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Dart Energy Limited ABN 21 122 588 505

Interim report for the half-year ended 31 December 2010

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Dart Energy Limited ABN 21 122 588 505 Interim report - 31 December 2010 Contents

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2010 and any public announcements made by Dart Energy Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The interim financial report consists of the consolidated financial statements of the consolidated entity consisting of Dart Energy Limited and its subsidiaries. The financial report is presented in the Australian currency.

Dart Energy Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office, principal place of business and registered postal address is:

Dart Energy Limited Level 11, Waterfront Place, 1 Eagle Street GPO Box 3120 Brisbane QLD 4001.

The financial report was authorised for issue by the directors on 28 February 2011. The directors have the power to amend and reissue the financial report.

Page

Directors’ report 1 Auditor’s independence declaration 6 Interim financial report

Consolidated income statement 7 Consolidated statement of comprehensive income 8 Consolidated balance sheet 9 Consolidated statement of changes in equity 10 Consolidated statement of cash flows 11 Notes to the consolidated financial statements 12 Directors' declaration 21

Independent auditor's review report to the members 22

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Dart Energy Limited Directors’ report

31 December 2010

Directors' report Your directors present their report on the consolidated entity consisting of Dart Energy Limited (Dart) and the entities it controlled at the end of, or during, the half-year ended 31 December 2010. Directors The following persons were directors of Dart during the whole of the half-year and up to the date of this report, unless otherwise stated: Nicholas Davies Non-Executive Chairman Simon Potter Managing Director and Chief Executive Officer Shaun Scott Executive Director Stephen Bizzell Executive Director David Williamson Non-Executive Director (Appointed on 21 July 2010) Peter Clarke Non-Executive Director (Appointed on 8 February 2011) Review of operations Profit after income tax amounted to $36.6 million (2009: loss of $9.2 million) after income tax credit of $0.5 million (2009: tax expense of $0.1 million).

Financial review:

A summary of consolidated revenues and results for the half-year is set out below: 31 December

2010 31 December

2009 $'000 $'000 Revenue 2,769 305 Other income (a) 44,883 - EBITDA 35,499 (9,193) Net profit/(loss) after tax 36,641 (9,246) (a) The gain on revaluation of the original 21.04% interest in Apollo Gas Limited amounting to $37.3 million is included in “Other

income". Refer to notes 4 and 14(ii) of this interim financial report for further details. Reconciliation of statutory profit/(loss) from continuing operations to EBITDA: 31 December

2010 31 December

2009 $'000 $'000 Statutory profit/(loss) before income tax 36,168 (9,139) (Less)/add back: Interest income (1,023) (294) Finance costs 201 155 Depreciation 153 85 EBITDA 35,499 (9,193)

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31 December 2010 (continued)

Review of operations (continued)

CORPORATE

Dart recruited a number of directors, key executives and management, so as to develop and enhance the overall Dart management team, both at a corporate level and in-country. Following the demerger from Arrow Energy, Dart moved into new offices in Singapore and Beijing, and a new office was established in Brisbane. On 2 September 2010, Dart acquired a 10% stake in Composite Energy Ltd (Composite) by subscription of US$7 million. Composite is a company engaged in the CBM and shale gas business in Europe and currently has a portfolio of 15 CBM permits in the United Kingdom and two in Poland. On 28 February 2011 Dart announced that it had reached agreement to acquire the 90% of Composite that it did not already own for approximately US$46.7 million. This transaction represented an acceleration and replacement of the previous arrangement entered into in August 2010 whereby Dart had an option to inject US$5 million into Composite in January 2011 for an additional 10% of Composite, and then an option to acquire the remaining 80% of Composite prior to June 2011 for US$56 million payable in Dart shares, or cash or a mix of both. In early October 2010 Dart announced that it had reached agreement with Apollo Gas Limited to make a recommended offer for all issued securities in Apollo, other than those already owned by Dart. The transaction implied an enterprise value for Apollo of approximately $145 million based on the last traded price of Dart on the ASX prior to the deal announcement. Apollo is a company engaged in the CBM, geothermal and shale gas business in NSW, Australia and currently holds a large acreage position of over 23,000km2 and includes seven CBM exploration permits and two geothermal licenses. By year end Dart Energy had successfully completed the takeover of Apollo Gas Limited. The Bidder’s Statement was lodged with the ASX on 25 October 2010, and by December 2010, Dart had secured voting power over 97% of Apollo, declared the bid as unconditional and issued compulsory acquisition notices. Apollo shares were suspended from trading on the ASX at the close of trading on 24 December 2010 in accordance with ASX listing rules. Approximately 118 million Dart shares were issued to Apollo shareholders as consideration under the takeover, increasing the total number of Dart shares on issue to approximately 547 million. The original 21.05% interest in Apollo held by Dart had been valued at $43 million resulting in a fair value gain amounting to $37 million recognised in profit or loss. On 17 December 2010, Dart exercised its option to increase its stake in Fortune Liulin Gas Ltd (FLG) from 35% to 45% for a consideration of US$8.7 million. The first instalment of this payment (US$4.35 million) was made on exercise, and the balance is due to be paid at the end of March 2011. All funds will be used by FLG to fund the ongoing work program at Liulin.

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ACCESS AND EARLY-STAGE EXPLORATION ACTIVITIES

LIULIN PSC (Shanxi, China) The exploration and pilot testing campaign on the Liulin PSC continued throughout the period. Fortune Liulin Gas Company (FLG), in which Dart has a 45% stake (30 June 2010: 35%), completed in-seam pilot wells in both the seam 3/4/5 and seam 8/9 cal measures.

DAJING PSC (Xinjiang, China) In May 2010, PetroChina and Dart signed a PSC to explore for natural gas within the Dajing block, whereby PetroChina will hold a 51% interest and Dart will hold a 49% interest. Under the PSC, Dart will act as operator. The PSC arrangement is awaiting regulatory approval from the Chinese Ministry of Commerce. Depending on approval timing, Dart intends to commence a 14-well exploration campaign. SANGATTA WEST PSC (East Kalimantan, Indonesia) The Sangatta West work program and budget for the balance of 2010 and 2011 was approved by both the Sangatta West Operating Committees and the Indonesian regulators. MURALIM PSC (Sumatra, Indonesia) On 3 December 2010, Dart Energy signed a new PSC in relation to the Muralim block (formerly known as the Kebur block) in South Sumatra. The participating interest is shared 50% Dart and 50% Medco Energi, an independent Indonesian oil & gas company, with Dart Energy holding operatorship. The PSC covers an area of 983 km2 in the South Sumatra basin. Dart Energy’s intended work program this year will be to drill a number of core-wells which, depending on the success of the exploration activities, would be followed by a pilot project in the subsequent year. TANJUNG ENIM PSC (Sumatra, Indonesia) All permits and land access for the work program on this PSC were secured, and the budget approved by the Indonesian regulator. TANJUNG AREAS (South Kalimantan, Indonesia) A joint evaluation of the Tanjung 1 area in South Kalimantan was completed. The Indonesian Government has now divided this area into several PSCs with an area of around 1,000 km2 each. Based on this division, Dart has expressed interest in several of the areas, and during the half-year commenced evaluation and due diligence of those specific areas, ahead of entering into PSC negotiations. ASSAM AND SATPURA (CBM-IV Blocks, India) In July 2010, Dart was awarded two CBM licences as part of the Indian Government’s CBM IV bidding round - the Assam and Satpura blocks. The Environmental Impact Assessment (EIA) Terms of Reference for both blocks were approved by the Indian Ministry of Environment and Forests. This allows Dart Energy to conduct the EIA studies and undertake preparatory work for drilling over the course of 2011, with a planned 15 core-well exploration programs for each block expected to commence in early 2012. PEL458 (Newcastle, NSW, Australia) The phase 1 farm-in expenditure commitments of A$3 million for 15% of PEL458 were completed by Arrow Energy Limited and transferred to Dart as part of the demerger scheme during the half-year. In addition, on 13 December 2010, Dart had also obtained control of Apollo Gas Limited, giving it 100% interest in PEL 458. APOLLO LICENCES (NSW, Australia) Work began on finalising 2011’s accelerated drilling campaign, to consist of a 10 hole exploration program across six of Apollo Gas’ exploration licences in New South Wales, Australia. Environmental and land access permits were secured for most of the drilling program, with the remainder to be sought in the early part of 2011. Lucas Drilling has been awarded the drilling contract, and drilling is expected to commence during the Q1 2011. 47.6 km2 of 2D line seismic was acquired in the western portion of PEL 459. Processing of the data is currently underway. MILEJOW AND USCB CONCESSIONS (Poland, Composite-held licences) Composite Energy secured two new licences in Poland – the Upper Silesian Coal Basin licence (which was acquired from another European operator) and the Milejow concession, proximate to Composite’s Chelm permit.

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APPRAISAL AND PILOT ACTIVITIES

LIULIN PSC (SHANXI, CHINA) The 2010 exploration and pilot testing campaign on the Liulin PSC was completed by year end. Over the course of 2010, a total of 46 vertical wells and 4 inseam wells were drilled by FLG and CUCBM. As at year end, 19 vertical wells and 4 in-seam wells are undergoing production testing. Commercial gas rates (according to Chinese reserve certification standards) have been observed, with some in-seam wells producing 9,000 cubic metres per day (315,000 cubic feet per day) in the early phase of production testing.

SANGATTA WEST PSC (East Kalimantan, Indonesia) Site preparation for the planned pilot wells and facilities was completed. TATAPANI RAMKOLA (CBM III block, India) A five-well phase 2 drilling program was completed on the block, and wells are currently being dewatered and production tested. Associated surface facilities were completed. A decision in relation to phase-2 drilling (of up to 15 wells) will be made following analysis of the phase 1 well results. This is expected to not be prior to 2H2011. HANOI TROUGH PSC (Hanoi, Vietnam) Dart applied for an extension of the PSC exploration period for the purpose of enabling further technical studies and, if appropriate, pilot testing at the Hanoi Trough block. PEL 458 (Newcastle, NSW, Australia) Following encouraging results from drilling earlier in 2010, Dart has progressed planning for a surface to in-seam (SIS) pilot at Fullerton Cove, north of Newcastle. Environmental and access approvals are currently in progress. Final budgeting, contracts and procurement processes are underway, with initial works expected to commence in during Q2 2011. PEL 456 (Upper Hunter, NSW, Australia) On 15 November 2010, farm-in partner Santos QNT elected to proceed to Phases 2B and 2C of the farm-in work program to earn a further 35% interest in the CBM rights in PEL 456. Phases 2B and 2C consist of a multi-well pilot and associated testing, the drilling of further exploration core holes and the acquisition of walkaway vertical seismic profiles. Drilling for the appraisal pilot is expected to commence during 2H2011. PEDL 133 (Airth, Scotland, Composite-held licence) A pilot programme for PEDL 133 was designed and a detailed planning consent request was lodged with the local council, with approval expected during Q1 2011.

COMMERCIALISATION ACTIVITIES

LIULIN PSC (Shanxi, China) In September 2010, an initial 15-year Gas Sales Agreement for the Liulin block was signed, for an annual volume of 1.4 Bcf, commencing 1 July 2011, with take-or-pay arrangements commencing 1 July 2012. Initial prices for the gas under this agreement will be in the order of US$6.60 / Mcf, subject to annual review and escalation. Initial discussions commenced in relation to a second GSA for Liulin, which would provide gas to a local power utility.

INDONESIA (Sangatta West, East Kalimantan and Tanjung Enim, South Sumatra) Engagement with central and local governments, General Electric as Independent Power Producer and the Indonesian State Owned Electricity Company was progressed to enable early commercialisation at both of these blocks via pilot to power projects.

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Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 6. Rounding of amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the directors' report and financial report. Amounts in the directors' report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order. This report is made in accordance with a resolution of directors. Stephen Bizzell Director Brisbane 28 February 2011

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Auditor's Independence Declaration As lead auditor for the review of Dart Energy Limited for the half-year ended 31 December 2010, I declare that, to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation

to the review; and

(b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Dart Energy Limited and the entities it controlled during the period.

Robert Hubbard Brisbane Partner PricewaterhouseCoopers 28 February 2011

PricewaterhouseCoopers, ABN 52 780 433 757 Riverside Centre, 123 Eagle Street, GPO BOX 150, BRISBANE QLD 4001 DX 77 Brisbane, Australia T +61 7 3257 5000, F +61 7 3257 5999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation

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Dart Energy Limited Consolidated income statement

For the half-year ended 31 December 2010

Half-year Consolidated

31 December

2010 31 December

2009

Notes $'000 $'000

Revenue 3 2,769 305

Other income 4 44,883 - Consultancy cost (1,867) (1,279) Depreciation (153) (85) Employee compensation (5,158) (3,812) Field related cost (684) (2) Office supplies (277) (149) Professional fees (523) (185) Occupancy cost (711) (296) Travel and accommodation (455) (1,455) Foreign exchange loss (1,050) (649) Other expenses (494) (1,377) Expenses, excluding finance costs (11,372) (9,289) Finance costs (201) (155) Total expenses (11,573) (9,444) Share of net profit of associates accounted for using the equity method 89 - Profit/(loss) before income tax 36,168 (9,139) Income tax credit/(expense) 473 (107) Profit/(loss) for the half-year 36,641 (9,246) Profit/(loss) is attributable to:

Owners of Dart Energy Limited 38,099 (8,338) Non-controlling interests (1,458) (908)

36,641 (9,246) Cents Cents Earnings/(loss) per share for profit/(loss) attributable to the ordinary equity holders of the company: Basic earnings/(loss) per share 11(d) 9.0 (2.6) Diluted earnings/(loss) per share 11(d) 8.5 (2.6)

The above consolidated income statement should be read in conjunction with the accompanying notes.

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Dart Energy Limited Consolidated statement of comprehensive income



31 December

2010 31 December

2009

$'000 $'000

Profit/(loss) for the half-year 36,641 (9,246)

Other comprehensive loss Exchange differences on translation of foreign operations (21,845) (7,715) Other comprehensive loss for the half-year, net of tax (21,845) (7,715) Total comprehensive income/(loss) for the half-year 14,796 (16,961) Total comprehensive income/(loss) for the half-year is attributable to:

Owners of Dart Energy Limited 25,361 (15,282) Non-controlling interests (10,565) (1,679)

14,796 (16,961)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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Dart Energy Limited Consolidated balance sheet

As at 31 December 2010

Consolidated 31 December 30 June 2010 2010 Notes $'000 $'000

ASSETS Current assets Cash and cash equivalents 5 61,065 14,713 Trade and other receivables 6 4,658 29,331 Inventories 634 401 Financial assets at fair value through profit or loss 7 26,261 11,733 Derivative financial instruments 1,090 812 Total current assets 93,708 56,990 Non-current assets Other receivables 8,589 2,401 Investments accounted for using the equity method 8 21,195 14,807 Property, plant and equipment 1,382 678 Goodwill 10 28,600 12,301 Exploration 9 282,397 20,215 Total non-current assets 342,163 50,402 Total assets 435,871 107,392 LIABILITIES Current liabilities Trade and other payables 9,492 5,508 Borrowings 235 - Current tax liabilities 280 253 Total current liabilities 10,007 5,761 Non-current liabilities Deferred tax liabilities 10 19,503 392 Provisions 5,525 773 Total non-current liabilities 25,028 1,165 Total liabilities 35,035 6,926 Net assets 400,836 100,466 EQUITY Contributed equity 11 233,036 45,456 Reserves 102,124 78,990 Retained profits/(accumulated losses) 9,329 (28,770) Capital and reserves attributable to owners of Dart Energy Limited 344,489 95,676 Non-controlling interests 56,347 4,790 Total equity 400,836 100,466

The above consolidated balance sheet should be read in conjunction with the accompanying notes. For

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Dart Energy Limited Consolidated statement of changes in equity


Attributable to owners of Dart Energy Limited

Consolidated Contributed

equity Reserves

Retained profits/

(accumulated losses) Total

Non-controlling

interests Total

equity

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 July 2009 - 83,595 (11,697) 71,898 7,210 79,108 Total comprehensive loss for the half-year - (6,944) (8,338) (15,282) (1,679) (16,961)

Balance at 31 December 2009 - 76,651 (20,035) 56,616 5,531 62,147

Attributable to owners of Dart Energy Limited

Consolidated Contributed

equity Reserves

Retained profits/

(accumulated losses) Total

Non-controlling

interests Total

equity

Notes $'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 July 2010 45,456 78,990 (28,770) 95,676 4,790 100,466 Total comprehensive income/(loss) for the half-year - (12,738) 38,099 25,361 (10,565) 14,796 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs 11 187,580 - - 187,580 - 187,580 Acquisition of subsidiary 13,14 - - - - 62,122 62,122 Employee share based payment 12 - 1,458 - 1,458 - 1,458 Acquisition of Apollo options 12 - 34,414 - 34,414 - 34,414 187,580 35,872 - 223,452 62,122 285,574 Balance at 31 December 2010 233,036 102,124 9,329 344,489 56,347 400,836 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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Dart Energy Limited Consolidated statement of cash flows



31 December

2010 31 December

2009

Notes $'000 $'000

Cash flows from operating activities Total profit/(loss) after income tax 36,641 (9,246) Adjustments for : - Income tax (credit)/expense (473) 107 - Depreciation 153 85 - Interest income 3 (1,023) (294) - Interest expense 201 155 - Share of profit of associated company (89) - - Non-cash employee benefits expense – share based payments 1,458 - - Fair value gains on financial assets at fair value through profit or loss 4 (7,119) - - Gain on revaluation of existing interest in acquired entity 4 (37,345) - - Fair value gains from derivative financial instruments 4 (419) - - Translation adjustments (4,308) (3,910) (12,323) (13,103) Changes in working capital - Trade and other receivables 7,505 6,488 - Inventories (233) (173) - Trade and other payables (1,357) (3,394) Cash used in operations (6,408) (10,182) Income taxes paid (282) (379) Interest received 612 294 Interest paid (201) (155) Net cash used in operating activities (6,279) (10,422) Cash flows from investing activities Payments for property, plant and equipment (257) (108) Payments for exploration and evaluation capitalised cost (8,805) (4,376) Net cash inflow from acquisition of subsidiaries 14 7,510 - Investment in associate (4,410) (6,690) Net cash used in investing activities (5,962) (11,174) Cash flows from financing activities Repayment of borrowings (2,875) - Bank deposits pledged (6,279) - Proceeds from issuance of share capital, net of transaction costs 61,989 - Net cash provided by financing activities 52,835 - Net increase/(decrease) in cash and cash equivalents 40,594 (21,596) Cash and cash equivalents at the beginning of the half-year 11,378 39,344 Effects of exchange rate changes on cash and cash equivalents (521) 1,178 Cash and cash equivalents at end of the half-year 5 51,451 18,926

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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Dart Energy Limited Notes to the consolidated financial statements

31 December 2010

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1 Basis of preparation of half-year report This general purpose interim financial report for the half-year reporting period ended 31 December 2010 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2010 and any public announcements made by Dart Energy Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

(a) Impact of standards issued but not yet applied by the Group In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB’s annual improvements project. This included an amendment to AASB 134 Interim Financial Reporting. The amendments place greater emphasis on the disclosure principles in AASB 134 involving significant events and transactions and may require additional disclosure. The standard is not applicable until 1 January 2011. Since the date of the 30 June 2010 annual report, there have been no other relevant new or amended standards issued and not yet applied by the Group.

2 Segment information (a) Description of segments Geographical segments Management has determined a number of operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. These consider the business from a geographical perspective and there are thus seven reportable segments, being: Australia, China, India, Indonesia, Vietnam, Europe and Singapore. Australia The home country of the parent entity which is also the venue of the parent entity listing. Subsequent to year end, the segment comprises farm-in assets in Australia, recently acquired Apollo Gas Limited assets and holdings in various Australian listed entities. China Comprises a PSC in China, and investment in entities that conduct CBM activities in China, including participation in PSCs. Also, this comprises the Chinese operations of the company, including in-country staff and office. Indonesia Comprises three PSCs in Indonesia, and investment in entities that conduct CBM activities in Indonesia, including participation in PSCs. Also, this comprises the Indonesian operations of the Company, including in-country staff and office. Vietnam Comprises a PSC in Vietnam. Also, this comprises the Vietnamese operations of the Company, including in-country staff and office. India Comprises licences for the extraction of CBM in India. Also, this comprises the Indian operations of the Company, including in-country staff and office. Singapore/Corporate Comprises a head office function, including most senior management staff and functions.

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2 Segment information (continued) Europe Comprises licenses in Poland and UK. Also, this comprises the European operations of the Company, including in-country staff and office. (b) Segment information provided to the Board The segment information for the reportable segments for the half-year ended 31 December 2010 is as follows: • Segment assets and capital expenditure are allocated based on where the assets are located.

• Segment results (EBITDA) are adjusted earnings/(loss) before interest, tax, depreciation and amortisation, which is the

measure of segment result that is reported to the Board to assess the performance of the operating segments.

• Segment total assets refers to the measure of the Group’s intangible assets (goodwill and exploration), property, plant and equipment, investments in associates and financial instruments (derivative options and convertible exchange note in Far East Energy Corporation).

• Unallocated assets relate to cash, trade and other receivables and inventories.

Segment Revenues from sales to

External Customers Segment Total Assets Segment Results

(EBITDA)

31 December 2010 $'000

31 December 2009 $'000

31 December 2010 $'000

30 June 2010 $'000

31 December 2010 $'000

31 December 2009 $'000

Australia - - 223,444 - 39,871 (168) India - - 2,447 2,032 (172) (49) Indonesia - - 9,193 8,320 (571) (2,215) China - - 43,771 39,026 3,255 (954) Vietnam - - 10,620 10,855 (100) (61) Singapore/Corporate - - 348 313 (5,583) (5,746) Europe - - 71,103 - (1,201) - - - 360,926 60,546 35,499 (9,193) Unallocated assets 74,945 46,846 Total assets 435,871 107,392

Half-year

Consolidated

31 December

2010 31 December

2009 $'000 $'000 EBITDA reconciliation 35,499 (9,193) Interest income 1,023 294 Finance costs (201) (155) Depreciation (153) (85) Profit/(loss) before income tax 36,168 (9,139)

3 Revenue Half-year

Consolidated

31 December

2010 31 December

2009 $'000 $'000

Other revenue Interest income - bank deposit 447 98 Interest income - convertible loan note 576 196 Production sharing contracts fees and charges 1,746 11 2,769 305

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4 Other income Half-year

Consolidated

31 December

2010 31 December

2009

$'000 $'000

Fair value gains on financial assets at fair value through profit or loss 7,119 - Gain on revaluation of existing interest in acquired entity [refer to note 14 (ii)](a)] 37,345 - Fair value gains from derivative financial instruments 419 - 44,883 - (a) The gain on revaluation of existing interest in acquired entity is not taxable.

5 Current assets – Cash and cash equivalents Consolidated

31 December

2010 30 June

2010

$'000 $'000

Cash at bank and on hand 50,432 10,022 Share of cash held in joint ventures 1,019 1,356 Bank deposits pledged 9,614 3,335 61,065 14,713

(a) Reconciliation to cash at the end of the period

The above figures are reconciled to cash at the end of the financial period as shown in the statement of cash flows as follows:

Consolidated

31 December

2010 30 June

2010

$'000 $'000

Balances as above 61,065 14,713 Less: Bank deposits pledged (9,614) (3,335) Balances per statement of cash flows 51,451 11,378

6 Current assets – Trade and other receivables Post completion of demerger, receivables due from Arrow Energy Limited amounting to $24 million were settled with the group.

7 Current assets - Financial assets at fair value through profit or loss Consolidated 31 December 30 June 2010 2010 $'000 $'000

Convertible loan note 12,473 11,733 Listed securities – equity securities (a) 13,788 - 26,261 11,733 (a) Relates to investments in Bow Energy Limited and LNG Limited transferred to Dart Energy Limited as part of the

demerger from Arrow Energy Limited.

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8 Non-current assets - Investments accounted for using the equity method

Consolidated 31 December 30 June 2010 2010 $'000 $'000

Opening balance 14,807 - Foreign currency translation (2,389) - Acquisition during the period (a) 8,688 14,793 Transfer of Apollo Gas Limited from Arrow Energy Limited on demerger (b) 5,750 - Disposal of Apollo Gas Limited (b) (5,750) - Share of net profit of associates 89 14 Ending balance 21,195 14,807 (a) In December 2010, Dart exercised its option to increase its equity stake in Fortune Liulin Gas Ltd (FLG) from 35% to 45%

in consideration for cash of US$8,700,000 (of which 50% is to be paid in March 2011).

(b) Refer to note 14(ii) for further details.

9 Non-current assets – Exploration costs


Cost 285,544 23,362 Accumulated impairment (3,147) (3,147) Net book amount 282,397 20,215 Opening balance – cost 23,362 16,013 Foreign currency translation (11,793) (605) Additions during the period 8,805 7,954 Assets transferred from Arrow Energy Limited during demerger 4,385 - Acquisition of subsidiaries (note 14) - Composite 62,805 - - Apollo 197,980 - Ending balance – cost 285,544 23,362 10 Goodwill and deferred tax liabilities

The increase in these balances is primarily due to the acquisitions of Apollo Gas Limited and Composite Energy Limited (refer to note 14).

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11 Contributed equity

31 December

2010 30 June

2010 31 December

2010 30 June

2010 Shares Shares $’000 $’000 (a) Share capital Ordinary shares

Fully paid 546,270,264 45,000,001 233,036 45,456 (b) Movements in ordinary share capital:

Date Details Number of

shares $’000 1 July 2009 Opening balance 1 - Share based payments settled through equity - 456 New issue of shares to Arrow Energy Limited 45,000,000 45,000 30 June 2010 Balance 45,000,001 45,456 1 July 2010 Opening balance 45,000,001 45,456 Issued shares to parent entity associated with demerger from Arrow

Energy Limited 21,470,691 21,471

Demerger dividends to shareholders 300,777,492 - New issue of shares 52,500,000 36,225 Exercise of options 10,000,000 4,000 Issue of shares to Apollo Gas Limited shareholders associated with

acquisition of the entity

116,522,080

125,262 Shares not yet issued* 2,056 234,470 Less: Transaction costs arising on share issues (1,434) 31 December 2010 Balance 546,270,264 233,036 * Represents the acquisition date value of shares to be issued subsequent to year end to the remaining Apollo Gas Limited shareholders under the

compulsory acquisition rules. (c) 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. (d) Earnings per share – weighted average number of shares

31 December 30 December 2010 2009 ‘000 ‘000

Weighted average number of shares used as the denominator Basic earnings per share 424,879 322,248 Diluted earnings per share 446,775 322,248

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12 Reserves and retained profits/(accumulated losses)


(a) Reserves Foreign currency translation reserve (27,174) (14,436) Merger reserve 4,633 4,633 Reserve arising on disposal of non-controlling interest in subsidiary 88,793 88,793 Share-based payments reserve 35,872 - 102,124 78,990 Movements: Foreign currency translation reserve

Opening balance (14,436) (9,831) Currency translation differences arising during the period (12,738) (4,605) Ending balance (27,174) (14,436)

Movements: Merger reserve

Opening and ending balance 4,633 4,633 Movements: Reserve arising on disposal of non-controlling interest in subsidiary

Opening and ending balance 88,793 88,793 Movements: Share-based payments reserves

Opening balance - - Employee share based payment 1,458 - Acquisition of Apollo options 34,414 - Ending balance 35,872 -

(b) Retained earnings/(accumulated losses) Opening balance (28,770) (11,697) Net profit/(losses) for the period 38,099 (17,073) Ending balance 9,329 (28,770) 13 Non-controlling interests


Arising on initial investment by Shell in Dart Energy (CBM) International Pte Ltd 10,268 10,268 Interest in foreign currency translation reserve (11,951) (2,844) Interest in retained profits/(accumulated losses) - Shell (3,141) (2,683) Interest in retained profits/(accumulated losses) - CJV 110 49 Arising on initial investment by Dart in Composite Energy Limited 62,122 - Interest in retained losses – Composite Energy Limited (1,061) - 56,347 4,790

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14 Business combinations

(i) Composite Energy Limited On 2 September 2010, Dart Energy Limited (Dart) acquired 10% of the shares in Composite Energy Limited (Composite) for US$7 million. The purchase and sales agreement included options in respect of the remaining 90% interest in Composite. The existence of Dart’s call options, which are currently exercisable, results in Dart having the capacity to control Composite. Therefore, this acquisition has been accounted for as a business combination in accordance with AASB 3 (revised) Business Combinations and Composite is included in the consolidated financial statements of Dart. On 28 February 2011 Dart announced that it had reached agreement to acquire the 90% of Composite that it did not already own for approximately US$46.7 million. This transaction represented an acceleration and replacement of the previous arrangement entered into in August 2010 whereby Dart had an option to inject US$5 million into Composite in January 2011 for an additional 10% of Composite, and then an option to acquire the remaining 80% of Composite prior to June 2011 for US$56 million payable in Dart shares, or cash or a mix of both. The acquired business contributed revenues of $1,215,000 and net loss $1,066,000 to the group for the period from 2 September to 31 December 2010. If the acquisition had occurred on 1 July 2010, consolidated revenue and profit for the half-year would have been $1,883,000 higher and $1,366,000 lower respectively. These amounts have been calculated using the group’s accounting policies. Acquisition costs amounting to $304,660 had been recognised in the profit or loss.

$'000 Acquisition value Cash paid 7,872 Value of non-controlling interests 62,122 Total 69,994 Fair value of net identifiable assets acquired 55,011 Goodwill 14,983

The goodwill is attributable to the strategic benefit from the potential to generate revenue from gas sales and other commercial advantages. (a) Cash flow information Consolidated 31 December 2010

$'000

Outflow of cash to acquire business Cash consideration 7,872

Less: Cash acquired (8,364) (Inflow) of cash (492)

(b) Assets and liabilities acquired The assets and liabilities arising from the acquisition are as follows:

Acquiree’s carrying amount Fair value

$'000 $'000

Cash 8,364 8,364 Trade and other receivables 6,367 6,367 Property, plant and equipment 579 579 Intangible assets – exploration (refer to note 9) 9,297 62,805 Investments accounted for using the equity method 274 274 Trade and other payables (1,192) (1,192) Provisions and other liabilities (4,094) (4,094) Borrowings (3,109) (3,109) Deferred tax liability - (14,983) Net identifiable assets acquired 16,486 55,011

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14 Business combinations (continued)

(i) Composite Energy Limited (continued) (b) Assets and liabilities acquired (continued)

Net assets acquired The fair values of the assets and liabilities acquired are provisional pending finalisation of the fair values within 12 months of acquisition. Acquired receivables The fair value of trade and other receivables is $6,367,000 which is equal to their gross contractual cash flows. All the receivables are expected to be collectible. (ii) Apollo Gas Limited On 13 December 2010, Dart acquired a further 78.96% of the shares in Apollo Gas Limited (Apollo). This acquisition, together with 21.04% of the shares already owned gave Dart a total interest of 100% of the shares in Apollo. Consideration for the shares acquired was $127,318,000 which is attributable to a swap of 3 ordinary Dart shares for every 4 ordinary Apollo shares. In addition, options with a value of $34,414,000 were issued to Apollo option holders. A fair value gain on the initial 21.04% investment held by Dart amounting to $37,345,000 (refer to note 4) was recognised, valuing the original 21.04% at $43,095,000. The acquired business contributed revenues of $Nil and net loss of $Nil to the group for the period from 13 December to 31 December 2010. If the acquisition had occurred on 1 July 2010, consolidated revenue and profit for the half-year would have been $472,000 higher and $2,949,000 lower respectively. These amounts have been calculated using the group’s accounting policies. Acquisition costs amounting to $407,000 had been recognised in the profit or loss.

$'000 Acquisition value Fair value of shares and options issued 204,827 Fair value of net identifiable assets acquired 199,427 Goodwill 5,400

The goodwill is attributable to the strategic benefit from the potential to generate revenue from gas sales and other commercial advantages. (a) Cash flow information Consolidated 31 December 2010

$'000

Outflow of cash to acquire business Cash consideration - Less: Balances acquired Cash 7,018 (Inflow) of cash (7,018)

(b) Assets and liabilities acquired The assets and liabilities arising from the acquisition are as follows:

Acquiree’s carrying amount Fair value

$'000 $'000

Cash 7,018 7,018 Trade and other receivables 439 439 Property, plant and equipment 23 23 Intangible assets – exploration (refer to note 9) 4,154 197,980 Trade and other payables (633) (633)

Deferred tax liability - (5,400)

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Net identifiable assets acquired 11,001 199,427 14 Business combinations (continued) (ii) Apollo Gas Limited (continued) (b) Assets and liabilities acquired (continued) Net assets acquired The fair values of the assets and liabilities acquired are provisional pending finalisation of the fair values within 12 months of acquisition. Acquired receivables The fair value of trade and other receivables is $439,000 which is equal to their gross contractual cash flows. All the receivables are expected to be collectible. 15 Events occurring after the reporting period (a) Extension of exploration period for the Hanoi Trough PSC

The exploration period for the Hanoi Trough PSC in Vietnam was extended, effective 1 November 2010, for a period of 12 months, to enable further studies to be conducted, following which Dart will be required to decide on whether it wishes to enter into a pilot well drilling programme.

(b) Memorandum of understanding with Kazakhstan

On 25 January 2011, Dart signed a Memorandum of Understanding with the Government of the Karaganda region in Kazakhstan, to undertake a joint evaluation study of CBM potential in that province during the remaining period of 2011.

(c) Early acquisition of Composite Energy Limited

On 28 February Dart announced that it had reached agreement to acquire the 90% of Composite that it did not already own for approximately US$46.7 million.

This transaction represented an acceleration and replacement of the previous arrangement entered into in August 2010 whereby Dart had an option to inject US$5 million into Composite in January 2011 for an additional 10% of Composite, and then an option to acquire the remaining 80% of Composite prior to June 2011 for US$56 million payable in Dart shares, or cash or a mix of both.

(d) Partial conversion of convertible loan note On 31 January 2011, Dart made a partial conversion of the convertible loan note (refer to note 7) amounting to A$3,940,000 (US$4,000,000) for 8,421,053 Far East Energy Corporation shares.

(e) Shares issued to remaining Apollo Gas Limited shareholders On 4 February 2011, in accordance with the compulsory acquisition rules, 1,912,304 shares amounting to $2,055,727 has

been issued to the remaining Apollo Gas Limited shareholders.

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Dart Energy Limited Directors' declaration

31 December 2010 In the directors' opinion:

(a) the financial statements and notes set out on pages 7 to 20 are in accordance with the Corporations Act 2001, including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

(ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2010 and of its performance for the half-year ended on that date, and

(b) there are reasonable grounds to believe that Dart Energy Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

Stephen Bizzell Director 28 February 2011

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Independent auditor’s review report to the members of Dart Energy Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Dart Energy Limited, which comprises the balance sheet as at 31 December 2010, and the income statement, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, selected explanatory notes and the directors’ declaration for the Dart Energy Limited Group (the consolidated entity). The consolidated entity comprises both Dart Energy Limited (the company) and the entities it controlled during that half-year.

Directors’ responsibility for the half-year financial report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Dart Energy Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. It also includes reading the other information included with the financial report to determine whether it contains any material inconsistencies with the financial report. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our review was not designed to provide assurance on internal controls.

Our review did not involve an analysis of the prudence of business decisions made by directors or management.



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Independent auditor’s review report to the members of Dart Energy Limited (continued)

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Dart Energy Limited is not in accordance with the Corporations Act 2001 including:

(a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance for the half-year ended on that date; and

(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

PricewaterhouseCoopers Robert Hubbard Brisbane Partner 28 February 2011



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