JOINT VENTURE AGREEMENT ON GEORGIAN CBM PROJECT

Agreement reached on the joint development of Coal Bed Methane (“CBM”) gas

and conventional gas potential around the Tkibuli

GIG has estimated Contingent Resources for the Tkibuli Project of

approximately 400 bcf of CBM gas;

GIG is the largest industrial holding company in Georgia;



The fast‐track program is designed for gas production and sales to potentially

begin within 18 months;

GIG to purchase all gas produced on a take or pay arrangement; and



Red Emperor is carried through the drilling of the first well and the remaining

Pilot project, is proposed to be predominantly debt financed, reducing capital

Red Emperor ” or “the Company ”) is pleased to announce

that the Company, along with its joint venture partners, Strait Oil and Gas UK Limited

(“

Strait ”) and Range Resources Limited (“Range ”) (together “the Consortium ”) have

executed a heads of agreement with the Georgian Industrial Group (“

GIG ”) with respect

to the joint development of the Coal Bed Methane project (CBM) and conventional gas

potential around the Tkibuli

‐Shaori Coal Field (“Tkibuli Project ”) in the Republic of

Georgia.

ARI ”) full development would involve 6 CBM wells per annum that are

forecast to produce between 0.3

‐0.5 mmcf/d per well. It is anticipated that over the first

3 years, production will build to rates that will fund further expansion of the CBM project.

The initial pilot project will focus on appraising area already known to be venting

methane, thus ensuring a higher chance of success. The work programme is anticipated to

commence in the second half of 2013 and will be predominantly debt financed, resulting

in limited capital commitments for Red Emperor moving forward. New wells will target

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‐track program is designed for gas production and sales to begin within 18 months given the

existing infrastructure and logistics. GIG have agreed a take or pay arrangement for all gas produced

by the Development Company at a 5% discount to a regional indexed price less transportation, thus

removing the monetization risk so often faced with prospective CBM projects in the region. Over the

last few years regional prices have averaged between US$8

‐ US$10 / mcf.

It is the intention of the Consortium to ensure that the first well of the pilot program counts as the

commitment well with respect to retaining Block VIb. Red Emperor will be free carried for the full

costs of this first well.

‐hydrocarbon wells have been drilled in the Tkibuli area,

many encountering hydrocarbons and one producing gas for over 35 years.

CBM has become an increasingly important source of energy around the world and production is well

established in the US, Australia and China. Access to market is key to commercialisation and,

although major pipelines transect the country, Georgia remains almost entirely dependent on

imports of foreign natural gas. CBM production from Tkibuli, therefore, could immediately be fed

into the local energy market.

‐fired

power station located in Gardabani, as well as importing 25% of gas currently used in Georgia. The

power station currently does not use any gas sourced locally in Georgia.

GIG is the largest holding company within Georgia and embraces a number of subsidiary companies

operating in the energy sector, acquiring and processing of natural resources, production of building

materials, logistics service and real estate development. GIG’s operations are concentrated on the

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ABN 99 124 734 961