Calvalley Updates Yemen Ops

Calvalley provided an operational update on the recent activities on Block 9. We currently have three rigs operating (two drilling and one service) on the block.

Due to political developments in Yemen, we have experienced some delays that have impacted the supply of equipment from Sana'a into our area of operations. While we continue to operate all key areas of development, including operation of our production facilities and drilling activities with available materials on hand, transportation logistics have been challenging.

Construction of the Truck Offloading Facilities ("TOF") at Block 51, which is 95% complete, continues to face a setback due to transportation challenges. The final component required for the TOF's telecommunication system for the metering system is currently being delayed in Sana'a due to transportation impediments. As an alternative measure, Calvalley is in discussions with the operator of Block 51 regarding the utilization of their existing metering system on a temporary basis. Should this alternative become available, the commissioning of the TOF could be completed within the next two weeks.

Due to a recent attack on the export pipeline from Block 18 to the Ras Isa export terminal, Calvalley has stopped shipping oil to Block 18. Production from the Hiswah field continues and the produced crude oil is being stored in tanks at our CPF. We have a spare storage capacity to accommodate for an additional 7 days of production. Based on our experience with similar situations in the past, we expect that the export pipeline will be repaired within a few days. Thus, it is unlikely that a production shut-down will be required. Upon resumption of oil shipments to Block 18, we will transport the cumulative inventory to compensate for lost days.

Drilling of the Qarn Qaymah-3 ("QQ-3") appraisal well was completed on March 8, 2011 to a total depth of 4,460 meters including an openhole section of approximately 1,000 meters in the Fractured Granitic Basement ("FGB"). The wellbore image logs and electrical logs indicate that the openhole section encountered a number of fractured sections in the FGB. On March 9, 2011, Calvalley began testing of QQ-3. Currently the well is undergoing pressure build up. The testing program is expected to be completed in April 2011.
Calvalley is currently drilling the Ras Nowmah East-1 ("RNE-1") exploratory well. The well is targeting both Qishn and Saar Formation similar to that of Ras Nowmah Discovery. We expect to complete the well by mid-April 2011. Upon completion of RNE-1, the rig will be mobilized to Ras Nowmah Field to drill two development wells (RN-4 and RN-5).


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