----

----

| Nevada                                                                          | 91-1918324                                                                   |
|---------------------------------------------------------------------------------|------------------------------------------------------------------------------|
| (State                  or other jurisdiction of incorporation or organization) |  (I.R.S.                  Employer Identification                  No.) |

----

| Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Page              No.         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|
| FINANCIAL              INFORMATION:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                          |
|  Financial              Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                          |
|  Condensed              Consolidated Balance Sheets at September 30, 2007 (unaudited) and December              31, 2007 (audited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   F-              1 |
|  Condensed              Consolidated Statement of Operations for the Three Months Ended September              30, 2007 and 2006, for the Nine Months Ended September 30, 2007 and              2006              and for the Period From Inception, May 25, 2004              (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |    F-2         |
|  Consolidated              Statements of Cash Flows for the Nine Months Ended September 30, 2007              and              2006 and for the Period From Inception, May 25, 2004              (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   F-3               |
|  Condensed              Consolidated Statement of Shareholders’ Equity/(Deficit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  F-5                     |
|  Notes              to Consolidated Financial Statements              (Unaudited)                                                                                                                                   |  F-6                     |

----

| CONDENSED              CONSOLIDATED BALANCE SHEET                                                                                                                                 |         |   |        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|--------|-------------|
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              | 09.30.2007   |   | 12.31.2006  |
|                                                                                                                                                                              | USD          |   | USD         |
|                                                                                                                                                                              |         |   |        |
| ASSETS                                                                                                                                                                            |         |   |        |
| Cash              and cash equivalents                                                                                                                                            | 10,201,883   |   | 1,090,098   |
| Other              current assets                                                                                                                                                 | 220,651      |   | 48,683      |
|                                                                                                                                                                              |         |   |        |
| Total              current assets                                                                                                                                                 | 10,422,534   |   | 1,138,781   |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
| Tangible              fixed assets                                                                                                                                                | 70,307       |   | 3,998       |
|                                                                                                                                                                              |         |   |        |
| Total              non-current assets                                                                                                                                             | 70,307       |   | 3,998       |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
| TOTAL              ASSETS                                                                                                                                                         | 10,492,841   |   | 1,142,779   |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
| LIABILITIES              AND SHAREHOLDERS' EQUITY                                                                                                                                 |         |   |        |
| Bank              overdraft                                                                                                                                                       | 39,328       |   | 19,003      |
| Deferred              consideration for interest in CJSC South Petroleum                                                                                                          | 109,560      |   | 193,003     |
| Accounts              payable                                                                                                                                                     | 86,295       |   | 70,918      |
| Accrued              expenses                                                                                                                                                     | 204,703      |   | 167,664     |
|                                                                                                                                                                              |         |   |        |
| Total              current liabilities                                                                                                                                            | 439,886      |   | 450,588     |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
| Liability              in respect of investment in associate                                                                                                                      | 253,743      |   | 253,743     |
| Loan              owed to a major shareholder                                                                                                                                     | 37,758       |   | 409,920     |
|                                                                                                                                                                              |         |   |        |
| Total              non-current liabilities                                                                                                                                        | 291,501      |   | 663,663     |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
| TOTAL              LIABILITIES                                                                                                                                                    | 731,387      |   | 1,114,251   |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
| Common              stock (300,000,000 shares authorized, USD 0.001 par value, 112,156,488              and              80,000,000 shares, respectively, issued and outstanding) | 112,156      |   | 80,000      |
| Additional              paid-in capital                                                                                                                                           | 19,883,970   |   | 1,466,071   |
| Foreign              currency translation reserve                                                                                                                                 | 53,576       |   | 53,464      |
| Deficit              accumulated during the development stage                                                                                                                     | (10,288,248) |   | (1,571,007) |
|                                                                                                                                                                              |         |   |        |
| Total              shareholders' equity                                                                                                                                           | 9,761,454    |   | 28,528      |
|                                                                                                                                                                              |         |   |        |
|                                                                                                                                                                              |         |   |        |
| TOTAL              LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                           | 10,492,841   |   | 1,142,779   |

----

| CONDENSED              CONSOLIDATED STATEMENTS OF OPERATIONS         |
|----------------------------------------------------------------------|
|                                                                 |   |   |   |   | Period              from |
|                                                                 | For              the three months ended | For              the nine months ended | 05.25.2004 |
|                                                                 |   |   |   |   | (Inception)              to |
|                                                                 | 09.30.2007 | 09.30.2006 | 09.30.2007 | 09.30.2006 | 09.30.2007 |
|                                                                 | USD | USD | USD | USD | USD |
| OPERATING              REVENUES                                      |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| Other              revenues                                          |                     - |                     - |                     - |                    - |           115,148 |
|                                                                 |   |   |   |   |   |
| Total              revenues                                          |                     - |                     - |                     - |                    - |           115,148 |
|                                                                 |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| OPERATING              EXPENSES                                      |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| Personnel              costs                                         |       (2,012,860) |            (40,687) |       (3,709,079) |        (133,342) |       (4,046,488) |
| Exploration              costs                                       |          (105,651) |            (17,803) |          (151,552) |          (95,767) |          (310,024) |
| Depreciation                                                         |              (4,210) |              (3,973) |              (8,018) |          (11,045) |            (39,017) |
| Consulting              fees                                         |          (492,434) |          (231,951) |          (914,635) |        (694,150) |       (3,245,859) |
| Administrative              costs                                    |          (714,948) |          (251,476) |       (4,104,720) |        (690,077) |       (6,220,571) |
| Total              operating expenses                                |       (3,330,103) |          (545,890) |       (8,888,004) |     (1,624,381) |     (13,861,959) |
|                                                                 |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| Gain              from sale of investment                            |                     - |                     - |                     - |                    - |        3,126,967 |
| Loss              from sale of investment                            |                     - |                     - |                 (900) |                    - |                 (900) |
| OPERATING              LOSS                                          |       (3,330,103) |          (545,890) |       (8,888,904) |     (1,624,381) |     (10,620,744) |
|                                                                 |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| NON-OPERATING              INCOME / (EXPENSE)                        |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| Exchange              differences                                    |               8,825 |             16,809 |            (18,195) |            43,184 |            (41,085) |
| Interest              income                                         |             97,622 |               3,982 |           199,259 |            12,641 |           245,469 |
| Interest              expense                                        |              (3,950) |              (2,474) |              (8,725) |            (7,872) |            (76,677) |
|                                                                 |   |   |   |   |   |
| Loss              before taxes and equity in net income of associate |       (3,227,606) |          (527,573) |       (8,716,565) |     (1,576,428) |     (10,493,037) |
|                                                                 |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| Taxes                                                                |                 (352) |                  275 |                 (676) |                 (79) |              (1,524) |
| Equity              in net income of associate                       |   |                     - |                     - |                    - |           201,960 |
| Minority              interest in net income                         |                    - |                    - |                    - |                   - |              (5,308) |
| Net              loss                                                |       (3,227,958) |          (527,298) |       (8,717,241) |     (1,576,507) |     (10,297,909) |
|                                                                 |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
|                                                                 |   |   |   |   |   |
| Weighted              average number of outstanding shares           |    111,878,422 |    100,110,400 |    107,416,090 |   100,110,400 |    101,735,214 |
| Basic              and diluted loss per share                        |            (0.0289) |            (0.0053) |            (0.0812) |          (0.0157) |            (0.1012) |
|                                                                 |   |   |   |   |   |

----

| CONDENSED              CONSOLIDATED CASH FLOW STATEMENT               |
|-----------------------------------------------------------------------|
|                                                                  |   |   |   |   |   |
|                                                                  | For              the nine months ended |   | Period              from |
|                                                                  |   |   |   |   | 05.25.2004 |
|                                                                  |   |   |   |   | (Inception)              to |
|                                                                  | 09.30.2007 |   | 09.30.2006 |   | 09.30.2007 |
|                                                                  | USD |   | USD |   | USD |
|                                                                  |   |   |   |   |   |
| OPERATING              ACTIVITIES                                     |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| Net              loss for the period                                  |       (8,717,241) |   |       (1,576,507) |   |     (10,297,909) |
|                                                                  |   |   |   |   |   |
| To              reconcile net loss to net cash used                   |   |   |   |   |   |
| in              operating activities                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| Gain              from sale of investment                             |                     - |   |                     - |   |       (3,126,967) |
| Loss              from sale of investment                             |                  900 |   |                     - |   |                  900 |
| Equity              in net income of associate                        |                     - |   |                     - |   |          (201,960) |
| Depreciation                                                          |               8,018 |   |             11,045 |   |             39,017 |
| Exchange              differences                                     |             18,195 |   |            (43,184) |   |             41,085 |
| Decrease              / (increase) in receivables                     |          (166,775) |   |             54,470 |   |          (215,457) |
| (Decrease)              / increase in accounts payables               |          (411,385) |   |            (56,302) |   |          (340,467) |
| (Decrease)              / increase in accrued expenses                |             30,848 |   |            (36,464) |   |           198,512 |
| Stock-based              compensation                                 |        5,578,623 |   |                     - |   |        5,578,623 |
|                                                                  |   |   |   |   |   |
| Cash              outflow from operating activities                   |       (3,658,817) |   |       (1,646,942) |   |       (8,324,623) |
|                                                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| INVESTING              ACTIVITIES                                     |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| Purchase              of tangible fixed assets and computer software  |            (74,043) |   |                     - |   |          (188,366) |
| Sale              of tangible fixed assets and computer software      |                     - |   |               4,589 |   |             79,326 |
| Proceeds              from sale of investment                         |                     - |   |                     - |   |        4,000,000 |
| Acquisition              of investment in associate                   |                     - |   |                     - |   |            (67,747) |
|                                                                  |   |   |   |   |   |
| Cash              inflow (outflow) from investing activities          |            (74,043) |   |               4,589 |   |        3,823,213 |
|                                                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| FINANCING              ACTIVITIES                                     |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| Contribution              share capital founders                      |                     - |   |                     - |   |             80,019 |
| Issuance              of units                                        |      13,208,055 |   |                     - |   |      13,208,055 |
| Cash              arising on recapitalization                         |               6,510 |   |                     - |   |               6,510 |
| Major              shareholder loan repaid                            |          (372,162) |   |                     - |   |       (3,348,074) |
| Major              shareholder loan raised                            |                     - |   |        1,017,760 |   |        4,653,720 |
| Related              company loan raised / (repaid)                   |                     - |   |          (179,210) |   |                     - |
| Increase              in bank overdraft                               |             20,325 |   |                     - |   |             39,328 |
|                                                                  |   |   |   |   |   |
| Cash              flows from financing activities                     |      12,862,728 |   |           838,550 |   |      14,639,558 |
|                                                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| Net              change in cash and cash equivalents                  |        9,129,868 |   |          (803,803) |   |      10,138,148 |
|                                                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |
| Cash              and cash equivalents at the beginning of the period |        1,090,098 |   |        1,551,938 |   |  - |
| Currency              translation effect on cash and cash equivalents |            (18,083) |   |          (107,646) |   |             63,735 |
|                                                                  |   |   |   |   |   |
| Cash              and cash equivalents at the end of the period       |      10,201,883 |   |           640,489 |   |      10,201,883 |
|                                                                  |   |   |   |   |   |
|                                                                  |   |   |   |   |   |

----

| CONDENSED              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY /              (DEFICIT) |
|-------------------------------------------------------------------------------------------------|
|                                                                                            |   |   |   |   |   |   |   |
|  SHAREHOLDERS'              EQUITY / (DEFICIT)                                             |  Number              of Shares |  Share              Capital |  Additional              paid-in capital |  Deficit              accumulated during the development stage | Accumulated              Other Compre-hensive Income (Loss) |  Total              share-holders' equity / (deficit) |  Compre-hensive              Income (Loss) |
|                                                                                            |   |   |   |   |   |   |   |
| Balance              May 25, 2004                                                               |                     - |                     - |                     - |                     - |                     - |                     - |                     - |
| Contribution              share capital from founders                                           |     80,000,000 |            80,000 |                   19 |                     - |                     - |            80,019 |                     - |
| Currency              translation adjustment                                                    |                     - |                     - |                     - |                     - |          (77,082) |          (77,082) |          (77,082) |
| Net              loss for the period                                                            |                     - |                     - |                     - |        (601,032) |                     - |        (601,032) |        (601,032) |
| Balance              December 31, 2004                                                          |     80,000,000 |            80,000 |                   19 |        (601,032) |          (77,082) |        (598,095) |        (678,114) |
|                                                                                            |   |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |   |
| Balance              January 1, 2005                                                            |     80,000,000 |            80,000 |                   19 |        (601,032) |          (77,082) |        (598,095) |   |
| Currency              translation adjustment                                                    |                     - |                     - |                     - |   |          218,699 |          218,699 |          218,699 |
| Net              loss for the year                                                              |                     - |                     - |                     - |     (1,993,932) |                     - |     (1,993,932) |     (1,993,932) |
| Balance              December 31, 2005                                                          |     80,000,000 |            80,000 |                   19 |     (2,594,964) |          141,617 |     (2,373,328) |     (1,775,233) |
|                                                                                            |   |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |   |
| Balance              January 1, 2006                                                            |     80,000,000 |            80,000 |                   19 |     (2,594,964) |          141,617 |     (2,373,328) |   |
| Forgiveness              of debt by major shareholder                                           |                     - |                     - |       1,466,052 |                     - |                     - |       1,466,052 |                     - |
| Currency              translation adjustment                                                    |                     - |                     - |                     - |                     - |          (88,153) |          (88,153) |          (88,153) |
| Net              income for the year                                                            |                     - |                     - |                     - |       1,023,957 |                     - |       1,023,957 |       1,023,957 |
| Balance              December 31, 2006                                                          |     80,000,000 |            80,000 |       1,466,071 |     (1,571,007) |            53,464 |            28,528 |          935,804 |
|                                                                                            |   |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |   |
| Balance              January 1, 2007                                                            |     80,000,000 |            80,000 |       1,466,071 |     (1,571,007) |            53,464 |            28,528 |   |
| Recapitalization              transaction (Note 1)                                              |     20,110,400 |            20,110 |        (356,732) |                     - |                     - |        (336,622) |                     - |
| Stock-based              compensation                                                           |          880,000 |                 880 |       3,911,077 |                     - |                     - |       3,911,957 |                     - |
| Private              placement of Units, issued for cash                                        |     10,330,152 |            10,330 |       9,675,667 |                     - |                     - |       9,685,997 |                     - |
| Currency              translation adjustment                                                    |                     - |                     - |                     - |                     - |                 138 |                 138 |                 138 |
| Net              loss for the period                                                            |                     - |                     - |                     - |     (5,489,284) |                     - |     (5,489,284) |     (5,489,284) |
| Balance              June 30, 2007                                                              |   111,320,552 |          111,320 |     14,696,083 |     (7,060,291) |            53,602 |       7,800,714 |     (5,489,146) |
|                                                                                            |   |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |   |
| Balance              July 1, 2007                                                               |   111,320,552 |          111,320 |     14,696,083 |     (7,060,291) |            53,602 |       7,800,714 |   |
| Stock-based              compensation                                                           |                     - |                     - |       1,666,666 |                     - |                     - |       1,666,666 |                     - |
| Private              placement of Units (Note 2)                                                |            10,709 |                   11 |                 (11) |                     - |                     - |                     - |                     - |
| Private              placement of Units, issued for cash                                        |          825,227 |                 825 |       3,521,232 |                     - |                     - |       3,522,057 |                     - |
| Currency              translation adjustment                                                    |                     - |                     - |                     - |                     - |                 (26) |                 (26) |                 (26) |
| Net              loss for the period                                                            |                     - |                     - |                     - |     (3,227,957) |                     - |     (3,227,957) |     (3,227,957) |
| Balance              September 30, 2007                                                         |   112,156,488 |          112,156 |     19,883,970 |   (10,288,248) |            53,576 |       9,761,454 |     (3,227,983) |

----

----

|  Avergae                  Rates | January                  1, 2007 to September                  30, 2007 |  2006 |  2005 |
|--------------------------------------|-------------------------------------------------------------------------|------------|------------|
|                                 | TJS                                                                     | CHF        | CHF        |
| USD                                  | 3.4355                                                                  | 1.2536     | 1.2458     |
|                                 |                                                                    |       |       |
| Balance                  Sheet       |                                                                    |       |       |
| Period                  End Rates    |  September                  30, 2007                               |  2006 |  2005 |
|                                 | TJS                                                                     | CHF        | CHF        |
| USD                                  | 3.4445                                                                  | 1.2198     | 1.3179     |

----

|  2007                                              | Office                Equipment and                Furniture |  Vehicles | Leasehold                Improvements |  Total    |
|---------------------------------------------------------|--------------------------------------------------------------|----------------|---------------------------------------|----------------|
|                                                    | USD                                                          | USD            | USD                                   | USD            |
| Cost                at January 1                        | 5,436                                                        | -              | -                                     | 5,346          |
| Recapiatlization                Transaction (Note 1)    |  3,407                                                  |  -        |  -                               |  3,407    |
| Additions                                               | 21,043                                                       | 53,000         | -                                     | 74,043         |
| Cost                at September 30                     | 29,886                                                       | 53,000         | -                                     | 82,886         |
|                                                    |                                                         |           | -                                     |           |
| Accumulated                Depreciation at January 1    |  (1,438)                                                |  -        |  -                               |  (1,438)  |
| Recapiatlization                Transaction (Note 1)    |  (3,123)                                                |  -        |  -                               |  (3,123)  |
| Depreciation                                            | (2,018)                                                      | (6,000)        | -                                     | (8,018)        |
| Accumulated                Depreciation at September 30 |  (6,579)                                                |  (6,000)  |  -                               |  (12,579) |
|                                                    |                                                         |           |                                  |           |
| Net                Book Value                           | 23,307                                                       | 47,000         | -                                     | 70,307         |

----

The      following summarized financial information (in USD thousand) as of      September 30, 2007 and for the period from January 1, 2007 to September 30,      2007      is presented for CJSC South Petroleum Company which is a significant equity      method investee that is not consolidated:

| Current                assets                    | 101,202        |
|--------------------------------------------------|----------------|
| Non-current                assets                | 66,237         |
| Current                liabilities               | 4,300          |
| Non-current                liabilities           | 244,520        |
| Gross                revenues                    | 0              |
| Gross                profit                      | 0              |
| Income                from continuing operations |  -153,209 |
| Net                income                        | -153,209       |

| Board                  of Directors                                                                                     |                                                   |                                                   |
|-------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|--------------------------------------------------------|
|                                                                                                                    | January                  1, 2007 to September 30, 2007 | January                  1, 2006 to September 30, 2006 |
|                                                                                                                    | USD                                                    | USD                                                    |
| Payments                  to a director for office rent                                                                 | 72,273                                                 | 71,455                                                 |
| Payments                  to related companies controlled by directors forrendered                  consulting services |  -                                                |  291,071                                          |
|                                                                                                                    |                                                   |                                                   |
|                                                                                                                    | September                  30, 2007                    | September                  30, 2006                    |
|                                                                                                                    | USD                                                    | USD                                                    |
| Loan                  from a director                                                                                   | 37,758                                                 | 6,001,639                                              |
| Loan                  from a related company controlled by a director                                                   | -                                                      | 76,947                                                 |

----

|                                      | September                  30, 2007 | December                  31, 2006 |
|-------------------------------------------|-------------------------------------|------------------------------------|
|                                      | USD                                 | USD                                |
| Within                  1 year            | 42,639                              | 9,948                              |
| Between                  2 and 5 years    | 91,437                              | 4,972                              |
| After                  5 years            | 0                                   | 0                                  |
| Total                  future commitments | 134,076                             | 14,920                             |

----

----

| -   | excellent                network in the CIS and Balkan                countries, |
|---------------|----------------------------------------------------------------------------------|

| -   | increase                of value through exploration of known                structures, |
|---------------|------------------------------------------------------------------------------------------|

| -   | exploration                of new structures identified by previous geological research,                and |
|---------------|-------------------------------------------------------------------------------------------------------------|

| -   | modern                geological knowledge and new concepts implemented to existing seismic                and                well data base. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

|   Blocks   | Entitlement                Interest (%) |  Area(KM2) |  Date                of Award |   Expiry            |   Renewal                Date |   Expiry               |
|----------------------|-----------------------------------------|-----------------|------------------------------------|-------------------------------|-----------------------------------------|----------------------------------|
| Nanay                | 25                                      | 999             | July                9, 2004        | July                9, 2006   | June                14, 2006            | December                31, 2008 |
| Naushkent            | 25                                      |            | July                9, 2004        | July                9, 2006   | June                14, 2006            | December                31, 2008 |
| Soh                  | 25                                      |            | April                29, 2004      | April                29, 2006 | April                29, 2006           | April                29, 2010    |
| Tuzluk               | 25                                      |            | April                29, 2004      | April                29, 2006 | April                29, 2006           | April                29, 2010    |
| W                Soh | 25                                      |            | April                29, 2004      | April                29, 2006 | April                29, 2006           | April                29, 2010    |

| -   | The                project team in Adelaide, Australia has been primarily engaged in                technical review work to define the prospects and leads in preparation                for                the seismic program was initiated in the third quarter of                2007. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Consolidation                of the seismic database has been undertaken with data acquired in                Bishkek                transferred to the database in Adelaide. Reprocessing of Soviet era                seismic data and digitizing of well logs has                continued. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | The                office in Bishkek has been involved in general office administration                and                management, acquiring new staff and building relationships with industry                and government. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | On-going                database assembly with: |
|--------------------|-------------------------------------------------|

| o   | digitization                of well wire line log data |
|---------------|--------------------------------------------------------|

| o   | rectification                of maps |
|---------------|--------------------------------------|

| o   | integration                of the topographic map data into digital                form |
|---------------|-----------------------------------------------------------------------------------------|

| o   | well                locations into Santos mapping package                (dbmap) |
|---------------|----------------------------------------------------------------------------------|

| o   | collation                of incremental oil and gas field                information |
|---------------|--------------------------------------------------------------------------------------|

| o   | capture                of relevant information from Soviet                reports |
|---------------|-----------------------------------------------------------------------------------|

| o   | wire                line log and seismic data loaded into geoframe master interpretation                project |
|---------------|-----------------------------------------------------------------------------------------------------------------|

| o   | formation                tops data assembled and ready to be bulk loaded into dbmap mapping                package |
|---------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | Seismic                reprocessing project is complete. Total of 447 km reprocessed data                was                loaded to workstation. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Scanning                seismic project by SNG is completed. Total of 699km scanned data                was                loaded to workstation. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Geophysical                interpretation of digital seismic is                proceeding. |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Visits                to offices of Saratovneftegeofizika in Saratov, Russia for quality                control                of and input to seismic                reprocessing. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                layout for the new acquisition was prepared and submitted to                Saratovneftegeofizica. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | All                original hardcopy seismic is currently being scanned in Australia                by                contractor New Wave to provide a further dataset, which is being                utilized                as a final quality check against the reprocessed and SNG                scanning. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Saratovneftegeofizika                and Kyrgyzgeofizika have been mobilized to the Tuzluk area for the                commencement of the Tuzluk-Sulukta 2D acquisition program. Parameter                testing commence on Monday, 1st                October. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Legal                and commercial and technical support is being provided to advance                the                facilitation of seismic acquisition across the border into Tajikistan                in                the Tuzluk area (long offset data acquisition required for suitable                imaging of sub-thrust structural                leads). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Seismic                interpretation and preliminary mapping in each of the Tuzluk, Soh,                West                Soh, Nuashkent and Nanai permits in                progress. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mapping                has been incorporated into plans for proposed new seismic acquisition,                with minor adjustments being made to the location of lines in the                2D                acquisition grid. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Field                work was conducted during 2007 with the following                objectives: |
|--------------------|---------------------------------------------------------------------------------------------------|

| o   | Sampling                of prime candidate Palaeogene source rocks in Batken                region, |
|---------------|-----------------------------------------------------------------------------------------------------|

| o   | Surface                geology reviewed along seismic lines to aid subsurface                structural  interpretation and lead generation preliminary to                new seismic acquisition in Tuzluk, |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Report                of field activities completed, and |
|---------------|----------------------------------------------------------|

| o   | Geochemical                Analysis / Oil to Source Correlation of newly acquired Palaeogene                source                samples undertaken. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Planning                in progress to conduct field work in the Tuzluk                area. |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | Field                GPS quality control of well head locations                (ongoing). |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Petrography                and geochemical analysis of rock samples                initiated. |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | Revision                of seismic and structural model interpretations based on field                observations of surface geology. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Integration                of well velocity data and wireline log data into seismic interpretation                project. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | Internal                review of prospects and leads, updated risks and reserves in prospect                database. |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | Geological                well to well correlations                (ongoing). |
|--------------------|-------------------------------------------------------------------------------|

| ·   | Acquisition                of SPOT imagery data completed. |
|--------------------|------------------------------------------------------------|

| ·   | Reservoir                summary maps based on fields data. |
|--------------------|-------------------------------------------------------------|

| ·   | Field                and well summaries in and adjacent to the southern permit areas are                on-going. |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | Technical                evaluation (cross-sections and mapping) and support for the relinquishment                of the Arkyt permit has been conducted through the                quarter. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Multiple                core samples from the Palaeozoic, Palaeogene and Neogene were taken                from                selected well locations for maturation studies (conducted by Alan                Cook at                Keiraville Konsultants in Australia) and visual kerogen assessments                (Santos in-house evaluation). This work is being utilized to constrain                thermal and burial history modeling being conducted along the southern                flank of the basin. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Regional                Basin modeling - regional migration studies are                ongoing. |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | A                number of prospects and lead areas have been re-defined and a number                of                preliminary prospect evaluation updates have been                made. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | General                license administration and reporting continued during the                quarter. |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | Digitizing                of electric logs and maps continued during the                period. |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Assisted                in finalization of the seismic and seismic supervision                contracts. |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | Undertook                a review of available drilling equipment and contractors in the Kyrgyzstan                area and supported preliminary investigations into national requirements                for a drilling operation. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Facilitated                the mobilization of the SNG seismic crew to                Kyrgyzstan. |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | Field                geology work program in the Tuzluk/Soh/Nanai/Arkit area during                August/September 2006 has been incorporated into geological studies                being                carried out in the Adelaide Office |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Planning                for field work in the Tuzluk/Soh/Nanai/Arkit                area. |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Continued                to build in-country relationships with industry and                government |
|--------------------|--------------------------------------------------------------------------------------------------------|

----

----

| Block                D & E: Minimum Work and Financial Program for the Exploration                Period |        |
|--------------------------------------------------------------------------------------------------------------|-------------|
|                                                                                                         |        |   |   |   |   |   |
| First                Phase                                                                                   |        |
|                                                                                                         |        |   |   |   |   |   |
| Duration                                                                                                     |        |   | 3                Years |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Work                Program                                                                                  |        | Minimum                Expenditure |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 1.  Geological                and Geophysical                                                      | $400,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 2.  Seismic                Reprocessing (200 km)                                                   | $150,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 3.  Seismic                Acquisition (300 km (2D))                                               | $2,500,000  |   |   |   |
| or                                                                                                           |        |   |   |   |
| 3.  1                Exploration Well (3000 m)                                                     | $6,000,000  |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Commitment                                                                              |        | $3,050,000/$6,550,000 |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Second                Phase                                                                                  |        |
|                                                                                                         |        |   |   |   |   |   |
| Duration                                                                                                     |        |   | 2                Years (extension option of one year) |   |
|                                                                                                         |        |   |   |   |   |   |
| Work                Program                                                                                  |        | Minimum                Expenditure |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 1.  Geological                and Geophysical                                                      | $300,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 2.  1                Exploration Well (3000 m)                                                     | $6,000,000  |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Commitment                                                                              |        | $6,300,000 |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Third                Phase                                                                                   |        |
|                                                                                                         |        |   |   |   |   |   |
| Duration                                                                                                     |        |   | 2                Years (if extension option exercised in Second Phase, reduced by                length of                extension) |
|                                                                                                         |        |   |   |   |   |   |
| Work                Program                                                                                  |        | Minimum                Expenditure |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 1.  Geological                and Geophysical                                                      | $300,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 2.  1                Exploration Well (3000 m)                                                     | $6,000,000  |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Commitment                                                                              |        | $6,300,000 |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Phase 1 – 3 Commitment                                                            | $15,650,000 |   |   |   |

----

| Block                D & E: Minimum Work and Financial Program for the Exploration                Period |        |
|--------------------------------------------------------------------------------------------------------------|-------------|
|                                                                                                         |        |   |   |   |   |   |
| First                Phase                                                                                   |        |
|                                                                                                         |        |   |   |   |   |   |
| Duration                                                                                                     |        |   | 3                Years |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Work                Program                                                                                  |        | Minimum                Expenditure |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 1.  Geological                and Geophysical                                                      | $400,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 2.  Seismic                Reprocessing (200 km)                                                   | $150,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 3.  Seismic                Acquisition (300 km (2D))                                               | $2,500,000  |   |   |   |
| or                                                                                                           |        |   |   |   |
| 3.  1                Exploration Well (3000 m)                                                     | $6,000,000  |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Commitment                                                                              |        | $3,050,000/$6,550,000 |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Second                Phase                                                                                  |        |
|                                                                                                         |        |   |   |   |   |   |
| Duration                                                                                                     |        |   | 2                Years (extension option of one year) |   |
|                                                                                                         |        |   |   |   |   |   |
| Work                Program                                                                                  |        | Minimum                Expenditure |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 1.  Geological                and Geophysical                                                      | $300,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 2.  1                Exploration Well (3000 m)                                                     | $6,000,000  |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Commitment                                                                              |        | $6,300,000 |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Third                Phase                                                                                   |        |
|                                                                                                         |        |   |   |   |   |   |
| Duration                                                                                                     |        |   | 2                Years (if extension option exercised in Second Phase, reduced by                length of                extension) |
|                                                                                                         |        |   |   |   |   |   |
| Work                Program                                                                                  |        | Minimum                Expenditure |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 1.  Geological                and Geophysical                                                      | $300,000    |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| 2.  1                Exploration Well (3000 m)                                                     | $6,000,000  |   |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Commitment                                                                              |        | $6,300,000 |   |   |
|                                                                                                         |        |   |   |   |   |   |
| Total                Phase 1 – 3 Commitment                                                            | $15,650,000 |   |   |   |

----

| -   | Setup                of DWM offices in Albania. This included renting, refurbishing and                furnishing office space for 12 people in Tirana, hiring three geologists,                one accountant and one representative in charge of all issues to                do with                the Albanian authority. |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Geological                work commenced which included |
|---------------|---------------------------------------------------------|

| o   | Identification                of detailed areas of interest for geological seismic                work |
|---------------|--------------------------------------------------------------------------------------------------------|

| o   | Definition                of seismic lines |
|---------------|--------------------------------------------|

| o   | Identification                of geological material, in electronic and hardcopy format, from previous                exploration programs, received from different Albanian                archives |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Reprocessing                and analysis of geological exploration                material, |
|---------------|---------------------------------------------------------------------------------------------|

| o   | Negotiation                and planning of geological consultancy work by a third                party |
|---------------|--------------------------------------------------------------------------------------------------------|

| o   | Workshop                presentation of the Albanian project to a third party consultant                and                mandate for a volumetric report on the identified                structures |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Setup                of management processes and planning                included |
|---------------|-----------------------------------------------------------------------------------|

| o   | Creation                of a 3-year Master plan for geological work to be                performed |
|---------------|----------------------------------------------------------------------------------------------------|

| o   | Clarification                of Milestones |
|---------------|--------------------------------------------|

| o   | Definition                of roles and responsibilities within the Albanian team and reporting                lines                to the Head office |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Setup                of finance reporting structure |
|---------------|-----------------------------------------------------|

| -   | Commencement                of the study group regarding the documentation needed to submit a                bid for                the Otoway and Tranquilo blocks. This included mainly geological                studies. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Mandating                Mr. Ernesto Correa on all legal matters in the bidding process. Mr.                Correa                has strong legal background in the oil                industry |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Negotiating                with various partners concerning operatorship in the                project |
|---------------|--------------------------------------------------------------------------------------------------------|

----

----

----

----