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Hulf Hamilton

Commentary on First Calgary Petroleums Ltd.

Presented

October 2005

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CONTENTS

Hulf Hamilton

Summary and Conclusion

 

1

Corporate Overview

 

2

Reserves and Production

 

3

Valuation

 

4

Financial Projections

 

5

Appendices

 

Disclaimer The material in this report is for the general information of clients of Hulf Hamilton only. This material has been written for technical purposes and should not be construed as an offer to

sell or solicitation to buy any security or other financial instrument. The material in this report is based on information that we consider reliable, but we do not represent that it is accurate, complete or not misleading and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update the material in this report on a timely basis, but regulatory, compliance, or other reasons may prevent us from doing so. Neither should any of this material be redistributed without the prior

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consent of Hulf Hamilton Limited. Hulf Hamilton Limited accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any of this material.

Hulf Hamilton

Summary and Conclusion

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Summary and Conclusion

Hulf Hamilton

Summary

 

Conclusion

First Calgary Petroleum Limited (FCPL) is a Canadian based E&P

The headline numbers are impressive

that listed on AIM on 30 July 2002 raising $25MM.

  • - Gross proven + probable (2P) gas reserves of 2.165 trillion cubic feet (tcf).

FCPL signed acreage in Algeria in 2000 – prior to that the

  • - Upside of more than double this.

company had assets in China, Tunisia, Oman and North America

  • - liquids as well as gas giving total combined gross reserves of 13tcf.

But gross reserves are not the full story.

The fiscal regime in Algeria tends to be quite punishing to western companies

and all have now been relinquished. FCPL is now singularly focused on Algeria where it has subsequently made significant gas discoveries. The acreage is in eastern Algeria in the prolific Berkine basin

with the Algerian State taking a large share of production via participation of the State oil company Sonatrach.

where Lasmo found fame and eventually accepted a bid from ENI who is now a major acreage holder in Algeria along with Anadarko and others (see page 38 for more).

FCPL’s equity interest in its main Block (405) which probably represents about 90%-95% of the above reserves is 75% to FCPL.

The company is led by Richard Anderson who joined the company

After the fiscal system has done its work, FCPL ends up with about 20% of the total reserve value.

  • - $36/bbl long term liquids prise/ $4.5/MCF gas price/ 10% discount rate

as CEO in 1997 and is assisted by key board members that joined

On top of this about 70% of the big (13tcf) gross reserve number is in the

the company from 1999 onwards. The value of FCPL shares has fallen recently following failed

‘possible’ category, or in probabalistic speak – 10% chance of commercial success – by no means certain.

negotiations to sell the company in June 2005.

FCPL did not want us to see the reserve report that derived these numbers so

Does the current share price range of 400p fairly reflect the

we have no way finding out if the report is conservative.

potential value of the company from a previous range of 700p?

We therefore base our valuation on the 2p reserve values and recreate the

 

strict fiscal system in the form of discounted cash flows. On this basis the core value of the company is $948MM or 254p share and

 
First Calgary Petroleum Share Price History
First Calgary Petroleum Share Price History

including the upside (risked) we get to $1569MM or 421p share; based on:

We can imagine how the company failed to agree a sale/joint venture when

the shares were trading around 800p when bids were likely at 400p. But that is where the shares are now and we think this is a fair value for the current discoveries and identified upside.

The company appears to have been advised by Leman Brothers that

developing the discoveries on its own may be the best option.

We doubt this, consider:

  • - The gross capital expenditure required for development is nearly $2billion

  • - FCPL is not experienced at massive developments like this

  • - Consider neighbouring development partners – ENI, Anadarko, Burlington

   
     
  • - FCPL cost of capital is relatively high for the complex liquids/gas treatment plant necessary.

 
  • - FCPL will have to recruit a large number of operations staff from scratch

   

So we think the shares are fairly valued at the 400p level and the

     

companies problems are only just geginning if it sticks to the current plan. Upside is more likely in the form of another bid at this stage.

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Hulf Hamilton

Corporate Overview

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Management

Hulf Hamilton

Richard Anderson

Management Hulf Hamilton Richard Anderson Chief Exec Practical oil industry background, founded and ran 2 other

Chief Exec

Practical oil industry background, founded and ran 2 other E&P’s from 81 to 96 (Tangent Oil and Petrostar). Joined FCPL as CEO in 1997.

Garry Worth

Management Hulf Hamilton Richard Anderson Chief Exec Practical oil industry background, founded and ran 2 other

Executive Director

Corporate Financier with O&G M&A background in small Canadian E&P’s (Bonanza Oil, Maximum Energy Group). Joined FCPL as Executive Vice President in 2004

Source: Photographs – First Calgary Petroleum.

Martin Layzell

Management Hulf Hamilton Richard Anderson Chief Exec Practical oil industry background, founded and ran 2 other

Exploration Director

UK National settled in Canada - Geophysicist and

exploration geoscientist with small Canadian E&P’s (Dome Petroleum, Westcoast Petroleum/Numac Energy). Joined FCPL in 1999.

Ken Rutherford

Management Hulf Hamilton Richard Anderson Chief Exec Practical oil industry background, founded and ran 2 other

Finance Director

Canadian Accountant with small E&P background – (Shelter Hydrocarbons, Opinac Exploration, CN Exploration, Arakis Energy and Scorpion Energy).

Joined FCPL in 1999.

Non executives

Include an interesting selection of ex Eurosov Executives (sold to Sibir in the 1990’s) including – Alastair Beardsall and Yuri Shafranik. Ray Anthony is now a non-exec but started out as a Director in 1997.

The company has been operating in North Africa since it first started raising public funds in
The company has been operating in North Africa since it first started raising public funds in 1997
when Ray Anthony and Art Milholland (now Oilexco) were Directors. The company first had assets in
Tunisia (Suda Nefta & Bazma), Louisiana, Texas, China and Yemen. The company signed the first
Algerian agreements in early 2000. The company entered Yemen in 1998 and sold the final interests
in Feb 2004 to DNO (DNO went on to make the 70mmbbl Nabrajah oil discovery that launched the
shares)
Our judgement of management is that Martin and Ken joined to ‘beef up’ the team when Algeria took
off and Garry joined to help mastermind the sale of the company (that fell through earlier this year).
Seasoned pro’s might be an appropriate expression but perhaps lacking an Arab Board member to
aid in negotiations with Sonatrach and perhaps a Director with big project management experience.

Conclusion: Canadian globetrotters get lucky in Algeria after years of trying around the world. Current management hand picked to do the job in Algeria but will need a strong Operations Director with big oil project experience to complete the picture.

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Introduction

Hulf Hamilton

Algerian Cambro-Ordovician sandstones

Introduction Hulf Hamilton Algerian Cambro-Ordovician sandstones Source: Algerian Mi nistry of Mines Algeria hydrocarbons are produced

Source: Algerian Ministry of Mines

Algeria hydrocarbons are produced

from good quality (mostly Triassic) sandstone in 4 areas:

Eastern Sahara, mature oil and gas production with potential for more major discoveries (First Calgary here).

Central Sahara, gas prone with

renewed interest with recent oil strikes. Western Sahara, chiefly gas

prone but remains practically unexplored. Northern Algeria is geologically very complex and its hydro- carbon potential remains only partially known.

Introduction Hulf Hamilton Algerian Cambro-Ordovician sandstones Source: Algerian Mi nistry of Mines Algeria hydrocarbons are produced

General

First Calgary Petroleums (FCPL) has been in Algeria since 2000 when it first signed the Ledjmet 405b (75% working interest) and Rhourde Yacoub Block 406a (49%).

The terms of the original exploration license required the company to relinquish parts of the original acreage which it now has and the remaining prospective acreage is summarised on the following pages.

The real headline hydrocarbons have been the gas discoveries on Block 405 where gross proven plus probable (2P) recoverable gas is 2165bcf or about the size of the gas recovered from the Beryl field in the North Sea – pretty large by any standards.

Block 406 looks as if it may hold oil, although end 2004 estimates may have to be downgraded after some slightly disappointing appraisal drilling in 2004/05.

Although Algeria is also known for its prolific oil and gas fields it is also known for a fairly harsh fiscal regime that on average will likely leave FCPL with an economic benefit from 405b as little as 20% of the value of the gas.

Geology

 

The sedimentary basins of Algeria cover more than 1.5 million km 2 with an average thickness exceeding 3 km in some places.

The presence of thick source rocks rich in organic material, the right conditions for hydrocarbon generation, and multiple reservoir layers and seals spread throughout the stratigraphic section, offer excellent oil and gas potential on the Sahara platform and throughout the northern part of the country.

Potential

 

With an average exploration drilling density of approximately 7 wells /10,000 km 2 , Algeria is under explored (world average is 95 wells /10,000 km 2 ).

The majority of exploration wells in Algeria were drilled before the mid 1970s, using methods and technology which are now considered obsolete.

The history of exploration activities and discoveries highlights the adverse effects of interruptions and uncertainties caused by events outside the control of the petroleum industry.

If FCPL can develop its significant Algerian gas discoveries in a timely fashion and is adequately capitalized to do so then there may be a significant cash flow prize that could enable the company to go forth and repeat the Algerian success elsewhere.

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Algeria Reserves and Production

Hulf Hamilton

Oil: Proved reserves

1984

1994

2003

2004

Share

R/P

(bn bbls)

(bn bbls)

(bn bbls)

(bn bbls)

of world

ratio

Algeria

9.0

10.0

11.8

11.8

1.0%

16.7

Angola

2.1

3.0

8.8

8.8

0.7%

24.3

Chad

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-

0.9

0.9

0.1%

14.6

Rep. of Congo (Brazzaville)

0.8

1.4

1.4

1.8

0.2%

20.3

Egypt

4.0

3.9

3.5

3.6

0.3%

13.8

Equatorial Guinea

-

0.3

1.3

1.3

0.1%

10.0

Gabon

0.6

1.4

2.3

2.3

0.2%

26.6

Libya

21.4

22.8

39.1

39.1

3.3%

66.5

Nigeria

16.7

21.0

35.3

35.3

3.0%

38.4

Sudan

0.3

0.3

6.3

6.3

0.5%

57.3

Tunisia

1.8

0.3

0.5

0.6

0.1%

25.2

Other Africa

1.0

0.6

0.6

0.5

8.6

Total Africa

57.8

65.0

111.8

112.2

9.4%

33.1

Natural Gas: Proved reserve

1984

1994

2003

2004

Share

R/P

(tcm)

(tcm)

(tcm)

(tcm)

of world

ratio

Algeria

3.44

2.96

4.55

4.55

2.5%

55.4

Egypt

0.24

0.63

1.72

1.85

1.0%

69.1

Libya

0.63

1.31

1.49

1.49

0.8%

*

Nigeria

1.36

3.45

5.00

5.00

2.8%

*

Other Africa

0.56

0.78

1.18

1.18

0.7%

*

Total Africa

6.22

9.13

13.94

14.06

7.8%

96.9

Algeria Production

9 2500 8 Gas Oil 2000 7 6 1500 5 4 1000 3 2 500 1
9
2500
8
Gas
Oil
2000
7
6
1500
5
4
1000
3
2
500
1
0
0
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Gas Prod (bcf/d)
Oil Prod (000 b/d)

Source: BP Statistical Review, 2005

General

Algeria is experiencing an economic upturn, in large part aided by

strong oil and natural gas export revenues. Real GDP growth is expected to reach 6.9% in 2005, following

estimated growth of 6.1% in 2004. President Abdelaziz Bouteflika, elected President in 1999 and re-

elected in 2004, is restoring social stability and economic reform. The hydrocarbons reform bill will shortly become law. The bill will

reform Sonatrach (state oil company) along corporate lines, allow foreign operators to act independently of Sonatrach, and possibly private Sonatrach or its subsidiaries and this is a good thing. Energy Minister Chekib Khelil has stated his goal is to double the

Oil

number of companies operating in Algeria.

Algeria is underexplored, even though the country has produced oil

since 1956, and Algeria's National Council of Energy believes that the country still contains vast hydrocarbon potential. Over the last few years, there have been significant new oil and gas

discoveries, largely by foreign companies: (Anadarko, BHP, Amerada Hess and ENI). Algeria's oil sector, unlike that of most OPEC producers, has been

open to foreign investors for more than a decade. Algeria hopes to increase its crude oil production capacity significantly over the next few years by attracting more foreign

investment.

Gas

Sonatrach dominates natural gas production and wholesale

distribution in Algeria, while Sonelgaz, controls retail distribution. Algeria has increasingly allowed greater foreign investment in the sector, and foreign gas producers have entered into numerous

partnership agreements with Sonatrach.

There are also plans to allow foreign participation in the retail natural gas sector. In order to attract foreign investment, the

government has pushed efforts to liberalize domestic natural gas

prices. The latest push at price liberalization in 2005 coincided with record freezing temperatures in Algeria, and there were protests and riots

against the liberalization plans in several cities. Algeria is a major natural gas exporter, mostly to Europe and the

United States. (Source – EIA Algeria Country profile, March 2005)

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Acreage locations

Hulf Hamilton

Algerian Main Oil and Gas Fields

FCPL Acreage
FCPL Acreage

Source: Petroleum Economist

Algerian Geological Basins Constantine Ghadames Triassic Illizi
Algerian Geological Basins
Constantine
Ghadames
Triassic
Illizi

Commentary

The FCPL acreage is in the Ghadames Basin.

Of the 13 sedimentary basins in Algeria, four are producing:

  • - Triassic Basin, comprising the Oued Mya Basin, Timimoun, Hassi Messaoud Ridge,

Tilrhmet Dome, Touggourt Saddle, and Dahar Dome

  • - Illizi

  • - Ghadames

  • - Constantine.

Currently, hydrocarbon production in Algeria comes primarily from the Triassic and Illizi

basins, with oil from the Ghadames and a tiny amount from the Constantine basins.

The distribution split of the country’s reserves is similar, with the Triassic Basin hosting about 80% of the recoverable reserves, the Illizi Basin about 15%, and the Ghadames Basin about

5%.

The FCPL acreage is in the Ghadames basin in the excellent Devonian-Triassic sandstones.

Exploration successes by First Calgary, Anadarko, AGIP and Petro-Canada in the Ghadames

and Illizi basins indicate that considerable additional reserves remain to be discovered in the Paleozoic basins of the Saharan Platform in addition to the 16 billion barrels of known recoverable oil and 25tcf of gas. Other companies active in Algeria are shown in the Appendices on p38.

From the generalized geology we are of the opinion that

  • - FCPL acreage is in a proven hydrocarbon province

  • - Significant gas reserves are being established on Block 405

  • - Some oil reserves are present on Block 406

  • - Reservoir quality is generally excellent and this is reflected in well flow rates

  • - The geology of source/trap/migration is complex so hydrocarbon type

(oil/gas/condensate), associated production facilities and ongoing development

may be complex and expensive.

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Hulf Hamilton

Algerian Assets

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Algerian License Block Summary

Hulf Hamilton

Algerian License Blocks

Gulf Keystone acreage
Gulf Keystone acreage

Block 405b Ledjmet

The gas discovery Block now

under development.

406a Rhourde Yacoub

Oil discovery Block with exploration potential in the north

Algerian License Block Summary Hulf Hamilton Algerian License Blocks Gulf Keystone acreage Block 405b Ledjmet The

Enlarged area showing Lasmo/ENI acreage (yellow) to the south and Anadarko (purple) adjacent acreage in the centre.

Algerian License Block Summary Hulf Hamilton Algerian License Blocks Gulf Keystone acreage Block 405b Ledjmet The

Source: Algerian Ministry of Energy & Mines

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Algeria Hydrocarbon Basins

Hulf Hamilton

Trias/Ghadames Province

Ledjmet and Rhourde Yacoub
Ledjmet and
Rhourde Yacoub

Source: USGS, Hulf Hamilton

Commentary

This diagram shows the active basins in the area of

Blocks 405 and 406. Most of the oil and gas fields are located on subtle,

low-relief structures within the central and northeast portions of the Ghadames (Berkine) Basin. Most of these accumulations are within anticlines,

faulted anticlines, or fault blocks developed during Hercynian and Austrian deformation. Accumulations in combination traps, those containing

both structural and stratigraphic components, are common. The Ghadames Petroleum System is an important

total petroleum system with respect to known oil and gas volumes, containing about 30 percent of the discovered oil and 60 percent of the discovered gas in the province. A small portion of this total petroleum system extends

into the neighboring Illizi, Hamra, and Pelagian Provinces. Middle to Upper Devonian-aged mudstone may be the

primary source rock.

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Hulf Hamilton

Stratigraphic section across FCPL Blocks 405b and 406a

Frasnian oil source Reservoir Silurian gas source Source: FCPL
Frasnian oil source
Reservoir
Silurian gas source
Source: FCPL
Hulf Hamilton Stratigraphic section across FC PL Blocks 405b and 406a Frasnian oil source Reservoir Silurian

Source: USG, Total Petroleum Systems of the

Trias/Ghadames Province, Algeria, Tunisia, and Libya

Conclusion: Clearly a proven hydrocarbon system exists but there are complexities in the source – migration, resulting in some uncertainties on oil/gas/condensate volumes and associated reservoir engineering complications.

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License Map showing Hydrocarbon discoveries

Hulf Hamilton

Berkine Basin Discoveries - Algeria

Anadarko - El Merk 600MMbbl oil discovery, 156 well development.
Anadarko - El Merk 600MMbbl oil
discovery, 156 well development.

Anadarko – Hassi Berkine giant oil field

Sonatrach – Ourhoud giant oil discovery

CEPSA - Rhourde Yacoub oil discovery on adjacent Block

FCPL Oil discoveries on Rhourde Yacoub

FCPL MLE gas discoveries on Ledjmet

License Map showing Hydrocarbon discoveries Hulf Hamilton Berkine Basin Discoveries - Algeria Anadarko - El Merk

Source: FCPL, Hulf Hamilton

Conclusion: Some impressive discoveries and partners in adjacent licenses making development infrastructure access (pipelines) more probable if the company acts fast to start negotiations with ENI on the El Merk development to the south.

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Generalised Geology

Hulf Hamilton

Triassic Reservoir Sand Distribution.

Generalised Geology Hulf Hamilton Triassic Reservoir Sand Distribution. Source Rock Distribution Source: First Calgary Petroleum Commentary

Source Rock Distribution

Generalised Geology Hulf Hamilton Triassic Reservoir Sand Distribution. Source Rock Distribution Source: First Calgary Petroleum Commentary

Source: First Calgary Petroleum

Commentary

Source

Our lower left diagram shows deeper Silurian (oil) source rock around the outside of the Blocks and shallower Frasnian (oil and gas) source rocks in the centre.

Silurian source rocks are presently in the peak to late oil generation phase, whereas Frasnian source rocks are presently in the early to peak oil generation window. Silurian rocks are presently in the wet to dry gas generation phase. This partly explains the difference in hydrocarbon content across the FCPL acreage although from this theory

we would have expected to see oil rather than gas discovered in the south of Block

  • 405. The reality proves the complexity of hydrocarbon prediction in the region.

Reservoir

Multiple reservoir rocks are from lower Devonian to Triassic in age. The upper left diagram clearly shows the demarcation of reservoir rock across the bottom of Block

  • 406 that has been proven by drilling. Devonian rocks consist of interbedded marine

and deltaic sand and mudstone and quality is generally very good. Triassic reservoir rocks are generally fluvial and we would expect a slight degradation in quality here. High well test results to date have generally borne out the story of quality reservoir on

  • 405 in particular.

Trap

Low relief anticlinal structures and fault blocks appear to form the trapping mechanisms in Blocks 405 and 406.

Seal

Triassic to Jurassic evaporates (salts) provide a regional top seal.

Risk factors

We would see migration from deeper Silurian (oil) source rocks to the shallower Triassic sandstones as a potential risk factor to be considered in the case of undiscovered hydrocarbons. For the development scenarios the structural nature of the trapping mechanisms on 405 and 406 should make reservoir rock volume fairly predictable, especially after some production testing can confirm volumes and reservoir extent. We

do not have sufficient reservoir information (FCPL did not want us to see the engineers report from Degolyer and Macnaughton) so we could not comment further. We are still curious what FCPL did not want us to see in the engineers report and regard this as a risk factor in itself.

Conclusion: Potential migration risk for oil discoveries on Block 406 but no obvious development risk factor for the gas development on Block 405 apart from the fact that FCPL did not want us to see the Engineers report that could have given us more detail.

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Block 405b Development

Hulf Hamilton

Ledjmet Block 405b Well Flowrates Well Liquids Gas (bbl/d) (mmcfd) MLE-1 1,418 38 MLE-2 12,949 184
Ledjmet Block 405b
Well Flowrates
Well
Liquids
Gas
(bbl/d)
(mmcfd)
MLE-1
1,418
38
MLE-2
12,949
184
MLE-3
3,677
130
Gross Recoverable Gas Reserves Estimate
MLE-4
1,223
23
Proven 560bcf Probable 1432bcf Possible 4439bcf
Proven 560bcf
Probable 1432bcf
Possible 4439bcf

MLE-5

MLE-6

LEC-1

MZLN-1

MZLS-1

LEW-1

LES-1

LES-2

1,590

39

Pending

2,153

92

9,058

208

5,447

8,539

55

15

10,707

18,325

11

92

Commentary

The 3-D visualization left shows the

gas (red) discoveries across the Block in main designated blocks

  • - Menzel Ledjmet East (MLE)

  • - Menzel Ledjmet (MZ)

  • - Ledjmet (LE)

Flowrates from wells tested to date has been impressive and this gives us

confidence for a fairly bullish production profile to support the development case. The Ledjmet reserves contribute

around the:

between 90%-95% of the overall booked reserves for FCPL. The proven and probable reserves are

in the lower Devonian reservoirs based

  • - MZLS-1, LES-1 and LES 2 wells on the MZ and LE structures.

  • - MLE-1 to MLE-5 wells on the MLE structure

  • - LEW-1 well on the LEW structure.

The significant possible reserve (70%) is in the undrilled portions of LE to the south west of the Block.

We would expect to see rapid

development of reserves around the 2P area followed by appraisal drilling in the south west in 2006 to prove up the area. This uncertainty on reserves was probably what undermined the negotiations to sell the company

earlier in 2005.

Conclusion: Proven gas play but still uncertainties hanging over the upside (possible) reserves that are a big proportion of overall volumes.

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Hulf Hamilton

Block 406a Development

Rhourde Yacoub Block 406a

Hulf Hamilton Block 406a Development Rhourde Yacoub Block 406a Well Flowrates Commentary Block 406a is estimated

Well Flowrates

Commentary

Block 406a is estimated to contain between 5%-10% of the overall

3P reserves currently attributed to FCPL. ZCH-1 has been the only positive success to date with an 8,454b/d

gross flowrate. The ZCH-2 well is currently drilling in the adjacent fault block and

we would expect a similar result to ZCH-1. The potential reserves on this block have actually decreased since

the end of 2004 as drilling this year (ZCHW-1) has disproven the extension of oil across the bottom of the block. Because we do not know the precise split of reserves between

Blocks 405 and 406 but we know the 406 contribution is small we have not adjusted our overall reserve data downwards. Furthermore we think an increase in 2P reserves from the 405 Block contribution is likely to cancel out the slight reduction in 406.

 

Well

Liquids

Gas

 

(bbl/d)

(mmcfd)

 

RKFN-1

Un commercial

Source: FCPL, Hulf Hamilton

YCB-1

Dry hole

ZCH-1

8,545

56

ZCH-2

Drilling Oct 2005

ZCHW-1

Un commercial

RTN-1

Pending

Conclusion: Oil discovery in the south shrinking with each well – the next result (ZCH-2) almost certainly to be positive newsflow. FCPL seem more likely to have clipped an oil field on the 208 Block to the south (Anadarko), see page 36 for more details.

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Hulf Hamilton

Reserves and Production

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Proven + Probable (2P) Reserves

Hulf Hamilton

Degolyer & Macnaughton

GROSS

Gas

Reserves

 

1P

2P

3P

(bcf)

(bcf)

(bcf)

405b

560

1992

6431

406a

49

173

559

 

609

2165

6990

Liquids

Reserves

 

1P

2P

3P

(MMbbl)

(MMbbl)

(MMbbl)

405b

71

300

922

406a

6

26

80

 

77

326

1002

Total

1071

4121

13002

Source: Reserve Estimate News Release, 31/12/04

Commentary

Hulf Hamilton

First Calgary

NET NET Gas Reserves Gas Reserves 1P 2P 3P 1P 2P 3P (bcf) (bcf) (bcf) (bcf)
NET
NET
Gas
Reserves
Gas
Reserves
1P
2P
3P
1P
2P
3P
(bcf)
(bcf)
(bcf)
(bcf)
(bcf)
(bcf)
405b
177
411
1081
405b
406a
36
85
223
406a
213
495
1304
152
353
920
Liquids
Reserves
Liquids
Reserves
1P
2P
3P
1P
2P
3P
(MMbbl)
(MMbbl)
(MMbbl)
(MMbbl)
(MMbbl)
(MMbbl)
405b
17
57
162
405b
406a
4
13
36
406a
21
69
198
22
71
199
338
911
2491
284
779
2114
Forms the basis of our Core
valuation on p24.

The only immovable data is the Gross Equity Reserve data shown in the green table top left.

Net recoverable entitlement reserves are a function of the fiscal regime which is in turn a function of expenditures and forward commodity price

assumptions. The First Calgary reserves are shown on the far right and these are based on the same fiscal assumptions as our own data but unknown forward

commodity price assumptions. We elaborate on fiscal assumptions in the following pages but basically the revenue share to First Calgary decreases as the ratio of revenue to cumulative

investment increases so if commodity prices are high in the short term, so are revenues so the FCPL share decreases sooner than if commodity prices are relatively lower in future years. A curious situation arises in this complex formula where the company net entitlement reserves could be higher but each barrel is worth relatively less

than for certain cases where reserves could be lower. The bottom line is that absolute valuation is more important than entitlement reserves.

Conclusion: Our net reserves are greater than the company estimates but this is more a function of our conservative commodity price assumptions. Our ultimate values ($/boe basis) are lower than FCPL estimates.

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Production Potential

Hulf Hamilton

Gross 2P Liquids Production - 405

180 160 140 120 100 80 60 40 20 0 Production (000 b/d) 2005 2006 2007
180
160
140
120
100
80
60
40
20
0
Production (000 b/d)
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035

Gross 2P Liquids production - 406

16 14 12 10 8 6 4 2 0 Production (000 b/d) 2005 2006 2007 2008
16
14
12
10
8
6
4
2
0
Production (000 b/d)
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035

Commentary

The dominant profile is the gas

production from Ledjmet 405. We have based our assumption

on the 3P profile cases provided in the company update in September 2005. The 3P case is for an 800MMcfd

profile based on 125 wells. We have assumed fewer wells for the 2P case but similar

inflow potential.

Liquids production is also based on company guidance on gas oil ratios.

Gross 2P Gas Production - 405

600 Significant 500mmcfd 500 plateau gas rate 400 300 200 100 0 2005 2007 2009 2011
600
Significant
500mmcfd
500
plateau gas rate
400
300
200
100
0
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
Production (MMcfd)

Gross 2P Gas production - 406

50 45 Very low 45mmcfd 40 plateau for 406. 35 30 25 20 15 10 5
50
45
Very low
45mmcfd
40
plateau for 406.
35
30
25
20
15
10
5
0
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
Production (MMcfd)

Source: Hulf Hamilton

- 20 -

Hulf Hamilton

Valuation

- 21 -

Algeria Fiscal Regime

Hulf Hamilton

Comparison of Government take on oil projects

Algeria Fiscal Regime Hulf Hamilton Comparison of Government take on oil projects Commentary The fiscal regime

Commentary

The fiscal regime in Algeria is generally regarded as harsh by international standards as the chart left shows.

But different sets of fiscal terms are applied to oil and gas operations in Algeria depending upon whether they are undertaken by Sonatrach or by Joint Venture partners.

Ledjmet 405

 

FCPL has a 75% working interest

 

FCPL entitlement to revenues is based on the formula:

Entitlement = 75% x ((R- Production Volume Factor) – Rate of Return) = 75% x ((R – PVF) – RRF) R = 77% (biddable factor by which FCPL secured the license)

PVF = 0 –

20kbd

48%

20kbd – 40kbd

45%

40kbd - 60kbd

39%

60kbd+

39%

RRF = 0%-23% for 7<Z<8 where Z = Revenue/cumulative dev capex

Sonatrach pays all taxes and royalties

Overall we estimate that FCPL takes roughly 22%-27% economic entitlement compared to its original 75% equity interest after the fiscal regime.

Source: IHS Energy, 2004

Rhourde Yacoub 406

FCPL has a 49% working interest in a JV with Sonatrach

FCPL pays tax (65%) and royalty (3%-12.5%) – production based.

Because FCPL has full tax and royalty exposure on this Block the overall

entitlement is low. We are not surprised that the pace of development on 406 has been s lower

than on 405 – the fiscal motivation is not high.

Conclusion: Although the official line is for a State take of 90%, with individual concessions on the FCPL licenses (tax and royalty breaks), the

state take is probably closer to 75%-80%.

- 22 -

Algeria Asset Deal History

Hulf Hamilton

Year

Buyer

Seller

Asset

 

Proven

 
 

Value

Oil

Gas

Total

Value

($MM) (MMbbl)

(bcf)

(Mmboe)

($/boe)

KEY ASSETS

2005

BP, BHP, Shell, Gulf Keystone Government of Algeria

 

9 projects in 6th licensing awards

2005

Gulf Keystone

Government of Algeria

2 projects in 6th licensing awards

2004

First Calgary

Sonatrach

105

15

121

35

3.00

5% net profits interest in 2 Algeria blocks

2004

Repsol , Gas Natural

Sonatrach

1680

 

Gassi Touil LNG

2004

PTT Exploration

PetroVietnam

two onshore oil blocks in Algeria

2003

Statoil ASA

BP plc

740

47

582

144

5.14

31.85% - In Salah, 50% -

Amenas gas project

2003

First Calgary

Sonatrach

Menzel Ledjmet East field in Berkine Basin

2003

Total

Government of Algeria

Interest in an Algeria exploratory permit

2002

Anadarko, Maersk Olie

Government of Algeria

 

Historic 1P

   

Exploration rights over Block 403c/e

2002

Repsol YPF SA

Woodside, Partex

Exploration block 401-d

2002

Total SA

Government of Algeria

reserve multiple

 

exploration permit in the Timimoun Basin

2001

Tullow Oil plc

ENI

30% participating interest in Block 222b

2001

First Calgary

Sonatrach

Block 405b Menzel Lejmat

2000

Amerada Hess

Sonatrach

434

147

147

2.95

49% interest in Gassi El Agreb project

2000

Sonatrach

Arco, BP plc

350

98

98

3.57

40% interest in Rhourde El Baguel oil field

 

3310

307

703

424

$3.84/boe

Year

Buyer

Seller

Asset

Proven + Probable

 

Value

Oil

Gas

Total

Value

($MM) (MMbbl)

(bcf)

(Mmboe)

($/boe)

KEY ASSETS

2005

BP, BHP, Shell, Gulf Keystone Government of Algeria

 

9 projects in 6th licensing awards

2005

Gulf Keystone

Government of Algeria

2 projects in 6th licensing awards

2004

First Calgary

Sonatrach

105

61

406

129

0.82

5% net profits interest in 2 Algeria blocks

2004

Repsol , Gas Natural

Sonatrach

1680

225

5538

1148

1.46

Gassi Touil LNG

2004

PTT Exploration

PetroVietnam

two onshore oil blocks in Algeria

2003

Statoil ASA

BP plc

740

 

31.85% - In Salah, 50% -

Amenas gas project

2003

First Calgary

Sonatrach

Menzel Ledjmet East field in Berkine Basin

2003

Total

Government of Algeria

Interest in an Algeria exploratory permit

2002

Anadarko, Maersk Olie

Government of Algeria

Exploration rights over Block 403c/e

2002

Repsol YPF SA

Woodside, Partex

     
   

Exploration block 401-d

2002

Total SA

Government of Algeria

 

Historic 2P

2002 Total SA Government of Algeria Historic 2P exploration permit in the Timimoun Basin

exploration permit in the Timimoun Basin

2001

Tullow Oil plc

ENI

reserve multiple

 

30% participating interest in Block 222b

2001

First Calgary

Sonatrach

Block 405b Menzel Lejmat

2000

Amerada Hess

Sonatrach

434

 

49% interest in Gassi El Agreb project

2000

Sonatrach

Arco, BP plc

350

40% interest in Rhourde El Baguel oil field

 

3310

286

5944

1277

$1.40/boe

Source: JS Herold, 2005

Conclusion: Historic acquisition multiples are low and may reflect the historic political uncertainty associated with the region. This may have been another factor in the failed negotiations with other buyers driving down agreed prices.

- 23 -

Valuation Assumptions

Hulf Hamilton

Valuation Methodology

What are the Algerian reserves and prospectivity of First Calgary worth?

This would be easier to answer if there were cash flows – which there are not yet.

But we do know the theoretical value of the entitlement cash flows because we know the terms of the PSC from theoretical DCF calculations.

DCF Assumptions

We have therefore modeled potential production from Block 126a based on the profiles on p22 and with the following assumptions

  • - Fiscal regime as described on P22

  • - Oil price $45/bbl, $50/bbl then flat $36/bbl from 2007 on

  • - Gas price long term $4.5/mcf at Algerian border.

Zero inflation real economics. 405 Life of field Gross Capex $1900MM ($3.04/boe) – mid range for regional trends 405 Life of field Gross Opex $700MM ($1.14/boe) – low for regional trends

Valuation Assumptions Hulf Hamilton Valuation Methodology What are the Algerian reserves and prospectivity of First Calgary

Regional Capex trends

El Merk (ENI): $2.51/boe Ian EOR (ENI): $4.09/boe

Hassi Mersoud (Anadarko): $4.19/boe

Source: Company data

Industry Multiples

As shown on the previous page we can see how the oil industry has valued oil and gas.

The $1.4/boe - $3.84/boe seems to reflect the historic uncertainties associates with the country but are nevertheless important

This was illustrated by the Repsol – First Calgary negotiations where clearly market expectations of the value of First Calgary were miss-aligned with oil

industry estimates resulting in a correction to the First Calgary share price. However, we believe Algeria will become a more active market for oil and gas exploration by the major oil companies so there will be upward pressure on these multiples.

- 24 -

Valuation

Hulf Hamilton

Core Assets

RESERVES

 

VALUE

 

Asset

2P Net Reserves

Dev

Risked

Unit

Risked

 

Liquids

Gas

Total

Risk Entitlement

Value

Asset Value

(MMbbl)

(bcf)

(Mmboe)

(%)

(Mmboe)

($/boe)

($MM)

(p)

Algeria

405b

57

411

125

1

125.1

7.03

880

236 p

406a

13

85

27

1

26.7

1.23

33

9 p

 

Core Assets

69

495

152

152

8

912

245 p

Financial effects

 

Debt

0

0

Cash

40

11 p

Options & Warrants

-4

-1 p

 

36

10 p

Core NAV

152 MMboe

152 MMboe $6.2/boe

$948 MM

254 p

Upside

RESERVES

 

VALUE

 

Prospect

3P Net Reserves

Expl

Risked

Unit

Risked

 

Liquids

Gas

Total

Risk Entitlement

Value

Asset Value

(MMbbl)

(bcf)

(Mmboe)

(%)

(Mmboe)

($/boe)

($MM)

(p)

Algeria

405b

105

670

217

0.40

87

2.81

610

164 p

406a

23

138

46

0.2

9

0.25

11

3 p

Upside NAV

263 MMboe

96 MMboe $6.5/boe

$621 MM

167 p

Total NAV

415 MMboe

248 MMboe $6.3/boe $1569 MM 421 p

Diluted Shares:

208.6

$/£ Exchange:

1.787

Share Price:

410

Oil Price assumptions

 

2005

2006

2007+

Oil

45

50

36

Gas

4

4.8

4.5

Commentary

Our core valuation is

based on the 2P gross data as shown on page

18.

We show actual

shown in appendices on

entitlement reserves based on the fiscal regime described on previous pages. We then add financial

effects (options data

page 34) The upside is the

possible reserve data also shown on page 18, risked as shown and valued at $7.08/boe. Commodity assumptions are as shown, sensitivities are on the following page.

Conclusion: With risked upside we feel that the company is fairly valued at 421p and only a traditional bid premium for the sector (30%?) could take it higher.

- 25 -

Valuation Sensitivity

Hulf Hamilton

$2.7/mcf $3.6/mcf

$4.5/mcf

$5.1/mcf $6.0/mcf $6.9/mcf

$25/bbl

$30/bbl

$36/bbl

$40/bbl

$45/bbl

$50/bbl

(p)

(p)

(p)

(p)

(p)

(p)

89

p

169 p

236

p

256

p

319 p

367 p

4

p

6 p

9

p

11

p

13 p

15 p

92

p

175 p

245

p

267

p

332 p

383 p

     
   

000000

11

p

11 p

11

p

11

p

11 p

11 p

-1 p

-1 p

-1 p

-1 p

-1 p

-1 p

10

p

10 p

10

p

10

p

10 p

10 p

102

p

185 p

254

p

277

p

342 p

392 p

(p)

(p)

(p)

(p)

(p)

(p)

61

p

117 p

164

p

178

p

222 p

256 p

1

p

2 p

3

p

4 p

5 p

5 p

62

p

119 p

167

p

182

p

227 p

261 p

164

p

304 p

421

p

458

p

569 p

654 p

Commentary

Because of the way our valuation is driven by the 2P unit value of $6.68/boe, changing the oil price in the DCF model has a minimum

impact on the final valuation.

In our opinion we see a better spread of results by proposing a range

of PV’s from $2/boe-$10.boe.

In approximate terms this is like varying the oil price from a range of

share price of 75p.

$20/boe to $45/boe. The exploration upside is unaffected as we use a constant $1.4/boe

value. The analysis shows that even on a very low PV of $2/boe

We would have to assume $3/boe to get our core value to the current

We would have to assume long term oil prices of $20/bbl and gas prices of $3/mcf in our DCF model of Block 126 to get this PV.

- 26 -

Hulf Hamilton

Financial Projections

- 27 -

FCPL Projected Key Financials

Hulf Hamilton

Summary Data

Key Numbers

First Calgary

 

2004

2005E

2006E

2007E

2008E

2009E

2010E

Revenue

1.3

0.0

0.0

0.0

279.6

533.2

946.6

EBITDA

(6.5)

(18.9)

(82.3)

(118.8)

156.1

419.1

845.0

EBIT

-6.6

-18.9

-82.3

-118.8

137.2

384.9

788.8

Pre-tax profit

(6.6)

(19.3)

(55.0)

(80.9)

172.1

412.7

807.3

Tax rate %

38.6%

33.0%

33.0%

33.0%

33.0%

33.0%

33.0%

Net Income

(6.6)

(19.3)

(55.0)

(80.9)

172.1

299.5

540.9

Gross cash

81.9

42.1

40.1

40.0

76.9

93.3

609.3

Gross debt

0.0

(72.0)

(742.5)

(877.5)

(877.5)

(877.5)

(877.5)

Net cash/(debt)

81.9

(29.9)

(702.4)

(837.5)

(800.6)

(784.2)

(268.2)

Net assets

362.2

463.7

1008.7

1228.7

1400.7

1700.2

2241.1

EPS

0.00

-0.09

-0.26

-0.39

0.82

1.44

2.59

EV / EBITDA (x)

-183.3

-84.9

-27.7

-20.3

15.2

5.6

2.2

Key Assumptions

2004

2005

2006

2007

2008

2009

2010

Interest on debt

4.00%

4.75%

4.50%

4.50%

4.50%

4.50%

4.50%

Corporate Tax rate

38.60%

33.00%

33.00%

33.00%

33.00%

33.00%

33.00%

No shares

191.684

208.6

208.6

208.6

208.6

208.6

208.6

$/$ Exchange

1.8

1.8

1.8

1.8

1.8

1.8

1.8

Commentary

We have attempted to

2008.

model the finances of FCPL forward to 2010. We have done this as the

capital expenditures for the company going forward will be significant so financing cost and cash flow becomes an important part of the equation. If the company intends to

go it alone on the development it will need significant further equity and debt injections. As our data shows the

company will likely not see positive cash flow until

Financing costs continue to drag on finances until

2010.

Conclusion: Two more years of losses before big cash flows kick-in, assuming the company can manage the capital expenditures to keep the project on track.

- 28 -

FCPL Projected Profit and Loss (US$)

Hulf Hamilton

Commentary

First Calgary Petroleum

2004

2005E

2006E

2007E

2008E

2009E

2010E

Finances assume the company keeps

 

75% and 49% working interest of 405

Assumptions

and 406 respectively.

WTI Oil Price ($/bbl)

45.00

50.00

50.00

36.00

36.00

36.00

36.00

US$ / £ exchange rate

1.80

1.80

1.80

1.80

1.80

1.80

1.80

Production (mboe/d)

0.0

0.0

0.0

0.0

21.7

41.5

73.0

Profit and Loss Account

Turnover

1.3

0.0

0.0

0.0

279.6

533.2

946.6

Turnover 1.3 0.0 0.0 0.0 279.6 533.2 946.6
 

- operating costs

(2.2)

(3.8)

(9.2)

(21.4)

(21.4)

(21.4)

(21.4)

(0.1)

0.0

0.0

0.0

(19.0)

(34.1)

(56.2)

- depreciation and abandonment

 

Total cost of sales

(2.3)

(3.8)

(9.2)

(21.4)

(40.4)

(55.6)

(77.6)

 

Gross profit

(1.0)

(3.8)

(9.2)

(21.4)

239.2

477.6

868.9

Gross profit (1.0) (3.8) (9.2) (21.4) 239.2 477.6 868.9

Exploration expenditure/reserves written off

(10.0)

(12.0)

(14.4)

(17.3)

(20.7)

(24.9)

Administrative costs

(4.0)

(6.0)

(6.6)

(7.3)

(15.0)

(16.5)

(18.2)

 

Operating profit

(5.0)

(19.8)

(27.8)

(43.1)

207.0

440.4

825.9

Operating profit (5.0) (19.8) (27.8) (43.1) 207.0 440.4 825.9
 

JV/other income

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Foreign Exchange gains (loss)

(1.5)

0.0

0.0

0.0

0.0

0.0

0.0

Exceptional gains

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net Interest

0.0

0.4

(27.3)

(37.8)

(34.9)

(27.7)

(18.6)

Net Interest 0.0 0.4 (27.3) (37.8) (34.9) (27.7) (18.6)
 
   

Profit before tax

(6.6)

(19.3)

(55.0)

(80.9)

172.1

412.7

807.3

Taxation

0.0

0.0

0.0

0.0

0.0

(113.2)

(266.4)

Profit after tax

(6.6)

(19.3)

(55.0)

(80.9)

172.1

299.5

540.9

Profit after tax (6.6) (19.3) (55.0) (80.9) 172.1 299.5 540.9
 

Dividend

0.0

0.0

0.0

0.0

0.0

0.0

0.0

 

Retained Profit

0.0

(19.3)

(55.0)

(80.9)

172.1

299.5

540.9

EPS (c)

0.00

(0.09)

(0.26)

(0.39)

0.82

1.44

2.59

CFPS (c)

0.00

(0.12)

(0.31)

(0.42)

0.68

1.44

2.87

- 29 -

FCPL Projected Cash flows

Hulf Hamilton

Commentary

Cashflow

US$ millions 2004 2005E 2006E 2007E 2008E 2009E 2010E Oil price 45.00 50.00 50.00 36.00 36.00
US$ millions
2004
2005E
2006E
2007E
2008E
2009E
2010E
Oil price
45.00
50.00
50.00
36.00
36.00
36.00
36.00
Operating profit
Depreciation
Exploration write off
Working capital & other gains/losses
(6.6)
(19.8)
(27.8)
(43.1)
207.0
440.4
825.9
(0.1)
0.0
0.0
0.0
(19.0)
(34.1)
(56.2)
0.0
(10.0)
(12.0)
(14.4)
(17.3)
(20.7)
(24.9)
5.1
4.0
5.0
6.0
6.0
6.0
6.0
Net cash inflow from operations
(1.5)
(25.8)
(34.8)
(51.5)
176.7
391.5
750.8
Returns on investment and servicing of finance
Net interest paid
Other
Net cash outflow
0.0
0.0
(29.3)
(35.4)
(35.4)
(33.8)
(19.5)
1.6
0.0
0.0
0.0
0.0
0.0
0.0
1.6
0.0
(29.3)
(35.4)
(35.4)
(33.8)
(19.5)
Pre-tax cashflow
Taxation
Post tax cashflow
0.1
(25.8)
(64.0)
(86.9)
141.3
357.7
731.3
0.0
0.0
0.0
0.0
0.0
(56.6)
(133.2)
0.1
(25.8)
(64.0)
(86.9)
141.3
301.1
598.1
Investing Activities
Development Capex
Exploration Capex
Acquisitions/Disposals
other
(38.6)
(120.0)
(1117.5)
(225.0)
(52.5)
(22.5)
(7.5)
(70.0)
(30.0)
(36.0)
(43.2)
(51.8)
(62.2)
(74.6)
0.0
0.0
0.0
0.0
0.0
0.0
16.2
Net cash outflow
(92.4)
(150.0)
(1153.5)
(268.2)
(104.3)
(84.7)
(82.1)
Dividends paid
Cashflow before financing
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(92.2)
(175.8)
(1217.5)
(355.1)
36.9
216.4
515.9
Equity Financing
78.9
114.0
545.0
220.0
Debt Financing
72.0
670.5
135.0
0.0
0.0
0.0
Net Cashflow
(13.3)
10.3
(2.0)
(0.1)
36.9
216.4
515.9

Significant capital expenditures from 2006 onwards.

Company must come back to the market for significant equity in

2006.

Debt portion of 60% of required financing assumed.

- 30 -

FCPL Projected Balance Sheet Data

Hulf Hamilton

Commentary

Balance Sheet

US$ millions 2004 2005E 2006E 2007E 2008E 2009E 2010E Fixed Assets Tangible Fixed Assets end 310.1
US$ millions
2004
2005E
2006E
2007E
2008E
2009E
2010E
Fixed Assets
Tangible Fixed Assets end
310.1
348.7
471.7
1595.5
1849.4
1950.2
2047.9
Intangible Fixed Assets end
Investments
0.0
30.0
63.0
99.9
141.8
189.8
245.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
310.1
378.7
534.7
1695.4
1991.1
2140.0
2293.3
Current Assets
Stock
0.8
0.8
0.8
0.8
0.8
0.8
0.8
Debtors
0.4
0.4
0.4
0.4
0.4
0.4
0.4
Cash
81.9
42.1
40.1
40.0
76.9
93.3
609.3
83.0
(56.8)
41.2
41.1
78.0
94.4
610.4
Creditors: within one year
(30.9)
(34.4)
(37.5)
(45.8)
(51.3)
(51.2)
(56.3)
Net Current (liabilities)/assets
Total assets less current liabilities
Creditors: due after one year
52.1
(91.2)
3.7
(4.8)
26.7
43.2
554.1
362.2
287.4
538.4
1690.6
2017.9
2183.2
2847.4
0.0
(72.0)
(692.5)
(827.5)
(827.5)
(827.5)
(527.5)
Provisions for liabilities and charges
0.0
248.2
1162.8
365.7
210.4
344.4
(79.1)
Net Assets
362.2
463.6
1008.7
1228.8
1400.8
1700.1
2240.8
Capital and Reserves
Called up share capital
P&L account
362.2
463.7
1008.7
1228.7
1228.7
1228.7
1228.7
0.0
0.0
0.0
0.0
172.1
471.5
1012.5
Equity shareholders funds
362.2
463.7
1008.7
1228.7
1400.7
1700.2
2241.1
diff
0.0
0.0
0.0
0.1
0.0
-0.1
-0.3
Gearing
0%
6%
70%
68%
57%
46%
12%

Cash is managed to pay back debt by 2010 when free cash accumulates.

Equity doubles from injections in 2006/07 to 2010

FCPL Projected Balance Sheet Data Hulf Hamilton Commentary Balance Sheet US$ millions 2004 2005E 2006E 2007E

Gearing managed at 70% max with equity injection.

- 31 -

Hulf Hamilton

Appendices

- 32 -

Algerian Sedimentary basins

Hulf Hamilton

Algerian Sedimentary Basins

Algerian Sedimentary basins Hulf Hamilton Algerian Sedimentary Basins Source: BGS - 33 -

Source: BGS

- 33 -

Share Option and Warrant valuation

Hulf Hamilton

Current Value

$1.33 per share

Exercise

No OptionsCash raised 'In money'

Intrinsic

Price

& Warrants

Value

($)

($)

($)

($)

Share Options

0.86

5700000

4889232

0.5

2699264

Warrants

0.01

1167640

11676.4

1.3

1542820

Totals

6867640

4900908.4

4242084

Total Intrinsic Option Value

 

4.9009084

4.24

 

- 34 -

Algeria Block 405 Fiscal model

Hulf Hamilton

A lgeria 405

First Calgary

 

75.00%

As at 1 Jan 2005

 

Outputs

 

Oil (mmbls)

220.19

NPV £mm

492

Unit ca pex 3.04

 
- 1,493.78 469.16
-
1,493.78
469.16

NPV $mm

880

Unit opex

1.14

NGL (mmbls)

 

NPV10

7.03

Gas (bcf) Total mmboe

IRR

24%

Entitlement Basis

125.13

751

 

Inputs

 

0.27

2007

oil price

36

2007