Major New Oil Discovery in Iraqi Kurdistan

There was no observed decline and no formation water was recovered during the testing. The deeper Oligocene oil pay will not be tested at this time due to time constraints, as the well is required to drill and evaluate the deeper Cretaceous by the end of June 2012. The Company interprets these results as an additional successful confirmation of a significant oil column underlying the gas cap in the Oligocene reservoir. (The first confirmation was provided in Kurdamir-1 as disclosed in the Company's news release of December 16, 2010.)

The Company interprets that since the test was conducted across the gas-oil contact, and the fact that gas flow impedes oil flow, the results do not represent the true oil rate potential of this interval. According to analysis by an independent third party engineering expert, the 33 metres of oil pay tested to date is capable of flowing at rates of 4,000 barrels per day if isolated from the gas pay and stimulated.

The Company is working with the operator, Talisman (K44) B.V. ("Talisman"), to examine options for additional cased hole testing focused on the full 118 metres of gross oil pay in the Oligocene after the well has met the PSC commitments. The co-venturers are also planning a 3D seismic program and a further appraisal well to help determine the ultimate size of the Oligocene reservoir.

These interim results from the Kurdamir-2 well are significant for two reasons:

1. The 327 metres of Oligocene hydrocarbon column that was proven in the Kurdamir-1 well, has now increased significantly to at least 420 metres (i.e. from the top of the Oligocene reservoir in Kurdamir-1 well at 2,142 metres to the base of the gross oil pay in the Kurdamir-2 well at 2,562 metres.) As no oil-water contact has been encountered in Kurdamir-2, the maximum thickness of the oil column is not yet known.

2. The bottom of the known oil column extends down to at least 2,562 metres, which is significantly deeper than the limit of closure of the Kurdamir structure as mapped from seismic data. This finding, in turn, supports the observation that the Oligocene reservoir is involved in a considerably larger trap and that Kurdamir and the neighbouring Topkhana structure share a common oil leg.

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