STRATEGIC  REPORT DIRECTORS’  REPORT F INANCIAL  S T ATEMENTS www.bordersandsouthern.com  09 Borders & Southern Petroleum plc Annual Report & Accounts 2014 3. Appraise ASSESS THE COMMERCIALITY 4. Accrete BUILD A STRONG POSITION 5. Monetise MAXIMISE ASSET VALUE PROGRESS IN 2014 OUTLOOK PROGRESS IN 2014 OUTLOOK PROGRESS IN 2014 OUTLOOK •  The Company, with its adviser,  continued to seek partners to  fund the next phase of operations  which would include the appraisal  of the Darwin discovery and  potentially other exploration •  Whilst the decline in oil prices  during 2014 has put considerable  pressure on oil projects around the  world, Darwin is robust at oil prices  lower than current levels. Further,  exploration costs are declining  so the capital required to fully  appraise Darwin has significantly  reduced •  The Company remains confident  that a partner will be found  and the appraisal programme  advanced •  We received the processed  merged PSDM 3D data and we  carried out an initial interpretation •  We initiated a seismic inversion  project to aide the reservoir  characterisation and help de- risk the prospect portfolio and  identify additional targets •  We also evaluated the shelf  portfolio to assess volumes and  to help high grade exploration  targets •  The Darwin field volumetrics  were re-assessed incorporating  additional stacked pay intervals •  We plan to fully integrate the  inversion data to continue with  the portfolio assessment •  We will also evaluate the slope and  basin floor targets to integrate  into the prospect portfolio •  The Company believes that  bringing in a partner is the best  option to fund the next phase of work •  Once the Darwin discovery is  appraised, the Company will  have more options of funding the  development  •  The oil and gas industry has  witnessed oil price rises and  declines many times. During oil  price declines, the industry tends  to allocate funding to the best/ lowest cost projects and Darwin is  such a project so we are confident  that a fully appraised Darwin will  attract development funding Partial monetisation can occur at  all stages of the business cycle.  Partners can be brought into a  project soon after Access or during  the Exploration, Appraisal and  Accrete phases in order to help fund further work. But maximum value will be obtained  following the Appraisal and Accrete  phases. B&S believes its core skills lie in the  pre-development phase of the  Exploration and Production cycle  and will seek to monetise pre- production or partially monetise and  retain a lower interest non-operated  role through production. Once a working petroleum system  has been demonstrated through  the discovery of hydrocarbons, the  objective will be to maximise the  acreage position and add value to  the asset. Near field targets will be tested to  extend the discovery and exploration  will continue focusing on analogue  prospects within the prospect  inventory. Alternative play types will also be  tested in order to assess the overall  value of the acreage. If the drilling campaign results  in the successful discovery of  hydrocarbons, then an appraisal  programme will be executed in order  to constrain the resource estimates  and to assess the commerciality of a potential development project. Typically, several more wells will  be drilled. Coring and reservoir  flow tests will be undertaken  and exhaustive reservoir studies  completed. Positive results from this technical  work will lead to detailed facilities  engineering studies prior to a Final  Investment Decision ahead of  proceeding into a Development  project.