Salamand

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Annual R

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Salamander Energy PLC Annual Report 2009

SALAMANDER ENERGY

PURE ASIAN ENERGY

SALAMANDERENERGY

About us

Who we are, what we do

Salamander Energy is an Asia-focused independent exploration and production company with 21 licenses across Indonesia, Thailand, Vietnam, Lao PDR and the Philippines.

Our strategy

Regional focus Asia is home to high growth energy markets, some of the largest producing basins in the world and a variety of exciting, frontier exploration regions with significant potential. Regional focus helps the Group to anticipate and respond to changes in the operating and economic environment, as well as maintain and deepen its network of contacts and relationships.

Leveraging regional knowledge and relationships We believe our local knowledge and relationships with national and regional governments, national oil companies, key service providers and peers provide us with a sustainable competitive edge. On a technical and operational level, the Group uses its knowledge and expertise gained from its producing and development assets in its exploration and appraisal activities.

Maintaining a balanced portfolio Our portfolio is built upon a foundation of producing and development assets that offer long-life, stable and reliable cash flows. These cash flows are re-invested in high returning development and exploration assets that offer further growth. Moreover, we look to ensure we have a portfolio with a blend of different economic regimes and an appropriate mix of both oil and gas.

Capital allocation disciplineWe maintain an 80/20 allocation of capital employed whereby 80% of capital is allocated to lower risk production, development and appraisal assets, and 20% of capital is allocated to higher risk exploration assets. In this way the Group can have sustained exposure to the benefits of exploration without putting the company at significant risk from the outcome of a single well or exploration drilling campaign.

Growing the business organically and through acquisitionOur technical and senior management teams have a significant breadth and depth of experience in the hydrocarbon basins of Asia. We also have a corporate finance skill set that has enabled the company to identify situations it can capitalise on, and to transact quickly and efficiently in building its portfolio.

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2009Highlights of the year Key performance indicators

Operations

• 42%increaseinproductionto13,600boepd

• FirstgasfromtheoperatedKambunafield, Offshore North Sumatra

• SuccessfulexplorationdrillingonBualuangdeep and South Sebuku prospects

• PlanofdevelopmentapprovedforSouth Sembakung field, Indonesia

• Progressedtodrill-readystatus12well exploration programme for 2010

Financials

• Revenueincreasedby56%to$157.1million (2008:$100.8million)

• EBITDAXincreasedby64%to$87.6million (2008:$53.3million)

• Pre-taxlossof$3.0million(2008:$75.5million)

• Yearendfundsbalanceof$59.2million (2008:$115.1million)(includingrestrictedbank depositsof$11.4million(2008:$12.1million)), netdebtof$115.4million(2008:$41.9million)

Outlook

• 2010 average daily production rate anticipated to be 17,000 – 18,000 boepd

• Active2010drillingprogrammeof12E&Awells targeting 340 MMboe of net unrisked resource (75 MMboe of net risked resource)

• CurrentlydrillingBangNouan-1exploration well in Lao PDR

• Asiangasmarketscontinuetodevelopwith attractive medium and long term demand dynamics

• Announcedseparatelytodaylaunchofa Convertible Bond, proceeds of which will be used to broaden and diversify Asian portfolio

• Agreementtoacquire50%interestand operatorship of Block 101-100/04, Offshore Northern Vietnam

Lost time incidents

2009 Zero

2008 Zero

2007 Zero

Proven and probable reserves (working interest basis)MMboe

2009 64.8

2008 67.7

2007 38.8

Reserves replacement ratio %

2009 42

2008 950

2007 (2.5)

Production (working interest basis) boepd

2009 13,600

2008 9,600

2007 7,800

Operating cost per boe $

2009 13.99

2008 10.64

2007 9.93

Operating cash flow prior to working capitalper entitlement boe $

2009 20.77

2008 17.03

2007 16.08

Three year average finding cost per boe1 $

2009 23.84

2008 14.75

2007 3.99

Gearing2 %

2009 23

2008 21

2007 8

1 Finding cost per boe is defined as exploration and acquisition expenditures divided by working interest reserves additions in the period. 2 Gearing is defined as debt divided by debt plus equity.

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2009 Chairman’s and

Chief Executive’s review

The Group delivered on its key objectives for the year in bringing the Kambuna field on-stream and completing a second phase of development drilling at the Bualuang oil field. These developments contributed to another year of material growth for Group production which rose by 42% to a daily average of 13,600 boepd. The other major achievement during the year was the agreement of a five licence farm out to Origin Energy which provided the Group with a high quality strategic partner and reduced planned 2010 exploration and appraisal (‘E&A’) expenditure.

Over the past five years Salamander has made good progress towards its goal of building a diverse base of producing assets that will generate sufficient cash flows to fund its exploration and appraisal activity. With the Kambuna field now on-stream the Group has five producing assets in different economic regimes. In 2010 Salamander should achieve further production growth whilst embarking on its most active year of exploration drilling to date.

Exploration success is important if an independent explorer & producer (‘E&P’) is to create significant value. Salamander’s 2010 drilling programme will test a diversity of play types with a range of risk ratings from step out through to frontier exploration with twelve wells planned. Nine of these twelve wells are operated by Salamander and are the culmination of, in some cases, four years of planning, technical work and investment. We believe this combination of risk profiles and careful selection allows Salamander to optimise the risk and likely reward of our drilling programme.

Management is focused on positioning the Group to capitalise on medium and long term opportunities. Despite the active exploration programme the Group will only be drilling in seven of its twenty-one licences in 2010. Further technical work is being conducted to acquire additional seismic data and to progress other leads and prospects up to a drill ready state. In addition, we are constantly looking to add further licences that would complement and broaden this portfolio as we plan the drilling programme beyond 2010.

Oil and gas markets

The Brent oil price recovered from a low in 2009 of $39.08/bbl and has stabilised in 2010 with an average price to date of $77.00/bbl. This has seen the return of confidence in the E&P sector, with a marked increase in planned exploration drilling across the sector in 2010.

It has been well documented that Asia is at the forefront of the global return to growth. This trend is expected to continue with the IMF forecasting that GDP growth in Thailand, Indonesia and Vietnam will average 4.6% in 2010. This contrasts sharply with a forecast of circa. 1% in the United Kingdom.

Such strong GDP growth is driving an increased demand for power. Gas at present only meets approximately 5% of power demand in Asia, compared to circa. 25% in OECD countries. With low levels of gas penetration in the Asian primary energy mix relative to more mature OECD countries, gas demand is expected to rise strongly, underpinned by both increased power demand from these growing industrial economies and by the continued removal of subsidies on competing fuels.

The relatively robust regional macro-economic outlook, the dynamic Asian gas markets, and the co-operative nature of the host governments and NOC’s, combine to make Asia an attractive operating environment for an independent E&P company with experience of operating in the region, such as Salamander.

Financials

Increased production levels were reflected by the Group reporting a 56% increase in revenue for the year at $157.1 million (2008: $100.8 million). The Group reports a loss before tax of $3.0 million (2008: $75.5 million) inclusive of mark to market hedging charges and a loss after tax of $13.5 million (2008: $66.5 million). The Group reports a loss of $0.09 per share (2008: $0.53).

Operating cash flow increased by 132% to $59.3 million (2008: $25.5 million) as daily average production grew throughout the year. Average realisations of $53.97 per bbl and $4.03 per Mscf were achieved during the year.

SALAMANDERENERGY

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2009Portfolio management

In December 2009 the Group announced that it had agreed a transaction that saw Origin Energy (‘Origin’) farm into five exploration licences across three countries. Origin Energy is an ASX listed company with a market capitalisation of approximately $14 billion and is Australasia’s leading integrated energy player focused on oil and gas exploration and production, power generation and energy retailing.

Under the terms of the deal, Origin will pay the first $50 million of exploration spend across the five blocks and up to an additional $40 million of appraisal expenditure. Salamander will retain material positions in, and operatorship of, all five licences. This deal protects Salamander’s balance sheet from exposure to the higher risk wells in the 2010 programme, whilst still providing investors with access to material upside in the event of drilling success. It also releases capital that the Group can redeploy to further broaden the exploration portfolio.

As a predominantly mid- and downstream player with an excellent track record of commercialising gas which is looking to expand in Southeast Asia, Origin is a key strategic partner for Salamander. With the pooling of regional E&P skills and mid-stream expertise, we believe the combined experience will be invaluable should the partnership prove up large quantities of gas in the Khorat basin in Lao PDR and Northeast Thailand.

Board and staff

On 15 May 2009 the Group announced that, following the placing of 3i’s equity interest in Salamander Energy plc, Mike Sibson had resigned as a Director of the Company. Mike’s experience was much valued by the Board and we would like to thank him for his contribution to the Group.

Salamander has assembled one of the most experienced and capable teams in the region. The Board would like to thank all of the management and staff for their continued hard work and commitment which have been the foundation for another year in which the Group has made significant progress. This progress has been made without compromising on safety due to the commitment of all staff, and we are pleased to report that the Group has maintained its track record of no lost time incidents.

Production update and outlook

In March 2010 to date Group daily production has averaged 16,300 boepd. Group average daily production for the full year is expected to increase to between 17,000 and 18,000 boepd. This growth will be driven by a full year contribution from the Kambuna field and by further development drilling on the Bualuang field.

The Group plans to drill twelve exploration and appraisal wells targeting 340 MMboe of net unrisked mean prospective resource (75 MMboe of net risked mean prospective resource). The drilling programme will target a range of play types and prospect styles from high risk, high volume impact to low risk, high value step out targets. We are also continuing to look for opportunities to broaden the portfolio and add to our near-term drilling options.

Capital expenditure in 2010 is forecast to be approximately $95 million. The farm down to Origin reduced the planned E&A budget and the total capital expenditure budget for 2010 will comprise approximately $55 million of exploration and appraisal expenditure and $40 million of production and development expenditure.

2010 will be a year in which the Group carries out a potentially transformational exploration drilling programme and continues to expand its production base. The Group will also seek to continue to diversify its portfolio through selective acquisitions and we expect further production and cash flow growth from our existing fields to support continued investment in the Group’s exploration and appraisal activities.

Charles Jamieson Chairman

17 March 2010

James Menzies Chief Executive Officer

17 March 2010

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2009 Salamander Energy at a glance

Thailand

1 L15/43EA

2 L13/48A

3 EU1/E5 Sinphuhorm fieldPD

4 L15/50EA

5 L27/43EA

6 L26/50E

7 B8/38 Bualuang fieldPD

Lao PDR

8 Savannakhet PSCE

9 Champasak and Saravan PSCE

Vietnam

10 DBSCL-01 PSCE

11 Block 31 PSCE

Philippines

12 SC41E

Indonesia

13 Glagah-KambunaTACP

14 South East Sumantra PSCPD

15 Offshore North West Java PSCPD

16 Bengara-1 PSCE

17 Simenggaris JOAED

18 South East Sangatta PSCE

19 Bontang PSCEA

20 KutaiPSCE

Key A Appraisal D Under development E Exploration P In production

ThailandLiquids Gas Total

1P reserves 5.9 6.4 12.32P reserves 13.5 16 29.5Contingent resource 0.4 99.5 99.9

Production 5.4 1.4 6.8Revenue 93.3 16.2 109.5

IndonesiaLiquids Gas Total

1P reserves 7.8 11.0 18.82P reserves 14.5 20.8 35.3Contingent resource 35.2 19.5 54.7

Production 3.8 3.0 6.8Revenue 41.5 16.9 58.4

Exploration and appraisal drilling target inventory

Broad portfolio of future opportunities, near term drilling provides balanced exposure to oil and gas.

Total portfolio 3 years +

Near term 24 – 36 months

2010 Drilling

Prospects/leads 70+ 25+ 12Net unrisked resource (mmboe) 1,800 730 340

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Production

Production has increased year on year since Salamander’s inception. Further growth is expected in the coming years from fields currently on-stream or under development. With the Kambuna field having been brought on-stream in 2009, the production base has been diversified to five assets. Cash flow generated from production is used to fund exploration and appraisal activities.

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Salamander operates over 60% of its production. Being an operator of production and development assets Salamander has the skills to work with key regional stakeholders such as NOC’s, host governments and regulators.

Production continued

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Annual production Mboepd (000s)

2010* 17-18

2009 13.6

2008 9.6

2007 7.8

* Forecast

1Helicopter landing on Rubicon Vantage FPSO Salamander successfully drilled horizontal wells in the Bualuang field in 2009 leading to a step up in production. Two more phases of horizontal development drilling are planned for 2010.

2Loading topsides on the Kambuna platform GaspricesatKambunaaverage$5.90perMscfwith a 3% per annum inflator. There were over 20 bidding parties in the auction reflecting the growing demand for gas across Asia. Gas prices in Indonesia have more than doubled in the past three years.

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3Cats Cradle transferring workers on to the Kambuna platform The current infrastructure attheKambunafieldhasthecapacity to handle a 20% increase in volumes above the current contracted quantity of 40 MMscfd. Marketing of these additional volumes is expected to take place in H2 2010.

4Rubicon Vantage FPSO, Bualuang field, Thailand The Rubicon Vantage has a 480,000 bbl capacity and sits above the Bualuang field. In the event of success in the step out exploration, this could be tied in to the FPSO and brought on-stream in a short time frame.

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Operational review

SALAMANDERENERGY

The Group’s average daily production for 2009 increased by 42% to 13,600 boepd. This comprised 66% liquids and 34% gas. This growth was attributable to two Salamander operated assets, the Bualuang oil field in Thailand, where the Group benefited from a first full year contribution, and the Kambuna gas-condensate field that came on stream in August 2009.

It is expected that there will be further growth in production in 2010 with the average daily production expected to be between 17,000 and 18,000 boepd. Growth will be driven by further phases of development drilling on the Bualuang oil field and by a first full year contribution from the Kambuna field. The composition of 2010 production is forecast to be 57% liquids and 43% gas with fixed price gas accounting for around 35% of production. Salamander will operate over 60% of its production.

Thailand

Bualuang oil field, Block B8/38 (60%, Operator) Production from the Bualuang oil field in the Gulf of Thailand averaged 8,900 bopd (gross) through the year. A second phase of drilling on the field was successfully completed in the first half of 2009, which saw the drilling of an exploration well, two horizontal producers and a water disposal well. The two horizontal production wells were completed in the second quarter in a crestal area of the field and were immediately tied in to the production system and put on stream. Horizontal sections measuring 250 metres were drilled in a target zone 2-3 metres below the top of the reservoir. Both wells encountered excellent quality reservoir rock and tested at over 8,000 bopd each before being choked back to manage production in line with reservoir simulation and thereby optimise reserves recovery.

The Bualuang field had produced 4,211,645 million barrels by year end 2009. The uptime on the FPSO exceeded 99% and the vessel has not needed to disconnect from its risers since production began in 2008. Well performance is in line with reservoir modelling and expectations. The reservoir has high permeability and there is a very active water drive which should assist ultimate oil recovery. The wells are highly productive and so to extend well life and to avoid excessive water coning the electrical submersible pump (ESP) rates are set to limit the pressure drawdown on the reservoir and balance oil production and water breakthrough. Water disposal systems on the FPSO allow all of the produced water

Significant operational progress was made in 2009 with the Group bringing on-stream the Kambuna gas-condensate field and completing a second phase of development drilling on the Bualuang oil field in Thailand. These developments saw net average daily production for the year increase 42% to 13,600 boepd with further growth expected in 2010 as Kambuna provides a first full year contribution. In addition to its development activity, the Group was busy maturing numerous prospects in the exploration portfolio to drillable status. After considerable effort to date focused on licence capture, data gathering, seismic acquisition, interpretation and analysis, 2010 sees a shift to the first phase of exploration drilling with plans to drill twelve exploration and appraisal wells.

Reserves

2P Reserves history MMboe

31/12/09 64.8

31/12/08 67.7

31/12/07 38.8

31/12/06 42.3

The Group started 2009 with 67.7 MMboe of proved and probable (2P) reserves (on a working interest basis). Following the approval of a plan of development for the South Sembakung field, and a number of other minor revisions, a further 2.1 MMboe were added during the year, whilst total Group production for 2009 was approximately 5.0 MMboe. As a result, at 31 December 2009 the Group’s 2P reserves were 64.8 MMboe.

Production

Annual production Mboepd (000s)

2010* 17-18

2009 13.6

2008 9.6

2007 7.8

* Forecast

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to be re-injected into the reservoir and existing injection capacity is three times the current water rate. Two further phases of development drilling are planned in 2010 that will see four horizontal wells drilled in late Q1 2010 and three horizontal wells drilled in Q4 2010. These will replace the slant wells drilled in the first phase of the Bualuang development and should sustain production at a rate in excess of the 2009 daily average volumes.

Sinphuhorm Field, Production licence (9.5%) Production from the Sinphuhorm field, onshore Northeast Thailand, averaged 85 MMscfd for the year. Nominations from the Nam Phong power plant were at a reduced level in the early part of the year due to an extensive maintenance programme on the turbines. Nominations for the second half of the year averaged 92 MMscfd and for the first two months of 2010 average daily nominations were 82 MMscfd. 2010 will see the workover of two production wells. Environmental permitting to allow the acquisition of the Sinphuhorm 3D seismic programme is advancing and the survey is planned for late 2010 once all permits are received.

Indonesia

Kambuna gas and condensate field, Glagah-Kambuna TAC, (50%, Operator) The development of the Kambuna field was successfully completed and first gas was produced in August 2009 through early production facilities. The field had just finished ramping up to full contracted volume of 40 MMscfd in late September when production was shut in at the request of the buyer. Damage had been caused to the turbine burners at the Belawan Power Plant due to unexpected carry over of condensate and water. After conducting a detailed investigation into the cause of the problem, the buyer agreed that Kambuna’s gas had consistently been delivered on specification and that the problem was related to other gases that were being co-mingled with the Kambuna gas in the pipeline downstream of Salamander’s delivery point. On completion of the investigation, following repairs to the turbines and after Kambuna gas was given a dedicated pipeline, production recommenced in early November 2009 and was ramping up towards the full contracted volume in March 2010 following refurbishment and recommissioning of another gas turbine at Belawan. A take or pay provision in the GSA has been activated.

Work continues on the permanent onshore receiving facilities at Pangkalan Brandan. These are expected to complete in Q3 2010 and will have the capacity to

handle in excess of the current contracted volumes. Kambuna gas is already an important contributor to power generation for the City of Medan which requires additional baseload power supply. Once production has switched to the permanent facilities, bringing additional volumes on-stream will be a priority for both the local authorities and the Group.

Offshore Northwest Java PSC/ Southeast Sumatra PSC (5%)Offshore Northwest Java saw a change of operatorship in 2009 with Pertamina buying out BP’s interest. Pertamina was able to increase production which had been lagging behind budget and also appraised the APNE gas field and prepared and submitted a plan of development for these reserves. The operator is targeting commencement of the APNE development in 2010 with production starting in 2011. An aggressive drilling programme is planned for 2010 and is already underway. Production for the year was 61,000 boepd (gross).

Southeast Sumatra saw production at budget levels of 62,000 boepd (gross) and the operator has plans to continue infill drilling later in 2010.

South Sembakung Development, Simenggaris PSC (21.5%) In August 2009, a Gas Sales Agreement was signed with PT Pertamina Gas (Pertagas) and PT Medco Gas Indonesia for gas sales from the South Sembakung field, Simenggaris PSC, East Kalimantan. The agreement covers the supply of approximately 20 MMscfd of gas over an eleven year period at a minimum price of $3.00 per Mscf plus an inflator linked to methanol prices. The gas will be sent, via pipeline, to the nearby Bunyu Island Methanol plant and production is expected to commence in late 2011. The pipeline will be constructed by the consortium of buyers.

Exploration

Thailand

Block B8/38 (60%, Operator) As part of the second phase of drilling on the Bualuang oil field, in April 2009 the Group used the pilot hole for the first horizontal producer as an exploration well to investigate the potential of sands below the main Bualuang reservoir. The well encountered a 32 metre oil column in the main T4 reservoir sandstones, the thickest penetration in the main field to date. Three additional sandstones were encountered above the T4 reservoir and were found to be oil bearing with some 7 metres of net oil pay at this interval. At the deeper objective

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Operational review continued

below the T4 reservoir, 8 metres of net oil pay were intersected in the T2 Oligocene section. These additional discovered resources are potentially commercial and will be more fully evaluated once the recently acquired B8/38 3D seismic survey has been reprocessed and the field re-mapped.

The B8/38 production license contains numerous other leads and prospects. Adjacent to and east of the main Bualuang oil field there is an undrilled fault compartment, the East Terrace, that could contain up to 7 MMbo of recoverable reserves. Two structures similar in form to Bualuang have been identified on the coarse grid of old 2D seismic data. Early in 2010 a 3D seismic survey was completed across the concession to further define the main field and the exploration prospects. Exploration drilling on the East Terrace and on one of the satellite structures is planned for H2 2010. Once processing of the 3D data is complete it is expected that additional prospects will be identified for drilling in 2011 and beyond.

L15/50 (50%, Operator) Block L15/50 is the Group’s operated acreage in the Western Khorat and contains a gas discovery called Dao Ruang that is thought to have approximately 600 Bcf of resource potential. Exploration and appraisal drilling in the Khorat basin has to date been based on 2D seismic data. At the end of 2009 the Group acquired the first high resolution, multi-azimuth 3D seismic survey in Thailand, which is designed to identify the fractures present within the Pha Nok Khao carbonate reservoir.

Processing of this 3D data has now been completed. The data quality is excellent and interpretation is underway. This interpretation will be used to identify the fracture zones within the structure and to locate slanted wells targeting those zones where Salamander expects the productive capacity of the reservoir to be enhanced. Two appraisal wells are scheduled on the Dao Ruang structure in Q4 2010. Initial interpretation of the seismic data also indicates the presence of another previously unknown, large, potentially gas bearing structure which could provide a follow on drilling target for 2011.

L26/50 (50%, Operator) A 2D seismic survey was completed in Q1 2009. Interpretation of this data has identified four large, potentially gas bearing, structures with similar characteristics to the Bang Nouan gas prospect across the Mekong river in the Group’s Savannakhet PSC, Lao PDR. The structures in L26/50 are closer to the gas source kitchen than the Bang Nouan prospect and any success in the Bang Nouan well would therefore encourage the Group to consider future exploration drilling in Block L26/50.

L13/48 (16.3%) In late 2009 Salamander participated in the drilling of the Si That-3 appraisal well in Northeast Thailand. The location, chosen on the basis of the 2D seismic over the structure, was targeting fractures within the Pha Nok Khao carbonate reservoir. Drilling results in 2010 indicate that the fracturing has enhanced the reservoir properties of the Pha Nok Khao but unfortunately it appears that the productive horizons encountered in the well are below the closure of the Si That structure.

L27/43 (27.2%) Salamander also participated in the drilling of the Phu Kheng 1 exploration well in the Khorat Plateau Basin of Northeast Thailand. Phu Kheng-1 targeted low permeability sands in the Jurassic and Triassic. The well encountered gas shows at numerous levels and hydraulic fracture testing of the thick sands of the Lower Nam Phong formation was undertaken. The tightness of the rock limited the effectiveness of the hydraulic fracturing to the naturally weaker zones and did not open the well bore up to a connected porosity volume. As such, the zone remained tight and did not flow on test. Since early 2010 preparations are in hand to perform further hydraulic fracture testing on the thinner but better quality sandstones shallower in the well.

Lao PDR

Savannakhet PSC (30%, Operator) Preparations were made throughout 2009 for the drilling of the Bang Nouan-1 well in Q1 2010. These included interpretation of the 2D seismic data acquired to delineate the Bang Nouan anticline which, along with geo-chemical sampling and other field surveys, enabled Salamander to select the drilling location for the Bang Nouan-1 well. The Bang Nouan prospect is estimated to have between 700 Bcf and 1.2 Tcf of resource potential on an extension of the Pha Nok Khao formation play fairway that is productive in the western, Thai side, of the basin. The Bang Nouan-1

Kutai PSC (23.4%) The Kutai PSC comprises first phase relinquishments around a number of giant fields in the Mahakam delta including Tunu (1,600 MMboe) and Attaka (800 MMboe). The operator completed a 2D seismic survey in 2009 that has firmed up a number of drilling prospects thought to have mean prospective resources in the 35-70 MMboe range. Two of these prospects are scheduled for drilling in 2010.

Vietnam

DBSCL-01/Block 31 (75% and 35%, Operator respectively) In March 2009 the Group signed a PSC for Block 31, offshore southern Vietnam. This block is adjacent to Salamander’s operated DBSCL-01 PSC and the two blocks cover the entire extent of the undrilled Vinh Chau Graben. Salamander believes that the Vinh Chau Graben could be analogous to the nearby prolific Cuu Long Basin.

The Group completed the acquisition and interpretation of new 2D seismic data across both blocks in the first half of 2009. The data indicates the presence of basal Tertiary Lacustrine rocks that are also developed in the Cuu Long Basin where they are the high quality oil source for the reserves found in that basin. The Vinh Chau seismic also revealed numerous structural play types including stacked Tertiary sandstone reservoirs and fractured pre-Tertiary basement. A number of prospects with mean resource potential of between 50 and 80 MMbo each have been identified. Exploration drilling is planned to commence in H1 2010 with the Rock Lobster 1 well targeting mean prospective resources of 57 MMbo and the Tiger Prawn 1 well targeting mean prospective resources of 82 MMbo. There are multiple further targets on the block with mean cumulative resource potential of circa. 225 MMbo.

Mike Buck Chief Operating Officer

17 March 2010

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exploration well spudded on 19 February 2010 and results are expected in late April 2010.

Indonesia

Bontang (90%, Operator) During the first half of 2009 the Group completed an additional 3D seismic survey over the Bontang PSC to extend coverage to the East where mapping indicated additional prospectivity. The Bontang PSC lies at the northern end of the prolific Kutei basin and has been unexplored since the 1980’s. The 3D seismic data has defined multiple prospects with cumulative mean potential resource in excess of circa. 500 MMboe. The Angklung prospect has been selected as the first exploration drilling target on the block and the well is expected to spud later in Q2 2010. Angklung is a fault bounded closure with sandstone reservoir targets in the Middle Miocene and potentially contains unrisked prospective resources of 125 MMboe. The main risk on the prospect is the development of sandstone reservoirs although sandstones were found by a 1971 Unocal well, Bungalun-1, drilled outside structural closure only a few kilometres from the site of the Angklung-1 well. There are numerous prospects to follow on from Angklung 1 and Salamander has recently secured a four year extension to the PSC and a rearrangement of licence commitments to allow sufficient time to fully evaluate the potential of the block.

The Group also completed a gas marketing study focussed on the local Bontang area. The results of this study suggest that the Tutung discovery, appraised by Salamander in 2008, could be commercially exploited if tied to an independent power plant development. The Group plans to complete a further appraisal well on Tutung in an onshore location during 2010 with a view to pursuing such a development option in 2011.

On 3 March 2010 the Group announced the acquisition of an additional 20% interest in the Bontang PSC taking its equity interest to 90%.

Bengara PSC (41.7%)The South Sebuku-1 exploration well was drilled in June 2009 and encountered gas in four zones. Two of these zones were tested and flowed at a cumulative rate of 10.9 MMscfd. An appraisal well is planned for H2 2010. Providing this is successful, then it is anticipated that South Sebuku discovery would be developed via a tie in to the South Sembakung field, located only 15 kilometres away. In February 2010, the Group increased its equity in the Bengara PSC from 25% to 41.7%.

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Exploration

Exploration success can unlock value and transform independent exploration and production (‘E&P’) companies.

Salamander’s 2010 drilling programme will target over 340 MMboe of net unrisked resource across a diversity of play types with a range of risk rating, from step out through to frontier exploration.

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The Group has a technical team with the depth and experience to compare with any in the region. Understanding the geology of the basins we work in better than anyone is a clear competitive advantage.

Exploration continued

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2

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1 Khorat seismic database Database of wells and seismic is prerequisite to understanding geology and hydrocarbon plays. Poor imaging in this region has led to moderate success. Salamander’s acquisition of the first hi-resolution 3D in theKhoratisapotential game changer and drilling on Dao Ruang will be first targets identified on 3D.

2 3D seismic vessel operating in Block B8/38, Gulf of Thailand The Group has acquired 3D seismic across Block B8/38 to better image the Bualuang field and the exploration prospects in the acreage around it. These include fault terraces adjacent

4 Drill bit from the Century 26 rig, Bang Nouan well site, Lao PDR The Bang Nouan-1 exploration well is located in the Salamander operated Savannakhet PSC in Lao PDR. The well is testing to see if there is an eastern extensionoftheKhoratbasin.Bang Nouan is one of six Tcf sized structures located in Salamander operated acreage straddling the Mekong river between Thailand and Lao PDR.

5 Operations on the South Sebuku-2 appraisal well, Bengara PSC, East Kalimantan The Group completed two E&Awellsin2009,both of which were successful.

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to the Bualuang field and possible analogue structures. These are high value barrels that could be on-stream in a short period of time.

3 Structural map of geology offshore Southern Vietnam Salamander operates two blocks covering a graben system that is geologically related to the prolific Cuu Long basin. The Vinh Chau graben lies in a restricted environment the same side of the Nam Con High as the Cuu Long. The Group believes this has lead to the development in the Vinh Chau graben of what appear to be the same high quality, oil prone, lacustrine source rocks that generate the oil in the Cuu Long.

The South Sebuku discovery will be further appraised in 2010 and if successful, it is expected this will be tied in to the South Sembakung development 15 km to the South.

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Financial review

Production and revenue

Revenue in 2009 grew 56% to $157.1 million driven by 42% production growth to a daily average production level of 13,600 boepd on a working interest basis. The Group’s realised oil price for 2009 was $53.97/bbl (2008: $60.52/bbl), reflecting both the market conditions and the impact of oil price hedging.

Commodity markets remained highly volatile in late 2008 and early 2009 and the Group implemented an oil hedging programme to secure a minimum floor price of $45.00/bbl and thereby protect its capital budget. In November 2008 the Group had purchased $45.00/bbl puts for 2,500 bpd for first half 2009 increasing to 4,000 bpd for second half 2009. As crude prices stabilised, these hedges were subsequently replaced from February 2009 onwards by a forward sale (swap) of 2,500 bpd at an average of $53.83/bbl for the period February to December 2009 plus the purchase of 1,500 bpd of put options at $54.00/bbl for the period July to December 2009. This programme hedged 45% of the Group’s 2009 entitlement oil production. The subsequent increase in the forward curve during 2009 enabled the

Financial highlights

Group to complete a hedging programme for 2010 that secured a minimum floor price of $60.00/bbl.

The fall in average realised gas prices reflected the contribution of Thai gas to Group production. Thai gas, which is indexed to medium sulphur fuel oil, realised an average price of $5.50 per Mscf in 2009 (2008: $8.90 per Mscf). The realised price of Indonesian gas continued to trend upward, averaging $3.20 per Mscf (2008: $3.00 per Mscf). Fixed price Indonesian gas contributed 64% of Group gas production.

Units 2009 2008 2007

Entitlement production: Oil and liquids Mbpd 7,200 3,100 1,500Gas MMscf/d 22,500 21,300 18,300

Realised prices: Oil and liquids $/bbl 53.97 60.52 71.75Gas $/Mscf 4.03 4.99 4.34

Revenue $’millions 157.1 100.8 69.6Proportion of production hedged (working interest) % 29.0 – –Operating costs per boe: $ 13.99 10.64 9.93(Loss)/profit before taxation $’millions (3.0) (75.5) 18.0Operating cash flow (prior to working capital

per entitlement boe) $ 20.77 17.03 16.80 Capital expenditures:

Intangibles (exploration and appraisal) $’millions 34.6 206.7 45.4Property, plant and equipment(development and production) $’millions 85.8 507.9 13.2

Net debt1 $’millions 115.4 41.9 (97.3)Gearing2 % 23 21 8

1 See note 21 to the consolidated financial statements for further details2 Gearing is defined as debt divided by debt plus equity

SALAMANDERENERGY

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2009 $ ‘millions

2008 $ ‘millions

2009 oil price hedges (swap of 2,500 bpd at $54.00/bbl and put of 1,500 bpd at $54.00/bbl) – 2.3

Reversal of gain to 31 December 2008 in respect of 2009 hedges (put of 2,500 bpd for 1H’09 and 4,000 bpd for 2H’09 $45.00/bbl) (2.3) –

2010 oil price hedges (zero cost collars of 2,500 bbls with put of $60.00/bbl and call of $78.15/bbl & 1,500 bbls with put of $60.00/bbl and call of $90.00/bbl) (9.2) –

Libor interest rate swap at 2.17% for approximately 50% of interest rate exposure (1.1) –

Loss on investments – (0.2)Currency exchange gain 0.3 1.5

Total (12.3) 3.6

Cost of sales

Cost of sales for 2009 totalled $123.7 million (2008: $125.6 million), within which direct operating costs were $69.4 million (2008: $37.2 million). The increase in operating costs was a function of a full years production from the Bualuang field and a phased ramp up on the Kambuna field. 2009 saw the continued ramp up and a first full year of production from the Bualuang field, whilst the Kambuna field commenced production on 11 August 2009. The 2009 unit operating cost was $13.99/boe (2008: $10.64/boe), the increase on 2008 being due to the partial shutdown of Kambuna and restricted production from 24 September 2009 to year end due to the gas buyers shutdown of its gas turbine generators. As of February 2010 this gas offtake problem had been remedied and production was returning to expected levels. Kambuna production is covered by take-or-pay obligations on the buyers.

Exploration expenses

Exploration expenses of $11.4 million (2008: $46.2 million) included write off of Dong Mung-3 drilled in Thailand in 2008, along with pre-acquisition expenditures and other exploration expenses incurred during 2009.

Finance charges

During Q1 2009, the Group took advantage of what were historically low Libor rates to execute a swap for approximately 50% of its interest rate exposure for a three year period commencing April 2009. Libor was swapped (fixed) for the period at 2.17%.

Other financial losses in 2009 of $12.3 million (2008: gain of $3.6 million) comprised non-cash mark to market charges against the Group’s commodity price, interest rate hedging programmes for 2009-2011 and currency exchange gains. These charges were as follows:

Taxation

The 2009 taxation charge of $10.6 million (2008: credit of $9.0 million) comprised an income tax charge of $23.9 million (2008: $14.6 million) and a deferred tax credit of $13.3 million (2008: credit of $23.6 million).

Operating cash flow

Operating cash flow grew strongly, by 109%, during 2009. The Group generated $83.7 million of operating cash flow prior to working capital adjustments (2008: ($40.4 million), which equated to operating cash flow per entitlement bbl of $20.77 (2008: $17.03). This comprised $86.6 million (2008: $12.8 million) from the Group’s Thailand operations and $18.2 million (2008: $27.6million) from the Indonesia operations; offset in part by operating and administrative payments of $21.1 million (2008: payments of $10.8 million).

In December 2009, the Group signed a $30.0 million subordinated junior facility as an extension to its existing senior reserves based lending facility. The subordinated facility is with existing lenders BNP, the IFC and Natixis. To date this facility has not been drawn down.

Post balance sheet events

During February 2010 the Group increased its equity interest in the Bengara PSC from 25% to 41.67% having assumed incremental equity from PTTEP following the drilling of the South Sebuku gas discovery well in 2009.

On 15 February 2010, the Group announced that the Si That-3 had been unsuccessful. Further analysis will be completed during 2010 to determine whether the structure merits further analysis.

On 3 March 2010, the Group increased its equity position in the Bontang PSC from 70% to 90% by acquiring PT Eksindo Petroleum Tabuhan’s 20% share in consideration for the issue of 792,942 Salamander Energy plc shares.

During March, the Group agreed to acquire a 50% operated interest in Block 101-100/04, in the Hanoi Trough offshore Vietnam, from Santos Vietnam Pty Ltd and Singapore Petroleum Vietnam Song Hong Co Ltd with the proposed drilling of one well 2011.

On 18 March 2010, the Group will announce the proposed issue of an up to $100 million convertible bond. It is intended that the funds will be applied towards the acquisition of new opportunities.

Nick Cooper Chief Financial Officer

17 March 2010

Investing cash flow

The 2009 cash flow used in investing activities was $119.1 million compared to 2008 of $300.5 million. 2008 investing activities included $32.7 million of acquisition costs relating to GFI. Exploration and appraisal expenditure during 2009 of $32.1 million (2008: $133.1 million) included investment into Thailand of $14.8 million (2008: $37.4 million), Indonesia of $9.4 million (2008: $166.8 million), the Philippines of $1.0 million (2008: $19.1 million), Lao PDR with credit of $2.1 million farm out proceeds (2008: $7.8 million) and Vietnam of $8.7 million (2008: $17.6 million). These programmes delivered necessary preparations for drilling activities during 2010. Production expenditures included investment in Thailand of $24.4 million (2008: $37.4 million), predominantly being the development drilling of Bualuang; and Indonesia, $63.6 million (2008: $166.8 million), predominantly the development expenditures for Kambuna.

Financing cash flow

2009 cash flow from financing activities was $9.9 million (2008: $259.6 million). The 2009 amount included net additional drawdowns of $16.9 million against the Group’s senior $200 million seven year reserves based lending facility in addition to the $160.9 million drawn in 2008, whereas 2008 included the initial drawdown against the facility on signing of $160.9 million. During 2009, payment of interest against the facility was $5.9 million (2008: $5.9 million). 2008 also saw the Group raise net equity of $179.2 million with a placing and open offer.

Cash and net debt

During 2009, the Group’s net cash outflow totalled $55.6 million (2008: $15.4 million). With the additional drawdown of debt against the Group’s $200 million reserve based lending facility, closing net debt increased to $115.4 million compared to year end 2008 of $41.9 million.

At year end 2009 the Group’s cash and cash equivalents was $47.8 million (2008: $103.0 million). In addition, the Group held funds of $11.4 million (2008: $12.1 million) in deposit accounts pledged as security against bank guarantees issued on behalf of the Group.

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Financial review continued

The identification of, and mitigation for, risks are of critical importance to the Group as it continues to grow and broaden its operations across Asia in a challenging economic environment.

The Group’s Executive Directors continually monitor the Group’s risk exposures and formally report to the Audit Committee on a six monthly basis, with more frequent updates on particular risks or situations as required. The Audit Committee provides oversight whilst ultimate authority remains with the Board of Directors.

The table below summarises the Group’s key risks, as currently identified, and the related mitigating actions.

Strategic risks

Group’s strategy execution fails to create shareholder value

Identification and mitigation of risk • Acomprehensiveriskregisterismaintainedthatcoversstrategic,operational,financial and other risks together with the specific mitigating factors. Board, Audit Committee and senior management are regularly updated on the Group risk register and profile.

Incorrect portfolio mix • Diversebaseofoilandgasassetswithamixtureoffiscalregimes.

Capital allocation • Consistent80/20capitalallocation(80%capitalintodiscoveredreservesandresources; 20% into exploration) • AnnualbudgetingprocessapprovedbyBoard.Boardreviewsallocationofcapital against stated 80/20 guidance.

Organic and acquisition led growth • Boardleveldiscussionandapprovalofgrowthstrategyandanyacquisitions.

Regional macroeconomic issues • Regularmonitoringofregionaleconomic,political,oil,gas,powermarketinformation. • Specificmarketanalysisbyreputedthirdpartyexpertswhererequired.

Operational risks

Operational events that impact on operational delivery, corporate reputation, revenues

HSE • GroupHSEpolicyreinforcedatalllevelsofoperations.GroupcompliancewithWorld Bank’s Equator Principles. Clear incident reporting and investigation procedures. • HSEstaffprofessionalsactiveineachcountryofoperations.

Drilling operations • Robustinternaldebateandchallengeatalllevelsofexplorationprocess,consistent approach to technical and commercial risking of drilling activities.

Oil/liquids spill at operated asset • Clearlyestablishedprotocolfordealingwithspillorotheroperationalemergencies.

Local community issues • Robustpublicconsultationonthegroundinoperationalareas.

Corporate Social Responsibility • DetailedCSRpolicyandprogrammesimplementedacrossoperations. • CSRinitiativesleadatthecountrylevelandoverseenbyCSRCommitteeand Executive Team. • GroupcompliancewithWorldBank’sEquatorPrinciples.

Rig and services availability • Planningprocessinplacethatallowssufficienttimeforprocurement.

Insurable risks • TheGroupmaintainsinsurancestoreducethepotentialimpactofthephysicalrisk associated with its oil and gas activities. • TheGroup’sinsuranceprogrammeisinlinewithstandardindustrypracticeandincludes insurances against drilling activities, operator’s extra expense, construction all risk, certain business interruptions and general liability.

Asset performance • TheGroup’sportfolioisincreasinglydiversified,reducingexposuretoanyindividual production, development, exploration or appraisal asset.

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Risk management

SALAMANDERENERGY

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Risk management continued

Financial risks

Underperforming assets, financial constraints lead to financial stress for the Group

Liquidity risk • TheGroupmanagesitsliquidityrisk(ensuringsufficientcapitalisavailabletomeetnear and medium term funding requirements) via a formal budgeting and forecasting process. • Budgets,forecastsandrelatedcommittedanddiscretionarycapitalrequirementsare monitored to ensure compliance with the corporate funding plan.

Oil price • PSCeffectsandcertainfixedpricegascontractsinGroup’sproductionbasepartially hedge oil price volatility. • Defensivehedgingstrategyimplementedasappropriatetominimisedownsiderisk to Group cash flows, business plan and debt related coverage ratios and agreed by the Board. • 2010hedgingprogrammeimplemented(asdescribedpreviouslyinFinancialReview), 2011 hedging programme under review at present.

Capital and operating costs • ConstantmonitoringofGroup’scapitalinvestmentprogrammeandappropriatesourcing of contractors and services. • RegularreviewofGroupoperatingandoverheadcosts.

Foreign exchange exposure • TheGroupaccountsandreportsinUSDollarsandmakeseffortstopreservefundsinUS Dollars. The Group may enter into foreign exchange hedges where the Group has a known and determined exposure.

Credit and counterparty risk • CreditandcounterpartyrisktotheGrouptaketwoforms: – the risk that a counterparty, including financial institutions, cannot continue to provide a service or product to the Group or to settle outstanding amounts due, and – the risk that a counterparty cannot continue to fund its contributions to a jointly owned asset or to fund its contractual product purchases. • TheGroupinvestssurpluscashwithbanksofstrong,stableinvestmentgrade. • ItmonitorscloselythefundingpositionofbothJVpartnersandkeycontractors, maintains close dialogue with those thought to be high risk, takes mitigating action and prepares contingencies where possible.

Interest rate risk • TheGroupperiodicallyreviewsitsinterestrateexposureandhashedgedapproximately 50% of its LIBOR rate exposure. • ApprovedatBoardlevel.

Debt levels and capital structure • TheGrouphasadoptedaconservativeleveragingofitsbalancesheet,constantly monitoring the amount and structure of its debt and ongoing compliance with debt related covenants.

Other risks

Market, industry or political risks that may impact on Group operations or cash flows

Fiscal regime • TheGroupseekstofosterandmaintainstronglinkswithhostcountrygovernments, regulators, national oil companies and other domestic industry partners.

Investor sentiment • TheBoardmaintainsaregulardialoguewiththeGroup’sshareholderbaseto communicate strategy and understand investor preferences.

Corporate governance issues • TheGroupupholdsacodeofgovernanceandcontrolpolicies,coveringallareasofits activities including business ethics, financial governance and control, procurement, HSE and CSR. • RegularlegalappraisalofcompliancewithCombinedCodeandother regulatory guidelines.

Additional detail on certain financial risks are set-out in note 24 to the consolidated financial statements.

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Corporate social responsibility

Salamander is aware that rapid growth brings with it an associated need to ensure that growth occurs in a responsible manner. These responsibilities include: ensuring the health and safety of our employees and people impacted by our activities; protecting the environment; and respecting the interests of communities amongst which we work.

In 2009 Salamander formalised its commitment to CSR with the formation of local CSR committees in each operating unit. These local committees are headed by the general manager of the respective operating units and report back to the Group CSR Steering Committee, headed by the Group Chief Executive. The Group has also taken the decision to broaden its CSR reporting metrics and for the first time is reporting on its health, safety and emissions data. These key metrics identify the material issues for Salamander.

The Group is committed to adhering to the World Bank Equator principles that provide a benchmark for ensuring projects are socially responsible and reflect sound environmental management practices. With the International Finance Corporation (“IFC”) being a lender, shareholder and partner to Salamander, the Group is regularly audited by the IFC to ensure that it is fulfilling its commitments in this regard.

As Salamander continues to grow, the need for the Group to act in the best interest of all its stakeholders, including local communities, is magnified and it is a challenge that the operating units readily accept.

Key metrics

SALAMANDERENERGY

2009 2008

Lost Time Incident (LTI) – –Lost Time Incident Frequency (LTIFR) – –Total Recordable Incidents (TRI) 6 17Total Recordable Incident Frequency Rate (TRIFR) 2.2 5.6Hours worked (millions) 2.7 3.0CO2 emissions (tonnes) 34,020 N/ACO2 emissions (tonnes per thousand tonnes production) 97 N/AGHG emissions (tonnes per thousand tonnes production)1 105 N/AFlaring and venting (MMscf) 72.8 4.7Oil and chemical spills (number) 5 8Total spilt (litres) 3,041 235Oil and chemical spills – released to the environment (litres) 9.5 9.5Produced water discharged (tonnes) 383 0Oil in produced water discharged (tonnes) 0.02 0

1 Sources: 2009 Guidelines to Defra/DECC’s GHG Conversion Factors for Company Reporting V2.0 30/9/2009 Greenhouse Gas Protocol Initiative – http://www.ghgprotocol.org/calculation-tools/all-tools

Health and safety performance

2009 saw 2.7 million man hours expended on operated activities. Zero lost time incidents were recorded and Salamander’s lost time incident free performance to date is such that the company is outperforming the Oil and Gas Producers’ (OGP) index for South East Asia. Salamander’s total recordable incident frequency rate (TRIFR) is also in line with the OGP average.

Environmental performance

There were no significant environmental incidents in 2009. A focus throughout the year was on formalising environmental reporting processes at both Group and operating level. Group level metrics for operated activities will be published on an annual basis, with the Group aiming to both outperform the OGP index for Southeast Asia and improve on its own previous year performance.

In 2009 the Group considerably outperformed against the OGP index. Group GHG emissions were 105 tonnes per thousand tonnes production compared to the OGP average for Asia of 179. Carbon dioxide emissions were 97, again significantly better than the OGP average for Asia of 147. The one material change compared with 2008 was in the volume of gas flared or vented which increased as the Kambuna field came on-stream during the second half of the year. Reduction initiatives underway include commissioning the permanent Kambuna production facilities at Pangkalan Brandan, and introduction of a gas fuelled power system at our Bualuang field in Thailand.

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Corporate social responsibility continued

Projects successfully completed in Thailand included the release of 25,000 sea bass and 1,000,000 shrimp into the mangrove areas of the Mu Kok Chumphon National Park. According to research the mangrove acts as a natural sanctuary for released juvenile marine life and improves the chances of survival compared to release into the open sea. The Mu Kok Chumphon National Park is the closest coastal area to the Group’s offshore Bualuang oil field.

The CSR Steering Committee noted that local CSR efforts tended to focus on projects with a social impact. As a result the committee requested that all operating units expand the scope of their CSR operations in 2010 to also include projects with an environmental focus. A variety of projects are under active consideration including coral reef/mangrove monitoring and preservation, working to support local bird sanctuaries and helping to replenish local fish stocks.

Community and society

The Group adopts a pro-active approach to building relationships with local communities and our local community liaison officers organise frequent meetings within the communities in which we operate. These meetings allow for a constructive dialogue between the Group and the community representatives: Salamander learns about the concerns of the local communities and areas where we can provide help and assistance; the community learns about the Group’s operational plans and any local training/employment opportunities.

In Indonesia, our projects in North Sumatra have increased in line with the commencement of production from the Kambuna field. Our initial efforts here have focussed on small social projects that are important to the communities and can have an immediate impact. At the end of 2009 we renovated the public hall in the village of Teluk Meku, provided materials for refurbishing dilapidated housing with poor sanitation near to the Kambuna pipeline, provided breakfast for local orphans during Ramadan and sponsored the local hospital’s circumcision programme that reduces risk of disease amongst disadvantaged and orphaned boys.

In Vietnam, we expanded the scope of the successful project undertaken in 2008, in conjunction with PetroVietnam, to distribute 20,000 notebooks to disadvantaged children in Hoa Binh, Tra Cu and Duyen Hai Districts, and on the island of Cu Lao Dung. In 2009 we also completed a renovation of the Dong Hai A Primary School in Tra Vinh province. This comprised plastering and painting walls, retiling floors and repaving the school yard. (See pictures on opposite page).

In Lao PDR, activity has focussed on a number of schools near the location of the Bang Nouan-1 exploration well. A first stage refurbishment of the Ban Naphabang Yai school has been completed. This involved rendering and painting the perimeter wall, painting the roof, building a separate toilet block and supplying footballs, goalposts and nets. Further schools have been identified for similar projects during 2010. Salamander is working with an NGO, Handicap International, to help promote safe motorbike riding practices, including the provision of helmets. Salamander Lao also supports COPE, a charity that provides prosthetic, orthotic and rehabilitation services to people who have been maimed by unexploded ordnance.

Employees

The Group is an equal opportunities employer and provides a working environment in which employees and consultants are recruited and promoted fairly on the basis of their ability for the job. We will prevent discrimination based on race, religion, gender, sexual orientation and age and will not tolerate sexual, physical or mental harassment.

We are committed to creating a challenging environment of empowerment and development, generating both a common sense of purpose and pride in working for the Group. We will seek to realise the potential of employees and consultants, recognise individual and team contributions and reward competitively relative to our success.

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Ethics

The Group is committed to conducting its business affairs with integrity and in compliance with the laws, regulations and standards which apply to its business activities. All Group employees and consultants are expected to conduct their business dealings honestly, openly, fairly and safely and we expect the same standards of all those with whom we do business. The Group Code of Conduct was published in May 2009.

Outlook

In 2010, the Group will continue to actively manage its corporate social responsibility programme to meet the challenges associated with an increase in operated activity. Salamander will be rolling out an improved HSE monitoring programme that will see each operating unit given specific HSE targets that are in line with Group targets. As part of this programme the number of senior management inspection tours will be increased to reinforce the commitment to achieving excellence in terms of our HSE performance. The Group will continue to engage and support local communities, and will be expanding our activities in each region to include environmental projects as well as social.

Refurbishment of Dong Hai A Primary School Tra Vinh province Vietnam

1 Children returning to refurbished school on opening day of new term.

2 Classrooms prior to refurbishment.

3 Classrooms post refurbishment.

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Board of directors and advisers 1 Charles Jamieson

Chairman(N)

Charles Jamieson is Salamander’s Chairman and a founder of Salamander. He holds an MBA from INSEAD and is a chartered accountant. Prior to joining Salamander, he spent over 25 years with Premier Oil plc where he held a number of posts, including Finance Director and Chief Executive Officer. He is currently also Chairman of Vostok Energy Ltd.

2 James Menzies

Chief executive officer James Menzies is a founder of Salamander and its Chief Executive Officer. He holds a BSc (Hons) in Geology and an MSc in Geophysics and Planetary Physics. After a period as a geophysicist at Schlumberger and ERC, he spent eleven years at LASMO plc holding a variety of posts including senior geophysicist in Vietnam, chief geophysicist in Indonesia, head of corporate development and head of strategy and corporate affairs. He spent four years as a senior partner at Lambert Energy Advisory prior to the founding of Salamander.

3 Mike Buck

Chief operating officer Mike Buck is Salamander’s Chief Operating Officer. He holds a BSc (Hons) in Geology with Geophysics and an MSc in Petroleum Geology (dist.). He spent twenty years with LASMO plc as a geophysicist in IndonesiaandtheUKContinentalShelf,chiefgeophysicist in Colombia, exploration manager in Vietnam and Exploration and general manager in Libya. He then spent four years with ENI as managing director in Tehran and managing director in Pakistan. Overall he has 30 years of international exploration and production experience.

4 Nick Cooper

Chief financial officer Nick Cooper is a founder of Salamander and its Chief Financial Officer. He holds a BSc (Hons) in Geophysical Sciences, a PhD in Exploration Geophysics and an MBA from INSEAD. He spent five years as a geophysicist at BG and Amoco and then was an upstream consultant for two years atBooz-Allen&Hamilton.Priortothefounding of Salamander, he spent five years at Goldman Sachs, of which two years was spent in Singapore as a vice-president in corporate finance (oil and gas).

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5 StruanRobertson

SeniorIndependentNon-executiveDirector(#N)(R)(A)

Struan Robertson is Salamander’s Senior Independent Non-executive Director and was educated at the University of Natal and the University of Cape Town, followed by Wharton Business School. He spent over 23 years at BP plc where he held a number of posts, including CEO of Oil Trading International, Executive Chairman of BP Asia Pacific based in Singapore and Downstream Senior Vice President for Technology and Marketing, based in London. Between 2000 and 2004 he was Group Chief Executive of Wates Group Ltd. He currently holds non-executive directorships with International Power plc, Tomkins plc, Henderson TR Pacific Investment Trust plc and Forth Ports plc.

6 RobertCathery

Non-executiveDirector(#R)(N)

Robert Cathery is an Independent Non-executive Director of the Company and was a founder of Salamander. He was a director of Vickers da Costa and Schroders Securities as well as Head of Corporate Sales at SG Securities (London) Ltd. He also spent four years as Head of Oil & Gas at Canaccord Europe. He is currently a non-executive director of Vostok Energy Ltd, SOCO International plc, Central Asia Metals Ltd and Indigovision Group plc.

7 JamesColeman

Non-executiveDirectorJames Coleman is an Independent Non-executive Director of the Company. He is a Canadian citizen and a senior partner and former Chairman of the international law firm of Macleod Dixon based in Calgary and was a board member of GFI Oil & Gas Corporation until that company was acquired by Salamander on 17 March 2008. He is currently a Non-executive Director of Anterra Energy Inc, and a non-executive Chairman of Sulliden Exploration, Inc, Energold Drilling, Inc and Gold Reserve, Inc – all publicly quoted companies in Canada.

8 JohnCrowle

Non-executiveDirector(R)(A)John Crowle is an Independent Non-executive Director of the Company and was educated at Durham University and Stanford University Business School. He spent more than 18 years at Enterprise Oil where he held a number of posts, including Group Exploration Manager. Between 2002 and 2004 he was at Royal Dutch Shell as General Manager of New Ventures Organisation Cluster, based in The Hague. He is currently a non-executive director of Rockhopper Exploration plc and a member of the Durham University Earth Sciences Advisory Board.

9 MichaelPavia

Non-executiveDirector(#A)

Michael Pavia is an Independent Non-executive Director of the Company and was appointed to the Board in July 2007. A chartered accountant and Chairman of the ICAEW’s Audit Committee, he has had a distinguished career in the energy sector, being finance director of UK independent LASMO plc and then SEEBOARD plc (now a subsidiary of EDF Energy plc). He is currently a non-executive director of Thames Water Utilities Ltd, Telecom Plus plc and Elizabeth Finn Care.

Membershipsofboardcommittees# Committee chairman (N) Nomination Committee member (R) Remuneration Committee member (A) Audit Committee member

Corporateadvisers

JointcorporatebrokersGoldman Sachs and Oriel Securities Ltd

RegisteredauditorDeloitte LLP

BankersHSBC Bank plc

LegaladvisersClifford Chance LLP

FinancialPRBrunswick

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Statement of proved and probable reserves (working interest basis)

The Group’s proven and probable commercial working interest at 31 December 2009 were as follows: Thailand Indonesia Total TotalOil

MMboGas BCF

Oil MMbo

Gas BCF

Oil MMbo

Gas BCF

MMboe1

At 1 January 2009 16.3 96.1 15.8 117.4 32.1 213.5 67.7Addition – – – 14.3 – 14.3 2.4Revisions (0.3) – – – (0.3) – (0.3)Production (2.0) (3.0) (1.3) (7.0) (3.3) (10.0) (5.0)

At 31 December 2009 14.0 93.1 14.5 124.7 28.5 217.8 64.8

1 All gas reserves are converted at 6.0 Bcf/MMbo.

Proved and probable commercial reserves are based on reports produced by the Group’s independent engineer, RPS Energy, and supplemented by the Group where necessary with additional and more recent information.

The Group provides for amortisation on its oil and gas properties on a net entitlements basis, which reflects the share of future production estimated to be attributable to the Group under the terms of the PSCs related to each field. Total proved and probable entitlement reserves were 48.4 MMboe at 31 December 2009 (2008: 50.1 MMboe).

The 2009 reserves replacement ratio was 42% (2008: 950%).

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Directors’ report

The Directors submit their report together with the audited Consolidated and Parent Company Financial Statements of Salamander Energy PLC for the year ended 31 December 2009.

Salamander Energy PLC is the holding company of the Group and its issued ordinary shares were admitted to listing on the main market of the London Stock Exchange on 5 December 2006.

Principal activities

The principal activities of the Group which are intended to continue into the future are as an independent oil and gas exploration, development and production company focused on building a portfolio of assets in Asia. The Group operates through a number of subsidiary and other undertakings, including Joint Venture Entities, which are set out in note 16 to the consolidated Financial Statements.

The Group’s head office is in London with regional offices in Singapore, Thailand, Indonesia, Lao PDR and Vietnam.

Business review

The Company is required by the Section 417 of the Companies Act 2006 to include a review of its business in this report. The information that fulfils the requirement is contained in the following sections of the annual report and should be treated as forming part of this report by reference: • Chairman’sandChiefExecutive’sreview • Operationalreview • Financialreview • Riskmanagement • CSR • Directors’report

Directors

The Directors who served in office during the financial year were as follows: • CharlesJamieson(Chairman) • JamesMenzies(ChiefExecutive) • MikeBuck • NickCooper • StruanRobertson(SeniorIndependentNon-executiveDirector) • MichaelPavia • JohnCrowle • RobertCathery • MikeSibson(resignedon15May2009) • JamesColeman

ThearticlesofassociationoftheCompanyrequirethatone-thirdoftheboardmembers(orthenumbernearesttoone-third)retirebyrotationandofferthemselvesforre-electionattheAGM,whichthisyearwillbe Charles Jamieson, Michael Pavia and James Coleman.

Results and dividends

TheConsolidatedFinancialStatementsfortheyear-ended31December2009areassetoutintheFinancialStatementssectionofthisreport.TheGroup’slossaftertaxfortheyearwas$13.5million(2008:post-taxloss $66.5 million).

TheCompanyhasdeclarednodividendfortheyear-ended31December2009(2008:nil).ItisnottheDirectors’ current intention that the Company will pay a dividend for the foreseeable future.

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Directors’ interests

The Directors’ interests in the ordinary shares of the Company and Directors’ remuneration are as set out in the Remuneration report.

Capital structure and takeovers directive

Details of the authorised and issued share capital together with details of movements in share capital during the year are included in note 26 to the Consolidated Financial Statements. The Company has one class of ordinary shares.

Details of employee share schemes are disclosed in the Remuneration Report and in note 27 to the consolidated Financial Statements.

Article 55 of the Company’s Articles restricts the percentage of Salamander shares that may be held by Canadian residents to below 10 per cent so as to permit the Company to rely on exemptions from certain obligations which the Company may be subject to under Canadian Securities Law. Article 55 of the Company’sArticlesconfersupontheBoardthepowertorequireCanadiancitizensbeneficiallyowningSalamander shares to transfer their Salamander shares when the threshold of 10 per cent Canadian Salamander Shareholders is approached. In the event that such Canadian Salamander shareholders are required to transfer their Salamander shares under Article 55, the relevant Salamander shares will be sold in the market at the best price reasonably obtainable in the market and the net proceeds (if any) will be remitted to the relevant Canadian Salamander Shareholder. This compulsory transfer power is generally available to the Board to exercise from time to time, and the Board is free to exercise this power in its absolute discretion. The Directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.

NopersonhasanyspecialrightsofcontrolovertheCompany’ssharecapitalandallissuedsharesare fully paid.

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the Combined Code, the Companies Acts and related legislation.

The Company’s Articles of Association give power to the Board to appoint Directors but require the Directors to submit themselves for election at the first Annual General Meeting following their election and thereafterre-electionbyshareholdersatleasteverythreeyears.TheArticlesthemselvesmaybeamendedby special resolution of the shareholders. Powers relating to the issuing and buy back of shares are also included in the Articles and the authority to issue shares is renewed by shareholders each year at the Annual General Meeting. The powers of directors are described in the Board Terms of Reference, copies of which are available on request, and in the Corporate Governance section of this report.

In relation to agreements that take effect, alter or terminate upon a change of control of the company, detailsoftheBNPPledloanfacilityaresetoutinnote21totheconsolidatedFinancialStatements.Thereare, in addition, a number of other agreements so affected, such as commercial contracts, property lease arrangements and employee share plans, none of which are considered to be significant in terms of their likely impact on the business of the Group as a whole.

Directors report continued

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Significant shareholders

At 17 March 2010, being the latest practicable date prior to the publication of this Annual Report, the significant interests in the voting rights of the Company’s issued ordinary shares as notified in accordance with Chapter 5 of the Disclosure and Transparency Rules were as follows:

Voting rights attaching to issued ordinary shares

Percentage of total voting rights

Nature of holding

FinVentures UK 19,994,897 13.0 DirectPhineus Partners LP 15,278,126 9.9 Direct/IndirectArtemis Investment Management Ltd 13,274,068 8.6 DirectOchZiffManagement1 10,694,688 7.0 Direct/IndirectFidelity Investments 7,348,132 4.8 IndirectFloriline SA 6,830,544 4.4 Direct/IndirectLegal & General 6,231,951 4.1 DirectBlack Rock 4,689,146 3.0 Direct

1 OchZiffManagementissuedapressreleaseon19January2010statingthatitsholdinghadgonebelowthe5%threshold but did not provide details of their new shareholding amount.

Employees

The Company has a policy of providing employees with information about the Company and regular meetings between management and employees are held to exchange information and ideas.

2009 saw an increase in employee levels in line with the growth in operated activity. At year end Salamander employed 126 people compared with 64 employees at the end of 2008.

The Group has a diverse workforce comprising of a mixture of local employees and expatriates. It is an equal opportunities employer and gives every consideration to applications for employment by disabled persons where the requirements of the job may be adequately filled by a disabled person. Where existing employees become disabled, it is the Company’s policy wherever practicable to provide continuing employment under similar terms and conditions and to provide training, career development and promotion wherever appropriate.

The Company requires all employees to conform to the policies outlined in the Business Code of Conduct that is available for viewing on the Company website.

Annual General Meeting

TheCompany’sfourthAnnualGeneralMeetingasalistedpubliccompanywillbeheldattheParkPlazaCountry Hall Hotel, 1 Addington Street, London SE1 7RY at 2pm on Tuesday, 11 May 2010. The notice of meeting and an explanatory circular to shareholders setting out the AGM business accompanies this Annual Report.

Principal risks and uncertainties

The Board has established a process for identifying, evaluating and managing the significant risks the group faceswhichareset-outintheRiskManagementsectionofthisreport.

Payment policy

The Group’s policy in respect of its vendors is to agree and establish terms of payment when contracting for the goods or services and to abide by those payment terms. The Company is the holding Company of the Group and has no trade creditors. Further details can be found in note 23 to the consolidated financial statements.

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Charitable and political donations

During the year the Group made no political donations (2008: nil). Charitable donations made by the Group amounted to $38,000 (2008: $41,000).

Auditors

As far as each Director is aware, there is no relevant audit information of which the Company’s Auditors are unaware. In addition, each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s Auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Deloitte LLP were first appointed as Auditors to the Company in September 2005 and have expressed their willingness to continue as Auditors. A resolution to reappoint Deloitte LLP as the Group’s Auditors will be proposed at the forthcoming Annual General Meeting.

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review and note 21 to the consolidated financial statements. In addition, note 24 to the Consolidated Financial Statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Group’s forecasts and projections, demonstrate that the Group is adequately financed and is able to operate within the level of its current facility.

As highlighted in note 21 to the Financial Statements, the Group meets its investments required to realise its development projects and committed exploration and appraisal programme through a $200 million reserves based lending facility which is due for renewal in 2015. In addition, in December 2009 the Group signed a $30 million subordinated junior facility as an extension to its existing senior reserves based lending facility. The subordinatedfacilityiswithexistinglendersBNP,theIFCandNatixis.Todatethisfacilityhasnotbeendrawn.

The current economic conditions create uncertainty, particularly over the oil price, which affects revenue from the Group’s production and the availability under the reserves based lending facility, the basis of which is discussed in note 21 of the Consolidated Financial Statements. The Group undertook a 2009 hedging programme and has undertaken a 2010 hedging programme to manage this risk.

The Directors believe that the Group’s forecasts and projections, taking account of reasonably possible changes in economic assumptions such as the oil price, show that the Group will be able to operate within the level of its current reserves based lending facility.

In addition to provide increased flexibility to the Group to advance a number of strategic options in addition to its current planned programmes, the Group will announce on 18 March 2010 a proposed issue of a convertible bond for up to $100 million.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual report and accounts.

Approved by the Board on 17 March 2010

Douglas Barrie Company Secretary

17 March 2010

Directors report continued

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Salamander strives to apply best industry practice in all of its activities. The Board, Management and Staff of Salamander are committed to applying the highest standards of business ethics, corporate governance and health, safety and environmental control. To this end, the Group has put in place policies and procedures within which it conducts its activities along with working practices and a business culture to ensure openness and full accountability.

Compliance with the financial reporting council’s combined code on corporate governance

This report and the Remuneration Report describe how the Company has applied the principles set out in Section 1 of the 2008 Combined Code on Corporate Governance (“the Code”) published by the Financial Reporting Council. It also discloses the extent to which the Company has complied with the provisions of the Code.

The Board considers it has complied with the Code in all aspects throughout the financial year.

Board of directors

During2009,theBoardcomprisedten,andlatterlynine,DirectorsincludingtheNon-executiveChairman,threeExecutiveDirectors,fiveindependentNon-executiveDirectorsandonenon-Independent Non-executiveDirector.MikeSibsonwasconsideredtobenon-independentsincehewasappointedpursuant to an understanding between the Company and 3i QPE PLC that for as long as 3i QPE PLC held not less than 10 per cent of the Company’s issued share capital, 3i QPE PLC would have the right to appoint,removeandre-appointonenon-executivedirectoroftheCompany,subjecttoconfirmationofitsnominationbytheNominationCommittee.MikeSibsonresignedon15May2009followingtheplacing of 3i QPE PLC’s equity interest in the Company where upon this right ceased. All of the Executive Directors haveextensiveupstreamoilandgasexperience.ThemajorityoftheNon-executiveDirectorshaveheldseniorappointmentsinoilandgascompaniesand,together,theNon-executiveDirectorsbringabroadrange of business and commercial experience to the Board. The biographies of the Board members are set out in the Board of Directors and Advisers section.

The role of the Board is clearly defined. The Board is accountable to shareholders for the creation and deliveryofstrong,sustainablefinancialperformanceandlong-termshareholdervalue.Toachievethis,the Board directs and monitors the Group’s affairs within a framework of controls which enable risk to be assessed and managed effectively. It sets the Group’s strategic aims, ensuring that the necessary resources are in place to achieve those aims, and reviews management and financial performance. The Board also has responsibility for setting the Group’s core values and standards of business conduct and for ensuring that these, together with the Group’s obligations to its stakeholders, are widely understood throughout the Group.

ThereisaclearseparationbetweentherolesoftheChairmanandChiefExecutiveOfficer.TheChairman’skey responsibilities are the effective running of the Board, ensuring that the Board plays a full and constructive part in the development and determination of the Group’s strategy, and acting as guardian of theBoard’sdecision-makingprocess.TheChairman’sothersignificantcommitmentisasChairmanofVostokEnergy Limited. The Board believes that the Chairman’s obligations are unaffected by this directorship. ThekeyresponsibilitiesoftheChiefExecutiveOfficeraremanagingtheGroup’sbusiness,proposinganddeveloping the Group’s strategy and overall commercial objectives in consultation with the Board and, as leader of the executive team, implementing the decisions of the Board and its Committees. In addition, the ChiefExecutiveOfficerisresponsibleformaintainingregulardialoguewithmajorshareholdersaspartoftheCompany’s overall investor relations programme.

Corporate governance statement

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Board of directors continued

The Board has established a process for identifying, evaluating and managing the significant risks the Group faces. Additionally, the Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

InaccordancewiththerevisedguidanceoninternalcontrolpublishedinOctober2005(theTurnbullGuidance), the Board regularly reviews the effectiveness of the Group’s system of internal control which has been in place throughout 2009. The Board’s monitoring covers control matters, including financial, operational and compliance controls and risk management. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate a need for more extensive monitoring. The Audit Committee assists the Board in discharging its review responsibilities. A summary of the key risks facing the Group and mitigating actions is described in the Financial Review.

During the course of its review of the system of internal control, the Board has not identified nor been advised of any failings or weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions has not been considered applicable.

Non-executiveDirectorsareappointedforaninitialtermofthreeyears.Thereafter,theymayserveone or more three year terms subject to satisfactory performance. The letters of appointment of each Non-executiveDirectorareavailableforinspection.TheSeniorIndependentNon-executiveDirectorisStruan Robertson. In this role he is available to shareholders who have concerns that cannot be resolved through discussion with the Chief Executive or Chairman.

AllDirectorsappointedbytheBoardarerequiredbytheCompany’sArticlesofAssociationtobere-electedbyshareholdersatthenextAGMaftertheirappointment.Subsequently,Directorsaresubjecttore-electionbyshareholdersatleasteverythreeyears.Priortosuchre-elections,theChairmanandtheNominationCommittee will review each Director’s performance to ensure they continue to be effective and demonstrate commitment to the role.

The Board meets at least quarterly during the year and on an ad hoc basis as required. The attendance record of each Director is shown below.

Board

Audit Committee

Remuneration Committee

Nomination Committee

Charles Jamieson 6 N/A N/A 2JamesMenzies 6 N/A N/A N/AMike Buck 6 N/A N/A N/ANickCooper 6 N/A N/A N/AStruan Robertson 6 3 2 2Michael Pavia 6 3 N/A N/AJohn Crowle 6 3 2 N/ARobert Cathery 5 N/A 2 2James Coleman 6 N/A N/A N/AMike Sibson1 1 N/A N/A N/ANumberofMeetings 6 3 2 2

1 Until date of resignation on 15 May 2009

In addition to the formal meetings of the Board, the Chairman and Executive Directors, maintain frequent contact with the other Directors to discuss any issues of concern they may have relating to the Group or as regards their area of responsibility and to keep them fully briefed on ongoing matters relating to the Group’s operations.

Corporate governance statement continued

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Board of directors continued

Directors have access to a regular supply of financial, operational and strategic information, as well as the Company Secretary, to assist them in the discharge of their duties. Such information is provided as part of the normal management reporting cycle undertaken by senior management. Board papers are generally circulated seven days in advance of Board meetings. In addition, each formal Board meeting includes a review of the history, performance and future potential of an individual asset or business unit designed to ensure that all material assets are considered on a cyclical basis and to enable Board members to familiarise themselves with the key assets and operations of the Group. The Board formally reviews the Group’s risk register twice a year with the constant monitoring of events by the Executive Directors.

All Directors and Board Committees have access to independent professional advice, at the Company’s expense, as and when required.

The Company Secretary, in consultation with the Chairman and Chief Executive provides an induction process for each new director tailored to their individual knowledge and experience.

The Company provides training to Directors where required. Training can include attendance at seminars, briefings by advisers and internal briefings.

The Group maintains directors’ and officers’ liability insurance cover, the level of which is reviewed annually.

A formal schedule of matters reserved for Board approval is in place. The matters reserved include: the Group’s overall strategy, approval of annual and interim results, material acquisitions and disposals, material contracts and major capital expenditure projects and budgets. Subject to those reserved matters, the Board delegates authority for the management of the business primarily to the Chief Executive and a senior executivecommittee.CertainothermattersaredelegatedtotheAudit,RemunerationandNominationCommittees, each of which is described in more detail below.

The Companies Act 2006 allows directors of public companies to authorise conflicts and potential conflicts of interests of directors where the Articles of Association contain a provision to that effect. Shareholders approved amendments to the Company’s Articles of Association at the 2008 Annual General Meeting which included provisions giving the Board authority to authorise matters which may result in the Directors breaching their duty to avoid a conflict of interest. Directors of the Company who have an interest in matters underdiscussionataBoardmeetingmustdeclarethatinterestandabstainfromvoting.Onlydirectorswhohave no interest in the matter being considered are able to approve a conflict of interest and, in taking the decision the Directors must act in a way they consider, in good faith, would be most likely to promote the Company’s success. The Directors are able to impose limits or conditions when giving authorisation if they think this is appropriate. During the year procedures, based upon the GC100 guidance, were in place to review any conflicts of interest. The Board considers that these procedures are operating effectively.

Board performance

Annual performance appraisal of the Board, its Committees, individual Directors and the Chairman is carried out, with the evaluation process involving Directors’ input to a detailed questionnaire followed by individual interviews and feedback with the Chairman. The results of the survey, together with any recommendations for improving effectiveness, are presented by the Chairman to the whole Board for discussion.TheNon-executiveDirectors,ledbytheSeniorIndependentDirector,meetwithouttheChairman to evaluate his performance in leading the Board and chairing meetings to conduct the Board’s business.

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Board performance continued

In addition to their attendance at Board and, as appropriate, Committee meetings, the Chairman and the Non-executiveDirectorswillalsomeetformally(withoutexecutivemanagementpresent)toexamineandreview the Board performance of the executive management, both individually and as a team; this review process is in part dealt with by the Board Committees referred to below. Separately, the Chairman and ChiefExecutiveholdinformalmeetingswiththeNon-executiveDirectorstodiscussissuesaffectingtheGroup such as target objectives and remuneration matters. It is the intention of the Board to conduct an external review of Board, Committee and Director performance during 2010.

Audit committee

The members of the Audit Committee are Michael Pavia (Chairman), Struan Robertson and John Crowle. OtherBoardmembersmayalsobeinvitedtoattendcommitteemeetings.MichaelPaviaisconsideredtohave recent and relevant financial experience.

Meetingsareheldatleastthreetimesayear.TheChiefFinancialOfficerisinvitedtoattendmeetingswhere appropriate and the Group’s Auditors are regularly invited to attend meetings, including once at the planningstagebeforetheauditandonceduringtheyear-endauditandhalf-yearreviewatthereportingstage. At least once a year the Audit Committee will also meet the Group’s external auditors without Management being present.

The work of the Audit Committee in respect of the financial year has included: • ConsiderationofmattersrelatingtotheappointmentoftheGroup’sAuditors. • Reviewingtheindependence,objectivityandeffectivenessoftheGroup’sAuditors. • ReviewingtheintegrityoftheGroup’sannualandhalf-yearreports,preliminaryresultsannouncements and any other formal announcement relating to its financial performance. • ReviewingtheeffectivenessoftheGroup’ssystemofinternalcontrolandcomplianceprocedures. • ReviewingtheGroup’sarrangementsforitsemployeestoraiseconcerns,inconfidence,aboutpossible wrongdoing in financial reporting or other matters.

In fulfilling its responsibility of monitoring the integrity of financial reports to shareholders, the Audit Committee has reviewed accounting principles, policies and practices adopted in the preparation of public financial information and has examined documentation relating to the annual report and preliminary announcement. The clarity of disclosures included in the financial statements was reviewed by the Audit Committee, as was the basis for significant estimates and judgements. In assessing the accounting treatment of major transactions open to different approaches, the Committee considered written reports by management and the external auditors. The Committee’s recommendations are submitted to the Board for approval.

TheCommitteedecidedinMarch2010toestablishaninternalauditfunctionasthesizeandcomplexity of the Group has increased.

The Committee also reviewed the independence and effectiveness of the external auditors, particularly inviewoftherelativelyhighleveloftheirnon-auditfees,acceptingthattheirindependencehadbeenmaintained throughout the audit process for the financial year. The Committee considers that at this stageitismoreefficienttouseasingleauditfirmtoalsoprovidecertainnon-auditservicesfortransactions and tax matters. However, to regulate the position, the Committee has established a policy on the provision ofnon-auditservicesbytheexternalauditor.Incompilingthatpolicy,whichsetsouttheexternalauditor’spermittedandprohibitednon-auditservicesandafeethresholdrequiringpriorapprovalbythe Audit Committee for any new engagement, reference was made to Ethical Standard 5 of the Auditing Practices Board.

The terms of reference of the Audit Committee are included on the Company’s website, www.salamander-energy.com

Corporate governance statement continued

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Remuneration committee

The members of the Remuneration Committee are currently Robert Cathery (Chairman), John Crowle and Struan Robertson.

The primary duty of the Remuneration Committee is to determine and agree with the Board the framework or broad policy for the remuneration of the Group’s Chief Executive, Chairman, the Executive Directors, the Company Secretary and such other members of the executive management as it is designated to consider. TheremunerationofNon-executiveDirectorsisamatterfortheChairmanandtheexecutivemembersoftheBoard.NoDirectormaybeinvolvedinanydecisionsastotheirownremuneration.

The terms of reference of the Remuneration Committee are included on the Company’s website, www.salamander-energy.com

Nomination committee

ThemembersoftheNominationCommitteeareStruanRobertson(Chairman),CharlesJamiesonand Robert Cathery.

TheNominationCommittee’stermsofreference,whichareincludedontheCompany’swebsite, www.salamander-energy.com,aretoreviewregularlythestructure,sizeandcomposition(includingtheskills, knowledge and experience) required of the Board compared to its current position and make recommendationstotheBoardwithregardtoanychanges.TheNominationsCommitteealsoconsidersfuture considerations of the composition of the Board, taking into account the challenges and opportunities facing the Group, and what skills and expertise are needed on the Board. Following a decision of the Board that the appointment of a new director is appropriate, the duty of the Committee is to present for consideration suitably qualified candidates. In making such recommendations, the committee evaluates the balance of skills, knowledge and experience on the Board and develops a description of the role and required capabilities. Candidates are then identified for interview. The Committee also makes recommendationstotheBoardregardingthere-electionand/orre-appointmentofanydirector.Similarselection processes would apply for the appointment of a Chairman. Succession plans for key management roles, including the Executive Directors, are reviewed on an ongoing basis.

Shareholder relations

Communication with shareholders is given high priority and there is regular dialogue with institutional investors,aswellasgeneralpresentationstoanalystsatthetimeofthereleaseoftheannualandhalf-yearresults. The Board receives regular investor relations reports covering key investor meetings and activities, as well as shareholder and investor feedback. The Group publishes its periodic results and other stock marketannouncementsontheInvestorRelationssectionoftheCompany’swebsitewww.salamander-energy.com and regular news updates in relation to the Group, including the status of exploration and development programmes, are also included on the website. Shareholders and other interested parties can subscribe toreceivethesenewsupdatesbye-mailbyregisteringonlineonthewebsite.

Subsequent events

Subsequent events are as set out in note 29 to the Consolidated Financial Statements.

Approved by the Board of Directors on 17 March 2010

Douglas Barrie Company Secretary

17 March 2010

Remuneration committee

The members of the Remuneration Committee are currently Robert Cathery (Chairman), Struan Robertson and John Crowle. The Committee’s primary duty is to determine and agree with the Board the framework or broad policy for the remuneration of the Group’s Chief Executive, the Chairman, the Executive Directors, the Company Secretary and such other members of the executive management as it is designated to consider. TheremunerationoftheNon-executiveDirectorsisamatterfortheChairmanandtheexecutivemembersof the Board.

The main responsibilities of the Committee are to: • AssessandsetcompensationlevelsforExecutiveDirectorsandseniormanagers. • ReviewExecutiveDirectors’andseniormanagers’shareandotherincentiveplanspriortoaward. • ReviewcompensationlevelsforExecutivesandseniormanagersatleastannually. • MakerecommendationstotheBoardonmattersrelatingtotheremunerationandtermsofemployment of the Directors of the Company and on proposals for granting of share awards pursuant to any share awards scheme in operation from time to time.

The Chief Executive is invited to attend meetings of the Committee but does not take part in the decision making of the Committee.

TheCommitteehasaccesstoexternalconsultancyservicesonremunerationandsectorissues.New Bridge Street Consultants were employed to assist, as required, only with matters relating to the Company’s PerformanceSharePlan.NewBridgeStreetConsultantshavenoconnectionwiththeCompany.

The terms of reference of the Remuneration Committee are available on the Company’s website, www.salamander-energy.com.

Historical comparator performance chart

TheCompany’sIPOandlistingontheLondonStockExchangetookplaceon5December2006.Thechartbelow shows the Company’s share price performance since listing compared with the performance in the sameperiodoftheFTSEAllShareOil&GasProducersIndexandtheFTSE250Index,whichtheCommitteeconsiders are the closest comparable indices.

Salamander Energy FTSE 250 FTSE All share oil and gas

This chart looks at the value of the Company from listing of £100 invested in the Company’s issued ordinary share capital compared with the values of £100 invested intheFTSEAllShareOil&GasProducersIndexandtheFTSE250.Itisassumedthatanydividendsarere-invested.

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Executive directors’ remuneration

The Group’s remuneration policy is to provide remuneration packages which ensure that Directors and senior managers are fairly and responsibly rewarded for their contributions. The aim is to provide remuneration packages which are sufficiently competitive to attract, retain and motivate individuals of the quality required to achieve the Group’s objectives and thereby enhance shareholder value. The Committee takes account of the level of remuneration paid to Executive Directors and senior managers of comparable public companies and best practice standards. It is the intention that this policy will continue to apply for 2010 and subsequent years subject to ongoing review as appropriate.

The main details of the Executive Directors’ Service Agreements relating to base salary, annual bonus, share plan awards, pensions and other benefits for 2009 are as set out below:

Service agreements

The Service Agreements for the Executive Directors are for no fixed term and may in normal circumstances be terminated by either party on giving six months’ notice. The Company reserves the right and discretion to pay the Executive Director in lieu of notice. If the Company terminates the employment of an Executive Director by exercising its right to pay in lieu of notice, the Company is required to make a payment equal to the aggregate of basic salary and the cost to the Company of providing other contractual benefits (which excludes bonus) for the unexpired portion of the duration of any entitlement to notice.

If, within 12 months of a change of control, the Company terminates the employment of an Executive Director in breach of the terms of his Service Agreement in circumstances where the Company is not entitled to terminate the Executive Director’s employment, the Executive Director will be entitled to payment of a fixed sum equal to six months’ base salary (not including accrued bonus). In return for the payment of such a fixed sum, the Executive Director agrees to waive, release and discharge any entitlement to further or additional compensation of any kind whatsoever.

Date of contract Notice period

JamesMenzies 29/11/06 Six monthsMike Buck 29/11/06 Six monthsNickCooper 29/11/06 Six months

Salary

The annual base salaries of the Executive Directors for the year to 31 December 2009 were as follows: Salary £’s

JamesMenzies £315,000Mike Buck £237,930NickCooper £262,500

The salary of each Executive Director is subject to regular review by the Remuneration Committee and such a review took place in December 2009. With the exception of Mike Buck, base salaries were not raised in 2009.

It is expected that approximately 33% of Executive Directors’ remuneration will be fixed with the remaining performance related.

Bonus

Each of the Executive Directors is eligible for a discretionary annual bonus up to a maximum of 100% of their base salary. The bonus may only be payable to the extent that individual and corporate performance targets set by the Remuneration Committee are achieved in the relevant year.

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Bonus continued

Performance targets cover the following areas:

• Sharepriceperformance • Businessdevelopment • Operationaldelivery • Finance

Performance share plan (‘PSP’)

In accordance with the Company’s Performance Share Plan (‘PSP’) and at the discretion of the Remuneration Committee,alleligibleemployeesincludingExecutiveDirectorsmaybeawardedShareOptionsintheCompany (‘Awards’). The Committee supervises the operation of the PSP including the levels of awards made to employees and Executive Directors. During the year, as approved by the Shareholders at the 2009 Annual General Meeting, a new deferred bonus scheme replaced the PSP for certain employees but not directors, recognising that the PSP continuing to apply to all employees was not appropriate.

The PSP is intended to facilitate the retention and incentivisation of employees of the Group and to align their interests with those of shareholders by enabling employees, including Executive Directors, to receive shares in Salamander, subject to the satisfaction of performance conditions and continued employment. At 31 December 2009, a total of 3,860,196 options over ordinary shares (representing 2.5% of the Company’s issued share capital of 152,781,255 ordinary shares at the year end) were outstanding and granted to eligible employees including the Executive Directors. The Remuneration Committee believes that the PSP provides an appropriate degree of flexibility in the way in which a share based incentive arrangement can be operated by the Group, while giving due consideration to best and market practice.

The maximum value of shares over which awards may be granted under the PSP to an Executive Director in any financial year will not normally exceed 100% of that individual’s base salary. In circumstances where the Committee considers it appropriate to do so, including the recruitment or retention of an employee, the Committee by exception may exceed this 100% limit at its discretion. Awards vest on or following the third anniversary of the date of grant once the Committee has determined the extent to which the applicable performance condition (see below) has been satisfied and provided the participant remains an employee with the Group. Awards, once vested, will normally remain capable of exercise for a period of twelve months.

Awards granted to all employees, including the Executive Directors, will vest based on Salamander’s relativetotalshareholderreturn(‘TSR’)performanceagainstanindustry-specificpeergroupofcompaniesdrawnfromtheconstituentsoftheFTSE250,FTSESmallCapandAIMlistedcompaniesintheOilandGasProducers sector with market capitalisations in excess of £100 million at or around the date of grant. The comparator groups for the 2008 and 2009 Awards are:

2009 Awards 2008 Awards

Afren Heritage Oil Afren Melrose ResourcesCairn Energy JKX Oil & Gas Antrim Energy OilexcoCircle Oil Melrose Resources Bowleven Providence ResourcesCoastal Energy Premier Oil Dana Petroleum Regal PetroleumDana Petroleum Providence Resources Faroe Petroleum ROCOilCompanyDragon Oil ROC Oil Company Geopark Holdings Serica EnergyEmerald Energy SOCO International Gulfsands Petroleum Sterling EnergyFaroe Petroleum Valiant Petroleum HardyOil&Gas Urals EnergyGeopark Holdings Venture Production Imperial Energy Valiant PetroleumGulfsands Petroleum JKXOil&Gas Venture PetroleumHardy Oil & Gas Max Petroleum

Remuneration report continued

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Performance share plan (‘PSP’) continued

The Award will not vest if Salamander’s relative TSR performance over the performance period ranks the Group below the median of the peer group. 30% of the Award will vest if the Company’s TSR performance ranks the Company at the median of the peer group, 100% of the Award will vest if the Company ranks in the upper quartile and there will be straight line vesting between 30% and 100% if the Company ranks between the median and the upper quartile of the peer group.

Further information regarding Share Based Payments is included in note 27 to the consolidated financial statements.

Benefits

Executive Directors receive a defined pension contribution (or salary supplement in lieu of pension contributions) equal to 15% of their salary, private medical cover and life assurance of up to four times salary.

Non-executive directors’ remuneration

TheCompany’spolicyonNon-executiveDirectors’remunerationistosetcompensationatalevelwhichissufficientlycompetitivetoattract,retainandmotivatehighqualitynon-executivesandtobeconsistentwithbestpracticestandards.Non-executiveDirectorsmaynotparticipateintheCompany’sPSPorpensionarrangements.EachoftheNon-executiveDirectorsisentitledtoreimbursementofreasonableexpensesincurred in the course of their duties and to directors’ and officers’ liability insurance cover.

TheBoardreviewsNon-executiveDirectors’(includingtheChairman’s)remunerationperiodicallytoensure itremainscompetitive.AdditionalfeesarepaidtothechairmenoftheAudit,RemunerationandNominationCommittees.SaveinrelationtoCharlesJamieson,thefeesofeachNon-executiveDirectorsetoutbelowcomprise a £30,000 annual base fee and an additional annual fee of £5,000 for chairing a Board Committee. Struan Robertson also receives an additional annual fee of £10,000 for his role as Senior Independent Non-executiveDirector.JohnCrowlereceivesanadditionalannualfeeof£5,000inrecognitionofhisresponsibility for advising, as required, on technical issues.

AllNon-executiveDirectorshavelettersofappointmentwiththeCompany.CharlesJamieson,StruanRobertson, John Crowle and Robert Cathery will continue in office for a term of three years from 27 June 2007. Michael Pavia and James Coleman will continue in office for a term of three years from 30 June 2008. All appointments are subject to satisfactory performance and the requirements of the Company’s Articles ofAssociationforone-thirdoftheDirectorstoretirebyrotationandofferthemselvesforre-appointment at each AGM.

Annual salary £’s Date of contract Notice period

Charles Jamieson 55,000 29/11/06 Three monthsStruan Robertson 45,000 29/11/06 OnemonthMichael Pavia 35,000 09/07/07 OnemonthJohn Crowle 35,000 29/11/06 OnemonthRobert Cathery 35,000 29/11/06 OnemonthJames Coleman 30,000 08/05/08 Onemonth

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Aggregate remuneration of directors (audited)

The total amount of Directors’ remuneration was as follows: 2009

£’s2008

£’s

Emoluments 1,686,664 2,171,151Amounts receivable under long term incentive schemes – –

Total Aggregate Remuneration 1,686,664 2,171,151

Remuneration of directors (audited)

The remuneration of Directors during 2009 was as follows: 2009 2008

Base salary £’s

Bonus £’s

Benefits £’s

Total £’s

Total £’s

Executive directorsJamesMenzies 315,000 173,250 51,975 540,225 576,884Mike Buck1 237,930 130,862 95,686 464,478 461,674NickCooper 262,500 144,375 43,322 450,197 480,799Andrew Cochran2 – – – – 424,172Non-executive directorsCharles Jamieson 55,000 – – 55,000 55,000Struan Robertson 45,000 – – 45,000 45,000Michael Pavia 35,000 – – 35,000 35,000John Crowle 35,000 – – 35,000 35,000Robert Cathery 35,000 – – 35,000 35,000Mike Sibson3 – – – – –James Coleman 26,764 – – 26,764 22,622

Total remuneration of directors 1,047,194 448,487 190,983 1,686,664 2,171,151

1 In line with the Group’s Policy, expatriate employees are paid a net salary by the Group in their host country based on their base salary and other factors associated withlivingabroad.ThesalaryandbenefitsreportedaboveforMikeBuckincludehisnetexpatriatesalarygrossed-upforincometaxpayableinhishostcountry, and other expatriate benefits. 2 Andrew Cochran resigned effective 31 December 2008. 3 At the time of Mike Sibson’s appointment the company entered into an agreement with 3i Investments PLC (who act as investment advisers to 3i QPE PLC) which providesforafeeof£30,000inclusiveofVAT.OnlyexpenseswerepaidtoMikeSibson.MikeSibsonresignedfromtheCompanyeffective15May2009.

Remuneration report continued

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Remuneration of directors (audited) continued

At 31 December 2009, the following Awards had been made to Executive Directors under the PSP: Award

DateGrant price

£’sOptions granted

NumberOptions lapsed

NumberEarliest exercise

DateLatest exercise

DateAt 1 January 09

NumberAt 31 December 09

Number

JamesMenzies 13/12/06 2.67 112,360 112,360 13/12/09 13/12/1005/10/07 2.395 125,261 – 05/10/10 05/10/1128/03/08 2.795 113,605 – 28/03/11 28/03/12 350,322 483,05227/03/09 1.29 244,186 – 27/03/12 27/03/13

Mike Buck 13/12/06 2.67 82,397 82,397 13/12/09 13/12/1005/10/07 2.395 91,858 – 05/10/10 05/10/11 383,550 486,58518/12/07 2.50 44,000 – 18/12/10 18/12/1128/03/08 2.795 166,285 – 28/03/11 28/03/1227/03/09 1.29 184,442 – 27/03/12 27/03/13

NickCooper 13/12/06 2.67 93,633 93,633 13/12/09 13/12/1005/10/07 2.395 104,384 – 05/10/10 05/10/1128/03/08 2.795 94,671 – 28/03/11 28/03/12 291,935 402,54327/03/09 1.29 203,488 – 27/03/12 27/03/13

1 Awards are in the form of a nominal cost option and no payment is required for the grant of an Award. However, participants who are granted nominal cost options under the PSP are required to pay the Company the nominal value of £0.10 for each share issued upon the exercise of the option. 2 The Committee considers the interests of shareholders when deciding on how the PSP is operated and ensures that no individual is granted excessive levels of Awards, taking into consideration the overall quantum and structure of that individual’s compensation package. In circumstances where the Committee considers it appropriate to do so, including the recruitment or retention of an employee or Executive Director, the Committee may exceed the normal 100% limit at its discretion. 3 TheaggregatevalueofAwardsgrantedin2008bytheCommitteetoMikeBuck(ChiefOperatingOfficer)wasequivalentto200%ofhisbaseannualsalary, reflecting his increased operational responsibilities and contribution to the Group’s performance. 4. ThehighestandlowestclosingpricesoftheCompany’ssharesduringtheyearwere£2.98and£1.00respectively.Themid-marketpriceoftheCompany’ssharesat 31 December 2009 was £2.97.

FurtherdetailsontheCompany’sPSPareset-outintheremunerationreport.

Directors’ interests in shares

Thefollowingsets-outtheinterestsofthepastandservingDirectorsandtheirimmediatefamiliesintheOrdinarySharesoftheCompanyduringthefinancialyear:

Beneficial shares Non-beneficial shares (PSPs)

At 1 January 09 Number

At December 09 Number

At 1 January 09 Number

At December 09 Number

Charles Jamieson 659,869 659,869 – –JamesMenzies 1,961,158 1,981,158 350,322 483,052Mike Buck 130,774 130,774 383,550 486,585NickCooper 1,755,236 1,755,236 291,935 402,543Struan Robertson 9,300 9,300 – –Michael Pavia 20,000 20,000 – – John Crowle 13,040 13,040 – – Robert Cathery1 659,869 659,869 – – Mike Sibson2 – – – – James Coleman 55,055 55,055 – –

1 RobertCatheryheld350,000OrdinarySharesat16March2010.TheotherDirectors’holdingsinOrdinarySharesat2010Marchwerethesameasreportedat 31 December 2009. 2 As at date of resignation.

Approval

The Directors’ Remuneration Report has been approved by the Board of Directors of the Company.

Signed on behalf of the Board

Robert Cathery Chairman of the Remuneration Committee

17 March 2010

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Statement of directors’ responsibilities

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company Financial Statements under IFRSs as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors: • properlyselectandapplyaccountingpolicies; • presentinformation,includingaccountingpolicies,inamannerthatprovidesrelevant,reliable, comparable and understandable information; • provideadditionaldisclosureswhencompliancewiththespecificrequirementsinIFRSsareinsufficientto enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and • makeanassessmentofthecompany’sabilitytocontinueasagoingconcern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

• thefinancialstatements,preparedinaccordancewithInternationalFinancialReportingStandardsgive a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

• thebusinessreview,whichisincorporatedintothedirectors’report,includesafairreviewofthe development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board

James Menzies Nick Cooper ChiefExecutiveOfficer ChiefFinancialOfficer

17 March 2010 17 March 2010

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Independent auditors’ report to the member of Salamander Energy PLC

We have audited the financial statements of Salamander Energy plc for the year ended 31 December 2009 which comprise the Consolidated Income Statement, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent Company Balance Sheets, the Consolidated and Parent Company Cash Flow Statements, and the related notes 1 to 29 and 1 to 10. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company’s members, as a body, in accordance with sections 495, 496 and497oftheCompaniesAct2006.Ourauditworkhasbeenundertakensothatwemightstatetothecompany’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. OurresponsibilityistoauditthefinancialstatementsinaccordancewithapplicablelawandInternationalStandards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements

In our opinion: • thefinancialstatementsgiveatrueandfairviewofthestateoftheGroup’sandoftheParentCompany’s affairs as at 31 December 2009 and of the Group’s loss for the year then ended; • thefinancialstatementshavebeenproperlypreparedinaccordancewithIFRSsasadoptedbythe European Union; and • thefinancialstatementshavebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion: • thepartoftheDirectors’RemunerationReporttobeauditedhasbeenproperlypreparedinaccordance with the Companies Act 2006; and • theinformationgivenintheDirectors’Reportforthefinancialyearforwhichthefinancialstatementsare prepared is consistent with the financial statements.

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Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequateaccountingrecordshavenotbeenkeptbytheParentCompany,orreturnsadequateforour audit have not been received from branches not visited by us; or • theParentCompanyfinancialstatementsandthepartoftheDirectors’RemunerationReporttobe audited are not in agreement with the accounting records and returns; or • certaindisclosuresofdirectors’remunerationspecifiedbylawarenotmade;or • wehavenotreceivedalltheinformationandexplanationswerequireforouraudit.

Under the Listing Rules we are required to review: • thedirectors’statementcontainedwithintheDirector’sReportinrelationtogoingconcern;and • thepartoftheCorporateGovernanceStatementrelatingtothecompany’scompliancewiththenine provisions of the June 2008 Combined Code specified for our review.

Bevan Whitehead (Senior Statutory Auditor) For and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditors London, UK

17 March 2010

Independent auditors’ report to the members of Salamander Energy PLC continued

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Statement of accounting policies and general information

General information on the Company and the Group

Salamander Energy PLC (‘the Company’) is a company incorporated in England and Wales on 13 September 2006 under the Companies Act 1985, which serves as a holding company for the Group. The address of the registered office is 5th Floor, 21 Palmer Street, London, SW1H 0AD. The nature of the Group’s operations and its principal activities are as an independent oil and gas exploration, development and production company focused on building a portfolio of assets in Southeast Asia.

Financial information The financial information is presented in US Dollars. Foreign operations are included in accordance with policies set out later in this section.

At the date of authorisation of this financial information, the following Standards and Interpretations which have not been applied in this financial information were in issue but are not yet effective:

IFRS 1 (amended)/IAS 27 (amended) Cost of an Investment in a Subsidiary, Jointly Controlled Entityor Associate

IFRS 1 (amended)* AdditionalExemptionsforFirst-timeAdopters

IFRS 2 (amended)* GroupCash-settledShare-basedPaymentTransactions

IFRS 3 (revised 2008) Business Combinations

IFRS 9* Financial Instruments

IAS 24 (revised 2009)* Related Party Disclosures

IAS 27 (revised 2008) Consolidated and Separate Financial Statements

IAS 28 (revised 2008) Investment in Associates

IAS 32 (amended)* Classification of Rights Issues

IFRIC 14 (amended) Prepayment of a Minimum Funding Requirement

IFRIC 17 DistributionsofNon-cashAssetstoOwners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19* Extinguishing Financial Liabilities with Equity Instruments

Improvements to IFRSs (2009)** * NotyetendorsedbyEU. ** Improvements with effective date 1 January 2010 have not yet been endorsed by EU.

The Directors anticipate the adoption of these Standards and Interpretations in future periods will not have a material impact on the financial position of the Group.

Accounting policies and presentation of financial information

Basis of preparation The financial statements have been prepared in accordance with IFRS and IFRIC interpretations adopted for use in the European Union and therefore comply with Article 4 of the EU, IAS Regulation.

The financial statements have been prepared under the historical cost convention except for the revaluation of certain financial instruments.

The financial statements have been prepared on a going concern basis as set out in the Directors’ Report.

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Basis of preparation continued The separate financial statements of the Parent Company are presented as required by the Companies Act 2006. As permitted by the Act, the separate financial statements have been prepared in accordance with IFRS. The financial statements have been prepared on the historical cost basis. The principal accounting policies are the same as those set out in the Accounting Policies in this section. As a consolidated income statement is included, a separate income statement for the Parent Company has not been included in accordance with section 408 of the Companies Act 2006. The profit for the year for the Parent Company is disclosed in the Statement of Changes in Equity to the Company financial statements.

Adoption of new accounting standards Inthecurrentfinancialyear,theGrouphasadoptedInternationalFinancialReportingStandard8‘OperatingSegments’, International Accounting Standard 1 ‘Presentation of Financial Statements’ (revised 2007) and International Accounting Standard 23 ‘Borrowing Costs’ (March 2007).

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group. The adoption of IFRS 8 has had no effect on the identified operating segments for the Group which are also the reportable segments.

IAS 1 (revised) requires the presentation of a statement of changes in equity as a primary statement, separate from the income statement and statement of other comprehensive income. As a result, a consolidated statement of changes in equity has been included in the primary statements, showing changes in each component of equity for each period presented. As the Group has no other losses in the periods presented, no statement of other comprehensive income is included.

IAS 23 (March 2007) had no impact on the Group, as the Group already capitalises borrowing costs directly attributable to the construction of qualifying assets under its existing accounting policies.

Basis of consolidation The consolidated financial statements consist of the financial statements of the Company and all its subsidiaryundertakings.Allintra-grouptransactions,balances,incomeandexpensesareeliminated on consolidation.

Revenues and the results of subsidiary undertakings are consolidated in the consolidated income statement from the dates on which control over the operating and financial decisions is obtained.

Where necessary, adjustments are made to the results of Subsidiary and Joint Venture Entities to bring the Accounting Policies into line to those used by the Group.

Commercial reserves Commercial reserves are proved and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially viable. There should be a 50% statistical probability that the actual quantity of recoverable reserves will be more than the amount estimated as proven and probable reserves and a 50% statistical probability that it will be less.

Joint ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control.

Where a Group Company undertakes its activities under joint venture arrangements directly, the Group’s shareofjointly-controlledassetsandanyliabilitiesincurredjointlywithotherventures’arerecognisedin the financial statements of the relevant company and classified according to their nature.

Statement of accounting policies and general information continued

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Joint ventures continuedLiabilitiesandexpensesincurreddirectlyinrespectofinterestsinjointly-controlledassetsareaccountedforonanaccrualsbasis.IncomefromthesaleoruseoftheGroup’sshareoftheoutputofjointly-controlledassets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transaction will flow to/from the Group and their amount can be measured reliably.

Joint venture arrangements which involve the establishment of a separate entity in which each venturer has aninterestarereferredtoasjointly-controlledentities.TheGroupreportsitsinterestinjointly-controlledentities using proportionate consolidation, that is, the Group’s share of the assets, liabilities, income and expensesofjointly-controlledentitiesarecombinedwiththeequivalentitemsinconsolidatedfinancialstatementsonaline-by-linebasis.

WheretheGrouptransactswithitsjointly-controlledentities,unrealisedprofitsandlossesareeliminatedtothe extent of the Group’s interest in the joint venture.

Acquisitions OnanacquisitionthatqualifiesasabusinesscombinationinaccordancewithIFRS3–BusinessCombination, the assets and liabilities of a subsidiary are measured at their fair value as at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill which is treated as an intangible asset. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired is credited to the Income Statement in the period of acquisition.

If the Group acquires a group of assets or equity in a company that does not constitute a business combination in accordance with IFRS 3 – Business Combination, the cost of the acquired group of assets or equity is allocated to the individual identifiable assets acquired based on their relative fair value.

Revenue Revenue represents the sales value, net of VAT and equivalent taxes, and overriding royalties, of the Group’s share of liftings in the period together with tariff income.

Revenuereceivedundertake-or-paysalescontractsinrespectofundeliveredvolumesisaccountedforasdeferred income. Revenue is recognised when goods are delivered and title has passed.

Interest revenue Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Derivative financial instruments and hedge accounting The Group uses derivative financial instruments to manage its exposure to movements in oil and gas prices interest rates and foreign exchange. The Group does not use derivatives for speculative purposes.

Derivative financial instruments are stated at fair value. The purpose for which a derivative is used is established at inception. To qualify for hedge accounting, the derivative must be highly effective in achieving its objective and this effectiveness must be documented at inception and throughout the period of the instrument (designation).

Gains or losses on derivatives that do not qualify for hedge accounting treatment (either from inception or during the life of the instrument) are taken directly to the Income Statement in the period. These include economic hedges that might qualify as accounting hedges, but were not designated as such at inception.

The estimated fair value of these derivatives is included in other creditors or other debtors in the Balance Sheet and the related changes in the fair value are included in finance costs in the Income Statement. Upfront contract fees and realised gains and losses upon settlement are included within revenue in the Income Statement over the hedged period.

During 2009 and 2008 there were no derivatives that were designated as hedges for accounting purposes.

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Cost of sales Underlift and overlift Lifting or offtake arrangements for oil and gas produced in certain of the Group’s jointly owned operations are such that each participant may not receive and sell its precise share of the overall production in each period. The resulting imbalance between cumulative entitlement and cumulative production is ‘underlift’ or ‘overlift’. Underlift and overlift are valued at market value and included within debtors and creditors respectively. Movements during an accounting period are adjusted through Cost of Sales such that Gross Profit is recognised on an entitlements basis.

Share based payment The Company has applied the requirements of IFRS 2 – Share Based Payment.

The Group makes equity settled Share Based Payment to certain employees. Equity settled share based schemes are measured at fair value at the date of grant.

The fair value determined at the grant of the equity settled Share Based Payment is expensed on a straight line basis over the vesting period, based on an estimate of shares that will eventually vest. The expenses so recognised are simultaneously added back as an adjustment through equity.

Operating leases RentalsunderoperatingleasesarechargedtotheIncomeStatementonastraight-linebasisoverthetermof the lease.

Foreign currencies TheUSDollaristhepresentationcurrencyoftheGroup.Onconsolidation,financialstatementsofforeigncurrency denominated subsidiaries are translated into US Dollars whereby the results of the overseas operations are translated at the average rate of exchange for the period and their balance sheets at rates of exchange ruling at the balance sheet date. Currency translation adjustments arising on the restatement of opening net assets of foreign subsidiaries, together with differences between the subsidiaries’ results translated at average rates versus closing rates, are taken directly to reserves. All resulting exchange differencesareclassifiedasequityuntildisposalofthesubsidiary.Ondisposalthecumulativeamountsofthe exchange differences are recognised as income or expense.

Transactions in foreign currencies in individual subsidiaries are recorded at the rates of exchange ruling at the transaction dates. Monetary assets and liabilities are translated into US Dollars at the exchange rates ruling at the balance sheet date, with a corresponding charge or credit to the Income Statement.

Finance costs and debt Finance costs of debt are allocated to periods over the term of the related debt at a constant rate on the carrying amount. Debt is shown on the balance sheet net of arrangement fees and issue costs, and amortised through to the income statement as finance costs over the term of the debt.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Taxation Current and deferred tax, including UK corporation tax and overseas corporation tax, are provided at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred corporation tax is recognised on all temporary differences that have originated but not reversed at the Balance Sheet date where transactions or events that result in an obligation to pay more, or right to pay less tax in the future have occurred at the balance sheet date. Deferred tax assets are recognised only to

Statement of accounting policies and general information continued

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Taxation continuedthe extent that it is considered more likely than not that there will be suitable taxable profits from which the underlyingtemporarydifferencescanbededucted.Deferredtaxismeasuredonanon-discountedbasis.

Deferred tax is provided on temporary differences arising on acquisitions that are categorised as business combinations. Deferred tax is recognised at acquisition as part of the assessment of the fair value of assets and liabilities acquired. Any deferred tax is charged or credited in the income statement as the underlying temporary difference is reversed.

Exploration and evaluation assets The Group adopts the ‘successful efforts’ method of accounting for exploration and evaluation costs. All licence acquisition, exploration and evaluation costs are initially capitalised as intangible fixed assets in cost centres by well, field or exploration area, as appropriate. Directly attributable administration costs are capitalisedinsofarastheyrelatetospecificexplorationanddevelopmentactivities.Pre-licencecostsareexpensed in the period they are incurred.

If prospects are deemed to be impaired (‘unsuccessful’) on completion of an evaluation, the associated capitalised costs are charged to the Income Statement. If the field is determined to be commercially viable, the attributable costs are transferred to Property, Plant and Equipment in a single field cost centre.

Property, plant and equipment Property, plant and equipment is stated in the balance sheet at cost less accumulated amortisation and depreciation.

Oil and gas properties Oilandgaspropertiesexpenditurescarriedwithineachfieldareamortisedfromthecommencementofproduction, on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, onafield-by-fieldbasis.Costsusedintheunitofproductioncalculationcomprisethenetbookvalueofcapitalised costs plus the estimated future field development costs. The production and reserve estimates used in the calculation are on an entitlements basis. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively.

Where there has been a change in economic conditions (including commodity assumptions and cost of capital) that indicate a possible impairment of a field previously determined to be commercially viable, the recoverability of the net book value relating to that field is assessed by comparison with the estimated discounted future cash flows based on management’s expectations of future oil and gas prices and future costs. Any impairment identified is charged to the Income Statement as additional depreciation, depletion and amortisation. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that would have been charged since the impairment.

Provision for decommissioning is recognised in full when the related facilities are installed, where the Group has a legal or constructive obligation to decommission. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related property, plant and equipment. The amount recognised is the estimated cost of decommissioning, discounted to its net present value and is reassessed each year in accordance with local conditions and requirements. Changes in the estimated timing of decommissioning or decommissioning cost estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment. The unwinding of the discount on the decommissioning provision is included as Finance Costs.

Other fixed assets Property, plant and equipment other than oil and gas properties, is depreciated at rates calculated to write-offthecostlessestimatedresidualvalueofeachassetonastraight-linebasisoveritsexpectedusefuleconomic life of between three and five years.

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Investments InvestmentsinsubsidiariesandjointventureentitiesheldbytheCompanyasnon-currentassetsarestatedat cost less any provision for impairment.

Share issue expenses and share premium account Costs of share issues are written off against the premium arising on the issue of share capital.

Inventories Inventories of oil and gas are stated at their net realisable values. Inventories of materials are stated at the lower of cost or net realisable value.

Financial Instruments Financial assets and financial liabilities are recognised in the group’s balance sheet when the group becomes a party to the contractual provisions of the instrument.

Financial assets Investments are recognised and derecognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value.

Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applyingtheeffectiveinterestrate,exceptforshort-termreceivableswhentherecognitionofinterestwouldbe immaterial.

Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis for all debt instruments.

Financial assets at fair value through profit and loss (‘FVTPL’) Financial assets are classified as financial assets at fair value through profit or loss where the Group acquires the financial asset principally for the purpose of selling in the near term, the financial asset is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short term profit taking as well as all derivatives that are not designated as effective hedging instruments. Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.

Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. All impairment losses are taken to the Income Statement.

Trade receivables are assessed for impairment based on the number of days outstanding on individual invoices. Any trade receivable that is deemed uncollectible is immediately written off to the income statement, any subsequent recoveries are also taken directly to the income statement upon receipt of cash collected.

Statement of accounting policies and general information continued

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Cash and cash equivalents Cashandcashequivalentscomprisecashonhandanddemanddeposits,andothershort-termhighlyliquidinvestments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

Financial liabilities Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities Otherfinancialliabilities,includingborrowings,areinitiallymeasuredatfairvalue,netoftransactioncosts.Otherfinancialliabilitiesaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Critical judgements and accounting estimates In the process of applying the Group’s accounting policies described above, management has made judgements and estimates that may have a significant effect on the amounts recognised in the financial statements.

Management is required to assess the level of the Group’s commercial reserves together with the future expenditures to access those reserves, which are utilised in determining the amortisation and depreciation charge for the period and assessing whether any impairment charge is required. The Group employs independent reserves specialists who periodically report on the Group’s level of commercial reserves by evaluating the estimates of Salamanders’ in house reserves specialists and where necessary referencing geological, geophysical and engineering data together with reports, presentation and financial information pertaining to the contractual and fiscal terms applicable to the Group’s assets. In addition the Group undertakes its own assessment of commercial reserves and related future capital expenditure by reference to the same datasets using its own internal expertise. The estimates adopted by the Group may differ from the independent reserves specialists’ estimates where management considers that adjustments are appropriate in the circumstances.

Management is required to assess intangible fixed assets for impairment with reference to the indicators providedinIFRS6–ExplorationforEvaluationofMineralResources.Note12totheconsolidatedfinancialstatements discloses the carrying value of such assets.

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Critical judgements and accounting estimates continuedManagement is required to determine the fair value of the assets and liabilities acquired under a business combination including the cost of the acquisition and allocate a fair value cost to the underlying assets acquired.

Management is required to review and potentially test property plant and equipment for impairmentusuallybyestimatingapre-taxvalueinuseforeachassetheldandcomparingthatvalue to the book value of the asset being carried in the balance sheet.

Management,inregardtotheBNPPledreservesbasedlendingfacility,isrequiredtoestimatethe amount of borrowings that are classified as a due within one year and the amount that is classified as due after one year, as the calculations are based on uncertain future assumptions such as oil price and other economic factors.

Management has determined that for certain assets the Group does not need to make provisions for decommissioning because: (i) the contracts covering the Group’s operations do not provide for the Group to decommission its oil and gas properties; and (ii) the fields in question are expected to continue producing for substantial periods after the contracts expire and therefore the costs will be incurred by other parties unless the Group agrees to extend these contracts.

Management is required to make assumptions in respect of the inputs used to calculate the fair values of share based payment arrangements. Details of these assumptions and the resultant charge to the income statement are provided in note 27 to the consolidated financial statements.

Management is required to determine the fair value at the balance sheet of derivative contracts entered into.

Management is required to assess the carrying value of investments in subsidiaries in the Parent Company balance sheet for impairment by reference to the recoverable amount. This requires an estimate of amounts recoverable from oil and gas assets within the underlying subsidiaries, which is inherently uncertain.

Statement of accounting policies and general information continued

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Note

2009 $’000s

2008 $’000s

Continuing operationsRevenue 2 157,148 100,753Cost of sales

Impairment – (55,000)Othercostofsales (123,749 ) (70,552)

Total cost of sales 3 (123,749) (125,552)

Gross profit/(loss) 33,399 (24,799)Exploration expenses:

Exploration costs written off (5,860) (39,065)Pre-licenceexplorationexpenses (5,510) (7,981)Profit on disposal of assets – 807

Total exploration expenses (11,370) (46,239)Administration expenses (8,850) (10,859)

Operating profit/(loss) 6 13,179 (81,897)Interest revenue 7 531 5,814Finance costs 8 (4,411) (2,953)Otherfinancial(losses)/gains 9 (12,258) 3,564

Loss before tax (2,959) (75,472)Taxation:Current tax 10 (23,895) (14,651)Deferred tax: 17 13,323 23,628Total taxation 10 (10,572) 8,977

Loss for the year (and total comprehensive loss) (13,531) (66,495)Note $’s $’s

Loss per ordinary shareBasic and diluted 11 (0.09) (0.53)

Consolidated income statement Fortheyear-ended31December2009

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Share capital $’000s

Share premium $’000s

Otherreserves $’000s

Profit and Loss $’000s

Total $’000s

At 1 January 2008 17,271 202,345 67,996 (4,450) 283,162Shares issuedOrdinary shares issued in

business combination 6,172 – 178,064 – 184,236Ordinary shares issued for cash 6,401 185,618 – – 192,019Share issue costs – (9,278) (3,574) – (12,852)Share based payments – – 2,033 – 2,033Loss for the year – – – (66,495) (66,495)

At 31 December 2008 29,844 378,685 244,519 (70,945) 582,103Share based payments – – 3,434 – 3,434Loss for the year – – – (13,531) (13,531)

At 31 December 2009 29,844 378,685 247,953 (84,476) 572,006

Other reserves

Otherreservescomprise: 2009

$’000s2008

$’000s

Share based payment reserve 6,222 2,788Merger reserve 241,731 241,731

Total other reserves 247,953 244,519

Consolidated statement of changes in equity Fortheyear-ended31December2009

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Consolidated balance sheet 31 December 2009

Note

2009 $’000s

2008 $’000s

AssetsNon-current assetsIntangible exploration and evaluation assets 12 243,579 214,814Property, plant and equipment 13 575,945 552,138Otherreceivables:Restricted bank deposits 14 11,398 12,084Other 5,727 –Deferred tax assets 17 2,271 387

Total non-current assets 838,920 779,423Current assetsAssets held for saleInventories 18 24,326 7,894Trade and other receivables 19 50,978 43,775Financial assets – hedges – 5,708Cash and cash equivalents 20 47,753 103,012

Total current assets 123,057 160,389

Total assets 961,977 939,812

LiabilitiesNon-current liabilitiesBorrowings 21 136,306 157,016Provisions 22 7,400 4,713Deferred tax liability 17 136,450 147,889

Total non-current liabilities 280,156 309,618Current liabilitiesTrade and other payables 23 49,635 41,829Financial liabilities – hedges 10,314 – Borrowings due within one year 21 38,287 – Current tax payable 11,579 6,262

Total current liabilities 109,815 48,091

Total liabilities 389,971 357,709

Net assets 572,006 582,103

EquityShare capital 26 29,844 29,844Share premium 378,685 378,685Otherreserves 247,953 244,519Retained loss (84,476) (70,945)

Total equity 572,006 582,103

Approved by and authorised for issue, and signed on behalf of, the Board of Directors

Nick Cooper ChiefFinancialOfficer

17 March 2010 CompanyNumber5934263

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Consolidated cash flow statement Fortheyear-ended31December2009

2009 $’000s

2008 $’000s

Cash flow from operating activitiesLoss before tax (2,959) (75,472)Adjustments for:Profit on disposal of assets – (807)– Exploration write offs 5,860 39,065– Amortisation and depreciation 62,406 83,104– Interest revenue (531) (5,814)– Finance costs 4,411 2,953– Otherfinancialgainslosses/(gains) 12,258 (3,564)– Share based payment 2,233 939

Operating cash flow prior to working capital 83,678 40,404Increase in inventories (16,432) (176)Decrease in trade and other receivables (2,972) 1,326Increase/(decrease) in trade and other payables 7,839 (128)

Cash generated from operations 72,113 41,426Payment of tax (18,555) (15,916)

Net cash inflows from operating activities 53,558 25,510

Cash flow from investing activitiesAcquisition of subsidiary – (32,676)Expenditures on intangible assets (32,105) (133,110)Purchase of property, plant and equipment (88,194) (113,315)Disposal of assets – 1,500Loan advances – (32,350)(Payment)/Repayment of other receivables 686 5,905Interest received 531 3,545

Net cash used in investing activities (119,082) (300,501)

Cash flow from financing activitiesInterest paid (5,851) (5,848)Otherfinancialpayments (1,063 ) (3,401)Cash flows in respect of long term borrowings 16,853 89,670Netproceedsfromtheissueofshares – 192,019Costs of issuing new shares – (12,851)

Net cash from financing activities 9,939 259,589

Net decrease in cash and cash equivalents (55,585) (15,402)Cash and cash equivalents at the beginning of the year 103,012 116,881Effect of foreign exchange rate change 326 1,533

Cash and cash equivalents at the end of the year 47,753 103,012

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Notes to the consolidated financial statements Fortheyear-ended31December2009

1 Segmental analysis

AdoptionofIFRS8,OperatingSegments

TheGrouphasadoptedIFRS8OperatingSegmentswitheffectfrom1January2009.IFRS8requiresoperating segments to be identified on the basis of internal reports about components of the Group that areregularlyreviewedbytheChiefOperatingOfficertoallocateresourcestothesegmentsandtoassesstheir performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach, with the Group’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments.

The Group’s reportable and geographical segments which have not changed as a result of the adoption ofIFRS8,areThailand,Indonesia,thePhilippines,LaoPDR,VietnamandOther.

OtheractivitiesincludeitscorporatecentreintheUK.

Information regarding the Group’s operating segments is reported below. Amounts reported for the prior year have been restated to conform to the requirements of IFRS 8.

Segment revenues and results

The following is an analysis of the Group’s revenue and assets by reportable segment: 2009

Thailand £’000s

Indonesia $’000s

Philippines $’000s

Lao PDR $’000s

Vietnam $’000s

Other $’000s

Total $’000s

Revenue (external) 109,476 58,385 – – – (10,713) 157,148Operating profit/(loss) 44,615 (7,919) (22) 136 (17) (23,614) 13,179Interest revenue 531 531Finance cost (4,411) (4,411)Otherfinanciallosses (12,258) (12,258)

Profit/(loss) before tax (2,959)Tax (10,572) (10,572)

Profit/(loss) for the year (13,531)

Non-currentassets 331,263 443,209 6,239 8,262 28,961 20,986 838,920Total assets 375,295 466,371 6,820 8,816 29,331 75,344 961,977Depreciation and

amortisation 36,076 26,104 – 8 – 218 62,406Additions tonon-currentassets 43,895 69,229 1,193 (2,095) 6,821 1,795 120,838

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Notes to the consolidated financial statements continued

Segment revenues and results continued

2008Thailand

£’000sIndonesia

$’000sPhilippines

$’000sLao PDR

$’000sVietnam

$’000sOther

$’000sTotal

$’000s

Revenue (external) 40,452 60,301 – – – – 100,753Operating loss (40,496) (887) (22,748) (72) (10) (17,684) (81,897)Interest revenue 5,814 5,814Finance cost (2,953) (2,953)Otherfinancialgains 3,564 3,564

Loss before tax (75,472)Tax 8,977 8,977

Loss for the year (66,495)

Non-currentassets 329,306 400,195 5,046 10,366 22,039 12,470 779,423Total assets 357,913 464,345 6,042 10,802 22,879 77,830 939,812Depreciation and

amortisation 10,489 17,236 – – – 379 28,104Additions tonon-currentassets 336,813 331,846 18,869 8,584 19,535 (940) 714,707

Impairment 55,000 – – – – – 55,000

The accounting policies used for the reportable segments are the same as the Group’s accounting policies.

For the purposes of monitoring segment performance and allocating resources between segments, the Group’sChiefOperatingOfficermonitorsthetangible,intangibleandfinancialassetsattributabletoeachsegment. All assets are allocated to reportable segments with the exception of the segments financial assets (except for trade and other receivables) (see note 19) and tax assets.

Information about major customers Included in revenues arising from Thailand are revenues of approximately $92,511,000 (2008: $15,547,000) which arose from sales to the Group’s largest customer.

2 Revenue

Revenue, excluding interest revenue (see note 7), comprises: 2009

$’000s2008

$’000s

Sales of oil 134,795 62,218Sales of gas 33,066 38,535Oilandgasderivatives:Hedging fees (3,401) – Realised settlement losses (7,312) –

Total revenue (excluding interest revenue) 157,148 100,753

Total revenue in accordance with IAS 18 includes interest revenue and amounted to $157,679,000 (2008: $106,567,000).

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3 Cost of sales

Cost of sales comprises: 2009

$’000s2008

$’000s

Operatingcosts 69,448 37,179Royalty Payable 9,889 4,254Amortisation of oil and gas properties 61,957 27,725Impairment – 55,000Overlift/(underlift) 4,582 (1,303)Movement in inventories of oil (22,127) 2,697

Total cost of sales 123,749 125,552

Royalty of $7,768,000 (2008: $3,113,000) was payable in respect of certain Thailand assets held by the Group in accordance with the applicable Thailand tax regulations Royalty was deductible as an advance payment of income tax to the extent income tax was payable (see note 10).

4 Employee numbers and costs

The monthly average number of employees (including Executive Directors and consultants) employed and charged to operations was as follows:

2009 Number

2008 Number

Professional 65 44Administration 27 17

Total employee numbers 92 61

The aggregate remuneration was as follows: 2009

$’000s2008

$’000s

Wages and salaries 15,086 17,530Share based payment 3,434 2,033Pension 611 573Social security 869 784

Total employee costs 20,000 20,920

A proportion of total employee costs were directly attributable to capital and other projects and were capitalised or expensed consistent with the project expenditures as follows:

2009 $’000s

2008 $’000s

Non-currentassets 7,267 12,059Operatingcosts 7,600 2,800Administrative 5,133 6,061

Total employee costs 20,000 20,920

5 Operating lease arrangements2009

$’000s2008

$’000s

FPSOlease 10,950 3,810Officeleases 2,152 1,312

Minimum lease payments under operating leasesRecognised in income statement for the year 13,102 5,122

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Notes to the consolidated financial statements continued

5 Operating lease arrangements continued

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments undernon-cancellableoperatingleases,whichfalldueasfollows:

2009 2008 FPSO $’000s

Offices $’000s

FPSO $’000s

Offices $’000s

Within one year 10,950 1,553 10,950 2,553In second year 10,950 852 10,950 1,378In the third to fifth year 18,090 273 29,040 723

Total outstanding operating lease commitments 39,990 2,679 50,940 4,654

6 Operating profit/(loss)

Operatingprofit/(loss)isstatedaftercharging: 2009

$’000s2008

$’000s

Employee costs expensed 12,733 8,861Amortisation and depreciation of property, plant and equipment 61,957 83,104Auditors’ remuneration (see below)

Audit services 486 388Non-auditservices 997 4,316

Netforeignexchangegains/(losses) 318 (1,533)MovementininventoriesofOil (22,127) 2,697Operatingleasearrangements(seenote5)FPSOlease 10,950 3,810Officelease 2,152 1,312

Auditors’ remuneration The following is an analysis of gross fees paid to the Company’s Auditors, Deloitte LLP:

2009 $’000s

2008 $’000s

Audit servicesFees payable to the Company’s Auditors for the auditof the Company’s annual accounts 323 256The audit of the Company’s subsidiaries pursuant to legislation 163 132

Total audit fees 486 388

Non-audit servicesOtherservicesprovidedpursuanttolegislation 98 87Corporate finance services (reporting accountant services) – 3,898Tax services 899 311Otherservices – 20

Total non-audit services 997 4,316

Total 1,483 4,704

FeespayabletoDeloitteLLPandtheirassociatesfornon-auditservicestotheCompanyarenotrequiredto be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.

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7 Interest revenue 2009

$’000s2008

$’000s

Loans:Amortisation of deferred fees – 2,456Loan interest revenue 269 746

269 3,202OtherBankInterestRevenue 262 2,612

Total interest revenue 531 5,814

8 Finance costs 2009

$’000s2008

$’000s

Long term borrowings:Amortisation of capitalised arrangement fees 724 2,448Interest expense 5,851 5,846Unwinding of discount 806 114Less interest capitalised (2,970) (5,457)

Total finance costs on long term borrowings 4,411 2,951OtherBankInterestExpense – 2

Total finance costs 4,411 2,953

9 Other financial gains and losses 2009

$’000s2008

$’000s

(Loss)/profit relating to oil price hedges (11,513) 2,307Loss relating to interest rate hedges (1,108) –Profit/(loss) on investments 45 (276)Currency exchange gain 318 1,533

Total other financial (losses)/gains (12,258) 3,564

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Notes to the consolidated financial statements continued

10 Taxation

The tax charge for the year of $10,572,000 (2008: credit of $8,977,000) comprised corporate income tax of $23,895,000 (2008: $14,651,000) and a net deferred tax credit of $13,323,000 (2008: $23,628,000) arising on the Group’s Thailand and Indonesia activities.

Reconciliation of Tax to Loss The tax credit for the year can be reconciled to the loss before tax per the income statement as follows:

2009 $’000s

2008 $’000s

Loss before tax (2,959) (75,472)Applicable rate of tax 28% 28.5%

Tax at the applicable rate of tax (829) (21,509)Tax effect of:

Items which are not deductible for tax (3,839) 19,059UK losses not recognised 4,687 306Royalty tax credit (1,188) (1,774)Different foreign tax rates 4,063 (5,059)

Total tax charge/(credit) 10,572 (8,977)

The applicable rate of tax is assumed as 28% being the UK corporation tax rate.

Items not deductible for tax primarily relates to depreciation in respect of the Group’s assets in Thailand and Indonesia.

11 Loss per ordinary share

The calculation of the basic and diluted loss per share on the following data:2009

$’000s2008

$’000s

Loss for the purpose of basic loss per share being the net loss attributable to being the net loss attributable to equity holders of the parent (13,351) (66,495)Effect of dilutive potential ordinary shares – –

Loss for the purpose of diluted loss per share (13,531) (66,495)

2009 Shares’000s

2008 Shares’000s

Weighted average number of ordinary shares for the purposeof basic earnings loss per share 152,781 126,268Effect of dilutive potential ordinary shares:1 – –

Weighted average number of ordinary shares for the purposeof diluted earnings loss per share 152,781 126,268

2009 $’s

2008 $’s

Loss per ordinary shareBasic and diluted (0.09) (0.53)

1 As there is a loss for the year ended 31 December 2009, there is no difference between the basic and diluted earnings per share. Potentially dilutive ordinary shares for the year ended 31 December 2009 were 4,490,963 (2008: 2,489,785)

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12 Intangible exploration and evaluation assets

2009 $’000s

2008 $’000s

Exploration and evaluationAt 1 January 214,814 54,523Additions 34,625 206,770Transfers to property, plant and equipment – (7,414)Costs written off (5,860) (39,065)

At 31 December 243,579 214,814

13 Property, plant and equipment Oil and gas properties Otherfixedassets Total net book

value $’000s

Cost $’000s

Amortisation $’000s

Total $’000s

Cost $’000s

Depreciation $’000s

Total $’000s

1 January 2008Additions for the period 141,725 (22,998) 118,727 1,756 (592) 1,164 119,891Transfers from 507,830 – 507,830 107 – 107 507,937intangible assets 7,414 – 7,414 – – – 7,414Charge for the period – (82,725) (82,725) – (379) (379) (83,104)

31 December 2008 656,969 (105,723) 551,246 1,863 (971) 892 552,138Additions for the period 85,793 – 85,793 420 – 420 86,213Charge for the period – (61,957) (61,957) – (449) (449) (62,406)

31 December 2009 742,762 (167,680) 575,082 2,283 (1,420) 863 575,945

Additions to oil and gas properties include capitalised interest of $2,970,000 (2008: $5,457,000) charged at an average rate of 5.4% (2008: 4.7%). Included in the net book amount at 31 December 2009 in oil and gas propertiesareassetsamountingto$567,580,000(2008:$543,832,000)pledgedagainsttheGroup’sBNPPledsevenyearsreserve-basedlendingfacility.

14 Other receivables – restricted bank deposits

Restricted bank deposits of $11,398,000 (2008: $12,084,000) represent deposits held as security against bank guarantees issued by the bank on behalf of the Group.

15 Commitments and guarantees

Bank guarantees: At 31 December 2009, there were outstanding bank guarantees issued by banks on behalf of the Group, amounting to $21,341,000 (2008: $26,993,000).

Capital commitments: The Group’s outstanding financial capital commitments represent the minimum agreed amounts the Group will expend completing its obligated work programmes of carrying out geophysical and geological studies, and to drill exploration and appraisal wells. At 31 December 2009, the Group’s anticipates it will discharge its minimum financial capital commitments as follows:

2010 $’000s

2011 $’000s

2012 $’000s

Future capital commitments 38,000 30,000 2,000

TheabovecommitmentsareshownnetofthefarmouttoOrigin.

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Notes to the consolidated financial statements continued

16 Group companies

The principal Subsidiaries and Jointly Controlled Entities of the Group, the activity of which relates to oil and gas exploration, development and production, at the Balance Sheet date were as follows:

Subsidiaries: Company

Country of operation

Country of incorporation

Percentage holding

Salamander Energy Group Limited1 United Kingdom, Thailand and Vietnam United Kingdom 100.00%

Salamander Energy (E&P) Limited United Kingdom and Thailand United Kingdom 100.00%

PHT Partners LP United States of America United States of America 100.00%

Salamander Energy (Holdco) Limited United Kingdom United Kingdom 100.00%

Salamander Energy Singapore Pte Ltd Singapore Singapore 100.00%

Salamander Energy (SE Asia) Limited United Kingdom United Kingdom 100.00%

Salamander Energy (Bontang) Company Pte Ltd Indonesia Singapore 100.00%

Salamander Energy (Java & Sumatra) BV TheNetherlands TheNetherlands 100.00%

Salamander Energy (Java) BV Indonesia TheNetherlands 100.00%

Salamander Energy (Sumatra) BV Indonesia TheNetherlands 100.00%

Salamander Energy (Philippines) Limited The Philippines United Kingdom 100.00%

Salamander Energy (Indonesia) Limited Indonesia United Kingdom 100.00%

Salamander Energy (Vietnam) Limited Vietnam United Kingdom 100.00%

Salamander Energy (Simenggaris) Limited Indonesia United Kingdom 100.00%

Salamander Energy (Bengara) limited Indonesia United Kingdom 100.00%

Salamander Energy (Lao) Company Limited Lao PDR Lao PDR 100.00%

Salamander Energy (Canada) Limited Canada Canada 100.00%

SalamanderEnergyOil&GasInc Canada Canada 100.00%

SalamanderEnergyOil&GasUSAInc United States of America United States of America 100.00%

SalamanderEnergyOil&GasCrystalInc United States of America United States of America 100.00%

Salamander International Holdings Limited British Virgin Islands British Virgin Islands 100.00%

Salamander Energy (Asahan) Limited Indonesia British Virgin Islands 100.00%

Salamander Energy (Seruway) Limited Indonesia British Virgin Islands 100.00%

Salamander Bualuang & Kambuna Holdings Limited British Virgin Islands British Virgin Islands 100.00%

Salamander Energy (Bualuang) Limited British Virgin Islands British Virgin Islands 100.00%

Salamander Energy (Glagah Kambuna) Limited Indonesia British Virgin Islands 100.00%

Salamander Energy (Kutai) Limited Indonesia United Kingdom 100.00%

Salamander Energy (S.E. Sangatta) Limited Indonesia United Kingdom 100.00%

SalamanderEnergy(NorthSumatra)Limited Indonesia British Virgin Islands 100.00%

Salamander Energy (Bualuang Holdings) Limited United Kingdom United Kingdom 100.00%

Salamander Energy (Glagah Kambuna Holdings) Limited United Kingdom United Kingdom 100.00%

1 Salamander Energy Group Limited is the only direct subsidiary of the Company.

Jointly controlled entities: Company

Country of operation

Country of incorporation

Percentage holding

APICOLLC Thailand United States of America 27.18%

APICO(Khorat)HoldingsLLC Thailand United States of America 27.18%

APICO(Khorat)Limited Thailand Thailand 27.18%

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16 Group companies continued

The following amounts are included in the financial statements relating to proportionately consolidated Jointly Controlled Entities of the Group:

2009 $’000s

2008 $’000s

Total revenue 16,965 24,905Total expenses 11,347 14,084Non-currentassets 57,506 60,956Current assets 6,511 5,842Non-currentliabilities 1,861 1,463Current liabilities 6,489 7,956

17 Deferred tax assets and liabilities

Netdeferredtaxliabilitieswere: Accelerated tax amortisation

2009 $’000s

2008 $’000s

At 1 January 147,502 1,262Acquisition of subsidiaries – 169,868Credited to income statement (13,323) (23,628)

At 31 December 134,179 147,502

Deferred tax assets and liabilities included in the balance sheet were as follows: 2009

$’000s2008

$’000s

Deferred tax assets 2,271 387Deferred tax liabilities (136,450) (147,889)

Netdeferredtaxliabilities (134,179) (147,502)

At 31 December 2009, the Group had not recognised a potential deferred tax asset of $7,972,000 (2008: $2,085,000) relating to tax losses as there was insufficient evidence of future taxable profits in the relevant jurisdictions. These losses can be carried forward indefinitely.

There are no significant unrecognised temporary differences associated with undistributed profits of subsidiaries and joint ventures.

18 Inventories 2009

$’000s2008

$’000s

Oil 16,732 2,697Materials 7,594 5,197

Total inventories 24,326 7,894

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Notes to the consolidated financial statements continued

19 Trade and other receivables

2009 $’000s

2008 $’000s

Prepayments 3,582 3,323Trade debtors 10,619 10,614Underlift – 1,416Otherdebtors 36,777 28,422

Total trade and other receivables 50,978 43,775

The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty. The average age of these receivables is 23.1 days (2008: 38.5 days).

TheGroupdoesnothaveanyreceivablesthatarepasttheirduedate.Noprovisionfordoubtfuldebtshas been raised as it is believed that all trade debtor balances are recoverable. The Directors consider the carrying amount of trade and other receivables approximates to their fair value.

20 Cash and cash equivalents 2009

$’000s2008

$’000s

Amounts held directly by the Group 43,448 100,835Amounts held in joint ventures 4,305 2,177

Total cash and cash equivalents 47,753 103,012

OftheamountshelddirectlybytheGroup,$18,278,000(2008:$29,706,000)washeldindebtserviceaccounts and subject to restrictions in accordance with the Group’s debt facility, the key terms of which are described in note 21 to the consolidated financial statements.

Financial institutions, and their credit ratings, whom held greater than 5% of the Group’s cash and cash equivalents at the balance sheet date were as follow:

S&P credit rating

2009 $’000s

2008 $’000s

HSBC Bank plc AA- 16,228 51,912The Hong Kong and Shanghai Banking Corporation Ltd AA- 3,616 10,575BNPParibas AA 18,192 27,742Sumitomo Mitsui Banking Corporation Europe Limited A+ 5,004 –

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21 Borrowings 2009

$’000s2008

$’000s

Principal repayable on maturity 178,464 160,918Less deferred fees1 (3,871) (3,902)

Total unamortised borrowings 174,593 157,016Less amounts due within one year (38,287) –

Total long term borrowings 136,306 157,016

1 Deferred fees includes fees of $650,000 associated with the subordinated junior facility signed in December 2009.

Net debt 2009

$’000s2008

$’000s

Long term borrowings 136,306 157,016Add amounts due within one year 38,287 – Less restricted bank deposits (11,398) (12,084)

Less cash and cash equivalents (47,753) (103,012)

Total net debt 115,442 41,920

At the Balance Sheet date, the principal repayable on maturity is calculated to be repayable as follows: 2009

$’000s2008

$’000s

Ondemandorduewithinoneyear 38,287 – In the second year 29,338 2,563In the third to fifth year inclusive 110,839 86,419After five years – 71,936

Total principal payable on maturity 178,464 160,918

BorrowingsatthebalancesheetdateareaBNPPledsevenyearborrowingbasefacilityenteredintoinJune 2008. The loan is secured against certain of the Group’s Thailand and Indonesia development and producing assets and includes certain covenants relating to the ratio of the loan balance outstanding to the net present value of cash flows of the secured assets. There has been no breach of terms on the borrowing facility. The key terms of the facility are:

• Aninitialfacilityamountof$200million. • TheGroupmaydrawanamountuptothelowerofthefacilityamountortheborrowingbaseamountas determined by the cash flows arising from the borrowing base assets. • Interestaccruesatarateofbetween2.20%and2.95%plusLIBORdependingonthematurityofthe assets.Theborrowingbaseamountisre-determinedonanannualbasis,withtheGroupfurtherhaving theoptiontoundertaketwomid-periodredeterminationsineachyearshoulditelecttodoso. • Annualredeterminationsofdebtcapacity. • Noearlyrepaymentpenalties. • Changeofcontrolprovisions.

At 31 December 2009, the Group had drawn fully against the facility the amount that was available (2008: $15,561,000 available but undrawn).

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Notes to the consolidated financial statements continued

22 Provisions

Provisions for decommissioning and restoration of oil and gas assets are: 2009

$’000s2008

$’000s

At 1 January 4,713 – Onacquisitionofsubsidiary – 2,726Additions 1,881 1,873Unwinding of discount 806 114

At 31 December 7,400 4,713

23 Trade and other payables 2009

$’000s2008

$’000s

Trade creditors 656 733Overlift 4,489 – Othercreditors 22,145 23,969Accrued expenses 22,345 17,127

Total trade and other payables 49,635 41,829

The average credit period taken for trade purchases is 43.8 days (2008: 37.4 days). The Directors consider the carrying value of trade and other payables approximates to their fair value.

24 Financial instruments

Capital risk management The Group manages its capital to ensure that entities in the Group are able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 21, cash and cash equivalents as disclosed in note 20, and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings as disclosed in note 26 and the statement of changes in equity. This is further discussed in the Directors Report.

Gearing ratio Managementreviewsthecapitalstructureonacontinuingbasis.Thegearingratioattheyear-endwas as follows:

2009 $’000s

2008 $’000s

Borrowings 174,593 157,016Equity plus borrowings 746,599 739,119

Gearing ratio 23% 21%

The gearing ratio is defined as borrowings divided by equity plus borrowings.

Significant accounting policies Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which the income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in the statement of accounting policies.

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Categories of financial instruments 2009

$’000s2008

$’000s

Financial assets:Restricted bank deposits 11,398 12,084Cash and bank balances 47,753 103,012Loans and receivables 18,430 36,513Mark to market value of derivatives – 5,708

Financial liabilities: –Mark to market value of derivatives 10,314 –Amortised Cost 221,558 201,541

Financial assets and liabilities exclude tax receivables and payables as they do not constitute a contractual right or obligation to receive or pay cash or another financial asset.

Financial risk management The Group’s Board of Directors monitor and manage the financial risks relating to the operations of the Group through an internal risk register. These include commodity, foreign exchange, credit, liquidity and interest rate risks.

Commodity price risk The Group’s policy is to consider oil and gas price hedging when and where it is economically attractive tolock-inpricesatlevelsthatprotectthecashflowoftheSalamanderGroup,itsbusinessplananddebtrelated coverage ratios. All hedging transactions to date have been related directly to expected cash flows and no speculative transactions have been undertaken.

For 2009, the Group’s oil production was all sold at prices relative to the spot market. During January 2009 the Group purchased Swaps for 3,750 bopd with a price of $54.00. During May 2009 the Group purchased ZeroCostCollarsfor2010for2,500bopdwithaputandcallpriceof$60.00and$78.00respectivelyandinJulyadditionalZeroCostCollarsfor1,500bopdwithaputandcallpriceof$60.00and$90.00.

During 2009, 64% of the Group’s gas production (its Indonesian gas production) was sold at fixed prices under long term contracts with the balance (its Thai gas production) sold at prices relative to the spot market. The Group held no hedges with respect to its gas production during 2009.

The key variable which affects the fair value of the Group’s hedge instruments is market expectations about future commodity prices. The following illustrates the sensitivity of net income and equity to a twenty per cent increase and a twenty per cent decrease in this variable:

Increase/(decrease) to mark to market value Oil

$’000s

Twenty per cent increase (24,144)Twenty per cent decrease 1,131

Foreign exchange risk The Group undertakes certain transactions denominated in foreign currencies, hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed through maintaining the majority of the Group’s cash and cash equivalent balances in US Dollars, the Group’s functional and presentational currency. The Group does also holds, from time to time, cash balances in UK Pounds Sterling and other currenciestomeetshort-termcommitmentsinthosecurrencies.

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Notes to the consolidated financial statements continued

Foreign exchange risk continuedThe carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

Assets Liabilities 2009 $’000s

2008 $’000s

2009 $’000s

2008 $’000s

UK Pounds Sterling 48 5,878 1,149 1,732Singapore Dollar 1 483 52 1,095Indonesian Rupiah 15,174 7,769 1,131 1,095Thailand Baht 13,148 9,511 5,783 5,128Vietnamese Dong 874 355 611 405Other 31 15 2 2

The following table details the Group’s sensitivity to a 20% increase or decrease in the US Dollar against the relevant foreign currency. The sensitivity analysis includes only foreign currency denominated monetary items and adjusts their translation at the yearend for a 20% change in the foreign currency rate. A positive number below indicates an increase in profit after tax where the US Dollar strengthens by 20% against the relevant currency. For a 20% weakening of the US Dollar against the relevant currency, there would be an equal and opposite impact on the profit after tax and the balances below would be negative.

2009 $’000s

2008 $’000s

Change in Profit or LossUK Pounds Sterling 220 829Singapore Dollar 10 122Indonesian Rupiah 2,808 1,335Thailand Baht 1,473 877Vietnamese Dong 52 10

Credit risk Creditriskreferstotheriskthatacounter-partywilldefaultonitsobligationsresultinginafinanciallosstothe Group. The Group is exposed to the following credit and counter party risks:

In respect of cash and cash equivalents, the Group’s principal financial asset, the credit risk is deemed limited because the majority of the cash and cash equivalents are deposited with banks with AA or A credit ratingsassignedbyinternationalcredit-ratingagencies.

In respect of the Group’s trade sales, the Group manages credit risk through dealing with, whenever possible, either international energy companies or state owned companies based in Thailand and Indonesia and obtaining sufficient collateral where appropriate. The Group consistently monitors counterparty credit risk.

The carrying value of financial assets recorded in the financial statements represents the Group’s maximum exposuretocreditriskattheyear-endwithouttakingaccountofanycollateralobtained.

In addition, the Group’s operations are typically structured via contractual joint venture arrangements. As such the Group is reliant on joint venture partners to fund their capital or other funding obligations in relation to assets and operations which are not yet cash generative. The Group closely monitors the risks and maintains a close dialogue with those counterparties considered to be highest risk in this regard.

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Liquidity risk The Group manages its liquidity risk by maintaining adequate cash and cash equivalents, and borrowing facilitiestomeetitsforecastshort,mediumandlong-termcommitments.TheGroupcontinuallymonitorsitsactual and forecast cash flows to ensure that there are adequate reserves and banking facilities to meet the maturing profiles of its financial assets and liabilities.

ThefollowingtablesdetailtheGroup’sremainingcontractualmaturitiesforitsnon-derivativefinancialliabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date the Group was required to pay at the balance sheet date. The table includes both interest and principal cash flows.

2009Weighted

average effective

interest rate %

Less than 1 month

$’000s

1–3 months $’000s

3 Months to 1 year

$’000s

1–5 years $’000s

5+years $’000s

Total

Non-interestbearing n/a 24,620 22,345 – – – 46,965Variable interest rate instruments 5.4 735 1,470 44,507 157,552 – 204,264

Total 25,355 23,815 44,507 157,552 – 251,2292008

Weighted average effective

interest rate %

Less than 1 month

$’000s

1–3 months $’000s

3 Months to 1 year

$’000s

1–5 years $’000s

5+years $’000s

Total

Non-interestbearing n/a 24,702 17,127 – – – 41,829Variable interest rate instruments 5.8 681 1,362 6,674 112,813 73,600 195,130

Total 25,383 18,489 6,674 112,813 73,600 236,959

Additionally,note15tothefinancialstatementsset-outstheGroup’soutstandingfinancialcommitmentsatthe balance sheet date.

The following table details the Group’s remaining contractual maturities for its derivative financial liabilities: 2009

Less than 1 month

$’000s

1–3 months $’000s

3 months to 1 year

$’000s

Total

$’000s

Oilcollar 190 873 8,143 9,206Interest rate swap 92 185 831 1,108

Total 282 1,058 8,974 10,314

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Notes to the consolidated financial statements continued

Interest rate risk The Group is exposed to interest rate movements through its lendings, borrowings and cash and cash equivalent deposits, which are at rates fixed to LIBOR.

The sensitivity analysis’ below have been determined based on the Group’s exposure to an interest rate movement and is prepared assuming the amount of the net debt and interest rate swaps outstanding at the balance sheet date were outstanding for the whole year.

For net debt, if interest rates had been 1% higher or lower and all other variables were held constant, the Group’s profit after tax for the year ended 31 December 2009 would have decreased or increased as applicable by $1.3 million (2008: $0.4 million). This is principally attributable to the Group maintaining a lower cash and cash equivalents position as described in note 20.

For interest rate swaps, if interest rates had been 1% higher or lower and all other variables were held constant, the Group’s profit after tax for the year ended 31 December 2009 would have decreased or increased by $1.3 million and $1.8 million respectively (no interest rate swaps held in 2008).

Fair value of financial assets and financial liabilities The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: • Level1fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivemarketsfor identical assets and liabilities: • Level2fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesincludedwithin Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsforthe assetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

All of the Groups’ fair value financial assets and liabilities are deemed to be Level 2.2009

Level 1 $’000s

Level 2 $’000s

Level 3 $’000s

Total $’000s

Derivative financial liabilities held to hedge theGroup’s exposure on expected future sales:Derivative financial liabilities – 10,314 – 10,314

– 10,314 – 10,314

There were no transfers between Level 1 and 2 during the year.

25 Related party transactions

Transactions with key management personnel Detailsoftheremunerationofkeymanagementpersonnelareprovidedbelow:

2009 $’000s

2008 $’000s

Short term employee benefits 6,710 7,181Share based payment 1,036 1,581

Total key management employee costs 7,746 8,762

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26 Share capital

Share capital as at 31 December 2009 amounted to $29,844,000 (2008:$29,844,000).

Authorised equity share capital 2009

Number2008

Number

OrdinarySharesat£0.10each 205,000,000 205,000,000

Allotted equity share capital 2009

Ordinary shares 10p

Number

2008 Ordinaryshares

10p Number

At 1 January 152,781,255 88,604,55417 March 2008: Allotment of Shares – 30,843,3678 August 2008: Allotment of Shares – 33,333,334

At 31 December 152,781,255 152,781,255

27 Share option schemes and share based payment

TheCompanyhasimplementedanequity-settledshareoptionscheme(PSP)foremployeescalledthe Salamander Energy Performance Share Plan (‘PSP’). Further details of the PSP are set out in the Remuneration Report. Awards under the PSP may be satisfied by the issue of new shares, or the transfer of shares from the Company’s treasury or shares purchased in the market. In any ten year period, the Company may not issue (or have the possibility to issue) more than ten per cent of the issued capital of the Company pursuant to awards granted under the PSP and any other rights granted under any other employee share plan adopted by the Company. Shares held in treasury will count as new issue shares for the purposes of the above limits unless institutional bodies decide that they need not count. Shares purchased in the market will not, however, count towards the limit described above.

Movement in PSP Shares during the year was as follows: 2009 2008

Shares under opinion

Number

Weighted average price

£’s

Shares under opinion

Number

Weighted average price

£’s

Outstandingat1January 2,489,785 0.10 1,709,026 0.10Granted during the year 1,994,754 0.10 890,635 0.10Lapsed during the year (541,946) – – – Forfeited during the year (82,397) – (109,876) –

Outstandingat31December 3,860,196 0.10 2,489,785 0.10

Exercisable at 31 December – –

Theexpenserecognisedforunvestedemployeeshareoptionsof$3,433,649relateswhollytoequity-settled share based payment arising from grants made under the PSP. At 31 December 2009, the total future expense relating to unvested awards not yet recognised was $3,309,937, which is expected to be recognised over the following 3 years. The weighted average exercise price for options that were forfeited during the year was £0.10.

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Notes to the consolidated financial statements continued

27 Share option schemes and share based payment continued

The weighted average fair value of share options granted during the year, as estimated at the date of grant, was£0.89pershare(2008:£1.84).ThiswascalculatedusingaMonte-Carlosimulationmodelbasedonthefollowing assumptions:

2009 2008

Weighted average share price at date of grant £1.29 £2.80Exercise price £0.10 £0.10Expected volatility 63% 32%Expected life 3 Years 3 YearsExpected dividend 0% 0%Risk-freeinterestrate 1.93% 4.25%

Expected volatility was determined by calculating the historical volatility of the comparator group’s share price, over a period equal to the expected life of the options. The median of the constituents of the comparator group which had a three year history was used to determine the estimate for the Company volatility. The mean average of all the constituents of the comparator group (including those with only a short listing history) was 54% (2008: 57%). The average comparator group correlation was 22% (2008: 9%).

There is a 12 month window for exercise. However, as the exercise price is nominal it is assumed that recipients exercise at the end of the performance period. Therefore an expected life of three years after the date of grant has been assumed.

28 Dividends

The Company has declared no dividend for the year (2008: nil).

29 Post balance sheet events

During February 2010, the Group increased its equity interest in the Bengara PSC from 25% to 41.67% having assumed incremental equity from PTTEP following the drilling of the South Sebuka gas discovery well in 2009.

On15February2010,theGroupannouncedthattheSiThat-3hadbeenunsuccessful.Furtheranalysiswillbe completed during 2010 to determine whether the structure merits further analysis.

On3March2010,theGroupincreaseditsequitypositionintheBontangPSCfrom70%to90%by acquiring PT Eksindo Petroleum Tabuhan’s 20% share in consideration for the issue of 792,942 Salamander Energy plc shares.

DuringMarch2010,theGroupagreedtoacquirea50%operatedinterestinBlock101-100/04,intheHanoiTrough offshore Vietnam, from Santos Vietnam Pty Ltd and Singapore Petroleum Vietnam Song Hong Co Ltd with the proposed drilling of one well 2011.

On18March2010,theGroupwillannounceitproposedissueofanupto$100millionconvertiblebond. It is intended that the funds will be applied towards the acquisition of new opportunities.

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Parent company balance sheet 31 December 2009

Note

2009 $’000s

2008 $’000s

AssetsNon-current assetsInvestments 3 133,975 112,288Loans to group companies 8 512,196 613,235Otherreceivables – 1,650

Total non-current assets 646,171 727,173Current assetsTrade and other receivables 4 114 450Cash and cash equivalents 20,958 49,759

Total current assets 21,072 50,209

Total assets 667,243 777,382

LiabilitiesCurrent liabilitiesTrade and other payables 5 39 135,069

Total current liabilities 39 135,069

Total liabilities 39 135,069

Net assets 667,204 642,313

EquityShare capital 9 29,844 29,844Share premium 378,685 378,685Otherreserves 380,283 376,849Retained loss (121,608) (143,065)

Total equity 667,204 642,313

Approved by and authorised for issue, and signed on behalf of, the Board of Directors

Nick Cooper ChiefFinancialOfficer

17 March 2010 CompanyNumber5934263

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Parent company statement of changes in equity Fortheyear-ended31December2009

Share capital $’000s

Share premium $’000s

Otherreserves $’000s

Profit and loss $’000s

Total $’000s

At 1 January 2008 17,271 202,345 200,326 5,735 425,677Shares issuedNewsharesissuedinexchangeforshares of a subsidiary company 6,172 – 178,064 – 184,236Newsharesissuedforcash 6,401 185,618 – – 192,019Share issue costs – (9,278) (3,574) – (12,852)Share based payment – – 2,033 – 2,033Profit for the year – – – (148,800) (148,800)

At 31 December 2008 29,844 378,685 376,849 (143,065) 642,313Share based payment – – 3,434 – 3,434Loss for the year – – – 21,457 21,457

At 31 December 2009 29,844 378,685 380,283 (121,608) 667,204

Other reserves

Otherreservescomprise: 2009

$’000s2008

$’000s

Share based payment reserve 6,222 2,788Merger reserve 374,061 374,061

Total other reserves 380,283 376,849

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Parent company cash flow statement Fortheyear-ended31December2009

2009 $’000s

2008 $’000s

Cash flow from operating activitiesLoss before tax 21,457 (148,800)Adjustment for:

(Reversal of)/provision against investment (21,687 ) 150,000Interest revenue (4,458) (5,758)Finance costs – 3,037Otherfinancialgains (31) (2,516)Share based payment 1,177 300

Operating cash flow prior to working capital (3,542) (3,737)Decrease/(increase) in trade and other receivables 336 (299)Decrease in trade and other payables (70) (308)

Net cash outflows from operating activities (3,276) (4,344)

Cash flow from investing activitiesRepayment of/(loans to) group companies 103,296 (348,520 )Repayment/(advance)oflong-termotherreceivables 1,650 (1,650)Interest received 4,458 1,349

Net cash provided by investing activities 109,404 (348,821)

Cash flow from financing activitiesBorrowings from Group companies (134,960) 134,960Net proceeds from the issue of shares – 192,019Costs of issuing new shares – (12,851)Cost of borrowings – (3,037)

Net cash outflows from financing activities (134,960) 311,091

Net decrease in cash and cash equivalents (28,832) (42,074)Cash and cash equivalents at the beginning of the year 49,759 89,317Effect of foreign exchange rate change 31 2,516

Cash and cash equivalents at the end of the year 20,958 49,759

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1 Segmental analysis

The Company currently operates only in the United Kingdom and its activities comprise one class of business, being that of a holding company for the Group.

2 Employee numbers and costs

The monthly average number of employees (being the Executive Directors) employed was as follows: 2009

Number2008

Number

Professional 3 4Administration – –

Total employee numbers 3 4

The aggregate remuneration was as follows: 2009

$’000s2008

$’000s

Wages and salaries 2,078 2,675Share based payment 1,177 300Pensions 161 222Social security 317 336

Total employee costs 3,733 3,533

Details of Directors’ remuneration are provided in the Remuneration report. A proportion of employee costs were charged to other subsidiaries of the Group.

Share based payments Share based payments are disclosed in note 27 to the consolidated financial statements.

3 Investments

The Group’s principal Subsidiaries and Jointly Controlled Entities are as set out in note 16 to the consolidated financial statements.

Fair value information regarding investments in subsidiaries and jointly controlled entities has not been disclosed as their fair value cannot be measured reliably, as they are investments in unquoted group companies.

The Company has reversed $21,687,000 of the total $150,000,000 provision made in 2008 against its investment in Salamander Energy Group Limited reflecting changes in economic conditions.

4 Trade and other receivables 2009

$’000s2008

$’000s

Prepayments 114 59Otherdebtors – 391

Total trade and other receivables 114 450

At the reporting date the group had no past due or impaired trade and other receivables. The Directors consider the carrying amount of trade and other receivables approximates their fair value.

Notes to the parent company financial statement Fortheyear-ended31December2009

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5 Trade and other payables 2009

$’000s2008

$’000s

Other creditors 33 – Accrued expenses 6 109Group companies – 134,960

Total trade and other payables 39 135,069

The Directors consider the carrying value of trade and other payables approximates their fair value.

6 Commitments and contingencies

Bank guarantees At 31 December 2009, there were outstanding bank guarantees issued by banks on behalf of the Group, amounting to $21,341,000 (2008: $26,993,000). Guarntees were issued against work programme obligations of subsidiary undertakings of the company.

Salamander Energy PLC has entered into certain parent guarantee and other undertakings in relation to the BNPP Borrowing Base Facility Agreement.

7 Financial instruments

Full details of the Company’s risk management and financial instrument policies are shown in note 24 to the consolidated financial statements.

Significant accounting policies The Company follows the accounting policies as shown in statement of accounting policies.

Categories of financial instruments 2009

$’000s2008

$’000s

Financial assets:Cash and bank balances 20,958 49,759Preference coupon receivable from Salamander Energy Group Limited 13,516 9,119Loans and receivables 498,682 605,801Financial liabilities:Amortised cost 39 135,069

Financial risk management

Foreign exchange risk The carrying amounts of the Company’s UK Pounds Sterling monetary assets and liabilities at the balance sheet date were as follows:

Assets Liabilities2009

$’000s2008

$’000s2009

$’000s2008

$’000s

UK Pounds Sterling – 4,036 39 17

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Notes to the parent company financial statements continued

Financial risk management continued

The following table details the Company’s sensitivity to a 20% change in US Dollars against UK Pounds Sterling.

UK Pounds Sterling Currency impacts2009

$’000s2008

$’000s

Profit or loss 8 804

This is mainly due to holding UK Sterling Pounds cash and cash equivalent deposits. The sensitivity to exchange rate movements has decreased during the year as the Company reduced its UK Sterling Pound cash and cash equivalent balances.

Interest rate risk If interest rates had been 1% higher or lower and all other variables were held constant, the Company’s profit for the year ended 31 December 2009 would have increased or decreased as applicable by $0.2 million (2008: increase or decrease of $0.5 million).

Liquidity risk The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.

2009 2008Less than 1 month

$’000s

1–3 months $’000s

Total

$’000s

Less than 1 month

$’000s

1–3 months $’000s

Total

$’000s

Non-interest bearing 33 6 39 134,960 109 135,069

Total 33 6 39 134,960 109 135,069

8 Related party transactions

Transaction with directors Transactions with Directors are included in the Remuneration Report.

Related party transactions with subsidiary companies The Company entered into the following transactions with related parties during the year affecting the income statement as follows:

2009 $’000s

2008 $’000s

Interest receivable from Salamander Energy Group Limited 4,397 4,409

The Company held balances with related parties at the balance sheet date as follows: 2009

$’000s2008

$’000s

Investment in Salamander Energy Group Limited 133,975 112,288Preference Coupon Receivable from Salamander Energy Group Limited 13,516 9,119Loans to Salamander Energy Group Limited 498,680 602,804Loans to Salamander Energy (Bualuang) Limited – 877Loans to Salamander Energy (Glagah Kambuna) Limited – 435Borrowings from Salamander Energy (S.E. Asia) Limited – (134,960)

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9 Share capital

Authorised equity share capital 2009

Number2008

Number

Ordinarysharesat£0.10each 205,000,000 205,000,000

Allotted equity share capital 2009

Ordinary Shares 10p

Number

2008 OrdinaryShares

10p Number

At 1 January 152,781,255 88,604,55417 March 2008: Allotment of shares – 30,843,3678 August 2008: Allotment of shares – 33,333,334

At 31 December 152,781,255 152,781,255

10 Dividends

The Company has declared no dividend for the year (2008: nil).

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Glossary

2006ESOP 2006EmployeeShareOwnershipPlan

$ or US Dollar United States Dollar

£ UK Pounds Sterling

€ Euro

bbl Barrel

Bcf Billion of standard cubic feet

BNPP BNPParibas,Singapore

boepd Barrels of oil equivalent per day

boe Barrels of oil equivalent

bopd Barrels of oil per day

E&P Exploration and production

EBITDAX Earnings before interest (finance costs), tax, DD&A and exploration expenses

FPSO FloatingProductionStorageOffload

GAAP Generally Accepted Accounting Principles

GFI GFIOil&GasCorporation

HSE Health, Safety and Environmental

IAS International Accounting Standards

IPO InitialPublicOffering

IFRS International Financial Reporting Standards

km2 sq km

LSE London Stock Exchange

Mbo Thousand barrels of oil

Mbopd Thousand barrels of oil per day

Mboepd Thousand barrels of oil equivalent per day

MMbo Million barrels of oil

MMboe Millions barrels of oil equivalent

Mscf Thousand standard cubic feet of gas

MMscfd Million standard cubic feet per day of gas

ONWJ OffshoreNorthWestJavaPSC

PSC Production Sharing Contract

PSP Performance Share Plan

SEGL Salamander Energy Group Limited, a wholly owned subsidiary of the Company from 5 December 2006

SES South East Sumatra PSC

SMBC Sumitomo Mitsui Banking Corporation Europe Limited

Des

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Singapore

80 Raffles Place #34 – 02 UOB Plaza Singapore 048624

Tel + 65 6309 3300 Fax + 65 6536 5390

Bangkok

#17 – 02 Q.House Lumpini Building 1 South Sathorn Road Kwaeng Tungmahamek Khet Sathorn Bangkok 10120 Thailand

Tel +6626200800 Fax +6626200820

Jakarta

15th Floor Indonesia Stock Exchange Building #15 – 02 Tower II Jln Jenderal Dudirman Kav 52 – 53 Jakarta 12190 Indonesia

Tel + 62 21 5291 2900 Fax + 62 21 3000 4020

Ho Chi Minh City

#10 – 06 Citi Lights Tower 45 Vo Thi Sau Street Ward Dakao District 1 Ho Chi Minh City Vietnam

Tel +84862905999 Fax +84862906111

Vientiane

14 Phayasi Road Ban Sithane Neau Sikhottabong District Vientiane Lao PDR

Tel + 85621241121 Fax + 856 21 241 121

Our offices

Directors

Charles Jamieson Chairman and Non-executive Director

James Menzies Chief Executive Officer

Mike Buck Chief Operating Officer

Nick Cooper Chief Financial Officer

Struan Robertson Senior Independent Non-executive Director

Michael Pavia Independent Non-executive Director

John Crowle Independent Non-executive Director

Robert Cathery Independent Non-executive Director

James Coleman Independent Non-executive Director

Secretary

Douglas Barrie

Registered office

5th Floor 21 Palmer Street London SW1H 0AD

Auditors

Deloitte LLP 2 New Street Square London EC4A 3BZ

Lawyers

Clifford Chance LLP 10 Upper Bank Street London E14 5JJ

Bankers

HSBC Bank plc 8 Canada Square London E14 5HQ

Corporate brokers

Goldman Sachs Peterborough Court 133 Fleet Street London EC4A 2BB

Oriel Securities Ltd 125 Wood Street London EC2V 7AN

Public relations Brunswick Group LLP 16 Lincoln’s Inn Fields London WC2A 3ED

Registration number

5934263

Corporate directory

Salamander Energy 5th Floor 21 Palmer Street London SW1H 0AD

Phone +44 (0) 20 7960 1580

Fax +44 (0) 20 7692 5524

Emailinfo@salamander-energy.com

Website salamander-energy.com