Forum Reserach Note June 2005

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Forum Energy Resources is an oil and gas company that is primarily focused on the acquisition
and exploration of natural resources, mainly in hydrocarbons and coal. It is currently focusing
primarily on the hydrocarbon and coal potential of the Philippines and is set to become a gas and
coal producer in 2006 when its Libertad gas field and its South Cebu Coal Operating Contract come
on-stream. Further oil production will be added if it acquires Basic Petroleum & Minerals Inc, a
Filipino company, with a stake in the Nido and Matinloc oil producing fields and a number of
additional prospects and leads on block SC 14 A - D. Forum has a large number of oil and gas
prospects and leads on its SC40 and GSEC (Reed Bank) 101 exploration and development
contracts, in particular the Sampaguita prospect.
The Libertad gas field, the Maya & Sampaguita Prospects and Corporate Acquisitions
Forum expects to start developing later this year the small Libertad gas field located on Cebu Island.
It expects to monetise the value of its gas reserves by converting it to electricity with the use of a
number of generators. The Philippines Government sees this development as a role model for future
gas-to-electricity projects in the country. Forum also expects this year to re-enter its second well on
the Maya gas field, also on Cebu Island. The workover is to re-evaluate the field before long term
testing, and estimates indicate that the Maya field prospect could have reserves of 4 m bbls of oil or
14 BCF of gas. The Tañon Strait prospect, offshore west Cebu Island, which contains the
Sampaguita prospect, is to be evaluated with the Company shooting a large 3D seismic programme
starting in July. Potential reserves are estimated at 264 m bbls on an oil case scenario or 660 BCF
on a gas case scenario.
Earlier this year, Forum completed a farm-in to GSEC 101 (Reed Bank) with Sterling Energy Plc,
that has the exciting Sampaguita gas prospect with possible reserves of between 5 TCF and 12 TCF
of gas reserves and is on trend with the giant Malampaya gas and oil field. There are a number of
other prospects and leads on the block. Forum is in discussions to acquire Basic Petroleum &
Minerals Inc., a Filipino company, that holds an interest in the Nido and Matinloc fields that contain
proven producing reserves offshore North West Palawan. Forum holds two Coal Operating Contract
(COC) on the Island of Cebu, with potential rerserves of up to 20 m tones of coal.
Recent news-flow: 2D Seismic completed.
Since the private placing in June, when the Company raised £3.4 m, Forum has completed shooting
2D seismic over 310 sq.kms. on its SC40 licence, where it holds a 67 % interest. The combined
potential reserves of the block have been estimated by industry consultants at 350 million barrels
(bbls). In July this year, Forum will start a 3D seismic programme over the same licence.
Valuation: Large upside potential with initial cash flow on stream in 2006.
This is an exciting play into a country that is desperate to increase its hydrocarbon reserves. The
Company is set to produce gas and coal next year but the upside potential of its exploration acreage
is very high. On a conservative basis, Forum can be valued at between £18 to £21.25 million, with an
upside potential of between £234m and £1.09 bn.
Outlook
Price
Market Cap
Share price graph
Share details
Code
Listing
Sector
Shares in issue
Price
52 week High Low
Balance Sheet
Debt/Equity (%) 0
NAV per share (p) £252m – 1.1
bn
Net borrowings (£m) 0
Business
Valuation
2004 2005e 2006e
P/Erelative
P/CF
EV/Sales
ROE
Geography based on revenues
UK Europe US Other
Analyst
Brian McBeth 020 7190 1760
bmcbeth@edisoninvestmentresearch.co.uk
Year
End
Revenue
(US$00s)
PBT*
(US$00s)
EPS*
(p)
DPS
(p)
PE
(x)
Yield
(%)
12/03
12/04 0 -5595 0 0
12/05e 400 -3660 0 0
12/06e 2680 -3425 0 0
Note: *PBT and EPS are normalised, excluding goodwill amortisation and exceptional items
Investment summary: Philippines Oil, Gas & Coal Play
Major Philippines Gas and Coal Play
Listing AIM
Sector Oil & Gas
.
Forum is an oil, gas and coal company operating in the
Philippines. The funds raised will be used to establish gas
production from the Libertad field on Cebu Island to be used in a
gas-to-electricity power contract. To start production from its coal
contracts in South and Central Cebu Island. To develop the 2003
Maya onshore discovery if the F2X long term test is successful.To
shoot 3D seismic on the Sampaguita prospect with the view of
drilling a well. To do due diligence on the Basic Petroleums
acquisition.

Cover has overrun to second page
.

3 | Edison Investment Research | Outlook | |
Investment summary:
Company description: Philippines Oil, Gas & Coal Play
Forum Energy Resources is an oil and gas company that is primarily focused on the acquisition and exploration
of natural resources, mainly in hydrocarbons and coal. It is currently focusing primarily on the hydrocarbon and
coal potential of the Philippines and is set to become a gas and coal producer in 2006 when its Libertad gas field
and its South Cebu Coal Operating Contract come on-stream. Further oil production will be added if it acquires
Basic Petroleum & Minerals Inc., a Filipino company, with a stake in the Nido and Matinloc oil producing fields
and a number of additional prospects and leads on block SC 14 A - D Forum has a large number of oil and gas
prospects and leads on its SC40 and GSEC (Reed Bank) 101 exploration and development contracts, in
particular the Sampaguita prospect.
Valuation
The Company’s assets can be divided into two, namely its oil and gas prospects and its coal reserves. It is, however,
extremely difficult to value a company that currently has no production and very small proven reserves, although the
upside potential is great, and it is just starting work on its exploration blocks in the Philippines. We have modelled the
various fields and prospects detailed below, and have tested them under constant and declining oil and gas prices, as
well as various discount factors ranging from 10% to 20%. (See Appendix A). The fiscal regime in the Philippines is
extremely favourable to oil and gas companies. There is a 7.5 % Filipino participation exemption, which Forum will be
able to use. There is full cost recovery of capital expenditure and production costs up to 70 % of total revenues per
annum. Finally, there is a profit sharing split of 40 % to Forum and 60 % to the government after cost recovery and
Filipino participation exemption have been deducted from revenues. The government tax rate of 32 % is taken out of
the government’s profit participation. This means that Forum will get to keep up to 84 % of total revenues, which is
exceedingly favourable.
The discounted cash flows given in Appendix A are net to Forum and have been risked for success. For the
Company’s coal reserves, estimated to be between 5m tonnes and 20m tonnes, we have assumed a nominal value
of US$4/tonne. On a conservative basis, Forum can be valued, assuming that both the Libertad and Maya fields are
developed this year, together with a conservative figure of 5 million tonnes of proven coal reserves, at between £18 -
21.25 million. The upside potential is enormous, at between £234m and £1.09 bn. These figures should be treated
with caution however as they are only indicative of the tremendous upside potential of the Company
Financials
Forum is expected to generate a small amount of revenue this year from its Hycalog drilling rig. With the Libertad gas
field and its coal reserves coming on-stream in 2006, the Company will generate more revenue. However, it is only in
2007 that we expect Forum to declare a profit. We estimate that the Company is fully funded until 2007 with the
money raised in the current fund raising exercise.
The funds raised will be used over the next 18 to 24 months to appraise and develop its existing oil, gas and coal
assets. Forum will::
 delineate the reserves in the Sampaguita gas prospect by shooting and interpreting 3D seismic data
and drilling a well.
 to establish gas production from the Libertad field on Cebu Island to be used in a GTE power
contract.
 To develop the Maya onshore discovery if the F2X long term test is successful.
 To start production from its coal contracts in South and Central Cebu Island.
 To acquire a stake in the Farm-in to Nido/Matinloc fields and start an enhancement programme on the
three producing platforms.

Company description: The road to the Philippines
History
Forum Energy Resources evolved out of Tracer Petroleum Corp. (Tracer) of Calgary, Canada. In February 2003,
Tracer restructured itself by selling most of its Canadian and Indonesian assets. The following month, Tracer acquired
a 66.67 % stake in Forum Exploration Inc., (FEI) of the Philippines, for US$10 m by issuing 100 m shares. The
remaining third of the equity is owned by Forum Pacific Inc, a Filipino company listed on the Philippines Stock
Exchange. In July 2003, FEI changed its name to Forum Energy Corp., and a new management team was brought in
to increase the Company’s returns on its assets. Forum’s main assets are hydrocarbon and coal exploration and
development acreage in the Philippines.
A new UK PLC was formed to take over some of the assets. Forum Energy Resources is 71.4% owned by Forum
and 28.6% owned by Sterling Oil, which reversed its GSEC 101 Reed Bank exploration block in the Philippines to
acquire its stake.
Forum’s current assets are:
Forum has the following assets
• a 66.7 % stake in Service Contract (SC) 40 (North Cebu),
• a 100 % stake in Geological Survey & Exploration Contract (GSEC) 101 - Reed Bank,
• a 66.7 % stake in Coal Operating Contracts (COC) in Southern and Central Cebu.
Forum is also negotiating to acquire Basic Petroleum & Minerals Inc., a Filipino company that holds a stake in SC 14
A-D. The block contains the Nido and Matinloc producing fields that are close to the giant Malampaya gas and oil
field. Production from Nido/Matinloc peaked in 1980 at 40,000 barrels of oil per day (bopd), and currently produces
400 bopd. Forum feels that production could increase significantly to around 3000 bopd and if it is successful in its
acquisition, Forum will conduct a full 3D and 2D survey over the entire block.
The Philippines is in desperate need to increase its hydrocarbon reserves. In 2001, the Philippines produced
1,000 bopd, rising to around 25,000 bopd in 2004, primarily as a result of new deep-sea oil reserves found
beneath the giant Malampaya gasfield (see below). The increased production volume is still modest, in relation to
the country's needs, which in 2003 consumed 338,000 bopd, with net oil imports of 312,000 bopd. Oil
consumption is relatively stable, despite the country's economic growth, due to reduced reliance on oil for electric
power generation following the development of the Malampaya natural gas field.
The US$2bn Malampaya gas field operated by Shell, and its partners ChevronTexaco and the Philippines
National Oil Company (PNOC) has reduced the country’s dependence on imported hydrocarbon supplies and
has improved the country’s energy matrix. The US$4.5 billion Malampaya Deep Water GTE icame on stream in
2002 and was the largest and most important industrial development in the country. It marked the start of the
country's natural gas industry supplying enough feedstock to generate 2,700 megawatts (MW) of power to Luzon
for a period of 20 years and meeting 30% of the country’s power generation requirements.
Hydrocarbon Background
The Philippines is made up of two major tectonic plates, viz, the stable rifted continental block to the west and the
mobile Philippine arc to the east. The offshore West Palawan and the Sulu Sea region belong to the rifted block
that separated from mainland China as a direct consequence of the opening of the South China Sea basin in the
Oligocene. The offshore West Palawan consists of three sedimentary basins namely,
• Northwest Palawan,
• Southwest Palawan and
• Reed Bank.
The Sulu Sea region is composed of the East Palawan and the Sulu Sea basins including the sub-basins of
Balabac, Bancauan and Sandakan.

Exploration and Drilling History
Exploration of the country’s hydrocarbon resources started in the latter half of the 19th century when two
exploration wells were drilled in central Cebu, encountering oil shows. There was a surge of onshore exploration
during the 1950s and 1960s, with the focus shifting offshore during the 1970s and 1980s. In the mid-1960’s
exploration in West Palawan started with the acquisition by Amosais Philippines of 1,800 kms of 2D marine
seismic data in the SW Palawan basin. In 1971, the first offshore petroleum well in the country, Pagasa 1A, was
drilled by Oriental Petroleum and Minerals Corporation.
Seismic data acquisition from 1973 to the present amounts to 85,400 kms of 2D and 5,300 sq km of 3D data.
The extensive exploration program in the 1970’s resulted in several oil and gas discoveries in the West Palawan
basins. The Nido-1 well, drilled by Philippine Cities Service Inc. in 1976, was the first oil discovery in the NW
Palawan basin. Up to now, a total of 126 wells, composed of 96 exploration, 22 development, and 8 appraisal
wells, were drilled in the West Palawan basins. Twenty-one wells were discoveries and six fields were developed
for commercial production. The Philippines has produced to date 54 million bbls of oil, 4 million bbls of
condensate and 67 BCF of gas from the NW Palawan basin.
The Tubbataha-1 well was the first attempt to explore hydrocarbons in the Sulu Sea region. It was drilled in 1957
to test the Tubbataha reefs. Since then, a total of 18 wells have been drilled in the region, 7 in East Palawan and
11 in the Sulu Sea. Eight of these wells had oil and gas shows. From 1965 to 2002, a total of 50,400 kms of 2D
seismic lines were shot, and data about 1,800 sq kms of 3D seismic data was obtained by ARCO for the Hippo
prospect in 1998.
Hydrocarbon Reserves
According to the Philippine Petroleum Resource Assessment Project the country’s total risked petroleum
resources is about nine billion barrels of oil equivalent (boe), with gas accounting for 57 % of the total and crude
oil for 41 %. More than half of these or about five billion boe is estimated to occur in the offshore West Palawan
and Sulu Sea regions.
Natural Gas
The country’s gas reserves are estimated at between 5.8 TCF to 20.8 TCF (see table below). The Philippines
had no significant natural gas production until late 2001 when the giant Malampaya gasfield came on-stream.
Malampaya is located in the South China Sea, off the northern island of Palawan, and contains an estimated 3.3
TCF – 3.7 TCF of natural gas. A 312-mile pipeline links the field to three power plants in Batangas with a
combined 2,700-megawatt (MW) capacity.
Table 6: Estimate of Natural Gas Reserves (BCF)
Gas Field/ Basin Minimum Prospective Maximum
Proven Fields
Malampaya 2,528 3,340 4,277
San Martin 243 359 454
San Antonio 4
Potential Fields
Mindoro-Cuyo 2,720 7,060 11,210
Catobato 60 1,158 1,760
Cagayan 176 322 518
Central Luzon 78 637 2,574
TOTAL 5,805 12,880 20,813
Source: Philippine Energy Plan, 2002-2011

Forum’s Service Contract (SC) 40
The SC 40 licence is located in the Visayan Basin in the central part of the Philippines archipelago. The licence
covers the northern half of Cebu Island together with part of the Visayan Sea offshore to the west of the island.
Exploration in the basin started over 100 years ago, and so far, approximately 130 shallow wells have been drilled,
with a number of oil and gas discoveries. Hydrocarbon seeps are common in the area indicating an active and mature
petroleum area. Since 1994, 12 wells have been drilled offshore, with seven encountering hydrocarbon shows.
Forum has a 67.7% equity stake in the licence with Forum Pacific (a Philippines company) holding the remaining
third. The Libertad gas field (see below), with minimum reserves of 1 billion cubic feet (BCF) of gas that can be
developed within a short period, is found within SC40. In addition, there are a number of other prospects and leads
that make this block extremely exciting. The upside potential of these prospects and leads are enormous and are
detailed below. Clearly, the figures, with the exception of the Libertad gas field, are hypothetical at the moment.
Forum expects later this year to farm-out many of these prospects, in particular Central Tañon and Jibitnil Island, in
order to reduce its financial exposure in the exploration programme of this highly prospective licence.
Table 1: SC 40 Prospects & Leads
PROSPECT
WATER
DEPTH (ft)
PGS’s Chance of
Discovery (%)
POTENTIAL
RESERVES
Oil Case
(MMBO
POTENTIAL
RESERVES
Gas Case
(BCF)
Libertad Onshore 100 - 1.2
Maya Onshore 100 0.84 -
Jibitnil Island Onshore 11.5 85 450
West Toledo 300 11.3 97 332
North Bantayan 300 8 250 1,000
West Malapascua 120 11.5 80 185
South Guintacan 100 9.9 70 330
Central Tañon 650 11.5 264 660
Agojo 250 10 60 210
Source: Forum Energy & PGS
Libertad Gas Field Development
The Libertad gas field, which lies to the southeast of the town of Bogo in northern Cebu Island, was discovered in the
late 1950s by the Acoje Oil & Mineral Development Corporation of Manila. Acoje drilled 22 wells on the prospect, of
which two were completed as gas wells but never developed commercially because of its modest size and a lack of
market for the gas. In the 1990s there was renewed interest in the field and five additional wells were drilled by the
Cophil Exploration Corporation, the forerunner of Forum Exploration. One of the wells was placed on a long term test
and subsequently completed as a gas well.
In 2004, Forum conducted a feasibility and engineering study to determine the most commercially beneficial option
for the development of Libertad’s 1 BCF of gas reserves. Two of the three completed gas wells in the field are
capable of producing 1.2 million cubic feet of gas per day (mmcfd) individually, and at times have reached 2 mmcfd.
Forum is currently negotiating with CEBECO, the country’s national power company, for a Gas-to-Electricity (GTE)
sales contract to produce electricity. Production could come on stream during the fourth quarter of this year, with a
field life of around two years that could be extended if needed.
Forum estimate that 2.5 mmcfd could be produced from the field to generate 2 MW of electricity. Two existing
completed wells will be used to supply the gas and the development is expected to be completed in 4Q/05 and is
likely to generate gross revenues of around $950,000 per annum over two years. The Filipino Department of Energy
(DOE) considers the Libertad GTE project as a model for other small gas discoveries in the country.
Forum will benefit in other ways by declaring the Libertad field commercial because it will be able to extend the life of
the licence since the development of the field will allow the deferment of its two commitment wells to be drilled in

2005. The extension will also provide the necessary time for Forum to complete a comprehensive review of the
acreage available for farm-outs.
SC 40 Seismic Reprocessing and Seismic Acquisition
As part of its evaluation of SC 40, Forum plans later this year to reprocess 1000 km of vintage seismic data shot in
the Tañon Strait offshore Cebu using current state-of-the-art technology, and focusing on the lines that pass through
Central Tañon, West Malapascua, and other identified onshore / offshore prospects and leads. At the same time,
Forum will shoot a further 250 km of new seismic over the Central Tañon and Jibitnil–Sabil Point prospects to help
define more precisely these structures and an eventual well location.
Maya Area
The Maya Area prospect lies at the northern tip of Cebu Island in an area known as the Central Maya Bulge (CMB),
and has been sporadically explored since the 1920s when oil shows were encountered in a shallow well. Several
wells were drilled in the 1970s, with oil shows and even reports of flowing oil on test. In October 2000, Forum drilled
an exploration well F1X, which had oil shows, but was not tested. In September 2003, the second well (F2X) was
drilled encountering gas and was tested at 217 mcfd but the open-hole flow test was later abandoned due to technical
problems. A third well, F3X, was drilled close to FX2 encountering only minor gas shows. Forum expects this year to
use its own rig, the Hycalog, to re-enter well F2X and test it. If this is successful, the well will be completed for oil
production or suspended if natural gas is found for future production to be used in a GTE project similar to the
Libertad gas field. Moreover, if the well is successful and produces at over 100 bopd, then Forum will re-enter and
test the suspended F1X well. It will also drill further wells on the CMB using the Hycalog rig to ensure maximum
utilisation of the Company’s rig. PGS, the petroleum engineers, estimates that the volume of oil in place could be
around 2.8 m bbls, with a 30% recovery factor if using a waterflood secondary recovery process.
Central Tañon Prospect
The Central Tañon prospect is located offshore west Cebu, and is an elongated anticlinal structure. There is limited
technical data available to make an assessment of the reserves, but PGS using a total field deterministic value has
calculated possible recoverable reserves of 264 m bbls assuming a 20% recovery factor.
Jibitnil Island Prospect
The Jibitnil Island prospect lies beneath the eponymous island in the Central Tañon Strait, flanking the western side
of the Daanbantayan Island, Northern Cebu. The Jibitnil-1 well, drilled four kilometres to the east of the island,
encountered both oil and gas shows in two different formations. It is thought that this prospect could contain either 85
m bbls of oil or 450 BCF of gas.
West Malapascua Prospect
The West Malapascua prospect is located 10 kms north of Cebu Island, and is a wrench induced fault and dip closed
structure. According to Forum, the potential recoverable reserves are 80m bbls in an oil case scenario or 185 BCF in
a gas case scenario.
South Guintacan Prospect
The South Guintacan prospect is located to the southwest of Guintacan Island and along the NW flank of the Tañon
Strait sub-basin, and is believed to be a faulted anticline. A number of wells have been drilled that had oil shows.
According to Forum, the potential recoverable reserves are 70m bbls in an oil case scenario or 330 BCF in a gas
case scenario.
West Toledo Prospect
The West Toledo prospect lies in the offshore Tañon Strait, approximately 15 kms southwest of Toledo City on Cebu
Island and is a reverse structural fault. In 1959, two wells were drilled in onshore Cebu that were discoveries, with
one producing 250 bopd initially. PGS considers that the deterministic recoverable reserves could be 97m bbls for the
oil case or 332 BCF for the gas case. Only a small fraction of the field is located on SC 40, and therefore it is likely
that in the event of a successful development that Forum would only hold a small interest in a unitised field
development operated by another company.
The Agojo Prospect
The Agojo prospect lies in the northern part of the Central Tañon Strait located to the northeast of Cebu Island, and is
a 4-way dip closed closure. According to Forum, the recoverable reserves could be around 60m bbls in an oil case or
210 BCF in a gas case.
The North Bantayan Prospect
The North Bantayan prospect lies in the Bantayan sub-basin of the the Visayan Sea, and is a fault and dip closed
structure. According to Forum, the potential recoverable reserves could be around 250m bbls in an oil case or 1TCF
in a gas case.

Geological Survey and Exploration Contracts (GSEC) 101 Reed Bank
On June 13, 2002, Sterling Energy Plc (Sterling) acquired 100% of the GSEC 101 Reed Bank Licence, and has
completed the initial work programme of General & Geophysical Studies and a Gas-to-Liquids (GTL) feasibility study.
The block is situated in shallow water and is believed to hold a number of large undrilled prospects with significant
upside. A 2D seismic survey was completed at the beginning of June and the Company is currently interpreting the
data.
The most prospective one is the Sampaguita gas prospect located in the southern part of the licence, with two out of
four wells testing gas from the Lower Tertiary sands. The prospects is located 150 miles southwest of the giant gas
and oil Malampaya field. It is estimated that the Sampaguita prospect could have proven gas reserves of 5 TCF, with
12 TCF upside potential, and reservoir deliverability could be as high as 40 mmcfd per well.
Sterling Energy transferred its rights to this block to Forum earlier this year for a 28.6 % stake in the Company. Forum
plans to conduct a 3D seismic acquisition programme during the third quarter this year. The data will provide better
definition to the structure as well as the location for a well to be drilled.
Coal
The development of new natural gas projects in the Philippines has been largely at the expense of the country's
struggling coal industry. The Philippines consumed 5.7 million tonnes of coal in 2002, of which 1.9 m tonnes was
produced locally and 3.8 million tonnes were imported, mainly from Indonesia, China, and Australia. While coal
represents a declining share of the Philippines fuel mix overall, there are several small coal mines under
development, mainly on the southern island of Mindanao, and Forum is developing two contract areas on Cebu
Island.
Forum’s Coal Assets in Central & South Cebu
South Cebu
In February this year, Forum acquired two Coal Operating Contracts (COC) that contain coal with a calorific value of
11,000 BTUs. Coal production has become very profitable in the Philippines, especially for production close to
market, with the recent increase in coal prices and good fiscal terms available. The South Cebu COC covers four coal
blocks over an area of 3,000 hectares near the town of Dealgete in an area known for its high grade coal bearing
Calagasan formation of early-middle Miocene age. It is estimated that the blocks contain proven and probable
reserves of 2m tonnes, with an upside potential of 24m tonnes.
Exploration and development activities will start immediately and once an Environment Compliance Certificate (ECC)
is secured, coal mining operations will commence with first coal production expected in 3Q/05. Mining will take place
underground and initial production will be around 500 tonnes/month gradually increasing to a plateau of around 6,000
tonnes/month after approximately one year.
Central Cebu
This COC covers four coal blocks in Central Cebu, near the towns of Balamban and Ulings. The blocks extend over
an area of 4,000 hectares and contain the widespread coal bearing Luca Formation of early-middle Miocene age.
Estimated coal reserves from just one block are estimated at 3m tonnes.
As with Forum’s Southern Cebu coal project, an Environment Compliance Certificate will have to be secured prior to
the start of actual mining operations. Also as with the South Cebu project, mining will be underground and first coal
production is expected in 3Q/05. Initial production will be around 300 tonnes/month gradually increasing this to a
plateau of about 3,000 tonnes/month after one year.
HYCALOG RIG
Forum owns a well equipped Hycalog land rig capable of drilling down to 3000 ft which is ideal for exploring and
eventually exploiting the SC40 Maya area where Forum is expecting to be very active. Having this valuable asset
helps to reduce well costs. A maintenance programme is in place to keep the rig in good condition and during
windows in Forum’s drilling programme, it will be made available for use by third parties.
POSSIBLE CORPORATE ACQUISITION: A STAKE IN THE NIDO / MATINLOC FIELDS
Forum expects to acquire Basic Petroleum & Minerals Inc., a Filipino company, that owns a number of stakes,
ranging from 8 % to 19.5 % in SC 14 A - D block, which contains the Nido / Matinloc producing areas of NW
Palawan. Amoco discovered these two fields 25 years ago, drilling three to four wells per field, with 20 m bbls
recoverable reserves for the Nido field and 16 m bbls of recoverable reserves for the Matinloc field. Current
production is 20,000 barrels per month, with just natural drive. Forum is confident that the two fields could produce
40,000 bopd for the first 4-5 years, and there are further additional reserves to be produced. It is estimated that 2m

bbls could be added to the original reserves, and the licence itself probably has around 20m bbls left to be recovered.
Forum expects to increase production from the seven active wells to around 3,000 to 4,000 bopd per well.
Valuation – Upside large in an area desperate for
hydrocarbon production.
The Company’s assets can be divided into two, namely its oil and gas prospects and its coal reserves. It is, however,
extremely difficult to value a company that currently has no production and very small proven reserves, although the
upside potential is great, and it is just starting work on its exploration blocks in the Philippines. We have modelled the
various fields and prospects detailed above, and have tested them under constant and declining oil and gas prices,
as well as various discount factors ranging from 10% to 20%. (See Appendix B). The fiscal regime in the Philippines
is extremely favourable to oil and gas companies. There is a 7.5 % Filipino participation exemption, which Forum will
be able to use. Then there is full cost recovery of capital expenditure and production costs up to 70 % of total
revenues per annum. Finally, there is a profit sharing split of 40 % to Forum and 60 % to the government after cost
recovery and Filipino participation exemption have been deducted from revenues. The government tax rate of 32 % is
taken out of the government’s profit participation. This means that Forum will get to keep up to 84 % of total
revenues, which is exceedingly favourable.
The discounted cash flows given below are net to Forum and have been risked for success. We have assumed a
nominal value of US$4/tonne for the Company’s coal reserves, estimated to be between 5m tonnes and 20m tonnes.
On a conservative basis, Forum can be valued, assuming that both the Libertad and Maya fields are developed this
year, together with a conservative figure of 5 million tonnes of proven coal reserves, at between £18 -21.25 million.
The upside potential is enormous, at between £234m and £1.09 bn. These figures should be treated with caution
however as they are only indicative of the tremendous upside potential of the Company. The value of Forum is given
below:
Table 2: Forum: Valuation of Oil & Gas Assets, Prospects, Leads & Coal Reserves
US$ million £ million (£1=US1.90)
Declining Oil & Gas
Prices and 20%
Discount Factor
Constant Oil & Gas
Prices & 10%
Discount Factor
Declining Oil & Gas
Prices and 20%
Discount Factor
Constant Oil & Gas
Prices & 10%
Discount Factor
Service Contract 40
Libertad 2.53 2.77 1.33 1.46
Maya 11.68 17.61 6.15 9.27
Central Tanon 30.57 483.21 16.09 254.32
Jibitnil Island 31.09 148.75 16.36 78.29
West Toledo* 0.84 8.29 0.44 4.37
North Bantayan 30.13 316.69 15.86 166.68
West Malapascua 10.25 137.37 5.40 72.30
South Guintacan 14.68 98.05 7.73 51.61
Agojo 9.75 51.74 5.13 27.23
Geological Survey and Exploration Contract 101
Sampaguita 316.69 758.47 166.68 399.19
*Only 5 % on SC 40
Sub-Total 458.23 2022.96 241.17 1064.71
Coal Operating Contracts

Low Coal Reserves High Coal Reserves Low Coal Reserves High Coal Reserves
South & Central Cebu 20 80 10.5 42.1
TOTAL 478.23 2,102.98 251.67 1,106.81
Source: Edison Investment Research
Comparative Analysis
The following exercise is a way of demonstrating the large upside potential of Forum’s business model. If we
assume that all the prospects and leads detailed above are successful, then Forum could be producing an
average of 38,608 barrels of oil per day if the reserves in the prospects and leads turn out to be liquids or 37,915
barrels of oil equivalent per day if the reserves in the prospects and leads contain gas.
Table 3: Net Oil or Gas Production from Fields, Prospects & leads
Oil bopd
(On Oil Base Case )
Gas (mmcfd)
(On a Gas Base Case)
Oil boepd (On a Gas Base
Case)
Libertad 0.00 0.45 0.07
Maya 55.68 0.00 0.00
Central Tanon 13,746.14 23,092.67 3,665.50
Jibitnil Island 3,324.67 16,751.78 2,659.01
West Toledo* 188.66 61.68 9.79
North Bantayan 13,077.46 37,985.59 6,029.46
West Malapascua 3,081.13 6,781.41 1,076.41
South Guintacan 2,783.65 12,167.05 1,931.28
Agojo 2,350.50 7,736.63 1,228.04
GSEC 101 - Sampaguita 0.00 134,287.23 21,315.43
*Only 5 % on SC 40
Total 38,607.88 238,864.49 37,915.00
Such a production base places Forum ahead of Cairn Energy and Premier Oil, with a market capitalisation of
£1.4bn and £689m respectively, as we see from the table given below:
Table 4: Peer Comparison – Oil & Gas

Source:
The Company’s coal reserves can be compared to Asia Energy Plc, a UK listed company with a market
capitalisation of £277m, which is currently developing 15m tonnes of coal reserves in Bangladesh, as well as to
Semirara Mining Corp., (a Filipino Company that is 85% owned by DMC a Filipino construction company), which
is quoted on the Philippines Stock Exchange with a market capitalisation of US$150 m (£81.1m), and which has
60m tonnes of reserves. There are US coal companies such as Alliance Resource Partners and Alpha Natural
Resources with coal reserves of 400m tonnes and 500m tonnes and a market capitalisation of US$1.3bn and
US$1.4bn respectively.
Table 5: Peer Comparison – Coal
Share Price
p/share
(29.3.05)
Market
Capitalisation
(millions)
Hydrocarbon
Prod. (boepd)
2P Hydrocarbon
Reserves (million
bbls of oil
equivalent)
2P Hydrocarbon
Reserves per £100
Market
Capitalisation
LSE - Full
Listing
Burren
670.5 931.8 8140 119.3 12.8
Cairn Energy
1395 2225 30200 113 5.1
Dana Petroleum
Plc 659 517.3 18000 124 24.0
Dragon Oil
107.5 541.6 8385 641 118.4
Edinburgh Oil &
Gas 314.5 131.8 433 24.9 18.9
Emerald Energy
174.5 86.4 883 11.8 13.7
JKX Oil & Gas
155.5 236.2 8022 56 23.7
Melrose
Resources 277.5 209.9 2900 38.1 18.2
Paladin
Resources 218.5 739.7 15332 138 18.7
Premier Oil
689 565.7 35300 200 35.4
Soco
International 555 403.1 5400 72.5 18.0
Tullow Oil Plc
183.5 1186 53000 171 14.4
LSE - AIM
Caspian Energy 81.5
68.5 412 0.5 0.7
Circle oil 45.25
57.4 0 0 0.0
Desire petroleum 40
88.4 0 0 0.0
Global Energy
Development
225
78.6 1100 19.6 24.9
Hardmnan
Resources
92
604 1000 22.1 3.7
Sibir energy 199.5
405.3 70000 432.4 106.7
Forum Energy 38,608 on an oil
base case
37,915 boep on a
gas base case
99

Company Market Cap US$m Reserves million tonnes Reserves per US$100 MV
Alliance Resource Partners 1339 400 29.9
Alpha Natural Resources 1440 500 34.7
Asia Energy 277 15 5.4
Semirara Mining Corp. 150 60 27.5
Forum 34.2- 40.9 5-20 14.6 – 49.0
Financials
Forum is expected to generate a small amount of revenue this year from its Hycalog drilling rig. With the Libertad gas
field and its coal reserves coming on-stream in 2006, the Company will generate more revenue. However, it is only in
2007 that we expect Forum to declare a profit. We estimate that the Company is fully funded until 2007 with the
money raised in the current fund raising exercise.
The funds raised will be used over the next 18 to 24 months to appraise and develop its existing oil, gas and coal
assets. Forum will::
 delineate the reserves in the Sampaguita gas prospect by shooting and interpreting 3D seismic data
and drilling a well.
 to establish gas production from the Libertad field on Cebu Island to be used in a GTE power
contract.
 To develop the Maya onshore discovery if the F2X long term test is successful.
 To start production from its coal contracts in South and Central Cebu Island.
 To acquire a stake in the Farm-in to Nido/Matinloc fields and start an enhancement programme on the
three producing platforms.

APPENDIX A: Risked Valuation of Fields, Prospects and Leads (US$m)
CONSTANT OIL PRICES CONSTANT GAS PRICES
Discount Factor Discount Factor
10.00 15.00 20.00 10.00 15.00 20.00
SC 40
Libertad 0.00 0.00 0.00 1.48 1.36 1.25
Maya 12.38 13.73 15.46 0.43 0.39 0.36
Central Tanon 413.37 320.25 253.23 37.52 23.60 14.81
Jibitnil Island 121.29 92.72 73.36 42.87 29.75 21.03
West Toledo* 6.83 5.20 4.09 1.23 0.75 0.44
North Bantayan 263.07 201.90 158.17 53.64 32.99 20.34
West Malapascua 112.95 86.32 68.27 13.77 8.42 5.10
South Guintacan 80.11 58.15 43.70 21.18 12.78 7.57
Agojo 73.24 55.25 43.12 14.38 9.07 5.77
SGSEC 101
Sampaguita 0.00 0.00 0.00 740.96 531.08 387.91
Total 1083.24 833.53 659.40 927.46 650.18 464.58
* Assumes only 5 % of lead in SC40
DECLINING OIL PRICES DECLINING GAS PRICES
Discount Factor Discount Factor
10.00 15.00 20.00 10.00 15.00 20.00
SC 40
Libertad 0.00 0.00 0.00 0.00 0.00 0.00
Maya 11.63 10.58 9.74 0.34 0.31 0.28
Central Tanon 203.14 159.72 127.76 19.54 10.28 4.55
Jibitnil Island 60.38 47.98 39.21 20.38 13.21 8.45
West Toledo* 3.43 2.71 2.19 0.45 0.19 0.04
North Bantayan 127.42 99.01 78.26 6.73 0.65 -3.06
West Malapascua 56.36 44.78 36.57 5.13 2.34 0.63
South Guintacan 34.81 25.90 19.85 7.57 3.22 0.57
Agojo 35.35 27.57 22.10 5.73 3.00 1.32
SGSEC 101
Sampaguita 0.00 0.00 0.00 344.77 234.34 159.37
Total 532.52 418.24 335.68 410.62 267.54 172.15
* Assumes only 5 % of lead in SC40

Company Details
Address One London Wall
London, EC2Y 5EB
Non- Executive
Chairman
Alan Brodie Henderson
Chief Executive
Officer
David Russell Robinson
Chief Financial
Officer
David M Thompson

Chairman of the Board Alan Brodie Henderson
Alan Henderson has over 20 years' experience in the oil indus
during a career spanning over 40 years. Alan is currently
Chairman of Energy Capital Investment Company plc and
Aberdeen New Thai Investment Trust plc. He also sits on the
boards of Aberdeen New Dawn Investment Trust plc and Glo
Oil Development plc. He ilas held several Non-Executive
Directorships, including Ranger Oil (UK) Ltd between 1972 an
1992 and ADT Limited between 1992 and 1997. He was an
Executive Director of Ranger Oil (UK) Ltd between 1991 and
2000, and Chairman between 1995 and 2000.
President & CEO David R. Robinson
has David Robinson has spent the past 18 years working in b
the investment business and petroleum industry. Previously t
President and Cilief Executive Officer of first NASDAQ'quoted
Odyssey Petroleum Corporation and most recently Toronto S
Exchange-listed Aurado Energy Inc. Prior to that David Robin
was Executive Vice President of Arakis Energy Corporation. H
has been responsible for raising over $250 million in equity
capital for various companies for investment in major
international petroleum projects in countries including Sudan,
Oman, Papua New Guinea, Indonesia, Ukraine, Kazakhstan,
Iran, and Turkmenistan.
CFO, Corporate Secretary and
Director
David M. Thompson
David Thompson ilas over 25 years of financial experience.
Previously he was Senior Vice President of Larmag Group of
Companies. He established a downstream Oil Trading Compan
based in Bermuda with offices in the US and Europe before
becoming the Finance Director for Larmag's development of an
upstream Company in an existing production Company in the
Caspian Sea off the coast of Turkmenistan. David Thompson h
helped to raise over $100 million in funds for tile Company and
negotiated farm-outs to reduce Larmag's interest to Odyssey
Petroelum and later Dragon Oil. Became the CFO of Toronto S
exchange listed Aurado Energy, Inc during the listing phase an
a period of two years.
Non-Executive Director David Wilson
Harry Wilson joined BP and worked for 17 years in a variety of
exploration and corporate finance roles. In 1987 ile left BP to for
Kirkland Resources which was listed in London as Dragon Oil in
1993. In 1997, he was the principal founding partner of the
Endeavour Oil & Gas Limited Partnership and following the
successful sale of Endeavour in 2000 was a founding partner an
director of Sterling. Following the listing of Sterling on AIM in 20
he was appointed Chief Executive of the Group.
Non-Executive Director Barry Stansfield
Barry Stansfield is an independent director with over 30 years
business experience and presently also director of a property
investment firm.
Non-Executive Technical Director Ian Baron
lan Baron is a geology graduate who has worked in the upstre
oil and gasindustry for 25 years. He has held positions includi
CEO of Dragon Oil plc, VP of Business Development for Cono
Middle East Ltd in Dubai, and Exploration Director of two liste
companies in Australia. He was COO of Aurado Energy Inc, a
Toronto Stock Exchange listed oil company. He is currently
President of Argo Plus, a privately-held oil and gas company
activities in Russia, as well as Vice President Upstream at
Energy Services Group (ESG) Dubai, a consulting firm provid
management services to tile oil and gas industry.

Non-Executive Director Graeme Thomson
In 1989 Graeme Thomson co-led a management buy-in of
AmBrit International plc, which was taken over in 1992. He the
joined the Kirkland Group, which later became Dragon Oil plc
where he served as Finance Director and Company Secretary
until April 1999. A founder partner of Endeavour and Sterling,
has
assisted unquoted and quoted companies in a variety of area
including corporate finance, accounting, commercial and
strategic affairs. He is Finance Director of Sterling..

PROFIT & LOSS US$000s
Year ended [Click here to add year end] 2004 2005e 2006e 2007e
Revenue 0 400 2680 11716
Cost of Sales 0 360 2055 4665
Gross Profit 0 40 625 7051
Administrative expenses -3904 4000 4250 4500
EBITDA -3904 -3960 -3625 2551
Operating Profit (before GW and except.) -3960 -3625 2551
Goodwill Amortisation 1691 0 0 0
Exceptionals 0 0 0 0
Operating Profit -5595 -3960 -3625 2551
Net Interest 0 300 200 -110
Profit Before Tax (norm) -5595.0 -3660.0 -3425.0 2441.0
Profit Before Tax (FRS 3) -5595.0 -3660.0 -3425.0 2441.0
Tax 0 0 0 0
Profit After Tax (norm) -5595.0 -3660.0 -3425.0 2441.0
Profit After Tax (FRS3) -5595.0 -3660.0 -3425.0 2441.0
Minority Interest
Earned for ordinary shares (norm)
Earned for ordinary shares (FRS3)
Average Number of Shares Outstanding (m)
EPS - normalised (p)
EPS - FRS 3 (p)
Gross Margin (%) 0 0 0 60
EBITDA Margin (%) 0 0 0 22
Operating Margin (before GW and except.) (%) 0 0 0 22
BALANCE SHEET
Fixed Assets
Intangible Assets 8324 9410 9600 9700
Tangible Assets 297 5740 8250 9575
Current Assets
Stocks 114 105 250 350
Debtors 64 150 250 450
Cash 6 14283 2171 2778
Current Liabilities
Group Borrowings -385.0 0.0 0.0 0
Other Current Liabilities 0.0 -250.0 -750.0 -1250
Long Term Liabilities
Borrowings -8582.0 500.0 1500.0 1500.0
Other Long Term Liabilities 0.0 1000.0 2500.0 2500
Net Assets -81.0 26868.0 13796.0 12197.0
Net Cash (Borrowings) 6.0 14283.0 2171.0 -2778.0
Net Current Assets -81.0 26868.0 13796.0 12197.0
CASH FLOW
Operating Cash Flow 296.0 -3960.0 -3625.0 2551.0
Net Interest 0 300 200 -110
Tax 0 0 0 0
Capex 965.0 3500.0 5000.0 7500
Acquisitions 10.0 5000.0 0.0 0
Financing 678.0 23250.0 0.0 0
Dividends 0 0 0 0
Net Cash Flow -1.0 10790.0 -8625.0 -4949.0
Movement in other borrowings/exchange differences 0 0 0
Net movement in debt 6.0 10796.0 2171.0 -2778.0
Notes:

Growth Profitability Balance sheet strength Sensitivities evaluation
0
5
10
15
20
25
2002 2003 2004 2005e 2006e
NormalisedEPS(p)
0
5
10
15
20
25
2002 2003 2004 2005e 2006e
NormalisedEPS(p)
0
5
10
15
20
25
2002 2003 2004 2005e 2006e
NormalisedEPS(p)
Litigation/regulatory 
Pensions 
Currency 
Stock overhang 
Interest rates 
Oil/commodity prices 
Growth metrics % Profitability metrics % Balance sheet metrics Company details
EPS CAGR 02-06e ROCE 05e Gearing 05e Address:
EPS CAGR 04-06e Avg ROCE 02-06e Interest cover 05e One London Wall
London, EC2Y 5EBEBITDA CAGR 02-06e ROE 05e CA/CL 05e
EBITDA CAGR 04-06e Gross margin 05e Stock turn 05e Phone
Sales CAGR 02-06e Operating margin 05e Debtor days 05e Fax
Sales CAGR 04-06e Gr mgn / Op mgn 05e Creditor days 05e [Click here to add website]
Principal shareholders % Management team
Forum Energy Corp 71.4 CEO:
Sterling Energy 28.6 [Click here to add management bio]
CFO:
[Click here to add management bio]
Forthcoming announcements/catalysts Date *
AGM
Investor day Chairman:
Trading update [Click here to add management bio]
Interim results
Note: * = estimated
Edison Investment Research
18 Southampton Place, London, WC1A 2AJ  tel: +44 (0)20 7745 7222  fax: +44 (0)20 7745 7226  www.edisoninvestmentresearch.co.uk
Registered in England, number 4794244
EDISON INVESTMENT RESEARCH LIMITED
Edison Investment Research produces reports on smaller quoted UK companies that we believe have been overlooked by the market. We provide smaller quoted UK companies with access to equity research
coverage that is normally only available to larger companies. Our research is distributed free to professional advisors such as institutional investors and private client brokers.
DISCLAIMER
Copyright 2004 Edison Investment Research Limited. All rights reserved. This report has been commissioned by and prepared and issued by Edison Investment Research Limited for publication in the United
Kingdom. All information used in the publication of this report, has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this
report. Opinions contained in this report represent those of the research department of Edison Investment Research Limited at the time of publication. The research in this document is intended for professional
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document is provided for information purposes only and should not be construed as an offer or solicitation for investment. This research is non-objective. Edison Investment Research Limited does not conduct
investment business and as such does not hold any positions in the securities mentioned in this report. However its directors, officers, employees and contractors may have a position in any or related securities
mentioned in this report. Edison Investment Research Limited or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this
report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report.
Past performance is not necessarily a guide to future performance.

Forum Reserach Note June 2005

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