ORIVA PROJECT

The Oriva Project comprises two contiguous project areas, Oriva Throne which is in production and Oriva Federal which is in the permitting phase. The Oriva Project is located approximately 21 kilometres west of Gillette, Wyoming, and totals 505 net hectares (1,248 acres) in Sections 8, 9 and 10, Township 50 North, Range 74 West, Campbell County.

The Oriva Project contains nearly all productive coals in the Powder River Basin: Felix, Smith, and Anderson seams (depths 60 to 300 metres), Canyon/Cook and Wall seams (depths 300 to 500 metres). In addition to these primary coal bed targets, there are two deeper seams, Moyer & Danner at depths of approximately 750 metres.

The proximity of Oriva Throne to Oriva Federal is of strategic importance, not only for the addition of reserves but to the overall project development with access to existing infrastructure and operations.

In addition to the CBM potential of the Oriva Project, a conventional oil and gas prospect in the Lower Cretaceous Muddy Formation may be developed.

The proximity of Oriva Throne to Oriva Federal is of strategic importance, not only for the addition of reserves but to the overall project development with access to existing infrastructure and operations.

Oriva Throne

The consolidated entity holds a 75.975% Working Interest (60.75% NRI) in the Oriva Throne tenements which total 146 net hectares (361 acres). Oriva Throne is operated by Emerald Operating Company and Rocky Mountain Exploration of Denver, Colorado which holds the remaining 24.025% Working Interest (19.25% NRI). The entire leasehold interest is subject to a 20% land/mineral owner royalty.

Production during the half year at Oriva Throne was from the 5 state mandated 32 hectare (80 acre) spacing CBM pad sites each of which have been developed with 3 wells, producing CBM from the Felix, Smith, Anderson and Wall Coal seams plus 3 ¡®exception location¡¯ Wall seam wells.

CBM production for the half year was as follows:

During the half year, CBM production was sold for an average of US$4.60 per Mcf for total net revenues of US$123,896.

Oriva Federal

The Company holds a 100% Working Interest (85.5% NRI) in the Oriva Federal tenements which total 359 net hectares (887 acres). The entire leasehold interest is subject to a 12.5% mineral owner royalty and a 2% overriding royalty. On the basis of the State mandated 32 hectare (80 acre) well spacing, the Oriva Federal tenements have the capacity for 11 pad sites.

CBM Development

The fully permitted Oriva Federal project will develop 11 pad sites on the State mandated 32 hectare well spacing with three CBM production wells on each pad. Overall project development will involve the drilling of 33 wells totalling approximately 13,400 metres (44,000 feet), in-field piping for gas and water gathering 20,000 metres (66,000 feet), underground electrification for its pumping requirements and construction of multiple water retention reservoirs and pits. The Company¡¯s Water Management Plan provides for standard CBM style reservoirs either along or in ephemeral channels with the project designed to fully contain its water output of nearly 25,000 barrels of water per day in constructed earthen pits, called Off-Channel Containment Pits. In addition, two contracts for in-field gas compression and gas transportation to markets are in place.

Conventional Oil and Gas Development

Under the terms of a Conventional Oil and Gas Farmout Agreement, Carpenter & Sons and North Finn (¡®C&S-NF¡¯) of Casper, Wyoming, as Operator, earned an 81% NRI to conventional oil and gas (not coal bed methane which is retained by the Company) production in one half of the Oriva Federal leasehold by drilling test well Oriva Deep Federal No 9-8A. The completion of a second well will earn-in C&S-NF to the remaining leasehold interest.

The Company retains a 19% Net Revenue Interest which will cover all royalties (totalling 14.5%) and will retain a 4.5% Net Revenue Interest to conventional oil and gas production from the Oriva Federal leasehold. Further, for future wells, the Company has the option to convert its 4.5% NRI to a participating 20% Working Interest.

Late in 2006, the Oriva Deep Federal No 9-8A conventional oil and gas well on the Company¡¯s Oriva Federal property was completed to a depth of 2,949 metres (9,676 feet). The well has been cased to 2,944 metres (9,660 feet) in the Cretaceous Muddy Formation, the primary target, as a potential natural gas and condensate or oil producer.

In addition to the primary Cretaceous Muddy Formation target, gassy Cretaceous aged fractured shales situated above the primary target were intercepted and will continue to be evaluated for potential oil and gas production. The Muddy pay zone found in Well No.9-8A is similar to that found in the nearby Amos Draw field, located 3 miles northwest, which has a cumulative production of 2.7 million barrels of oil and 67 Bcf of gas since its discovery in 1982. The Kingsbury Creek field has also produced commercial oil and gas since its discovery in 1968; it is located 1.6 kilometres (1.0 mile) mile southeast and has produced 627,000 barrels of oil and 11 Bcf of gas.

The Company has been advised by C&S-NF, as Operator, that production testing initially commenced before the Oriva Deep Federal No 9-8A well had been tied into an existing Western Gas-Anadarko pipeline which is less than 1.6 kilometres (1.0 mile) from the well. Western Gas-Anadarko has advised the Operator that it will restrict the daily gas production to its compressor due to the high pipeline pressure that the Oriva Deep Federal No 9-8A is delivering. The Operator is evaluating piping alternatives and will be continue its production testing.

Preliminary daily flow tests are producing 15 to 20 barrels oil per day and 80 to 100 Mcf of gas per day. Testing is continuing.

A second deep well is being proposed to the US Bureau of Land Management for their approval with drilling planned in the near future.

In addition to Oriva Deep Federal well No 9-8A, on the basis of 65 hectare (160 acre) spacings, there are an additional 5 Muddy well locations which are able to be developed on the Oriva Federal project.