11. Financial Position and Result of Operation

Since 1 January 2011, PTTEP has complied with Thai Financial Reporting
Standards (TFRS) in conformity with International Financial Reporting
Standards (IFRS). Moreover, the Company has adopted Thai Financial
Reporting Standard No.21 (revised 2009) “The Effects of Changes in
Foreign Exchange Rates”,  which has been published but will not become
effective until 2013, and which also requires the Company to determine
its functional currency. The Company has also completed early adoption
of International Accounting Standard (IAS) No. 39 “Financial
Instruments: Recognition and Measurement”.

The Company’s management has determined the US Dollar as the functional
currency and has presented its financial statements in US Dollars in
accordance with Thai Accounting Standard No. 21 “The Effects of Changes
in Foreign Exchange Rates”. In addition, the Stock Exchange of Thailand
and the Department of Business Development require entities to present
their financial statements in Thai Baht. The Group, therefore, presents
its financial statements in Thai baht by translating them from US
Dollars.

Therefore, the significant financial information and financial ratios
for 2009-2011 are presented in US Dollars to reflect the Group’s
financial position and results of operations. However, the Group has
adopted Thai Financial Reporting Standard No.21 (revised 2009) “The
Effects of Changes in Foreign Exchange Rates” since 1 January 2011.
Therefore, the financial statements for 2011 have been prepared in US
Dollars compared with the financial statements for 2010 restated. The
financial statements for 2009 presented for comparative purposes have
been translated to US Dollars from the audited financial statement
presented in Thai Baht and reported to the Stock Exchange of Thailand on
February 17, 2010 ; however, Thai Financial Reporting Standard No.21
(revised 2009) has not yet been applied for the financial statement for
2009. The statements of financial position as at December 31, 2009 have
been translated by using the average closing rate as of December 30,
2009. The Statements of income and statements of cash flows have been
translated by using the average mid-rates of 2009.

1.  Summary of Financial Information

+------------------------+---------+---+---------+----+---------+---+
|                        | PTT     |   |         |    |         |   |
|                        | Expl    |   |         |    |         |   |
|                        | oration |   |         |    |         |   |
|                        | an      |   |         |    |         |   |
|                        | Pro     |   |         |    |         |   |
|                        | duction |   |         |    |         |   |
|                        | Public  |   |         |    |         |   |
|                        | Company |   |         |    |         |   |
|                        | Limited |   |         |    |         |   |
|                        | and     |   |         |    |         |   |
|                        | Subsi   |   |         |    |         |   |
|                        | diaries |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
|                        | St      |   |         |    |         |   |
|                        | atement |   |         |    |         |   |
|                        | of      |   |         |    |         |   |
|                        | Fi      |   |         |    |         |   |
|                        | nancial |   |         |    |         |   |
|                        | p       |   |         |    |         |   |
|                        | osition |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
|                        | As at   |   |         |    |         |   |
|                        | D       |   |         |    |         |   |
|                        | ecember |   |         |    |         |   |
|                        | 31,     |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
|                        | 2009 *  |   | 2010    |    | 2011    |   |
+------------------------+---------+---+---------+----+---------+---+
|                        | T       | % | T       | %  | T       | % |
|                        | housand |   | housand |    | housand |   |
|                        | US      |   | US      |    | US      |   |
|                        | Dollar  |   | Dollar  |    | Dollar  |   |
+------------------------+---------+---+---------+----+---------+---+
| Assets                 |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Current Assets         |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Cash and cash          | 1,      | 1 | 1,      | 18 | 1,      | 9 |
| equivalents            | 462,399 | 6 | 979,478 | .5 | 350,530 | . |
|                        |         | . |         |    |         | 6 |
|                        |         | 2 |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Trade receivable -     | 327,210 | 3 | 328,153 | 3  | 484,200 | 3 |
| parent company         |         | . |         | .1 |         | . |
|                        |         | 6 |         |    |         | 4 |
+------------------------+---------+---+---------+----+---------+---+
| Trade accounts         | 100,260 | 1 | 61,342  | 0  | 150,155 | 1 |
| receivable             |         | . |         | .6 |         | . |
|                        |         | 1 |         |    |         | 1 |
+------------------------+---------+---+---------+----+---------+---+
| Other accounts         | - -     | - | 58,669  | 0  | 201,897 | 1 |
| receivable             |         |   |         | .5 | 229,335 | . |
|                        |         |   |         |    | 229335  | 4 |
|                        |         |   |         |    | 229,335 |   |
+------------------------+---------+---+---------+----+---------+---+
| Inventories            | 31,436  | 0 | 18,456  | 0  | 17,360  | 0 |
|                        |         | . |         | .2 |         | . |
|                        |         | 3 |         |    |         | 1 |
+------------------------+---------+---+---------+----+---------+---+
| Materials and          | 244,107 | 2 | 239,295 | 2  | 271,130 | 1 |
| supplies, net          |         | . |         | .2 |         | . |
|                        |         | 7 |         |    |         | 9 |
+------------------------+---------+---+---------+----+---------+---+
| Other current assets   | 199,209 | 2 | 122,737 | 1  | 262,527 | 1 |
|                        |         | . |         | .1 |         | . |
|                        |         | 2 |         |    |         | 9 |
+------------------------+---------+---+---------+----+---------+---+
| Total Current Assets   | 2,      | 2 | 2,      | 26 | 2,      | 1 |
|                        | 364,621 | 6 | 808,130 | .3 | 737,799 | 9 |
|                        |         | . |         |    |         | . |
|                        |         | 2 |         |    |         | 4 |
+------------------------+---------+---+---------+----+---------+---+
| Non-current assets     |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Investments in         | 27,640  | 0 | 24,601  | 0  | 26,923  | 0 |
| associates             |         | . |         | .2 |         | . |
|                        |         | 3 |         |    |         | 2 |
+------------------------+---------+---+---------+----+---------+---+
| Long-term loans to     | 15,126  | 0 | 19,695  | 0  | 18,485  | 0 |
| related parties        |         | . |         | .2 |         | . |
|                        |         | 2 |         |    |         | 1 |
+------------------------+---------+---+---------+----+---------+---+
| Property, plant and    | 6,      | 6 | 6,      | 63 | 9,      | 6 |
| equipment, net         | 194,568 | 8 | 794,617 | .5 | 300,912 | 5 |
|                        |         | . |         |    |         | . |
|                        |         | 7 |         |    |         | 8 |
+------------------------+---------+---+---------+----+---------+---+
| Goodwill               | -       | - | 7,314   | 0  | 329,695 | 2 |
|                        |         |   |         | .1 |         | . |
|                        |         |   |         |    |         | 3 |
+------------------------+---------+---+---------+----+---------+---+
| Intangible assets, net | 119,195 | 1 | 183,187 | 1  | 1,      | 8 |
|                        |         | . |         | .7 | 136,555 | . |
|                        |         | 3 |         |    |         | 0 |
+------------------------+---------+---+---------+----+---------+---+
| Deferred income tax    | 256,023 | 2 | 469,797 | 4  | 510,603 | 3 |
| assets                 | 256,023 | . |         | .4 |         | . |
|                        | 256,023 | 8 |         |    |         | 6 |
|                        | 256,023 |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Other non-current      | 38,175  | 0 | 386,404 | 3  | 70,460  | 0 |
| assets                 |         | . |         | .6 |         | . |
|                        |         | 4 |         |    |         | 5 |
+------------------------+---------+---+---------+----+---------+---+
| Total Non-current      | 6,      | 7 | 7,      | 73 | 11,     | 8 |
| assets                 | 650,727 | 3 | 885,615 | .7 | 393,633 | 0 |
|                        |         | . |         |    |         | . |
|                        |         | 8 |         |    |         | 6 |
+------------------------+---------+---+---------+----+---------+---+
| Total Assets           | 9,      | 1 | 10,     | 1  | 14,     | 1 |
|                        | 015,348 | 0 | 693,745 | 00 | 131,432 | 0 |
|                        |         | 0 |         | .0 |         | 0 |
|                        |         | . |         |    |         | . |
|                        |         | 0 |         |    |         | 0 |
+------------------------+---------+---+---------+----+---------+---+
| Liabilities and        |         |   |         |    |         |   |
| Shareholders' Equity   |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Current Liabilities    |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Trade Accounts         | 27,532  | 0 | 67,420  | 0  | 72,996  | 0 |
| payables               |         | . |         | .6 |         | . |
|                        |         | 3 |         |    |         | 5 |
+------------------------+---------+---+---------+----+---------+---+
| Current portion of     | 309,498 | 3 | - -     | -  | 687,772 | 4 |
| long-term debts        |         | . |         |    | 687,772 | . |
|                        |         | 4 |         |    |         | 9 |
+------------------------+---------+---+---------+----+---------+---+
| Short-term loans       | 57,987  | 0 | 263,502 | 2  | 315,545 | 2 |
|                        |         | . |         | .5 |         | . |
|                        |         | 6 |         |    |         | 2 |
+------------------------+---------+---+---------+----+---------+---+
| Working capital to     | 19,546  | 0 | 33,418  | 0  | 35,665  | 0 |
| co-venturers           |         | . |         | .3 |         | . |
|                        |         | 2 |         |    |         | 3 |
+------------------------+---------+---+---------+----+---------+---+
| Accrued expenses       | 621,127 | 6 | 603,161 | 5  | 995,314 | 7 |
|                        |         | . |         | .6 |         | . |
|                        |         | 9 |         |    |         | 0 |
+------------------------+---------+---+---------+----+---------+---+
| Accrued interest       | 7,148   | 0 | 18,312  | 0  | 29,583  | 0 |
| payable                |         | . |         | .2 |         | . |
|                        |         | 1 |         |    |         | 2 |
+------------------------+---------+---+---------+----+---------+---+
| Income tax payable     | 570,518 | 6 | 738,359 | 6  | 802,476 | 5 |
|                        |         | . |         | .9 |         | . |
|                        |         | 3 |         |    |         | 7 |
+------------------------+---------+---+---------+----+---------+---+
| Financial derivative   | -       | - | 976     | -  | 46,419  | 0 |
| assets                 |         |   |         |    |         | . |
|                        |         |   |         |    |         | 3 |
+------------------------+---------+---+---------+----+---------+---+
| Short-term provision   | 26,175  | 0 | 130,449 | 1  | 75,772  | 0 |
|                        |         | . |         | .2 |         | . |
|                        |         | 3 |         |    |         | 5 |
+------------------------+---------+---+---------+----+---------+---+
| Other current          | 44,544  | 0 | 68,467  | 0  | 78,255  | 0 |
| liabilities            |         | . |         | .6 |         | . |
|                        |         | 5 |         |    |         | 6 |
+------------------------+---------+---+---------+----+---------+---+
| Total Current          | 1,      | 1 | 1,      | 18 | 3,      | 2 |
| Liabilities            | 684,075 | 8 | 924,064 | .0 | 139,797 | 2 |
|                        |         | . |         |    |         | . |
|                        |         | 7 |         |    |         | 2 |
+------------------------+---------+---+---------+----+---------+---+
| Non-current            |         |   |         |    |         |   |
| liabilities            |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Bonds                  | 1,      | 1 | 2,      | 21 | 2,      | 1 |
|                        | 466,975 | 6 | 319,410 | .7 | 251,987 | 5 |
|                        |         | . |         |    |         | . |
|                        |         | 3 |         |    |         | 9 |
+------------------------+---------+---+---------+----+---------+---+
| Finance lease          | - -     | - | - -     | -  | 617,861 | 4 |
| liabilities            |         | - |         | -  | 617,861 | . |
|                        |         |   |         |    |         | 4 |
+------------------------+---------+---+---------+----+---------+---+
| Deferred income tax    | 316,365 | 3 | - - -   | -  | - -     |   |
| liabilities            |         | . |         |    |         |   |
|                        |         | 5 |         |    |         | - |
|                        |         |   |         |    |         | - |
+------------------------+---------+---+---------+----+---------+---+
| Other non-current      | 449,312 | 5 | 199,034 | 1  | 918,666 | 6 |
| liabilities            |         | . |         | .9 |         | . |
|                        |         | 0 |         |    |         | 5 |
+------------------------+---------+---+---------+----+---------+---+
| Deferred income        | -       | - | 51,744  | 0  | 62,463  | 0 |
|                        |         |   | 51,744  | .5 | 62,463  | . |
|                        |         |   |         |    |         | 4 |
+------------------------+---------+---+---------+----+---------+---+
| Provision for          | 683,905 | 7 | 725,804 | 6  | 703,998 | 5 |
| decommissioning costs  |         | . |         | .8 |         | . |
|                        |         | 6 |         |    |         | 0 |
+------------------------+---------+---+---------+----+---------+---+
| Other non-current      |         | 1 | 65,652  | 0  | 124,998 | 0 |
| liabilities            | 125,633 | . |         | .7 |         | . |
|                        |         | 4 |         |    |         | 9 |
|                        |         |   |         |    |         | 0 |
|                        |         |   |         |    |         | . |
|                        |         |   |         |    |         | 9 |
|                        |         |   |         |    |         | 0 |
|                        |         |   |         |    |         | . |
|                        |         |   |         |    |         | 9 |
+------------------------+---------+---+---------+----+---------+---+
| Total Non-current      | 3,      | 3 | 3,      | 31 | 4,      | 3 |
| liabilities            | 042,190 | 3 | 361,644 | .4 | 679,973 | 3 |
|                        |         | . |         |    |         | . |
|                        |         | 8 |         |    |         | 1 |
+------------------------+---------+---+---------+----+---------+---+
| Total Liabilities      | 4,      | 5 | 5,      | 49 | 7,      | 5 |
|                        | 726,265 | 2 | 285,708 | .4 | 819,770 | 5 |
|                        |         | . |         |    |         | . |
|                        |         | 4 |         |    |         | 3 |
+------------------------+---------+---+---------+----+---------+---+
| Shareholders' Equity   |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Share capital          |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Issued and paid-up     | 129,238 | 1 | 129,391 | 1  | 129,475 | 0 |
| share capital          |         | . |         | .2 |         | . |
|                        |         | 4 |         |    |         | 9 |
+------------------------+---------+---+---------+----+---------+---+
| Share premium          | 449,598 | 5 | 462,090 | 4  | 469,655 | 3 |
|                        |         | . |         | .3 |         | . |
|                        |         | 0 |         |    |         | 3 |
+------------------------+---------+---+---------+----+---------+---+
| Currency translation   |         |   |         |    |         |   |
| differences            |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Retained earnings      |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Appropriated           |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Legal reserve          | 12,964  | 0 | 12,964  | 0  | 12,964  | 0 |
|                        |         | . |         | .1 |         | . |
|                        |         | 1 |         |    |         | 1 |
+------------------------+---------+---+---------+----+---------+---+
| Reserve for expansion  | 431,231 | 4 | 431,231 | 4  | 431,231 | 3 |
|                        |         | . |         | .0 |         | . |
|                        |         | 8 |         |    |         | 1 |
+------------------------+---------+---+---------+----+---------+---+
| Unappropriated         | 3,      | 3 | 4,      | 40 | 5,      | 3 |
|                        | 342,462 | 7 | 345,041 | .6 | 254,384 | 7 |
|                        |         | . |         |    |         | . |
|                        |         | 1 |         |    |         | 2 |
+------------------------+---------+---+---------+----+---------+---+
| Other components of    | (       | ( | 27,320  | 0  | 13,953  | 0 |
| Shareholders' Equity   | 76,410) | 0 |         | .3 |         | . |
|                        |         | . |         |    |         | 1 |
|                        |         | 8 |         |    |         |   |
|                        |         | ) |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Total Shareholders'    | 4,      | 4 | 5,      | 50 | 6,      | 4 |
| Equity                 | 289,083 | 7 | 408,037 | .6 | 311,662 | 4 |
|                        |         | . |         |    |         | . |
|                        |         | 6 |         |    |         | 7 |
+------------------------+---------+---+---------+----+---------+---+
| Total Liabilities and  | 9,      | 1 | 10,     | 1  | 14,     | 1 |
| Shareholders' Equity   | 015,348 | 0 | 693,745 | 00 | 131,432 | 0 |
|                        |         | 0 |         | .0 |         | 0 |
|                        |         | . |         |    |         | . |
|                        |         | 0 |         |    |         | 0 |
+------------------------+---------+---+---------+----+---------+---+
| Book value per share   | 1.29    |   | 1.63    |    | 1.90    |   |
| (US Dollar)            |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+
| Issued and fully       | 3,      |   | 3,      |    | 3,      |   |
| paid-up capital at the | 312,561 |   | 317,448 |    | 319,985 |   |
| end of year(Thousand   |         |   |         |    |         |   |
| share)                 |         |   |         |    |         |   |
|                        |         |   |         |    |         |   |
| (                      |         |   |         |    |         |   |
|                        |         |   |         |    |         |   |
| (Thousand share)       |         |   |         |    |         |   |
|                        |         |   |         |    |         |   |
| (Thousand share)       |         |   |         |    |         |   |
| (Thousand share)       |         |   |         |    |         |   |
+------------------------+---------+---+---------+----+---------+---+

the year (Thousand shares

* Assets and Liabilities have been translated from audited financial
statement presented in Thai Baht by using the average closing rate as of
December30, 2009

for Baht 33.3688 per 1 US dollar and Shareholders' Equity has been
translated by using historical rate.

  ------------------------- -------------- ------- ----------- ------- ------------- -------
                            PTT                                                      
                            Exploration                                              
                            and Production                                           
                            Public Company                                           
                            Limited and                                              
                            Subsidiaries                                             

                            Statements of                                            
                            Income                                                   

                            For the years                                            
                            ended December                                           
                            31,                                                      

                            2009 **                2010                2011          

                            Thousand US    %       Thousand US %       Thousand US   %
                            Dollar                 Dollar              Dollar        

  Revenues                                                                           

  Sales                     3,370,128      96.0    4,329,635   95.5    5,439,722     95.7

  Revenue from pipeline     109,742        3.1     110,836     2.4     124,071       2.2
  transportation                                                                     

  Interest income           10,975         0.3     11,795      0.3     16,239        0.3

  Other revenues            19,012         0.5     79,505      1.8     105,061       1.8

  Total Revenues            3,509,857      100.0   4,531,771   100.0   5,685,093     100.0

  Expenses                                                                           

  Operating expenses        347,848        9.9     458,390     10.1    625,396       11.0

  Exploration expenses      215,170        6.1     86,924      1.9     216,890       3.8

  Administrative expenses   147,639        4.2     192,465     4.2     257,409       4.5

  Petroleum royalties and   410,245        11.7    525,329     11.6    645,468       11.4
  remuneration                                                                       

  Depreciation, depletion   870,798        24.8    1,017,342   22.4    1,117,346     19.7
  and amortization                                                                   

  Loss from derivative      -              -       3,468       0.1     11,057        0.2
  financial instruments                                                              

  Loss from Montara         265,004        7.6     14,410      0.3     5,331         0.1
  incident                                                                           

  Managements' remuneration 4,552          0.1     5,915       0.1     4,571         0.1

  Loss from foreign         14,823         0.4     85,854      1.9     64,886        1.1
  exchange                                                                           

  Other expenses            -              -       47,740      1.1     -             -

  Finance costs             54,551         1.6     104,546     2.3     123,557       2.2

  Total Expenses            2,330,630      66.4    2,542,383   56.1    3,071,911     54.0

  Share of gain (loss) from (521)          -       (1,347)     -       2,430         -
  associates                                                                         

  Income before income      1,178,706      33.6    1,988,041   43.9    2,615,612     46.0
  taxes                                                                              

  Income taxes              (532,560)      15.2    (607,563)   13.4    (1,147,365)   20.2

  Net income                646,146        18.4    1,380,478   30.5    1,468,247     25.8

  Basic earning per share   0.20                   0.42                0.44          
  (US Dollar)                                                                        

  Diluted earning per share 0.20                   0.42                0.44          
  (US Dollar)                                                                        

  Weighted average number   3,309,079              3,314,906           3,319,078     
  of outstanding ordinary                                                            
  shares (Thousand share)                                                            
  ------------------------- -------------- ------- ----------- ------- ------------- -------

** Statements of income has been translated from audited financial
statement presented in Thai Baht by using the average mid-rates of 2009
for Baht 34.2858 per 1 US dollar.

  ----------------------------------- -------------- ------------- -------------
                                      PTT                          
                                      Exploration an               
                                      Production                   
                                      Public Company               
                                      Limited and                  
                                      Subsidiaries                 

                                      Statements of                
                                      Cash flows                   

                                      For the years                
                                      ended December               
                                      31,                          

                                      2009 **        2010          2011

                                      Thousand US    Thousand US   Thousand US
                                      Dollar         Dollar        Dollar

  Cash flows from operating                                        
  activities                                                       

  Income before income taxes          1,178,706      1,988,041     2,615,612

  Adjustment to reconcile income                                   
  before income taxes to net cash                                  
  provided by (used in ) operating                                 
  activities                                                       

  Share of (gain) loss from           521            1,347         (2,430)
  associates                                                       

  Depreciation, depletion and         870,798        1,017,342     1,117,346
  amortization expenses                                            

  Amortization of prepaid expenses    2,097          4,564         5,714

  Amortization of exploration         165,408        46,056        150,450
  expenses                                                         

  (Gain) loss on disposal of assets   102,051        (11,266)      1,726

  Income recognized from deferred     2,550          (15,443)      (11,455)
  income                                                           

  Loss from Montara incident          90,577         -             -

  Loss from derivative financial      -              3,468         11,057
  instruments                                                      

  Provision for Employee benefits     11,705         13,068        15,264

  (Gain) loss on foreign exchange     (24,631)       188,333       (62,284)

  Interest income (higher) less than  40,561         90,590        103,957
  interest expenses                                                

                                      2,440,343      3,326,100     3,944,957

  Changes in operating assets and     (1,189,490)    (666,048)     (1,036,853)
  liabilities                                                      

  Net cash provided by operating      1,250,853      2,660,052     2,908,104
  activities                                                       

  Cash flows from investing                                        
  activities                                                       

  (Increase) decrease in loans to     38,799         (2,530)       274
  related related parties                                          

  Advance for the purchase of         -              (342,000)     (1889,560)
  partnership units                                                

  Increase in investments in related  (16,212)       -             -
  parties                                                          

  Interest received from loans        1,300          606           2,158

  Increase in property, plant and     (1,732,168)    (1,944,320)   (2,206,095)
  equipment                                                        

  Increase in intangible assets       (105,975)      (43,563)      (114,199)

  Net cash used in investing          (1,814,256)    (2,331,807)   (4,207,422)
  activities                                                       

  Cash flows from financing                                        
  activities                                                       

  (Decrease) increase in short-term   (39,687)       205,269       63,707
  loans                                                            

  Proceeds from long-term loans       -              -             616,303

  Redemption of bonds                 -              (285,393)     -

  Proceeds from bonds                 1,165,209      693,683       698,020

  Interest paid                       (41,973)       (63,191)      (123,106)

  Proceeds from common stock          10,705         12,645        7,649

  Dividends paid                      (389,848)      (379,986)     (560,133)

  Net cash provided from (used in)    704,406        183,027       702,440
  financing activities                                             

  Net increase in cash and cash       141,003        511,272       (596,878)
  equivalents                                                      

  Cash and cash equivalents at the    1,259,013      1,462,399     1,979,478
  beginning of the year                                            

                                      1,400,016      1,973,671     1,382,600

  Adjustment for the effect of        62,383         5,807         (32,070)
  exchange rate changes on cash and                                
  cash equivalents                                                 

  Cash and cash equivalents at the    1,462,399      1,979,478     1,350,530
  end of the year                                                  
  ----------------------------------- -------------- ------------- -------------

** Statements of cashflows has been translated from audited financial
statement presented in Thai Baht by using the average mid-rates of 2009
for Baht 34.2858 per 1 US dollar.

  Summary significant financial ratio table

  ----------------------------------- --------- ----------- ---------- --------
                                                Financial              
                                                Ratio                  

                                                2009        2010       2011

  Liquidity Ratio                                                      

  Current Ratio                       (times)   1.40        1.46       0.87

  Quick Ratio / Acid Ratio            (times)   1.12        1.26       0.63

  Cash flow from Operations to        (times)   0.81        1.48       1.15
  current liabilities ratio                                            

  Account Receivable Turnover         (times)   9.25        10.87      10.87

  Collection Period                   (days)    39          34         34

  Profitability Ratio                                                  

  Profit Margin                       (%)       18.57       31.09      26.39

  Return on Equity ( ROE )            (%)       15.99       28.17      25.06

  Efficiency Ratio                                                     

  Return on Assets                    (%)       8.22        14.05      11.83

  Return on Fixed Assets              (%)       27.81       37.24      32.13

  Assets Turnover                     (times)   0.44        0.45       0.45

  Financial Policy Ratio                                               

  Debt - to -Equity                   (times)   1.10        0.48       0.61

  Times Interest Earned               (times)   33.69       41.56      42.39

  Dividend Ratio                      (%)       40.00       40.00      40.00

  Data Per Share                                                       

  Book value per share                (USD)     1.29        1.63       1.90

  Net Profit per share                (USD)     0.20        0.42       0.44

  Dividend per share                  (THB)     2.68        5.03       5.40

  Growth Rate                                                          

  Total Asset                         (%)       26.21       18.66      32.40

  Total Liabilities                   (%)       51.41       11.84      48.46

  Sales                               (%)       (12.87)     28.47      25.30

  Net Profit                          (%)       (46.84)     113.65     6.36
  ----------------------------------- --------- ----------- ---------- --------

2.  Management Discussion and Analysis of Operation Results in 2011

    1.  PTTEP Performance

  Global economy has slowdown with volatility in the year 2011. The
  major factors affecting the global economy are sluggish economy in the
  U.S., public debt crisis in European countries, natural disaster in
  Japan, and political unrests in the MENA region. These factors
  supported the rise in oil price, as well as affecting the developing
  countries and the emerging countries, particularly the Chinese
  economy, which, while remain strong growth, has lower growth rate due
  to the lower export volume. These situations have also affected the
  slowdown of Thai economy. The Office of the National Economic and
  Social Development Board (NESDB) has revised the economic growth
  projection for the year from the previous projection of 3.5%-4.0%,
  down to only 1.5%. The major factors suppressing the Thai economy are
  the impact from the global economy, which effected especially on the
  export sector; and the flooding incident in Thailand during the third
  and fourth quarter, which has broad impact on production sector,
  agricultural sector, industrial sector, and tourism sector.

  On the energy policy, the government issued measures to ease the
  burden on public spending by temporary deferring the oil-fund
  collection on certain types of fuels. As a result, short-term fuel
  demand rose. In the long-term, the government announced the policy to
  restructure the energy price to reflect the actual cost by gradually
  floating the prices of Natural Gas for Vehicles (NGV) and Liquefied
  Petroleum Gas (LPG) starting from January 16th 2012. The energy price
  restructure will result in the domestic energy demand that is based on
  the market mechanism and the country’s growth rate, in order to
  prepare for the ASEAN Economic Community (AEC) in the year 2015. In
  addition, the government increased the target usage of alternative
  energy from 20% to 25% by the year 2020, which includes promoting the
  use of natural gas instead of diesel fuel in the transport sector.
  This may result in the lower than expected growth rate of demand for
  fossil fuels. Furthermore, the government plans to develop natural gas
  resources in Thailand-Cambodia overlapping area to meet future demand.

  As the world economy and the Thai economy are very fragile and highly
  uncertain, PTTEP has continuously monitored the economics closely and
  revised its action plan and investment plan accordingly for
  consistency with its strategic directions. PTTEP continues to increase
  efficiency and develop capabilities for sustainable growth. The
  results can be summarized as follows.

  Exploration and Appraisal: PTTEP continues exploration activities in
  both domestic and international areas in order to assess the potential
  of fields and the amount of petroleum reserves added. In the year
  2011, the company drilled exploration wells in several projects.

  Arthit project: The petroleum has been discovered in appraisal well
  Arthit-14-19 A&B, in which will be developed further.

PTTEP Australasia project: The Cash-Maple field locating in Timor Sea,
the company has drilled the appraisal well Cash-2. The natural gas has
been discovered and the result of this appraisal well is important
information for the Preliminary Front End Engineering Design (Pre-FEED)
to estimate the potential of the development of the Floating Liquefied
Natural Gas (FLNG) project in Timor Sea. FLNG is the project with the
purpose to facilitate the development of the natural gas in the remote
area. In addition, the company will continue drilling additional
appraisal wells in 2012 to confirm the petroleum reserves and evaluate
the commercial potential of the field.

  As for the exploration block WA-397-P, Browse Basin, in which PTTEP
  holds 20% participation interest, the exploration well Omar-1 was
  drilled to the total depth of 5,229 meters and encountered some
  hydrocarbons which are not sufficient for commerciality.

  In addition, the exploration well Kingtree-1 in project AC/P24 and the
  exploration well Ironstone-1 in project AC/P40 were drilled to the
  total depth of 1,472 and 1,492 meters respectively and and encountered
  some hydrocarbons which are not sufficient for commerciality.

  Oman 44 Project: The drilling result of exploration well Munhamir-3 to
  discover more petroleum reserve in the Munhamir oil field yielded
  petroleum discovery but not enough quantity for commerciality.
  Nonetheless, in 2012, PTTEP plans to produce additional condensate
  from the production well Munhamir-2. The additional production from
  Munhamir field, together with the current gas and condensate
  production from Shams gas field, will increase the petroleum
  production from Oman 44 project.

  Myanmar M3 Project: Gulf of Martaban, Republic of the Union of
  Myanmar. As a result of the natural gas discovery in the exploration
  well, Aung Sinkha-2 PTTEP has accelerated the 3-D seismic survey of
  1,000 square kilometers from the first quarter of 2012 to the fourth
  quarter of 2011, in order to align with the appraisal drilling plan in
  the fourth quarter of 2012. Currently, PTTEP is preparing the area to
  be surveyed in conjunction with relevant government agencies. In
  addition, Myanma Oil and Gas Enterprise (MOGE) has approved in
  principle for the extension of exploration period of 1 year, for PTTEP
  to continue with the drilling of exploration and appraisal wells, in
  order to prove the commerciality.

  Indonesia Semai II Project: which PTTEP entered into joint venture and
  hold 28.33% participation interest; with Murphy Semai Oil Co. Ltd. as
  the operator. An exploration well, Lengkuas-1, was drilled at the
  water depth of 1,095 meters. The well was drilled to a total depth of
  6,500 meters and encountered some hydrocarbons which are not
  sufficient for commerciality. However, the data gathered from the
  Lengkuas-1 is crucial for further study and evaluation of petroleum
  potential of the Semai II project and the basin. The study and
  evaluation results will be beneficial for the company’s exploration
  and investment plan in the area.

  MTJDA-B17 Project: There was the drilling of an exploration well and
  an appraisal well. Petroleum was discovered in 5 wells, which confirms
  the potential of the area.

  Development: PTTEP has accelerated the development of various projects
  to start up production as planned.

  PTTEP Australasia Project, Montara field: Development of Montara Field
  is progressing, with the installation of the new wellhead platform
  completed. The drilling of the production well has commenced, and is
  expected to begin production in the second half of 2012

  Regarding the implementation of the Montara Action Plan proposed to
  the Australian Government, PTTEP has received approval from the
  Australian government to continue petroleum exploration and production
  operations in Australia. The company has continued to report the
  progress of the implementation of the Action Plan to the Department of
  Resources and Energy of Australia. PTTEP is currently in the process
  of taking lessons learned from the Montara incident to analyze and
  improve the operations as the “Corporate Lessons Learned” including to
  extend the lesson learned to subsidiaries in other countries. PTTEP
  remains committed to prevent similar incidents in the future.

  For the compensation claim, ending the year 2011, PTTEP has received
  total compensation claim of USD 119.5 million to date.

  Regarding the claim that was submitted by the Government of Indonesia
  for compensation due to oil leaks from the Montara incident, PTTEP is
  continuously collaborating with the Indonesian government. The company
  is still based on the evidence and the impact (if any) to use
  scientific principles.

  Bongkot Project: The construction and installation of processing
  platform, wellhead platform, and living quarter platform of the
  Bongkot South project were completed. The initial production of
  natural gas is expected by the first half of 2012.

  Myanmar Zawtika Project: The project is currently under process of the
  constructions of the processing platform & bridge, wellhead platform
  and intra-field sealines, offshore gas export pipeline, and onshore
  gas export pipeline and facilities. PTTEP expects to start up natural
  gas production from Zawtika Project in 2013.

  Algeria 433a & 416b Project: The project is currently under process of
  the design of detailed engineering for processing and pipeline. As for
  the construction of living quarter and facilities, the technical and
  commercial evaluation of the contracts have been approved. In
  addition, the drilling of the development well has begun in late 2011
  and expected the initial production within the year 2014.

  Production: PTTEP continuously put efforts to maintain the current
  production level and increase production from new projects.

  Canada Oil Sands KKD Project: Production from Canada Oil Sands KKD
  Project has commenced in 2011 and has continuously increased its
  production from the Leismer area. The total production in Leismer area
  was approximately 3 million barrels in November 2011. The average
  production rate for the fourth quarter 2011 was approximately 14,300
  barrels per day, and the maximum production rate reaching
  approximately 18,190 barrels per day during December 2011. In
  addition, an evaluation of installing the fourth stream generator to
  increase the production rate to 22,000 barrels per day was conducted,
  prior to the Leismer Expansion plan, which aims to increase production
  to 40,000 barrels per day in 2015. For the Corner area, the study
  period has been extended, in order to evaluate in more details of the
  development plan and overall budget to maximize the value of the
  investment and construction process. It is expected that there will be
  a Final Investment Decision (FID) in 2013 and start production by the
  year 2016.

  Vietnam 16-1 Project: has commenced its first production on August,
  2011 with the initial flow rate of approximately 15,000 barrels per
  day. The current average production rate is approximately 32,000
  barrels per day.

  Arthit Project: PTTEP and the joint venture partners (the sellers)
  reviewed the development and production plan of the project to recover
  the limited natural resources to support the Kingdom’s energy demand
  and the dependency on the domestic reserves; as a result, the
  amendment of the Gas Sales Agreement was agreed and signed by the
  sellers and PTT Public Company Limited (the buyer). The key contents
  of the amendment include the adjustment of the Daily Contract Quantity
  (DCQ) from 330 million cubic feet per day (MMSCFD) to 220 MMSCFD and
  the adjustment in gas price formula to reflect the same level of
  return.

  As for Arthit North Project, PTTEP has been the operator and the sole
  shareholder of the Arthit North Project since 2006 to produce the
  natural gas via FPSO (Floating Production Storage and Off-Loading). At
  present, Arthit North has stopped the production since 28 Nov 2011 due
  to the FPSO rental agreement ended.

  Nonetheless, PTTEP plans to produce the remaining natural gas from the
  field at Arthit Processing Platform in 2012, where PTTEP and Arthit
  joint venture partners, Chevron Thailand Exploration and Production,
  Ltd. (Chevron) and Mitsui Oil Exploration Co., Ltd. (MOECO), have
  entered into the Arthit North Participation agreement on 29 Dec 2011
  with 80% 16% and 4% participation interests respectively. This
  agreement will be effective in January 2012 in order to deliver the
  natural gas to produce at Arthit Processing Platform.

  Impact from the flood in Thailand: During October 2011, there has been
  a major flood in Thailand, impacting the petroleum transportation of
  the company. As a result, the production levels have been decreased in
  some part of S1, PTTEP1, Bongkot, Yadana, and Yetagun projects.
  However, the mentioned projects were able to resume to normal
  operation and production rate early in the fourth quarter. In
  addition, the major flood has also impacted the natural gas demand in
  the fourth quarter, reducing the natural gas demanded from Bongkot
  Project, Yadana Project, and Yetagun Project, resulting in the total
  gas sales volume to decrease 5% compared to the third quarter of 2011.

  Portfolio Management: PTTEP has operated continuously in the areas of
  Portfolio Management, which aims to manage risk and to have
  appropriate level of investment in each project, as well as to have
  the experienced technology experts as an operator.

  PTTEP Australasia Project: In March 2011, PTTEP Australasia (Ashmore
  Cartier) Pty Ltd (PTTEP AAA) has signed an agreement to acquire an
  additional 20 percent from the joint venture in the exploration block
  AC/RL7 in Australia. As a result, PTTEP AAA has 100% share in the
  block AC/RL7.

  In June 2011, PTTEP Australia Offshore Pty Ltd (a subsidiary of PTTEP)
  has relinquished the share of 22.21% in block AC/P 36 in Australia
  after fulfillment of the exploration work commitment.

  In July 2011, the Australian Government has granted PTTEP Australasia
  (Ashmore Cartier) Pty Ltd. (A subsidiary of the PTTEP) to be entitled
  to 100 % share of the block AC/P54 for the period of six years on July
  7, 2011 onwards.

  In September 2011, PTTEP Australasia Pty Ltd (a subsidiary of PTTEP)
  has relinquished the joint venture of 20% in the concession WA-378-P.

  Sidi Abd El Rahman Offshore Project: PTTEP has carefully analyzed the
  remaining potential of the concession and decided to inform the
  partner in January 2011 to relinquished 30% share in project Sidi Abd
  El Rahman Offshore, Republic of Egypt after fulfillment of the
  exploration work commitment.

  Myanmar M4 Project: PTTEP has relinquished the entire area of
  Exploration Block M4 in the Union of Myanmar after fulfillment of the
  exploration work commitment. The termination was effective as of May
  2011.

  New Zealand Great South Project: PTTEP has ceased the exploration and
  relinquished the block PEP 50121, which has been evaluated to have low
  petroleum potential, to the Government of New Zealand. The
  relinquishment was approved in August 2011.

  In addition, PTTEP New Zealand Limited (PTTEP NZ), a subsidiary of
  PTTEP and its joint venture have signed a farm-out agreement of the
  two areas in the New Zealand Great South Project, PEP 50119 and PEP
  50120, to Shell New Zealand Limited (Shell), who has extensive
  experience in the field of deepwater petroleum exploration and
  production. Both areas are located off the coast of the South Island
  of New Zealand, which is a frontier area. This farm-out contract
  resulted in PTTEP share down from 36 to 18 percent whereas Shell’s
  share up to 50 percent. Furthermore, PTTEP NZ is filing for approval
  of combining the concession block PEP 50119 and PEP 50120, together
  with the extension of the concession area of 1,367 square kilometers
  from New Zealand Government in September 2011, in order to have the
  concession cover all area with potential in the block PEP 50121.

  Indonesia South Mandar, Sadang, and South Sageri Project: PTTEP has
  signed a farm-out agreement of the three deep-offshore exploration
  blocks in the Makassar Strait in Indonesia to Total. The farm-out
  agreement includes (1) South Mandar block, where PTTEP (Operator)
  diluted its share from 67% to 34%, with Talisman (33%) and Total
  (33%). (2) Sadang block, where PTTEP diluted its share from 40% to
  30%, with Total (30%) and Talisman (40% and Operator). (3) South
  Sageri block, where PTTEP diluted its share from 30% to 20%, with
  Total (45%), and Talisman (35% and Operator). The dilution in
  exploration blocks is one of PTTEP strategies to manage our
  exploration portfolio. PTTEP believes that Total, PTTEP’s long time
  strategic partner in the Gulf of Thailand, will bring its recognized
  worldwide deep-offshore technology and experiences to the assets in
  Indonesia.

Results of Operations

  Since 1 January 2011, PTTEP has complied with Thai Financial Reporting
  Standards (TFRS) in conformity with International Financial Reporting
  Standards (IFRS). Moreover, the Company has adopted Thai Financial
  Reporting Standard No.21 (revised 2009) “The Effects of Changes in
  Foreign Exchange Rates”,  which has been published but will not become
  effective until 2013, and which also requires the Company to determine
  its functional currency. The Company has also completed early adoption
  of International Accounting Standard (IAS) No. 39 “Financial
  Instruments: Recognition and Measurement”.

  The Company has determined the USD to be its functional currency.
  However, in submission of its financial statements to the Stock
  Exchange of Thailand and the Department of Business Development, the
  Company is also required to convert the financial statements from USD
  to the presentation currency, which is Thai Baht.

  Detailed discussion of financial results for the two years ending 31
  December is below:

  Results of Operations – Full Year Comparison

  ------------------------------------- ---------- --------- ---------- ----------
                                        Millions             Millions   
                                        of US                of Baht    
                                        Dollar                          

  Earnings summary                      2011       2010      2011       2010

  Total Revenues                        5,685      4,532     173,375    143,506

  Total Expenses                        (3,072)    (2,543)   (93,657)   (80,493)

  Operating Income                      2,613      1,989     79,718     63,013

  Gain(Loss) from the investments in    2          (1)       75         (45)
  associates                                                            

  Income before income taxes            2,615      1,988     79,793     62,968

  Income Taxes                          (1,147)    (608)     (35,045)   (19,194)

  Net income                            1,468      1,380     44,748     43,774

  Diluted earnings per share            0.44       0.42      13.48      13.20

                                                                        

  Income from normal operation          1,659      1,292                

  Gain(Loss) from non recurring items   (191)      88                   

  Net income                            1,468      1,380                
  ------------------------------------- ---------- --------- ---------- ----------

Regarding the results of operations (Unaudited) for the year 2011, PTTEP
and its subsidiaries’ totaled a net profit of USD 1,468 million
(equivalent to 44,748 million baht) or USD 0.44 per share-diluted
(equivalent to 13.48 baht per share-diluted), an increase of USD 88
million or 6% compared with 2010’s net profit of USD 1,380 million
(equivalent to 43,774 million baht) or USD 0.42 per share-diluted
(equivalent to 13.20 baht per share-diluted). Return on shareholder’s
equity for 2011 was 25%.

However, PTTEP and subsidiaries’ net profit amounted to USD 1,468
million for 2011, comprising the recurring net profit for this year,
which amounted to USD 1,659 million, and the loss from non-recurring
items, which amounted to USD 191 million.

For the results of recurring operations in 2011, PTTEP and subsidiaries’
recurring net profit was USD 1,659 million, an increase of USD 367
million or 28% against last year which was USD 1,292 million. Return
from normal operation on shareholder’s equity for 2011 was 28%.

For 2011, total revenues for PTTEP and its subsidiaries amounted to USD
5,685 million (equivalent to 173,375 million baht), an increase of USD
1,153 million or 25% against last year which was USD 4,532 million
(equivalent to 143,506 million baht). The increase was mainly due to
higher sales of petroleum of USD 1,110 million, resulting from (1) the
higher average petroleum sales price for 2011, which rose to USD 55.49
per BOE compared with 2010 when it was at USD 44.83 per BOE; however (2)
the higher sales volume for this year rose to 265,047 BOED compared with
for last year of 264,575 BOED. The increased sales volume largely came
from natural gas and condensate sales volume from the MTJDA-B17 project
and the higher Diluted Bitumen (Dilbit) sales volume from the Canada Oil
Sands KKD project, which started its production in the first quarter of
2011, as well as the increased crude oil sales volume from the Vietnam
16-1 project, which started its production in the third quarter of 2011.
On the other hand, natural gas and condensate sales volumes from the
Arthit decreased resulting from a lower daily contract quantity, in
addition to crude oil and natural gas sales volume from the B8/32 & 9A
project decreased when compared with the volumes of last year.

PTTEP and subsidiaries’ revenue from pipeline transportation from
proportionate revenue in Moattama Gas Transportation Company (MGTC) and
Taninthayi Pipeline Company (TPC) increased.

This year, other income increased, principally because of the
recognition of other income from the transfer of interest in Myanmar
Zawtika, New Zealand Great South, Indonesia South Mandar, Indonesia
South Sageri and Indonesia Sadang projects. However, other income from
insurance claim from Montara incident decreased in 2011. There was a
recognition of additional insurance claims amounting to USD 36 million
in 2011; whereas, this insurance claim was recognized, amounting USD 44
million last year.

PTTEP and its subsidiaries incurred expenses for 2011 amounting to USD
3,072 million (equivalent to 93,657 million baht), an increase of USD
529 million compared with USD 2,543 million (equivalent to 80,493
million baht) for 2010. The increase was due to the following:

(1) Operating expenses increased amounting to USD 167 million, mainly
from the Canada Oil Sands KKD and the Vietnam 16-1 project as the
projects started production in 2011.

(2) Exploration expenses increased amounting to USD 130 million due to
following reasons:

-   Increased exploratory well write-off costs amounting to USD 104
    million, primarily from the Indonesia Semai II amounting to USD 57
    million, PTTEP Australasia amounting to USD 37 million, Myanmar M3,
    M7 & M11 (Aung Sinkha-1) amounting to USD 17 million, and Bongkot
    project amounting to USD 10 million in 2011, while there were
    exploration well write-off costs amounting to USD 46 million mainly
    from the Myanmar Zawtika project amounting to USD 31 million in
    2010.

-   Increased geology and geophysics studies cost amounting to USD 26
    million from the Algeria Hassi Bir Rekaiz, Canada Oil Sands KKD and
    Indonesia Malunda projects amounting to USD 10 million, 8 million
    and 8 million respectively.

(3) Increased petroleum royalties were occurred amounting to USD 120
million resulting from increased sales revenues.

(4) Depreciation, depletion and amortization expenses escalated,
amounting to USD 100 million, mainly from an increase of the number of
completed assets of S1, Contract 4, and Arthit projects and from the
Canada Oil Sands KKD and the Vietnam 16-1 project, as these projects
started production in 2011.

In 2011, PTTEP and subsidiaries incurred higher income tax expenses
compared with those of 2010, totaling USD 539 million, in accordance
with the higher petroleum taxable income. Moreover, the changes in
foreign exchange of THB against USD resulted in an increase of deferred
tax expenses which are non-recurring items.

For 2011, PTTEP and subsidiaries incurred a loss from non-recurring
items of USD 191 million. An increased loss of USD 279 million, while
against that a gain from non-recurring items from last year of USD 88
million, stemmed from the following:

(1) Increased income tax expenses in 2011 of USD 305 million, mainly
    owing to the higher deferred income tax liabilities because of a
    decrease of net assets after they were translated into USD on 31
    December 2011, when compared with net assets after they were
    translated into USD on 31 December 2010, given the Baht depreciation
    against the USD. This decrease of net assets resulted in a decrease
    of depreciation expenses in USD and will result in an increase of
    income tax expenses in the future, accordingly.

(2) Decreased foreign exchange losses of USD 21 million. In 2011, PTTEP
    and its subsidiaries recognized a foreign exchange loss, which was
    mainly due to loss from foreign exchange of loans in USD currency
    from PTTEP Canada Limited; while, PTTEP and its subsidiaries
    recognized a higher foreign exchange loss in 2010 mainly due to net
    liabilities in Thai Baht currency.

    1.  Financial position

  --------------------------- ---------- ---------- ----------- -----------
                              Unit :                Unit :      
                              Millions              Millions of 
                              of US                 Baht        
                              Dollar                            

                              Dec 31,    Dec 31,    Dec 31,     Dec 31,
                              2011       2010       2011        2010

  Total Assets                14,131     10,694     447,842     322,430

  Current Assets              2,737      2,808      86,764      84,669

  Non-current Assets          11,394     7,886      361,078     237,761

  Total Liabilities           7,819      5,286      247,818     159,371

  Current Liabilities         3,139      1,924      99,504      58,013

  Non-current Liabilities     4,680      3,362      148,314     101,358

  Shareholders’ Equity        6,312      5,408      200,024     163,059

  Total Liabilities and       14,131     10,694     447,842     322,430
  Shareholders’ Equity                                          
  --------------------------- ---------- ---------- ----------- -----------

As of December 31, 2011, PTTEP and subsidiaries commanded total assets
of USD 14,131 million (equivalent to 447,842 million baht), an increase
of USD 3,437 million higher than the total on hand at the end of 2010 at
which point total assets were USD 10,694 million (equivalent to 322,430
million baht). This increase was mainly due to (1) an increase of USD
2,506 million in exploration and production assets, mostly from the
purchase of 40% of the partnership units in the Canada Oil Sands KKD
Project; (2) an increase of USD 1,277 million in intangible assets and
goodwill, chiefly from the purchase of the partnership units in Canada
Oil Sands KKD Project; (3) a decrease in cash and cash equivalent of USD
629 million mostly from payment for additional investment in oil and gas
properties, the payment to purchase 40% of the partnership units in the
Canada Oil Sands KKD Project, income tax payment for 2010, dividend
payment for the second half of 2010 and for the first half of 2011,
together with the net effect of cash inflow from operations, debenture
issuance and syndicated loans; (4) a decrease in deposits for the
purchase of partnership units of USD 342 million from a final payment to
purchase the partnership units in the Canada Oil Sands KKD Project.

Most current assets as of December 31, 2011 were in cash and cash
equivalents, parent company accounts receivable, trade accounts
receivable, and materials and supplies. A large proportion of the
non-current assets were (1) assets used in joint-venture exploration and
production, presented under Property, Plant, and Equipment; (2)
intangible assets; and (3) deferred income taxes. PTTEP and subsidiaries
Current Ratio as of December 31, 2011, was 0.87 times.

PTTEP and subsidiaries had total liabilities of USD 7,819 million
(equivalent to 247,818 million baht), an increase of USD 2,533 million
higher than the total at the end of 2010, when total liabilities were
USD 5,286 million (equivalent to 159,371 million baht), principally due
to (1) an increase of current liabilities of USD 1,215 million,
primarily from the current portion of the long term debt of USD 688
million, the accrued expenses of USD 392 million, and tax payable of USD
64 million (2) an increase of USD 720 million in deferred income tax
liabilities mainly from the Canada Oil Sands KKD project; and, (3) an
increase in long term borrowings of USD 618 million from syndicated
loans.

PTTEP maintains the company’s Short-term Financing Program (“PF”) which
involves the company’s issuance of Bills of Exchange (B/Es) via Public
Offering to institutional and high net-worth investors. B/Es are to be
issued with a total revolving credit of up to Baht 50,000 million which
was approved by the Resolution of the Board of Directors’ meeting in
February 2009 and again in November 2010. As of December 31, 2011, there
were no outstanding B/Es.

PTTEP issued warrants to directors, management and employees of 2
million units on August 1, 2002, 2 million units on August 1, 2003, 2.8
million units on August 1, 2004, 2.8 million units on August 1, 2005 and
2.8 million units on August 1, 2006, with the exercise prices of Baht
111 per share, Baht 117 per share, Baht 183 per share, Baht 278 per
share and Baht 456 per share respectively. As of April 12, 2006 the
company registered the change in its par value from Baht 5 each with
664.40 million ordinary shares to Baht 1 each with 3,322 million
ordinary shares. The change of its par value affected the exercise ratio
of the warrants from 1:1 to 1:5 including the exercise price from Baht
111, Baht 117, Baht 183, Baht 278 and Baht 456 to Baht 22.20, Baht
23.40, Baht 36.60, Baht 55.60 and Baht 91.20 respectively.

The last exercise date under the Employee Stock Option Program (ESOP)
was July 31, 2011. As of December 31, 2011, the total number of shares
exercised was 59.99 million shares.

For the year that ended on December 31, 2011, PTTEP and subsidiaries had
a net cash flow from operations of USD 2,876 million, chiefly due to the
higher sales revenue resulting from the higher average petroleum sales
price during this year.

PTTEP and subsidiaries had a net cash flow used in investment activities
of USD 4,207 million, mainly resulting from the higher investment in oil
and gas properties for exploration and production from the Canada Oil
Sands KKD, Bongkot, PTTEP Australasia and Arthit project of which
totaled USD 2,320 million, and also from the final payment of USD 1,890
million completed in accordance with the Partnership Unit Sale Agreement
with Statoil Canada Ltd. and Statoil Canada Holdings Corp to purchase
40% of the partnership units in the Canada Oil Sands KKD project.

PTTEP and subsidiaries had a net cash flow provided by financing
activities of USD 702 million, mainly enabled by (1) cash received from
the bonds issuance of USD 698 million (2) net proceeds from a syndicated
loan of USD 616 million (3) net proceeds from a short-term loan of USD
64 million (4) cash received from the issuance of common stock based on
the ESOP of USD 7 million; while (5) dividend paid of USD 270 million
for the second half of 2010 and USD 290 million for the first half of
2011; and, (6) interest paid of USD 123 million.

As of December 31, 2011, PTTEP and subsidiaries had cash and cash
equivalents of USD 1,350 million, a decrease of USD 629 million from the
end of 2010.

2.3 Impact on Operating Results

During 2011, the global economy has been volatile throughout the year.
The major factors against the oil price are global economics issues
especially the slowing economy of the U.S., public debt in the EU, and
the slowing growth of China. As a result, the world’s oil demand has
declined. On the other hand, the major factors supporting oil price is
the political unrest in the MENA region throughout 2011, resulting in
the uncertainty of the supply from the region. The average Dubai oil
price in 2011 was USD 105.6 per barrel, higher than 2010’s average of
USD 78.2 per barrel by approximately 35%. The rising oil prices will
positively impact operations in petroleum production and exploration as
well as the rising competition.

As the global economy and oil price have been very volatile, PTTEP has
continuously monitored the changing economic situation and energy demand
and has moved in response to the challenging business environment as
follows:

Responding to the increase in energy demand- PTTEP has reviewed the
supply plan and improved production in order to support the rise in
energy demand. PTTEP has been cooperating with the related government
agencies to collectively outline the optimal supply plan from both
domestic and neighboring countries, in both short and long term, and
adjusted its production plan as well as project development plan.

Even though 2011 is filled with the unexpected events, resulting in the
reduction of production in some project such as the adjustment of the
daily contract quantity (DCQ) of Arthit project, the delay of Montara
project due to delay in the procedures with the Australian government in
order for PTTEP to continue its operation in Australia, and the major
flood in Thailand resulting in some production reduction in S1 and
PTTEP1 project. Nonetheless, there have been the efforts to increase
production in Bongkot Project, S1 Project, and MTJDA-B17 Project in
order to accommodate the loss production in response to the changing
environment. In addition, PTTEP constantly developing various
technologies in exploration and production and seeking the investment
opportunities in order to increase the reserve, with the purpose of
meeting the nation’s demand.

Improving the efficiency and cost optimization - PTTEP regards
efficiency improvement and cost optimization as a key component for long
term value creation and sustainable growth. PTTEP continues its focus on
Operational Excellence (OE) and has initiated the Operational
Benchmarking program in order to excel in operations and able to compete
in an increasingly competitive environment

The trend of the cost of petroleum exploration and production industry
has been in an increasing trend, as well as the fact that PTTEP has
unconventional projects and increasing oil producing projects, in order
to maintain the optimal operating cost and maintain the level of return,
PTTEP has continuously operates in the area of cost optimization, for
instance, the supply chain plus project and the Zero Unplanned Shutdown
program.

In addition, PTTEP has its main focus on Safety, Security, Health and
Environment (SSHE). One example is that the project Step Change in SSHE
was kicked-off in 2011 with the target of being LTI (Loss Time Injury)
free organization by 2013. Moreover, there were various initiatives on
the environment as PTTEP announced Climate Change Policy in recognizing
PTTEP role in supporting global energy demand in parallel with the
responsibility in the sustainable development of petroleum resources. A
living example of PTTEP environmental initiatives is the “Natural Gas
for Community Farmers and Environment Project” where PTTEP constructed a
food-processing plant, equipped with natural gas distribution pipeline,
for the Banana Processing Cooperative Ltd. of Tambon Nong Tum. The
system enabled the cooperative to use natural gas surplus from oil
production process from S1 Project instead if the more costly LPG fuel.

Expanding Abroad – PTTEP has continuously expand its investment
according to the strategic investment by pursuing a suitable investment
opportunities, includes seeking strategic partner for investment in
various projects abroad, focusing on the strategically targeted
countries to be the growth platform for future expansion such as the
PTTEP Australasia Project and the Canada Oil Sands KKD Project.

Managing Portfolio and Reviewing Investment - PTTEP has review its
focused countries by prioritize the countries in order of opportunity
and appropriateness in investment by analyzing various factors including
petroleum potential, geological factors, government’s fiscal regimes,
political and business risk, and competitive advantages. In addition,
PTETP has set up the portfolio management department in order to manage
risks and appropriately allocate the investment in each projects to
align with the strategic direction of the company.

Managing Risks on oil price volatility - PTTEP continuously conducted
oil price hedging programs (Derivative on Oil Price Hedged) for the
petroleum products from PTTEP group, using the Brent crude oil price as
a reference, as well as closely monitoring the changing economy and
events that may impacted the oil price.

Capability Development - PTTEP has been continually improving the
capability of the organization, particularly the capabilities urgently
required including the deepwater drilling, the long term capability
development, and leadership development program; in order to align with
the global growth direction. Moreover, PTTEP constantly improves its
work process, for instance, the new “Enterprise Resource Planning (ERP)”
project which will be an efficient and comprehensive set of integrated
and cross-functional business processes for all PTTEP’s domestic and
overseas operations.

  ----------------------------- -------------- ---------- ---------- ----------
  PTT EXPLORATION AND                                                
  PRODUCTION PUBLIC COMPANY                                          
  LIMITED AND SUBSIDIARIES                                           

  STATEMENTS OF INCOME                                               

  Unit : Million US dollars                                          

                                Consolidated                         

                                For the fourth            For the    
                                quarter                   year       

                                2011           2010       2011       2010

                                                                     

  Revenues                                                           

  Sales                         1,441          1,156      5,440      4,330

  Revenue from pipeline         31             30         124        111
  transportation                                                     

  Other revenues                                                     

  Gain on foreign exchange      50             10         -          -

  Interest income               6              3          16         12

  Other revenues                54             5          105        79

  Total revenues                1,582          1,204      5,685      4,532

  Expenses                                                           

  Operating expenses            181            99         625        458

  Exploration expenses          27             19         217        87

  Administrative expenses       90             73         258        193

  Petroleum royalties and       168            144        645        525
  remuneration                                                       

  Depreciation, depletion and   268            232        1,117      1,017
  amortization                                                       

  Other expenses                                                     

  Loss on foreign exchange      -              -          65         86

  Loss from Montara incident    2              (1)        5          14

  FPSO Settlement               -              -          -          48

  Loss from derivative          4              1          11         4
  financial instruments                                              

  Management's remuneration     1              1          5          6

  Finance costs                 34             32         124        105

  Total expenses                775            600        3,072      2,543

  Share Gain (loss) from the    1              -          2          (1)
  investments in associates                                          

  Income before income taxes    808            604        2,615      1,988

  Income taxes                  319            222        1,147      608

  Net income                    489            382        1,468      1,380

                                                                     

  Earnings per share                                                 

                                                                     

  Basic earnings per share      0.14           0.12       0.44       0.42

  Diluted earnings per share    0.14           0.12       0.44       0.42

                                                                     
  ----------------------------- -------------- ---------- ---------- ----------

1.  3.  Audit fee and Significant Accounting Policies

    1.  Audit fee

  For the year 2011, PTTEP and its subsidiaries, both domestic and
  overseas have an Audit fee with the Office of the Auditor General and
  other Audit firms, totaling an amount of USD 0.8 million.

  Non-Audit fee

  In addition, for the year 2011, PTTEP paid a non-audit services fee to
  The Office of The Auditor General totaling USD 0.5 million. This fee
  is charged for the preparation of a Letter of Comfort for the Offering
  Memorandum for international bond issuance.

2.  Summary of the Auditors’ Report for the past 3 years (2009-2011)

  The Office of the Auditor General expressed clean opinion in the
  Auditors’ Report on the PTTEP consolidated financial statements for
  the past 3 years.