Prospectus re Admission to the Official List - Heritage Oil

6.3 Petroleum and Natural Gas RevenuePetroleum and natural gas revenue may be analysed as follows.Year ended31 December2005 2006$ $OmanCondensate .................................................. 468,816 3,535,267LPG....................................................... 372,950 403,245Total ........................................................ 841,766 3,938,512Net petroleum and natural gas revenue from Oman increased by $3,096,746 (368 per cent.) in 2006 to$3,938,512. $2,208,665 of this increase resulted from a 128 per cent. increase in sales volumes as a result ofthe periodic nature of condensate sales and $888,081 from a 106 per cent. increase in the weighted averagecommodity prices. The average sales price per barrel increased from $24.51 in 2005 to $50.36 in 2006.6.4 Drilling Services RevenueThird party drilling rig revenue of $2,895,727 in 2006 was generated from the Group’s 50 per cent. share ofEagle Drill’s sales to third parties. Eagle Drill had drilled four wells and tested two wells in Block 2,Uganda since December 2005. Revenue in 2005 totalled $342,359.6.5 Operating ExpensesPetroleum and natural gas operating costs increased from $465,110 in 2005 to $723,611 in line with thevolume of condensate sold from the Bukha field in Oman.Operating expenses from drilling operations of $2,291,585 in 2006, were substantially higher than the$196,804 incurred in 2005 due to the large increase in third party drilling operations in that year.The average operating cost per barrel sold during the period under review from the Bukha field, Omanmay be summarised as follows.Year ended31 December2005 2006$/bbl (1) $/bbl (1)Average operating cost per barrel ...................................... 13.54 9.25(1) As a result of the periodic nature of condensate sales from the Bukha field, Oman, $/bbl is based on net sales volumes ratherthan net production volumes.6.6 General and AdministrativeGeneral and administrative expenses increased from $5,706,396 in 2005 to $8,628,127 in 2006. The increasemay be analysed as follows:In 2006 the Group trained 40 officials from the Ministry of Oil of Iraq and the Ministry of NaturalResources in Portugal at a cost of $720,000. A previous training course was undertaken in 2004, whilstno training was held in 2005; andThe Group continued to grow substantially in 2006, employing additional staff, appraising andundertaking operations in new territories. The Group’s increased level of activity during 2006 cangenerally be linked to the acquisition of the Zapadno Chumpasskoye field in Russia, preparation fordrilling in Uganda and initiatives in the KRI. Fees and expenses paid to technical members of staffand consultants increased by $1,530,000 in 2006, accounting for the majority of the remaining increaseof $2,201,731.In 2006, the Group capitalised $2,813,303 (2005—$1,332,363) of general and administrative costs relatingto exploration and development activities.148