Argos raises prospective resource by 182% to 2.1 billion barrels of oil

Highlights

• New prospective resource estimate of 2,107mmbo

• The six structural prospects mapped from earlier 2D seismic data confirmed

• 22 new stratigraphic prospects identified, creating significant new opportunities

• Good quality sandstones predicted, with several prospects, including Rhea, exhibiting similar seismic anomalies to those seen at Sea Lion

• Progress made towards being drill ready in late 2011 / early 2012

• Various financing options to fund drilling costs are being actively considered

The new CPR identifies considerable additional prospectivity resulting from the interpretation of the Company’s recently acquired 3D seismic data over its 100% owned licence PL001. Based upon this report the total Best Estimate of unrisked potentially recoverable prospective resource on the Argos licence area amounts to 2,107 million barrels of oil (mmbo), an uplift of 182 per cent. on the previous resource estimate of 747mmbo.

The new CPR is available on the Company’s website, www.argosresources.com.

In April 2011 the Company announced the completion of the acquisition of 1,415 net square kilometres of 3D seismic data, including coverage over the entire licence area, a halo outside the licence boundaries and tie-ins to key wells. The entire 3D data set was processed on a fast-track basis from which the Company has identified a portfolio of prospects.

The prospects fall broadly into two categories:

• Combination structural and stratigraphic traps defined by seismic amplitude anomalies and in several cases supported by isopach and structural conformance with the anomaly.

• Fault bounded and four-way dip closed structural traps often with closures at several horizons providing multiple reservoir targets.

For the first category, a total of 22 new combination structural and stratigraphic prospects have been mapped. Four of these prospects are within the previously identified Boreas prospect area. The remaining 18 prospects were not apparent prior to the 3D data being acquired. These prospects are expected to contain good quality sandstone reservoirs with several, including Rhea, exhibiting similar seismic anomalies to those seen at the Sea Lion oil discovery. The Best Estimate of net un-risked potentially recoverable prospective resource for these prospects amounts to 1,508mmbo. In four areas within the licence a number of these prospects are vertically stacked, offering the potential for drilling targets to combine several objectives to be tested by one well. The four areas offer stacked Best Estimate potential of 216mmbo, 118mmbo, 800mmbo and 69mmbo. Additional leads, not included in the above numbers, have also been identified and are the subject of ongoing mapping.

For the second category of prospects, the structural traps, the new 3D data has confirmed the presence of all six structural prospects that were mapped from the reprocessed 2D seismic data and that were described in an earlier CPR by Senergy in June 2010. The 3D data has achieved better data quality and fault definition and has therefore improved confidence in mapping. The Best Estimate of net un-risked potentially recoverable prospective resource for these structural prospects amounts to 599mmbo (previous P50 estimate of 602mmbo in the June 2010 Senergy report based on 2D seismic).

Therefore, the total Best Estimate of unrisked potentially recoverable prospective resource on the Argos licence area currently amounts to 2,107mmbo, with additional leads still to be evaluated. The High Estimate is 7,301mmbo.

The final processed data for the entire survey area is due to be received around year-end. Further improvements in data quality are expected, which will assist in planned seismic modelling studies. Future work utilising this data will include modelling of potential reservoir sands within the Johnson gas discovery, which appears to extend into the Argos licence. Potential contingent resources for Johnson attributable to the Company have not been included in the above figures.

The Company continues to work towards being ready to drill in late 2011/early 2012 in order to have an option to contract the Ocean Guardian drilling rig which is currently operating in the area. Such preparations include gaining the approval for an Environmental Impact Statement, received on 29 September, and purchasing three wellhead assembly packages which are held in storage to avoid long lead-order item delays. Preparations to meet other approval requirements are continuing apace.

Commenting on the results of the seismic interpretation, Ian Thomson, Chairman of Argos, said:

“The 3D seismic we have obtained is the best quality data seen in the basin to date. This has allowed us to map with confidence numerous new stratigraphic prospects associated with the early Cretaceous delta system that is a principal feature of the licence area and which is intimately associated with proven oil source rocks of the same age. We have also confirmed as robust the six structural prospects identified from earlier 2D seismic data.

Identifying new stratigraphic prospects which were not evident on the old 2D seismic was one of the key objectives in acquiring 3D seismic data. This objective has been more than achieved, with the results reported above of 22 new stratigraphic prospects considerably exceeding expectations. At the time of planning the 3D seismic programme Senergy estimated that some 522 mmbo of new prospects might be identified. In fact we have identified almost three times that level of prospectivity, with additional leads still being mapped. We are therefore delighted that the seismic programme has proven to be so successful.

Various financing options to fund drilling costs are being actively considered.”