# FORM 10-KSB

# SECURITIES
AND EXCHANGE COMMISSION

`Delaware                         1311                  76-0644935
(State or Other Jurisdiction      (Primary Standard        (I.R.S. Employer
          of                         Industrial          Identification Number)
     Incorporation or            Classification Code)
      Organization)

                                                Jim Tucker, V.P. Finance
                                               397 N. Sam Houston Parkway
        397 N. Sam Houston Parkway                            Suite 300
                                   Suite 300,
Houston, Texas  77060                        Houston, Texas, 77060
             (281) 999-9091                                 (281) 999-9091
(Address, Including Zip Code,               (Name, Address, Including Zip Code,
and Telephone Number, Including Area        and Telephone Number, Including Area
Code of Registrant's Executive Offices)     Code, of Agent for Service)`

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

YES |X| NO |_|

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

As of December 31, 2001, the aggregate market value of registrant's voting common stock, par value $.0006 per share, held
by non-affiliates was $16,767.
As of December 31, 2001, registrant had 56,747,129 shares of its common stock, par value $.0006 per share, issued and
outstanding.

`Page
PART I

ITEM 1.  BUSINESS...........................................................   3

ITEM 2.  PROPERTIES.........................................................   6

ITEM 3.  LEGAL PROCEEDINGS.................................................   16

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............   16

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS...............................................   17

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND PLAN OF OPERATION.............................................   18

ITEM 7.  FINANCIAL STATEMENTS
         (See below).......................................................   24

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE..........................................   24

PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..................  25

ITEM 10. EXECUTIVE COMPENSATION............................................   27

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT....................................................   28

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................   28

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..................................   28

SIGNATURES.................................................................   29

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS................................................................   F-2`

This Annual Report on Form
10-KSB contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1993 and Section 21E of the Securities Exchange Act of
1934. The words anticipate, believe, estimate, expect, project and similar
expressions are intended to identify forward-looking statements. Without
limiting the foregoing, all statements under the caption Item
6--Managements Discussion and Analysis of Financial Condition and Results
of Operations relating to the Companys anticipated capital expenditures,
future cash flows and borrowings, pursuit of potential future acquisition
opportunities and sources of funding for exploration and development are
forward-looking statements. These statements are subject to certain risks and
uncertainties, such as the volatility of natural gas and oil prices, potential
write downs or impairments, inability to meet capital requirements, uncertainty
of reserve information and future net revenue estimates, reserve replacement
risks, drilling risks, operating risks of natural gas and oil operations,
acquisition risks, hedging risks, government regulation, environmental matters,
competition and potential conflicts of interests with our majority shareholder.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated, expected or projected. For additional
discussion of such risks, uncertainties and assumptions, see Risk Factors
Affecting Our Business in Items 1 and 2. Business and Properties and Item 6.
Managements Discussion and Analysis of Financial Condition and Results of
Operations included in this Annual Report filed under the Securities Exchange
Act of 1934, as amended.

Unless
otherwise indicated, references to Transmeridian Exploration or the Company
refers to Transmeridian Exploration Incorporated and its subsidiaries on a
consolidated basis.

ITEM 1. BUSINESS

Our Business

Transmeridian Exploration,
Inc. is an independent energy company established to acquire and develop
identified and underdeveloped hydrocarbon reserves in the region of the former
Soviet Union known as the Confederation of Independent States (CIS) and more
particularly the Caspian Sea region. Our philosophy is to take advantage of
these opportunities based in part on our managements experience and
business relationships in the area. Our Chairman, President and Vice President
of Exploration have a total of 15 years of experience working in the Kazakhstan
area. We target opportunities with proved and potential oil and natural gas
reserves at below international finding cost rates.

The first opportunity which
the company has tied up and which will be our anchor project is the
South Alibek Field. The South Alibek Field is located in the Caspian Region of
western Kazakhstan, and is situated near pipelines, railroads and oil field
infrastructure. The proximity to existing infrastructure for exportation of oil
and gas, which reduces associated costs as well as reduces the time needed to
place wells on production, will be an important factor in our acquisition of any additional
properties.

As at December 31, 2001 we
had estimated net proved reserves of 17,645,418 barrels of oil and 3.475 MMCF
(million cubic feet) with a net present value at 10% (before taxes) of
$128,917,482 and a standardized measure of $90,871,453 (after tax) as measured
on December 31, 2001. Of these reserves, 5,808,683 barrels of oil and 1,144 MMCF
were classified as proved developed non-producing.

Our long term strategy is
to develop a continuous stream of commercial production from our Kazakhstan
Property. We then will be poised to continue the growth of our assets with the
possible acquisition of similar properties in the region.

We were incorporated in the
State of Delaware on April 18, 2000 as an independent energy company established
to develop identified and underdeveloped hydrocarbon reserves in the region of
the former Soviet Union, known as the Confederation of Independent States (CIS)
and more particularly the Caspian Sea region. We target opportunities to
purchase proved and potential oil and natural gas reserves at below
international finding cost rates such as in distress sales. For example our
acquisition cost from a distress sale, based on an independent engineering
evaluation of the known producible reserves in South Alibek was about $0.20 per
barrel compared with comparable industry sales in the region of about $1.00 per
barrel. We also concentrate on properties that are close to existing
infrastructure for exportation of oil and gas, which reduces associated costs as
well as reduces the time needed to place wells on production. We prefer to
invest in projects in which we can have a controlling interest.

We are in the start-up
phase of exploiting the one project we currently have available for exploration
and production of hydrocarbons. The project is located in the Caspian region of
western Kazakhstan. While the South Alibek Field is located near other producing
and proved oil fields and near pipelines and railroads, you should note that
proximity to such fields and infrastructure does not assure that we will be able
to successfully exploit our resources.

For our projects, all
exploration and production activities are conducted through wholly owned
operating subsidiaries. Transmeridian Exploration Inc.(BVI) is responsible for
the management of the South Alibek Field, with Open Joint Stock Company (OJSC)
Caspi Neft TME (Caspi Neft TME) established in Kazakhstan to handle all the
joint venture operations of that project. The Exploration License 1557 for South
Alibek and the related Exploration Contract for the exploration work are
registered in the name of the operating company Caspi Neft TME. Transmeridian
Exploration Inc. (BVI) also has acquired 50% of Emba Trans Ltd, a newly formed
Kazakhstan company with 100% ownership of the Emba Oil Terminal at the Emba
railhead. OJSC Trans Caspian Petroleum was established in Kazakhstan as a wholly
owned subsidiary also of Transmeridian Exploration Inc (BVI) but with no
activity at this time.

Transmeridian Exploration
Inc.(BVI) was formed in December 1997, by one of our directors and founders, Mr.
Peter Holstein and Transmeridian Kazakhstan Inc.(BVI) was formed in March 2000.
Prior to 2000, neither company had any operations, assets or liabilities. Both
are registered in the British Virgin Islands with their registered office at
Nerine Chambers, 5 Columbus Centre, Pelican Drive Road Town, Tortola, British
Virgin Islands.

Acquisition of Transmeridian Exploration , Inc., (BVI)

Transmeridian Exploration, Inc. was formed on April 18, 2000.  Transmeridian acquired all of the issued and outstanding
shares of Transmeridian Exploration, Inc. BVI on April 19, 2000 in exchange for the issuance of 18,900,000 shares to each of
Messrs. Peter Holstein and Lorrie Olivier.

Transmeridian BVI had no
assets or liabilities prior to its acquisition and its only commercial activity
consisted of a consulting agreement with Kornerstone Investment Group Ltd
(Kornerstone). The consulting agreement, signed on May 1, 1999 for the
identification of potential property acquisitions in Kazakhstan and the
negotiation of the purchase terms, gave them consideration of a 10% carried
interest upon consummation of any such property acquisition.

During 2000, Kornerstone
identified a potential acquisition. A Share Purchase Agreement dated March 24,
2000 was signed with Alpha Corporation Ltd (Alpha) pursuant to which
Transmeridian Exploration Inc. BVI agreed to acquire license 1557.

On March 31, 2000 an option
Agreement was signed with Tracer Petroleum Corporation (Tracer) pursuant to
which Tracer acquired a 4.5% interest in the License 1557 and was granted the
right to acquire up to a 50% interest in the License 1557.

None of these agreements
required payment by or receipt by Transmeridian Exploration Inc BVI of any
monies on the assignment of or transfer of any rights unless and until the
transactions contemplated by the Share Purchase Agreement were
consummated. No payments were made or rights transferred until after our acquisition of Transmeridian Exploration Inc. BVI
on April 19, 2000.

Acquisition of Caspi Neft TME and License 1557

Kornerstone identified the South
Alibek Field as a potential acquisition. The Share Purchase Agreement provided
for a down payment of $100,000, held in trust until the final transaction in
April, 2000 in exchange for an option period to allow for satisfaction of
certain legal conditions required to transfer the License 1557 from Alphas
operating entity to the newly formed entity Caspi Neft TME. Transmeridian
Exploration Inc.(BVI) would then purchase 100% of the shares of Caspi Neft TME
once it was verified that this entity had a certifiable clear title to the
License and related Exploration Contract for License 1557. The full purchase
price for securing 100% control of the License and stock of the title holding
company was $4,000,000.

Prior to our acquisition of
Caspi Neft TME, the License was held by another subsidiary of Alpha. There was
no activity in this subsidiary nor was there any activity on the oil and gas
property related to the license.

On April 19, 2000 the Share
Purchase Agreement was initiated by Transmeridian Exploration Inc.(BVI) with the
payment of $614,158 by Tracer to Alpha, for which Alpha initiated the transfer
of the License 1557 and Exploration Contract for South Alibek to Caspi Neft TME
and assigning 100% of the shares of Caspi Neft TME to Transmeridian Exploration
Inc (BVI).

On June 7, 2000 the License
1557 and Exploration Contract for South Alibek was officially transferred to
Caspi Neft TME by Resolution 645 of the Republic of Kazakhstan parliament and

Alpha transferred the
shares of the corporate entity to Caspi Neft TME. Thus, at this time,
Transmeridian through its subsidiaries, now held full title to the South Alibek
Field.

In August of 2000 we paid Alpha $500,000 to restructure the Share Purchase Agreement in order to extend the $3,385,842
balance due on the Share Purchase Agreement.

In September of 2000, TRACER elected not to participate on a 50% basis but chose to retain a 4.5% working interest in the
property.

In 2001, Transmeridian
increased its working interest to 90% by acquiring Tracers 4.5% working
interest in exchange for 100,000 shares of convertible preferred shares of
Transmeridian. Each share of preferred stock is convertible into fifteen shares
of our common stock for a five-year period. In addition, TRACER received
warrants for the purchase of up to one million shares of our common stock at a
price of $1.00 per share for a maximum of two years. As of the date of this
prospectus, none of the Series B Convertible Preferred Shares or warrants have
been converted or exercised.

The final payment terms for
the Share Purchase Agreement was settled on April 20, 2001, by the payment of
$385,842 and the payment of the balance of $1,000,000 on December 1, 2001.

The South Alibek field was
discovered in 1996 when the Alibek No.29 was drilled and tested flowing oil. The
Government Operating Company in charge of this exploration drilling was without
funds to continue operations and the South Alibek field was offered in a public
tender in the governments privatization program. OJSC Caspi Neft won the
tender and began looking for a financial partner for the continued exploration
and development of the field. We negotiated to purchase the License giving
rights to the exploration and development of the field based on the geological
evidence supporting the existence of a large structure with oil potential proved
by Well No. 29 and other wells drilled within 1- 3 kilometers. After we acquired
the acreage, we conducted geological, petrophysical and engineering studies of
the available well data as well as the available seismic over the area. This
data supported the Ryder Scott Company reserve study which confirmed and
quantified from an independent third party source our evaluation of the
potential of the field. The cost we paid for the license bears no relationship
to the value of the reserves that the Ryder Scott Company later determined for
the field.

Acquisition of Emba Oil Terminal

On August 27th of 2001
Transmeridian purchased a 50% interest in Emba Trans Ltd a rail terminal at the
city of Emba to facilitate the storage, sales and export of oil from the
production of South Alibek Field. The Company is in the process of completion of
the upgrade of the terminal by Emba Trans Ltd and the installation of related
production and delivery facilities for South Alibek Field. The terminal has
sufficient handling capacity for the production from South Alibek.

Employees

As of December 31, 2001,
our staff consists of an experienced management team with five professionals in
the Houston office plus the support of expert engineering and geoscience
consultants as needed and an operations management team and staff in Almaty and
Aktobe comprised of nine in Almaty and eleven in Aktobe and six field personnel,
as well as contract employees supervised by our expatriate engineers.

Corporate Information

Transmeridian was
incorporated under the laws of the State of Delaware on April 18, 2000.

Our corporate
headquarters offices comprising 6,725 square feet of rented executive
offices in Houston, at 397 N. Sam Houston Parkway, Suite 300, Houston, Texas
77060, at a monthly rental of $9,527 on a five-year lease. The corporate office
of Caspi Neft TME is in Almaty, Kazakhstan, 130AFurmanova street, comprising
4500 square feet rented monthly for $5,460 and their branch office in Aktobe,
Kazakhstan, is at Gaziza Zhubanova Street, 50 A comprising 1,162 square feet,
rented monthly at $540. Our Houston telephone number is (281) 999-9091.

ITEM 2. PROPERTIES

Properties

All exploration and production
activities are conducted through wholly owned operating subsidiaries.
Transmeridian Exploration Inc.(BVI) is responsible for the management of the
South Alibek Field, with Open Joint Stock Company (OJSC) Caspi Neft TME (Caspi
Neft TME) established in Kazakhstan to handle all the joint venture operations
of that project. The Exploration License 1557 for South Alibek and the related
Exploration Contract for the exploration work are registered in the name of the
operating company Caspi Neft TME. Transmeridian Exploration Inc. (BVI) also has
acquired 50% of Emba Trans Ltd, a newly formed Kazakhstan company with 100%
ownership of the Emba Oil Terminal at the Emba railhead.

>The South Alibek Field is
located in the north-eastern portion of the Caspian Sea Region, in northwestern
Kazakhstan within the prolific oil region of Aktobe. It is approximately 380
kilometers (225 miles) northeast of the giant Tengiz oil field. South Alibek
lies in a fairway of oil and gas fields that produce from carbonate reservoirs
of Middle Carboniferous and Lower Carboniferous age. The trend follows the reef
buildup on the margin of an ancient sea in this area. The field is located in
the Mugodzhar region of the Aktubinsk Oblast, 240 kilometers (75 miles) south of
the city of Aktobe and the license area for the field is 14,111 acres (57.1 sq
km).

The project is in very
close proximity (10 miles) to two large developed oil fields, Kenkiyak and
Zhanazhol Field. The South Alibek field borders the Alibekmola field. The South
Alibek project is within an area of good infrastructure including, oil and gas
pipelines, electrical transmission connections, all weather roads, small towns
and trained oilfield labor force. The fields in the region were identified and
developed during the time of the former Soviet Union and soon after its breakup
all activity on the Alibekmola and South Alibek field stopped due to lack of
funds to finance its development. Tenders were held to offer the further
exploration and development of these fields to private investors.

The South Alibek field is
immediately adjacent to the Alibekmola Field, on its western flank and is
separated by a known major fault. The oil reservoirs are in the Middle
Carboniferous (KT1) and Lower Carboniferous (KT-2) limestones which can be found
at an initial depth of 6,500 feet, and are generally 7,000 feet thick in the
area of the field. The carbonate limestones are the main oil reservoirs for many
of the fields in the area. The net pay thickness for well No.29 based on
evaluation of electric logs and production tests is estimated to be 700 feet.
Based on additional wells drilled during the Soviet era, in and on the border of
the license, combined with seismic coverage, we are estimating that this amount
of net pay extends over most of the area covered by the License 1557. The
estimate of average pay intervals through out the field area is based on seismic
which gives us control on the structural extent of the productive intervals and
well logs with extensive petrophysical evaluation which allow for correlation
and area control within the field area. We also have well tests over these same
intervals which gives us confidence of the productive nature of these intervals.

The wells drilled in South
Alibek before and soon after the independence of Kazakhstan were part of the
field delineation program of the Soviet-modeled geological association, a
company acting on behalf of the government. The Alibekmola and South Alibek
Fields are delineated by 31 wells, two of which are within the area covered by
License 1557 and a grid of modern 2D seismic. The existence of a downthrown
field adjacent to the Alibekmola main structure was discovered in 1994 with the
drilling and testing of well Alibekmola No.29. The South Alibek field is about
2,000 feet lower than the Alibekmola Field having a different
production drive mechanism, deeper oil water contact and generally a higher oil
quality.

On December 28th, 2001 the company signed a contract to purchase a Land Drilling Rig named Rig 232 - type
National 1320UE, from Seaboard Equipment Company, Inc., for a total consideration of $5,300,000 to be paid in
cash and the Company's common stock. The Company will use this rig to start its drilling program in the spring
of 2002.

`No.     Company Holding Title           Name            Description        Size            Costs
1       Caspi Neft TME                  South Alibek    License 1557       14,111 acres    $4,000,000
                                                        Oil and Gas Lease
        Obligateions
        KAZSTROIPOEK TOO (KSP)
        has the right, for two
        years, to convert for
        50% of this license
2       Transmeridian Exploration HVI    Emba Terminal  Legal Title             50%        $  200.000
                                                        Railroad oil shipping
                                                        terminal
                                                        Drilling rig                       $5,300,000

        Obligations                      Land lease     20 years                20 acres   $1.,750,000`

Reserves

Extensive geologic and
engineering information was obtained from 1996 to December of 2000 and provides
the basis of the technical evaluation and conclusions made by us and third
parties. Reserves estimates are based on the available data on South Alibek
Field, Alibekmola Field and Zhanazhol Field. Ryder Scott Company, a US
independent engineering company, estimated Transmeridian Exploration Inc. net
known producible reserves in the field of 17,645, million barrels of oil for the
South Alibek Field as corrected for its current 90% interest in the property.
These reserves only include the reserves estimated to be recoverable from well
No. 29 and two 80 acre offset units (wells) in the 14,111 acre license area.
Larger reserves are anticipated if certain reasonable assumptions based on the
nearby analogous fields are proven applicable for South Alibek Field. These
reserves estimates are contingent on successful confirmation of the estimates
and assumptions made in arriving at those estimates, and have the types of risks
associated with each category as defined by the SPE/SPEE that are normally
associated with oil and gas property estimates.

Summary of the Work Performed by Ryder Scott

Ryder Scott prepared an
estimate of the reserves, future production, and income attributable to certain
leasehold interests of Transmeridian Exploration, Inc. (Transmeridian) as of
December 31, 2001. The subject property is located in South Alibek Field,
License Number 1557, in the Republic of Kazakhstan. The income data were
estimated using the Securities and Exchange Commission (SEC) requirements for
future price and cost parameters.

The estimated reserves and
future income amounts presented in this report are related to hydrocarbon
prices. Hydrocarbon prices in effect at December 31, 2001 were used in the
preparation of this report as required by SEC rules; however, actual future
prices may vary significantly from December 31, 2001 prices. Therefore, volumes
of reserves actually recovered and amounts of income actually received may
differ significantly from the estimated quantities presented in this report. The
results of this study are summarized below.

The estimates of reserves
presented herein were based upon a detailed study of the properties in which
Transmeridian owns an interest; however, Ryder Scott has not made any field
examination of the properties. No consideration was given in this report to
potential environmental liabilities that may exist nor were any costs included
for potential liability to restore and clean up damages, if any, caused by past
operating practices. Transmeridian has furnished all of the accounts, records,
geological and engineering data, and reports and other data required for the
Ryder Scott investigation. The ownership interests, prices, and other factual
data was also furnished by Transmeridian and were accepted without independent
verification. The estimates presented in this report were based on data
available through December 2001.

The following table
presents Ryder Scotts estimated net proved oil and natural gas reserves
and the present value of our reserves at December 31, 2001, based on, and
qualified by reference to, the reserve report prepared by them. The present
values, discounted at 10% per annum, of estimated future net cash flows before
income taxes shown in the table are not intended to represent the current market
value of the estimated oil and natural gas reserves we own.

The present value of future
net cash flows before income tax as of December 31, 2001 was determined by using
the stated sales price offered for field deliveries using the market crude price
of Dated Brent as of December 31, 2001 of U.S. $20.50 per barrel less a 25%
discount for quality and transportation and handling for a net price of U.S.
$15.37 per barrel. Ryder Scott utilized an estimate of 10% for government
royalty in the calculations of present value. Royalty rates currently being
applied to new production contracts in the Kazakhstan range between 6-10%. No
value was assigned to gas reserves as currently there is no delivery contract
for gas sales. Per Ryder Scott (December 31, 2001)

`Category                     Oil          Gas           Total             Present Worth

Proved:                       Bbls        Mmef     (Undiscounted Future) (Discounted Future
                                                        Net Reserves)      Net Revenue(10%))
  Debeloped Non Producing   5,675,781    1,118       $ 89,052,064            $ 38,233,968
        Undeveloped        11,536,991    2,273       $184,169,051            $111,222,514
        Total Proved       17,212,772    3,391       $273,221,115            $128,526,298`

`Gross
        Total Area           14,111 acres
                                                1 well puls 2 offsets at 80 acre spacing
        Proved                  240 acres
        Remaining             13,871 acres              (1)
        Interest                90%                     (2)
        Wells                     1                     (3)`

Oil and Gas
Producing Activities:

Total costs incurred in the
acquisition of the License 1557 and the formation and development of our wholly
owned subsidiary Caspi Neft TME, the owner of the oil and gas exploration
activities, all incurred within Kazakhstan, were as follows (in thousands except
per barrel information):

`For the year ended
                                                        December 31,2001

Property Acquisition Costs
        Unproved                                        $  -
        Proved                                          $  5,597,850

Exploration Costs                                       $  -

Development Costs                                       $  3,173,097

Depreciation, depreciattion and amoritazion per
    equivalent barrel of production                     $  -

The aggregate capital cost relative to oil and gas
    producing activities are as follows
        Unproved oil and gas properties                 $  -
        Proved oil and gas properties                   $  8,770,947

Accumulated depreciation, depletion and
    amortization                                        $  -

                        Net Capitalized Cost            $  8,770,947`

Standardized Measure of
Discounted Future Net Cash Flows from Oil and Gas Operations and Changes
Therein.

The standardized measure of
discounted future net cash flows was determined based on the economic conditions
in effect at the end of the period presented, except in those instances where
fixed and determinable gas price escalations are included in contracts. The
disclosures below do not purport to present the fair market value of our oil and
gas reserves. An estimate of the fair market value would also take into account,
among other things, the recovery of reserves of an independent engineering
evaluation of the known producible reserves in the field, anticipated future
changes in prices and costs, a discount factor more representative of the time
value of money and risk inherent in reserve estimates.

The reserve estimates
provided at December 31, 2001 are based on oil prices of approximately $15.37,
which approximates 75% of the Brent North sea crude price per barrel which
related to a commercial offer at that time to purchase crude from the field. No
value was assigned to gas reserves, as currently there is no delivery contact
for gas sales.

`For the year ended
                                                        December 31, 2000

Future net revenue                                       $271,298,289

Future costs
        Lease operating expense                         ($ 27,481,568)
        Development costs                               ($ 10,407,000)

Future net cash flows before income taxes                $233,409,721
Discounted at 10% annum                                 ($104,492,239

Discounted future net cash flows before income taxes     $128,917,482
Future income taxes net of discount at 10$ annum        ($ 38,046,029)

Standardized measure of discounted future net cash flows $ 90,871,453`

The following are the
principal sources of changes in the standardized measure of discounted future
net cash flows:

## Commencement
of Operations and Initial Production Activities

We currently have a ninety
percent (90.0%) equity interest in the Kazakhstan property with Kornerstone
holding a ten percent (10%) carried interest. Contractually, therefore, we are
responsible for 100% of development costs. We pay the 10% interest holders
portion of expenses until the project reaches a positive cash flow basis. Then
we are reimbursed from production for the payments made on behalf of the 10%
interest holder, Kornerstone, plus 10% interest.

An administrative office in
Almaty, Kazakhstan was staffed in June 2000 and the physical possession of the
field was transferred to Caspi Neft TME in July, 2000 by the Kazakhstan
authorities. All Kazakhstan operations and administration are coordinated
through this representation office in the countrys commercial center. The
Almaty office, with a staff of 9, handles all federal government liaisons and
contacts as wells as serving as our head office in the Country. A branch
operating office was established in the town of Aktobe, which is the nearest
industrial area to the field. This office, with a staff of 11 is to maintain a
liaison with the local governmental regulatory agencies and the respective state
governors office, as well as handling the implementation of all operations
of South Alibek Field with the help of the field office, staffed by 6 employees
and contractors.

An Early Start-up Program
(ESP) has been established to evaluate reservoir and productive characteristics
that will be critical in determining the final design of the field development
program. Permits and operational plans were filed with the authorities to begin
production testing of Well No. 29 in January 2001. The various permits and
authorizations required were granted in February 2001. This testing program has
been authorized for 18 months, which will allow us to flow and recover
production from Well No. 29 during this period.

The initial work program on
Well No. 29 includes remedial work to repair mechanical deficiencies as well as
evaluation of new zones identified but not tested in the original drilling and
testing of the well. This ongoing work began in February 2001 with an extended
flow test of the existing well No.29. Test production from well No.29 was 180
barrels of oil per day, off and on, for a total of 30 days of production from
the 13 feet (4 meters) of open interval in the well intervals that was in
condition to flow without any treatment or improvement in well production
mechanics. Test production at this rate totaled in excess of 5,000 barrels of
oil as of April 30, 2001. Currently the field produces crude with a high gravity
of 39(Degree) API and with a low sulfur content of about 0.8%.

A program to repair well
damage and to open additional intervals for production evaluation was completed
in June, 2001. During this workover, it was discovered that in Well No. 29 only
13 feet (4 meters) of oil pay had been previously opened to production. After
repair of well damage, an additional 60 net feet of oil pay intervals were
opened by perforations. No other perforations are planned until further logging
and test results can be analyzed. The well testing is continuing, with
installation of new down hole and surface production facilities. Production
engineer modeling by Weatherford Artificial Lift Systems of the new mechanical
configuration of the well, pump and surface facilities indicates that the
equipment relieves the pressure on the reservoir allowing the fluid to come into
the well bore at a faster rate. The modeling indicates that with 60 net feet of
pay and the help of the artificial lift equipment, test production rates of 600
BOPD to 1,500 BOPD can be anticipated with the installation of this additional
equipment.

This testing program will
provide well production data and reservoir pressure analysis essential to the
design of permanent production facilities. This production also facilitates the
estimation of reserves required in the transitions to a commercial license and
production contract for the exploitation of the field.

This work will be followed
this year, with the initiation of the drilling program with the drilling of two
new delineation wells and further improvement of the production facilities and
infrastructure (See Plan of Business).

Marketing of
Test Production



The Mugodzhar region of
the Aktubinsk Oblast, in which South Alibek is located, is one of the most highly developed areas
for oil field development and production in the Republic of Kazakhstan, with existing roads, railroads, rail oil terminals and
oil pipelines.



Companies in the area of South
Alibek Field utilize both the KazTrans Oil and Russian Transneft pipeline system
to export their oil to regional hub export locations such as Samara, Ukraine,
and the Port of Odessa on the Black Sea and European locations such as Poland,
Hungry, Lithuania, Germany and Finland. Pipeline capacity in the area has
significantly improved this year with the opening of the Caspian Pipeline
Consortium (CPC) pipeline, raising current capacity of 250,000 barrels oil per
day (bopd) to 800,000 bopd by year end. Two oil pipelines currently service the
producing fields, Kenkiyak and Zhanazhol, 10 miles from South Alibek, with
50,000 barrel per day and 93,000 barrel per day capacities, with only one
pipeline currently being used at a 53% capacity. The pipelines transport the oil
to the refinery in Orsk and is a transfer point for swaps to western markets.
The Alibekmola Field, adjacent to South Alibek, is now beginning development,
with pipeline construction started to cross our license to connect to the larger
capacity pipeline at Zhanazhol Field. The CPC pipeline is between Atyrau and the
Black Sea Port of Novorosiisk, and access could be by rail or the laying of a 90
mile pipeline from Kenkiyak to Atyrau as planned by KazTransOil. The capacity
would be about 125,000-165,000 bopd and would provide an alternative routing for
the projects production. Our current plans do not rely on entry in the CPC
system for its export and sales routes but this facility provides a feasible
alternative. All economic estimates assume the utilization of trucking, pipeline
and rail facilities located within 35 miles of the field.

Since we do not currently
have access to a pipeline, the production is being sold, either at the field or
trucked to a local rail terminal, to export or local markets depending on market
conditions at the time The production from Well No. 29 and the new wells planned
for this year is expected to be sold on the export market at world oil prices
less deductions for quality, transportation and handling costs. Under the terms
of the Exploration and Production Contracts, the Kazakhstan Government can
require us to sell 50% of our production into local markets, but so far they
have not done so. The use of the rail system for shipment of crude to Western
Europe and China is used by a number of companies, the largest of which is
Chevrons Tengiz operations shipping about 161,000 barrels per day. Other
operators in the Mugodzhar region including Shell Oil, Maersk Oil & Gas,
Veba Oil, and the Chinese National Petroleum Company also include rail transport
in their marketing of oil. Four oil terminals are present in the area and
available for storage and sale to export markets. They include Emba 5, 30 miles
from South Alibek, Emba, 35 miles from South Alibek, Shubarkuduk, 94 miles from
South Alibek and Bestamak, 120 miles from our field. Trucking crude to the
terminals is considered a temporary measure until we can establish our own
export facilities or pipeline connections to these or other export routes

Initially the oil was
trucked to Shubarkuduk Oil Terminal and sold to Kaspi Neft Chim, a local crude
oil purchaser. Production for the next twelve months will be sold to So Cal
Energy Inc., under an agreement reached on August 27, 2001 and discussed further
in Our Plan of Business in 2002. The oil will be stored and sold for export at
our Emba facilities and will initially be trucked the 35 miles from South
Alibek. We have an agreement with Emba Trans Ltd. for through put charges of
$0.73 per barrel for the storage and handling of the oil. The terminal currently
has 25,000 barrel storage capacity. The terminal will be expanded to accommodate
the anticipated increase for the field.

Exploration
Contract and Conversion to Exploration and Production Contract

>Exploration Contract

Currently we have an
Exploration Contract for South Alibek. As long as we operate under the
Exploration Contract we can produce the wells under a test program and pay a 2%
royalty. The exploration period consists of six (6) successive years from the
effective date of the License dated April 29, 1999.

The License may be extended
twice as mutually agreed by the parties to the License with each extension
period having a term of two years. Therefore the total possible exploration
period utilizing the maximum of extension periods allowed by the contract is a
term of ten (10) years. For each extension requested of the competent government
body, the parties shall determine the part of the Contractual Area for further
exploration work and make the appropriate changes in the applicable working
program. The exploration contract can be converted to terms under a Production
Contract at any time that we wish with the requirement that we file an approved
reserves report based on the current test production of Well No. 29.

Typical
Production Contract in Kazakhstan

While the majority of the
production contract is defined by the countries petroleum and tax code there are
some terms open to negotiation such as royalty rates, production bonus and other
production related assessments. The normal term provided under the Kazakhstan
Petroleum Code for the exploitation of a proved oil field under a Production
Contract is 25 years unless extended. The typical exploration period is five
years unless extended. In total a contractor will have at least 30 years to
explore and exploit a contract area unless extended. Generally with the
commercial production of a field the royalty is much higher and can be as much
as 10% of the net production from the field. A typical commercial production
contract would include definitive terms describing the commercial and tax
conditions for producing any fields discovered within the License area. We would
choose a contract structured on a Tax / Royalty model as opposed to a Production
Sharing Model. Under a Tax/Royalty model we would pay 100% of all development
costs and receive 100% of all sales proceeds.

Steps we must take to obtain a Production Contract and preserve our rights.

In accordance with the
Exploration Contract and the provision of the Kazakhstan Petroleum Code, we will
be expected to inform the government within 30 days of the existence of any
commercial reserves at which time we will be expected to convert our operations
to a Production Contract, which will also cover the entire license area. We
believe the present Exploration Contract provides us with a preferential right
to receive such a commercial production contract. We have sought and received a
letter from the Ministry of Natural Resources as to their preferred treatment of
transitioning our existing operating contract to include commercial production.
Section 10.4. of the present Exploration Contract grants us the exclusive right
to a production contract, it states Commercial Discovery entitles the Contractor
with the exclusive right for conclusion of a Production Contract provided that
provisions of the License and the Contract are met. and the letter we received
from the Ministry of Energy, Industry and Trade, clearly states that we have an
exclusive right to be granted the right for hydrocarbon production.. and we have
a right to a Production Contract.... When we establish commercial production we
expect that we will convert from an Exploration Contract to an Exploration
Production Contract, as we will still have an unexpired Exploration term and
additional exploration works would be warranted.

The material terms
of the letter from the Ministry of Natural Resources.

A. That the Agency of the
Republic of Kazakhstan for Investments is the competent body for Exploration, Production and
Joint Exploration and Production of Natural Resources.

B. Since we have an
Exploration contract and in accordance with Regulations on Granting Use of
Subsoil Natural Resources Article 3.1, we have an exclusive right to produce the
hydrocarbons arising from exploration works and to enter in to a Production
Contract with the competent authority for the development of the reserves.

C. At all times, the
completion of the Exploration works must be completed in a time - efficient manner.

D. The Ministry of Energy, Industry and Trade is willing to prepare an expert evaluation and approval of the South Alibek
field within the time frame prescribed by law.

We will submit the
technical data from the well tests that are being preformed on Alibek No.29 as
soon as the test data is available, to a recognized institute in Kazakhstan for
the writing of a government reserve report, and when this report is filed we
will submit a formal application for a commercial Production Contract covering
the entire license area. (The Production Contract is a contract for fields with
only production. We will request an Exploration and Production Contract as we
will continue to explore within the License area, as well as produce discovered
fields.) We expect to request a conversion of the present Exploration Contract
to an Exploration and Production Contract by the end of this year. We expect
that the Government will act on our request in December or during the first
quarter of 2003. The Kazakhstan law requires government agencies to respond to
any administrative matter within 30 days from its submission. To this end we
expect the government to

acknowledge our request and to select a negotiation committee to handle our negotiations within this 30 day time frame.
There is no legal time frame to conclude negotiations.

License
Extension

An Application was made to
the government authorities and an extension was granted and authorized by
government resolution on November 7, 2001 that the license area for the
Companys South Alibek Field (Field) was increased 400% to
incorporate all of the currently identified potentially oil bearing reservoirs
associated with the Field. With this increase, the Company now estimates that
the entire structural closure of the Field is completely within the expanded
14,111 acre (57.106 sq. km) License, and provides TMEI the opportunity to fully
develop the complete Field structure area, as well as providing additional
acreage for the exploration of upside prospective targets within the license.
This significantly larger area could potentially provide additional proved
reserves and higher daily production rates to us in the future than we have
currently forecasted.

The original area of the
South Alibek License was 3,396 acres (13.745 sq. km.) when acquired by TMEI.
During 2001, the Companys technical team of specialists studied the
feasibility of extending the license area due to the structural continuation of
the South Alibek Fields oil oil-bearing reservoirs beyond the original
license boundary. The specialists, as well as Ryder Scott Company, a US
independent engineering company, estimated that approximately half of the Field
was potentially outside of the original license area. An Application was made to
the government authorities and an extension was granted and authorized by
government resolution on November 7, 2001. The new license area is 14,111 acres
(57.106 sq. km.) and is governed by the existing Exploration Contract and
Exploration License, giving TMEI rights to explore and continue its exploitation
of the hydrocarbons found within the license.

Present
Activities

The following discussion of
our plan of operation should be read in conjunction with the consolidated
financial statements and the attached notes included elsewhere in this
prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including but not limited to, those set forth under Risk Factors and elsewhere
in this prospectus.

The company has executed a
Share Purchase Agreement with Kazstroiproekt Ltd (KSP), an affiliate of Astana
Holdings Ltd., which provides for the sale and transfer of 50% interest of Caspi
Neft TME, the company which holds the license to the South Alibek Field. In
exchange for this interest, KSP must make available initially a three year $20
million dollar financing for the development of the field. Within twenty-four
months of this initial loan, KSP must determine if it wants to continue with the
project. If KSP determines that it will continue it will be responsible for the
payment of $15 million of the initial loan and make available up to $30 million
in additional development financing at commercial rates. If KSP determines that
it will not continue in the project it will return its 50% interest in Caspi
Neft TME and Caspi Neft will be solely responsible for the existing loan. The
partnership is governed by an international joint operating agreement with TMEI
as operator for at least the first 3 years. Astana Holdings has existing crude
oil production and export terminal operations in Kazakhstan and offers essential
in-country support for a fast track development program for the field. An
interim bridge loan for $1.5 million was issued in December 2001, and the
Company paid off the $1 million Al Alpha note on December 1, and a final credit
agreement for the principal loan of $20 million is pending finalization of
documents. The company believes that this financing should be sufficient to
bring the field into production of rates up to 40-50 thousand barrels per day.
Additional financing may be required if a larger scale of production is
indicated by drilling results.

## Financial Plan
and Plan of Operation for 2002

Our focus in 2002 will be to:
; Financing through the Sale of Stock
; Crude oil forward purchase contracts
; Bank Financing of Future Crude Production
; Joint Venture Partners
; Commence initial 10 well drilling activities
; Improvement of Production Facilities



; Staffing

Financing
through the Sale of Stock

The Company plan to fill a
registration statement with the SEC in the near future for the sale of its common stock to the
public.

Crude oil forward
purchase contracts

On August 27 of 2001, Caspi
Neft TME executed a Crude oil forward purchase contract with So Cal Energy
Incorporated for the delivery and sale of a minimum 3,000 tons (approximately
21,000 barrels) of crude oil per month at a price tied to Dated North Sea Brent
Crude. The price we receive for our oil and natural gas production are tied to
the price of North Sea Brent Crude. North Sea Brent Crude prices fluctuate
depending upon several factors such as world demand. Brent crude oil prices rose
from $25.26 to $25.31 from May 15th of 2001 to March 26th
of this year. The agreement provides for off takes from the rail terminals of
21,000 barrels per month initially but can be increased to 210,000 barrels per
month if the field delivery capacity can be increased with new drilling. Pricing
is based on Dated North Sea Brent Crude discounted $13 per barrel for
transportation and quality. Payment will be in US dollars, with 80% prepayment
based on the published price of North Sea Brent for the date of shipment. The
final payment of 20% is determined by the average of a 15 day quote for Dated
Brent for the respective shipping date. Caspi Neft TME has the right to sell any
volumes of oil greater than 3,000 tons per month to other buyers if more
favorable pricing terms are offered or if So Cal Energy Inc declines the
additional volumes. Due to mechanical problems making production from the Alibek
Well No.29 impossible, the company and So Cal suspended the previous sales
agreement to handle production from this well.  Company maintains contacts
with this and other marketing companies in the region in anticipation of
beginning test production in the third quarter after the initiation of the
current 3- well drilling program.

Bank Financing

The company has executed a
Share Purchase Agreement with Kazstroiproekt Ltd (KSP), an affiliate of Astana
Holdings Ltd., which provides for the sale and transfer of 50% interest of Caspi
Neft TME, the company which holds the license to the South Alibek Field. In
exchange for this interest, KSP must make available initially a three year $20
million dollar financing for the development of the field. Within twenty-four
months of this initial loan, KSP must determine if it wants to continue with the
project. If KSP determines that it will continue it will be responsible for the
payment of $15 million of the initial loan and make available up to $30 million
in additional development financing at commercial rates. If KSP determines that
it will not continue in the project it will return its 50% interest in Caspi
Neft TME and Caspi Neft will be solely responsible for the existing loan. The
partnership is governed by an international joint operating agreement with TMEI
as operator for at least the first 3 years. Astana Holdings has existing crude
oil production and export terminal operations in Kazakhstan and offers essential
in-country support for a fast track development program for the field. An
interim bridge loan for $1.5 million was issued in December 2001, and the
Company paid off the $1 million Al Alpha note on December 1, and a final credit
agreement for the principal loan of $20 million is pending finalization of
documents. The company believes that this financing should be sufficient to
bring the field into production of rates up to 40-50 thousand barrels per day.
Additional financing may be required if a larger scale of production is
indicated by drilling results.

Joint Venture
Partners

See Kazstroiproekt Ltd (KSP) under bank financing above.

Commencement
of Initial Drilling Activities

The investment program for
the next three years, will include the drilling and completion of 10 wells and
the installation of production facilities and pipeline at a cost of
approximately $34,000,000. The development of these wells should prove up
additional reserves according to the independent petroleum engineering report
from the Ryder Scott Company. The first three well program will be initiated
with the drilling of the first well in the 2nd Quarter 2002. Two additional
wells will be drilled and completed by year end 2002, for a total cost of
$8,400,000 and the construction of a sales trunk-line to the railroad terminal,
construction planned for 2002 at a cost of $2,000,000. We estimate that each
well should cost about $2.8 million dollars to drill and complete and will be
placed on production upon completion. This initial program is expected to
generate cash flow by the end of the three year period of $36,000,000 under
existing crude pricing and transportation tariff levels yielding a net revenue
of $11 per barrel to the lease. This program will be initiated by the funds from
the bank financing but the majority of the development capital will come from
the excess internally generated cash flow from this drilling program

and or commercial financing
based on these production levels. Each commercial well drilled will add to this
commercial lending base. We currently estimate that 44 dual completed wells will
be required to fully develop the current 57.1 square kilometer contract area.
Production from Well No. 29 at 180 bopd can generate between $50,000 to $60,000
per month in net operating cash flow based on a net price to us of $9.80 per
barrel delivery to Emba terminal per the terms of the current oil sales. The
estimate transportation costs is fairly estimated in the 25% discount to the
Brent North Sea Crude price used by Ryder Scott at Dec 31, 2001. Our in-country
and corporate operating costs during this test period of approximately $140,000
per month could be covered by the funds generated from production if we are
successful in getting this well to produce 600 to 1500 bopd, resulting in a
positive cash flow position with the limited production from this first well
alone. Most sales from our area of operation are based on the European marker
crude Brent North Sea. Initial transportation costs are higher due to the
limited amounts of production. Economies of scale will be realized when
production increases and transportation costs should not exceed the discount
used by Ryder Scott. Additionally, trucking costs will be eliminated with the
installation of a field trunk line to the rail terminal located about 35 miles
from our field. If the increase in production does not occur and our production
continues at 180 barrels per day, our monthly operating cash flow would be
$52,920.

Based upon the funding
provided by the bank loan from Kazstroiproekt, Ltd for the drilling of the first
well, on December 28th, 2001 the company purchased a Land Drilling Rig named Rig
232 - type National 1320UE, from Seaboard Equipment Company, Inc., for a total
consideration of $5,300,000 to be paid in cash and the Companys common
stock. The Company will use this rig to start its drilling program in the spring
of 2002. The rig was constructed in the middle 80s by western companies
and will be operated by Transmeridian Kazakhstan (BVI).

We intend to initially
drill two delineation wells, in succession, beginning in the second quarter of
2002. Test production from each of these wells are estimated at about 2,500
barrels of oil per day from each well based upon well tests of other wells in
the same fault separated reservoir in Alibekmola field operated by Kazakhoil,
which borders the South Alibek field. Alibek No.29 cannot produce at these
calculated rates because it has small casing which prohibits the use of large or
two strings of tubing required to move the large fluid volumes. Production
modeling of well No.29 indicates that this well could have produced at a rate of
2,500 BOPD if larger casing had been used and Artificial Lift equipment. When
these two new wells are completed, we expect to reach total test production
capacity of about 4,000 to 6,000 barrels per day for all three wells combined.
This larger monthly volume should enhance our marketing position such that
placement of sales should reduce the handling discounts we are currently being
charged. With the proper facilities in place this production could result in
monthly operating income of $1.9 - to $2.3 million per month by the end of the
fourth quarter 2001 if North Sea Brent Crude prices remain at the $20 level as
to which there is no assurance. The price for the Brent North Sea Crude was
$25.07 for March 18, 2002. Using this marker base crude, oil sales from the
lease would result in operating revenues of $13.50 per barrel. With the
elimination of trucking with the installation of a sales trunk-line and higher
values due to larger volume transactions, we expect the netback of operating
revenues per barrel to increase to $15.00 - $18.00 per barrel.

We expect to utilize the
equity funding from future offerings and the $20,000,000 loan to support the
start-up of the initial development drilling program. After the drilling and
completion of seven successful wells, excess internally generated funds from
Alibek No. 29 and this drilling program, based on current estimates of the
production from each new well, should provide the additional funds needed to
complete the 10 well program and to construct a crude oil sales trunk-line to
connect the field to a oil terminal railroad distribution center located about
35 miles from the field. We currently have a budget designed for the
construction of the pipeline to start in the Forth Quarter of 2002 at a cost of
$2,000,000.

The drilling of these first
two wells is also anticipated to prove up additional reserves. These additional
reserves are contingent on the success of these and other wells using many
assumptions based on the currently available information but which cannot be
known with any assurance and contained within directly and indirectly many of
the risks associated with oil and gas exploration and field development.

Improvement of
Production Facilities

Production facilities for
this level of production have been designed and the necessary equipment has been
identified for immediate purchase pending available funds. All tankage and
piping and construction should be provided by local construction firms which
specialize in installing petroleum processing facilities.

We estimate that
approximately $2 million will be required for the installation of permanent
production facilities to process production of 10,000 BOPD. Emba Trans Ltd. will
install production and delivery facilities at the South Alibek Field per the
terms of the option agreement with Caspi Neft TME, reducing our funding
requirement from other sources.

The gas produced in
association with the oil production will be separated, treated and utilized in
providing fuel for operations with the balance re-injected until sales to local
markets can be arranged.

We located most of the
major new treating vessels required for our operation in Canada. This equipment
is ideal since it is already designed for artic conditions and sour gas service.
By purchasing existing excess inventory equipment to start up production we are
not only saving on construction and engineering costs, but on installation time
since the equipment is ready for shipment and can be installed once the surface
area is prepared in the field. Storage tankage, handling and gathering
facilities will be provided and installed through qualified local contractors
from Kazakhstan with western supervision.

Staffing

At the present time, we
have a start-up staff of about 25 professionals between the Houston and
Kazakhstan field offices. The drilling program will require a team of at least
six engineers to be employed from the Houston office. Two drilling engineers
will supervise the drilling work in Kazakhstan for 30 days and then be relieved
by two other engineers from the Houston office for 30 days. Two expatriate
production engineers will also rotate on a 30 days on and off basis to supervise
the crude oil production. Each of these professionals will require approximately
four Kazakhstan field assistances for fieldwork and language translation, or 12
in country employees. This increase in activity and payroll will require
administrative support, geologist, engineers, accountants, interpreters and
drivers both at the Almaty office as well as at the Aktobe office. With the
addition of the pipeline and terminal construction and expanded development
field operations we expect to increase the number of employees in about 4 years
to approximately 100 employees in Kazakhstan and 15 in the Houston office.

Growth
Strategy

Our Growth Strategy is
dependent upon raising the funds necessary to carry out the following plan. We
plan to raise these funds through our financial plan, which includes bank
financing for our drilling program which in turn should generate additional
revenues for more drilling. At the present time we do not have any other firm
offers or commitments for any financing other than our bank loan.
Transmeridians goal is to achieve rapid growth with key acquisitions in
the Kazakhstan region. There are several other License Areas very similar to
South Alibek around our lease that were discovered by the Russians and turned
over to the Kazakhstan Government. These areas will be coming up for tender in
the near future. One of our Goals is to show success with our project and use it
as a showcase to raise additional funding to bid on the new areas and expand our
holding. If successful, these new acquisitions could help us achieve rapid
growth. Entry into these markets is facilitated by managements experience
and industry contacts developed over the past ten years in this area. Balance in
country exposure and type of production will be important to secure long-term
growth of the company.

There is no question that
there is opportunity in Kazakhstan. The Russians discovered several major fields
with proved reserves and left these fields for the Kazakhstan Government to
develop. The Government has turned to independent companies for development
investment. If we can use our present funding wisely, develop South Alibek,
produce the proved reserves that are there, transport and sell our oil through
our Emba Oil Terminal and achieve profitability, we should be able to attract
the needed financial resources to acquire more fields and continue to seek out
other under-developed oil fields.

Our focus is to expand our
asset base with a financial plan of development of our property in Kazakhstan
and, once a stable production and sales stream is achieved, our attention will
be directed to the raising of additional funding for the acquisition and
development of additional properties that have:

; low entry cost as measured
on a dollar per barrel for proved and potential reserves;
 ; ready access to infrastructure allowing for production within a short time period without
significant capital commitments;
 ; ready access to local and export markets
without the need for immediate investment in pipeline construction projects; and 
; projects where we can control operations and ownership.

Operationally, we expect to
finish the year in the South Alibek Field with a substantial increase in daily
production from the field. In an independent engineering evaluation of the known
producible reserves in the field and an early start up program with daily
production of about 6,000 barrels could be achieved through the successful
workover of well No.29 and the drilling of two delineation wells. Over the next
five years, daily production from the South Alibek field could be increased
substantially as a result of expanded developmental infield drilling and the
installation of treating and pipeline sales facilities.

We plan to continue with
our reserve-purchasing program that will include at least one additional field
acquisition in the region, which can all be managed from one core administration
and operational team, in each of the next two years.

ITEM 3. LEGAL
PROCEEDINGS

We are not party to any pending or threatened legal proceeding nor are any of our properties subject to a pending or
threatened legal proceeding.

ITEM 4.
       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our Annual Shareholders' Meeting was held on October 11, 2001.

Re-election of
the Board

All of our Directors were re-elected at the Annual Shareholders' Meeting.  The following is our Board of Directors  as of
December 31, 2001:

`Name                                    Age             Position

Lorrie T. Olivier (1)                   51              President & CEO, Secretary, Treasurer, CL
Peter L. Holstein (1)                   59              Director
Philip J. McCauley                      39              Director
Angus G.P.M. Simpson (2)                37              Director
Roger W. Brittain (2)                   64              Director, Chairman of the Audit Committee`

(1) These Directors were
elected and have served since the formation of Transmeridian in 2000.
(2) These Directors were elected by the sitting Board on October 23, 2000.

They have all acted as directors since October 23, 2000. All directors hold office until the next annual meeting of stockholder
and until their successors have been duly elected and qualified. There are no agreements with respect to the election of
directors.

Appointment of Corporate
Auditors

At the Annual Shareholders'
Meeting held October 11, 2001, the Board unanimously appointed Grant Thornton LLP as the
company's auditors.

Adoption of
Company Incentive Stock Option Plan

At the Annual
Shareholders Meeting held October 11, 2001, the Board unanimously approved
the Company Incentive Stock Option Plan. As of December 31, 2001 no options had
been issued.

>Other Matter
Voted On

There were no other matters voted
on at the Annual Shareholders' Meeting.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The trading market for our common stock
is on the OTC bulletin board, under our symbol TMXN.  The trading range for
April 2002 was from a low of $0.35 to a high of $2.20.

The following description
of our securities and various provisions of our Restated Certificate of
Incorporation and our bylaws are summaries. The Restated Certificate of
Incorporation and bylaws, copies of which have been filed with the Securities
and Exchange Commission as exhibits to our registration statement of which this
prospectus constitutes a part, and provisions of applicable law. Our authorized
capital stock consists of 200,000,000 shares of common stock, $.0006 par value,
of which 56,247,029 shares were issued and outstanding as of August 7, 2001, and
5,000,000 shares of preferred stock, $.0006 par value, of which 3,000 shares of
Non-Voting Series A Convertible Preferred Stock and 100,000 shares of Non-Voting
Series B Convertible Preferred Stock were issued and outstanding as of August 7,
2001. As of August 7, 2001, there were approximately 63 holders of record of our
common stock.

Common Stock

Each share of common stock
is entitled to share pro rata in dividends and distributions with respect to the
common stock when, as and if declared by the board of directors from legally
available funds. No holder of any shares of common stock has any pre-emptive
right to subscribe for any of our securities. Upon our dissolution, liquidation
or winding up of our corporate affairs, the assets will be divided pro rata on a
share-for-share basis among holders of the shares of common stock after any
required distribution to the holders of preferred stock, if any. All shares of
common stock outstanding are fully paid and non-assessable.

Each shareholder of common
stock is entitled to one vote per share with respect to all matters that are
required by law to be submitted to shareholders. The shareholders are not
entitled to cumulative voting in the election of directors. Accordingly, the
holders of more than 50% of the shares voting in the election of directors will
be able to elect all the directors if they choose to do so.

Currently, our bylaws
provide that shareholder action may be taken at a meeting of shareholders and
may be affected by a consent in writing if such consent is signed by the holders
of the majority of outstanding shares, unless Delaware law requires a greater
percentage. Our Restated Certificate of Incorporation provides that they may be
amended by the affirmative vote of a majority of the shares entitled to vote on
such an amendment. These are the only provisions of our bylaws or Restated
Certificate of Incorporation that specifies the vote required by security
holders to take action. Written notice of the annual, and each special meeting
of stockholders, stating the time, place, and purpose or purposes thereof, shall
be given to each stockholder entitled to vote thereat, not less than 10 nor more
than 60 days before the meeting. The holders of a majority of the shares of the
corporations capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum at
any meeting of stockholders for the transaction of business, except as otherwise
provided by statute or by the Certificate of Incorporation.

Preferred Stock

The board of directors is
authorized, without further shareholder approval, to issue from time to time up
to an aggregate of 5,000,000 shares of preferred stock. The preferred stock may
be issued in one or more series and the board of directors may fix the rights,
preferences and designations thereof. There are two series of Preferred shares
outstanding, a Series A and B both with a par value of $.0006. Series A of 3,000
shares with a stated value of $100 per share issued to Ratcliff International
Ltd. which are convertible at any time by Transmeridian, after the stock is
publicly tradable, at the rate of 85% of the average bid price for our common
stock, five days prior to conversion. The total series accrues dividends at
12.5% per annum of the stated value of $300,158 until conversion. An aggregate
of 100,000 Series B Preferred Shares with a stated value of $15 per share are
convertible by the holder at any time prior to their 5 year term on the basis of
15 shares for our common stock for each Series B Preferred Share. These Series B
shares accrue no interest and are convertible to Transmeridians common
share at the rate of $1.00 per share. Both the Series A and Series B are non
voting.

ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

1. Liquidity and Capital Resources

General
Liquidity Considerations.

Going Concern

Our financial statements
have been presented on the basis that we are a going concern, which contemplates
the realization of assets and satisfaction of liabilities in the normal course
of business. As shown in the financial statements, we incurred a net loss of
$2,023,587 during the year ended December 31, 2001, and, as of that date, our
current liabilities exceeded our current assets by $912,503. These factors,
among others, including our ability to raise additional funds, as discussed in
Note B to the financial statements, raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

We have incurred losses for
start-up efforts and may continue to incur losses in the future. We sold 4,979
barrels of test production in April of 2001. Even if we get increased cash flow
from well No.29, we will still need additional capital to fully develop the
property. Transmeridians financial plan to raise the required capital is
through but not limited to, the sale of stock, obtaining bank loans, using
commercial financing through crude oil forward purchase contracts and joint
ventures with other oil and gas operators.

If we are unable to
generate sufficient operating revenues or raise the required amount of
additional capital, our ability to meet our obligations and to continue the
expansion of our operations will be adversely affected.

In the aggregate, ownership
of our shares by management represents approximately 57% of our issued and
outstanding shares of common stock as of date of filing. These shareholders, if
acting together, will be able to significantly influence all matters requiring
approval by our shareholders, including the election of directors and the
approval of mergers or other business combination transactions.

Our performance is
dependent on the performance of our senior management and key technical
personnel. In particular, our success depends on the continued efforts of our
senior management team. The loss of the services of any of our executive
officers or other key employees could have a material adverse effect on our
business, results of operations and financial condition. We do not have
employment agreements in place with all of our senior management or key
employees.

Our future success also
depends on our continuing ability to retain and attract highly qualified
technical and managerial personnel. We anticipate that the number of our
employees will increase in the next 12 months. Wages for managerial and
technical employees are increasing and are expected to continue to increase in
the foreseeable future due to the competitive nature of this job market. We may
experience difficulty from time to time in attracting the personnel necessary to
support the growth of our business, and there can be no assurance that we will
not experience similar difficulty in the future. The inability to attract and
retain the technical and managerial personnel necessary to support the growth of
our business could have a material adverse effect upon our business, results of
operations and financial condition.

Liquidity and
Capital Resources

Bank Financing

The company has executed a
Share Purchase Agreement with Kazstroiproekt Ltd (KSP), an affiliate of Astana
Holdings Ltd., which provides for the sale and transfer of 50% interest of Caspi
Neft TME, the company which holds the license to the South Alibek Field. In
exchange for this interest, KSP must make available initially a three year $20
million dollar financing for the development of the field. Within twenty-four
months of this initial loan, KSP must determine if it wants to continue with the
project. If KSP determines that it will continue it will be responsible for the
payment of $15 million of the initial loan and make available up to $30 million
in additional development financing at commercial rates. If KSP determines that
it will not continue in the project it will return its 50% interest in Caspi
Neft TME and Caspi Neft will be solely responsible for the existing loan. The
partnership is governed by an international joint operating agreement with TMEI
as operator for at least the first 3 years. Astana Holdings has existing crude
oil production and export terminal operations in Kazakhstan and offers essential
in-country support for a fast track development program for the field. An
interim bridge loan for $1.5 million was issued in December 2001, and the
Company paid off the $1 million Al Alpha note on December 1, and a final credit
agreement for the principal loan of $20 million is pending finalization of
documents. The company believes that this financing should be sufficient to
bring the field into production of rates up to 40-50 thousand barrels per day.
Additional financing may be required if a larger scale of production is
indicated by drilling results.

Development
Financing

See Kazstroiproekt Ltd (KSP) under bank financing above.

Joint Venture
Partners

See Kazstroiproekt Ltd (KSP) under bank financing above.

Operation Plan

The following discussion of
our plan of operation should be read in conjunction with the consolidated
financial statements and the attached notes included elsewhere in this filing.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors.

Commencement
of Initial Drilling Activities

The investment program for
the next three years, will include the drilling and completion of 10 wells and
the installation of production facilities and pipeline at a cost of
approximately $34,000,000. The development of these wells should prove up
additional reserves according to the independent petroleum engineering report
from the Ryder Scott Company. The first three well program will be initiated
with the drilling of the first well in the 2nd Quarter 2002. Two additional
wells will be drilled and completed by year end 2002, for a total cost of
$8,400,000 and the construction of a sales trunk-line to the railroad terminal,
construction planned for 2002 at a cost of $2,000,000. We estimate that each
well should cost about $2.8 million dollars to drill and complete and will be
placed on production upon completion. This initial program is expected to
generate cash flow by the end of the three year period of $36,000,000 under
existing crude pricing and transportation tariff levels yielding a net revenue
of $11 per barrel to the lease. This program will be initiated by the funds from
bank financing but the majority of the development capital will come from the
excess internally generated cash flow from this drilling program and or
commercial financing based on these production levels. Each commercial well
drilled will add to this commercial lending base. We currently estimate that 44
dual completed wells will be required to fully develop the current 57.1 square
kilometer contract area. Production from Well No. 29 at 180 bopd can generate
between $50,000 to $60,000 per month in net operating cash flow based on a net
price to us of $9.80 per barrel delivery to Emba terminal per the terms of the
current oil sales. The estimate transportation costs is fairly estimated in the
25% discount to the Brent North Sea Crude price used by Ryder Scott at Dec 31,
2001. Our in-country and corporate operating costs during this test period of
approximately $140,000 per month could be covered by the funds generated from
production if we are successful in getting this well to produce 600 to 1500
bopd, resulting in a positive cash flow position with the limited production
from this first well alone. Most sales from our area of operation are based on
the European marker, Brent North Sea crude. Initial transportation costs are
higher due to the limited amounts of production. Economies of scale will be
realized when production increases and transportation costs should not exceed
the discount used by Ryder Scott. Additionally, trucking costs will be
eliminated with the installation of a field trunk line to the rail terminal
located about 35 miles from our field. If the increase in production does not
occur and our production continues at 180 barrels per day, our monthly operating
cash flow would be $52,920.

Based upon the funding
provided by the bank loan from Kazstroiproekt, Ltd for the drilling of the first
well, on December 28th, 2001 the company signed a contract to purchase a LAND
DRILLING RIG named Rig 232 - type National 1320UE, from Seaboard Equipment
Company, Inc., for a total consideration of $5,300,000 to be paid in cash and
the Companys common stock. The Company will use this rig to start its
drilling program in the spring of 2002. The rig was constructed in the middle
80s by western companies and will be operated by Transmeridian Kazakhstan
(BVI).

We intend to initially
drill two delineation wells, in succession, beginning in the second quarter of
2002. Test production from each of these wells are estimated at about 2,500
barrels of oil per day from each well based upon well tests of other wells in
the same fault separated reservoir in Alibekmola field operated by Kazakhoil,
which borders the South Alibek field. Alibek No.29 cannot produce at these
calculated rates because it has small casing which prohibits the use of large or
two strings of tubing required to move the large fluid volumes. Production
modeling of well No.29 indicates that this well could have produced at a rate of
2,500 BOPD if larger casing had been used and Artificial Lift equipment. When
these two new wells are completed, we expect to reach total test production
capacity of about 4,000 to 6,000 barrels per day for all three wells combined.
This larger monthly volume should enhance our marketing position such that
placement of sales should reduce the handling discounts we are currently being
charged. With the proper facilities in place this production could result in
monthly operating income of $1.9 - to $2.3 million per month by the end of the
fourth quarter 2002 if North Sea Brent prices remain at the $20 level as to
which there is no assurance. The price for the Brent North Sea Crude was $20.50
for December 31, 2001. Using this marker base crude price, oil sales from the
lease would result in operating revenues of $9.80 per barrel. With the
elimination of trucking with the installation of a sales trunk-line and higher
values due to larger volume

transactions, we expect
the netback of operating revenues per barrel to increase to $10.92 - $12.92 per barrel. See Risk
Factors.

We expect to utilize the
equity funding from future offerings and the $20,000,000 loan from to support
the start-up of the initial development drilling program. After the drilling and
completion of seven successful wells, excess internally generated funds from
Alibek No. 29 and this drilling program, based on current estimates of the
production from each new well, should provide the additional funds needed to
complete the 10 well program and to construct a crude oil sales trunk-line to
connect the field to a oil terminal railroad distribution center located about
35 miles from the field. We currently have a budget designed for the
construction of the pipeline to start in the Forth Quarter of 2002 at a cost of
$2,000,000.

The drilling of these first
two wells is also anticipated to prove up additional reserves. These additional
reserves are contingent on the success of these and other wells using many
assumptions based on the currently available information but which cannot be
known with any assurance and contained within directly and indirectly many of
the risks associated with oil and gas exploration and field development.

## Improvement of
Production Facilities

Production facilities for
this level of production have been designed and the necessary equipment has been
identified for immediate purchase pending available funds. All tankage and
piping and construction should be provided by local construction firms which
specialize in installing petroleum processing facilities.

We estimate that
approximately $2 million will be required for the installation of permanent
production facilities to process production of 10,000 BOPD. Emba Trans Ltd. will
install production and delivery facilities at the South Alibek Field per the
terms of the option agreement with Caspi Neft TME, reducing our funding
requirement from other sources.

The gas produced in
association with the oil production will be separated, treated and utilized in
providing fuel for operations with the balance re-injected until sales to local
markets can be arranged.

We located most of the
major new treating vessels required for our operation in Canada. This equipment
is ideal since it is already designed for artic conditions and sour gas service.
By purchasing existing excess inventory equipment to start up production we are
not only saving on construction and engineering costs, but on installation time
since the equipment is ready for shipment and can be installed once the surface
area is prepared in the field. Storage tankage, handling and gathering
facilities will be provided and installed through qualified local contractors
from Kazakhstan with western supervision.

Staffing

At the present time, we
have a start-up staff of about 16 professionals between the Houston and
Kazakhstan field offices. The drilling program will require a team of at least
six engineers to be employed from the Houston office. Two drilling engineers
will supervise the drilling work in Kazakhstan for 30 days and then be relieved
by two other engineers from the Houston office for 30 days. Two expatriate
production engineers will also rotate on a 30 days on and off basis to supervise
the crude oil production. Each of these professionals will require approximately
four Kazakhstan field assistances for fieldwork and language translation, or 12
in country employees. This increase in activity and payroll will require
administrative support, geologist, engineers, accountants, interpreters and
drivers both at the Almaty office as well as at the Aktobe office. With the
addition of the pipeline and terminal construction and expanded development
field operations we expect to increase the number of employees in about 4 years
to approximately 100 employees in Kazakhstan and 15 in the Houston office.

Growth Strategy

Our Growth Strategy is
dependent upon raising the funds necessary to carry out the following plan. We
plan to raise these funds through our financial plan, which includes bank
financing for our drilling program which in turn should generate additional
revenues for more drilling. At the present time we do not have any other firm
offers or commitments for any financing other than our bank loan.
Transmeridians goal is to achieve rapid growth with key acquisitions in
the Kazakhstan region. There are several other License Areas very similar to
South Alibek around our lease that were discovered by the Russians and turned
over to the Kazakhstan Government. These areas will be coming up for tender in
the near future. One of our Goals is to show success with our project and use it
as a showcase to raise additional funding to bid on the new areas and expand our
holding. If successful, these new acquisitions could help us achieve rapid
growth. Entry into these markets is facilitated by managements experience
and industry contacts developed over the past ten years in this area. Balance in
country exposure and type of production will be important to secure long-term
growth of the company.

There is no question that
there is opportunity in Kazakhstan. The Russians discovered several major fields
with proved reserves and left these fields for the Kazakhstan Government to
develop. The Government has turned to independent

companies for development
investment. If we can use our present funding wisely, develop South Alibek,
produces the proved reserves that are there, transport and sell our oil through
our Emba Oil Terminal and achieve profitability, we should be able to attract
the needed financial resources to acquire more fields and continue to seek out
other under-developed oil fields.

Our focus is to expand our
asset base with a financial plan of development of our property in Kazakhstan
and, once a stable production and sales stream is achieved, our attention will
be directed to the raising of additional funding for the acquisition and
development of additional properties that have:

; low entry cost as measured
on a dollar per barrel for proved and potential reserves;
; ready access to infrastructure allowing for production within a short time period without
significant capital commitments;
 ; ready access to local and export markets
without the need for immediate investment in pipeline construction projects; and
* projects where we can control operations and ownership.

Operationally, we expect to
finish the year in the South Alibek Field with a substantial increase in daily
production from the field. In an independent engineering evaluation of the known
producible reserves in the field and an early start up program with daily
production of about 6,000 barrels could be achieved through the successful
workover of well No.29 and the drilling of two delineation wells. Over the next
five years, daily production from the South Alibek field could be increased
substantially as a result of expanded developmental infield drilling and the
installation of treating and pipeline sales facilities.

We plan to continue with
our reserve-purchasing program that will include at least one additional field
acquisition in the region, which can all be managed from one core administration
and operational team, in each of the next two years.

Commodity
Prices for Oil

Our revenues,
profitability, growth and value are highly dependent upon the price of oil.
Market conditions make it difficult to estimate prices of oil or the impact of
inflation on such prices. Oil prices have been volatile, and it is likely they
will continue to fluctuate in the future. Various factors beyond our control
affect prices for oil, including supplies of oil available worldwide and in
Kazakhstan, the ability of OPEC to agree to maintain oil prices and production
controls, political instability or armed conflict in Kazakhstan or other oil
producing regions, the price of foreign imports, the level of consumer demand,
the price and availability of alternative fuels, the availability of
transportation routes and pipeline capacity, and changes in applicable laws and
regulations.

Inflation

We cannot control prices
received from our oil sales and to the extent we are unable to pass on increases
in operating costs, we may be affected by inflation. In April 1999, the
government of the Republic of Kazakhstan discontinued its support of the tenge
and allowed it to float freely against the U.S. dollar. Immediately thereafter,
the official exchange rate declined from 87.5 tenge to the U.S. dollar to 142
tenge to the U.S. dollar, but was relatively stable for the remainder of 1999
and 2000. The devaluation of the tenge, the currency of the Republic of
Kazakhstan, can significantly decrease the value of the monetary assets that we
hold in Kazakhstan as well as our assets in that country that are based on the
tenge. KKM retains the majority of cash and cash equivalents in U.S. dollars in
an offshore bank account outside of Kazakhstan, but KKMs statutory tax
basis in its assets, tax loss carry forwards, and VAT receivables are all
denominated in tenge and subject to the effects of devaluation. Local tax laws
allow basis adjustments to offset the impact of inflation on statutory tax basis
assets, but there is no assurance that any adjustments will be sufficient to
offset the effects of inflation in whole or in part. If not, KKM may be subject
to much higher income tax liabilities within Kazakhstan due to inflation and or
devaluation of the local currency. Additionally, devaluation may create
uncertainty with respect to the future business climate in Kazakhstan and to our
investment in that country. As of December 31, 2000, the exchange rate was 144.5
tenge per U.S. dollar.

Exploration Contract and Conversion to Exploration and
Production Contract

Exploration
Contract

Currently we have an
Exploration Contract for South Alibek. As long as we operate under the
Exploration Contract we can produce the wells under a test program and pay a 2%
royalty. The exploration period consists of six (6) successive years from the
effective date of the License dated April 29, 1999.

The License may be extended
twice as mutually agreed by the parties to the License with each extension
period having a term of two years. Therefore the total possible exploration
period utilizing the maximum of extension periods allowed by the

contract is a term of ten
(10) years. For each extension requested of the competent government body, the
parties shall determine the part of the Contractual Area for further exploration
work and make the appropriate changes in the applicable working program. The
exploration contract can be converted to terms under a Production Contract at
any time that we wish with the requirement that we file an approved reserves
report based on the current test production of Well No. 29. In accordance with
the Exploration Contract and the provision of the Kazakhstan Petroleum Code, we
will be expected to inform the government within 30 days of the existence of any
commercial reserves at which time we will be expected to convert our operations
to a Production Contract, which will also cover the entire license area. We
believe the present Exploration Contract provides us with a preferential right
to receive such a commercial production contract. We have sought and received a
letter from the Ministry of Natural Resources as to their preferred treatment of
transitioning our existing operating contract to include commercial production.
Section 10.4. of the present Exploration Contract grants us the exclusive right
to a production contract, it states Commercial Discovery entitles the Contractor
with the exclusive right for conclusion of a Production Contract provided that
provisions of the License and the Contract are met and the letter we received
from the Ministry of Energy, Industry and Trade, clearly states that we have an
exclusive right to be granted the right for hydrocarbon production.. and we have
a right to a Production Contract.... When we establish commercial production we
expect that we will convert from an Exploration Contract to an Exploration
Production Contract, as we will still have an unexpired Exploration term and
additional exploration works would be warranted.

Economic and
Political Climate in Kazakhstan

Adverse economic or
political developments in Kazakhstan may adversely affect our business.
Kazakhstan has been independent from the Soviet Union for only 10 years. Future
changes in the political and economic environment in Kazakhstan may adversely
affect our business. That is why we maintain a Kazakhstan Company in Almaty,
staffed by Kazakhstan citizens which, aids in the relations with the local
government and helps to keep Houston based management informed as to the proper
protocol and any adverse developments. These developments could include, among
other things:

`o local currency fluctuations or devaluation;

          o civil disturbances;

          o exchange controls or restrictions on availability of hard currency;

          o changes in crude oil and gas price and transportation regulations;

          o changes with respect to taxes, royalty rates, import and export tariffs and withholding taxes on distribution to
         foreign investors; nationalization or expropriation of property; and

          o interruption or blockage of oil exports.`

Changes in Kazakhstan laws and regulations and the interpretation of those laws
and regulations may also adversely affect
our business. Kazakhstan's foreign investment laws, including petroleum licensing legislation, corporate law, tax law,
customs law and currency and banking legislation, are still developing and uncertain. These laws are subject to changing and
different interpretations, they may contain inconsistencies and contradictions; some may be discretionary in application and
enforcement. As a result Kazakhstan laws could have a material adverse effect on our business and financial results of
operations. Our interests in exploration and production contracts and other agreements may be susceptible to revision or
cancellation, and legal redress may be uncertain, delayed or unavailable. Ensuring our on-going right to contracts will require
a careful monitoring or performance of the terms of the contracts, and monitoring of the evolution under the Kazakhstan laws
and contract administration practices. That is why our Company engages law firms in Kazakhstan, Russia and the United
States. Together with our Kazakhstan team, the Houston executive team and our legal and accounting advisors, we can react
to any situation quickly and protect the companies interest when needed.

Changes in current policies of the Kazakhstan government may also adversely affect our business. Government policies may
affect our ability to market oil and natural gas to export markets where hard currency earnings are available. The government
has previously issued regulations limiting export of oil to assure local supplies to source price controlled fuel for the local
markets. The government has announced that up to ten percent (10%) of a producer's production must be reserved for
domestic refining. No regulations have been issued and there is no assurance that world oil price can be realized on such
reserves destined for local markets.

Environmental Regulations

The environmental regulations
to which we are subject may become more numerous and compliance with them may become
more expensive. We must comply with Kazakh laws and international requirements that
regulate the discharge of materials
into the environment. Environmental protection and pollution control could, in the future, become so restrictive as to make
production unprofitable. Furthermore, we may be exposed to potential claims and lawsuits involving such environmental
matters as soil and water contamination and air pollution. We are currently in compliance with all local and international
environmental requirements and are closely monitored by the Kazakh environmental authorities. We have not made any
material capital expenditures for environmental control facilities and have no plans to do so in foreseeable future. Our
Companies Environmental Policy is Clean As You Go and therefore our cost to comply with government regulations is
included in our daily field operating costs. To date we have not seen nor been made aware of any material effects of
government regulations that would adversely impact our business or operations outside the normal course of business. We
experience the same government regulations in Kazakhstan as we do here in the United States, taxes, royalty payments,
reporting and environmental compliance. If we have an environmental spill, we report it to the Environmental Agency with a
recommended clean up procedure and they approve and or modify and approve and we proceed with our own clean up under
their supervision.

All costs associated with meeting and operating within the environmental laws of Kazakhstan are included in our normal
operating budget. We know of no Kazakhstan environmental law, which will cause a material impact on the viability of our
project. Kazakhstan does require that all operating companies establish a reserve to reclaim the industrial areas used during
the life of the field and to liquidate all depleted wells at the end of the contract term. Our existing contract requires that a fund
equal to 1% of the capital development budget of the project must be funded during the development of the field to cover
such costs. We do not estimate that this reclamation fund or the actual cost of reclamation will be a material cost to the
project.

2. Results from Operations

Oil and gas revenues for the twelve months ended December 31, 2001 were $51,350,  compared to  $-0- reported  as the oil
and gas revenues for the nine months ended December 31, 2000.  There has been no production since the second quarter,
which is primarily attributed to the shut down of Well No. 29 due to the work over in progress. Lease operating expense
increased  from $-0- for the twelve months ended December 31, 2000 to $1,246,856 for the twelve months ended December
31, 2001, an increase of $1,246,856. The increase is primarily due to the start up of production activity. General and
administrative costs decreased from $679,570 for the twelve months ended December 31, 2000 to $657,016 for the twelve
months ended December 31, 2001. The decrease of $22,554 primarily consists of an decrease in payroll and office overhead
expenses.

We are an independent energy company established to acquire and develop identified and underdeveloped hydrocarbon
reserves in the region of the former Soviet Union known as the Confederation of Independent States (CIS) and more
particularly the Caspian Sea region, based in part on our management's experience and business relationships in the area. Our
Chairman, President and Vice President of Exploration have a total of 15 years of experience working in the Kazakhstan area.
We target opportunities with proved and potential oil and natural gas reserves at below international finding cost rates. We
currently have one project under development. The project (which is referred to at times as the Kazakhstan Property or the
South Alibek Field) is located in the Caspian Region of western Kazakhstan, and is situated near pipelines, railroads and oil
field infrastructure. The proximity to existing infrastructure for exportation of oil and gas, which reduces associated costs as
well as reduces the time needed to place wells on production, will be an important factor in our acquisition of any additional
properties.

We currently have a ninety percent (90.0%) equity interest in the Kazakhstan property with Kornerstone holding a ten percent
(10%) carried interest. Contractually, therefore, we are responsible for 100% of development costs. We pay the 10% interest
holder's portion of expenses until the project reaches a positive cash flow basis. Then we are reimbursed from production for
the payments made on behalf of the 10% interest holder, Kornerstone, plus 10% interest.

An administrative office in Almaty, Kazakhstan was staffed in June 2000 and the physical possession of the field was
transferred to Caspi Neft TME in July, 2000 by the Kazakhstan authorities. All Kazakhstan operations and administration are
coordinated through this representation office in the country's commercial center. The Almaty office, with a staff of 6,
handles all federal government liaisons and contacts as well as serving as our head office in the country. A branch operating
office was established in the town of Aktobe, which is the nearest industrial area to the field. This office, with a staff of 8 is to
maintain a liaison with the local governmental regulatory agencies and the respective state governor's office, as well as
handling the implementation of all operations of South Alibek Field with the help of the field office, staffed by 6 employees
and contractors.

An Early Start-up Program (ESP) has been established to evaluate reservoir and productive characteristics that will be critical
in determining the final design of the field development program. Permits and operational plans were filed with the
authorities to begin production testing of Well No. 29 in January 2001. The various permits and authorizations required were
granted in February 2001. This testing program has been authorized for 18 months, which will allow us to flow and recover
production from Well No. 29 during this period.

The initial work program on Well No. 29 includes remedial work to repair mechanical deficiencies as well as evaluation of
new zones identified but not tested in the original drilling and testing of the well. This ongoing work began in February 2001
with an extended flow test of the existing Well No.29. Test production from Well No. 29 was 180 barrels of oil per day, off
and on, for a total of 30 days of production from the 13 feet (4 meters) of open interval in the well intervals that was in
condition to flow without any treatment or improvement in well production mechanics. Test production at this rate totaled in
excess of 5,000 barrels of oil as of April 30, 2001. Currently the field produces crude with a high gravity of 39(Degree) API
and with a low sulfur content of about 0.8%.

A program to repair well damage and to open additional intervals for production evaluation was completed in June, 2001.
During this workover, it was discovered that in Well No. 29 only 13 feet (4 meters) of oil pay had been previously opened to
production. After repair of well damage, an additional 60 net feet of oil pay intervals were opened by perforations. No other
perforations are planned until further logging and test results can be analyzed. The well testing is continuing, with installation
of new down hole and surface production facilities. Production engineer modeling by Weatherford Artificial Lift Systems of
the new mechanical configuration of the well, pump and surface facilities indicates that the equipment relieves the pressure
on the reservoir allowing the fluid to come into the well bore at a faster rate. The modeling indicates that with 60 net feet of
pay and the help of the artificial lift equipment, test production rates of 600 BOPD to 1,500 BOPD can be anticipated with the
installation of this additional equipment.

This testing program will provide well production data and reservoir pressure analysis essential to the design of permanent
production facilities. This production also facilitates the estimation of reserves required in the transitions to a commercial
license and production contract for the exploitation of the field.

This work will be followed this year, with the initiation of the drilling program with the drilling of two new delineation wells
and further improvement of the production facilities and infrastructuref.

ITEM 7. FINANCIAL STATEMENTS

See Item 14(a) for a list of the Financial Statements and the supplementary financial information included in this report will
be provided upon the completion of the Audit, following the signature page.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

Not Applicable.

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

As of December 31, 2001, the
following table sets forth (i) the names and ages of our directors and executive officers of
Transmeridian, (ii) the principal offices and positions with Chaparral held by
each person and (iii) the date such person
became a director or executive officer. The executive officers are elected annually
by the board of directors. Executive
officers serve terms of one year or until their death, resignation or removal
by the board of directors. The present term of
office of each director will expire at the next annual meeting of stockholders.
Each executive officer will hold office until his
successor duly is elected and qualified, until his resignation or until he is
removed in the manner provided by our bylaws.

`Name                                    Age             Position
Lorrie T. Olivier (1)                   51              President & CEO, Secretary, Treasurer
Bruce A. Falkenstein                    44              Vice President Exploration and Geology
Jim W. Tucker                           59              Vice President Finance, Controller
Peter L. Holstein (1)                   59              Director
Philip HJ. McCauley                     39              Director
Angus G.P.M. Simpson (2)                37              Director
Roger W. Bris\ttain (2)                 64              Director, Chairman of the Audit Committee`

(1)        These Directors
were elected and have served since the formation of Transmeridian in 2000.
       (2)             These Directors were elected by the sittin
         Board on October 23, 2000.

They have all acted as directors since October 23, 2000. All directors hold office until the next annual meeting of stockholder
and until their successors have been duly elected and qualified. There are no agreements with respect to the election of
directors.

The following represents a summary of the business history of each of the named individuals for the last five years:

Lorrie T. Olivier

Mr. Olivier is President, Chief Executive Officer and Chairman of the Board. From February 1, 1991 to March 30, 2000, Mr.
Olivier was employed by American International petroleum Corporation as a Vice President of Operation and President of
American International Petroleum Kazakhstan (AIPK), American Eurasia Petroleum, and American International Petroleum
Holdings. He was the lead manager in developing the company's interest in the Caspian Sea region with the acquisition of a
several large properties, the last three years focused on Kazakhstan as well as developing experience and business contacts in
Russia and other CIS countries.

Bruce A. Falkenstein

Mr. Falkenstein is Vice President of Exploration and Geology. He served for 20 years with Amoco, and later with BP from
February 3, 1994 to August 5, 2000, as Chief Geophysicist and a manager of the Kazakhstan Exploration team. Since 1992 he
has been working and managing the identification, technical evaluation and capture of oil fields and operations of licenses in
the CIS, with particular focus on the Caspian Sea region, 6 years of that time concentrating on Kazakhstan, developing
experience and industry contacts in the region during this time.

Jim W. Tucker

Mr. Tucker is Vice President of Finance.
From 1966 to 1972 he served Texaco Inc. His last position as Vice President of
Texaco Nigeria Ltd. From 1976 to 1988 he served with Texas Oil and Gas Corp., holding positions as Assistant Controller,
Vice President and assistant to the President. From January 1, 1990 until January 20, 2001 he served as the Vice President of
Finance of Crossroads Environmental Corp. and Chairman of the Board.

Peter L. Holstein

Mr. Holstein is a Director. From April 1, 1994 to December 1, 1999 he served as a Director and Chairman of the Board for
Tracer Petroleum International Director Atlantic Caspian Resources Plc. (January- February 1999), Chairman and Director of
Odyssey Petroleum Corporation (1997), and President Arakis Energy International (1996). He has been actively engaged in
seeking out and reviewing oil industry opportunities in the Former Soviet Union since 1995. These have included those in
Russia, the Ukraine, Kyrgestan, Romania, Azerbijan and participating in a joint venture in Turkmenistan, as well as the
company's current project in Kazakhstan.

Philip J. McCauley

Mr. McCauley is a Director. He is currently the Chairman and Chief Executive Officer of Audio Navigation Ltd. From
November 1, 1983 to December 1, 1999, Mr. McCauley was the chief executive officer of TTL Group Ltd.

Angus G.M.P Simpson

Mr. Simpson is a Director. He has been a Director of Glenrand Ltd. since October 1, 1994 and also a Director and Executive
Chairman of Glenrand Simpson Ltd. since October 1, 1994, Insurance and Reinsurance Advisers and Intermediaries. Prior to
this Mr. Simpson served as a Director of Crawley Warren & Co. Ltd.

Roger W. Brittain

Mr. Brittain is Chairman of the Audit Committee of the Board and a Director. Until his retirement on March 31, 2001 he was
a Director of Investec Henderson Crosthwaite Corporate Finance from January 10, 1998. Mr. Brittain is also the non-
executive Chairman of the Board of Directors of Canargo Energy Corporation, and a former Director of Snyder Oil Company
(January 1, 1986-December 31, 1998), Sen Hong Resources from August 30, 1997 to August 30, 2000 and Glenrand Simpson
from November 1, 1998 to November 1, 2000.

We have not compensated directors for service on the Board of Directors or any committee thereof. As of the date hereof, no
director has accrued any expenses or compensation. Officers are appointed annually by the Board of Directors and each
executive officer serves at the discretion of the Board of Directors. We do not have any standing committees at this time.

There are no family relationships between any of the our directors, executive officers and other key personnel.

During the past five years none or our directors, executive officers, promoters or control persons was:

(1) the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or
executive officer either at the time of the bankruptcy or within two years prior to that time;

(2) convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);

(3) subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or

(4) found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities law.

ITEM 10.  EXECUTIVE COMPENSATION

There was no executive
compensation program as of December 31, 2001. This is the first year of operation and there are no
historical compensation amounts prior to 2001 to report. The following table sets forth information concerning the
compensation of the named executive officers through December 31, 2000.

`Annual Compensation                                     Long Term Compensation
                                                                             Awards                   Payouts

                                                                     Restricted  Securities
Name and Principal                                 Other Annual       Stock       Underlying    LTIP       All other
    Position            Year    Salary  Bonuses    Compensation       Awards    Options/SARs    Payouts   Compensation
                         (b)    ($)(c)   ($)(d)      ($)(e)            ($)(f)     (=)(g)         ($)(h)      ($)(i)

P.L. Holstein
     Chairman          2001    105,000    0            0                0            0            0             0
L.T. Olivier
     President (CEO)  2001    200,000    0            0                0            0             0            0
Bruce Falkenstein
     VP               2001    110,000    0            0                0            0             0            0
Jim W. Tucker
     VP               2001    94,444     0            0                0            0             0            0`

An incentive employee stock option plan was approved at the Annual Shareholders meeting held on October 11, 2001 and
Lorrie Olivier and Peter Holstein each gave 2,500,.000 shares of Company stock to the Company, which the Company
redeemed, for this plan.   There were no outstanding options as of the date of this prospectus.

There are no arrangements
pursuant to which any director has been or is currently compensated for any service
 provided as a director. Directors and/or officers will receive expense
reimbursement for expenses reasonably incurred on our behalf.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, to the best knowledge of Transmeridian as of December 31, 2001, with respect to
each person known by us to own beneficially more than 5% of Tran meridian's outstanding common stock, each director of
Transmeridian and all directors and officers of Transmeridian as a group.

`Name of Beneficail              Number of Shares                Percentage of Current
     Owners                         Owned                       issued and outstanding

Lorrie T. Olivier               7,800,000                               14$
JMJC Investments Inc (1)        8,300,000                               15%
Colamar Ltd. (2)                  800,000                                1%
Peter L. Holstein               1,610,000                                3%
Sovereign Trust (3)            10,000,000                               18%
Roger W. Brittain                 150,000                                0%
Angus Simpson                      50,000                                0%
Philip J. McCauley                 50,000                                0%
Zen Trust (4)                     500,000                                1%
Remaining Officers              2,667,500                                5%
All Officers and Directors
   as a group (7 persons)      31,927,500                               57%`

(1) Beneficial owner of JMJC Investments Inc.
are the children of Mr. Lorrie T. Olivier, who is the President of the Company.
(2) Beneficial owner of Colamer Ltd. is Lorrie T. Olivier
(3) Beneficial owner of the Sovereign Trust is the Holstein family,  Mr. Peter Holstein is the
    settler of the Trust.
(4) Beneficial owner of Zen Trust are the children of Mr. Philip McCauley. Mr. McCauley is
    the settler of the Trust

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On April 19, 2000 we issued 18,900,000 shares to
each Mr. Peter Holstein and Mr. Lorrie Olivier in exchange for their stock
in Transmeridian Exploration, Inc. (BVI) and $.0006 per share.



ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

All schedules for which a provision is made in
the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

Year end Audited Financial
Statements will be filed as an amendment as soon at the Audit is completed.



We filed a Current Report on Form 8-K, dated
January 11, 2002 to report the purchase of a $5,300,000 drilling rig, the
extension of our acreage in Kazakhstan  from 13 sq km to 57 sq km and a bank financing for our drilling program from
$20,000,000 to $50,000,000..

Pursuant to the requirements of Section 13 or
 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

`By: /s/ Lorrie T. Olivier
    ------------------------------------------------------------------
    Lorrie T. Olivier, President, Chief Executive Officer and Chairman`

`by:      /s/ Jim Tucker                              Vice President Finance
         Jim Tucker`

`by:      /s/ Jeff Tucker                             Assistant Secretary
         Jeff Tucker`

Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated:

`Date                                                 Signature

April 15, 2002
                                                     By: /s/ Lorrie T. Olivier`

`-----------------------------------------------
                                                     Lorrie T. Olivier, President, Chief Executive
                                                     Officer and Director

April 15, 2002
                                                     by:      /s/ Jim Tucker
                                                     Jim Tucker
                                                     Vice President Finance
April 15, 2002
                                                     by:      /s/ Jeff Tucker
                                                     Jeff Tucker
                                                     Assistant Secretary`

February 1, 2002

Transmeridian Exploration, Inc.
11811 North Freeway
Houston, Texas  77060

Gentlemen:

The estimated reserves and future income amounts presented in this report are related to
hydrocarbon prices.  Hydrocarbon prices in effect at December 31, 2001 were used in the preparation of
this report as required by SEC rules; however, actual future prices may vary significantly from
December 31, 2001 prices.  Therefore, volumes of reserves actually recovered and amounts of income
actually received may differ significantly from the estimated quantities presented in this report.  The
results of this study are summarized below.

`Proved

                                         ----------------------------------------------------------------------
                                              Developed                                             Total

                                            Non-Producing              Undeveloped                 Proved

                                         -------------------        ------------------        -----------------
Net Remaining Reserves
----------------------
  Oil/Condensate - Barrels                         5,808,683                11,836,735               17,645,418

  Gas - MMCF                                           1,144                     2,331                    3,475


Income Data
-----------
  Future Gross Revenue                           $89,308,496              $181,989,793             $271,298,289

  Deductions                                      13,726,691                24,161,877               37,888,568
                                                ------------            --------------           --------------

  Future Net Income (FNI)                        $75,581,805              $157,827,916             $233,409,721


  Discounted FNI @ 10%                           $32,953,417             $  95,964,065             $128,917,482`

Liquid hydrocarbons are expressed in standard 42 gallon barrels.  All gas volumes are sales gas
     expressed in millions of cubic feet (MMCF) at the official temperature and pressure base of the area
     in which the gas reserves are located.

The future gross revenue is after the deduction of the normal direct costs of operating the wells,
recompletion costs, and development costs.  The future net income is before the deduction of
Kazakhstan income tax and excess profit tax.  No gas pipeline is in place nor is there a contract in place
for sale of gas, therefore no income is included for the gas that will be produced.  Liquid hydrocarbon
reserves account for all of the total future gross revenue from proved reserves.

The discounted future net income shown above was calculated using a discount rate of 10
percent per annum compounded monthly.  Future net income was discounted at four other discount rates
which were also compounded monthly.  These results are shown on each estimated projection of future
production and income presented in a later section of this report and in summary form below.

`Discounted Future Net Income

                                                   As of December 31, 2001

                                       ------------------------------------------------

   Discount Rate                                            Total

      Percent                                              Proved

-------------------                                  -------------------

         8                                              $142,374,028

        12                                              $117,607,233

        15                                              $103,712,251

        20                                              $ 86,301,191`

The results shown above are presented for your information and should not be construed as our
estimate of fair market value.

Reserves Included in This Report

The proved reserves included herein conform to the definition as set forth in the Securities and
Exchange Commission's Regulation S-X Part 210.4-10 (a) as clarified by subsequent Commission Staff
Accounting Bulletins.  The definition of proved reserves are included under the tab "Reserve
Definitions" in this report.

Because of the direct relationship between volumes of proved undeveloped reserves and
development plans, we include in the proved undeveloped category only reserves assigned to
undeveloped locations that we have been assured will definitely be drilled.

Transmeridian has additional interests in this concession that may contain substantial
hydrocarbon potential not included herein.  Transmeridian has stated that they have an active
exploratory and development drilling program that may result in the discovery or reclassification of
significant additional volumes.

The various reserve status categories are defined under the tab "Reserve Definitions" in this
report.  The developed non-producing reserves included herein are comprised of the shut in category.

Estimates of Reserves

All reserves included in this report were estimated using volumetric methods.

The reserves included in this report are estimates only and should not be construed as being
exact quantities.  They may or may not be actually recovered, and if recovered, the revenues therefrom
and the actual costs related thereto could be more or less than the estimated amounts.  Moreover,
estimates of reserves may increase or decrease as a result of future operations.

Future Production Rates

Test data and other related information were used to estimate the anticipated initial production
rates for those wells or locations that are not currently producing.  Future production rates were held
constant, or adjusted for the effects of curtailment where appropriate, until a decline in ability to
produce was anticipated.  An estimated rate of decline was then applied to depletion of the reserves.  For
reserves not yet on production, sales were estimated to commence at an anticipated date furnished by
Transmeridian.

Wells or locations that are not currently producing may start producing earlier or later than
anticipated in our estimates of their future production rates.

Hydrocarbon Prices

Transmeridian furnished us with hydrocarbon prices in effect at December 31, 2001 and with its
forecasts of future prices which take into account SEC and Financial Accounting Standards Board
(FASB) rules, current market prices, contract prices, and fixed and determinable price escalations where
applicable.

In
accordance with FASB Statement No. 69, December 31, 2001 market prices were
determined using the daily oil price or daily gas sales price (spot
price) adjusted for oilfield or gas gathering hub and wellhead price
differences (e.g. grade, transportation, gravity, sulfur and BS&W) as
appropriate. Also in accordance with SEC and FASB specifications, changes in
market prices subsequent to December 31, 2001 were not considered in this
report.

For hydrocarbon products sold under contract, the contract price including fixed and determinable
escalations, exclusive of inflation adjustments, was used until expiration of the contract.  Upon contract
expiration, the price was adjusted to the current market price for the area and held at this adjusted price to
depletion of the reserves.

The effects of derivative instruments designated as price hedges of oil and gas quantities are
generally not reflected in our individual property evaluations.

Costs

Operating costs for the leases and wells in this report were supplied by Transmeridian and
include only those costs directly applicable to the leases or wells.  When applicable, the operating costs
include a portion of general and administrative costs allocated directly to the leases and wells under
terms of operating agreements.  No deduction was made for indirect costs such as general administration
and overhead expenses, loan repayments, interest expenses, and exploration and development
prepayments that are not charged directly to the leases or wells.

Development costs were furnished to us by Transmeridian and are based on authorizations for
expenditure for the proposed work or actual costs for similar projects.  At the request of Transmeridian,
their estimate of zero abandonment costs after salvage value for onshore properties was used in this
report.  We have not performed a detailed study of the abandonment costs or the salvage value and
makes no warranty for Transmeridian's estimate.

Current costs were held constant throughout the life of the properties.

General

Table A presents a one line summary of proved reserve and income data for each of the subject
properties which are ranked according to their future net income discounted at 10 percent per year.
Table B presents a one line summary of gross and net reserves and income data for each of the subject
properties.  Table C presents a one line summary of initial basic data for each of the subject properties.
Tables 1 through 12 present our estimated projection of production and income by years beginning
January 1, 2002, by lease or well.

While it may reasonably be anticipated that the future prices received for the sale of production
and the operating costs and other costs relating to such production may also increase or decrease from
existing levels, such changes were, in accordance with rules adopted by the SEC, omitted from
consideration in making this evaluation.

The estimates of reserves presented herein were based upon a detailed study of the properties in
which Transmeridian owns an interest; however, we have not made any field examination of the
properties.  No consideration was given in this report to potential environmental liabilities that may exist
nor were any costs included for potential liability to restore and clean up damages, if any, caused by past
operating practices.  Transmeridian has informed us that they have furnished us all of the accounts,
records, geological and engineering data, and reports and other data required for this investigation.  The
ownership interests, prices, and other factual data furnished by Transmeridian were accepted without
independent verification.  The estimates presented in this report are based on data available through
December 2001.

Transmeridian has assured us of their intent and ability to proceed with the development
activities included in this report, and that they are not aware of any legal, regulatory or political
obstacles that would significantly alter their plans.

Neither we nor any of our employees have any interest in the subject properties and neither the
employment to make this study nor the compensation is contingent on our estimates of reserves and
future income for the subject properties.

This
report was prepared for the exclusive use and sole benefit of Transmeridian
Exploration, Inc. The data, work papers, and maps used in this report are
available for examination by authorized parties in our offices. Please contact
us if we can be of further service.

Very truly yours,

RYDER SCOTT COMPANY, L.P.

L. B. Branum, P.E.

Vice President

LBB/plk