Prospectus re Admission to the Official List - Heritage Oil

In 2005, the Group acquired a 95 per cent. equity interest in ChumpassNefteDobycha, a Russian companywhose sole asset is the Zapadno Chumpasskoye licence, an exploration permit previously held by TNK-BP.The field is located in West Siberia in the province of Khanty-Mansiysk, approximately 100 km fromNizhnevartovsk in the vicinity of TNK-BP’s prolific Samotlor field. The licence, which expires on7 September 2024, has an area of approximately 200 square km and contains a field which was discoveredin 1997. Zapadno Chumpasskoye has net 60.5 million bbls proved & probable reserves independentlycertified by RPS and current production is approximately 342 bopd. Initial production facilities werecommissioned in May 2007, following which production commenced on 14 May 2007.Zapadno Chumpasskoye is located close to well-developed infrastructure in West Siberia and an oilpipeline runs through the licence area for which the Group has negotiated certain access rights. It is theGroup’s intention to build its presence around this area, which is attractive because of its resourcepotential and existing infrastructure.Nine wells had been drilled in the licence area prior to acquisition by the Group. The reservoir is asandstone of late Jurassic age at a depth of approximately 2,700 metres.The work programme in the licence includes a commitment to drill no less than three wells (which theGroup has already satisfied). As operator of the licence, the Group has built an operational and technicalteam consisting of 39 employees in Nizhnevartovsk, Russia with experience of working in the region,acquired 200 km of 2D seismic, undertaken certain civil works to build a drilling pad and roads, acquiredcertain early production equipment, drilled three wells and re-entered and brought existing well #226 intoproduction.Capital expenditure in Russia between 2005 and 2007 (IFRS) may be summarised as follows:Nine-month period endedYear ended 31 December30 September2005 2006 2006 2007$ $ $ $(Unaudited)Drilling ................................. — — — 5,590,214Seismic .................................. — 1,345,524 1,373,001 —Other (1) ................................. 6,080,697 11,236,331 4,338,516 8,645,0836,080,697 12,581,855 5,711,517 14,235,297(1) Such figure includes the acquisition costs of the licence in 2005.Production from the field commenced in 2007, and management estimate could increase to a peak ofapproximately 16,000 bopd in 2014. Total gross development costs of the field are estimated at over$400 million and are estimated to be incurred up to 2015, with peak expenditure expected in 2009 and2010.Independent Reserves at the Zapadno Chumpasskoye FieldRPS estimated the Zapadno Chumpasskoye field’s net working and entitlement interest reserves and valueto the Group as at 30 September 2007, using money of the day prices, discounted at 10 per cent., to beas follows:Net NetNet Working Entitlement PresentInterest Interest ValueMMboe MMboe $MillionsProved ............................................. 23.1 23.1 17.5Probable Additional ................................... 37.4 37.4 209.1Total Proved + Probable ............................... 60.5 60.5 226.6Total Proved + Probable + Possible ....................... 161.4 161.4 762.2The Group’s Russian strategy is to acquire a series of development licences at attractive prices to allow theGroup to generate early cash flow and production. The Group established a jointly owned company withTISE Holding Company, TISE-Heritage Neftegas, in 2007. The other shareholders of TISE HoldingCompany include Concord, Zarubejneft, Zarubejneftegas (a wholly-owned Gazprom subsidiary),Technopromexport and Zarubejstroymontaj. TISE-Heritage Neftegas was formed to appraise and acquireoil and gas opportunities in Russia and internationally.39