Nile Valley Petroleum Ltd.

Nile Valley Petroleum Limited (NVPL) is Citadel Capital’s Sudanese oil and gas exploration and production Platform Company. In June 2008, NVPL acquired participating interests in three highly promising blocks (Blocks A, 9 and 11) and is currently engaged in the exploration of all three assets. The three blocks cover a total area of 263,718 square kilometers.

OPERATIONAL UPDATE

As of year end 2010, NVPL held a 78% participating interest in Block A, located in Sudan’s southern region. In addition, NVPL held a 71% participating interest in each of Blocks 9 and 11, both located in Sudan’s central region.

Block A is optimally located at the junction of the Muglad and Melut basins. Both basins are considered to be among the world class hydrocarbon mature basins and contain the majority of Sudan discovered oil fields.

To the west of Block A, and along the south extension of Muglad basin, are Blocks 1 & 5A which consist of several discovered oil fields. The Panour-N1 well is the most recent discovery in Block 5A which is located about 17 kilometers to the west of the Block A boundary.

Blocks 9 and 11 lie in the fairly unexplored northern part of the country. Six prospective basins, including Khartoum Basin, have been identified by gravity and seismic profiles in Block 9. In 2009, a gas discovery was made in Block 8, located 100 kilometers to the southeast of Block 9, which is on trend with the Khartoum Basin.

Block 11 also consists of several basins that represent the northwest extension of the Melut basin. In 2009, a discovery well in Block 7 was located about 95 kilometers to the southeast of the Block.
In April 2011, NVPL successfully farmed out 30% of its participating interest in Blocks 9 and 11.
Under the terms of an agreement reached in May 2011, Sudapet, the state-owned Sudanese oil company, will increase its participating interest in Blocks 9 and 11 to 59% from 29%, paying US$ 10 million for the additional interest. At the same time, NVPL will reduce its participating interest to 41%. Under this agreement, NVPL will be entitled to recover all of the recoverable cost pool — US$ 73 million — for Blocks 9 and 11.

As lead shareholder, Citadel Capital has been funding NVPL’s monthly running costs, including salaries, accrued payables and state entitlements, for some time.

The US$ 10 million consideration will be used to meet NVPL’s obligations to fund a budgeted work program mainly in the two blocks.

NVPL’s interest in its southern Sudanese concession remains unchanged at 78%. The two northern plots are together approximately one-and-a-half-times as large as Egypt’s offshore Gulf of Suez zone, while the southern block (unaffected by this transaction) is nearly three times as large as the Gulf of Suez offshore area.

Sudapak Operating Company, a joint venture between the contractors, is operating all three Blocks.