Document

EMPIRE OIL & GAS NL

ACN 55 063 613 730

SUITES 7 & 8

154 HAMPDEN ROAD

NEDLANDS 6009 W ESTERN AUSTRALIA

TELEPHONE 61 8 6389 2687

FACSIMILE 61 8 9386 6812

EMAIL in fo@empireo i l .com.au

WEBSITE www.empireo i l .com.au\

30 September 2008 The Manager Australian Securities Exchange Limited The Company Announcements Office 20 Bridge Street SYDNEY NSW 2000 Dear Sir Re: EMPIRE OIL & GAS N.L. ANNUAL REPORT

Empire Oil & Gas N.L. is pleased to provide the Company’s Annual Report for 2008 and the Notice of Annual General Meeting. Yours faithfully

J L CRAIG MARSHALL Managing Director EMPIRE OIL & GAS NL

A N N U A L

R E P O R T

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A B N 5 5 0 6 3 6 1 3 7 3 0

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Lake Macleod-1

1

1 . Principal Office

Empire Oil & Gas NL

Suites 7 & 8

154 Hampden Road

Nedlands 6009

Western Australia

Telephone 61 8 6389 2687

Facsimile 61 8 9386 6812

Email [email protected]

Website www.empireoil.com.au

2 . Registered Office

C/- Stanton Partners

Level 1

1 Havelock Street

West Perth 6005

Western Australia

3 . Share Registry

Computershare Investor Services Pty Limited

Level 2

45 St George’s Terrace

Perth 6000

Western Australia

4. Company Solicitor

Mizen & Mizen

69 Mount Street

Perth 6000

Western Australia

5 . Auditors

Ord Partners

Level 2

47 Colin Street

West Perth 6005

Western Australia

CORPORATE DIRECTORY

EMPIRE

2

CONTENTS

managing director’s report . . . . . . 3

Key Information . . . . . . . . . . . . . . . . . . 4

REVIEW OF OPERATIONS . . . . . . . . . . . . . 10

Financial Statements

directors’ report . . . . . . . . . . . . . . 38

Corporate Governance . . . . . . . . . 48

Statement

auditor’s independent . . . . . . . . . 53

declaration

independent audit . . . . . . . . . . . . . 54

report

income statement . . . . . . . . . . . . . . 56

balance sheet . . . . . . . . . . . . . . . . . 57

statement of changes in equity . 58

statements of cash flows . . . . . . . 59

notes to the financial . . . . . . . . . 60

statements

directors’ declaration . . . . . . . . . 87

additional shareholder . . . . . . . 88

information

notice of ANNUAL . . . . . . . . . . . . . . . . . 93GENERAL MEETINGAND EXPLANATORY NOTES

how to complete the . . . . . . . . . . . . . 98proxy form

proxy form . . . . . . . . . . . . . . . . . . . . . . . 99

NOTICE OF ANNUALGENERAL MEETING

Notice is hereby given that

the 2008 Annual General

Meeting of shareholders of

Empire Oil & Gas NL

will be held at

the University Club

University of Western

Australia

35 Stirling Highway

Crawley

Western Australia

(Enter via Hackett Drive,

Entrance No.1 , Carpark 3)

On Wednesday

26 November 2008

At 10 .00 am

3

OIL & GAS NL

managing director’s report

Dear Shareholders

Empire Oil & Gas N.L. looks forward to

conducting its planned exploration, drilling and

testing programmes within the Company’s onshore

Carnarvon, Canning and Perth Basins Permits in the

next 12 month period.

The Company has drilled the Moriary-1 and Star

Finch-1 wells and has commenced the drilling of

Lake MacLeod-1 well in September 2008.

Within this 2008 Annual Report the Company has

provided details of this planned programme of

drilling further exploration wells, contingent wells,

testing and exploration programmes in all of

these basins.

In the Carnarvon Basin, there are, including Lake

MacLeod-1, 3 wells planned, 2 contingent wells and

plans for a shallow horizontal well.

In the Canning Basin, the Company is participating

in the ARC Energy Limited operated Stokes Bay-1

Testing Programme. The Company has also two

additional Canning Basin exploration programmes in

joint venture with ARC Energy Limited where

significant exploration of seismic and/or drilling are

planned to be conducted.

In the Perth Basin, the Company has completed three

separate seismic surveys which will progress the

drilling of three additional wells in the 2009 year.

These include the Gingin West-1 well and a possible

sidetrack of the Company’s Gingin-3 well, a well on

the Mullering Anticline and a Wellesley-1 well. The

Company is currently processing the Gingin West

and Mullering 3D and the Wellesley 2D seismic

surveys and looks forward to interpreting the seismic

data sets and selecting drilling locations.

The Company is excited by the gas potential of the

Gingin West and Wellesley Prospects. The Mullering

Anticline is highly prospective for oil where the

Company is confident the 3D Seismic will firm a

number of drillable prospects for the

2009 Year.

Empire has and continues to introduce venture

participation in all its exploration and drilling

programmes where farmouts have been structured to

minimise expenditure by Empire whilst retaining

meaningful equities at the discovery stage.

During the Year the Company raised a total of

$6,693,500 by way of Share Placements and a Share

Purchase Plan. The Share Purchase Plan successfully

raised $3,226,500. As of 10 September 2008 the

Company had available funds totalling $7,646,576.

Empire, together with its Farminees and Joint Venture

Partners, is now in a sound financial position to

undertake its planned drilling and testing

programmes in 2008 and 2009.

I take this opportunity to thank all Shareholders for

their support during the year and in particular

Shareholders participation in the Company’s Share

Purchase Plan. I look forward to providing details of

the drilling and testing programmes aimed at

discovering new oil and gas fields.

J L Craig Marshall

Managing Director

EMPIRE OIL & GAS N.L .

EMPIRE

KEY INFORMATION

LOCATION OF PETROLEUM PERMITS

4

W E S T E R N

A U S T R A L I A

PERTH

C A N N I N GB A S I N

E S P E R A N C E

G E R A L D T O N

C A R N A R V O N

E X M O U T H

C A R N A R V O NB A S I N

P E R T HB A S I N

ep 416

ROUGH RANGEOilfield

onD-1oil recovery

barrowisland

EP 444

EP 359 (parts 1, 2 & 3)

EP 435

EP 10/06-7

EP 434

Ep 412

EP 389

EP 440

EP 426

EP 432

EP 430

EP 454

EP 439ep 461

ep 434, EP 435, ep 359ep 444, ep 412 &EP 10/06-7

ep 426, EP 430, EP 454ep 432, ep 440, ep 389 &ep 416

EP 104, R1 andproduction licenceapplication l98-1

EP 438

EP 448

ep 460

5

OIL & GAS NL

KEY INFORMATION

planned exploration activity

W E S T E R N

A U S T R A L I A

PERTH

C A N N I N GB A S I N

E S P E R A N C E

G E R A L D T O N

C A R N A R V O N

E X M O U T H

C A R N A R V O NB A S I N

P E R T HB A S I N

ep 359 PLANNING TO drill BEE-EATER-1 2008

ep 435 rough range oilfield production

planning to drill rainbow-1

ep 412 drill ONE well Thornbill-1 or Sandalwood-1

ep 460drilled Star Finch-1 2008

R1/ep 104TEST stokes bay-1 planned 2008

Ep 104, R1 and production licence

application l98-1 work over west Kora-1

ep 444CONDUCT geochem survey

PLANNING TO drill TWO wellS 2008

ep 448REPROCESS seismic, PLAN SEISMIC PROGRAMME

ep 438REPROCESS seismic, PLAN SEISMIC PROGRAMME or drill one well

EP 432 interpret 50km2 mullering 3d seismic

drill one well 2009

EP 389interpret 45km2 gingin west 3d seismic

drill one well 2009

EP 416interpret 50km wellesley 2d seismic

drill one well 2009

EP 439ep 461

drill lake macleod-1 2008

ep 426drilled moriary-1 2008

EMPIRE

6

KEY INFORMATION

drilling prospects

carnarvon basin

No Permit Status Basin estimated Potential

Prospect recoverable

Reserves

1 EP 460 Star Finch-1 Gascoyne Sub Basin Star Finch did notEmpire - 22.856% Drilled July 2008 Carnarvon Basin encounter hydrocarbons

in the well

2 EP 439 Drill Lake MacLeod-1 Gascoyne Sub basin OilEP 461 Mature drilling prospect Carnarvon Basin 30 MMBO withLake MacLeod August-September 2008 potential up toEmpire - 30.351% 150 MMBO

if filled to maximumspill point of closure

3 EP 359 Drill Bee-Eater-1 Exmouth Sub Basin OilEmpire - 33.36% Farmout of Bee-Eater-1 Carnarvon Basin 5 MMBO

4 EP 444 Geochem to define Carnarvon Basin OilEmpire - 100% two well locations Drill 2 of:

of the three mapped Opal prospect 12 MMBOprospects. Amethyst prospect 17 MMBOFarmout of 2 wells Topaz South prospect 5 MMBOwith farminees

5 EP 412 Drill Thornbill-1 Exmouth Sub Basin OilThornbill-1 Encouraging petroleum Shallow well 2 - 5 MMBOEmpire - 50% geochemical anomaly

coincident to seismic Gasamplitude for gas. 50 BCFA discoveryBee-Eater-1 well willenhance drilling theSandalwood oil prospect Oilon trend from Bee-Eater 3 - 5 MMBO

6 EP 435 The EP 435 Joint Exmouth Sub Basin OilEmpire - 38% Venture would drill 5 MMBO

Rainbow-1 on the including thatextention of the portion inBee-Eater prospect EP 359in the permit upon aBee-Eater-1 discovery inEP 359. Bee-Eaterprospect extends fromEP 359 into EP 435

BCF Billion Cubic FeetMMBO Million Barrels of Oil

OIL & GAS NL

7

perth basin

No Permit Status Basin estimated Potential

Prospect recoverable

Reserves

7 EP 426 Star Finch-1 North Perth Basin Moriary-1 did notMoriary Drilled March 2008 encounter hydrocarbonsEmpire - 40% in the well

8 EP 389 Process and interpret North Perth Basin GasGingin West 45 km2 3D seismic Structure up dip 212 BCFEmpire - 62.5% over Gingin West from Bootine-1 gas

completed 26 April 2008 discoveryPlan to drill GinginWest-1 2009 Sidetrack Gingin-3 200 BCF

9 EP 432 Process and interpret Perth Basin OilMullering/Cataby 50 km2 3D seismic 10 strong leads Each lead 5 - 10 MMBOAnticlinorium completed 25 April 2008 around Cataby-1Empire - 62.5% Plan to drill one well which tested 25-30

2009 BOPD

10 EP 416 Process and interpret South Perth Basin GasWellesley 50 km 2D seismic Located adjacent to 150 BCFEmpire - 70% completed the Port of Bunbury

4 April 2008 and industrial area ofPlan to drill Wellesley-1 Kemerton2009

canning basin

11 R1/ EP 104 Test Stokes Bay-1 Canning Basin adjacent Test the DevonianStokes Bay-1 October 2008 to Derby aged Nullara carbonateEmpire - 14.8% of Stokes Bay-1 completed

Demand for gas-fired well with an appropriatepower and is located testing programme.adjacent a deep water Prospective for both oilsite for oil transport and Gasby sea

12 EP 438 Farminee ARC Canning Basin Evaluation of Hedonia-1Empire - 20% recorded aeromagnetic and Goldwyer-1 wells for[post farmout] survey with seismic redrill. Other prospects

reprocessing to and reserves to beprovide additional definedexpenditure of $3 millionon seismic and/or drilling. OilSeismic planning in 5-10 MMBOprogress

13 EP 448 Farminee ARC Canning Basin Prospects and reservesEmpire - 17.5% recorded aeromagnetic to be defined[post farmout] survey with seismic

reprocessing toprovide additionalexpenditure of $3 millionon seismic and/or drilling.Seismic planning inprogress

The information in this summary that relates to estimated potential recoverable oil or gas reservesand their prospectivity for oil and gas is based on information by Mr J L Craig Marshall who has30 years experience in petroleum geology, is a Fellow of the Australian Institute of Mining andMetallurgy, a Certified Practising Geologist and is a full time employee of the Company.

CARNARVON BASIN

Planning to drill 6 wells and 1 optional well 2008 - 2009

1 EP 460 Drilled Star Finch-1 July 2008

2 EP 461/EP 439 Drill Lake MacLeod-1 September 2008

3 EP 359 Drill Bee-Eater-1 October 2008

4 EP 444 Conduct Geochemical Survey to determine location to drill Opal-1 or Topaz

5 EP 444 Conduct Geochemical Survey to determine location to drill Amethyst-1

6 EP 412 Drill Sandalwood-1 upon Bee-Eater discovery otherwise drill Thornbill-1

7 EP 435 Optional well drill Rainbow-1 November 2008 upon Bee-Eater-1 discovery(other wells will be pushed back)

PERTH BASIN

Seismic Surveys recorded 2008 to decide drilling 3 wells 2009

8 EP 426 Drilled Moriary-1 12 March 2008

9 EP 416 Completed 50 km 2D Seismic Survey 4 April 2008.Plan to drill Wellesley-1 2009 on confirmation of new seismic interpretation 2008.Completed processing seismic and interpretation to commence in 3rd Quarter.

10 EP 432 Completed 50 km2 3D Seismic Survey 23 April 2008.Plan to drill 1 well 2009 on confirmation of drillable prospects from new seismicinterpretation 2008.Processing seismic and interpretation to commence in 3rd Quarter.

11 EP 389 Completed 50 km2 3D Seismic Survey 26 April 2008.Plan to drill Gingin West-1 2009 on confirmation of Gingin West Structure fromnew seismic interpretation 2008.Processing seismic and interpretation to commence in 3rd Quarter.

12 EP 389 Drill Gingin-3. Sidetrack is on the agenda

CANNING BASIN

Test 1 well and reprocess seismic 2008. Plan seismic drilling 2 wells 2009

13 EP 104/R1 Test Stokes Bay-1 2008Plan to test the Stokes Bay-1 well and stimulate the Nullara Formation to flow withtesting operations to be settled by the Joint Venture.

14 EP 438 Seismic reprocessing, seismic planning and evaluation of the re drilling Hedonia-1and/or Goldwyer-1.Plan new seismic or drill 1 well 2009Empire to acquire additional 60% interest from private interests. Empire will thenhave a post farmin interest of 20%.ARC Energy $3 million farmin to record seismic and/or drilling

15 EP 448 Seismic reprocessing to determine leads for new seismic 2009Empire to acquire 45% additional interest from private interests. Empire will thenhave a post farmin interest of 17.5%.ARC Energy $3 million farmin to record seismic to delineate drilling targets.

EMPIRE

KEY INFORMATION

SUMMARY OF PLANNED ACTIVITIES

8

2008 2009

Well/Seismic Permit Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1st Half 2nd Half

Moriary-1 EP 426 Drilled 12 February - 12 March Farminee ERM Gas evaluating

Coal Seam Objectives

Drill Coal seam well/s

Wellesley 2D EP 416 30 March 4 - April Completed Drill Wellesley-1

Seismic Survey Seismic processingCommence seismic interpretation

Mullering 3D EP 432 Completed 13-23 April Seismic processing Drill 1 well on MulleringSeismic Survey Anticline

Commence seismic interpretation

Gingin West 3D EP 389 Completed April - May Seismic processing Drill Gingin West-1

Commence seismic interpretation SidetrackGingin-3

Test Stokes Bay-1 EP 104/R1 Preliminary evaluation Testing

Star Finch-1 EP 460 June and July Drilled

Lake MacLeod-1 EP 439/ September DrillEP 461

Bee-Eater-1 EP 359 October Drill

Two wells EP 444 October DrillAmethyst-1, (weather dependent)Opal-1, Topaz-1

Thornbill-1/ EP 412 December DrillSandalwood

Rainbow-1 EP 435 November drill option(Optional) upon Bee-Eater-1 discovery

Hedonia-2 EP 438 Dependent on studies,Goldwyer-2 record seismic or

drill 1 well

Seismic EP 448 Record seismic

KEY INFORMATION

DRILL AND SEISMIC PROGRAMME 2008-2009

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OIL & GAS NL

EMPIRE

10

review of operations

EP 104 and retention lease R1

Canning Basin, western australia

August 2007 drilling programme for

valentine-1 and stokes bay-1

valentine/stokes bay-1 well

KAMBARA-1

MINJ IN-1

PERINDI-1 TAPPERS INLET-1

CURRINGA-1

PENDER-1

PADILPA-1

PURATTE-1JUM JUM-1POINT TORMENT-1

WEST KORA-1

KORA-1

BOORAN-1

D E R B Y

LLOYDBOUNDARY

WEST TERRACE

SUNDOWN

BLINA

MOOGANA-1

K I M B E R L E Y

B L O C K

L E N N A R DS H E L F

F I T Z R O Y

S U B - B A S I N

P EN

DE

RF

AU

LT

P I N N A C L E

K I N G S O U N D

STOKES BAY-1

onshore canning basin

EP 104/r1 and l98-1

test Stokes Bay-1

EP 104

RETENTION

LEASE R1

production licence L98-1

APPLICATION

11

OIL & GAS NL

PROSPECTS EP 104 AND RETENTION

LICENCE R1 AND APPLICATION FOR

PRODUCTION LICENCE L98-1

CANNING BASIN WESTERN AUSTRALIA

Gulliver Productions Pty Ltd - 14.8%(Subsidiary of Empire Oil & Gas N.L.)ARC Energy Limited - 38.95% (Operator)Indigo Oil Pty Ltd - 5.5%First Australian Resources Limited - 8%Pancontinental Oil & Gas N.L. - 10%Emerald Gas Limited - 12.75%Phoenix Resources Plc - 10%

drilling Valentine-1

The Company completed farmouts with ARC Energy

Limited, Emerald Gas Pty Ltd and its parent, Emerald

Gas Limited, and Phoenix Resources Plc, where

Gulliver Productions Pty Ltd is near carried

contributing only 5.06% through the earning well in

EP 104/R1.

Valentine-1, the earning well, was located 20

kilometres north of the township of Derby, West

Kimberley, Western Australia. The Valentine-1 well

was spudded on 12 August 2007 with Century Rig 18

and drilled to a total depth of 3,430 metres on 27

September 2007.

The primary objective, the Late Devonian aged

Virgin Hills Formation, was intersected consisting

predominantly of tight sandstones and calcareous

claystones. There were no significant indications

of hydrocarbons.

The secondary objectives in the Valentine-1 well

were very encouraging with very strong gas shows

and indications of reservoir quality in the Anderson

Formation encouraging for the Stokes Bay-1 well

to be drilled updip as a lateral well from the

same borehole.

Stokes Bay-1

Stokes Bay-1 well was spudded on 3 October 2007 to

evaluate the primary reservoir objectives of the

Anderson Formation and Fairfield Group that had

very strong gas shows in Valentine that are mapped

significantly higher in the mapped closure at the

Stokes Bay-1 deviated well location. The Stokes Bay-

1 location is also significantly along strike (5.5

kilometres) and updip (120 to 150 metres) from the

Point Torment-1 Anderson Formation gas discovery

made in 1992 where gas was tested at a flow rate of

4.3 million cubic feet of gas per day. This is still the

largest onshore gas flow rate recorded for an onshore

well in the Canning Basin, Western Australia.

Point tormentgas poolequivalent location

drilling fluid

loss in nullara

section imply

well porosity.

Point torment

gas flowed from

equivalent

section which

was tight

stokes bay-1well bore

valentine-1well bore

mature sourcerocks

tightreservoir

west koraoil pool

valentine gasshows

valentine prospect

Seismic cross Section of the Stokes Bay-1 and Valentine-1 wells

valentine/stokes

bay-1 well drilled

from a 1.5km

causeway in

mudflats

The Stokes Bay-1 well was planned to test the extent

and reservoir development of the gas accumulation

intersected by Point Torment-1 and was drilled as a

deviated well with a total depth of 2589 metres

reached on 15 October 2007, the total depth agreed

in the Stokes Bay-1 Drilling Programme.

The Stokes Bay-1 well encountered two sands with

oil and gas shows in the Lower Anderson Formation.

Empire interpreted these to be from 2104-2113

metres and 2147-2158 metres (true vertical depth)

and can be correlated with sands from 2242-2250

metres (good gas shows) and 2310-2320 metres in

Valentine-1. Empire has evaluated the results and has

sought to test these sands, being in the order of 140

metres updip from Valentine-1.

The Operator proposed to the EP 104/R1 Joint

Venture that the well be deepened from 2589 metres

to 2800 metres to evaluate the Upper Devonian aged

Nullara carbonates.

Empire notified the EP 104/R1 Joint Venture of its

decision to go Non-Consent pursuant to the

provisions in the EP 104/R1 Joint Operating

Agreement on the deepening of the Stokes Bay-1

well from its approved total depth of 2589 metres to

the new total depth of 2800 metres as the Company’s

technical analysis of the Nullara Limestone play was

that it was very high risk. Empire, on making this

decision, has the right to back into this Nullara play

where the penalty is paid out of production, should

the Nullara Formation and any deeper interval

discover commercial hydrocarbons. This decision

preserved the Company’s cash position with such an

expensive and high risk operation being undertaken

whilst providing the opportunity for Empire to back

in with the provision of the ‘deepening costs’ coming

out of production.

The evaluation of well data provided significant

encouragement for the EP 104/R1 Joint Venture to

run 7” casing in the well to enable the test of the

Nullara where, while drilling ahead, drilling fluids in

the well bore were lost to the Nullara Formation.

This is called a lost circulation zone indicative of a

porous and permeable reservoir. Drilling ahead was

not possible. The decision was made to set 7” casing

above this zone to test the Nullara Formation.

Between 25 October 2007 and 1 November 2007,

the 7” casing was run and cemented to a depth of

2585 metres.

The well was then deepened by 22 metres from the

previous 2755 metres to 2777m in the Nullara

Formation. During this operation, the lack of all

drilling fluid returns (lost circulation) continued and

no drill cuttings were collected at the surface. While

trying to control the lost circulation, the well had

intermittently flowed into the well bore during flow

checks. Flows into the wellbore have been recorded

at rates of up to 4 barrels of fluid per minute or 5,760

barrels of fluid per day demonstrating very good

reservoir parameters.

There have been some hydrocarbon indications

interpreted to be from the Nullara Formation. While

controlling the well and circulating the wellbore, a

gas peak of 3,816 units was recorded (these being

mud gas peaks of up to 10%). This gas was

interpreted to be very dry, being 97% methane and

coming from the Nullara Formation limestones.

The EP 104/R1 Joint Venture then elected to run

production tubing and a surface wellhead to enable

testing of the Nullara limestones.

EMPIRE

12


Drilling Valentine-1 September 2007

EP 104/R1, Canning Basin, Western Australia

13

OIL & GAS NL

From 1 November to 5 November 2007 upon the

3 ½” tubing being run, the wells was opened up to

test the well on 4 November 2007. Initial flow rates

of drilling fluids was at a rate of 3,000 to 4,000

barrels per day at a wellhead pressure of 30 psi.

Approximately 12,000 barrels of drilling mud and

associated fluids were lost to the Nullara Formation

during drilling and completion operations. To date

some 1,500 barrels of this drilling fluid in total have

been recovered. At the cessation of the initial test

flow using Century Rig 18, the well was shut in and

down hole pressure measurements taken.

Interpretation of these pressure measurements by the

Operator together with surface shut in pressures

provided encouragement that the well will flow and

clean up so that the nature of the reservoir fluid can

be determined.

Because of the vugular and cavernous nature of the

porosity in the Nullara section and the amount of

drilling fluid and lost circulation material lost to the

formation, the well may take some time to flow and

clean up.

Upon rig release on 6 November 2007 and following

the initial set up and pressure testing of the Stokes

Bay-1 wellhead, the first attempt to flow fluid in the

well to surface was not successful and now required

assistance to commence flow. A swabbing unit was

mobilised to wellsite on 15 November 2007.

Swabbing commenced on 22 November 2007

recovering 624 barrels of the drilling fluids lost to

the formation. Total drilling fluids recovered consist

of 3644 barrels and represent 29% of the now

estimated 12,400 barrels of drilling fluid lost. Rain -

stopped swabbing operations on 23 November 2007

with the Operator proposing further testing

operations be planned to recommence in 2008 after

the wet season.

Stokes Bay-1 Inspection 5 & 6 July 2008

The Operator, ARC Energy Limited, advised Empire

on 6 July 2008 that the EP 104/R1 Joint Venture had

undertaken well inspection operations at the Stokes

Bay-1 well to assist in the design of the appropriate

Testing Programme. Operations at this site inspection

included removal of the back pressure valve on the

well with the installation of the wellhead and

pressure gauges. The wellhead pressure was 1200 psi.

On opening the well to the test pit, it flowed gas for

approximately six minutes before slugging mud and

gas with the flow ceasing after some 30 minutes.


R1/ep 104 canning basin, western australia stokes bay-1 well

1.5 km causeway and century rig 18

After an overnight shut-in the well head pressure was

250 psi but there was no significant flow. The well

was shut in after this inspection with the crew

demobilised. These results are interpreted to be very

encouraging with gas flowing either from the Laurel

Formation gas sands located below the 7 inch casing

shoe or from the Nullara reef section. The noted

presence of gas and well head pressure will assist in

the evaluation of the best method to undertake a

definitive test of the reservoir. ARC Energy Limited

are to undertake this evaluation for review by the

Joint Venture.

ARC Energy Limited, the Operator, has advised the

Joint Venture of a proposed testing programme

planned for 2008. Empire and the Joint Venture have

agreed the proposed testing programme of the Stokes

Bay-1 Nullara Formation, to determine the nature of

the reservoir fluid and the source of the pressure

within the reservoir. Empire has elected to participate

in all of the casing and tubing run in the wellbore to

date and will participate at its 14.8% interest in the

Stokes Bay-1 testing programme, planned to comence

in October 2008.

Nullara Formation Potential

If Stokes Bay-1 successfully tests hydrocarbons, then

Empire interprets this Nullara trend of hydrocarbons

could extend 4.5 kms to the south east to Point

Torment-1 (where Nullara limestones flowed 134,000

cubic feet of gas per day with a trace of oil) and up

to 7 kms to the north west where the Pinnacle Fault

curves to the west. The trend is bounded to the south

west by the Pinnacle Fault where the Nullara

limestones dip steeply into the basin and were

intersected in Valentine-1 some 650 metres deeper

than Stokes Bay-1. For the trap to be effective, the

Nullara Trend must also be stratigraphically trapped

updip and to the north east by either tight limestones

or lagoonal shales.

The Company is looking forward to the Joint

Venture recommencing testing of the Stokes Bay-1

Nullara Formation where it is 80 metres high to the

Nullara gas test at Point Torment-1. There is drilled

to date a 40 to 45 metre intersection of the Nullara

limestones in Stokes Bay-1. The areal closure could

be up to 17 km2. The testing to date has not provided

any formation fluids from the Nullara and the

presence of hydrocarbons and the extent of the

reservoir parameters will be determined by the

further testing of the well planned for late 2008.

EMPIRE


14

stokes bay-1

valentine-1

Kora-1

west kora-1

Nullara

Formation

Potential

point torment-1

Near Top Devonian

Reef/Platform Margin

& Slope Depth

Structure Map

interpreted area of

anomalous low

frequency seismic

response. possible

extent of

vuggy/cavernous

Stokes BAy

stratigraphic trap

[8 to 20 square

kilometre zone

developed at the edge

of nullara carbonate

platform]

EP 438

CANNING BASIN

WESTERN AUSTRALIA

Gulliver Productions Pty Ltd - 20%(A wholly-owned subsidiary of Empire Oil & Gas N.L.)Seaville Investments Pty Ltd - 20%Venus Bay Pty Ltd - 20%Cosmetica Pty Ltd - 20%Indigo Oil Pty Ltd - 20%ARC Energy Limited (earning up to 75% from theJoint Venture)

Pursuant to the EP 438 Agreement entered into

between ARC and Empire on 5 December 2006, ARC

has exercised the option within the Agreement on 10

July 2007 to farmin to the EP 438 permit. ARC will

have transferred to it a 5% interest in EP 438 upon it

completing an aeromagnetic survey and reprocessing

seismic. ARC is to earn up to 75% in the EP 438

permit by undertaking additional exploration of

seismic and/or drilling by the expenditure of

$3 million.

The West La Grange Aeromagnetic Survey consisted

of 3,000 line kilometres was recorded in July 2007 by

ARC Energy Limited and ARC are now in the process

of reprocessing select seismic lines within the Permit

to progress the identification of prospects and leads

for future seismic or drilling.

The 2008 exploration programme will consist of

completing this seismic reprocessing and evaluating

the Hedonia and Goldwyer wells which had

anomalous hydrocarbon shows. The Hedonia No. 1

well drilled by Gulf Oil in 1984, is located on an

anticlinal feature and is of significant interest as the

well lost circulation of its drilling fluids upon drilling

into the top of the reservoir objective the Ordovician

Willara Formation at 1050 metres. This ‘severe lost

circulation’ indicates high permeabilities in this

limestone reservoir where a significant gas show

was recorded.

There were also numerous oil and gas shows in the

marine black shales of the Goldwyer Formation

which demonstrated oil maturity in these source

rocks. The potential remains to either re-drill or re-

enter the Hedonia No. 1 well to properly test this

reservoir. Potential recoverable reserves for the

Hedonia Prospect are estimated to be in the order of

5 million barrels of oil if the structure is filled to

spill. Reprocessing of the seismic will enhance the

seismic data set to assist in defining the

Hedonia structure.

The Goldwyer-1 well is also of interest where the

well intersected a porous dolomite within the

Willara Formation with excellent oil shows. The

seismic reprocessing could provide an updip well

location from the Goldwyer-1 located on the

Goldwyer Anticline.

Gulliver Productions Pty Ltd entered into Sale and

Purchase Agreements on 4 January 2008 with Seaville

Investments Pty Ltd, Venus Bay Pty Ltd and

Cosmetica Pty Ltd, to acquire that 60% interest they

collectively hold in EP 438. Empire’s Gulliver

Productions Pty Ltd with the additional equity will

be carried through ARC’s $3 million seismic and/or

drilling programmes, retaining a post farmout interest

of 20% in EP 438. The acquisition of the Seaville

interests will be the subject of a General Meeting of

Shareholders to be held on 24 september, 2008.


15

OIL & GAS NL

EMPIRE


16

PETROLEUM EXPLORATION

PERMIT EP 448

CANNING BASIN

WESTERN AUSTRALIA

Gulliver Productions Pty Ltd - 25%(Subsidiary of Empire Oil & Gas N.L.)Seaville Investmentrs Pty Ltd - 15%Venus Bay Pty Ltd - 15%Cosmetica Pty Ltd - 15%Indigo Oil Pty Ltd - 20%Uranium Oil & Gas Limited - 10%ARC Energy Limited (earning up to 75% from theJoint Venture)

Pursuant to the EP 448 Agreement entered into

between ARC and Empire on 5 December 2006, ARC

has exercised the option within the Agreement on 10

July 2007 to farmin to the EP 448 permit. ARC will

have transferred to it 5% interest in EP 448 upon it

completing an aeromagnetic survey and reprocessing

seismic. ARC will now earn up to 75% in the EP 448

permit by undertaking additional exploration of

seismic and/or drilling by the expenditure of

$3 million.

The potential reservoir objective in the Permit is at

the Ordovician aged Nita Formation which is sealed

by thick, red bed and salt sequences at the base of

the Carribuddy Group. These are excellent seals in

the Permit Area. Source is provided by the thick,

organic-rich, marine shales in the Ordovician

Goldwyer Formation which are considered to be

some of the richest source rocks in Western Australia

and immediately underlie the potential Nita

Formation reservoirs. Based on geochemical studies,

they are interpreted to be thermally mature for oil

generation within select prospective parts of

the Permit.

The West Anketell Aeromagnetic Geophysical Survey

was recorded and completed mid 2007 and consisted

of 8,000 line kilometres. ARC are reprocessing select

seismic data within the permit to progress the

identification of leads and prospects for future

detail seismic.

The aeromagnetic, together with seismic

reprocessing, will enhance the interpretation at Nita

Formation level for reef type (carbonate build up)

reservoirs as drilling objectives. Empire considers that

EMPIRE OIL & GAS N.L.

AND THE ARC ENERGY

LIMITED FARMINS

EP 104, RETENTION LEASE

R1 AND APPLICATION

L98-1, EP 438 AND EP 448

Canning basin,

western australia

B R O O M E

K I N G S O U N D

D E R B Y

EP 438

EP 448

EP 104 (R5)

retention lease R1

productionlicenceAPPLICATIONAREA l98-1

17

OIL & GAS NL


recording of a modern seismic data set will provide a

number of drilling prospects.

Gulliver Productions Pty Ltd entered into Sale and

Purchase Agreements on 4 January 2008 with Seaville

Investments Pty Ltd, Venus Bay Pty Ltd and

Cosmetica Pty Ltd, to acquire their collective 45%

interest in EP 448. Empire’s Gulliver Productions Pty

Ltd with the additional equity will be carried through

ARC’s $3 million seismic and/or drilling programmes,

retaining a post farmout interest of 17.5% in EP 448.

The acquisition of the Seaville interest will be the

subject of a General Meeting of Shareholders to be

held on 24 september, 2008.

EP 435 ROUGH RANGE OILFIELD

EXMOUTH SUB BASIN

CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd - 100%

The Company settled all the necessary agreements

for the grant of the Production Licence over Rough

Range 1B. The decision was made on 5 December

2007 to shut the Rough Range well in and take a

series of shut in pressure readings until the grant of

the Production Licence.

The Company applied for a Production Licence 1/04-

5L over the Rough Range 1B oil well area. An

Agreement with the registered native title claimants

over this area was settled on 15 January 2008 with

the grant of the Production Licence by the Western

Australian State Government which is now due. The

Rough Range 1B Production Facility can be increased

in its size and be duplicated. This has been taken into

consideration particularly should additional oil

reserves be discovered at the proposed drilling of the

Bee-Eater Prospect in EP 359 that extends into EP

435. With potential recoverable oil reserves in the

order of 5 million barrels, an upgrade of the facility

would be required. A Bee-Eater discovery will result

in drilling additional wells along the trend in EP 435,

EP 359 and EP 412. A number of ‘Bee-Eater type

prospects’ and leads in these permits have been

identified.

EP 435

EXMOUTH SUB BASIN

CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd - 38% (Operator)Phoenix Resources Plc - 25%Australian Oil Company Limited - 17%Bounty Oil & Gas N.L. - 10%Black Fire Energy Limited - 10%

It is planned to drill the Bee-Eater Prospect in EP 359

the subject of seismic mapping and several

geochemical surveys with positive anomalies. A Bee-

Eater oil discovery in EP 359 will result in the EP 435

Joint Venture progressing the drilling of the

extension of the Bee-Eater Prospect in EP 435 as a

Rainbow-1 well. There are other leads and prospects

in the Permit including the Pindan Prospect along

this Bullara Trend in the Permit. Should the

Company drill a Rainbow-1 well, it will seek to

contract DCA Rig 7.

The EP 435 Permit was renewed for a further

5 years.

Dune-1. DCA Rig 7 Drilling one of the Company’s

wells in EP 435 Exmouth Sub Basin, Carnarvon Basin

EMPIRE


LEATHERBACK

ROLLER

PYRENNEES

MACEDON

ENFIELD

EXMOUTH

RIVOLI

E X M O U T H

G U L F

CARNARVON

BARROW ISLAND

TUBRIDGI

OND-1 OIL RECOVERY

ep 434

EP 359(2)

EP 444

EP 10/06-7

EP 359(1)

ep 435

ep 412

ep 439

ep 461

ep 460

ep 359(3)

rouGh range oilfield

drill bee-eater prospect

potential recoverable oil reserves of

5 million barrels

rainbow prospect

sandAlwood south prospect


5.0 million barrels

opal

potential recoverable oil reserves of 12 million barrels

amethyst


topaz south


drilled Star Finch-1 prospect

drill lake macleod prospect


30 - 150 million barrels

drill thornbill-1

potential recoverable gas reserves of

50 bcf or 2-5 Million Barrels of oil

tubridgi

prospect

carnarvon basin

OIL & GAS NL

19


23º 30’

114º 05’ 114º 10’

22º 25’

U

OU

GH

RA

NG

EF

A

R

LT

RO

UG

HRA

NG

E

R O U G H R A N G E

R O B E R T S H I L L

P A R R O T H I L LO I L D I S C O V E R Y

AN

TI C

L I NE

P AT

E RS O

N

TR

OU

GH

O I L F I E L D

O I L D I S C O V E R Y

EP 435

P I N D A N P R O S P E C T

D U N E N o . 1

EP 412EP 359B E E E AT E R

0 4 k m

114º 00’

1300m

B E E E A T E R - 1

South EastNorth West

Oil Migrationfrom Paterson Trough

1200m

1400m

1200m

1300m

1400m

1

GEARLE SILTSTONE

G

WINDALIA RADIOLARITE

MUDERONG SHALE

BIRDRONG/WOGATTI SANDS

K

ep 359 bee-eater prospect

EP 359 Bee-Eater Cross section illustrating the

migration of oil into the Bee-Eater structure from

the oil generative Paterson Trough.

EP 359 EXMOUTH SUB BASIN

CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd - 33.36% (Operator)Lansvale Oil & Gas Pty Ltd - 31.65%Pace Petroleum Pty Ltd - 1.67%Farminees - 33.32%

There are a number of prospects located on the

Bullara Trend in this permit. An airborne geophysical

survey was recorded over the permit on 28 January

2007 together with separate geochemical surveys

with anomalies coincident to seismic structural

closure over the Bee-Eater Prospect.

The Company, for the EP 359 Joint Venture, is

negotiating farmouts with two separate farminees.

Empire’s Rough Range Oil Pty Ltd is to retain its

33.36% and not farmout.

A discovery will progress further exploration

drilling along a number of prospects and leads in the

Company’s EP 359, EP 434, EP 435 and

EP 412 Permits.

It is planned to drill Bee-Eater-1 following drilling

Lake MacLeod-1 with DCA Rig 7. Bee-Eater-1 is an

exciting prospect located on the eastern side of the

Miocene aged Rough Range Anticline. The structural

development of Bee-Eater-1 is interpreted to predate

oil generation and migration from the Paterson

Trough and pre-dates the formation of the Rough

Range Fault and Anticline. The timing of an early

formed Bee-Eater structure enhances the possibility

that it could be charged with oil to its spill point

from oil migrating from the Paterson Trough. The

seismically defined structure has been the subject of

several geochemical surveys which have

demonstrated repeated hydrocarbon anomalies over

the Bee-Eater structure. The Bee-Eater-1 well is

located nearby the Company’s Rough Range Oil

Production Facility which will progress early oil

production upon an oil discovery.

Empire has estimated recoverable oil reserves in the

Bee-Eater structure, which also extends into the

Company’s EP 435 Permit, to contain up to

5 million barrels.

Empire would also progress the drilling of the

Rainbow-1 well located on the extension of the Bee-

Eater structure into the adjoining permit EP 435

which is also operated by Empire Oil & Gas N.L.’s

wholly owned subsidiary Rough Range Oil Pty Ltd.

The Western Australian Department of Industry and

Resources, Petroleum and Royalties Division granted

the approval to drill Bee-Eater-1 on 13 August 2008.

Bee-Eater Structure has potential recoverable oil

reserves of 5 million barrels

EMPIRE

20


The Bee-Eater-1 well location siteworks are

completed. The Company’s drilling camp will be

located on the existing camp location Empire used

for drilling Parrot Hill-2 in EP 435 in April 2007.

The Company will utilise the existing water bore,

access roads and other infrastructure on this site.

EP 412

ONSHORE CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd - 29% (Operator) - (Postfarmout - 50%)Bounty Oil & Gas N.L. - 65% - (Post farmout - 20%)Jurassica Oil & Gas Plc - 6% and has the right toincrease to a 30% interest in an EP 412 well paying afurther $480,000 - (Post farmin 30%)

(The Company is earning an additional 45% equity inthe permit by drilling one well).

Jurassica Oil & Gas Plc have assigned the funding of

$480,000 of the Thornbill-1 well to the Lake

MacLeod-1 well in EP 439 and retains the right to

fund the $480,000 towards an EP 412 well after the

results of Bee-Eater-1 in EP 359.

The Company intends to wait on the results of

drilling the Bee-Eater-1 well in EP 359 before making

the decision to drill a Bee-Eater type prospect, such

as Sandalwood South instead of Thornbill-1.

A Thermoluminescence Geochemical survey

conducted on 30 August 2007 recorded anomalous

results over Sandalwood South, a seismically defined

structure. Further geochemical and other technical

surveys would be required to further define a drilling

location at the oil prospective Sandalwood South

Prospect. It is proposed to conduct a further

geochemical survey over the Sandalwood Prospect in

2008 when conducting the EP 444 geochemical

survey in the Carnarvon Basin.

The Thornbill Prospect is mapped at the Lyndon

Sandstone level, a Permian-aged extensive basal

transgressive sandstone. The Thornbill-1 Gas

Prospect has a seismic amplitude anomaly resulting

from amplitude versus offset seismic processing over

a shallow target of 800 metres. The Company has

completed a geochemical survey over the Thornbill

Prospect to progress drilling this prospect in 2008.

The preliminary results indicate the presence of

hydrocarbons coincident to the mapped seismic

closure. The Company considers although

prospective for oil, it is considered a gas play with

potential recoverable reserves of up to 50 billion

cubic feet of gas.

E X M O U T H

G U L F

EP 412

EP 359 (3)

EP 359 (2)

EP 434

ep 412 thornbill prospect

SeaLevel

500m

E

T H O R N B I L L - 1WHITLOCK DAM-1

S

SeaLevel

500m

South North

G

GEARLE SILTSTONE


MUDERONG SHALE

BIRDRONG SANDSTONE

CORDALIA FORMATION

CALLYTHARRA FORMATION

LYONS GROUP

D

SeaLevel

500m

E

T H O R N B I L L - 1WHITLOCK DAM-1

S

SeaLevel

500m

South North

G

GEARLE SILTSTONE


MUDERONG SHALE

BIRDRONG SANDSTONE

CORDALIA FORMATION

CALLYTHARRA FORMATION

LYONS GROUP

D

rouGh rangeoilfield

kite prospect

sandalwoodsouth prospect

bee-eaterprospect


21

OIL & GAS NL

ep 444 opal prospect

ep 444 amethyst prospect

ABDUL’S DAM-1Northwest SoutheastAMETHYST

PROSPECT

GEARLE SILTSTONE


MUDERONG SHALE

LOCKER SHALE

CHINTY FORMATION

Oil Migration

from Barrow

Sub - Basin

-300m

-400m

-500m

-300m

-400m

-500m

R O L L E R

S K A T E

B A R R O W S U B - B A S I N

2 2 º 0 0 '

2 1 º 5 0 '

2 1 º 4 0 '

1 1 4 º 4 5 ' 1 1 4 º 5 5 '

A M E T H Y S T

P R O S P E C T

0 1 0 k m

EP 444

T U B R I D G I

G A S F I E L D

EP 434

ONSHORE EXMOUTH SUB BASIN

CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd (Non-Operator) - 20%Lansvale Oil & Gas Pty Ltd (Operator) - 70%Pace Petroleum Pty Ltd - 10%

The Company has applied to renew the permit for a

further 5 years. The prospect of immediate interest is

Kite located updip from the Wingette-1 well. The

reservoir objectives are the Jurassic Aalenian Sands.

EP 444

ONSHORE CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd (Operator) - 50%United Oil Plc - 25% (farminee)Seek Oil & Gas Limited - 25% (farminee)

Empire has recorded an airborne geochemical survey

and completed a seismic interpretation over the

northern part of the permit with a number of 4-way

dip-closed anticlines and stratigraphic traps all

prospective for oil being defined. There are three oil

prospects that are of particular interest. These are:

• The Opal Prospect - a simple 4-way dip closure

interpreted as drape over a topographic high which

provides the ideal geological timing to trap

hydrocarbons migrating out of the Barrow Sub basin.

Estimated potential recoverable reserves of oil are in

the order of 12 million barrels.

• The Amethyst Prospect - a stratigraphic trap

pinching out on the Yanrey Ridge. It is well defined

seismically. Estimated potential recoverable oil

reserves are in the order of 17 million barrels.

• Topaz South - a faulted anticline. Estimated

potential recoverable oil reserves are in the order of 5

million barrels.

The Company is negotiating Farmin Agreements with

two new farminees to fund the drilling of two wells

to each earn 25% interest in EP 444; such wells to be

defined by a further geochemical survey planned for

October 2008.

The Operator, Rough Range Oil Pty Ltd, has

provided an extension of time to both farminees to

provide the farmin costs. The EP444 wells are

planned for the year end 2008 and will also be

subject to weather conditions for a late drilling

timetable 2008. Should Bee Eater-1 or any prior wells

result in a discovery, the timetable will change into

early 2009.

It is planned that these two wells will be drilled with

contracted DCA Rig 7.

EP 439 and 461

ONSHORE EXMOUTH SUB BASIN

CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd - 30.35% (Operator)Longreach Oil Limited - 9.352%Indigo Oil Pty Ltd - 4.676%Falcore Pty Ltd - 2.596%Vigilant Oil Pty Ltd - 0.52%Jurassica Oil & Gas Plc - 35%Black Fire Energy Limited - earning 7.5% by Farminfrom the J.V.DVM International Limited - earning 10% by Farminfrom the J.V.

LAKE MACLEOD-1

The Company has introduced farminee Jurassica Oil

& Gas Plc who have contributed $840,000 towards

the costs of drilling Lake MacLeod-1, earning a 35%

interest in both the EP 439 and EP 461 permits. The

Company has also introduced farminee Black Fire

Energy Limited who will contribute 15% of the Lake

MacLeod well costs to earn a 7.5% interest in EP

439 and EP 461. Rough Range Oil Pty Ltd, on behalf

of the EP 439/EP 461 Joint Venture, settled a Farmin

Agreement with DVM International Limited on 8

February 2008, where DVM will earn 10% interest in

EP 439 and EP 461 by contributing 20% of the costs

of drilling Lake MacLeod-1.

The Operator, Empire, has contracted Drilling

Contractors of Australia and Rig 7 to drill Lake

MacLeod in the 3rd quarter of 2008. Unseasonal rain

in late July has caused damp conditions on this well

site adjacent to Lake MacLeod. This location was

abandoned and a new wellsite nearby prepared. Site

works were being undertaken in August to ensure the

actual wellsite is stable for drilling the Lake

MacLeod-1 well. The approval to drill Lake

MacLeod-1 was received from the Department of

Industry and Resources on 31 January 2008.

The Lake MacLeod structure is interpreted from

seismic data as an anticlinal feature where Devonian

aged carbonate sediments drape over an older

Silurian-aged fault block. This structure exhibits the

necessary pre-requisites of structural timing for oil

generation and entrapment.

Good oil-prone source rocks are present in organic-

rich marine shales of the Late Devonian Gneudna

Formation. The Devonian section in the Quobba-1

well is predominantly shale so sealing of the reservoir

in Lake MacLeod-1 is not considered a problem.

There were also good oil and gas shows throughout

the Gneudna Formation in Quobba-1 demonstrating

there are porous and permeable reservoirs in

dolomites of the Gneudna Formation.

EMPIRE


22

113° 40'

0

I N D I A N

O C E A N

L A K E

M A C L E O D

114°CG83-06L

CG83-07L

CG

83-0

9L

CG

83-0

4L

72-1

CG

83-0

2L

CG83-01L

EP 439

Pelican Hill-1

Carnarvon

EP 460

EP 461

STARFINCHPROSPECT

Carnarvon

10km

LAKE MACLEODPROSPECT

LAKE MACLEOD-1 PROPOSED LOCATION

L A K E M A C L E O D - 1

SeaLevel

500m

1000mOil M ig ra tionfrom Gas coyneS ub - B a s in

West East

1

1000m

500m

SeaLevel

S

KOROJON CALCARENITE

TOOLONGA CALCILUTITE

TERTIARY

EARLY CRETACEOUS

GNEUDNA FORMATION

NANNYARRA SANDSTONE

SILURIAN

ep 439

lake macleod

prospect

ep 439

Star Finch-1

drilled 2008


23

OIL & GAS NL

The main structures drilled in the Gascoyne Sub

Basin such as Quobba-1, Pendock-1D and

Wandagee-1 formed during the Miocene which post

dates primary hydrocarbon migration and are dry.

Structures such as Lake MacLeod however were

formed during the Devonian and pre date primary

hydrocarbon migration from the Gneudna Formation

source rocks which generated their hydrocarbons

during the Late Carboniferous to Permian. It is

important to note that none of these aged structures

have been drilled in the Gascoyne Sub basin,

Carnarvon Basin.

The larger Lake MacLeod structure covers an area of

27,500 hectares (70,000 acres). Estimated potential

recoverable oil reserves for the larger Lake MacLeod

Prospect if the structure is filled to its maximum spill

point are in the order of 150 million barrels.

Potential recoverable oil reserves within the Lake

MacLeod structure in the EP 461 Permit are more

conservatively calculated using a 5000 hectare

closure at the Top Nannyarra Sandstone and are

estimated to be in the order of 30 million barrels

of oil.

EP 460

ONSHORE CARNARVON BASIN,

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd - 22.856%Jurassica Oil & Gas Plc - 40%Longreach Oil Limited - 9.352%Indigo Oil Pty Ltd - 4.676%Falcore Pty Ltd - 2.596%Vigilant Oil Pty Ltd - 0.52%DVM International Limited - 20%

Jurassica has farmed in to EP 460 paying $640,000 on

18 September 2007 towards the cost of conducting a

ground geochemical survey at a cost of $40,000 and

contributing $600,000 towards the cost of drilling

Star Finch-1. The EP 460 Joint Venture will transfer

40% interest in EP 460 to Jurassica. A separate

Farmin Agreement with DVM International Limited

was entered into between the existing pre-Jurassica

Joint Venture and DVM International Limited and

was settled on 8 February 2008 where DVM will fund

40% of the Star Finch-1 well costs earning a 20%

interest in the EP 460 Permit.

The Star Finch-1 well was spudded on 8 July 2008

and reached a total depth of 400 metres on 23 July

2008.

The primary reservoir objective, the Birdrong

Sandstone, was intersected high to prognosis

however there were no significant hydrocarbons

present. Electric wireline logs confirmed that

although there were amplitude anomalies on the

seismic coincident to the closure, no hydrocarbons

were intersected in the well.

The Company is in the process of conducting a post

mortem on the Star Finch-1 well.

Spud of Star Finch-1, 8 July 2008, with DCA Rig 7

EMPIRE


24

EXPLORATION PERMIT 10/06-7

PEEDAMULLAH SHELF

CARNARVON BASIN

WESTERN AUSTRALIA

Rough Range Oil Pty Ltd - 100%

The Application was offered by the State to Rough

Range Oil Pty Ltd on 21 March 2007. The main oil

play in the Application Area is the Early Cretaceous

Mardie Greensand and Birdrong Sandstone. The main

prospects in the permit area are the gentle anticlines

and fault blocks plus the potential for stratigraphic

traps in the M. australis sands within the Muderong

Shale. The Company plans to utilise new drilling

technology and exploration methods to increase the

oil recoveries of shallow oil discoveries made by

previous explorers called the Mardie Oilfield Area.

Some of the drilling concepts being evaluated are the

drilling of shallow horizontal wells successfully

utilised in the mining and coal seam gas industries to

enhance oil productivity and avoiding the strong

water aquifer of the Yarraloola Conglomerate

beneath the Mardie Greensand reservoir objective.

The Company has commenced native title

negotiations to be settled prior to the State granting

the Permit.

10 KM

LAMBERT

21°30'

21°15'

21°00'

21°30'

21°15'

21°00'

''0000°°661111''5544°°551111''0033°°551111

PEEDAMULLAHSHELF

SHELF

BARROWSUB-BASIN

HERO 1

BANDAR 1

MARDIE 1

COONGA 1

CARNIE 1

MARDIE 3

MULYERY 1

WOORAWA 1

FORTESCUE 1

YARRALOOLA 1

SADDLEBACK 1

MARDIEWEST 1

MULTHUWARRA 1

MANGROVE ISLAND 1

ROBE RIVER COREHOLE 5

ROBE RIVERCOREHOLE 3


MARDIE 2

MURNDA 1

SHARON 1

PHANTOM 1

MARDIE 1AWINDOO 1ATHRINGA 1MYANORE 1

MARDIE 1B

SOMELIM 1

SURPRISE 1

ECHO BLUFF 1

PEEDAMULLAH 1

EAST SOMELIM 1



Application Exploration permit 10/06-7 showing wells and seismic lines

peedamullah shelf, carnarvon basin

10/06-7

gas pipeline

25

OIL & GAS NL

WOODADA

GERALDTON

KWINANA

BUSSELTON

P E R T H

B A S I N

MT HORNER

DONGARA

BEHARRASPRINGS

DA

RL

IN

GF

AU

LT

DA

ND

AR

RA

GA

NT

RO

UG

H

J INGEMIAU

RE

LL

AF

AU

LT

MONDARRA

PERTH

50km

BEHARRA SPRINGS NORTH

50

m

HOVEA

CLIFF HEAD

WALYERING

BUNBURY

EP 430

EP 454

ep 440

prospect

onshore perth basin

drill 3 well

2009

EP 432

mullering cataby

oil prospects

3d seismic completed

april 2008

drill one well 2009

EP 389

gingin west prospect


may 2008

drill one well 2009

EP 416

wellesley gas prospect


april 2008

EP 426

moriary-1 drilled

EMPIRE


26

EP 426

29ϒ00'S

MINGENEW

GERALDTON

DONGERA

UR

EL

LA

AB R O

HO

L OS

TR

AN

SF

ER

FA

UL

TNORTHAMPTON

BLOCK

DA

RL

IN

G

FA

UL

T

FA

UL

T

EN

EA

BB

A

MO

UN

TA

INB

RI D

GE

FA

UL

T

BE

HA

RR

AS

PR

I NG

S

A L L A N O O K A FAULT

I RW

I NT

ER

RA

CE

DA

ND

AR

AG

AN

TR

OU

GH

FA

UL

T

MINGENEW

Dongara gasfield

Mt Horner oilfield

Mondarra gasfield

Cliff Head oilfield

hovea, jingemia, eremia oilfields

Woodada gasfield

Beharra Springs, Beharra Springsnorth And tarantula gas fields

Moriary prospect

EP 426 MORIARY-1

ONSHORE PERTH BASIN

WESTERN AUSTRALIA

Empire Oil Company (WA) Limited - 40%Allied Oil & Gas Plc - 25%Black Fire Energy Limited - 10%ERM Gas Pty Ltd - 25%

The Company drilled Moriary-1 with ADS Rig 6 on

12 March 2008 with a total depth of 2,558 metres

reached at 2400 hours, 9 April 2008. Oil shows were

recorded during drilling between the intervals: 2366-

2370 m, 2409-2417 m, 2458-2466 m, 2469-2472 m,

2565-2570 m and 2575-2578 m.

The ‘F’ and ‘J’ sands within the Jurassic aged

Cattamarra Coal Measures were intersected low to

prognosis. The shows intersected while drilling were

further evaluated by electric wireline logs that

demonstrated they were all residual hydrocarbons.

The interpretation is that the oil that had migrated

into the structure has escaped from the structure or

to elsewhere in the basin or to the surface upon the

structure being breached by later structural

movement after oil entrapment.

The Company has received expressions from other

oil companies to farmin and explore deeper

objectives in the permit. These negotiations are

continuing with technical evaluations of the data set.

ERM Gas Pty Ltd, pursuant to their Coal Seam Gas

Farmin has the right to pursue coal seam gas

objectives within the permit and are also currently

evaluating the data sets within the Permit.

27

OIL & GAS NL


EP 432

ONSHORE PERTH BASIN

WESTERN AUSTRALIA

Empire Oil Company (WA) Limited - 62.5% (Operator)Allied Oil & Gas Plc - 25%ERM Gas Pty Limited - 12.5% (earning by farmin)

CATABY-MULLERING PROSPECTS

The Mullering 3D Seismic Survey of 50 km2 in EP

432, North Basin was completed on 24 April 2008.

The processing of the seismic data sets is at an early

stage but the Company is confident it will result in a

good quality modern seismic data set. Interpretation

of the seismic is to commence in the 3rd Quarter to

define drillable Cataby-Mullering Prospects.

The Mullering 3D Seismic Survey was recorded over

the Mullering Anticline, a large complexly faulted

anticline, where the Cataby-1 well recovered oil on

drill stem test. Empire is confident the 3D Seismic

will resolve the faulting over the crest of the

anticline.

Potential recoverable reserves of the 10 leads

identified to date on the Mullering Anticline are

estimated to have recoverable oil reserves between

5 to 10 million barrels each if oil is present and the

structures are full to their spill points.

Joint Venture participants, Allied Oil & Gas Plc and

ERM Gas Pty Ltd, have the option to earn additional

equity in EP 432 by contributing to drilling 1 well

defined by the 3D Seismic. ERM Gas Pty Ltd’s option

is to increase its equity a further 12.5% to 25% by

contributing 30% of the well costs. Allied Oil & Gas

Plc can increase its equity to 50% from 25% by

expending a further $1,500,000 towards the

well costs.

The Company looks forward to announcing the

results of the seismic interpretation and drilling 1

well in EP 432 in 2009 with the existing Joint

Venture or new venture participants.

L A N C E L I N

M O O R A

EP 432

30º 00'S

31º 00'S

DA

ND

AR

AG

AN

TR

OU

GH

CA

DD

AT

ER

RA

CE

BE

AG

LE

RI D

GE

BE

AG

LE

FA

UL

T

FA

UL

T

LE

SU

EU

R

DA

RL

IN

GF

AU

LT

WOODADA GAS FIELD

MULLERING / CATABYANTICLINORIUM

WALYERING GAS FIELD

cataby-1

EMPIRE

28


EP 389

ONSHORE PERTH BASIN

WESTERN AUSTRALIA

YEAL OIL PROSPECT, GINGIN

WEST AND GINGIN-3 SIDETRACK

Empire Oil Company (WA) Limited - 62.5%Wharf Resources Plc - 25%ERM Gas Pty Ltd (farminee) - 12.5%

Exploration History of the Gingin

Gasfield and the Planned Drilling of

Gingin West-1

Following is a brief summary of the discovery gas

wells in the EP 389 Permit that flowed gas naturally

at economic rates without the requirement of fracture

stimulation. The Jurassic aged Cattamarra Coal

Measures Sandstone reservoirs are not deemed by the

Company as ‘tight gas reservoirs’.

The Gingin Gasfield wells, located within EP 389,

were discovered by WAPET in 1964 and 1965

respectively. Gingin No. 1 was put on production in

1972 and flowed an average 5 million cubic feet of

gas per day (MMCFG/D). Cumulative production

was 1.72 billion cubic feet (BCF).

Gingin No. 2, drilled in 1965, tested gas at rates of

3.9 MMCFG/D. The Gingin No. 2 well was put on

production but declined after 14 days. It is

considered progressive formation damage (blocking)

during the test is likely due to the use of a diesel

based drilling mud system.

Bootine-1 was drilled by MESA Australia Limited in

1981 with a test flowing gas at a natural rate of 2.25

MMCFG/D from one reservoir sand.

Empire ’s Exploration to date and the

Planned Drilling of Gingin West-1

Empire has recorded aeromagnetic surveys over the

EP 389 Permit with detail aeromagnetics over the

Gingin Gasfield Area. This was followed by

recording 333 line kilometers of 2D Seismic in late

1997 and a further 110 km2 was recorded in

1999/2000. A total of 443 kilometres of modern 2D

160 fold seismic has been recorded in the Permit and

300

400 500

203 300400

500

97-05

300

400

500

527E97-06

202 300

400

500

E97-07 400

500

526E97-08

500 600

700

1600

1700

1800

1

250

GG

W-0

3

1

250

500

GGW-04

1

250

295

GGW-05A

GGW-05A

500

750

905

GG

W-0

5B

80

90

100

50

60

70

80

250

500

750

756

R97-02

250

500

644R97-04

250

500618R97-11

250

500

750

500

750

500

750

500

750

1000

750

1000

0

27 2

0 3 7 2

0472

05

72

06

72

07

72

08

72

0482

28

50

2850

28

60

0682

28

7028

80

289

0

00 9 2

2900

2

910

29

1 0

29

20

0292

29

30

29

40

29

50

29

60

0792

08

92

299

0

01

03

02

03

04

03

309

0

09

03

31

3100

0113

3 120

3120

3130

3 1 3 0

3 1 30

31

30

0

31

30

3140

3 1 4 0

3 1 4 0

0413

31

40

3150

3 1 5 0

0513

3

15

0

3160

31 6 0

0613

3 1

60

3170

3 1 7 0

3170

3 1 7 0

3170

3 1 8 0

3 1 80

3 1 8

0

3180

0913

3 19

0

3190

023

00 2 3

32

00

3200

012

3

32

10

3210

3 2 2 0

3220

03

23

3 2 3 0

3230

04

2 3

3 2 4 0

3240

32

5 0

3 2 5 0

3 250

3 2 6 0

32 6 0

3 2 6 0

327 0

3 2 7 0

0823

3 2 80

32

8 0

3 2 8 0

3 2 9

0

3 2 9 0

0033

3 3

0 0

3 3 0 0

013

3

013

3

3 3

1 0

3 3 1 0

3320

33 2 0

0233

3 3 2 0

3 3 2 0

03

33

3330

333 0

03

333 3 3 0

3 3 3 0

3340

0433

3 3 4 0

0433

33

50

3350

3 3 5 0

3 3 5 0

3 3 5 0

336

0

3 3 6 0

3 3 6 0

3 3 6 0

337

0

0733

337

0

3 3 7 0

33 7 0

3 3 7 0

33

80

0833

0833

08

33

3 3 8 0

0833

0833

33

90

3390

3390

3 3 9 0

0933

09333 3 9 0

34

00

3400

0043

00

43

0043

3 4 0 0

34

10

3410

3410

01

43

3 4 1 0

34

20

3420

3420

02 4 3

0343

0343

3 4 3 0

0443

3440

3 4 4 0

05

43

0543

06

43

0643

3470

07

43

3 4 8 0

3490

3 4 9 0

0

053

005

3

3 5 0 0

35

10

01

53

01

53

0153

35

20

025

3

3 5 2 0

35

30

3530

3 5 3 0

35

40

3540

3 5 4 0

055

3

3 5 50

50

06

53

3 5 6

0

07

53

3 5

70

07

53

3580

3580

08

53

3590

3590

09

53

3600

0063

00

63

01

63

0163

01

63

3620

362

0

3620

03

63

3630

0363

0363 3

6

04

63

3640

36

40

36

4

3650

056

3

36

50

0663

066

3

36

60

07

63

076

3

36

70

0863

3680

08

63

3

690

3690

36

90

3

700

3700

37

00

01

73

3710

37

10

372

0

37

20

373

0

3

730

3740

3

740

37

40

3750

057

3

37

50

3760

3

3760 3

76

0

07

73

0

77

3

37

70

08

73

08

73

09

73

09

73

3800

01

83

810

02

83

20

0383

30

0483

0483

0583

93

01

3 300

3 3 1 0

3340

34

30

34

40

3450

06

43

3470

3480

660

36

70

0

0

963

00

73

0

173

0

273

03

73

0

473

36

50

0463

036

3016

3

026

3

00

63

08

53

09

53

06

53

35

70

04

53

35

50

03

53

35

20

01

53

00

53

09

43

08

43

07

433

06 0

07

03

08

03

09

03

001

3

0113

0213

3110

3 1 2 0

EP 389 ONSHORE

PERTH BASIN

YEAL OIL PROSPECT

GINGIN

WEST AND GINGIN-3

SIDETRACK

Two way Time

Structural Map

Top Coaly Unit A

Cattamarra Coal

Measures

gingin-1

gingin-3

sidetrack

gingin-2

gingin south

prospect

bounding faultgingin west

prospect

gingin prospect

bootine-1

29

OIL & GAS NL


interpreted together with the reprocessing of all the

substantial previous seismic already recorded in

the Permit.

Based on seismic interpretations at near the top of

the Lower Jurassic Cattamarra Coal Measures,

significant areas of structural closures are interpreted

at Gingin West, and in the Gingin Gasfield Area,

Gingin South Lead, Gingin Brook, Eclipse West and

Yeal and other leads located along the axis of the

Gingin/Bullsbrook Anticline.

Gingin West Gas Prospect

The Company considers the Gingin West Gas

Prospect to be the lowest risk. Sand 5 (within Sand

Member D of the Cattamarra) tested gas at 2.25

MMCFG/d in the Bootine-1 well. Seismic mapping

shows an anticline to the north west of Bootine-1.

Based on the current seismic database, this anticline

is closed to the south. The gas accumulation in

Bootine-1 also indicates that the structure is closed to

the south.

Gingin West 45 km2 3D Seismic Survey

recorded in April 2008

In April 2008, Empire recorded the Gingin West

45km2 3D Seismic Survey to detail the Gingin West

structure and a well location at a crestal position

updip from Bootine-1 to intersect all 5 sands of the

reservoir objective Cattamarra Coal Measures.

Potential recoverable reserves are estimated at 212

BCF. These calculations are based on the

interpretation that Bootine-1 was drilled at or near

the spill point of the structure. The 3D Seismic is

currently being processed and the data set will be

available to be interpreted by the Company in the

3rd Quarter. The Gingin West Structure is located

within a few kilometres of both the Parmelia

(Dongara to Pinjarra) and Dampier to Bunbury Gas

Pipeline. The Parmelia Pipeline has an existing ‘T’

piece access (from Gingin No. 1) with Compression

Station No. 5 in closer proximity.

As of August 2008, the processing of the Gingin

West 3D seismic is very encouraging. The

preliminary processed 3D seismic cube shows good

quality seismic data and structural closure at the

Cattamarra Coal Measures horizon. Migration of the

seismic will commence early September and will

better define the Gingin West structure. The

Company will have completed the interpretation in

the 4th Quarter of 2008 to progress the drilling of

the Gingin West-1 well in 2009.

Gingin Gasfield Area

Empire drilled the Gingin No. 3 well in 1998,

reaching a total depth of 4,200 metres on 24 October

1998. Subsequent seismic recorded and its

interpretation demonstrates the well was drilled

outside of the bounding fault closure. The Gingin

No. 3 well was suspended for future entry and

sidetrack. Upon success at the Gingin West No. 1

well, an attractive drilling operation being considered

is to sidetrack the Gingin No. 3 well into the

Cattamarra Coal Measure gas sands to the east of the

bounding fault containing both the Gingin No. 1 and

Gingin No. 2 gas discovery wells. The potential

recoverable gas reserves in the Gingin Gasfield area

are estimated to be 200 BCF.

Recording Gingin West 3D Seismic Survey, EP 389, overlooking coastal plain to the Indian Ocean in the

background

EMPIRE

30


YEAL OIL PROSPECT

The Eclipse-1 well which the Company drilled in

2003 had live oil shows in thin sands in the

Cattamarra Coal Measures. These thin sands are

most likely encased in shales and may not be

laterally extensive, and any oil accumulations are

interpreted to be stratigraphically trapped. The

shales and coals in the Cattamarra Coal Measures are

proven source rocks with oil and gas generating

potential. At the Eclipse location, these source rocks

are in the oil generating window and the Eclipse

structure is now interpreted to have originally been

filled with oil. However, in the deep Dandaragan

Trough to the east, the source rocks are in the gas

generating window. It is interpreted that a later pulse

of gas generation has filled the Eclipse structure with

gas and displaced the oil updip and to the west.

Only the thick, regionally extensive sands were

displaced with gas while the thin, discontinuous

sands remained filled with oil.

Later structural movements created new faults on the

crest of the Eclipse structure allowing the gas to

escape but some of the stratigraphically trapped oil

accumulations remained unbreached where they are

faulted against shales. Despite the disappointing

results at Eclipse-1, this interpretation has significant

implications for the Yeal Prospect to the west of

Eclipse-1. If the original oil accumulation in Eclipse

was displaced to the west, then the Yeal Prospect,

being updip and to the west of Eclipse, could be full

of oil. This interpretation is supported by oil

recoveries from Cataby-1 in the Company’s Permit

EP 432 to the north where the Company has

completed the recording of a 45 km2 3D

Seismic Survey.

The oil in Cataby-1 is also interpreted to have been

displaced westwards and updip from the Walyering

Gasfield into traps within the Mullering Anticline,

the subject of the 3D Survey. This has opened up a

new oil trend in the Basin extending north westerly

some 150 kms, starting from the Company’s southern

EP 389 Permit to the Yeal Oil Prospect and then to

the Company’s EP 432 Permit with the Cataby

oil prospects.

Gingin 3 - Potential to sidetrack toward the

foreground of the photograph across the

bounding fault into gas sands defined by the

Gingin-1 and Gingin-2 discovery gas wells.

31

OIL & GAS NL


As the Company evaluates the Yeal-Cataby Oil Trend

it is further supported by the fact that there were also

oil shows in similar sands in the Gingin No.1 and

Bootine No.1 wells providing further evidence of a

westward migration of oil in this part of the Perth

Basin, enhancing the prospectivity for oil in EP 440..

The Company just completed the Gingin West 3D

Seismic Survey and plans drilling the Gingin West-1

well. An additional seismic survey is planned over the

Yeal structure prior to drilling it. In addition, Empire’s

farmin agreement with ERM Gas Pty Ltd will fund

the reprocessing of the existing seismic with the right

for ERM Gas to earn further equity by recording new

seismic to progress leads and prospects along this

Yeal-Cataby Oil Trend within EP 440 exploring this

new trend.

The Yeal structure within EP 389 if full to the

currently mapped spill point, is calculated to have


The Yeal Oil Prospect has the potential to have

entrapped up to 25 million barrels of oil.

PERTH

L ANCELIN

EP 389

DA

ND

AR

RA

GA

NT

RO

UG

H

5 0 k m

DA

RL

ING

FA

UL

T

G INGIN-1

GINGIN-2

EP 430

EP 432

BULLSBROOK-1

ECLIPSE-1

P E R T H B A S I N

WALYERING GASFIELD

EP 440

BOOTINE-1GINGIN-3

EP 389?

gingin brook prospect(calculated volume of potential gas in place of 633 bcf )

eclipse west gas prospect(potential recoverable gas reserves of 266 bcf )

yeal OIL prospect(potential recoverable oil reserves up to 25 million barrels )

gingin gasfield area(potential recoverable gas reserves of 200 bcf )gingin-3 sidetrack

gingin west GAS prospectrecorded 3D seismic 2008(potential recoverable gas reserves of 212 bcf )

gingin gasfield likely to extend southward

gingin south lead

EP 389

dampier to bunbury natural gas pipeline

parmelia natural gas pipeline

pinjar gas power station

GASField

ep 389 onshore Perth Basin

planned gingin west-1 well

the gingin gasfield,

prospects and leads

mugumber lead

prospect and lead

EMPIRE

32

Other Prospects and Leads

There are a number of exciting prospects and leads

within the EP 389 Permit which require additional

seismic to delineate well locations prior to drilling.

Some of these prospects are potentially quite large.

Gingin Brook has the potential to have a volume of

gas in place of 633 BCF. Eclipse West has potential

recoverable gas reserves calculated at 226 BCF.

Markets

The Gingin Gasfield wells of Gingin No. 1 and

Gingin No. 2 have flowed naturally at economic rates

in the 1960’s. An assessment of the reservoir quality

of all the wells drilled in the EP389 Permit has

demonstrated that these reservoir rocks have

sufficient quality to not require any further

stimulation to flow at sustained and economic flow

rates utilising good drilling practices suitable for

these reservoirs.

The proximity of the Gingin West Gas Prospect and

the Gingin Gasfield area to pipeline infrastructure in

a deregulated gas market place provides the market

place with a diversity of supply from North West

Shelf gas upon new gas discoveries and their

development in the EP 389 Permit.

PERTH

LANCEL IN

DA

ND

AR

RA

GA

NT

RO

UG

H

5 0 k m

DA

RL

ING

FA

UL

T

GINGIN- 1

GINGIN- 2

EP 430

BULLSBR OOK-1

ECLIPSE-1

P E R T H B A S I N

L

GINGIN GASFIELD

BOOTINE-1

EP 432

EP 454

EP 440

EP 389

WA YERING GAS FIELD

PERT

gingin brook prospect

eclipse west

yeal OIL prospect

gingin west GAS prospect

EP 389

cataby prospects

cataby - 1

yeal - cataby oil trend

epic gas pipeline

parmelia gas pipeline

MULLERING /CATABYANTICLINORIUM

EP 389 together with empire’s

north perth basin permit areas,

WESTERN AUSTRALIA and

the yeal-cataby trend

EP 389 oil and gas migration

Top cattamarra 2500m potential oil reserves

25 million barrels

ECLIPSEWEST

ECLIPSE

YEAL

LATE FAULTING

GAS ESCAPES

OIL GENERATION GAS GENERATION

W E

Proposed Yeal-1

STABLE BLOCK FAULTED DANDARAGAN TROUGH

Oil displacedmigrates updipto west

Eclipse-1


33

OIL & GAS NL

The economics of developing and selling gas has

increased during the year with substantially higher

natural gas prices being entered into between

producers and consumers in Western Australia. There

is an increasing demand for natural gas in Western

Australia’s deregulated market where producers of gas

can negotiate gas sales pricing directly with

consumers. The onshore Perth Basin offers the gas

market a diversity of supply from North West Shelf

gas. This has been highlighted recently with the

interruption of gas supply into the Dampier to

Bunbury Natural Gas Pipeline which has resulted in a

shortage of gas supply in the marketplace.

EP 416

PERTH BASIN

WESTERN AUSTRALIA

Empire Oil Company (WA) Limited - 75%Allied Oil & Gas Plc - 20%ERM Gas Pty Ltd - 5%

WELLESLEY

Empire, as Operator, completed recording

approximately 50km 2D Wellesley Seismic Survey on

4 April 2008 with Terrex Seismic Crew 401. The

seismic data recorded is of good quality with

processing to final seismic sections by a specialist

seismic processing company near complete.

Interpretation of this data set over the Wellesley

Anticlinal Prospect is to be undertaken in the 3rd

Quarter. The reservoir objective Permian aged Sue

Coal Measures at Wellesley have the dimensions to

potentially trap 150 billion cubic feet of gas at a

depth of 3700 metres. The preliminary evaluation of

the Wellesley structure on the new seismic data set is

very encouraging.

The Wellesley Gas Prospect is located adjacent the

City and Port of Bunbury and encroaches into the

industrial area of Kemerton. Gas demand in the

industrial satellites of the south west of Western

Recording the Wellesley 2D Seismic Survey in EP 416 along a firebreak adjacent State Forest

with Terrex Seismic Crew 401

EMPIRE


34

Australia has seen prices firm substantially. The

Bunbury-Kemerton industrial area is energy

dependent with a demand for a diversity of

gas supply.

Processing of the seismic data is well advanced.

Preliminary data shows good rollover at the top

Permian without crestal faulting and with strong

structural ground. This is very encouraging.

Interpretation will commence late August to progress

the drilling of the Wellesley-1 well in 2009.

EP 440

ONSHORE PERTH BASIN

WESTERN AUSTRALIA

Empire Oil Company (WA) Limited - 87.5%ERM Gas Pty Ltd - 12.5%

EP 440 adjoins EP 432 to the north with the Cataby

Mullering prospects and EP 389 with the Yeal Oil

Prospect to the south. The trend through EP 440 has

been called the Cataby to Yeal Oil Trend.

The main play in EP 440 is the Jurassic Cattamarra

Coal Measures along the Cataby to Yeal Oil Trend.

The Eclipse-1 well drilled during 2003 by Empire in

EP 389 encountered live and residual oil shows in

thin sands in the Cattamarra Coal Measures. The

Cataby-1 well drilled in EP 432 in 1992 tested oil at

30 BOPD from a thin sand in the Cattamarra Coal

Measures. Similar oil shows are also seen in Gingin-1

and Gingin-2 and in the Walyering wells which

emphasise the potential of gas displacing oil

westward into structures along the Cataby to Yeal Oil

Trend within EP 440.

The Company has entered into a Farmin Agreement

with ERM Gas Pty Ltd as part of the Empire Perth

Basin Wide Farmout with ERM Gas, where ERM Gas

will contribute 100% of the costs of reprocessing and

interpreting the existing seismic data set to earn a

12.5% interest in EP 440. ERM Gas has the option to

increase its interest in EP440 to 50% by contributing

100% of the cost of the approvals and preparing and

acquiring 2D Seismic.

During the Quarter, the Company is near to

completing the reprocessing of the existing seismic

data set. In the 3rd Quarter interpretation of this

seismic will be undertaken to delineate prospects

and leads.

wellesley

11 Km2 4 Way dip closure

potential recoverable reserves

150bcf

ep 416 wellesley prospect top permian sue coal

measures two way time structure


35

OIL & GAS NL

EP 454

PERTH BASIN

WESTERN AUSTRALIA

Empire Oil Company (WA) Limited - 87.5%ERM Gas Pty Ltd - 12.5%







increase its interest in EP 454 to 50% by contributing



The Company has commenced the process of

reprocessing and reinterpreting the existing seismic

data set. The results of this technical work will decide

where the acquisition of new seismic over mapped

leads will mature them to drillable status.

The permit is located on the northern part of the

Dandaragan Trough in the North Perth Basin,

Onshore Western Australia.

The leads are Jurassic rollovers, similar in style to the

Mount Horner in the North Perth Basin. Structures

within the new permit area will have potential

reserves of up to 5 million barrels in the separate sand

intervals such as the ‘F’, ‘J’ and ‘L’ sands of the

Cattamarra Coal Measures.

The new permit extends this Mount Horner style play

with similar objectives further south.

EP 430

PERTH BASIN

WESTERN AUSTRALIA

Empire Oil Company (WA) Limited - 87.5% (Operator)ERM Gas Pty Ltd - 12.5%







increase its interest in EP 430 to 50% by contributing



The Company has acquired the seismic data sets to be

reprocessed and interpreted.

The permit was applied for to explore the fault

terraces adjacent the Darling Fault. In the southern

part of the Permit the targets are Jurassic in age along

the Darling Terrace Trend. The target along this trend

is for shallow oil trapped below the base of the Late

Jurassic, Parmelia Formation which is the seal

overlying the Middle Jurassic Yarragadee Formation

sandstone reservoirs. This exploration play extends

into EP389 which hosts the Gingin West gas

prospect and the Gingin Gasfield with the Yeal oil

prospect also.

In the northern part of EP 430 the reservoir targets

are Permian in age and these are also at relatively

shallow depth. The main objective is to define

drilling targets on the Yarra Yarra Terrace. This

terrace lies between the Urella Fault and the Darling

Fault. Recent activity in the Northern Perth Basin, in

particular, the success of oil and gas discoveries in the

Permian has upgraded the potential of this area. The

Permian reservoir targets are present at depths

between 500 metres and 1500 metres. The shallow

drilling techniques utilised in Empire’s work in the

onshore Carnarvon Basin may be appropriate for

this area.

36

WOODADA

GERALDTON

KWINANA

BUSSELTON

P E R T H

B A S I N

MT HORNER

DONGARA

BEHARRASPRINGS

DA

RL

IN

GF

AU

LT

DA

ND

AR

RA

GA

NT

RO

UG

H

J INGEMIAU

RE

LL

AF

AU

LT

MONDARRA

PERTH

50km

BEHARRA SPRINGS NORTH

50

m

HOVEA

CLIFF HEAD

WALYERING

BUNBURY

EP 430

EP 454

ep 440

prospect

onshore perth basin

erm gas pty ltd

PERTH BASIN

Farm-in

Farmout in 7 permit areas

spending minimum $2.1

million

1. traditional oil & gas

farmout.

2 . coal seam gas farmout

into all 7 perth basin

permits spending $5.5

million

EP 432

mullering cataby

oil prospects


april 2008

drill one well 2009

erm gas farmin is 12 .5%

and has option

to contribute

TO drilling one well 2009

EP 389

gingin west prospect


may 2008

drill one well 2009


and has option

to contribute to

drilling one well 2009

EP 430, 440

and 454 :

seismic

reprocessing


and HAS option to

acquire new

2D seismic

EP 416

wellesley gas prospect


april 2008

drill one well 2009

erm gas farmin is 5%

and has option

to contribute to

drilling one well 2009

EP 426

erm gas farmin 25%

EMPIRE

37


OIL & GAS NL

EMPIRE OIL & GAS NL’S BASIN-WIDE

FARMOUT OF ALL OF ITS ONSHORE

PERTH BASIN EXPLORATION PERMITS

TO ERM GAS PTY LTD

On 27 November 2007, Empire Oil & Gas NL

announced that, on 21 November 2007, its wholly-

owned subsidiary, Empire Oil Company (WA)

Limited had executed a basin-wide farmout of all its

exploration permits in the onshore Perth Basin with

ERM Gas Pty Ltd. ERM Gas Pty Ltd (‘ERMG’) is a

wholly-owned subsidiary of Australia’s leading gas-

fired power generation developer, ERM Power.

ERMG will earn varying interests in exploration

permits EP 389, EP 416, EP 426, EP 430, EP 432,

EP 440 and EP 454, all in the onshore Perth Basin, by

contributing to the exploration programme

described below.

During the year ERMG contributed 33-1/3% of the

costs of drilling the Moriary-1 exploration well and

has earned a 25% interest in EP 426.

ERMG has contributed 32.0% of the costs of

acquiring the Gingin West 3D Seismic Survey and

has earned a 12.5% interest in EP 389. ERMG has the

option to increase its interest in EP 389 to 30.0% by

contributing 32.0% of the cost of drilling the Gingin

West-1 exploration well.

ERMG contributed 30.0% of the costs of acquiring

the Mullering 3D Seismic Survey and has earned a

12.5% interest in EP 432. ERMG has the option to

increase its interest in EP 432 to 25.0% by

contributing 30.0% of the cost of drilling one

exploration well in EP 432.

ERMG paid to Empire the sum of $70,000 and has

earned a 5.0% interest in EP 416.

ERMG has commenced its contribution to 100% of

the costs of reprocessing and interpreting the existing

seismic data in exploration permits EP 430, EP 440

and EP 454 to earn a 12.5% interest in each of these

permits. ERMG will have the option to increase their

interests in EP 430, EP 440 and EP 454 to 50% by

contributing 100% of the cost of acquiring 2D

seismic surveys in each of the permits including the

approval costs for these surveys.

Under the terms of the Farmin Agreement, ERMG

made two initial payments to Empire. The first

payment of $1.05 million was made upon approval of

the AFE’s for the drilling of Moriary-1 and the

acquisition of the three seismic surveys. The second

payment of $1.05 million was made on 3 April 2008.

(The final farmin costs of these programmes will be

adjusted according to the final approval actual

programme costs).

Upon making these payments, then ERMG now has

the right to earn varying interests in the Coal Seam

Gas rights in all of the permits by contributing to a

$5.5 million exploration programme designed by

ERMG to explore for coal seam gas reserves in the

permits. The Coal Seam interest in each of the

permits will vary depending on whether existing joint

venture participants wish to contribute to the coal

seam exploration programme. In exploration permits

EP 430, EP 440 and EP 454 where Empire currently

has 100%, ERMG will earn a 75% interest in the

Coal Seam Gas Rights.

The Initial Work Programmes consisted of the

drilling of Moriary-1 in EP 426; the acquisition of the

Gingin West 3D Seismic Survey in EP 389; the

acquisition of the Mullering 3D Seismic Survey in EP

432; the reprocessing and interpretation of existing

seismic in EP 430, EP 440 and EP 454; and the

$70,000 payment in EP 416.

ERMG are progressing their technical evaluation of

the Coal Seam Gas objectives to be tested by drilling

and coring those coal seams that are considered the

most prospective to host methane gas in economic

quantities.

J L CRAIG MARSHALL

Managing Director

EMPIRE OIL & GAS NL

BSc (Hons), F.Aus. IMM, CPGeo

Empire Oil & Gas NL ABN: 55 063 613 730

38

DIRECTORS' REPORT Your Directors’ present their report on the consolidated entity consisting of Empire Oil & Gas NL and the entities it controlled at the end or during the Financial Year ended 30 June 2008. DIRECTORS The names and details of the Company’s Directors in office during the Financial Year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Names, Qualifications, Experience and Special Responsibilities Mr J L Craig Marshall BSc (Hons), F.Aus.IMM, CPGeo, M.PESA MANAGING DIRECTOR Member of the Audit Committee Mr Marshall is a petroleum geologist with over 30 years experience in the petroleum and mining industry in Australia, New Zealand, United Kingdom and SE Asia. He has been involved with the development and management of several public companies. Mr Marshall is responsible for the management of the Company’s geological, exploration and production activities, future project generation, capital raising, petroleum operations and contracts and implementation of strategies by the Board. He did not hold any directorships in other listed public companies over the past three years. Dr Bevan Warris B.Sc (Hons), Phd AAPG Certified Petroleum Geologist EXECUTIVE DIRECTOR Member of the Audit Committee Dr Warris is a petroleum geologist with over 40 years technical and managerial experience in the petroleum exploration industry both internationally and in Australia. Dr Warris has held senior positions with a number of international oil companies prior to working as an independent consultant. Dr Warris is responsible for Company’s geological and exploration activities. He did not hold any directorships in other listed public companies over the past three years. Mr Neil K Joyce B.Bus, FCA. NON-EXECUTIVE DIRECTOR AND COMPANY SECRETARY Mr Joyce is a Chartered Accountant with over 30 years experience in the corporate and business sector. Mr Joyce is a senior tax consultant in the Australian accounting firm of Stanton International, which he joined in 1985. Mr Joyce has been the Company’s Secretary since Empire Oil & Gas NL listed on the Australian Securities Exchange in January 1998. He did not hold any directorships in other listed public companies over the past three years. DIRECTORS’ INTERESTS Interests in the shares and options of the Company and related bodies corporate As at the date of this report, the interests of the Directors in the shares and options of Empire Oil & Gas NL were:

Ordinary Shares

Options over Ordinary Shares

JLC Marshall 14,283,334 36,000,000BJ Warris 30,000,000 20,000,000NK Joyce 19,231 10,000,000


39

PRINCIPAL ACTIVITIES The principal activity of the Company and the Group during the course of the Financial Year was oil and gas exploration and production. No significant change in the nature of these activities occurred during the year. DIVIDENDS No dividends were paid during the year and no recommendation is made as to dividends. OPERATING AND FINANCIAL REVIEW Review of operations A review of the operations of the Company during the Financial Year and the results of those operations are set out in the Review of Operations on pages 10 to 37 and such review forms part of the Directors’ Report. Financial review The Group began the Financial Year with a cash reserve of $1,944,135. During the year the Company raised a total of $6,058,500 by way of placements of 545,125,000 New Ordinary Shares and a total of $635,000 by way of exercise of Directors’ and Staff Options resulting in the issue of 52,500,000 New Ordinary Shares. Total capital raised as of the balance date amounted to $6,693,500 with a total of 597,625,000 New Shares issued. This capital raising includes 58,125,000 (un-allotted shares at the balance date) to the value of $1,162,500 received against the Company’s June 2008 Share Purchase Plan. A total of 161,325,000 New Shares amounting to $3,226,500 were issued and allotted on 14 July 2008 pursuant to the applications received from the Share Purchase Plan. The Company has also made two other Placements since the balance date, issuing and allotting 25,000,000 New Shares raising $500,000 in July 2008 and 85,000,000 New Shares raising $1,147,500 in August 2008. Funds have and are being used for the Group’s exploration programmes and working capital. During the year total exploration expenditure incurred by the Group amounted to $3,465,970. In line with the Group’s accounting policies, where an area of interest is abandoned or the Directors decide that it is not commercial or where the accumulated exploration expenditure is deemed not recoverable in the future, any accumulated costs in respect of that area are written off in the financial period and the decision is made, resulting in a write off of $1,592,207 during the year. Total expenditure incurred amounted to $4,334,128. This has resulted in an operating loss after income tax for the year ended 30 June 2008 of $3,854,602 (2007 - $2,848,617) As of 30 June 2008 surplus cash available totalled $4,225,909 and as of 10 September 2008 the available cash totalled $7,646,576 Operating Results for the Year Summarised operating results are as follows:

2008 Revenue ResultsConsolidated Entity Revenue and losses from Ordinary activities before income tax expense

479,526 (3854,602)

RISK MANAGEMENT The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with the risks and opportunities identified by the Board.

The Company believes that it is crucial for all Board Members to be a part of this process, and as such the Board has not established a separate risk management committee.

The Board has a number of mechanisms in place to ensure that the management's objectives and activities are aligned with the risks identified by the Board. These include the following:

• Board approval of a strategic plan, which encompasses strategy statements, is designed to meet


40

stakeholder’s needs and manage business risk.

• Implementation of Board approved operating plans and budgets and the Board’s monitoring of progress against these budgets.

STATE OF AFFAIRS AND LIKELY DEVELOPMENTS The Directors advise that the Company and the Group is engaged in high risk exploration activities, the nature of which is such that the Company’s financial position is susceptible to sudden and unforeseen changes due to the unpredictable risk factors inherent in such activities. Whilst all statements made herein are currently true and correct to the best of the Directors’ knowledge and belief, shareholders must have regard to the Company’s and the Group’s continuing petroleum exploration activities with their inherently unpredictable risk and possible consequential affects upon the Company’s and the Group’s financial position. The Directors believe on reasonable grounds, that to include in this report particular information regarding likely developments in the Company’s operations and the expected results of those operations in financial years after the Financial Year would be likely to result in unreasonable prejudice to the Company. Accordingly, this information has not been included in this Report. Significant changes during the Year and to the date of this Report are outlined elsewhere in this Report and the Financial Statements. SIGNIFICANT EVENTS AFTER THE BALANCE DATE No matters or circumstances, besides those disclosed at note 20, have arisen since the end of the Financial Year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. ENVIRONMENTAL ISSUES AND REGULATIONS The Company is subject to significant environmental regulations under both Commonwealth and State legislation in relation to its oil & gas exploration and production activities. The Company actively monitors compliance with environmental regulations. The Directors are not aware of any material breaches during the period. The Company has formulated a Corporate Environmental Policy in compliance with the State and Commonwealth Acts to assist regarding all of its petroleum operations. SHARES

Fully Paid Ordinary Shares issued during the Year total 539,500,000 as follows Number August 2007 – Exercise of Options by the Directors 43,500,000 August 2007 Placement 287,000,000 February 2008 Placement 100,000,000 April 2008 Placement 100,000,000

June 2008 – Director and Employee’s Exercise of Options 9,000,000

Total 539,500,000 As at the balance date the Company was in receipt of applications for 58,125,000 new fully paid ordinary shares and subscription funds of $1,162,500.


41

SHARE OPTIONS 75,000,000 New Options over ordinary shares were issued during the Year. As of the date of this Report there are unissued ordinary shares in respect of which options are outstanding.

Date Number of Options

Balance at the beginning of the Year 65,000,000 Movement during the Year Exercise of Options by Directors August 2007 (43,500,000) Issue of New Options to Directors / Employees and Consultants

November 2007

75,000,000

Exercise of Options by Directors and Consultants June 2008 (9,000,000) Total number of Options outstanding at the date of this Report 87,500,000

The balance is comprised as follows:

Expiry Price Exercise Price

Number of Options

28 November 2010 1 Cent 2,000,000 28 November 2010 1.5 Cents 10,500,000 28 November 2010 2.5 Cents 37,500,000 28 November 2010 3 Cents 37,500,000 Total 87,500,000

The holders of such options do not have the right, by virtue of the option, to participate in any share issued. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the financial year, the Company has paid premiums insuring all the Directors of Empire Oil & Gas NL against costs incurred in defending proceedings for conduct involving:

(a) a wilful breach of duty; or (b) a contravention of sections 182 or 183 of the Corporations Act 2001 as permitted by section 199B of the Corporations Act 2001

The Company paid a total of $14,818in insurance premiums for the Directors as follows: The total amount of indemnity insurance contract premiums paid during the year $13,243Personal accident cover for the Executive Directors $1,575Total $14,818 REMUNERATION REPORT (Section A to D – Audited) The remuneration report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration B. Details of remuneration C. Service agreements D. Share-based compensation E. Additional information A. Principles used to determine the nature and amount of remuneration Remuneration Policy The remuneration policy of Empire Oil & Gas NL has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific


42

long-term incentives based on key performance areas affecting the Company’s consolidated financial results. The Board of Empire Oil & Gas NL believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Group. The Board’s policy for determining the nature and amount of remuneration for Board Members and senior executives of the Group is as follows: The remuneration policy, setting the terms and conditions for the Executive Directors and other senior executives, was developed by the Board. All executives receive base remuneration (which is based on factors such as length of service and experience) and superannuation. The Board reviews executive remuneration annually by reference to the consolidated entity’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives are also entitled to participate in the employee share and option arrangements. All remuneration paid to directors and executives is valued at the cost to the Company and expensed. Options are valued using either the Black-Scholes or Binomial methodologies. The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting (currently $150,000). Fees for non-executive directors are not linked to the performance of the Consolidated Entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the employee option plan. Remuneration Policy of Key Management Personnel The objective of The Company’s executive reward framework is set to attract and retain the most qualified and experienced directors and senior executives. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

• Competitiveness

• Acceptability to shareholders

• Capital Management The Company has taken advantage of the relief provided by Corporations Regulation 2M 6.04 and has transferred the detailed remuneration disclosures required under AASB 124 – Related Party Disclosure to the Directors’ Report. Non Executive Directors The constitution of the Company provides that the non-executive directors may collectively be paid remuneration for their services a fixed sum not exceeding the aggregate maximum sum per annum from time to time determined by the Company in general meeting (currently $150,000). The Chairman’s fees are determined independently to the fees of non-executive directors based on comparative roles in the external market. The remuneration policy has been tailored to increase goal congruence between shareholders and directors. Currently, this is facilitated through the issue of free options to Directors to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. At commencement of petroleum production, performance based bonuses based on key performance indicators are expected to be introduced.


43

Directors Fees A director may be paid fees or other amounts as the Directors determine where a director performs special duties or otherwise performs service outside the scope of the ordinary duties of a director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties. Retirement Benefits Other retirement benefits may be provided directly by the Company if approved by Shareholders. Company Performance, Shareholder Wealth and Directors' and Executives' Remuneration The remuneration policy has been tailored to increase goal congruence between Shareholders and Directors and Executives. Currently, this is facilitated through the issue of options to the majority of Directors and Executives to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. For details of Directors and Executives interests in options at year end, refer note 23(d) of the Financial Statements. B. Details of remuneration Details of the remuneration of the Directors and the Key Management Personnel, as defined in AASB 124 Related Party Disclosure, of Empire Oil & Gas NL are set out in the following table. The following persons were key management personnel of the Group during the Financial Year: J L C Marshall Managing Director B J Warris Executive Director N K Joyce Non-Executive Director and Company Secretary Given the size and nature of operations of Empire Oil & Gas NL and the Group, there are no other employees who are required to have their remuneration disclosed in accordance with the Corporations Act 2001.


44

Compensation of Key Management Personnel Including Related Party Payments for the Year Ended 30 June 2008

Short Term Post Employment Share Based Payments

Related Party

Basic Salary

Consultants/

Directors Fees

Motor

Vehicle

Non

Monetary

Superannuation

Retirement

Benefits

Options (% of

Remuneration)

Furniture leasing

(i)

Accounting & Taxation

services (ii)

Total

$ $ $ $ $ $ $ $ $ $ JLC Marshall 2008 2007

57,285

70,272

200,000

190,000

14,400

14,400

5,446

10,240

5,678

6,636

- -

367,650

(56.10%) -

4,792

9,584

- -

655,251 301,132

BJ Warris 2008 2007

- -

153,500

174,374

- -

5,447

10,241

- -

- -

245,100

(60.66%) -

- -

- -

404,047 184,615

NK Joyce 2008 2007

- -

57,000

57,000

- -

5,447

10,241

-

-

- -

122,550

(26.78%) -

- -

272,528

257,964

457,527 325,205

Total 2008 2007

57,285

70,272

410,500

421,374

14,400

14,400

16,340

30,722

5,678

6,636

- -

735,300 (48.48%)

-

4,792

9,584

272,528

257,964

1,516,823 810,952

(i) Amount paid to Munro Mining, a company controlled by JL Craig Marshall for furniture leasing. The leasing contract ceased effective 31 December 20007. (ii) Amount paid to Stanton International, an Accounting Firm in which NK Joyce is a Senior Consultant for Accounting and Taxation services.


45

Compensation of Key Management Personnel by category Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ Short term 498,525 536,768 61,415 67,241 Post Employment 5,678 6636 - - Other long term - - - - Termination benefits - - - - Share-based payment 735,300 - 735,300 - Related Party Payments 277,320 267,548 - - Total 1,516,823 810,952 796,715 67,241

C. Service Agreements The details of Service Agreements of the key management personnel of Empire Oil & Gas NL and the Group are as follows: J L C Marshall – Managing Director

Term of agreement - 3 years commencing 28 September 2006. This agreement was renewed on the 28 September 2006 for a period of 3 years to 28 September 2009.

Base salary as Managing Director of $55,620 to 30 September 2007 and increased to $57,840 effective 1 October 2007 being the CPI increase pursuant to Mr Marshall’s employment contract. Total paid during the Year amounts to $57,285.

Travel allowance in lieu of Company Car $14,400.

Consultancy fees rates increased effective 1 January 2008 from $95 per hour to $105 per hour to a maximum of $210,000 per annum. Total paid during the Year amounts to $200,000.

Superannuation being 10% of the base salary to be paid to the nominated Superannuation fund.

Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes any accrued long service leave and annual entitlements, superannuation, retiring allowance, superannuation gratuity to the value of which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001. Payment of termination benefit on early termination by the Company, other than for gross misconduct, equal to the fee for the remaining term of the agreement.

Dr B J Warris – Executive Director

Term of agreement - 4 years commencing 7 November 2004 to 7 November 2008.

Consulting fee to a minimum of $150,000 per annum based on a retainer fee of $12,500 per month payable for 100 hours of work per month and $125 per hour payable for any work done in excess of 100 hours per month. Total paid during the Year amounts to $153,500.

N K Joyce – Non-Executive Director / Company Secretary

Term of agreement – No formal agreement

Directors fees $15,000 per annum and a fixed annual fee of $42,000 for the provision of consulting and company secretarial services.Total paid during the Year amounts to $57,000.


46

D. Share-based compensation (audited) Options are issued to Directors and Executives as part of their remuneration. The Options are not issued based on performance criteria, but are issued to the majority of Directors and Executives of Empire & Oil Gas NL to increase goal congruence between Directors, Executives and Shareholders.

During the Year 60,000,000 options were issued to the following Directors

Key Management

Personnel

Number granted

Tranche Grant / Vested

date

Expiry date Exercise price

($)

Fair value at grant date ($)

JLC Marshall 15,000,000 A 30 Nov 2007 28 Nov 2010 0.025 187,500 JLC Marshall 15,000,000 B 30 Nov 2007 28 Nov 2010 0.030 180,150 BJ Warris 10,000,000 A 30 Nov 2007 28 Nov 2010 0.025 125,000 BJ Warris 10,000,000 B 30 Nov 2007 28 Nov 2010 0.030 120,100 NK Joyce 5,000,000 A 30 Nov 2007 28 Nov 2010 0.025 62,500 NK Joyce 5,000,000 B 30 Nov 2007 28 Nov 2010 0.030 60,050

The options were valued using a Black and Scholes model with the following inputs:

Tranche A

Tranche B

Grant date share price ($) 0.018 0.018 Exercise price ($) 0.0250 0.030 Expected volatility 124.00% 124.00% Option life (years) 3.00 3.00 Dividend paid Nil Nil Risk free interest free 6% 6% Fair Value $0.0125 $0.012

The Company also issued 15,000,000 options to various employees and consultants (Grant date 12 December 2007) during the Year to 30 June 2008 on the same terms and conditions disclosed above (7,500,000 Options under Tranche A and 7,500,000 Options under Tranche B) The number of Options issued as share based payments during the period totals 75,000,000.

Value of Options Issued to Directors’ during the Year

Options Granted

Options Exercised

Options Lapsed

Total Value of Options Granted, Exercised and Lapsed

Value of Options Included in remuneration for the Year

Percentage of total remuneration for the Year that Consist of Options

Key Management Personnel

Value at Grant Date

Value at Exercise Date

Value at Time of Lapse

$ $ $ $ $ % JLC Marshall 367,650 107,048 - 474,548 367,650 56.10 BJ Warris 245,600 72,987 - 318,587 245,100 60.66 NK Joyce 122,550 63,256 - 185,806 122,550 26.78

E Additional Information – Unaudited Performance Income as a proportion of total compensation No performance based remuneration has been paid to key management personnel during the financial year.


48

CORPORATE GOVERNANCE STATEMENT This statement outlines the main Corporate Governance practices that were in place throughout the Financial Year, unless otherwise stated. BOARD OF DIRECTORS AND ITS COMMITTEES The Board is responsible for the overall corporate governance of the Consolidated Entity including its strategic direction, establishing goals for management and monitoring the achievement of those goals. It has established one Board Committee to assist in the execution of its responsibilities being the Audit Committee. The Board has also established a framework for the management of the Consolidated Entity including a series of internal controls, a business risk management process and the establishment of appropriate ethical standards. The Board sets the remuneration packages and policies applicable to the Managing Director, senior executives and Directors themselves. The Directors also accept responsibility for setting performance criteria, measurement of performance against this criteria, share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies. Remuneration levels are competitively set to attract the most qualified and experienced directors and senior executives. The Board obtains independent advice on the appropriateness of remuneration packages. Details of Directors’ remuneration, superannuation and retirement payments are set out in Remuneration Report under Director’s Report on pages 41 to 46 and in Note 23 to the financial statements. The Company’s Constitution provides that the number of directors shall not be less than three and not more than ten. There is no requirement for any share holding qualification. As and if the Company’s activities increase in size, nature and scope, the size of the Board will be reviewed periodically and the optimum number of directors required to supervise adequately the Company’s Constitution determined within the limitations imposed by the Constitution and as circumstances demand. The membership of the Board, its activities and composition, is subject to periodic review. The criteria for determining the identification and appointment of a suitable candidate for the Board shall include quality of the individual, background of experience and achievement, compatibility with other Board members, credibility within the Company’s scope of activities, intellectual ability to contribute to Board’s duties and physical ability to undertake the Board’s duties and responsibilities. Directors are initially appointed by the Board subject to election by Shareholders at the next general meeting. Under the Company’s Constitution the tenure of a director (other than Managing Director, and only one managing director where the position is jointly held) is subject to reappointment by Shareholders not later than the third anniversary following his or her last appointment. Subject to the requirements of the Corporations Act, the Board does not subscribe to the principle of retirement age and there is no maximum period of service as a director. A managing director may be appointed for any period and on any terms the directors think fit and, subject to the terms of any agreement entered into, may revoke any appointment. APPOINTMENT TO OTHER BOARDS Directors are required to take into consideration any potential conflicts of interest when accepting appointments to other Boards. INDEPENDENT PROFESSIONAL ADVICE The Board has determined that individual directors have the right in connection with their duties and responsibilities as Directors, to seek independent professional advice at the Company’s expense. With the exception of expenses for legal advice in relation to Director’s rights and duties, the engagement of an outside adviser is subject to prior approval of the Chairman and this will not be withheld unreasonably. PERFORMANCE EVALUATION The Chairman reviews the performance of all Directors each year. Directors whose performance is unsatisfactory are asked to retire.


49

CONTINUOUS REVIEW OF CORPORATE GOVERANCE Directors consider, on an ongoing basis, how management information is presented to them and whether such information is sufficient to enable them to discharge their duties as Directors of the Company. Such information must be sufficient to enable the Directors to determine appropriate operating and financial strategies from time to time in light of changing circumstances and economic conditions. The Directors recognise that oil and gas exploration is an inherently risky business and that operational strategies adopted should, notwithstanding, be directed towards improving or maintaining the net worth of the Company. AUDIT COMMITTEE The role of the Committee (established in January 1998) is to advise on the establishment and maintenance of a series of internal controls and appropriate ethical standards for the management of the Consolidated Entity. It also gives the Board of Directors additional assurance regarding the quality and reliability of financial information prepared for use by the Board in determining policies or for inclusion in financial statements. The responsibilities of the Audit Committee include: Reviewing external audit reports to ensure that where major deficiencies or breakdowns in controls or procedures have been identified appropriate and prompt remedial action is taken by management; Liaising with the external auditors and ensuring that the annual and half-year statutory audits are conducted in an effective manner; Reviewing internal controls and recommending enhancements, and monitoring compliance with the Corporations Act, the Australian Securities Exchange Listing Rules and any matters outstanding with the Auditors, the Australian Taxation Office, the Australian Securities and Investment Commission, the Australian Securities Exchange and financial institutions. The Audit Committee reviews the performance of the external auditors on an annual basis and meets with them during the Year as follows: AUDIT PLANNING To discuss the external audit plan; To discuss any significant problems that may be foreseen; and To discuss the impact of any proposed changes in accounting policies adopted by the Consolidated Entity during the Year; To review the pro-forma half-year and pro-forma preliminary financial statements prior to lodgement of those documents with the ASX and any significant adjustments required as a result of the audit; and To make the necessary recommendation to the Board for the approval of these documents. HALF-YEAR AND ANNUAL REPORTING To review the results and findings of the audit review, the adequacy of financial and operating controls, and to monitor the implementation of any recommendations made; and To review the draft financial statements and the audit report to make the necessary recommendation to the Board for the approval of the Financial Statements. AS REQUIRED To organise, review and report on any special reviews or investigations deemed necessary by the Board. ETHICAL STANDARDS The Consolidated Entity has a Code of Conduct Statement which sets out the standards in accordance with which each Director, Manager and Employee of the Consolidated Entity is expected to act. The requirement to comply with these ethical standards is communicated to all employees. The Statement deals with the following areas: Professional conduct Dealing with suppliers;


50

Dealing with advisers and regulators; Dealing with competitors; Dealing with the community; and Dealing with other employees. All Directors, Managers and Employees are expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the Consolidated Entity. ENVIRONMENTAL CULTURAL AND HERITAGE The Consolidated Entity aims to ensure that the highest standard of respect and care is achieved in regard to environment and cultural and heritage issues where any of its activities may impact on same. OCCUPATIONAL HEALTH AND SAFETY The Consolidated Entity aims to ensure that it maintains a healthy and safe work environment for its employees and visitors to any land or premises under its control. SHAREHOLDER RELATIONS AND PARTICIPATION The Board of Directors aims to ensure that Shareholders are informed of all major developments affecting the Consolidated Entity’s state of affairs. Information is communicated to shareholders as follows: The Annual Report is made available to all Shareholders (unless a shareholder has specifically requested not to receive the document). The Board ensures that the Annual Report includes relevant information about the operations of the Consolidated Entity during the Year, changes in the state of affairs of the Consolidated Entity and details of future developments, in addition to the other disclosures required by the Corporations Act; The Quarterly Reports contain summarised financial information statements prepared in accordance with the requirements of Accounting Standards and the Corporations Act and are lodged with the Australian Securities and Investment Commission and Australian Securities Exchange. The Financial Statements are sent to any Shareholder who requests them, and proposed major changes in the Consolidated Entity which may impact on share ownership rights are submitted to a vote of Shareholders. The Board encourages full participation of Shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Consolidated Entity’s strategy and goals. Important issues are presented to the Shareholders as single resolutions. ASX CORE PRINCIPLES OF CORPORATE GOVERNANCE AND ASX GUIDELINES The Australian Securities Exchange (“ASX”) has published 10 core principles of Corporate Governance which it believes underline good Corporate Governance together with guidelines to satisfy those core principles. Under ASX listing rules, listed companies are required to provide a statement in their annual reports outlining the extent to which they have followed these best practice guidelines. In the following table the ASX core principles and guidelines are listed in the left hand column and the Company’s comment/response is listed in the right hand column. ASX Principle Status Reference/comment Principle 1: Lay solid foundations for management and

oversight

1.1 Formalise and disclose the functions reserved to the Board and those delegated to management

Comply Corporate Governance Statement 1.1 and 1.2

Principle 2: Structure the Board to add value 2.1 A majority of Board members should be

Independent Directors Do not Comply

1 of 3 current board members is independent. The Companies present size does not warrant the expense of further independent directors.

2.2 The chairperson should be an independent director Comply The Independent Director chairs the board meetings.

2.3 The roles of chairperson and chief executive officer should not be exercised by the same

Comply


51

individual 2.4 The Board should establish a nomination

committee Do not comply

The Company does not have a formal nomination committee, however the whole Board meet to consider additional appointments to the Board.

2.5 Provide the information indicated in Guide to reporting on Principle 2

Comply (in part)

The skills and experience of the directors are set in the Company’s Annual Report and on its Website.

Principle 3: Promote ethical and responsible decision-

making

3.1 Establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to: 3.1.1 the practices necessary to maintain

confidence in The Company’s integrity 3.1.2 the responsibility and accountability of

individuals for reporting or investigating reports of unethical practices

Comply

Code of Conduct

3.2 Disclose the policy concerning trading in company securities by directors, officers and employees

Comply Share Trading Policy

3.3 Provide the information indicated in Guide to Reporting on Principal 3

Comply Corporate Governance Statement

Principle 4: Safeguard integrity in financial reporting 4.1 Require the chief executive officer (or equivalent)

and the chief financial officer (or equivalent) to state in writing to the Board that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards

Comply Corporate Governance Statement Section 8.

4.2 The Board should establish an audit committee Comply Corporate Governance Statement Section 7.

4.3 Structure the audit committee so that it consists of: • Only non-executive directors • A majority of independent directors • An independent chairperson who is not the chairperson of

the Board • At least three members

Do not Comply Comply Do not Comply

50% are non-executive and independent directors. Empire has only 3 Directors, 2 executive and 1 non-executives due to economic constraints. One of the Director is a full time Geologist and therefore is not a Committee member. If the Company makes a significant hydrocarbon discovery it will review its Board and Audit Committee structure. Only 2 members

4.4 The audit committee should have a formal charter Comply Audit Committee Charter 4.5 Provide the information indicated in Guide to

reporting on Principle 4 Comply Corporate Governance Statement section

8 Principle 5: Make timely and balanced disclosure 5.1 Establish written policies and procedures designed

to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance


5.2 Provide the information indicated in Guide to Reporting on Principle 5



52

Principle 6: Respect the rights of shareholders 6.1 Design and disclose a communications strategy to

promote effective communication with shareholders and encourage effective participation at general meetings


6.2 Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the audit and the preparation and content of the auditor’s report

Comply Corporate Governance Statement section 7

Principle 7: Recognise and manage risk 7.1 The Board or appropriate board committee should

establish policies on risk oversight and management

Comply Risk management policy statement

7.2 The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the Board in writing that: 7.2.1 the statement given in accordance with

best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the polices adopted by the Board

7.2.2 The Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects


7.3 Provide information indicated in Guide to Reporting on Principle 7

Do not comply

The Company considers that the Managing Director monitors risk on a daily basis as he is actively involved in the day to day management of the Company.

Principle 8: Encourage enhanced Performance 8.1 Disclose the process for performance evaluation of

the Board, its committees and individual directors, and key executives


Principle 9: Remunerate fairly and responsibly 9.1 Provide disclosure in relation to the Company’s

remuneration policies and benefits to these policies and the link between remuneration paid to directors and key executives and corporate performance.


9.2 The Board should establish a remuneration committee

Do not Comply

The Company does not have a formal remuneration committee, however the whole Board meets to discuss remuneration issues.

9.3 Clearly distinguish the structure of non-executive directors remuneration from that of executives

Comply Corporate Governance Statement section 6

9.4 Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by shareholders

Comply Approved by shareholders.

9.5 Provide information indicated in ASX Guide to Reporting on Principle 9


Principle 10: Recognise legitimate interests of Stakeholders 10.1 Establish and disclose a code of conduct to guide

compliance with legal and other obligations to legitimate stakeholders

Comply Code of Conduct, section 11


56

INCOME STATEMENT FOR THE YEAR ENDED 30 June 2008

Consolidated Parent Entity NOTE 2008

$ 2007

$ 2008

$ 2007

$ REVENUE Revenue From Continuing Operations

3

479,526

451,439

142,868

34,232

Finance Costs 28,676 39,405 - - Depreciation of Plant and Equipment 710,926 710,299 1,319 4,642 Impairment of Exploration Expenditure 1,592,207 1,087,931 - - General and Administration Costs 647,745 693,012 343,650 447,752 Management, Consulting and Professional Fees

301,657

352,420

405,850

420,249

Provision for Diminution of Loans to Controlled Entities

4

-

-

2,694,365

1,380,985

Share Based Payment Expense 27 885,925 - 885,925 - Production Expenses 166,992 416,989 - - Total Expenditure 4,334,128 3,300,056 4,331,109 2,253,628 Loss Before Income Tax

(3,854,602) (2,848,617) (4,188,241) (2,219,396)

Income Tax Benefit / (Expense) 5 - - - - Loss from Continuing Operations

(3,854,602)

(2,848,617)

(4,188,241)

(2,219,396)

Net Loss Attributable to Members of Empire Oil & Gas NL

16(b)

(3,854,602)

(2,848,617)

(4,188,241)

(2,219,396)

Basic Loss Per Share (cents per share)

21

0.17

0.17

-

-

The above Income Statements are to be read in conjunction with the Notes to the Financial Statements.


57

BALANCE SHEET AS AT 30 June 2008

Consolidated Parent Entity NOTE 2008

$ 2007

$ 2008

$ 2007

$ CURRENT ASSETS

Cash and Cash Equivalents

6

4,225,909

1,944,135

3,188,105

1,139,997

Other Receivables 7 728,757 514,659 77,289 54,904 TOTAL CURRENT ASSETS 4,954,666 2,458,794 3,265,394 1,194,901 NON CURRENT ASSETS

Other Financial Assets 8 - - 4,771,996 3,860,952 Plant and Equipment 10 390,907 1,054,417 684 2,003 Capitalised Petroleum Exploration and Acquisition Costs

11

4, 112,864

2, 239,101

-

- Inventories – Downhole Equipment

30,000

30,000

- -

TOTAL NON CURRENT ASSETS

4, 533,771

3, 323,518

4, 772,680

3, 862,955

TOTAL ASSETS 9, 488,437 5, 782,312 8, 038,074 5, 057,856 CURRENT LIABILITIES

Trade and Other Payables 12 731,286 252,683 49,464 72,934 Provisions 13 20,571 9,931 - - Borrowings 14 220,285 205,794 33,579 26,017

TOTAL CURRENT LIABILITIES 972,142 468,408 83,043 98,951 NON-CURRENT LIABILITIES

Borrowings 14 103,148 230,522 - - TOTAL NON-CURRENT LIABILITIES

103,148

230,522

-

-

TOTAL LIABILITIES 1,075,290 698,930 83,043 98,951 NET ASSETS 8,413,147 5,083,382 7,955,031 4,958,905 EQUITY

Issued Capital Share Application Proceeds

15 15

35,895,238 1,141,745

30,738,541 -

35,895,238 1,141,745

30,738,541 -

Reserves 16(a) 1,158,365 272,440 1,158,365 272,440 Accumulated Losses 16(b) (29,782,201) (25,927,599) (30,240,317) (26,052,076) TOTAL EQUITY 8,413,147 5,083,382 7,955,031 4,958,905

The above Balance Sheets are to be read in conjunction with the Notes to the Financial Statements.


58

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 June 2008

Notes Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ TOTAL EQUITY AT THE BEGINNING OF THE FINANCIAL YEAR 5,083,382 5,015,637 4,958,905 4,261,939 LOSS FOR THE YEAR (3,854,602) (2,848,617) (4,188,241) (2,219,396)TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR ATTRIBUTABLE TO MEMBERS OF EMPIRE OIL & GAS NL (3,854,602) (2,848,617) (4,188,241) (2,219,396) Transactions With Equity Holders in their Capacity as Equity Holders: Shares Issued During the Year 15 5,531,000 3,055,000 5,531,000 3,055,000 Receipt Of Share Application Proceeds 15(b) 1,162,500 - 1,162,500 - Transaction Costs 15(b) (395,058) (138,638) (395,058) (138,638) Share based payments 16(a) 885,925 - 885,925 - 7,184,367 2,916,362 7,184,367 2,916,362 TOTAL EQUITY AT THE END OF THE FINANCIAL YEAR 8,413,147 5,083,382 7,955,031 4,958,905 The above Statements of Changes in Equity are to be read in conjunction with the Notes to the Financial Statements.


59

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Parent Entity Note 2008

$ 2007

$ 2008

$ 2007

$ Cash Flows From Operating Activities Interest Received 376,753 93,466 142,868 34,232 Rough Range Crude Oil Sales 101,618 277,293 - - Other Income - 50,930 - - Payments to Suppliers, Contractors and Employees (1,032,343) (1,585,173) (795,355) (869,173) Net Cash Used In Operating Activities 17(a) (553,972) (1,163,484) (652,487) (834,941) Cash Flows From Investing Activities Payment for Fixed Assets - (7,524) - - Expenditure on Oil and Gas Properties and Exploration

(3,325,506)

(686,651)

-

-

Net Cash Used In Investing Activities (3,325,506) (694,175) - - Cash Flows From Financing Activities Loans to Related Parties - - (3,605,410) (936,822) Repayment of Borrowings (127,665) (140,062) - - Proceeds from Issue of Shares 6,693,501 3,055,000 6,693,501 3,055,000 Shares Placement Costs (395,058) (138,638) (395,058) (138,638) Net Cash Used In Financing Activities 6,170,778 2,776,300 2,693,033 1,979,540 Net Increase / (decrease) in Cash Held 2,291,300 918,641 2,040,546 1,144,599 Cash and Cash Equivalents at Beginning Of The Year 1,891,153 972,512 1,113,980 (30,619) Cash and Cash Equivalents at the End Of The Year 17(b)

4,182,453

1,891,153

3,154,526

1,113,980

The above Statements of Cash Flows are to be read in conjunction with the Notes to the Financial Statements.


NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

60

1. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS In the current year, the Company has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. The adoption of these new and revised Standards and Interpretations has not resulted in changes to the Company's accounting policies. At the date of authorisation of the Financial Report, the following Standards and Interpretations were in issue but not yet effective: The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the Financial Statements of the Company.

Reference Title Summary Application date of

standard*

Impact on Group Financial Report

Application date for Group*

AASB Int. 4 (Revised)

Determining whether an Arrangement contains a Lease

The revised Interpretation specifically scopes out arrangements that fall within the scope of AASB Interpretation 12.

1 January 2008

Refer to AASB Int. 12 and AASB 2007-2.

1 July 2008

AASB 8 and AASB 2007-3

Operating Segments and consequential amendments to other Australian Accounting Standards

New standard replacing AASB 114 Segment Reporting, which adopts a management reporting approach to segment reporting.

1 January 2009

AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group's financial statements. In addition, the amendments may have an impact on the Group’s segment disclosures.

1 July 2009

AASB 123 (Revised) and AASB 2007-6

Borrowing Costs and consequential amendments to other Australian Accounting Standards

The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised.

1 January 2009

The Group has no borrowing costs associated with qualifying assets and as such the amendments are not expected to have any impact on the Group's Financial Report.

1 July 2009

AASB 101 (Revised) and AASB 2007-8

Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards

Introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements.

1 January 2009

These amendments are only expected to affect the presentation of the Group’s Financial Report and will not have a direct impact on the measurement and recognition of amounts disclosed in the financial report.

1 July 2009

AASB 2008-1

Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations

The amendments clarify the definition of 'vesting conditions', introducing the term 'non-vesting conditions' for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied.

1 January 2009

The Group has share-based payment arrangements that may be affected by these amendments. However, the Group has not yet determined the extent of the impact, if any.

1 July 2009



61

Reference Title Summary Application date of

standard*

Impact on Group Financial Report

Application date for Group*

AASB 3 (Revised)

Business Combinations

The revised standard introduces a number of changes to the accounting for business combinations, the most significant of which allows entities a choice for each business combination entered into – to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively.

1 July 2009

The Group has not yet assessed the impact of early adoption, including which accounting policy to adopt.

1 July 2009

AASB 127 (Revised)

Consolidated and Separate Financial Statements

Under the revised standard, a change in the ownership interest of a subsidiary (that does not result in loss of control) will be accounted for as an equity transaction.

1 July 2009

If the Group changes its ownership interest in its existing subsidiary in the future, the change will be accounted for as an equity transaction. This will have no impact on goodwill, nor will it give rise to a gain or a loss in the Group’s income statement.

1 July 2009

AASB 2008-3

Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127

Amending standard issued as a consequence of revisions to AASB 3 and AASB 127.

1 July 2009

Refer to AASB 3 (Revised) and AASB 127 (Revised) above.

1 July 2009

Amendments to International Financial Reporting Standards

Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

The main amendments of relevance to Australian entities are those made to IAS 27 deleting the ‘cost method’ and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity's separate financial statements (i.e., parent company accounts). The distinction between pre- and post-acquisition profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment. AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value.

1 January 2009

If the Group enters into any group reorganisation establishing new parent entities, an assessment will need to be made to determine if the reorganisation meets the conditions imposed to be effectively accounted for on a ‘carry-over basis’ rather than at fair value.

1 July 2009

Amendments to International Financial Reporting Standards

Improvements to IFRSs

The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact.

1 January 2009 except for amendments to IFRS 5, which are effective from 1 July 2009.

The Group has not yet determined the extent of the impact of the amendments, if any.

1 July 2009

*Designates the beginning of the applicable annual reporting period unless otherwise stated. Adoption of new accounting standard The Group has adopted AASB 7 Financial Instruments: Disclosures and all consequential amendments which became applicable on 1 July 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profit and loss or the financial position of the entity.



62

2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the Financial Report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The Financial Report includes separate financial statements for Empire Oil & Gas NL as an Individual Entity and the Group consisting of Empire Oil & Gas NL and its subsidiaries. Empire Oil & Gas NL is a company limited by shares incorporated in Australia whose shares are publicly traded on Australian Securities Exchange Limited. Basis of preparation This General Purpose Financial Report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRSs), other authoritative pronouncements of the Australian Accounting Standards Board, including Australian Interpretations and the Corporations Act 2001. They have been prepared on the basis of historical costs except for the revaluation of certain non-current assets and financial instruments and on the going concern basis. All amounts are presented in Australian Dollars unless otherwise noted. Compliance with IFRSs Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (IFRSs). Compliance with AIFRSs ensures that the Financial Report, comprising the Group’s Financial Statements and notes and the Company’s Financial Statements and notes of Empire Oil & Gas NL, comply with IFRSs and interpretations adopted by the International Accounting Board (IASB). The Financial Statements were approved by the Directors on 30 September 2008. The Accounting policies below have been applied in preparing and presenting the Financial Statements. (a) Principles of Consolidation The consolidated Financial Statements are those of the Group, comprising of Empire Oil & Gas NL (Parent Entity) and all entities which Empire Oil & Gas NL controlled from time to time during the Year and at balance date. A controlled entity is any entity Empire Oil & Gas NL has the power to control the financial and operating policies of so as to obtain benefits from its activities. A list of controlled entities is contained in note 9. Information from the Financial Statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the Group’s Financial Statements include the results for the part of the reporting period during which the parent company has control. Subsidiary acquisitions are accounted for using the purchase method of accounting. The Financial Statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Investments in subsidiaries are accounted for at cost in the individual financial statements of Empire Oil & Gas NL. (b) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash



63

flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation Depreciation of plant and equipment is calculated using the straight line basis so as to write off the net costs of each asset over the expected useful life. Depreciation rates are: Plant and Equipment 10% to 36% Camp and Accessories 20% to 40% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, it is group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings. (c) Impairment of Assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (d) Exploration and Evaluation Costs Exploration and evaluation costs are carried forward where right of tenure to the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Where an area of interest is abandoned or the Directors decide that it is not commercial, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. (e) Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the Group are classified as finance leases.



64

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the year. Leased assets are depreciated on a straight-line basis over their estimated useful lives. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. (f) Income Tax The charge for current income tax expense is based on the profit for the Year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. (g) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (h) Foreign Currency Translation Functional and Presentation Currency The functional currency of each of the Group's entities is measured using the currency of the primary economic environment in which that entity operates. The Group’s Financial Statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transactions and Balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.



65

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement. Group Companies The financial results and position of foreign operations whose functional currency is different from the Group's presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; • income and expenses are translated at average exchange rates for the period; and • retained profits are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the Group's foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed. (i) Trade and Other Payables Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis. (j) Employee Benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used. Share-Based Payments

The Group provides benefits to employees (including Directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the Directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.



66

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. (k) Revenue Recognition Interest revenue is recognised when receivable. Revenue from sale of crude oil is recognised upon delivery to the customer. All revenue is stated net of Goods and Services Tax. (l) Issued Capital Ordinary shares are classified as equity Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received (m) Earnings per Share (EPS) Basic Earnings per Share Basic EPS is calculated as the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, divided by the weighted average number of ordinary shares outstanding during the Financial Year, adjusted for any bonus elements in ordinary shares issued during the year. Diluted Earnings per Share Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (n) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet. (o) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (p) Interests in Joint Ventures The Group's share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the consolidated income statement and balance sheet. Details of the Group's interests are shown in note 28. The Group's interests in joint venture entities are brought to account using the equity method of accounting in the Consolidated Financial Statements. The Parent Entity’s interests in joint venture entities are brought to account using the cost method.



67

(q) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. (r) Financial Instruments Recognition Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. Financial assets at fair value through profit and loss A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Held-to-maturity investments These investments have fixed maturities, and it is the group’s intention to hold these investments to maturity. Any held-to-maturity investments held by the group are stated at amortised cost using the effective interest rate method. Available-for-sale financial assets Available-for-sale financial assets include any financial assets not included in the above categories. Available-for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity. Financial liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement. (s) Critical accounting judgements, estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:



68

Share based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model, using the assumptions detailed in note 27. Exploration and evaluation costs Exploration and evaluation costs are carried forward where right to tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at balance sheet date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Impairment of Assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement. 3. REVENUE FROM CONTINUING OPERATIONS Notes Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ Revenues from Operating & Non - Operating activities Interest 377,908 93,466 142,868 34,232Rough Range Crude Oil sales 101,618 307,043 - -Other Income - 50,930 Total Revenues from Continuing Operations 479,526 451,439 142,868 34,232 4. Loss Before Income Tax The loss before income tax has been arrived at after charging the following expenses: Employee Benefit Expense 10,640 14,372 - -Provision for Diminution of Loans to Controlled Entities - -

2,694,365 1,380,985

Finance Costs – Interest payable 28,676 39,405 - -Operating Lease Expense 65,310 54,612 65,310 54,612 5. INCOME TAX (a) Income Tax Expense Current tax - - - -Deferred tax - - - - - - - -



69

5. Income Tax – (Contd.) Consolidated Parent Entity 2008 2007 2008 2007 (b) Numerical Reconciliation of Income Tax Expense to Prima Facie Tax payable

$ $ $ $

Loss from Ordinary Activities before Income Tax Expense (3,854,602) (2,848,617) (4,188,241) (2,219,396) Prima Facie Tax Benefit on Loss From Ordinary Activities at 30% (2007:30%) (1,156,381) (854,585) (1,256,472) (665,819) Tax Effect of Amounts Which are Not Deductible (taxable) in Calculating Taxable Income:

Share-Based Payments 265,778 - 265,778 -Movements in Unrecognised Temporary Differences (551,422) (61,649) 812,623 417,525

(1,442,025) (916,234) (178,071) 248,294Tax Effect of Current Year Tax Losses for Which No Deferred Tax Asset Has Been Recognised 1,442,025 916,234 178,071 248,294Income Tax Expense - - - -(c) Unrecognised Temporary Differences Deferred Tax Assets (at 30%) On Income Tax Account Provision for Diminution - - 4,609,442 3,801,133Provisions 6,171 - - -Carry Forward Tax Losses 8,154,816 6,712,794 2,283,326 2,105,255Total Deferred Tax Assets 8,160,987 6,712,794 6,892,768 5,906,388 Deferred Tax Assets (at 30%) - - - - 6. Cash and Cash Equivalents comprises: − Cash at Bank and in Hand 1,037,800 721,289 - -− Receipt of Share Application Proceeds - June 2008 Share Purchase Plan 1,162,500 -- 1,162,500 -− Short-Term Deposits 2,025,609 1,222,846 2,025,605 1,139,997Closing Cash and Cash Equivalents Balance 4,225,909 1,944,135 3,188,105 1,139,997 Cash at Bank earns interest at Floating Rates based on Daily Bank Deposit Rates. Short-Term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. 7. OTHER RECEIVABLES (CURRENT) Other Receivables 574,913 419,313 27,714 18,136 Deposits 153,844 95,346 49,575 36,768

728,757 514,659 77,289 54,904



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8. OTHER FINANCIAL ASSETS Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $Amounts Owing From Controlled Entities Empire Oil Company (WA) Limited - - 6,684,504 5,896,189Rough Range Oil Pty Ltd - - 9,180,042 8,934,510Empire Services Pty Ltd - - 1,910,616 1,577,353Gulliver Productions Pty Ltd EP 104 & R1 JV EP 389 JV EP 416 JV

- - -

- - -

1,376,427 -

400,000 195,000

226,4403,000

-

EP 426 JV - - (166,686) -EP 432 JV - - 556,893 -EP 435 – Dune 1 JV EP 435 – Parrot Hill JV

- -

- -

- -

(69,732)(36,373)

- - 20,136,796 16,531,387 Less: Provision for Diminution Of Loans - (15,364,808) (12,670,443) - - 4,771,988 3,860,944Shares in Controlled entities at cost (9) - - 8 8Total Other Financial Assets 4,771,996 3,860,952 (i) The loans to subsidiaries are non-interest bearing, unsecured and repayable on demand. (ii) An allowance for impairment is recognised when the net assets of the controlled entity (excluding the loan payable to the Company) falls below the carrying value of the loan. An allowance for impairment is reversed when the net assets of the controlled entity (excluding the loan payable to the Company) exceed the carrying value of the loan. An impairment loss of $2,694,365 (2007: $1,380,985) has been recognised by the Company as in the income statement in the current year.

9. SUBSIDIARIES Name Country of Incorporation

Class of Share

Holding Percentage

Book Value of Investment (Parent Entity)

2008 %

2007 %

2008 $

2007 $

Empire Services Pty Ltd Australia Ordinary 100 100 2 2Empire Oil Company (WA) Limited and its Controlled Entity New Zealand

Ordinary

100

100

4,771,722

4,771,722

Gulliver Productions Pty Ltd Australia Ordinary 100 100 350,000 350,000Rough Range Oil Pty Ltd Australia Ordinary 100 100 2 2St. George Petroleum Limited * Australia Ordinary 100 100 2 2Provision for Investment Diminution (5,121,720) (5,121,720) 8 8

*The Company was acquired on 5 January 2006 and has not operated until the balance date.

There is uncalled capital of NZ 20 cents (totalling approximately A$54,000) on 300,000 ordinary shares in Empire Oil Company (WA) Ltd. The cost of the investment in Rough Range Oil Pty Ltd is $2. All Controlled Entities are unlisted companies.



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10. PLANT AND EQUIPMENT

Consolidated Parent Entity 2008

$ 2007

$ 2008

$ 2007

$ Plant and Equipment - at cost 2,115,460 2,115,460 89,445 89,445Accumulated Depreciation (1,990,275) (1,361,300) (88,761) (87,853) 125,185 754,160 684 1,592 Motor Vehicle - at Cost 57,414 10,000 10,000 10,000Accumulated Depreciation (13,951) (9,589) (10,000) (9,589) 43,463 411 - 411 Camp and Accessories – at Cost 392,953 392,950

-

-

Accumulated Depreciation (170,694) (93,104) - - 222,259 299,846 - -

Carrying Amount at End of the Year 390,907 1,054,417 684 2,003

Movements for Year in Plant and Equipment

Opening Balance 1,054,417 1,757,192 2,003 6,645Purchases / Additions 47,416 7,524 - -

Depreciation for the Year (710,926) (710,299) (1,319) (4,642)

Carrying Amount at End of the Year 390,907 1,054,417 684 2,003

Plant and Equipment to the Value of $671,555 (2007 $671,555) has been Secured by Registered Mortgage. A Motor Vehicle to the value of $57,414 (2007 $Nil) has been secured by Registered Mortgage during the year.

11. CAPITALISED PETROLEUM EXPLORATION AND ACQUISITION COSTS

Consolidated Parent Entity

2008 $

2007 $

2008 $

2007

Exploration, Production and Evaluation Costs 2,239,101 2,455,955 - -Exploration Expenditure incurred during the year

3,465,970 871,077 - -

Capitalised Exploration Costs Written Off (1,592,207) (1,087,931) - - 4,112,864 2,239,101 Distribution of Capitalised Petroleum Expenditure:

Exploration and Evaluation Costs 4,112,864 2,239,101 - -Production Phase Costs - - - - Total 4,112,864 2,239,101 - - Recoverability of the carrying amount for Exploration Assets depends upon the successful exploration and sale of oil and gas.



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Consolidated

Parent Entity

12. TRADE AND OTHER PAYABLES (CURRENT) 2008 2007 2008 2007

$ $ $ $ Trade Payables 550,718 81,269 32,464 36,735Other Payables and Accruals 180,568 171,414 17,000 36,199

731,286 252,683 49,464 72,93413. PROVISIONS (CURRENT)

Employee Benefits 20,571 9,931 - - 20,571 9,931 - - 14. INTEREST BEARING LIABLITIES

CURRENT Unsecured Liabilities

Bank Overdraft* 17(b) 43,456 52,982 33,579 26,071 Secured Liabilities** Rough Range Production Facility Financing 194,339 179,469 - - Less: Unexpired Charges (17,510) (26,657) - - Net Secured Liabilities 176,829 152,812 Total Current Liabilities 220,285 205,794 33,579 26,071 NON CURRENT Secured Liabilities

Rough Range Production Facility Financing 114,178 246,325 - - Less: Unexpired Charges (11,030) (15,803) - - Total Non-current 103,148 230,522 - -

*Bank Overdrafts are subject to variable interest rates

**These liabilities are secured over plant and equipment of Rough Range Oil Pty Ltd and guaranteed by the Parent Entity.

15. ISSUED CAPITAL

(a) Issued and Paid Up Capital Consolidated and

Parent Entity 2008

Consolidated and Parent Entity

2007

Number of

Shares $ Number of Shares $

Ordinary Shares Fully Paid 15(b) 2,455,860,285 35,895,238 1,916,360,285

30,738,541 Share Application Proceed – June 2008 Share Purchase Plan Less issue Expenses ($20,755) 15(b) 58,125,000 1,141,745 -- - 2,513,985,285 37,036,983 1,916,360,285 30,738,541



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15 Issued Capital – (Contd.) (b) Movement in Ordinary Share Capital 2008 2007

Number of


Beginning of the Financial Year 1,916,360,285 30,738,541 1,405,921,843 27,822,179Issued During the Year: − August 2006 -Shares issued for cash @ 0.56 cent per share - - 107,000,000 599,200− December 2006 -Shares issued for cash @ 0.050 cent per share - - 140,000,000 700,000− January 2007 – Shares issued for cash @ 0.70 cent per share - - 86,900,000 608,300February 2007 – Shares issued for cash @ 0.65 cent per share – Share Purchase Plane - - 176,538,442 1,147,500− February 2007 – Share Purchase Plan – Shares issued for cash @ 0.65 cent per share - - - -− August 2007 -Director’s Exercise of Options for cash @1 cent per share 28,000,000 280,000 - -− August 2007 – Director’s Exercise of Options for cash @ 1.5 cents per share 15,500,000 232,500− August 2007 Shares issued for cash @ 0.80 cent per share 287,000,000 2,296,000− February 2008 – Shares issued for cash @ 0.013 cents per share 100,000,000 1,300,000− April 2008 – Shares issued for cash @ 0.013 cents per share 100,000,000 1,300,000− June 2008 – Director’s exercise of Options @ 1.5 cents 6,500,000 97,500− June 2008 – Employees exercise of Options @ 1 cent 2,500,000 25,000− June 2008 – Share Purchase Plan – Share Application Proceeds 58,125,000 1,162,500 less transaction costs - (395,058) - (138,638)End of the Financial Year 2,513,985,285 37,036,983 1,916,360,285 30,738,541 (c) Movements in Options On Issue Consolidated and Parent Entity Number of Options 2008 2007 Beginning of the Financial Year 65,000,000 65,000,000 − Exercised During The Year − August 2007 -Director’s Exercise of Options for cash @1 cent per share (28,000,000)− August 2007 -Director’s Exercise of Options for cash @1.5 cent per share (15,500,000)− June 2008 -Director’s Exercise of Options for cash @1 cent per share (6,500,000)− June 2008 -Director’s Exercise of Options for cash @1 cent per share (2,500,000)



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(c) Movements in Options On Issue – (Contd.) Consolidated and Parent EntityIssued During the Year Number of Options 2008 2007December 2007- New Options issued to Directors, Employees and Consultants exercisable at @ 2.5 cents per share on or before 28 November 2010. 37,500,000December 2007- New Options issued to Director’s, Employees and Consultants exercisable at @ 3 cents per share on or before 28 November 2010. 37,500,000End of the financial year 87,500,000 65,000,000

(d) Ordinary Shares Ordinary Shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. 16. RESERVES AND ACCUMULATED LOSSES Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ (a) Reserves Share-Based Payments Reserve 1,158,365 272,440 1,158,365 272,440 1,158,365 272,440 1,158,365 272,440

Consolidated

Parent Entity

2008 2007 2008 2007 Movements $ $ $ $ Share-Based Payments Reserve Balance at Beginning of Year 272,440 272,440 272,440 272,440Option Expense 885,925 - 885,925 -Balance at End of Year 1,158,365 272,440 1,158,365 272,440(b) Accumulated Losses Consolidated Parent Entity 2008 2007 2008 2007

Number of


Balance at Beginning of Year (25,927,599) (23,078,982) (26,052,076) (23,832,680) Net loss Attributable to Members of Empire Oil & Gas NL (3,854,602) (2,848,617) (4,188,241) (2,219,396) Balance at End of Year (29,782,201) (25,927,599) (30,240,317) (26,052,076) (c) Nature and Purpose of Reserves Share-Based Payments Reserve The share-based payments reserve is used to recognise the fair value of options issued.



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17. CASH FLOW STATEMENT (a) Reconciliation of the Net Loss after Income Tax to Net Cash Flows from Operating Activities Consolidated Parent Entity

2008

2007 2008 2007 $ $ $ $ Net loss for the Year (3,854,602) (2,848,617) (4,188,241) (2,219,396)Non-Cash Items Depreciation 710,926 710,299 1,319 4,642Share based payment 885,925 - 885,925 -Impairment of Exploration Expenditure 1,592,207 1,087,931 - -Impairment of loans to Controlled Entities - - 2,694,365 1,380,985Changes in Operating Assets and Liabilities (Increase)/decrease in Trade and Other Receivables (214,098) 87,141 (22,385) 3,263(Decrease)/increase in Trade and Other Payables 315,030 (195,151) (23,470) (4,435)(Decrease) / increase in Employee Entitlement Provisions 10,640 (5,087) - -Net Cash Outflow from Operating Activities (553,972) (1,163,484) (652,487) (834,941) (b) Reconciliation of Cash Cash at the end of the Financial Year as shown in the Cash Flow Statement is reconciled to items in the Balance Sheet as follows: Closing Cash and Cash Equivalents Balance 6 4,225,909 1,944,135 3,188,105 1,139,997 Bank Overdraft 14 (43,456) (52,982) (33,579) (26,017) Cash as per Cash Flow Statements 4,182,453 1,891,153 3,154,526 1,113,980 (c) Non-Cash Financing and Investing Activities Options issued to employees and consultants for no consideration or as settlement for expenses are shown in note 23. (c) 18. EXPENDITURE COMMITMENTS (a) Exploration Commitments The Company has certain commitments to meet minimum expenditure requirements on the Petroleum exploration assets it has an interest in. Outstanding exploration commitments are as follows: Not later than one year 2,090,000 765,000 - -Later than one year and not later than five years - - - -Greater than five years - - - - 2,090,000 765,500 - - These obligations may vary over time depending on the group’s exploration programme and movements. These obligations are also subject to variation by regulation, joint venturing or relinquishing some of the relevant tenements. The above figures include proposed commitments on permits yet to be formerly granted



76

(b) Lease Expenditure Commitments Operating leases (no cancellable): Minimum lease payments Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ − not later than one year 67,137 62,190 67,137 62,190− later than one year and not later than five years 91,869 10,360 91,869 10,360− Greater than Five Years - - - -Aggregate lease expenditure contracted for at reporting date 159,006 72,550 159,006 72,550Terms of the Tenancy Lease for the Empire Oil & Gas NL Office situated on 154 Hampden Road, Nedlands: Office lease renewed for the two year period from 27 October 2008 to 27 October 2010. (c) Hire Purchase Expenditure Commitments − not later than one year 176,829 152,812 - -− later than one year and not later than five years 103,148 230,522 - -− Greater than Five Years - - - -Aggregate lease expenditure contracted for at reporting date 279,977 383,334 - - 19. CONTINGENT LIABILITIES AND CONTINGENT ASSETS There are no material contingent liabilities or contingent assets at balance date. 20. SUBSEQUENT EVENTS a) Placement of Shares On 4 June 2008 the Company invited the Shareholders to participate in Company’s Share Purchase Plan, the Plan closed on 4 July 2008 and on 14 July 2008 the Company allotted 161,325,000 New Shares and raised a total of $3,226,500. On 14 July 2008 the Company placed 25,000,000 New Shares under section 708A(5)e of the Corporation Act 2001 at an issue price of 2 cents per share to certain investors pursuant to Section 708 (8) ( c) without disclosure to them under part 6D.2 of the Act. The Placement which was fully subscribed, raised funds of $500,000 before expenses. The Placement was closed and new Shares were allocated on 14 July 2008 On 29 August 2008 the Company placed 85,000,000 New Shares under section 708A(5)e of the Corporation Act 2001 at an issue price of 1.35 cents per share to certain investors pursuant to Section 708 (8) ( c) without disclosure to them under part 6D.2 of the Act. The Placement which was fully subscribed, raised funds of $1,147,500 before expenses. The Placement was closed and new Shares were allocated on 29 August 2008. 21. LOSS PER SHARE The loss and weighted average number of ordinary shares used in the calculation of basic loss per share is as follows: 2008 2007 $ $ Loss Used in Calculating Basic Loss Per Share (3,854,602) (2,848,617) Weighted Average Number of Ordinary Shares used 2,291,579,035 1,702,679,527



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in Calculating Basic Loss per Share Diluted loss per shares Diluted loss per share has not been calculated as the Company’s potential ordinary shares are not considered dilutive and do not increase loss per share. 22. AUDITORS' REMUNERATION Amounts received or due and receivable by the Auditors for an audit or review of the financial report of the Group including Audit of the Company’s New Zealand registered Subsidiary Company Consolidated Parent Entity 2008 2007 2008 2007Judge Constable - 11,996 - 9,397Ord Partners 32,915 18,920 29,915 15,920 32,916 30,916 29,915, 25,317Auditors received no fees for any other services. 23. KEY MANAGEMENT PERSONNEL DISCLOSURES a) Details of Key Management Personnel The following persons were key management personnel of the Group during the financial year: J L C Marshall Managing Director B J Warris Executive Director N K Joyce Non-Executive Director and Company Secretary (b) Compensation of Key management Personnel by Category Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ Short-term 498,525 536,768 61,415 67,241Post employment 5,678 6,636 - -Other long-term - - - -Termination benefits - - - -Share-based payment 885,925 - 885,925 -Related party payments 277,320 267,548 - - 1,667,448 810,952 947,340 67241

(c) Option Holdings of Key Management Personnel The Company has taken advantage of the relief provided by Corporations regulation 2m 6.04 and has transferred the detailed remuneration disclosures required under AASB 124 – Related Party Disclosure to the Directors’ Report. The relevant information can be found in sections A to D of the remuneration report on pages 41 to 46. The number of options over ordinary shares in the Company held during the financial year by each director of Empire Oil & Gas NL of the Group including their personally related parties are set out below:

Year 2008 Balance

1 July 2007 Granted /

Vested Exercise of

Options Lapsed Balance

30 June 2008 Directors JL C Marshall 28,000,000 30,000,000 (22,000,000) - 36,000,000 BJ Warris 15,000,000 20,000,000 (15,000,000) - 20,000,000 N K Joyce 13,000.000 10,000,000 (13,000,000) - 10,000,000 Total 56,000,000 60,000,000 (50,000,000) - 66,000,000



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Year 2007

Balance

1 July 2006

Granted /

Vested

Exercise

of Options

Lapsed

Balance

30 June 2007 Directors JL C Marshall 28,000,000 - - - 28,000,000 BJ Warris 15,000,000 - - - 15,000,000 N K Joyce 13,000,000 - - - 13,000,000 Total 56,000,000 - - - 56,000,000

(d) Shareholdings of Key Management Personnel

The number of options over ordinary shares in the Company held during the financial year by each Director of Empire Oil & Gas NL of the Group including their personally related parties are set out below:

2008 Balance

1 July 2007 Granted On

Exercise of Options

Net Change Other

Balance 30 June 2008

Ord Ord Ord Ord Directors JL C Marshall 8,283,334 - 6,000,000 - 14,283,334 BJ Warris 40,000,000 - - (10,000,000) 30,000,000 N K Joyce 100,000 - 6,500,000 (6,580,769) 19,231 Total 48,383,334 - 12,500,000 (16,580,769) 44,302,565

2007 Balance

1 July 2006 Granted On

Exercise of Options

Net Change Other

Balance 30 June 2007

Ord Ord Ord Ord Directors JL C Marshall 8,283,334 - - - 8,283,334 BJ Warris 40,000,000 - - - 40,000,000 N K Joyce 100,000 - - - 100,000 Total 48,383,334 - - - 48,383,334

(e) Loans to Key Management Personnel There were no loans to key management personnel during the year. (f) Other Transactions With Key Management Personnel There were no other transactions with key management personnel other than as disclosed in section A to D of the Remuneration Report and note 24. 24. RELATED PARTY DISCLOSURES (a) The Company The ultimate Parent Entity within the Group is Empire Oil & Gas NL. (b) Wholly-Owned Group Transactions Loans The balance of unsecured, interest free loans provided by Empire Oil & Gas NL to its various wholly owned subsidiary companies as of the balance date amounts to $20,136,796 (2007: $16,531,387). There were no



79

repayments made during the year (2007: Nil). Please refer to note 8 of the Financial Statements for details of amount owing by individual wholly owned subsidiary companies. For the year ended 30 June 2008 the Company has made acumulative provision for impairment relating to the amounts owed by its subsidiary companies of $15,364,808 (2007: $12,670,443). An impairment assessment is undertaken each financial year by examining the financial position of the subsidiary and the market in which the subsidiary operates to determine whether there is objective evidence that the subsidiary is impaired. When such objective evidence exists, the Company recognises an allowance for the impairment loss described as impairment of loss to controlled entities in the financial statements.

(c) Key Management Personnel There were no other transactions with key management personnel other than as disclosed in section A to D of the Remuneration Report and note 23 except for the following balance being recorded in Financial Statements under Accounts Payable against Demandem Holdings Pty Ltd, a Company associated with Mr Neil Joyce for the Consulting and Company Secretarial Services and Stanton Partners, a Partnership in which NK Joyce is a Partner for Accounting and Taxation Services.

Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $

Demandem Pty Ltd 4,750 4,750 4,750 4,750Stanton International 27,850 28,265 16,350 17,975

32,600 33,015 21,100 22,72525. SEGMENT INFORMATION

Description of Segments The Group’s operations are in the area of oil and gas production and exploration in Australia. 26. FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial Risk Management The Group’s principal financial instruments comprise receivable, payables, bank overdrafts, finance leases, cash and short term deposits. The Group manages its exposure to key financial risks including interest rate and currency risk in accordance with the Groups financial risk management policy. The objective of the policy is to support the delivery of the Groups financial targets whilst protecting future financial security. At balance date the Group had the following mix of financial assets and liabilities, only assets exposed to variable interest rates being the Cash and Cash equivalent and the bank overdrafts. Finance leases being on fixed interest rate have no financial exposure. The board reviews and agrees policies for managing each of these risks as summarised below:

(a) Interest Rate Risk The Group is exposed to movements in market interest rates on short-term deposits. The policy is to monitor the interest rate yield curve out to 120 days to ensure a balance is maintained between the liquidity of cash assets and the interest rate return (b) Capital Management

Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the consolidated entity defines as net operating income divided by total shareholders’ equity. The Board of Directors also monitors the level of dividends to ordinary shareholders.



80

There were no changes in the Consolidated Entity’s approach to capital management during the year. Neither the Company nor the Consolidated Entity are subject to externally imposed capital requirements.



81

CONSOLIDATED ENTITY Fixed Interest Rate Maturing in:

Financial Instruments

Floating Interest Rate

1 year or less Over 1 to 5 years

More than 5 years

Non-Interest Bearing

Total Carrying Amount as per the

Balance Sheet

Weighted Average Effective Interest Rate

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $ $ $ $ $ $ $ $ $ $ $ $ % % (i) Financial Assets Cash 4,225,909 1,944,135 - - - - - - - 4,225,900 1,944,135 6.98 5.5 Trade and Other Receivables - - - - - - - 728,757 514,659 728,527 514,659 - - Total Financial Assets 4,225,909 1,944,135 - - - - - 728,757 514,659 4,954,427 2,458,794 Fixed Interest Rate Maturing in:

Financial Instruments Floating Interest Rate 1 year or less Over 1 to 5 years

More than 5

years Non-Interest

Bearing Total Carrying Amount as per

the Balance Sheet

Weighted Average Effective

Interest Rate 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $ $ $ $ $ $ $ $ $ $ $ $ % % (ii) Financial Liabilities Trade Creditors - - - - - - - - 731,286 252,683 731,286 252,683 6.98 5.3 Interest bearing liabilities 43,456 52,982 176,829 152,812 103,148 230,522 - - - - 323,433 436,316 - - Total Financial Liabilities 43,456 52,982 176,829 152,812 103,148 230,522 - - 731,286 252,683 1,054,719 688,999



82

PARENT ENTITY Fixed Interest Rate Maturing in:

Financial Instruments

Floating Interest Rate

1 year or less Over 1 to 5 years

More than 5 years

Non-Interest Bearing

Total Carrying Amount as per the

Balance Sheet

Weighted Average Effective Interest Rate

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $ $ $ $ $ $ $ $ $ $ $ $ % % (i) Financial Assets Cash 3,188,105 1,139,997 - - - - - - - 3,188,105 1,139,997 6.98 5.5 Trade and Other Receivables - - - - - - - 77,289 54,904 77,289 54,904 - - Total Financial Assets 3,188,105 1,139,997 - - - - - 77,289 54,904 3,265,394 1,194,901 Fixed Interest Rate Maturing in:

Financial Instruments Floating Interest Rate 1 year or less Over 1 to 5 years

More than 5

years Non-Interest

Bearing Total Carrying Amount as per

the Balance Sheet

Weighted Average Effective

Interest Rate 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $ $ $ $ $ $ $ $ $ $ $ $ % % (ii) Financial Liabilities Trade Creditors - - - - - - - - 49,464 72,934 49,464 72,934 6.98 5.3 Interest bearing liabilities 33,579 26,071 - - - - - - - - 33,579 26,071 - - Total Financial Liabilities 33,579 26,071 - - - - - - 49,464 72,934 83,043 99,005


83

NOTES TO FINANCIAL STATEMENETS FOR TEH YEAR ENDED 30 JUNE 2008

26. FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (cont'd) (b) Net Fair Values All financial assets and liabilities have been recognised at the balance date at amounts approximating their carrying value. (c) Credit Risk Exposures The Group has no significant concentrations of credit risk. The maximum exposure to credit risk at balance date is the carrying amount (net of provision of doubtful debts) of those assets as disclosed in the Balance Sheet and Notes to the Financial Statements. As the Group presently have no significant debtors, lending, significant stock levels or any other credit risk, a formal credit risk management policy is not maintained. (d) Liquidity Risk The Group currently does not have major funding in place. However the Group continuously monitors forecast and actual cash flow and the maturity profiles of financial liabilities to manage its liquidity risk. (e) Foreign Currency Risk The Group is exposed to fluctuations in foreign currencies arising from exploration commitments in currencies other than the group’s measurement currency. The Crude Oil Sales from the Company’s Rough Range Oil Field is billed and received in US Dollars however during the year total crude oil sale amount s to $101,618 as the Well Rough Range 1b has been shut in for maintenance since December 2007. The foreign currency exposure therefore has been very limited during the year. The Group has not formalised a foreign currency risk management policy, however it monitors its foreign currency expenditure in light of exchange rate movements. (f) Sensitivity Analysis The following tables summarise the sensitivity of the Group’s financial assets to interest rate risk. Had the relevant variables, as illustrated in the tables, moved, with all other variables held constant, post tax loss and equity would have been affected as shown. The analysis has been performed on the same basis for 2008 and 2007. Consolidated Entity & Parent Entity

Carrying Amount

$

Interest Rate Risk Interest Rate Risk 30 June 2008 -1% +1% Net Loss

$ Equity

$ Net

Loss $

Equity $

Financial assets Cash and cash equivalents 4,225,909 (42,259) (42,259) 42,259 42,259 4,225,909 (42,259) (42,259) 42,259 42,259 None of the Group’s financial liabilities are variable interest bearing.



84

Consolidated Entity & Parent Entity

Carrying Amount

$

Interest Rate Risk Interest Rate Risk 30 June 2007 -1% +1% Net Loss

$ Equity

$ Net

Loss $

Equity $

Financial assets Cash and cash equivalents 1,944,135 (19,441) (19,441) 19,441 19,441 1,944,135 (19,441) (19,441) 19,441 19,441 27. SHARE-BASED PAYMENTS Employees and Consultants Options The Group provides benefits to employees (including Directors) and consultants of the Group in the form of share-based payment transactions, whereby employees or consultants render services in exchange for options to acquire ordinary shares. The exercise price of the options granted during the year range from 2.5 cent to 3 cents per option. All options granted to Directors, Employees and Consultants are exercisable at any time from the date of issue until 28 November 2010. Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share in the capital of The Company with full dividend and voting rights. Set out below are summaries of granted options: 2008 2008 2007 2007 $ $

Number of Options

Weighted Average Exercise

Price Cents

Number of Options

Weighted Average Exercise priceCents

Outstanding at the beginning of the year 65,000,000 1.25 65,000,000 1.25

Granted 75,000,000 2.75 - -

Forfeited - - - -

Exercised (52,500,000) 1.25 - 1.25

Expired - - - -

Outstanding at year-end 87,500,000 2.50 65,000,000 1.25

Exercisable at year-end 87,500,000 2.50 65,000,000 1.25

The weighted average remaining contractual life of share options outstanding at the end of the period was two years (2007: three), and the exercise prices range from 1 cent and 3 cent.



85

Expenses Arising from Share-Based Payment Transactions

During the Year 75,000,000 options were issued to the following Directors, Staff and Consultants:

Key Management Personnel

Number granted

Tranche Grant date Expiry date Exercise price ($)

Fair value at grant date ($)

JLC Marshall 15,000,000 A (i) 28 Nov 2007 28 Nov 2010 0.025 187,500 JLC Marshall 15,000,000 B (i) 28 Nov 2007 28 Nov 2010 0.030 180,150 BJ Warris 10,000,000 A (i) 28 Nov 2007 28 Nov 2010 0.025 125,000 BJ Warris 10,000,000 B (i) 28 Nov 2007 28 Nov 2010 0.030 120,100 NK Joyce 5,000,000 A (i) 28 Nov 2007 28 Nov 2010 0.025 62,500 NK Joyce 5,000,000 B (i) 28 Nov 2007 28 Nov 2010 0.030 60,050 Staff & Consultants

2,500,000

A (i)

28 Nov 2007 28 Nov 2010

0.025

31,250

Staff & Consultants

2,500,000

B (i)

28 Nov 2007 28 Nov 2010

0.030

30,025

Staff & Consultants

5,000,000

A (ii)

12 Dec 2007 28 Nov 2010

0.025

45,700

Staff & Consultants

5,000,000

B (ii)

12 Dec 2007 28 Nov 2010

0.030

43,650

The options were valued using a Black and Scholes model with the following inputs:

(i) Fair value per option is $0.0125 (ii) Fair value per Option is $0.009

Tranche

A Tranche

B Grant date share price ($)

0.018 0.018

Exercise price ($) 0.0250 0.030 Expected volatility 124.00% 124.00% Option life (years) 3.00 3.00 Dividend paid Nil Nil Risk free interest free 6% 6%

The number of Options issued as share based payments during the period totals 75,000,000.

Total expenses arising from share based transactions recognised during the year were as follows: Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ $ $ $ $

Options issued to directors, employees and consultants

885,925

-

885,925

-



86

28. JOINT VENTURE The principal activity of the Joint Ventures is the exploration for oil and gas. Further details on these activities are discussed in the Directors Report under Review of Operations. Equity details of Joint Ventures in place as of the balance date are as follows:

Permit Empire EP389 62.50% EP426 40.00% EP432 62.50% EP416 EP430 EP440 EP454

75.00% 87.5% 87.5% 87.5%

EP435 38.00% EP412 35.00% with the right to earn a further 45%

interest (Post Farmin 50%) EP359 33.36% EP439 30.356% EP460 22.856% EP461 30.356% EP434 20.00% EP 104 R1

14.80% 14.8%

L98-1 49.00% EP438 80.00% (Post Famin 20%) EP448 70.00% (Post Farmin 17.5%)

Joint Venture accounts incorporated in the consolidated financial statements based on above equities to 30 June 2008 are disclosed as follows:

Consolidated JV Equity

$ Assets Cash 37,101 Receivables 505,911 Capitalised Exploration Costs 1,345,826 Total Assets 1,888,838 Liabilities Creditors (193,842) Amount payable to Empire Oil & Gas NL and / or its controlled entities

(2,579,125)

Total Liabilities (2,772,967) Net Assets / Liabilities (884,129) Accumulated Losses (884,129)

29. COMPANY DETAILS

Registered Office of the Company Principal Place of Business 1 Havelock Street, West Perth Suite 7, 154 Hampden Road Western Australia Nedlands, Western Australia


88

Additional shareholder information Additional information required by Australian Securities Exchange and not shown elsewhere in this Report is as follows. The information is made up to 9 September 2008. (a) 20 Largest Shareholders – Ordinary Shares The following information is extracted from The Company’s Register of Substantial Shareholders as at 9 September 2008. The substantial shareholders pursuant to the provisions of the Corporations Law are as follows:

Name of Shareholders Ordinary Shares

Mr Brian Lesleigh Williams & Mrs Valerie Ruby Dawn Williams (Williams Superannuation Account)

36,800,000

National Nominees Limited 26,492,300 Citi Corp Nominees Pty td 22,676,122 Dr Bevan Jon Warris 20,250,000 Tyche Investments Pty Ltd 20,000,000 Canberra Nominees Pty Ltd 18,250,000 M B Anderson Nominees Pty Ltd (MB Anderson Super Fund Account)

14,550,000

Canberra Nominees Pty Ltd 12,000,000 Mr Austin John Murray 11,250,000 Brownward Pty Ltd 10,250,000 Mrs Maureen Adele Warris 10,250,000 Mr Chris Christakos 10,200,000 Mr Richmond Yuan-Rong Hua 10,000,000 Mr Peter Mcloughney 10,000,000 Mr William Douglas Goodfellow 9,788,462 Mr Ross Douglas Shield 8,900,000 Linden-O Ostriches Pty Ltd 8,475,000 Seaville Pty Ltd 8,250,000 Mr Joaquin Eastban 8,000,000 Mr Ben Kurzer & Mrs Sara Kruzererrill Lynch (Australia)

8,000,000

(b) 20 Largest Option holders Nil outstanding Listed Options as at the balance date. Please refer to the Directors’ Report for the details of the non-listed Directors’ and Staff Options outstanding as of the balance date.


89

(b) Distribution of Shareholders as at 9 September 2008 The distribution of ordinary fully paid shares in the Company is as follows:

Shares held Number of Holders

Fully Paid Ordinary Shares

100,001 plus 4,166 2,482,884,106 10,001 to 100,000 4,363 240,815,200 5,001 to 10,000 311 2,793,626 1,001 to 5,000 178 667,126 1 to 1,000 55 25,227 9,073 2,727,185,285

(d) Directors' Shareholding The Directors’ interests in the shareholding of The Company (direct and indirect combined) at 12 September 2008 are follows:

Shares Options BJ Warris 30,000,000 20,000,000 JLC Marshall 14,283,334 36,000,000 NK Joyce 19,231 10,000,000 (e) Taxation The Company is taxed as a public company.


90

EMPIRE OIL & GAS NL TENEMENT SCHEDULE

As at 12 September 2008 PERTH BASIN Permit No. Drilling Prospects Permit Holders Equity

Held Programme Status Potential

Reserves EP 389 Gingin West

Gingin Gasfield Eclipse West Yeal Gingin Brook

Empire Oil Company (WA) Limited Wharf Resources Plc ERM Gas Pty Ltd

62.5% 25%

12.5%

45 km2 Gingin West 3D Seismic Survey acquired April-May 2008. Option well planned 1st half 2009. Planned 3D Seismic 3D Seismic planned 2D seismic planned

Gas – 212 BCF Gas – 150-200 BCF Gas – 226 BCF Oil – 25 MMBO Gas – 633 BCF

EP 426 Moriary-1 Empire Oil Company (WA) Limited

Allied Oil & Gas Plc ERM Gas Pty Ltd Black Fire Energy Limited

40% 25% 25% 10%

Drilled February 2008 To earn 10% by paying 13.33% of Moriary-1

EP 432 Mullering/Cataby

Anticlinorium Empire Oil Company (WA) Limited Allied Oil & Gas Plc ERM Gas Pty Ltd

62.5% 25%

12.5%

53 km2 Mullering 3D Seismic Survey acquired April 2008. Option well planned 1st half 2009.

Oil – 5-10 MMBO

EP 416 Wellesley Empire Oil Company (WA) Limited

Allied Oil & Gas Plc ERM Gas Pty Ltd

75% 20% 5%

50 km 2D Seismic Survey acquired March-April, 2008 Option well planned 1st half 2009.

Gas – 150 BCF

EP 430 Empire Oil Company (WA) Limited

ERM Gas Pty Ltd 87.5% 12.5%

Seismic reprocessing and interpretation

EP 440 Yeal/Cataby Oil Trend Empire Oil & Gas N.L. ERM Gas Pty Ltd

87.5% 12.5%



91

EP 454 Northern Dandaragan Trough

Empire Oil Company (WA) Limited ERM Gas Pty Ltd

87.5% 12.5%


CARNARVON BASIN Permit No. Drilling Prospects Permit Holders Equity

Held Programme Status Potential

Reserves EP 435 Rainbow-1

Rough Range Oil Pty Ltd Phoenix Resources Plc Australian Oil Company Limited Bounty Oil & Gas N.L. Black Fire Energy Limited

38% 25% 17% 10% 10%

Planned 4thQ 2008 if Bee-Eater-1 successful.

Oil – 3 MMBO

EP 412 Thornbill-1 Sandalwood Prospect

Rough Range Oil Pty Ltd Bounty Oil & Gas N.L. Jurassica Oil & Gas

35% 65%

Empire has right to go to 80% by drilling one well Paying $120,000 to earn 6%

Gas – 50 BCF

EP 359 Bee-Eater Prospect Paterson East Nabalgee Prospect

Rough Range Oil Pty Ltd Lansvale Oil & Gas Pty Ltd Pace Petroleum Pty Ltd

33.36% 63.30% 3.34%

Bee-Eater-1 planned 4thQ 2008.

Oil – 4.7 MMBO

EP 444 Amethyst Opal Topaz South

Rough Range Oil Pty Ltd

100% New farminees to pay 100% of costs of drilling two wells to earn 50%

Oil - 17 MMBO Oil - 12 MMBO

EP 439 and EP 461 (previously EP 6/06-7)

Lake MacLeod Prospect Rough Range Oil Pty Ltd Longreach Oil Limited Indigo Oil Pty Ltd Falcore Pty Ltd Vigilant Oil Pty Ltd Jurassica Oil & Gas Plc DVM International Limited Black Fire Energy Limited

30.356% 9.352% 4.676% 2.596% 0.52% 35.00% 10.00% 7.50%

Farmed out to Jurassica Oil & Gas Plc to earn 35% Farmed out to Black Fire Energy to earn 7.5% Farmed out to DVM International to earn 10% Lake Macleod-1 planned to be drilled September-October 2008

Oil – 30 MMBO

EP 460 (previously EP 5/06-7)

Star Finch-1

Rough Range Oil Pty Ltd Longreach Oil Limited Indigo Oil Pty Ltd Falcore Pty Ltd Vigilant Oil Pty Ltd Jurassica Oil & Gas Plc DVM International Limited

22.856% 9.352% 4.676% 2.596% 0.52% 40.00% 20.00%

Farmed out to Jurassica Oil & Gas Plc to earn 40% Farmed out to DVM International to earn 20% Star Finch-1 drilled June-July, 2008

EP 434 Rough Range Oil Pty Ltd Lansvale Oil & Gas Pty Ltd Pace Petroleum Pty Ltd

20.00% 70.00% 10.00%

No activity

EMPIRE OIL & GAS NL ABN: 55 063 613 730

EP 10/06-7 Rough Range Oil Pty Ltd 100% Application granted subject to Native Title agreement Two SPA applications

Rough Range Oil Pty Ltd

100.0% One north of EP 439 and one south of EP 460 Applications being processed by government Applications held in trust for EP-439, EP-460 and EP-461 joint ventures. Equities to be determined.

CANNING BASIN Permit No. Drilling

Prospects Permit Holders Equity

Held Programme Status Potential Reserves

EP 104/R1 Stokes Bay-1 Gulliver Productions Pty Ltd

Indigo Oil Pty Ltd First Australian Resources Limited Buru Energy Limited. Pancontinental Oil & Gas N.L. Emerald Gas Limited Phoenix Resources Plc

14.8% 5.5% 8.0%

37.95% 11.0% 12.75% 10.0%

Stokes Bay-1 drilled 4thQ 2007 and encountered two sands with good shows in lower Anderson. The well was deepened to 2777m and lost circulation prevented testing. The well was completed and will be tested during October 2008.

Gas Lower Anderson: 20 BCF

Nullara: 200 BCF Oil

Lower Anderson: 2.5 MMBO

Nullara: 10 MMBO L98-1 West Kora

Workover Gulliver Productions Pty Ltd Indigo Oil Pty Ltd First Australian Resources Limited Buru Energy Limited Pancontinental Oil & Gas N.L.

49% 8%

12% 19% 12%

Completed oil well. Put on pump upon Stokes Bay-1 success. Buru Energy, Emerald Gas and Phoenix Resources have the option to earn interests in L98-1 via farmin agreements with Gulliver and Indigo.

Oil – 50-100 MBO

EP 438 Hedonia Prospect Goldwyer Prospect

Gulliver Productions Pty Ltd Indigo Oil Pty Limited

80% 20%

Aeromagnetic survey completed. Seismic reprocessing in progress. ARC Energy (now Buru Energy) has exercised its option to earn 75% Gulliver acquired Maneroo interest

Oil – 5 MMBO

EP 448

No prospects yet defined

Gulliver Productions Pty Ltd Indigo Oil Pty Limited Uranium Oil & Gas Limited

70.5% 20% 10%

Aeromagnetic survey completed. Seismic reprocessing in progress. ARC Energy (now Buru Energy) has exercised its option to earn 75% Gulliver acquired Maneroo interest

Legend: BCF Billion Cubic Feet MMBO Million Barrels of Oil MBO Thousand Barrels of Oil TCF Trillion Cubic Feet

NOTICE OF ANNUAL

GENERAL MEETING

Notice is hereby given that the 2008

Annual General Meeting of

shareholders of

Empire Oil & Gas NL

will be held at

the University Club

University of Western Australia

35 Stirling Highway

Crawley

Western Australia

(Enter via Hackett Drive, Entrance No.1,

Carpark 3)

On Wednesday

26 November 2008

At 10.00 am

93

E M P I R E O I L & G A S N L

A BN 5 5 0 6 3 6 1 3 7 3 0

NOTICE OF ANNUAL GENERAL MEETING

EXPLANATORY MEMORANDUM

PROXY FORM

This document should be read in its entirety. If after reading this Notice of Meeting,

you have any questions or doubts as to how you should vote, you should contact

your stockbroker, solicitor, accountant or professional adviser.

AGENDA

ORDINARY BUSINESS:

1 Financial Statements and Reports

for 2008

To receive and consider the Annual Financial

Statements (including the Directors’ Declaration) and

reports of the Directors and Auditors for the financial

year ended 30 June 2008.

To consider and if thought fit to pass

with or without amendments the

following resolutions as ordinary

resolutions.

2 Ordinary Resolution – Adoption of

Remuneration Report

‘That for all purposes, Shareholders adopt the

Remuneration Report set out in the Directors’ Report

for the year ended 30 June 2008’

Please note that the vote on this resolution is advisory

only, and does not bind the Directors or

the Company.

3 Ordinary Resolution - Re-election of

Director

‘That Mr N K Joyce being a Director of the Company

retires in accordance with rule 74.2 of the Company’s

Constitution and being eligible for re-election is

hereby re-elected as a Director of the Company.’

4 Ratification of Issue of Shares on

29 August 2008

‘That pursuant to and in accordance with Listing Rule

7.4 of the Listing Rules of the ASX, the Shareholders

approve and ratify the prior issue and allotment by

the Company of 85 million ordinary shares ranking

pari passu with the Company’s existing shares, on or

about 29 August 2008 at an issue price of $0.0135

(1.35 cents) per share to the investors listed in Item 4

of the Explanatory Memorandum.’

Voting Exclusion Statement

The Company will disregard any votes cast on this

resolution by:

• the persons listed in Ordinary Resolution 4 of the

Explanatory Memorandum; and

• any associate of that person or those persons.

However, the Company need not disregard a vote if:

• it is cast by person as proxy for a person who is

entitled to vote, in accordance with the directions on

the proxy form; or

• it is cast by the person chairing the meeting as

proxy for a person who is entitled to vote, in

accordance with a direction on the proxy form to

vote as the proxy decides.

‘Snap-Shot’ Time

The Corporations Act permits the Company to

specify a time, not more than 48 hours before the

meeting, at which a ‘snap shot’ of Shareholders will be

taken for the purposes of determining Shareholder

entitlement to vote at the meeting.

The Company’s Directors have determined that all

shares of the Company that are quoted on ASX at

5.00 pm WST Monday 24 November 2008 shall for

the purposes of determining voting entitlements at

the Annual General Meeting, be taken to be held by

the persons registered as holding the shares at that

time.

PROXIES

Please note that:

(a) A member of the Company entitled to attend and

vote at the Annual General Meeting is entitled to

appoint a proxy;

(b) A proxy need not be a member of the Company;

and

(c) A member of the Company entitled to cast two or

more votes is appointed to exercise , but where the

proportions is not specified each proxy may exercise

half of the votes.

EMPIRE

94

NOTICE OF ANNUAL GENERAL MEETINGAND EXPLANATORY NOTES

OIL & GAS NL

The enclosed proxy form provides further details on

appointing proxies and lodging proxy forms,

By order of the Board

NK Joyce

Company Secretary

Empire Oil & Gas NL

29 September 2008

EXPLANATORY MEMORANDUMRELATING TO THE RESOLUTIONSTO BE PUT TO THESHAREHOLDERS OF THECOMPANY AT ITS ANNUALGENERAL MEETING TO BE HELDON 26 NOVEMBER 2008 AT10.00 AM

This Explanatory Memorandum has been prepared for

the information of the Company Shareholders in

relation to the business to be conducted at the

Company’s Annual General Meeting to be held at The

University Club, The University of Western Australia,

Crawley, Western Australia on 26 November 2008

commencing at 10.00 am.

This Explanatory Memorandum has been prepared for

the information of Shareholders in relation to the

business to be conducted at the Company’s 2008

Annual General Meeting.

The purpose of this Explanatory Memorandum is to

provide Shareholders with all information known to

the Company which is material to a decision on how

to vote on the resolutions in the accompanying

Notice of Annual General Meeting. This Explanatory

Statement is to be read in conjunction with the

Notice of Annual General Meeting.

Definitions

In this Explanatory Memorandum, the following

terms have the following meanings:

‘ASX’ means Australian Securities Exchange Limited;

‘Board’ means the directors of the Company;

‘Company’ means Empire Oil & Gas NL (ABN 55 063

613 730);

‘Directors’ means each of Mr J L Craig Marshall, Dr

Bevan Warris and Mr Neil Joyce;

‘Listing Rules’ mean the Listing Rules of the ASX;

‘Meeting’ means the meeting of Shareholders

convened by the Notice;

‘Notice’ means the notice of meeting dated the 29th

of September 2008 to which this Explanatory

Memorandum is attached;

‘Share’ means a fully paid ordinary share in the

Company; and

‘Shareholder’ means a person registered in the

Company’s register as the holder of a Share.

95


Financial Statements and Reports for 2008

The Annual Financial Report, Directors’ Report and

Auditor’s Report for the Company for the year ending

30 June 2008 will be laid before the meeting.

There is no requirement for Shareholders to approve

these reports. However, the Chairman will allow a

reasonable opportunity for Shareholders to ask

questions or make comments about those reports and

the management of the Company. Shareholders will

also be given a reasonable opportunity to ask the

auditor questions about the conduct of the audit and

the preparation and content of the Auditor’s Report.

In additions to taking questions at the meeting,

written questions may be submitted to the Chairman

about the management of the Company, or to the

Company’s Auditor about:

• The preparation and content of the Auditor’s Report

• The conduct of the audit

• Accounting policies adopted by the Company in

relation to the preparation of the financial statements;

and

• The independence of the auditor in relation to the

conduct of the audit,

no later than 5 days before the meeting date to:

N K Joyce

Company Secretary

Suite 7, 154 Hampden Road,

Nedlands WA 6009

Or email or fax to the Company offices on:

email address: [email protected]

Fax number: 08 9386 6812

Ordinary Resolution 2: Adoption of

Remuneration Report

Section 298 of the Corporations Act requires that the

Annual Directors’ Report contain a Remuneration

Report prepared in accordance with Section 300A of

the Corporations Act.

The Remuneration Report of the Company for the

financial year ending 30 June 2008 is set out in the

Directors’ Report on pages 41 to 46 of the Company’s

remuneration arrangement for the Directors and

seniors executives of the Company.

Section 250R(2) of the Corporations Act requires

companies to put a resolution to their members that

the Remuneration Report be adopted. Pursuant to

section 250R(3), the vote on this resolution is

advisory only and does not bind the Board or the

Company.

A reasonable opportunity will be given for the

discussion of the Remuneration Report at the

meeting.

Ordinary Resolution 3 - Re-election of

Director

In accordance with Listing Rule 14.4 and the

Company’s Constitution, at every Annual General

Meeting, one third of the Directors for the time being

must retire from Office and are eligible for re-

election. The Directors to retire are to be those who

have been in office for 3 years since their

appointment or last re-appointment or who have been

the longest in office since their appointment or last

re-appointment or, if the Directors have been in

office for an equal length of time, by agreement.

Resolution 4 seeks approval for the re-election of Mr

N K Joyce as Director of the Company with effect

from the end of the meeting.

96


EMPIRE

97

Applicant New Shares

1 Mr Stephen John Miller 1,200,000

2 RF Management Pty Ltd <Super Fund A/C> 1,500,000

3 Mr Richard King & Mrs Diane King 2,000,000

<King Super Fund A/C>

4 Greenbak Pty Ltd <Green Family A/C> 2,500,000

5 Winphil Pty Ltd 3,000,000

6 Mr Matthew Matthews 2,000,000

7 Mallum Trading Pty Ltd 2,000,000

8 Leymar International Pty Ltd 3,000,000

9 Mr Michael Hughes & Mrs Prudence Hughes 2,500,000

<The Hughesy Super Fund A/C>

10 DS Sharp Pty Ltd <Sharp Family A/C> 800,000

11 Bonarc Pty Ltd 12,000,000

12 Mr Ying Wang 3,000,000

13 Mr Pasquale Parrottino 4,000,000

14 Mr Mark Stollery 3,000,000

15 Mr Gary Forrester & Mrs Belinda Forrester 3,000,000

16 Mr Lawrence Angelo Buono 11,000,000

17 Mrs Jeanette Green 2,500,000

18 Mr Philip Lumb & Mrs Beverley Lumb 2,000,000

<Lumb Family Super Fund A/C>

19 Ravenhill Investmentes Pty Ltd 3,000,000

<House of Equity A/C>

20 Biset Holdings Pty Ltd 3,000,000

<Kelf & Tactum Super Fund A/C>

21 Mr Stephen Brett Peruch & 3,500,000

Mrs Sharon Sylvia Peruch

22 Mr Leo Rufus & Mrs Denise Rufus 2,000,000

<The Fox Super Fund A/C>

23 Mr Nicholas Koreneff & Mrs Linda Koreneff 3,000,000

24 Amazing Grace Holdings Pty Ltd 3,000,000

<The GMR Family A/C>

25 Ms Angela Hayward 2,000,000

26 Saberline Pty Ltd <JPR Investment A/C> 2,000,000

27 Pareto Nominees Pty Ltd <The Damelle A/C> 2,500,000

Total 85,000,000

Ordinary Resolution 4 - Ratification of

Issue of Shares on 29 August 2008

On 29 August the Company allotted and issued

85,000,000 ordinary shares in Empire at a price of

$0.0135 (1.35 cents) to the following investors (none

of whom are Related Parties of the Company),

pursuant to Section 708(8) (c) of the Corporation Act

2001 to raise $1,147,500. The per share Investors are:

The funds raised were used for administration and

working capital expenses, additional exploration

expenditure and capital raising expenses. The shares

issued were fully paid ordinary shares in the capital of

Empire ranking parri passu with all existing shares.

Resolution 3 seeks ratification of the issue of these

securities pursuant to Listing Rule 7.4 of the ASX for

the purpose of effectively reinstating the maximum

limit under the Listing Rules of the ASX on the

number of securities that the Company may issue in

any 12 month period without shareholder approval.

The issue of Securities in Resolution 3 did not breach

Listing Rule 7.1 being the maximum limit of Securities

the Company was permitted to issue without the

Shareholders approval.

OIL & GAS NL

EMPIRE OIL & GAS NL

How to complete the Proxy Form

1. Your Name and Address

This is your name and address as it appears on theShare Register of Empire Oil & Gas NL. If thisinformation is incorrect, please mark the box andmake the correction on the form. Security holderssponsored by a broker should advise their broker ofany changes. Please note, you cannot changeownership of your securities using this form.

2. Appointment of a Proxy

If you wish to appoint the Chairman of the Meetingas your proxy, mark the box. If the person you wish toappoint as your proxy is someone other than theChairman of the Meeting, please write the name ofthat person. If you leave this section blank, or yournamed proxy does not attend the meeting, theChairman of the Meeting will be your proxy and voteon your behalf. A proxy need not be a security holderof Empire Oil & Gas NL.

3. Votes on Items of Business

You may direct your proxy how to vote by placing amark in one of the three boxes opposite each item ofbusiness. All your securities will be voted inaccordance with such a direction unless you indicateonly a portion of voting rights are to be voted on anyitem by inserting the percentage or number ofsecurities you wish to vote in the appropriate box orboxes. If you do not mark any of the boxes on a givenitem, your proxy will vote as he or she chooses. If youmark more than one box on an item your vote on thatitem will be invalid.

4. Appointment of a Second Proxy

If you wish to appoint a second proxy, an additionalProxy Form may be obtained by telephoning theShare Registry of Empire Oil & Gas NL or you maycopy this form.

To appoint a second proxy you must:

• indicate you wish to appoint a second proxy by

marking the box.

• on each of the first Proxy Form and the second

Proxy Form state the percentage of your voting rights

or number of securities applicable to that form.

• return both forms together in the same envelope.

5. Authorised Signature(s)

You must sign this form as follows in the spacesprovided:

Joint Holding - where the holding is in more than onename, all of the securityholders must sign.Power of Attorney - to sign under Power of Attorney,you must have already lodged this document with theregistry. If you have not previously lodged thisdocument for notation, please attach a certifiedphotocopy of the Power of Attorney to this formwhen you return it.Companies - where the Company has a Sole Directorwho is also the Sole Company Secretary, this formmust be signed by that person. If the company(pursuant to section 204A of the Corporations Act2001) does not have a Company Secretary, a SoleDirector can also sign alone. Otherwise this formmust be signed by a Director jointly with eitheranother Director or a Company Secretary. Pleaseindicate the office held by signing in theappropriate place.

If a representative of the corporation is to attend themeeting the appropriate ‘Certificate of Appointmentof Corporate Representative’ should be producedprior to admission. A form of the certificate may beobtained from the Share Registry of EmpireOil & Gas NL.

Lodgement of a Proxy

This Proxy Form (and any Power of Attorney underwhich it is signed) must be received not later than 48hours before the commencement of the meeting. AnyProxy Form received after that time will not be validfor the schedule meeting.

Documents are to be lodged by posting or faxing to:

Empire Oil & Gas N.L.

Suite 7, 154 Hampden StreetNedlandsWestern Australia6009

Telephone 08 6389 2687Facsimile 08 9386 6812email [email protected]

98

PROXY FORM

EMPIRE OIL & GAS NLABN 55 063 613 730TELEPHONE 08 6389 2687

FACSIMILE 08 9386 6812

Appointment of Proxy

I/We..................................................................................................................................................(name of shareholder)of .........................................................................................................................................................................(address)being a shareholder of Empire Oil & Gas NL are entitled to attend and vote hereby appoint

The Chairman of the Meeting (mark box with an ‘X’) OR........................................................................................(Write here the name of the person you are appointing if this person is someone other than the Chairman of the Meeting)

Or failing the person named, or if no person is named, the Chairman of the Meeting, as my/our proxy and to vote inaccordance with the following directions (or if no directions have been given, as the proxy sees fit) at the AnnualGeneral Meeting of Empire Oil & Gas NL to be held at The University Club, University of Western Australia,35 Stirling Highway, Crawley WA 6009 on Wednesday 26 November 2008 and at any adjournment of that meeting.

IMPORTANT

If the Chairman of the Meeting is to be your proxy and you do not wish to direct your proxy how to vote on thefollowing items below, please place a mark in this box

By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest inthe outcome of that item and that votes cast by him, other than as proxy holder, would be disregarded because ofthat interest. If you do not mark this box, the Chairman will not cast your votes on that Item and your votes will notbe counted in computing the required majority if a poll is called on this Item. The Chairman intends to voteundirected proxies in favour of that item.

Voting directions to your proxy - please mark ‘X ’ to indicate your directions

For Against Abstain*

1 Adoption of Remuneration Report

2 Appointment of the auditor

3 Re-election of Mr n k Joyce

4 Ratification of the issue of 85,000,000 New Shares at an issue price

of $0.0135 (1.35 cents) each. Issued pursuant to Section 708 (8) (c)

of the Corporations Act 2001 on 29 August 2008.

* If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a showof hands or on a poll, or if your voting entitlement cannot be voted by the Chairman of the Meeting, your votes willnot be counted in computing the required majority on a poll.

Appointing a second Proxy

I/We wish to appoint a second proxy (Mark with an ‘X’ if you wish to appoint a second proxy).AND........................................% OR................................................(State the percentage of your voting rights or thenumber of securities for this Proxy Form)

PLEASE SIGN IN THE APPROPRIATE space This section must be signed in accordance with the instructions over-leaf to enable your directions to be implemented.

.............................................................................................................................................................................

.Security holder 1 (Individual) Joint Security holder 2 (Individual) Joint Security holder 3 (Individual)Individual/Sole Director and Director/Company Secretary Director

Sole Company Secretary (Delete One)

ContactName........................................................................................................................................................

Contact Daytime Telephone................................................................................................Date...........................

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