Annual Report 2006

Annual Report
Managing Adversity
Managing
Adversity
Introduction
Financial Highlights
Message from the President Commissioner
Report of the President Director
10
Review of Operations
16
Managements Discussion and Analysis of

the Financial Condition and Results of
Operations (MD&A)
32
Safety, Health and Environment (SHE)
36
Community Relations
40
Corporate Governance Report
42
Glossary
56
Financial Report
61
The soft copy of this report and regular

updated information on the Company is
available at www.energi-mp.com
Aerial view from Kangean

PSC of mangroves across
the sandy shallows
north of Pagerungan
island. Linked by a major
pipeline to the growing
industrial market of
East Java, Kangean PSC
is a good example of
EMPs strategy at work
in the commercialization
and development of
significant oil and gas
reserves.

EMP Annual Report 2006
In 2006 PT Energi Mega Persada

Tbk (EMP or the Company) faced
adversity on an unprecedented
scale. It was also a year from
which we emerged with resolve
and closed the year with a
significantly improved outlook.
One single event in 2006 - the
development of a mud volcano some
distance from our drilling operation
at Banjarpanji in May - has attracted
significant comment and debate, much
of which has been ill-informed. Seven
months on, measures to contain the
mud flow continue under a Govermentled emergency team and the gross cost
of restitution for local communities and
infrastructure has been estimated at
US$ 183 million to the end of 2007.
This annual report contains a status
report on Banjarpanji and the actions
taken by subsidiary Lapindo Brantas Inc.
(LBI) to address the subsequent mud
flows and the impact on the surrounding
communities, on infrastructure in the area
of Sidoarjo regency, East Java and the
financial consequences. EMPs prudent
approach to valuing its development
portfolio has enabled the Company to
capitalize expenditures incurred, to be
offset through future earnings from a
diverse oil and gas portfolio.
Adversity is a fact of life.

It cant be controlled.
What we can control is how
we react to it.
Despite the challenging
conditions, EMPs four key
strategies were in evidence in
2006:
We achieved organic growth: an
extensive investment program to build
new reserves continued.
We maintained our focus on gas
commercialization: further progress
has been made in realizing value from
gas fields, in terms of new contract prices
and in unlocking asset values, through
a proposed new strategic partnership in
Kangean.
We remain committed to operational

excellence: the use of innovative
techniques has unlocked new production
and reserve potential.
Strategic acquisitions were completed
and new opportunites seized: the
completion of the Tunas Harapan Perkasa
(THP) transaction at the beginning of
the year has boosted reserves by 30%
and a planned strategic partnership
will strengthen the balance sheet while
introducing additional expertise and
further scope to accelerate production.
EMP is a company managed for

long-term value: meeting the
energy needs of Indonesias
expanding economy by playing
a significant role in the ongoing
development of the upstream oil
and gas sector.
How to read this report

Production, product price realizations, reserves and resources are all expressed on
a gross basis except in the MD&A section, page 32.
Sales revenues and average sales prices as quoted in the MD&A are based on
entitlement.
Oil and gas terms are defined in a Glossary on page 56 of the report.
Managing Adversity
PT Energi Mega Persada Tbk

Oil & Gas Properties
Thailand
N
Vietnam
Philippines
South China Sea
400 KM
Gebang JOB PSC

Korinci Baru PSC
Brunei
Malaysia
Semberah TAC
Malaysia
Sumatera
Bentu PSC
Singapore
Kalimantan
Gelam TAC
Sulawesi
A
Papua
Malacca Strait PSC

Java
Brantas PSC
Kangean PSC
East Timor
Indian Ocean
One of the leading publicly listed oil and gas exploration and production companies in Indonesia, EMP
and its wholly owned subsidiaries control working interests in a wide ranging portfolio of oil and gas
properties:
Sumatera
Malacca Strait PSC (60.49%)
Gebang JOB PSC (50%)
Bentu PSC (100%)
Korinci Baru PSC (100%)
Gelam TAC (100%)
Java and environs

Kangean PSC (100%)
Brantas PSC (50%)
Kalimantan
Semberah TAC (100%)
The Company is applying its extensive skills in reservoir management, innovative use of modern
technology and drilling techniques in the exploration and production of oil and gas in an area of over
17,000 square kilometers.
EMP is a major gas supplier to the rapidly-growing industrial region of East Java.
Financial Highlights
Financial Performance
2006
2005
2004
2003
1,646.5
629.5
4.1
198.9
203.0
14.4
1,682.1
788.1
133.5
68.5
201.0
21.2
972.7
440.0
180.1
(149.7)
30.0
3.2
513.1
241.7
134.9
(119.6)
15.4
2.3
9,883.4
3,957.2
1,833.2
6,336.2
2,877.1
692.8
3,492.4
1,095.3
475.0
662.8
72.8
(422.4)
12
11
216
207
12
29
415
316
3
6
231
698
3
(4)
(17)
1,274
2006
2005
2004
2003
13
9,182
547
0
0
339
455
97
10,633
14
9,328
773
0
9,887
397
0
10,567
-
10,114
10,284
10,567
Total Oil Production (mmboe) 3.9
3.7
3.8**
3.9
(in billion Rupiah, except EPS and Financial Ratios)

Income Statement
Revenue
EBITDA
Profit Before Tax
Income Tax
Net Profit
Earnings Per Share (EPS)

Balance Sheet
Total Assets
Net Debt
Equity

Ratios (%)
Net Profit Margin
ROE
Net Debt/Equity
Interest Coverage Ratio
Production Performance*

Oil Production (bopd)
Brantas PSC
Malacca Strait PSC
Kangean PSC
Bentu PSC
Korinci Baru PSC
Gelam TAC
Semberah TAC
Gebang JOB PSC
Total
Gas Sales (mmcfd)

Brantas PSC
Malacca Strait PSC
Kangean PSC
Bentu PSC
Korinci Baru PSC
Gelam TAC
Semberah TAC
Gebang JOB PSC
Total
39
0
58
0
0
0
0
3
100
51
0
81
65
0
41
48
0
0
132
106
48
Total Gas Production (mmboe)
6.1
7.7
6.5**
2.9
* On a gross basis
** EMP consolidated Kangean from August 2004
Managing Adversity
Product Price Realizations*

Average realized liquid price (US$ / bbl)
Average realized gas price (US$ / mcf)
2006
2005
2004
2003
63.9
2.5
53.2
2.3
37.7
2.1
28.9
2.5
* On a gross basis
2006 Year End Proforma Gross Reserves and Resources

(in mmboe)
1P
2P
3P
Contingent Resources*
Brantas PSC
Oil
Gas
2
9
9
18
19
26
0
5
Malacca Strait PSC

Oil
Gas
21
0
31
0
43
0
2
10
Kangean PSC
Oil
Gas
4
131
13
230
36
335
0
11
Bentu PSC
Oil
Gas
0
24
0
48
0
76
0
0
Korinci Baru PSC

Oil
Gas
0
3
0
13
0
17
0
0
Gelam TAC
Oil
Gas
1
0
5
0
50
0
0
67
Semberah TAC
Oil
Gas
3
3
13
9
33
29
0
0
Gebang JOB PSC

Oil
Gas
0
0
0
1
1
7
0
20
Total
Oil
Gas
31
170
71
319
181
489
2
113
Grand Total
201
390
670
115
* best estimate
Notes
1) Gross reserves have been certified by independent certification agencies such as Gaffney, Cline and Associates, Sproule International and MHA Petroleum
Consultants.
2) The gross reserves stated in the above table reflect EMPs latest independent reserve appraisal. EMP has taken a conservative approach to reserves in
setting depreciation, depletion and amortization (DDA) policy as outlined on Page 67 of the Audited Financial Statements. When an approved plan of
development (POD) contains reserve estimates lower than the independent certification, the POD estimate is used for DDA purposes.
3) 3P Reserves and Contingent Resources totals: figures subject to rounding.
Gross Reserves and Resources

2006
2005**
2004
1P
Oil
Gas
Total
31
170
201
34
258
292
30
255
285
2P
Oil
Gas
Total
71
319
390
77
360
437
42
305
347
3P
Oil
Gas
Total
181
489
670
185
437
622
71
331
402
Contingent Resources*
Oil
Gas
Total
2
114
116
2
116
118
25
98
123
(in mmboe)
* best estimate
** source: 2005 Annual Report
Drilling Activity
(based on year spudded)

Total

Development wells

Exploration wells*

2006
2005
2004
2003
30
8
20
5
14
5
4
5
38
25
19
Brantas PSC
Development wells
Exploration wells*
4
2
3
3
5
3
3
1
Malacca Strait PSC

Development wells
Exploration wells*
11
4
14
1
9
2
1
4
Kangean PSC
Development wells
Exploration wells*
7
2
3
1
0
0
0
0
Bentu PSC
Development wells
Exploration wells*
0
0
Korinci Baru PSC

Development wells
Exploration wells*
0
0
Gelam TAC
Development wells
Exploration wells*
2
0
Semberah TAC
Development wells
Exploration wells*
6
0
Gebang JOB PSC

Development wells
Exploration wells*
0
0
* exploration includes appraisal wells
Managing Adversity
Jack up rig operating offshore, Kangean
Message from the President Commissioner
Suyitno Patmosukismo
Dear Shareholder,
2006 was both a landmark year, and
one of unprecedented challenge. The
landmark for the global oil and gas
industry was the price of oil which
reached record levels in nominal
terms as indicated by WTI peaking
at US$ 77.03/bbl during July 2006.
The unprecedented challenge was
encountered near a drill site in East
Java from a mud volcano.
First, I will address the broader
picture on market conditions and
prices.
Industry experts remain confident
that the substantial demand for
energy, on the back of a strong global
economy and oil production capacity
constraints, has elevated oil prices by
a quantum step above the previous
long term average of US$ 18/bbl.
A number of oil producers are budgeting
oil prices at or above US$ 50/bbl in
the short term as supported by the
forward market. A robust global
economy drove demand higher for
all commodities pushing the global
commodity cycle into its second year
of strong growth driving prices for
other forms of energy, such as natural
gas, coal and uranium, higher.
Notwithstanding increased demand

and attractive prices, 2006 also
proved to be a very challenging year
for the upstream oil and gas sector,
with demand for people, equipment,
materials and services exceeding
supply, resulting in rapidly rising costs
and lengthening schedules for all
upstream projects. While oil projects
generally enjoyed enhanced margins,
Indonesian domestic gas projects,
with non-oil linked prices, faced
dramatic margin squeeze as well as
schedule expansion.
The more than doubling of domestic
fuel prices in October 2005, along
with rising international oil prices,
dramatically increased the price
competitiveness of domestic natural
gas and this is increasing gas demand.
The Company was at the forefront
of gas price increases with new
gas volumes contracted at prices
above US$ 3.5/mmbtu. However,
while petroleum prices have been
deregulated, gas prices still remain
well below international levels. I am
confident that with the optimization
of domestic gas policies and ongoing
infrastructure development,
Indonesian gas prices will increase
to levels reflecting their true value
Managing Adversity
to customers and in turn lead to a

more sustainable gas industry for
the benefit of all stakeholders, and
shareholders of EMP in particular.
EMP continued to invest heavily
to develop its substantial proved
undeveloped gas reserves base into
proved developed producing reserves,
production and cash flow. We are
proud of the way management and
staff responded with innovative
solutions to cut costs and manage
schedule challenges, thereby ensuring
the benefits of gas are realized by
all stakeholders as early as possible.
We also applaud the results of
management and staff in maintaining
a strong focus on safety, health and
environment issues (SHE) alongside
sustainable development. This was
evident internally through improving
performance metrics and externally
by industry awards such as PROPER
ratings.
Oil and gas supply-demand

imbalances in 2006 not only pushed
up spot and forward prices, but the
value of reserves and resources in
the ground, as reflected in asset
reserve acquisition prices. Given
the Companys substantial reserve
and resource base, the benefits of
the increase in reserve values will
ultimately accrue to shareholders.
The Company faced adversity on an
unprecedented scale in 2006.
During May mud erupted near the
Banjarpanji exploration well being
drilled in Sidoarjo, East Java by an
indirectly owned operating subsidiary,
Lapindo Brantas Inc. (LBI). The mud
subsequently inundated an area of
over 400 hectares displacing some
11,000 people from 4 villages and
closing a number of factories. LBI, as
operator of the well and 50% interest
holder in the Brantas PSC Joint
Venture, responded to the incident
with a massive relief effort aimed at
stopping the mud flow, mitigating
the surface impact and managing
the social implications. The resource
commitment of LBI to the disaster has
been on an unprecedented scale with
intense emergency and restorative
work and expenditures of over US$ 92
million gross expended by year end.
The cause of the disaster has

naturally generated considerable
speculation, analysis and unfounded
allegations. However, as with many
underground events the cause may
never be known with any certainty.
There is a growing body of informed
scientific opinion that the major
Yogyakarta earthquake was an
initiating factor behind this natural
disaster. This report does not set out
to debate the cause, rather sets out
the facts to shareholders and outlines
the scale of the response by LBI.
While the issue continues into 2007,

management remains focused
on sweeping away obstacles and
pursuing a fair and equitable
outcome. In the view of the Board of
Commissioners, adversity precedes
growth. The Board of Directors
commitment to maximizing
shareholder value through innovative
strategies to monetize the Companys
substantial hydrocarbon reserves
and resource bases provides a strong
platform for future value creation and
earnings.
Adversity is a fact of life, it cannot

be controlled. What can be controlled
is how we react to it. I am proud of
the way LBI, a small limited liability
company, coped with the incident
though a massive commitment of
financial and human resources. This
was a true test of corporate social
responsibility and it brought out
the best in their people during the
exhausting and arduous period since
May 2006.
The Board of Commissioners

continued to play an active oversight
and advisory role during the year,
supporting the Board of Directors. This
role, along with the committees that
report to the BoC including the Audit
Committee and the Conflict of Interest
Compliance Committee, underpinned
the Companys objective of enhancing
corporate governance, transparency
and ultimately performance, in an
increasingly complex and competitive
upstream oil and gas environment.
Responding to the incident did

deflect management from day to
day operations, but only to increase
the resolve to deal promptly and
effectively with the matter. The
need to protect the interests of
minority shareholders drove the
Board on two separate occasions
to seek divestment of its indirectly
owned stake in LBI. The proposed
transactions were poorly understood
as the incident had already become
highly emotive and politically
charged and therefore the necessary
approvals to proceed were not
forthcoming.
We thank the Board of Directors,

management and staff for their
focus, resolve and commitment
during a challenging year in which
their abilities and the value of the
underlying oil and gas portfolio
stood up to scrutiny. We also thank
the Companys business partners,
communities, and of course
shareholders, for continued support
given to the Company during an
unprecedented year.
For and on behalf of the Board of

Commissioners,
President Commissioner
Board of Commissioners
A Qoyum Tjandranegara
B Suyitno Patmosukismo
C Rennier Latief
Managing
ManagingAdversity
Adversity
Report of the President Director
Chris Newton
Dear Shareholder,
Emerging from exceptional and
unparalleled challenge
During 2006 the Board of Directors
has faced exceptional and
unparalleled challenge on a number
of fronts, however I am pleased to
report EMP has emerged with some
positive news through the end of the
year both in terms of operations and
strategic development. We began
2006 on a positive note and 12
months on, despite severe tests we
are once again positioned well for the
future.
We commenced the year with the
landmark acquisition of Tunas
Harapan Perkasa (THP), adding 90
mmboe to our existing 2P oil and gas
reserves, just prior to a substantial
increase in international prices for
oil and gas. As prices continued to
escalate, the Board concentrated
EMPs activities on optimizing the
existing portfolio. The THP acquisition
provides significant depth, diversity
and optionality, while at Kangean,
recent new production from
Sepanjang island oil field is especially
encouraging at 3,500 bopd.
10
The 2006 Results

Top line sales for 2006 were 2% lower
at Rp 1,646 billion on the back of a
20% increase in average per boe price
realizations for oil and 9% for gas.
Production of oil declined by 7%, a not
unexpected trend in mature fields,
while total gas production decreased
by 26%, primarily affected by the
damage to the East Java pipeline.
Net profit was virtually flat year on
year at Rp 203 billion. The result
includes a positive contribution
from deferred tax of Rp 238 billion
associated with the heavy capital
investment over the last year.
Earnings were not significantly
impacted by the Banjarpanji incident
since the costs are capitalized under
full cost accounting.
During the year credit facilities were
completed for a total of US$ 152.8
million used for the development of
the reserves of the Gebang, Gelam,
Bentu & Korinci Baru and Semberah
blocks acquired as part of the THP
acquisition that closed in January
2006.
Banjarpanji, Sidoarjo Regency

In May, following the Yogyakarta
earthquake, seepage from a mud
volcano 200 meters away from the
Banjarpanji exploration well in East
Java resulted in emergency relief
action on an unprecedented scale in
the history of the oil and gas sector
in Indonesia. It is of great concern
to the Board to note the loss of the
lives of two construction workers
on routine activities in September,
a further 14 lives in November from
the rupture of the East Java gas
pipeline and the displacement of local
communities. The scale of the mud
volcano warranted the declaration
of a national emergency for the
Sidoarjo regency by the Government.
Insurance claims have been met and
the East Java pipeline was being
returned to full operational status as
this report was being published. In
December, EMPs indirect subsidiary,
LBI proposed comprehensive terms
and compensation to the displaced
communities in line with Presidential
Decree No. 13 requiring LBI to bear
all costs incurred in overcoming the
incident.
Measures to contain the mud flow

under a Government-led emergency
team continue and the cost of
restitution has been estimated at
US$ 183 million. EMPs portion of the
costs incurred in 2006 under the PSC
is assessed at US$ 31 million, net of
insurance claims already honoured.
Consistent with its policy of full cost
accounting, these costs have been
capitalized and will be amortized as
oil and gas are produced, subject to a
ceiling test, that such costs should not
exceed the value of EMP reserves. As
at reporting date, no such excess was
evident. We will continue to monitor
the situation.
In the interests of all shareholders,
the Board has explored a number of
alternatives to contain and manage
the impact of this natural disaster.
On two separate occasions the Board
has sought to divest the indirect
interests of EMP in LBI through a sale
to a related party, the Bakrie Group,
without prejudice to the commitments
made to local communities, however
these proposals, in both cases,
were not given the approval of the
Capital Market Authority. While
the situation is ongoing, the Board
takes this opportunity to record our
appreciation of the efforts of all those
involved and the support of Santos
Limited, our joint venture partner.
Development costs and reserve

values
Over the year, as exploration and
development continued, we faced
further delays and cost increases
from tight supply conditions in drilling
equipment and oil field services.
Ironically, within the cause lies a
benefit. The shift of oil prices up to
new levels, as a trend in itself and a
factor stimulating demand for lower
priced natural gas, is driving the
expansion of upstream investment,
hence the demand for equipment and
services. At the same time, the value
of our oil and gas portfolio has been
considerably enhanced. Our strongest
challenge is how best to realize the
value from the new price levels.
The results for 2006 reflect these
multiple challenges, but should be
viewed in the context of the medium
term prospects for our industry and
specifically EMPs step up growth and
commercialization strategies, which
remain robust. Our post year-end
announcement of the intention to
build a new strategic partnership
encapsulates those strategies and
directly addresses the challenge of
realizing value.
Managing Adversity
In 2006, despite many

distractions, the Board of EMP
maintained its focus on four key
strategic levers:
Organic growth of existing
assets - new reserves and recent
production successes point to a
resumption of earnings growth
in 2007.
Gas Commercialization
- development of Kangean is a
case study in realizing value.
Operational Excellence
- innovative solutions, such
as the use of underbalanced
drilling, are improving the rate of
return from wells and unlocking
considerable potential for new
projects.
Strategic Acquisitions - THP has
added 30% to 2P reserves and
through new strategic partners
in Kangean, the Company
enhances its financial and
operational capacity.
11
New strategic partners

During the second half of the year
we began negotiations to introduce
new strategic partners, Mitsubishi
Corporation (Mitsubishi) and
Japan Petroleum Exploration Co.,
Ltd (Japex) through their planned
subscription for shares in our
subsidiary EMP Inc (EMPI). Subject
to formal shareholder approval,
Mitsubishi and Japex will assume,
in aggregate, an indirect working
interest of 50% in the Kangean
PSC and will carry a substantial
portion of EMPs remaining capital
expenditure obligations for the major
projects at Kangean. The benefits to
shareholders from this partnership
are considerable:
EMP will immediately realize
proceeds of US$ 360 million,
thus substantially reducing the
Companys debt and cost of funds.
The new partners will bring
financial strength and the capacity
to accelerate delivery of the full
reserve and resource potential
of an expanded production,
development, appraisal and
exploration portfolio at Kangean
PSC.
EMP will gain immediate access to
extensive offshore gas production
experience, particularly in
fractured reservoirs, which will be
of value for the development of the
overall portfolio.
The value of the Kangean block
as defined in this transaction will
establish a true benchmark for the
Companys undeveloped gas assets
carried in the balance sheet at
historical cost.
Ongoing 50% exposure to this
material growth asset and
significant upside in terms of gas
prices for contracted and uncontracted gas.
12
Kangean: EMP strategy at work

A year ago I outlined the key
elements of our strategy. Our
Kangean property, despite shortterm disruption through damage to
the East Java pipeline, demonstrates
the effectiveness of our strategy
particularly well.
Firstly, Kangean was highly attractive
as it represented an opportunity
for us to achieve step up growth,
acquired in a counter cyclical period
at a value of US$ 0.8/boe on a proved
and probable reserves basis. Today
valuations are in the range of
US$ 3/boe for undeveloped gas
reserves. Secondly, since acquisition
we have achieved organic growth
from existing assets as our
projects have added oil production
and reserves: from 207 mmboe
at acquisition to a level of 257
mmboe as the basis for the sale
of 50%. Thirdly, Kangean is an
excellent demonstration of EMPs
commercialization strategy, value
having been added through the
extension of the life of the PSC on
improved terms. A number of gas
contracts have been signed to realize
that value in a rising market. Finally,
Kangean serves to demonstrate
the benefits of a commitment to
operational excellence through the
use of, for example, underbalanced
drilling which has unlocked the
potential of oil at Sepanjang island.
Capitalizing on domestic market

conditions for gas
The Board of Energi Mega Persada
has long recognized that the least
competitive sector of the Indonesian
upstream oil and gas business has
been the domestic gas market.
The Company has built a strong
gas reserve, resource and acreage
position over recent years based on
the hypothesis that both volumes and
prices would increase as Indonesias
growing economy made the transition
from an oil exporter to an oil importer.
This portfolio has been built taking
full advantage of attractively-priced
counter cyclical investments, hence
acquisition costs are well below
current market values. The Companys
2P reserves have grown from 56
mmboe at the time of EMPs initial
public offering in July 2004 to 390
mmboe at the end of 2006. At the
same time the number of blocks in
which the company has an interest
has increased from two to eight. Net
acreage exposure has increased from
7,267 to 17,075 square kilometers.
Rising oil and petroleum product
prices have triggered domestic energy
consumers to switch to gas and this,
along with strong Government policy
support, is driving domestic gas
prices higher. Concurrently, the global
upstream industry is, in general,
cash long and opportunity short.
This combination has significantly
increased the value of oil and gas
reserves.
Production and Reserves

Total oil and gas production volume
in 2006 reached 10 mmboe, a
decrease of 12% compared with
2005, reflecting natural decline of
existing reservoirs, ahead of delayed
production startup from new 2006
projects. Year-end certified 1P and
2P reserves were 201 mmboe and
390 mmboe respectively, including
the THP acquisition, drilling results
and updated certifications. An
updated reserve certification on the
material Terang Sirasun Batur (TSB)
field has confirmed mean and 2P
reserves similar to the D&M 1995
certification. While a wider range of
uncertainty was identified around
the 1P and 3P volumes, significantly
increased 3P gas reserves were
confirmed, a positive indicator for
future production. The updated TSB
certification is reflected in the 2006
reserves numbers presented in this
report.
Drilling: issues and successes
This time last year the Board noted
our main challenge was maintaining
our fast track development schedule
in a rapidly tightening market
for equipment and services. This
condition remained widespread in
2006, and EMP was no exception to
the industry norm of escalating day
rates for rig and related services,
costs in excess of budgets and
schedule delays, all of which impacted
production.
EMP subsidiaries invested

US$ 198 million (gross) in drilling and
operating a total of 45 wells, including
several that began in 2005. The total
comprised 4 exploration, 6 appraisal
and 35 development wells with 39
onshore and 6 in offshore locations.
Success rates achieved in exploration,
appraisal and development were 75%,
33% and 71% respectively. These
results reflect the depth and quality
of the underlying portfolio and set the
stage for strong production growth
in 2007 and beyond. Collectively EMP
operations ranked among the top 2
to 3 operators by drilling activity in
Indonesia in 2006.
Commercial highlights include the
successful appraisal of the Sepanjang
island and Pagerungan Utara oil
fields in the Kangean PSC, the former
commencing commercial production
immediately after the year end.
Sepanjang island oil, Pagerungan
Rancak gas and MSDA are already
contributing to production.
The successful drilling, testing and

completion of the fractured carbonate
reservoir of the Sepanjang island oil
field is an excellent example of the
application of modern technology
by utilizing underbalanced drilling
techniques. This resulted in lower
drilling costs and vastly improved
reservoir productivity. The success of
these techniques can be leveraged in
other fractured carbonate reservoirs,
such as the West Kangean gas
field, whose significant upside gas
resource potential will be evaluated
by employing underbalanced drilling
in 2007.
The 75% exploration drilling
commercial success rate came from
three discoveries in the Malacca Strait
where step out development and
near field exploration has consistently
grown the reserves base over the
last decade. While small in volume
terms, these barrels add value as
they can quickly be tied into existing
infrastructure at low cost.
Organic Growth and Operational
Excellence
Production optimization, the
development of reserves, and the
moving of resources to reserves
continue to be priorities in unlocking
the value of the Companys deep and
diverse project portfolio. The focus
has been on lower risk development
of proved undeveloped reserves
rather than exposure to high impact
exploration. Kangean remains
the major source of medium term
production growth with development
of the TSB fields continuing towards
first production potentially in
late 2008. The Sepanjang island,
Pagerungan Utara and Semberah
fields will deliver important new oil
production volumes in 2007.
Managing Adversity
13
A range of technologies and skills

have been deployed to stem
production decline from mature fields,
enhance well and reservoir production
and improve overall recovery at
minimal cost. Horizontal drilling at
Pagerungan Utara, underbalanced
drilling at Sepanjang island and 3D
seismic programming at Gelam stood
out in 2006.
Safety, Health & Environment (SHE)
and Corporate Social Responsibility
It goes without saying that the
Board is saddened by the loss of life
and extremely concerned that the
immense natural disaster in Sidoarjo
regency should be contained with
minimal harm or disruption going
forward. This did not detract from
our commitment to the safety
and welfare of our employees and
neighbouring communities in every
location in which we operate. Our
pursuit of the best standards in
SHE practice across the business
continued with excellent results. The
establishment of the SHE Excellence
Functional Team was undertaken to
ensure that policy was implemented
to international standards.
Exceptional safety standards in Gelam
were recognised by the Ministry
of Labor as we recorded 2 million
man-hours without a single lost time
incident. At Kangean, our operations
continue to focus on community
relations through sustainable social
and economic development programs.
14
Corporate Governance
Proper governance is about
maintaining the right balance
between controls, management
processes, systems, entrepreneurial
flair and operational flexibility. We
followed through in beginning to
implement the recommendations
of the corporate governance review
conducted by a leading international
consultancy in 2005. We have more to
do and are committed to international
best practice standards. Upstream
oil and gas is both a capital intensive
and a skills-driven business. High
standards and skills in allocating
capital are key long term value drivers
for shareholders. During the year
significant organizational, system
and process enhancements were
implemented to ensure our technical
and commercial decisions were of the
best quality.
Outlook
We believe growth prospects in
revenues and the value of underlying
assets are good, given sustained
demand and the introduction of new
strategic partners at Kangean to
enhance production and development
capabilities. We expect cost pressures
to remain in the industry and
therefore we will have to remain
innovative and alert. However, with
oil prices off the peak and supply of
equipment and services responding,
these pressures should subside.
Appreciation
Through a period of extreme
difficulty, the support and
commitment of our suppliers,
customers and communities was
exceptional and much appreciated,
indicating the strength of
relationships built over years and the
sustainability of our business.
I have highlighted the quality of our
assets and it is entirely appropriate to
make a special mention of the people
in EMP who have been the catalyst
in the often complex processes of
creating value from our portfolio.
Management and staff rose to
meet challenges and adversity in
2006 with quality teamwork, spirit
and experience. Their endurance
in adversity as EMP surmounted
numerous hurdles is commendable.
Toughened by a challenging
12 months, we look forward to
maintaining our course and realizing
our goals.
For and on behalf of the Board of

Directors,
Chris Newton
President Director
Board of Directors
A
B
C
D
E
Managing
ManagingAdversity
Adversity
Yuli Soedargo
Faiz Shahab
Chris Newton
Norman Harahap
Tom Soulsby
15
Review of Operations
16
Kangean operations
Managing Adversity
17
East Java
Kangean PSC (working interest 100%)
Operator : EMP Kangean Limited (60%)
Partner : EMP Exploration (Kangean) Limited (40%)
40 KM
Pagerungan Utara Field
Payang
Jenggolo
KE
(PUO)
Pagerungan Besar Island Field
Bukit Tua
Poleng
(PGA, PGB, PGC & PGR)
West Kangean Field
Bukit Panjang
Petrokimia Gresik
PLN Gresik
Gresik Stn.
PGN
Karangtakat
(TEO)
Surabaya
South Saubi
TERANG
BD
Jeruk
PGN Waru
BATUR
Maleo
Oyong
PGN Tandes
PGN Gn. Sari
Kangean Island
Terang Sirasun Batur Field
Madura
East
ipelin
Gas P
Java
SIRASUN
(SS0)
GP)
e (EJ
JS 53A
Pulau Sepanjang
East Pagerungan Field

(PTO)
South Celukan
(SC0)
Sepanjang Island Field

(SED)
Pasuruan
Moncong
(MCO)
(WKO)
Pangkah
Kangean PSC
Leces
East Java
Bali
Lombok
LEGEND
Thailand
BLOCK
OIL FIELD
GAS FIELD
OIL & GAS FIELD
PROSPECT
LEAD
CUSTOMER
GAS PIPELINE
PGN DISTRIBUTION GRID
Philippines
Malaysia
Brunei
Singapore
REPUBLIC OF INDONESIA
Java
INDEX MAP
Kangean PSC
East Timor
Contributing over half of total

gas production in 2006, Kangean
produced gas of 58 mmcfd and
condensate at 547 bpd. Nine
wells were drilled during the year,
including 7 development wells and
2 appraisal wells. The priority has
been to develop the Pagerungan and
Sepanjang Island gas and oil fields.
Two new oil fields, Pagerungan Utara

Offshore (PUO) and Sepanjang island
(SED) have been appraised. A jack
up rig has been secured to complete
development of PUO and to appraise
the West Kangean gas field. The SED1A well was flow tested with first oil
production following in January 2007
at a rate of 3,500 bopd.
18
Progress has been made at the

Terang-Sirasun-Batur gas field (TSB),
with first gas production planned for
late 2008. EPC contracts are in process
and a drill ship has been secured to
drill five new wells at TSB during 2007.
An independent technical review
has identified significantly increased
3P reserves, a positive indicator
for future production and reserve
upgrade potential.
East Java
Brantas PSC (working interest 50%)
Operator : Lapindo Brantas Inc. (50%)
Partners : Santos Brantas Pty. Ltd. (18%)

PT Medco E&P Brantas (32%)
Payang
Jenggolo
KE
Bukit Tua
Poleng
Bukit Panjang
Java Sea
Pangkah
20 KM
Tuban
Petrokimia Gresik
PLN Gresik
Madura
Surabaya
Brantas PSC
Pandan
S. Jombang
Kunjang
Ketingan
Bangil
Kresna
Srikandi
Arimbi
Carat Field
Ea st
BD
Jeruk
Kertosono
Maleo Field
Oyong
Shinta
Salya
Karna
Kunti
Bima
Larasati
Andjani
Ja v a
ip el
Gas P
JG P
in e (E
Bisma
Nakula
Sadewa
Pasuruan
Wunut Field
Tanggulangin Field
Leces
Banjarpanji, Porong, Banjarsari
East Java
LEGEND
BLOCK
Bali
OIL FIELD
GAS FIELD
OIL & GAS FIELD
Indian Ocean
Thailand
Philippines
PROSPECT
LEAD
Malaysia
Singapore
CUSTOMER
GAS PIPELINE
Java
PGN DISTRIBUTION GRID
Gross production was 39.4 mmcfd.

Strategic priorities for development
at Brantas include the optimization
of gas production from Wunut,
Tanggulangin and Carat gas fields,
new gas contracts and further
appraisal and exploration to realize
the potential of the deep Kujung
exploration play.
INDEX MAP
Six wells were spudded during the

year with success recorded in both
appraisal and development drilling.
Gas was found at the Tanggulangin-5
well, and both oil and gas found at
the Wunut-19 well. Tanggulangin first
gas is planned for the third quarter
of 2007, with 4 bcf sold at a contract
prices averaging US$ 4.1/mmbtu. The
Carat field commenced gas production
in April 2006 at 2.5 mmcfd.
Managing Adversity
Brantas PSC
East Timor
Banjarpanji well, spudded early in

2006, subsequently ceased operations
after substantial seismic activity in
Central Java during May. Mud, water
and gas emissions in the vicinity have
impaired further development as
reported on page 20.
19
On May 29 mud erupted through three fissures in the vicinity of the Banjarpanji well. EMPs indirect subsidiary, LBI
immediately activated its Emergency Response Team to undertake initial disaster assessments and containment activities.
This team was superseded by the National Mudflow Mitigation Team (Tim Nas) which was established by Presidential
Decree, and to which LBI acted as a representative of the Executing Team. A chronology of the events in 2006 follows, listing
the occurrences at and around Sidoarjo, the efforts undertaken by all concerned parties to control the natural disaster, and
the steps taken to ensure the protection and welfare of the affected communities.
Banjarpanji - a chronology
Month & Event
Technical Action Taken
Community Action Taken
The Lapindo Emergency Response Team is

activated. The broach is immediately assessed.
People in the immediate vicinity are temporarily

evacuated following the detection of minor
levels of H2S (hydrogen sulfide) in the surface
emissions.
May
Banjarpanji well
experiences loss
of circulation after
an earthquake
in Yogyakarta
measuring 6.2 on the
Richter Scale.
Steam, water and gas
observed bubbling to
the surface at three
locations between
200m and 500m
from the Banjarpanji
exploration well at
Sidoarjo, East Java.
LBI works with local officials and selected

suppliers to contain the mud by pumping drilling
fluid into the well. Communication between
well and mudflow could not be established and
pumping drilling fluid had no impact on the
developing mud volcano.
LBI offers free medical assistance to local

villagers.
Existing H2S monitoring is intensified.
June
Emissions of H2S stop.
Volume of mud
flowing from the
broach increases to
50,000m3 per day,
covering a total area
of 110 hectares of
land: 1.1 million m3.
6,668 villagers from
Renokenongo, Siring
and Jatirejo are
displaced.
7 factories are closed,
and 45 hectares of
rice and sugarcane
fields are affected.
Mud encroaches on
the Surabaya-Gempol
toll road.
The toll road is closed.
The Banjarpanji Emergency Task Force is formed

comprising LBI and seconded EMP personnel.
The Ministry of Environment leads an
independent team to analyze and monitor the
mud, ambient air, and water.
Abel Engineering, international well control
specialists, carry out engineering work and assist
with the design of relief efforts.
The design of relief wells is assisted by external
drilling specialists.
LBI builds ponds and levees to contain the mud
and installs pumping systems. Pond walls are
reinforced. Local communities assist with pond
construction.
SATLAK is formed: a task force comprising LBI,
BPMIGAS, the Departments of Social Welfare,
Environment, and Health, and other relevant
departments of the Sidoarjo local government.
SATLAK is led by the head of the local
government.
The Indonesian Association of Geologists, in
cooperation with LBI, assesses mud extrusion,
and conducts surveys and geological and
geochemical studies of this and other mud
volcanoes in the area.
20
LBI establishes the following priorities:

1. The health and safety of local communities;
2. Mud flow management;
3. The curtailment of the mud flow.
LBI provides masks to students in two schools
and community members in Renokenongo, Siring,
and Jatirejo to prevent fume inhalation.
Emergency accommodation, food, drinking
water, and amenities are provided for the 6,668
displaced people, along with a monthly stipend of
Rp 300,000 per person. Amenities include school
transportation for children, and entertainment,
vocational training, and religious programs.
Temporary emergency shelter is located at
Pasar Baru Porong. In cooperation with the local
Department of Education, affected schools are
relocated.
Potable water and sanitation facilities are
constructed for displaced citizens.
Free medical care is provided for all displaced
families. The Sidoarjo Department of Health
appoints 5 hospitals and 9 health centers to care
for those affected. In addition, 2 emergency
hospitals and 9 mobile units are set up.
Month & Event
Integrated geological, geophysical and

geochemical studies are undertaken by the
Institute of Technology Bandung and Institute of
Technology Surabaya in cooperation with LBI.
LBI provides salary compensation for the

employees unable to work in the affected
factories.
June (continued)
A number of mud disposal options are evaluated,

including piping it to the sea.
The C-5 Galaxy, the worlds largest cargo plane,
was chartered to fly in a 10K Blow Out Preventer
from Singapore to be used in Snubbing Unit
operations.
SATKORLAK is formed: a task force led by
the Governor of East Java, including SATLAK
members, LBI, BPMIGAS, the Ministry of Energy
and Mineral Resources and the Ministry of the
Environment.
Snubbing Unit activities commence to:
1. Determine conditions in the well;
2. Confirm source of mud flow;
3. Staunch the flow.
The toll road is elevated by 1.5m, drains are
added, and a bridge is constructed.
LBI announces compensation arrangements: it

will pay damages for affected rice and sugarcane
fields; rent the affected land for two years;
provide households with Rp 5 million to fund
two-year housing leases, and provide a moving
costs allowance of Rp 500.000.
The Ministry of Energy and Mineral Resources
announces three resolutions:
1. To stop the mud flow;
2. To determine suitable locations for the digging
of mud ponds;
3. To care for the victims.
LBI and the Government undertake joint
investigations into the cause of the broach.
LBI makes an initial Rp 5 billion compensation
payout to the displaced citizens through the
local SATLAK account administered by the local
government head.
Instances of loss are recorded into a database.
A media center is established to provide regular
updates.
July
The volume of mud
from the broach
reaches 2.5 million m3,
covering 179 hectares
of land, and develops
into a mud volcano.
The Snubbing Unit is unable to reach the source

of water and mud.
The air above the mud

volcano is found to
be neither toxic nor
hazardous, despite its
faint odour.
The Ministry of Environment leads a Surface

Management Team to contain the surface mud
and divert it into purposely built settlement
ponds.
The toll road reopens.
Worst case scenario simulations predict the areas

next likely to be affected by the mud as the
volume expands. Predictive maps are drawn.
A 750 HP rig replaces the efforts of the Snubbing

Unit.
Halliburton provide integrated equipment and
services regarding the relief wells.
The location of the first relief well is prepared.
Three alternate locations are prepared.
7 ponds are built with a combined capacity of
767,000m3 covering 135 hectares of land; they
are worked by 70 pumps.
To date, LBI have safely evacuated 7,918 people.

Affected families receive two-year rental
assistance.
Studies examine the properties of the mud, and
conclude that it is:
a. Non-toxic and not hazardous;
b. Suitable for producing bricks, paving blocks,
and concrete blocks.
LBI and the environmental division of the local
government support local industry in Mojokerto
by training villagers to make bricks and
construction materials from the mud.
Local government leads a Community and Social
Impact Team to mediate between LBI and the
communities regarding remedial actions and
compensation.
A Media Relations Team is established responsible
for local community communications.
Traffic is diverted to Jl. Raya Porong while the toll
road is cleaned.
Managing Adversity
21
Month & Event
LBI, in cooperation with the army (ZIPUR), POLRI,

and the local government, repair the retaining
mud-pond wall on the same day it was broached.
Villagers from Siring and Kedung Bendo are

safely evacuated following the broach in the mud
pond-wall.
Boots & Coots, well control specialists, assist with

the drilling of relief wells.
To date, 10,860 people have been displaced.
August
The volume of mud
increases to 100,000
m3 per day, making
a total of 3.65
million m3 covering
approximately 350
hectares of land.
A retaining wall
of an emergency
containment pond is
broached affecting
the villages of Siring
and Kedung Bendo;
causing temporary
closure to the
Surabaya-Gempol toll
road and the railway.
The toll road
and railway are
intermittently open.
A 1500 HP drilling rig replaces the 750 HP rig, and

drills a relief well 500m from the Banjarpanji well,
350m from the broach, to identify the source of
mud and water and kill it with heavy drilling mud
and cement.
The first relief well is flooded two days prior to its
spudding date.
Land is assessed for subsidence.
Scientific Drilling, USA, provides specialist
equipment to assist with drilling and relief
efforts.
It is announced that permanent housing will be

provided for the displaced villagers. Temporary
housing and food continues to be provided.
The fishermen are told that the water and mud
will be separated and treated before being
disposed of.
LBI tells demonstrators it will appoint a firm to
handle the technicalities of compensation for
property damage.
A sugar plantation receives Rp 592 million for
damages incurred.
The toll road is elevated 2.5m.

Fishermen in Desa
Kalirejo demonstrate
against the proposal
to dump the mud
into the Madura
Strait, fearing
contamination.
Pond construction continues, bund walls are

reinforced with geotextile, 20km of levees are
built, and local irrigation canals are rehabilitated.
The installation of 18 inch and 20 inch pipes
commences to carry the mud to the sea.
Demonstrators
block the Porong
road and railway
line demanding
compensation.
September
The Surabaya-Gempol
toll road is reopened.
EMP announces
intention to divest
ownership in Kalila
Energy Limited and
Pan Asia Enterprise
Limited, which
together own 99.99%
shares in LBI, to the
Bakrie Group.
22
Two fatalities occur at the site as a result of

contractor heavy equipment accidents. LBI
investigates the incidents and reviews the sites
safety procedures. The families of the two men
receive compensation.
The first monitoring well spudded to assess and
monitor shallow drilling hazards.
Traffic is diverted to the Porong Road. Public

roads are rehabilitated.
A pilot project commences processing the mud
into bricks, but is discontinued after the project
site is submerged by mud.
Month & Event
With Presidential Decree No. 13, the National

Mudflow Mitigation Team (Tim Nas) is formed
to take operational measures in an integrated
manner to overcome the mud volcano including:
1. Sealing off the broach;
2. Mitigating the impact of the mud flow;
3. Managing social issues.
Tim Nass guidelines from the Government state

that families from the affected area will be
resettled as the land is no longer fit for human
habitation and is considered a disaster zone.
September (continued)
A retaining wall is
breached causing the
toll road to close.
The railway is
impaired.
LBI is a representative member of the Executing

Team and provides technical, operational and
management assistance to support Tim Nas.
LBI presents results of a subsidence survey which

investigated the possibility of subsidence around
relief wells, extrusion points, the gas pipeline, the
railway and toll road.
Donations are made to affected schools. Affected
schools are relocated.
Following further evidence that the mud is not

toxic, the Government authorizes the disposal of
the mud into the sea via the Porong river. This is
determined to be the most viable and effective
solution for short term emergency relief.
Construction of a spillway commences to increase
the flow of mud into the river.
A section of the railway is elevated and the
crossing at Siring is reinforced.
The first relief well spudded.
The Governments guidelines for Tim Nas state
that drilling efforts should continue to stop the
mud flow; that practical uses for the mud should
be developed; that the mud containment area
should be strengthened; that the toll road, gas
pipeline, and railway should be relocated.
October
Between 100,000
150,000 m3 of mud
flow daily from the
mud volcano. Mud has
affected an area of
400 hectares and 8
villages.
The Surabaya-Gempol
toll road reopens.
Bapepam rejects
proposals to divest LBI
to Lyte Ltd and Bakrie
Oil & Gas.
Geotextile is applied to mudpond levees.

To date, three water treatment units have been
installed, and 20 inch and 32 inch pipes connect
mud ponds to the Porong river.
Ecological and hydrological studies continue to
ensure that the discharge of mud is conducted in
an ecological and sustainable manner. Long term
environmentally sustainable solutions to mud
disposal are investigated.
LBI, the Institute of Technology Surabaya, and
Tim Nas work together to minimize any effects to
the ecology of the Porong river.
LBI, the Institute of Technology Surabaya, and

the affected communities develop permanent
relocation plans.
To date, 3,300 families have been re-located
to safety. LBI continues to provide a monthly
stipend of Rp 300,000 per person to cover food
costs, and provides free medical assistance.
Temporary accommodation at Pasar Baru Porong
is vacated as people utilize LBIs rental assistance
to relocate to more permanent housing.
The Mindi Village Public Cemetery is relocated.
LBI receives the first insurance installment.
Local and international contractors continue with

relief well drilling efforts.
Managing Adversity
US$ 24 million compensation is announced for

the relocation of the community and their living
costs.
23
Month & Event
The second relief well spudded.
LBI continues to work with the owners of farms,

factories and small/medium enterprises, as well
as market sellers and other businesses to ensure
that their commercial enterprises are relocated
promptly and that compensation is made for any
losses.
October (continued)
LBI and Tim Nas work together to mitigate the

effects of any possible subsidence in the area.
A differential GPS system is used to undertake
continuous readings of the bund walls and mud
elevations.
The total capacity of ponds built is 11,744,000m3,
covering 252 hectares of land.
Penkonindo, the Indonesian subsidiary of Van
Oord, assists LBI with mud containment issues.
1,400 army personnel assist with the
strengthening and stabilization of levee walls
and the mud containment area.
LBI reiterates that the mud is neither toxic nor

poisonous, despite media reports.
The Ministry of Environment believes that the
mud can be disposed of safely without being
treated.
The United Nations Environment Program finds
the current impact of the incident on human
health to be low.
LBI agrees to fund a religious holiday allowance of
Rp 700,000 per worker.
November
The toll road is closed.
EMP signs agreement
to sell its shares
in Kalila Energy
Limited and Pan Asia
Enterprise to Freehold
Group Limited.
Pertaminas East Java
Gas Pipeline ruptures
at KM 38 of the
Porong-Gempol toll.
The toll road collapses
and is closed
permanently.
EMP announces the
cancellation of the
divestment to the
Freehold Group.
24
EMP Kangean Ltd shuts in the supply of gas to

customers following the explosion.
The disposal of mud into the Porong river ceases
following the gas pipeline rupture which caused
the mud to spread north instead of south into the
spillway.
GPS monitoring of subsidence levels around both
relief wells continues, as does monitoring of the
spillway.
Construction of a spillway pump house is
underway, and bund walls are reinforced in
anticipation of the rainy season. 5 additional
pumps are installed.
Tim Nas announces the decision to broaden the
Porong Road.
There were 14 fatalities as a result of the rupture

in the gas pipeline. Families were given financial
support, and assistance with burial expenses.
The Ministry of Energy and Mineral Resources
declares the pipeline rupture a natural disaster.
The affected communities continue to receive
food and beverages, as well as medical care.
3,779 people affected by the pipeline rupture
are provided emergency shelter at Pasar Baru
Porong.
Month & Event
EMP Kangean Ltd

recommences gas
supplies after an 8day shut-in.
Minarak Labuan Co starts supporting LBI.
Refugees continue to receive free medical care. To

date, 35,000 patients have been attended to.
A bund wall is
broached in the
vicinity of the second
relief well and the
area is deemed
unsafe.
Subsidence causes the Porong flyover bridge to

become unstable and it is dismantled.
December
The Association of
National Oil and
Gas Companies
(Aspermigas)
concludes the Sidoarjo
mud volcano is a
natural disaster.
Subsidence continues to be monitored through

the GPS system.
By the end of the year, 40km of large scale

levees had been constructed to contain the mud,
measuring up to 30m in height, 30m across the
base width, and narrowing to 8m at the top.
LBI estimates the total costs for drilling relief
wells and mud management to be
US$ 183 million to the end of 2007. To date,
LBI has paid US$ 92 million on containing the
mud, stopping the mud flow and compensating
victims.
Pertamina, Kodeco
Energy and LBI
sign gas sales and
purchase agreements
with seven companies
to the total of US$ 2.8
billion.
LBI receives the second insurance installment.

Tim Nas proposes to buy affected land
and property from those with proper land
certification at the following rates:
Land: Rp 1,000,000/m2
Buildings: Rp 1,500,000/m2
Rice fields Rp 120,000/m2
12,463 people are being given shelter in Pasar
Baru Porong, Dinas Diklat, and Balai Desa
Ketapang.
LBI announces that displaced people who meet
specified criteria have the option to be relocated
to Kawasan Sidoarjo Baru, a residential area to
be developed which will include a school, medical
clinic, sports facilities, a mosque, cemetery, and
traditional market.
The mud continues

to flow at a rate of
approximately 1.1
million barrels per
day.
For further information regarding the Sidoarjo mud volcano please refer to www.sidoarjo.info
Managing Adversity
25
Lalang platform and Ladinda FSO
26
Sumatera
Malacca Strait PSC (working interest 60.49%)
Operator : Kondur Petroleum S.A. (34.46%)
Partners : PT Imbang Tata Alam (26.03%)
China National Offshore Oil Corporation (32.58%)
Malacca Petroleum Limited (6.93%)
Rupat Island
Malaysia
Malacca Strait PSC
St
Bengkalis Island
QC
VA
ra
it
of
Ma
lac
ca
OA
QD
QF
QE
0
Refinery
Pertamina UP II
15 KM
QB
BA
AG
Padang Island
OSB Ladinda
LEGEND
Gatam
BLOCK
OIL FIELD
GAS FIELD
OIL & GAS FIELD
PROSPECT
LEAD
CUSTOMER
Sabak
Pedada
Benua
Dusun
Oil Gathering station

BOP Pertamina BSP
DC
BZ
CA
BH
BY-2
DR
BY-1
Mengkapan Field
Philippines
Ponak-1
FC
BU
Rangsang Island
TA
EG
N
FB
FD
BK
BM
BC
Pusaka
Thailand
Melibur Field
Merbau Island
CN
DF
BV
EA
AL
Butun Industrial Estates
SAG
CM
BGW
Kuat
Field
NM
Ponder Field
Kurau Field
CO
LE
DD
Lalang Field
OIL PIPELINE
GAS PIPELINE
DU
AI
BQ
BT
CW
TG
TH
TH
CU
Selatan Field
DB
CH
TE
TB
TC
Tebing Tinggi Island

TD
Malaysia
Beruk Timur Laut
Singapore
Malacca Strait PSC
Sumatera
INDEX MAP
East Timor
Sumatera
Beruk
Contributing 86% of total oil

production in 2006, Malacca Strait
produced 3.35 mmbbl (2005: 3.4
mmbbl). Production for the year
averaged 9,182 bopd.
The program of workovers and well

service continued during 2006 to
mitigate production decline from
these mature fields. A total of 15
wells have been drilled during the
year including 11 development wells,
Managing Adversity
Mendol Island
3 for exploration and 1 appraisal

well with 100% exploration success
rate. Appraisal tests at the BY-2 well
showed oil instead of gas and the
BY2-DC-DR discoveries open up an
exciting new deep oil play.
27
Sumatera
Gelam TAC (working interest 100%)
Operator : PT Insani Mitrasani Gelam (100%)
Setiti
Jambi
SE Setiti
PLN
Sungai Gelam A Field (SG)
LEGEND
BLOCK
OIL FIELD
GAS FIELD
OIL & GAS FIELD
PROSPECT
LEAD
CUSTOMER
OIL PIPELINE
GAS PIPELINE
PROPOSED GAS PIPELINE
Kenali Asam
Sultan Thaha
Airport
Kecamatan
Rumpeh
Sungai Gelam B Field (SG)

Sungai Gelam D Field (SG)
Gelam TAC
IP
TG
ip e
Kecamatan Jambi Luar Kota
e
lin
Sungai Gelam C Field (SG)
Thailand
Tempino
Kecamatan Mestong
Malaysia
Singapore
South Sumatera
Oil production under contract with

Pertamina doubled in 2006 to
over 117,000 bbl and encouraging
progress was made on development
drilling, the SG-12 ST well delivering
volumes of 300 bopd, well in excess
of EMPs average performance for a
single well. We rescheduled our gas
projects to 2008 and deliberately
shifted the short-term focus towards

oil production, development drilling
and workover activity taking
consideration of the successful
results of our drilling program and
the increase in oil prices. A 3D seismic
survey is planned for the first half of
2007 to optimize the development
program. Contingent upon the results,
further drilling is scheduled for late in
the year.
28
We received approval from Pertamina

for our POD for gas in May 2006 and
in July we signed an MOU to supply
Indogas.
We achieved over 2 million manhours without a lost time incident
and received an award recognizing
our high standards of safety from
the Ministry of Labor, Republic of
Indonesia.
Sumatera
Bentu PSC & Korinci Baru PSC (working interest 100%)
Bentu PSC Operator
: Kalila (Bentu) Limited (100%)
Korinci Baru PSC Operator : Kalila (Korinci-Baru) Limited (100%)
Minas
Beruk Timur Laut
Zamrud
Baru Pipeline
Kotabatak
Beruk
Korinci Baru PSC

Pekanbaru
Minsis
West Baru Field
Perak Field
Bentu PSC
Baru Field
Desabaru
Korinci Field
Terusan Field
Bentu Field
Sering
Sangkulin
LEGEND
BLOCK
OIL FIELD
Seng Field
GAS FIELD
OIL & GAS FIELD
Timah
ns
Tra
Nikel
PROSPECT
do
sin
Segat Field
CUSTOMER
Ga
LEAD
ia
ne
eli
Pip
Besi
es
on
Ind
GAS PIPELINE
Sumatera
The Bentu and Korinci Baru blocks

lie adjacent to each other in Riau
province, Sumatera, with 2P gas
reserves constituting almost one fifth
of total Company gas reserves.
Investment in production facilities

in the Baru and West Baru fields
proceeded in 2006 and a 10 kilometer
pipeline was completed to connect
to PLNs gas turbine generating
facility. The customer requested
supply postponement during the
year, being unable to meet certain
conditions precedent under the GSA,
which resulted in its cancellation.
Negotiations on a revised GSA are
ongoing to incorporate the impact of
the delayed gas offtake.
Managing Adversity
Positive progress has been achieved

in negotiations under an MOU with
Riau Andalan Pulp and Paper (RAPP)
to supply uncommitted gas from
both PSCs. Multiple gas market
opportunities are available in this gas
short area.
29
Sumatera
Gebang JOB PSC (working interest 50%)
Operator : Costa International Group Limited (50%)
Partner : Pertamina (50%)
GOS
it
ra
St
Sumatera
la
Ma
of
a
cc
Rantau
Kuala Simpang
Barat
Kuala Simpang
Kambuna
Serang Jaya
Sungai Buluh
10 KM
Arbei Field
Sembilan Island
Oil
Pangkalan Susu
LEGEND
BLOCK
OIL FIELD
GAS FIELD
OIL & GAS FIELD
PROSPECT
LEAD
CUSTOMER
OIL PIPELINE
GAS PIPELINE
HM 55
Tabuhan Barat
SBM
Anggor Field
rt
o
xp
ne
eli
Pip
Gebang JOB PSC
Gebang Deep
Tabuhan Timur
Pangkalan Brandan
Secanggang Field
Gebang
Securai
Besitang
Darat Utara
Tanjung Perling
Batang Sarangan
Tanjung Pura (TPA)

Thailand
PLTG Belawan
Malaysia
Singapore
Binjai
Batu Mandi
Wampu
The Gebang Joint Operation Body PSC

in partnership with Pertamina is a
combination of onshore and offshore
fields, with water depth offshore of
less than 40 meters. Covering an area
of 980 square kilometers, geologically
the block is located in the North
Sumatera Basin, one of the most
prolific basins in Indonesia.
pipeline connects to a Pertamina

gas gathering facility. Demand in
the Medan gas market is rapidly
expanding with PLN and PGN as the
major gas consumers. The upturn in oil
and coal prices is pulling up average
realizations for gas to levels of over
US$ 3.5/mmbtu.
Oil and gas is already being produced

from 8 wells within the Arbei field at
rates of 80 bopd for oil and 2 mmcfd
gas. An established 9 kilometer
To mitigate declining production, four

well workovers are planned for 2007
while the Anggor field is planned to
commence development during 20072008. At Secanggang, one appraisal
30
Medan Industrial Estates

(KIM)
well is planned for 2007, subject to rig

availability. Given successful appraisal
and POD approval, development
drilling will follow in 2009. Exploration
leads at Tanjung Pura and Gebang
Deep have also been studied with a
view to future drilling.
A number of alternative gas supply
opportunities are currently being
evaluated with prospective offtakers
in order to optimize commercial terms.
Kalimantan
Semberah TAC (working interest 100%)
Operator : PT Semberani Persada Oil (100%)
Pertamina
Sangatta
TAC
10 KM
Tanjung Sangatta
Tanker to
UP. V Balikpapan
ince
Acce
ss R
Prov
BLOCK
OIL FIELD
GAS FIELD
OIL & GAS FIELD
PROSPECT
LEAD
CUSTOMER
OIL PIPELINE
GAS PIPELINE
oad
LEGEND
Bontang
Strait of Makassar
Kalimantan
Tanjung Santan
Union
Santan Terminal
Trucking to
Sangatta
VICO P
Oil & Gas Prod. Facility

Semberah
Field (UKM, SBR)
ne
ipeli
PLN
Gas Power Plant
Tanjung Batu
Semberah TAC
Junction Gas Plant

Samarinda
Gas Production Facility
Karangmumus Field
Binangat Field
Pelarang
Field
Sambutan
Field (SBT)
Managing Adversity
Gas processing facilities and the

pipeline to serve the end user,
PLN, were 80% completed during
2006. This project was held back
by unforeseen delays in the land
acquisition process, however these
have now all been resolved and gas
production is expected to commence
in the first half of 2007.
Oil production in 2006 was at a
comparable level to the previous year,
despite a temporary shut down of
the SBR-5 well for maintenance. Some
delay was experienced in securing
maintenance equipment for the
overhaul.
The drilling program in the Sambutan
field produced positive results with
a total of 5 wells completed, one,
SBR-08 is already in production
and two further wells are due to
commence production during the first
quarter of 2007 after the installation
of equipment to enhance flow has
been completed. One well produced
negative results and the fifth was
geologically successful but the
quantities of oil and gas produced
were uneconomic. During December a
sixth well, SBT-2A, showed indications
of considerable gas production
potential and this has subsequently
been completed to accommodate oil
and gas production simultaneously.
31
Managements Discussion
and Analysis of the Financial
Condition and Results of
Operations (MD&A)
32
Overview
EMP (the Company) derived net sales
revenues in 2006 from the sale of
crude oil, condensate and natural
gas produced in accordance with the
terms of production sharing contracts
(PSC), including one JOB PSC and
technical assistance contracts (TAC)
relating to the development of eight
discrete blocks in Java, Sumatera and
Kalimantan.
Net sales revenues are affected by the
net entitlement volume of oil and gas
under PSC, JOB and TAC. Entitlement
is defined as a quantity of petroleum
that a party has a right and
obligation to take delivery of under a
PSC, JOB or TAC. Entitlement consists
of the Companys cost recovery
and its share of production value,
net of domestic market obligations
(DMO). A contractor must fulfill DMO,
commencing after a period of five
years from the month of the first
delivery of crude oil produced from
any new field, through the sale of a
portion of the contractors share of
the crude oil produced from the field
at a subsidized price in accordance
with the terms set out in the PSC,
JOB or TAC. The Companys DMO
accounted for 25% of the Companys
crude oil entitlement during the
period under review for an average
price of approximately 10% to 25% of
weighted average price of all crude oil
produced and sold from the Contract
Areas. According to the Amendment
of the Kangean PSC, DMO was also
deemed applicable to gas production

from Kangean Block, however since all
gas production from Kangean Block is
sold to domestic buyers, DMO had no
impact on Company entitlement.
Terms relating to Gas Sales
Sales of the Companys net gas
entitlement, denominated in US
Dollars, are primarily through bilateral
medium-term (two to three years)
and long-term (longer than three
years) fixed price contracts with
leading customers, thereby avoiding
risks associated with volatility of
prices. Factors used to determine the
fixed price for each contract include
demand volume, contract terms,
prevailing contract prices for other
medium-term and long-term fixed
price contracts, alternate fuel prices
and the rate of exchange between
the Rupiah and US Dollar. The average
realized sales prices for gas per
mmbtu for the years ended December
31, 2005 and 2006 were US$ 2.0 and
US$ 2.2, respectively. It should be
noted that all GSA supply contracts
are on a reasonable endeavors basis.
Terms relating to Oil and
Condensate Sales
Net crude oil entitlement is sold
through one-year sales contracts
to the winning bidder under a
competitive tender process, subject to
market conditions. The largest portion
of this entitlement in 2006 was sold
under a one-year crude oil sales off
take contract with Petro Diamond

Company Limited (a subsidiary of the
Mitsubishi Corporation). In 2005 and
prior years substantially all of the
condensate production was sold to
BP Singapore Pte Ltd under a sales
contract renewed annually.
Sales of net crude entitlement are
predominantly at prices based on the
prevailing Indonesian Crude Price (ICP).
Average realized sales prices (based
on entitlement) for oil per bbl for the
years ending December 31, 2005 and
2006 were US$ 50.3 and US$ 60.1
respectively.
Full Cost Accounting
The Company and subsidiaries follow
the full cost method of financial
accounting in recording oil and gas
properties. Accordingly, all costs
related with acquisition, exploration
and development of oil and gas
reserves, including directly related
overhead costs are capitalized.
All costs arising from production
activities are recorded at the time
they are incurred. The capitalized
costs are subject to a ceiling test
which limits the level of such costs
to the estimated present value of
future aggregate net revenues,
discounted at a 10% interest rate
using reasonable assumptions on oil
and gas prices.
Expenditures Capitalized as Oil and
Gas Properties
Oil and gas properties at cost increased
from Rp 4.8 trillion to Rp 7.2 trillion.
Annual Revenues
2006
Value (Rp billion)
YoY (%)
Volume (mmboe)
YoY (%)
1,081
565
1,646
66%
34%
100%
12
(21)
(2)
2.0
4.7
6.7
29%
71%
100%
4
(26)
(19)
Oil
Gas

Annual Capital Expenditures
Year Ended December 31, (US$ in millions)

2006
2005
2004

Annual expenditures on Oil and Gas Properties
Managing Adversity
261.2
168.6
215.6
33
Total Net Sales Revenues

Net sales for 2006 were 2% lower at
Rp 1,646 billion. Net sales represented
revenues from oil sales of Rp 1,081
billion (US$ 118 million equivalent)
up 12% and Rp 565 billion (US$ 61.7
million) from gas sales. Volumes for
the year were 4% higher for oil at
2.0 mmbbl and 25% lower for gas
at 28.2 bcf, the latter partly due
to interruption to gas production
through damage to the East Java
pipeline, which has subsequently reopened. Average prices realized for
oil were significantly higher, by 20%
year on year to US$ 60.1 per bbl with
average gas prices 7% higher at
US$ 2.2 per mcf.
Production Costs were 7% lower in

2006 at Rp 398 billion (US$ 43.5
million), related to the lifting of
oil and gas from the sub surface
including the cost of collecting,
separating, clearing and storing oil
and gas in production facilities prior
to delivery to customers. These costs
are mainly affected by the levels of
production, overhead from oil and gas
field operations, as well as operations
and maintenance costs and pipeline
fees paid for carrying the Companys
gas production.
The 45% increase in Production
Support Costs to Rp 389 billion
(US$ 42.5 million) reflects the
increase in size of operations with the
consolidation of the THP acquisition.
Production Support Costs comprises
management and administration
costs relating to each PSC and TAC
including salary and employee
benefits, office rentals and operating
expenses.
Cost of Goods Sold

Cost of Goods Sold of Rp 1,175
billion (US$ 128.3 million) in 2006
was almost flat year on year. Cost
of Goods Sold consists primarily
of depreciation, depletion and
production costs, as well as costs of
production support and workovers
directly related to the activities in
the operating subsidiaries. All costs
arising from production activities are
recorded at the time they are incurred.
Depreciation and depletion costs arise
from the depletion of capitalized oil
and gas exploration and development
costs, based on the total estimated
proved reserves (using independent
reserve certifications) as detailed in
notes 2 and 12 of the consolidated
financial statements.
Workover Costs were 5% lower year

on year at Rp 51 billion: primarily
maintenance activities relating to
current production capacity, including
activities such as the cleaning of well
bore equipment to ensure the smooth
flow of oil and to reduce the rate of
natural production decline.
Revenue (Rp billion)

Income from Operations

Income from Operations was
significantly lower at Rp 238 billion
(US$ 25.9 million). This result takes
into account reduced gross profit,
down 9% to Rp 471 billion and
an increase of 27% in operating
expenses, relating to the costs of the
THP acquisition and generally higher
costs impacted by industry cost
pressures.
Other Charges - Net
Other Charges, Net increased by 15%
from Rp 203 billion to Rp 233 billion.
This reflected a combination of firstly,
an increase of 22% in financing
charges to Rp 304 billion, secondly an
amount of interest and penalty tax
of Rp 32 billion and lastly, amounts
received under insurance claims of
Rp 56 billion, relating to the 2002
damage to the pipeline connection to
Pagerungan field at Kangean Block.
Tax Income/Expense
The change in tax income/expense
in 2006 was primarily attributed to
an increase in deferred taxes arising
as a result of incurring sunk costs at
the Kangean block due to increased
drilling activities during the year
approved by BPMIGAS, such costs
being deductible against future
taxable income.
Revenue Mix (Rp billion)
973 1,682 1,646
432 541
967 715
1,081 565
Oil
Gas

34
2004
2005
2006
2004
2005
2006
Net Income
As a result of the foregoing, the
Companys net income increased
slightly from Rp 201 billion to Rp 203
billion for the year ended December
31, 2006.
Financial Position
Assets
Total assets increased by Rp 3.5 trillion
in 2006 to Rp 9.9 trillion mainly due
to the significant increase of Rp 2.2
trillion in oil and gas properties as
the Company expanded through an
extensive drilling program as well as
the acquisition of THP with its five
oil and gas blocks representing an
additional 30% in 2P reserves. Further
additions to the oil and gas properties
came from the capitalization of costs
relating to the Banjarpanji incident
amounting to US$ 78 million in
accordance with full cost accounting
as described in note 36 of the
financial statements.
Current assets grew by Rp 1 trillion to
Rp 2.4 trillion in 2006 predominantly
due to increase in size of operations
reflected in higher inventories,
receivables and cash.
Non current assets grew by 2.5 trillion
to Rp 7.4 trillion primarily attributable
to the additional oil and gas
properties and an increase in deferred
tax assets to Rp 492 billion.
Liabilities and Equity

The increase in current liabilities, of
19%, reflected accrued expenses
relating to increased production and
drilling activity. Non-current liabilities
increased by Rp 2.2 trillion due to an
additional loan arranged by Credit
Suisse amounting to US$ 100 million,
and the drawdown of a five year
credit facility to develop the Kangean
Block amounting to US$ 90 million.
The potential loss in relation to the
Banjarpanji incident is estimated to
be approximately US$ 31.7 million.
On January 25, 2006, the Company
completed the acquisition of a 99.99%
equity interest in PT Tunas Harapan
Perkasa (THP), plus receivables
of PT Mitra Andalan Mandiri from
THPs subsidiaries. THP is a special
purpose sub-holding company which
controls 99.99% equity interests in
PT Semberani Persada Oil, PT Insani
Mitrasani Gelam and 100% equity
interests in Kalila (Bentu) Limited,
Kalila (Korinci Baru) Limited and Costa
International Group Limited. The
Company paid Rp 2,599 billion for a
99.99% equity interest in THP, being
the Rupiah equivalent on the date
of the purchase of the agreed sale
price of US$ 250.1 million. THP assets
comprise working interests of 50% in
the Gebang PSC, 100% in the Bentu
PSC, 100% of the Korinci Baru PSC,
100% of the Sungai Gelam TAC and
100% of the Semberah TAC.
EBITDA (Rp billion)
The purchase price for the acquired

assets was tendered in cash, and
was financed primarily through a
rights issue completed on January
25, 2006 by the Company of
4,909,368,195 shares of the Company,
at a price of Rp 770 per share, raising
approximately Rp 3,780 billion.
The acquisition of THP reflects the
Companys strategy to selectively
acquire additional reserves and
resources using equity funding
that will contribute to strengthen
the portfolio of productive natural
resource assets. The acquisition
of THP has been accounted for in
accordance with PSAK No. 38 as
described on page 13 of the Financial
Statements.
Total equity increased from Rp 692
billion to Rp 1,833 billion in 2006 due
to the increase in retained earnings
plus additional capital raised through
a fully subscribed rights issue of 4.9
billion shares.
Cash Flow
Cash flow generated from operating
activities of Rp 580 billion and net
cash generated from the issuance
of shares and financing activities of
Rp 5,531 billion was used to acquire
THP and oil and gas properties and
in settlement of financing charges,
resulting in a net cash increase of
Rp 556 billion for the year. The cash
position at the end of the year was
Rp 858 billion.
Net Profit (Rp billion)
Total Assets (Rp billion)
442
699
630
30
201
203
3,492
6,336
9,883
2004
2005
2006
2005
2006
2004
2005
2006
2004
Managing Adversity
35
Safety, Health and

Environment (SHE)
36
A responsible approach to providing

proper safety procedures, essential
training and safety awareness is
central to all operations at EMP. In
2006 a SHE Excellence Functional
Team dedicated to the development
of SHE initiatives was established.
Banjarpanji and the East Java
Pipeline
The Company is deeply concerned
about the discomfort and disruption
to adjacent communities sustained as
a result of the eruption of mud in the
vicinity of the Banjarpanji exploration
well on May 29, 2006. In addition we
report two serious accidents in 2006:
firstly, the loss of 2 lives in a separate
incident involving third party
construction workers, and secondly,
when land subsidence caused a
rupture in the East Java Gas Pipeline
at KM 38 of the Porong-Gempol
tollway resulting in the loss of 14 lives
in November 2006.
SHE Functions
EMPs SHE mechanisms are
designed to cement a culture of
commitment to safe, healthy, and
environmentally friendly practices
which in turn enhance the business
performance and sustainability of
EMPs operations. Reporting directly
to the CEO, SHE collaborates with all
business units to ensure compliance
to SHE protocol and other applicable
standards and regulations. SHE
also facilitates the sharing of best
practices, resources, and lessons
learned between the business units.
The SHE function coordinates
the satisfactory and efficient
implementation of risk management
processes throughout business
operations with regards to crisis
management, business continuity
planning, hazard identification, and
risk assessment, implementation and
appropriate follow-up.
SHE Performance
The establishment of the SHE
Excellence Functional Team in 2006
has yielded positive results, including
the drafting of EMP SHE Corporate
policy, the completion of the SHE
Management System Framework, the
establishment of risk identification
and assessment guidance, and
the preparation of EMPs Building
Emergency Procedure.
During the year the SHE team also
conducted coordination meetings
and inspections, organized and
deployed SHE resources, attended
an international lessons-learned
and best practice sharing workshop
presented by Exxon entitled
Developing World-Class Crisis
Response Responsibilities, set up an
intranet forum for the internal sharing
of lessons learned and best practices,
assisted EMP business maintain their
blue PROPER ratings, and prepared
daily, weekly and monthly SHE reports
of all wells being drilled. SHE ensures
that all rig personnel possess the
necessary certificates and safety
training required by MIGAS and
BPMIGAS.
2006 SHE Performance

Target
Bentu Brantas Gebang Gelam Kangean
-Korinci Baru
Malacca Semberah
Strait
Lost Time Incidents (cases)

Total Recordable Incidents Rate (cases)
Spills Incidents
Damage/ Loss
PROPER Ratings
0.0
0.89 (20)
0.0
0.0
Blue
0.3
0.0
1.5 0.56 (1)
3
0.0
1
0.0
Blue
-
0.29 (8)
0.88 (24)
0.0
1
Blue
Managing Adversity
0.0
0.0
0.0
0.0
-
0.0
0.0
0.0
0.0
-
0.07 (1)
0.52 (8)
0.0
0.0
Blue
0.0
0.0
0.0
0.0
-
37
Internal trainings conducted were

wide-ranging, covering topics
from avian flu awareness, first aid,
hazardous waste training, firefighting and defensive driving, to man
overboard drills and oil pollution drills.
With specific regard to Banjarpanji,
the SHE team conducted extensive
risk assessment studies; established
medical facilities at Wunut; deployed
additional SHE officers to assist
with supervision and monitoring;
provided additional support and
training for on-site staff; monitored
and analyzed the mud, water, and
air; established a bubble monitoring
capacity; conducted studies into mud
dispersion; monitored gas emissions
and air quality, and revised the
Emergency Preparedness Manual.
38
The SHE team has identified specific

targets for 2007 which include the
ongoing promotion of SHE awareness
among employees; the continuation
of internal trainings on world-class
safety improvements and risk
assessment conduct; the publication
of SHE Regulatory Compliance
Assessment Protocol; increased
reporting on near-miss instances, and
the preparation of an updated crisis
management framework and waste
management handbook.
Safety: Lost time incident record

In 2006, high safety standards
were evident in Gelam, Sumatera
which recorded more than 2 million
man-hours without a single lost
time incident, for which we received
an award of recognition from the
Ministry of Labor. Four other sites,
Bentu-Korinci Baru, Gebang, and
Semberah also recorded no lost time
incidents. The SHE team conducts
regular training programs to elevate
awareness of general and specific
safety practices, and incorporates
lessons learned into training programs
and risk assessment criteria.
Environment
PROPER, the environmental
compliance performance evaluation
program operated by the Ministry of
Environment, assessed and awarded
a blue rating to our operations at
Brantas, Malacca Strait, and Kangean;
a rating of blue signifies good
performance and is the highest rating
attained to date by companies in the
oil and gas sector. A target of blue or
better has been set for the sites at
Bentu-Korinci Baru, Gelam, Gebang
and Semberah for 2007.
The commitment to safeguard and
support sustainable natural resources
is a crucial component of SHE. EMP
initiated a number of environmental
rehabilitation projects during 2006
across the Indonesian archipelago
with an overt emphasis on protecting,
repairing, and replenishing local
habitats; these included the
replanting of 70,000 mangrove
seedlings and the repair of the
breakwater at Melibur, Sumatera.
Managing Adversity
39
Community Relations
40
The nature of our operations locates

us in often isolated areas across
the Indonesian archipelago among
communities living beyond the bounds
of mainstream economic and social
development programs. EMP considers
these communities as neighbors, and
where possible potential employees
and partners. Our support projects
are constructed to contribute to
sustainable grass-roots economic
development, to protect and nurture
the natural environment, and to
empower communities through
developing vocational capacity.
Sharing Resources
In 2006, the provision of power
and potable water to neighboring
communities were two of our
infrastructure development projects.
In partnership with members of the
community, the local government, and
PLN, the local electricity company, we
upgraded the local electricity service
on Pagerungan Besar and Pagerungan
Kecil from a 7-hour to a 24-hour a day
service, and installed an underground
pipeline to pump potable water to 16
community water tanks, providing
villagers with easy access to safe
water.
Following the provision of skills

training to midwives in 2005, we
furnished a nursing and midwifery
school with, among others, hospital
beds, oxygen bottles, wheelchairs,
sterilisation equipment, and practice
dummies. Scholarships for 102 high
school students and 48 college
students were provided for academic
high achievers from economically less
advantaged homes, and parcels of
essential daily goods were donated
to 178 elementary and junior high
school teachers. We also facilitated
the strengthening of intra-community
relations: religious leaders were
invited to lead ceremonies and
prayers on key days throughout
the Islamic calendar and lead a 6day road show enhancing religious
understanding and education in more
remote regions.
coconut oil (VCO), a more profitable

and in-demand export. Graduates
from ITB Bandung provided the
2-day training sessions and EMP
marketed VCO to mainland customers.
In cooperation with the local
government and the Department
of Fisheries, fishing livelihoods were
stimulated through the sponsorship
of a 3-year fishing diploma for high
school graduates. The program
commenced in 2003 and the 30
participants graduated in 2006.
The fundamental aim for each project
is to improve quality of life in a
sustainable and empowering manner
in partnership with community
members.
Encouraging Commerce
EMP encourages the development of
economic projects which enable the
communities themselves to propel
their businesses independent of
outside support. Local producers of
cooking oil had their vocational skills
enhanced through the provision of
training on the processing of virgin
Managing Adversity
41
Corporate Governance Report
42
Introduction
Framework and Approach to
Corporate Governance
The Company recognises that
a strong commitment to good
corporate governance practices
is vital to its continued success.
At its base, corporate governance
is about establishing a code of
behavior and a set of values that
underpin the Companys everyday
activities and ensure transparency,
fair dealing and protection of the
interests of stakeholders. Best
practice governance focuses on the
processes used to direct and manage
our business in a manner in line
with our corporate objectives, the
expectations of society and which is
fully accountable to our stakeholders.
In pursuing its commitment to best
practice in governance, EMP has and
will continue to:
Review and improve governance
practices
Monitor global developments
in best corporate governance
practice; and
Strive for best practice and
fully comply with the rules and
regulations of Bapepam, the
Jakarta Stock Exchange and the
Indonesian National Code of Good
Governance
Roles, Responsibilities and Skills of

the Boards
Membership and Expertise
The Board of Commissioners (BoC) and
the Board of Directors (BoD) jointly
share responsibility to implement best
practices in corporate governance.
The Company also maintains a full
committee structure to help ensure
that the key elements of governance
are carried out. This structure is
discussed in more detail below.
The integrity, professionalism and
accountability of Board members
are essential to implementing best
practice in corporate governance
and to this end the Company is
governed by a well-informed Board
of Commissioners, which includes
one independent commissioner and
a responsible and professional Board
of Directors, comprising 5 Directors.
Members of both Boards have a
broad range of relevant financial
skills, professional experience and
managerial expertise to meet the
Companys objectives.
Size and Composition of the Boards
The size and composition of the
BoC and BoD is subject to the limits
imposed by the Companys Articles
of Association, which stipulate that
nominations to the BoC and BoD
should be approved by shareholders
at a General Meeting of Shareholders
(GMOS) for a period commencing from
the date of the GMOS appointing them
until the closing of the fifth Annual
GMOS after the date of appointment.
Managing Adversity
Board of Commissioners: Roles and

Responsibilities
The Board of Commissioners
comprises three members, one of
whom is independent, and undertakes
a supervisory role in monitoring the
Companys performance against its
stated business objectives. Aside
from its statutory authority, as
stated in the Companys Articles of
Association with respect to approving
certain transactions and approving
the annual report, the BoC has
oversight of risk management, audit
controls and the timely disclosure of
information in line with prevailing
regulations. To ensure this happens,
every effort is made to provide the
BoC with the relevant information
through regular formal joint meetings
of the BoD and BoC.
In accordance with Bapepam
guidelines, the Indonesian Capital
Market regulator, and the Jakarta
Stock Exchange rule [1-A Kep-305/
BEJ/07-2004], 30% of the BoC is
independent to safeguard the
interests of minority shareholders.
The independent commissioner, as
defined by the regulations, serves
as the Companys Audit Committee
chairman.
The Board of Commissioners met
formally 5 times in 2006; in each case
an agenda including board papers and
the minutes of the previous meeting
were distributed to Commissioners
in a timely fashion. These formal
meetings do not preclude frequent
informal contacts and information
sharing between Commissioners and
directors. 6 formal joint meetings
were held in 2006 with the Board
of Directors in addition to routine
informal meetings during the course
of the year.
43
Qoyum Tjandranegara, Independent

Commissioner
Qoyum Tjandranegara is well-known
both domestically and internationally
in the industry, serving in the past
as President Director of Perum
Gas Negara, President Director
of PT Perusahaan Gas Negara, as
Advisor to the Ministry of Mines &
Energy, Secretary of the Board of
Commissioners of Pertamina, and
Special Staff to the Vice President
of the Republic of Indonesia, Energy
& Industrial sector. Appointed as
Independent Commissioner in March
2004, he serves as Chairman of the
Audit Committee.
Rennier Latief, Commissioner

Rennier Latief began his career at
Philips Petroleum as a geologist in
the late 1970s. From 1986 he served
in different management positions
at Huffco International culminating
in his appointment as Senior Staff
Geologist. He then joined VICO as
Exploration Manager in 1994 before
acquiring the Malacca Strait PSC from
Lasmo in 1995. He acquired control
of the Brantas PSC from Huffco, and
his leadership was instrumental in
the commencement of commercial
production just 3 years later. Formerly
serving as President Director, Rennier
oversaw the acquisition of the
Kangean PSC from BP in late 2004
before stepping down as President
Director in May 2005 to assume his
current role as Commissioner.
Qoyum Tjandranegara
Rennier Latief
44
Suyitno Patmosukismo, President

Commissioner
Suyitno Patmosukismo has
contributed extensively to the
development of the Indonesian oil
and gas industry in several senior
positions including the Director
of Exploration and Production at
Pertamina, the Director General
Oil & Gas within the Indonesian
Department of Mines & Energy, and
the position of Chairman of the OPEC
Board of Governors in the mid1990s. He has served as President
Commissioner since the Company
went public in June 2004. He is also
currently the Executive Director of the
Indonesia Petroleum Association.
The Board of Directors: Roles and

Responsibilities
The Board of Directors, currently
comprises 5 Directors including the
President Director and is responsible
for the day to day management
of the Company and as such has
responsibility, inter alia, for the
following key tasks:
Administration of Company
accounts
Jointly with the BoC, the
preparation and signature of
the Companys annual report for
approval by shareholders
Approving the Companys risk
management strategy, monitoring
its effectiveness and maintaining
a direct and ongoing dialogue
with the Companys auditors and
regulators
Implementation of corporate
strategies and recommendations
on significant corporate strategic
initiatives
Development and recommendation
of the Companys annual budget
to the BoC and shareholders for
approval and management of
day to day operations within the
budget
Establishing appropriate terms

of appointment, performance
evaluation and succession plans for
the BoD
Representing the Company in every
aspect of its activities and for all
legal purposes
Setting of standards for social and
ethical behaviour and monitoring
compliance with the Companys
corporate social responsibility
policy and practice
The Board of Directors convened
formally 8 times in 2006. The
President Commissioner and President
Director establish the agenda for each
meeting to ensure adequate coverage
of financial, strategic and major risk
issues throughout the year.
In addition, meetings were held
whenever necessary to deal with
specific matters requiring attention
during the periods between scheduled
meetings. In 2006 six formal meetings
combining both the Board of
Directors and Board of Commissioners
were held, in addition to routine
informal meetings on a regular basis
throughout the year.
Board of Directors
Chris Newton, President Director
Chris Newton joined EMP in January
2005 and was appointed to his
current position at the May 2005
EGM of shareholders. Chris has 28
years of international upstream oil
and gas experience with 14 of the
last 16 years in Asia and 9 in total
in Indonesia. He joined EMP from
Santos Ltd. where he was President
and General Manager of Santos
Indonesian business. He led and
managed the development of Santos
business via exploration, development
and production acquisitions to New
Core Business for Santos with 10
Production Sharing Contracts focused
in East Java and the deepwater Kutai
Basin. Prior to joining Santos, Chris
spent 5 years in Brunei, building,
leading and managing the Fletcher
Challenge Energy Business in the
country. He holds an Honors Degree
in Geology from the University of
Durham, England and a Post Graduate
qualification in Applied Finance
and Investment from the Securities
Institute of Australia. Chris is also
currently a member of the Indonesian
Petroleum Associations Board of
Directors, having led the IPA for two
and a half years to the end of 2006.
Chris Newton
Managing Adversity
45
Faiz Shahab, Director & Chief

Executive Officer
Faiz Shahab has 26 years extensive
experience in the oil and gas industry.
He spent many years in VICO serving
as Facilities Project Engineer until
his last position as Vice President
Support & HSE. He then moved
to Lapindo Brantas Inc. as Vice
President & General Manager. In
2002 BP Indonesia engaged him as
Vice President Java LNG and 2 years
later he moved to EMP Kangean
Ltd. as Senior Vice President before
being appointed a Director of EMP in
December 2005.
Yuli Soedargo, Director & Chief

Financial Officer
Yuli Soedargo has extensive
experience in Senior Management
roles with leading Indonesian listed
companies. He served as Financial
Services Director of Kalbe Farma
Group in the 1990s, as Managing
Director of BII and Head of Banking
Relations, Control & Audit at Asia Pulp
& Paper. He was appointed a Director
in December 2005.
Tom Soulsby, Business Development

Director
Tom Soulsby has extensive merger
and acquisition expertise in the
resource sector, having held several
positions including Director of ANZ
Singapore Ltd, ANZs local merchant
bank in Singapore where he was
also the Director and Regional Head
of Corp. Finance for Asia at ANZ
Investment Bank from 1998 to
2002. He worked with ANZ in both
Melbourne and Jakarta in investment
banking during the period 1994 to
1998 and has been involved in over
26 successful transactions. Prior to
that, Tom worked at Potter Warburg,
Western Mining Corporation and
KPMG in various finance related
positions. Mr Soulsby is a founding
director of the Company having
joined the Board of Directors in March
2004, with responsibility for Business
Development and Investor Relations.
Faiz Shahab
Yuli Soedargo
Tom Soulsby
46
Norman Harahap, Control and

Support Director
After a stint at Peat Marwick Mitchell
in the 1970s, Norman Harahap joined
HUFFCO Indonesia as Economic &
Planning Manager. He then moved to
ARCO spending many years in finance
and administration. He has served
as Director, responsible for Internal
Control and Human Resources and
Administration of the Company and
Accounting since his appointment as
Director in March 2004.
Succession planning
An important function of both boards
is to ensure that the Company has
the appropriate mix of skills and
experience. The BoC in conjunction
with the BoD, is tasked with the
responsibility of preparing the
selection criteria and procedures
for nominating appointments and
succession planning in relation to
members of the Boards, taking into
account the skills, experience and
expertise required, and currently
represented, and the future direction
of the Company.
The selection and role of the
President Director
The President Directors duties are to:
Ensure that, when all BoD members
take office, they are fully briefed
on the Company strategy and
key performance objectives and
the contribution expected from
each Director on achieving overall
objectives
Provide effective leadership in
formulating strategy
Represent the Companys views to
the public
Ensure that the BoD meets at
regular intervals throughout the
year, and that minutes of meetings
accurately record decisions taken
and, where appropriate, the views
of individual Directors
Guide the agenda and conduct of
all BoD meetings, and
Review the performance of Board
Directors.
The selection of President Director is

based on an evaluation as to whether
the candidate is able to execute these
duties effectively.
Review of BoD and BoC Performance
The two Boards meet on a regular
basis to review plans, budgets and
performance and to discuss major
issues and decisions facing the
Company. The Boards regularly review
their overall performance, as well
as the performance of Committees
and individual Commissioners
and Directors. Clear criteria and
performance targets are set annually
for the BoC, the BoD, each Special
Committee, and each Commissioner
and Director.
Orientation and training programs
On an ongoing basis training is
undertaken for Board members
to stay informed of current and
forthcoming regulations and issues
relating to the upstream oil and gas
sector, as well as developments in the
regulatory environment for publicly
listed companies, in coordination with
the Corporate Secretary.
Access to information and advice
All Commissioners and Directors have
unrestricted access to the Companys
records and information and receive
regular detailed financial and
operational reports to enable them to
carry out their duties.
Norman Harahap
Managing Adversity
47
Corporate Secretary
Riri Harahap, Corporate Secretary
and Vice President Legal
Riri Harahap was appointed Corporate
Secretary in June 2005 and to the
position of Vice President, Legal, in
February 2006. She brings with her
over 14 years of experience in law.
The Companys Corporate Secretary
plays a key role providing effective
legal advice with regard to general
day-to-day matters and in compliance
with regulations including those of
the capital market. The Corporate
Secretary is also tasked to provide
Commissioners and Directors with
ongoing guidance on issues such as
corporate governance, on matters
relating to the Companys Articles
of Association and to achieve the
highest standards in the organization
of shareholder meetings and
meetings of the Boards.
Report of the Audit Committee
The effectiveness of both Boards
is enhanced by the support of
the Audit Committee with a role
to oversee all matters relating
to the integrity of the financial
statements, recommendations for
the appointment of external auditors,
management of operational risks and
compliance with legal and regulatory
requirements.
48
Audit Committee members

Qoyum Tjandranegara, Chairman
(Independent Commissioner)
Hertanto , Member
Toha Abidin, Member
Audit Committee members are
chosen for their skills and relevant
experience.
Tasks implemented
The Audit Committee is responsible
for providing independent
professional opinions to the Board of
Commissioners, and to bring to their
attention any matters related to:
Financial Statements, projections
and other financial information to
be published by the Company
Adherence to legislation and
regulation of the Capital Market
authorities and the Jakarta Stock
Exchange and any other regulatory
requirements related to the
Companys activities
Reviewing the work undertaken
by Internal Audit and the External
Auditor
Reviewing any complaints, or
references made to either Board
from the public
Assisting the Board of
Commissioners with the selection
and appointment of the External
Auditor.
Meetings
The Audit Committee held a total of 8
meetings during 2006 attended by:
Qoyum Tjandranegara, Chairman
Hertanto, Member
Toha Abidin, Member
The Audit Committee assessed and
reviewed the Consolidated Financial
Statements as of December 31,
2006 along with the notes to the
Financial Statements. To ascertain the
fairness of the consolidated Financial
Statements, the Audit Committee has
also conducted discussions with the
External Auditor and Internal Auditor
regarding the holding Company and
its subsidiaries in respect of:
Organization structure
Internal control systems
Accounting Policies, systems and
procedures
Compliance with capital market
regulations and other regulations
Other information related to the
Companys management policies
Summary of conclusions from Audit
Committee meetings:
a. The External Auditor has
performed the general audit of the
Companys consolidated Financial
Statements as of December
31, 2006 independently and
objectively.
b. Internal Audit has carried out its
function satisfactorily. Further
improvement in some aspects of
the performance of the internal
audit system is still required.
c. The management of the holding

Company and its subsidiaries has
applied policies and governance to
a high standard as well as complied
with capital market regulations
and other regulations of the
Government of the Republic of
Indonesia.
d. The management of the holding
Company and its subsidiaries has
prepared the Financial Statements
of the Holding Company and its
Subsidiaries as of December 31,
2006 in accordance with the
Financial Accounting Standards
of Indonesia (PSAK) and in
accordance with the PSC Contract
Conditions valid for Subsidiaries
with a line of business in oil and
natural gas.
e. The compensation packages for
the Board of Commissioners and
Directors are in line with standing
procedures and were approved
at the Annual General Meeting of
Shareholders.
f. The estimate of gross proved
oil & gas reserves is based on
certification issued by independent
oil and gas consultants.
g. LBI has deployed all reasonable
resources and efforts to contain
and minimize the impact of the
mud volcano adjacent to the drill
site at Banjarpanji and is actively
managing the outcomes of the
event to the best of its ability.
Approach to audit governance

The Company is committed to the
implementation of three basic
principles:
The preparation of true and fair
financial reports;
The use of accounting methods
that are comprehensive, relevant
and compliant with applicable
accounting rules and policies; and
That external auditors are
independent and serve shareholder
interests by ensuring shareholders
are aware of the Companys true
financial position. Developments
and practices are monitored and
reviewed accordingly.
External audit
The Companys independent external
auditor was appointed by the
Directors with the authorization of
shareholders at the Annual General
Meeting of Shareholders.
The Committee is responsible for
making recommendations concerning
the appointment of external auditors
and the terms of their engagement.
The Committee reviews the
performance of the external auditors.
The independent external auditor
reports directly to the Committee.
Certification and discussion

with external auditor on their
independent status
The Audit Committee requires the
external auditor to confirm their
independence. The Companys
external auditor gives assurance
to the Audit Committee that they
have complied with all standards
promulgated by local and overseas
regulators and professional bodies.
Relationship with external auditor
Audit partners and audit firm
employees are prohibited from
being officers of the Company,
while retaining their status as audit
partners or audit firm employees. This
also applies to any immediate family
members of audit firm employees.
Financial and business relationships
are also prohibited. A minimum period
of five years must elapse before
former audit firm employees may be
considered for a position on the Board
or within the Company.
The Public Accountant Office of Jimmy

Budhi & Rekan has been appointed
as the Companys external auditor
to audit the Companys Consolidated
Financial Statements for the year
ended December 31, 2006.
Managing Adversity
49
Restrictions on non-audit services

by the external auditor
The external auditor is not authorised
to carry out the following types of
non-audit services for the Company:
Preparation of accounting records
and financial statements;
Information technology systems
design and implementation;
Valuation services and other
corporate finance activities;
Internal audit services;
Temporary senior staff
assignments, management
functions;
Broker or dealer, investment
adviser or investment banking;
Legal services;
Litigation services;
Actuarial services; and
Recruitment services for senior
management.
For all other non-audit services,
use of the external audit firm must
be assessed in accordance with
the Companys policy requiring an
independence assessment to be done
by the business manager requiring
the service. The approval of Internal
Audit and the Chairman of the Audit
Committee must also be obtained.
Internal audit function
The Audit Committee approves
the appointment of the Head of
Internal Audit. It reviews internal
audit responsibilities, budget
and staffing, significant reports
prepared by Internal Audit and
management responses thereto. The
Audit Committee Chairman meets
separately with the Head of Internal
Audit.
50
Compliance with legal and

regulatory requirements
The Audit Committee ensures
conformity with applicable legal
and regulatory requirements and
the Companys Code of Conduct,
examining material issues raised
internally or from the external
auditor, in conjunction with the
Corporate Secretary and in-house
legal counsel from time to time as
required.
Risk Management Committee
While risk management is currently
handled by the Companys Risk
Management Department, the
Company is committed to the
establishment of a fully functioning
Risk Management Committee (RMC)
in 2007.
Risk Management encompasses
a review of all risks faced by the
Company, to quantify their impact
and likelihood, and ensure appropriate
mitigation measures are in place.
Delegation of Authority
The BoD delegates financial authority
to employees who are responsible for
taking actions, signing documents and
approving transactions affecting the
operation and affairs of the business
entity. The overriding principle is
that no individual is to exercise more
authority than that which has been
delegated to him or her.
Delegation of authority is managed
top down, is consistent across the
organization, and is based on the
amount of risk - in terms of value
associated with the decision. The
authority delegated is based on the
desired balance between centralized
and decentralized decision making in
the organization.
An operational framework is
implemented via (1) approvals
manuals (2) delegation of authority
guides (3) authorized approval lists
with specimen signatures (4) other
means such as electronic storage and
retrieval.
Final approval requirements are
specified in delegation of authority
or equivalent guides, usually
within monetary, volume, or other
appropriate limits. No employee is
granted authority to approve his
or her own travel and businessrelated expense statements or
reimbursements.
Authority is limited to expenditures
and other transactions made within
ones area of responsibility. The BoD
reviews the delegation of authority
guides as required.
IT Governance
The Company is in the process of
preparing all necessary requirements
in relation to the establishment of the
IT Steering Committee. The Company
considers that the IT Steering
Committee will have representatives
from all relevant business and IT areas
to ensure that IT investments meet
their objectives in terms of efficiency,
effectiveness and standardisation.
Compliance policy and practices
The Companys compliance approach
focuses on ensuring strict adherence
to all laws and regulations,
maintaining quality control over
practices and processes, identifying
any weaknesses and addressing any
gaps.
Corporate responsibility and

sustainability
Approach to corporate
responsibility and sustainability
The Companys aim is to manage
its business in way that produces
positive outcomes for all stakeholders
and maximizes economic, social and
environmental value simultaneously.
In doing so, the Company accepts
that the responsibilities flowing
from this go beyond both strict legal
obligations and the financial bottom
line. Transparency, the desire for fair
dealing, responsible treatment of
staff and of customers and positive
links into the community, underpin
everyday activities and corporate
responsibility practices.
Employee Relations
The Company has policies related to:
Safe work environment;
Non-discrimination;
Equal employment opportunity;
Competitive terms and conditions
of employment; and
Elimination of forced or compulsory
labour.
The Companys Code of Conduct
The Companys Code of Conduct
applies to the BoC, BoD and employees
without exception, and if necessary
facilitates the use of sanctions. The
Code governs workplace and human
resource practices and is aligned
to the Companys core values of
teamwork, integrity and performance.
The Code is supported with
appropriate awareness training and
reviewed periodically and approved by
the Boards.
Corporate Governance Manual

The Companys implementation of the
Good Corporate Governance practice
has been guided by the principles
and practices already in place with
the best interest of all stakeholders,
while ensuring full compliance with
regulatory requirements. A formal
Corporate Governance Manual
drawing together all current best
practice routines in existence, as
described in this report, is being
prepared to be implemented by
employees while ensuring that the
contents are reasonable and cover
all key subjects. Employees will be
required to sign to confirm they have
read and understood all elements of
the manual.
Commissioners and Directors
interests
The extent of share ownership by
Board members at December 31,
2006 is as follows:
Rennier Latief : 446,912,286 shares
Yuli Soedargo : 4,250,000 shares
Norman Harahap : 142 shares
Prevention of Conflict of Interest
In compliance with Bapepam Rule No.
IX.E.1 regarding Conflict of Interest
on Certain Transactions, which
details the permitted transactions
and procedures to conduct and/
or disclose conflicts of interest,
the Company always ensures that
any potential conflict of interest
transaction is proposed and approved
by shareholders in a General Meeting
of Shareholders prior to the execution
of such transaction. The Company
has established a Conflict of Interest
Compliance Committee.
Conflict of Interest Compliance

Committee
The Companys Conflict of Interest
Compliance Committee reports
directly to the Board of Commissioners
and reviews transactions to ensure
proper compliance with procedures
and applicable regulations. The
Committee meets five times annually
and several routine informal meeting
during the course of the year, and is
chaired by Suyitno Patmosukismo.
The members of this committee are
Suyitno Patmosukismo, Norman
Harahap, Riri Harahap and Rida
Handayani (Legal Manager).
In addition to formal meetings, the
Committee continuously reviews
and gives recommendations
whenever necessary in relation to the
implementation of and compliance
with regulations.
The Company reports the
total remuneration paid to the
Commissioners and Directors in Note
No. 1 of the financial statements and
the extent of individual shareholdings
of Commissioners and Directors is
fully disclosed above.
Material Transaction
In compliance with Bapepam Rule No.
IX.E.2 regarding Material Transactions
and Changes of Core Business
(Bapepam Rule No. IX.E.2), the
Company ensures that any acquisition
or disposal of shares or assets
transactions that are equal or greater
than 10% of revenue or 20% of equity
are approved by half plus one of the
Companys shareholders through an
Extraordinary General Meeting of
Shareholders.
Key suppliers are required to sign

Code of Conduct before becoming
accredited.
Managing Adversity
51
The plan for EMP Inc.s Shares

Subscription transaction shall be
classified as a material transaction as
referred in the Bapepam Rule
No. IX.E.2, considering that the
transaction value is estimated to
exceed 10% of the Companys income
(Rp 1,646,538,248,288) and 20%
of the Companys equity
(Rp 1,833,167,047,850) as of
December 31, 2006. The said
transaction requires shareholder
approval at the Companys
Extraordinary General Meeting of
Shareholders.
Market disclosure practices

The Company is committed to giving
all shareholders comprehensive and
equal access to information about
our activities and obligations to the
broader market and primarily uses its
website www.energi-mp.com as an
information delivery mechanism to
shareholders, investors and users.
The Corporate Secretary is
responsibile for ensuring compliance
with the continuous disclosure
requirements in the Listing Rules,
and overseeing and co-ordinating
information disclosure to the Jakarta
Stock Exchange, analysts, brokers,
shareholders, the media and the
public. Guidelines exist for staff and
Directors to ensure that unpublished
information, which may be price
sensitive about the Company or any
other organization, is not used in an
illegal manner.
Transparency and Disclosure

Means of communication
The audited 2nd quarter was
published in Bisnis Indonesia and
The Jakarta Post and the full year
financial results of the Company
were published in Bisnis Indonesia,
Investor Daily Indonesia and
The Jakarta Post. Both audited
Reports were also published via
the Companys website www.
energi-mp.com
Periodic audited results are filed
with the Jakarta Stock Exchange.
These details are also published
in the Companys website. The
Company makes use of its website
for publishing official news
releases and presentations made
to institutional investors and
analysts.
The Company held 2 Public
Exposes in 2006, on August 30 and
December 21.
Distribution of shareholdings as at December 31, 2006

Range of Shares Ownership
No. of share accounts
1 - 5,000 Shares
5,001 - 10,000
10,001 - 50,000
50,001 - 100,000
100,001 - 500,000
500,001 - 1,000,000
1,000,001 - 5,000,000
5,000,001 - 10,000,000
10,000,001 - 50,000,000
50,000,001 - 100,000,000
100,000,001 - 1,000,000000
> 1,000,000,001
262
204
677
234
283
74
88
21
60
13
16
4
13.53
10.54
34.97
12.09
14.62
3.82
4.54
1.08
3.10
0.67
0.83
0.21
1,936
100.00
Total
52
Share Information
Share Price
The Company is quoted on the Jakarta Stock Exchange, code: ENRG.

2006
Highest Price Lowest Price

930
910
710
550
Q1
Q2
Q3
Q4
740
650
510
500
2005
Volume
Highest Price
Lowest Price
Volume
25,065,000
26,563,500
72,204,000
64,052,000
910
850
870
830
590
550
700
710
19,502,500
12,560,000
41,697,500
3,586,000
Share Performance
Volume
(in millions)
Price
(in Rupiah)
40
1,000
35
900
30
800
700
25
600
20
500
15
400
10
300
200
100
0
Jan06
Feb06
Mar06
Apr06
May06
Jun06
Jul06
Aug06
Sep06
Oct06
Nov06
Dec06
Volume
Price
Managing Adversity
53
Corporate Structure
100%
100%
100%
Energi Mega Pratama Inc.
EMP Exploration
40%
(Kangean) Ltd.
WI-100%
100%
EMP Kangean Ltd.
60%
100%
Kondur Petroleum S.A.
34.46%
WI-60.49%
RHI Corporation
99.99%
PT Imbang Tata Alam
Kangean PSC
Malacca Strait PSC
26.03%
PT Energi Mega Persada Tbk.

100%
Malacca Brantas Finance B.V.
100%
Energi Mega Persada Finance B.V.
99.99%
Kalila Energy Ltd.
84.24%
Pan Asia Enterprise Ltd.
15.76%
Lapindo Brantas, Inc.

99.99%
100%
100%
100%
99.99%
PT Tunas Harapan Perkasa
Kalila (Bentu) Ltd.

Kalila (Korinci Baru) Ltd.
Costa Intl Group Ltd.
99.99%
PT Insani Mitrasani Gelam
99.99%
PT Semberani Persada Oil
WI-50%
WI-100%
WI-100%
WI-50%
WI-100%
WI-100%
Company
Operator
PSC (Production Sharing Contract)
54
TAC (Technical Assistance Contract)
JOB (Joint Operating Body)
WI
Working Interest
Brantas PSC
Bentu PSC
Korinci Baru PSC
Gebang JOB PSC
Gelam TAC
Semberah TAC
Responsibility for Financial Reporting

This Annual Report and the accompanying financial statements and related financial information are the responsibility of
the Management of PT Energi Mega Persada Tbk and have been approved by members of the Board of Commissioners and
Board of Directors whose signatures appear below:
Board of Directors
Christopher B. Newton
President Director
Qoyum Tjandranegara
Independent Commissioner
Faiz Shahab
Director
Rennier Latief
Commissioner
Yuli Soedargo
Director
Thomas L. Soulsby
Director
Norman H. Harahap
Director
Managing Adversity
55
Glossary of Oil and Gas Terms and Units of Measurements
Defined Terms
acquired companies
(THP acquisition)
comprises: Costa International Group Limited, Kalila (Korinci Baru) Limited, Kalila
(Bentu) Limited, PT Semberani Persada Oil and PT Insani Mitrasani Gelam.
BPMIGAS
Badan Pelaksana Kegiatan Usaha Hulu Minyak Dan Gas Bumi or Upstream
Executive Body, the non-profit, Government-owned, operating board that is
succeeding Pertaminas role as regulator of upstream oil and gas activities under
the New Oil and Gas Law.

Badan Pengatur Hilir Minyak Dan Gas Bumi, the non-profit Government-owned
operating board that is succeeding Pertaminas role as regulator of downstream
oil and gas activities under the New Oil and Gas Law.

Gaffney, Cline & Associates (Consultants) Pte Ltd, independent assessors of the
Companys reserves.

Gas Sales Agreement.

PT Perusahaan Gas Negara (Persero) Tbk.

PT Pembangkitan Jawa Bali.

PT Petrokimia Gresik.

PT Perusahaan Listrik Negara (Persero).

The Environmental Compliance Performance Evaluation Program or Program
Penilaian Peringkat Kinerja Perusahaan dalam Pengelolaan lingkungan.

Terang, Sirasun and Batur fields.

BPHMIGAS
GCA
GSA
PGN
PJB
PKG
PLN
PROPER
TSB
56
Oil and Gas Terms

1P or proved reserves
2P or proved plus probable

reserves
3P or proved, probable & possible

reserves
contingent resources
crude oil
deep-water play
delineation well or appraisal well
development well
represents those quantities of petroleum which, by analysis of geological and

engineering data, can be estimated with reasonable certainty to be commercially
recoverable, from a given date forward, from known reservoirs and under current
economic conditions, operating methods, and Government regulations.

proved reserves plus those reserves that are unproved reserves which analysis
of geological and engineering data suggests are more likely than not to be
recoverable.

2P reserves plus those reserves that are unproved reserves which analysis of
geological and engineering data suggests are less likely to be recoverable than
probable reserves.

Volumes of recoverable hydrocarbons that are excluded from the reserve
category primarily because the Company has yet to file a definitive POD or agree
on GSA.

A general term for unrefined petroleum or liquid petroleum.

Exploration activity located in offshore areas where water depths exceed
approximately 600 feet [200 m], the approximate water depth at the edge of
the continental shelf.
a well drilled in a newly discovered or known discovery to gain further
information.

a well that is drilled to exploit the hydrocarbon accumulation defined by an
appraisal or delineation well.

Managing Adversity
57
exploration well or wild cat well
gross production
gross reserves
ICP-LC
ICP-SLC
JOA
JOB
lead
lifting cost or production cost
net production
net reserves
petroleum
a well that is designed to test the validity of a seismic interpretation and to

confirm the presence of hydrocarbons in an undrilled formation.

represents the sum of all oil and gas production from each of the Companys
blocks but does not take into account cost recovery or Government take.

represents the sum of all oil and gas operated reserves not adjusted for the
Government take payable.

Indonesian Crude Price-Lalang Crude.

Indonesian Crude Price-Sumatra Light Crude Minas, a reference price calculated
using a formula determined by the Government.

Joint Operating Agreement.

Joint Operating Body in reference to production sharing contracts.

preliminary interpretation of geological and geophysical information that
may or may not lead to prospects.

the cost incurred to operate and maintain wells and related equipment and
facilities for a given period.
represents the Companys share of gross production.

represents the reserves attributable to the Companys effective interest.

A complex mixture of naturally occurring hydrocarbon compounds found in rock.
Petroleum can range from solid to gas, but the term is generally used to refer to
liquid crude oil.
POD
Plan of Development.
PSC
Production Sharing Contract.
snubbing
the process of using a hydraulic work-over rig to repair damaged casing,

production tubing and down-hole production equipment in a high-pressure
environment. A snubbing unit makes it possible to remove and replace downhole equipment while maintaining pressure in the well.

to start a well drilling process by removing rock and sedimentary material with a
drill bit.
spud
TAC
Technical Assistance Contract.

58
Units of Measurement
bbl
bbl/d
bboe
bbtu
bcf
boe
bopd
btu
mbbl/d
mboe/d
mbopd
barrels.

barrels per day.

billion of barrels of oil equivalent.

billion btu.

billion cubic feet.

barrels of oil equivalent; natural gas is converted to boe using the ratio of
one bbl of crude oil to 5.85 mcf of natural gas.

barrels of oil production.

British Thermal Unit, the standard measure of the heating value of natural gas.

thousand barrels per day.

thousand barrels of oil equivalent per day.
mcf
million barrels gross oil production.

thousand btu.

thousand cubic feet.
mmbbl
million barrels.
mmbbl/d
million barrels per day.

million barrels of oil equivalent.

million btu.

million btu per day.

million cubic feet.

million cubic feet per day.

million standard cubic feet per day.

trillion cubic feet.
mbtu
mmboe
mmbtu
mmbtud
mmcf
mmcfd
mmscfd
tcf
Managing Adversity
59
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60
Financial Report
PT Energi Mega Persada Tbk and Subsidiaries
Consolidated Financial Statements for the Year Ended December 31, 2006
(With Comparative Figures for the Years Ended December 31, 2005 and 2004)
and Report of Independent Auditors
Managing Adversity
61
Directors Statement Letter

Report of Independent Auditors
Financial Statements
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Supplementary Information (Unaudited)
62
67
PT ENERGI MEGA PERSADA Tbk

AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
(With Comparative Figures for December 31, 2004)
(Figures in Rupiah expressed in thousands, unless otherwise stated)
ASSETS
Notes
CURRENT ASSETS
Cash and cash equivalents
Trade receivables
Other receivables
Inventories
Prepaid expenses and advances
Prepaid tax
Deferred Rights Issue cost
2d,5
2e,6
2e,7
2f,8
2g,9
2q,26a
2006
2005
(As restated see Note 3)
2004
858,434,789
320,530,734
549,480,023
605,074,350
99,855,609
-
323,123,189
286,503,862
318,480,773
354,191,558
129,025,075
4,867,253
3,244,472
21,730,243
112,317,540
149,684,486
121,860,730
21,776,214
3,781,286
-
2,433,375,505
1,419,436,182
431,150,499
2h,10a
2i,11
500,587,596
126,846,622
430,901,040
200,915,225
59,426,226
73,288,308
2j
2k,12
32a,34
2q,26e
6,502,331
5,990,632,043
85,644,826
492,309,688
7,234,909
3,786,677,686
71,727,804
172,604,748
1,638,957
2,630,320,899
48,302,380
25,381,698
198,842,996
48,650,315
216,699,185
30,040,479
204,795,059
18,144,112
Total Non-Current Assets
7,450,016,417
4,916,801,076
3,061,297,639
TOTAL ASSETS
9,883,391,922
6,336,237,258
3,492,448,138
Total Current Assets

NON-CURRENT ASSETS
Due from related parties
Restricted time deposits
Fixed assets - net of accumulated
depreciation of Rp 6,362,487
in 2006, Rp 4,149,925 in 2005 and
Rp 1,638,957 in 2004
Oil and gas properties - net
Site restoration fund
Deferred tax assets
Reimbursement of Subsidiarys
dividend tax paid
Other assets
4
13
The accompanying Notes to Consolidated Financial Statements are an integral part of the consolidated financial statements.

AND SUBSIDIARIES
LIABILITIES AND EQUITY
Notes
CURRENT LIABILITIES
Short-term loans
Trade payables
Other payables
Accrued expenses
Taxes payable
Current maturities of long-term loans
14
15
16
17
2q,26b
18
266,515,001
65,916,066
398,157,559
136,566,835
259,353,452
140,129,487
142,360,206
58,643,863
136,478,763
121,040,782
242,933,416
1,335,800,758
1,126,508,913
841,586,517
18
2h,10b
2q,26e
4,941,733,089
793,314,356
350,138,776
3,141,760,852
774,507,950
275,688,092
807,252,079
851,447,220
238,340,301
2u,36a
2p,28
34
4
286,049,453
40,649,262
103,684,826
198,842,996
25,220,060
83,044,347
216,699,185
24,478,989
51,112,149
204,795,059
6,714,412,758
4,516,920,486
2,177,425,797
11,360
2,941
Total Non-Current Liabilities

MINORITY INTEREST IN
NET ASSETS OF SUBSIDIARIES
2004
594,976,126
42,531,777
500,714,411
196,812,150
766,294
Total Current Liabilities

NON-CURRENT LIABILITIES
Long-term loans - net of current
maturities
Due to related parties
Deferred tax liabilities
Estimated obligation on probable
losses
Employee benefits obligation
Site restoration obligation
Subsidiarys dividend tax liability
2006
2005
2b
(1,543,754 )

AND SUBSIDIARIES
Notes
EQUITY
Capital stock - Rp 100 par value
per share
Authorized - 55,000,000,000 shares
in 2006 15,000,000,000 shares
in 2005 and 2004
Issued and paid-in capital 14,400,813,372 shares in 2006,
9,491,445,177 shares in 2005
and 2004
19
Additional paid-in capital
2n,20
Equity proforma from restructuring
transaction of entities under
common control
2c,3,4
Difference in value from
restructuring transactions of
entities under common control
2c,21
Translation adjustments
2t
Retained earnings
2005
2006
2004
1,440,081,335
3,354,749,228
949,144,518
158,420,946
949,144,518
158,420,946
54,886,877
54,886,877
(3,376,756,375 )
(36,112,508 )
451,205,366
(793,336,425 )
75,488,874
248,200,128
(793,336,425 )
58,666,134
47,197,528
Total Equity
1,833,167,046
692,804,918
474,979,578
TOTAL LIABILITIES
AND EQUITY
9,883,391,922
6,336,237,258
3,492,448,138

AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(With Comparative Figures for the Year Ended December 31, 2004)
Notes
2005
2006
2004
NET SALES
2o,22
1,646,538,248
1,682,100,322
972,664,531
COST OF GOODS SOLD
2o,23
1,175,612,629
1,162,228,835
630,704,879
470,925,619
519,871,487
341,959,652
233,360,933
183,192,733
93,453,266
237,564,686
336,678,754
248,506,386
56,438,666
17,590,085
34,260,991
(304,287,994 )
(31,615,790 )
(18,715,427 )
12,853,199
6,359,458
30,980,416
(249,505,266 )
22,064,808
(13,054,567 )
7,940,868
22,076,239
(63,037,007 )
5,159,651
(17,083,683 )
(23,451,808 )
(233,476,270 )
(203,155,151 )
(68,395,740 )
4,088,416
133,523,603
180,110,646
(39,050,544 )
237,967,366
(53,519,047 )
121,972,754
(97,828,649 )
(51,873,716 )
Total
198,916,822
68,453,707
(149,702,365 )
INCOME BEFORE MINORITY

INTEREST IN NET INCOME
OF SUBSIDIARIES
203,005,238
201,977,310
30,408,281
GROSS PROFIT
OPERATING EXPENSES
General and administrative
2o,24
INCOME FROM OPERATIONS

OTHER INCOME (CHARGES)
Income form insurance claim
Interest income
Overhead cost recovery
Financing charges
Interest and penalty tax
Gain (loss) on foreign exchange - net
Allocation from administrator
Others - net
2o,25b
25a
26b
2t
Other Charges - Net

INCOME BEFORE TAX BENEFIT
(EXPENSE)
TAX BENEFIT (EXPENSE)
Current
Deferred
MINORITY INTEREST IN
INCOME OF SUBSIDIARIES
2q,26c
2b
NET INCOME
BASIC EARNINGS PER SHARE
(in full amount)
2r,27
(974,710 )
(438,087 )
203,005,238
201,002,600
29,970,194
14.42
21.18
3.16

AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Notes
Balance as of December 31, 2003 - as restated
Conversion of promissory notes to paid-in capital
Elimination of Subsidiaries equity from transactions
of entities under common control
Equity proforma form restructuring transaction
Difference in value from restructuring transactions
Initial public offering
Cash dividend
Net income for the year
Balance as of December 31, 2004 - as restated
Balance as of December 31, 2005- as restated
Right Issue I
Elimination of Subsidiaries equity from transactions
Difference in value from restructuring transactions
Balance as of December 31, 2006
Equity Proforma
from Restructuring
Transaction of
Entities under
Common Control
Additional
Paid-in Capital
Capital Stock
Difference in
Value from
Restructuring
Transactions of
Entities under
Common Control
Retained
Earnings
Total Equity
19
200,777,778
463,623,390
(613,001,552 )
-
2c
514,766,429
2c,21
153,122,000
2c
2t
1b,19
284,743,350
-
158,420,946
-
(685,794,504 )
-
44,373,879
-
949,144,518
-
158,420,946
-
54,886,877
-
(793,336,425 )
-
58,666,134
16,822,740
-
47,197,528
201,002,600
474,979,578
16,822,740
201,002,600
949,144,518
490,936,817
158,420,946
3,196,328,282
54,886,877
-
(793,336,425 )
-
75,488,874
-
248,200,128
-
692,804,918
3,687,265,099
(2,583,419,950 )
-
(111,601,382 )
-
203,005,238
(2,583,419,950 )
(111,601,382 )
203,005,238
1,440,081,335
3,354,749,228
(3,376,756,375 )
(36,112,508 )
451,205,366
1,833,167,046
2t
19
2c
2c,21
2t
(54,886,877 )
-
(107,541,921 )
-
Translation
Adjustments
14,292,255
-
20,596,797
-
514,766,429
153,122,000
(3,369,463 )
29,970,194
(484,876,643 )
463,623,390
(685,794,504 )
44,373,879
443,164,296
(3,369,463 )
29,970,194
(54,886,877 )

AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Notes
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash receipts from customers
Cash paid to suppliers, contractors,
and employees
Cash generated from operations
Financing charges paid
Corporate income and dividend
tax paid
6,22
Net Cash Provided by Financing

Activities
1,507,914,000
1,016,277,387
(903,066,241 )
(684,919,209 )
25
580,884,596
(650,358,600 )
604,847,759
(256,724,925 )
331,358,178
(29,673,537 )
26b,26c
(41,223,977 )
(123,743,751 )
(25,077,776 )
(110,697,981 )
224,379,083
276,606,865
(2,599,869,500 )
(2,304,953,084 )
(32,526,857 )
(1,612,128 )
56,438,666
17,590,085
(1,467,593,147 )
(11,896,367 )
(4,373,759 )
6,359,458
(872,285,301 )
(485,020,194 )
(10,522,329 )
(1,043,780 )
6,120,868
(4,864,932,818 )
(1,477,503,815 )
(1,362,750,736 )
4
12
2o,25b
Net Cash Used in Investing Activities

CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issuance of shares
Proceeds from long-term and
short-term loans - net
Increase (decrease) in due
from/to related parties - net
Restricted time deposits
Payment of loan of acquired
Subsidiaries
Payment of stock issuance costs
Dividend paid
1,612,511,376
2004
(1,031,626,780 )
Net Cash Provided by (Used in)

Operating Activities
CASH FLOWS FROM
INVESTING ACTIVITIES
Acquisition of Subsidiaries
Acquisition of oil and gas properties
Increase in other assets
Acquisition of fixed assets
Proceeds from insurance claim
Interest income received
2006
2005
19,20
3,780,213,508
455,589,360
14,18
1,821,442,579
2,210,799,322
942,903,843
10
11
297,323,234
74,068,603
(447,649,313 )
(127,626,917 )
(348,203,384 )
(92,948,409 )
5,531,896,131
1,635,523,092
289,271,842
(72,592,256 )
(574,482,238 )
(12,425,064 )
(3,369,463 )
1,024,896,024

AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes
2005
2006
2004
NET INCREASE (DECREASE)

IN CASH AND CASH
EQUIVALENTS
556,265,332
382,398,360
(61,247,847 )
CASH AND CASH

EQUIVALENTS AT
BEGINNING OF YEAR
323,123,189
21,730,243
24,566,657
Effect of foreign exchange rate

changes
(20,953,732 )
(81,005,414 )
58,411,433
858,434,789
323,123,189
21,730,243
463,623,390
CASH AND CASH

EQUIVALENTS AT END
OF YEAR
Additional information for
non-cash financing activities:
Conversion of promissory notes to
paid-in capital

AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
a.
Establishment and General Information

PT Energi Mega Persada Tbk (the Company) was established based on notarial deed No. 16 dated
October 16, 2001 of H. Rakhmat Syamsul Rizal, S.H. Notary in Jakarta. The deed of establishment
was approved by the Minister of Justice and Human Rights of the Republic of Indonesia in his
decision letter No. C-14507.HT.01.01.TH.2001 dated November 29, 2001 and published in State
Gazette No. 31, Supplement No. 3684 dated April 16, 2002. The Companys Articles of Association
have been amended several times, the most recent being based on Notarial Deed No. 45, dated
January 25, 2006 of Robert Purba S.H., Notary in Jakarta, as a result of the Rights Issue I, concerning
the change of the Companys Articles of Association articles 4(1), (2), and (3) (see Note 19). The
Amendment has been approved by the Minister of Law and Human Rights in his Decision Letter
No. C-03656.HT.01. 04.TH.2006, dated February 9, 2006 and was published in State Gazette No. 39,
dated May 16, 2006, Supplement No. 5161.
In connection with the Companys Initial Public Offering, the Companys Articles of Association
have been amended based on Notarial Deed No. 40 of Extraordinary General Meeting of
Shareholders (EGMS) dated March 30, 2004 of Lena Magdalena, S.H., Notary in Jakarta, which was
approved by the Minister of Justice and Human Rights of the Republic of Indonesia in his Decision
Letter No. C-08031.HT.01.04.TH.2004 dated April 2, 2004 and published in State Gazette No. 97,
Supplement No. 11746 dated December 3, 2004. The changes include, among others, the changes of
the Companys capital stock (see Note 19) and the Companys name from PT Energi Mega Persada
to PT Energi Mega Persada Tbk.
In accordance with Article 3 of the Companys Articles of Association, the scope of its activities
comprises of, among others: trading, services and mining, and providing management services in the
oil and gas industry.
The Companys head office is located at Wisma Mulia, 33rd Floor, Jl. Jend. Gatot Subroto, Kav. 42,
Jakarta. The Subsidiaries of the Company are engaged in oil and gas exploration, and its activities are
located in Sidoarjo and Kangean Island in East Java Province, Riau, Jambi, North Sumatra, and East
Kalimantan Provinces.
The Company commenced its commercial operations in February 2003.
b. Initial Public Offering of Shares of the Company

The Company obtained the effective notice of its initial public offering from the Chairman of the
Capital Market Supervisory Agency (Bapepam) in his letter No. S.1480/PM/2004 dated May 26,
2004. On June 7, 2004, these shares were listed on the Jakarta Stock Exchange.
The Companys Extraordinary General Meeting (EGMS) dated December 22, 2005, as recorded in
Notarial Deed No. 40 of Robert Purba S.H., Notary in Jakarta, approved the Rights Issue I to the
Companys shareholders in connection with the Exercise Rights (ER) of 4,909,368,195 shares with
nominal value Rp 100 (full amount) per share, which were offered at Rp 770 (full amount) per share
totaling Rp 3,780,213,510,150 (full amount). On January 25, 2006, the Company completed the
Rights Issue I.

AND SUBSIDIARIES
1. GENERAL (Continued)
c.
Structure of the Company and its Subsidiaries

The Company has ownership interest of more than 50%, directly and indirectly, in the following
Subsidiaries:
Percentage of
Ownership
(%)
Subsidiaries
Domicile
RHI Corporation (RHI)

Delaware, USA
Kondur Petroleum SA
(KPSA) *)
Panama
PT Imbang Tata Alam (ITA)
Indonesia
Kalila Energy Ltd. (KEL)
Hong Kong
Pan Asia Ltd. (PAN)
Hong Kong
Lapindo Brantas Inc. (LBI) *) Delaware, USA
Energi Mega Pratama, Inc.
British Virgin
(EMP Inc)
Islands
EMP Exploration
England
(Kangean), Ltd. (EEKL) *)
EMP Kangean, Ltd. (EKL) *) Delaware, USA
Malacca Brantas Finance, B.V.
Netherlands
(MBF)
Energi Mega Persada
Netherlands
Finance, B.V. (EMP Finance)
PT Tunas Harapan Perkasa (THP) Indonesia
(Semco) *)
Indonesia
(IMG) *)
Indonesia
Kalila (Bentu) Ltd. (Bentu) *)
British Virgin
Islands
British Virgin
(Korinci Baru) *)
Islands
Costa International Group Ltd. British Virgin
(Costa) *)
Islands
Tunas Harapan Perkasa Pte.Ltd
(THPPL)
Singapore
Total Assets
(Rp)
2006
2005
2004
Year of
Commercial
Operation
100
100
100
1984
1,376,655,999
1,144,982,613
445,980,915
100
99.92
99.99
99.99
100
100
96
99.99
99.99
100
100
96
99.99
99.99
100
1995
2001
1997
1997
1999
1,367,846,514
719,421,920
1,126,096,794
6,298
1,085,652,080
1,146,093,226
446,837,422
925,838,932
31,605,191
861,314,860
446,059,043
228,029,302
381,826,488
15,686,407
326,614,373
100
100
100
2003
4,523,845,486
3,158,871,287
1,855,446,727
100
100
100
100
100
100
1987
1987
1,481,836,268
2,256,856,641
990,148,813
1,439,445,760
718,102,266
999,878,315
100
100
100
2005
1,091,642,486
1,186,827,216
100
100
99.99 99.99
100
99.99
2005
211,247
1,929,252,306
212,770
1,220,637,957
1,001,823,780
99.99 99.99
99.99
1996
1,399,719,239
436,236,973
491,634,381
99.99 99.99
99.99
2004
486,265,032
309,009,315
179,873,723
2006
2005
2004
100
100
100
294,168,940
286,849,007
208,822,887
100
100
100
268,472,428
220,319,838
77,242,142
100
100
100
2002
267,890,371
138,233,548
96,207,797
100
100
100
45,670
584
*) Indirect ownership interest through Subsidiaries
All the Subsidiaries of the Company, except MBF, THPPL and EMP Finance, are holders of working
interest of the following oil and gas production blocks directly or indirectly through Production
Sharing Contracts (PSC) with Badan Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi
(BPMIGAS) or Technical Assistance Contract (TAC) with PT Pertamina (Persero) (Pertamina) as
follows:
Working Area
Maturity of
Contract
Percentage of Ownership
(%)
Owned by
2006
2005
2004
34.46
26.03
34.46
26.03
34.46
26.03
Malacca PSC
2020
Kondur Petroleum S.A. (KPSA)

PT Imbang Tata Alam
Brantas PSC
2020
Lapindo Brantas Inc.
50
50
50
Kangean PSC
2030
EMP Exploration (Kangean) Ltd.

EMP Kangean Ltd.
40
60
40
60
40
60
Semberah TAC
2015
100
100
100

AND SUBSIDIARIES
Working Area
Percentage of Ownership
(%)
Maturity of
Contract
Owned by
2006
2005
2004
Gelam TAC
2017
100
100
100
Bentu PSC
2021
Kalila (Bentu) Ltd.
100
100
Korinci PSC
2027
100
100
Gebang PSC
2015
Costa International Group Ltd.
50
50
50
MBF and EMP Finance are involved in financial and commercial activities.
d. Employees, Boards of Commissioners and Directors
As of December 31, 2006, 2005 and 2004, the members of the Companys boards of Commissioners
and Directors were as follows:
December 31, 2006 and 2005
December 31, 2004
Independent Commissioner
Commissioner
A. Qoyum Tjandranegara
Rennier Abdul Rachman Latief
A. Qoyum Tjandranegara
Roosmania Kusmuljono
Board of Directors
President Director
Director
Director
Director
Director
Director
Christopher Basil Newton

Yuli Soedargo
Faiz Shahab
Norman Hafiz Harahap
Thomas Leo Soulsby
-

Nazamudin Latief
Muhammad Suluhudin Noor
Norman Hafiz Harahap
Thomas Leo Soulsby
Purwanto
The compositions as of December 31, 2006 and 2005 were based on the decision of the EGMS on
December 22, 2005, as stated in the Summary of EGMS Deed No. 46 on December 23, 2005 of
Robert Purba S.H., Notary in Jakarta.
The compositions as of December 31, 2004 were based on the decision of the EGMS on July 30,
2004, as stated in the Summary of EGMS Deed No. 27 dated July 30, 2004 and in connection with
the Statement of Meeting Decision Deed No. 28 on July 30, 2004, both being deeds of Lena
Magdalena, S.H., Notary in Jakarta.
Total remuneration paid to the Commissioners and Directors of the Company for the years ended
December 31, 2006, 2005 and 2004 amounted to Rp 25.30 billion, Rp 16.66 billion and
Rp 4.90 billion, respectively.
As of December 31, 2006, 2005 and 2004, the Company and its Subsidiaries had approximately 726,
875 and 585 employees, respectively.
10

AND SUBSIDIARIES
e.
LBI Going Concern Issue

The accompanying consolidated financial statements include the financial statements of LBI, which
have been prepared assuming that LBI will continue as a going concern. LBI has a net capital
deficiency due to the large-scale impact of the Banjar Panji-1 (BJP-1) (see Note 36). Furthermore, it is
probable that LBI may have liquidity problems as a result of negative cash flows arising from the
costs of containment of mud in BJP-1, as well as costs that may be incurred arising from social,
economic and legal liability that may result in negative cash flows. Based on the valuation report of
Truscel Capital dated January 22, 2007, the fair value of KELs and PANs shares, intermediate
shareholders of LBI, as of December 31, 2006, amounted to negative US$ 60,654,782 and
US$ 1,743,282, respectively. The valuation report was prepared based on the estimated total losses of
the BJP-1 incident of US$ 183.3 million as of December 31, 2006.
The Company is looking at several alternatives to prevent the going concern issue of LBI from
creating impact on the Companys going concern status.
Minarak Labuan Co. (L) Ltd., a Bakrie Group representative, has confirmed its intention to make
available adequate funds for LBI as and when required to settle the expenses related to BJP-1 with
the purpose to maintain the LBI as a going concern. As of February 28, 2007, LBI obtained
additional funding from the Bakrie Group amounting to US$ 34,500,000.
The consolidated financial statements do not include any adjustments that might result from the
outcome of the uncertainty relating to the going concern of LBI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.
Basis of Consolidated Financial Statements

The consolidated financial statements have been prepared using accounting principles and reporting
practices generally accepted in Indonesia.
The consolidated financial statements, except for the consolidated statements of cash flows, are
prepared under the accrual basis of accounting, with the measurement basis being historical cost,
except for certain accounts that are measured on the basis described in the related accounting
policies.
The reporting currency used in the preparation of the consolidated financial statements is Indonesian
Rupiah (Rp).
The consolidated statements of cash flows are prepared using the direct method, cash flows being
classified into operating, investing and financing activities.
11

AND SUBSIDIARIES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

b. Principles of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and its
Subsidiaries wherein:
-
the Company has direct or indirect ownership of more than 50% with the ability to control; or
the Company has 50% or less ownership, but the Company has the ability to control.
The financial statements of Subsidiaries are consolidated commencing from the date on which
control is acquired and cease to be consolidated from the date on which control is transferred out of
the Company. The results of acquired or disposed of Subsidiaries during the year are included in the
consolidated statements of income from the effective date of acquisition or up to the effective date of
disposal, as appropriate.
The interest of the minority shareholders is stated as the minoritys proportion of the historical cost
of the net assets. The minority interest is subsequently adjusted for the minoritys share of
movements in equity. Any losses applicable to the minority interest in excess of the minority interest
are allocated against the interests of the parent.
Where necessary, adjustments are made to the financial statements of the Subsidiaries to bring the
accounting policies used in line with those used by the Company.
All inter-company transactions and account balances are eliminated to reflect the financial position
and the results of operations of the Company and its Subsidiaries as a single business entity.
c.
Business Acquisitions
Acquisitions are accounted for using the purchase method in accordance with the requirements of
Statement of Financial Accounting Standard (PSAK) No. 22, Business Combination. On
acquisition date, the assets and liabilities of a Subsidiary are measured at their fair values. Any excess
of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as
goodwill. Goodwill from the acquisition of oil and gas properties is recorded in the oil and gas
properties and amortized using the unit of production method during the year of PSC or TAC. When
the cost of acquisition is less than the interest in the fair values of the identifiable assets and liabilities
acquired as at the date of acquisition (i.e. discount on acquisition), fair values of the acquired nonmonetary assets are reduced proportionately until all the excess is eliminated. The remaining excess
after reducing the fair values of non-monetary assets acquired is recognized as negative goodwill,
treated as deferred revenue and recognized as revenue on a straight-line method over twenty (20)
years.
12

AND SUBSIDIARIES

Acquisitions of Subsidiaries that represent a restructuring transaction of entities under common
control are accounted for in accordance with PSAK No. 38 (Revised 2004), Accounting for
Restructuring Transactions of Business under Common Control. Based on this standard, acquisition
of a subsidiary is accounted based on the pooling of interest, wherein assets and liabilities of a
subsidiary are recorded at their book values. The difference between the transfer price and the
Companys interest in the subsidiarys book values, if any, is recorded as Difference in Value from
Restructuring Transactions of Entities under Common Control and presented as a separate
component in the Companys Equity. Accordingly, the consolidated financial statements prior to
acquisitions are restated, wherein the beginning balance of equity of the Subsidiary is presented
separately as proforma equity arising from restructuring transactions of entities under common
control. The balance of Difference in Value from Restructuring Transactions of Entities under
Common Control can be realized to gain or loss from the time the common control no longer exists
between the entities that entered into the transaction.
d. Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in banks and investment with maturities of
three months or less that can be used freely to finance operating activities.
e.
Receivables
Receivables are stated at face value less allowance for doubtful accounts. The level of this allowance
is based on managements evaluation of collection experience and other factors that may affect
collectibility.
Allowance for doubtful accounts is provided based on a review of the status of the individual
receivable accounts at the end of the year.
f.
Inventories
Inventories of spare-parts, chemicals and fuel are classified into capital and non-capital inventories.
Capital inventories represent spare-parts, chemicals, and fuel that are consumed or used as
components of construction or capitalized as assets. Non-capital inventories represent inventories
being consumed for the purpose of repair and maintenance of assets or used for operations. The
costs of the consumed inventories are charged when used.
Inventory purchased under the terms of the PSC and TAC becomes the property of BPMIGAS or
Pertamina when landed in Indonesia.
Inventories of spare-parts, chemicals and fuel are valued at the lower of cost or net realizable value.
Cost is determined using the weighted average method. Provision for obsolete and/or slow-moving
inventories is provided based on review of the condition of the inventories at the end of the year.
g. Prepaid Expenses
Prepaid expenses are amortized over the period benefited using the straight-line method.
13

AND SUBSIDIARIES

h. Transactions with Related Parties
The Company and its Subsidiaries have transactions with certain parties, which are related to them. In
accordance with the PSAK No. 7, Related Party Disclosures, related parties are defined as follows:
(1) Enterprises that, through one or more intermediaries, control, or are controlled by, or are under
common control with, the reporting enterprise (including holding companies, subsidiaries and
fellow subsidiaries);
(2) Associated companies;
(3) Individuals owning, directly or indirectly, an interest in the voting power of the Company that
gives them significant influence over the enterprise, and close members of the family of any such
individual (close members of a family are defined as those members who are able to exercise
influence or can be influenced by such individuals, in conjunction with their transactions with the
Company);
(4) Key management personnel, that is, those persons having authority and responsibility for
planning, directing and controlling the activities of the Company, including commissioners,
directors and managers of the enterprise and close members of the families of such individuals;
and
(5) Enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by
any person described in (3) or (4) or over which such a person is able to exercise significant
influence. This definition includes enterprises owned by the commissioners, directors or major
stockholders of the Company and enterprises that have a member of key management in
common with the Company.
All significant transactions with related parties are disclosed in the notes to the consolidated financial
statements.
i.
Restricted Time Deposits

Time deposits that are restricted in use are presented under non-current assets.
j.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and any impairment in value.
Depreciation is computed using the straight-line method based on the estimated useful life of the
asset as follows:
Years
Machinery and equipment
Transportation and office equipment
4
4
14

AND SUBSIDIARIES

The costs of maintenance and repairs are charged to expense as incurred; expenditures that extend
the useful life of the asset or result in an increase of future economic benefits such as increase in
capacity and improvement in the quality of output or standard of performance, are capitalized. When
assets are retired or otherwise disposed of, their carrying values and the related accumulated
depreciation are removed from the accounts and any resulting gain or loss is reflected in the current
operations.
k. Oil and Gas Properties
The Company and its Subsidiaries adopted the full cost method of accounting in recording oil and
gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil
and gas reserves, including directly related overhead costs, are capitalized. All costs arising from
production activities are recorded at the time they are incurred.
Under the full cost method, a Cost Center is used to "pool" costs to be later matched with revenues
generated from the cost center's operations. The Company considers a country as a single cost center
in accordance with PSAK No. 29, and, therefore, cost centers are established on a country-bycountry basis.
The capitalized costs are subject to a ceiling test, which basically limits such costs to the aggregate
of (1) the estimated present value, discounted at a 10% interest rate of future net revenues from
estimated future production of proved reserves using prices based on current economic and
operating conditions; (2) the cost of unproved properties and major development projects not being
amortized, and (3) the lower of cost or estimated fair value of unproved properties included in cost
being amortized. Any excess over the cost is charged to expense and separately disclosed during the
year.
All capitalized costs relating to oil and gas properties, including the estimated future costs of
developing proved reserves, are amortized using the unit-of-production method based on the total
estimated proved reserves. Investments in unproved properties and major development projects are
not amortized until proved reserves associated with the projects can be determined or until
impairment occurs.
The Company and its Subsidiaries have no ownership interest in the producing assets nor in the oil
and gas reserves, but rather have the right to operate the assets and receive a share of production
and/or revenues from the sale of oil and gas in accordance with the PSC and TAC.
There is no inventory of oil and gas owned by the Company since the total production of oil and gas
shall be shared based on an agreed formula between the Subsidiaries and BPMIGAS or Pertamina
(see Notes 31a and 31b).
Sale of proved and unproved properties are accounted for as adjustments of capitalized costs with no
gain or loss recognized, unless such adjustments would significantly change the relationship between
capitalized costs and proved reserves of oil and gas, in which case, the gain or loss is recognized in
statements of income.
15

AND SUBSIDIARIES

l.
Impairment of Assets Value

In compliance with PSAK No. 48, Impairment of Asset Values, asset values are reviewed for any
impairment and possible write-down to fair values whenever events on changes in circumstances
indicate that their carrying values may not be fully recovered. Whenever the carrying amount of an
asset exceeds its recoverable amount, an impairment loss is recognized in the statement of income of
the current year.
m. Capitalization of Borrowing Cost and Foreign Exchange Losses

In accordance with the revised PSAK No. 26 (Revised 1997), Borrowing Cost, interest cost,
foreign exchange differences and other costs incurred from borrowings obtained to finance the
construction or installation of major facilities are capitalized. Capitalization of these borrowing costs
ceases when the acquisition, construction or installation activities are substantially completed and the
assets are ready for their intended use.
n. Shares Issuance Costs
Based on Bapepams Decision Letter dated March 13, 2000, No. KEP-06/PM/2000, costs incurred
in relation to Initial Public Offering and Rights Issue are presented as part of equity.
o. Revenue and Expense Recognition
Revenue is recognized when the crude oil and/or gas are delivered and title has passed. Expenses are
recognized when incurred (accrual basis). Claim from insurance will be recognized as income upon
collection.
p. Employee Benefits
Liabilities relating to employee benefits covering retirement benefits, short-term (e.g. paid annual
leave, paid sick leave) and other long-term benefits (e.g. long-service leave, post-employement
medical benefits) are computed based on the provision stated in PSAK
No. 24 (Revised 2004). Korinci Baru, Bentu and IMG, the Subsidiaries, did not calculate estimated
employee benefits since the amount is not material.
The Company and its Subsidiaries provide defined post-employment benefits for their employees
pursuant to the terms of the Employment Work Contract/Company Policy. KPSA and ITA,
Subsidiaries, also provide post-employment benefits from defined contribution pension plans. The
contribution charged to the Subsidiaries is recognized as expense in the current year.
The cost of providing post-employment benefits is determined using the projected unit credit
method. The accumulated unrecognized actuarial gains and losses that exceed 10% of the greater of
the present value of the Companys defined benefit obligations and the fair value of plan assets are
recognized on a straight-line basis over the expected average remaining working lives of the
participating employees. Past service cost is recognized immediately to the extent that the benefits are
already vested, and otherwise is amortized on a straight-line basis over the average period until the
benefits become vested.
16

AND SUBSIDIARIES

The benefit obligation recognized in the balance sheet represents the present value of the defined
obligation, adjusted for unrecognized actuarial gains and losses, unrecognized past service cost and
fair value of the plan assets.
q. Income Tax
The Company and its Subsidiaries determine their income taxes in accordance with PSAK No. 46,
Accounting for Income Tax.
Current tax expense of the Company is determined based on the taxable income for the year
computed using prevailing tax rates. Current tax expense of Subsidiaries that are domiciled and
registered as tax subjects in other countries is determined based on the taxable income for the year
computed using prevailing tax rates in the related countries.
Current tax expense of the Subsidiaries that are engaged in exploration and production of oil and gas
based on PSC and TAC is determined based on the taxable income in the related year using the
prevailing tax rates as stated in the PSC and TAC.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax liabilities are recognized for all taxable temporary differences and
deferred tax assets are recognized for deductible temporary differences to the extent it is probable
that taxable income will be available in future years against which the deductible temporary
differences can be utilized.
Deferred tax is calculated at the tax rates that have been enacted or substantively enacted at the
balance sheet date. Deferred tax is charged or credited in the statement of income, except when it
relates to items charged or credited directly to equity, in which case the deferred tax is also charged or
credited directly to equity.
Deferred tax assets and liabilities are offset in the balance sheet, except if these are for different legal
entities, in the same manner as the current tax assets and liabilities are presented.
Amendments to taxation obligations are recorded when an assessment is received or, if appealed
against, when the results of the appeal are determined.
r.
Earnings per Share

In accordance with PSAK No. 56, Earnings per Share, basic earnings per share are computed by
dividing net income by the weighted average number of shares outstanding during the year.
Diluted earnings per share are computed by dividing net income by the weighted average number of
shares outstanding as adjusted for the effects of all potential dilution.
s.
Segment Information
Segment information is prepared using the accounting policies adopted for preparing and presenting
the consolidated financial statements. The Company and its Subsidiaries primary reporting segment
information is based on business segment, while its secondary reporting segment information is based
on geographical segment.
17

AND SUBSIDIARIES

A business segment is a distinguishable component of an enterprise that is engaged in providing
products or services or a group of products or services, which are subject to risks and returns that are
different from those of other business segments.
A geographical segment is a distinguishable component of an enterprise that is engaged in providing
products or services within a particular economic environment, which are subject to risks and returns
that are different from those of components operating in other economic environments.
Assets and liabilities that relate jointly to one or more segments are allocated to their respective
segments, if and only if, their related revenues and expenses are also allocated to those segments and
the relative autonomy of those segments.
t.
Foreign Currency Transactions and Translation

The books of accounts of the Company are maintained in Indonesian Rupiah. Transactions during
the year involving foreign currencies are recorded at the rates of exchange prevailing at the time the
transactions are made. At balance sheet date, monetary assets and liabilities denominated in foreign
currencies are adjusted to reflect the exchange rates prevailing at that date. The resulting gains or
losses are credited or charged to current operations.
The books of accounts of the Subsidiaries are maintained in United States Dollar. For consolidation
purposes, assets and liabilities of the Subsidiaries at balance sheet date are translated into Rupiah
using the exchange rates at balance sheet date, while revenue and expenses are translated at the
average exchange rates for the year. Resulting translation adjustments are shown as part of Equity as
Translation Adjustments. The middle rates of Bank Indonesia prevailing on December 31, 2006,
2005 and 2004 were as follows:
2005
(full amount)
Currency
US$
HK$
Euro
9,020
1,160
11,858
2004
(full amount)
9,830
1,268
11,660
2003
(full amount)
9,290
1,195
12,652
u. Provisions and Contingencies

Provision is recognized only when the Company has: (a) a present obligation (legal or constructive) as
a result of a past event; (b) it is probable (i.e. more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can
be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and
adjusted to reflect the current best estimate.
Contingent liabilities are not recognized in the financial statements, but are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are
not recognized in the consolidated financial statements but disclosed when inflow of economic
benefits is probable.
18

AND SUBSIDIARIES

v. Subsequent Events
Post year-end events that provide additional information about the Company and its Subsidiaries
position at the balance sheet date (adjusting events) are reflected in the financial statements. Any post
year-end event that is not an adjusting event is disclosed when material to the consolidated financial
statements.
w. Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in Indonesia requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS
The Company made several acquisitions of Subsidiaries, the latest being the acquisition of PT Tunas
Harapan Perkasa (THP), which became effective on January 25, 2006 (see Note 4). Since the acquisition
of THP represents transactions of entities under common control, as required by PSAK No. 38 (Revision
2004), the Company has restated its consolidated financial statements for the years ended December 31,
2005 and 2004. The effect of the restatement of the equity of the Companys Subsidiaries is presented as
Proforma Equity from Restructuring Transactions of Entities under Common Control.
The comparison of restated consolidated financial statements as of and for the year ended December 31,
2005 with the consolidated financial statements that had been previously reported is as follows:
As restated
Total current assets
Oil and gas properties
Deferred tax assets
Total non-current assets
Total assets
Trade payables
Taxes payable
Total current liabilities
Long-term loans
Total non-current liabilities
Retained earnings
Total equity - net
Net sales
Operating expenses
Net income
Basic earnings per share (in full amount)
1,419,436,182
430,901,040
3,786,677,686
172,604,748
4,916,801,076
6,336,237,258
266,515,001
136,566,835
1,126,508,913
3,141,760,852
774,507,950
275,688,092
4,516,920,486
248,200,128
692,804,918
1,682,100,322
183,192,733
201,002,600
21.18
As previously reported
1,113,445,539
427,202,349
2,937,209,264
89,774,398
3,945,755,535
5,059,201,074
84,878,740
112,711,257
582,808,272
2,881,450,898
380,989,284
256,997,271
3,834,680,610
270,968,699
641,712,192
1,479,359,013
139,892,634
195,818,413
20.63
19

AND SUBSIDIARIES
3. RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The comparison of restated consolidated financial statements as of and for the year ended December 31,
2004 with previous financial statements that had been reported is as follows:
As restated
Total current assets
Deferred tax assets
Total non-current assets
Total assets
Trade payables
Taxes payable
Total current liabilities
Long-term loans
Total non-current liabilities
Retained earnings
Total equity - net
Net sales
Operating expenses
Net income
Basic earnings per share (in full amount)
431,150,499
2,630,320,899
25,381,698
3,061,297,639
3,492,448,138
142,360,206
121,040,782
841,586,517
807,252,079
851,447,220
238,340,301
2,177,425,797
47,197,528
474,979,578
972,664,531
93,453,266
29,970,194
3.16
As previously reported
300,238,774
2,028,879,880
8,839,134
2,372,788,221
2,673,026,995
28,619,113
104,089,113
593,680,710
706,783,237
431,143,921
238,340,301
1,649,324,282
75,150,286
431,565,544
855,079,977
59,055,718
74,166,617
8.98
4. ACQUISITIONS OF SUBSIDIARIES
a.
PT Tunas Harapan Perkasa (THP)

The Company (acquirer) entered into a Sales and Purchase Agreement (SPA) with PT Mitra Andalan
Mandiri (MAM, as seller) on October 25, 2005 as follows:
i.
2,598,830 shares or 99.99% of all issued shares of PT Tunas Harapan Perkasa (THP as target
company) that are owned by MAM amounting to Rp 2,599,869,500,000 (full amount). THP owns
100% shareholding in Costa International Group Ltd. (Costa), Kalila (Bentu) Ltd. (Bentu)
and Kalila (Korinci Baru) Ltd. (Korinci Baru) and 99.99% shareholding in PT Insani Mitrasani
Gelam (Gelam) and PT Semberani Persada Oil (Semco). Except for Costa, all of these
subsidiaries are the operators and the owners of 100% working interest in Bentu Block PSC,
Korinci Baru Block PSC, Sungai Gelam Block TAC, and Semberah Block TAC. Costa owns a
50% working interest in Gebang Block PSC and has significant authorities in the operational
activity within the Joint Operating Body (JOB), in which Pertamina acts as the operator.
ii. Trade receivables of MAM to THPs subsidiaries, which were based on the restructuring and
debt acknowledgment agreement of MAM and THPs subsidiaries amounting to US$ 33,497,199
or equivalent to Rp 348,203,383,605 (full amount).
The Companys Extraordinary General Meeting of Shareholders (EGMS) approved the above
acquisition on December 22, 2005.
On January 25, 2006, the Company completed the Rights Issue I.
20

AND SUBSIDIARIES
4. ACQUISITIONS OF SUBSIDIARIES (Continued)

The acquisition represents a transaction of entities under common control, and was therefore
accounted for as restructuring transactions of entities under common control in accordance with
PSAK No. 38 (see Note 3).
The acquisition became effective on January 25, 2006.
b. Energi Mega Persada Finance B.V.
On November 21, 2005, the Company acquired 100% equity interest of Stijna Belastingadviseurs
B.V., a company incorporated in Amsterdam, Netherlands from a third party. On the same day Stijna
Belastingadviseurs B.V. changed its name to Energi Mega Persada Finance B.V. (EMP Finance). The
acquisition cost amounted to Euro 24,600 and because the difference between this purchase price
and the net assets value of EMP Finances shares, which amounted to Euro 6,600, was not material,
this difference was recorded as loss in the current year. This acquisition was recorded using the
purchase method.
c.
Malacca Brantas Finance B.V. (MBF)

On May 23, 2005, the Company acquired 100% equity interest of A. Bohl Vastgoed B.V., a company
incorporated in Amsterdam, The Netherlands, from a third party. On June 24, 2005, A Bohl
Vastgoed B.V. changed its name to Malacca Brantas Finance B.V. (MBF). The acquisition cost
amounted to Euro 24,600 and because the difference between this purchase price and the net assets
value of MBFs shares, which amounted to Euro 6,600, was not material, this difference was recorded
as loss in the current year. This acquisition was recorded using the purchase method.
d. ITA, PAN, KEL and EMP Inc.

In 2004, the Company acquired equity interests in PT Imbang Tata Alam (ITA) (96%), Pan Asia Ltd.
(PAN), Hong Kong (99.99%), Kalila Energy Ltd. (KEL), Hong Kong (99.99%) and Energi Mega
Pratama Inc. (EMP, Inc.), British Virgin Islands (100%), from entities under common control. ITA,
PAN and KEL were acquired on February 27, 2004, April 19, 2004, and May 6, 2004, respectively,
before the Companys initial public offering of its shares. The acquisition of EMP Inc., which was
made on November 8, 2004 had been approved by independent stockholders on September 30, 2004
as stated in the Extraordinary Meeting of independent stockholders of the Company.
Before the Company acquired EMP Inc., a Subsidiary incorporated in the British Virgin Islands, on
August 4, 2004, EMP Inc. acquired 100% shares of BP Exploration (Kangean) Ltd. and BP Kangean
Ltd. from British Petroleum (BP). Combined, the two companies held a 100% working interest in the
Kangean Block. Acquisition cost of these companies amounted to US$ 97.79 million. Based on the
fair value assessment performed by an independent appraiser, the fair value of the purchased
companies ranged from US$ 79.59 million to US$ 156.76 million, subject to whether the Kangean
PSC could be extended or not. Subsequently, the Subsidiaries obtained the extension of the Kangean
PSC until 2030. BP Exploration (Kangean) Ltd. and BP Kangean Ltd. have subsequently changed
their names to EMP Exploration (Kangean) Ltd. and EMP Kangean Ltd, respectively.
21

AND SUBSIDIARIES
4. ACQUISITIONS OF SUBSIDIARIES (Continued)

The acquisitions of EMP Exploration (Kangean) Ltd. and EMP Kangean Ltd. were recorded by
EMP Inc. using the purchase method. Fair values of net assets of these acquired companies were,
accordingly, stated at acquisition costs while the differences between the net book value and their fair
values were attributed to oil and gas properties. Details of the fair values of net assets as of the
acquisition dates are as follows:
EMP Exploration
(Kangean) Ltd.
EMP Kangean Ltd.
4,293,696
395,772
168,107
68,663,525
6,383,135
7,041,688
593,658
3,289,723
80,405,923
6,383,135
11,335,384
989,430
168,107
3,289,723
149,069,448
14,062,507
(3,800,755 )
(253,252 )
(6,266,751 )
(21,876,791 )
(14,062,507 )
(692,162 )
(1,515,456 )
7,982,171
(5,667,465 )
(343,941 )
(32,092,365 )
(7,982,171 )
(936,457 )
-
22,044,678
(9,468,220 )
(597,193 )
(6,266,751 )
(53,969,156 )
(22,044,678 )
(1,628,619 )
(1,515,456 )
39,115,933
58,673,899
97,789,832
Cash on hand and in banks

Trade receivables
Inventories
Deferred tax assets
Right to reimburse prior years
dividend tax
Taxes payable
Accrued expenses
Prior years dividend taxes payable
Other payables
Fair Value of Net Assets
Total
The acquisition cost was financed by EMP Inc. through loans obtained from Capital Management Asia,
Pte. Ltd. (CMA) and Credit Suisse (CS) (formerly Credit Suisse First Boston/CSFB), Singapore (see
Notes 14 and 18).
At the time of the acquisition, these Subsidiaries had recorded dividend tax payable and penalties
amounting to US$ 22,044,678. Based on the sales and purchase agreement, EMP Inc. has a right to
reimbursement from BP for the payment of the tax payable if this is paid by EMP Inc. EMP Inc.
recognized this right to reimbursement as an identifiable asset and thus accordingly included it in the
value of the acquired net assets.
5. CASH AND CASH EQUIVALENTS
This account consists of:
2006
Cash on hand
Cash in banks
Rupiah
PT Bank Negara Indonesia (Persero) Tbk
PT Bank Mega Tbk
PT Bank Pan Indonesia Tbk
2005
2004
753,610
1,237,025
395,592
2,000,022
598,160
358,929
13,908,287
126,750
894,557
795,614
139,853
115,456
22

AND SUBSIDIARIES
5. CASH AND CASH EQUIVALENTS (Continued)

2005
2006
PT Bank Mandiri (Persero) Tbk
PT Bank International Indonesia Tbk
Citibank N.A.
Deutsche Bank
Hongkong Shanghai Bank Corporation
PT Bank Central Asia Tbk
PT Bank Resonia Perdania
Standard Chartered Bank
PT Bank Permata Tbk
PT Bank Syariah Mandiri
PT Bank Global
PT Bank Danamon Indonesia Tbk
United States Dollar
Citibank N.A.
Credit Suisse
Societe Generale Hongkong
PT Bank Negara Indonesia (Persero) Tbk
Fortis Bank
PT Bank Mega Tbk
PT Bank Resonia Perdania
Standard Chartered Bank
Deutsche Bank
Hongkong Shanghai Bank Corporation
PT Bank Syariah Mandiri
PT Bank Danamon Indonesia Tbk
PT Bank Central Asia Tbk
Hongkong Dollar
Citibank N.A.
Euro
Fortis Bank
Time deposits
PT Bank Mega Tbk
2004
272,641
208,713
174,122
46,898
24,035
7,119
3,272
3,188
2,398
1,064
-
874,832
5,641,046
684,225
58,595
25,000
32,822
4,970
4,995
2,423
6,030,734
489
583,381
284,807
840,453
485,588
5,936
18,961
33,156
3,700,561
28,289,725
3,303,205
284,536,319
86,308,870
12,531,654
2,647,745
2,097,631
1,211,614
932,677
712,222
384,634
72,572
50,693
20,485
9,020
-
90,235,386
8,072,899
12,041,840
28,519,724
47,275,079
26,284,558
7,022,925
80,346
49,688
25,738
-
6,421,188
1,545,895
2,432,020
3,379,804
726,250
2,211,234
383,946
874,988
51,030
391,516,136
219,608,183
18,026,355
50,410
5,091
81,635
127,851
273,600,000
8,382,847
-
4,999,995
281,982,847
4,999,995
23

AND SUBSIDIARIES
5. CASH AND CASH EQUIVALENTS (Continued)
2006
2005
2004
Short-term investments
PT Danatama Makmur
180,400,000
68,810,000
Total
858,434,789
323,123,189
21,730,243
The Company and its Subsidiaries made investments with PT Danatama Makmur amounting to
US$ 20,000,000 and US$ 7,000,000 as of December 31, 2006 and 2005, respectively, for a term of 30
days subject to extension upon written instruction from the Company. All income earned from the
investment will be credited to the Company and its Subsidiaries account less any necessary expenses
incurred including taxes, commissions, and discounts.
The interest rates of time deposits and short-term investments were as follows:
United States Dollar

Rupiah
2006
(%)
2005
(%)
2004
(%)
2,25 - 6,00
7,00 - 9,25
5,75
2006
2005
2004
6. TRADE RECEIVABLES
a.
By Debtor - Third Parties
Local debtors
Pertamina
PT Perusahaan Gas Negara (Persero) Tbk
PT Petrokimia Gresik
PT Perusahaan Listrik Negara (Persero)
Petrochina International Java Ltd
PT Indogas Kriya Dwiguna
61,195,195
27,674,008
13,023,539
6,183,429
2,225,313
90,222
89,121,484
26,110,655
55,006,516
27,905,853
-
45,108,747
34,573,952
22,563,069
9,901,654
-
Foreign debtors
Mitsubishi Corporation
Petro Diamond Pte. Ltd.
BP Singapore Pte. Ltd.
Itochu Petroleum Co. (S) Pte. Ltd.
158,590,340
51,548,688
-
66,513,605
21,845,749
170,118
Total
320,530,734
286,503,862
112,317,540
24

AND SUBSIDIARIES
6. TRADE RECEIVABLES (Continued)

b. By Age Category
2006
2005
2004
Up to 30 days
Over 31 - 60 days
Over 60 days
251,782,543
31,913,525
36,834,666
213,949,220
44,614,025
27,940,617
93,915,183
13,055,209
5,347,148
Total
320,530,734
286,503,862
112,317,540
All trade receivables are in US Dollar. The Company and its Subsidiaries did not provide any allowance
for doubtful accounts as the management believes that the trade receivables are fully collectible.
Receivables from Subsidiaries as of Desember 31, 2006, are pledged as collateral for the long-term loans
(see Note 18).
7. OTHER RECEIVABLES
2006
2005
2004
Reimbursable Value Added Tax

Overhead receivables from PSC participants
Paceworks International Ltd.
Receivable from suppliers
Loan to employees
Scott Asia Limited Trading
Advances to BPMIGAS and Pertamina
Interest
Others
209,765,873
78,007,238
61,000,889
52,708,385
29,483,890
27,601,200
1,965,067
89,025,955
156,763,277
16,822,033
66,478,796
43,201,000
30,742,743
3,804,428
10,622,264
55,855,326
11,293,834
36,962,457
13,592,893
77,388,598
1,820,000
35,754,758
Total
Allowance for doubtful accounts
549,558,497
(78,474 )
328,434,541
(9,953,768 )
232,667,866
(82,983,380 )
Net
549,480,023
318,480,773
149,684,486
Reimbursable Value Added Tax represents value added tax that has been paid by Subsidiaries and is
reimbursable from BPMIGAS or Pertamina in accordance with the terms of PSC and TAC agreements.
Paceworks International Ltd. (PI) is a company that assists MBF in general financial strategy and planning
activity for obtaining capital expenditure funds (fund raising). Receivable from PI represents a portion of
funds originating from a loan by Merrill Lynch, which was temporarily transferred to PI in line with its
capacity as financial advisory in accordance with the agreement between PI and MBF (see Note 31d).
25

AND SUBSIDIARIES
7. OTHER RECEIVABLES (Continued)

Receivable to Scott Asia Limited Trading (SALT) represents promissory note from SALT dated
September 22, 2006, which amounted to US$ 3,000,000, bearing interest at the rate of 6% and payable in
one year.
On March 31, 2006, the management of IMG had written off its receivables to Lirik Petroleum
amounting to US$ 952,600 (Rp 8,088,523) as they believe that such receivable will no longer be
collectible.
8. INVENTORIES
2006
2005
2004
Spare-parts
Fuel
Chemicals
589,082,417
9,525,960
6,465,973
341,107,281
8,977,188
4,107,089
114,485,993
4,011,794
3,362,943
Total
605,074,350
354,191,558
121,860,730
Inventories were insured in an insurance package with Oil and Gas Properties (see Note 12).
Based on the evaluation of the inventory condition at year-end, management believes that no provision
for obsolete and slow-moving inventories was required.
9. PREPAID EXPENSES AND ADVANCES
2006
Prepaid expenses
Rental
Insurance
Service charge
Others
2005
2004
8,430,092
1,849,369
1,354,255
274,202
9,971,625
1,182,682
424,277
-
3,674,148
348,774
-
Advances
Project
Employees
Others
86,392,372
913,063
642,256
107,444,794
3,904,295
6,097,402
15,508,256
1,597,536
647,500
Total
99,855,609
129,025,075
21,776,214
Project advances represent advances for drilling services provided by suppliers in Kangean PSC and
Malacca PSC.
26

AND SUBSIDIARIES
10. DUE FROM/TO RELATED PARTIES

a.
Due from Related Parties
2006
2005
2004
PT Energi Timur Jauh (ETJ)

PT Kalila Energi Hijau
PT Raja Lampung Persada
PT Bakrie Capital Indonesia
PT Ladinda Petroindo (Ladinda)
Luxuriace Asset
Asian Worldwide Group Ltd.
PT Gunung Latimojong
Others
498,816,382
1,771,214
429,882,919
1,018,121
10,439,284
23,225,000
12,354,474
8,707,089
1,858,000
954,761
929,000
958,618
Total
500,587,596
430,901,040
59,426,226
Due from ETJ represents advances made based on the agreement dated August 1, 1998 (see
Note 31c). Out of the funds advanced to ETJ, an amount of US$ 28 million was paid by KPSA to
ETJ for the settlement of the loan obtained by Ladinda from PT Bank International Indonesia Tbk.
The loan was made available to finance the development in Brantas PSC by LBI, a Subsidiary and is
guaranteed by LBIs working interest in the Brantas Block.
b. Due to Related Parties
2006
2005
2004
Minarak Labuan Co. (L) Ltd.

PT Brantas Indonesia (BI)
PT Kondur Indonesia (KI)
Enercorp Ltd.
Asian Worldwide Group Ltd.
Global Overseas Enterprise
Kalila (Bentu) Pty. Ltd.
PT Mitra Andalan Mandiri (MAM)
Kalila (Korinci Baru) Operator Pty. Ltd.
PT Mitrasani Lestari Nusa
Kalila (Bentu) Operator Pty. Ltd.
PT Hartindo Adhi Kencana
PT Energi Timur Jauh (ETJ)
Semberani Persada Oil HK
Kalila (Korinci Baru) Pty. Ltd.
Others
270,600,000
172,385,842
171,885,553
117,260,000
41,438,110
16,687,774
1,371,338
985,633
208,317
192,048
132,341
7,575
159,825
190,767,250
190,222,034
45,171,563
18,199,675
329,729,663
6,055
411,710
188,190,670
6,773,692
68,950
90,498,646
42,795,110
39,252,294
1,398,935
107,689,884
122,564,029
152,842,573
65,803,318
33,429,545
139,574
Total
793,314,356
774,507,950
851,447,220
27

AND SUBSIDIARIES
10. DUE FROM/TO RELATED PARTIES (Continued)

On December 29, 2006, the Company obtained an unsecured and non-interest bearing loan from
PT Bakrie Capital Indonesia (BCI) amounting to US$ 13,000,000 (Rp 117.26 billion), which will
mature on December 29, 2007. On the same date, the Company entered into a novation agreement
with KEL and PAN whereby the Company assigned its loan from BCI to KEL and PAN at the
amount of US$ 12,500,000 (Rp 112.75 billion) and US$ 500,000 (Rp 4.51 billion), respectively.
Subsequently, BCI assigned its receivables from KEL and PAN to Minarak Labuan Co (L) Ltd.
(MLC) based on the Receivables Purchases Agreement dated December 29, 2006.
On December 29, 2006, LBI obtained an unsecured and non-interest bearing loan from Enercorp
Limited (EL) amounting to US$ 30,000,000 (Rp 270.6 billion), which will mature on December 29,
2007. On the same date, LBI entered into a novation agreement with KEL and PAN whereby LBI
assigned US$ 17,000,000 out of the total amount of the loan from EL to KEL and PAN in the
amounts of US$ 16,500,000 (Rp 261.58 billion) and US$ 500,000 (Rp 9.02 billion), respectively.
Subsequently, EL assigned its receivables from KEL and PAN to MLC in the amount of
US$ 17,000,000 based on the Receiveable Purchase Agreement dated December 29, 2006.
As of December 31, 2006, the balance of amounts due to MLC amounted to US$ 30,000,000 and due
to EL amounted to US$ 13,000,000.
Amounts due to BI and KI, Companys stockholders, represent net of due from and due to related
parties that were transferred in 2004 in accordance with the acquisition of Subsidiaries under
common control, which had been executed before the Companys initial public offering.
Due to Asian Worldwide Group Ltd. (AWGL) and Global Overseas Enterprise Ltd. (GOEL)
represent payables from taking over the working interest in Bentu PSC and Korinci Baru PSC from
Petroz Korinci Baru Ldc. and Petroz Bentu Ldc. on August 7, 2005.
Due to AWGL and GOEL represent payables arising from acquisition of THP.
Based on the restated consolidated financial statements as of December 31, 2005, the Company has
payables to MAM from taking over the liability of THPs subsidiaries based on the restructuring and
debt acknowledgment agreement (see Note 4).
Based on the restated consolidated financial statements, as of December 31, 2004, the Company had
payables to ETJ amounting to Rp 152.8 billion. The payables represent costs paid by ETJ that were
allocated to Subsidiaries in accordance with the function of ETJ as cash manager. Due to and due
from ETJ is presented at net in the consolidated financial statements.
28

AND SUBSIDIARIES
11. RESTRICTED TIME DEPOSITS

2005
2006
Credit Suisse (CS), Singapura
Bank of New York, Singapura
Others
Total
2004
82,645,531
44,201,091
-
103,439,505
97,475,720
-
67,823,810
4,999,998
464,500
126,846,622
200,915,225
73,288,308
Time deposits in CS, represent placement of time deposits pursuant to:

a.
The Cash and Account Management Agreement (CAMA) between EMP Inc. and CS, which will
serve as collateral for the loan obtained from CS on May 19, 2005 (see Note 18). Time deposits
mature on a monthly basis and earn interest at a rate of LIBOR less 0.25%, or zero, whichever is
higher.
b. The Credit Agreement between Semco and CS, which will serve as collateral for the loan obtained
from CS on October 27, 2005 (see Note 18) and earn interest at a rate of LIBOR.
Time deposits in Bank of New York, Singapore (BONY) represents placement of time deposits pursuant
to the CAMA between MBF, LBI, KPSA and ITA with BONY to serve as collateral for credit facility
received from Merrill Lynch on July 27, 2005 (see Note 18). Time deposits mature on a quarterly basis
and earn interest at a rate of LIBOR.
12. OIL AND GAS PROPERTIES
The movement of this account were as follows:
2006
January 1
Additions
Translation
Adjustments
Deductions
December 31
Cost
Accumulated depreciation,
depletion and
amortization
4,832,562,487
2,937,073,143
(581,149,334 )
7,188,486,296
1,045,884,801
336,411,311
(184,441,859 )
1,197,854,253
Net Book Value
3,786,677,686
5,990,632,043
29

AND SUBSIDIARIES
12. OIL AND GAS PROPERTIES (Continued)

2005
(As restated - see Note 3)
Translation
Adjustments
January 1
Additions
Deductions
December 31
Cost
depletion and
amortization
3,175,333,610
1,467,593,147
189,635,730
4,832,562,487
545,012,711
410,968,484
89,903,606
1,045,884,801
Net Book Value
2,630,320,899
3,786,677,686
2004
January 1
Cost
depletion and
amortization
Net Book Value
Acquisition
Additions
Translation
Adjustments
Deductions
December 31
1,172,419,746
1,330,892,031
494,527,776
10,700,137
188,194,194
3,175,333,610
324,802,456
205,090,495
32,468,172
47,587,932
545,012,711
847,617,290
2,630,320,899
Depreciation, depletion and amortization for the years ended December 31, 2006, 2005 and 2004
amounting to Rp 336,411,311, Rp 410,968,484 and Rp 205,090,495, respectively, were charged to cost of
goods sold (see Note 23).
In 2006, the additions were mainly caused by capitalization of total cost incurred and estimated cost that
will be incurred in relation to the BJP-1 incident, amounting to US$ 78 million in accordance with the full
cost method adopted by the Company (see Note 36). In 2005, the additions mainly consisted of costs of
development and exploration and capitalization of borrowing cost. Total capitalized borrowing cost in
2006 and 2005 amounted to US$ 37.76 million and US$ 31.08 million, respectively (see Note 18). In 2004,
the acquisitions principally consisted of oil and gas properties of the newly acquired Subsidiaries, ITA,
KEL and EMP Inc., totaling US$ 149.1 million, while the additions represented costs of development and
exploration amounting to US$ 34.6 million.
The oil and gas properties, as well as inventories were insured with several third party insurance
companies, against risk of loss and damage. As of December 31, 2006, 2005 and 2004, total sums insured
were US$ 436,264,466, US$ 321,682,669 and US$ 256,546,699, respectively.
13. OTHER ASSETS
2006
2005
2004
Security deposits
Post employment fund
Employees cooperative
Others
36,737,893
8,783,937
3,128,485
17,760,159
9,317,744
2,962,576
3,851,378
5,954,323
4,262,458
4,075,953
Total
48,650,315
30,040,479
18,144,112
30

AND SUBSIDIARIES
14. SHORT-TERM LOANS

2005
2006
2004
Capital Manager Asia Pte. Ltd.

Suisse Charter Investment
124,336,487
15,793,000
Total
140,129,487
On August 4, 2004, EMP Inc. obtained an unsecured short-term loan from Capital Management Asia Pte.
Ltd., a related party, to finance the acquisition of 100% shares in BP Exploration (Kangean) Ltd. and BP
Kangean Ltd. amounting to US$ 14.85 million. The loan bears interest at a rate of 15.5% per annum,
which was initially due in three (3) months after loan availability but could be extended up to a maximum
of three (3) years.
On November 3, 2004, EMP Inc. obtained a loan from Suisse Charter Investment amounting to US$ 3
million with an interest rate of 8.25% per annum. The loan was due on February 11, 2005.
Both loans were fully paid in 2005.
15. TRADE PAYABLES
a.
By Creditors
2006
Third parties
PT Jasa Karya Utama
PT Indoturbine
PT Wijaya Karya
PT Duta Energi Semesta
PT Halliburton Indonesia
PT Halliburton Logging Service Indonesia
PT Dwi Prima Sembada
PT Batam Dwi Karya
PT Sarana Adikarya Utama
PT Baruna Raya Logistic
PT Pilar Dwi Perkasa
Ficorinvest
PT Dowell Anadrill Schlumberger
PT Indal Steel Pipe
66,706,631
45,432,030
40,759,574
33,784,869
30,536,453
29,090,457
20,356,875
19,885,609
11,164,307
10,758,335
10,369,960
9,269,491
8,557,612
8,208,480
2005
106,685,596
2,467,350
23,561,673
3,534,314
418,470
23,451,657
-
2004
83,692,855
1,149,805
1,100,493
-
31

AND SUBSIDIARIES
15. TRADE PAYABLES (Continued)
2006
Promatcon Tepatguna - Aquanur
Sinergindo
PT Unichem Candi Industri
PT Inti Brunel Teknindo
PT Perdana Karya
PT Supraco Indonesia
Medici Citra Nusa
Alton Internasional Indonesia
Baker Atlas Indonesia
PT Apexindo Pratama Duta Tbk.
PT Nana Yamano Technik
PT Kutilang Paksi Mas
PT Indopenta Bumi Permai
PT Schlumberger Geophysics Nusantara
PT Pacific Mitra Bersama
PT Wira Insani
PT Jaya Wijaya Raya
Exxonmobil Oil Indonesia Inc.
Jsl Jet Drilling
PT Daya Alam Tehnik Inti
PT Singgar Mulia
Others (below Rp 4 billion each)
Total
2005
2004
8,181,290
8,162,350
7,976,488
7,552,979
7,271,774
7,254,535
7,077,583
6,557,110
6,106,810
5,706,741
4,809,599
4,706,995
4,462,472
4,365,680
4,096,686
1,918,097
153,888,254
898,210
1,292,322
564,529
23,381,786
20,077,293
4,484,855
4,218,669
51,478,277
1,084,366
4,035,251
8,127,849
43,169,587
594,976,126
266,515,001
142,360,206
b. By Age Category
2006
2005
2004
Up to 30 days
Over 31 - 60 days
Over 60 days
138,348,060
164,305,628
292,322,438
137,518,146
6,358,813
122,638,042
41,772,846
3,447,743
97,139,617
Total
594,976,126
266,515,001
142,360,206
32

AND SUBSIDIARIES
15. TRADE PAYABLES (Continued)

c.
By Currency
2006
2005
2004
US Dollar
Rupiah
518,876,546
76,099,580
251,392,271
15,122,730
131,982,343
10,377,863
Total
594,976,126
266,515,001
142,360,206
Credit terms for the purchase of goods and services, both from local and foreign suppliers, ranged from
30 to 90 days.
16. OTHER PAYABLES
2006
2005
2004
Overlifting
Interests
Take or pay
Others
19,913,289
15,820,000
2,122,669
4,675,819
47,475,614
14,016,952
4,423,500
3,190,651
7,396,999
28,887,236
19,168,977
Total
42,531,777
65,916,066
58,643,863
Overlifting represents liability to BPMIGAS and Pertamina on differences between lifting of oil and gas
and the Subsidiaries entitlement.
Take or pay liabilities represent payments received by EEKL and EKL from PT Perusahaan Gas Negara
(Persero) Tbk (PGN) in 1999 and 2000 arising from underlifting of natural gas volumes based on the
provision of the gas sales agreement between EEKL, EKL and PGN. Since 2005 such liabilities were
paid through deduction from the invoice amount EEKL and EKL to PGN.
Interest payable mostly represents accrued interest on loan of Semco, a Subsidiary, from PT Danatama
Makmur, PT Bakrie Investindo and PT Bakrie Capital Indonesia. The principal loan was transferred to
PT Hartindo Adi Kencana, whereafter based on the restructuring and debt acknowledgement agreement,
the loan was taken over by MAM.
33

AND SUBSIDIARIES
17. ACCRUED EXPENSES

2005
2006
2004
Drilling
Production and material
Interest and financing charges
Support cost
Geological and geophysical
Professional fee
Project
Employee salaries and benefits
Others
235,550,587
139,991,306
57,457,433
43,422,487
13,016,097
1,409,698
8,271,333
53,866
1,541,604
121,041,128
166,103,383
40,992,784
48,894,125
5,514,421
1,191,093
5,698,971
5,168,821
3,552,833
19,287,043
14,044,092
48,212,443
30,259,448
2,684,671
2,639,897
1,977,655
14,988,365
2,385,149
Total
500,714,411
398,157,559
136,478,763
Accrued production and drilling represents expenditure for development of oil and gas facilities and
integrated drilling service and offshore drilling in Rancak, Ngimbang and Sepanjang areas in the Kangean
PSC Block.
Accrued interest mostly represents accrued interest on long-term loans (see Note 18).
18. LONG-TERM LOANS
2005
2006
2004
Credit Suisse (US$ 427.75 million in 2006,

US$ 225.75 million in 2005 and
US$ 85.35 million in 2004)
Merrill Lynch (US$ 120 million)
PT Bank Niaga Tbk
PT Bank Permata Tbk
(US$ 27.69 million in 2004)
3,858,305,000
1,082,400,000
1,211,042
421,235
162,106
2,219,122,500
1,179,599,995
1,844,052
547,757
-
792,901,453
-
257,284,042
Total
Less current maturities
4,942,499,383
(766,294 )
3,401,114,304
(259,353,452 )
1,050,185,495
(242,933,416 )
Long-term Loans - Net
4,941,733,089
3,141,760,852
807,252,079
34

AND SUBSIDIARIES
18. LONG-TERM LOANS (Continued)

Credit Suisse, Singapore (CS)
The loan from CS as of December 31, 2006 consists of loans obtained by EMP Inc. and Semco
amounting to US$ 275,000,000 and US$ 152,750,000, respectively.
On May 19, 2005, EMP Inc. entered into another credit facility agreement with CS, whereby CS agreed to
provide a loan of a maximum US$ 275 million, of which US$ 78.5 million was used to settle the
outstanding balance of the existing CS facility, and the remaining US$ 196.5 million was used to finance
the development of Kangean PSC Block. The loan bears interest at 7% above LIBOR per annum and is
secured by the entire EMP Inc. shares, EMP Exploration (Kangean Ltd.) shares, EMP Kangean Ltd.
shares, receivables, and sales contract of EMP Inc.s oil and gas. The loan is due in 5 years with a 3-year
grace period.
The credit facility is divided into the following 4 drawdowns:
Drawdown
First
Second
Third
Fourth
Amount
(full amount)
Date
June 20, 2005
September 30, 2005
December 31, 2005
March 31, 2006
US$
115,000,000
60,000,000
65,000,000
35,000,000
US$
275,000,000
Interest will be paid on a monthly basis within 60 months after the first drawdown has been made, and
the principal repayment will be on a monthly basis within 24 months from the grace period.
The loan agreement relating to the above facility contains covenants that, among others, require EMP
Inc. to increase its equity amount to US$ 60 million no later than 18 months after the first utilization date
and to maintain certain financial ratios computed based on EMP Inc.s financial statements.
On October 27, 2005, Semco obtained a credit facility from CS amounting to US$ 52.75 million to be
used as follows:
(1) repayment of Semcos loan of US$ 19 million obtained from PT Bank Mandiri (Persero) Tbk and
IMGs loan of US$ 7.8 million obtained from PT Bank Syariah Mandiri;
(2) funding for capital expenditures for the Operating Companies (Korinci Baru, IMG, Semco and
Costa) amounting to US$ 9 million; and
(3) funding for inter-company loan.
The loan bears interest at 5% above LIBOR for the first six (6) months, 7% above LIBOR for the
following three (3) months and 9% above LIBOR up to maturity.
The loan period is three (3) years with two installments. The first installment is due on the ninth month,
while the second installment on the thirty-sixth month, both amounting to US$ 26,375,000. The first
installment was paid on August 16, 2006.
35

AND SUBSIDIARIES

Collateral used for this credit facility is as follows:
THP and Operating Companies shares.

Receivable of IMG and Semco.
Work contract of Operating Companies.
On August 16, 2006, Semco obtained an additional loan from Credit Suisse amounting to
US$ 126,375,000, which may only be used for the following purposes:
1.
2.
3.
4.
Paying fees and expenses due under the credit facility;

Making payments of the outstanding loan and unpaid interest obtained from loan Tranche A;
Deposit into the debt service account;
Funding for capital expenditures of THP and Operating Companies.
The loan bears interest at 5% above LIBOR for the first twelve (12) months and 9% above LIBOR up to
the maturity date.
The total loan will be due on August 15, 2008.
First ranking pledge of 100% of the issued share capital of the following: THP, Korinci Baru, Bentu,
IMG, Semco and Costa (THP and Operating Companies);
Corporate guarantees of THP and Operating Companies;
Work contracts of Operating Companies;
Irrevocable payment instructions in relation to payments under all existing and future contracts from
Operating Companies;
Assignment of all proceeds of insurance policies and reinsureance policies maintained by or on behalf
of each of THP and Operating Companies where the beneficiary is THP or Operating Companies;
and
Security over bank accounts, assignments of dividends and irrecovable payment instructions over
dividends from the Subsdiaries.
On August 3, 2004, EMP Inc. obtained a credit facility from CS amounting to US$ 95 million to finance
the acquisition of 100% shares in BP Exploration (Kangean) Ltd. and BP Kangean Ltd. (see Note 4). The
loan is secured by the receivables (see Note 6) and shares of EMP Inc. and bears interest at 6% above
LIBOR per annum and shall be payable in 60 monthly installments commencing from the date of its
availability. This loan was fully paid on May 19, 2005.
Merrill Lynch, Singapore (ML)
On July 27, 2005, MBF obtained a credit facility, Equity Collateralized Leveraged Securities (ECOLES)
that consists of Series A Notes & Series B Notes from Merrill Lynch, Singapore (as placing agent)
amounting to US$ 120 million to be used as follows:
-
payment for the LBI loan from PMA Investment Advisory Ltd. and ITAs loan from PT Bank
Mandiri (Persero) Tbk;
funding for the development and exploration of oil and gas fields in Malacca Straits PSC Block and
Brantas PSC Block; and
funding for the operations of ITA, LBI and KPSA.
36

AND SUBSIDIARIES

Series A Notes of US$ 25 million and Series B Notes US$ 95 million bear interest at 8.5% above LIBOR
and at 8% above LIBOR, respectively. Notes will mature on July 2, 2008 with three (3) monthly interest
payments starting October 27, 2005.
-
Corporate guarantees from ITA, LBI and KPSA.

Stocks, directly or indirectly owned by the Company.
Collection Accounts, Debt Service Account, and Reserve Account.
Receivables of ITA, LBI and KPSA.
Inter-company loan between MBF with ITA, LBI dan KPSA
Proceeds of claim of insurance in reference to operational obstacles in Malacca Straits PSC Block and
Brantas PSC Block.
MBF entered into Stock Appreciation Rights (SAR) agreement that includes a Call Option with the
holders of Series B Notes. The call option will be paid in cash by MBF for the difference between the
Settlement Price and the Companys basic share price (based on the weighted average price of shares
during the 20 days prior to the issuance date of the notes).
Subsequently, MBF transferred the loan to ITA, LBI and KPSA based on an agreement signed by each
party on July 27, 2005. The loan received by each Subsidiary was as follows:
ITA
(US$)
Type of Loan
LBI
(US$)
KPSA
(US$)
Total
(US$)
Tranche A
Tranche B
5,632,045
21,401,769
12,624,490
47,973,060
6,743,466
25,625,170
25,000,001
94,999,999
Total
27,033,814
60,597,550
32,368,636
120,000,000
Specific terms and conditions applying to the loan obtained by ITA, LBI and KPSA were as follows:
a.
Interest date and maturity date

Type of Loan
Interest Rate
Maturity Date
Tranche A
LIBOR plus 8.5%
36 months from the date of the agreement
Tranche B
LIBOR plus 8.0%
36 months from the date of the agreement
b. Term of Repayment
The repayment will be executed at the date of maturity.
PT Bank Niaga Tbk
In 2005, the Company obtained a credit facility from PT Bank Niaga Tbk. with a maximum amount of
Rp 2.02 billion to be used for the purchase of Company vehicles. The loan bears interest at 6.93% 9.62% per annum and is collateralized by the vehicles. The loan will be paid on a 36 monthly installment
basis.
37

AND SUBSIDIARIES

PT Bank Permata Tbk
On February 8, 2005, IMG obtained a credit facility from PT Bank Permata Tbk. for the purchase of
Company vehicles. The loan bears interest at 8.8% per annum over its 5-year period.
PT BII Finance Center and PT Bank Internasional Indonesia Tbk (BII)
On February 1, 2006, the Company obtained a loan facility from BII for the purchase of Company
vehichles. This loan bears interest at 10.5% per annum over its 36-month period.
In 2002, ITA, a Subsidiary, obtained a credit facility from Bank Mandiri with a maximum credit of
US$ 12.25 million at an interest rate of 9% per annum, which was used to take over the working interests
of Novus Petroleum in Block Malacca Straits. It is collateralized by the working interest of ITA and
KPSA in the Malacca Straits Block, sales of oil of ITA and KPSA, and personal guarantees by Rennier
Abdul Rachman Latief and Julianto Benhayudi. Based on the letter from PT Bank Mandiri (Persero) Tbk
dated February 28, 2003, the maximum credit has been changed to US$ 11.88 million. The loan is paid on
a three-monthly installment basis and will become due on December 31, 2007. The loan has been fully
paid, as ITA received a loan from MBF on July 27, 2005.
In 2004, Semco, a Subsidiary, obtained an investment credit facility from Bank Mandiri with a maximum
amount of US$ 21,000,000. The outstanding loan as of December 31, 2004 was US$ 18,314,730. The loan
was used to finance oil and gas drilling project in Semberah TAC Block, including its production facility.
The loan is to be paid on a three-monthly installment basis starting from June 2005 and will be due in
June 2008. The interest rate for the loan is 8.25% per annum.
The investment loan was collateralized by working interest, accounts receivable, corporate guarantee of
Semco and PT Hartindo Adi Kencana, personal guarantee of Indra Usmansyah Bakrie and Rennier A.R.
Latief and Semcos time deposits amounting to Rp 5 billion. The loan has been fully paid, as Semco
obtained a loan from CS on October 27, 2005.
19. CAPITAL STOCK
Composition of the Companys stockholders and their respective shareholdings was as follows:
2006
Name of Stockholder
PT Kondur Indonesia
PT Brantas Indonesia
Julianto Benhayudi
Public (below 5%)
Total
Number of
Shares
(full amount)
Percentage
of Ownership
(%)
Total
Paid-up Capital
(Rp)
4,741,855,486
4,088,864,035
446,912,286
314,488,667
4,808,692,898
32.93
28.39
3.11
2.18
33.39
474,185,548
408,886,403
44,691,229
31,448,866
480,869,289
14,400,813,372
100.00
1,440,081,335
38

AND SUBSIDIARIES
19. CAPITAL STOCK (Continued)

2005
Name of Stockholder
Number of
Shares
(full amount)
Percentage
of Ownership
(%)
Total
Paid-up Capital
(Rp)
PT Kondur Indonesia
UBS AG Singapore
Julianto Benhayudi
Public (below 5%)
2,886,355,362
1,893,780,980
800,726,388
446,912,286
314,388,667
3,149,281,494
30.41
19.95
8.44
4.71
3.31
33.18
288,635,536
189,378,098
80,072,639
44,691,229
31,438,867
314,928,149
Total
9,491,445,177
100.00
949,144,518
2004
Name of Stockholder
Number of
Shares
(full amount)
Percentage
of Ownership
(%)
Total
Paid-up Capital
(Rp)
PT Kondur Indonesia
Julianto Benhayudi
Public:
Above 5%
Credit Suisse
Below 5%
2,941,355,362
2,941,355,362
314,388,667
446,912,286
30.99
30.99
3.31
4.71
294,135,536
294,135,536
31,438,867
44,691,229
1,400,000,000
1,447,433,500
14.75
15.25
140,000,000
144,743,350
Total
9,491,445,177
100.00
949,144,518
Based on EGMS dated February 27, 2004, as stated in deed No. 25 dated March 17, 2004 of Lena
Magdalena S.H., Notary in Jakarta, the stockholders approved the issue of 384,970,667 shares with
nominal value of Rp 100 (full amount) per share by converting the Companys payable to Julianto
Benhayudi and Rennier Abdul Rachman Latief amounting to Rp 31,278,867 and Rp 7,218,200,
respectively.
Based on EGMS dated March 18, 2004, as stated in deed No. 36 dated March 25, 2004 of Lena
Magdalena S.H., Notary in Jakarta, the stockholders approved the issue of 4,251,263,232 shares with
nominal value of Rp 100 (full amount) per share by converting promissory notes of Rennier Abdul
Rachman Latief, BI and KI amounting to Rp 37,433,029, Rp 193,846,647 and Rp 193,846,647,
respectively.
Based on the Meeting Statement deed No. 40 dated March 30, 2004 of Lena Magdalena, S.H., Notary in
Jakarta, the shareholders agreed to:
Increase the authorized capital of the Company to Rp 1,500,000,000,000 (full amount);

Change the Companys status from a private company to a public company;
Conduct a public offering through the capital market of 2,850,000,000 shares, being new shares
issued;
39

AND SUBSIDIARIES
19. CAPITAL STOCK (Continued)
Delegate to the Companys Directors authority to conduct necessary actions in relation to the Initial
Public Offering (IPO); and
Change the Companys name from PT Energi Mega Persada to PT Energi Mega Persada Tbk.
The deed was approved by the Minister of Justice and Human Rights of the Republic of Indonesia in his
Decision Letter No. C-08031 HT.01.04.TH.2004 dated April 2, 2004. The deed was accepted and
recorded in the database of the Administration System for Legal Entities Directorate General of Law
Administration Department of Justice and Human Rights of the Republic of Indonesia
No. C-08309 HT.01.04.TH.2004 dated April 7, 2004.
On May 26, 2004, the Company obtained the effective notice from the Chairman of the Capital Market
Supervisory Agency (Bapepam) regarding the public offering of 2,850,000,000 shares of the Companys
stocks with nominal value of Rp 100 (full amount) per share, which were offered at Rp 160 (full amount)
per share.
Based on EGMS dated December 22, 2005, the shareholders of the Company approved the Rights Issue
I to the Companys shareholders in connection with the Exercise Rights of 4,909,368,195 shares with a
nominal value of Rp 100 (full amount) per share, which were offered at Rp 770 (full amount) per share
totaling Rp 3,780,213,510,150 (full amount). The Company completed all the requirements for the Rights
Issue I on January 25, 2006.
Based on the Meeting Statement deed No. 45 dated January 25, 2006 of Robert Purba, S.H., Notary in
Jakarta, the shareholders agreed to change the Articles of Association due to the increase in the
authorized capital stock of the Company to Rp 5,500,000,000,000 (full amount).
20. ADDITIONAL PAID-IN CAPITAL
2006
Excess of Price
over Par Value of
Shares
Shares Issuance Cost
Amount
Issuance of 7,756,801,695 shares

of the Company through:
Initial Public Offering 2,847,433,500 shares
Right Issues I - 4,909,368,195 shares
170,846,010
3,289,276,690
12,425,064
92,948,408
158,420,946
3,196,328,282
Total
3,460,122,700
105,373,472
3,354,749,228
40

AND SUBSIDIARIES
20. ADDITIONAL PAID-IN CAPITAL (Continued)

2005 and 2004
Excess of Price
over Par Value of
Shares
Issuance of 2,847,433,500
(full amount) shares
through Initial Public Offering
170,846,010
Shares Issuance Cost
Amount
12,425,064
158,420,946
21. DIFFERENCE IN VALUE FROM RESTRUCTURING TRANSACTIONS OF ENTITIES

UNDER COMMON CONTROL
2006
Net Book Value
Acquisition
Cost
Difference in value
from restructuring
transactions of
entities under
common control

RHI Corporation
PT Tunas Harapan Perkasa
Pan Asia Enterprise
PT Imbang Tata Alam
Kalila Energy Limited
238,407,446
92,458,079
16,449,550
10,891,647
(43,635,241 )
(537,838,356 )
239,420,000
200,000,000
2,599,869,500
74,800,000
38,400,000
1,000,000
(1,012,554 )
(107,541,921 )
(2,583,419,950 )
(63,908,353 )
(82,035,241 )
(538,838,356 )
Total
(223,266,875 )
3,153,489,500
(3,376,756,375 )
2005 and 2004
Net Book Value
Acquisition
Cost
Difference in value
from restructuring
transactions of
entities under
common control

RHI Corporation
Pan Asia Enterprise
PT Imbang Tata Alam
Kalila Energy Limited
238,407,446
92,458,079
10,891,647
(43,635,241 )
(537,838,356 )
239,420,000
200,000,000
74,800,000
38,400,000
1,000,000
(1,012,554 )
(107,541,921 )
(63,908,353 )
(82,035,241 )
(538,838,356 )
Total
(239,716,425 )
553,620,000
(793,336,425 )
41

AND SUBSIDIARIES
22. NET SALES

2006
Mitsubishi Corporation
PT Petrokimia Gresik (Persero)
PT Perusahaan Gas Negara (Persero) Tbk
Pertamina
Petro Diamond Co. Ltd.
PT Perusahaan Listrik Negara (Persero)
Petrochina Int'l Java Ltd.
PT Indogas Kriya Dwiguna
Itochu Petroleum Co. (S) Pte. Ltd.
BP Singapore Pte. Ltd.
Total
2005
2004
852,313,140
267,694,792
225,072,572
143,573,505
99,487,960
51,970,565
5,227,089
1,198,625
-
297,113,791
347,801,206
230,833,719
69,734,264
595,028,961
141,588,381
199,091,606
292,877,933
5,544,734
49,098,920
406,212,447
19,838,891
1,646,538,248
1,682,100,322
972,664,531
23. COST OF GOODS SOLD

2006
Production
Production support
Depreciation, depletion and amortization
(see Note 12)
Workover
Total
2005
2004
398,452,511
389,272,269
429,246,875
267,589,749
242,206,159
151,381,025
336,411,311
51,476,538
410,968,484
54,423,727
205,090,495
32,027,200
1,175,612,629
1,162,228,835
630,704,879
Total cost of goods sold amounting to US$ 13 million in 2004 included cost of goods sold of EMP Inc.
for the first five (5) months from the acquisition date of EKL and EEKL (see Note 4).
42

AND SUBSIDIARIES
24. OPERATING EXPENSES

2006
2005
2004
General and administrative

Salaries, allowances and employee benefits
Professional fees
Rent
Representation and donation
Office expenses
Business travelling
Depreciation
Bank charges
Provision for doubtful accounts
Management service
Others (below Rp 500 million)
101,062,572
88,450,183
15,077,586
9,745,086
8,166,068
3,695,189
2,344,706
749,232
4,070,311
58,989,816
54,525,245
12,080,423
4,497,338
13,038,346
5,874,857
1,429,878
2,387,026
4,015,977
2,058,428
24,295,399
25,435,527
33,285,396
1,250,782
5,872,250
16,378,222
1,567,038
191,021
36,991
9,436,039
Total
233,360,933
183,192,733
93,453,266
25. OTHER INCOME (CHARGES)

a.
Financing Charges
2006
2005
2004
Interests and financing charges

Others
293,907,633
10,380,361
240,785,485
8,719,781
61,043,661
1,993,346
Total
304,287,994
249,505,266
63,037,007
b. Income from Insurance Claim

On January 27, 2006, EKL and EEKL, Subsidiaries, received the insurance claim from PT Tugu
Pratama Indonesia amounting to Rp 56,438,666 (US$ 6,158,737) in relation to damage to the pipeline
in the Pagerungan field in the North Bali Sea in 2002.
43

AND SUBSIDIARIES
26. TAXATION
a.
Prepaid tax
This account represents value added tax - net
b. Tax payable
2006
Corporate income and dividend tax
Income tax
Article 4 (2)
Article 21
Article 23
Article 26
Interest and Tax Penalty
Value Added Tax
Total
2005
2004
64,589,674
66,763,107
101,875,459
131,949
18,994,186
34,354,084
15,977,356
31,118,991
31,645,910
160,706
8,423,787
7,835,728
8,176,612
45,206,895
928,032
5,017,287
8,251,044
4,968,960
196,812,150
136,566,835
121,040,782
KEL and PAN owns 84.24% shares and 15.76% shares, respectively, in Lapindo Brantas Inc. (LBI).
LBI established and domiciled in Delaware, United States of America (USA) and LBI has an
obligation to calculate, pay and file the corporate income tax return to US Tax Authority under US
Tax Laws. LBI has not filed its 2005, 2004 and 2003 annual corporate income tax returns due to the
adjustments made in respect to operating expenses that pertained to capitalization and amortization
of deferred cost pior to 2003. Due to the delay, LBI has appointed an independent US Tax advisor to
calculate the tax liability and estimation of interest and tax penalty.
The LBIs estimated income tax liability for years 2006, 2005 and 2004 is US$ nil million, US$ 0.9
million and US$ 1.3 million. As of December 31, 2006 the estimated interest and penalty is
US$ 3,449,999 (Rp 31,118,991). These amounts were included in the consolidated financial
statements.
Until 2004, EKL has been registered as United Kingdom (UK) and USA tax residents. However,
since January 1, 2005 has revoked its UK tax domicile and EKL only registered as USA tax resident.
In 2003, EEKL and EKL recognized dividend tax in Indonesia at the rate of 10%, and recognized
the under-provision of US$ 9,550,099 and US$ 5,476,627, respectively for the period from 1998 to
2002. An accrual of US$ 4,512,408 and US$ 2,801,372 for penalties in relation to the late payments of
such dividend tax as of June 30, 2004 was recognized by EEKL and EKL, respectively. EEKL and
EKL did not calculate any penalty for the period starting July 2004 to December 31, 2006 (see
Note 4). Estimated income tax expense for EEKL and EKL was amounting to US$ nil as of
December 31, 2006.
RHI has no taxable income, hence the management believes that RHI has no tax liability as of
December 31, 2006.
44

AND SUBSIDIARIES
26. TAXATION (Continued)

The estimated income tax of LBI, EKL and RHI assumes that the US IRS will accept such
recalculation. The estimated income tax could be different, should the IRS disagree with such
assumption and calculation.
MBF and EMP Finance are registered in the Netherlands.
MBF tax consultants calculated the current tax liability to be US$ nil as of December 31, 2006, 2005
and 2004.
EMP Finance has not yet started its operations and hence the management believes that EMP
Finance has no tax liability as of December 31, 2006.
c.
Tax Benefit (Expense)

Details of tax benefit (expense) of the Company and its Subsidiaries were as follows:
2006
2005
2004
Current tax
Subsidiaries
(39,050,544 )
(53,519,047 )
(97,828,649 )
Deferred tax
Subsidiaries
Company
171,451,576
66,515,790
106,839,148
15,133,606
(54,323,389 )
2,449,673
237,967,366
121,972,754
(51,873,716 )
198,916,822
68,453,707
(149,702,365 )
Sub-total
Total
d. Current Tax
Reconciliation between income before tax as shown in the consolidated statements of income and
estimated fiscal losses for the years ended December 31, 2006, 2005 and 2004, calculated with the
effective tax rate, were as follows:
2006
Income before income tax benefit
(expense) per consolidated
statements of income
4,088,416
2005
2004
133,523,603
180,110,646
Deduct income of Subsidiaries before tax
(228,160,137 )
(188,374,247 )
(189,225,667 )
Loss before estimated corporate income tax
(224,071,721 )
(54,850,644 )
(9,115,021 )
1,313,128
2,351,428
Timing difference
Employee benefits
1,433,281
45

AND SUBSIDIARIES

2005
2006
Permanent differences
Representation and donations
Interest income already subject to final tax
Others
Estimated fiscal loss of the Company
Estimated cumulative fiscal
losses beginning of year
Cumulative tax loss carried
forward - Company
e.
2004
6,971,418
(5,514,092 )
895,089
1,950,046
(29,853 )
2,485,098
1,370,645
(497,415 )
76,214
2,352,415
4,405,291
949,444
(220,286,025 )
(49,132,225 )
(5,814,149 )
(56,306,379 )
(7,174,154 )
(1,360,005 )
(276,592,404 )
(56,306,379 )
(7,174,154 )
Deferred Tax
The details of the Company and its Subsidiaries deferred tax assets and liabilities were as follows:
2006
January 1,
Deferred Tax Assets
Employee benefits
Fiscal loss
Depreciation, depletion
and amortization
Non-capital inventory
Unrecoverable charges
(120,320,521 )
(5,655,606 )
217,429,493
Total
529,094
80,622,288
Translation
Adjustments
(323,086 )
-
Credited (charged)
to Statements
of Income
December 31,
9,692,314
66,095,473
9,898,322
146,717,761
21,672,574
1,161,730
(39,492,494 )
(299,133,029 )
(67,214,898 )
627,246,356
(397,780,976 )
(71,708,774 )
805,183,355
172,604,748
(16,981,276 )
336,686,216
492,309,688
5,115,030
(634,427 )
(1,909,915 )
Deferred Tax Liabilities

Employee benefits
Depreciation, depletion and
amortization
(262,331,418 )
(40,591,221 )
22,119,517
22,848,715
4,043,795
(1,989,917 )
(78,428,325 )
9,000,285
(27,380,895 )
(317,911,028 )
(27,547,141 )
(7,251,295 )
Total
(275,688,092 )
24,268,166
(98,718,850 )
(350,138,776 )
Deferred tax benefit
2,570,688
237,967,366
46

AND SUBSIDIARIES

2005
January 1,
Deferred Tax Assets
Employee benefits
Fiscal loss
and amortization
Total
Credited (charged)
to Statements
of Income
Translation
Adjustments
December 31,
7,216,323
65,882,620
(4,609,899)
-
(2,077,330 )
14,739,668
529,094
80,622,288
(104,993,962 )
(5,631,225 )
62,907,942
(11,362,239 )
(10,731 )
9,529,232
(3,964,320 )
(13,650 )
144,992,319
(120,320,521 )
(5,655,606 )
217,429,493
25,381,698
(6,453,637 )
153,676,687
172,604,748
3,968,224
(457,998 )
1,604,804
5,115,030

Employee benefits
Depreciation, depletion and
amortization
(220,543,262 )
(21,765,263 )
-
(12,677,344 )
3,989,977
3,501,507
(29,110,812 )
(22,815,935 )
18,618,010
(262,331,418 )
(40,591,221 )
22,119,517
Total
(238,340,301 )
(5,643,858 )
(31,703,933 )
(275,688,092 )
Deferred tax benefit
121,972,754
2004
January 1
Deferred Tax Assets
Employee benefits
Fiscal loss
and amortization
Total
Translation
Adjustments
Credited (charged)
to Statements
of Income
Beginning Balance
of Acquisition
December 31
4,366,805
17,396,875
492,553
3,412,578
2,356,965
45,073,167
7,216,323
65,882,620
(61,994,028 )
(1,137,476 )
93,511,535
(7,482,082 )
(281,650 )
7,566,005
(35,517,852 )
(4,212,099 )
(38,169,598 )
(104,993,962 )
(5,631,225 )
62,907,942
52,143,711
3,707,404
(30,469,417 )
25,381,698
1,919,109
259,560
5,989,518
(4,199,963 )
3,968,224

Employee benefits
and amortization
Letter of credit service
(122,542,438 )
(18,876,316 )
-
(15,296,385 )
(1,880,529 )
-
(66,224,690 )
(594,025 )
310,194
(16,479,749 )
(414,393 )
(310,194 )
(220,543,262 )
(21,765,263 )
-
Total
(139,499,645 )
(16,917,354 )
(60,519,003 )
(21,404,299 )
(238,340,301 )
Deferred tax expense
(51,873,716 )
47

AND SUBSIDIARIES

f.
Tax Assessment Letters

Lapindo Brantas Inc. (LBI)
Based on Tax Assessment Underpayment Letters (SKPKB) No. 00006/201/03/081/06 dated
August 8, 2006, the Directorate General of Taxation had assessed underpayment for income tax
article 21 for the year 2003 amounting to Rp 371,907,408. On October 16, 2006, LBI submitted their
objection letter No. 925/FN/CS/L06 opposing the fiscal tax correction for national benefit in kind.
On November 6, 2006, the Directorate General of Taxation issued a compulsory Letter
No. SP-0082/WPJ.07KP. 1004/2006, stating that LBI has to pay their tax underpayment.
Based on SKPKB No. 00006/201/03/081/06 dated September 1, 2006, the Directorate General of
Taxation had assessed underpayment for income tax article 21 for LBI for the year 2003 amounting
to Rp 25,430,392. On September 29, 2006, LBI submitted its objection letter No.9040/FN/CS/L06
opposing the fiscal tax correction for national benefit in kind. That objection letter was rejected by
the Directorate General of Taxation by its decision letter No. KEP-47/WPJ24/BD0303/2006 dated
December 26, 2006.
Costa International Group Ltd.
On November 28, 2006, the Directorate General of Taxation had issued SKPKB for corporate
income tax and income tax article 26 (4) for Costa for the years 1997, 1998, 2000, 2001 and 2002
totaling to US$ 8,860,992.
On February 27, 2007, Costa submitted their Objection Letter the Tax Service Office and filed the
lawsuit to the State Adminstration Court opposing such SKPKB. As of March 7, 2007, there has no
reply from the Tax Office regarding this matter.
Management believes that the Subsidiaries will have favorable outcomes from all the objection and
lawsuit proceedings.
27. BASIC EARNINGS PER SHARE

The computation of basic earnings per share is based on the following data:
Earnings
Net earnings used for calculation

(in full amount)
2006
2005
2004
203,005,238,000
201,002,600,000
29,970,194,000
48

AND SUBSIDIARIES
27. BASIC EARNINGS PER SHARE (Continued)

Number of shares
Weighted average number of shares for the

calculation of basic earnings per share
(in full amount)
2006
2005
2004
(Shares)
(Shares)
(Shares)
14,077,118,766
9,491,445,177
9,491,445,177
14.42
21.18
3.16
Basic earnings per share

(in full amount)
The Company did not calculate diluted earnings per share since the Company had no shares that had a
potential dilutive effect for the years ended December 31, 2006, 2005 and 2004.
28. PENSION PLANS AND EMPLOYEE BENEFITS

Pension plans and retirement benefit liabilities (assets) balances as of December 31, 2006, 2005 and 2004
were computed by an independent actuary in accordance with PSAK No. 24 (Revised 2004) regarding
Employee Benefits.
Pension Plans
The Companys Subsidiaries (KPSA and ITA) provide defined contribution pension plans covering all
their permanent employees.
Pension plans are managed by PT Tugu Mandiri, the contribution amounting to 9% of employees salary,
of which 6% is paid by the Company and 3% by the employee.
Employee Benefits
The Company and its Subsidiaries provide post-employment benefits for all of its permanent employees
based on Employment Working Agreement/Company Policy. No funding has been made by the
Company and its Subsidiaries, except by KPSA and ITA, which funds are administrated and managed by
the Board of Trustees Contribution Fund of the Strait Malacca Employees Foundation and Trust Fund
Agreement with several banks.
49

AND SUBSIDIARIES
28. PENSION PLANS AND EMPLOYEE BENEFITS (Continued)

Amounts recognized in respect of these employee benefits were as follows:
2006
2005
2004
Current service cost

Interest cost
Expected return on plan assets
Net actuarial losses recognized
Past service cost
10,512,813
9,076,261
(3,881,266 )
12,862,044
(98,282 )
8,585,833
8,399,768
(3,460,705 )
2,838,295
-
12,977,577
6,039,890
(2,950,418 )
1,174,011
1,346,140
Total
28,471,570
16,363,191
18,587,200
The amounts included in the consolidated balance sheets, arising from the Company and certain
Subsidiaries obligations in respect of these employment benefits were as follows:
2006
2005
2004
Present value of employee benefits obligation

Fair value of employee benefits plan assets
99,558,046
(52,093,325 )
90,236,887
(47,720,313 )
83,196,310
(43,258,820 )
Funding status
Unrecognized actuarial loss
Unrecognized past service liability
47,464,721
(6,899,120 )
83,661
42,516,574
(17,296,514 )
-
39,937,490
(15,768,695 )
310,194
40,649,262
25,220,060
24,478,989
Amounts recognized in consolidated balance sheets in respect of these employment benefits were as
follows:
2006
2005
2004
Beginning of the year

Contribution
Benefit paid
Amount charged to consolidated
statement of income
25,220,060
(10,752,777 )
(2,289,591 )
24,478,989
(8,634,006 )
(6,988,114 )
14,737,389
(8,845,600 )
-
28,471,570
16,363,191
18,587,200
End of the year
40,649,262
25,220,060
24,478,989
The actuarial computations of employee benefits obligations as of December 31, 2006 and 2005 for the
Company, KPSA, LBI and EMP Inc. were prepared by PT Bumi Persada Aktuaria, an independent
actuarial firm, in its reports dated February 15, 2007 and February 1, 2006, respectively, while the
computations for the year ended December 31, 2004 for the Company, KPSA and LBI were prepared by
PT Dian Artha Tama in its reports dated February 28, 2005, February 25, 2005 and March 16, 2005,
respectively. The computations used the following assumptions:
50

AND SUBSIDIARIES
28. PENSION PLANS AND EMPLOYEE BENEFITS (Continued)

December 31, 2006, 2005 and 2004
Discount rate
Future salary increases
Mortality rate
Disability rate
Actuarial method
Resignation rate
Normal retirement age
10% per annum

10% per annum
Commissioner Standard Ordinary (CSO) - 1980
10% of Commissioner Standard Ordinary (CSO) - 1980
Projected Unit Credit
Old 18-45 = 1% per annum and old > 46 = 0%
56 years (all employees are assumed to retire
at normal retirement age)
The actuarial computations of employee benefits obligation for December 31, 2006, 2005 and 2004 for
Costa were prepared by PT Dian Artha Tama, an independent actuarial firm, in its reports dated
January 22, 2007, February 13, 2006 and August 11, 2005, respectively. The computations used the
following assumptions:
December 31, 2006, 2005 and 2004
Discount rate
Mortality rate
Disability rate
Actuarial method
Resignation rate
10% per annum

5% per annum
Commissioner Standard Ordinary (CSO) - 1980
0,1% of Commissioner Standard Ordinary (CSO) 1980
Projected Unit Credit
Old 18-45 = 1% per annum and old > 46 = 0%
56 years (all employees are assumed to retire
at normal retirement age)
The actuarial computations of employee benefits obligation for December 31, 2006, 2005 and 2004 for
Semco were prepared by PT Padma Radya Aktuaria, an independent actuarial firm, in its reports dated
January 22, 2007, June 1, 2006 and February 10, 2006, respectively. The computations used the following
assumptions:
December 31, 2006, 2005 and 2004
Discount rate
Mortality rate
10% per annum

5% per annum
100% TM 12
56 years old
29. NATURE OF RELATIONSHIP AND TRANSACTIONS WITH RELATED PARTIES

Nature of relationship
a.
PT Brantas Indonesia and PT Kondur Indonesia are the Companys stockholders.
b. PT Energi Timur Jauh, Asian Worldwide Group Ltd., Global Overseas Enterprise and PT Mitra
Andalan Mandiri are companies whose management is the same as the Company.
c.
Minarak Labuan Co. (L) Ltd. and Enercorp Ltd. are companies whose indirect stockholders are the
same as the indirect stockholders of the Company.
51

AND SUBSIDIARIES
29. NATURE OF RELATIONSHIP AND TRANSACTIONS WITH RELATED PARTIES

(Continued)
Transactions with related parties
In the normal course of business, the Company and its Subsidiaries entered into non-trade transactions
with related parties, mainly advance payments and payment of expenditures on behalf of related parties.
30. SEGMENT INFORMATION
Primary Segment
For management purposes, the Company and its Subsidiaries are currently organized into two (2)
business divisions consisting of trading and mining. These divisions are the basis on which the Company
and its Subsidiaries report their primary segment information.
Business segment information of the Company and its Subsidiaries was as follows:
2006
Trading
Mining
Elimination
Consolidated
SALES
External sales
1,646,538,248
1,646,538,248
RESULT
Segment result
470,925,619
470,925,619
Unallocated expenses
(233,360,933 )
Income from operations

Financing cost
Other income
237,564,686
(304,287,994 )
70,811,724
Income before tax benefit

Tax benefit
4,088,416
198,916,822
Income before minority interest

Minority interest
203,005,238
-
Consolidated net income
203,005,238
OTHER INFORMATION
Assets
Segment assets
Unallocated assets
5,697,723,421
10,185,969,140
(6,462,610,328 )
Consolidated total assets

Liabilities
Segment liabilities
Unallocated liabilities
9,883,391,922
(505,622,577 )
(10,222,939,728 )
3,201,848,343
Consolidated total liabilities

Capital expenditure
9,391,082,234
492,309,688
(7,526,713,962 )
(523,499,554 )
(8,050,213,516 )
2,306,565,212
338,756,017
2,306,565,212
338,756,017
52

AND SUBSIDIARIES
30. SEGMENT INFORMATION (Continued)

2005
Trading
Mining
Elimination
Consolidated
SALES
External sales
1,682,100,322
1,682,100,322
RESULT
Segment result
519,871,487
519,871,487
(183,192,733 )

Financing cost
Other income
336,678,754
(249,505,266 )
46,350,115

Tax benefit
133,523,603
68,453,707

Minority interest
201,977,310
(974,710 )
201,002,600
OTHER INFORMATION
Assets
Segment assets
Unallocated assets
1,526,836,195
7,961,197,422
(3,324,401,107 )

Liabilities
Segment liabilities
6,163,632,510
172,604,748
6,336,237,258
(160,417,534 )
(7,304,984,001 )
2,097,660,228
(5,367,741,307 )
(275,688,092 )
(5,643,429,399 )
Capital expenditure
1,471,966,906
412,398,362
1,471,966,906
412,398,362
2004
Trading
Mining
Elimination
Consolidated
SALES
External sales
972,664,531
972,664,531
RESULT
Segment result
341,959,652
341,959,652
(93,453,266 )

Financing cost
Other income
248,506,386
(63,037,007 )
(5,358,733 )

Tax expenses
180,110,646
(149,702,365 )

Minority interest
30,408,281
(438,087 )
29,970,194
53

AND SUBSIDIARIES
30. SEGMENT INFORMATION (Continued)

2004
Trading
OTHER INFORMATION
Assets
Segment assets
Unallocated assets
Mining
305,090,702
Elimination
4,732,917,560
Consolidated
(1,570,941,822 )
3,467,066,440
25,381,698

Liabilities
Segment liabilities
3,492,448,138
(119,893,470 )
(3,447,444,847 )
786,666,304
(2,780,672,013 )
(238,340,301 )

Capital expenditure
(3,019,012,314 )
-
1,825,419,807
205,090,495
1,825,419,807
205,090,495
Secondary Segment
The Company and its Subsidiaries are operating in two main geographical areas; domestic and
international.
Sales based on market
The following are the Company and its Subsidiaries sales based on geographical market, regardless of the
location of the production of oil and gas:
Sales based on geographical market
2006
Geographical market
Domestic
East Java
Jakarta
International
Singapore
Total
2005
2004
549,965,017
144,772,130
917,390,569
28,092,410
541,068,458
5,544,735
951,801,101
736,617,343
426,051,338
1,646,538,248
1,682,100,322
972,664,531
54

AND SUBSIDIARIES
31. COMMITMENTS
a.
Production Sharing Contract (PSC)

The Subsidiaries entered into agreements in the exploration and production of crude oil and gas
contract area based on PSC with BPMIGAS.
A summary of significant provisions of the PSC is as follows:
1. Sales
The oil and gas production shall be shared based on an agreed formula between the Subsidiaries
and BPMIGAS.
After deducting first tranche petroleum and recoverable operating cost, the Subsidiaries are
required to pay their own Indonesian income tax for the revenues from the remaining crude oil
and gas at the PSC effective rates, consisting of income tax and dividend tax.
2. Domestic Market Obligation
The Subsidiaries are required to supply the Indonesian domestic crude oil requirements
(Domestic Market Obligation - DMO) up to a certain percentage of oil production using the
market price. The Subsidiaries receive the prevailing market price per DMO barrel for the first 60
months from commencement of commercial production from each new field in each respective
contract area. After the period of 60 months, the selling price will be lower than market price.
3. Cost Recovery
Recoverable costs are distinguished between capital and non-capital costs and are recoverable
only from production revenues derived from the related contract area.
4. Compensation, Assistance and Production Bonuses
The Subsidiaries shall pay bonus and assistance to BPMIGAS for equipment and services,
ranging between US$ 500,000 - US$ 25,000,000 within 30 - 60 days after the production of
petroleum has reached between 50 million - 325 million barrels. Such bonus payments shall be
borne solely by the Subsidiaries and shall not be included in the recoverable operating costs.
5. Exclusion of Areas
The Subsidiaries have the obligation to relinquish certain areas to BPMIGAS within a certain
period based on the agreement between the Subsidiaries and BPMIGAS. This obligation shall not
apply to any part of the surface area of any field in which petroleum has been discovered.
6. Claim Insurance
Operating cost shall include premium paid for insurance normally required to be carried for
petroleum operation, together with all expenditures incurred or paid in settlement of any and all
losses, claims, damages, judgment and other expenses.
55

AND SUBSIDIARIES
31. COMMITMENTS (Continued)

7. Abandonment and Site Restoration
The Subsidiaries are required to perform an environmental baseline assessment on the contract
area at the commencement of their activities. Upon the expiration or termination or
relinquishment of part of the contract area, or abandonment of any fields, the Subsidiaries are
required to remove all equipment and installations that have been installed in the contract area,
and perform all necessary site restoration activities. As of December 31, 2006, 2005 and 2004, the
estimated site restoration liabilities amounted to US$ 11.5 million, US$ 8.4 million and US$ 5.5
million, respectively and the provision funding amounted to US$ 9.5 million, US$ 7.3 million and
US$ 5.2 million, respectively.
8. Participation
BPMIGAS shall have the right to demand from the Subsidiaries a 10% working interest in the
total rights and obligations under the PSC. In consideration for the acquisition of the 10%
working interest, BPMIGAS shall reimburse the Subsidiary an amount equal to a certain
percentage of the cumulative operating costs that the Subsidiary has incurred over a determined
period and of the amount of the bonus and assistance for procurement of equipment or services
paid to BPMIGAS as referred to in the PSC.
b. Technical Assistance Contract (TAC)
Significant provisions of the TAC applicable to the participants, including IMG and Semco,
Subsidiaries, in the contract area are as follows:
1. Entitlement to Production
Crude oil produced, net of cost recovery and investment credit is allocated at 73.2143% for
Pertamina and 26.7857% for the Subsidiaries before consideration of tax and adjustment in
domestic market obligation, if any. Pertaminas share of production from its properties in the
TAC contract area represents the entitlement of Pertamina to a portion of the crude oil
production. Costs related to the oil production are recoverable from Pertamina.
2. Cost Recovery
The Subsidiaries will recover all operating costs out of the sales proceeds or other disposition of
the required quantity of crude oil equal in value to such operating costs with a maximum of 65%
per annum of crude oil produced and saved hereunder and not used in petroleum operations.
3. Investment Credit
The Subsidiaries are entitled to recover an investment credit amounting to 15.78% of the capital
investment of crude oil production facilities out of gross production before recovery of operating
costs and tax deductions, commencing in the earliest production year. The investment credit may
be applied to new secondary and tertiary recovery projects, but it is not applicable to "Interim
Production Schemes."
56

AND SUBSIDIARIES

4. Domestic Market Obligation
The Subsidiaries are required to supply the domestic market in Indonesia with a portion of the
share of the crude oil to which the Subsidiaries are entitled. This portion is not to exceed 25% of
the total quantity of crude oil produced from the contract area. For the initial period of sixty
months starting from the month of the first delivery of crude oil produced and saved from each
field in the contract area, the fee per barrel for the quantity of crude oil supplied to the domestic
market from each field shall be equal to the net realized Indonesian Crude Price. Subsequent to
the initial period of sixty months, crude oil production supplied to the domestic market in
Indonesia is priced at 15% of the Indonesian crude price.
Nonetheless, if for any year, the recoverable operating costs exceed the difference of the total
sales proceeds from crude oil produced minus the investment credit, the Subsidiaries shall be
relieved from this supply obligation for such year.
5. Production Bonuses due to Pertamina
Under the terms of the TAC, the Subsidiaries are committed to pay Pertamina certain production
bonuses once production of crude oil reaches the following prescribed levels:
Cumulative Shareable Production
3 MMBOE (Million barrels of Oil Equivalent)
Production bonus
(US$)
50.000
100.000
175.000
As of December 31, 2006, the Subsidiaries production has not reached those prescribed levels.
6. Interest Recovery
Interest on loans for capital investments in petroleum operations not exceeding the prevailing
commercial rates for capital investments in petroleum operations may be recovered as a
component of operating costs with the approval of Pertamina.
7. Overhead Allocation
General and administrative costs, other than direct charges may be allocated from an affiliate
company. Pertamina must approve the method employed to allocate affiliate overhead costs.
8. Signature Bonus Costs
Signature and commercial production bonus costs are not recoverable under the TAC agreement.
Signature bonus costs represent the signature bonus paid to Pertamina under the terms of the
TAC.
57

AND SUBSIDIARIES

c.
Agreement with PT Energi Timur Jauh (ETJ)

KPSA, IMG, Semco, Costa, Bentu and Korinci Baru, the Subsidiaries, appointed ETJ as operational
and administrative coordinator, provider of general and administrative assistance and as cash manager
for the period commencing on August 1, 1998 until July 31, 1999, which shall be automatically
extended unless terminated by either party.
Based on the agreement, ETJ shall assist Subsidiaries in keeping the required books of accounts and
other records applicable in Indonesia for oil and gas industries. ETJ shall also deliver to Subsidiaries a
monthly report of operational and administrative matters and activities and provide access to duly
authorized parties of Subsidiaries to examine or inspect the books of accounts and records prepared
by ETJ. ETJ was also appointed as cash manager and authorized signatory in respect of each of
Subsidiaries bank accounts, without limitation, in making payment of expenditures on behalf of
Subsidiaries. ETJ shall arrange the use of Subsidiaries funds as necessary and use any of Subsidiaries
money being managed by ETJ to fund expenditures of other related parties having a similar
agreement with ETJ as deemed necessary. ETJ shall also maintain separate and individual clean
records of the inter-company payables and receivables status of Subsidiaries and update them on a
regular basis.
All costs and expenses incurred by ETJ in relation to the above mentioned purposes shall be
chargeable to Subsidiaries. All interest arising from Subsidiaries funds in ETJs bank account shall be
credited to Subsidiaries.
d. Financial Advisory and Financial Management

Based on the agreement between PI and MBF dated July 28, 2005, MBF appointed PI in connection
with the general strategic and financial planning activities of MBF in respect to funding MBFs capital
expenditure. PI will provide advisory services and financial arrangement to MBF. In accordance with
the agreement PI will arrange to channel MBF funds received from its creditors to other companies
within the Companys group.
The period of agreement shall be one (1) year from the date of signing of the agreement.
e.
Agreement with PT Perusahaan Listrik Negara (PLN)

On May 17, 2005, Bentu entered into an agreement with PLN whereby Bentu will supply gas to PLN.
The gas supplied will originate from the Bentu PSC and Korinci Baru PSC fields. This agreement
shall be effective when the following conditions precedent have been fulfilled:
Bentu has signed the Seller Appointment Agreement with BPMIGAS,
Bentu has signed the Trustee and Paying Agent agreement with BPMIGAS for transactions in
regard to this agreement, and
PLN has obtained the approval from its shareholders to carry out this agreement.
The agreement shall be effective until July 15, 2020 or when the volume of gas supplied has reached
146 BCF (Billion Cubic Feet), whichever occurs earlier.
58

AND SUBSIDIARIES

Since approval from PLNs shareholders to carry out the agreement had not yet been received, on
August 1, 2006, Bentu and PLN signed the Mutual Agreement on Delivery and Taking of the Gas.
The Mutual Agreement stated, among others, that since July 15, 2006 or on any other agreed date,
Bentu based on the reasonable endeavor principle will deliver the gas in the the daily delivery amount
in accordance with the nominations agreed by both parties up to December 31, 2006 or until the
conditions precedent have been met, whichever occurs earlier.
f.
The Subsidiaries Sale and Purchase Gas Agreements

On December 2005, the Subsidiaries, EMP Kangean Ltd. and EMP Exploration (Kangean) Ltd.,
entered Sales and Purchase Gas Agreement with:
a.
PT Perusahaan Listrik Negara (Persero) in the amount of 368.7 TBTU, which shall end on
December 31, 2024;
b. PT Perusahaan Gas Negara (Persero) in the amount of 6.38 TBTU, which shall end on June 30,
2007;
c.
PT Petrokimia Gresik (Persero) in the amount of 241.86 BSCF, which shall end on
December 31, 2015;
d. PT Pembangkitan Jawa Bali in the amount of12.99 BBTU, which shall end on September 30,
2007;
e.
Perusahaan Pertambangan Minyak dan Gas Bumi Negara in the amount of 221 TBTU, which
shall end on December 31, 2016; and
f.
PT Indogas Kriya Dwiguna in the amount of 79.2 TBTU, which shall end on December 31,
2017.
g. Joint Operating Agreement (JOA)

In 1985, Japan Petroleum Exploration Co., Ltd. (Japex) approved the JOA. Under the JOA, Costa as
the successor of Japex and Japan North Sumatera (JNS), as the assistant operator of the Joint
Operating Body, (Gebang) (JOB-G) will recover its participating interest share of all operating costs
and one half (1/2) of the amount of the reimbursement having been made by Costa pursuant to the
reimbursement out of the sale proceeds or other disposition of the required quantity of its
participating interest share of crude oil equal in value to such operating cost and reimbursement that
is produced and saved and not used in the petroleum operation.
The intent is that the Operator shall neither have gain nor loss as a result of being the assistant
operator that wholly finances the JOB-G activities.
59

AND SUBSIDIARIES
32. CONTINGENT LIABILITIES

The Company and its Subsidiaries operations are subject to Indonesian laws and regulations
governing relating to environmental protection. These laws and regulations may require the
acquisition of a permit before drilling commences, which may restrict the types, quantities and
concentration of various substances that can be released into the environment in connection with
drilling and production activities, limit or prohibit drilling activities in certain lands lying within
wilderness, wetlands and other protected areas, require remedial measures to prevent pollution
resulting from the Company and Subsidiaries operations. The Government has imposed
environmental regulations on oil and gas companies operating in Indonesia and in Indonesian waters.
Operators are prohibited from allowing oil into the environment and must ensure that the area
surrounding any onshore well is restored to its original state insofar as this is possible after the
operator has ceased to operate on the site.
Management believes that the Company and its Subsidiaries are in compliance with current applicable
environmental laws and regulations.
Banjar Panji Incident
The Company considers the following as contingent liabilities as of December 31, 2006:
The Company has recognized a provision for probable losses of Banjar Panji-1 incident based on
an estimate (see Note 36). As the mud flow is currently still continuing and due to the complexity
of the ongoing issue, the ultimate outcome of the measures that are being and will be undertaken
to handle the incident is currently still uncertain. Due to these uncertainties, the estimate was
made upon certain assumptions based on information currently available, which upon resolution
of the uncertainties may ultimately need to be revised and may result in ultimate costs that may
differ significantly from those presently estimated.
All costs incurred relating to the incident are accounted for as recoverable from the Government
based on the Production Sharing Contract (PSC) of the Brantas Block. Given the extraordinary
nature of the incident, the Government may not approve the cost recovery requests from LBI, in
which case, the matter could be disputed through a court proceeding. As of March 7, 2007, LBI
has not filed costs recovery relating to this incident to the Government.
Based on the Joint Operating Agreement all costs incurred are to be shared with the other
partners of the Block, namely PT Medco E&P Brantas (Medco) and Santos Brantas Pty. Ltd.
(Santos), according to their respective working interest holdings. In connection with this on
October 13, 2006, Medco filed arbitration before the American Arbitration Association against
LBI, in which Medco seeks to be excused from its obligation to pay its participating share of the
costs associated with the BJP-1 incident, plus recover its attorneys fees and costs related to the
arbitration. The amount Medco is seeking to avoid paying is presently in the US$ 10 million. LBI
filed its answer on December 22, 2006 denying Medcos claims and asserting certain
counterclaims including disparagement of reputation, failure to meet payment obligations under
the Joint Operating Agreement governing operation on the Brantas Block, and breach of
contractual confidentiality obligations. As of the date of this report, the arbitration process is still
ongoing.
The Company is currently undergoing an investigation by the Authorities on the possibility of the
occurrence of willful misconduct and/ or negligence by a person(s) that caused the mudflow
and/ or caused pollution and/or environmental damages.
60

AND SUBSIDIARIES
32. CONTINGENT LIABILITIES (Continued)
On December 8, 2006, Yayasan Lembaga Bantuan Hukum Indonesia (YLBHI) has filed a lawsuit
to the Central Jakarta District Court (the Court) under the Negligent Tort against several parties
including LBI. As of March 7, 2007, no decision has yet been rendered by the Court regarding
the case filed.
Due to the large scale impact of the incident, it is probable that the costs of the containment of
mud in BJP-1, as well as costs that may be incurred arising from social, economic and legal
liability associated with the incident are beyond the financial capability of LBI. Management is of
the opinion that, with LBI being a limited liability company established in Delaware, U.S.A., the
shareholders and the ultimate shareholders of LBI will not be held liable for LBIs debts and
obligations or for the consequences of LBIs actions, unless final and binding judgment of the
court of law decides otherwise, in which case, a court of competent jurisdiction would have to
find, based on a preponderance of the evidence, that the Company has engaged in unlawful
conduct.
The lawsuit filed against the Company and its Subsidiaries which were disclosed in the paragraph 7
were based on lawsuit filed as of March 7, 2007 as confirmed by the Companys independent legal
consultant.
Lawsuits and class actions against LBI may arise if LBI fails to settle potential obligation to residents
pursuant to its public commitments and or fails to pay certain damages due to losses incurred by
businesses relating to the BJP-1 incident. As of March 7, 2007, LBI has been working to meet,
negotiate and settle claims to prevent the possibility of a lawsuit or class action suit.
It is not currently possible to determine the impact of the above contingent liabilities on the
Company. Management of the Company and LBI are of the opinion that the ultimate outcome of the
above cases will be favorable to LBI and to the Company.
33. OPERATING HAZARDS AND UNSECURED RISKS
The Company and its Subsidiaries operations are subject to hazards and risks inherent in drilling for and
production and transportation of natural gas and oil, such as fires, natural disasters, explosions,
encountering formations with abnormal pressures, blowout, cratering, pipeline ruptures and spills, and
which can result in the loss of hydrocarbons, environmental pollution, personal injury claims and other
damage to properties of the Company and its Subsidiaries. Additionally, certain natural gas and oil
operations of the Company and its Subsidiaries are subject to tropical weather disturbances, some of
which can be severe enough to cause substantial damage to facilities and possibly interrupt production. As
protection against operating hazards, the Company and its Subsidiaries maintain insurance coverage
against some, but not all for the potential losses. The Company and Subsidiaries coverage for the oil and
gas exploration and production activities include, but is not limited to, loss of wells, blowouts and certain
cost of pollution control, physical damage on certain assets, employers liability, comprehensive general
liability, automobile and workers compensation.
The Company and its Subsidiaries maintain coverage for their drilling rigs, equipment and machinery for
their replacement value and insure against third party liability and workers compensations. However, they
do not insure these assets against business interruption or loss of revenues following damage to or loss of
a drilling rig, except in respect of an offshore rig where a term of the refinancing for such rig is that
insurance coverage be in place for the benefit of the lender.
(See Note 36 for the related disclosures.)
61

AND SUBSIDIARIES
34. ABANDONMENT AND SITE RESTORATION OBLIGATIONS

Under the renewal and extension of PSC signed by Kondur Petroleum S.A. - IJV, and EMP Kangean Ltd.
- IJV with BPMIGAS, the Subsidiaries are required to provide for abandonment of all exploration wells
and the restoration of their drill sites, together with all estimates of money required for the funding of any
abandonment and site restoration program established in conjunction with an approved plan of
development for a commercial discovery. Expenditures incurred in the abandonment of exploratory wells
and the restoration of their drill sites shall be charged as operating cost in accordance with PSC,
calculated based on the total estimated cost of abandonment and site restoration for each discovery
divided by the total estimated number of economic years of each discovery. The estimates shall be
reviewed on an annual basis and shall be adjusted each year as required.
35. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
As of December 31, 2006, 2005 and 2004 the Company and its Subsidiaries had monetary assets and
liabilities denominated in foreign currencies as follows:
December 31, 2006
Foreign
Currency
(full amount)
Assets
Cash on hand and in
banks
Restricted time
deposits
Trade receivables
Other receivables
Abandonment and
site restoration
fund
Foreign
Currency
(full amount)
Equivalent in
Rupiah
December 31, 2004

Foreign
Currency
(full amount)
Equivalent in
Rupiah
US$
HK$
Euro
93,737,931
6,884
845,516,136
81,635
29,134,817
39,755
10,965
288,418,183
50,410
127,851
1,940,404
4,355
-
18,026,355
5,091
-
US$
US$
US$
14,062,818
35,535,558
57,649,239
126,846,622
320,530,734
519,996,133
20,438,985
29,145,866
23,572,952
200,915,225
286,503,862
231,722,121
7,888,946
12,090,155
15,227,761
73,288,308
112,317,540
141,465,901
US$
9,494,992
85,644,826
7,296,826
71,727,804
5,199,395
48,302,380
Total Assets
Liabilities
Trade payables
Short-term loans
Other payables
Accrued expenses
Subsidiaries dividen
tax liability
Long-term loans
Site restoration
obligation
Equivalent in
Rupiah
December 31, 2005
1,898,616,086
1,079,465,456
393,405,575
US$
US$
US$
US$
57,525,116
11,540,849
87,349,375
518,876,546
104,098,462
787,891,364
25,573,985
6,643,310
40,290,698
251,392,271
65,303,738
396,057,565
14,206,926
15,083,906
4,184,481
14,285,471
131,982,343
140,129,487
38,873,826
132,712,026
US$
US$
US$
22,044,678
25,627,503
547,750,000
198,842,992
231,160,075
4,940,705,000
22,044,678
78,790,229
345,750,000
216,699,185
774,507,950
3,398,722,495
5,934,582
113,059,713
113,044,725
204,795,059
1,050,324,734
1,050,185,495
US$
11,494,992
103,684,829
8,448,052
83,044,347
5,501,846
51,112,149
Total Liabilities
6,885,259,268
5,185,727,551
2,800,115,119
Net Liabilities
(4,986,643,182 )
(4,106,262,095 )
(2,406,709,544 )
62

AND SUBSIDIARIES
36. OTHER SIGNIFICANT INFORMATION

Other significant information in relation to the operational activities of the Company and its Subsidiaries
is as follows:
a.
Banjar Panji Incident

BJP-1 exploration well is located in the Brantas PSC in the Sidoarjo, East Java province and operated
by Lapindo Brantas Inc. (LBI), which has a 50% working interest in the PSC. The other working
interest partners are PT Medco E&P Brantas (Medco) (32%) and Santos Brantas Pty. Ltd. (18%).
On May 29, 2006, a large volume of steam, hot water and mud broached to the surface approximately
200 meters from Lapindo Brantas Inc. (LBI)s BJP-1 exploration well. Prior to the broach, on
May 27, 2006 LBI experienced well control issues at the well, which occurred on the same day as a
6.2 Richter-scale earthquake struck Yogyakarta. Correlation between the well and the broach has not
been established. Since that date, LBI has been involved in mitigating the impacts of the mud flow to
the surrounding area and has made tremendous efforts in trying to stop the mud flow and manage
the surface impact. On September 8, 2006, the President of the Republic of Indonesia issued
Presidential Decree No. 13 pertaining to the National Task Force to Overcome the Mudflow in
Sidoarjo, which requires LBI, to bear all the costs incurred in overcoming the incident.
As of March 7, 2007, the relief wells were temporarily suspended due to land subsidence within the
area. On December 4, LBI issued a letter to the National Team, proposing a land settlement of
(1) Rp1 million/m2 for Land; (2) Rp 1.5 million/m2 for Buildings; and (3) Rp 120,000/m2 for Rice
Fields. The land settlement has the following conditions: (1) The agreed purchase price must first be
approved by the Regent of Sidoarjo; (2) The sale-purchase transaction can only be performed based
on the official land ownership certificates; (3) The acquisition payment will be made before a twoyear lease period ends; (4) All transactions must be carried out based on the applicable laws and
regulations (Brantas PSC, Oil & Gas law, etc.) For those people who choose and meet the criteria for
relocation, they will be relocated to Kawasan Sidoarjo Baru, a future residential area that is soon to be
developed.
LBI has appointed PT Quality Management Services (QMS) to prepare an estimate of the total costs
based on the information currently available. QMS estimate that total costs to handle the mud flow
amounted to US$ 183.7 million.
On December 22, 2006 and November 3, 2006, LBI received insurance claims from PT Tugu
Pratama Indonesia amounting to US$ 4,964,644 and US$ 4,670,971, respectively.
Total estimated obligation on probable losses amounted to US$ 63,425,599. This represents the QMS
estimated costs of US$ 183,700,000 less total costs incurred of US$ 92,784,401 and expected results
from insurance claim of US$ 27,490,000. LBI recorded such liability amounting to US$ 31,712,800,
representing its participants share of 50% as of December 31, 2006. On December 31, 2006, LBI
also recognized a loss on impairment of assets amounting to US$ 97,884,327, as LBIs capitalized
costs had already exceeded the ceiling test value. On LBIs financial statements, the loss on
impairment of assets is directly charged to the statement of income for the current year.
As the mud flow is currently still continuing and due to complexity of the ongoing issue, the ultimate
outcome of the measures that are being and will be undertaken to handle the incident is currently still
uncertain. Due to these uncertainties, the above estimation was made under certain assumptions
based on information currently available, which upon resolution of the uncertainties may ultimately
need to be revised and may result in ultimate costs that differ significantly from those presently
estimated.
63

AND SUBSIDIARIES
36. OTHER SIGNIFICANT INFORMATION (Continued)

The Company applies the full cost method, and under this method, the Cost Center is used to
"pool" costs to be later matched with revenues generated from the cost center's operations. The
Company considers a country as a single cost center in accordance with the Statement of Financial
Reporting Standard (PSAK) No. 29, and, therefore, cost centers are established on a country-bycountry basis. The full cost method regards the costs of unsuccessful acquisition and exploration
activities as necessary for the discovery of reserves. All of those costs are incurred with the
knowledge that many of the Company's prospects will not result directly in the discovery of reserves.
However, the Company expects that the benefits obtained from those prospects that prove to be
successful, together with the benefits from past discoveries will be adequate to recover the costs of all
activities, both successful and unsuccessful. Thus, all costs in acquiring, exploring, and developing
properties within one cost center (i.e. a country), including those related to the BJP-1 incident, are
capitalized when incurred and are amortized as mineral reserves in the cost center are produced,
subject to a limitation that the capitalized costs do not exceed the value of those reserves (i.e. ceiling
test). As of December 31, 2006, there was no excess cost over the ceiling test that should be charged
as an expense in the consolidated statements of income.
As of March 7, 2007, the management has not been able to determine the ultimate outcome of all the
measures to be undertaken before the incident is completely overcome, and therefore, could not
determine the contingency provisions that provide all costs relating to BJP-1. As information
becomes known, further loss contingency provisions, if any, may be established, and these may create
excess costs over the ceiling test that should be charged to consolidated statement of income in the
year in which they become known.
b. Spin-off plan
On October 20, 2006 and November 6, 2006, the management of the Company scheduled an EGMS
to obtain the shareholders approval for the LBI divestment to a related party company, Bakrie Oil &
Gas Ltd. The LBI divestment plan was proposed by the Management based on the following
considerations: (1) For the best interest of the shareholders, including minority shareholders, (2) To
redirect the managements focus towards developing the Companys other prospective assets, (3) The
commitment of the Bakrie Group in supporting LBI to resolve the BJP-1 mudflow incident. The
Extraordinary Shareholders Meeting was cancelled, as the divestment was not approved by Bapepam
based on its Letter No. S-2560/BL/2006 dated October 20, 2006 and Letter No. S-2574/BL/2006
dated November 1, 2006.
Subsequently, on November 14, 2006, the Company signed a Share Sale and Purchase Agreement
(SPA) with Freehold Group Ltd to divest LBI. The Companys management, supported by its legal
counsel felt that the transaction did not violate Bapepam policy No. IX.E.1, regarding conflict of
interest, and No. IX.E.2, regarding material transactions. The Company sent letters disclosing the
transaction to Bapepam and JSX on the same date. Bapepam, supported by the Ministry of Finance,
felt that the transaction was still improper, as quoted by many media in the month of November
2006. In late November 2006, Freehold Group requested the cancellation of the divestment and the
signed SPA, due to the controversy and misunderstanding surrounding the transaction. The
Company notified the Jakarta Stock Exchange and Bapepam of the divestment cancellation on
November 27, 2006.
64

AND SUBSIDIARIES
36. OTHER SIGNIFICANT INFORMATION (Continued)

c.
East Java Gas Pipeline incident

On November 22, EMP Kangean Ltd., a subsidiary shut down gas production at the Pagerungan
field in the Kangean PSC due to the rupture of the East Java Gas Pipeline (EJGP), which
unfortunately resulted in several fatalities and serious injuries. The EJGP failure occurred at KM 38
of the Porong - Gempol Tollway, Sidoarjo, East Java, as a result of land subsidence in the
surrounding area of the mud flow and over-burdening created by the bund-wall built along the top of
the pipeline. EJGP is the main gas transmission line connecting Pagerungan gas production facilities
(EMP Kangean) and Maleo gas production facilities (Santos) to various industries and power plants
in East Java. This pipeline is owned and operated by PT Pertamina (Persero).
On December 1, 2006 based on the BPMigas Letter No. 388/BPB0000.2006-S1, EMP Kangean
commenced supply of up to 45 MMCFD of gas using the Perusahaan Gas Negara (PGN), Porong
distribution pipeline. The gas is to be used by Gresik Petrochemical (PKG). As the PGN Porong
distribution pipeline can handle a maximum flow of 67 MMCFD gas, the remaining 22 MMCFD gas
is being supplied by the Santos Maleo field.
37. SUBSEQUENTS EVENTS

a.
New Shares Subscription on EMP Inc.

On March 6, 2007, the Company has signed binding agreements with Mitsubishi Corporation
(Mitsubishi) and Japan Petroleum Exploration Co., Ltd. (Japex) wherein Mitsubishi and Japex will
assume new subscription shares in EMP Inc. Based on these agreements, Mitsubishi and Japex will
assume, in aggregate, an indirect 50% working interest in the Kangean PSC block, as well as agreeing
to carry a substantial portion of the remaining development capital expenditure for Kangean PSC
block. The total subscription proceeds from this transaction will amount to US$ 360 million.
The proposed transaction is a material transaction and is subject to the approval of Bapepam and the
majority of the Companys shareholders at EGMS.
The proposed transaction involves Mitsubishi and Japex subscribing for new shares in EMP Inc. to
dilute the Companys current 100% shareholding to 50%.
The aforementioned Subsidiarys financial statements as of and for the year ended December 31,
2006 were consolidated into the Companys consolidated financial statements based on its 100%
ownership. The pro forma summary of the consolidated financial statements of the Company if the
proposed transaction is applied as of December 31, 2006 were as follows:
65

AND SUBSIDIARIES
37. SUBSEQUENTS EVENTS (Continued)

Proforma Summary
Consolidated
Financial Statements
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Equity
Net sales
Net Income
2,895,884,644
5,777,151,844
8,673,036,488
756,439,143
4,806,813,761
5,563,252,904
3,109,772,225
1,402,895,022
48,972,279
b. Receipt of Insurance Claim of LBI

On March 5, 2007, LBI received its remaining BJP-1 insurance claim from PT Tugu Pratama
Indonesia amounting to US$ 15,364,385 of the total LBI claim of US$ 25,000,000. Therefore, all
insurance claims of BJP-1 have been received by LBI.
38. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its Subsidiaries have been approved for release
by the Boards of Directors and Commissioners on March 7, 2007.
66

AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION (UNAUDITED)
DECEMBER 31, 2006, 2005 AND 2004
RESERVE ESTIMATION
The following information on gross proved developed, undeveloped and probable reserve quantities are estimates only, and do not purport to reflect realizable values
or fair market values of Subsidiaries oil and gas reserves. The Subsidiaries emphasize that reserve estimates are inherently imprecise; accordingly, these estimates are
expected to change as future information becomes available. There are numerous uncertainties inherent in estimating oil and gas reserves including many factors
beyond the control of the Subsidiaries.
Management believes that the reserve quantities shown below are reasonable estimates based on available engineering and geological data, as follows:
Malacca 1)
Brantas 2)
Kangean 3)
Gelam 4)
Semberah 5)
Gebang 6)
Korinci 7)
Bentu 8)
Crude Oil
Gas and
Crude Oil *)
Gas and
Condensate *)
Crude Oil
Crude Oil
Gas and
Crude Oil *)
Gas
Gas
MBOE
MBOE
MBOE
MBOE
MBOE
MBOE
MBOE
MBOE
Proved developed, undeveloped and probable reserves

Acquisition
Revision to previous estimation
Production during the year
34,745
8,534
(3,609 )
31,724
(3,936 )
285,174
(7,222 )

Acquisition
39,670
(1,736 )
(3,405 )
27,788
3,912
(3,126 )
277,952
(61,167 )
(4,862 )
5,181
(65 )
22,699
(300 )

34,529
(3,352 )
28,574
739
(2,378 )
211,923
35,000
(3,488 )
5,116
(123 )
22,399
(166 )
31,177
26,935
243,435
4,993
22,233
680
(345 )
12,595
-
48,273
-
335
882
(196 )
12,595
-
48,273
-
12,595
48,273
1,021
67

AND SUBSIDIARIES
DECEMBER 31, 2006, 2005 AND 2004
RESERVE ESTIMATION (Continued)
Malacca 1)
Brantas 2)
Kangean 3)
Gelam 4)
Semberah 5)
Gebang 6)
Korinci 7)
Bentu 8)
Crude Oil
Gas and
Crude Oil *)
Gas and
Condensate *)
Crude Oil
Crude Oil
Gas and
Crude Oil *)
Gas
Gas
MBOE
MBOE
MBOE
MBOE
MBOE
MBOE
MBOE
MBOE
Proved developed and undeveloped reserves

Acquisition
26,564
4,211
(3,609 )
23,591
(3,936 )
243,530
(7,222 )

Revision to previous estimatio
Acquisition
27,166
107
(3,405 )
19,655
(3,935 )
(3,126 )
236,308
(69,584 )
(4,862 )
1,052
(65 )
6,847
(300 )

23,868
(3,352 )
12,594
739
(2,378 )
161,862
(23,167 )
(3,488 )
987
(123 )
20,516
10,955
135,207
864
532
(345 )
2,661
-
23,602
-
6,547
(166 )
187
38
(196 )
2,661
-
23,602
-
6,381
29
2,661
23,602
*) Units for gas and condensate have been converted from Billion Cubic Feet (BCF) and Million Barrels of Oil (MMBO) to Thousand Barrels Oil Equivalent (MBOE).
1) Estimated oil and gas reserves in the Malacca Block as of September 30, 2005, were certified by Gaffney, Cline and Associates (GCA), independent petroleum
engineering consultants in their report dated May 5, 2006. In preparing their report, GCA utilized generally accepted petroleum engineering principles and
definitions applicable to the proved and probable reserve categories and sub-classification by the U.S. Society of Petroleum Engineering.
2) Estimated oil and gas reserves in Brantas Block as of September 30, 2005 were certified by Gaffney, Cline and Associate (GCA), independent petroleum engineering
consultants in their report dated May 5, 2006. In preparing their report, GCA utilized generally accepted petroleum engineering principles and definitions applicable
to the proved and probable reserve categories and sub-classification by the U.S. Society of Petroleum Engineering.
3) Estimated oil and gas reserves in Kangean Block were certified by DeGolyer and MacNoughton (D&M), independent petroleum engineering consultants from
United States of America in their report dated September 30, 2004 for the Pegerungan Field and April 30, 1995 for the Terang Sirasun Batur Field (TSB). The
reserve calculation for TSB field has been revised several times, the most recent being based on the Sproule certification in their report in February 2007 for
estimated oil and gas reserves as of July 31, 2006.
68

AND SUBSIDIARIES
DECEMBER 31, 2006, 2005 AND 2004
RESERVE ESTIMATION (Continued)
4) Estimated oil and gas reserves in Gelam Block as of September 30, 2005 were certified by Gaffney, Cline and Associate (GCA), independent petroleum engineering
consultants in their report on February 2006. In preparing their report, GCA utilized generally accepted petroleum engineering principles and definitions applicable
to the proved and probable reserve categories and sub-classification by the U.S. Society of Petroleum Engineering.
5) Estimated oil and gas reserves in Semberah Block as of September 30, 2005 were certified by Gaffney, Cline and Associate (GCA), independent petroleum
engineering consultants in their report on March 2006. In preparing their report, GCA utilized generally accepted petroleum engineering principles and definitions
applicable to the proved and probable reserve categories and sub-classification by the U.S. Society of Petroleum Engineering.
6) Estimated oil and gas reserves in Gebang Block as of January 1, 2006 were certified by Gaffney, Cline and Associate (GCA), independent petroleum engineering
consultants in their report dated March 16, 2006. In preparing their report, GCA utilized generally accepted petroleum engineering principles and definitions
applicable to the proved and probable reserve categories and sub-classification by the U.S. Society of Petroleum Engineering.
7) Estimated oil and gas reserves in Korinci Block as of September 2005 were certified by Malkewicz Hueni Associate (MHA), independent petroleum engineering
consultants in their report dated September 13, 2005.
8) Estimated oil and gas reserves in Bentu Block as of September 2005 were certified by Malkewicz Hueni Associate (MHA), independent petroleum engineering
consultants in their report dated September 13, 2005.
69
PT Energi Mega Persada Tbk.

Wisma Mulia 33rd Floor
Jl. Jend. Gatot Subroto No.42
Jakarta 12710
Indonesia
Phone: 62 21 5290 6250
Fax: 62 21 5290 6267
www.energi-mp.com
Lapindo Brantas Inc.

Wisma Mulia 28th Floor
Jl. Jend. Gatot Subroto No. 42
Jakarta 12710
Indonesia
Phone: 62 21 5290 6336
Fax: 62 21 5290 6335
Sidoarjo
Jl. Jend Gatot Subroto RT 07 RW 01
Dese Tebel Kec Gedangan
Sidoarjo 61254 Jawa Timur
Indonesia
Phone : 62 31 8912638
Fax: 62 31 8912635
Wunut
Desa Kedung Boto
Kec Porong Sidoarjo 61274 - Jawa Timur
Indonesia
Phone: 62 343 854604
Fax: 62 343 854603
Kondur Petroleum S.A.

Wisma Mulia 31st Floor
Jakarta 12710
Indonesia
Phone: 62 21 5290 6100/6200
Fax: 62 21 5290 6300
Riau (Malacca Strait)
Desa Lukit Kec. Merbau
Kabupaten Bengkalis
Propinsi Riau - Sumatra
Indonesia
Phone: 62 788 51245/51246/51046
Fax: 62 766 51257
EMP Kangean Limited

Wisma Mulia 25th & 26th Floor
Jakarta 12710
Indonesia
Phone: 62 21 2550 4880
Fax: 62 21 2550 4884
PT Ficomindo Buana Registrar

- Registrar
Mayapada Tower 10th Floor suite 2B
Jl. Jendral Sudirman Kav. 28
Jakarta 12920
Surabaya
Jl Raya Jemur Sari 152
Surabaya 60292 - Jawa Timur
Indonesia
Phone: 62 31 841 7684/847 0596
Fax: 62 31 841 1339
Jimmy Budhi & Rekan - Auditor

Member firm of Moores Rowland
International
Registered Public Accountants
Jl. Patimura No. 2
Jakarta Selatan 12110

Jln. Jend. Gatot Subroto No. 42
Jakarta 12710
Phone: 62 21 5290 6393
Fax: 62 21 5290 6399

Jakarta 12710
Phone: 62 21 5290 5891/92
Fax: 62 21 5290 5889
Kalila (Bentu) Limited

Kalila (Korinci Baru) Limited
Jakarta 12710
Phone: 62 21 521 4567
Fax: 62 21 520 1313
Costa International Group Limited

Jakarta 12710
Phone: 62 21 5214311
Fax: 62 21 52906443
Managing Adversity
List of Advisers and Bankers
Hadiputranto, Hadinoto & Partners

- Legal Consultant
The Jakarta Stock Exchange Building,
Tower II, 21st Floor
Sudirman Central Business District
Jl. Jendral Sudirman Kav 52-53
Jakarta 12190, Indonesia
Tel: +62 21 5155090/91/92/93
Fax: +62 21 5154840/45/50/55
PT Bank International Indonesia Tbk.
- Bank
Plaza BII Tower 2, 6th Floor
Jl. MH. Thamrin No.51
Jakarta 10350
Credit Suisse First Boston (Singapore)
Limited - Bank
1 Raffles Link
#03/#04-01 South Lobby
Singapore 039393
PT Bank Mandiri Persero Tbk. - Bank
Plaza Bank Mandiri
Jl. Gatot Subroto Kav.30 38
Jakarta12190
PT Bank Mega Tbk. - Bank
Kantor Cabang Pembantu Tanjung Karang
Gedung DP MAndiri 1st Floor
Jl. Tanjung Karang No.3-4a
Jakarta Pusat
63
64
www.energi-mp.com

Annual Report 2006

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Annual Report

Message from the President Commissioner

Report of the President Director

Managements Discussion and Analysis of

Safety, Health and Environment (SHE)

Corporate Governance Report

The soft copy of this report and regular

Aerial view from Kangean

EMP Annual Report 2006

In 2006 PT Energi Mega Persada

Adversity is a fact of life.

We remain committed to operational

EMP is a company managed for

How to read this report

PT Energi Mega Persada Tbk

South China Sea

Gebang JOB PSC

Malacca Strait PSC

Java and environs

EMP Annual Report 2006

Total Oil Production (mmboe) 3.9

(in billion Rupiah, except EPS and Financial Ratios)

Gas Sales (mmcfd)

Total Gas Production (mmboe)

Product Price Realizations*

2006 Year End Proforma Gross Reserves and Resources

Malacca Strait PSC

Korinci Baru PSC

Gebang JOB PSC

EMP Annual Report 2006

Gross Reserves and Resources

** source: 2005 Annual Report

Malacca Strait PSC

Korinci Baru PSC

Gebang JOB PSC

* exploration includes appraisal wells

Jack up rig operating offshore, Kangean

EMP Annual Report 2006

Message from the President Commissioner

Notwithstanding increased demand

to customers and in turn lead to a

Oil and gas supply-demand

The cause of the disaster has

While the issue continues into 2007,

Adversity is a fact of life, it cannot

The Board of Commissioners

Responding to the incident did

We thank the Board of Directors,

For and on behalf of the Board of

EMP Annual Report 2006

Report of the President Director

The 2006 Results

EMP Annual Report 2006

Banjarpanji, Sidoarjo Regency

Measures to contain the mud flow

Development costs and reserve

In 2006, despite many

New strategic partners

Kangean: EMP strategy at work

EMP Annual Report 2006

Capitalizing on domestic market

Production and Reserves

EMP subsidiaries invested