Audit Report 04

INDEPENDANT AUDITORS’ REPORT
Financial statements
Period ended December 31st, 2004

Summary
I- Auditor’s Report
II - Financial Statements
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of EXXOIL S.A
We have audited the accompanying balance sheet of ……….. as at December 31st, 2004 and
the related statements of income and cash flows for the year then ended. These financial
statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those

standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by the management, as well as evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these financial statements give a true and fair view of the financial position of
the Company as at December 31st, 2004 and the results of its operations and its cash flows for
the year then ended in accordance with International Financial Reporting Standards.
Mohamed Zinelabidine CHERIF Tunis, August 15th, 2005
AMC Ernst & Young

Financial Statements
Exxoil S.A – Financial statements for the period ended December 31st, 2004 4
EXXOIL S.A- BALANCE SHEET AS AT DECEMBER 31st, 2004
(In TND)
Notes 2004 2003

ASSETS
Non-current assets
Exploration assets ……….. ………..

Accumulated depreciation (………..) (………..)
Net Accumulated depreciation (1) ……….
Property, plant and equipment ………. ………

Accumulated depreciation (……….) (……….)
Net Property, plant and equipment (2) ………. ……….
Financial assets 392 13

799
Total Non-current assets 9 608 593 12 413

553
Current assets
Inventories (3) ………. -
Trade receivables (4) …………. ……..
Other current assets (5) ………. ………..
Deferred tax ………. ……..

.
Short term investments ……….. ………

.
Cash and cash equivalents (6) 5 181 42

094
Total Current assets …………. ………

…
TOTAL ASSETS …………. ………….
EXXOIL S.A- BALANCE SHEET AS AT DECEMBER 31st, 2004
(In TND)
Notes 2004 2003

EQUITY AND LIABILITIES
Equity
Share capital 1 000 000 1 000 000
Retained earnings -
Gain on formation of a joint venture
Deferred depreciation
Net income (Loss)
Total equity
Non-current liabilities
Provision for site restoration (8)
Total non-current liabilities
Current liabilities
Trade payables (9)
Joint venture accounts (10) -
Other current liabilities (11)
banking facilities
Total current liabilities
Total liabilities
TOTAL EQUITY AND LIABILITIES
EXXOIL S.A - INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31st, 2004
(illustrating the classification of expenses by nature)
(In TND)
Notes 2004 2003

Bni Khalled Al Manzah
Revenues (12)
Other operating revenues (13)
Total revenues
Raw material and consumables used
Depreciation of exploration assets (14)
Other depreciation and provision (15) -
Royalties
Payroll (16) -
Other operating expenses -
Total operating expenses
OPERATING INCOME
Net financial expenses (17) -
Income from investments -
Other ordinary gains -
Other ordinary losses -
PROFIT BEFORE TAX
Income tax expense - -
INCOME (LOSS) FOR THE PERIOD
Earning per share
Average number of shares outstanding
BASIC EARNING PER SHARE
EXXOIL S.A - STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31st, 2004
(In TND)
Retained earnings Gain on

Share Accounting Net income Total
Deferred Deferred formation of a
capital changing (loss) equity
losses Depreciation joint venture
Balance at 31 December 2002 1 000 000 110 370 (236 750) (1 662 066) 5 755 601 1 558 512 6 525 667
Changes in accounting policy
Dividends
Profit (loss) for 2002 Affectation 236 750 1 285 586 (1 558 512)
Deferred depreciation (246 622)
Profit (loss) for the period 208 265
Balance at 31 December 2003 1 000 000 - - (623 102) 5 755 601 208 265 6 340 765
Changes in accounting policy 46 617
Dividends
Profit (loss) for 2002 Affectation 64 174 (208 265)
Deferred depreciation 631 428
Profit (loss) for the period Bni Khalled (503 510)
Profit (loss) for the period Al Manzah (300 497)
Balance at 31 December 2004 1 000 000 46 617 - 72 500 5 755 601 (804 007) 6 070 711
EXXOIL S.A - CASH FLOW STATEMENTFOR THE YEAR ENDED DECEMBER 31st, 2004
(In TND)
2004 2003
Cash flow from operating activities
Net income (804 007) 208 265
Depreciation and amortization 3 486 064 999 258

Other adjustments 533 953 (94 056)
Change in inventory (264 432) (43 121)

(Increase) / Decrease in currents assets (936 320) 1 188 251
(Increase) / Decrease in currents liabilities (1 024 029) 450 831
Cash flow from operating activities 991 229 2 709 428
Cash flow from investing activities
Payments to acquire tangible and intangible assets (320 298) (4 215 360)
Proceeds from disposition of tangible and intangible assets - -
Payments to acquire long term investments 13 408 (13 408)
Proceeds from disposition of long term investments - -
(306 (4 228
Cash flow from investing activities 890) 768)
Cash flow from financing activities
Dividends and other distributions 0 0

Payments on borrowings 0 0
Reimbursement of borrowings 0 0
Cash flow from financing activities 0 0
(Increase) / Decrease in cash 684 339 (1 519 340)
Beginning cash balance 279 436 1 798 776
Ending cash balance 963 774 279 436
Notes to the Financial Statements
Period ended December 31st, 2004
(Amounts in TND)
PRESENTATION OF THE COMPANY
EXXOIL SA is a private limited company registered under the Tunisian companies’ law. It
was constituted in November 1993. Its capital amounts to TND 1 000 000.
The main activities of the company are about exploring and exploiting any oil field
concession, developing and procession any discovery of liquid or gas hydrocarbons, operating
in any industrial, commercial, financial or real estate activities directly or indirectly related to
hydrocarbons, through the creation of corporate subsidiaries, subscription or purchase of
shares or equities, mergers, associations in participation, or through any other way.
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements as at December 31st, 2004 are prepared in accordance with the
International Financial Reporting Standards.
The financial statements of Exxoil S.A have been prepared in Tunisian Dinar (TND)
according to international accounting standards (IAS / IFRS). There has been no change since
12/31/2001 in the methods used in preparing such financial statements.
FINANCIAL PERIOD
The financial year is from January 1st, to December 31st.
ACCOUNTING POLICIES
1) Revenue recognition
Revenue from the sale of oil are recorded when title passes to the customer
2) Foreign currency transactions
The company operates in business environment where the Tunisian dinar is the functional
currency, monetary assets and liabilities denominated in a currency other than the
functional currency are revaluated at the balance sheet date and any gains or losses arising
on the revaluation are reflected in earnings.
3) Joint ventures
The company conducts exploration and operating activities on Al Manzah concession

jointly with others.
The financial statements reflect only the company’s proportionate interest in such
activities.
The company discloses the current position of its operations with the partners at the
balance sheet date under a separate account called “joint venture current account” as
described by the IAS 31.
4) Petroleum properties
The company follows the full cost method of accounting whereby all costs incurred in
exploring for and developing oil and gas reserves are capitalized.
Such expenditures include land acquisition costs, geological and geophysical expenses,
costs, costs of drilling both productive and non productive wells and G&A directly related
to exploration and development activities.
Capitalized costs are accumulated on a concession by concession basis and are

depreciated and depleted using the unit of production method based upon estimated
proved reserves with legal limit fixed at 30%.
Costs directly associated with the evaluation of unproved properties are excluded from the
computation of depletion.
The depletion of unproved properties is realized when commercial reserves are

attributable to the underlying assets.
5) Impairment
Exploration expenditures are reviewed regularly for indication of impairment, if any,

when circumstances indicate that the carrying values might not be recoverable.
6) Depreciation
Fixed assets, other than oil and gas assets, are depreciated over their expected useful life
Annual rate Depreciation method
Industrial plants 10 % Straight line

Computers 15% Straight line
Office equipment 10% Straight line
Transport equipment 20% Straight line
7) Costs for site restoration
At the end of the producing life of a field, costs for site restoration are to be incurred.
The initial estimate of the costs for site restoration is an element of the cost of a tangible
fixed asset (IAS 16) which must be accounted for against a provision (IAS 37)
DETALED FINANCIAL STATEMENTS NOTES
1. Exploration assets
Exploration asset’s details and variation between 2003 & 2004 are the following:
2 004 2 003
DESIGNATION AMOUNT DEPRECIATION NET AMOUNT AMOUNT DEPRECIATION NET AMOUNT
SIDI JDIDI
SOLIMAN
RAS MARMOUR
MEZNINE
GROMBALIA
SIDI TOUMI
AL MANZAH 1
AL MANZAH 2
AL MANZAH 3
EAST BNI KHALLED
KEF ER REND
SIDOUIKCH
CAP BON 1991
CAP BON 1992
BIR DRASSEN
CAP BON 101 RECOMPLETION
SIDI EL KHAFI
SIDI DJEMARA
RESTORATION AL MANZAH
RESTORATION BNI KHALLED
Total Exploration Assets
2. Property, plant and equipment
These asset’s details and variation between 2003 & 2004 are the following:
2004 2003
DESIGNATION AMOUNT DEPRECIATION NET AMOUNT DEPRECIATION NET
Industrial equipment
Cars
fixtures and fittings
Office equipment
fixed assets under construction
Total Property, plant & equipment
3. Inventories
Details of Inventories values are the following:
DESIGNATION 2004 2003
CASING 238 905 43 121

WELLHEAD 37 108 0
LINER 31 540 0
- Provision -43 121 -43 121
Total Inventories 264 432 0
4. Trade receivables
Trade receivables details and variation between 2003 & 2004 are the following:
2004 2003
DESIGNATION AMOUNT PROVISION NET AMOUNT AMOUNT PROVISION NET AMOUNT
MARATHON PETROLIUM 277 689 0 277 689 277 689 0 277 689
ETAP 1 331 418 0 1 331 418 5 052 0 5 052
Total Trade receivables 1 609 107 0 1 609 107 282 741 0 282 741
5. Other current assets
These assets details and variation between 2003 & 2004 are the following:
Advance to suppliers 71 858 1 129 437

Employees 0 6 964
Tax 24 615 37 491
Others 87 276 31 638
- Provision -18 674 -18 980
Total Other current assets 165 075 1 186 549
6. Cash & equivalent of cash
These assets details and variation between 2003 & 2004 are the following:
UIB 4 277 40 723

Banque de Tunsie 229 279
Petty cash 675 1 092
Total Cash & equivalent of cash 5 181 42 094
7. Gain on formation of a joint venture
Exxoil has included in its assets the past costs incurred by the company MARATHON in
the Cap Bon permit after finalizing the deal by which Exxoil has acquired 16 % of interest
in the Cap Bon Permit in 1996.
The difference between 16% of the past costs and the amount paid by Exxoil was
accounted for among “Gain on formation of a joint venture”
8. Provision
Provisions subjects and details are the following:
RESTORATION SITE AL MANZAH

RESTORATION SITE BNI KHALLED
Total Provision
9. Trade payables
Trade payables details and variation between 2003 & 2004 are the following:
ECUMED 1 710 2 079 531

OFIS 2 749 998 1 379 125
DOWELL SHLUMBERGER 0 412 083
MARATHON CAP BON 419 849 208 305
Other Suppliers 1 144 698 1 648 818
Bills not yet received 32 380 930 128
Total Trade payables 4 348 635 6 657 991
10. Joint venture accounts
The detailed balances of joint venture accounts are the following:
GROMBALIA 214 526 0

AL MANZAH 889 607 0
SIDI DJEDID 60 173 0
SIDI MAHREZ 211 259 0
SOLIMAN 7 740 0
Total Joint venture accounts 1 383 305 0
11. Other current liabilities
These liabilitie’s details and variation between 2003 & 2004 are the following:
Employees 110 334 127 132

Tax 5 826 14 443
SEFINA SITCAF 161 479 161 479
OFIS 0 279 536
Others 602 685 395 712
Total Other current liabilities 880 323 978 302
12. Revenues
The revenue’s details and variations are the following:
2004
DESIGNATION 2003
Al Manzah Bni Khalled
Local sales
Export
Royalties
Total Revenues
13. Other operating revenues
The balance of this account is detailed as follows:
2004
DESIGNATION 2003
Transport
Storage
Total Other operating revenues
14. Depreciation of exploration assets
Depreciations of exploration assets are detailed as follows:

2004
DESIGNATION 2003
Depreciation of exploration assets

Provision for site restoration
Total Depreciation of exploration assets
15. Other depreciation & provision

2004
DESIGNATION 2003
Depreciation of tangible assets

Other provision
Total Other depreciation & provision
16. Payroll

2004
DESIGNATION 2003
Salaries 152 344 0 602 679

Social expense 21 265 0 24 671
Total Payroll 173 609 0 627 349
17. Net financial expenses (gains)
2004
DESIGNATION 2003
Debt interest 0 0 0
bank charges 10 364 0 223
Interests -1 249 0 -3 472
exchange loss 95 763 0 55 935
Commissions 521 0 471
exchange gain -146 860 0 -83 924
Total Net financial expenses -41 462 0 -30 767

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INDEPENDANT AUDITORS’ REPORT

Period ended December 31st, 2004

To the Shareholders of EXXOIL S.A

We conducted our audit in accordance with International Standards on Auditing. Those

Mohamed Zinelabidine CHERIF Tunis, August 15th, 2005

AMC Ernst & Young

Notes 2004 2003

Exploration assets ……….. ………..

Property, plant and equipment ………. ………

Financial assets 392 13

Total Non-current assets 9 608 593 12 413

Inventories (3) ………. -

Trade receivables (4) …………. ……..

Other current assets (5) ………. ………..

Deferred tax ………. ……..

Short term investments ……….. ………

Cash and cash equivalents (6) 5 181 42

Total Current assets …………. ………

TOTAL ASSETS …………. ………….

Notes 2004 2003

Share capital 1 000 000 1 000 000

Gain on formation of a joint venture

Net income (Loss)

Provision for site restoration (8)

Total non-current liabilities

Trade payables (9)

Joint venture accounts (10) -

Other current liabilities (11)

Total current liabilities

TOTAL EQUITY AND LIABILITIES

Notes 2004 2003

Other operating revenues (13)

Raw material and consumables used

Depreciation of exploration assets (14)

Other depreciation and provision (15) -

Other operating expenses -

Total operating expenses

Net financial expenses (17) -

Income from investments -

Other ordinary gains -

Other ordinary losses -

PROFIT BEFORE TAX

Income tax expense - -

INCOME (LOSS) FOR THE PERIOD

Earning per share

Average number of shares outstanding

BASIC EARNING PER SHARE

Retained earnings Gain on

Changes in accounting policy

Deferred depreciation (246 622)

Profit (loss) for the period 208 265

Changes in accounting policy 46 617

Profit (loss) for 2002 Affectation 64 174 (208 265)

Deferred depreciation 631 428

Profit (loss) for the period Bni Khalled (503 510)

Profit (loss) for the period Al Manzah (300 497)

Cash flow from operating activities

Net income (804 007) 208 265

Depreciation and amortization 3 486 064 999 258

Change in inventory (264 432) (43 121)

Cash flow from operating activities 991 229 2 709 428

Cash flow from investing activities