Petro Kamchatka

PetroKamchatka Resources Plc was incorporated as CEP International petroleum Ltd., in November, 1998, in Yukon, Canada. The Company was re-domiciled to Cyprus in August, 2009, and renamed PetroKamchatka Resources Plc. On November 23, 2009, the Company acquired PetroKamchatka Resources Plc pursuant to an offer whereby each outstanding share and warrant was exchanged, on a one-for-one basis to a common share and warrant by PetroKamchatka Plc, domiciled in Jersey. PetroKamchatka also completed a Plan of Arrangement with Bluerock Acquisition Corp., a TSXV listed capital pool corporation with no material assets or operations, on November 26, 2009, enabling it to become listed on the TSXV effective on December 11, 2009.

The Tigil exploration licence was issued to PetroKamchatka in December, 2005. The Icha exploration licence was issued to PetroKamchatka in December. 2006. Both required the Company to meet specific work commitment within specified time periods.

PetroKamchatka acquired the Urginskaya licence on February 1, 2008, which also requires specific work commitments.

In June, 2009 PetroKamchatka established four direct, wholly-owned Russian subsidiaries to bid on four exploration licences posted by FASU. These subsidiaries, being CJSC Kingi-Exploration, CJSC Palana-Exploration, CJSC Tvayan-Exploration and CJSC Kehta-Exploration, submitted bids in June, 2009 for the Pustaretskaya Block, the Palanskaya Block, the Ichinskaya Block and the Vorovskaya Block, respectively. The bid criteria were based solely on work commitments, with no cash bonus required. In September, 2009, FASU issued to PetroKamchatka four new exploration licences. These new licences are for the Pustaretskaya, Vorovskaya, Palanskaya and Ichinskaya blocks. These licenses have associated work commitments and five-year terms.

The Tigil, Icha and Urginskaya blocks are indirectly held via LukinCholot, in which PetroKamchatka currently owns a 90% interest. This was formerly 85%, but in august, 2009, MAGKO transferred to PetroKamchatka its 5% interest in LukinCholot in exchange for 5,200,000 common shares of the Company, plus transaction costs. The remaining 10% partner is the Koryakia Property Fund, a corporate vehicle of the regional administration in Kamchatka.

In December, 2005, PetroKamchatka sold a 50% interest in each of CJSC Tigil Exploration and CJSC Icha Exploration to KKPL, a Korea National Oil Company-led company, thereby indirectly selling a 50% net beneficial interest in the Tigil Block and the Icha Block.

In addition to other consideration provided to the Company and LukinCholot, for each of the Tigil and Icha blocks, KKPL agreed to pay 80% of the first US$10 million of exploration costs, and 53.75% of the next US$20 million of exploration costs. This sale to KKPL reduced the Company's net beneficial interest in each of the Tigil licence and the Icha licence to 42.5%, and also reduced the net beneficial interest in such licences held by the Koryakia Property Fund, indirectly through its 10% ownership of LukinCholot, to 5% and held by MAGKO, indirectly through its 5% interest in LukinCholot, to 2.5% (which was a minority shareholder of LukinCholot at that time).

Following the expenditure of the first US$30 million, LukinCholot and KKPL are obliged to share in the costs associated with the Icha licence and the Tigil licence in proportion to their respective share ownership in the prospective companies, provided that the Russian minority shareholders in LukinCholot continued to be carried. Thus, KKPL bore 53.75% of all subsequent costs until August, 2009, and 52.5% since, following the swap of MAGKO's 5% interest in LukinCholot for shares in PetroKamchatka.

On May 18, 2007, KKPL and KNOC filed for arbitration in the International Court of Arbitration (ICA) against PetroKamchatka, alleging it failed to perform its obligations pursuant to the Shareholder Agreements.

Following management changes at PetroKamchatka, in October, 2007, PetroKamchatka and KKPL, together with KNOC, signed a Settlement Agreement. As part of these agreements, the international arbitration proceedings initiated by KKPL and KNOC, referred to above, were suspended. Management considers that PetroKamchatka's obligations under the Settlement Agreement have been met. PetroKamchatka received a letter dated 29 July, 2009 from the ICA confirming KKPL and KNOC's withdrawal of its claims under the ICA proceedings. PetroKamchatka has requested a release of pledged shares in CJSC Tigil Exploration and CJSC Icha Exploration, and formal recognition of its 46.25% interest in the Highkelly rig, and expects KKPL to fulfil this shortly.

The founders of the Company were first attracted to the geology of the western portion of the Kamchatka Peninsula because it is similar, in some respects, to Sakhalin Island, the largest producing area in the northwest Pacific Ocean region. Both areas are located adjacent to the Sea of Okhotsk on the northwestern Pacific Rim, a geologically complex area where plate collisions resulted in the subduction of oceanic crust from an eastern direction. Sediment of early Eocene and Miocene age unconformably overlie Cretaceous to Paleocene deformed and metamorphosed accretionary rocks. Late Miocene and Pliocene tectonism contributed to significant faulting and folding of the sedimentary package, which can be very thick (over 1,000 metres) in localized sub-basins. Early studies of outcrops and modern seismic data acquired by PetroKamchatka confirm that the thick sediments of Eocene and Miocene age are present in its areas of operation.

The West Kamchatka basin also shared a similar exploration history as Sakhalin Island, where early surface geology-based drilling had yielded modest results, but later seismic-driven deeper drilling had led to commercial discoveries. In particular, significant gas and condensate reserves were discovered on the Kamchatka Peninsula in the 1980s. In particular, four fields with reserves estimated to total in excess 685 BCF, as estimated by BC Gas International Inc. in its report, "Kamchatka Regional Gas Supply Feasibility Study", are located approximately 100 kilometres south of PetroKamchatka's Icha block. However, because of the collapse of the Former Soviet Union, and its economy, these properties are only now being developed now.

Geophysical data from Russian sources and more recent data collection by PetroKamchatka indicate the presence of structures with potential to trap hydrocarbons in the Tigil, Icha and Urginskaya blocks.

PetroKamchatka completed a 360 km 2-D seismic program on the Tigil Block in the winter of 2005/2006, followed by another 120 km of 2-D seismic in the summer of 2006. The combination of these two seismic programs was sufficient to meet the 400 km seismic work commitment on the Tigil Block. The seismic was subsequently interpreted and a number of prospects and leads were identified.

In summer and fall 2008, PetroKamchatka conducted an additional seismic program on the Tigil Block, which successfully acquired 224 km of 2-D seismic. The seismic was subsequently processed with leads and prospects identified by PetroKamchatka.

PetroKamchatka completed a 404 km 2-D seismic program on the Icha licence area in the winter of 2006/2007, which enabled the Company to successfully meet its seismic work commitment on the Icha licence. The seismic was subsequently processed with leads and prospects identified.

PetroKamchatka completed a 198 km 2-D seismic program on the Icha Block in the winter of 2007/2008. The seismic was subsequently processed with leads and prospects identified.

Exploratory drilling was conducted on these licences between 1930 and 1980, with no commercial hydrocarbons being identified. In November, 2008, the Russian Federal Agency for Subsoil Use (FASU) extended the condition set forth in the Tigil licence which required PetroKamchatka to drill two exploration wells by the end of 2008 in order to keep the exploration licence in effect to 31 December, 2010. The revised condition requires PetroKamchatka to drill one exploration well before the end of 2009 and to drill a second well before the end of 2010, in order to hold the exploration licence to term.

PetroKamchatka spudded its first exploration well on the Tigil Block in late October, 2009. PetroKamchatka anticipates drilling a second commitment well in the Tigil Block in the spring of 2010.

Gross prospective un-risked oil resources in respect of a 100% interest in the Tigil, Icha and Urginskaya blocks have been estimated by D&M to range from 696 million barrels (low estimate) to 1,868 million barrels (high estimate), with a mean estimate of 1,228 million barrels, across 13 prospects and three leads. D&M attributed the prospects a truncated, TEFS-adjusted, Pe-adjusted, net oil and gas resources potential present worth of US$111 million.

Since inception, PetroKamchatka has raised approximately US$95 million in equity from private investors, with US$71 million of this raised since new management took the helm in September, 2007.

These funds have been used to cover the cost of five seismic programmes, the Company's share in two drilling rigs and other field equipment, plus the operating expenses of the Company. The balance of cash remaining is expected to cover the first two exploration wells and the Company's general and administrative expenses until the end of 2010.