Carnavale will earn a 20% working interest in Lambouka, which is scheduled to be drilled in the June quarter 2010.

Lambouka Project - Figure 1: Map showing Lambouka oil and gas project.

Location

Lambouka lies in 400m water depth and straddles the Italian and Tunisian international boundary. It is a large tilted horst block with a combined prospective mean resource of 270 MMBOE, targeting three prospective and regionally proven hydrocarbon objectives namely the highly productive Middle to late Miocene Birsa Sandstone, the Middle Miocene Ain Grab Limestone and the deeper Late Cretaceous Abiod Chalk.

Highlights

• Key strategic investment in a mature offshore oil and gas opportunity in politically stable producing offshore oil and gas areas close to facilities, ready to drill.
• Lambouka contains three targets in formations that are highly prospective and importantly, regionally these target reservoirs are traditionally hydrocarbon bearing.
• Approximately US $20 million dry well cost.
• Lambouka has not been previously recognized due to lack of integrated seismic data across the Italy - Tunisia international Border and may be one of the largest untested structures in the Mediterranean Sea.
• 3D seismic acquisition over Lambouka commenced in March 2010 and completed in April 2010.
• A contract with a recognized offshore deep water drilling contractor has been signed and a rig has been selected for a planned spud date of 15 June 2010.

Transaction Terms

Carnavale has entered into an agreement with Audax Resources Limited to acquire a 20% working interest in Lambouka.

In consideration for the assignment of the 20% working interest, Carnavale:

(i) will pay US $200,000 on signing of the agreement; and
(ii) contribute up to US $5,400,000 for the Farm-in Well Costs.
(iii) after the Farm-in Date, Carnavale (or its nominee) shall pay its Farm-in Interest share of all costs, expenses and liabilities in connection with Lambouka in accordance with the JOA.

In the event that the drilling of a well in Lambouka does not occur within 6 months, the US$200,000 will be refunded by Audax Resources Limited.

Capital Raising

Carnavale has finalised plans to raise up to $2 million through a private placement of shares and options to clients of Alto Capital. Carnavale proposes to issue up to 10 million shares at an issue price of $0.20 cents per share, with a 1 for 2 free attaching option (CAVO) exercisable at 20 cents per share and expiring 28 February 2013.

Funds raised will be used to contribute to the investment in the Lambouka project.