GEEC.L Regulatory News (GEEC)

7 November 2011

Great Eastern Energy Corporation Limited

("Great Eastern" or "the Company")

Interim Results

For the six months ended 30 September 2011

Great Eastern Energy Corporation Limited (LSE: GEEC), the fully integrated, leading Indian Coal Bed Methane (CBM) company, is pleased to announce its Interim Results for the six months ended September 30, 2011.

Highlights

Financials:

·; Total revenue increased by 89% to US$ 11.42m (Six month period ended September 30, 2010: US$ 6.04m)

·; EBITDA increased by 148% to US$ 6.77m (Six month period ended September 30, 2010: US$ 2.73m)

·; PAT [pre MTM*] US$ 2.16m (Six month period ended September 30, 2010: loss [pre MTM*] of US$ 1.44 m)

·; PAT [after MTM*] loss of US $ 4.92m (Six month period ended September 30, 2010: loss [after MTM*] of US$ 1.26m)

* MTM (Mark to Market) is on account of the restatement of the foreign currency loans and derivatives. There is no MTM impact on cash flows during the period.

Upstream:

·; Exit Production on September 30, 2011 was 8.36 mmscfd

·; A total of 96 wells drilled

·; 5 more core wells drilled; 13 core wells so far; 1 more being drilled

·; Total of 68 wells dewatering and producing gas, a 66% increase over the previous year figure of the corresponding period

·; Total of 71 wells fractured, a 51% increase over the previous year figure of the corresponding period

·; Second drilling rig commissioned and in operation

·; Second Fracturing unit in operation

Notwithstanding a particularly severe monsoon season in Raniganj, we have continued to progress our operational plan according to our target.

Downstream:

·; Great Eastern continues to supply to its existing customer base while adding further new industrial customers;

·; Additional contracts/MOU signed from July 2011 for 0.48 mmscfd;

·; 34.29 mmscfd gas under contract/MOU (33.81 mmscfd at July, 2011)

·; The Company has sufficient contracts in hand to meet its projected production targets;

·; Further discussions underway with major industrial customers.

Expected exit production levels:

Exit Production Range

(mmscfd)

31-Mar-12 14.6 - 16.2

30-Sep-12 21.7 - 24.1

Prashant Modi, President and COO of Great Eastern, commented:

"We have continued to make excellent progress in the period, delivering significant growth in production, revenue and profits and we therefore expect to meet market expectations for the full year.

We have signed the Petroleum Exploration License for the Mannargudi block meaning that work here will commence in H1 2012.

Production ramp up is on schedule and the deployment of a second rig at Raniganj will allow up to 40 wells per year to be drilled. This, and the commencement of deviated wells and multiple wells from the same location, will also accelerate production."

Enquiries:

Chairman's Statement

Financials

In the first six months of FY 2011-12 Great Eastern made excellent progress across the business, delivering significant growth in production, revenue and profit.

The increase in revenue and profit was as a result of the significant uplift in gas production and corresponding sales. With existing gas sales contracts / MOU in place, any increase in production is immediately reflected in enhanced revenues, and further revenue and profit growth is expected this year.

Total revenue increased by 89% to US$ 11.42m in the first half over the corresponding period last year.EBITDA increased by 148% to US$ 6.77m in the first half over the corresponding period last year.

At the PAT level (pre MTM) the company has made a significant profit of US$ 2.16m as compared to loss (pre MTM) of US$ 1.44m for the same period last year. MTM (Mark to Market) is on account of the restatement of the foreign currency loans and derivatives. There is no MTM impact on cash flows during the period.

The Company has a long term debt of US$ 93.60 m as at September 30, 2011.

The Company is in negotiations with a leading bank to arrange further debt. The same is expected to be in place by January 2012.

The supply and demand dynamic for Indian gas, and the pricing environment, remains extremely attractive and is likely to remain so for some years to come.

Drilling, Production & Reserves

Production ramp-up is on schedule (as announced at final results in May, 2011). A total of 96 wells have now been drilled at our world-class Raniganj block, with a total of 68 wells dewatering and producing gas, a 66% increase over the previous year.

A second frac unit is in operation and accordingly, the frac rate is expected to increase to up to 40 wells per year. In the last 30 days we have fracced 4 wells after the monsoons were over. The Company has more than sufficient wells in-hand and planned to ensure a significant further uplift in production over the next 12 months as new wells come on-stream.

The deployment of a second rig at Raniganj will allow up to 40 wells per year to be drilled, and should accelerate our ability to meet our stated target to have drilled a further 204 wells over the next six years. The commencement of drilling of deviated wells from a single well site, and the drilling of multiple wells from the same location, will also accelerate production, with increased time efficiency and faster completions. Deviated drilling is scheduled to commence in the last week of November 2011. The slight delay is due to the ship transporting the equipment being delayed at sea. We expect production from Raniganj to continue to increase substantially going forward.

The Company is pleased to announce that it has signed the Petroleum Exploration License (PEL) for the Mannargudi block. The Company has also applied for the Environment Clearance which is in process. Work is expected to start in H1 2012, and will consist of 30 pilot production wells and 50 core holes.

Sales, Marketing, & Distribution

Since July 2011 additional contracts were signed for 0.48 mmscfd. In total, the Company has 34.29. mmscfd gas under contract / MOU. This represents an increase of 38% over the period ended September 30, 2010.

Great Eastern is well placed to be the supplier of choice for gas resources in the highly industrialised area of West Bengal, where we are located, where demand is both substantial and growing. Our position as supplier of choice to our local customers is underpinned by our fully-functioning infrastructure, including our pipeline which runs through the key industrial areas

In respect of pricing, the Asian Gas price is expected to increase on Japanese gas demand increase and current spot LNG prices are up at around US$ 17 per mmbtu, which may rise to US$ 25 per mmbtu (source: Bank of America report). We have maintained rupee earnings on pricing.

Mannargudi CBM Block

The Mannargudi Block covers an effective area of 667 sq. km. and is located in the southern part of the country.

As previously reported, the Company signed a CBM Contract with the Government of India on July 29, 2010. As noted above the Company has signed the Petroleum Exploration License (PEL) with the Government of Tamil Nadu and work is expected to start in H1 2012.

Quality, Health, Safety and Environment Accreditation (QHSE)

Great Eastern is pleased to be awarded the following certifications by TUV NORD CERT GmbH for its operations in Raniganj and also for its Corporate Office at Gurgaon:

o ISO 9001:2008 (Quality Management System);

o OHSAS 18001:2007 (Occupational Health & Safety Assessment Series); and

o ISO 14001:2004 (Environmental Management System)

Great Eastern is the first CBM Company in India to receive the above certification.

CSR

Great Eastern aims to be a responsible and transparent business in the areas in which it operates, and the Company works closely with stakeholders to ensure that the economic value generated by its operations is applied effectively to address important aspects of local need.

In 2011 we have strengthened our relationships with the local communities in which we operate through a number of projects, including the sponsorship of medical centres, sporting events and community health initiatives. We also maintained our focus on local employment, environmental impact awareness, and achieved an excellent health and safety record.

I would like to thank our management team and all personnel for their ongoing contribution to our continuing success.

Outlook

2011 provides us with an opportunity to build on the success of 2010. The Raniganj Block continues to increase production, and project execution will be helped by the second rig and best-of-breed fracturing technology. We have the infrastructure in place to meet the needs of the multiple large industrial customers in the region, and consequently each increase in production feeds directly through to revenue.

In the Mannargudi block, the Environment Clearance is in process. Work is expected to start in H1 2012, and will consist of 30 pilot production wells and 50 core holes.

In the last 30 days we have fracced 4 wells after the monsoons were over, which should enable us to complete up to 40 wells per year.

Looking further ahead we have an exciting drilling schedule with some 204 wells planned to be drilled over the next six years on the Raniganj block alone, and we look forward to delivering future value for our shareholders.

Independent Auditors' Report on review of condensed interim financial statements

To the Board of Directors of

Great Eastern Energy Corporation limited

Introduction

We have reviewed the accompanying condensed statement of financial position of Great Eastern Energy Corporation Limited as at 30 September 2011, the condensed income statement, the condensed statement of comprehensive income, changes in equity and cash flows for the six months period then ended and notes to the interim financial information ("the condensed interim financial statements"). Management is responsible for the preparation and presentation of these condensed interim financial statements in accordance with IAS 34 Interim Financial Reporting. Our responsibility is to express a conclusion on these condensed interim financial statements based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagement 2410 Review of Interim Financial Information performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial statements, as at 30 September 2011, is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting.

KPMG

Place: Gurgaon

Date: 5 November 2011

Great Eastern Energy Corporation Limited

Condensed statement of financial position

(All amounts in US dollars unless otherwise stated)

Great Eastern Energy Corporation Limited

Condensed statement of comprehensive income

(All amounts in US dollars unless otherwise stated)

Great Eastern Energy Corporation Limited

Condensed statement of financial position

(All amounts in US dollars unless otherwise stated)

For the six months ended 30 September 2010 (Unaudited)

* During the previous year, the Company spent USD 1,101,482 towards proceeds of equity capital. The amount was considered as prepayment though it was required to be adjusted from the related proceeds. Accordingly, this has been adjusted from the opening balance of share premium (along with the consequential adjustment in foreign currency translation reserve).

Share premium represents the premium paid by shareholders on issue of shares and is net of equity transaction costs. Under the Indian Companies Act, 1956 such a reserve has a restricted usage.

Great Eastern Energy Corporation Limited

Condensed statement of changes in equity

(All amounts in US dollars unless otherwise stated)

For the six months ended 30 September 2011 (Unaudited)

Great Eastern Energy Corporation Limited

Condensed statement of comprehensive income

(All amounts in US dollars unless otherwise stated) 

Great Eastern Energy Corporation Limited

(All amounts in US dollars unless otherwise stated)

Notes to condensed interim financial statements

1. Organisation and nature of operations

Great Eastern Energy Corporation Limited ('GEECL' or 'the Company') is a public limited company incorporated in India with its registered office at M-10, ADDA Industrial Area, Asansol-713305, West Bengal, India. GEECL's shares were listed as Global Depository Receipts in the Alternate Investment Market, London, upto 27 May 2010. The Company made a publication of its prospectus in relation to the introduction of its Global Depositary Receipts ('GDRs') to the standard list on the official list of the UK Listing Authority (the 'Official List') and admission to trading on the London Stock Exchange Plc's Main Market for listed securities (the 'Main Market'). Pursuant to the admission of its GDRs to the standard list on the official list and commencement of trading in the GDRs on the main market on 28 May 2010, trading of the Company's GDRs on AIM has been cancelled.

The Company was incorporated in 1992 to explore, develop, distribute and market Coal Bed Methane gas or CBM gas in India. GEECL originally entered into a license agreement in December 1993 with Coal India Limited (CIL) for exploration and development of CBM over an area of approximately 210 Sq. km (approximately 52,000 acres) in the Raniganj coalfields of West Bengal (the block). Following the transfer of CBM administration in India from the Ministry of Coal to the Ministry of Petroleum and Natural Gas (MoPNG), the Company entered into Production Sharing Contract (PSC) for CBM gas on 31 May 2001 with the Government of India for the block.

The PSC has been effective from 9 November 2001 as a result of the granting by Government of West Bengal of the Petroleum Exploration License on the same date and provides for a five year initial assessment and market development phase, followed by a five year development phase and then a twenty-five year production phase, extendable with the approval of the Government of India (GOI). Besides this, during the previous year, the Company was awarded with Mannargudi block located in Tamil Nadu under CBM IV round for which the Production Sharing Contract was signed with the Government of India on 29 July 2010. In this regard, the Company has applied for issuing two PEL on September 16, 2010 to the Hon'ble Chief Secretary, Government of Tamil Nadu. One of the PEL has been granted on 13 September 2011.

The Company does not have any subsidiary, associate or joint venture and accordingly, does not require any consolidated financial statements. Hence, these financial statements are individual financial statements of the Company.

The financial statements of the Company as at and for the year ended 31 March 2011 are available upon request from the Company's registered office at M-10, ADDA Industrial Area, Asansol-713305, West Bengal, India, or at www.geecl.com.

2. Statement of compliance

These condensed interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. These condensed interim financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the financial statements of the Company as at and for the year ended 31 March 2011. These condensed interim financial statements have been authorised to issue by the Board of Directors in its meeting held on 5 November 2011.

3. Change in presentation of condensed statement of comprehensive income

Till 31 March 2011, the Company had presented a single statement of comprehensive income, which includes all components of profit or loss and other comprehensive income. During the six months ended 30 September 2011, the Company has changed the manner of presentation and has presented two statements, being an 'income statement' (which displays components of profit or loss) followed immediately by a separate 'statement of comprehensive income' (which begins with profit or loss as reported in the income statement and displays components of other comprehensive income to sum to total comprehensive income for the period).

4. Significant accounting policies

The accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 31 March 2011.

5. Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by the management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those applied to the financial statements as at and for the year ended 31 March 2011

6. Financial risk management

The Company's financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended 31 March 2011, except for the amendment of existing risk management policy during the six months period ended 30 September 2011 by inclusion of following clauses to facilitate the Company to enter into Indian Rupee derivative transactions and arrangements pursuant to the guidelines/norms of Reserve Bank of India:

i) The risk limits for various risk exposures.

ii) Hedging in cases where currency of the hedge is different from the currency of the underlying exposure.

iii) Various types of cost reduction structure as permitted and defined by Reserve Bank of India.

7. Segment reporting

Chief Operating Decision Maker (CODM) reviews the business as one operating segment, being the extraction and sale of CBM gas. Hence, no separate segment information has been furnished herewith.

8. a) Property, plant and equipment

During the six-month period ended 30 September 2011, the company has acquired assests with cost (including capitalized borrowing cost) of USD 14,392,426 September 2010:USD 12,935,9331

Movements in property, plant and equipment are as follows:

During the previous year ended 31 March 2011, the Company had adopted the amendment as per IAS 17, Leases. The amendment was effective for periods beginning on or after 1 January 2010 and provides guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating, using the general principles of IAS 17.

As a result, the Company had changed its accounting policy with respect to those leases for land which transfer to the Company substantially all risks and rewards incidental to the ownership. Such leases have been considered as finance leases and hence reclassified from "prepayments" to "property, plant and equipment" in accordance with the above amendment. Consequently, the cumulative amortization of prepayments had also been reclassified to accumulated amortization on leasehold land with retrospective effect.

In line with the principles given in IAS 8, this change in accounting policy had been applied retrospectively and, accordingly, balances as at 31 March 2010 were also restated. As a result, the carrying amount of property, plant and equipment as at 31 March 2010 had been restated to USD 71,349,050 from the carrying amount of USD 71,221,372.

Well capitalisation

During the six months period ended 30 September 2011, the Company has capitalized 7 wells (30 September 2010:

 8 wells). All costs involved in drilling, cementing, fracturing and drilling of exploratory core holes are initially considered as Capital work-in-progress till the time these are ready for commercial use when they are transferred to producing properties.

Depletion: Commercially producing wells are depleted using unit of production method, based on related proved developed reserves. Proved developed reserves of gas per well are technically re-assessed, 'in house', normally at the end of each reporting period, based on technical data available.

b) Capital commitments

9. Capital work in progress

During the six month period ended 30 September 2011, the company has made additions to Capital work in progress, (including borrowing cost) of USD 11,550,063 (30 September 2010:USD 6,956,054)

Movement in Capital work in progress is as follows-

During the earlier years, the Company had incurred upfront transaction costs on arranging borrowings from a consortium of banks. The entire transaction cost was considered as borrowing cost of the year of incurrence and accounted for accordingly instead of amortising it over the period of the loan. 

During the previous year, the Company had restated the opening balance of 'capital work in progress' and 'prepayments' by USD 374,967 as at 31 March 2010 to rectify the accounting treatment in respect of above loan origination cost. The Company considers that the amount involved in restatement is not significant.

10. Intangible assets

During the six months period ended 30 September 2011, the Company has acquired intangible assets of USD 82,149 (30 September 2010: USD Nil)

11. Borrowing cost

The capitalization rate used to determine the borrowing cost eligible for capitalization is 13.21% p.a for the six months period ended 30 September 2011 ( 30 September 2010: 10.45% p.a).

During the six months period ended 30 September 2011, the Company has allocated borrowing cost of USD 2,323,006 (30 September 2010: USD 656,408) to fixed assets/capital work in progress, being directly attributable to the acquisition or construction of qualifying assets. The balance borrowing cost amounting to USD 3,091,346 (30 September 2010: USD 2,299,048) has been charged to income statement. Borrowing cost is reduced by USD 788,326 (30 September 2010: USD Nil) in respect of income on temporary deployment of borrowings by the Company.

12. Income tax

There is no current tax liability in view of losses for the current and previous periods. Deferred tax asset has not been recognized in respect of carried forward tax losses and unabsorbed depreciation because sufficient taxable temporary differences are not available and the probable taxable profits may not be available against which the benefits can be utilised.

13. Loans and borrowings

The fair value of borrowings equals their carrying amount, as the debts are at floating rates of interest with non-related parties.

Secured term loans (Indian rupee loan and foreign currency loan) are secured by:

i) First mortgage and charge over all the immovable properties and assets of the Company and property situated at MouzaIshwarpura, TalukaKadi, District Mehsana, in the state of Gujarat, both present and future.

ii) First charge by way of hypothecation on all the movables (including movable plant and machinery, machineries spares, tools and accessories and other current assets) of the Company, both present and future.

iii) First ranking charge on the Participating Interest of the Company under Raniganj Coalfields Production Sharing Contract (PSC).

iv) Assignment of (a) all the project documents in relation to the contract area; (b) all the rights, title, interest, benefits, claims and demands, whatsoever, of the Company in the project documents, any letter of credit, guarantee or performance bond that may be provided by any party to any project document in favour of the Company, all as amended, varied or supplemented from time to time; and (c) all the rights, title, interest, benefits, claims and demands, whatsoever, of the Company in or under the authorization.

v) First charge on all receivables and the bank accounts including, without limitation, the Project Capex Account, Trust and Retention Account and each of the other accounts required to be created by the Company in accordance with the Financing Documents.

vi) First charge on the intangible (including but not limited to any know how rights, patents and goodwill) and rights thereto of the Company, both present and future.

The aforesaid mortgage and charge shall rank pari-passu with mortgages and charges created/to be created in favour of the participating institutions/ banks to the project.

During the previous year, the Company had been sanctioned External Commercial Borrowings ('ECB') facility of EUR 36.50 million from ICICI Bank Ltd., Bahrain. Out of the sanctioned facility, the Company has drawn EUR 22.10 million on 29 December 2010 and EUR 10 million on 7 July 2011. During the six months period ended 30 September 2011, the Company and the lender agreed to make certain changes in the terms and conditions of the original deed of hypothecation. As per the amended and restated deed of hypothecation, the Company has primarily hypothecated the following assets as security, as and by way of first charge in favour of the lender:

i) All rights, titles, interests. benefits, claims, and demands, whatsoever of the Company, into, under and/or in respect of the Project Documents and the Clearances (both of the above hereinafter referred to as the "Contracts"), (collectively, the "First Hypothecated Properties")

ii) All and singular the moveable properties, accounts, plant and machinery, all other tangible moveable assets (both present and future) together with all benefits, rights and incidentals attached thereto which are now or shall at anytime hereafter be owned by the Company and the uncalled capital, intellectual property/ intellectual property rights, goodwill. Permitted Investments and all the other investments, rights, title and interest in the undertakings of the Company and all rights, titles, interest, property, claims and demands, whatsoever of the Company, unto and upon the same, whether presently in existence, constructed or acquired hereafter (collectively, the "Second Hypothecated Properties")

iii) All amounts, revenues, receipts and other receivables owing to, and received by, the Company from whosoever person, all rights, titles, interest, benefits, claims and demands whatsoever of the Company in, to or in respect of all amounts owing to and received by, the Company from whomsoever person, including any amounts received by the Company under contract guarantees, performance bonds, letter of credit or receivables from the shareholders of the Company or otherwise, which description shall include all properties of the above description, including the accounts in which such amounts are held (including the Project Accounts), whether presently in existence or acquired hereafter. but excluding the Distribution Account (collectively the "Third Hypothecated Properties")

iv) All amounts, revenues, receipts owing to/receivable and/or received by, the Company in relation to the Project or otherwise and all rights. titles, interest, benefits, claims and demands whatsoever of the Company in to or in respect of all amounts owing to/receivable and/or received by, the Company, both present and future, which description shall include all properties of the above description whether presently in existence or acquired hereafter (collectively, the "Fourth Hypothecated Properties") and

v) By way of a first charge, all the other moveable assets of the Company both present and future including the Distribution Account [other than the property effectively charged pursuant to the provisions of Sub-clause (i) through (iv)], (collectively. the "General Assets") provided that the charge created over the General Assets shall rank as a floating charge and shall not hinder the Company from dealing with the same or any part thereof in the ordinary course of its business in accordance with the terms of the Financing Documents and free of liens in each case unless the dealings have been restricted in accordance with the terms or its Deed or otherwise or the charge gets converted into a fixed charge and subject to and only as expressly permitted by the Financing Documents. The Company shall not, without the prior written consent of the lender, create or attempt to create any mortgage, charge, lien, pledge or hypothecation upon the General Assets.

The Security Interest created by the Company in favour of the lender on the hypothecated property by the deed rank Pari Passu with the Security Interest created/to be created in favour of existing lenders and Parallel lenders.

Car loan is secured by way of hypothecation of vehicle.

During the six months period ended 30 September 2011, the Company has converted Indian currency loan amounting to USD 3,295,441 (30 September 2010: USD 12,780,000) taken from banks to foreign currency non-resident borrowing. The loans would be again convertible to rupee loan at the end of contracted period if the loan agreement is not renewed. The other terms and conditions of the loan including security and repayments terms for the foreign currency loan remain the same as secured rupee loan.

14. Share based payment

Share options are granted to non-executive directors and eligible employees under the stock option plan ("Plan") established and operated by the Company. The plan is an equity settled plan. The Plan was established by the Company on 27 May 2008 and provides for allotment of up to 500,000 equity shares of INR 10 each (before consolidation of shares 5,000,000 equity shares of INR 1 each).

During the six months period ended 30 September 2011, the Company has modified the plan whereby employees are given phantom options under which the employees have a choice to either settle the stock options through issuance of equity shares or in cash (equivalent to a percentage, as decided by the remuneration committee, of the difference between the market price of the equity shares of the Company on the date of exercise and the exercise price). This being a compound instrument, the Company measured the fair value of the liability component and equity component as at the measurement date. The value of the equity component is zero. Accordingly, the fair value of the options as at the date of modification amounting to USD 226,145 has been reclassified from equity to liability. The amount of liability recognized is less than the amount previously recognized as an increase in equity. In this regard, no gain has been recognized, since the Company is required to recognize, as a minimum, the grant date fair value of the options granted as the cost of the share-based payment. However, the subsequent remeasurement of the liability (from the date of modification till the reporting date, i.e., 30 September 2011) is recognized in the income statement.

The options are fair valued using the Black-Scholes model as at the grant date/date of modification/reporting date, as the case may be. The share based payment charge on these options granted are amortized over the vesting period in accordance with the vesting schedule below, provided that the holders of the options continue to be an employee on the vesting date. The options must be exercised before the expiry of 9 years from the date of first vesting. All the options would vest in five equal installments on an annual basis over a five year period.

A. Charge to the condensed income statement towards share based payments and the movement in share based compensation reserve is as given below.

\* The share based payment liability is re-measured as at 30 September 2011 and the carrying amount is USD 141,279 as at 30 September 2011 (31 March 2011: USD Nil).

Great Eastern Energy Corporation Limited

(All amounts in US dollars unless otherwise stated)

B. Details of options granted:

Expected volatility was computed on the basis of the historical daily volatility of the closing price of the equity share of the Company over the expected life of the option.

Great Eastern Energy Corporation Limited

(All amounts in US dollars unless otherwise stated)

The total charge/(credit) for the six months period ended 30 September 2011 relating to employee share-based payment plans was USD (15,526) (six months period ended 30 September 2010: USD 90,694) after considering the effect ofre-measurement of liability as at 30 September 2011.

The fair value of each option award is estimated by using the Black-Scholes Option Pricing employee share-based payment model.

C. The fair value of option as at the date of modification and 30 September 2011 has been computed by using the following assumptions:

As the Company's shares are not listed on any recognised stock exchange in India, share price is determined after discounting the GDR price by 30 percent towards lack of marketability and liquidity.

D. Movement in the share options outstanding:

The remaining weighted average contractual life of options outstanding as at 30 September 2011 is 8.11 years (31 March 2011: 8.28 years).

15. Retirement benefits

The Company has two post employments unfunded benefit plans, namely gratuity and superannuation. The Company also has a funded defined contribution plan in the form of a State administered provident fund. Gratuity and superannuation are defined benefit schemes. The Company has made provision for gratuity and superannuation benefits on the basis of actuarial valuation.

16. Provisions

Movement in provision for site restoration

*The provisions created during the period ended 30 September 2011 and 2010 have been capitalised and no amount has been charged to the statement of income.

Site restoration costs

A provision for restoring the land back to its originality is created by way of site restoration costs, on a well by well basis. Such expenses are provided when the wells have been drilled substantially. These are expected to be incurred when the Company has commercially exploited the proved reserves of the well or when a well which has been drilled, has been declared as dead.

17. Commitments and Contingencies

Claims made against the Company not acknowledged as debts (including interest wherever applicable) are as follows:-

*During the six months period ended 30 September 2011, the Company, as decided by the Hon'ble High Court, has deposited an amount of USD 102,187, pending final decision on the matter.

Future cash outflows in respect of the above would be determinable on finalisation of judgments / decisions pending with various forums / authorities.

There are no new contingencies other than those disclosed in the financial statements as at and for the year ended 31 March 2011 except for certain show cause notices received from the Excise Department regarding levy of excise duty on sale of natural gas amounting to USD 68,979 and order from Sales Tax Authorities regarding levy of sales tax amounting to USD 85,500. In respect of the sales tax matter, the Company has submitted its reply.

Bank Guarantee

Counter guarantee given by the Company to its bankers and outstanding as on 30 September 2011 amounting to USD 613,121 (31 March 2011 USD 671,892) in respect of performance related guarantee commitments by a related party.

18. Related party disclosures

a) Relationship with the related parties

Related parties where control exists: The Company is controlled by Mr. Yogendra Kr. Modi, who is also the Company's ultimate controlling party.

Other related parties with whom transactions have taken place during the period and the nature of related party relationship:

b) Related party transactions

The following tables provide the total amount of transactions which have been entered into with related parties during the period ended 30 September 2011 and 30 September 2010.

c) The following tables provide the total amount outstanding with related parties as at the period end.

* Amounts recoverable from YKM Holdings Private Limited consist of USD 29,706 (31 March 2011: USD 32,553) on account of security deposits paid for property taken on lease, recoverable on expiry of lease agreement and USD 29,706 (31 March 2011: USD 32,553) on account of advance rent paid, adjustable against future occupation of property taken on lease.

d) Compensation paid to key management personnel and their relatives.

In addition to above payments, the Company during the six months period ended 30 September 2011, paid USD 4,861 (30 September 2010: USD 5,207) as sitting fees to the non-executive directors for attending various meetings and the same are included in 'other operative expenses' in the income statement. These non-executive directors have also been issued stock options by the Company under the stock options plan and the expenses for the same, recognized in the income statement during the six months period ended 30 September 2011 amounts to USD 6,375 (30 September 2010 : USD 12,132).

e) Terms and conditions of transactions with related parties

Outstanding balances at the period-end are unsecured, interest free and settlement occurs in cash. For the period ended 30 September 2011, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (30 September 2010: Nil). This assessment is undertaken each period end through examining the financial position of the related party and the market in which the related party operates.

19. Leases and arrangements containing lease

The Company enters into equipment lease and other arrangements with various contractors for development of its wells, whereby the specific assets leased by the contractors are used only at the Company's well development site and such arrangements convey the right to use the assets.

These arrangements include non-lease elements also and are being treated as well development costs along with other costs. The segregation of the lease and non-lease elements under the arrangements is not possible. The details of total expenses in this regard are as follows:

a) The Company's leasing arrangements are in respect of operating leases for premises and equipments. These leasing arrangements range normally from 12 months to 3 years and are renewable on mutual consent of parties as per mutually agreeable terms. All the lease agreements are cancellable in nature.

Lease rentals accrued during the period for the premises, equipment and site office/store yard amounting to USD 80,843 (30 September 2010: USD 73,047) have been charged to the income statement and the balance of USD 5,755 (30 September 2010: USD 7,487) has been recognized in capital work in progress.

b) The Company had taken a building on lease for 99 years, the net carrying amount of which is USD 225,646(30 September 2010: USD 250,237). Entire consideration for the building was paid during the year ended 31 March 2006 and there are no obligations in respect of future lease rentals payable.

c) The Company has taken different pieces of land on lease on which the wells are being developed. The lease period for these pieces of land generally ranges from 30 to 99 years. The Company is required to pay the entire amount of consideration as lease premium upfront upon entering into agreement for acquisition of these pieces of land and no further periodic lease rentals are payable for use of these pieces of land. The leasehold land have been classified as finance or operating lease on the basis of principles given in IAS 17. Accordingly the leasehold land determined as finance lease as at 30 September 2011 amounting to USD 169,691 (31 March 2011: USD 177,051) has been classified/reclassified to property, plant and equipment. The leasehold land determined to be operating lease as of 30 September 2011 amounting to USD 74,531 (31 March 2011: USD 81,675) continued to be recognized as prepayments and being amortized over their respective lease periods.

20. The Company uses derivative instruments to mitigate its risks associated with foreign currency fluctuation relating to underlying transactions, firm commitments, highly probable forecast transactions and certain other permissible derivative instruments.

The Company has carried out fair value of derivative instruments and recognised derivative instruments loss amounting to USD 4,614,646 (30 September 2010: credit of USD 205,334) primarily due to significant fluctuation in exchange rate during the six months period ended 30 September 2011. Further, the Company has also recognised foreign exchange loss amounting to USD 2,460,349 (30 September 2010: USD 25,699) primarily due to restatement of foreign currency denominated borrowings.

21. London stock exchange (LSE) listing

During the previous year, the Company had migrated its GDR listing from Alternative Investment Market (AIM) to the main market of LSE. In this regard, the Company made a publication of its prospectus in relation to the introduction of its Global Depositary Receipts ('GDRs') to the standard list on the official list of the UK Listing Authority (the 'Official List') and admission to trading on the London Stock Exchange Plc's Main Market for listed securities, (the 'Main Market'). Pursuant to the admission of its GDRs to the standard list on the official list and commencement of trading in the GDRs on the main market on 28 May 2010, trading of the Company's GDRs on AIM had been cancelled. The Company had incurred the total listing expenses during the year ended 31 March 2011 of USD 710,388 (31 March 2010: USD Nil), which have been expensed off during the previous year.

22. Foreign currency translation

The Company has converted Indian Rupees ('INR') balances to 'USD' equivalent balances on the following basis:

·; For conversion of all assets and liabilities, other than equity, as at the reporting dates, the exchange rates prevailing as at the reporting date have been used, which are as follows:

- as at 30 September 2011: USD 1 = INR 48.93

- as at 31 March 2011: USD 1 = INR 44.65

·; For conversion of all expenses and income on income statement and the cash flow statement, for the respective periods, periodic average exchange rates have been used, which are as follows:

- For the six months ended 30 September 2011: USD 1 = INR 45.26

- For the six months ended 30 September 2010: USD 1 = INR 46.09

23. In the condensed statement of financial position, derivative assets amounting to USD 603,953 as at 31 March 2011 have been reclassified into non-current as compared to its earlier disclosure as current, based on settlement date. Further, in the condensed income statement, the change in the fair value of derivative instrument amounting to USD (205,334) for the six month period ended 30 September 2010 has been reclassified as a part of finance income as compared to its earlier adjustment in other operating expenses, to conform to the current period classification.