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CEO's Quarterly Message

“During Q2 2017 we maintained fairly stable production and sales. Gross (100%) oil production averaged 2,900 bbl/d in Q2 2017 with all production sold via the export pipeline and payments for export sales through the end of May received in full.


In recent weeks we have successfully drilled and completed the ZAB-1ST well as a producer in the Cretaceous reservoir at the Zey Gawra field. The well is now being prepared for acid stimulation and we expect to have it on production before the end of August at a rate similar to that of the Zeg-1ST well. The rig that was used to drill the ZAB-1ST well has now been moved to Demir Dagh where it will complete the workovers of the Demir Dagh-8 and Demir Dagh-7 wells both targeting the Cretaceous reservoir. Results of these wells are expected in Q3 2017.


Fast-track processing of the approximately 2,000 km2 of 3D seismic data covering the AGC Central license area is complete with full processing and interpretation ongoing and expected to be completed later this year. Initial results are very encouraging with several large prospects identified. In the coming months we will begin preparations for an exploration drilling program that we expect to commence as early as late 2018. We expect the AGC Central license to be a very important determinant of our value in the future.


We have modified our capital program for the second half of 2017 and early 2018. We now plan to drill two rather than three further wells at Zey Gawra. The drilling of the next well targeting the Zey Gawra Cretaceous is now expected in Q4 2017 with spudding of the second well expected in Q1 2018. The third well originally planned to target the Tertiary reservoir at Zey Gawra has been deferred indefinitely. We have also added a workover of the Demir Dagh-7 well to the program.


In June, we completed the restructuring of our key obligations and a recapitalisation of our balance sheet. The agreement with AOG to amend the credit facility’s repayment terms was approved by disinterested shareholders and accepted by the Toronto Stock Exchange. We also reached an agreement with the vendor of the Hawler license to restructure the contingent consideration obligation, and equity subscriptions by AOG and Zeg Oil and Gas in consideration for cash and debt extinguishment have closed. The restructuring of our obligations and the equity subscriptions have provided us with the liquidity and financial flexibility needed to execute our capital program in 2017 and 2018.


We look forward to implementing our plans for continued appraisal, development and exploration of our core assets.”