Salamander Energy Seeks Acquisition of GFI Oil & Gas

Salamander has agreed on the terms of a proposed acquisition with the board of directors of GFI for a total consideration of approximately C$198 million. Under the terms of the recommended proposed acquisition, Salamander will acquire, for cash and shares, the entire issued and to be issued shares in the capital of GFI, a company listed on the TSX Venture Exchange in Canada.

The proposed acquisition will be structured as a plan of arrangement under the laws of Alberta, Canada. Salamander Energy (Canada) Limited, a wholly-owned subsidiary of Salamander, incorporated in Alberta, Canada, will acquire all of the issued and to be issued GFI Shares and GFI Shareholders will receive cash and New Salamander Shares.

"This proposed acquisition is a clear fit with Salamander's strategy to increase its oil and gas reserves through acquisitions," said Chairman Charles Jamieson. "Salamander will enjoy material reserve and near term production increases as well as an enlarged exploration and appraisal programme; we look forward to taking advantage of the significant opportunities from the enlarged Salamander group."

The total amount of cash payable to GFI Shareholders as consideration for the Proposed Acquisition is limited to US$55 million and in the event that GFI Shareholders, in aggregate, make elections which would result in the cash payable by Salamander exceeding the Cash Limit, the amount they shall receive shall be scaled down pro rata and any balance shall be settled via the issue of additional Salamander Shares.

Salamander also entered into formal documentation for a Debt Facility of up to U.S. $55.5 million with GFI, which GFI can draw down subject to the satisfaction of customary conditions precedent. The Debt Facility is being provided to GFI to meet its obligations to existing creditors and is subject to certain events of default and restrictions. The Debt Facility is secured by certain assets of GFI and its subsidiaries.

The Proposed Acquisition is expected to complete during the first quarter of 2008 following, amongst other things, approval by Salamander Shareholders and GFI Shareholders of the Proposed Acquisition and approval by Salamander Shareholders of amendments to the articles of association of Salamander at the Salamander Extraordinary General Meeting restricting the number of Canadian Salamander Shareholders.

Salamander's strategy is to build a balanced Southeast Asian portfolio from production through to exploration. GFI's interests in Indonesia and Thailand complement and enhance Salamander's portfolio by adding late-stage development assets.