2015 Second 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 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.

During the second quarter of 2015, the Company focused its efforts on appraisal in the South Lokichar Basin, Extended Well Tests (EWTs) in the Amosing and Ngamia fields, and reservoir and engineering studies. This focus for 2015 has 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

During the first quarter of 2015 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.

During the first half of 2015, in preparation for the EWTs, the Amosing-1 and Amosing-2A wells were successfully completed in five separate zones. Initial rig-less flow testing during clean-up flowed at a cumulative maximum rate of 5,600 and 6,000 bopd respectively. These results exceeded expectations, and demonstrated high quality reservoir sands which flowed 31 to 38 degree API dry oil under natural conditions. During the test the wells produced at a cumulative average constrained rate of 4,300 bopd under natural flow conditions. Pressure data from the two wells supports significant connected oil volumes and confirms lateral reservoir continuity, which is positive for the future development. A cumulative volume of 30,000 barrels of oil has been produced into storage. Water injection tests are under way to further validate the viability of water flood reservoir management and the oil recovery assumptions.

During the first quarter of 2015, 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. During the second quarter of 2015, the drilling of the Ngamia-9 well was completed and encountered between 90 and 110m of pay in the Lokone and Auwerwer horizons.

In preparation for the EWT activities in the Ngamia field, multi zone completions were installed in the Ngamia-8, Ngamia-3 and Ngamia-6 wells. The Ngamia-8 well will be the main production well for the Ngamia EWT. Flow testing of the Ngamia EWT wells is expected to commence early in the third quarter. Following the flow testing water injection tests will be undertaken to further validate the viability of water flood reservoir management and the oil recovery assumptions.

Elsewhere in the Lokichar basin, during the first quarter of 2015, 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 first quarter of 2015, 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.

A one rig operation will continue with the drilling of the Twiga-3 well, which is currently underway. The large Amosing North prospect located on the northern flank of Amosing and updip of the Ngamia field will be drilled next. The Cheptuket exploration well in Block 12A is scheduled to commence in October 2015 and will test a basin bounding structural closure in the Kerio Valley Basin in a similar structural setting to the successful Ngamia and Amosing discoveries. Other wells under consideration include Etom North (an appraisal well to follow up on our success at Etom-1) and Emesek (formerly named Tausi) (a basin opening well).

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.

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 EWTs, along with the development concept studies completed in 2014, are addressing key reservoir uncertainties around the South Lokichar contingent resource estimate. 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.

Progress on the East African pipeline route to export oil from Lake Albert in Uganda and the South Lokichar Basin in Kenya has gained pace in recent months. The Governments of Kenya and Uganda are working closely together and the pipeline studies undertaken by a jointly appointed independent technical consultant have progressed rapidly. Subsequent to the end of the second quarter of 2015, on 10 August 2015, the Governments of Kenya and Uganda issued a joint communiqué which stated that "the two Heads of State agreed on the use of the Northern Route i.e. Hoima-Lokichar-Lamu for the development of the crude oil pipeline." The decision on the pipeline route will enable the joint venture partnerships to move on to the next phases of development with a Government ambition to reach project sanction by the end of 2016.

Cretaceous Anza Rift – Kenya

In Block 9, the Company continues to assess the results of its 2014 drilling program. The Government of Kenya has granted an eighteen month extension to the second additional exploration period, which will now expire in June 2017.

Tertiary Rift – Ethiopia

In the Rift Basin Area Block, a 2D seismic crew will complete the acquisition of approximately 600 kilometers of land and lake seismic in the third quarter of 2015. Source rock outcrops and oil slicks on the lakes have been identified in the block where there was previously no existing seismic or wells.