PROPOSED ISSUE OF NOTES TO BE GUARANTEED BY THE COMPANY RESUMPTION OF TRADING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The securities have not been registered under the U.S. Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act. Any public offering of securities to be made in the United States will be made by means of a prospectus. Such prospectus will contain detailed information about the Company making the offer and its management and financial statements. (Incorporated in Hong Kong with limited liability under the Companies Ordinance) (Stock Code: 883) PROPOSED ISSUE OF NOTES TO BE GUARANTEED BY THE COMPANY RESUMPTION OF TRADING Reference is made to the two announcements of CNOOC Limited (the "Company") published on 13 January 2011 (the "Announcements"). Terms defined in the Announcements shall, unless the context otherwise requires, bear the same meaning herein. Attached to the English version of this announcement is the previously published Extract Information, and attached to the Chinese version of this announcement is a Chinese version of the Extract Information. The Chinese version of the Extract Information has been translated from the previously published English version of the Extract Information. Trading in the shares and debt securities of the Company on the Stock Exchange was suspended from 10:00 a.m. on 13 January 2011 pending the release of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the shares and debt securities of the Company on the Stock Exchange with effect from 9:30 a.m. on 14 January 2011. By Order of the Board CNOOC Limited Jiang Yongzhi Joint Company Secretary Hong Kong, 14 January 2011 1

As at the date of this announcement, the Board comprises the following: Executive Directors Yang Hua (Vice Chairman) Li Fanrong Wu Guangqi Non-executive Directors Fu Chengyu (Chairman) Zhou Shouwei Wu Zhenfang Independent Non-executive Directors Edgar W. K. Cheng Chiu Sung Hong Lawrence J. Lau Tse Hau Yin, Aloysius Wang Tao 2

AP P E N DI X CERT AIN DE F I NI T I O NS AND CO N VE NT I O N S US E D I N T H I S AP P E NDI X A s u s ed i n this ap p e n di x to this a nn o u n c e m e n t, r e f e r e n c es to w e, us, o u r and the C o m p a n y are to C N O O C Li mit e d, a c o m p a n y in c o rp o r at e d with li mit e d lia bilit y in the H o n g K o ng S p e ci al A d m i nist r ativ e R e gi on ( H o n g K o n g ) in A u g ust 1 99 9, and its su b si di ari e s, i n clu di n g the I ss u er, u nl es s the c o nt ext oth e r w is e r e q uir e s. All r e f e r e n c es t o C N O O C are t o C hi n a N a tio n al O f fs h or e Oil C o r po r ati o n, our i ndi r e ct c o ntr olli ng sh a r e h ol d er, an d all of its su bsi di a ri es ( ot h er th a n C N O O C Li mit e d and its s ub si di ari e s) u nl e ss the c o nt e xt ot h er w i se r e q ui r es. All r ef e r e n c es to P a r e nt G ro u p are to C N O O C, C N O O C Li m it ed and our su bsi di a ri es. A s u s ed in this a p p en di x to this a n n o u n c e m e nt, r e f er e n c e s to: C hi n a o r P R C m e a n the P e o pl e s R e pu bli c of C hin a, e x clu di n g, for pu r p os es of t his a p p e n dix to thi s a n n o un c e m e n t, H o n g K o n g, M a c a u and Ta i w a n, and r e f e r e n c es to the c e nt r al g o v er n m e n t or the P R C G ov e r n m e n t m e a n the c e nt r al g ov e r n m e nt of the P R C; G u a r a nt o r are t o C N O O C L i mit e d; Is su e r are t o C N O O C Fi n a n c e ( 20 1 1 ) L i mit e d; H o n g K o n g St o c k E x c h a n g e, S E H K o r H K S E m e a n The St o c k E x c h a n g e o f H o n g K o n g Li m it e d, L isti n g R ul e s m e a n the H o n g K o n g St o c k E x c h a n g e Listi n g R ul es and r e f er e n c e s t o N Y S E o r N e w Y ork St o c k E x c h a n g e m e a n The New Y ork Sto c k E x c h a n g e, I n c; and R e n m i nbi o r R M B o r R m b are t o the c u r r en c y o f the P R C, r e f er e n c e s t o U. S. d oll ar s o r U S $ are t o the c ur r e n c y o f the U nit e d St at e s o f A m e r i c a, and r e f er e n c e s to HK d oll a rs o r H K $ are t o the cur r e n c y o f the H o n g K o n g. We r e c o r d and p u blis h our fin a n ci al stat e m e n ts in R e n mi n bi. U nl ess ot h e r w is e stat e d in this a p p e n di x to this a n no u n c e m e n t, all tr a nsl ati o ns fr o m R e n m i n bi a m o u nts t o U. S. d oll a rs w e r e m a d e at the r at e of R m b 6. 7 81 5 to U S $ 1. 0 0, the e x c h a n g e r at e as set fo rt h in the H. 1 0 w e e k ly st ati sti c al r el e a se o f the B o ar d of G o v e r n o rs of the F e d e r al R e s e r ve S y st e m o f the U nit e d St at es o n J u ne 30, 2010. All su c h t r a nsl ati o ns in this a p p e n dix to t his a n n o u n c e m e nt are p r o vi d ed s ol el y for yo u r c o n v e ni e n c e and n o r e pr e s e nt ati on is m a d e th at the a m o u nts r ef e r r e d to h e r ei n h a v e b e e n, c oul d h av e b e e n o r c o ul d b e c on v e rt e d int o U.S. d oll a rs at any p a rti c ul ar r at e or at all. For f u rth e r in f or m a ti on r el ati n g to e x c h a n g e r at es, see E x c h a n g e R at e I nf o r m a tio n. M a r k et d at a and c e rt ai n in du str y f o r e c asts and st ati sti cs in this a p p e n di x to this a n n o u n c e m e nt h a v e b e e n o bt ai n ed from b oth p u blic and p ri v ate s o ur c e s, in cl u di ng m a rk et r es e a r c h, pu bli cl y a v ail a bl e in f o r m ati o n and in d ust ry p u bli c atio n s. Alth o u g h w e b eli eve this in f or m a ti on to be r eli a bl e, it has not b e en in d e p e n d e ntl y v e rifi e d b y us o r the I niti al P u r c h as e rs or our o r th ei r r e s p e cti ve di r e ct ors and a d vi so rs, an d n eith e r we, the I nitial P u r c h as e rs nor our or t h eir r e s p e cti v e di r e ct or s and a d vis o rs m a k e any r e p r es e nt ati o n as to the a c c ur a c y or c o m pl et e n e ss of th at i nf o r m ati o n. S u ch i nf o r m a tio n may not b e c o nsi st ent w ith oth e r in f o r m ati o n c o m p il ed w it hin or out si de the P R C. I n a d diti o n, t hir d p a rt y i n f or m a ti on pr o vi d e rs may h a v e o bt ai n ed i n fo r m a tio n from m a r ket p a rti ci p a nts and s u ch in f or m a ti on may not h a v e b e e n in d e p e nd e ntl y v e rifi e d. T his ap p e n di x to this a n n o un c e m e n t su m m a r i z es c ert ai n d o c u m e nts and oth e r inf o r m a tio n, and in v est o rs sh o ul d re f e r to th e m for a m o r e c o m p l ete un d e rst a n di n g of w h at is di s c uss e d in th os e d o c u m e n ts. I n m a kin g a n in v est m e n t d e cisi o n, each in v est o r mu st r ely o n its own e x a m i n atio n o f us, in cl udi n g the m e rits and ri s ks in v olv e d. 3

C AP I TAL I Z AT I O N The f oll o wi n g ta bl e s ets f ort h our c o ns oli d at ed c a pit ali z ati on under IF R S as at Sept e m b e r 30, 2 01 0: o n a n a ct u al b a sis; and o n a n a s a dj ust e d b asi s t o gi v e e ff e ct t o the is su a n c e o f the N ot e s and the net p ro c e e d s o f US$ billio n from s u c h is su a n c e a ft er d e d u cti n g the u n d e r w riti n g dis c o u nts and c o m m i ssi o ns and e sti m at e d of f e ri ng e x p e ns e s p a y a bl e by us. The as a dj ust e d in f or m a ti on b el o w is ill ust r ativ e o nl y. Yo u s h o uld r e ad t his t a ble t o g et h er w ith our u n a u dit ed c o ns oli d at e d fi n a n ci al st at e m e nts as of and for the ni n e m o nt hs e nd e d S ept e m b e r 30, 2010 i n cl ud e d in the se cti o n h e a d e d R e cent D e v el o p m e n ts of t his a p p e n dix to this a n no u n c e m e n t. As o f S ep t em b er 30, 2010 (In M illio ns) ( Un a u d it ed ) Act u a l As Ad j us t ed (1) Rmb US$ (2) Rmb US$ (2) Ca sh an d Ca sh Eq u iv a len ts....................... 3 7, 119.3 5, 5 4 8.0 T ime d epo s it s wit h m a tu rit y over three m o nt hs..................................................... 8, 2 0 0.0 1, 2 2 5.6 8, 2 0 0.0 1, 2 2 5.6 Sh o rt -t erm B o rro win gs : Sh o rt -t er m L o a ns and Bo r r o wi n gs............... 8, 3 0 9.8 1, 2 4 2.0 8, 3 0 9.8 1, 2 4 2.0 C u rr e nt P orti o n of L o n g-t e r m B a nk L o a ns.. 5, 4 4 3.0 8 1 3. 5 5, 4 4 3.0 8 1 3. 5 C u rr e nt P orti o n of N ot es............................. 1 6 7. 5 2 5. 1 1 6 7. 5 2 5. 1 Tot al S h ort -t e r m B o rr o w i n gs....................... 1 3, 9 2 0. 3 2, 0 8 0.6 1 3, 9 2 0. 3 2, 0 8 0.6 L o ng - t erm B o rro win g s: N o t es Of f e r e d H er e b y.................................. U S $ 5 0 0 Milli on in 6. 37 5 % L o n g-t e r m G u a r a nt e e d N ot es due 20 1 2..................... 3, 3 4 2.2 4 9 9. 5 3, 3 4 2.2 4 9 9. 5 U S $ 2 0 0 Milli on in 4. 12 5 % L o n g-t e r m G u a r a nt e e d N ot es due 20 1 3..................... 1, 3 3 3.8 1 9 9. 4 1, 3 3 3.8 1 9 9. 4 U S $ 3 0 0 Milli on in 5. 50 0 % L o n g-t e r m G u a r a nt e e d N ot es due 20 3 3..................... 1, 9 5 9.5 2 9 2. 9 1, 9 5 9.5 2 9 2. 9 O t h er L o ng -t e r m b o rr o w i n gs ( n et of c u rr e nt p o rtio n )........................................ 5, 6 5 6.6 8 4 5. 4 5, 6 5 6.6 8 4 5. 4 Tot al L on g -t e r m B o rr o w i n gs ( n et of c u rr e nt p o rtio n )........................................ 1 2, 2 9 2. 1 1, 8 3 7.2 Sh a reh old ers E q uit y O r di n a r y Sh a r e s, par v al u e H K $ 0. 02 per O r di n a r y Sh a r e; P ai d-i n C a pit al Is s u ed and O utst a n di ng....................................... 9 4 9. 3 1 4 1. 9 9 4 9. 3 1 4 1. 9 R e s er v es....................................................... 1 9 4, 6 7 1. 5 2 9, 0 9 6. 7 1 9 4, 6 7 1. 5 2 9, 0 9 6. 7 Tot al S h a r e hol d e rs E q uity........................... 1 9 5, 6 2 0. 8 2 9, 2 3 8. 6 1 9 5, 6 2 0. 8 2 9, 2 3 8. 6 Tot a l Ca p it a lizat io n (3 )................................ 221, 8 3 3. 2 3 3, 1 5 6. 4 (1 ) The as ad just e d c olu m ns re fl e ct esti m a te d net pr o c e eds re c ei v ed fr o m th e iss u an c e of the Not e s. (2 ) R e n mi nbi a mo un ts are tr a nsl at ed into U S doll a rs usi ng R m b6. 69 05 to US$ 1.00, the ex ch a ng e rat e set f ort h in the H. 10 we e kly sta tisti cal rel e as e of the Bo a rd of Gov e rn or s of the F ed e r al R es er v e S yst e m of the Unit ed St at es on S e pt e m b er 30, 201 0. (3 ) Tot al c apit al iz a tion eq u als the su m of int er e st- b e ari ng de bts plus total sha r e hol de r s eq uit y. E x c e pt as dis cl os e d or c o nt e m pl at e d in this a p p e n dix to this an n o u n c e m e n t, th er e has b e e n no m a t eri al ad v e rs e c h a n ge in our c o ns oli d at e d c a pit ali z ati o n sin c e S e pt e m b e r 30, 20 1 0. 4

S E L E CT E D C O NS O L I D ATED F I NA N CI AL D AT A AND O P E R AT I N G D ATA S elect ed H is t o rica l Co n so lid at e d F in a n cia l Da t a Yea r ended D ecem be r 31, Six M o nths ended J une 30, 2007 2008 2009 2009 2010 2010 (R mb i n milli o ns, ex cept ra ti os) (R mb i n milli o ns, ex cept ratios ) (U S$ i n mill io ns ex cept ra ti os ) (una udited ) (una udited ) (una udited ) O ther Fi n a n ci al Da ta: C a pit al e xp e ndit u res pai d (1)... 26,9 42 36,4 10 42,6 10 17,5 34 12,6 10 1,85 9 C as h p ro vid ed by (u se d f or ):... Op e r ati ng a ct iviti es.... 41,3 01 55,7 38 52,8 58 17,0 21 37,9 33 5,59 4 In v esti ng act iviti es.... (2 1,37 4) (4 8,98 4) (4 0,54 1) 10,2 57 (2 9,28 2) (4, 318 ) Fi n an ci ng a ct iviti es.... (1 0,79 9) (1 0,12 9) (9, 403 ) (4,9 83 ) 353 52 R ati o of tot al d ebt to total c api ta li za tion....... 7.9 % 8.0 % 9.7 % 8.9 % 12.9 % 12.9 % E B IT D A (2).... 49,1 35 63,9 23 56,2 68 23,0 06 46,5 15 6,859 E B IT D A margin (3).... 54.2 % 50.7 % 53.5 % 56.6 % 55.9 % 55.9 % (1 ) C a pit al e xp e ndit u res paid ex clu d es ac qui siti on ca pit al exp e ndi tu r es. (2 ) E B IT D A is cal cul at e d as tot al op er ati ng r ev e nu e min us tot al exp e ns es, plus dep r e ci ati on, de pl etio n an d a m ort iz at io n. E B I T D A sho uld not b e vi e we d as an alt e rn at iv e m e asu r e of op e r atin g r es ults or ca sh flo w s fr o m ope r ati ng ac tivi ti es as d et e r m in ed in a c co rd a n ce wi th I F R S or U. S. GAAP. E BI T D A has be e n incl ud e d be c au se it is wi de ly us ed as a fin a n ci al m e as ur e of th e pot ent ial c ap a cit y of a co m p an y to incu r and se rv ic e d ebt. E B IT D A is not a sta nd a rd m e asu r e und e r the I F R S or U. S. GA A P. We ha ve inc lu de d EB I T D A b e c au se w e b eli ev e it is a fin a n ci al m ea su r e c o m m o nly use d in the oil an d gas indus tr y. S in c e th e in dust ry is c api tal int en siv e, c apit al e xp en dit ur es fo r de v elo p m e nt and ex pl or ati on and lev els of d ebt an d inte r est e xp en s es may h av e a sign ifi c a nt im pa ct on co m p a ni es with si mil ar op e r ati ng re sult s. E B I T D A en ab le s us to m e asu r e op er ati ng pe r fo r m a n ce and pr ovi de a ge ne r al indi c at or of ou r abil ity to s er vi c e and in cu r de bt as we ll as to int er n ally fu nd e xpl or at ion and de v elo p m e nt ac tivit ie s. Ho we v e r, E B IT D A sho uld not be c on sid e r ed in isol ati on or c onst r u ed as an alt e rn ati v e to op e r ati ng inc o m e, op e r atin g c as h fl o w s or an y oth e r m ea su r e of pe r fo r m a nc e or as an in di c ato r of op er at ing pe r fo r m a n ce, liquid ity, pro fit a bility or ca sh flo w s g en e r at ed by op e ra tin g, in ve stin g an d fin an ci ng a cti viti es. E B IT D A f ai ls to a c c ou nt for ta x es, int er est e xp e ns e an d oth er no n- op e r ati ng c ash ex p en se s. E B I T D A does not co nsi d er any fu nc tio n al or leg al r eq ui re m e nts o f the busi n ess th at may r eq ui r e us to co ns e rv e and all o ca te fu nds fo r p ur po s es oth er tha n debt se r vi ce or fu ndi ng of ex plo r ati on and d ev el op m e nt a ctivi ti es. E B I T D A m e as ur es pr es e nt ed in this a pp en dix to this ann ou n c e m ent may not be co m p a ra bl e to ot he r si mil ar ly titl ed m e as u res of oth er co m p a ni es. (3 ) E DI T D A margin is c al cul at e d as E B IT D A divi d ed by tot al op e r atin g r e ve nu e s. 5

S elect ed O p era t ing Da t a The f oll o wi n g ta bl e s ets f ort h our op e r ati n g d at a for the p e ri o ds in di c at e d. Year end ed Dece m b er 31, Six M o n t hs en d ed J u n e 30, 2007 2008 2009 2009 2010 Net P rod u ct ion : Oil (d ail y a v e r a g e b bls/ d a y).................................. 3 7 1, 8 27 4 2 2, 0 68 5 0 9, 6 96 4 8 2, 1 68 6 6 4, 5 34 Gas ( d ail y a v e r a ge m m c f/ d a y).................................. 5 5 9. 6 6 2 1. 1 6 5 3. 5 587 921 Oil e q uiv al e nt ( B O E / d a y).... 4 6 9, 4 07 5 3 0, 7 28 6 2 3, 8 96 5 8 4, 7 67 8 2 2, 9 64 Av e r a g e net r e ali z e d p ri c e s: Oil (p e r b bl) (1)................. U S $ 6 6.2 6 U S $ 8 9.3 9 U S $ 6 0.6 1 U S $ 4 9.3 5 U S $ 7 6.5 9 Gas ( p er m c f) (1)............... U S $ 3. 30 U S $ 3. 83 U S $ 4. 01 U S $ 3. 90 U S $ 4. 16 O f fs h o r e C hi na lifti n g c osts ( p er B O E ) (1)(2)................. U S $ 5. 29 U S $ 6. 55 U S $ 7. 24 U S $ 6. 52 U S $ 6. 05 O v e r s e as lifti ng c osts ( p e r B O E ) (1 )(2 )......................... U S $ 1 4.3 5 U S $ 1 4.7 0 U S $ 11. 85 U S $ 1 0.8 3 U S $ 1 0.2 9 Av e r a g e lifti ng c ost ( p er B O E ) (1 )(2 )......................... U S $ 6. 48 U S $ 7. 53 U S $ 8. 03 U S $ 7. 13 U S $ 6. 80 (1 ) R e n mi nbi a m ou nts wer e tr ans la te d into U S dol la rs usi ng the r esp e cti v e ex ch a ng e rat e set fo rth in the H.10 we ek ly stati sti c al r el e as e of the Bo a rd of Gov e rn o rs of the F ed e r al R es e rv e S yst e m of the Unit e d St at es at the end of each pe ri od. (2 ) In cl ud es op er at ing ex p ens es only. 6

M AN A G E M E NT S DI S CUS S I O N AND ANAL YS IS O F F I N A N CI AL CO N DI T I O N AND RE S ULT S O F O P E R AT I O NS The foll o wi n g dis c u ssi on and a n al ysis s h o uld be r ead in c o nj u n cti on with our c o ns oli dat e d fi n a n ci al stat e m e n ts, s el e ct e d c o n soli d at e d fin a n ci al d ata, our i nt eri m c o n d e ns e d c o ns oli dat e d fin a n ci al stat e m e n ts and o p er ati ng and re s er v e s d ata, in e a ch c as e to g et h er wit h th eir a c c o m p a n y i ng n ot e s in c lu d e d el s e w h er e in this a p p e ndi x to this an n o u n c e m e n t on our pr e vi ou sl y dis cl o s ed inf o r m ati o n. Thi s se cti o n in cl u d es for w ar d -l oo ki n g stat e m e n ts th at in v ol v e ris ks and u n c ert ai nti es. Ot h er th an stat e m e n t of hist ori c al fa ct s, all stat e m e n ts i n cl u d ed i n this s e c tio n t hat addr ess a cti viti es, e v e nt s or d e v el o p m e n t s w hi c h we e x p e ct o r a nti ci pat e will or may o c c ur in the fut ur e ar e fo r w ard -l o o ki ng st at e m e n ts. Th e s e st at e m e n ts ar e b as e d on as su m p ti o ns and a nal y s es w e m a d e in li g ht of e x p eri e n c e, t o g et h er wit h our per c e pti on of hist o ri cal tre n ds, c urr ent c o nditi o ns and e x p e ct e d fut ure d e v e lo p m e n ts, as w ell as ot h er fa ct ors w e b eli e v e ar e appr o pri at e under the cir c u m st a n c e s. U n l ess the c o nt e xt oth e r wis e r eq uir es, ref er e n c e s to 2 0 0 7, 2 0 08 and 2 0 0 9 in this a pp e n di x t o this a n no u n c e m e n t ar e to our fin an ci al y e a rs e n d e d D e c e m b e r 31, 2 0 07, 2008 and 2009, re s p e cti v ely. O VE R VI E W We are a n u pst r e a m c o m p a n y s p e ci ali z e d in the e x pl or ati o n, d e v el op m e n t and p r od u cti o n of oil and n at ur al g a s. We are a m aj or oil an d n at u r al gas p ro d u c e r in of fs h o re C hin a an d al so one o f the lar g e st in d e p e n d ent oil and n at u r al gas e x pl o r ati on and d e v el o p m e nt c o m p a ni es i n the w o rl d in t er m s of r e s e r v es and p ro d u cti o n. I n a d ditio n, w e are one of the lar g est of fs h o re cr u d e oil pr o d u c ers in In d o n esi a. We h a v e f o ur m a jo r p r od u cti o n a r e as in o ff s ho r e C hi n a, w hi c h are B o h ai Bay, We s t er n S o uth C hin a S e a, E a st er n S o uth C hi n a Sea and E a st C hi n a Se a. We als o h a v e up str e a m as s ets in Ni g e ri a, A ust r ali a, A r g e nti n a, I n do n e si a and so m e ot h er c o u ntri es and w e co nti n u e to s e e k to ex p a n d our gl o b al f oot p ri nt as p art o f our r e g ul ar bu si n ess str at e gi es as d e m o n str at e d b y the t r a ns a cti o ns w e c o m pl e t ed or a n n ou n c e d in 2 0 10. For f urt h e r in f or m a ti on r e g ar di n g so m e of th es e r e c e nt p r oj e cts or a c qui sitio n s, pl e a se see R e c e nt D e v el o p m e nts R e c e nt A c q u isiti o ns. In the fi rst h alf of 2 0 10, the C o m p a n y had a n a v er a g e d ail y p r o d u ctio n of a p pr o xi m a t el y 6 6 4, 5 3 4 b a rr el s o f cr u d e oil and ap p r o xi m at el y 921 mmcf o f n at u r al g as, r e pr e s e nti ng a tot al net oil and gas p ro d u cti o n of 8 2 2, 96 4 BOE per day. 7

F A CT O RS AF F E CT I N G OUR RE S UL T S O F O P E R AT I O N S T h e r e are m a n y f a ct o rs t h at a ff e c t our r es ults o f op e r ati o ns and fi n a n ci al c o nditi o n, i n cl u di n g m ai nl y the f ollo w i n g: Oil and Gas P rices Su b st a nti ally all of our r e v e n u e s are fr o m the sal e s of oil and n at u r al g a s. T h e r ef o r e, one of the p ri m a r y f a ct or s a ff e cti n g our r e v e n u es is the p ri c es for c r u de oil and n at u r al g as. C r u d e oil p ri c es are s u bj e ct to flu c tu ati o ns due to m ar k et u n c e rt ai nty an d v a ri o us ot her f a ct o rs th at are b e y o n d our c o nt r ol, i n cl u din g, but not limit e d to o v er all e c o n o m ic c on diti o ns, su p ply an d d e m a n d d y n a m i cs for c r u d e oil and n at u r al g as, p oliti c al d e v el o p m e nts, the a bility of p et r ol e u m p r o du c in g n ati o ns to set and m ai nt ai n p ro d u cti o n le v els an d p ri c es, the p ri ce and a v ail a bility o f ot h er en e r gy s o u r c es and w e at h e r c o n ditio n s. In a d ditio n, our t y pi c al c o ntr a c ts wit h n at u r al gas b uy e rs i n cl u de p ro vi sio ns for p e ri o di c r es et s and a dj ust m e nt f o r m ul as w hi c h may r es ult in selli n g pri c e fl u ct u ati o ns. In a d diti on to di r e ctly af f e cti ng our re v e n u es an d e a r ni n gs, d e cli n e s in c r u d e oil a n d/ or n at u r al gas p ri c es may als o r es ult in the w rit e -o ff of hi g h er c ost r es e r v es and oth e r ass et s. F u rth e r m o r e, lo w e r c ru d e oil an d n at u r al gas pri c e s may r e d u c e the a m o u nt of c r u de oil and n at u r al gas w e can pr o d u c e e c o no m i c all y and r e n d er e xisti n g c o ntr a c ts th at w e h a v e e nt e r ed i nto u n e c o n o m i c al. The f ollo w i n g ta ble s ets f ort h our a v e r a g e net r e ali z e d pri c e s fo r c ru d e oil and n at u r al gas for the p e ri o ds in di c at ed: Year end ed Dece m b er 31, Six M o n t hs en d ed J u n e 30, 2007 2008 2009 2009 2010 Av era g e net rea lized p rices : C r ud e oil ( U S $ per b bl)... 6 6. 2 6 8 9. 3 9 6 0. 6 1 4 9. 3 5 7 6. 5 9 N a t ur al Gas ( U S $ per m c f).............. 3. 3 0 3. 8 3 4. 0 1 3. 9 0 4. 1 6 P ro du ct ion and S a les Vo lu m es Our r e v e n u es are also g r e atl y af f e ct e d by our p r o du c tio n and s al es v ol u m e as w ell as our p r od u ct m ix. Our c r u d e oil an d n at u r al gas p ro d u cti o n v olu m e s d e p e n d pri m a r ily o n our a bilit y to k e ep a hi g h r es e r v e r e pl a c e m e nt r ati o and to d e v el op c ur r e ntly un d e v el o p e d r es e r v es in a ti m el y and c ost - ef f e cti v e m a n n e r. We pr o d u c e and s ell dif f er e nt mi x es o f c r u de oil and n atu r al g a s, each h a vin g dif f e r e nt m a r k et p ri c es. In a d diti on, w e c o nti n ue to e x p a nd our n at u r al gas b usi n e ss a s p a rt of our b usi n ess st r at e g y and to m e et in c r e asi n g m a r k et d e m a n d in C hi n a. T h er e f o r e, in any gi v e n p eri o d, our pr o d u ct mix is su bj e ct to c h a n g e, w h i ch will al so af f e ct our r e s ults of o p e r ati o ns. 8

The f oll o w i ng t a bl e s ets f o rth our a v e r a g e d ail y net p ro d u cti o n o f cr u d e oil and n at ur al gas for the p e rio ds i ndi c a t e d: Year end ed Dece m b er 31, Six M o n t hs en d ed J u n e 30, 2007 2008 2009 2009 2010 Net pr o d u cti on of cr u d e oil ( bbl/ d a y ).......................... 3 7 1, 8 27 4 2 2, 0 68 5 0 9, 6 96 4 8 2, 1 68 6 6 4, 5 34 Net pr o d u cti on of n at u r al gas ( m m c f / d a y)................ 5 5 9. 6 6 2 1. 1 6 5 3. 5 5 8 7. 0 9 2 1. 0 Ca p it al E xp en d it u re P la ns Our abilit y to m aint ai n an d in c r e a s e our r e v e n u es, p ro fits an d c as h fl o ws d e p e n ds upon c onti n ui ng c a pit al sp e n di n g, w hi c h is su bj e ct to a n u m b e r of c o ntin g e n ci e s, s o m e of w hi c h are b e y o n d our c o ntr ol. T h e se v a ri a bl es in cl u d e: the a m o u nt of c as h fl o w s fr o m o p e r atio n s, the a v ail a bilit y and te r ms of e xt e r n al fin a n ci n g, our a bility to e x e c ut e our pr oj e ct pl a ns and co m m e n c e p r o d u ctio n on ti m e, a p p r ov als re q ui r ed from fo r ei gn g o v er n m e n ts for c e rt ai n c a pit al e x p e ndit u r es and in v est m e n ts o utsi d e the P R C, and e c o n o m i c, p oliti c al and ot h er c o n diti on s in the PRC and o v er s e as w h e re w e h a v e op e r ati o ns. The ti min g and a m o u nt o f our c a pit al sp e n di n g will als o af f e ct our r e s ults of o p er ati o ns an d fi n a n ci al c o n ditio n in a gi v e n p e ri od. P ro du ct ion Co st Co n t ro l In r e c e nt y e a rs, up str e a m d e v el o p m e nt and pr o d u cti on c osts h a v e g e n e r ally b e e n in c r e asi n g, an d as a r es ult, E&P c o m p a n i es may b e s u bj e ct to hig h e r co st pres s ur e s. Our c osts th at are su bj e ct to c o st p r es su r es in cl u de raw m a t e ri al p ri c es and s er vi c e f e es. Our p r ofit a bilit y is a ff e c t ed b y our a bilit y to c ont r ol o p e r ati ng c osts u nd e r s u ch tr e n ds. Ch a n g es in L a ws and Reg u la t io ns We c ur r e ntly h a v e o p e r ati on s a nd a ss ets m ai nl y in the PRC and al so in v a rio us f o r ei gn c o u nt ri es and r e gio n s, in c lu di n g I n d on e si a, A u st r ali a, N ig e ri a, Ar g e nti n a an d c e rt ain ot h er c o u ntri e s. We may e x p a nd our o p e r atio ns i nto a d diti o n al c o u ntri e s to f u rt h er e n h a n c e our r e s er v e b as e and di v e rsi fy our g e o gr a p hi c ri sk p ro fil e. Our non-prc int e r est s c o uld be af f e ct e d b y c h a n g es in go v e r n m e nt al poli ci e s or s o ci al inst a bilit y or ot h er p oliti c al, e c o n o mi c o r di pl o m ati c d e v el o p m e n t s in or af f e cti ng t h es e f o r ei gn n ati o ns w hi c h are not wit hin our contr ol, i n cl u di n g, a m o n g ot h e r thi n gs, a c h a n g e in c ru d e oil or n at u r al gas p ri cin g p oli c y, the ris ks of war and t er r ori s m, ex p r o pri ati o n, n ati o n ali z ati o n, r e n e goti ati o n or nulli fi c ati on o f e xisti ng c o n c e ssi o ns and c o ntr a c ts, t a x ati on p oli ci es, f o r ei gn e x c h a n g e an d r e p a tri ati o n r est ri cti o ns, c h a n gi ng p oliti c al c o n diti o ns, f or ei g n e x c h a n g e r at e flu ct u ati o ns and cu r r e n cy c o ntr ols. Our o p er a tio ns are su bj e ct to la w s and re g ul ati o ns in c o u nt ri es w h e r e w e o p e r at e. C h a n g es in su c h l a w s and r e gul ati o ns c oul d c h a n g e en vi r o n m e nt al p r ot e cti on r e q ui r e m e nts and the a m o u nts o f ta x es, r oy alti e s and ot h er a m o u nts p a y a bl e to go v e r n m e nt s o r g o v e r n m e nt al a g e n ci es. S u c h c h a n g es c o ul d al so a ff e ct our net in c o m e an d r e sult o f o p e r atio n s. M o v em en ts in E x ch an g e Ra t es We c u rr e ntl y h a v e o p e r ati o ns and a ss ets m ai nl y in the PRC and al so in v ari o us f o r ei gn c o unt ri es and r e gio n s. We d o not h e dg e ex c h a n g e r at e fl u ctu a tio ns b et w e e n the R e n m i nbi and any fo r ei g n c ur r e n ci es an d c u rr e ntl y h a v e no pl a ns to d o so. Fl u ct u ati o ns in e x c h a n g e r at e s will af f e ct the v alu e of our net ass et s, e a r ni ng s and any d e cl a r ed di vi d e n ds, and r es ult in e x c h a n ge g ai ns or lo ss e s. 9

C RI TI C AL A C CO U NT ING P O L I CE S We p r e p a r e our c o ns oli d at e d fin a n ci al stat e m e n ts in a c c o rd a n c e wit h IF RS iss u e d by the I A S B, H K F R S iss u ed by the H K I C PA, a c c o u ntin g pri n ci pl es g e n er a lly a c c e pt e d in H o n g K o n g, and the H o ng K o n g C o m p a ni e s Or di n a n c e. The p r e p a r atio n o f th es e fi n a n ci al stat e m e n ts r e qui r es m a n a g e m e nt to m a k e esti m a t es and ju d g m e nts t h at af f e ct the r e p o rt ed a m o u nts of our a ss ets and li a biliti es, the di s cl os u re of our c o nti ng e nt a ss ets and li a bilitie s as of the d at e of our fi n a n ci al st at e m e nt s, if any, and the r e p o rt ed a m o u nts of our r e v e n u es and e xp e n s es d uri n g the p eri o ds r e po rt e d. M a n a g e m e n t m a k es th e s e esti m a t es and ju d g m e nts b a s e d on hist o ri c al e x p e ri e n c e an d oth e r f a c to rs t h at are b e li ev e d to b e r e a s o n a ble under the ci r c u m st a n c e s. A ct u al r es ults may di ffer fr o m th e s e esti m a t es under dif f e r e nt as su m p ti on s or c o n ditio n s. We b eli e v e th at the f ollo w i ng sig ni fi c a nt a c c o u nti ng poli ci es may in v ol v e a hi gh e r d e gr e e of ju d g m e nt i n the p r e p a r ati on of our c o ns oli d at e d fin a n ci al st at e m e n ts. For a d ditio n al dis c u ssi o n of our si g nifi c a nt a c c o unti n g p oli ci es, see n ot e 3 to our c o ns oli d at ed fi n a n ci al stat e m e n ts for the th r e e y e a rs e n d ed D e c e m b e r 31, 2009 and n ot e 2 to our u n a u dit ed int e ri m c o n d e ns e d c o ns oli d at ed fi n a n ci al st at e m e nt s fo r the six mo nt hs e n d e d Ju n e 30, 2 01 0 in cl u d ed els e w h e r e in t his a p p e n dix to this a nn o u n c e m e n t. Oil and Gas P rop ert ies For oil and gas e x pl or ati o n, w e h a ve ado pt ed the s u c c e ss f ul ef f o rts m et ho d o f a c c o u nti n g. As a r es ult, w e c a pit ali z e i nitial a c q uisiti o n c o sts o f oil and gas p r op e rti e s. I m p a i r m e nt o f initi al a c q uisiti on c ost s is r e c o g ni z ed b a s e d o n e x pl or at o ry e x p eri e n c e and m a n a g e m e nt j ud g m e nt w hi c h in cl u d e s, but is not limit e d to, th at an y dry h ole has b e e n drill e d on the p r o p ert y; th at any drilli ng a cti vit y has c o m m e n c e d on the pr o p e rty or on ot h er p r o p e rti es n e a r by and is still under way or has b e e n fi r ml y pl a n n ed or d et e r m in e d; th at the c a rr yi ng a m o u nt o f the e x pl or ati o n and e v al u atio n as s et is u nlik el y to b e r e c o v e r ed i n f ull fr o m s u c c es sf ul d e v e lo p m e nt or by s al e; and t h at the p e ri od du ri ng w h i ch w e h a v e the ri g ht to e x pl or e in the sp e c ifi c ar e a has e xpi r e d o r will e x pir e in the n e a r fut u re and is not e x p e ct e d to b e r e n e w e d. U p on dis c o v e r y of c o m m e r c i al r es e r v e s, we tr a ns f er a c q uisiti on c osts to p r o v ed pr o p e rti es and c a pit ali z e the c osts of d rillin g an d eq ui p pi ng s u c c e ss f ul e x pl or at o ry w e lls, all d ev e lo p m e nt e x p e ndit u r e on c o nst ru c tio n, i nst all ati on or c o m p l etio n o f inf r a str u ct u re f a ciliti es su c h as pl at f or m s, pip eli n e s, p r o c es si ng pl ant s and the drilli n g of d e v el o p m e nt w e lls, and the b uil di ng of e nh a n c e d r e c o v er y f a ciliti es, in cl u di ng th os e r e n e w a ls and b ett er m e n ts th at ext e n d the e c on o m i c liv es of the a ss ets, and the r el at ed bo r r o wi n g c o sts. The c o sts in cu r r ed in inst alli n g e n h a n c ed r e c o v e r y fa ciliti es are c a pit ali z e d to g et h er wit h the d e v el o p m e nt c osts o f the r el e v a nt oil and gas pr o p e rti es. We tr e at the c osts o f un s u c c es sf ul e x pl or at o ry w e lls and all ot her r el at e d e x pl or ati o n c osts as ex p e n s es w h en in c u rr e d. Pr o d u ctiv e oil and gas p r o p erti e s and ot h er ta n gi ble and int a n gi bl e c osts o f pr o d u ci ng p r o p e rti es are a m o rti z e d usi n g the u nit - of- pr o d u cti o n m et h o d on a p ro p e rt y -by- pr o p e rty b asi s under w hi c h the r atio of pr o d u c e d oil an d gas t o the esti m a t ed r e m ai ni n g p r o v ed d e v el o p ed r es e r v es is u s ed t o d et e r mi n e the p ro vi sio n of d e p r e ci ati o n, d e pl eti on and a m o rti z ati o n. C o m m o n f a ciliti es th at are b uilt s p e cifi c a lly to s e r vi c e p ro d u cti o n di r e ctly attri b ut e d to d e sig n at e d oil an d gas p r op e rti es are a m o rti z ed b as e d on the p r o v e d d e v el o p e d r e s er v e s o f the r e s p e cti v e oil and gas pr o p e rti es on a pr o -r at a b asi s. G e n e r all y, c o m m o n f a ciliti es t h at are not b uilt s p e c ifi c all y to s er vi c e id e nti fi ed oil and gas p r op e rti es are dep r e ci at ed usi ng the str ai g ht -li ne m et h o d ov e r th eir esti m a t ed u s e ful liv e s. C osts as so ci a t ed wit h sig ni fi c a nt d e v el o p m e nt pr oj e cts are not d e p r e ci at e d u ntil c o m m e r c i al pr o d u cti on co m m e n c e s and the r es e r v es r el at e d to th os e c ost s are ex c lu d e d fr o m the c al c ul atio n of d e p r e ci ati o n. We a m o rti z e c a pit ali z e d a c q uisiti on co sts of p ro v e d p ro p e rti es b y the u nit - of- p ro d u cti o n m et h o d on a p r op e rt y - by- p ro p e rt y b asis b a s ed o n the tot al e sti m at e d u nits of pr o v e d r es e r v es. 10

We r e c o g ni z e the a m o u nt of the esti m at e d c ost of dis m a n tl e m e nt and dis c o u nt e d the a m o u nt to its p r es e nt v al u e usi n g a c u rr e nt pr e -tax r at e t h at r e fl e cts, w h e r e ap p r o pri at e, the ris ks s p e ci fi c to the li a bilit y. C h a n g es in the e sti m at e d ti mi ng of di s m a ntl e m e n t c o st esti m a t es are d e alt with p ro s p e cti v ely by r e c or di n g a n a dj ust m e nt to the p r o visi o n, an d a c or r es p o n di ng a dju st m e nt to p r o p ert y, pl a nt and e qui p m e n t. We in c lu d e d the u n wi n di n g of the di s c o unt o n the dis m a n tl e m e nt p r o visi on as a fi n a n c e c o st. Res erv es E st im a t ion Pu r su a nt to the a m e n d m e n ts to the oil and gas r es e r v e esti m a tio n r e q uir e m e n ts under the S E C s fin al r ul es on M o d e r ni z ati o n of Oil and Gas R e p orti n g, w hi c h b e c a m e ef f e cti v e for a c c o u nti ng p e ri o ds e n d e d on or a ft e r D e c e m b e r 31, 20 0 9, w e use the a v e r a g e, fir st- d a y - of-t h e - m o nth oil pri c e s du ri ng the 12- m o n th p e ri od b e f or e the e ndi n g d at e o f the p e ri od c ov e r e d b y the co n s olid at e d fi n a n ci al st at e m e nts to esti m a te our p r o v ed oil and gas r e s e rv e s. Year - end pri c e s w e re us e d for the esti m a ti on in the p ast acco u nti ng p eri o ds. H o w e v e r, it is n eit h er p r a cti c al nor c o st- e ff e c tiv e for our m a n a g e m e nt to e sti m at e the ef f e ct of s u ch ch a n g e in a c c o u nti ng p r e cis el y. I mp a irm en t of Ass ets We m a k e an ass e ss m e nt w h e n e v e r ev e nt s o r c h a n g es in ci r c u m st a n c es in di c at e th at the c a rr yi n g a m o u nt of an as s et may not b e r e c o v er a bl e, or w h e n th e r e is any in di c ati o n th at a n im p ai r m e nt lo ss p r e vio u sly r e c o g ni z ed for a n as s et in pri o r y e a rs may no lo n g e r e xist o r may h a v e d e c r e a s e d. I n any e v e nt, w e w o ul d m a k e a n e sti m at e o f the as s et s r e c o v er a bl e a m o u nt, w hi c h is c al c ul at ed as the hi g h er o f the a ss et s v al u e in use or its net s ellin g p ri c e. We r e c o g ni z e a n i m p ai r m e nt los s o nly if the c a rr yi n g a m o u nt o f a n a ss et ex c e e d s its r e c o v er a bl e a m o u nt. We c h ar g e an i m p ai r m e nt l oss t o the c on s olid at e d st at e m e nt of c o m p r e h e n siv e i n c o m e in the p eri o d in w hi c h it ari s es. A r e v e rs al of a n im p ai r m e nt lo ss is c r e dit ed to the c on s olid at e d st at e m e nt of c o m p r e h e nsi v e in c o m e in the p eri o d in w hi ch it ari s es. P ro v is io ns We r e c o g ni z e a pr o vi sio n w h e n a p r es e nt obli g ati o n (l e g al o r con str u cti v e) has a ris e n as a r es ult o f a p ast e v e nt and it is pr o b a bl e th at a f ut ur e o utfl o w of r es o u r c es w ill b e r e q uir e d to s e ttle the o bli g ati on pr o vi d e d th at a r eli a bl e esti m a te can b e m a d e of the a m o u nt of the o blig ati o n. Wh e n the ef f e ct o f di s c ou nti n g is m a t eri al, the a m o u nt r e c o g ni z e d for a p r o visi on is the pr e s e nt v al u e at the r e p orti n g d at e o f the f ut u r e e x p e n dit ur e s e x p e ct e d to b e r e q ui r e d to s ettl e the o blig ati o n. The in c r e a s e in the dis c o u nt e d p r es e nt v alu e a m o u nt a risi ng fr o m the p as s a g e of ti m e is in cl u d e d in fi n a n ce c osts in the co n s olid at e d st at e m e nt o f c o m p r e h e nsi v e in c o m e. We m a k e p r o visi o ns for dis m a n tl e m e nt b a s ed on the p r es e nt v al u e of our f utu r e c ost s e x p e ct e d to b e in c ur r e d, o n a p r o p ert y - by- p r op e rt y b asis, in r es p e ct of our e x p e ct e d di s m a ntl e m e nt and a b a nd o n m e nt c ost s at the end of the r el at e d oil e x pl or a tio n and r e c o v e ry a ctiviti e s. Def erred Tax D e f e r r e d tax is p r o vi d e d, u si ng the lia bility m e t ho d, o n all te m p o r a ry dif f e r e n c es at the r e p o rtin g d at e b et w e e n the tax b as e s of ass et s a nd li a bilitie s and th eir c ar r yi ng a m o u nts for fi n a n ci al r e p orti n g p ur p os e s. 11

D e f e r r e d tax lia biliti es are r e c o g ni z ed for all ta x a bl e te m p o r a r y dif f er e n c e s, e x c e pt: w h e r e the d e f er r e d tax lia bilit y ari s es fr o m the initi al re c o g niti on o f an ass et or lia bilit y in a tr a ns a cti o n th at is not a b usi n es s c o m b i n atio n a n d, at the ti m e o f the tr a n s a cti o n, af f e cts n eit h er a c c o u ntin g p r ofit or l oss nor ta x a bl e pr o fit or lo ss; and in r es p e ct o f ta x a bl e te m p o r a ry dif f e r e n c es a ss o ci at e d wit h in v est m e n ts in sub sidi a ri e s, a ss o ci at es and inte r e sts in a joi nt v e nt ur e, wh e r e the ti mi ng o f the r e v e rs al of the t e m p or a r y dif f e r e n c es can b e co nt r oll ed and it is pr o b a bl e th at the te m p o r a ry di ff e r e n c e s will not r e v er s e in the fo r e s e e a bl e fut u r e. A ty pi c al e x a m pl e of tr a ns a cti o ns th at are not b usi n e ss c o m bi n ati on s an d, at the time of the t r a ns a c tio n, a ff e ct n eit h e r a c c o u nti ng pr o fit or lo ss nor ta x a bl e p ro fit or l oss is the a c q uisiti o n of a n as s et, s u c h as an e x pl or ati o n li c e ns e o r c o n c es sio n, w h e r e n o pr e vi o us a cti vity h as t a k e n pl a c e, w h e r e b y the c o nsi d e r ati on p aid is hi g h er th a n its tax b a s e. The f a cts and ci r c u m st a n c es o f each tr a ns a cti on n e ed to b e c o nsi d e r e d in or d e r to d et e r mi n e w h et h er the d efi niti on of b u sin e ss under the r el e v a nt a c c o u ntin g st a nd a r d has b e e n m et. Reco g n it ion o f Rev en u e f ro m Oil and Gas S a les and M a rk et in g We r e c o g ni z e r e v e n u e w h e n it is pr o b a bl e th at the e c o n o mi c b e n e fits will fl o w t o us and w h e n the r e v e n ue can b e m e as u r ed r eli a bl y. For oil and gas sal e s, our r e v e n u es r ep r e s e nt the in v oi c ed v al u e of s al es of oil and gas att ri b ut a ble t o our int e r est s, net of r oy alti e s and any g o v er n m e nt sh a r e oil th at is li ft ed and s old on b e h alf of the g o v er n m e n t. We h a ve a d o pt e d a net b asis o f r e p o rtin g for ro y alti es and g o v e r n m e nt sh a r e oil w h e n w e h a v e no l e g al rig hts to the u nd e rl yi ng r es e r v es. As s u c h, w e act as a n a g e nt for the r el e v a nt g o v er n m e n ts o r r o y alty h old e rs w h e n w e s ell the p orti o n o f oil and gas o n th ei r b e h al v es. S al es are r e c o gni z e d w h e n the sig ni fi c a nt ris ks an d r e w a r d s o f o w n e r s hip of oil a nd gas h a v e b e e n tr a n sf e r r ed t o c ust o m e r s. Oil and gas lift e d and s old b y us a b o ve or b e lo w our p a rti cip ati n g i nt e r ests in any PSC r es ult in o v e rlifts and u n d erli fts. We r e c o rd t h es e t r a ns a cti o ns in a c c o r d a n c e wit h the e ntitl e m e nt m e th o d un d e r w hi c h o v erli fts are r e c o rd e d as lia biliti es and u n d e rlift s are r e c o r d ed as as s ets at y e ar - end oil p ri c es. S ettle m e n t will b e in kin d or in cash w h e n the lifti n gs are eq u ali z e d o r in cash w h e n p r o d u ctio n c e a s e s. We e nt er int o gas s al es c o ntr a ct s with c ust o m e r s w hi ch often co nt ai n t a k e - or - pay cl a us e s. U n d e r th es e c o ntr a ct s, w e m a k e a lo n g te r m s u p ply c o m m it m e nt in r et u r n for a c o m m it m e nt from the b uy e r to pay for mi ni m u m qu a ntiti e s, w h et h e r or not it ta k es d eli v e r y. T h es e c o m m it m e nt s c ont ai n p r ot e ctiv e p r o visi o ns, s u c h as f or c e m aj e u re p r o visi o n, and a dj ust m e nt p ro vi sio n s. I f a bu y e r has a ri g ht to get a m a k e up d eli v e r y at a l at e r d at e, r e v e n ue r e c o g nitio n is d e f e rr e d. If no s u c h o pti on e xists a c c or di n g to the c o ntr a ct t er m s, r e v e n ue is r e c o g ni z e d w h en the t a k e- o r- pay p e n alt y is trig g e r e d. Our m a r k eti ng r e v e n u es pri n ci p all y r e p r es e nt s al es o f oil p u r c h a s ed fr o m the f o r ei gn p a rt n e rs under our PS Cs and r e v e n u es from the tr a di n g of oil th r o ug h our su bsi di a ri es. The title, to g et h e r with the ris ks and r e w a r ds of the o w n e r s hi p o f s u ch oil p u r c h as e d from the f o r ei gn p a rtn e r s, are t r a ns f er r e d t o us from the f or ei g n p art n e rs and ot h e r u n r el at e d oil and gas c o m p a n i es b ef o r e w e s ell s u ch oil to our c ust o m e r s. The c o st of the oil s old is in cl u d ed in cr u d e oil and pr o d u ct p ur c h a s e s. 12

RE S UL T S O F O P E R AT I O N S O v erv iew The f oll o w i ng t a bl e s u m m a ri z e s the c o m p o n e nts of our r e v e n u es and th ei r r e sp e c tiv e p e r c e nt a g es o f our tot al r e v e n u es for the p eri o ds in di c at e d: Year en d e d D e c e m b e r 3 1, Si x M o n ths e n d e d J u n e 30, 200 7 200 8 200 9 200 9 201 0 201 0 (U S $ i n (R m b i n m i ll io n s, e xc e p t per c e n tag es ) m il l io ns ) (u na u d i te d ) (u na u d i te d ) (u na u d i te d ) R e v e n u es : Oil and gas sales: Crude oil... 68,039 75.0% 94,779 75.2% 77,383 73.6% 29,692 73.0% 62,909 75.6% 9,277 Natural gas... 4,998 5.5% 6,052 4.8% 6,531 6.2% 2,831 7.0% 4,730 5.7% 697 Total oil an d gas sales... 73,037 80.5% 100,831 80.0% 83,914 79.8% 32,523 80.0% 67,639 81.3% 9,974 Marketing revenues.. 17,397 19.2% 22,967 18.2% 20,752 19.7% 7,787 19.2% 14,941 18.0% 2,203 Other income... 290 0.3% 2,179 1.7% 529 0.5% 338 0.8% 575 0.7% 85 Total revenues... 90,724 100.0% 125,977 100.0% 105,195 100.0% 40,648 100.0% 83,155 100.0% 12,262 The f oll o wi n g ta bl e s u m m a r i z es the co m p o n e nt s of our net p r o d u ctio n as a p e r c e nt a g e o f our tot al net p ro d u cti o n for the p e ri od s in di c at e d: Year en d e d D e c e m b e r 3 1, Si x M o n ths e n d e d J u n e 30, 200 7 200 8 200 9 200 9 201 0 Net p r o du c tio n (m il l io n B O E ) : Crude oil.... 135.7 79.2% 154.4 79.5% 186.0 81.7% 87.3 82.5% 120.3 80.7% Natural gas... 35.6 20.8% 39.8 20.5% 41.7 18.3% 18.5 17.5% 28.7 19.3% Total net production... 171.3 100.0% 194.2 100.0% 227.7 100.0% 105.8 100.0% 149.0 100.0% 13

The foll o w i ng ta bl e sets f ort h, for the p eri o ds indi c a t e d, c e rt ain in c o m e and ex p e n s e ite m s in our c o ns oli d at e d c o m p r e h e nsi v e in c o m e st at e m e n ts a s a p e r c e nt a g e of tot al r e v e n u es: Yea r ended D ecem be r 31, Six M o nths ended J une 30, 2007 2008 2009 2009 2010 (una udited ) (una udited ) O p erati ng R ev enues : Oil and gas sal es... 80.5 % 80.0 % 79.8 % 80.0 % 81.3 % M a r k etin g r ev e nu es... 19.2 % 18.2 % 19.7 % 19.2 % 18.0 % Oth e r inco m e.... 0.3 % 1.7 % 0.5 % 0.8 % 0.7 % Tot al op e ra ting r ev e nu es.... 100. 0 % 100. 0 % 100. 0 % 100. 0 % 100. 0 % E x p ens es : Op e r ati ng e xp e ns es... (8. 9) % (7. 9) % (11. 9) % (1 2.7 ) % (8. 3) % P ro du cti on tax es... (3. 9) % (3. 9) % (3.5 ) % (3. 8) % (4. 1) % Ex plo r ati on costs... (3. 8) % (2. 7) % (3.1 ) % (2. 4) % (2. 3) % De p r e ci atio n, d epl eti on and a m or ti z atio n.... (8. 7) % (7. 9) % (1 5.2 ) % (1 6.1 ) % (1 5.2 ) % S pe ci al oil g ain levy.... (7. 5) % (1 2.9 ) % (6.0 ) % (3. 2) % (9. 6) % I m pa ir m e nt loss es rel at e d to pr op e rt y, pla nt and eq uip m e nt.... (0.7 ) % (1.2 ) % (0.0 ) % C ru d e oil and pro du ct pu rc h as es... (1 8.8 ) % (1 8.0 ) % (1 9.4 ) % (1 8.7 ) % (1 7.8 ) % S elli ng and ad m in ist r ativ e ex pe ns es... (1.9 ) % (1.4 ) % (2.2 ) % (2.3 ) % (1.6 ) % Oth e r.... (0.4 ) % (1.2 ) % (0.4 ) % (0.3 ) % (0.4 ) % Total Ex p ense s... (5 4.6 ) % (5 7.2 ) % (6 1.7 ) % (5 9.5 ) % (5 9.3 ) % Int e r est inc o m e.... 0.7 % 0.9 % 0.6 % 0.8 % 0.5 % Fi n an c e c osts....... (2.2 ) % (0.3 ) % (0.5 ) % (0.6 ) % (0.5 ) % Ex ch a ng e gai ns/ (lo ss es ), net... 2.0 % 2.0 % 0.1 % 0.0 % 0.6 % In v est m e nt in co m e... 1.0 % 0.4 % 0.2 % 0.2 % 0.1 % S ha r e of pr o fits of as so ci at es... 0.8 % 0.3 % 0.2 % 0.2 % 0.1 % No n- op e r ati ng inc o m e ( ex p en se s ), net... 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % P ro fit be fo r e tax... 47.7 % 45.9 % 38.8 % 41.1 % 41.5 % In c o m e tax e xp en se.... (1 3.3 ) % (1 0.7 ) % (1 0.8 ) % (1 0.6 ) % (1 0.2 ) % Pro fit fo r the y ear/ perio d.... 34.4 % 35.2 % 28.0 % 30.5 % 31.3 % 14

S eg m ent In f o rm a t ion The f oll o wi n g ta bl e s h o ws the br e a k d o w n of our tot al c o ns oli d at e d o p e r ati ng r e v e n u es for each o f the p e rio ds i ndi c a t ed and the p e r c e nt a g e co nt ri b utio n of each r e v e n ue c o m p o n e nt to our tot al o p e r atin g r e v e n u es: Year en d e d D e c e m b e r 3 1, Si x M o n ths e n d e d J u n e 30, 200 7 200 8 200 9 200 9 201 0 201 0 Rmb i n m il l io ns % Rmb i n m il l io ns % Rmb i n m il l io ns % Rmb i n m il l io ns % Rmb i n m il l io ns % US$ i n m il l io ns % (u na u d i te d ) (u na u d i te d ) (u na u d i te d ) Independent operations... 34,586 38.1 54,682 43.4 44,657 42.5 17,837 43.9 39,480 47.5 5,822 47.5 PSCs.... 45,816 50.5 56,020 44.5 48,598 46.2 17,160 42.2 36,899 44.4 5,441 44.4 Trading businesses... 17,397 19.2 22,967 18.2 20,752 19.7 7,787 19.2 14,941 18.0 2,203 18.0 Unallocated and elimination... (7,075) (7.8) (7,692) (6.1) (8,812) (8.4) (2,136) (5.3) (8,165) (9.9) (1,204) (9.9) To tal o p e ra ti ng r ev e n u es.... 90,724 100.0 125,977 100.0 105,195 100.0 40,648 100.0 83,155 100.0 12,262 100.0 We are m ai nl y e n g a g ed in the e x pl or ati o n, d e v e lo p m e nt a nd p r o d u ctio n of cr u d e oil and n atu r al gas p ri m a rily o ff s ho r e C hi n a. For the y e a r e n d e d D e c e m b e r 31, 2009, a p p r o xi m at el y 7 6. 2 % o f our tot al r e v e n u e was so u r c e d in the P R C, and our ov e rs e a s a cti viti es w er e m ai nly c o n d u ct e d in I n do n e si a, A u st r ali a an d N i g eri a. Ca lcu la t ion o f Rev en u es C hi na We r e p ort tot al r e v e n u e s, w hi c h c o nsist o f oil an d gas s al es, m a r k etin g r e v e n u es and ot h er i n c o m e, i n our c o ns oli d at e d fin a n ci al st at e m e nts in cl u d e d els e w h e r e i n this a p p e ndi x to this a n n ou n c e m e n t or our p r e vi o usl y dis cl o s ed in f or m a ti o n. With r es p e ct to re v e n u es d e ri v e d fr o m our o ff s ho r e C hi n a op e r ati o ns, oil and gas sal e s r e pr e s e nt gr o ss oil and gas s al es le ss r o y alti es and sh a r e oil p a y a bl e to the PRC go v e r n m e nt. The gr o ss oil and gas s al e s co n sist o f our p e r c e nt a g e i nt er e st in tot al oil and gas s al es, c o m p ri s ed of (i) a 100% i nt er e st in our in d e p e n d e nt oil and gas p r op e rti es and (ii ) our p a rti ci p ati ng int e r e st in the p r o p e rti es c o v e r ed under our PS Cs, l ess a n a dj ust m e nt for p ro d u cti o n allo c a bl e to fo r ei g n p art n e rs under our PS Cs as r ei m b u rs e m e nt for e x pl or ati o n c ost s attri b ut a bl e to our p a rti ci p ati ng i nt er e st. M a r k e ti ng r e v e nu e s r e p r es e nt our s al es of our f or ei g n p art n e rs oil and gas p r od u c e d under our PSCs and p ur c h a s ed b y us from our f o r ei gn p a rt n e rs u nd e r su c h cont r a cts a s w ell as fr o m int e r n ati o n al oil and gas c o m p a ni e s thr o u gh our w h oll y -o w n e d s u bsi di a r y in Si n g a po r e. Net m a r k etin g r e v e n u es r ep r e s e nt the m a r k eti n g r ev e n u es net o f the co st of p ur c h a si ng oil and gas fr o m f or e ig n p a rt n ers an d fr o m int e r n ati o n al oil and gas c o m p a ni e s. Our f or e ig n p a rt n e rs h a v e the ri ght to eit h er t a k e p os s es sio n o f th ei r oil and gas for s al e in the int e rn ati o n al m a rk et o r to s ell th ei r oil and gas to us for r e s al e in the PRC m a r k et. O t h er in c o m e m a inl y r e p r es e nts p r oj e ct m a n a g e m e nt f e es c h ar ged to our f o r ei gn p art n e rs an d h a n dli ng f e es c h a rged to end c ust o m e r s b oth f e es are re c o g ni z e d w h en the se r vi c es are r en d e r e d. R ei m b u r s e m e nt of ins u r a n c e cl ai m s is re c o g ni z e d w h e n the c o m p e n s atio n b e c o m e s r e c ei v a bl e. 15