THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If youare in any doubt about the contents of this Document and the action you should take, you arerecommended immediately to seek your own independent advice from a person duly authorised underthe Financial Services and Markets Act 2000 (or, if you are a person outside of the United Kingdom,otherwise duly qualified in your jurisdiction) who specialises in advising on the acquisition of sharesand other securities.

The Company and the Directors of Eland Oil & Gas PLC (the “Company”), whose names appear on page 14of this document (the “Document”), accept responsibility both individually and collectively for theinformation contained in this Document including responsibility for compliance with the AIM Rules forCompanies. To the best of the knowledge and belief of the Directors and the Company (who have taken allreasonable care to ensure that such is the case), the information contained in this Document is in accordancewith the facts and contains no omission likely to affect its import. This Document is an Admission Documentrequired by the rules of AIM (“AIM”), a market operated by London Stock Exchange plc (the “London StockExchange”), and has been drawn up in accordance with the AIM Rules for Companies. This Document doesnot contain an offer of transferable securities to the public in the United Kingdom within the meaning ofsection 102B of the UK Financial Services and Markets Act 2000 (as amended) and is not required to beissued as a prospectus pursuant to section 85 of the UK Financial Services and Markets Act 2000 (asamended).

Application has been made for the Admission of the entire issued and to be issued share capital of theCompany to trading on AIM. It is expected that dealings in the Ordinary Shares and the New Ordinary Shareswill commence on AIM on 3 September 2012. The New Ordinary Shares and Ordinary Shares are not dealtin on any other recognised investment exchange and it is emphasised that no application is being made forAdmission of the Ordinary Shares and New Ordinary Shares to the Official List of the United KingdomListing Authority. The rules of AIM are less demanding than those of the Official List of the United KingdomListing Authority.

Your attention is drawn in particular to the “Risk Factors” set out in Part 4 of this Document.

Eland Oil & Gas PLC(Incorporated and registered in Scotland under the Companies

Act 2006 as amended, with registered number SC364753)

Placing of 118,000,000 New Ordinary Shares at 100p per shareand

Admission to trading on AIMNominated Adviser & Broker

Canaccord Genuity Limited

Canaccord Genuity Limited (“Canaccord”), which is authorised and regulated in the United Kingdom bythe FSA, is acting as the Company’s nominated adviser and broker in connection with the Placing andAdmission. Canaccord’s responsibilities as the Company’s nominated adviser and broker under the AIMRules are owed solely to the London Stock Exchange and are not owed to the Company or to any Directoror to any person in respect of his decision to acquire shares in the Company in reliance on any part of thisDocument. No representation or warranty, express or implied, is made by Canaccord as to any of the contentsof this Document (without limiting the statutory rights of any person to whom this Document is issued).Canaccord will not be offering advice and will not otherwise be responsible to anyone other than theCompany for providing customer protections to recipients of this Document in respect of the Placing or anyacquisition of Ordinary Shares in the Company. In particular (i) the provision of this Document to any personis not a personal recommendation of any investment to which this Document relates; and (ii) Canaccord isnot required to assess the suitability of any investment to which this Document relates or any transaction orarrangement referred to in this Document and no such person will benefit from the protection of the rulesassessing suitability in relation thereto.

The whole of this Document should be read. You should be aware that an investment in the Companyinvolves a high degree of risk.

Other than in accordance with the Company’s obligations under the AIM Rules or otherwise required by law,the Company undertakes no obligation to update or revise publicly any forward-looking statement, whetheras a result of new information, future events or otherwise. All subsequent written and oral forward-lookingstatements attributable to the Company, its directors or to persons acting on its behalf are expressly qualifiedin their entirety by the cautionary statements referred to above and contained elsewhere in this Document.The information on the Company’s website does not form a part of this Document.

Copies of this Document will be available free of charge during normal business hours on any weekday(except Saturdays, Sundays and public holidays) at the offices of Stephenson Harwood LLP, 1 FinsburyCircus, London EC2M 7SH and at the Company’s website, www.elandoilandgas.com from the date of thisDocument until the date which is one month from the date of Admission except that this Document will notbe available to residents in, and should not be forwarded or transmitted into, any jurisdiction where doing somay constitute a violation of local securities law.

The content of this Document has not been approved by an authorised person within the meaning ofthe FSMA. Reliance on this Document for the purpose of engaging in any investment activities mayexpose an individual to a significant risk of losing all of the property or other assets invested.

NOTICE TO PERSONS LOCATED OUTSIDE THE UNITED KINGDOM

The New Ordinary Shares are being offered and sold outside the United States in reliance on Regulation Sand, subject to certain exceptions, may not be offered, sold, resold, taken up, transferred, delivered ordistributed, directly or indirectly, within, into or in the United States unless in reliance on an exemption from,or in a transaction not subject to, the registration requirements of the US Securities Act. For a description ofthe restrictions on offers, sales and transfers of the New Ordinary Shares and the distribution of theDocument, please see section headed Notice to Investors in the United States on page 6.

The New Ordinary Shares, this Document and any other documents distributed in relation to the Placing havenot been approved or disapproved by the US Securities and Exchange Commission, any state securitiescommission in the United States or any other United States regulatory authority, nor have any of theforegoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or theaccuracy or adequacy of the Document. Any representation to the contrary is a criminal offence in the UnitedStates.

Subject to certain exceptions, this Document does not constitute an offer of the New Ordinary Shares to anyperson with a registered address, or who is resident or located, in the United States or any persons withaddresses in Australia, the Republic of Ireland, the Republic of South Africa, Canada or Japan (includingtheir territories, possessions and all areas subject to their jurisdiction) or any other country outside the UnitedKingdom where its distribution would require compliance by the Company with any governmental orregulatory procedure or any similar formalities including, without limitation, any obligation to prepare andfile a prospectus, registration statement or similar document, to register with any regulatory authority or anyobligation regarding ongoing reporting requirements. The New Ordinary Shares have not been, and will notbe, registered or qualified under the relevant laws of any state, province or territory of the United States,Australia, the Republic of Ireland, the Republic of South Africa, Canada or Japan and may not be offered,sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, into, in or within the UnitedStates, Australia, the Republic of Ireland, the Republic of South Africa, Canada or Japan except pursuant toan applicable exemption from, or in a transaction not subject to, the registration or qualification requirementsof such jurisdiction. There will be no public offer in the United States or Canada.

In addition, until 40 days after the commencement of the Placing, an offer, sale or transfer of the NewOrdinary Shares within the United States by a dealer (whether or not participating in the Placing) may violatethe registration requirements of the US Securities Act.

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NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR ALICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISEDSTATUTES WITH THE STATE OF NEW HAMPSHIRE, NOR THE FACT THAT A SECURITY ISEFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE,CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANYDOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHERANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR ASECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED INANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVENAPPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, ORCAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANYREPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

IMPORTANT INFORMATION

The information below is for general guidance only and it is the responsibility of any person or persons inpossession of this Document and wishing to make an application for New Ordinary Shares to informthemselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. No person hasbeen authorised by the Company to issue any advertisement or to give any information or to make anyrepresentation in connection with the contents of this Document and, if issued, given or made, suchadvertisement, information or representation must not be relied upon as having been authorised by theCompany. This Document does not constitute, and may not be used for the purposes of, an offer orsolicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any personto whom it is unlawful to make such offer or solicitation.

Without limiting the foregoing, this Document does not constitute an offer to buy or to subscribe for, or thesolicitation of an offer to buy or subscribe for, the New Ordinary Shares in any jurisdiction in which suchoffer or solicitation is unlawful. The New Ordinary Shares have not been, and will not be, registered underthe US Securities Act or under the securities laws of any state or other jurisdiction of the United States norwill a prospectus or similar document be filed under the applicable laws of Canada, Australia, the Republicof South Africa, the Republic of Ireland or Japan and, subject to certain exceptions, may not be offered, sold,resold, taken up, transferred, delivered or distributed, directly or indirectly, within, into or in the UnitedStates or in or to any national, resident or citizen of Canada, Australia, the Republic of South Africa, theRepublic of Ireland or Japan. There will be no public offer in the United States or Canada.

This Document should not, subject to certain exceptions, be distributed, published, reproduced or otherwisemade available in whole, or in part, or disclosed by recipients to any other person and, in particular, shouldnot, subject to certain exceptions, be distributed to persons with addresses in Canada, Australia, the Republicof South Africa, the Republic of Ireland, Japan or the United States or in any other country outside the UnitedKingdom where such distribution may lead to a breach of any law or regulatory requirements.

The New Ordinary Shares are being offered or sold only: (a) outside the United States in offshoretransactions within the meaning of, and in accordance with, the safe harbour from the registrationrequirements provided by Regulation S; and (b) within, into or in the United States to persons reasonablybelieved to be Accredited Investors solely in private placement transactions not involving any public offeringin reliance on the exemption from the registration requirements of Section 5 of the US Securities Actprovided by Section 4(2) under the US Securities Act or another applicable exemption thereunder. No actionhas been taken by the Company or by Canaccord that would permit a public offer of securities in theCompany or possession or distribution of this Document where action for that purpose is required. Anyfailure to comply with these restrictions may constitute a violation of the securities law of such jurisdictions.As explained below, Canaccord is advising the Company only in relation to the offer and sale of securitiesin the United Kingdom, Canada and the United States.

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Neither the issue of this Document, nor any part of its contents, is to be taken as any form of commitmenton the part of the Company to proceed with any transaction, and the right is reserved to terminate anydiscussions or negotiations with any prospective investors.

This Document should not be considered as the giving of investment advice by the Company, Canaccord, orany of their respective shareholders, directors, officers, agents, employees or advisers. Each party to whomthis Document is made available must make its own independent assessment of the Company after makingsuch investigations and taking such advice as may be deemed necessary. In particular, any estimates orprojections or opinions contained herein necessarily involve significant elements of subjective judgment,analysis and assumptions, and each recipient should satisfy itself in relation to such matters. It should beremembered that the price of securities and the income from them can go down as well as up.

The distribution of this Document and the offering of the New Ordinary Shares in certain jurisdictions maybe restricted. Persons into whose possession this Document comes are required by the Company to informthemselves about and to observe any such restrictions. Prospective investors in the New Ordinary Sharesshould inform themselves as to the legal requirements applying and any applicable exchange controlregulations and applicable taxes in the countries of their respective citizenship, residence or domicile.Canaccord has no involvement or responsibility, and shall have no liability, with respect to any offer or saleof securities outside the United Kingdom, Canada and the United States.

No representations or warranties of any kind are intended or should be inferred with respect to the economicreturn or the tax consequences from an investment in the New Ordinary Shares. No assurance can be giventhat existing laws will not be changed or interpreted adversely. Prospective investors are not to construe thisDocument as legal or tax advice. Each investor should consult his own counsel and accountant for adviceconcerning the various legal, tax and economic considerations relating to his investment. Each prospectiveinvestor is responsible for the fees of his own counsel, accountants and other advisers.

No person has been authorised to give any information or to make any representations, other than thosewhich will be contained in this Document, in connection with the investment in the New Ordinary Shares,and, if given or made, such information or representations must not be relied on. Neither the delivery of thisDocument nor the issue of this Document shall, under any circumstances, create any implication that therehas been no change in the affairs of the Company since the date hereof.

This Document is only being sent to persons reasonably believed by the Company to be investmentprofessionals or to persons to whom it may otherwise be lawful to distribute it.

Prospective investors should inform themselves as to: (a) the legal requirements of their own countries forthe purchase, holding, transfer or other disposal of the New Ordinary Shares; (b) any foreign exchangerestrictions applicable to the purchase, holding, transfer or other disposal of the New Ordinary Shares whichthey might encounter; and (c) the income and other tax consequences which may apply in their own countriesas a result of the purchase, holding, transfer or other disposal of the New Ordinary Shares. Prospectiveinvestors must rely upon their own representatives, including their own legal advisers and accountants, as tolegal, tax, investment or any other related matters concerning the Company and an investment therein.

FOR THE ATTENTION OF UNITED KINGDOM RESIDENTS

No approved prospectus relating to the matters in this Document has been made available to the public inthe UK, and, accordingly, the New Ordinary Shares may not be, and will not be, offered in the UnitedKingdom except in circumstances which would not result in there being an offer to the public in the UnitedKingdom within the meaning of section 102B of FSMA.

This Document has not been approved by an authorised person pursuant to section 21 of FSMA and,accordingly, is only being distributed (in accordance with the Financial Services and Markets Act 2000(Financial Promotion) Order 2005, as amended (the “Order”) in the United Kingdom to persons who fallwithin Article 19 of the Order (investment professionals), Article 43 of the Order (members and creditors ofcertain bodies corporate), Article 48 of the Order (certified high net worth individuals), Article 49 of theOrder (high net worth companies, unincorporated associations etc), Article 50A of the Order (self-certifiedsophisticated investors) or otherwise to persons to whom this Document may lawfully be communicated.

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This Document and its contents are directed only at persons having professional experience in mattersrelating to investments and any investment or investment activity to which this Document relates is onlyavailable to such persons. Persons of any other description, including those who do not have professionalexperience in matters relating to investments, should not rely on this Document or act upon its content andshould return it immediately to the Company.

Certified High Net Worth Individuals (falling within Article 48 of the Order) and Self-CertifiedSophisticated Investors (falling within Articles 50A of the Order)

A certified high net worth individual is an individual who has signed, within the preceding 12 months, astatement complying with Part I, Schedule 5 of the Order and which requires, amongst other things, theindividual to certify that he had, during the immediately preceding financial year, an annual income to thevalue of £100,000 or more or net assets (not including any property which is his primary residence, lifepolicies and pension benefits) of £250,000 or more.

A self-certified sophisticated investor is an individual who has signed, within the previous 12 months, astatement complying with Part II, Schedule 5 of the Order, under which he certifies that at least one of thefollowing applies to him:

(A) he is a member of a network or syndicate of business angels and has been so for at least the last sixmonths prior to the date of the certificate;

(B) he had made more than one investment in an unlisted company in the preceding two years;

(C) he works, or has worked, in the two preceding years, in a professional capacity in the private equitysector, or in the provision of finance for small and medium enterprises; or

(D) he is currently, or has been in the preceding two years, a director of a company with an annualturnover of at least £1 million.

If any person is in any doubt about the investment to which this Document relates he should consult a personauthorised under the FSMA who specialises in advising on investments of this kind.

By accepting this Document, the recipient represents and warrants that (i) it is a person to whom thisDocument may be so delivered without contravening the financial promotion prohibition in section 21of FSMA, (ii) it has read, agrees to and will comply with the contents of this notice and (iii) it willconduct its own analyses or other verification of the information set out in this Document and will bearthe responsibility for all or any costs incurred in doing so.

Canaccord is advising the Company in relation to the issue of the New Ordinary Shares in the UnitedKingdom, the United States and Canada and will not provide any advice to any other person in relation tothe issue of the New Ordinary Shares or any transaction or arrangement referred to in this Document.Accordingly, recipients should note that Canaccord is neither advising nor treating as a client any otherperson and will not be responsible to anyone other than the Company for providing the protections affordedto clients of Canaccord nor for providing advice in relation to the proposals contained in this Document. Inparticular (i) the provision of this Document by Canaccord to any person is not a personal recommendationof any investment to which this Document relates; and (ii) Canaccord is not required to assess the suitabilityof any investment to which this Document relates or any transaction or arrangement referred to in thisDocument, and no Relevant Person will benefit from the protection of the rules on assessing suitability inrelation thereto.

FOR THE ATTENTION OF EUROPEAN ECONOMIC AREA RESIDENTS

In relation to each member state of the European Economic Area that has implemented the ProspectusDirective (each, a relevant member state) with effect from and including the date on which the ProspectusDirective is implemented in that relevant member state (the “relevant implementation date”), an offer of theNew Ordinary Shares described in this Document may not be made to the public in that relevant memberstate prior to the publication of a prospectus in relation to the New Ordinary Shares approved by thecompetent authority in that relevant member state or, where appropriate, approved in another relevant

5

member state and notified to the competent authority in that relevant member state, all in accordance withthe Prospectus Directive, except that, with effect from and including the relevant implementation date, anoffer of securities may be offered to the public in that relevant member state at any time to any legal entitythat is authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whosecorporate purpose is solely to invest in securities; or to any legal entity that has two or more of (1) an averageof at least 250 employees during the last financial year; (2) a total balance sheet of more than €43 millionand (3) an annual net turnover of more than €50 million, as shown in its last annual or consolidated accounts;or in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of theProspective Directive.

Each purchaser of the New Ordinary Shares described in this Document located within a relevant memberstate will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” withinthe meaning of Article 2(1)(e) of the Prospectus Directive.

For purposes of this provision, the expression an “offer to the public” in any relevant member state meansthe communication in any form and by any means of sufficient information on the terms of the Placing andthe New Ordinary Shares to be offered so as to enable an investor to decide to purchase or subscribe for theNew Ordinary Shares, as the expression may be varied in that member state by any measure implementingthe Prospectus Directive in that member state, and the expression “Prospectus Directive” means Directive2003/71/EC and includes any relevant implementing measure in each relevant member state. No purchaserof the New Ordinary Shares other than Canaccord is authorised to make any further offer of the NewOrdinary Shares on behalf of any other person.

NOTICE TO INVESTORS IN THE UNITED STATES

In the United States, this Document may be distributed by the Company only to persons that the Companyreasonably believes are Accredited Investors. Any person receiving this Document that is not an AccreditedInvestor should return this Document to the Company.

The New Ordinary Shares, this Document and any other documents distributed in relation to the Placing havenot been approved or disapproved by the US Securities and Exchange Commission, any state securitiescommission in the United States or any other United States regulatory authority, nor have any of theforegoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or theaccuracy or adequacy of the information contained in this Document. Any representation to the contrary isa criminal offence in the United States.

The New Ordinary Shares have not been, and will not be, registered under the US Securities Act or underthe securities laws of any state or other jurisdiction of the United States and may not be offered, sold, resold,taken up, transferred, delivered or distributed, directly or indirectly, within, into or in the United Statesexcept pursuant to an applicable exemption from, or in a transaction not subject to, the registrationrequirements of the US Securities Act and in compliance with any applicable securities laws of any state orother jurisdiction of the United States. There will be no public offer in the United States. The New OrdinaryShares are being offered or sold only: (a) outside the United States in offshore transactions within themeaning of, and in accordance with, the safe harbour from the registration requirements provided byRegulation S; and (b) within, into or in the United States to persons reasonably believed to be AccreditedInvestors solely in private placement transactions not involving any public offering in reliance on theexemption from the registration requirements of Section 5 of the US Securities Act provided by Section 4(2)under the US Securities Act or another applicable exemption thereunder.

Each investor of New Ordinary Shares in the Placing that is offered outside the United States in reliance onRegulation S (and each subsequent investor in the New Ordinary Shares) will be deemed to have representedand agreed that (i) the investor is acquiring the New Ordinary Shares in an “offshore transaction” as definedin Regulation S and (ii) the New Ordinary Shares have not been offered to it by means of any “directedselling efforts” as defined in Regulation S.

Each potential investor of New Ordinary Shares in the Placing that is within the United States, prior to anysuch transaction, will be required to execute a US Investor’s Letter, and deliver such letter to Canaccord and

6

the Company. The US Investor’s Letter will require such potential investor to represent and agree that, amongother things, (i) it is an Accredited Investor, (ii) that the New Ordinary Shares have not been offered to it bymeans of any “general advertising” or “general solicitation” as such terms are defined in Regulation D, (iii)that it is acquiring the New Ordinary Shares as principal for its own account and not with a view to or fordistributing or reselling such New Ordinary Shares or any portion thereof, and (iv) it will only offer, sell,transfer, assign, pledge or otherwise dispose of the New Ordinary Shares purchased in the Placing in anoffshore transaction complying with the provisions of Regulation S (including, for the avoidance of doubt,a bona fide sale on AIM) and in compliance with applicable securities laws. Such transferor will notify anysubsequent transferee or executing broker, as applicable, of the restrictions that are applicable to the NewOrdinary Shares being sold.

Any New Ordinary Shares sold during the Placing will be treated as “restricted securities” within themeaning of Rule 144(a)(3) under the US Securities Act. As such, the New Ordinary Shares may not, for USsecurities law purposes, generally be transferred except pursuant to an applicable exemption from, or in atransaction not subject to, the registration requirements of the US Securities Act and in compliance with anyapplicable securities laws of any state or other jurisdiction of the United States. The Company shall have theright to request an opinion of counsel from the transferor in form, and from counsel, acceptable to theCompany and its counsel that such registration is not required in the case of an exempt sale.

In addition, until 40 days after the commencement of the Placing, an offer, sale or transfer of the NewOrdinary Shares within the US by a dealer (whether or not participating in the Placing) may violate theregistration requirements of the US Securities Act.

The Company’s corporate disclosure may differ from the disclosure made by similar companies in theUnited States. Publicly available information about the issuers of securities listed on AIM differs from and,in certain respects, is less detailed than the information that is regularly published by or about listedcompanies in the United States. In addition, regulations governing AIM may not be as extensive in allrespects as those in effect on United States markets.

Financial statements prepared under IFRS differ from those prepared under US GAAP in a number ofrespects including, but not limited to, revenue recognition, share option compensation, accounting forbusiness combinations and acquisitions of intellectual property and accounting for capital instruments.Potential investors are advised to consult their own professional advisers as to the significance of thesedifferences. In making an investment decision, investors must rely upon their own examination of theCompany, the terms of the offering and the financial information. Potential investors should consult theirown professional advisers for an understanding of the differences between IFRS and US GAAP, and howthose differences might affect the financial information herein.

Furthermore, the ability of an investor in the United States to bring an action against the Company may belimited under law. The Company is a public limited company incorporated in Scotland. The rights of holdersof Ordinary Shares are governed by Scottish law and by the Company’s memorandum of association andArticles. These rights differ from the rights of shareholders in typical US corporations.

NOTICE TO INVESTORS IN SWITZERLAND

The New Ordinary Shares may not be publicly offered, sold or advertised, directly or indirectly, in or fromSwitzerland and will not be listed on the SIX Swiss Exchange Ltd. or on any other stock exchange orregulated trading facility in Switzerland. Neither this Document nor any other offering or marketing materialrelating to the New Ordinary Shares constitutes a prospectus as such term is understood pursuant to article652a or article 1156 of the Swiss Federal Code of Obligations or a listing prospectus within the meaning ofthe listing rules of the SIX Swiss Exchange Ltd. or any other stock exchange or regulated trading facility inSwitzerland, and neither this Document nor any other offering or marketing material relating to the NewOrdinary Shares or the offering may be publicly distributed or otherwise made publicly available inSwitzerland.

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Neither this Document nor any other offering or marketing material relating to the offering, the Company orthe New Ordinary Shares has been or will be filed with or approved by any Swiss regulatory authority inparticular, this Document will not be filed with, and the offer of the New Ordinary Shares will not besupervised by the Swiss Financial Markets Supervisory Authority FINMA and the offer of the New OrdinaryShares has not been and will not be authorised under the Swiss Federal Act on Collective InvestmentSchemes (the “CISA”). The investor protection afforded to acquirers of interests in collective investmentschemes under the CISA does not extend to acquirers of shares.

NOTICE TO INVESTORS IN CANADA

The offering of New Ordinary Shares in Canada is being made in the Province of Ontario (the “CanadianJurisdiction”) pursuant to exemptions from the prospectus requirements of applicable securities laws. TheNew Ordinary Shares will be offered to “accredited investors” in the Canadian Jurisdiction pursuant tosection 2.3 (the “Accredited Investor Exemption”) of National Instrument 45-106 – Prospectus andRegistration Exemptions of the Canadian Securities Administrators (“NI 45-106”). Under the AccreditedInvestor Exemption, a subscriber or any principal on whose behalf the subscriber is acting as agent (a“Canadian Purchaser”) must qualify as an “accredited investor”, as such term is defined in NI 45-106 andwho otherwise satisfy the criteria for reliance on the Accredited Investor Exemption. All CanadianPurchasers of New Ordinary Shares will be required to execute a subscription agreement which will containrepresentations, warranties, covenants and acknowledgments of the Canadian Purchaser to establish theavailability of such exemption and to ensure compliance with applicable Canadian securities laws.

Resale Restrictions

The New Ordinary Shares acquired by Canadian Purchasers may not be sold, transferred or otherwisedisposed of in Canada in any manner unless such sale, transfer or disposition complies with the resalerestrictions of the securities laws of the Canadian Jurisdictions. Pursuant to applicable Canadian provincialand territorial securities laws, New Ordinary Shares acquired by a Canadian Purchaser hereunder will besubject to restrictions on resale until such time as:

(a) the appropriate “hold periods” have been satisfied and such purchaser has complied with otherapplicable requirements, including the filing of appropriate reports pursuant to applicable securitieslegislation;

(b) a further statutory exemption may be relied upon by such purchaser; or

(c) an appropriate discretionary order is obtained pursuant to applicable securities laws.

As the Company is not a reporting issuer in any province or territory of Canada, the applicable hold periodfor the New Ordinary Shares (and any securities issued in exchange or upon substitution therefor) may neverexpire, and if no further statutory exemption may be relied upon and if no discretionary order is obtained,this could result in a Canadian Purchaser having to hold the New Ordinary Shares for an indefinite period oftime. Each certificate representing the New Ordinary Shares (and any securities issued in exchange or uponsubstitution therefor) issued to Canadian Purchasers, or any written notice received by Canadian Purchasersif the New Ordinary Shares are entered into a direct registration or other electronic book-entry system or ifthe Canadian Purchasers do not otherwise directly receive a certificate representing the New OrdinaryShares, will bear a legend indicating that the resale of such securities is restricted.

The foregoing is a summary only of applicable resale restrictions and is subject to the express provisions ofapplicable securities legislation. All Canadian Purchasers should consult with their own legal advisers todetermine the extent of the applicable hold period and the possibilities of utilizing any further statutoryexemptions or the obtaining of a discretionary order.

Indirect Collection of Personal Information

By purchasing New Ordinary Shares, a Canadian Purchaser acknowledges that its name, residential address,telephone number (and, if applicable, that of each beneficial purchaser for whom it may be acting) and otherspecified information may be disclosed to Canadian securities regulatory authorities and become available

8

to the public in accordance with the requirements of applicable Canadian laws. By purchasing the NewOrdinary Shares, a Canadian Purchaser consents to the disclosure of such information.

By purchasing the New Ordinary Shares, a Canadian Purchaser that is resident in the Province of Ontarioacknowledges that it has been notified by the Company: (a) of the requirement to deliver to the OntarioSecurities Commission (the “OSC”) the full name, residential address and telephone number of suchpurchaser, the number and type of securities purchased, the total purchase price, the exemption relied uponand the date of distribution; (b) that this information is being collected indirectly by the OSC under theauthority granted to it in applicable securities legislation; (c) that this information is being collected for thepurposes of the administration and enforcement of the securities legislation of Ontario; and (d) that theAdministrative Support Clerk can be contacted at the Ontario Securities Commission, Suite 1903, Box 55,20 Queen Street West, Toronto, Ontario M5H 3S8, or at (416) 593-3684, and can answer any questions aboutthe OSC’s indirect collection of this information.

Rights of Actions for Damages or Rescission

Ontario Purchasers

The Securities Act (Ontario) (the “Ontario Act”) provides Canadian Purchasers resident in the Province ofOntario with, in addition to any other right they may have at law, rights of rescission or damages, or both,where this Document and any amendment to it contains a misrepresentation (as defined below). However,such rights must be exercised by the purchasers within the time limits prescribed by the Ontario Act.Canadian Purchasers resident in the Province of Ontario should consult with a legal adviser or refer to theapplicable provisions of the Ontario Act, found in section 130.1, for the complete text of these rights, thedefences available to the Company and others and the time limits during which these rights must beexercised.

The rights of action summarised below shall be available to each Canadian Purchaser of New OrdinaryShares resident in Ontario and are in addition to and without derogation from any other right or remedyavailable at law to such purchaser and are intended to correspond to the rights against an issuer of securitiesprovided in the Ontario Act and are subject to the defences contained therein. Where used in this section,“misrepresentation” means an untrue statement of material fact or an omission to state a material fact that isrequired to be stated or that is necessary to make a statement not misleading in the light of the circumstancesin which it was made.

In the event that this Document, together with any amendments hereto, is delivered to a Canadian Purchaserresident in Ontario (who purchased the New Ordinary Shares during the period of distribution) and containsa misrepresentation, such purchaser shall be deemed to have relied upon such misrepresentation and has,subject as hereinafter provided, a statutory right of action against the Company either for damages oralternatively, while still the owner of any New Ordinary Shares, rescission, provided that:

(a) an action is commenced to enforce such right (i) in the case of an action for rescission, within 180days after the date of purchase, or (ii) in the case of an action for damages, within the earlier of 180days following the date such purchaser first had knowledge of the misrepresentation or three yearsafter the date of the purchase;

(b) a person or company will not be liable if it proves that such purchaser purchased the New OrdinaryShares with knowledge of the misrepresentation;

(c) in the case of an action for damages, the Company will not be liable for all or any portion of thedamages that it proves does not represent the depreciation in value of New Ordinary Shares as a resultof the misrepresentation relied upon;

(d) in no case will the amount recoverable in any action exceed the price at which the New OrdinaryShares were sold to such purchaser; and

(e) if such purchaser elects to exercise the right of rescission, it will have no right of action for damages.

9

Notwithstanding the foregoing, a Canadian Purchaser resident in the Province of Ontario will not have therights referred to above if such purchaser is:

(A) a Canadian financial institution, meaning either:

(i) an association governed by the Cooperative Credit Associations Act (Canada) or a centralcooperative credit society for which an order has been made under section 473(1) of that Act;or

(ii) a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch,credit union, caisse populaire, financial services cooperative, or league that, in each case, isauthorised by an enactment of Canada or a jurisdiction of Canada to carry on business inCanada or a jurisdiction in Canada;

(B) a Schedule III bank, meaning an authorised foreign bank named in Schedule III of the Bank Act(Canada);

(C) the Business Development Bank of Canada incorporated under the Business Development Bank ofCanada Act (Canada); or

(D) a subsidiary of any person referred to in paragraphs (A), (B) or (C), if the person owns all of the votingsecurities of the subsidiary, except the voting securities required by law to be owned by the directorsof the subsidiary.

The foregoing summary is subject to the express provisions of the Ontario Act and the respectiveregulations and rules thereunder. Each Canadian Purchaser resident in Ontario should refer to thecomplete text of such provisions or consult with a legal adviser.

Language of Documents

Upon receipt of this Document, the purchaser hereby confirms that he, she or it has expressly requested thatall documents evidencing or relating in any way to the offer and/or sale of the securities be drawn up in theEnglish language only. Par la réception de ce document, l’acheteur confirme par les présentes qu’il aexpressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit àl’offre ou à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, touteconfirmation d’achat ou tout avis) soient rédigés en anglais seulement.

NOTICE TO INVESTORS IN IRELAND

This Document does not comprise a prospectus for the purposes of Article 5.4 of Directive 2003/71/EC, theInvestment Funds, Companies and Miscellaneous Provisions Act 2005 of Ireland, the Prospectus(Directive 2003\71\EC) Regulations 2005 of Ireland (the “Prospectus Regulations”) or the ProspectusRules issued by the Central Bank of Ireland in August 2008 (in each case as amended, supplemented, variedand/or replaced from time to time). Neither this Document nor any other offering or marketing materialrelating to the offering of the New Ordinary Shares have been prepared in accordance with Directive2003/71/EC on prospectuses or any measures made under that directive or the laws of Ireland implementingthat directive or of any EU Member State or EEA treaty adherent state that implements that directive or thosemeasures.

This Document is only being made available to certain prospective investors in Ireland (“Prospective IrishInvestors”) on the understanding that any written or oral information contained herein or otherwise madeavailable to them will be kept strictly confidential. The opportunity described in this Document is personalto the addressees in Ireland. This Document must not be copied, reproduced, redistributed or passed by anyProspective Irish Investor to any other person or published in whole or in part for any purpose without theconsent of the Company. By accepting this Document, Prospective Irish Investors are deemed to undertakeand warrant to the Company that they will keep this Document confidential.

Prospective Irish Investors are recommended to seek their own independent financial advice in relation tothe opportunity described in this Document from their own suitably qualified stockbroker, bank manager,

10

solicitor, accountant or other independent financial adviser who is duly authorised or exempted under theInvestments Intermediaries Act 1995 of Ireland (as amended) and/or the European Communities (Markets inFinancial Instruments) Regulations 2007 of Ireland as appropriate. This Document does not constitute orform part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy oracquire securities in Ireland nor is it an inducement to enter into investment activity in Ireland and no part ofthis Document, nor the fact of its distribution, shall form the basis of, or be relied upon in connection with,any contract or commitment or investment decision whatsoever.

Nothing herein shall constitute, or is intended to constitute, or shall be treated as constituting or shall bedeemed to constitute, any offer or sale of the New Ordinary Shares or other securities to the public in Irelandor the marketing of a collective investment scheme or any other form of offer, sale, marketing, advertisingor provision of facilities for the participation by the public, as beneficiaries, in profits or income arising fromthe acquisition, holding, management or disposal of securities or any other property whatsoever, otherwisethan in accordance with Irish Prospectus Law (as defined in the Investment Funds, Companies andMiscellaneous Provisions Act, 2005 of Ireland), the Central Bank Acts, 1942-2010, the Companies Acts1963-2009, the Unit Trusts Act, 1990 (as amended), the European Communities (Markets in FinancialInstruments) Regulations, 2007 (S.I. No. 60 of 2007)(as amended), the Investment Intermediaries Act, 1995(as amended) and any regulations made thereunder and any codes of conduct, guidance and any otherrequirements issued in connection therewith (as each of the foregoing may be amended, supplemented,varied and/or replaced from time to time) (“Irish Securities Laws”).

Neither this Document nor any other offering or marketing material relating to the offering of the NewOrdinary Shares have been approved by the Central Bank of Ireland or any other authority or exchange inIreland and therefore may not contain all the information required where a document is prepared pursuant toIrish Securities Laws. An investment in the New Ordinary Shares may not provide a level of investorprotection equivalent to schemes authorised under Irish Securities Laws and subject to Irish regulations andconditions.

An investment in the New Ordinary Shares does not have the status of a bank deposit and is not within thescope of the Deposit Protection Scheme operated by the Central Bank of Ireland nor any other Irishgovernment guarantee scheme and Eland Oil & Gas PLC would not be regulated by the Central Bank ofIreland arising from the issue of any of the New Ordinary Shares.

Irish Selling Restrictions

Each holder of the New Ordinary Shares shall be deemed to have, represented, warranted and agreed, to theextent applicable, that:

(i) it has not and will not underwrite the issue of, or place, offer or sell or otherwise act in Ireland inrespect of any of the New Ordinary Shares other than in compliance with the EU Directive 2003/6/ECon insider dealing and market manipulation, Irish market abuse law (as defined in the InvestmentFunds Companies and Miscellaneous Provisions Act, 2005), the Market Abuse (Directive 2003/6/EC)Regulations 2005 (S.I. No. 342 of 2005) and any rules issued under section 34 of the InvestmentFunds, Companies and Miscellaneous Provisions Act, 2005 (as each of the foregoing may beamended, supplemented, varied and/or replaced from time to time);

(ii) it has not underwritten and will not underwrite the issue of or place the New Ordinary Shares or takeany other action in connection with the New Ordinary Shares otherwise than in conformity with theprovisions of (i) the Investor Compensation Act, 1998 including, without limitation, Section 21thereof; (ii) the Irish Investment Intermediaries Act, 1995 (as amended) and has and will conduct itselfin accordance with any codes of conduct, guidance and other requirements issued in connectiontherewith with respect to anything done by it in relation to the New Ordinary Shares; and (iii) theEuropean Communities (Markets in Financial Instruments) Regulations, 2007 (S.I. 60 of 2007) (asamended) including, without limitation, Parts 6, 7 and 12 thereof and any codes of conduct, otherrequirements and guidance issued in connection therewith (as each of the foregoing may amended,supplemented, varied and/or replaced from time to time);

11

(iii) it has not underwritten and will not underwrite the issue of, or place, or do anything in Ireland inrespect of the New Ordinary Shares otherwise than in conformity with the provisions of: (i) theCompanies Acts 1963 – 2009, and (ii) the Prospectus (Directive 2003/71/EC) Regulations 2005 (andamendments thereto, including Directive 2010/73/EU (“2010 PD Amending Directive”), to theextent implemented in Ireland including any relevant implementing measure of the 2010 PDAmending Directive in Ireland) and any rules issued under Section 51 of the Investment Funds,Companies and Miscellaneous Provisions Act 2005 (as each of the foregoing may be amended,supplemented, varied and/or replaced from time to time);

(iv) it has not underwritten and will not underwrite the issue of, or place, the New Ordinary Shares,otherwise than in conformity with the provisions of the Central Bank Acts 1942-2010 and any codesof conduct made under Section 117(1) of the Central Bank Act, 1989 (as amended); and

(v) it has not done anything, and will not do anything, in connection with the New Ordinary Shares whichwould constitute a breach of the Irish Data Protection Acts 1998 and 2003 (as amended) and/or theEuropean Communities (Electronic Communications Networks and Services) (Data Protection andPrivacy) Regulations 2003 (S.I 535 of 2003).

PLEASE NOTE: Any recipient of this Document who does not fall within any of the availableexemptions in relation to its distribution should not rely on this Document nor take any action uponit but should return it immediately to the Company or Canaccord.

NOTICE TO INVESTORS IN MAURITIUS

New Ordinary Shares in the Company are not being offered to the public in Mauritius and the Company isnot and does not intend to be registered as a “reporting issuer” under the Securities Act 2005 of Mauritius.

Accordingly, this Document has not been registered with the Mauritius Financial Services Commission(“FSC”). New Ordinary Shares are offered in Mauritius only:-

(i) by way of private placements only to the person to whom such offer has been made; and

(ii) to persons in Mauritius meeting the criteria of “sophisticated investors” as defined under theSecurities Act 2005 of Mauritius.

The Company has not been authorised or recognised by, and does not intend to seek authorisation orrecognition from, the FSC, and the FSC expresses no opinion as to the matters contained in this Documentor as to the merits on an investment in the Company. There is no statutory compensation scheme in Mauritiusin the event of the Company’s failure.

FORWARD-LOOKING STATEMENTS

This Document contains forward-looking statements. These relate to the Company’s future prospects,developments and strategies. Forward-looking statements are identified by their use of terms and phrasessuch as “believe”, “could”, “envisage”, “estimate”, “intend”, “may”, “plan”, “seek”, “target”, “will” or thenegative of those, variations or comparable expressions, including references to assumptions. Thesestatements are primarily contained in Parts 1, 3 and 4 of this Document. The forward-looking statements inthis Document are based on current expectations and are subject to risks and uncertainties that could causeactual results to differ materially from those expressed or implied by those statements.

No undertaking, representation, warranty or other assurance, express or implied, is made or given by or onbehalf of the Company, Canaccord, or any of their respective directors, officers, partners, employees, agentsor advisers or any other person as to the accuracy, completeness or fairness of the information or opinionscontained in this Document, and no responsibility or liability is accepted by any of them for any suchinformation or opinions. Notwithstanding the aforesaid, nothing in this paragraph shall exclude liability forany undertaking, representation, warranty or other assurance made fraudulently.

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CONTENTS

Page

DIRECTORS, SECRETARY AND ADVISERS 14

PLACING STATISTICS 16

PART 1 INFORMATION ON THE GROUP 17

PART 2 INFORMATION ON ELCREST, STARCREST AND EMEKA OFFOR 42

PART 3 THE PLACING 49

PART 4 RISK FACTORS 52

PART 5 COMPETENT PERSON’S REPORT 76

PART 6 FINANCIAL INFORMATION 172

PART 7 TAXATION 247

PART 8 ADDITIONAL INFORMATION 250

DEFINITIONS 306

GLOSSARY OF TECHNICAL TERMS 315

ANNEX 1 316

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DIRECTORS, SECRETARY AND ADVISERS

Directors Henry George Wilson Proposed Directors Robert Alexander LambertNon-Executive Director, Chairman Non-Executive Director andIan Leslie Blair Senior Independent DirectorChief Executive Officer Louis Emmanuel CastroGeorge Walter Mitchell Maxwell Non-Executive DirectorChief Financial Officer Russell Seth HarveyGilles Jacobus Krijger Non-Executive DirectorTechnical Director

all of:Registered Office 34 Albyn Place

AberdeenAB10 1FWUnited Kingdom

Company Secretary (and David Sheach Stronachs LLPprovider of Scottish Stronachs LLP 34 Albyn Placelegal opinion) 34 Albyn Place Aberdeen

Aberdeen AB10 1FNAB10 1FW United KingdomUnited Kingdom

Nominated Adviser and Canaccord Genuity LimitedBroker 88 Wood Street

LondonEC2V 7QRUnited Kingdom

Lawyers to the Company Stephenson Harwood LLP1 Finsbury CircusLondonEC2M 7SHUnited Kingdom

US Lawyers to the Company Covington & Burling LLP265 StrandLondonWC2R 1BHUnited Kingdom

Nigerian Lawyers to the Company Streamsowers & Köhn16D Akin Olugbade StreetVictoria IslandLagosNigeria

Jersey Lawyers to the Company Ogier Legal JerseyOgier HouseThe EsplanadeSt. HelierJerseyJE4 9WGChannel Islands

14

Auditors Deloitte LLP2 New Street SquareLondonEC4A 3BZUnited Kingdom

Competent Person McDaniel & Associates Consultants Ltd.2200, 255 – 5th Avenue SWCalgary T2P 3G6Canada

Lawyers to Nominated Adviser Mayer Brown International LLPand Broker as to English 201 Bishopsgateand US law London

EC2M 3AFUnited Kingdom

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PLACING STATISTICS

Placing Price 100p

Number of New Ordinary Shares being issued pursuant to the Placing 118,000,000

Number of Ordinary Shares in issue immediately following the Placing and Admission1 134,871,982

New Ordinary Shares as a percentage of the Enlarged Share Capital 87.5 per cent.

Expected market capitalisation upon Admission based on the Placing Price £134.8 million

Estimated gross proceeds of the Placing approx. £118.0 million

Estimated proceeds, after expenses, of the Placing receivable by the Company approx. £106.8 million

Number of Non-Voting Right Ordinary Shares under the Helios Option Agreement 10,000,000

Number of Ordinary Shares subject to the Solstice Option Agreement 10,000,000

ISIN GB00B8HHWX64

SEDOL B8HHWX6

Ticker Symbol ELA

1. Includes the conversion into Ordinary Shares of the First Loan Notes, the Third Loan Notes and the conversion into OrdinaryShares of interest payable to the holders of First Loan Notes, the former holders of Second Loan Notes and the holders of ThirdLoan Notes. This number also assumes the full conversion of the Preference Shares into Ordinary Shares, which is expected tooccur on or shortly after Admission.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Completion of the Acquisition1 31 August 2012

Admission and commencement of dealings in New Ordinary Shares 8.00 a.m. on 3 September 2012and Ordinary Shares on AIM2

Delivery of New Ordinary Shares and Ordinary Shares into CREST accounts 3 September 2012

Monies for Completion of the Acquisition paid on or around 3 September 2012

Despatch of definitive share certificates (where applicable) on or around 17 September 2012

Notes:

1. On this date the First Loan Notes and Third Loan Notes convert into Ordinary Shares also and interest under the First Loan Notes,Second Loan Notes (where holders of the Second Loan Notes have elected to convert their interest entitlement into OrdinaryShares) and Third Loan Notes convert into Ordinary Shares.

2. On this date the Preference Shares are capable of conversion into Ordinary Shares.

3. Each of the times and dates above is subject to change. Any such change will be notified by an announcement on a RegulatoryInformation Service.

4. References to times in this Document are to London times (unless otherwise stated).

5. The following illustrative exchange rates are set out to assist the understanding of this Document (except for Parts 5 and 6):£1 = US$1.55

US$1 = N156.9

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PART 1

INFORMATION ON THE GROUP

1.1 Introduction

Eland Oil & Gas PLC is a company incorporated on 28 August 2009 and registered in Scotland withcompany number SC364753. Eland commenced operational activities in May 2010 with the principalbusiness objective of identifying and acquiring interests in oil and gas assets in West Africa, focused initiallyon Nigeria including the prolific Niger Delta, and to develop and bring acquired oil and gas assets intoproduction. The Company has, to date, established offices in Nigeria (Abuja), Scotland (Aberdeen) andU.A.E. (Sharjah).

The Company has assembled an experienced board and management team with established and successfultrack records in acquiring and developing oil and gas interests. The Company’s founders, Les Blair andGeorge Maxwell, previously held senior management positions with Addax Petroleum Corp. (“Addax”) andplayed a significant role in developing Addax into a highly successful independent oil company focused onupstream operations in Nigeria prior to its sale to the Sinopec Group in 2009. In 2010, Harry Wilson joinedthe Company in order to facilitate the development of the Company’s strategy which, at the time, wasprincipally the evaluation of acquisition opportunities.

In line with the Company’s focus on Nigeria, the Directors believe, given the importance of alignment withthe Nigerian Government’s indigenisation programme, that there are significant benefits in working closelywith a Nigerian partner (for example, indigenous companies in Nigeria will benefit from preferentialtreatment in the award of further licence areas). The Company has therefore established a joint venturecompany, Elcrest, in which the Company currently holds 45 per cent. of the shares. The balance of the sharesin Elcrest are held by a subsidiary of the Chrome Group of companies, Starcrest Nigeria Energy Limited(“Starcrest”). The Chrome Group was founded by Emeka Offor in 1994 and is regarded by the Directors asa major Nigerian indigenous group. According to its website the Chrome Group employs over 800 people.It has subsidiaries operating in oil and gas exploration and production, oil and gas servicing, engineering,insurance, logistics and power industries. The Company has agreed with Starcrest to acquire an additionalfour per cent. of the shares in Elcrest held by Starcrest in consideration for US$5 million, completion ofwhich will occur within 30 days of completion of the Acquisition Agreement. Also, under the terms of theStarcrest Option Agreement, the Company has an option to acquire a further 10 per cent. of the shares inElcrest from Starcrest. For further details see paragraph 11.2.5 of Part 8 of this Document. Furtherinformation on Elcrest, the Chrome Group, Starcrest and Emeka Offor is set out in paragraph 1.5 of thisPart 1 and in Part 2 (“Information on Elcrest, Starcrest and Emeka Offor”) and your attention is also drawnto the Risk Factors titled “Eland and Elcrest’s relationship with Starcrest”, “Reliance on local partners” and“Oversight of local partners” on pages 54 and 55 of this Document.

Elcrest has executed a binding Acquisition Agreement to acquire a 45 per cent. participating interest in anonshore mining lease in Nigeria known as OML 40 from Shell Petroleum Development Company of NigeriaLimited (“SPDC”), Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited. SPDC has held aparticipating interest in OML 40 since 1964 and has since then acted as its operator. The AcquisitionAmendment Agreement was entered into on 23 August 2012 to meet with the settlement requirements of thePlacing and the completion procedures which the Directors understand were recently followed on similarsales of OMLs 26 and 42 in November 2011.

Under the terms of the Acquisition Agreement (as amended by the Acquisition Amendment Agreement),Elcrest is required to deposit in the Acquisition Escrow Account(s) an amount equal to the balance of theAcquisition Price (US$138.6 million). The Acquisition Escrow Account has been funded using the proceedsof the Escrow Receipts Placing, details of which are set out in Part 3 of this Document. In particular, Helios,which will have an interest in 29.4 per cent. of the issued share capital from Admission, has agreed to fundthe Acquisition Escrow Account(s).

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The Directors believe that the Acquisition represents a solid foundation on which to grow the Group inNigeria. OML 40 has production history, booked developed and undeveloped reserves, infrastructure forproduction and oil export for 30,000 bopd comprising a flowstation and an export pipeline, and the Directorsbelieve that there is low risk appraisal upside and substantial exploration potential. The licence area covers498 sq.km with gross lease 2P Reserves of 71.5 MMbbls, gross lease 3P Reserves of 117 MMbbls and grosslease 2C Contingent Resources of 15.5 MMbbls, as estimated by McDaniel. In addition, SPDC carried anexploration portfolio of 15 prospects and leads within OML 40 with total unrisked mean crude oilProspective Resources of 356 MMbbls which have not been audited by McDaniel.

From 1975 until 2006, the Opuama field in OML 40 produced approximately 43 MMbbls. In 2006, SPDCundertook a controlled shut down of certain of SPDC’s assets in the Niger Delta, including OML 40, as itwas unable to continue to operate these assets due to security problems. Eland considers the security issuesthat prevented SPDC from producing from the OML 40 Lease area in March 2006 to be regional and notspecific to the licence area. The Directors believe that focused engagement by the Group with the localcommunities will create an environment that will allow production and development to be resumed at OML40 within approximately six months following Admission. The Directors intend to re-commission existinginfrastructure and restart existing wells to re-commence production at an initial gross rate of 2,500 bopd witha target to grow gross production to 50,000 bopd within four years. Nigerian crude is a high quality, light oilgrade referred to as “sweet”, which trades at a premium to Brent because of its high gasoline content andrelatively low processing costs.

SinceAugust 2010, Eland has been financed as to a total of £14.8 million cash raised by way of equity capitaland the issuance of the First Loan Notes and Third Loan Notes. This has been used to fund costs associatedwith the Acquisition, ongoing working capital and payment of the deposit of US$15.4 million for thepurchase of Elcrest’s 45 per cent. interest in OML 40. The balance of the Acquisition Price ofUS$138.6 million (£88.8 million) and Elcrest’s working capital requirements, within the first two years, todevelop OML 40 will be principally funded through the proceeds of the Escrow Receipts Placing and theGeneral Placing which will then be lent by the Company (via its wholly owned subsidiary Westport OilLimited), as part of the joint venture arrangements, to Elcrest to finance the Acquisition. The Companyentered into the SCB Facility Agreement, with Standard Chartered on 24 August 2012, the Solstice OptionAgreement on 13 June 2012 and the Helios Option Agreement on 23 August 2012, details of which are setout at paragraph 11.7.1, paragraph 11.3.19 and paragraph 11.3.22 respectively of Part 8 of this Document.The SCB Facility Agreement, the Solstice Option Agreement and the Helios Option Agreement provide theCompany with access to further funding of approximately US$53 million in aggregate subject, in each case,to the satisfaction of certain conditions.

Pursuant to the Elcrest Loan Agreement, Eland’s economic return from Elcrest is expected to be significantlyhigher than it would otherwise derive solely as a 45 per cent. shareholder (or (in due course) 49 per cent.shareholder) of Elcrest. Whilst the financing provided under the Elcrest Loan could be repaid earlier than thestated maturity date where Elcrest can access more favourable third party finance, Eland will have the rightto match any such third party financing as further explained in paragraph 2.3 of Part 2 of this Document. Theprojected returns of Eland from the Free Cash Flow of Elcrest assuming that the Elcrest Loan remainsoutstanding on its current terms are expected to be in the range of 71 per cent. to 84 per cent. of Elcrest FreeCash Flows or the equivalent to 32 per cent. – 38 per cent. of the total OML 40 Free Cash Flows, primarilyas a result of the interest payments under the Elcrest Loan. This range will fluctuate as a result of workprogramme changes and oil price fluctuations. Eland will also benefit from significant lender protectionsduring the term of the Elcrest Loan which the Directors believe gives the Company control over theoperations and affairs of Elcrest. Further information on the Elcrest Loan is set out at paragraph 2.3 of Part 2and at paragraph 11.2.4 of Part 8 of this Document.

1.2 Key strengths and investment proposition

The Directors believe that an investment in the Company should be attractive to potential investors for thefollowing reasons:

• Nigeria holds the largest oil and gas reserves in Sub-Saharan Africa and is the region’s largestproducer of oil. Since 1956, substantial activity has been undertaken in the upstream oil sector by anumber of international oil companies and, as a consequence, there is a long history of discovering

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and producing oil from the Niger Delta and an extensive pipeline network infrastructure and a numberof export terminals are already in place;

• the Federal Government of Nigeria has stated that it intends to increase the participation of indigenouscompanies in the development and operation of oil and gas projects in Nigeria. The Company, due toits relationships, in particular with the Chrome Group, is well positioned to develop its strategyalongside indigenous partners;

• the Group has an established management team with extensive oil and gas industry experience, withsignificant experience of operations in Nigeria, and a broad range of technical, operational andfinancial skills. Management has a successful track record of identifying and exploiting commercialdiscoveries as well as operating and creating shareholder value from Nigerian assets;

• OML 40 represents an asset with 71.5 MMbbls of gross lease 2P Reserves, gross lease 3P Reservesof 117 MMbbls and gross lease 2C Contingent Resources of 15.5 MMbbls as estimated by McDaniel.In addition, SPDC carried an exploration portfolio of 15 prospects and leads within OML 40 with totalunrisked mean crude oil Prospective Resources of 356 MMbbls which have not been estimated oraudited by McDaniel. It is anticipated that existing wells, facilities and an export pipeline will allowfor early production and cash flow. The Directors expect production and development to be resumedat OML 40 within approximately six months following Admission. The Directors expect that theGroup will re-commission existing infrastructure (including making repairs to the pipeline) and restartexisting wells to re-commence production at an initial gross rate of 2,500 bopd with a target to growgross production to 50,000 bopd through appraisal and exploration drilling within four yearsfollowing Admission;

• the Directors believe that there is significant exploration upside on the OML 40 block. Specifically,the Group is scheduled to drill two exploration wells on the Abiala prospect in 2013 which, accordingto data provided by SPDC, will target gross prospective resource of 102 MMbbls. According to theMcDaniel CPR the Abiala prospects are attributed 45 MMbbls gross prospective resource with theAbiala field attributed gross contingent resource of 11 MMbbls. There exist a further 13 otherprospects which were identified by SPDC as result of the 3D Seismic acquired between 1991 and1994; and

• the Group intends to enhance Shareholder value through: (i) the re-commissioning of previously shutin production on OML 40; (ii) developing reserves within the OML 40 Lease; (iii) through furtherexploration and appraisal convert resources to reserves within the OML 40 Lease; and (iv) furtheracquisitions focused on West Africa and Nigeria.

1.3 Background and history

As referred to above, the Company was established with a view to acquiring interests in oil and gas assets,focusing on the prolific Niger Delta.

Since August 2010, Eland has been financed as to a total of approximately £14.8 million cash raised by wayof equity capital and the issuance of the First and Third Loan Notes.

Initially, £4.5 million was raised (by way of the issue of Ordinary Shares and Preference Shares of which theFounders (and their connected persons) subscribed for £1 million) to evaluate and negotiate potentialacquisition opportunities, including OML 40, and a number of other assets. As at 16 August 2012, the totalaccrued preference dividend under the Preference Shares was £276,383.

A further £9.5 million was then raised from certain institutional investors and high net worth individuals, byway of the First Note Issue, in order to fund the Deposit. Under the terms of these loan notes, as at 16 August2012, approximately £339,658 of interest remains outstanding to the holders of those loan notes and will besatisfied by the issue of Ordinary Shares or in cash upon Completion at the option of each holder of the FirstLoan Notes.

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Subsequently, a further £95.5 million was raised from certain institutional investors, high net worthindividuals and certain of the Directors and the Proposed Directors by way of the Second Note Issue to fundthe balance of the Acquisition Price for the 45 per cent. participating interest in OML 40. These funds werereturned to the holders of the Second Loan Notes because certain of the conditions to the Acquisition werenot satisfied prior to the expiry of the long stop date stipulated in the Second Loan Notes. Under the termsof these loan notes, as at 16 August 2012, approximately £2,668,767 of interest remains outstanding to theholders of those loan notes and will be satisfied by the issue of Ordinary Shares or in cash upon Admissionat the option of each holder of the Second Loan Notes.

A further £0.8 million was raised from certain institutional investors, high net worth individuals and certainof the Directors and the Proposed Directors by way of the Third Note Issue at the end of 2011 to fundworking capital required to complete the process of Admission and the Acquisition. Under the terms of theseloan notes, as at 16 August 2012 approximately £5,557 of interest remains outstanding to the holders of thoseloan notes and will be satisfied by the issue of Ordinary Shares or in cash upon Admission at the option ofeach holder of the Third Loan Notes.

On or before Admission, the Company raised monies through the Escrow Receipts Placing to fund thebalance of the Acquisition Price of US$138.6 million, further details of which are set out in Part 3 onpages 49 to 51 of this Document.

Timeline of key events:

May 2010 Eland commences operational activities

August 2010 Seed funding of £4.5 million raised (and then used to evaluate and negotiate potentialacquisition opportunities)

January 2011 Raised deposit financing of £9.5 million for Deposit by way of the First Note Issue

March 2011 Notification by SPDC of selection as exclusive bidder Raised purchase anddevelopment financing of £95.5 million by way of the Second Note Issue

Elcrest signed Acquisition Agreement with the Sellers and Deposit transferred toSellers under the terms of the Acquisition Agreement

April/May 2011 Nigerian national elections held and President Goodluck Ebele Jonathan electedPresident of the Federal Republic of Nigeria

July 2011 Mrs. Deizani Alison-Madueke sworn in as Minister of Petroleum

September 2011 The longstop date for Completion under the Acquisition Agreement reached withoutcompletion of the conditions precedent

October 2011 Purchase and development financing of £95.5 million returned to the originalinvestors in the Second Note Issue because completion of the acquisition of OML 40had not occurred before the Longstop Date under the Second Note Issue

November 2011 Funding of £0.8 million raised by way of the Third Note Issue

22 February 2012 Written consent received from the Ministry of Petroleum Resources, the Departmentof Petroleum Resources, from the Director of the DPR to assign 45 per cent.participating interest in OML 40 to Elcrest and addressed to SPDC

31 August 2012 Anticipated date of Completion of the Acquisition

1.4 The Acquisition – OML 40

In the autumn of 2010, the Company was prequalified by Shell to participate in a bid process to acquire its30 per cent. participating interest in OML 40. Subsequently, Total and ENI also included their aggregateinterests in OML 40 in the sale process comprising, in aggregate, a further 15 per cent. participating interest.

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The auction process, which culminated in the Acquisition, allowed for the provision of limited due diligencematerials to each of the bidders and, for this reason, Eland, prior to execution of the Acquisition Agreement,had limited opportunity independently to verify the information provided by SPDC. The AcquisitionAgreement (further details of which are set out at paragraph 11.1.1 of Part 8 of this Document) which wasagreed as part of a competitive auction process, sets out the terms for the purchase of the Sellers’ interestswhich, in aggregate, amount to a 45 per cent. participating interest in the OML 40 Lease. The AcquisitionAgreement, signed on 31 March 2011, stipulated that completion was subject to a number of conditionsbeing satisfied.

Under the terms of the Acquisition Agreement, all of the environmental and decommissioning liabilities inrespect of OML 40 will be assumed by Elcrest on completion of the Acquisition, save that the Sellers willretain liability in respect of all historic litigation including in relation to environmental claims. RPS Energy,on behalf of the Group, has carried out an environmental and decommissioning liability due diligenceexercise and, accordingly, the Directors currently believe that there are no material environmental liabilitiesoutstanding in relation to OML 40. However the Directors intend to commission a comprehensiveenvironmental baseline study within 12 months of the Acquisition.

Following execution of the Acquisition Agreement, the Board sought to be designated as operator of OML40 and pursued completion with the Sellers, seeking necessary governmental consent, on this basis. Afterfurther discussions with NNPC, the state oil company in Nigeria, regarding joint operations and theoperatorship position and, following the completion of other analogous transactions in November 2011 onOMLs 26 and 42, with a structure where NNPC (through its subsidiary NPDC) was nominated as Operator,the Directors believe that it is in the Group’s best interest for NNPC (through its subsidiary NPDC) to be thenominated Operator. Under the terms of the New Joint Operating Agreement between NPDC and Elcrest, tobe entered into at Completion, pursuant to a novation as more fully set out at paragraph 11.3.3 of Part 8 ofthis Document, all key decisions in relation to the operation of OML 40 will require the unanimousagreement of Elcrest and NPDC and sole risk and customary dispute resolution procedures will apply.

Since execution of the Acquisition Agreement, the Group has received certain additional technical data onOML 40 from SPDC. Upon Completion, the Group will receive the technical database, including 3D Seismiccovering approximately three quarters of the OML 40 licence area, from SPDC.

Elcrest and the Sellers entered into the Acquisition Amendment Agreement on 23 August 2012 in order tomeet with the completion procedures recently followed on similar sales of OMLs 26 and 42 in November2011. In particular, the Acquisition Amendment Agreement provides that the Sellers and Elcrest extend thelongstop date for Completion under the Acquisition Agreement to 21 September 2012 and that the Companyestablish with the Sellers the Acquisition Escrow Account(s) in accordance with the terms of the AcquisitionEscrow Account Agreement. In addition, Elcrest is required to deposit in the Acquisition Escrow Account(s)an amount in aggregate equal to US$138.6 million (being the balance of the Acquisition Price) by no laterthan 2 Business Days prior to Completion. The Acquisition Escrow Account(s) has been funded using theproceeds of the Escrow Receipts Placing under which the Escrow Receipts Placees agreed to fund in cashthe Acquisition Escrow Account(s) prior to their subscription for New Ordinary Shares. Pending Completionand subject to the terms of the Acquisition Escrow Account Agreement, such monies will be held by theCompany subject to a trust pursuant to which if Completion does not take place before the Escrow Deadline,such funds and accrued interest are to be returned to the Escrow Receipts Placees. Provided that Completiontakes place before the Escrow Deadline, the monies provided by the Escrow Receipts Placees into theAcquisition Escrow Account(s) will automatically be applied to the Escrow Receipts Placees’ subscriptionsfor New Ordinary Shares.

Completion is subject only to the convening of a completion meeting at which the agreed form CompletionDocumentation is to be executed by the Sellers, Elcrest, NNPC and NPDC. Neither, Completion nor theEscrow Receipts Placing are conditional upon Admission. It is anticipated, however, that Admission will takeplace upon or shortly after Completion.

Further details of the Acquisition Amendment Agreement and the Acquisition Escrow Account Agreementare set out at paragraph 11.1 of Part 8 of this Document.

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A summary of the terms of certain documents relating to the Acquisition, including the AcquisitionAgreement and Acquisition Amendment Agreement, are set out in paragraphs 11.1.1 and 11.1.2 of Part 8 ofthis Document respectively.

1.5 Elcrest, Starcrest and Emeka Offor

As with many prominent and successful Nigerian businessmen, both Starcrest and Emeka Offor (as anindividual) have attracted significant media attention. Some of this media attention is of an adverse natureand relates to Emeka Offor’s political relationships or business affairs. Your attention is drawn to thesummary of relevant reputational issues set out in Part 2 of this Document and to the following Risk Factorsentitled “Eland and Elcrest’s relationship with Starcrest”, “Reliance on local partners” and “Oversight oflocal partner” on pages 54 to 55 of this Document.

1.6 Debt Financing Arrangements

Elcrest Loan Agreement

Under the terms of the Elcrest Loan Agreement, Elcrest was provided with a 10 year loan facility from theCompany, to reimburse the Company for the Bid Deposit and to pay the costs of the Acquisition and generalworking capital requirements. For so long as the Elcrest Loan Agreement is in place, Starcrest will berestricted from exercising certain of its rights pursuant to the terms of the Elcrest Shareholders’ Agreement(as more fully described in paragraph 11.2.1 of Part 8 of this Document). The Company and Starcrest haveagreed that Elcrest must seek external financing but that until such financing is available, the Company shallprovide or source a loan facility pursuant to the terms of the Elcrest Loan Agreement (as more fully describedin paragraph 11.2.4 of Part 8 of this Document). If the loan is not replaced by other third party financing, itsmaturity date is the tenth anniversary of the Elcrest Loan Agreement. The loan facility is interest-bearing ata rate of interest which is equivalent to the 90 day NIBOR interest rate, at the date of this Document, plus acommercial premium rate typically obtainable for a US dollar loan agreement of this type in Nigeria. Underthe terms of the Elcrest Shareholders’ Agreement (as amended by the Elcrest Shareholders’ AgreementAmendment Letter), Eland and Starcrest have agreed to seek bona fide arms length third party financing assoon as practicable for Elcrest, both to finance Elcrest and refinance the Elcrest Loan. Any such third partyfinancing must be approved by the Elcrest board (this must include at least one of the Company’s appointeddirectors’ positive vote) and (so far as is reasonably practicable) the servicing of the debts will not exceed70 per cent. of Elcrest’s budgeted net revenue. Eland will, in any event, have the right to match any such thirdparty financing. The Directors believe that until such time as OML 40 has been in production for a significantperiod of time it is unlikely that Elcrest will be able to source more favourable financing to replace theElcrest Loan on arms’ length terms acceptable to the board of Elcrest. Further details on the consequencesof the repayment of the Elcrest Loan are set out in the risk factors under the heading “Eland does not hold amajority of share capital of Elcrest” on page 52 of Part 4 of this Document.

In line with industry practice, Eland and Starcrest may charge Elcrest for the indirect costs of providingsupport to Elcrest. Eland may charge Elcrest the greater of (a) five per cent. of its costs and (b) US$3 millionper annum whereas Starcrest may charge Elcrest US$3 million per annum. Any further charges in respect ofdirect or indirect costs of either Eland or Starcrest require the approval of the board of Elcrest. Further detailsof the arrangements are set out at paragraph 11.2.1 of Part 8 of this Document.

The Company intends to transfer to Westport all of the Company’s interests in the Elcrest Loan Agreementand supporting security (as more fully described in paragraph 11.2.6 of Part 8 of the Document).

The Elcrest Loan Agreement, the Additional Elcrest Loan Agreement and associated documents providevarious other grounds on which the parties can terminate the arrangements. In such circumstances, Eland (orStarcrest) could then purchase the equity that it does not hold in Elcrest at fair value, and would be able toretain control of the 45 per cent. participating interested in OML 40 through its shareholding in Elcrest.

SCB Facility Agreement

In accordance with its obligations to seek external financing for Elcrest, the Company has entered into a loanfacility with SCB in an amount of US$22,000,000 (the SCB Facility Agreement, as more fully described inparagraph 11.7.1 of Part 8 of this Document). The SCB Facility Agreement will, subject to the other

22

conditions precedent being met, be available for drawdown only once First Oil has occurred. The Companywill make the proceeds of drawdown under the SCB Facility Agreement available to Elcrest to be used tofund operating costs of Elcrest under the terms of the Additional Elcrest Loan Agreement. The maturity dateof the SCB Facility is eighteen months from the date of the SCB Facility Agreement. The Company proposesto obtain third-party funding to replace the SCB Facility. Details of the interest rates and other costsassociated with the SCB Facility Agreement and the Additional Elcrest Loan Agreement are set out inparagraphs 11.7.1 and 11.7.2 of Part 8 of this Document.

In addition, the Company will grant security to the lenders under the SCB Facility Agreement over all of itsassets. This will involve an assignment of its bank accounts, its shares in Westport and its rights under theAdditional Elcrest Loan Agreement and any related security. The Company will continue to be entitled toexercise all of its rights in relation to the assets secured to the lenders (subject to the provisions of the SCBFacility Agreement described in more detail at paragraph 11.7.1 of Part 8 of this Document) until such timeas an event of default arises under the SCB Facility Agreement, at which time the lenders will be entitled toexercise these rights.

In addition, Westport will grant security to the lenders under the SCB Facility Agreement over all of itsassets. This will involve an assignment of its bank accounts, its rights under the Elcrest Loan Agreement andany related security. Westport will continue to be entitled to exercise all of its rights in relation to the assetssecured to the lenders (subject to the provisions of the SCB Facility Agreement described in more detail atparagraph 11.7.1 of Part 8 of this Document) until such time as an event of default arises under the SCBFacility Agreement, at which time the lenders will be entitled to exercise these rights.

Under the Deed of Priority (as more fully described in paragraph 11.7.3 of Part 8 of this Document) it hasbeen agreed that the Company’s rights under the Additional Elcrest Loan Agreement and associated securityshall be treated as ranking in priority to the rights of Westport under the Elcrest Loan Agreement andassociated security.

1.7 Group structure

A summary of the Group’s existing corporate structure, following Completion, will be as follows:

* Within 30 days of Completion, the shareholdings will change to 51 per cent. and 49 per cent. respectively, pursuant to theStarcrest Option Agreement.

Eland Oil & Gas PLC

Elcrest Explora�on and Produc�on (Nigeria)

Limited

Elcrest Explora�on and Produc�on (Nigeria)

Limited

OML 40 JOA Assignment

OML 40

Nigerian Petroleum Development Corpora�on

(“NPDC”)

Nigerian Petroleum Development Corpora�on

(“NPDC”)

55%45%

100%

Starcrest Energy Nigeria LtdStarcrest Energy Nigeria Ltd

55% 45%

Westport Oil Limited

Eland Oil & Gas (Nigeria) Ltd

**

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1.8 Starcrest Option Agreement

The Company has entered into the Starcrest Option Agreement with Starcrest, whereby, within 30 daysfollowing Completion, Eland has agreed to acquire an additional four per cent. of the shares in Elcrest fromStarcrest, (taking its overall stake to 49 per cent.) in consideration for the payment of US$5 million toStarcrest. In addition, in the period of twelve months from the first anniversary of First Production and beforethe second anniversary of First Production, the Company has been granted the option to acquire a further10 per cent. of the shares in Elcrest from Starcrest. The exercise of this option would further increase theCompany’s holding of shares in Elcrest to 59 per cent. The consideration payable on exercise of the optionis US$10 million. Further details are set out in paragraph 11.2.5 of Part 8 of this Document.

1.9 The OML 40 block overview

Following completion of the Acquisition, Elcrest will hold a 45 per cent. participating interest in OML 40.Eland holds currently 45 per cent. of the shares in Elcrest but will increase this shareholding to 49 per cent.within 30 days following completion of the Acquisition Agreement. All references in paragraphs 1.9 and1.10 are calculated on the basis of this future 49 per cent. shareholding in Elcrest. Eland’s interest in OML40 following the Acquisition will be as summarised in Table 1 below.

Eland’s indirect LicenceLease Operator interest (%) Status Expiry Date Area (km2)

OML 40 NPDC 22.05 Production June 2019 498

Table 1

The OML 40 area contains the Opuama field which was in production between 1975 and 2006. In addition,OML 40 contains four other undeveloped fields Abiala, Adagbassa Creek, Gbetiokun and Ugbo which werediscovered between 1971 and 1999. Adagbassa Creek is a gas discovery, whereas the other fields arepredominantly oil bearing.

OML 40 is an oil mining lease located onshore Nigeria within the Niger Delta area some 75 kilometresnorthwest of Warri. The lease covers an area of 498 square kilometres with terrain covered by mangroveswamps, tropical forest and numerous rivers including a section of the Benin River.

OML 40 was awarded in 1964 to the Shell-BP Petroleum Development Company of Nigeria whichsubsequently became SPDC in 1979 after the departure of BP from Nigeria. 18 wells have been drilledwithin the lease area between 1971 and 1991 and a number of fields discovered.

From 1975 until 2006, the Opuama field was put in production and produced approximately 43 MMbbls. In2006, SPDC undertook a controlled shut down of certain of SPDC’s assets in the Niger Delta, includingOML 40, as they were unable to continue to operate these assets due to security problems. OML 40 has notbeen returned to production since. The field was producing 2,500 bopd at the time of shut-in. Eland considersthe security issues that prevented SPDC Joint Venture Partners from producing from the OML 40 Lease areain March 2006 to be regional and not specific to the licence area. The field facility consists of a piledflowstation with a single train of two separators and a surge vessel providing a gross capacity of 30,000 bopd.A mixture of stabilised crude oil and produced water is pumped into the Trans Escravos Pipeline system andthen on to the Forcados Terminal some 86.5 kilometres away. Associated gas was being flared whenproduction ceased in 2006 and is expected to be initially flared when production recommences prior toimplementation of the Group’s gas utilisation strategy.

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Figure 1 location of OML 40

KeyRed areas: oil discoveriesGreen areas: gas discoveries

Figure 2 OML 40 field area location map

1.10 The OML 40 block – CPR estimates applicable to Eland

Reserves

Crude oil and natural gas reserves have been assigned by McDaniel to the main reservoirs in the Opuama andGbetiokun fields in the OML 40 Lease. Proved developed and total proved reserves are estimated to the endof the licence expiry in June 2019. Probable and possible reserves assume a licence extension will be granted

25

to allow production to continue after 2019. A summary of Eland’s share of the proved developed (“PD”),proved undeveloped (“PUD”), total proved (“1P”) and total proved plus probable (“2P”) and total proved plusprobable plus possible (“3P”) reserves estimates, as of 30 June 2012 is presented in Table 2.

Proved Proved Developed Undeveloped 1P 2P 3P

OML 40Crude Oil Reserves (Mbbls)Company Gross1 877 3,348 4,226 15,767 25,798Company Net2 702 2,679 3,381 12,613 20,638Natural Gas Reserves (MMcf)Company Gross1 – – – 7,376 12,940Company Net2 6,859 12,034

1 Gross reserves include Eland’s 22.05 per cent. working interest reserves before deduction of royalty and assumes Eland purchasesa further 4 per cent. of Elcrest.

2 Net reserves include gross reserves after deduction of royalty.

Source: CPR

Table 2

The net present values of the reserves have been based on future production and revenue analyses. AssumingEland purchases a further 4 per cent. of Elcrest, Eland’s 22.05 per cent. working interest share of the netpresent values of the reserves based on forecast prices and costs assumptions as of 30 June 2012 is presentedin Table 3.

Discounted Discounted Discounted DiscountedNet present values after income taxes1,2 at 0% at 10% at 15% at 20% US$(1,000) US$(1,000) US$(1,000) US$(1,000)

Total Proved (1P) 75,838 52,874 44,870 38,423Total Probable 173,874 97,933 76,749 61,491Total Proved plus Probable (2P) 249,712 150,807 121,619 99,914Total Possible 161,723 102,246 83,666 69,598Total Proved plus Probable plusPossible (3P) 411,435 253,052 205,285 169,512

1 The net present values may not necessarily represent the fair market value of the reserves.

2 The value of all wells and facilities are included in the net present value estimates.

Source: CPR

Table 3

Contingent Resources

The Abiala and Ugbo discoveries have been assigned contingent crude oil and natural gas resources. Bothfields have only one well drilled to date and further appraisal is required. A summary of Eland’s share of thelow estimate (“1C”), best estimate (“2C”) and high estimate (“3C”) contingent resources estimates, as of30 June 2012 is presented in Table 4.

1C 2C 3C Mean2

Company Gross2

Crude Oil (Mbbls) 2,533 3,424 5,153 3,684Natural Gas (MMcf) 8,782 10,374 12,581 10,556

1 Gross reserves include Eland’s working interest reserves before deduction of royalty and assumes Eland will purchase a further4 per cent. in Elcrest.

2 The statistical mean is provided in addition to the standard 1C, 2C and 3C resource categories.

Source: CPR

Table 4

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Prospective Resources

Exploration of OML 40 effectively stopped in 1991 prior to the acquisition of any 3D Seismic and noexploration wells have been drilled since then. Prior to this, 18 wells were drilled, of which 15 weresuccessful, resulting in the discovery of six fields between 1971 and 1991 using 2D Seismic. Tsekelewu hassince been farmed out and no longer forms part of the OML 40 Lease area. Based on 3D Seismic acquiredbetween 1991 and 1994, SPDC carried an exploration portfolio of 15 prospects in relation to Elcrest’sinterest in OML 40 and prospects within OML 40 with total unrisked mean crude oil prospective resourcesof 356 MMbbl.

Prospective resources have been assigned to two prospects close to the Abiala discovery and one offsettingthe Gbetiokun field. A summary of the gross lease prospective resources estimates for these prospects inOML 40 is presented in Table 5.

Low Best High Geological Estimate Estimate Estimate Chance of (P90) (P50) (P10) Mean2 Success1

Crude Oil (Mbbls)Abiala NE 1,445 7,588 38,318 15,706 34%Abiala N Blk-2 2,552 13,833 71,288 29,008 27%GBW D5000 1,285 5,773 24,689 10,322 27% –––––––– –––––––– –––––––– –––––––– Total 5,281 27,194 134,295 55,036 –––––––– –––––––– –––––––– –––––––– Natural Gas (mmcf)Abiala NE 1,635 8,694 43,977 18,102 34%Abiala N Blk-2 2,859 15,297 78,689 32,120 27%GBW D5000 254 1,450 7,105 2,960 27% –––––––– –––––––– –––––––– –––––––– Total 4,748 25,441 129,771 53,181 –––––––– –––––––– –––––––– –––––––– 1 There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it

will be economically viable or technically feasible to produce any portion of the resources.

2 Individual zone estimates statistically aggregated to the prospect/lead level and arithmetically aggregated to the asset level. Thesum of the individual mean estimates may be different from the total due to rounding difficulties.

Source: CPR

Table 5

1.11 The OML 40 block – CPR estimates applicable to Elcrest

The Company will receive interest payments from Elcrest pursuant to the Elcrest Loan described inparagraph 11.2.4 of Part 8 of this Document and, consequently, for so long as the Elcrest Loan remainsoutstanding, Eland’s economic return from Elcrest is expected to be significantly higher than it wouldotherwise derive as a 45 per cent. (or 49 per cent.) shareholder of Elcrest. The CPR estimates relating toElcrest’s interest in OML 40 are set out below.

Reserves

A summary of Elcrest’s share of the proved developed (“PD”), proved undeveloped (“PUD”), total proved(“1P”), total proved plus probable (“2P”) and total proved plus probable plus possible (“3P”) reservesestimates, as of 30 June 2012, is presented in Table 6.

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Proved Proved Developed Undeveloped 1P 2P 3P

OML 40Crude Oil Reserves (Mbbls)Elcrest Gross1 1,790 6,833 8,624 32,177 52,648Elcrest Net2 1,432 5,467 6,899 25,742 42,119Natural Gas Reserves (MMcf)Elcrest Gross1 – – – 15,052 26,408Elcrest Net2 – – – 13,999 24,559

1 Gross reserves include Elcrest’s 45 per cent. working interest reserves before deduction of royalty.

2 Net reserves include gross reserves after deduction of royalty.

Source: CPR

Table 6

The net present values of the reserves have been based on future production and revenue analyses. Elcrest’s45 per cent. working interest share of the net present values of the reserves based on forecast prices and costsassumptions as of 30 June 2012 is presented in Table 7.

Discounted Discounted Discounted DiscountedNet present values after income taxes1,2 at 0% at 10% at 15% at 20% US$1,000 US$1,000 US$1,000 US$1,000

Total Proved (1P) 164,975 117,869 101,425 88,163Total Probable 354,845 199,863 156,630 125,492Total Proved plus Probable (2P) 519,819 317,733 258,055 213,655Total Possible 330,047 208,665 170,747 142,037Total Proved plus Probable plusPossible (3P) 849,867 526,397 428,802 355,693

1 The net present values may not necessarily represent the fair market value of the reserves.

2 The value of all wells and facilities are included in the net present value estimates.

Source: CPR

Table 7

Contingent Resources

The Abiala and Ugbo discoveries have been assigned contingent crude oil and natural gas resources. Bothfields have only one well drilled to date and further appraisal is required. A summary of Elcrest’s share ofthe low estimate (“1C”), best estimate (“2C”) and high estimate (“3C”) contingent resources estimates, as of30 June 2012, is presented in Table 8.

1C 2C 3C Mean2

Elcrest1

Crude Oil (Mbbls) 5,169 6,988 10,516 7,518Natural Gas (MMcf) 17,922 21,171 25,676 21,543

1 Gross resources include Elcrest’s 45 per cent. working interest resources before deduction of royalty.

2 The statistical mean is provided in addition to the standard 1C, 2C and 3C resource categories.

Source: CPR

Table 8

1.12 Competent Person’s Report

A Competent Person’s Report in relation to OML 40 was prepared at the end of 2010 and then again in April2011 and December 2011. Since then, the price assumptions on which that report was based have changed

28

and these updates are now reflected in the CPR. The updated evaluation was prepared between June andAugust 2012 and was based on technical and financial data at 30 June 2012.

For further information the attention of Placees is drawn to the Competent Person’s Report which can befound in full in Part 5 of this Document.

1.13 The OML 40 block – additional resource potential

The OML 40 block has been operated by SPDC since 1964, during which time 18 wells have been drilled,of which 15 were successful, resulting in the discovery of six fields. Prior to shut-in in March 2006,43 MMbbls of oil had been produced.

Nigerian National Standard reserves as of 1 January 2010 of 180 MMbbls of proved and probable oil and20 billion cubic feet of gas have been assigned to five fields on OML 40 as presented in table 9 below. TheDirectors understand that these reserves have been submitted to the Department of Petroleum Resources inNigeria as of 1 January 2010.

NNS P50 Field Discovered Reserves Comments

Oil Fields (MMbbl)Opuama 1974 53 Produced 43 MMbbls up to 2006Gbetiokun 1987 104 UndevelopedAbiala 1990 6 UndevelopedUgbo 1991 17 UndevelopedGas Field (Bcf)Adagbassa Creek 1971 20 Undeveloped

Table 9

Exploration of OML 40 effectively stopped in 1991 prior to the acquisition of any 3D Seismic and noexploration wells have been drilled since then. Prior to this, 18 wells were drilled with 15 successful between1971 and 1991 using 2D Seismic.

SPDC carried an exploration portfolio of 15 prospects and leads within OML 40 with total unrisked meancrude oil prospective resources of 356 MMbbls which have not been estimated or audited by McDaniel.

The Acquisition has been a competitive process with selected data about OML 40 being made available topotential and, ultimately, preferred bidders. The 3D Seismic data which SPDC acquired between 1991 and1994, and which covers approximately 75 per cent. of the OML 40 block, will not be made available untilcompletion of the Acquisition and neither McDaniel nor the Company have therefore had an opportunity toreview this data.

As such, it has not been possible for McDaniel to estimate or audit the prospective resources carried bySPDC. However, McDaniel believes the number of prospects identified is in line with what would beexpected when moving from exploration based on 2D Seismic to exploration based on 3D Seismic.

1.14 Fiscal framework applicable to OML 40

The taxes and costs arising from production at OML 40 are as follows:

(i) a royalty rate of 20 per cent. will be applied and is payable from OML 40 revenues to the NigerianGovernment;

(ii) payment of operating costs; and

(iii) payment of capital costs which are deducted over a five year period.

The resulting sum (the “net back before tax”) will be split in line with NPDC’s and Elcrest’s participatinginterests (that is 55:45 in favour of NPDC) in OML 40, and Elcrest will then benefit from a number ofallowances and will be subject to a number of taxes as are more fully set out on pages 318 to 319 of Annex 1

29

under the heading ‘Fiscal Framework (OML 40 Elcrest)’. In particular Elcrest, as an entity that has notpreviously been in oil and gas production in Nigeria, will currently qualify for the new entrant tax rate of65.75 per cent. under the Petroleum Profits Tax Act, Cap. Pll LFN 2004.

1.15 Nigeria Oil and Gas Industry Content Development Act 2010

Elcrest qualifies as an indigenous company under the provisions of the Nigeria Oil and Gas Industry ContentDevelopment Act 2010. This legislation gives priority to indigenous companies, inter alia, in the award ofany licence area. See Annex 1 of this Document on page 315 for more detail and a summary of the relevantpetroleum laws and resolutions in Nigeria.

1.16 Infrastructure

The existing oil export pipeline runs from the Opuama flowstation in OML 40 through OML 49 and to theOtumara flowstation in OML 43. This 36 km pipeline is an integral element of the OML 40 infrastructureand included within the acquisition cost. The pipeline consists of a delivery line from the Opuamaflowstation to the Opuama manifold, after which it joins the Trans Escravos pipeline system to the Adagbassamanifold, and then to the Otumara flowstation, where the oil delivery point is located.

The export pipeline has been in place since 1975, and is an extension of the earlier installed Trans Escravospipeline network which remains in full service and is currently evacuating SPDC production. As part of there-commissioning work, repairs will be required to the Opuama to Otumara section of the Trans Escravospipeline network.

The existing Opuama flowstation was also commissioned in 1975. It has a nominal 30,000 bopd capacity,equipment to handle gas and water separation together with all associated piping and controls. Theflowstation provides for diesel fuel storage, accommodation, water and drainage, and has sufficient sparecapacity to enable immediate hook-up of production from the Opuama field.

The OML 49 block, located immediately to the south of OML 40 and operated by Chevron, contains anumber of large producing fields and the Opuekeba flowstation which, if required may offer, subject toreaching an agreement with Chevron, an alternative export route for oil and gas exports from the Opuamafield.

Eland expects Elcrest to have access to, and the benefit of, crude handling arrangements to be agreedbetween NPDC and Shell on terms similar to those recently agreed as part of other transactions.

The Directors intend that production from the Gbetiokun field will be evacuated through an early productionfacility which contains all the equipment needed for oil treatment, pumping and gas compression.

Gas production from Opuama and Gbetiokun could either be sold to the Chevron gas-to-liquids facility or,via pipeline, be connected to and exported through the Escravos to Lagos Pipeline System.

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1.17 Work programme

Re-commissioning of Opuama

Prior to being shut-in by the Sellers in March 2006, the Opuama field had been producing since 1975. Sincethis time, the field has produced approximately 43.0 MMbbls of oil with production rates peaking at 11,000bopd before declining to 2,500 bopd prior to the controlled shut-in in March 2006. McDaniel estimatesremaining recoverable gross 2P Reserves of 42.0 MMbbls to Opuama.

The Group plans to re-commission existing infrastructure (including the Opuama flowstation) and two existingOpuama wells to commence production within six months of Admission at an initial gross rate of 2,500 bopd.

The Company has carried out a risk mitigation study in relation to the re-commissioning work programmeand are confident that all reasonable steps have been taken to ensure that the re-commissioning can beachieved. In particular, management have visited the Opuama flowstation and associated facilities and heldextensive consultation with SPDC and representatives and staff who are familiar with OML 40.

Exploration in 2013

The Company plans to drill two exploration wells at Abiala in Q4 2013, targeting gross ProspectiveResources of 102 MMbbls, as estimated by Shell. According to the McDaniel CPR the Abiala prospects areattributed 45 MMbbls gross prospective resource with the Abiala field attributed gross contingent resourceof 11 MMbbls. The first well will be an appraisal well on the Abiala North Field, targeting 11 MMbbls ofContingent Resources, and with an exploration sidetrack targeting 68 MMbbls of Prospective Resourceaccording to Shell (29 MMbbls according to the McDaniel CPR) on the Abiala Block 2 prospect. The well,including sidetracking, is expected to take approximately 60 days to drill.

Immediately following the Abiala North exploration well, the Group intends to drill an exploration well onthe Abiala North East prospect. The well will target 34 MMbbls of Prospective Resources according to Shell(16 MMbbls according to the McDaniel CPR) and is expected to take 30 days to drill.

Following reprocessing and interpretation of the 3D Seismic acquired by Shell, the Group expects to definefurther exploration potential within OML 40.

Further appraisal and production drilling on Opuama and Gbetiokun

Following the successful re-commissioning of Opuama 1 and 3, the Group intends to increase productionthrough the drilling of up to six further development wells on Opuama and up to six on Gbetiokun startingin 2014. The Directors expect that field production will be increased through optimising infill developmentdrilling via deviated and horizontal wells.

To accommodate increased production for Gbetiokun, the Directors intend that a floating early productionfacility will be mobilised and a new export pipeline will be constructed.

Long term production growth

The Group’s four year target of 50,000 bopd of gross production on OML 40 will be achieved through furtherappraisal and development drilling of nearby fields, and development of the Abiala and Ugbo fields. SPDCwas informed in 2010 that each of these fields was being considered by the Department of PetroleumResources in Nigeria for inclusion in a new marginal field operation (“MFO”) round. It cannot be guaranteedthat these fields will be available to Elcrest. However, based on the approach followed on recent divestments,the Directors believe that these fields will not be included in any MFO round as a result of the change inownership of OML 40. Following reprocessing and interpretation of the 3D Seismic acquired by Shell, theGroup expects to define further exploration potential within the OML 40 Lease. Your attention is drawn tothe Risk Factor titled “Marginal Field Operations arrangements” on page 61 of this Document.

1.18 Company strategy

As stated above, the Group’s immediate objective following Completion is to re-commission OML 40production facilities, and to increase production through further development, appraisal and exploration toreach target gross production of 50,000 bopd within four years. The Group will also focus on capitalising

31

management’s Nigerian expertise and relationships to secure further opportunities in conjunction withindigenous partners in the prolific and underexploited Niger Delta.

The Directors believe that the current divestment activities of SPDC and other international oil companiesand the anticipated asset sales by the Federal Government of Nigeria have created a number of attractiveinvestment and acquisition opportunities in Nigeria. The Directors will, as part of the Group’s widerdevelopment, also consider other opportunities elsewhere in West Africa.

The Company expects to participate in acquisitions and retain an interest in oil and gas assets alongside anindigenous partner, and to align with governmental aspirations for the development of more robustindigenous capability in the upstream sector.

The upstream market in Nigeria is anticipated to change significantly in the coming years with opportunitiesbecoming available to acquire onshore acreage that has been exclusively held by a small number ofinternational oil companies for over 40 years. In part, this is being driven by the aspirations of the FederalGovernment of Nigeria to increase the level of indigenous participation in the upstream sector.

The Directors anticipate that the deep-water areas in the Gulf of Guinea will continue to be largelydominated by the major international players (although with increasing indigenous participation). However,the onshore areas of the Niger Delta no longer require the financial and technical expertise of the majorinternational oil companies. New independent players, such as Addax and Afren plc in particular, haveenjoyed significant success in Nigeria in recent years and have demonstrated that they can bring the financialand technical expertise, alongside local partners, to develop upstream assets in the Niger Delta quickly andeffectively for the benefit of all stakeholders. Indeed the greater flexibility of the smaller companies has beena significant advantage in unlocking the upside potential of the Niger Delta.

The Directors expect that the number of indigenous companies will grow significantly over the next fewyears and many will work in partnership with independent international companies. The Company is wellplaced with its local partner to secure further opportunities in Nigeria working alongside these newindigenous players.

The Directors expect that the oil price will remain at levels that will encourage active upstream developmentand that the capital and operating costs in the onshore Niger Delta will allow for profitable development ofOML 40 and a number of other opportunities.

1.19 Future financing strategy

The Group is in negotiations to replace the SCB Facility Agreement with a reserves-based lending facility.

As future production generates increasing cash flow, it is intended that third party debt funding will be usedfor further development of existing assets, potential future acquisitions and ongoing working capital. In theevent that the Group identifies a potential acquisition but has insufficient cash available to pursue anacquisition, it may seek further funding either by means of debt or equity or from other industry participants.

1.20 Nigeria market overview

Nigeria returned a government in April 2011 in what was viewed by independent observers as one of themost democratic elections in the history of Nigeria and Sub-Saharan Africa.

Nigeria has the largest oil and gas reserves in Sub-Saharan Africa and is a major oil supplier to the UnitedStates and Europe.

Companies such as Shell, Exxon, Chevron, Total and ENI have operated in the country for many years andhave been instrumental in developing the oil and gas industry including the development of the large gasreserves for export as LNG.

As at 31 December 2010, Nigeria had oil reserves of 37.2 billion barrels and 186.9 Tcf of natural gas.Nigerian crude is a high-quality, light oil grade referred to as “sweet”, which trades at a premium to Brentbecause of its high gasoline content and relatively low processing costs.

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Historical oil and gas production in Nigeria

Proved oil reserves of selected African countries

The Federal Government of Nigeria has, in recent years, introduced a number of initiatives to encouragewider participation in the upstream oil and gas sector by indigenous companies and to increase the levels ofactivity in this sector. These initiatives include the designation and farm-out of marginal fields introduced bythe Petroleum (Amendment) Act of 1996 and the stated policy of the Guidelines for Farmout and Operationof Marginal Fields 2001 (“Marginal Fields Guidelines”) which reserved the initial award of such fields forindigenous companies. The Nigeria Oil and Gas Industry Content Development Act 2010 has enacted thelocal content policies outlined in the Marginal Fields Guidelines.

Additionally, provisions within the PIB, an executive bill which seeks to reform the regulatory framework ofthe industry, will, if enacted as drafted by the executive in 2012, require the relinquishment after 10 yearsfrom the date of grant of any undeveloped lease areas for which no firm development commitments havebeen made during that period. This may provide access to very large areas of the Niger Delta which have

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33

been licensed continuously for over 50 years. A new draft PIB was prepared by a committee set up by theMinister of Petroleum Resources and approved by the Federal Executive Council in July 2012 forpresentation to the National Assembly for consideration.

Nigeria has extensive coverage of 2D and 3D Seismic and a large number of exploration and appraisal wellswere drilled, particularly in the 1970s and 1980s. However, a large number of these wells and discoveredfields were never commercially developed due to periods of low oil prices that lasted from 1986 to 2000, aswell as the civil unrest in Nigeria that intensified during the 1990s and continued until the recent successfulamnesty programme initiated by the Federal Government of Nigeria.

The Directors believe that Nigeria offers an attractive investment proposition because of the history of oiland gas development since the first discovery was made in 1956; in particular, in respect of onshore areas,where the majority of the lease areas have been held, in addition to NNPC, by four companies (Chevron,Shell, Total and ENI) under licence terms that do not have any requirement to relinquish any areas ordiscovered fields that have not been developed.

Further details on the fiscal framework applicable to OML 40 are set out on page 318 of Annex 1 to thisDocument.

1.21 Competition and trends

The Directors expect the number of indigenous companies in Nigeria to grow significantly over the next fewyears and many will work in partnership with independent international companies. The Company is wellplaced with its local partner to secure opportunities in Nigeria working alongside these new indigenousplayers.

A number of divestments by SPDC have recently occurred. These have utilised a similar structure to thatwhich has been put in place by the Group, whereby NPDC is the named operator of the licence.

• OMLs 4, 38 and 41

Seplat Petroleum Company Limited, a Nigerian consortium jointly owned by Maurel et Prom Nigeriaand Nigerian firms Platform Petroleum Limited and Shebah Petroleum Development Company Ltd.,has acquired a 45 per cent. interest in producing licences OML 4, 38 and 41.

• OML 26

First Hydrocarbon Nigeria, a company of which Afren plc owns 45 per cent., has acquired a45 per cent. interest in OML 26.

• OML 42

The Neconde Energy Ltd., consortium, consisting of Kulczyk Oil Ventures Inc. and Nigeria-basedpartners NestOil Limited, Aries Energy & Petroleum Co. and VP Global Ltd., has acquired a45 per cent. interest in OML 42.

• OML 30

On 30 June 2012, Heritage Oil Plc announced the proposed acquisition of a 45 per cent. interest inOML 30.

1.22 Corporate social responsibility, environmental, health and safety

An integral part of the Company’s strategy is to pay close attention to its host communities and the variousenvironmental and social aspects of its operations so that it not only fully complies with all relevantlegislation but also seeks to make a significant contribution to the communities within which it operates.

In particular, the success of oil and gas operations in the Niger Delta will depend on the creation of aninterdependency between the Company and its host communities where the Company, through Elcrest, willplay a major role in the provision of basic social amenities such as education, health, services, powergeneration and the provision of potable water as well as skills training and employment.

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The Company is also fully aligned with the stated commitment of the Federal Government of Nigeria to thedevelopment of local content and priority is given in the award of contracts to Nigerian contractors where alarge number of oilfield services are now reserved for indigenous companies and this will have a positiveimpact on employment and wealth creation within the communities in which Elcrest will operate.

The Company treats the health and safety of all employees as a highest priority, and will comply with allenvironmental obligations to ensure that its operations do not harm the environment or affect the ecosystemin the areas where it operates.

1.23 Current trading and financial information

The current business activities of Eland include the evaluation of acquisition opportunities, the raising offinance and the recruitment of staff. Further details of the recent capital raisings are set out at paragraph 1.3of this Part 1 in the Document.

The financial statements of the Company in the year to 31 December 2011, and the pro forma balance sheetare set out in Part 6 of this Document.

1.24 Reasons for the Placing and Admission

The Directors are seeking to raise funds in the Placing (in conjunction with the proceeds of the SCB FacilityAgreement and, to the extent exercised, the proceeds of the Solstice Options and the Helios Options)principally to finance the remainder of the consideration payable in relation to the Acquisition together withsums for the payment of accrued interest on the First Loan Notes, the Second Loan Notes and the Third LoanNotes and to finance the initial development of OML 40. The proceeds from the Placing will further providethe Group with additional working capital to execute its business strategy outlined at paragraph 1.18 above.It is anticipated that Admission will raise the Company’s profile, provide it with access to the capital markets,aid liquidity of the Shares as well as diversifying its shareholder base.

1.25 Use of proceeds

The Board intends to use the gross proceeds from the Placing (being £118 million) together with theadditional financing to which it has access pursuant to the Solstice Option Agreement and the SCB FacilityAgreement as follows:

• US$138.6 (£89.4) million, being the balance amount to be applied to the Acquisition Price

• US$15.0 (£9.7) million, being the amount applied to the re-commissioning of existing infrastructure

• US$5.0 (£3.2) million, being the amount to be applied to the acquisition of a further four per cent.interest in Elcrest

• US$47.9 (£30.9) million, being the working capital and administrative costs

• US$14.4 (£9.3) million, being the amount applied to fees relating to the Acquisition and Admission

1.26 Directors and senior management

Ian Leslie Blair, Chief Executive Officer, aged 59

Leslie Blair has over 35 years’ upstream oil and gas industry experience, most recently with Addax. He spent12 years with Addax in Nigeria and Kurdistan and he has held a wide variety of senior executive positionsin the United Kingdom, Spain, Libya, Vietnam, India, Nigeria, Kurdistan and Dubai.

Mr. Blair spent nine years in Nigeria with Addax from 1998 to 2006 where he was Executive DirectorBusiness Services, Managing Director New Ventures and Managing Director of Nigeria operations. In 2006he assumed the position of General Manager of the operating company for the giant Taq Taq Field inKurdistan and in 2008 became Managing Director of Addax Petroleum Middle East Limited based in Dubai.

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Prior to joining Addax in Nigeria, Mr. Blair held Country Manager positions with Enterprise Oil and BritishGas in South East Asia.

Mr. Blair graduated from the University of Aberdeen in Finance & Economics in 1974 and is a Fellow of theAssociation of Certified Accountants. He is currently on the board and is the managing director of Elcrest.

George Walter Mitchell Maxwell, Chief Financial Officer, aged 46

George Maxwell has over 20 years’ oil industry experience in both the producing and service/manufacturingarena. He was until recently Business Development Manager for Addax and, prior to this, CommercialManager in Geneva. Mr. Maxwell joined Addax in 2004 and held the General Manager’s position in Nigeria,responsible for finance, fiscal and commercial activities.

Prior to this, Mr. Maxwell worked with ABB Oil & Gas as vice president of finance based in the UK withresponsibilities for Europe and Africa. He held a similar position in Houston, from where the organisationran its operations in 10 countries. Prior to this, Mr. Maxwell was located in Singapore as finance director forAsia Pacific and Middle East, handling currency swaps and minimising exposures during the Asian financialcrisis of the late 1990s.

Mr. Maxwell began his career at Texaco working in economics and fiscal planning and has held variousdirectorships in the UK, France, Singapore, Iran, Canada, Australia and Nigeria in the shipping,manufacturing and oil producing sectors.

Mr. Maxwell graduated from Robert Gordon University in Aberdeen with a Masters in BusinessAdministration. He is currently on the board and is the financial director of Elcrest.

Gilles Jacobus Krijger, Executive Technical Director, aged 64

Mr. Krijger has over 35 years’ upstream oil and gas experience. He is a Dutch citizen, and joined RoyalDutch Shell in 1976 with assignments to Brunei Shell, Nederlandse Aardolie Maatschappij, Abu Dhabi OilCompany, Shell Expro (UK), Shell Argentina, Norske Shell and Shell Nigeria.

During his career with Shell, Mr. Krijger held various positions in reservoir and petroleum engineering, newventures and project management. Mr. Krijger joined Addax in 1999 and was Head of ReservoirEngineering, Head of Corporate Planning and Corporate Head of Reservoir Engineering/Reserves Manager.

Mr. Krijger holds a Masters degree in Aeronautical Engineering from the Technical University of Delft,Netherlands.

Henry (“Harry”) George Wilson, Non-Executive Chairman, aged 59

Mr. Wilson has over 35 years’ international experience in upstream oil and gas initially as an explorer withBritish Petroleum and then as the founder and chief executive officer of several independent oil companies.During this period, he led listings for four companies. He has been a director of public companies both inthe UK and abroad across a number of sectors.

Mr. Wilson graduated with a BSc Hons in Physics from Manchester University and attended the InseadBusiness School in France.

Proposed Directors

Robert (“Bob”) Alexander Lambert, Non-Executive Director and Senior Independent Director, aged 63

Mr. Lambert has over 40 years’ upstream oil and gas experience. Mr. Lambert is currently CEO andPresident of TSX-V listed Petra Petroleum Inc. Mr. Lambert recently stepped down from GB Petroleum Ltd,a London-based private international exploration company that he founded and managed for just over fiveyears. Prior to GB Petroleum, Mr. Lambert enjoyed a successful 25 year career with Conoco.

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Mr. Lambert has broad multi-disciplinary experience in Exploration, Production, Business Development andCorporate Management with a wide international exposure in North Africa, West Africa, Middle East,Southeast Asia, Australia and the USA.

Mr. Lambert obtained an MBA (with Distinction) in 1997 from Aberdeen University and is a CharteredGeologist and Fellow of the Geological Society of London.

Louis Emmanuel Castro, Non-Executive Director, aged 54

Mr. Castro has over 25 years’ corporate finance and corporate broking experience, both in the City andoverseas, during which time he has been responsible for a number of oil and gas and mining IPOs and capitalraisings.

Mr. Castro is currently head of equities at Northland Capital Partners in London, having previously beenhead of corporate finance at Matrix Corporate Capital LLP and at Insinger de Beaufort. Before then he spenteight years at Williams de Broe, six years at Price Waterhouse and three years at SG Warburg. He haswidespread international expertise, having advised the boards of companies in the UK, Australia, Canada,India, Africa, the Far East, and South America, in a variety of sectors, including oil & gas, mining, andenergy.

Mr. Castro is a Fellow of the Institute of Chartered Accountants in England and Wales and graduated with aBSc & BComm (Hons) in Engineering Production & Economics from Birmingham University.

Russell Seth Harvey, Non-Executive Director, aged 60

Mr. Harvey has 38 years of diversified experience in the upstream oil and gas business.

Mr. Harvey started his career with Philips Petroleum in Texas and Norway and has held executive positionswith Kerr McGee Oil, a leading US independent where he was responsible for properties in the UK, Norwayand the Middle East. He was also heavily involved in the discovery and development of their first UKoperated field. He was Managing Director of Lasmo North Sea from 1991 to 1996 ultimately responsible for100mbopd of production and operations in both the UK and the Netherlands. In 1996, as CEO of BitechPetroleum, a Canadian Toronto Stock Exchange listed company, he was instrumental in developing fields inthe Komi republic of Russia taking the company from zero to 10mbopd in one year.

Mr. Harvey assisted in the formation of Intrepid Energy, a private company funded by venture capital.Having raised US$250 million equity this became a full time role in 1997 where he was director responsiblefor all transactions. The company ultimately had circa 20mbopd production and interests in a major oildiscovery. It was sold for over US$1 billion in 2004 following which he consulted with SumitomoCorporation as a mergers and acquisitions adviser. From 2006 to 2008 he was CEO of AIM-quoted ForumEnergy, a company with oil, gas and coal assets in the Philippines. From 2008, he has consulted with anumber of companies providing business strategy and development advice using his extensive network in theindustry. Latterly, this included Nigerian-focused UK private company EER. This association endedin January 2012 but his two year involvement gave him a firm understanding of the Nigerian oil industry andbusiness practices.

Mr. Harvey has broad international experience, and has experience in the development of a number of start-up exploration, production and service companies both in the UK and internationally.

Mr. Harvey has a BSc in Mechanical Engineering from Imperial College and is a member of the Institute ofEnergy.

Non-Executive Director to be appointed to the Board by Helios

Under the terms of the Relationship Agreement, further details of which are set out in paragraph 11.3.21 ofPart 8 of this Document, Helios has the right (subject to certain conditions) on the day which is 90 days afterAdmission to nominate for appointment to the Board (and all committees of the Board except the nomination

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committee and subject to such individual having appropriate experience) one Director by giving notice to theCompany.

Senior Management

Jay Christison, Facilities Manager, aged 65

Mr. Christison has over 30 years’ experience in the safe, successful design and construction of oilfieldfacilities worldwide, with the last 15 years being in Nigeria. Prior to moving to Nigeria, he worked inCalifornia, the Middle East and Houston.

In Nigeria, Mr. Christison spent the first five years as the Country Manager for Paragon Engineering,providing design engineering services to the local petroleum industry. The last 10 years were spent withAddax where he played a key management role in both the design and construction of all the successfulprojects in both the near shore and onshore concessions.

Mr. Christison brings a proven record of performance in conceiving and executing smaller sized, fit forpurpose, low cost projects, and a wealth of knowledge on the capabilities of local contractors and vendors inNigeria. Mr. Christison will manage the design and construction of the oil producing facilities from thewellheads through the flowstations to the pipelines carrying the crude to the point of sale.

Mr. Christison has a Masters degree in Mechanical Engineering and has been a registered ProfessionalEngineer in British Columbia since 1974.

Micol Hetherington, General Manager Finance, aged 42

Mrs. Hetherington is a chartered accountant with over 18 years’ oil operator and service experience.

Prior to joining Eland, Mrs. Hetherington worked for over five years with Addax in Geneva as their JointVenture Accounting Manager responsible for the finance reporting of all their joint ventures in West Africaand Kurdistan.

Mrs. Hetherington worked for Amerada Hess in their Aberdeen and Copenhagen offices as the FinanceManager for the Danish operations and the forecast and budget team leader for their North West Europeoperations. Other experience includes management accounting for Paladin Resources in Aberdeen, BakerHughes Centrilift in Aberdeen and Norway, tax accounting for Sedco Forex and auditing with Ernst &Young.

Mrs. Hetherington graduated with degree in Business Studies from Robert Gordon University and is amember of the Institute of Chartered Accountants of Scotland.

Proposed Senior Management

Pieter van der Groen, Technical General Manager, aged 50

Mr. van der Groen has over 20 years’ oilfield exploration and production experience in a variety of technical,operational and management roles. He started his career with the oilfield service company Schlumberger asa geologist in London, moving on to become a wireline engineer working in South East Asia and WestAfrica. After his field work, he trained as a log analyst working in London and seconded to Exxon.

Mr. van der Groen moved to the independent oil company Amerada Hess in London, providing petrophysicalsupport for the newly formed International Department. With Amerada Hess, he worked abroad on two largeon-shore field rehabilitation projects, the first in Azerbaijan and the second in Algeria, in a variety oftechnical, operational and management roles. Mr. van der Groen has also worked with Gulfsands in Syria asdeputy general manager, and his recent experience consists of four years in Nigeria as general manager ofan independent oil company, overseeing an on-shore development in the Niger Delta. Mr. van der Groen alsopreviously worked for Eland from August 2010 to April 2012.

Mr. van der Groen has a comprehensive background in subsurface evaluation, operations and technicalmanagement with specific expertise in oil-field start-ups and field rehabilitation projects.

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Mr. van der Groen has a geology degree from Auckland University and a Masters degree in PetroleumGeology from the University of Aberdeen.

1.27 Offices and employees

To date, the Company has established offices in Abuja (Nigeria), Aberdeen (Scotland) and Sharjah (U.A.E).

To meet the human resource needs of the business of operating OML 40 indirectly through Elcrest, theCompany expects to significantly expand its operational and technical personnel principally in Nigeria, andalso in the UK.

As part of the Acquisition arrangements, it was provided that a number of SPDC employees would transferto Elcrest. Pursuant to the Acquisition Amendment Agreement, Elcrest is no longer under an obligation toassume such employees and certain of such employees will now transfer to NPDC as Operator. Pursuant tothe terms of the Acquisition Agreement, Shell’s facilities in Warri will be made available to Elcrest for a sixmonth period. Further details of the Acquisition Agreement and the Acquisition Amendment Agreement canbe found at paragraphs 11.1.1 and 11.1.2 of Part 8 of this Document.

1.28 Share scheme arrangements

The Company recognises that ongoing share ownership is an important part of the Company’s incentivisationand retention policy. The Company has therefore adopted the following share incentive plans:

• the Eland Share Option Plans; and

• the Eland Co-Investment Plan (together the “Share Plans”).

The Eland Share Option Plans are intended to provide incentives to employees, Directors and officers of theCompany and its subsidiaries and to persons who provide services to the Company or any of its subsidiariesunder a contract for services. There are two plans, one for employees and one for non-employees. The termsof the two plans are substantially similar.

The Eland Co-investment Plan is intended for persons providing services to the Company or any of itssubsidiaries under a contract for services.

Details of the Share Plans and options that have been granted under them are set out in section 11.5 of Part 8of this Document.

1.29 Lock-in and orderly market arrangements

Following Admission, the Directors and the Proposed Directors will, between them, hold 1,364,681 OrdinaryShares, representing approximately 1 per cent. of the Enlarged Share Capital.

Pursuant to Rule 7 of the AIM Rules the Directors and the Proposed Directors have, under the terms of theLock-in Arrangements, agreed with Canaccord not to dispose of, or agree to dispose of, directly or indirectly,and procure that their Associates shall not dispose of or agree to dispose of, any Ordinary Shares or intereststherein at any time prior to the first anniversary of the date of Admission save in certain circumstancesincluding the event of the acceptance of an offer for the entire issued share capital of the Company or anintervening court order. In addition, the parties have agreed to certain orderly market arrangements withregard to their shareholdings in the period up to 12 months from the first anniversary of the date ofAdmission.

1.30 Dividend policy

It is the intention of the Directors that the Company should achieve capital growth for Shareholders. In theshort term, the Directors intend to re-invest any future profits of the Company in the Group and, accordingly,are unlikely to declare dividends for the foreseeable future. However, the Directors will consider thepayments of dividends out of distributable profits of the Company where they consider it is appropriate todo so. The Company has paid no dividend to Shareholders as of the date of this Document.

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1.31 Corporate governance

The Directors recognise the importance of sound corporate governance and intend that the Company willcomply with the main provisions of the UK Corporate Governance Code insofar as is practicable to do sofor a company of Eland’s size and stage of development, save in relation to certain of the Directors andProposed Directors, who will not be independent because of the grant or proposed grant of options to themby the Company and for any director appointed by Helios under the terms of the Relationship Agreement,who will not be independent because of their connection with Helios. Further details of the Share Plans andthe performance conditions attached to them and the Relationship Agreement are set out at paragraphs 11.5and 11.3.21 of Part 8 of this Document. It is anticipated that at such time as when Helios appoint a directorto the Board, which in any event will be no earlier than 3 months after Admission (pursuant to theRelationship Agreement), they will also be appointed to one or more of the committees as appropriate to theirskills and experience and as recommended by the Chairman. The Company has decided to appoint RobertLambert as the Company’s senior independent director.

The Board is responsible for formulating, reviewing and approving the Company’s strategy, budgets andcorporate actions. Following Admission, the Directors intend to hold Board meetings at least quarterly andat such other times as they deem necessary. The Board will create a remuneration committee, an auditcommittee, a Technical and Reserves committee and a nomination committee with effect from Admission.

The audit committee will initially consist of Louis Castro as chairman and Robert Lambert and HarryWilson. It will meet at least twice each year and will be responsible for ensuring that the financialperformance of the Company is properly monitored and reported on and for meeting with the auditors andreviewing findings of the audit with the external auditor. It is authorised to seek any information it properlyrequires from any employee and may ask questions of any employee. It will meet with the auditors once ayear without any members of management being present and is also responsible for considering and makingrecommendations regarding the identity and remuneration of such auditors.

The remuneration committee will initially consist of Harry Wilson as chairman and Louis Castro and RussellHarvey. It will meet at least once each year and will consider and recommend to the Board the frameworkfor the remuneration of the executive directors of the Company and any other senior management. It willfurther consider and recommend to the Board the total individual remuneration package of each executivedirector including bonuses, incentive payments and share options or other share awards. In addition, subjectto existing contractual obligations, it will review the structure of all share incentive plans for approval by theBoards and, for each such plan, will recommend whether awards are made and, if so, the overall amount ofsuch awards, the individual awards to executive directors and the performance targets to be used. No directorwill be involved in decisions concerning his own remuneration.

The technical and reserves committee will initially consist of Robert Lambert as chairman and Louis Castroand Russell Harvey. The committee will meet at least twice a year and will be responsible for reviewing thetechnical performance and plans of the Company and to review and approve the annual reserves audit to beperformed by a competent technical auditor. The committee will be responsible for the selection andappointment of the technical auditor for recommendation provided by the Company or independentlysourced by the committee.

The nomination committee will initially consist of Harry Wilson as committee chairman and Robert Lambertand Russell Harvey. The nomination committee will meet at least once each year and will consider theselection and re-appointment of Directors. It will identify and nominate candidates to all Board vacanciesand will regularly review the structure, size and composition of the Board (including the skills, knowledgeand experience) and will make recommendations to the Board with regard to any changes.

The Company has adopted a share dealing code (based on the AIM Rules) and the Company will take allproper and reasonable steps to ensure compliance by the Directors and relevant employees.

The Board is also responsible for ensuring the Company’s compliance with all applicable anti-corruptionlegislation, including, but not limited to, the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act1977. The UK Bribery Act 2010 came into force on 1 July 2011 and consolidates the UK’s existinganti-corruption laws. The Company complies and always has complied with all applicable anti-corruption

40

laws. In view of the requirement in the UK Bribery Act 2010 for relevant companies to have adequate anti-bribery procedures, the Company has devised and implemented a suite of anti-corruption policies andprocedures designed to prevent corruption by anyone working on its behalf. The Company has adopted a“zero tolerance” approach to corruption and is committed to ethical business practices.

1.32 The City Code on Takeovers and Mergers (the “Code”)

The Code is issued and administered by the Takeover Panel. The Code applies to offers for all UK-incorporated AIM-quoted companies considered by the Takeover Panel to be resident in the UK, the ChannelIslands or the Isle of Man. The Takeover Panel will normally consider a company to be resident if its placeof central management is in one of those jurisdictions. It is expected that the Code will apply to the Companyat Admission and Shareholders are entitled to the Protections afforded by the Code. Under Rule 9 of theCode, where (i) any person acquires, whether by a series of transactions over a period of time or not, aninterest in shares which (taken together with shares in which persons in which he is already interested andin which persons acting in concert with him are interested) carry 30 per cent., or more of the voting rightsof a company subject to the Code, or (ii) any person who, together with persons acting in concert with him,is interested in shares which in the aggregate carry not less than 30 per cent. but holds shares in the aggregatewhich carry not more than 50 per cent. of the voting rights of such a company, and such person, or any personacting in concert with him, acquires an interest in any other shares which increases the percentage of sharescarrying voting rights in which he is interested, then, except with the consent of the Takeover Panel, he, andany person acting in concert with him, must make a general offer in cash to the holders of any class of equityshare capital whether voting or non-voting and also to the holders of any other class of transferable securitiescarrying voting rights to acquire the balance of the shares not held by him and his concert parties.

Save where the Takeover Panel permits otherwise, an offer under Rule 9 of the Code must be in cash and atthe highest price paid within the 12 months prior to the announcement of the offer for any shares in thecompany by the person required to make the offer or any person acting in concert with him. Offers fordifferent classes of equity share capital must be comparable. The Takeover Panel should be consulted inadvance in such cases.

In the event that the Code should cease to apply, the Company will notify Shareholders accordingly uponbecoming so aware of this occurring.

1.33 Risk factors

Investing in New Ordinary Shares involves a high degree of risk. Investors should carefully consider all theinformation in this Document including the Risk factors in Part 4 of this Document and the reputationalissues drawn to the attention of Placees in Part 2 of this Document, before investing in the New OrdinaryShares.

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PART 2

INFORMATION ON ELCREST, STARCREST AND EMEKA OFFOR

2.1 Elcrest

As described in Part 1 of this Document, the Company established a joint venture with Starcrest throughElcrest where a pre-requisite to the Company’s participation in the bidding round for the Acquisition wasthat the divestment would be made to an indigenous company. The Company currently owns 45 per cent. ofthe shares in Elcrest whilst Starcrest owns the balance of 55 per cent. The Company and Starcrest haveentered into the Starcrest Option Agreement on 21 April 2012. Under the Starcrest Option Agreement, theCompany has agreed to purchase four per cent. of the shares in Elcrest from Starcrest for US$5 million,within 30 days of completion of the Acquisition. This will thereby increase the Company’s holding of sharesin Elcrest to 49 per cent. Under the Starcrest Option Agreement, the Company also has the benefit of theStarcrest Option giving the Company the right to acquire from Starcrest a further 10 per cent. of the sharesin Elcrest exercisable at any time after the first anniversary of First Production and before the secondanniversary of First Production in consideration for the payment of US$10 million. If exercised, the StarcrestOption would lead to the Company holding a majority of the shares in Elcrest. The Directors believe thatwhilst the Starcrest Option to acquire the 10 per cent. shareholding in Elcrest provides the Company withthe opportunity to increase its equity in Elcrest, the exercise of the Starcrest Option would not add materiallyto the level of control which the Company already has over Elcrest despite being a minority shareholder.However in circumstances where the Company’s business plan changes materially it may be advantageousto exercise the Starcrest Option. Further details concerning the Company’s control of Elcrest are set out atparagraph 2.3 of this Part 2.

As with many prominent and successful Nigerian businessmen, both Starcrest and Emeka Offor (as anindividual) have attracted significant media attention primarily in Nigeria, some of which is of an adversenature. Paragraph 2.2 of this Part 2 also therefore provides a summary of key allegations and claims aboutthe Company’s joint venture partner which the Company is aware of and addresses potential concerns whichinvestors might have as a result. Despite efforts to address the issue, reports from organisations such asTransparency International indicate that corruption remains widespread in Nigeria.

2.2 The Chrome Group, Starcrest and Emeka Offor

Emeka Offor has a high profile in Nigeria where he has a large range of business interests principally focusedon the energy sector, held through the Chrome Group. He is also well-known for his service as chairman ofUS-registered ERHC Energy Inc. (“ERHC”) from 2001 until he resigned in August 2007. The ChromeGroup continues to hold a substantial minority equity interest in ERHC. ERHC is a Colorado (US) companywith oil and gas assets in Sub-Saharan Africa. Its securities are publicly traded on the OTCBB (Over TheCounter Bulletin Board) securities market.

The Chrome Group was founded by Emeka Offor in 1994. The Directors regard the Chrome Group as amajor Nigerian indigenous group with subsidiaries operating in oil and gas exploration and production, oiland gas servicing, engineering, insurance, logistics and power industries.

As explained in Part 1 of this Document, Starcrest is a Nigerian-registered subsidiary of the Chrome Group,and was established in May 2006 in Abuja, Nigeria. Starcrest is currently an equity partner of Addax (asubsidiary of the Sinopec Group) in OPL 291 which is an oil prospecting lease located offshore in Nigeria.Both the Chief Executive (Les Blair) and Chief Financial Officer (George Maxwell) of the Company havehad previous experience in working with Starcrest since 2006 when they were employed by Addax prior tothe setting up of the Company in 2009. Les Blair has also been a director of ERHC from 2010 to date.Mr. Blair has undertaken to resign from ERHC on Admission. The Company entered into the ElcrestShareholders’ Agreement with Starcrest to work together, through Elcrest, in relation to the acquisition ofOML 40.

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As with many prominent and successful Nigerian businessmen, both Starcrest and Emeka Offor (as anindividual) have attracted significant media attention primarily in Nigeria, some of which is of an adversenature. The media attention focuses particularly on Emeka Offor’s close relationships with members of thepolitical elite in Nigeria including suggestions that he has used these relationships improperly forcommercial advantage or represents undisclosed commercial interests of politicians and enjoys protectionfrom senior politicians.

Emeka Offor does enjoy strong connections with senior government officials in Nigeria and is also widelycited as one of the main financiers of the ruling Peoples’ Democratic Party (“PDP”).

Despite significant due diligence, the Directors are not aware of any charges or convictions against Starcrestand/or Emeka Offor. Rumours about prominent and wealthy business people in Nigeria acting as the ‘fronts’or proxies for public officials are common but very rarely proven. The Directors believe that in the absenceof an effective regulator, local media publications are often prone to circulate unsubstantiated claims againsthigh profile or highly politicised individuals, which have not been thoroughly researched or corroborated.Whilst investigations have been commenced by governmental bodies either within or outside of Nigeria, sofar as the Directors are aware, none of these enquiries have resulted in any action being taken against EmekaOffor or Starcrest.

Details of the key claims and allegations relating to Emeka Offor and/or Starcrest which have come to theCompany’s attention as a result of its due diligence are set out below. This is not an exhaustive list and it ispossible that other claims and allegations may arise after the date of this Document.

United Kingdom visa withdrawal

• In March 2010, Emeka Offor’s leave to enter the United Kingdom was withdrawn due to certainallegations of impropriety including some of those set out below.

• An appeal was made against the exclusion order at the UK immigration court in the first tier tribunal.The judge ruled that there were no grounds to support the visa withdrawal and ordered it be reinstatedon 17 March 2011.

OPL 291 bid round award

• As mentioned above, OPL 291 was awarded to Starcrest (and subsequently Addax) in 2006. Therewas significant media speculation as to whether Starcrest was awarded the OPL 291 licence inaccordance with the terms of the relevant licensing round or the award was influenced by Starcrest’spolitical connections.

• A Nigerian House of Representatives Ad Hoc Committee carried out an investigation and issued asubsequent comprehensive report into the due process of allocation of all oil blocks by the Directorateof Petroleum Resources from 1999 to 2010. In the report tabled in December 2008 to the House ofRepresentatives, the award of OPL 291 to Starcrest is detailed as being approved with no furthercomment.

• The Company is aware of press commentary suggesting that Nigeria’s Economic and FinancialCrimes Commission (“EFCC”) initiated an investigation in relation to OPL 291. So far as theDirectors are aware, there are no outstanding EFCC investigations nor have any charges been broughtby EFCC.

• Separately, Starcrest Investment Limited, a company in no way related to Starcrest, claimed thelicence was awarded to it rather than Starcrest. Therefore, the Economic Community of West AfricanStates Court of Justice was asked to rule on the validity of the award of OPL 291 and the Court ruledin favour of Starcrest.

ERHC US governmental and regulatory investigations

• ERHC has been the subject of a number of investigations, some of which are regarding events that predate the involvement of Emeka Offor in ERHC. In 2005, the Attorney General of São Tomé and

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Principe produced a report that made reference to specific allegations against ERHC and the ChromeGroup of improprieties related to the award of licences in the Nigeria-São Tomé Joint DevelopmentZone including allegations of payments made to government officials in São Tomé or the provision ofbenefits to their families. The Attorney General referred the matter to the United States Departmentof Justice (“DoJ”) and the United States Securities and Exchange Commission (“SEC”) who eachconducted further investigations.

• ERHC announced on 27 April 2012 that it had received formal confirmation from the Department ofJustice and the SEC that proceedings on subpoenas served on ERHC several years ago are closed. Theannouncement follows ERHC’s receipt of letters from each of the DoJ and the SEC relating to thesubpoenas served on ERHC between 2006 and 2007. The DoJ stated that as at the date of its letter itdid not intend to take any enforcement action against ERHC and is closing its enquiry. The SEC statedin April 2012 that it had completed the investigation and had no intention, at that time, to recommendany enforcement action against ERHC. The Directors understand that both the DoJ and the SEC havethe ability to reopen their respective investigations in the future.

Refinery turn around maintenance contract (“TAM”)

• Chrome Oil Services was awarded a TAM contract of a value of circa US$100 million at Port HarcourtRefinery in the late 1990s. This was the first time a refinery maintenance contract in Nigeria wascarried out by an indigenous company (in partnership with Retrom Oil Co of Romania).

• The TAM project was subject to negative media comment which revolved around a perception thatChrome Oil Services was ill-equipped to perform the services under the TAM contract and thus aninappropriate and unlikely choice of contractor.

• So far as the Directors are aware, Chrome Oil Services completed the TAM contract in 2001.

Banking Relationships: Orient Bank/African Express Bank

• The Chrome Group purchased and recapitalised the Orient Bank in 2001 when it initially failed andchanged its name to the African Express Bank. A total of 36 banks ultimately failed prior to the 2005banking consolidation in Nigeria, including the African Express Bank. A number of these banks failedfollowing defaults on loans granted by the banks to shareholders (“insider loans”) where the collateralobtained by the banks proved inadequate.

• A report was adopted by the Nigerian Senate that named a large number of parties who had defaultedon insider loans. Emeka Offor, as Chairman of the Chrome Group, was named in this report as beingthe holder of an insider loan to the value, following partial repayment, of N3.8 billion(US$24,219,248 million).

• In 2009 the Nigerian Senate Committee on Banking, whilst acknowledging that Chrome Group stillhad balances outstanding, formally commended the Chrome Group for their attitude during thebanking crisis and for the repayments made to that date. So far as the Directors are aware, there areno outstanding investigations against Emeka Offor or the Chrome Group in this regard.

Diamond Bank

• A story was published in the Nigerian press in 2012 stating that Diamond Bank was going to declareEmeka Offor bankrupt due to an alleged default on a N2 billion (US$12,742,912.76) debt owed byChrome Oil Services.

• The Company is aware of correspondence from Diamond Bank clarifying that it did not authorise thepublication or verify the contents of the press story and requested a retraction by the newspaper. Sofar as the Directors are aware, although debts remain outstanding with Diamond Bank, there are nobankruptcy proceedings between Diamond Bank and Chrome Oil Services currently in place orcurrently anticipated.

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National Integrated Power Project (NIPP) Contracts

• In the period 1999-2007, under the Presidency of Olusegun Obasanjo, a large number of contractswere awarded under the National Integrated Power Project (“NIPP”) including power plants andassociated infrastructure.

• In 2008/2009 there was considerable media attention relating to the various contract awards andsubsequently Nigerian Senate Committees looked at whether these contracts were awarded under dueprocess or were the subject of improper interference.

• Chrome Group was one of a number of firms awarded contracts and which was named by the NigerianSenate. So far as the Directors are aware, on conclusion of the Nigerian State Committeeinvestigations, no criticisms were made and ultimately no charges were brought against ChromeGroup and the relevant contracts awarded to the Chrome Group under the NIPP continued in place.

Despite the various enquiries conducted by the Company, the Directors are not aware of any sanctions,charges, or convictions, that have been brought against Emeka Offor and/or Starcrest in Nigeria or overseas.Furthermore, Emeka Offor’s companies have continued to expand their operations in Nigeria and have beeninvolved in transactions with a number of prominent local and international companies in the oil and gassector. Emeka Offor has enjoyed close relationships with members of the Nigerian political elite for manyyears and is widely cited as a major financier of the ruling PDP. This might result in Emeka Offor enjoyinga degree of political protection.

Whilst the absence of any convictions is no guarantee that Emeka Offor has never engaged in anyimpropriety which could, if discovered, bring the Company into disrepute, the Directors are comfortable,through (where relevant) a combination of their previous experience of working with Emeka Offor andhaving done substantial due diligence into Emeka Offor and Starcrest, that the Company’s past andcontinuing relationship with Starcrest was and is in the best interests of the Company. It is worthwhile notingthat despite the levels of corruption in Nigeria there are a significant number of listed oil and gas companiesoperating in Nigeria. The Directors believe that the Company has put in place appropriate protections toguard against corruption.

Your attention is drawn to the following Risk Factors titled “Eland and Elcrest’s relationship with Starcrest”,“Reliance on local partners” and “Oversight of local partners” on pages 54 to 55 of this Document.

2.3 Control of Elcrest

The Company is aware that investors may have potential concerns over how the Company’s interest inElcrest is protected and how the perceived risks of operating with an indigenous Nigerian partner have beenaddressed. Therefore, the details of the key elements of the controls in place are detailed below.

The Company has in place a number of substantial controls notwithstanding the fact that it is only a45 per cent. shareholder in Elcrest. These controls are achieved through a combination of the Elcrest LoanAgreement (and the related Share Charge and debenture) and through the Elcrest Shareholders’ Agreement.The Elcrest Shareholders’ Agreement places a number of restrictions on the rights of Starcrest at a board andshareholder level whilst the Elcrest Loan Agreement remains outstanding. There are also positive obligationsimposed on Starcrest on how it operates at a board and shareholder level which are backed up by appropriatesecurity.

Also, the Elcrest Shareholders’ Agreement provides that the executive positions in Elcrest, being those of themanaging director and finance director, are the responsibility of the Company’s nominee directors.

The Directors consider that should the Company need to take steps to terminate the joint venture withStarcrest, the Company would be able to retain its interest (through Elcrest) in OML 40 (subject to beingable to finance the buy-out of Starcrest).

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The Elcrest Loan Agreement

The Company entered into the Elcrest Loan Agreement with Elcrest on 24 March 2011 under which Elcresthas borrowed from the Company an amount needed to reimburse the Company for the Bid Deposit, requiredby the Sellers (US$15.4 million) which was paid into an escrow account as part of the Acquisition process,and to pay the costs of the Acquisition. Elcrest may also use the loan facility in the future for general workingcapital purposes. The principal amount of the loan under the Elcrest Loan Agreement is up to an initial limitof US$180,000,000, and interest is payable at a rate of interest equivalent to the 90 day NIBOR interest rate,at the date of this Document, plus a commercial premium rate typically obtainable for a US dollar loanagreement of this type in Nigeria.

The Elcrest Shareholders’ Agreement (as amended by the Elcrest Shareholders’ Agreement AmendmentLetter) states that Eland and Starcrest have agreed to seek bona fide arms’ length third party financing assoon as practicable for Elcrest, both to finance Elcrest and refinance the Elcrest Loan. Any such third partyfinancing must be approved by Elcrest’s board (requiring at least one of the Company’s appointed directors’positive vote) and the cost of servicing such debt, as far as reasonably practicable, not exceed 70 per cent.of Elcrest’s budgeted net revenue. Eland will, in any event, have the right to match any such third partyfinancing and Eland (i) has the right to review and confirm the financial proposal from the third partyfinancing entity; and (ii) is obliged to provide such matching proposals within 30 days of receipt of suchproposals by Elcrest.

The loan is repayable on demand, although the Company can only make demand on (a) quarter days fallingafter the third anniversary of the date of the agreement; or (b) any time after the date of an event of defaultoccurs. Unless an event of default is continuing the Company cannot demand repayment for more than thefree cash flow (calculated in accordance with terms of the Elcrest Loan Agreement). Events of default (whichmay be declared by the Company and not by Starcrest) include the usual events such as:

• non-payment,

• breaches of representations,

• insolvency,

• material change in financial condition,

• breach of an obligation under a finance document (including the Share Charge),

• change of control of Elcrest, and

• any court action which would affect Elcrest’s ability to perform its obligations under the Elcrest LoanAgreement (or any other finance document),

along with certain bespoke events, such as the issuance by the Company of a “Deadlock Notice” (which isdescribed in more detail below in the paragraph entitled “The Elcrest Shareholders’ Agreement”).

The Elcrest Loan Agreement is supported by security in favour of the Company in the form of a debenture(fixed and floating charge) over certain assets of Elcrest and the Share Charge.

Under the Share Charge, Starcrest has deposited the following documentation with the Company’s Nigerianlegal counsel:

• Share certificates in relation to Starcrest’s holding of shares in Elcrest;

• Signed undated blank transfer forms in relation to Starcrest’s shares in Elcrest;

• Signed undated letters of resignation from each director of Elcrest appointed by Starcrest;

• An irrevocable proxy signed by Starcrest appointing the Company as proxy to attend and vote atshareholder meetings of Elcrest;

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• An irrevocable power of attorney signed by Starcrest empowering the Company to exercise the votingrights attaching to Starcrest’s shares in Elcrest and enter into transfers, contracts and carry into effectany agreements with the Company in respect of the shares.

Starcrest is required to deposit with the Company updated documentation from time to time e.g. additionalpowers of attorney if and when further shares are issued to Starcrest.

For so long as the loan to Elcrest is outstanding, Starcrest is required to exercise (or refrain from exercising)any voting or any conditional or preferential rights attaching to Starcrest’s shares in Elcrest as directed bythe Company from time to time. Failure to comply with this obligation would constitute an event of defaultunder the Elcrest Loan Agreement and a breach of the Share Charge if left unremedied, and in suchcircumstances, the Company would be entitled to acquire Starcrest’s shares in Elcrest at 90 per cent. of fairvalue.

Upon the occurrence of an event of default under the Elcrest Loan Agreement, the Company is entitled toenforce its security under the Share Charge (and the debenture) including dating the transfer form(s), lettersof resignation, proxies and power(s) of attorney, have its name entered in the register of members of Elcrest,vote and transfer the charged shares and sell the charged shares and apply the proceeds towards the dischargeof the secured obligations.

The Elcrest Shareholders’ Agreement

The Company entered into the Elcrest Shareholders’ Agreement with Starcrest on 24 March 2011, asamended by the Elcrest Shareholder Agreement Amendment Letter on 31 May 2012. Further details are setout at paragraphs 11.2.1 and 11.2.2 of Part 8 respectively. The Elcrest Shareholders’ Agreement sets out therespective rights and obligations of the shareholders of Elcrest with regard to the direction and control of thebusiness of Elcrest. The Elcrest Shareholders’ Agreement also enshrines certain additional protections thatthe Company enjoys and which it would not otherwise derive as a 45 per cent. (or 49 per cent.) shareholderin Elcrest. Importantly, the required majority for carrying resolutions of the shareholders (where required bylaw or where there is deadlock at board level for example) is 75 per cent., which enables the Company toexert a substantial degree of control over Elcrest. Further, while the Elcrest Loan Agreement remains inforce, Starcrest is not permitted to take certain actions it would otherwise be entitled to take, including(without limitation):

• service of a default notice on the Company (which would otherwise result in the forced sale of thedefaulting shareholders’ shares), which may be served by a shareholder of Elcrest in the event of theinsolvency of the other party;

• service of a deadlock notice on the Company, which would otherwise trigger a process where, in theevent that a board or shareholder resolution is not passed by the requisite majority, the shares of oneor other of the shareholders’ shares in Elcrest may be transferred; or

• service of a drag along notice on the Company, which is a notice whereby each shareholder of Elcresthas a right (subject to waiver of pre-emption rights) to compel the other shareholder to sell its sharesto a bona fide arm’s length buyer.

These are important protections for the Company, as they effectively limit the actions that can be undertakenby Starcrest in relation to Elcrest for so long as the Elcrest Loan Agreement remains in place.

By comparison, the Company may serve a default notice, deadlock notice or drag along notice in relevantsituations. Whilst the representatives of the Company on the Elcrest board will be subject to fiduciary dutiesand the Company is under an obligation to ensure the Elcrest board directors nominated by the Companygive effect to the Elcrest Shareholders’ Agreement, the Elcrest Shareholders’ Agreement does not require anyparticular level of materiality to be exceeded before the Company can serve a default notice.

The Elcrest Shareholders’ Agreement contains other provisions that one would ordinarily expect to find insuch an arrangement, such as pre-emption rights on any new issue or transfer of shares, as well as a bespokeundertaking on each party to make any necessary adjustments to shareholdings to maintain the indigenous

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status of Elcrest. In line with industry practice, both shareholders may charge Elcrest for services providedby them to Elcrest under the Elcrest Shareholders’ Agreement: the Company may charge the greater of(a) 5 per cent. of its budgeted costs (including head office costs) and (b) US$3 million per annum for theprovision of administrative and technical services. Starcrest may charge Elcrest US$3 million per annum fortechnical and logistical services provided by it to Elcrest. Eland or Starcrest may charge further costs subjectto approval by the board of Elcrest.

Corporate governance arrangements for Elcrest

Elcrest has established a board comprising five directors, three of whom may be elected by Starcrest and twoof whom may be elected by the Company and the Company has the right, enshrined in the ElcrestShareholders’ Agreement, to appoint the managing director and the finance director of Elcrest whileStarcrest has the right to appoint the chairman, the company secretary and the deputy finance manager.

The Elcrest board will initially comprise Les Blair (Managing Director (the Company)), George Maxwell(Finance Director (the Company)), Dr. Andrew Uzoigwe (Chairman (Starcrest)), Paul Mba and Dr. StanleyLawson.

The Company and its wholly owned subsidiaries have adopted a Code of Conduct and Anti-Bribery Policydesigned to ensure compliance with relevant anti-corruption and bribery legislation including the UK’sBribery Act. The Code of Conduct and Anti-Bribery Policy have also been adopted by Elcrest. The Companyand Elcrest have received advice and training on relevant US anti-corruption and bribery legislationincluding the Foreign Corrupt Practices Act 1977.

The Elcrest Shareholders’ Agreement contains specific undertakings from each shareholder to comply withapplicable anti-corruption and bribery legislation. The committing of a material or persistent breach of theElcrest Shareholders’ Agreement that has not been remedied within the relevant time frame would entitle thenon-defaulting shareholder to serve a default notice to buy out the other shareholder’s shares in Elcrest at 90per cent. of fair value. However, whilst the Elcrest Loan Agreement remains outstanding Starcrest is not ableto serve a default notice on the Company.

OML 40 Operations

The Directors anticipate on the basis of analogous completed transactions, that the New Joint OperatingAgreement to be signed with NPDC on completion of the Acquisition will provide for equal representationfrom NPDC and Elcrest and that all decisions will require unanimity. The Company expects it will providethe majority of the representatives for Elcrest on the Operating Committee (being the Committee establishedpursuant to the New Joint Operating Agreement responsible for determining certain operational mattersrelating to OML40).

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PART 3

THE PLACING

Details of the Escrow Receipts Placing

As described on page 17 of Part 1 of this Document, Elcrest is required to procure that a minimum amountin aggregate equal to the balance of the Acquisition Price (US$138.6 million) is deposited in the AcquisitionEscrow Account(s) prior to Completion. The Acquisition Escrow Account(s) have been funded usingproceeds of the Escrow Receipts Placing under which the Escrow Receipts Placees have agreed to fund incash the Acquisition Escrow Account(s) prior to their subscription for New Ordinary Shares. PendingCompletion and pursuant to the Escrow Receipts, the Escrow Monies will be held by the Company subjectto a trust pursuant to which if Completion does not take place by the Escrow Deadline, the Escrow Monies,together with any accrued interest, are to be returned to the Escrow Receipts Placees. Provided thatCompletion takes place before the Escrow Deadline, the Escrow Monies equal to the balance of theAcquisition Price deposited by the Escrow Receipts Placees into the Acquisition Escrow Account(s) will betransferred to the Sellers as part payment for the Acquisition and the balance of the amounts standing to thecredit of the Acquisition Escrow Account(s) and any accrued interest after deduction of any costs charged bythe Escrow Agent will be provided to the Company for its general working capital purposes in considerationfor which the Escrow Receipts Placees will be issued with New Ordinary Shares.

Details of the General Placing

In addition to the Escrow Receipts Placing, the Company is proposing to undertake a further placing to beconducted by Canaccord, which is conditional on, amongst other things, Admission. Together with theEscrow Receipts Placing, the Company is proposing to raise approximately £106,800,000 (net of expenses)through the issue of 118,000,000 New Ordinary Shares at £1.00 per Ordinary Share. The expenses of theEscrow Receipts Placing and the General Placing will be paid from the funds raised through the GeneralPlacing.

The Placing

The New Ordinary Shares to be allotted pursuant to the Placing will represent 87.5 per cent. of theCompany’s Enlarged Share Capital. Except under the Helios Option Agreement described in paragraph11.3.22 of Part 8 of this Document, the Solstice Option Agreement described in paragraph 11.3.19 of Part 8of this Document and under the Share Plans described in paragraph 11.5 of Part 8 of this Document, nooptions over the Shares and New Ordinary Shares have been granted as at the date of Admission.

The New Ordinary Shares will rank, on issue, pari passu with the Existing Ordinary Shares including theright to receive dividends and other distributions, thereafter, declared, made or paid.

Pursuant to the Placing Agreement, Canaccord has conditionally agreed with the Company, on and subjectto the terms set out therein, to use reasonable endeavours to procure institutional and other investors tosubscribe for New Ordinary Shares at the Placing Price by means of the Escrow Receipts Placing and theGeneral Placing.

The Company and the Directors have, under the Placing Agreement, given certain warranties (which, so faras the Directors are concerned, are limited in amount), in favour of Canaccord. In addition, the Company hasgiven Canaccord an indemnity which applies in certain circumstances.

Canaccord is entitled to terminate the Placing Agreement insofar as it relates to the Escrow Receipts Placing,in its absolute discretion in certain specified circumstances prior to Completion and, insofar as it relates tothe General Placing, in its absolute discretion in certain specified circumstances prior to Admission,including, inter alia, for a breach of the terms of the Placing Agreement in any material respect by theCompany or the Directors or if an event occurred or a matter arose prior to the date of Completion orAdmission (as the case may be) which has rendered any of the warranties untrue or incorrect in any materialrespect or in the case of an event of force majeure arising (as defined in the Placing Agreement).

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On Admission, at the Placing Price, the Company will have a market capitalisation of approximately£135 million.

Further details of the Placing Agreement are set out in paragraph 11.4.2 of Part 8 of this Document.

Allocation and Placing

The Placing Price and the basis of allocation have been determined by the Company and Canaccord havingtaken into account various matters, including the level and the nature of the demand for New Ordinary Sharesand the desire for an orderly after-market. All New Ordinary Shares being subscribed for pursuant to theEscrow Receipts Placing or the General Placing (as the case may be) are being allotted at the Placing Price.

The rights attaching to the New Ordinary Shares being subscribed for pursuant to the Escrow ReceiptsPlacing or the General Placing (as the case may be) will be uniform in all respects with the Existing OrdinaryShares and will form a single class for all purposes.

Canaccord, and any of its affiliates acting as an investor for its own account, may purchase New OrdinaryShares pursuant to the Placing and, in that capacity, may retain, purchase, sell, offer to sell or otherwise dealfor its or their own account(s) in such securities or any other related investments in connection with thePlacing or otherwise. Accordingly, references in this Document to New Ordinary Shares being offered orotherwise dealt with should be read as including any offer to purchase or dealing by Canaccord and any ofits affiliates acting as an investor for its own account. Canaccord does not intend to disclose the extent of anysuch investment or transaction otherwise than in accordance with any legal or regulatory obligation to do so.

Admission, settlement and dealings

Application will be made for Admission of the Enlarged Share Capital to trading on AIM. It is expected thatAdmission to trading will become effective and that dealings in the Ordinary Shares and New OrdinaryShares will commence at 8.00 a.m. on 3 September 2012.

The Articles permit the Company to issue shares in uncertificated form in accordance with the CRESTRegulations.

Application has been made for all of the to be issued New Ordinary Shares and the issued Ordinary Sharesto be eligible for Admission to CREST with effect from Admission. Accordingly, settlement of transactionsin the Ordinary Shares and New Ordinary Shares following Admission may take place in CREST if therelevant Shareholder so wishes. CREST is a paperless settlement procedure enabling securities to beevidenced otherwise than by a share certificate and transferred otherwise than by written instrument. TheArticles permit the holding and transfer of Ordinary Shares and New Ordinary Shares under the CRESTsystem.

It is expected that, subject to the satisfaction of the conditions of the Placing, the New Ordinary Shares willbe registered in the names of the Placees subscribing for them and issued either:

• in certificated form, where the placees so elects, with the relevant share certificate expected to bedespatched by post, at the placee’s risk, on or around 17 September 2012; or

• in CREST, where the placee so elects and only if the placee is a “system member” (as defined in theCREST Regulations) in relation to CREST, with delivery (to the designated CREST account) of theNew Ordinary Shares subscribed for expected to take place on 3 September 2012.

Notwithstanding the election by Placees as to the form of delivery of the New Ordinary Shares, no temporarydocuments of title will be issued. All documents or remittances sent by or to a Placee, or as they may direct,will be sent through the post at their risk.

The New Ordinary Shares have not been, and will not be, registered under the US Securities Act or underthe securities laws of any state or other jurisdiction of the United States and may not be offered, sold, resold,taken up, transferred, delivered or distributed, directly or indirectly, within, into or in the United Statesexcept pursuant to an applicable exemption from, or in a transaction not subject to, the registrationrequirements of the US Securities Act and in compliance with any applicable securities laws of any state orother jurisdiction of the United States. There will be no public offer in the United States. The New OrdinaryShares are being offered or sold only: (a) outside the United States in offshore transactions within the

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meaning of, and in accordance with, the safe harbour from the registration requirements provided byRegulation S; and (b) within, into or in the United States to persons reasonably believed to be AccreditedInvestors solely in private placement transactions not involving any public offering in reliance on theexemption from the registration requirements of Section 5 of the US Securities Act provided by Section 4(2)under the US Securities Act or another applicable exemption thereunder.

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PART 4

RISK FACTORS

THE ATTENTION OF PROSPECTIVE INVESTORS IS DRAWN TO THE FACT THATOWNERSHIP OF ORDINARY SHARES IN THE COMPANY WILL INVOLVE A VARIETY OFRISKS WHICH, IF THEY OCCUR, MAY HAVE A MATERIALLY ADVERSE EFFECT ON THECOMPANY’S BUSINESS OR FINANCIAL CONDITION, RESULTS OR FUTURE OPERATIONS.IN SUCH CASE, THE MARKET PRICE OF THE ORDINARY SHARES COULD DECLINE ANDAN INVESTOR MIGHT LOSE ALL OR PART OF HIS OR HER INVESTMENT. IN ADDITION TOTHE INFORMATION SET OUT IN THIS DOCUMENT, THE FOLLOWING RISK FACTORSSHOULD BE CONSIDERED CAREFULLY IN EVALUATING WHETHER TO MAKE ANINVESTMENT IN THE COMPANY. IN PARTICULAR, THE COMPANY’S PERFORMANCEMIGHT BE AFFECTED BY CHANGES IN MARKET AND/OR ECONOMIC CONDITIONS ANDIN LEGAL, REGULATORY AND TAX REQUIREMENTS. ADDITIONALLY, THERE MAY BERISKS OF WHICH THE BOARD IS NOT AWARE OR BELIEVES TO BE IMMATERIAL WHICHMAY, IN THE FUTURE, ADVERSELY AFFECT THE COMPANY’S BUSINESS AND THEMARKET PRICE OF THE ORDINARY SHARES. BEFORE MAKING A FINAL INVESTMENTDECISION, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY WHETHER ANINVESTMENT IN THE COMPANY IS SUITABLE FOR THEM AND, IF THEY ARE IN ANYDOUBT, SHOULD CONSULT WITH AN INDEPENDENT FINANCIAL ADVISER AUTHORISEDUNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000 WHO SPECIALISES INADVISING ON THE ACQUISITION OF SHARES AND OTHER SECURITIES.

An investment in the Ordinary Shares may not be suitable for all recipients of this Document. An investmentin the Ordinary Shares should be considered highly speculative, due to the Company’s stage of developmentand the nature of its involvement in the business of the acquisition of oil and natural gas assets. Any one ormore of these risks could have a material effect on the value of any investment in the New Ordinary Sharesand should be taken into account in assessing the Company’s and Elcrest’s activities. The exploration anddevelopment of natural resources is a highly speculative activity that involves a high degree of financial andoperational risk. The value of the Ordinary Shares may decline, and investors could lose all or part of theirinvestment.

Any one or more of the risks described below could have a material adverse effect on the value of theCompany. Investors should consider carefully whether an investment in the New Ordinary Shares is suitablefor them in light of the information in this Document and their personal circumstances.

The Company is subject to most of or all of the commercial, legal, employment, operational and reputationalrisks that also affect companies in other business sectors. The information in this Document is based uponcurrent tax law and practice and other legislation, and any changes in the legislation or in the levels and basesof, and reliefs from, taxation may affect the value of an investment in the Company.

RISKS RELATING TO THE BUSINESS

There are numerous risks relating to the nature of Eland’s business and the jurisdictions in which itoperates

There are numerous factors which may affect the success of Eland’s business which are beyond its controlincluding local, national and international economic, legal and political conditions. Eland’s business involvesa high degree of risk which a combination of experience, knowledge and careful evaluation may notovercome. The operations of Eland in developing countries in West Africa expose it to potential civil unrestand political or currency risks. In particular, recent escalation in civil unrest in the north of Nigeria or arenewal of unrest in the Niger Delta where OML 40 is located may pose a threat to the operation of Elandin those countries and any intensification in the level of civil unrest may have a material effect on Eland’sbusiness, results of operations or financial condition.

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Dependence on one line of business and on one asset

The future economic development of the Group is likely to be strongly influenced by demand for oil incomparison to other sources of fuel and exact levels of demand are difficult to assess.

On completion of the Acquisition the Group will have only one asset. If Elcrest were to dispose of its interestin OML 40 it may not realise its full value. Any write down of the carrying value of OML 40 wouldsignificantly impact on Eland’s financial position.

Eland does not hold a majority of the share capital of Elcrest

Eland holds 45 per cent. of the issued share capital of Elcrest with Starcrest holding the remaining55 per cent. albeit that within 30 days of completion of the Acquisition Eland’s stake will increase to49 per cent. The relationship between the Company and Starcrest as regards Elcrest is governed by theElcrest Shareholders’ Agreement (as amended by the Elcrest Shareholders’ Agreement Amendment Letter)and the Elcrest Loan Agreement. Whilst the contractual and financing arrangements between Eland, Elcrestand Starcrest provide Eland with significant management control over Elcrest and, for so long as amountsare outstanding under the Elcrest Loan Agreement, Starcrest is required to exercise (or refrain fromexercising) any voting or any conditional or preferential rights attaching to its shares in Elcrest as directedby Eland from time to time (and this undertaking is backed up with various security over Starcrest’sshareholding in Elcrest as set out in paragraph 11.2.4 of Part 8 of this document), Eland is a minorityshareholder in Elcrest and will remain so unless Eland exercises its option under the Starcrest OptionAgreement to acquire more shares from Starcrest. Any failure of the board or Shareholders to make timelydecisions as a result of any party exercising its rights under the joint venture arrangements may cause delaysin the conduct of Elcrest’s operations and may, in turn, have an adverse effect on the Group’s financialcondition and results of operations.

Whilst the Elcrest Loan is outstanding, Starcrest will be restricted from exercising certain of its rights underthe Elcrest Shareholders’ Agreement. Under the Elcrest Shareholders’ Agreement (as amended) Eland andStarcrest have agreed to seek bona fide arms length third party financing as soon as practicable for Elcrestboth to finance Elcrest and refinance the Elcrest Loan. Eland will have the right to match any third partyfinancing. However, Eland’s position will be significantly changed should such third party funding beavailable to replace the Elcrest Loan and Eland is unable to match it as the benefit of the security and rightsto the Company provided under the Elcrest Loan Agreement will no longer be available. In addition, ifinterest on the loan under the Elcrest Loan Agreement is reduced as a result of the matching arrangementsset out in the Elcrest Shareholders’ Agreement Amendment Letter, this could have a negative impact on theeconomic return anticipated to be achieved by the Company as a result of the Acquisition.

Following the repayment of the Elcrest Loan, Eland will continue to exercise influence in Elcrest’s affairsthrough provisions in the Elcrest Shareholders’ Agreement that require Eland’s consent for board and certainshareholder decisions. In circumstances where the unanimous consent of shareholders of Elcrest is required,where such consent is not obtained, the Elcrest Shareholders’ Agreement specifies deadlock provisionswhich could result in either Eland or Starcrest being bought out by the other, at fair market value. In addition,if Starcrest wishes to sell its shares in Elcrest to a bona fide arm’s length purchaser, if Eland does not exerciseits rights of first refusal to acquire Starcrest’s shares, Starcrest could require that Eland sell its shares to suchthird party purchaser. There can be no assurance that these provisions will not be used against Elandfollowing the repayment of the Elcrest Loan to Eland by Elcrest. This could have a material impact on thevalue of Eland’s stake in Elcrest or the continued existence of such stake.

Elcrest does not hold the position of Operator

Elcrest will not be the operator of OML 40, rather NPDC will be the operator under the New Joint OperatingAgreement. Elcrest will not be in sole control of day to day operations. As this is a newly formed jointoperating agreement, there is uncertainty as to how it will work in practice. Elcrest anticipate that they willbe working with NPDC towards bringing OML 40 into production and meeting production targets within thetimescales currently anticipated. Any arrangement with a joint venture partner has the potential risk that theparties will be unable to reach decisions quickly and that this may cause delays. As is usual industry practiceunder joint operating agreements, both parties have the right to undertake sole risk operations pursuant to

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which a party may, subject to certain conditions, undertake at its sole risk, cost and expense an operation inOML 40 Lease including the drilling of an exploratory well.

Eland and Elcrest’s relationship with Starcrest

The Company is working with Starcrest in the operation of Elcrest. Any arrangement with a joint venturepartner has the potential for delays and disagreements which are inherent in a multi-party relationship. Thestructure of the relationship with Starcrest has been designed to conform with existing law and policy whichwould allow Elcrest to be treated as an indigenous company. However, relevant law and policy in Nigeriamay change in the future and this may affect Elcrest’s indigenous status. Any change may have a materialadverse effect on Elcrest’s profitability and access to resources in Nigeria.

The Elcrest Shareholders’ Agreement provides for default and deadlock situations where Eland may buyStarcrest’s interest in Elcrest or vice versa. In the event that Eland were to acquire the interest of Starcrest inElcrest, Eland would still intend to maintain the status of Elcrest as an indigenous company in Nigeria.Instead of holding Starcrest’s shares directly or indirectly, Eland could arrange for their sale to a third party,which in turn could be a qualifying indigenous company. There is a risk that Eland may not be able toidentify and partner with another indigenous entity in Nigeria and that, as a result, Elcrest could lose itsindigenous status. This could have a negative impact on any potential acquisitions by the Group.

Investors are referred to Part 2 of this Document.

The grant of security over assets under facility arrangements

It is a condition of the SCB Facility Agreement that the Company grant security over all of its assets. Thisincludes the shares owned by the Company in Elcrest and the rights that the Company has in respect of theshares owned by Starcrest in Elcrest (being the rights in the security given in respect of the Additional ElcrestLoan Agreement and the rights established under the Elcrest Shareholders’ Agreement). If the Company isin default under the SCB Facility Agreement, this security would become enforceable such that SCB wouldbe entitled to exercise all of the Company’s rights in respect of those shares and, ultimately, dispose of thoserights. However, until such time as a default arises the Company remains free to exercise its discretion indealing with its rights in respect of the shares in Elcrest, including those owned by Starcrest.

Reliance on local partners

The acquisition of OML 40 was through an open and competitive bidding process conducted by Shell onbehalf of the Sellers however the Group could not have participated in the process without the participationof its local partner and, should Eland no longer have joint venture arrangements with Starcrest and be unableto find a suitable alternative local partner, Eland’s ability to operate effectively in Nigeria and its ability toacquire further assets in Nigeria would most likely be impaired. However, the Directors are confident, shouldStarcrest no longer be a shareholder in Elcrest at any point in the future, Elcrest should be able to retain itsinterest in OML 40.

In Nigeria if an entity qualifies as an indigenous company it may take advantage of the recent Nigerian Oiland Gas Industry Content Development Act 2010 which gives priority to indigenous companies in the awardof any licence area. The Company has been advised that Elcrest does qualify as such but the Company cannotguarantee against the qualification criteria being changed (including with retrospective effect) or Elcrest’squalification being challenged by its competitors and resulting in the loss of its indigenous status. WereEland to exercise its option to acquire a further 10 per cent. shareholding in Elcrest under the StarcrestOption Agreement, Elcrest would no longer qualify as an indigenous company for the purposes of NOGICA.This may have an adverse effect on the Company if Eland were unable (in accordance with normal practice)to establish an alternative indigenous vehicle through which to bid for new licence area awards.

Oversight of local partners

Doing business in Nigeria and other countries in West Africa necessarily involves partnering with localcompanies and citizens of these countries. This is often required to comply with indigenous contentrequirements and may also provide a beneficial tax structure for the Company. None of the Company, Elcrest

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or any future joint venture company has day-to-day control over these local companies and individuals andcannot be responsible for their actions. It is possible that from time to time the local partner may be subjectto allegations relating to its relationship with government and regulators or to the local partner’s business andother conduct. Where allegations about a local partner surface, it may reflect badly on the Company, Elcrestand future joint ventures and have a material adverse effect on the Company, irrespective of whether theallegations are true or false. Bribery and corruption are features of many developing nations includingNigeria and other countries in which the Company intends to do business and this may apply to the jointventure partners that the Company selects – see Risk Factor entitled “Risk of crime and corruption” onpage 67 of this Part 4.

Under the terms of the Elcrest Shareholders’ Agreement, each shareholder warrants to the other shareholderthat they and their affiliates will fully comply with applicable anti-corruption and bribery legislation and notengage in any practice that would constitute a breach of applicable laws including those of the United Statesand the United Kingdom. A material breach of the Elcrest Shareholders’ Agreement would entitle the non-defaulting shareholder to serve a default notice to buy out the other shareholder’s shares in Elcrest.

It should be noted that, as with many prominent and successful Nigerian businessmen, Emeka Offor hasattracted significant media attention, some of which is of an adverse nature and which relates to his politicalrelationships or business affairs. The attention of investors is specifically drawn to Part 2 of this Document.Despite the various enquiries conducted by the Company, the Directors are not aware of any sanctions,charges or conditions that have been brought against Emeka Offor and/or Starcrest in Nigeria or overseas.

As stated in the Risk Factor above, Eland places certain reliance on its local partner and, should the localpartner be unable to carry on his business affairs for whatever reason, there could be a material adverseimpact on Eland.

Delays to bringing OML 40 into production

It is intended to bring two wells at OML 40 back into production as soon as possible following Admission.Whilst the Directors anticipate gross production at OML 40 of approximately 2,500 bopd withinapproximately six months of recommissioning, delays in achieving the recommissioning may beexperienced (not least because each well needs to be operational to provide this level of production). Reasonswhy production could be delayed include; delays in the repair of the pipeline, the flowstation not being inworkable condition and delays in the procurement of equipment. Should such delays occur, the length ofdelay and its nature may have a significant impact on the returns which Elcrest and indirectly, the Companywill achieve.

There can be no guarantee that Elcrest and NPDC will be able to meet their target production rates over theperiods described in this Document. Failure to meet their targets will have a negative impact on the financialreturns of Eland.

Potential delay in the development of the Gbetiokun field

A unitisation has been proposed in relation to the Gbetiokun field which straddles OML 40 and OML 49.OML 49 is operated by a joint venture between Chevron and NNPC. It is understood that no detailed workin relation to unitisation arrangements has been undertaken to date by either Chevron, NNPC or SPDC. Therelevant Nigerian regulations require that the parties to a potential unitisation agree the terms on which thatunitisation will occur and operates. If the parties are unable to agree such terms, the DPR will impose termsupon the parties. It should be noted, however, that many fields in Nigeria straddle licence areas and operatewithout unitisation agreements.

There is a risk that if the parties to the New Joint Operating Agreement and Chevron are unable to agree theterms of the unitisation on a timely basis then the development of the Gbetiokun field may be delayed andif the DPR imposes terms then such terms may not be as favourable as the Company might have anticipated.

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Export pipeline risk

Currently the only available crude oil export route for OML 40 is through a pipeline operated by SPDC. Thesection of the pipeline from Opuama to Otumara is damaged and needs to be repaired before the export ofoil can commence. There can be no guarantee that this pipeline can be repaired quickly or at all or that it willnot be damaged again.

Crude handling arrangements may not be available to the Group in the manner anticipated under theAcquisition arrangements

Shell and NPDC have agreed in principle (and initialled) the terms of a new agreement in relation to crudehandling arrangements for OML 40 more particularly described in paragraph 11.3.4 of Part 8 of thisDocument. However there can be no guarantee that the agreement will be formally executed on the termscurrently contemplated. If terms are not agreed, Elcrest will need to procure alternative crude oil evacuationarrangements and failure to do so, or failure to do so on no less favourable terms, could materially adverselyimpact the financial position of the Company.

Commodity price risk

Historically, oil and gas prices have fluctuated widely and are affected by numerous factors over which theCompany has no control, including world production levels, international economic trends, currencyexchange rate fluctuations, expectations for inflation, speculative activity, consumption patterns and globalor regional political events. The aggregate effect of these factors is impossible to predict. The productionestimates for OML 40 and the oil and gas prices estimated will vary depending upon market conditions,which are not within the control of the Company.

Foreign exchange risk

Any proceeds of the Group’s oil and gas sales in Nigeria are expected to be received in US Dollars. Whilstthe majority of the Company’s expenditure requirements are in US Dollars, as the Company Shares will beadmitted to trading on AIM, any funds which may be raised through the issue of share capital will bedenominated in UK Sterling, however the majority of the Company’s capital expenditure will be in USDollars. The Company has general and administrative expenditure with respect to offices in Nigeria and theUnited Kingdom, therefore the Company is exposed to foreign exchange risk against Nigerian Naira, USDollars and UK Sterling.

Insurance coverage

There are significant exploration and operational risks associated with drilling oil and gas wells, includingblowouts, cratering, uncontrollable flows of oil, natural gas or well fluids, adverse weather conditions,environmental risks and fire, all of which can result in injury to persons, as well as damage to or destructionof oil and gas wells, equipment, formations and reserves, production facilities and other property. In addition,the Group will be subject to liability for environmental risks, such as pollution and abuse of the environment.Neither the Company nor Elcrest is fully insured against all risks in its business (as to do so would not becommercially viable). Substantial damages may be claimed against Elcrest due to events arising from theinherently hazardous nature of its operations and omissions of sub-contractors and any indemnities theCompany and/or Elcrest may receive from such sub-contractors may be difficult to enforce if suchsubcontractors lack adequate resources. The Group is unable to provide any guarantee that expenses relatingto losses or liabilities will be fully covered by the proceeds of applicable insurance. The Company maysuffer, indirectly, material losses from uninsurable or insured risks or insufficient insurance coverage. Theoccurrence of a significant event against which Elcrest is not fully insured could have a material adverseeffect on the Group’s operations and financial performance. The Group is also subject to the future risk ofunavailability of insurance, increased premiums or excesses, and expanded exclusions.

Tax risks

The Company and Elcrest are subject to sales, employment and corporation taxes and the payment of certainroyalties in their respective local jurisdictions. The application of such taxes may change over time due tochanges in laws, regulations or interpretations by the relevant tax authorities. Whilst no material changes are

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anticipated in such taxes any such changes may have a material adverse effect on the Company’s financialcondition and results of operations.

Petroleum Profits Tax – the benefit of newcomer status

In relation to determining petroleum profits tax, the Directors expect that Elcrest will qualify for newcomerstatus which is expected to apply to the five year period from First Oil. There can be no guarantee that Elcrestwill achieve this status nor that the period of its application will extend to the full five years. If Elcrest is nottreated as a newcomer for petroleum profits tax purposes, it would have to pay the full 85 per cent. tax ratefrom first production rather than the reduced rate of 65.75 per cent.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Failure to obtain financing in the future could materially adversely impact the performance of the Group

The Group’s business necessarily involves significant capital expenditure. In addition, if the Group isrequired to provide further capital in pursuit of additional opportunities, the Company may have a need toseek further external debt and future equity financing. There is no guarantee that such additional funding, ifrequired, will be available on acceptable terms at the relevant time. Furthermore, any additional debtfinancing may involve restrictive covenants, which may limit or affect the Company and/or Elcrest’soperating flexibility. If additional funds are raised through the issue of equity or equity-linked instruments,Shareholders may experience a dilution in their percentage holdings in Ordinary Shares.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Future litigation

From time to time, the Group may be subject, indirectly, to litigation arising out of its or Elcrest’s proposedoperations. Damages claimed under such litigation may be material or may be indeterminate, and theoutcome of such litigation may materially impact the Company’s business, results of operations or financialcondition. While Elcrest or the relevant member of the Group assesses the merits of each lawsuit and defendsitself accordingly, it may be required to incur significant expenses or devote significant resources todefending itself against such litigation. In addition, the adverse publicity surrounding such claims may havea material adverse effect on the Company’s business.

There is no guarantee that the Group has or will continue to have good title to its properties

There is no guarantee that an unforeseen defect in title, changes in law or change in their interpretation orpolitical events will not arise to defeat or impair the claim of the Group to any properties which it currentlyowns or may acquire which could result in a material adverse effect on the Group, including a reduction inrevenue.

Reliance on limited due diligence information on OML 40

The Group has not been able to perform extensive due diligence on OML 40 and is therefore making theAcquisition based on the limited information which has been provided. There can be no guarantee that theinformation provided by SPDC as part of the Acquisition process is complete and accurate, and there are noguarantees that there have not been errors and omissions in the information provided in advance of andduring the Acquisition process. The Group is subject to various confidentially restrictions.

The current or future of the lease of OML 40 may be challenged

The term of OML 40 expires in June 2019. OML 40 contains provision for extension for a further 30 years,at additional cost, provided that the terms of OML 40 have been complied with. Such renewal will also besubject to government approval. The deed of renewal given in 1989 is subject to the Petroleum Act, whichonly allows renewals for 20-year periods at a time. However, the renewal was granted for 30 years and it isthe opinion of local counsel that this is a valid term and the Nigerian government is estopped from refuting

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this. Any further renewals from 2019 will be granted for 20-year periods only. Any successful challenge tothe validity of the current term of OML 40 or any failure to secure the renewal of OML 40 would have amaterial impact on the revenues and financial position of the Group.

Nigerian Trademarks registration may be challenged

The Company has applied for the registration of the name “Eland” and its logo as trade marks in Nigeria.Whilst a search of the trade mark registry has not revealed any similar marks, there is a risk that registrationmay be challenged and/or declined. In the event the registration is challenged and/or declined the Companywould need to consider whether to change its name and/or logo (in the case of a challenge by a party whichclaims to already have rights in the name and/or logo) or negotiate with that party.

Environmental liabilities under the Acquisition Agreement

Under the Acquisition Agreement, Elcrest accepted liability for all environmental liabilities (i.e. not limitedin excess of Elcrest’s participating interest in OML 40 and irrespective of whether incurred before or aftercompletion of the Acquisition) and has agreed to indemnify and hold the Sellers harmless in relation to thesame. Elcrest will also generally be responsible for environmental liabilities arising from operations on OML40 following Completion. The extent of environmental liabilities to which Elcrest may be exposed from pastoperations is inherently uncertain. The extent of such liabilities may have a material adverse effect on theability of Elcrest to operate and on its revenue and profits.

Whilst SPDC has confirmed that it has complied with requirements to conduct baseline environmentalstudies and produce detailed environmental evaluation reports in respect of OML 40 as required by theMinistry of Petroleum Resources, if this is not correct, NPDC as operator will need to rectify this and willlook to pass on a proportional amount of the costs to Elcrest as a participant in OML 40. If Elcrest is requiredto pay any such costs it could have a negative impact on the financial position of the Group.

Whilst the Company has commissioned an environmental and decommissioning evaluation report whichentailed a scouting visit to OML 40, it has not had an opportunity to conduct a baseline environmental study.To the extent that the environmental liabilities and decommissioning liabilities exceed those highlightedunder the RPS Report this could have a material adverse impact on the ability of Elcrest to operate and onits revenue and profits.

Decommissioning costs inherited from SPDC

Abandonment and reclamation of facilities and the costs associated therewith is often referred to as“decommissioning”. Elcrest will inherit SPDC’s decommissioning liabilities and will therefore beresponsible for costs associated with, for example, abandoning and plugging wells, facilities and pipelinesand decommissioning infrastructure which it may use for production of oil and gas. There are no immediateplans to establish a reserve account for these potential costs rather, the costs of decommissioning areexpected to be paid from the proceeds of production in accordance with the practice generally employed inon-shore and off-shore oilfield operations. Should decommissioning be required, the costs ofdecommissioning may exceed the value of reserves remaining at any particular time to cover suchdecommissioning costs. If the operator determines there is a need to have a reserve account, or to the extentthe funds available in any such account are insufficient to cover the decommissioning costs of OML 40,Elcrest may have to draw on funds from other sources to satisfy such costs. Under the AcquisitionAgreement, Elcrest accepted liability for all decommissioning liabilities (whether or not in excess ofElcrest’s participating interest in OML 40 and whether or not incurred before or after completion of theAcquisition) and has agreed to indemnify and hold the Sellers harmless in relation to the same.

Supply of gas to local domestic market

SPDC is currently under an obligation, at the ultimate parent company level, to supply a certain quantity ofnatural gas to the local domestic market in Nigeria at a specified price (the Domestic Gas Supply Obligation(“DSO”)). There is a possibility that the OML 40 partners (including Elcrest) may be allocated a DSO as andwhen gas production on OML 40 commences. The price at which Elcrest may be required to supply its DSOmay be below the price it may have been able to obtain on the open market.

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Options for monetising natural gas discoveries are undeveloped

There is currently very limited infrastructure to enable companies in the Niger Delta region to sell or exportgas. Although some of the areas in OML 40 may result in potentially recoverable natural gas discoveries, thedevelopment of such assets may be hindered due to the lack of infrastructure to sell or export natural gas inthe Niger Delta region. Accordingly, the opportunities to monetise any commercial discovery of natural gasby Elcrest are currently very limited, and developing such opportunities may be challenging and take asignificant amount of time. The Company has not attributed any commercial value in the short to mediumterm to gas resources at OML 40. The Federal Government of Nigeria’s stated position is to develop gasresources under the “Gas Masterplan” (which is a plan introduced by the Nigerian government to increasegas use in Nigeria).

The absence of sufficient opportunities to monetise natural gas may, in the future, have a material andadverse effect on Elcrest’s and the Company’s business, financial condition, results of operations andprospects.

Gas flaring

As part of the recommissioning process it may be necessary for Elcrest to flare gas. It is understood that gasflaring permits in respect of OML 40 have expired and that if the operator of OML 40 is not able to renewsuch permits, it may be subject to fines which may have an adverse impact on the Group’s financial position.

Failure to obtain, renew or retain statutory or regulatory permits and approvals

Certain statutory and regulatory permits and approvals are required in order to operate the oil and gasexploration and production business, while new permits and approvals will be required for future operations.In particular, drilling permits, field development plan approvals, local content compliance approvals,pipeline licences, unitisation approvals and environmental permits will be required to operate OML 40 orany other asset the Company is involved with. There can be no assurance that on Admission the relevantauthorities will have issued any or all of such permits and approvals and the Company’s experience is thatdelays occur from time to time. Failure to maintain or obtain required permits or approvals may result in theinterruption of operations and may have a material adverse effect on the Company’s financial condition andresults of operations.

Governmental relations may change

Although the Company believes it has good relations with the Nigerian government, there can be noassurance that the actions of present or future governments in Nigeria and governments of other countries inwhich the Company may operate, directly or indirectly, in the future, will not materially adversely affect thebusiness or financial condition of the Company.

Eland is at an early stage of operations

An investment in the Company is subject to certain risks related to the nature of the Company’s business inthe acquisition, exploitation, development and production of oil and natural gas assets and their early stageof development. The Company has no operating history and no history of earnings, and there can be noassurance that the Company’s business will be successful or profitable.

The Company may be subject to growth-related risks, capacity constraints, and pressure on its internalsystems and controls, particularly given the early stage of the Company’s development. The ability of theCompany to manage growth effectively will require it to continue to implement and improve its operationaland financial systems and to expand, train and manage its employee base. The inability of the Company todeal with this growth could have a material adverse impact on its business, operations and prospects.

High levels of competition for acquisition of oil and gas assets

The Directors are of the opinion that the oil and natural gas industry is competitive and particularly so insuch a prolific basin as the Niger Delta. There is strong competition for the discovery and acquisition ofassets considered to have commercial potential as well as for the contracting of equipment and therecruitment and retention of skilled personnel. The Company will compete with a substantial number of

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other companies, many of whom have greater financial resources. Many such companies not only explorefor and produce oil, natural gas and NGLs, but they also carry on refining operations and market petroleumand other products on a worldwide basis. There is also competition between the petroleum industry and otherindustries supplying energy and fuel to industrial, commercial and individual customers. Such competitionmay result in the Company being unable to secure or develop new opportunities or to recruit and retain staff.

Success of acquisition strategy not guaranteed

Returns ultimately achieved by investors in the Company will be reliant upon the quality and performanceof the assets being acquired directly or indirectly by the Company. The success of the Company’s strategyalso depends on the Directors’ ability to identify potential assets, and the acquisition of the assets onfavourable terms and to generate value from the assets. No assurance is given that the strategy to be used willbe successful under all or any market conditions or that the Company will be able to invest its capital directlyor indirectly to acquire assets on attractive terms and to generate returns for investors.

Issues resulting from limited due diligence on new acquisitions

The Company intends to acquire directly or indirectly a number of oil and gas assets in Nigeria and othercountries in West Africa. The Company has performed a review of OML 40 and intends to do so in respectof any potential assets prior to acquisition. Although it is intended that such review would be consistent withindustry practice, such reviews are inherently incomplete. It is generally not feasible to review in depth everyindividual well or field involved in each acquisition. Generally, the Company will aim to focus its duediligence efforts on higher-valued assets and will sample the remainder. However, even an in-depth reviewof all assets and records may not necessarily reveal existing or potential problems, nor will it permit a buyerto become sufficiently familiar with the assets to assess fully their deficiencies and capabilities. TheCompany may be required to assume directly or indirectly pre-closing liabilities, including environmentalliabilities, and may acquire direct or indirect interests in assets on an “as is” basis. Future acquisitions mayinclude off-shore licences and/or exploration assets. The acquisition of such assets would provide muchgreater levels of risk for the Company, because such assets, by their nature, may be more expensive toacquire and more difficult to exploit.

In addition, investments in assets outside Nigeria may be more difficult as, although the management of theCompany does have significant experience in certain countries, it may have less familiarity with some of thecountries in which such assets are located. In addition, the market for acquiring such assets is by its nature,extremely competitive and finding commercially viable acquisitions may be difficult.

Risk of loss by Elcrest of its indigenous status

In 2008, with a view to reforming the oil sector in Nigeria, the new Petroleum Industry Bill (the “Bill”) wassubmitted to the National Assembly. The sixth National Assembly was unable to pass the Bill before itsdissolution in June 2011 and as at the date of this Document the Bill has yet to be passed into law. However,reports indicate that there is renewed interest, on the part of the Nigerian government, to push through thelong-delayed reform legislation in 2012. In January 2012, the Federal Government set up a committee toreview the Bill, propose further amendments aimed at improving industry regulation and transparency andmeet with key stakeholders, with a view to completely restating the Bill for consideration by the NationalAssembly. The Federal Executive Council approved the most recent version of the Bill at its meeting heldon 11 July 2012, and same has since been presented to the National Assembly and the National Assembly isexpected to consider the Bill on its return from annual recess. The new Petroleum Industry Bill seeks to bringtogether the provisions of several laws regulating the petroleum industry. In addition, the Bill seeks to effectwide reaching changes to the structure of the petroleum industry by creating of new regulatory agencies,proposing the implementation of new licencing regimes for activities in both the upstream and downstreampetroleum industry, as well as the introduction of a new tax regime in the upstream sector, which willsupersede the current regime under the Petroleum Profits Tax Act and the Petroleum Act. However, as of thedate of this Document, the current version of the Bill is yet to be reviewed and approved by both houses ofthe National Assembly; and the timing and level of implementation of any of the reforms proposed in theBill remains uncertain, all of which prevents a proper assessment of the potential impact of the current draftof the Bill on the oil and gas industry, or specific operations, in Nigeria.

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The difficulty in attracting and retaining key employees

The Company relies heavily on a small number of key individuals (including those who are able to interpretmarket and geological data correctly), in particular the Chief Executive, Chief Financial Officer, and seniormanagement, for the conduct of its day-to-day activities and implementation of its growth strategy. Inaddition, personal connections and relationships of its key management are important to the conduct of itsbusiness. The Company’s business and operations may be negatively affected by the departure of any of theseindividuals, or any of a number of other key employees. There can be no guarantee that the Company willbe able to continue to attract and retain required employees. Difficulties may also be experienced inobtaining suitably qualified staff and retaining staff that are willing to work in Nigeria, and no assurance canbe given that individuals with the required skills will continue their association or employment with theCompany or that replacement personnel with comparable skills can be found. The Board has sought to andwill continue to aim to ensure that the Directors and any key employees are appropriately incentivised.However, their continued services cannot be guaranteed.

Conflicts of directors

Certain Directors of the Company are also directors or have interests in other companies involved in oil andnatural gas exploitation, development, production and acquisition, and conflicts of interest may arisebetween their duties as officers and Directors of the Company and as directors of such other companies.Representatives of Starcrest on the board of Elcrest may have conflicts of interest between their duties asofficers and directors of Elcrest and duties as directors of other companies. Situations may arise whereDirectors will be in direct competition with the Company. Conflicts, if any, arising in respect of the Companyand its Directors will be subject to the procedures and remedies under the 2006 Act and applicable law.

Marginal Field Operations arrangements

Some of the smaller fields in OML 40 that continue to remain undeveloped were to have been surrenderedfrom OML 40 as part of a Nigerian government initiative to encourage the development of marginal assetsby indigenous companies referred to as the Marginal Field Operations (“MFO”) arrangement. An MFOarrangement has applied to Tsekelewu field since 2004 when it was excised from OML 40. SPDC wasinformed in 2010 that the Abiala and Ugbo fields within OML 40 are currently being considered by theDepartment of Petroleum Resources for inclusion in a new MFO round. However, in earlier sales of otherOMLs by SPDC, similar fields were removed from the MFO listing, and returned to the original OML forthe benefit of the purchaser. Given that NPDC will act as Operator following the Acquisition, it is notanticipated that any marginal fields, which form part of OML 40, will be lost. However, there can be noassurance that these fields will not be excluded from OML 40 and any such exclusion would have an adverseeffect on the Group’s operations and financial performances.

Solstice Option Agreement

Whilst Solstice has granted the Company with the ability under the Solstice Option Agreement to requireSolstice to inject into the Company further equity capital of up to £10 million, it is possible that if and whenthe Company exercises that right, Solstice defaults and this could have a negative impact on the finances ofthe Company.

GENERAL EXPLORATION, DEVELOPMENT AND PRODUCTION RISKS

Capital expenditure estimates may not be accurate

The estimated capital expenditure requirements for OML 40 are estimates based on anticipated costs and aremade on certain assumptions. Should those capital expenditure requirements turn out to be higher thancurrently anticipated (for example, if there are unanticipated difficulties in drilling or connecting to orrepairing infrastructure or price rises) the Company or its partners may need to seek additional funds whichit may not be able to secure on reasonable commercial terms to satisfy the increased capital expenditurerequirements. If this happens, the Group’s business, cash flow, financial condition and operations may bematerially adversely affected.

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This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Exploration, development and production risks

The Company’s strategy is initially driven by the acquisition, exploration, exploitation, appraisal,development and production of OML 40 by Elcrest. There are risks inherent in the acquisition, exploration,exploitation, appraisal, development and production of oil and gas reserves and resources. Whilst the rewardscan be substantial, there is no guarantee that exploration will lead to further commercial discoveries.Exploration and production activities by their nature involve significant risks. Risks such as delays in theconstruction and commissioning of drilling platforms or other technical difficulties, lack of access to keyinfrastructure, adverse weather conditions, environmental hazards, industrial accidents, occupational andhealth hazards, technical failures, labour disputes, unusual or unexpected geological formations, explosionsand other acts of God are inherent to the business. Although in many cases these represent insurable risks,the Group may also become subject to other hazards (including pollution and oil seepage liability) againstwhich it is not insured or is under insured. The occurrence of any of these incidents can result in the Group’sfuture project target dates for drilling or production being delayed or interrupted and increase capitalexpenditure and production costs.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Oil and gas reserves or resources figures are based on estimates only and may not be correct

Unless stated otherwise, the oil and gas reserves and resources data contained herein are extracted from areport by McDaniel. The reserves and resources data contained in this Document have been estimated byMcDaniel unless stated otherwise. Estimating the quantity of reserves and resources and projecting futurerates of production is a subjective process and has inherent uncertainties, including factors beyond theCompany’s control.

The estimates of reserves and resources data contained should not be construed as exact. Reserves estimatescontained in this Document are based on production, prices, costs, ownership, geophysical, geological andengineering data and other information collated by the Company. The estimates may prove to be incorrectafter further drilling, testing and production. Forward-looking statements contained herein (including dataincluded in the report by McDaniel or taken from the report by McDaniel and whether expressed to havebeen estimated by McDaniel or otherwise) concerning Elcrest’s reserves and resources definitions should notbe unduly relied upon by potential investors. Certain categories of reserves and resources (such asProspective and Contingent Resources) are inherently riskier than certain other categories (such as ProvedReserves). If the assumptions upon which the estimates of Elcrest’s gas reserves or resources are based proveto be incorrect, Elcrest may be unable to recover and produce the estimated levels or quality of oil or gas setout in this Document and the Company’s business, prospects and financial results could be materially andadversely affected.

The nature of reserve quantification studies means that there can be no guarantee that the estimates ofquantities and quality of oil discovered will be available for extraction. Delays in the construction andcommissioning of projects or other technical difficulties may result in the Company’s and/or Elcrest’s futureprojected target dates for production being delayed or further capital expenditure being required. If theCompany and/or Elcrest fails to meet its work and/or expenditure commitments, the rights granted thereinmay be forfeited, and the Company and/or Elcrest may be liable to pay large sums, which could jeopardiseits ability to continue operations.

It should be noted that the CPR has been produced by McDaniel in accordance with the requirements of theNote for Mining and Oil and Gas Companies (which forms part of the AIM Rules) and the SPE-PRMS. Thedata referred to in this Document which is not derived from or contained in the CPR may not have beenprepared to the same standard and potential investors should take this into account when evaluating suchdata.

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This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Assumptions underlying reserve and resource estimates depend on certain variables which are subjectivein nature or are beyond the Company’s control

Estimation of underground accumulations of oil or gas is a subjective process aimed at understanding thestatistical probabilities of recovery. Estimates of the quantity of economically recoverable oil or gas reserves,rates of production, net present value of future cash flows and the timing of development expendituresdepend upon several variables and assumptions, including the following:

• production history compared with production from other comparable producing areas;

• interpretation of geological and geophysical data;

• effects of regulations adopted by governmental agencies;

• future oil and gas prices;

• capital expenditure; and

• future operating costs, royalties, tax on the extraction of commercial minerals, development costs andworkover and remedial costs.

Considering that all reserve estimates are subjective, each of the following items may differ materially fromthose assumed in estimating reserves:

• the quantities and qualities that are ultimately recovered;

• the production and operating costs incurred;

• the amount and timing of additional exploration and future development expenditures; and

• future oil and gas sales prices.

Many of the assumptions used in estimating reserves and resources are beyond the Company’s control andmay prove to be incorrect over time. Evaluations of reserves and resources necessarily involve multipleuncertainties. The accuracy of any reserves or resources evaluation depends on the quality of availableinformation, petroleum engineering and geological interpretation. Exploration drilling, interpretation, testingand production after the date of the estimates may require substantial upward or downward revisions in theCompany’s reserves or resources data. Moreover, different reservoir engineers may make varying estimatesof reserves and resources and cash flows based on the same available data. Actual production, revenues andexpenditures with respect to reserves and resources will vary from estimates, and the variances may bematerial. Uncertainties exist with respect to the estimation of resources in addition to those set forth abovethat apply to reserves. The probability that Prospective Resources will be discovered, or be economicallyrecoverable, is considerably lower than for 3P Reserves. Volumes associated with Prospective Resourcesshould be considered highly speculative.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Appraisal and development results may be unpredictable

Appraisal results for discoveries are also uncertain. Appraisal and development activities involving thedrilling of wells across a field may be unpredictable and not result in the outcome planned, targeted orpredicted, as only by extensive testing can the properties of the entire field be fully understood.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

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Production operations may produce unforeseen issues and drilling activities may not be successful

The planned production operations involve risks common to the industry, including blowouts, oil spills,explosions, fires, equipment damage or failure, natural disasters, geological uncertainties, unusual orunexpected rock formations and abnormal geological pressures. In the event that any of these occur,environmental damage, injury to persons and loss of life, failure to produce oil or gas in commercialquantities or an inability to fully produce discovered reserves could result. Drilling activities may beunsuccessful and the actual costs incurred in drilling, operating wells and completing well workovers mayexceed budget. There may be a requirement to curtail, delay or cancel any drilling operations because of avariety of factors, including unexpected drilling conditions, pressure or irregularities in geologicalformations, equipment failures or accidents, adverse weather conditions, compliance with governmentalrequirements and shortages or delays in the availability of drilling rigs and the delivery of equipment. Theoccurrence of any of these events could have a material adverse effect on the Group’s business, prospects,financial condition and operations.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Exploration activities are expensive and there is no guarantee of success

Exploration activities are capital intensive and their successful outcome cannot be assured. The Groupintends to undertake exploration activities and incur significant costs with no guarantee that suchexpenditures will result in the discovery of commercially deliverable oil or gas. The Group intends to explorein geographic areas, where environmental conditions are challenging and costs can be high. The costs ofdrilling, completing and operating wells is often uncertain. As a result, there may be cost overruns orrequirements to curtail, delay or cancel drilling operations because of many factors, including unexpecteddrilling conditions, pressure or irregularities in geological formations, equipment failures or accidents,adverse weather conditions, compliance with environmental regulations, governmental requirements andshortages or delays in the availability of drilling rigs and the delivery of equipment. Capital expenditurecommitments may vary (or be increased) as a result of actual exploration performance. The risk of incurringsuch costs and the failure of such exploration may adversely affect the Company’s profitability.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Increase in drilling costs and the availability of drilling equipment

The oil and gas industry historically has experienced periods of rapid cost increases. Increases in the cost ofexploration and development would affect the Group’s ability to invest directly or indirectly in prospects andto purchase or hire equipment, supplies and services. In addition, the availability of drilling rigs and otherequipment and services is affected by the level and location of drilling activity around the world. An increasein drilling operations outside the Group’s intended area of operations may reduce the availability ofequipment and services to the Group and to the companies with which it operates. The reduced availabilityof equipment and services may delay the Group’s ability, directly or indirectly, to exploit reserves andadversely affect the Group’s operations and profitability.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Delays in production, marketing and transportation

Various production, marketing and transportation conditions may cause delays in oil production andadversely affect the Company’s business. Drilling wells in areas remote from distribution and productionfacilities may delay production from those wells until sufficient reserves are established to justifyexpenditure on construction of the necessary transportation and production facilities. The Group’s inabilitydirectly or indirectly to complete wells in a timely manner would result in production delays.

The marketability and price of oil and natural gas that may directly or indirectly be acquired or discoveredby the Company will be affected by numerous factors beyond the control of the Company. The Company is

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also subject to market fluctuations in the prices of oil and natural gas, deliverability uncertainties related tothe proximity of reserves to adequate pipeline and processing facilities, and extensive governmentregulations relating to price, taxes, royalties, licences, land tenure, allowable production, the export of oil andnatural gas, and many other aspects of the oil and natural gas business. Moreover, weather conditions mayimpede the transportation and delivery of oil by sea. Any or all of these factors may result in an adverseimpact on the financial returns anticipated by the Company.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Failure to meet contractual work commitments may lead to penalties

The Company may, indirectly, be subject to contractual work commitments, from time to time, which mayinclude minimum work programmes to be fulfilled within certain time restraints. Specifically thesecommitments may cover certain depths of wells to be drilled, seismic surveys to be performed and other dataacquisition. Failure to comply with such obligations, whether inadvertent or otherwise, may lead to fines,penalties, restrictions and withdrawal of licences with consequent material adverse effects.

The Company believes that it will have no such work commitments in respect of OML 40.

Interruptions in availability of exploration, production or supply infrastructure

The Company may suffer, indirectly, from delays or interruptions due to lack of availability of drilling rigsor construction of infrastructure, including pipelines, storage tanks and other facilities, which may adverselyimpact the operations and could lead to fines, penalties, criminal sanctions against Elcrest and/or its officersor the OML 40 Lease or other interests (which Elcrest/the Company may acquire in the future) beingterminated. Delays in obtaining licences, permissions and approvals required by Elcrest in the pursuance ofits business objectives could likewise have a material adverse impact on the Company’s business and theresults of its operations.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Third party contractors and providers of capital equipment are in short supply and can be expensive

The contracting or leasing services and equipment from third-party providers and suppliers may beproblematic in that such equipment and services can be in short supply and may not be readily available atthe times and places required. In addition, the costs of third-party services and equipment have increasedsignificantly over recent years and may continue to rise. This may, therefore, have an adverse effect on theCompany’s business. In addition, the failure of a third party provider or supplier of equipment or servicescould have a material adverse impact on the Company’s business and the results of its operations.

This risk factor is not intended to qualify the working capital statement set out at paragraph 14 of Part 8 ofthis Document.

Decommissioning costs may be much greater than initially estimated

Leaseholders are invariably obliged under the terms of relevant leases or local law, to dismantle and removeequipment, cap or seal wells and generally make good production sites. Decommissioning estimates arebased on facts and circumstances known at the time of estimation. No guarantee can be given that suchprovisions shall in due course turn out to be sufficient.

Risk of loss of oil and gas rights

The Company’s activities will be dependent, indirectly, upon the grant, renewal and maintenance ofappropriate leases, licences, concessions, permits and regulatory consents which may not be granted or maybe withdrawn or made subject to qualifications. Also, in its proposed Concessions, Elcrest/the Company isan indirect joint interest holder with other parties over which it has no control. A Concession or authorisationmay be revoked by the relevant regulatory authority, inter alia, if any interest holder is no longer deemed to

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be financially credible or if one of the joint interest holders defaults on its Concession obligations. Althoughthe Company believes that the authorisations in relation to OML 40 will be granted, will not be withdrawnand will be renewed following expiry (as the case may be), there can be no guarantee that such authorisationswill not, in the future, be withdrawn, fail to be renewed or granted. There can be no assurance as to the termsof such future grants or renewals.

RISKS RELATING TO NIGERIA AND AFRICA

On-shore exploration in Nigeria can be disrupted due to community issues

The Company faces additional risks due to its proposed focus on on-shore activities in the Niger Delta, wherethere has been an historic record of disruption to oil related activities including violence. Accordingly,community relations including interruptions and violence could materially increase the cost and difficulty ofoperations. A major management focus on community affairs is essential, which typically means that theGroup will be taking on a role typically undertaken by governmental agencies to provide basic infrastructurein medical clinics, schools, water and electricity. Such costs are deductible for tax purposes, but it is likelyto require that the Company and Elcrest devote significant attention to these issues, and there is always thepotential that communities will disrupt the Company’s and Elcrest’s activities.

Such disruption of activities may also result in potential harm to operations personnel. In the recent past,there have been a number of kidnappings, which were for ransom. Such kidnappings target expatriate andindigenes alike. Aside from the personal consequences for the individuals affected, the kidnappings couldsignificantly interfere with the Company’s operations and its ability to recruit and maintain the employees itneeds to implement its growth strategy, particularly if key employees are the subject to any kidnappings.

Terrorism, militant activity and war

Militant activity is a major problem in the Niger Delta region of Nigeria, where a range of militant groupswith differing goals operates. The main militant group in the region is the ethnic-Ijaw Movement for theEmancipation of the Niger Delta (“MEND”), which claims to be fighting for political power for the region’sresidents and a redistribution of oil revenues. Since MEND emerged in 2006, attacks and kidnappings havemade the core Niger Delta states of Rivers, Delta and Bayelsa challenging operating environments forcompanies, particularly for companies in the oil and gas industry, which have been the main target of attacks.The security situation remains volatile in the Niger Delta region. Despite the Niger Delta AmnestyProgramme of 2009 and a surrender of weapons, militant and criminal groups do continue to operate in theregion and are capable of carrying out armed attacks. While security installations and personnel remain theprimary targets for any such incidents, foreign companies, such as the Company and its employees may besingled out.

Most oil operators in the region reduced operations in recent years because of persistent community unrestand the direct threat of abduction, extortion and robbery. The security environment in the region is likely toremain uncertain in spite of a government strategy to resolve insecurity through the Niger Delta AmnestyProgramme. If the Company, Elcrest or its employees are the subject of any attacks, kidnappings or othersecurity threats, this could have a material adverse effect on the Company’s and Elcrest’s operations in theNiger Delta.

Following the re-election of Dr. Goodluck Jonathan as president of the Federal Republic of Nigeria in April2011, most of the purported members of MEND have committed to support the presidency through improvedsecurity and stability in the Niger Delta region. Since then, security and stability have improved significantlybut there could be no guarantee that this will continue.

The Islamic militant group Jama’atu Ahlis Sunna Lidda’awati wal-Jihad (known as ‘Boko Haram’) haslaunched a series of attacks in north-east Nigeria, most recently killing 165 people in the northern city ofKano in January 2012. The threat of similar groups from northern Nigeria is likely to remain whilsteconomic and educational disparity between the north and south of the country continues. It is quite possiblethat there will be further bombing attacks, and if such attacks escalate, oil installations may be targeted. Suchactivity may have a significant impact on Elcrest and the Company.

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The potential near-term and long-term effects of terrorist and militant activities on the Company’s business,including the possibility that these could escalate into war, are uncertain; and the Company may not be ableto foresee events that could have adverse effects on its business.

Strikes affecting the operations of OML 40

In recent months, Nigeria has been subject to countrywide strikes which have brought the country to astandstill. There can be no certainty that such strikes will not occur again and if they were to becomefrequent, this could result in significant delays to the operations of OML 40 and in turn have a significantnegative impact on the financial position of Elcrest and Eland.

Risk of crime and corruption

Countries in West Africa experience high levels of criminal activity and governmental and businesscorruption. Oil and gas companies operating in West Africa may be particular targets of criminal or terroristactions. Criminal, corrupt or terrorist action against the Group and its directly or indirectly held propertiesor facilities could have a material adverse effect on the Group’s business, results of operations or financialcondition. In addition, the fear of criminal or terrorist actions against the Group could have an adverse effecton the ability of the Group to adequately staff and/or manage its operations or could substantially increasethe costs of doing so.

The Company is not aware of any current or threatened investigations relating to or any existing adversefindings against the Company, its directors, officers or employees (potential investors are referred to Part 2of this Document in relation to its joint venture partner). If any such investigations are made andsubstantiated in the future against the Company, its directors, officers, employees or (potentially) against itsjoint venture partners, or such persons are found to be involved in corruption or other illegal activity, thiscould result in criminal or civil penalties, including substantial monetary fines, against the Company, itsdirectors, officers or employees. Any such findings in the future could damage the Company’s reputation andits ability to do business, including by affecting its rights under any Concessions it may have acquired or bythe loss of key personnel, and could adversely affect its financial condition and results of operations.Furthermore, alleged or actual involvement in corrupt practices or other illegal activities by the joint venturepartners of the Company, or others with whom the Company directly or indirectly conducts business, couldalso damage the Company’s reputation and business and adversely affect the Company’s financial conditionand results of operations. The UK Bribery Act 2010 (the “Act”) came into force in July 2011. Under theterms of the Act, an unlimited fine may be imposed on companies (which could potentially include theCompany) where they have failed to take appropriate steps (“Adequate Procedures”) to ensure that theCompany and its associated persons, as defined in the Act (including, but not limited to, employees,subsidiaries, joint ventures, and agents) are not involved in any corrupt practices. There is concern in the oiland gas industry that, following the letter of the law, the Act prohibits certain practices which are not coveredby the US Foreign Corrupt Practices Act 1977 (the “FCPA”), but which are regarded as standard industrypractice (for example, facilitation payments). The issue of facilitation payments is covered by the UKgovernment’s official guidance on what constitutes Adequate Procedures (the “Guidance”). As was the caseunder the old UK law, the Act does not provide any exemption for facilitation payments (small paymentsmade to facilitate routine government action). The Company is also subject to FCPA, which prohibits briberyof foreign public officials. The FCPA has wide extraterritorial application and is prosecuted vigorously byUS authorities.

Underdeveloped infrastructure

Underdeveloped infrastructure (in particular road, rail and air) in West Africa may constrain the speed atwhich the Company can grow.

Risks associated with emerging and developing markets

The disruptions recently experienced in the international and domestic capital markets have led to reducedliquidity and increased credit risk premiums for certain market participants and have resulted in a reductionof available financing. Companies doing business in countries in the emerging markets, such as Nigeria, maybe particularly susceptible to these disruptions and reductions in the availability of credit or increases in

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financing costs. This could result in such companies experiencing financial difficulty. In addition, theavailability of credit to entities operating within the emerging and developing markets is significantlyinfluenced by levels of investor confidence in such markets as a whole. As such, any factors that impactmarket confidence (for example, a decrease in credit ratings, state or central bank intervention in one marketor terrorist activity and conflict) could affect the price or availability of funding for entities within any ofthese markets.

Since the advent of the global economic crisis in 2008, certain emerging market economies have been, andmay continue to be, adversely affected by market downturns and economic slow downs elsewhere in theworld. As has happened in the past, financial problems outside countries with emerging or developingeconomies or an increase in the perceived risks associated with investing in such economies could dampenforeign investment in and adversely affect the economies of these countries (including, for example,countries in which the Company operates).

Investors in emerging markets, such as Nigeria, should, therefore, be aware that these markets are subject togreater risk than more developed markets, including, in some cases, significant legal, fiscal, economic andpolitical risks. Accordingly, investors should exercise particular care in evaluating the risks involved in aninvestment in the Company and must decide for themselves whether, in the light of those risks, theirinvestment is appropriate. Generally, investment in emerging and developing markets is suitable only forsophisticated investors who fully appreciate the significance of the risks involved.

Political, economic, fiscal, legal, regulatory and social environment risk

The Group’s operations in Nigeria are likely to be exposed to political, economic, fiscal, legal, regulatoryand social environment risk. The Company’s business will involve a high degree of risk which a combinationof experience, knowledge and careful evaluation may not overcome. These risks include, but are not limitedto, corruption, civil strife or labour unrest, armed conflict, terrorism, limitations or price controls on oilexports, and limitations or the imposition of tariffs or duties on imports of certain goods. The potentialoperations of the Company in Nigeria are likely to expose it to potential civil unrest and political or currencyrisk. As a significant oil producer and consumer market of great potential, Nigeria remains a key investmentlocation, though corruption, policy drift and inadequate infrastructure, as well as insecurity in the NigerDelta, present significant risks to business operations in that country. Any intensification in the level of civilstrife may have a material adverse effect on the Group’s business, results of operations or financial condition.

If the existing body of laws and regulations in Nigeria are interpreted or applied, or relevant discretionsexercised, in an inconsistent manner by the courts or applicable regulatory bodies, this could result inambiguities, inconsistencies and anomalies in the enforcement of such laws and regulations, which, in turn,could hinder the long-term planning efforts of the Company and may create uncertainties in its operatingenvironment.

Exploration and development activities in developing countries may require protracted negotiations withhost governments, national oil companies and third parties and may be subject to economic and politicalconsiderations such as the risks of war, actions by terrorist or insurgent groups, community disturbances,expropriation, nationalisation, renegotiation, forced change or nullification of existing contracts or royaltyrates, unenforceability of contractual rights, changing taxation policies or interpretations, adverse changes tolaws (whether of general application or otherwise) or the interpretation thereof, foreign exchangerestrictions, inflation, changing political conditions, the death or incapacitation of political leaders, localcurrency devaluation, currency controls, and foreign governmental regulations that favour or require theawarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchasesupplies from, a particular jurisdiction. Any of these factors detailed above or similar factors could have amaterial adverse effect on the Group’s business, results of operations or financial condition. If a disputearises in connection with operations in developing countries, the Group may be subject to the exclusivejurisdiction of foreign courts or foreign arbitration tribunals or may not be successful in subjecting foreignpersons, especially foreign oil ministries and national oil companies, to the jurisdiction of the UnitedKingdom.

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Uncertainties in the interpretation and application of laws and regulations

The courts in Nigeria may offer less certainty as to the judicial outcome or a more protracted judicial processthan is the case in more established economies. Businesses can become involved in lengthy court cases oversimple issues when rulings are not clearly defined, and the poor drafting of laws and excessive delays in thelegal process for resolving issues or disputes compound such problems. Accordingly, the Company couldface risks, such as: (i) effective legal redress in the courts being more difficult to obtain, whether in respectof a breach of law or regulation, or in an ownership dispute, (ii) a higher degree of discretion on the part ofgovernmental authorities and, therefore, less certainty, (iii) the lack of judicial or administrative guidance oninterpreting applicable rules and regulations, (iv) inconsistencies or conflicts between and within variouslaws, regulations, decrees, orders and resolutions and (v) relative inexperience of the judiciary and courts insuch matters.

Enforcement of laws in Nigeria may depend on and be subject to the interpretation placed upon such lawsby the relevant local authority, and such authority may adopt an interpretation of an aspect of local law whichdiffers from the advice that has been given to the Company by local lawyers or even previously by therelevant local authority itself. There can be no assurance that contracts, joint ventures, Concessions or otherlegal arrangements will not be adversely affected by the actions of government authorities and theeffectiveness of and enforcement of such arrangements in the jurisdiction. The commitment of localbusinesses, government officials and agencies, and the judicial system to abide by legal requirements andnegotiated agreements may be more uncertain and may be susceptible to revision or cancellation, and legalredress may be uncertain or delayed.

In Nigeria and other countries in which the Company intends to directly/indirectly invest, the state assertsownership of minerals and consequently retains control of (and, in many cases, participates in) theexploration and production of hydrocarbon reserves. Accordingly, the operations of companies in the oil andgas industry may be materially affected by the host government through royalty payments, taxes andregulations, surcharges, value added taxes, production bonuses and other charges to a greater extent thanwould be the case if their operations were in countries where mineral resources are not state owned andcontrolled (or where there is no state participation). In addition, transfers of interests typically requiregovernment approval, which may delay or otherwise impede such transfers, and the government may imposeobligations on companies to complete minimum work within specified timeframes either generally or as acondition to approving such transfers. This could materially affect the Company’s stated growth strategy.

The Nigerian Oil and Gas Industry Content Development Act 2010 will impact upon the operations ofcompanies in the oil and gas industry in Nigeria. The legislation provides that Nigerian independentoperators or indigenous companies shall be given priority in consideration in the award of oil blocks, oil fieldlicences, oil lifting licences and, generally, all projects for which a contract is to be awarded in the oil andgas industry. Whilst Elcrest is an indigenous company, in practice the Company will need to put in placesimilar indigenous vehicles when bidding for other assets and there is no guarantee that the Company willbe able to do this.

All projects or contracts with a budget of more than US$100 million are required to contain a specific“Labour Clause” mandating a minimum percentage of Nigerian labour involvement. There are alsorestrictions on the level of expatriate staff employed by oil companies operating in Nigeria. Certainrestrictions are also placed on the maintenance of insurance risks outside Nigeria without the writtenapproval of the National Insurance Commission, and there are obligations on the Company to buy goods andservices from Nigerian companies. This in practice may mean there is less choice and this may impact thecosts of the Company’s operations in Nigeria.

Licensing and other regulatory requirements in Nigeria

The Company’s direct and/or indirect intended future operations will be subject to mineral leases, petroleumleases, licences, production sharing contracts, regulations and approvals of governmental authorities forexploration, development, construction, operation, production, marketing, pricing, transportation and storageof oil, taxation, and environmental and health and safety matters. The Group cannot guarantee that suchdocuments applied for will be granted or, if granted, will not be subject to possibly onerous conditions. Any

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changes to exploration, exploration and production, or production licences, regulations and approvals, ortheir availability to the Group or its associated companies may adversely affect the Company’s assets, plans,targets and projections.

Following the Acquisition, the Company will be subject to extensive government laws and regulationsgoverning prices, taxes, royalties, allowable production, waste disposal, pollution control and similarenvironmental laws, the export of oil and many other aspects of the oil business. There can be no assurancethat the actions of present or future governments in Nigeria, or of governments of other countries in whichthe Company may operate in the future, will not materially adversely challenge Elcrest’s title to the OML 40Lease with retrospective effect.

Furthermore, the oil and gas sector in Nigeria is still developing, and there have been a number of changesin policy affecting the sector. Nigeria is pursuing a number of new policy directions with the aim ofrestructuring its upstream and deregulating its downstream sectors. The adoption of new regulations and theimplementation of suggested reforms may be subject to political and economic influences, which couldcreate uncertainty in relevant sectors.

In August 2007, the Federal Government of Nigeria announced the overhaul of the oil sector and stated thatit would be implementing reforms to make the oil and gas sector more responsive to the needs of Nigeria.These reforms were first suggested by the Oil and Gas Reform Committee set up in 2000 and anothercommittee set up by the National Council on Privatisation, but the mooted plans were rejected by formerPresident Olusegun Obasanjo. In 2008, the new Petroleum Industry Bill was submitted to the NationalAssembly but after 3 years, it is yet to be passed as a law. The Petroleum Industry Bill seeks to bring togetherthe provisions of many laws regulating the petroleum industry, but there is still uncertainty with respect toits effect on the industry. Having failed to be enacted under the last National Assembly, the PetroleumIndustry Bill is being reviewed by a technical committee set up by the Minster of Petroleum Resourcesbefore it is re-submitted to the current National Assembly. It is not certain what its key provisions are likelyto be at this stage albeit it is fair to assume that it will still reflect key elements of Nigerian oil and gas policyin recent years i.e. promoting local content, establishing a competitive regulatory and fiscal regime incomparison to comparable oil producing nations, etc.

In recent months, the government run oil operator NNPC has become more engaged with its involvement inoperating of oil and gas licences. In particular, its subsidiary NPDC has taken a more active role in acting asoperator where previously other entities holding participating interests have taken on this role. As such,Elcrest will not be able to act as operator of OML 40 and there can be no guarantee that this position willchange during the term of the OML 40 Lease.

Adverse sovereign action involving expropriation or renationalisation

The oil and gas industry is central to the economy and future prospects for development in Nigeria.Therefore, the industry can be expected to be the focus of continuing attention and debate. In certaindeveloping countries, petroleum companies have faced the risks of expropriation or renationalisation, breachor abrogation of project agreements, application to such companies of laws and regulations from which theywere intended to be exempt, denials of required permits and approvals, increases in royalty rates and taxesthat were intended to be stable, application of exchange or capital controls, and other risks.

As with many countries, possible future changes in the government, major policy shifts or increased securityarrangements could have, to varying degrees, an adverse effect on the value of investments. These factorscould materially adversely affect the Company’s business, prospects or financial results.

Foreign operations may be influenced by political, economic and other uncertainties

The Company’s focus is on the direct and/or indirect acquisition of oil and gas assets in Nigeria andelsewhere in West Africa. As a result, the Company may be subject to significant political, economic andother uncertainties, including, but not limited to, sometimes frequent changes in energy policies or thepersonnel administering them, nationalisation, expropriation of property without fair compensation,cancellation or modification of contract rights, foreign exchange restrictions, currency fluctuations, royaltyand tax increases, and other risks arising out of foreign governmental sovereignty over the areas in which the

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Company’s operations are conducted, even though nationalisation and expropriation of property have nothappened in Nigeria in recent times and current Nigerian law provides for payment of adequatecompensation in such circumstances. Changes in legislation may affect the Group’s oil and natural gas director indirect exploration and production activities. Laws and policies of the United Kingdom may alsoadversely affect the Company’s international operations as they pertain to foreign trade, taxation andinvestment.

In the event of a dispute arising in connection with its foreign operations, the Company may be subject tothe exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to thejurisdiction of courts in the United Kingdom or enforcing United Kingdom judgments in foreignjurisdictions. The effectiveness of and enforcement of such contracts and relationships with parties in thesejurisdictions cannot be assured. Consequently, the Group’s foreign exploration, development and productionactivities could be substantially affected by factors beyond the Company’s control, any of which could havea material adverse effect on the Company.

Natural disasters

The planned acquisition of OML 40 by Elcrest and new projects that may be undertaken are subject to theimpacts of any natural disaster such as earthquakes, epidemics, fires and floods etc. No assurance can begiven that Elcrest will not be affected by future natural disasters.

Environmental factors

Elcrest’s operations are, and will be, subject to environmental regulation (with regular environmental impactassessments and evaluation of operations required before any permits are granted to it) in Nigeria.Environmental regulations are likely to evolve in a manner that will require stricter standards andenforcement measures being implemented, increases in fines and penalties for non-compliance, morestringent environmental assessments of proposed projects and a heightened degree of responsibility forcompanies and their directors and employees. Compliance with environmental regulations could increase theGroup’s costs. Should the Group’s operations not be able to comply with this mandate, financial penaltiesmay be levied. Environmental legislation can provide for restrictions and prohibitions on spills, releases ofemissions of various substances produced in association with oil, condensate and natural gas operations. Inaddition, certain types of operations may require the submission and approval of environmental impactassessments. The Group’s operations will be subject to such environmental policies and legislation.Environmental legislation and policy is periodically amended. Such amendments may result in stricterstandards of enforcement and in more stringent fines and penalties for noncompliance. Environmentalassessments of existing and proposed projects may carry a heightened degree of responsibility for companiesand their directors, officers and employees. The costs of compliance associated with changes inenvironmental regulations could require significant expenditure, and breaches of such regulations may resultin the imposition of material fines and penalties. In an extreme case, such regulations may result intemporary or permanent suspension of production operations. There can be no assurance that theseenvironmental costs or effects will not have a materially adverse effect on the Group’s future financialcondition or results of operations.

Terrorism and war

Terrorism and other acts of violence or war may affect, indirectly, the Group’s operations and profitability.The potential near-term and long-term effects that these attacks may have on the Company’s business areuncertain. The consequences of any terrorist attacks or any armed conflicts which may result areunpredictable, and the Company may not be able to foresee events that could have an adverse effect on itsbusiness.

INVESTMENT AND AIM RISKS

Suitability of Ordinary Shares as an investment

The Ordinary Shares may not be a suitable investment for all people receiving this Document. Before makingany investment, potential investors should consult an investment adviser, authorised by the FSA, who

71

specialises in advising on the acquisition of listed securities. The value of the Ordinary Shares and theincome received from them can go down as well as up and investors may get back less than their originalinvestment.

Risks relating to investment in the Ordinary Shares

Share prices may fluctuate from time to time for various reasons. As well as being affected by the Company’sactual or forecast operating results, the market price of the Ordinary Shares may fluctuate significantly as aresult of factors beyond the Company’s control, including among others:

• a change in world oil and natural gas prices;

• the results of exploration, development and appraisal programmes and production operations;

• changes in research analysts’ recommendations or any failure by the Company/Elcrest to meet theexpectations of research analysts;

• changes in the performance of the oil and gas sector as a whole and of any of the Company’scompetitors;

• fluctuations in share prices and volumes and general market volatility; and

• involvement of the Company in any litigation.

Helios will be a significant Shareholder

Prospective investors should note that, at Admission, Helios will be interested in 39,600,000 Ordinary Sharesrepresenting 29.4 per cent. of the issued share capital of the Company. In addition, under the terms of theHelios Option Agreement, Helios may subscribe for up to 10,000,000 Non-Voting Right Ordinary Shares ona one-for-one basis at Admission which are convertible into Ordinary Shares subject to the restrictionscontained in the Articles.

The Code applies to the Company at Admission on the basis that the Company has its registered office in theUK and is considered to have its place of central management and control in the UK too. Therefore theCompany falls under the jurisdiction of the Code and Shareholders are entitled to the protections affordedby the Code.

Under the Code, assuming: (i) an acquisition of Ordinary Shares or (ii) the conversion of Non-Voting RightOrdinary Shares into Ordinary Shares were to increase the aggregate holding of Helios (taken together withany Ordinary Shares in which persons acting in concert with Helios are interested) to 30 per cent. or moreof the total voting rights in the Company, Helios (and its concert parties if applicable) would be required(except with the consent of the Takeover Panel) under Rule 9 of the Code to make a cash offer for theoutstanding shares in the Company at a price not less than the highest price paid for the Ordinary Shares byHelios (or its concert parties if applicable) during the previous 12 months.

Under the Code, a ‘concert party’ arises when persons acting together pursuant to an agreement orunderstanding (whether formal or informal), actively co-operate to obtain or consolidate control of, orfrustrate the successful outcome of an offer for, the Company. ‘Control’ means an interest or interests inshares carrying an aggregate of 30 per cent. or more of the voting rights of the Company irrespective ofwhether the holding or holdings give de facto control.

As at the date of this Document, the Company is not aware of Helios ‘acting in concert’ with any other partyas defined in the Code. Other than the protections afforded to Shareholders under the Code, there are nocontrols in place to ensure that Helios (whether on its own or together with another party deemed to be actingin concert with it) with such a significant shareholding does not make a cash offer for the outstandingOrdinary Shares in the Company.

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Helios’ interests may differ from those of other Shareholders

At Admission, Helios will hold in aggregate approximately 39,600,000 Ordinary Shares constitutingapproximately 29.4 per cent. of the total issued Ordinary Share capital of the Company. In addition Helioswill have an option to acquire 10,000,000 Non-Voting Ordinary Shares pursuant to the terms of the HeliosOption Agreement.

As a result, Helios will possess sufficient voting power to have a significant influence over all mattersrequiring Shareholder approval. This concentration of ownership may have the effect of delaying, preventingor deterring a change in control of the Group, could deprive Shareholders of an opportunity to receive apremium for their Ordinary Shares as part of any sale of the Group and might affect the market price of theOrdinary Shares.

In addition, pursuant to the terms of the Relationship Agreement, so long as the shareholding of Helios (orany member of its group) in the Company does not fall below 17.5 per cent. (subject to certain anti-dilutionprovisions in the case of certain non-pre-emptive offers of shares by the Company) it will have the right tonominate for appointment and propose for removal one Director. The interests of Helios may not always bealigned with those of other Shareholders. Furthermore, Helios may hold interests in, or may makeacquisitions of, or investments in, other businesses that may be, or may become, competitors of the Group.Also, disputes may arise between Helios and other Shareholders regarding how to manage the Group’sbusiness, which could in turn delay or prevent the Group from achieving its objectives.

Solstice may be a significant Shareholder

Under the terms of the Solstice Option Agreement, Solstice has an option to subscribe for 10,000,000Ordinary Shares in the Company at par value and the Company has an option to require Solstice to subscribefor up to 10,000,000 Ordinary Shares at par value. The maximum number of Ordinary Shares which can beacquired by operation of these options is in aggregate 10,000,000.

Were Solstice to subscribe for the full amount of the 10,000,000 Ordinary Shares under either or both ofthese options, then, assuming no other changes to the issued Ordinary Share capital and no other acquisitionor disposal of relevant securities by Solstice, Solstice would hold 23,658,251 Ordinary Shares representing17.5 per cent. of the issued Ordinary Share capital of the Company. Accordingly, Solstice may acquiresignificant influence over the Company.

Solstice has given certain undertakings in the Solstice Option Agreement that it will not acquire, nor will itpermit any person with which it may now or subsequently be deemed to be acting in concert with, to acquireany interest in Ordinary Shares which would trigger a requirement under Rule 9 of the Code to make a cashoffer for the outstanding Ordinary Shares. Rule 9 of the Code is triggered when Solstice (or any concert partof Solstice) acquires any interest in securities of the Company which results in Solstice (taken together withany relevant interest in securities in which persons acting in concert with Solstice are interested) holding 30per cent. or more of the total voting rights. Solstice (together with any concert parties) could thereforeacquire interests in additional Ordinary Shares without triggering Rule 9 which would allow them to exercisegreater control over the Company.

The market price of the Ordinary Shares could be negatively affected by sales of substantial amounts ofshares in the public markets.

On Admission, Helios will hold approximately 39,600,000 Ordinary Shares (constituting approximately 29.4per cent. of the total issued Ordinary Share capital of the Company). In addition, the Company mayundertake a public or private offering of Ordinary Shares. There can be no assurance as to what effect, if any,future sales of Ordinary Shares will have on the market price of the Ordinary Shares. If Helios were to selltheir Ordinary Shares, or the Company were to issue and sell a substantial number of Ordinary Shares in thepublic market, the market price of the Ordinary Shares could be adversely affected. Sales by Helios couldalso make it more difficult for the Company to sell equity securities in the future at a time and price that itdeems appropriate. There can be no assurance that Helios will not effect transactions in relation to its shares.The sale of a significant amount of Ordinary Shares in the public market, or the perception that such salesmay occur, could materially affect the market price of the Ordinary Shares.

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Payment of dividends will not occur for some time

Following Completion, the initial focus of the Company will be the achievement of capital growth forShareholders and therefore the Company will only consider the payment of dividends as and when it isappropriate to do so. As such, it is not possible at this stage to give an indication of the likely level or timingof any future dividends. To the extent that any dividends are paid they will be paid in accordance with anyapplicable laws and the regulations to which the Company is subject. The amount of the dividends paid toShareholders will fluctuate according to the levels of profits earned by the Company and will be dependenton sufficient distributable reserves being available to the Company.

Disclosure may differ from the disclosure made by similar companies in the United States

The Company’s corporate disclosure may differ from the disclosure made by similar companies in theUnited States. Publicly available information about the issuers of securities listed on AIM differs from and,in certain respects, is less detailed than the information that is regularly published by or about listedcompanies in the United States. In addition, regulations governing AIM may not be as extensive in allrespects as those in effect on United States markets.

IFRS Financial Statements

Financial Statements prepared under IFRS differ from those prepared under US GAAP in a number ofrespects including, but not limited to, revenue recognition, share option compensation, accounting forbusiness combinations and acquisitions of intellectual property and accounting for capital instruments.Potential investors are advised to consult their own professional advisers as to the significance of thesedifferences. In making an investment decision, investors must rely upon their own examination of theCompany, the terms of the offering and the financial information. Potential investors should consult theirown professional advisors for an understanding of the differences between IFRS and US GAAP, and howthose differences might affect the financial information herein.

Eland’s operations involve use of different currencies

The Company reports the results of its operations and financial condition in US dollars. The share price ofthe Company will continue to be quoted on AIM in UK sterling. As a consequence Shareholders mayexperience fluctuations in the market price of the Ordinary Shares as a result of, amongst other factors,movements in the exchange rate between UK sterling and the US dollar.

Transfer restrictions for Shareholders in the United States

The Ordinary Shares have not been registered in the United States under the US Securities Act or under anyother applicable securities laws and are subject to restrictions on transfer contained in such laws. There areadditional restrictions on the resale of Ordinary Shares by Shareholders who are in the United States and onthe resale of Ordinary Shares by any Shareholders to any person who is in the United States. Theserestrictions could make it more difficult to resell Ordinary Shares in many instances and this could have anadverse effect on the market value of Ordinary Shares. There can be no assurance that Shareholders in theUnited States will be able to locate acceptable purchasers or obtain the required certifications to effect a sale.

Limitations on ability of Shareholders located or residing outside of the United Kingdom to bring actionsor enforce judgments against the Company

The ability of Shareholder located or residing outside of the United Kingdom to bring an action against theCompany may be limited under law. The Company is a public limited company incorporated in Scotland.The rights of holders of New Ordinary Shares are governed by the laws of Scotland and by the Articles.These rights differ from the rights of shareholders in typical US corporations. A Shareholder located orresiding outside the United Kingdom may not be able to enforce a judgment against some or all of theDirectors or other executive officers of the Company. The majority of the Directors and executive officersare residents of the United Kingdom. Consequently, it may not be possible for a Shareholder residing outsidethe United Kingdom to effect service of process upon the Directors and executive officers within suchShareholder’s country of residence or to enforce against the Directors and executive officers judgments ofcourts of such Shareholder’s country of residence based on civil liabilities under that country’s securities

74

laws. In addition, the Scottish or other courts may not impose civil liability on the Directors or executiveofficers in any original action based solely on foreign securities laws.

Investment risk and AIM

Following Admission, assuming it occurs, the New Ordinary Shares will be quoted on AIM rather than theOfficial List. The AIM Rules are less demanding than those of the Official List and an investment in sharesquoted on AIM may carry a higher risk than an investment in shares quoted on the Official List. AIM hasbeen in existence for some time but its future success and the liquidity in the market for the New OrdinaryShares cannot be guaranteed. Investors should be aware that the value of the New Ordinary Shares may bevolatile and may go down as well as up and investors may therefore not recover their original investment.The market price of the New Ordinary Shares may not reflect the underlying value of the Company’s netassets. The price at which investors may dispose of their New Ordinary Shares will be influenced by anumber of factors, some of which will be outside the Company’s control. On any disposal Shareholders mayrealize less than the original amount invested. Stock markets have also from time to time experiencedextreme price and volume fluctuations, which have affected the market prices of securities and which havebeen unrelated to the operating performance of the companies affected. These broad market fluctuations, aswell as general economic and political conditions, could adversely affect the market price of the NewOrdinary Shares.

Forward-looking statements

Certain statements in this Document constitute “forward-looking statements”. Forward-looking statementsinclude statements concerning the plans, objectives, goals, strategies and future operations and performanceof the Company and the assumptions underlying these forward-looking statements. The Company uses thewords “anticipates”, “estimates”, “expects”, “believes”, “intends”, “plans”, “may”, “will”, “should”, and anysimilar expressions to identify forward-looking statements. Such forward-looking statements involve knownand unknown risks, uncertainties and other important factors that could cause the Company’s actual results,performances or achievements to be materially different from any future results, performances orachievements expressed or implied by such forward-looking statements. Such forward-looking statementsare based on numerous assumptions regarding present and future business strategies and the environment inwhich the Company will operate in the future. These forward-looking statements speak only as at the dateof this Document. The Company is not obliged, and does not intend, to update or to revise any forward-looking statements, whether as a result of new information, future events or otherwise except to the extentrequired by any applicable law or regulation. All subsequent written or oral forward-looking statementsattributable to the Company, or persons acting on behalf of the Company, are expressly qualified in theirentirety by the cautionary statements contained throughout this Document. As a result of these risks,uncertainties and assumptions, a prospective investor should not place undue reliance on these forward-looking statements.

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PART 5

COMPETENT PERSON’S REPORT

Set out below is the Competent Person’s Report as prepared by McDaniel originally dated 6 December 2010,updated as at 30 April 2011, 31 December 2011 and further updated as at 30 June 2012.

76

ELAND OIL AND GAS LIMITED

Competent Person’s Report

OML 40 - Nigeria

June 30, 2012

77

ELAND OIL AND GAS LIMITED

Competent Person’s Report OML 40 - Nigeria

Prepared For: Eland Oil and Gas Limited

34 Albyn Place Aberdeen, United Kingdom

AB10 1FW

Canaccord Genuity Limited 88 Wood Street

London, United Kingdom EC2V 7QR

Prepared By: McDaniel & Associates Consultants Ltd.

2200, 255 - 5th Avenue SW Calgary, Canada

T2P 3G6

August 2012

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ELAND OIL AND GAS LIMITED

TABLE OF CONTENTS

1� EXECUTIVE SUMMARY 85�

1.1� Reserves �

1.2� Net Present Values of the Reserves 89�

1.3� Contingent Resources 90�

1.4� Prospective Resources 92 �

2� RESERVES AND RESOURCES DEFINITIONS 93�

2.1� Resources �

2.2� Range of Uncertainty 95�

2.3� Reserves Categories and Status 95�

2.4� Contingent Resource Categories 97�

2.5� Prospective Resource Categories 97�

3� PRICE FORECASTS �

4� PROPERTY OVERVIEW 98�

5� OWNERSHIP AND CONTRACT TERMS 101�

6� SOURCE AND QUALITY OF DATA 102�

7� REGIONAL GEOLOGY – NIGER DELTA BASIN 103 �

8� GEOLOGY OF THE OML 40 AREA 104�

8.1� Opuama Field Geology 105�

8.2� Gbetiokun Field Geology 106�

8.3� Abiala Field Geology 108�

8.4� Ugbo Field Geology 108�

9� CRUDE OIL & NATURAL GAS RESERVES 108�

9.1� Volumetric In Place Estimates 109�

9.2� Opuama Field Crude Oil Reserves Estimates 110�

9.3� Gbetiokun Field Crude Oil Reserves Estimates 112 �

9.4� Natural Gas Reserves Estimates �

10� NET PRESENT VALUES OF THE RESERVES 114�

11� CONTINGENT RESOURCE ESTIMATES 117�

11.1� Abiala Field �

11.2� Ugbo Field �

86

93

98

113

117

118

12� PROSPECTIVE RESOURCE ESTIMATES 118�

12.1� Abiala Area Prospects 118�

12.2� Gbetiokun West D5000 Prospect 119�

12.3� Exploration Upside 119 �

13� ABBREVIATIONS �

14� PROFESSIONAL QUALIFICATIONS �

APPENDIX 1 TABLES AND FIGURES

APPENDIX 2 ELCREST SPECIFIC TABLES

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121

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TABLES

Summary of Assets Table 1

Eland Reserves Summary Table 2

Elcrest Reserves Summary Table 3

Eland Reserves Net Present Value Summary Table 4

Elcrest Reserves Net Present Value Summary Table 5

Eland Contingent Resources Summary Table 6

Elcrest Contingent Resources Summary Table 7

Prospective Resources Summary Table 8

McDaniel Price Forecast Summary Table 9

OML 40 Discovered Fields Table 10

Opuama Field Well Status Table 11

OML 40 Fiscal Terms Table 12

Gbetiokun Field Fluid Contact Data for Main Reservoirs Table 13

Opuama Field Crude Oil Reserves Summary Table 14

Opuama License Extension Recovery Sensitivity Table 15

Gbetiokun Field Crude Oil Reserves Summary Table 16

OML 40 Natural Gas Reserves Summary Table 17

OML 40 Production Forecast Summary Table 18

Eland After Tax 2P Reserves NPV Sensitivity to Oil Price and Tax Status Table 19

Elcrest After Tax 2P Reserves NPV Sensitivity to Oil Price and Tax Status Table 20

Eland After tax NPV Sensitivity to License Extension Table 21

Elcrest After tax NPV Sensitivity to License Extension Table 22

APPENDIX 1 - TABLES

Total OML 40 - Summary of Reserves and Net Present Values Table 1

Opuama Field Crude Oil Reserves Summary Table 2

Opuama Field Reservoir and Fluid Properties Table 3

Gbetiokun Field Crude Oil Reserves Summary Table 4

Gbetiokun Field Reservoir and Fluid Properties Table 5

US $60/bbl Price Forecast Summary Table 6

APPENDIX – TABLES (CONTINUED)

US $75/bbl Price Forecast Summary Table 7

US $85/bbl Price Forecast Summary Table 8

Eland - Summary of Reserves and Net Present Values - US $60/bbl Price Forecast Table 9

Eland - Summary of Reserves and Net Present Values - US $75/bbl Price Forecast Table 10

Eland - Summary of Reserves and Net Present Values - US $85/bbl Price Forecast Table 11

Eland - Summary of Reserves and Net Present Values – Non-Newcomer Tax Status Table 12

Eland - Summary of Reserves and Net Present Values – License Extension Table 13

Summary of Property Gross Contingent Resources Table 14

Summary of Contingent Resources Input Parameters Table 15

Abiala N-Blk 2 Prospect – D2.2 to E9.2 Table 16

Abiala NE Prospect – D2.2 to E9.2 Table 17

Gbetiokun West D5000 Prospect – D5000 Table 18

APPENDIX 2 – ELCREST SPECIFIC TABLES

Elcrest - Summary of Reserves and Net Present Values Table 1

Elcrest - Summary of Reserves and Net Present Values - US $60/bbl Price Forecast Table 2

Elcrest - Summary of Reserves and Net Present Values - US $75/bbl Price Forecast Table 3

Elcrest - Summary of Reserves and Net Present Values - US $85/bbl Price Forecast Table 4

Elcrest - Summary of Reserves and Net Present Values – Non-Newcomer Tax Status Table 5

Elcrest - Summary of Reserves and Net Present Values – License Extension Table 6

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FIGURES

Location Map for OML 40 Figure 1

OML 40 Field Area Location Map Figure 2

Resource Classification Framework Figure 3

Opuama Field Production History by Well Figure 4

Schematic Niger Delta Cross Section Figure 5

APPENDIX 1 - FIGURES

Opuama Field, D1000X Top Structure Map Figure 1

Opuama Field, D1000X Gross Oil Thickness Map Figure 2

Opuama Field, D2000X Top Structure Map Figure 3

Opuama Field, D2000X Gross Oil Thickness Map Figure 4

Opuama Field, D5000X Top Structure Map Figure 5

Opuama Field, D5000X Gross Oil Thickness Map Figure 6

Opuama Field, E2000X Top Structure Map Figure 7

Opuama Field, E2000X Gross Oil Thickness Map Figure 8

Gbetiokun Field, D5000X Top Structure Map Figure 9

Gbetiokun Field, D5000X Gross Oil Thickness Map Figure 10

Gbetiokun Field, E2000X Top Structure Map Figure 11

Gbetiokun Field, E2000X Gross Oil Thickness Map Figure 12

Gbetiokun Field, E5000X Top Structure Map Figure 13

Gbetiokun Field, E5000X Gross Oil Thickness Map Figure 14

Gbetiokun Field, E6000X Top Structure Map Figure 15

Gbetiokun Field, E6000X Gross Oil Thickness Map Figure 16

Gbetiokun Field, E7000X Top Structure Map Figure 17

Gbetiokun Field, E7000X Gross Oil Thickness Map Figure 18

Abiala Field, E9200X Top Structure Map Figure 19

Ugbo Field, B1000X Top Structure Map Figure 20

Abiala N Blk-2 and NE Prospects, D2.2 Top Structure Map Figure 21

Gbetiokun Field, D5000 Prospect, D5000 Top Structure Map Figure 22

Opuama Field, Crude Oil Production History / Forecast Plot Figure 23

Gbetiokun Field, Crude Oil Production Forecast Plot Figure 24

2200, Bow Valley Square 3, 255 - 5 Avenue SW, Calgary AB T2P 3G6 Tel: (403) 262-5506 Fax: (403) 233-2744 www.mcdan.com

August 1, 2012

Eland Oil and Gas Limited 34 Albyn Place Aberdeen, United Kingdom AB10 1FW

Canaccord Genuity Limited 88 Wood Street London, United Kingdom EC2V 7QR

Reference: Eland Oil and Gas Limited Competent Persons Report as of June 30, 2012 OML 40 - Nigeria

Dear Sirs:

Pursuant to your request, we have prepared an evaluation of the crude oil and natural gas reserves and resources for Oil Mining Lease 40 (“OML 40”) in Nigeria in which Eland Oil and Gas Limited (“Eland” or the “Company”) has an interest. The effective date of this evaluation is June 30, 2012. This evaluation was prepared to support an admission by Eland to the AIM market in London.

Eland has entered into a shareholder’s agreement with Starcrest Nigeria Energy Limited (“Starcrest”) to acquire, through a joint venture vehicle called Elcrest, a 45 percent interest in OML 40. Eland currently owns 45 percent of Elcrest but the equity parties have agreed that Eland will purchase a further 4 percent of Elcrest for a payment of US $5 million. This evaluation assumes Eland will increase their interest in Elcrest to 49 percent interest, which in turn will give Eland a 22.05 percent working interest in OML 40. The reserves, future net revenues and net present values included in this report are presented on the basis of Eland’s 22.05 percent working interest. At Eland’s request, separate tables are also included presenting Elcrest’s share of the reserves, future net revenues and net present values.

The future net revenues and net present values presented in this report were calculated using forecast prices and costs using McDaniel & Associates Consultants Ltd.’s (“McDaniel”) opinion of future crude oil and natural gas prices at July 1, 2012 and are presented in United States dollars. The reserves estimates and future net revenue forecasts have been prepared in accordance with the 2007 SPE/WPC/AAPG/SPEE Petroleum Resource Management System. The format and content

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Eland Oil and Gas Limited Page 2 Competent Person’s Report – OML 40 August 1, 2012

of this report follows the guidance set out in the June 2009 Note for Mining and Oil & Gas Companies published by the London Stock Exchange.

McDaniel previously evaluated OML 40 for Eland at the end of 2010 and then again in April 2011 and December 2011. This updated evaluation was prepared between June and August 2012 and was based on technical and financial data to the end of June 2012.

Eland has provided McDaniel with written representation that no new data or information has been acquired between June 30, 2012 and the date of this report, which might materially impact our opinions in this report. All of the basic information employed in the preparation of this report was obtained from Eland. The data was generally of good quality, consistent with the type and quality of information usually available in Nigeria. McDaniel has not conducted a field visit to OML 40 due to the current security issues. McDaniel understands that staff from Canaccord Genuity Limited have undertaken a visit to the facilities during 2012 and confirm their existence.

1 EXECUTIVE SUMMARY

Eland in conjunction with their Nigerian partner, Starcrest, is to acquire a 45 percent interest in OML 40 from SPDC, Total and ENI (collectively referred to as the “SPDC JV”). Eland’s interests in OML 40 are summarized in Table 1 below. The OML 40 area contains the Opuama Field, which produced between 1975 and 2006. In addition, there are five other undeveloped fields (Abiala, Adagbassa Creek, Gbetiokun, Tsekelewu and Ugbo) which were discovered between 1971 and 1999. Adagbassa Creek is a gas discovery whereas the other fields are predominantly oil bearing. A regional map of Nigeria showing the location of OML 40 is presented in Figure 1 and a map showing the location of the fields within OML 40 is shown in Figure 2.

Lease Operator Interest (%)(1) Status License

Expiry Date Area (sq.km) Comments

OML 40, Nigeria NPDC 22.05 Production June 2019 498 1 field closed-in since 2006 plus 5 undeveloped fields

(1) The working interest shown assumes Eland will purchase a further 4 percent in Elcrest.

Table 1 – Summary of Assets

Eland is still in the process of obtaining a full data set from the SPDC JV however sufficient data was available to undertake a full evaluation for the Abiala, Gbetiokun, Opuama and Ugbo fields. Data for the Adagbassa Creek gas discovery was not available, but according to the Nigerian National Standard (“NNS”) reserves estimates as of January 1, 2010 it contains less than two percent of the BOE reserves and so this omission is not considered material. As of the effective date of this evaluation SPDC had not provided Eland with a 3D seismic data set, which would allow McDaniel to carry out an evaluation of the exploration portfolio; SPDC will provide the 3D seismic data after the change of ownership has been completed.

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In the past smaller fallow fields have sometimes been farmed out of licences as part of a Nigerian Government initiative to encourage the development of marginal assets by indigenous companies, referred to as the Marginal Field Operations (“MFO”) arrangement. This is already the case with the Tsekelewu Field, which was part of an MFO agreement in 2004. The OML 40 owners are entitled to receive an overriding royalty from any production revenue as defined by the agreement but has no control over the development.

1.1 Reserves

Crude oil and natural gas reserves were assigned in this report to the main reservoirs in the Opuama and Gbetiokun fields in the OML 40 license. Eland considers the security issues that prevented SPDC JV from producing from the OML 40 licenses area in March 2006 to be regional and not specific to the license area. Eland believes that focused engagement with the local communities in close coordination with their indigenous partner will create an environment that will allow production and development to be resumed.

Proved developed and total proved reserves are estimated to the end of the license expiry in June 2019. Probable and possible reserves assume a license extension will be granted to allow production to continue after 2019. A summary of Eland’s share of the proved developed (“PD”), proved undeveloped (“PUD”), total proved (“1P”) and total proved plus probable (“2P”) reserves estimates, as of June 30, 2012, is presented in Table 2.

Proved Proved TotalProved

Plus Proved Plus

Probable Developed Undeveloped Proved Probable Probable Possible Plus Possible OML 40

Crude Oil Reserves

Company Gross, Mbbl (1) 877 3,348 4,226 11,541 15,767 10,031 25,798 Company Net, Mbbl (2) 702 2,679 3,381 9,233 12,613 8,025 20,638

Natural Gas Reserves

Company Gross, MMcf (1) - - - 7,376 7,376 5,564 12,940 Company Net, MMcf (2) - - - 6,859 6,859 5,175 12,034

(1) Gross reserves include Eland’s 22.05 percent working interest reserves before deduction of royalty and assumes Eland will purchase a further 4 percent in Elcrest.

(2) Net reserves include gross reserves after deduction of royalty.

Table 2 – Eland Reserves Summary

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A summary of Elcrest’s share of the proved developed (“PD”), proved undeveloped (“PUD”), total proved (“1P”) and total proved plus probable (“2P”) reserves estimates, as of June 30, 2012, is presented in Table 3.

Proved Proved TotalProved

Plus Proved Plus

Probable Developed Undeveloped Proved Probable Probable Possible Plus Possible OML 40

Crude Oil Reserves

Elcrest Gross, Mbbl (1) 1,790 6,833 8,624 23,553 32,177 20,471 52,648 Elcrest Net, Mbbl (2) 1,432 5,467 6,899 18,843 25,742 16,377 42,119

Natural Gas Reserves

Elcrest Gross, MMcf (1) - - - 15,052 15,052 11,355 26,408 Elcrest Net, MMcf (2) - - - 13,999 13,999 10,561 24,559

(1) Gross reserves include Elcrest’s 45 percent working interest reserves before deduction of royalty. (2) Net reserves include gross reserves after deduction of royalty.

Table 3 – Elcrest Reserves Summary

Figure 1 – Location Map for OML 40

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Figure 2 - OML 40 Field Area Location Map (source Eland)

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1.2 Net Present Values of the Reserves

The net present values of the reserves were based on future production and revenue analyses. Assuming Eland will purchase a further 4 percent of Elcrest, Eland’s 22.05 percent working interest share of the net present values of the reserves based on forecast prices and costs assumptions as of June 30, 2012 is presented in Table 4.

(A combined summary of the reserves and the net present values is presented in Table 1 of Appendix 1.)

OML 40 Net Present Values at June 30, 2012 (US$1000) Discounted At

0% 5% 10% 15% 20%

Before Income Taxes (1) (2)

Proved Developed Reserves 54,633 45,839 39,010 33,611 29,274 Proved Undeveloped Reserves 211,722 178,230 152,072 131,301 114,561 Total Proved Reserves 266,356 224,069 191,082 164,912 143,835 Probable Reserves 823,737 582,210 428,058 325,315 254,226 Total Proved + Probable Reserves 1,090,093 806,278 619,140 490,227 398,062 Possible Reserves 693,275 520,210 402,545 319,673 259,481 Total Proved + Probable + Possible Reserves 1,783,368 1,326,488 1,021,685 809,900 657,542

After Income Taxes (1) (2) Proved Developed Reserves 12,541 10,064 8,110 6,545 5,274 Proved Undeveloped Reserves 63,296 52,886 44,763 38,325 33,149 Total Proved Reserves 75,838 62,950 52,874 44,870 38,423 Probable Reserves 173,874 128,364 97,933 76,749 61,491 Total Proved + Probable Reserves 249,712 191,315 150,807 121,619 99,914 Possible Reserves 161,723 127,298 102,246 83,666 69,598 Total Proved + Probable + Possible Reserves 411,435 318,613 253,052 205,285 169,512

(1) The net present values may not necessarily represent the fair market value of the reserves. (2) The value of all wells and facilities are included in the net present value estimates

Table 4 – Eland Reserves Net Present Value Summary

Elcrest’s 45 percent working interest share of the net present values of the reserves based on forecast prices and costs assumptions as of June 30, 2012 is presented in Table 5. (A combined summary of the reserves and the net present values is presented in Table 1 of Appendix 2.)

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OML 40 Net Present Values at June 30, 2012 (US$1000) Discounted At

0% 5% 10% 15% 20%

Before Income Taxes (1) (2) (3)

Proved Developed Reserves 121,701 103,629 89,575 78,448 69,493 Proved Undeveloped Reserves 432,086 363,735 310,351 267,961 233,798 Total Proved Reserves 553,787 467,363 399,926 346,409 303,291 Probable Reserves 1,681,096 1,188,183 873,589 663,908 518,830 Total Proved + Probable Reserves 2,234,884 1,655,547 1,273,515 1,010,317 822,120 Possible Reserves 1,414,847 1,061,653 821,520 652,394 529,552 Total Proved + Probable + Possible Reserves 3,649,730 2,717,199 2,095,035 1,662,711 1,351,673

After Income Taxes (1) (2) (3) Proved Developed Reserves 35,799 30,620 26,516 23,212 20,513 Proved Undeveloped Reserves 129,176 107,931 91,353 78,213 67,650 Total Proved Reserves 164,975 138,551 117,869 101,425 88,163 Probable Reserves 354,845 261,968 199,863 156,630 125,492 Total Proved + Probable Reserves 519,819 400,519 317,733 258,055 213,655 Possible Reserves 330,047 259,793 208,665 170,747 142,037 Total Proved + Probable + Possible Reserves 849,867 660,312 526,397 428,802 355,693

(1) The net present values presented are for Elcrest’s share of OML 40. (2) The net present values may not necessarily represent the fair market value of the reserves. (3) The value of all wells and facilities are included in the net present value estimates

Table 5 – Elcrest Reserves Net Present Value Summary

1.3 Contingent Resources

The Abiala and Ugbo discoveries have been assigned contingent crude oil and natural gas resources as part of this Evaluation. Both fields have only one well drilled to date and further appraisal is required before reserves could possibly be assigned. A summary of Eland’s share of the low estimate (“1C”), best estimate (“2C”) and high estimate (“3C”) contingent resources estimates, as of June 30, 2012, is presented in Table 6.

OML 40 Contingent Resources 1C 2C Mean (2) 3C

Company Gross (1) Crude Oil, Mbbl 2,533 3,424 3,684 5,153 Natural Gas, MMcf 8,782 10,374 10,556 12,581

(1) Gross reserves include Eland’s working interest reserves before deduction of royalty and assumes Eland will purchase a further 4 percent in Elcrest.

(2) The statistical mean is provided in addition to the standard 1C, 2C and 3C resource categories

Table 6 – Eland Contingent Resources Summary

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A summary of Elcrest’s share of the low estimate (“1C”), best estimate (“2C”) and high estimate (“3C”) contingent resources estimates, as of June 30, 2012, is presented in Table 7.

OML 40 Contingent Resources 1C 2C Mean (2) 3C

Elcrest Gross (1) Crude Oil, Mbbl 5,169 6,988 7,518 10,516 Natural Gas, MMcf 17,922 21,171 21,543 25,676

(1) Gross resources include Elcrest’s 45 percent working interest resources before deduction of royalty. (2) The statistical mean is provided in addition to the standard 1C, 2C and 3C resource categories

Table 7 – Elcrest Contingent Resources Summary

The Opuama and Gbetiokun fields contain oil and gas in more reservoirs than those assigned reserves as part of this Evaluation. Previously SPDC has assigned NNS reserves to 7 reservoirs in the Opuama Field and 20 reservoirs in the Gbetiokun Field compared to the 4 reservoirs in Opuama and 8 reservoirs in Gbetiokun assigned reserves as part of this evaluation. In our opinion, the resources contained within these other reservoirs should be classified as contingent resources as they are all relatively thin and have not been produced. A quick look review would suggest these reservoirs each contain significantly less than 1 million barrels of contingent resources and as such will not materially affect the value determined within this evaluation.

The Adagbassa Creek would most likely be classified as contingent natural gas resources however due to incomplete data this could not be quantified.

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1.4 Prospective Resources

Prospective resources have been assigned to two prospects close to the Abiala discovery and one offsetting the Gbetiokun Field. A summary of the prospective resources estimates for these prospects is presented in Table 8.

Prospective Resources (1): Crude Oil (Mbbl)

Property Gross (Unrisked) Prospect Risked Risked Risked

Low Best High Geological Mean Mean Mean Estimate Estimate Mean Estimate Chance of Property Eland Elcrest

Prospect (P90) (P50) (P10) Success Gross (2) Gross (3) Gross (4)

Abiala NE 1,445 7,588 15,706 38,318 34% 5,301 1,169 2,385 Abiala N Blk-2 2,552 13,833 29,008 71,288 27% 7,832 1,727 3,525 GBW D5000 1,285 5,773 10,322 24,689 27% 2,787 615 1,254

Total (5) 5,281 27,194 55,036 134,295 15,920 3,510 7,164

Prospective Resources (1): Natural Gas (MMcf)

Property Gross (Unrisked) Prospect Risked Risked Risked

Low Best High Geological Mean Mean Mean Estimate Estimate Mean Estimate Chance of Property Eland Elcrest

Prospect (P90) (P50) (P10) Success Gross (2) Gross (3) Gross (4)

Abiala NE 1,635 8,694 18,102 43,977 34% 6,109 1,347 2,749 Abiala N Blk-2 2,859 15,297 32,120 78,689 27% 8,672 1,912 3,903 GBW D5000 254 1,450 2,960 7,105 27% 799 176 360

Total (5) 4,748 25,441 53,181 129,771 15,581 3,436 7,011

(1) There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it will be economically viable or technically feasible to produce any portion of the resources.

(2) These are partially risked prospective resources that have been risked for chance of discovery, but have not been risked forchance of development.

(3) Eland gross prospective resources are based on a 22.05 percent working interest share of the property gross prospective resources and assumes Eland will purchase a further 4 percent in Elcrest.

(4) Elcrest gross prospective resources are based on a 45 percent working interest share of the property gross prospective resources.

(5) Individual zone estimates statistically aggregated to the prospect/lead level and arithmetically aggregated to the asset level. The sum of the individual mean estimates may be different from the total due to rounding differences.

Table 8 – Prospective Resources Summary

Exploration effectively stopped in 1991 prior to the acquisition of any 3D seismic suggesting there could be additional exploration upside. Prior to this, nine separate structures were drilled between 1971 and 1991 using 2D seismic resulting in six discoveries (Abiala, Adagbassa Creek, Gbetiokun, Opuama, Tsekelewu and Ugbo) with a 66 percent success rate.

SPDC carried an exploration portfolio of 15 prospects and leads within OML 40 with total unrisked mean crude oil prospective resources of 356 MMbbl. There is currently insufficient data to allow all these to be assessed but it should be noted that the SPDC unrisked recoverable volumes for the Abiala North Block 2 and Abiala North East prospects are approximately 50 percent larger than the estimates presented here.

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Whilst the majority of the SPDC prospective resources cannot be audited, McDaniel believes the numbers of prospects identified is in line with what would be expected when moving from exploration based on 2D seismic to exploration based on 3D seismic.

2 RESERVES AND RESOURCES DEFINITIONS

The definitions employed in this evaluation conform to the 2007 Petroleum Resource Management System jointly published by the Society of Petroleum Engineers (“SPE”), World Petroleum Council (“WPC”), American Association of Petroleum Geology (“AAPG”) and the Society of Petroleum Evaluation Engineers (“SPEE”).

2.1 Resources

The term “resources” is intended to encompass all quantities of petroleum naturally occurring on or within the Earth’s crust, discovered and undiscovered (recoverable and unrecoverable), plus those quantities already produced. Further, it includes all types of petroleum whether currently considered “conventional” or “unconventional.”

The resources classification framework is summarized in Figure 3 and a summary of the definitions are given below.

Figure 3 – Resource Classification Framework

Production

Reserves

ProvedProved

plusProbable

Proved plus

Probableplus

Possible

Contingent Resources

Unrecoverable

Prospective Resources

Low Estimate

Best Estimate

High Estimate

Unrecoverable

Range of Uncertainty

Incr

easi

ng C

hanc

e of

Com

mer

cial

ity

Tota

l Pet

role

um In

itial

ly-In

-Pla

ce

Dis

cove

red

Petr

oleu

m In

itial

ly-In

-Pla

ce

Sub-

Com

mer

cial

Com

mer

cial

Und

isco

vere

d Pe

trol

eum

Initi

ally

-In-

Plac

e

1P 2P 3P

1C 2C 3C

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The “Range of Uncertainty” reflects a range of estimated quantities potentially recoverable from an accumulation by a project, while the vertical axis represents the “Chance of Commerciality”, that is, the chance that the project that will be developed and reach commercial producing status.

The quantities estimated to be initially-in-place are defined as Total Petroleum-initially-in-place, Discovered Petroleum-initially-in-place and Undiscovered Petroleum-initially-in-place, and the recoverable portions are defined separately as Reserves, Contingent Resources, and Prospective Resources. Reserves constitute a subset of resources, being those quantities that are discovered (i.e. in known accumulations), recoverable, commercial and remaining.

Reserves

Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of the evaluation date) based on the development project(s) applied. Reserves are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by development and production status.

The reserve classification system is covered in Section 2.3.

Contingent Resources

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality. Contingent Resources are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by their economic status.

Prospective Resources

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity.

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2.2 Range of Uncertainty

The range of uncertainty of the recoverable and/or potentially recoverable volumes may be represented by either deterministic scenarios or by a probability distribution. When the range of uncertainty is represented by a probability distribution, a low, best, and high estimate shall be provided such that:

� There should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.

� There should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

� There should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

When using the deterministic scenario method, typically there should also be low, best, and high estimates, where such estimates are based on qualitative assessments of relative uncertainty using consistent interpretation guidelines. Under the deterministic incremental (risk-based) approach, quantities at each level of uncertainty are estimated discretely and separately.

These same approaches to describing uncertainty may be applied to Reserves, Contingent Resources, and Prospective Resources. While there may be significant risk that sub-commercial and undiscovered accumulations will not achieve commercial production, it is useful to consider the range of potentially recoverable quantities independently of such a risk or consideration of the resource class to which the quantities will be assigned.

2.3 Reserves Categories and Status

For Reserves, the general cumulative terms low/best/high estimates are denoted as 1P/2P/3P, respectively. The associated incremental quantities are termed Proved, Probable and Possible. Reserves are a subset of, and must be viewed within context of, the complete resources classification system.

Proved Reserves

Proved Reserves are those quantities of petroleum which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations. If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimate.

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Probable Reserves

Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves (2P). In this context, when probabilistic methods are used, there should be at least a 50 percent probability that the actual quantities recovered will equal or exceed the 2P estimate.

Possible Reserves

Possible Reserves are those additional Reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus Possible (3P) Reserves, which is equivalent to the high estimate scenario. In this context, when probabilistic methods are used, there should be at least a 10 percent probability that the actual quantities recovered will equal or exceed the 3P estimate.

Reserves status categories define the development and producing status of wells and reservoirs.

Developed Reserves

Developed Reserves are expected quantities to be recovered from existing wells and facilities. Reserves are considered developed only after the necessary equipment has been installed, or when the costs to do so are relatively minor compared to the cost of a well. Where required facilities become unavailable, it may be necessary to reclassify Developed Reserves as Undeveloped. Developed Reserves may be further sub-classified as Producing or Non-Producing.

Developed Producing Reserves

Developed Producing Reserves are expected to be recovered from completion intervals that are open and producing at the time of the estimate. Improved recovery reserves are considered producing only after the improved recovery project is in operation.

Developed Non-producing Reserves

Developed Non-Producing Reserves include shut-in and behind-pipe Reserves. Shut-in Reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but which have not yet started producing, (2) wells which were shut-in for market conditions or pipeline connections, or, (3) wells not capable of production for mechanical reasons. Behind-pipe Reserves are expected to be recovered from zones in

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existing wells, which will require additional completion work or future re-completion prior to start of production.

Undeveloped Reserves

Undeveloped Reserves are expected quantities expected to be recovered through future investments: (1) from new wells on undrilled acreage, (2) from deepening existing wells to a different (but known) reservoir, (3) from infill wells that will increase recovery, or (4) where a relatively large expenditure (e.g. when compared to the cost of drilling a new well) is required to (a) recomplete an existing well or (b) install production or transportation facilities for primary or improved recovery projects.

2.4 Contingent Resource Categories

For Contingent Resources, the general cumulative terms low/best/high estimates are denoted as 1C/2C/3C respectively. No specific terms are defined for incremental quantities within Contingent Resources.

2.5 Prospective Resource Categories

For Prospective Resources, the general cumulative terms low/best/high estimates apply. No specific terms are defined for incremental quantities within Prospective Resources.

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3 PRICE FORECASTS

The net present value estimates were based on the McDaniel & Associates July 1, 2012 price forecast. A summary of the reference crude oil price forecasts and the field prices for the OML 40 lease is presented in Table 9.

Year

Brent Crude Oil Price (1)

Forcados Crude Oil Premium

OML 40 Export

Price (2)

OML 40 Natural Gas

Price (3) Inflation Forecast

US$/bbl US$/bbl US$/bbl US$/Mcf %2012 (6 mo) 102.50 2.00 104.50 2.10 2.00

2013 102.00 2.04 104.04 2.10 2.00

2014 101.40 2.08 103.48 2.40 2.00

2015 100.80 2.12 102.92 2.45 2.00

2016 100.10 2.16 102.26 2.50 2.00

2017 102.20 2.21 104.41 2.55 2.00

2018 104.20 2.25 106.45 2.60 2.00

2019 106.30 2.30 108.60 2.65 2.00

2020 108.30 2.34 110.64 2.70 2.00

2021 110.60 2.39 112.99 2.76 2.00

2022 112.70 2.44 115.14 2.81 2.00

2023 115.00 2.49 117.49 2.87 2.00

2024 117.30 2.54 119.84 2.93 2.00

2025 119.60 2.59 122.19 2.98 2.00

2026 122.10 2.64 124.74 3.04 2.00

2027 124.54 2.69 127.23 3.10 2.00

2028 127.03 2.75 129.78 3.17 2.00

2029 129.57 2.80 132.37 3.23 2.00

2030 132.16 2.86 135.02 3.29 2.00

2031 134.81 2.91 137.72 3.36 2.00

Pricing Assumptions: (1) Brent price forecast based on the McDaniel & Associates July 1, 2012 price forecast (2) Crude oil export price based on a US $2/bbl premium to Brent (increased with inflation) (3) Natural gas price based on an aggregated domestic price for strategic power, strategic industries and

commercial industries

Table 9 – McDaniel Price Forecast Summary

4 PROPERTY OVERVIEW

OML 40 is an Oil Mining Lease located onshore Nigeria within the Niger Delta area some 75 kilometres northwest of Warri. The lease covers an area of 498 square kilometres with terrain covered by mangrove swamps, tropical forest and numerous rivers including a section of the large Benin River. A number of river based communities such as Opuama and Tsekelewu are located either within or close to the lease area. Opuama has around 18,000 inhabitants with the main economy based on trading, canoe carving, lumber and fishing but with high rates of unemployment.

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OML 40 was awarded in 1962 to the Shell-BP Petroleum Development Company of Nigeria, which subsequently became SPDC in 1979 after the departure of BP from Nigeria. Elcrest is to acquire the 45 percent working interest in OML 40 from SPDC. Eland currently owns 45 percent of Elcrest but the equity parties have agreed that Eland will purchase a further 4 percent of Elcrest for a payment of US $5 million. Assuming this occurs Eland will have an effective working interest of 22.05 percent in OML 40.

Eighteen wells have been drilled within the lease area between 1971 and 1991 and a number of fields discovered. NNS reserves are assigned to six fields as presented in Table 10. The wells not included in this table are Amakubu-1, Polobo-1 and Tongarafa-1, which either contained very limited net pay or were wet.

Field Number of Wells Drilled

Discovered NNS Reserves (P50) as of Jan 1, 2010

Units Comments

Adagbassa Creek 3 1971 20 Bcf Undeveloped gas field Opuama 7 1974 53 MMbbl Produced 43 MMbbl up to 2006 when

closed in Tsekelewu 1 1979 2 MMbbl MFO since 2004

Gbetiokun 2 1987 104 MMbbl Undeveloped. Straddles boundary with OML 49 (Chevron)

Abiala 1 1990 6 MMbbl Undeveloped. MFO candidate. Ugbo 1 1991 17 MMbbl Undeveloped. MFO candidate.

Table 10 – OML 40 Discovered Fields

The Opuama Field was put on production in 1975 and the production history is presented in Figure 4 on a well-by-well basis. The field was part of a controlled shut-in of all SPDC JV onshore licenses in early 2006 and has not been returned to production since. The field facility consists of a piled flowstation with a single train of two separators and a surge vessel providing a gross capacity of 30,000 bpd. A mixture of stabilized crude oil and produced water is pumped into the Trans Forcados Pipeline system and then onto the Forcados Terminal some 86.5 kilometres away. The first 36.4 kilometres of the pipeline from Opuama to the Otumara manifold in OML 43 will be the responsibility of the OML 40 joint venture. Associated gas was being flared when production ceased in 2006, however, options to utilize the gas were also being considered as there is pressure from the Nigerian Government to cease flaring. Eland as a future joint venture owner of OML 40 intends to either export or re-inject any produced gas.

Each field within the OML 40 lease contains a number of stacked reservoirs containing light oil (810 to 840 kg/m3) and/or free gas. In the Opuama Field wells typically are completed on two or three reservoir intervals and produced via two strings. The status of the Opuama wells is presented in Table 11.

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Well String Reservoir Peak Rate Cum. Oil Status (bopd) (MMbbl) OP-1 S D5000X 3,300 16.7 Available for Production OP-1 L E2000X 2,100 3.9 Closed-in 1989, High BS&W OP-3 S D5000X 2,427 4.9 Available for Production OP-3 L D1000X 2,808 3.4 Available for Production OP-3 L E2000X 1,600 4.3 Closed-in 1992, High GOR OP-4 S D5000X 2,590 3.1 Closed-in 1988, High BS&W OP-4 L E2000X 2,240 0.9 Closed-in 1977, High BS&W OP-5 - E2000X 2,750 3.6 Closed-in 1995, High GOR OP-7 - D2000X 2,625 2.4 Closed-in 2005, High GOR/Sand

Table 11 – Opuama field Well Status

Reservoir drive energy is provided by solution gas expansion and aquifer support. Wells have produced at several thousand barrels of oil per day under natural flow. Ultimately, as water cut increases wells will need some form of artificial lift to maintain production and it is likely gas lift will be used.

Crude oil infrastructure production and storage capacity reservations will be agreed as part of future Crude Handling Agreements (“CHA”) between Eland and SPDC. SPDC has indicated that the initial production capacity allocated to OML 40 will be 24,000 bpd.

The SPDC JV had a natural gas Domestic Supply Obligation (“DSO”) for the period 2009 to 2013. Eland believes that these obligations can be re-negotiated, as they have a plan to utilize gas.

Approximately three quarters of the OML 40 area is covered by 3D seismic acquired between 1991 and 1994. Apart from helping to define the existing discoveries the seismic also has been used by SPDC to identify a number of prospects and leads within the lease area. Two of these prospects have been assessed as part of this report.

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Figure 4 – Opuama Field Production History by Well

5 OWNERSHIP AND CONTRACT TERMS

The onshore OML 40 lease is a Joint Venture between the Nigerian National Petroleum Corporation (“NNPC”) with a 55 percent participating interest, SPDC with a 30 percent participating interest, Total E&P Nigeria Limited with a 10 percent participating interest and Nigerian Agip Oil Company Limited with a 5 percent participating interest. All the joint venture partners excluding NNPC have agreed to sell their interests in OML 40 to Elcrest. Assuming Eland will purchase an additional 4 percent in Elcrest, Eland will hold a 22.05 percent working interest in OML 40. All joint venture parties have to pay their share of costs including NNPC. The original lease signed in 1964 was for 30 years but this was renewed in 1989 and now expires at the end of June 2019. There is provision within the lease to extend for a further 30 years for a cost of US $1.0 million provided the terms and conditions of the lease have been honoured.

OML 40 does not have tax stability provisions and is subject to the current Nigerian joint venture tax code as summarized in Table 12.

0

2000

4000

6000

8000

10000

12000

14000O

il Pr

oduc

tion

Rat

e (b

opd)

OP�7

OP�5

OP�4

OP�3

OP�1

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Crude Oil Taxes Crude Oil Royalty 20.0 percent Petroleum Profits Tax (PPT) - Existing & Newcomers after 5 yrs 85 percent of taxable income Petroleum Profits Tax (PPT) - Newcomers first 5 years 65.75 percent of taxable income Petroleum Investment Allowance (PIA) on capital in first year 5 percent Capital Allowance (CA) over 5 year period 20, 20, 20, 20 and 19 percent Natural Gas Taxes Natural Gas Royalty 7.0 percent Corporate Income Tax (CIT) 30 percent Other Taxes Education Tax 2 percent Niger Delta Development Commission Fund 3 percent

Table 12 – OML 40 Fiscal Terms

For the purposes of this Evaluation it has been assumed that Elcrest would qualify for newcomer status when determining Petroleum Profits Tax. This will apply to the period from November 2012 (first oil) to 2017 inclusive.

The Tsekelewu Field was awarded as part of a Marginal Field Operation agreement to Sahara Energy in 2004 and as such is no longer controlled by the OML 40 joint venture. Under the MFO agreement the OML 40 joint venture will receive an overriding oil royalty of between 2.5 and 7.5 percent depending on the daily production rate. The field though still has not been developed and no value has been assigned as part of this Evaluation.

SPDC had been informed that the Abiala and Ugbo fields were being considered by the DPR in 2010 for inclusion in a new MFO round. The current status of this MFO round is unclear however Eland believes the inclusion of Abiala and Ugbo is now very unlikely given the change of ownership and the new impetus to accelerate development of these discoveries.

The Gbetiokun Field straddles the boundary between OML 40 and the neighbouring lease OML 49 operated by Chevron Nigeria Limited. Within OML 49 the accumulation is called the Bime field and two wells have been drilled. A unitization agreement between the OML 40 and OML 49 joint venture has been agreed with SPDC nominated as the operator, however no progress has been made.

6 SOURCE AND QUALITY OF DATA

Essentially all of the basic information employed in the preparation of this CPR was obtained from SPDC through a virtual web based dataroom and a physical dataroom in Shell’s offices in The Hague, Netherlands in November 2010. The data set comprised of geophysical, geological, petrophysical, engineering and financial information. A team from both McDaniel and Eland of geoscientists and engineers attended the physical dataroom to review the seismic, petrophysical and production data. Most of the data was only available in secure Adobe PDF format, which limits what could be done. By reviewing the seismic, it was possible to verify the structural interpretations and generate a set of maps for use in this evaluation.

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Estimates of net pay were made by examining images of the interpreted well logs and comparing this to the SPDC estimates.

A number of reports were also provided including a 2003 field development plan for the Opuama Field and a circa 1991 field development plan for the Gbetiokun Field.

In our opinion, the data is sufficient to provide confident estimates of the reserves and resource estimates and the revenue forecasts presented in this Evaluation.

7 REGIONAL GEOLOGY – NIGER DELTA BASIN

The Niger Delta basin is situated in the Gulf of Guinea, West Africa and is one of the most prolific hydrocarbon provinces in the world. The OML 40 license is located in the onshore part of the basin approximately 75 kilometres northwest of the town of Warri, Nigeria.

The basin initiated along the failed rift arm of the Benue Trough following the Late Jurassic break-up of the African and South-American plates with the deposition of Albian age drift, siliciclastic sediments. During early stages of basin development in the Middle and Late Cretaceous, marine and marginal marine siliciclastic sediments were deposited in the Benue Trough until basin inversion in Late Cretaceous ended the syn-rift phase.

The next stage of development is associated with river delta type sediments as increased sediment supply from the Benue and Cross rivers in the Tertiary led to steadily increasing rates of regression and to the development of the present day wave and tide dominated Niger delta.

The overall progradation of the Niger delta since the Paleocene is reflected in three major diachronous, lithostratigraphic units: the Akata, Agbada and Benin formations. The deposition of the Akata marine pro-delta shales at the base of the delta system began with the Sokoto transgression in the Late Paleocene. It is composed of up to 23,000 feet thick shale sequences with a high organic content and constitutes an excellent source rock. The over-pressured shales also act as a detachment surface for large extensional growth faults up-dip and have been formed into large shale diapirs further basinward due to down-dip compression as a result of distal shortening. The proximal roll-over anticlines and related features of the large extensional growth faults represent structural traps for the deltaic facies of the overlaying paralic siliciclastics of the Agbada Formation. The deposition of the Agbada Formation in the Niger Basin began in the Eocene and signalled a change in the delta system to a more wave-dominated delta with a progressively more convex coastline and divergent long-shore currents. The deltaic facies of the Agbada Formation is generally divided into five coarsening upwards cycles, or depo-belts, representing a series of regressive off-lap sequences of mainly shoreface sands with a high degree of channeling and form the reservoir zones in the Akata-Agbada petroleum system. The continental Benin Formation comprises the top part of the Niger Delta clastic wedge and consists of fluvial and backswamp deposits with little or no hydrocarbon potential. A schematic cross-section prepared by the USGS through the Niger Delta from onshore to offshore is presented in Figure 5.

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Oil and gas in the Niger Delta is mostly produced from sands in the Agbada Formation. Reservoirs are often stacked, individually ranging in thickness from less than 50 feet to 10 percent having a thickness of greater than 150 feet.

The main source rocks are the marine shales of the Akata Formation. Reservoir seals are provided by the interbedded shales within the Agbada Formation itself.

Figure 5 – Schematic Niger Delta Cross-Section (source USGS)

8 GEOLOGY OF THE OML 40 AREA

The hydrocarbon accumulations within the OML 40 area lie within the Agbada Formation which was deposited during the Eocene through into recent time. The sand complexes within the Agbada are identified using letters which prefix a number used to identify a particular reservoir interval. A final letter is used to designate the particular fault block. Both the Opuama and Gbetiokun fields contain reservoirs within the D and E sand complexes. In Opuama hydrocarbons are present over a 1,300 feet gross interval, whereas in Gbetiokun the gross interval is much greater at around 5,000 feet. The geology of each field is discussed in the following subsections. Top structure maps and gross oil thickness maps for each of the reservoirs evaluated are presented in Figures 1 to 8 of Appendix 1 for the Opuama Field and in Figures 9 to 18 of Appendix 1 for the Gbetiokun Field.

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8.1 Opuama Field Geology

All the identified hydrocarbon zones in the Opuama Field are contained within a simple roll-over anti-cline structure bounded to the north by an extensional growth fault dipping towards the south with a north west-south east strike and to the south by a corresponding crestal fault. The trapping mechanism is a combination of a three-way structural closure and fault sealing. For the shallowest reservoirs, the D1000X and D2000X, a shale filled canyon provides an additional side and top seal.

Hydrocarbons are interpreted within twelve vertically stacked zones. Only the four main zones, the D1000X, D2000X, D5000X and E2000X, have been produced through five wells (four of which have dual strings). These four main reservoir intervals account for more than 90 percent of the estimated original oil-in-place (“OOIP”).

The delineation and mapping of the reservoirs are based on the original structural interpretation provided by SPDC.

A description of the main producing reservoirs is presented below.

8.1.1 D1000X Reservoir

The D1000X reservoir consists of two fining upwards sand intervals separated by a shale horizon of apparent field-wide extent. The presence of sands within three wells (OP-1, OP-3 and OP-6) and the absence in two other wells (OP-4 and OP-7) supports the interpretation of channel sands with limited lateral extent. The total sand thickness is approximately 50 feet with a most likely oil water contact (“OWC”) of 7,345 feet tvss estimated based on the average of the lowest known oil (“LKO”) in well OP-3 and the highest known water (“HKW”) in well OP-6. The reservoir pool is bounded by faults to the south and north and the estimated OWC. However, there is likely to be a stratigraphic component to the pool given the channel nature of the sands.

8.1.2 D2000X Reservoir

The D2000X is a multi-storey type reservoir of fining upwards, stacked channel sands separated by shale horizons. The reservoir zone typically consists of five to six, 10 feet to 40 feet thick, sand intervals interbedded with 10 feet thick shale layers. The D2000X is penetrated by three wells (OP-3, OP-6 and OP-7) and bounded to the south by the crestal fault and to the north by an OWC at 7,380 feet tvss as interpreted from the logs in well OP-3. The gross thickness of this zone, 150 feet to 250 feet, suggests it would be reasonable to expect lateral continuity across the mapped area, although the presence of intra-reservoir shale layers could pose significant barriers to flow.

8.1.3 D5000X Reservoir

The D5000X reservoir is penetrated by three wells (OP-1, OP-3 and OP-4). It consists of an estimated 200 feet thick section of amalgamated, distributary channel sands with a very high net-to-gross of 95 percent. The log signature is very stable and easily correlateable in all three wells suggesting an overall field-wide extent and distribution. Clear OWCs were identified from logs at

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8,061 feet and 8,050 feet in wells OP-3 and OP-4 respectively and an average OWC of 8,055 feet tvss was assumed. The reservoir pool has three-way closure bounded by the OWC and the crestal fault to the south.

8.1.4 E2000X Reservoir

The E2000X reservoir contains oil with a free gas cap. As with the D5000X reservoir (Section 8.1.3), the E2000X reservoir is formed of amalgamated, distributary channel sands with a high net-to-gross of 85 percent. However, unlike the D5000X reservoir the top 75 feet of this 175 feet thick zone contains a poorer reservoir quality, channel abandonment facies with 10 feet thick, interbedded shale and sand sequences. The E2000X reservoir pool is bounded by faults to the north and south and an OWC at 8,820 feet tvss, interpreted on logs in well OP-4, to the east and west. The reservoir zone is completed in all five producing wells and exhibits a high degree of consistency in log response across all wells.

8.2 Gbetiokun Field Geology

The Gbetiokun Field is located in the eastern part of the license on the boundary between OML 40 (Eland) and OML 49 (Chevron).

The Gbetiokun Field is a simple east-west trending anticline structure bounded by a major extensional growth fault to the north. Two wells (GB-1 and GB-2) have been drilled in the OML 40 area and two wells (Bime-1 and Bime-2) drilled in the OML 49 area. Well GB-1 encountered approximately 20 different oil and gas bearing reservoirs with the majority of OOIP estimated to be in the D5000, D8010X, E2000, E3000X, E4000X, E5000X, E6000X and E7000X reservoirs. Well GB-2 was drilled as a deviated well towards the northern fault and penetrated the fault surface between the E2000X and E3000X reservoirs. The structural interpretation is based on 3D seismic and available well data.

A main lithological feature in the field is a large shale-filled canyon occupying an area to the west. This canyon cuts deep into D5000 reservoir and effectively splits the reservoir into two pools. Apart from the direct structural significance, the shale fill of the canyon has significant influence on the time to depth conversion of the seismic data.

The structural interpretation provided by SPDC was in general considered reasonable however some corrections were applied to the interpretation below the shale canyon.

A description of the main reservoirs assessed as part of this Evaluation is presented below.

8.2.1 D5000X Reservoir

The D5000X reservoir consists of a thick sand interval in excess of 500 feet with a net to gross of approximately 70 percent. The OWC is estimated at 4,644 feet tvss based on the log interpretation of well GB-1.

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In well GB-1 there is a 66 feet gross oil bearing interval underlain by more than 400 feet of water suggesting a likely moderate to strong bottom water drive. In well GB-2 the D5000X reservoir was wet despite being at an elevation above the OWC seen in well GB-1. It is therefore assumed that the saddle, although not deep enough as mapped, does actually separate the two wells (the top structure map is presented in Appendix 1, Figure 9).

The D5000X reservoir is also reported to be wet in the Bime-1 and -2 wells in the OML 49 area and so a stratigraphic reservoir limit has been assumed approximately halfway between the wells.

Reserves have only been assigned in the 2P case to the eastern pool area around well GB-1.

The D5000X reservoir is effectively divided into two pools by the shale canyon running through the central part of the area. The western part of the reservoir to the northwest of the shale canyon is considered an exploration prospect and has been assigned prospective resources as discussed in Section 12.

8.2.2 D8010X Reservoir

The D8010X reservoir is a relatively minor reservoir with 18 feet of net oil pay present in well GB-2 underlain by water. The OWC is estimated at 8,366 feet tvss based on log interpretation. Unlike all the other pools, well GB-2 is interpreted to be structurally higher than well GB-1 which suggests the geometry of the pool may not be clear. Reserves have been assigned to the area around the GB-2 well.

8.2.3 E2000X Reservoir

The E2000X reservoir is penetrated by both wells GB-1 and GB-2. It consists of a sand interval with a gross thickness of up to 80 feet and a net to gross of 80 percent. The reservoir is interpreted as oil bearing over the entire reservoir interval in well GB-1 and an OWC has been interpreted in well GB-2 at 9,425 feet tvss.

The pool is interpreted to have three way structural closure limited by the extensional growth fault to the north.

8.2.4 Reservoirs below the E2000X

Structure maps below the E2000X reservoir were created using the E2000X top depth structure map and isopached down based on the GB-1 well formation tops. Well GB-2 penetrated the down-thrown fault block in the hanging wall below the E2000X reservoir and did not encounter productive sands comparable to the sands in well GB-1. The corrected structure maps were used for all volumetric calculations.

Fluid contact data for all the main Gbetiokun reservoirs is summarized in Table 13.

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Reservoir LKO OWC HKW Defined by Well

(ft tvss) (ft tvss) (ft tvss)

D5000X - 4,644 - GB-1 D8010X - 8,366 - GB-2 E2000X - 9,425 - GB-2 E3000X 9,454 - 9,488 LKO from GB-1 & HKW from Bime-1 E4000X 9,644 - 9,697 LKO from Bime-1 & HKW from Bime-2 E5000X - 9,688 - Bime-1 E6000X 9,888 - 9,912 LKO from Bime-1 & HKW from Bime-2. E7000X - 9,983 - GB-1

Table 13 – Gbetiokun Field Fluid Contact Data for Main Reservoirs

8.3 Abiala Field Geology

The Abiala Field is located north of the Gbetiokun Field in the eastern part of the license close to the boundary between OML 40 (Eland) and OPL 274 (Sahara Group Ltd.) licenses.

The Abiala Field was discovered in 1990 by well Abiala-1 (“AB-1”) which drilled to a depth of 11,025 feet md. The well found a typical stacked sequence of oil and gas bearing reservoirs at depths between 6,800 feet ss to 10,500 feet ss. Net pay varies from a few feet in the thinnest reservoirs up to nearly 75 feet in the thickest. The structural configuration is similar to Opuama and Gbetiokun with the field bounded to the north by an extensional growth fault dipping towards the south. A top structure map for the E9200X reservoir is presented in Appendix 1, Figure 19.

8.4 Ugbo Field Geology

The Ugbo Field is located in the central part of the OML 40 license area to the south west of the Abiala field as shown on Figure 2.

The Ugbo Field was discovered in 1991 by well Ugbo-1 (“UG-1”) which drilled to a depth of 9,355 feet md. The structure is located within a northwest to southeast trending growth fault complex and consists of a four way dip closure with three separate culminations.

Well UG-1 found a single hydrocarbon bearing reservoir (designated the B1000X) at approximately 4,250 feet ss. The total thickness of the reservoir sand is around 75 feet with the upper 24 feet oil bearing (an OWC is interpreted at 4,275 feet ss). A production test was carried out with a rate of 200 bopd (38 API oil) with a water cut of 5 percent. SPDC prepared a reserves estimation note for file in 1991 that was provided by Eland and includes a base channel fill (B1000X) map which is defined by nine 2D seismic lines. McDaniel was unable to verify the map against the seismic but believes it to be reasonable. A digitized version of the SPDC map is presented in Appendix 1, Figure 20. Estimates of the pool area vary between 250 acres and 1,250 acres depending on how many culminations are included.

9 CRUDE OIL & NATURAL GAS RESERVES

Crude oil and natural gas reserves were assigned to the main reservoir intervals in both the Opuama and Gbetiokun fields.

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In the Opuama Field the D1000, D2000, D5000X and E2000X reservoir intervals have all produced significant quantities of oil in the past. Production ceased in 2006 as part of a controlled shut-in of all SPDC onshore licenses in response to growing security issues. Since then many fields in other licenses have been returned to production without major problems. Eland considers that the security issues that prevented SPDC producing from OML 40 in March 2006 were regional and not particular to the license area. Eland believes that focused engagement with the local communities, in close coordination with their indigenous partner, will create an environment that will allow production and development to be resumed. In our opinion, there is sufficient confidence that production can be resumed to allow the assignment of reserves.

In the longer term, crude oil production will only be possible if some form of gas utilization is put in place to eliminate associated gas flaring. Eland are considering options to either sell gas to the domestic market or to re-inject gas in the reservoir. The gas utilization option assumed in this Evaluation is gas export which appears to be slightly NPV positive; in view of this, natural gas probable and possible reserves (but not proved) were assigned to the Opuama Field.

The Gbetiokun Field is undeveloped and neither of the wells drilled have been production tested. Bottom hole crude oil samples were successfully taken on wireline from two of the reservoir intervals (the E2000X and E6000X) and in our opinion there is no reason why these reservoirs will not be productive. The log responses for the other main reservoir intervals (D5000X, D8010X, E3000X, E4000X, E5000X and E7000X) also clearly indicate the presence of oil in good quality channel type sands typical of the area and there is no reason to believe these will not also be productive. For these reasons probable and possible reserves (but not proved) were assigned to all the main reservoir intervals within the Gbetiokun Field. Natural gas probable and possible reserves were also assigned.

The crude oil reserves estimates were based on a review of the volumetric data and production characteristics of the individual reservoir intervals and are summarized in Tables 2 and 4 of Appendix 1 for the Opuama and Gbetiokun fields respectively. Similarly a summary of various reservoir and fluid properties are presented Tables 3 and 5 of Appendix 1.

9.1 Volumetric In Place Estimates

The OOIP estimates were calculated using gross rock volumes and average petrophysical parameters and fluid parameters. Gross rock volume (“GRV”) was estimated using the gross oil thickness map for each of the main reservoirs in both the Opuama and Gbetiokun fields based on the interpreted top structure map and an assumed OWC. For the Gbetiokun Field estimates were only made for the volumes within the OML 40 area. As noted in Section 8.1, top structure maps and gross oil thickness maps for the main reservoirs evaluated are presented in Figures 1 to 8 of Appendix 1 for the Opuama Field and in Figures 9 to 18 of Appendix 1 for the Gbetiokun Field. Fluid parameters were determined from bottom hole PVT samples available for 2 reservoir

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intervals in Opuama and two reservoir intervals in Gbetiokun with the parameters for the remaining reservoir intervals based on SPDC correlations using analogue data.

To reflect the uncertainty in the OOIP estimates, the 2P OOIP estimates were increased by 20 percent in the Opuama Field and 50 percent in the Gbetiokun Field to determine the 3P OOIP. This reflects both uncertainties in the structural area and in the fluid contacts. For the proved reserves cases the OOIP estimate was not decreased as the reserves uncertainty was incorporated within the recovery factors assigned.

9.2 Opuama Field Crude Oil Reserves Estimates

Crude oil reserves estimates are based in part on the performance history to date. The Opuama Field has produced 43 million barrels of oil to date which represents a cumulative recovery factor of 27 percent based on the estimated OOIP. In particular, the D5000X reservoir interval has produced 24.7 million barrels which equates a 50 percent cumulative recovery factor. Well OP-1, which is located crestally on the D5000X reservoir, produced 16.7 million barrels from this interval and was producing at 1,650 bopd (with a water cut of 40 percent) when it was closed in during 2006.

The reservoirs in the Opuama Field are somewhat ideal in terms of recovery. The combination of good quality sand and light oil together with moderate to strong aquifer support results in generally very high recovery efficiency. The only negative factors are that the oil columns can be relatively short and some of the reservoirs contain either free gas or close to saturated oil which can mean that high levels of gas or water production can result. The E2000X reservoir interval for example contains a free gas cap above a 120 foot oil rim with parts of the oil located both below gas and above water. Drilling horizontal wells will help to mitigate against these factors. Conversely the stacked nature of the sands lends itself more to deviated wells which can be completed on several reservoir intervals within the one well. Consequently a mix of deviated and horizontal wells will be used for the development of the Opuama Field.

Proved developed reserves are based on the continued production of wells OP-1 and OP-3 on the D1000X and D5000X. Eland believe that production will commence from the Opuama Field during Q4 2012 (assumed to be November 1, 2012). Based on decline curve analysis it is estimated that these two wells will recover an additional 4.0 million barrels by June 2019 when the license expires. For the proved developed and total proved reserves cases the estimates are made to the end of the current lease.

The 2P reserves are based on the drilling of two deviated wells which will both be completed on the D1000X and D2000X reservoirs using dual completion strings. In addition, two horizontal wells will be drilled on the oil rim in the E2000X. These plans are based on the current SPDC field development plan which seems reasonable. The 2P recovery factors are based on a combination of the results of reservoir simulation undertaken by SPDC and theoretical considerations. For the D1000X and E2000X reservoirs a 2P recovery factor of 50 percent was estimated. For the

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D2000X a slightly lower recovery factor of 45 percent was estimated reflecting the shalier nature of the sands and the higher initial water saturation. For the D5000X reservoir it is predicted that an additional 6 million barrels could be recovered from well OP-1 which equates to a 62.5 percent recovery factor. No probable undeveloped reserves were assigned to the D5000X reservoir as well OP-1 is most likely adequately draining the pool. The total estimated 2P reserves are 42 million barrels which equates to 4.7 million barrels per completion interval.

The 1P reserves case assumes the same number of wells as the 2P reserves case but with much lower recovery in part because of the lease expiry.

The 3P reserves case assumes an additional dual completion deviated well on the D1000X and D2000X reservoir and an additional horizontal well on the E2000X. A possible undeveloped well for the D5000X was also included. Recovery factors of 55, 50, 65 and 55 percent were assigned to the D1000X, D2000X, D5000X and E2000X reservoirs respectively. The total estimated 3P reserves are 67 million barrels which equates to 5.2 million barrels per completion interval.

A summary of the crude oil reserves in the Opuama Field is shown in Table 14.

Proved Proved Total Proved

Plus Proved Plus

Probable Developed Undeveloped Proved Probable Probable Possible Plus Possible

Property Gross, Mbbl (1) 3,978 15,185 19,164 22,804 41,968 25,290 67,259 Company Gross, Mbbl (2) 877 3,348 4,226 5,028 9,254 5,577 14,831 Company Net, Mbbl (3) 702 2,679 3,381 4,023 7,403 4,461 11,864

(1) Property Gross Reserves are based on a 100 percent working interest. (2) Company Gross Share is based on Eland’s 22.05 percent working interest and assumes Eland will purchase a further 4 percent

in Elcrest. (3) Company Net Share is based on Eland’s Gross share less royalties.

Table 14 – Opuama Field Crude Oil Reserves Summary

The proved developed and total proved crude oil reserves were estimated to the end of the license expiry in June 2019, whereas the probable and possible reserves assume a license extension will be granted. As sensitivity, the recovery was also estimated for the proved developed and total proved cases assuming a license extension is granted. The resulting crude oil recoverable volumes, as of June 30, 2012, are presented in Table 15.

Sensitivity Cases (1)

Proved Proved Total Developed Undeveloped Proved

Property Gross, Mbbl (2) 5,832 17,962 23,794 Company Gross, Mbbl (3) 1,286 3,961 5,247 Company Net, Mbbl (4) 1,029 3,168 4,197

(1) Recoverable volumes assume a license extension is granted in 2019. (2) Property Gross Reserves are based on a 100 percent working interest. (3) Company Gross Share is based on Eland’s 22.05 percent working interest and assumes Eland will purchase a

further 4 percent in Elcrest. (4) Company Net Share is based on Eland’s Gross share less royalties.

Table 15 – Opuama License Extension Recovery Sensitivity

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9.3 Gbetiokun Field Crude Oil Reserves Estimates

The crude oil reserves estimates for the Gbetiokun Field are derived from volumetric analysis as there has been no production to date. The reservoirs are similar to those found in the Opuama Field and it is likely that reservoir performance will also be similar with moderate to strong aquifer support expected. The estimated pool areas are relatively small (less than 400 acres) and for the 2P reserves case it is assumed that one or two drainage points will be enough for adequate drainage.

The D5000X reservoir encountered in well GB-1 comprises a small 66 foot oil column over water within a 500 feet thick sand package. Compared to the Opuama Field a relatively low 2P recovery factor of 35 percent was estimated as the oil column is relatively small and SPDC believe the in-situ oil viscosity is likely to be around 10 cP (based on analogue reservoirs at a similar depth) implying the mobility ratio to water will be less favourable. Well GB-1 is located in a fairly optimal location for development, but rather than risk working over the old well a re-drill was assumed. For the 3P reserves it is assumed that the pool extends to the west towards well GB-2 which is interpreted to be wet. In addition a higher recovery factor of 45 percent was assigned as it may be that the oil has a lower viscosity more in line with the deeper reservoirs.

The D8010X reservoir in well GB-2 contains 18 feet of net pay over water. The structural geometry of the pool is unclear as, unlike the others reservoirs, well GB-2 is interpreted to be higher than well GB-1. The current structural interpretation suggests there is an approximately 90 foot oil column which should allow the pool to be developed using horizontal wells. Relatively low recovery factors have been assigned as it may be difficult to locate development wells away from the water. A 2P recovery factor of 10 percent is based on drilling one well and a 3P recovery factor of 15 percent is based on two wells assuming a larger pool and better performance.

Unlike the D5000X and D8010X reservoirs the E2000X reservoir appears laterally more continuous and is interpreted to be oil bearing in all the wells drilled to date. For the 2P reserves it is assumed that well GB-2 will be worked over (the well status appears more conducive to a workover than in well GB-1) and a horizontal well will be drilled to the east of well GB-1. A 2P recovery factor of 50 percent was assigned in line with those in the Opuama Field. For the 3P reserves an additional horizontal well is required to develop the larger OOIP resulting in a 55 percent recovery factor.

The E3000X and E4000X reservoirs are similar but slightly thinner that the E2000X and so lower recovery factors of 45 and 50 percent were assigned to the 2P and 3P reserves cases respectively. Well requirements are the same as for the E2000X reservoir with 2 and 3 dedicated horizontal wells for the 2P and 3P reserves cases respectively.

The E5000X reservoir is again similar to the E2000X reservoir and the same recovery factors of 50 and 55 percent were assigned to the 2P and 3P cases respectively. The 2P reserves will be developed by one horizontal well and the 3P reserves by two horizontal wells.

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The E6000X reservoir will be developed in the 2P case using the re-drill of well GB-1 that will also target the D5000X reservoir. The 3P reserves case carries a horizontal well in addition to the re-drill of GB-1. Slightly higher recovery factors of 52.5 and 57.5 percent were assigned to the 2P and 3P cases respectively compared to the other reservoirs as the estimated water saturation is lower at 15 percent.

The E7000X reservoir is the smallest pool and has only a 58 foot oil column. The pool will be developed using a recompletion on the re-drill of well GB-1 after the D5000X and E6000X reservoirs have been produced. Recovery factors of 45 and 50 percent were assigned to the 2P and 3P reserves cases respectively.

A summary of the crude oil reserves in the Gbetiokun Field is shown in Table 16.

Proved Proved TotalProved

Plus Proved Plus

Probable Developed Undeveloped Proved Probable Probable Possible Plus Possible Property Gross, Mbbl (1) - - - 29,536 29,536 20,202 49,738 Company Gross, Mbbl (2) - - - 6,513 6,513 4,454 10,967 Company Net, Mbbl (3) - - - 5,210 5,210 3,564 8,774

(1) Property Gross Reserves are based on a 100 percent working interest. (2) Company Gross Share is based on Eland’s 22.05 percent working interest and assumes Eland will purchase a further 4 percent

in Elcrest. (3) Company Net Share is based on Eland’s Gross share less royalties.

Table 16 – Gbetiokun Field Crude Oil Reserves Summary

9.4 Natural Gas Reserves Estimates

Natural gas reserves were assigned to both fields on the basis that gas will be exported and sold to the domestic market. Raw gas volumes were estimated using the solution gas oil ratio for each reservoir multiplied by the respective reserves. Natural gas reserves were based on the raw gas volumes and five percent shrinkage to account for fuel and flare. Proved gas reserves were not assigned to either field as there is no firm gas sales development planned at this stage. The 2P and 3P gas reserves were assigned as the domestic gas market is developed and a review of the economics suggest the gas is commercial.

The E2000X reservoir in the Opuama Field contains a free gas cap however, gas reserves were not assigned as it is not clear if the blowdown of the gas volumes at the end of the field life will be economic.

A summary of the natural gas reserves for OML 40 is presented in Table 17.

Eland Oil and Gas Limited Page 31 Competent Person’s Report – OML 40 August 1, 2012

Proved Proved TotalProved

Plus Proved Plus

Probable Developed Undeveloped Proved Probable Probable Possible Plus Possible Opuama Field Property Gross, Mbbl (1) - - - 23,688 23,688 18,405 42,093 Company Gross, Mbbl (2) - - - 5,223 5,223 4,058 9,281 Company Net, Mbbl (3) - - - 4,858 4,858 3,774 8,632

Gbetiokun Field Property Gross, Mbbl (1) - - - 9,761 9,761 6,830 16,591 Company Gross, Mbbl (2) - - - 2,152 2,152 1,506 3,658 Company Net, Mbbl (3) - - - 2,002 2,002 1,401 3,402

(1) Property Gross Reserves are based on a 100 percent working interest. (2) Company Gross Share is based on Eland’s 22.05 percent working interest and assumes Eland will purchase a further 4 percent

in Elcrest. (3) Company Net Share is based on Eland’s Gross share less royalties.

Table 17 – OML 40 Natural Gas Reserves Summary

10 NET PRESENT VALUES OF THE RESERVES

The net present values of the crude oil and natural reserves were based on future production and revenue analyses. All of the revenues and costs presented in this report were presented in US dollars and include an allowance for Nigerian taxes.

Crude oil revenue is derived by employing the forecast production and the forecast Brent crude oil price plus an estimate of the price differential between the Brent reference price and the field price. A summary of the calculation of the field export price is presented in Section 3 of this report.

Natural gas revenue is derived by employing the forecast oil production and the solution gas oil ratio with an estimate of the domestic gas price as presented in Section 3 of this report.

The existing Opuama facilities will be refurbished and production restarted from wells OP-1 and OP-3 at the beginning of November 2012. A rig mounted swamp barge will commence drilling at the beginning of Q1 2013 in the Opuama Field. An additional rig will be taken on contract to drill 2 exploration wells near the Abiala Field during 2013 and then begin drilling development wells in the Gbetiokun Field at the beginning of 2014. A flowstation will be built at Gbetiokun with multiphase export via a new pipeline to the Opuama production facilities. During 2014 gas sales will commence following the installation of gas compression at Opuama and the building of a gas pipeline to the domestic gas grid at Escravos. Prior to this gas will be flared. Also during 2014 water treatment will be installed at Opuama allowing water free crude oil export to begin.

The crude oil production forecast for both fields is presented in Table 18 for each reserves category. A crude oil production history and forecast is presented for each field in Figures 23 and 24 of Appendix 1. All the forecasts, except the 3P case, honour the initial SPDC allocated production capacity to OML 40 of 24,000 bpd. For the 3P case it is assumed this capacity can be increased to around 45,000 bpd.

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Opuama Field (bopd) Gbetiokun Field (bopd) PD 1P 2P 3P 2P 3P

2012 405 405 425 445 - -

2013 2,219 7,261 9,426 10,968 - -

2014 1,933 12,933 17,000 26,597 4,750 4,750

2015 1,706 10,204 16,500 30,000 7,500 13,333

2016 1,510 8,074 15,455 27,713 9,000 15,000

2017 1,349 6,420 11,677 20,522 9,000 16,000

2018 1,217 5,134 9,270 15,741 9,000 16,000

2019 561 2,074 7,450 12,201 9,000 16,000

2020 License Expiry 6,006 9,486 9,000 16,000

2021 - - 4,845 7,381 8,482 13,787

2022 - - 3,910 5,745 4,682 8,622

2023 - - 3,155 4,471 3,364 6,075

2024 - - 2,546 3,480 2,423 4,099

2025 - - 2,054 2,709 1,801 2,811

2026 - - 1,658 2,109 1,354 1,943

2027 - - 1,338 1,641 1,021 1,224

2028 - - 922 1,145 545 624

2029 - - 744 892 - -

2030 - - 601 694 - -

2031 - - - 329 - -

Table 18 – OML 40 Crude Oil Production Forecast Summary

Operating and capital costs were based on McDaniel and Eland estimates. New wells were estimated to cost US $18.6 million which includes the cost of dredging, drilling, completion and hook up. Under full production operating costs are around US $10/bbl which includes a transportation tariff of US $2.6 per barrel for wet export prior to implementing water treatment in 2014 at the Opuama Field and US $2.1 per barrel thereafter.

Abandonment costs were included at the end of field life based on 10 percent of the facilities costs plus a further $100,000 per well. This applies to the 2P and 3P reserves cases which are forecast to the end of field life but not the PD and 1P reserves cases which are cut-off at the license expiry.

Eland’s share of the net present values is presented in Table 4 of Section 1.2 and Elcrest’s share of the net present values is presented in Table 5 of Section 1.2.

The sensitivity to oil price was analysed for both Eland’s and Elcrest’s share using, a US $60/bbl price forecast, a US $75/bbl price forecast and a US $85/bbl price forecast as presented in Tables 6, 7 and 8 of Appendix 1 respectively. Eland’s share of the resulting NPVs for the US $60/bbl price

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forecast, the US $75/bbl price forecast and the US $85/bbl price forecast are presented in Tables 9, 10 and 11 of Appendix 1 respectively. Elcrest’s share of the resulting NPVs for the US $60/bbl price forecast, the US $75/bbl price forecast and the US $85/bbl price forecast are presented in Tables 2, 3 and 4 of Appendix 2 respectively.

A sensitivity was also run to determine the effect on NPV if Eland or Elcrest were treated as a non-newcomer for petroleum profits tax purposes and therefore had to pay the full 85 percent tax rate from first production rather than receiving the first 5 years at the reduced rate of 65.75 percent. The resulting NPVs for this case are presented in Table 12 of Appendix 1 for Eland and Table 5 of Appendix 2 for Elcrest.

Eland’s 2P after tax NPV values at 10 and 15 percent discount rates for these sensitivities are presented in Table 19.

Case

AT NPV at 10%

(US $M)

AT NPV at 15%

(US $M) McDaniel, Jun 30, 2012 150,807 121,619 US $60/bbl Price Case 75,919 58,821 US $75/bbl Price Case 108,300 85,763 US $85/bbl Price Case 129,958 103,818 Non-Newcomer (McDaniel, Jul 1, 2012 Prices) 82,754 62,230

Table 19 – Eland After Tax 2P Reserves NPV Sensitivity to Oil Price and Tax Status

Elcrest’s 2P after tax NPV values at 10 and 15 percent discount rates for these sensitivities are presented in Table 20.

Case

AT NPV at 10%

(US $M)

AT NPV at 15%

(US $M) McDaniel, Jun 30, 2012 317,733 258,055 US $60/bbl Price Case 164,900 129,897 US $75/bbl Price Case 230,985 184,879 US $85/bbl Price Case 275,183 221,728 Non-Newcomer (McDaniel, Jul 1, 2012 Prices) 178,850 136,854

Table 20 – Elcrest After Tax 2P Reserves NPV Sensitivity to Oil Price and Tax Status

To determine the impact of a possible license extension on the NPV of the proved developed and total proved reserves cases a sensitivity was run assuming the extension is granted. In this case, the US $1 million license extension fee and the abandonment costs have been included. The resulting NPVs for this case are presented in Table 13 of Appendix 1 for Eland and Table 6 of Appendix 2 for Elcrest.

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Eland’s after tax NPV values at 10 and 15 percent discount rates for these sensitivities are presented in Table 21.

AT NPV AT NPV at 10% at 15%

(US $M) (US $M)

Proved Developed Sensitivity 9,485 7,498 Proved Undeveloped Sensitivity 49,835 42,215 Total Proved Sensitivity 59,321 49,713

Table 21 – Eland After Tax NPV Sensitivity to License Extension

Elcrest’s after tax NPV values at 10 and 15 percent discount rates for these sensitivities are presented in Table 22.

AT NPV AT NPV at 10% at 15%

(US $M) (US $M)

Proved Developed Sensitivity 29,322 25,155 Proved Undeveloped Sensitivity 101,705 86,153 Total Proved Sensitivity 131,027 111,308

Table 22 – Elcrest After Tax NPV Sensitivity to License Extension

11 CONTINGENT RESOURCE ESTIMATES

Contingent resources were assigned to the main reservoirs in the Abiala and Ugbo fields and were estimated using probabilistic methods. A summary of the property gross contingent resources by field and reservoir are presented in Table 14 of Appendix 1.

11.1 Abiala Field

The Abiala Field has a large number of stacked reservoirs. McDaniel has assigned contingent resources to eleven separate reservoir intervals which contain the majority of the interpreted net pay in well AB-1. Due to hole problems none of the reservoirs have been tested and hence there is some uncertainty as to whether they contain oil or gas. Neutron and density logs indicate that the majority most likely contain oil with the D6000X reservoir the only exception. To address this issue a cased hole wireline pressure tool was run to obtain fluid samples after the well had been suspended. Three gas samples were obtained from F7000X, F8000X and G2000X reservoirs however there are some doubts as to whether these are reliable. In addition the F6000X and G2000X were reportedly perforated and tested however there are no test results available. It was decided to treat the reservoirs below the F6000X as being 50 percent oil and 50 percent gas bearing for the purposes of this assessment.

Eland Oil and Gas Limited Page 35 Competent Person’s Report – OML 40 August 1, 2012

McDaniel audited the SPDC map for the E9200X reservoir and found it to be reasonable. Reservoir pool areas are based on this map adjusted for the different interpreted hydrocarbon columns. A summary of the input parameters assigned to the Abiala Field reservoirs is presented in Table 15 of Appendix 1.

11.2 Ugbo Field

McDaniel has assigned contingent resources to the B1000X reservoir. A summary of the input parameters is presented in Table 15 of Appendix 1.

12 PROSPECTIVE RESOURCE ESTIMATES

Sufficient data for two of these was available to allow an independent assessment (Abiala N Blk-2 and Abiala NE). In addition, a prospect within the D5000 reservoir offsetting the Gbetiokun Field was also assigned prospective resources.

Prospective resources for each of the prospects were estimated probabilistically using log-normal distributions for all the parameters. The parameters used were pool area, average net pay, porosity, oil or gas saturation together with estimated PVT parameters and recovery factors. Low (P90) and High (P10) estimates were used to define the distributions. The structure maps were verified using the seismic data available in the physical dataroom. The parameters were based on the offsetting well data.

Prospects were risked using five parameters including source, migration, reservoir, structure and seal. Source and migration are not considered to be a risk and were assigned a probability of 1.0.

The prospective resources estimates are summarized in Table 8 of Section 1.4.

12.1 Abiala Area Prospects

There are two main prospects in the area close to the existing Abiala discovery; Abiala North Block 2 and Abiala North East, are situated to the north and northeast of well AB-1 respectively. The traps are expected to be anticline structures with three way closure. The reservoirs are expected to be a sequence of stacked channel sands with thickness ranging from 10 feet to more than 100 feet with the main reservoirs included in six zones: D2200, D3000, D6000, D7600, E2000 and E9200. Based on the depth maps provided by SPDC the top structure depth is at approximately 6,500 feet to 7,000 feet, with the deepest, potential reservoir sand at 11,000 feet tvss. A top structure map for the D2200 is presented in Figure 21 of Appendix 1. Prospect assessment sheets for Abiala N Blk-2 and Abiala NE are presented in Tables 16 and 17 of Appendix 1. The structural risk for Abiala N Blk-2 is considered higher as the prospect is on the edge of the 3D seismic survey. The unrisked mean prospective resources estimates of 34 MMboe and 19 MMboe are approximately one half of the SPDC estimates of 68.0 MMboe and 39.7 MMboe for the Abiala N Blk-2 and Abiala NE prospects respectively.

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12.2 Gbetiokun West D5000 Prospect

The Gbetiokun West D5000 prospect is located to the west of the Gbetiokun Field and is separated from the main part of the field by a large shale filled canyon. The D5000 prospect is contained within a simple roll over, anticline structure bounded to the north and east by extensional growth faults and to the west by the shale filled canyon. The reservoir seal is expected to be a combination of field wide shale horizons providing a top seal and the sealing capacity of the bounding faults. Based on the checkshot survey in well GB-1 and the seismic marker in time, the estimated depth to the top of the prospect is approximately 4,450 feet tvss, which is approximately 150 feet shallower than the D5000 reservoir in well GB-1. Parameters were all based on the interpreted petrophysical parameters from the nearby GB-1 well at the D5000 level. A top structure map for the D5000 is presented in Figure 22 of Appendix 1. A prospect assessment sheet is presented in Table 18 of Appendix 1.

12.3 Exploration Upside

In addition to the three prospects detailed above there are thirteen other prospects and leads, which SPDC has identified but, due to limited data, could not be included in this Evaluation. SPDC carry unrisked mean crude oil prospective resources of 254 MMbbl, which is equivalent to an average 19.5 MMbbl per prospect.

Exploration effectively stopped in 1991 prior to the acquisition of any 3D seismic suggesting there could be additional exploration upside. Prior to this, nine separate structures were drilled between 1971 and 1991 using 2D seismic resulting in six discoveries (Abiala, Adagbassa Creek, Gbetiokun, Opuama, Tsekelewu and Ugbo) with a 66 percent success rate.

McDaniel believes the application of the 3D seismic to the exploration of the OML 40 has good potential and the numbers of prospects already identified by SPDC using the 3D seismic is in line with what would be expected.

Eland Oil and Gas Limited Page 37 Competent Person’s Report – OML 40 August 1, 2012

13 ABBREVIATIONS

The following is a list of the abbreviations used in this report:

Abbreviation Meaning

1P total proved reserves

2P proved plus probable reserves

3P proved plus probable plus possible reserves

AAPG American Association of Petroleum Geology

Bopd barrels of oil per day

Bpd Barrels per day

CHA crude handling agreements

DPR Department of Petroleum Resources

DSO Domestic Supply Obligation

Ft Feet

GOC gas oil contact

GOR gas oil ratio

GRV gross rock volume

HKW highest known oil

kg/m3 kilograms per cubic metre

Km Kilometres

LKO lowest known oil

LTO lowest tested oil

MFO marginal field operations

MMbbl million barrels

MMcfpd million standard cubic feet per day

NNPC Nigerian National Petroleum Corporation

NNS Nigerian National Standard

OML Oil Mining Lease

OOIP original oil in place

OWC oil water contact

PD proved developed reserves

PUD proved undeveloped reserves

Q1, Q2, Q3, Q4 Quarter 1, 2, 3 ,4 (respectively) of the year in question

scf/bbl standard cubic feet per barrel

SPDC Shell Petroleum Development Company of Nigeria Limited

SPE Society of Petroleum Engineers

SPEE Society of Petroleum Evaluation Engineers

Tvss true vertical subsea (depth relative to a sea level datum)

USGS United States Geological Survey

US$ United States dollars

US$M thousand United States dollars

WPC World Petroleum Congress

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14 PROFESSIONAL QUALIFICATIONS

McDaniel & Associates Consultants Ltd. has over 50 years of experience in the evaluation of oil and gas properties. McDaniel is registered with the Association of Professional Engineers and Geoscientists of Alberta (APEGA). All of the professionals involved in the preparation of this report have in excess of 5 years of experience in the evaluation of oil and gas properties. Mr. Bryan Emslie, Senior Vice President, Mr. Paul Taylor, Senior Petroleum Engineer, and Mr. Anatoli Tchernavskikh, Manager International Geology, all with McDaniel & Associates, were responsible for the preparation of this report. Mr. Emslie has over 30 years of experience in the evaluation of oil and gas properties Mr. Taylor has over 25 years of experience and Mr. Anatoli Tchernavskikh has in excess of 15 years. All of the persons involved in the preparation of this report and McDaniel & Associates are independent of Eland, Starcrest and Elcrest.

In preparing this report, we relied upon factual information including ownership, technical well and seismic data, contracts, and other relevant data supplied by Eland. The extent and character of all factual information supplied were relied upon by us in preparing this report and has been accepted as represented without independent verification. We have relied upon representations made by Eland as to the completeness and accuracy of the data provided and that all data proved to us was lawfully acquired.

This report was prepared by McDaniel & Associates Consultants Ltd. for Eland’s submission to the AIM market in London and to support banking and financing. It is not to be reproduced, distributed or made available, in whole or in part, to any person, company or organization other than Eland for any other purpose without the knowledge and consent of McDaniel & Associates Consultants Ltd. We reserve the right to revise any opinions provided herein if any relevant data existing prior to preparation of this report was not made available or if any data provided is found to be erroneous.

Sincerely,

McDANIEL & ASSOCIATES CONSULTANTS LTD. APEGA PERMIT NUMBER: P3145

“signed by B. H. Emslie” “signed by P. M. Taylor” ______________________________ ______________________________ B. H. Emslie, P. Eng. P. M. Taylor, MEI CEng Senior Vice President Associate

“signed by A. Tchernavskik” ______________________________ A. Tchernavskikh, P. Geol. Manager, International Geology BHE/PMT/AT:jep [12-0264]

APPENDIX 1 Additional Tables and Figures

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Eland Oil & Gas Limited Table 1

Total OML40 AssetsSummary of Reserves and Net Present Values

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 877 702 - - -Proved Undeveloped Reserves 15,185 3,348 2,679 - - -Total Proved Reserves 19,164 4,226 3,381 - - -Probable Reserves 52,341 11,541 9,233 33,449 7,376 6,859Proved Plus Probable Reserves 71,505 15,767 12,613 33,449 7,376 6,859Possible Reserves 45,492 10,031 8,025 25,234 5,564 5,175Proved Plus Probable Plus Possible Reserves 116,997 25,798 20,638 58,684 12,940 12,034

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 54,633 45,839 39,010 33,611 29,274

Proved Undeveloped Reserves 211,722 178,230 152,072 131,301 114,561

Total Proved Reserves 266,356 224,069 191,082 164,912 143,835

Probable Reserves 823,737 582,210 428,058 325,315 254,226

Proved Plus Probable Reserves 1,090,093 806,278 619,140 490,227 398,062

Possible Reserves 693,275 520,210 402,545 319,673 259,481

Proved Plus Probable Plus Possible Reserves 1,783,368 1,326,488 1,021,685 809,900 657,542

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 12,541 10,064 8,110 6,545 5,274Proved Undeveloped Reserves 63,296 52,886 44,763 38,325 33,149Total Proved Reserves 75,838 62,950 52,874 44,870 38,423Probable Reserves 173,874 128,364 97,933 76,749 61,491Proved Plus Probable Reserves 249,712 191,315 150,807 121,619 99,914Possible Reserves 161,723 127,298 102,246 83,666 69,598Proved Plus Probable Plus Possible Reserves 411,435 318,613 253,052 205,285 169,512

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

and assumes Eland will purchase an additional 4 percent in Elcrest during 2012. Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Eland - OML40 Evaluation - Jun 30, 2012 - Final.xlsm 01/08/2012

Eland Oil & Gas Limited Table 2Opuama Field - OML40, NigeriaCrude Oil Reserves Summary

Effective June 30, 2012Area/Field Opuama Opuama Opuama Opuama TotalZone D1000X D2000X D5000X E2000X Opuama FieldPorosity, % 22.9 22.2 20.5 17.4Water Saturation, % 33.7 38.1 24.2 25.3Oil Shrinkage, frac 0.885 0.870 0.685 0.625Net-to-Gross, % 70 79 95 85Original Oil-In Place, bbl/ac-ft 733 732 784 536Area, acres 925 633 722 765Net Pay, ft 42 61 83 75Gross Rock Volume, acre-ft 54,656 49,254 63,032 67,761 234,703Proved DevelopedOriginal Oil in Place, Mbbl 40,051 36,071 49,443 36,299 161,865Recovery Factor, % 10.6 6.7 56.4 35.1 29.2Original Recoverable, Mbbl 4,230 2,432 27,910 12,747 47,319Cumulative Recovery, Mbbl 3,429 2,432 24,733 12,747 43,341Cumulative Recovery, % 8.6 6.7 50.0 35.1 26.8Remaining Recoverable, Mbbl 801 - 3,177 - 3,978

Total ProvedOriginal Oil in Place, Mbbl 40,051 36,071 49,443 36,299 161,865Recovery Factor, % 28.5 22.5 56.4 41.5 38.6Original Recoverable, Mbbl 11,415 8,116 27,910 15,064 62,505Cumulative Recovery, Mbbl 3,429 2,432 24,733 12,747 43,341Remaining Recoverable, Mbbl 7,985 5,684 3,177 2,317 19,164

Total Proved + ProbableOriginal Oil in Place, Mbbl 40,051 36,071 49,443 36,299 161,865Recovery Factor, % 50.0 45.0 62.5 50.0 52.7Original Recoverable, Mbbl 20,026 16,232 30,902 18,150 85,309Cumulative Recovery, Mbbl 3,429 2,432 24,733 12,747 43,341Remaining Recoverable, Mbbl 16,596 13,800 6,169 5,402 41,968Total Proved + Probable + Possible% of 2P Original Oil in Place 120 120 120 1203P Original Oil in Place, Mbbl 48,061 43,286 59,332 43,559 194,238Recovery Factor, % 55.0 50.0 65.0 55.0 56.9Original Recoverable, Mbbl 26,434 21,643 38,566 23,958 110,600Cumulative Recovery, Mbbl 3,429 2,432 24,733 12,747 43,341Remaining Recoverable, Mbbl 23,004 19,211 13,833 11,210 67,259

Proved Developed WellsZones with Historical Production 1 1 3 4 9Existing Producible Zones 1 - 2 - 3Av. Reserves per Well, Mbbl 801 - 1,589 - 1,326Total Pool Productivity, bopd 500 - 2,000 - 2,500Remaining Reserve Life Index, yrs 4.39 - 4.35 - 4.361P Well RequirementsAverage Spacing (acres/well) 308 211 241 128Total Drainage Points Required 3 2 2 2 9New Drainage Points Required 2 2 - 2 6Av. New Well Productivity, bopd/w 2,000 2,000 - 1,500 1,833Av. Reserves per new Well, Mbbl 3,592 2,842 - 1,158 2,531Total Pool Productivity, bopd 4,500 4,000 2,000 3,000 13,500Remaining Reserve Life Index, yrs 4.86 3.89 4.35 2.12 3.892P Well RequirementsAverage Spacing (acres/well) 308 211 241 128Total Drainage Points Required 3 2 2 2 9New Drainage Points Required 2 2 - 2 6Av. New Well Productivity, bopd/w 3,000 2,500 - 2,000 2,500Av. Reserves per new Well, Mbbl 7,898 6,900 - 2,701 6,332Total Pool Productivity, bopd 6,500 5,000 2,000 4,000 17,500Remaining Reserve Life Index, yrs 7.00 7.56 8.45 3.70 6.573P Well RequirementsAverage Spacing (acres/well) 278 190 217 131Total Drainage Points Required 4 3 3 3 13New Drainage Points Required 3 3 1 3 10Av. New Well Productivity, bopd/w 3,500 3,000 3,500 2,250 2,975Av. Reserves per new Well, Mbbl 7,401 6,404 10,655 3,737 6,328Total Pool Productivity, bopd 11,000 9,000 5,500 6,750 32,250Remaining Reserve Life Index, yrs 5.73 5.85 6.89 4.55 5.71

McDaniel & AssociatesConsultants Ltd.Eland - OML40 Evaluation - Jun 30, 2012 - Final.xlsm 01/08/2012

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Eland Oil & Gas Limited Table 3Opuama Field - OML40, NigeriaReservoir and Fluid Properties

Area Opuama Opuama Opuama OpuamaZone D1000X D2000X D5000X E2000XField UnitsAge Tertiary Tertiary Tertiary TertiaryLithology Sandstone Sandstone Sandstone SandstoneAverage Oil Column Depth, ft SS 7,264 7,334 7,953 8,760Oil Column Height, ft 162 92 205 120Average Net Pay Thickness, ft 42 62 79 75Oil Water Contact, ft SS 7,345 7,380 8,055 8,820Gas Oil Contact, ft SS n/a n/a n/a 8,700Pool Area, ac 925 633 722 765Average Oil Permeability, md n/a n/a n/a n/aInitial Reservoir Pressure, psia 3,134 3,177 3,324 3,663Bubble Point Pressure, psia 545 719 1,282 3,652Reservoir Pressure at date, psia n/a 3,019\Jun-88 3,251\May-91 3,467\Oct-95Reservoir Temperature, F 236 238 258 260Stock Tank Oil Gravity, degrees API 47 46 48 39Oil Viscosity at Reservoir Conditions, cp 0.8 0.7 0.2 0.2Solution GOR, scf/bbl 102 138 1,049 1,266Formation Volume Factor, rb/stb 1.1 1.2 1.9 1.8Oil CO2 Content, % n/a n/a 0.2 2.5Solution Gas H2S n/a n/a n/a none

Zone D1000X D2000X E1000X E2000XSI UnitsAge Tertiary Tertiary Tertiary TertiaryLithology Sandstone Sandstone Sandstone SandstoneAverage Oil Column Depth, m SS 2,214 2,235 2,424 2,670Oil Column Height, m 49 28 62 37Average Net Pay Thickness, m 13 19 24 23Oil Water Contact, m SS 2,239 2,249 2,455 2,688Gas Oil Contact, m SS n/a n/a n/a 2,652Pool Area, km2 3.7 2.6 2.9 3.1Average Oil Permeability, md n/a n/a n/a n/aInitial Reservoir Pressure, kPa 21,604 21,899 22,916 25,253Reservoir Pressure at date, kPa n/a 20,813\Jun-88 22,412\May-91 23,901\Oct-95Bubble Point Pressure, kPa 3,757 4,957 8,838 25,177Reservoir Temperature, C 113 114 126 127Stock Tank Oil Density, g/cc 0.793 0.797 0.788 0.828Oil Viscosity at Reservoir Conditions, mPa.s 0.8 0.7 0.2 0.2Solution GOR, m3/m3 18 25 187 226Formation Volume Factor, m3/m3 1.1 1.2 1.9 1.8Oil CO2 Content, % n/a n/a 0.2 2.5Solution Gas H2S n/a n/a n/a none

"n/a" designates the data was not available

McDaniel & AssociatesConsultants Ltd.Eland - OML40 Evaluation - Jun 30, 2012 - Final.xlsm 01/08/2012

Eland Oil & Gas Limited Table 4Gbetiokun Field - OML40, Nigeria

Crude Oil Reserves Summary Effective June 30, 2012

TotalZone D5000X D8010X E2000X E3000X E4000X E5000X E6000X E7000X FieldPorosity, % 30 16 21 23 17 20 21 18Water Saturation, % 47 35 26 27 27 29 15 33Oil Shrinkage, frac 0.917 0.893 0.833 0.763 0.667 0.667 0.714 0.645Net-to-Gross, % 70 98 83 85 83 87 92 96Original Oil-In Place, bbl/ac-ft 802 706 842 853 530 626 888 593Area, acres 324 410 * 436 370 * 413 345 290 124Average Net Pay, ft 18 17 48 16 17 45 32 32Gross Rock Volume, acre-ft 8,164 7,175 25,462 6,784 8,288 17,903 10,164 4,116 88,056

Total ProvedOriginal Oil in Place, Mbbl - - - - - - - - -Recovery Factor, % - - - - - - - - -Original Recoverable, Mbbl - - - - - - - - -Cumulative Recovery, Mbbl - - - - - - - - -Cumulative Recovery, % - - - - - - - - -Remaining Recoverable, Mbbl - - - - - - - - -

Total Proved + ProbableOriginal Oil in Place, Mbbl 6,547 5,065 21,434 5,784 4,389 11,210 9,029 2,440 65,899Recovery Factor, % 35.0 10.0 50.0 45.0 45.0 50.0 52.5 45.0 44.8Original Recoverable, Mbbl 2,292 507 10,717 2,603 1,975 5,605 4,740 1,098 29,536Cumulative Recovery, Mbbl - - - - - - - - -Remaining Recoverable, Mbbl 2,292 507 10,717 2,603 1,975 5,605 4,740 1,098 29,536

Total Proved + Probable + Possible% of 2P Original Oil in Place 150 150 150 150 150 150 150 1503P Original Oil in Place, Mbbl 9,821 7,598 32,152 8,675 6,584 16,815 13,544 3,659 98,848Recovery Factor, % 45.0 15.0 55.0 50.0 50.0 55.0 57.5 50.0 50.3Original Recoverable, Mbbl 4,419 1,140 17,683 4,338 3,292 9,248 7,788 1,830 49,738Cumulative Recovery, Mbbl - - - - - - - - -Remaining Recoverable, Mbbl 4,419 1,140 17,683 4,338 3,292 9,248 7,788 1,830 49,738

1P Well RequirementsAverage Spacing (acres/well) - - - - - - - -Total Drainage Points Required - - - - - - - - -New Drainage Points Required - - - - - - - - -Workovers Required - - - - - - - - -Av. New Well Productivity, bopd/w - - - - - - - - -Av. Reserves per Well, Mbbl - - - - - - - - -Total Pool Productivity, bopd - - - - - - - - -Remaining Reserve Life Index, yrs - - - - - - - - -

2P Well RequirementsAverage Spacing (acres/well) 324 410 218 185 207 172 290 124Total Drainage Points Required 1 1 2 2 2 2 1 1 12New Drainage Points Required 1 1 1 2 2 2 1 - 10Workovers Required - - 1 - - - - 1 2Av. New Well Productivity, bopd/w 1,500 500 2,500 1,000 750 2,500 2,000 500 1,500Av. Reserves per Well, Mbbl 2,292 507 5,359 1,301 988 2,803 4,740 1,098 2,461Total Pool Productivity, bopd 1,500 500 5,000 2,000 1,500 5,000 2,000 500 18,000Remaining Reserve Life Index, yrs 4.19 2.78 5.87 3.57 3.61 3.07 6.49 6.02 4.50

3P Well RequirementsAverage Spacing (acres/well) 243 308 218 185 207 172 218 186Total Drainage Points Required 2 2 3 3 3 3 2 1 19New Drainage Points Required 2 2 2 3 3 3 2 - 17Workovers Required - - 1 - - - - 1 2Av. New Well Productivity, bopd/w 1,500 500 2,500 1,000 750 2,500 2,000 750 1,526Av. Reserves per Well, Mbbl 2,210 570 5,894 1,446 1,097 3,083 3,894 1,830 2,618Total Pool Productivity, bopd 3,000 1,000 7,500 3,000 2,250 7,500 4,000 750 29,000Remaining Reserve Life Index, yrs 4.04 3.12 6.46 3.96 4.01 3.38 5.33 6.68 4.70

*Mapped area from Eland - audited and considered reasonable

McDaniel & AssociatesConsultants Ltd.Eland - OML40 Evaluation - Jun 30, 2012 - Final.xlsm 01/08/2012

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Eland Oil & Gas Limited Table 5Gbetiokun Field - OML40, Nigeria

Reservoir and Fluid Properties

Zone D5000X D8010X E2000X E3000X E4000X E5000X E6000X E7000XField UnitsAge Tertiary Tertiary Tertiary Tertiary Tertiary Tertiary Tertiary TertiaryLithology SST SST SST SST SST SST SST SSTAverage Oil Column Depth, ft SS 4,611 8,320 9,350 9,372 9,467 9,607 9,832 9,954Oil Column Height, ft 66 90 150 164 213 163 113 58Average Net Pay Thickness, ft 18 17 48 16 17 45 32 32Oil Water Contact, ft SS 4,644 8,365 9,425 9,454 * 9,573 * 9,688 9,888 * 9,983Gas Oil Contact, ft SS n/a n/a n/a n/a n/a n/a n/a n/aPool Area, ac 324 410 436 370 413 345 290 124Average Oil Permeability, md n/a n/a n/a n/a n/a n/a n/a n/aInitial Reservoir Pressure, psia 2,057 3,658 4,088 4,126 4,207 4,226 4,291 4,356Bubble Point Pressure, psia 1,184 1,939 815 1,152 2,821 2,822 1,925 2,488Reservoir Temperature, F 125 160 189 192 199 200 205 211Stock Tank Oil Gravity, degrees API 20 20 39 41 41 41 44 44Oil Viscosity at Reservoir Conditions, cp 9.2 0.8 0.7 0.6 0.6 0.4 0.4 0.3Solution GOR, scf/bbl 150 250 252 255 672 673 708 677Formation Volume Factor, rb/stb 1.09 1.12 1.23 1.31 1.50 1.50 1.39 1.55Oil CO2 Content, % n/a n/a 0.05 n/a n/a n/a 0.68 n/aSolution Gas H2S n/a n/a n/a n/a n/a n/a n/a n/a

Zone D5000X D8010X E2000X E3000X E4000X E5000X E6000X E7000XSI UnitsAge Tertiary Tertiary Tertiary Tertiary Tertiary Tertiary Tertiary TertiaryLithology SST SST SST SST SST SST SST SSTAverage Oil Column Depth, m SS 1,405 2,536 2,850 2,857 2,885 2,928 2,997 3,034Oil Column Height, ft 20 27 46 50 65 50 34 18Average Net Pay Thickness, m 5 5 15 5 5 14 10 10Oil Water Contact, m SS 1,415 2,550 2,873 2,882 2,918 2,953 3,014 3,043Gas Oil Contact, m SS n/a n/a n/a n/a n/a n/a n/a n/aPool Area, km2 1.3 1.7 1.8 1.5 1.7 1.4 1.2 0.5Average Oil Permeability, md n/a n/a n/a n/a n/a n/a n/a n/aInitial Reservoir Pressure, kPa 14,181 25,218 28,183 28,445 29,003 29,136 29,582 30,029Bubble Point Pressure, kPa 8,162 13,367 5,619 7,942 19,448 19,455 13,271 17,152Reservoir Temperature, C 52 71 87 89 93 93 96 99Stock Tank Oil Density, g/cc 0.932 0.931 0.828 0.820 0.820 0.820 0.806 0.805Oil Viscosity at Reservoir Conditions, mPa.s 9.2 0.8 0.7 0.6 0.6 0.4 0.4 0.3Solution GOR, m3/m3 27 45 45 46 120 120 126 121Formation Volume Factor, m3/m3 1.09 1.12 1.23 1.31 1.50 1.50 1.39 1.55Oil CO2 Content, % n/a n/a 0.05 n/a n/a n/a 0.68 n/aSolution Gas H2S n/a n/a n/a n/a n/a n/a n/a n/a

* Lowest Known Oil"n/a" designates the data was not available

McDaniel & AssociatesConsultants Ltd.Eland - OML40 Evaluation - Jun 30, 2012 - Final.xlsm 01/08/2012

Eland Oil & Gas Limited Table 6

Summary of US $60/bbl Sensitivity Forecast Price CaseEffective June 30, 2012

Brent Forcados OML40 OML40Crude Crude Oil Export Natural Inflation

Oil Price Premium Price Gas Price ForecastYear $US/bbl $US/bbl $US/bbl $US/Mcf %

2012 (6 mo) 60.00 2.00 62.00 2.10 2.002013 61.20 2.04 63.24 2.10 2.002014 62.42 2.08 64.50 2.40 2.002015 63.67 2.12 65.79 2.45 2.002016 64.95 2.16 67.11 2.50 2.002017 66.24 2.21 68.45 2.55 2.002018 67.57 2.25 69.82 2.60 2.002019 68.92 2.30 71.22 2.65 2.002020 70.30 2.34 72.64 2.70 2.002021 71.71 2.39 74.10 2.76 2.002022 73.14 2.44 75.58 2.81 2.002023 74.60 2.49 77.09 2.87 2.002024 76.09 2.54 78.63 2.93 2.002025 77.62 2.59 80.20 2.98 2.002026 79.17 2.64 81.81 3.04 2.002027 80.75 2.69 83.44 3.10 2.002028 82.37 2.75 85.11 3.17 2.002029 84.01 2.80 86.81 3.23 2.002030 85.69 2.86 88.55 3.29 2.002031 87.41 2.91 90.32 3.36 2.00

Thereafter +2.0% +2.0% +2.0% 2.00

Pricing Assumptions : Brent price based on US $60/bbl in 2012 and escalated with inflation thereafter. Third Pary Infrastructure Tariffs included within operating costs Forcados oil price based on Brent plus $2.0/bbl OML40 Natural Gas Price based on an aggregated domestic price for strategic power, strategic industries and commercial industries

McDaniel & AssociatesConsultants Ltd.Eland - OML40 Evaluation - Jun 30, 2012 - Eland $60 per bbl - Final.xlsm 01/08/2012

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Eland Oil & Gas Limited Table 7

Summary of US $75/bbl Sensitivity Forecast Price CaseEffective June 30, 2012

Brent Forcados OML40 OML40Crude Crude Oil Export Natural Inflation

Oil Price Premium Price Gas Price ForecastYear $US/bbl $US/bbl $US/bbl $US/Mcf %

2012 (6 mo) 75.00 2.00 77.00 2.10 2.002013 76.50 2.04 78.54 2.10 2.002014 78.03 2.08 80.11 2.40 2.002015 79.59 2.12 81.71 2.45 2.002016 81.18 2.16 83.35 2.50 2.002017 82.81 2.21 85.01 2.55 2.002018 84.46 2.25 86.71 2.60 2.002019 86.15 2.30 88.45 2.65 2.002020 87.87 2.34 90.22 2.70 2.002021 89.63 2.39 92.02 2.76 2.002022 91.42 2.44 93.86 2.81 2.002023 93.25 2.49 95.74 2.87 2.002024 95.12 2.54 97.65 2.93 2.002025 97.02 2.59 99.61 2.98 2.002026 98.96 2.64 101.60 3.04 2.002027 100.94 2.69 103.63 3.10 2.002028 102.96 2.75 105.70 3.17 2.002029 105.02 2.80 107.82 3.23 2.002030 107.12 2.86 109.97 3.29 2.002031 109.26 2.91 112.17 3.36 2.00

Thereafter +2.0% +2.0% +2.0% 2.00

Pricing Assumptions : Brent price based on US $75/bbl in 2012 and escalated with inflation thereafter. Third Pary Infrastructure Tariffs included within operating costs Forcados oil price based on Brent plus $2.0/bbl OML40 Natural Gas Price based on an aggregated domestic price for strategic power, strategic industries and commercial industries

McDaniel & AssociatesConsultants Ltd.Eland - OML40 Evaluation - Jun 30, 2012 - Eland $75 per bbl - Final.xlsm 01/08/2012

Eland Oil & Gas Limited Table 8

Summary of US $85/bbl Sensitivity Forecast Price CaseEffective June 30, 2012

Brent Forcados OML40 OML40Crude Crude Oil Export Natural Inflation

Oil Price Premium Price Gas Price ForecastYear $US/bbl $US/bbl $US/bbl $US/Mcf %

2012 (6 mo) 85.00 2.00 87.00 2.10 2.002013 86.70 2.04 88.74 2.10 2.002014 88.43 2.08 90.51 2.40 2.002015 90.20 2.12 92.33 2.45 2.002016 92.01 2.16 94.17 2.50 2.002017 93.85 2.21 96.06 2.55 2.002018 95.72 2.25 97.98 2.60 2.002019 97.64 2.30 99.94 2.65 2.002020 99.59 2.34 101.93 2.70 2.002021 101.58 2.39 103.97 2.76 2.002022 103.61 2.44 106.05 2.81 2.002023 105.69 2.49 108.17 2.87 2.002024 107.80 2.54 110.34 2.93 2.002025 109.96 2.59 112.54 2.98 2.002026 112.16 2.64 114.79 3.04 2.002027 114.40 2.69 117.09 3.10 2.002028 116.69 2.75 119.43 3.17 2.002029 119.02 2.80 121.82 3.23 2.002030 121.40 2.86 124.26 3.29 2.002031 123.83 2.91 126.74 3.36 2.00

Thereafter +2.0% +2.0% +2.0% 2.00

Pricing Assumptions : Brent price based on US $85/bbl in 2012 and escalated with inflation thereafter. Third Pary Infrastructure Tariffs included within operating costs Forcados oil price based on Brent plus $2.0/bbl OML40 Natural Gas Price based on an aggregated domestic price for strategic power, strategic industries and commercial industries

McDaniel & AssociatesConsultants Ltd.Eland - OML40 Evaluation - Jun 30, 2012 - Eland $85 per bbl - Final.xlsm 01/08/2012

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Eland Oil & Gas Limited Table 9

Total OML40 AssetsSummary of Reserves and Net Present Values - US $60/bbl Price Forecast

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 877 702 - - -Proved Undeveloped Reserves 15,185 3,348 2,679 - - -Total Proved Reserves 19,164 4,226 3,381 - - -Probable Reserves 52,341 11,541 9,233 33,449 7,376 6,859Proved Plus Probable Reserves 71,505 15,767 12,613 33,449 7,376 6,859Possible Reserves 45,492 10,031 8,025 25,234 5,564 5,175Proved Plus Probable Plus Possible Reserves 116,997 25,798 20,638 58,684 12,940 12,034

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 28,006 22,910 18,969 15,868 13,388

Proved Undeveloped Reserves 111,085 92,129 77,437 65,861 56,606

Total Proved Reserves 139,091 115,038 96,406 81,729 69,994

Probable Reserves 471,518 330,493 240,369 180,396 139,056

Proved Plus Probable Reserves 610,609 445,532 336,775 262,125 209,050

Possible Reserves 392,031 293,331 226,001 178,579 144,201

Proved Plus Probable Plus Possible Reserves 1,002,640 738,863 562,776 440,705 353,251

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 4,498 3,030 1,881 968 234Proved Undeveloped Reserves 32,316 26,064 21,277 17,555 14,620Total Proved Reserves 36,814 29,094 23,158 18,523 14,854Probable Reserves 96,878 70,590 52,760 40,298 31,345Proved Plus Probable Reserves 133,692 99,685 75,919 58,821 46,198Possible Reserves 90,304 70,827 56,472 45,805 37,753Proved Plus Probable Plus Possible Reserves 223,995 170,512 132,390 104,626 83,951

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

and assumes Eland will purchase an additional 4 percent in Elcrest during 2012. Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Eland - OML40 Evaluation - Jun 30, 2012 - Eland $60 per bbl - Final.xlsm 01/08/2012

Eland Oil & Gas Limited Table 10

Total OML40 AssetsSummary of Reserves and Net Present Values - US $75/bbl Price Forecast

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 877 702 - - -Proved Undeveloped Reserves 15,185 3,348 2,679 - - -Total Proved Reserves 19,164 4,226 3,381 - - -Probable Reserves 52,341 11,541 9,233 33,449 7,376 6,859Proved Plus Probable Reserves 71,505 15,767 12,613 33,449 7,376 6,859Possible Reserves 45,492 10,031 8,025 25,234 5,564 5,175Proved Plus Probable Plus Possible Reserves 116,997 25,798 20,638 58,684 12,940 12,034

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 39,237 32,506 27,295 23,188 19,900

Proved Undeveloped Reserves 154,021 128,661 108,940 93,349 80,838

Total Proved Reserves 193,258 161,167 136,235 116,537 100,739

Probable Reserves 631,125 444,016 324,597 245,102 190,221

Proved Plus Probable Reserves 824,383 605,183 460,832 361,639 290,960

Possible Reserves 527,697 395,039 304,786 241,266 195,199

Proved Plus Probable Plus Possible Reserves 1,352,080 1,000,223 765,618 602,905 486,158

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 7,855 5,946 4,446 3,251 2,285Proved Undeveloped Reserves 45,437 37,368 31,130 26,230 22,328Total Proved Reserves 53,293 43,314 35,576 29,481 24,612Probable Reserves 131,437 96,323 72,724 56,282 44,462Proved Plus Probable Reserves 184,729 139,638 108,300 85,763 69,075Possible Reserves 122,253 95,935 76,717 62,473 51,713Proved Plus Probable Plus Possible Reserves 306,982 235,573 185,017 148,235 120,788

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

and assumes Eland will purchase an additional 4 percent in Elcrest during 2012. Company Net reserves are based on Company working interest share of reserves after royalties.

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Eland Oil & Gas Limited Table 11

Total OML40 AssetsSummary of Reserves and Net Present Values - US $85bbl Price Forecast

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 877 702 - - -Proved Undeveloped Reserves 15,185 3,348 2,679 - - -Total Proved Reserves 19,164 4,226 3,381 - - -Probable Reserves 52,341 11,541 9,233 33,449 7,376 6,859Proved Plus Probable Reserves 71,505 15,767 12,613 33,449 7,376 6,859Possible Reserves 45,492 10,031 8,025 25,234 5,564 5,175Proved Plus Probable Plus Possible Reserves 116,997 25,798 20,638 58,684 12,940 12,034

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 46,724 38,903 32,845 28,069 24,242

Proved Undeveloped Reserves 182,645 153,016 129,942 111,673 96,993

Total Proved Reserves 229,370 191,920 162,788 139,742 121,235

Probable Reserves 737,530 519,698 380,749 288,240 224,331

Proved Plus Probable Reserves 966,899 711,618 543,536 427,982 345,566

Possible Reserves 618,140 462,845 357,309 283,056 229,197

Proved Plus Probable Plus Possible Reserves 1,585,039 1,174,462 900,845 711,038 574,763

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 10,094 7,890 6,157 4,773 3,652Proved Undeveloped Reserves 54,185 44,904 37,698 32,013 27,466Total Proved Reserves 64,279 52,794 43,854 36,786 31,118Probable Reserves 154,459 113,513 86,103 67,032 53,319Proved Plus Probable Reserves 218,738 166,307 129,958 103,818 84,438Possible Reserves 143,410 112,605 90,176 73,560 61,001Proved Plus Probable Plus Possible Reserves 362,148 278,912 220,134 177,378 145,439

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

and assumes Eland will purchase an additional 4 percent in Elcrest during 2012. Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Eland - OML40 Evaluation - Jun 30, 2012 - Eland $85 per bbl - Final.xlsm 01/08/2012

Eland Oil & Gas Limited Table 12

Total OML40 AssetsSummary of Reserves and Net Present Values - Non Newcomer Status

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 877 702 - - -Proved Undeveloped Reserves 15,185 3,348 2,679 - - -Total Proved Reserves 19,164 4,226 3,381 - - -Probable Reserves 52,341 11,541 9,233 33,449 7,376 6,859Proved Plus Probable Reserves 71,505 15,767 12,613 33,449 7,376 6,859Possible Reserves 45,492 10,031 8,025 25,234 5,564 5,175Proved Plus Probable Plus Possible Reserves 116,997 25,798 20,638 58,684 12,940 12,034

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 54,633 45,839 39,010 33,611 29,274

Proved Undeveloped Reserves 211,722 178,230 152,072 131,301 114,561

Total Proved Reserves 266,356 224,069 191,082 164,912 143,835

Probable Reserves 823,737 582,210 428,058 325,315 254,226

Proved Plus Probable Reserves 1,090,093 806,278 619,140 490,227 398,062

Possible Reserves 693,275 520,210 402,545 319,673 259,481

Proved Plus Probable Plus Possible Reserves 1,783,368 1,326,488 1,021,685 809,900 657,542

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 3,407 1,993 906 55 (619)Proved Undeveloped Reserves 29,269 23,331 18,848 15,408 12,730Total Proved Reserves 32,676 25,324 19,754 15,464 12,111Probable Reserves 124,951 87,254 63,001 46,766 35,521Proved Plus Probable Reserves 157,627 112,578 82,754 62,230 47,633Possible Reserves 101,192 76,181 58,632 46,108 36,982Proved Plus Probable Plus Possible Reserves 258,819 188,759 141,387 108,338 84,615

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

and assumes Eland will purchase an additional 4 percent in Elcrest during 2012. Company Net reserves are based on Company working interest share of reserves after royalties.

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Eland Oil & Gas Limited Table 13

Total OML40 AssetsSummary of Reserves and Net Present Values - License Extension for all cases

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 5,832 1,286 1,029 - - -Proved Undeveloped Reserves 17,962 3,961 3,168 - - -Total Proved Reserves 23,794 5,247 4,197 - - -Probable Reserves 47,711 10,520 8,416 33,449 7,376 6,859Proved Plus Probable Reserves 71,505 15,767 12,613 33,449 7,376 6,859Possible Reserves 45,492 10,031 8,025 25,234 5,564 5,175Proved Plus Probable Plus Possible Reserves 116,997 25,798 20,638 58,684 12,940 12,034

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 83,502 64,108 50,881 41,514 34,654

Proved Undeveloped Reserves 256,524 211,553 177,147 150,407 129,304

Total Proved Reserves 340,026 275,660 228,029 191,921 163,957

Probable Reserves 750,128 530,677 391,169 298,362 234,159

Proved Plus Probable Reserves 1,090,153 806,337 619,197 490,283 398,116

Possible Reserves 693,275 520,210 402,545 319,673 259,481

Proved Plus Probable Plus Possible Reserves 1,783,428 1,326,547 1,021,742 809,956 657,597

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 15,540 12,080 9,485 7,498 5,945Proved Undeveloped Reserves 72,508 59,639 49,835 42,215 36,188Total Proved Reserves 88,049 71,720 59,321 49,713 42,132Probable Reserves 161,684 119,616 91,506 71,926 57,801Proved Plus Probable Reserves 249,733 191,336 150,827 121,638 99,933Possible Reserves 161,723 127,298 102,246 83,666 69,598Proved Plus Probable Plus Possible Reserves 411,456 318,634 253,073 205,304 169,531

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

and assumes Eland exercises an option to acquire an additional 4 percent in Elcrest during 2012. Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Eland - OML40 Evaluation - Jun 30, 2012 - inc 1P extension - Final.xlsm 01/08/2012

Eland Oil & Gas Limited Table 14Summary of Contingent Resource Estimates - Property Gross Values

Effective June 30, 2012

Contingent Resources - Crude OilContingent Resources (1) (2) (3)

1C 2C Mean 3CField Zone Mbbl Mbbl Mbbl Mbbl

Abiala D2400X 520 768 796 1,105 Abiala D3000X 1,030 1,541 1,603 2,265 Abiala D4000X 854 1,259 1,303 1,811 Abiala D6000X - - - - Abiala D7200X 1,111 1,611 1,666 2,296 Abiala D7600X 166 274 288 429 Abiala E9200X 945 1,405 1,462 2,039 Abiala F6000X 966 1,408 1,458 2,014 Abiala F7000X 523 798 831 1,183 Abiala F8000X 476 711 744 1,053 Abiala G2000X 480 714 744 1,046 Abiala Total 9,560 10,850 10,896 12,298

Ugbo B1000X 1,927 4,680 5,810 11,072

Ugbo Total 1,927 4,680 5,810 11,072 OML40 Total 11,488 15,530 16,706 23,370

Contingent Resources - Natural GasContingent Resources (1) (2) (3)

1C 2C Mean 3CField Zone MMcf MMcf MMcf MMcf

Abiala D2400X 259 384 400 562 Abiala D3000X 509 775 807 1,148 Abiala D4000X 424 630 656 920 Abiala D6000X 8,941 12,785 13,211 18,026 Abiala D7200X 966 1,421 1,472 2,043 Abiala D7600X 155 260 274 412 Abiala E9200X 886 1,336 1,388 1,956 Abiala F6000X 5,936 8,501 8,759 11,964 Abiala F7000X 4,402 6,411 6,637 9,108 Abiala F8000X 3,414 4,929 5,131 7,097 Abiala G2000X 4,549 6,587 6,822 9,352 Abiala Total 39,060 45,187 45,556 52,603

Ugbo B1000X 768 1,860 2,317 4,454 Ugbo Total 768 1,860 2,317 4,454

OML40 Total 39,828 47,047 47,873 57,057

(1) There is no certainty that it will be economically viable or technically feasible to produce any portion of the resources.(2) These are unrisked contingent resources that do not take into account the chance of commerciality.(3) Individual zone estimates statistically aggregated to the field level.

McDaniel & AssociatesConsultants Ltd.

Eland���OML40�Resources���Jun�30,�2012���Final.xlsx 01/08/2012

136

137

Elan

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2000

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10

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100

10

0

50

50

50

50

100

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cent

age

Gas

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stan

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100

-

-

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50

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50

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320

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435

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1

496

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2

538

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280

68

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1,01

6

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3

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85

55

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85

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80

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75

85

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95

65

95

75

95

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90

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85

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12

Eland Oil & Gas Limited Table 16Abiala N-Blk 2 - D2.2 to E9.2

Prospective Resource Estimates - Property Gross ValuesEffective June 30, 2012

Prospect Description Zone DescriptionPool Name Abiala�N�Blk�2 Formation D2.2 to E9.2Classification Prospect 2C - 3C AnticlineCountry Nigeria Depth 2,200 ft ssBasin Niger�Delta Reservoir Type Clastic

Rock PropertiesInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Pool Area, acres Log-normal 100 2,050 29 453 826 7,022Geometric Shape Factor, % Normal 65 65 65 65 65 65Maximum Gross Pay, ft Normal 75 400 29 238 238 446Matrix Net to Gross Ratio, % Normal 100 100 100 100 100 100Fracture Net to Gross Ratio, % Normal 0.0 0 0 0 0 0Matrix Porosity, % Normal 20 23 19 22 22 24Fracture Porosity, % Normal 0.00 0.00 0.00 0.00 0.00 0.00

Fluid PropertiesInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Percentage Hydr. Filled, % Normal 100 100 100 100 100 100Matrix Oil or Gas Saturation, % Normal 60 80 52 70 70 88Fracture Oil or Gas Saturation, %Normal 0 0 2C 0 3C 0Oil Shrinkage, stb/rb Uniform 0.63 0.91 0.60 0.77 0.77 0.95Gas Expansion Factor, scf/rcf Uniform 179 220 174 200 199 225Solution Gas GOR, scf/bbl Uniform 150 1,000 44 575 574 1,106Cond. Gas Ratio, bbl/MMcf Uniform 0 0 (0) 0 0 0

RecoveryInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Matrix Oil Recovery Factor, % Normal 20 40 12 30 30 48Fracture Oil Recovery Factor, % Normal 0 0 0 0 0 0Gas Recovery Factor, % Normal 60 80 52 70 70 88Condensate Recovery Factor, % Normal 0 0 0 0 0 0

Geological Chance of SuccessParameter ValueSource 1.00Migration & Time 1.00 Percentage Oil (of Hydr.), % 85Reservoir 0.90 Percentage Gas (of Hydr.), % 15Structure 0.60Seal 0.50Overall 0.27

Calculated ResultsMatrix Fracture (not applicable to this pool)

Crude Oil P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked OOIP, Mbbl 2,548 9,219 48,018 96,441 235,638 701,242 0 0 0 0 0 0Unrisked Oil Resources, Mbbl 726 2,552 13,833 29,008 71,288 214,617 0 0 0 0 0 0Risked Mean Oil Resources, Mbbl 7,832 0

Natural Gas P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked OGIP, MMcf 1,321 5,646 35,269 79,694 197,979 650,259 0 0 0 0 0 0Unrisked Gas Resources, MMcf 634 2,433 14,551 32,120 78,666 258,236 0 0 0 0 0 0Risked Mean Gas Resources, MMcf 8,672 0

Condensate P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked Cond. In-Place, Mbbl (0) 0 0 0 0 0 (0) 0 0 0 0 0Unrisked Cond. Resources, Mbb (0) 0 0 0 0 0 (0) 0 0 0 0 0Risked Mean Cond. Resources, Mbbl 0 0

Total BOE

Total BOE Resources P99 P90 P50 Mean* P10 P1Unrisked OOIP, Mbbl 2,980 10,571 54,565 109,723 809,431 109,723Unrisked Resources, Mbbl 881 3,052 16,555 34,362 259,131 34,362Risked Mean Resources, Mbbl 9,278

Gas Shrinkage (fuel, flare and losses), % 5

McDaniel & AssociatesConsultants Ltd.Eland���OML40�Resources���Jun�30,�2012���Final.xlsx 01/08/2012

138

139

Eland Oil & Gas Limited Table 17Abiala NE - D2.2 to E9.2

Prospective Resource Estimates - Property Gross ValuesEffective June 30, 2012

Prospect Description Zone DescriptionPool Name Abiala�NE Formation D2.2 to E9.2Classification Prospect 2C - 3C AnticlineCountry Nigeria Depth 2,350 ft ssBasin Niger�Delta Reservoir Type Clastic

Rock PropertiesInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Pool Area, acres Log-normal 55 1,100 16 246 445 3,730Geometric Shape Factor, % Normal 65 65 65 65 65 65Maximum Gross Pay, ft Normal 75 400 29 238 238 446Matrix Net to Gross Ratio, % Normal 100 100 100 100 100 100Fracture Net to Gross Ratio, % Normal 0.0 0 0 0 0 0Matrix Porosity, % Normal 20 23 19 22 22 24Fracture Porosity, % Normal 0.00 0.00 0.00 0.00 0.00 0.00

Fluid PropertiesInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Percentage Hydr. Filled, % Normal 100 100 100 100 100 100Matrix Oil or Gas Saturation, % Normal 60 80 52 70 70 88Fracture Oil or Gas Saturation, %Normal 0 0 2C 0 3C 0Oil Shrinkage, stb/rb Uniform 0.63 0.91 0.60 0.77 0.77 0.95Gas Expansion Factor, scf/rcf Uniform 191 235 186 213 213 240Solution Gas GOR, scf/bbl Uniform 150 1,000 44 570 572 1,106Cond. Gas Ratio, bbl/MMcf Uniform 0 0 (0) 0 0 0

RecoveryInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Matrix Oil Recovery Factor, % Normal 20 40 12 30 30 48Fracture Oil Recovery Factor, % Normal 0 0 0 0 0 0Gas Recovery Factor, % Normal 60 80 52 70 70 88Condensate Recovery Factor, % Normal 0 0 0 0 0 0

Geological Chance of SuccessParameter ValueSource 1.00Migration & Time 1.00 Percentage Oil (of Hydr.), % 85Reservoir 0.90 Percentage Gas (of Hydr.), % 15Structure 0.75Seal 0.50Overall 0.34

Calculated ResultsMatrix Fracture (not applicable to this pool)

Crude Oil P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked OOIP, Mbbl 1,416 4,998 26,010 51,897 128,436 375,634 0 0 0 0 0 0Unrisked Oil Resources, Mbbl 409 1,445 7,588 15,706 38,318 120,290 0 0 0 0 0 0Risked Mean Oil Resources, Mbbl 5,301 0

Natural Gas P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked OGIP, MMcf 781 3,130 19,452 44,214 110,794 357,764 0 0 0 0 0 0Unrisked Gas Resources, MMcf 357 1,393 8,226 18,102 44,799 143,139 0 0 0 0 0 0Risked Mean Gas Resources, MMcf 6,109 0

Condensate P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked Cond. In-Place, Mbbl (0) 0 0 0 0 0 (0) 0 0 0 0 0Unrisked Cond. Resources, Mbb (0) 0 0 0 0 0 (0) 0 0 0 0 0Risked Mean Cond. Resources, Mbbl 0 0

Total BOE

Total BOE Resources P99 P90 P50 Mean* P10 P1Unrisked OOIP, Mbbl 1,628 5,750 29,720 59,266 421,924 59,266Unrisked Resources, Mbbl 505 1,737 9,081 18,723 141,168 18,723Risked Mean Resources, Mbbl 6,319

Gas Shrinkage (fuel, flare and losses), % 5

McDaniel & AssociatesConsultants Ltd.Eland���OML40�Resources���Jun�30,�2012���Final.xlsx 01/08/2012

Eland Oil & Gas Limited Table 18Gbetiokun (West of Shale Canyon) - D5000

Prospective Resource Estimates - Property Gross ValuesEffective June 30, 2012

Prospect Description Zone DescriptionPool Name Gbetiokun�(West�of�Shale�Canyon) Formation D5000Classification Prospect 2C - 3C AnticlineCountry Nigeria Depth 1,350 ft ssBasin Niger�Delta Reservoir Type Clastic

Rock PropertiesInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Pool Area, acres Log-normal 75 1,125 25 290 476 3,393Geometric Shape Factor, % Normal 50 50 50 50 50 50Maximum Gross Pay, ft Normal 40 180 20 110 110 200Matrix Net to Gross Ratio, % Normal 100 100 100 100 100 100Fracture Net to Gross Ratio, % Normal 0.0 0 0 0 0 0Matrix Porosity, % Normal 25 35 21 30 30 39Fracture Porosity, % Normal 0.00 0.00 0.00 0.00 0.00 0.00

Fluid PropertiesInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Percentage Hydr. Filled, % Normal 100 100 100 100 100 100Matrix Oil or Gas Saturation, % Normal 45 65 37 55 55 73Fracture Oil or Gas Saturation, %Normal 0 0 2C 0 3C 0Oil Shrinkage, stb/rb Uniform 0.85 0.95 0.84 0.90 0.90 0.96Gas Expansion Factor, scf/rcf Uniform 191 235 186 213 213 240Solution Gas GOR, scf/bbl Uniform 100 500 50 299 300 550Cond. Gas Ratio, bbl/MMcf Uniform 0 0 (0) 0 0 0

RecoveryInput Parameters

Distrib. Input Parameters Calculated ParametersParameter Type P90 P10 P99 P50 Mean* P1Matrix Oil Recovery Factor, % Normal 25 45 17 35 35 53Fracture Oil Recovery Factor, % Normal 0 0 0 0 0 0Gas Recovery Factor, % Normal 60 80 52 70 70 88Condensate Recovery Factor, % Normal 0 0 0 0 0 0

Geological Chance of SuccessParameter ValueSource 1.00Migration & Time 1.00 Percentage Oil (of Hydr.), % 100Reservoir 0.90 Percentage Gas (of Hydr.), % 0Structure 0.60Seal 0.50Overall 0.27

Calculated ResultsMatrix Fracture (not applicable to this pool)

Crude Oil P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked OOIP, Mbbl 1,253 3,837 16,774 29,642 69,897 184,646 0 0 0 0 0 0Unrisked Oil Resources, Mbbl 400 1,285 5,773 10,322 24,689 66,897 0 0 0 0 0 0Risked Mean Oil Resources, Mbbl 2,787 0

Natural Gas P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked OGIP, MMcf 211 795 4,441 8,936 21,243 68,364 0 0 0 0 0 0Unrisked Gas Resources, MMcf 64 254 1,450 2,960 7,105 22,323 0 0 0 0 0 0Risked Mean Gas Resources, MMcf 799 0

Condensate P99 P90 P50 Mean* P10 P1 P99 P90 P50 Mean* P10 P1Unrisked Cond. In-Place, Mbbl (0) 0 0 0 0 0 (0) 0 0 0 0 0Unrisked Cond. Resources, Mbb (0) 0 0 0 0 0 (0) 0 0 0 0 0Risked Mean Cond. Resources, Mbbl 0 0

Total BOE

Total BOE Resources P99 P90 P50 Mean* P10 P1Unrisked OOIP, Mbbl 1,318 4,015 17,647 31,131 196,193 31,131Unrisked Resources, Mbbl 416 1,345 6,037 10,815 69,134 10,815Risked Mean Resources, Mbbl 2,920

Gas Shrinkage (fuel, flare and losses), % 5

McDaniel & AssociatesConsultants Ltd.Eland���OML40�Resources���Jun�30,�2012���Final.xlsx 01/08/2012

140

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10

1

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Elan

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OM

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195.0

103.0

97.0

OP-1

OP-2

OP-3

OP-4

OP-5

OP-6

OP-7

2140

0021

4000

2150

0021

5000

2160

0021

6000

2170

0021

7000

2890

00

2890

00

2900

00

2900

00

2910

00

2910

00

2920

00

2920

00

2930

00

2930

00

2940

00

2940

00

2950

00

2950

00

10

1

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Elan

d O

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Nig

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Gro

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2150

0021

5000

2160

0021

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2170

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2890

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2890

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2900

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2900

00

2910

00

2910

00

2920

00

2920

00

2930

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2930

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2940

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2940

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2950

00

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10

1

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58.0

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OP-2

OP-3

OP-4

OP-5

OP-6

OP-7

2140

0021

4000

2150

0021

5000

2160

0021

6000

2170

0021

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2890

00

2890

00

2900

00

2900

00

2910

00

2910

00

2920

00

2920

00

2930

00

2930

00

2940

00

2940

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2950

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2950

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10

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2100

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2120

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2000

2140

0021

4000

3160

00

3160

00

3180

00

3180

00

3200

00

3200

00

3220

00

3220

00

3240

00

3240

00

Elan

d O

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Oil

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2100

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2120

0021

2000

2140

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3160

00

3160

00

3180

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3180

00

3200

00

3200

00

3220

00

3220

00

3240

00

3240

00

Elan

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2100

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2120

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2140

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4000

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6000

3160

00

3160

00

3180

00

3180

00

3200

00

3200

00

3220

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3220

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3240

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3240

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10

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Elan

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Map

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Units

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4000

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3220

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152

153

OM

L-40

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3200

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3220

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3220

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3240

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Elan

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OM

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5000

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Map

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Units

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4 N

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2010

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Map

Abb

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3

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OM

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2100

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3220

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2010

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154

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OM

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3200

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3220

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3220

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Elan

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3200

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10

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156

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OM

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2100

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6000

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00

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3180

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3180

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3200

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3200

00

3220

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3220

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165

APPENDIX 2 Additional Elcrest Specific Tables

Elcrest Table 1

Total OML40 AssetsSummary of Reserves and Net Present Values

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 1,790 1,432 - - -Proved Undeveloped Reserves 15,185 6,833 5,467 - - -Total Proved Reserves 19,164 8,624 6,899 - - -Probable Reserves 52,341 23,553 18,843 33,449 15,052 13,999Proved Plus Probable Reserves 71,505 32,177 25,742 33,449 15,052 13,999Possible Reserves 45,492 20,471 16,377 25,234 11,355 10,561Proved Plus Probable Plus Possible Reserves 116,997 52,648 42,119 58,684 26,408 24,559

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 121,701 103,629 89,575 78,448 69,493

Proved Undeveloped Reserves 432,086 363,735 310,351 267,961 233,798

Total Proved Reserves 553,787 467,363 399,926 346,409 303,291

Probable Reserves 1,681,096 1,188,183 873,589 663,908 518,830

Proved Plus Probable Reserves 2,234,884 1,655,547 1,273,515 1,010,317 822,120

Possible Reserves 1,414,847 1,061,653 821,520 652,394 529,552

Proved Plus Probable Plus Possible Reserves 3,649,730 2,717,199 2,095,035 1,662,711 1,351,673

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 35,799 30,620 26,516 23,212 20,513Proved Undeveloped Reserves 129,176 107,931 91,353 78,213 67,650Total Proved Reserves 164,975 138,551 117,869 101,425 88,163Probable Reserves 354,845 261,968 199,863 156,630 125,492Proved Plus Probable Reserves 519,819 400,519 317,733 258,055 213,655Possible Reserves 330,047 259,793 208,665 170,747 142,037Proved Plus Probable Plus Possible Reserves 849,867 660,312 526,397 428,802 355,693

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Elcrest - OML40 Evaluation - Jun 30, 2012 - Final.xlsm 01/08/2012

166

167

Elcrest Table 2

Total OML40 AssetsSummary of Reserves and Net Present Values - US $60/bbl Price Forecast

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 1,790 1,432 - - -Proved Undeveloped Reserves 15,185 6,833 5,467 - - -Total Proved Reserves 19,164 8,624 6,899 - - -Probable Reserves 52,341 23,553 18,843 33,449 15,052 13,999Proved Plus Probable Reserves 71,505 32,177 25,742 33,449 15,052 13,999Possible Reserves 45,492 20,471 16,377 25,234 11,355 10,561Proved Plus Probable Plus Possible Reserves 116,997 52,648 42,119 58,684 26,408 24,559

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 67,360 56,835 48,676 42,237 37,072

Proved Undeveloped Reserves 226,704 188,018 158,034 134,411 115,523

Total Proved Reserves 294,063 244,853 206,710 176,648 152,595

Probable Reserves 962,282 674,476 490,550 368,156 283,788

Proved Plus Probable Reserves 1,256,345 919,329 697,260 544,803 436,383

Possible Reserves 800,064 598,635 461,226 364,447 294,287

Proved Plus Probable Plus Possible Reserves 2,056,409 1,517,964 1,158,486 909,251 730,670

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 19,384 16,264 13,803 11,830 10,226Proved Undeveloped Reserves 65,951 53,192 43,423 35,826 29,837Total Proved Reserves 85,335 69,456 57,226 47,656 40,063Probable Reserves 197,710 144,062 107,674 82,241 63,969Proved Plus Probable Reserves 283,045 213,518 164,900 129,897 104,032Possible Reserves 184,293 144,545 115,248 93,479 77,047Proved Plus Probable Plus Possible Reserves 467,337 358,063 280,148 223,376 181,079

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Elcrest - OML40 Evaluation - Jun 30, 2012 - Eland $60 per bbl - Final.xlsm 01/08/2012

Elcrest Table 3

Total OML40 AssetsSummary of Reserves and Net Present Values - US $75/bbl Price Forecast

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 1,790 1,432 - - -Proved Undeveloped Reserves 15,185 6,833 5,467 - - -Total Proved Reserves 19,164 8,624 6,899 - - -Probable Reserves 52,341 23,553 18,843 33,449 15,052 13,999Proved Plus Probable Reserves 71,505 32,177 25,742 33,449 15,052 13,999Possible Reserves 45,492 20,471 16,377 25,234 11,355 10,561Proved Plus Probable Plus Possible Reserves 116,997 52,648 42,119 58,684 26,408 24,559

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 90,280 76,419 65,668 57,177 50,362

Proved Undeveloped Reserves 314,329 262,574 222,326 190,507 164,976

Total Proved Reserves 404,609 338,993 287,994 247,684 215,338

Probable Reserves 1,288,010 906,155 662,443 500,209 388,206

Proved Plus Probable Reserves 1,692,619 1,245,148 950,437 747,893 603,544

Possible Reserves 1,076,932 806,203 622,012 492,379 398,364

Proved Plus Probable Plus Possible Reserves 2,769,550 2,051,351 1,572,449 1,240,272 1,001,909

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 26,236 22,215 19,038 16,488 14,413Proved Undeveloped Reserves 92,729 76,262 63,530 53,531 45,566Total Proved Reserves 118,965 98,477 82,568 70,019 59,979Probable Reserves 268,238 196,578 148,417 114,860 90,739Proved Plus Probable Reserves 387,203 295,055 230,985 184,879 150,718Possible Reserves 249,496 195,787 156,566 127,495 105,538Proved Plus Probable Plus Possible Reserves 636,699 490,842 387,550 312,375 256,255

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Elcrest - OML40 Evaluation - Jun 30, 2012 - Eland $75 per bbl - Final.xlsm 01/08/2012

168

169

Elcrest Table 4

Total OML40 AssetsSummary of Reserves and Net Present Values - US $85/bbl Price Forecast

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 1,790 1,432 - - -Proved Undeveloped Reserves 15,185 6,833 5,467 - - -Total Proved Reserves 19,164 8,624 6,899 - - -Probable Reserves 52,341 23,553 18,843 33,449 15,052 13,999Proved Plus Probable Reserves 71,505 32,177 25,742 33,449 15,052 13,999Possible Reserves 45,492 20,471 16,377 25,234 11,355 10,561Proved Plus Probable Plus Possible Reserves 116,997 52,648 42,119 58,684 26,408 24,559

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 105,560 89,475 76,995 67,137 59,223

Proved Undeveloped Reserves 372,746 312,278 265,188 227,905 197,944

Total Proved Reserves 478,306 401,753 342,183 295,042 257,167

Probable Reserves 1,505,162 1,060,608 777,038 588,245 457,818

Proved Plus Probable Reserves 1,983,468 1,462,361 1,119,221 883,286 714,985

Possible Reserves 1,261,510 944,581 729,203 577,666 467,750

Proved Plus Probable Plus Possible Reserves 3,244,978 2,406,942 1,848,424 1,460,953 1,182,735

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 30,804 26,182 22,528 19,594 17,203Proved Undeveloped Reserves 110,581 91,642 76,934 65,333 56,053Total Proved Reserves 141,385 117,824 99,463 84,927 73,256Probable Reserves 315,223 231,660 175,721 136,800 108,815Proved Plus Probable Reserves 456,608 349,483 275,183 221,728 182,071Possible Reserves 292,673 229,806 184,033 150,123 124,493Proved Plus Probable Plus Possible Reserves 749,281 579,289 459,216 371,850 306,564

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Elcrest - OML40 Evaluation - Jun 30, 2012 - Eland $85 per bbl - Final.xlsm 01/08/2012

Elcrest Table 5

Total OML40 AssetsSummary of Reserves and Net Present Values - Non Newcomer Status

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 3,978 1,790 1,432 - - -Proved Undeveloped Reserves 15,185 6,833 5,467 - - -Total Proved Reserves 19,164 8,624 6,899 - - -Probable Reserves 52,341 23,553 18,843 33,449 15,052 13,999Proved Plus Probable Reserves 71,505 32,177 25,742 33,449 15,052 13,999Possible Reserves 45,492 20,471 16,377 25,234 11,355 10,561Proved Plus Probable Plus Possible Reserves 116,997 52,648 42,119 58,684 26,408 24,559

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 121,701 103,629 89,575 78,448 69,493

Proved Undeveloped Reserves 432,086 363,735 310,351 267,961 233,798

Total Proved Reserves 553,787 467,363 399,926 346,409 303,291

Probable Reserves 1,681,096 1,188,183 873,589 663,908 518,830

Proved Plus Probable Reserves 2,234,884 1,655,547 1,273,515 1,010,317 822,120

Possible Reserves 1,414,847 1,061,653 821,520 652,394 529,552

Proved Plus Probable Plus Possible Reserves 3,649,730 2,717,199 2,095,035 1,662,711 1,351,673

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 17,157 14,148 11,812 9,967 8,487Proved Undeveloped Reserves 59,732 47,615 38,466 31,446 25,980Total Proved Reserves 76,889 61,763 50,278 41,413 34,467Probable Reserves 255,003 178,068 128,572 95,441 72,492Proved Plus Probable Reserves 331,892 239,831 178,850 136,854 106,959Possible Reserves 206,514 155,472 119,658 94,099 75,474Proved Plus Probable Plus Possible Reserves 538,406 395,303 298,508 230,953 182,433

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Elcrest - OML40 Evaluation - Jun 30, 2012 - non newcomer - Final.xlsm 01/08/2012

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Elcrest Table 6

Total OML40 AssetsSummary of Reserves and Net Present Values - License Extension for all cases

Effective June 30, 2012

Summary of Reserves (1)Crude Oil Reserves - bbls Natural Gas Reserves - scf

Property Company Company Property Company CompanyGross Gross Net Gross Gross Net

Reserve Category Mbbl Mbbl Mbbl MMcf MMcf MMcfProved Developed Reserves 5,832 2,624 2,100 - - -Proved Undeveloped Reserves 17,962 8,083 6,466 - - -Total Proved Reserves 23,794 10,707 8,566 - - -Probable Reserves 47,711 21,470 17,176 33,449 15,052 13,999Proved Plus Probable Reserves 71,505 32,177 25,742 33,449 15,052 13,999Possible Reserves 45,492 20,471 16,377 25,234 11,355 10,561Proved Plus Probable Plus Possible Reserves 116,997 52,648 42,119 58,684 26,408 24,559

Summary of Company Share of Net Present Values Before Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%

Proved Developed Reserves 180,616 140,912 113,803 94,577 80,471

Proved Undeveloped Reserves 523,518 431,740 361,525 306,953 263,886

Total Proved Reserves 704,134 572,653 475,328 401,530 344,356

Probable Reserves 1,530,873 1,083,014 798,303 608,902 477,875

Proved Plus Probable Reserves 2,235,007 1,655,667 1,273,632 1,010,431 822,232

Possible Reserves 1,414,847 1,061,653 821,520 652,394 529,552

Proved Plus Probable Plus Possible Reserves 3,649,854 2,717,319 2,095,151 1,662,825 1,351,784

Summary of Company Share of Net Present Values After Income Taxes$M US Dollars

Reserve Category 0.0% 5.0% 10.0% 15.0% 20.0%Proved Developed Reserves 41,919 34,734 29,322 25,155 21,881Proved Undeveloped Reserves 147,976 121,713 101,705 86,153 73,852Total Proved Reserves 189,895 156,447 131,027 111,308 95,734Probable Reserves 329,968 244,115 186,747 146,787 117,961Proved Plus Probable Reserves 519,863 400,562 317,774 258,095 213,695Possible Reserves 330,047 259,793 208,665 170,747 142,037Proved Plus Probable Plus Possible Reserves 849,911 660,354 526,439 428,842 355,732

(1) Company Gross reserves are based on Company working interest share of the reserves for each property

Company Net reserves are based on Company working interest share of reserves after royalties.

McDaniel & AssociatesConsultants Ltd.

Elcrest - OML40 Evaluation - Jun 30, 2012 - inc 1P extension - Final.xlsm 01/08/2012

PART 6

FINANCIAL INFORMATION

The financial information in Part 6 is prepared in accordance with International Financial ReportingStandards as adopted by the European Union.

Historical financial information

The Company’s audited report and accounts for the periods ended 31 December 2010 and 2011 have beenextracted, without adjustment, as set out below.

Pro forma financial information

An audited pro forma balance sheet of Eland Oil & Gas PLC, which has been prepared on the basis of theCompany’s audited financial information for the period ended 31 December 2011, as adjusted for the Placingand the Acquisition, is set out in the last two pages of Part 6.

172

Company Registration No. SC364753

Eland Oil & Gas Limited

Annual report and financial statements

For the year ended 31 December 2011

173

Eland Oil & Gas Limited

Annual report and financial statements 2011 Contents Page

Officers and professional advisers 175

Directors’ report 176�

Directors’ responsibilities statement 180

Independent auditor s report 181�

Consolidated income statement 184

Consolidated statement of comprehensive income 185

Consolidated balance sheet 186�

Company balance sheet 187�

Consolidated statement of changes in equity 188�

Company statement of changes in equity 189

Consolidated cash flow statement 190�

Company cash flow statement 191

Notes to the financial statements 192�

’

174

175

Eland Oil & Gas Limited

Officers and professional advisers

Directors

Ian Leslie Blair, Chief Executive Officer

George Walter Mitchell Maxwell, Chief Financial Officer Henry George Wilson, Non-Executive Director

Secretary

Stronachs Secretaries Limited 34 Albyn Place Aberdeen AB10 1FW

Registered Office

34 Albyn Place Aberdeen AB10 1FW

Bankers

The Royal Bank of Scotland Plc Aberdeen Central Branch 12 Golden Square Aberdeen AB10 1DU Standard Chartered Bank – Tswanya Center Branch Muhammadu Buhari Way Garki Area 11 Abuja Nigeria

Solicitors

Stephenson Harwood 1 Finsbury Circus London EC2M 7SH United Kingdom

Independent Auditor

Deloitte LLP Union Plaza 1 Union Wynd Aberdeen AB10 1SL

Eland Oil & Gas Limited

Directors’ report

The Directors present their Annual Report and the audited financial statements of Eland Oil & Gas Limited (the “Company”) for the year ended 31 December 2011.

Principal activities

The Company’s principal activity is the exploration, development and production of oil and gas reserves in West Africa, with activities initially planned to begin in Nigeria during 2012.

Results and dividends

The loss for the year ended 31 December 2011 amounted to $17.7 million (2010: $1.8 million). The Directors do not propose a dividend (2010: $nil) and the loss of $17.7 million will be transferred against reserves.

Review of developments and future prospects

Planned acquisition of OML 40

The Company has been engaged in the process of evaluation of a major asset purchase in Nigeria. This evaluation and subsequent fund raising has been the primary activity of the Company during 2011.

The Company, in conjunction with its partner Starcrest, prepared the bid submission to Shell (the ‘Sellers’) for OML 40, following a visit to the Shell data room in the Netherlands and an online data room during November and December 2010. The bid was subsequently submitted in January 2011. The Company received confirmation from Shell that the bid submitted by Elcrest, a joint venture between the Company and Starcrest, had been successful and Elcrest signed the Sale and Purchase Agreement (“SPA”) on 31 March 2011.

The transaction is subject to Government approval in Nigeria which is awaited at the date of this report. The Sale and Purchase Agreement Longstop Date for completion (the “Longstop Date”) was 27 September 2011, however the SPA remains active and in force at the date of this report and the Board is confident that the transaction will complete before the end of March 2012.

Convertible loan notes

In January 2011, the Company raised £9.5 million via the issue of secured convertible loan notes (the “First Loan Notes”) (see note 16) principally to fund the deposit for the OML 40 acquisition.

In March 2011, the Company raised a further £95.5 million via the issue of unsecured convertible loan notes (the “Second Loan Notes”) (see note 16) principally to fund the remainder of the purchase price of the OML 40 acquisition. The Second Loan Notes were redeemable if the transaction did not complete before 15 October 2011. In October 2011, following the passing of the Longstop Date and prior to completion of the SPA, pursuant to the terms of the Second Loan Notes agreement, the Second Loan Notes were redeemed and £95.5 million was returned to holders of the Second Loan Notes.

In December 2011, the Company raised a further £0.8 million through the issue of a further round of Loan Notes (the “Third Loan Notes”) (see note 16), the raise to be used for working capital to complete the process of the Company’s proposed admission to the Alternative Investment Market of the London Stock Exchange (“AIM”).

Proposed conversion of the Company to a public limited company (‘plc’)

In order to facilitate the proposed admission to AIM, the Company is required to convert from a private limited company (“Ltd”), to a public limited company (“plc”) and adopt revised company articles. Draft shareholder resolutions have been prepared in order to seek the requisite authority from the shareholders to this conversion and Deloitte has been engaged by the Company to provide the auditor’s report required by the Companies Act (2006).

Bridging loan facility

The Directors are currently in the process of negotiating bridge financing with a major UK lending institution (the “Bridge Facility”). The Directors hope that this Bridge Facility, once agreed, will provide a basis for further lending under a Reserves based facility should the Company complete the acquisition of OML 40 and that the subsequent development of this licence proceeds in the manner in which management currently assumes.

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Eland Oil & Gas Limited

Directors’ report (continued)

Bridging loan facility (continued)

Discussions regarding the Bridge Facility are ongoing at the date of this report, although the Directors are hopeful that these discussions will be concluded in the first quarter of 2012 and that the Bridge Facility might be available (subject to certain conditions precedent) prior to AIM admission and OML 40 completion.

Future prospects

The Company intends to continue with its stated strategy, in actively pursuing oil and gas opportunities in West Africa. In the near term, the Company is actively engaged in completing the OML 40 transaction and is preparing the Company for an admission to AIM and plans to raise the balance of the OML 40 funding requirement through this market admission. The strategy and completion of the OML 40 acquisition will result from the extensive and relevant experience of the management and board of the Company.

Principal risks and uncertainties

Going concern

The Group incurred a net loss of $17.7 million (Company profit: $1.8 million) during the year ended 31 December 2011 and had net current liabilities of $24.5 million (Company net assets: $12.4 million) as at that date. Currently the Group does not generate any revenues and to date its operations have been entirely dependent on financing from investors’ funds and the issuance of a series of Loan Note rounds (note 16).

The process relating to the Company’s proposed admission to AIM and the associated raising of £140 million through the issue of new shares in the Company in order to finance the balance of the consideration payable in relation to the proposed acquisition of OML 40 of $138.6 million is ongoing. At the date of this report, the Directors are confident that the AIM admission and fundraising process will be completed successfully during the first quarter of 2012.

The proceeds from the issue of the First Loan Notes amounting to $15.4 million are currently held by the Sellers as a deposit for the OML 40 acquisition and were the acquisition not to be completed, this deposit may not be refundable to the Company depending on the reasons for non-completion. The First Loan Notes are however redeemable if the acquisition of OML 40 does not complete before 14 April 2012, which itself is reliant in part upon the receipt of Government approval in Nigeria and in part upon the Group raising sufficient proceeds from the Company’s proposed admission to AIM to finance the balance of the consideration payable in relation to the acquisition of OML 40 of $138.6 million.

In the event that the proposed admission to AIM does not proceed or the funds ultimately raised through this process fall short of management’s current expectations of £140 million, the Company and Group will likely not have the funding to complete the acquisition of OML 40 by 14 April 2012 and may also, depending on the level of funds raised, not have sufficient cash resources to meet the resultant requirement to repay the principal and associated interest on the First Loan Notes. As such, the Company and the Group are currently reliant on the successful completion of the Company’s proposed admission to AIM in order to continue to meet their obligations as they fall due for the next 12 months.

Whilst the Directors remain confident that the admission to AIM and the associated proposed raising of £140 million through the issue of new shares in the Company will be completed successfully, and have therefore prepared the Company and Group’s consolidated financial statements on a going concern basis, these conditions indicate the existence of a material uncertainty which may cast doubt about the Company and the Group’s ability to continue as going concerns.

Recoverability of the carrying value of the Group’s oil and gas assets

Whilst the Directors are confident that the acquisition of OML 40 will complete before the end of March 2012 and have therefore concluded that it is appropriate that costs incurred to 31 December 2011 of $17.1 million which are directly attributable to the acquisition of the licence should be capitalised within oil and gas assets, the Longstop Date for completion of the SPA of 27 September 2011 has passed and the transaction is subject to Governmental approval in Nigeria, which was initially requested in April 2011 but is still awaited at the date of this report.

Eland Oil & Gas Limited

Directors’ report (continued)

Recoverability of the carrying value of the Group’s oil and gas assets (continued)

As noted above, completion of the transaction is also subject to the Company raising sufficient funds in its proposed admission to AIM in order to fund the balance of consideration payable of $138.6 million.

In the event that the Group is unable to ultimately complete the acquisition of OML 40 it would be necessary to fully impair the value of the associated capital expenditure in the Group’s consolidated financial statements of $17.1 million at 31 December 2011; and to fully impair the amounts due from Group undertakings of $36.7 million in the Company’s financial statements at 31 December 2011. No such impairment has been recorded in the consolidated or Company financial statements on the basis that, notwithstanding the significant uncertainties referred to above, the Directors believe that the acquisition of OML 40 will be completed before the end of March 2012.

Ability to fund the future development of OML 40 if the acquisition is completed

If the Group is successful in completing the acquisition of OML 40, its development will be capital intensive, and significant investment will be required before revenues can be realised from this licence. The proposed admission of the Company to AIM will seek to raise sufficient working capital in order to meet these intensive capital requirements and commence the proposed work program with the target of delivering first oil in the second half of 2012.

As noted above, the Directors are also in the process of negotiating bridge financing with a major UK lending institution. The Directors hope that the Bridge Facility, once agreed, will provide a basis for further lending under a Reserves based facility should the Group complete the acquisition of OML 40 and that the subsequent development of this licence proceeds in the manner in which management currently assumes.

Discussions regarding the Bridge Facility are ongoing at the date of this report, although the Directors are hopeful that these discussions will be concluded and that the Bridge Facility might be available (subject to certain conditions precedent) prior to AIM admission and OML 40 completion.

The Directors remain focussed on completing the acquisition of OML 40 and the proposed funding through AIM admission, however, there is no certainty at the date of this report that either will be completed successfully.

Inherent risk of undertaking oil and gas activities in Nigeria

The Company’s strategy is predominantly driven by the exploration, exploitation, appraisal, development and production of oil and gas reserves in Nigeria. There are risks inherent in the exploration, exploitation, appraisal, development and production of oil and gas reserves and resources. Whilst the rewards can be substantial, there is no guarantee that exploration will lead to further commercial discoveries. Exploration and production activities by their nature involve significant risks. Risks such as delays in the construction and commissioning of drilling platforms or other technical difficulties, lack of access to key infrastructure, adverse weather conditions, environmental hazards, industrial accidents, occupational and health hazards, technical failures, labour disputes, unusual or unexpected geological formations, explosions and other acts of God are inherent to the business. Although in many cases these represent insurable risks, the Group may also become subject to other hazards (including pollution and oil seepage liability) against which it is not insured or is under insured. The occurrence of any of these incidents could result in the Group’s current or future project target dates for drilling or production being delayed or interrupted and increased capital expenditure and production costs.

Reliance upon key personnel and management

The Company has a significant reliance on a small number of Directors and Senior Managers, which may result in the Company experiencing delays in execution of the stated strategy.

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Eland Oil & Gas Limited

Directors’ report (continued)

Directors

The Directors, who served throughout the year and to the date of this report, are as follows:

Ian Leslie Blair, Chief Executive Officer George Walter Mitchell Maxwell, Chief Financial Officer Henry George Wilson, Non-Executive Director

Auditor

Each of the persons who is a Director at the date of approval of this annual report confirms that:

• so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

• the Director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.

Deloitte LLP have been appointed as auditor and have expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

Approved by the Board of Directors and signed on behalf of the Board George Maxwell Director 10 February 2012

Eland Oil & Gas Limited

Directors’ responsibilities statement

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

• make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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Eland Oil & Gas Limited

Independent auditor’s report to the members of Eland Oil & Gas Limited

We have audited the financial statements of Eland Oil & Gas Limited for the year to 31 December 2011 which comprise the Consolidated Income Statement, the Consolidated and Parent Company Balance Sheets, the Consolidated and Parent Company Statements of Changes in Equity, Consolidated and Parent Company Cash Flow Statements and the related notes 1 to 28. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2011 and of the Group’s loss for the year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Emphasis of matter – going concern

Without qualifying our opinion, we draw attention to the disclosures made in notes 2 and 3 of the financial statements concerning the Company’s and the Group’s ability to continue as going concerns.

The Group incurred a net loss of $17,689,000 (Company profit: $1,821,000) for the year ended 31 December 2011 and had net current liabilities of $24,451,000 (Company net current assets: $12,362,000) as at that date. Currently the Group does not generate any revenues and to date its operations have been entirely dependent on financing from investors’ funds and the issuance of a series of Loan Note rounds.

Eland Oil & Gas Limited

Independent auditor’s report to the members of Eland Oil & Gas Limited (continued)

Emphasis of matter – going concern (continued)

The process relating to the Company’s proposed admission to AIM and the associated raising of £140 million through the issue of new shares in the Company in order to finance the balance of the consideration payable in relation to the proposed acquisition of OML 40 of $138.6 million is ongoing. At the date of this report, the Directors are confident that the AIM admission and fundraising process will be completed successfully during the first quarter of 2012.

The proceeds from the issue of the First Loan Notes of $15.4 million is currently held by the Sellers as a deposit for the OML 40 acquisition and were the acquisition not to be completed, this deposit may not be refundable to the Company depending on the reasons for non-completion. The First Loan Notes are however redeemable if the acquisition of OML 40 does not complete before 14 April 2012, which itself is reliant in part upon the receipt of Government approval in Nigeria and in part upon the Group raising sufficient proceeds from the Company’s proposed admission to AIM to finance the balance of the consideration payable in relation to the acquisition of OML 40 of $138.6 million.

In the event that the proposed admission to AIM does not proceed or the funds ultimately raised through this process fall short of management’s current expectations of £140 million, the Company and Group will likely not have the funding to complete the acquisition of OML 40 by 14 April 2012 and may also, depending on the level of funds raised, not have sufficient cash resources to meet the resultant requirement to repay the principal and associated interest on the First Loan Notes. As such, the Company and the Group are currently reliant on the successful completion of the Company’s proposed admission to AIM in order to continue to meet their obligations as they fall due for the next 12 months.

Whilst the Directors remain confident that the admission to AIM and the associated proposed raising of £140 million through the issue of new shares in the Company will be completed successfully, and have therefore prepared the Company and Group’s consolidated financial statements on a going concern basis, these conditions indicate the existence of a material uncertainty which may cast doubt about the Company and the Group’s ability to continue as going concerns.

The financial statements do not include the adjustments that would result if the Company and/or the Group were unable to continue as going concerns.

Emphasis of matter – carrying value of oil and gas assets

Without qualifying our opinion, we draw attention to the disclosures made in Note 3 concerning the significant risk and uncertainties of completing the acquisition of OML 40.

Whilst the Directors are confident that the acquisition of OML 40 will complete before the end of March 2012 and have therefore concluded that it is appropriate that costs incurred to 31 December 2011 of $17.1 million which are directly attributable to the acquisition of the licence should be capitalised within oil and gas assets, the Longstop Date for completion of the SPA of 27 September 2011 has passed and the transaction is subject to Governmental approval in Nigeria, which was initially requested in April 2011 but is still awaited at the date of this report.

As noted above, completion of the transaction is also subject to the Company raising sufficient funds in its proposed admission to AIM in order to fund the balance of consideration payable of $138.6 million.

In the event that the Group was unable to ultimately complete the acquisition of OML 40 it would be necessary to fully impair the value of the associated capital expenditure in the Group’s consolidated financial statements as at 31 December 2011 of $17.1 million, and to fully impair the amounts due from Group undertakings as at 31 December 2011 of $36.7 million in the Company’s financial statements. No such impairment has been recorded in the consolidated or Company financial statements on the basis that, notwithstanding the significant uncertainties referred to above, the Directors believe that the acquisition of OML 40 will be completed before the end of March 2012.

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Independent auditor’s report to the members of Eland Oil & Gas Limited (continued)

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Directors’ report for the year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Graham Hollis ACA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Aberdeen, United Kingdom

10 February 2012

Eland Oil & Gas Limited

Consolidated income statement For the year ended 31 December 2011

Note 2011

16 month period to

31 December 2010

$000’s $000's

Administrative expenses (1,005) (1,662)

Other operating expenses (2,383) -

Operating loss (3,388) (1,662)

Investment revenue 7 211 1

Finance costs

8 (14,512) (165)

(14,301) (164)

Loss before tax and for the year/period from continuing operations 4 (17,689) (1,826)

Attributable to:

Owners of the Company (8,432) (1,826)

Non-controlling interests 22 (9,257) -

4 (17,689) (1,826)

All activities relate to continuing operations.

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185

Eland Oil & Gas Limited

Consolidated statement of comprehensive income For the year ended 31 December 2011

2011

16 month period to

31 December 2010

$000’s $000’s

Loss for the year/period (17,689) (1,826)

Exchange differences on translation of financial statements to presentation currency 180 28

Total comprehensive loss for the year/period (17,509) (1,798)

Attributable to:

Owners of the Company (8,252) (1,798)

Non-controlling interests 22 (9,257) -

(17,509) (1,798)

Eland Oil & Gas Limited

Consolidated balance sheet As at 31 December 2011

1

Note 2011 2010

$000’s $000's

Non-current assets

Property, plant and equipment, net 10 17,243 373

17,243 373

Current assets

Trade and other receivables 12 634 715

Cash and bank balances 24 1,391 4,957

2,025 5,672

Total assets 19,268 6,045

Current liabilities

Trade and other payables 13 (8,778) (926)

Convertible redeemable loan notes 14, 16 (15,027) -

Cumulative convertible redeemable preference shares 14, 15 (2,671) (2,509)

(26,476) (3,435)

Net current (liabilities)/assets (24,451) 2,237

Net (liabilities)/assets (7,208) 2,610

Equity

Share capital 17 4,285 4,285

Equity reserve 18 7,999 227

Other reserve 19 (185) (104)

Retained losses 20 (10,258) (1,826)

Translation reserve 21 208 28

Equity attributable to the owners of the Company 2,049 2,610

Non-controlling interest 22 (9,257) -

Total equity (7,208) 2,610

These financial statements were approved by the Board of Directors and authorised for issue on 10 February 2012.

They were signed on its behalf by:

George Maxwell

Director

186

187

Eland Oil & Gas Limited

Company balance sheet As at 31 December 2011

1

Note 2011 2010

$000’s $000's

Non-current assets

Investments in group undertakings 11 93 64

Property, plant and equipment, net 10 46 263

139 327

Current assets

Trade and other receivables 12 37,207 1,574

Cash and bank balances 24 1,384 4,912

38,591 6,486

Total assets 38,730 6,813

Current liabilities

Trade and other payables 13 (8,531) (1,017)

Convertible redeemable loan notes 14, 16 (15,027) -

Cumulative convertible redeemable preference shares 14, 15 (2,671) (2,509)

(26,229) (3,526)

Net current assets 12,362 2,960

Net assets 12,501 3,287

Shareholders' equity

Share capital 17 4,285 4,285

Equity reserve 18 7,999 227

Other reserve 19 (185) (104)

Retained profits/(losses) 20 672 (1,149)

Translation reserve 21 (270) 28

Equity attributable to the owners of the Company 12,501 3,287

These financial statements were approved by the Board of Directors and authorised for issue on 10 February 2012.

They were signed on its behalf by:

George Maxwell

Director Company Number SC364753

Eland Oil & Gas Limited

Consolidated statement of changes in equity Year ended 31 December 2011

Share capital

Equity reserve

Other reserve

Translation reserve

Retained losses Total

Non-controlling

interest Total

equity

$000's $000's $000's $000's $000's $000's $000's $000's

Loss for the period to 31 December 2010

- - - - (1,826) (1,826) - (1,826)

Exchange differences on translation

- - - 28 - 28 - 28

Total comprehensive loss for the period

- - - 28 (1,826) (1,798) - (1,798)

Issue of share capital

- ordinary shares 4,285 - - - - 4,285 - 4,285

- preference shares - 227 - - - 227 - 227

Costs of share issues - - (104) - - (104) - (104)

Balance at 31 December 2010

4,285 227 (104) 28 (1,826) 2,610 - 2,610

Loss for the year - - - - (8,432) (8,432) (9,257) (17,689)

Exchange differences on translation

- - - 180 - 180 - 180

Issue of convertible redeemable loan notes (note 16)

-

7,772

-

- -

7,772 - 7,772

Costs of loan note issues

-

-

(81)

- -

(81) - (81)

Balance at 31 December 2011

4,285

7,999

(185)

208 (10,258)

2,049 (9,257) (7,208)

188

189

Eland Oil & Gas Limited

Company statement of changes in equity Year ended 31 December 2011

Share

capital Equity reserve

Other reserve

Translation reserve

Retained (losses)/earnings

Total equity

$000's $000's $000's $000's $000's $000's

Loss for the period to 31 December 2010

- - - - (1,149) (1,149)

Exchange differences on translation

- - - 28 - 28

Total comprehensive loss for the period

- - - 28 (1,149) (1,121)

Issue of share capital

- ordinary shares 4,285 - - - - 4,285

- preference shares - 227 - - - 227

Costs of share issues - - (104) - - (104)

Balance at 31 December 2010 4,285 227 (104) 28 (1,149) 3,287

Profit for the year - - - - 1,821 1,821

Exchange differences on translation

- - - (298) - (298)

Issue of convertible redeemable loan notes (note 16)

-

7,772

-

- -

7,772

Costs of loan note issues - - (81) - - (81)

Balance at 31 December 2011 4,285 7,999 (185) (270) 672 12,501

Eland Oil & Gas Limited

Consolidated cash flow statement Year ended 31 December 2011

2011

16 month period to

31 December 2010

Note $000’s $000's

Net cash used in operating activities 23 (1,411) (1,508)

Investing activities

Purchases of property, plant and equipment (16,934) (387)

Net cash used in investing activities (16,934) (387)

Financing activities

Net proceeds on issue of loan notes 163,292 -

Repayment of borrowings (148,417) -

Net proceeds on issue of shares

- ordinary shares - 4,086

- convertible preference shares - 2,646

Net cash from financing activities 14,875 6,732

Net (decrease)/increase in cash and cash equivalents (3,470) 4,837

Cash and cash equivalents at the beginning of the year/period 4,957 -

Effect of foreign exchange rate changes (96) 120

Cash and cash equivalents at the end of the year/period 1,391 4,957

190

191

Eland Oil & Gas Limited

Company cash flow statement Year ended 31 December 2011

2011

16 month period to

31 December 2010

Note $000’s $000's

Net cash used in operating activities 23 (17,839) (1,611)

Investing activities

Purchases of property, plant and equipment (18) (264)

Investment in Group undertakings (29) (65)

Net cash used in investing activities (47) (329)

Financing activities

Net proceeds on issue of loan notes 163,292 -

Repayment of borrowings (148,417) -

Net proceeds on issue of shares

- ordinary shares - 4,086

- convertible preference shares - 2,646

Net cash from financing activities 14,875 6,732

Net (decrease)/increase in cash and cash equivalents (3,011) 4,792

Cash and cash equivalents at the beginning of the year/period 4,912 -

Effect of foreign exchange rate changes (517) 120

Cash and cash equivalents at the end of the year/period 1,384 4,912

Eland Oil & Gas Limited

Notes to the financial statements Year ended 31 December 2011

1. General information

The principal accounting policies are summarised below. They have all been applied consistently throughout the year and preceding period.

Eland Oil & Gas Limited is a company incorporated in the United Kingdom, under the Companies Act 2006. The address of the registered office is given on page 1. The nature of the Company’s operations and its principal activities are set out on page 2 of this Annual Report.

The Company and the Group’s financial statements cover the year to 31 December 2011.

2. Significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU Regulations.

The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for the assets at the date of transaction. The principal accounting policies adopted are set out below.

As permitted by section 408 of the Act, the Company has elected not to present its profit and loss account for the year. Eland Oil & Gas Limited reports a profit for the year ended 31 December 2011 of $1.8 million.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Standards issued but not yet effective

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 9 Financial Instruments — Classification and Measurement (1 January 2013)

IFRS 10 Consolidated Financial Statements (1 January 2013)

IFRS 11 Joint Arrangements (1 January 2013)

IFRS 12 Disclosure of Interests in Other Entities (1 January 2013)

IFRS 13 Fair Value Measurements (1 January 2013)

IAS 12 Income Taxes (1 January 2012)

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Group’s financial statements.

192

193

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

2. Significant accounting policies (continued)

Going concern

As discussed in the “Going concern” section of the Directors’ Report, the Company and the Group are reliant on the successful completion of the Company’s proposed admission to AIM and associated fund raising in order to continue to meet their obligations as they fall due for the next 12 months. These conditions indicate the existence of a material uncertainty which may cast doubt about the Company and the Group’s ability to continue as going concerns.

As of the date of this report, the Directors are confident that the admission to AIM, and the associated proposed raising of £140 million through the issue of new shares of the Company, will be completed successfully and will provide sufficient cash resources for the Company and the Group to continue as going concerns for the foreseeable future. Accordingly, the Directors have a reasonable expectation that the Company and Group will continue in operational existence for the foreseeable future, and therefore the financial statements have been presented on a going concern basis and do not include any adjustments that may be required if the Company and/or the Group were unable to continue realising their assets and discharging their liabilities in the ordinary course of business.

Property, plant and equipment

Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, on the following bases: Fixtures and equipment 10% - 30% Motor vehicles 30%

Oil and gas assets

Development and production assets

Development and production assets are accumulated generally on a field-by-field basis and represent the cost of developing the commercial reserves discovered and bringing them into production. The cost of development and production assets also includes the cost of acquisitions and purchases of such assets, directly attributable overheads, finance costs capitalised, and the cost of recognising provisions for future restoration and decommissioning.

Depreciation of producing assets

The net book values of producing assets are depreciated generally on a field-by-field basis using the unit-of-production method by reference to the ratio of production in the year and the related commercial reserves of the field, taking into account future development expenditures necessary to bring those reserves into production. Producing assets are generally grouped with other assets that are dedicated to serving the same reserves for depreciation purposes, but are depreciated separately from producing assets that serve other reserves.

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

2. Significant accounting policies (continued)

Oil and gas assets (continued)

Impairment of development and production assets

An impairment test is performed whenever events and circumstances arising during the development or production phase indicate that the carrying value of a development or production asset may exceed its recoverable amount.

The carrying value is compared against the expected recoverable amount of the asset, generally by reference to the present value of the future net cash flows expected to be derived from production of commercial reserves. The cash generating unit applied for impairment test purposes is generally the field, except that a number of field interests may be grouped as a single cash generating unit where the cash flows of each field are interdependent.

Any impairment identified is charged to the income statement as additional depreciation. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that would have been charged since the impairment.

Acquisitions, asset purchases and disposals

Acquisitions of oil and gas properties are accounted for under the acquisition method when the assets acquired and liabilities assumed constitute a business.

Transactions involving the purchase of an individual field interest, or a group of field interests, that do not constitute a business, are treated as asset purchases irrespective of whether the specific transactions involve the transfer of the field interests directly or the transfer of an incorporated entity. Accordingly, no goodwill and no deferred tax gross up arises, and the consideration is allocated to the assets and liabilities purchased on an appropriate basis.

Proceeds on disposal are applied to the carrying amount of the specific intangible asset or development and production assets disposed of and any surplus is recorded as a gain on disposal in the income statement.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to income on a straight line basis over the term of the lease.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

To the extent that variable rate borrowings are used to finance a qualifying asset and are hedged in an effective cash flow hedge of interest rate risk, the effective portion of the derivative is recognised in other comprehensive income and released to profit or loss when the qualifying asset impacts profit or loss. To the extent that fixed rate borrowings are used to finance a qualifying asset and are hedged in an effective fair value hedge of interest rate risk, the capitalised borrowing costs reflect the hedged interest rate.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

194

195

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

2. Significant accounting policies (continued)

Foreign currencies

For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in US Dollars, which is the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

Taxation

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when the Company or Group has become a party to the contractual provisions of the instrument.

Trade and other receivables

Trade receivables are measured at amortised cost.

Trade and other payables

Accounts payable are measured at fair value.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

2. Significant accounting policies (continued)

Financial instruments (continued)

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Compound instruments

The component parts of compound instruments (including redeemable convertible preference shares and redeemable convertible loan notes) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.

Other financial liabilities

Other financial liabilities are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recorded on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.

3. Critical accounting judgements

In the application of the Company and the Group’s accounting policies, which are described in note 2, the Directors are required to make critical accounting judgements and assumptions. The assumptions are based on historical experience and other factors that are considered to be relevant.

The following are the critical judgements that the Directors have made in the process of applying the Company and the Group’s accounting policies and that have the most significant effect on the amounts recognised in financial statements.

Going concern

The Group incurred a net loss of $17,689,000 (Company profit: $1,821,000) for the year ended 31 December 2011 and had net current liabilities of $24,451,000 (Company net current assets: $12,362,000) as at that date. Currently the Group does not generate any revenues and to date its operations have been entirely dependent on financing from investors’ funds and the issuance of a series of Loan Note rounds.

The process relating to the Company’s proposed admission to AIM associated raising of £140 million through the issue of new shares in the Company in order to finance the balance of the consideration payable in relation to the proposed acquisition of OML 40 of $138.6 million is ongoing. At the date of this report, the Directors are confident that the AIM admission and fundraising process will be completed successfully during the first quarter of 2012.

196

197

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

3. Critical accounting judgements (continued)

Going concern (continued)

The proceeds from the issue of the First Loan Notes amounting to $15.4 million are currently held by the Sellers as a deposit for the OML 40 acquisition and were the acquisition not to be completed, this deposit may not be refundable to the Company depending on the reasons for non-completion. The First Loan Notes are however redeemable if the acquisition of OML 40 does not complete before 14 April 2012, which itself is reliant in part upon the receipt of Government approval in Nigeria and in part upon the Group raising sufficient proceeds from the Company’s proposed admission to AIM to finance the balance of the consideration payable in relation to the acquisition of OML 40 of $138.6 million.

In the event that the proposed admission to AIM does not proceed or the funds ultimately raised through this process fall short of management’s current expectations of £140 million, the Company and Group will likely not have the funding to complete the acquisition of OML 40 by 14 April 2012 and may also, depending on the level of funds raised, not have sufficient cash resources to meet the resultant requirement to repay the principal and associated interest on the First Loan Notes. As such, the Company and the Group are currently reliant on the successful completion of the Company’s proposed admission to AIM in order to continue to meet their obligations as they fall due for the next 12 months.

Whilst the Directors remain confident that the admission to AIM and the associated proposed raising of £140 million through the issue of new shares in the Company will be completed successfully, and have therefore prepared the Company and the Group’s consolidated financial statements on a going concern basis, these conditions indicate the existence of a material uncertainty which may cast doubt about the Company and the Group’s ability to continue as going concerns.

The financial statements do not include the adjustments that would result if the Company and/or the Group were unable to continue as going concerns.

Recoverability of the carrying value of the Group’s oil and gas assets

Whilst the Directors are confident that the acquisition of OML 40 will complete before the end of March 2012 and have therefore concluded that it is appropriate that costs incurred to 31 December 2011 of $17.1 million which are directly attributable to the acquisition of the licence should be capitalised within oil and gas assets, the Longstop Date for completion of the SPA of 27 September 2011 has passed and the transaction is subject to Governmental approval in Nigeria, which was initially requested in April 2011 but is still awaited at the date of this report.

As noted above, completion of the OML 40 transaction is also subject to the Company raising sufficient funds in its proposed admission to AIM in order to fund the balance of consideration payable of $138.6 million.

In the event that the Group is unable to ultimately complete the acquisition of OML 40 it would be necessary to fully impair the value of the associated capital expenditure of $17.1 million as at 31 December 2011 in the Group’s consolidated financial statements; and to fully impair the amounts due from Group undertakings in the Company’s financial statements of $36.7 million as at 31 December 2011. No such impairment has been recorded in the consolidated or Company financial statements on the basis that, notwithstanding the significant uncertainties referred to above, the Directors believe that the acquisition of OML 40 will be completed before the end of March 2012.

Convertible redeemable loan notes (see note 16)

The interest rates used to discount cash flows for the First Loan Notes, Second Loan Notes and Third Loan Notes are 18%, 13% and 18% respectively. These interest rates are based on management’s estimate of the prevailing market interest rates for a similar non-convertible instrument. The fair value of the liability component of the convertible loan notes is determined assuming that the First Loan Notes are redeemed by 13 April 2012; and the Third Loan Notes by 23 November 2012.

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

3. Critical accounting judgements (continued)

Cumulative convertible redeemable preference shares (see note 15)

The interest rate used to discount cash flows is 18%, based on management’s estimate of the prevailing market interest rates for a similar non-convertible instrument. The fair value of the liability component of the convertible preference shares is determined assuming that the preference shares are redeemed within three months of the balance sheet date.

4. Loss for the year/period

Group

The loss before taxation for the year/period has been arrived at after charging/(crediting):

2011

16 month period to

31 December 2010

$000's $000's

Depreciation on property, plant and equipment (note 10) 60 12

Net foreign exchange gains (77) (1)

(17) 11

5. Auditor’s remuneration

The analysis of auditor’s remuneration is as follows:

2011

16 month period to

31 December 2010

$000’s $000's

Fee payable to the Company's auditor for the audit of the Company's annual accounts

26 24

Total audit fees 26 24

198

199

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

5. Auditor’s remuneration (continued)

Fees payable to the Company's auditor and their associates for other services to the Group

- Tax services 136 98

- Corporate finance services 233 -

Total non-audit fees 369 98

The tax services relate to general VAT advice, Nigerian tax advice, UK corporation tax advice and legal entity structuring advice for the corporate debt structure.

The corporate finance services relate to work undertaken in relation to the Company’s proposed AIM listing.

6. Staff costs

The average monthly number of employees (including Executive Directors) was:

2011 No.

16 month period to

31 December 2010

No.

Management 2 2

Technical Administration

3 11

1 3

16 6

Their aggregate remuneration comprised:

2011 $000’s

16 month period to

31 December 2010

$000’s Wages and salaries 1,335 478 Social security costs 35 20

1,370 498

A breakdown of Directors’ remuneration is included at Note 27.

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

7. Investment revenue

2011 $000’s

16 month period to

31 December 2010

$000’s

Interest revenue Bank deposits 211 1

8. Finance costs

2011

16 month period to

31 December 2010

$000’s $000’s Currency option expensed at cost 1,206 - Interest on convertible redeemable loan notes classified as financial liabilities (note 16)

12,897

-

Interest on cumulative convertible redeemable preference shares classified as financial liabilities (note 15)

409

165

14,512 165

9. Tax

2011 $000’s

16 month period to

31 December 2010

$000’s

Current tax charge/(credit) - - Deferred tax charge/(credit) - -

Total tax charge for the year/period - -

200

201

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

9. Tax (continued)

The standard rate of tax for the year, based on the average rate of corporation tax, is 64% (2010: 28%). The total tax charge can be reconciled to the loss per the income statement as follows:

2011 $000’s

16 month period to

31 December

2010 $000’s

Loss on activities before tax (17,689) (1,773) Loss on activities multiplied by the domestic rate of corporation tax applicable in the countries concerned

(11,372)

(510)

Non-deductible expenses for tax purposes 8,273 182 Brought forward losses utilised in the period (499) - Losses carried forward 3,597 331 Foreign exchange 1 (3)

Total taxation - -

The Group has taxable losses of $6,592,000 (2010: $1,117,000) for which no deferred tax asset has been recognised. This is due to uncertainty over the availability of future taxable profits to offset these losses against.

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

10. Property, plant and equipment

The Group Fixtures and

equipment $000’s

Motor

vehicles $000’s

Oil and gas assets

$000’s Total

$000’s

Cost Additions and as at 31 December 2010 113 57 215 385 Additions 27 25 16,882 16,934 Exchange differences (2) - (2) (4)

As at 31 December 2011 138 82 17,095 17,315

Accumulated depreciation Charge for the period and as at 31 December 2010 (6) (6) - (12) Charge for the year (36) (24) - (60)

At 31 December 2011 (42) (30) - (72)

Carrying amount At 31 December 2011 96 52 17,095 17,243

At 31 December 2010 107 51 215 373

The Company Fixtures and

equipment $000’s

Motor

vehicles $000’s

Oil and gas assets

$000’s Total

$000’s

Cost Additions and as at 31 December 2010 49 - 215 264 Additions 18 - - 18 Exchange differences - - (215) (215)

As at 31 December 2011 67 - - 67

Accumulated depreciation Charge for the period and as at 31 December 2010 (1) - - (1) Charge for the year (20) - - (20)

At 31 December 2011 (21) - - (21)

Carrying amount At 31 December 2011 46 - - 46

At 31 December 2010 48 - 215 263

202

203

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

10. Property, plant and equipment (continued)

As disclosed in note 3, included within oil and gas assets as at 31 December 2011 is an amount of $15.4 million which is held by the Sellers as a deposit for the OML 40 acquisition. Were the acquisition of OML 40 not to be completed, this deposit may not be refundable to the Company depending upon the reasons for non-completion.

11. Group undertakings

Group undertakings

$000's

Cost and net book value at 1 January 2011 64

Additions 29

At 31 December 2011 93

Place of incorporation and operation

Proportion of ownership

interest

Proportion of voting power

held

Eland Oil & Gas (Nigeria) Limited Nigeria 100% 100% Elcrest Exploration and Production Nigeria Limited*

Nigeria 45% 45%

* In accordance with the Group’s accounting policy on page 18, due to the level of representation on the Board of Elcrest Exploration and Production Nigeria Limited, the Company’s interest in Elcrest Exploration and Production Nigeria Limited has been consolidated into the Group financial statements.

12. Trade and other receivables

Group 2011

$000's

Company 2011

$000's

Group 2010

$000's

Company 2010

$000's

Amounts due from Group undertakings (note 26) �� 36,749� �� 1,159

Other debtors (note 26) 172 137 361 360

Prepayments 462 321 354 55

634 37,207 715 1,574

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

13. Trade and other payables

Group 2011

$000's

Company 2011

$000's

Group 2010

$000's

Company 2010

$000's

Amounts due to Group undertakings (note 26) - 241 - 123

Trade creditors (note 26) 3,034 2,902 554 530

Accruals and deferred income (note 26) 5,744 5,388 372 364

8,778 8,531 926 1,017

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amounts of trade and other payables are approximate to their fair values. All trade and other payables are denominated in Sterling, US dollars, Euros or Naira (Nigerian currency).

The Company has financial risk management policies in place to ensure that all payables to third parties are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period.

14. Borrowings

Group and company 2011 $000’s

2010 $000’s

Unsecured borrowings at amortised cost Convertible redeemable loan notes (note 16) 15,027 - Cumulative convertible redeemable preference shares (note 15) 2,671 2,509

17,698 2,509

The First Loan Notes and Second Loan Notes were issued on 12 January 2011 and 10 March 2011 respectively, at an issue price of £50,000 per note. The Third Loan Notes were issued on 20 December 2011, at an issue price of £10,000 per note. The First Loan Notes and the Third Loan Notes are convertible into ordinary shares of the Company upon completion of the OML 40 acquisition. The loan notes are convertible at par. The Second Loan Notes were redeemed in October 2011.

If the First Loan Notes have not been converted, they will be redeemed on 13 April 2012. If the Third Loan Notes have not been converted, they will be redeemed on 24 November 2012. Interest of 5 per cent will be paid on the First and Second Loan Notes up to 30 September 2011, after which date interest ceases to accrue. Interest of one per cent will be paid annually on the Third Loan Notes up until the settlement date.

Cumulative convertible redeemable preference shares of £1.75 million were issued on 26 August 2010 at par value and are expected to fall due for settlement or conversion to ordinary shares of the Company within three months of the balance sheet date.

A fixed cumulative preferential dividend at the annual rate of 8% of the issue price per share (excluding any associated tax credit) is payable in one instalment on 31 December in each year in respect of each preference share. To date the Company has not paid any preferential dividends and has accrued interest at the rate of 2.5% on the unpaid 2010 dividend, in accordance with the Company’s Articles of Association.

204

205

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

14. Borrowings (continued)

The weighted average interest rate paid during the year/period was as follows:

2011 %

2010 %

First Loan Notes 25.3 -

Second Loan Notes 12.7 -

Third Loan Notes 20.6 -

Cumulative convertible redeemable preference shares 21.5 21.5

15. Convertible preference shares

The convertible preference shares were issued by the Company on 26 August 2010 at a par value of £1 each. The preference shares are expected to fall due for settlement or conversion to ordinary shares of the Company within three months of the balance sheet date. A dividend at a coupon rate of 8% is payable annually up until the date of settlement or conversion.

The net proceeds received from the issue of convertible preference shares have been split between the financial liability element and an equity component, representing the fair value of the embedded option to convert the financial liability into equity of the Company, as follows:

$000's

Liability component as at 1 January 2011 2,509

Interest charged (note 8) 409

Accrued coupon interest (218)

Exchange differences (29)

Liability component as at 31 December 2011 2,671

The interest expensed for the year is calculated by applying an effective interest rate of 21.5% to the liability component for the year to 31 December 2011. The liability component is measured at amortised cost.

16. Convertible loan notes

The First Loan Notes and Second Loan Notes were issued on 12 January 2011 and 10 March 2011 respectively, at an issue price of £50,000 per note. The Third Loan Notes were issued on 20 December 2011, at an issue price of £10,000 per note. The First Loan Notes and the Third Loan Notes are convertible into ordinary shares of the Company upon completion of the OML 40 acquisition. The loan notes are convertible at par. The Second Loan Notes were redeemed in October 2011.

If the First Loan Notes have not been converted, they will be redeemed on 13 April 2012. If the Third Loan Notes have not been converted, they will be redeemed on 24 November 2012. Interest of five per cent will be paid on the First and Second Loan Notes up to 30 September 2011, after which date interest ceases to accrue. Interest of one per cent will be paid annually on the Third Loan Notes up until the settlement date.

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

16. Convertible loan notes (continued)

The net proceeds received from the issue of the convertible loan notes have been split between the financial liability element and equity component, representing the fair value of the embedded option to convert the financial liability into equity of the Company, as follows:

First Loan Notes

$000’s

Second Loan Notes

$000’s

Third Loan Notes

$000’s Total

$000’s

Proceeds of issue of convertible loan notes 14,764 148,417 1,166 164,347 Equity component (1,228) (6,387) (157) (7,772)

13,536 142,030 1,009 156,575 Interest charged 1,823 11,057 17 12,897 Accrued coupon interest (531) (4,329) (1) (4,861) Issue costs (liability component0 (756) (197) (50) (1,003) Exchange differences (22) (144) 2 (164) Repayment of convertible loan notes - (148,417) - (148,417)

Liability component as at 31 December 2011 14,050 - 977 15,027

The interest expensed for the year is calculated by applying an effective interest rate of 25.3% in respect of the First Loan Notes, 12.7% in respect of the Second Loan Notes, and 20.6% in respect of the Third Loan Notes, to the liability components of each respective Loan Note round for the year to 31 December 2011. The liability components are measured at amortised cost.

17. Share capital

Group and Company

2011 $000’s

2010 $000’s

Authorised:

5,000,000 ordinary shares of £1 each - 7,790

150,000,000 ordinary shares of £0.10 23,370 -

Allotted, issued and paid:

2,750,000 shares of £1 each

- 4,285

27,500,000 shares of £0.10 each 4,285 -

In June 2011, the Company passed a resolution that each of the ordinary shares of £1.00 each in the capital of the Company in issue be sub-divided into 10 ordinary shares of £0.10 each, and all issued and to be issued ordinary shares shall have a nominal value of £0.10 each.

A further resolution was passed in October 2011 to authorise the allotment of up to 150,000,000 ordinary shares of £0.10 each in the capital of the Company.

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207

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

18. Equity reserve

Group and Company

Equity reserve

$000's

Recognition of equity component of cumulative convertible redeemable preference shares (note 15) 227

Balance as at 31 December 2010 227

Recognition of equity component of 5% convertible redeemable loan notes 7,615

Recognition of equity component of 1% convertible redeemable loan notes 157

Balance as at 31 December 2011 7,999

This reserve represents the equity component of convertible debt instruments (see notes 15 and 16).

19. Other reserve

Group and Company

Other reserve

$000's

Costs of issue of convertible preference shares (104)

Balance as at 31 December 2011 (104) Costs of issue of 5% convertible redeemable loan notes (equity component) (74)

Costs of issue of 1% convertible redeemable loan notes (equity component) (7)

Balance as at 31 December 2011 (185)

20. Retained (losses)/profits

Group Company

$000’s $000’s

Loss for the period from incorporation to 31 December 2010 (1,826) (1,149)

Balance at 31 December 2010 (1,826) (1,149)

(Loss)/Profit for the year (17,689) 1,821

Less: Non-controlling interest 9,257 -

As at 31 December 2011 (10,258) 672

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

21. Translation reserve

Exchange differences relating to the translation of the net assets of the Parent Company from their functional currency into the Group’s presentation currency, being US Dollars, are recognised directly in the translation reserve.

Group Company

$000’s $000’s

Effect of translation of net assets of foreign operations for the period from incorporation to 31 December 2010 28 28

Balance at 31 December 2010 28 28

Effect of translation on net assets of foreign operations 180 (298)

As at 31 December 2011 208 270

22. Non-controlling interest

$000’s

Balance at 1 January 2011 -

Share of loss for the year (9,257)

Balance as at 31 December 2011 (9,257)

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209

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

23. Notes to the cash flow statement

2011 2010

Group $000’s $000's

Loss for the year/period (17,689) (1,826)

Adjustments for:

Depreciation of property, plant and equipment (note 10) 60 12

Finance costs (note 8) 13,306 165

13,366 177

Operating cash flows before movements in working capital (4,323) (1,649)

Increase in trade and other operating creditors 2,993 862

Increase in trade and other operating receivables (81) (721)

2,912 141

Net cash used in operating activities (1,411) (1,508)

2011 2010

Company $000’s $000's

Profit/(Loss) for the year/period 1,821 (1,149)

Adjustments for:

Depreciation of property, plant and equipment (note 10) 20 1

Finance costs 13,306 165

13,326 166

Operating cash flows before movements in working capital 15,147 (983)

Increase in trade and other operating creditors 2,661 953

Increase in trade and other operating receivables (35,647) (1,581)

(32,986) (627)

Net cash used in operating activities (17,839) (1,611)

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

24. Cash and cash equivalents

Group Company Group Company

2011 2011 2010 2010

$000's $000's $000's $000's

Cash and bank balances (note 26) 1,391 1,384 4,957 4,912

25. Operating lease arrangements

Group Company Group Company

2011 2011 2010 2010

$000's $000's $000's $000's

Minimum lease payments under operating leases recognised as an expense in the year/period 316 42

45

-

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2011 2010

$000’s $000’s

Within one year 29 137

In the second to fifth years inclusive 24 119

53 256

Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated for an average term of two years and rentals are fixed for an average of two years.

26. Financial instruments

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in the accounting policies section of these financial statements.

210

211

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

26. Financial instruments (continued)

Principal financial instruments

The principal financial instruments used by the Group and the Company, from which financial instrument risk arises, are as follows:

• Trade and other receivables

• Trade and other payables

• Cash and bank balances

• Cumulative convertible redeemable preference shares

• Convertible redeemable loan notes

Categories of financial instruments

At 31 December 2011, the Group and Company held the following financial assets:

Group Company Group Company

2011 2011 2010 2010

$000's $000's $000's $000's

Trade and other receivables (note 12) 172 36,886 361 1,519

Cash and bank balances (note 24) 1,391 1,384 4,957 4,912 �

1,563 38,270 5,318 6,431

At 31 December 2011, the Group and Company held the following financial liabilities:

Group Company Group Company

2011 2011 2010 2010

$000's $000's $000's $000's

Trade creditors (note 13) 3,034 2,902 554 530

Convertible redeemable loan notes (note 16) 15,027 15,027 - - Cumulative convertible redeemable preference shares (note 15) 2,671 2,671 2,509 2,509 Amounts due to Group undertakings (note 13) - 241 - 123

Accruals and deferred income (note 13) 5,744 5,388 372 364

26,476 26,229 3,435 3,526

Market risk

The Group’s and Company’s activities expose them primarily to the financial risks of changes in foreign currency exchange rates.

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

26. Financial instruments (continued)

Foreign currency risk management

The functional currency of the Company is Pounds Sterling. A portion of the Company’s costs are denominated in US dollars, the remainder of the costs being denominated in Naira (Nigerian currency) or Euros. The Company also has foreign currency denominated liabilities. Exposures to exchange rate fluctuations therefore arise. The Company pays for invoices denominated in a foreign currency in the same currency as the invoice. The Company therefore suffers from foreign currency risk. The Directors currently believe that foreign currency risk is at an acceptable level.

During the year, the Company entered into a currency option in order to hedge its exposure to US dollar foreign exchange fluctuations in relation to the £95.5 million loan notes issued during the year. The loan notes were redeemed during the year and the option expired at this time. Neither the Group nor the Company held any financial instruments as at 31 December 2011.

Liquidity risk management

Liquidity risk is the risk that the Group or Company will encounter difficulty in meeting their financial obligations as they fall due. Ultimate responsibility for liquidity risk management rests with the board of Directors. In order to mitigate this risk the management regularly reviews the upcoming liabilities to ensure these can be met as and when they fall due. This review is undertaken at the time the liability is engaged.

Maturity of financial assets and liabilities

All of the Group’s and Company’s financial liabilities and their financial assets in the period to 31 December 2011 are either payable or receivable within one year.

27. Related party transactions

Group and Company

Loans to related parties

2011 $000’s

2010 $000’s

Loans to Eland Oil & Gas (Nigeria) Limited 1,329 536 Loans to Elcrest Exploration and Production Nigeria Limited 16,823 -

18,152 536

Loans to Eland Oil & Gas (Nigeria) Limited are short-term and carry interest of 5% per annum.

Loans to Elcrest Exploration and Production Nigeria Limited are short-term and carry interest of 18% per annum.

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213

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

27. Related party transactions (continued)

Other transactions between the Company and Group undertakings

Eland Oil & Gas

(Nigeria) Ltd

$000's Elcrest $000's

Total $000's

Transactions during the period ended 31 December 2010:

Costs recharged 626 - 626

Exchange differences (3) - (3)

Balance at 31 December 2010 623 - 623

Eland Oil & Gas

(Nigeria) Ltd

$000's Elcrest $000's

Total $000's

Balance at 1 January 2011 623 - 623

Transactions during the year ended 31 December 2011:

Management fees - 2,321 2,321

Costs recharged 907 15,340 16,247

Exchange differences (33) (561) (594)

Balance at 31 December 2011 1,497 17,100 18,597

During the year, Eland Oil & Gas (Nigeria) Limited paid costs of $118,000 (2010: $123,000) on behalf of the Company. A balance of $241,000 (2010: $123,000) remained outstanding as at 31 December 2011.

Trading transactions

During the year, Group companies entered into the following transactions with related parties who are not members of the Group:

Purchase of services

Purchase of services

2011 2010

$000's $000's

Park Holdings - 101

Park Securities Ltd 87 35

87 136

Eland Oil & Gas Limited

Notes to the financial statements (continued) Year ended 31 December 2011

27. Related party transactions (continued)

The following amounts were outstanding at the balance sheet date:

Amounts owed to related parties

2011 2010

$000's $000's

Park Securities Ltd 14 7

Park Securities Ltd is a related party of the Group because Henry George Wilson holds directorships in both Park Securities Ltd and Eland Oil & Gas Ltd. Park Holdings is a related party of the Group because Henry George Wilson is a partner of the firm.

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given.

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24, Related Party Disclosures.

2011 2010

$000's $000's

Wages and salaries 602 330

Social security costs 29 20

631 350

The Company made no personal pension contributions during the year or preceding period on behalf of the Directors.

28. Contingent liabilities

As discussed in the Directors’ Report, the process relating to the Company’s proposed admission to AIM and the associated raising of £140 million through the issue of new shares in the Company in order to finance the balance of the consideration payable in relation to the proposed acquisition of OML 40 of $138.6 million is ongoing. At the date of this report, the Directors are confident that the AIM admission and fundraising process will be completed successfully during the first quarter of 2012.

The Company estimates that professional fees of approximately $1.9 million will become payable upon the admission of the Company to AIM and successful fund raising of £140 million. These professional fees include commissions, and advisers’ and legal fees.

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Company Registration No. SC364753

Eland Oil & Gas Limited(formerly Mountwest 852 Limited)

Annual report and financial statements

For the period from 28 August 2009 to31 December 2010

215

Contents

Page

Officers and professional advisers 217

Directors’ report 218

Directors’ responsibilities statement 221

Independent auditor’s report 222

Consolidated income statement 224

Consolidated statement of comprehensive income 225

Consolidated balance sheet 226

Company balance sheet 227

Consolidated statement of changes in equity 228

Company statement of changes in equity 229

Consolidated cash flow statement 230

Company cash flow statement 231

Notes to the financial statements 232

216

Officers and professional advisers

Directors Ian Leslie Blair, Chief Executive OfficerGeorge Walter Mitchell Maxwell, Chief Financial OfficerHenry George Wilson, Non-Executive Director

Secretary Stronachs Secretaries Limited34 Albyn PlaceAberdeenAB10 1FWUnited Kingdom

Registered Office 34 Albyn PlaceAberdeenAB10 1FWUnited Kingdom

Bankers The Royal Bank of Scotland PlcAberdeen Central Branch12 Golden SquareAberdeenAB10 1DUUnited Kingdom

Standard Chartered Bank – Tswanya Center BranchMuhammadu Buhari WayGarkiArea 11AbujaNigeria

Solicitors Stephenson Harwood1 Finsbury CircusLondonEC2M 7SHUnited Kingdom

Independent Auditor Deloitte LLPUnion Plaza1 Union WyndAberdeenAB10 1SLUnited Kingdom

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Directors’ report

The directors present their first report and the audited financial statements of Eland Oil & Gas Limited(formerly Mountwest 852 Limited) (‘the Company’) for the period from incorporation to 31 December 2010.

Principal activities

The Company’s principal activity is the exploration, development and production of oil and gas reserves inWest Africa, with activities initially planned to begin in Nigeria during 2011. The Company was incorporatedon 28 August 2009.

Results and dividends

The loss for the first period ended 31 December 2010 amounted to $1.8 million. The directors do not proposea dividend and the loss of $1.8 million will be transferred against reserves.

Review of developments and future prospects

The Company has been engaged in the period reviewing a number of opportunities to acquire oil and gasproperties in Nigeria. These have included existing marginal fields currently not in production, futuremarginal field opportunities and the much-publicised Shell Nigeria (‘Shell’ or the ‘Sellers’) divestmentprocess.

The Company established a local Nigerian subsidiary, also Eland Oil & Gas Ltd (‘the Subsidiary’), and abranch of the UK company in UAE (together comprising ‘Eland’ or ‘the Group’). The Group entered into a3-year lease arrangement for an office in the UK and a 2-year lease arrangement for an office in Abuja,Nigeria. The Company also has a short-term lease for an office in UAE for the UK branch.

The Company entered into a Bid Co-Operation Agreement with Starcrest Energy Nigeria Ltd (‘Starcrest’),a local Nigerian company, during 2010. Starcrest is an established oil and gas company, with existing non-operated oil interests in Nigeria. The purpose of this agreement was directly linked to the Group’sparticipation in the Shell divestiture process and the Operator strategy for Eland complemented the Non-Operator strategy of Starcrest. Through this arrangement the Company successfully qualified to participatein the divestiture process.

The Company commissioned an evaluation of the technical and economic merits of the oil leases beingoffered by Shell and concluded that the smallest of the leases on offer (OML 40), best met the Company’sstrategy at this stage of the Company’s development. The Company further commissioned a CompetentPersons Report to provide an independent view of the value of the asset to assist in the bidding and fundraising activities.

The Company prepared documentation and engaged with Legal and Financial advisors with a view to raisingthe required funding for the purchase of Shell’s interests in OML 40. As of December 2010 the fundraisingwas at an advanced stage and subsequently the initial rounds of funding were successfully completed in earlyJanuary and March 2011 (see note 26 for details). This funding structure remains in place as at the date ofsigning and the Board are confident that the transaction will close within the financing timeline.

The Company, in conjunction with partner Starcrest, prepared the bid submission to Shell for OML 40,following a visit to the Shell data room in the Netherlands and an online data room during November andDecember. The bid was subsequently submitted in January 2011. The Company received confirmation fromShell that the bid submitted by Elcrest, a joint venture between the Company and Starcrest, had beensuccessful and Elcrest signed the Sale and Purchase Agreement on (SPA) on 31 March 2011. The transactionis subject to Government approval which is awaited at the date of this report. The Sale and PurchaseAgreement validity expires on 27 September 2011 however the Board are confident that the transaction willcomplete before this date.

The Company intends to continue with its stated strategy, in actively pursuing oil and gas opportunities inWest Africa. In the near term the Company is actively engaged in securing the assets currently under

218

evaluation and is extremely confident that the extensive and relevant experience of the management andboard of the Company will ensure success of the strategy.

Principal risks and uncertainties

The Company’s strategy is predominantly driven by the exploration, exploitation, appraisal, developmentand production of oil and gas reserves in Nigeria. There are risks inherent in the exploration, exploitation,appraisal, development and production of oil and gas reserves and resources. Whilst the rewards can besubstantial, there is no guarantee that exploration will lead to further commercial discoveries. Explorationand production activities by their nature involve significant risks. Risks such as delays in the constructionand commissioning of drilling platforms or other technical difficulties, lack of access to key infrastructure,adverse weather conditions, environmental hazards, industrial accidents, occupational and health hazards,technical failures, labour disputes, unusual or unexpected geological formations, explosions and other actsof God are inherent to the business. Although in many cases these represent insurable risks, the Group mayalso become subject to other hazards (including pollution and oil seepage liability) against which it is notinsured or is under insured. The occurrence of any of these incidents can result in the Group’s current orfuture project target dates for drilling or production being delayed or interrupted and increased capitalexpenditure and production costs.

Liquidity and access to capital

Currently the Group does not generate any revenues and its operation is entirely dependent on financing frominvestors. As disclosed in note 26, the Company raised additional financing of £105 million through the issueof convertible loan notes in January and March 2011 in contemplation of completing the acquisition of a45% interest in OML 40. The loan notes are redeemable if the OML 40 transaction is not completed before15 October 2011. Of this £105 million, £9.5 million is currently held by the Sellers as a deposit for thelicence. In the event that the acquisition does not complete, this deposit may not be refundable to theCompany depending on the reasons for non-completion.

If the Group is successful at obtaining the interest in OML 40, its development will be capital intensive, andsignificant investment will be required before revenues can be realised from this licence. Management areconsidering a number of options to finance the additional investment required. The options underconsideration include an initial public offering (IPO) on the London Stock Exchange which the directorsanticipate would be completed in H2 2011 or a combination of a private placing of new equity and bridgefinancing to first oil. Whilst the Directors are pleased with the progress that has been made to date in respectof completing the acquisition of OML 40 and the proposed funding options, there is no certainty at the dateof this report that either will be completed successfully.

Going concern

The Group incurred a net loss of $1,826,000 during the period ended 31 December 2010 and whilst it hadnet assets of $2,610,000 as at that date, the convertible loan notes of £105 million issued in January andMarch 2011 are redeemable if the acquisition of OML 40 does not complete before 15 October 2011. Inaddition, £9.5 million of the £105 million loan note proceeds is currently held by the Sellers as a deposit forthe OML 40 acquisition and were the acquisition not to be completed, this may not be refundable to theCompany depending on the reasons for non-completion.

In the event that the acquisition is not completed, the Company has insufficient cash resources to meet therepayments of the principal and associated interest on the above loan notes. As such, the Company and theGroup are reliant on the successful completion of the acquisition of OML 40 in order to continue theiroperations for the next 12 months. These conditions indicate the existence of a material uncertainty whichmay cast doubt about the Company and the Group’s ability to continue as going concerns.

As of the date of this report, the Directors are confident that the acquisition of OML 40 will be completedby 15 October 2011 and therefore that the loan notes will be converted into equity rather than be redeemed;furthermore the directors are confident that the additional funding expected to be raised from the financingoptions currently being considered, which include an initial public offering on the London Stock Exchange

219

which the directors anticipate would be completed in H2 2011, or the mix of new equity (through aplacement) and bridge financing, will provide sufficient cash resources for the Company and the Group tocontinue as going concerns for the foreseeable future. Accordingly, the Directors have a reasonableexpectation that the Company and Group will continue in operational existence for the foreseeable future,and therefore the financial statements have been presented on a going concern basis and do not include anyadjustments that may be required if the Company and/or the Group were unable to continue realising theirassets and discharging their liabilities in the ordinary course of business.

Directors

The directors, who served throughout the period and to the date of this report, are as follows:

Ian Leslie Blair, Chief Executive Officer (appointed 28 September 2009)

George Walter Mitchell Maxwell, Chief Financial Officer (appointed 28 September 2009)

Henry George Wilson, Non-Executive Director (appointed 26 May 2010)

In addition, Ewan C Neilson served as a director from the date of incorporation until his resignation on28 September 2009.

Auditor

Each of the persons who is a director at the date of approval of this annual report confirms that:

• so far as the director is aware, there is no relevant audit information of which the Company’s auditoris unaware; and

• the director has taken all the steps that he ought to have taken as a director in order to make himselfaware of any relevant audit information and to establish that the Company’s auditor is aware of thatinformation.

This confirmation is given and should be interpreted in accordance with the provisions of s418 of theCompanies Act 2006.

Deloitte LLP have been appointed as auditor and have expressed their willingness to continue in office asauditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

Approved by the Board of Directors and signed on behalf of the Board

George MaxwellDirector

5 August 2011

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Directors’ responsibilities statement

The directors are responsible for preparing the Annual Report and the financial statements in accordancewith applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that lawthe directors have elected to prepare the financial statements in accordance with International FinancialReporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must notapprove the financial statements unless they are satisfied that they give a true and fair view of the state ofaffairs of the company and of the profit or loss of the company for that period. In preparing these financialstatements, International Accounting Standard 1 requires that directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable,comparable and understandable information;

• provide additional disclosures when compliance with the specific requirements in IFRSs areinsufficient to enable users to understand the impact of particular transactions, other events andconditions on the entity’s financial position and financial performance; and

• make an assessment of the company’s ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explainthe company’s transactions and disclose with reasonable accuracy at any time the financial position of thecompany and enable them to ensure that the financial statements comply with the Companies Act 2006. Theyare also responsible for safeguarding the assets of the company and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial informationincluded on the company’s website. Legislation in the United Kingdom governing the preparation anddissemination of financial statements may differ from legislation in other jurisdictions.

221

Independent auditor’s report to the members of Eland Oil & Gas Limited(formerly Mountwest 852 Limited)

We have audited the financial statements of Eland Oil & Gas Limited (formerly Mountwest 852 Limited) forthe period from 28 August 2009 to 31 December 2010 which comprise the Consolidated Income Statement,the Consolidated and Parent Company Balance Sheet, the Consolidated and Parent Company Statement ofChanges in Equity, Consolidated and Parent Company Cash Flow statement and the related notes 1 to 27.The financial reporting framework that has been applied in their preparation is applicable law andInternational Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards theparent company financial statements, as applied in accordance with the provisions of the Companies Act2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’smembers those matters we are required to state to them in an auditor’s report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibility to anyone other than theCompany and the Company’s members as a body, for our audit work, for this report, or for the opinions wehave formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for thepreparation of the financial statements and for being satisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on the financial statements in accordance with applicablelaw and International Standards on Auditing (UK and Ireland). Those standards require us to comply withthe Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficientto give reasonable assurance that the financial statements are free from material misstatement, whethercaused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate tothe Group’s and the Parent Company’s circumstances and have been consistently applied and adequatelydisclosed; the reasonableness of significant accounting estimates made by the directors; and the overallpresentation of the financial statements.

Opinion on the financial statements

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parentcompany’s affairs as at 31 December 2010 and of the Group’s loss for the period then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted bythe European Union;

• the parent company financial statements have been properly prepared in accordance with IFRSs asadopted by the European Union and as applied in accordance with the provisions of the CompaniesAct 2006; and

• the financial statements have been prepared in accordance with the requirements of the CompaniesAct 2006.

Emphasis of matter – going concern

Without qualifying our opinion, we draw attention to the disclosures made in the Directors’ Report and notes2 and 3 of the financial statements concerning the Company and the Group’s ability to continue as goingconcerns. The Group incurred a net loss of $1,826,000 (Company loss: $1,149,000) for the period ended

222

31 December 2010 and whilst it had net assets of $2,610,000 (Company net assets: $3,287,000) as at thatdate, the convertible loan notes of £105 million issued by the Company in January and March 2011 areredeemable if the acquisition of OML 40 does not complete before 15 October 2011. In the event that theacquisition is not completed, the Company and the Group have insufficient cash resources to meet therepayments of the principal and associated interest on the above loan notes. As such, the Company and theGroup are reliant on the successful completion of the acquisition of OML 40 in order to continue theiroperations for the next 12 months. These conditions indicate the existence of a material uncertainty whichmay cast doubt about the Company and the Group’s ability to continue as going concerns. The financialstatements do not include the adjustments that would result if the Company and/or the Group were unableto continue as going concerns.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Directors’ report for the period for which the financial statementsare prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us toreport to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for ouraudit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns;or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Graham Hollis ACA (Senior Statutory Auditor)for and on behalf of Deloitte LLPChartered Accountants and Statutory AuditorAberdeen, United Kingdom

5 August 2011

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Consolidated income statement

For the period ended 31 December 2010

16 month period to 31 December 2010 Note $000’s

Administrative expenses (1,662) ————Operating loss (1,662) ———— ————Investment revenue 7 1Finance costs 8 (165) ———— (164) ————Loss before tax and for the period from continuing operations 4 (1,826) ———— ————

All activities relate to continuing operations.

224

Consolidated statement of comprehensive income

For the period ended 31 December 2010

16 month period to 31 December 2010 $000’s

Loss for the period (1,826) ————Exchange differences on translation of financial statements to presentation currency 28Total comprehensive income for the period (1,798) ———— ————Attributable to:Owners of the Company (1,798) ———— ————

225

Consolidated balance sheet

As at 31 December 2010

2010 Note $000’sNon-current assetsProperty, plant and equipment, net 10 373 ———— 373Current assetsTrade and other receivables 12 715Cash and bank balances 23 4,957 ———— 5,672 ————Total assets 6,045 ———— ————Current liabilitiesTrade and other payables 13 (926)Cumulative convertible redeemable preference shares 14, 15 (2,509) ———— (3,435) ————Net current assets 2,237 ————Net assets 2,610 ———— ————EquityShare capital 16 4,285Equity reserve 17 227Other reserve 18 (104)Retained losses 19 (1,826)Translation reserve 20 28 ————Equity attributable to the owners of the company 2,610 ———— ————

These financial statements were approved by the Board of Directors and authorised for issue on 5 August2011.

They were signed on its behalf by:

George MaxwellDirector

226

Company balance sheet

As at 31 December 2010

2010 Note $000’sNon-current assetsInvestment in subsidiary 11 64Property, plant and equipment, net 10 263 ———— 327Current assetsTrade and other receivables 12 1,574Cash and bank balances 23 4,912 ———— 6,486 ————Total assets 6,813 ———— ————Current liabilitiesTrade and other payables 13 (1,017)Cumulative convertible redeemable preference shares 14, 15 (2,509) ———— (3,526) ————Net current assets 2,960 ————Net assets 3,287 ———— ————Shareholders’ equityShare capital 16 4,285Equity reserve 17 227Other reserve 18 (104)Retained losses 19 (1,149)Translation reserve 20 28 ————Equity attributable to the owners of the company 3,287 ———— ————

These financial statements were approved by the Board of Directors and authorised for issue on 5 August2011.

They were signed on its behalf by:

George MaxwellDirector Company Number SC364753

227

Consolidated statement of changes in equity

Period ended 31 December 2010

Share Equity Other Retained Total capital reserve reserve losses equity $000’s $000’s $000’s $000’s $000’s

Loss for the period – – – (1,798) (1,798) ———— ———— ———— ———— ————Total comprehensive loss for the period – – – (1,798) (1,798)

Issue of share capital– ordinary shares 4,285 – – – 4,285– preference shares – 227 – – 227

Costs of share issues – – (104) – (104) ———— ———— ———— ———— ————Balance at 31 December 2010 4,285 227 (104) (1,798) 2,610 ———— ———— ———— ———— ———— ———— ———— ———— ———— ————

228

Company statement of changes in equity

Period ended 31 December 2010

Share Equity Other Retained Total capital reserve reserve losses equity $000’s $000’s $000’s $000’s $000’s

Loss for the period – – – (1,121) (1,121) ———— ———— ———— ———— ————Total comprehensive loss for the period – – – (1,121) (1,121)

Issue of share capital– ordinary shares 4,285 – – – 4,285– preference shares – 227 – – 227

Costs of share issues – – (104) – (104) ———— ———— ———— ———— ————Balance at 31 December 2010 4,285 227 (104) (1,121) 3,287 ———— ———— ———— ———— ———— ———— ———— ———— ———— ————

229

Consolidated cash flow statement

Period ended 31 December 2010

16 month period to 31 December 2010 Note $000’s

Net cash used in operating activities 22 (1,508)Investing activitiesPurchases of property, plant and equipment (387) ————Net cash used in investing activities (387)

Financing activitiesNet proceeds on issue of shares

– ordinary shares 4,086– convertible preference shares 2,646

————Net cash from financing activities 6,732

Net increase in cash and cash equivalents 4,837

Cash and cash equivalents at the beginning of the period –Effect of foreign exchange rate changes 120 ————Cash and cash equivalents at the end of the period 4,957 ———— ————

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Company cash flow statement

Period ended 31 December 2010

16 month period to 31 December 2010 Note $000’s

Net cash used in operating activities 22 (1,611)Investing activitiesPurchases of property, plant and equipment (264)Acquisition of subsidiary (65) ————Net cash used in investing activities (329)

Financing activitiesNet proceeds on issue of shares

– ordinary shares 4,086– convertible preference shares 2,646

————Net cash from financing activities 6,732

Net increase in cash and cash equivalents 4,792

Cash and cash equivalents at the beginning of the period –Effect of foreign exchange rate changes 120 ————Cash and cash equivalents at the end of the period 4,912 ———— ————

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Notes to the financial statements

Period ended 31 December 2010

1. General information

The principal accounting policies are summarised below. They have all been applied consistently throughoutthe period.

Eland Oil & Gas Limited (formerly Mountwest 852 Limited) is a company incorporated in the UnitedKingdom, under the Companies Act 2006. The address of the registered office is given on page 217. Thenature of the Company’s operations and its principal activities are set out on page 218 of this Annual Report.

The Company and the Group’s financial statements cover the period from the date of incorporation on28 August 2009 to 31 December 2010.

2. Significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards(IFRSs) as adopted by the European Union and therefore the Group financial statements comply with Article4 of the EU Regulations.

The financial statements have been prepared on the historical cost basis. Historical cost is generally basedon the fair value of the consideration given in exchange for the assets at the date of transaction. The principalaccounting policies adopted are set out below.

As permitted by section 408 of the Act, the company has elected not to present its profit and loss account forthe period. Eland Oil & Gas Limited reports a loss for the 16 month period ended 31 December 2010 of$1.1 million.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entitiescontrolled by the Company (its subsidiaries) from inception to 31 December 2010. Control is achieved wherethe Company has the power to govern the financial and operating policies of an investee entity so as to obtainbenefits from its activities.

The results of subsidiaries acquired during the period are included in the consolidated income statement fromthe effective date of acquisition.

Going concern

As discussed in the Directors’ Report, the Company and the Group are reliant on the successful completionof the acquisition of OML 40, and the subsequent conversion of the loan notes to equity, in order to continuetheir operations for the next 12 months. These conditions indicate the existence of a material uncertaintywhich may cast doubt about the Company and the Group’s ability to continue as going concerns.

As of the date of this report, the Directors are confident that the acquisition of OML 40 will be completedby 15 October 2011 and therefore that the loan notes will be converted into equity rather than be redeemed;and that the additional funding expected to be raised from the proposed initial public offering on the LondonStock Exchange, which the directors anticipate would be completed in H2 2011, or the mix of new equity(through a placement) and bridge financing, will provide sufficient cash resources for the Company and theGroup to continue as going concerns for the foreseeable future. Accordingly, the Directors have a reasonableexpectation that the Company and Group will continue in operational existence for the foreseeable future,and therefore the financial statements have been presented on a going concern basis and do not include anyadjustments that may be required if the Company and/or the Group were unable to continue realising theirassets and discharging their liabilities in the ordinary course of business.

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Standards issued but not yet effective

At the date of authorisation of these financial statements, the following Standards and Interpretations whichhave not been applied in these financial statements were in issue but not yet effective (and in some cases hadnot yet been adopted by the EU):

IFRS 7 Financial Instruments: Disclosures (1 January 2011)

IFRS 9 Financial Instruments — Classification and Measurement (1 January 2013)

IFRS 10 Consolidated Financial Statements (1 January 2013)

IFRS 11 Joint Arrangements (1 January 2013)

IFRS 12 Disclosure of Interests in Other Entities (1 January 2013)

IFRS 13 Fair Value Measurements (1 January 2013)

IAS 1 Presentation of Financial Statements (1 January 2011)

IAS 12 Income Taxes (1 January 2012)

IAS 24 Related Party Disclosures (1 January 2011)

IAS 32 Financial Instruments: Presentation (1 February 2010)

IAS 34 Interim Financial Reporting (1 January 2011)

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will haveno material impact on the Group’s financial statements.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all of the risksand rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payableunder operating leases are charged to income on a straight line basis over the term of the lease.

Foreign currencies

For the purpose of the consolidated financial statements, the results and financial position of each groupcompany are expressed in US Dollars, which is the presentation currency for the consolidated financialstatements.

In preparing the financial statements of the individual companies, transactions in currencies other than theentity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on thedates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated inforeign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fairvalue that are denominated in foreign currencies are translated at the rates prevailing at the date when thefair value was determined. Non-monetary items that are measured in terms of historical cost in a foreigncurrency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’sforeign operations are translated at exchange rates prevailing on the balance sheet date. Income and expenseitems are translated at the average exchange rates for the period, unless exchange rates fluctuate significantlyduring that period, in which case the exchange rates at the date of transactions are used. Exchangedifferences arising, if any, are recognised in other comprehensive income and accumulated in equity.

Taxation

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amountsof assets and liabilities in the financial statements and the corresponding tax bases used in the computation

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of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax assets arerecognised to the extent that it is probable that taxable profits will be available against which deductibletemporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extentthat it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset tobe recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settledor the asset is realised based on tax laws and rates that have been enacted at the balance sheet date. Deferredtax is charged or credited in the income statement, except when it relates to items charged or credited in othercomprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Property, plant and equipment

Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over theiruseful lives, using the straight-line method, on the following bases:

Fixtures and equipment 10% – 30%Motor vehicles 30%

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when the Company has becomea party to the contractual provisions of the instrument. The Group does not utilise derivative financialinstruments.

Trade and other receivables

Trade receivables are measured at amortised cost.

Trade and other payables

Accounts payable are measured at fair value.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with thesubstance of the contractual arrangement.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity afterdeducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceedsreceived, net of direct issue costs.

Compound instrumentsThe component parts of compound instruments (including redeemable convertible preference shares) issuedby the Company are classified separately as financial liabilities and equity in accordance with the substanceof the contractual arrangement. At the date of issue, the fair value of the liability component is estimatedusing the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded asa liability on an amortised cost basis using the effective interest method until extinguished upon conversionor at the instrument’s maturity date. The equity component is determined by deducting the amount of theliability component from the fair value of the compound instrument as a whole. This is recognised andincluded in equity, net of income tax effects, and is not subsequently remeasured.

Other financial liabilitiesOther financial liabilities are initially measured at fair value, net of transaction costs.

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Other financial liabilities are subsequently measured at amortised cost using the effective interest method,with interest expense recorded on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and ofallocating interest expense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments through the expected life of the financial liability to the netcarrying amount on initial recognition.

3. Critical accounting judgements

In the application of the Company and the Group’s accounting policies, which are described in note 2, thedirectors are required to make critical accounting judgements and assumptions. The assumptions are basedon historical experience and other factors that are considered to be relevant.

The following are the critical judgements that the directors have made in the process of applying theCompany and the Group’s accounting policies and that have the most significant effect on the amountsrecognised in financial statements.

Going concern

As discussed in the Directors’ Report, the Company and the Group are reliant on the successful completionof the acquisition of OML 40, and the subsequent conversion of the loan notes to equity, in order to continuetheir operations for the next 12 months. As of the date of this report, the directors are confident that theacquisition of OML 40 will be completed by 15 October 2011 and therefore that the loan notes will beconverted into equity rather than be redeemed; and that the additional funding expected to be raised from theproposed initial public offering on the London Stock Exchange expected to be completed in H2 2011, or themix of new equity (through a placement) and bridge financing, will provide sufficient cash resources for theCompany and the Group to continue as going concerns for the foreseeable future.

Cumulative convertible redeemable preference shares

The interest rate used to discount cash flows is 18%, based on management’s estimate of the prevailingmarket interest rates for a similar non-convertible instrument. The fair value of the liability component of theconvertible preference shares is determined assuming that the loan notes are redeemed within twelve monthsof the balance sheet date.

4. Loss for the period

Group

The loss before taxation for the period has been arrived at after charging/(crediting):

16 month period to 31 December 2010 $000’s

Depreciation on property, plant and equipment (note 10) 12Net foreign exchange gains (1) ———— 11 ———— ————

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5. Auditor’s remuneration

The analysis of auditor’s remuneration is as follows:

16 month period to 31 December 2010 $000’s

Fee payable to the company’s auditor for the audit of the company’s annual accounts 24 ————Total audit fees 24 ———— ————Fees payable to the company’s auditor and their associates for other services to the group

– Tax services 98 ————Total non-audit fees 98 ———— ————

6. Staff costs

The average monthly number of employees (including executive directors) was:

16 month period to 31 December 2010 No.

Management 2Technical 1Administration 3 ———— 6 ———— ————Their aggregate remuneration comprised:

16 month period to 31 December 2010 $000’s

Wages and salaries 478Social security costs 20 ———— 498 ———— ————A breakdown of directors’ remuneration is included at Note 27.

7. Investment revenue

16 month period to 31 December 2010 $000’s

Interest revenue:Bank deposits 1 ———— ————

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8. Finance costs

16 month period to 31 December 2010 $000’s

Interest on cumulative convertible redeemable preference shares classified as financial liabilities (note 15) 165

———— ————

9. Tax

16 month period to 31 December 2010 $000’s

Current tax charge/(credit) –Deferred tax charge/(credit) – ————Total tax charge for the period – ———— ————The standard rate of tax for the year, based on the average rate of corporation tax, is 28%. The total taxcharge can be reconciled to the loss per the income statement as follows:

16 month period to 31 December 2010 $000’s

Loss on before tax on continuing operations (1,826)Loss on ordinary activities multiplied by the domestic rate of

corporation tax applicable in the countries concerned (511)Non-deductible expenses for tax purposes 183Losses not utilised in the period 331Foreign exchange (3) ————Total taxation – ———— ————The Group has taxable losses of $1,117k for which no deferred tax asset has been recognised. This is due touncertainty over the availability of future taxable profits to offset these losses against.

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10. Property, plant and equipment

The Group

Fixtures and Motor equipment vehicles Other Total $000’s $000’s $000’s $000’sCostAdditions and as at 31 December 2010 113 57 215 385

DepreciationCharge for the period and as at

31 December 2010 (6) (6) – (12) ———— ———— ———— ————Net book valueAt 31 December 2010 107 51 215 373 ———— ———— ———— ———— ———— ———— ———— ————

The Company

Fixtures and Motor equipment vehicles Other Total $000’s $000’s $000’s $000’sCostAdditions and as at 31 December 2010 49 – 215 264

DepreciationCharge for the period and as at

31 December 2010 (1) – – (1) ———— ———— ———— ————Net book valueAt 31 December 2010 48 – 215 263 ———— ———— ———— ———— ———— ———— ———— ————Other property, plant and equipment includes detailed technical work undertaken by third parties in relationto the purchase of OML 40.

11. Subsidiary

Subsidiary undertakings $000’s

Cost and net book value –Additions (note 21) 64 ————At 31 December 2010 64 ———— ————Details of the Company’s subsidiary at 31 December 2010 are as follows:

Place of Proportion of Proportion of incorporation ownership voting power and operation interest held

Eland Oil & Gas Limited Nigeria 100% 100%

The investment in subsidiary is stated at cost.

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12. Trade and other receivables

Group Company 2010 2010 $000’s $000’s

Amounts due from group undertakings – 1,159Other debtors 361 360Prepayments 354 55 ———— ———— 715 1,574 ———— ———— ———— ————

13. Trade and other payables

Group Company 2010 2010 $000’s $000’s

Amounts due to group undertakings – 123Trade creditors 554 530Accruals and deferred income 372 364 ———— ———— 926 1,017 ———— ———— ———— ————Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. Thedirectors consider that the carrying amounts of trade and other payables are approximate to their fair values.All trade and other payables are denominated in Sterling, US dollars, Euros or Naira (Nigerian currency).

The Company has financial risk management policies in place to ensure that all payables to third parties arepaid within the credit timeframe and no interest has been charged by any suppliers as a result of late paymentof invoices during the period.

14. Borrowings

Group and Company

2010 $000’sUnsecured borrowings at amortised costCumulative convertible redeemable preference shares (note 15) 2,509 ———— ————Cumulative convertible redeemable preference shares of £1.75 million were issued on 26 August 2010 at parvalue and are expected to fall due for settlement or conversion to ordinary shares within twelve months ofthe balance sheet date.

A fixed cumulative preferential dividend at the annual rate of 8% of the issue price per share (excluding anyassociated tax credit) is payable in one instalment on 31 December in each year in respect of each preferenceshare.

The weighted average interest rate paid during the period was as follows:

2010 %

Cumulative convertible redeemable preference shares 21.5 ———— ————

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15. Convertible preference shares

The convertible preference shares were issued by the Company on 26 August 2010 at a par value of £1 each.The preference shares are expected to fall due for settlement or conversion to ordinary shares within twelvemonths of the balance sheet date. Interest of 8% will be paid annually up until the date of settlement orconversion.

The net proceeds received from the issue of convertible preference shares have been split between thefinancial liability element and an equity component, representing the fair value of the embedded option toconvert the financial liability into equity of the Company, as follows:

$000’s

Proceeds of issue of convertible preference shares 2,741Equity component (227) ————Liability component as at date of issue 2,514Interest charged 165Interest accrued (75)Issue costs (95) ————Liability component as at 31 December 2010 2,509 ———— ————The equity component of $227k has been credited to equity reserves (see note 17).

The interest expensed for the period is calculated by applying an effective interest rate of 21.5% to theliability component for the four month period since the preference shares were issued. The liabilitycomponent is measured at amortised cost.

16. Share capital

Group and Company

2010 $000’sAuthorised:5,000,000 ordinary shares of £1 each 7,790 ————Allotted, issued and paid:2,750,000 shares of £1 each 4,285 ————At 31 December 2010 4,285 ———— ————The Company was incorporated on 28 August 2009 with an authorised share capital of 10,000 ordinaryshares of £1 each at par.

The authorised share capital of the Company was increased from £10,000 to £100,000 on 28 September 2009by the creation of 90,000 ordinary shares of £1 each.

The authorised share capital of the Company was further increased from £100,000 to £5,000,000 on3 August 2010 by the creation of 4,900,000 ordinary shares of £1 each.

Additionally the Company has authorised, issued and fully paid 1.75 million cumulative convertibleredeemable preference shares of £1 each. These do not carry voting rights. Further details are provided innote 15.

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17. Equity reserve

Group and Company

Equity reserve $000’s

Balance as at 28 August 2009 –Recognition of equity component of cumulative convertible redeemable preference shares (note 15) 227 ————Balance as at 31 December 2010 227 ———— ————This reserve represents the equity component of convertible debt instruments (see note 15).

18. Other reserve

Group and Company

Other reserve $000’s

Balance as at 28 August 2009 –Costs of issue of convertible preference shares (104) ————Balance as at 31 December 2010 (104) ———— ————

19. Retained losses

Group Company 2010 2010 $000’s $000’s

Loss for the period (1,826) (1,149) ———— ————As at 31 December 2010 (1,826) (1,149) ———— ———— ———— ————

20. Translation reserve

Exchange differences relating to the translation of the net assets of the Parent company from their functionalcurrency into the Group’s presentation currency, being US Dollar, are recognised directly in the translationreserve.

21. Acquisition of subsidiary

On 27 September 2010, the Company acquired 100 per cent of the issued share capital of Eland Oil & GasLimited, a newly formed company incorporated in Nigeria, for $64k. The Subsidiary was established inorder to progress the Company’s commercial interests in Nigeria.

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22. Notes to the cash flow statement

Group

2010 $000’s

Loss for the period (1,826)

Adjustments for:Depreciation of property, plant and equipment (note 10) 12Finance costs (note 8) 165 ———— 177Operating cash flows before movements in working capital (1,649)Increase in trade and other operating creditors 862Increase in trade and other operating receivables (721) ———— 142 ————Net cash used in operating activities (1,508) ———— ————

Company

2010 $000’s

Loss for the period (1,149)

Adjustments for:Depreciation of property, plant and equipment (note 10) 1Finance costs (note 8) 165 ———— 166Operating cash flows before movements in working capital (983)Increase in trade and other operating creditors 953Increase in trade and other operating receivables (1,581) ———— (627) ————Net cash used in operating activities (1,611) ———— ————

23. Cash and cash equivalents

Group Company 2010 2010 $000’s $000’s

Cash and bank balances 4,957 4,912 ———— ———— ———— ————

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24. Operating lease arrangements

Group Company 2010 2010 $000’s $000’sMinimum lease payments under operating leases recognisedas an expense in the period 45 – ———— ———— ———— ————At the balance sheet date, the Group had outstanding commitments for future minimum lease paymentsunder non-cancellable operating leases, which fall due as follows:

2010 $000’s

Within one year 137In the second to fifth years inclusive 119 ———— 256 ———— ————Operating lease payments represent rentals payable by the Group for certain of its office properties. Leasesare negotiated for an average term of two years and rentals are fixed for an average of two years.

25. Financial instruments

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, thebasis of measurement and the basis on which income and expenses are recognised, in respect of each classof financial asset, financial liability and equity instrument are disclosed in the accounting policies section ofthese financial statements.

Principal financial instruments

The principal financial instruments used by the Group and the Company, from which financial instrumentrisk arises, are as follows:

• Trade and other receivables

• Trade and other payables

• Cash and bank balances

• Cumulative convertible redeemable preference shares

Categories of financial instruments

At 31 December 2010, the Group and Company held the following financial assets:

Group Company 2010 2010 $000’s $000’s

Trade and other receivables 361 1,519Cash and bank balances 4,957 4,912 ———— ———— 5,318 6,431 ———— ———— ———— ————

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At 31 December 2010, the Group and Company held the following financial liabilities:

Group Company 2010 2010 $000’s $000’s

Cumulative convertible redeemable preference shares 2,509 2,509Amounts due to group undertakings – 123Accruals and deferred income 372 364 ———— ———— 2,881 2,996 ———— ———— ———— ————

Market risk

The Group’s and Company’s activities expose them primarily to the financial risks of changes in foreigncurrency exchange rates and interest rates.

Foreign currency risk management

The functional currency of the Company is Pounds Sterling. A portion of the Company’s costs aredenominated in US dollars, the remainder of the costs being denominated in Naira (Nigerian currency) orEuros. The Company also has foreign currency denominated liabilities. Exposures to exchange ratefluctuations therefore arise. The Company pays for invoices denominated in a foreign currency in the samecurrency as the invoice. The Company therefore suffers from foreign currency risk. The directors currentlybelieve that foreign currency risk is at an acceptable level.

The Company and the Group did not enter into any derivative financial instruments to manage its exposureto foreign currency risk.

Liquidity risk management

Liquidity risk is the risk that the Group or Company will encounter difficulty in meeting their financialobligations as they fall due. Ultimate responsibility for liquidity risk management rests with the board ofdirectors. In order to mitigate this risk the management regularly reviews the upcoming liabilities to ensurethese can be met as and when they fall due. This review is undertaken at the time the liability is engaged.

Maturity of financial assets and liabilities

All of the Group’s and Company’s financial liabilities and their financial assets in the period to 31 December2010 are either payable or receivable within one year.

26. Events after the balance sheet date

The Company issued 95 Convertible Loan Certificates of £100k par value with a 5% rate of interest on10 January 2011 raising a total of £9,500,000. These notes are convertible to Ordinary Shares of theCompany at a price of £7.20 upon the successful completion of the acquisition of OML 40.

The Company submitted a bid to Shell to acquire a 45% interest in OML 40, an oil and gas field located inthe Federal Republic of Nigeria. This bid was submitted through a newly formed joint venture company,Elcrest Exploration and Production Ltd, a company registered in Nigeria on 6 January 2011, in which theCompany has a 45% interest and Starcrest has a 55% interest.

The Company issued 1,910 Secured Convertible Loan Certificates of £50k par value with a 5% rate ofinterest on 10 March 2011 raising a total of £95,500,000. These notes are convertible to Ordinary Shares ofthe Company at a price of £9.00 upon the successful completion of the acquisition of OML 40. The notesare redeemable if the transaction is not completed before 15 October 2011.

The Company received confirmation from Shell that the bid submitted by Elcrest, a joint venture betweenthe Company and Starcrest, had been successful and Elcrest signed the Sale and Purchase Agreement on31 March 2011. The transaction is subject to Government approval which is awaited at the date theseaccounts were prepared. The Sale and Purchase Agreement validity expires on 27 September 2011 howeverthe Board are confident that the transaction will complete before this date.

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27. Related party transactions

Group and Company

Trading transactions

During the period, group companies entered into the following transactions with related parties who are notmembers of the Group:

Purchase of services 2010 $000’s

Park Holdings 101Park Securities Ltd 35 ———— 136 ———— ————The following amounts were outstanding at the balance sheet date:

Amounts owed to related parties

2010 $000’s

Park Securities Ltd 7 ———— ————Park Securities Ltd is a related party of the Group because Henry George Wilson holds directorships in bothPark Securities Ltd and Eland Oil & Gas Ltd. Park Holdings is a related party of the Group because HenryGeorge Wilson is a partner of the firm.

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given.

Remuneration of key management personnel

The remuneration of the directors, who are the key management personnel of the Group, is set out below inaggregate for each of the categories specified in IAS 24, Related Party Disclosures.

2010 $000’s

Wages & Salaries 330Social security costs 20 ———— 350 ———— ————The company made no personal pension contributions during the period on behalf of the directors.

Directors’ transactions

Two of the Company’s directors, George Maxwell and Leslie Blair, made loans to the Company during theperiod of $53k and $68k respectively. The balances were repaid in full by the end of the period.

Company

Loans to related parties

2010 $000’sLoan to Subsidiary– Eland Oil & Gas Limited 530 ———— 530 ———— ————Loans to the Subsidiary are short-term and carry interest of 5% per annum. The loan is repayable on or after31 December 2013.

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PRO FORMA BALANCE SHEET

Set out below is an unaudited pro forma balance sheet of Eland Oil & Gas PLC, which has been preparedon the basis of the Company’s audited financial information for the period ended 31 December 2011 asadjusted for the Placing and the acquisition of an interest in OML40 through Elcrest, a 45 per cent. ownedjoint venture, as set out in the notes below.

The unaudited pro forma has been prepared for illustrative purposes only and, because of its nature, the proforma balance sheet addresses a hypothetical situation and, therefore, does not represent the Company’sactual financial position nor does it represent the actual consolidated financial position of the Company atthe date of Admission.

Eland Oil & Gas PLCConsolidated Balance Sheet

AIM listing & Acquisition of Conversion ofAs reported placement of interest in loan notes to

$’000 31-Dec-11 shares OML 40 equity ProformaNote 1 Note 2 Note 3 Note 4 Note 5

Non-current assetsProperty, plant and equipment 17,243 – 138,600 – 155,843

–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– 17,243 – 138,600 – 155,843Current assetsTrade & other receivables 634 (274) 360

Cash and bank balances 1,391 166,047 (138,600) (5,079) 23,759–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––

2,025 165,773 (138,600) (5,079) 24,119–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––

Total assets 19,268 165,773 – (5,079) 179,962–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Current liabilitiesTrade and other payables (8,778) 2,608 5,079 (1,091)

Convertible redeemable loan notes (15,027) – 15,027 –

Cumulative convertible redeemable preference shares (2,671) – 2,671 ––––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––

(26,476) 2,608 – 22,777 (1,091)–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––

Net current (liabilities)/assets (24,451) 168,381 (138,600) 17,698 23,028–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––

Net (liabilities)/assets (7,208) 168,381 – 17,698 178,871–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––EquityShare capital 4,285 172,107 17,698 194,090

Equity reserve 7,999 – 7,999

Other reserve (185) – (185)

Retained losses (10,258) (3,726) (13,984)

Translation reserve 208 – 208–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––

Equity attributable to owners of the Company 2,049 168,381 – 17,698 188,128Non-controlling Interest (9,257) – (9,257)

–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––

Total equity (7,208) 168,381 – 17,698 178,871–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––NOTES:I. The consolidated balance sheet of the Company as at 31 December 2011 has been extracted, without adjustment, from the audited

financial information included within Part 6 of this Document

2. This adjustment reflects the Placing of shares. The resulting adjustments from these transactions are:

i. Net receipts from the Placing of shares of $166.0m. This consists of estimated fundraising proceeds from the Placing of$183.4m (£118.0m) less broker commissions of $11.0m and other professional fees of $6.3m, as outlined below;

ii. As at 31 December 2011, $2.6m of accrued professional fees had been accrued and will be paid at Admission;

iii. A further $3.7m of professional fees, with $2.7m relating to the period from 31 December 2011 to Admission and $1.0mrelating to the issuance of the First Round Loan Notes are also assumed to be settled at Admission. These balances areassumed to relate fully to the Admission and, as such, have been posted against retained losses; and

iv. $0.3m of other receivables relates to capitalized legal fees related to the Placement of shares. These can be offset againstshare premium upon completion of the Placing.

3. This column reflects the acquisition of the 45% interest in OML40 for the consideration of $154.0 less the non-refundable depositheld in escrow (as detailed in Note 4 below).

4. This adjustment reflects the conversion of convertible preference shares and loan notes to equity upon Admission.

i. The convertible redeemable preference shares ($2.7m as per the 31 December 2011 balance sheet) are assumed to be fullyconverted to share capital upon Admission.

ii. The three rounds of loan notes, which totalled $15.0m as per the 31 December 2011 balance sheet are assumed to be fullyconverted to share capital upon Admission.

iii. Total accrued interest on both the convertible preference shares and loan notes ($5.1m as per the December 2011 balancesheet) is assumed to be settled in cash upon Admission.

5. For consistency with the December 2011 audited balance sheet the Pro forma figures have been shown converted from sterlingto dollar values at an exchange rate of $1.5541/£.

PART 7

TAXATION

The following paragraphs, which are intended as a general guide only and not a substitute for detailed taxadvice, are based on current law and HM Revenue & Customs practice as at the date of this Document.UK tax legislation and published practice of HM Revenue & Customs are both subject to change, possiblywith retrospective effect. The following paragraphs summarise certain limited aspects of the tax position ofholders of the New Ordinary Shares who (unless the position of non-resident holders of the New OrdinaryShares is expressly referred to) are resident or ordinarily resident in the United Kingdom for tax purposes,who are the absolute beneficial owners of their New Ordinary Shares and who hold their New OrdinaryShares as an investment. Certain holders of the New Ordinary Shares, such as dealers in securities,insurance companies, employees and Directors and collective investment schemes, may be taxed differentlyand are not considered.

If you are in any doubt as to your tax position or you are subject to tax in a jurisdiction outside the UnitedKingdom, you should consult an appropriate professional adviser before taking any action.

1. Chargeable gains

UK resident individuals

A disposal of the New Ordinary Shares by a holder of the New Ordinary Shares who is resident or, in thecase of an individual, ordinarily resident for tax purposes in the UK, or a holder of the New Ordinary Shareswho is neither resident nor ordinarily resident in the UK for tax purposes, but who carries on a trade,profession or vocation in the UK through a branch or agency and has used, held or acquired the NewOrdinary Shares for the purposes of such trade, profession or vocation or such branch or agency(as appropriate), may, depending on the Shareholder’s circumstances and subject to any available exemptionor relief, give rise to a chargeable gain or an allowable loss for the purposes of UK taxation on chargeablegains. An individual Shareholder who acquires New Ordinary Shares whilst resident in the UK (for a periodof at least four out of the last seven years before departure) and for a period of less than five years, either hasceased to be resident and ordinarily resident for tax purposes in the UK or has become resident in a territoryoutside the UK for purposes of double taxation relief arrangements and who disposes of the New OrdinaryShares during that period may be liable on his or her return to the UK to UK capital gains tax on anychargeable gain realised. However, relief may be available under certain double taxation treaties to preventsuch an individual from being subject to UK capital gains tax in those circumstances.

UK resident or ordinary resident Shareholders who are individuals (or otherwise not within the charge toUK corporation tax) and who are basic rate taxpayers are currently subject to tax on their chargeable gainsat a flat rate of 18 per cent. Individuals who are higher or additional rate taxpayers are currently subject totax on their chargeable gains at a flat rate of 28 per cent. Such Shareholders may be entitled to an annualexemption from capital gains (this is £10,600 for individuals for the year 2012/2013).

UK resident companies

A disposal or deemed disposal of the New Ordinary Shares by a company within the charge toUK corporation tax will give rise to a chargeable gain or an allowable loss for the purposes of corporationtax depending upon the Shareholder’s circumstances and subject to any available exemption or relief (suchas indexation).

2. Stamp duty and stamp duty reserve tax

No stamp duty or stamp duty reserve tax (SDRT) should be payable on the issue of definitive sharecertificates or on issue in uncertificated form of the New Ordinary Shares, unless, in certain circumstances,issued into a depository receipt or clearance service arrangement (excluding clearance services where anelection for an alternative system of charge is in effect) in which case specialist advice should be sought.

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Any dealings in the New Ordinary Shares after issue will be subject to stamp duty or SDRT. A writtentransfer on sale of the New Ordinary Shares will generally be liable to stamp duty at the rate of 0.5 per cent.of the amount or value of the consideration given (rounded up to the nearest £5.00). An exemption fromstamp duty will be available on an instrument transferring the shares where the amount or value of theconsideration is £1,000 or less, and it is certified on the instrument that the transaction effected by theinstrument does not from part of a larger transaction or series of transactions for which the aggregateconsideration exceeds £1,000. Stamp duty is normally the liability of the purchaser or the transferee of theNew Ordinary Shares. An unconditional agreement to transfer the New Ordinary Shares will also normallygive rise to SDRT at 0.5 per cent. of the amount or value of the consideration for the New Ordinary Shares.However, this SDRT liability will be cancelled, and any SDRT already paid will be refunded, if theagreement is completed by a duly stamped transfer within six years of the agreement being made. SDRT isnormally the liability of the purchaser or the transferee of the New Ordinary Shares.

The above statements are intended as a general guide. Certain categories of persons are not liable to stampduty or SDRT, and others may be liable at a higher rate or may, although not primarily liable for the tax berequired to notify and account for it.

3. Taxation of dividends

Under current UK tax law, no tax will be required to be withheld at source by the Company when it pays adividend.

UK resident individuals

A UK tax resident individual Shareholder who receives a dividend will be entitled to a tax credit, currentlyat the rate of 1/9th of the cash dividend paid (or 10 per cent. of the aggregate of the net dividend and relatedtax credit). The individual is treated as receiving for tax purposes gross income equal to the cash dividendand the tax credit. The tax credit is then set against the individual’s tax liability on that gross income.

An individual Shareholder who is liable for income tax at the basic rate will be taxed at the rate of10 per cent. on the dividend plus the tax credit. The tax credit will cover this tax liability in full so theshareholder will have no income tax to pay in respect of the dividend. For example, a cash dividend of£80.00 would carry a tax credit of £8.89, giving gross income of £88.89. The income tax liability would be£8.89 (£88.89 at 10 per cent.), which, for such a shareholder, is satisfied in full by the tax credit.

An individual Shareholder who is liable for income tax at the higher rate will be taxed at the rate of32.5 per cent. on the dividend plus the tax credit but will be able to set the tax credit off against part of thisliability. However, such a shareholder will have further income tax to pay in respect of the dividend and therelated tax credit. In the above example, the gross income represented by the cash dividend and the tax credit(£88.89) would be taxed at 32.5 per cent., giving a tax liability of £28.89. Credit is given for the tax credit(£8.89), giving a net further tax liability of £20.00. This represents 25 per cent. of the net dividend(or 22.5 per cent. of the dividend plus the tax credit).

An individual Shareholder who is liable for income tax at the additional rate of tax (i.e. those with taxableincome in excess of £150,000) will be taxed at the rate of 42.5 per cent. on the dividend plus the tax creditbut will be able to set the tax credit off against part of this liability. However, such a shareholder will havefurther income tax to pay in respect of the dividend and the related tax credit. In the above example, the grossincome represented by the cash dividend and the tax credit (£88.89) would be taxed at 42.5 per cent., givinga tax liability of £37.78. Credit is given for the tax credit (£8.89), giving a net further tax liability of £28.89.This represents 36.1 per cent. of the net dividend.

A UK resident shareholder who does not pay income tax or whose liability for income tax on the dividendand related tax credit is less than the tax credit, including pension funds, charities and certain individuals, isnot entitled to any payment in respect of any part of the tax credit associated with the dividend fromHM Revenue & Customs.

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An individual shareholder who holds his shares in an Individual Savings Account or a Personal Equity Planis not taxed on the dividends from those shares but is no longer entitled to recover from HM Revenue &Customs the tax credit on such dividends.

UK resident companies

Subject to certain exceptions for traders in securities and insurance companies, a corporate Shareholderresident in the UK for tax purposes will generally not be subject to corporation tax or income tax on thereceipt of dividends.

4. US Tax Considerations

Neither the Company nor Canaccord is providing any tax advice regarding United States federal, state orlocal tax considerations pertinent to an investment in the New Ordinary Shares and nothing contained in thisDocument should be construed to be tax advice as to such matters. None of the information contained hereinis intended or written to be used, and cannot be used, for the purpose of avoiding US tax related penalties.Any prospective investor that is resident in the United States for tax purposes should fully consider both thepresent and future US federal, state and local tax consequences of any investment in the New OrdinaryShares. The US tax consequences of an investment in the New Ordinary Shares are potentially complex andwill not necessarily be the same for all investors. Accordingly, each prospective US investor is urged toconsult his or her own tax advisors as to the particular US tax consequences to him or her of the purchase,ownership, conversion and disposition of the New Ordinary Shares, including the applicability of anyUS federal tax laws or any state or local tax laws, and any changes (or proposed changes) in applicable taxlaws or interpretations thereof. There is no assurance that the US tax consequences of investing in the NewOrdinary Shares will not be significantly modified by future legislation or administrative or court decisions.

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PART 8

ADDITIONAL INFORMATION

1 Responsibility

The Directors of the Company, whose names are set out on page 14 of this Document, and the Companyaccept responsibility both individually and collectively for the information contained in this Document. Tothe best of the knowledge and belief of the Directors and the Company (who have taken all reasonable careto ensure that such is the case) the information contained in this Document is in accordance with the factsand does not omit anything likely to affect its import.

2 The Company

2.1 The Company was incorporated and registered in Scotland on 28 August 2009 under the 2006 Act asa private company limited by shares with the name Mountwest 852 Limited. The Company changedits name to Eland Oil & Gas Limited on 28 September 2009 and was re-registered as a publiccompany limited by shares on 28 February 2012 following the passing of a special resolution of theCompany on 23 February 2012. Upon such re-registration becoming effective, the Company changedits name to Eland Oil & Gas PLC. The Company’s registered number is SC364753.

2.2 The Company is domiciled in Scotland.

2.3 The registered office of the Company is at 34 Albyn Place, Aberdeen, Aberdeenshire AB10 1FW andits telephone number is 01224 737300.

2.4 The Company is governed by its Articles.

2.5 The principal legislation under which the Company operates is the 2006 Act.

2.6 The liability of the Company’s members is limited.

2.7 The ISIN number of the Ordinary Shares is GB00B8HHWX64. The Ordinary Shares have beencreated pursuant to the 2006 Act.

2.8 The Company’s accounting reference date is 31 December.

3 Share Capital

3.1 The Company was incorporated on 28 August 2009 with an authorised share capital of £10,000divided into 10,000 Ordinary Shares. Of these, one Ordinary Share was issued to Ewan Neilson beingthe subscriber to the memorandum of association of the Company.

3.2 The following is a summary of the changes to the authorised and issued share capital of the Companysince incorporation:

3.2.1 On 28 September 2009, Ewan Neilson transferred his one Ordinary Share to George Maxwell.

3.2.2 On 28 September 2009, the Company passed an ordinary resolution to increase the authorisedshare capital to £100,000 divided into 100,000 Ordinary Shares. Subsequently, on 19 January2010 one Ordinary Share was allotted and issued.

3.2.3 On 3 August 2010, the Company passed a special resolution amending the Articles such thatthe authorised share capital was increased and amended to £7,500,000 divided into 2,500,000Preference Shares and 5,000,000 Ordinary Shares. On 26 August 2010 2,749,998 OrdinaryShares and 1,750,000 Preference Shares were allotted and issued.

3.2.4 On 16 December 2010, the Company passed a special resolution removing the share capitalrestrictions in the memorandum of association and authorising the allotment and disapplication

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of pre-emption rights in relation to Ordinary Shares resulting from the conversion of the FirstLoan Notes (being a maximum of 2,250,000 Ordinary Shares in the capital of the Company).

3.2.5 On 25 February 2011, the Company passed special resolutions which inter alia authorised theallotment and disapplied pre-emption rights in relation to ordinary shares resulting from theconversion of the Second Loan Notes (being a maximum of 13,527,778 Ordinary Shares). Theresolutions also approved the conversion of such number of Preference Shares as exceeded thenumber of Ordinary Shares held by Preference Shareholders (pursuant to the conversion oftheir Preference Shares into Ordinary Shares under article 8 of the Articles) into DeferredShares of £1.00 each in the capital of the Company. The Deferred Shares, upon issue, will beautomatically redeemed at a cost in aggregate to the Company of £1.00.

3.2.6 On 24 June 2011, the Company passed ordinary and special resolutions which inter aliaauthorised the splitting of the ordinary shares on a 1:10 basis such that the par value of theOrdinary Shares became £0.10 and authorised the allotment and disapplying pre-emptionrights in relation to an aggregate nominal amount of £736,112.

3.2.7 On 30 November 2011, the Company passed ordinary and special resolutions which authorisedthe allotment and disapplied pre-emption rights in relation to an aggregate nominal amount of£15,000,000 (being a maximum of 150,000,000 ordinary shares of £0.10 each in the capital ofthe Company) with such authority to expire on 29 June 2012.

3.3 Subject to certain limited exceptions, or as permitted by the Articles, unless the approval ofShareholders in general meeting is obtained, the Company must normally offer Ordinary Shares to beissued for cash to holders of Ordinary Shares on a pro rata basis. Pursuant to the Articles and writtenresolutions of the Shareholders passed on 23 February 2012, the Directors have been authorised:

3.3.1 to consolidate the Ordinary Share capital of the Company such that the par value of theOrdinary Shares is changed from £0.10 to £1.00;

3.3.2 to allot Ordinary Shares free of pre-emption up to an aggregate nominal amount of£201,750,000 such authority to expire on 31 March 2012;

3.3.3 to allot Ordinary Shares free of pre-emption in an amount which is not more than 33.3 per cent.of the number of Ordinary Shares in issue at 11.59 p.m. on the day on which Admission occurs;and

3.3.4 to make market purchases of Ordinary Shares at any time before the expiry of the first annualgeneral meeting of the Company following Admission up to a maximum of 14.99 per cent. ofthe number of Ordinary Shares in issue at 11.59 p.m. on the day on which Admission occurs.

3.4 The Company has held three general meetings since it re-registered as a public limited company:

3.4.1 On 19 April 2012, the Company passed an ordinary and a special resolution at a generalmeeting authorising the allotment and dis-application of pre-emption rights in relation to anaggregate nominal amount of £201,750,000 (being a maximum of 201,750,000 OrdinaryShares in the capital of the Company) with such authority to expire on 31 July 2012.

3.4.2 On 26 June 2012, the Company passed an ordinary and a special resolutions at a generalmeeting authorising the Directors:

(a) to allot Ordinary Shares free of pre-emption in an amount which is not more than33.3 per cent. of the number of Ordinary Shares in issue at 11.59 p.m. on the day onwhich Admission occurs; and

(b) to make market purchases of Ordinary Shares at any time before the expiry of the firstannual general meeting of the Company following Admission up to a maximum of14.99 per cent. of the number of Ordinary Shares in issue at 11.59 p.m. on the day onwhich Admission occurs.

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3.4.3 On 22 August 2012, the Company passed ordinary and special resolutions at a general meeting(i) authorising the Directors to allot Ordinary Shares free of pre-emption up to an aggregatenominal amount of £201,750,000 such authority to expire on 31 October 2012; and (ii)authorising the Directors to allot Ordinary Shares free of pre-emption up to an aggregatenominal amount of £10,000,000 such authority to expire on the conclusion of the first annualgeneral meeting of the Company following Admission.

3.5 The fully paid issued share capital of the Company, immediately before Admission and immediatelyfollowing Admission (on the assumption that the Placing is fully subscribed) is and will be:

Issued Share CapitalPreference Shares Ordinary Shares

Amount (£) Number Amount (£) Number

Immediately before Admission 1,750,000 1,750,000 2,750,000 2,750,000On conversion of the First Loan Notes(1) 0 0 12,530,661 12,530,661On conversion of the Third Loan Notes(1) 0 0 13,326,103 13,326,103On conversion of the Preference Shares(2) 0 0 15,076,103 15,076,103Immediately following Admission(3) 0 0 134,871,982 134,871,982

(1) Number of Ordinary Shares includes conversion of interest.

(2) Assumes the conversion of all Preference Shares into Ordinary Shares, which is expected to occur on or shortly afterAdmission.

(3) Number of Ordinary Shares includes the Placing Shares and conversion of interest under the Second Loan Notes.

The Company anticipates receiving notices from all Preference Shareholders prior to Admission toconvert their holdings of Preference Shares, in their entirety, on Admission.

On 23 August 2012 and 24 August 2012, the Company invited Preference Shareholders to notify theCompany that they wish to convert their holdings of Preference Shares into Ordinary Shares and as at24 August 2012 the Company had received valid notices from 9 Preference Shareholders representing35.5 per cent. of the total number of Preference Shares by value.

In the event that the Company does not receive valid notices from a Preference Shareholder andbelieves that it is unable to convert the relevant holdings of Preference Shares on Admission, thePreference Shares will remain in existence following Admission unless and until converted orredeemed. A summary of the rights attaching to the Preference Shares is set out at paragraph 5.1.2 ofPart 8 of this Document.

3.6 Other than the issue of New Ordinary Shares pursuant to the Placing, the issue of the options overOrdinary Shares or Non-Voting Right Ordinary Shares (as the case may be) under the Helios OptionAgreement, the Solstice Option Agreement and the Share Plans and the issue of Ordinary Sharespursuant to the conversion of the First Note Issue, the Third Note Issue and the Preference Sharesthere are no acquisition rights or obligations over any of the unissued share capital nor is there anundertaking to increase the share capital of the Company.

3.7 All Ordinary Shares represent capital in the Company. No Ordinary Shares are held by or on behalfof the Company.

3.8 Except pursuant to the Placing Agreement, the Lead Manager Agreement, the Second Lead ManagerAgreement, the Madison Williams Engagement Letter and the Madison Williams Placement AgentAgreement, details of which are set out in paragraphs 11.4.2, 11.3.7, 11.3.8, 11.3.10 and 11.3.11 ofthis Part 8, no commission, discount, brokerages or other special terms have been granted by theCompany or any other member of the Group in connection with the issue or sale of any share or loancapital of the Company or any other member of the Group.

3.9 The New Ordinary Shares and Non-Voting Right Ordinary Shares will rank pari passu for alldividends and other distributions hereafter declared, paid or made on Existing Ordinary Shares. All

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New Ordinary Shares shall form one class with the Existing Ordinary Shares and shall rank pari passuin respect of payment of dividends, voting rights, entitlement to liquidation proceeds and otherwise.

3.10 The Ordinary Shares are capable of being held in certificated and uncertificated form. Application hasbeen made to Euroclear for the Ordinary Shares to be enabled for dealing through CREST as aparticipating security. No temporary documents of title will be issued.

3.11 Save for the loan notes issued pursuant to the First Note Issue (which will convert into OrdinaryShares at Completion) and the Third Note Issue (which will convert into Ordinary Shares atCompletion), the Preference Shares (which will convert into Ordinary Shares at completion of thePlacing), the options (which will convert into Ordinary Shares pursuant to the Eland Share OptionPlans) and the Non-Voting Right Ordinary Shares (which will convert into Ordinary Shares subject tothe restrictions contained in the Articles) there are no outstanding convertible securities, exchangeablesecurities or securities with warrants issued by the Company.

3.12 There are no shares in the capital of the Company currently in issue with a fixed date on whichentitlement to a dividend arises and there are no arrangements in force whereby future dividends arewaived or agreed to be waived.

3.13 None of the Ordinary Shares have been sold or made available to the public in conjunction with theapplication for Admission.

4 Non-Voting Right Ordinary Shares

4.1 Rights Attaching to the Non-Voting Right Ordinary Shares

Except as set out below, the Non-Voting Right Ordinary Shares rank pari passu with the OrdinaryShares (and any other Non-Voting Right Ordinary Shares issued on substantially equivalent terms tothe Non-Voting Right Ordinary Shares) in all respects and no action may be taken by the Company inrelation to, or offer made by the Company to the holders of, the Ordinary Shares (or any other Non-Voting Right Ordinary Shares issued on substantially equivalent terms to the Non-Voting RightOrdinary Shares) unless the same action is taken in respect of, or the same offer is made to the Non-Voting Right Ordinary Shareholders.

4.2 Voting at general meetings or annual general meetings

4.2.1 A Non-Voting Right Ordinary Shareholder shall be entitled to receive notice of, and to attendand speak at, any general meeting or annual general meeting of the Company, but shall not beentitled to vote in respect of any Non-Voting Right Ordinary Shares held.

4.2.2 The rights attaching to the Non-Voting Right Ordinary Shares shall not be, and shall not bedeemed to be, varied or abrogated in any way by the creation, allotment or issue of anyOrdinary Shares and the rights attaching to the Ordinary Shares shall not be, and shall not bedeemed to be, varied or abrogated in any way by the creation, allotment or issue of any Non-Voting Right Ordinary Shares.

4.3 Income

On a distribution of profits (whether by cash dividend, dividend in specie, scrip dividend,capitalisation issue or otherwise), the Non-Voting Right Ordinary Shares shall rank pari passu withthe rights to distributions of profits attaching to the Ordinary Shares.

4.4 Capital

On a return of capital, whether on a winding-up or otherwise, the Non-Voting Right Ordinary Sharesshall rank pari passu with the rights to the assets of the Company attaching to the Ordinary Shares.

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4.5 Conversion

4.5.1 Upon a transfer of Non-Voting Right Ordinary Shares by any person (the “transferor”) to aperson who is not a Non-Voting Right Ordinary Shareholder or an Affiliate of any such Non-Voting Right Ordinary Shareholder, the person receiving such Non-Voting Right OrdinaryShares (the “transferee”) may elect to convert such Non-Voting Right Ordinary Shares intoOrdinary Shares in accordance with paragraph 4.5.2 if the transferee:

(a) gives notice in writing to the Company at the time of such transfer confirming that thetransferee has elected to convert the number of Non-Voting Right Ordinary Shares beingtransferred to it by the transferor into Ordinary Shares (subject to paragraph 4.9 on aone-for-one basis); and

(b) provides the Company with an original certificate signed by the transferor and thetransferee confirming that the transferee is not an Affiliate of and is not acting in concertwith the transferor,

whereupon the Company (or its registrar) shall register the transfer in the register of membersof the Company.

4.5.2 Upon:

(a) a transfer of Non-Voting Right Ordinary Shares by any person to a person who is not aNon-Voting Right Ordinary Shareholder or an Affiliate of, or acting in concert with,such Non-Voting Right Ordinary Shareholder and who has elected to convert the Non-Voting Right Ordinary Shares so transfers such Non-Voting Right Ordinary Shares inaccordance with paragraph 4.5.1; or

(b) any issue of further Ordinary Shares by the Company or conversion of Non-Voting RightOrdinary Shares as referred to in paragraph 4.6 below, as a result of which such Non-Voting Right Ordinary Shareholder’s voting shareholding is reduced below theMaximum Voting Percentage,

such number of Non-Voting Right Ordinary Shares as, immediately following conversion, willresult in such Non-Voting Right Ordinary Shareholder’s voting shareholding being equal to theMaximum Voting Percentage, shall convert into Ordinary Shares (subject to paragraph 4.9 ona one-for-one basis) subject to receipt by the Company of an original certificate signed by therelevant shareholder confirming the number of Non-Voting Right Ordinary Shares whichshould convert in order for its voting shareholding, together with the voting shareholding of anyAffiliate and/or persons acting in concert with it, to be equal to or less than the MaximumVoting Percentage, whereupon the Company (or its registrar) shall register the conversion ofsuch Non-Voting Right Ordinary Shares into Ordinary Shares (subject to paragraph 4.9 on aone-for-one basis).

4.6 Conversion at the instance of a Non-Voting Right Ordinary Shareholder (or any of its Affiliates)

At any time, a Non-Voting Right Ordinary Shareholder (or any of its Affiliates) shall be entitled (butshall not be bound) to require the Company to convert Non-Voting Right Ordinary Shares held bysuch Non-Voting Right Ordinary Shareholder (or such Affiliate) into Ordinary Shares (subject toparagraph 4.9 on a one-for-one basis), so long as such conversion does not result in the Non-VotingRight Ordinary Shareholder's voting shareholding together with the voting shareholding of suchAffiliate and/or persons acting in concert with it, being more than the Maximum Voting Percentageand subject to receipt by the Company of an original certificate signed by the relevant Non-VotingRight Ordinary Shareholder confirming that its voting shareholding, together with the votingshareholding of any Affiliate and/or persons acting in concert with it immediately following suchconversion will not be more than the Maximum Voting Percentage.

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4.7 Conversion following a pre-emptive offer

If the Company makes an offer of Non-Voting Right Ordinary Shares in accordance with theprovisions of these Articles, it shall be entitled to convert into Ordinary Shares with voting rights,subject to paragraph 4.9 on a one-for-one basis, any Non-Voting Right Ordinary Shares issued topersons other than a Non-Voting Right Ordinary Shareholder or any of its Affiliates in connection withsuch offer.

4.8 General

4.8.1 Within 21 days after the conversion of any Non-Voting Right Ordinary Shares into OrdinaryShares, the Company shall forward to the relevant Non-Voting Right Ordinary Shareholder (orits Affiliate), at its own risk, free of charge, a definitive certificate for the appropriate numberof fully paid up Ordinary Shares and a new certificate for any unconverted non-voting rightOrdinary Shares comprised in the certificate surrendered by it. Pending the despatch ofdefinitive certificates, transfers shall be certified against the register of members of theCompany.

4.8.2 The Company shall use best endeavours to procure that the Ordinary Shares arising onconversion of the Non-Voting Right Ordinary Shares are admitted to AIM.

4.8.3 No admission to listing or admission to trading shall be sought for the Non-Voting RightOrdinary Shares whilst they remain Non-Voting Right Ordinary Shares.

4.9 Consolidation, Sub-Division or Reduction

In the event of a consolidation, sub-division or reduction of the Ordinary Share capital or the Non-Voting Right Ordinary Share capital, the conversion ratio shall be adjusted to such extent (if any) asthe auditors for the time being of the Company certify in writing to the Company to be in their opinionfair and reasonable in consequence of such event.

5 Memorandum and Articles of Association

The following is a summary of Eland’s Articles, which replaced the previous articles of association of theCompany following the coming into effect of a special resolution of the Company passed on 23 February2012 whereby the Company was re-registered as a public limited company. These articles of association takeeffect for the period between re-registration of the Company as a public limited company and Admission andwere amended by special resolution on 22 August 2012 to include the terms of the Non-Voting RightOrdinary Shares as set out in paragraph 4 of this Part 8. After Admission, a second set of Articles take effectwhich are identical to the articles of association summarised below and at paragraph 4 of this Part 8 save thatthe sections concerning the Preference Shares have been deleted. The summary of the articles which havebeen removed when the second set of articles or association are adopted appear below underlined and initalics. The Articles are available for inspection as set out in paragraph 20 of this Part 8 (AdditionalInformation). In the event that any Preference Shares are not converted into Ordinary Shares on Admission,the rights attaching to the Preference Shares will remain as explained in paragraph 3.5 of this Part 8notwithstanding the second set of Articles taking effect.

5.1 Articles of Association

5.1.1 Objects

The Articles of Association do not contain any restrictions on Eland’s objects and, by aresolution passed on 23 February 2012 by written resolution, the existing objects of Eland wereremoved. Accordingly, Eland’s objects are unlimited.

5.1.2 Rights attaching to the Ordinary Shares and Preference Shares

The following is a summary of the rights and provisions in the Articles of Association of Elandrelating to the Ordinary Shares and Preference Shares generally:

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(a) Dividends and unclaimed dividendsOrdinary Shares

Subject to the provisions of the 2006 Act and the rights of the holders of PreferenceShares Eland may, by ordinary resolution, declare a dividend to be paid to holders ofOrdinary Shares, according to their respective rights and interests in the profits, and mayfix the time for payment of such dividend provided that no dividend shall exceed theamount recommended by the Board. No dividend is payable to Eland in respect of anyshares held by it as treasury shares (except to the extent permitted by the 2006 Act).

The Board may pay interim dividends if it appears to the Board to be justified by thefinancial position of Eland. The Board may also pay fixed rate dividends at intervalssettled by the Board whenever the financial position of Eland, in the opinion of theBoard, justifies the payment. If the Board acts in good faith, none of the Directors shallincur any liability to the holders of Ordinary Shares conferring preferred rights for anyloss they may suffer in consequence of the payment of an interim dividend on anyOrdinary Shares having deferred or non-preferred rights (provided that at the time of thedeclaration no preferential dividend is in arrears).

Except insofar as the rights attached to, or the terms of issue of, any Ordinary Shareotherwise provide: (i) all dividends shall be declared and paid according to the amountspaid up on the Ordinary Shares in respect of which the dividend is paid, but no amountpaid up on an Ordinary Share in advance of calls shall be treated for the purposes of theArticles as paid up on the Ordinary Share, and (ii) all dividends shall be apportioned andpaid pro rata according to the amounts paid up on the Ordinary Shares during anyportion or portions of the period in respect of which the dividend is paid.

Preference Shares

Subject to the 2006 Act, the Company may, without resolution of the Board or of theCompany in general meeting, pay, in respect of each Preference Share, a fixedcumulative preferential dividend at the annual rate of 8 per cent. of the issue price(being £1.00 per Preference Share) paid on 31 December in each year to the registeredpreference shareholder as at that date. Such dividend to accrue from day to day beforeand after the commencement of a winding up. Interest accrues on any unpaid dividendat the rate of 2 per cent. per annum above The Royal Bank of Scotland Plc’s baselending rate from time to time or 8 per cent. whichever is higher).

Dividends General

The Board may agree with any member that dividends which may at any time or fromtime to time be declared or become due on his shares in one currency shall be paid orsatisfied in another, and may agree the basis of conversion to be applied and how andwhen the amount to be paid in the other currency shall be calculated and paid and forEland or any other person to bear any costs involved.

With the authority of an ordinary resolution of Eland and, on the recommendation of theBoard, payment of any dividend may be satisfied in whole or in part by the distributionof specific assets and in particular of paid up shares or debentures of any other company.

The Board may, with the authority of an ordinary resolution of Eland, offer any holdersof any particular class of shares (excluding Eland itself to the extent that it is such aholder by virtue of its holding any Shares as treasury shares) the right to receive furthershares, whether or not of that class, credited as fully paid, instead of cash in respect ofall (or some part) of any dividend specified by the ordinary resolution in accordancewith the provisions of the Articles.

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No dividends or other moneys payable by Eland on or in respect of a share shall bearinterest as against Eland unless otherwise provided by the rights attached to the share.

All unclaimed dividends, interest or other sums payable may be invested or otherwisemade use of by the Board for the benefit of Eland until claimed. Any dividend which hasremained unclaimed for 12 years from the date when it was declared/became due forpayment shall be forfeited and shall cease to remain owing by Eland.

Eland shall not be obliged to send any dividends or other sums payable in respect of ashare to a member until such member notifies Eland of an address or where the paymentis to be made by a funds transfer system, details of the account, to be used for thepurpose if: (a) at least two (2) consecutive payments for a dividend or other sum payablein respect of a share sent by Eland to a member is left uncashed by that member or isreturned to Eland and, after reasonable enquiries, Eland is unable to establish any newaddress or, with respect to a payment made by funds transfer system, a new account, forthat person; and (b) such payments are left uncashed or returned to Eland on bothconsecutive occasions.

(b) Voting rightsSubject to any special rights or restrictions as to voting for the time being attached toany class of share in Eland, on a show of hands every member who (being an individual)is present in person or by proxy or (being a corporation) is present by a duly authorisedrepresentative, not being himself a member, shall have one vote and on a poll everymember present in person or by proxy or (being a corporation) is present by a dulyauthorised representative, shall have one vote for every share of which he is the holder.Eland is prohibited (to the extent specified by the 2006 Act) from exercising any rightsto attend or vote at meetings in respect of any shares held by it as treasury shares. In thecase of joint holders, the vote of the person whose name stands first in the register ofmembers and who tenders a vote whether in person or by proxy is accepted to theexclusion of any votes tendered by any other joint holders. Unless the Board otherwisedecides, no member shall be entitled to vote at any general meeting of Eland, either inperson or by proxy or in the case of a corporate member by a duly authorisedrepresentative, in respect of any share held by him unless all calls and other sumspresently payable by him in respect of that share have been paid.

The preference shareholders are not entitled to attend or vote at any general meeting,though they are entitled to receive notice of all such meetings.

(c) Redemption of Preference SharesThe Preference Shares shall be redeemed: (a) immediately prior to the acquisition ofsuch shares, where the acquirer of such shares as a result of such acquisition would havean interest giving him/them control of the Company within the meaning of section 840of Income and Corporation Taxes Act 1988; (b) at the discretion of the Company(providing not less than 25 business days’ notice); or (c) on the occurrence of a Listingor a placing of new share capital in the Company raising at least £50,000,000 (wheresuch preference shareholders have not elected to convert their shares into OrdinaryShares). Redemption pursuant to (a) or (c) above being conditional on such eventoccurring within one month of the date fixed for redemption, failing which redemptionwill be revoked. If less than all of the Preference Shares are to be redeemed, the numberof Preference Shares to be redeemed shall be apportioned between the preferenceshareholders pro rata to their holding at the date of redemption.

On redemption, each Preference Share shall receive an amount equal to: (a)100 per cent. of the issue price (being £1.00 per Preference Share); and (b) all accrualsand/or unpaid amounts of preference dividend (see paragraph 4.1.2(a) PreferenceShares above) up to the date of redemption. If the Company is unable to pay such

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amounts on the redemption date, such amount plus interest (being 2 per cent. per annumabove the Royal Bank of Scotland Plc’s base lending rate from time to time or8 per cent., whichever is higher) will be due from the Company.

(d) Conversion of Preference SharesPreference shareholders may convert their Preference Shares: (a) on a Listing; (b) onor after 3 August 2012 by notice to the Company; or (c) by prior notice on the date of aplacing of new share capital in the Company raising at least £50,000,000. Suchconversion occurring, in relation to (a) immediately before the Listing becomes effectiveand in relation to (c), immediately before such funding becomes effective.

The conversion of Preference Shares in circumstances set out in (a) above will becalculated by dividing the total issue price of Preference Shares being converted by thepreference shareholder by the listing price of an Ordinary Share on a Listing, such sumbeing rounded down to the nearest whole number.

The conversion of Preference Shares in circumstances set out in (c) above will becalculated by dividing the total issue price of the Preference Shares being converted bythe Preference Shareholder by the issue price subscription price payable for anOrdinary Share being allotted/issued on such funding, such sum being rounded down tothe nearest whole number.

The conversion of Preference Shares in circumstances set out in (b) above will becalculated by the conversion on the basis of one Ordinary Share for each PreferenceShare held.

On conversion, subject to the requirements of the 2006 Act, a dividend will be paid topreference shareholders.

(e) Disclosure of interests in sharesIf, at any time, the Board is satisfied that any member or other person appearing to beinterested in the shares of Eland has been duly served with a notice under section 793 ofthe 2006 Act and is in default for 14 days after the section 793 notice has been given insupplying to Eland the information thereby required, then the Board may direct that, inrespect of the shares in relation to which the default has occurred:

(i) if the default shares in which any one person is interested or appears to Eland tobe interested represent less than 0.25 per cent. (in nominal value) of the issuedshares of the class, the holders of the default shares shall not be entitled, in respectof those shares, to attend or vote either personally or by proxy at any generalmeeting or annual general meeting of Eland; and/or

(ii) if the default shares in which any one person is interested or appears to Eland tobe interested represent at least 0.25 per cent. (in nominal value) of the issuedshares of the class, the holders of the default shares shall not be entitled, in respectof those shares: (i) to attend or vote either personally or by proxy at any generalmeeting or annual general meeting of Eland; or (ii) to receive any dividend orother distribution; or (iii) to transfer or agree to transfer any of those shares or anyrights in them.

These restrictions shall continue for the period specified by the Board, being not morethan 7 days after the earlier of:

(A) Eland being notified that the default shares have been sold pursuant to anexempt transfer; or

(B) due compliance, to the satisfaction of the Board, with the section 793notice.

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The restrictions in (i) and (ii) above shall not prejudice the right of either the memberholding the default shares or, if different, any person having a power of sale over thoseshares to sell or agree to sell those shares under an exempt transfer. An “exempt transfer”being:

(i) a sale of the share on a recognised investment exchange (as defined in FSMA) inthe United Kingdom or on any stock exchange outside the United Kingdom onwhich shares of that class are listed or normally traded; or

(ii) a sale of the whole beneficial interest in the share to a person whom the Board issatisfied is unconnected with the existing holder or with any other personappearing to be interested in the share; or

(iii) acceptance of a takeover offer (as defined for the purposes Part 28 of the 2006Act).

(f) Transfer of sharesThe instrument of transfer of a certificated share may be in any usual form or in anyother form approved by the Board. An instrument of transfer shall be signed by or onbehalf of the transferor and, unless the share is fully paid, by or on behalf of thetransferee. The Board may, in its absolute discretion and without giving any reason,refuse to register any instrument of transfer of a certificated share on which Eland has alien or which is not fully paid, provided that, in the case of a class of shares which hasbeen admitted to trading on AIM, the refusal does not prevent dealings in shares fromtaking place on an open and proper basis. The Board may also refuse to register anyinstrument of transfer of a certificated share unless the instrument of transfer is left atthe office or at such other place as the Board may decide, for registration, accompaniedby the certificate for the shares to be transferred and such other evidence as the Boardmay reasonably require to prove the right of the title of the intended transferor or hisright to transfer the shares.

In addition the Board may refuse to register any transfer unless it is made:

(A) in respect of only one class of shares; and

(B) is in favour of not more than four transferees.

In addition, the Board may, in its absolute discretion and without giving any reason forits decision, refuse to register any transfer of an uncertificated share where permitted bythe 2006 Act and UK Listing Authority.

(g) Changes in share capitalSubject to the 2006 Act and without prejudice to the rights conferred on the holders ofany shares (which rights shall not be varied or abrogated except with any consent orsanction as required by the Articles), any share in Eland may be issued with, or haveattached to it, such rights or restrictions as Eland may by ordinary resolution determineor, if no such resolution is in effect or so far as the resolution does not make specificprovision, as the Board may determine. Subject to the provisions of the 2006 Act, anyresolution by Eland and the provisions in Eland’s Articles, the Board may offer, allot(with or without conferring a right of renunciation), grant options over or otherwise dealwith or dispose of any shares in Eland to such persons, at such times and generally onsuch terms as the Board may decide.

Eland may by ordinary resolution consolidate, divide or sub-divide all or any of its sharecapital. Subject to the provisions of the 2006 Act and any rights conferred on the holdersof any class of shares, Eland may by special resolution reduce its share capital, anycapital redemption reserve, share premium account or redenomination reserve in any

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way. Subject to and in accordance with the provisions of the 2006 Act and to any rightsconferred on the holders of any class of shares, Eland may purchase all or any of its ownshares of any class, including any redeemable shares.

Subject to the 2006 Act, any share may be issued on terms that it is to be redeemed oris liable to be redeemed at the option of Eland or the holder. The terms and conditionsand manner of redemption of such shares may be determined by the Board provided thatthis is done before the shares are allotted.

(h) Variation of rightsWhenever the capital of Eland is divided into different classes of shares, all or any of therights or privileges attached to any class of shares in issue may from time to time(whether or not Eland is being wound up) be varied in such manner as those rights mayprovide, or (if no such provision is made) either:

(A) with the written consent of the holders of three quarters in nominal value of theissued shares of that class (excluding any shares at that class held as treasuryshares); or

(B) with the authority of a special resolution passed at a separate general meeting orannual general meeting of holders of those shares.

The rights attaching to any class of shares are not, unless otherwise expressly provided,deemed to be varied by the creation or issue of further shares ranking pari passu withthem or by the purchase or redemption by Eland of any of its own shares.

(i) Lien, calls and forfeitureEland shall have a first and paramount lien on every share (not being a fully paid share)for all amounts payable (whether or not due) in respect of that share. The Board mayeither generally or in any particular case declare any share to be wholly or in part exemptfrom such lien. Unless otherwise agreed, the registration of a transfer of a share shalloperate as a waiver of Eland’s lien (if any) on that share. Eland may sell any sharesubject to a lien, in such manner as the Board may decide, if the sum payable is due andis not paid within 14 clear days after notice has been given to the shareholder or theperson entitled by transmission to the share demanding payment of that amount andgiving notice of intention to sell in default.

Subject to the terms of allotment, the Board may make calls on the members in respectof any moneys unpaid on their shares (whether in respect of the nominal amount orpremium) and each member shall (subject to his receiving at least 14 clear days’ noticespecifying when and where payment is to be made) pay to Eland as required by thenotice the amount called on his shares. If payment is not made when due, the Board maygive not less than 14 clear days’ notice requiring payment of the amount unpaid togetherwith any interest which may have accrued. If that notice is not complied with, any sharein respect of which it was given may, at any time before the payment required by thenotice has been made, be forfeited by a resolution of the Board. The forfeiture shallinclude all dividends or other moneys payable in respect of the forfeited shares whichhave not been paid before the forfeiture.

(j) Untraced shareholdersEland shall be entitled to sell, in such manner as the Board may decide and at the bestprice it considers reasonably obtainable at that time, any share of a member or the shareto which a person is entitled by transmission if:

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(A) during a period of 12 years at least three cash dividends have become payable inrespect of the share to be sold and have been sent by Eland in accordance with itsArticles;

(B) during that period of 12 years no cash dividend payable in respect of the share hasbeen claimed, no cheque, warrant, order or other payment for a dividend has beencashed, no dividend sent by means of a funds transfer system has been paid andno communication has been received by Eland from the member or the personentitled by transmission to the share;

(C) on or after the expiry of that period of 12 years Eland has publishedadvertisements both in a national newspaper and in a newspaper circulating in thearea in which the last known address of the member or person entitled bytransmission to the share or the address at which notices may be given inaccordance with the Articles is located, in each case giving notice of its intentionto sell the share; and

(D) during the period of 3 months following the publication of those advertisementsand after that period until the exercise of the power to sell the share, Eland hasnot received any communication from the member or the person entitled bytransmission to the share.

Eland shall be obliged to account to the person entitled to the share at the date of salefor an amount equal to the net proceeds of sale and shall be deemed to be his debtor andnot a trustee for him, in respect of them.

(k) Members resident abroadMembers with registered addresses outside the United Kingdom are not entitled toreceive notices or other documents from Eland unless they have given Eland an addresswithin the United Kingdom (not being an electronic address) at which such notices orother documents may be served.

(l) Convening of Annual General Meeting and general meetingsThe Board shall convene and Eland shall hold Annual General Meetings in accordancewith the 2006 Act.

The Board may convene a general meeting whenever and wherever it thinks fit.

A general meeting shall not conduct any business unless a quorum is present. Except asotherwise provided by the Company’s Articles, two members present in person or byproxy or by a duly authorised representative (where such member is a corporation) andentitled to vote on a poll shall be a quorum.

An Annual General Meeting and all other general meetings of Eland shall be called byat least 21 clear days’ notice, save that general meetings of Eland which are not AnnualGeneral Meetings may be held on 14 clear days’ notice provided that, in accordancewith the 2006 Act, (i) Eland allows members to vote by electronic means accessible toall members who hold shares that carry voting rights at general meetings and (ii) aspecial resolution reducing the period of notice to not less than 14 clear days has beenpassed either at the immediately preceding Annual General Meeting or a generalmeeting of Eland held since that Annual General Meeting.

The notice shall specify the time, date and place of the meeting, the general nature ofthe business of the meeting and that a member entitled to attend and vote may appointone or more proxies. A notice convening an Annual General Meeting shall state that themeeting is an Annual General Meeting. A notice convening a meeting to pass a special

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resolution shall specify the intention to propose the resolution as such and the text of theresolution, subject to the exceptions in the 2006 Act.

For the purposes of determining which persons are entitled to attend or vote at anygeneral meeting, and how many votes such persons may cast, Eland may specify in thenotice of the general meeting a time, not more than 48 hours before the time fixed forthe general meeting, by which a person must be entered on the register in order to havethe right to attend or vote at the general meeting. The accidental omission to give noticeof a general meeting to, or the non-receipt of notice by, any person entitled to receivethe notice shall not invalidate the proceedings of that meeting.

(m) DirectorsNumber of Directors

The Directors shall be not less than 6 and not more than 9 in number. Eland may byordinary resolution vary the minimum and/or the maximum number of Directors.

Directors’ shareholding qualification

A Director shall not be required to hold any shares in Eland.

Appointment of Directors

Directors may be appointed by Eland by ordinary resolution of Eland or by the Board.

Executive Directors

Subject to the provisions of the 2006 Act, the Board may appoint one or more Directorsto hold any executive office with Eland for such period and on such terms as it maydecide and may revoke or terminate any appointment so made without prejudice to anyclaim for damages for breach of any contract of service between the Director and Eland.The Board may entrust to and confer upon a managing director or such executiveDirector any of the powers and discretions exercisable by them upon such terms andconditions and with such restrictions as they may think fit. The remuneration of aDirector appointed to any executive office shall be fixed by the Board and may be byway of salary, commission, participation in profits or otherwise and either in addition toor inclusive of his remuneration as a Director.

A Director appointed as executive chairman, chief executive or managing director shallautomatically cease to hold that office if he ceases to be a Director but without prejudiceto any claim for damages for breach of any contract of service between him and Eland.

Retirement of Directors

At every Annual General Meeting of Eland, any Director then in office who has beenappointed by the Board since the previous Annual General Meeting shall retire fromoffice but shall be eligible for re-appointment. Subject to the Articles, at each AnnualGeneral Meeting a minimum number equal to one third of the Directors shall retire byrotation but shall be eligible for reelection.

If Eland, at any meeting at which a Director retires in accordance with the Articles, doesnot fill the office vacated by such Director, the retiring Director, if willing to act, shallbe deemed to be re-appointed, unless at the meeting a resolution is passed not to fill thevacancy or to appoint another person in his place or unless the resolution to re-appointhim is put to the meeting and lost. In the event of the vacancy not being filled at suchmeeting, it may be filled by the Directors as a casual vacancy in accordance with theArticles.

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Removal of Directors

Eland may, by ordinary resolution of which special notice has been given in accordancewith the 2006 Act, remove any Director before the expiration of his period of officenotwithstanding anything in the Articles or in any agreement between him and Eland.

A Director may also be removed from office by giving him notice to that effect signedby or on behalf of all the other Directors (or their alternates).

Vacation of office

The office of a Director shall be vacated if:

(A) he gives Eland written notice of his wish to resign; or

(B) he is or may be suffering from a mental disorder and in relation to that disordereither he is admitted to hospital for treatment or an order is made by a court(whether in the United Kingdom or elsewhere) for his detention or for theappointment of some person to exercise powers with respect to his property oraffairs and, in either case, the Board resolves that his office be vacated; or

(C) for more than six (6) months both he and any alternate Director appointed by himare absent without special leave of absence from the Board, from Board meetingsheld during that period and the Board resolves that his office be vacated; or

(D) he becomes bankrupt or makes any arrangement or composition with his creditorsgenerally; or

(E) he is prohibited by a law from being a Director; or

(F) he is removed from office pursuant to the Articles.

Alternate Director

Each Director (other than an alterative director) may appoint by notice in writinganother Director or any person to be his alternate and may remove such an alternateDirector. If the alternate Director is not already a Director, the appointment shall besubject to the approval of a majority of the Directors or a resolution of the Board.

Every person acting as an alternate Director shall have one vote for each Director forwhom he acts as alternate, in addition to his own vote if he is also a Director, but he shallcount as only one for the purpose of determining whether a quorum is present.

Every appointment or removal of an alternate Director shall be made by notice in writingand shall be effective (subject to the approval of the Board in the case of an alternatewho is not a Director) on receipt by the secretary of the notice.

Proceedings of the Board

Subject to the Articles, the Board may meet for the despatch of business, adjourn andotherwise regulate its meetings as it thinks fit. Notice of a Board meeting may be givento a Director personally or by word of mouth or given in writing or by electronic meansto him at such address as he may from time to time specify for this purpose. The quorumnecessary for the transaction of the business of the Board may be fixed by the Board and,unless so fixed at any other number not being less than two, shall be two. A meeting ofthe Board at which a quorum is present shall be competent to exercise all the powers,authorities and discretions vested in or exercisable by the Board.

The Board may appoint a Director to be the chairman or one or more deputy chairmenand may at any time remove him from that office. Questions arising at any meeting ofthe Board shall be determined by a majority of votes. In the case of an equality of votesthe chairman of the meeting shall have a second or casting vote.

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A Board meeting may consist of a conference between Directors some or all of whomare in different places provided that each Director may participate in the business of themeeting whether directly, by telephone or by other electronic means which enables himto hear each of the other participating Directors addressing the meeting and if he sowishes, to address all of the other participating Directors simultaneously. A person soparticipating shall be deemed to be present at the meeting and shall be entitled to voteand to be counted in the quorum.

A resolution which is signed or approved by all the Directors entitled to vote on thatresolution or a duly appointed committee for the time being shall be as valid andeffectual as if it had been passed at a Board meeting duly called and constituted.

The Board may delegate any of its powers, authorities and discretions (with power tosub-delegate) to any committee, consisting of such person or persons (whether or notDirectors) as it thinks fit, provided that the majority of persons on any committee areDirectors. The proceedings of any committee consisting of two or more members shallbe governed by the regulations imposed on it by the Board and by the Articles regulatingthe proceedings of the Board so far as the same are capable of applying.

The Board may entrust to and confer upon any Director any of its powers, authoritiesand discretions (with power to sub-delegate) on such terms and conditions as it thinksfit and may revoke or vary all or any of them, but no person dealing in good faith shallbe affected by any revocation or variation.

The Board may establish any local or divisional board or agency for managing any ofthe affairs of Eland whether in the United Kingdom or elsewhere and may appoint anypersons to be members of a local or divisional board, or to be managers or agents, andmay fix their remuneration.

Remuneration of Directors

The Directors (other than any director who for the time being holds an executive officeor employment with the Company or a subsidiary of the Company) shall be paid out ofthe funds of the Company by way of remuneration for their services as directors, suchfees being those appropriate for a company admitted to trading on AIM and in line withthe recommendations of the Company’s remuneration committee (or as the Companymay, by ordinary resolution, determine) and the directors may decide how such feesshall be divided among them in such proportion and manner as they may agree or, failingagreement, equally. Any fee payable under this article shall be distinct from anyremuneration or other amounts payable to a director under other provisions of thesearticles and shall accrue from day to day.

Pensions and other benefits

The Board may exercise all the powers of Eland to pay, provide or procure the grant ofpensions or other retirement or superannuation benefits and death, disability or otherbenefits, allowances or gratuities to any person who is or has been at any time a Directorof Eland or in the employment or service of Eland or of any company which is or was asubsidiary of or associated with Eland or of the predecessors in business of Eland or anysuch subsidiary or associated company or the spouses, civil partners, former spouses,former civil partners, children and other relatives or dependants of any such person. Forthat purpose the Board may procure the establishment and maintenance of, or participatein, or contribute to, any non-contributory or contributory pension or superannuationfund, scheme or arrangement and pay any insurance premiums.

The Directors may exercise all the powers of Eland to purchase and maintain insurancefor or for the benefit of any persons who are or were at any time Directors of Eland.

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The Directors may exercise all the powers of Eland to establish, maintain, and contributeto any scheme for encouraging or facilitating the holding of shares in Eland or in anyconnected company by or for the benefit of current or former Directors of Eland, and inconnection with any such scheme, to establish, maintain and contribute to a trust for thepurpose of acquiring and holding shares in Eland or any connected company.

Permitted interests of Directors

Subject to the provisions of the 2006 Act, and provided he has declared the nature of hisinterest to the Board as required by the 2006 Act, a Director is not disqualified by hisoffice from contracting with Eland in any manner, nor is any contract in which he isinterested liable to be avoided, and any Director who is so interested is not liable toaccount to Eland for any benefit resulting from the contract by reason of the Directorholding that office or of the fiduciary relationship thereby established.

A Director may hold any other office or place of profit with Eland (except that ofauditor) in conjunction with his office of Director for such period (subject to the 2006Act) and upon such terms as the Board may decide and may be paid such extraremuneration for so doing as the Board may decide, either in addition to or in lieu of anyremuneration provided for by the Articles. A Director may also be or become a Directoror member or employee or other officer of, or otherwise be interested in, any othercompany in which Eland may be interested (directly or indirectly) as a holder orotherwise of any parent undertaking or subsidiary undertaking of any parent undertakingof Eland and shall not be liable to account to Eland, by reason of his office for anybenefit received by him.

Subject to declaring the nature of his interest to the Board, a Director may act by himselfor his firm in a professional capacity for Eland (otherwise than as auditor) and he or hisfirm shall be entitled to remuneration for professional services as if he were not aDirector.

Restrictions on voting

No Director may vote (or be counted in the quorum at a meeting) in relation to anyresolution of the Board concerning his own appointment (including fixing or varying ofits terms), or the termination of his own appointment, as the holder of any office or placeof profit with Eland or any other company in which Eland is interested. However, whereproposals are under consideration concerning the appointment (including the fixing orvarying of its terms) or the termination of the appointment, of two or more Directors tooffices or places of profit with Eland or any other company in which Eland is interested,those proposals may be divided and a separate resolution may be put in relation to eachDirector and in that case each of the Directors concerned shall be entitled to vote inrespect of each resolution unless it concerns his own appointment or the termination ofhis own appointment.

Except as mentioned below, no Director may vote on, or be counted in a quorum inrelation to, any resolution relating to any contract or arrangement or other proposal inwhich he (together with any interest of any connected person of his) has to hisknowledge a material interest which may reasonably be regarded as likely to give rise toa conflict of interest and, if he does so, his vote shall not be counted. These prohibitionsdo not apply to a Director in relation to:

(A) the giving to him of any guarantee, indemnity or security in respect of money lentor obligations incurred by him or any other person at the request of or for thebenefit of Eland or any of its subsidiary undertakings;

(B) the giving of any guarantee, indemnity or security in respect of a debt orobligation of Eland or any of its subsidiary undertakings which he has himself

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assumed responsibility in whole or in part under a guarantee, indemnity or by thegiving of security;

(C) any issue or offer of shares, debentures or other securities of Eland or any of itssubsidiary undertakings in respect of which he is or may be entitled to participatein his capacity as a holder of any such securities or as an underwriter or sub-underwriter;

(D) any contract in which he is interested by virtue of his interest in shares ordebentures or other securities of Eland or otherwise in or through Eland;

(E) any contract concerning any other company in which he and any connectedpersons do not to his knowledge hold an interest in shares (within the meaning ofPart 22 of the 2006 Act) representing one per cent. or more of any class of theequity share capital of that company or of the voting rights available to membersof that company;

(F) any arrangement for the benefit of employees of Eland or any of its subsidiaryundertakings which does not accord to him any privilege or benefit not generallyaccorded to employees to whom the arrangement relates;

(G) the purchase or maintenance of any insurance for the benefit of Directors or forthe benefit of persons including Directors; and

(H) any proposal concerning the funding of expenditure by one or more Directors ondefending proceedings against him or them or doing anything to enable suchDirectors incurring such expenditure.

Eland may by ordinary resolution suspend or relax the above provisions to any extent orratify any contract not duly authorised by reason of a contravention of such provisions.

(n) Borrowing and other powersThe business of Eland shall be managed by the Board which may exercise all the powersof Eland, subject to the 2006 Act, the Articles and any ordinary resolution of Eland. TheBoard may exercise all the powers of Eland to borrow money and to mortgage or chargeall or any part of its undertaking, property and assets (both present and future) anduncalled capital and, subject to the 2006 Act, to issue debentures and other securities,whether outright or as collateral security for any debt, liability or obligation of Eland orof any third party.

The Board shall restrict the borrowings of Eland and exercise all voting and other rightsor powers of control exercisable by Eland in relation to its subsidiary undertakings (ifany) so as to secure that the aggregate principal amount outstanding at any time inrespect of all borrowings by the Group (exclusive of any borrowings which are owed byone member of the Group to another) after deducting the amount of cash deposited willnot, without the previous sanction of Eland in general meeting, exceed an amount equalto two times the adjusted capital and reserves, or any higher limit fixed by ordinaryresolution of Eland which is applicable at the relevant time.

(o) Winding upIf the Company shall be wound up, the surplus assets remaining after payment of allcreditors, including the repayment of bank borrowings, shall be first used to paypreference shareholders an amount equal to the issue price of each Preference Shareheld (being £1.00 per Preference Share) and the aggregate amount of any accrualsand/or unpaid amounts of Preference Share dividend and, secondly, the balance of suchassets (if any) divided pari passu among the Ordinary Shareholders pro rata to theirholdings of those shares.

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6 Significant Shareholders

6.1 In addition to the interests of the Directors disclosed in paragraph 7.1 below, as at the date of thisdocument, insofar as is known to the Company, the following persons were, or will at Admission, bedirectly or indirectly interested (within the meaning of Part VI of FSMA and DTR5) in three per cent.or more of the issued share capital of the Company, excluding for these purposes the Non-VotingRight Ordinary Shares: Number of Percentage of Ordinary issued Percentage Shares share Number of of Issued (at the date capital (at the Ordinary Ordinary of this date of this Shares (on Shares (on Name Document) Document) Admission)(1) Admission)(1)

Davycrest Nominees 330,000 12.0% 3,727,726 2.8%Seaspin Pty Ltd as Trustees for the

Aphrodite Trust 212,500 7.7% 425,000 0.3%Richard Griffiths 210,000 7.6% 13,595,875(3) 10.1%Moreno Energy Inc 150,000 5.5% 300,000 0.2%Providence Capital Partners LLC 140,000 5.1% 280,000 0.2%Emeka Offor 130,000 4.7% 260,000 0.2%Helios Natural Resources Limited – – 39,600,000 29.4%Henderson Volantis – – 19,250,000 14.3%Solstice International Investments Inc(2) – – 13,658,251 10.1%Artemis Investment Management – – 5,287,499 3.9%HMS Lux S.A. – – 4,500,000 3.3%

(1) Includes the conversion into Ordinary Shares of the First Loan Notes, the Third Loan Notes and the full conversioninto Ordinary Shares of interest payable to the holders of First Loan Notes, the former holders of Second Loan Notesand the holders of Third Loan Notes. This number also assumes the full conversion of the Preference Shares intoOrdinary Shares, which is expected to occur on or shortly after Admission.

(2) The Directors understand that Solstice is beneficially owned by Mr Alshair Fiyaz.

(3) 2,703,204 Ordinary Shares are held in Mr Griffiths' own name. 892,671 Ordinary Shares and 4,000,000 OrdinaryShares are held in the name of Ora Capital (Guernsey) and Cream Capital Limited respectively (each of Ora Capital(Guernsey) and Cream Capital Limited being companies in which Mr Griffiths owns more than 50 per cent. of theissued share capital) and 6,000,000 Ordinary Shares are held by Cantor Fitzgerald Europe Limited in whichMr Griffiths holds a corresponding derivative giving him an economic interest in the 6,000,000 Ordinary Shares.

6.2 Save as disclosed in paragraph 6.1, so far as the Directors are aware, there are no persons who are, atthe date of this Document, or will be immediately following Admission, interested directly orindirectly in three per cent. or more of the issued share capital of the Company or who, directly orindirectly, jointly or severally, exercise or could exercise control over the Company.

6.3 Save for the Non-Voting Right Ordinary Shares, the persons referred to in this paragraph 6 do not havevoting rights in respect of the share capital of the Company (issued or to be issued) which differ fromany other Shareholder.

6.4 Except for the provisions of the Articles described in paragraph 5 of this Part 8, the Directors are notaware of any arrangements, the operation of which may at a subsequent date result in a change ofcontrol of the Company.

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7 Directors and other interests

7.1 As at the date of this Document, the interests of the Directors (including the interests of their spousesand infant children and the interests of any person connected with him (within the meaning of sections252 to 254 of the 2006 Act)) are as follows:

On the date of this Document Upon Admission(3)

Percentage of Percentage of Company’s Company’s issued share issued share capital capital Percentage represented represented of Company’s by options Percentage of by options Number of issued over Number of Company’s over Ordinary ordinary Ordinary Ordinary issued OrdinaryDirector Shares share capital Shares Shares share capital Shares

Ian Leslie Blair 450,000 16.4% 0.8% 600,349 0.5% 3.0%George Walter

Mitchell Maxwell 225,000 8.2% 0.7% 366,606(2) 0.3% 2.6%Henry George Wilson 225,000 8.2% 0.5% 337,657(1) 0.3% 1.9%Gilles Jacobus Krijger – – – 20,000 0.01% 0.1%Robert Alexander Lambert – – – 10,000 0.01% –Louis Emmanuel Castro – – – 20,069 0.01% 0.1%Russell Seth Harvey – – – 10,000 0.01% –

(1) 100,000 Ordinary Shares are registered in the name of Roselea Limited, 144,794 Ordinary Shares are registered in thename of Park Securities Limited and 92,863 Ordinary Shares are registered in the name of Henry George Wilson.

(2) 140,209 Ordinary Shares are held by members of Mr Maxwell’s Family (as defined by the AIM Rules).

(3) Assumes full conversion of the Preference Shares into Ordinary Shares, which is expected to occur on or shortly afterAdmission.

7.2 Save as disclosed above, no Director nor any member of his immediate family or person connectedwith him (within the meaning of sections 252 to 254 of the 2006 Act) holds or is interested, whetherbeneficially or non-beneficially, directly or indirectly, in any shares, options over shares, voting rightsin respect of shares or securities convertible into shares of the Company or any of its subsidiaries.

7.3 No Director is or has been interested in any transactions which are or were unusual in their nature orconditions or which are or were significant to the business of the Company effected during the currentor immediately preceding financial year or which were effected during an earlier financial year andwhich remain in any respect outstanding or unperformed.

7.4 There are no outstanding loans or guarantees provided by the Company to or for the benefit of anyDirectors.

7.5 Save as disclosed below, none of the Directors or Proposed Directors have any potential conflicts ofinterest between their duties to the Company and their private interests and/or other duties they mayalso have:

7.5.1 Mr. Wilson is a director on the board of Park Securities Limited and a partner in Park Holdings.Under the Park Holdings Agreement and the Park Securities Agreement described inparagraphs 11.3.13 and 11.3.14 of this Part 8 these companies provided certain investment andadvisory services to the Company. This may give rise to a conflict of interest, notwithstandingthat these agreements have been terminated.

7.5.2 Mr. Blair is a director of ERHC Energy Inc, which operates a similar business to the Company.Mr. Blair has undertaken to resign from ERHC Energy Inc. on Admission.

7.5.3 Mr. Castro was a partner at Matrix Corporate Capital LLP and Matrix has been paid andfollowing Admission will be paid certain fees and commissions as more fully set out in thesummary of the Lead Manager Agreement and the Second Lead Manager Agreement atparagraphs 11.3.7 and 11.3.8 of Part 8 of this Document.

7.6 No Director, nor any member of his immediate family, nor any person connected with him (within themeaning of Sections 252 to 254 of the 2006 Act), has a Related Financial Product (as defined in the

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AIM Rules for Companies) referenced to the Ordinary Shares or the Non-Voting Right OrdinaryShares.

8 Further information about the Directors

8.1 The full names, ages, functions and dates of appointment of the Directors are as follows:

Date of Appointment as

Name Age Functions in the Company Director

Ian Leslie Blair 59 Managing Director 28/9/2009George Walter Mitchell Maxwell 46 Chief Financial Officer 28/9/2009Gilles Jacobus Krijger 64 Technical Director 8/2/2012Henry George Wilson 59 Non-executive Chairman 26/5/2010Robert Alexander Lambert 63 31/8/2012

Louis Emmanuel Castro 54 Non-executive Director 31/8/2012Russell Seth Harvey 60 Non-executive Director 31/8/2012

8.2 The Directors currently hold, and have during the five years preceding the date of this Document held,the following directorships or partnerships in addition to their directorships of the Company and itssubsidiary undertakings:

Current directorship/ Previous directorships/Name partnerships partnerships within last 5 years

Feltz Consultancy Limited –

Elcrest Exploration and Production(Nigeria) Limited

Elstar Exploration and Production(Nigeria) Limited

Westport Oil LimitedEland Oil and Gas (Nigeria) Limited

Deeside Crewing Services LimitedOffshore Support Vessels IV LimitedOffshore Support Vessels V LimitedOffshore Support Vessels VI LimitedOffshore Support Vessels VII LimitedOffshore Support Vessels VIII LimitedVroon Offshore Services LimitedVroon Offshore UK LimitedVroon Offshore (Holdings) LimitedBritannia Marine LimitedThe Emergency Response and

Rescue Vessel Association LimitedABB VETCO Gray UK Ltd

George WalterMitchell Maxwell

Gilles JacobusKrijger

Ian Leslie Blair ERHC Energy Inc1

Elcrest Exploration and Production(Nigeria) Limited

Elstar Exploration and Production(Nigeria) Limited

Addax Petroleum InternationalAddax Petroleum Nigeria LimitedWestport Oil Limited

Non-executive Director andSenior Independent Director

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1 Les Blair has undertaken to resign from this position on Admission.

Current directorship/ Previous directorships/Name partnerships partnerships within last 5 years

Forum Energy PLC

8.3 As at the date of this Document, save as set out in paragraph 8.4 below, none of the Directors have:

8.3.1 any unspent convictions in relation to indictable offences;

8.3.2 been made bankrupt nor been the subject of any form of individual voluntary arrangement;

8.3.3 been a director of a company at the time of, or within the 12 months preceding the date of, thatcompany being the subject of a receivership, compulsory liquidation, creditors’ voluntaryliquidation, administration, company voluntary arrangement or any composition orarrangement with its creditors generally or any class of its creditors;

8.3.4 been a partner in a partnership at the time of, or within 12 months preceding the date of, thatpartnership being placed into compulsory liquidation or administration or partnershipvoluntary arrangement;

Henry GeorgeWilson

Roselea LimitedRoselea Developments LimitedPark Securities LimitedFairplay Securities LimitedMardall Securities A LimitedNew Town Property Development

LLPPark HoldingsEland Oil & Gas Limited

Sangster & May LimitedForum Energy PlcFlow Energy Limited (Australian)Sterling Energy PlcSterling Energy (UK) LimitedBow Energy Resources (Pakistan)

SRL (Barbados)Ocean Pakistan Limited (BVI)Orient Petroleum (Central Asia)

Limited (BVI)Sterling Energy (International)

LimitedSterling Energy (Mauritania) Limited

JerseySterling Oil LimitedSterling Energy (North America)

LimitedSterling Northwest Africa Holdings

LimitedSterling Energy (Mauritania) Limited

– UKSterling Energy USA IncSterling Energy, Inc – USASterling Oil & Gas Pty LtdSterling USA Operating, Inc – USARIMCO Production Company Inc –

USAWhittier Energy Company – USAWestmount Resources, Inc – USA

Petra Petroleum Inc.Ipex Resources LimitedWestport Oil Limited

GB Petroleum International LimitedGB Petroleum Zambia Limited

Robert AlexanderLambert

Baltic Oil Terminals plcNorthland Capital Partners

Matrix Corporate Capital LLCLouis EmmanuelCastro

Russell SethHarvey

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8.3.5 had any asset of his subject to a receivership or been a partner in a partnership at the time of orwithin the 12 months preceding any asset of such partnership being subject to a receivership;or

8.3.6 been the subject of any public criticism by any statutory or regulatory authority (includingrecognised professional bodies) nor disqualified by a court from acting as a director of acompany or from acting in the management or conduct of the affairs of any company.

8.4 8.4.1 Harry Wilson was a non-executive director of Ocean Recognition Limited, having made afinancial investment in the company. The company then suffered trading difficulties andfollowing legal advice was put into liquidation on 4 August 1999.

8.4.2 Harry Wilson was also a non-executive director of Impulse Entertainment Limited, havingmade a financial investment in the company. The company suffered trading difficulties andfollowing legal advice was put into liquidation on 21 March 2001.

9 Directors’ service agreements and letters of appointment

9.1 Service agreements and supplementary documentation

The following service agreements will be entered into between the Company and its ExecutiveDirectors, Ian Leslie Blair, George Maxwell and Gilles Krijger (the “Executive(s)”) on Admission.

Mr. Blair’s position is Chief Executive Officer and Mr. Maxwell’s is Chief Financial Officer. For thepurposes of continuous employment, Mr. Blair’s and Mr. Maxwell’s employment with the Companyshall be deemed to have commenced on 1 July 2010. Mr. Blair is entitled to an annual base salary of£253,165 (gross) and Mr. Maxwell is entitled to an annual base salary of £220,000 (gross).Mr. Krijger’s position will be Executive Technical Director and he will receive an annual base salaryof £99,800 (gross) for working two days per week.

The service agreements can be terminated by either the Company giving the Executive not less than12 months’ prior notice in writing or the Executive giving the Company not less than six (6) months’prior notice in writing. Save in the case of the first successful listing of all or any of the shares in thecapital of the Company on AIM, if there is a change of control of the Company, the Executive or theCompany may, within three months following the change of control, serve a notice in writing toterminate the appointment. At the end of this three month notice period the appointment shallterminate and the Company shall pay the Executive the termination payment (the sum equal to hisgross annual salary together with the cash equivalent of all other benefits which he would have beenentitled to receive during the 12 month period following expiry of such notice less any applicableincome tax and national insurance contributions that would have been payable had the appointmentcontinued for that period of 12 months).

In addition to the salary, the Executives are also entitled to participate in the Founders’ incentivescheme and long term incentive plans of the Company as approved from time to time and may in thediscretion of the Company be paid a bonus. The Executives are also entitled to participate in theCompany’s permanent health insurance scheme, the Company’s life insurance scheme (up to amaximum total cost to the Company of £2,000 per annum or such higher figure as approved by theboard of directors of the Company) and the Company’s private medical insurance scheme (up to amaximum total cost to the Company of £10,000 per annum or such higher figure as approved by theBoard). The Company shall supply the Executive with a car. The Executives are entitled to Companypension contributions of an amount equal to 11 per cent. of their salary. The Executives are subject tonon-compete undertakings for six months following termination and are subject to restrictions onhaving outside interests.

Secondment Letter – Ian Leslie Blair

Mr. Blair shall enter into a secondment letter on Admission in relation to Mr. Blair’s secondment toAbuja in Nigeria for such period as shall be agreed between Mr. Blair and the Company(“Secondment”). During the Secondment the terms of Mr. Blair’s service agreement (see section 9.1

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above) shall be supplemented and/or amended by various terms, including that Mr. Blair’s annualsalary shall comprise an additional sum equivalent to 45 per cent. of his salary. The Company shallbe responsible for and will pay, on Mr. Blair’s behalf, all tax or other social security contributions asare necessary in Nigeria. Mr. Blair shall also be entitled to other benefits, including without limitation,travel, health and transport in line with the oil industry expatriate remuneration in Nigeria. TheCompany may at any time, but by giving not less than 30 days’ prior written notice, terminate theSecondment and the Company has the right to call upon Mr. Blair to return to work with or reassignhim to any group company or branch thereof.

9.2 Appointments of Executive and Non-Executive Directors

The following letters of appointment will be entered into between the Company, the Executives andthe Non-Executive Directors on Admission:

9.2.1 Appointment of the Executives – Ian Leslie Blair, George Maxwell and Gilles Krijger

The Executive will spend a minimum of four (4) days a month working for the Company, forwhich he is entitled to a director’s fee of £25,000 per annum.

Either party may terminate by giving the other party not less than three (3) months’ priorwritten notice. The appointment will automatically terminate should the shareholders not re-elect the Executive as a director in accordance with the Articles.

9.2.2 Appointment of Non-Executive Chairman – Harry Wilson and of Non-Executive Directors –Louis Castro, Robert Lambert and Russell Harvey

The appointment of the Non-Executive Chairman and the Non-Executive Directors will takeeffect from Admission. The Non-Executive Chairman will spend a minimum of three (3) daysa month working for the Company and will chair the Board and general meetings of theCompany and, if required, meetings of the various committees for which he is entitled to adirector’s fee of £60,000 per annum. The other Non-Executive Directors will spend a minimumof two (2) days a month working for the Company. Mr. Castro will be entitled to a director’sfee of £30,000 per annum. Mr. Lambert and Mr. Harvey will each be entitled to a director’s feeof £45,000 per annum. If either the Non-Executive Chairman or Non-Executive Directorscommit excess time per month, they will be entitled to an additional fee at a pro rata rate of£1,500 per day. They will also be paid an additional fee of £2,000 per annum for each of theboard committees that they participate in.

Either party may terminate by giving the other party not less than three (3) months’ priorwritten notice. The appointment will automatically terminate should the shareholders not re-elect the Non-Executive Chairman or Non-Executive Directors as a director in accordance withthe Articles.

9.3 It is estimated that the aggregate remuneration (including pension fund contributions and benefits inkind, but excluding bonuses payable to the Directors) in respect of the current financial year (underthe arrangements in force at the date of this Document) is expected to be £1.03 million.

9.4 Save as disclosed in paragraphs 9.1 and 9.2 above, there are no service agreements, existing orproposed, between any Director and the Company providing for benefits upon termination ofemployment.

10 Taxation

Please refer to Part 7 of this Document for a summary of the taxation relating to the United Kingdom.

11 Material Contracts

The following are the only contracts which have been entered into by the Company since its incorporationand which are or may be material or which have been entered into at any time by the Company and which

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contain any provision under which the Company has any obligation or entitlement which is, or may be,material to the Company as at the date of this Document:

11.1 Agreements relating to the Acquisition

The following are transaction agreements relating to the Acquisition:

11.1.1 Acquisition Agreement

On 31 March 2011 Elcrest entered into the Acquisition Agreement with the Sellers. Under thisagreement Shell, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited agree totransfer their aggregate 45 per cent. participating interest in OML 40 to Elcrest (excludingintellectual property). Elcrest is to acquire both the Sellers’ interests in OML 40 and the NewJoint Operating Agreement which will be entered into in respect of OML 40. The AcquisitionAgreement is subject to English law and ICC arbitration.

Under the terms of this agreement:

• Elcrest had agreed to offer employment to 25 of SPDC’s employees and to remuneratethem to at least the level they were at under SPDC for a period of at least 24 monthsfollowing Completion. Pursuant to the Acquisition Amendment Agreement, Elcrest is nolonger under such obligation and retains no on-going liability in respect of suchemployees other than a payment obligation referred to in paragraph 11.1.2 below.

• Any decommissioning costs in relation to OML 40 (whether incurred prior to, at or afterCompletion) will be Elcrest’s liability and responsibility.

• All environmental risk in relation to OML 40 (whether incurred prior to, at or afterCompletion) will be the liability and responsibility of Elcrest and the Sellers have notgiven any indemnities and have given very limited warranties in relation to anyenvironmental issues/risk.

• Elcrest is liable for all claims, costs, charges, expenses, obligations and liabilitiesrelating to OML 40 that are attributable to the period from and after Completion andagrees to indemnify the Sellers in relation to the same.

• Elcrest is liable for all claims, costs, charges, expenses, obligations and liabilities inrespect of tax relating to OML 40 that are attributable to the period from and afterCompletion.

• The Sellers are required to perform prescribed tasks in respect of OML 40 betweensigning and Completion, and Elcrest is required to indemnify SPDC against all costs andexpenses it incurs in complying with certain information and consultation obligations.

Elcrest warranted on signing that it had the necessary capacity and authority to enter into theAcquisition Agreement, as well as warranting that it would have, on Completion, sufficientfinancial resources to meet the balance of the consideration.

The Sellers’ total financial liability for any claims under the Acquisition Agreement is limitedto 50 per cent. of the Acquisition Price (other than warranties relating to title, which is limitedto 100 per cent. of the Acquisition Price). Any claims to be brought against the Sellers must bemade within one year of Completion. Any claim of less than US$500,000 shall be disregarded.The Sellers shall not be liable until all claims exceed an aggregate of US$3.5 million and thenonly to the extent of such excess.

Elcrest has agreed to assume a proportion of the Sellers' domestic gas supply obligations whichhave been determined by the DPR (as 3 MM scf/d for 2012 and 4 MM scf/d for 2012) andnotified to NPDC on behalf of it as Operator and Elcrest as non-operator.

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Completion has not yet taken place but is subject only to the convening of a completionmeeting at which the agreed form Completion Documentation will be executed by the Sellers,Elcrest, NNPC and NPDC (as the case may be).

11.1.2 Acquisition Amendment Agreement

On 23 August 2012 Elcrest entered into the Acquisition Amendment Agreement with theSellers under which it was agreed that (a) the Sellers and Elcrest extend the longstop date forCompletion under the Acquisition Agreement to 21 September 2012; (b) the Sellers and Elandopen in their joint names the Acquisition Escrow Account(s) on the terms of the AcquisitionEscrow Account Agreement and (c) Elcrest must (or must procure the) deposit in theAcquisition Escrow Account(s) of an amount in aggregate equal to US$138.6 million by nolater than 2 Business Days prior to Completion. In addition, Elcrest shall not later than3 months after Completion pay the Sellers the amount of US$1,500,000, being a proportion ofthe cost of disengagement of the SPDC employees who will not transfer to Elcrest. The levelof this liability is less than Elcrest's liability would have been in respect of the assumption ofsuch employees as originally required by the Acquisition Agreement.

11.1.3 Acquisition Escrow Account Agreement

The Company entered into the Acquisition Escrow Account Agreement with the Sellers andSCB (as Escrow Agent) on 23 August 2012. The Acquisition Escrow Account Agreementprovides that the balance of the consideration payable under the Acquisition Agreement (beingUS$138.6 million) is held by the Escrow Agent in two accounts (a dollar account and a sterlingaccount). If Completion occurs prior to the Escrow Deadline then US$138.6 million will betransferred to the Sellers (in proportion to their interests in OML 40) in satisfaction of thebalance of the consideration and excess capital amounts standing to the credit of theAcquisition Escrow Account(s) together with interest will be transferred to the Company. IfCompletion does not occur by the Escrow Deadline then all monies standing to the credit ofthe Acquisition Escrow Account(s) together with any accrued interest will be returned to theEscrow Receipts Placees in proportion to their funding of the Acquisition Escrow Account(s).The Acquisition Escrow Account Agreement contains provisions for the conversion of moniesin the sterling account into US dollars if Completion occurs and standard escrow terms andconditions including template notification certificates and release notices. The Company isresponsible for the Escrow Agent’s fees (US$5,000).

11.1.4 Escrow Receipts

The escrow receipts to be issued by the Company to each Escrow Receipts Placees setting outconfirmation of receipt by the Escrow Agent of the Escrow Monies and setting out the termson which the Escrow Monies are either provided to the Sellers or returned to the EscrowReceipts Placees. The escrow receipt sets out certain undertakings of the Company in relationto its obligations in the Acquisition Escrow Account Agreement.

11.2 Agreements in respect of Elcrest

11.2.1 Elcrest Shareholders’ Agreement

The Elcrest Shareholders’ Agreement between the Company, Starcrest and Elcrest dated24 March 2011 provides that the board of Elcrest consists of five directors, three nominated byStarcrest and two nominated by Eland. Decisions of the board of Elcrest must be approved byfour of the five directors of Elcrest. The quorum for all board meetings is five directors presentin person, by proxy or by video conference. In certain situations, the consent of the holders ofnot less than seventy-five per cent. of the share capital of Elcrest must be obtained. Thesesituations are as follows: (i) where a resolution proposed at a board meeting of Elcrest is notpassed; (ii) where shareholder consent is required pursuant to Nigerian law, English law, thearticles of association of the Company and/or Starcrest (in the case of Starcrest, neither Elandnor Elcrest has any control over amendments which may be made to Starcrest’s articles ofassociation); or (iii) where the requirements of any applicable stock exchange require it. The

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Company and Starcrest have agreed that Elcrest must seek external financing but that until suchfinancing is available, the Company shall provide a loan facility pursuant to the terms of theElcrest Loan Agreement (as more fully described in paragraph 11.2.4 below). Theshareholders’ agreement contains provisions relating to transfer of shares, deadlock and defaultunder the agreement together with change of control provisions. While the obligations ofElcrest are outstanding under such loan agreement, restrictions on the transferability ofStarcrest’s shares in Elcrest and its rights under the Elcrest Shareholders’ Agreement apply. Forso long as the Elcrest Loan Agreement (as more fully described in paragraph 11.2.4 below) isin place, Starcrest will be restricted from exercising certain of its rights it would otherwise beentitled to take, including (without limitation):

• Starcrest may not serve a default notice on the Company (which could result in theforced sale of the defaulting shareholders’ shares), which may be served by ashareholder of Elcrest in the event of the insolvency of the other party;

• serve a deadlock notice on the Company, which would otherwise trigger a processwhere, in the event that a board or shareholder resolution is not passed by the requisitemajority, the shares of one or other of the shareholders’ shares in Elcrest may betransferred; or

• serve a drag along notice on the Company, whereby each shareholder of Elcrest has aright (subject to waiver of pre-emption rights) to compel the other shareholder to sell itsshares to a bona fide arm’s length buyer.

The Company may serve a default notice, deadlock notice or drag along notice in relevantsituations from the outset. Whilst the representatives of the Company on the Elcrest board willbe subject to fiduciary duties and the Company is under an obligation to ensure directors giveeffect to the Elcrest Shareholders’ Agreement, the Elcrest Shareholders’ Agreement does notrequire any particular level of materiality to be exceeded before the Company can call an Eventof Default.

The Elcrest Shareholders’ Agreement contains other provisions that one would ordinarilyexpect to find in such an arrangement, such as pre-emption rights on any new issue or transferof shares, as well as a bespoke undertaking on each party to make any necessary adjustmentsto shareholdings to maintain the indigenous status of Elcrest.

In line with industry practice each of the shareholders in Elcrest (Eland and Starcrest) shall beentitled to charge for the cost of indirect services and related office costs which represent thecost of general assistance and support services provided by each shareholder and its affiliates.These costs are such that it is not practical to identify or associate them with specific projectsbut are for services which provide Elcrest with the necessary resources to carry out itscorporate operations.

Eland will be entitled to charge the higher of (a) five per cent. of its costs (including head officecosts) and (b) US$3 million per annum for the provision of administrative and technicalservices. Starcrest shall be entitled to charge US$ 3 million per annum. Any further charges byStarcrest require the approval of the board of Elcrest.

11.2.2 Elcrest Shareholders’ Agreement Amendment Letter

The Elcrest Shareholders’ Agreement Amendment Letter between the Company, Starcrest andElcrest dated 31 May 2012 provides for the amendment of sections 7.1 and 7.2 of the ElcrestShareholders’ Agreement. Section 7.1 has been amended to acknowledge the need for Elcrest,subject to the matching arrangements set out in Section 7.2, to (a) repay the sums owed underthe Elcrest Loan Agreement as soon as reasonably practicable and (b) replace such loan withacceptable external financing, such external financing and any future loan arrangements to beon a commercial arms’ length basis and to be approved by the board of Elcrest. Section 7.2 hasbeen amended to explain that, as an alternative to the obtaining of third party financing on bona

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fide arms’ length terms (the “Third Party Financing”), Eland has the right to match any ThirdParty Financing on the basis that Eland (i) has the right to review and confirm the financialproposal from the Third Party Financing entity; (ii) is obliged to provide proposals to matchany Third Party Financing within 30 days of receipt of such proposals by Elcrest and each ofEland and Starcrest agree that when such matching arrangement is provided by Eland they willamend the terms of the Elcrest Loan Agreement and provide, on a timely basis, any and allresolutions to give effect to any such proposal, which matches or is superior to, the Third PartyFinancing acceptable to the Elcrest board. On 21 August 2012 the Company, Starcrest andElcrest agreed to amend certain terms of the Elcrest Shareholders’ Agreement. The Directorsdo not consider these amendments to be material.

11.2.3 Study and Bid Group Agreement

In contemplation of the Acquisition, the Company entered into an agreement with Starcrest toregulate the study and bidding process between the two parties in relation to OML 40. TheCompany was the lead negotiator on behalf of the parties. The Company financed Starcrest’sshare of the costs of the bid and study work on commercial terms.

11.2.4 Elcrest Loan Agreement and Security Arrangements

The Company entered into a loan facility agreement with Elcrest on 24 March 2011 pursuantto which Elcrest has used the loan facility to reimburse the Company for the Deposit (whichthe Company had paid into the First Escrow Account as part of the Acquisition process). It isintended that the loan facility will also be used to fund the payment of the balance of theAcquisition Price under the Acquisition Agreement. Elcrest may also use the loan facility in thefuture for general working capital purposes. If the loan is not replaced by other third-partyfinancing, its maturity date is the tenth anniversary of the Elcrest Loan Agreement. The loanfacility bears interest at a rate of interest which is equivalent to the 90 day NIBOR interest rate,at the date of this Document, plus a commercial premium rate typically obtainable for a USdollar loan agreement of this type in Nigeria. The loan facility agreement containsrepresentations, warranties and covenants and events of default consistent with thosecommonly used for transactions of this type.

The loan is repayable on demand, although the Company can only make demand on the earlierof (a) the third anniversary of the date of the agreement; or (b) the date of an event of default.Events of default which may be declared by the Company and not by Starcrest while the loanis in place to cover usual events such as:

• non-payment,

• breaches of representations,

• insolvency,

• material change in financial condition,

• breach of an obligation under a finance document (including the Share Charge)

• change of control of Elcrest, and

• any court action which would affect Elcrest’s ability to perform its obligations under theElcrest Loan Agreement (or any other finance document), along with certain bespokeevents, such as the issuance by the Company of a “Deadlock Notice” (which is describedin more detail above in paragraph 11.2.1).

The Elcrest Loan Agreement imposes certain positive and negative covenants on Elcrest asborrower in favour of the Company. The Elcrest Loan Agreement is supported by security infavour of the Company in the form of a debenture (fixed and floating charge) over certain assetsof Elcrest and a deed of charge over the shares held by Starcrest in Elcrest (the “Share

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Charge”). Under the Share Charge, Starcrest has deposited the following documentation withthe Company:

• Share certificates in relation to Starcrest’s holding of shares in Elcrest;

• Signed undated blank transfer forms in relation to Starcrest’s shares in Elcrest;

• Signed undated letters of resignation from each director of Elcrest appointed byStarcrest;

• An irrevocable proxy signed by Starcrest appointing Eland as proxy to attend and voteat AGMs and EGMs of Elcrest;

• An irrevocable power of attorney signed by Starcrest empowering Eland to exercise thevotes attaching to Starcrest’s shares in Elcrest and enter into transfers, contracts andcarry into effect any agreements with Eland in respect of the shares.

Starcrest is required to deposit with Eland updated security documentation from time to timee.g. additional powers of attorney if and when further shares are issued to Starcrest.

For so long as the loan to Elcrest is outstanding, Starcrest is required to exercise (or refrainfrom exercising) any voting or any conditional or preferential rights attaching to Starcrest’sshares in Elcrest as directed by Eland from time to time. Failure to comply with this obligationwould constitute an event of default under the Elcrest Loan Agreement and the Share Chargeif left unremedied.

Upon the occurrence of an event of default under the Elcrest Loan Agreement Eland is entitledenforce its security under the Share Charge (and the debenture) including dating the transferform(s), letters of resignation, proxies and power(s) of attorney, have its name entered in theregister of members, vote and transfer the charged shares and sell the charged shares and applythe proceeds towards the discharge of the secured obligations.

11.2.5 Starcrest Option Agreement

The Company entered into an option agreement with Starcrest on 21 April 2012.

Under the Starcrest Option Agreement, Eland has agreed to acquire four per cent. of the sharesin Elcrest from Starcrest within 30 days of Completion. The consideration payable for suchshares is US$5 million. After the first anniversary of First Production and anytime up to thesecond anniversary of First Production, Eland has the ability to purchase a further 10 per cent.of Elcrest so that it holds up to 59 per cent. of Elcrest. The option relates to the entire10 per cent. and cannot be exercised in part. If the option is not exercised or otherwise extendedby the second anniversary of First Production it will lapse.

11.2.6 Transfer Agreement

The Company has obtained all the necessary corporate authorities in order to effect the transferand committed subscription agreement (see paragraph 11.2.7 below) and intends to enter intoand effect a transfer agreement with Westport (as the new lender), Elcrest (as borrower) andStarcrest on or around the date of Admission.

The Company made a loan facility available to Elcrest under the Elcrest Loan Agreement (asmore fully described in paragraph 11.2.4. The Company has agreed to transfer all its interest inthe Elcrest Loan Agreement to Westport on the terms set out in the transfer agreement.

The transfer agreement becomes effective on the first date on which: (a) the Company hasreceived certain conditions precedent documents; and (b) the ordinary issued share capital ofElcrest or any holding company to Elcrest is admitted to trading on the AIM market of theLondon Stock Exchange.

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On the effective date, Westport will issue to the Company 15,400,000 shares in considerationof the transfer. Westport will meet all the costs and expenses of the Company in connectionwith the preparation of the transfer agreement.

11.2.7Committed Subscription Agreement

The Company has entered into a committed subscription agreement with Westport on24 August 2012, whereby the Company has agreed to subscribe for shares on receipt of anexercise notice from Westport, to the amount stated in the notice. The Company entered intothe Elcrest Loan Agreement, which will subsequently be transferred from the Company toWestport (see paragraph 11.2.6 above which sets out further details concerning the transfer). Inthe event that Westport is served a drawdown notice from Elcrest pursuant to the terms of theElcrest Loan Agreement, Westport will immediately serve an exercise notice by email on theCompany in the form attached to the agreement for the equivalent amount in pounds sterlingas the amount stated in the drawdown notice. The Company will supply Westport with therequired funds by subscribing for shares in Westport for the equivalent value within onebusiness day of receipt of the exercise notice, and the consideration for the shares will be usedby Westport to satisfy the drawdown notice. The Company and Westport have undertaken tomaintain at all times during the term of the agreement the necessary shareholder approvals toissue and allot the shares as may be required. Westport is to maintain at all times authorised butunissued share capital sufficient to meet the subscription requirements.

11.2.8 Technical Services Agreement

On 30 April 2012, the Company entered into a technical services agreement with Elcrest inrelation to the provision of financial, technical and administrative services and support by theCompany to Elcrest.

The agreement provides that Elcrest may request Eland to provide assistance, information,advisory supports, materials, supervision and services necessary or useful for Elcrest toproperly plan and carry out its operations.

In particular, these services include, without limitation:

(a) advice and assistance in the provision and review of work programmes and budgets forexploration, appraisal, development and production operations;

(b) assistance in joint venture accounting including AFE preparation, cash calls and billings;

(c) assistance with treasury functions, including negotiations with national and foreignbanks, and cash management and control of accounts;

(d) legal advice and assistance including contract tenders, bids, negotiations and contractadministration;

(e) technical and financial advice in all matters related to any development plan of Elcrest;and

(f) material and equipment selection and procurement, and coordination with suppliers, andsolution of technical activities in respect of material and equipment.

Under the agreement services required by Elcrest from Eland shall be specified in a workprogramme and budget agreed between the parties for each year.

Any services carried out by Eland are to be carried out in a good and workmanlike manner andin accordance with accepted oil industry practice as required by OML 40.

The agreement may be terminated on thirty (30) days written notice given to Eland by Elcrest:

(a) if Eland fails to provide with the services with reasonable due diligence; or

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(b) if Eland fails in any material respect to perform the services or its other materialobligations under the agreement; or

(c) if Eland fails to make good defective services within thirty (30) days; or

(d) if Elcrest is no longer obliged to carry out Petroleum Operations under OML 40.

The agreement may be terminated on thirty (30) days written notice given by Eland to Elcrestif Elcrest fails to make full and timely payment or persistently fails to perform any of itsobligations under the agreement.

11.3 Agreements relating to OML 40

11.3.1Oil Mining Lease 40 – 1964 Grant

The original OML 40 Lease is dated 6 March 1964 between the Federal Minister of Mines andPower and SPDC and grants SPDC as lessee the right to enter the lands leased to the lessee tosearch for, win work, carry away and dispose of all petroleum in, under or throughout the saidlands for a term of 30 years from 1 January 1962, renewed in 1989 (see below). It is subject tothe laws of Nigeria, and disputes are to be subject to arbitration in Nigeria, except where thematter is subject to the Minister’s discretion.

There is a warranty by the Minister or any person claiming through him of peaceful and quietenjoyment by SPDC of the rights and privileges granted upon paying the rents and royaltyreserved and observing the terms of the agreement. Rent is payable annually in advance, and aroyalty is payable on the production from OML, although the rates have been superseded bythe renewal.

The 1964 grant provides that the lease can be terminated by SPDC at any time during the termgranted by giving to the Minister not less than 12 months’ prior notice in writing.

The 1964 grant also provides that, upon the determination by SPDC of the term granted or anyrenewal thereof or upon the surrender by him of any part or parts of OML 40, the Minister willrefund an apportioned part of any certain yearly rent paid by SPDC in advance in respect of thesaid lands or any such part or parts thereof for a period of the whole which has not expired atthe date of such determination or surrender.

11.3.2Oil Mining Lease 40 – 1989 Renewal

This agreement dated 24 August 1993 between SPDC, the Nigerian Minister of PetroleumResources and NNPC was a renewal of the original 1964 lease. It is governed by Nigerian law,and disputes are subject to arbitration in Nigeria, except where matters are expressed to beexcluded from arbitration or at the discretion of the Minister.

The lease grants SPDC the right to search for, win work, carry away and dispose of allpetroleum in, under or throughout the leased land for a term of 30 years from 1 July 1989. Rentis payable annually in advance. Royalties are also payable as follows:

A royalty payment based on rate per centum of the chargeable value (calculated as provided inthe relevant regulation) of the crude oil and casing – head petroleum spirit, produced from therelevant area in the relevant period is as follows:

In on-shore areas (oil) 20 per cent.

A rate per centum of the price received by a lessee in the relevant area and sold, but does notinclude any flare or waste gas appropriated by the government for its own use or for anypurpose approved by it is as follows:

On-shore areas (gas) 7 per cent.

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The lessee is liable to pay fair and adequate compensation for the disturbance of surface rightsto any person who is in lawful occupation of the leased land.

The OML 40 Lease may be terminated by SPDC at any time by giving the Minister ofPetroleum Resources not less than three months’ notice of termination in writing. Fees arepayable by SPDC for termination of the lease at its instance. SPDC can also surrender the OML40 Lease in respect of any particular part of the leased area. No rent paid shall be refundableupon termination by SPDC or where a surrender is made.

SPDC shall, within two months after termination of the OML 40 Lease or such period as maybe approved by the Minister:

• Deliver up to the Minister in good order, repair and condition and fit for further workingall productive boreholes or wells (unless the Director of the Department of PetroleumResources (the “DPR Director”) requires SPDC in writing to plug them), together withcasings and other appurtenances to the borehole, which are below the Christmas tree andcannot be moved without causing injury to the said boreholes or wells.

• Fill up holes (other than boreholes and wells) and excavations made to the extentreasonably required by the Minister.

• Take reasonable steps to restore as far as possible to their original conditions the relevantsurface areas and all buildings and structures damaged by SPDC during the course ofoperations.

• SPDC shall, within two months of termination (or such further period approved by theDPR Director), plug every borehole indicated by the DPR Director.

• Subject to the right of owners of the surface area or other persons having a legal interestin the relevant area or part of it, remove all buildings, installations, works, chattels andeffects erected or brought by SPDC on the area for its operation. The Minister mayspecify any such buildings, installations, works, chattels and effects and shall be entitledto take them at a price bearing a reasonable relationship to its written down value.

SPDC must at all times indemnify and keep harmless the Minister and every officer of thegovernment against all actions, costs, charges, claims and demands whatsoever which may bemade or brought against it by a third party in relation to or in connection with the OML 40Lease or things done or purported to be done pursuant to it.

Prior written consent of the Minister and NNPC is required before SPDC can grant or assignany of its rights under OML 40.

The holder of an OML may, with the consent of the President of Nigeria, farm out any marginalfield lying within the leased areas.

The Minister, if he considers it to be in the public interest, may impose on the OML 40 Leasespecial terms and conditions, including participation by the government in the venture to whichOML 40 relates on terms negotiated and provisions applying to natural gas discovered.

The Minister may, in addition to any available remedy, if any fee, rent or royalty due is unpaidfor a period of one month after the due date (whether legally demanded or not):

• Enter into and upon any land, property or premises possessed or occupied by SPDC inconnection with the OML 40 Lease.

• Seize and distrain, and sell as landlords may do for rents in arrears, any petroleum,petroleum products, engines, machinery, tools, implements, or other effects belonging tothe lessee found in or upon the land, property or premises.

• Retain and pay off the amount due from the monies realised.

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11.3.3 The New Joint Operating Agreement

The Sellers are party to the Old Joint Operating Agreement which set out the operating termsfor a number of oil and gas leases in Nigeria. As a result of the Acquisition, it will be necessaryto separate out the OML 40 Lease into its own operating agreement in advance of thisbecoming available to Elcrest. The New Joint Operating Agreement to be entered into, will bein substantially the same terms and conditions as the Old Joint Operating Agreement, exceptthat the New Joint Operating Agreement applies in respect of OML 40 alone. The terms of theNew Joint Operating Agreement are summarised below.

On Completion the following will occur:

(a) NNPC, SPDC, TEPNG and NAOC will execute a side-letter the effect of which will beto remove OML 40 from the Old Joint Operating Agreement;

(b) NNPC, SPDC, TEPNG and NAOC will execute the New Joint Operating Agreementwhich will apply and relate only to OML 40; and

(c) NNPC, SPDC, TEPNG, NAOC and Elcrest will execute a deed of novation which willnovate the New Joint Operating Agreement to NPDC and Elcrest.

The New Joint Operating Agreement is governed by Nigerian law and disputes are subject toarbitration in Nigeria.

The respective participating interests in the joint property are NPDC 55 per cent. and Elcrest45 per cent.

The agreement provides that the operator appointed under the New Joint Operating Agreement,being NPDC, (the “JOA Operator”) shall not be liable for any loss or damages resulting fromoperating OML 40 unless caused by its wilful default, although the JOA Operator is not to beliable to any non-operator for reservoir damage or pollution.

The JOA Operator is under an obligation to consult with the non-operating parties and toconduct the operations with the utmost good faith and in accordance with good industrypractice. The JOA Operator has broad authority to operate OML 40 and enter into contractswith third parties for this purpose, under the supervision of an operating committee establishedby the parties to the New Joint Operating Agreement and within procedural frameworks andfinancial limits set out in the agreement. The JOA Operator is to submit to the operatingcommittee for approval a work programme and budget each year.

The operating committee consists of 12 persons, with both Elcrest and NPDC having the rightto appoint six members each. A quorum for committee meetings will be six NPDC members,six Elcrest members, with meetings held once every four months or as otherwise agreed.Decisions of the committee are to be unanimous, whether made at a meeting or otherwise,provided that the JOA Operator members may not vote on a decision relating to the removal ofoperatorship (for which agreement of non-operators holding a 60 per cent. participating interestis sufficient).

Operatorship is to be terminated if the JOA Operator assigns or purports to assign its generalpowers of supervision and management as operator to any person other than an affiliate (or anaffiliate to which it has assigned them ceases to be an affiliate); it assigns its participatinginterest in the New Joint Operating Agreement to a person other than an affiliate; it is provedpursuant to an arbitration award made under the agreement to have committed wilfulmisconduct; or it becomes insolvent or insolvency proceedings are commenced against it.

If the JOA Operator commits any breach of, or fails to perform its obligations under, the NewJoint Operating Agreement and it amounts to wilful misconduct, non-operating parties holding60 per cent. or more of the participating interests may remove the JOA Operator.

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The JOA Operator may resign operatorship on six months’ written notice to the non-operatorparties and may retain its participating interest to the extent its rights and obligations are notconnected with operatorship.

Each party is required to maintain a minimum level of insurance in respect of its participatinginterest for physical damage to property and well control. The JOA Operator is also requiredto obtain joint insurance for certain matters, such as employee and third-party liability.

Liabilities arising out of the operation of OML 40, including any losses or damage suffered byElcrest, are to be paid by the parties in the proportions of their respective participating interests.

Each party is required to contribute its participating interest proportion of funds required forthe joint operations as determined by programmes and budgets approved by the operatingcommittee. Where a party does not meet a cash call, the other parties may make up thedefaulting party’s share until the default is remedied, with interest due to the paying party(ies).

Certain activities relating to the drilling of exploratory wells may be undertaken by one or moreof the parties as a sole risk operation, carried out by the JOA Operator at the sole risk, cost andexpense of the party(ies) electing to do so. If parties other than the party proposing the sole riskoperation wish to participate, the operation shall become a joint operation carried on by theJOA Operator on behalf of all the parties. Any party not participating in a sole risk operationshall be indemnified by the participating parties against all losses and damages it incurs inrespect of the sole risk operation.

Each of the parties to the New Joint Operating Agreement has the right to nominate, lift andseparately dispose of its participating interest share of petroleum produced from OML 40, inaccordance with a prescribed procedure.

No party may transfer part or all of its participating interest without the consent of the otherparties and subject to an assignee being of sufficient financial and technical standing. Where aparty receives an offer from a third party, it must make a pre-emptive offer to the other partieson the same terms and, if the other parties do not accept the offer, must make the transfer withinone year. A transferring party shall remain liable, alongside its transferee, for all of theobligations attaching to the participating interest unless the operating committee waives thisrequirement.

11.3.4Crude Handling Agreement

This is a contract for crude handling services between NPDC as Operator and SPDC. Theagreement addresses acceptance at the delivery point, transport, treatment, processing ofcomingled fluid or export quality crude. It also covers crude storage at the terminal andredelivery of export quality crude to NPDC at the redelivery point to tankers contracted byNPDC. It is subject to Nigerian law and arbitration and is for a term of 5 years, unless extendedby agreement for a further 5 years, and can be terminated by a party giving 6 months’ notice ifthe other commits a material breach of the agreement.

In consideration of the performance of the crude handling services, NPDC will pay SPDCoperator capacity and production charges. These charges can be adjusted depending on thevariations in the quantities between the reserve production capacity and the volume of crudeinjected at the delivery point. NPDC is entitled to inject into the system/facilities the agreedreserved production capacity.

NPDC is responsible for the volumes that are delivered to the SPDC delivery point, and willbe able to export the volumes that are put into the system at the redelivery point.

SPDC has control over the management of the systems and control over the identity of anythird party crude brought in by way of comingling. SPDC will determine the reserve andstorage capacity available to NPDC and also controls the overall number and the use of tankersat the terminal which are to be used by NPDC to ship its export crude.

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Indemnities are imposed on both parties generally where either is shown to be grossly negligentor reckless where losses and damages flow to the facilities or to the users’ crude oil. As thesystems/facilities are available to other parties, the indemnities cover not only losses toNPDC’s crude but the other users where they have suffered loss. There is a general exclusionof any liability on the part of SPDC unless gross negligence or wilful misconduct is proven,and these are onerously defined. Otherwise, NPDC bears its own losses and participates in theshare of the other users’ losses in the facilities.

11.3.5Crude Oil Purchase Agreement

Under the terms of this contract Elcrest will sell to Shell Western Supply & Trading Limitedall of the crude oil allocated to it under the Crude Handling Agreement and derived fromElcrest’s share in both the Opuama field and any and all additional fields within OML 40. Ithas a term of 8 years subject to earlier termination as provided for under the agreement. Oneground for early termination is where, after the initial 5 year term of the Crude HandlingAgreement, a replacement Crude Handling Agreement on substantially the same terms as theinitial one has not been agreed for a further term of at least 3 years.

It is a bespoke FOB Sale & Purchase Agreement as between Elcrest and Shell Western Supply& Trading Limited whereby Elcrest will sell to Shell Western Supply & Trading Limited exportcrude which without taking delivery from SPDC under the Crude Handling Agreement. TheCrude Oil Purchase Agreement contains terms as to; grade and quality, quantity, delivery,vessel nomination, taxes, payment, risk and title, crude oil inspection, laytime and demurrageand termination. It is subject to English law and English arbitration and incorporates the ShellInternational Trading & Shipping Company General Terms and Conditions of Sale of CrudeOil in respect of FOB deliveries (2010 Edition).

The price of the crude oil delivered by Elcrest to Shell Western Supply & Trading Limited isdetermined in accordance with a specified formula extracted from the average of the meanDated Brent quotations as published in Platts Crude Oil Market Wire plus the Forcadosdifferential to Dated Brent as published in the Platts Crude Oil Market Wire. The applicableDated Brent and Forcados differential to Dated Brent is to be taken from two alternatives at theoption of Shell Western Supply & Trading Limited. Payment is to be made in US dollars.

11.3.6Matrix Engagement Letter (2010)

On 13 July 2010, Matrix Corporate Capital LLP (“Matrix”) entered into an engagement letterwith the Company. Under the terms of the engagement letter, the proposed fundraising was totake place in two stages, with phase 1 being for an amount up to £5 million (“Phase 1”) andphase 2 being for an intended amount of up to US$100 million (“Phase 2”).

Matrix was to act as financial advisor and broker to the Company. Under the terms of theengagement letter, Matrix was to be paid fees and commission including a commission ofsix per cent. on funds raised from investors introduced by Matrix in Phase 1, a corporatefinance fee of £50,000 and a further commission of between 4.5 per cent. and 5.5 per cent. onfunds raised from investors introduced by Matrix in addition to a commission of one per cent.on funds raised from investors who were introduced other than by Matrix in Phase 2.

The engagement letter includes certain indemnities given by the Company, whereby theCompany agreed to indemnify Matrix from and against any losses which Matrix may suffer orincur arising from the provision of its services under the engagement.

The engagement letter has been subsequently amended by a letter entered into on 8 February2012 between Matrix and the Company, pursuant to which Matrix agreed to waive any fees,obligations or claims due under this agreement and all other agreements between the partiesin return for the Company paying a one-off fee to Matrix within seven days of Admission orany other form of fundraising that allows the Company to acquire the participating interest inOML 40.

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11.3.7 The Lead Manager Agreement

The Company and the Directors entered into a lead manager agreement with MatrixCorporate Capital LLP on 27 January 2011 under which Matrix agreed, subject to certainconditions, to act as agent for the Company and use its reasonable endeavours to procuresubscribers in the UK for the First Loan Notes.

Matrix was not required to be involved in any actions relating to the Company’s offer or saleof the First Loan Notes in the United States. In consideration for the performance of itsservices, Matrix was entitled to receive an aggregate corporate finance advisory fee of£50,000 (in relation to the First Note Issue and the Second Note Issue), in relation to the FirstNote Issue, a management commission of 4.5 per cent. of the aggregate amounts committedby investors in the First Note Issue introduced by Matrix and a management commission ofone per cent. of the aggregate amounts committed by investors to the First Note Issue notintroduced by Matrix (save for those investors from Korea and the United States of America).The Company is also responsible for paying certain other costs and expenses.

The lead manager agreement contains representations, warranties and indemnities given bythe Company and representations and warranties given by the Directors to Matrix as to theaccuracy of the information contained in the first information memorandum and other mattersrelating to the Company and its business.

This agreement has been subsequently amended by the letter referred to at paragraph 11.3.6above entered into on 8 February 2012 between Matrix and the Company, pursuant to whichMatrix agreed to waive any fees, obligations or claims due under this agreement and all otheragreements between the parties in return for the Company paying a one-off fee to Matrixwithin seven days of Admission or any other form of fundraising that allows the Company toacquire the participating interest in OML 40.

11.3.8 The Second Lead Manager Agreement

The Company, the Directors and Matrix entered into a second lead manager agreement dated9 March 2011 pursuant to which Matrix agreed, subject to certain conditions, to act as agentfor the Company and use its reasonable endeavours to procure subscribers in the UK for theSecond Loan Notes.

In consideration for the performance of its services, Matrix was entitled to receive in relationto the Second Note Issue, a management commission of 4.5 per cent. of the aggregateamounts committed by investors in the Second Note Issue introduced by Matrix and amanagement commission of one per cent. of the aggregate amounts committed by investorsto the Second Note Issue not introduced by Matrix (save for those investors from Korea andthe United States of America). The Company is also responsible for paying certain other costsand expenses.

The Second Lead Manager Agreement contains representations, warranties and indemnitiesgiven by the Company and representations and warranties given by the Directors to Matrix asto the accuracy of the information contained in the second round information memorandumand other matters relating to the Company and its business.

This agreement has been subsequently amended by the letter referred to at paragraph 11.3.6above entered into on 8 February 2012 between Matrix and the Company, pursuant to whichMatrix agreed to waive any fees, obligations or claims due under this agreement and all otheragreements between the parties in return for the Company paying a one-off fee to Matrixwithin seven days of Admission or any other form of fundraising that allows the Company toacquire the participating interest in OML 40.

11.3.9 Matrix Engagement Letter (2011)

On 4 July 2011, Matrix entered into an engagement letter with the Company under whichMatrix agreed, subject to certain conditions, to perform certain services for the Company.

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Under its engagement letter, Matrix was to act as financial advisor and broker to theCompany. The Company was responsible for paying Matrix a corporate advisory fee of£50,000 payable on signing of the engagement letter, in addition to a further £50,000 payableupon admission. In respect of monies raised by Matrix and the joint broker of an amount upto £35 million, Matrix and the joint broker would be entitled to receive an aggregatecommission of up to five per cent. of the gross aggregate amount raised between Matrix andthe joint broker under the placing.

If, following the marketing period in connection with the placing and admission, theCompany, Matrix and the joint broker were unable to agree the price per ordinary share to beissued pursuant to the placing and admission and, as a result, the Company decided not toproceed and instead raise monies by way of a private placing, Matrix would be entitled to afurther commission of three per cent. of any monies raised by the placing from existinginvestors and a commission of 4.5 per cent. on monies raised from any investors introducedby Matrix before the Company decided to proceed with a private placing.

The engagement letter includes certain indemnities given by the Company, whereby theCompany has indemnified Matrix from and against any losses which Matrix may suffer orincur arising from the provision of its services under the engagement.

It should be noted that Matrix will not act as nominated adviser to the Company and thatCanaccord will have this role.

The engagement letter has been subsequently amended by the letter referred to atparagraph 11.3.6 above entered into on 8 February 2012 between Matrix and the Company,pursuant to which Matrix agreed to waive any fees above, obligations or claims due under thisagreement and all other agreements between the parties in return for the Company paying aone-off fee to Matrix within seven days of Admission or any other form of fundraising thatallows the Company to acquire the participating interest in OML 40.

11.3.10Madison Williams Engagement Letter

On 7 January 2011, Madison Williams and Company LLP (“Madison Williams”) entered intoan engagement letter with the Company under which Madison Williams agreed, subject tocertain conditions, to perform certain services for the Company. Under its engagement letter,Madison Williams was entitled to find investors in relation to an aggregate amount of no lessthan one third of the total capital raised in certain fundraisings. Madison Williams was to beentitled to a fee equal to 0.25 per cent. of the initial capital agreed to in a transaction duringthe term of its engagement (the “Initial Capital”) together with a fee equal to 4.75 per cent.of the Ordinary Shares, preferred or equity linked or convertible securities of the Companyagreed to in a transaction payable upon conversion of the Initial Capital into such securities.The engagement is for a period of 12 months subject to extension by mutual agreement.

The engagement letter contains certain indemnities given by the Company to MadisonWilliams. Each of Madison Williams and the Company is entitled to terminate its engagementin certain specified circumstances prior to the completion of the initial term of theengagement. To date, the engagement has not been terminated.

11.3.11Madison Williams Placement Agent Agreement

The Company, the Directors and Madison Williams entered into a placement agent agreementdated 18 March 2011 pursuant to which Madison Williams agreed, subject to certainconditions, to act as agent for the Company and use its reasonable endeavours to procuresubscribers in the USA and Canada for the Second Note Issue.

The placement agent agreement contains representations, warranties and indemnities given bythe Company to Madison Williams as to the accuracy of the information contained in thesecond information memorandum and other matters relating to the Company and its business.

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11.3.12 Novum Introducer Letter

The Company entered into an introducer agreement with Novum Securities Limited(“Novum”) on 5 January 2011, pursuant to which the Company agreed to pay Novum acommission fee of five per cent. of any funds invested in the Company by investors introducedby Novum. The commission becomes payable when a loan note converts into equity or upona change of control of the Company. The letter was terminated on 9 February 2012.

11.3.13 Park Holdings Agreement

A contract was entered into on 1 July 2010 whereby Park Holdings Limited agreed tointroduce potential investors to the Company as an independent contractor of the Company.In return for introductions resulting in an investor making a direct investment with theCompany, Park Holdings would be entitled to receive four per cent. of the total investmentmade. Where Park Holdings introduce an investor who subsequently introduces a differentinvestor, Park Holdings will be entitle to receive two per cent. of the total investment if thefirst investor receives a commission less than five per cent., or one per cent. of the totalinvestment if the first investor receives a commission greater than five per cent. Any VATincurred by Park Holdings is to be paid by the Company. Either party may terminate on onemonth’s notice. This agreement has now been terminated.

11.3.14 Park Securities Agreement

A contract was entered into on 1 July 2010 whereby Park Securities Limited agreed to providecertain services to the Company and its affiliated oil and gas companies as an independentcontractor of the Company. Such services included development of an oil and gas strategy forthe Company, identification of business development opportunities for the Company andadvice on corporate and asset matters.

In return for providing the services described above, Park Securities Limited received a fee of£4,500 plus VAT per month (plus expenses) for a minimum of five days per month spentperforming the services. Either party may terminate on three months’ written notice. Thisagreement has now been terminated.

11.3.15 First Note Issue Subscription Agreement and Loan Note Instrument

In relation to the First Note Issue, the Company entered into the First Loan Note Instrumentin January 2011. The First Loan Note Instrument constituted the First Loan Notes on termswhich provided for the conversion of the First Loan Notes into Ordinary Shares (at aconversion price of £7.20 per Ordinary Share) upon completion of the Acquisition, orredemption of the First Loan Notes within 15 clear business days following events whichanticipated the failure of the Acquisition. A five per cent. coupon was payable on the FirstLoan Notes upon redemption, or within 15 clear business days of conversion.

The holders of the First Loan Notes each entered into a Subscription Agreement with theCompany, under which they gave various warranties relating to their ability to invest in theFirst Loan Notes. The Company also provided certain undertakings including, inter alia, touse reasonable endeavours to make an application for admission to trading of the OrdinaryShares to AIM as soon as reasonably practicable (and in any event within six months) afterCompletion. The Subscription Agreement relating to the First Note Issue appended the formof the First Loan Note Instrument. £9.5 million was raised in the First Note Issue.

On 15 October 2011 in anticipation of the passing of 15 October 2011 (being the end of thegrace period under the First Loan Note Instrument), the note holders under the First NoteIssue agreed by written resolution to extend the grace period prior to conversion/redemptionof the First Loan Notes from forty five days from 31 August 2011 by a further 90 days. Thegrace period would then expire on 13 January 2012.

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On 15 October 2011, the note holders under the First Note Issue agreed by written resolutionto amend the terms of the First Loan Note Instrument such that the date for payment in respectof any interest on the First Loan Notes be modified such that the interest on the First LoanNotes would cease to accrue after 30 September 2011.

On 15 October 2011, the note holders under the First Note Issue agreed by written resolutionto amend the terms of the First Loan Note Instrument such that the interest payable to the noteholders under the First Note Issue shall only become payable on Completion or terminationof the Acquisition Agreement and, if payable, such interest may be paid either in cash or inOrdinary Shares (such allotment of shares being at an aggregate value of no more thantwo per cent. of the value of the Company on Completion) such payment method being at thesole discretion of the First Loan Note holders and the conversion price was amended from£7.50 to par value. As at 16 August 2012, the outstanding balance of interest payable to thenote holders under the First Note Issue is £339,658.

On 13 January 2012, in anticipation of the passing of 13 January 2012 (being the date of theexpiry of the grace period extension), the note holders under the First Note Issue agreed, bywritten resolution, to extend the grace period prior to conversation/redemption of the FirstLoan Notes by 90 days.

On 24 February 2012, the note holders under the First Note Issue agreed by written resolutionand authorised the Company to:

(i) amend the First Loan Note Instrument so that the restrictions contained in the FirstLoan Note Instrument on issuing securities (a) at less than £9.00 per Ordinary Share(as adjusted) or (b) issuing securities other than as permitted under the First Loan NoteInstrument, shall cease to apply with immediate effect;

(ii) apply the proceeds of such issuance to, inter alia, (a) fund the remainder of theAcquisition Price and (b) fund the payment of interest on the First Loan Notes, SecondLoan Notes and Third Loan Notes;

(iii) amend the First Loan Note Instrument so that conversion of the First Loan Notesoccurs on the earlier of Completion or Admission (where the net proceeds of thePlacing are sufficient to fund the remaining Acquisition Price);

(iv) put in place a new holding company on the condition that the shareholdings in the newholding company will be the same as the shareholdings in Eland immediately beforethe new holding company becomes the parent of Eland (save in relation to shareswhich have to be subscribed in the new holding company to meet the minimum capitalrequirements on incorporation); and

(v) put in place a new holding company and, if this occurs, the noteholders agree that theyshall sell their Ordinary Shares into which the First Loan Notes would convert underthe terms of the First Loan Notes (as varied from time to time) in return for the issueby the new holding company of ordinary shares in the new holding company to theholders of First Loan Notes on the same terms as those terms as will apply to existingholders of Ordinary Shares and the holders of the First Loan Notes rights of conversionwill be conditional upon doing so.

On 11 April 2012, in anticipation of the passing of 12 April 2012 (being the date of the expiryof the grace period extension dated 13 January 2012), the note holders under the First NoteIssue agreed by written resolution, to extend the grace period prior to conversion/redemptionof the First Loan Notes by a further 60 days, (i.e. to 11 June 2012).

On 11 June 2012, in anticipation of the passing of 11 June 2012 (being the date of the expiryof the grace period extension dated 11April 2012), the note holders under the First Note Issueagreed by written resolution, to extend the grace period prior to conversion/redemption of theFirst Loan Notes by a further 90 days, (i.e. to 9 September 2012).

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11.3.16 Subscription Deed

On 23 August 2012 Helios and the Company entered into a subscription deed (the“Subscription Deed”).

The Subscription Deed is conditional on the issue of Ordinary Shares to Helios pursuant tothe Escrow Receipts Placing.

Pursuant to the Subscription Deed, the Company agrees to pay Helios an equity facility feeon the date which is 30 days after the issue of Ordinary Shares to Helios pursuant to theEscrow Receipts Placing. The fee shall be 1.5 per cent. of such amount as is calculated bysubtracting the nominal value of the number of Ordinary Shares for which Helios subscribespursuant to the Escrow Receipts Placing from the nominal value of such number of OrdinaryShares as represents 29.8 per cent. of the Company’s issued share capital on Admission.

The Company may, but is not obliged to, consult with Helios if it is made aware of anybusiness opportunities for which the Company believes a member of Helios’ group would bea suitable partner and which require a Nigerian shareholder or participant in order to satisfylocal laws. The Company and Helios shall discuss such opportunities in good faith with aview to a member of Helios’ group participating if both parties agree it is in their bestinterests.

The Company agrees that until 90 days after Admission (or the next following business day),it shall not agree to terminate, amend or vary the Elcrest Shareholders’ Agreement (asamended) or the New Joint Operating Agreement and it shall procure to the extent it is ablethat Elcrest does the same.

11.3.17 Second Note Issue Subscription Agreement and Second Loan Note Instrument

In relation to the Second Note Issue, the Company entered into the Second Loan NoteInstrument in March 2011. The Second Loan Note Instrument constituted the Second LoanNotes on terms which provided for the conversion of the Second Loan Notes into OrdinaryShares (at a conversion price of £9 per Ordinary Share) upon completion of the Acquisition,or redemption of the Second Loan Notes within 15 clear business days following eventswhich anticipated the failure of the Acquisition. A 5 per cent. coupon was payable on theSecond Loan Notes upon redemption, or within 15 clear business days of conversion. TheSecond Loan Notes were also secured by way of an assignment (in favour of a securitytrustee) over the Company’s bank account (into which the subscription proceeds for theSecond Loan Notes were paid), and the Company’s rights under the escrow agreementregulating the payment of the balance of the Acquisition Price. The form of a security deedwas scheduled to the Loan Note Instrument.

The holders of the Second Loan Notes each entered into a Subscription Agreement with theCompany, under which they gave various warranties relating to their ability to invest in theSecond Loan Notes. The Company also provided certain undertakings including, inter alia,to use reasonable endeavours to make an application for admission to trading of the OrdinaryShares to AIM as soon as reasonably practicable (and in any event within six months) aftercompletion of the Acquisition. The Subscription Agreement relating to the Second Note Issueappended the form of the Second Loan Note Instrument. £95.5 million was raised in theSecond Note Issue.

Following the passing of 15 October 2011 (being the end of the grace period under the SecondLoan Note Instrument) the Loan Notes were redeemed and all funds invested were returnedto note holders in the Second Note Issue.

On 15 October 2011, the note holders under the Second Note Issue agreed by writtenresolution to amend the terms of the Second Loan Note Instrument such that the date forpayment in respect of any interest on the Second Loan Notes be modified such that the intereston the Second Loan Notes would cease to accrue after 30 September 2011.

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On 15 October 2011, the note holders under the Second Note Issue agreed by writtenresolution to amend the terms of the Second Loan Note Instrument such that the interestpayable to the note holders under the Second Note Issue shall only become payable onCompletion or termination of the Acquisition Agreement and, if payable, such interest maybe paid either in cash or in Ordinary Shares (such allotment of shares being at an aggregatevalue of no more than two per cent. of the value of the Company on Completion) suchpayment method being at the sole discretion of the Second Loan Note holders.

As at 16 August 2012, the outstanding balance of interest payable to the note holders underthe Second Note Issue is £2,668,767.

11.3.18 Third Note Issue Subscription Agreement and Loan Note Instrument

In relation to the Third Note Issue, the Company entered into the Third Loan Note Instrumentin November 2011. The Third Loan Note Instrument constituted the Third Loan Notes onterms which provided for the conversion of the Third Loan Notes into Ordinary Shares (at aconversion price of £0.10 per Ordinary Share) with the consent of those holders of Third LoanNotes that hold more than 50 per cent. by value of the then outstanding Third Loan Notes, atany time until the Third Loan Notes are repaid in full. A one (1) per cent. coupon was payableon the Third Loan Notes upon redemption or conversion. If more than 50 per cent. by thevalue of the then outstanding Third Loan Noteholders so request, upon any issue of shares orother securities of Eland (save for such issue being in lieu of a dividend) or any return ofcapital, consolidation or subdivision of the Ordinary Shares, the conversion price of £0.10 perOrdinary Share shall be adjusted as agreed by the Board and a firm of independent charteredaccountants.

The holders of the Third Loan Notes each entered into a Subscription Agreement with theCompany, under which they gave various warranties relating to their ability to invest in theThird Loan Notes. The Company also provided certain undertakings including, inter alia, touse reasonable endeavours to make an application for admission for trading of the OrdinaryShares to AIM as soon as reasonably practicable (and in any event within six months) aftercompletion of the Acquisition. The Subscription Agreement relating to the Third Note Issueappended the form of the Third Loan Note Instrument. £0.8 million was raised in the ThirdNote Issue.

On 29 February 2012, the note holders under the Third Note Issue agreed by writtenresolution and authorised the Company to:

(i) conditional on the approval by Shareholders of the consolidation of the issued and tobe issued share capital of the Company, amend the definition of conversion price sothat it means the issue of one Ordinary Share for each £1.00 nominal amount of theThird Loan Notes;

(ii) amend the Third Loan Note Instrument so that conversion of the Third Loan Notesoccurs on Admission (where the net proceeds of the Placing are sufficient to fund theremaining Acquisition Price);

(iii) put in place a new holding company on the condition that the shareholdings in the newholding company will be the same as the shareholdings in Eland immediately beforethe new holding company becomes the parent of Eland (save in relation to shareswhich have to be subscribed in the new holding company to meet the minimum capitalrequirements on incorporation); and

(iv) put in place a new holding company and, if this occurs, the note holders agree that theyshall sell their Ordinary Shares with which the Third Loan Notes would convert underthe terms of the Third Loan Notes (as varied from time to time) in return for the issueby the new holding company of ordinary shares in the new holding company to theholders of Third Loan Notes on the same terms as those terms as will apply to existing

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holders of Ordinary Shares and the holders of the Third Loan Notes rights ofconversion will be conditional upon doing so.

On 29 February 2012, the note holders under the Third Note Issue agreed by the signing ofwaiver letters that in respect to any allotments or issuances of securities of the Companywhich occur prior to 31 March 2012, such allotments or issuances would not be consideredan ‘adjustment event’ under the Third Loan Note Instrument and therefore the conversionprice of the Third Loan Notes would not be adjusted. This waiver was extended to 31 July2012 on or around 11 May 2012 and further extended to 30 September 2012 on 31 July 2012by the signing of waiver letters by the note holders under the Third Note Issue.

As at 16 August 2012, the outstanding balance of interest payable to the note holders underthe Third Note Issue is £5,557.

11.3.19 Solstice Option Agreement

The Company entered into an option agreement with Solstice International Investments Inc.on 13 June 2012 and a deed of amendment in relation to such agreement on 23 August 2012.Under this agreement Solstice may invest up to £10,000,000 into the Company.

Solstice may, subject to Admission, elect to subscribe for Ordinary Shares in the Company atanytime in the 24 month period after the completion of the Placing (provided that such periodmay be extended in the event that it ends during a close period (as defined in the AIM Rules).The number of option shares shall be determined by dividing £10,000,000 by the placingprice per share as determined in the Placing Agreement (rounded down to the nearest wholenumber), and the option price shall be equal to the Placing Price.

Solstice may exercise the option on more than one occasion, provided that (i) on eachoccasion the aggregate price for exercising the option is not less than £2.5 million (unlessthere are fewer than that value of option shares remaining in which case Solstice mustexercise in respect of all of the remaining option shares) and (ii) the aggregate number ofshares subscribed for in total does not exceed 100 per cent. of the available option shares.

Solstice has given certain undertakings in the Solstice Option Agreement including thatduring the period in which the option may be exercised, Solstice will not acquire nor will itpermit any person with which it may now or subsequently be deemed to be acting in concertto acquire any interest in Ordinary Shares if and to the extent that such acquisition, whentaken in conjunction with the grant or exercise of the option, would trigger any of the eventsor requirements of Rules 5 or 9 of the Code.

The Company has the option to require Solstice to subscribe for some or all of the optionshares at anytime during the 12 month period commencing on the first anniversary ofcompletion of the Placing (provided that such period may be extended in the event that it endswithin a close period (as defined in the AIM Rules)). The same conditions apply to exercisingas described above, with the additional conditions (amongst others) that: (i) the warranty fromthe Company to Solstice that it is not aware of any reason why the information in theAdmission Document will show the financial position and prospects of the Company to bematerially worse than presented in the draft investor presentation to Solstice and pathfinderadmission document (each of which are set out in the Solstice Option Agreement) is correct;(ii) no material breach of the warranties or representations contained in the PlacingAgreement has occurred; (iii) the proceeds of the subscription for the option shares bySolstice are required to fund planned expenditure, the Company does not have sufficient freecash to fund such planned expenditure and the free cash in the Company on the business dayimmediately before the date on which the Company proposes to give notice of exercise of theoption is less than US$10 million; (iv) the SCB Facility Agreement has been drawn down infull; (v) the Company is not in a close period and (vi) there is no material adverse change inthe Company which would in the reasonable opinion of Solstice result in the financial

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position and prospects of the Company being materially worse than presented in the draftinvestor presentation to Solstice and pathfinder admission document (each of which are setout in the Solstice Option Agreement). Furthermore Solstice shall only be obliged tosubscribe for option shares if the Company has exercised its option, pro-rata and to the extentpossible, under the Helios Option Agreement and Helios has subscribed for such shares.

If the exercise of the Company’s option would trigger any obligation under Rule 9 of theCode, the option will be extended for 90 days to allow for a whitewash under the Code,subject to any applicable law.

The maximum amount to be invested by Solstice in aggregate is £10,000,000. Accordinglythe Company cannot require Solstice to subscribe for Ordinary Shares under the SolsticeOption Agreement to the extent that this would result in Solstice investing more than£10,000,000.

If the Company is seeking a whitewash of the provisions of Rule 9 of the Code in respect ofanother shareholder, it shall inform Solstice and if so requested shall, subject to applicablelaws, seek such a whitewash to enable Solstice to subscribe for Ordinary Shares up to thesame shareholding percentage as in respect of the first whitewash for the other shareholder.

Solstice may transfer its rights under the Solstice Option Agreement subject to certain criteriafor suitability of the transferee.

If any Ordinary Shares are issued other than in connection with an employee share scheme ata price less than the option price, or there is a sub-division, consolidation or reduction of theOrdinary Share Capital of the Company, the option price will be adjusted accordingly.

Where an offer (including a scheme of arrangement) is made which would constitute a saleof the Company (which would confer control on the buyer), the Company shall notify Solsticeof such offer and shall use reasonable endeavours to procure that a like offer is made toSolstice in respect of the option shares.

11.3.20McDaniel Engagement Letter

On 24 January 2012 McDaniel entered into an engagement letter with the Company underwhich McDaniel agreed, subject to certain conditions, to perform certain oil and gasconsulting services for the Company. Under the terms of the engagement letter, McDanielagreed to provide an updated evaluation of the OML 40 Lease, having previously provided anevaluation of the OML 40 Lease for the Company in 2011.

Under the terms of the engagement letter, McDaniel provided the consulting services in twophases. Phase 1 included updating the product price forecasts and the production start-up andpreparing an updated competent person’s report (the “Report”). Phase 2 included reviewingthe Report and conducting work related to the Admission, such as reviewing and commentingon submission documents and presentations ensuring that extracts of the Report in thisDocument are balanced and not misleading. Under the terms of the engagement letter,McDaniel is subject to a duty of confidentiality in respect of all information ascertained byMcDaniel in the course of providing its services. The engagement letter provides that theReport will be prepared in accordance with the AIM Rules including the June 2009 AIM Notefor Mining and Oil and Gas Companies.

The engagement letter contains indemnities given by the Company to McDaniel in relation toany liability or loss pursuant to McDaniel’s consultancy services. Under the terms of theengagement letter, the Company has indemnified McDaniel against all losses, claims,damages, expenses or liabilities resulting from the provision of its services under theengagement. However, the Company is only entitled to pursue a claim for damages againstMcDaniel if McDaniel is guilty of gross negligence or wilful misconduct in the provision ofits services. The Company is responsible for paying a fixed fee of US$7,500 for phase 1

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services in advance of McDaniel commencing work. The cost of phase 2 services will becharged on a time and expense basis according to a fee schedule attached to the engagementletter and the Company will pay a retainer of US$10,000.

The term of the engagement is for the period up to 30 June 2012, subject to earlier terminationby the Company on 15 days’ written notice.

11.3.21 Relationship Agreement

On 23 August 2012 the Company and Helios entered into a relationship agreement which willregulate the ongoing relationship between them.

The Relationship Agreement is conditional on the issue of Ordinary Shares to Helios pursuantto the terms of the Escrow Receipts Placing Letter and will terminate upon (i) Helios and anymember of its group ceasing between them to hold in aggregate 17.5 per cent. or more of theissued Ordinary Shares, subject to certain anti-dilution provisions in the case of non-preemtive offers of shares by the Company (the “Threshold”) or (ii), if Admission has notoccurred by 21 September 2012, Helios giving 30 days’ notice of termination to the Company.

Pursuant to the terms of the Relationship Agreement, it has been agreed that, among otherthings:

(a) Helios will:

(i) conduct, and procure that each member of its group conducts, all transactions,agreements, arrangements and relationships with the Company (or any memberof its group) on arm’s length terms and on a normal commercial basis;

(ii) not take any action, and procure that each member of its group does not take anyaction, which precludes or inhibits the Company (or any member of its group)from carrying on its business independently of Helios (or any member of itsgroup);

(iii) exercise its, and procure that each member of its group exercises its, votingrights in the capital of the Company such that the provisions of the RelationshipAgreement are observed and no variations to the Articles which would beinconsistent with the Relationship Agreement are made;

(b) Helios has the right, on the day which is 90 days after Admission and provided that itsshareholding is not lower than the Threshold, to nominate for appointment to the Board(and all committees of the Board except the nomination committee) one Director bygiving notice to the Company (the “Nominated Director”). The Nominated Directormust be suitably qualified in the reasonable opinion of the Company and its nominatedadviser from time to time and must enter into a letter of appointment as set out in theRelationship Agreement. Helios also has the right (subject to the same criteria otherthan the need for the nominated adviser to opine on suitability of qualification) toappoint the Nominated Director if the Placing Agreement has been executed and notterminated and Admission has not taken place by 21 September 2012;

(c) the Relationship Agreement contains standard confidentiality provisions;

(d) the Company gives various warranties to Helios relating to compliance by it, themembers of its group and its agents with anti-bribery laws and certain environmentalcodes; and

(e) Helios undertakes that, save in respect of the exercise by the Company of its optionunder the Helios Option Agreement, prior to dealing in any securities of the Companyit shall discuss the proposed dealing with the Nominated Director and if the NominatedDirector is in possession of any Inside Information (as defined in FSMA) then Helios

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shall delay such dealing until such time as the Nominated Director confirms to Heliosthat he is no longer in possession of Inside Information.

11.3.22 Helios Option Agreement

On 23 August 2012 Helios and the Company entered into an option agreement (the “HeliosOption Agreement”) pursuant to which the Company grants Helios the right to subscribe atthe Placing Price for such number of Non-Voting Ordinary Shares as result from dividing£10,000,000 by the Placing Price (rounding down fractions) and Helios grants the Companythe right to require Helios to subscribe for such shares.

The Helios Option Agreement is conditional on the issue of Ordinary Shares to Heliospursuant to the Escrow Receipts Placing. Helios may elect to subscribe for option shares atany time in the 24 month period after completion of the Escrow Receipts Placing if Admissionoccurs, and the date of the Helios Option Agreement if Admission does not occur (providedthat such period may be extended in the event it ends within a close period (as defined in theAIM Rules).

Helios may exercise the option on more than one occasion, provided that: (i) on each occasionthe minimum aggregate value for exercising the option is not less than £2.5 million (unlessthere are fewer than that value of option shares remaining in which case Helios must exercisein respect of all of the remaining option shares) and (ii) the aggregate number of sharessubscribed for in total does not exceed 100 per cent. of the available option shares.

Helios has given certain undertakings in the Helios Option Agreement including that it is notacting in concert with any other party and that the grant of the option will not trigger any ofthe events or requirements of Rules 5 or 9 of the Code.

The Company has the option to require Helios to subscribe for some or all of the option sharesat any time during the 12 month period commencing on the first anniversary of completion ofthe Escrow Receipts Placing (provided that such period may be extended in the event that itends during a close period (as defined in the AIM Rules)). The same conditions apply toexercising as described above, with the additional conditions (amongst others) that: (i) thewarranty from the Company to Helios that it is not aware of any reason why the informationin the Admission Document will show the financial position and prospects of the Company tobe materially worse than presented in the draft investor presentation to Helios and pathfinderadmission document (each of which are set out in the Helios Option Agreement) is correct;(ii) no material breach of the warranties or representations contained in the PlacingAgreement has occurred; (iii) the proceeds of the subscription for the option shares by Heliosare required to fund planned expenditure, the Company does not have sufficient free cash tofund such planned expenditure and the free cash in the Company on the business dayimmediately before the date on which the Company proposes to give notice of exercise of theoption is less than US$10 million; (iv) the SCB Facility Agreement has been drawn down infull; (v) the Company is not in a close period and (vi) there is no material adverse change inthe Company which would in the reasonable opinion of Helios result in the financial positionand prospects of the Company being materially worse than presented in the draft investorpresentation to Helios and pathfinder admission document (each of which are set out in theHelios Option Agreement). Furthermore Helios shall only be obliged to subscribe for optionshares if the Company has exercised its option, pro-rata and to the extent possible, under theSolstice Option Agreement and Solstice has subscribed for such shares.

If the Company is seeking a whitewash of the provisions of Rule 9 of the Code in respect ofanother shareholder, it shall inform Helios and if so requested shall, subject to applicablelaws, seek such a whitewash to enable Helios to subscribe for Ordinary Shares rather thanNon-Voting Ordinary Shares up to the same shareholding percentage as in respect of the firstwhitewash for the other shareholder.

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If any Ordinary Shares are issued (other than in connection with an employee share scheme)at a price less than the option price or there is a sub-division, consolidation or reduction of theOrdinary Share capital of the Company, the option price will be adjusted accordingly.

Where an offer (including a scheme of arrangement) is made which would constitute a saleof the Company (which would confer control on the buyer), the Company shall notify Heliosof such offer and shall use reasonable endeavours to procure that a like offer is made to Heliosin respect of the option shares.

Helios may transfer its rights under the Helios Option Agreement subject to certain criteriafor suitability of the transferee.

11.4 Placing Documents

11.4.1Nominated Adviser and Broker Agreement

A nominated adviser and broker agreement will be entered into prior to Admission betweenCanaccord, the Company and the Directors of the Company, pursuant to which Canaccord hasagreed to act as the Company’s nominated adviser and broker upon the satisfaction or waiverof the Placing Agreement becoming unconditional and not having been terminated prior toAdmission (“Effective Date”) (the “Nominated Adviser and Broker Agreement”).

Under the Nominated Adviser and Broker Agreement, the Company has agreed to payCanaccord an annual fee of £70,000 together with any applicable VAT thereon. Such annual feeshall be payable in half yearly instalments six months in advance with the first such instalmentbeing due and payable on the Effective Date. This agreement is terminable on not less than onemonths written notice provided that such notice shall expire on or after the expiry of 12 monthsimmediately following the Effective Date. The agreement may be terminated on shorter noticein certain limited circumstances.

The Nominated Adviser and Broker Agreement contains warranties, indemnities andundertakings given by the Company to Canaccord and contains undertakings from theDirectors and the Company relating to the retention of control over Elcrest.

11.4.2 Placing Agreement

The Company, the Directors, and Canaccord have entered into a placing agreement dated24 August 2012, pursuant to which, Canaccord has agreed, subject to the Placing Agreementbecoming unconditional and not being terminated in accordance with its terms, to act as agentfor the Company to procure subscribers for New Ordinary Shares.

The obligations of the parties to the Placing Agreement are subject to certain conditions thatare typical for an agreement of this nature. These conditions include, amongst others, theaccuracy of the representations and warranties under the Placing Agreement.

Canaccord may terminate the Placing Agreement prior to Completion in certain specifiedcircumstances that are typical for an agreement of this nature. These include, amongst others,the occurrence of certain material adverse changes in, or affecting, the condition (financial,operational, legal or otherwise), or in the earnings, liquidity, net asset value, management,funding position, business affairs or operations, solvency or prospects of the Company or anymember of the Group, whether or not arising in the ordinary course of business, certain changesin political, financial or economic conditions and any event, circumstance, effect, occurrenceor state of affairs or any combination of them resulting or reasonably likely to result in amaterial diminution of value of Elcrest or OML 40. Canaccord has agreed to waive its right toterminate the Placing Agreement after Completion.

If any of the above-mentioned conditions are not satisfied (or waived, where capable of beingwaived), or if the Placing Agreement is terminated in accordance with the terms of the PlacingAgreement, then the Placing will lapse and the Company will withdraw its application forAdmission.

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The Company has agreed to pay Canaccord a commission of five per cent. of the grossproceeds raised from the placing of New Ordinary Shares with the subscribers it procures,together with a corporate finance fee of £325,000 and, at the Company’s discretion, a fee of upto £75,000, together with any applicable VAT on such amounts.

Subject to certain restrictions, the Company will pay certain other costs and expenses(including any applicable VAT) of, or incidental to, the Placing including all fees and expensespayable in connection with Admission, expenses of the registrars, printing and advertisingexpenses, postage and all other legal, accounting and other professional fees and expenses.

The Placing Agreement also contains (i) certain customary representations, warranties andundertakings given by the Company and the Directors to Canaccord as to the accuracy of theinformation contained in this Document and other matters relating to the Group, its businessand the Acquisition; (ii) certain customary indemnities from the Company in favour ofCanaccord; (iii) an undertaking by the Company that, without the prior written consent ofCanaccord, it will not, subject to certain customary exceptions, amongst other things, issue anyshares, incur any indebtedness or adopt any share incentive schemes (save as set out in thisDocument), for a period of six months from the date of the Placing Agreement; and (iv) certainundertakings from the Company to, amongst other things, consult with and provide certaininformation to Canaccord.

11.4.3 Lock-in Deed

A lock-in deed dated 24 August 2012 between the Company, Canaccord and theDirectors/Proposed Directors pursuant to which such Directors/Proposed Directors haveagreed not to dispose of, or agree to dispose of, whether conditionally or unconditionally,directly or indirectly, and procure that their Associates will not dispose of or agree to disposeof any Ordinary Shares or interests in any Ordinary Shares at any time prior to the date falling12 months after Admission (“Relevant Date”), save in certain circumstances permitted byRule 7 of the AIM Rules. In addition, the Directors/Proposed Directors have agreed to certainorderly market arrangements with regard to their Ordinary Shares for a period of 12 monthsafter the relevant date.

11.4.4Canaccord and Novum Agreement

On 25 January 2012, Canaccord entered into an agreement with Novum Securities Limited(“Novum”), pursuant to which Canaccord has agreed to pay Novum a fixed proportion of thecommission Canaccord receives under the terms of the Placing Agreement (described atparagraph 11.4.2 above), subject to certain terms and conditions. If the Placing raises a sumequal to or less than £130,000,000 Canaccord shall pay Novum a commission equal to22.5 per cent. of the commission Canaccord receives from the Company under the PlacingAgreement. If the Placing raises a sum greater than £130,000,000 Canaccord shall pay Novuma sum equal to (i) 50 per cent. of the commission received from the Company for the Placingamount raised in excess of £130,000,000 and (i) 22.5 per cent. of the commission received forthe initial £130,000,000 raised.

11.5 Share Plans

For the purposes of the summaries of the Eland Share Option Plans and the Eland Co-Investment Plancontained in paragraphs 11.5.1 and 11.5.2, references to the Board shall mean the board of directorsof Eland from time to time or a duly authorised committee thereof, which shall include theremuneration committee.

11.5.1 Eland Share Option Plans

The Eland Share Option Plans were adopted on 26 June 2012 by the Board and on that datecertain options were granted to certain Directors and employees.

Share options exercisable at par have been granted to the Founders representing 15 per cent. ofthe Pre-Placing Diluted Share Capital:

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Name of Individual Options Proportion

Leslie Blair 1,067,905 40.00%George Maxwell 934,417 35.00%Harry Wilson 667,441 25.00% –––––––– ––––––––Total 2,669,763 100% –––––––– ––––––––The Company has agreed to grant on Admission such further options as would then represent,when aggregated with the options granted to the Founders before Admission, 8 per cent. of thefully diluted share capital of the Company on Admission. These options will be issued in thefollowing proportions:

Name Proportion Name Proportion

Leslie Blair 35.93% Gilles Krijger 2.31%George Maxwell 31.44% Harry Wilson 22.46%Jay Christison 3.11% Louis Castro 1.58%Gina Dadia 0.79% Robert Lambert noneMicol Hetherington 1.58% Russell Harvey noneSteven Archibald 0.79%

Each of Harry Wilson’s and Louis Castro’s options will not be exercisable prior to the thirdanniversary of grant and, in the event that he ceases to be a Director, he will not be permittedfor at least one year after he ceases to be a Director to dispose of the Ordinary Shares acquiredon the exercise of his options, net of any Ordinary Shares sold to meet the costs of exercise(including any tax due).

The Eland Share Option Plans may also be operated after Admission. Details of the ElandShare Option Plans are as follows:

Structure of optionsOptions over Ordinary Shares may be granted on the recommendation of the Board.

Ordinary Shares allotted or transferred on the exercise of options will rank equally withOrdinary Shares then in issue.

Timing of grantOptions may be granted at any time after the Eland Share Option Plan is adopted by the Boardbut prior to Admission. Options may be granted on Admission and thereafter within the periodof 42 days starting with (i) the dealing day after the date on which the Company announces itsresults for any period; and (ii) if the Board so resolves, any day on which exceptionalcircumstances exist which justify the grant of options.

EligibilityAny employee, any Director or officer of Eland or any of its subsidiaries or any person whoprovides services to Eland or any of its subsidiaries under a contract for services is eligible toparticipate at the discretion of the Board.

Plan LimitsThe aggregate number of Ordinary Shares issued or which may be issued in respect of optionsgranted under the Eland Share Option Plans and any other employee share scheme or any othershare plan for officers or consultants adopted by the Company providing for the subscriptionof Ordinary Shares (including the Co-Investment Plan), cannot exceed 10 per cent. of theissued share capital of the Company in any 10 year period.

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Exercise PriceThe exercise price for an option will be determined by the Board. In respect of options grantedon Admission the exercise price will be the Placing Price. In respect of options granted afterAdmission, the exercise price may not be less than the higher of: (i) the market value of anOrdinary Share on the dealing day immediately preceding the date of grant or, if the Boarddecides, the average of the market values on the three dealing days immediately preceding thedate of grant; and (ii) if the shares are to be subscribed, the nominal value of an Ordinary Share.

Vesting and performance conditionsOptions will ordinarily vest on a straight line basis over a three year period. However, in respectof certain of the options granted prior to Admission, the Board has determined that this shallnot apply.

Options may also be granted subject to performance conditions imposed by the Board so thatthe options may not be exercised unless any such condition has been satisfied. The Board maywaive or amend any condition attached to the option, if an event occurs which causes the Boardto consider that a waiver or amendment to any performance condition would produce a fairermeasure of performance provided that the waiver of or amendment to the condition would notmake the condition more difficult to satisfy.

For the options granted prior to or on Admission, the performance condition is that the closingmiddle market quotation for an Ordinary Share as derived from the AIM Appendix to the DailyOfficial List of the London Stock Exchange is equal to or greater than 150 per cent. of thePlacing Price for a period of 30 consecutive days in the 10 year period from the date of grant.In addition for certain options, their exercise is conditional on the option holder having beennotified on or before 31 March 2013 that Elcrest has acquired a 45 per cent. interest in the OML40 Lease.

Options are normally exercisable on or after the third anniversary of the date of grant, or anylater date determined by the Board at the date of grant, to the extent that any performanceconditions and/or applicable conditions as to the time of vesting have been met. In respect ofcertain of the options granted prior to Admission, the Board has determined that options shallbecome exercisable on the second anniversary of the date of grant.

Subject to meeting any vesting criteria and performance conditions, the options will have a 10year life from award.

Cessation of connection with the CompanyWhere an option holder ceases employment due to death, ill health, disability, redundancy, thesale of the business or company in which the option holder is employed, or any other reasonspecified by the Board at the date of grant, or, in the case of an option holder who does not havea contract of employment with the Company, ceases, in any such circumstances, to hold officeor no longer provides services to Eland or any of its subsidiaries, the option will becomeexercisable to the extent vested and to the extent any exercise conditions have been met orwaived and shall lapse six months from the date an option holder ceases his or her connectionwith the Company (except in the case of death where the option will lapse on the firstanniversary of the date of death).

In respect of options granted prior to Admission, the Board may determine that options can beexercised for longer than six months in the circumstances described above, and has done sowith respect to certain options granted prior to Admission.

Options will lapse on cessation of connection with the Company for any other reason unlessthe Board exercises its discretion to allow the option to be exercised.

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Certain options granted before AdmissionFor the options granted before Admission which are exercisable at par, the terms of grant havebeen modified. These changes are summarised in the table below and are compared to standardterms applying to options.

Options with modified terms Standard Options

Vesting period Options vest on grant

Exercise Three years from grant

No restrictions

Other terms

Change of controlOptions will become immediately exercisable to the extent vested and to the extent any exerciseconditions have been met where there is a change of control of the Company (except wherethere is no ultimate change of ownership) and will lapse six months after the change of control.

Non transferabilityOptions are non transferable. Options may only be exercised by persons to whom they aregranted (or, in the case of death, by their personal representatives).

Variation of share capitalOn a variation of the Company’s share capital, the exercise price and the number of OrdinaryShares subject to an option may be adjusted by the Board in such manner as it determines.

Administration and amendment of the Eland Share Option PlansThe Board administers the Eland Share Option Plans. The Board has the power to amend therules of the Eland Share Option Plans but any alteration which would materially advantageoption holders cannot be made without the prior approval of Shareholders in general meeting(except for minor amendments to benefit the administration of the Eland Share Option Plans orto take account of a change in legislation or to obtain or maintain favourable tax, exchangecontrol or regulatory treatment for option holders, or the Company or any of its subsidiaries).

No amendment which adversely affects any rights acquired by an option holder can be madewithout either: (a) the written consent of option holders that hold options under the Eland ShareOption Plans to acquire 75 per cent. of the Ordinary Shares which would be delivered if alloptions granted and subsisting under the Eland Share Option Plan were exercised (ignoring anyconditions which may be attached to their exercise); or (b) a resolution at a meeting of optionholders passed by not less than 75 per cent. of the option holders who attend and vote either inperson or by proxy.

Options vest over three yearson straight line basis

Two years from grant – ElandEmployee Share Option Planoptions only

Good Leaver/Bad Leaverprovisions apply

Entitlement ondeparture

Some Board discretion torestrict value on deathdeparture etc

No Board discretion to restrictvalue. Shares derived fromoptions granted under the ElandNon-Employee Share OptionPlan must be retainedfor one year from ceasing tobe an officer

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TerminationThe Eland Share Option Plans shall terminate on the tenth anniversary of the date of adoptionor at any earlier time by the passing of a resolution by the Board or the Company in generalmeeting.

Termination of the Eland Share Option Plans shall not affect the subsisting rights of optionholders.

11.5.2 Eland Co-Investment Plan

The Eland Co-Investment Plan was adopted on 26 June 2012 by the Board. No invitations havebeen made under the Eland Co-Investment Plan. Details of the Eland Co-Investment Plan areas follows:

Structure of awardsFollowing receipt of an invitation, a participant may invest an amount with the Company whichthe Board shall use to procure the purchase of Ordinary Shares for and on behalf of theparticipant (the “Award Shares”). The Board may also grant the participant an option to acquirean equal number of Ordinary Shares to their Award Shares (the “Matching Share Award”) at aset price.

The Matching Share Award may ordinarily only be exercised between the third and the fifthanniversaries of the date of Matching Share Award. The Matching Share Award may only beexercised to the extent that the Award Shares have been held by the participant for a three yearperiod (the “Deferred Period”).

Timing of InvitationInvitations may be issued within the period of 42 days starting with (i) the date the Eland Co-Investment Plan is adopted by the Board; or (ii) the dealing day after the date on which theCompany announces its results for any period.

Alternatively, invitations may be issued on any day on which the Board resolves thatexceptional circumstances exist which justify the making of an invitation.

Where the Board resolves to grant a Matching Share Award, it will be granted as soon aspracticable after the Award Shares have been purchased for and on behalf of the participant.

EligibilityA person providing services to Eland or any of its subsidiaries under a contract for services iseligible to be invited to participate in the Eland Co-Investment Plan, at the discretion of theBoard.

Individual LimitsThe maximum total market value of Ordinary Shares in respect of which an invitation may bemade to any participant during any financial year of the Company shall be equal to 50 per cent.of the total remuneration payable to that person by Eland or any of its subsidiaries under therelevant contract for services in that financial year.

Exercise PriceThe exercise price for a Matching Share Award will be determined by the Board and cannot beless than the nominal value of an Ordinary Share, if the shares are to be subscribed.

Exercise of Matching Share AwardA Matching Share Award will ordinarily be exercisable from the third anniversary of its dateof grant until the fifth anniversary of its date of grant, when it will lapse.

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Ceasing to provide services under a contract for servicesWhere, during the Deferred Period, a participant ceases to provide services under a contract forservices due to death, injury, ill health, disability, or Eland or any of its subsidiaries givingnotice or otherwise terminating the participant’s contract for services for any reason other thanperformance, the Matching Share Award may be exercised for six months (or 12 months in thecase of death).

If a participant’s contract for services is terminated for any other reason during the DeferredPeriod, the Board has discretion to decide whether to permit the Matching Share Award to beexercised and, if so, the number of Ordinary Shares that may be acquired on exercise.

To the extent that the Board has not exercised its discretion to permit the Matching Share Awardto be exercised within 14 business days of the date of termination of the participant’s contractfor services, the Matching Share Award immediately lapses (provided that it will lapse sooneron a decision not to permit exercise being reached by the Board). If the Board permits theMatching Share Award to be exercised, it shall be exercisable within 14 business days from thedate permitted by the Board after which it shall lapse if unexercised.

If, after the Deferred Period, a participant’s contract for services is terminated for cause, hisMatching Share Award immediately lapses on the date the contract for services so terminates.If, after the Deferred Period, a participant’s contract for services is terminated for any reasonother than for cause, he may exercise his Matching Share Award within 14 business days oftermination after which it shall lapse if unexercised.

Change of controlMatching Share Awards will become immediately exercisable where there is a change ofcontrol of the Company (except where there is no ultimate change of ownership) and will lapsesix months after the change of control.

Non transferabilityAwards are non transferable. Matching Share Awards may only be exercised by persons towhom they are granted (or, in the case of death, by their personal representatives).

Variation of share capitalOn a variation of the Company’s share capital, the Matching Share Award may be adjusted bythe Board in such manner as it determines.

Administration and amendment of the Eland Co-Investment PlanThe Board administers the Eland Co-Investment Plan. The Board has the power to amend therules of the Eland Co-Investment Plan but any alteration which would materially affect thesubsisting rights of participants cannot be made without the consent of participants.

TerminationThe Eland Co-Investment Plan shall terminate on the tenth anniversary of the date of itsadoption or at any earlier time by the passing of a resolution by the Board or the Company ingeneral meeting.

Termination of the Eland Co-Investment Plan shall not affect the subsisting rights ofparticipants.

11.6 General Company Agreements

11.6.1 Registrars’ Agreement

An agreement for the provision of registry and associated services agreement dated 24 August2012 between Computershare Investor Services Plc (“Computershare”) and the Company,pursuant to which Computershare has agreed to provide the Company with registration services

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for a minimum of two years and the agreement can be terminated on six months notice byeither party. Computershare has agreed to provide a registration and transfer office for theCompany.

Under the terms of the agreement, the Company is to pay the fees incurred for the provision ofthe various services monthly in arrears to Computershare. The fees are exclusive of VAT. If theCompany fails to pay the fees due to Computershare under the agreement, Computershare maysuspend provision of its services until payment is received after providing 14 days’ notice tothe Company.

The agreement contains indemnities from the Company to Computershare regardinginaccuracy of information provided by the Company and Computershare has providedindemnities to the Company for loss suffered as a result of fraud or negligence or wilful defaultby Computershare.

11.7 Debt Funding Agreements

11.7.1 SCB Facility Agreement

On 24 August 2012 the Company entered into a US$22,000,000 secured term loan facility withStandard Chartered. Subject to the satisfaction of conditions precedent, the facility is availableto the Company to fund loans to Elcrest to allow Elcrest to meet its general working capitalrequirements, including in relation to OML 40. The facility falls due for repayment in full onthe date falling 18 months after the execution of the SCB Facility Agreement. It is a conditionprecedent to the availability of the facility that First Oil has been achieved. First Oil means theproduction of crude oil at an average rate of 2000 bopd for a cumulative 30-day period in a 90-day period following the restart of production. All conditions precedent other than First Oilmust be satisfied no later than 3 months after the date of the SCB Facility Agreement otherwisethe facility will be cancelled. Interest is payable on amounts outstanding from time to time ata rate of 9 per cent. per annum for the first 12 months and 11 per cent. per annum thereafter.Interest is payable quarterly in arrear. Fees are payable to SCB and fall due on the first receiptof proceeds of Admission, and the balance on the earlier of first utilisation under the SCBFacility Agreement and three months after the date of the Agreement. The aggregatearrangement fees are equal to 5 per cent. of the facility amount. Commitment fees at 2 per cent.per annum accrue on committed but undrawn amounts. The SCB Facility Agreement containsrepresentations, warranties and undertakings on the part of the Company considered customaryfor facilities of this nature. These undertakings include obligations on the Company in relationto the management and operation of Elcrest’s business and undertaking. In this way, mattersand circumstances affecting Elcrest could give rise to a breach of the SCB Facility Agreementand entitle SCB under that to demand repayment and take enforcement action, including inrelation to the security interests described below.

Under the terms of the SCB Facility Agreement Westport guarantees all of the obligations ofthe Company.

As security for the performance of its obligations under the SCB Facility Agreement theCompany is required to grant security over all of its assets and revenues. This includes securitygiven over all of the shares in Elcrest and Westport and Eland Oil & Gas (Nigeria) Limitedowned by the Company. The bank accounts owned by the Company are subject to security infavour of SCB under the SCB Facility Agreement. The rights of the Company under theAdditional Elcrest Loan Agreement (referred to below) and associated security (as more fullydescribed below) are also subject to security in favour of SCB.

In addition, Westport will grant security to the lenders under the SCB Facility Agreement overall of its assets. This will involve an assignment of its bank accounts, its rights under the ElcrestLoan Agreement and any related security. Westport will continue to be entitled to exercise allof its rights in relation to the assets secured to the lenders (subject to the provisions of the SCBFacility Agreement described in more detail in this paragraph 11.7.1 of Part 8) until such time

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as an event of default arises under the SCB Facility Agreement, at which time the lenders willbe entitled to exercise these rights.

The Company will continue to be entitled to exercise a number of its rights in relation to thesecured assets until such time as an event of default arises under the SCB Facility Agreementat which time SCB may exercise those rights.

11.7.2 Additional Elcrest Loan Agreement

Amounts borrowed by the Company under the SCB Facility Agreement will be on-lent toElcrest to enable Elcrest to meet its general working capital requirements, including in relationto OML 40. Under the Additional Elcrest Loan Agreement free cash flow (calculated inaccordance with the agreement) is to be used for debt service if required by the Company.

The Additional Elcrest Loan Agreement is secured by a debenture (fixed and floating charge)over certain assets of Elcrest and a deed of charge over the shares held by Starcrest in Elcrest(the “Elcrest Share Charge”). Under the Elcrest Share Charge, Starcrest is required to depositthe following documentation with the Company:–

• Share certificates in relation to Starcrest’s holding of shares in Elcrest;

• Signed undated blank transfer forms in relation to Starcrest’s shares in Elcrest;

• Signed undated letters of resignation from each director of Elcrest appointed byStarcrest;

• An irrevocable proxy signed by Starcrest appointing the Company as proxy to attend andvote at AGMs and EGMs of Elcrest;

• An irrevocable power of attorney signed by Starcrest empowering the Company toexercise the votes attaching to Starcrest’s shares in Elcrest and enter into transfers,contracts and carry into effect any agreements with the Company in respect of theshares.

Starcrest is required to deposit with the Company updated documentation from time to timee.g. additional powers of attorney if and when further shares are issued to Starcrest.

For so long as the loan to the Company is outstanding, Starcrest is required to exercise (orrefrain from exercising) any voting or any conditional or preferential rights attaching toStarcrest’s shares in Elcrest as directed by the Company from time to time. Failure to complywith this obligation would constitute an event of default under the Additional Elcrest LoanAgreement and the Elcrest Share Charge if left unremedied.

Upon the occurrence of an event of default under the Additional Elcrest Loan Agreement theCompany may enforce its security under the Elcrest Share Charge (and the debenture)including dating the transfer form(s), letters of resignation, proxies and power(s) of attorney,have its name entered in the register of members, vote and transfer the charged shares and sellthe charged shares and apply the proceeds towards the discharge of the secured obligations.

11.7.3Deed of Priority

The Company, Westport, Elcrest and Starcrest will enter into a Deed of Priority in relation tothe Elcrest Loan Agreement and the Additional Elcrest Loan Agreement. The main purpose ofthe Deed is to govern the relationship between the Company and Westport as creditors ofElcrest. The Company’s claims against Elcrest will rank ahead of Westport’s claims. However,until an event of default occurs under the Additional Elcrest Loan Agreement, Westport will bepermitted to receive payments due to it from Elcrest. Westport also agrees not to enforce itssecurity without the consent of the Company. Starcrest agrees to exercise its voting rights inrespect of the shares in Elcrest (which are charged in favour of each of Eland and Westport) as

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directed by the Company until all amounts due to the Company are discharged, and then asdirected by Westport.

12 Properties of the Company

12.1 The Company has the following property interests:

Property Description Location Interest Term Parties

Two storey office building Leasehold

Leasehold

12.2 The Company also has a branch office in the Sharjah Airport International freezone which is held onan annual basis.

13 Related Party Transactions

13.1 Save as disclosed below, the Company has not entered into any related party transactions of the typeas set out in the AIM Rules.

13.2 The Park Holdings Agreement and the Park Securities Agreement described in paragraphs 11.3.13 and11.3.14 of this Part 8 are related party transactions due to Mr. Wilson’s beneficial interest in ParkSecurities and Park Holdings. These agreements were entered into on arm’s length terms.

14 Working Capital

The Directors are of the opinion, having made due and careful enquiry, and after taking into account thefinancing facilities available and the net proceeds of the Placing to be received by the Company, the workingcapital available to the Company will be sufficient for its present requirements, that is, for at least the next12 months from the date of Admission.

15 Legal and arbitration proceedings

The Company is not, and during the 12 month period prior to the date of this Document has not been,involved in any governmental, legal or arbitration proceedings which may have or have had in the recent pasta significant effect on the Company’s financial position or profitability, nor, so far as the Company is aware,are there any such proceedings pending or threatened.

16 Principal Investments

The only investment the Company currently intends to make is the Acquisition of the OML 40 Lease. Nofurther investments are planned for the foreseeable future other than in accordance with the Company’sstrategy as set out in Part 1 of this Document.

17 Disclosure and Transparency Rules

Shareholders are obliged to disclose their interests in the Company and in particular, the relevant provisionsof chapter 5 of the Disclosure and Transparency Rules apply.

18 General

18.1 Save as disclosed in the documents summarised in paragraphs 11.2.2, 11.2.5, 11.3.19, 11.3.22 and11.7 of Part 8 of this Document, there has been no significant change in the trading or financial

Landlord: GladmanDevelopmentsLimited Tenant:Eland Oil & GasLimited

Five years from11 October 2010 to10 October 2015

17 Abercrombie Court,Prospect Road, Westhill,Aberdeen, Scotland,AB32 6FG

Landlord: StyconProperties LimitedTenant: Eland Oil &Gas Limited

Two years from1 September 2010to 31 August 2012with option to renew

1 Winnipeg Close, offPanama Street, MaitamaDistrict, Abuja, Nigeria

Four bedroom detachedhouse with servants quartersand guest chalet

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position of the Company since 31 December 2011, being the date to which the Accountants’ Reportin Part 6 is made up.

18.2 The total costs/charges and expenses of, or incidental to, the Placing and Admission are estimated toamount to approximately £11.2 million (excluding VAT where applicable). The total net proceeds ofthe Placing are expected to amount to £106.8 million.

18.3 Deloitte LLP, 2 New Street Square London EC4A 3BZ are the auditors and reporting accountants ofthe Company and are members of the Institute of Chartered Accountants in England and Wales.

18.4 Canaccord Genuity Limited is registered in England and Wales under number 01774003 and itsregistered office is at 88 Wood Street, London EC2V 7QR, United Kingdom. Canaccord is regulatedby the Financial Services Authority and is acting in the capacity as nominated adviser and broker tothe Company.

18.5 Canaccord has given and has not withdrawn its written consent to the issue of this Document with theinclusion of its name and references to it in the form and context in which they appear.

18.6 The Directors believe that the Company is not dependent on patents or other intellectual propertyrights, licences, industrial, commercial or financial contracts or new manufacturing processes whichare material to the Company’s business or profitability.

18.7 Save as disclosed in paragraph 11 of Part 8 of the Document, no person (excluding professionaladvisers otherwise disclosed in this Document and trade suppliers) has received, directly or indirectly,from the Company within the 12 months preceding the date of this Document or entered intocontractual arrangements to receive, directly or indirectly, from the Company on or after Admissionany of the following:

18.7.1 fees totalling £10,000 or more;

18.7.2 securities in the Company with a value of £10,000 or more calculated by reference to thePlacing Price; or

18.7.3 any other benefit with a value of £10,000 or more at the date of Admission.

18.8 Assuming that the New Ordinary Shares are fully subscribed, the conversion into Ordinary Shares ofthe Preference Shares, the First Loan Notes, the Third Loan Notes, the former holders of Second LoanNotes and the full conversion into Ordinary Shares of interest payable to the holders of First LoanNotes, the holders of Third Loan Notes, the Existing Ordinary Shares will account for approximately2 per cent. of the Enlarged Share Capital following the Placing and Admission.

18.9 The Directors are unaware of exceptional factors which have influenced the Company’s activities.

18.10 Save as disclosed in this Document, the Directors are unaware of any environmental issues that mayaffect the Group’s utilisation of its tangible fixed assets.

18.11 Save as disclosed in this Document, the Directors are not aware of any trends, uncertainties, demands,commitments or events that are reasonably likely to have a material effect on the Company’s prospectsfor the current financial year.

18.12 Save as disclosed in this Document, there are no investments in progress and there are no futureinvestments on which the Directors have already made firm commitments which are significant to theCompany.

18.13 McDaniel has given and has not withdrawn its written consent to the inclusion of the CPR in the formset out in Part 5 of this Document and the references to such report in the form and the context inwhich it appears and accepts responsibility for the contents of its report for the purposes of the AIMRules.

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18.14 McDaniel, the Competent Person, whose principal place of business is at Suite 2200, Bow ValleySquare 3, 255-5 Ave SW, Calgary, Canada, delivers integrated studies and evaluations to the upstreampetroleum industry and has prepared the report contained in Part 5 of this Document at the request ofthe Company. The Competent Person does not have any material interest in the Company or theOrdinary Shares. Information contained in this Document which is stated to have been taken from theCPR prepared by the Competent Person has been accurately reproduced and, as far as the Companyis aware and able to ascertain from information published by the Competent Person, no facts havebeen omitted which would render the information reproduced from the Competent Person’s Reportinaccurate or misleading.

18.15 RPS Energy Limited, whose principal place of business is at First Floor, 14 Cornhill, London EC3V3ND, has given and has not withdrawn its written consent to the issue of this Document with theinclusion of its name and references to it in the form and context in which they appear.

19 Third party information

Where information has been sourced from a third party, the information has been accurately reproduced and,as far as the Company and the Directors are aware and are able to ascertain from information published bythat third party, no facts have been omitted which would render the reproduced information inaccurate ormisleading. Reference materials include various historical and recent publications. A comprehensive list ofreports and information used in the preparation of this Document is available if required.

20 Availability of this Document

Copies of this Document and the Articles are available free of charge for inspection during normal businesshours on any weekday (Saturdays and public holidays excepted) at the offices of Stephenson Harwood LLP,One Finsbury Circus, London, EC2M 7SH for at least one month after Admission.

Date 24 August 2012

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DEFINITIONS

“2006 Act” the Companies Act 2006, as amended

“Accredited Investor” as defined in Rule 501 of Regulation D

“Acquisition” the acquisition of a 45 per cent. participating interest in OML 40

“Acquisition Agreement” the agreement(s) dated 31 March 2011 entered into to effect theAcquisition between the Sellers and Elcrest, details of which aresummarised in paragraph 11.1.1 of Part 8 of this Document

“Acquisition Amendment Agreement” the agreement dated 23 August 2012 between each of Elcrest andthe Sellers making certain amendments to the AcquisitionAgreement, details of which are summarised in paragraph 11.1.2 ofPart 8 of this Document

“Acquisition Escrow Account(s)” the bank account(s) established in connection with the EscrowReceipts Placing with Standard Chartered (London Branch) in thejoint names of the Sellers and Eland, one being a US$ account andthe other being a GBP account

the agreement dated 23 August 2012 between each of the Sellers,Eland and SCB in relation to the Acquisition Escrow Accountdetails of which are summarised in paragraph 11.1.3 of Part 8 of thisDocument

“Acquisition Price” the price offered by Elcrest and accepted by the Sellers in relationto the Acquisition

“acting in concert” has the meaning given to it in the Code

“Additional Elcrest Loan Agreement” the loan agreement between the Company and Elcrest, pursuant towhich the Company makes available to Elcrest the proceeds drawndown under the SCB Facility Agreement, further details of whichare set out in paragraph 11.7.2 of Part 8 of this Document

“Admission” the admission of the Ordinary Shares and New Ordinary Shares totrading on AIM and such admission becoming effective inaccordance with the AIM Rules

this document, drawn up in accordance with the AIM Rules

“Affiliates” in relation to a Non-Voting Right Ordinary Shareholder:

(i) any person that directly or indirectly controls, is controlledby, or is under common control of the Non-Voting RightOrdinary Shareholder (but excluding the Company and anyperson or entity controlled by the Company);

(ii) any person holding shares as nominee for the Non-VotingRight Ordinary Shareholder (but only in relation to the sharesso held); and

(iii) any person holding shares which represent an identifiable,distinct partnership interest of the Non-Voting RightOrdinary Shareholder (but only in relation to the shares soheld),

“Acquisition Escrow AccountAgreement”

“Admission Document” or“Document”

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and, for the purposes of this definition, “control”, when used withrespect to any person, means the power to direct the managementand policies of such person, directly or indirectly, whether throughthe ownership of voting securities, by contract or otherwise (and“controlled” shall be construed accordingly)

“Agreement Amendment Letter” the agreement between the Company, Starcrest and Elcrest, whichfurther amends the Elcrest Shareholders’ Agreement, further detailsof which are set out in paragraph 11.2.2 of Part 8 of this Document

“AIM” the market of that name operated by the London Stock Exchangeplc

“AIM Rules” the AIM Rules for Companies governing admission to and theoperation of AIM, as amended from time to time

“Articles” the articles of association of the Company from time to time

“Associates” has the meaning given to it in the definition of “related party” setout in the glossary to the AIM Rules

“Business Day” a day (other than a Saturday or Sunday) on which banks are openfor general business in London

“Canaccord” Canaccord Genuity Limited

“certificated” or “in certificated form” the description of a share of security which is in certificated form(that is, not in CREST)

“CITA” Companies Income Tax Act, Cap. C21, LFN 2004

“Code” the UK City Code on Takeovers and Mergers as published by theTakeover Panel (as amended)

“Company” or “Eland” Eland Oil & Gas PLC, a company incorporated in Scotland withregistration no. SC364753

the competent person report as prepared by McDaniel and whichappears in Part 5 of this Document

“Completion” completion of the Acquisition in accordance with the AcquisitionAgreement, as amended by the Acquisition Amendment Agreement

“Completion Documentation” (a) a side letter removing OML 40 from the Old JOA

(b) the New JOA

(c) the Deed of Novation in relation to the New JOA’s

(d) the Crude Handling Agreement

(e) the Crude Handling Side Letter

(f) the Deed of Transfer of land

(g) document escrow agreement

(h) sale and purchase extension agreement; and

(i) deed of assignment of OML 40

“Concessions” mineral leases, petroleum leases, mining leases, licences, licenceapplications and/or production sharing contracts

“Competent Person’s Report” or“CPR”

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“CREST” the relevant system (as defined in the CREST Regulations) for thepaperless settlement of share transfers and the holding of shares inuncertificated form

“CREST Regulations” the Uncertificated Securities Regulations 2001 of the UnitedKingdom (as amended) including any modification or re-enactmentthereof for the time being in force

“Deed of Priority” the security priority agreement between the Company, Westport andElcrest by which it is agreed that the rights of the Company underthe Additional Elcrest Loan Agreement shall stand in priority to therights of Westport under the Elcrest Loan Agreement, further detailsof which are set out in paragraph 11.7.3 of Part 8 of this Document

“Deferred Shares” deferred shares of £1.00 each in the capital of the Company

“Deposit” the deposit of US$15.4 million paid by or on behalf of Elcrest to theSellers in relation to the Acquisition following the entry into theAcquisition Agreement

“Directors” or “Board” the directors of the Company whose names appear on page 14 ofthis Document

“Disclosure and Transparency Rules” the disclosure and transparency rules of the UKLA

“DPR” the Department of Petroleum Resources, the regulatory agency forthe petroleum industry in Nigeria

“Eland Co-Investment Plan” the co-investment plan adopted by the Board on 26 June 2012 underwhich the Company may make an award of Ordinary Shares to acontractor providing service to the Company or any of itsubsidiaries (as defined in the plan) and invite the contractor toacquire Ordinary Shares, details of which plan are summarised inparagraph 11.5 of Part 8 of this Document

the share option plan adopted by the Board on 26 June 2012 underwhich options over Ordinary Shares may be granted to eligibleemployees of the Company or of its subsidiaries (as defined in theplan) details of which plan are summarised in paragraph 11.5 ofPart 8 of this Document

the share option plan adopted by the Board on 26 June 2012 underwhich options over Ordinary Shares may be granted to officers andconsultants providing services to the Company or its subsidiaries(as defined in the plan) details of which plan are summarised inparagraph 11.5 of Part 8 of this Document

“Eland Oil & Gas (Nigeria) Limited” a company incorporated under the laws of Nigeria on 11 August2010, with registered number RC905660 having its registered officeat Streamsowers and Köhn Barristers, Solicitors and Arbitrators,16D Akin Olugbade Street, Victoria Island, Lagos

“Eland Share Option Plans” the Eland Non-Employee Share Option Plan and the ElandEmployee Share Option Plan

“Eland Employee Share OptionPlan”

“Eland Non-Employee ShareOption Plan”

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incorporated under the laws of Nigeria on 6 January 2011, and ajoint venture vehicle held by the Company and Starcrest for thepurposes of the Acquisition

“Elcrest Loan” the loan facility in favour of Elcrest as set out in the Elcrest LoanAgreement

“Elcrest Loan Agreement” the loan agreement between the Company and Elcrest, furtherdetails of which are set out in paragraph 11.2.4 of Part 8 of thisDocument

“Elcrest Shareholders’ Agreement” the joint venture agreement between the Company, Starcrest andElcrest, to regulate the relationship between them, further details ofwhich are set out in paragraph 11.2.1 of Part 8 of this Document, asamended by the Elcrest Shareholders’ Agreement AmendmentLetter

the agreement between the Company, Starcrest and Elcrest, whichamends the Elcrest Shareholders’ Agreement, further details ofwhich are set out in paragraph 11.2.2 of Part 8 of this Document

“ENI” Eni S.p.A., the parent company of NAOC

“Enlarged Share Capital” the issued share capital of the Company immediately followingAdmission consisting of the Existing Ordinary Shares and the NewOrdinary Shares, together with such Ordinary Shares as shall beissued pursuant to the conversion of the First Loan Notes and ThirdLoan Notes

“Escrow Agent” Standard Chartered Bank

“Escrow Monies” the proceeds of the Escrow Receipts Placing

“Escrow Deadline” 21 September 2012

“Escrow Receipts” the receipts to be issued by the Company to the Escrow ReceiptsPlacees which will, subject to satisfaction of the Escrow ReleaseCondition, entitle the holder to receive the Escrow Receipts PlacingShares, further details of which are set out in paragraph 11.1.4 ofPart 8 of this Document

the letters of confirmation sent with the Escrow Receipts PlacingLetters to potential Escrow Receipts Placees

“Escrow Receipts Placees” the persons who agree conditionally to subscribe for EscrowReceipts Placing Shares

“Escrow Receipts Placing” the proposed conditional placing of the Escrow Receipts and theEscrow Receipts Placing Shares to Escrow Receipts Placees on theterms and subject to the conditions set out in the PlacingAgreement, the Escrow Receipts Placing Letters and the EscrowReceipts

“Escrow Receipts Placing Letters” the UK escrow receipts placing letters and the Canadian escrowreceipts placing letters sent to prospective Escrow Receipts Placeesin connection with the Escrow Receipts Placing together with theEscrow Receipts Letters of Confirmation

“Elcrest Shareholders’ AgreementAmendment Letter”

“Escrow Receipts Letters ofConfirmation”

“Elcrest” or “Elcrest Explorationand Elcrest Exploration andProduction Nigeria Limited, acompany Production (Nigeria)Limited”

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“Escrow Receipts Placing Shares” the 113,189,000 New Ordinary Shares to be issued by the Companyfor cash pursuant to the Escrow Receipts Placing

“Escrow Release Condition” has the meaning given to it in the Escrow Receipts Placing Letter

“Euroclear” Euroclear UK & Ireland Limited, the operator of CREST

“Existing Ordinary Shares” the 2,750,000 Ordinary Shares in issue immediately prior toAdmission

the Financial Services Authority of the United Kingdom

“First Escrow Account” an escrow account held with Standard Chartered for the benefit ofSPDC and the Company in which the Deposit was held

“First Loan Note Instrument” a loan note instrument entered into by the Company on 12 January2011

“First Loan Notes” the £9.5 million 5.00 per cent. unsecured convertible loan notes due2011 and constituted by the First Loan Note Instrument

“First Note Issue” the issue of the First Loan Notes

“First Oil” the production of crude oil at an average rate of 2,000 bopd asmeasured at the Opauma Field in OML 40 for a cumulative 30 daysin the 90 day period commencing at the restart of field production

“First Production” the date on which crude oil is first delivered from OML 40 to theForcados terminal

“Founders” Ian Leslie Blair, George Walter Mitchell Maxwell, Henry GeorgeWilson and Pieter van der Groen

“Free Cash Flow” the cash flow derived from OML 40 after all costs, taxes andexpenses

“FSMA” Financial Services and Markets Act 2000 (as amended)

“General Placees” the persons who agree conditionally to subscribe for GeneralPlacing Shares pursuant to the General Placing Letters

“General Placing” the proposed conditional placing of the General Placing Shares toGeneral Placees on the terms and subject to the conditions set out inthe Placing Agreement and in either the General Placing Letters orin the case of the General US Placees only, the general US placingletters

“General Placing Letters” the UK placing letters and the Canadian placing letters (but not thegeneral US placing letters) sent to prospective General Placees inconnection with the General Placing together with the GeneralPlacing Letters of Confirmation

the letters of confirmation sent with the General Placing Letters andgeneral US placing letters to potential General Placees and GeneralUS Placees

“General Placing Shares” the 4,763,000 New Ordinary Shares to be issued by the Companyfor cash pursuant to the General Placing

“Financial Services Authority” or“FSA”

“General Placing Letters ofConfirmation”

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“General US Placees” those persons who (a) have a registered address in, or are residentin, the United States and (b) who are Accredited Investors, each ofwhom has agreed or will agree to subscribe for the General PlacingShares at the Placing Price pursuant to the General Placing on theterms and conditions set out in the general US placing letters and onthe basis of this Document

“Group” Eland Oil & Gas PLC, its wholly owned subsidiary, Eland Oil &Gas (Nigeria) Limited, Westport and Elcrest

“Helios” Helios Natural Resources Limited

“Helios Option” the option for Helios to subscribe for 10,000,000 Non-Voting RightOrdinary Shares in the Company in accordance with the terms ofthe Helios Option Agreement

“Helios Option Agreement” the agreement dated 23 August 2012 between the Company andHelios under which Helios may subscribe for Non-Voting RightOrdinary Shares in the Company further details of which are set outin paragraph 11.3.22 of Part 8 of this Document

“IFRS” International Financial Reporting Standards

“Issue” the issue of the New Ordinary Shares to Placees

“Listing” means the successful application and admission of all or any of theshares in the capital of the Company, or securities representing suchshares on the AIM market operated by the London Stock Exchange

“Loan Notes” the First Loan Notes and the Second Loan Notes

“Lock-in Arrangements” the lock-in arrangements contained in the Placing Agreementbetween (1) each of the Directors/Proposed Directors, (2) theCompany and (3) Canaccord, details of which are set out inparagraph 11.4.3 of Part 8 of this Document

“London Stock Exchange” London Stock Exchange plc

“Longstop Date” 27 September 2011

“Matrix” Matrix Corporate Capital LLP

“Maximum Voting Percentage” such percentage as would, in the event of a Non-Voting RightOrdinary Shareholder (or any of its Affiliates) subsequentlyacquiring one additional Ordinary Share, result in a Non-VotingRight Shareholder (or any of its Affiliates) being required to makea mandatory offer for the Company under Rule 9 of the Code

“McDaniel” or “Competent Person” McDaniel & Associates Consultants Ltd

“NAOC” Nigerian Agip Oil Company Limited

“New Joint Operating Agreement” the agreement assigned to Elcrest in relation to OML 40 in a formsubstantially the same as the Old Joint Operating Agreement

“New Ordinary Shares” the 118,000,000 new Ordinary Shares to be issued by the Companypursuant to the Placing

“NIBOR” Nigerian Interbank Offered Rate

“Nigeria” the Federal Republic of Nigeria

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“NNPC” Nigerian National Petroleum Corporation, the state oil company ofNigeria

“Non-Voting Right Ordinary Shares” the Non-Voting Ordinary Shares of £1.00 each issued by theCompany, as more fully described at paragraph 4 of Part 8 of thisDocument

the holders of the Non-Voting Right Ordinary Shares

“NPDC” Nigerian Petroleum Development Corporation

“Official List” the official list of the UK Listing Authority

the joint operating agreement dated 11 July 1991 between NNPC,SPDC, TEPNG and NAOC in respect of various oil mining leasessituated in the Niger Delta of Nigeria

“OML 40” or “OML 40 Lease” the on-shore mining lease in the Niger Delta region of Nigeriaknown as OML 40 as more fully described in Part 1 of thisDocument

“Operator” NPDC or another party as may be appointed as operator pursuant tothe New Joint Operating Agreement

“Ordinary Shareholders” holders of Ordinary Shares from time to time

“Ordinary Shares” ordinary shares of £1.00 each in the capital of the Company

means the Petroleum Act, Chapter P10, LFN 2004

“PIB” or “Petroleum Industry Bill” draft petroleum legislation introduced to the National Assembly inNigeria

“Placees” the Escrow Receipts Placees and the General Placees

“Placing” the Escrow Receipts Placing and the General Placing

“Placing Agreement” the conditional agreement dated 24 August 2012 between (1)Canaccord, (2) the Company and (3) the Directors, further details ofwhich are set out in paragraph 11.4.2 of Part 8 of this Document

“Placing Price” £1.00 per New Ordinary Share

“Placing Shares” the General Placing Shares and the Escrow Receipts Placing Shares

“PPT” Petroleum Profits Tax Act, Cap. P11, LFN 2004

“Proposed Directors” the individuals to be appointed to the board of directors of theCompany immediately prior to Admission

“Prospectus Rules” the prospectus rules published by the FSA under Part VI of theFinancial Services and markets Act 2000

“Preference Shareholders” holders of Preference Shares from time to time

“Preference Shares” preference shares of £1.00 each in the capital of the Company

“Petroleum Act” “Petroleum(Drilling and Production)Petroleum (Drilling andProduction) Regulations 1969Regulations”

“Old Joint Operating Agreement”or “Old JOA”

“Non-Voting Right OrdinaryShareholders”

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“Pre-Placing Diluted Share Capital” the issued Ordinary Share capital of the Company after taking intoaccount the conversion of the First Loan Notes, the Third LoanNotes and the conversion of the accrued interest on the First LoanNotes and the Third Loan Notes (in each case at par) but beforetaking into account the conversion of the Preference Shares intoOrdinary Shares, the conversion of the accrued interest on theSecond Loan Notes (at the Placing Price) and the New OrdinaryShares issued pursuant to the Placing

“Regulation D” Regulation D under the US Securities Act

“Regulation S” Regulation S under the US Securities Act

“Relationship Agreement” the agreement dated 23 August 2012 between the Company andHelios further details of which are set out in paragraph 11.3.21 ofPart 8 of this Document

“SCB” or “Standard Chartered” Standard Chartered Bank, of 1 Basinghall Avenue, London,EC2V 5DD, the lender providing the SCB Facility Agreement

“SCB Facility Agreement” the facility agreement dated 24 August 2012 between the Companyas borrower and Standard Chartered Bank as initial mandated leadarranger, lender, facility agent, security agent and technical andmodelling bank

“Sellers” being SPDC, TEPNG and NAOC

“Second Note Issue” the issue of the Second Loan Notes

“Second Loan Note Instrument” a loan note instrument entered into by the Company on 10 March2011

“Second Loan Notes” the up to £100 million 5.00 per cent. secured convertible loan notesdue 2011 and constituted by the Second Loan Note Instrument

“Shareholders” holders of the Ordinary Shares and/or the Preference Shares and/orDeferred Shares and/or the Non-Voting Right Ordinary Shares, asthe case may be

“Share Charge” the deed of charge over the Shares held by Starcrest in Elcrest

“Share Plans” the Eland Share Option Plans and the Eland Co-Investment Plan

“Shares” Ordinary Shares and/or the Preference Shares and/or DeferredShares and/or the Non-Voting Right Ordinary Shares, as the casemay be

“Solstice” Solstice International Investments Inc

“Solstice Options” the option for Solstice to subscribe for Ordinary Shares in theCompany and/or for the Company to require Solstice to sosubscribe in accordance with the terms of the Solstice OptionAgreement

“Solstice Option Agreement” the agreement dated 13 June 2012 (as amended by deed ofamendment on 23August 2012) between the Company and Solsticeunder which Solstice may subscribe for Ordinary Shares in theCompany or be required by the Company to so subscribe furtherdetails of which are set out at paragraph 11.3.19 of Part 8 of thisDocument

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“SPDC” or “Shell” Shell Petroleum Development Company of Nigeria Limited

“SPDC Joint Venture Partners” being NNPC, SPDC, TEPNG and NAOC

Starcrest Nigeria Energy Limited

“Starcrest Option” the option for the Company to acquire from Starcrest 10 per cent. ofthe shares in Elcrest under the terms of the Starcrest OptionAgreement

“Starcrest Option Agreement” the option agreement dated 21 April 2012 between (1) Eland and(2) Starcrest, further details of which are set out in paragraph 11.2.5of Part 8 of this Document

“Subscription Agreement” an agreement entered into between the Company and eachnoteholder setting out the terms of the subscription for the FirstLoan Notes, the Second Loan Notes and/or the Third Loan Notes

“Subscription Deed” the agreement between Eland and Helios dated 23 August 2012further details of which are set out in paragraph 11.3.16 of Part 8 ofthis Document

“Takeover Panel” the UK Panel on Takeovers and Mergers

“TEPNG” or “Total” Total E&P Nigeria Limited

“Third Loan Notes” the up to £1.5 million 1.00 per cent. unsecured convertible loannotes due 2012 and constituted by the Third Loan Note Instrument

“Third Note Issue” the issue of the Third Loan Notes

“Third Loan Note Instrument” a loan note instrument entered into by the Company on24 November 2011

“UK Listing Authority” or “UKLA” the Financial Services Authority acting in its capacity as competentlisting authority for listing in the United Kingdom pursuant toPart VI of FSMA

recorded on the relevant register of the share or security concernedas being held in uncertificated form in CREST and title to which, byvirtue of the CREST Regulations, may be transferred by means ofCREST

“United States” or “US” the United States of America, its territories and possessions, anystate of the United States of America and the District of Columbia

“US Securities Act” the United States Securities Act of 1933, as amended

“Westport” or “Westport Oil Limited” Westport Oil Limited, a company incorporated under the laws ofJersey on 8 August 2011 with registered number 108770 having itsregistered office at Ogier House, The Esplanade, St. Helier, JerseyJE4 9WG

“Working Capital Amount” the proceeds of the Issue after deduction of the balance of theAcquisition Price after payment of the Deposit

In this Document the symbols “$” or “US$” refer to US dollars, “£” refers to UK pounds sterling and “N”refers to Nigerian Naira.

In this Document all references to times and dates are references to those observed in London, UnitedKingdom.

“uncertificated” or “inuncertificated form”

“Starcrest” or “Starcrest EnergyNigeria Limited”

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GLOSSARY OF TECHNICAL TERMS(not included in the CPR)

“bbls” oilfield barrel(s)

“bcf” billion standard cubic feet

“bopd” barrels of oil per day

“Brent” sweet light crude oil comprising brent blend, forties blend, osebergand ekofisk crudes

“Contingent Resources” those quantities of petroleum estimated, as of a given date, to bepotentially recoverable from known accumulations by applicationof development projects, but which are not currently considered tobe commercially recoverable due to one or more contingencies

“Geological Chance of Success” the chance that the potential accumulation will result in thediscovery of petroleum. However, the recovery of any suchpetroleum may not be economically viable

“mbopd” thousand barrels of oil per day

“MM scf/d” million standard cubic feet per day

“NGLs” natural gas liquids

“Prospective Resources” those hydrocarbon volumes which it is estimated may be potentiallyrecoverable from as yet undiscovered accumulations; prospectiveresources can be quoted as either unrisked or risked volumes

“Proved Reserves” those reserves which on the available evidence are virtually certainto be technically and economically producible (i.e. having a betterthan 90 per cent. chance of being produced)

“SPE-PRMS” Society of Petroleum Engineers – Petroleum Management System

“tcf” trillion standard cubic feet

“1P Reserves” proved reserves

“2D” or “2D Seismic” seismic data which is acquired along a line with a “Shot andReceiver” configuration that allows the signal-to-noise ratio to beenhanced by linear stacking of the reflections caused by subsurfaceinterfaces between rocks with different acoustic properties

“2P Reserves” proved reserves plus probable reserves

“3D” or “3D Seismic” seismic data which is acquired in a multi-azimutual pattern andprocessed such that the signal-to-noise ratio is enhanced by threedimensional stacking of the reflections caused by subsurfaceinterfaces between rocks with different acoustic properties

“3P Reserves” proved reserves plus probable reserves plus possible reserves

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ANNEX 1

SUMMARY OF THE RELEVANT PETROLEUM LAWS ANDREGULATIONS IN NIGERIA

“Agency” means the Federal Environmental Protection Agency.

“Constitution” means the 1999 Constitution of the Federal Republic of Nigeria as amended.

“Director” means the Director of Petroleum Resources.

“EIA” means environmental impact assessments.

“FEPA” means the Federal Environmental Protection Agency Act 1988.

“FMG” means Federal Military Government.

“Government” means the government of the Federal Republic of Nigeria.

“Minister” means the Minister of Petroleum Resources.

“MPR” means the Ministry of Petroleum Resources.

“NESREA” means the National Environmental Standards and Regulations Enforcement Act 2007.

“NNOC” means the Nigerian National Oil Corporation.

“NOGICA” means the Nigerian Oil and Gas Industry Content Act 2010.

“OPEC” means Organisation of Petroleum Exporting Countries.

“PIB” means the Petroleum Industry Bill.

Regulatory Matters

Regulatory history and overview

1. Under the Petroleum Act and the Constitution, the Government “has exclusive ownership of petroleumand mineral resources and can grant the right to exploit or participate in joint exploration with anycompany”.

Nigeria became a member of OPEC in 1971 and in accordance with various OPEC resolutions passedin the previous decade it sought to increase its control over its oil and gas industry. NNOC was alsoestablished in 1971 and commenced, on behalf of FMG, acquiring certain assets from existing oilcorporations which were operating in Nigeria. Separately, MPR functioned as the regulator ofPetroleum operations in Nigeria.

NNPC was then established in April 1977 as the result of a merger between NNOC and MPR andNNPC succeeded NNOC in relation to its specific roles and duties and assumed MPR’s regulatoryfunctions through a petroleum inspectorate department. In 1979 NNPC completed the process of theacquisition of the majority interests in the operations of oil corporations which were then engaged inexploration and production activities in Nigeria, and which were, until then, 100 per cent. whollyowned by non-Governmental corporations.

In 1986, the petroleum inspectorate department, mentioned above and which was responsible forregulations and policy formulation, was separated from NNPC and became DPR. NNPC was thendirected by FMG to concentrate on the commercial aspects of oil and gas activity in Nigeria.These activities were (and are) conducted principally on the basis of traditional joint venturearrangements between NNPC and foreign oil corporations which operate in Nigeria through a varietyof locally registered subsidiary companies usually linked to a specific project or operation. NNPC(on behalf of the Government) controls a majority stake in the long-standing joint venture operations,being those with the Nigerian subsidiaries of Chevron.

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Texaco, Eni/Agip, ExxonMobil, Shell and Total, which account for majority of Nigeria’s totalproduction. The Shell joint venture is currently the largest of these operations.

(A) NNPC manages Nigerian interests across the industry through a network of directorates andsubsidiaries. The exploration and production directorate includes NPDC. Other directorates areresponsible for refineries, distribution of products and other areas of operation.

(B) The Nigerian oil and gas industry is currently regulated by DPR, the technical arm of MPRwhich is responsible for the supervision of operations in the industry including the licensing ofoil concessions through the award of oil prospecting licences and their conversion on discoveryto OMLs. The Petroleum Act vests the Minister with substantial discretionary powers to makeregulations for the industry. The Petroleum Act and its regulations also give the Director thekey role in the day to day supervision of the industry and empowers him/her to issue guidelinesfor the conduct of operations. Discretionary powers exercised by the Minister and the Directorare subject to judicial review.

Environmental

Nigeria has developed environmental laws specifically addressing issues arising out of the oil and gasindustry.

The Petroleum Act, particularly the Petroleum (Drilling and Production) Regulations, led to the adoption ofstatutes providing that the licencees of an oil prospecting licence or OML, adopt all practicable precautionsto prevent the pollution of inland waters, rivers, water courses, territorial waters or the high seas by oil,drilling muds or other harmful fluids or substances. Where any such pollution occurs the licencees arerequired to take prompt steps to control and, if possible, to end it. However, these provisions are generic innature and sometimes lack specific enforcement mechanisms.

The Harmful Waste (Special Criminal Provisions, etc) Act was passed in 1988 and provides a framework forthe control of toxic and hazardous wastes into any environment within Nigeria. This was followed by FEPA,reflecting FMG’s response to worldwide requirements for legislative mechanisms to protect the environment.FEPA established the Federal Environmental Protection Agency, which was responsible for ‘the protectionand development of the environment in general and environmental technology...’. FEPA was repealed by theNESREA Act which established the National Environmental Standards and Regulations EnforcementAgency with the responsibility of enforcing compliance with environmental laws, policies, guidelines andregulations in Nigeria.

The Environmental Impact Assessment Act 1992 represented a significant step in environmental control byextending the reach of the principles of environmental protection to impose mandatory EIAs of projects in anumber of areas including oil and gas projects. The Agency was mandated to facilitate EIAs, the minimumcontents of which are prescribed by law but misinterpretation by project sponsors in EIA reports and theconstant verification of compliance continue to present challenges to achieving the spirit of environmentallaws. With the repeal of FEPA, the responsibility for superintending and certifying EIAs is now theresponsibility of the Federal Ministry of Environment.

The DPR has also set out comprehensive standards and guidelines to direct the execution of projects withproper consideration for the environment. The DPR Environmental Guidelines and Standards for thePetroleum Industry in Nigeria were issued in 1991 and updated in 2002 and constitute a comprehensiveworking document which gives serious consideration to the preservation and protection of the Niger Deltaand like the EIA, is a mandatory compliance tool.

The National Oil Spill Detection and Response Agency has the responsibility for the co-ordination andimplementation of the national oil spill contingency plan.

Background to recent proposed regulatory reform

There has in recent years been a considered view that the Nigerian oil and gas industry, which providesalmost all the country’s export revenue, was generally underperforming. The reasons include the significant

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security challenges to the industry and competing pressures on Nigeria’s budget which has often made itdifficult for it to finance its share of joint venture operations. It was also felt that production sharing contractterms, agreed in the early 1990s, were generous to counterparties particularly given improvements intechnology and higher commodity prices.

In 2008 a Presidential committee prepared the PIB. In its original form the PIB proposed to remove keypowers over the award of oil licences from the Ministry to an independent Petroleum InspectorateCommission. It also proposed the replacement of NNPC, with a new National Petroleum Company ofNigeria, which would have a more limited mandate to operate Nigeria’s interest in the oil and gas sector ona fully commercial basis.

Draft provisions of the PIB also included proposals to promote local participation in upstream operations tobuild genuine private sector capacity in technical capability and to limit political factors influencing thedevelopment of the industry.

The PIB has undergone a number of iterations and has been challenged at each stage by various vestedinterests and stakeholders. It was not passed during the 2007-11 National Assembly and as a result lapsed.Under the terms of the Constitution, the Minister was required to begin the legislative process again and anew draft bill was prepared by a committee set up by the Minister. In July 2012 the Federal ExecutiveCouncil reintroduced the PIB to the National Assembly for consideration and passage.

Applicable regulation

The Nigerian Companies are required by law to provide reports to DPR at every stage of their explorationand production operations. These reports cover drilling operations, geological data and interpretations,Environmental issues, health and safety, production etc.

Elcrest has been set up as an indigenous company and accordingly will enjoy the benefits that accrue fromthat status, which presently consists in obtaining favourable consideration in the allocation, bidding andpurchase of acreage. The concept of an indigenous company in the Nigerian upstream oil and gas industrybegan in the late 1980s when the then FMG sought to increase the involvement of Nigerians in the holding ofoil and gas acreages. The then Minister enunciated a policy whereby companies owned by Nigerian citizenswere awarded acreages on “sole risk” terms upon paying concessionary signature bonuses. In order to makeit difficult for such Nigerians to simply sell their interests in such acreages to foreigners, FMG insisted that atleast 60 per cent. (sixty per cent) of the participating interest in such acreages must be owned by companiesowned by Nigerian citizens. There was no government policy on the level of payment or revenue interestwhich an indigenous company must have in any arrangements for exploring and developing any acreage.

In the course of the next 20 years, the concept of indigenous company status was extended to that ofincreasing local content in contracting within the Nigerian upstream oil and gas industry. The Governmentestablished a policy to promote Nigerian content in the management and operation of the oil and gasindustry, both within joint ventures and to support privately owned indigenous companies. For many years,an indigenous company, for local content purposes, was defined in guidelines issued by NNPC. In 2010, alegislative definition was finally given in NOGICA which provides that a Nigerian company is one which isregistered in Nigeria with a shareholding of at least 51 per cent. (fifty-one per cent) vested in Nigeriancitizens. NOGICA also provides that Nigerian independent operators shall be given first consideration in theaward of oil and gas acreages, oilfield licences and oil lifting contracts. It should be noted that “indigenouscompany” and “Nigerian independent operators” have been used interchangeably in the Nigerian oil and gasindustry and are therefore regarded as synonymous terms. Under the provisions of NOGICA, Elcrest wouldqualify as a Nigerian company and also qualify as an indigenous company.

It should also be noted that the PIB, an executive bill which seeks to reform the regulatory framework of theindustry has adopted the definition of indigenous or Nigerian company contained in NOGICA. A draft of thePIB has proposed a minimum shareholding of 51 per cent. (fifty-one per cent) by Nigerians in addition tofulfilment of other requirements in any guidelines or regulations that may be issued by the UpstreamPetroleum Inspectorate or the Downstream Petroleum Regulatory Agency to be established under the PIB,before a company could qualify as an indigenous company.

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The benefits of indigenous company status under the PIB allows indigenous companies to produce up to25,000 barrels of oil or its gas equivalent per day. Section 2.3 of the Elcrest Shareholders’ Agreementprovides that the parties intend that Elcrest should maintain indigenous company status and the shareholdershave agreed to make the necessary adjustments (including to their shareholdings) in order to maintain thatstatus. Shares to be transferred pursuant to Section 2.3 shall be at a price agreed by the parties, and failingthat, such shares shall be valued at “fair value” as such term is defined by the Elcrest Shareholders’Agreement.

Elcrest’s ability to qualify as indigenous under the PIB may be affected by whether Eland exercises its optionunder the Starcrest Option Agreement.

The rights attached to OML 40 of which Elcrest is vested with a 45 per cent. (forty-five per cent)participating interest are the exclusive rights to conduct exploration and prospecting activities within OML40 and to win, work, get, store, carry away, transport, export or otherwise treat oil and gas discovered in orunder OML 40. Elcrest is required to exercise these rights in accordance with the provisions of the PetroleumAct and OML 40.

OML 40 was granted in 1964 and renewed in 1989. The initial renewal is valid till 2019. The subsistingrenewal was for a 30 year term and even though that seems to be contrary to the provisions of the PetroleumAct, our view is that the Federal Government of Nigeria is stopped from denying the validity of the 30 yearterm that ends in 2019. A renewal from 2019 will be valid for 20 years based on the provisions ofparagraph 10 of the First Schedule to the Petroleum Act which specifies that the term of an OML shall notexceed 20 years, although it may be renewed in accordance with the provisions of the Petroleum Act.

A renewal under the Petroleum Act is subject to an application being made no later than 12 months beforethe expiration of the OML. The Petroleum Act provides that the renewal shall be granted if the lessee haspaid all rent and royalties due and has otherwise performed all of its obligations under OML 40. There areno other grounds or circumstances, other than a breach of OML 40, that would mean a renewal of OML 40could be refused.

OML 40 has no minimum work programme obligation set by either statute or contract.

Elcrest would require certain licences, consents, permits and authorizations (collectively “Permits”) in orderto conduct petroleum operations.

Fiscal Framework (OML 40 Elcrest)

There are two separate taxation systems relating to oil and gas developments in Nigeria. Tax and royaltywhich is the traditional system for onshore and shallow water fields (and which applies to OML 40) andproduction sharing arrangements.

The following table identifies the relevant current fiscal provisions applicable to Elcrest:

Fiscal Provision Rate/Description

Royalty rate (“the Act”) Oil – 20% (onshore) Gas – 7% (onshore)Petroleum Profit Tax Oil (“PPTA”) 65.75% (new entrants for first 5 years)Petroleum Profit Tax Gas (“PPTA”) 30% (“Companies Income Tax Act” rate)Dividends No withholding tax on profits derived from petroleum operationsDepreciation 20%, 20%, 20%, 20%, 19%.Investment Allowance 5% onshoreNiger Delta Development Commission Levy 3% total expenditureEducation Tax 2% of taxable profit before fiscal depreciationRing-fence None; costs can be offset against revenues at Eland level

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Petroleum Profit Tax (Crude Oil)

The PPTA prescribes an assessable tax rate of 85 per cent. of chargeable profits of a company engaged inpetroleum operations. During the period when such a company has not fully amortised all pre-productioncapitalised expenditure due to it less the amount to be retained in the books, the assessable tax shall be65.75 per cent. of the chargeable profits for the period. Since capitalised expenditure is amortised over fiveyears, that is also the time during which the reduced tax rate applies.

Petroleum Profit Tax (Natural Gas)

The PPTA prescribes that gas utilization projects shall be taxed at an assessable tax rate of 30 per cent. ofchargeable profits, which is also the rate prescribed by CITA. Investment required to separate crude oil andnatural gas from the reservoir into usable products and capital investment in facilities to deliver gas in usableform at utilization points are treated as part of the capital investment for oil development and allowed assuch. Gas utilization projects include natural gas liquid extraction facilities, aluminium smelter and methanolprojects.

Royalty Rates

The Petroleum (Drilling and Production) Regulations which have been made under the Petroleum Actprescribe royalty rates for production from onshore joint venture concessions such as OML 40 of 20 per cent.for crude oil and seven per cent. for natural gas.

Dividends

The PPTA prescribes that no withholding tax is payable on dividends from companies engaged in petroleumoperations.

Depreciation or Capital Allowances

The PPTA provides that capital allowances for capital investments made may be claimed in equal annualinstalments over five years subject to a statutory retention of one per cent. of value in the books from thefifth year.

Investment Allowance

The PPTA provides for an investment allowance of five per cent. as an incentive to encourage capitalinvestment. The allowance is taken in the accounting period in which the asset is first used.

NDDC Levy

The NDDC levy is prescribed by the eponymous legislation as a means of providing funding for thedevelopment activities of the NDDC within the Niger Delta area. The levy amounts to three per cent. of thetotal annual budget of each oil and gas producing company operating onshore and offshore the Niger Delta.

Education Tax

The education tax is a tax payable by companies registered in Nigeria in support of the rehabilitation,restoration and consolidation of education in Nigeria. The tax is at the rate of two per cent. of the assessableprofit of a company, that is to say, profits before depreciation or capital allowances are calculated anddeducted.

Ring Fence

There is no ring fence on the costs of engaging in petroleum operations within OML 40. Accordingly, OML40 costs may be consolidated at a company level.

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