExxonMobil its Sakhalin I project.)

But connections are one thing and acquiring giant developable oil leases are quite another. When we started watching Manas it already had a major developing its Kyrgyz Republic project which was impressive but we wondered if it was a one off event. Can they keep doing it? Clearly the more of these giant oil projects they can acquire (and get development paid for by Major oil companies) � the better chance they will have, that at least one will be highly successful - translating to giant profits for us.

Our plan was to wait and let them prove themselves first. With the latest two deals and the time-line of events we judge that from now on the longer we wait the higher Manas Petroleum's share price is likely to be. We were lucky that our wait and see strategy coincided with a very significant stock market correction, creating what we think is a huge buying opportunity.

In the past months, a parade of CEO's from the world's largest oil companies has warned that it is getting extremely difficult to acquire giant sized, exploration and development plays.

ConocoPhilips Chief Executive Jim Mulva was among the more recent to say this when in July he told the U.S. Chamber of Commerce most of the world's oil is controlled by exporting nations. [So] there is a great deal of international competition for opportunities to develop what's left� What's left is mostly Canada's tar sands and ultra-deep and expensive Gulf of Mexico exploration. Witness the bidding frenzy in the Gulf of Mexico or the amount being paid to acquire tracts in Canada's tar sands. Both require investments north of $30,000 per flowing barrel and offer very low returns. In the words of Rigzone a highly respected oil industry publication regarding the Gulf's latest wave of exploration and development: oil companies are going to have to travel down a long expensive path.

But in places like Central Asia the capital required is a fraction of this amount and it can be paid back fast: in months instead of years. But you have to have access to those oil lands - a very rare thing. If a company does however, it can quickly go from being a small company to become a giant company. After studying its activities carefully for the past eight months it is apparent that Manas Petroleum is capable of (and has been) acquiring giant assets and as a consequence is more than likely to make us huge profits. The facts are as follows:

Fact #1

Kyrgyz is a P50 1.2 billion barrel project. Its original project in Kyrgyz Republic has (according to an independent engineering study) a most likely case of P50 1.2 billion barrels based on 10 of 23 reservoir structures already discovered.

Santos, Australia's third largest energy company is spending $54 million to bring it to a commercial level of production. Until this occurs Manas Petroleum's expenses are paid by Santos for the entire $54 million program. Manas ends up with 25% of the oil production and only when it is judged to flow at economic levels does Manas begin paying development capital costs on a pro-rata basis.

We note that last month China agreed to fund gas and oil pipelines which pass either near or through Kyrgyz capital city Bishkek on their way to the Turkmenistan and North Caspian with the intent of eventually importing from the region more that 1 million barrels of oil per day and a trillion cubic feet of gas annually as the areas energy reserves are developed.

The Chinese know what they are doing. Central Asia is one of the world's last relatively low cost energy growth frontiers. Manas already has oil giant CNOOC spending almost a quarter of a billion dollars on drilling oil wells next to its Nanai concession.

Fact #2.

Tajikistan has the potential to double Manas Petroleum's P50 oil reserves. That would translate to an increase of its Central Asian P50 to total 2.4 billion barrels. Manas managed to acquire this extremely coveted piece of the Fergana oil basin (the Fergana is where the US department of Energy expects a further 3 billion barrels of light oil will be produced) in a deal announced July 12th and it again shows that the company has exceptional access to major oil assets in the Former Soviet Union. This is the company's second major Central Asian acquisition.

We sat through several presentations when the company was recently in New York. Several, not just because we wanted to really understand what Manas was doing but also because we wanted to hear what that city's top oil analysts thought of Manas: (They were, to say the least, impressed).

What we also found out at that meeting is that the Soviets did a lot of work including seismic and stratigraphic wells in the basin just before the Soviet Union collapsed - they (and Manas ex-Soviet management) have a very clear understanding of its development and exploration upside.

We also were reminded (they alluded to this in a July news release regarding the acquisition) that negotiations were very advanced regarding getting a major oil company to explore and develop its Tajik holdings in a Santos-sized deal- so advanced that the major has already started a multimillion dollar seismic program on the Tajik license.

One reservoir structure is as close as three kilometers (2 miles) from oil production - dramatically reducing risk. If the Tajik concession has the same P50 1.2 billion barrels then the combined amount for the Kyrgyz and Tajik concession's is P50 2.4 billion barrels of oil.

We expect that these majors will spend well over $100 million and that if they are successful, Manas will be left with a net 25% of the 2.4 billion barrels in place or 600 million barrels of which 40% is recoverable. Using prior sales as an example we think its fair to value proven, recoverable reserves at $10 per barrel given the current oil price outlook. Consider that recent transactions in the US were as high as $18 per barrel.

The upside market capitalization target for Manas is $2.4 billion or 600 million barrels times 40% times $10. This is the potential, based on the known structures in the basin and does not include exploration upside. We think it is a reasonable target because historically (over the past 100 years and more than 50 oil field discoveries) when an anticline structure has been drilled in the Fergana Basin an oil discovery was made - a 100% SUCCESS RATE.

In March/April 2008 drilling is expected to begin - by then we think it will be too late to buy its shares - as the closer we get the more people will know and buy its shares in anticipation.

This is a very rich area but because it is a long way from America it is being ignored. But with the Chinese pouring billions into Central Asian energy development this is unlikely to last. Obviously the Manas licenses are very credible or these major oil companies would not even consider spending the $100 plus million required to develop them.

Fact#3.

Manas' Albania project is a super-major sized oil play. Last month we were alerted that the Albanian Oil Minister and Manas Petroleum had complete the acquisition in a televised signing ceremony in Tirana, Albania's capital. Albania used to have one of Europe's largest oil fields. It has produced 350 million barrels and has roughly 2.7 billion barrels in place. It is shallow heavy oil and it was not until recently that explorationists discovered that as the same oil-containing thrust-sheet plunged deeper, not only did it continue to contain oil but the oil became much lighter and thus more valuable. This is a project that super-major Shell and another company Corporex were hot to develop and their own preliminary estimates were that it had the potential to contain at least a recoverable 800 million barrels of light 35 degree oil. Along came the Yugoslav conflict and Albania�s collapse. The two companies� declared force majure and left. Manas deftly snapped them up as soon as the Albania became peaceful and the European Union began rebuilding the country. Now here�s the critical fact. There has since been a light oil discovery nearby which as a consequence greatly reduces the project�s risks. On top of this (we learned at the NY presentations - and the experts we knew there agreed with this) that by combining all the Shell, Corporex and Government data and using the most state of the art processing techniques for the first time, a much larger and lower-risk light oil resource was probable. Manas management would not say what the new P50 or most likely oil resource was but instead has hired an independent engineering firm to go through all of the data and prepare their own calculations. We appreciate Manas management's blue chip approach and expect (as the experts in attendance at the meeting advised us) the final results should easily indicate a much larger P50 oil reservoir and as a consequence should result in a significantly higher Manas share price.

If we just use the original 800 million barrels that Shell and Corporex estimated as the potential reservoir size, then the market capitalization upside target is (800 million times $10 per barrel) $8 billion. Critically, the recent nearby oil discovery in the same thrust sheet has dramatically lowered the risk so this becomes an even more viable project than when Shell was pursuing it.

What to watch for:

Now that Manas has proven it can keep acquiring giant projects here is what we see as likely to move its share price higher in the immediate future. Manas has three projects from which there should be a lot of news over the coming months. Drilling is expected to begin late winter early spring and this should definitely act as a share-price catalyst. The Albanian P50 estimate should also be something very-positive to watch for (it is expected in 6-8 weeks) and should cause an upward revaluation of its shares. The company has said it is negotiating other high impact acquisitions and an announcement regarding this could come at any time. This occurring or if Manas also announces another farm-out then we would expect its shares to trade higher.

After already acquiring several giant projects we wonder what they will do for an encore. Suffice to say that Manas appears to be well on the way to becoming a major success and that as its news flow increases so should its share price. We feel fortunate that the wait has paid off but certainly will no longer take the risk of waiting any longer to buy Manas Petroleum shares. Any one of these projects has the potential to turn Manas into a multi-billion market-cap company. We are now aggressive buyers.