Calvalley's exploration program has proven that Block 9 contains hydrocarbon accumulations in multiple stratigraphic units. To date, Calvalley has demonstrated hydrocarbons and reserves in the following formations: Qishn, Saar, Naifa, Madbi/Shuqra, Kohlan and fractured Basement.

The seismic data shot and reprocessed in 2007 was utilized in an interpretation and mapping program throughout 2008. In conjunction with this seismic mapping, Calvalley has reviewed the geological play types on the block, recognizing six key zones of interest to be pursued in various prospects across Block 9. These zones include the Qishn clastics, Saar, Naifa and Madbi carbonates in addition to the Kohlan sand and fractured Basement plays. The result of this effort was a ranking of 42 prospects and leads that constitutes a portfolio of future exploration opportunities on the block.

Calvalley drilled two exploration wells in Block 9 during 2008: Qarn Qaymah 2 and Malik 2. The fractured granitic Basement and the associated overlying Kohlan sand in the Qarn Qaymah area are one of our most exciting exploration targets in Block 9, and the drilling results of Qarn Qaymah 2 proved very encouraging.

Qarn Qaymah 2 reached a total depth of 3,975 meters measured depth and the rig was released on March 16, 2008. During drilling, the well encountered hydrocarbon shows in the Kohlan sand and the fractured granitic Basement. The well encountered 12 meters of gross Kohlan sandstone which provided shows of gas and associated liquids upon penetration. This is the same play as Qarn Qaymah 1 which was located 2.1 km to the west and also tested gas and liquids. The aerial extent of the Kohlan in the Qarn Qaymah structure, taken down to its structural spill point, exceeds 11 km². In addition, similar structures flanking the Qarn Qaymah discoveries have been mapped and cumulatively exceed an additional 22 km² for a total of 33 ² in aerial extent. Completion of Qarn Qaymah 2 in the Kohlan sand is expected in the first half of 2009 following full evaluation of Qarn Qaymah 2 in the fractured Basement.

The granitic Basement in Qarn Qaymah 2 was drilled at an inclination of 72 degrees to the south, enabling the wellbore to intersect fracture networks developed in the Basement structure. 747 meters of granite was penetrated below the casing shoe giving a lateral offset of 570 meters to the south. The well encountered six fracture zones within the granite section with associated hydrocarbon shows. A progression of hydrocarbon shows, from gas to gas-associated liquids to oil, was observed as the well penetrated deeper into the structure. Full evaluation of this zone will commence upon the arrival of specialized equipment.

Malik 2 reached a total depth of 1,600 meters measured depth and the rig was released on March 27, 2008. The well successfully encountered 5 meters of 18 degree API oil column in the Qishn clastics and 5 meters oil column in the Saar clastics. While this well does not constitute a standalone commercial development based on the thin hydrocarbon column and the limited hydrocarbon flow, the Company intends to drill further exploration wells on the southern extension of the structure which lies underneath the Plateau. The Qishn clastics and the fractured granitic Basement will be the focus of future exploration wells.

Click to enlarge

Figure 8

Click to enlarge

Figure 9

Click to enlarge

Figure 10