Interim report First quarter 1 January – 31 March 2022

First quarter 2022 (fourth quarter 2021)

• The three-well exploration and appraisal campaign in the Al Jumd trend was successfully finalised without incidents. The Al Jumd-2 horizontal well flowed 700 barrels of oil per day on test. Further testing for all three wells will be performed during the second quarter 2022.
• Driven by a higher achieved oil price, revenue and other income as well as profitability continued to improve. First quarter revenue and other income was MUSD 34.6 (31.8) and EBITDA was MUSD 20.2 (18.0).
• The production of 10,475 barrels per day is 2 percent lower than previous quarter primarily due to underperformance of the Anan field on Blocks 3&4.
• Production guidance for 2022 revised to 10,500 – 11,000 barrels of oil per day, lowered from a full year daily average of 11,000-11,500 barrels of oil per day.
• Total investments in Oil & Gas properties, primarily on Blocks 3&4 and Block 56, amounted to MUSD 24.6 (17.2).

Letter to shareholders

Dear Friends and Investors,

The most significant event for the quarter is by far the increased and successful activity on our operated Block 56. The Al Jumd-2 horizontal appraisal well reached a total measured depth of 2,032 meters and tested at an initial rate of 700 bopd from a 430-metre section of the Al Khalata sandstone! These results superbly support our expectations and compares very favourably with the Al Jumd-1 vertical well which flowed 100 bopd when tested in January 2020. An early production system is being installed to enable a long term, six months, test of the Al Jumd structure and we are accelerating the drilling of additional appraisal wells. The plan is to complete two further horizontal wells during the third quarter this year and to sequentially hook up all four Al Jumd wells to the long-term test unit beginning with Al Jumd-1 and Al Jumd-2 in late June or early July. The test program could give a limited but still important boost to our production for the year while yielding valuable data in understanding the long-term potential of the Al Jumd structure and other prospective structures in the Al Jumd area.

In addition to the Al Jumd-2 appraisal well, the Sabah-1 exploration well and the Sarha-3 appraisal well were drilled nearby. Both had oil shows while drilling and both wells will undergo an extensive test programme during the second quarter. Depending on results of these tests, both structures could be suitable for the drilling of horizontal appraisal wells later this year.

And Block 56 activity does not end here. A 2,000 km2 3D seismic study covering the ‘Central Area’ of the Block was also successfully completed. This area covers a part of the Block where vintage 2D seismic suggests the presence of more than a dozen leads. Seismic processing and interpretation will last until the end of 2022 and if some of these leads can be matured into prospects exploration drilling in the ‘Central Area’ could commence within a year.

Last quarter I said that Block 56 offers a smorgasbord of opportunity and resembles the state of development where Blocks 3&4 were 10 years ago. The results of the Block 56 work programme so far this year in no way contradicts either of those statements!

And turning to Blocks 3&4 we gratefully accept production of close to 10,500 bopd for the quarter.

This is however still below expectations and deserves a few comments. The good news is that most of the catch-up spending and upgrade of surface facilities that was deemed necessary is well underway and most bottlenecks have been cleared. The bad news is that the small, but not unimportant, Anan field which came on stream in 2021 has performed below expectations. The cause is under investigation but until we know more, we elect to lower the lower limit of our guidance for average daily production for the year to 10,500-11,000 bopd (down from 11,000-11,500 bopd). It is still possible that production will recover and any exploration success on Blocks 3&4 could also have a positive impact but that is for the future to show. For clarity I should also say that any test production from Blocks 56 is not included in this guidance.

Turning to the financials, the oil price development overshadows most other factors. World events continue to have a very strong, and to large degree, unforeseeable, impact on price developments, but many signs now suggest that the oil market will remain tight for the rest of the year.

While we closely follow international developments, we are also fully focused on our operated Blocks and on working closely with the operator on Blocks 3&4. In addition, we have completed another seismic study on our other operated Block 58, and we are about to conclude two studies on our operated Block 49 to better understand the best way to handle the Thameen-1 well before the decision to either extend or relinquish the license. Our 30 percent interest in the CCED-operated Blocks 3&4 continues to provide the cash flow to fund our operated activities and enable us to distribute cash to you, our shareholders. If the AGM on May 18 approves the Board’s proposal for distribution this year, a total of SEK 7 per share will be transferred to the shareholders.

So, stay with us!

We live in interesting, if also disturbing, times.

Stockholm, May 2022

Magnus Nordin,

Managing Director

CONFERENCE CALL
Date: 10 May 2022
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