In November 2006 Candax signed a PSA with the Madagascan Government for the oil and gas rights of Block 1101 onshore in the north of the country and received Presidential Decree in 2007.

The Block covers 14,900 square kilometres and is adjacent to of the Exxon operated, offshore, Ampasindava Block and the Ambilobe Block of Sterling where Exxon has farmed-in.

Block 1101 offers Candax a low cost entry into one of East Africa’s most prolific oil provinces with billion barrel potential. To date in its onshore Tsimiroro and Bemolanga fields, Madagascar has reported 30 billion barrels of discovered tar sands/heavy oil (8º to 16º API). Lighter oils (22º and 45º API) have also been discovered onshore, and are the target of new exploration both onshore and offshore. Candax (60% and Operator) and its partner EAX acquired the Block in the 2006 onshore Licensing Round.

Whilst the acquisition of Block 1101 is a departure from Candax’s core production/development based strategy, the Block offers low cost, high impact exploration potential. Limited data is currently available across the Block and a program of geological mapping, seismic acquisition and shallow drilling is planned in the first two years (Phase 1). The 3-phase exploration program has a total commitment of US $6 million of which phases 2 and 3 are optional. The initial phase has a commitment of US $1.5 million with a likely overall budget of US $2.5 million.

Analogies of the large geological anticlinal features that have formed the multi-billion fields of Tsimiroro and Bemolanga are believed, from initial geological mapping available to the partners, to be present within Block 1101. As well as numerous identified oil seeps onshore within the Block, a recent satellite-based oil seep study has indicated the presence of numerous active seeps just offshore. During 2007 and 2008, results from the initial geological field work, geochemistry and gravity / magnetics have confirmed the high potential of Block 1101. Over 5,000 metres of sedimentary section have been identified beneath the Block, together with numerous oil shows.

Candax is currently tendering a planned 2D seismic program, expected to commence in the third quarter of 2008, with the first exploration well planned for early 2009.