CEO’s Message Quarterly Update

“In 2016 our focus was on containing costs and protecting our balance sheet in view of the global recession in the oil and gas industry. We see the outlook improving for 2017 and are prudently preparing to increase activity on our Garmian and Kurdamir blocks. We are encouraged by the receipt of oil sales payments for IOCs for 2016 from the Kurdistan Regional Government. We are also pleased to announce the receipt of payments for our January and February 2017 oil sales, which reinforce our optimism for the Region. On Garmian, we are planning to drill the Sarqala-2 well in the third quarter of this year with the goal of tripling our production. On Kurdamir, although we are working diligently with Repsol and the KRG, the project has taken more time than anticipated to negotiate the development plan and gas sales agreement, and as such, the timing for the first phase of development is uncertain.

We have increased the Garmian Gross Block’s estimated 2P Reserves by 60 percent to over 20 million barrels of oil and without any material change to the Gross Block’s estimate of unrisked P50 Prospective Resources, now at 65 million barrels of oil. Our Sarqala-1 well continues to produce at over 5,000 barrels of oil per day. To date, the well has produced 4.5 million barrels of high quality crude with no evidence of formation water or hydrogen sulphide.

We continue to defer the draw down dates of our debt facility to better align with our anticipated capital requirements, notably the anticipated spud of the Sarqala-2 well. We also continue to review alternate financing options to best fund the advancement of our projects while maintaining our financial flexibility.”