2011 Second Quarter Report

The Company has launched a major exploration initiative throughout its East Africa portfolio which includes at least 10 seismic acquisition programs (totaling over 7,000 kilometers), 6 full tensor gravity surveys, extensive environmental studies, acquisition of high resolution gravity and magnetic data, as well as geochemical surveys. Over the next 18 months, multiple exploratory wells are planned to test the numerous prospects identified throughout the blocks.

KENYA

The Company and Tullow Oil plc. ("Tullow"), its operating partner in each of the Kenyan Blocks other than Block 9, have completed the work and/or are proposing the work programs, described below.

Block 10BB

The Company and Tullow have integrated and interpreted all newly acquired (610 km) and vintage 2D seismic data. A number of prospects have been identified and are being high graded for the planned drill program. The Ngamia (Camel) prospect (previously named Fise-1) has been selected by the joint venture for the initial well in Block 10BB. The prospect will test the oil potential in Miocene age sandstones within a three way dip closure against the West Lokichar rift fault. Ngamia is directly analogous to successful oil accumulations drilled by Tullow and partners early in the exploration efforts in the Lake Albert graben of Uganda. The contract for the drilling rig has been awarded to Weatherford International. Additional preparations for drilling, including purchase of materials, execution of drilling related contracts, civil works, and environmental permits are either completed or underway. Spudding of the Ngamia well is slated for the fourth quarter of 2011. In addition to drilling operations, the Company and its partner are currently acquiring a full tensor gravity survey (FTG) to further define prospective areas of the block that lack 2D seismic data. The survey should be completed in the fourth quarter of 2011.

Block 10BA

The Company and Tullow have initiated a FTG survey over most of Block 10BA, covering all of Lake Turkana and most of the adjacent onshore areas. Two FTG contractors are working simultaneously to expedite the survey, which is expected to be completed during the fourth quarter of 2011. A seismic acquisition contract has been awarded to the Bureau of Geophysical Prospecting ("BGP") for 1350 km of 2D data to be acquired in both the offshore lake environment and nearshore transitional areas adjacent to Lake Turkana. The offshore data will be acquired using state of the art Ocean Bottom Cable ("OBC"), whereby the recording receivers will be positioned on the bottom of the lakebed. Pre-seismic environmental studies are underway and the seismic survey is planned to commence in the fourth quarter of 2011.

Block 10A

The Company and Tullow have integrated and interpreted all newly acquired (750 km) and vintage 2D seismic data. A number of prospects have been identified and are being high graded for selection of the first drilling location. Preparations for drilling, including purchase of materials, execution of drilling related contracts, civil works, and environmental permits are either completed or underway. The Block 10A well is expected to spud in early 2012 using the same Weatherford rig as will be used in Block 10BB. In addition to the drilling operations, a small swath of full tensor gravity (FTG) is being acquired to test the applicability of the FTG technology in Block 10A. The swath survey should be completed in the third quarter of 2011.

Block 13T

The Company and Tullow have awarded contracts for both a FTG survey and seismic acquisition. The FTG survey is underway and is anticipated to be completed by the third quarter of 2011. The recording of at least 562 km of 2D seismic data by BGP is planned to commence in the fourth quarter of 2011. Environmental impact studies and government permitting will precede the seismic survey. Interpretation of reprocessed vintage seismic data has revealed a string of interesting structures on trend with the Ngamia feature of Block 10BB. The seismic program will focus on further delineation of these leads to mature them to drillable prospect status.

Block 12A

The Company and Tullow have awarded contracts for both an FTG survey and seismic acquisition. The FTG survey is underway and is expected to be completed during the third quarter of 2011. The recording of at least 520 km of 2D seismic data by BGP is planned to commence in January 2012. Environmental impact studies and Government permitting will precede the seismic survey.

Block 9

The Company holds 100% interest in Block 9 and has recently completed the acquisition of 750 km of 2D seismic data. The survey was focused on delineating a drillable prospect in the oil-prone Kaisut sub-basin in the northwestern portion of the block. Newly acquired data is of excellent quality and a number of interesting leads have been identified. One exploration well is expected to be drilled during 2012. Additionally, the Company has completed a study associated with potential commercialization of gas resources in the 2010 Bogal discovery prior to a potential 2012 Bogal re-entry, and testing program. The Company plans to pursue a partner on Block 9 that brings gas development and marketing experience to the joint venture.

ETHIOPIA

South Omo Block

The Company and its operating partner on the Block, Tullow, have recently completed a FTG survey across most of the southern portion of the South Omo Block. The results of the survey are encouraging and will be used to lay out the upcoming 2D seismic survey. A contract with BGP for the acquisition of at least 1000 km of 2D seismic data has been executed and base camp construction began in July 2011. The seismic recording is estimated to commence during the third quarter of 2011. Environmental impact studies and government permitting will precede the seismic survey.

Ogaden Blocks 7/8

The Company and its partners have integrated and interpreted all newly acquired (430 km) and vintage 2D seismic data over the two blocks. The joint venture is currently focused on developing a better understanding of the large El Kuran oil and gas accumulation in Block 8, discovered in the early 1970's. The Company has completed a reservoir characterization study over the El Kuran structure. A revised analysis of the well data has confirmed the presence of light oil in the Jurassic limestones. The Company is currently analyzing how best to re-drill and test El Kuran in hopes of proving up movable, commercial quantities of oil. Preparations for drilling, including purchase of materials, execution of drilling related contracts, civil works, and environmental permits have commenced. Spud of the El Kuran well is anticipated in the first half of 2012.

Ogaden Blocks 2/6

Ogaden Blocks 2/6 have been relinquished and Ministerial approval to waive remaining commitments is expected shortly. The Company has written off all incurred and expected oil and gas expenditures relating to Blocks 2/6.

Adigala Block

The Company and its partner have completed the first exploration period of three years and have exceeded the contractual work obligations. Negotiations with the Ministry of Mines to enter the second period of exploration for the Adigala Block are ongoing. The Company and its partner are proposing additional geologic and geophysical studies to better understand the subsurface configuration of the block. In addition, the partnership is contemplating drilling a stratigraphic test well if a suitable light rig can be secured at reasonable costs.

Rift Valley Joint Study Block

The Company completed the acquisition of high resolution gravity and magnetic data over the Rift Valley Block in April 2011. Final processing and interpretation is anticipated to be completed during the third quarter of 2011. The gravity and magnetic interpretation will enable the Company to decide whether to commit to a further work program under a formal production sharing agreement. The block is on trend with highly prospective blocks in the Tertiary rift valley such as Ethiopian South Omo block, and Kenyan blocks 10BA, 10BB, 13T, and 12A. Additionally, the Company mobilized geochemical specialists to collect fluid samples to detect potential oil seeps at the surface and/or margins of the major rift lakes Abaya and Chamo, within the southern portion of the block. A total of 17 samples were collected of which 3 revealed hydrocarbon signatures.

PUNTLAND (SOMALIA)

Dharoor and Nugaal Valley Blocks

The Company is currently in final preparations to commence a two well drilling campaign in the Dharoor Valley Block, with the first well planned to spud in the fourth quarter of 2011. Drilling locations have been selected over two robust prospects targeting gross best estimated prospective resources of over 300 million barrels each, based on internal estimates. A contract has been awarded to Sakson Drilling and Oil Services who will provide a 1500 horse-power, top drive equipped rig. The majority of the drilling related third party service contracts have been entered into and all outstanding service contracts are expected to be complete before the end of August.

The Company is actively engaged in sourcing drilling related materials and early stage logistics including drill site and ingress route construction. A contract has been signed with a water well drilling company and water well drilling will commence in early September. Mobilization of required personnel and equipment is planned to allow for spud of the first well, Shabeel-1, during the fourth quarter of this year.

The Puntland Government and Dharoor Valley communities are fully supportive of the drilling project and have ensured they will do all to allow the project to move forward safely and expeditiously. Specific milestone target dates have been adjusted by the Puntland Government allowing the Company and partners to move the drilling start-up to the fourth quarter of 2011. In addition, partial relinquishments in both the Dharoor Valley and Nugaal Valley agreements have been finalized and approved. The Puntland Government has also given its approval for the formation of Horn Petroleum and the proposed transaction with the Company.

MALI

Blocks 7 and 11

The Company and its partner, Heritage Oil and Gas Ltd. ("Heritage") have recently completed the acquisition of 848 km of 2D seismic in Block 11 and 243 km in Block 7. Both blocks are located in the Gao Graben which is thought to be analogous to other Cretaceous age, oil productive, central African rift basins. The Company's share of costs for initial seismic and the drilling of the first exploratory well are fully carried by its single partner, Heritage.