Heritage Oil (HOIL) BUY

28 June 2010

52-wk Range: £4.12-6.30 Market Cap (M): £1,191.9

12 month target £7.00 EV (M): £1,139.9 Oil & Gas
Fishing in rich waters

Summary Summary
Heritage Oil is an independent oil and gas
production and exploration company listed on We are initiating coverage of Heritage Oil Plc (“Heritage”) with a Buy
the London Stock Exchange, with a further
recommendation and a price target of 700p.
listing on the Toronto Stock Exchange. The
Company's immediate focus is on its operations
in Africa, the Middle East and Russia. Heritage has created considerable value over the years, culminating with the
GBp recent sale of its assets in Uganda for at least US$1.35bn. An early mover in
650 the country in 1997, the Company has realised close to a 10x return on its
600
overall investment to date.

550 Heritage has a number of additional exploration acreage positions that have
500 the potential to replicate such a success. First of all Kurdistan in Iraq where
450
the Company has made the recent Miran West discovery, but also Malta and
Pakistan, the focus of forthcoming exploration activities, as well as Mali,
400 Tanzania and the Democratic Republic of Congo (“DRC”) at a later stage.
350
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Our risked NAV is 714p based on net risked resources of 744MMboe with
unrisked values of 1,341p and 1,734MMboe respectively.
Key Metrics
Shares Outstanding (M): 287.9 The breadth, quality and high potential of the portfolio also make Heritage a
Current Price (GBP): £4.14 perfect target for takeover. We understand that the current situation
between Iraq and Kurdistan might act as a poison pill for large companies to
get involved at this stage, but view the potential resolution of the current
situation as a potent catalyst for consolidation in the region in the near-term.

Contact
Lionel Therond
+44 (0)20 7936 5244
Lionel.Therond@fdcap.com Disclaimer
This is a marketing communication. It has not been prepared in accordance with legal requirements
designed to promote the independence of investment research and is not subject to any prohibition on
dealing ahead of the dissemination of investment research. Non-US research analysts who have
prepared this report are not registered/qualified as research analysts with FINRA, may not be
associated persons of the member organisation and may not be subject to NASD/NYSE restrictions on
communications with a subject company, public appearances and trading securities held by a research
analyst account.
 Heritage Oil

Table of Contents
Investment Case 3
Background 4
Licence Portfolio 5
Valuation 7
Risks 11
Appendix 1: Valuation Summary 12
Appendix 2: Description of the Assets 13
- Uganda
- Kurdistan
- Malta
- Tanzania
- Pakistan
- Mali
- Democratic Republic of Congo
- Russia
Appendix 3: Key personnel 26
Appendix 4: Newsflow 28
Appendix 5: Capital structure 30
Appendix 6: Resources classification framework 31

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Investment Case

We are initiating coverage of Heritage Oil Plc (“Heritage”) with a Buy recommendation and a price target of 700p.

o We like the value creation legacy…

Heritage has a history of smart, value accretive asset deals. The sale of the assets in Uganda to Tullow
exemplifies the value optimisation philosophy of the Company and might obviously be difficult to replicate in
the future; however the Company has assembled a portfolio of assets with high impact exploration potential in
order to maximise returns.

o …as well as the portfolio geared to high impact exploration.

Kurdistan, Malta, Pakistan, Tanzania, Mali and the DRC all have the potential for significant oil and/or gas
discoveries. We estimate net risked resources at 744MMboe and 1,734MMboe unrisked; however these
estimates only take into account the immediate drilling opportunities and do not account for the ultimate
potential of the whole portfolio.

o Heritage is also a prime takeover candidate.

The unresolved issue between Iraq and Kurdistan that caused the interruption of oil exports from Kurdistan and
the insistence of Baghdad to ban companies involved in Kurdistan from bidding for projects elsewhere in Iraq,
in particular the redevelopment projects of multi-billion barrel oil fields in the south of the country, have
prevented all major companies to participate in the exploration effort in Kurdistan. This created a huge
opportunity for small independents to access a low geological risk, onshore and high impact exploration
acreage. It has also set the scene for a massive consolidation to take place once the issue has been resolved.
As it happens, we expect asset prices to soar.

We believe the acreage in Malta is in a similar situation as a border dispute with Libya prevents companies
active in Libya to be involved in Malta.

Heritage’s portfolio has many other attractive assets located in regions of the world that have seen recent M&A
activity, such as the East Coast of Africa and also the Albertine Graben, on the DRC side.

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Background

Heritage is a Jersey-based oil and gas exploration and production company which was formed in 1992 by the
current Chief Executive and main shareholder Anthony Buckingham.

Throughout its history the strategy of the Company has been to realise the value of an asset when it reaches its
peak potential in the context of the overall portfolio. An early entrant in Uganda and Congo in 1997, Heritage has
been active in a number of other African countries, such as Angola, but also in Oman until recently. Uganda is now
the subject of a sale and purchase agreement with Tullow Oil and the transaction should be completed imminently.

The Company has more recently built a presence in Kurdistan, Malta, Tanzania, Pakistan, Mali, the Democratic
Republic of Congo (“DRC”) and has also some production in West Siberia, Russia, a legacy from a 2005 acquisition.

Heritage listed on the Toronto Stock Exchange in 1999 and London in 2008.

Since listing in London the stock has outperformed the FTSE 350 Oil&Gas Index, although performance of late has
been lacklustre (Exhibit 1). The recent underperformance followed the preliminary results of the Miran West-2
appraisal well which disappointed the market, and delays to the sale of the Ugandan interests.

Exhibit 1: Share Price History

GBp
700
HOIL
600 FTSE 350 Index

500

400

300

200

100

0
Apr-08 Oct-08 Apr-09 Oct-09 Apr-10

'000 shares
20,000
15,000
10,000
5,000
0
Apr-08 Oct-08 Apr-09 Oct-09 Apr-10

Source: Bloomberg

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Licence Portfolio
Heritage has a global portfolio of oil and gas projects in the Kurdistan region of Iraq, the Democratic Republic of
Congo, Malta, Pakistan, Mali and Russia (Exhibit 2).

Exhibit 2: Licences Location Map

Source: Company data

The Company is in the process of disposing of its assets in Uganda and has agreed an offer from Tullow for the
whole of its interest. The disposal of those assets should complete imminently. Licence characteristics are
summarised in Table 1.

Table 1: Licences Characteristics

License Name Country Awarded Operator Interest Partners Size
2
% (km )
Zapadno-Chumpasskoye Russia Dec 2005 Heritage 95.0 200
Miran Iraq Oct 2007 Heritage 56.25(*) Genel Energy 1,015
Block I DRC Jul 2006 (**) Tullow 39.5 Tullow Oil, Cohydro 3,825
Block II DRC Jul 2006 (**) Tullow 39.5 Tullow Oil, Cohydro 2,634
Block 7 Mali Jul 2006 Heritage 75.0 Centric Energy 39,804
Block 11 Mali Jul 2005 Heritage 75.0 Centric Energy 32,810
Area 2 Malta Dec 2007 Heritage 100 - 9,190
Area 7 Malta Dec 2007 Heritage 100 - 8,778

Sanjawi Pakistan Nov 2007 Heritage 54.0 Hycarbex, American Energy, Sprint Energy, 2,258
Trakker Energy

Zamzama North Pakistan Dec 2008 Heritage 48.0 Hycarbex, American Energy, Sprint Energy, 1,229
Trakker Energy
Latham Tanzania Sep 2006 Heritage 70.0 Petrodel 5,506
Kimbiji Tanzania Sep 2006 Heritage 29.9 Petrodel 4,298
Kisangire Tanzania May 2005 Heritage 55.0 Dominion/Maurel&Prom (***) 7,280
Lukuliro Tanzania May 2005 Heritage 55.0 Dominion/Maurel&Prom (***) 8,828
Source: Company data (*) after State back-in (**) awaiting Presidential Decree (***) awaiting completion of farm-out

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Timeline

Activities and timing are illustrated in Exhibit 3 below.

In Kurdistan, the appraisal well Miran West-2 is being drilled and should be completed in Q3 2010, at which point a 3D
seismic survey will be acquired over the Miran West structure to enable a more efficient appraisal of the reservoir and of
the fracture system.

A high impact well will be drilled in Malta towards the end of the year after 2D seismic acquisition.

Seismic acquisition has just been completed in Pakistan and a well is now planned also towards the end of the year.

Exhibit 3: Timeline
2010 2010 2010 2010 2011 2011 2011 2011
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Kurdistan Miran West-2 Miran East-1

3D seismic

Malta 2D seismic Drilling

Russia Drilling

Mali 2D seismic

Pakistan 2D seismic Drilling

Tanzania Drilling

Drilling Development well

Drilling Exploration well

Source: Company data, FDC

The main catalysts for share price performance are:

o the completion of the sale of the Ugandan assets;
o the tests results of the Miran West-2 well;
o the spudding of wells in Pakistan, Kurdistan and Malta in Q4 2010.

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Valuation
We have set our target price at 700p, close to our risked NAV of 714p.

The risked NAV is the aggregated value of all risked assets, minus corporate costs and adjusted for non-operating
items such as net debt and asset transactions. The value of risked assets is calculated from DCF and is based on our
assessment of risked resources for individual assets.

We estimate the risked resources of Heritage at 744MMboe (Exhibit 4), or 1,734MMboe unrisked.

Exhibit 4: Net Risked Resources

4 744
61
281
Net Risked Resources (MMboe)

319

22
57

Russia Miran W Miran West Miran East Malta Others Total

Source: FDC Contingent

Net risked resources are based on our estimates for net resources and probability of success for a commercial
development or discovery. The Company provided a third-party evaluation of reserves in Russia and contingent
resources in Kurdistan by RPS, an energy consultant, as of 30 June 2009. Our estimates of prospective resources
across the portfolio rely on Company guidance and publicly available data.

We have risked those resources using probabilities of success ranging from 100% in Russia, down to 5% for the
riskiest assets in the portfolio (Appendix 1). Contingent resources of Miran West are risked at 75% whereas
Prospective resources in the Miran licence are risked uniformly at 50% and in Malta at 20%.

Overall, Kurdistan accounts for 84% of net risked resources and 71% of unrisked resources.

We have carried out DCF valuations for each of the assets above, using normalised commodity prices assumptions
of US$75/b for oil and US$5/mscf for gas, a 10% discount rate in Malta and 12% elsewhere, consistent with FDC
valuation parameters for those regions. We have chosen to include the risked value of all licences in the portfolio in
order to quantify the opportunity, even though some are not material due to the high risk attached.

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For Uganda, we have used the agreed price of US$1.35bn and have added a 75% chance for the contingent
deferred consideration of US$150m to be paid. This payment is not contingent on either the quality or performance
of the assets. It is contingent on the acquirer seeking, on a best effort basis, and receiving tax breaks from the
Ugandan authorities within a two-year period. We understand from the Company that it is likely to be paid this
year; however we have assumed payment in 2011 and discounted accordingly.

Corporate costs are capitalised at US$100m and net debt is nil. We have considered that the difference between
the cash balance of some US$208m and total debt of US$15m at end Dec 2009 was compensated by the 2010
Capex of US$155m, while the remainder is likely to be spent in Capex or working capital to run the operations.

We have used a fully diluted number of shares of 343.5m, including exchangeable shares, options outstanding, LTIP
and also converting the convertible debt into equity given that it is well in the money already.

Our estimate of risked NAV is 714p (Exhibit 5), or 1,341p unrisked.

Exhibit 5: Risked NAV

4
44
390 714

-18
Risked Net Asset Value (p)

231

49 15

Russia Miran W Uganda Miran E+W Malta Others Corporate Total

Source: FDC Contingent Prospective Costs

We have also taken into account the potential Capital Gain Tax (“CGT”), of maximum US$360m, resulting from the
disposal of the assets in Uganda. We understand from the Company that there is no CGT liability to arise in Canada
and that the liability payable in Uganda is likely to be lower than the maximum possible liability given the
characteristics of the transaction as well as precedent transactions in the country.

In an attempt to resolve the dispute, which is holding up the approval process, Heritage has proposed that the tax
dispute should be submitted to binding arbitration in London under the rules established by the United Nations
Commission for International Trade Law, as required under the PSA terms.

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Even though Heritage is under no legal obligation to do so, it has offered to deposit $108m with the Government
on receipt of the $1.35bn, which would be refunded to Heritage if it is ultimately determined that no tax is payable.
The US$108m has been determined as per subsection 103 (2) of the Income Tax Act (Uganda), which requires a tax
payer to deposit 30% of the disputed tax amount. In view of the uncertainty, we have risked the CGT payment at
50%.

Core NAV is 276p and includes the value of Russia, Contingent Resources of Miran West as well as the cash from
the sale of assets in Uganda, adjusted for Corporate Costs.

The attraction of the Heritage stock also depends on the attraction of the portfolio of assets for industry buyers looking to
acquire resources on the market rather than through the drill-bit. A potential acquirer would look to add reserves and
resources barrels at a competitive risk-adjusted price versus the pure exploration option. We believe that Heritage’s
portfolio offers a number of attractions.

First and foremost it provides an entry into Iraq, through the exposure to Kurdistan, which can attract industry players not
currently present in Iraq or present but keen to increase positions. It also offers exposure to high impact less explored
basins around the world.

For a larger player already present in the south of Iraq, the exposure to Kurdistan acts as a poison pill due to the running
dispute between the Kurdistan Regional Government (“KRG”) and the Federal Government in Baghdad. The dispute
revolves around the payment mechanism to oil producing companies and has caused oil exports from Kurdistan to be
interrupted last year as companies were not being paid for their production. The Federal Government also does not
recognise the 34 PSCs awarded by the KRG to a number of independent companies since 2004 and bars any company
active in Kurdistan to bid for contracts in southern Iraq. With most of the major industry players already involved in the
redevelopment of giant oil fields in southern Iraq, it is understandable they are still staying out of Kurdistan.

We see that situation changing in the near future as both KRG and Federal Government are slowly coming to an agreed
solution. From that point onward we believe there will be consolidation of exploration and production interests as well as
entry of major players in Kurdistan, with a resulting increase in asset prices.

In addition, we believe that PSCs in Kurdistan will be recognised by the Federal Government as soon as the dispute with
the KRG is resolved and that PSC terms will not be renegotiated downwards. Indeed Iraq needs foreign investment in its
oil industry and the PSC terms are not that generous compared to international standards and also compared to terms of
service contracts awarded in the south of the country by the Federal Government for oil field redevelopment projects.

The oil companies currently involved in oil field redevelopment in the south of Iraq are listed in Table 2 below.

Table 2: Service Contracts in South Iraq

Company (% Interest) Fields Date Reserves Published fee Peak production
signed (Bbbl) (US$/b) (MMb/d)
BP (38%), CNPC (37%), Iraqi State (25%) Rumaila Jun 2009 17.0 2.00 2.85
Shell (45%), Petronas (30%), Iraqi State (25%) Majnoon Jan 2010 12.6 1.39 1.80
Petronas (45%), Japex (30%), Iraqi State (25%) Algharraf Jan 2010 3.0 1.49 0.70
ENI, Occidental, Kogas (S Korea), Iraqi State (25%) Zubair Jan 2010 4.0 2.00 1.13
ExxonMobil (60%), Shell (15%), Iraqi State (25%) West Qurna 1 Jan 2010 8.7 1.90 2.33
Sonangol (75%), Iraqi State (25%) Alkayara, Najmah Jan 2010 1.7 5.00 & 6.00 0.23
CNPC (56.25%), Total (18.75%), Iraqi State (25%) Halfaya Jan 2010 5.0 1.40 0.25
Gazprom (30%), Kogas (22.5%), TPAO (11.25%), Petronas Badra Jan 2010 2.0 5.50 0.17
(11.25%), Iraqi State (25%)
Lukoil (56.25%), Statoil (18.75%), Iraqi State (25%) West Qurna 2 Jan 2010 12.9 1.15 1.80

CNOOC (63.75%), TPAO (11.25%), Iraqi State (25%) Bazarkan, Fakkah May 2010 8.0 2.50 0.45
and Abu-Gharb
CNPC (75%), Iraqi State (25%) Ahdab Nov 2008 1.0 3.00-6.00 0.11
Total 76.0 11.82
Source: Various

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We have ranked the companies listed above according to equity reserves positions resulting from their participation in
the development projects (Table 3). We have highlighted the companies that might feel under-represented in Iraq and
might view acquisitions of assets in Kurdistan as a way to add to reserves, when possible.

Table 3: Equity Reserves in South Iraq Developments

Companies Approximate Equity reserves
(Bbbl)
CNPC 9.85
Lukoil 7.26
Shell 6.98
BP 6.46
Petronas 5.36
Exxon 5.22
CNOOC 5.10
Statoil 2.42
Kogas 1.45
Sonangol 1.28
TPAO 1.13
ENI 1.00
Occidental 1.00
Total 0.94
Japex 0.90
Gazprom 0.60
Source: Various

A number of major Oil&Gas companies not present in the list above, such as Chevron or ConocoPhillips, could also
decide to become involved at some stage.

Executives of Chinese companies have made no secrets of their great interest in Iraq and in the Middle East in general
and Chinese companies are also very active acquirers of commodities across Africa.

Other National Companies already present in Kurdistan, such as KNOC, might also be keen to increase their exposure to
the region.

Although Heritage could also be an acquirer in Kurdistan, as evidenced by its previous attempt in acquiring Genel Enerji,
the Turkish company, the Company would have to consider its current exposure in the region and balance it with
available opportunities elsewhere.

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Risks

Geological risk

We consider Kurdistan to be of low geological risk, in particular in the area where Heritage is present with an overall low
gas risk. Nevertheless Heritage also operates in a number of less explored and more challenging regions where the
geological risk is higher.

Operational risk

Heritage typically operates in politically and/or socially instable regions and there is always a risk to personnel and assets.
The management team is experienced in and fully familiar with the regions they are operating in and can very effectively
mitigate the operational risk.

In the DRC, Tullow Oil is the operator.

Licensing risk

The DRC licences are awaiting Presidential ratification.

Financing risk

Heritage will be very well funded after the disposal of the assets in Uganda and the financing risk is very low.

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Appendix 1: Valuation Summary

HERITAGE OIL Price (p) risked per share un-risked per share Discount PoS NAV risked Oil Gas Interest
Date 6/25/10 415.0 (m$) (p) (m$) (p) rate (%) % $/b MMboe MMboe (MMbo) (Bcf) %

Production

Russia 267 49 267 49 12.0 100 4.7 57 57 57 0 95.0%

sub-total 267 49 267 49 57 57 57 0

Appraisal & Development

Kurdistan Miran West 80 15 106 19 12.0 75 3.6 22 30 30 0 56.3%

Uganda Contingent cash 102 19 136 25 10.0 75
Uganda Contingent CGT (180) (33) (361) (66) 50

Total 2 0 (118) (21) 22 30 30 0

Exploration & Appraisal

Kurdistan Miran West 1,138 207 2,275 414 12.0 50 3.6 319 638 638 0 56.3%
Kurdistan Miran East 1,004 183 2,008 365 12.0 50 3.6 281 563 563 0 56.3%
Malta Gas 73 13 365 66 10.0 20 2.0 36 179 0 1,000 100.0%
Malta Condensates 167 30 837 152 10.0 20 8.4 20 100 100 0 100.0%
Tanzania 12 2 124 23 12.0 10 2.5 5 49 0 275 55.0%
Pakistan 1 0 29 5 12.0 5 2.3 1 13 0 72 48.0%
Mali 8 1 152 28 12.0 5 2.3 3 67 0 375 75.0%
DRC 0 0 179 33 12.0 0 4.5 0 40 40 0 39.5%

Total 2,403 437 5,970 1,086 665 1,647 1,340 1,722

Debt 0.0 0

Corporate costs (100) (18)

Surplus Cash 1,350 246

Core NAV 1,518 276 1,399 254 19.1 79 87 87 0

= Core NAV up/downside -33% -39%

Total NAV 3,921 714 7,368 1,341 5.3 744 1,734 1,426 1,722
= Total NAV up/downside 72% 223%

Oil price assumption (2010-2012+ in US$/b) 60.0 70.0 75.0 RT

Source: FDC
Gas price assumption (US$/mscf) 5.0 5.0 5.0 RT

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Appendix 2: Description of the Assets

Uganda

Heritage announced its intention of disposing of its 50% interest in Blocks 1 and 3A in Uganda (Exhibit 6) in
November 2009.

Exhibit 6: Kurdistan Assets Location Map

Source: Company data

The Company took the view that the development of the Albert Basin will take time and will be capital intensive
given the location of the basin 1,250km from the African coast, the lack of oil infrastructure in country and the waxy
nature of the crude. It will also require midstream and downstream capability that Heritage lacks. The sale provides
the Company with considerable financial flexibility to continue to grow internally and externally, while retaining
exposure to the Albert Basin with its interests in Blocks 1 and 2 in the DRC.

Initially a Letter of Intent for a sale to ENI was signed for a cash consideration on closing of US$1.35bn and a
deferred consideration of up to US$150m in cash or assets. The sale and purchase agreement (“SPA”) with ENI was
signed in December 2009. However, Tullow exercised its right of pre-emption in January 2010 and a new SPA was
signed with Tullow. The disposal was subsequently approved by Heritage shareholders at an EGM on 25 January
2010 and as a result ENI terminated the SPA in February 2010.

Heritage has spent approximately US$150m since being awarded its first licence in 1997 and has discovered net
contingent resources of approximately 355MMbbl, highlighting the considerable value created by the management
team.

Heritage announced on 7 April 2010 that it had received a letter from Government stating that it supports
Heritage’s disposal of the assets and will conclude its review of the transaction within eight weeks. As previously
announced, the only substantive condition still outstanding and preventing completion of the disposal of the

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Assets is Government approval of the transaction. Government has now informed Heritage that its review of the
transaction has been concluded and the only issue preventing approval from being granted is the absence of an
agreement between Heritage and Government with respect to whether the disposal of the Assets is taxable in
Uganda.

Heritage representatives have met with appointed officials from the Ministry of Energy and Mineral Development,
Ministry of Finance Planning and Economic Development and the URA on many occasions over recent weeks to
resolve this remaining issue but no agreement has been reached.

Heritage’s position, based on comprehensive advice from leading tax experts in Uganda, the United Kingdom and
North America, is that the disposal of the assets is not taxable in Uganda. Historically, none of the corporate or
asset transactions in the oil sector in Uganda which have involved the sale or transfer of a licence have been taxed.
Government’s current position is that the consideration is subject to a tax of approximately US$360m.

Even though Heritage is under no legal obligation to do so, it has also offered to deposit US$108m with the URA
on its receipt of the consideration, which would be refunded to Heritage if it is ultimately determined that no tax is
payable. Although the dispute will be settled in accordance with the procedures set out in the PSAs, this amount of
US$108m has been determined based on subsection 103(2) of the Income Tax Act (Uganda), which requires a
taxpayer to deposit 30% of the disputed amount of tax with the URA pending final resolution of the dispute.

The Proposal is in accordance with the laws of Uganda and the terms of the PSAs and goes beyond Heritage’s legal
obligations. Government has assured Heritage that it will respond in a timely fashion and is committed to
completing the transaction as soon as possible. Heritage is of the opinion that it has done everything reasonable to
obtain Government’s consent to the disposal of the assets and expects to complete the transaction shortly.

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Kurdistan

Iraq has the second largest oil reserves in the world, estimated at more than 112Bbbl of oil and 100Tcf of gas. The
Kurdistan region of Iraq is a highly prospective, under-explored part of Northern Iraq with estimated potential of
c.a. 40Bbbl of oil and 60Tcf of gas. The existing pipeline capacity is 1.6MMb/d and there is a spare capacity of over
1MMb/d. Oil exports from Kurdistan have been interrupted in October 2009, due to the absence of an agreed
payment mechanism between Kurdistan and Iraq to remunerate producing oil companies. The respective
governments are currently negotiating and we expect the standoff to be resolved this year, on the back of the
results of the Federal Iraqi elections in March 2010. Exports should resume soon after an agreement is reached.

Heritage was one of the first companies to be awarded a Production Sharing Agreement (“PSA”) by the Kurdistan
Regional Government (“KRG”). The PSA over the Miran Block was awarded in October 2007 and Heritage was
appointed operator of the licence, which covers 1,015km2 (Exhibit 7).

Exhibit 7: Kurdistan Assets Location Map

Source: Company data

The Miran surface structure lies only 55km from the giant Kirkuk oilfield with its remaining reserves thought to be in
excess of 10Bbbl. In the first half of 2008 Heritage acquired a 330km seismic survey of over the Miran structure
which identified two very large anticlines Miran West and Miran East (Exhibit 8).

Miran West-1 was the first wildcat exploration well ever drilled on this licence covering two structures which
together total approximately 320km2. Heritage commenced drilling operations in December 2008. It is reported
that 80% of wells drilled in Iraq have found oil and Miran West-1 was ‘unsurprisingly’ a significant oil discovery,
announced in early May 2009.

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Initial testing operations were completed in May 2009 and the structure, with a gross oil bearing interval of 710m,
was estimated to have oil-in-place of 2.3-4.2Bbbl based on fracture porosity alone. Excellent recoveries of 50-70%
are expected due to the highly fractured nature of the reservoirs and the lack of associated gas. Initial Miran West-1
drilling operations were designed to cope with the potential for high reservoir pressures and this resulted in the
loss of drilling fluid and lost circulation material in these highly permeable fractured reservoirs, whereby initial
testing operations were severely constrained.

A further test was completed in August 2009 during which the Miran West-1 well flowed at a maximum rate of
3,640bopd from a single upper reservoir interval. The test rate was restricted by surface equipment capacity and
test data indicated that a rate of 8,000-10,000bopd would be achievable when placed on production. Tests on two
deeper reservoir intervals were unsuccessful due to damage and contamination sustained during drilling.

Exhibit 8: Seismic Line through Miran Structure

Source: Company data

The Miran West-2 appraisal well spudded at the end of November, 4km NW of Miran West-1. The well was planned
to appraise the reservoir sections encountered in Miran West-1, whilst minimising formation damage, and further
enhance knowledge of the structure and associated fracturing.

The well encountered hydrocarbon-bearing intervals totalling approximately 1,800m within Cretaceous formations
and approximately 250m of cores were taken. Three zones from within a deeper Cretaceous interval have been
identified for testing once drilling operations have been completed. TD is anticipated at approximately 4,600m to
explore further potential in the underlying Jurassic and Triassic structures. These targets have been identified from
additional seismic data acquired in January 2010 after Miran West-2 had commenced drilling. These targets have
the potential to contain substantial volumes of additional hydrocarbons. The end of the drilling operations is
expected in Q3 2010, following which the well will be tested.

Miran West-2 was drilled within a part of the Miran West structure where it now appears the fracture network is less
well developed. This variability in fracture development is consistent with carbonate reservoirs throughout the
region and 3D seismic data will be acquired in the Block to locate fracture networks more efficiently in future
appraisals.

Future plans for the drilling of the Miran East-1 exploration well are progressing and the Company is looking to
contract a rig for later this year.

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Malta

Malta is a small island nation in the Mediterranean Sea with a population of 400,000. It is situated to the south of
Sicily, North of Libya and East of Tunisia and is comprised of an archipelago of seven small islands encompassing
316km2 in area. It is a member of the European Union and very stable politically.

Heritage Oil was awarded a Production Sharing Contract in the offshore Areas 2 and 7 in December 2007, with a
100% interest. The licences extend to almost 18,000km2 and are situated approximately 80km (Area 2) and 140km
(Area 7) from the South-Eastern Maltese coast in water depths of 200-400m (Exhibit 9).

Exhibit 9: Maltese Assets Location Map

Source: Company data

The licences are under-explored, having had only one well drilled in Area 2, the Medina Bank 1 by Texaco in 1980.
Structures identified on Areas 2 & 7 could be analogous to the giant Bouri Field offshore Libya where reserves are
estimated at 630MMbbl of oil and in excess of 8Tcf of gas. A number of producing fields offshore Libya and Tunisia
are proof of a valid petroleum system present in this region.

Initial seismic interpretation, based on the current extensive data set of almost 3,500km acquired since 2000, has
identified a variety of potential prospects; planned future seismic acquisition may well identify more. Primary
targets are Lower Eocene and Cretaceous carbonates which are recognised to be major hydrocarbon producing
plays in the central part of the Mediterranean.

Approximately 1,000km of seismic is planned over a number of prospects and leads in H1 2010 and a high impact
exploration well targeting 500MMbbl is planned for H2 2010.

There is currently a border dispute between Malta and Libya that cuts right across Area 7. We understand that a
resolution to that conflict could be imminent, potentially enabling oil companies active in Libya to be involved in
Malta and hence providing Heritage with an option to farm-out some of its interest if need be, although the
Company has an excellent cash position to be able to finance large expenditures. A well in these water depths is
likely to cost US$70-80m.

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Tanzania

Heritage has operating interests in 4 blocks located on- and offshore Tanzania (Exhibit 10), namely the Kisangire
and Lukuliro licences under one single PSA with partner Dominion Petroleum Ltd (“Dominion”) and the Kimbiji and
Latham Blocks under one single PSA with partner Petrodel Resources Ltd ("Petrodel").

Exhibit 10: Tanzanian Assets Location Map

Source: Company data, Dominion Petroleum

Under the terms of the farm-in agreement with Dominion, Heritage has the right to initially earn a working interest
of 55% in the Kisangire and Lukuliro licences. In order to earn the working interests, Heritage will fund all costs to
acquire a minimum of 150km of 2D seismic data and the costs of the first commitment well. Heritage also has an
option to earn an additional working interest of 15%, thereby increasing its participating interest to 70%, by funding
87.5% of the costs of a second well.

Under the terms of the farm-in agreement with Petrodel, Heritage has the right to earn a 70% working interest in
the Kimbiji licence area, and a 29.9% working interest in the Latham licence area. In order to earn the working
interests, Heritage will fund all seismic costs of the required work programmes on both licences, comprising the
acquisition of both 2D and 3D seismic data, and the drilling of two exploration wells within the Kimbiji licence area.
Heritage will be appointed operator upon drilling the second exploration well in the Kimbiji licence.

Geologically, all four Blocks are located within or in continuation of the Permian Selous sedimentary basin and the
area includes both Permian and Jurassic targets. A number of discoveries and seeps are evidence of a working
hydrocarbon system that is generating both oil and gas. The 500Bcf Songo Songo gas field, which supplies gas for
power generation in Dar es Salaam, lies to the east of the Kisangire and Lukuliro PSA. The Mkuranga gas discovery,
made by Maurel & Prom in 2007, lies just outside the Kisangire Block and reportedly flowed gas at rate of
20MMscf/d. Also the Wingayongo oil seep is located in the centre of the Kisangire Licence.

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At the end of 2009, the Mafia deep discovery by Maurel & Prom to the south of the Latham licence encountered at
least 600m of gas column and highlighted the potential for considerable resources in deeper plays. The discovery
has estimated recoverable gas resources of 4Tcf.

The acquisition of 207km of 2D seismic in the onshore portion of the Kimbiji licence area was concluded in January
2009. This completed the initial Tanzania seismic acquisition programme which began in the fourth quarter of 2008
with the acquisition of 198km of 2D seismic in the Kisangire licence area. This data is in the process of being
interpreted and will be used as the basis for planning a multi-well drilling programme expected to commence in
2011.

Following a series of high profile discoveries along the East African coast, there is a renewed interest from the
industry for that less explored part of Africa:

o Recently BG Group farmed-in Ophir 1, 3 and 4 offshore southern Tanzania. Under the terms of the agreement,
BG will acquire a 60% interest by contributing 85% towards the cost of an extended work programme that will
include the drilling of at least three exploration wells and an additional 4,000km2 of 3D seismic.

o Exxon Mobil acquired a stake in a Tanzanian block held by Statoil ASA following a huge gas discovery in
neighbouring Mozambique.

o More recently Afren Plc acquired Black Marlin Energy, a Canadian listed exploration company with interests in
Kenya both on- and offshore as well as Madagascar and The Seychelles.

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Pakistan

Heritage has a 54% operating interest in the Sanjawi Block in Baluchistan, together with Hycarbex American Energy,
Sprint Energy and Trakker Energy. This onshore exploration licence covers a gross area of 2,258km2. The Company
also has a 48% operating interest in the Zamzama North Block with the same partners. The licence covers a gross
area of 1,229km2 and is located in the south of Pakistan in the western part of the Sindh Province approximately
200km NW of Hyderabad (Exhibit 11).

Exhibit 11: Pakistan Assets Location Map

Source: Company data

The Sanjawi Block is considered highly prospective due to the presence of oil seeps to the south of the licence and
the proximity of the Sui and Pirkoh gas fields. The block is dominated by a series of east-west trending surface
features including the Dabbar and Warken Shah anticlines. They are large structures, the Dabbar anticline being
some 300km2, and will be examined as potential targets for drilling. The presence of these surface structures gives
encouragement that similar features may be present at depth. However despite the high prospectivity of the block,
the current security situation prevents any exploration activities to be carried out.

The Zamzama Block is situated only 10km from the eastern flanks of the Kirthar Fold Belt and forms part of the
associated compressive foreland. The eastern portion of the block is in the rich, flat, low lying and intensively
cultivated flood plain of the Southern Indus Basin, whilst the western area is uncultivated and covered by the low,
flat, alluvial outwash from the Kirthar Hills. The current seismic database used to map the Zamzama North Block
comprises some 750km of fair to good quality recent 2D seismic. To the immediate south of this block is the large
2.3Tcf Zamzama gas field, providing close-by infrastructure and the potential to bring on production quickly.

Heritage has acquired 336km of seismic on a number of leads in Zamzama North and a well is planned for H2 2010.
Prospects are likely to be of small-medium size.

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Mali

Mali is a large land-locked country in North-West Africa, with a population of 12 million. With an economy mainly
based on agriculture, farming and mines, Mali imports about 700,000 T p.a. of petroleum products.

The existence of hydrocarbons in Mali has been known since the 1970s, when very scattered seismic and drilling
tests gave strong indications of oil resources. But a turbulent political history and the very remoteness of the Malian
part of the Sahara desert have prevented further serious investigations into the possibility of worthwhile oil
production in the country.

Heritage is the operator of the Block 7 and 11 licences covering a gross area of over 72,000km2 (Exhibit 12) and has
the right to earn a 75% working interest by completing the minimum work programme. Centric Energy Corp owns
the remaining 25% interest. Heritage farmed-in to the blocks in November 2007.

Exhibit 12: Mali Assets Location Map

Source: Company data

This is a large under-explored region with only 5 exploration wells drilled in the largest country in West Africa.

The two licences are located in the east of the country within the Gao Graben, a Mesozoic basin that the Company
considers has geological similarities to other Mesozoic interior-rift basins within North Africa, such as the Muglad
Basin of Sudan, the Doba Basin of Chad, and Tertiary basins such as the Albert Basin of Uganda.

The Gao Graben is part of a system that extends across central Africa from Mali and Nigeria in the east to Sudan
and Kenya in the west, referred to as the Central African Rift System (Exhibit 13). These basins formed in response
to stress fields set up by the opening of the Atlantic Ocean to the west. The eastern and central parts contain
considerable quantities of hydrocarbons, with commercial production and export of oil currently underway from
Sudan and Chad. A recent announcement indicates that some of the pools in eastern Niger are also about to be
developed.

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The western section of the system is hardly explored. Only one deep exploration well has been drilled in the Gao
Graben, just east of Block 10. Block 10 itself contains an abandoned well drilled to investigate water resources
which encountered significant oil and gas shows at shallow depths of around 300m.

Exhibit 13: Mali Assets Location Map

Source: Sphere Petroleum

The Graben has been delineated by various surveys since the early 1970's, including over 2,000km of 2D seismic
(Exhibit 14) and a comprehensive gravity and magnetic survey. The data show the presence of tilted fault-blocks
and indicate some 4km of sedimentary section.

Exhibit 14: Mali Assets Location Map

Source: Ministry of Mines, Energy and Water of Mali

The Tin Bergoui water well some 30km to the west of the Heritage Block 11, drilled to a depth of 350m,
encountered oil and gas shows in a number of horizons, indicating the presence of a working hydrocarbon system.

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The Gao Graben itself is a complex series of half grabens (Exhibit 15) probably formed in the late Jurassic or
earliest Cretaceous, some 140-130 million years ago.

Exhibit 15: Mali Assets Location Map

Source: Sphere Petroleum

ENI has farmed into Blocks; 1,2,3,4 and 9 to the NW of Block 7, for exploration in the Taoudeni Basin to the north.

More recently Algeria's national oil company Sonatrach and the Canadian owned Selier Energy have also signed
concession agreements in the Taoudeni basin. Sonatrach has a long experience with hydrocarbon exploration and
production just north of Mali, in similar geological and environmental conditions as the Taoudeni basin, and also in
comparable basins in Niger and Libya.

Sphere Petroleum is an independent private company which was awarded Blocks 8 in the Gao Graben and Block 10
in the south-eastern part of the Taoudeni basin in 2005.

A recent World Bank funding of an oil pipeline from land-locked Chad through Cameroon opens up the possibility
of considering pipelines from the Malian Sahara, through Algerian oil and gas fields, connecting the Taoudeni
basin to the European market.

Heritage has planned to acquire 1,000km of seismic in 2010, after having obtained a time extension of 2 years from
the Mali Government. The deadlines for the first phase of exploration are now June 2011, for Block 11, and July
2012, for Block 12. After those dates, each license continues for a further two periods totalling 6 years each. Centric
Energy is carried through all exploration costs until the completion of a seismic program and drilling of one
exploratory well.

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Democratic Republic of Congo

Heritage holds a 39.5% interest in Blocks I and II, located in the Albert Basin in the Western Rift Valley of East Africa
adjacent to its border with Uganda. The blocks cover the entire area of Lake Albert that lies within DRC, plus a smaller
area onshore to the south of the lake adjacent to the Semliki flats in Uganda. Blocks I & II are held under a single
Petroleum Sharing Agreement, executed in July 2006. Tullow Oil, the operator, holds an interest of 48.5% and the DRC
state oil company, COHYDRO, holds an interest of 12%. The initial exploration term is for five years, during which seismic
data will be acquired and exploration wells drilled. The programme will only begin, however, following the receipt of a
Presidential Decree, the timing of which is uncertain.

Exhibit 16: DRC Assets Location Map

Source: Company data

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Russia

Heritage holds a 95% interest in Zapadno-Chumpasskoye licence in the West Siberian Basin of Russia, the principal
oil producing region in the country (Exhibit 17). The Zapadno Chumpasskoye licence expires on 7 September 2024,
and is located in the province of Khanty-Mansyisk, approximately 100km from Nizhnevartovsk. The licence has an
area of approximately 200km2 and contains a field that was discovered in 1997.

Exhibit 17: Russian Assets Location Map

Source: Company data

A total of nine wells had previously been drilled on the licence. The reservoir is a sandstone of Late Jurassic age at
a depth of approximately 2,800m, and is the same producing horizon as in a number of the neighbouring fields. An
approximately 200km 2D seismic survey was acquired in 2006 and three wells were drilled in 2007. In December
2006, Well 226 tested at the equivalent of 600b/d, sweet, 36° API crude with moderate gas-to-oil ratio.

Production commenced in May 2007 with daily output averaging approximately 350b/d with zero water cut.
Production averaged 329b/d in 2009 as production resumed in March 2009 after being shut-in since December
2008. Production is expected to increase further as a result of existing wells being brought on-stream as well as
further development drilling.

Access to export facilities via a Transneft pipeline has been agreed and installation of the feeder pipeline is
planned to be completed in the short-term. Heritage has also established a jointly owned company, TISE-Heritage
Neftegas, with the TISE Holding Company to appraise and acquire oil and gas opportunities in Russia and
internationally. Shareholders of TISE Holding Company include Concord, Zarubejneft, Zarubejneftegas (a wholly-
owned Gazprom subsidiary), Technopromexport and Zarubejstroymontaj.

Heritage is currently guiding for a production of about 600b/d for 2010 and is planning to drill a producing well at
the end of the year to increase production to the maximum capacity of the facilities at around 900b/d. We do not
believe this is a core asset for Heritage.

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Appendix 3: Key personnel

Michael J. Hibberd

Chairman and Non-Executive Director

Mr. Hibberd has extensive international energy project planning and capital markets experience. Mr. Hibberd has
been president and chief executive officer of MJH Services Inc., a corporate finance advisory company, since 1995,
prior to which he spent 12 years with ScotiaMcLeod in corporate finance and held the position of director and
senior vice-president, corporate finance. He is chairman of Canacol Energy Ltd., co-chairman of Sunshine Oilsands
Ltd. and currently serves on the boards of directors of AltaCanada Energy Corp., Avalite Inc., Iteration Energy Ltd.,
Pan Orient Energy Corp. and Zapata Energy Corporation. Mr Hibberd also served as a director of Rally Energy
Corp. until October 2007 and as a director of Deer Creek Energy Limited until December 2005. Mr. Hibberd joined
Heritage in March 2006.

Anthony Buckingham

Chief Executive Officer

Mr. Buckingham is the founder of Heritage. Mr. Buckingham commenced his involvement in the oil industry as a
North Sea diver and subsequently became a concession negotiator acting for several companies including Ranger
and Premier Oil plc. He was previously a security adviser to various Governments.

Paul Atherton

Chief Financial Officer

Mr. Atherton is a qualified accountant, having qualified with Deloitte & Touche, and holds a degree in geology
from Imperial College London. He has a corporate finance background with specific experience in the international
mining and resource sectors. He joined Heritage in 2000 and subsequently joined the Board of Directors in 2005.

Gregory Turnbull

Non-Executive Director

Mr. Turnbull is the Regional Managing Partner of the Calgary office of the law firm of McCarthy Tétrault LLP. Mr.
Turnbull has extensive knowledge of corporate governance issues and has acted for many boards of directors and
special committees in that regard. Mr. Turnbull started his career with the law firm of MacKimmie Matthews in 1979.
From 1987 to 2001, he was a partner with Gowlings LLP (formerly Code Hunter LLP). In 2001 and 2002, he was a
partner with the law firm of Donahue LLP. Mr. Turnbull has been a partner with the law firm of McCarthy Tétrault
LLP since July 2002. He is a non-executive director of Crescent Point Energy Corp., Storm Exploration Inc, Seaview
Energy Inc., Hawk Exploration Inc., Canadian Superior Energy Inc., BNP Resources Inc. and Sunshine Oilsands Ltd.
He joined Heritage in 1997.

John McLeod

Non-Executive Director

Mr. McLeod is a Professional Engineer with nearly 40 years of varied resources extraction experience. He is the
president of McLeod Petroleum Consulting Limited, the president, chief executive officer and a director of Tuscany
Energy Ltd., Paris Energy Inc. and California Oil and Gas Corporation. He has held positions and has served on
various boards including Constellation Oil & Gas Ltd. and CanArgo Energy Inc., as president and chief executive
officer of Arakis Energy Company, as vp, operations of Pengrowth Gas Company, chief executive officer and
director of Rally Energy Corp. and Canoro Resources.

(continued overleaf)

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Currently, Mr. McLeod serves as a director of Diaz Resources Ltd., Ranger Energy Ltd and Ralliste Energy Corp. He
is a Past-President of the Association of Professional Engineers, Geologists and Geophysicists of Alberta. He joined
Heritage in 1998.

General Sir Michael Wilkes

Non-Executive Director and Senior Independent Director

General Sir Michael Wilkes KCB, CBE, retired from the British Army in 1995 as Adjutant General and Middle East
Adviser to the British Government. As Adjutant General, Sir Michael was the most senior administrative officer
within the Army and a member of the Army Board. During his distinguished career, he has seen active service
across the world while also commanding at every level from Platoon to Field Army including commanding 22
Special Air Service Regiment and serving as the Director of Special Forces. Sir Michael is a non-executive director
of the AIM listed companies Stanley Gibbons Group and Blue Star Capital plc. In addition, he holds non-executive
positions on a number of private companies including Britam Defence. He joined Heritage in 2008.

Salim Macki

Non-Executive Director

Mr. Macki was a Member of the State Council, Former Ambassador, Government of Sultanate of Oman and has
been a director of Oman Oil (a wholly owned Government company) since 1996. Mr. Macki holds a master’s degree
in petrochemical engineering and has spent most of his working life in the oil industry, where he is highly regarded
internationally. He holds, or has previously held, many senior executive positions in various private and state-owned
entities in Oman and internationally. He joined Heritage in 2008.

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Appendix 4: Newsflow
17 June 2010 – Heritage announced an operational update to accompany its Annual General Meeting. The
Government of the Republic of Uganda has assured Heritage that it is committed to completing the transaction as
soon as possible. Heritage and Government are in discussion over whether the disposal of the Ugandan interests is
subject to tax in Uganda. Heritage has proposed that the outstanding tax dispute be submitted to binding
arbitration in London and has offered to deposit US$108 million with the Ugandan Revenue Authority (the “URA”)
on its receipt of the cash consideration of US$1.35 billion on closing, which would be refunded to Heritage if it is
ultimately determined that no tax is payable. The Company proposes a dividend of 75p-100p per share following
the completion of the sale of the Ugandan interests. The exploration drilling of the Miran West-2 well in Kurdistan is
scheduled to be completed in the third quarter of 2010. Testing of the Miran West-2 well will resume on completion
of the deeper exploration drilling. A 3D seismic programme is to commence shortly in Kurdistan. Further diversified
drilling programmes scheduled to commence in Malta, Pakistan and Russia in the second half of 2010

18 May 2010 – Heritage issued its Interim Management Statement for the period from 1 January 2010 to 17 May
2010, in accordance with reporting requirements of the EU Transparency Directive.

30 Apr 2010 – Heritage announced its annual financial report for the year ended 31 December 2009.

7 Apr 2010 – Heritage received the support of the Government of Uganda for the sale and transfer of its Ugandan
assets to Tullow Oil. The company also announced the results of the Miran West-2 well in Kurdistan. The Miran
West-2 appraisal well, which spudded on 26 November 2009, reached a current depth of 2,627m and encountered
hydrocarbon-bearing intervals totalling approximately 1,800m within Cretaceous formations. An extensive coring
programme of approximately 250m was undertaken. The well will be deepened to approximately 4,600m to explore
further potential in the underlying Jurassic and Triassic structures.

18 Jan 2010 – Heritage announced that Tullow exercised its right to pre-empt the sale of the assets on the same
terms and conditions as agreed in the Sale and Purchase agreement entered into between Heritage and ENI, on 18
December 2009. Completion of the transaction remains subject, inter alia, to approval by the Ugandan
Government. The Government will determine which transaction to approve (either Eni or Tullow) in its role as final
arbiter. Eni has the option to terminate the SPA following an exercise by Tullow of its pre-emption rights, which Eni
has not so far done. Heritage remains able to accept any superior proposal made by any other party at any time
prior to Heritage’s shareholders’ meeting on 25 January 2010, the purpose of which is to approve the disposal.

18 Dec 2009 – Heritage entered into a sale and purchase agreement, with Eni for the sale of its 50% interest in
Blocks 1 and 3A in Uganda. The consideration comprises cash of US$1.35bn and a further contingent, deferred
consideration of either US$150m in cash or an interest in a mutually agreed producing oil field independently
valued at a similar amount. Completion of the SPA is subject to the receipt and satisfaction of certain approvals and
conditions, including the approval of the Company’s shareholders at a meeting to be held before the end of
January 2010, the receipt of any necessary consent from the Ugandan Government and HOGL not receiving a valid
pre-emption notice from Tullow Uganda Limited.

23 Nov 2009 – Heritage entered into a binding letter of intent, with Eni S.p.A for the sale of its entire interests in
Blocks 1 and 3A in Uganda. Completion is subject to the receipt and satisfaction of certain approvals and
conditions and to negotiating the terms and conditions of a sale and purchase agreement. The consideration
comprises cash of US$1.35bn and a further contingent, deferred consideration of either US$150m in cash or an
interest in a mutually agreed producing field independently valued at a similar amount.

17 Aug 2009 – Heritage completed testing on the Miran-1 West discovery in the Kurdistan region of Iraq. A flow
rate of 3,640bopd was recorded from a single reservoir interval at the well, and was restricted by surface equipment
capacity, with an estimated productive potential of 8,000-10,000bopd achievable when this well is placed on
production. The Miran West-1 well has been suspended as a future producer.

(continued overleaf)

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4 Aug 2009 – Heritage updated on the status of negotiations of the proposed acquisition of Genel Energy
International Ltd. Further to announcement on 9th June, it has been agreed in principle, subject to completion of a
definitive binding implementation agreement, that Heritage will issue 286.3m ordinary shares (approximately 50%
of the voting rights of an enlarged Heritage) in consideration for acquiring the entire share capital of Genel.
Additionally, it has been agreed that Genel’s previously announced US$1.1bn capacity building liability for
infrastructure support to the Kurdistan Region of Iraq will be extinguished in its entirety at, or before, completion.

15 Jun 2009 – Heritage Oil announced the completion of a placing of a total of 25,400,000 new ordinary shares in
the Company at a price of 520p per share. The gross proceeds of the placing will be £132m.

9 Jun 2009 – Heritage entered into a non-binding MoU with Genel Enerji. The MoU is subject to various conditions
and execution of binding documentation to acquire Genel Energy International Limited, a private independent oil
and gas exploration and production company, with licences in the Kurdistan Region of Iraq. The proposed
acquisition would be paid for wholly in new shares of Heritage and would result in Genel shareholders owning
approximately 50% of the enlarged ordinary share capital of Heritage. It is anticipated that following the proposed
acquisition, the Company, as enlarged by the acquisition of Genel will be re-named HeritaGE Oil plc.

6 May 2009 – Heritage announced a major oil discovery in Iraqi Kurdistan and the completion of an initial test of
the Miran West-1 well. The Miran West structure has an estimated OIIP of 2.3-4.2Bbbl and recovery factor of 50-70%
due to the highly fractured nature of the reservoirs. From the pressure data recorded during testing management
estimates flow rates of 10,000-15,000bopd per well. The well has an estimated gross oil-bearing interval of 710m,
and oil produced during testing was 27o API with low sulphur, low gas-oil ratio and no water.

8 Apr 2009 – Heritage completed the sale of Eagle Energy Limited, a wholly-owned subsidiary of Heritage, to RAK
Petroleum Oman Limited for US$28m, plus a working capital adjustment of $0.4mn. Eagle Energy holds a 10%
interest in Block 8, Oman.

18 Feb 2009 – Heritage commenced oil and associated gas production from the West Bukha field in Block 8,
located in the Strait of Hormuz offshore of the Sultanate of Oman. Heritage has a 10% working interest. Initial gross
flow rates are approximately 15,000boed, comprising 10,000bbl of 42 o API oil and 30MMscfd of associated gas.

5 Feb 2009 – Heritage completed the Kingfisher-3A (Kajubilizi-3A) well in Block 3A, Uganda. The appraisal well had
a gross oil-bearing interval of approximately 90m, with approximately 22m of net oil pay. All three Kingfisher
reservoir intervals were intersected and pressure data indicated these to be in communication with the intervals
production tested in Kingfisher-1A and Kingfisher-2.

13 Jan 2009 – Heritage reported that the Giraffe-1 well in Uganda Block 1 could be one of the largest recent onshore oil
discoveries in Africa having multi Bbbl potential. A gross oil-bearing interval of approximately 89m, with approximately
38m of net oil pay and is considered to be structurally connected to the Buffalo discovery, creating the Buffalo-Giraffe
complex. Based on current mapping the Company's initial estimate of reserves for the Buffalo-Giraffe complex is over
400MMbbls. The company suggests that the Buffalo-Giraffe complex may extend further to the north and east and
include the Buffalo East prospect.

16 Dec 2008 – Heritage announced a new oil discovery in the Buffalo-1 exploration well in Block 1, Uganda. The company
reported 43m of net hydrocarbon pay with no-oil water contact encountered. The well was drilled to a TD of 637m
approximately ½ km from the crest of the structure and wireline logs indicate 28m of net oil pay. This is the largest
discovery in the Butiaba area to date and many other prospects mapped within Block 1 are characterised by similar
seismic amplitude anomalies to the Buffalo and Warthog prospects. The Buffalo-1 well is now being suspended as a
potential future producer. The rig will move to the drilling location for Giraffe-1 to be spudded within 2 weeks.

11 Dec 2008 – Heritage completed drilling of the Kingfisher-3 appraisal well in Block 3A Uganda. The well
encountered oil in all 3 of the Kingfisher reservoir intervals with a net pay of up to 40m and indications are that
these intervals are in communication with the three intervals tested in the Kingfisher-1A and 2 wells. The drilling of
Kingfisher 3 marks the end of the appraisal drilling on the field as drilling moves into development phase. The well
will now be suspended as a future producer in line with the Kingfisher-1A and Kingfisher-2 wells. Heritage holds a
50% working interest with the remainder held by Tullow Oil. According to the company the Kingfisher field is now
the largest light oil discovery in East Africa.

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Appendix 5: Capital structure

Heritage Oil has a total of 287.9M ordinary shares on issue, along with 23,597,010 share option with an average
exercise price of £1.52 per share.

Table 2: Major shareholders

Company % owned
Albion Energy 29.68
Capital Research & Management 11.21
Lansdowne Partners 10.10
London & Capital 3.48
Freebird Global 3.29
Blackrock Group 2.27
William Blair & Co 1.70
Barclays Plc 1.41
Standard Life Investment 1.20
JP Morgan Asset Management 0.94
Source: Bloomberg

Fundraising history
Table 3: Fundraising
Date Shares Offered (M) Price (GBp) Total raised (GBPm)
June 2009 25.4 520 132.1
November 2007 3.0 C$60.5 C$181.5
Source: Bloomberg

Debt

As of 31 December 2009, Heritage had a total of US$208m of cash and some US$15m of debt.

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Appendix 6: Resources classification framework

Source: Society of Petroleum Engineers

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Research Disclosures

Lionel Therond
Lionel has worked at Fox-Davies since April 2009. Prior to this, he had 13 years experience as an investor at JPMorgan Asset
Management and had previously spent 10 years in the Oil&Gas industry at Shell. Lionel graduated in Geology and Geophysics
(MSc) before gaining an MBA at Insead; he is also a CFA charterholder.
+44 (0)20 7936 5244
Lionel.Therond@fdcap.com

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Fox-Davies Capital Limited provides professional independent research services and all Analysts are free to determine which
assignments they accept, and they are free to decline to publish any research notes if their views change.

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Research disclosure as of 28 June 2010

Company Name Disclosure

Heritage Oil (HOIL) 7

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specialises in assisting international resource companies gain access to the UK, European and North American capital markets and has a
substantial background in emerging markets particularly in Africa, Asia, Russia and the CIS, raising over US$250mn in 2007.

FDC enjoys a successful track record in advising and undertaking fundraising transactions for its clients from private equity to IPO and
secondary offerings and works with over 350 specialised institutional resource and emerging markets funds worldwide.

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FDC provides professional advice based on effective analysis and research to assist its corporate clients in presenting their proposals to
the investment community. Our strength lies in the oil & gas and mining sectors where as a company we have advised clients on AIM
and ASX.

FDC is authorised and regulated by the Financial Services Authority (FSA) and is a member firm of the London Stock Exchange (LSE).

Fox-Davies Capital Coverage

Fox-Davies corporate client & coverage universe as of 28 June 2010:

Company Ticker Recommendation Date Target Price Last Price

Oil & Gas
Ascent Resources AST LN Equity BUY 22.04.10 £0.20 £0.04
Borders & Southern Petroleum BOR LN Equity BUY 01.02.10 £1.50 £0.64
Bowleven BLVN LN Equity BUY 28.06.10 £3.00 £1.30
Circle Oil COP LN Equity BUY 25.06.10 £0.90 £0.33
Desire Petroleum DES LN Equity HOLD 29.03.10 £1.00 £0.89
Enegi Oil ENEG LN Equity SELL 17.05.10 £0.10 £0.20
Falklands Oil & Gas FOGL LN Equity BUY 01.02.10 £4.00 £2.00
Gulf Keystone GKP LN Equity BUY 25.05.10 £2.00 £0.72
Gulfsands Petroleum GPX LN Equity HOLD 04.05.10 £3.00 £2.61
Hardy Oil & Gas HDY LN Equity BUY 26.05.10 £3.00 £1.72
Heritage Oil HOIL LN Equity BUY 28.06.10 £7.00 £4.14
Matra Petroleum MTA LN Equity BUY 26.05.10 £0.07 £0.02
Max Petroleum MXP LN Equity BUY 15.06.10 £0.50 £0.13
Petrokamchatka PKP CN Equity HOLD 14.01.10 C$0.15 C$0.045
Po Valley PVE AU Equity BUY 29.04.10 A$1.50 A$0.34
Range Resources RRL LN Equity BUY 17.12.09 £0.08 £0.05
Rockhopper Exploration RKH LN Equity BUY 04.06.10 £4.00 £2.87
San Leon Energy SLE LN Equity BUY 02.06.10 £0.80 £0.17
Sterling Energy SEY LN Equity SELL 11.06.10 £1.00 £1.16
Tower Resources TRP LN Equity HOLD 23.03.10 £0.02 £0.02
Victoria Oil & Gas VOG LN Equity BUY 21.04.10 £0.09 £0.03

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Disclaimer - Important Information

This document was produced by Fox Davies Capital, a trading name of Fox Davies Capital Limited (“FDC”), Whitefriars House, 6 Carmelite
Street, London EC4Y OBS. FDC is authorised and regulated by the Financial Services Authority (“the FSA”).

This document is not independent and should not be relied on as an impartial or objective assessment of its subject matter. Given the
foregoing this document is deemed to be a marketing communication and as such has not been prepared in accordance with legal
requirements designed to promote the independence of investment research and FDC is not subject to any prohibition on dealing
ahead of the dissemination of this document as it would be if it were independent investment research.

The research analyst is primarily responsible for the content of the research document. He/she certifies that all views expressed accords with
his/her personal views about the issuer or securities covered in the research document. The contents are based upon sources of information
believed to be reliable but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion
reflects our judgment at the date of publication and neither FDC, nor any of its affiliated or associated companies, nor any of their directors or
employees accepts any responsibility in respect of the information or recommendations contained herein which, moreover, are subject to
change without notice.

This is not an offer, nor a solicitation, to buy or sell any investment referred to in this document. The material is general information intended for
recipients who understand the risks associated with investment. It does not take account of whether an investment, course of action, or
associated risks are suitable for the recipient. FDC or its affiliated or associated companies and their directors or employees may, as principal or
as agent, make purchases, sales and offers to purchase or sell in the open market or otherwise and may have positions in or options on any such
investment(s). FDC may provide services (including corporate finance advice) where the flow of information is restricted by a Chinese Wall.
Accordingly, information may be available to FDC that is not reflected in this document.

This report has been approved in the UK by FDC solely for the purposes of section 21 of the Financial Services and Markets Act 2000. In the UK,
this report is directed at and is for distribution only to persons who (i) fall within Article 19(5) (persons who have professional experience in
matters relating to investments) or Article 49(2) (a) to (d) (high net worth companies, unincorporated associations, etc) of the Financial Services
and Markets Act 2000 (Financial Promotions) Order 2005 (as amended) or (ii) are intermediate customers or market counterparties of FDC (all
such persons together being referred to as “relevant persons”). This report must not be acted on or relied up on by persons in the UK who are
not relevant persons.

FDC Capital Limited may distribute research in reliance on Rule 15a-6(a)(2) of the Securities and Exchange Act 1934 to persons that are major US
Institutional investors, however, transactions in any securities must be effected through a US registered broker-dealer. Any failure to comply with
this restriction may constitute a violation of the relevant country’s laws for which FDC does not accept responsibility. By accepting this document
you agree that you have read the above disclaimer and to be bound by the foregoing limitations / restrictions.

Please note that unless otherwise stated, the share price used in this publication is taken at the close of business for the previous business day.

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Sales Research Market Making

Oliver Stansfield +44 (0)20 7936 5222 Peter Rose +44 (0)20 7936 5246 Russell Jackson +44 (0)20 7936 5214
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Genene Burnett +44 (0)20 7936 5225 Lionel Therond +44 (0)20 7936 5244 Chris Hart +44 (0)20 7936 5227
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Ian Lucas +44 (0)20 7936 5245 STX 77766

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Dealing
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ken.taylor@fdcap.com

STX 77767

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