Interim Report for January – March 2012

January to March

– Net sales amounted to SEK thousands 5 012 (5 066)
– Net income amounted to SEK thousands -3608 ( -4415 )
– Operating income from oil operations amounted to SEK thousands -1192 (-127)
– Earnings per share amounted to SEK -0.02 (-0.04)
– Equity per share amounted to SEK 0.37 ( 0.59)

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CEO’s Comments

To begin with, I would like to thank the owners and board for the confidence I gained in developing Commodity Quest.

During the first period as president of Commodity Quest, I have been focused on our biggest investment, Benchmark Oil & Gas in Texas. Currently, Benchmark, the only investment in our portfolio that generates cash flow which naturally made ​​the company a priority. On my first visit to Houston in early January , it quickly became apparent that it would require considerable time and work on-site at our oilfields in Orange. Investments in the field has been for a long period has been neglected and there is a great need to implement the previously planned workover program. This was started immediately at the beginning of the year. A precondition for the resumption of investment in the field and thereby increase production was a capital injection. To minimize dilution of Commodity Quest’s shareholders chose to sell some of its subsidiary Benchmark Oil & Gas. The sale gave us a momentum in the pace of investment and it can now be seen clearly on the production figures.

During the quarter we invested approximately $1 million in the Benchmark Oil & Gas. Approximately 600,000USD intends called workovers; 200,000USD relates to improved working capital and a further 200,000USD relates to the upcoming exploration well . Investments have increased production and allow faster exploration well. We have improved the ability to reinject brine which is a key factor for long-term increase production. After a period of expansion, we have the last month’s shift to focus on our production costs. We started the year with a production cost of about 100 USD/barrel and ended March with about 65 USD/barrel. Long term, we want to keep down the cost of about 50 USD/barrel, creating stamina even during periods of lower oil prices.

Besides developing Orange Field, we review potential acquisitions or mergers. We offer structural changes, such as producing fields that can be integrated and provide significant economies of scale. With the cash situation we are in , we are open to conduct business when the right time comes. In parallel, we call for a new bank that is willing to contribute to the Benchmark Oil & Gas is a major company.

We have come a long way in planning our new exploration well and we have identified three potential wells. In accordance with our geologs recommendation, we have now selected drill site with the best conditions and we will begin a drilling of approximately 4,500 feet in depth. The well will go through three zones, and we hope to achieve similar production figures of 100 barrels per day, when Norwood 1 was drilled in 2007. Our geologist involved with 9% of the investment. The fact that an EXPERT IN A LINE OF TRADE is willing to take a substantial private risk increases confidence that any of the three zones to contain oil. A dry hole would cost around 400,000 USD and if the well would be dry, we will try to get permission to use it for water injections.

In summary, the period has been successful and Orange Field has developed well through the investments made. The key to continued success is cost control and further explore options that gas injection and chemical treatments to further increase production. Each option has its advantages and disadvantages and must be carefully considered.

With my background in finance, I would emphasize the importance of keeping the company financially stable and minimize dilution for our shareholders in the future.

Pål Mörch , MD