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CEO's Quarterly Message

“In Q1 2018, production from the Hawler license was steady, we resumed our drilling program in the Hawler license, we continued to mature our exciting AGC Central exploration license, and we progressed divestment of our remaining non-core assets.

Gross (100%) oil production from the Hawler licence area averaged 3,800 bbl/d in Q1 2018 and 4,000 bbl/d in April 2018 versus an average of 2,900 bbl/d in Q1 2017 and 3,800 bbl/d in Q4 2017. All production has been sold via the export pipeline and payments for export sales through the end of January 2018 have been received in full.  Higher realised oil prices and lower operating expenses helped us achieve our highest quarterly netback and operating cash flow on record.

After a period of uncertainty following the Kurdistan Region independence referendum we resumed our drilling program by drilling the Zey Gawra-2 well targeting the Cretaceous reservoir. The well was successfully completed as a producer and is currently on extended well test. In recent weeks we have been working to optimise surface level processing facilities and production from existing wells.

The rig that drilled the Zey Gawra-2 well is now preparing to spud the Zey Gawra-3 well also targeting the Cretaceous reservoir. This will be the first well we drill in the Hawler license area with a horizontal well design. We expect such a design to result in higher oil production rates and better isolation from water and natural gas than we have achieved with vertical well designs to date. We are also mobilising a rig to drill a new well targeting the Banan Tertiary reservoir. Following those wells, the drilling or re-entry of four additional wells is planned in the Hawler license area in 2018.

During Q1 2018 we also continued to mature our interests in the AGC Central license area. Final interpretation and prospect selection are ongoing and drilling preparation will follow as we prepare for exploration drilling in 2019.

Recently we announced that we had entered into a definitive agreement to transfer our interest in the Haute Mer B license area in Congo (Brazzaville) to a subsidiary of Total SA for cash consideration and we expect the transaction to close during Q2 2018. We also expect to complete disposal of our interest in the Haute Mer A license area in Congo (Brazzaville), the last remaining non-core asset in our portfolio, in the coming months.

We expect that cash on hand, cash receipts from net revenues and the proceeds from the disposition of our interests in the Haute Mer B license will fund forecasted capital expenditures and operating and administrative costs through the end of 2018.

We look forward to continuing to implement our plans in 2018 and achieving both higher production in the Hawler license area and preparing for an exciting exploration drilling program in the AGC Central license area in 2019.”