88 Energy Regulatory News (88E)

TANGIERS PETROLEUM LIMITED - Letter to Shareholders

PR Newswire

London, December 20

20 December 2012

A NEW YEAR IS ABOUT TO BEGIN AND TANGIERS IS POISED TO GROW

Dear Shareholder,

With the festive season now well upon us, I would like to take this opportunityto outline the significant progress your Company has made towards its goal ofbuilding a substantial oil and gas group and the next steps it plans to takealong that path.

A little over 100 days have passed since Tangiers announced the Boardrestructure in which I was appointed as Executive Chairman. This restructurealso saw the appointment of highly experienced geologist Max de Vietri as aNon-executive Director, while Brent Villemarette continued as an ExecutiveDirector.

To this end, the new Board immediately set about raising capital andnegotiating "farm out" arrangements which have covered virtually all ofTangier's financial obligations on its existing acreage while retainingvaluable exposure for the Company should upcoming exploration programs besuccessful.

In early September, your Company had commitments of over $70 million on itsexploration permits in Morocco and Australia, less than $1 million available tospend and a market capitalisation of $28 million. Today, even at our currentrelatively depressed share price of 32c, the market capitalisation is $42million and on closure of the farm-out deals, the Company will have about $15million in cash to contribute to new projects.

As well as generating some valuable cash, I believe these farm-out deals, whichcover Tangier's exploration acreage in both Australia and Morocco, havedelivered excellent outcomes for the Company in both the short and long terms.

The Moroccan farm-out brings in a valuable partner in Galp Energia. Galp has amarket capitalisation of ~$12 billion and operating experience in eight Africancountries. It is a deepwater producer in Brazil and a fully integratedpetroleum company with interests in exploration, development, production,refining, marketing and petrol stations.

Galp will fund the commitments (up to $33 million) that Tangiers previously hadfor the period up to August 2014 as well as refund our past costs of $7.5million. The full carry on the well costs is comparable to other deals insurrounding permits, but the level of refund of past costs far exceeds theamounts agreed in these same deals.

It is important to note that the well costs in our Tarfaya block will berelatively low because of our ability to utilise a jack-up rig, typicallyaround half the cost of the floating rigs that will be required to drill insome of the adjacent permits. Tangiers will retain a 25 per cent interest inthe Tarfaya offshore area following completion of the farm-in arrangements.

In Australia, a Heads of Agreement has been signed with CWH Resources Ltd andwe are now working on completing the definitive agreement. CWH will fund thefirst $35 million of exploration expenditure in our WA-442-P and NTP/81permits. This should cover most of our commitment of 3D seismic acquisition andtwo wells. Tangiers will retain a 27 per cent interest in the permits.

CWH is an ASX-listed company with an extensive network in China, through whichCWH has arrangements to fund its exploration projects in Australia. CWH doesnot intend to raise capital in Australia to fund the exploration programs butwill cover the costs through debt financing, some of which will come from the$50 million it has recently secured for acquisition of resources projects inthe Northern Territory.

CWH also has other sources of funding through its major shareholders, whichhave a variety of businesses in China including building materials, chemicalindustries, investment companies, gas companies, manufacturing, logisticscompanies, petroleum stations and more.

CWH has advised Tangiers that it has always been supported by these majorshareholders and the support is expected to continue into the future. CWH isbased in Chongqing, a major municipality in south-west China with a populationof ~30 million.

With the farm-out agreements relieving Tangiers of most of its financialobligations on its existing assets, the Company is now ideally placed to pursuethe next leg of its growth strategy. This will involve identifying "farm-in"and acquisition opportunities in Africa to grow our portfolio of explorationand production assets.

This process is now underway, with the Board targeting onshore and shallowwater opportunities. These parameters recognise the Company's financialresources, which realistically do not stretch to becoming involved in the deepwater exploration business that is predominantly a game for the deep pockets ofthe petroleum majors.

The Board has a preference for oil exploration and production opportunities,though it remains open to involvement in the gas industry provided key criteriasuch as gas prices and nearby infrastructure meet its requirements.

I believe that the experience of the people within Tangiers, along with theCompany's ability to fund suitable farm-ins and acquisitions, will enable us tocapitalise on the opportunities in our chosen region of growth.

I look forward to reporting to you in the New Year on the finalisation of thefarm-out agreements and progress on sourcing new assets for the Company.

Contacts

Mr Ed Portman (Media and Investor Relations - United Kingdom)Tavistock Communications+ 44 20 7920 3150