Developing Hydrocarbons in Europe and the Mediterranean Basin

Developing Hydrocarbons in Europe and the Mediterranean Basin

Developing Hydrocarbons in Europe and the Mediterranean Basin

NOTESNOTES

Why the European Focus?Why the European Focus?

• Europe disenchanted by Moscow’s use of Energy weapon (Globe and Mail, January 2, ’06)

• Italy Taps Reserves, Will Raise Alarm Level (Platts, March 05)

• Italian Industry Minister Claudio Scajola ordered companies to increase imports of natural gas … “There’s no emergency, it’s a preventive measure..” Dec. 20, 05 (Bloomberg)

• Europe is a net importer of energy – Italy imports 75% of energy needs.

• Domestic production and sales don’t require access to transnational pipelines.

– Less logistics / fewer problems

• Gas prices of US$7.50 and rising. – Russian price increases will flow through to Europe and result in a

premium for European production

Areas of OperationsOnshore – Gas / Offshore oil focus

Areas of OperationsOnshore – Gas / Offshore oil focus

Exploration Prospect CriteriaExploration Prospect Criteria

• Proven geological basins– under-explored for a variety of reasons with historically poor seismic

coverage.

• Material working interests (minimum 40%)– providing substantial share price leverage upon success.

• Close proximity/access to infrastructure and distribution networks.– small accumulations are extremely profitable.

• Potential for low development costs and early cash flow.

• Favorable fiscal and PSA terms.

Corporate Overview January 2006Corporate Overview January 2006

• TSX-V and AIM Listed (“GRV”)

• Market Capitalization C$95 million

• Shares on issue 133 million (142 million fd)

• Average Daily Volume > 750,000 shares

• Cash – US$11 million - minimal payables

• 2006 – Drilling planned in Italy, Romania and Slovenia (6 wells)

– Capex budget

• London Head office with Regional track record and experienced

• 10% rolling stock option plan

San Marco Permit, Po ValleySan Marco Permit, Po Valley

San Marco Permit, Po ValleySan Marco Permit, Po Valley

• Over 120 oil & gas fields discovered in the last 20 years in the Po Valley. Exploration for the past 50 years.

• Permit surrounded by 1 Tcf plus of discovered gas; operated by Eni.

• Enforced relinquishment by Eni in the late 1990’s (EU Directive)

• Excellent infrastructure and distribution facilities through region.

• New ventures and projects still available in the Po Valley.– Grove applied for Solarono block – December ‘05– Grove granted Casli Cocchi Permit – December ’05

• Tax Rate ~ 30% and Royalty of 7%

• Other regional players: Eni-Agip, BG Group, Forest Oil, JKX, Northern Petroleum, Po Valley Energy, Vintage Petroleum, Italmin.

San Marco Permit Abbadesse Discovery and Exploration Potential

San Marco Permit Abbadesse Discovery and Exploration Potential

San Marco Permit Eni Mapped Prospects

San Marco Permit Eni Mapped Prospects

San Marco PermitSan Marco Permit

Abbadesse Discovery• Significant multi-pay gas reservoirs

• Grove has mapped reservoir extension in adjoining Eni concession

• Data exchange agreement entered into with Eni – will allow for accelerated development and reserve allocation

• Eni spudded Longanese-1 step out well 1,100 meters from Abbadesse-1 and will be testing in early February 2006

Prospectivity of San Marco• Abbadesse discovery validated Grove’s missed-play strategy

– Subtle low relief strategraphic traps

• US$800,000 seismic program during 2005 has identified three multi target prospects and leads associated with basin floor flans and channels.

• Three ready to drill prospects.– Two to be drilled in 2006.

• FURTHER UPSIDE – 50% of existing seismic still to reprocess.• Ongoing exploration over the next 2-3 years • Potential for in excess of 400 bcf of gas in Permit

Abbadesse-1 Discovery Test ResultsAbbadesse-1 Discovery Test Results

San Marco PermitsBlugas/Grove Joint Venture

San Marco PermitsBlugas/Grove Joint Venture

• Blugas co-operative owned by 9 regional municipalities delivering gas to more than 400,000 customers

• Abbadesse Discovery– Grove’s NRI on attributable production is 75.7% (includes royalties and Blugas

discount)

– Long term Take or Pay gas sales agreement with variable pricing based on market conditions.

• Balance of San Marco Concession– Groves NRI on attributable production is 95%

– Seismic farm-in negotiated

– 72.5% of costs - 50% working interest

– Blugas to fund 50% of seismic acquisition, processing and interpretation

– Blugas to meet 72.5% of drilling, testing and completing multiple wells on any structure

– No back-in or sole risk rights

– Long term gas sales agreement (no discount)

Sicily Channel PermitsTunisia and Italy


Prospect / Lead

Area Resource

Volumes

Acres mmbbls

GROVE-PANTELLERIA

Sambucca* 17455 234

Galliano* 12182 79

East Gallaino*

4242 14

Nth Tazerka*

7413 20



• Groves acreage position in the Sicily channel has increased to ca 8,000 sq. km with the acquisition of the Kerkouane permit.

• Grove holds 100% of both blocks. Farm out process to commence this week through Stellar Energy Advisors

• 750 km of seismic shot, processed and interpreted during 2005 over GR 15 Pantelleria Concession.

• Results have validated prospectivity identified from vintage 1982 seismic and lead to acquisition of Kerkouane Permit.

• Substantial structures with potential for stacked pay have been mapped.

• Under explored in Italian waters with the benefits of Tunisian geology and Italy royalties.

Tunisian Acquisition from AnschutzKerkuoane and Chorbane Permits

Tunisian Acquisition from AnschutzKerkuoane and Chorbane Permits

• Binding agreement with Anschutz; subject to assignment by Tunisian authorities and finalization of performance bond

• Kerkuoane Permit – 6,720 sq km– Initially awarded 1998, exploration

permit 2000– Extensive geological and geophysical

work carried out, including field exploration surveys

– Historical expenditure of US$3.2 million– 5,323 km of 2D seismic reprocessed– 1,728 km of 2D seismic acquired

• Chorbane Permit – 2,428 sq. km’s– 444 km of seismic reprocessed– Historical expenditure US$1 million



Prospect / Lead

Area Resource

Volumes

Acres mmbbls

KERKOUANE

El Houaria 6762 251

Cap Bon Mare

7422 202

Zaghouan 8487 211

Pantelleria 10989 202

Carthage 8500 45

Menzil Termime

1869 31

South Craiova Concession (40% Grove)Oil Fields in South Romania and Bulgaria

South Craiova Concession (40% Grove)Oil Fields in South Romania and Bulgaria

South Craiova Concession (40% Grove)South Craiova Concession (40% Grove)

• High quality exploration acreage in known hydrocarbon province.

• Close to existing infrastructure and facilities.

• Significant under-explored land position - 1.5 million gross acres – Concession borders the producing Romanian fields to the north and Bulgarian fields to the south.

• Historical exploration drilling confined to depths of +/- 1,500 meters.

• Evidence of multiple plays and reservoirs, ranging from shallow Tertiary sands through the Cretaceous, Jurassic, Triassic and Paleozoic.

• Preliminary mapping: 20 plus leads – multi reservoir. Substantial Block potential – several hundred Mmbbls potential OIP.

Petisovci-Dolina Gas FieldPetisovci-Dolina Gas Field

Petisovci-Dolina Gas Field – (45.1% Grove)Petisovci-Dolina Gas Field – (45.1% Grove)

• Multi-zone liquid rich gas field (6 zones)• Last field activity 1990 – fracing of PG1 and PG5• Wells PG1 + PG5

– Historical production ~ 9 bcf– 2-4.5 mmscf/d historical production (post frac)

• Gas price > C$7.00 mcf• EU member state, low royalties (<US$0.1 mcf)• Excellent reserve potential

Resources – Attributable to Grove Interest (zones A – E)

Low Estimate Best Estimate High EstimateBscf Bscf Bscf

Discovered Resources 152 281 478Contingent Resource 76 159 300

Source: Troy IkodaCut off parameters: Shale volume <50%; Porosity >7%; Water saturation <60%

Petisovci-Dolina Gas Field – Slovenia Well Locations

Petisovci-Dolina Gas Field – Slovenia Well Locations

Petisovci-Dolina Gas Field (45.1% Grove)Petisovci-Dolina Gas Field (45.1% Grove)

• D-14 appraisal well drilled to depth of 2,805 metres.

• Multi fracture / stimulation commenced December 2004.

• Three reservoir intervals fractured to allow multi zone completion to connect perforated intervals and access larger volumes of gas.

• Testing results inconclusive. Rig moved offsite before testing could recommence.

• March 2006 - Re-enter D-14 and deepen well to determine whether commercial flow rates can be achieved.

Management and DirectorsManagement and Directors

Glenn Whiddon (London) – CEO

• Background in banking and corporate advisory working for the Bank of New York in Sydney, Melbourne, Geneva and Moscow. Established a boutique merchant bank in Moscow in 1994 undertaking corporate advice and direct investments.

Feroz Sultan (London) – COO

• Petroleum geologist and engineer with over 34 years of experience in management, development and production of oil and gas fields.

• Has worked in Pakistan, Egypt, UK North Sea and the FSU for Wintershall, Deminex, Burmah Oil, BNOC and Dragon Oil, and most recently with Troy Ikoda as a reservoir consultant.

Charlie Nieto (London) – G.M. Operations & Project Development

• Technical Manager for Shell Italia and Enterprise Oil Italia (2000 & 2004). Worked in Italy, Norway, North Sea, North Africa, and Far East.

• 15 years with Enterprise Oil holding as Joint Venture Manager, Senior Reservoir Engineer and Petroleum Engineer.

Management and DirectorsManagement and Directors

Anthony Hawkshaw (London) – CFO

• Member of the Institute of Chartered Accounts of Ontario. Extensive experience in international finance, equity raising and acquisitions. CFO of Pan American Silver Corp. from 1995-2003

Rob Downey – Vice President, Legal & Commercial

• Practiced as a barrister and solicitor of the Supreme Court of Western Australia and the High Court of Australia. Extensive experience with listed companies.

Michael Knowles – Non-Executive Director

• Past Chairman and Director of Troy-Ikoda Limited . Currently Chairman of Ikon Science Limited and Virgo Energy Limited. Held senior positions with Premier Oil plc, UK Offshore Operators Assoc. & British Petroleum.

Andrew Childs BSc (Perth) - Non-Executive Director

• Started his professional career as an exploration field geologist. Undertook the role as General Manager of a successful geotechnical consulting group.

• Andrew worked with one of Perth's leading human resource consultancies before founding Resource Recruitment in 1995.

UK North Sea – Virgo Petroleum UK North Sea – Virgo Petroleum

• Consolidation of the 3 companies assets creates a material exploration portfolio.

– 24 licences

– 30 prospects

• Grove holds 27.5% pre IPO, scheduled for 1st half 2006.

• Experienced and impartial management team will focus effort on best assets.

• Management team not related to any of the parent companies.

• Supported by Ikon Science.

– One of the UK’s leading sub surface technology companies.

• “Size of the prize.”

– Collectively the portfolio has the potential for 1Tcf gas and 100 mmbbls oil reserves.

What to expect from 2006What to expect from 2006

• Abbadesse Discovery (San Marco Exploration Permit)– Appraisal drilling and reserve delineation.– Production and cash flow (GRV models 20 MM scf/d from 3 wells / 3 zones).– Joint venture with ENI (subject to results of Longasese-1 ENI exploratory well

expected early February 2006).

• Petisovci-Dolina Gas Field– Re-enter D-14, deepen well, clean up well bore damage and retest.– Review and evaluate test results to determine further action.

• San Marco Exploration Permit (excludes Abbadesse discovery)– Drill two exploration wells Abbadesse analogues.– Expand prospect inventory beyond existing mapped structures.

• South Craiova Exploration Permit– Two /three exploration wells for mid 2006.– Additional 75 km seismic planned for north west and central– Two / three exploration wells based on seismic results for 4th quarter 2006.

What to expect from 2006What to expect from 2006

• Sicily Channel (Pantelleria and Kerkouane Permits)– Farm out acreage and plan and permit exploration well in the Kerkouane

Permit during 1st quarter 2007.– Integrate all seismic and geological data acquired from Anschultz

• Chorbane Exploration Permit– Review and interpret existing data base.– Seek farm in partners– Acquire additional 100 km of 2-D seismic late 2006.

• Dutch North Sea– Gazette and award of 4 blocks. (One block close to finalization)

• UK North Sea– List Virgo Petroleum plc on AIM prior to June 30, 2006.

ConclusionConclusion

• Excellent portfolio, large acreage position in proven geological basins.

• Active exploration drilling program planned for 2006 in Italy, Romania and Slovenia. Rig availability confirmed.

• First Gas Sales scheduled for Abbadesse during 2006.

• Imminent booking of reserves. Awaiting Eni results for Longanese - 1

• High working interests - Grove has substantial share price leverage to drilling success and commencement of production.

DisclaimerDisclaimer

Some of the statements contained in this release are forward-looking statements. Forward looking statements include but are not limited to, statements concerning estimates of recoverable hydrocarbons, expected hydrocarbon prices, expected costs, statements relating to the continued advancement of the Company’s projects and other statements which are not historical facts. When used in this document, and on other published information of the Company, the words such as “could,” “estimate,” “expect,” “intend,” “may,” “potential,” “should,” and similar expressions are forward-looking statements. Although the Company believes that its expectations reflected in the forward-looking statements are reasonable, such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors could cause actual results to differ from these forward-looking statements include the potential that the Company’s projects will experience technical and mechanical problems, geological conditions in the reservoir may not result in commercial level of oil and gas production, changes in product prices and other risks not anticipated by the Company or disclosed in the Company’s published material. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties.

NOTESNOTES

Suite 4, Audit House, 260 Field End Road,Ruislip, Middlesex, HA4 9LT

Telephone: +44-208-429-7478Facsimile: +44-208-429-7479

Email: [email protected]: www.groveenergy.com

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Developing Hydrocarbons in Europe and the Mediterranean Basin