valuation jessica lindskog / +44 (0)20-3440-6872 p/high ... · high-resolution 3d seismic has...

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Dundee Capital Markets is a registered trademark of Dundee Corporation, used under license.

Condor Petroleum Inc. (CPI-T: C$0.51) June 18, 2013

BUY, Speculative Risk

Dundee target: C$1.00

David Dudlyke / +44 (0)20-3440-6870 [email protected]

Jessica Lindskog / +44 (0)20-3440-6872 [email protected]

‘Cracking The Code’ – Unlocking Fresh Oil Potential Within A Prolific Basin

We initiate coverage of Condor Petroleum with a Buy rating and C$1.00/share target, the latter in line with our 'base case' risked NAV of C$0.99/share.

‘Cracking the Code’ To A New Post-Salt Play: Operating within Kazakhstan’s prolific Pre-Caspian Basin – a region best known for super-giant pre-salt oilfields – Condor Petroleum is on the cusp of ’cracking the code’ to a new but potentially material post-salt play, previously unexploited within Kazakhstan.

High-resolution 3D seismic has revealed a previously ‘hidden’ post-salt Primary Basin play, now validated with the Kiyaktysai discovery well – derisking analogous prospects within its contract area, and potentially elsewhere within the basin.

Valuation - Substantial Leverage To Success: With a ‘core’ 2P reserves plus net cash valuation of C$0.39/share, based on two modest ‘conventional’ post-salt discoveries, the market is, in our view, overly discounting this new post-salt play.

The Kiyaktysai discovery alone – at the low-end pre-drill estimate of 10 mmbbls, adds C$0.36/share to our ‘core’ 2P reserves valuation, yielding C$0.76/share.

Our 'base case' risked NAV of C$0.99/share only assumes a 1 in 5 chance of success for one further Primary Basin prospect, 7 mmbbls of risked upside.

Our 'high case' risked NAV of C$3.08/share assumes a 1 in 5 chance of success across the unrisked 200 mmbbls Primary Basin prospect inventory, and a 1 in 10 chance of success across the entire 1035 mmboe pre-salt prospect inventory.

Marsel Sale Provides Focus & Funding: The agreed sale of its Marsel stake for $88 million provides focus and funding for this new, high-impact, post-salt oil play through 2014; year-end completion of this sale may however require modest near-term funding.

Prudently Farming-Out Pre-Salt Exposure: Furthermore, whilst pre-salt prospectivity of over 1 bnbbls, on an unrisked mean basis, has been identified and will be explored in due course, the company prudently intends to farm out its exposure to these deeper, higher-cost and technically challenging exploration wells – not wishing to mirror the prior experiences of other junior E&P players in Kazakhstan.

Strong Management & Backing: Condor Petroleum possesses a strong management team that combines substantial technical E&P expertise – gained with both international majors and independents – with invaluable in-country knowledge and experience.

Eurasia Resource Holding AG, a founding and 50% shareholder of Condor Petroleum, has operated in Kazakhstan since 1994, led by CEO Norman Storm who is also Condor’s Kazakhstan Managing Director.

CPI: Price/Volume Chart

Source: Factset

Company Description Condor Petroleum is an international E&P company that provides pure-play exposure to Kazakhstan’s upstream oil sector.

Recommendation New Last

Rating: Buy --

Target: C$1.00 --

Risk: Spec --

Projected Return 96% --

2013 CFPS -0.02 --

2014 CFPS 0.01 --

Company Data

Current Price (06/17/13): C$0.51

52-Week Range: C$0.27-0.73

Market Capitalization ($MM): US$177

Enterprise Value ($MM): US$166

Shares Outstanding - Basic (MM): 346.1

Shares Outstanding - Diluted (MM): 380.7

% held insiders (includes Eurasia) 53%

Avg Daily Volume (1 Mth): 61,040

Net Cash as of 1Q13 ($MM): 11.0

Fiscal year end December 31

Forecasts 2012A 2013E 2014E

Brent Oil (US$/bbl) 111.69 110.00 105.00

WTI Oil (US$/bbl) 94.20 92.20 92.50

Urals Med (US$/bbl) 110.64 108.10 103.00

FX Rate (C$/US$) 1.00 1.00 1.00

Production Oil (mbbl/d) 0.22 0.67 1.68

Production Gas (mboe/d) 0.02 0.00 0.00

Total (mboe/d 6:1) 0.24 0.68 1.68

% Oil 91% 99% 100%

EPS (fd) -0.04 0.21 -0.06

CFPS (fd) -0.03 -0.02 0.01

Valuation

Core NAV C$0.39

Base Case NAV C$0.99

High Case NAV C$3.08

P/Core NAV 1.3x

P/Base Case NAV 0.5x

P/High Case NAV 0.17x

2013E 2014E

P/EPS 2.5x nm

P/CFPS nm 39.9x

EV/DACF nm 37.5x

All Figures in C$ Unless Otherwise Noted

Source: Factset, Company reports, DCM

Jul-11 Jan-12 Jul-12 Jan-130.2

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Condor Petroleum Inc. (CPI-CA)

Volume (Millions) Price (CAD)

Volume Condor Petroleum Inc.

mailto:[email protected]

Condor Petroleum June 18, 2013

DUNDEE CAPITAL MARKETS Page | 2

Contents

OVERVIEW - A PURE-PLAY ON KAZAKHSTAN'S PROLIFIC PRE-CASPIAN OIL PROVINCE ..................................................3

VALUATION ...............................................................................................................................................................6

'Base Case' Risked NAV - C$0.99/share .......................................................................................................................6

'High Case' Risked NAV - C$3.08/share .......................................................................................................................7

Tax Pools Add Over $3.60/bbl Or 35% To Our Reserve/Resource Valuations ................................................................7

Sensitivity To Oil Price And Discount Rate ...................................................................................................................9

Financials – Potential For A Bridge Loan Until Marsel Proceeds Arrive ....................................................................... 10

UPCOMING CATALYSTS & DRILLING PROGRAM – KEY TO UNLOCKING VALUE ............................................................ 11

‘CRACKING THE CODE’ TO A NEW POST-SALT PLAY ................................................................................................... 12

DIVERSE, MULTI-YEAR DRILLING INVENTORY ............................................................................................................ 13

PHASED EXPLORATION STRATEGY LOWERS RISKS ..................................................................................................... 15

RISKS ....................................................................................................................................................................... 20

APPENDIX I: KAZAKHSTAN - BRIEF E&P OVERVIEW ................................................................................................... 21

APPENDIX II: COMMERCIALIZING DISCOVERIES IN KAZAKHSTAN ............................................................................... 23

APPENDIX III: KAZAKHSTAN - FISCAL REGIME ............................................................................................................ 25

APPENDIX IV: DRILLING REPORT CARD...................................................................................................................... 27

APPENDIX V: MANAGEMENT & BOARD OF DIRECTORS ............................................................................................. 28

APPENDIX VI: KEY SHAREHOLDERS ........................................................................................................................... 32

APPENDIX VII: FINANCIAL MODEL............................................................................................................................. 33



OVERVIEW - A PURE-PLAY ON KAZAKHSTAN'S PROLIFIC PRE-CASPIAN OIL PROVINCE

Condor Petroleum is a Calgary-headquartered international E&P company that provides pure-play exposure to oil exploration, appraisal and development within Kazakhstan.

TSX-listed (CPI-T), the company went public in April 2011, raising gross proceeds of C$87.6 million at C$1.40/share.

With the recently agreed sale of its 66% interest in the gas-prone Marsel contract for $88 million, the company is focused entirely on its 100%-held oil-prone Zharkamys West contract area (2,610 km2, 655,000 acres), located within the eastern part of the prolific Pre-Caspian Basin, as shown below.

Recently granted a two-year extension, the Zharkamys West contract will now remain within the exploration period until August 2015. For any discovery deemed commercial, Condor Petroleum holds the exclusive right to enter a development period thereafter subject to state approval and execution of a development contract.

See Appendix III for a fuller description of Kazakhstan’s tiered process to commercialize oil & gas discoveries.

Zharkamys West Contract Lies Within Prolific Pre-Caspian Basin

Source: Company reports



Current Reserves & Production Belie Condor’s Recent ‘Play-Opening’ Success …

Condor’s current Kazakh oil production and reserves are relatively modest – ca. 560 bopd of oil production and 2P reserves of 2.1 mmbbls respectively – stemming from two shallow, conventional post-salt oil discoveries, Shoba (34 API) and Taskuduk West (35 API). A third and similar post-salt discovery, Ebeity, awaits further evaluation.

Discovered in early 2011, the Shoba field commenced Trial Production in late 2012, and is currently producing ca. 350 bopd from three of the five wells approved for trial production.

The ongoing development of Shoba and Taskuduk West should, however, result in full field commerciality by mid-2014, accompanied by an estimated initial aggregate production rate of ca. 1,500 bopd.

Furthermore, such metrics reflect neither the future contribution of the company’s most recent exploration/ appraisal success – the ’play opening’ post-salt Kiyaktysai discovery – nor the scale of upside potential – both pre-salt and post-salt – identified within the company’s acreage.

With 90-day testing of the Kiyaktysai discovery well about to commence, a successful appraisal well recently completed and a further appraisal well planned for 3Q13, the initial production and resource potential of Kiyaktysai (pre-drill estimate: 10-15 mmbbls) will soon be established.

Furthermore, the company has identified some 66 prospects and leads, post-salt and pre-salt – in aggregate, a gross unrisked mean recoverable resource of 1.5 bnboe.

With the exploration phase of the Zharkamys West contract now extended until August 2015, Condor Petroleum will continue with its phased exploration strategy, targeting deeper, larger post-salt and pre-salt prospects within its portfolio – although risk exposure to the latter is likely to be prudently reduced via farm-outs.

… Within A Proven, Prolific World-Class Hydrocarbon Basin …

The Pre-Caspian basin is a highly prolific region that contains several of the world’s largest oil & gas discoveries – Russia’s Astrakhan (27 bnboe) gasfield as well as the Karachaganak (14 bnboe), Kashagan, (13 bnbbls), Tengiz (9 bnbbls) and Zhanazhol (1.8 bnbbls) oil & gas fields within Kazakhstan – all examples of pre-salt Devonian-Carboniferous reef carbonate accumulations lying beneath an extensive Permian salt seal.

In addition, despite extensive development of shallow, post-salt discoveries (> 100 fields) within the basin during the Soviet era, 3D seismic interpretation confirms that substantial post-salt prospectivity remains within shallow Triassic, Jurassic and Cretaceous reservoirs.

… Well Served By Existing And New Infrastructure

Kazakhstan’s current oil production stands at 1.84 mmbbls/d, having more than doubled in the last decade and amply supported by a reported proven reserve bases of 30 bnbbls.

With domestic demand of 210,000 bbls/d, substantial export infrastructure, rail terminals & pipelines, exists to evacuate oil north to Russia, west to Europe and east to China.

The Zharkamys West contract area is well served by local export infrastructure:

The Kenkiyak-Atyrau pipeline (120,000 bbls/d; may be upgraded to 180,000 bbls/d) crosses the northwest section of the Zharkamys West block, providing an option for future tie-in.

Condor Petroleum soon expects to complete its $2.5 million purchase of a 90% interest in the Sagiz Oil terminal which lies 12 kilometers north of the Zharkamys West block. The terminal contains a 7,500 bbl storage facility and a rail spur tied into the main Atyrau-Aktobe rail line, thus providing a variety of export options that offer lower all-in transportation costs.



Zharkamys West – Proximity To Extensive Export Infrastructure & Sagiz Terminal




VALUATION

Our valuation methodology is based on asset-specific discounted cash flow models which incorporate the fiscal terms unique to that field or block as well as our assumptions as to pricing, field reserves or discovery scale, forecast production profile and the unit operating and capital expenditures associated with an appropriate development plan.

Given the array of different prospect types - ranging from shallow, low-risk but modest post-salt Phase 1 prospects through deeper higher-impact, higher-risk post-salt Phase 2 prospects to the deep, high-risk but ‘game-changing’ pre-salt Phase 3 prospects - we have modeled an example of each to establish the likely 'in the ground' value per barrel:

Phase 1: 2 mmbbls recoverable, $1.0MM/well, EUR/well ~ 185,000 bbls => $10.30/bbl; Phase 2: 15 mmbbls recoverable, $2.5MM/well, EUR/well ~ 650,000 bbls => $13.87/bbl; Phase 3: 100 mmbbls recoverable, $30MM/well, EUR/well ~ 4 mmbbls => $9.80/bbl

All such valuations assume an 18-24 month period of 90-day tests and trial production, with sales restricted to the domestic market, with full commerciality thereafter, with a 85/15 export/domestic sales split, and a LT Urals benchmark price of $96/bbl.

Given the substantial leverage that Condor Petroleum enjoys to success, given its extensive Phase 2 and Phase 3 prospect inventories, we have modeled a 'Base Case' risked NAV and a 'High Case' NAV.

'Base Case' Risked NAV - C$0.99/share

For the 'base case' risked NAV, we include:

2P Reserves/Assets Under Development

Shoba/Taskuduk West 2P reserves of 2.1 mmbbls; Kiyaktysai - assuming the 'low-end' pre-drill estimate of 10 mmbbls;

Exploration Upside - Limited To A Single Phase 2 Prospect, No Phase 3 Prospectivity

There are six Primary Basin prospects, estimated to hold ca. 200 mmbbls on an aggregate unrisked basis, ranging from 20 - 52 mmbbls in scale, the average scale being 33 mmbbls.

In the 'base case' risked NAV, we only include one further Primary Basin prospect beyond the Kiyaktysai discovery - the Korumbet SE prospect (35 mmbbls on an unrisked basis) - which we have risked at 1 in 5.

Furthermore, in this 'base case' risked NAV, we explicitly exclude any risked upside attached to the deep Phase 3 exploration prospect inventory.

All in all, the risked exploration upside in our 'base case' risked NAV amounts to just 7 mmbbls - less than the 'low-end' 10 mmbbls estimate for the Kiyaktysai discovery.

Net of cash, which includes the prospective sale proceeds for the Marsel block, we derive a 'base case' risked NAV of C$0.99/share.



'High Case' Risked NAV - C$3.08/share

Our 'high case' risked NAV differs from the 'base case' risked NAV thus:

2P Reserves/Assets Under Development

Kiyaktysai - we assume the 'high-end' pre-drill estimate of 15 mmbbls; Exploration Upside - Includes Broader Phase 2 & Phase 3 Prospectivity

We include all six Phase 2 Primary Basin prospects, estimated to hold ca. 200 mmbbls on an aggregate unrisked basis - all risked at 1 in 5.

We assume that, as with Phase 2 prospects, that Phase 3 prospects are 2/3 oil, 1/3 associated gas. Attaching no value to the gas, we now include all 14 identified Phase 3 prospects - 690 mmbbls on an unrisked basis - risked at 1 in 10.

We have also assumed that, consistent with management's stated strategy, that Phase 3 prospects are farmed out to lower the company's financial and technical exposure to risk - we assume that Condor Petroleum retains a 50% interest in these deep, pre-salt prospects.

All in all, the risked exploration upside in our 'high case' risked NAV amounts to 74 mmbbls.

Net of cash, which includes the prospective sale proceeds for the Marsel block, we derive a 'high case' risked NAV of C$3.08/share.

On a fully unrisked basis, we derive a NAV of C$15.64/share.

Tax Pools Add Over $3.60/bbl Or 35% To Our Reserve/Resource Valuations

Zharkamys West holds a corporate tax pool and loss carry-forward of $90.7 million at year-end 2012, and, as of March 31st 2013, a capex pool of $97.5 million.

We have applied these tax and capex pools to minimise both corporate tax and excess profits tax (EPT) - the result being to significantly increase the 'in the ground' value of its 2P reserves and development assets, by over 35% or $3.60/bbl, from $10.26/bbl to $13.87/bbl.

For comparison, we note KNOC's 2011 acquisition of Vitol's Altius assets in Kazakhstan (previously those of Arawak Energy) implied a 2P reserve value of $9.53/bbl - not dissimilar to the $10.26/bbl that we derive for Condor's 2P reserves and development assets in the absence of any meaningful tax pools.



Exhibit: Risked NAV Details

Source: DCM, company reports

Exhibit: Risked NAV Waterfall


'Base Case' 'High Case'

Licence Reserves NPV Working Reserves NPV Per boe Chance of Reserves NPV Risked Chance of Reserves NPV Risked Unrisked

Field/Prospect mmboe US$m interest mmboe US$m US$/boe Success mmboe US$m C$/share Success mmboe US$m C$/share C$/share

Kazakhstan - 2P Reserves/Development Assets

Zharkamys Block

Shoba/Taskuduk 2.1 24.4 100% 2.1 24.4 11.49 100% 2.1 24.4 0.06 100% 2.1 24.4 0.06 0.06

Kiyaktysai 15.0 208.2 100% 15.0 208.2 13.87 67% 10.0 138.8 0.36 100% 15.0 208.2 0.55 0.55

Pre-Royalty, CT Consolidation & EPT 17.1 232.6 100% 17.1 232.6 13.57 71% 12.1 163.2 0.43 100% 17.1 232.6 0.61 0.61

Royalty consolidation -0.2 -0.2 0.00 -0.2 0.00 0.00

Excess Profits Tax -7.2 -5.1 -0.01 -7.2 -0.02 -0.02

Post-EPT, Royalty Consolidation 17.1 232.6 100% 17.1 225.2 13.14 71% 12.1 157.9 0.41 100% 17.1 225.2 0.59 0.59

Corporate tax consolidation 12.5 8.8 0.02 12.5 0.03 0.03

Post-Tax 17.1 232.6 100% 17.1 237.7 13.87 71% 12.1 166.8 0.44 100% 17.1 237.7 0.62 0.62

Kazakhstan - exploration upside

Phase II

Korumbet SE 35.0 441.3 100% 35.0 441.3 12.61 20% 7.0 88.3 0.23 20% 7.0 88.3 0.23 1.16

Other Primary Basin Prospects 165.0 2080.5 100% 165.0 2080.5 12.61 0% 0.0 0.0 0.00 20% 33.0 416.1 1.09 5.46

Phase III **

Ebeity-401 120.0 1069.0 50% 60.0 534.5 8.91 0% 0.0 0.0 0.00 10% 6.0 53.5 0.14 1.40

Other Phase III prospects 570.0 5077.9 50% 285.0 2539.0 8.91 0% 0.0 0.0 0.00 10% 28.5 253.9 0.67 6.67

Net cash (debt) 11.0 11.0 0.03 11.0 0.03 0.03

Annual G&A -10.1 -10.1 -0.03 -10.1 -0.03 -0.03

Proceeds from asset sale - Marsel 88.0 88.0 0.23 88.0 0.23 0.23

Proceeds from dilutive securities 33.6 33.6 0.09 33.6 0.09 0.09

Proceeds from financing 0.0 0.0 0.00 0.0 0.00 0.00

Dilutive effect of equity issuance 0.00 0.00 0.00

Financial Items Subtotal 122.5 122.5 0.32 0.32 0.32

Total 907.1 8,901.4 62% 562.1 5,955.5 3% 19.1 377.5 0.99 16% 91.6 1,171.9 3.08 15.64

Note: Discounted at 10% per annum, figures are post-tax.

** We assume, as with Phase II prospects, that Phase III prospects contain 1/3 associated gas by volume

Gross Unrisked Net RiskedNet Unrisked Net Risked

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Sensitivity To Oil Price And Discount Rate

We have run sensitivities for the three types of exploration prospects - Phase 1 to Phase 3 - to evaluate the sensitivity of our per barrel valuations to both oil price and discount rate:

Phase 1: $/bbl Sensitivity To Oil Price & Discount Rate



Source: DCM estimates

Urals

US$/bbl 10% 15% 20%

80.00 n/a 2.77 1.87

90.00 7.79 6.15 4.82

96.00 10.30 8.32 6.70

100.00 11.12 9.00 7.29

110.00 14.26 11.69 9.60

Discount rate

Urals

US$/bbl 10% 15% 20%

80.00 9.65 6.81 4.88

90.00 12.29 8.89 6.56

96.00 13.87 10.15 7.60

100.00 14.60 10.70 8.02

110.00 16.90 12.48 9.45

Discount rate

Urals

US$/bbl 10% 15% 20%

80.00 7.03 4.38 2.76

90.00 8.79 5.71 3.81

96.00 9.80 6.49 4.43

100.00 10.36 6.89 4.73

110.00 11.91 8.03 5.61

Discount rate



Financials – Potential For A Bridge Loan Until Marsel Proceeds Arrive

With funds from the $88 million sale of its 66% interest in the Marcel contract not likely to arrive much before year-end, Condor’s immediate financial position is fairly tight – given the residual 2013 capex program of $14 million and cash on hand of $10.9 million.

Indeed, we forecast, based on our forward production assumptions for Shoba, Taskuduk and testing of Kiyaktysai, that cash on hand gets down to $4.5 million by end-3Q13 - despite an immediate 2Q13 $5 million advance from the purchaser of the Marcel contract.

It is, however, worth noting that the company has an undrawn $20 million credit facility provided by its largest shareholder, Eurasia , carrying a 5% interest rate and convertible at Eurasia's request at par with 20-day VWAP.

The company is also, we believe, working on a debt facility with a Kazakh bank.

We therefore expect the company to fund its 2013 capital program with either a bridge loan or a drawdown of an existing or new credit facility until the Marcel sale proceeds are obtained in late 2013.

We do not forecast a funding requirement for 2014, based on:

Receipt of Marsel funds by year-end 2013; Mid-2014 commerciality for Shoba/Taskuduk; Ongoing test/trail production at Kiyaktysai; and Management's early indications of a $30 - 40 million capital program for 2014.



UPCOMING CATALYSTS & DRILLING PROGRAM – KEY TO UNLOCKING VALUE

Drilling activity is expected to accelerate during 2H13 into 2014 as Condor continues its post-salt exploration/appraisal program, in parallel with ongoing appraisal and field development-led activities at Kiyaktysai, Shoba and Taskuduk West.

We look to these and other catalysts, described more fully below, to drive Condor’s valuation over the next 12 months or so.

Establishing The Scale Of Kiyaktysai

Initial results from KN-E-202 bode well for the ongoing appraisal program - a further appraisal well is planned for 3Q13.

90-day testing of intervals within the KN-E-201 well is scheduled to commence imminently.

We expect 90-day testing of the KN-E-202 appraisal well to commence thereafter, once the discovery KN-E-201 well has been approved for trial production.

Commercial Production For Shoba/Taskuduk West

On Sept 27th 2012, the Shoba field commenced a Trial Production period – with approval to produce from up to five Shoba wells during this phase. Shoba will continue in the Trial Production phase until mid-2014, when the field is expected to transition into commercial production. Shoba production rates are forecast to peak at up to 1,500 bopd during commercial production.

The Taskuduk West field discovery is much smaller than Shoba, forming a western lobe to the larger Takskuduk field to the north, operated by Sinopec. This field is also expected to transition from a Trial Production phase into commercial production on a similar timetable.

The immediate benefits to Condor Petroleum of commercial production are two-fold: higher rates of permitted production and higher netbacks due to export volumes being permitted.

Upcoming Licensing Round

Although yet to be officially announced, a licensing round is expected to occur this year, providing Condor the opportunity to expand its acreage position in-country.

Securing a Farm-Out Partner

Condor has launched a farm-out process in order to secure a partner to explore the deeper, high-risk, high-reward, pre-salt prospects.

Assuming that a partner is secured, the company plans to drill the first pre-salt well in 2014 - likely targeting the Ebeity-401 prospect - a 4-way closure estimated to hold an unrisked mean recoverable resource of 180 mmboe across all three pre-salt horizons.



‘CRACKING THE CODE’ TO A NEW POST-SALT PLAY

A key differentiating tenet of the company’s exploration strategy in Kazakhstan has been the early and comprehensive acquisition of high-resolution (aka high-fold) 3D seismic, more akin to that used for field development than exploration – the key variants being increased source density, long offsets and wide azimuths – the result being a high-resolution dataset (high-fold of 160 vs. 12-60) with an improved signal-noise ratio.

Allied to a proprietary geological velocity model and modern seismic processing techniques, well-proven in other major offshore salt basins worldwide (West Africa, Brazil, Gulf of Mexico) but previously untested within Kazakhstan, the resultant superior imaging has identified and/or refined seven different play types, from shallow, post-salt to deep, sub-salt horizons.

Multiple Play Types Identified With High-Fold 3D Seismic Dataset


Post-Salt Primary Basin Play Concept Validated With Kiyaktysai Discovery

A key outcome was the identification of the post-salt Primary Basin play, previously ‘hidden’ or discounted as ‘dirty’ salt rather than a sedimentary reservoir, but now validated with the Kiyaktysai KN-E-201 discovery well – the first well to target this new play concept.

The key risks for this newly validated Primary Basin play are migration and reservoir quality:

For oil migration to occur, from the Upper Devonian and Lower Permian pre-salt source rocks to the post-salt Upper Permian sands within a Primary Basin prospect, a ‘touchdown’ or direct contact is required between the two facies to allow a pathway for oil to reach the shallower reservoir.

Reservoir quality is obviously key – porosity and permeability being vital to ensuring both storage and mobility of migrated oil.



DIVERSE, MULTI-YEAR DRILLING INVENTORY

The company’s early $23 million investment in a comprehensive, high-resolution 3D seismic dataset is paying off - the result being a diverse multi-year drilling inventory – ranging from shallow, low-risk but modest post-salt prospects (Horn, Post-Canopy) through deeper higher-impact, higher-risk post-salt prospects (Primary Basin, Salt Flank, Sub-Canopy) to the deep, high-risk but ‘game-changing’ pre-salt prospects.

In all, the company has identified 66 prospects and leads with an estimated overall gross mean unrisked recoverable resource potential of over 1.5 bnboe.

Zharkamys West – Multiple Prospects Across Multiple Horizons

Note: For clarity, the diagram above excludes leads


Primary Basin Play Offers Significant Resource Potential At Zharkamys West ….

Whilst two-thirds of this exploration inventory (1.0 bnboe) is, perhaps unsurprisingly, associated with deep, large sub-salt prospects – the key takeaway, in our view, is that Condor Petroleum’s post-salt exploration inventory therefore stands at 500 mmboe (unrisked) – of which the now validated Primary Basin play accounts for over 300 mmboe (unrisked) – a remarkable outcome given the previously ‘invisible’ nature of this play type.

…. But Primary Basin Play Type May Extend Basin-Wide

Having validated the post-salt Primary Basin play with the KN-E-201 & -202 wells – and thus potentially derisked the other analogous prospects identified elsewhere within the Zharkamys West contract area – how ubiquitous could this post-salt Primary Basin play prove to be within the Pre-Caspian basin?

The company certainly believes that such Primary Basin plays are likely to extend basin-wide, and is carrying out work to test that hypothesis.

In our view, the paucity of high-resolution 3D seismic acquisition and interpretation within Kazakhstan to date, the immediate exploration success enjoyed by Condor with this new play concept, and the sheer scale of the Pre-Caspian basin all indicate a strong likelihood that such Primary Basin plays could extend basin-wide.



How Could Condor Gain Further Leverage To This Play?

Should this ‘new’ play prove likely to extend basin-wide, we would expect Condor to seek and secure further acreage to leverage its current in-country competitive advantage in interpreting, identifying and drilling such prospects:

With open acreage immediately to the south and east of Zharkamys West, Condor could potentially expand its local acreage position.

Alternatively, with a moratorium on bid rounds expected to be removed this year – the last formal bid round was held in 2007 – there is a possibility of a new Kazakh exploration bid round being held either this year or next, with potentially up to 40 contract areas available.

Condor could also potentially secure attractive farm-in terms on appropriate exploration acreage, using its advantaged interpretation expertise and knowledge of this ‘post-salt play as collateral.



PHASED EXPLORATION STRATEGY LOWERS RISKS

To minimize early exposure to excessive financial and technical risks, the company has adopted a phased exploration approach – initially drilling shallow, low-risk (650 – 1,500 metre depth) Triassic and Jurassic post-salt targets, albeit modest in scale, to establish initial production and cash flow.

The associated well control data also provides further calibration of the 3D seismic data, enabling deeper horizons to be drilled thereafter with a greater degree of confidence.

Phased Exploration Strategy – Post-Salt to Pre-Salt

Source: DCM, Company reports

Phase 1:

Shallow (650 – 1,500 m); 2 – 10 mmbbls recoverable; $1 million/well

Eight Phase 1 exploration wells have been drilled to date – each well costing less than $1 million to drill – yielding two modest but commercial oil discoveries, Shoba and Taskuduk West, currently assigned initial 2P reserves of 1.95 mmbbls and 0.18 mmbbls respectively. A third oil discovery, Ebeity awaits further evaluation.

Following a series of 90-day well tests, the Shoba field commenced Trial Production in late 2012, and is currently producing ca. 350 bopd from three of the five wells approved for production, achieving a wellhead netback of ca. $36/bbl for sales into the domestic market, as required under trial production.

Shoba field development – production facilities, gauging station, 9 additional development wells, 4 injector wells – is underway, and, subject to approval of a development contract, the field is expected to transition into commercial production by mid-2014, with gross production expected to peak shortly thereafter at ca. 1,500 bopd.

See Appendix III for a fuller description of Kazakhstan’s tiered process to commercialize oil & gas discoveries.

Importantly, commercial production volumes can be exported, deriving higher netbacks than that of domestic sales. By way of example, we estimate the marginal netback on an exported barrel to be ca. US$45-49/bbl, dependent upon quality discount, based on our



long-term Urals NWE benchmark price deck of $96/bbl – versus a $35-38/bbl netback estimate for the domestic market.

The Taskuduk West oil discovery, located on the northern perimeter of the contract area, is part of the larger Taskuduk field (37 mmbbls), currently being developed by Sinopec.

As with Shoba, this field is expected to transition into commercial production by mid-2014. The modest scale of this discovery, combined with potential future infrastructure and logistic synergies with Sinopec’s larger Taskuduk field development will, however, likely dictate lower levels of initial capital investment and field production.

Phase 2:

Deeper (1,500 – 5,000 m); > 10 mmbbls recoverable; $2 - 10 million/well

A total of four Phase 2 exploration wells were drilled during 2012 – 2013, the first three unsuccessfully targeting salt flank and sub-canopy plays.

However, in February 2013, the fourth Phase 2 exploration well, KN-E-201, yielded a key ‘play-opening’ discovery at Kiyaktysai (10-15 mmbbls pre-drill recoverable estimate). As mentioned earlier, the KN-E-201 exploration well (TD: 2,000 metres) was the first well to target the newly characterized Primary Basin play – a play type previously ‘hidden’ on lower-resolution 2D and 3D seismic or, since entirely encapsulated in salt, simply viewed as ‘dirty’ salt rather than a sedimentary reservoir capable of holding hydrocarbons.

Similar post-salt prospects have been successfully targeted in other salt basins worldwide, such as offshore Brazil, West Africa and in the Gulf of Mexico. Adopting similar 3D seismic acquisition and interpretation techniques appears to be yielding successful results for Condor Petroleum in Kazakhstan.

This well encountered 160 metres of net reservoir sands (assuming a 8% porosity cut-off) – including 58 metres of net hydrocarbon pay (a continuous 41-metre light oil column and a separate 17-metre gas column) and an additional 86 metres of net residual hydrocarbon pay over a deeper 450-metre gross interval.

Individual 90-day production tests of multiple pay zones within this discovery well will commence imminently.

Kiyaktysai KN-E-201 Discovery – Validates A New Post-Salt Primary Basin Play Concept




The recently completed KN-E-202 appraisal well (TD: 1,955 metres) encountered similar reservoir and pay intervals to the discovery well – logs indicate two pay zones of 23 metres and 57 metres thickness within a 130-metre gross interval, and an additional 93 metres of net residual hydrocarbon pay over a deeper 626-metre gross interval.

As shown above, further appraisal wells will be needed to evaluate the full resource potential of Kiyaktysai; the next one is expected to be drilled during 3Q13.

Following this initial Primary Basin success at Kiyaktysai, Condor Petroleum is actively maturing analogous prospects – 4-way traps with robust top seals – provided by salt – and simple oil migration pathways – ‘touchdown’ of the Primary Basin reservoir sands to deeper pre-salt sequences, where salt has evacuated, being key.

The company has identified a series of analogous prospects – trending SE – NW across the block.

Phase 2: Primary Basin Prospects & Leads


The six identified Primary Basin prospects hold an estimated 300 mmboe of gross unrisked mean recoverable resources (inclusive of prospectivity within the deeper residual oil zones).

With 23 additional leads also mapped, this ‘new’ Primary Basin play presents a material, multi-year exploration inventory, accompanied by relatively modest drilling costs of $2 – 10 million/well (Kiyaktysai wells - ca. $2.5 million).

With a well-established petroleum system, salt providing an effective and ductile seal, and low-risk structural closures being targeted, the key geologic risks for this Primary Basin prospect & lead inventory are migration – hence the focus on ensuring that adequate ‘touchdown’ has occurred – and the quality of the reservoir sands.



Phase 3:

Deepest (5,000 – 7,500 m); 60 - 180 mmbbls recoverable; $25 - 30 million/well

With further insights and improved seismic imaging from its phased exploration of shallower horizons, Condor Petroleum’s Phase 3 exploration program will target pre-salt Permian, Carboniferous and Devonian sedimentary horizons at depths of 5,000 – 7,500 metres.

The rationale is simple – despite the obvious financial, technical and geologic risks that accompany such exploration wells, the size of the potential prize is substantial – ‘game-changing’ for the company in the event of success – as evidenced by analogue sub-salt fields discovered by oil majors elsewhere within the Pre-Caspian basin.

Condor Petroleum has mapped some 14 prospects to date – ranging in scale from 60 – 180 mmboe (gross unrisked mean recoverable) – that hold, in aggregate, over 1 bnboe of gross unrisked mean recoverable resources.

Phase 3: Pre-Salt Prospects


The company prudently plans to farm-down its exposure to these deeper, higher-cost and technically challenging exploration wells – not wishing to mirror the prior experiences of other junior E&P players in Kazakhstan.

The company is currently maturing the Ebeity-401 prospect – a 4-way closure estimated to hold an unrisked mean recoverable resource of 180 mmboe across all three pre-salt horizons.

Subject to achieving satisfactory farm-out terms, the company plans to drill its first pre-salt exploration well in 2014.



Phase 3: Ebeity-401 – Pre-Salt Prospect




RISKS

Commodity Price: Changes in crude oil and natural gas benchmark prices would have a material impact on our investment thesis and valuation.

Country Risk: Condor Petroleum is directly exposed to the political, economic and social stability of Kazakhstan, given that its sole E&P asset - the Zharkamys West contract area - is located within Kazakhstan's Pre-Caspian basin.

World Bank Governance Indicators for 2011 rank Kazakhstan in the bottom quartile for Control of Corruption and Voice & Accountability.

Fiscal Risk: Significant amendments to Kazakhstan’s fiscal regime for oil & gas took place in early 2009, following an extended period of volatility and frequent changes and adjustments to fiscal terms.

The majority of the prior production sharing agreements have been replaced by a tax & royalty regime, with an additional Excess Profits Tax (EPT).

Increased Government Control: In conjunction with changes to the fiscal framework, changes to the legal framework have resulted in the state playing a greater role in the hydrocarbon sector.

The immediate risks posed by a more active government partner could range from increased bureaucracy, and ensuing operational delays, all the way up to asset expropriation.

The removal of tax stability clauses from contracts does indeed allow the state to amend the terms and conditions of contracts, should a company’s operations be deemed to result in a substantial change to Kazakhstan's economic interests or pose a threat to national security.

However, such powers are likely to only apply to 'significant, strategic' oil & gas fields.

Execution Risk: As with operating in any foreign jurisdiction, the interpretation of local laws and codes of conduct can pose issues.

Furthermore, high bureaucracy levels are systemic within the FSU region – resulting in potentially significant delays to operations.

For example, permit approval delays would have a material impact on the company’s production and cash flow.

Until the company can establish a broader portfolio of production assets and/or contract areas, bureaucratic delays could severely impact sales volumes and financial forecasts.

Strong in-country relationships are vital in order to navigate any such potential 'roadblocks' – hence the vital importance of both management and the boards’ extensive experience working in-country.

Technical/Operational Risk: As with any E&P company, the company’s reserve base could be significantly impacted by poor technical results. Furthermore, future reservoir performance inherently carries risk. Well test and long-term production data may lead to material changes in reserves, contingent and prospective resources.

Weather Conditions: Kazakhstan can experience severe winter weather conditions - winter Buran winds being both strong and laden with snow and ice - which can lead to the delays of or indeed the shutdown of field operations and transportation.



APPENDIX I: KAZAKHSTAN - BRIEF E&P OVERVIEW

Kazakhstan – Oil & Gas Production

Kazakhstan’s current oil production stands at 1.84 mmbbls/d, having more than doubled in the last decade and amply supported by a reported proven reserve bases of 30 bnbbls.

Kazakhstan intends to achieve 2 mmbbls/d by 2017 and 3 mmbbls/d by 2030.

With domestic consumption of just 210,000 bbls/d, such targets are facilitated by the country’s substantial export infrastructure – rail terminals, railcars and pipelines – exists to evacuate oil north to Russia, west to Europe and east to China.

Kazakhstan – Average Daily Oil Production, 1992 to date, & Targeted Oil Production

Source: BP Statistical Review, Company reports

Kazakhstan – E&P Players

KazMunaiGas – the state entity - is a major player in the majority of the country’s largest fields.

There has also been a longstanding presence of both NOCs and oil majors in-country – NOCs (predominantly the Chinese) have significant interests in all the vast Kazakh onshore fields – whilst Chevron, ExxonMobil, ENI, Shell, Total and BG holds stakes in the Tengiz, Kashagan and Karachaganak fields.

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Historical Production Current Production Targeted Production



Pre-Caspian Basin Geology

The Pre-Caspian basin, located primarily within western Kazakhstan, is a highly prolific region that contains several of the world’s largest oil & gas discoveries – Russia’s Astrakhan (27 bnboe) gasfield as well as the Karachaganak (14 bnboe), Kashagan, (13 bnbbls), Tengiz (9 bnbbls) and Zhanazhol (1.8 bnbbls) oil & gas fields within Kazakhstan – all examples of pre-salt Devonian-Carboniferous reef carbonate accumulations lying beneath an extensive Permian salt seal.

Location Of Pre-Caspian Basin


Oil and gas discoveries have been made throughout the basin in both pre-salt and post-salt sequences; all basin margins where pre-salt horizons have been encountered have proven hydrocarbons, demonstrating a prolific hydrocarbon system. Such reservoirs are typically highly over-pressured and often contain a high sulphur content, presenting drilling and operational challenges.

Source rocks are largely Upper Devonian to Lower Permian in age, with hydrocarbons migrating laterally into adjacent subsalt reservoirs and vertically, where the overlying salt is either thin or absent by virtue of salt-dome influenced depressions.

Reservoir rocks within the giant pre-salt discoveries are generally carbonate facies and reef build-ups with good, but highly variable, permeability and porosity. Within the shallower post-salt horizons, Jurassic and Cretaceous sandstones typically offer the best reservoir properties.

Salt provides the most uniformly established seal; however, localized overlying and interbedded shale provides a seal for some post-salt discoveries.

Productive traps in the post-salt environment are all related to salt tectonics, most commonly sealed by updip faults or the walls of salt domes. However, modern 3D seismic imaging has revealed Upper Permian Primary Basin sequences sealed within salt domes, where 'touchdown' due to salt evacuation has allowed oil migration from deeper pre-salt sequences.



APPENDIX II: COMMERCIALIZING DISCOVERIES IN KAZAKHSTAN

In Kazakhstan, hydrocarbons are the exclusive property of the state – and the right to exploit oil and gas must be granted by the Ministry of Oil & Gas.

The Zharkamys West exploration contract, signed in August 2007, was granted for a four-year period – with a right to extend the contract twice - for two-year periods (4+2+2).

The contract has been extended twice – thus is in good standing until August 2015.

Development contracts are typically awarded for up to 25 years – discussions are currently underway regarding the likely term of Condor’s development contract.

Commercializing Discoveries - Contract Periods in Kazakhstan


Exploration Period – ’90-day Test’ & ‘Trial Production’ Periods

The exploration period provides the rights for exploration - but requires various government approvals to produce any hydrocarbons encountered.

After a discovery is made, and subject to approval, each individual zone of interest can be tested for an initial ‘90-day test’ period – during which all production is required to be sold into the domestic market.

After all ‘90-day tests’ are completed, the operator must apply for a Trial Production License (TPL) for continuous production thereafter. During this time, all production is still required to be sold into the domestic market but the terms and volumes of production will depend on the term and inspection level of each exploration/appraisal well.

Historically, many companies typically continue in this ‘Trial Production’ phase for several years, allowing the use of temporary facilities.

By contrast, Condor seeks to complete this ‘Trial Production’ phase in no more than 18-24 months.



Development Period – Full Production

During, or upon completion of the ‘Trial Production’ periods, any field with a commercial discovery may be transferred into the development period, following which no further approvals are required for continuous production.

The operator has the exclusive right to enter the development period by executing a development contract, for which a range of project documentation – including a feasibility study and technological development plan – must be submitted and approved.

Once granted, development contracts are typically awarded for up to 25 years, dictate any domestic sales obligations but require no further approvals for continuous production.



APPENDIX III: KAZAKHSTAN - FISCAL REGIME

Kazakhstan moved away from Production Sharing Agreements (PSAs) in 2009 – and subsequently implemented a multi-tiered tax and royalty regime which governs almost all new and existing onshore contracts.

Key components of the current (2013) Kazakhstan Tax Code are outlined in further detail below:

Mineral Production Tax

Mineral Production Tax (MPT) is effectively a sliding-scale volume-based royalty payment that ranges from 5% (5,000 bopd) to 18% over (200,000 bopd) for export sales and half that (2.5% to 9%) for domestic sales. For natural gas, export sales are subject to a flat 10% MPT with domestic sales levied at some 0.5% to 1.5%.

The revenue base for exports is based on a Mediterranean Urals price; for domestic sales, the average domestic sales price is used.

MPT is paid in cash unless the government requests payment in kind.

Mineral Production Tax


Export Rent Tax

Export Rent Tax (ERT) is paid on exported volumes and is effectively a 'windfall' tax when oil prices exceed $40/bbl. Levied on a ‘World Price’ (effectively a Mediterranean Urals price), the ERT tax rate runs from 7% at $50/bbl to 32% at $200/bbl or more.

Export Rent Tax


Customs Export Duty

The Customs Export Duty (CED) was introduced in mid-2010 and currently stands at $5.48/bbl ($40/ton) for 2013 for all exported crude oil volumes.

Million Barrels ~ bopd

1.8 5,000 5% 2.5%3.6 10,000 7% 3.5%7.3 20,000 8% 4.0%

14.6 40,000 9% 4.5%21.9 60,000 10% 5.0%29.2 80,000 11% 5.5%36.5 100,000 12% 6.0%51.1 140,000 13% 6.5%73.0 200,000 15% 7.5%

above above 18% 9.0%

Annual ProductionExport Sales Domestic Sales

World Price per bbl (up to) 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 200Domestic Sales (%) 0% 7% 11% 14% 16% 17% 19% 21% 22% 23% 25% 26% 27% 29% 30% 32%



Excess Profits Tax

The Excess Profits Tax (EPT) was introduced in 2009 and applies to any residual net income that exceeds 125% of allowable deductions.

Above the 125% threshold, the overall EPT burden depends on the overall ratio of net income to deductions, since the EPT burden varies on a sliding scale - from 10% for the lowest ratio tranche to 60% for the highest ratio tranche.


Corporate Income Tax

Corporate net income is taxed at 20% with a 10 year loss carry forward period. Condor has accumulated some $90.7 million of tax losses to date, thus we estimate income tax will not be payable until 2017.

Less than 1.25 0%From 1.25 to 1.3 10%From 1.3 to 1.4 20%From 1.4 to 1.5 30%From 1.5 to 1.6 40%From 1.6 to 1.7 50%In excess of 1.7 60%

Ratio Rate



APPENDIX IV: DRILLING REPORT CARD


Date Event Detail

June 10 2010 Drilling commences Drilling kicks off - 2 rigs at Zharkamys - 6 wells to be drilled

August 2010 3 Exploration wells - 1 commercial, 2 P&A'd Zhaman Koblandy hit oil in 20 m gross interval - Korumbet North and Kiyaktysay non commercial

March 2011 Shoba 1 discovery well TD of 899 m, 34 m hydrocarbon column in Triassic sands, net pay 19 m oil/5 m gas

April 18 2011 Shoba 2 appraisal well TD of 900 m -58 m hydrocarbon column in the Triassic zone, net pay 15 m oil/24 m of gas

May 17 2011 Shoba-1 flow rates 250-280 bopd 35 API from 6.5 m of perforations at 747.5 m to 754.0 m in the oil pay zone. Stabilized at 210 bopd

May 25 2011 Shoba‐2 flow rates 1,080 bopd of 35API - stabilized at 530 bopd

May 31 2011 Shoba‐3 appraisal TD of 943 m, 48 m hydrocarbon column in the Triassic zone. Net pay 18.4 m oil/16 m gas

June 17 2011 Kiyaktysay North–3 P&A 7 m net oil pay over a 90 m interval - thin pay zones noncommercial

July 11 2011 Shoba‐3 flow rates Avg of 310 bopd - 11 m oil zone interval was perforated & yielded a 35 degree API, consistent with S1& S2

July 26 2011 Taskuduk SE‐1 well P&A - non-commercial P&A - noncommercial

Aug 10 2011 Eibety‐1 exploration well TD of 1,000 m, 8 m net oil pay

Aug 18 2011 Taskuduk West‐3 Well tests 300 bopd Stabilized oil rate of 300 bopd (cleanup); up to 580 bopd initially

Sept 9 2011 Ebeity‐5 - Non commercial Non-commercial

Sept 19 2011 Shoba 1 & 2 90 day production tests commence Combined production rates between 500 and 700 bopd

Oct 3 2011 Taskuduk W4 Well TD of 1329 m - 19 m of net oil pay within two Triassic intervals

Nov 2011 Ut-6 P&Ad TD of 1236 m; no commercial hydrocarbons

Jan 20 2012 Zhaman Koblandy 2 (ZhK‐2) - waterbearing Directionally drilled to a depth of 2200 m - primary target water bearing

Jan 20 2012 Taskuduk W‐3 (TasW‐3) test results Initial flow rates 5 m net pay interval of 280 bopd

May 3 2012 Shoba-8 15 m gross oil pay, 8.7 m net pay above OWC - 1st of four appraisal wells in 2012

June 5 2012 Shoba-6 TD 896 m; 19 m oil/10 m net gas pay Triassic

June 5 2012 Shoba-9 TD 843 m; 3 net oil pay Triassic

Aug 13 2012 Eb-E-201 exploration well P&A shallow tgt wet & lacked migration pathway; wellbore issues resulted in P&A

Aug 20 2012 Shoba 7 appraisal well update uncontrolled gas influx; no oil observed at surface; replacement well is being evaluated

Sept 27 2012 Trial Production Starts from Shoba Wells Rates are forecast to peak at up to 1,500 bopd during commercial production

Oct 18 2012 Shoba-201 exploration well non-commercial Limited amount of net pay is attributed to a subtle transition within the top‐seal units - uncommercial

Nov 14, 2012 Shoba-7a (Sh-7a) - Shoba 7 replacement well 26 m net oil pay, avg 24% porosity & 26 m net gas pay in Triassic

Feb 5 2013 Kiyaktysai Oil Discovery (KN-NE-1) 58 m pay 41 m light oil column and a separate 17 meter gas column. No OWC

June 3 2013 Kiyaktysai KN-E-202 Appraisal Well 93 m of net hydrocarbon pay over a 626 m gross interval



APPENDIX V: MANAGEMENT & BOARD OF DIRECTORS

Management

Don Streu, President and Chief Executive Officer

Mr. Streu has a diverse professional background with extensive experience in drilling, asset management, strategic and tactical business planning, and production operations. Prior to joining Condor, he had over 22 years with Chevron working in several countries including Canada, United States, Angola, Indonesia, and Nigeria with a proven track record of consistently delivering strong business results.

While with Chevron, Mr. Streu spent 14 years in various onshore and offshore drilling-related assignments with increasing responsibility and complexity. He played an integral role in Angola’s first deepwater development, initially as the Drilling Coordinator and then as the Asset Manager. This development progressed from discovery to first oil in only 30 months. He subsequently became Chevron Indonesia’s Planning Manager responsible for developing strategic and tactical plans for an organization producing in excess of 350,000 barrels of oil per day. During Mr. Streu’s most recent assignment with Chevron Nigeria, he was accountable for managing an asset with a world-class resource base producing 250,000 barrels of oil per day.

Mr. Streu has a BSc in Mining engineering from the University of Alberta with post graduate studies in Petroleum Engineering.

Sandy Quilty, Vice-President and Chief Financial Officer

Mr. Quilty is a Chartered Accountant with 20 years experience in the international oil and natural gas industry working for exploration and production companies and service enterprises in Kazakhstan, Russia, China and Canada, including seven years resident in Kazakhstan. Previously, Mr. Quilty was Vice-President of Finance at Arawak Energy Corporation, CFO at Altius Energy Corporation and Finance and Accounting Manager at Fracmaster/BJ Services.

William Hatcher, Chief Operating Officer

Mr. Hatcher has over 25 years of international and domestic (US) experience in the upstream industry. His international experience includes playing key operational roles in Kazakhstan, Nigeria, Turkmenistan, and Trinidad. He has worked with both major and independent oil producers.

Most recently, Mr. Hatcher was a founder and Technical Director for Bayfield Energy. Previous significant operational assignments include serving as General Manager of Operations for Burren Energy in Turkmenistan, where he provided in country oversight to an operation producing 23,000 bbls/day. He has previously worked in a variety of operational roles in Kazakhstan, including the Operations Manager for Nelson Resources.

Mr. Hatcher holds a BSc in Petroleum Engineering from the University of Southern California.

Norman Storm, Kazakhstan Managing Director

Mr. Storm is Chief Executive Officer of EurAsia Holding AG and EurAsia Resource Holdings AG, as well as a director of Osisko Mining Corporation, a TSX-listed gold mining company.

Mr. Storm has spent more than 16 years in Kazakhstan and his business activities in the region include manufacturing, international transportation and oil field services, as well as oil and gas. Mr. Storm was co-founder of a JV that constructed the first wallpaper factory in Kazakhstan based on western technology, as well as a principal of the country’s first international transport company that was also the founding member of KAZATO, the IRU’s (Switzerland) customs bonding agency for road transportation in the Republic of Kazakhstan. The oil field service and transport company actively provided services to many of the major projects in Kazakhstan and Kyrgyzstan, including Tengizchevroil, Petro- Kazakhstan, Kashagan, Karachaganak, Temir and Kumtor.

Mr. Storm is very well versed in doing business in Kazakhstan and has established an extensive network of contacts in the region.



Roger Whittaker, Vice-President Exploration and New Ventures

Mr. Whittaker brings over 30 years of Exploration and Development experience in both International and Domestic projects. He recently held the position of Vice President Exploration and Subsurface Development with First Calgary Petroleums where, over a period of nine years, he saw his responsibility grow within the company. Mr. Whittaker became a member of the executive team at First Calgary and was involved in corporate and strategic planning in addition to overseeing the subsurface technical teams and field operations. A key achievement under Mr. Whittaker’s tenure was the exploration, appraisal and successful submission of the Final Development Plans for the commercialization of the Menzel Ledjmet, Block 405b project located in the Berkine Basin of Algeria – a project that had gross 2P reserves exceeding 500 MMBOE.

Mr. Whittaker also maintains operational experience in Yemen, Beaufort Sea and Canadian Domestic exploration projects, in addition to working on various evaluation projects throughout North Africa and the Middle East.

He is dually registered as a Professional Geologist and Geophysicist with APEGGA (Association of Professional Geologists, Geophysicists and Engineers of Alberta) and is a Fellow of the Geological Society of London.

Source: Company website

Board of Directors

Sean Roosen, Director and Chairman

Mr. Roosen is President, Chief Executive Officer and Director of Osisko Mining Corporation (TSX: OSK, Frankfurt: EWX). A graduate of the Haileybury School of Mines, Mr. Roosen has over 25 years of experience in mining and development on the national and international scale. Mr. Roosen is a founding member and Chairman of Eurasia Holding AG, and currently holds a position on the Board of Directors of Astur Gold Corp., Dalradian Resources Inc., Condor Petroleum Inc., and Bowmore Exploration Ltd. In 2010, Mr. Roosen occupied second place in the Financial Post Canada’s Top CEOs ranking; and in 2011, he was inducted into the Quebec Employers Council’s Club des entrepreneurs and was the Québec Ernst & Young Entrepreneur of the Year award winner.

Alongside the Osisko team, Mr. Roosen has been recognized for contributions within the industry, having received several awards including the 2006 Prospector of the Year Award, 2008 e3 Award, 2009 Entrepreneur of the Year Award and 2011 Developer of the Year Award (all four from AEMQ, Association de l’exploration minière du Québec), the 2007 Bill Denis Award and 2011 Viola R. MacMillan Award (both from PDAC, Prospectors and Developers Association of Canada), the 2011 « Construire Chantier d'importance » award from the Quebec Construction Association, the 2010 CIM Syncrude Award for Excellence in Sustainable Development, the 2009 Mining Men of the Year (Northern Miner) and, from 2008 to 2012, several awards from the Chambers of Commerce of Rouyn-Noranda, Val d’Or and Malartic to recognize Osisko’s contribution to the regional economic development in the Abitibi.

Dennis Balderston, Director

Mr. Balderston is a Chartered Accountant and independent businessman with over 38 years of public accounting experience specializing in public and private energy sector companies. Mr. Balderston was a partner with Ernst & Young LLP from 1990 to 2005. Since 2005 Mr. Balderston has been a director of a number of public companies and is currently a director of Suroco Energy Inc. and AvenEx Energy Corp.



Dr. Edward W. Bogle, Director

Dr. Bogle is President and CEO of Holocene Equity a private investment company and has more than 32 years of experience in the oil and natural gas industry in Canada and Internationally. Dr. Bogle was appointed President and CEO of Compton Petroleum in 2011 where he successfully managed the financial re-structuring and sale of the Corporation. Prior to joining Compton he held the role of Executive in Residence with the Alberta Department of Energy. Dr. Bogle served as Chief Strategic Officer of Nexen International from 2004 to 2010 and as Executive Vice-President of Exploration at Talisman Energy from 1992 to 2003. Dr. Bogle currently serves as a director of Skope Energy Inc. and a number of private companies. Dr. Bogle holds an ICD.D (Certified Director) from the Institute of Corporate Directors, a Western Executive Program Diploma from the University of Western Ontario, and a Ph.D. in Geological Sciences from Queen's University.

John Burzynski, Director

Mr. Burzynski holds a Bachelor of Science (Honours) degree in geology from Mount Allison University and a Master’s of Science in exploration and mineral economics from Queen’s University. He is a registered P.Geo. in the province of Québec, and has over 25 years experience as a professional geologist on international mining and development projects.

He currently holds a position on the Board of Directors of Condor Petroleum Inc. and Braeval Mining Corporation.

Mr. Burzynski has worked as project and country manager in Canada, the United States and in west, central and east Africa on a variety of gold, base metal and diamond projects with groups including International Gold Resources Corporation, Echo Bay Mines Ltd., Pangea Goldfields Inc. and Barrick Gold Corporation. He is the Vice-President Corporate Development for Osisko Mining Corporation, a TSX-listed gold mining company, and is also a founding member of EurAsia Holding AG and EurAsia RH. He was a co-winner of the Prospectors and Developers Association of Canada’s “Prospector of the Year Award” for 2007, and was named, together with Sean Roosen and Robert Wares as “Mining Men of the Year” for 2009 by the Northern Miner.

Walter Dawson, Director

Mr. Dawson is the Executive Chairman, and founder of Tuscany International Drilling Inc., a public oilfield services company. He was the Chairman and founder of Saxon Energy Services Inc., a publicly-traded international oilfield services company from 2001 until its sale in 2008. Prior thereto, Mr. Dawson served for 19 years as the President, Chief Executive Officer and a director of Computalog Ltd., which is now an operating division of Weatherford International. He is a past director of Gran Tierra Energy Inc., an international oil and gas exploration and production company operating in South America.

Stefan Kaltenbach, Director

Mr. Kaltenbach is currently the vice chairman of the supervisory board of EurAsia Holding AG and EurAsia RH and a member of the board of directors of RV Resource. Each of these companies forms part of the EurAsia group, an international, privately-held investment fund in the natural resources industry. Mr. Kaltenbach is also a member of the supervisory boards of several companies in Germany, Switzerland and the United States, primarily companies in the medical technology, dental and software industries, and he is the chairman of the German software company Ametras Informatik AG and the vice chairman of the supervisory board of Valtronic Technologies S.A. Previously, Mr. Kaltenbach was CEO and a member of the advisory board of KaVo Dental GmbH & Co. KG in Germany. Mr. Kaltenbach has a degree in economics from Ludwig Maximilians Universität in Munich.

Don Streu, Director, President and Chief Executive Officer

Please refer to bio above



Donald Wright, Director

Mr. Wright is the President and Chief Executive Officer of The Winnington Capital Group Inc.. Mr. Wright’s career has spanned over 30 years in the investment industry. He has held a number of leadership positions, including President of Merrill Lynch Canada, Executive Vice-President, director and member of the executive committee of Burns Fry Ltd., Chairman and Chief Executive Officer of TD Securities Inc. and Deputy Chairman of TD Bank Financial Group.

Mr. Wright currently serves as Chairman of the Board of Directors of GMP Capital Inc., Cinaport Capital Inc., Equity Financial Holdings Inc. and Richards Packaging Inc., Chairman of the Board of Trustees of Richards Packaging Income Fund and Lead Director of Tuscany International Drilling Inc. Mr. Wright also serves as a Director of American Cancer Center Limited., Bank of China, Clear Energy Systems, and Public Mobile Inc.

He actively supports numerous charitable organizations and is a member of the Board of Directors for MaRS Innovation, the Royal Ontario Museum Governors’ Finance Committee, Trustee of MI Ventures, and a member of the Campaign Cabinet of the Centre for Addiction and Mental Health Foundation and Honorary Chair Pine River Institute Campaign Cabinet.

He is also a past member of the Board of Trustees of The Hospital for Sick Children, and Past Chairman of the Board of Directors of VIA Rail Canada Inc.

Dr. Werner Zoellner, Director

Dr. Zoellner has spent 15 years in the private equity domain, during which time he held positions as an Investment Principal and Partner with Wellington Finanz GmbH, an Investment Partner with the Landes-Bank of the State of Baden-Württemberg and, since 2009, as a Partner with Patrimonium Advisors in Switzerland. Dr. Zoellner has also served on the boards of directors of several companies in Germany, Switzerland and the United States. Previously, Dr. Zoellner spent 10 years in senior management positions with various technology companies, including 3M ESPE.

Source: Company website



APPENDIX VI: KEY SHAREHOLDERS

(as of June 2013)

Note: italics denote insiders

Source: Bloomberg

Percent

Outstanding

EurAsia Holding 142,637,645 49.89%

Sean Roosen 2,096,472 0.61%

John Burzynski 1,947,059 0.56%

Norman Storm 1,944,118 0.56%

Stefan Kaltenbach 1,941,177 0.56%

Don Streu 1,479,412 0.43%

TD Asset Management 1,450,000 0.42%

Sandy Quilty 1,114,706 0.32%

GCIC Ltd/CANADA (Dynamic Funds) 770,060 0.22%

Rainer Ruckteschler 731,884 0.21%

Walter Dawson 588,236 0.17%

Tocqueville Asset Managment 500,000 0.14%

Donald Wright 191,177 0.06%

Total 54.79%

Insiders 53.16%

Holder Name Position



APPENDIX VII: FINANCIAL MODEL

Source: Company reports, DCM

Commodity prices 2012A Q1 13A Q2 13E Q3 13E Q4 13E 2013E Q1 14E Q2 14E Q3 14E Q4 14E 2014E

Brent Oil (US$/bbl) 111.69 112.87 107.13 110.00 110.00 110.00 105.00 105.00 105.00 105.00 105.00

Urals Med (US$/bbl) 110.64 111.26 105.13 108.00 108.00 108.10 103.00 103.00 103.00 103.00 103.00

Currencies

Exchange rate (C$/$) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Oil & Gas ProductionOil & gas production (boe/d) 238 629 392 771 908 676 1018 1123 2265 2300 1682

Kazakhstan 165 559 392 771 908 659 1018 1123 2265 2300 1682

Canada 72 71 0 0 0 17 0 0 0 0 0

Income Statement (C$mm)Oil & Gas revenues 3.8 2.3 1.9 3.8 4.5 12.5 4.7 5.3 16.6 16.9 43.5

Interest and other income 1.0 0.2 0.0 0.0 0.0 0.3 0.1 0.1 0.1 0.0 0.3

Royalties & taxes (0.5) (0.2) (0.0) (0.1) (0.1) (0.5) (0.1) (0.1) (3.9) (4.0) (8.1)

Production costs (2.8) (1.3) (1.1) (2.3) (2.3) (7.0) (2.4) (2.4) (2.8) (2.8) (10.5)

Transportation & selling costs (0.0) (0.0) (0.6) (1.2) (1.4) (3.3) (1.4) (1.6) (3.2) (3.2) (9.5)

G&A (10.3) (2.4) (2.5) (2.6) (2.6) (10.1) (2.7) (2.8) (2.9) (3.0) (11.3)

Stock-based compensation (3.3) (0.6) (0.6) (0.6) (0.6) (2.2) (0.6) (0.6) (0.6) (0.6) (2.2)

DD&A (3.0) (1.5) (1.2) (2.5) (2.9) (8.2) (3.2) (3.6) (7.3) (7.4) (21.5)

Interest expense (1.0) (0.2) 0.0 0.0 0.0 (0.2) 0.0 0.0 0.0 0.0 0.0

FX Gains and other 2.1 0.1 7.0 0.0 83.0 90.1 0.0 0.0 0.0 0.0 0.0

Earnings before tax (14.1) (3.5) 2.8 (5.3) 77.6 71.5 (5.6) (5.7) (4.0) (4.0) (19.3)

Taxes (0.01) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Tax rate 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Reported net income (14.1) (3.5) 2.8 (5.3) 77.6 71.5 (5.6) (5.7) (4.0) (4.0) (19.3)

Non-controlling interests 0.8 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0

Clean net income (13.3) (3.4) 2.8 (5.3) 77.6 71.7 (5.6) (5.7) (4.0) (4.0) (19.3)

Shares Outstanding - Basic (millions) 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1

Shares Outstanding - Diluted (millions) 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1 346.1

Reported EPS - Fully diluted (0.04) (0.01) 0.01 (0.02) 0.22 0.21 (0.02) (0.02) (0.01) (0.01) (0.06)

Clean EPS - Fully diluted (0.04) (0.01) 0.01 (0.02) 0.22 0.21 (0.02) (0.02) (0.01) (0.01) (0.06)

CFPS - Diluted (0.03) (0.00) (0.01) (0.01) (0.01) (0.02) (0.01) (0.00) 0.01 0.01 0.01

Cash Flow Statement (C$mm) 2012A Q1 13A Q2 13E Q3 13E Q4 13E 2013E Q1 14E Q2 14E Q3 14E Q4 14E 2014E

Earnings after tax (13.33) (3.37) 2.80 (5.34) 77.6 71.67 (5.61) (5.7) (3.96) (4.00) (19.31)

Stock-based compensation 3.27 0.56 0.56 0.56 0.6 2.25 0.56 0.6 0.56 0.56 2.25

DD&A 3.05 1.51 1.25 2.48 2.9 8.16 3.21 3.6 7.29 7.41 21.48

Operating Cash flow (9.2) (1.6) (2.4) (2.3) (1.9) (8.2) (1.8) (1.6) 3.9 4.0 4.4

Change in non-cash working capital (2.74) (1.42) (3.33) (0.43) (0.2) (5.34) (0.05) (0.12) (2.53) (0.07) (2.76)

Cashflow from operations (11.978) (3.018) (5.717) (2.732) (2.088) (13.555) (1.884) (1.728) 1.373 3.897 1.658

Acquisitions 0.00 0.00 0.00 0.00 (2.50) (2.50) 0.00 0.00 0.00 0.00 0.00

Capital expenditure (34.20) (5.43) (3.00) (2.00) (10.00) (20.43) (11.00) (13.00) (6.00) (8.00) (38.00)

Value added tax paid (3.13) (0.34) 0.00 0.00 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00

Proceeds on disposals 3.60 0.00 7.00 0.00 83.00 90.00 0.00 0.00 0.00 0.00 0.00

Other (0.47) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cashflow after investing (48.43) (8.98) (1.72) (4.73) 68.41 52.99 (12.88) (14.73) (4.63) (4.10) (36.34)

Net change in debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Proceeds from options & warrants 0.00 0.00 0.00 0.00 0.00 0.00

Issuance of common stock, net of costs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other 0.00 0.00 0.00 0.00 0.00 0.00

Cashflow after financing 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Effect of exchange rate changes (0.30) 0.14 0.00 0.00 0.00 0.14 0.00 0.00 0.00 0.00 0.00

Net cash acquired with acquisitions 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cash & cash equivalents - beginning of period 68.55 19.82 10.98 9.26 4.53 19.82 72.94 60.06 45.33 40.71 72.94

Cash & cash equivalents - end of period 19.82 10.98 9.26 4.53 72.94 72.94 60.06 45.33 40.71 36.60 36.60

Net cash/(debt) 19.82 10.98 9.26 4.53 72.94 72.94 60.06 45.33 40.71 36.60 36.60

Balance Sheet (C$mm) 2012A Q1 13A Q2 13E Q3 13E Q4 13E 2013E Q1 14E Q2 14E Q3 14E Q4 14E 2014E

Cash & cash equivalents 19.82 10.98 9.26 4.53 72.94 72.94 60.06 45.33 40.71 36.60 36.60

Accounts receivable 1.43 1.38 1.25 2.55 3.01 3.01 3.15 3.51 11.09 11.29 11.29

Inventory 0.45 0.61 0.61 0.61 0.61 0.61 0.61 0.61 0.61 0.61 0.61

Other assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Current Assets 24.72 15.22 13.37 9.94 78.80 78.80 66.06 51.70 54.65 50.75 50.75

PP&E 152.69 159.98 161.73 161.25 170.82 170.82 178.62 188.04 186.75 187.34 187.34

Other long term assets 1.56 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60

Fixed Assets 163.32 171.30 173.05 172.56 182.14 182.14 189.93 199.36 198.06 198.66 198.66

Total Assets 188.04 186.51 186.42 182.50 260.94 260.94 255.99 251.05 252.71 249.41 249.41

Liabilities

Current portion of LT debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Accounts payable 6.50 4.30 0.83 1.70 2.00 2.00 2.10 2.34 7.39 7.53 7.53

Other ST Liabilities 1.04 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05

Current Liabilities 7.54 5.34 1.88 2.75 3.05 3.05 3.14 3.38 8.44 8.57 8.57

Long term debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other LT liabilities 3.24 3.39 3.39 3.39 3.39 3.39 3.39 3.39 3.39 3.39 3.39

Long term Liabilities 5.31 5.48 5.48 5.48 5.48 5.48 5.48 5.48 5.48 5.48 5.48

Shareholders Equity 175.2 175.7 179.1 174.3 252.4 252.4 247.4 242.2 238.8 235.3 235.3

Total Liabilities 188.0 186.5 186.4 182.5 260.9 260.9 256.0 251.1 252.7 249.4 249.4



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As at March 31, 2013

Source: Dundee Capital Markets

86%

13%

1%

31%

22%

0%0%

11%

22%

33%

44%

55%

66%

77%

88%

99%

Buy Neutral Sell

% of companies covered by Dundee Capital Markets in each rating category

% of companies within each rating category for which Dundee Capital Markets has provided investment banking services for a fee in the past 12 months.

valuation jessica lindskog / +44 (0)20-3440-6872 p/high ... · high-resolution 3d seismic has...

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