FULL ANNUAL REPORT

Website

http://www.nido.com.au

Managing Director's Report

As this is my fourth and last report as Managing Director, I would like to take this time to reflect on how far our Company has come in recent years.

Nido Petroleum Limited was reborn when the present Board assumed control of the Company in late 2004. From humble beginnings, Nido has evolved into a company which is focused, has a much coveted asset base with depth and possesses the core competencies both in Perth and Manila to realise the value that we see in our production and exploration assets.

The accomplishments of the Company can be directly attributed to the passion of our people and the expertise, courage and strength of conviction of the Board and senior staff in Perth and Manila. I would like to take this opportunity to thank all of our staff and, in particular, from Perth, Joanne Williams, Jon Pattillo, Ashley Gilbert and Andrew Francis, and in Manila, Jocot de Dios, Leonardo Ote and Anthony Ferrer, whose support and wealth of experience have guided the Company through another successful year. And to my colleagues on the Nido Board, my deepest gratitude for sharing in this journey. It has truly been an amazing ride.

2007 in Review

2007 was an outstanding year for the Company as our Philippine strategy entered into the execution phase and we achieved several key milestones:

100 prospects and leads throughout Nido’s exploration acreage in SC 54 and SC 58 were revealed in 2007 following the 2006 seismic campaign. Thirteen of these leads revealed potential of greater than 500 million barrels of oil in place

Nido's Investment in the Philippines

Shareholder Value

The 2007 seismic programme was Nido’s largest ever. This seismic acquisition was undertaken to mature the exploration portfolio to drillable status in SC 54 and SC 58 and to include prospects and leads in SC 63 in the portfolio.
The Galoc oilfield development was well and truly underway, with drilling competed just after year-end and first production expected in April 2008.
Appraisal activities on Galoc have been very positive in the southern half of the field where the presence of significant oil and reservoir quality was confirmed with the pilot hole and both production wells improving on expectations.
A total of $32.9 million was raised through the issuance of equity at $0.28 per share to finance ongoing operations.

Strategic Focus

The Company’s current strategy will be realised once the cash flow is confirmed from Galoc in April 2008 and the exploration drilling activities commence. This strategy is based upon three key principles:

Focus: Nido’s focus since 2004 has been the North West Palawan Basin, Philippines. The renaissance of the oil industry in the Philippines has provided us with the first mover advantage in this arena. The Philippines itself is proving to be one of the most prospective upstream destinations in South East Asia, with certainly the best fiscal regime among its neighbours.
Asset depth: Within Nido’s acreage is the Galoc development project, six undeveloped oil and gas discoveries and at least 100 leads and prospects of varying play types. This is an asset portfolio, covering more than three million hectares of contiguous acreage over almost the entire North West Palawan Basin, which has great depth across the value chain and will provide Nido with growth opportunities in the near future.

Strategic Focus - continued

Core competencies: Nido’s strength continues to lie in understanding and unlocking the value in the subsurface coupled with a strong, local in-country presence. Support and leadership from our internationally experienced, energy-immersed Board has been a crucial part of our success to date. The strengthening of the Board in February 2008 will complement the significant potential of our asset base and enable the Company to pursue its next phase of growth.

Investments

Cool Energy Limited. Nido holds a 25.7% interest in Cool Energy Limited, a gas-sweetening technology company enabling the commercial development of high CO₂ gas fields through CO₂ sequestration and providing environmental advantages for the energy sector. Nido continues to be very pleased with its investment, with successful field trials being completed in 2007 and the pursuit of the commercialisation of its technology in 2008.
Encore Oil plc. Nido completed the sale of its shareholding in Encore in October 2007, realising a 366% return on Nido’s original UK investment.

Fund Raising Activities

In May 2007, Nido successfully completed a $21.9 million (gross) fundraising round to institutional shareholders in Hong Kong, Singapore, the UK and New York, enabling Nido to accelerate its exploration activities in its promising exploration portfolio. Strong interest from investors continued to be shown resulting in further fundraising undertaken in September 2007 which produced gross funds of $11 million from a single sophisticated investor in China. This further strengthened the Company’s ties to Asia, consistent with its asset base. Cumulatively, these funds were applied to ongoing operating costs associated with the Galoc development, the exploration portfolio maturation, business development opportunities and working capital.

The Nido Team

During the year, we augmented our staffing levels to support our increased activities in both the Perth and Manila offices. As at year end 2007, we had 24 staff of which 21 were full-time employees.

In February 2008, I am proud to say that we added substantial bench strength to our Board. Jocot de Dios has been appointed to the Board coincident with a promotion to the President and Chief Executive Officer position at Nido, replacing myself. William Bloking has been appointed as non-executive director. I have assumed the position of Chairman consequent upon the retirement of Gregor Dixon as Chairman and non-executive director. I would especially like to thank Gregor for his dedication and commitment to the Company and wish him well for the future.

The Future

Looking forward, the future for Nido is bright and we face it with the aim of taking the execution of Nido’s exploration strategy into its next phase: a multi-well exploration drilling programme in the prolific Palawan Basin funded by the cash flow from the Galoc oil development. Nido will also look to take in a strategic partner who has the commitment to the country, the core competencies and track record to successfully explore in the deep water of this proven hydrocarbon basin. In such prosperous times, we will also continue to pursue that next challenge, that next frontier, that next breakthrough change. And I look forward to being part of that continuing journey as Chairman of Nido.

Yours sincerely,

David Whitby
Managing Director

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