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Operational Update, 3rd Quarter 2010

North West Gemsa

Vegas Oil & Gas operates the NW Gemsa concession located in the Gulf of Suez basin in the Eastern Desert of Egypt. The company discovered the Al Amir SE and Geyad oilfields and the Al Amir 18o API heavy oil discovery. Production from the two fields is holding steady at 9,000bopd but is expected to rise to 15,000bopd in 2011 under a planned waterflood.

Al Amir-1 heavy-oil discovery well was re-entered, completed and tested at 300bopd from the South Gharib Formation at a depth of 4,750ft. Geological interpretation of this formation is ongoing in view of the heavy oil shows seen in the Al Amir SE-6 well three kilometres distance from Al Amir-1.

The Al Ola-1 exploration well spud on July 15th and reached TD at 14,323ft in the Nukhul Formation. This well is situated outside the southern boundary of the Al Amir SE Development Lease and was intended to test an undrilled structural compartment that might prove to be an extension of the Al Amir SE oil field. The primary objectives of the Rahmi and Shagar Kareem sandstones currently producing in the Amir SE oil field were found to be oil-bearing in Al Ola-1, and, as prognosed, the reservoirs are not in free communication with the main field updip. The well will be put on production in 4Q, and further appraisal drilling will take place. A secondary objective in Al-Ola-1 was the appraisal of a new play in the Lower Rudeis Formation which was tested in Al Amir SE-6 well and flowed gas and condensates. In Al Ola-1, high gas readings were encountered and logged while drilling through several sandstone intervals between 13,400ft and 13,670ft, and a programme of testing is being considered.

Vegas as operator has working interest in the NW Gemsa Concession of 50% with Circle Oil at 40% and Sea Dragon Energy at 10%.

East Ghazalat

Vegas Oil & Gas also operates the East Ghazalat concession in the Abu Gharadig Basin of the Western Desert. The concession was awarded to Vegas 100% in 2007 after a licensing round. Following acquisition and processing of high resolution 3D seismic data, the first phase drilling campaign involving four exploratory wells was completed and two oil discoveries made. Exploration wells Safwa-1 & Safwa NW-1 both tested 34o API oil from Upper Bahariya sandstone reservoirs with average rates of 250bopd. Other prospects have been identified in the area and a drilling campaign of three wells will commence in 4Q 2010 to test two structures and appraise the Safwa oil discovery. Successful outcome of this phase will lead to application of a development lease from the Egyptian authorities, followed by further exploration drilling for the later exploration periods of the concession agreement. TransGlobe Energy farmed in and took a 50% non-operated working interest in February this year.

Alam El Shawish West

The Alam El Shawish West concession in the Abu Gharadig basin of the Western Desert was awarded to Vegas 100% in July 2005, following a licensing round. A fast-track programme of 3D seismic acquisition and drilling resulted in the establishment of four development leases and early production of oil from five fields in 2008. Production from all oil wells is currently around 2,500bopd. Appraisal drilling through the first half of 2010 led to the discovery of three new oil pools in the Lower Bahariya and Kharita formations in Bahga field and Abu Roash G formation in Bahga SE field. Total addition to in-place reserves is in the region of 25MMbbl. First Gas from the concession commenced in July and production is currently at 85mmscf/d from two wells, plus 5,800bbl/day of condensate.

Operatorship was transferred to Shell in February and the post-farmout interests in the concession are Shell 40%, Vegas Oil and Gas 35%, and GDF SUEZ 25%.