In response to the DTI’s efforts to attract new entrants to the UK North Sea, we initiated a review of opportunities in the region in 2001 that led to bids for 5 production licenses in the 20^th UK Offshore Licensing Round. We were awarded 3 licenses, one of which included the Brenda property.

Why are we focused on the UK North Sea? We believe this is the right location for our company for a number of reasons:

• Proven oil and gas basins.

  Since oil and gas exploration and production began in the UK North Sea in the 1960s, approximately 30 billion boe has been produced, with an estimated 30 billion boe remaining.

• A favourable fiscal regime.

  There are no royalties in the UK North Sea, and we are able to recover 100% of our capital and operating expenses before we are required to pay taxes.

• A favourable regulatory regime.

  The DTI is committed to providing a framework that allows companies to explore, appraise and develop prospects in a fair and efficient manner.

• Political stability.

  Growth companies such as ours require minimal political risk to protect assets. While some exciting discoveries have been made elsewhere in the world, geopolitical risks create complications that we do not experience in the UK.

• A well developed subsea infrastructure.

  Discovering oil is only part of the challenge. A company needs to be able to develop and transport oil to a facility. Forty years of oil production has allowed the UK North Sea to develop the necessary infrastructure so that new discoveries can be brought on line quickly and cost effectively.

• Well developed on shore resources.

  Whether it be equipment, supplies, personnel or technical expertise, Aberdeen is regarded as a world class resource centre for the oil and gas industry.