Arawak Unit Resumes Production at Besbolek Block in Kazakhstan

Arawak Energy has received a favorable response from relevant government departments in Kazakhstan in relation to regulatory issues affecting Arawak's wholly owned subsidiary, Altius Energy Corporation ("Altius") and the decision has been made to resume full production from the Besbolek block. Total production rate for Kazakhstan is shortly expected to be in excess of 4,500 barrels of oil per day ("bopd").

The Company has completed a 3D seismic survey over 21.1 square kilometeres of the Besbolek block in Kazakhstan in the first quarter 2006. The results are expected to be available within the second quarter to allow further appraisal drilling of additional prospects within Besbolek. A decision has also been made to shoot a 3D seismic survey over the entire Akzhar block, which was expanded to 71.5 sq km in January 2006, rather than just the most developed area, in order to provide a picture of the prospectivity of the full block, which Altius believes contains extensions of the productive areas already identified within the original 3.8 sq km contract area. Appraisal drilling continued in the Besbolek field and production recommenced from Besbolek on a limited basis in March from the newly drilled wells.

In Russia, three new wells were completed in the first quarter of 2006, of which two were horizontal. The horizontal wells are presently being put on production. Initial rates prior to stimulation have been very encouraging. The first of the 2006 horizontals, well 122, flowed on pump at a rate of 340 bopd and this rate increased to 535 bopd after stimulation. A fourth rig has now been mobilized and it is expected to spud a first sidetrack later this month.

In Azerbaijan, commercial gas production commenced on February 1st 2006, with sales to the State Oil Company of the Azerbaijan Republic ("SOCAR"). Gross production rates have fluctuated but averaged about 1.4 million standard cubic feet per day in March 2006, and are expected to increase sharply when the most productive well, Duvanny 102, is brought on stream. Difficulties have been experienced with this well, as the wellhead flowing pressure on production has been higher than initially expected. Work continues with the deep exploration well Kyanizadag 101, which was initially drilled to 4,080 meters. A simple log suite on the deeper Miocene exploration section showed encouraging results and the decision was made to deepen the well to 4,130 meters. A full suite of logs on the deeper exploration section have yet to be run due to operational difficulties.

Arawak group production rose by 8.5% in the first quarter 2006 compared to the preceding quarter, despite very severe winter conditions encountered in Russia where the temperature in the field dropped to -45 degrees C in January, and the effects of the spring thaw in Kazakhstan, where a lower than normal snowfall and investment in road maintenance meant that seasonal effects were minimized. Average production in the first quarter of 2006 was just over 6,400 bopd net to Arawak with approximately 3,400 bopd from Russia and 3,000 bopd from Kazakhstan.

The results of the independent reserve reports pursuant to National Instrument 51-101 ("NI 51-101") showed reserves replacement and promising growth in reserves. These reports do not include significant reserves increment attributable to the acquisitions in Kazakhstan due to expansion of the Akzhar area and the award of the Alimbai block announced in December 2005 and January 2006. Company reserves evaluated as at December 31st, 2004 and as at December 31st, 2005 are summarized in the table below:

	             Proved plus  2005        Proved plus   Proved plus
	             probable     Production  probable      probable      Percentage
	             reserves as              reserves as   reserves as   change in
	             at Dec. 31st,            at Dec. 31st, at Dec. 31st, proved plus
	             2004                     2004 minus    2005          probable
	                                      2005                        reserves
	             (thousand    (thousand   production    (thousand     after 2005
	                boe)         boe)    (thousand boe)    boe)       production
	    Russia       13,284        1,100       12,184       12,995           7%
	    Kazakhstan   26,757          969       25,788       27,416           6%
	    Azerbaijan   32,485           11       32,474       32,863           1%
	    Total        72,526        2,080       70,446       73,274           4%

The reserves attributable to Arawak's interest in the South West Gobustan fields in Azerbaijan and the Sotchemyu - Talyu fields in Russia have been evaluated by Ryder Scott Company ("Ryder Scott"). The reserves attributable to the Altius fields in Kazakhstan have been evaluated by McDaniel & Associates Consultants Ltd ("McDaniel"). Ryder Scott and McDaniel are independent qualified reserves evaluators appointed pursuant to NI 51-101.

There was also substantial growth in net present value ("NPV") of future net revenues after income taxes, based on forecast prices and costs. This increase in NPV is attributable to development activities that occurred during 2005 and the increase in oil price forecast assumptions. The oil price assumptions were derived from Ryder Scott forecasts, which for the reports as of December 31st, 2005 started from a first forecast year (2005) Brent at US $42 per barrel, falling thereafter and for December 31st, 2006 reports show the first forecast year (2006) Brent price increased to US $56 per barrel, also falling thereafter.