UNLOCKING NAMIBIA’S - Investment Promotion Consultants · N UNLOCKING NAMIBIA’S OIL & GAS...

Chariot Oil & Gas Limited

Registered Offi ce:

Sydney Vane House,

Admiral Park,

St. Peter Port,

Guernsey, GY1 2HU

www.chariotoilandgas.com

BrazilEspirito Santo

Congo

Angola

Namibia

Santos

Campos

Sedimentary Basins

16 Billion BOE14 Billion BOE

30 Billion BOE!

PelotasWalvis

Luderitz

OrangeBasin

Africa

8.4 Tcf (inc 3 Tcf in Kudu)

5 Billion BOE

KUDU FIELD

!

N UNLOCKING NAMIBIA’S OIL & GAS POTENTIAL

Unlocking Namibia’s Oil & Gas Potential

Namibia

Enigma Licences

ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 28 FEBRUARY 2009

Chariot Oil & Gas Limited is an AIM listed oil and gas exploration

company with interests in Namibia.

Enigma Oil & Gas Exploration (Pty) Limited was incorporated

in Namibia in 2003. Enigma was acquired by Chariot in January

2008 and is the holder of the petroleum agreements and licences.

Enigma is the operator of the licences in Namibia.

ADVISERS

Contents

1 Highlights

4 Chairman’s Statement

10 Board of Directors

11 Report of the Directors

13 Directors’ Remuneration Report

15 Social Responsibility Statement

16 Corporate Governance Statement

17 Report of the Independent Auditors

18 Consolidated Income Statement

19 Consolidated Statement of Changes in Equity

20 Consolidated Balance Sheet

21 Consolidated Cash Flow Statement

22 Notes forming part of the FinancialStatements

ibc Advisers

Registered offi ce

Sydney Vane House,

Admiral Park,

St. Peter Port,

Guernsey, GY1 2HU

Nominated advisor

KPMG LLP

8 Salisbury Square,

London, EC4Y 8BB

Broker

BMO Capital Markets Limited

95 Queen Victoria Street,

London, EC4V 4HG

Bankers

Barclays Bank PLC

PO Box 41, Le Marchant House,

Le Truchot, St Peter Port,

Guernsey, GY1 3BE

Auditors

BDO Stoy Hayward LLP

55 Baker Street,

London, W1U 7EU

Financial PR

Hogarth

No1. London Bridge,

London, SE1 9BG

Solicitors

As to English Law

Memery Crystal LLP

44 Southampton Buildings,

London, WC2A 1AP

As to Namibian Law

Lorentz Angula Inc.

Private Bag 12007,

Ausspannplatz,

Windhoek 3rd Floor,

LA Chambers,

Ausspann Plaza,

Windhoek, Namibia

As to Guernsey Law

Babbé

PO Box 69,

18–20 Smith Street,

St. Peter Port,

Guernsey, GY1 4BL

Company secretary

Artemis Secretaries Limited

Sydney Vane House,

Admiral Park,

St.Peter Port,

Guernsey, GY1 2HU

Registrars and

receiving agents

Anson Registrars Limited

PO Box 426, Anson Place,

Mill Court, La Charroterie,

St Peter Port,

Guernsey, GY1 3WX

Namibia

AFRICA

Chariot’s key objective is to maximise returns for shareholders by exploring for and proving up resources from its current licences and diversifying its asset base through the introduction of production cashfl ow and other exploration opportunities.

16282 31/07/2009 Proof 11

1CHARIOT OIL & GAS LIMITED

● Admitted to AIM in May 2008 having raised gross proceeds of £45m (US$88.9m at time of admission)

● Cash balance at 28 February of US$28.9m

● Seismic acquisition programme undertaken across all offshore licences

● Further exploration since admission to AIM has led to expansion of prospect and lead inventory

● Increased gross mean prospective resources to 5.24 billion barrels in licence areas

● Data room opened from mid October to end ofJanuary 2009 with multiple expressions of interest in reviewing data after 3D processing complete

● Farm-out agreed with Petrobras Oil and Gas BV (Petrobras) for a 50%interest on one of the Group’s southern offshore licences

● Strengthened cash position

● Highly experienced partner in deep water exploration and development

● Third party endorsement of Namibia’s prospectivity and potential

Post period

Financial year highlights

Unlocking Namibia’soil and gas potential


16282CHARIOTOIL.indd 116282CHARIOTOIL.indd 1 31/07/2009 16:1331/07/2009 16:13

16282 31/07/2009 Proof 11

2

AT A GLANCE

● Licences covering 10 blocks: 8 offshore, 2 onshore, totalling an area of 15.2 million acres

● Offshore licences of strategic interest

● In counterpart margin to petroliferous province offshore Brazil

● South of prolific basins offshore Angola

● Applying same suite of analysis tools used to help identify potential petroleum

systems in the pre-salt, deepwater offshore Brazil

● Multidisciplinary exploration approach has demonstrated that offshore Namibia contains mature source rocks and hydrocarbon migration pathways to reservoirs

● One prospect and 22 leads in Chariot’s blocks to date (four additional prospects created by stacking leads)

● Deep water exploration — underexplored with only 3 wells drilled to date in water depths greater than 500m — early stages but receiving increased interest

● Potential to become a major oil and gas province

Key highlights

Progress and plans

● New 2D and 3D seismic acquired in late 2008 / early 2009 currently in processing with fast track volume under interpretation

● A further 1500km² of 3D seismic is currently being acquired in the southern block 2714A in partnership with Petrobras

● Range of production opportunities under review

● Intend to explore other potential farm-out agreements when 2D and 3D seismic processing completed


16282 31/07/2009 Proof 11


● Due to a geological history similar to Brazil and Angola, there is good potential that offshore Namibia has similar petroleum systems

● Key positioning within the South Atlantic margins — over 60 billion barrelsof oil equivalent (BOE) of discoveries in South Atlantic

● Oil seepage slicks from RadarSat imagery indicate working petroleum system

● Vast acreage position relative to Brazil and Gulf of Mexico block sizes

Namibia


Congo

Angola

Namibia

Santos

Campos

Sedimentary Basins


30 Billion BOE!

PelotasWalvis

Luderitz

OrangeBasin

Africa


5 Billion BOE

KUDU FIELD

!

N

Underexplored frontierregion – highly prospective



16282 31/07/2009 Proof 11

4

Dear Shareholder,I am pleased to present Chariot’s fi nal results for the year ended 28 February 2009 and first annual report on the significant progress the

Group has made since our admission to AIM in May 2008.

Since our successful admission we have delivered upon a number of our key objectives:

● negotiated a farm-out agreement with Petrobras on one of our southern blocks – 2714A offshore Namibia (post period end);

● completed comprehensive seismic acquisition programmes across our offshore interests;

● matured our prospect and lead inventory over our exploration blocks of interest – increasing our gross mean prospective resources

in our Namibian licence areas by over a billion barrels – now totalling 5.24 billion barrels;

● opened a dataroom to invite interested parties to investigate our assets with a view to farming down our interests – from which

expressions of interest in viewing further information have been received; and

● undertaken a range of due diligence on potential production and near-term production opportunities.

The Group’s Namibian licences, held by our wholly owned subsidiary Enigma Oil & Gas Exploration (Pty) Ltd (“Enigma”) continue to be the main

focus of our efforts to date. We secured licences in Peru in partnership with Jindal Steel and Power Limited (“JSPL”) in September 2008 although

as announced post period end in May 2009 we decided not to sign for these exploratory blocks. As part of a strategic review, JSPL decided to

withdraw from the licence application and rather than fund 100% of the exploration programme in Peru, we also withdrew, opting instead to

concentrate on our existing assets and pursue potential production and exploration opportunities.

Progress over the past year has served to further highlight the potential of our Namibian blocks. The farm-out agreement with Petrobras

is a significant endorsement of both the prospectivity of our licence areas and Namibia’s potential to become an oil and gas region. The

continued success reported offshore Brazil, with further multi-billion barrel discoveries announced in deep water, pre-salt environments and

in neighbouring Angola, has also led to increased interest in this region of the South Atlantic. Chariot’s geochemical analysis of hydrocarbons

from offshore Namibia suggest the same source rocks as in offshore Brazil may be present and actively generating oil and gas. Namibia is still

underexplored from an oil and gas perspective but we are confident we are in a key strategic position within a frontier that could well attract

significant interest from major oil companies.

Farm-out agreed with PetrobrasAs announced on the 19 May 2009, we have signed a farm-out with Petrobras for a 50% stake in one of our four licences offshore Namibia,

in block 2714A. This agreement included a signing bonus of US$16.04 million. A production bonus is also payable to Chariot by Petrobras in

the event of a commercial discovery which is equal to 4.75% (after royalties) of Petrobras’ share of production up to either 2 million barrels of oil

equivalent or a value of US$118 million, whichever occurs first. Petrobras has also agreed to, and will pay its 50% share of, a further 1,500km²

of 3D seismic acquisition which is now underway.

Following the acquisition of further 3D seismic and subsequent processing and interpretation, Petrobras can elect to enter the first renewal

period (the initial exploration period ends on 31 August 2010) which includes an exploration programme commitment to drill a well.

Enigma will remain as operator of the block until the end of the initial exploration period with Petrobras having the option of becoming

the operator thereafter. If Petrobras chooses not to enter the first renewal period, Chariot has the option to reclaim its interest in the block.

We are very pleased to have Petrobras as a partner on this licence area as they have a wealth of deep water expertise and resources, with

notable success offshore Brazil and Angola. The agreement also complements their strategy of exploring deep and ultra deep water

opportunities offshore West Africa and serves our stated strategy to mitigate risk and expedite the exploration of our blocks.

CHAIRMAN’S STATEMENTPeter Kidney

Peter Kidney, Chairman

Fulfillingobjectives


16282 31/07/2009 Proof 11


Seismic activityChariot has undertaken a combination of Pre-stack Depth Migration (“PSDM”) reprocessing, reinterpretation and new seismic acquisition

programmes over the past year.

As announced in October 2008, analysis of reprocessed PSDM 2D seismic results led to a signifi cant increase in our mean gross

prospective resources, up by 1.3 billion barrels to 5.24 billion barrels in total. This analysis was undertaken as part of the ongoing

effort to mature the prospect and lead inventory and also resulted in a number of new leads and prospects being identifi ed in both

our Northern and Southern blocks (blocks 1811 A & B and 2714 A & B respectively).

We also initiated seismic acquisition programmes across all of our offshore licences with 3,000km of 2D seismic acquired in our Central

Blocks, 1,500km² in our Southern Blocks and 900km² of 3D seismic acquired in the Northern blocks. These programmes were completed

in February 2009.

The new 3D seismic data has been acquired over many of the most prospective features in the Northern and Southern licence areas and

has been targeted to further mature the best locations for a potential drilling campaign. This seismic data is currently being processed

and the resulting interpretation will increase our understanding of the hydrocarbon potential offshore Namibia. The 3,000km of 2D

seismic on our Central blocks, (2312 A & B and 2412 A & B) was acquired in order to better defi ne some major geological structures

which may be present in this area.

Further exploration workDuring the past few months geochemical analysis of cutting samples taken during the drilling of exploration wells offshore Namibia

has reinforced the conclusions of earlier work done on the Kudu fi eld. There were oils encountered in many of these wells and these oils

have been identifi ed as mixtures coming from at least two sources – an Albian marine source and more importantly the same Aptian

lacustrine/hypersaline source that has been so prevalent on the Brazilian side of the South Atlantic. The impact of this knowledge is

that the ‘mixed source’ story is now a regional one that can be applied to the entire Namibian offshore, whereas before it had only been

proven in the vicinity of the Kudu gas and condensate discovery.

DataroomThe Group opened a dataroom from mid October 2008 to the end of January 2009. A number of major multinational oil companies carried out

a detailed technical review of the data available at that time. The resultant feedback was pleasing, with multiple expressions of interest in our

acreage and requests for an opportunity to examine the new acquired and processed 3D seismic data once it is available later this year. Similar

to the agreement with Petrobras, farming out interests on our remaining blocks will serve to reduce our risk and expedite exploration.

Chariot will look to revisit discussions with these selected companies in due course.

Production opportunitiesAs stated at the time of listing, a priority for Chariot is to introduce production cash fl ows in order to balance the existing exploration

portfolio. We have undertaken due diligence on a number of potential production opportunities and will continue to do so to fi nd the

best value and fi t for the Group.

Management changeAs announced on 15 June, Kevin Broger resigned as CEO of the Company for personal reasons and we thank him for his efforts. He will

be replaced in the interim by James Burgess, who was previously the Company’s Commercial Director.

£45mraised on listing



16282 31/07/2009 Proof 11

6

CHAIRMAN’S STATEMENT

Our admission to AIM on 19 May last year proved to be timely, raising £45 million (US$88.9m at the time of admission) from institutional

shareholders in North America and Europe and the conversion of US$5.7m loans into equity at 50% of the price at which the shares

were placed. The monies raised will fund the Group’s current minimum work programme obligations. As we are debt free with cash on

hand as of 28 February of US$28.9m (excluding the proceeds of the Petrobras farm-out that occurred after the period end), we can also

examine various avenues with regard to production and near-term production opportunities.

Since our listing the oil price has been affected signifi cantly by the changes in the world economy, falling from the highs of US$147 per

barrel in mid-2008. However, prices seem to have recovered somewhat in recent times and we are confi dent that the long term supply

concerns that infl uenced the previous rise in oil prices still remain. We believe the market continues to expect rises in oil prices from

which Chariot is well placed to benefi t.

Economic conditions have also resulted in a weaker Sterling exchange rate than the rate prevalent at the time at which we raised our

financing of £45 million. As we report our financial statements in US dollars this has given rise to a foreign exchange loss of US$19.7m

following the conversion during the year of the majority of the Group’s cash balance to US dollars (see note 13 to the fi nancial

statements for details of the currency split of the year end cash balance). The overall loss in value caused by the exchange rate impact

has been partly mitigated by the successful negotiation of our 2D and 3D seismic acquisition programmes, the costs of which have

been capitalised, which Chariot contracted signifi cantly below our internal budget and expectations. The Group has reported a loss for

the year of US$28.1 million which includes a provision of US$3.1m against the book value of our Namibian onshore licence area as a

consequence of a disappointing aeromagnetic survey of the area.

It should be noted though that the weaker oil price has also coincided with a subsequent reduction in seismic acquisition costs and

drilling rig rates which are a signifi cant cost component in exploration programmes. As our exploration work progresses, Chariot will

stand to benefi t from this and will look to optimise programmes in this respect as we have done with our seismic acquisition.

Farm-out agreedwith Petrobras

Financial Review


16282 31/07/2009 Proof 11

7CHARIOT OIL & GAS LIMITED 7

OverviewThe Namibian offshore basins are located in the

south-eastern part of the south Atlantic margin (on

the West Africa side) and extend from land out to the

3,000 metre isobath. These basins are directly related

to the rifting of the African and the South American

plates during the Lower Cretaceous period. Evolution

of the South Atlantic started in the Jurassic era with

a rift system that evolved into the passive margin

basins of the present day.

Chariot’s offshore blocks are located along

the coast of Namibia and are bordered by the

paleodepositional systems of the Kunene River

to the north and the Orange River to the south.

The onshore blocks are located in the south of the

country in the Nama basin.

Frontier for discoveryExploration offshore Namibia is also being undertaken by other operators – most signifi cantly the drilling of the Kunene well in block

1711, (located to the north of our block 1811A) which was concluded in August 2008. This was a noteworthy step forward in the

exploration of this region, marking the fi rst exploratory well drilled offshore Namibia in over a decade and representing only the third

well ever drilled in these waters to depths greater than 500m. The Namibian government recently reported that geological analysis of

the drilling results indicated oil and gas potential in Block 1711, as well as good prospects for the region as a whole. Further exploration

will continue in this licence area.

Summary table of the Blocks

Licence LicenceInterest expiry date – first area

Asset Licence Operator % Status phase exploratory phase km2 Comment

Offshore basins

Block 1811A 14 Enigma 100 Exploration 31 August 2010 5,481

Block 1811B 14 Enigma 100 Exploration 31 August 2010 5,481

Block 2312A 19 Enigma 100 Exploration 31 August 2010 Minimum


four year

N/2 of Block 2412A 19 Enigma 100 Exploration 31 August 2010 exploration

N/2 of Block 2412B 19 Enigma 100 Exploration 31 August 2010 period

Block 2714A 20 Enigma 50 Exploration 31 August 2010 5,481


Onshore basin

Block 2518 21 Enigma 100 Exploration 31 August 2010

Block 2618 21 Enigma 100 Exploration 31 August 2010 22,196

Namibia

Arcadia Petroleum BHP Billiton Circle Oil Tullow Oil Enigma IDG INA Kunene Energy Labrea Petroleo Namcor Sintezneftegaz Namibia

Licences Status

Gross mean prospectiveresources of 5.24 billion barrels


Review of Operations


16282 31/07/2009 Proof 11

8

CHAIRMAN’S STATEMENT

Introduction Exploration has continued across all our licences in Namibia during the past year, with extensive seismic interpretation (both in time and

depth), geochemistry analysis and a comprehensive seismic acquisition programme undertaken over our offshore blocks of interest - 900km²

of 3D seismic was acquired in the north (from the second half of January to the end of first half of February 2009) 3,000km of 2D was acquired

in the Central licences (from the second half of October to the end of November 2008) and 1,500km² of 3D in the south (from the first week of

November 2008 to the first week of January 2009). We also opened a dataroom in Rio de Janeiro from the second half of October 2008 to the

end of January 2009 which was visited by several major oil companies and feedback from this was positive with interest expressed in viewing

the data further once 3D has been processed. As announced in October 2008 reprocessing and reinterpretation of 2D seismic data to PSDM

(available prior to the recent acquisition programme) led to an increase of over 1.3 billion barrels in gross prospective oil resources, to a total

of 5.24 billion barrels located in our Northern and Southern blocks.

Gross attributable to Licence in MMbbls Net attributable to Group in MMbblsProbabilistic Volume Method Low Best High Low Best High(Monte Carlo Simulation) Estimate Estimate Estimate Estimate Estimate Estimate Risk

P90 P50 P10 Mean P90 P50 P10 Mean Factor Operator

Lead Tapir - Campanian 10 86 523 209 10 86 523 209 13 Enigma

Lead Tapir - Campanian 2 23 94 348 149 23 94 348 149 13 Enigma

Lead Tapir North - Campanian 96 288 79 383 96 288 779 383 11 Enigma

Lead Tapir North - Campanian 2 88 195 395 223 88 195 395 223 11 Enigma

Lead Tapir - South - Campanian 183 437 1053 546 183 437 1053 546 11 Enigma

Lead Tapir - Deep 5 22 89 37 5 22 89 37 10 Enigma

Prospect Zamba 197 670 2115 985 197 670 2115 985 14 Enigma

Lead Scimitar 120 246 512 288 60 123 256 144 8 Enigma

Lead Mastodon - Campanian Lead 1 1 5 30 12 0.5 2.5 15 6 13 Enigma

Lead Mastodon - Campanian Lead 2 2 9 46 19 1 4.5 23 9.5 13 Enigma

Lead Mastodon - Campanian Lead 3 6 22 79 34 3 11 39.5 17 13 Enigma

Lead Mastodon - Campanian Lead 4 7 16 33 18 3.5 8 16.5 9 13 Enigma

Lead Mastodon - Campanian Lead 5 3 9 27 12 1.5 4.5 13.5 6 13 Enigma

Lead Mammoth - Santonian Lead 1 24 171 1136 465 12 85.5 568 232.5 13 Enigma

Lead Mammoth - Santonian Lead 2 25 109 494 205 12.5 54.5 247 102.5 13 Enigma

Lead Mammoth - Santonian Lead 3 15 59 229 99 7.5 29.5 114.5 49.5 13 Enigma

Lead Mammoth - Santonian Lead 4 5 19 60 28 2.5 9.5 30 14 13 Enigma

Lead Mammoth - Santonian Lead 5 6 35 245 95 3 17.5 122.5 47.5 13 Enigma

Lead Albian 1 18 75 332 139 9 37.5 166 69.5 11 Enigma

Lead Albian 2 38 188 910 374 19 94 455 187 11 Enigma

Lead Albian 3 19 47 111 58 9.5 23.5 55.5 29 11 Enigma

Lead Woolly Rhino 51 173 606 258 25.5 86.5 303 129 11 Enigma

Lead Sabertooth Cat 208 378 670 417 104 189 303.5 208.5 8 Enigma

Total for Oil & Liquids * 3,314 4,780 7,472 5,237 2,603 3,786 5,874 4,086 Enigma

The table below details the current prospective resources net to Chariot:

* Total resource numbers are probabilistically summed and therefore the fi gures do not add arithmetically.

Northern Blocks:Chariot’s Northern licence is comprised of 1811A and 1811B covering an aggregate area of 10,926km², located in the Namibe Basin. The PSDM

reprocessing of 2D seismic as announced in October 2008, identified a series of new structural leads in the Campanian-aged horizons, some of

which have possible direct hydrocarbon indicators. Reinterpretation of the seismic data has confirmed the presence of four main structural leads in

the Tapir Complex (all with a stratigraphic component); Tapir North, Tapir, Tapir South and Tapir Deep - increasing the mean prospective resource

from an initial figure disclosed in the AIM admission document of 675 MMbbls, to 1,547 MMbbls – a net increase of 872 MMbbls.

Review of Operations


16282 31/07/2009 Proof 11

9CHARIOT OIL & GAS LIMITED ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 28 FEBRUARY 2009

3D compositional basin modelling has provided further indications of an overcharged oil system in the immediate vicinity blocks 1811A

& B, as reported in the Competent Person’s Report of the AIM Admission Document. In the Northern Blocks, three prospects are now

evident. Tapir North has stackable leads in the Campanian at 606 MMbbls of mean prospective resource. Tapir also has stackable leads

in the Campanian for 358 MMbbls. Additionally, the prospect Zamba is a well defi ned Albian structural feature with mean prospective

resources of 985 MMbbls, a slight increase of 17 MMbbls from the initial fi gure disclosed in the AIM admission document.

As mentioned above, 900km² of 3D seismic was completed in February 2009 — processing of this data is currently underway and will be

followed by interpretation and mapping.

Central Blocks:The Central licence is comprised of blocks 2312 A & B and the Northern halves of 2412 A & B, over an aggregate area of 16,801km²,

located in the Luderitz Basin. 3,000km of new 2D seismic data was acquired in late 2008 and the processing is currently underway on

this. This area was initially covered with a sparse dataset of only seven 2D seismic lines and a map of leads and prospects will be prepared

after the interpretation of the processed data – this is scheduled to happen during the second half of 2009.

Southern Blocks: (fi gures are gross and therefore include interest farmed-out to Petrobras since theyear end)The Southern two licences are comprised on one block each — Blocks 2714 A & B covering an aggregate area of 10,926km² and are

located in the Orange Basin. In these blocks, PSDM reprocessing and mapping led to the identifi cation of a series of new structural

leads in the Campanian, Santonian and Albian-aged horizons. Reinterpretation of the Mastodon and Mammoth leads detailed in the

AIM admission document confi rmed the presence of 13 new structural leads (all with a stratigraphic component) increasing the mean

prospective resource from an initial gross fi gure of 1,294 MMbbls, to 1,558 MMbbls — a net increase of 264 MMbbls in this area.

Where individual leads defi ned on 2D seismic are vertically stackable and potentially drillable with a single well, we have combined these

into prospect areas. For example, in the Southern blocks two prospects are now evident. The revised Combo prospect has stackable

Campanian (1, 2, 3), Santonian (1) and Albian (1) structural leads and the stratigraphic Woolly Rhino with a potential 927 MMbbls mean

prospective resource. An additional prospect combines Campanian (4), Santonian (2) and Albian (2) structural leads with a potential

596 MMbbls mean prospective resource.

A further 1,500km² of seismic acquisition is currently underway on block 2714A. As part of the farm-out agreement with Petrobras a

seismic vessel was mobilised in order to acquire this additional 3D seismic.

Onshore Blocks:An aeromagnetometric survey of 31,115km was conducted and completed on our onshore blocks further to initial fieldwork which had

been carried out, prior to our admission, in November and December 2007. This fieldwork included surface geology reconnaissance,

sampling for rock, oil and surface gas, microbiology and age dating. The results of the surveys have indicated a reduced potential for the

area and no further exploration is being undertaken pending a final evaluation of the area. No prospective resources have been attributed to

these blocks to date and hence the Directors have decided to make an impairment provision of US$3.1m against the investment in this area.

Conclusion and outlook:Chariot’s fi rst year as a listed Group has seen it make considerable progress in strengthening its financial position and funding a major

exploration programme with high impact potential. The Group will continue to focus on delivery of its objectives and growth strategy

over the coming year.

The Board remains extremely optimistic about the potential of offshore Namibia and believes it is well placed to develop and realise

the potential of our assets. Looking forward, we are also committed to sourcing appropriate production opportunities and believe

that Chariot is well placed to capitalise on market opportunities in this regard as we continue to look to drive shareholder value.

Peter Kidney

Chairman

25 June 2009


16282 31/07/2009 Proof 11

10

BOARD OF DIRECTORS

Peter KidneyChairman

Peter is a fellow of the Institute of Chartered Accountants and he has 25 years of experience in natural resources, including oil and gas.

Peter was previously the Chief Executive Offi cer of the quoted mining Company, ARCON International Resources Plc, which was taken

over by Lundin Mining in 2005. He is also a founding Director and currently a Non-Executive Director of Providence Resources Plc, an oil

and gas exploration and production Company admitted to AIM. From 2004 to 2006, Peter also acted as the Chairman of the Irish Mining

Industries Association, IMEG.

James BurgessChief Executive Officer

James set up Everett Financial Management Limited in 1992 and sold it in 2003. Since then, he has been involved in numerous fund

raisings and admissions to trading on AIM of a number of companies in the energy and resource sectors operating largely in the African

continent. Prior to Everett Financial Management Limited, James worked with Hoare Govett which is now part of ABN Amro. He is a Non-

Executive Director of a number of companies, including Chromex Mining Plc which is listed on AIM.

Heindrich NdumeCountry Director Namibia

Heindrich is a Namibian national with mining exploration experience throughout sub-Saharan Africa. He has played a unique role within

the development of Namibia’s mining and energy strategies, including acting as National Energy Council Secretary and World Energy

Council Representative for the Namibian Ministry of Mines and Energy. Heindrich was one of the founding shareholders of Enigma.

Adonis PouroulisNon-Executive Director

Adonis is the founder and the Chairman of Petra Diamonds Ltd, a pan-African diamond mining company admitted to trading on AIM.

He is also a consultant to Sirius Investment Management LP Incorporated, a fund management company active in raising capital to help

finance early stage exploration. Adonis has extensive experience in the discovery and exploration of natural resources and bringing

them into production, in particular within the mining industry.

Norman LeightonNon-Executive Director

Norman is the owner and a co-Director of Leighton & Leighton SNC, a Company specialising in international trust and corporate

administration. Norman has extensive experience acting as Non-Executive Director for a large number of companies. He is a Chartered

Accountant by background and qualifi ed as a Fellow of the Institute of Chartered Accountants in England and Wales in 1984. He is

currently a member of the Institute of Directors and of the Society of Trust and Estate Practitioners. Norman represents the interests of

ICM, a major shareholder of Chariot.

Robert SinclairNon-Executive Director

Robert is managing Director of the Guernsey-based Artemis Company and a Director of a number of investment fund management companies

and investment funds associated with Artemis Company. Robert is Chairman of Schroder Oriental Income Fund Limited, a Director of ING UK

Real Estate Income Trust Limited and Chairman of its audit committee. He is a Fellow of the Institute of Chartered Accountants in England and

Wales and is resident in Guernsey. Robert represents the interests of Westward, a major shareholder of Chariot.


16282 31/07/2009 Proof 11


The Directors present their report together with the audited fi nancial statements for the year ended 28 February 2009.

Results and dividendsThe results for the year are set out on page 18.

The Directors do not recommend payment of a fi nal dividend (2008 – nil).

Principal activityThe principal activity of the Group is that of oil and gas exploration.

Going concernThe Directors consider that the Group has adequate fi nancial resources to enable it to continue in operation for the foreseeable future.

For this reason they continue to adopt the going concern basis in preparing the Financial Statements.

Business review & principal risks and uncertaintiesA full review of the Group’s activities during the year, recent events, and expected future developments and principal risks and

uncertainties is contained within the Chairman’s Statement on pages 4 to 9. These pages form part of this Directors’ Report.

Key Performance Indicators:The key performance indicators of the Group are as follows:

2009 2008

Cash at bank at 28 February (US$’000) 28,850 3,528

Exploration expenditure (US$’000) 38,186 2,690

Financial instruments Details of the use of fi nancial instruments by the Group are contained in note 18 to the financial statements.

DirectorsThe Directors of the Company during the year were:

Date appointed

Peter Kidney (Chairman) 7 December 2007

Kevin Broger (Chief Executive Offi cer) 16 April 2008 (resigned June 15 2009)

James Burgess (Executive Director) 7 December 2007

Heindrich Ndume (Executive Director) 7 December 2007

Norman Leighton (Non-Executive Director) 7 December 2007

Adonis Pouroulis (Non-Executive Director) 7 December 2007

Robert Sinclair (Non-Executive Director) 13 August 2007

Details of Directors’ interests in shares and share options are disclosed in the Remuneration report on pages 13 and 14.

REPORT OF THE DIRECTORSfor the year ended 28 February 2009


16282 31/07/2009 Proof 11

12

REPORT OF THE DIRECTORSfor the year ended 28 February 2009

Directors’ responsibilitiesThe Directors are responsible for preparing the Directors’ Report and the fi nancial statements for the Group in accordance with

applicable Guernsey law and regulations.

Guernsey legislation requires the Directors to prepare fi nancial statements for each financial year which give a true and fair view of the

state of affairs of the Group and of the profi t or loss of the Group for that year.

International Accounting Standard 1 requires that the fi nancial statements present fairly for each financial year the Group’s financial

position, fi nancial performance and cash flows. This requires the faithful representation of the effects of transaction, other events

and conditions in accordance with the defi nitions and recognition criteria for assets, liabilities, income and expenses set out in the

International Accounting Standards Board’s “Framework for the preparation and presentation of fi nancial statements”. In virtually all

circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. A fair presentation also requires the

Directors to:

● consistently select and apply appropriate accounting policies;

● present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

● provide additional disclosures when compliance with the specifi c requirements in IFRSs is insufficient to enable users to understand

the impact of particular transactions, other events and conditions on the entity’s fi nancial position and financial performance; and

● prepare the fi nancial statements on a going concern basis unless, having assessed the ability of the Group to continue as a going

concern, management either intends to liquidate the entity or to cease trading, or have no realistic alternative to do so.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the fi nancial

position of the Group and to enable them to ensure that the fi nancial statements comply with The Companies (Guernsey) Law 2008.

They are also responsible for safeguarding the assets of the Group 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 fi nancial information included on the Group’s

website. Legislation in Guernsey governing the preparation and dissemination of fi nancial statements may differ from legislation in

other jurisdictions.

AuditorsAll of the current Directors have taken all the steps they ought to have taken to make themselves aware of any information needed by

the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are

not aware of any relevant audit information of which the auditors are unaware.

BDO Stoy Hayward LLP were appointed as auditors of the Company by the Directors. BDO Stoy Hayward LLP have expressed their

willingness to continue in offi ce and a resolution to re-appoint them as auditors will be proposed at the next Annual General Meeting.

By order of the Board

Artemis Secretaries Ltd

Secretary

25 June 2009


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DIRECTORS’ REMUNERATION REPORT

Remuneration committeeThe Group’s Remuneration Committee comprises Robert Sinclair (Chairman), Peter Kidney and Norman Leighton.

The purpose of the Remuneration Committee is to:

● make recommendations to the Board on an overall remuneration policy for Executive Directors and other senior Executives in order

to retain, attract and motivate high quality Executives capable of achieving the Group’s objectives; and

● demonstrate to shareholders that the remuneration of the Executive Directors of the Group is set by a committee whose members

have no personal interest in the outcome of their decision, and who will have due regard to the interests of the shareholders.

Procedures for developing policy and fi xing remunerationThe Board fi xes Executive remuneration and ensures that no Director is involved in deciding his or her own remuneration. The

Committee is authorised to obtain outside professional advice and expertise.

The Remuneration Committee is authorised by the Board to investigate any matter within its terms of reference. It is authorised to seek

any information that it requires from any employee.

Details of the remuneration policyThe basic fees to be paid to the Directors are recommended by the Remuneration Committee, and are subject to approval by the

full Board.

Directors’ service agreementsAll service agreements for Directors are terminable by either party on six months notice.

Directors’ remunerationThe following remuneration, comprising Directors’ fees, share option charge and benefi ts in kind, was payable to Directors during

the year:

Fees/basic Share based Benefits 2009 2008salary payment in kind* Total Total

US$’000 US$’000 US$’000 US$’000 US$’000

K Broger 264 368 6 638 —

J Burgess 105 245 — 350 8

A Pouroulis 78 122 — 201 20

P Kidney 99 889 — 968 21

R Sinclair 26 122 — 146 13

N Leighton 26 122 — 148 7

H Ndume 150 307 2 459 28

Total 748 2,175** 8 2,910 97

* Benefi ts typically comprise private health care arrangements and permanent health insurance.

** The IFRS 2, share option, charge relating to the Directors is US$2,175,000 (non-cash) (2008 – US$ nil).

Pension costs in 2009 in relation to Directors were US$ nil (2008 – US$ nil).



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14

DIRECTORS’ REMUNERATION REPORT

Directors’ interests in sharesThe Directors who held offi ce at the end of the year had the following interests in the issued share capital of the Group.

2009 2008

K Broger 1,000,000 —

J Burgess 2,250,000 2,250,000

A Pouroulis1 22,835,971 22,835,971

P Kidney 500,000 500,000

R Sinclair — —

N Leighton 1,450 —

H Ndume2 22,376,171 22,376,171

Total 48,963,592 47,962,142

1 Shares are held by Westward Investments Limited a Group which is owned by a discretionary trust, of which A. Pouroulis is one of a number of beneficiaries.2 Shares are held by Protech Namibia (Pty) Limited, of which H. Ndume is the sole registered shareholder.

Share options and long term incentive planThe Group operates a share option scheme pursuant to which Directors and senior Executives may be granted options to acquire ordinary

shares in the Group at a fixed option exercise price. During the year, options were granted over a total of 1,840,000 ordinary shares.

Further details of the above share option scheme can be found in note 19.

Directors’ share option schemeThe Directors who held offi ce at the end of the financial year had the following interests in the share option scheme:

Options Options Options Optionsheld at granted exercised held at

1 March in the in the 28 February Exercise Exercisable Expiry2008 year year 2009 price (p) from date

K Broger — 300,000 — 300,000 130.00 13/05/2010 13/05/2018

J Burgess — 200,000 — 200,000 130.00 13/05/2010 13/05/2018

A Pouroulis — 100,000 — 100,000 130.00 13/05/2010 13/05/2018

P Kidney — 500,000 — 500,000 38.50 25/04/2010 25/04/2018

R Sinclair — 100,000 — 100,000 130.00 13/05/2010 13/05/2018

N Leighton — 100,000 — 100,000 130.00 13/05/2010 13/05/2018

H Ndume — 250,000 — 250,000 130.00 13/05/2010 13/05/2018

Total — 1,550,000 — 1,550,000

The interests of the Directors to subscribe for ordinary shares have not changed since the year end.

Signifi cant shareholders:

International Consultancy and Marketing S.A. 17.98%

Westward Investments Limited 16.18%

Protech Namibia (Pty) Limited 15.85%

Al Rajhi Holdings W.L.L. 9.73%

Credit Suisse International 6.48%

Photon Global Limited 5.94%

Sirius Resources Fund 1 Limited 3.77%

Approximate percentage of ordinary shares not in public hands: 57%

By order of the Board

Robert Sinclair

Chairman of the Remuneration Committee

25 June 2009


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SOCIAL RESPONSIBILITY STATEMENT


The Group supports the growing awareness of social, environmental and ethical matters when considering business practices.

This statement provides an outline of the policies in place that guide the Company and its employees when dealing with social,

environmental and ethical matters in the workplace.

Code of conductThe Group maintains and requires the highest ethical standards in carrying out its business activities in regard to dealing with gifts,

hospitality, corruption, fraud, the use of inside information and whistle-blowing.

Equal opportunity and diversityThe Group promotes and supports the rights and opportunities of all people to seek, obtain and hold employment without

discrimination. It is our policy to make every effort to provide a working environment free from bullying, harassment, intimidation and

discrimination on the basis of disability, nationality, race, sex, sexual orientation, religion or belief.

Employee welfareThe Group aims to assist employees at all levels to improve their professional abilities and to develop their skills.

The Group will practice manpower and succession planning in regard to the number and type of employee personnel resources that will

be required in the future. Individual career progression activities are developed with this in mind.

Joint venture partners, contractors and suppliersThe Group is committed to being honest and fair in all its dealings with partners, contractors and suppliers. The Group has a policy to

provide clarity and protection, within its terms of business, and to ensure the delivery and receipt of products and services at agreed

standards. The Group also closely guards information entrusted to it by joint venture partners, contractors and suppliers, and seeks to

ensure that it is never used improperly.

Operating responsibly and continuous improvementThe Group is committed to a proactive quality policy to ensure that stakeholders are satisfi ed with the Group’s results and the way

in which the business operates and to promote continuous improvement in the overall operation of the Group. In pursuit of these

objectives, the Group will use recognised standards and models as benchmarks for its management system.

Environmental policyThe Group adopts an environmental policy which sets standards that meet or exceed industry guidelines and host government

regulations. This will be reviewed on a regular basis.

As part of our environmental assessment, we employed marine mammal observers to travel on board the seismic vessel. These

observers were able to compile marine mammal and bird count statistics which will assist in the preparation of future environmental

impact assessments. Social impacts will also form part of these assessments and preliminary work in this area will consider the impact

on the Namibian coastline in the event that it becomes a petroleum province.


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16

CORPORATE GOVERNANCE STATEMENT

The Combined CodeChariot Oil & Gas Limited’s shares are traded on AIM and as such, Chariot is not subject to the requirements of the Combined Code on corporategovernance, nor is it required to disclose its specific policies in relation to corporate governance. The Directors, however, support high standards ofcorporate governance and will progressively adopt best practices in line with the Combined Code on Corporate Governance, so far as is practicable.

The Board of Directors operates within the framework described below.

The workings of the Board and its Committees:

The Board of DirectorsThe Board meets frequently to consider all aspects of the Group’s activities. A formal schedule of matters reserved for the Board has been issued and approved and includes overall strategy and approval of major capital expenditure.

The Board consists of the Chairman, Chief Executive Offi cer, Executive Directors and Non-Executive Directors. All Directors have access to

the advice and services of the Company Secretary and the Group’s professional advisers. Peter Kidney is an independent Director.

Remuneration CommitteeThe remuneration committee comprises Peter Kidney and Norman Leighton, and is chaired by Robert Sinclair. Its terms of reference are discussed in the remuneration report.

Audit CommitteeThe audit committee comprises Robert Sinclair (Chairman), Norman Leighton and Peter Kidney. It meets at least twice each year and at any othertime when it is appropriate to consider and discuss audit and accounting related issues. The audit committee is responsible for monitoring thequality of any internal controls and for ensuring that the financial performance of the Group is properly monitored, controlled and reported on.It also meets the Group’s auditors and reviews reports from the auditors relating to accounts and any internal control systems.

Nomination CommitteeThe nomination committee comprises Peter Kidney, Robert Sinclair and Norman Leighton and is chaired by Adonis Pouroulis. Thecommittee is responsible for reviewing the structure, size and composition of the Board, preparing a description of the role and capabilitiesrequired for a particular appointment and identifying and nominating candidates to fill Board positions, as and when they arise.

Relations with shareholdersCommunications with shareholders are given a high priority by the Board of Directors who take responsibility for ensuring that a satisfactorydialogue takes place. Directors plan to meet with the Group’s institutional shareholders following the announcement of interim and final resultsand at other appropriate times. The Directors are also in regular contact with stockbrokers’ analysts. The Group has developed a website containinginvestor information to improve communications with individual investors and other interested parties.

Internal controlThe Directors acknowledge their responsibility for the Company’s system of internal control and for reviewing its effectiveness. The system of internal control is designed to safeguard the Company’s assets and interests and to help ensure accurate reporting and to help ensure compliance with applicable laws and regulation. Despite the inherent risk of certain limitations in any system of internal control the Board considers that the Company’s existing systems operated effectively throughout the year.


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REPORT OF THE INDEPENDENT AUDITORS

To the shareholders of Chariot Oil & Gas LimitedWe have audited the Company fi nancial statements (the “consolidated fi nancial statements”) of Chariot Oil & Gas Limited for the year ended 28 February 2009 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash fl ow statements and the related notes. These fi nancial statements have been prepared under the accounting policies set out therein.

Respective responsibilities of Directors and AuditorsThe Directors’ responsibilities for preparing the Annual Report and the fi nancial statements in accordance with section 262 of The Companies (Guernsey) Law 2008 and International Financial Reporting Standards (IFRSs) as adopted by the European Union are as set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the fi nancial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the fi nancial statements give a true and fair view and have been properly prepared in accordance with The Companies (Guernsey) Law 2008 and accounting standards.

We also report to you if, in our opinion, the Directors’ Report is not consistent with those fi nancial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specifi ed by law regarding Directors’ remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited fi nancial statements. The other information comprises only the Chairman’s Statement, the Report of the Directors, the Review of Operations, the Social Responsibility Statement, the Board of Directors, the Directors’ Remuneration Report, and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the fi nancial statements. Our responsibilities do not extend to any other information.

Our report is made solely to the Company’s members, as a body, in accordance with The Companies (Guernsey) Law 2008 and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of The Companies (Guernsey) Law 2008 or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the fi nancial statements. It also includes an assessment of the signifi cant estimates and judgments made by the Directors in the preparation of the fi nancial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with suffi cient evidence to give reasonable assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the fi nancial statements.

In our opinion the fi nancial statements:

● the Group fi nancial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 28 February 2009 and of its loss for the year then ended;

● have been properly prepared in accordance with The Companies (Guernsey) Law 2008;

● the information given in the Directors’ report is consistent with the fi nancial statements.

BDO STOY HAYWARD LLP

Chartered Accountants and Registered Auditors

London

25 June 2009


16282 31/07/2009 Proof 11

18

Period 13 August Year ended 2007 to 28 February 29 February 2009 2008

Note US$’000 US$’000

Provision for Impairment of Intangible Assets (3,098) —

Share Based Payments (2,641) —

IPO costs expensed (1,842) —

Other administrative expenses (3,217) (2,835)

Total administrative expenses (10,798) (2,835)

Loss from operations 4 (10,798) (2,835)

Finance income 2,039 —

Finance expense 6 (19,811) (26)

Loss for the year before taxation (28,570) (2,861)

Taxation expense 8 — —

Loss for the year attributable to the

equity holders of the parent (28,570) (2,861)

Loss per ordinary share – Basic and diluted 9 US$(0.22) US$(0.05)

All amounts relate to continuing activities.

The notes on pages 22 to 35 form part of these fi nancial statements.

CONSOLIDATED INCOME STATEMENTfor the year ended 28 February 2009


16282 31/07/2009 Proof 11


Foreign Share Share Other exchange Retained capital premium reserve reserve losses Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Exchange differences arising on

translation of foreign operations — — — (353) — (353)

Net income/(expense)

recognised directly in equity — — — (353) — (353)

Loss for the period — — — — (2,861) (2,861)

Total recognised income

and expense for the period (2,861) (2,861)

Issue of share capital 1,988 45,506 — — — 47,494

Share based payments — — 343 — — 343

Issue of Convertible Loan notes — — 1,111 — — 1,111

As at 29 February 2008 1,988 45,506 1,454 (353) (2,861) 45,734

Exchange differences arising from

translation of foreign operations — — — (832) — (832)

Net income/(expense)

recognised directly in equity — — — (832) — (832)

Loss for the period — — — — (28,570) (28,570)

Total recognised income

and expense for the period — — — — (28,570) (28,570)

Convertible loan note conversion — 1,111 (1,111) — — —

Issue of share capital 814 97,497 — — — 98,311

Issue costs — (9,484) — — — (9,484)

Share based payments — (1,421) 4,062 — — 2,641

As at 28 February 2009 2,802 133,209 4,405 (1,185) (31,431) 107,800

The following describes the nature and purpose of each reserve within owners’ equity.

Share capital Amount subscribed for share capital at nominal value.

Share premium Amount subscribed for share capital in excess of nominal value.

Other reserve Amount of proceeds on issue of convertible debt relating to the equity component and share based payments reserve.

Retained earnings Cumulative net gains and losses recognised in the fi nancial statements.

Exchange Reserve Exchange differences arising on translating into the reporting currency.


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 28 February 2009


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20

28 February 29 February 2009 2008

Note US$’000 US$’000

Non-current assets

Exploration and appraisal costs 10 86,991 51,903

Property, plant and equipment 11 209 156

Total non-current assets 87,200 52,059

Current assets

Trade and other receivables 12 122 8

Cash and cash equivalents 13 28,850 3,528

Total current assets 28,972 3,536

Total assets 116,172 55,595

Current liabilities

Trade and other payables 14 8,372 4,120

Net current assets 20,600 (584)

Non-current liabilities

Long-term borrowings — 5,741

Total liabilities 8,372 9,861

Net assets 107,800 45,734

Capital and reserves attributable to shareholders

Share capital 15 2,802 1,988

Share premium account 15 133,209 45,506

Other reserve 4,405 1,454

Retained loss (31,431) (2,861)

Foreign Exchange Reserve (1,185) (353)

Total equity 107,800 45,734

The fi nancial statements were approved by the Board of Directors and authorised for issue on 25 June 2009.

Peter Kidney

Chairman


CONSOLIDATED BALANCE SHEETat 28 February 2009


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Period Period

13 August 13 August

Year ended Year ended 2007 to 2007 to

28 February 28 February 29 February 29 February

2009 2009 2008 2008

US$’000 US$’000 US$’000 US$’000

Loss for the year before taxation (28,570) (2,861)

Finance income (2,039) —

Finance expense 54 26

IPO costs expenses 1,842 —

Impairment 3,098 —

Depreciation 47 —

Foreign exchange differences 19,757 —

Share based payment expense 2,641 343

25,400 369

Net cash fl ow from operating activities before

changes in working capital (3,170) (2,492)

(Increase)/decrease in trade and other receivables (114) (8)

Increase/(decrease) in trade and other payables (504) (3,251)

Net cash infl ow/(outfl ow) from operating activities (3,788) (5,751)

Investing activities

Finance Income 2,039 —

Payments in respect of property, plant and equipment (100) —

Payments in respect of intangible assets (31,375) (2,690)

Cash outfl ow used in investing activities (29,436) (2,690)

Financing activities

Proceeds from issue of Convertible Loan notes 1,992 5,400

Issue costs relating to Convertible Loan notes — (681)

Issue of ordinary share capital 88,847 7,635

Issue costs relating to share capital (9,484) —

Repayment of borrowings (3,052) —

Net cash fl ow from fi nancing activities 78,303 12,354

Net increase/(decrease) in cash and

cash equivalents in the year 45,079 3,913

Cash and cash equivalents at start of year 3,528 —

Effect of foreign exchange rate changes on cash

and cash equivalents (19,757) (385)

Cash and cash equivalents at end of year 28,850 3,528


CONSOLIDATED CASH FLOW STATEMENTfor the year ended 28 February 2009


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22

1 General information

Chariot Oil & Gas Limited is a Company incorporated and domiciled in Guernsey with registered number 47532. The address of the registered offi ce is Sydney Vane House, Admiral Park, St Peter Port, Guernsey GY1 2HU. The Company’s administrative offi ce is in Guernsey. The nature of the Company’s operations and its principal activities are set out in the Director’s report and in the Review of Operations and the Financial Review.

The functional and presentational currency of the Company is US Dollars (US$).

2 Accounting policies adopted under IFRS

Basis of preparation The fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the

International Accounting Standards Board (IASB), as adopted by the European Union.

In accordance with the provisions of section 244 of the Companies (Guernsey) Law 2008, the Group has chosen to only report the Group’s consolidated position hence Company only fi nancial statements are not presented.

The fi nancial statements are prepared under the historical cost accounting convention on a going concern basis.

Going concern The Directors are of the opinion that the Group has adequate fi nancial resources to enable it to undertake its planned programme of

exploration and appraisal activities over the forthcoming twelve months.

New Accounting Standards Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group’s

accounting periods beginning on or after 1st January 2008 or later periods and which the Group has decided not to adopt early. These are:

IAS 1, Presentation of fi nancial statements: A Revised Presentation (effective for accounting periods beginning on or after 1 January 2009).

Revised IFRS 3: Business Combinations (effective for accounting periods beginning on or after 1 July 2009). The revised IFRS 3 is still to be endorsed by the EU.

IFRS 8, Operating Segments (effective for accounting periods beginning on or after 1 January 2009).

IAS 23 Borrowing Costs (revised) (effective for accounting periods beginning on or after 1 January 2009).

Amendment to IFRS 2 share based payments: Vesting conditions and cancellations (effective for accounting periods beginning on or after 1 January 2009).

Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial statements – Puttable Financial Instruments and Obligations Arising on Liquidation (effective for accounting periods beginning on or after 1 January 2009). The amended IAS 32 is yet to be endorsed by the EU.

Amendment to IAS 27: consolidated and separate fi nancial statements. Amendments are effective for periods beginning 1 July 2009. The amended IAS 27 is still to be endorsed by the EU.

Amendment to IAS 39 and IFRS 7: Reclassifi cation of Financial Instruments (effective for accounting periods beginning on or after 1 July 2008). The amendment has been endorsed by the EU.

Amendment to IAS 39 and IFRS 7: Reclassifi cation of Financial Instruments – Effective date and transition (effective for accounting periods beginning on or after 1 July 2008). The amendment has yet to be endorsed by the EU.

Amendments to IFRS 1 and IAS 27: Cost of an Investment in a subsidiary, jointly controlled entity or associate (effective 1 January 2009). The amendment has been endorsed by the EU.

Amendment to IAS 39: Financial Instruments: Recognition and Measurement: Eligible Hedged Items (effective 1 July 2009). The amendment has yet to be endorsed by the EU.

Amendment to IFRIC 9 and IAS 39: Embedded derivatives (effective 30 June 2009). The amendment has been endorsed by the EU.

Amendment to IFRS 7: Improving Disclosures about Financial Instruments (effective 1 January 2009). The amendment has been endorsed by the EU.

IFRIC 12, Service Concession Arrangements (effective for accounting periods beginning on or after 1 January 2008). IFRIC 12 has been endorsed by the EU.

IFRIC 13, Customer Loyalty Programmes (effective for accounting periods beginning on or after 1st July 2008). IFRIC 13 has been endorsed by the EU.

NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the year ended 28 February 2009


16282 31/07/2009 Proof 11


2 Accounting policies continued

IFRIC15 Agreements for the Construction of Real Estate (effective for accounting periods beginning on or after 1 January 2009). IFRIC15 is still to be endorsed by the EU.

IFRIC16 Hedges of a Net Investment in a Foreign Operation (effective for accounting periods beginning on or after 1 October 2008). IFRIC 16 is still to be endorsed by the EU.

IFRIC17 Distributions of Non-cash Assets to Owners (effective for accounting periods beginning on or after 1 July 2009). IFRIC17 is still to be endorsed by the EU.

IFRIC18 Transfer of Assets from Customers (effective for accounting periods beginning on or after 1 January 2009). IFRIC18 is still to be endorsed by the EU.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the fi nancial statements of the Group. There will be additional presentational and disclosure impact affecting the presentation of the fi nancial statements.

Intangible fi xed assets The Group applies the full-cost method of accounting under which all expenditure relating to the acquisition, exploration, appraisal and

development of oil and gas interests, including an appropriate share of directly attributable overheads, is capitalised within cost pools. Capitalised costs are amortised on a unit of production basis. The Board regularly reviews the carrying values of intangible assets and writes down capitalised expenditure to levels it considers to be prudent. Costs pools are determined on the basis of geographical principles. The Group currently has two cost pools, both relate to its exploration interests in Namibia one being onshore and the other being offshore.

Taxation Income tax expense represents the sum of the current tax and deferred tax charge for the period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that have been enacted or substantially enacted and are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Foreign currencies Monetary assets and liabilities denominated in foreign currencies are translated into US Dollars at the rates of exchange prevailing at the

balance sheet date. Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Exchange differences are taken to the income statement.

Property, plant and equipment and depreciation Property, plant and equipment are stated at cost or fair value on acquisition less depreciation. Depreciation is provided on a straight line

basis at rates calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful life.

Property, plant and equipment are depreciated using the straight line method over their estimated useful lives, as follows:

Fixtures, fi ttings and equipment — 25 %

The carrying value of tangible fi xed assets is assessed annually and any impairment charge is charged to the income statement.

Leases Rent paid on operating leases is charged to the income statement on a straight line basis over the term of the lease.


16282 31/07/2009 Proof 11

24

2 Accounting policies continued

Share based payments Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the

consolidated income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfi ed, a charge is made irrespective of whether the market vesting conditions are satisfi ed. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modifi ed before they vest, the increase in the fair value of the options, measured immediately before and after the modifi cation, is also charged to the consolidated income statement over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the consolidated income statement is charged with the fair value of goods and services received.

Basis of consolidation Where the Company has the power, either directly or indirectly, to govern the fi nancial and operating policies of another entity or business

so as to obtain benefi ts from its activities, it is classifi ed as a subsidiary. The consolidated fi nancial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single entity. InterCompany transactions and balances between the Group companies are therefore eliminated in full.

Business combinations The consolidated fi nancial statements incorporate the results of business combinations using the purchase method. In the consolidated

balance sheet, the acquiree’s identifi able assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.

Financial instruments The Group’s fi nancial assets consist of current account or short term deposits at variable interest rates, loans and other receivables. Any

interest earned is accrued and classifi ed as interest. Trade and other receivables are stated at fair value and subsequently at amortised cost.

The Group’s fi nancial liabilities consist of convertible loan notes, trade and other payables. All are non derivative assets. The trade and other payables are stated initially at fair value and subsequently at amortised cost. Convertible loan notes are treated as described below.

Critical accounting estimates and judgements The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical

experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are as follows:

Recoverability of intangible assets Under the full cost based method of accounting, the Group capitalises exploration costs until it is capable of determining whether its

exploration efforts were successful and, if they were successful, whether any impairment charges may be required to bring the net book values of assets in line with their economic values.

Impairment review The carrying amounts of the Group’s assets are reviewed at each balance sheet date and, if there is any indication that an asset may be

impaired, its recoverable amount is estimated. The recoverable amount is the higher of its net selling price and its value in use.

Estimates on impairment are limited to an assessment by the Directors of any events or changes in circumstance that would indicate that the carrying value of the asset may not be recoverable.

Any impairment loss arising from the review is charged to administrative expenses whenever the carrying amount of the asset exceeds its recoverable amount.

Convertible loan notes The fair value of the liability component on initial recognition is the present value of the stream of future cash fl ows (including both coupon

payments and redemption) discounted at the market rate of interest that would have been applied to an instrument of comparable credit quality with substantially the same cash fl ows, on the same terms, but without the conversion option. The applicable rate of interest is estimated at 20%.

Share based payments Directors best estimate of the valuations underlying the share based payments are based on assumptions made by Directors using updated

models previously prepared by external consultants. See note 19 for further details of these assumptions.



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3 Segmental analysis In the opinion of the Directors, the operations of the Group companies comprise one single class of business including oil and gas exploration.

The Group operates in one geographic area, Namibia. The fi nancial information presented refl ects all the activities of this single business.

The Group’s primary reporting segment is oil and gas exploration.

Exploration of Oil and Gas Corporate Total

2009 US$000 US$000 US$000

Administrative expenses 3,747 7,051 10,798Loss after taxation 11,197 17,373 28,570Total assets 87,200 28,972 116,172Total liabilities 3,050 5,322 8,372 Other segment items included in the group statementsare as follows:Capital expenditures 38,186 — 38,186Depreciation, amortisation and depletion 47 — 47Provision for impairment of intangible assets 3,098 — 3,098Share based payments — 2,641 2,641

Exploration of Oil and Gas Corporate Total

2008 US$000 US$000 US$000

Administrative expenses 89 2,746 2,835Loss after taxation (89) (2,772) (2,861)Total assets 52,170 3,425 55,595Total liabilities (1,599) (8,262) (9,861) Other segments included within the Group statements are as follows:Capital expenditures 2,690 — 2,690

4 Loss from operations Period 13 August 2007 to 28 February 29 February 2009 2008

US$’000 US$’000

Loss from operations is stated after charging:Depreciation 47 — Share based payments 2,641 343Pre licence acquisition expenditure 383 —AIM admission costs expensed 1,842 —Professional and consultancy fees 825 64Auditors’ remuneration: Fee payable to the auditor for the audit of the Company’s annual fi nancial statements 45 35

Fee payable to the auditor for corporate fi nance services 212 —Total payable 257 35

Fees payable for corporate fi nance services include an amount of US$150,000 set against the share premium account.


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26


5 Employees

Period 13 August 2007 to 28 February 29 February 2009 2008 US$’000 US$’000

Directors fees and emoluments 309 30

Wages and salaries – staff costs 275 315

Compensation for loss of offi ce — 342

Amounts paid to third parties in respect of Directors’ services 426 41

Share based payment expense (note 19) 2,641 —

Social security costs 20 —

3,671 728

Included in Directors fees is an amount of US$118,000 in respect of capitalised costs. Included in wages and salaries is an amount of

US$216,000 in respect of capitalised costs.

6 Finance income and expense Period 13 August 2007 to 28 February 29 February 2009 2008

US$’000 US$’000

Bank interest receivable 2,039 —

Other fi nance expense (54) (26)

Foreign exchange loss on cash balances (19,757) —

Net fi nance expense (17,772) (26)

7 Investment The Company’s directly(*) and indirectly (**) held subsidiary undertakings at 28 February 2009 and at 29 February 2008 are:

Country of Percentage of ordinary

Subsidiary undertaking Principal activity incorporation share capital held

Enigma Oil & Gas Exploration

(Pty) Limited ** Oil and Gas exploration Namibia 100%

Greendale Universal Holdings

Limited ** Holding Company BVI 100%

Chariot Oil & Gas Investments

(Namibia) Limited * Holding Company Guernsey 100%


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8 Taxation

The Company is tax resident in Guernsey, where corporate profi ts are taxed at zero percent.

No taxation charge arises in Namibia as the Namibia subsidiary has recorded a taxable loss for the period.

Factors affecting the tax charge for the current periodThe tax assessed for the year is higher than the standard rate of corporation tax in Guernsey. The differences are explained below:

Period 13 August Year ended 2007 to 28 February 29 February 2009 2008

US$’000 US$’000

Tax reconciliation

Loss on ordinary activities for the year before tax (28,570) (2,861)

Loss on ordinary activities at the standard rate

of corporation tax in Guernsey of 0% (2008 – 0%) — —

Difference in tax rates in local jurisdictions at the

applicable tax rate of 35% (2008 – 35%) (241) (259)

Tax effect of adjustments on taxable income

Disallowable expenses 1 —

Loss carried forward 240 259

Deferred tax not recognised in respect of losses carried forward in Namibia total US$498,576 (2008 – US$258,699). The Company had tax losses carried forward on which no deferred tax asset is recognised. Deferred tax assets were not recognised as there is uncertainty regarding the timing of future profi ts against which these assets could be utilised.

Namibian taxation and royalties

Normal taxation

The petroleum income tax is payable annually at a rate of 35% of the taxable income received by or accrued to any person from a licence

area in connection with exploration, development or production operations in that area. Each licence area is assessed separately and losses

in one cannot be set off against profi ts in another.

Additional profi ts tax

In addition to the above tax, annually there will be paid an Additional Profi ts Tax. Additional Profi ts Tax shall be payable at the end of each

tax year on each petroleum licence area and determined on the basis of the rate of return on the project. It is levied on the project’s net cash

receipt, the after tax project net cash fl ow achieved above certain defi ned tiers of threshold rate of return on the project and has a range of

between 15 and 33%.

9 Loss per shareThe calculation of basic loss per ordinary share is based on a loss of US$28,570,000 (2008 – loss of US$2,861,000) and on 132,261,953

ordinary shares (2008 – 58,923,840), being the weighted average number of ordinary shares in issue during the year. Potentially dilutive

options are detailed in note 19, however, these are anti-dilutive as the Group reported a loss for the year.


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28


10 Exploration and appraisal costs by Cost Pool Total 2009

Onshore Offshore US$’000

Cost

At 13 August 2007 — — —

Additions 1,970 49,933 51,903

At 1 March 2008 1,970 49,933 51,903

Additions 1,128 37,058 38,186

At 28 February 2009 3,098 86,991 90,089

Impairment provision

Impairment charge for the period** (3,098) — (3,098)

Provided at 28 February 2009 (3,098) — (3,098)

Net book value

At 28 February 2009 — 86,991 86,991

Net book value

At 29 February 2008 1,970 49,933 51,903

* On 7 January 2008, the Company acquired the entire share capital of Enigma Oil & Gas Exploration (Pty) Limited (“Enigma”), in

consideration for the issue of ordinary shares. The surplus of value of the consideration over other separable net assets and liabilities of the

acquired group has been attributed to the Oil and Gas properties and represents their estimated fair value as at the date of acquisition.

** Impairment charge.

After review of the results of the aeromagnetic survey the Directors considered the carrying value of the on-shore assets to be US$ nil,

therefore an impairment charge of US$3,098,000 (2008 – US$ nil) was charged to the income statement representing all the costs incurred

on the onshore licences to date. This view is taken given the expected recoverable prospects of this licence.

11 Property, plant and equipment Fixtures, Fixtures, fi ttings and fi ttings and equipment equipment

2009 2008 US$’000 US$’000

Cost

At 1 March 156 —

Additions 100 156

At 28 February 2009 256 156

Depreciation

Charge for the year 47 —

At 28 February 47 —

Net book value

At 28 February 209 156


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12 Trade and other receivables Group Group 28 February 29 February 2009 2008

US$’000 US$’000

Trade and other receivables 122 8

Group Group 28 February 29 February 2009 2008

US$’000 US$’000

Amounts due:

Under three months 53 —

Between 3 and 6 months 57 —

Over 6 months 12 8

122 8

All above amounts are due within one year.

13 Cash and cash equivalents Group Group 28 February 29 February 2009 2008 US$’000 US$’000

Sterling balance 2,672 3,528

Restricted cash balance (sterling) 4,630 —

US dollar balance 21,548 —

28,850 3,528

The restricted cash balance relates to funds placed by the Company in a jointly managed deposit account to provide Wavefi eld Inseis

(the service provider for the 3D seismic acquisition) settlement of their monthly invoices. Funds were released upon approval of periodic

invoices with the bank mandated to accept payment instructions only on signature receipt from both the Company and the service

provider. The full amount shown as restricted cash above was released to settle fi nal payments relating to the completion of the seismic

acquisition within 30 days of the balance sheet date.


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30


14 Trade and other payables


US$’000 US$’000

Trade payables 6,696 126

Accruals 1,676 942

Amounts due to related parties — 3,052

8,372 4,120


US$’000 US$’000

Amounts payable

Under 3 months 5,429 1,068

Between 3 and 6 months 2,943 —

After 6 months — 3,052

8,372 4,120

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. Included within trade and

other payables is the amount of US$7.130m (2008 – US$ nil) as liabilities to be paid for exploration expenses.

15 Share capital Authorised 28 February 28 February 29 February 29 February 2009 2009 2008 2008

Number US$’000 Number US$’000

Ordinary shares of US$0.02 (1p) each 400,000,000 2,984 400,000,000 2,984

Allotted, called up and fully paid 28 February 28 February 29 February 29 February 2009 2009 2008 2008


Ordinary shares of US$0.02 (1p) each 141,173,471 2,802 100,000,000 1,988

The shares are legally 1p ordinary shares. The share capital has therefore been translated at the historic rate of 1.995.

Details of the ordinary shares issued during the period are given in the table below:

Date Description Price US$ No. of shares

2 November 2007 Placing of shares to provide working capital 0.02 26,117,326

21 December 2007 Placing of shares to provide working capital 0.02 3,000,000

7 January 2008 Acquisition of Enigma 0.76 52,234,653

7 January 2008 Conversion of loan notes 0.38 18,648,021

1 March 2008 Opening Balance 100,000,000

19 May 2008 Placing of shares to provide working capital 2.58 34,615,000

19 May 2008 Conversion of loan notes 1.29 846,154

19 May 2008 Conversion of loan notes 1.29 5,712,317

141,173,471


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16 Capital commitments At the balance sheet date the Group had entered into capital commitments of US$7.1 million (2008 – US$1.8 million).

17 Related party transactions The Group has entered into various transactions in which ICM, Westward and Protech are interested parties. ICM, Protech and Westward

own 18%, 16.2% and 15.9% respectively of the issue ordinary shares. Norman Leighton, one of the Directors, is a Director of ICM. Adonis

Pouroulis, one of the Directors is one of a number of potential benefi ciaries of the trust that owns Westward. Robert Sinclair, one of the

Directors, is a Director of Westward. Protech is wholly owned by Heindrich Ndume, one of the Directors. The transactions entered into by

the Group in which ICM, Protech or Westward have an interest are as follows:-

— Westward paid exploration costs on behalf of Enigma amounting to US$1.7 million.

— Westward Investments Limited no. 2, a company of which Mr Adonis Pouroulis is a Director and ultimately a shareholder, provides

services and facilities for the Group and received fees totalling approximately €8,330 for the period (2008 – nil).

— A further US$1.4 million was advanced to fund exploration costs by ICM. These balances were outstanding at the commencement of

the year, were non interest bearing and were settled after Admission from proceeds out of the placing. There were no fees outstanding

at the year end (2008 – US$3.052 million).

— J&K Property Investments Limited, a company owned as to 50% by James Burgess and of which he is a Director, provided services and

facilities for the Group in the fi rst quarter of the accounting period and received fees totalling approximately £10,000 for the period

(2008 – £40,000). There were no fees outstanding at the year end (2008 – nil).

— Pursuant to an agreement dated 1 October, 2007, Artemis Trustees Limited, a Company of which Mr Robert Sinclair is a Director and

ultimately a shareholder, was appointed by the Company to provide administration and secretarial services. Fees are chargeable on

a time spent basis, calculated by reference to the time, work type and skills involved in providing the services. The fees paid for the

period totalled £211,200 (2008 – £29,200). The amount outstanding at the year end was US$26,111 (2008 – nil).

— By deed of assignment dated 7 May 2008, the Company consented to the assignment by BMO to Sirius Investment Management LP

Incorporated of warrants exercisable over a number of Ordinary Shares calculated by dividing £44,556 by 50% of the Placing Price.

— Chromex Mining PLC, a Company of which Mr James Burgess is a Director and ultimately a shareholder, provides services and facilities

for the Group and received fees totalling approximately £15,000 for the period (2008 – nil). There were no fees outstanding at the year

end (2008 – nil).

— Aladar Resources Limited, a Company of which Mr Kevin Broger is a Director and majority owner, provides services and facilities for the

Group and received fees totalling approximately Canadian $25,000 for the period (2008 – nil). There were no fees outstanding at the

year end (2008 – nil).


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18 Financial instruments The Board of Directors determine, as required, the degree to which it is appropriate to use fi nancial instruments or other hedging contracts

or techniques to mitigate risk. The main risk affecting such instruments is foreign currency risk which is discussed below. Throughout the

year ending 28 February 2009 no trading in fi nancial instruments were undertaken (2008 – nil).

There is no material difference between the book value and fair value of the Group cash balances, short term receivables and payables.

Market risk

Market risk arises from the Group’s use of interest bearing and foreign currency fi nancial instruments. It is the risk that future cash fl ows

of a fi nancial instrument will fl uctuate because of changes in interest rates (interest rate risk), and foreign exchange rates (currency risk).

Throughout the period the Group has held surplus funds on deposit, principally with its main bankers Barclays, on fi xed short-term deposits

covering periods of one week to three months monitoring rates of return whilst assuring the ability to meeting working

capital requirements.

The Directors have not disclosed sensitivity analysis of the Group’s fi nancial assets and liabilities at the year end to interest rates as the risk is

not deemed to be material.

The Group’s treasury policy is that all signifi cant cash balances are held in the Group. Therefore the market risk is not deemed signifi cant in

any of the subsidiary undertakings.

Currency risk

The Group has potential currency exposures in respect of items denominated in foreign currencies comprising:

● Transactional exposure in respect of operating costs and capital expenditure incurred in currencies other than the functional currency

of operations.

During the period the Group initially held the majority of its cash received from the funds raised at AIM admission in pounds sterling. Due

to adverse movements in the value of sterling the Group experienced adverse currency movements. This risk is now managed with funds

being held principally in US Dollars to recognise the trading currency of the industry, a limited balance has been retained in sterling to meet

ongoing corporate overhead and projected sterling based commitments.

At the year end, the Group had cash balances of US$28,850,000 as detailed in note 13.

Other than the above sterling cash balances no other fi nancial instrument is denominated in a currency other than US Dollars.

A 10% adverse movement in exchange rates would lead to an increase in the foreign exchange loss of US$250,500 and a 10% favourable

movement in exchange rates would lead to a corresponding reduction, the effect on net assets would be the same as the effect on

profi ts (2008 – US$352,800).

Restricted cash balances are detailed in note 13.


16282 31/07/2009 Proof 11


18 Financial instruments continued

Capital

The Company considers its capital to comprise its ordinary share capital, share premium and retained earnings as well as the Equity portion

of the convertible loan notes (“Other reserve”).

In managing its capital, the Group’s primary objective is to maintain a suffi cient funding base to enable the Group to meet its working

capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, through new share issues,

the Group considers not only its short-term position but also its long-term operational and strategic objectives.


Capital and reserves attributable to shareholders US$’000 US$’000

Share capital 2,802 1,988

Share premium 133,209 45,506

Other reserve 4,405 1,454

Foreign exchange reserve (1,185) (353)

Retained earning (31,431) (2,861)

Total equity 107,800 45,734

Liquidity risk

The Group’s practice is to regularly review cash needs including those of its subsidiaries and to place excess funds on fi xed term deposits

for periods not exceeding three months with an institution that is top band rated by Standard & Poors.

The Group has suffi cient funds to continue operations for the forthcoming year and has no perceived liquidity risk.

19 Share-based payments

Share Option Scheme

During the year, the Company operated the Chariot Oil & Gas Share Option Plan (“Share Option Scheme”). The Company recognised total

expenses (all of which related to equity settled share-based payment transactions) under the plan of:


US$’000 US$’000

Share Option Scheme 2,641 —


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34

19 Share-based payments continued

Share Option Scheme (continued)

The Option Plan provides for an exercise price equal to the closing market price of the Company shares on the date of the grant. The

vesting period is two years. The options expire if they remain unexercised after the exercise period has lapsed. For options valued using

the Black-Scholes model there are no market performance conditions or other vesting conditions attributed to the options.

The following table sets out details of all outstanding options granted under the Share Option Scheme.

28 February 29 February 28 February 2009 29 February 2008 2009 Fair 2008 Fair Options value Options value


Granted during the year 1,840,000 2,641 — —

Outstanding at the end of the year 1,840,000 2,641 — —

The range of the exercise price of share options exercisable at the year-end falls between US$0.55 (38.5p) — US$1.87 (130.0p),

(2008 – US$ nil — US$ nil).

The weighted average share price at the date of exercise is US$1.37 (0.95p), using exchange rate of £ = US$1.4347

The estimated fair values of options which fall under IFRS 2, and the inputs used in the Black-Scholes model to calculate those fair values are

as follows:

Estimated Share Exercise Expected Expected Risk ExpectedDate of grant fair value price price volatility life free rate dividends

28 April 2008* £0.98 £1.21 £0.385 32% 10 years 4.94% 0%

13 May 2008* £0.62 £1.21 £1.3 32% 10 years 4.94% 0%

* Calculated using the Black–Scholes model.

Expected volatility was determined by calculating the annualised standard deviation of the daily changes in the share price.



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19 Share-based payments continued Warrants

The following table sets out details of all outstanding warrants.

28 February 29 February 28 February 2009 29 February 2008 2009 Fair 2008 Fair Number of value Number of value

warrants US$’000 warrants US$’000

Outstanding at beginning of year 130,224 344 — —

Granted during the year 2,865,795 1,421 130,224 344

Outstanding at the end of the year 2,996,019 1,765 130,224 344

The range of the exercise price of warrants outstanding at the year-end falls between US$0.93 (65.0p) — US$1.87 (130.0p),

(2008 – US$1.78 — US$1.78).

The weighted average share price at the date of exercise is US$1.77 (124.0p) — using exchange rate of £ = US$1.4347.

The warrants were issued to the Company’s brokers and the cost set against the share premium account.

The estimated fair values of warrants which fall under IFRS 2, and the inputs used in the Black-Scholes model to calculate those fair values

are as follows:

Estimated Share Exercise Expected Expected Risk ExpectedDate of grant fair value price price volatility life free rate dividends

13 February 2008* £1.33 £1.30 £0.65 32% 3 years 4.94% 0%

27 March 2008* £0.62 £1.21 £0.65 32% 2.1 years 4.94% 0%

25 April 2008* £0.21 £1.21 £1.30 32% 2.1 years 4.94% 0%

* Calculated using the Black-Scholes model.

Expected volatility was determined by calculating the annualised standard deviation of the daily changes in the share price.

For warrants valued using the Black-Scholes model there are no market performance conditions or other vesting conditions attributed to

the warrants.

20 Post balance sheet events As announced on 19 May 2009, we have signed a farm-out with Petrobras for a 50% stake in one of our four licences offshore Namibia,

block 2714A. This agreement included a signing bonus of US$16.04m. A production bonus is also payable in the event of a commercial

discovery which is equal to 4.75% (after royalties) of Petrobras’ share of production up to either 2 million barrels of oil equivalent or a value

of US$118m whichever occurs fi rst. Petrobras has also agreed to, and will pay its 50% share of, a further 1,500km2 of 3D seismic acquisition

which is now underway.


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36

SHAREHOLDER NOTES


Chariot Oil & Gas Limited is an AIM listed oil and gas exploration

company with interests in Namibia.

Enigma Oil & Gas Exploration (Pty) Limited was incorporated

in Namibia in 2003. Enigma was acquired by Chariot in January

2008 and is the holder of the petroleum agreements and licences.

Enigma is the operator of the licences in Namibia.

ADVISERS

Contents

1 Highlights

4 Chairman’s Statement

10 Board of Directors

11 Report of the Directors

13 Directors’ Remuneration Report

15 Social Responsibility Statement

16 Corporate Governance Statement

17 Report of the Independent Auditors

18 Consolidated Income Statement

19 Consolidated Statement of Changes in Equity

20 Consolidated Balance Sheet

21 Consolidated Cash Flow Statement

22 Notes forming part of the FinancialStatements

ibc Advisers

Registered offi ce

Sydney Vane House,

Admiral Park,

St. Peter Port,

Guernsey, GY1 2HU

Nominated advisor

KPMG LLP

8 Salisbury Square,

London, EC4Y 8BB

Broker

BMO Capital Markets Limited

95 Queen Victoria Street,

London, EC4V 4HG

Bankers

Barclays Bank PLC

PO Box 41, Le Marchant House,

Le Truchot, St Peter Port,

Guernsey, GY1 3BE

Auditors

BDO Stoy Hayward LLP

55 Baker Street,

London, W1U 7EU

Financial PR

Hogarth

No1. London Bridge,

London, SE1 9BG

Solicitors

As to English Law

Memery Crystal LLP

44 Southampton Buildings,

London, WC2A 1AP

As to Namibian Law

Lorentz Angula Inc.

Private Bag 12007,

Ausspannplatz,

Windhoek 3rd Floor,

LA Chambers,

Ausspann Plaza,

Windhoek, Namibia

As to Guernsey Law

Babbé

PO Box 69,

18–20 Smith Street,

St. Peter Port,

Guernsey, GY1 4BL

Company secretary

Artemis Secretaries Limited

Sydney Vane House,

Admiral Park,

St.Peter Port,

Guernsey, GY1 2HU

Registrars and

receiving agents

Anson Registrars Limited

PO Box 426, Anson Place,

Mill Court, La Charroterie,

St Peter Port,

Guernsey, GY1 3WX

Namibia

AFRICA

Chariot’s key objective is to maximise returns for shareholders by exploring for and proving up resources from its current licences and diversifying its asset base through the introduction of production cashfl ow and other exploration opportunities.

Chariot Oil & Gas Limited

Registered Offi ce:

Sydney Vane House,

Admiral Park,

St. Peter Port,

Guernsey, GY1 2HU

www.chariotoilandgas.com


Congo

Angola

Namibia

Santos

Campos

Sedimentary Basins


30 Billion BOE!

PelotasWalvis

Luderitz

OrangeBasin

Africa


5 Billion BOE

KUDU FIELD

!

N UNLOCKING NAMIBIA’S OIL & GAS POTENTIAL

Unlocking Namibia’s Oil & Gas Potential

Namibia

Enigma Licences


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