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Equity Research Industry Report April 2010 Gavin Wylie – (403) 213-7333 (Scotia Capital Inc. – Canada) For Reg AC Certication and important disclosures see Appendix A of this report. Analysts employed by non-U.S. afliates are not registered/qualied as research analysts with FINRA in the U.S. Energy – Oil & Gas – International E&P Oil & Gas – International E&P Kurdistan – A Region Full of Ambition
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Page 1: Scotia Capital

Equity Research Industry Report April 2010

Gavin Wylie – (403) 213-7333(Scotia Capital Inc. – Canada)

For Reg AC Certifi cation and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affi liates are not registered/qualifi ed as research analysts with FINRA in the U.S.

Energy – Oil & Gas – International E&P

Oil & Gas – International E&P

Kurdistan – A Region Full of Ambition

Page 2: Scotia Capital

Kurdistan – A Region Full of Ambition April 2010

1

Contents

Investment Themes and Recommendations 2 Valuation Analysis – High Risk = Steep NAV Discounts 3

Iraq Overview – Big Oil Country! 5

Kurdistan Region of Iraq – Building Its Own Success 7 Political Overview – In Need of a Federal Oil and Gas Law 8 Infrastructure – A Key Risk to Development Timelines 9 Kurdistan Fiscal Term Overview 10

Kurdistan Players – A Closer Look at the Action 12 Consolidation Potential with Size Discoveries 12 Exploration Activity Set to Rise in 2010/11 16 Prolific Prospects, But Challenging Realities 18 Evaluating the Kurdish Economics – Big Potential! 21 Key Assumptions 21

Vast Exploration Inc. – Ready to Summit the Black Mountain 25

Longford Energy Inc. – Blast from the Past 43

ShaMaran Petroleum Corp. – Three Blocks Heating Up in 2011 61

All share prices as at March 26, 2010.

Page 3: Scotia Capital

Energy – Oil & Gas – International E&P April 2010

2

Exhibit 1.1: Kurdistan Economic Scenario Analysis – Contractor NPV10 and IRR

Brent Crude

Price (US$) 50 100 150 200 250 300 400 500 750 1,000

$50/bbl -US$51.3M US$77.9M US$191.7M US$357.7M US$497.8M US$626.3M US$853.6M US$1,069.7M US$1,581.3M US$2,038.7M

6.1% 14.3% 18.3% 24.0% 27.1% 30.0% 34.4% 34.9% 34.8% 35.3%

$60/bbl -US$4.7M US$159.7M US$307.0M US$470.0M US$640.7M US$792.6M US$1,066.3M US$1,345.5M US$1,973.8M US$2,530.1M

9.7% 18.7% 22.9% 28.1% 31.5% 34.8% 39.2% 39.9% 39.3% 39.7%

$70/bbl US$35.2M US$230.6M US$405.6M US$576.9M US$779.7M US$959.0M US$1,285.4M US$1,608.6M US$2,377.1M US$3,042.7M

12.5% 22.3% 26.6% 31.6% 35.3% 38.9% 43.4% 44.2% 43.5% 43.7%

$80/bbl US$70.6M US$293.2M US$491.2M US$686.0M US$921.7M US$1,127.2M US$1,504.0M US$1,869.1M US$2,786.1M US$3,533.5M

15.0% 25.3% 29.8% 34.7% 38.7% 42.7% 47.2% 47.9% 47.3% 47.2%

$90/bbl US$102.0M US$350.0M US$568.0M US$797.1M US$1,065.0M US$1,295.8M US$1,737.0M US$2,141.4M US$3,169.2M US$4,022.1M

17.1% 28.0% 32.5% 37.6% 41.8% 46.2% 51.0% 51.4% 50.5% 50.4%

$100/bbl US$131.0M US$401.0M US$636.3M US$906.6M US$1,211.8M US$1,473.7M US$1,961.2M US$2,423.9M US$3,536.0M US$4,522.8M

19.0% 30.3% 34.9% 40.3% 44.8% 49.6% 54.4% 54.7% 53.3% 53.4%

Kurdistan Economics - Contractor (80% wi) NPV 10 and IRR (After-Tax)

Gross (100%) Recoverable Oil Estimates (mmbbl)

Source: Scotia Capital estimates.

Investment Themes and Recommendations

In our view, the Kurdistan Region of Iraq has the potential to emerge as a new global energy player in the context of targets of nearly half a billion barrels and goals of reaching 1.0 mmbbl/d over the next five years. That said, we believe exploration in Kurdistan offers amongst the highest-impact catalyst potential within our International E&P coverage universe in 2010. Activity in the region is expected to increase significantly with as many as 13-18 wells to spud this year and more than 15 in 2011. The ability to recommence exports later this year from the Tawke and Taq Taq fields, and the potential signing of a federal Oil and Gas Law, also represent material catalysts for the region and the companies involved. However, we note the lack of infrastructure, limited exploration, complex geology, and inability to establish an export payment mechanism/federal Oil and Gas Law as key challenges for companies in Kurdistan that also yields an above-average risk profile.

We have initiated coverage on the common shares of Vast Exploration Inc. (VST-V), Longford Energy Inc. (LFD-V), and ShaMaran Petroleum Corp. (SNM-V). A summary of our one-year target prices, total returns, and relative valuations is contained within Exhibits 1.2-1.3.

Billion barrel potential the norm in Kurdistan. Kurdistan lies within the prolific and underexplored Zagros Fold Belt of northern Iraq/Iran, an area believed to possess 38 billion barrels of undiscovered recoverable crude oil resource. Our assessment of Kurdistan discoveries implies impressive upside given the original oil-in-place (OOIP) estimates that have been in excess of a billion barrels on average. Based on our evaluation, a discovery of 100 mmbbl-500 mmbbl recoverable could ultimately imply an NPV10 of US$230 million-US$1,869 million or after-tax IRRs of 25%-48%, respectively. We also note that a minimum discovery of 50 mmbbl likely is required to pursue commercial development (see Exhibit 1.1).

Activity set to ramp up in 2010/11. The success of the Kurdistan Regional Government (KRG) and its Ministry of Natural Resources is highlighted by the fact that over 38 production-sharing contracts (PSCs/ EPSAs) have been signed with ~38 international companies since 2004. As such, activity is now setting new pace with material catalyst potential as exploration ramps up. We also note the high probability of potential takeovers due to the large number of small to mid-sized players involved in one of the last onshore regions to offer oil fields with 100-500 mmbbl of ultimate recoverable resource.

Top Kurdistan pick: Vast Exploration. We view Vast Exploration Inc. (1-Sector Outperform) as offering one of the highest potential rewards within our Kurdistan coverage universe in 2010, given its combination of large OOIP targets (1.7 billion-4.9 billion barrels) and material near-term catalysts. Vast is expected to spud its first exploration well on the Niko Resources-operated Qara Dagh Block (37% wi) in early April (results in July/August), the materiality of which we estimate at $1.40 per share risked ($5.05 unrisked) based on our NAV analysis. That said, given the limited exploration activity in Kurdistan and high drilling costs, Vast remains highly speculative today and carries an above-average risk profile.

Kurdistan offers one of the highest-reward opportunities in our coverage universe in 2010.

The economic argument in Kurdistan is compelling with IRRs in the 25%-48% range.

Vast holds one of the biggest catalysts in our coverage universe – results from its first well are expected in summer 2010.

Page 4: Scotia Capital

Kurdistan – A Region Full of Ambition April 2010

3

Exhibit 1.2: Kurdistan – Select Company Valuation Metrics

TickerShare Price

Mkt. Cap. (C$ M)

Mkt. Cap. / Net Acres

Mkt. Cap. / P90 OOIP

Mkt. Cap. / P50 OOIP

Mkt. Cap / P10 OOIP

Longford Energy LFD.V $0.33 $44.1 $0.48 $1.87 $0.17 $0.02ShaMaran Petroleum1,2

SNM.V $0.62 $309.4 $1.25 $1.79 $1.15 $0.49

Vast Exploration VST.V $0.86 $148.8 $1.92 $0.24 $0.15 $0.08WesternZagros2

WZR.V $0.80 $166.0 $0.83 $0.09 $0.06 $0.05

Gulf Keystone3GKP.L $1.55 $757.0 $5.65 $0.78 $0.35 $0.20

Average $2.03 $0.96 $0.38 $0.17

One-YearTarget

Implied Return

Mkt. Cap / P90 Prospective

Mkt. Cap / P50 Prospective

Mkt. Cap / P10 Prospective

P/Unrisked NAV P/Risked NAV

Longford Energy $0.45 38% $18.38 $0.84 $0.06 20% 76%ShaMaran Petroleum1,2

$0.70 13% $11.21 $6.45 $2.91 36% 91%

Vast Exploration $1.40 63% $1.49 $0.89 $0.47 17% 61%WesternZagros2

$1.15 44% $0.26 $0.17 $0.12 8% 69%

Gulf Keystone3n.a. n.a. n.a. $1.02 n.a. n.a. n.a.

Average 39% $7.83 $1.87 $0.89 21% 74%

1 Resource estimates are for the Pulkhana Block only, excludes Arbat / K42 blocks.2 Report in US$, balance sheet converted to C$ using current FX rate.3 Reported in GBP, current share price converted to C$ using current FX rate.

Source: Company reports; Scotia Capital estimates.

V A L U A T I O N A N A L Y S I S – H I G H R I S K = S T E E P N A V D I S C O U N T S

Given the complexity of valuing pure-play exploration companies with no cash flow, we have elected to use a risked NAV approach that incorporates third-party estimates for original oil-in-place and/or prospective resources where available. That said, our overall valuation analysis (P/NAV – risked and unrisked) and resource/land estimates support our thesis toward Kurdistan’s high-impact potential that exists. Our Kurdistan peer group includes WesternZagros Resources Ltd., Vast Exploration, ShaMaran, and Longford, with our one-year target prices based on our risked NAV analysis. Our ratings distribution includes a relative ranking between an exploration peer group1 (see Exhibit 1.2).

P/NAV – risked and unrisked. We have assessed our NAVs largely on the basis of our discounted cash flow analysis (NPV12) of potential developments using, where available, P50 (best case) OOIP/ prospective resource estimates and/or analogues from discovered fields in the region. Under this basis our Kurdistan peer group is trading at a P/NAV ratio of 21% unrisked and 74% risked, which is also a discount to our International E&P universe averages of 40% and 91%, respectively. In our view, the discount is warranted due to the higher risk profile of exploration-based companies.

Market cap to resource estimates and land holdings. While somewhat limited for direct comparability, we have also provided price-to-resource and price-to-land estimates. That said, our Kurdistan group is trading at an average of $0.38 per net P50 OOIP barrel, but we recognize the significant variability in the estimates and limited data available for certain blocks. On the basis of net acreage held in Kurdistan, the companies are trading at roughly $1.12 per net thousand acres, excluding Gulf Keystone. Our full International E&P universe comparative valuation analysis is contained within Exhibit 1.3.

1 Note: Our exploration company rankings are based on a benchmark of primarily exploration-based companies with operations focused in the Middle East and Africa, which includes WesternZagros (Kurdistan), Longford Energy (Kurdistan), ShaMaran Petroleum (Kurdistan), DNO (Kurdistan), Vast Exploration (Kurdistan), Gulf Keystone (Kurdistan/Algeria), Heritage Oil (Kurdistan), Sterling Energy (Kurdistan/Africa), Groundstar Resources (Kurdistan/Egypt), Gulfsands Petroleum (Iraq/Syria), Sea Dragon Energy (Egypt), Hardy Oil & Gas (India/Nigeria), ERHC Energy (Nigeria/JDZ), and Chariot Oil & Gas (Namibia).

For valuation purposes, we have focused on a risked NAV assessment, but note the unrisked potential is significant.

We believe the discount valuation for our Kurdistan companies is warranted given the higher risk, but could narrow as discoveries are made.

Page 5: Scotia Capital

En

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April 2010

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Exhibit 1.3: International E&P Comparative Valuation Analysis

Figures in C$, unless otherwise notedCommodity Price Outlook 2007A 2008A 2009A 2010E 2011E 2012E Gavin Wylie (403) 213-7333 [email protected] Crude Oil (US/$bbl, Cushing) $72.36 $99.75 $62.09 $80.00 $85.00 $85.00Brent Differential to WTI (US$/bbl) -$0.35 $2.06 $0.05 $1.50 $1.00 $1.50 Long-Dated WTI Price (2010 - 15)Brent Crude Oil (US$/bbl) $72.71 $97.69 $62.04 $78.50 $84.00 $83.50 Implied (Discounted) WTI Price k

Foreign Exchange Rate (US$/C$) $0.93 $0.94 $0.88 $0.97 $0.95 $0.93

Price 12-Month Div Total Debt-Adjusted Net Debt/ Net Debt to Base (2P) NetTSX (C$) SC Mkt Cap Targetd Yield Return CFPS (D)a Operating EPS (D) ROACE CROCIi Price/CFPS CF Multipleb Price/EPS Cash Flowc Total Cap Asset Value

Int'l E&P Companies Ticker 3/26/10 Rating C$M (C$) % % DACF 2P NAV 2009E 2010E 2011E 2009E 2010E 2011E 2010E 2010E 2009E 2010E 2011E 2009E 2010E 2011E 2009E 2010E 2011E 2009E 2010E 2011E 2009E 2010E 2011E NAV (C$) P/NAV

Pacific Rubiales Energy (US$)e PRE $20.09 1-SO $5,240 $23.50 0.0% 17% 3.8x 1.5x $0.93 $3.11 $5.41 -$0.72 $1.56 $3.07 19.2% 27.2% 16.6x 6.3x 3.6x 14.4x 5.9x 3.3x 6.0x n.m. 12.5x 1.2x 0.2x -0.2x 14% 7% -9% $15.76 127%Petrominerales (US$)e PMG $31.52 2-SP $3,108 $33.00 0.0% 5% 3.7x 2.2x $2.78 $6.32 $7.48 $1.00 $3.47 $4.00 54.6% 57.2% 6.8x 4.9x 4.1x 6.6x 4.4x 3.7x 3.7x 18.8x 8.8x 0.2x -0.2x -0.3x 11% -14% -18% $15.14 208%Calvalley Petroleum (US$)e CVI.a $3.44 2-SP $339 $4.00 0.0% 16% 3.6x 1.4x $0.13 $0.31 $0.87 $0.03 $0.18 $0.56 10.0% 14.2% 24.9x 10.7x 3.9x 19.7x 9.3x 3.1x 17.8x 132.1x 18.9x -5.0x -1.5x -0.8x -73% -37% -42% $2.91 118%Petrolifera Petroleum PDP $0.89 2-SP $127 $1.05 0.0% 18% 7.1x 1.1x $0.41 $0.16 $0.15 -$0.14 -$0.08 -$0.10 n.m. 6.0% 2.2x 5.5x 5.9x 3.9x 6.2x 6.2x 4.1x n.m. n.m. 0.9x 1.5x 1.6x 11% 12% 13% $0.95 93%Niko Resources(US$)ef NKO $103.23 2-SP $5,237 $110.00 0.1% 7% 11.2x 1.9x $4.41 $7.97 $8.95 $2.29 $4.51 $4.93 17.2% 22.7% 22.8x 12.6x 11.2x 21.8x 12.1x 10.9x n.m. 44.0x 22.3x -0.3x 0.0x 0.1x -6% -1% 3% $59.31 174%Vermilion Energy Trust VET.UN $35.33 2-SP $2,810 $39.00 6.5% 17% 8.5x 1.4x $3.94 $4.44 $5.02 $2.30 $1.13 $1.34 8.6% 21.7% 8.2x 8.0x 7.0x 8.3x 8.5x 7.7x 8.7x 14.1x 31.1x 0.4x 0.7x 0.8x 10% 22% 28% $27.05 131%Bankers Petroleum (US$)e BNK $9.23 2-SP $2,107 $10.00 0.0% 8% 10.1x 1.8x $0.12 $0.41 $0.88 $0.00 $0.12 $0.30 10.7% 25.4% 74.7x 21.9x 10.2x 53.9x 20.7x 9.5x n.m. n.m. 72.0x -2.0x 0.0x -0.2x -32% -32% -17% $5.67 163%

Average 1.1% 13% 6.9x 1.6x 20.1% 24.9% 22.3x 10.0x 6.6x 18.4x 9.6x 6.3x 8.1x 52.2x 27.6x -0.7x 0.1x 0.1x -9.2% -5.9% -6.1% 145%

Int'l Exploration Companies

Parex Resources Inc. (US$)(e) PXT.V $4.64 1-SO $298 $5.50 0.0% 19% -- -- -$0.10 -$0.11 $0.41 -$0.11 -$0.14 $0.34 n.m. n.m. n.m. n.m. 11.1x n.m. n.m. 10.8x n.m. n.m. n.m. n.m. n.m. -0.5x n.m. n.m. -11% $6.03 77%WesternZagros Resources (US$)(e) WZR.V $0.80 2-SP $166 $1.15 0.0% 44% -- -- -$0.01 -$0.03 -$0.04 -$0.03 -$0.03 -$0.04 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. 13% $2.98 27%Vast Exploration VST.V $0.86 1-SO $149 $1.40 0.0% 63% -- -- -$0.03 -$0.02 -$0.01 -$0.10 -$0.04 -$0.04 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. 3% $2.38 36%Longford Energy LFD.V $0.33 2-SP $44 $0.45 0.0% 38% -- -- -$0.03 -$0.01 -$0.02 -$0.09 -$0.03 -$0.03 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. 93% $0.41 79%ShaMaran Petroleum (US$)(e) SNM.V $0.62 2-SP $309 $0.70 0.0% 13% -- -- $0.01 $0.00 -$0.01 $0.01 -$0.01 -$0.01 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. 39% $0.59 105%

Average 0.0% 35% 0.0x 0.0x 0.0% 0.0% 0.0x 0.0x 11.1x 0.0x 0.0x 10.8x 0.0x 0.0x 0.0x 0.0x 0.0x -0.5x 0.0% 0.0% 27.2% 65%

Net Net Upstream Production Outlookl CFPS Sensitivities2008 2008 Net 2P Reserves EV (C$)/Net EV (C$)/Net 2009E % 2010E % 2011E % Crude Oil Natural Gas Foreign Exch.

Proved 2P 2008 % % 2008 Reservesg Productiong FCFPSh Oil Gas Total YOY Crude Oil Gas Total YOY Crude Oil Gas Total YOY Crude US$1.00/bbl US$1.00/mcf US$0.01/CADInt'l E&P Companies RLIk RLIk (mboe) Undev Crude Proved 2P 2009E 2010E 2011E 2009E 2010E 2011E bbl/d mmcf/d boe/d % Grth 09E bbl/d mmcf/d boe/d % Grth 10E bbl/d mmcf/d boe/d % Grth 11E 2010E 2011E 2010E 2011E 2010E 2011E

Pacific Rubiales Energy (US$)e 9.6 11.6 208,983 60% 65% $31.28 $26.36 $135,765 $86,119 $53,081 ($0.78) ($0.73) $1.60 33,120 45 40,579 90% 82% 53,650 56 62,900 55% 85% 83,460 61 93,543 49% 89% 2.8% 1.8% 8.1% 2.4% 0.0% 0.0%Petrominerales (US$)e 4.5 6.6 33,828 61% 100% $132.16 $94.02 $158,519 $86,367 $77,982 ($0.18) $1.61 $0.91 20,063 0 20,063 103% 100% 34,766 0 34,766 73% 100% 37,205 0 37,205 7% 100% 2.6% 0.8% 0.0% 0.0% 0.0% 0.0%Calvalley Petroleum (US$)e 5.6 11.0 11,178 75% 100% $45.82 $23.42 $134,492 $104,435 $39,005 ($0.05) ($0.20) $0.21 1,947 0 1,947 -3% 100% 2,773 0 2,773 42% 100% 6,828 0 6,828 146% 100% 5.1% 5.3% 0.0% 0.0% 0.0% 0.0%Petrolifera Petroleum 4.0 6.5 15,833 52% 94% $18.81 $9.89 $35,072 $42,385 $44,030 ($0.44) ($0.14) ($0.01) 3,717 4 4,467 -34% 83% 3,128 4 3,761 -16% 83% 3,030 4 3,647 -3% 83% 6.9% 13.4% 5.6% 19.9% 3.8% 9.8%Niko Resources (US$)ef 6.1 8.6 180,937 90% 4% $41.23 $28.57 $137,854 $90,579 $86,073 ($6.91) ($1.03) ($1.13) 1,196 218 37,493 176% 3% 2,753 330 57,714 54% 5% 3,563 347 61,416 6% 6% 0.6% 0.5% 10.4% 6.0% 2.1% 2.0%Vermilion Energy Trust 6.5 9.8 113,071 39% 68% $29.42 $24.16 $100,100 $102,705 $98,056 ($0.46) $0.30 $1.15 16,068 67 27,295 -4% 59% 15,949 73 28,106 3% 57% 15,787 87 30,236 8% 52% 2.7% 2.6% 7.1% 2.7% 0.0% 0.0%Bankers Petroleum (US$)e 13.0 35.4 164,752 89% 100% $34.98 $12.43 $416,484 $210,401 $118,916 ($0.06) ($0.22) $0.20 4,917 0 4,917 6% 100% 10,021 0 10,021 104% 100% 17,310 0 17,310 73% 100% 5.2% 2.1% 0.0% 0.0% 0.0% 0.0%

Average 7.1 12.8 67% 76% $47.67 $31.26 $159,755 $103,284 $73,878 47% 75% 45% 76% 41% 76% 3.7% 3.8% 4.4% 4.4% 0.9% 1.7%

Int'l Exploration Companies

Parex Resources Inc. (US$)(e) n.m. n.m. n.a. n.a. n.a. n.m. n.m. n.m. n.m. $209,618 ($0.53) ($0.78) ($0.35) 0 0 0 n.m. n.m. 0 0 0 n.m. n.m. 1,360 0 1,360 n.m. 100% n.a. n.a. n.a. n.a. n.a. n.a.WesternZagros Resources (US$)(e) n.m. n.m. n.a. n.a. n.a. n.m. n.m. n.m. n.m. n.m. ($0.27) ($0.24) ($0.23) 0 0 0 n.m. n.m. 0 0 0 n.m. n.m. 0 0 0 n.m. n.m. n.a. n.a. n.a. n.a. n.a. n.a.Vast Exploration n.m. n.m. n.a. n.a. n.a. n.m. n.m. n.m. n.m. n.m. ($0.25) ($0.11) ($0.09) 8 0 37 n.m. 22% 8 0 24 n.m. 33% 7 0 15 n.m. 48% n.a. n.a. n.a. n.a. n.a. n.a.Longford Energy n.m. n.m. n.a. n.a. n.a. n.m. n.m. n.m. n.m. n.m. ($0.48) ($0.23) ($0.14) 33 0 46 n.m. 73% 0 0 0 n.m. n.m. 0 0 0 n.m. n.m. n.a. n.a. n.a. n.a. n.a. n.a.ShaMaran Petroleum (US$)(e) n.m. n.m. n.a. n.a. n.a. n.m. n.m. n.m. n.m. n.m. ($0.23) ($0.09) ($0.16) 35 1 133 n.m. 26% 0 0 0 n.m. n.m. 0 0 0 n.m. n.m. n.a. n.a. n.a. n.a. n.a. n.a.

Average 0.0 0.0 0% 0% $0.00 $0.00 $0 $0 $209,618 0% 40% 0% 33% 0% 74% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

(a) CFPS = operating CFPS. (b) Debt-adjusted cash flow multiple = (market price x basic shares + YE net debt) / (discretionary cash flow + (interest x (1 - current tax/pre-tax income))).(c) Net debt / cash flow = year-end net debt / current year cash flow; net debt = long-term debt + net working capital + preferred shares. (d) 12-month target prices driven by weighting 2011E implied debt-adjusted cash flow multiples and our NAV analysis. (e) CVI, WZR.V, PMG, NKO, PRE, PXT.V, SNM.V & BNK EPS/CFPS estimates denominated in US$, converted at current exchange rate for valuation purposes. Share price is denominated in C$. (f) Niko Resources year-end is March 31; 2009E based on fiscal 2010E year-end.(g) Enterprise values (EV) in C$ . Production stated after royalties and government entitlement (net); reserves stated after (net) royalties and government entitlement. (h) Free Cash Flow = Operating Cash Flow - Net Capital Expenditures (Gross Capital Expenditures - Dispositions + Acquisitions).(i) CROCI = cash return on cash invested. (j) Implied (discounted) WTI price equates to an average P/NAV of 110% under our 2P NAV analysis, escalated at 2.0% p.a. (k) RLI figures adjusted for 2008 exit rates or expected peak production.(l) Production is net of royalties and government entitlement.

Principal risks that may prevent these stocks from reaching their target prices include: lower realized crude oil and gas prices, general market conditions, and project execution.

2011E ImpliedTarget Multiples

US$84.29/bbl

US$98.60/bbl

Source: Company reports; Scotia Capital estimates.

Page 6: Scotia Capital

Kurdistan – A Region Full of Ambition April 2010

5

Exhibit 1.4: Iraq Crude Oil and Natural Gas – Production, Consumption, and Reserves

Iraq Natural Gas - Proved Reserves, Production & Consumption

50.0

65.0

80.0

95.0

110.0

125.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

(tcf)

0.00

0.10

0.20

0.30

0.40

0.50

(bcf/d)

Consumption

Production

Reserves

Iraq Crude Oil - Proved Reserves, Production & Consumption

50.0

65.0

80.0

95.0

110.0

125.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

(billion bbls)

0.00

0.60

1.20

1.80

2.40

3.00

(mb/d)

Consumption

Production

Reserves

Refining Capacity

Source: BP Statistical Review of World Energy; International Energy Agency; EIA.

Iraq Overview – Big Oil Country!

Kurdistan lies in the northern portion of Iraq, which possesses one of the largest global energy opportunities given its third-largest proved crude oil reserves at 115 billion barrels and tenth-largest proved natural gas reserves at 112 tcf, with additional undiscovered potential. Despite its sizable reserve estimates, a large portion of Iraq’s oil and gas fields remains undeveloped, undercapitalized, and underexplored, largely due to its historical political structure and regional conflicts. Of the ~73 oil fields discovered in Iraq, only 15 are currently producing, but the growth potential is substantial with a total of six to nine supergiant fields (>5 billion barrels) and 22-23 giant fields (>1.0 billion barrels). The majority of Iraq’s oil resources are contained within Cretaceous formations (~80%), with the remaining amount primarily related to the Tertiary (i.e., 8.6 billion barrel Kirkuk oil field), both of which are zones of interest in the Kurdistan region.

Oil activities in Iraq (excluding Kurdistan) fall under the central jurisdiction of The Ministry of Oil, and are operated by its state companies: the North Oil Company (NOC), the South Oil Company (SOC), and the Missan Oil Company (MOC). Exports are controlled via the State Oil Marketing Organization (SOMO).

Targeting 3.0 mmbbl/d-4.0 mmbbl/d by 2014. The Government of Iraq has also established an aggressive strategic plan aimed at increasing the country’s total productive capacity to 4.0 mmbbl/d within the next four years and to 6.0 million barrels within 10 years. The International Energy Agency (IEA) has estimated Iraq’s current sustainable productive capacity at 2.6 mmbbl/d, which could increase to over 3.1 mmbbl/d by 2014 with the development of fields awarded in its primary and secondary offerings in 2008/09. Crude oil production in 2009 averaged roughly 2.4 mmbbl/d-2.5 mmbbl/d – essentially flat from 2008, but still 22% below pre-war (1988/89) levels of 2.8 mmbbl/d and well below peak production of ~3.5 mmbbl/d in 1979 (see Exhibit 1.4).

Infrastructure access – good in some areas, bad in others. The main export pipeline to the north is the 1.1 mmbbl/d Kirkuk-Ceyhan line that runs through Turkey, which remains underutilized as current production from the Kirkuk field is only ~475,000 bbl/d due to high frequency of attacks/disruption and lack of new investment. The formation of the Pipeline Exclusion Zone (U.S. funded) has reduced the frequency of attacks on the Kirkuk-Baiji portion of the line since its inception in 2007. The Kirkuk-Ceyhan line could also be one of the primary export lines for Kurdistan crude volumes via stub lines from DNO and as proposed by the Taq Taq operating company (TTOPCO). There are currently no direct export pipelines from the Kurdistan region, and any new lines via Turkey, Iran, or Syria will require federal approval to construct. There is also no gas infrastructure to support material gas exports form Iraq/Kurdistan.

Iraq holds the world’s third-largest crude oil resources.

Iraq has ambitious plans to increase production from 2.5 mmbbl/d to over 4.0 mmbbl/d in the near to medium term.

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Exhibit 1.5: Iraq Oil Infrastructure

Source: MIT OpenCourseWare.

Other export lines include the 500,000-700,000 bbl/d Iraq-Syria-Lebanon Pipeline (ISLP), which, although it has been closed since 2003, has the potential to be expanded to 1.4 million bbl/d. The southern 1.65 million bbl/d Iraq Pipeline to Saudi Arabia (IPSA) has been closed since 1991. Other pipeline routes (500,000 bbl/d) are being evaluated via Jordan to the port of Aqaba. Overall, Iraq has nearly 7,000 km of pipeline within its borders (see Exhibit 1.5).

Iraq’s refining capacity is limited with overall capacity of ~600,000 bbl/d, primarily relating to refineries at Baiji (310,000 bbl/d), Basrah (150,000 bbl/d), and Daura (110,000 bbl/d). Proposals have been set to expand capacity to 1.5 mmbbl/d via five new refineries, but timing remains uncertain.

Exports from Iraq also move via six oil terminals on the Persian Gulf that have operated at only marginal utilization rates in the past. The largest of the ports is the al-Basrah Oil Terminal, which is capable of supporting Very Large Crude Carriers (VLCCs) and has capacity to load up to 82,000 bbl per hour.

OPEC – potential quotas down the road. As one of the founding members of OPEC in 1960, Iraq’s crude oil production volumes are not currently subject to official quotas, but could be in future as its productive capacity increases. Should production quotas be enforced, there is the potential for both Iraq and Kurdistan volumes to be restricted, which could negatively impact company production outlooks versus our base outlook.

Limited infrastructure in Iraq has contributed to its minimal development, despite its enormous oil potential.

Iraq is not currently subject to OPEC quotas but could be in the future, which could also restrict volumes from Kurdistan.

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Exhibit 1.6: Kurdistan/Zagros Fold Belt Prospectivity Assessment

Source: U.S. Geological Survey (USGS) – World Petroleum Assessment 2000.

Kurdistan Region of Iraq – Building Its Own Success

The Kurdistan Region of Iraq lies within the prolific and underexplored Zagros Fold Belt, an area believed to possess 38 billion barrels (USGS 2000) of undiscovered crude oil resource. On April 17, 2009, Kurdistan’s Natural Resource Minister, Dr. Ashti Hawrami, stated that 3 billion-4 billion barrels had been discovered in Kurdistan with total resources in the 40 billion-45 billion barrel range. Factoring in disputed areas, the ultimate potential could be 60 billion-65 billion barrels (see Exhibit 1.6). The success of the 2008/09 drilling programs in the region (Miran-Heritage, Shaikan-Gulf Keystone, Taq Taq-Addax (Sinopec)/Genel) highlights firmly the prospectivity within the underexplored borders of Kurdistan.

Successful in attracting global interest. The potential for large onshore oil discoveries and reasonable fiscal terms in Kurdistan have allowed the KRG and the Ministry of Natural Resources to sign ~38 production sharing contracts (PSCs/EPSAs) with 38 international oil companies since 2004, the largest of which include Korea National Oil Corporation (KNOC), Reliance Industries (India), Sinopec (China), Talisman Energy, Niko Resources, DNO, OMV, MOL, and Heritage Oil. More than 17 nations are now represented in Kurdistan, making it a truly global player. That said, given the large number of small/mid-cap companies operating within Kurdistan, successful exploration on a meaningful scale (>200 mmbbl) could also result in significant M&A activity over the next two years. A more detailed summary of the regional players and blocks is contained in Exhibits 1.13-1.14.

Ready to break out – targeting 1.0 mmbbl/d. Decades of containment during Saddam Hussein’s reign has left the Kurdish territory short of investment, significantly underexplored, and underdeveloped. We look upon Kurdistan as one of the last onshore regions to contain a hundred million to a billion barrels of undiscovered potential. This level of prospectivity offers material upside for large cap companies in the context of many resource estimates (OOIP) in excess of 2.0 billion barrels per field. The Kurdistan Regional Government (KRG) has noted current production from the region could total 100,000-150,000 bbl/d (Tawke and Taq Taq fields), with the potential to reach 1.0 mmbbl/d as early as 2015. With up to 13-18 additional exploration wells this year and 15 in 2011, activity within Kurdistan is on the rise and the country is ready to establish itself as a global energy player (see Exhibit 1.7).

Kurdistan is estimated to hold 40 billion-45 billion barrels, with only 3 billion-4 billion barrels discovered.

Kurdistan lies within the Zagros Fold Belt where the majority of undiscovered oil fields are prospective for ~150 mmbbl.

Attractive environment for investment and high prospectivity have yielded 38 contracts signed since 2004.

The KRG estimates the region’s productive capacity at 100,000 bbl/d, with the ability to reach 1.0 mmbbl/d within five years.

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Exhibit 1.7: Kurdistan Production Potential (bbl/d)

Source: Kurdistan Regional Government.

P O L I T I C A L O V E R V I E W – I N N E E D O F A F E D E R A L O I L A N D G A S L A W

Despite ongoing turmoil and conflict in Iraq, Kurdistan has proven to be relatively stable and secure and has emerged as an attractive region for foreign investment. That said, the lack of a federal Oil and Gas Law has curtailed the establishment of a payment mechanism for oil exports from Kurdistan, leaving two major developments (Tawke and Taq Taq) limited to only domestic sales and placing added uncertainty around needed development of key export infrastructure. The establishment of a federal law could help to legitimize contracts signed by the KRG, an area that still has some questions given comments from the federal oil minister, Dr. Hussain Al-Shahristani, that contracts in Kurdistan are illegal. On January 4, 2010, Iraqi Prime Minister Nuri Al-Maliki made rare comments on ending the Iraqi-Kurdish dispute over contracts/law in a timely manner as an important priority for the success of post-war Iraq.

Any material progression on the long-awaited federal Oil and Gas Law (post March federal election) and/or the ability for the Tawke and Taq Taq consortiums to receive export payments represent meaningful catalysts for the region – potentially in 2H/10. However, we also note the potential risk of contracts in Kurdistan to be reviewed or altered by the KRG and/or the federal government should the federal Oil and Gas Law contain certain imposed revisions (i.e., federal corporate income tax, higher royalties).

Background to the federal law. The draft federal Oil and Gas Law of February 2007 provided that the Kurdistan region would receive 17% of total Iraq petroleum revenue (including Kurdistan). However, the law must still be approved by the Iraqi Council of Representatives (Parliament), with no indication of timing at this stage. The importance of the federal Oil and Gas Law will be to set out the framework for payment of crude oil export revenues to the KRG, marketing of crude oil (likely SOMO), and legitimacy of oil and gas contracts signed. The KRG has stated its belief that Articles 112/141 of the Iraqi Constitution reinforce the KRG’s authority to negotiate, administer, and agree to long-term oil contracts. Other central issues that have limited progression include disputes around the jurisdiction of Kirkuk (disputed area) that resulted in Article 140, by which a referendum will be held, the timing of which remains uncertain.

Successful full field development of Tawke and Taq Taq could raise overall productive capacity from 100,000 bbl/d at present to more than 1 mmbbl/d.

The ability to receive payment for exports in Kurdistan is a primary catalyst for the region and could emerge as early as Q3/10.

The establishment of the federal Oil and Gas Law should allow for exports from the Kurdish region and legitimize the contracts signed by the KRG.

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Exhibit 1.8: Proposed Export Pipelines in Kurdistan

Source: Addax Petroleum.

Kurdistan Oil and Gas Law. Kurdistan is an autonomous territory within northern Iraq as established by the December 2005 Iraqi Constitution (passed with >80% approval), and the KRG approved its own Oil and Gas Law in August 2007 that established the directives by which the region would administer oil and gas operations, consistent with provisions within the Iraqi Constitution and the draft federal Oil and Gas Law (February 20007). This also resulted in the formation of the model PSC in October 2007, to which all PSCs were reviewed and amended to be compliant. In our view, terms of the Kurdistan PSCs fall within generally accepted practices of global energy contracts, a view that was confirmed by a review by Pedro van Meurs (a consultant on petroleum contracts for Clifford Chance LLP, London) at the request of the KRG (available at www.KRG.org).

I N F R A S T R U C T U R E – A K E Y R I S K T O D E V E L O P M E N T T I M E L I N E S

Given the lack of capital investment in Kurdistan/Iraq, many fields within the country lack the infrastructure required to develop the vast hydrocarbon resources. While companies operating in Kurdistan could truck or build pipelines to tie in their oil production to the Kirkuk-Ceyhan (Turkey) pipeline,

natural gas infrastructure is non-existent. Companies within the region have proposed a number of crude oil stub lines (50,000-250,000 bbl/d) that could connect Kurdish fields to the main 1.1 mmbbl/d Kirkuk-Ceyhan export line, but they still require federal approval. Also partly contingent on a federal Oil and Gas Law, the Kurdistan region is proposing an export line that could provide up to 1.0 mmbbl/d of capacity, likely to run from central Kurdistan (i.e., Taq Taq-Silopi) to Turkey (see Exhibit 1.8).

Natural gas – no market, gas discoveries a negative. At present, natural gas is stranded in Kurdistan with no near-term market and pricing mechanism established, and as such a gas discovery is likely to be viewed negatively by the market. That said, Kor Mor (Dana Gas-

operated) partners OMV and MOL have an interest in the proposed 3,300 km Nabucco gas pipeline that could run from Turkey into southern Europe with completion in the 2014/15 time frame, which could create a market for Kurdish/Iraqi gas. In addition, Dana Gas (Pearl Petroleum) has set forth plans to invest US$8 billion to develop its Kurdistan “Gas City,” which is expected to take initial production of 300 mmcf/d (year-end 2009) to 1.5 bcf/d by 2015 with ultimate capacity of 3.0 bcf/d.

Nabucco – big questions on timing and possibility. The Nabucco line has been proposed to connect the Caspian region and Middle East to southern Europe via Turkey, Bulgaria, Romania, Hungary, and Austria. The Nabucco partners (Botas AS, Bulgarian Energy Holdings, MOL, OMV, RWE, and Transgaz S.A.) will likely look to secure sources of supply to fill a maximum capacity of 31 billion cubic metres per year that could be from sources in Iraq and Iran. The pipeline’s estimated cost is currently €7.9 billion.

Development in Kurdistan is largely constrained by limited infrastructure, but a number of proposals have been made to build new capacity.

The Nabucco line to southern Europe could create a market for stranded gas in Kurdistan.

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Exhibit 1.9: Government Take Analyis – Kurdistan PSC

Production Sharing

Contractor Share* Gross Revenue Government Share100%

Operations Oil

Royalty 10%10%

Net Available Oil90% remaining revenue

Max Cost Recovery Oil40.5% 45%

Total Profit Oil(R-Factor Sliding Scale)**

50% remaining revenue17% 35% Rev/Cost (<1x) 65% 32%8% 16% Rev/Cost (>2x) 84% 42%

58% Max Contractor Take 42%

8% Max Government Take 92%

*Contractor Share includes KRG 20% wi that is carried through the exploration phase.

**R-Factor is based on cumulative revenues divided by cumulative costs.

Source: Company reports; Scotia Capital estimates.

K U R D I S T A N F I S C A L T E R M O V E R V I E W

The Kurdish model contract was ratified in October 2007 and created a consistent Production Sharing Contract (PSC/EPSA) for all participants in Kurdistan, which we view as generally acceptable by global standards. Under the Kurdish PSC, contractor take can range from >50% initially (including cost recovery allocations) to less than 10% post-payout. Over the life of the field, we estimate

government take will range between 60% and 80% depending upon oil prices, cumulative capital expenditures, operating costs, and recoverable oil size. While we do not anticipate any modifications to the contracts in the near term, there is still a risk that following the establishment of the federal Oil and Gas Law, a review by the federal Oil & Gas Committee could provide some changes to the Kurdish PSCs (see Exhibits 1.9-1.10).

Term and work commitments. The model PSC is broken into exploration and development phases, by which the company has an initial three-year exploration sub-phase (seismic plus one- to three-well commitment). A second exploration sub-phase of two years can be entered (additional wells), with the extension granted for further evaluation. Upon discovery, the contractor can apply to enter the development phase, which lasts 25 years, plus potential extensions.

Cost recovery. Annual cost recovery is 45% of net available oil revenue (after royalties); any costs not recovered can be carried forward. The contractor is required to carry any KRG interest (usually 20%) through the exploration periods, the cost of which is included in the contractor’s recovery pool.

Royalties. Crude production is subject to a flat 10% royalty on gross revenue.

Profit oil sharing. Profit oil is split between the contractor and KRG based on a sliding scale R-Factor (cumulative revenue divided by cumulative cost) model by which the contractor share of profit oil declines as the return on capital increases. At less than 1x return on capital, the contractor take is 35% initially, declining to 16% upon an R-Factor of greater than 2x.

Bonus payments. Companies are subject to signature bonuses that can be more than US$20 million, capacity-building payments of US$50 million-US$100 million at a minimum (depending on blocks and working interest), and production bonuses. Production bonuses are payable at first production, and cumulative production thresholds of 10 mmbbl, 25 mmbbl, and 50 mmbbl.

Taxes. Taxes are essentially paid from the government’s share of profit oil and, as such, the contractor is not directly subject to any income taxes.

The model PSC in Kurdistan offers reasonable returns for both small and large field developments.

Based on our estimates for capex and revenue, government take in Kurdistan ranges from 60%-80% over the full field life.

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Exhibit 1.10: Summary of Select Global Petroleum Contracts – Total Government Take

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Source: Chevron; Alberta Royalty Review; Wood Mackenzie; IHS Energy; Daniel Johnston – International Petroleum Fiscal Systems; International Energy Agency; company reports; Scotia Capital estimates.

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Exhibit 1.11: Kurdistan Land Holdings by Company

Source: Wood Mackenzie.

Exhibit 1.12: Qualified/Approved Companies for Iraq’s Second Bid Round

Anadarko Petroleum Corp Eni S.p.A Maersk Pakistan Petroleum Limited StatoilHydro ASA

BG Group Plc Exxon Mobil Corporation Marathon Oil Corporation PT Pertamina Total S.ABHP Billiton OAO Gazprom Mitsubishi Corporation Petrovietnam Turkish Petroleum Corporation (TPAO)BP Plc Hess Corporation Mitsui Oil Exploration Co. Petronas Wintershall BASF Group Cairn Energy plc INPEX Corporation Nexen Inc Repsol YPF, S.A. Woodside Petroleum Ltd

Chevron Corporation Japan Petroleum Exploration Co. Ltd Nippon Oil Corporation OJSC Rosneft Oil CompanyCNOOC Limited Japan Oil OAO TatNeft Royal Dutch Shell plcCNPC JSC KazMunaiGas Exploration Production Occidental Petroleum Corporation Sinochem CorporationConocoPhillips Korea Gas Corporation Oil India Limited Sinopec

Edison SpA OAO Lukoil Holdings ONGC Sonangol

Source: Reuters.

Kurdistan Players – A Closer Look at the Action

Activity in Kurdistan is expected to ramp up dramatically in the coming years with further exploration and development being pursued and as potential consolidation emerges. The KRG and the Ministry of Natural Resources have signed 38 production sharing contracts (PSCs/EPSAs) with 38

international oil companies since 2004 – the largest of which include Korea National Oil Corporation (KNOC), Reliance Industries (India), Sinopec (China), OMV, MOL, Talisman Energy, Niko Resources, DNO, and Heritage Oil. More than 17 nations are now represented in Kurdistan, making it a truly global player. Given the number of small to mid-sized players in Kurdistan, we also anticipate that a significant level of consolidation could unfold in the region as material exploration success is achieved. A summary of the land holders in Kurdistan is contained in Exhibits 1.11-1.15.

C O N S O L I D A T I O N P O T E N T I A L W I T H S I Z E D I S C O V E R I E S

In our view, the Kurdistan Region of Iraq represents one of the most likely candidates for active consolidation over the next few years given its big oil potential and the numerous small to mid-sized players unlikely to fund the high costs of capital to develop the assets. Furthermore, the presence of the Asian national oil companies (NOCs) and others that have been actively acquiring new sources of large resources around the globe makes the argument that much more compelling, in our view. We also highlight other large companies already operating within Kurdistan (Korea’s KNOC, China’s Sinopec, Reliance, OMV, MOL, and Talisman) that could look to expand their foothold (see Exhibit 1.12). The potential for new entrants that were unsuccessful in the Iraqi bid rounds to look north to Kurdistan could increase as the political situation improves (payment for exports) and/or in the event of large oil discoveries. That said, the federal Oil Minister’s comments that any company operating in Kurdistan will be excluded from the federal bid rounds could result in some hesitation until a federal Oil and Gas Law can be ratified.

The KRG has actively been signing contracts and anticipates 2010 to be its most active exploration year yet.

Given the significant resource being discovered, takeover potential in Kurdistan is likely to increase with future success.

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Exhibit 1.13: Map of Kurdistan Blocks, Operator and Key Infrastructure

Source: IHS Energy.

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Exhibit 1.14: Kurdistan Operations/Block Summary

Block Name Area Operator/Partners TickerBefore

Back-In

After Back-

In (1) Phase Work Phase/PlansP90 / Low

CaseP50 / Best

CaseP10 / High

CaseP90 / Low

CaseP50 / Best

CaseP10 / High

Case

Taq Taq 951 km2 Sinopec/TTOPCO* SHI 45% 36% Producing 550 - 1,200 38 304 424Genel/TTOPCO* 55% 44%

Kewa Chirmila Exploration300

Tawke 594 km2 DNO* DNO 69% 55% Producing 900 1,300 1,900 150 230 370Genel 31% 25%

Kalar-Bawanoor 2,120 km2 WesternZagros* WZR 60% 40% Exploration 4,460 6,419 9,129 1,615 2,392 3,462Talisman* TLM 40% 40%

Sangaw North 492 km2 Sterling Energy* SEY 53% 40% Exploration 663 2,978 6,163 179 804 1,664Sinopec (Addax) SHI 27% 20%KNOC 20% 20%

Qara Dagh 846 km2 Niko Resources* NKO 46% 37% Exploration 1,674 2,742 4,896 269 450 849Vast Exploration VST 46% 37%Groundstar GSA 8% 6%

Chia Surkh 938 km2 Longford Energy* LFD 50%-75% 40% Exploration/ 59 662 6,556 6 132 1,967Genel* 25% 20% DevelopmentPetoil 0%-25% 20% Longford to operate initial exploration phase; Joint Operating Company thereafter

Miran West 1,015 km2 Heritage* HOC 75% 56% Exploration 265 2,272 4,808 106 1,138 2,885Miran East Genel 25% 19%

141 602 1,637 56 301 982

Shaikan 283 km2 Gulf Keystone* GKP 75% 51.0% Exploration 1,891 4,184 7,422 1,460MOL MOLB 20% 13.6%Texas Keystone 5% 3.4%Potential third-party - 12.0%

Arbat 974 km2 ShaMaran* SNM 100% 60% Exploration 196 589 1,177 35 105 210Potential third-party - 20%

Pulkhana 529 km2 ShaMaran* SNM 75% 60% Exploration/ 288 448 1,058 46 80 177Petoil 25% 20% Development

Khalakan (Blocks 28/29) 624 km2 New Age Al Zarooni* 25% 20.0% Exploration 502 1,392 2,427 94 260 621Dogan Enerji 50% 40.0%Range Oil & Gas RGO 25% 20.0%

Dohuk (Dihok) 162 km2 DNO* DNO 50% 40% Exploration 2,200Genel 50% 40%

Ber Bahr (Bar Bahar) 350 km2 Genel* 50% 40% Exploration 1,900Gulf Keystone GKP 50% 40%

Khor Mor (Gas) 510 km2 Dana Gas DANA Service 1.8 tcfCrescent Petroleum Contract

Chemchemal (Gas) MOL MOLB 2.2 tcfOMV OMVV Operated by Pearl Petroleum (100%) - equity ownership noted

Akri-Bijeel (Block 58) 889 km2 Kalegran Ltd (MOL)* MOLB 80% 64.0% Exploration >500Gulf Keystone GKP 20% 12.8%

Shakal 632 km2 Prime/Shakal Production Ltd.* 60% 36% Exploration 250Oil Search ASX 25% 15%Petoil 15% 9%Potential third-party - 20%

Sheikh Adi 180 km2 Gulf Keystone* GKP 100% 80% Exploration >1,000

Bazian (Block 52) 473 km2 KNOC* 53.5% 43% Exploration First exploration well spud September 2009 (5-6 months) 1,178

Bazian Consortium (2) 46.5% 37%

*Denotes operator(1) Working Interest after government and potential third-party back-ins. After-back-in interest does not include potential KRG ownership (10%-25%) or non-assigned potential third-party interests.(2) Bazian Consortium includes SK Energy, Samchully, Beuma, Daesung, UI Energy, GS, and Majuko Enterprises.

Shakal-1 spud Oct/08, tested at 750 bbl/d (Jaddala) in Sep/09; TD 3,356m; restricted test due to surface constraints; drilling delays due to rig repairs; 200 km 2D in 2007; additional seismic planned for 2010 (along with K42); potential second well to spud 2011

First exploration well to spud May 2010; on-trend to Shaikan; Cretaceous-Permian; 32 km2 undrilled surface anticline; 2D acquired

OOIP Estimates (mmbbl)

Acquire 350 km 2D 2H/10; first exploration drilling in 2011; primary target Cretaceous, deeper Triassic/Jurassic potential

Working Interest

Completed 355 km 2D (June/09); First exploration well to spud late-March 2010 (Qara Dagh-1); three prospects identifies - Qara Dagh, Sagrima, Golan

10% Equity Interest10% Equity Interest

40% Equity Interest40% Equity Interest

Proposed capacity of 150,000 bbl/d (w/ pipeline to Kirkuk); waiting on export payment; TT-10 well to assess deeper Triassic gas targets; KC-1 plugged and abandoned Oct/09 after reaching Shiranish (2,836 m) other Cretaceous TD deeper than expected

Recoverable Resource Estimate (mmbbl)

First exploration well late-2010/11; formerly Dohuk; 42 km2 surface anticline; further seismic to be acquired; Jurassic/Triassic/Permian; on-trend with Shaikan/Sheikh Adi structures

Bijeel-1 (spud Dec/09) tested 3,200 bbl/d 18°API (Jurassic), plan to drill to 4,400 m; 442 km 2D in Aug/08; Bekhme-1 well to spud late-2010; 82 km2 surface anticline; Cretaceous/Jurassic/Triassic targets

75-300 mmcf/d by late-2009; 180 km pipeline; local power generation (1,250 MW); 3 bcfe/d potential 2014 (US$8B spending); Chemchemal - Spud July (2,000 hp rig) deep Triassic

Commenced 250 km 2D in Jan/10 (completed Apr/10); plan to spud first exploration well Q4/10

Waiting on export payment; commitment exploration well in Q1/11 (Peshkabir-

1); 12" (50,000 bbl/d) pipeline to Kirkuk-Ceyhan export line; 200 km2 of 3D / 81 km 2D acquired

Miran West-1 tested 3,640 b/d (10-15 kb/d expected); 332 km of 2D (Jun/08); Miran West-2 spud in November 2009; Miran West-3 (appraisal) 2H/10); Miran East-1 to spud Q3/10

Plan to shoot 250-300 km 2D seismic in 2010; two exploration well commitment; First exploration well to spud late-2010/11

Khanke-1 oil shows (2006); Summail Ext-1 oil shows (2007); over 475 km 2D acquired; 8 leads & prospects; plan to spud commitment exploration well Q3/10 (Summail-2)

Shaikan-1 (spud Apr/09) tested at a combined rate of 20,000 boe/d; further extended testing (10,000 bbl/d target) in Q1/10; 171 km of 2D seismic (2008); Shaikan-2 to spud mid-2010; Shaikan-3 appraisal well late-2010/11; Jurassic/Triassic/Permian targets; high-pressure gas while drilling Shaikan-1 (Upper Permian); 3D seismic 2010

200 km of 2D seismic to be acquired 2010; 1 exploration well committed (2011); targeting lower Cretaceous (2,400-2,500 m)

Drilling Kurdamir-1 (Q1/2010 TD); Suspended Sarqala-1 (Feb/08); acquired >1,500 km 2D; 20 leads and prospects

Spud 1st well spud February 2010 (180 days to results); 323 km of 2D acquired in 2008; Cretaceous (3,660 m) / Triassic (4,160 m) targets; second well potentially late-2010 pending results

Source: Kurdistan Regional Government; Wood Mackenzie, IHS Energy; International Energy Agency; company reports; Scotia Capital estimates.

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Exhibit 1.15: Kurdistan Operations/Block Summary

Block Name Area Operator/Partners TickerBefore

Back-In

After Back-

In (1) Phase Work Phase/PlansP90 / Low

CaseP50 / Best

CaseP10 / High

CaseP90 / Low

CaseP50 / Best

CaseP10 / High

Case

K39 945 km2 Talisman* TLM 100% 60% Exploration Two-year seismic option; 1 well commit within 1 year of signing PSC; could spud 2H/2010

K42 511 km2 Oil Search* ASX 75% 60% ExplorationShaMaran SNM 25% 20%

Ain Sifni (Block 59) 840 km2 Hunt Oil* 50% 40% ExplorationImpulse Energy Corp 50% 40%

Rovi Block 517 km2 Reliance Industries* RIL 100% 64% ExplorationPotential third-party - 16%

Sarta Block 607 km2 Reliance Industries* RIL 100% 64% Exploration First exploration well planned to spud 2010; Weatherford rig contracted

Potential third-party - 16%

Shorish (Block K25) 526 km2 OMV* OMV 100% 60%-80% ExplorationPotential third-party 15%-20%

Barda Rash 265 km2 KOMET Group S.A.* 100% 80% Exploration First exploration well planned to spud 2010 (Barda Rash-1)

Sangaw South 846 km2 KNOC* 100% 60% ExplorationPotential third-party - 20%

Qush Tappa 1,180 km2 KNOC* 100% 80% Exploration First exploration well planned to spud Q2/10

Sindi Amedi 2,358 km2 Perenco* 100% 75% Exploration

Baranan (Block K9) 722 km2 Talisman* TLM 100% 80% Exploration 2D seismic acquisition planned for 2010

Al Qush 331 km2 KOMET Group S.A.* 100% 80% Exploration N/A

Atrush 269 km2 Aspect Energy* 100% 80% Exploration Seismic acquisition planned for 2010

Bina Bawi 240 km2 Petoil* 59% 26% ExplorationPrime/Shakal Production Ltd. 41% 18%Potential third-party - 36%

Hawler Contract Area 1,532 km2 Norbest* 85% 85% Exploration(Blocks K15 / K16 / K17/ K21) KNOC 15% 15%

Erbil 313 km2 DNO* DNO 60% 40% ExplorationGas Plus Erbil 40% 40%

Mala Omar 285 km2 OMV* OMVV 100% 80% Exploration N/A

Sarsang 1,085 km2 HKN (Hillwood) Energy* HKN 100% 80%Exploration

~250 km 2D acquired in 2008; plan to spud first well in 2010/11 pending Weatherford rig

*Denotes operator(1) Working Interest after government and potential third-party back-ins. After-back-in interest does not include potential KRG ownership (10%-25%) or non-assigned potential third-party interests.(2) Bazian Consortium includes SK Energy, Samchully, Beuma, Daesung, UI Energy, GS, and Majuko Enterprises.

First exploration well planned to spud 2010; Weatherford rig contracted

Recoverable Resource Estimate (mmbbl)

Hawler-1 (Jan/08) tested 9,000 bbl/d 34 API in Lower Jurassic (40 mmboe); Erbil-2 re-entry/test underway (results Apr/10) Benenan discovery; further plans in Jun/10

First exploration well planned to spud 1H/10

First exploration well (Jebel Simrit-1) spud Sep/09 - TD at 3,605 m in Jan/10 (Q1/10 results); proximate to Shaikan-1; Cretaceous to Triassic targets

First exploration well spud Dec/09 (Shorish-1); exploration results 4-6 months; 2D seismic acquired on the block

Seismic agreement (Aug/09); 200 km 2D acquisition to commence April/10; no surface features

OOIP Estimates (mmbbl)

Second exploration well Bina Bawi-2 was completed in September 2007; 2D seismic acquired in 2008; first of two potential exploration wells to spud 2H/2010; Petoil contracted the Aladdin rig for a two well commitment

Two exploration wells drilled in the past; work commitment includes 1,500 km of 2D seismic (late-2009) and two firm wells; plan to spud three exploration wells 2010-2011

Working Interest

In-fill 2D seismic acquisition in 2010; two exploration wells in planned as early as 2H/10 (Yakmalah-1 and Mateen-1)

Source: Kurdistan Regional Government; Wood Mackenzie, IHS Energy; International Energy Agency; company reports; Scotia Capital estimates.

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Exhibit 1.16: Kurdistan Exploration Wells Currently Drilling

Spud PlannedCurrent Drilling Block Operator Other Interest Date TD (m) Target(s) Expected Results*

Bazian-1 Bazian KNOC Bazian Consortium Sep-09 n/a n/a TD Q1, results early-Q2Bijeel-1 Akri-Bijeel Kalegran Ltd (MOL) Gulf Keystone Dec-09 4,400 Jurassic /

TriassicJurassic tested 3,600 bbl/d, drill to

Triassic, results early-Q2

Jebel Simrit-1 Ain Sifni Hunt Oil Impulse Energy Oct-09 3,605 Cretaceous / Jurassic

4-5 months to drill, results Q2

Kurdamir-1 Kalar-Bawanoor WesternZagros Talisman May-09 4,077 Tertiary / Cretaceous

Test gas/cond in Tertiary, current side-track to Cretaceous, results May

Miran West-2 Miran Heritage Oil Genel Enerji Nov-09 ~3,000 Cretaceous appraisal well to Miran West-1, 4-5 month to drill, results Q2

Sangaw North-1 Sangaw North Sterling Energy Sinopec/KNOC Feb-10 3,660-4,160 Cretaceous / Triassic

5-6 months to drill and evaluate, results in Q3

Shorish-1 Shorish OMV potential third-party Dec-09 n/a n/a reportedly oil shows in three reservoirs; drill/evaluate planned in 4-6 months;

results Q2

Shaikan-1 Shaikan Gulf Keystone MOL / Texas Keystone Apr-09 2,950 Triassic resume testing with ESPs in 1H/10Erbil-2 / Benenan-2 (re-entry)

Erbil DNO Gas Plus Erbil May/08, suspended

late-'08

n/a Lower Jurassic / Triassic

well suspended late-2008 due to overpressure, Feb/10 reported to be 200300 bbl/d heavy oil, full results in Apr/10

*Scotia Capital Estimates

Source: Wood Mackenzie, IHS Energy; Platts; Oil & Gas Journal; Reuters; company reports; Scotia Capital estimates.

E X P L O R A T I O N A C T I V I T Y S E T T O R I S E I N 2 0 1 0 / 1 1

In Kurdistan, 2010 is stacking up to be its most active year yet with up to 13-18 new exploration wells planned and potential results from nine wells currently drilling/testing – a trend we anticipate to continue. Results from the 2008/09 programs were impressive, as highlighted by the 2.3 billion barrel (P50 OOIP) Miran West-1 (Heritage Oil) and the 4.2 billion barrel (P50 OOIP) Shaikan-1 (Gulf Keystone) discoveries. That said, the geological complexity must also be noted, with the Sarqala-1 well (WesternZagros) unable to reach total depth (TD) due to technical challenges and the Kewa Chirmila-1 well similarly unable to reach its targeted depth.

Our assessment of the potential upcoming exploration results from current wells drilling and potential exploration drilling for 2010/11 is contained in Exhibits 1.16-1.17. Timing of exploration drilling and results could vary from our base outlook given the limited drilling fleet and service equipment operating in Kurdistan, and the difficult conditions that can yield significant delays. Currently we estimate three rigs running from Weatherford, three from Sakson, one from each Atlantic Oilfield Services and a Chinese operator, along with Romanian and Turkish crews.

2010 is expected to include results from eight to nine wells currently drilling/testing and up to 18 additional wells that could spud this year.

The majority of drilling in Kurdistan remains wildcat exploration, but a number of appraisal wells are also planned (Miran West-2).

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Exhibit 1.17: Kurdistan – Planned Exploration in 2010 and 2011

EarliestPlanned Wells Block Operator Other Interest Spud Date

2010Sheik Adi-1 Sheik Adi Gulf Keystone Potential third-party Q2/10Qara Dagh-1 Qara Dagh Niko Resources Vast / Groundstar Q2/10Qush Tappa-1 Qush Tappa KNOC none Q2/10Sangaw South-1 Sangaw South KNOC Potential third-party Q3/10Summail-2 Dohuk DNO Genel Enerji Q3/10Shaikan-2 Shaikan Gulf Keystone MOL / Texas Keystone Q3/10

Miran East-1 Miran Heritage Oil Genel Enerji Q3/10Rovi-1 Rovi Reliance Potential third-party 2H/10Sarta-1 Sarta Reliance Potential third-party 2H/10Yakmalah-1 Sindi Amedi Perenco n/a 2H/10Mateen-1 Sindi Amedi Perenco n/a 2H/10Bina Bawi-2 Bina Bawi Petoil Prime Resources 2H/10Pulkahana-# Pulkhana ShaMaran Petoil Q4/10Chia Surkh-# Chia Surkh Longford Energy Genel Enerji / Petoil Q4/10Barda Rash-1 Barda Rash Komet Group S.A. n/a Q4/10Kurdamir-2 Kalar-Bawanoor WesternZagros Talisman Q4/10Miran West-3 Miran Heritage Oil Genel Enerji Q4/10Sangaw North-2 Sangaw North Sterling Energy Sinopec/KNOC Q4/10

2010Bekhme-1 Akri-Bijeel Kalegran Ltd (MOL) Gulf Keystone Q1/11Ber Barh-1 Ber Barh Genel Enerji Gulf Keystone Q1/11Peshkabir-1 Tawke DNO Genel Enerji Q1/11Shaikan-3 Shaikan Gulf Keystone MOL / Texas Keystone Q1/11Arbat-1 Arbat ShaMaran Potential third-party Q2/11Bina Bawi-3 Bina Bawi Petoil Prime Resources 1H/11Pulkahana-# Pulkhana ShaMaran Petoil 2H/11Khalakan-1 Khalakan Zarooni Range Oil & Gas / Dogan 2011Shakal-2 Shakal Prime Resources Oil Search / Petoil 2011

Source: Wood Mackenzie, IHS Energy; Platts; Oil & Gas Journal; Reuters; company reports; Scotia Capital estimates.

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P R O L I F I C P R O S P E C T S , B U T C H A L L E N G I N G R E A L I T I E S

Results in Kurdistan have been impressive thus far, but recent drilling has also highlighted the complex nature of the region, which places a greater importance on the capabilities of the partners involved. Of the eight wells drilling in 2009, we estimate a 50%-75% success rate with discoveries to date of 3.3 billion barrels of oil and 5 trillion cubic feet of gas, with most of the discoveries/targets in the Cretaceous. Over 10,000 km of seismic (mostly 2D) acquired since 2004, large surface anticlines, and oil seeps have also been used to identify approximately 100 additional prospects within the awarded Kurdistan blocks. Volumetric assessments by third-party reserve/resource evaluators have been pointing toward average OOIP estimates in excess of 1.0 billion barrels with overall recoveries in the 18%-25% range on average (chance of commercial success + recovery factor) (see Exhibits 1.18-1.19).

That said, a number of risks and challenges should be noted:

High costs of drilling. Base exploration well costs in Kurdistan are steep, in the US$25 million-US$35 million range, but could reach in excess of US$60 million if delays occur due to the high complexity of carbonate drilling in the region. We estimate the average time to reach total depth at 100-120 days and testing operations to take an additional three to four weeks. We also note that total depth of 2,500-4,000 metres will require drilling rigs with a capacity of 1,500-3,000 hp.

Risk of gas or heavy oil. While the Zagros Fold Belt is primarily prospective for light oil, a number of gas/condensate discoveries have been made in Kurdistan, including Kurdamir (Tertiary), Kor Mor, and Chemchemal. The limited drilling in Kurdistan also raises the risk of drilling into gas caps on the crest of the structure that can skew initial results, but can still yield flank oil accumulations with additional delineation. Gas is currently undesirable in Kurdistan as there is no market for sales. We also view heavy oil as also having potential issues similar to those experienced by other Middle East operators (i.e., Calvalley in Yemen) around marketing heavy volumes into primarily light/sweet crude pipelines. Furthermore, heavier oils and/or cold reservoirs (lower viscosity) could exhibit lower recovery factors than our base assessment assumes at ~30%-40% of total estimated OOIP.

Risk of overpressure. A number of wells (Sarqala, Pulkhana, Kurdamir) have observed overpressure within formations in the Cretaceous/Tertiary that can add to wellbore instability and increase ultimate drilling costs. Managing the overpressure can require the operator to increase mud weights, which can contribute to formation damage and limit test results. Acidization has been used in Kurdistan as a remedial effort for formation damage with success at fields such as Taq Taq. WesternZagros has noted the pressures experienced at Kurdamir/Sarqala could also require wellheads capable of handling 15,000 psi for deeper reservoirs.

Extensive fracturing = mud loss. Carbonate reservoirs in the area appear to contain extensive fracture systems that, while positive for well productivity, can cause extensive fluid loss while drilling. This can contribute to drill bits getting stuck (requires fishing or side-tracks), which can also cause delays and cost overruns.

Matrix vs. fracture porosities. Reservoir quality is always a risk, including such factors as source, migration, maturity, seal, hydrocarbon quality, and permeability/porosity. Furthermore, ultimate oil recovery will depend on a number of variables including structure size, fracture extent/porosity, and matrix porosity, the latter of which can be minimal or nonexistent within Kurdistan. The highest recovery factors for OOIP estimates will be attributed to those reservoirs with highest fracture and matrix porosity. Despite its impressive flow rates at Taq Taq, Addax revised down its original OOIP estimates from 1,200-2,700 mmbbl to 550-1,200 mmbbl in early 2008, in part related to additional well data obtained that indicated compartmentalization within the structure.

To date, roughly 3.3 billion barrels of oil are believed to have been discovered in Kurdistan, with even more potential.

Cost overruns while drilling, the presence of gas, and overpressure represent the biggest risks for operators in Kurdistan at this stage.

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Exhibit 1.18: Kurdistan/Iraq – Prospectivity by Select Discovered Fields

Chia Miran Naft BaiField/Resevoir Kurdamir Surkh Pulkhana Taq Taq Shaikan West Kor Mor Qamar Gilabat Jambur Kirkuk Khaneh Khabbaz Hassan

Upper Fars oil NP oilLower Fars Seal

Jeribe oil oil NP gas/cond oil oil/gas oil oilEuphrates oil NP gas/cond oil/TD oil/gas

Oligocene gas/cond NP NP NP gas/cond NP NP oil/gas NP oil/gas oil/gas

Pilaspi/Jaddala oil oil NP oil/gas

Aaliji Seal oil

Shiranish target/test oil/gas oil oil oil oil oil oilHartha TD TDKometan oil oil oil oil/gas

Khasib oilMishrifGulneri Seal TDUpper Qamchuqa target oil oil oil/gas oil/gas TD oil/gas oilLower Qamchuqa TD oil/gas oil oil oil

Upper Jurassic - Barsarin Seal gasMiddle Jurassic - Sargelu oilLower Jurassic - Alan - Mus oilLower Jurassic - Adaiyah Seal

Lower Jurassic - Butmah oilLower Jurassic - Baluti SealTriassic - Upper Kurra Chine A gas oil/gas

Traissic - Upper Kurra Chine B gas gas/TD

OOIP (P90/P10) mmbbl 4,460-9,129 59 - 6,556 288 - 1,058 550-1,200 1,891-7,422 406 - 6,445 n.a

OOIP (P50/Best) mmbbl 6,419 662 448 n.a. 4,184 2,874 n.aRecoverable Oil (P90/P10) 1,615-3,462 6 - 1,967 46 - 177 34 - 424 n.a. 162 - 3,867 n.a 23,650 2,500Recoverable Oil (P50/Best) 2,392 132 80 304 1,460 1,439 125 1,124 13,000 445Prospective Gas (P50/Best) bcf 886 n.a. n.a. n.a. 849 n.a. 1,800 4,500 2,600 1,300

Shaikan = as of Jan/10, Dynamic Global Advisors estimate Miran West = as of Jun/09, RPS Energy estimateTaq Taq = 2008 reserves, Netherland Sewell estimate NP = Not PresentKurdamir = as of Nov/09, Sproule estimates for total block TD = Total DepthChia Surkh = as of Sep/09, DeGolyer & MacNaughton estimates

Res

ou

rce

Est

ima

tes

Jura

ssi

c /

Tri

ass

ic

Kurdistan Region of Iraq Iraq

Cre

tace

ou

sT

erti

ary

Source: Company reports; Wood Mackenzie; IHS Energy; Scotia Capital estimates.

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Exhibit 1.19: Kurdistan/Iraq – Stratigraphy

Source: U.S. Geological Survey (USGS) – World Petroleum Assessment 2000.

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Exhibit 1.20: Kurdistan Economics – Contractor After-Tax IRR Scenario Analysis

Brent Crude

Price (US$) 50 100 150 200 250 300 400 500 750 1,000

$50/bbl

$60/bbl

$70/bbl

$80/bbl

$90/bbl

$100/bbl53.4%

47.9% 47.3% 47.2%

19.0% 30.3% 34.9% 40.3% 44.8% 49.6% 54.4%

39.9%

54.7%

46.2% 51.0%

34.8% 39.2%

44.2%

39.3% 39.7%

50.5% 50.4%

43.5% 43.7%

53.3%

15.0% 25.3% 29.8% 34.7% 38.7% 42.7% 47.2%

51.4%41.8%

9.7% 18.7% 22.9% 28.1%

17.1% 28.0% 32.5% 37.6%

35.3%

12.5% 22.3% 26.6% 31.6% 35.3% 38.9% 43.4%

27.1%

31.5%

Kurdistan Economics - Contractor IRR (%)

Gross (100%) Recoverable Oil Estimates (mmbbl)

30.0% 34.4% 34.9%6.1% 14.3% 18.3% 24.0% 34.8%

Source: Scotia Capital estimates.

E V A L U A T I N G T H E K U R D I S H E C O N O M I C S – B I G P O T E N T I A L !

Our analysis of potential developments in Kurdistan yields compelling economics in the context of field discoveries that could be in the 100 mmbbl-500 mmbbl recoverable range. That said, assuming a US$80/bbl long-term escalated oil price (2% per annum), we estimate the NPV10 at US$0.3 billion-US$1.1 billion (IRRs 25%-48%) net to the contractor’s 80% working interest for a gross discovery of 100 mmbbl-300 mmbbl. In our view, a minimum discovery of 50 mmbbl recoverable is likely to be required to pursue commercial development, but the economics are limited at lower oil prices. We recognize that our estimates are preliminary as there is limited development in Kurdistan (Tawke/Taq Taq), and timing of future activities remains highly uncertain until further infrastructure is developed, amongst other political events (see Exhibit 1.20).

K E Y A S S U M P T I O N S

In developing our cost, production timing, and reserve estimates we have used a number of sources, including analogues from fields currently being or already developed (Tawke/Taq Taq) and third-party resource assessments provided by Addax, Heritage Oil, ShaMaran, and DNO. A number of aspects that could contribute to delays/variation to our base estimates include cost overruns while drilling (overpressure, mud loss), poor reservoir quality (limited matrix/fracture porosities, heavy oil, high gas-oil ratio, lack of reservoir energy), and availability of qualified labour/equipment. Furthermore, additional infrastructure is required and we have estimated that any potential pipeline developments will take a minimum of five to six months for front-end engineering and design (FEED) and 10-16 months for construction, depending on length and route.

On average our total development cost estimates (drilling and facilities) range from US$1.50/bbl to US$4.17/bbl depending on discovery size, assuming central processing module sizes of 30,000-50,000 bbl/d. We have also assumed that due to the absence of reservoir energy (water or gas drive), an injector to producer ratio of 0.4:1 (consistent with Addax/Heritage Oil estimates) is required. Our production outlooks assume initial production within two years (2012) and various peak production rates, with large fields taking up to four to six years to reach full capacity.

A summary of our key assumptions and sensitivity analysis is contained in Exhibits 1.21-1.22, while our discovery size, discount rate, and oil price scenario analysis is contained in Exhibits 1.23-1.24.

Economics look good in Kurdistan with IRRs in the 25%-48% range, varying by oil prices and discovery size.

Our base assumptions remain preliminary due to the limited development within the region and the need for further infrastructure.

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Exhibit 1.21: Kurdistan Economics – Key Assumptions and Sensitivity Analysis

Sensitivity Analysis (100 mmbbl) Base Change 100 mmbbl 250 mmbbl 400 mmbbl 500 mmbbl

Operating/Lifting Costs US$3.00/bbl +US$2/bbl -1.5% -0.7% -1.0% -0.9%Trucking Costs US$8.00/bbl +US$2/bbl -0.9% 0.2% 0.0% 0.2%Realized Prices/Differentials US$6.00/bbl +US$2/bbl -3.3% -2.6% -2.4% -2.2%Royalty 10% +5% -9.1% -6.6% -6.1% -5.8%

Government Share of Profit Oil 84% +5% -11.9% -21.4% -23.1% -23.2%Bonus Payments (US$M) US$150.0M +10% -4.4% -1.4% -0.9% -0.7%Development Costs (US$M) Variable +20% -2.6% 0.2% 0.5% 1.0%

Change in NPV10 @ US$80/bbl

Source: Scotia Capital estimates.

Exhibit 1.22: Kurdistan Economics – Undiscounted Field Economics and Key Assumptions (US$/bbl)

US$/bbl 100 mmbbl 250 mmbbl 300 mmbbl 400 mmbbl 500 mmbbl

Peak Net (80%) Production 24,000 60,000 68,000 92,000 120,000

Long-Term Brent Crude Price $60.00 $60.00 $60.00 $60.00 $60.00Realized Price (2% escalation) 65.49 69.26 69.29 70.02 70.76

Royalty 6.55 6.93 6.93 7.00 7.08

Operating Costs (4% escalation) 13.06 4.51 4.65 4.13 3.95

Capital Costs 5.14 3.92 3.58 3.09 3.13

Govt Share of Profit Oil 29.59 42.88 43.20 45.13 45.77

Bonus Payments 2.38 0.95 0.79 0.59 0.48

$8.78 $10.07 $10.14 $10.08 $10.37

NPV10 (US$M) $2.00 $3.20 $3.30 $3.33 $3.36

After-Tax IRR (%) 19% 32% 35% 39% 40%

US$/bbl 100 mmbbl 250 mmbbl 300 mmbbl 400 mmbbl 500 mmbbl

Peak Net (80%) Production 24,000 60,000 68,000 92,000 120,000

Long-Term Brent Crude Price $80.00 $80.00 $80.00 $80.00 $80.00

Realized Price (2% escalation) 88.50 94.49 94.44 95.55 96.61

Royalty 8.85 9.45 9.44 9.55 9.66

Operating Costs (4% escalation) 13.06 4.51 4.65 4.13 3.95

Capital Costs 5.14 3.92 3.58 3.09 3.13

Govt Share of Profit Oil 46.65 62.05 62.27 64.44 65.42

Bonus Payments 2.38 0.95 0.79 0.59 0.48

$12.42 $13.61 $13.71 $13.74 $13.98

NPV10 (US$M) $3.66 $4.61 $4.70 $4.70 $4.67

After-Tax IRR (%) 25% 39% 43% 47% 48%

US$/bbl 100 mmbbl 250 mmbbl 300 mmbbl 400 mmbbl 500 mmbbl

Peak Net (80%) Production 24,000 60,000 68,000 92,000 120,000

Long-Term Brent Crude Price $100.00 $100.00 $100.00 $100.00 $100.00

Realized Price (2% escalation) 111.51 119.72 119.60 121.07 122.46

Royalty 11.15 11.97 11.96 12.11 12.25

Operating Costs (4% escalation) 13.06 4.51 4.65 4.13 3.95

Capital Costs 5.14 3.92 3.58 3.09 3.13

Govt Share of Profit Oil 64.52 81.03 81.18 83.60 84.84

Bonus Payments 2.38 0.95 0.79 0.59 0.48

$15.27 $17.34 $17.45 $17.55 $17.82

NPV10 (US$M) $5.01 $6.06 $6.14 $6.13 $6.06

After-Tax IRR (%) 30% 45% 50% 54% 55%

Undiscounted Field (Contractor 80%) Economics @ US$60/bbl

Undiscounted Field (Contractor 80%) Economics @ US$80/bbl

Undiscounted Field (Contractor 80%) Economics @ US$100/bbl

Source: Scotia Capital estimates.

Our sensitivity analysis indicated the Kurdistan PSC exhibits the most sensitivity to levels of government take (royalties and profit oil) and, to a lesser extent, realized prices. Given the annual cost recovery allowance of 45% on all carried forward costs and the steep government share of profit oil of 84% (post-payout), the PSC has limited sensitivity to overall capital costs.

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Exhibit 1.23: Kurdistan Discovery Size and Oil Price Scenario Analysis – NPV10

Brent Crude

Price (US$) 50 100 150 200 250 300 400 500 750 1,000

$50/bbl -US$51.3M US$77.9M US$191.7M US$357.7M US$497.8M US$626.3M US$853.6M US$1,069.7M US$1,581.3M US$2,038.7M

-$1.28/bbl $0.97/bbl $1.60/bbl $2.24/bbl $2.49/bbl $2.61/bbl $2.67/bbl $2.67/bbl $2.64/bbl $2.55/bbl

$60/bbl -US$4.7M US$159.7M US$307.0M US$470.0M US$640.7M US$792.6M US$1,066.3M US$1,345.5M US$1,973.8M US$2,530.1M

-$0.12/bbl $2.00/bbl $2.56/bbl $2.94/bbl $3.20/bbl $3.30/bbl $3.33/bbl $3.36/bbl $3.29/bbl $3.16/bbl

$70/bbl US$35.2M US$230.6M US$405.6M US$576.9M US$779.7M US$959.0M US$1,285.4M US$1,608.6M US$2,377.1M US$3,042.7M

$0.88/bbl $2.88/bbl $3.38/bbl $3.61/bbl $3.90/bbl $4.00/bbl $4.02/bbl $4.02/bbl $3.96/bbl $3.80/bbl

$80/bbl US$70.6M US$293.2M US$491.2M US$686.0M US$921.7M US$1,127.2M US$1,504.0M US$1,869.1M US$2,786.1M US$3,533.5M

$1.76/bbl $3.66/bbl $4.09/bbl $4.29/bbl $4.61/bbl $4.70/bbl $4.70/bbl $4.67/bbl $4.64/bbl $4.42/bbl

$90/bbl US$102.0M US$350.0M US$568.0M US$797.1M US$1,065.0M US$1,295.8M US$1,737.0M US$2,141.4M US$3,169.2M US$4,022.1M

$2.55/bbl $4.37/bbl $4.73/bbl $4.98/bbl $5.32/bbl $5.40/bbl $5.43/bbl $5.35/bbl $5.28/bbl $5.03/bbl

$100/bbl US$131.0M US$401.0M US$636.3M US$906.6M US$1,211.8M US$1,473.7M US$1,961.2M US$2,423.9M US$3,536.0M US$4,522.8M

$3.27/bbl $5.01/bbl $5.30/bbl $5.67/bbl $6.06/bbl $6.14/bbl $6.13/bbl $6.06/bbl $5.89/bbl $5.65/bbl

Gross (100%) Recoverable Oil Estimates (mmbbl)

Kurdistan Economics - Contractor NPV 10 - US$ Millions and US$ per bbl

Kurdistan Economics - Contractor NPV10

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

50 100 150 200 250 300 400 500 750 1,000

Gross Recoverable Resource (mmbbl)

US

$ M

illio

ns

$50/bbl

$60/bbl

$70/bbl

$80/bbl

$90/bbl

$100/bbl

Source: Company reports; Scotia Capital estimates.

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Exhibit 1.24: Kurdistan Discovery Size and Oil Price Scenario Analysis – NPV15

Brent Crude

Price (US$) 50 100 150 200 250 300 400 500 750 1,000

$50/bbl -US$89.7M -US$8.7M US$55.3M US$168.5M US$258.0M US$342.2M US$490.0M US$610.4M US$890.1M US$1,129.5M

-$2.24/bbl -$0.11/bbl $0.46/bbl $1.05/bbl $1.29/bbl $1.43/bbl $1.53/bbl $1.53/bbl $1.48/bbl $1.41/bbl

$60/bbl -US$55.0M US$50.7M US$137.2M US$248.5M US$359.2M US$459.7M US$635.2M US$796.7M US$1,148.4M US$1,444.5M

-$1.37/bbl $0.63/bbl $1.14/bbl $1.55/bbl $1.80/bbl $1.92/bbl $1.98/bbl $1.99/bbl $1.91/bbl $1.81/bbl

$70/bbl -US$25.8M US$101.9M US$206.9M US$323.0M US$455.6M US$574.2M US$782.3M US$971.6M US$1,412.1M US$1,769.4M

-$0.64/bbl $1.27/bbl $1.72/bbl $2.02/bbl $2.28/bbl $2.39/bbl $2.44/bbl $2.43/bbl $2.35/bbl $2.21/bbl

$80/bbl -US$0.1M US$147.3M US$267.7M US$397.2M US$552.3M US$688.8M US$928.6M US$1,143.2M US$1,677.6M US$2,078.9M

$0.00/bbl $1.84/bbl $2.23/bbl $2.48/bbl $2.76/bbl $2.87/bbl $2.90/bbl $2.86/bbl $2.80/bbl $2.60/bbl

$90/bbl US$22.9M US$188.5M US$322.4M US$472.6M US$649.5M US$803.2M US$1,084.5M US$1,322.1M US$1,924.2M US$2,384.9M

$0.57/bbl $2.36/bbl $2.69/bbl $2.95/bbl $3.25/bbl $3.35/bbl $3.39/bbl $3.31/bbl $3.21/bbl $2.98/bbl

$100/bbl US$44.0M US$226.0M US$371.5M US$546.6M US$749.0M US$923.9M US$1,234.1M US$1,507.8M US$2,158.6M US$2,698.2M

$1.10/bbl $2.82/bbl $3.10/bbl $3.42/bbl $3.74/bbl $3.85/bbl $3.86/bbl $3.77/bbl $3.60/bbl $3.37/bbl

Kurdistan Economics - Contractor NPV 15 - US$ Millions and US$ per bbl

Gross (100%) Recoverable Oil Estimates (mmbbl)

Kurdistan Economics - Contractor NPV15

-$500

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

50 100 150 200 250 300 400 500 750 1,000

Gross Recoverable Resource (mmbbl)

US

$ M

illio

ns

$50/bbl

$60/bbl

$70/bbl

$80/bbl

$90/bbl

$100/bbl

Source: Company reports; Scotia Capital estimates.

Page 26: Scotia Capital

Vast Exploration Inc. April 2010

25

Vast Exploration Inc. (VST-V)

Mar 26, 2010: $0.86 1-Yr Target: $1.40 Capitalization Rating: 1-Sector Outperform 1-Yr ROR: 62.8% Shares O/S (M) 173.0 Risk: Caution Warranted 2-Yr Target: $1.50 Total Value ($M) 148.8 IBES EPS 2010E $-0.03 2-Yr ROR: 74.4% Float O/S (M) 153.7 IBES EPS 2011E $-0.02 Div. (Curr.): $0.00 Float Value ($M) 132.2 Yield 0.0% Valuation: Based on our risked NAV of $1.40/share. Key Risks to Target: Commodity prices, exploration, project execution, political/regulatory. Qtly CFPS (FD) (Next Release: Apr-10) Y/E JANUARY-31 Apr Jul Oct Jan Year P/CF 2009A $-0.01A $-0.03A $0.00A $-0.01A $-0.03 n.a. 2010E $-0.01A $-0.01A $0.00A $0.00 $-0.02 n.a. 2011E $0.00 $0.00 $0.00 $0.00 $-0.01 n.a. 2012E $0.00 $0.00 $0.00 $0.00 $-0.02 n.a. Industry Specific 2008A 2009A 2010 2011 Oil Price (Brent, /bbl) (US$) $75.68 $95.35 $63.33 $74.45 Foreign Exchange (US$) / $0.94 $0.92 $0.87 $0.89 CFPS Sens to $1/bbl Brent (US$) n.m. n.m. n.m. n.m. CFPS Sens to $0.01/CAD FX (US$) n.m. n.m. n.m. n.m.

Regular Voting Note: Historical price multiple calculations use FYE price. Source: Reuters; company reports; Scotia Capital estimates.

Ready to Summit the Black Mountain I N V E S T M E N T H I G H L I G H T S

First well to spud early April. We view Vast Exploration Inc. (Vast) as offering one of the highest potential rewards within our Kurdistan coverage universe in 2010, but it remains highly speculative given its wildcat exploration base. Vast’s sole asset is its 37% non-operated interest in the 209,000 acre Qara Dagh Block.

Big resource potential. Vast carries significant prospective upside as it chases large oil targets (1.7 billion-4.9 billion barrels of OOIP) with plans to spud its first well in early April 2010. Qara Dagh is believed to be on trend with other Cretaceous discoveries, including the Taq Taq and Miran West/East oil fields.

Strong board is an asset. Vast’s Board of Directors and Advisory Board possess close relationships with officials in the Kurdistan Regional Government that could offer a key competitive advantage for the company and its partners going forward.

Valuation. Our NAV analysis for Vast is based on our assessment of the potential for Qara Dagh, which implies an unrisked NAV of $5.05 per share ($1.40 per share risked), highly contingent on the company’s ability to raise future capital and its exploration success.

Balance sheet. With approximately $18 million of cash on its balance sheet, we anticipate Vast will need to raise equity by mid-year if its warrants are not fully exercised to fund its future obligations. The company has ~44 million warrants outstanding that could net proceeds of roughly $34 million if fully exercised – the lion’s share of which expires in June 2010 at ~$0.90.

We have initiated coverage on the common shares of Vast Exploration Inc. with a 1-Sector Outperform rating and a one-year target of $1.40 per share, based on our risked NAV analysis.

Page 27: Scotia Capital

Energy – Oil & Gas – International E&P April 2010

26

Summary & Investment Recommendation

We view Vast Exploration Inc. (Vast) as offering one of the highest potential rewards within our Kurdistan coverage universe in 2010, but it remains highly speculative given its pure wildcat exploration base. In our opinion, Vast carries significant prospective upside as it chases large oil targets (>1.7 billion barrels of OOIP) on the Qara Dagh (“Black Mountain”) block where it holds a 37% non-operated working interest. The company plans to spud its first well in early April 2010 – its most notable catalyst over the next six months. The Qara Dagh block is operated by Niko Resources Ltd., which we feel possesses an experienced management team with strong technical expertise as demonstrated offshore India. With limited cash on its balance sheet, we anticipate Vast will likely need to tap equity markets for additional cash later this year as its exploration activity ramps up. We also note that Vast has committed to issue 60 million shares (26% ownership) to the KRG in connection with its 10% increase in working interest in Qara Dagh.

We have initiated coverage on the common shares of Vast Exploration Inc. with a 1-Sector Outperform rating and a one-year target of $1.40 per share, which is based on our risked NAV analysis. We recommend Vast Exploration to those investors looking for the highest torque to Kurdistan oil plays, but also note its risk profile is well above average with limited cash and wildcat exploration. The results of its first exploration well (summer 2010) represent the single biggest potential catalyst for the stock over the next eight months. Other catalysts for Vast could include potential signing of or further progression on the Iraqi federal Oil and Gas Law (2010/11), drilling results from other Kurdish players such as Heritage Oil and WesternZagros, and a potential merger with its sister company, Longford Energy Inc., toward mid-2010.

In our view, Vast represents one of the highest- torque names this year in Kurdistan.

Vast will commence its first exploration well in late March, results expected in July/ August.

Page 28: Scotia Capital

Vast Exploration Inc. April 2010

27

Exhibit 2.1: Vast Exploration – Warrants Outstanding

Exercise Warrants Potential Expiry Date Price Outstanding ProceedsJune 5, 2010 $0.40 1.4M $0.6MJune 12, 2010 $0.90 29.2M $26.3MOctober 8, 2010 $0.75 1.2M $0.9MJune 5, 2011 $0.50 12.5M $6.2M

44.3M $34.0M

Source: Company reports.

Exhibit 2.2: Vast Exploration – Capital Spending and Cash Outlook

F2010E F2011E F2012E F2013E F2014E F2015E

Production (bbl/d) 0 0 0 1,865 11,100 18,500

Net Capital Expenditure Summary (C$M)- Seismic $9.3 $1.2 $1.9 $0.0 $0.0 $0.0- Exploration & Appraisal Drilling 0.0 16.2 16.9 0.0 0.0 0.0

- Development Drilling 0.0 0.0 0.0 31.5 37.0 16.7- Facilities 0.0 0.0 0.0 13.0 33.3 20.4- Pipeline 0.0 0.0 0.0 0.0 0.0 0.0

Total Net (VST) Capital Spending (C$M) $9.3 $17.3 $18.7 $44.4 $70.3 $37.0

Y/E Cash Position (C$M) $17.9 -$2.5 -$24.9 -$75.2 -$21.7 $154.7

Note: Vast's year-end is January 31.

Source: Company reports; Scotia Capital estimates.

Financial Outlook – In the Spend Phase, Equity Issue?

With approximately $18 million of cash on its balance sheet, we anticipate Vast will need to raise equity by mid-year if its warrants are not fully exercised to fund its first exploration well (spud late March) and future obligations. We note that Vast has ~44 million warrants outstanding that could net the company proceeds of roughly $34 million if fully exercised – the lion’s share of which expire in June

2010. Our diluted per share estimates (NAV and CFPS) also include 60 million shares to be issued to the KRG in lieu of cash payments expected in 2H/10 for Vast’s increased working interest in September 2009 (see Exhibits 2.1-2.3).

F2011 outlook. Our F2011 outlook is based on net capital spending of $17.3 million, which assumes one exploration well will be drilled at a cost of US$30 million-US$35 million (US$13.9 million-US$16.2 million net) and potential additional

seismic. We forecast minimal cash flow being generated from its Canadian operations, and as such we forecast Vast’s year-end cash deficit at $2.5 million. We place a high probability Vast will look to raise additional equity in calendar 2010 if warrants are not fully exercised in June.

F2012 outlook. Our net capital spending forecast of $18.7 million in F2012 incorporates drilling one additional exploration well at Qara Dagh and potential for a further 2D/3D seismic acquisition program. Our base outlook does not include any potential spending associated with development activities or facilities construction, but could change pending a successful discovery this year. In our view, first production is unlikely to occur prior to F2013.

Vast’s fiscal year-end occurs January 31. The company reports its financial results in Canadian dollars in accordance with Canadian GAAP and reports its reserves in compliance with NI 51-101.

Current cash position could fully fund one exploration well, but we expect an equity raise mid-year.

Our base outlook does not include any production until late 2012 (F2013).

Our preliminary capital outlook requires additional financing to be secured given Vast’s limited cash balance.

Page 29: Scotia Capital

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28 Exhibit 2.3: International E&P Comparative Valuation

Enterprise Value (EV) (c)

12 Mkt Debt-Adjusted 2008 Net 2P 2010E NetTSX SC Price Month Cap CF Multiple (a) Reserves Production Net Asset Value

C$, unless otherwise noted Ticker Rating* (C$) Target (C$) (C$M) 2010E 2011E (C$/boe) (C$/boe/d) Risked P/Risked Unrisked P/Unrisked

Producing E&Ps (d)

Pacific Rubiales PRE 1-SO $20.09 $23.50 $5,240 5.9x 3.3x $26.36 $86,119 $23.39 86% $74.29 27%Petrominerales PMG 2-SP $31.52 $33.00 $3,108 4.4x 3.7x $94.02 $86,367 $32.79 96% $69.63 45%Niko Resources (b)

NKO 2-SP $103.23 $110.00 $5,237 12.1x 10.9x $28.57 $90,579 $106.92 97% $156.03 66%

Calvalley Petroleum CVI.a 2-SP $3.44 $4.00 $339 9.3x 3.1x $23.42 $104,435 $3.78 91% $11.26 31%Bankers Petroleum BNK 2-SP $9.23 $10.00 $2,107 20.7x 9.5x $12.43 $416,484 $10.11 91% $18.80 49%Vermilion Energy Trust VET.UN 2-SP $35.33 $39.00 $2,810 8.5x 7.7x $24.16 $100,100 $38.77 91% $78.36 45%Petrolifera Petroleum PDP 2-SP $0.89 $1.05 $127 6.2x 6.2x $9.89 $42,385 $1.07 83% $4.91 18%

Average 9.6x 6.3x $31.26 $132,352 91% 40%

Exploration Companies (d)

Parex Resources PXT.V 1-SO $4.64 $5.50 $298 $5.63 82% $28.79 16%Vast Exploration VST.V 1-SO $0.86 $1.40 $149 $1.40 61% $5.05 17%WesternZagros Resources WZR.V 2-SP $0.80 $1.15 $166 $1.16 69% $9.86 8%Longford Energy LFD.V 2-SP $0.33 $0.45 $44 $0.43 76% $1.60 20%ShaMaran Petroleum SNM.V 2-SP $0.62 $0.70 $309 $0.68 91% $1.71 36%

Average 76% 20%

(a) Debt-adjusted cash flow multiple = (market price x basic shares + YE net debt) / (discretionary cash flow + (interest x (1 - current tax/pre-tax income))).

(b) Niko Resources year-end is March 31 and Vast Exploration year-end is January 31; 2010E based on fiscal 2011E year-end.(c) Enterprise value (EV) in C$. Production and reserves stated after royalties and government entitlement (net).(d) PMG, CVI, NKO, WZR.V, PRE, PXT.V, SNM.V & BNK EPS/CFPS estimates denominated in US$, converted at current exchange rate for valuation purposes. Share price is denominated in C$.

*Note: Our exploration company rankings are based on a benchmark of primarily exploration based companies (moderate production) with operations focused in the Middle East, Africa and Southeast Asia, which includes WesternZagros Resources (Kurdistan), Longford Energy (Kurdistan), ShaMaran Petroleum (Kurdistan), DNO (Kurdistan), Vast Exploration (Kurdistan), Gulfkeystone (Kurdistan/Algeria), Heritage Oil (Kurdistan), Sterling Energy (Kurdistan/Africa), Groundstar Resources (Kurdistan/Egypt), Gulfsands Petroleum (Iraq/Syria), Sea Dragon Energy (Egypt), Hardy Oil & Gas (India/Nigeria), ERHC Energy (Nigeria/JDZ) and Chariot Oil & Gas (Namibia).

Source: Company reports; Bloomberg; Scotia Capital estimates.

Page 30: Scotia Capital

Vast Exploration Inc. April 2010

29

Exhibit 2.4: Vast Exploration – Building Blocks of NAV

36% 36%

61% 61%

17% 17%

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$/Share

0%

20%

40%

60%

80%

P/NAV

Kurdis tan - Golan Prospec t (P50) $0.00 $0.00 $0.00 $0.00 $0.25 $0.25

Kurdis tan - Sagrima Prospec t (P50) $0.00 $0.00 $0.07 $0.07 $1.31 $1.31

Kurdis tan - Qara Dagh Prospect (P50) $0.00 $0.00 $0.34 $0.34 $3.43 $3.43

Kurdis tan - Qara Dagh Prospect (P90) $2.31 $2.31 $0.92 $0.92 $0.00 $0.00

Balance Sheet/Land/Fx $0.07 $0.07 $0.07 $0.07 $0.07 $0.07

Target Price $1.40 $1.40 $1.40 $1.40 $1.40 $1.40

Current Price $0.86 $0.86 $0.86 $0.86 $0.86 $0.86

P/NAV 36% 36% 61% 61% 17% 17%

Base Strip Base Strip Base Strip

Base (P90) NAV Risked NAV All-In Identif ied Projects

UnriskedUpside

Note: Our base NAV includes P90 estimated OOIP, while our unrisked includes P50 OOIP estimates.

Source: Scotia Capital estimates.

Valuation – Significant Potential Unfolding

Our NAV analysis for Vast is based on our assessment of the potential for the Qara Dagh Block (37% wi), which implies an unrisked NAV of $5.05 per share ($1.40 per share risked), highly contingent on the company’s ability to raise future capital and its exploration success, which we still characterize as carrying above-average risk. We consider our estimates preliminary as the company has no reserves booked and has yet to commence its exploration program (spud April 2010). In January 2010, AJM Petroleum Consultants provided a third-party NI 51-101 prospective resource estimate report for Qara Dagh that pointed toward P50 gross OOIP of 2.7 billion barrels and unrisked prospective recoverable oil estimates of 269 mmbbl-849 mmbbl (166.5 mmbbl net P50). As such, we have used the AJM estimates as the foundation in developing our NAV analysis, along with numerous Kurdish field comparisons. Our fully diluted per-share NAV figures noted below include the additional 60 million shares that we expect will be issued to the KRG later this year. A summary of our NAV analysis is contained in Exhibit 2.4.

Our one-year target price for Vast of $1.40 per share (63% potential return) is based on our risked NAV of $1.40 per share. We anticipate that our target price could move toward our unrisked NAV of $5.05 per share as the company is able to prove up its resource potential through successful exploration drilling and as the political situation in Iraq/Kurdistan improves.

We estimate Vast’s unrisked NAV at $5.05 per fully diluted share, based on P50 OOIP estimates of 2.7 billion barrels.

Our fully diluted NAV estimates include 60 million shares firmly committed to be issued to the KRG in 2H/10.

Page 31: Scotia Capital

Energy – Oil & Gas – International E&P April 2010

30

Exhibit 2.5: Vast Exploration – NAV Sensitivity Analysis

Brent 37% Brent 37%Price (US$) wi 100 250 400 500 Price (US$) wi 100 250 400 500

$50/bbl Net $82M $263M $467M $575M $50/bbl Net $41M $162M $306M $375M$2.20/bbl $2.85/bbl $3.15/bbl $3.11/bbl $1.11/bbl $1.75/bbl $2.07/bbl $2.03/bbl$0.35/sh $1.12/sh $1.99/sh $2.45/sh $0.18/sh $0.69/sh $1.30/sh $1.60/sh

$70/bbl Net $169M $444M $676M $841M $70/bbl Net $108M $295M $458M $567M$4.55/bbl $4.80/bbl $4.57/bbl $4.54/bbl $2.92/bbl $3.19/bbl $3.09/bbl $3.07/bbl$0.72/sh $1.89/sh $2.88/sh $3.59/sh $0.46/sh $1.26/sh $1.95/sh $2.42/sh

$80/bbl Net $205M $516M $786M $978M $80/bbl Net $135M $348M $535M $664M$5.53/bbl $5.58/bbl $5.31/bbl $5.29/bbl $3.64/bbl $3.76/bbl $3.61/bbl $3.59/bbl$0.87/sh $2.20/sh $3.35/sh $4.17/sh $0.57/sh $1.48/sh $2.28/sh $2.83/sh

$100/bbl Net $265M $636M $1,010M $1,255M $100/bbl Net $181M $436M $692M $858M$7.17/bbl $6.87/bbl $6.82/bbl $6.78/bbl $4.89/bbl $4.72/bbl $4.68/bbl $4.64/bbl$1.13/sh $2.71/sh $4.31/sh $5.35/sh $0.77/sh $1.86/sh $2.95/sh $3.66/sh

*NPV C$ values noted net to company's working interest, based on fully diluted shares including shares to be issued to the KRG.

Gross (100%) Recoverable Oil (mmbbl)Qara Dagh Economics - NPV 10 - C$ Millions and C$ per share Qara Dagh Economics - NPV 15 - C$ Millions and C$ per share

Gross (100%) Recoverable Oil (mmbbl)

Source: Company reports; Scotia Capital estimates.

Base NAV of $2.38 per share. We estimate Vast’s base NAV at $2.38 per share as at October 31, 2009, based on a sum-of-the-parts approach. Assuming gross OOIP (P90) of 1.7 billion barrels over three prospects, we have incorporated a 50% chance of success and a 35% recovery factor, which yields gross recoverable reserves of 293.0 mmbbl (108.4 mmbbl net). We forecast that a commercial discovery in calendar 2010 (F2011) of this magnitude could result in initial volumes of 10,000 bbl/d (gross) being trucked in late 2012 (F2013) before reaching peak field production of 75,000 bbl/d (27,750 bbl/d net) in F2016. Our base case assumes all volumes will be trucked to Kirkuk or Taq Taq and no pipeline development. Our NAV is based on a 12% after-tax discount rate and a long-term escalated (2% per annum) crude oil price of US$85/bbl in F2013 and beyond.

Ready to shoot the moon – unrisked NAV of $5.05 per share. On an unrisked basis, we calculate Vast’s potential NAV at $5.05 per share, which applies a 55%-80% chance of success (depending on the prospect) and a recovery factor of 35% to its P50 OOIP estimates of 2.7 billion barrels OOIP for the Qara Dagh Block. Under this scenario we forecast initial volumes of 30,000-50,000 bbl/d (gross) in F2013/14 and peak production of 150,000 bbl/d (55,500 bbl/d net) in F2016 following construction of a pipeline to an existing offloading station, such as Kirkuk, or a future central export line from Kurdistan. Our unrisked NAV carries upside of 112% and 260%, respectively, compared to our base and risked NAVs.

P/NAV. Vast is trading at a P/NAV (risked) ratio of 61% compared with our producing international E&P peer group1 average of 91%, and 76% for our exploration-based companies (WesternZagros Resources Ltd., Longford Energy Inc., ShaMaran Petroleum Corp., and Parex Resources Inc.), which are the company’s most direct comparables in our universe. On a P/unrisked NAV basis, the company is trading at 17% compared to the producing E&Ps at 40% and the exploration companies at 20%. In our minds, the steep discount at which the stock is trading relative to its NAV is warranted given that the likelihood of a commercial oil discovery is still quite uncertain and the company will likely require future capital. However, it also points to the significant upside we potentially see unfolding for the company in Kurdistan.

Evaluating the possibilities. Our NAV estimates are highly sensitive to changes in discovery size and oil prices. With a wide range of potential outcomes, we have run a scenario analysis to illustrate the possible impact to our NAV per share estimates (see Exhibits 2.5-2.6).

1 Producing E&Ps include our coverage universe of Pacific Rubiales Energy Corp., Petrominerales Ltd., Niko Resources Ltd., Calvalley Petroleum Inc., Petrolifera Petroleum Limited, Bankers Petroleum Ltd., and Vermilion Energy Trust.

Our base NAV has used P90 OOIP estimates of 1.7 billion barrels – 108.4 mmbbl net recoverable.

Our unrisked NAV represents a 260% increase above our risked NAV.

Based on our assessment, Vast is reflecting less upside vs. its Kurdish peers in the context of our risked and unrisked P/NAV ratios.

Page 32: Scotia Capital

31

Vast E

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Exhibit 2.6: Vast Exploration – NAV Analysis Summary

Net Asset Value (C$)

Reserves/Resource Unit Value (C$ Millions) (C$/share) % NAV Unit Value (C$ Millions) (C$/share) % NAV (C$ Millions) (C$/share) % NAV

Crude Oil & NGL P90/2P 3P/P50

Kurdistan - Qara Dagh Prospect (P90) 108.4 mmbbl @ $5.00 /bbl $542 $2.31 97% 0.0 mmbbl @ $0.00 /bbl $0 $0.00 0% $217 $0.92 66%

Total Booked Crude & NGL 108.4 mmbbl @ $5.00 /bbl $542 $2.31 97% 0.0 mmbbl @ $0.00 /bbl $0 $0.00 0% $217 $0.92 66%

Crude Oil & NGL - Identified Projects/Exploration

Kurdistan - Qara Dagh Prospect (P50) 159.1 mmbbls @ $5.05 /bbl $804 $3.43 68% $80 $0.34 24%

Kurdistan - Sagrima Prospect (P50) 80.8 mmbbls @ $3.79 /bbl 306 1.31 26% 15 0.07 5%

Kurdistan - Golan Prospect (P50) 17.6 mmbbls @ $3.28 /bbl 58 0.25 5% 0 0.00 0%

Total Unbooked Crude & NGL 257.4 mmbbls @ $4.54 /bbl $1,168 $4.98 99% $96 $0.41 29%

Total Reserves 108.4 mmboe @ $5.00 /boe $542 $2.31 97% 257.4 mmboe @ $4.54 /boe $1,168 $4.98 99% $313 $1.33 95%

Net Undeveloped Land (c)

Kurdistan 77 M Acres @ $0.00 /acre $0 $0.00 0% 0 M Acres @ $0.00 /acre $0 $0.00 0% $0 $0.00 0%

Canada 0 M Acres @ 0.00 /acre 0 0.00 0% 0 M Acres @ 0.00 /acre 0 0.00 0% 0 0.00 0%

Total 77 M Acres @ $0.00 /acre $0 $0.00 0% 0 M Acres @ $0.00 /acre $0 $0.00 0% $0 $0.00 0%

Total Reserves and Undeveloped Land $542 $2.31 97% $1,168 $4.98 99% $313 $1.33 95%

Balance Sheet/Equity InterestsAssets

Current Assets 22 0.09 4% 22 0.09 2% 22 0.09 7%

Current Liabilities 4 0.02 -1% 4 0.02 0% 4 0.02 -1%

Net working capital 18 0.08 3% 18 0.08 2% 18 0.08 6%

Total Assets $560 $2.39 100% $1,186 $5.06 100% $331 $1.41 101%

Liabilities

Long term debt $0 0.00 0% $0 $0.00 0% $0 $0.00 0%

Abandonment liability 2 0.01 0% 2 0.01 0% $2 0.01 -1%

Total Liabilities $2 $0.01 0% $2 $0.01 0% $2 $0.01 -1%

Base (P90) Net Asset Value $558 Unrisked Net Asset Value $1,184 $329

Basic (C$) (e) $3.23 Basic (C$) $6.85 $1.90

Diluted (C$) $2.38 100% Diluted (C$) $5.05 100% $1.40 100%

Outstanding Common Shares Building Blocks of NAV - Base Case Commodity Prices & 3-Yr Forward Strip Basic (Excl. KRG shares to be issued) 173.0

Diluted (Incl. KRG shares to be issued) 234.5

Notes:

Base (P90) NAV Unrisked All-In Indentified Projects (a) Risked All-In Identified Projects (b)

NAV Breakdown

Risked Upside-$0.9814%

Base (P90) NAV$2.3834%

Unrisked Identified Project Upside

$3.6552%

What's Being Discounted?

-$1

$0

$1

$2

$3

$4

$5

$6

Total Unrisked NAV $6.04 $5.05 $3.45

Unrisked IdentifiedProject Upside

$4.41 $3.65 $2.49

Risked Upside -$1.11 -$0.98 -$0.64

Base (P90) NAV $2.74 $2.38 $1.60

Current Price $0.86 $0.86 $0.86

US$100/bbl Base Case US$60/bbl

(a) Our Base NAV has included P90 OOIP of 1,674 mmbbl and assumed a recovery factor of 35% and an overall chance of success of 50% (37% net to VST). Chance of success varies over the three prospects with the main Qara Dagh being highest.(b) Unrisked NAV analysis includes identified projects and exploration estimates. Our analysis is based on P50 OOIP of 2,742 mmbbl over 3 prospects yielding total recoverable reserves of 257 mmbbl net to VST. (c) Risk factors include adjustment for chance of success and capital availability.(d) Land value based on SC estimates - excluded from upside analysis.(e) Fully diluted shares includes 60M to be issued to the KRG.

Source: Company reports; Scotia Capital estimates.

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Exhibit 2.7: Vast Exploration – Qara Dagh Structures

Source: Company reports.

Operations Overview – “Black Mountain”

Vast’s high-impact exploration portfolio is focused in Kurdistan, an area estimated to contain up to 38 billion barrels of undiscovered resources in the Zagros Fold Belt. The company’s exploration acreage is located solely on the Qara Dagh Block (“Black Mountain”), covering 209,000 gross acres (77,000 net, 37% wi), where it plans to spud its first exploration well early April 2010. The consortium has acquired 355 km of 2D seismic and identified three prospects over the massive surface anticline, which extends 65 km by 6 km (390 km2). The largest of the three prospects is believed to be the central Qara Dagh dome, with the smaller prospects to the north and south at Sagrima and Golan. Given that the three prospects occur on the same structural trend and geological concept (primarily Cretaceous, Jurassic, and Triassic), we note results from one prospect are likely to be highly correlated across all three. Based on past results of other operators in the region, we estimate the probability of oil in the Cretaceous is relatively high at >60%, while the lower Jurassic and Triassic reservoirs possess a >50% chance of discovering gas (see Exhibits 2.7-2.8).

Vast’s sole asset is its 37% non-operated interest in Qara Dagh along with Niko Resources and the KRG.

The Qara Dagh Block has three structures all along the same anticline and geological concept.

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Exhibit 2.8: Vast Exploration – Qara Dagh Block Prospectivity

Source: Company reports.

The presence of oil seeps on the surface of the Qara Dagh Block provides us with an additional level of comfort that a discovery could be oil-bearing. The primary reservoirs occur in the Cretaceous starting at a depth of ~850 metres, with additional potential existing in the deeper Jurassic/Triassic at less than 4,000 metres (targeted total depth).

Billion barrels becoming the norm OOIP. The Qara Dagh Block is believed to be on trend with other Cretaceous discoveries, including Sinopec (Addax)/Genel’s Taq Taq oil field and the Heritage Oil Miran West/East discovery. AJM Petroleum Consultants’ (AJM) estimated gross OOIP range for Qara Dagh of 1.7 billion to 4.9 billion barrels is impressive, and falls relatively in line with Heritage Oil’s Miran estimates of 2.3 billion-4.2 billion barrels and above that of the Taq Taq estimates of 1.0 billion-2.0 billion barrels (~350 mmbbl recoverable). As a point of reference, the Taq Taq field anticline is slightly smaller at 30 km by 10 km (300 km2) with an overall average oil column of 575-710 metres, while the Miran West/East prospects extend 320 km2 with an estimated 710 metre gross oil column (based on a single well).

Primary prospectivity is believed to be within the Cretaceous, similar to that of Taq Taq and Miran.

OOIP estimates for the Qara Dagh block range from 1.7 billion to 4.9 billion barrels.

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Exhibit 2.9: Vast Exploration – Qara Dagh Resource Estimates

OOIP and Prospective Resources (Unrisked)Qara Dagh Block (mmbbls)

As of December 31, 2009

CategoryLow Estimate

(P90)Best Estimate

(P50)High Estimate

(P10)Mean Estimate

Original Oil in Place 1,674 2,742 4,896 3,129

Prospective Gross Ultimate Recovery

269 450 849 526

Net to VST (37% wi) 100 167 314 195

Implied Ultimate Recovery 16.1% 16.4% 17.3% 16.8%

Source: Company reports.

The AJM report incorporated the combined potential from the block’s three prospects, including the largest at Qara Dagh, Sagrima, and Golan domes. Resource estimates have been assigned to seven target formations on the block – three in both the Cretaceous and Jurassic with a 30% and 21% chance of success, respectively, and one in the Triassic with a 17% chance of success. Our base estimates assume an overall recovery factor of 35%, further risked for the chance of gas (see Exhibit 2.9).

Exploration set to commence in early-April. The first exploration well is expected to be drilled to a depth of ~4,000 metres and will take roughly 100 days at a cost of US$30 million-US$35 million, barring any unforeseen delays. Well site construction is currently underway and a 2,000 hp drilling rig has been contracted to drill the well, leaving the consortium with the option to drill an additional three wells thereafter. In our view, results from the first exploration could be seen as early as July/August – the single biggest catalyst in the near term for Vast.

Development concept – first production late 2012 (F2013). Following a successful oil discovery this year, we anticipate the Niko Resources-operated consortium would evaluate potential development opportunities that could include temporary facilities to initially truck oil and the viability of constructing a pipeline to connect to a central gathering system like the Kirkuk or future Kurdish central export line. That said, political developments and discovery size will likely dictate the pace and size of development. We estimate that a minimum discovery of 50 mmbbl would be required for commercial development.

In assessing a potential development, we have assumed per-well recoveries of 12 mmbbl-15 mmbbl and IP rates of 7,500-10,000 bbl/d per development well at a cost of US$18 million-US$22 million per well. Furthermore, facilities are likely to be built in modules of 30,000-50,000 bbl/d of gross processing capacity at a total development cost (facilities plus drilling) of US$2.00-US$2.50 per barrel recoverable, excluding cost overruns and pipeline expenditures. We expect oil will be trucked to either Taq Taq or Kirkuk at US$7/bbl-US$10/bbl before a pipeline is constructed.

Depending on the size of a discovery and timing of a federal Oil and Gas Law, the Qara Dagh partners could evaluate a pipeline to connect to central gathering systems. Our base NAV does not include any potential pipeline development, while our unrisked NAV assumes gross capital spending of US$200 million (using Taq Taq as a proxy) for a 150,000-200,000 bbl/d net capacity line. The ultimate size of the line could be larger and the cost shared by a number of producers in the area.

We estimate exploration well costs at US$35 million, of which Vast will fund 46.25%.

Development of a potential discovery could occur in late 2012, but remains contingent on discovery size and political events in Kurdistan/Iraq.

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Exhibit 2.10: Vast Exploration – PSC Summary and Commitments

Block Working Interest Summary Acreage Position Terms/Commitments Status

● Operator: Niko Resources ● 3 yr. Phase 1 ends May 14, 2011 ● 355 km 2D seismic acquired in June 2009● Area Under Licence: 838 km2

● 300 km 2D seismic ● 1st exploration well to spud April 2010● Est. OOIP: P50 2,742 mmbbl(1)

● 1 exploration well● Minimum spending of US$16M● Optional Phase 2

(1) AJM Petroleum Consultants.(2) Vast pays ~C$464K per annum for rent and estimated operating costs.

Qara Dagh

VST (37%) NKO (37%)

GSA (6%) KRG (20%)

Source: Company reports.

Terms of the PSC. Under the agreement, Vast has a 37% non-operated working interest in the Block and is responsible for 46.25% of the initial exploration costs and 37% of total development costs. The PSC is separated into two exploration sub-periods, the first requiring the parties to acquire at least 300 km of 2D seismic (completed) and drill one exploration well. The parties then have the choice as to whether they will continue into the second sub-period, which requires further seismic and the drilling of an additional exploration well. The exploration period is for five years and can be extended on an annual basis for up to a combined total of seven years. In the event of a commercial discovery, the development period of the PSC is for 20 years with an option to extend by five years (see Exhibit 2.10).

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Principal Risks – High Risk/Reward Exploration

We characterize Vast as one of the potentially highest-reward names within our coverage universe in 2010 as it commences its exploration program in Kurdistan in early April, but it remains highly speculative today. Vast looks to be funded through its first exploration well (pays 46.25% of gross costs), but will likely need to raise additional capital to fund its additional work commitments. While the Kurdistan Region of Iraq has been quite open and transparent for foreign investment, uncertainty around timing of a federal Oil and Gas Law and the ability to receive payment for oil exports highlight the high country/political risk that still exists.

Country/political risk. Kurdistan has proven to be relatively stable from a political and civil perspective despite ongoing turmoil in Iraq. However, instability elsewhere has created challenges for approving an Iraqi federal Oil and Gas Law, which has the potential to create further delays (e.g., export pipeline) versus our base outlook. Vast’s production is governed under EPSAs that could be modified by the KRG following the ratification of the federal Oil and Gas Law, the timing of which is still uncertain. As a member of OPEC, Iraq’s crude oil production could become subject to quotas that could constrain Vast’s production.

Exploration risk. Given the significant cost of exploration wells (>US$20 million on average), complex geology/drilling, and the relatively underexplored nature of Kurdistan, Vast’s exploration risk remains high at this point. Vast may have to manage overpressured reservoirs that could prove challenging for drilling operations, and also highlight the risk of gas discoveries in the area. Currently there is no market for gas in Kurdistan and, as such, it is unlikely to be developed. Marginal exploration success and flow test results could also temper our outlook towards the company and negatively impact its development plans.

Execution risk. Vast’s development plans are largely contingent upon the size of the discovery on its block, its ability to raise future capital, and political developments within Iraq. Assuming exploration success on its block, Vast will need to overcome logistical issues such as gathering pipeline construction and export constraints, potentially adding to its risk of delay versus our base outlook. In our view, oil field developments in Kurdistan are largely contingent upon the passage of the federal law, which should then allow for export from Kurdistan via new or existing export lines. Limited infrastructure access remains a key issue for companies operating within the region; currently there is no export pipeline available for crude oil production from the region.

Financial risk. With ~$18 million of cash on its balance sheet and zero debt, Vast should be funded through its first exploration well, but it will likely need to raise additional equity, potentially later this year, to fund its future work commitments. The company has warrants outstanding that could provide a much-needed cash injection of $27 million in June 2010.

Vast appears to be funded through its first exploration well, but its cash position will be tight.

Passage of the federal Oil and Gas Law remains a critical milestone for companies in Kurdistan to receive payment for exports.

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Corporate Profile – Vast Exploration Inc.

Vast’s international oil exploration strategy is one based in the Kurdistan region, holding 77,330 net undeveloped acres on the Qara Dagh Block. Vast entered Kurdistan in May 2008 after it, along with partners Niko Resources (37% operated) and Groundstar Resources (6% wi), signed a PSC with the Kurdistan Regional Government whereby Vast would receive a 27% non-operated interest in the Qara Dagh Block. The company then increased its working interest to 37% in September 2009 with the understanding that the KRG will receive 60 million common shares of Vast (valued at $30 million) in 2H/10 to be held in the Kurdistan Social Fund. Vast also has minor operations in Canada; however, with the company’s focus in Kurdistan, no material capital is expected to be allocated to these operations (see Exhibits 2.11-2.16).

T H E K U R D I S T A N C O N N E C T I O N

In our view, Vast’s Board of Directors and Advisory Board possess close relationships with key officials within the Kurdistan Regional Government that could offer a competitive advantage for the company and its partners. The company’s President and CEO, Ahmed Said, was appointed in October 2007 in connection with an overall shift in strategy aimed at high-impact international exploration. Mr. Said, Kurdish by background, brings a short but thus far successful track record in oil and gas, and also serves as the President and CEO of Longford Energy. Other members of the senior management team are Fari Goodarzi, VP Exploration; Gary Lobb, VP Finance and CFO; Richard Naab (U.S. General, Retired), VP Kurdistan Operations; and Patrick Gleeson, Corporate Secretary. Vast maintains close ties with Forbes & Manhattan Inc. (Stan Bharti), a resource-focused private merchant bank that has been involved in over $1 billion in financings since 2007, including Vast, Longford, and Stetson Oil & Gas Inc. (SSN-V) in the mining and oil and gas sectors (see Exhibit 2.13). The Strategic Advisory Board also includes U.S. General (Retired) Jay Garner, appointed in 2003 to direct the Office of Reconstruction and Humanitarian Assistance in Iraq.

Vast trades on the TSX Venture Exchange under the symbol VST. With a market capitalization of $149 million, Vast has 173 million shares outstanding, of which roughly 1.4 million (<1%) are held by senior management and directors. In lieu of cash payment for its capacity-building payments and increased working interest in the Qara Dagh Block, the Kurdistan Regional Government (Social Fund) does not currently hold any shares in Vast Exploration, but will have a 26% stake once the 60 million shares are issued in connection with its 10% increase in working interest. We also note that Niko Resources holds 19.3 million common shares (11%) of Vast. Vast reports its financial results in Canadian dollars in accordance with Canadian GAAP and follows a full cost accounting policy. The company’s reserves are evaluated by GLJ Petroleum Consultants Ltd.

Qara Dagh ownership: Niko Resources 37%, Vast 37%, Groundstar 6%, and the KRG 20%.

Vast’s strong relationships in Kurdistan could provide a key competitive advantage for the partners going forward.

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Exhibit 2.12: Vast Exploration – Forbes & Manhattan Equity Deals

Company NamePrimary Country of Operations Main Product(s)

Market Capitalization

Constd. Thomson Canada Iron Ore $1,200MDesert Sun Mining Brazil Gold Production $735M (sold)First Uranium South Africa Uranium, Gold $400MCrocodile Gold Corp. Australia Gold Production $170MSulliden Gold Peru Near-Term Gold Producer $110MAvion Resources Mali Gold Production $93MVast Exploration Kurdistan (Iraq) Oil & Gas $85MCrowflight Minerals Canada Nickel Production $78MAlexis Minerals Canada Gold Production $65MLongford Energy Canada Oil & Gas $39MLargo Resources Brazil Strategic Metals $39MAberdeen International Global Resource Investment $32MAllana Resources Ethiopia Potash $27MRodinia Minerals U.S.A. Lithium $20MApogee Minerals Bolivia Silver/Zinc $14MDacha Capital N/A Rare Earth Investment $12M

Total $3.0B

Brazil Potash Corp. Brazil Potash Private Company

Source: Company reports.

Exhibit 2.11: Vast Exploration – Stock Performance

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Mill

ion

s

Market Cap:

EV:O/S shares:

52 w k:Vast Exploration

TSX Producers Index (Rebased)

Brent Crude Oil Price (Rebased)

C$148.8M

C$129.6M173.0M

$0.26-$0.93

Source: Bloomberg; Company reports; Scotia Capital estimates.

V A S T / L O N G F O R D M E R G E R P O S S I B I L I T Y ?

We place a high probability that Vast Exploration and Longford Energy will pursue a merger in mid-2010 that could create a sizable Kurdistan pure play with ample exploration potential. The combined entity would still require new capital under our estimates by mid-2010 due to Longford’s remaining PSC capacity-building payments to the KRG (US$25 million) and it plans to spud its first well in Q4/10. We believe the combination would be strategically sound as Longford could capitalize (equity raise) on any early success from Vast’s Qara Dagh exploration program (see Exhibits 2.11-2.16).

Forbes & Manhattan has been involved with numerous resource companies across challenging jurisdictions.

A merger between Vast and Longford could occur in 2010 and would provide two prospective blocks for the combined entity.

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Exhibit 2.13: Vast Exploration – Management and Directors

Name Position SharesOptions/ Warrants Description

Ahmed Said President, Chief Executive Officer and Director

50,000 3,480,000 Mr. Said is a professional engineer with experience in the domestic and international oil and gas industry. He is also the President and CEO of Longford Energy Inc. (operations in Kurdistan) and the President of the Oil & Gas Group of Forbes & Manhattan Inc., a private merchant bank. Mr Said holds a Bachelor of Science degree in Engineering from the University of Calgary.

Gary Lobb Vice President, Finance and Chief Executive Officer

0 482,500 Mr. Lobb is a Chartered Accountant with over 22 years of financial and tax experience in the oil and gas industry. He has previously held management positions in various financial capacities including the VP, Finance and CFO of C1 Energy Ltd. and VP, Finance and CFO and Corporate Secretary of Nycan Energy Corp. Mr. Lobb holds a Bachelor of Commerce degree from the University of Calgary.

Fari Goodarzi Vice President, Exploration 152,000 482,500 Mr. Goodarzi has over 40 years of experience in technical and management roles with public, private and government corporations. He holds a Master of Science and a Doctor of Philosophy in Geology and Geochemistry from the University of Newcastle-Upon Tyne in England and is a Fellow of the Royal Society of Canada.

Richard Naab Vice President, Kurdistan Operations 0 0 Mr. Naab was the commander of the allied forces in northern Iraq (Kurdistan) in 1991 where he was largely responsible for implementing a humanitarian effort to assist and resettle many of the destroyed villages. In 2003, he was appointed as North Regional Coordinator for the Coalition Provisional Authority, where he was in charge of the administration of seven northern governates from a military and economic perspective.

Patrick Gleeson Corporate Secretary 0 505,000 Mr. Gleeson has more than six years of experience as corporate lawyer at a major Canadian law firm. His main responsibilities included counselling companies with respect to equity and debt debt financings, mergers and acquisitions, and defense of hostile takeovers. He is concurrently General Counsel and Corporate Secretary of Longford Energy Inc. Mr. Gleeson is a director of a number of private companies and an officer of several public companies.

Stan Bharti Director 1,135,834 4,005,000 Mr. Bharti has over 25 years of business, management and financial experience, and is the President of Forbes & Manhattan Inc. Over the past ten years he has been involved in business transactions in Europe, Australia, Africa, and North America. Mr. Bharti holds two Master of Science degrees in Mining Engineering from Moscow, Russia and London, England.

Tito Ghandi Director 0 500,000 Mr. Ghandi has more than 20 years of experience as an entrepreneur, business operator and investor. He has bought, restructured and sold numerous private companies over his career.

Mark Brennan Director 25,000 900,000 Mr. Brennan was a founding member of Desert Sun Mining Corp. with over 20 years of financing experience in North America and Europe. He is also the founder and principal of Linear Capital, President and CEO of Largo Resources Inc. and former President and CEO and Chairman of Admiral Bay Resources.

Jay Garner Director 80,650 775,000 Mr. Garner has recently been an advisor to Vast and Forbes & Manhattan, Inc. in the acquisition of the company's exploration block in Kurdistan. He has held numerous positions with the U.S. Army and in 2003 was appointed by the Secretary of Defense to organize and direct the Office of Reconstruction and Humanitarian Assistance (ORHA) for post-war Iraq.

Total Beneficial Ownership 1,443,484 11,130,000Total Ownership as % of Total Shares Outstanding 0.83%

Source: Company reports; SEDI.

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Exhibit 2.14: Vast Exploration – Operating Summary

Years Ending January 31, C$000's 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E

Avg Daily Production

Crude Oil & NGL (bbl/d)

Canada 4 0 8 8 8 7 10 10 10

Kurdistan 0 0 0 0 0 0 1,865 11,100 18,500

Total 4 0 8 8 8 7 1,875 11,110 18,510

Natural Gas (mcf/d)

Canada 69 199 173 99 46 37 0 0 0

Total 69 199 173 99 46 37 0 0 0

Equivalent (boe/d) 16 33 37 24 16 13 1,875 11,110 18,510

Equivalent (mcfe/d) 93 199 221 147 93 77 11,251 66,660 111,060

Production Breakdown (%)

Crude Oil & NGL 26% 0% 22% 33% 51% 51% 100% 100% 100%

Natural Gas 74% 100% 78% 67% 49% 49% 0% 0% 0%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

Commodity Prices

WTI Crude Oil (Cushing, US$/bbl) $65.30 $75.68 $95.35 $65.01 $81.22 $85.00 $85.00 $85.00 $85.00

Brent Differential to WTI (US$/bbl) 0.68 -0.33 1.80 0.37 1.43 1.00 1.50 1.50 1.50

Brent Posted (US$/bbl) 64.62 76.01 93.54 64.64 79.79 84.00 83.50 83.50 83.50

Foreign Exchange (US$/C$) 0.88 0.944 0.922 0.892 0.978 0.950 0.925 0.925 0.925

Wellhead Prices

Crude Oil & NGL ($/bbl)

Canada $50.69 $59.80 $90.34 $81.31 $93.48 $96.38 $95.81 $95.81 $95.81

Kurdistan 0.00 0.00 0.00 0.00 0.00 0.00 30.00 83.78 83.78

Global Wellhead Oil Price ($/bbl) (Unhedged) 50.69 0.00 90.34 81.31 93.48 96.38 30.35 83.79 83.79

Natural Gas ($/mcf)

Canada $8.45 $6.67 $8.38 3.84 4.84 5.37 0.00 $0.00 $0.00

Global Natural Gas Price ($/mcf) 8.45 6.67 8.38 3.84 4.84 5.37 0.00 0.00 0.00

Royalties (%)

Canada 5.1% 12.3% 12.7% 7.8% 13.0% 13.0% 13.0% 13.0% 13.0%

Kurdistan 0.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0% 10.0% 10.0%

Total 5.1% 0.0% 12.7% 7.8% 13.0% 13.0% 10.1% 10.0% 10.0%

Natural Gas (%)

Canada 5.1% 12.3% 12.7% 11.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Total 5.1% 12.3% 12.7% 11.0% 13.0% 13.0% 0.0% 0.0% 0.0%

Worldwide Royalty Rate 5.1% 12.3% 12.7% 9.1% 13.0% 13.0% 10.1% 10.0% 10.0%

Operating and G&A Costs ($)

General & Administration 1,537 1,604 3,083 3,263 3,300 3,550 4,100 5,500 6,200

General & Administration ($/boe) 271.71 132.15 229.33 364.90 580.77 757.08 5.99 1.36 0.92

Depletion, Depreciation & Amortization 1,061 2,841 1,172 1,742 2,925 3,200 10,474 28,386 40,537

Depletion, Depreciation & Amortization ($/boe) 187.59 234.03 87.20 194.81 514.78 682.44 15.30 7.00 6.00

Depletion, Depreciation & Amortization ($/mcfe) 31.27 39.00 14.53 32.47 85.80 113.74 2.55 1.17 1.00

Crude Oil & NGL ($/bbl)

Canada $71.90 $30.39 $27.96 $36.10 $25.00 $25.00 $25.00 $25.00 $25.00

Kurdistan 0.00 0.00 0.00 0.00 0.00 16.58 17.03 15.14 11.35

Total $71.90 $0.00 $27.96 $36.10 $25.00 $25.00 $17.07 $15.14 $11.36

Natural Gas ($/mcf)

Canada $11.98 $5.07 $4.66 $4.85 $4.17 $4.17 $4.17 $4.17 $4.17

Total $11.98 $5.07 $4.66 $4.85 $4.17 $4.17 $0.00 $0.00 $0.00

Operating Netback ($/bbl)

Crude Oil & NGL ($/bbl)

Canada -$23.80 $0.00 $50.91 $38.91 $56.33 $58.85 $58.36 $58.36 $58.36

Kurdistan 0.00 0.00 0.00 0.00 0.00 0.00 9.97 60.27 64.05

Total -$23.80 $0.00 $50.91 $38.91 $56.33 $58.85 $10.23 $60.27 $64.05

Natural Gas ($/mcf)

Canada -$3.97 $0.78 $2.66 -$1.43 $0.05 $0.51 $0.00 $0.00 $0.00

Total -$3.97 $0.78 $2.66 -$1.43 $0.05 $0.51 $0.00 $0.00 $0.00

Worldwide Operating Netback ($/boe) -$25.06 $4.71 $23.08 $6.68 $28.99 $31.63 $10.23 $60.27 $64.05

Source: Company reports; Scotia Capital estimates.

Financial Statements

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Exhibit 2.15: Vast Exploration – Income Statements

Years Ending January 31, C$000's 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E

Commodity Prices

WTI Crude Oil (US$/bbl) $65.30 $75.68 $95.35 $65.01 $81.22 $85.00 $85.00 $85.00 $85.00

Brent Posted (US$/bbl) 64.62 76.01 93.54 64.64 79.79 84.00 83.50 83.50 83.50

Revenue

Exploration & Production $287 $484 $782 $371 353 305 14,202 230,582 356,922

Corporate 16 49 204 47 0 0 0 0 0

Royalties 15 60 99 34 46 40 2,088 33,990 56,620

Net Revenues 289 473 887 384 307 266 12,114 196,591 300,302

Expenses

Operating Costs 414 367 373 278 142 117 11,683 61,411 76,741

General & Administrative 1,537 1,604 3,083 3,263 3,300 3,550 4,100 5,500 6,200

Interest 0 0 0 -96 -121 335 912 2,121 -1,017

Depletion, Depreciation & Amortization 1,061 2,841 1,172 1,742 2,925 3,200 10,474 28,386 40,537

Foreign Exchange Loss 1 7 -95 -247 0 0 0 0 0

Stock Based Compensation 87 568 5,826 2,386 2,800 3,150 3,500 3,500 3,500

Impairment 0 0 0 0 0 0 0 0 0

Other 1,000 0 115 0 0 0 0 0 0

Total Expenses 4,101 5,387 10,475 7,326 9,046 10,353 30,670 100,918 125,961

Earnings Before Income Taxes -3,813 -4,914 -9,587 -6,941 -8,739 -10,087 -18,555 95,673 174,341

Taxes

Current 0 0 0 0 0 0 0 0 0

Deferred -576 0 0 0 0 0 0 0 0

Total Tax -576 0 0 0 0 0 0 0 0

Corporate Tax Rate 15% 0% 0% 0% 0% 0% 0% 0% 0%

Current Tax 0% 0% 0% 0% 0% 0% 0% 0% 0%

Deferred Tax 100% 0% 0% 100% 100% 100% 100% 100% 100%

Minority Interest 0 0 0 0 0 0 0 0 0

Equity Income 0 0 0 0 0 0 0 0 0

Discontinued Operations 0 -1,051 0 0 0 0 0 0 0

Extraordinary Items/Accounting Changes 0 0 0 0 0 0 0 0 0

Net Income from Continuing Operations -3,237 -5,965 -9,587 -6,941 -8,739 -10,087 -18,555 95,673 174,341

Net Income Available to Common -3,237 -5,965 -9,587 -6,941 -8,739 -10,087 -18,555 95,673 174,341

EPS -- Basic -$0.15 -$0.14 -$0.10 -$0.05 -$0.05 -$0.06 -$0.11 $0.55 $1.01

EPS -- Diluted -$0.15 -$0.14 -$0.10 -$0.04 -$0.04 -$0.04 -$0.08 $0.41 $0.74

Reported Operating Cash Flow -1,666 -2,138 -3,025 -2,891 -3,014 -3,737 -4,581 127,559 218,378

CFPS -- Basic -$0.08 -$0.05 -$0.03 -$0.02 -$0.02 -$0.02 -$0.03 $0.74 $1.26

CFPS -- Diluted -$0.08 -$0.05 -$0.03 -$0.02 -$0.01 -$0.02 -$0.02 $0.54 $0.93

Capitalized Interest 0 0 0 0 0 0 0 0 0

Discretionary Cash Flow -1,666 -2,138 -3,025 -2,891 -3,014 -3,737 -4,581 127,559 218,378

CFPS -- Basic -$0.08 -$0.05 -$0.03 -$0.02 -$0.02 -$0.02 -$0.03 $0.74 $1.26

CFPS -- Diluted -$0.08 -$0.05 -$0.03 -$0.02 -$0.01 -$0.02 -$0.02 $0.54 $0.93

Outstanding Common Shares (Basic) 31,328 49,211 110,894 172,976 172,976 172,976 172,976 172,976 172,976

Weighted Average Common Shares

Basic 22,105 42,496 91,766 139,204 172,976 172,976 172,976 172,976 172,976

Diluted (incl. share to KRG) 22,105 42,496 91,766 169,937 234,463 234,463 234,463 234,463 234,463

Note: Taxes in Kurdistan are paid from the government's share of profit oil.

Source: Company reports; Scotia Capital estimates.

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Exhibit 2.16: Vast Exploration - Cash Flow Statements and Balance Sheets

Years Ending January 31, C$000's 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E

Retained EarningsRetained Earnings, Opening -8,445 -11,681 -17,646 -27,233 -34,175 -42,914 -53,001 -71,556 24,117

Net Income -3,237 -5,965 -9,587 -6,941 -8,739 -10,087 -18,555 95,673 174,341

Other 0 0 0 0 0 0 0 0 0

Retained Earnings, Closing -11,681 -17,646 -27,233 -34,175 -42,914 -53,001 -71,556 24,117 198,458

Cash FlowOperating ActivitiesNet Income -3,237 -4,914 -9,587 -6,941 -8,739 -10,087 -18,555 95,673 174,341

Deferred Taxes -576 0 0 0 0 0 0 0 0

Depreciation, Depletion & Amortization 1,061 2,841 1,172 1,742 2,925 3,200 10,474 28,386 40,537

Stock Based Compensation 87 568 5,826 2,386 2,800 3,150 3,500 3,500 3,500

Asset Retirement Obligation -2 0 -346 -337 0 0 0 0 0

Foreign Exchange Amortization 0 7 -90 259 0 0 0 0 0

Other 1,000 -640 0 0 0 0 0 0 0

Operating Cash Flow -1,666 -2,138 -3,025 -2,891 -3,014 -3,737 -4,581 127,559 218,378

Changes in non-cash working capital -814 3,822 -1,399 0 0 0 0 0 0

Funds from Operating Activities -2,479 1,684 -4,424 -2,891 -3,014 -3,737 -4,581 127,559 218,378

Net Investing ActivitiesExploration & Development -3,027 -2,430 -20,302 -16,338 -17,344 -18,731 -44,400 -70,300 -37,000

Corporate Eliminations 0 90 165 0 0 0 0 0 0

Other/Bonus Payments/Third-Party Cost Recovery -1,000 0 0 0 0 0 -1,250 -3,750 -5,000

Cash Flow from Investing Activities -4,027 -2,340 -20,136 -16,338 -17,344 -18,731 -45,650 -74,050 -42,000

Changes in non-cash working capital 1,601 -3,121 -595 0 0 0 0 0 0

Funds from Investing Activities -2,426 -5,461 -20,731 -16,338 -17,344 -18,731 -45,650 -74,050 -42,000

Financing ActivitiesLong Term Debt (Decrease) 0 0 0 0 0 0 0 0 0

Issuance of Common Shares 4,113 4,496 32,593 28,473 0 0 0 0 0

Other 0 0 0 0 0 0 0 0 0

Cash Flow from Financing Activities 4,113 4,496 32,593 28,473 0 0 0 0 0

Changes in non-cash working capital 0 0 0 0 0 0 0 0 0

Funds from Financing Activities 4,113 4,496 32,593 28,473 0 0 0 0 0

Cash, Opening 1,274 482 1,201 8,635 17,879 -2,479 -24,947 -75,178 -21,669

Effect of FX on Cash 0 0 -4 0 0 0 0 0 0

Net Change in Cash -792 719 7,438 9,244 -20,358 -22,468 -50,231 53,509 176,378

Cash, Closing 482 1,201 8,635 17,879 -2,479 -24,947 -75,178 -21,669 154,709

Balance SheetsYears Ending January 31, C$000's 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E

AssetsCurrent Assets

Cash & Term Deposits 482 1,201 8,635 17,879 -2,479 -24,947 -75,178 -21,669 154,709

Accounts Receivable 6,206 862 2,884 2,884 2,884 2,884 2,884 2,884 2,884

Future Income Taxes 576 0 0 0 0 0 0 0 0

Other/Prepaid Expenses 0 0 0 0 0 0 0 0 0

Total Current Assets 7,264 2,062 11,519 20,763 406 -22,063 -72,294 -18,785 157,593

Property, Plant & Equipment 5,478 9,140 29,781 43,811 58,355 73,936 116,086 186,636 225,136

Accumulated Depletion, Depreciation & Amortization 1,723 5,639 6,556 8,298 11,223 14,423 24,897 53,283 93,820

Net Property, Plant & Equipment 3,755 3,501 23,226 35,513 47,132 59,513 91,189 133,353 131,316

Other 0 0 0 0 0 0 0 0 0

Total Assets 11,020 5,564 34,745 56,277 47,538 37,451 18,895 114,568 288,909

Liabilities 0 0 0 0 0 0 0 0 0Current Liabilities

Bank Indebtedness $0 $0 $0 0 0 0 0 0 0

Accounts Payable & Accrued Liabilities 6,209 1,565 1,595 1,595 1,595 1,595 1,595 1,595 1,595

Other 0 0 0 0 0 0 0 0 0

Total Current Liabilities 6,209 1,565 1,595 1,595 1,595 1,595 1,595 1,595 1,595

Long Term Debt 0 0 0 0 0 0 0 0 0

Asset Retirement Obligation 548 1,213 1,533 1,533 1,533 1,533 1,533 1,533 1,533

Other 0 0 0 0 0 0 0 0 0

Total Liabilities 6,758 2,778 3,128 3,128 3,128 3,128 3,128 3,128 3,128

Shareholder EquityCommon Shares 14,354 17,796 50,549 79,022 79,022 79,022 79,022 79,022 79,022

Contributed Surplus 1,589 2,635 8,301 8,301 8,301 8,301 8,301 8,301 8,301

Retained Earnings -11,681 -17,646 -27,233 -34,175 -42,914 -53,001 -71,556 24,117 198,458

Translation Adjustment 0 0 0 0 0 0 0 0 0

Total Equity 4,262 2,785 31,617 53,149 44,410 34,323 15,767 111,440 285,781

Total Liabilities & Shareholder's Equity $11,020 $5,564 $34,745 $56,277 $47,538 $37,451 $18,895 $114,568 $288,909

Source: Company reports; Scotia Capital estimates.

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Longford Energy Inc. (LFD-V)

Mar 26, 2010: $0.33 1-Yr Target: $0.45 Capitalization Rating: 2-Sector Perform 1-Yr ROR: 38.5% Shares O/S (M) 135.7 Risk: Caution Warranted 2-Yr Target: $0.50 Total Value ($M) 44.1 IBES EPS 2009E $-0.03 2-Yr ROR: 53.8% Float O/S (M) 116.7 IBES EPS 2010E $-0.04 Div. (Curr.): $0.00 Float Value ($M) 37.9 Yield 0.0% Valuation: Based on our risked NAV of $0.43/share. Key Risks to Target: Commodity prices, exploration, project execution, political/regulatory. Qtly CFPS (FD) (Next Release: Apr-10) Y/E DECEMBER-31 Mar Jun Sep Dec Year P/CF 2008A $-0.01A $0.01A $0.01A $0.00A $-0.05 n.a. 2009E $-0.00A $0.00A $0.00A $0.00 $-0.03 n.a. 2010E $0.00A $0.00A $0.00A $0.00 $-0.01 n.a. 2011E $0.00 $0.00 $0.00 $0.00 $-0.02 n.a. Industry Specific 2008A 2009A 2010 2011 Oil Price (Brent, /bbl) (US$) $97.69 $62.04 $77.60 $77.60 Foreign Exchange (US$) / $0.94 $0.88 $0.95 $0.95 CFPS Sens to $1/bbl Brent (US$) n.m. n.m. n.m. n.m. CFPS Sens to $0.01/CAD FX (US$) n.m. n.m. n.m. n.m.

Regular Voting Note: Historical price multiple calculations use FYE price. Source: Reuters; company reports; Scotia Capital estimates.

Blast from the Past I N V E S T M E N T H I G H L I G H T S

First well to spud Q4/10. As a Kurdistan exploration pure play, Longford Energy Inc.’s (Longford’s) most visible catalyst remains its first exploration well on the Chia Surkh Block, which could spud as early as Q4/10, with results expected three to four months thereafter.

Discovered oil lowers its risk profile. Overall, we characterize Longford as offering reasonable prospectivity in the context of current gross OOIP (P50) estimates of >660 mmbbl and a slightly lower exploration risk profile given the nine wells drilled and discovered oil on the main Chia Surkh structure. Of note, the No. 7 well (1952) flowed at nearly 5,000 bbl/d from the Jeribe (Tertiary).

Valuation. Our NAV analysis for Longford assumes a 40% interest in the Chia Surkh Block that implies an unrisked NAV of $1.60 per share ($0.43 per share risked), highly contingent on the company’s ability to raise additional capital and exploration success.

Leveraging a strong team. In our view, Longford has a strong partner in Turkish-based Genel Enerji (20% wi), which holds interests in six licenses in Kurdistan, including the production-ready Taq Taq field (Addax/Sinopec/KRG), and a strong advisory board with relationships in Kurdistan.

Balance sheet – limited cash. With approximately $8.2 million of cash on its balance sheet, Longford will likely need to tap equity markets to fund its remaining US$25 million capacity building payment and as it prepares to spud its first exploration well later this year.

We have initiated coverage on the common shares of Longford Energy Inc. with a 2-Sector Perform rating and a one-year target price of $0.45 per share (based on our risked NAV analysis).

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Summary & Investment Recommendation

As a Kurdistan exploration pure play, Longford Energy Inc.’s (Longford’s) most visible catalyst remains its first exploration well on the Chia Surkh Block, which could spud as early as Q4/10, with results expected three to four months thereafter. Overall, we characterize Longford as offering reasonable prospectivity in the context of current gross OOIP (P50) estimates of >660 mmbbl and a slightly lower exploration risk profile given the nine exploration wells and discovered oil on the main Chia Surkh structure. While exploration costs can vary based on shallow versus deeper targets, the fact that Longford will also carry Petoil’s 20% interest through the first two well commitments (or 75% of gross costs) raises its capital risk, and it will likely require additional funding/equity this year. As such, our base outlook is subject to delays until financing can be secured. In our view, Longford has a strong partner in Turkish-based Genel Enerji (20% wi), which holds interests in six licenses in Kurdistan, including the production-ready Taq Taq field (Addax/Sinopec/KRG). Longford has the option to an additional 20% interest (increasing to 40% overall) in the Chia Surkh Block and is currently in negotiations with the KRG for signature/capacity bonus payments that we estimate could result in 100 million additional shares being issued directly to the KRG later this year.

We have initiated coverage on the common shares of Longford Energy Inc. with a 2-Sector Perform rating and a one-year target price of $0.45 per share, which is based on our risked NAV analysis. Given the company shares the same management and strategic focus as Vast Exploration Inc. (both Forbes & Manhattan companies), we place a high probability that Longford could announce a potential merger with Vast as early as 1H/10. In our view, the combination could be beneficial to Longford as it could potentially capitalize on the valuation uplift afforded by early success at Vast’s Qara Dagh block (which spud its first well in late March 2010).

Longford’s primary catalyst is its first exploration well, which could spud Q4/10.

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Exhibit 3.1: Longford – Warrants Outstanding

Exercise Warrants Potential Expiry Date Price Outstanding ProceedsFebruary 8, 2010 $0.35 10.7M $3.7MJuly 7, 2010 $0.75 4.5M $3.4MJuly 10, 2010 $1.00 12.3M $12.3M

July 7, 2011 $0.75 75.0M $56.3M

102.4M $75.6M

September 29, 2011* $0.65 9.5M $6.2M

*Incl. with proposed issue to Quantum Partners Ltd. (Soros Fund Management), expiry 18 months from expected close.

Source: Company reports.

Financial Outlook – Moving into Spending Phase

With approximately $8.2 million of cash on its balance sheet, Longford will likely need to tap equity markets to fund its remaining US$25 million capacity-building payment and as it prepares to spud its first exploration well as early as Q4/10. Longford also has 102.4 million warrants currently outstanding that could net the company proceeds of roughly $75.6 million if fully exercised, the lion’s share of which do not expire until July 2011 (see Exhibit 3.1). The company’s last issue on July 7, 2009,

included 75 million shares at $0.40 per share, but the company announced on March 25, 2010, that it had entered into an agreement to sell 19.0 million (14% ownership) shares at $0.30 per share to Quantum Partners Ltd. (Soros Fund Management). Under the PSC’s initial three-year exploration sub-phase (ends June 2012), Longford estimates its net minimum work commitment at US$46 million, including two exploration wells. Assuming a 40% interest in the block, Longford will pay 75% (including Petoil’s 20% wi) of the gross exploration costs under the first sub-phase (two wells plus seismic).

The KRG does not currently hold any beneficial equity ownership in Longford, but is expected to be issued shares in lieu of signature bonuses and capacity payments when the company elects to exercise the option for an additional 20% interest (40% overall). As such, our fully diluted NAV and CFPS estimates include 100 million shares that we estimate could be issued later this year.

2010 outlook. Our 2010 outlook includes net capital spending of $13.9 million, which assumes 305 km of 2D seismic acquisition (May) and site preparation for its first well. We anticipate an additional net cash outlay of US$25 million as early as June/July to the KRG for Longford’s remaining capacity-building payment, associated with only the initial 20% interest. That said, we place a high probability that Longford will need to raise additional equity mid-year that could move up drilling of its first shallow exploration well to Q4/10 (December), which would raise our overall capital spending outlook for 2010 (see Exhibits 3.2-3.3).

2011 outlook. Our net capital spending forecast of $30.5 million in 2011 incorporates the cost of drilling the first shallow (<2,000 m) exploration well, which could spud as early as Q4/10, but will likely require additional cash. We have also incorporated spending for a second deeper (2,500-3,500 metre) well to spud Q3/11E (our estimate). We estimate gross costs for exploration wells (70- to 110-day drill) at US$15 million for the shallower targets and US$20 million-US$25 million for deeper prospective zones going forward. While our base outlook does not include any development expenditures in 2011 or 2012, early success could yield temporary production facilities and trucking moderate volumes to local markets ahead of our expectations.

Longford’s fiscal year-end is December 31. The company reports its financial results in Canadian dollars in accordance with Canadian GAAP and reports its reserves in compliance with NI 51-101.

Longford will likely need to raise capital to fund its first exploration well.

Longford will need to pay US$25 million and issue additional shares to the KRG this year in connection with its 40% interest in Chia Surkh.

Our capital spending outlook includes two exploration wells to be drilled over by the end of 2011E.

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Exhibit 3.2: Longford – Net Capital Spending and Cash Outlook

2010E 2011E 2012E 2013E 2014E

Production (bbl/d) 0 0 0 4,000 8,000

Capital Expenditure Summary (C$M)- Seismic $6.4 $0.0 $0.0 $3.8 $0.0- Exploration & Appraisal Drilling 7.5 30.5 23.3 15.0 0.0

- Development Drilling 0.0 0.0 0.0 8.0 8.0- Facilities 0.0 0.0 4.0 10.0 20.0- Pipeline 0.0 0.0 0.0 0.0 0.0

Total (C$M) $13.9 $30.5 $27.3 $36.8 $28.0

Y/E Cash Position (C$M) -$29.8 -$64.0 -$95.8 -$98.4 -$34.4

Source: Company reports; Scotia Capital estimates.

We have assumed production will not occur until 2013.

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Exhibit 3.3: International E&P Comparative Valuation

Enterprise Value (EV) (c)

12 Mkt Debt-Adjusted 2008 Net 2P 2010E NetTSX SC Price Month Cap CF Multiple (a) Reserves Production Net Asset Value

C$, unless otherwise noted Ticker Rating* (C$) Target (C$) (C$M) 2010E 2011E (C$/boe) (C$/boe/d) Risked P/Risked Unrisked P/Unrisked

Producing E&Ps (d)

Pacific Rubiales PRE 1-SO $20.09 $23.50 $5,240 5.9x 3.3x $26.36 $86,119 $23.39 86% $74.29 27%Petrominerales PMG 2-SP $31.52 $33.00 $3,108 4.4x 3.7x $94.02 $86,367 $32.79 96% $69.63 45%Niko Resources (b)

NKO 2-SP $103.23 $110.00 $5,237 12.1x 10.9x $28.57 $90,579 $106.92 97% $156.03 66%

Calvalley Petroleum CVI.a 2-SP $3.44 $4.00 $339 9.3x 3.1x $23.42 $104,435 $3.78 91% $11.26 31%Bankers Petroleum BNK 2-SP $9.23 $10.00 $2,107 20.7x 9.5x $12.43 $416,484 $10.11 91% $18.80 49%Vermilion Energy Trust VET.UN 2-SP $35.33 $39.00 $2,810 8.5x 7.7x $24.16 $100,100 $38.77 91% $78.36 45%Petrolifera Petroleum PDP 2-SP $0.89 $1.05 $127 6.2x 6.2x $9.89 $42,385 $1.07 83% $4.91 18%

Average 9.6x 6.3x $31.26 $132,352 91% 40%

Exploration Companies (d)

Parex Resources PXT.V 1-SO $4.64 $5.50 $298 $5.63 82% $28.79 16%Vast Exploration VST.V 1-SO $0.86 $1.40 $149 $1.40 61% $5.05 17%WesternZagros Resources WZR.V 2-SP $0.80 $1.15 $166 $1.16 69% $9.86 8%Longford Energy LFD.V 2-SP $0.33 $0.45 $44 $0.43 76% $1.60 20%ShaMaran Petroleum SNM.V 2-SP $0.62 $0.70 $309 $0.68 91% $1.71 36%

Average 76% 20%

(a) Debt-adjusted cash flow multiple = (market price x basic shares + YE net debt) / (discretionary cash flow + (interest x (1 - current tax/pre-tax income))).

(b) Niko Resources year-end is March 31 and Vast Exploration year-end is January 31; 2010E based on fiscal 2011E year-end.(c) Enterprise value (EV) in C$. Production and reserves stated after royalties and government entitlement (net).(d) PMG, CVI, NKO, WZR.V, PRE, PXT.V, SNM.V & BNK EPS/CFPS estimates denominated in US$, converted at current exchange rate for valuation purposes. Share price is denominated in C$.

*Note: Our exploration company rankings are based on a benchmark of primarily exploration based companies (moderate production) with operations focused in the Middle East, Africa and Southeast Asia, which includes WesternZagros Resources (Kurdistan), Longford Energy (Kurdistan), ShaMaran Petroleum (Kurdistan), DNO (Kurdistan), Vast Exploration (Kurdistan), Gulfkeystone (Kurdistan/Algeria), Heritage Oil (Kurdistan), Sterling Energy (Kurdistan/Africa), Groundstar Resources (Kurdistan/Egypt), Gulfsands Petroleum (Iraq/Syria), Sea Dragon Energy (Egypt), Hardy Oil & Gas (India/Nigeria), ERHC Energy (Nigeria/JDZ) and Chariot Oil & Gas (Namibia).

Source: Company reports; Bloomberg; Scotia Capital estimates.

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Exhibit 3.4: Longford – Building Blocks of NAV

79% 79%76% 76%

20% 20%

$-

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

$1.75

$/Share

0%

20%

40%

60%

80%

100%

P/NAV

Kurdistan - Chia Surkh Prospect (P50) $0.00 $0.00 $0.23 $0.23 $1.54 $1.54

Kurdistan - Chia Surkh Prospect (P90 + SC Risked) $0.36 $0.36 $0.14 $0.14 $0.00 $0.00

Balance Sheet/Land/Fx $0.06 $0.06 $0.06 $0.06 $0.06 $0.06

Target Price $0.45 $0.45 $0.45 $0.45 $0.45 $0.45

Current Price $0.33 $0.33 $0.33 $0.33 $0.33 $0.33

P/NAV 79% 79% 76% 76% 20% 20%

Base Strip Base Strip Base Strip

Base NAV (P90) Risked NAV All-In Identified Projects (P50)

UnriskedUpside

Source: Company reports; Scotia Capital estimates.

Valuation – Moving Higher as De-Risked

Our NAV analysis for Longford assumes a 40% interest in the Chia Surkh Block that implies an unrisked NAV of $1.60 per share ($0.43 per share risked), highly contingent on its ability to raise additional capital and exploration success; we characterize it as carrying a slightly lower than average risk to its Kurdish peers. We consider our estimates preliminary as the company has no reserves booked and has yet to commence its first exploration well (spud Q4/10-Q1/11). However, the consortium commissioned DeGolyer and MacNaughton Canada Limited (D&M) to provide a Prospective Resource Report for Chia Surkh in September 2009.

The D&M report has been used as the foundation for our NAV analysis, incorporating gross P90 OOIP estimates of 58.9 million barrels in our base NAV and gross P50 OOIP estimates of 661.6 mmbbl in our unrisked NAV. The resource assessment includes only the Tertiary reservoirs for the main Chia Surkh field (excluding five additional prospects) using data acquired from shallow wells drilled from 1908-1952, oil seeps, and surface geology. Longford believes additional potential could exist in the Cretaceous reservoirs and on the five other leads on the block, but no wells have been tested to confirm this. A summary of our NAV analysis is contained in Exhibits 3.4-3.6.

Our one-year target price for Longford of $0.45 per share (38% potential return) is based on our risked NAV of $0.43 per share. We anticipate that our one-year target price could move toward our unrisked NAV of $1.60 per share as the company is able to prove up its resource potential through successful exploration drilling and as the political situation in Iraq/Kurdistan improves. We have assumed Longford will exercise its 20% option to take its ownership of Chia Surkh up to 40% overall, and as such have included the issuance of 100 million shares (our estimate) to the KRG in our fully diluted NAV analysis.

Longford is trading at a 24% and 80% discount to our risked and unrisked NAVs, respectively.

Using the P90 OOIP for Chia Surkh implies a negative NPV under our analysis; as such, we have assumed 50 mmbbl gross recoverable in our Base NAV analysis.

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Exhibit 3.5: Longford – NAV Sensitivity Analysis

Brent 40% Brent 40%Price (US$) wi 100 250 400 500 Price (US$) wi 100 250 400 500

$50/bbl Net $53M $238M $463M $581M $50/bbl Net $13M $137M $297M $376M$1.32/bbl $2.38/bbl $2.89/bbl $2.91/bbl $0.32/bbl $1.37/bbl $1.85/bbl $1.88/bbl$0.22/sh $1.00/sh $1.95/sh $2.44/sh $0.05/sh $0.58/sh $1.25/sh $1.58/sh

$70/bbl Net $158M $446M $701M $870M $70/bbl Net $95M $293M $474M $588M$3.94/bbl $4.46/bbl $4.38/bbl $4.35/bbl $2.38/bbl $2.93/bbl $2.96/bbl $2.94/bbl$0.66/sh $1.88/sh $2.95/sh $3.66/sh $0.40/sh $1.23/sh $1.99/sh $2.47/sh

$80/bbl Net $199M $530M $825M $1,021M $80/bbl Net $127M $356M $564M $696M$4.98/bbl $5.30/bbl $5.16/bbl $5.10/bbl $3.17/bbl $3.56/bbl $3.53/bbl $3.48/bbl$0.84/sh $2.23/sh $3.47/sh $4.29/sh $0.53/sh $1.50/sh $2.37/sh $2.93/sh

$100/bbl Net $268M $666M $1,061M $1,311M $100/bbl Net $180M $458M $732M $900M$6.70/bbl $6.66/bbl $6.63/bbl $6.56/bbl $4.50/bbl $4.58/bbl $4.57/bbl $4.50/bbl$1.13/sh $2.80/sh $4.46/sh $5.51/sh $0.76/sh $1.93/sh $3.08/sh $3.79/sh

*NPV C$ values noted net to company's working interest, based on fully diluted shares including shares to be issued to the KRG.

Chia Surkh Economics - NPV 10 - C$ Millions and C$ per shareGross (100%) Recoverable Oil (mmbbl)

Chia Surkh Economics - NPV 15 - C$ Millions and C$ per shareGross (100%) Recoverable Oil (mmbbl)

Source: Scotia Capital estimates.

Base NAV of $0.41 per share. We estimate Longford’s base NAV at $0.41 per share as at September 30, 2009, based on a sum-of-the-parts approach. Given that under D&M’s estimated gross P90 OOIP for the Chia Surkh field (Tertiary) of roughly 60 mmbbl a commercial development is unlikely to be pursued, we have assumed an additional 120 mmbbl of OOIP for the Cretaceous and/or associated with other prospects on the block. Our analysis assumed a 35% recovery factor and an 80% chance of success, which yields overall gross recoverable resource of 50.1 mmbbl (20.0 mmbbl net). Our base case assumes a discovery in 2011 of this magnitude could provide initial volumes of 20,000 bbl/d (8,000 bbl/d net) being trucked via temporary facilities by 2013 to local markets or other central gathering locations in Kurdistan. Our NAV is based on a 12% after-tax discount rate and a long-term escalated (2% per annum) crude oil price of US$85/bbl in 2012 and beyond.

Layering in the P50 prospective resource estimates – unrisked NAV of $1.60 per share. On an unrisked basis, we calculate Longford’s potential NAV at $1.60 per share, which applies an 80% chance of success and a recovery factor of 35% to its P50 OOIP estimate of 661.6 mmbbl for Chia Surkh – indicating an overall recoverable resource of 185.3 mmbbl gross or 74.1 mmbbl net to Longford. Under this scenario we forecast initial volumes of 10,000-20,000 bbl/d (gross) to be trucked in 2012/13 and peak production of 60,000 bbl/d (24,000 bbl/d net) in 2014. At this production level we have assumed production would be trucked and have not included any potential pipeline. We also note that further upside could exist to our base outlook if the Cretaceous can be proven successful. Our unrisked NAV carries potential upside of 287% and 272%, respectively, compared to our base and risked NAVs.

P/NAV. Longford is trading at a P/NAV (risked) ratio of 76% compared to the producing E&P group1 average of 91%, and 76% for our pure exploration-based peer group average (including WesternZagros Resources Ltd., Vast Exploration Inc., ShaMaran Petroleum Corp., and Parex Resources Inc.), which are its most direct comparables. Based on our unrisked NAV analysis, Longford is trading at a P/NAV ratio of 20% versus our producing E&Ps at 40% and the exploration companies at 20%. In our minds, the discount is in part warranted given that the likelihood and scale of a commercial oil discovery is still uncertain, and the company will likely need to issue equity prior to drilling its first well, which will not spud for another eight months at minimum. That said, our unrisked NAV also points to the upside we potentially see unfolding for the company in Kurdistan.

Evaluating the possibilities. Our NAV estimates are highly sensitive to changes in discovery size and oil prices. With a wide range of potential outcomes, we have run a scenario analysis to illustrate the possible impact to our NAV per share estimates (see Exhibits 3.5-3.6).

1 Producing E&Ps include our coverage universe of Pacific Rubiales Energy Corp., Petrominerales Ltd., Niko Resources Ltd., Calvalley Petroleum Inc., Petrolifera Petroleum Limited, Bankers Petroleum Ltd., and Vermilion Energy Trust.

On a P/NAV basis, Longford is trading relatively in line with its exploration peer group average.

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50 Exhibit 3.6: Longford – NAV Summary Sheet

Net Asset Value (C$)

Reserves/Resource Unit Value (C$ Millions) (C$/share) % NAV Unit Value (C$ Millions) (C$/share) % NAV (C$ Millions) (C$/share) % NAV

Crude Oil & NGL

Kurdistan - Chia Surkh Prospect (P90 + SC Risked) 20.0 mmbbl @ $4.22 /bbl $85 $0.36 86% 0.0 mmbbl @ $0.00 /bbl $0 $0.00 0% $34 $0.14 33%

Kurdistan - Other Prospects (SC Risked) 0.0 mmbbl @ $0.00 /bbl 0 0.00 0% 0.0 mmbbl @ $0.00 /bbl 0 0.00 0% 0 0.00 0%

Total Booked Crude & NGL 20.0 mmbbl @ $4.22 /bbl $85 $0.36 86% 0.0 mmbbl @ $0.00 /bbl $0 $0.00 0% $34 $0.14 33%

Crude Oil & NGL - Identified Projects/Exploration

Kurdistan - Chia Surkh Prospect (P50) 74.1 mmbbls @ $4.94 /bbl $366 $1.54 96% $55 $0.23 54%

Kurdistan - Chia Surkh South Prospect 0.0 mmbbls @ $0.00 /bbl 0 0.00 0% 0 0.00 0%

Kurdistan - Nuhairat Prospect 0.0 mmbbls @ $0.00 /bbl 0 0.00 0% 0 0.00 0%

Kurdistan - Bizniyan Prospect 0.0 mmbbls @ $0.00 /bbl 0 0.00 0% 0 0.00 0%

Kurdistan - Divan Prospect 0.0 mmbbls @ $0.00 /bbl 0 0.00 0% 0 0.00 0%

Kurdistan - Shawladar Prospect 0.0 mmbbls @ $0.00 /bbl 0 0.00 0% 0 0.00 0%

Total Unbooked Crude & NGL 74.1 mmbbls @ $4.94 /bbl $366 $1.54 96% $55 $0.23 54%

Total Reserves 20.0 mmboe @ $4.22 /boe $85 $0.36 86% 74.1 mmboe @ $4.94 /boe $366 $1.54 96% $89 $0.37 87%

Net Undeveloped Land (c)

Kurdistan 93 M Acres @ $0.00 /acre $0 $0.00 0% 0 M Acres @ $0.00 /acre $0 $0.00 0% $0 $0.00 0%

Total 93 M Acres @ $0.00 /acre $0 $0.00 0% 0 M Acres @ $0.00 /acre $0 $0.00 0% $0 $0.00 0%

Total Reserves and Undeveloped Land $85 $0.36 86% $366 $1.54 96% $89 $0.37 87%

Balance Sheet/Equity InterestsAssets

Current Assets 15 0.06 15% 15 0.06 4% 15 0.06 15%

Current Liabilities 1 0.00 -1% 1 0.00 0% 1 0.00 -1%

Net working capital 14 0.06 15% 14 0.06 4% 14 0.06 14%

Total Assets $99 $0.42 101% $381 $1.60 100% $103 $0.43 101%

Liabilities

Long term debt $0 0.00 0% $0 $0.00 0% $0 $0.00 0%

Abandonment liability 1 0.00 -1% 1 0.00 0% $1 0.00 -1%

Total Liabilities $1 $0.00 -1% $1 $0.00 0% $1 $0.00 -1%

Base (P90) Net Asset Value $98 Unrisked Net Asset Value $380 $102

Basic (C$) (e) $0.72 Basic (C$) $2.80 $0.75

Diluted (C$) $0.41 100% Diluted (C$) $1.60 100% $0.43 100%

Outstanding Common Shares Basic 135.7

Diluted (incl. share to KRG) 237.8

Notes:

Base (P90) NAV Unrisked All-In Indentified Projects (a) Risked All-In Identified Projects (b)

NAV Breakdown

Risked Upside$0.021%

Base (P90) NAV$0.4126%

Unrisked Identified Project Upside

$1.1773%

What's Being Discounted?

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

Total Unrisked NAV $1.90 $1.60 $0.94

Unrisked IdentifiedProject Upside

$1.38 $1.17 $0.71

Risked Upside -$0.01 $0.02 $0.07

Base (P90) NAV $0.53 $0.41 $0.15

Current Price $0.33 $0.33 $0.33

US$100/bbl Base Case US$60/bbl

(a) Our Base (P90) NAV has included OOIP of 179 mmbbl (includes 120 mmbbl of OOIP for the deeper Cretaceous) and assumed a recovery factor of 35% and an 80% chance of success (40% net to LFD).(b) Unrisked NAV analysis includes indentified projects and exploration estimates. Our analysis is based on P50 OOIP of 662 mmbbl yielding total recoverable reserves of 74 mmbbl net to LFD. (c) Risk factors include adjustment for chance of success and capital availability.(d) Land value based on SC estimates - excluded from upside analysis.

Source: Company reports; Scotia Capital estimates.

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Exhibit 3.7: Longford – Chia Surkh Block

Additional prospects include: Chia Surkh South, Nuhairat, Bizniyan, Divan, and Shawladar.

Source: Company reports.

Operations Overview – Chia Surkh Block

Longford’s operations are focused solely on the Chia Surkh Block (20% operated interest + 20% option), an area that is considered to be prospective for both near-term development opportunities and higher-impact exploration. The block covers 231,785 gross acres of land and contains one of the first oil/gas fields discovered in Iraq, which occurred in 1902. Chia Surkh lies mostly within the prolific Zagros Fold Belt, with overall oil prospectivity believed to be within the Tertiary and Upper Cretaceous, while the lower intervals are believed to have a much higher probability of gas. The block is located roughly 70 km south of the 3.9 tcf Kor Mor natural gas and condensate field and directly south of WesternZagros’ Kalar-Bawanoor Block. The consortium is expected to commence seismic acquisition in Q2/10 and could commence drilling the first exploration well as early as Q4/10 (December) if interpretation and new financing can be completed. Worthy of note, Longford will operate during the initial three-year exploration sub-phase before the partners (with Genel Enerji) create a joint operating vehicle similar to the TTOPCO at the Taq Taq field (see Exhibit 3.7).

Longford holds a 20% interest in Chia Surkh, with an option to an additional 20%.

Chia Surkh lies on trend with existing discoveries at Kor Mor (gas), Jambur (gas/oil), and Kurdamir (gas/condensate).

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Exhibit 3.8: Longford – Chia Surkh Block Stratigraphy

Source: Company reports.

Leveraging past success and new technology. From 1902 to 1952, nine wells were drilled on the Chia Surkh field, with eight reaching TD in the Tertiary and one in the Upper Cretaceous. The No. 7 well, drilled in 1936 to a depth of 1,669 metres, hit oil in the Jerebi (Miocene) formation and flowed at a rate of nearly 5,000 bbl/d. The ninth well was drilled near the seventh to a depth of 3,870 metres and indicated oil in the Jerebi formation while encountering overpressured gas in the Upper Cretaceous (Shiranish) that could not be tested due to technical issues. Given Chia Surkh is on trend with the Kor Mor gas field (3.9 tcf) and WesternZagros’ Kalar-Bawanoor Block (gas/oil), we place a higher probability the company could experience similar drilling challenges to those of the adjacent operators as it proceeds into the deeper Cretaceous targets. We also note Tertiary reservoirs occur at shallower depths than on the WesternZagros block.

Overpressure could complicate reaching deeper zones. The combined issues of mud loss due to extensive fracturing and overpressure encountered while drilling have been key challenges for a number of operators in the region near Chia Surkh. The results of these could cause delays, higher costs, or the inability to reach TD. A point not to be overlooked: wells No. 7 & 9 on Chia Surkh confirmed overpressure (gas reservoirs) in the Lower Jaddala and Shiranish (see Exhibits 3.8-3.9).

Overpressure represents one of the biggest challenges to drilling we see at Chia Surkh.

Chia Surkh has existing discovery wells that have flowed at up to 5,000 bbl/d in 1952.

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Exhibit 3.9: Longford – Chia Surkh Field Cross Section

Source: Company reports.

Exhibit 3.10: Longford – Chia Surkh Resource Estimates

OOIP and Prospective Resources (Unrisked)Chia Surkh Block (mmbbls)

As of September 1, 2009

CategoryLow Estimate

(P90)Best Estimate

(P50)High Estimate

(P10)

Petroleum Initially in Place 59 662 6,559

Prospective Gross Ultimate Recovery

6 132 1,967

Net to LFD (40% wi) 2 53 787

Implied Ultimate Recovery 10.0% 20.0% 30.0%

Source: Company reports.

OOIP (P50) potential of 662 mmbbl to start. D&M’s independent resource assessment of the Chia Surkh field pointed toward gross P50 OOIP of 662 mmbbl; however, we note that the assessment only included the potential from the shallower Miocene-Oligocene (Jerebi-Euphrates) carbonate reservoirs, and excluded the Upper-Middle Fars oil reservoirs and Jaddala-Shiranish reservoirs, where there could exist a combination of oil and/or gas/condensate. We would attach a much higher risk factor for these excluded zones of interest. Also not included in the resource estimates are five additional leads identified on the block using surface geology and limited seismic data (see Exhibit 3.10).

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Exhibit 3.11: Longford – PSC Summary and Commitments

Working Interest Summary Acreage Position Terms/Commitments Status

● Operator: Joint Operatorship ● 3 yr. Phase 1 ends June 11, 2012 ● 300 km 2D seismic planned for May 2010 Longford & Genel ● 250 km 2D seismic ● 1st exploration well could spud Q4/2010● Area Under Licence: 938 km2

● 2 exploration wells● Est. OOIP: P50 662 mmbbl(1)

● Minimum spending of US$25M● Optional Phase 2

(1) DeGolyer and MacNaughton Canada Limited. Estimates are for the Tertiary formations in the Chia Surkh field only, do not include deeper

formations or the 5 additional identified leads on the Block.(2) Longford currently has a 20% working interest in the Block, but is currently negotiating with the KRG to exercise its option on an addiitional 20% this year.

Chia Surkh

LFD (40%) Genel (20%)

Petoil (20%) KRG (20%)

Source: Company reports.

Exploration set to commence as early as Q4/10. With 305 km of 2D (~US$4 million net) seismic planned for May, Longford anticipates it could spud its first well as early as Q4/10 at an estimated ~70 days to reach TD on the shallower zone (<2,000 m) at a gross cost we estimate at roughly US$15 million-US$20 million. The well remains conditional on the ability to raise new capital mid-year. The second well planned for 2011 (US$20 million-US$25 million) could be drilled to evaluate deeper potential in the Cretaceous, but we note a higher probability of encountering gas and potential challenges associated with overpressure.

Potential development in 2013/14. Contingent upon exploration success, we anticipate the Chia Surkh partners would evaluate potential development opportunities that could include initially trucking oil and the viability of constructing a pipeline to an existing or future central gathering system (i.e., Kirkuk/Taq Taq). That said, political development (federal Oil and Gas Law) and discovery size will likely dictate the pace and size of development. Early production could be possible if the company is able to secure new financing and the political situation in Kurdistan improves to give producers access to world crude pricing. We also estimate that a minimum discovery of 40 mmbbl-50 mmbbl gross recoverable would be required to merit a commercial development at Chia Surkh.

In assessing a potential development, we have assumed per-well recoveries of 6 mmbbl-10 mmbbl and IP rates of 5,000-7,500 bbl/d, along with total development costs of US$2.60-US$4.35/bbl. Our expectation is that oil will be initially trucked to either Taq Taq or Kirkuk at US$7/bbl-US$10/bbl. Our unrisked (P50) NAV analysis does not forecast a pipeline will be built for Chia Surkh given the size of our production estimate, at 60,000 bbl/d.

Terms of the PSC. Longford currently holds a 20% joint operated interest in the block and plans to exercise its option to assume the remaining 20% from the KRG over the coming months to hold an overall position of 40%. The remaining interests are Genel, Petoil, and the KRG, each of which holds 20%. The company is required to pay 75% of the total costs in the first exploration sub-period, which includes its 40% interest plus Longford carrying Petoil’s 20% plus the KRG. During this initial three-year period, the PSC requires the companies to acquire a minimum of 250 km of 2D seismic and drill at least two exploration wells. Longford has committed to spend a minimum of US$46 million net during this period, excluding capacity-building payments. If the consortium enters the second exploration period, which lasts two years, it will be required to acquire an additional 250 km of 2D seismic and drill two exploration wells. During the second exploration sub-phase, Longford will only be required to cover its 40% share of costs plus a portion of the KRG’s cost (8% net) (see Exhibit 3.11).

Exploration is set to commence Q4/10 or Q1/11, with production unlikely until 2012/13E.

For the initial exploration phase, Longford will pay 75% of total costs, decreasing to 40% of development costs.

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Principal Risks – Exploring with Limited Cash

We characterize Longford as carrying an average risk profile to its exploration-based peer group, given that oil has been discovered on its Chia Surkh Block in the shallower reservoirs (lower relative cost). That said, Longford will likely need to raise additional capital to fund its first exploration well (pay 75% of total costs). While the Kurdistan Region of Iraq has been quite open and transparent for foreign investment, uncertainty around timing of a federal Oil and Gas Law and the ability to receive payment for oil exports highlights the high country/political risk that still exists.

Country/political risk. Kurdistan has proven to be relatively stable from a political and civil perspective despite ongoing turmoil in Iraq. However, instability elsewhere has created challenges for approving an Iraqi federal Oil and Gas Law and this has the potential to create further delays (e.g., export pipeline) versus our base outlook. Longford’s production is governed under EPSAs that could be modified by the KRG following the ratification of the federal Oil and Gas Law, the timing of which is still uncertain. As a member of OPEC, Iraq’s crude oil production could become subject to quotas that could constrain Longford’s production.

Exploration risk. Given the significant cost of exploration wells (>US$20 million on average), complex geology/drilling, and the relatively underexplored nature of Kurdistan, Longford’s exploration risk remains high at this point. Longford may have to manage overpressured reservoirs, which can prove challenging for drilling operations and also highlights the risk of gas discoveries in the area. Currently there is no market for gas in Kurdistan and as such it is unlikely to be developed. Marginal exploration success and flow test results could also temper our outlook towards the company and negatively impact its development plans.

Execution risk. Longford’s development plans are largely contingent upon its ability to commence drilling operations in Q4/10 and political developments within Iraq. Assuming exploration success on its block, Longford will need to overcome logistical issues such as gathering pipeline construction and export constraints, potentially adding to its risk of delay versus our base outlook. In our view, oil field developments in Kurdistan are largely contingent upon the passage of the federal law, which should then allow for export from Kurdistan via new/existing export lines. Limited infrastructure access remains a key issue for companies operating within the region; currently there is no export pipeline available for crude oil production from the region.

Financial risk. With a moderate $8.2 million of cash on its balance sheet and zero debt, Longford will likely need to raise additional equity this year to fund its first exploration well, which is set to spud as early as Q4/10. The company has firmly committed to spend US$46 million over the next three years of the initial exploration sub-phase work commitments.

Discovered oil on the No. 7 well (5,000 bbl/d) on the block lower its risk profile, but will require new capital prior to drilling.

Passage of the federal Oil and Gas Law remains a critical milestone for companies in Kurdistan to receive payment for exports.

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Corporate Profile – Longford Energy Inc.

Longford’s strategy is one of oil exploration and development solely focused in the Kurdistan Region of Iraq, with a land position covering 231,785 gross acres. Initially focused in Western Canada and the United States, an extensive strategic review process beginning in August 2007 resulted in a shift in focus to international opportunities. In July 2009, the company announced that it had assumed a 20% working interest (option for an additional 20%) in the Chia Surkh Block PSC from Forbes & Manhattan Inc. at no cost. Forbes & Manhattan was the means by which Longford gained an interest in the PSC, providing the support and backing for the company in order to leverage its relationships with the KRG. In November 2009, Longford disposed of all its minor Canadian operations (45 boe/d, 96 mboe) to Stetson Oil & Gas Ltd. (another Forbes & Manhattan company) for proceeds of $425,000 (see Exhibits 3.12-3.16).

W E ’ R E G O I N G I N T E R N A T I O N A L !

In our view, Longford’s Board of Directors and Advisory Board possess a close relationship with officials in the Kurdistan Region government that offers a key competitive advantage for the company and its partners. The company’s President and CEO, Ahmed Said, was appointed in August 2007 in connection with an overall shift in strategy aimed at high-impact international exploration. Mr. Said, Kurdish by background, brings a short but thus far successful track record in oil and gas, and also serves President and CEO of Vast Exploration. Other members of the senior management team are Fari Goodarzi, VP Exploration; Gary Lobb, VP Finance and CFO; Sig Slotboom, VP Operations; and Patrick Gleeson, Corporate Secretary. Longford maintains close ties with Forbes & Manhattan Inc. (Stan Bharti), a resource-focused private merchant bank, which has been involved in over $1 billion of resource company financings since 2007, including Longford, Vast, and Stetson Oil & Gas Inc. (SSN-V).

Longford trades on the TSX Venture Exchange under the symbol LFD. With a market capitalization of $44 million, Longford has 135.7 million shares outstanding (including the announced 19.0 million share issue to close early April 2010), of which roughly 4.4 million (3.8%) are held by senior management and directors. The KRG does not currently hold any beneficial equity ownership in Longford, but is anticipated to be issued common shares in Longford in 2H/10 in lieu of cash bonus payments for the additional 20% interest to be assumed by the company. Longford also announced March 25, 2010, that it had entered into an agreement by which Quantum Partners Ltd. (Soros Fund Management) will purchase 19.0 million shares, or ~14% of its total outstanding shares, at $0.30 per share. Longford reports its financial results in Canadian dollars in accordance with Canadian GAAP, and follows a full cost accounting policy. The company’s reserves are evaluated by DeGolyer and MacNaughton Canada Limited.

V A S T / L O N G F O R D M E R G E R P O S S I B I L I T Y ?

We place a high probability that Longford Energy and Vast Exploration will pursue a merger in mid-2010 that could create a sizable Kurdistan pure play with ample exploration potential. The combined entity would still require new capital under our estimates by mid-2010 due to Longford’s remaining PSC capacity-building payments to the KRG (US$25 million) and plans to spud its first well in Q4/10. We believe the combination is strategically sound as Longford could capitalize (equity raise) on any early success from Vast’s Qara Dagh exploration program (first well to spud early April 2010).

The company moved to a pure play in Kurdistan in 2009, its first international opportunity.

Longford holds a strong Advisory Board with meaningful relationships in Iraq/Kurdistan.

Vast and Longford were established by the Forbes Energy Group; the merger of the two companies would make strategic sense.

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Exhibit 3.12: Longford – Stock Performance

$0.00

$0.30

$0.60

$0.90

$1.20

$1.50

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10

0.0

0.4

0.8

1.2

1.6

2.0

Mill

ion

s

Market Cap:

EV:O/S shares:

52 w k:

Longford Energy

TSX Producers Index (Rebased)

Brent Crude Oil Price (Rebased)

C$44.1M

C$63.9M135.7M

$0.24-$0.76

Source: Company reports; Bloomberg; Scotia Capital estimates.

Exhibit 3.13: Longford – Management and Directors

Name Position SharesOptions/ Warrants Description

Ahmed Said President, Chief Executive Officer and Director

1,863,740 4,375,740 Mr. Said is a professional engineer with experience in the domestic and international oil and gas industry. He is also the President and CEO of Vast Exploration (operations in Kurdistan) and the President of the Oil & Gas Group of Forbes & Manhattan Inc., a private merchant bank. Mr Said holds a Bachelor of Science degree in Engineering from the University of Calgary.

Gary Lobb Vice President, Finance and Chief Executive Officer

3,000 325,000 Mr. Lobb is a Chartered Accountant with over 22 years of financial and tax experience in the oil and gas industry. He has previously held management positions in various financial capacities including the VP, Finance and CFO of C1 Energy Ltd. and VP, Finance and CFO and Corporate Secretary of Nycan Energy Corp. Mr. Lobb holds a Bachelor of Commerce degree from the University of Calgary.

Fari Goodarzi Vice President, Exploration 64,000 400,000 Mr. Goodarzi has over 40 years of experience in technical and management roles with public, private and government corporations. He holds a Master of Science and a Doctor of Philosophy in Geology and Geochemistry from the University of Newcastle-Upon Tyne in England and is a Fellow of the Royal Society of Canada.

Sig Slotboom Vice President, Operations 200,000 200,000 Mr. Slotboom is a Petroleum Engineer with over 28 years of technical and management experience in the oil and gas industry. His experience includes a term with Chauvco Resources in Iraq in the 1990s where he played a major role in leading the evaluation and negotiation of several exploration and development/EOR projects.

Patrick Gleeson Corporate Secretary 0 395,000 Mr. Gleeson has more than six years of experience as corporate lawyer at a major Canadian law firm. His main responsibilities included counseling companies with respect to equity and debt financings, mergers and acquisitions, and defense of hostile takeovers. He is concurrently General Counsel and Corporate Secretary of Longford Energy Inc. Mr. Gleeson is a director of a number of private companies and an officer of several public companies.

Stan Bharti Director 2,300,000 3,590,000 Mr. Bharti has over 25 years of business, management and financial experience, and is the President of Forbes & Manhattan Inc. Over the past ten years he has been involved in business transactions in Europe, Australia, Africa, and North America. Mr. Bharti holds two Master of Science degrees in Mining Engineering from Moscow, Russia and London, England.

Pierre S. Pettigrew Director 0 400,000 The Honorable Pierre S. Pettigrew had a distinguished career as a Canadian Federal cabinet minister, serving as Minister of Foreign Affairs and most recently as Minister of International Trade. He has also served as Minister of Health, Minister of Intergovernmental Affairs, Minister of Human Resources Development and Minister of International Cooperation. From 1985 to 1995, he was an International Business Consultant with Deloitte.

David Argyle Director 0 300,000 Mr. Argyle is the President and Chief Executive Officer of Dynamite Resources. Mr. Argyle brings 20 years of experience in senior management positions on mining and chemical projects in China, South East Asia, Central Asia and Australia. He holds a degree in Commerce from the University of Western Australia and an MBA from the University of Michigan.

Total Beneficial Ownership 4,430,740 9,985,740Total Ownership as % of Total Shares Outstanding 3.26%

Source: Company reports; SEDI.

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Exhibit 3.14: Longford – Operating Summary

Years Ending December 31, C$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Avg Daily Production

Crude Oil & NGL (bbl/d)

Canada 12 30 33 0 0 0 0 0

Kurdistan - Chia Surkh 0 0 0 0 0 0 4,000 8,000

Total 12 30 33 0 0 0 4,000 8,000

Natural Gas (mcf/d)

Canada 37 103 74 0 0 0 0 0

Total 37 103 74 0 0 0 0 0

Equivalent (boe/d) 18 47 46 0 0 0 4,000 8,000

Equivalent (mcfe/d) 109 283 274 0 0 0 24,000 48,000

Commodity Prices

WTI Crude Oil (Cushing, US$/bbl) $72.36 $99.75 $62.09 $80.00 $85.00 $85.00 $85.00 $85.00

Brent Differential to WTI (US$/bbl) -0.35 2.06 0.05 1.50 1.00 1.50 1.50 1.50

Brent Posted (US$/bbl) 72.71 97.69 62.04 78.50 84.00 83.50 83.50 83.50

Foreign Exchange (US$/C$) 0.93 0.937 0.877 0.971 0.950 0.925 0.925 0.925

Wellhead Prices

Crude Oil & NGL ($/bbl)

Canada $74.06 $71.53 $52.00 $0.00 $0.00 $0.00 $0.00 $0.00

Kurdistan - Chia Surkh 0.00 0.00 0.00 0.00 0.00 30.00 82.70 82.70

Global Wellhead Oil Price ($/bbl) (Unhedged) 74.06 71.53 52.00 0.00 0.00 0.00 82.70 82.70

Natural Gas ($/mcf)

Canada $7.37 $8.03 4.13 0.00 0.00 0.00 0.00 0.00

Global Natural Gas Price ($/mcf) 7.37 8.03 4.13 0.00 0.00 0.00 0.00 0.00

Global Realized Equivalent Price ($/boe) $63.34 $63.41 $41.87 $0.00 $0.00 $0.00 $82.70 $82.70

Royalties (%)

Canada 8.6% 16.3% 10.7% 0.0% 0.0% 0.0% 0.0% 0.0%

Kurdistan - Chia Surkh 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0%

Total 8.6% 16.3% 10.7% 0.0% 0.0% 0.0% 10.0% 10.0%

Natural Gas (%)

Canada 8.6% 16.3% 10.7% 0.0% 0.0% 0.0% 0.0% 0.0%

Total 8.6% 16.3% 10.7% 0.0% 0.0% 0.0% 0.0% 0.0%

Worldwide Royalty Rate 8.6% 16.3% 10.8% 0.0% 0.0% 0.0% 10.0% 10.0%

Operating and G&A Costs ($)

General & Administration 1,149 2,158 2,186 2,400 2,700 3,000 4,200 5,500

General & Administration ($/boe) 173.29 125.01 131.13 0.00 0.00 0.00 2.88 1.88

Depletion, Depreciation & Amortization 9,161 825 1,979 700 1,000 2,000 17,520 20,440

Depletion, Depreciation & Amortization ($/boe) 1,381.63 47.80 118.72 0.00 0.00 0.00 12.00 7.00

Crude Oil & NGL ($/bbl)

Canada $36.80 $21.56 $16.73 $0.00 $0.00 $0.00 $0.00 $0.00

Kurdistan - Chia Surkh 0.00 0.00 0.00 0.00 0.00 18.92 18.92 12.43

Total $36.80 $21.56 $16.73 $0.00 $0.00 $0.00 $18.92 $12.43

Natural Gas ($/mcf)

Canada $6.13 $3.59 $2.81 $0.00 $0.00 $0.00 $0.00 $0.00

Total $6.13 $3.59 $2.81 $0.00 $0.00 $0.00 $0.00 $0.00

Worldwide Operating Costs ($/boe) $36.49 $21.68 $16.71 $0.00 $0.00 $0.00 $18.92 $12.43

Operating Netback ($/bbl)

Crude Oil & NGL ($/bbl)

Canada $30.89 $38.31 $29.72 $0.00 $0.00 $0.00 $0.00 $0.00

Kurdistan - Chia Surkh 0.00 0.00 0.00 0.00 0.00 0.00 55.51 62.00

Total $30.89 $38.31 $29.72 $0.00 $0.00 $0.00 $55.51 $62.00

Natural Gas ($/mcf)

Canada $0.60 $3.13 $0.87 $0.00 $0.00 $0.00 $0.00 $0.00

Total $0.60 $3.13 $0.87 $0.00 $0.00 $0.00 $0.00 $0.00

Worldwide Operating Netback ($/boe) $21.42 $31.38 $20.63 $0.00 $0.00 $0.00 $55.51 $62.00

Source: Company reports; Scotia Capital estimates.

Financial Statements

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Exhibit 3.15: Longford – Income Statements

Years Ending December 31, C$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Commodity Prices

WTI Crude Oil (US$/bbl) $72.36 $99.75 $62.09 $80.00 $85.00 $85.00 $85.00 $85.00

Brent Posted (US$/bbl) 72.71 97.69 62.04 78.50 84.00 83.50 83.50 83.50

Revenue

Exploration & Production $420 $1,095 $698 $0 $0 $0 $81,896 $163,792

Corporate 24 429 426 0 0 0 0 0

Royalties 36 179 75 0 0 0 12,075 24,149

Net Revenues 408 1,345 1,049 0 0 0 69,821 139,643

Expenses

Operating Costs 242 374 279 0 0 0 27,622 36,303

General & Administrative 1,149 2,158 2,186 2,400 2,700 3,000 4,200 5,500

Interest 89 109 -19 91 919 1,554 2,473 1,860

Depletion, Depreciation & Amortization 9,161 825 1,979 700 1,000 2,000 17,520 20,440

Foreign Exchange Loss 0 0 544 0 0 0 0 0

Stock Based Compensation 34 506 3,073 1,500 1,600 1,750 2,500 2,500

Impairment 0 0 0 0 0 0 0 0

Other 0 34 0 0 0 0 0 0

Total Expenses 10,675 4,007 8,041 4,691 6,219 8,304 54,315 66,602

Earnings Before Income Taxes -10,268 -2,662 -6,993 -4,691 -6,219 -8,304 15,507 73,040

Taxes

Current Tax paid from govt share of profit oil 0 0 0 0 0 0 0 0

Deferred -804 0 0 0 0 0 0 0

Total Tax -804 0 0 0 0 0 0 0

Corporate Tax Rate 8% 0% 0% 0% 0% 0% 0% 0%

Current Tax 0% 0% 0% 0% 0% 0% 0% 0%

Deferred Tax 100% 0% 0% 100% 100% 100% 100% 100%

Minority Interest 0 0 0 0 0 0 0 0

Equity Income 0 0 0 0 0 0 0 0

Discontinued Operations 0 0 0 0 0 0 0 0

Extraordinary Items/Accounting Changes 0 0 0 0 0 0 0 0

Net Income from Continuing Operations -9,464 -2,662 -6,993 -4,691 -6,219 -8,304 15,507 73,040

Net Income Available to Common -9,464 -2,662 -6,993 -4,691 -6,219 -8,304 15,507 73,040

EPS -- Basic -$1.77 -$0.10 -$0.09 -$0.04 -$0.05 -$0.06 $0.11 $0.54

EPS -- Diluted -$1.77 -$0.10 -$0.09 -$0.03 -$0.03 -$0.03 $0.07 $0.31

Reported Operating Cash Flow -1,072 -1,370 -2,062 -2,491 -3,619 -4,554 35,527 95,980

CFPS -- Basic -$0.20 -$0.05 -$0.03 -$0.02 -$0.03 -$0.03 $0.26 $0.71

CFPS -- Diluted -$0.20 -$0.05 -$0.03 -$0.01 -$0.02 -$0.02 $0.15 $0.40

Capitalized Interest 0 0 0 0 0 0 0 0

Discretionary Cash Flow -1,072 -1,370 -2,062 -2,491 -3,619 -4,554 35,527 95,980

CFPS -- Basic -$0.20 -$0.05 -$0.03 -$0.02 -$0.03 -$0.03 $0.26 $0.71

CFPS -- Diluted -$0.20 -$0.05 -$0.03 -$0.01 -$0.02 -$0.02 $0.15 $0.40

Outstanding Common Shares (Basic) 5,435 41,906 116,705 135,705 135,705 135,705 135,705 135,705

Weighted Average Common Shares

Basic 5,341 26,712 78,040 131,072 135,705 135,705 135,705 135,705

Diluted (incl. shares to KRG) 5,341 26,712 78,577 183,614 237,836 237,836 237,836 237,836

Note: Corporate taxes are paid from the government’s (KRG) share of profit oil.

Source: Company reports; Scotia Capital estimates.

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Exhibit 3.16: Longford – Cash Flow Statements and Balance Sheets

Years Ending December 31, C$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Retained EarningsRetained Earnings, Opening -1,769 -11,233 -13,895 -20,888 -25,580 -31,798 -40,103 -24,596

Net Income -9,464 -2,662 -6,993 -4,691 -6,219 -8,304 15,507 73,040

Other 0 0 0 0 0 0 0 0

Retained Earnings, Closing -11,233 -13,895 -20,888 -25,580 -31,798 -40,103 -24,596 48,444

Cash FlowOperating ActivitiesNet Income -9,464 -2,662 -6,993 -4,691 -6,219 -8,304 15,507 73,040

Deferred Taxes -804 0 0 0 0 0 0 0

Depreciation, Depletion & Amortization 9,161 825 1,979 700 1,000 2,000 17,520 20,440

Stock Based Compensation 34 506 3,073 1,500 1,600 1,750 2,500 2,500

Asset Retirement Obligation 0 -40 -121 0 0 0 0 0

Other 0 0 0 0 0 0 0 0

Operating Cash Flow -1,072 -1,370 -2,062 -2,491 -3,619 -4,554 35,527 95,980

Changes in non-cash working capital 72 -623 0 0 0 0 0 0

Funds from Operating Activities -1,000 -1,994 -2,062 -2,491 -3,619 -4,554 35,527 95,980

Net Investing ActivitiesExploration & Development -3,117 -630 -1,435 -13,850 -30,525 -27,250 -36,750 -28,000

Corporate Eliminations 0 0 0 0 0 0 0 0

Other/Bonus Payments/Third-Party Cost Recovery 1,214 0 -34,494 -25,740 0 0 -1,351 -4,054

Cash Flow from Investing Activities -1,902 -630 -35,928 -39,590 -30,525 -27,250 -38,101 -32,054

Changes in non-cash working capital -810 256 0 0 0 0 0 0

Funds from Investing Activities -2,712 -374 -35,928 -39,590 -30,525 -27,250 -38,101 -32,054

Financing ActivitiesLong Term Debt (Decrease) 2,200 -110 26,885 0 0 0 0 0

Issuance of Common Shares 13 19,727 0 5,415 0 0 0 0

Repurchase of Common Shares 0 -43 0 0 0 0 0 0

Other 0 0 0 0 0 0 0 0

Cash Flow from Financing Activities 2,213 19,574 26,885 5,415 0 0 0 0

Changes in non-cash working capital 0 0 0 0 0 0 0 0

Funds from Financing Activities 2,213 19,574 26,885 5,415 0 0 0 0

Cash, Opening 2,218 719 17,926 6,821 -29,846 -63,989 -95,794 -98,369

Net Change in Cash -1,499 17,207 -11,105 -36,667 -34,143 -31,804 -2,575 63,926

Cash, Closing 719 17,926 6,821 -29,846 -63,989 -95,794 -98,369 -34,442

Balance SheetsYears Ending December 31, C$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

AssetsCurrent Assets

Cash & Term Deposits 719 17,926 6,821 -29,846 -63,989 -95,794 -98,369 -34,442

Accounts Receivable 1,393 1,023 1,023 1,023 1,023 1,023 1,023 1,023

Other/Prepaid Expenses 71 133 133 133 133 133 133 133

Total Current Assets 2,183 19,082 7,977 -28,690 -62,833 -94,638 -97,213 -33,286

Property, Plant & Equipment 10,832 11,947 44,924 83,014 111,939 137,439 173,041 202,595

Accumulated Depletion, Depreciation & Amortization 9,156 10,148 12,127 12,827 13,827 15,827 33,347 53,787

Net Property, Plant & Equipment 1,676 1,800 32,797 70,188 98,112 121,612 139,694 148,808

Other 0 0 0 0 0 0 0 0

Total Assets 3,859 20,882 40,774 41,498 35,279 26,974 42,481 115,521

Liabilities 0 0 0 0 0 0 0 0Current Liabilities

Bank Indebtedness $2,200 $0 0 0 0 0 0 0

Accounts Payable & Accrued Liabilities 1,525 849 849 849 849 849 849 849

Other 0 0 0 0 0 0 0 0

Total Current Liabilities 3,725 849 849 849 849 849 849 849

Long Term Debt 0 0 26,885 26,885 26,885 26,885 26,885 26,885

Asset Retirement Obligation 106 386 386 386 386 386 386 386

Other 0 0 0 0 0 0 0 0

Total Liabilities 3,831 1,235 28,120 28,120 28,120 28,120 28,120 28,120

Shareholder EquityCommon Shares 10,597 31,749 31,749 37,164 37,164 37,164 37,164 37,164

Contributed Surplus 664 1,792 1,792 1,792 1,792 1,792 1,792 1,792

Retained Earnings -11,233 -13,895 -20,888 -25,580 -31,798 -40,103 -24,596 48,444

Total Equity 28 19,647 12,654 13,377 7,158 -1,146 14,361 87,401

Total Liabilities & Shareholder's Equity $3,859 $20,882 $40,774 $41,498 $35,279 $26,974 $42,481 $115,521

Source: Company reports; Scotia Capital estimates.

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ShaMaran Petroleum Corp. (SNM-V)

Mar 26, 2010: C$0.62 1-Yr Target: C$0.70 Capitalization Rating: 2-Sector Perform 1-Yr ROR: 12.9% Shares O/S (M) 499.0 Risk: Caution Warranted 2-Yr Target: C$0.70 Total Value (C$M) 309.4 IBES CFPS 2009E C$0.00 2-Yr ROR: 12.9% Float O/S (M) 384.9 IBES CFPS 2010E C$-0.00 Div. (Curr.): $0.00 Float Value (C$M) 238.6 Yield 0.0% Valuation: Based on our risked NAV of $0.68/share. Key Risks to Target: Commodity prices, exploration, project execution, political/regulatory. Qtly CFPS (FD) (Next Release: Apr-10) Y/E DECEMBER-31 Mar Jun Sep Dec Year P/CF 2008A $0.00A $0.00 $0.00 $0.00A $-0.05 n.a. 2009E $0.00A $0.00A $0.00A $0.00 $0.01 84.3x 2010E $0.00 $0.00 $0.00 $0.00 $-0.00 n.a. 2011E $-0.01 n.a. Industry Specific 2008A 2009A 2010 2011 Oil Price (Brent, /bbl) $72.71 $97.69 $62.04 $77.60 Foreign Exchange (US$) / (C$) $1.15 $0.98 $0.89 $0.97 CFPS Sens to $1/bbl Brent n.m. n.m. n.m. n.m. CFPS Sens to $0.01/CAD FX n.m. n.m. n.m. n.m.

All values in US$ unless otherwise indicated. Regular Voting Note: Historical price multiple calculations use FYE price. Source: Reuters; company reports; Scotia Capital estimates.

Three Blocks Heating Up in 2011 I N V E S T M E N T H I G H L I G H T S

First well expected to spud in Q4/10. We view ShaMaran Petroleum Corp. (ShaMaran) as offering a combination of nearer-term development potential and higher-impact exploration over its three blocks in Kurdistan. ShaMaran is expected to spud its first exploration well in Q4/10 at Pulkhana – its most notable catalyst this year.

Multi-block potential in Kurdistan. ShaMaran is one of the few small-cap companies to hold multiple interests in three prospective oil blocks, including a 60% operated interest in the Pulkhana Block (near-term production potential) and Arbat Block, along with a 20% option in the K42 Block.

Previous success = lower risk profile. Given management’s previous experience in Kurdistan (Taq Taq/Addax Petroleum) and the fact that oil has already been discovered on the Pulkhana Block, we characterize the company’s overall risk as lower relative to others in the region.

Valuation. Our NAV analysis for ShaMaran is based on our assessment of the company’s three blocks in Kurdistan and implies an unrisked NAV of $1.71 per share ($0.68 risked), highly contingent on exploration success and the ability to raise future capital.

Balance sheet. With ~US$60 million of cash on its balance sheet, ShaMaran looks to be funded through its 800 km 2D seismic program and first exploration well at Pulkhana. We estimate ShaMaran likely will need to secure new financing toward year-end 2010/11 as activity ramps up.

We have initiated coverage on the common shares of ShaMaran Petroleum Corp. with a 2-Sector Perform rating and a one-year target of $0.70 per share, which is based on our risked NAV analysis.

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Summary and Investment Recommendation

We view ShaMaran Petroleum Corp. (ShaMaran) as offering a combination of near-term development potential and higher-impact wildcat exploration over its three blocks in Kurdistan. Given management’s previous experience in Kurdistan (Taq Taq/Addax Petroleum) and the fact that oil has already been discovered on the Pulkhana Block (60% operated), we characterize the company’s overall risk as lower relative to others in the region. That said, we estimate that the added dilution associated with 200 million new shares to be issued to the KRG for capacity building payments and to Lundin Petroleum B.V. upon development could take away some of the upside a reasonably sized discovery would yield. ShaMaran’s most notable catalyst is likely to be its first of three exploration wells at Pulkhana, set to spud in Q4/10. Overall, we are anticipating three wells to be drilled by the end of 2011, but we also expect the company will need to raise new funds after the first well.

We have initiated coverage on the common shares of ShaMaran Petroleum Corp. with a 2-Sector Perform rating and a one-year target of $0.70 per share, which is based on our risked NAV analysis. In our view, the company’s lower risk profile and multi-block potential has contributed to its premium NAV valuation (discounting more of its unrisked upside), but also leaves us more neutral today. We recognize that as drilling of and results from its first exploration well move closer (Q4/10) and new resource estimates are provided for the Arbat and K42 Blocks (late 2010), we could become much more bullish on the name. Other catalysts for ShaMaran include potential signing of or further progression on the Iraqi federal Oil and Gas Law and drilling results from other Kurdish players, such as Heritage Oil Corporation and WesternZagros Resources Ltd.

ShaMaran is one of the few companies to hold multi-block potential in Kurdistan.

Based on our NAV analysis, ShaMaran is discounting more upside to its risked/ unrisked NAVs than its Kurdish peers.

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Exhibit 4.1: ShaMaran – Future Equity Obligations

Block # Shares (M) Details

Pulkhana 65.0 Prior to January 25, 2010 - Capacity Payment to KRG50.0 Within 30 days of end of first exploration sub-phase (Aug/2012) - KRG50.0 Upon approval for a field development plan - Lundin

Arbat 35.0 Prior to January 25, 2010 - Capacity Payment to KRG

Total 200.0

Source: Company reports.

Financial Outlook – Enough to Drill One

With approximately US$60 million of cash on its balance sheet (including its $105 million October equity issue), ShaMaran looks to be funded through its 800 km 2D seismic program and first exploration well at Pulkhana, which is set to spud in Q4/10. That said, our base outlook indicates ShaMaran will likely need to secure additional financing toward year-end 2010 or early 2011 given that it will carry 100% of the first exploration phase expenses on both the Pulkhana and Arbat blocks. The company has no outstanding warrants, but has committed new shares to the KRG in lieu of cash capacity-building payments and to Lundin Petroleum B.V. for its interests allocated to ShaMaran in Kurdistan.

2010 outlook. Our 2010 outlook is based on net capital spending of US$49.6 million, which assumes one exploration well will be drilled at Pulkhana at a cost of ~US$25 million (Q4/10) and an 800 km 2D seismic acquisition program. The seismic program will include 250 km 2D at Pulkhana, 350 km 2D at Arbat, and 200 km 2D at K42. We have also included additional capacity/bonus payments to the KRG of US$4.0 million. With no production or cash flow, we estimate ShaMaran’s year-end cash at US$9.5 million.

Additional dilution. ShaMaran has firmly committed common shares to the KRG after January 25, 2010, in the amount of 65 million and 35 million associated with capacity payments for Pulkhana and Arbat, respectively. The company has further committed 50 million shares to the KRG to be issued within 30 days of the end of the first exploration sub-phase at Pulkhana (August 2012) and an additional 50 million shares to Lundin upon KRG approval for a field development plan at Pulkhana.

Our fully diluted NAV and cash flow estimates include the impact of the 200 million shares committed to the KRG and Lundin, which would map to overall fully diluted shares of 699.0 million versus December 31, 2010E basic shares outstanding of 499.0 million (see Exhibit 4.1).

2011 outlook. Our net capital spending forecast of US$67.6 million in 2011 incorporates drilling a second exploration well at Pulkhana and one exploration well at either Arbat or Pulkhana. We have also included a cash payment to the KRG of US$20 million for signature bonus payments should ShaMaran elect to move the K42 Block into an exploration license/PSC (currently seismic option). Our base outlook does not include any potential spending associated with development activities or facilities construction, but could change pending a successful discovery this year. In our view, first production in Kurdistan is unlikely to occur prior to 2012/13 (see Exhibits 4.2-4.3).

ShaMaran’s fiscal year-end is December 31. The company reports its financial results in U.S. dollars in accordance with Canadian GAAP and reports its reserves in compliance with NI 51-101.

The company is expected to spud its first exploration well in Q4/10.

By our estimate, ShaMaran appears to be fully funded for its first well in Kurdistan… assuming no cost overruns.

Additional dilution has been factored into our fully diluted NAV and cash flow estimates.

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Exhibit 4.2: ShaMaran – Net Capital Spending and Cash Outlook

2010E 2011E 2012E 2013E 2014E

Production (bbl/d) 0 0 3,016 15,000 18,000

Capital Expenditure Summary (US$M) - Pulkhana- Seismic $8.7 $1.6 $0.0 $0.0 $0.0- Exploration & Appraisal Drilling 28.9 31.1 25.8 37.5 0.0

- Development Drilling 0.0 0.0 0.0 19.2 48.0- Facilities 0.0 0.0 10.0 19.5 15.6- Pipeline 0.0 0.0 0.0 0.0 0.0

Total (US$M) $37.5 $32.8 $35.8 $76.2 $63.6

Capital Expenditure Summary (US$M) - Arbat- Seismic $9.3 $0.0 $0.0 $0.0 $0.0- Exploration & Appraisal Drilling 0.0 29.3 28.8 37.5 18.8- Development Drilling 0.0 0.0 0.0 0.0 10.8- Facilities 0.0 0.0 0.0 10.0 10.0

- Pipeline 0.0 0.0 0.0 0.0 0.0

Total (US$M) $9.3 $29.3 $28.8 $47.5 $39.6

Capital Expenditure Summary (US$M) - K42- Seismic $2.8 $0.0 $0.0 $0.0 $0.0

- Exploration & Appraisal Drilling 0.0 5.6 5.5 0.0 0.0- Development Drilling 0.0 0.0 0.0 0.0 0.0- Facilities 0.0 0.0 0.0 0.0 0.0- Pipeline 0.0 0.0 0.0 0.0 0.0

Total (US$M) $2.8 $5.6 $5.5 $0.0 $0.0

Total Capital Spending (US$M) $49.6 $67.6 $70.0 $123.7 $103.2

Total Bonus/Capacity Payments (US$M) $4.0 $26.9 $6.9 $0.0 $0.0

Y/E Cash Position (US$M) $9.5 -$89.0 -$171.0 -$151.4 -$74.1

Source: Company reports; Scotia Capital estimates.

ShaMaran will likely need to raise additional funds in early 2011.

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En

ergy – O

il & G

as – Intern

ation

al E&

P

April 2010

Exhibit 4.3: International E&P Comparative Valuation

Enterprise Value (EV) (c)

12 Mkt Debt-Adjusted 2008 Net 2P 2010E NetTSX SC Price Month Cap CF Multiple (a) Reserves Production Net Asset Value

C$, unless otherwise noted Ticker Rating* (C$) Target (C$) (C$M) 2010E 2011E (C$/boe) (C$/boe/d) Risked P/Risked Unrisked P/Unrisked

Producing E&Ps (d)

Pacific Rubiales PRE 1-SO $20.09 $23.50 $5,240 5.9x 3.3x $26.36 $86,119 $23.39 86% $74.29 27%Petrominerales PMG 2-SP $31.52 $33.00 $3,108 4.4x 3.7x $94.02 $86,367 $32.79 96% $69.63 45%Niko Resources (b)

NKO 2-SP $103.23 $110.00 $5,237 12.1x 10.9x $28.57 $90,579 $106.92 97% $156.03 66%

Calvalley Petroleum CVI.a 2-SP $3.44 $4.00 $339 9.3x 3.1x $23.42 $104,435 $3.78 91% $11.26 31%Bankers Petroleum BNK 2-SP $9.23 $10.00 $2,107 20.7x 9.5x $12.43 $416,484 $10.11 91% $18.80 49%Vermilion Energy Trust VET.UN 2-SP $35.33 $39.00 $2,810 8.5x 7.7x $24.16 $100,100 $38.77 91% $78.36 45%Petrolifera Petroleum PDP 2-SP $0.89 $1.05 $127 6.2x 6.2x $9.89 $42,385 $1.07 83% $4.91 18%

Average 9.6x 6.3x $31.26 $132,352 91% 40%

Exploration Companies (d)

Parex Resources PXT.V 1-SO $4.64 $5.50 $298 $5.63 82% $28.79 16%Vast Exploration VST.V 1-SO $0.86 $1.40 $149 $1.40 61% $5.05 17%WesternZagros Resources WZR.V 2-SP $0.80 $1.15 $166 $1.16 69% $9.86 8%Longford Energy LFD.V 2-SP $0.33 $0.45 $44 $0.43 76% $1.60 20%ShaMaran Petroleum SNM.V 2-SP $0.62 $0.70 $309 $0.68 91% $1.71 36%

Average 76% 20%

(a) Debt-adjusted cash flow multiple = (market price x basic shares + YE net debt) / (discretionary cash flow + (interest x (1 - current tax/pre-tax income))).

(b) Niko Resources year-end is March 31 and Vast Exploration year-end is January 31; 2010E based on fiscal 2011E year-end.(c) Enterprise value (EV) in C$. Production and reserves stated after royalties and government entitlement (net).(d) PMG, CVI, NKO, WZR.V, PRE, PXT.V, SNM.V & BNK EPS/CFPS estimates denominated in US$, converted at current exchange rate for valuation purposes. Share price is denominated in C$.

*Note: Our exploration company rankings are based on a benchmark of primarily exploration based companies (moderate production) with operations focused in the Middle East, Africa and Southeast Asia, which includes WesternZagros Resources (Kurdistan), Longford Energy (Kurdistan), ShaMaran Petroleum (Kurdistan), DNO (Kurdistan), Vast Exploration (Kurdistan), Gulfkeystone (Kurdistan/Algeria), Heritage Oil (Kurdistan), Sterling Energy (Kurdistan/Africa), Groundstar Resources (Kurdistan/Egypt), Gulfsands Petroleum (Iraq/Syria), Sea Dragon Energy (Egypt), Hardy Oil & Gas (India/Nigeria), ERHC Energy (Nigeria/JDZ) and Chariot Oil & Gas (Namibia).

Source: Company reports; Bloomberg; Scotia Capital estimates.

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Exhibit 4.4: ShaMaran – Building Blocks of NAV

105% 105%

91% 91%

36% 36%

$-

$0.50

$1.00

$1.50

$2.00

$/Share

0%

20%

40%

60%

80%

100%

120%

P/NAV

Kurdistan - K42 (Pros pect) $0.00 $0.00 $0.02 $0.02 $0.32 $0.32

Kurdistan - Arbat (Prospect) $0.00 $0.00 $0.12 $0.12 $0.81 $0.81

Kurdistan - Pulkhana (P50) $0.00 $0.00 $0.22 $0.22 $0.49 $0.49

Kurdistan - Arbat (SC Ris ked) $0.18 $0.18 $0.05 $0.05 $0.00 $0.00

Kurdistan - Pulkhana (P90) $0.30 $0.30 $0.18 $0.18 $0.00 $0.00

Balance Sheet/Land/Fx $0.11 $0.11 $0.09 $0.09 $0.09 $0.09

Target Price $0.70 $0.70 $0.70 $0.70 $0.70 $0.70

Current Price $0.62 $0.62 $0.62 $0.62 $0.62 $0.62

P/NAV 105% 105% 91% 91% 36% 36%

Base Strip Base Strip Base Strip

Bas e (P90) NAV Risked NAV All -In Identified Pro jects (P50)

Unrisked

Upside

Note: Based on FD shares of 699.0M.

Source: Company reports; Scotia Capital estimates.

Valuation – Premium Reflects Past Success

Our NAV analysis for ShaMaran is based on our assessment of the company’s three blocks in Kurdistan, which implies an unrisked NAV of $1.71 per share ($0.68 risked), highly contingent on exploration success and the ability to raise future capital. We consider our outlook preliminary as the company has no reserves booked and has yet to commence its exploration program. In August 2009, ShaMaran commissioned Petrotech Engineering Ltd. to provide third-party resource estimates for the Pulkhana Block (using data from eight wells) that pointed toward gross P50 (best estimate) OOIP of 447.6 mmbbl and a prospective recoverable resource of 46.2 mmbbl-177.0 mmbbl (27.7 mmbbl-106.2 mmbbl net). Petrotech also provided a general assessment of the Arbat and K42 blocks. We have used the Petrotech report as the foundation in developing our NAVs, along with numerous analogous fields.

Our one-year target price for ShaMaran of $0.70 per share (13% implied return) is based on our risked NAV of $0.68 per share. Our one-year target price could move toward our unrisked NAV of $1.71 per share or higher as the company is able to prove up its resource potential and as the political situation in Iraq improves. Our sum-of-the-parts NAV approach (as at September 30, 2009) includes a 12% after-tax discount rate and a long-term escalated (2% per annum) crude oil price of US$85/bbl in 2012 and beyond. Our fully diluted per share NAV estimates also include 200 million additional shares (vs. September 30 basic outstanding at 499.0 million) in aggregate that have been firmly committed to the KRG and Lundin. Our NAV summary is contained in Exhibit 4.4.

Our unrisked NAV of $1.71 per share indicates significant upside, highly contingent upon exploration success.

The stock appears to be discounting more of our risked NAV than its Kurdistan exploration peer group.

Pulkhana could represent near-term production (2012), which is supportive of our unrisked NAV of $1.71 per share.

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Pulkhana’s base NAV is $0.40 per share ($0.49 per share unrisked). Our base NAV assumes gross OOIP (low case/P90) of 287.8 million barrels, and we have incorporated an 80% chance of commercial success and a 35% recovery factor for Pulkhana, which could yield gross recoverable reserves of 80.6 mmbbl (48.4 mmbbl net) at Pulkhana. We forecast that a commercial discovery in 2011 of this magnitude could result in initial volumes of 10,000 bbl/d (gross) being trucked via temporary facilities in 2012 before reaching peak field production of 25,000-30,000 bbl/d (15,000-18,000 bbl/d net) in 2013/14. Our base case assumes all volumes will be trucked to Kirkuk or a potential future central gathering system.

Pulkhana unrisked NAV analysis. Our unrisked NAV for Pulkhana incorporates best case (P50) gross OOIP estimates of 447.6 mmbbl. We have estimated a 35% recovery factor and an 80% chance of commercial success that yields gross recoverable reserves of 125.3 mmbbl (75.2 mmbbl net). Our outlook includes peak production of 45,000 bbl/d (27,000 bbl/d net) in 2014. We note that further upside to our estimates could exist as only reservoirs in the Lower Tertiary and Upper Cretaceous have been included in Petrotech’s resource estimates and our NAV analysis.

Arbat’s base NAV is $0.17 per share ($0.81 per share unrisked). Our base NAV for the Arbat Block includes gross OOIP estimates of 286.0 mmbbl, based on management estimates (pre-seismic) for three potential surface structures ranging from 196 mmbbl to 1,177 mmbbl. We have assumed a 35% recovery factor, but place a higher degree of risk (50% chance of success) until seismic/exploration commences. That said, we have initially estimated gross production from extended testing at 10,000 bbl/d (2012/13), before reaching peak rates of 20,000 bbl/d (12,000 bbl/d net) in 2014.

Arbat unrisked NAV analysis. Our unrisked NAV for Arbat assumes 883 mmbbl gross OOIP (231.8 mmbbl recoverable), based on a 35% recovery factor and a 75% chance of success. As such, our net to ShaMaran recoverable resources of 139.1 mmbbl could yield initial production in 2012/13 and move toward peak rates of 75,000 bbl/d in 2015.

K42’s unrisked NAV is $0.32 per share. We have assessed the preliminary value of the K42 Block, assuming net 20% wi recoverable resource of 60 mmbbl (300 mmbbl gross) and using a discount to our per barrel NPV for Pulkhana to reflect the likelihood of a longer lead time to first production at K42. The K42 Block prospectivity remains highly uncertain given there are no surface features present in the area; as such we are cautious to include a material portion of the assessed value in our risked NAV/target price.

P/NAV. ShaMaran is trading at a P/NAV (risked) ratio of 91% compared to the producing E&P1 group average of 91%, and 76% for our exploration-based companies (WesternZagros Resources Ltd., Vast Exploration Inc., Longford Energy Inc., and Parex Resources Inc.), which are the company’s most direct comparables in our universe. On a P/unrisked NAV basis, the company is trading at 36% compared to the producing E&Ps at 40% and the exploration companies at 20%. ShaMaran’s premium to its Kurdistan/exploration peers leaves us more neutral toward the name in the near term. However, the premium may be warranted given its lower relative risk profile, as eight wells have already been drilled (two discoveries) at Pulkhana, and due to management’s past experience in Kurdistan (Taq Taq).

Evaluating the possibilities. Our NAV estimates are highly sensitive to changes in discovery size and oil prices. With a wide range of potential outcomes, we have run a scenario analysis to illustrate the possible impact to our NAV per share estimates (see Exhibits 4.5-4.6).

1 Producing E&Ps include our coverage universe of Pacific Rubiales Energy Corp., Petrominerales Ltd., Niko Resources Ltd., Calvalley Petroleum Inc., Petrolifera Petroleum Limited, Bankers Petroleum Ltd., and Vermilion Energy Trust.

The company has yet to compile a resource assessment for Arbat; as such, we have assumed a higher risk factor.

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Exhibit 4.5: ShaMaran – NAV Sensitivity Analysis

Brent 60% Brent 60%Price (US$) wi 100 250 400 500 Price (US$) wi 100 250 400 500

$50/bbl Net $119M $348M $621M $765M $50/bbl Net $65M $208M $395M $485M$1.99/bbl $2.32/bbl $2.59/bbl $2.55/bbl $1.08/bbl $1.39/bbl $1.64/bbl $1.62/bbl$0.17/sh $0.50/sh $0.89/sh $1.09/sh $0.09/sh $0.30/sh $0.56/sh $0.69/sh

$70/bbl Net $230M $578M $905M $1,101M $70/bbl Net $151M $382M $610M $736M$3.84/bbl $3.86/bbl $3.77/bbl $3.67/bbl $2.52/bbl $2.54/bbl $2.54/bbl $2.45/bbl$0.33/sh $0.83/sh $1.30/sh $1.57/sh $0.22/sh $0.55/sh $0.87/sh $1.05/sh

$80/bbl Net $277M $672M $1,038M $1,257M $80/bbl Net $187M $452M $707M $848M$4.61/bbl $4.48/bbl $4.33/bbl $4.19/bbl $3.12/bbl $3.01/bbl $2.95/bbl $2.83/bbl$0.40/sh $0.96/sh $1.49/sh $1.80/sh $0.27/sh $0.65/sh $1.01/sh $1.21/sh

$100/bbl Net $354M $834M $1,306M $1,579M $100/bbl Net $247M $574M $899M $1,073M$5.89/bbl $5.56/bbl $5.44/bbl $5.26/bbl $4.11/bbl $3.83/bbl $3.75/bbl $3.58/bbl$0.51/sh $1.19/sh $1.87/sh $2.26/sh $0.35/sh $0.82/sh $1.29/sh $1.54/sh

Brent 60% Brent 60%Price (US$) wi 100 250 400 500 Price (US$) wi

$50/bbl Net $62M $273M $590M $740M $50/bbl Net $12M $140M $347M $441M$1.04/bbl $1.82/bbl $2.46/bbl $2.47/bbl $0.20/bbl $0.93/bbl $1.45/bbl $1.47/bbl$0.09/sh $0.39/sh $0.84/sh $1.06/sh $0.02/sh $0.20/sh $0.50/sh $0.63/sh

$70/bbl Net $205M $551M $888M $1,085M $70/bbl Net $125M $344M $565M $689M

$3.41/bbl $3.67/bbl $3.70/bbl $3.62/bbl $2.08/bbl $2.29/bbl $2.36/bbl $2.30/bbl$0.29/sh $0.79/sh $1.27/sh $1.55/sh $0.18/sh $0.49/sh $0.81/sh $0.99/sh

$80/bbl Net $260M $667M $1,020M $1,239M $80/bbl Net $167M $427M $660M $797M$4.34/bbl $4.45/bbl $4.25/bbl $4.13/bbl $2.78/bbl $2.84/bbl $2.75/bbl $2.66/bbl$0.37/sh $0.95/sh $1.46/sh $1.77/sh $0.24/sh $0.61/sh $0.94/sh $1.14/sh

$100/bbl Net $356M $868M $1,279M $1,553M $100/bbl Net $239M $570M $841M $1,009M$5.94/bbl $5.79/bbl $5.33/bbl $5.18/bbl $3.98/bbl $3.80/bbl $3.50/bbl $3.36/bbl$0.51/sh $1.24/sh $1.83/sh $2.22/sh $0.34/sh $0.82/sh $1.20/sh $1.44/sh

*NPV C$ values noted net to company's working interest, based on fully diluted shares including shares to be issued to the KRG.**NPV10 converted to C$ based on long-term foreign exchange rate of US$0.90.

Pulkhana Economics - NPV 10 - C$ Millions and C$ per shareGross (100%) Recoverable Oil (mmbbl)

Pulkhana Economics - NPV 15 - C$ Millions and C$ per shareGross (100%) Recoverable Oil (mmbbl)

Arbat Economics - NPV 10 - C$ Millions and C$ per shareGross (100%) Recoverable Oil (mmbbl)

Arbat Economics - NPV 15 - C$ Millions and C$ per shareGross (100%) Recoverable Oil (mmbbl)

Source: Company reports; Scotia Capital estimates.

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En

ergy – O

il & G

as – Intern

ation

al E&

P

April 2010

Exhibit 4.6: ShaMaran – NAV Summary

Net Asset Value (C$)

Reserves/Resource Unit Value (US$ Millions) (US$/share) % NAV Unit Value (US$ Millions) (US$/share) % NAV (US$ Millions) (US$/share) % NAV

Crude Oil & NGL 2P/P90 unrisked/P50

Kurdistan - Pulkhana (P90) 48.4 mmbbl @ $3.93 /bbl $190 $0.27 50% 0.0 mmbbl @ $0.00 /bbl $0 $0.00 0% $114 $0.16 26%

Kurdistan - Arbat (SC Risked) 30.0 mmbbl @ $3.92 /bbl 118 0.17 31% 0.0 mmbbl @ $0.00 /bbl 0 0.00 0% 35 0.05 8%

Total Booked Crude & NGL 78.4 mmbbl @ $3.93 /bbl $308 $0.44 81% 0.0 mmbbl @ $0.00 /bbl $0 $0.00 0% $149 $0.21 34%

Crude Oil & NGL - Identified Projects/Exploration

Kurdistan - Pulkhana (P50) 75.2 mmbbls @ $4.17 /bbl $314 $0.45 28% $141 $0.20 32%

Kurdistan - Arbat (Prospect) 139.1 mmbbls @ $3.76 /bbl 523 0.75 47% 78 0.11 18%

Kurdistan - K42 (Prospect) 60.0 mmbbls @ $3.44 /bbl 207 0.30 19% 10 0.01 2%

Total Unbooked Crude & NGL 274.3 mmbbls @ $3.80 /bbl $1,043 $1.49 95% $230 $0.33 52%

Total Reserves 78.4 mmboe @ $3.93 /boe $308 $0.44 81% 274.3 mmboe @ $3.80 /boe $1,043 $1.49 95% $379 $0.54 86%

Net Undeveloped Land (c)

Kurdistan - Pulkhana 79 M Acres @ $0.00 /acre $0 $0.00 0% 0 M Acres @ $0.00 /acre $0 $0.00 0% $0 $0.00 0%

Kurdistan - Arbat 144 M Acres @ 0.00 /acre 0 0.00 0% 0 M Acres @ 0.00 /acre 0 0.00 0% 0 0.00 0%

Kurdistan - K42 25 M Acres @ 450.00 /acre 11 0.02 3% 0 M Acres @ 450.00 /acre 0 0.00 0% 0 0.00 0%

Total 248 M Acres @ $45.32 /acre $11 $0.02 3% 0 M Acres @ $0.00 /acre $0 $0.00 0% $0 $0.00 0%

Total Reserves and Undeveloped Land $319 $0.46 84% $1,043 $1.49 95% $379 $0.54 86%

Balance Sheet/Equity InterestsAssets

Current Assets 63 0.09 17% 63 0.09 6% 63 0.09 14%

Current Liabilities 3 0.00 -1% 3 0.00 0% 3 0.00 -1%

Net working capital 60 0.09 16% 60 0.09 5% 60 0.09 14%

Total Assets $379 $0.54 100% $1,103 $1.58 100% $439 $0.63 100%

Liabilities

Long term debt $0 0.00 0% $0 $0.00 0% $0 $0.00 0%

Abandonment liability 0 0.00 0% 0 0.00 0% $0 0.00 0%

Total Liabilities $0 $0.00 0% $0 $0.00 0% $0 $0.00 0%

Base 2P Net Asset Value $379 Unrisked Net Asset Value $1,103 $439

Basic (US$) (e) $0.76 Basic (US$) $2.21 $0.88

Diluted (US$) $0.54 100% Diluted (US$) $1.58 100% $0.63 100%

Net Asset Value (C$) $413 Unrisked Net Asset Value (C$) $1,195 $475

Basic (C$) $0.83 Basic (C$) $2.39 $0.95

Diluted (C$) $0.59 Diluted (C$) $1.71 $0.68

Balance Sheet FX (US/C$) $0.94 $0.94 $0.94

Outstanding Common Shares Basic 499.0

Diluted (incl. shares to issue to KRG/Lundin) 699.0

Notes:

Base (P90) Unrisked All-In Indentified Projects (a) Risked All-In Identified Projects (b)

NAV Breakdown

Unrisked Identified Project

Upside$0.9561%

Base (2P) NAV$0.5434%

Risked Upside$0.095%

What's Being Discounted?

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

Total Unrisked NAV $1.89 $1.58 $0.95

Unrisked IdentifiedProject Upside

$1.14 $0.95 $0.57

Risked Upside $0.09 $0.09 $0.08

Base (2P) NAV $0.66 $0.54 $0.30

Current Price $0.62 $0.62 $0.62

US$100/bbl Base Case US$60/bbl

(a) Our Base NAV has included P90 OOIP of 288 mmbbl and assumed a recovery factor of 35% and a chance of success of 80% (40% net to SNM) at Pulkhana. In addition, we have included P90 OOIP of 286 mmbbl and assumed a recovery factor of 35% and a chance of success of 50% (60% net to SNM) at Arbat.(b) Unrisked NAV analysis includes identified projects and exploration estimates. Our analysis is based on P50 OOIP at Pulkhana, Arbat and K42 yielding total recoverable reserves of 274 mmbbl net to SNM. (c) Risk factors include adjustment for chance of success and capital availability.(d) Land value based on SC estimates - excluded from upside analysis.(e) Fully diluted shares includes 200M to be issued to the KRG and Lundin.

Source: Company reports; Scotia Capital estimates.

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Exhibit 4.7: ShaMaran – Map of Operations

Source: Company reports.

Operations Overview – Sizable Base

ShaMaran’s asset base spans ~496,000 gross acres (248,000 net) over three exploration blocks in Kurdistan, with a combination of pure wildcat exploration and potential near-term development opportunities. The company holds a 60% operated interest in the Pulkhana Block that could yield first production within two to three years, a 60% operated interest in the Arbat Block believed to be on trend with Taq Taq/Miran, and a 20% interest in the K42 Block (seismic option) directly east of Pulkhana. ShaMaran commenced its 2D seismic program in January 2010 and expects to spud its first well on the Pulkhana Block by Q4/10, with additional activity (up to three wells) planned for 2011. As a point of note, the Pulkhana Block was one of the original five PSCs signed by the KRG with Petoil in 2005 (see Exhibit 4.7).

P U L K H A N A B L O C K ( 6 0 % W I ) – P O T E N T I A L N E A R - T E R M D E V E L O P M E N T

ShaMaran holds a 60% operated interest in the Pulkhana Block, which we believe could support lower-risk exploration upside (first well to spud Q4/10) and a potential near-term development opportunity. The Pulkhana block covers 130,837 gross acres of land and is located in the southeastern fairway of the Zagros Fold Belt, roughly 75 km southeast of the supergiant Kirkuk oil field. Drilling on the block commenced in 1929 with four wells being drilled, but all were abandoned due to mechanical challenges. The first discovery came in 1956 with the P-5 well, which was successfully drilled to a depth of 2,790 metres and tested at a combined rate of 2,880 bbl/d from the Euphrates (Tertiary) reservoir (2,180 bbl/d) and the Shiranish (Cretaceous) reservoir (700 bbl/d). In addition, the PPP-1 well drilled in 2006 to 1,656 metres tested at 700 bbl/d from the Shiranish, but did not show oil in the Euphrates and could be the result of reservoir damage due to heavy overbalanced drilling (see Exhibits 4.8-4.10).

ShaMaran holds a 60% operated interest in two Kurdish blocks, along with a 20% non-operated interest.

ShaMaran plans to spud its first well at Pulkhana in Q4/10.

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Exhibit 4.10: ShaMaran – Pulkhana Resource Estimates

Estimates FormationSTOOIP (mmbbl)

Gross Recoverable (mmbbl)

Implied Recovery Factor

Net Recoverable (mmbbl)

Low Euphrates 280.3 44.5 16% 26.7Shiranish 7.5 1.7 23% 1.0Total 287.8 46.2 16% 27.7

Best Euphrates 390.2 67.4 17% 40.5Shiranish 57.4 13.0 23% 7.8Total 447.6 80.4 18% 48.2

High Euphrates 961.1 155.1 16% 93.1Shiranish 96.6 21.8 23% 13.1Total 1,057.7 177.0 17% 106.2

Source: Company reports; Petrotech Engineering Ltd.

Exhibit 4.9: ShaMaran – Pulkhana Drilling History

Well No. Drilling Date Depth Condition

Pulkhana-1 1927 647 m Abandoned due to technical reasonsPulkhana-2 1927 576 m Abandoned due to technical reasonsPulkhana-3 1927 990 m Abandoned due to technical reasonsPulkhana-4 1929 840 m Abandoned due to technical reasonsPulkhana-5 1956 2,790 m Oil well - 2,900 bbl/d Euphrates/ShiranishPulkhana-6 1959 1,549 m Trace of oil and gas cut - TD above EuphratesPulkhana-7 1979 2,240 m Tested water from EuphratesPPP-1 2006 1,656 m Oil well - Tested tight in Euphrates, oil from Shiranish

Source: Company reports.

Exhibit 4.8: ShaMaran – Pulkhana Exploration

Source: Company reports.

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Estimated resources in the Tertiary and Cretaceous. Petrotech’s assessment of the Pulkhana field was based on the eight wells drilled to date, analogue fields (Jambur/Kor Mor/Shakal), and analysis of surface features across the 45 km by 8 km structure. The report included resource estimates for the Lower Tertiary (Euphrates) through the Upper Cretaceous (Shiranish) pointing toward gross OOIP of 287.8 mmbbl-1,057.7 mmbbl or 46.2 mmbbl-177.0 mmbbl of recoverable resources. ShaMaran commenced a 2D seismic program in January 2010 that should provide additional clarity on the block’s potential.

Exploration – first well to spud Q4/10. With its 250 km of 2D program expected to be complete in April 2010, ShaMaran anticipates it could spud its first well as early as Q4/10 at an estimated 120-150 days to reach TD at a gross cost we estimate at US$20 million-US$25 million. The company will look to further evaluate the potential in the Tertiary and Upper Cretaceous as a follow-up to existing discoveries, but also the Lower Cretaceous potential within the Kometan and Qamchuqa reservoirs that have yet to be reached.

Near-term development potential. Contingent upon exploration success, we anticipate the Pulkhana partners would evaluate near-term development opportunities that could include initially trucking oil and the viability of constructing a pipeline to an existing or future central gathering system (i.e., Kirkuk). That said, political development (federal Oil and Gas Law) and discovery size will likely dictate the pace and size of development. Early production could be possible if the company is able to secure new financing and the political situation in Kurdistan improves to give producers access to world crude pricing.

In assessing a potential development, we have assumed per-well recoveries of 7.0 mmbbl- 8.0 mmbbl and IP rates of 6,000-7,000 bbl/d at a total development cost (drilling plus facilities) of US$3.00-US$3.50 per recoverable barrel. Our expectation is that oil will be initially trucked to Kirkuk at US$3.00-US$4.00/bbl. Our NAV analysis does not forecast a pipeline will be built for Pulkhana.

Terms of the PSC. Under the PSC, ShaMaran holds a 60% operated working interest in the block, with Petoil and the KRG each holding 20%. ShaMaran is required to pay 100% of the costs under the first exploration sub-period (three years, commencing August 28, 2009), which requires the consortium to acquire 250 km of 2D seismic and drill three appraisal wells at a minimum overall cost of US$35 million. The company will then have the option to enter into a second exploration sub-period that will last for two years and will require ShaMaran to acquire additional seismic and drill two wells at a minimum cost of US$25 million. ShaMaran will pay 75% of the costs in the second sub-period.

In addition to the signature and building bonuses of US$42.5 million and 65 million common shares already paid and to be issued (after January 25, 2010) to the KRG, the company is required to issue 50 million additional common shares to the KRG within 30 days of the expiry of the first sub-period should the PSC still be in effect. The company also paid US$15 million to Petoil under the terms of the participation agreement. Furthermore, ShaMaran is required to issue 50 million common shares to Lundin Petroleum within five days of a development plan being approved for the Pulkhana field.

A R B A T B L O C K ( 6 0 % W I ) – I N G O O D C O M P A N Y

ShaMaran holds a 60% operated interest in the 240,557 gross acre Arbat Block, which is located approximately 200 km east of the Kirkuk oil field and 200 km northeast of the Pulkhana block. Arbat is believed to be on trend with the Miran Block, which Heritage Oil estimates to hold 2.3 billion bbl-4.2 billion bbl of OOIP following its discovery in May 2009, and the 350 mmbbl (recoverable) Taq Taq field. The company has identified three surface features, with pre-seismic management estimates of gross OOIP estimates of 196 mmbbl-1,177 mmbbl. Primary objectives are likely to be in the Cretaceous, with deeper potential in the Jurassic and Triassic. Of interest, significant oil seeps are present in the northern limit of the Arbat block, which supports the possibility of a working petroleum system being in place. ShaMaran has planned 350 km of 2D seismic acquisition to start July/August 2010 (potential resource estimates prior to year-end) and its first exploration well to spud as early as 1H/11 (see Exhibit 4.11).

Third-party estimates peg the OOIP at upwards of 1.1 billion barrels (gross).

Successful exploration in 2010 could yield first production as early as 2012.

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Exhibit 4.11: ShaMaran – Arbat Block Lead Prospects and Analogue Field Summary

Source: Company reports.

Development potential. Similar to other blocks, upon exploration success the Pulkhana partners will likely evaluate development opportunities that could include initially trucking oil and the viability of constructing a pipeline to an existing or future central gathering system (i.e., Kirkuk). In assessing a potential development, we have assumed per-well recoveries of 6.0 mmbbl-10.0 mmbbl and IP rates of 5,000-8,500 bbl/d, with total development cost of US$2.80-US$4.85 per recoverable barrel. Our expectation is that oil will initially be trucked to Kirkuk at US$8.00/bbl with overall peak production of 75,000 bbl/d in 2015.

Terms of the PSC. Over the initial three-year sub-period (commencing August 28, 2009), ShaMaran’s work program consists of acquiring 350 km of 2D seismic and drilling two exploration wells at a minimum cost of US$26 million. The company will fund 100% of the costs until the KRG assigns the remaining 20% reserved interest, at which time ShaMaran will pay 75% of the costs going forward and will be reimbursed for the 25% of costs incurred up to that point. During the second sub-period, which lasts for two years, ShaMaran and its partners are required to shoot the necessary seismic and drill one exploration well at a minimum expenditure of US$10 million.

Signature and capacity-building bonuses paid totalled US$2.5 million and US$17.5 million, respectively, and the company is required to issue 35 million common shares to the KRG after January 25, 2010.

Arbat exploration is likely to commence in 2011, that could push first production into 2013E/14E.

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Exhibit 4.12: ShaMaran – PSC Summary and Commitments

Block Working Interest Summary Acreage Position Terms/Commitments Status

● Operator: ShaMaran ● 3 yr. Phase 1 ends August 28, 2012 ● 2D seismic program to commence late-● Area Under Licence: 529 km2

● 250 km 2D seismic April 2010● Est. OOIP: P50 448 mmbbl(1)

● 3 exploration wells ● 1st exploration well to spud Q4 2010

● Minimum spending of US$35M

● Optional Phase 2

(1) Petrotech Engineering Ltd. Estimates are for the Euphrates and Shiranish only.

Block Working Interest Summary Acreage Position Terms/Commitments Status

● Operator: ShaMaran ● 3 yr. Phase 1 ends August 28, 2012 ● 2D seismic program to commence● Area Under Licence: 974 km2

● 350 km 2D seismic early Q3 2010● Est. OOIP: P50 589 mmbbl(2)

● 2 exploration wells ● 1st exploration well in 2011

● Minimum spending of US$26M

● Optional Phase 2

(2) Management estimates (September).

Block Working Interest Summary Acreage Position Terms/Commitments Status

● Operator: Oil Search (Iraq) ● Technical Evaluation Agreement ● 2D seismic program to commence in Q4● Area Under Licence: 511 km2

● 250 km 2D seismic which ends

February 28, 2011.

● Pre-negotiated PSC

Pulkhana

Arbat

K-42

SNM (60%) Petoil (20%)

KRG (20%)

SNM (60%) KRG (40%)

Oil Search (60%)

SNM (20%)

KRG (20%)

sdfsdf

Oil Search (60%) SNM (20%)

KRG (20%)

Source: Company reports.

K 4 2 B L O C K ( 2 0 % W I ) – S E I S M I C O P T I O N

ShaMaran anticipates mobilizing its seismic crew to the K42 Block for a 200 km 2D program, following acquisition at Pulkhana, to help prove its prospectivity. ShaMaran holds a 20% non-operated interest in the seismic option that can be converted into a pre-negotiated PSC on the ~126,271 gross acre block. There are no surface expressions on K42, which raises its exploration risk, but it is located immediately to the northwest of Pulkhana and on trend with the 1.1 billion bbl Jambur field. The block is operated by Oil Search (Iraq) Limited (60% working interest) and the KRG has the remaining 20% interest in the block. The company paid US$5 million (as well as limited past costs) to enter into the agreement, which permits the companies to acquire 200 km of seismic over 18 months (effective August 28, 2009) in order to evaluate the prospectivity of the field.

Terms of the PSC. If converted into a PSC, the initial three-year work program consists of acquiring 200 km of 2D seismic and drilling one exploration well at a minimum cost of US$10 million. If the PSC option is exercised, the company would also be required to pay signature and capacity-building bonuses of US$2.5 million and US$17.5 million, respectively, within 60 days of the contract’s effective signing date. The second sub-period also consists of drilling one exploration well, and if necessary acquiring additional seismic, at a minimum expenditure of US$10 million. ShaMaran will be required to pay 25% of the costs on block K42 (see Exhibit 4.12).

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Principal Risks – Balanced Portfolio with Cash

In our view, ShaMaran possesses a relatively lower risk profile given its combination of near-term development and higher-impact exploration. We also highlight that management has previous experience in Kurdistan (Taq Taq/Addax) and the fact that oil has already been discovered on the Pulkhana Block as key aspects that lower its overall risk profile. ShaMaran appears to be funded for its initial exploration well (Q4/10) at Pulkhana, but will need to raise additional capital to fund its future work commitments on its three blocks. While the Kurdistan Region of Iraq has been quite open and transparent for foreign investment, uncertainty around timing of a federal Oil and Gas Law and the ability to receive payment for oil exports highlights the high country/political risk that still exists.

Country/political risk. Kurdistan has proven to be relatively stable from a political and civil perspective despite ongoing turmoil in Iraq. However, instability elsewhere has created challenges for approving an Iraqi federal Oil and Gas Law, which has the potential to create further delays (e.g., export pipeline) versus our base outlook. ShaMaran’s production is governed under EPSAs that could be modified by the KRG following the ratification of the federal Oil and Gas Law, the timing of which is still uncertain. As a member of OPEC, Iraq’s crude oil production could become subject to quotas that could constrain ShaMaran’s production.

Exploration risk. Given the significant cost of exploration wells (>US$20 million on average), complex geology/drilling, and the relatively underexplored nature of Kurdistan, ShaMaran’s exploration risk remains high at this point. ShaMaran may have to manage overpressured reservoirs that can prove challenging for drilling operations and also highlight the risk of gas discoveries in the area. Currently there is no market for gas in Kurdistan and as such it is unlikely to be developed. Marginal exploration success and flow test results could also temper our outlook towards the company and negatively impact its development plans.

Execution risk. ShaMaran’s development plans are largely contingent upon discovery size, its ability to commence drilling operations in Q4/10, and political events within Iraq. Assuming exploration success on its block, ShaMaran will need to overcome logistical issues such as gathering pipeline construction and export constraints, potentially adding to its risk of delay versus our base outlook. In our view, oil field developments in Kurdistan are largely contingent upon the passage of the Federal Law that should then allow for export from Kurdistan via new/existing export lines. Limited infrastructure access remains a key issue for companies operating within the region; currently there is no export pipeline available for crude oil production from the region.

Financial risk. With roughly $60 million of cash on its balance sheet and zero debt, ShaMaran should be fully funded for its initial exploration well at Pulkhana, which is set to spud later this year, but the company will likely need to raise additional capital to fulfill its future exploration obligations. The company has firmly committed to spend a minimum of US$66 million (three blocks) over the next three years of the initial exploration sub-phase work commitments.

We look upon ShaMaran as possessing one of the lower risk profile in our Kurdish coverage group.

Oil has been discovered in the Tertiary/Euphrates, noting flow rates of 2,880 bbl/d in 1956.

Passage of the federal Oil and Gas Law remains a critical milestone for companies in Kurdistan to receive payment for exports.

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76

Corporate Profile – ShaMaran Petroleum Corp.

Focused in Kurdistan, ShaMaran is one of the few small-cap companies to hold multiple interests in three highly prospective oil blocks that span over 496,000 gross acres of land. Initially focused on oil and gas exploration in the U.S. Gulf of Mexico under the name Bayou Bend Petroleum Ltd. (BBP-V), the company initiated a strategic review in September 2008 in order to maximize shareholder value. The Gulf of Mexico properties were ultimately sold in May 2009 for US$12.5 million cash and a potential deferred payment of up to US$8 million to be received by April 1, 2011, pending future reserve additions. With no assets, but a healthy cash position of ~US$60 million and the support of the Lundin Group, the company went on the hunt for new business ventures and on August 31, 2009, signed agreements for interests in three blocks (originally evaluated by Lundin), two exploration and one development, in the Kurdistan region of northern Iraq. The company subsequently changed its name to ShaMaran Petroleum Corp. Of note, “ShaMaran” is a Kurdish deity reflecting wisdom and secrets.

L E V E R A G I N G O F F E X P E R I E N C E

While each member of the management team has experience in the international arena, the added ability to leverage the Lundin Group’s expertise and experience specifically in Kurdistan is a clear asset to ShaMaran. The team is led by Pradeep Kabra (President & CEO), who brings a wealth of experience to ShaMaran from his time spent with Addax Petroleum and Lundin Oil and International Petroleum. Most notably, Mr. Kabra was the General Manager – Kurdistan for Addax and was involved in the exploration/development of the Taq Taq oil field and, in our view, holds a significant level of expertise in the region that could emerge as a source of competitive advantage for the company. Instrumental to ShaMaran gaining interests in Kurdistan was John Ashbridge (COO), previously working with the Lundin Group, BP Exploration, Occidental, and Elf. Since joining the Lundin Group in 2005, Mr. Ashbridge has been focused primarily on Middle Eastern and African opportunities, including the addition of Africa Oil Corporation into the Lundin Group. The company’s Chairman, Keith Hill, was previously President and CEO of Valkyries Petroleum Corp. (sold to Lundin Group in 2006) and senior director of Tanganyika Oil (sold to Sinopec in 2008). The senior management team also includes Brenden Johnstone, CFO, formerly with Swiss company Avante Petroleum SA (see Exhibit 4.14).

ShaMaran trades on the TSX Venture Exchange under the symbol SNM. With a market capitalization of $309 million, ShaMaran has 499.0 million shares outstanding (excluding 100 million to be issued after January 2010), of which roughly 2.0 million (<1%) are held by senior management and directors. The company has firmly committed to issue 150 million shares to the KRG and 50 million additional shares to Lundin Petroleum B.V., which would represent total ownership of 21% and 14%, respectively, when fully diluted/issued at 699.0 million shares. Also of note, Zebra Holdings Ltd. (wholly owned by the Lundin Family) owns 64.1 million shares (12.8%), along with Lundin Petroleum B.V., which was issued 50 million shares during Q4/09. ShaMaran reports its financial results in U.S. dollars in accordance with Canadian GAAP, and follows the successful efforts method of accounting. The company’s resources have been evaluated by Petrotech Engineering Ltd. (see Exhibits 4.15-4.17).

ShaMaran maintains close ties with the Lundin Group, which owns roughly 23% of the outstanding shares.

Management has direct experience in Kurdistan (Taq Taq), which could emerge as a key advantage for the company.

Upon full dilution, Lundin (and its wholly owned companies) will own 23.5% of the 699 million shares outstanding.

Page 78: Scotia Capital

Energy – Oil & Gas – International E&P April 2010

77

Exhibit 4.13: ShaMaran – Stock Performance

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Mill

ion

s

Market Cap:

EV:O/S shares:

52 w k:ShaMaran Petroleum

TSX Producers Index (Rebased)

Brent Crude Oil Price (Rebased)

C$309.4M

C$239.3M499.0M

$0.17-$0.76

Source: Company reports; Bloomberg.

Exhibit 4.14: ShaMaran – Management and Directors

Name Position Shares Options Description

Pradeep Kabra President and CEO 50,000 800,000 Mr. Kabra has over 22 years of experience in the oil industry including senior operational and international new venture management positions at Addax Petroleum, Lundin Oil and International Petroleum. Prior to joining ShaMaran he was the General Manager Kurdistan for Addax and was involved in the development of Taq Taq. Mr. Kabra is a CA from India, has a Bachelors degree in Law from the University of Delhi, and completed his LLM in Petroleum Law and Policy from the University of Dundee.

Brenden Johnstone Chief Financial Officer 0 300,000 Mr. Johnstone is a Chartered Accountant and a graduate of the University of Saskatchewan where he obtained bachelor degrees in both Commerce and Arts. He has a broad range of experience in the oil and gas industry, most recently holding the position of CFO with Avante Petroleum SA, an upstream oil and gas company with offices in Geneva, Switzerland.

John Ashbridge Chief Operating Officer 42,300 500,000 Mr. Ashbridge has over 20 years of experience in oil and gas exploration, production and development. His career began with BP Exploration and was followed by technical positions with Occidental and Elf Aquitaine (now Total). Mr. Ashbridge holds an Honours degree in Geophysics with Geology from the University of Liverpool, and a Masters degree in Petroleum Geology from the University of Aberdeen.

Keith Hill Chairman of the Board 2,004,000 1,150,000 Mr. Hill has over 22 years of experience in the oil industry. Previously, Mr. Hill was the founder, President and CEO of Valkyries Petroleum Corp, a publicly traded E&P company, since August 2002. He holds a Master of Science degree in Geology and Bachelor of Science degree in Geophysics from Michigan State University, as well as an MBA from the University of St. Thomas in Houston.

James Bailey Director 0 100,000 Mr. Bailey has worked in the energy investment banking business for the past 19 years. He was a Managing Director of Network Capital and prior thereto a Managing Director of Corporate Finance at Peters & Co. Limited. Mr. Bailey is presently the President and CEO of Fortress Energy Inc. and also serves on the Board of Directors of several publicly traded companies. He holds a CFA designation and has a Bachelor of Commerce degree from the University of Calgary.

Alexandre Schneiter Director 0 100,000 Mr. Schneiter has worked within the Lundin Group of Companies since 1993 and is currently Executive VP and COO of Lundin Petroleum AB. Over the past several years he has been a valuable component of the team responsible for major oil discoveries in countries such as Libya, Sudan and Malaysia. Mr. Schneiter is a graduate of the University of Geneva with a Bachelor degree in Geology and a Masters degree in Geophysics.

Gary Guidry Director 0 350,000 Mr. Guidry was previously President and CEO of Calpine Natural Gas Trust, leading to the successful merger with Viking Energy Royalty Trust. Prior thereto he held executive and senior management positions with AEC International, CanOxy/Nexen, Benton Oil and Gas, and Occidental Petroleum, which included projects in Nigeria, Yemem and Ecuador. Mr. Guidry is a Petroleum Engineer and is a registered Professional Engineer in Alberta.

Brian Edgar Director 0 250,000 Mr. Edgar has over 25 years of experience in the public markets. He has significant experience in corporate and securities law, and formed Rand Edgar Investment Corp., an investment banking/venture capital company. Mr. Edgar is a graduate of the University of British Colombia law school, and serves on the board of several public companies.

Total Beneficial Ownership 2,046,300 2,750,000Total Ownership as % of Total Shares Outstanding 0.41%

Zebra Holding and Investments 64,121,600 Wholly owned by the Lundin Family.Lundin Petroleum B.V. 50,000,000Total Ownership as % of Total Shares Outstanding 22.87%

Source: Company reports; SEDI.

Page 79: Scotia Capital

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78

Exhibit 4.15: ShaMaran – Operating Summary

Years Ending December 31, US$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Avg Daily Production

Crude Oil & NGL (bbl/d)

Kurdistan - Pulkhana 0 0 0 0 0 3,016 15,000 18,000

Kurdistan - Arbat 0 0 0 0 0 0 0 0

Gulf of Mexico 22 43 35 0 0 0 0 0

Total 22 43 35 0 0 3,016 15,000 18,000

Natural Gas (mcf/d)

Gulf of Mexico 940 1,103 586 0 0 0 0 0

Total 940 1,103 586 0 0 0 0 0

Equivalent (boe/d) 179 227 133 0 0 3,016 15,000 18,000

Equivalent (mcfe/d) 1,072 1,363 796 0 0 18,098 90,000 108,000

Commodity Prices

WTI Crude Oil (Cushing, US$/bbl) $72.36 $99.75 $62.09 $80.00 $85.00 $85.00 $85.00 $85.00

Brent Differential to WTI (US$/bbl) -0.35 2.06 0.05 1.50 1.00 1.50 1.50 1.50

Brent Posted (US$/bbl) 72.71 97.69 62.04 78.50 84.00 83.50 83.50 83.50

Henry Hub Natural Gas (US$/mmBtu) 7.12 8.90 4.17 5.00 6.00 6.50 6.50 6.50

Foreign Exchange (US$/C$) 0.93 0.937 0.877 0.971 0.950 0.925 0.925 0.925

Wellhead Prices

Crude Oil & NGL ($/bbl)

Kurdistan - Pulkhana $0.00 $0.00 $0.00 $0.00 $0.00 $30.00 $77.50 $77.50

Kurdistan - Arbat 0.00 0.00 0.00 0.00 0.00 0.00 77.50 77.50

Gulf of Mexico 74.10 96.81 41.66 0.00 0.00 0.00 0.00 0.00

Global Wellhead Oil Price ($/bbl) (Unhedged) 74.10 96.81 41.66 0.00 0.00 30.00 77.50 77.50

Natural Gas ($/mcf)

Gulf of Mexico $6.68 $8.57 $4.29 $0.00 $0.00 $0.00 $0.00 $0.00

Global Natural Gas Price ($/mcf) 6.68 8.57 4.29 0.00 0.00 0.00 0.00 0.00

Royalties (%)

Kurdistan - Pulkhana 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0%

Kurdistan - Arbat 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0%

Gulf of Mexico 32.0% 34.0% 30.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total 32.0% 34.0% 30.0% 0.0% 0.0% 10.0% 10.0% 10.0%

Natural Gas (%)

Gulf of Mexico 32.0% 34.0% 30.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total 32.0% 34.0% 30.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Worldwide Royalty Rate 25.5% 25.5% 20.6% 0.0% 0.0% 10.0% 10.0% 10.0%

Operating and G&A Costs ($)

General & Administration 3,035 3,363 3,958 2,600 3,300 3,700 4,500 5,500

General & Administration ($/boe) 46.53 40.45 81.74 0.00 0.00 3.35 0.82 0.84

Exploration Expense 4,816 10,500 810 0 0 0 0 0

Exploration Expense (US$/boe) 73.84 126.29 16.73 0.00 0.00 0.00 0.00 0.00

Dry Hole Expense 45,150 12,716 21 0 0 0 0 0

Dry Hole Expense (US$/boe) 692.21 152.94 0.43 0.00 0.00 0.00 0.00 0.00

Depletion, Depreciation & Amortization 3,259 1,912 482 780 1,900 2,900 27,375 39,420

Depletion, Depreciation & Amortization ($/boe) 49.96 23.00 9.95 0.00 0.00 2.63 5.00 6.00

Crude Oil & NGL ($/bbl)

Kurdistan - Pulkhana $0.00 $0.00 $0.00 $0.00 $0.00 $12.25 $10.50 $7.00

Kurdistan - Arbat 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Gulf of Mexico 15.00 26.49 15.99 0.00 0.00 0.00 0.00 0.00

Total $15.00 $26.49 $15.99 $0.00 $0.00 $12.25 $10.50 $7.00

Natural Gas ($/mcf)

Gulf of Mexico $2.50 $4.42 $2.67 $0.00 $0.00 $0.00 $0.00 $0.00

Total $2.50 $4.42 $2.67 $0.00 $0.00 $0.00 $0.00 $0.00

Worldwide Operating Costs ($/boe) $14.49 $26.49 $15.99 $0.00 $0.00 $12.25 $10.50 $7.00

Operating Netback ($/bbl)

Crude Oil & NGL ($/bbl)

Kurdistan - Pulkhana $0.00 $0.00 $0.00 $0.00 $0.00 $14.75 $59.25 $62.75

Kurdistan - Arbat $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Gulf of Mexico 35.39 37.40 13.17 0.00 0.00 0.00 0.00 0.00

Total $35.39 $37.40 $13.17 $0.00 $0.00 $14.75 $59.25 $62.75

Natural Gas ($/mcf)

Gulf of Mexico $2.04 $1.24 $0.34 $0.00 $0.00 $0.00 $0.00 $0.00

Total $2.04 $1.24 $0.34 $0.00 $0.00 $0.00 $0.00 $0.00

Worldwide Operating Netback ($/boe) $27.34 $33.76 $18.27 $0.00 $0.00 $14.75 $59.25 $62.75

Source: Company reports; Scotia Capital estimates.

Page 80: Scotia Capital

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Exhibit 4.16: ShaMaran – Income Statements

Years Ending December 31, US$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Commodity Prices

WTI Crude Oil (US$/bbl) $72.36 $99.75 $62.09 $80.00 $85.00 $85.00 $85.00 $85.00

Brent Posted (US$/bbl) 72.71 97.69 62.04 78.50 84.00 83.50 83.50 83.50

Revenue

Exploration & Production $3,661 $6,723 $2,090 $0 $0 $19,885 $254,757 $285,172

Corporate 4,182 2,056 255 0 0 0 0 0

Royalties 932 1,714 431 0 0 3,312 42,431 50,918

Net Revenues 6,911 7,066 1,914 0 0 16,573 212,326 234,255

Expenses

Operating Costs 945 2,202 774 0 0 13,524 57,488 45,990

General & Administrative 3,035 3,363 3,958 2,600 3,300 3,700 4,500 5,500

Interest 0 0 -232 -669 730 2,580 3,298 2,329

Exploration 4,816 10,500 810 0 0 0 0 0

Dry Hole 45,150 12,716 21 0 0 0 0 0

Depletion, Depreciation & Amortization 3,259 1,912 482 780 1,900 2,900 27,375 39,420

Foreign Exchange Loss -18,016 5,010 -5,149 0 0 0 0 0

Stock Based Compensation 2,223 801 947 1,100 1,500 2,000 2,000 2,500

Impairment 23,934 68,556 -1,566 0 0 0 0 0

Writedown 0 0 0 0 0 0 0 0

Other 37 55 12 0 0 0 0 0

Total Expenses 65,383 105,115 58 3,811 7,430 24,704 94,660 95,739

Earnings Before Income Taxes -58,473 -98,050 1,856 -3,811 -7,430 -8,131 117,666 138,516

Taxes

Current 0 0 0 0 0 0 0 0

Deferred 0 0 0 0 0 0 0 0

Total Tax 0 0 0 0 0 0 0 0

Corporate Tax Rate 0% 0% 0% 0% 0% 0% 0% 0%

Current Tax 0% 0% 0% 0% 0% 0% 0% 0%

Deferred Tax 0% 0% 0% 100% 100% 100% 100% 100%

Minority Interest 0 0 0 0 0 0 0 0

Equity Income 0 0 0 0 0 0 0 0

Discontinued Operations 0 0 0 0 0 0 0 0

Extraordinary Items/Accounting Changes 0 0 0 0 0 0 0 0

Net Income from Continuing Operations -58,473 -98,050 1,856 -3,811 -7,430 -8,131 117,666 138,516

Net Income Available to Common -58,473 -98,050 1,856 -3,811 -7,430 -8,131 117,666 138,516

EPS -- Basic -$0.21 -$0.32 $0.01 -$0.01 -$0.01 -$0.02 $0.24 $0.28

EPS -- Diluted -$0.21 -$0.32 $0.01 -$0.01 -$0.01 -$0.01 $0.17 $0.20

Reported Operating Cash Flow 16,130 -14,010 1,752 -1,931 -4,030 -3,231 147,041 180,436

CFPS -- Basic $0.06 -$0.05 $0.01 $0.00 -$0.01 -$0.01 $0.29 $0.36

CFPS -- Diluted $0.06 -$0.05 $0.01 $0.00 -$0.01 $0.00 $0.21 $0.26

Capitalized Interest 0 0 0 0 0 0 0 0

Discretionary Cash Flow 16,130 -14,010 1,752 -1,931 -4,030 -3,231 147,041 180,436

CFPS -- Basic $0.06 -$0.05 $0.01 $0.00 -$0.01 -$0.01 $0.29 $0.36

CFPS -- Diluted $0.06 -$0.05 $0.01 $0.00 -$0.01 $0.00 $0.21 $0.26

Outstanding Common Shares (Basic) 308,256 308,756 498,991 498,991 498,991 498,991 498,991 498,991

Weighted Average Common Shares

Basic 278,017 308,745 342,387 498,991 498,991 498,991 498,991 498,991

Diluted (incl. share committed to KRG/Lundin) 278,017 308,745 342,387 598,991 598,991 649,264 698,991 698,991

Note: Taxes in Kurdistan are paid from the government’s share of profit oil.

Source: Company reports; Scotia Capital estimates.

Page 81: Scotia Capital

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Exhibit 4.17: ShaMaran – Cash Flow Statements and Balance Sheets

Years Ending December 31, US$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Retained EarningsRetained Earnings, Opening -$46,217 -104,690 -202,739 -200,883 -204,694 -212,124 -220,254 -102,589

Net Income -58,473 -98,050 1,856 -3,811 -7,430 -8,131 117,666 138,516

Other 0 0 0 0 0 0 0 0

Retained Earnings, Closing -104,690 -202,739 -200,883 -204,694 -212,124 -220,254 -102,589 35,927

Cash FlowOperating ActivitiesNet Income -58,473 -98,050 1,856 -3,811 -7,430 -8,131 117,666 138,516

Deferred Taxes 0 0 0 0 0 0 0 0

Impairments 23,934 68,556 38 0 0 0 0 0

Writedowns 0 0 0 0 0 0 0 0

Dry Hole 45,150 12,716 21 0 0 0 0 0

Depreciation, Depletion & Amortization 3,259 1,912 482 780 1,900 2,900 27,375 39,420

Stock Based Compensation 2,223 801 947 1,100 1,500 2,000 2,000 2,500

Foreign Exchange Amortization 0 0 0 0 0 0 0 0

Other 37 55 -1,592 0 0 0 0 0

Operating Cash Flow 16,130 -14,010 1,752 -1,931 -4,030 -3,231 147,041 180,436

Changes in non-cash working capital 109 -10,507 0 0 0 0 0 0

Funds from Operating Activities 16,239 -24,517 1,752 -1,931 -4,030 -3,231 147,041 180,436

Net Investing ActivitiesExploration & Development -98,195 -20,803 -82,039 -53,641 -94,500 -76,870 -123,700 -103,150

Other/Bonus Payments/Third-Party Cost Recovery -32,056 31,977 0 0 0 -1,875 -3,750 0

Cash Flow from Investing Activities -130,251 11,174 -82,039 -53,641 -94,500 -78,745 -127,450 -103,150

Changes in non-cash working capital 0 0 0 0 0 0 0 0

Funds from Investing Activities -130,251 11,174 -82,039 -53,641 -94,500 -78,745 -127,450 -103,150

Financing ActivitiesLong Term Debt (Decrease) 0 0 0 0 0 0 0 0

Issuance of Common Shares 166,785 50 100,098 0 0 0 0 0

Other -18 0 0 0 0 0 0 0

Cash Flow from Financing Activities 166,767 50 100,098 0 0 0 0 0

Changes in non-cash working capital 0 0 0 0 0 0 0 0

Funds from Financing Activities 166,767 50 100,098 0 0 0 0 0

Cash, Opening 2,535 58,574 45,282 65,093 9,521 -89,008 -170,984 -151,393

Effect of FX on Cash 3,284 0 0 0 0 0 0 0

Net Change in Cash 52,755 -13,293 19,811 -55,572 -98,530 -81,976 19,591 77,286

Cash, Closing 58,574 45,282 65,093 9,521 -89,008 -170,984 -151,393 -74,107

Balance SheetsYears Ending December 31, US$000's 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

AssetsCurrent Assets

Cash & Term Deposits 58,574 45,282 65,093 9,521 -89,008 -170,984 -151,393 -74,107

Accounts Receivable 3,109 1,912 1,912 1,912 1,912 1,912 1,912 1,912

Other/Prepaid Expenses 32,685 1,625 1,625 1,625 1,625 1,625 1,625 1,625

Total Current Assets 94,368 48,819 68,630 13,058 -85,471 -167,447 -147,856 -70,570

Property, Plant & Equipment 75,731 19,946 102,571 155,112 248,112 324,857 450,307 550,957

Accumulated Depletion, Depreciation & Amortization 3,259 5,171 5,653 6,433 8,333 11,233 38,608 78,028

Net Property, Plant & Equipment 72,472 14,775 96,918 148,679 239,779 313,624 411,699 472,929

Other 0 0 0 0 0 0 0 0

Total Assets 166,840 63,594 165,548 161,737 154,307 146,177 263,842 402,358

LiabilitiesCurrent Liabilities

Bank Indebtedness $0 $0 0 0 0 0 0 0

Accounts Payable & Accrued Liabilities 12,868 5,636 5,636 5,636 5,636 5,636 5,636 5,636

Future Income Taxes 0 0 0 0 0 0 0 0

Other 1,381 1,588 1,588 1,588 1,588 1,588 1,588 1,588

Total Current Liabilities 14,249 7,224 7,224 7,224 7,224 7,224 7,224 7,224

Long Term Debt 0 0 0 0 0 0 0 0

Asset Retirement Obligation 927 1,904 1,904 1,904 1,904 1,904 1,904 1,904

Future Income Taxes 0 0 0 0 0 0 0 0

Other 0 0 0 0 0 0 0 0

Total Liabilities 15,176 9,128 9,128 9,128 9,128 9,128 9,128 9,128

Shareholder EquityCommon Shares 250,835 250,899 350,997 350,997 350,997 350,997 350,997 350,997

Contributed Surplus 2,237 3,024 3,024 3,024 3,024 3,024 3,024 3,024

Retained Earnings -104,690 -202,739 -200,883 -204,694 -212,124 -220,254 -102,589 35,927

Translation Adjustment 3,282 3,282 3,282 3,282 3,282 3,282 3,282 3,282

Total Equity 151,664 54,466 156,420 152,609 145,179 137,049 254,714 393,230

Total Liabilities & Shareholder's Equity $166,840 $63,594 $165,548 $161,737 $154,307 $146,177 $263,842 $402,358

Source: Company reports; Scotia Capital estimates.

Page 82: Scotia Capital

Appendix A: Important Disclosures Company Ticker Disclosures (see legend below)* Calvalley Petroleum Inc. CVI.A J Niko Resources Ltd. NKO D22, T Pacific Rubiales Energy Corp. PRE P Parex Resources Inc. PXT G, U, U29 Petrolifera Petroleum Limited PDP G, I, J, T, U Petrominerales Ltd. PMG G, I, T, U Vermilion Energy Trust VET.UN G, I, P, U I, Gavin Wylie, certify that (1) the views expressed in this report in connection with securities or issuers that I analyze accurately reflect my personal views and (2) no part of my compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by me in this report. This research report was prepared by employees of Scotia Capital who have the title of Analyst. All pricing of securities in reports is based on the closing price of the securities’ principal marketplace on the night before the publication date, unless otherwise explicitly stated. All Equity Research Analysts report to the Head of Equity Research. The Head of Equity Research reports to the Managing Director, Head of Institutional Equity Sales, Trading and Research, who is not and does not report to the Head of the Investment Banking Department. The Supervisory Analyst, who reviews the report prior to publication, has a dual reporting line to the Head of Equity Research and the Head of Scotia Capital Compliance. Scotia Capital has policies that are reasonably designed to prevent or control the sharing of material non-public information across internal information barriers, such as between Investment Banking and Research. The compensation of the research analyst who prepared this report is based on several factors, including but not limited to, the overall profitability of Scotia Capital and the revenues generated from its various departments, including investment banking. Furthermore, the research analyst's compensation is charged as an expense to various Scotia Capital departments, including investment banking. Research Analysts may not receive compensation from the companies they cover. Non-U.S. analysts may not be associated persons of Scotia Capital (USA) Inc. and therefore may not be subject to NASD Rule 2711 restrictions on communications with subject company, public appearances and trading securities held by the analysts. For Scotia Capital Research analyst standards and disclosure policies, please visit http://www.scotiacapital.com/disclosures Scotia Capital Research, 40 King Street West, 33rd Floor, Toronto, Ontario, M5H 1H1. * Legend D22 Don R. Hansen is a director of Niko Resources Ltd and is a Managing Director of Scotia Waterous. G Scotia Capital USA Inc. or its affiliates has managed or co-managed a public offering in the past 12 months. I Scotia Capital USA Inc. or its affiliates has received compensation for investment banking services in the

past 12 months. J Scotia Capital USA Inc. or its affiliates expects to receive or intends to seek compensation for investment

banking services in the next 3 months. P This issuer paid a portion of the travel-related expenses incurred by the Fundamental Research

Analyst/Associate to visit material operations of this issuer. T The Fundamental Research Analyst/Associate has visited material operations of this issuer. U Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability

with respect to equity or debt securities of, or have provided advice for a fee with respect to, this issuer. U29 Parex is a newly formed international exploration company holding the Colombia and Trinidad and Tobago

exploration assets formerly owned by Petro Andina.

Page 83: Scotia Capital

General Disclosures This report has been prepared by analysts who are employed by the Research Department of Scotia CapitalTM. The Scotia Capital trademark represents the corporate and investment banking businesses of the Scotiabank Group. Scotia Capital Research produces research reports under a single marketing identity referred to as “Globally-branded research” under U.S. rules. This research is produced on a single global research platform with one set of rules which meet the most stringent standards set by regulators in the various jurisdictions in which the research reports are produced. In addition, the analysts who produce the research reports, regardless of location, are subject to one set of policies designed to meet the most stringent rules established by regulators in the various jurisdictions where the research reports are produced. This report is provided to you for informational purposes only. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. The securities mentioned in this report may neither be suitable for all investors nor eligible for sale in some jurisdictions where the report is distributed. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, however, Scotia Capital makes no representation or warranty, express or implied, as to their accuracy or completeness. Scotia Capital has policies designed to make best efforts to ensure that the information contained in this report is current as of the date of this report, unless otherwise specified. Any prices that are stated in this report are for informational purposes only. Scotia Capital makes no representation that any transaction may be or could have been effected at those prices. Any opinions expressed herein are those of the author(s) and are subject to change without notice and may differ or be contrary from the opinions expressed by other departments of Scotia Capital or any of its affiliates. Neither Scotia Capital nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Equity research reports published by Scotia Capital are available electronically via: Bloomberg, Thomson Financial/First Call - Research Direct, Reuters, Capital IQ, and FactSet. Institutional clients with questions regarding distribution of equity research should contact us at 1-800-208-7666. This report and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without the prior express consent of Scotia Capital.

Additional Disclosures Canada: This report is distributed by Scotia Capital Inc., a subsidiary of the Bank of Nova Scotia. Scotia Capital Inc. is a member of CIPF. Mexico: This report is distributed by Scotia Inverlat Casa de Bolsa S.A. de C.V., a subsidiary of the Bank of Nova Scotia. United Kingdom and the rest of Europe: Except as otherwise specified herein, this report is distributed by Scotia Capital (Europe) Limited, a subsidiary of the Bank of Nova Scotia. Scotia Capital (Europe) Limited is authorized and regulated by the Financial Services Authority (FSA). Scotia Capital (Europe) Limited research complies with all the FSA requirements and laws concerning disclosures and these are indicated on the research where applicable. Scotia Capital Inc. is regulated by the FSA for the conduct of investment business in the UK. United States: This report is distributed by Scotia Capital (USA) Inc., a subsidiary of Scotia Capital Inc., and a registered U.S. broker-dealer. All transactions by a U.S. investor of securities mentioned in this report must be effected through Scotia Capital (USA) Inc. Non-U.S. investors wishing to effect a transaction in the securities discussed in this report should contact a Scotia Capital entity in their local jurisdiction unless governing law permits otherwise.

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Definition of Scotia Capital Equity Research Ratings & Risk Rankings We have a three-tiered rating system, with ratings of 1-Sector Outperform, 2-Sector Perform, and 3-Sector Underperform. Each analyst assigns a rating that is relative to his or her coverage universe. Our risk ranking system provides transparency as to the underlying financial and operational risk of each stock covered.Statistical and judgmental factors considered are: historical financial results, share price volatility, liquidity of the shares,credit ratings, analyst forecasts, consistency and predictability of earnings, EPS growth, dividends, cash flow fromoperations, and strength of balance sheet. The Director of Research and the Supervisory Analyst jointly make the finaldetermination of all risk rankings. The rating assigned to each security covered in this report is based on the Scotia Capital research analyst’s 12-month view on the security. Analysts may sometimes express to traders, salespeople and certain clients their shorter-term views on these securities that differ from their 12-month view due to several factors, including but not limited to the inherent volatilityof the marketplace. Ratings

1-Sector Outperform The stock is expected to outperform the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. 2-Sector Perform The stock is expected to perform approximately in line with the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. 3-Sector Underperform The stock is expected to underperform the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Other Ratings Tender – Investors are guided to tender to the terms of the takeover offer. Under Review – The rating has been temporarily placed under review, until sufficient information has been received and assessed by the analyst.

Risk Rankings

Low Low financial and operational risk, high predictability of financial results, low stock volatility. Medium Moderate financial and operational risk, moderate predictability of financial results, moderate stock volatility. High High financial and/or operational risk, low predictability of financial results, high stock volatility. Caution Warranted Exceptionally high financial and/or operational risk, exceptionally low predictability of financial results, exceptionally high stock volatility. For risk-tolerant investors only. Venture Risk and return consistent with Venture Capital. For risk-tolerant investors only.

Scotia Capital Equity Research Ratings Distribution*

Distribution by Ratings and Equity and Equity-Related Financings* Percentage of companies covered by Scotia Capital Equity Research within each rating category.

Percentage of companies within each rating category for which Scotia Capital has undertaken an underwriting liability or has provided advice for a fee within the last 12 months.

Source: Scotia Capital.

For the purposes of the ratings distribution disclosure the NASD requires members who use a ratings system with terms different than “buy,” “hold/neutral” and “sell,” to equate their own ratings into these categories. Our 1-Sector Outperform, 2-Sector Perform, and 3-Sector Underperform ratings are based on the criteria above, but for this purpose could be equated to buy, neutral and sell ratings, respectively.

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Scotia Capital Equity Research Team HEAD OF EQUITY RESEARCH John Henderson, P.Eng ...............................(416) 945-7393 [email protected] SUPERVISORY ANALYST Claude King, CFA.........................................(416) 863-7985 [email protected] DIRECTOR OF ADMINISTRATION Erika Osmond...............................................(416) 945-4529 [email protected] CHINA STRATEGY Na Liu, CFA..................................................(416) 945-4235 [email protected] CONSUMER DISCRETIONARY Cable Jeff Fan, CA, CFA ........................................(416) 863-7780 [email protected] Hotels, Restaurants & Leisure Turan Quettawala, CFA................................(416) 863-7065 [email protected] Media Paul Steep....................................................(416) 945-4310 [email protected] CONSUMER STAPLES Retailing Patricia Baker, Ph.D. ....................................(514) 287-4535 [email protected] ENERGY Oil & Gas – Integrated and E&P Mark Polak, CFA ..........................................(403) 213-7349 [email protected] Oil & Gas – International E&P Gavin Wylie ..................................................(403) 213-7333 [email protected] Oil & Gas – E&P Jason Bouvier, CFA .....................................(403) 213-7345 [email protected] William Lee...................................................(403) 213-7331 [email protected] Oil & Gas – Royalty Trusts Patrick Bryden, CFA.....................................(403) 213-7750 [email protected] FINANCIALS Banks & Diversified Financials Kevin Choquette, CFA, CMA........................(416) 863-2874 [email protected] Diversified Financials – Small Cap Phil Hardie, CFA, P.Eng...............................(416) 863-7430 [email protected] INCOME TRUSTS Diversified Business Trusts Turan Quettawala, CFA................................(416) 863-7065 [email protected]

Power & Energy Infrastructure Trusts Tony Courtright, CA......................................(416) 945-4536 [email protected] REITs Mario Saric, CA, CFA ...................................(416) 863-7824 [email protected] Pammi Bir, CA, CFA.....................................(416) 863-7218 [email protected] INDUSTRIALS Transportation & Aerospace Turan Quettawala, CFA................................(416) 863-7065 [email protected] INFORMATION TECHNOLOGY Hardware & Equipment Gus Papageorgiou, CFA ..............................(416) 863-7552 [email protected] Software & Services Paul Steep ....................................................(416) 945-4310 [email protected] MATERIALS Fertilizers, Biofuels & Chemicals Sam Kanes, CA, CFA...................................(416) 863-7798 [email protected] Agriculture & Fertilizers Ben Isaacson, CFA.......................................(416) 945-5310 [email protected] Gold & Precious Minerals Trevor Turnbull, MSc ....................................(416) 863-7427 [email protected] David Christie, P.Geo ...................................(416) 863-7141 [email protected] Indi Gopinathan, P.Eng. ...............................(416) 945-4083 [email protected] Metals & Mining Lawrence Smith, CFA...................................(416) 945-4526 [email protected] Paper & Forest Products Benoit Laprade, CA, CFA .............................(514) 287-3627 [email protected] MEXICO Construction Marcos Durán y Casahonda, CFA..... 011-52-55-9179-5209 [email protected] (Scotia Inverlat Casa de Bolsa) Transportation & Aerospace Rodrigo Echagaray............................ 011-52-55-9179-5236 [email protected] (Scotia Inverlat Casa de Bolsa) PORTFOLIO STRATEGY Vincent Delisle, CFA.....................................(514) 287-3628 [email protected] REAL ESTATE Mario Saric, CA, CFA ...................................(416) 863-7824 [email protected] Pammi Bir, CA, CFA.....................................(416) 863-7218 [email protected] SPECIAL SITUATIONS Anthony Zicha...............................................(514) 350-7748 [email protected]

TELECOMMUNICATION SERVICES John Henderson, P.Eng. ............................ (416) 945-7393 [email protected] Jeff Fan, CA, CFA ....................................... (416) 863-7780 [email protected] UTILITIES Energy Infrastructure Sam Kanes, CA, CFA.................................. (416) 863-7798 [email protected] Power & Energy Infrastructure Trusts Tony Courtright, CA..................................... (416) 945-4536 [email protected] Renewable Power Ben Isaacson, CFA...................................... (416) 945-5310 [email protected] ECONOMICS Warren Jestin .............................................. (416) 866-6136 Aron Gampel ............................................... (416) 866-6259 Pablo Bréard................................................ (416) 862-3876 Derek Holt.................................................... (416) 863-7707 Patricia Mohr................................................ (416) 866-4210 Mary Webb .................................................. (416) 866-4202 PORTFOLIO ADVISORY GROUP (SCOTIAMCLEOD) Managing Director: Stewart Hunt ................................................ (416) 863-2855 Trading Elliott Fishman ............................................. (416) 863-7860 Angelo Rizzo ............................................... (416) 863-7521 Dave Stephens ............................................ (416) 862-3115 Portfolio Manager: Stephen Uzielli............................................. (416) 863-7939 Equity Advisory Paul Danesi ................................................. (416) 863-7735 Gareth Watson, CFA ................................... (416) 863-7604 Geoff Ho, CFA ............................................. (416) 865-6354 Institutional Equity Sales & Trading Toronto ........................................................ (416) 863-2885 1-888-251-4484 Montreal....................................................... (514) 287-4513 Vancouver ................................................... (604) 661-7411 1-888-926-2288 New York ................................................ (212) 225-6605/04 1-800-262-4060 Boston ......................................................... (617) 330-1477 Mexico City, MX ................................ 011-52-55-9179-5181 (Scotia Inverlat Casa de Bolsa) London, U.K. .................................... 011-44-207-826-5919 Singapore .................................................... (65) 6305-8350 (65) 6305-8347

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TM Trademark of The Bank of Nova Scotia. The Scotia Capital trademark represents the corporate and investment banking businesses of The Bank of Nova Scotia, Scotiabank Europe plc, Scotia Capital Inc. and Scotia Capital (USA) Inc. – all members of the Scotiabank Group and authorized users of the mark. Scotia Capital Inc. is a member of CIPF.

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