2013 First Quarter Update

On the back of the successful exploration activities in Kenya during 2012, the Company, together with its partners, continues to ramp up its exploration program in Kenya and Ethiopia. Entering the year, two Tullow-Africa Oil joint venture rigs were operating in Kenya and one joint venture rig was operating in Ethiopia. A fourth Tullow-Africa Oil joint venture rig has been secured and is expected to commence testing and drilling operations in Kenya on Blocks 10BB and 13T during the third quarter of 2013. The Company, as operator, and its partner in Block 9 (Kenya) have secured a fifth rig, which will commence drilling operations in the third quarter of 2013. In addition, the Company and its partners in Block 7/8 (Ethiopia) have secured a sixth rig, which will commence drilling operations in June 2013. For a period, the Company will have 6 drilling rigs operating and expects to exit the year with 5 rigs operating in the region. The Company plans to drill 10 to 12 wells and perform up to 5 well tests across its exploration blocks during 2013.

The Ministry of Energy in Kenya has been provided with the Twiga South-1 testing results, which accompanied a formal Notice of Discovery under the terms of the Block 13T PSC. Following this Notice of Discovery, the Ministry of Energy has agreed to the Tullow proposal, as operator of Blocks 10BB and 13T, to carry out a combined exploration and evaluation program over a defined Area of Interest ("AOI") including all of the mapped prospects and leads along the basin bounding fault on the western edge of the Lokichar Basin. The basis of the AOI approach is to adopt a basin-wide approach to concurrently explore and evaluate the area as opposed to undertaking well-by-well appraisals for each discovery well. This basin-wide approach, with regards to the AOI, is mutually agreed to be the most efficient and quickest approach to moving the exploration and evaluation work program forward towards reaching a commercial threshold of reserves required to justify any large scale oil development.

The Company and its partners plan to continue to actively acquire, process and interpret an extensive 2D seismic program totaling approximately 3,600 kilometers during 2013 over Blocks 10BA, 10BB, 12A, 13T and South Omo with 2 onshore and one offshore 2D seismic crews operating throughout the remainder of the year. A third 2D seismic crew operating in South Omo was released in May 2013 after completing 1,174 km of 2D seismic. In addition, the Company and its partner in Blocks 10BB and 13T will mobilize a 3D seismic crew to complete a 550 square kilometer 3D seismic survey over the Ngamia and Twiga structures later in 2013.

KENYA

The Company and its operating partners in the Kenyan blocks are actively exploring for oil as described below.

Block 10BB

Based on the very positive results at Ngamia-1 on Block 10BB in 2012, the Company and its partner, Tullow, have accelerated the pace of exploration along the Ngamia trend in Block 10BB and Block 13T. The Company currently has 2 drilling rigs operating in the Lokichar Basin and has committed to mobilize a third light drilling/testing rig to the area in the third quarter of 2013. Up to six exploration wells and up to four well tests are planned to be completed across Blocks 10BB and 13T during 2013.

The Company and its operating partner on Block 10BB are currently conducting tests on a series of six zones at the Ngamia-1 discovery. Ngamia-1 was drilled in 2012 but testing operations were postponed until appropriate artificial lift equipment was sourced to properly assess the accumulation. The first of these tests was in the Lower Lokhone formation where up to 43 meters of potential pay had previously been identified by logging and MDT sampling. The well flowed 281 barrels of 30 degree API oil per day from this zone. The remaining 5 tests are being conducted in the Auwerwer formation which are the highest quality reservoirs penetrated in the Ngamia well and which produced very well in the Twiga South-1 well. Results of these remaining Ngamia-1 tests are expected to be announced in June 2013.

The rig that drilled the Paipai-1 well in Block 10A has mobilized to the Lokichar Basin in Block 10BB to drill the Etuko prospect in the flank play where oil was discovered in 1992 by Shell at the Loperot-1 well. The Etuko-1 well spud in early May 2013 and results from the well are expected in July 2013. Should Etuko-1 be successful, there are a number of drill ready follow-up prospects on the same trend.

The Company and its partner have plans to drill up to two additional wells in Block 10BB in 2013; either one exploration well on the Ngamia trend and an appraisal well on the Ngamia structure, or in the event of success at Etuko-1, possibly two follow-up prospects on the flank play trend.

The 2D seismic crews operating in Block 10BB intend to acquire approximately 1,200 kilometers of 2D seismic during 2013. Much of this program will be focused on defining prospects in the South and North Kerio Sub-Basins, with the aim of defining drilling prospects for the 2014 program. The Company and its partner have also committed to acquire 550 square kilometers of 3D seismic over the Ngamia and Twiga structures in Block 10BB and Block 13T combined.

The current exploration phase under the Block 10BB PSC, which expires in July 2014, includes a commitment to drill one exploratory well and acquire 300 square kilometers of 3D seismic. The planned work program in Block 10BB during 2013 will exceed the PSC commitment.

Block 13T

During the first quarter of 2013, the Company and its partner, Tullow, conducted well testing operations at Twiga South-1, which resulted in a cumulative flow rate of 2,812 barrels of oil per day ("bopd") from three zones, despite being constrained by surface equipment. With optimized production equipment, the cumulative flow rate is anticipated to have increased to a cumulative rate of approximately 5,200 bopd. High quality 37 degree API waxy sweet crude flowed from all three zones in the Auwerwer formation with good quality reservoir sands encountered. The well was suspended as a potential future production well.

The rig currently completing the Ngamia-1 well test is next scheduled to drill the Ekales prospect that sits on a similar structure along the main bounding fault mid-way between the Ngamia-1 and Twiga South-1 discoveries. The Ekales-1 well is expected to spud in the third quarter of 2013.

Two exploration wells and one appraisal well are planned on Block 13T in 2013. Besides Ekales, an exploration well on the Agete structure, just to the north of the Twiga South-1 well, and an appraisal well up dip on the Twiga South structure are planned to be drilled. Further drill ready prospects exist on this trend.

In 2013, the Company plans to acquire a 550 square kilometer 3D seismic survey over the Twiga South and Ngamia structures, in Blocks 13T and 10BB combined.

The current exploration phase under the Block 13T PSC, which expires in September 2014, includes a commitment to drill one exploratory well, which was satisfied with the drilling of Twiga South-1, and a commitment to acquire 200 square kilometers of 3D seismic. The planned work program in Block 13T during 2013 will exceed the PSC commitment.

Block 10A

In the first quarter of 2013, the Company and its operating partners on Block 10A completed drilling the Paipai-1 exploration well. The Paipai-1 well tested a large four-way closed structure with Cretaceous-age sandstone targets at multiple depths. Paipai-1 spudded in September 2012 and completed drilling in the first quarter of 2013 to a total depth of 4,255 meters. Light hydrocarbons were encountered while drilling a 55 meter thick gross sandstone interval. Attempts to sample the reservoir fluid were unsuccessful and the hydrocarbons encountered while drilling were not recovered to surface. The Company and its partners were unable to test the well at the time due to the unavailability, in country, of testing equipment capable of handling the higher reservoir pressures encountered at this depth. As a result, the well has been temporarily suspended pending further data evaluation. Paipai-1 fully satisfied the remaining work obligations for the initial exploration period, which was extended to January 2014 to allow for evaluation of the well results. The rig was subsequently mobilized to Block 10BB (Kenya) to drill follow-up prospects in the Lokichar Sub-Basin commencing with Etuko-1.

Block 10BA

The Company and its operating partner on Block 10BA, Tullow, are conducting a 1,350 kilometer 2D seismic program. The onshore program has largely been completed and the offshore and near shore portions of the 2D program commenced in January 2013 and are approximately 45% complete. The 2D seismic acquired to date exceeds the work obligations of the initial exploration period under the Block 10BA PSC which expires in April 2014.

Block 12A

The Company and its partners on Block 12A have determined that a 600 kilometer 2D seismic acquisition program will mainly be focused in the Kerio Valley in the southwestern portion of the block or the Saguta basin in the eastern portion of the block. The Block 12A 2D seismic program commenced shooting near the end of the second quarter of 2013. The planned 2D seismic program will satisfy the 500 kilometer 2D seismic work obligation for the initial exploration period under the Block 12A PSC which expires in September 2013.

Block 9

The Company and its partner on Block 9 are currently planning to drill one exploration well in 2013. Block 9 is in the Cretaceous rift basin on trend with the South Sudan oil fields and the play concept was confirmed by the recent Paipai-1 well drilled in Block 10A. Two major prospects, Bahasi-1 and Sala-1, with large volume potential have been identified. The Company, as operator, and its partners in Block 9 have secured a rig to drill the Bahasi-1 exploration well. Site construction for Bahasi-1 commenced in May and the well is expected to spud in the third quarter of 2013. The Bahasi-1 well will satisfy the remaining exploration commitment for the second exploration period under the PSC, which expires in December 2013. The potential to spud the Sala-1 well in late 2013 is being evaluated.

ETHIOPIA

South Omo Block

The South Omo Block is located in the northern portion of the Tertiary East African Rift trend where Africa Oil and their partner, Tullow, have made two significant oil discoveries in the Lokichar Basin of Kenya. The Company and its partners on the South Omo Block (Tullow operated) spudded the Sabisa-1 well in January 2013 and the well was drilled to a preliminary total depth of 1,810 meters. Hydrocarbon indications in sands beneath a thick claystone top seal have been recorded while drilling, but hole instability issues have required the drilling of a sidetrack to comprehensively log and sample these zones of interest. The sidetrack is underway and a result is expected in late May/early June. There are a number of interesting drill ready follow-on prospects that have been identified on the 2D seismic survey that was completed in 2012 on the western portion of the South Omo Block. Should Sabisa-1 show encouragement, the Tultule location has been prepared as an immediate follow-on prospect located 10 kilometers to the east of Sabisa-1.

The Company and its partners have just completed a 1,174 kilometer 2D seismic program in the Chew Bahir Sub-Basin on the eastern portion of the South Omo Block. This survey has identified a number of prospects and leads some of which are supported by amplitude anomalies indicative of possible hydrocarbon fill. The Shimela prospect has been identified as the first well in the area and is expected to spud in the fourth quarter of 2013. The current exploration period under the PSC expires in January 2015. The remaining work commitments on the block will be satisfied by the completion of Sabisa-1 and the drilling of one additional exploration well.

Ogaden Blocks 7/8

The Company and its partners continue to focus on the El Kuran oil accumulation on Block 8, discovered in the early 1970's. After completing reservoir characterization studies, the Company focused efforts on testing and completion strategies for producing commercial quantities of oil and gas. The Company and its joint operating partners on Blocks 7/8 (New Age operated) are planning to drill and test the El Kuran-3 appraisal well. A rig has been secured, the well site has been constructed and the well is expected to spud towards the end of June 2013. Should the well show encouragement, a multi-zone acid fracture stimulation well test is planned during 2013. The initial exploration period under the PSC expires in July 2013 and requires that the El Kuran-3 well be completed before then. The Company expects to receive an extension to the initial exploration period sufficient to drill and test the El Kuran-3 well.

Adigala Block

As part of work obligations for the second exploration period which expires July 2013, the Company and its partner (NewAge operated) incorporated newly acquired Full Tensor Gradiometry data with seismic data to improve the subsurface interpretation of the block. The Company also integrated results of recent surface geological studies and reprocessed data acquired in 2009 with the goal of improving the data quality. All work obligations on this block have been completed.

Rift Basin Area

In first quarter of 2013, the Company executed a PSC for the Rift Basin Area in Ethiopia. Located north of the South Omo Block, the Rift Basin Area covers 42,519 square kilometers. This block is on trend with highly prospective blocks in the Tertiary rift valley including the South Omo Block in Ethiopia, and Kenyan Blocks 10BA, 10BB, 13T, and 12A. The Company commenced acquiring a Full Tensor Gradiometry survey in May 2013 and will conduct an exhaustive environmental and social impact assessment over the block later in the year in preparation for a seismic program in 2014. The initial exploration period, which expires in February 2016, includes a commitment to acquire a Full Tensor Gradiometry survey and 400 kilometers of 2D seismic.

PUNTLAND (SOMALIA)

Dharoor Valley and Nugaal Valley Blocks

The Company continues to evaluate the encouraging results of the two wells drilled in 2012 on the Dharoor Valley block which proved all the critical elements exist for oil accumulations, namely a working petroleum system, good quality reservoirs and thick seal rocks. Based on these encouraging results, the Company, through its ownership interest in Horn, committed to enter the next exploration period, which carries a commitment to drill one exploration well in each block within an additional three year term ending October 2015.

Efforts are now focused on making preparations for a seismic acquisition campaign in the Dharoor Valley area which will include a regional seismic reconnaissance grid in the previously unexplored eastern portion of the basin as well as prospect specific seismic to delineate a drilling candidate in the western portion of the basin where an active petroleum system was confirmed by the recent drilling at the Shabeel-1 and Shabeel North-1 locations. The Company continues to pursue efforts to drill an exploration well in the Nugaal Valley block and is working with the Puntland government to move this project forward.

Horn has been in discussions with potential joint venture partners and is also reviewing new venture opportunities in the region.

MALI

Blocks 7 and 11

The deteriorating security and political situation in Mali halted operations on the Company's blocks. As a consequence, the Company impaired $3.1 million of capitalized intangible exploration assets during the first quarter of 2012. During the first quarter of 2013, the Company and its operating partner, Heritage, terminated their interest in Block 7 and 11 and have been released from all future PSC obligations in relation to these blocks by the Ministry of Mines in the Republic of Mali.