Production at Brenda/Nicol Restricted, Oilexco Expects Increase

Production from Brenda and Nicol has continued to be restricted to rates between 18,000 to 20,000 bbl/d of oil until the commissioning of the multiphase pump at Brenda. The company believes that production levels at Brenda/Nicol are set to increase once this key component is in operation. Reservoir performance at Brenda and Nicol continues to meet or exceed our expectations.

Commissioning of Oilexco's multiphase pump at Brenda is currently underway. Commissioning of this integral component of the company's subsea production system at Brenda has been delayed for several months due to issues at the Balmoral FPV. These issues have been resolved.

In the Balmoral core area, which includes the Balmoral FPV and the Brenda/Nicol oil accumulations, activity has been centered on closing the acquisition of additional interests in the Balmoral FPV and the Balmoral, Glamis, and Sterling oil fields, as well as completing topsides work on the Balmoral FPV to allow the commissioning of the Oilexco's subsea multiphase pump at its Brenda manifold.

Closing of the Balmoral acquisition is on schedule to occur by the end of the fourth quarter, which will be followed by the orderly transfer of operatorship to Oilexco of the Balmoral FPV.