2015 First Quarter Update

OPERATIONS UPDATE

During the first quarter of 2015, seven wells finalized drilling across the South Lokichar Basin and the North Turkana basin in Block 10BA, Kenya. In addition, an extensive appraisal program of the Ngamia and Amosing fields in the South Lokichar Basin in Kenya Block 10BB has continued. These oil fields are expected to form the foundation for a phased development of the South Lokichar Basin. One drilling rig is currently active in the South Lokichar Basin.

Over the balance of 2015, the Company will focus its efforts on appraisal and exploration in the South Lokichar Basin, Extended Well Tests (EWT's) in the Amosing and Ngamia fields, and reservoir and engineering studies. These will focus on delivering the following objectives; confirming reservoir quality and deliverability, resource size and definition, and advancement of the development plans, including the export pipeline.

Tertiary Rift - Kenya

In the Amosing field, the Amosing-3 appraisal well, located one kilometer northwest of the Amosing-1 discovery, well was drilled. The well encountered up to 140 meters of net oil pay and proved an extension of the field. Pressure data from the Amosing-3 well indicated connectivity in some reservoir horizons encountered in the Amosing-1, 2 & 2A wells. The Amosing-4 well, located approximately one kilometer southeast of the Amosing-1 well, was drilled to test the southern extent of the field and successfully encountered 27 meters of net oil pay in thick upper reservoir zones proving the significant down-dip extent of the field. Mapping of the Amosing field does not close the structure to the south and there is potential for the field to spill up-dip into the Ekosowan prospect area, where the Ekosowan-1 well was drilled last year encountering a 900 meter column of near continuous oil shows in tight alluvial fan facies. The Amosing-4 well has further de-risked drilling of the Ekosowan prospect.

In preparation for the EWT's, production completions were successfully run in the Amosing-1 and Amosing-2A wells. The EWT involves production and injection testing to provide dynamic flow characterization of the Amosing field stacked reservoirs. Both wells have been completed in five zones with hydraulically controlled selective completions that permit independent tests of completed intervals without well intervention. Initial clean-up testing has been completed on both wells with excellent results. The Amosing-1 well flowed at a combined maximum rate of 5,600 barrels of oil per day ("bopd") from five zones and the Amosing-2A well flowed at a combined maximum rate of 6,000 bopd from four zones, the fifth zone being in the aquifer. Both wells demonstrated high quality reservoir sands and flowed 31 to 38 degree API dry oil under natural flow. Pressure data during the initial clean-up flows shows connectivity between the two completed wells in the upper three zones with further production testing required to test connectivity in the lower two zones. These findings support the static pressure data which indicated connectivity between the Amosing-1, 2, 2A and 3 wells in multiple zones. The Amosing EWT results are expected in the second quarter of this year.

In the Ngamia field, the Ngamia-7 and Ngamia-8 appraisal wells were drilled. The Ngamia-7 well was drilled 1.2 kilometers east of Ngamia-3 and encountered up to 130 meters of net oil pay identifying a large eastern extension of the field that had been identified from the new 3D seismic survey. The Ngamia-8 appraisal was drilled and encountered up to 200 meters of net oil pay in line with pre-drill expectations. The well was positioned in the center of the Ngamia structure and static pressure data indicates the well is in pressure communication with the oil discovered in the neighbouring Ngamia-1A, Ngamia-3, Ngamia-5, Ngamia-6 and Ngamia-7 wells.

In preparation for the EWT activities in the Ngamia field, the Ngamia-8 well is to be completed, located in the center of the eastern fault block between the Ngamia-3, 5, 6 and 7 wells. This well will be the main production well for the EWT. The Ngamia-3 and Ngamia-6 wells will be the two other wells completed as EWT wells. Initial flow testing of the Ngamia EWT wells is expected to commence around mid-year.

Elsewhere in the Lokichar basin, the Ekales-2 appraisal well reached a total depth of 4,059 meters and encountered an estimated 60-100 meters of net oil pay in the primary shallower objectives. This highly deviated well was also deepened to test the basin center stratigraphic play where it intersected sandstones with elevated pressures and 50 meters of oil bearing sands; however, operating conditions precluded logging and confirmation of any oil pay in this section. This was the first test of this exploration target and is very positive for the future upside potential of the South Lokichar Basin, above the significant oil resources already discovered.

During the period, the Epir-1 exploration well was drilled to a total depth of 3,057 meters in the North Kerio Basin in Block 10BB, Kenya. The well encountered a 100 meter interval of wet hydrocarbon gas shows with florescence indicating the presence of an active petroleum system. The hydrocarbon shows were encountered primarily in rocks which are not of reservoir quality. The partnership is very encouraged the Epir-1 well has demonstrated a working hydrocarbon system in the Kerio Basin and technical work will now focus on identifying a prospect in the basin where there is a high chance of trapping hydrocarbons in reservoir quality rock.

The Engomo-1 well was drilled in the first quarter of 2015, which was the first test of the North Turkana Basin in Block 10BA, Kenya. This prospect is to the west of Lake Turkana where numerous naturally occurring oil slicks and seeps have been observed. The Engomo-1 exploration well in Block 10BA was drilled to a total depth of 2,353 meters. The well encountered interbedded siltstones, sandstones and claystones, becoming more tuffaceous and tight until reaching a total depth in basement. No significant oil or gas shows were encountered and the well has been plugged and abandoned. The prevalence of tight facies in the wellbore may be due to the well's close proximity to the basin bounding fault. Future analysis will be focused on understanding how this result impacts the remaining prospectivity in the basin.

The full fast track processed data set for the 951 square kilometer 3D seismic survey over the series of significant discoveries along the western basin bounding fault in the South Lokichar Basin, is now available and is being interpreted. The 3D seismic indicates significantly improved structural and stratigraphic definition and additional prospectivity not evident on the 2D seismic. The large Amosing North prospect located on the northern flank of Amosing and updip of the Ngamia field has been identified from the 3D seismic and is being assessed as a potential 2015 drilling candidate. The 3D seismic mapping over the Etom area now shows that the Etom-1 discovery well was drilled in a graben between two large prospects, one located to the south and one to the north of the well. Technical work is being progressed so that these prospects are drill ready. In addition, the 3D seismic also reinforces the potential of the intra-Lokhone shale amplitude prospectivity.

In addition, the partnership has acquired over 1,100 meters of whole core from the wells drilled in the South Lokichar Basin, and an extensive program of detailed core analysis is ongoing that will provide results throughout the year. A key focus of the core program is to better assess oil saturation and to refine the recovery factors of the main reservoir sands. Early core analysis results support the reservoir assumptions used in the contingent resource estimate and are reducing the uncertainty around oil saturations in the reservoir.

The extensive appraisal activities in Kenya, including the EWT, along with the development concept studies completed in 2014, will address the key reservoir uncertainties around the contingent resource estimate. These are aerial net pay distribution and connectivity, which has a significant bearing on recovery factor and oil saturation in the reservoir sands. The results to date from the ongoing appraisal drilling program and early Amosing EWT results provides significant comfort that the reservoir sands are connected over an area larger than the assumed development well spacing which will narrow the range of uncertainty around recovery factors. The early results are positive in this respect.

The ongoing work program will enable a draft Field Development Plan (FDP) to be prepared by the end 2015. The current ambition of the joint venture partnership is to position the South Lokichar Basin development and an export pipeline for possible sanction by the end of 2016, subject to receipt of all necessary permits and approvals. Good progress continues to be made towards development of these oil resources and as part of the ongoing collaboration between the Governments of Kenya and Uganda on the oil export pipeline for the Lake Albert and South Lokichar resources, a joint technical adviser was appointed in late 2014. The independent technical studies being undertaken by the adviser, with extensive support from the Kenya and Uganda upstream partners, are progressing rapidly and should assist in the finalization of the pipeline route.

Cretaceous Anza Rift - Kenya

In Block 9, the Company continues to assess the results of its 2014 drilling program.

Tertiary Rift - Ethiopia

In the Rift Basin Area Block, a 2D seismic crew has mobilized and has commenced the acquisition of a minimum of 400 kilometer land and lake survey. Source rock outcrops and oil slicks on the lakes have been identified in the block where there is no existing seismic or wells.