niger delta annual report chika · consolidated statement of cash flows 51 notes to the financial...

ANNUAL REPORTA N D A C C O U N T S

2009

www.ngdelta.com

NDPR 1000 b/d Topping Plant at Ogbele

NDPR Diesel Topping Plant at Ogbele

1

CONTENTS

Notice of Annual General Meeting 2

Board of Directors 6

Management Team 10

Corporate Information 12

Chairman's Statement 14

Managing Director's Statement 20

Corporate Social Responsibility Report 34

Report of the Directors 40

Independent Auditors' Report 45

Report of the Audit Committee 46

Statement of Significant Accounting Policies 47

Consolidated Balance Sheet 49

Consolidated Profit and Loss Account 50

Consolidated Statement of Cash Flows 51

Notes to the Financial Statements 52

Consolidated Statement of Value Added 63

Four-Year Financial Summary (The Group) 64

Five-Year Financial Summary (The Company) 65

Supplementary Financial Information 66

Mandate for E-Dividend Payment 67

Shareholder Information Update Form 69

Proxy Form 71

Notes 72

NOTICE OF ANNUAL GENERAL MEETING

thNOTICE IS HEREBY GIVEN that the Fifteenth (15 ) Annual General Meeting of the

members of NIGER DELTA EXPLORATION & PRODUCTION PLC will hold on Thursday ndthe 22 July 2010 in the Main Hall of the Metropolitan Club, 15 Kofo Abayomi Street,

Victoria Island, Lagos at 11.00 a.m. to transact the following business:

2 3

ORDINARY BUSINESS

1. To lay before the members the Audited Financial Statements for the year stended 31 December 2009 and the Reports of the Directors, Auditors and Audit

Committee thereon.

2. To declare a dividend.

3. To re-elect Directors.

4. To ratify the appointment of new Directors.

5. To re-appoint the Auditors.

6. To authorise the Directors to determine the remuneration of the Auditors.

7. To re-elect/elect members of the Audit Committee.

SPECIAL BUSINESS

stA. To approve the remuneration of the Directors for the year ending 31

December 2010.

thDated this 28 June 2010

BY ORDER OF THE BOARD

Titilola O. Omisore

COMPANY SECRETARY

NDEP Annual Report and Accounts 2009

Compressors at the NDPR Gas Plant Section of the NDPR Topping Plant Topping Plant Pump Skid

4 5

NOTES:

i PROXY

A member of the company entitled to attend and vote at the meeting is entitled to appoint a proxy

to attend and vote in his/her place. A proxy for a corporation may vote on a show of hands and on a

poll. A proxy need not be a member of the company.

To be valid, a Proxy Form, if intended to be used, should be duly stamped by the Commissioner

for Stamp Duties and deposited at the Registered Office of the Company being 15 Festival Road,

Victoria Island Lagos, not later than 48 hours before the time fixed for the meeting.

ii. DIVIDEND

If approved, warrants in the sum of N9.00 (Nine Naira Only) made up of N6.00 (Six Naira Only)

regular dividend and N3.00 (Three Naira Only) special dividend per every ordinary share held by Members whose names appear on the Register of Members as at the close of business on the

th st16 July 2010, will be despatched immediately, being total dividend payout for the year ended 31

December 2009. The payment of dividend is subject to deduction of appropriate withholding tax.

iii AUDIT COMMITTEE

In accordance with Section 359(5) of the Companies and Allied Matters Act, 1990, any member

may nominate a shareholder as a member of the Audit Committee by giving notice in writing of

such nomination to the Company Secretary at least 21 (Twenty-One) days before the Annual

General Meeting.

iv RE-ELECTION OF DIRECTORS RETIRING BY ROTATION

In accordance with the provisions of the Company's Articles of Association, Prof. Sylvanus J.S.

Cookey, OFR and Mr. Ahmed Khelif both retire by rotation and being eligible, offer themselves for

re-election.

v APPROVAL OF NEW DIRECTORS

Pursuant to Section 249 of the Companies and Allied Matters Act 1990, and Article 95 of the

Company's Articles of Association, the Board of Directors appointed Dr. (Mrs) Zuwairatu Mantu th thand Mr. Ladi Jadesimi as additional directors. Having been in office since the 7 and 14 April

2010 respectively, they are by virtue of the Company's Articles of Association eligible for the

ratification/approval of Shareholders to continue in office.

vi AGE DECLARATION

Mr. Ben Osuno and Professor Sylvanus J.S. Cookey, OFR in accordance with Section 252(1) of

the Companies and Allied Matters Act, 1990, intend to disclose at the meeting that they are over

70 years of age.


Storage tank at NDPR’s Flow Station, Ogbele

6 7

BOARD OF DIRECTORS

MR. BEN OSUNO (FNAPE, FNMGS) Chairman

Mr. Ben Osuno holds a BSc Degree (1960) in Physics

from the University College, Ibadan. He is a seasoned

geophysicist with experience spanning over fifty years.

He has served as the Head of Exploration and

Production at the Nigerian National Oil Corporation

(NNOC now NNPC) and as Director of Petroleum

Resources at the DPR. In 1990, he was deployed to

the position of Director, Planning, Research and

Statistics of the Ministry of Petroleum Resources, a

post that he held until he voluntarily retired from

service in January 1992. He served as the Special

Adviser to the Honorable Minister of Petroleum

Resources from 1992 to 1993. During his service, he

held various other offices including being Nigeria's

Representative on the Permanent Council of the World

Petroleum Congress and Nigeria's Governor to

OPEC. He is a Fellow of both the Nigerian Mining and

Geosciences Society (NMGS) and the Nigerian

Association of Petroleum Explorationists (NAPE).

LAYI FATONA Ph.D., M.Sc., DIC, FNAPE

(Managing Director)

Dr. 'Layi Fatona is a Petroleum Geologist with

thirty-seven years of practicing experience

commencing with a seven year stint in the

Petroleum Engineering and Exploration &

Production Departments at The Shell Petroleum

Development Company of Nigeria Ltd (SPDC).

He obtained both the Masters of Science and

Doctorate degrees respectively from the Royal

School of Mines at the Imperial College of

Science Technology and Medicine of the

University of London in 1976 and 1980. He is the

Chairman of Geotrex Systems Limited, Nigeria's

foremost independent Exploration & Production

Consultants, which has worked for all the major

oil companies in the country. He is a past

President and a Fellow of the Nigerian

Association of Petroleum Explorationists,

(NAPE), and a Certified Petroleum Geologist of

the American Association of Petroleum

Geologists (AAPG). He is a leading authority on

the geology of the Niger Delta Oil and Gas

Province.

CHIEF DAVID RICHARDS (British)

Chief David Richards is a professional banker

with over thirty years experience with Standard

Chartered Bank in and around Africa,

specialising in Industrial Development and

Investment Banking. In 1989, he co-founded

Midas Merchant Bank as its first Managing

Director. Since 1984, he has specialised in

raising venture capital for the Manufacturing,

Mining and the Oil and Gas sectors. He was a

member of the National Executive Council of

the Chartered Institute of Bankers of Nigeria

(CIBN), and a former Director of Global Bank

Plc. Chief Richards was also NDEP's first

Finance Director, from the Company's inception

until his retirement in 2008.


8 9

MR. SAMMY O. OLAGBAJU

Mr. Sammy O. Olagbaju holds a Masters Degree

in Economics and Political Science (1964) from

Trinity College, University of Dublin, Ireland. He is

a trained Merchant Banker and Stockbroker, of

over twenty-five years standing. He serves on the

Board of various companies in which he has

interests. He was the Chairman of the former

Midas Merchant Bank, which he co-founded. He

has extensive business and cultural affiliations

across the globe and is the Chairman of Marius

Limited, a firm of corporate consultants,

representing in Nigeria a number of reputable

overseas companies in the environmental and

energy sectors of the economy.

MR. AHMED KHELIF (Algerian)

Mr. Ahmed Khelif holds a BSc Degree (1967) in

Electronics Engineering from the Algiers

Polytechnic School, Algeria and a Masters

Degree (1968) in Geophysics from the Algerian

Institute of Petroleum, Algeria. He worked with

Sonatrach as an Exploration Manager from

where he retired and is currently the Technical

Director of the Petrolin Group (Switzerland), in

charge of the Exploration & Production activity

for the group in the Middle East and Africa. He

has over forty-three years experience in the

Petroleum Exploration and Production and the

Information Technology fields.

PROFESSOR S. J. S. COOKEY, OFR, KSC, PHD. (London)

An astute Administrator and renowned historian,

he hails from the Niger Delta region. He is a retired

Professor of History and a former Vice-Chancellor

of the University of Port Harcourt as well as Pro-

Chancellor of Obafemi Awolowo University, Ile Ife,

Osun State, Nigeria. A former Chairman of the

Department of Afro-American Studies, State

University of New York, Binghamton USA (1972-

74) and the Department of African Studies,

Rutgers University, New Brunswick, New Jersey

USA (1974-80), and member of the UNDP-GEF

(Global Environmental Facility) Mission to Kenya,

Zimbabwe, Ghana and Mali. He has been

awarded the D.Sc. (Honoris Causa) of the

University of Port Harcourt and is an Officer of the

Order of the Federal Republic of Nigeria (OFR).

MR. GOODIE IBRU (OON)

A lawyer by training, Mr. Goodie Ibru graduated

LLB (London) from the Holborn College of Law in

1965 and was called to the English Bar (Inner

Temple) in 1966 and is currently a Principal Partner

in the Law firm of G.M. Ibru & Co. An astute

entrepreneur and businessman, he is well

established in the hotel and hospitality industry in

Nigeria and is the Chairman of Ikeja Hotels Plc,

owners of the Lagos Sheraton Hotel & Towers and

the Abuja Sheraton Hotel & Towers. He is also the

Chairman of The Tourist Company of Nigeria Plc,

owners and operators of the Federal Palace Hotel

& Suites Victoria Island, Lagos.

Mr. Ibru is involved in many business associations

and is a Past President and Chairman of the

Council of the Nigerian Stock Exchange. He is also

currently the Honorary Consul of the Republic of

Lithuania in Nigeria, Executive Vice President

(West Africa Chapter) African Business Round

Table, Chairman NEPAD Business Group and Vice

President Lagos Chamber of Commerce. He

remains on the board of several companies

including The Guardian Press Ltd.; Dunlop Nigeria

Plc and Crusader General Insurance Plc. He is an

Officer of the Order of the Niger (OON).


10 11

MANAGEMENT TEAM


LAYI FATONA Ph.D., M.Sc., DIC, FNAPE

Managing Director

12 13

CORPORATE INFORMATION

COMPANY SECRETARY AND LEGAL ADVISER

Titilola Omisore

15 Festival Road

Victoria Island, Lagos

REGISTERED OFFICE

15 Festival Road


AUDITORS

Ernst & Young

(Chartered Accountants)

2A Bayo Kuku Road

Ikoyi, Lagos

FINANCIAL ADVISER

Chapel Hill Advisory Partners Limited

1st Floor, 45 Saka Tinubu Street


BANKERS

Barclays Bank Plc.

Guaranty Trust Bank Plc.

Intercontinental Bank Plc.

Skye Bank Plc

Standard Chartered Bank Nigeria Limited


Butane Tanks at NDPR Gas Site Aerial View of Workshop Building NDPR’s Diesel Topping Plant

14 15

CHAIRMAN'S

STATEMENT

MR. BEN OSUNO FNAPE, FNMGS


“On deeper analysis, the activities and decisions taken

throughout the year have fortified your Company's position.”

Distinguished Shareholders, ladies and gentlemen.

thOn behalf of the Board and Management, I welcome you all to this 15 Annual General Meeting st(AGM) of your company for the year ended 31 December, 2009.

As in the past, this forum will be used to present the Audited Financial Statements for the year, as

well as brief you on the state of your company, render an account of the stewardship of the Board

and Management for the year, and give you a preview of our plans for the future development of

your company.

THE BOARD

During the year under review, the composition of your Board remained the same, but early this

year, we identified and invited two eminent shareholders to join the Board. They are Dr. (Mrs)

Zuwairatu Mantu and Mr. Ladi Jadesimi. They have both accepted the invitation, and will be

presented to you at this AGM for the necessary ratification of their appointment to the Board.

THE GLOBAL ENVIRONMENT IN 2009

The year 2009 witnessed what has been the most severe global financial crisis for the last 30

years, even receiving comparisons with the Great Depression of the 1930s. The crisis, already

evident in 2008, intensified as the fallout from the American subprime mortgage crisis deepened,

causing stock markets to contract sharply, massive job cuts, lending freezes and increased state

intervention. Many governments were compelled to make financial bailouts and introduce

stimulus packages to lessen the impact of the recession.

In Africa, initially the financial crisis was considered to be a matter for the developed economies

only. Africa's fledgling financial system was thought to be insulated from the effects of the

recession in the West. However, such a view underestimated the interdependency of the world

financial system and soon, Foreign Direct Investment (FDI) decreased and the prices of key

export commodities, which many African economies rely upon, dropped due to weakened global

demand. Truly this was a global economic crisis.

Sadly, Nigeria was not immune. We were affected by the sharp drop in oil prices and a decreased

demand for oil. Additionally, many national and multinational companies adopted retrenchment

policies which hampered growth and increased unemployment. Like their foreign counterparts,

the lending practices of Nigerian banks came under increased government scrutiny and

investigations by the Economic and Financial Crimes Commission (EFCC) resulted in the

dismissal of key industry figures.

Nigeria's economic situation was further exacerbated by the debate on the Petroleum Industry

Bill (PIB), which caused much uncertainty about the future of the oil and gas industry.

Unfortunately this anxiety was not assuaged. As at year end the Bill had yet to be passed. We are

hopeful, that it will be passed in 2010 so that companies operating in Nigeria's oil and gas

industry can plan their future activities properly. Restiveness in the Niger Delta region continued,

although thankfully we began to see some thawing in the militancy as a result of the Federal

Government's Amnesty Programme, introduced in 2009.

16 17


OPERATIONS & RESULTS

Throughout 2009, the Board and Management were able to make opportune decisions and

investments to the profit of your Company, both now and concerning its future operations.

Indeed, since last year, we have significantly increased our level of investment. We have fully

bought out the NDEP Irredeemable Participating Investment Note (IPIN) holders and most of the

Niger Delta Petroleum Resources Ltd. (NDPR/PETRE) IPI Note holders, in line with the

resolutions taken at the Extra-Ordinary General Meeting held in 2008. For those PETRE Note

holders who have opted to retain their Notes, we have no choice but to respect their decision,

allowing us to draw a line under this issue. By buying back the IPINS some expense was

incurred, but those will be quickly recouped from the additional revenue that has since the

acquisitions, begun to accrue to your Company, thus increasing its appeal to investors. 2009 was a challenging year for your Company and indeed globally. Against this backdrop, the

year should be regarded as one of mixed blessings. Whilst our overall profit has slightly dipped,

for reasons previously outlined, it should be noted that it is comparable with 2008, a year that

witnessed significantly more buoyant oil prices.

Given our relative success, we are pleased to report the payment of a dividend for the 2009

financial year for our shareholders. This will comprise of a dividend of N6.00 (six naira) per share,

as well as a special dividend of N3.00 (three naira) per share. This will be our fourth consecutive

dividend payment and is testament to our appreciation of our shareholders, who have helped to

make the vision of our Company a reality.

PRODUCTION

In 2009, your Company sought to increase production at the Ogbele Field through the drilling of

additional wells. However, given the lower price of oil, the remedial work undertaken and the

attendant security challenges, Management decided to defer some of its drilling programme until

2010.

Despite this, I am pleased to report that in 2009 we achieved an all time high of 1,616,657 (one

million, six hundred and sixteen thousand, six hundred and fifty seven) barrels of oil, significantly

higher than what was achieved in 2008.

In 2009, NDPR decided to procure a Diesel Topping Plant, which has the capacity to “skim”

diesel from 1000 barrels of oil per day (BOPD). Once this plant is operational, it will be the first

time such a facility has been used in Nigeria. The decision to procure this 'topping' plant

acknowledges the importance of having an independent supply of diesel, which will increase our

self sufficiency, reduce costs and promote smoother field based operations.

OMERELU FARM-OUT AGREEMENT

I am pleased to report that negotiations for the Omerelu Farm-Out Agreement have been

concluded, in no small part due to the perseverance of the Management and Staff of your

Company. Now, all that remains is a final approval from the regulatory authorities before field

development activities can commence.

GAS UTILISATION PROJECT

Throughout 2009, Management and Staff continued in their efforts to bring the gas processing

plant into operation. This will generate revenue for your Company and will enable the full

utilisation of gas ahead of the Federal Government's enforcement of its zero flare policy, now

expected to come into force in 2012. To this end, 2009 allowed your Company to make significant

progress in securing and developing the Gas Plant site, as well as the construction of the Gas

Pipeline.

Additionally, your Company has identified the CER (Certified Emissions Reduction) Initiative,

part of the United Nation's Kyoto Protocol, where Certified Energy Units can be sold to offset

greenhouse gas emissions. Your Company, seeking to be a responsible participant against

global climate change, is working towards complying with this Initiative which will also result in an

additional stream of revenue for your Company.

FUNDRAISING

Your Board recognises the derivable mileage and success from enhanced capital. Accordingly, it

is fully committed to a capital growth strategy which will ensure that Niger Delta can support its

expenditures and planned future acquisitions.

As you are aware, we have not received regulatory approvals for the Rights Issue and Private

Placement exercises which you have authorised the Board to proceed on. The Board is

however confident that its renewed and vigorous efforts with the new leadership of the Securities

& Exchange Commission (SEC) will bear fruit and the Company can proceed with its planned

capital raising. We will continue to update you as events occur.

GTBank continues to support your Company, providing a $40M loan facility disbursed in two

tranches, to finance the 2008-2009 work programme. I am happy to confirm that this has been

fully paid off as at December 2009. Acknowledging our credibility and their belief in our business

proposition, GTBank has offered an additional $100 million facility, to fund the development of

the Omerelu Field and the further development of the Ogbele Field.

18 19


THE FUTURE

Whilst an initial reading of this Report and Accounts might suggest that 2009 has been an

uneventful year, hampered by setbacks, this is not the case. On deeper analysis, the activities

and decisions taken throughout the year have fortified your Company's position. The internal and

external events of 2009 have revealed that even with various challenges, the solid foundation

that your Company has established allowed it to weather the storm and emerge unshaken. Our

future looks bright.

We are now poised to build on our successes by diversifying our portfolio and maximising our

existing investments. We look forward to commencing the Omerelu Field project, which will

significantly increase our total proved recoverable reserves. We also plan to drill additional wells

in the Ogbele Field, with the aim of exceeding our production targets for 2010. I am pleased to

note that as at Q1, we have seen a more attractive oil price, averaging just over $70/bbl, which

bodes well for the future of your Company.

We envisage that the gas processing plant will be up and running by Q3 2010, which will provide

a substantial boost to your Company's income. Through our operating Company, Niger Delta

Petroleum Resources Ltd. (NDPR), we have already reached the effective conclusion of the Gas

Sale and Purchase Agreement with the NNPC/Shell Joint Venture Partners, which will formalise

the supply of gas to the NLNG Train 6, at Bonny Island. This agreement is not only a first for your

Company, but also the first to be undertaken by an Independent producer in Nigeria; it is yet

another demonstration of our trailblazing credentials.

In line with our policy of expansion and securing profitability for our shareholders, we are

continuously investigating opportunities both at home and abroad, with a view to enhancing

returns to our shareholders.

CONCLUSION

In recognition of their continuous dedication, I would like to conclude my report by sincerely

commending the efforts of my fellow Directors on the Board, who have selflessly guided and

nurtured our Company, the Management and Staff, who work tirelessly to implement the

Company's objectives and our host communities, for their co-operation and engagement. I

would also like to extend my recognition to our shareholders, for their longstanding patience,

understanding and loyalty; and finally, I acknowledge the work of our Regulators, for their efforts

in promoting a sustainable oil and gas industry in Nigeria.

May God continue to bless and keep us all.

Aerial view of the Gas Plant, Ogbele

20 21

MANAGING DIRECTOR'S STATEMENT

“It is all about re-discovering Nigeria-doing things

the right way, the first time”

INTRODUCTION

Esteemed and distinguished shareholders, the year has run another full cycle. So, here I am, still

privileged, but again struggling to give a full and detailed account of yet another exciting year of

activities. Like the previous year (2008), the past was just as challenging and rewarding for our

pioneering company. I must however start with an apology. Last year, on behalf of management, I

did promise that preparations for the yearly AGM will be concluded to allow such important yearly stgathering to hold during the 1 half of each year. Indeed, this year everything was ready in time.

The external Auditors with our dedicated staff prepared the annual accounts in very good time for

the routine Board and Company Audit Committees' approvals. However, the elaborate

preparations required, for a smooth gathering such as what we hope for at today's meeting had

taken a bit longer. It is again a positive sign that our company is growing and the corporate rhythm

we all expect is still evolving. We now need more time to prepare for any important assembly such

as of today. Reading this annual report, from the Chairman's Statement, through to the robust

statement of accounts for an otherwise “difficult year” for most if not all corporate entities globally,

it must be self evident that you will excuse the seeming late convening of the 2009 AGM.

The Board and Management of your Company value every opportunity to interact with you, our

Shareholders. We will as in the past continue our efforts at establishing a timely framework and

calendar for information dissemination more so at statutory gatherings such as this.

As the Chairman has alluded, 2009 was a challenging year notable for the severity of the global

recession, which intensified significantly since 2008. It was a period of uncertainty as the true

impact of the American Sub Prime Mortgage Crisis became apparent. Stock markets worldwide

took a dramatic fall, wiping value off investment portfolios, while the 'credit crunch' contributed to

the reduced price of residential and commercial properties. Unfortunately, as I had cautioned in

2008, the high oil price was indeed unsustainable and as the recession deepened, the global

demand for oil also cooled.

Given these circumstances, 2009 was a time of retrenchment, of hiring and spending freezes.

Many established businesses became insolvent, while many more issued profit warnings and

underperformed. We at Niger Delta cautiously watched these events unfold, in our aim to

ascertain the impact on the oil and gas sector.


NDPR Gas Pipe under Construction NDPR Topping Plant NDPR Workshop Building

22 23

However, during such testing times, the Board and Management of your Company found

strength by considering how far the Company has come since its modest beginnings. We

encourage you, our Shareholders to reflect on the same. Since inception, NDEP has

continuously worked towards its goal of being an Independent, locally funded and publicly

owned E&P Company. By virtue of your Company's existence, over five hundred members of the

Nigerian public have been able to invest directly in the country's key income generator, the oil

and gas sector and more specifically for now, the Ogbele Field Development. We hope to extend

this growing opportunity to more assets in the immediate future. Along our journey, we have

endured many challenges, setbacks and frustrations. We have learnt from our experiences that

patience, for us, remains a virtue.

As a result, your Company is rapidly evolving and moving on to a bigger, more efficient, more

productive and a more profitable future. We may have been temporarily delayed or slowed down

in the pace or speed at achieving the objectives, but we were never derailed. Our track record

and milestones speak for themselves and reflect your Company's resilience.

Indeed, against the prevailing gloom and pessimism of 2009, I am pleased to report that your

Company managed to buck the economic trend by maintaining a comparatively successful profit

margin. Whilst this dipped slightly in comparison to 2008, it is at least within the same benchmark

range. The policies implemented by the Board and Management of your Company have been

catalyst for success.

Numerous opportune and bold decisions were made, which mitigated the brunt of the recession

and allowed us to consolidate the progress of your Company. This was aided by the solid

progress and financial results that were obtained in the previous year, which placed us on a

strong footing at the beginning of 2009. Indeed, a significant proportion of the profits reported

then was reinvested in projects to increase our long-term revenue base and shareholder value.

In tandem with the reduced oil price, throughout 2009, your Company proactively reappraised its

existing forecasts and began a more stringent selection of projects based on Company and

Shareholder profitability.

The corporate re-structuring of our Company commenced and is being vigorously pursued. We

have prided ourselves on our lean and efficient results orientated mode of operation. Given the

broadening of our activities, it became necessary to review the Company's structure and that of

our fully owned subsidiary and operating Company, NDPR as approved by the Board of NDEP.

Advisers were appointed into a newly constituted Management Board of NDPR. To facilitate this

process, streamlined departments were re-defined, each reporting to the Managing Director.

Also, to oversee our Technical operations in Port Harcourt, a Productions Operations Adviser

was appointed, in addition to the Drilling and Completions, the Field Development and New

Business Development Advisers.

These appointments have helped achieve smoother field development and production

operations. They have further assisted the enhancement of our technical and productive

efficiency as well project execution capacities.

The cumulative effect of these decisions meant that 2009 allowed your Company to introduce

and continue many initiatives and projects that will enhance productivity and our projected

revenue in the years ahead. Thus, paving the way for NDEP's continuing development and

transition from a junior to a Medium sized oil and gas development Company. Therefore, the

theme I adopted in the 2008 Report, 'Launching NDEP into the Future', is still very much

applicable to 2009. However, for this specific year, I will compliment the previous year's catch

phrase with another: 'Re-Discovering ourselves as a company and Nigeria' by doing things right

the first time!

Even though, the year was laced with multiple challenges, in fact, for the Board and Management

of your Company, 2009 could be viewed as a double edged sword. With modest rewards and

increased capacity, but also with hindrances from within and without.

From a regulatory standpoint, we, like the others in our industry suffered from the expectations,

anxieties and the inconclusiveness of the Federal Government's proposed reforms of the oil

sector. The much expected passing of the Petroleum Industry Bill (PIB) remained outstanding as

at year end. Not only have the proposed reforms contained therein, caused much speculations

and apprehensions as to what its final terms could be, they sadly and indirectly too delayed the

conclusion of some of our negotiations. In particular, the Gas Purchase Agreement between

NDPR and the NNPC/SPDC/Total/Agip Joint Venture was affected as the gas purchasing

customers (the NNPC/SPDC/TOTAL/AGIP JV) were initially reluctant to ratify existing fully

negotiated agreements in the face of such uncertainty. Your Company looks forward to the Bill's

passage in the near future.**

Additionally, your Company is still limited by the ongoing challenge of obtaining adequate

funding. Throughout 2009, the Management and Board expended a lot of time and resources

trying to commence the Rights Issue and Private Placement. Sadly and despite our best of

efforts, we were unable to conclude negotiations with the industry regulator, the Securities &

Exchange Commission (SEC) occasioned by the unresolved internal negotiations for the

cancellation of the NDPR Irredeemable Participating Investment Notes (IPINs).

**As at the date of the AGM the Gas Purchase Agreement (GSA) between NDPR and the NNPC/SPDC/TOTAL/AGIP

JV for the supply of tail gas to the Train-6 of the Nigeria LNG Limited (NLNG) has been executed.


24 25

However, we remain grateful for the continued support and recognition we have received from

local banks, as they have helped fund our ongoing development projects and thus sustaining

NDEP Investments. I am pleased to note that in spite of no new investment capital inflow into your stcompany, as at 31 December 2009, all outstanding project loans were fully repaid thus allowing

the company start anew, the 2010 financial year, debt free. We therefore specifically report:

1. The full repayment of our GTBank $40 Million Ogbele Field Development Facility,

2. That GTBank continues to support the field operations of your Company and has offered

an additional four year term $100M loan facility for the further development of the Ogbele

Oil and Gas potentials and the commencement of the development of the Omerelu Field.

Your Board had approved of this facility and is readily available for use as at when

required.

3. Your Company is also pursuing other avenues to build up its cash reserves, so we can

have the resources to take advantage of any profitable new producing opportunities.

More positively, I am pleased to report that after much negotiation, your Company has been able

to conclude the buying of the NDEP Irredeemable Participating Investment Notes (IPINS) from all

its holders, with the Note holders receiving full compensation as negotiated. This measure will

ensure that more revenue is retained by your Company, which will increase our appeal to

potential investors, aiding future fundraising efforts. As for the Niger Delta Petroleum Resources

Notes (NDPR IPINs), we were only able to buy-back most of these as some Note holders

preferred to retain their instruments.

Rather than expend additional time and resources pursuing this matter, it has been decided to

permit them to so do. Allowing your Company subsequently to concentrate its efforts on wider

fundraising issues. On this note, we shall expect an expeditious re-consideration of all our

pending applications for a Rights Issue as well as a Private Placement. All these being our efforts

which will bring additional new capital into your company.

Permit me now to continue my report to address other equally significant issues affecting our

company, our operating areas, our great country Nigeria, the future we all hope to face and the

growth path our company must prepare for.

OUR PAST

stThe past had been daunting, difficult and unsteady starting out as a pioneering company. The 1

ever marginal oil field operator with some firsts. It was obvious that on attainment of what looked st stlike success, starting with 1 Oil in August 2005, 1 million barrels of oil production in February

2007, and since then, un-interrupted steady and sustained oil production even at the peak of

unrestrained vandalization of facilities rampant in the Niger Delta Region. These past four years,

our company against all odds is now being looked at as a small successful Nigerian Independent

Producing Company. The transformation is gradual but assuring.

thDistinguished shareholders, successful we may look, as we quietly waded through the 4 steady

year of oil and gas production operations, the most difficult challenge we face today remains

managing the perceived success. This will be very difficult as shareholder expectations need to

be matched with company growth and investment needs.

OUR PRESENT-THE 2009 RESULTS

stI am pleased to report that as of 31 December 2009 your company achieved a net cumulative

production of 4.4mmbbls of oil from the Ogbele field. An achievement of some significance in just thfour years. What will make the day for our company and its patient shareholders will be the 5

mmbbls of oil production from this asset.

stThe successful drilling and completion of two additional producing wells in the 1 half of 2009

prior to the hurting decision to release the drilling rig under contract, by our fully owned operating

company (NDPR) remained a timely and prudent action. This turned out as the major

contributing factor to our sustained oil production and consequently, the modest operating profits

reported for the year.

I will defer my submission on the future prospects of our company to the tail end of this report. As I

do so, I cannot but refer our shareholders to what I have added this year as a further theme of this streport- “Re-discovering Nigeria: Doing things the right way-1 time”, I have come to realize

and accept that we cannot change Nigeria overnight but “change Nigeria” we must all help

achieve. In our little ways, as a company and a positive looking corporate citizen of Nigeria, with

our sustained zeal to promote the good ways of doing things. We are making the difference!


26 27

Looking at our 2009 company results, the need for caution must be re-emphasized. The

unprecedented drop in the global oil price saw the plummeting of the commodity to an all time

record low of $43/bbl (Figure 1). This global event made many of the multinational oil companies

quickly adjust their investment plans as well as their profit projections for 2009. We had little

doubt or suffered no illusion that a readjustment of our planned work program was equally

necessary as a means of self preservation and survival.

The depressed oil price notwithstanding, the complementary increase in our oil production and

the very necessary and timely cut back in our work program more or less contributed to the

modest results achieved.

The prudent manner in which we deployed our profits of 2008 into further self financing of the

growth-inducing field development projects for your company, ensured that management was

able to sustain the funding requirements of our scaled down work program for 2009.

Unsurprisingly therefore, the profit generated in 2009 was affected by the reduced oil price.

However, our increased rate of production helped to partly compensate for this. I am pleased to

note that in 2009 the total volume produced from the only producing asset, (the Ogbele Field)

increased to 1,616,657 (One Million, Six Hundred and Sixteen Thousand, Six Hundred and Fifty

Seven) barrels compared to 1,383,094 (One Million, Three Hundred and Eighty Three Thousand

and Ninety Four) barrels in 2008 even with only 10 effective months of production, as Shell's

receiving facility upstream of our injection was severely curtailed.

Also affecting our profit margin was the burden of the rising expenditure attributed to our growth

inducing work programme in 2009. Even though this had been modestly downwardly revised, a

substantial amount of our revenue was spent extinguishing the IPINS and servicing other field

based projects. These capital expenses should be viewed positively. They have allowed your

Company to continue its upward trajectory, by increasing its assets base and investment level

(Figure 2), which will ultimately help us diversify our income base in the coming months.


Figure 2: Value of NDEP Investments and Revenues from 2006-2009

Indeed, the level of investments made by your Company has increased by one third (33%) since

2008 to a new high threshold of NGN 24, 789, 296, 000 (Twenty Four Billion, Seven Hundred and

Eighty Nine Million and Two Hundred and Ninety Six Thousand Naira) against NGN 18, 585, 803,

000 (Eighteen Billion, Five Hundred and Eighty Five Million and Eight Hundred and Three

Thousand Naira) in 2008.

Investments, Revenue & Profit: 2006 - 2009 (NGN’Million)

Figure 1: Average Dated Brent Prices (2008-2009)

Jan-0

8

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-

08

Jan-0

9

Mar

-09

May

-09

Jul-0

9

Sep-0

9

Nov-

09

Investment Revenue Profit After Tax

20072006 2008 2009

6,898

2,6051,264 1,373

516 332

10,315

8,078

6,174 6,2037,193

5,191

12,000

10,000

8,000

6,000

4,000

2,000

150.00

100.00

50.00

50.00

0.00

s/bb

l

Average Dated Brent Prices (2008-2009)

BRENT

28 29

Against this backdrop, we are also happy to report the following additional encouraging results

achieved in 2009:

. A significant Group revenue level of NGN7, 192,838,000 (Seven Billion, One Hundred

and Ninety Two Million, Eight Hundred and Thirty Eight Thousand Naira) was attained,

as against the NGN 8, 077, 863,000 (Eight Billion, Seventy Seven Million and Eight

Hundred and Sixty Three Thousand Naira) achieved in 2008 (Figure 2).

. An increased Shareholders' Fund of NGN 12, 418, 357, 000 (Twelve Billion, Four

Hundred and Eighteen Million, Three Hundred and Fifty Seven Thousand Naira) as

against NGN 8, 561, 406, 000 (Eight Billion, Five Hundred and Sixty One Million, Four

Hundred and Six Thousand Naira) realized in 2008 (Figure 4).

. A solid Profit After Taxation of NGN 5, 190, 776, 000 (Five Billion, One Hundred and

Ninety Million, Seven Hundred and Seventy Six Thousand Naira) comparable to the

NGN 6,174, 211, 000 (Six Billion, One Hundred and Seventy Four Million, Two Hundred

and Eleven Thousand Naira) of 2008 (Figure 2).

. An impressive Group Operating Profit of NGN 6, 881, 663, 000 (Six Billion, Eight

Hundred and Eighty One Million, Six Hundred and Sixty Three Thousand Naira) as

against NGN 7, 797, 384, 000 (Seven Billion, Seven Hundred and Ninety Seven Million,

Three Hundred and Eighty Four Thousand Naira) obtained in 2008.

. A modest increase in the issued and fully paid up capital of your company from a level of

NGN 735M (Seven Hundred and Thirty Five Million Naira) in 2008 to a new high of NGN

923M (Nine Hundred and Twenty Three Million Naira) in 2009 (Figure 4).

All of these results paint a positive picture for the future prospects of your Company. They equally

reflect the continuous desire and commitment of the Board and Management to ensure that the

long term interests of shareholders are upheld. As for our desire for new capital, the efforts

remain sustained and with the closure on the controversial issue of the cancellation of all NDPR

IPINs, we must now justifiably look for a timely approval from the regulatory authorities of our

pending applications for both the Rights Issue as well as Private Placement albeit in some

revised mode.

In the event of a Rights Issue and Private Placement, which the Company is seeking to achieve

in the near future (subject of course to the Regulatory Authority's approval), we must therefore

urge you, our shareholders to take advantage of this new opportunity. Not only will this benefit the

Company by providing much needed new equity capital, but hopefully, as the preceding results

indicate, it is assuredly to be a profitable decision in the long term.

Figure 3: NDEP Group Cumulative Investment: 2006-2009

Figure 4: NDEP Shareholders Fund from 2006-2009

Figure 5: Earnings Per Share: 2006-2009


Paid-up Capital Vs Shareholders Fund: NGN (Million)

Cumulative Investment

Earnings Per Share

30,000

25,000

20,000

15,000

10,000

5,000

6,898 8,271

18,586

24,786

NDEP Group Cumulative Investment: 2006-2009 (NGN Million)

2006 2007 2008 2009

14,000

Paid-up Capital Vs Shareholders Fund: NGN (Million)

12,000

10,000

8,000

6,000

4,000

2,000 453

2,735

735

3,145

735 923

8,561

12,418

2006 2007 2008 2009

100

80

60

40

20

0

27.88

4.51

83.95

56.26

2006 2007 2008 2009

Earnings Per Share

Earnings Per Share: 2006-2009 (NGN)

30 31

We believe in rewarding our Shareholders with the opportunity to have the first right of refusal for

the Company's shares and the possibility of benefiting from the progress that our Company has

made.

In a similar vein, the Board and Management of NDEP appreciate the long term loyalty of our

Shareholders and are aware that 2009 was indeed a financially tasking year for many, with

dwindling returns on investments. Therefore, we have opted to reward our investors for their

loyalty and commitment, with a dividend payment for the fourth consecutive year.

Your Board is therefore proposing a dividend of NGN6.00, as well as a special dividend of

NGN3.00 per share, as announced. NDEP's record of rewarding Shareholders with capital

growth and regular dividends, helps to establish our leading position and separates us from our

peers.

OUR OPERATING ENVIRONS

In the last four years since commencement of oil production, it is a noteworthy accomplishment

that we have suffered minimal down time and production shut-ins arising from our host

communities induced disruptions. All our host communities (with the exception of Rumuekpe)

continue to take full benefits of the rewards emanating from the Host Community and

Environmental Development Trust set up by your company for their exclusive benefit. The

significant sums of money accruing to them through the 5% net profits endowment into the Trust

continue to be a novel avenue and vehicle for effective ownership and participation in our

business by the various Host communities located within the areas of our production operations.

The spread of economic, social and human capital development activities being funded by the

Trust has become a veritable means of demonstrating the effectiveness of this partnership

arrangement with our host communities.

It is therefore humbling and satisfying, to see the Federal Government under the ongoing post

Amnesty rehabilitation efforts, adopt a more generous template of our Host Community

Development Trust as a reward to oil producing communities in the ongoing national conflict

resolution and peaceful settlement of the crises in the Niger Delta Region.

We must continue to warn however, of the dangers that will surely arise with the management

and distribution of such financial accruals as being promised by the Federal Government to the

oil producing communities. Our template will remain a model to emulate.

We continue to thank and appreciate the dexterity of our passionate members of the previous

and newly reconstructed Board of Trustees under the chairmanship of Prof. S. J. S. Cookey

(OFR), who over such a very short period, ensured the effective implementation of the various

development projects in all but one of our host communities.

We must continue to urge and encourage the Rumuekpe Host community to get internally

organised so that they too can take benefit of the sizeable funds accruals now in their favour for

the re-settlement and rehabilitation of their otherwise strife-torn community.

rdWhile we continue to suffer sometimes, albeit now in a reduced frequency from the risks of 3

party induced shut downs upstream of our operations, it is indeed a good feeling that our well

thought out process of inclusive partnership with our host communities seem to be bearing very

good results. They remain partners in our business and will continue to reap the fruits of our

success for as long as we remain profitably in business.

OUR GREAT COUNTRY NIGERIA

Our country and our industry continue to pass through very unsteady times. The political

uncertainties of the period before the sad loss of our former President late Alhaji Umaru Yar-Adua

(May the Peace of Allah be with him always) are transforming gradually, with the political

landscape becoming more stable. This being the outcome of the Amnesty Program. It is our

hope, that the Niger Delta Region returns quickly to its past of land of plenty. The industry

however continues to witness certain uncertainties deriving from the final content of the

Petroleum Industry Bill (PIB).

In the interim, two significant events manifested during the period of this report.

1. The zero gas flaring policy of the Federal Government has finally crystallized with an

unqualified pronouncement that the new effective “gas flare out date” will now be January

01, 2012. Regarding the revised timetable for achieving total gas flare-out, the punitive gas

flaring charges that companies will be liable for between now and then remains an albatross.

That no flaring will be allowed beyond this date, is even more a business threatening

situation.


32 33

2. The Local Content Act has now been passed into law. We are less worried by the effect of

this new law which specifically requires the preferential use of indigenous service

companies as long as they demonstrate ownership of equipment, Nigerian personnel

competence and when available to execute such work on land and swamp operating areas

of the Nigerian oil and gas industry. The schedule list of services contained in this Act is wide.

Given our lean historical circumstances and our extended preferential use of Nigerian

service companies for most of our field development projects in the past, we remain

sustained in our commitment to looking internally for the resources with which to

implement any new field development activities. We remain fully in support of the Federal

Government's efforts to achieve internal capacity building for the Nigerian petroleum

industry.

Your company, with its forward looking gas utilization investment program could not have so

implemented at a more opportune and appropriate time. Having proceeded with the installation

of the Ogbele Gas Plant and its complementary 20km gas delivery line from Ogbele to the NLNG

manifold at Rumuji, (now at an advanced state of construction, Figure 6), your company will

become fully compliant with the zero gas flaring policy and assuredly so ahead of the 2012 newly

set deadline. We expect the Ogbele gas plant to be operational in 2010.

Together, with the ongoing installation of the NDPR 1000bpd Diesel Topping Plant (Figure 7)

and for which the appropriate license to operate the facility has been granted by the Department

of Petroleum Resources (DPR), we are poised for not just a significant enhancement in our

operating footprint, but also in the diversity of our revenue base. These, effective 2010, will derive

from not only crude oil sales, (as is now the case) but also from (i) the sale of cooking gas and

propane into the domestic market, (ii) condensate injection into our crude stream, and (iii) sale of

tail (dry) gas to the NLNG. All these being the first of such by a Nigerian Independent Producer.

Figure 6: The Ogbele Gas Plant - now under construction and for commissioning in 2010 Figure 7: The Ogbele Topping Plant ready for commissioning

The effective total independence of supply of diesel for our operations and the projection that we

shall secure the necessary government permit to sell off any excess products into the domestic

market must be something to look forward to. The net positive revenue contributions these will

add to our cash flow is bound to be significant both in the short and long term.

These strategic investments being executed by your company, all albeit during an otherwise

difficult year and with no new capital injection, are themselves some of the prudent ways the

Board and Management have positioned your company for a brighter future.

In the past two years, our successful drilling and production efforts coupled with the 3D data

acquired have availed us of additional useful data set to better understand the potentials and

upsides in the re-estimation of the reserves carried by the Ogbele producing field.

Although further production tests data are expected that should further confirm our reserves

position after we must have successfully re-entered and recompleted Ogbele-1 in 2010, I can, at stthis juncture report some enhanced results for our reserves base as at 31 December 2009. With

a low (P1) total liquids reserves at 22.6mmb and a cumulative production of 4.4mmb as of even

date, the liquids reserves as at 31/12/2009 therefore stood at 18.2MMB for the Ogbele field. In addition, the low (P1)Associated and Non Associated gas reserves as at the same date stood at

16.0 and 278.3bcf respectively, bringing our total low (P1) gas reserves to 294.3bcf.

These modest enhancements to our reserves base even for the Ogbele Field do call for new and

sizeable investments for a prudent exploitation of the revised resource base. It is expected that

we shall substantially add to this enhanced reserves position upon the full execution of the Farm-

out Agreement for the Omerelu marginal field.

With the conclusion at year end of the Farm-Out Agreement in respect of the Omerelu Oil field

(with NNPC/Chevron JV in OML-53) and for which we expect a sign off by the NNPC and DPR in

2010, your company is gradually transforming into a strong player on the basis of its reserves.

This, more than anything else, made 2009 a remarkable year.

From all the reports and disclosures so far made in this address, it is obvious we have had a

challenging yet exciting year. The future of your company looks very bright. The growth path

ahead is being secured and must be so sustained by prudent management of our financial and

human capital resources. A successful company is in the making. It is in the management of this

seeming success that we need the support and cooperation of all our shareholders.

Thank God, for our company, shareholders and country.

'Layi Fatona (Dr.)

MANAGING DIRECTOR


34 35

Acknowledging the Company's commitment to environmental and social concerns, in 2002 a

Community Affairs, Health, Environment and Security (CASHES) manual was developed. This

manual forms the basis of the Company's approach to health and safety issues and its

interaction with host communities. It provides a systematic framework that guides the

Company's day to day operations and also aids the attainment of longer term CSR and HSE

(Health, Safety and Environment) objectives. Adherence to the manual ensures that potential

risks are reported, assessed and managed and that environmental pollution is kept to a

minimum.

Specifically, NDEP is committed to the following principles:

. Ensuring the health and safety of all stakeholders

. Minimising any damage to the environment

. Liaising with stakeholders honestly and transparently

. Partnering with host communities to promote sustainable development

. Recognising, rewarding and retaining staff talent

Staff Welfare

As a lean but expanding operating Company, recruiting and retaining skilled staff is key to

maintaining a competitive edge. Therefore, NDEP continuously reviews staff remuneration and

other benefits to ensure that its workforce is competent and motivated.

NDEP places great emphasis on the welfare of its staff and adheres to health and safety codes to

ensure a safe and enabling work environment, especially for staff in the field. In line with the

CASHES manual, NDPR provides protective equipment and regularly conducts training

sessions to ensure staff can anticipate potential risks, and in the event of an emergency, are

familiar with the appropriate procedures. NDEP, through its operating Company, NDPR, also

ensures that any appointed contractors strictly adhere to the CASHES manual.

NDEP is a proudly Nigerian Company with a genuine, long term regard for the

environment and the society in which it operates. Whether at its Head Office, in the

field or in relations with host communities, NDEP through its operating Company,

NDPR, strives to be an excellent corporate citizen by adhering to the principles of

CSR. NDEP's scope encompasses much more than its bottom line; indeed the

Company's stakeholders, especially those in host communities, occupy a central

position in Company policy.

CORPORATE SOCIAL

RESPONSIBILITY REPORT

Rolling of asphalted section of Ogbele Community Road Military Structure in constructionCross section of Women from host communities at an interactive session of the Women Empowerment Programme


36 37

Safeguarding the Environment

Testament to its environmental commitment, NDEP's operating Company, NDPR is set to

become the first Independent oil producing Company to completely phase out the use of gas

flaring, setting a standard for other producers to follow. It is envisaged that this measure will

decrease pollution and significantly benefit the local environment and neighbouring communities.

Additionally, NDEP, again through NDPR, takes care to assess the environmental impact of its

operations, so any negative consequences can be identified and actively managed prior to the

commencement of a project.

Community Affairs

NDEP's innovative approach to community affairs is illustrated through the Host Community

Development Trust. The Trust, set up by NDEP's operating Company, NDPR, undertakes and

finances projects to advance development and protect the environment, and also facilitates

opportunities to boost education and employment.

The Trust is overseen by a Board of Trustees (BOT), under the Chairmanship of Professor S.J.S

Cookey (OFR), who meet regularly to monitor its progress. The Trust is funded from 5% of the

Company's annual net profits and various Community Advisory Committees nominate projects

based on the shared needs of their community. The Trust is transparent and fully accountable; in

Q1 2010, the BOT were able to present the audited accounts for 2006 to 2009.

The Trust has played a vital role in promoting engagement and has helped to align the

community's interest with the Company's. That there has been minimal downtime in nearly 5

years of production is a direct result of the success of the Trust. Indeed, the Trust has received

independent recognition from the Federal Government, who lauded our unique approach as an

example for other operating companies to follow. Over the years, and without fanfare, the projects commissioned and completed by the Trust have

significantly enhanced the quality of life for local inhabitants. Transport links have been improved,

clean and accessible water has been provided, local residents have been empowered and

students have received bursaries towards their education. 2009 was no exception and we were

able to build on our achievements with the following projects:

In Ogbele NGN14, 999,000 (Fourteen Million, Nine Hundred and Ninety Nine Thousand Naira)

was spent as part payment for the Rehabilitation of the 4 km Community Link Road.

For the Oshiugbokor Community, NGN29, 130,000 (Twenty Nine Million, One Hundred and Thirty

Thousand Naira) was expended as part payment for the construction of the Oshiugbokor/Okoma

Bridge to provide a safe crossing for local inhabitants. Additionally, NGN5, 800,000 (Five Million,

Eight Hundred Thousand Naira) was spent as mobilisation for the grading and filling of

Oshiugbokor-Ogbele Road.

For the Otari community, NGN7, 410,000 (Seven Million, Four Hundred and Ten Thousand Naira)

was spent on the construction of 8 boreholes.

The 5th Water bore-hole drilled, with 2-2000litres GP tanks

on a steel stand, along Otari-School Road.

Richy Adesuyan, Flowstation Supervisor at the Ogbele Field


300

250

200

150

100

50

2006 2007 2008 2009

38

thAs quoted in Business Day, 29 December, 2009

Across Obumeze, Otari, Ogbele and Oshiugbokor communities, nearly Four Hundred (391)

students received a total of NGN19, 550,000 (Nineteen Million, Five Hundred and Fifty Thousand

Naira) in bursaries to help with school and college fees.

Unfortunately, continued division in the Rumuepke community has hampered their ability to

propose projects based on mutual consensus and endorsement. Therefore their accruals have

been placed in a fixed deposit account until peace can be re-established.

Finally in 2009, the commissioned Non-Governmental Organisation (NGO), Community Life

Project (CLP), commenced its economic empowerment programme for women in the host

communities and undertook the following activities:

. Leadersh ip t ra in ing fo r 468 women, f rom Ogbe le , Osh iugbokor,

Obumeze and Otari communities

. 135 women from Ogbele, Obumeze and Oshiugbokor communities were able to

participate in the micro credit scheme and by year end 106 women had made loan

repayments

. As part of the micro credit scheme, participating women undertook a three day training

session on business skills and planning

39

As all of the preceding activities show, NDEP seeks to foster sustainable and long term

development through projects that will benefit whole communities and provide solutions to

environmental, social and economic challenges. Instead of using a top down approach, NDEP

strives to partner with key community stakeholders to empower inhabitants and co-opt them into

the development process, through the Host Community Development Trust. Therefore, the

Company's community affairs policy is carefully executed and goes beyond corporate rhetoric to

positively impact people's lives.

Given the pressing needs of Host Communities, the Host Community Development Trust has

deviated from its original mandate, whereby 50% of the Trust's accruals are retained and invested

for the benefit of future generations, while the remaining 50% is used to fund immediate projects.

Instead, the BOT have been able to allocate 100% of the funds to meet the development needs of

the communities. However, in the near future, the Trust will revert to its original charter. This

measure, in addition to the ongoing and completed projects, will ensure that the proceeds from the

Trust will leave a lasting legacy for generations to come.

Cross section of students from NDPR hosts communities in tertiary institutions at a Bursary Award Ceremony organised by the Company


Beginning of Upgraded Ogbele Community Road

Ogbele Obumeze Oshiugbokor

Ogbele Otari Obumeze Oshiugbokor

15,000,000.00

10,000,000.00

5,000,000.00

0.00

300

250

200

150

100

50

0

40 41

REPORT OF THE DIRECTORSFOR THE YEAR ENDED DECEMBER 31, 2009

The Directors submit to the members of the Companytheir report together with the consolidated audited financial statements for the year ended December 31, 2009.

PRINCIPAL ACTIVITY

It is in the business of investing in Nigerian upstream oil and gas activities.

STATE OF AFFAIRS

In the opinion of the Directors, the state of affairs of the Company is satisfactory and there has been no material change since the date of the balance sheet.

RESULTS FOR THE YEAR

THE GROUP THE COMPANY2009 2009

N'000 N’000

Profit before exceptional items and taxation 7,180,214 6,446,041

Exceptional items (254,650) ------------- ------------

Profit before taxation 6,925,564 6,446,041

Taxation (1,734,788) (1,569,382)------------ ------------

Profit after taxation 5,190,776 4,876,659======== ========

DIVIDEND

The Board of Directors has recommended for approval of the members a dividend of N9.00 per share which if approved will amount to N996,596,910.00

FIXED ASSETS

Information relating to Fixed Assets is given in Note 2 to the financial statements. In the opinion of the Directors, market value of the Company's assets is not less than the value shown in the financial statements.

CHARITABLE CONTRIBUTIONS

The Company made charitable contributions amounting to N535,000 during the year (2008: N900,000).


2009 MANAGING DIRECTOR'S REPORT

06 07


06 07


06 07


06 0742 43

DIRECTORS

The names of the Directors at the date of this report and of those who held office during the year are as

follows:

Mr. B. A. Osuno - Chairman Dr. O. F. Fatona - Managing DirectorChief D. Richards (British)Mr. Sammy O. OlagbajuMr Goodie Ibru (OON)Mr. Ahmed Khelif (Algerian)Prof. S.J.S. Cookey (OFR)Dr (Mrs.) Z. Mantu Appointed: April 7, 2010Mr. L. Jadesimi Appointed: April 14, 2010

DIRECTORS' INTERESTS

Directors' interests in the share capital of the Company were as follows:-Number of Shares

Mr. L. Jadesimi 3,440,779Dr (Mrs.) Z. Mantu 1,860,915Dr O.F. Fatona 1,340,584Chief D. Richards 927,754Mr. Sammy O. Olagbaju 192,093Mr. Goodie Ibru (OON) 75,000Mr. B.A. Osuno 75,000Prof. S.J.S. Cookey (OFR) 30,000Mr. Ahmed Khelif Nil

Also, the following Directors have beneficial interests in the shares held by the corporate bodies listed

against their names:Corporate body in whose Number of

Name of Director name shares are held shares

Mr. Goodie Ibru (OON) Associated Ventures International Ltd 5,938,786Mr. Sammy O. Olagbaju Marius Limited 2,015,229Dr O.F. Fatona Geotrex Systems Ltd. 2,015,229Chief D. Richards Sasha Nominees Ltd 1,244,071Mr. L. Jadesimi First Zenith Investment Holding Company 900,000Mr. L. Jadesimi Global Resource Management Limited 1,266

RESPONSIBILITIES OF DIRECTORS

In accordance with the provisions of sections 334 and 335 of the Companies and Allied Matters Act, CAP

C20 Laws of the Federation of Nigeria 2004, the Company's Directors are responsible for the preparation

of consolidated financial statements which give a true and fair view of the state of affairs of the Company

as at the end of the financial year and of its financial performance and cash flows for the year which

comply with the provision of the Act. These responsibilities include ensuring that:

i) adequate internal control procedures are instituted to safeguard assets, prevent and detect fraud

and other irregularities;

ii) proper accounting records are maintained;

iii) applicable accounting standards are followed;

iv) suitable accounting policies are used and consistently applied; and

v) the financial statements are prepared on the going concern basis unless it is

inappropriate to presume that the Company will continue in business.

SUBSTANTIAL SHAREHOLDING

The following shareholder of the Company held 10% or more of the paid-up share capital of the Company

as at December 31, 2009:

Number of ordinary shares of N10 each held

At Dec. 31, 2009 At Dec. 31, 2008

Number % Number %

Petrolin Ocean Limited 9,171,427 9.9 9,171,427 12

HEALTH, SAFETY AND WELFARE AT WORK OF EMPLOYEES

One of the Company's primary business objectives is that its operations shall not cause accidents,

damage or losses. The Company is committed to protect people, the environment and physical assets.

The Company established adequate health and safety measures within its premises and its areas of

operations and in the operation of all its vehicles. The Company will aim to provide as far as possible

(subject to limits) medical care for all members of its staff and immediate members of their nuclear

families.


REPORT OF THE DIRECTORS CONTINUED REPORT OF THE DIRECTORS CONTINUED


06 07


06 07


06 07


06 0744 45

FORMAT OF FINANCIAL STATEMENTS

The financial statements have been issued under the reporting and presentation requirements of

the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004. The

Directors consider that the format adopted is most suitable for the Company.

AUDITORS

Ernst & Young, have expressed their willingness to continue in office as the Company's auditors in

accordance with section 357(2) of the Companies and Allied Matters Act, CAP C20 Laws of the

Federation of Nigeria, 2004.

BY ORDER OF THE BOARD

(SECRETARY)May 27, 2010

INDEPENDENT AUDITORS' REPORT REPORT OF THE DIRECTORS CONTINUED

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF

NIGER DELTA EXPLORATION & PRODUCTION PLC

We have audited the accompanying consolidated financial statements of Niger Delta Exploration & Production Plc, which comprise the group balance sheet as at December 31, 2009, the group profit and loss account, the group statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes.

Directors' Responsibility for the Financial Statements

The Directors are responsible for the preparation and fair presentation of these financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Nigerian Standard on Auditing issued by the Institute of Chartered Accountants of Nigeria and International Standards on Auditing, which require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of Niger Delta Exploration & Production Plc as of December 31, 2009, and of its financial performance and cash flows for the year then ended in accordance with relevant accounting standards issued by the Nigerian Accounting Standards Board and Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004.

Lagos, Nigeria.

May 27, 2010

A Member Firm of Ernst & Young Global Limited

Ernst & Young2A, Bayo Kuku Road,Ikoyi LagosP.O Box 2442, Marina,Lagos, Nigeria.

Tel: +234 (01) 463 0479-80Fax: +234 (01) 463 0481e-mail: [email protected]

www.ey.com


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The following significant accounting policies were adopted by the Company in the preparation of

these financial statements.

Basis of Accounting

The consolidated financial statements have been prepared under the historical cost convention.

Consolidation

The group financial statements consolidate the financial statements of Niger Delta Exploration &

Production Plc and its subsidiary wherein there is majority shareholding and/or control of the

Board of Directors and management. The consolidated subsidiary is Niger Delta Petroleum

Resources Limited.

Preliminary and Pre-production Expenses

All preliminary and pre-production expenses including license fees are accumulated for

subsequent write off over two accounting years beginning from the year in which production

commences.

Depreciation

Fixed assets are depreciated on a straight-line basis over the estimated useful lives of the various

classes of assets, using the following average annual rates:

%

Plant and machinery 25Office equipment 25Furniture and fittings 25Computer hardware 25

Depreciation commences in the month in which an asset is brought into use.

Leases

Leases in which a significant portion of the risks and rewards of ownership are maintained by the

lessor are classified as operating leases. Payments made under operating leases are charged to

the profit and loss account on a straight-line basis over the period of the lease. Leasehold

improvements are recorded as a component of property, plant and equipment and these costs are

amortized over the shorter of the lease term or other useful lives.

Foreign Currency Translation

Transactions denominated in foreign currencies are translated into Naira using the appropriate

official rates of exchange ruling at the transaction date as notified by the Central Bank of Nigeria.

At the end of the year, all monetary assets and liabilities denominated in foreign currencies are

translated at the official exchange rates ruling at the balance sheet date and the resulting

exchange differences are dealt with in the determination of the profit or loss for the year.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES


REPORT OF THE AUDIT COMMITTEE

TO THE MEMBERS OF NIGER DELTA EXPLORATION & PRODUCTION PLC

In accordance with the provision of sections 359(4) and (6) of the Companies and Allied Matters

Act, CAP C20 Laws of the Federation of Nigeria 2004, we have reviewed:

1. the scope and planning of the audit requirements and

2. the accounting and reporting policies of the Company for the year ended December 31,

2009 and ascertained that they are in accordance with legal requirements and agreed

ethical practice.

In our opinion, the scope and planning of the audit for the year ended December 31, 2009 together

with the consolidated audited financial statements were satisfactory. The external Auditors had

discharged their duties conscientiously and satisfactorily. We were satisfied with management

responses to the Auditors' findings.

Chief Victor Oyolu ChairmanAudit Committee

May 28, 2010

Members of the Audit Committee

1. Chief Victor Oyolu Chairman Appointed: July 16, 20092. Alhaji Idris O.Sulaimon 3. Mr. Sammy O. Olagbaju4. Prof. G. O.A. Sowemimo5. Engr. Alex Ogedegbe 6. Prof. S.J.S. Cookey (OFR)7. Chief D. Richards

Resigned: July 16, 2009


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Inventories

i) Crude oilCrude oil is valued at the lower of cost and net realisable value at the balance sheet date.

ii) Consumable materialsConsumable materials are valued at the lower of cost and net realisable value, cost

being determined on a moving average basis.

Receivables

Receivables are stated after deduction of adequate provisions for any debts considered bad and

doubtful.

Investment in Subsidiaries

Investment in subsidiaries are stated at the lower of cost and the Company's share of net tangible

assets for unquoted investments and market value for quoted investments, the difference is

written off to profit and loss account.

Current Taxation

Income taxes payable are provided on taxable profits at the current petroleum profit tax rate.

Deferred Taxation

Deferred income tax is provided using the liability method for all temporary differences arising

between the tax bases of assets and liabilities and their carrying values for financial reporting

purposes. Currently enacted tax rates are used to determine deferred income tax.

Pension

The Company operates a pension scheme in line with the Pension Reform Act 2004. The

employee and Company contributions are 5% and 10% respectively of the annual emoluments

(Basic, Housing and Transport). The Company's contributions are accrued and charged to the

profit and loss account while the fund is being managed by IBTC Pension Administrators and

Trust Fund Pensions Plc.

AS AT DECEMBER 31, 2009 THE GROUP THE COMPANY

2009 2008 2009 2008Note N '000 '000 '000 ’000

FIXED ASSETS 2 592 652 592 652INVESTMENTS 3 24,789,296 18,585,803 23,384,273 17,717,431

------------ ------------- ------------- -------------24,789,888 18,586,455 23,384,865 17,718,083

------------ ------------- ------------- -------------CURRENT ASSETSDebtors and prepayments 4 12,482,497 8,892,168 9,899,421 6,848,506Cash and bank 144,333 134,162 115,974 105,948

------------ ------------ ------------ ------------12,626,830 9,026,330 10,015,395 6,954,454

CURRENT LIABILITIESCreditors and accruals 5 (22,344,871) (16,890,479) (20,081,378) (15,063,073)Taxation 6 (1,031,446) (1,053,772) (357,788) (460,014)

------------ ------------ ------------ ------------NET CURRENT LIABILITIES (10,749,487) (8,917,921) (10,423,771) (8,568,633)

------------ ------------ ------------ ------------TOTAL ASSETS LESS CURRENT LIABILITIES 14,040,401 9,668,534 12,961,094 9,149,450

LONG-TERM LIABILITIESIrredeemable Participating Investment Notes - (356,463) - (356,463)Deferred taxation 7 (1,622,044) (750,665) (1,548,282) (685,395)

------------- ------------ -------------- ------------12,418,357 8,561,406 11,412,812 8,107,592

======== ======= ======== =======FINANCED BY:Share capital 8 922,706 735,433 922,706 735,433Share premium 9 12,496 1,219,233 12,496 1,456,847Premium on IrredeemableParticipating - Investment Notes - 222,090 - 222,090Revenue reserve 10 11,483,155 6,384,650 10,477,610 5,693,222

------------- ------------ -------------- ------------12,418,357 8,561,406 11,412,812 8,107,592======== ======= ======== =======

--------------------------) ) Directors

--------------------------)

See notes to the financial statements.

N N N

CONSOLIDATED BALANCE SHEET



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FOR THE YEAR ENDED DECEMBER 31, 2009

THE GROUP THE COMPANY2009 2008 2009 2008

Note N '000 N'000 N'000 N'000

Revenue 11 7,192,838 8,077,863 6,567,378 7,375,493

Operating costs 12 (311,175) (280,479) (305,828) (275,519)------------ ------------ -------------- ------------

Operating profit 13 6,881,663 7,797,384 6,261,550 7,099,974

Other income 14 383,329 885,003 184,491 10,510

IPIN interest 15 (84,778) (929,756) - (561,215)

------------ ------------ -------------- ------------Profit before exceptional items and taxation 7,180,214 7,752,631 6,446,041 6,549,269

Exceptional items 16 (254,650) - - ------------- ---------- ------------ ----------

Profit before taxation 6,925,564 7,752,631 6,446,041 6,549,269

Taxation 6(c) (1,734,788) (1,578,420) (1,569,382) (1,123,921)------------ ---------- ------------ ----------

Profit after taxation 5,190,776 6,174,211 4,876,659 5,425,348======= ====== ======= ======

Basic earnings per share 18 N56.26 N83.95 N52.85 N73.77Adjusted earnings per share 19 N56.26 N66.91 N52.85 N58.80


CONSOLIDATED PROFIT AND LOSS ACCOUNT



Note N '000 N'000 N'000 N’000CASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers 3,982,397 1,747,416 3,700,382 1,517,360Payments to suppliers andemployees (656,160) (307,064) (254,508) (302,006)Tax paid (885,735) (35,022) (808,721) (31,976)

------------ --------- ------------ --------Net cash inflow from operating activities 17 2,440,502 1,405,330 2,637,153 1,183,378

------------ ------------ ------------ ------------CASH FLOWS FROMINVESTING ACTIVITIESInterest received 3,972 7,149 1,103 3,677Purchase of fixed assets (163) (747) (163) (747) Increase in investments (6,203,493) (10,312,106) (5,666,842) (9,444,591)

------------ -------------- ------------ ------------Net cash outflow frominvesting activities (6,199,684) (10,305,704) (5,665,902) (9,441,661)

------------ -------------- ------------ ------------CASH FLOWS FROMFINANCING ACTIVITIES(Loss on)/proceeds from issue of shares (1,019,464) 265,615 (1,257,078) 265,615(Refund)/proceeds from investors' deposit (68,188) 83,255 (68,188) 83,255 Redemption of IPINs (578,553) - (578,553) -Dividend paid (92,271) (735,433) (92,271) (735,433)Receipts from related companies 6,171,416 9,686,369 5,495,981 8,819,127IPINs Interest (643,587) (365,550) (461,116) (168,589)

------------ ---------- ---------- ------------Net cash inflow fromfinancing activities 3,769,353 8,934,256 3,038,775 8,263,975

------------ ------------ ---------- ------------Net increase in cash and cash equivalents 10,171 33,882 10,026 5,692Cash and cash equivalents at the beginning of the year 134,162 100,280 105,948 100,256

---------- ---------- ---------- ----------Cash and cash equivalents at the end of the year 144,333 134,162 115,974 105,948

====== ====== ====== ======


CONSOLIDATED STATEMENT OF CASH FLOWS



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1. CORPORATE STRUCTURE AND BUSINESS

Niger Delta Exploration & Production Plc was originally incorporated on March 25, 1992. The

Company's objective is to create a diversified oil and gas investment portfolio. The Company invests

principally in oilfield properties (both developed and undeveloped) and in oilfield services Companies.

2. FIXED ASSETS

THE GROUPPlant Furniture

and and Office Computermachinery fittings equipment hardware Total

N'000 N'000 N'000 N'000 N’000COST:At Jan. 1, 2009 3,642 791 5,208 423 10,064Additions - - 163 - 163Assets written off (3,631) (155) (1,879) - (5,665)

------- ----- ------- ----- --------At Dec. 31, 2009 11 636 3,492 423 4,562

------- ----- ------- ----- --------

DEPRECIATION:At Jan. 1, 2009 3,642 791 4,777 202 9,412Charge for the year - - 129 94 223Assets written off (3,631) (155) (1,879) - (5,665)

------- ----- ------- ----- --------At Dec. 31, 2009 11 636 3,027 296 3,970

------- ----- ------- ----- --------

NET BOOK VALUES:

At Dec. 31, 2009 - - 465 127 592 === === === === ===

At Dec. 31, 2008 - - 431 221 652 === === === === ===

NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS - Continued

2. FIXED ASSETS

THE COMPANYPlant and Furniture Office Computer

machinery and fittings equipment hardware Total N'000 N'000 N'000 N'000 N’000

COST:At Jan. 1, 2009 11 636 3,329 423 4,399Additions - - 163 - 163

---- ----- ------- ------- -------At Dec. 31, 2009 11 636 3,492 423 4,562

---- ----- ------- ------- -------

DEPRECIATION:At Jan. 1, 2009 11 636 2,898 202 3,747Charge for the year - - 129 94 223

---- ----- ------- ------- -------At Dec. 31, 2009 11 636 3,027 296 3,970

---- ----- ------- ------- -------

NET BOOK VALUES:

At Dec. 31, 2009 - - 465 127 592 === === ===== === ===

At Dec. 31, 2008 - - 431 221 652 === === ===== ==== ===


N'000 N'000 N'000 N’0003. INVESTMENTS

Nigerian Energy Sector Fund 250 250 250 250Petro-Data ManagementServices Limited 16,000 16,000 16,000 16,000Global Energy Inc. 145 145 145 145Ogbele Joint Venture (Note 3.1) 24,282,400 18,110,453 22,171,045 16,535,749Niger Delta Gas Dev. Co. Ltd. 180 180 180 180Niger Delta Properties Ltd 489,592 458,775 489,592 458,775Niger Delta Exploration &Production (Uganda) Ltd 729 - 729 -Niger Delta PetroleumResources Ltd (NDPR) - - 706,332 706,332

------------- ------------- ------------ -------------24,789,296 18,585,803 23,384,273 17,717,431======== ======== ======= ========



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3. INVESTMENTS - Continued

The Directors are of the opinion that the market value of unquoted equity investments is not below their

costs.

3.1 The Group has a working interest of 100% in the Ogbele Joint Venture.


N'000 N'000 N'000 N’0004. DEBTORS AND PREPAYMENTS

Trade debtors (Ogbele Joint Venture) 11,276,816 7,700,669 9,855,303 6,805,781Due from related Companies (Note 4a) 9,336 8,805 18,433 17,902Sundry debtors 25,650 24,757 25,650 24,757Prepayments 35 66 35 66 Joint Venture Net Profit Interest 1,170,660 1,157,871 - -

------------ ------------ ------------ ------------12,482,497 8,892,168 9,899,421 6,848,506

======= ======= ======= =======

4a. DUE FROM RELATED COMPANIES

Niger Delta Petroleum Resources Ltd (NDPR) - - 9,097 9,097First Delta Investment Limited 6 6 6 6Niger Delta Gas Dev. Co. Ltd. 1,827 1,827 1,827 1,827Niger Delta Properties Ltd 7,503 6,972 7,503 6,972

------- ------- -------- --------9,336 8,805 18,433 17,902==== ==== ===== =====

5. CREDITORS AND ACCRUALSOgbele Joint Venture 21,824,778 15,652,831 19,795,464 14,160,168NDPR (IPINs) - - 156,500 295,284NDPR IPINs redeemable in shares (Note 5a) 59,787 - 59,787 -Accruals 36,120 49,739 14,819 30,351Sundry Creditors 41,852 35,010 39,741 32,899Interest Payable (IPIN Holders) 139,678 698,487 - 461,116PetRe IPINs 167,661 311,229 - -Due to related Companies 59,928 59,928 - - Investors' deposit 15,067 83,255 15,067 83,255

------------- ------------- ------------- -------------22,344,871 16,890,479 20,081,378 15,063,073======== ======== ======== ========


5a. NDPR IPINs REDEEMABLE IN SHARES

There is an agreement between the holders of the Irredeemable Participating Investment Notes with the

nominal value of N59,787,000 and the Company to surrender these Notes in exchange for the Company's

share worth N286,788,765. This transaction still awaits the approval of the Securities and Exchange

Commission. No provision has been made in the books for the premium of N227,001,243 that will result

from the transaction.


N'000 N'000 N'000 N’0006. TAXATION

BALANCE SHEET(a) PETROLEUM PROFIT TAX

At the beginning of the year 1,030,135 185,234 452,669 (10,878) Tax on profit for the year 837,921 871,708 685,639 488,023Payments made during the year (808,753) (26,807) (738,432) (24,476)

------------ ------------ ---------- ---------At the end of the year 1,059,303 1,030,135 399,876 452,669

------------ ------------ ---------- ---------(b) INCOME TAX

At the beginning of the year 23,637 5,336 7,345 - Education tax 25,488 26,516 20,856 14,845Payments made during the year (76,982) (8,215) (70,289) (7,500)

---------- -------- ---------- ---------At the end of the year (27,857) 23,637 (42,088) 7,345

------------ ------------ ---------- ---------Total (a + b) 1,031,446 1,053,772 357,788 460,014

======= ======= ====== =====

PROFIT AND LOSS ACCOUNT(c) TAXATION FOR THE YEAR

Petroleum profit tax (Note 6a) 837,921 871,708 685,639 488,023 Education tax (Note 6b) 25,488 26,516 20,856 14,845 Deferred taxation (Note 7) 871,379 680,196 862,887 621,053

------------ ------------ ------------ ------------1,734,788 1,578,420 1,569,382 1,123,921======= ======= ======= =======

7. DEFERRED TAXATIONBalance at the beginning of year 750,665 70,469 685,395 64,342Charge for the year 871,379 680,196 862,887 621,053

------------ ---------- ------------ ----------Balance at the end of the year 1,622,044 750,665 1,548,282 685,395

======= ====== ======= ======



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N '000 N'000 N'000 N'0008. SHARE CAPITAL

Authorized Share Capital:275 million (2008: 275 million)ordinary shares of N10 each 2,750,000 2,750,000 2,750,000 2,750,000

======= ======= ======= =======Called up and fully paid:92,270,602 (2008: 73,543,281)ordinary shares of N10 each 922,706 735,433 922,706 735,433

====== ====== ====== ======

As at December 31, 2009, 18,727,321 ordinary shares of N10 each were issued to the NDEP Irredeemable

Participating Investment Note (IPIN) holders as 70% consideration for the repurchase of the Notes. THE GROUP THE COMPANY

2009 2008 2009 2008N '000 N'000 N'000 N'000

9. SHARE PREMIUMAt the beginning of the year 1,219,233 1,227,952 1,456,847 1,465,566Premium paid on issue of shares (9a) (1,206,737) (8,719) (1,444,351) (8,719)

------------ ------------ ------------ ------------At the end of the year 12,496 1,219,233 12,496 1,456,847

======= ======= ======= =======9(a). PREMIUM PAID ON ISSUE OF SHARES

The issue of shares in exchange for the cancelled notes resulted in payment of premium as the difference

between the value in the books and the consideration paid.


N'000 N'000 N'000 N’00010. REVENUE RESERVE

Balance at the beginning of the year 6,384,650 962,371 5,693,222 1,019,806 Bonus dividend issued in prior year - 76 - 76 Final dividend paid for prior year (92,271) (735,433) (92,271) (735,433) Staff bonus for prior year - (16,575) - (16,575) Profit for the year 5,190,776 6,174,211 4,876,659 5,425,348

------------ ------------ ------------ ------------Balance at the end of the year 11,483,155 6,384,650 10,477,610 5,693,222

======= ======= ======= =======


11. REVENUERevenue represents the share of the Company in the profit before taxation of the Ogbele Joint Venture

operations for the year.


N'000 N'000 N'000 N’00012. OPERATING COSTS

Administrative Expenses 236,278 192,561 230,931 187,601Staff Salary and Allowances 69,569 82,019 69,569 82,019Company's Pension Contribution 5,328 5,899 5,328 5,899

---------- ----------- ---------- ----------311,175 280,479 305,828 275,519====== ====== ====== ======

13. OPERATING PROFITOperating profit is stated after charging:Audit Fee 13,320 12,109 8,699 7,908Depreciation 223 151 223 151Directors' Fees 15,236 14,741 15,236 14,741

===== ===== ===== =====

14. OTHER INCOMEExchange gain 2,435 4,139 2,435 4,139Interest 3,972 7,149 1,103 3,677Dividend 3,034 1,817 3,034 1,817Miscellaneous 7 877 7 877 Provision for interest payable no longer required 177,912 - 177,912 -NDPR Net profit interest 195,969 871,021 - -

---------- ---------- ---------- ---------383,329 885,003 184,491 10,510====== ====== ====== =====



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15. IPIN INTERESTThis represents the interest payable to Irredeemable Participating Investment Note (IPIN) holders for the

year.

16 EXCEPTIONAL ITEM


N '000 N'000 N'000 N'000Premium paid on redemption of NDEP's IPINs (Note 16a) 237,614 - - -

Premium paid on redemption ofNDPR's IPINs (Note 16b) 17,036 - - -

---------- --- --- ---254,650 - - -====== == == ==

16a PREMIUM PAID ON REDEMPTION OF NDEP's IPINs

This relates to the amount paid over the book value of the NDEP's IPINs to repurchase the Notes. The

share premium account of the group was unable to absorb the premium. The shortfall in the group's share

premium account is as a result of consolidation loss booked into the share premium account in the first

year of consolidation.

16b PREMIUM PAID ON REDEMPTION OF NDPR's IPINs

This represents the premium paid on the 30% cash consideration for the repurchase of the Irredeemable

Participating Investment Notes (IPINs). The balance of 70% is payable in shares to be issued by NDEP

upon the approval of the Securities and Exchange Commission. No provision has been made in the books

for the premium of N227,001,243 that will arise as a result of the NDEP's shares to be issued.


17. RECONCILIATION OF NET PROFIT AFTER TAXATION TO CASH PROVIDED BY OPERATING ACTIVITIES


N'000 N'000 N'000 N’000

Profit after taxation 5,190,776 6,174,211 4,876,659 5,425,348------------ ------------ ------------ ------------

Adjustments to reconcile operational charges to Net Cash provided:Depreciation 223 151 223 151Interest received (3,972) (7,149) (1,103) (3,677)Interest expense 84,778 929,756 - 561,215Staff share of profit for prior year - (16,575) - (16,575)

Changes in assets and liabilities:

Increase in trade debtors (3,589,798) (7,208,302) (3,050,384) (5,864,966)(Decrease)/increase in creditors and accrued expenses (90,558) (10,161) 51,097 (10,063)(Decrease)/increase in company income tax (22,326) 863,203 (102,226) 470,892Increase in deferred tax liability 871,379 680,196 862,887 621,053

------------ ------------ ------------ ------------(2,750,274) (4,768,881) (2,239,506) (4,241,970)

------------ ------------ ------------ ------------Net cash provided by operating activities 2,440,502 1,405,330 2,637,153 1,183,378

======= ======= ======= =======

18. BASIC EARNINGS PER SHARE

Basic earnings per share is based on the profit after taxation for the year and the number of ordinary shares

issued and fully paid as at the end of the year.

19. ADJUSTED EARNINGS PER SHARE

Adjusted earnings per share is based on the profit after taxation for the year and the number of ordinary

shares issued and fully paid as at the end of the year ended December 31, 2009.



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20. RELATED PARTIES TRANSACTIONS

During the year the Company entered into transactions, in the ordinary course of business, with some

related parties. Transactions entered into, balances outstanding with related parties have been disclosed

in the balance sheets, income statements and notes thereto as applicable.

Amounts due from related companies at the end of the year are:


N'000 N'000 N'000 N’000Niger Delta Petroleum ResourcesLtd (NDPR) - - 9,097 9,097First Delta Investment Limited 6 6 6 6Niger Delta Gas Dev. Co. Ltd. 1,827 1,827 1,827 1,827Niger Delta Properties Ltd 7,503 6,972 7,503 6,972

------- ------- -------- --------9,336 8,805 18,433 17,902==== ==== ===== =====

21. STAFF SALARIES AND ALLOWANCES

(a) Employee costs during the year amounted to:Salaries 37,525 47,048 37,525 47,048Other staff costs 32,044 34,971 32,044 34,971

--------- --------- --------- ---------69,569 82,019 69,569 82,019===== ===== ===== =====

(b) The average number of full time persons employed by the Company during the year was as follows: THE GROUP THE COMPANY

2009 2008 2009 2008Number Number Number Number

Management 1 1 1 1Finance 2 3 2 3Administration 9 9 9 9

--- --- --- ---12 13 12 13== == == ==


21. STAFF SALARIES AND ALLOWANCES - Continued

(c) Higher paid employees of the Company, other than Directors, whose duties were wholly or mainly

discharged in Nigeria, received remuneration (excluding pension contributions) in the following ranges: THE GROUP THE COMPANY

2009 2008 2009 2008Number Number Number Number

Less than N 500,000 - - - -N500,001 - N1,000,000 - - - -N1,000,001- N1,500,000 7 7 7 7N1,500,001- N2,000,000 - - - -N2,000,001- N2,500,000 - - - -Above N2,500,000 5 6 5 6

--- --- --- ---Total 12 13 12 13

== == == ==

22. DIRECTORS REMUNERATION

The remuneration paid to the Directors of the Company was: THE GROUP THE COMPANY

2009 2008 2009 2008 N'000 N'000 N'000 N'000

Emoluments (including fees and sitting allowance) 15,236 14,741 15,236 14,741

==== ===== ==== =====

Fees and other emoluments disclosed above include amounts paid to: THE GROUP THE COMPANY

2009 2008 2009 2008 N'000 N'000 N'000 N’000

The Chairman 2,648 2,677 2,648 2,677==== ==== ==== ====

The highest paid Director 2,648 2,677 2,648 2,677

==== ==== ==== ====



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23. CONTINGENT LIABILITY

Contingent liabilities exist in a number of legal suits against the Operator of the Joint

Venture, Niger Delta Petroleum Resources Limited, the possible liabilities from these

cases amount to N550,000,000. These have not been incorporated in these financial

statements. Management and the Company's solicitors are of the opinion that the

Company will suffer no loss from these claims.

Also, a legal suit against the Operator of the Joint Venture, Niger Delta Petroleum

Resources, for the sum of N2,000,000,000 per annum from January 1, 2004 until

possession of the parcel of land in Rumuekpe now being occupied by the Defendants is

surrendered to the Claimants. This has not been incorporated in the financial statements.

Management and the Company's solicitors are of the opinion that the Company will suffer

no loss from these claims.

24. POST BALANCE SHEET EVENTS

There were no significant post balance sheet events which could have had a material

effect on the state of affairs of the Company as at December 31, 2009, which have not

been adequately provided for.

25. RECLASSIFICATIONS

Certain reclassifications have been made to some prior year balances to conform to this

year's presentation.


THE GROUP THE COMPANY 2009 2008 2009 2008

N'000 N'000 N'000 N’000Turnover 7,192,838 8,077,863 6,567,378 7,375,493Cost of bought in materials and services- Local (490,705) (198,309) (230,708) (193,349)

------------ ------------ ------------ ------------6,702,133 7,879,554 6,336,670 7,182,144

Non-trading items 383,329 885,003 184,491 10,510------------ ------------ ------------ ------------

Value added 7,085,462 8,764,557 6,521,161 7,192,654======= ======= ======= =======

% % % %Applied as follows:To employees:- Staff salaries and allowances 74,897 1 87,918 1 74,897 1 87,918 1

To Government:- Taxes 863,409 12 898,224 10 706,495 11 502,868 7

To providers of funds:- Interest 84,778 1 929,756 11 - - 561,215 8

To provide for the Company's future:- assets' replacement (depreciation) 223 - 151 - 223 - 151 - - deferred taxation 871,379 13 680,196 8 862,887 13 621,053 9- retained earnings 5,190,776 73 6,174,211 70 4,876,659 75 5,425,348 75

------------ ----- ------------ ----- ------------ ----- ------------ -----7,085,462 100 8,770,456 100 6,521,161 100 7,198,553 100======= === ======= === ======= === ======= ===

The value added represents the wealth created through the use of the Company's assets by its employees, management

and Board.

CONSOLIDATED STATEMENT OF VALUE ADDED



06 07


06 07


06 07


06 0764 65

DECEMBER 31,

THE GROUP December 31,2009 2008 2007 2006

N'000 N'000 N'000 N’000

Share capital 922,706 735,433 735,425 453,422Share premium 12,496 1,219,233 1,225,242 930,977Premium on IPINs - 222,090 222,090 222,090Revenue reserve 11,483,155 6,384,650 962,371 1,128,104

------------ ------------ ------------ ------------12,418,357 8,561,406 3,145,128 2,734,593

======= ======= ======= =======

Fixed assets 592 652 56 99Investments 24,789,296 18,585,803 8,270,751 6,897,737Preliminary expenses - - - 3,922Pre-production expenses - - - 150,885Net current liabilities (10,749,487) (8,917,921) (4,698,747) (3,736,869)Irredeemable ParticipatingInvestment Notes (IPINs) - (356,463) (356,463) (356,463)Deferred Tax Liability (1,622,044) (750,665) (70,469) (224,718)

------------ ------------ ------------ ------------12,418,357 8,561,406 3,145,128 2,734,593

======= ======= ======= =======

Turnover 7,192,838 8,077,863 515,870 2,604,547======= ======= ====== =======

Profit before taxation 6,925,564 7,752,631 197,220 1,887,266

Taxation (1,734,788) (1,578,420) 134,289 (623,135)

Profit after taxation 5,190,776 6,174,211 331,509 1,264,131

Dividend - - - (136,027)

Revenue reserve 5,190,776 6,174,211 331,509 1,128,104======= ======= ====== =======

Earnings per share N56.26 N83.95 N4.51 N27.88

Adjusted Earnings per share N56.26 N66.91 N3.59 N13.70

Interim Dividend per share - - - N3.00

Final Dividend per share - N1.00 N10.00 N3.00

Return on Net Assets

Employed (%) 41.80 72.12 10.54 46.23

The financial summary of the group is not up to five years because this is the fourth year the group is preparing consolidated financial statements.

FOUR-YEAR FINANCIAL SUMMARY

DECEMBER 31,

THE COMPANY December 31,2009 2008 2007 2006 2005

N'000 N'000 N'000 N'000 N’000

Share capital 922,706 735,433 735,661 453,422 311,606Share premium 12,496 1,456,847 1,465,566 1,168,591 660,231Premium on IPINs - 222,090 222,090 222,090 222,090Revenue reserve 10,477,610 5,693,222 1,019,806 1,316,912 -

------------ ------------ ------------ ------------ ------------11,412,812 8,107,592 3,443,123 3,161,015 1,193,927

======= ======= ======= ======= =======

Fixed assets 592 652 56 99 177Investments 23,384,273 17,717,431 8,272,840 6,988,385 3,352,220Preliminary expenses - - - 3,871 7,742Pre-production expenses - - - 127,462 254,925Net current liabilities (10,423,771) (8,568,633) (4,408,968) (3,397,160) (2,064,674)Irredeemable ParticipatingInvestment Notes (IPINs) - (356,463) (356,463) (356,463) (356,463)Deferred Tax Liability (1,548,282) (685,395) (64,342) (205,179) -

------------ ------------ ------------ ------------ ------------11,412,812 8,107,592 3,443,123 3,161,015 1,193,927

======= ======= ======= ======= =======

Turnover 6,567,378 7,375,493 471,015 2,378,082 -======= ======== ======= ======= =======

Profit before taxation 6,446,041 6,549,269 59,299 1,855,240 -Taxation (1,569,382) (1,123,921) 140,837 (402,301) -Profit after taxation 4,876,659 5,425,348 200,136 1,452,939 -Dividend - - - (136,027) -Revenue reserve 4,876,659 5,425,348 200,136 1,316,912 -

======= ======= ====== ======= =======

Earnings per share N52.85 N73.77 N2.72 N32.04 - Adjusted Earnings per share N52.85 N58.80 N2.17 N15.75 - Interim Dividend per share - - - N3.00 -Final Dividend per share - N1.00 N10.00 N3.00 - Return on Net Assets Employed (%) 42.73 66.92 5.81 45.96 -

FIVE-YEAR FINANCIAL SUMMARY


66



N '000 N'000 N'000 N’0001. ADMINISTRATIVE EXPENSES

Audit fees 13,320 12,109 8,699 7,908Bank Charges 4,255 4,184 3,537 3,739Depreciation 223 151 223 151Directors' fees 15,236 14,741 15,236 14,741Entertainment and gifts 14,739 5,068 14,739 5,068 Insurance 6,521 - 6,521 -Medical 1,145 1,272 1,145 1,272Office Rent 4,000 4,000 4,000 4,000Other Office Expenses 24,313 19,026 24,313 18,748Other taxes 22,897 3,766 22,897 3,766 Professional Fees 88,055 33,621 88,047 33,621Property levy 1,121 1,228 1,121 1,228 Repairs and Maintenance 737 1,195 737 1,195Stamp duties - 13,148 - 13,148 Statutory fees 2,050 47,922 2,050 47,922Telephone and Postage 8,720 6,086 8,720 6,086Training and Seminar 7,712 12,519 7,712 12,519Traveling and passages 21,234 12,525 21,234 12,489

---------- ---------- ---------- ----------236,278 192,561 230,931 187,601====== ====== ====== ======

2. TOTAL PROVED RECOVERABLE RESERVES

Estimated Quantities of Total Proved Developed and Undeveloped Oil, Condensate and Natural Gas

Liquids Reserves (million barrels) in the Ogbele field.

2009 2008 2007 2006 2005Crude:At beginning of year 6.07 7.45 8.02 8.86 9.00Revision 13.74 - - - -Production (1.62) (1.38) (0.57) (0.84) (0.14)

------ ----- ----- ----- -----At end of year 18.19 6.07 7.45 8.02 8.86

==== === === === ===

SUPPLEMENTARY FINANCIAL INFORMATION


NDPR gas plant under construction

MANDATE FOR E-DIVIDEND PAYMENT

Following the passing into law by the National Assembly and the official launch of the E-Dividend payment system, all

registrars have been mandated to effect payment of dividend on behalf of their client companies electronically.

The E-dividend payment system ensures that your dividend is credited directly into the bank account of your choice

within 24 hours of payment date.

In order to prepare for this new payment procedure, we require you to kindly complete the E-Dividend Form below.

PLEASE NOTE THAT THE SECTION FOR YOUR BANK ACCOUNT DETAILS HAS TO BE COMPLETED BY YOUR

BANK.

Kindly return the duly completed Form to the Registrar, United Securities Limited at the address stated below.

Date (DD/MM/YYYY)

City State

Email Address1:

Other Names (for individual Shareholder)

Present Postal Address

I/We hereby request that from now, all dividend warrant(s) due to me / us from my / our holdings in Niger Delta Exploration & Production Plc be mandated to my /our Bank named above.

The completed Form should be returned by post, e-mail or fax to: Investor Relations Department, Niger Delta Exploration & Production Plc, 15

Festival Road, Victoria Island Lagos. Fax: 01-4619126, Email: [email protected] or United Securities Limited, 14, Idowu Taylor Street,

Victoria Island, Lagos. Email: [email protected]

Company Seal / Incorporation Number ( Corporate Shareholder)

Authorised Signature & Stamp of Bankers

67

Mobile (GSM) Phone Number

Shareholder’s Signature or Thumbprint Shareholder’s Signature or Thumbprint

SHAREHOLDER INFORMATION UPDATE FORM


I/We wish to request that my/our details as a shareholder(s) of Niger Delta Exploration & Production Plc be amended to reflect the

following information:

Other Names (for individual Shareholder)

Present Postal Address

Incorporation Number with Company Seal

Shareholder’s Signature or ThumbprintShareholder’s Signature or ThumbprintShareholder’s Signature or Thumbprint

6968

NDPR Gas Plant under construction, Ogbele

Email Address 1

Email Address 2

Mobile (GSM) Phone Number

The completed Form should be returned by post, e-mail or fax to: Investor Relations Department, Niger Delta Exploration & Production Plc, 15 Festival

Road, Victoria Island Lagos. Fax: 01-4619126, Email: [email protected] or United Securities Limited, 14, Idowu Taylor Street, Victoria

Island, Lagos. Email: [email protected]

Tax ID


70

PROXY FORM

IMPORTANT

1. Before posting the above proxy, please tear this part off and retain it. A person attending the Annual General Meeting of the Company

or his proxy should produce this card to secure admission to the meeting.

2. A member of the Company is entitled to attend and vote at the Annual General Meeting of the Company. He is also entitled to appoint

a proxy to attend and vote instead of him, and in this case the above card may be used to appoint a proxy.

3. In line with best practice, the name of a Director of the company has been entered on the proxy form to ensure that someone will be

at the meeting to act as your proxy, but if you wish, you may insert in the blank space on the form (marked*) the name of the person,

whether a member of the Company or not, who will attend and vote on your behalf instead of the Director named.

4. The above proxy when completed, must be deposited at the Registered Office of the Company being 15 Festival Road Victoria

Island, Lagos, not less than 48 hours before the time fixed for the meeting.

5. It is a requirement of the law under the Stamp Duties Act, Cap 58, Laws of the Federation of Nigeria, 2004, that any instrument of

proxy to be used for the purpose of voting by any person entitled to vote at any meeting of shareholders must bear a stamp duty.

6. If a proxy from is executed by a company, it should be sealed under its common seal or under the hand and seal of its attorney.

15th ANNUAL GENERAL MEETING (AGM) to be held at the Metropolitan Club 15 Kofo Abayomi

Street, Victoria Island, Lagos on 22 July 2010 at 11:00 a.m.

I/We

being member/members of Niger Delta Exploration & Production Plc hereby appoint

*

or failing him Dr Layi Fatona, as my/our proxy to attend and vote for me/us and on my/our behalf at

the Annual General Meeting of the Company to be held on 22 July 2010 at 11:00 a.m. and at any

adjournment thereof

.

Dated this __________________ day of _________________________2010

Admission Card

Annual General Meeting to be held on 22 July 2010 at 11.00 a.m. at the Metropolitan Club, 15 Kofo Abayomi Street, Victoria Island, Lagos.

I/We______________________________________________________________ Number of Shares_______________________________

Signature of person attending

71

A courtesy call by NDPR to Obumeze Community

NUMBER OF SHARES

RESOLUTION

1. To consider and approve the Audited

Financial Statements for the year

ended 31st December 2009 and the

Reports of the Directors, Auditors and

Audit Committee thereon.

2. To declare a dividend

3. To re-elect Directors

4. To ratify the appointment of new

Directors

5. To re-appoint the Auditors

6. To authorise the Directors to determine

the remuneration of the Auditors

8. To approve the remuneration of the

Directors for the year ending

31st December 2010.

7. To re-elect/elect members of the Audit

Committee

FOR AGAINST

72

NOTES

niger delta annual report chika · consolidated statement of cash flows 51 notes to the financial...

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