Canoro Moving Forward with Phase III Activities at Block AA-ON/7

Canoro Resources has received government approval to retain approximately 1,089 km2 or 56% of the original block area of the AA-ON/7 exploration block for Phase III exploration activities. This is more than double the acreage than originally anticipated.

Canoro applied to move into Phase III exploration activities in August 2006. Under the terms of the AA-ON/7 Production Sharing Contract (PSC), Canoro was to relinquish an additional 50% of the original area of the block, thereby retaining approximately 484 km2 or 25% of the original area of the block. Since the block covers a portion of two states - Assam and Nagaland, two Production Exploration Licenses were issued at different times - March 29, 2001 for the Assam acreage and August 9, 2006 for the Nagaland acreage. Based on the unique feature of this block (i.e. two separate PELs transferred at different times), Canoro presented a proposal, which was accepted, whereby it would retain 1,089 km2 of the original area instead of the 484 km2. The block now is comprised of approximately 770 km2 in Assam and 319 km2 in Nagaland.

Canoro plans to apply to the Government of India for an extension to the PSC to accommodate a seven-year exploration period for the Nagaland portion of the block, continuing the attractive fiscal terms of the block.

Seismic Acquisition

Canoro acquired approximately 140 km of 2D seismic on the eastern portion of the block. This seismic acquisition, the first for Canoro in the area, was completed considerably faster than previous acquisition programs in the area, considering the extremely steep terrain and dense jungle environment. The seismic data will be processed and analyzed during the summer months to identify any drilling locations. This area of the block has the potential for significant sub-thrust prospects.