annual report 2009

Annual Report2009

3Annual Report2009Chairman’s Statement AGM4 Corporate governance and responsibility5 Board of Directors Report8 Income statement9 Balance sheet12 Changes in equity14 Cash flow15 Notes to the financial statements43 Auditors Report48 Contacts

Chairman’s Statement AGM28th February 2011Dear fellow shareholder,Aladdin Oil & Gas ASA (Aladdin) is an independent Norwegianoil and gas exploration and production company with itsassets in Russia. The company has been through turbulenttimes over the last two years and has now emerged stronger,better financed and with a clear work programme. Aladdin’swork programme is aimed at increasing both oil and gasproduction together with its reserves base through seismicacquisition and drilling. Aladdin has continued to focus itsefforts in Orenburg and Ukhta. In Orenburg Aladdin has fiveproduction licences and currently produces oil, in Ukhta Aladdinhas two production licences, one exploration licence andcurrently produces gas. This all adds up to a solid productionand reserves base with significant exploration upside.The financial position of the group has been significantlystrengthened by the conversion of the Company’s bondsto shares in July of 2010 plus a loan to finance the initialstages of the newly developed work programme. Aladdin nowbenefits from the strong support of a strategic shareholderwith the ambition and vision to build a significant oil and gasproducer in Russia.The newly established board has spent a lot of time putting inplace strong governance structures plus investors’ protectioncompliant with Norwegian legislation. The board hasinternational oil company experience and the senior managementin Aladdin is now mostly based in Russia. We believethis combination of changes will best enable Aladdin to takeadvantage of the opportunities available with its assets.The company’s focus for 2011 is summarised in the presentationrecently posted on the company website. In additionto this the company will continue to assess new ventureopportunities in Russia where we believe there are many undervaluedassets. 2011 will be an exciting year for Aladdin’sshareholders and we hope you continue to support the group.Fred PonsonbyChairman3

Corporate governanceand responsibilityAladdin Oil & Gas Company ASA aims to comply with The NorwegianCode of Practice for Corporate Governance, regulatingthe division of roles between shareholders, board of directorsand executive management beyond the requirements of thelegislation. The Code of Practice is intended to strengthenconfidence in companies and to enhance the greatest possiblevalue creation over time in the best interests of shareholders,employees and other stakeholders.The company has implemented several of the practices, especiallyrelated to the composition of the board of directors andthe corporate assembly, independence, the work of the boardof directors, internal control, financial reporting and informationand communications. Exemplifying the latest, Aladdin Oil& Gas emphasizes openness and equal treatment of all participantsin the securities market. Thus, the company informsthe market through the Norwegian Securities Dealers Associationnews feed and the company’s web page. In addition, allinformation is presented both in Norwegian and English, inorder to avoid discrimination of any shareholder.As a young company, Aladdin Oil & Gas Company is in the processof further building up structures and processes, enablingfull compliance with the Code of Practices.Aladdin strongly recognizes the importance of active involvementin developing the local community in the areas wherewe operate. We are aware that our ability to develop, grow andperform is not only dependent upon our organization but alsoupon the local community surrounding our operations. ConsequentlyAladdin strives to utilize our resource base in a bestpossible way to engage and commit resources for developingthe local community.4

Board of Directors’reportOperationsAladdin Oil & Gas Company (Aladdin) is an independentNorwegian exploration- and production company engaged indevelopment and operation of oil and natural gas propertiesin Russia. The Company owns the three operating entitiesOOO Geotechnologia, ZAO Orneftegaz and OOO Veselovskoe.Geotechnologia is located in the Timan Pechora region andowns one production license (West Ukhtinskoye) and oneexploration license (Middle Sedolskoye). Company head officeis located in Ukhta.Orneftegaz is located in the Volga-Uralregion and holds one exploration license (Bogdanovskoye)expected to expire 31. December 2010. Company headoffice is located in Orenburg. OOO Veselovskoye holds fiveproduction licenses located in the Orenburg area, in closeproximity to the Bogdanovskoye license. Company head officeis located in Orenburg. Aladdin group headquarter is locatedin Oslo, Norway.The company’s goal remains to become a significant producerof oil and gas in Russia and the former Soviet UnionHighlights 20092009 was again a challenging year for the Group. VenatinoTrading Limited did in year 2008 subscribe for shares withgross proceeds in the amount of NOK 155 million but hasfailed to pay more than NOK 78.4 million. Last payment wasreceived in July 2009. In order to secure capital a number ofsubsequent equity issues were performed with payments ofNOK 13.9 million for the balance of the year and NOK 48.7million in year 2010. The financial uncertainty combined withbeing underfinanced in relation to the planned operationalactivity lead to production target not being met. However, theplanned 100 % acquisition of OOO Veselovskoe, owning fivelicenses, for a total consideration of USD 3.2. Million includingdebt and acquisition costs was made May 2010. SinceAugust 2009 three wells in the license Nikiferovskoye havebeen producing approximately 175-250 bbl pr day.In July 2010 the Company’s bonds were converted to sharesand NOK 32 million in fresh equity was paid in. This has significantlystrengthened the financial position of the Group.The Group has continued its focus on developing the gaslicenses in Ukhta. The gas production commenced in April2010 and reached an average production of 112 thousandcubic meters per day by December 2010.The Company has not met all its license obligations andanticipates further breaches before the situation is remediated.The Bogdanovskaya exploration license has expired andthe Company has decided not to apply for extension of thelicense due to limited potential. The Company has writtenoff the license and related assets in the annual accounts for2009. The Board of Directors considers the risk for losing theremaining licenses as minimal as the necessary actions formaintaining these are either in progress or planned remediatedwithin a few months. The Company is in addition applyingfor extension of time limits where appropriate. The Companyhas decided to abandon the Khersonskoe license due to theproduction prospects not being satisfactory.At the end of the year, the company’s licenses had a total of36,2 mboe verified P50 SPE (Society of Petroleum Engineers)classified reserves. In addition, the company has reportedresources not yet SPE verified, through the WU17 structureand the interesting gas discovery in structure 14 on the MSlicense.Please refer to Note 16 for further detail on activitiesundertaken in 2010.Financial statements 2009Aladdin prepares and presents its accounts in accordancewith Simplified International Financial Reporting Standards(IFRS). The Board of Directors and the CEO considers thestatements and corresponding notes presented in this reportto give a correct and accurate summary of the company’soperations and position at the end of the year. Aside from thefinancial restructuring referred to under highlights there hasnot been any events after year-end which may alter the figurespresented or the position of the company.Consolidated 2009 Group operating revenues amounted toNOK 6.4 million, and the Group had a negative comprehensiveincome for the year of NOK 193.4 million. The parentcompany, Aladdin Oil & Gas Company ASA, had a net loss in2009 of NOK 255.1. On the consolidated level the increasedlosses relative to 2008 are largely related to Increasedimpairments from NOK 14.0 million in 2008 to NOK 70,1million in 2009, of which the impairment of the Bogdanovskayalicense constitutes NOK 33.3 million (Note 17), andincreased other financial costs from a positive NOK 23.3million in 2008 to an expense of NOK 59,9 million in 2009.Exchange differences from foreign operations as shownunder comprehensive income is negative with NOK 8,6 millionversus negative NOK 8.9 million for 2008. This expenseis in 2009 mainly related to not realize currency losses oninter-company loans. The production targets not met becauseof Venatino’a not fulfilling its equity-issue obligations hasresulted in higher fixed costs relative to development andproduction than planned.5

At the year-end of 2009, the Group had total equity of NOK59, 7 million, which is equal to an equity ratio of 26,9 %.Available cash and cash equivalents at year end 2009 wereNOK 11 million. Total capital at the end of the year was NOK228,1 million. The Group’s non-current interest-bearing debtat the year end 2009 was NOK 62.5 million, compared toNOK 55.2 million at year end 2008 (Note 9). The Group’sshort term debt as of 31.12.09 amounted to NOK 86.6 million,compared to 67.3 million in 2008. The Group’s net cashflow from operations amounted to minus NOK 121,9 million.The Groups total investments were NOK 27.7 million in 2009.Please refer to Note 2 for details on acquisition of OOO Veselovskoe.New equity paid in was NOK 92.1 million.Working conditionsSafe working conditions are a fundamental prerequisite forthe future growth in the Aladdin Group. The board and theCEO consider the working conditions in the Group to be satisfactory.No serious accidents resulting in major personnelinjuries or material damage have been reported in 2009. In2009 the sickness absenteeism was 2.7 % for Aladdin.Research & development activitiesThe Aladdin Group has not undertaken any research- anddevelopment (R&D) activities in 2009.Gender equalityOut of the 119 employees in the Group as of year-end 2009,16 are women. Women represent 42,8% of the boardmembers in Aladdin. The company is trying to recruit womento group management positions. Women are well representedin the group. There are no significant differences in employeebenefits between men and women.Anti discriminationThe discrimination act´s purpose is to promote equality,ensure equal opportunities and rights, and prevent discrimination.The group is working actively, targeted and plannedto promote this in all of the group’s activities. The activitiesinclude recruitment, salary – and working condition, promotion,development and protection against harassment.The group is working actively and targeted for designing andfacilitating the physical conditions, so that the company´svarious functions can be used by so many people as possible.For employees or applicants with disabilities it will bemade individual arrangements.The external environmentAladdin Oil & Gas Company ASA is through its subsidiariesOOO Geotechnologia, OOO Veselovskoe and ZAO Orneftegazan operator of the group’s oil fields in Russia. During drilling,the responsibility for the well may be transferred to a subcontractor(drilling company) which holds full responsibility for theoperations and any reporting to Russian authorities until thewell is finished. When a well is finished and ready for beingput in production, the responsibility of the well is transferredback to the operating entities. The Board is very aware of theimportance in finding industrial solutions protecting the externalenvironment and ensuring the companies co-existencewith other important industries. The company upholds thelaws and regulations applying in Russia at all time. No environmentalincidents have been reported for 2009.Financial riskMainly, the Aladdin Group is exposed to currency risk, pricerisk and liquidity risk. The Group seeks to achieve anacceptable risk within these areas. As to interest rate risk,the company’s bond loans had fixed interest rates, and weretherefore considered being low risk. The functional and presentationcurrency for Aladdin is Norwegian kroner, while theRussian subsidiaries have income and expenses in roublesand inter-company loans in US dollars and roubles. The Groupis therefore exposed to currency risk. Due to the fact thatRussian Rouble and Norwegian Kroner are deemed to bestable currencies, both strongly correlated with the oil prices,the Group uses no derivative financial instruments to hedgethe currency risk exposure.The Groups gross income is exposed to price risk due to oilprice fluctuations. However, the net income is subject to theRussian duties and taxes which are progressive relative tothe oil price and therefore limits the Groups overall exposureto this risk. A substantial or extended decline in oil pricewould have a material adverse effect for us. Historically, theprice of oil has fluctuated greatly in response to changes inmany factors. The Group does not and will not have controlover these factors, so have to accept this risk.As to liquidity, the Group is in a development phase, and theaccess to necessary funds is considered a risk factor withregards to the future funding of the company, which isplanned to be covered through a combination of loans andequity. The current financing and production plans allow us tosay those necessary funds are to be available for the Groupin the nearest future. Our plan is to get enough funds tooperate during the next 12 months. At the same time we planto reach breakeven point for the whole group in 2011, so theliquidity risk is to be minimised.Further information on financial instruments and risks areprovided in Note 9 and 10.Operational riskAladdin is exposed to operational and technical risk duringdrilling and production activities on the company’s licensesin Russia. Technical risk inhered in the operations as wellas risk of equipment being delayed and contractors failingoperations may cause delays of operations. Similar cost canincrease due to the high level of activity and pressure in theindustry. In shallow areas low pressure is a technical challenge.6

Aladdin’s exploration license Middle Sedolskoye expires in2011, however the company will apply for extension of thelicense in due time. There are always operation risks associatedwith such extension processes for Aladdin as for otheroperators in Russia. Aladdin fails to be in compliance with alllicense obligations which may cause additional risk related toits licenses. See notes 17 and 18 for more detailed informationon the licenses.Political riskIt is still recognized to be a significant political risk related toforeign investments in Russia. Oxford Analytica and AON haverecently ranked Russia in the category “medium risk”. Oilcompanies in Russia have been subject to high taxation overthe last years. However; Russian authorities has now realizedthat the high taxation has reduced the level of investmentsand the growth rate. Strong signals from Kremlin gives reasonto believe that the level of taxation is more likely to decreasethan increase especially for smaller fields.Business ethicsAladdin has adopted a policy that all activities and operationsare to be conducted in a professional and safe manner,without injuries on human beings or environmental damage.Training and exercises are important measures to achievesuch. Aladdin supports honesty and trustful relationships withour business partners as well as the local community wherewe operate and has zero tolerance for corruption.Corporate governanceThe Norwegian recommendation for corporate governancecovers general principles which Norwegian private, and listedcompanies in particular, are encouraged to follow. Aladdinsupports and tries to act according to these recommendations.Going ConcernAs of date the Group is lack of cash to finance its operations.The board’s intention is to maintain the company as a goingconcern. In this respect the Group has obtained a bridge loanin the amount of USD 5.0 million from its biggest shareholderand raise up to USD 20.0 millions in new equity or similarfinancing arrangement during first half 2011. These plansare subject to the shareholders’ approval. Therefore there issome risk that the Group will not continue as a going concern.OutlookThe Company’s goal for the oil production in Orenburg during2011 is to increase the production up to 720 barrels per daythrough re-activating three wells on the Veselovskoe licenseand further development of the licenses Voinskoe, Besedinskoeand Nikiferovskoe. Said development consists mainly ofconducting seismic programs and subsequent side-tracking’s.Secondly a change of lifting system is planned.The Company aims at increasing gas production in Ukhta Toup to 175,000 cubic meters per day by end of 2011. Theplan is to achieve this through improvements of well designand drilling one production well on the Middle Sedelskoyelicense. A seismic program will be executed and explorationwells drilled during 2011 to further enhance production in2012 onwards.The financing of these operations is expected to be a combinationof debt- and equity issues as outlined under goingconcern above.Parent company accounts and theallocation of profit for the yearThe profit and loss account for the parent company AladdinOil & Gas Company ASA showed a loss for the year of NOK255.1 million. The Board suggests the loss is allocated toother equity. Unrestricted equity at 31.12.2009 amounts toNOK 0.Oslo, Norway, 11. February 2011Frederick Matthew ThomasPonsonbyChairman of the BoardMikhail AlyautdinovBoard MemberAlexey KruzhkovChief Executive OfficerEinar LycheBoard MemberKatherine Hatlen StøvringBoard MemberArtur RastroginBoard MemberAnn Elizabeth SeabrookBoard MemberEkaterina ZhdanBoard Member7

ALADDINOILANDGASCOMPANYASA_______________________________EkaterinaZhdanBoardMemberincome statementStatementofcomprehensiveincome_______________________________AlexeyKruzhkovChiefExecutiveOfficerNorwegianKroner RestatedASA ASA Notes Group Group 2009 2008 2009 2008OperatingRevenues ‐ 8 6423438 2216633TotalRevenues ‐ ‐ 6423438 2216633ProductionExpenses ‐ (12398435) (17599320)PersonnelExpenses (7783510) (8998239) 4,5 (14740289) (16848362)OtherOperatingExpenses (8586686) (7510596) 11 (25963657) (22458923)TotalOperatingExpenses (16370196) (16508835) (53102381) (56906604) OperatingIncome(Loss) (16370196) (16508835) (46678943) (54689971)Depreciation (30250) ‐ 11 (2862001) (8936819)Impairment (182320368) ‐ 6 (70077840) (14000000)Depreciationandimpairment (182350618) ‐ (72939841) (22936819)InterestFromGroupCompanies 32291856 20295182 ‐ ‐InterestIncome 4661884 1642942 4667256 1643432OtherFinancialIncome 463097 1000894 594503 4813921InterestExpenses (16162271) (18564000) (16275415) (18669292)OtherFinancialExpenses (77594374) (131771) 3 (59896448) 23294671NetFinancialItems (56339808) 4243247 (70910105) 11082732 Income(Loss)BeforeTax (255060622) (12265588) (190528889) (66544058)TaxExpense(Income) ‐ 13 5763438 6710093 NetIncome(Loss) (255060622) (12265588) (184765451) (59833966)Foreignexchange (8606649) (8972572)Totalcomprehensiveincome (193372099) (68806538)Numberofsharesparentcompany 7 42165582 19402222Earningspershare 14 (4.38) (3.08)Dilutednumberofsharesparentcompany 50523082 27759722DilutedEarningspershare 14 (3.66) (2.16)8

ALADDINOILANDGASCOMPANYASABalance sheetStatementoffinancialposition31DecemberNorwegianKroner Restated RestatedASA ASA Notes Group Group Group 2009 2008 2009 2008 01.01.2008Assets Goodwill ‐ ‐ 12 37674001 66075407 ‐Licenses ‐ ‐2,12,16,17 94252891 132126477 239417072CapitalizedExplorationExpenses ‐ ‐ 12 56717839 41058780 30331916Deferredtaxassets ‐ ‐ 13 ‐ 1057175 ‐TotalIntangibleAssets ‐ ‐ 188644731 240317840 269748988 Productionfacilitiesindevelopment ‐ ‐ ‐ ‐ ‐MachinesandEquipment 39930 70180 11 12057769 14788932 11385394TotalTangibleAssets 39930 70180 12057769 14788932 11385394 Shareinsubsidiaries 78201911 154046765 3 ‐ ‐ ‐Loantogroupcompanies 112788781 191248713 6 ‐ ‐ ‐Otherlongtermreceivables 350195 161497 350195 161497 ‐TotalFinancialAssets 191340887 345456975 350195 161497 ‐ TotalNoncurrentAssets191380817 345527155 201052695 255268269 281134382 Inventories ‐ ‐ 8105500 17637726 34254249

Balance sheetALADDINOILANDGASCOMPANYASATradereceivables ‐ 544718 7354163 11882207 7467369OtherReceivables 575660 ‐ 639700 ‐ ‐CashandBankDeposit 9793136 4249360 10977211 5967650 44454305TotalCurrentAssets 10368796 4794078 27076574 35487584 55347099 TotalAssets 201749613 350321233 228129269 290755852 336481481 EquityandLiabilities ShareCapital 5770061 2261768 7 5770061 2261768 1661820SharePremiumReserve 297825890 227270213 297825890 227270213 174583934OtherEquity 40519848 22511486 40519848 22511486 18563406TotalPaid‐incapital 344115799 252043467 344115799 252043467 194809160 Otherequity ‐ ‐ ‐ ‐ Retainedearnings (267326210) (12265588) (284417970) (110249626) (31690722)TotalRetainedearnings (267326210) (12265588) (284417970) (110249626) (31690722) TotalEquity 76789590 239777879 59697829 141793841 163118438 Liabilities PensionLiabilities ‐ ‐ ‐ ‐79 71069DeferredTax ‐ ‐ 13 18313213 26425316 57436207OtherLiabilities ‐ ‐ ‐ ‐ ‐TotalProvisions ‐ ‐ 18313213 26425237 57507276 Non‐currentliabilities Bonds 62488046 55233866 9 62488046 55233866 100086791Liabilitiestofinancialinstitutions ‐ ‐ 989074 ‐ ‐TotalnoncurrentLiabilities 62488046 55233866 81790333 81659103 15759406710

Balance ALADDINOILANDGASCOMPANYASAsheet Shorttermliabilities Bonds 49622735 48322292 9 49622735 48322292 ‐TradeCreditors 4757296 929559 22979131 11227070 2025446Taxpayable 344259 ‐ 344259 ‐ 2649738PublicDutiesPayable 155534 1033936 1028650 3113621 ‐OtherCurrentLiabilities 7592153 5023701 12666331 4639926 11093792TotalCurrentLiabilities 62471977 55309488 86641106 67302909 15768975 TotalLiabilities 124960023 110543354 168431440 148962012 173363044 TotalEquityandLiabilities 201749612 350321233 228129269 290755852 336481481 Oslo, Norway, 11. February 2011FrederickMTPonsonby‐Chairman EkaterinaZhdan Frederick Matthew Thomas Mikhail Alyautdinov Alexey KruzhkovPonsonbyBoard MemberChief Executive OfficerEinarLyche Chairman of the Board ArturRastrogin MikhailAlyautdinov Katherine Hatlen StøvringArtur Rastrogin AnnElizabethSeabrookSeabrookBoard MemberBoard MemberBoard Member KatherineH.Støvring AlexeyKruzhkov‐CEOEinar LycheBoard MemberEkaterina ZhdanBoard Member11

ALADDINOILANDGASCOMPANYASA’ change in equityStatementofchangesinequity‐Group NorwegiankronerNotesSharecapitalSharepremiumOtherpaidincapital Otherequity Totalequity Equity1.1.08 1661820 174583934 18563406 (16451994) 178357166 Correctionpreviousyearserror ‐ ‐ ‐ (15238728) (15238728) RestatedEquity1.1.08 1661820 174583934 18563406 (31690722) 163118438 Foreignexchange ‐ ‐ ‐ (8972572) (8972572)Capitalincrease 599948 57596078 ‐ ‐ 58196026IssueExpenses ‐ (4909799) ‐ ‐ (4909799)Grantedoptions ‐ ‐ 3948080 ‐ 3948080Netincome(loss) ‐ ‐ ‐ (59833966) (59833966) Equity31.12.08 2261768 227270213 22511486 (100497260) 151546207 Correctionpreviousyearserror ‐ ‐ ‐ (9752367) (9752367) RestatedEquity31.12.08 2261768 227270213 22511486 (110249626) 141793841 Equity1.1.09 2261768 227270213 22511486 (110249626) 141793841 Foreignexchange ‐ ‐ ‐ (8606649) (8606649)Capitalincrease 7 3508293 70555678 699600 ‐ 74763571Unregisteredcapitalincrease Acquisition 2Netincome(loss) ‐ ‐ 17308762 ‐ 17308762‐ ‐ ‐ 19203755 19203755‐ ‐ ‐ (184765451) (184765451) Equity31.12.09 5770061 297825891 40519848 (284417970) 5969783012

ALADDINOILANDGASCOMPANYASAchange in equity - GROUPStatementofchangeinequity‐CompanyNorwegiankronerNotesSharecapitalSharepremiumOtherpaidincapitalOtherequityTotalequity Equity1.1.08 1661820 174583934 18563406 0 194809160 Capitalincrease 599948 64951869 3921344 (12265588) 57207573Grantedoptions ‐ ‐ 26736 ‐ 26736Netincome(loss) ‐ (12265590) ‐ ‐ (12265590) 0Equity31.12.08 2261768 227270213 22511486 (12265588) 239777879 Equity1.1.09 2261768 227270213 22511486 (12265588) 239777879 Capitalincrease 7 3508293 70555678 699600 ‐ 74763571Unregisteredcapitalincrease 17308762 ‐ 17308762Netincome(loss) ‐ ‐ ‐ (255060622) (255060622) Equity31.12.09 5770061 297825890 40519848 (267326210) 7678959013

ALADDINOILANDGASCOMPANYASA’ Notes to the Financial StatementNotestothefinancialstatementsNote1AccountingpoliciesandeffectofnewaccountingstandardsAladdinOil&GasCompanyASAisapubliclimitedcompanyincorporatedinNorway.Thecompany’smainofficeislocatedinØvreSlottsgate14,0157Oslo.ThefinancialstatementshavebeenpreparedinaccordancewiththeNorwegianAccountingAct§3‐9andtherulesforsimplifiedIFRSpassedbytheNorwegianFinanceMinistryJanuary21.2008.ThisimpliesthatrecognitionandmeasurementmainlyisperformedaccordingtoInternationalFinancialReportingStandards(IFRS)andpresentationandnotestothefinancialstatementsareaccordingtotheNorwegianAccountingActandNorwegiangenerallyacceptedaccountingstandards.Thefinancialstatementswereapprovedbytheboardofdirectorson11February2011.Saleofpetroleumproductsisrecognizedasincomeatthetimeofdelivery;whentheriskistransferredtothecustomersaccordingtothecontractualagreements.Incomefromoilproducingfieldsispresentednetafterdeductionofroyalties.Currentassetsandshorttermliabilitiesconsistofreceivablesandpayablesduewithinoneyear.Currentassetsarevaluedatbelowcostandfairvalue.Shorttermliabilitiesarerecognizedatnominalvalue.Monetary items in a foreign currency are converted to NOK using the exchange rate applicable on thebalancesheetdate.Receivablesandpayableswhicharehedgedarerecognizedattheexchangerateofthehedge contract with exception for the interest which is recognized and classified as interestincome/expense.Accountreceivablesandothercurrentreceivablesarerecordedinthebalancesheetatnominalvaluelessprovisionsforexpectedlosses.Provisionsforexpectedlossesarebasedonindividualassessmentsofthedifferentreceivables.Fortheremainingreceivables,ageneralprovisionisestimatedbasedonexpectedloss.Excessvalueonthepurchaseofoperationsthatcannotbeallocatedtoidentifiableassetsorliabilitiesontheacquisitiondateisclassifiedinthebalancesheetasgoodwill.Goodwillisrecognizedatcostlessanyaccumulatedimpairmentlosses.Goodwillisnotdepreciated,butistestedforimpairmentannuallyormorefrequentlyifeventsorchangesincircumstancesindicatethatitmightbeimpaired.Licenses,explorationfieldsandproperty,plantandequipmentisrecognizedinthebalancesheetatcostreduced by accumulated depreciation and any devaluations. Licenses are depreciated according to theproductionunitmethod.Cost of exploration and development of the oil and gas activities is accounted for according to thesuccessfuleffortsmethod.Costsofacquiringlicensesanddrillingofexplorationwellsarecapitalized.Costswithout identifiable future economic benefits such as geological and geophysical costs, costs of dryexplorationwellsareexpensed.Capitalizedcostsandproductionfacilitiesaredepreciatedovertheirusefuleconomiclivesanddevaluatediffutureeconomicbenefitsoftheassetsarenotpresent.15

ALADDINOILANDGASCOMPANYASAThe company has issued two loans with warrants. The loans have been recognized according to theamortizedcostprincipleandtheeffectiveinterestmethod.Financialderivativesarerecognizedatfairvalueandasassetsorliabilitiesdependingonthevalue.Typicalderivativesforthecompanyarefuturecontractsforsaleofgas,putoptionsforoilorcurrencySWAPS.Changesinfairvalueofthederivativesarerecognizedintheincomestatementfortheperiod.Stockoptionsissuedtoemployeesaremeasuredatfairvalueatthetimegranted.Thecostisexpensedoverthevestingperiod.Inventoriesconsistofcrudeoilandarerecognizedatlowerofproductioncostandnetrealizable value. Production costs include raw material, salaries and certain administrative costs. Netrealizablevalueistheestimatedsalespricewhichcanbeachievedinnormaloperations,reducedbytheestimatedcostofsales.The tax expense consists of payable taxes and changes to deferred tax. Deferred tax/tax assets arecalculatedonalltaxabletemporarydifferencesattheendofthefinancialyear.Taxincreasesanddecreasesthataretemporarydifferenceswhichreverseormayreverseinthesameperiodareoffset.Netdeferredtaxassetarerecognizedtotheextentthatitisreasonablethatthecompanycanutilizethedeferredtaxasset.Theparentcompany’saccountingprinciples have been used in the group consolidated statements. TheassetsandliabilitiesofforeignsubsidiariesareconvertedintoNOKattheexchangerateatthebalancesheetdate.TheresultsandcashflowsofforeignsubsidiariesareconvertedintoNOKusingaverageratesofexchange.ForeignexchangeadjustmentsarisingwhentheopeningnetassetsandtheprofitsfortheyearforforeignsubsidiariesaretranslatedintoNOKarebookedtoequity.Thepurchasemethodimpliesthatthepurchasepriceofthesubsidiariesiseliminatedagainsttheequityofthesubsidiaryatthetimeofpurchase.Forfurtherexplanationsoftheaccountingprinciplesused,pleaseseethenotestothedifferentaccountingitems.ApprovedIFRSsandIFRICswithfutureimplementationimpact,notimplementedatthebalancesheetdate:•RevisedIFRS3BusinessCombinations(2008)•ChangetoIAS27ConsolidatedandseparateFinancialStatements(2008)•ChangetoIFRS2GroupCash‐settledShare‐basedPaymentTransactions•IFRS9Financialinstruments•IAS24(revised)RelatedPartyDisclosures•ChangetoIAS32ClassificationofRightsIssues•ChangetoIAS39EligibleHedgedItems•IFRIC12ServiceConcessionArrangements•ChangetoIFRIC14IAS19PrepaymentsofaMinimumFundingRequirement16

’ALADDINOILANDGASCOMPANYASA•IFRIC15AgreementsfortheConstructionofRealEstate•IFRIC16HedgesofaNetInvestmentinaforeignoperation•IFRIC17DistributionsofNon‐cashAssetstoOwners•IFRIC18TransfersofAssetsfromCustomer•IFRIC19ExtinguishingFinancialLiabilitieswithEquityInstrumentsNote2BusinesscombinationsAladdinOil&GasCompanyhasacquiredthecompanyZAOVeselovskoyeLLCduring2009.Ithasnotbeenanyotherchangesinthegroup’sstructurecomparedto2008.ZAOVeselovskoyeLLCwasacquired5May2009. The purchase price allocation has been determinedpreliminary.Statementoffinancialpositionatdateofacquisitionadjustedforfairvalue(Norwegiankroner)CarryingvalueatdateofacquisitionFairvalueadjustmentsFairvalueatdateofacquisition ‐ 3580 3580Licenses ‐ 19204 19204Fixedassets 4146 ‐ 4146Currentassets 3082 ‐ 3082Totalassets 7228 22784 30012 Equity (8461) 19204 10743 ‐ ‐Interestbearingloansandcredits 15689 ‐ 15689Deferredtax ‐ 3580 3580Totalequityandliabilities 7228 19204 26432 ‐ Acquisitioncost(incl.Transactioncost) 10743 Carryingamountofassets (8461) Fairvalueadjustmentallocatedtolicenses 19204 Fairvalueadjustmentsareallocatedtolicenses.ThecompanyhasnotreceivedsufficientinformationtoprepareproformainformationrequiredbyIFRS3.ALADDINOILANDGASCOMPANYASATheallocationhasbeendeterminedprovisionally.Note3SubsidiariesCompany Parentcompany OwnersshareCountrySharecapitalLarchbayTraders&ConsultantsLtd. AladdinOil&GasCompanyASA 100% CYP EUR8.55017AladdinOil&Gas(Cyprus)Ltd. AladdinOil&GasCompanyASA 100% CYP EUR10.000StikitoLimited AladdinOil&GasCompanyASA 100% CYP EUR11.777NorgesveienS.L. AladdinOil&GasCompanyASA 100% ESP EUR3.006OOOGeotechnologia LarchbayTraders&ConsultantsLtd. 100% RUS RUB10.000

’ALADDINOILANDGASCOMPANYASATheallocationhasbeendeterminedprovisionally.Note3SubsidiariesCompany Parentcompany OwnersshareCountrySharecapitalLarchbayTraders&ConsultantsLtd. AladdinOil&GasCompanyASA 100% CYP EUR8.550AladdinOil&Gas(Cyprus)Ltd. AladdinOil&GasCompanyASA 100% CYP EUR10.000StikitoLimited AladdinOil&GasCompanyASA 100% CYP EUR11.777NorgesveienS.L. AladdinOil&GasCompanyASA 100% ESP EUR3.006OOOGeotechnologia LarchbayTraders&ConsultantsLtd. 100% RUS RUB10.000OOOKOMIDrilling LarchbayTraders&ConsultantsLtd. 100% RUS RUB10.000ZAOYuKPerspectiva AladdinOil&GasCyprusLtd. 100% RUS RUB10.000ZAOOrneftegaz ZAOYuKPerspectiva 100% RUS RUB2.500.000OOOVeselovskoye StikitoLimited 100% RUS RUB10.000Aladdin Oil & Gas Company ASA has recognized impairment of the shares in Larchbay Traders andConsultantsLtdwithNOK75million.Theamountisincludedinotherfinancialexpenses.*NorgesveienS.L.wassoldin2010.Thesalehasnotresultedinagainorloss.Note4Employees,remunerationetc Company Group* 2009 2008 2009 2008Salaries 5154549 7692261 10662840 12521500Otherbenefits 1519860 38389 1656744 38389Employerstax 870124 935330 2181728 956484Otherstaffcost 238977 332259 238977 332259Totalemployerscost 7783510 8998239 14740289 13848632 Averagenumberofemployees 6 6 119 124*Salaryforthegrouphasbeenexpensed.Salarydirectlyrelatedtowellorprojectsarecapitalizedinthebalancesheet.18

ALADDINOILANDGASCOMPANYASA2009 Remuneration torelated parties Title from to Salary/Fees ExpensesConsultingfeesHansAxelJahren CEO 01.01.2009 31.05.2009 577960 28584‐HansAxelJahrenVPbusinessdevelopment 01.06.2009 31.12.2009 591500‐‐PålNedrelid CEO 01.06.2009 15.11.2009 658221 410‐EinarAskvig CEO 15.11.2009 31.12.2009 115000‐‐JørnBarkenæs CFO 01.09.2009 31.12.2009 243333‐‐EspenGlende COO 01.01.2009 31.12.2009 1124960 63785‐EinarAskvig Chairman 01.01.2009 31.12.2009 50000 67885 848236CecilieD.SimonsenBoardmember 01.01.2009 26.05.2009 37500‐‐SamuelL.KværnesBoardmember 01.01.2009 31.12.2009 50000‐‐IngerF.StrassBoardmember 01.01.2009 31.12.2009 50000‐‐Total 3498474 160664 848236At15December2009therewasmadechangesinthecompany’smanagement.Followingdifferingviewsonthecompany'sstrategy,theboardandCEOPålNedrelid,agreedthatheshouldresignfromhisposition.ChairmanEinarAskvigwasconstitutedasthecompany'sCEOfromthesamedate.EinarAskvigreceivedaremunerationofNOK57500permonthforthefirst3monthsandthereafterNOK115000permonth,inadditiondirectexpensesfortravel,hotel,subsistenceandcommunication.Iftheagreementisterminatedby the company Einar Askvig is entitled to one year’s fee if the termination is based on other thanemploymentofnewCEOorgrossmisconductbyEinarAskvig.Auditorsfee Company Group 2009 2008 2009 2008Statutoryaudit 218013 230000 2445374 811646Otherattestationservices 92187 75000 92187 75000Otherservices 109275 315000 109275 315000Taxadvice 57500 40000 57500 40000Total 476975 660000 2704336 12416462008 CompanyRemunerationtorelatedparties CEO ChairmanoftheboardALADDINOILANDGASCOMPANYASABoardmembersSalary 1295570 - -Boardfee - 50000 25000Consultingfee - 1051515 58545Expensedcovered 20375 61982 25457Total 1315945 1163497 109002Note5PensionarrangementTheparentcompanyisrequiredtohavepensionarrangementsaftertheMandatoryServicePensionAct.19Theparentcompany'spensionarrangementisinaccordancewiththerequirementsintheActIntheforeigncompaniestherearenopensionarrangements.

Consultingfee - 1051515 58545Expensedcovered 20375 61982 25457Total 1315945 1163497 109002’Note5PensionarrangementTheparentcompanyisrequiredtohavepensionarrangementsaftertheMandatoryServicePensionAct.Theparentcompany'spensionarrangementisinaccordancewiththerequirementsintheActIntheforeigncompaniestherearenopensionarrangements.Note6Relatedparties/ReceivableandpayablegroupcompaniesIntercompanyreceivables2009 LongtermreceivablesShorttermreceivablesTotalintercompanyreceivablesAladdinOil&GasCompanyASA 291044406 - 291044406LarchbayTradersandConsultantsLtd 98811395 455435 99266830AladdinOil&Gas(Cyprus)Ltd 78086121 - 78086121StikitoLtd 5868278 - 5868278YUKPerspektiva 8391871 1158624 9550495OOOGeotechnologia 123205 763 123968ZAOOrneftegaz 4586053 4586053 9172106OOOKOMIDrilling - 719226 719226OOOVeselovskoye - 2877011 2877011Total 486911329 9797112 496708441AladdinOil&GasCompanyASAhasrecognizedanimpairmentlossrelatedtointercompanyreceivablesofNOK178millionin2009.Intercompanypayables2009 LongtermpayablesShorttermpayablesTotalinternalpayablesLarchbayTradersandConsultantsLtd 91706360 - 91706360StikitoLtd 20401242 455435 20856677AladdinOil&Gas(Cyprus)Ltd 185759898 - 185759898OOOGeotechnologia 98665559 9006942 107672501YUKPerspektiva 12872646 26319 12898965ZAOOrneftegazALADDINOILANDGASCOMPANYASA 66956833 308416 67265249OOOKOMIDrilling 124036 - 124036OOOVeselovskoye 10424755 - 10424755Sum 486911329 9797112 496708441Intercompanyreceivables2008 LongtermreceivablesShorttermreceivablesTotalintercompanyreceivablesAladdinOil&GasCompanyASA 191248713 - 191248713LarchbayTradersandConsultantsLtd 82099380 - 82099380AladdinOil&Gas(Cyprus)Ltd 79838584 - 79838584StikitoLtd - - -YUKPerspektiva - - -OOOGeotechnologia - 352058 352058ZAOOrneftegaz - - -Total 353186677 352058 353538735 20

’Intercompanyreceivables2008 LongtermreceivablesShorttermreceivablesTotalintercompanyreceivablesAladdinOil&GasCompanyASA 191248713 - 191248713LarchbayTradersandConsultantsLtd 82099380 - 82099380AladdinOil&Gas(Cyprus)Ltd 79838584 - 79838584StikitoLtd - - -YUKPerspektiva - - -OOOGeotechnologia - 352058 352058ZAOOrneftegaz - - -Total 353186677 352058 353538735 Intercompanypayables2008 LongtermpayablesShorttermpayablesTotalinternalpayablesLarchbayTradersandConsultantsLtd 49110870 - 49110870StikitoLtd 350974 - 350974AladdinOil&Gas(Cyprus)Ltd 141028418 - 141028418OOOGeotechnologia 82099380 - 82099380YUKPerspektiva 15341688 352058 15693746ZAOOrneftegaz 65255347 - 65255347Total 353186677 352058 353538735Note7Noofshares,shareholdersetcIssuanceofnewsharecapitalAladdinOil&GasCompanyASAhasduring2009had16capitalincreasesandissued35.082.918shares.Ofthese8.472.918wereissuedatNOK7,70pershareand26.610.000wereissuedatNOK0,50pershare.Ofthis1.378.200wasissuedthroughtheconversionofdebtandissuedatNOK0,50pershare.Grosscapitalincreasepaidin2009wasNOK77.857.369.In 2010 Aladdin Oil and Gas Company ASA has increased its share capital. See note 16 for additioninformation.Noofsharesat20Decemberis1.751.511.862.21

’ALADDINOILANDGASCOMPANYASACompany’s20largestshareholders: Account Country NoofsharesOwnership%WATERFORDFINANCEANDINVESTMENTLTD* GUERNSEY 911960977 52,06%CITIBANKN.A.NEWYORA/CLAKESHOREINT.BU*NOMCAYMANISLANDS 122431724 6,99%MPPENSJON NORWAY 79224667 4,52%ANDOSKIN,VLADIMIR RUSSIA 64112800 3,66%TOLLEFSEN,IVARERIK NORWAY 54119048 3,09%HVEEM,PAAL NORWAY 50658696 2,89%BANKOFNEWYORKMELBNYGCMCLIENTACCOUNT NOM GERMANY 50369824 2,88%HAADEMINVESTAS NORWAY 47040217 2,69%FAIRVIEWFINANCE&INVESTMENTLTD VIRGINBRITISHISLANDS 21375150 1,22%SIXSISAGACCOUNT2 NOM SWITZERLAND 19866977 1,13%SIXSISAGS/ATELFORINTERVEST VIRGINBRITISHISLANDS 17130000 0,98%BAAL,ROGERFRANCISVAN NETHERLANDS 16012976 0,91%HAGEN,LARS NORWAY 14553693 0,83%ADVANCEDCONTROLENG NORWAY 14131366 0,81%FYFFE,GEORGINACAMPBELL GREATBRITAIN 12422000 0,71%BANKOFNEWYORKMELS/ACHEVIOTCAPTITAL GREATBRITAIN 9999000 0,57%STORMSKJOLDTALLAS NORWAY 9845652 0,56%SKEIEALPHAINVESTAS NORWAY 9605810 0,55%TOTENKOPFASC/OBJØRNBREIEN NORWAY 9525652 0,54%20largestshareholderat20December2010 1534386229 87,6%Other 217125633 12,4%Totalnoofshares20December2010 1751511862 100,0%*The27.12.2010WaterfordFinanceandInvestmentLtdpurchased122.431.724sharesfromCITIBANKN.A.NEWYORKA/CLAKESHOREINTBU.AfterthisWaterfordFinanceandInvestmentLtd has1.034.392.701representingaownershipof59,07%.Thecompanyhasoneclassofshareandallshareshavethesamevotingrights.ParvalueisNOK0,10.Therehasbeenissued2.177.500warrantswiththeloanofNOK37,5millionwithancalculatedstrikeofNOK18,90.InconnectionwiththeloanofNOK50,0milliontherehasbeenissued3.000.000warrantswithcalculatedstrikeofNOK2,20.ThelatterareissuedinAugust2009.Therehasbeencalculatedanupdatedstrikeinco‐operationwithNorskTillitsmanninaccordancewiththedilutiontermsintheloanagreements.22

’ALADDINOILANDGASCOMPANYASAIthasbeenagreedtoestablishandoptionprogramforthecompany’sboardmembersandotherthathaveprovidedbenefitstothecompany.In2009therewasgrantednewoptiontoanumberofexecutivesandkeypersonnel.Theoptionprogramcoversaperiodofupto36monthsfromgrantdate.Theoptionscanbesettlesinoneormoretransactionsduringtheperiod. No Strike LapseswithinEspenGlende 800000 1.00 05.10.2012Hans‐AxelJahren 800000 1.00 05.10.2012EinarAskvig 540000 1.00 05.10.2012NiclasBiørnstad 200000 1.00 05.10.2012SverreMonsen 200000 1.00 05.10.2012GeirYtreland 120000 1.00 05.10.2012LenaHansen 50000 1.00 05.10.2012SergeiSorokin 75000 1.00 05.10.2012LuisDiazMartinez 75000 1.00 05.10.2012PhilipVorobyrov 120000 1.00 05.10.2012KnutTollefsen 40000 1.00 05.10.2012RudolfStäger 40000 1.00 05.10.2012SamuelKvernes 40000 1.00 05.10.2012IngerFleslandStrass 40000 1.00 05.10.2012AnneJohanneBotterud 40000 1.00 05.10.2012Total 3180000 Options:(ThecalculationsoftheoptionpricesaremadeusingtheRoss,CoxandRubinstein’s(1979optionpricingformula).InOctober2009thecompanyallotted3.180.000tomanagement.Thenewoptionagreementsreplaceallpreviouslyenteredintooptionagreements.BasedonastrikepriceandmarketpriceofNOK0,55atthetime of allotment the value per options is NOK 0,22. Total value is NOK 699.600. After inclusion ofemployer’staxof14,10%totalcostsisNOK798.000(roundedtonearestthousand).Inthevaluationtherehasbeenused,basedontheassumptionofpositivedevelopmentinthesharevaluethat all option holders choose to exercise the options on their due date. Annualized volatility in thecompany'ssharepriceisapproximately185%estimatedbasedondailyendpricesasstatedontheOTClistenfrom10.04.2007to09.04.2010.Thevolatilityisthereforemeasuredoveraperiodalmostequaltotheoptionperiod.Itisdifficulttofindvolatilityforcomparablecompanies.ThevolatilityforAOGhasbeensignificant.Themanagementhasusedareasonableestimateforvolatilitythatwillbebetweencalculatedvolatilityandanormalizedintervalinthecomingthreeyearsperiodandconsiders100%asreasonableestimate.Basedonthefactthatthecompanyisinastart‐upphaseithasbeenassumedthattherewillnotbepaiddividendintheperiod.Discountrateis3,1%.Estimatedoptionvalueissensitivetochangesinvolatility.23

’ALADDINOILANDGASCOMPANYASAIFRS2requiresthatthecostsarechargedthefinancialstatements,anddistributedovertheperiodofwhichtheoptionisearned.Thisperiodexpireswhenalltheoptionscanbeexecuted.Inthiscase,alltheoptionscanbeexecutedimmediatelyuponissue,andthusalltheoptionsareearnedatthetimeofissue.Thisimpliesthattheentirecostregardingtheoptionsisrecordedinthefinancialstatementsin2008,includingthesocialsecuritytax.Thefollowingcanbesummedupattheexpiryoftheoldoptionplan:•Oldoptionsarere‐estimatedtorealvalueattimeofexpiry.•Newoptionsarepricedatrealvalueatthetimeofissue,whichinthiscasecorrespondstothetimeofexpiryoftheexistingoptions.•Thedifferencebetweenrealvalueofnewandoldsharesatthispointintimeshallbebookedasacostinthefinancialstatements.Theresultofcontrollingandtestingoldoptionstorealvalueatthetimeofexpiryshowthemtobevirtuallyworthless.Thedifferenceisthereforesettozeroandtherealvalueofthenewoptionsisbookedfully.Note8SalesincomesbygeographySalesin2009forthegroupisareonlydoneintheRussianmarkettolocalrefineries.Note9FinancialinstrumentsFinancialliabilities Company Carryingamount Fairvalue 2009 2008 2009 2008Long‐termdebt Bond AladdinOil&GasCompanyASA 62488046 55233866 62488046 55233866Total 62488046 55233866 62488046 55233866 Short‐termdebt Bond AladdinOil&GasCompanyASA 49622735 48322292 49622735 48322292Total 49622735 48322292 49622735 48322292 AladdinOil&GasCompanyASApurchasedonbonddebtin2007atparvalue5million.InterestonthebondloanofNOK50million,NOK3.250.000withordinaryduedate10December2009,wasdeferredto10March2010.Thiswasdonebyaddingtheinteresttoanew(unsecured)bondloan(coupon18%p.a).Aspartofthetermsthecouponontheordinarybondloanwasincreasedwith5%p.a.to18%p.a.from10December2009untiltheadditionalbondloanhasbeenrepaid.TheCompany'sproposalwasapprovedbythebondowners8December2009.24

’ALADDINOILANDGASCOMPANYASANote10FinancialriskmanagementThecompanyandthegroupareexposedtocreditrisk,liquidityrisk,interestraterisk,foreignexchangeriskandoperationalriskforthefinancialinstrumentsthecompanyandgrouphave.Thecompanyandthegroupdoesnotusefinancialinstrumentinconnectionwithmanagementoffinancialriskmanagement.CreditriskThecompanyhassignificantcreditriskattachedtoitsloanstosubsidiaries.Thesubsidiariesareinvolvedinoil‐andgasextractiontheirabilitytorepaytheloansdependentontheinherentriskinthesubsidiariesoperations.LiquidityriskThecompanyandthegroupsliquidityriskrelatestothepossibilityforfutureaccesstonecessaryfunding.InterestriskTheloanportfoliohasfixedinterestterms.ForeignexchangeriskThecompanyandgroupareexposedtothedevelopmentinforeignexchangeratesandisbothadirectandindirecteconomicriskforthecompanyandthegroup.Therehasnotbeenenteredintoanyagreementtomanagetheriskasat31.12.09.OperationriskThecompanyandthegroupisexposedtooperationalandtechnicalriskfromdrillingandproductioninconnection with the licenses in Russia. Technical risk inherent in the operations and risk of delays indeliveringofequipmentandnon‐performancefromsub‐contractorsmaydelaytheproduction.Thegroupisexposedtorawmaterialspricerisk,buthasnotusedanyfinancialinstrumenttomanagetherisk.25

ALADDINOILANDGASCOMPANYASANote11Fixedassets Company GroupCarryingvalue01.01.09 70180 14788932Businesscombinations ‐ 3652068Additions ‐ 1271705Disposals ‐ (150800)Foreignexchange ‐ (2612911)Carryingvalue01.01.09 70180 16948994 Accumulateddepreciation1.1.09 ‐ 2156465Disposals ‐ (127250)Depreciation 30250 2862010Accumulateddepreciation31.12.09 30250 4891225 Carryingvalue31.12.09 39930 12057769Depreciationrates 10‐50%Depreciationmethod Unchanged Company GroupCarryingvalue01.01.08 ‐ 14195086 Restatementcarryingvalue01.01.08 ‐ (2809692) Restatedcarryingvalue01.01.08 ‐ 11385394 Additions 70180 1283035Disposals ‐ ‐Carryingvalue01.01.08 70180 12668429 Accumulateddepreciation1.1.08 ‐ ‐Depreciation ‐ 2156465Accumulateddepreciation31.12.08 ‐ 2156465 Carryingvalue31.12.09 70180 10511964 Restatementcarryingvalue31.12.08 ‐ 4276968 Restatedcarryingvalue31.12.08 70180 14788932 Depreciationrates 10‐50%Depreciationmethod Unchanged26

ALADDINOILANDGASCOMPANYASANote12Intangibleassets Licenses Capitalized Goodwill TotalexplorationexpensesRestatedcarryingvalue01.01.09 132126477 41058780 66075407 239260664 Additions ‐ 42574227 ‐ 42574227Businesscombinations 19203755 146942 3579657 22930354Disposals ‐ ‐ ‐ ‐Impairment (29357904) (17306751) (19348443) (66013098)Foreignexchange (27719437) (9755359) (12632621) (50107417)Carryingvalue31.12.2009 94252891 56717839 37674001 188644731Each year the company assesses if there indicators of impairment related to the company's intangibleassets.Regardlessifthereareindicatorsofimpairmentimpairmenttestiscarriedoutforgoodwill.Mainassumptions Geotechnologia Orneftegaz Veselovskoe TotalWACC 22.9% 25.3% 22.9% Oilprice(USD)1) 71‐74 71‐74 71‐74 Cashflowperiod 2010‐2029 2010‐2029 2010‐2029 Impairment: Licenses (29357904)‐ (29357904)Goodwill (15465676) (3882767)‐ (19348443)Total (15465676) (33240671)‐(48706347)ThelicenseinOrneftegazexpired31December2010andinconnectionwiththistheboardhasconsideredtheprofitabilityofthefieldandconcludedthatitisnotprofitabletocontinuethedevelopmentoftheBogdanovskayafield.TheBoardthereforedecidedthatthereshouldnotbeappliedforanextensionofthedevelopmentlicensefortheBogdanovskayafield.Asaconsequenceofthistheimpairmentlossrelatedtolicensesandgoodwillhasbeenrecognized.1) Localdomesticpriceis60%ofmarketprice.27

ALADDINOILANDGASCOMPANYASA Licenses CapitalizedexplorationexpensesGoodwillTotalCarryingvalue31.12.07 239417072 30331916 ‐269748988Additions ‐ ‐ ‐ ‐Reclassificationfromgoodwill (73851225) ‐ 73851225 ‐Disposals ‐ ‐‐ ‐Foreignexchange (42778097) ‐‐(42778097)Restatedcarryingvalue31.12.07 122787750 30331916 73851225269748988Carryingvalue01.01.08 122787750 30331916 73851225226970891Additions ‐ 40484541 ‐ 40484541Disposal ‐ ‐ ‐‐Impairment (8936819) (14000000) (22936819)Foreignexchange 9338727(5676211) 6224182 9886698Carryingvalue31.12.2008 132126477 56203427 66075407254405311Restatementcarryingvalue2008 ‐(15144647) ‐(15144647)Restatedcarryingvalue31.12.08 132126477 41058780 66075407239260664Changesinthecompositionofintangibleassetsareduetochangesinfairvalueinthefinalpurchasepriceallocation.Basedonimpairmenttestrecoverableamountforgoodwillwasconsideredtobelowerthancarryingvalueasat31.12.08.FollowingthisanimpairmentlossofNOK14.000.000wasrecognizedforgoodwillin2008.*Rightshavenotbeendepreciationin2008and2009asthegroupusestheproductionunitmethodandproductionhasbeenminimalin2008and2009.*Developmentexpensesarenotdepreciatedasallcarryingamountsareconsideredtobeatfairvalueat31.12.09.28

ALADDINOILANDGASCOMPANYASANote13TaxexpenseCompany Taxexpense 2009 2008 Netincome(loss) (255060622) (12265588) Permanentdifferences 41259 952181 Changeintemporarydifferences 250883020 ‐ ShareofresultNOKUScompanies (222008692) (19758333) Taxbasis (226145035) (31071740) Taxpayable ‐ ‐ Taxexpense Taxpayable ‐ ‐ Changeindeferredtax ‐ ‐ Taxexpense ‐ ‐ Basisfordeferredtax 2009 2008 ChangeFixedassets ‐ 5460(5460)Impairmentsharesinsubsidiaries 75000000 ‐ 75000000Impairmentloans 182320368 ‐ 182320368Fairvalueadjustmentloans 11954 6443842 (6431888)Totaltemporarydifferences 257332322 6449302 250883020 LosscarriedforwardNOKUScompanies 115939873 31992871 83947002Losscarriedforward 28275950 24139607 4136343Deferredtaxasset 91564303 11764182 79800122Deferredtaxassetnotrecognizedinthebalancesheet 91564303 1176418229

ALADDINOILANDGASCOMPANYASAGroup Taxexpense 2009 2008 Netincome(loss) (190528888) (67821296) Permanentdifferences 42972837 952181 Changeintemporarydifferences* 107963381(5285059) Taxbasis (39592670) (72154174) Taxpayable 0 (5285059) Taxexpense 2009 2008 Taxpayable 0 0 Changeindeferredtax 5763438 0 Taxexpense 0 0 Basisfordeferredtax 2009 2008 ChangeFairvalueadjustments** (94252891) (132126477) 37873586Fixedassets 70077840 5460 70072380Fairvalueadjustmentloans 11954 (6443842) 6455796Otherchangesgroup ‐ 6438381 (6438381)Totaltemporarydifferences (24163097) (132126478) 107963381 Losscarriedforward 63732277 24139607 39592670Basisdeferredtax 39569180 (107986871) 147556051 Deferredtaxfairvalueadjustments (18262482) (26425316) 8162834DeferredtaxRussia (50732)‐ (50732)DeferredtaxassetRussia ‐ 1057175 (1057175)Netdeferredtax 18313213) (25368141) 7054928Deferredtaxnotrecognizedinthebalancesheet 26764414 4827921 *ChangeindeferredtaxrelatestochangeoftaxrateinRussianfrom24%to20%.EffectivetaxrateinRussiais20%andhasbeenusedtocalculatedeferredtax.**DeferredtaxrelatedtoidentifiedfairvalueadjustmentsinconnectionwiththeacquisitionofcompaniesinRussia.30

ALADDINOILANDGASCOMPANYASANote14EarningspershareBasisforcalculationofearningspershare 2009 Restated2008Netincome (184765451) (59833966) Numberofsharesparentcompany 42165582 19402222Effectofwarrantsrelatedtobonds 5177500 5177500Effectofoptions 3180000 3180000Dilutednumberofsharesparentcompany 50523082 27759722 Earningspershare Ordinary (4.38) (3.08)Diluted (3.66) (2.16)Note15RestatedincomestatementandstatementoffinancialpositionIn connection with the audit of the financial statements for 2009 there were identified errors in thereportedamountsfor2007and2008.Asaconsequenceofthistheincomestatementandstatementoffinancial position for 2008 as well as opening statement of financial position 1 January 2008 has beenrestated.Thechangesinthestatementsandthechangesarepresentedbelow. Group Restatement RestatedIncomestatement 2008 2008OperatingRevenues 2250744 (34111) 2216633Total Revenues TotalRevenues 2250744 (34111) 2216633Productioncosts (21084279) 3484959 (17599320)Personnelexpenses (13838696) (3009666) (16848362)Depreciation (23072359) 135540 (22936819)Otheroperatingexpenses (21131986) (1326937) (22458923)Totaloperatingexpenses (79127320) (716103) (79843423) Operatingresult (76876576) (750214) (77626790)Interestincome 1656308 (12876) 1643432Otherfinancialincome 4899085 (85164) 4813921Interestexpense (18669292) ‐ (18669292)Otherfinancialexpenses 21169178 2125493 23294671Netfinancialitems 9055279 2027453 11082732 Profit(loss)beforetax (67821297) 1277239 (66544058)Taxexpense ALADDINOILANDGASCOMPANYASA 5900241 809852 6710093Netincome(loss) (61921056) 2087090 (59833966)Statement of financial position 31 Group Restatement RestatedDecember 2008 2008 2008Non‐currentassets Goodwill 66075407 ‐ 66075407Licenses 132126477 ‐ 132126477Capitalizedexplorationexpenses 71524774 (30465994) 41058780Deferredtax 4717263 (3660088) 1057175Totalintangibleassets 274443921 (34126081) 240317840 31Productionequipment 6717390 1467276 8184666Machinery 6604266 ‐ 6604266Totalfixedassets 13321656 1467276 14788932 Otherlong‐termreceivables 161497 ‐ 161497

ALADDINOILANDGASCOMPANYASANetincome(loss) (61921056) 2087090 (59833966)Statement of financial position 31 Group Restatement RestatedDecember 2008 2008 2008Non‐currentassets Goodwill 66075407 ‐ 66075407Licenses 132126477 ‐ 132126477Capitalizedexplorationexpenses 71524774 (30465994) 41058780Deferredtax 4717263 (3660088) 1057175Totalintangibleassets 274443921 (34126081) 240317840 Productionequipment 6717390 1467276 8184666Machinery 6604266 ‐ 6604266Totalfixedassets 13321656 1467276 14788932 Otherlong‐termreceivables 161497 ‐ 161497Totalotherlong‐termreceivables 161497 ‐ 161497 Totalnon‐currentassets 287927074 (32658805) 255268269 Currentassets Inventory 6337710 11300016 17637726Tradeandotherreceivables 23580104 (11697897) 11882207Cashandbank 6129855 (162205) 5967650Totalcurrentassets 36047669 (560086) 35487584 Totalassets 323974743 (33218891) 290755852 Equityandliabilities Sharecapital 2261768 ‐ 2261768Sharepremium 227270213 ‐ 227270213Otherpaidincapital 22511486 ‐ 22511486Totalpaid‐in‐capital 252043467 ‐ 252043467 Retainedearnings (87345622) (22904004) (110249626)Totalotherequity (87345622) (22904004) (110249626)Totalequity 164697845 (22904004) 141793841 Longtermliabilities Pensionliabilities 18806 (18885) ‐79Deferredtax 29549636 (3124320) 26425316Otherliabilities ‐ ‐Totalliabilities 29568442 (3143205) 26425237 32

ALADDINOILANDGASCOMPANYASABond 55233866 ‐ 55233866Totallong‐termliabilities 55233866 ‐ 55233866 Short‐termliabilities Bond 48322292 48322292Tradepayable 16837497 (5610427) 11227070Taxandduties 3134834 (21213) 3113621Othershort‐termliabilities 6179967 (1540041) 4639926Totalshort‐termliabilities 74474590 (7171681) 67302909 Totalliabilities 129708456 (7171681) 122536775 Totalequityandliabilities 323974743 (33218891) 290755852Group Restatement RestatedStatement of financial position 1 January 2008 2008 2008Non‐currentassets Goodwill ‐ ‐ ‐Licenses 239417072 ‐ 239417072Capitalizedexplorationexpenses 45653263 (15321347) 30331916Deferredtax ‐ ‐Totalintangibleassets 285070335 (15321347) 269748988 Productionequipment 4961135 (110438) 4850697Machinery 6534697 ‐ 6534697Totalfixedassets 11495832 (110438) 11385394 Otherlong‐termreceivables ‐ ‐ ‐Totalotherlong‐termreceivables ‐ ‐ ‐ Totalnon‐currentassets 296566167 (15431785) 281134382 Currentassets Inventory 4670957 (1245533) 3425424Tradeandotherreceivables 9642575 (2175206) 7467369Cashandbank 44585879 (131574) 44454305Totalcurrentassets 58899411 (3552312) 55347099 Totalassets 355465578 (18984097) 336481481 Equityandliabilities Sharecapital 1661 ‐ 166133

Tradeandotherreceivables 9642575 (2175206) 7467369Cashandbank 44585879 (131574) 44454305Totalcurrentassets 58899411 (3552312) 55347099 Totalassets 355465578 (18984097) 336481481 Equityandliabilities Sharecapital 1661 ‐ 1661ALADDINOILANDGASCOMPANYASA820 820Sharepremium 174583934 ‐ 174583934Otherpaidincapital 18563406 ‐ 18563406Totalpaid‐in‐capital 194809160 ‐ 194809160 Retainedearnings (16451994) (15238728) (31690722)Totalotherequity (16451994) (15238728) (31690722)Totalequity 178357166 (15238728) 163118438 Longtermliabilities Pensionliabilities 71069 ‐ 71069Deferredtax 57460097 (23890) 57436207Otherliabilities ‐ ‐ ‐Totalliabilities 57531166 (23890) 57507276 Bond 100086791 ‐ 100086791Totallong‐termliabilities 100086791 ‐ 100086791 Short‐termliabilities Bond ‐ ‐ ‐56822025Tradepayable 565 (3657119) 44626732649Taxandduties Othershort‐termliabilities 859 (24121)11134031 (40240)73811093791Totalshort‐termliabilities 19490455 (3721480) 15768975 Totalliabilities 177108412 (3745369) 173363043 Totalequityandliabilities 355465578 (18984097) 33648148134

ALADDINOILANDGASCOMPANYASANote16Postbalancesheetevents4January2010:AOGChasreceivedUSD1,8millioninacapitalincreaseofNOK0,50pershare,atasyndicateledbyLakeshoreInternationalManagementInc.,andreceivedguarantiesofUSD4millioninancapitalincreaseofupto10millionplannedtobedoneinJanuary.Thecapitalincreasewasregistered16.3.2010.Thecapitalincreasetheguaranteeshouldcoverhasnotbeendone.3Februaryy2010:OOOGeotechnologiahascompletedthegasequipmentonstructure#1ontheMSlicense,andrequiredgastesthavebeenanalyzedandfulfilstherequirementsforthepipeline.Thegasequipmentisreadytoconnecttothepipelineandtheworkwiththeconnectionwillbecompletedbyanexternalcompany.Preparationfortheconnectionhasbeenstarted.26Februaryy2010:AOGCyesterdayclosedacapitalincreaseofUSD6,9millioninnewequityatparvalueofNOK1pershare.Seealso23March.Thiscapitalincreasewasnotcarriedthrough as the largestshareholderdidnotpay.1 March 2010: OOO Geotechnologia has completed a successful connection the local gas pipeline fordeliveryofthegasfromtheMS‐license.AspreviouslyannouncedOOOGeotechnologiahasenteredintoanagreementwiththelocalgasdistributioncompany,Komiregiongas,fordeliveryofgas.8March2010:OOOGeotechnologiahasstartedtestproductionandtestingofthegasmeasurementunit.Aspreviousannouncedthecompanyascarriedoutasuccessfulconnectiontothegaspipelineandhasnowcommenced test production of gas for sale. This is done in connection with mercaptan testing of themeasurementunit.9March2010:OOOGeotechnologiahasbeengranteda20yearproductionlicenseforthegasfield№1ontheMS‐licenseinUkhtainKomiRepublic,Russia.18March2010:BondownersinAOGChavevotedyestothecompany'sproposetorestructurethebondloan.Theproposalincludesdeferralofsettlementdateandreductionoftheinterestrateforaperiodforthethreebondloans.Asaconsequenceofthisthesubscriptionofnewequitywasnotcarriedout.19March2010:tOOOGeotechnologiawillstartgasproductionandsalethefirstcomingMondayat08.00‐Ukthatime.OOOGeotechnologiahasenteredintoanagreementwithalocaldistributioncompanyaboutdelivery of gas. The company has previously this month completed a successful connection to the gaspipelineandwillfromMonday22Marchstartproductionandsale.23 March 2010: In February AOGC carried out a capital increase of NOK 41 million due for paymentyesterday. In connection with the capital increase in AOGC in February of 41 million shares one of thesubscribersTelforIntervestLtd.(Telfor).Telforhasnotfulfilleditssubscriptionobligationsandpaidthesubscribedamountwithintheduedate.AOGCisincontactwithTelforandisworkingwithseveralpartiesaboutalternativesolutions.35

ALADDINOILANDGASCOMPANYASA19April2010:AOGChashadacapitalincreasetowardsHighmoorBusinessCorporationLtd.ofNOK50millionandthecompanycancarryoutthepreviouslyapprovedcapitalincrease.ThecompanyhasnowsecuredfinancingNOK50millionofparvalueNOK0,50pershare.ThesubscribersthathavefulfilledtheirobligationshavebeenofferedsimilarconditionsasHBC.22April2010:ThepaymentdateforAOGC’scapitalincreaseofNOK50milliontowardsmotHighmoorBusinessCorporationLtd.(HBC)wasyesterday,21April;AOGChasnotreceivedthepaymentfortheshareincreaseandconsidersHBCtobeinbreachoftheterms.28April2010:AOGChavetodayheldmeetingswithitsbondowners.Duringtheinformationmeeting,therewasanofferfromaBritishinvestmentcompany,Waterford,toacquirethebondloansissuedbyAOGC.PartsofthebondloanshavebeenacquiredbyWF.IfWaterfordreceivesacceptanceoftheofferfromthemajorityofthebond,theywillsubscribeinacapitalincreaseof93millionshares,NOK46,5million.InadditiontheywillalsosubscribeinacapitalincreaseofNOK30milliontothesamesharepriceinthenextphase.4May2010:AOGCwasduetopayinterestonthebondsonMonday3MayofNOK7,5million.AOGCisincontactwiththebondownersforrestructuringofthedebt.Thecompanyandthebondownersareworkingonalternativerestructuringsolutions.19May2010:Therehastodaybeenheldbondownermeetingfor2ofthebondloansinAOGCandaninterestpaymentdue2Mayhasbeenpostponedto31July2010.Inadditionthebondownershavegiventhecompanythepossibilitytousegetshorttermdebtwithduedatepriortothebondloan.ThisrelatestothebondloansISINNO0010040032.8‐The2009BondandISINNO001036650.3‐The2011Bond.28May2010:AOGCdecidedinGM19Maytohaveaincreaseinsharecapital of NOK 30 million. Thedeadlineforsubscribingwasyesterday16.00.IntotalshareforNOK12,7millionwassubscribed.Asthecapitalincreasewasnotfullysubscribedthecompanyisworkingonotheralternative.AdecisionforadirectedcapitalincreaseattheEGM20July20108June2010:OperationalupdateIn Ukhta,AOGCreceivedaproductionlicenseforthegasfieldontheMSlicensevalidto2030.TheexplorationlicensesfortheremainingMSblockthatwasvaliduntil30.07.2010hasbeenextendtotheendof2011.Thecompanyhasbeengiventhefollowingworkprogramintheperiod:‐200kmseismic‐250kmreprocessingofseismicincl.the200kmabove‐drillingof4wells.The gas production has been temporarily stopped due to necessary adjustments, where a value andwellheadhasbeenchanged.Thecompanyisalsousingthetimetopreparewellno2readyforproduction.Thefacilityhaswellduringstart‐up,withoutsignificantproblemswiththeimportedCanadianequipment.For ALADDINOILANDGASCOMPANYASAwell no 3 the company will attempt squeeze‐job as it problems with segmentation of the well. Ifsuccessful,wellin3willbereadyforproductioninQ3.Theworkonstartingupwellno2and3hasdelayedduetothefinancialdistressofthecompany.Thecompanyisplanningdrillingofprospect20justsouthofthegasfieldassoonatfinancingisavailable.In Orenburg field development plans are approved for Nikiferovskoye and Voinskoye licenses. Both areproductionlicenses.TheproductioncontinuesinNikiferovskoyefromwell91and61between200and250barrelsperday.Well83isplannedtobeconvertedtowaterinjectionwellastheexperiencefromtheproductionlastyearindicatesthatinjectionisrequiredtodevelopthefieldandmaintainahighdegreeofextraction. The Fraccing‐program has been stopped due to lack of financing. Sidetrack of well 96 onVoinskoyelicenseisplannedasthefirstactivitywhenfinancingallows.Itisexpectedthattheproductionin 36Orenburgcanbeincreasedimmediatelyassoonastheinvestmentcanbedone.9June2010:Abondownermeetingwasheld8June2010foroneofthebondloansandthecompanyingwasgivenadelayinpayinginterestforanundefinedperiod.Thisgivesthecompanytocontinueitsworkrefinancing.Allbondloansnowhavestoppedpayinginterest.ThelastloanofNOK50millionalsohasa

ALADDINOILANDGASCOMPANYASAsuccessful,wellin3willbereadyforproductioninQ3.Theworkonstartingupwellno2and3hasdelayedduetothefinancialdistressofthecompany.Thecompanyisplanningdrillingofprospect20justsouthofthegasfieldassoonatfinancingisavailable.In Orenburg field development plans are approved for Nikiferovskoye and Voinskoye licenses. Both areproductionlicenses.TheproductioncontinuesinNikiferovskoyefromwell91and61between200and250barrelsperday.Well83isplannedtobeconvertedtowaterinjectionwellastheexperiencefromtheproductionlastyearindicatesthatinjectionisrequiredtodevelopthefieldandmaintainahighdegreeofextraction. The Fraccing‐program has been stopped due to lack of financing. Sidetrack of well 96 onVoinskoyelicenseisplannedasthefirstactivitywhenfinancingallows.ItisexpectedthattheproductioninOrenburgcanbeincreasedimmediatelyassoonastheinvestmentcanbedone.9June2010:Abondownermeetingwasheld8June2010foroneofthebondloansandthecompanyingwasgivenadelayinpayinginterestforanundefinedperiod.Thisgivesthecompanytocontinueitsworkrefinancing.Allbondloansnowhavestoppedpayinginterest.ThelastloanofNOK50millionalsohasadeferralwithNOK5.000.000thatwasdueonthesamedateastheinterest10June2010.16June2010:TorjerHalleisappointedCEOinAladdinOil&GasCompanyASA.4July010:AladdinOil&GasCompanyASArequestsNorskTillitsmanntocallforameetingwiththebondownerstoconvertthebonddebttoshares.20July2010AladdinOil&GasCompanyASAholdsEGM.InthisthefinancialrestructuringwasdecidedandafullysubscribedcapitalincreaseofminimumNOK30million.TheEGMalsoelectedanewboardconsistingof; Fred Ponsonby (chairman), Kirill Dragun, Mark Bond, Yekaterina Zhdan, Michael Alyautdinov, AlexeyKruzhkov,EwaPopiolekandKatrineH.Støvring.TheEGMalsodecidedtoconvertallbonddebtandunpaidinteresttoshare.4August2010AladdinOil&GasCompanyASAcarriedoutacapitalincreaseofNOK32million,andaconversionofdebtofallthebonddebt.andotherloanstotalingNOK140million.Thecompany'ssharecapitalisafterthisNO174.083.186,20and1.740.831.862shares.27OctoberAladdinOil&GasCompanyASAappointedAlexeyKruzhkovasCEO.FollowingthisTorjerHallewillnotstartasCEO.2November2010AladdinOil&GasCompanyASAholdsEGM.TheEGMelectedanewboardconsistingof:FredPonsonby(Chairman),MikhailAlyautdinov,EinarLyche,PavelSemenyuta,ArturRastrogin,KathrineHatlenStøvring,EkaterinaZhdanandAnnElizabethSeabrook.8.December2010AladdinOil&GasCompanyASAannouncesthatfounderHans‐AxelJahren,leavesthecompanyon1January2011.37

ALADDINOILANDGASCOMPANYASA15 December 2010 The board has decided not to extend the license for the Bogdanovskaya area inOrenburg‐region.Thelicensesdated,26July2010,wasissuedtoOrneftegaztoassesspotentialexistenceofoilandgas.Seealsonote12.23 December 2010 Lakeshore International Buyout Fund Limited sold its share in AOGC to WaterfordFinance&InvestmentLimited.WaterfordFinance&InvestmentLimitednowowns59,07%inAOGC.Seenote7.Mr.PavelSemenyutawithdrawnfromtheboardofAOGC.17January2011AladdinOil&GasCompanyASAreceivesbridgefinancingofUSD5millionfromthemainshareholder,WaterfordFinance&InvestmentLtd.TheboardinAladdin14JanuaryapprovedabridgeloanfacilityUSD5millionUSDfromWaterfordFinance&InvestmentLtd.Theloanisfor6months.Note17Non‐compliancelicenserequirementsTheCompanyispartiallyinbreachandanticipatedbreachwithlicenseobligationsasofthedateofsigningtheannualaccountsfor2009.Company License CompliancesituationOOOGeotechnologia MiddleSedolskaya Incompliance. WestUkhtinskaya Drillingof3wellswithin31December2010willnotbeperformed.ZAOOrneftegaz Bogdanovskaya Thelicenseisexpired.OOOVeselovskoe Besedinskoe Incomplianceposttimelimit. Khersonskoe TheCompanyhasdecidednottomaintainthelicense. Nikiferovskoe Therequiredobservationwellsformonitoringgroundwaterwillnotbedrilledwithin31December2010. Veselovskoe Re‐estimateofreservesandrecuperationofonewellnotperformed. Voinskoe Productionratesarenotmet.38

ALADDINOILANDGASCOMPANYASATheimpactonyear2009accountsfromthelossoftheBogdanovskayalicenseisforthemothercompanyNOK178,255,626inloanstosubsidiaries,whileintheconsolidatedaccountsiswrittenofflicensevalueofNOK29,357,904andgoodwillofNOK3,882,767.If the licenses in OOO Geotechnologia were to be returned to the government as of 31.12.2009 thecombinedinvestmentandloanamounttobewrittenoffinthemothercompanyasofisNOK245,450,492,whileintheconsolidatedaccountslicensevalueofNOK76,520,022andgoodwillofNOK123,431,516wouldhavetobewrittenoff.Inadditionitmaybenetimpactfromsaleableassetsandtradecreditors.If the licenses in OOO Veselovskoe were to be returned to the government as of 31.12.2009 the loanamount to be written off in the mother company as of is NOK 20,525,198, while in the consolidatedaccounts is written off license value of NOK 76,520,022 and goodwill of NOK 123,431,516. No value isrecorded for the Khersonskoe license. In addition it may be net impact from saleable assets and tradecreditors.Note18GoingconcernAs of date the Group is lack of cash to finance its operations. The board’s intention is to maintain thecompanyasagoingconcern.InthisrespecttheGrouphasobtainedabridgeloanintheamountofUSD5.0millionfromitsbiggestshareholderandraiseuptoUSD20.0millionsinnewequityorsimilarfinancingarrangementduringfirsthalf2011.Theseplansaresubjecttotheshareholders’approval.ThereforethereissomeriskthattheGroupwillnotcontinueasagoingconcern.Note19Preserves(notrevised)DescriptionofreservesWestUkhtinskoye&MiddleSedolskoyeLicenses:HøydalsvikPetroconsulthasonrequestfromAladdinOilandGasCompanyASAprovidedthecompanywitha reserves report of the West Ukhtinskoye (WU) & Middle Sedolskoye (MS) licenses belonging to OOOGeotechnologia.Thecalculationsarebasedon2DseismicmappingontheMSlicenseaswellaswelldatafromwell3A(oil)and1A(1C(gas).Logsandtestdata(only(1A/1C)wereavailable.Well2Ahasnotbeentestedandtestresultsandadditionalinformationmaychangethereserves.HPCConsultingupdatedthegasreservesonstructure#1autumn2008afterdrillingandtestingofwell1C.Thisledthegasreservesincreasingsomewhat.Subsequenttothisthewells7Aand14Abeendrilledandbothhaveindicatedhydrocarbons(14Atestedgas).Anupdatedreportwillincludethesestructuresandthetotalgasreservesareexpectedtoincrease.FortheWUlicenseonlywelldataareavailablelikelogsandtestreportsfromthewells2,5and12.TheWUlicenseisaproductionlicense,whiletheMSlicenseisanexplorationlicensewhichisvaliduntil31.07.2010.OOOGeotechnologiahasstartedtheconversionprocessbasedonthegasdiscovery1A.Thereislimitedoperationalriskassociatedwiththeconversionprocess.After31.12.2009OOOGeotechnologiahasbeenallottedproductionlicenseuntilyear2030forgasfield#1andtheexplorationlicenseisextendeduntiltheend of year 2011 for the remaining license. Geotechnologia may also apply for an extension of theexplorationlicense.Anupdatedreservesreportisplannedpreparedduring2011.39

ALADDINOILANDGASCOMPANYASAVeselovskoyelicenses:AOGC has a reserve report for the licenses Voinskoye, Nikiferovskoye and Besidinskoye. Since then thecompanyhasreceivedandlocalizedmorenewinformationthatmaychangethereservenumbers.ThereisariskthattheBesidinskoye‐reserveislessthanstatedinthereservereport.ThecompanywillaimtoupdateallreservereportsrelatedtotheVeselovskoyelicenseduring2011.ApreliminaryreservereportfortheVeselovskoyelicensehasbeenprepared,butnotincludedinthetablebelow.Thisreportconcludeswith8.5millionbarrelsof2Preserves.Newinformationindicatesthatthismaybeaconservativeestimate.AcompletereportfortheVeselovskoyelicenseisplannedpreparedin2011.Asthecompanyhasnotcompliedwithallthelicensecommitmentsthereisariskthattheauthoritiesmayrecallorterminatethelicenses.Seenote17.40

ALADDINOILANDGASCOMPANYASATable‐Reservessplitbygeography,project,fieldorasset.Reserves Developedassets 1P/P902P/P50Pr.31.12.2009Oil Gas Interest Net Oilequiv(mbbl) (bcm) mboe % mboe (mbbl)MiddleSedolskoyegass 0,198 1,25 100 1,25 Nikiferovskoye 4,10 100 4,1 Totalt 5,35 Ikkeutvikledereserver 1P/P902P/P50Pr.31.12.2009Oil Gas Interest Net Oilequiv (mbbl) (bcm) mboe % mboe (mbbl)MiddleSedolskoyeolje 100 3,6Nikiferovskoye 100 7,5Voinskoye 1 100 1 1,8Besidinskoye 1,35 100 1,35 4,5 MiddleSedolskoyegass 0 0 100 0,00 2,9WestUkhtinskoye 0 0 100 0,00 15,9Totalt 2,35 36,2Totalereserver 1P/P902P/P50Pr.31.12.2009Oil Gas Interest Net Oilequiv(mbbl) (bcm) mboe % mboe (mbbl)Middlesedolskoyeolje 0 100 3,6Nikiferovskoye 4,1 100 4,1 7,5Voinskoye 1 100 1 1,8Besidinskyoye 1,35 100 1,35 4,5 0 MiddleSedolskoyegass 0 0,198 1,2 100 1,25 2,9WestUkhtinskoye 0 0 0 100 0,00 15,9Total 7,70 36,241

ALADDINOILANDGASCOMPANYASAManagementdiscussionandanalysis:Eventhoughtassessmentofreservesandresourceshavebeencarriedoutbyqualifiedthirdparties,theresults with contain inherent uncertainty and risk. The numbers are on the best estimate and futuredevelopmentmayleadtochangesintheresultspresentedinthereservesreport.Inadditionallcategoriesofreservesandresourcesaresubjecttoanannualauditasmoredatebecomesavailablethroughprogressinthedrillingprograms.ThereservesinAladdinOil&gasCompanyislocatedinRussiaandregisteredinaccordancewiththelawsandregulationsthatapplyinRussia.ThetaxregimeinRussiaisprogressivesothatAladdinisnotmateriallyexposedtofluctuationsintheoilprice.Managementisoftheopinionthatoilfieldswillbeprofitablealsoatoilpricessignificantlylowerthantheaveragein2009.42

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Addresses and contact information:Aladdin Oil & Gas Company ASAØvre Slottsgate 14N-0157 OsloNorwayTel: +47 22 97 99 00Fax: +47 22 97 99 01e-mail: post@aog.noweb: www.aog.noOOO GeotechnologiaUl.Stantsionnaya, 2Ukhta, 169300RussiaTel: +7 82147 52523Fax: +7 82147 52477e-mail: ukhta.geoteh@gmail.ruweb: www.aog.noZAO VeselovskoyeUl.Zarechnaya 6BuzulukOrenburg region, 461040RussiaTel:+7 3532 305326Fax:+7 3532 305327e-mail: mp@orng.ruweb: www.aog.no