SEA DRAGON ENERGY INC. - Letter to the Shareholders.

June 5, 2009-- Dear Shareholders: 2008 marked a year for major changes to the markets and the Oil Industry. With Oil prices coming down from over $140 to $35 per barrel and the chaos of the recessionary down-turn Sea Dragon had a successful year being able to go public and raise its required working capital for development of the exploration lease. Amidst the changing times, Sea Dragon:
·

  • successfully raised C$35 million from an Initial Public Offering and was listed on the on the Toronto Stock Exchange – Ventures Market with the call sign "SDX"; ·
  • commenced drilling the East Wadi Araba North Dahab prospect; and ·
  • put together a board of directors with an excellent reputation and track record and cultivated a team of experienced consultants and staff.
    While it was disappointing that we did not encounter hydro-carbons in sufficient quantity to be commercially viable, we did meet the commitments under the concession agreement in a timely manner and drilled two separate prospects. While we therefore believe that we have met the commitments on East Wadi Araba concession, the results of our testing program and the lack of any successful exploration drilling from the adjacent block leads us to believe that we should not continue to develop this concession area.
    Looking forward
    The economic landscape has changed dramatically from this time last year. The global economic crisis and the drop in oil and gas prices demand that we adopt a conservative strategy while at the same time create investment opportunities. Your Company has therefore decided to pursue a strategy of evaluating opportunities for direct ownership in producing or near to producing assets primarily in Egypt and the African continent. We believe that this strategy will take advantage of attractively priced properties that are now available due to the current market conditions and allow us to exploit the expertise and reputation of our board and management in this part of the world .
    Financially, we are in a strong position. Since Sea Dragon has retained some of the proceeds from the IPO and, because we have no debt or significant spending commitments, we can patiently review the many opportunities available to us and take advantage of those that are most attractive and fit our strategy. We intend to grow our Company over time by building a solid foundation of earnings and reserves and then adding to them.
    We believe that we can acquire producing oil properties so as to build our reserve base, provide cash flow and give Sea Dragon a stable base with which to continue its operations. Once this is in place the Company feels that it will be able to pursue potential upside development of those producing assets as well as looking to add to the portfolio of producing assets. While we have not closed an acquisition as of this date, we have or are in the midst of evaluating at least six serious proposals. From this we have concluded that attractive opportunities exist, and that financing for the right opportunity is available; the recent firming of the price of oil has encouraged financiers to once again look at carefully considered prospects.
    We will be keen to share with you the upside potential of the deals we are currently negotiating very soon.
    We thank you for you for your support and we thank the management and board of directors for their hard work this past year during very difficult market conditions.


    • For further information please contact:

    David Thompson
    President, CEO and Director
    (403) 629-5850

    Scott Koyich
    President, Brisco Capital Partners
    (403) 262-9888
    skoyich@briscocapital.com

    Graeme Dick
    Partner, Brisco Capital Partners
    (403) 561-8989
    graeme@briscocapital.com



    E-mail: info@seadragon.ca