Offshore Gabon

The Company entered into a sixth exploration period extension during November 2009 and is required to spend $5.3 million for its share of two exploration wells and to acquire and process 150 square kilometers of 3-D seismic on the Etame Marin block by July 2014. One of the two exploration commitment wells was drilled in 2010 on the Omangou prospect at a cost of $8.6 million ($2.6 million net to the Company). The seismic obligation was met with the acquisition of 223 square kilometers of 3-D seismic in 2011. The remaining obligation is the drilling of one exploration well by July 2014.

As part of securing the second ten year production license with the government of Gabon, the Company agreed in January 2012 to a cash funding arrangement for the eventual abandonment of the offshore wells, platforms and facilities. The agreement calls for annual funding for the next seven years at 12.14% of the total abandonment estimate per year and 5.0% per year for the last three years of the production license. The amounts paid will be reimbursed through the cost account. The funding is expected to begin in the third quarter of 2012 after the final details are agreed with the government of Gabon. The abandonment costs for this purpose are estimated to be approximately $9.2 million net to the Company on a discounted basis. This $9.2 million abandonment liability is $5.4 million less than previous abandonment cost estimates of $14.6 million at March 31, 2012. The changes in estimates are the result of the Company’s reassessment of the mobilization/demobilization cost estimates as well as alternative abandonment procedures for the eventual abandonment of the block. The obligation for abandonment expenses related to the Gabon offshore facilities is included in the asset retirement obligation shown on the Company’s balance sheet. The impact of the changes in estimates on the results from operations for the three months ended June 30, 2012 was a $0.7 million reduction in operating costs due to decreased depletion expense, resulting in a $0.01 increase in per share amounts on a fully diluted basis.

Onshore Gabon

In October 2010, the Company signed a second exploration period extension for the Mutamba Iroru block which expired in May 2012. The Company was obligated to reprocess 400 square kilometers of 2D seismic and drill one exploration well. An agreement with Total Gabon (“Total”) was completed in August 2010, which established a joint operation on the block whereby Total acquired a 50% working interest in the block effective November 1, 2010. The terms of the agreement provided for Total paying 75% of the seismic reprocessing costs and the exploration well drilling costs. The seismic reprocessing has been completed.

In April 2012, the Company signed a third exploration period extension for the Mutamba Iroru block, which expires at the end of February 2013. The latest extension requires the Company to reprocess an additional 350 kilometers of 2-D seismic by the end of February 2013.

The well location site has been determined and drilling the exploration well is expected in the second half of 2012. The additional seismic reprocessing required by the third extension is scheduled to commence in the third quarter of 2012 with the cost being equally split between the Company and Total.

Angola

In November 2006, the Company signed a production sharing contract for Block 5 offshore Angola. The four year primary term with an optional three year extension awards the Company exploration rights to 1.4 million acres offshore central Angola. The Company’s working interest is 40%. Additionally, the Company is required to carry the Angolan national oil company, Sonangol P&P, for 10% of the work program. During the first four years of the contract the Company was required to acquire and process 1,000 square kilometers of 3-D seismic data, drill two exploration wells and expend a minimum of $29.5 million ($14.8 million net to the Company). The Company fulfilled its seismic obligation when it acquired 1,175 square kilometers of 3-D seismic data at a cost of $7.5 million ($3.75 million net to the Company) in January 2007 and 524 square kilometers of 3-D seismic data during the fourth quarter of 2008 at a cost of $6.0 million ($3.0 million net to the Company).

The government-assigned working interest partner was delinquent paying their share of the costs several times in 2009 and consequently was placed in a default position. By a governmental decree dated December 1, 2010, the former partner was removed from the production sharing contract, and a one year time extension was granted for drilling the two exploration commitment wells. Following the decree, the Company and the government of Angola have been working together to obtain a replacement partner. In early 2012, the Angolan government granted a further one year extension to November 30, 2012 for drilling the two exploration commitment wells in accordance with the production sharing contract. In July 2012, the Angolan government granted an additional two year extension until November 30, 2014 to drill the two exploration commitment wells.

In the first quarter of 2012, the Company provided the Angolan government with a written offer that would allow the Company to proceed with exploration activities without obtaining a new partner, subject to certain criteria including changes to the work commitment and working interest percentages. While waiting on a response to the offer, the Company identified a potential partner to participate in the block during the second quarter of 2012. The Angolan government and the potential partner are in discussions regarding the working interest acquisition. The Company believes the Angolan government will not respond to the Company’s written offer made in the first quarter of 2012 until the outcome of the discussions with the potential partner are concluded.

The remaining obligation is a two well exploration commitment. Each well is subject to a $5.0 million penalty ($10.0 million in aggregate for both wells) if not drilled during the contract term. The $10.0 million is currently recorded as restricted cash and is held in a financial institution located in the United States.

Because of the continuing uncertainty with the Angolan government providing a replacement partner, the Company has recorded a full allowance totaling $5.0 million as of June 30, 2012, against the accounts receivable from partners for the amounts owed to the Company above its 40% working interest plus the 10% carried interest. The allowance recorded in the six months ended June 30, 2012 totaled $0.6 million with the remainder having been recorded in 2011. The Company expects the allowance amounts will be paid to the Company if a new partner to the block is obtained.

United States

In September 2011, the Company acquired a 65% working interest in approximately 22,000 gross acres (14,300 net acres) in the East Poplar Dome field in Roosevelt County, Montana. The primary objective for this field is the Bakken/Three Forks formation. Pursuant to the terms of the acquisition, the Company is required to drill three wells at its sole cost, one of which must be drilled by June 1, 2012, with the remaining two wells by the end of 2012. A vertical exploration well, which met the time requirement for drilling the first well, finished drilling in June 2012 after discovering commercial quantities of oil in the Bakken/Three Forks formation. However, the well did not discover commercial quantities of hydrocarbons in the formations below the Bakken/Three Forks formation and has been temporarily suspended. The Company recorded dry hole expense of $2.9 million in the second quarter of 2012 for drilling costs associated with the deeper formations. A second well was spudded in June 2012 to be completed as a horizontal well in the Bakken/Three Forks formation and a third well is expected to be drilled in the fourth quarter of 2012 which will satisfy the drilling obligation.