Annual Report 2007 - Global Energy Development

Global Energy Development PLCAnnual Report and Accounts 2007Identifying andRealising Potential

Global Energy Development PLC is apetroleum exploration and productioncompany focused on Latin America, anarea in which the management team hasdecades of operating experience and inwhich they have pursued a long-termstrategy of finding and developing reserves.The Company held as at 8 May 2008, seven contracts in the countries ofColombia, Peru and Panama.The Company’s balanced portfolio of contracts comprises a base ofproduction, development drilling and workover opportunities and severalhigh-potential exploration projects.The Company intends to continue increasing the asset value of its portfoliofocused in Latin America by utilising the cash flow from current production toadvance certain projects whilst looking for partners for other projects whichshould allow their value to be realised more quickly.The Company’s ordinary shares have been traded on AIM, a market operatedby the London Stock Exchange, since March 2002 (LSE-AIM: “GED”).01 Highlights02 At a glance04 Chairman’s statement05 Vice Chairman and Managing Director’s review08 Oil and gas reserves information09 Directors’ biographies10 Corporate governance statement12 Directors’ report15 Directors’ responsibilities16 Independent Auditors’ report17 Consolidated income statement18 Consolidated statement of changes in equity19 Consolidated balance sheet20 Consolidated cash flow statement21 Notes to the financial information55 Company accountsibc Corporate directory

01 Highlights 2007Global Energy Development PLCAnnual report 2007Highlights 2007Financial history since admission to AIMTurnover($000)27,289Gross profit($000)13,775Profit before tax($000)7,6198,55610,9741,8903,2395,349–1,9017973,12719,04521,0539,3449,4754,8178,8754,70602 03 04 05 06* 072007 Reserve report(Prepared by Ryder Scott Company, LP)02 03 04 05 06* 07* 2006 financial results restated due to International Financial Reporting Standards (“IFRS”).NPV10 = Net present value at 10% discountBOE = Barrels of oil equivalent$2.5bn02 03 04 05 06* 07$214m$64ImP1 ReservesNPV102P ReservesNPV103P ReservesNPV1064.9m BOE4.6m BOEProvedreserves(P1)15.2m BOEProved plusprobable reserves(2P)Proved plus probableplus possible reserves(3P)

02 At a glanceGlobal Energy Development PLCAnnual report 2007Global Energy Development PLCat a glanceThe Company has been active in Latin America for many years andthroughout this time has pursued what it refers to as its “footprint strategy”,The Company identifies acreage held by international oil companies overthe previous decades and then evaluates it using the strong historicaldata available, in-house expertise, specialised Latin American technicalconsultants and the new technologies available.Utilising this strategy, the Company has signed contracts in Colombia,Peru and Panama which offer considerable value for the Company butwhen held many years ago by the international oil companies may havebeen thought uneconomical due to extremely low oil prices and/or poorinfrastructure in and around the contract areas..Identifying and realisingPanamaColombiapanamaGarachine BlockCONTRACTSigned: 2007 with the MinistryExpiry date: 26.06.2042Acreage: Approx 691,500Initial royalty: 20%Status: Exploration2P Reserves 1 : nil3P Reserves 2 : nil(as at 31 December 2007)perublock 95 area licencecontractSigned: 2005 with PerupetroExpiry date: 07.06.2035Acreage: Approx 1,275,000Initial royalty: 5%Status: Exploration2P Reserves 1 : 3.9 million BOE3P Reserves 2 : 21.7 million BOE(as at 31 December 2007)Peru1Proved plus probable reserves2Proved plus probable plus possible reserves

03 At a glanceGlobal Energy Development PLCAnnual report 2007colombiaPerupanamaIn 2003, Colombia’s hydrocarbons sectorwas restructured with the NationalHydrocarbons Agency (“ANH”) beingcreated and assuming the administrativeand regulatory role previously held byEcopetrol S.A. (“Ecopetrol”). At the sametime a new contract model called“Concession contract” replaced the old“Association contract” featuring moreattractive terms for investors includingno back-in rights.Perupetro S.A. (“Perupetro”) is Peru’sstate company responsible for promotingthe investment of hydrocarbon activities inthe country. In 2003, the governmentapproved amendments to the Licencecontract whereby, among other initiatives,royalties were lowered to increaseinvestment into the hydrocarbons sector.In 2005, the Panamanian governmentannounced its first policy on hydrocarbonsand alternate energy sources and itsdesire to promote the development ofhydrocarbons in the country. Thehydrocarbons sector is administered byThe Ministry of Commerce and Industryfor the Republic of Panama (the“Ministry”).potentialColOmbiabolivar associationcontractSigned: 1996 with EcopetrolExpiry date: 12.07.2024Acreage: Approx 21,000Initial royalty: 20%Status: Production, development andexploration2P Reserves 1 : 7.2 million BOE3P Reserves 2 : 31.7 million BOE(as at 31 December 2007)ColOmbiabocachico associationcontractSigned: 1994 with EcopetrolExpiry date: 07.03.2022Acreage: Approx 54,700Initial royalty: 20%Status: Production and development2P Reserves 1 : 2.1 million BOE3P Reserves 2 : 4.0 million BOE(as at 31 December 2007)ColOmbiario verde concessioncontractSigned: 2004 with ANHExpiry date: 14.05.2034Acreage: Approx 75,000Initial royalty: 10.5%Status: Production, development andexploration2P Reserves 1 : 1.4 million BOE3P Reserves 2 : 5.0 million BOE(as at 31 December 2007)Colombiaalcaravan associationcontractSigned: 1993 with EcopetrolExpiry date: 13.02.2021Acreage: Approx 24,000Initial royalty: 20%Status: Production and development2P Reserves 1 : 0.4 million BOE3P Reserves 2 : 2.6 million BOE(as at 31 December 2007)ColOmbialos hatos concessioncontractSigned: 2004 with ANHExpiry date: 04.06.2034Acreage: Approx 295Initial royalty: 8%Status: Production and development2P Reserves 1 : 0.1 million BOE3P Reserves 2 : 0.1 million BOE(as at 31 December 2007)

04 Chairman’s statementGlobal Energy Development PLCAnnual report 2007Chairman’s statementPalo Blanco within theAlcaravan contract inColombiaTowards the end of 2007 the Company announced that it hadreceived several unsolicited expressions of interest from separateparties who were interested in potentially acquiring the Company.The Board of the Company ultimately concluded that theseapproaches undervalued the Company and terminated all suchdiscussions. These approaches arose, in the Board’s opinion, dueto the disconnect in the value the petroleum industry places onthe Company’s assets and the much lesser value that thefinancial markets place on the Company as a whole. TheCompany’s financial statements and independently auditedreserves for the year ended 31 December 2007 again show theconsiderable value inherent within the Company.Various initiatives are underway to develop the Company’s broadportfolio of assets, not least the potentially high-impact drillingcurrently underway at the Colombian Rio Verde contract. Inaddition, the Company has added a key appointment in 2008with Stephen Newton joining the Company as a member of theBoard and Managing Director. He has extensive experience inColombia having held, among other roles, the position ofPresident and General Manager of Colombia for OccidentalPetroleum Corporation. His contribution will be invaluable during2008.Mikel FaulknerExecutive Chairman8 May 2008

05 Vice Chairman and Managing Director’s reviewGlobal Energy Development PLCAnnual report 2007Vice Chairman and Managing Director’s reviewThe Torcaz 3well withinthe Bocachicocontract inColombiaOil storagetanks in TorcazfieldFinancialsThese final results are the Company’s first final results to bereported in accordance with International Financial ReportingStandards (“IFRS”) and the comparative financial informationfor the year ended 31 December 2006 has been restatedaccordingly. The percentages given within this report arecalculated using the restated financial information for the yearended 31 December 2006. The impact of adopting IFRS isdisclosed within the Notes to the Financial Information section ofthis report and additional information is also available on theCompany’s website at www.globalenergyplc.com.Turnover for the year ended 31 December 2007 was $27.3million, an increase of 29.6% against the prior year (year ended31 December 2006: $21.1 million) due to higher oil prices,marginally increased oil production volumes and income relatingto a quality adjustment. Total cost of sales was $13.5 million (yearended 31 December 2006: $11.6 million) and gross profit was$13.8 million (year ended 31 December 2006: $9.5 million).Operating profit was $9.9 million (year ended 31 December2006: $5.2 million) with profit before tax (excluding correction ofmiscellaneous income) (see note 4 of Notes to FinancialInformation) at $7.6 million (year ended 31 December 2006:$4.7 million).Gross production for the year ended 31 December 2007 totalled478,030 barrels of oil (“bbls”) (year ended 31 December 2006:466,099 bbls) with production net to the Company of 413,775bbls (year ended 31 December 2006: 401,298 bbls). Theaverage price for West Texas Intermediate (“WTI”) crude oilduring 2007 was $72.48 (2006: $66.23) and the Companyaveraged an operating cash netback per barrel of oil (excludingmiscellaneous income and income relating to a qualityadjustment) of $30.44 (2006: $23.86). The Company’s leaseand operating expense (“LOE”) per barrel of oil equivalent(“BOE”) in 2007 was 6.5% lower than in 2006 due to increasedoperational efficiencies and despite rising industry costs.Net cash inflow from operating activities for the year ended 31December 2007 was $12.4 million (year ended 31 December2006: $8.9 million) and this together with available cash fundedcapital expenditure of $13.3 million (year ended 31 December2006: $15.2 million).2007 reserve reportRyder Scott, the petroleum consultancy firm, has independentlyaudited the Company’s portfolio of contracts and prepared areserve report for the Company annually since the Company’sadmission to AIM in 2002.Ryder Scott reported that as at 31 December 2007, provedreserves net to the Company totalled 4.6 million BOE (as at 31December 2006: 5.5 million BOE), proved plus probable (“2P”)reserves net to the Company totalled 15.2 million BOE (as at 31December 2006: 19.4 million BOE) and proved plus probableplus possible (“3P”) reserves net to the Company totalled 64.9million BOE (as at 31 December 2006: 81.8 million BOE).Based upon a Brent Crude Oil Price of $93.85 per barrel, thisbeing the closing price as at 31 December 2007, the date of theReserve Report, the Net Present Value at a 10% discount(“NPV10”) of the proved reserves was $214.0 million (2006:$128.0 million). The NPV10 of the 2P reserves totalled $641.2million (2006: $427.0 million) and the NPV10 of the 3P reservestotalled $2.5 billion (2006: $1.7 billion).Of the 4.2 million BOE reduction in the 2P reserves in 2007against 2006, 0.4 million BOE was attributable to the productionin 2007, 2.9 million BOE of the reduction, almost 70%, was aconsequence of forecasted substantially higher oil pricesaccelerating the Company’s cost recovery and therefore allowingEcopetrol S.A. (“Ecopetrol”), the state oil company and thepartner in the Bolivar and Bocachico contracts, to back-in to thesetwo Colombian contracts at earlier dates in the future. In addition,a revised development approach at the Bolivar contract resultedin lower future development costs further accelerating Ecopetrol’sback-in. Anticipated accelerated Ecopetrol back-in also accountedfor 12.5 million BOE, approximately 74%, of the 16.8 million BOEreduction in the 3P reserves.Gross recoverable 3P reserves in 2007 totalled 106.0 millionBOE. This was a 2% increase against 2006 (2006: 103.7 millionBOE) and therefore indicated that engineering remained almostentirely unchanged since the 2006 Reserve Report.Therefore, while substantially improved oil prices in 2007 havedecreased the Company’s contractual share of future oilproduction, they have also increased the Company’s 2P propertyvalue by over 50% against 2006.

06 Vice Chairman and Managing Director’s reviewGlobal Energy Development PLCAnnual report 2007Vice Chairman and Managing Director’s review continuedAerial viewof the PaloBlancoproductionfacilities withinthe Alcaravancontract inColombiaProductionfacilities at thePalo Blancofield within theAlcaravancontract inColombiaOverview of contracts and activitiesThe Company currently holds five contracts in Colombia, onecontract in Peru and one contract in Panama. The Company iscurrently fully compliant with the terms of each of thesecontracts.During 2007, the Company undertook drilling at the ColombianLuna Llena contract. The first well, Luna Llena 1, tested freshformation water with small traces of hydrocarbons. While thesecond well, Luna Llena 2, proved the existence of a productivehorizon and possibly significant reserves, an independenttechnical study indicated that a major portion of these reserveswere located underneath or in close proximity to the Meta Rivermeaning a very capital intensive work programme would beneeded to potentially realise these reserves and that commercialdevelopment would be very high risk. Although the Companyexceeded the capital investment obligations for the initial phaseof the contract, the complications resulting from the location ofthe reserves and potential environmental restrictions, theunexpected additional capital requirement and very restrictiverainy season resulted in the Company not being able to meet allof the specific work commitments within the time periodprovided for under the contract. As a result, as at 31 March 2008the Company no longer held the contract. The Luna Llenacontract, however, accounted for no reserves within the 2007Reserve Report and only 341,000 BOE of 3P reserves in the2006 Reserve Report.During 2007, the Colombian Los Sauces contract was alsoterminated and relinquished to the National HydrocarbonsAgency of the Republic of Colombia (“ANH”) as the Companywas unable to secure a rig due to industry-wide equipmentavailability constraints and therefore unable to complete its workobligations under the contract. The Los Sauces contractaccounted for none of the Company’s reserves in either the2006 or 2007 Reserve Reports.Drilling equipment for the Boral 1 wellwithin the Rio Verde contract in Colombia

07 Vice Chairman and Managing Director’s reviewGlobal Energy Development PLCAnnual report 2007Productionfacilities at theTilodiran fieldwithin the RioVerde contractin ColombiaTilodiran fieldwithin the RioVerde contractin ColombiaIn relation to the Peruvian Block 95 contract, the Company isawaiting the environmental permit required to undertake drilling.Once this is obtained, the Company will proceed to finalise thedetails of the drilling programme with the first obligation wellcontractually required by late 2009.The Company signed the Panamanian Garachine contract duringJune 2007, the first hydrocarbons contract the Panamaniangovernment had signed since 1990. The Company is onschedule with the currently required geological and geophysicalwork obligations and anticipates completion of all phase 1requirements on or before November 2008.Since the end of 2007, the Company has experienced some fieldunderperformance at some of its older fields, predominately atthe Palo Blanco field within the Colombian Alcaravan contract.The field underperformance is partially due to an increasingpercentage of well downtime due to surface mechanicalconditions and also delays caused by the lack of rigs to repairdown hole problems. This resulted in average net production forthe first quarter of 2008 of 982 barrels of oil per day (“bopd”)versus 1,126 bopd for 2007. The Company is currently addressingthe Palo Blanco field power generation facilities issues whichhave been the major source of mechanical downtime. In May2008, production has been restored to approximately 1,000bopd net to the Company.The management believes that the current two-well drillingprogramme at the Colombian Rio Verde contract has thepotential to significantly enhance current production levels. TheRio Verde contract contains the Tilodiran field containing theTilodiran 2 well which is currently producing 500 net bopd andhas outperformed original decline rate projections resulting inRyder Scott assigning a 30% increase in the Tilodiran field provedreserves for 2007. The second of the two wells to be drilledback-to-back is the Tilodiran 3 well, a direct offset to the Tilodiran2 well and is classified by Ryder Scott as a proved, undevelopedlocation. The first well, the exploratory Boral 1 well, has nowbeen drilled vertically to a total depth of 12,340 feet, productioncasing has been set and initial testing is underway to evaluate theGacheta and Ubaque formations, with both these formationspresent in the Tilodiran field. The Boral 1 well is structurally updipfrom the Rio Verde 1 well which was drilled several years ago bya previous operator. Ryder Scott has assigned a total of eightpossible drilling locations to develop the Boral field based uponseismic and the Rio Verde 1 well log information.Stephen VossVice ChairmanStephen NewtonManaging Director8 May 2008

08 Oil and gas reserves informationGlobal Energy Development PLCAnnual report 2007Oil and gas reserves information (unaudited)As at 31 December 2007The reserve estimates shown in this report are based on the joint reserve and resource definitions of the Society of PetroleumEngineers, the World Petroleum Congress, and the American Association of Petroleum Geologists. Proved and probable reserveestimates are based on a number of underlying assumptions including oil prices, future costs, oil in place and reservoir performance,which are inherently uncertain. Management uses established industry techniques to generate its estimates and regularly referencesits estimates against those of joint venture partners or external consultants. However, the amount of reserves that will ultimately berecovered from any field cannot be known with certainty until the end of the field’s life.All reserves are in the Latin America exploration and development area:Estimated net proved and probable reserves of crude oilproved Probablelatin America Latin America Total allbarrels barrels barrels’000s ’000s ’000sAt 1 January 2007Developed 1,748 74 1,822Undeveloped 2,981 11,399 14,3804,729 11,473 16,202Changes in year attributable to:Revision of previous estimates (331) (2,219) (2,550)Production (414) – (414)Developed 1,210 – 1,210Undeveloped 2,774 9,254 12,028At 31 December 2007 3,984 9,254 13,238Estimated net proved and probable reserves of natural gasproved Probablelatin America Latin America Total allcu ft (millions) cu ft (millions) cu ft (millions)At 1 January 2007Developed 374 – 374Undeveloped 4,500 14,381 18,8814,874 14,381 19,255Changes in year attributable to:Revision of previous estimates (1,137) (6,429) (7,566)Production – – –Developed – – –Undeveloped 3,737 7,952 11,689At 31 December 2007 3,737 7,952 11,689

09 Directors’ biographiesGlobal Energy Development PLCAnnual report 2007Directors’ biographiesMikel FaulknerExecutive Chairman (58)Mikel Faulkner holds a Bachelors degree in Mathematics andPhysics and a Masters degree in Business Administration. Hisemployment experience includes service as an officer in theUnited States Naval Nuclear Power Program, a member of theaudit staff at Arthur Andersen & Co., a financial officer forAmerican Quasar Petroleum, and at HKN, Inc. (formerly HarkenEnergy Corporation), where he served as chairman from 1991 to2003 and chief executive officer since 1982.Stephen VossVice Chairman (59)Stephen Voss received a Masters degree in BusinessAdministration from Harvard University in June 1976 and aBachelors of Science degree in Petroleum Engineering fromTexas A&M in May 1971. From 1972 to 1974, he was employedby Chevron Oil Company and Burmah Oil and Gas Company inLafayette, Louisiana as a drilling engineer. From 1976 to 1981, heworked for Goldrus drilling Company as executive vice presidentand chief operating officer. In 1981, Stephen founded ReliantDrilling Company as CEO. Stephen is a Member of SPE (Societyof Petroleum Engineers) and is a Registered ProfessionalEngineer in Texas.Stephen NewtonManaging Director (55)Stephen Newton holds a Mining/Petroleum Engineering degreefrom the University of Queensland, Brisbane, a Master of SciencePetroleum Engineering degree from Imperial College London andan Executive MBA from UCLA. He was an employee ofOccidental Petroleum Corporation for 24 years, includingPresident of Occidental Colombia from 1992 to 1997 and VicePresident Occidental, Worldwide Engineering and TechnicalServices from 1997-1999. From 1999 to 2001, he was Presidentof Alberta Energy Company’s, now EnCana Corporation,operations in Ecuador and Colombia. From 2003 to early 2007,Stephen was President and Chief Executive Officer of SolanaResources Limited. He is a Member of SPE.Alan HendersonNon-executive Director (74)Alan Henderson is chairman of Forum Energy PLC, AberdeenNew Dawn Investment Trust PLC and Deputy Chairman of thecharity RAFT. He is also non-executive director of Public ServiceProperties Investments Limited. He was previously Chairman ofAberdeen New Thai Investment Trust PLC and Ranger Oil (UK)Ltd and a director of ADT Ltd and Ranger Oil Ltd.David QuintNon-executive Director (57)David Quint is a graduate of the University of Notre Dame fromwhich he received a Bachelors degree in Modern Languages in1972 and a Juris Doctorate in 1975. From 1975 until 1982, he wasan attorney with Arter & Hadden in Cleveland, Ohio and WashingtonD.C. From 1983 until 1992, he served as the managing director ofthe London-based international financing arm of a US oil and gascompany. In 1992, David founded RP&C International, Inc., aninvestment-banking firm with offices in London and New York. Hecurrently serves as the chief executive officer of RP&C International,Inc. and of RP&C International Limited.The Rt. Hon. Lord FreemanNon-executive Director (65)Lord Freeman is a member of the House of Lords and also servesas chairman of Thales Holdings UK plc. He is a consultant toPricewaterhouseCoopers (London) and chairman of their UKAdvisory Panel; director of Thales S.A. (France); chairman ofMetalysis Ltd; chairman of Radiation Watch Ltd and chairman ofCambridge Enterprise Ltd (the University technology transferoffice). Lord Freeman is a graduate of Balliol College, Oxford. Hewas formerly a partner and managing director of Lehman Brothers(New York and London), specialising in cross-border mergers andacquisitions, and then a partner of PricewaterhouseCoopers (UK).Lord Freeman was MP for Kettering from 1983 to 1997, and helda number of ministerial positions during this time, including theparliamentary secretary for the departments of health and armedforces and minister of state for public transport and defenceprocurement. He also served as a member of the cabinet asChancellor of the Duchy of Lancaster.

10 Corporate governance statementGlobal Energy Development PLCAnnual report 2007Corporate governance statementStatement by the Directors on compliance with theCombined CodeThe Board acknowledges that adhering to rules of good corporategovernance is in the best interests of the Company and itsshareholders. Although the Company is not required to complywith the Combined Code, all the Directors remain committed tohigh standards of corporate governance and intend to complywith its main provisions as far as possible having regards to thesize of the Group. The following sections describe how the Boardhas applied the principles of the Combined Code.The Workings of the Board and its CommitteesThe BoardThe Board comprises three Non-executive Directors and threeExecutive Directors. The Executive Directors are Mikel Faulkner,who serves as the Executive Chairman of the Company, StephenVoss, who serves as the Company’s Vice Chairman and StephenNewton, who serves as the Company’s Managing Director. Thereis a clear division of responsibility between the ExecutiveChairman, Vice Chairman and the Managing Director, with theExecutive Chairman being charged with the running of the Board,and the Managing Director with the running of the Company’sbusiness, thus ensuring a balance of power and authority. Thethree Non-executive Directors are Alan Henderson, David Quintand Lord Freeman. The Company considers that each of theNon-executive Directors is an independent Director in that: i)none are executive officers or employees of the Company; andii) none have a relationship with the Company that will interferewith the exercise of independent judgement in carrying out theresponsibilities of such Directors. The combined Board providesthe Company with a wide range of expertise on issues relating tothe Company’s mission, operations, strategies and, mostimportantly, its standards or conduct.The Board is responsible to the shareholders for the leadershipand control of the Company. The Board meets formally fourtimes a year and on an ad hoc basis as required. A table ofattendance by Directors at meetings is set out on page 13. Incompliance with the Combined Code, the Board considers andmonitors all such matters as are specifically reserved to it underthe Company’s articles of association (“Articles”). The Company’smanagement provide appropriate and timely information to theBoard to enable the Board to carry out its duties. The Company’sArticles provide for formal and transparent procedures to appointnew Board members. The Articles further provide for re-electionof all Directors each year. The Board has considered theformation of a Nomination Committee but does not consider it tobe appropriate for the recurrent nature and size of the Board andCompany. The Board will continue to monitor this issue.The following committees deal with specific aspects of theGroup’s affairs:Audit CommitteeThe Audit Committee, which is chaired by Lord Freeman,comprises only the Non-executive Directors and meets asrequired and at least twice a year. The Audit committee providesa forum for reporting by the Group’s external auditors.The responsibilities of the Audit Committee compriserecommending to the Board the appointment and remunerationof the auditors, co-coordinating with the auditors on anyproblems or reservations they may have and reviewing with themthe management reports prepared as a result of audits carriedout, review of the Company’s policy on internal controls andreview of interim and annual financial statements beforesubmission to the Board.Remuneration CommitteeThe Remuneration Committee is responsible for recommendingto the Board the remuneration of the Executive Directors and theongoing review of the remuneration and other benefits of theExecutive Directors and senior executives, recommending fromtime to time the introduction, variation or discontinuance of anybenefits, including bonuses and share options. The RemunerationCommittees comprises only Non-executive Directors and ischaired by David Quint.Relations with shareholdersCommunication with shareholders is conducted throughcorrespondence, meetings, stock exchange releases and theCompany’s website, www.globalenergyplc.com. Any feedbackfrom shareholders is reported to the Board.Internal controlsThe Board acknowledges that it is responsible for establishingand maintaining the Group’s system of internal control, theeffectiveness of which is reviewed on a regular basis. The internalcontrol system is an ongoing process for identifying, evaluatingand managing the significant risks faced by the Company and isdesigned to meet particular needs of the Group and the risks towhich it is exposed, and by its nature can provide reasonably butnot absolute assurance against material misstatement or loss. Inview of the size of the Company, the Board does not considerthat an internal audit function is required at present; however, theBoard intends to keep this under review. The key procedures,which the Directors have established with a view to providingeffective internal control, are as follows:Management structureThe Board has overall responsibility for the Group and there is aformal schedule of matters specifically reserved for decision bythe Board. Each executive has been given responsibility forspecific aspects of the Group’s affairs.

11 Corporate governance statementGlobal Energy Development PLCAnnual report 2007Corporate accounting and procedures manualResponsibility levels are communicated throughout the Group aspart of the corporate accounting and procedures manual whichsets out, inter-alia, the general ethos of the Group, delegation ofauthority and authorisation levels, segregation of duties andcontrol procedures together with accounting policies andprocedures. The manual is reviewed quarterly and updatedas required.Quality and integrity of personnelThe integrity of personnel is ensured through supervision andtraining. High-quality personnel are seen as an essential part ofthe control environment and the ethical standards expected arecommunicated through the corporate accounting and proceduresmanual.Identification of business risksThe Board is responsible for identifying the major business risksfaced by the Group and for determining the appropriate course ofaction to manage those risks.Budgetary processEach year the Board approves the annual budget. Key risk areasare identified. Performance is monitored and relevant actionstaken throughout the year through the monthly reporting to theBoard of variances from the budget, updated forecasts for theyear together with information on the key risk areas.Investment appraisalThe budgetary process and authorisation levels regulate capitalexpenditures. For expenditures beyond specified levels, detailedwritten proposals have to be submitted to the Board. Reviews arecarried out after the investment is complete and, for someprojects, during the investment period, to monitor expenditure.Major overruns are investigated.The Directors continue to monitor and review the Group’sprocedures and policies on internal controls on an annual basis.The internal controls situation is reported to the Audit Committee,which has reviewed the effectiveness of the system of internalcontrols as it operated during the year.

12 Directors’ reportGlobal Energy Development PLCAnnual report 2007Directors’ reportThe directors present their Annual Report and the audited financial statements for the year ended 31 December 2007.Principal activitiesThe principal activities of the Group are oil and gas exploration and production in Latin America.Business reviewA full review of the Group’s activities during the year, recent events, and expected future developments is contained within theExecutive Chairman’s Statement on page 4 and within the Vice Chairman’s and Managing Director’s Review on pages 5 to 7. Thesepages form part of this Directors’ Report. The Group’s primary key performance indicators for 2007 are shown below.•••••••Turnover up 29.6% to $27.3 million (year ended 31 December 2006: $21.1 million);Gross profit up 45.4% to $13.8 million (year ended 31 December 2006: $9.5 million);Profit before tax (excluding correction of miscellaneous income) up 61.7% to $7.6 million (year ended 31 December 2006:$4.7 million);Gross production for the 2007 totalled 478,030 barrels of oil (2006: 466,099 barrels) with production net to the Company of413,775 barrels (2006: 401,298 barrels);Average operating cash netback per barrel (excluding miscellaneous income and income relating to a quality adjustment) of $30.44during 2007 against an average price for West Texas Intermediate (“WTI”) crude oil of $72.48 (2006: average operating cashnetback per barrel $23.86, average price for WTI $66.23);Proved plus probable (“2P”) reserves totalling 15.2 million barrels of oil equivalent (“BOE”) as at 31 December 2007 giving a netpresent value at a 10% discount (“NPV10”) of $641.2 million (2006: $427.0 million); andProved plus probable plus possible (“3P”) reserves totalling 64.9 million BOE as at 31 December 2007 giving a NPV10 of$2.5 billion (2006: $1.7 billion).Results and dividendsThe Group’s profit on ordinary activities after taxation for the year amounted to $6,993,000 (year ended 2006 restated $3,481,000).The Directors do not recommend the payment of a dividend due to the Company’s strategy of re-investing in capital assets.Subsequent eventsIn March 2008, the Luna Llena exploration and production contract with the Colombian Agencia Nacional de Hidrocarburos wasterminated after a period of negotiations for modifications to the contract, which were deemed necessary to enable continuedeconomic investment in exploration activities in the contract area. The related reserves were eliminated from the commercial reservesestimates prepared by Ryder Scott Company, LP detailed above.Financial instrumentsNote 23 below details the risk factors affecting the Group and summarises the Group’s policies for mitigating such risks throughholding and issuing financial instruments. These policies have been followed during the year 2007.International Financial Reporting Standards (IFRS) and adoption of accounting standardsIn accordance with the mandatory requirement for AIM companies, the Group has adopted IFRS with effect from 1 January 2007. Thefirst results to be prepared under IFRS were the 2007 interim results. The Group has published on the Global Energy DevelopmentPLC website (www.globalenergyplc.com) a re-statement of the 2006 UK GAAP financials, together with a reconciliation of theadjustments between UK GAAP to IFRS. The key differences between UK GAAP and IFRS which have been identified as impacting theaccounting practices relating to capitalised exploration and development costs, related depreciation, depletion and amortisation,financial instruments and deferred taxes.A summary of standards effective at year end and their adoption status by the Group is included in note 1 to the financial statements.DirectorsThe Directors of the Company who served during the year and subsequent to the year end were as follows:Mikel Faulkner – Executive ChairmanStephen Voss – Vice Chairman (Previously Managing Director appointed Vice Chairman 7 March 2008)Stephen Newton – Managing Director (Appointed 7 March 2008)Guillermo Sanchez – Executive Director (Resigned 17 August 2007)Alan Henderson – Non-executive DirectorDavid Quint – Non-executive DirectorLord Freeman – Non-executive Director

13 Directors’ reportGlobal Energy Development PLCAnnual report 2007Mikel Faulkner and Stephen Voss stood for re-election and were re-elected at the Annual General Meeting of the Company which tookplace on 7 June 2007.Details of the Directors’ interests in the ordinary shares of the Company and options over ordinary shares are set out below:As at 31 December 2007 As at 1 January 2007ordinaryordinaryshares Options shares OptionsMikel Faulkner 150,000 1,580,000 105,504 1,580,000Stephen Voss 24,349 990,000 21,849 990,000Stephen Newton – – – –Guillermo Sanchez 1 12,483 590,000 12,483 590,000Alan Henderson 9,421 80,000 – 80,000David Quint 47,428 50,000 52,232 50,000Lord Freeman 5,000 40,000 – 40,0001Guillermo Sanchez, an Executive Director, resigned as a Director on 17 August 2007.All the holdings are beneficially held.No Director exercised any options during the year.No Director had any interest in the shares of the subsidiary undertakings or any other Group undertakings.There are no warrants in the Company outstanding.There were no contracts existing during, or at the end of the year, in which a Director was or is materially interested.A summary of the number of meetings attended by the Directors of the Company during 2007 is provided below.board Audit Remunerationmeetings Committee 1 Committee 1 TotalMikel Faulkner 9 – – 9Stephen Voss 9 – – 9Stephen Newton – – – –Guillermo Sanchez 2 – – – –Alan Henderson 7 2 1 10David Quint 9 1 1 11Lord Freeman 9 2 1 121 Only Non-executive Directors are entitled to attend the meetings of the Audit Committee and Remuneration Committee.2 Guillermo Sanchez, an Executive Director, resigned as a Director on 17 August 2007 and was eligible to attend two of the nine Board Meetings held in 2007.Corporate social responsibilityThe Group is fully committed to high standards of environment, health and safety management.Charitable and political donationsDuring the year, the Group made charitable contributions to The Children’s Vision International, a non-profit foundation in Colombia of$10,000 (2006: $23,500), to the Youth Development Center, a non-profit organisation in Houston, Texas of $8,000 (2006: $6,000),and to Raft International, Ltd, a non-profit organisation in the United Kingdom of $14,400 (2006: $nil).Supplier payment policyIt is Company and Group policy to settle all debts with creditors on a timely basis and in accordance with the terms of credit agreedwith each supplier.Trade creditors of the Group as at 31 December 2007 were equivalent to 31 (2006: 27) days’ purchases, based on the average dailyamount invoiced by suppliers to the Group during the year.

14 Directors’ reportGlobal Energy Development PLCAnnual report 2007Directors’ report continuedAuditorsIn accordance with the Companies Act 1985, a resolution for the re-appointment of BDO Stoy Hayward LLP as auditors of the Groupis to be proposed at the forthcoming Annual General Meeting.All of the Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by theGroup’s auditors for the purpose of their audit and to establish that the auditors are aware of that information. The Directors are notaware of any relevant audit information of which the auditors are not aware.Annual General MeetingYour attention is drawn to the Notice of Meeting enclosed with this Annual Report which sets out the resolutions to be proposed atthe forthcoming Annual General Meeting.By order of the BoardMikel Faulkner Stephen Voss Stephen NewtonExecutive Chairman vice Chairman managing Director8 May 2008Global Energy Development PLC26 Dover StreetLondon W1S 4LYUK

15 Directors’ responsibilitiesGlobal Energy Development PLCAnnual report 2007Directors’ responsibilitiesThe directors are responsible for keeping proper accountingrecords which disclose with reasonable accuracy at any time thefinancial position of the Group, for safeguarding the assets of theCompany, for taking reasonable steps for the prevention anddetection of fraud and other irregularities and for the preparationof a Directors’ Report which complies with the requirements ofthe Companies Act 1985.The directors are responsible for preparing the annual report andthe financial statements in accordance with the Companies Act1985. The directors are also required to prepare financialstatements for the Group in accordance with InternationalFinancial Reporting Standards as adopted by the European Union(IFRSs) and the rules of the London Stock Exchange forcompanies trading securities on the Alternative InvestmentMarket.International Accounting Standard 1 requires that financialstatements present fairly for each financial year the Group’sfinancial position, financial performance and cash flows. Thisrequires the faithful representation of the effects of transactions,other events and conditions in accordance with the definitionsand recognition criteria for assets, liabilities, income andexpenses set out in the International Accounting StandardsBoard’s “Framework for the preparation and presentation offinancial statements”. In virtually all circumstances, a fairpresentation will be achieved by compliance with all applicableIFRSs. A fair presentation also requires the Directors to:•••consistently select and apply appropriate accounting policies;present information, including accounting policies, in a mannerthat provides relevant, reliable, comparable and understandableinformation; andprovide additional disclosures when compliance with thespecific requirements in IFRS is insufficient to enable users tounderstand the impact of particular transactions, other eventsand conditions on the entity’s financial position and financialperformance.Financial statements are published on the Group’s website inaccordance with legislation in the United Kingdom governing thepreparation and dissemination of financial statements, which mayvary from legislation in other jurisdictions. The maintenance andintegrity of the Group’s website is the responsibility of thedirectors. The directors’ responsibility also extends to the ongoingintegrity of the financial statements contained therein.

16 Independent Auditors’ reportGlobal Energy Development PLCAnnual report 2007Independent Auditors’ reportTo the shareholders of Global Energy Development PLCWe have audited the Group financial statements (the “financialstatements”) of Global Energy Developments PLC for the yearended 31 December 2007 which comprise the ConsolidatedIncome Statement, the Consolidated Balance Sheet, theConsolidated Cash Flow Statement, the Consolidated Statementof Changes in Shareholders’ Equity and related notes. Thesefinancial statements have been prepared under the accountingpolicies set out therein.We have reported separately on the parent Company financialstatements of Global Energy Developments PLC for the yearended 31 December 2007 and on the information in theDirectors’ Report that is described as having been audited.Respective responsibilities of Directors and auditorsThe Directors’ responsibilities for preparing the Annual Reportand the financial statements in accordance with applicable lawand International Financial Reporting Standards as adopted by theEuropean Union are set out in the Statement of Directors’Responsibilities.Our responsibility is to audit the financial statements inaccordance with relevant legal and regulatory requirements andInternational Standards on Auditing (UK and Ireland).We report to you our opinion as to whether the financialstatements give a true and fair view and have been properlyprepared in accordance with the Companies Act 1985 andwhether the information given in the Directors’ Report isconsistent with those financial statements. We also report to youif, in our opinion, the Company has not kept proper accountingrecords, if we have not received all the information andexplanations we require for our audit, or if information specifiedby law regarding Directors’ remuneration and other transactions isnot disclosed.We read other information contained in the Annual Report andconsider whether it is consistent with the audited financialstatements. The other information comprises only the ExecutiveChairman’s Statement, the Vice Chairman and ManagingDirector’s Review, the Oil and Gas Reserves Information as at31 December 2007 (unaudited), the Directors’ Biographies, theCorporate Governance Statement and the Directors’ Report. Weconsider the implications for our report if we become aware ofany apparent misstatements or material inconsistencies with thefinancial statements. Our responsibilities do not extend to anyother information.Our report has been prepared pursuant to the requirements ofthe Companies Act 1985 and for no other purpose. No person isentitled to rely on this report unless such a person is a personentitled to rely upon this report by virtue of and for the purposeof the Companies Act 1985 or has been expressly authorised todo so by our prior written consent. Save as above, we do notaccept responsibility for this report to any other person or for anyother purpose and we hereby expressly disclaim any and all suchliability.Basis of audit opinionWe conducted our audit in accordance with InternationalStandards on Auditing (UK and Ireland) issued by the AuditingPractices Board. An audit includes examination, on a test basis, ofevidence relevant to the amounts and disclosures in the financialstatements. It also includes an assessment of the significantestimates and judgments made by the Directors in thepreparation of the financial statements, and of whether theaccounting policies are appropriate to the Group’s circumstances,consistently applied and adequately disclosed.We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary inorder to provide us with sufficient evidence to give reasonableassurance that the financial statements are free from materialmisstatement, whether caused by fraud or other irregularity orerror. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financialstatements.OpinionIn our opinion the Group financial statements:• give a true and fair view, in accordance with IFRS as adoptedby the European Union, of the state of the Group’s affairs asat 31 December 2007 and of its profit for the year thenended; and• have been properly prepared in accordance with theCompanies Act 1985.In our opinion, the information given in the Directors’ Report isconsistent with the financial statements.BDO Stoy Hayward LLPChartered Accountants and Registered AuditorsLondon8 May 2008

17 Consolidated income statementGlobal Energy Development PLCAnnual report 2007Consolidated income statementFor the period ended 31 December 20072007 2006note $000 $000Revenue 27,289 21,053Cost of sales (13,514) (11,578)Gross profit 13,775 9,475Other income 4 678 200Other income – correction of miscellaneous income 4 1,240 –1,918 200General and administrative costs (5,841) (4,438)Operating profit 9,852 5,237Finance income 7 164 152Finance expense 8 (1,141) (683)Profit before taxation 8,875 4,706Income tax expense 9 (1,882) (1,225)Profit after taxation 6,993 3,481Earnings per share 3– Basic $0.20 $0.10– Diluted $0.19 $0.09Shares outstanding 3– Basic 35,328,428 35,304,403– Diluted 43,038,651 43,814,626The results reflected above relate to continuing activities.The notes on pages 21 to 54 form an integral part of these financial statements.

18 Consolidated statement of changes in equityGlobal Energy Development PLCAnnual report 2007Consolidated statement of changes in equityCalledup share Capital Share Other Retainedcapital reserve premium reserve losses Total$000 $000 $000 $000 $000 $000At 1 January 2006 537 210,844 26,288 1,314 (177,809) 61,174Profit for the period – – – – 3,481 3,481Total recognised income and expense for the year – – – – 3,481 3,481Equity proportion of convertible debt – – – 512 – 512Share based payments – – – – 312 312Exercise of options 2 – 151 – – 153At 1 January 2007 539 210,844 26,439 1,826 (174,016) 65,632Profit for the period – – – – 6,993 6,993Total recognised income and expense for the year – – – – 6,993 6,993Share-based payments – – – – 480 480At 31 December 2007 539 210,844 26,439 1,826 (166,543) 73,105The notes on pages 21 to 54 form an integral part of these financial statements.

19 Consolidated balance sheetGlobal Energy Development PLCAnnual report 2007Consolidated balance sheetAs at 31 December 20072007 2006note $000 $000AssetsNon-current assetsIntangible assets 11 4,419 4,658Property, plant and equipment 12 82,499 76,57886,918 81,236Current assetsInventories 14 884 999Deferred tax assets 10 288 728Trade and other receivables 15 9,367 4,405Term deposits 16 1,831 893Cash and cash equivalents 17 4,602 6,95516,972 13,980Total assets 103,890 95,216LiabilitiesCurrent liabilitiesTrade and other payables 18 (4,223) (3,456)Non-current liabilities 19Convertible loan notes 20 (15,810) (15,425)Deferred tax liabilities 10 (10,010) (10,029)Long-term provisions 21 (674) (624)Other payables 19 (68) (50)(26,562) (26,128)Total liabilities (30,785) (29,584)Net assets 73,105 65,632EquityCalled up share capital 24 539 539Share premium account 24 26,439 26,439Other reserve 24 1,826 1,826Capital reserve 24 210,844 210,844Retained losses 24 (166,543) (174,016)Total equity 73,105 65,632These financial statements were approved by the Board of Directors and authorised for issue on 8 May 2008 and were signed on itsbehalf byMikel Faulkner Stephen Voss Stephen NewtonExecutive Chairman vice Chairman managing Director8 May 2008Global Energy Development PLC26 Dover StreetLondon W1S 4LYUKThe notes on pages 21 to 54 form an integral part of these financial statements.

20 Consolidated cash flow statementGlobal Energy Development PLCAnnual report 2007Consolidated cash flow statementFor the period ended 31 December 20072007 2006note $000 $000Operating activitiesProfit before taxation 8,875 4,706Depreciation, depletion and amortisation 12 6,805 4,343Write-off unsuccessful exploration costs 11 65 –(Increase)/decrease in trade and other receivables 15 (4,962) 1,016(Increase)/decrease in inventories 14 115 (343)Increase/(decrease) in trade and other payables 18 767 6Increase in long-term provisions 21 66 50Accretion expense on convertible notes 20 283 546Provision against unitisation receivable 1,050 –Other non-cash items 63 14Stock options expense 25 480 312Cash flows from operating activities 13,607 10,650Income taxes paid (1,202) (1,724)Net cash flows from operating activities 12,405 8,926Investing activityCapital expenditure and financial investment– Expenditure on tangible fixed assets 12 (12,242) (13,699)– Expenditure on intangible fixed assets 11 (1,040) (1,466)Disposal of assets 108 827Interest received 7 164 152Increase in short-term deposits 16 (938) (345)Net cash flows from investing activities (13,948) (14,531)Financing activitiesInterest paid (810) (305)Convertible loan notes issued 20 – 5,201Net cash flows from financing activities (810) 4,896Decrease in cash and cash equivalents (2,353) (709)Cash at beginning of year 6,955 7,664Cash at end of year 17 4,602 6,955The notes on pages 21 to 54 form an integral part of these financial statements.

21 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial informationFor the twelve months ended 31 December 20071. Accounting policiesBasis of preparationWith effect from 1 January 2007 it became mandatory for the Group to comply with International Financial Reporting Standards(IFRS).The financial results of the Group for the twelve months ended 31 December 2007 have been prepared on a basis which isconsistent with IFRS as adopted by the European Union. Comparative information for 2006 has been restated under IFRS.Reconciliations to IFRS from the previously published UK GAAP financial statements are summarised in note 30.First-time adoption of IFRSIn preparing these financial statements, the Group has elected to apply the following transitional arrangements permitted by IFRS1 “First-time Adoption of International Financial Reporting Standards”:• Business combinations effected before 1 January 2006, including those that were accounted for using the merger method ofaccounting under UK accounting standards, have not been restated.• Only those exchange differences arising on the retranslation of foreign operations since 1 January 2006 have been recognised as aseparate component of equity, with the related reserve being reset to zero at that date.• IFRS 2 “Share-based payments” has been applied to employee options granted after 7 November 2002 that had not vested by1 January 2006.• The Group has made estimates under IFRS at the date of transition, which are consistent with those estimates made for the samedate under UK GAAP unless there is objective evidence that those estimates were in error, i.e. the Group has not reflected any newinformation in its opening IFRS balance sheet but reflected that new information in its income statement for subsequent periods.New standards and interpretations(a) New standards, amendments to published standards and interpretations to existing standards effective in 2007 andadopted by the Group– IFRIC 10, Interim Financial Reporting and Impairment (effective for accounting periods beginning on or after 1 November 2006).IFRIC 10 prohibits impairment losses recognised in an interim period on goodwill and investments in equity instruments and onfinancial assets carried at cost from being reversed at a subsequent balance sheet date. There was no impact on the Group’s accountsfrom its adoption.(b) Standards, interpretations and amendments to published standards effective in 2007 but which are not relevant to theGroupThe following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning onor after 1 January 2007 but are currently not relevant to the Group’s operations:– IFRIC 7, Applying the restatement approach under IAS 29, Financial Reporting in Hyperinflationary Economies (effective foraccounting periods beginning on or after 1 March 2006). IFRIC 7 provides guidance on the application of IAS 29 requirements in areporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency, when theCompany was not hyperinflationary in the prior period. IFRIC 7 is not relevant to the Group as none of the Group companies has acurrency of a hyperinflationary economy as its functional currency.© Standards, amendments and interpretations to published standards not yet effective for the year 31 December 2007.Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for accountingperiods beginning on or after 1 January 2007 or later periods and which the Group has decided not to adopt early. These are:– IFRS 8, Operating Segments (effective for accounting periods beginning on or after 1 January 2009). This standard sets outrequirements for the disclosure of information about an entity’s operating segments and also about the entity’s products and services,the geographical areas in which it operates, and its major customers. It replaces IAS 14, “Segmental Reporting”. The Group expects toapply this standard in the accounting period beginning on 1 January 2009. As this is a disclosure standard it will not have any impacton the results or net assets of the Group.

22 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20071. Accounting policies continued– IAS 23, Borrowing Costs (revised) (effective for accounting periods beginning on or after 1 January 2009). The revised IAS 23 isstill to be endorsed by the EU. The main change from the previous version is the removal of the option of immediately recognising asan expense borrowing costs that relate to qualifying assets, broadly being assets that take a substantial period of time to get ready foruse or sale. The Group is currently assessing its impact on the financial statements.– IFRIC 11, IFRS 2 – Group and Treasury Share Transactions (effective for accounting periods beginning on or after 1 March 2007).IFRIC 11 requires share-based payment transactions in which an entity receives services as consideration for its own equityinstruments to be accounted for as equity settled. This applies regardless of whether the entity chooses or is required to buy thoseequity instruments from another party to satisfy its obligations to its employees under the share-based payment arrangement. It alsoapplies regardless of whether: (a) the employee’s rights to the entity’s equity instruments were granted by the entity itself or by itsshareholder(s); or (b) the share-based payment arrangement was settled by the entity itself or by its shareholder(s). Management iscurrently assessing the impact of IFRIC 11 on the accounts.– IFRIC 12, Service Concession Arrangements (effective for accounting periods beginning on or after 1 January 2008). IFRIC 12 is stillto be endorsed by the EU. IFRIC 12 gives guidance on the accounting by operators for public-to-private service concessionarrangements. IFRIC 12 is not relevant to the Group’s operations due to absence of such arrangements.– IFRIC 13, Customer Loyalty Programmes (effective for accounting periods beginning on or after 1 July 2008). IFRIC 13 is still to beendorsed by the EU. IFRIC 13 addresses sales transactions in which the entities grant their customers award credits that, subject tomeeting any further qualifying conditions, the customers can redeem in future for free or discounted goods or services. IFRIC 13 isnot relevant to the Group’s operations due to absence of such arrangements.– IFRIC 14, IAS 9 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective foraccounting periods beginning on or after 1 January 2008). IFRIC 14 is still to be endorsed by the EU. IFRIC 14 clarifies when refundsor reductions in future contributions should be regarded as available in accordance with paragraph 58 of IAS 19, how a minimumfunding requirement might affect the availability of reductions in future contributions and when a minimum funding requirementmight give rise to a liability. IFRIC 14 is not relevant to the Group’s operations due to absence of such arrangements.– Revised IFRS 3, Business Combinations and complementary Amendments to IAS 27, Consolidated and separate financialstatements (both effective for accounting periods beginning on or after 1 July 2009). This revised standard and amendments isstill to be endorsed by the EU. The revised IFRS 3 and amendments to IAS 27 arise from a joint project with the Financial AccountingStandards Board (FASB), the US standards setter, and result in IFRS being largely converged with the related, recently issued, USrequirements. There are certain very significant changes to the requirements of IFRS, and options available, if accounting for businesscombinations. The revision to IFRS 3 is not considered relevant to the Group’s operations at present due to absence of sucharrangements.– Amendment to IFRS 2, Share-based payments: vesting conditions and cancellations (effective for accounting periods beginning onor after 1 January 2009). This amendment is still to be endorsed by the EU. The Amendment to IFRS 2 is of particular relevance tocompanies that operate employee share save schemes. This is because it results in an immediate acceleration of the IFRS 2 expensethat would otherwise have been recognised in future periods should an employee decide to stop contributing to the savings plan, aswell as a potential revision to the fair value of the awards granted to factor in the probability of employees withdrawing from such aplan. This amendment is currently not applicable as the Group does not operate employee share save schemes. Management willcontinue to assess the impact of the amendment prior to adoption.– Amendment to International Accounting Standard 1 Presentation of Financial Statements (IAS 1) (effective for accounting periodsbeginning or after 1 January 2009, yet to be endorsed by the EU) replaces IAS 1 Presentation of Financial Statements (revised in2003) as amended in 2005.IAS 1 amends some of the terminology used in regard to the primary statements. Furthermore it introduces a requirement to includewithin a complete set of financial statements a statement of financial position as at the beginning of the earliest comparative periodwhenever the entity retrospectively applies an accounting policy or makes a retrospective restatement of items in its financialstatements, or when it reclassifies items in its financial statements. In addition the requirements in regard to the presentation ofchanges in equity and income and expenses are altered. Management is currently assessing the impact of the amendments on theaccounts.

23 Notes to the financial information Global Energy Development PLCAnnual report 20071. Accounting policies continued– Amendments to IAS 3, “Financial Instruments: Presentation” and IAS 1, “Presentation of Financial Statements” – Puttable FinancialInstruments and Obligations Arising on Liquidation (effective for accounting periods beginning or after 1 January 2009, yet to beendorsed by the EU) IAS 32 is amended by requiring some financial instruments that meet the definition of a financial liability to beclassified as equity. The amendment addresses the classification of some puttable financial instruments, and instruments, orcomponents of instruments, that impose on the entity an obligation to deliver to another party a pro rata share of the net assets ofthe entity only on liquidation. These amendments are currently not applicable as the Group does not utilise the described financialinstruments. Management will continue to assess the impact of the amendments prior to adoption.Basis of consolidationThe consolidated financial statements incorporate the financial statements of Global Energy Development PLC and entities controlledby the Company up to 31 December each year. Control is achieved where the Company has the power to govern the financial andoperating policies of an entity so as to obtain benefits from its activities.On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition.Any interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. Anyexcess of the cost of acquisition over the fair values of identifiable net assets is recognised as goodwill. The results of subsidiariesacquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or upto the effective date of disposal, as appropriate.Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line withthose used by other members of the Group. All significant intercompany transactions and balances between Group entities areeliminated on consolidation.Segment reportingThe Group’s primary form of segmental reporting will be by business segment. Its secondary form of segmental reporting will begeographic.A business segment is a group of assets or operations that are subject to risks and returns that are different to those of other businesssegments.Revenues and other IncomesSales revenues reflect actual volumes delivered to customers, valued at invoiced prices, as well as accruals for volumes delivered tothe sales point but not yet invoiced pending finalisation of pricing negotiations. Those volumes are accrued as sales and valued at theweighted average sales price for the month.Revenues relating to the sale of crude oil are recognised when the oil is received by the customer, and are net of taxes and royaltyinterests. Other incomes are recognised as incurred.Oil and gas assetsThe following policy definitions provide the guidelines for accounting treatment of Oil and Gas assets including properties, wells,facilities, pipelines and other related oil and gas producing assets during all stages of exploration and production activities:Intangible assets – evaluation and exploration assetsIn accordance with the provisions of IFRS 6, the Company has adopted an accounting policy for Evaluation and Exploration activity atthe Company’s transition date of 1 January 2006. The Company will continue to monitor the application of its policy with respect toany future guidance on accounting for oil and gas activities which may be issued.– Capitalisation of evaluation and exploration (E&E) assetsAll costs (other than payments to acquire the legal right to explore, evaluate or appraise an area) incurred during the Pre-licensingPhase are charged directly to the income statement. All costs incurred during the Evaluation and Exploration Phases, such as G&Gcosts, other direct costs of exploration (drilling, trenching, sampling and technical feasibility and commercial viability analyses) andappraisal are accumulated and capitalised as intangible Evaluation & Exploration (“E&E”) assets in accordance with the principles offull cost accounting.

24 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20071. Accounting policies continuedAt the completion of the Exploration Phase, if technical feasibility is demonstrated and commercial reserves are discovered, then,following the decision to continue into the development phase, the carrying value of the relevant E&E asset will be reclassified as aD&P asset, but only after the carrying value of the asset has been assessed for impairment in accordance with the Impairment of E&EAssets policy. E&E costs are not amortised prior to reclassification to the Development and Production Phase.– Impairment of E&E assetsUpon reclassification of a project from the E&E phase to D&P phase, an impairment review of the affected E&E assets is performed.The E&E impairment test is performed by comparing the carrying value of the costs against the estimated recoverable value of thereserves (proved plus probable) related to these assets. Any resulting impairment loss is charged to the income statement. Therecoverable value is determined as a) the higher of its fair market value less costs of disposal or b) the sum of related cash flows, on anet present value basis, from continued operations.Further, if at any time when indicators or circumstances exist such as:••••the licence to explore a particular area has expired or will expire soon and will not be renewed, or;further exploration or evaluation work in a particular area is not budgeted or planned, or;Evaluation and Exploration work has concluded that commercially viable amounts of oil are not available in a particular area and theCompany has decided to discontinue Evaluation and Exploration in that area, or;data shows that, although development of an area will continue, the carrying amount of the E&E asset is unlikely to be recovered infull from successful development, indicating the possibility that the carrying value of an E&E asset may exceed its recoverableamount,which suggest the E&E assets may be impaired; an impairment review of the affected E&E assets is performed. The E&E impairmenttest is carried out by adding the value of the E&E assets being evaluated to the D&P assets at a country level to determine the relevantCash Generating Unit (“CGU”). The relevant CGU is determined as a segment which is not larger than the Company’s primary orsecondary segment, as determined by IAS 14. The combined carrying value of the E&E and D&P assets in the CGU is comparedagainst the estimated recoverable value, and any resulting impairment loss is charged to the income statement. The recoverable valueis determined as a) the higher of its fair market value less costs of disposal or b) the sum of related cash flows, on a net present valuebasis, from continued operations.Property, plant and equipment – development and production (D&P) assetsIn accordance with the provisions of IAS 16, the Company has adopted an accounting policy for development and producing activity atthe Company’s transition date of 1 January 2006 which follows the full cost accounting principles. The Company will continue tomonitor the application of its policy with respect to any future guidance on accounting for oil and gas activities which may be issued.– CapitalisationDevelopment and production assets are accumulated into single field cost centres and represent the cost of developing thecommercial reserves and bringing them into production together with the E&E expenditures incurred in finding commercial reservespreviously transferred from E&E assets as outlined in the policy above. From time to time different scenarios occur that call for specificpolicy guidance. The following specific policies are applied by the Company:• Cash Generating Unit (CGU) – The Company has defined its Cash Generating Units as assets or groups of assets representing thesmallest identifiable segments generating cash flows that are largely independent of cash flows from other assets or groups ofassets. As defined, each CGU includes the relevant properties, wells, facilities, pipelines, and other key components of the includedoperations.• Dry Hole Costs – Dry hole costs are included in the capitalised costs of the field and would therefore be included in any impairmenttests conducted, as described below.• Water Injection/Disposal Wells – The Company may convert an existing well into a water injection or disposal well. At the time ofconversion, all costs associated with the asset are transferred to facility costs. Any capitalisable costs incurred there after will beincluded as facility costs.• Allocated Costs – Costs such as G&G, Seismic, Capitalised G&A costs, Financing costs, etc. which may cover multiple countries,business segments, CGU’s or other assets will be allocated to the appropriate CGU’s during the period in which the costs wereincurred.

25 Notes to the financial information Global Energy Development PLCAnnual report 20071. Accounting Policies continued– Depreciation, depletion and amortisation (DDA)Asset costs relating to each CGU as defined above, which include the components of properties, wells, facilities, pipelines and other,are depreciated, depleted or amortised (“DDA”) on a unit of production method based on the commercial proven and probablereserves for that CGU. Development and Production assets are depreciated over the relevant net production within the correspondingCGU. As noted above, asset costs associated with E&E projects, even though those assets may or may not have reserves associatedwith them and are within a CGU with active producing operations, are not depreciated until such costs are analysed for impairmentand then transferred to D&P phase. The DDA calculation takes into account the estimated future costs of development for recognisedproven and probable reserves for each field, based on current price levels and escalated annually based on projected cost inflationrates. Changes in reserve quantities and cost estimates are recognised prospectively from the last reporting date.– Impairment of D&P assetsA review is performed for any indication that the value of the Company’s D&P assets may be impaired such as:•••significant changes with an adverse effect in the market or economic conditions which will impact the assets, or;obsolescence or physical damage of an asset; an asset becoming idle or plans to dispose of the asset before the previouslyexpected date, or;evidence is available from internal reporting that indicates that the economic performance of an asset is or will be worse thanexpected.For D&P assets when there are such indications, an impairment test is carried out on the cash generating unit. Cash generating unitsare identified in accordance with IAS 36 “Impairment of Assets”, where cash flows are largely independent of other significant assetsgroups and are normally, but not always, single development or production areas. When an impairment is identified, the depletion ischarged through the income statement if the net book value of capitalised costs relating to the cash generating unit exceeds theassociated estimated future discounted cash flows of the related commercial oil and gas reserves.Workovers/overhaulsFrom time to time a workover or overhaul of existing D&P assets is required, which normally fall into one of two distinct categories.The type of workover dictates the accounting treatment and recognition of the related costs:– Capitalisable costsCosts will be capitalised where the performance of an asset is improved, where an asset being overhauled is being changed from itsinitial use, the assets’ useful life is being extended, or the asset is being modified to assist the production of new reserves.• If the workover is being performed on an asset which has been the subject of a previous workover, the net book value of costspreviously capitalised will be de-recognised and charged to Operating Expense at the same time as the subsequent capitalisableworkover expenditures are being recognised as part of the asset’s revised carrying value.• If the workover replaces parts, equipment or components of an asset or group of assets, and these replacement items qualify forcapitalisation, then the original cost of those parts or equipment, including related installation and set up costs that were capitalisedas part of the original asset, will be de-recognised and charged to Operating Expense in the income statement.In the event that the original cost of parts, equipment or components being replaced are not reasonably identifiable, the cost of thenew items, adjusted for inflation, may be deemed adequate for consideration as the original cost.– Non-capitalisable costsExpense type workover costs are costs incurred such as maintenance type expenditures, which would be considered day-to-dayservicing of the asset. These types of expenditures are recognised in the income statement as incurred. Expense workovers generallyinclude work that is maintenance in nature and generally will not increase production capability through accessing new reserves,producing from a new zone or significantly extend the life or change the nature of the well from its original production profile.Asset disposalsProceeds from the disposal of an asset, or part thereof, are taken to the income statement together with the requisite net book valueof the asset, or part thereof, being sold.

26 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20071. Accounting policies continuedDecommissioningWhere a material liability for the removal of production facilities and site restoration at the end of the productive life of a field exists, aprovision for decommissioning is recognised. The amount recognised is the present value of estimated future expenditure determinedin accordance with local conditions and requirements. The unwinding discount arising on the recognition of the provision is releasedto the income statement and included within finance expense.A tangible fixed asset of an amount equivalent to the provision is also created and depreciated on a unit of production basis. Changesin estimates are recognised prospectively, with corresponding adjustments to the provision and the associated fixed asset.Property, plant and equipment other than oil and gas assetsProperty, plant and equipment other than oil and gas assets are stated at cost less accumulated depreciation and any provision forimpairment. Depreciation is charged on such assets, with the exception of freehold land, so as to write off the cost, less estimatedresidual value, on a straight-line basis over their useful lives of between three and five years.InventoriesInventories are stated at the lower of cost and net realisable value.TaxationThe tax expense represents the sum of the tax currently payable and deferred tax.Current tax, including UK Corporation and any overseas tax, is provided at amounts expected to be paid (or recovered) using the taxrates and laws that have been enacted or substantially enacted by the balance sheet date.Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities inthe financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using thebalance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred taxassets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporarydifferences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from theinitial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profitnor the accounting profit.Deferred tax assets and liabilities are recognised for taxable temporary differences arising on investments in subsidiaries andassociates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it isprobable that the temporary difference will not reverse in the foreseeable future.The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longerprobable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, inwhich case the deferred tax is also dealt with in equity.Cash and cash equivalentsCash and cash equivalents comprise cash on hand, deposits with a maturity of three months or less and other short–term highlyliquid investments that are readily convertible into known amounts of cash and overdrafts repayable on demand. Bank overdrafts areshown within borrowings in current liabilities on the balance sheet.Term depositsTerm deposits relate to US dollar denominated Certificates of Deposit with restricted access and varying maturity dates which act asguarantees for Letters of Credits required for performance assurance on oil and gas fields and office rental contracts. The short-terminvestments are recorded at their fair value.

27 Notes to the financial information Global Energy Development PLCAnnual report 20071. Accounting policies continuedFinancial instrumentsFinancial assetsThe Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset wasrequired. The Group has not classified any of its financial assets as held to maturity or available for sale.The Group’s accounting policy for each category is as follows:Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in anactive market. They arise principally through the provision of goods and services to customers (i.e. trade receivables) but alsoincorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directlyattributable to their acquisition or issue and are subsequently carried at fair value (which is considered to equate to carried cost) lessprovision for impairment.Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of thecounterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under theterms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present valueof the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, suchprovisions are recorded in a separate allowance account with the expense being recognised within cost of sales in the incomestatement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off againstthe associated provision.From time to time the Group may elect to renegotiate the terms of trade receivables due from customers with which it has previouslyhad a good trading history. Such renegotiations may lead to changes in the timing of payments rather than changes to the amountsowed and, in consequence, the new expected cashflows would be discounted at the original effective interest rate.Cash and cash equivalents: Cash and cash equivalents includes cash in hand and deposits held at call with banks, but excludes cashheld within term deposits.Financial liabilitiesThe Group classifies its financial liabilities into categories depending on the purpose for which the liability was acquired. The Grouphas not classified any of its liabilities at fair value through profit and loss.The Group’s accounting policy for each category is as follows:Held at amortised cost: Trade payables and other short-term monetary liabilities are initially recognised at fair value and, wheredeemed material, subsequently carried at amortised cost using the effective interest method.Compound financial instruments: The Group’s convertible loan notes are classified as compound financial instruments and a separateaccounting policy for Convertible Debt has been included below.Share capitalFinancial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financialliability. The Group’s ordinary shares and unclassified shares are classed as equity instruments.ProvisionsFrom time to time it is necessary for the Group to defend itself against legal claims that may or may not result in the Group having tomake a financial settlement. Provisions for anticipated settlement costs and associated expenses arising from any legal and otherdisputes are made where a reliable estimate can be made of the probable outcome of the dispute. Where it is not possible to makesuch an estimate, no provision is made.

28 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20071. Accounting policies continuedConvertible debtIn accordance with IAS 32 and IAS 39, the Company has classified the convertible debt in issue as a compound financial instrument.Accordingly, the Company presents the liability and equity components separately on the balance sheet. The classification of theliability and equity components is not reversed as a result of a change in the likelihood that the conversion option will be exercised.No gain or loss arises from initially recognising the components of the instrument separately. Interest on the debt element of the loanis accreted over the term of the loan. Costs associated with the raising of debt are set off against the gross value of monies received.Interest on borrowings is capitalised where the related proceeds are clearly allocated to the development of a tangible asset.Capitalisation of interest is suspended once the asset is bought into production.Share-based paymentsIn accordance with IFRS 2 “Share-based payments”, the Group reflects the economic cost of awarding shares and share options toemployees and directors by recording an expense in the income statement equal to the fair value of the benefit awarded. Theexpense is recognised in the income statement over the vesting period of the award.Fair value is measured by use of a binomial model which takes into account conditions attached to the vesting and exercise of theequity instruments. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of nontransferability,exercise restrictions and behavioral considerations.Post retirement benefitsThe Group contributes to a defined contribution scheme. Contributions are charged to the income statement as they becomepayable.Foreign currenciesTransactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date. Exchange gainsor losses on translation are included in the income statement.The functional currency of the Company has been determined to be the US Dollar and accordingly the financial statements have beenprepared in US dollars.LeasesOperating leases and the corresponding rental charges are charged to the income statement on a straight-line basis over the life of thelease.Maintenance expenditureExpenditure on major maintenance, refits or repairs is capitalised where it fulfils one of the following:•••enhances the life or performance of an asset above its originally assessed standard of performance;replaces an asset, or part thereof, which was separately depreciated and which is then written off;restores the economic benefits of an asset which has been fully depreciated.All other maintenance expenditures are charged to the income statement as incurred.

29 Notes to the financial information Global Energy Development PLCAnnual report 20071. Accounting policies continuedCritical accounting judgements and key sources of estimation uncertaintyDetails of the Group’s significant accounting judgements and critical accounting estimates are set out in these financial statements andinclude:••••••carrying value of intangible exploration and evaluation fixed assets (note 11);carrying value of property, plant and equipment (note 12);commercial reserves estimates (ci-dessus);decommissioning provision (note 21);share based payments (note 25);convertible loans (note 20).2. Segmental analysisIn the opinion of the Directors, the operations of the Group companies comprise one single class of business including oil and gasexploration, development and production of oil and gas reserves, and the sale of hydrocarbons and related activities. The Groupoperates in one geographic area, Latin America. The financial information presented reflects all the activities of this single businesssegment.The Group’s primary reporting segment is business segment:Exploration,developmentand Productionof oil and gas Corporate Total2007 $000 $000 $000Crude sales 27,289 – 27,289Profit after taxation 12,579 (5,586) 6,993Total assets 75,654 28,236 103,890Total liabilities (11,879) (18,906) (30,785)Other segment items included in the Group statements are as follows:Capital expenditure 13,168 114 13,282Correction of miscellaneous income (see note 4) 1,240 – 1,240Depreciation, amortisation and depletion 6,680 125 6,805Share-based payments – 480 480exploration,developmentand productionof oil and gas Corporate Total2006 $000 $000 $000Crude sales 21,053 – 21,053Profit after taxation 7,289 (3,808) 3,481Total assets 54,690 40,526 95,216Total liabilities (3,494) (26,090) (29,584)Other segment items included in the Group statements are as follows:Capital expenditure 14,931 234 15,165Depreciation, amortisation and depletion 4,033 310 4,343Share-based payments – 312 312The Group’s secondary reporting segment is based on geographic regions; and since the Group presently operates only in LatinAmerica, the financial information presented would be the same as that presented for the business segment.

30 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20073. Earnings per share (EPS)Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parentby the weighted average number of ordinary shares outstanding during the year.Diluted earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parentby the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of ordinary sharesthat would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. The calculation of the dilutivepotential ordinary shares related to employee and director share option plans includes only those options with exercise prices belowthe average share trading price for each period.2007 2006$000 $000Net profit attributable to equity holders used in basic calculation ($000) 6,993 3,481Add back interest and accretion charge in respect of convertible loan notes ($000) 970 554Net profit attributable to equity holders used in dilutive calculation ($000) 7,963 4,035Basic weighted average number of ordinary shares 35,328,428 35,304,403Dilutive potential ordinary sharesOrdinary shares related to convertible notes 4,565,027 4,565,027Employee and Director share option plans 3,145,196 3,945,196Diluted weighted average number of ordinary shares 43,038,651 43,814,626The dilutive share schemes and options are detailed within share-based payments (note 25). The calculation of the diluted EPSassumes all criteria giving rise to the dilution of the EPS are achieved and all outstanding share options are exercised.4. Other income2007 2006$000 $000Financial gain on settlement of royalties 444 –Crude transport fees 104 40Miscellaneous income 22 160Gain on sale of assets 108 –Correction of miscellaneous income 1,240 –Total other income 1,918 200The correction of miscellaneous income resulted from a reconciliation of fees, tariffs and other income and an analysis of deferredincome recorded over a period of years, which identified that other income had been understated in prior periods. The correction ofmiscellaneous income was identified by the Group as a result of a reversal of a timing difference between the local Colombian policyof recording revenue and the Group policy of revenue recognition. Revenue is recorded in Colombia when the oil is lifted by thecustomer however revenue is recorded at Group level at the point of sale according to the sales contract in place. In addition duringthe detailed analysis and correction of the related accounts mis-classifications between other income and revenue were identified. Inaccordance with the provisions of IAS 8 regarding the practicality of identifying historic data in order to objectively ascertain thespecific nature and impact to prior periods, the adjustment to correct the miscellaneous income has been recognised in the currentyear. For comparison purposes, this adjustment has been excluded from the calculation of key performance indicators for profit beforetax and cash netback per barrel.

31 Notes to the financial information Global Energy Development PLCAnnual report 20075. Operating profitProfit from operations is stated after charging/(crediting):2007 2006$000 $000Depletion, depreciation and amortisation:Oil and gas assets 6,632 4,105Other fixed assets 173 238Operating lease charges – land and buildings 477 312Employee costs 3,932 3,331Gain on disposal of assets 108 –Stock options expense 480 312Net foreign currency gains/(losses) 67 (271)Auditors’ remuneration 312 255Analysis of auditors’ remuneration2007 2006$000 $000Audit services:Statutory audit 140 156Non-audit services:Audit related regulatory reporting 48 44Tax services 124 55Total auditors’ remuneration 312 2556. Employee costsGroup employee costs (including executive directors) during the year amounted to:2007 2006$000 $000Wages and salaries 2,469 2,341Social security costs and other payroll taxes 329 298Insurances and other benefits 379 182Other pension costs – defined contribution 45 45Share-based payments (note 25) 480 312Severance payments 230 –Total employee costs 3,932 3,178The average number of Group employees (including executive directors) was:2007 2006$000 $000Technical and operations 16 7Management and administrative 17 16Total Group employees 33 23The employee costs and number of employees above do not include contract and casual labour in field operations which are chargeddirectly to operating expense as incurred. These employees are not on the Group’s payroll and are contracted through third parties.

32 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20076. Employee costs continuedDirectors’ remunerationTotalTotalbonus Salary Benefits Severance Fees 2007 2006$000 $000 $000 $000 $000 $000 $000ExecutivesMikel Faulkner 75 107 – – – 182 279Stephen Voss 75 217 20 – – 312 315Guillermo Sanchez 8 169 25 75 – 277 258Non-executivesAlan Henderson – – – – 40 40 39David Quint – – – – 40 40 39Lord Freeman – – – – 40 40 39Total 158 493 45 75 120 891 969The disclosures required for Directors’ ordinary shares and options over ordinary shares in the Company are included in the Directors’Report on pages 12 to 14.7. Finance income2007 2006$000 $000Income on cash at bank and short-term deposits 164 1528. Finance expense2007 2006$000 $000Bank loans and overdrafts 122 80Interest on convertible debt 938 685Accretion of convertible debt expense 386 304Unwinding of discount on decommissioning provision 49 49Gross finance expenses 1,495 1,118Interest capitalised during the year (354) (435)Net finance expenses 1,141 6839. TaxationGlobal Energy Development PLC is subject to UK and Colombian taxation.UK taxationThe Company does not expect to be liable for UK corporation tax in the foreseeable future because, as of the date of the last UK taxreturn, Global had trading losses brought forward of $14.5 million which are expected to increase in the future.Colombian taxationThe Company pays taxes in Colombia through its branch office of the subsidiary Harken de Colombia, Ltd. The current tax includedrepresents the tax payable under Colombian legislation called Presumptive Income Tax (PIT). The PIT calculation is based upon a34% tax rate (2006: 35%) on presumptive income representing 3% of the previous year’s taxable net assets.At December 31 2007, net operating losses carried forward accumulated prior to the year 2002 and totalling $13.0 million expiredin accordance with Colombian tax law. To the extent allowed, net operating losses carried forward were utilised each year to reducecurrent taxation charges. See note 10 for information related to deferred taxation recognised regarding the net operating lossescarried forward.

33 Notes to the financial information Global Energy Development PLCAnnual report 20079. Taxation continuedTaxation chargeAnalysis of the Group tax charge/(credit):2007 2006$000 $000Current tax:UK Corporation Tax on profits at 30% (2006: 30%) – –Overseas tax 1,500 1,723Adjustments in respect of previous periods (40) –Total current tax 1,460 1,723Deferred tax: (see note 10)UK deferred tax (16) (47)Overseas tax 438 (451)Total deferred tax 422 (498)Tax charge on profit on ordinary activities 1,882 1,225The overseas current tax charge for 2006 includes a reclassification of $738,000 of tax expense previously reflected as administrativeexpenses. The weighted average effective tax rate is 21% (2006: 26%) based on profit before taxation.Taxation reconciliationThe charge for the year can be reconciled to the profit per the income statement:2007 2006$000 $000Profit before tax 8,875 4,706Tax on Group profit before tax at UK Corporation tax rate of 30% (2006: 30%) 2,663 1,412Effects of:Expenses not deductible for tax purposes 2,166 2,062Tax rate differences on profits/(losses) outside ring fence activities (1,077) 554Utilisation of Colombia tax losses (2,252) (2,305)Temporary differences (see note 10) 422 (498)Adjustments in respect of previous periods (40) 0Total tax charge 1,882 1,22510. Deferred taxationNet operating losses in the Harken de Colombia, Ltd branch generated in the years 2002 and prior were partially utilised in each yearsince. In 2006, a deferred tax asset in the amount of $433,000 was recognised on the basis of forecasted local profits and anticipatedutilisation of losses carried forward, however actual utilisation of losses was higher for the year. At 31 December 2007, the remainingbalance of net operating losses carried forward totalling $13.0 million expired, in accordance with Colombia tax law, therefore nodeferred tax assets related to those net operating losses were recorded in 2007.Historicallosses Deferred Deferred taxbrought tax charges/forward asset (Credits)Deferred taxation on Colombia tax losses $000 $000 $000As at 1 January 2006 139,718 – –Tax losses expiring (111,712) – –Utilisation of tax losses in 2006 (8,363) – –As at 31 December 2006 19,643 433 (433)Utilisation of tax losses in 2007 (6,623) (433) 433Tax losses expiring (13,020) – –As at 31 December 2007 – – –

34 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200710. Deferred taxation continuedAdditionally, in accordance with IAS 12, a deferred tax liability was recognised in non-current liabilities related to temporary differencesbetween net book values of assets in Colombia and their associated tax basis, as detailed below:Deferred Deferred taxtemporary tax charges/differences liability (credits)Temporary differences on Colombia assets $000 $000 $000As at 1 January 2006 (29,450) (10,013) –Movement in temporary differences (47) (16) 16As at 31 December 2006 (29,497) (10,029) –Movement in temporary differences 56 19 (19)As at 31 December 2007 (29,441) (10,010) –These temporary differences between the tax basis of Colombia related assets and their book value are generated due to investmentscarried outside of the local branch books and therefore not tax deductible in Colombia.Deferred Deferred taxtemporary tax charges/differences asset (credits)Other temporary differences $000 $000 $000As at 1 January 2006 711 214Movement in temporary differences 231 81 (81)As at 31 December 2006 942 295Movement in temporary differences 103 (7) 7As at 31 December 2007 1,045 288Other temporary differences between tax basis and net book carrying values arise in regards to a decommissioning liability related toColombia exploration and producing assets in the amount of $674,000 at 31 December 2007 (2006: $624,000), and officeequipment and miscellaneous assets with temporary differences totalling $371,000 (2006: $318,000).

35 Notes to the financial information Global Energy Development PLCAnnual report 200711. Intangible exploration and evaluation (E&E) assets2007 2006$000 $000CostsColombiaAt 1 January 1,157 2,257Additions 7,476 –Exploration expenditure written off (65) –Transfer to tangible assets (8,568) (1,100)At 31 December – 1,157PeruAt 1 January 2,807 1,508Additions 667 1,299Exploration expenditure written off (33) –At 31 December 3,441 2,807PanamaAt 1 January 694 527Additions 284 167At 31 December 978 694Total intangible costs at 31 December 4,419 4,658The amounts for intangible E&E assets represent costs incurred on active oil and gas exploration projects. In accordance with oil andgas asset accounting policies described in note 1, E&E assets are evaluated when circumstances exist that suggest the possibility ofimpairment, as well as when E&E assets are reclassed to the Development and Producing phase. The outcome of ongoing exploration,and therefore whether the carrying value of assets will ultimately be recovered, is inherently uncertain.In June 2007, the exploration and producing contract with the Colombian Agencia Nacional de Hidrocarburos covering the Los Saucesarea in Colombia was terminated. In September 2007, after negotiations to modify terms and conditions of the contract obligationsfailed, investment totalling $1,075,000 was reclassified to depreciable facilities in accordance with the accounting policies describedin note 1.Further during the year, Global invested $7.4m in the drilling of two wells on the Luna Llena contract area which were initially classifiedas E&E costs in the balance sheet. In March 2008, that contract was terminated, therefore in light of the financial impact and inaccordance with accounting policies described in note 1 and IAS 10, those assets were reclassed to depreciable assets in 2007, theappropriate depreciation expense was charged to the income statement, and related reserves were eliminated from commercialreserves estimates detailed above.In accordance with the provisions of IFRS 6 and IAS 36 the Group has considered, in detail, the definition of CGU for the purposes ofassessing the accounting treatment of the E&E assets referred to above. The considerations have taken into account the operatingstructure of the terminated licences alongside existing D&P assets, the interdependence of future cash flows arising from theterminated licences alongside existing D&P projects and hence the extent to which individual assets in each CGU generate cash flowswhich are largely independent of those from other assets, the operating segment to which the assets had belonged under IFRS 8 andan assessment of the recoverable amount of the CGU in which the assets were held. Accordingly the Directors consider that thecarrying value of the D&P assets as disclosed in note 12 are not impaired based on an assessment of the recoverable amount of eachof the Group’s CGUs.

36 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200712. Property, plant and equipmentoil and Facilities Officegas and equipmentproperties pipeline and other Total$000 $000 $000 $000Cost:At 1 January 2007 81,396 19,158 1,727 102,281Additions 3,012 1,674 169 4,855Disposals (293) – (279) (572)Transfers 9,819 (1,686) – 8,133At 31 December 2007 93,934 19,146 1,617 114,697Depreciation:At 1 January 2007 (20,350) (4,209) (1,144) (25,703)Disposals 211 – 181 392Transfers (118) 38 (2) (82)Provided during the year (5,368) (1,264) (173) (6,805)At 31 December 2007 (25,625) (5,435) (1,138) (32,198)Net book value at 31 December 2007 68,309 13,711 479 82,499For comparison purposes, balances and activity for the year 2006 is presented below:oil and Facilities Officegas and equipmentproperties pipeline and other Total$000 $000 $000 $000Cost:At 1 January 2006 84,162 2,660 1,486 88,308Additions 11,169 2,289 241 13,699Disposals – – – –Transfers (13,935) 14,209 – 274At 31 December 2006 81,396 19,158 1,727 102,281Depreciation:At 1 January 2006 (18,956) (1,436) (968) (21,360)Disposals – – – –Transfers 2,016 (2,078) 62 –Provided during the year (3,410) (695) (238) (4,343)At 31 December 2006 (20,350) (4,209) (1,144) (25,703)Net book value at 31 December 2006 61,046 14,949 583 76,578Net book value at 31 December 2005 65,206 1,224 518 66,948Included in the cost of tangible fixed assets is $788,000 (2006: $435,000) in respect of capitalised financing costs. The amount offinancing costs capitalised in the period is $353,000 (2006: $347,000).

37 Notes to the financial information Global Energy Development PLCAnnual report 200712. Property, plant and equipment continuedE&E costs for the Los Sauces contract in addition to drilling costs related to Luna Llena, as described in note 11, were transferred fromIntangible Assets to Tangible Assets during the year. Detailed analyses of tangible assets classifications recorded in prior years forColombia resulted in reclassification of asset values ($1,357,000) and related depreciation ($38,000) from Facilities and Pipelines toother categories of tangible fixed assets. In addition, excess materials and equipment valued at $329,000 were transferred intoinventory. Overall, profit after tax was not impacted by these transactions. Other excess materials and equipment totalling $572,000with related depreciation of $392,000 were sold to third parties or otherwise disposed of, resulting in recognition of a gain of$108,000 in Other Income.Depletion and depreciation for oil assets is calculated on a unit-of-production basis, using the ratio of oil production in the period tothe estimated quantities of proved and probable reserves at the end of the period plus production in the period. Oil and gas assetsare tested periodically for impairment to determine whether the net book value of capitalised costs relating to the cash generating unitexceed the associated estimated future discounted cash flows of the related commercial oil and gas reserves. If an impairment isidentified, the depletion is charged through the income statement in the period incurred. The Group has performed an impairmenttest at 31 December 2007 and no impairment requirement was identified.13. Investments in subsidiariesThe principal subsidiary undertakings in which the Group’s interest at the year end is equal to or more than 50% are as follows (theseundertakings are included on consolidation):Class ProportionCountry of of share held by theHeld directly incorporation capital held companyHarken de Colombia Cayman Islands ordinary 100%Harken de Colombia Holdings, Ltd. Cayman Islands ordinary 100%Harken de Colombia II, Ltd. Cayman Islands ordinary 100%Harken de Colombia III, Ltd. Cayman Islands ordinary 100%Harken South America, Ltd. Cayman Islands ordinary 100%Harken de Peru Holdings, Ltd. Cayman Islands ordinary 100%Harken del Peru Limitada Cayman Islands ordinary 100%Harken de Panama Holdings, Ltd. B british Virgin Islands ordinary 100%Harken de Panama, Ltd. british Virgin Islands ordinary 100%Global Energy Management Resources U united States ordinary 100%The following branches are included in the subsidiaries listed above:Harken de Colombia Ltd. Colombian branch Indirect holding 100%Harken de Colombia II, Ltd. Colombian branch Indirect holding 100%Harken del Peru Limitada peruvian branch Indirect holding 100%Harken de Panama, Ltd. panamanian branch Indirect holding 100%All of the above companies and branches are engaged in oil and gas exploration.14. Inventories2007 2006$’000 $’000Oil stocks 306 167Yard stock 578 832Total inventories 884 999The amount of inventory which has been recognised as an expense during the year is $1,703,000 (2006: $974,000).

38 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200715. Trade and other receivables2007 2006$000 $000Trade receivables 10,351 4,399Less provision for impairment of trade receivables (1,931) (881)Net trade receivables 8,420 3,518Other receivables 50 601Prepayments 437 286Withholding taxes receivable 460 –Total trade and other receivables 9,367 4,405As at 31 December 2007, with the exception of the unitisation issue discussed below, there were no receivables considered past due(2006: $nil), and the Board of Directors considers that the carrying values adequately represents the fair values of all receivables. Themaximum exposure to credit risk at the reporting date is the fair value of each class of receivable set out above.As at 31 December 2007, trade receivables of $4.0 million (2006: $3.1 million) related to an association partner in the Colombianregion, whose legal entitlement under a unitisation issue is subject to ongoing negotiation and arbitration. In light of the probability ofdelays anticipated in the resolution of the unitisation issue, the Board of Directors elected to impair the receivable. The amount of theprovision as at 31 December 2007 was $1.9 million (2006: $881,000) based on a 10% discount factor. The ageing of this receivableis as follows:2007 2006$000 $000Up to 3 months 244 974 to 6 months 236 317Over 6 months 3,560 2,717Total 4,040 3,131Also included in the above are trade receivables from the Group’s sole customer totalling $6.3 million (2006: $1.1 million) in crudesales receivables not considered a risk due to the short term nature of the receivables, the positive credit rating of the customer, andthe historical trading relationship with this customer. The full balance from this customer as at 31 December 2007 was due within30 days (2006: 30 days).Other classes of financial assets included within trade and other receivables do not contain impaired assets.The carrying values of the Groups’ trade and other receivables are denominated in the following currencies:2007 2006$000 $000US dollar 7,323 3,556Colombian peso 2,040 845Peruvian nuevos soles 4 4Total 9,367 4,405

39 Notes to the financial information Global Energy Development PLCAnnual report 200716. Term deposits2007 2006$000 $000Dollar denominated investments 1,831 893The Group has established US dollar denominated Certificates of Deposit with restricted access and varying maturity dates asguarantees for Letters of Credit required for performance assurance on oil and gas fields and office rental contracts. At 31 December2007, the Group maintained four Certificates of Deposit totalling $1,731,000 (2006: $793,000) supporting oil and gas fields and oneCertificate of Deposit in the amount of $100,000 (2006: $100,000) supporting one office rental contract. There are no materialdifferences between the carrying amounts of the financial assets and their fair values.The maturity of the Group’s term deposits is as follows:2007 2006$000 $000Up to 3 months – 4483 to 6 months – –Over 6 months 1,831 445Total 1,831 89317. Cash and cash equivalents2007 2006$’000 $’000Cash in bank and on hand 4,602 6,955All cash balances constitute demand deposits or short-term investments available at call and held in US dollars, Colombian pesos,Peruvian nuevos soles and pounds sterling. Details of balances, interest rates on deposits and currency exposures are summarised innote 23.18. Current liabilities2007 2006$’000 $’000Trade payables 1,109 2,206Taxation 1,579 308Other financial liabilities – 309Accrued liabilities 1,223 325Short-term loans payable 312 308Total current liabilities 4,223 3,456Trade payables reflect balances owed on invoices received from vendors and contractors related to active projects in progress at theend of each period. The increase in balances related to taxation is primarily due to VAT taxes on the open crude sales receivables.Other financial liabilities as at 31 December 2006 reflect the value of crude oil royalties due to Ecopetrol, which was settled in 2007.The increase in accrued liabilities relates to ongoing projects and represents the value of work completed but not yet invoiced at31 December 2007.Short-term loans payable represent the financing of insurance premiums at fixed rates over the coverage period.It is considered that where trade and other payables are not carried at fair value in the consolidated balance sheet, book valueapproximates to fair value at 31 December 2007 and 2006.

40 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200718. Current liabilities continuedMaturity analysis of the financial liabilities is as follows:2007 2006$000 $000Up to 3 months 3,989 3,2253 to 6 months 78 77Over 6 months 156 154Total 4,223 3,45619. Non-current liabilities2007 2006$000 $000Long-term leases payable 68 50Decommissioning provision (see note 21) 674 624Convertible loan notes (see note 20) 15,810 15,425Deferred income taxation (see note 10) 10,010 10,029Total non-current liabilities 26,562 26,128Long-term leases payable represents the difference between actual lease payments and the recognition of lease costs on a straightlinebasis as per IAS 17.2007 2006$000 $000Analysis of debt:Debt can be analysed as falling due:Within one year or on demand – –Between one and two years – –Between two and five years 68 50In five years or more 15,810 15,42515,878 15,475All of the Group’s loans and borrowings are denominated in United States dollars.20. Convertible loan notes2007 2006$000 $000Balance bought forward 15,425 10,482Convertible loan notes issued – 5,201Proportion classed as equity – (512)Costs of raising finance – (292)Accreted interest 385 546Balance carried forward 15,810 15,425On 8 December 2006, the Group entered into a fixed-rate loan agreement for $11,903,000 in convertible notes. Unless previouslyredeemed, converted or purchased and cancelled, the notes are repayable in full on 8 December 2012. If the Company redeems theloan notes prior to 8 December 2009, an early redemption penalty of 8% on the outstanding balance is payable. A portion of theprevious loan notes from the loan agreement entered into on 27 October 2005 (“2005 loan notes”) was partly extinguished($6,702,000) and re-invested in the new convertible notes. A balance of $5,798,000 in 2005 loan notes remains outstanding. TheGroup raised an additional $5,201,000 in cash from this financing transaction.

41 Notes to the financial information Global Energy Development PLCAnnual report 200720. Convertible loan notes continuedAll loan notes incur an interest charge of 5% per annum for the three years to 8 December 2009, 6% per annum for the two years to8 December 2011 and thereafter an interest rate of 7%. Interest is payable quarterly. The effective interest rate is therefore 5.85%.Holders of the loan notes issued in 2006 have the right to convert the outstanding amount (or part thereof) into ordinary shares at afixed exchange rate of $1.90: £1 and at a fixed price of 179p at any time. Holders of the 2005 loan notes have the right to convert theoutstanding amount (or part thereof) into ordinary shares at a fixed exchange rate of $1.78: £1 and at a fixed price of 305.8p at anytime. The loan notes are not secured against any assets of any Group company. In accordance with the provisions of IAS 32, theGroup has determined the convertible loan note issue to be a compound financial instrument requiring a proportion of the loan to beclassified as equity. The reclassified element represents the difference between the fair value of a similar liability with no equityconversion option and the fair value of the existing loan in current terms. Accordingly, an amount of $512,000 has been reclassified toequity in 2006. Total costs incurred in raising the loan amounts in 2006 were $325,000 of which $32,000 was reclassified to equity.The remainder was debited against the carrying value of the notes. Accreted interest is charged to the income statement over the lifeof the notes. The effective interest rate is 5.96%.21. Provisions2007 2006$000 $000Decommissioning liability on 1 January 625 575Unwinding of discount on decommissioning liability 49 49Decommissioning liability on 31 December 674 624The decommissioning provision represents the present value of decommissioning costs for existing assets in the Group’s oil and gasoperations, which are expected to be incurred between 2010 and 2018. These provisions have been generated based on the Group’sinternal estimates, and where available, studies and analyses from external sources. Assumptions, based on the current economicenvironment, have been made which management believes are a reasonable basis upon which to estimate the future liability. Theseestimates are reviewed periodically to take into account any material changes to those assumptions. However, actualdecommissioning costs will ultimately depend upon future market prices for the necessary decommissioning work required at thetime assets are decommissioned and abandoned. Furthermore, the timing of decommissioning is likely to depend on when the fieldscease to produce at economically viable rates, which in turn is dependent upon future oil and gas prices that are inherently uncertain.22. Obligations under leases and hire purchase contractsObligations under finance leases and hire purchase contractsAs at 31 December 2007 and 31 December 2006, the Group had no obligations under finance leases or hire purchase contracts.Obligations under operating lease contracts2007 2006$000 $000Minimum lease payments 473 372Outstanding commitments for future minimum lease payments undernon-cancellable operating leases, which fall due as follows:Within one year 410 473Between two and five years 1,270 1,348More than five years 340 672Total annual lease payments 2,020 2,493All commitments relate to land and buildings. There are no lease agreements where the Group is a lessor.

42 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200723. Financial InstrumentsFinancial instruments – risk managementThe Group is exposed through its operations to the following risks:••••Credit risk.Cash flow interest rate risk.Foreign exchange risk.Liquidity risk.In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describesthe Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitativeinformation in respect of these risks is presented throughout these financial statements.There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processesfor managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.Principal financial instrumentsThe principal financial instruments used by the Group, from which financial instrument risk arises are as follows:•••••Trade receivables.Cash at bank.Short-term investments.Trade and other payables.Convertible loan notes.General objectives, policies and processesThe Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retainingresponsibility for them it has delegated the authority for designing and operating processes that ensure the effective implementationof the objectives and policies to the Group’s finance function. The Board receives monthly reports from the Group Finance directorthrough which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.The overall objective of the Board is to set policies that seek to reduce as far as possible without unduly affecting the Group’scompetitiveness and flexibility. Further details regarding these policies are set out below:Credit riskCredit risk is the risk of financial loss to the Group if a customer or a counterpart to a financial instrument fails to meet its contractualobligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the creditrisk of new customers before entering contracts. Such credit ratings are taken into account by local business practices. The Group’sreview includes external credit ratings, when available. Potential customers that fail to meet the Group’s benchmark credit worthinessmay transact with the business on a prepayment basis only.Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financialinstitutions, only independently rated parties with minimum rating “A” are accepted.The Group does not enter into derivatives to manage credit risk, although in certain isolated cases may take steps to mitigate suchrisks if it is sufficiently concentrated.The Group monitors the utilisation of credit ratings and available credit evaluation information as appropriate and at the reporting datedoes not envisage any losses from non-performance of counterparties, other than the provision created in relation to the unitisationnegotiations and the related receivable (see note 15).

43 Notes to the financial information Global Energy Development PLCAnnual report 200723. Financial Instruments continuedCash flow interest rate riskThe Group is exposed to cashflow interest rate risk from its deposits of cash and cash equivalents with banks. The cash balancesmaintained by the Group are proactively managed in order to ensure that the maximum level of interest is received for the availablefunds but without affecting the working capital flexibility the Group requires.The Group does not consider itself exposed to cash flow interest rate risk from its borrowings in the form of convertible loan notes orshort term loans, both of which carry fixed interest rates within the terms of the agreements. Through the fixing of interest rates withinthe agreements the Company considers it has minimised the exposure of the Group to cash flow interest rate risk. No subsidiarycompany of the Group is permitted to enter into any borrowing facility or lease agreement without the prior consent of the Board ofDirectors.Interest rates on financial assets and liabilitiesThe interest rate profile of the Group’s financial assets and liabilities at 31 December 2007 was as follows:peruvianuS Colombian nuevo Pounddollar peso sol sterling TotalUS dollar equivalent of: $000 $000 $000 $000 $000Cash at bank at floating interest rate 5,950 361 – 94 6,405Cash at bank on which no interest is received 22 7 4 (5) 28Fixed rate debt (16,122) – – – (16,122)Floating rate debt – – – – –Net (debt)/cash (10,150) 368 4 89 (9,689)The profile at 31 December 2006 for comparison purposes was as follows:peruvianuS Colombian Nuevo PoundDollar Peso Sol Sterling TotalUS Dollar equivalent of: $’000 $’000 $’000 $’000 $’000Cash at bank at floating interest rate 7,275 464 0 9 7,748Cash at bank on which no interest is received (2) 37 24 41 100Fixed rate debt (15,731) (2) – – (15,733)Floating rate debt – – – – –Net (debt)/cash (8,458) 499 24 50 (7,885)Cash at bank at floating rates consisted of demand deposits and money market investments subject to floating rates which vary from2% to 5%.The Group has no floating rate debt. Fixed rate debt consists of obligations under finance agreements of one year or less andconvertible loan notes with rates fixed in advance for periods longer than three months. The average interest rate on these contractsfor the year is 5.96% (2006: 5.96%).Interest rate sensitivity analysisAt 31 December 2007, the Group had net cash totalling $6.4 million (2006: $7.7 million) in financial assets with floating interest rates,which averaged 2.9% (2006: 2.4%) return on investment. As required by IFRS 7, the Group has estimated the interest rate sensitivityon year-end balances and determined that a one percentage point increase or decrease in the interest rate earned on floating ratedeposits would have caused a corresponding increase or decrease in net income in the amount of $64,000 ($2006: $77,000).

44 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200723. Financial Instruments continuedForeign exchange riskForeign exchange risk arises because the Group has operations located in various parts of the world whose local operational currencyis not the same as the functional currency of the Group. Although its wider market penetration reduces the Group’s operational risk,the Group’s net assets arising from such overseas operations are exposed to currency risk resulting in gains and losses on translationinto US dollars. Only in exceptional circumstances will the Group consider hedging its net investments in overseas operations asgenerally it does not consider that the reduction in foreign currency exposure warrants the cash flow risk created from such hedgingtechniques. It is the Group’s policy to ensure that individual Group entities enter into local transactions in their operational currencyand that surplus funds over and above working capital requirements should be transferred to the parent company treasury. The Groupconsiders this policy minimises any unnecessary foreign exchange exposure.In order to monitor the continuing effectiveness of this policy, the Board, through their approval of capital expenditure budgets andreview of the monthly management accounts, considers the effectiveness of the policy on an ongoing basis.The following table discloses the exchange rates of those currencies utilised by the Group:peruvianColombian nuevo Poundpeso sol sterlingForeign currency units to $1.00 US Dollar $000 $000 $000At 31 December 2007 2,014.76 2.994 0.5007At 31 December 2006 2,238.79 3.190 0.5104Currency exposuresThe monetary assets and liabilities of the Group that are not denominated in US dollars and are therefore exposed to currencyfluctuations are shown below. The amounts shown represent the US dollar equivalent of local currency balances.peruvianColombian nuevo Poundpeso sol sterling TotalUS dollar equivalent of exposed net monetary assets and liabilities $000 $000 $000 $000At 31 December 2007 (1,725) 65 89 (1,571)At 31 December 2006 1,337 5 41 1,383The year over year fluctuation in Colombian peso denominated balances is attributed primarily to accrued liabilities and VAT taxespayable (see note 19).Foreign currency sensitivity analysisThe Group is mainly exposed to currency rate fluctuations of the Colombian peso versus the US dollar, and measures its foreigncurrency risk through a sensitivity analysis considering 10% favourable and adverse changes in market rates on exposed monetaryassets and liabilities denominated on Colombian pesos. At 31 December 2007, a 10% devaluation of the peso against the dollarwould have resulted in translation gains of $157,000 (2006: loss of $173,000), and a 10% revaluation of the peso against the dollarwould have resulted in a loss of $122,000 (2006: gain of $131,000).Liquidity riskLiquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debtinstruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The mostsignificant component of liquidity risk affecting the Group is the market price of the crude oil, specifically the WTI crude price which isthe source reference price in Global’s crude sales contracts.

45 Notes to the financial information Global Energy Development PLCAnnual report 200723. Financial Instruments continuedCrude oil price sensitivity analysisA sensitivity analysis based on a 10% price volatility assumption is used internally by management to estimate the potential impact ofvariations in crude oil market prices. As at 31 December 2007, a 10% increase in the average sales price obtained during the yearwould have increased revenues and equity by $2.7 million (2006: $2.1 million) and a 10% decrease in the average sales price wouldhave reduced revenues and equity by $2.5 million (2006: $1.9 million).The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. Toachieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at least 90days. The Group seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on its long-term borrowings.The Directors received rolling 12 month cash flow projections on a monthly basis as well as information regarding cash balances. Atthe balance sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligationsunder all reasonable expected circumstances.Capital management policiesThe Board of Directors has established guidelines and policies for the management of the Group’s capital resources based on a longtermstrategy that continually evaluates and monitors the achievement of corporate objectives and the development of the Group’sportfolio in core areas. Specific capital management policies set forth include the following:••••The reinvestment of all profits into new and existing assets that fit the corporate objectives;Consolidation of positions in developing regions and disposition of assets of low materiality or where meaningful operationalinfluence cannot be achieved.To identify the appropriate mix of debt, equity and partner sharing opportunities in order to balance the highest returns toshareholders overall with the most advantageous timing of investment flows.To hire and maintain highly qualified employees through effective manpower management processes, including compensation andbenefit programmes in concert with ongoing training and motivational programmes;Retain maximum flexibility to allocate capital resources between exploration and appraisal, and production and developmentprojects based on available funds and quality of opportunities.•On a monthly basis, management receives financial and operational performance reports that enable continuous management ofassets, liabilities and liquidity. In addition, management communicates frequently with the Board of Directors to provide consistentinformation and data flow to ensure the opportunities to evaluate and measure the achievement of objectives.The above policies and practices are consistent with strategies and objectives employed in prior years and are expected to remainconsistent in the extension of future resource allocation objectives.

46 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200724. Share capital2007 2006Number 2007 Number 2006of shares $000 of shares $000AuthorisedOrdinary shares of 1p each 70,000,000 1,071 70,000,000 1,071Unclassified shares of £1 each 50,000 92 50,000 92Allotted, called up and fully paidOrdinary shares of 1p each 35,328,428 539 35,328,428 539The ordinary shares confer the right to vote at general meetings of Global Energy Development PLC, to a repayment of capital in theevent of liquidation or winding up and certain other rights as set out in Global Energy Development PLC’s articles of association.The ordinary shares also confer the right to receive dividends if declared by the directors and approved by the Company.The unclassified shares do not carry any rights.The following describes the nature and purpose of each reserve within owners’ equityReserveDescription and purposeShare premiumAmount subscribed for share capital in excess of nominal value.Other reserve equity element of the convertible loan notes accounted for in accordance with IAS 32 and IAS 39.Retained lossesCumulative net gains and losses recognised in the consolidated income statement.Capital reservereserve created on issue of shares on acquisition of subsidiaries in prior years.25. Share-based paymentsDiscretionary share option incentive planThe Company periodically grants share options to employees and directors, as approved by the Board of Directors. At 31 December2007 and 31 December 2006 the following share options were outstanding in respect of the ordinary shares:Year ended 31 December 2007Year of number Issued exercised Number price pergrant of shares in year Lapsed in year of shares Start date End date share2002 2,915,196 – – – 2,915,196 31.01.2002 31.01.2012 50.0p2002 30,000 – – – 30,000 08.08.2002 12.08.2012 54.5p2004 675,000 – – – 675,000 03.12.2004 03.12.2014 151.1p2005 240,000 – (60,000) – 180,000 08.12.2005 08.12.2015 265.1p2006 325,000 – – – 325,000 13.09.2006 13.09.2016 174.5p2007 – 200,000 – – 200,000 13.06.2007 13.06.2017 85.7pTotal 4,185,196 200,000 (60,000) – 4,325,196Year ended 31 December 2006Year of number Issued exercised Number price pergrant of shares in year Lapsed in year of shares Start date End date share2002 2,967,636 – (32,440) (20,000) 2,915,196 31.01.2002 31.01.2012 50.0p2002 30,000 – – – 30,000 08.08.2002 12.08.2012 54.5p2004 780,000 – – (105,000) 675,000 03.12.2004 03.12.2014 151.1p2005 270,000 – – (30,000) 240,000 08.12.2005 08.12.2015 265.1p2006 – 325,000 – – 325,000 13.09.2006 13.09.2016 174.5pTotal 4,047,636 325,000 (32,440) (155,000) 4,185,196The Company’s share price at 31 December 2007 was 83.5p (31 December 2006: 123.5p). The highest and lowest share pricesduring the year were 140.0p (2006: 300.0p) and 82.5p (2006: 118.5p) respectively.

47 Notes to the financial information Global Energy Development PLCAnnual report 200725. Share-based payments continuedThe fair values of awards granted under the Group’s option plan have been calculated using a variation of a binomial option pricingmodel that takes into account factors specific to share incentive plans such as the vesting periods, estimated share price volatility, theexpected dividend yield on the Company’s ordinary shares and expected exercise of share options. The following principalassumptions were used in the valuation:Grant date 3 Dec 2004 8 Dec 2005 13 Sep 2006 13 Jun 2007Share price at date of grant 1.51p 2.651p 1.745p 0.857pExercise price 1.51p 2.651p 1.745p 0.857pVolatility 36.73% 33.02% 40.68% 30.99%Option life 3 Dec 2014 8 Dec 2015 13 Sep 2016 13 Jun 2017Dividend yield 0% 0% 0% 0%Risk-free investment rate 4.645% 4.226% 4.568% 5.416%Employee turnover 3.7 years 3.3 years 4.3 years 4.0 yearsVolatility has been based on a Volatility Cone calculation model using the historic share price two years prior to each grant date andassigning a probability weighting. Volatilities were selected between the median and the 75th percentile calculations.Based on above assumptions the fair values of the options granted are estimated to be:Grant date 3 Dec 2004 8 Dec 2005 13 Sep 2006 13 Jun 2007Fair value 51p 76p 66p 28pExpense arising from share-based payments:Based on the above fair values and the Company’s expectations of employee turnover, the expense arising from equity-settled shareoptions and share awards made to employees was $480,000 for the period (2006: $312,000). There were no other share-basedpayment transactions.26. Capital commitmentsCapital commitments at the end of the financial year, for which no provision has been made, are as follows:2007 2006$000 $000Rio Verde (Colombia) – Drilling of one exploratory well 3,170 425Luna Llena (Colombia) – Drilling of two wells; seismic; and evaluation of seven existing wells – 5,500Los Sauces (Colombia) – Drilling of one well and seismic interpretation – 6,000Block 95 (Peru) – Drilling of one exploratory well 9,000 –Garachine (Panama) – Seismic reprocessing 252 –Total 12,422 11,92527. Contingent liabilitiesThe Group did not have any contingent liabilities in either 2006 or 2007.

48 Notes to the financial informationGlobal Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200728. Related party disclosuresDavid Quint is a Director of the Company and a director of RP&C International Ltd. RP&C International provided certain corporatefinance services during 2006 and 2007.AmountsAmountsowedowedfrom/(to)from/(to)relatedrelatedServices parties as at Services parties as atprovided 31 December provided 31 December2007 2007 2006 2006$000 $000 $000 $000RP&C International Inc 17 – 294 –Compensation paid to key management personnel including Directors, Executive Directors and senior management:2007 2006$000 $000Non-executive Director fees 120 117Compensation and benefits paid to key management personnelCompensation paid 897 970Share-based payments – –Performance bonuses 272 270Health and life insurances 85 53Company contributions to payroll taxation 74 71Severance payments 75 –Pension contributions 26 27Total 1,549 1,50829. Post balance sheet eventsIn March 2008, the Luna Llena exploration and production contract with the Colombian Agencia Nacional de Hidrocarburos wasterminated after a period of negotiations for modifications to the contract, which were deemed necessary to enable continuedeconomic investment in exploration activities in the contract area. The related reserves were eliminated from commercial reservesestimates detailed above.30. Transition to IFRSFor all periods through and including the year ended 31 December 2006, Global Energy Development PLC prepared its financialstatements in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP). These financial statements, forthe year ended 31 December 2007, are the first the Group is required to prepare in accordance with International Financial ReportingStandards (IFRS) as adopted by the European Union and the International Accounting Standards Board.Accordingly, the Group has prepared financial statements which comply with IFRS applicable for periods beginning on or after1 January 2007 and the significant accounting policies adopted are shown above. In preparing these financial statements, the Groupstarted from an opening balance sheet as at 1 January 2006, the Group’s date of transition to IFRS, and made those changes inaccounting policies and other restatements required by IFRS 1 for the first time adoption of IFRS. This note explains the principaladjustments made by the Group in restating its UK GAAP Balance Sheet as at 1 January 2006 and its previously published UK GAAPfinancial statements for the year ended 31 December 2006. The restatement of the Group’s 2006 results under IFRS was publishedon the Global Energy Development website (www.globalenergyplc.com) on 27 September 2007. Subsequent to that date, additionaladjustments were identified which affected both the opening balance sheet at 31 December 2006 as well as the published financialsfor 2006. Those adjustments have been included in these financial statements.

49 Notes to the financial informationGlobal Energy Development PLCAnnual report 2007Consolidated income statement for the period ended 31 December 2006uK GAAP Adjustments IFRSnote $000 $000 $000Revenue 21,053 – 21,053Cost of sales a, b, c, d (9,545) (2,033) (11,578)Gross profit 11,508 (2,033) 9,475Other income 200 – 200Administrative expenses e, i (6,081) 1,643 (4,438)Operating profit 5,627 (390) 5,237Finance income 152 – 152Finance expense i (610) (73) (683)Profit before taxation 5,169 (463) 4,706Income tax expense h, i (984) (241) (1,225)Profit after taxation 4,185 (704) 3,481

50 Notes to the financial informationGlobal Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 2007Consolidated balance sheet as at 31 December 2006uK GAAP Adjustments IFRSnote $000 $000 $000AssetsNon-current assetsIntangible assets c 3,514 1,144 4,658Property, plant and equipment a,b,c,d,e,f 79,598 (3,020) 76,57883,112 (1,876) 81,236Current assetsInventories e 755 244 999Deferred tax assets h – 728 728Trade and other receivables i 4,678 (273) 4,405Term deposits 893 – 893Cash and cash equivalents 6,955 – 6,95513,281 699 13,980Total assets 96,393 (1,177) 95,216LiabilitiesCurrent liabilitiesTrade and other payables i (3,728) 272 (3,456)(3,728) 272 (3,456)Non-current liabilitiesConvertible loan notes (15,425) – (15,425)Deferred tax liabilities h – (10,029) (10,029)Long term provisions i (625) 1 (624)Other payables g – (50) (50)(16,050) (10,078) (26,128)Total liabilities (19,778) (9,806) (29,584)Net assets 76,615 (10,983) 65,632EquityCalled up share capital 539 – 539Share premium account 26,439 – 26,439Other reserve 1,826 – 1,826Capital reserve 210,844 – 210,844Retained losses (163,033) (10,983) (174,016)Total equity 76,615 (10,983) 65,632

51 Notes to the financial informationGlobal Energy Development PLCAnnual report 2007Consolidated cash flow statement for the period ended 31 December 2006uK GAAP Adjustments IFRSnote $000 $000 $000Operating activitiesProfit before taxation a,b,d,g,i 5,170 (464) 4,706Depreciation, depletion and amortization f 3,975 368 4,343Decrease in trade and other receivables 1,016 – 1,016Increase in inventories e (301) (42) (343)Increase/(decrease) in trade and other payables g (44) 50 6Increase in long-term provisions g 50 – 50Accretion expense on convertible notes 546 – 546Other non-cash items 14 – 14Stock options expense 312 – 312Cash flows from operating activities 10,738 739 10,650Income taxes paid i (985) (739) (1,724)Net cash flows from operating activities 9,753 – 8,926Investing activityCapital expenditure and financial investment– Expenditure on tangible fixed assets (13,700) (1) (13,699)– Expenditure on intangible fixed assets (1,465) 1 (1,466)Disposal of fixed assets a,b,d – 827 827Interest received 152 – 152Increase in short-term deposits (345) – (345)Net cash flows from investing activities (15,358) – (14,531)Financing activitiesInterest paid (305) – (305)Convertible loan notes issued 5,201 – 5,201Net cash flows from financing activities 4,896 – 4,896Decrease in cash and cash equivalents (709) – (709)Cash at beginning of year 7,664 – 7,664Cash at end of year 6,955 – 6,955

52 Notes to the financial informationGlobal Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 2007Consolidated balance sheet as at 1 January 2006uK GAAP Adjustments IFRSnote $000 $000 $000AssetsNon-current assetsIntangible assets c 2,049 2,243 4,292Property, plant and equipment a,b,c,d,e,f 69,873 (2,925) 66,94871,922 (682) 71,240Current assetsInventories e 451 202 653Deferred tax assets h – 214 214Trade and other receivables 5,697 – 5,697Term deposits 548 – 548Cash and cash equivalents 7,664 – 7,66414,360 416 14,776Total assets 86,282 (266) 86,016LiabilitiesCurrent liabilitiesTrade and other payables (3,772) – (3,772)(3,772) – (3,772)Non-current liabilitiesConvertible loan notes (10,482) – (10,482)Deferred tax liabilities h – (10,013) (10,013)Long-term provisions (575) – (575)(11,057) (10,013) (21,070)Total liabilities (14,829) (10,013) (24,842)Net assets 71,453 (10,279) 61,174EquityCalled up share capital 537 – 537Share premium account 26,288 – 26,288Other reserve 1,314 – 1,314Capital reserve 210,844 – 210,844Retained losses (167,530) (10,279) (177,809)Total equity 71,453 (10,279) 61,174

53 Notes to the financial informationGlobal Energy Development PLCAnnual report 2007Notes to IFRS adjustments reconciliation statementsa) Well workovers: The Group has adopted an accounting policy for the full cost pool which identifies that from time to time someassets included in Property, Plant and Equipment may require periodic repair or replacement. Workovers which are maintenance innature are expensed as incurred; however, in cases which meet specified criteria for capitalisation, the cost of those workovers iscapitalised. However under IAS 16, when the capital workover involves replacing parts or equipment that have been previouslycapitalised, the cost of the new parts or equipment is capitalised, and the carrying value of the items replaced is charged tooperating expense as a cost of sales in the income statement.Based on this policy, the Group has written-off the carrying value of certain parts replaced on Property, Plant and Equipmentassets.b) Terminated contracts: Under previous accounting policy under Full Cost Pool guidelines of UK GAAP, capitalised costs incurredunder exploration and production contracts which were subsequently terminated or relinquished remained as part of thedepreciable base of the full cost pool. IAS 16 requires that such costs be charged to the income statement in the year that they areincurred. On transition to IFRS all such costs existing at 1 January 2006 were derecognised and transferred to retained earnings.c) Transfer from exploration and evaluation to production and development: Per policies established by the Group under theguidelines of IFRS 6 and IAS 16 “Property, Plant and Equipment”, assets are initially classified as exploration and evaluation innature. At the time the assets are to be reclassified to the production and development asset pool, the assets are first evaluated forimpairment. If the assets are deemed commercially viable, the assets are then transferred to the full cost pool and included in thedepreciable asset base. If impairment were indicated, the assets would be written-down to the asset’s recoverable value andcharged as expense to the income statement. After evaluation of all assets at the date of transition and each subsequent reportingperiod, no impairment requirement was identified.Furthermore, under previous accounting policy under Full Cost Pool guidelines of UK GAAP, the Group’s oil and gas assets wereheld in a geographic cost pool, which was Latin America. Consequently, all expenditures related to oil and gas exploration,evaluation, and development were capitalised immediately and included in the depreciable base of that single cost pool. However,under IFRS 6, the Group implemented a concept of Cash Generating Units (CGU) and defined individual CGU’s by grouping assetswhich were largely independent in operations, expense and revenue generation processes from other assets. Expenditures relatedto exploration and evaluation activities under qualifying licences or contracts in individual CGU’s are capitalised but are notdepreciated until the asset group is transferred to the production and development phase, at which time the assets are depreciatedin accordance with IAS 16. As a consequence, exploration and evaluation expenditures previously treated as part of the single FullCost Pool were reclassed from tangible assets to intangible assets as of the transition date and in subsequent periods.d) Other miscellaneous – In accordance with IAS 16, the Group has evaluated asset balances as of the date of transition and identifiedcertain capitalised expenditures which have no current or future anticipated economic benefits, and thus were written-off to theincome statement.e) Transfer to inventory – Per IFRS guidelines regarding the capitalisation of costs, the Group has re-evaluated certain assetspreviously included in the full cost pool and transferred some parts and equipment previously included in tangible assetsinto inventory.f) DDA impacts – Due to the disclosed adjustments to the depreciable asset base, depreciation, depletion and amortisation expensewas recalculated in each corresponding period resulting in recognition of additional expense.g) Leases – The Group reviewed and evaluated all Leases in relation to IAS 17 “Leases” and one lease was identified affected by thechange to IFRS reporting guidelines. The corporate headquarters office lease in Houston, Texas has a term of seven years withescalating rent payments which included a two-month grace period. Under IAS 17, the terms and conditions of this lease requiredrecalculation of lease expense over the life of the contract including the grace period on a straight-line basis. The differencebetween the actual rent payments and the expense recorded on a straight-line basis resulted a charge to the income statementand the establishment of a non-current payable.h) Deferred taxation – In accordance with IAS 12, the Group analysed transactional activity and balance sheet data to identify timingdifferences between income tax impacts versus accounting recognition. Areas identified were quantified and deferred tax assets orliabilities were recorded as appropriate. See note 10 for details of adjustments.

54 Notes to the financial informationGlobal Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 2007Notes to IFRS adjustments reconciliation statements continuedi) Other presentation adjustments – During analysis and review of financial information in preparation for adoption of IFRS, severaladjustments and reclassifications were identified that were not related to specific IFRS standards, but were deemed important toreflect in the restated financial statements for comparative purposes with current year balances. Specific adjustments included:2006 Balance sheet – certain components of the net receivable related to the unitisation negotiation with Ecopetrol in Colombiawere previously reflected as debit balances in accrued liabilities accounts and were reclassed to the corresponding receivableaccount, resulting in a net credit to current liabilities and a net debit to current assets of $749,000.2006 Cash flow statement and Income statement – Colombia taxes previously presented as administrative expenses ($739,000)were reclassed to income tax expense.

55 Company accountsGlobal Energy Development PLCAnnual report 2007Company accountsTABLE OF CONTENTSPAGEDirectors’ report.................................................................................................................................................................................................................................... 56Independent Auditors’ report........................................................................................................................................................................................................ 59Company balance sheet................................................................................................................................................... …………………………………… 60Notes to the Financial Information1. Accounting policies...................................................................................................................................................................................................................... 612. Operating results........................................................................................................................................................................................................................... 623. Staff costs and audit fee............................................................................................................................................................................................................ 624. Property, plant and equipment............................................................................................................................................................................................... 635. Investment in subsidiaries......................................................................................................................................................................................................... 646. Deferred taxation.......................................................................................................................................................................................................................... 647. Debtors............................................................................................................................................................................................................................................. 658. Short-term investments ............................................................................................................................................................................................................. 659. Cash at bank and on hand........................................................................................................................................................................................................ 6510. Creditors: falling due in less than one year........................................................................................................................................................................ 6511. Creditors: falling due in more than one year..................................................................................................................................................................... 6512. Convertible loan notes ............................................................................................................................................................................................................... 6613. Share capital ................................................................................................................................................................................................................................... 6614. Share based payments............................................................................................................................................................................................................... 6715. Movement on reserves.............................................................................................................................................................................................................. 6816. Contingent liabilities .................................................................................................................................................................................................................... 6817. Related party disclosures........................................................................................................................................................................................................... 6818. Post Balance sheet events........................................................................................................................................................................................................ 68

56 Directors’ reportGlobal Energy Development PLCAnnual report 2007Directors’ reportFor the year ended 31 December 2007The Directors present their report together with the audited financial statements of the Company for the year ended 31 December2007.Principal activityThe principal activity of the Company is to act as a holding company for the subsidiary companies engaged in oil and gas exploration,development and production activities. The Company is integral to the Group in its role of providing corporate planning, managementexpertise to subsidiaries, shareholder relations and capital management.Review of the business and future prospectsThe Company results for the year and the financial position as at 31 December 2007 are deemed satisfactory by the Directors, andthe Directors consider that the Company will continue in its historical role as the ultimate parent company, utilising its services tocontinue to review the Company’s investment portfolio to ensure the Group maximises shareholder returns.Results and dividendsIn accordance with the provisions of S230 Companies Act 1985 the Company has elected not to present a profit and loss account.The Directors do not propose to recommend any distribution by way of a dividend for the year ended 31 December 2007(2006: $nil).DirectorsThe Directors of the Company who served during the year and subsequent to the year end were as follows:Mikel Faulkner – Executive ChairmanStephen Voss – Vice Chairman (Previously Managing Director appointed Vice Chairman 7 March 2008)Stephen Newton – Managing Director (Appointed 7 March 2008)Guillermo Sanchez – Executive Director (Resigned 17 August 2007)Alan Henderson – Non-executive DirectorDavid Quint – Non-executive DirectorLord Freeman – Non-executive DirectorMikel Faulkner and Stephen Voss stood for re-election and were re-elected at the Annual General Meeting of the Company which tookplace on 7 June 2007.Details of the Directors’ interests in the ordinary shares of the Company and in options over ordinary shares are set out below:As at 31 December 2007 As at 1 January 2007ordinaryordinaryshares Options shares OptionsMikel Faulkner 150,000 1,580,000 105,504 1,580,000Stephen Voss 24,349 990,000 21,849 990,000Stephen Newton – – – –Guillermo Sanchez 12,483 590,000 12,483 590,000Alan Henderson 9,421 80,000 – 80,000David Quint 47,428 50,000 52,232 50,000Lord Freeman 5,000 40,000 – 40,000All the holdings are beneficially held.No Director exercised any options during the year.No Director had any interest in the shares of the subsidiary undertakings or any other Group undertakings.There are no warrants in the Company outstanding.There were no contracts existing during, or at the end of the year, in which a Director was or is materially interested.

57 Directors’ reportGlobal Energy Development PLCAnnual report 2007PensionsThe Company does not operate a pension scheme for Directors or employees.Directors’ remunerationThe Directors’ remuneration was as follows:2007 2006totaltotal$’000 $’000Executive 1Mikel Faulkner 107 175Stephen Voss 217 240Guillermo Sanchez 2 244 196Non-Executive 3Alan Henderson 40 39David Quint 40 39Lord Freeman 40 39688 7281 Amounts paid represent salaries paid to Executive Directors.2 Amount paid includes severance payment of $75,000.3 Amounts paid represent fees for services as Non-executive Directors.See note 6 of the Group accounts for further details of directors’ remuneration.Employees’ health and safetyIt is the policy of the Company to consider the health and welfare of employees by maintaining a safe place and system of work.Creditor payment policy and practiceThe Company agrees terms of contracts when orders are placed and on entering exploration projects. It is the Company’s policy thatpayments to suppliers are made in accordance with the agreed terms and conditions, provided all trading terms and conditions havebeen complied with. At 30 September 2007 the Company had an average of 24 days (2006: 22 days) purchases outstanding.Political and charitable contributionsDuring the year, the Company made charitable contributions to the Youth Development Center, a non-profit organisation in Houston,Texas of $8,000 (2006: $6,000) and to Raft International, Ltd, a non-profit organisation in the United Kingdom of $14,400 (2006:$nil).Post balance sheet eventsThere are no post balance sheet events to be disclosed other than those noted in note 29 of the Group accounts.Directors’ responsibilitiesThe Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financialposition of the Group, for safeguarding the assets of the Company, for taking reasonable steps for the prevention and detection offraud and other irregularities and for the preparation of a Directors’ Report which complies with the requirements of the CompaniesAct 1985.The Directors are responsible for preparing the Annual Report and the financial statements in accordance with the Companies Act1985. The Directors are also required to prepare financial statements for the Company in accordance with UK Generally AcceptedAccounting Practice and the rules of the AIM Market of the London Stock Exchange.

58 Directors’ reportGlobal Energy Development PLCAnnual report 2007Directors’ report continuedFor the year ended 31 December 2007Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the stateof affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, theDirectors are required to:••••select suitable accounting policies and then apply them consistently;prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue inbusiness;make judgements and estimates that are reasonable and prudent; andstate whether applicable accounting standards have been followed, subject to any material departures disclosed and explained inthe financial statements.Financial statements are published on the Group’s website in accordance with legislation in the United Kingdom governing thepreparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance andintegrity of the Group’s website is the responsibility of the directors. The Directors’ responsibility also extends to the ongoing integrityof the financial statements contained therein.AuditorsIn accordance with the Companies Act 1985, a resolution for the re-appointment of BDO Stoy Hayward LLP as auditors of theCompany is to be proposed at the forthcoming Annual General Meeting.All of the Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by theCompany’s auditors for the purpose of their audit and to establish that the auditors are aware of that information. The Directors arenot aware of any relevant audit information of which the auditors are not aware.By order of the BoardMikel Faulkner Stephen Voss Stephen NewtonExecutive Chairman vice Chairman managing Director8 May 2008Global Energy Development PLC26 Dover StreetLondon W1S 4LYUK

59 Independent Auditors’ reportGlobal Energy Development PLCAnnual report 2007Independent Auditors’ reportTo the shareholders of Global Energy Development PLCWe have audited the Company financial statements (the“financial statements”) of Global Energy Development plc forthe year ended 31 December 2007 which comprise the BalanceSheet and the related notes. These financial statements havebeen prepared under the accounting policies set out therein.We have reported separately on the Group financial statementsof Global Energy Development plc for the year ended31 December 2007.Respective responsibilities of Directors and auditorsThe Directors’ responsibilities for preparing the financialstatements in accordance with applicable law and UnitedKingdom Accounting Standards (United Kingdom GenerallyAccepted Accounting Practice) are set out in the Statement ofDirectors’ Responsibilities.Our responsibility is to audit the financial statements inaccordance with relevant legal and regulatory requirements andInternational Standards on Auditing (UK and Ireland).We report to you our opinion as to whether the financialstatements give a true and fair view and have been properlyprepared in accordance with the Companies Act 1985 andwhether the information given in the Directors’ Report isconsistent with those financial statements. We also report to youif, in our opinion, the Company has not kept proper accountingrecords, if we have not received all the information andexplanations we require for our audit, or if information specifiedby law regarding Directors’ remuneration and other transactions isnot disclosed.We read other information contained in the Annual Report, andconsider whether it is consistent with the audited financialstatements. This other information comprises the Directors’Report only. We consider the implications for our report if webecome aware of any apparent misstatements or materialinconsistencies with the financial statements. Our responsibilitiesdo not extend to other information.Our report has been prepared pursuant to the requirements ofthe Companies Act 1985 and for no other purpose. No person isentitled to rely on this report unless such a person is a personentitled to rely upon this report by virtue of and for the purposeof the Companies Act 1985 or has been expressly authorised todo so by our prior written consent. Save as above, we do notaccept responsibility for this report to any other person or for anyother purpose and we hereby expressly disclaim any and all suchliability.Basis of audit opinionWe conducted our audit in accordance with InternationalStandards on Auditing (UK and Ireland) issued by the AuditingPractices Board. An audit includes examination, on a test basis, ofevidence relevant to the amounts and disclosures in the financialstatements. It also includes an assessment of the significantestimates and judgements made by the Directors in thepreparation of the financial statements, and of whether theaccounting policies are appropriate to the Company’scircumstances, consistently applied and adequately disclosed.We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary inorder to provide us with sufficient evidence to give reasonableassurance that the financial statements are free from materialmisstatement, whether caused by fraud or other irregularity orerror. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financialstatements.OpinionIn our opinion, the financial statements:• give a true and fair view, in accordance with United KingdomGenerally Accepted Accounting Practice, of the state of theCompany’s affairs as at 31 December 2007; and• have been properly prepared in accordance with theCompanies Act 1985.In our opinion, the information given in the Directors’ Report isconsistent with the financial statements.BDO Stoy Hayward LLPChartered Accountants and Registered AuditorsLondon8 May 2008

60 Company balance sheetGlobal Energy Development PLCAnnual report 2007Company balance sheetAs at 31 December 20072007 2006note $000 $000Fixed assetsTangible assets 4 352 402Investment in subsidiaries 5 26,701 34,48927,053 34,891Current assetsDeferred tax assets 6 104 88Debtors 7 102 229Short-term deposit 8 200 100Cash at bank and in hand 9 777 5,2181,183 5,635Creditors: amounts falling due within one year 10 (3,096) (10,665)Net current (liabilities) (1,913) (5,030)Total assets less current liabilities 25,140 29,861Non-current liabilitiesConvertible loan notes 12 (15,810) (15,425)Net assets 9,330 14,436Capital and reservesCalled up share capital 13 539 539Share premium account 15 26,439 26,439Other reserve 15 1,826 1,826Profit and loss account 15 (19,474) (14,368)Shareholder’s funds 9,330 14,436These financial statements were approved by the Board of Directors and authorised for issue on 8 May 2008 and were signed on itsbehalf by:Mikel Faulkner Stephen Voss Stephen NewtonExecutive Chairman vice Chairman managing Director8 May 2008Global Energy Development PLC26 Dover StreetLondon W1S 4LYUKThe notes on pages 61 to 68 form an integral part of these financial statements.

61 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial informationFor the twelve months ended 31 December 20071. Accounting PoliciesBasis of preparationThe financial statements have been prepared under the historical cost convention in accordance with the Companies Act 1985 andUK Generally Accepted Accounting Principles (UK GAAP). The following paragraphs describe the main accounting policies under UKGAAP, which have been applied consistently.In accordance with the provisions of Section 230 of the Companies Act, the Profit and Loss Account of the Company is not presentedseparately. In accordance with the exemptions available under IFRS 1 “Cash Flow Statements” the Company has not presented a cashflow statement as the cash flow of the Company has been included in the Cash Flow Statement of Global Energy Development PLCGroup set out above.Changes in accounting policiesThere have been no changes in accounting policies adopted during the year. In the prior year the Company adopted FRS 20 “ShareBased Payments”.InvestmentsFixed asset investments in subsidiaries are included in the accounts at cost less provision for impairment.Tangible assetsDepreciation is charged on fixed assets so as to write off the cost, less estimated residual value, on a straight-line basis over theiruseful lives of between three and five years.TaxationThe tax expense represents the sum of the tax currently payable and deferred tax.Current tax, including UK Corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws thathave been enacted or substantially enacted by the balance sheet date.Deferred taxDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date wheretransactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more,tax, with the following exceptions:• Provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries, associates andjoint ventures only to the extent that, at the balance sheet date, dividends have been accrued as receivables.• Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will besuitable taxable profits from which the future reversal of the underlying timing differences can be deducted.Deferred tax is measured on an undiscounted basis at the tax rates are expected to apply in the periods in which timing differencesreverse, based on the tax rates and laws enacted or substantively enacted at the balance sheet date.Cash and cash equivalentsCash and cash equivalents comprise cash on hand, deposits with a maturity of three months or less and other short-term highly liquidinvestments that are readily convertible into known amounts of cash and overdrafts repayable on demand. Bank overdrafts are shownwithin borrowings in current liabilities on the balance sheet.Convertible debtIn accordance with FRS 25, the Company has classified the convertible debt in issue as a compound financial instrument. Accordingly,the Company presents the liability and equity components separately on the balance sheet. The classification of the liability andequity components is not reversed as a result of a change in the likelihood that the conversion option will be exercised. No gain orloss arises from initially recognising the components of the instrument separately. Interest on the debt element of the loan is accretedover the term of the loan. Costs associated with the raising of debt are set off against the gross value of monies received.

62 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20071. Accounting Policies continuedShare-based paymentsThe Company has applied the requirements of FRS20 “Share-based payments”, reflecting the economic cost of awarding ordinaryshares and share options to employees and directors by recording an expense in the income statement equal to the fair value of thebenefit awarded. The expense is recognised in the income statement over the vesting period of the award.Fair value is measured by use of a binomial model which takes into account conditions attached to the vesting and exercise of theequity instruments. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of nontransferability,exercise restrictions and behavioral considerations.Pension costsThe Company contributes to a defined contribution scheme. Contributions are charged to the income statement as they becomepayable.Foreign currenciesThe functional currency of Global Energy Development PLC is the US dollar. Transactions in foreign currencies are recorded using therate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translatedusing the rate of exchange ruling at the balance sheet date. Exchange gains or losses on translation are included in the incomestatement.LeasesOperating leases and the corresponding rental charges are charged to the income statement on a straight-line basis over the life of thelease. Assets under finance leases are included under tangible fixed assets at their capital value and depreciated over their useful lives.Capital value is defined as the amount equal to the fair value of the leased property or, if lower, the present value of the minimumlease payments, each determined at the inception of the lease. Lease payments consist of capital and finance charge elements; thefinance charge element is charged to the income statement.2. Operating profit2007 2006$000 $000Operating profit is stated after charging/(crediting):Staff costs (see note 3) 2,736 2,288Office lease costs 358 188Shareholder relations expenses 310 626Interest expense 704 562Insurance expense 155 280Depreciation 125 310Auditors’ fees 30 283. Staff costs2007 2006$’000 $’000Wages and salaries 1,759 1,592Social security costs and other payroll taxes 191 198Insurances and other benefits 186 140Other pension costs – defined contribution 45 46Severance payments 75 –Share-based payments (Note 14) 480 312Total employee costs 2,736 2,288The 2006 expense includes $1,554,000 in staff costs paid through a separate Group entity and not consolidated into the Companyaccounts in 2006, however are included for comparison purposes. At 31 December 2007, all staff costs of Company employees areincluded in the Company accounts.

63 Notes to the financial information Global Energy Development PLCAnnual report 20073. Staff costs continuedThe average number of Company employees (including executive directors) was:2007 2006$000 $000Technical and operations – –Management and administrative 8 7Total Company employees 8 7The disclosures relating to the Directors’ remuneration for the current and prior year, as well as share holdings and share optionsinterests are included in the Directors’ report above.The Company audit fee for the year is $30,000 (2006: $28,000).4. Property, plant and equipmentofficeoil and gas equipmentproperties and other Total$000 $000 $000Cost:At 1 January 2007 152 1,064 1,216Additions – 114 114Transfers (152) – (152)At 31 December 2007 – 1,178 1,178Depreciation:At 1 January 2007 (112) (702) (814)Provided during the year – (124) (124)Transfers 112 – 112At 31 December 2007 – (826) (826)Net book value at 31 December 2007 – 352 352Net book value at 31 December 2006 40 362 402Oil and gas properties costs at 31 December 2006 related to operations in Colombia and were transferred to that entity in 2007.

64 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20075. Investments in subsidiaries$000At 1 January 2007 34,489Reductions (7,838)At 31 December 2007 26,701The reduction in investments in subsidiaries is primarily related to a reclassification of non-trade balances totalling $7,488,000 fromcreditors (see note 10).The principal subsidiary undertakings in which the Company’s interest at the year end is equal to or more than 50% are as follows(these undertakings are included on consolidation):Class ProportionCountry of of share held by theHeld directly incorporation capital held companyHarken de Colombia Cayman Islands ordinary 100%Harken de Colombia Holdings, Ltd. . Cayman Islands ordinary 100%Harken de Colombia II, Ltd. Cayman Islands ordinary 100%Harken de Colombia III, Ltd. Cayman Islands ordinary 100%Harken South America, Ltd. Cayman Islands ordinary 100%Harken de Peru Holdings, Ltd. Cayman Islands ordinary 100%Harken del Peru Limitada Cayman Islands ordinary 100%Harken de Panama Holdings, Ltd. British Virgin Islands ordinary 100%Harken de Panama, Ltd. british Virgin Islands ordinary 100%Global Energy Management Resources, Inc. U united States ordinary 100%The following branches are included in the subsidiaries listed above:Harken de Colombia Ltd. Colombian branch Indirect holding 100%Harken de Colombia II, Ltd. Colombian branch Indirect holding 100%Harken del Peru Limitada peruvian branch Indirect holding 100%Harken de Panama, Ltd. panamanian branch Indirect holding 100%All of the above companies and branches are engaged in oil and gas exploration.6. Deferred taxation2007timing Deferred Deferred taxdifferences tax assets charges/$000 $000 (credits)As at 1 January 2007 318 88 –Movement in timing differences 53 16 (16)As at 31 December 2007 371 104 –Timing differences reflect the difference between tax basis and net book carrying values of office equipment and miscellaneousassets described in note 4.

65 Notes to the financial information Global Energy Development PLCAnnual report 20077. Debtors2007 2006$000 $000Other debtors 47 –Prepayments 55 229102 229All amounts fall due for payment within one year.8. Short-term investments2007 2006$000 $000Dollar denominated investments 200 100The Company has established US dollar denominated Certificates of Deposit with restricted access and varying maturity dates asguarantees for Letters of Credit required for performance assurance on oil and gas fields and office rental contracts. At 31 December2007, the Company maintained one Certificate of Deposit totalling $100,000 (2006: $nil) supporting oil and gas fields and oneCertificate of Deposit in the amount of $100,000 (2006: $100,000) supporting one office rental contract. There are no materialdifferences between the carrying amounts of the financial assets and their fair values.9. Cash at bank and on hand2007 2006$000 $000Cash in bank and on hand 777 5,218All cash balances constitute demand deposits or short-term investments available at call and held in US dollars and British poundssterling.10. Creditors: falling due within one year2007 2006$000 $000Trade creditors 26 169Amounts owed to subsidiaries 2,348 9,836Accrued liabilities 410 354Short-term loans payable 312 3063,096 10,665Trade creditors reflect balances owed on invoices received from vendors and contractors related to active projects in progress at theend of each period. The decrease in amounts owed to subsidiaries is due to reclassification of non-trade balances to Investments insubsidiaries.11. Creditors: falling due in more than one year2007 2006$000 $000Convertible loan notes (see note 12) 15,810 15,425

66 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200712. Convertible loan notes2007 2006$000 $000Balance bought forward 15,425 10,482Convertible loan notes issued – 5,201Proportion classed as equity – (512)Costs of raising finance – (292)Accreted interest 385 546Balance carried forward 15,810 15,425On 8 December 2006, the Company entered into a fixed-rate loan agreement for $11,903,000 in convertible notes. Unless previouslyredeemed, converted or purchased and cancelled, the notes are repayable in full on 8 December 2012. If the Company redeems theloan notes prior to 8 December 2009, an early redemption penalty of 8% on the outstanding balance is payable. A portion of theprevious loan notes from the loan agreement entered into on 27 October 2005 (“2005 loan notes”) was partly extinguished($6,702,000) and re-invested in the new convertible notes. A balance of $5,798,000 in 2005 loan notes remains outstanding. TheGroup raised an additional $5,201,000 in cash from this financing transaction.All loan notes incur an interest charge of 5% per annum for the three years to 8 December 2009, 6% per annum for the two years to8 December 2011 and thereafter an interest rate of 7%. Interest is payable quarterly. The effective interest rate is therefore 5.85%.Holders of the loan notes issued in 2006 have the right to convert the outstanding amount (or part thereof) into ordinary shares at afixed exchange rate of $1.90: £1 and at a fixed price of 179p at any time. Holders of the 2005 loan notes have the right to convert theoutstanding amount (or part thereof) into ordinary shares at a fixed exchange rate of $1.78: £1 and at a fixed price of 305.8p at anytime. The loan notes are not secured against any assets of any Group company. In accordance with the provisions of FRS25, theCompany has determined the convertible loan note issue to be a compound financial instrument requiring a proportion of the loan tobe classified as equity. The reclassified element represents the difference between the fair value of a similar liability with no equityconversion option and the fair value of the existing loan in current terms. Accordingly, an amount of $512,000 was reclassified toequity in 2006. Total costs incurred in raising the loan amounts in 2006 were $325,000 of which $32,000 was reclassified to equity.The remainder was debited against the carrying value of the notes. Accreted interest is charged to the income statement over the lifeof the notes. The effective interest rate is 5.96%.13. Share capital2007 2006Number 2007 Number 2006of shares $000 of shares $000AuthorisedOrdinary shares of 1p each 70,000,000 1,071 70,000,000 1,071Unclassified shares of £1 each 50,000 92 50,000 92Allotted, called up and fully paidOrdinary shares of 1p each 35,328,428 539 35,328,428 539The ordinary shares confer the right to vote at general meetings of Global Energy Development PLC, to a repayment of capital in theevent of liquidation or winding up and certain other rights as set out in Global Energy Development PLC’s articles of association.The ordinary shares also confer the right to receive dividends if declared by the directors and approved by the Company. Theunclassified shares do not carry any rights.

67 Notes to the financial information Global Energy Development PLCAnnual report 200714. Share-based paymentsDiscretionary share option incentive planThe Company periodically grants share options to employees and directors, as approved by the Board of Directors. At 31 December2007 and 31 December 2006 the following share options were outstanding in respect of the ordinary shares:Year ended 31 December 2007Year of number Issued exercised Number price pergrant of shares in Year Lapsed in year of shares Start date End date share2002 2,915,196 – – – 2,915,196 31.01.2002 31.01.2012 50.0p2002 30,000 – – – 30,000 08.08.2002 12.08.2012 54.5p2004 675,000 – – – 675,000 03.12.2004 03.12.2014 151.1p2005 240,000 – (60,000) – 180,000 08.12.2005 08.12.2015 265.1p2006 325,000 – – – 325,000 13.09.2006 13.09.2016 174.5p2007 – 200,000 – – 200,000 13.06.2007 13.06.2017 85.7pTotal 4,185,196 200,000 (60,000) – 4,325,196Year ended 31 December 2006Year of number Issued exercised Number price pergrant of shares in year Lapsed in year of shares Start date End date share2002 2,967,636 – (32,440) (20,000) 2,915,196 31.01.2002 31.01.2012 50.0p2002 30,000 – – – 30,000 08.08.2002 12.08.2012 54.5p2004 780,000 – – (105,000) 675,000 03.12.2004 03.12.2014 151.1p2005 270,000 – – (30,000) 240,000 08.12.2005 08.12.2015 265.1p2006 – 325,000 – – 325,000 13.09.2006 13.09.2016 174.5pTotal 4,047,636 325,000 (32,440) (155,000) 4,185,196The Company’s share price at 31 December 2007 was 83.5p (31 December 2006: 123.5p). The highest and lowest share pricesduring the year were 140.0p (2006: 300.0p) and 82.5p (2006: 118.5p) respectively.The fair values of awards granted under the Group’s option plan have been calculated using a variation of a binomial option pricingmodel that takes into account factors specific to share incentive plans such as the vesting periods, estimated share price volatility, theexpected dividend yield on the Company’s ordinary shares and expected exercise of share options. The following principalassumptions were used in the valuation:Grant date 3 Dec 2004 8 Dec 2005 13 Sep 2006 13 Jun 2007Share price at date of grant 1.51p 2.651p 1.745p 0.857pExercise price 1.51p 2.651p 1.745p 0.857pVolatility 36.73% 33.02% 40.68% 30.99%Option life 3 Dec 2014 8 Dec 2015 13 Sep 2016 13 Jun 2017Dividend yield 0% 0% 0% 0%Risk-Free investment rate 4.645% 4.226% 4.568% 5.416%Employee turnover 3.7 years 3.3 years 4.3 years 4.0 yearsVolatility has been based on a Volatility Cone calculation model using the historic share price two years prior to each grant date andassigning a probability weighting. Volatilities were selected between the median and the 75th percentile calculations.

68 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 200714. Share-based payments continuedBased on above assumptions the fair values of the options granted are estimated to be:Grant date 3 Dec 2004 8 Dec 2005 13 Sep 2006 13 Jun 2007Fair value 51p 76p 66p 28pExpense arising from share-based payments:Based on the above fair values and the Company’s expectations of employee turnover, the expense arising from equity-settled shareoptions and share awards made to employees was $480,000 for the period (2006: $312,000). There were no other share-basedpayment transactions.15. Movement on reservesShareProfitpremium and loss Otheraccount account reserve$000 $000 $000At 1 January 2007 26,439 (14,368) 1,826Retained (loss) for financial year – (5,586) –Share-based payment – 480 –At 31 December 2007 26,439 (19,474) 1,82616. Contingent liabilitiesThe Company did not have any contingent liabilities in either 2006 or 2007.17. Related party disclosuresDavid Quint is a Director of the Company and a director of RP&C International Ltd. RP&C International provided certain corporatefinance services during 2006 and 2007.AmountsAmountsowedowedfrom/(to)from/(to)relatedrelatedServices parties as at Services parties as atprovided 31 December provided 31 December2007 2007 2006 2006$000 $000 $000 $000RP&C International Inc 17 – 294 –18. Post balance sheet eventsThere are no post balance sheet events to be disclosed other than those noted in note 29 of the Group accounts.

Corporate directoryDirectorsMikel Faulkner (Executive Chairman)Stephen Voss (Vice Chairman)Stephen Newton (Managing Director)Lord Freeman (Non-executive Director)Alan Henderson (Non-executive Director)David Quint (Non-executive Director)SecretaryCatherine MilesRegistered office26 Dover StreetLondon, W1S 4LYUKWeb pagewww.globalenergyplc.comEmailGED-info@globalnet.co.ukRegistered in England No. 4330608AdvisersNominated Adviser and BrokerLandsbanki Securities (UK) LimitedBeaufort House15 St. Botolph StreetLondon, EC3A 7QRUKAuditorsBDO Stoy Hayward LLP55 Baker StreetLondon, W1U 7EUUKRegistrarsCapita RegistrarsNorthern HouseWoodsome Park, Fenay BridgeHuddersfield, HD8 0LAUKIndependent Petroleum EngineersRyder Scott, Company LP1100 Louisiana, Suite 3800Houston,Texas 77002-5218USASolicitorsNorton Rose LLP3 More London RiversideLondon, SE1 2AQUKThis Annual Report is printed on Megamatt paper. Megamatt ismade from woodpulp which is sourced from sustainable forestsand is Elemental Chlorine Free (ECF). All inks used are vegetablebased and 98% of this report can be recycled.

United Kingdom Office andRegistered OfficeGlobal Energy Development PLC26 Dover StreetLondonW1S 4LYUKTel: +44 (0)20 7763 7177Fax: +44 (0)20 7763 7137Email: GED-info@globalnet.co.ukRegistered in England No. 4330608Colombia OfficeHarken de Colombia LtdCalle 113 Nro. 7-21Piso 10 Edificio TeleportBogotáColombiaGlobal Energy Development PLC Annual Report and Accounts 2007www.globalenergyplc.com