`

[1]

U.S.Oil & Gas

Research Note June 2014

Company Review

Investment Summary: A bright prospect beckons

U.S. Oil & Gas plc (USOG) is a GXG and OTC listed company with a number of

Federal hydrocarbon leases in the Hot Creek Valley of Nevada, USA. USOG, unlike

many foreign oil companies that enter the American crude oil and gas industry, has

taken a 100 % stake in the Federal leases. USOG has used its considerable technical

expertise to appraise and explore its acreage.

The Company holds a Net Revenue Interest (NRI) of 87.5 %, in its leases in

Nevada. USOG drilled its first well, Eblana #1, in 2012, which produced small

amounts of high quality API 28.5° - 33° crude oil. USOG is preparing to embark

on a three-well appraisal programme to translate its large prospective resources base

into the proven reserves category. If the drilling programme is successful, it is likely

that USOG could book P90 reserves of just under 9m barrels (bbls) and P50

reserves of just over 19m bbls. In a matter of months USOG could move away from

being a speculative exploration and appraisal play on the stock market to being a

crude oil and gas producer.

Financials

In 2013, the Company reported a net loss of US$1.6m. The Company is expected to

report a net loss of US$2.2m in 2014 largely due to costs incurred in preparation for

for its forthcoming drilling programme ahead of generating revenues.

If the planned drilling programme is successful, the Company can be expected to

report a net income of US$16.7m in 2015.

Funding

The Company intends raising further funding to strengthen its balance sheet and

finance its forthcoming drilling programme in Nevada.

Valuation

Part of the Company’s prospective oil resources in Nevada has been modelled and

risked. The net cash flow figures have been discounted by between 10 % - 25 %,

assuming constant and declining crude oil prices. From the model, the Company’s

assets, on a risked discounted cash flow basis, could be valued at between

US$60.0m to US$17.3m on an NPV10, an average of US$38.7m, compared to the

current market value of US$30.1m. The risked hypothetical resources implies a

market capitalisation 16.5x larger than current and the hypothetical risked reserves

per share implies a 24x to 33x larger company than the current one.

Price (£) 41p

Market Cap fully

diluted (£m):

18.0

Share price graph JUN JUL AUG SEP OCT NOV DEC FEB MAR APR MAY

Share details

Ticker USOP (GXG)

USOPY (OTC))

Listing GXG/OTC

Sector Oil & Gas Producers

Shares in issue 41.7m

Fully diluted shares 43.1m

Price (p)

52 week High Low

52 20

Balance Sheet

Debt/Equity (%) 0.0

NAV (US$m) 38.7

(Net borrowings)/Cash

(US$000s)

929

Business

U.S. Oil & Gas is a GXG and OTC listed

company, with assets in Nevada, USA. It

holds a NRI of 87.5 % over leases covering

88.1 km², and could be in production within

the next six months, creating significant

upside value to shareholders.

Geography based on future revenues (%)

US Ireland UK Other

100 0 0 0

Sales

James Dewhurst +44 (0) 207 448 9820

Alexander David Securities Ltd

Analyst

Brian McBeth +44 (0) 7768 013026

The Oxford Consultancy Group

Management (CEO)

Brian McDonnell +353 (0) 1 631 9022

US Oil & Gas Plc

web: www.usoil.us

U.S. Oil & Gas Plc

Year

End 30

Sept

Revenue

(US$000s)

Net Income

(US$000s)

EPS

Fully

diluted

(US$)

DPS

(US$)

PE

(x)

Yield

(%)

2013a 0.00 (1,799.00) 0.00 0.00 n/a 0.00

2014e 0.00 (2,223.11) (0.05) 0.00 n/a 0.00

2015e 24,656.13 16,748.55 0.38 0.00 1.8 0.00

2016e 42,285.48 23,667.64 0.54 0.00 1.3 0.00

[2]

Investment Summary: A new American Star

USOG to start drilling in the last quarter of

2014.

USOG is a GXG and OTC listed Irish company with an

extremely exciting exploration play in the Hot Creek Valley

of Nye County, Nevada. USOG owns a number of leases,

with a very high prospective resources base. USOG, unlike

most foreign companies that enter the mature US oil and gas

industry, owns a 100 % Working Interest (WI) (a Net

Revenue Interest of 87.5%) over a number of leases that

cover 88.1 km². USOG applied its considerable technical

expertise in choosing the Federal leases it acquired and hence

can be considered as a pure exploration play. Its first well,

Eblana #1, drilled by its wholly owned subsidiary, Major Oil

as the operator, in 2012 confirmed the existence of high

quality crude oil (API 28.5° - 33°). USOG, after an intensive

and rigorous technical assessment, has identified five major

potential reservoir structures and it is preparing to drill a 3-

well appraisal programme updip from the Eblana #1 well in

the last quarter of 2014.

Valuation: significant exploration upside

The main driver in the oil industry is the crude oil price,

which is currently just above US$100/bbl for WTI crude. Oil

prices have remained at relatively high levels for the last 24

months, mainly because of demand, the decline in OPEC

production and political instability in the Middle East.

Forrest A Garb, an independent technical adviser, has

assigned to USOG proven and probable contingent resources

of 8.7m bbls – 19.3m bbls. There are also 87m bbls of

prospective resources for the Paleozoics, which were not

tested in the Eblana #1 well. In the model, it is assumed that

the next three wells are successful and hence are placed in

long term production as soon as drilling is completed. The

Eblana #1 well will probably be used as a water disposal

well. The hypothetical production profile gives an initial

production rate of 736 barrels of crude oil per day (bpod),

peaking at 1,158 bopd in 2016. It is clear from these figures

that the reserves produced during the life of the field of 2.6m

bbls of crude oil equivalent (boe) are far short from the

hypothetical contingent resources of 8.7m bbls. The main

reason for this is that in order to deplete these reserves, it is

estimated that an additional 11-12 wells will need to be

drilled. The model shows the financial impact on USOG with

only three wells if the forthcoming drilling programme is

successful.

The results have been risked by a further 25 % and

incorporate discount factors between 10 % - 25 %, as well as

constant crude oil prices of US$100/bbl and declining crude

oil prices to US$31/bbl.

The matrix gives a conservative risked NPV10 of

US$60.0m to US$17.3m, an average of US$38.7m,

compared to the equivalent current market value of

US$30.2m..

Sensitivities: four main challenges

The Company faces four main challenges:

1. To convert its prospective contingent

hydrocarbon resource base in Nye County,

Nevada into proven, probable and possible

reserves.

2. To find hydrocarbon reserves in the Eocene-age

Sheep Pass formation that USOG was unable to

test when it drilled the Eblana #1 well owing to

technical problems.

3. To manage efficiently its forthcoming drilling

programme.

4. To start crude oil production from its

forthcoming 3-well appraisal programme.

Financials

In 2013, USOG reported a net loss of US$1.6m. It is

likely that the Company will also report an estimated

net loss of US$2.2m in 2014 because by its year-end

of September 30 it will not be receiving any revenues

from its hydrocarbon base and will incur relatively

high expenditure preparing for its forthcoming

drilling programme. In the financial modelling it is

assumed that the next three wells drilled (see below)

are successful. It is clear that there is no guarantee

that this will occur but the Company has undertaken

an immense amount of technical work that includes

3-D modelling. Assuming, that the hypothetical

production profile given in this Note is achieved then

USOG is expected to report revenue from its

hydrocarbon production base of US$24.7m in 2015

rising to US$42.3m in 2016, with net income of

US$16.7m in 2015 rising to US$23.7m in 2016.

It also follows from these estimated earnings that the

Company’s balance sheet will strengthen as

hydrocarbon production increases, with closing net

cash rising to US$13.6m in the first 12 months of

production, increasing to US$40.4m in 2016.

[3]

The road to Nevada

On 15 June, 2009 USOG was incorporated in the Republic

of Ireland as a public limited company under the name of

U.S. Oil and Gas plc to focus on the exploration and

production of the hydrocarbon resources in the State of

Nevada, USA. USOG’s wholly-owned operating subsidiary

in the USA is Major Oil International LLC, which was

registered and incorporated on 17 July 2008 in Houston,

Texas.

USOG holds nine Federal leases that cover 88.1 km²,

equivalent to 21,760 acres. USOG’s short term objective is

to complete its appraisal programme in its Hot Creek Valley

acreage in Nevada. USOG expects that the appraisal

programme will confirm that its potentially large contingent

resources base will be converted very soon into the category

of proven crude oil reserves.

USA – Nevada

Nevada’s production of crude oil is small compared with the

major US oil states of Texas and California. Crude oil

production in Nevada peaked in 1990 at 4m bbls declining to

under 500,000 bbls in 2008.

An interesting aspect of Nevada’s petroleum production is that

some of the oil is associated with hot water, although at a lower

temperature but otherwise much like the geothermal fluids that

formed gold and silver deposits. Another curiosity is that some

of the oil is trapped in fractured volcanic rocks, although the

ultimate source of petroleum is from organic matter in

sedimentary rocks. In Eastern Nevada, the important source

rock is the Chainman formation, which was deposited in the

Mississippian era, approximately 325 million years ago. In the

Hot Creek Range, to the west of Hot Creek Valley, the Eleana

formation can be found, which is the Chainman’s stratigraphic

equivalent. Another potential source rock is the Eocene-age

Sheep Pass.

Thrust belts and associated foreland basins provide a quarter

of the world’s known oil reserves and are found where the

western North American Cordillera coincides with organic-

rich hydrocarbon source rocks, including the Mississippian

Antler foreland basin of western Utah and central Nevada.

As with most thrust belts worldwide, some crude oil is

trapped in giant thrust structures. Typically, oil seeps occur

above the giant structures, except in Nevada where a blanket

of Oligocene volcanic rocks and detritus buried and sealed

the oil seeps. Some of these concealed Nevada oil seeps,

including the most prolific North American onshore flowing

oil well found in ten years, are unconformity-related

commercial grade oil accumulations. Conventional 2-D and

3-D seismology has not been able to identify oil bearing

forms.

However, the Antler Foreland basin contains enough

organics to generate huge quantities of oil. Geologists

believe there are at least 30 geologic structures each

containing in excess of 1 billion barrels of oil.

Identifying the anticlines becomes a real possibility with

state-of-the-art seismology, three dimensional models, well

information and high quality surface geologic maps. The

use of 2-D and 3-D IPDS promise to revolutionise

exploration in this previously difficult area. This is what

USOG’s highly experienced technical team, led by Karim

Akrawi, Exploration Director, has been doing for the past

three years.

First Oil Well drilled in 1907

The first exploratory well drilled in Nevada was in 1907. The

well was drilled in Washoe County, near Reno, but did not

encounter hydrocarbons in commercial quantities. Several

more dry wells were drilled until 1954 when Shell Oil Co.

drilled the State’s first commercial crude oil well of Eagle

Springs #1-35, in the Railroad Valley in Nye County. The

Eagle Springs field included 14 wells with an average

production of almost 55 barrels of oil per day (bopd) per well

by 1968. The field was estimated in 1954 to contain 4 million

bbls of proven recoverable reserves, of which 3.8m bbls were

produced by 1986. It took a further 22 years and 145 dry wells

before Northwest Exploration Co. drilled in 1976 the second

crude oil discovery with its Trap Springs #1 well located only

5 miles west of the Eagle Springs field. Recoverable reserves

were estimated at the time of discovery at 10m bbls of which

6.8m bbls were produced by 1986. In 1985, there were 27

producing wells in the Trap Springs fields producing an

average of 51 bopd per well. Later discoveries in the Railroad

Valley include the Bacon, Flat and Grant Springs fields. The

latter field at the time of discovery had recoverable reserves of

13m bbls of which 5.3m bbls were recovered by 1986. For a

time, the Grant Canyon #3 well, producing crude oil from the

Tertiary Volcanics in the Railroad Valley, was the most

prolific onshore oil well in continental USA, flowing at up to

4,300 bopd.

Crude oil production outside the Railroad Valley was

established in 1982 when the Amoco Production Co.

discovered the Blackburn field in Pine Valley, Eureka County,

when it drilled the Amoco Blackburn #3 well, which flowed

initially at 345 bopd. Crude oil production averaged around

300 to 450 bopd. In 1986, Marathon Oil Co. drilled the Kate

Spring #1 well discovery in the Railroad Valley, less than one

mile away from the Eagle Springs field.

[4]

USOG’s Eblana #1 Well.

Hot Creek Valley

Drilling in Hot Creek Valley

[5]

USOG’s Eblana #1 Well

USOG’s main asset is located in Nye County, Nevada where it holds nine exploration and development Federal leases

over 88.1 km² in the Hot Creek Valley. The acreage is adjacent to the hydrocarbon basin known as the Railroad Valley

area of Nevada, both of which are part of the Sevier Thrust of central Nevada and western Utah.

The most recent indication of crude oil in Nevada was USOG’s Eblana #1 well drilled in the Hot Creek Valley,

approximately 35 miles east of the nearest crude oil production in the Railroad Valley. The Eblana #1 well was drilled in

2012 to 8,550 ft and encountered the same Tertiary Volcanic formations present in the producing fields of the Railroad

Valley, with gas shows and non-commercial high quality crude oil of between API 28.5° - 33°. The Eblana #1 well had

oil shows in the welded volcanic tuffs and conglomerates present in the discoveries made in the Railroad Valley but the

well did not reach the Palaeozoic-age dolomites, which are also productive.

Table 1 shows that the major crude oil discoveries in Nevada have been made at roughly the target depth of the Eblana #1

well but the API gravity at 28.5° - 33° of the crude oil encountered at Eblana#1 was significantly lighter than in most

other fields in the Railroad Valley, which is a very positive sign. The quality of the crude oil discovered is so good

that it does not require any processing before transportation. Additionally, there were no indications in the crude oil

tested of sulphur or carbon monoxide and does not require the removal of wax or asphaltine elements prior to

transportation.

Table 1: Railroad Valley Reservoir Data.

Railroad Valley

Field Year Disc.

Depth

(feet)

Producing

Formation

Initial

Production

(bopd)

API

(degree)

Cumulative Production to

2012 (bbls).

Hydrocarbon Column

(feet)

Bacon Flat 1981 5,400

brecciated

Devonian

carbonate

(landslide

deposit)

200 28 1,039,759 450+

Eagle Springs 1954

5,800

to

6800

Tertiary

volcanic:

welded tuff;

Eocene Sheep

Pass;

Pennsylvanian

Ely limestone

340 26 - 29 5,549,929 1600+

Grant Canyon 1983 4,500

brecciated

Devonian

carbonate

(landslide

deposit)

1,816 26 21,322,978 900+

Kate Spring 1986 5,200

Brecciated

Paleozoic

(landslide

deposit)

345 10.5 2,467,595 200+

Trap Spring 1976

2,800

to

5,000

Tertiary

volcanic:

welded tuff

417 21 - 26 15,142,949 1,700 – 1,800

Source: Forrest A Garb & Associates, Inc. & http://www.nbmg.unr.edu/_docs/Presentations/NWMAupdate10.pdf

[6]

The Eblana #1 well did not find any evidence of the Eocene-age

Sheep Pass formation owing to drilling problems caused by the

formation encountered that prevented open hole logs being run

and cores collected. It is understood that USOG perforated

many intervals of the Tertiary Volcanics encountered by the

Eblana #1 well and flowed each one separately to determine the

productivity and content of the reservoir. The flow tests were

run on four separate formations, producing around 250 bbls of

liquids for three zones with an average crude oil cut of 2

percent. The fourth formation was tested for an extended period

producing 250 bbls of liquids with an average oil cut of 3

percent, but at times surging to 22 % and 60 %. Natural gas was

found in small quantities of 120 cubic feet of natural gas to one

barrel of crude oil. The interpretation of the large amounts of

water produced is that the well perforated an oil-water transition

zone. Although the Eblana #1 well is considered non-

commercial it did establish the presence of high quality crude

oil.

Estimated Crude Oil & Gas Resources

USOG’s independent technical consultants used the Petroleum

Resources Management System (SPE-PRMS), developed by the

Society of Petroleum Engineers/World Petroleum

Congresses/American Association of Petroleum Geologists/

Society of Petroleum Evaluation Engineers, to determine the

range of contingent resources present on the Company’s leases.

The SPE-PRMS definition of contingent resources is the volume

of hydrocarbon reserves that are potentially recoverable in

known accumulations by developing reservoirs but which

cannot be considered to be commercially recoverable because of

one or more contingencies. One of these contingencies is when

the accumulation after a discovery needs further appraisal to

justify commercial development. USOG is currently preparing

to undertake a three-well appraisal programme updip from the

Eblana #1 well to convert part of these contingent resources into

proven reserves and to start monetizing its potentially large

crude oil reserves. It is understood that a new well design will

be used featuring altered casing that will allow drilling into the

Palaeozoic zone.

The estimated original oil in place (OOIP) and recoverable

reserves are given in Table 2 below. It should be noted that

these estimated contingent resources only cover 50 % of Parcels

87414 and 87415 (original 21 km²) of USOG’s total leases in

the Hot Creek Valley. Additionally, the contingent resources

only refer to the Tertiary Volcanics formation because the

deeper potential reserves in the Eocene-age Sheep Pass formation

are not included in the estimates as they were not tested by the

Eblana #1

Risk

It should be noted that there is the possibility that the three-well

appraisal programme will not lead to a commercial discovery

and future development. In addition, there is also the possibility

that the target horizons are found to be primarily natural gas

bearing or are just a small column of crude oil with a gas cap.

Crude Oil and Gas Production Profile

In the hypothetical crude oil production profile an average

production of 199 bopd per well between 2014 – 2026 has

been assumed, with a peak production of 386 bopd in 2016.

It is unlikely that the small amount of natural gas production

(120 cubic feet per barrel of crude oil produced) would

justify building a pipeline to the nearest processing plant 90

miles away and will probably be re-injected into the

reservoir to maintain pressure. However, a hypothetical

production profile for the associated natural gas produced

with the crude oil has been provided because it is expected

that natural gas will be produced if the appraisal drilling

proves- up the large reserves referred to above because then

the number of wells needed to deplete the reservoir is

estimated at between 11- 12 and hence natural gas

production could possibly justify building a small gas

pipeline.

The estimate of USOG’s crude oil and gas production of the

field is given below:

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

1400.00

2015 2017 2019 2021 2023 2025

Natural

Gas Prod

(mcf/d)

bopd

Graph 1: USOG: Hypothetical Crude Oil

Production, 2014 - 2024 (bopd)

Crude Oil Production per day (bopd)

Natural Gas Production (mcf/d)

Source: The Oxford Consultancy Group

Table 2: Contingent Resources – Primary Zones in Eblana #1

Gross Contingent Resources

(W.I. 100 %)

(000s bbls)

Net Contingent Resources

(N.R.I. (87.5 %)

(000s bbls)

Target

Horizon Low Estimate

Best

Estimate High Estimate

Low

Estimate

Best

Estimate

High

Estimate

Tertiary

Volcanics

OOIP 51,773 2122,679 188,898 45,301 107,344 165,286

Recoverable 9,927 22,007 38,301 8,686 19,256 33,513

Source: Forrest A Garb & Associates, Inc.

[7]

Valuation

The main driver in the oil industry is the crude oil price, which is currently around US$100/bbl for WTI crude. Crude Oil

prices have remained at relatively high levels for the last 36 months, mainly because of demand driven by the pick-up in

economic growth, the decline in OPEC production and political instability in the Middle East. It is likely that crude oil prices

may strengthen during the second half of 2014 because of political problems associated with OPEC countries. According to

the International Energy Agency (IEA), OPEC needs to boost its current production by 800,000 bopd to a total of 30.7m

bopd during the second half of 2014 in order to cover the anticipated increase in world demand. However, such a large

increase in crude oil production could be difficult to achieve because members such as Libya, Nigeria, and Venezuela may

find it difficult to increase production. In the case of

Iran, the international sanctions against country will

impact on its ability to increase production in the short-

term, especially as its crude oil exports fell by 180,000

bopd in April this year to 1.11m bopd. Moreover, over

the past 24 months crude oil production in Iran

declined by 20 %, while Algeria’s production also fell

by 12 % during the same time frame. Moreover,

Mexico, which is not part of OPEC, also experienced a

25 % decline in its output since 2005.

The valuation is a hypothetical one that assumes three

producing wells with one water disposal well. The total

contingent resources produced in our hypothetical

valuation is 2.6m boe. In order to deplete the estimated

8.7m bbls of contingent resources we would need at

least 11 - 12 producing wells. The purpose of using a

three-well programme in the hypothetical valuation is

to indicate the robustness of the assets if the appraisal

wells confirm the presence of commercial reserves.

The hypothetical production profile for the Eblana #1 contingency resources as detailed above has been used together with

the assumptions given in Table 3.

In addition, the results for success have been risked in the following manner: for the best estimate (P90) 67.5 %, and for the

low estimate (P50) 37.5 %. The net cashflow figures have been discounted by 10 % to 25 %, and an initial constant crude

oil price of US$100/bbl and US$4.49 per thousand cubic feet (mcf) of natural gas. Thereafter crude oil prices are modelled

to decline to US$34.9/bbl and natural gas prices to US$1.6/mcf. Costs have been escalated by between 2 % – 5 % per annum.

From the Table 4 given below, it can be seen that the Company, on a discounted cash flow basis, could be valued at between

US$60.0m to US$17.3m, an average of US$38.7m, compared to the current market value of US$30.1m. It should be noted

that the discounted cash flows are positive with constant and declining hydrocarbon prices. In addition, the net return on

investment is between 29.2 % and 25.0 % depending on crude oil assumptions proven and probable reserves.

Table 4: Valuation of Nevada Hot Creek Contingent Resources risked by 25 %.

Constant Crude Oil Prices:

US$100/bbl

Declining Crude Oil Prices:

US$100/bbl to US$23.9/bbl

Contingent

Resources P90

risked by

25 %

Contingent

Resources P50

risked by

25 %

Contingent

Resources P90

risked

by 25 %

Contingent

Resources P50

risked

by 25 %

Unrisked Gross Reserve Potential (000s Bbls) 2,642.5 2,642.5 2,642.5 2,642.5

Assumed Success % 67.5 37.5 67.5 37.5

Potential Gross Reserves at assumed Success Rate (000s Bbls) 1,783.7 990.9 1,783.7 990.9

Gross Value of Potential Reserves (US$) 175,084,689.3 97,269,271.8 120,410,838.6 66,894,910.3

Gross Costs (US$) 123,929,863.3 93,873,912.0 89,968,884.1 70,349,999.0

USOG Net Return on Investment (US$) 51,154,826.0 3,395,359.8 30,441,954.4 -3,455,088.6

USOG Net Return on Investment ( %) 29.2 3.5 25.3 -5.2

USOG Risked NPV Value (10 % Discount) (US$) 59,991,912.2 33,328,840.1 42,423,029.9 23,568,350.0

USOG Risked NPV Value (15 % Discount) (US$) 51,822,366.2 28,790,203.4 37,789,717.5 20,994,287.5

USOG Risked NPV Value (20 % Discount) (US$) 45,588,441.7 25,326,912.1 34,115,491.2 18,953,050.6

USOG Risked NPV Value (25 % Discount) (US$) 40,711,119.6 22,617,288.7 31,140,161.9 17,300,090.0

Source: The Oxford Consultancy Group

Table 3: Assumptions used in compiling the

Hypothetical Net Present Value of the Contingent

Resources in Eblana #1 Area. Item Assumption

Working Interest (%) 100.00

Net Revenue Interest (%) 87.50

Crude Oil Price WTI (US$) 100.00

Natural Gas Price (Henry Hub) ($mcf) 4.49

Contingent Resources (000s boe) 2,436

Royalty (%) 12.50

Capex (US$/boe) 6.40

Opex (US$/boe) 0.80

Source: The Oxford Consultancy Group

[8]

Table 5 below suggests that the market is undervaluing the Company based on the hypothetical value of the Company’s

assets,. The hypothetical value, on a severe risked basis and with various crude oil price assumptions and discount

factors of between 10% and 25%, gives an NPV per share range of between US$0.76 per share to US$0.39 per share,

compared to the current share price of US$0.69 per share.

Table 5: NPV per share - Premium/Discount to Market Capitalisation (fully

discounted) at various assumptions

Fully diluted Share Capital (m) 43.9

Share price £(21.5.2014) 0.41

Share price US$(21.5.2014) 0.69

Market Capitalisation (£m) 18.0

US$ per

share

Market value

£m

Premium/

Discount to

Mkt Cap (%)

Constant Crude Oil Price

Risked NPV (10 % disc.) 0.76 19.8 10.3

Risked NPV (15 % disc.) 0.66 17.1 -4.7

Risked NPV (20 % disc.) 0.58 15.1 -16.2

Risked NPV (25 % disc.) 0.52 13.5 -25.1

Declining Crude Oil Price

Risked NPV (10 % disc.) 0.54 14.0 -22.0

Risked NPV (15 % disc.) 0.48 12.5 -30.5

Risked NPV (20 % disc.) 0.43 11.3 -37.3

Risked NPV (25 % disc.) 0.39 10.3 -42.7

Source: The Oxford Consultancy Group

Comparison with peer group

Table 6 below compares USOG with a number of crude oil companies listed on the London Stock Exchange’s

Alternative Investment Market (AIM). The table shows the calculated proven and probable resources per US$100

fully diluted market capitalisation, as well as the number of reserves per share for each of the companies. It can be

seen from Table 6 that the risked contingent resources base for USOG is around 60 % of Xxcite Energy, a company

with a market capitalisation 10.9x larger than the Company under review. In addition, USOG holds a larger number of

hypothetical reserves per share than Amerisur Resources and Ithaca Energy, companies that are 33.4x and 24x

respectively larger than the Company under review. The conclusion from this comparison is that once the contingent

resources are re-categorised as crude oil reserves, the market will adjust for this resulting in probably a valuation much

larger than the NPV suggested by the resource valuations.

Table 6: Comparison of USOG's Hypothetical Contingent Resources with certain

AIM Listed Companies

Company

Market

Capitalisation

(US$m)

Fully

Diluted

shares (m)

Reserve base

(m boe)

Production

(boepd)

Reserves

per $100

market cap

(boe)

Reserves

per share

Amerisur Resources 1,007.3 1,062.1 32.8 7,000.0 3.26 0.03

Xcite Energy 329.2 309.1 261.9 0.0 79.56 0.85

Global Energy Development 44.0 36.1 87.7 64.4 199.32 2.43

Ithaca Energy 735.1 328.1 58.0 10,392.0 7.89 0.18

Sterling Energy 105.5 233.8 200.0 63,000.0 189.66 0.86

USOG* 30.1 43.9 14.0 381.0 46.35 0.32

* Hypothetical figures.

Source: The Oxford Consultancy Group

[9]

Financials

Table 7 shows, a hypothetical breakdown of the

profitability of crude oil production from the Eblana #1

well, with estimated pre-tax income at US$70.34/boe, and

net income of US$40.74/boe.

In the financial model, it is assumed that the 3-well

appraisal programme is successful and that crude oil and

natural gas production will start at the end of October this

year. On this assumption, USOG will have crude oil and

natural gas production for its 2015 fiscal year of 335 days.

It is expected that USOG will generate earnings before

interest, taxes, depreciation and amortization (EBITDA) in

2015 of US$20m rising to US$38m in 2016, as can be seen

from Graph 2.

USOG is expected to report net losses of just over US$2m

in 2014. By its year-end of September 30, it will not have

started producing crude oil. However, with the start of

production later this year, it is expected that the Company

will report net profits of US$16.8m in 2015, rising to

US$23.7m in 2016, as can be seen from Graph 3.

The Company’s balance sheet will also strengthen

considerably, reaching net cash balances of US$40.4m in

2016, as illustrated in Graph 4 below.

-20,000,000.0

0.0

20,000,000.0

40,000,000.0

201

3(a

)

201

4(e

)

201

5(e

)

201

6(e

)

201

7(e

)

201

8(e

)

Year

Graph 2: USOG - EBITDA, 2013 -2018 (US$)

Source: The Oxford Consultancy Group

-5,000,000.0

0.0

5,000,000.0

10,000,000.0

15,000,000.0

20,000,000.0

25,000,000.0

Graph 3: USOG - Hypothetical Net Income

Forecast, 2013 - 2018 (US$)

Source: The Oxford Consultancy Group

0.0

5,000,000.0

10,000,000.0

15,000,000.0

20,000,000.0

25,000,000.0

30,000,000.0

35,000,000.0

40,000,000.0

45,000,000.0

US$

Graph 4: USOG - Hypothetical Net Cash

Balances, 2013 - 2018 (US$)

Net CashBalances(US$)

Source: The Oxford Consultancy Group

Table 7: Hypothetical Profitability of the Eblana #1

Area US$/bbl

Contingent Resources

of 2.436 boe

Crude Oil Price 98.2

Royalty 11.70

Operating Expenses 0.80

Transport costs 1.30

DDA 6.40

Interest & Capital

repayment

0.50

G&A 6.56

Pre-Tax 70.34

Tax 29.6

Net Income 40.74

Source: The Oxford Consultancy Group

[10]

The hypothetical detailed estimates of USOG’s Profit & Loss, Balance Sheet and Cash flow for 2013 – 2018 are given below in

Tables 8-10.

Table 8: USOG - Profit & Loss Forecast, 2013-2018

2013(a) 2014(e) 2015(e) 2016(e) 2017(e) 2018(e)

PROFIT & LOSS ACCOUNT US$ US$ US$ US$ US$ US$

Turnover 0.0 0.0 24,656,132.8 42,285,477.8 35,942,656.2 30,551,257.7

Selling, Opex & Transp Costs 0.0 0.0 770,155.9 1,290,580.0 1,132,123.5 995,760.6

Administrative expenses 1,600,536.0 2,000,670.0 1,850,000.0 2,775,000.0 4,162,500.0 4,786,875.0

Production royalty 0.0 0.0 3,082,016.6 5,285,684.7 4,492,832.0 3,818,907.2

Operating Income -1,600,536.0 -2,000,670.0 22,035,977.0 38,219,897.8 30,648,032.7 24,768,622.2

Interest receivable 1,422.0 9,350.0 680,995.1 2,022,005.4 1,614,952.6 1,306,745.0

Interest payable 0.0 -2,500.0 954,000.0 727,200.0 536,400.0 545,419.0

DDA 0.0 0.0 1,608,351.3 2,758,336.2 2,344,585.8 1,992,897.9

Profit/(loss) Loss on Ordinary Activities -1,599,114.0 -1,993,820.0 20,154,620.7 36,756,367.0 29,381,999.5 23,537,050.2

Taxation -199,889.0 -229,289.3 3,406,072.3 13,088,722.9 11,087,996.2 7,943,481.7

Net Income/(Net Loss) -1,799,003.0 -2,223,109.3 16,748,548.5 23,667,644.1 18,294,003.3 15,593,568.6

Opening Accumulated surplus (deficit) brought

forward -2,344,208.0 -3,943,322.0 -6,166,431.3 10,582,117.2 13,085,526.9 5,208,476.3

Closing Accumulated surplus (deficit) brought

forward -3,943,322.0 -6,166,431.3 10,582,117.2 13,085,526.9 5,208,476.3 10,385,092.2

EPS 41,398,337 shares (US$) -0.043 -0.054 0.405 0.572 0.442 0.377

EPS p fully diluted 43,853,337 shares (US$) -0.041 -0.051 0.382 0.540 0.417 0.356

Source: The Oxford Consultancy Group

[11]

Table 9: USOG - Balance Sheet Forecast, 2013-2018

BALANCE SHEET 2013(a) 2014(e) 2015(e) 2016(e) 2017(e) 2018(e)

US$ US$ US$ US$ US$ US$

Fixed Assets 5,089,878.0 5,344,371.9 13,861,590.5 17,142,170.0 13,686,778.5 11,996,117.4

Tangible assets 0 0 8,250,000.0 11,250,000.0 7,500,000.0 5,500,000.0

Intangible assets 5,089,878.0 5,344,371.9 5,611,590.5 5,892,170.0 6,186,778.5 6,496,117.4

Current Assets

Stock 0.0 0.0 250,000.0 500,000.0 500,000.0 500,000.0

Debtors 187,416.0 234,270.0 292,837.5 366,046.9 457,558.6 571,948.2

Cash at bank 985,985.0 12,685,000.0 13,619,902.2 40,440,108.9 32,299,051.4 26,134,900.2

Total 1,173,401.0 12,919,270.0 14,162,739.7 41,306,155.8 33,256,610.0 27,206,848.4

Total Current Assets

Net Current Assets 6,263,279.0 18,263,641.9 28,024,330.2 58,448,325.8 46,943,388.5 39,202,965.9

Creditors: Amounts falling due within one year 290,073.0 350,000.0 8,080,000.0 2,120,000.0 2,120,000.0 2,120,000.0

Long term debt 0.0 0.0 0.0 0.0 0.0 0.0

Current Liabilities 290,073.0 350,000.0 8,080,000.0 2,120,000.0 2,120,000.0 2,120,000.0

Total Liabilities 290,073.0 350,000.0 8,080,000.0 2,120,000.0 2,120,000.0 2,120,000.0

Net Current Assets 6,263,279.0 18,263,641.9 28,024,330.2 58,448,325.8 46,943,388.5 39,202,965.9

Total assets less current liabilities 5,973,206.0 17,913,641.9 19,944,330.2 56,328,325.8 44,823,388.5 37,082,965.9

Capital & Reserves

Called up share capital 5,670.0 12,758.0 12,758.0 12,758.0 12,758.0 12,758.0

Share premium

` 9,742,553.0 12,067,315.2 9,349,455.0 19,559,200.8 15,428,631.0 13,533,157.6

Issue of loan stock 0.0 12,000,000.0 0.000 0.0 0.0 0.0

Share based payment reserve 168,305.0 0.0 0.000 0.0 0.0 0.0

Profit & Loss Account -3,943,322.0 -6,166,431.3 10,582,117.2 36,756,367.0 29,381,999.5 23,537,050.2

Shareholders' equity funds 5,973,206.0 17,913,641.9 19,944,330.2 56,328,325.8 44,823,388.5 37,082,965.8

Source: The Oxford Consultancy Group

[12]

Table 10: USOG - Cash Flow Forecast, 2014 - 2018

CASH FLOW ACCOUNT 2013(a) 2014(e) 2015(e) 2016(e) 2017(e) 2018(e)

US$ US$ US$ US$ US$ US$

Net Cash (outflow)/inflow from operating

activities -1,600,536.0 -2,000,670.0 22,035,977.0 38,219,897.8 30,648,032.7 24,768,622.2

Movement in Working Capital

Share based payments 168,305.0 0.0 0.0 0.0 0.0 0.0

Movement in trade and other receivables 106,936.0 139,016.8 500,000.0 750,000.0 1,125,000.0 1,687,500.0

Movement in trade and other payables -65,193.0 -20,000.0 -25,000.0 -37,500.0 -56,250.0 -84,375.0

Cash used in operations 210,048.0 119,016.8 475,000.0 712,500.0 1,068,750.0 1,603,125.0

Returns on investments & servicing of finance

Interest received 1,422.0 9,350.0 1,229,925.2 1,893,011.1 1,514,618.7 1,220,859.0

Interest paid 0.0 -2,500.0 954,000.0 727,200.0 536,400.0 545,419.0

Net Cash Flow for returns on investments &

servicing of finance 1,422.0 6,850.0 2,183,925.2 2,620,211.1 2,051,018.7 1,766,278.0

Capital Expenditure & Financial Investment

Capital Expenditure & Financial Investment -1,142,679.0 -1,599,750.6 -10,600,000.0 -400,000.0 -400,000.0 -400,000.0

Cash outflow before use of liquid resources and

financing

FINANCING

Proceeds of share issue 168,305.0 12,000,000.0 0.0 0.0 0.0 0.0

Redemption of Loan 0.0 0.000 0.000 0.000 0.000 0.000

Advance of debenture loans 0.0 0.000 0.000 0.000 0.000 0.000

Advance of other loans 0.0 0.000 0.000 0.000 0.000 0.000

Net cash inflow for financing 168,305.0 12,000,000.0 0.0 0.0 0.0 0.0

Increase/(decrease) in cash 985,985.0 8,406,429.4 13,619,902.2 40,440,108.9 32,299,051.4 26,134,900.2

Reconciliation of net cash flow to movement in net

debt

(Decrease)/increase in cash in year 985,985.0 8,406,429.4 13,619,902.2 40,440,108.9 32,299,051.4 26,134,900.2

Net cash (inflow) from debentures 0.0 0.000 0.000 0.000 0.000 0.000

Net cash (inflow) from other loans 0.0 0.000 0.000 0.000 0.000 0.000

Movement in (debt) in year resulting from cash flows 985,985.0 8,406,429.4 13,619,902.2 40,440,108.9 32,299,051.4 26,134,900.2

Movement in funds/ (debt) in year 4,503,715.0 9,392,414.4 22,026,331.6 54,060,011.1 72,739,160.3 58,433,951.6

Opening net funds/(debt) 3,517,730.0 985,985.0 8,406,429.4 13,619,902.2 40,440,108.9 32,299,051.4

Closing net funds/(debt) 985,985.0 8,406,429.4 13,619,902.2 40,440,108.9 32,299,051.4 26,134,900.2

Cash per share fully diluted 0.022 0.192 0.311 0.922 0.737 0.596

Reconciliation of Movement in Shareholders'

Funds

Profit (Loss) for the year -1,799,003.0 -2,223,109.3 16,748,548.5 23,667,644.1 18,294,003.3 15,593,568.6

New shares issued 0.0 12,000,000.0 0.0 0.0 5.0 0.0

Premium on new share capital subscribed 9,742,553.0 0.0 0.0 0.0 0.0 0.0

Opening shareholders' funds 0.0 7,943,550.0 17,720,440.7 34,468,989.2 58,136,633.3 76,430,641.5

Closing shareholders' funds 7,943,550.0 17,720,440.7 34,468,989.2 58,136,633.3 76,430,641.5 92,024,210.1

Source: The Oxford Consultancy Group

[13]

Funding

The Company expects to raise additional working capital

mainly to finance the drilling of three appraisal wells

updip from the Eblana #1 well in Nye County, Nevada.

Prior to drilling the wells, technical work will be carried

out, including limited-area surveys local to the poposed

targets in order to choose the best drilling locations. The

first of the wells is due to spud in Q4 2014, with

completion of the drilling programme slated to finish

several months later.

Dividend Policy

The Company will consider its dividend policy once a

positive and stable cashflow position has been attained.

Directors’ Shareholding and Major Shareholders

The Directors hold 10.4 % of the Company’s equity with a

further 41.4 % of the equity held by nominees. The

holdings held by the Directors and major shareholders of

the Company are given below:

Table 11: Directors’ Shareholding –

Direct and indirect & Significant Shareholders

Director's Issued Shares

% of

Issued

Shares

Brian McDonnell 3,913,234 8.92

Peter Whelan 564,118 1.29

Karim Akrawi 100,000 0.23

Total 4,577,352 10.44

Significant

Shareholders

JIM Nominees Ltd 5,680,850 12.95

Daveycrest Nominees

Ltd 4,995,971 11.39

Aurum Nominees Ltd 2,350,626 5.36

SVS (Nominees) Ltd 1,765,137 4.03

Pershing Nominees Ltd 1,699,317 3.88

Goodbody Stockbrokers

Nominees 1,677,412 3.83

Total 18,169,313 41.43

Source: The Oxford Consultancy Group

Directors

Brian McDonnell, Chief Executive Officer and

Chairman, graduated from Dublin City University with a

business studies degree setting up and successfully

running his own training company after working in

manufacturing for a number of years. Brian has extensive

experience of bringing large and complex projects to

fruition, and has been CEO of USOG since it was founded in 2009.

Paul O'Callaghan, Chief Financial Officer, is a chartered

accountant who was Company Secretary of James Crean,

and more recently Financial Director and CEO of FBD Holdings plc.

Peter Whelan, Audit/Remuneration/Contracts, has held

various roles in the enforcement of criminal, public health,

environmental and sea fisheries law. Mr. Whelan has had

responsibility for developing, managing, reviewing and

renegotiation of service contracts across the public service.

Karim Akrawi, Exploration Director, is currently General

Director for Geodynamics Worldwide, the company

responsible for developing and implementing the

Infrasonic Passive Differential Spectroscopy (IPDS or

Passive Seismic) survey technology. Karim has presented

and published numerous papers and reports on the

application of IPDS and has made a significant

contribution to the development of the technology as used

today in oil exploration around the world. Karim has vast

experience of the oil and gas industry worldwide,

including the United States. He was Senior Exploration

Geologist with Abu Dhabi Company (ADCO) for Onshore

Oil Operations from 1980 to 2008, an enterprise currently

producing 1.8 million barrels of oil per day. He has also

been involved in major discoveries and field development

in the United Arab Emirates (UAE) and elsewhere in the

Gulf exploration area. His expertise includes formulating

well proposals, planning and supervising drilling

operations, carrying out geological and feasibility studies,

preparing conceptual field development plans, evaluating

the economics of well development, estimating probable

oil and gas reserves, and risk analysis.

[14]

SWOT Analysis

Strengths Weaknesses

Experienced technical management team, with

extensive knowledge of the oil industry.

Holds 100 % W.I. leases over 88.1 km² in Nevada

with prospective contingent reserves of 8.7m bbls

– 19.9m bbls

First well had oil shows of high quality crude oil

with an API 28.5° - 33°, higher that most other

fields in the State, with no H2S & no wax

contents.

Potentially large hydrocarbon reserves.

Strong oil market.

No crude oil reserves found in the forthcoming 3-well

appraisal drilling programme.

Hence prospective contingent resources not converted

to proven reserves.

Listed on GXG & OTC, neither of which are

established markets for institutional investors.

However, the Company has a large private investor

base which can provide high levels of liquidity

Opportunities Threats

High oil prices expected to remain for some time

leading to continued interest in the Oils sector.

Large contingent resources of hydrocarbon

resources converted to proven reserves.

Further hydrocarbon opportunities in the

Company’s Nevada leases.

Decline in oil prices.

First appraisal well is unsuccessful in finding

commercial reserves of hydrocarbons.

Finding natural gas reserves rather than crude oil.

Growth metrics %

Profitability

metrics % Balance sheet metrics Company details

EPS CAGR 2015-18e -3.28 ROCE 2015e 115.4 Gearing 2015e 0 % Address:

EBITDA CAGR 2015-

18e 7.31 Avg ROCE 05-09e 80.2

Interest cover

2015e 23.1

USOG Oil & Gas plc

Alexandria House,

The Sweepstakes

Ballsbridge,Dublin 4

Ireland

Sales CAGR 2015-18e 7.4 ROE 2015e 145.5 Debtor days

2008e 0

Gross margin

2015e 76.9

Creditor days

2008e 0 Phone +353 ( 0) 1 631 9022

Operating margin

2015e 84.38

Gross mgm/Op

margin 9.7 website www.usoil.us

Forthcoming announcements/catalysts Date Management team

Annual Report 20/03/14 Chief Executive Officer & Chairman: Brian McDonnell

Interim results 23/05/14 Chief Financial Officer: Paul O’Callagham

AGM 30/0614 Exploration Director: Karim Akrawi

Full Results

Source: The Oxford Consultancy Group

Audit, Remuneration & Contracts Director: Peter Whelan

[15]

DISCLAIMER

Apart from the responsibilities and liabilities, if any, which may be imposed on Alexander David Securities Limited (“ADS”) by the Financial

Services and Markets Act 2000, ADS accept no responsibility whatsoever for the contents of this Document, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on behalf, in connection with the Company.

ADS accordingly disclaim all any liability (whether arising in tort, delict, under contract or otherwise) (save as referred to above), which it

might otherwise have in respect of this document or such statement.

RELIANCE ON COMPANY INFORMATION

The information in this document which does not purport to be comprehensive, has been provided by US Oil & Gas PLC (“USOG” or “the Company”).This is being delivered for information purposes only to assist the recipient in assessing whether or not they wish to invest in or

provide financing for the Company. None of the information in this document has been independently verified. Neither the Company nor ADS

and their directors, officers or employees accept any liability or responsibility for the accuracy or completeness of, or make any representations or warranty, express or implied, with respect to the information contained in this document or on which this document is based or any other

information or representations (whether written or oral) supplied or made in connection with any negotiations for the investment in or the

provision of financing to the Company or as to the reasonableness of any projection which this documents contains, and any such liability or responsibility is expressly disclaimed.

This document does not purport to be impartial investment research as defined by the Conduct of Business Rules of the Financial Conduct

Authority and as such constitutes marketing communication. This document has not been prepared in accordance with legal requirements

designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of

investment research.

The information enclosed herein should be considered “non-independent research” and is categorised as such because it has been prepared by persons who may be exposed to such conflicts of interest and is considered non-objective or non-impartial.

FORWARD –LOOKING STATEMENTS

Certain statements contained herein constitute forward-looking statements. Forward-looking statements including, without limitation, statements typically containing words such as “intends”, “anticipates”, “targets”, “estimates”, “believes”, “should”, “plans”, “will”, “expects”

and similar expressions or statements that are not historical facts are intended to identify those expressions or statements as forward-looking

statements. The statements are based on the current expectations of the Company and are naturally subject to uncertainty and changes in circumstances. By their nature,, forward-looking statements involve risk and uncertainty and the factors described in the context of such

forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or

implied by such forward-looking statements. These factors include, but are not limited to, local and global political and economic conditions, interest rate fluctuations (including those from any potential credit rating decline) and legal or regulatory developments and changes. Given

these risks and uncertainties, investors should not place undue reliance on forward-looking statements.

This Document does not constitute an offer t0o sell or an invitation to subscribe for, or solicitation of an offer to subscribe for or but, Ordinary Shares to any person in any jurisdiction to whom it is unlawful to make such offer, invitation or solicitation. In particular, this document must

not be taken , transmitted, distributed or sent, directly or indirectly, in, or into, the United States of America, Canada, Australia, Japan or the

Republic of South Africa or transmitted, distributed or sent to, or by, any national, resident or citizen of such countries. Accordingly, the Ordinary Shares may not, subject to certain exemptions, be offered or sold, directly or indirectly, in, or into, the United States of America,

Canada, Australia, Japan or the Republic of South Africa or in any other country, territory or possession where to do so may contravene local

securities laws or regulations. The Ordinary Shares have not been, and will not be, registered under the United States of America Securities Act of 1933 (as amended) or under the securities legislation of any state of the United States of America, any province or territory of Canada,

Australia, Japan or the Republic of South Africa and they may not be offered or sold, directly or indirectly, within the United States of

America, Canada, Australia, Japan or the Republic of South Africa or to or for the account or benefit of any national, citizen or resident of the United States of America, Canada, Australia, Japan or the Republic of South Africa or to any US person (within the definition of Regulation S

made under the United States Securities Act 1933 (as amended)).

The distribution of this Document outside the UK may be restricted by law. No action has been taken by the Company or ADS that would permit a public offer of the shares in the Company or possession of this document where action for that purpose is required. Persons outside the

UK who come into possession of this Document should inform themselves about the distribution of this document in their particular

jurisdiction. Failure to comply with those restricytions may constitute a violation of the securities laws of such jurisdictions.

MATERIAL INTEREST

We endeavour at all times to ensure that our financial promotions are clear, fair and not misleading, however, we do not hold it out as being

impartial and it should not be viewed as wholly objective since Alexander David Securities Limited (“ADS”), is broker to, or is retained by, this company and any such financial promotion is therefore unlikely to be perceived as objective.

ADS, the directors and employees thereof and/or any connected persons may have or previously held a material interest in the company which

is the subject matter of this communication and may from time-to-time add to or dispose of such interest.

This report has been prepared for information purposes only and is not a solicitation or an offer to buy or sell any security. It does not purport to

be a complete description of the securities, markets or developments referred to in the report. It is based on publicly available information and

sources that we believe to be reliable but we have not independently verified such information and we do not guarantee that it is accurate and complete.

Neither the Company nor ADS nor any of their respective associates or directors , officers or advisers, provides any representation, assurance or

guarantee that the occurrence of the events expressed or implied by the forward-looking statements contained herein will actually occur. Other than in accordance with their legal or regulatory obligations ( including under the [GXG] Rules, the Disclosure and Transparency Rules of the

Financial Conduct Authority and the City Code on Takeovers and Mergers), neither the Company nor ADS is under any obligation, and each of

them expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CIRCULATION

[16]

RISK WARNING NOTICE

All investments are speculative and prices may change quickly and go down as well as up. Past performance will not necessarily be repeated

and is no guarantee of future success. There is an extra risk of losing money when shares are bought in some smaller companies including

“penny shares”. There can be a big difference between the buying price and the selling price of these shares and if they have to be sold immediately, you may get back much less than you paid for them or in some circumstances, it may be difficult to sell at any price. It may also

be difficult for you to obtain reliable information about the value of this investment or the extent of the risks to which it is exposed. Where a

company has chosen to borrow money (gearing) as part of its business strategy its share price may become more volatile and subject to sudden and large falls. This investment may not be suitable for all investors, and clients should carefully consider their own personal financial

circumstances before dealing in the stock market, particularly those on fixed incomes or approaching retirement age. If you have any doubts

you should seek advice from your investment adviser or your broker at this firm.

The success of the Company is highly dependent on the development of the Hot Creek acreage and in raising suffient funds for this

development. At the date of this document the Company has no producing well. Oil exploration and drilling is a high risk venture.

GXG

GXG Main Quote MTF is an SME dedicated exchange run by GXG Markets A/S providing full public market quote and trading facility. It is a

market designed primarily for emerging or smaller companies. The rules of this market are less demanding than those of the official List of the

London Stock Exchange and therefore companies quoted on GXG Main Quote carry a greater risk than a company with a full listing.

For further information on ADS’s policies and procedures, including our conflicts of interest policy, please visit our website at www.ad-securities.com.