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The Nkani G4-222 Property—Gabon, West Africa

Background and History

Gabon, a former French colony in West Africa, has become the continent’s fourth largest Sub-Saharan oil and gas producer with proven reserves of 1.9 billion barrels of oil and 3.98 billion cubic meters of natural gas. This small country has remained stable, attracting international investment and production sharing agreements with both multinational and independent petroleum exploration companies over the past 30 years. As a result, its prosperity has grown. With an estimated production around 300,000 barrels of oil per day (equivalent to US$18 million/day @ $60/barrel), 50% of Gabon’s GDP now comes from oil sector activities.

Recently, Gabon’s Ministere des Mines, de l’Energie, du Pétrole et des Ressources Hydrauliques issued a production sharing agreement for the Nkani G4-222 property located in the Gabon Estuary to Petrol One Corp. (a Canadian resource company) and Austin acting in concert. Petrol One will be the lead partner. The agreement refers to approximately 2,200 square kilometers of onshore territory covering the Gabon Estuary, Gabon’s capital city—Libreville—and two national parks (the Pongara national park to the south, and the Akanda national park to the north) and gives the partners exclusive exploration and production rights.

According to an engineering report* prepared for Petrol One, in the past, other enterprises have undertaken seismic surveys in the G4-222 area, but the assessments remain incomplete. The western side of the property is prospective for a deep structural trend widely covered by a thick salt layer, providing a strong seal. To date the structure has not been tested by drilling. The eastern side of the property has been explored and has oil showings on two wells in addition to a gas discovery on a third well. The report* also notes that “while there are no proven reserves due to lack of updated data, there are contingent resources which are favorable and prospective.” The Ozoumbele gas field is a contingent resource** that could contain between 106 bcf and 212 bcf of natural gas. The block also has two plays that—based on Monte Carlo simulations (computational modeling)—could hold between 29 million barrels and 140 million barrels of oil. These two plays are defined as prospective resources***. Significantly, approximately 40% of the property is currently unexplored. The production sharing agreement provides a five-year exploration period plus an additional 4-year exploration period. During the first period, the two partners must jointly commit at least US$10 million to complete a 700 km 2D seismic survey, and to drill one exploration well. During the second period, the partners must jointly commit US$12 million to drill one firm and one option well.

* An engineering report Form 51-101 Report on Reserves and Resources on Block Nkani G4-222 was prepared for Petrol One by BeicipFranclab (Cedex, France) on 1 September 2006. The full report can be viewed at www.sedar.com and is also available for download at here.

** Contingent resources are those quantities of oil and gas, which were estimated on a given date to be potentially recoverable from known accumulations but were not considered economic. There is no certainty that it will be technically or economically viable to produce any portion of the reported contingent resource.

*** Prospective resources are those quantities of petroleum that were estimated on a given date to be potentially recoverable from undiscovered accumulations. If discovered, they would be technically and economically viable to recover. There is no certainty that the prospective resource will be discovered. If discovered, there is no certainty that any discovery will be technically or economically viable to produce.

The Opportunity for Austin

As a result of its management strength, Petrol One presents unique credentials to succeed in Gabon and is therefore a strong partner for Austin. Through the structuring of the agreement the two companies have formed a close working relationship. Petrol One’s Board of Directors includes Sheikh Walid Al Rawaf, a pioneer of Petromin (a sister company of Saudi Aramco). Sheikh Walid’s experience includes Managing Director of the Mobil/Petromin refinery at Yanbu. Another key member of the board is Mohamed Messaoudi who has over 25 years experience in the oil and gas business holding senior positions with major and independent companies such as Nexen Inc., and Shell International’s operations in Oman, Tunisia, and Gabon. The opportunity for Austin is to act principally as an investment partner in the Gabon Estuary oil and gas project with the aim of generating revenue from the safe and economical extraction of any discovered oil and gas reserves.

Austin holds an indirect 18% interest after payout in the production sharing agreement described above. Petrol One Corp. holds a 72% interest after payout. A third party involved in the production sharing agreement is the ATAS Group of Saudi Arabia, which has a 10% carried interest after payout. The Government of Gabon has a back-in right for 15% carried interest, with an option for an additional 5% carried interest if production exceeds 30,000 barrels per day (this figure amounts to 10% of Gabon’s total production). Oil and gas exploration is inherently uncertain, but success in this venture will add significant shareholder value for Austin investors.

Current Status (October 2006)

Austin contributed US$900,000 towards a US$4.5 million signing bonus paid to Gabon’s Ministere des Mines, de l’Energie, du Pétrole et des Ressources Hydrauliques to issue the agreement. Petrol One will initially act as the manager of the property, but it is contemplated that a contract manager will be retained prior to the commencement of exploration operations.

Statements Regarding Forward-Looking Information: Some statements contained in this web site are forward-looking statements. Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially. There can be no assurances that future developments affecting Austin will be those anticipated by management. The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this information.