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Salamander Energy Provides Operational and Corporate Update

Monday, May 12, 2008

Business Development

On 17 March 2008 Salamander completed the acquisition of GFI Oil and Gas Corporation (“GFI”). The final consideration was $34.8 million in cash and the issue of 30,843,367 Salamander shares. Following the transaction the total number of Salamander shares in issue increased by 35% to 119,447,921. The integration of GFI has been successfully completed.

In addition to the GFI transaction, Salamander has continued to expand its portfolio in other areas. In February Salamander completed the acquisition of a 25% interest in the Bengara-1 PSC in the Tarakan Basin, East Kalimantan. In March, Salamander signed a cross-assignment agreement with PetroVietnam Exploration Production Corp. (“PVEP”) which saw Salamander assign a 25% working interest in its operated Savannakhet PSC to PVEP in return for a 20% working interest in PVEP's operated Champasak & Saravan PSC,both licences in Lao PDR. The Company now has a portfolio of 18 licences across five countries.

Operations

During the period the Company has completed four appraisal wells, Tutung Alpha-1, Dong Mun-3, Gurame-1X and South Phu Horm. Preparations have been progressing for the rest of the 2008 drilling programme and the Ensco-1 barge mounted rig is currently mobilizing to drill the next well in the programme, the Tutung Alpha-2 appraisal well that is expected to spud before the end of May.

The developments of the Bualuang oil field and Kambuna gas-condensate field remain on schedule. Five development wells and a water injector have been drilled on the Bualuang oil field. The results to date have indicated greater potential net pay than was initially prognosed. The FPSO has set sail and production is expected to commence by the mid-year target date. The Kambuna-3 and -4 wells and the deepening of Kambuna-2 have been completed and it is expected that the field will produce around 50 MMscfd (gross) and realise an average gas price of $6 per Mcf.

Debt Facility

A $125 million, fifteen month bridge financing facility was put in place at the time of the GFI acquisition. Salamander is at an advanced stage of discussions to replace this with a new $200 million seven year senior reserve based lending facility.
The balance sheet remains strong and there are no changes, apart from those discussed above, to the financial position of the Company since the preliminary results announcement on 27 March 2008.

Commenting on the year to date, James Menzies, CEO stated:
"The developments of the Bualuang and Kambuna fields are proceeding on schedule and we will be spudding the Tutung Alpha-2 well in the coming weeks. We look forward to drilling further high impact exploration wells in Thailand, Indonesia and the Philippines in the second half of the year."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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