*  EAX is a wholly owned subsidiary of Afren Plc
** Management estimate

Overview

Block 1 is located on the Western margin of the Mandera-Lugh basin in north eastern Kenya bordering both Somalia and Ethiopia. Afren operates the block with a 50% working interest. The Mandera-Lugh sedimentary basin is located in North-Eastern Kenya and continues partly into Somalia and Ethiopia where it is connected to the Ogaden basin.

The Upper Triassic and Jurassic formations that have been identified are considered to be the primary zones of oil prospectivity. An oil seep close to the well Tarbaj-1 in the South West corner of the block confirms the presence of hydrocarbons. Analogous data with the Ogaden basin also suggests there may be other potential source rocks and reservoirs. The Bur Mayo and the Kalicha-Seir formations in the Mandera-Lugh basin appear comparable to the Lower and Upper Hamanlei (Jurassic) formations in the Ogaden basin. If analogous these formations should have high total organic content ("TOC") source rocks and good quality reservoirs.

Exploration

Early exploration occurred during the 1970's when Burmah Oil conducted gravity and seismic surveys over Block 1. This was followed during the 1980's when Amoco and Total acquired a combined 850 km of 2D seismic data. After this exploration effectively ceased until Lion Petroleum was awarded the block in October 2007. EAX farmed into the block in January 2009 taking a 50% interest and becoming operator of the block.

Commercial terms

During the first exploration period, the PSC partners are obligated to obtain 1,200km of 2D seismic data. An extension of the first exploration period until October 2011 has been granted and states that during the initial exploration period the Joint Venture will be expected to acquire gravity and magnetic data and 1,200km of 2D seismic data. During the second exploration period, the farm-in partners are obligated to acquire 25 square km of 3D seismic and to drill one exploration well. During the third exploration period, the partners are obligated to acquire 25 square km of 3D seismic and to drill a further exploration well.

Outlook

The partners on Block 1 have commenced the acquisition of 1,200 km of 2D seismic data over the block. Airborne gravity and magnetic data was acquired in the first half of 2011, the results of which are very encouraging and have been used to target the planned 1,200 km seismic. Several major structures have already been mapped on the block that currently has 850 km of existing 2D seismic coverage.