KARL THOMSON HOLDINGS LIMITED *

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. KARL THOMSON HOLDINGS LIMITED * (Incorporated in Bermuda with limited liability) (Stock Code: 7) DISCLOSEABLE TRANSACTION DISPOSAL OF 20% PARTICIPATING INTEREST IN A PETROLEUM EXPLORATION AND EXPLOITATION PROJECT IN EGYPT On 18 May 2010, the Vendor, a wholly-owned subsidiary of the Company, the Purchaser and the Guarantor entered into the Agreement pursuant to which the Vendor agreed to sell to the Purchaser or its designated nominee its 20% participating interest in the WKO Concession and the WKO JOA. As the applicable percentage ratios under Chapter 14 of the Listing Rules are 5% or more but less than 25%, the transaction contemplated under the Agreement constitute a discloseable transaction for the Company under the Listing Rules. THE AGREEMENT Date: 18 May 2010 Parties: (a) (b) (c) Pan Pacific Petroleum Egypt Pty Limited (the Vendor); Aegean Energy (Egypt) Limited (the Purchaser); and Energean E&P Holdings Limited (the Guarantor). The Vendor is a wholly-owned subsidiary of the Company and is engaged in the principal business of oil and gas exploration and production in Egypt. The Purchaser is a wholly owned subsidiary of the Guarantor which is an international upstream oil and gas exploration & production company with a Mediterranean and North African Basin focus. A subsidiary of the Guarantor in Greece is operating three producing oil fields and one producing * For identification purposes only 1

2 gas field and has also recently acquired a 70% interest in the Sea of Thrace offshore concession license. In Egypt, the Purchaser holds a 100% operated interest in the offshore East Magawish concession in the Gulf of Suez and has just entered a farm-in agreement with Groundstar to acquire 70% working interest and operatorship of the WKO Concession. To the best of the Directors knowledge, information and belief having made all reasonable enquiry, each of the Purchaser, the Guarantor and their respective ultimate beneficial owners is a third party independent of the Company and its connected persons. Assets to be disposed of Subject to certain conditions, the Vendor agreed to sell, and the Purchaser agreed to purchase, a 20% participating interest in the WKO Concession and the WKO JOA, and the interest of the Vendor in all of the tangible and intangible properties, rights, benefits, privileges and other assets that are attributable to such participating interest. Consideration The consideration for the Disposal is US$ 2,000,000 (equivalent to approximately HK$15,600,000), which is to be paid to the Vendor in cash on the Closing Date. The consideration was determined after arm s length negotiation with reference to (i) the factors set out in the paragraph headed Reasons for the Disposal of this announcement below, (ii) the special arrangement on payment obligations as set out in the paragraph headed Special arrangement on payment obligations of this announcement below, (iii) the fact that the consideration for the Disposal will be paid in a form of cash and (iv) the purchase consideration agreed between the Purchaser and Groundstar in respect of Groundstar s 70% participating interest in the WKO Concession. The Purchaser has recently entered into a farm-in agreement with Groundstar to acquire 70% working interest and operatorship of the WKO Concession at a consideration of US$8,000,000 (equivalent to approximately HK$62,400,000) together with an undertaking to carry Groundstar s remaining 10% working interest through to the end of the first extension period which is 16 September The consideration for the Disposal represents a discount to the proportionate consideration to be paid by the Purchaser to Groundstar in respect of the 70% participating interest in the WKO Concession. The discount reflects the fact that the Vendor is not the operator and no right of operatorship will be transferred by the Vendor to the Purchaser. Special arrangement on payment obligations During the interim period from the date of the Agreement until completion of the Disposal, all expenditure obligations incurred in respect of the WKO Concession will be solely borne by the Purchaser. Guarantee The Guarantor agreed to unconditionally and irrevocably guarantee the due and punctual performance and observance by the Purchaser of all the Purchaser s obligations arising under the Agreement. Conditions to completion Completion of the Agreement is subject to satisfaction of the following conditions: 2

3 (a) (b) (c) (d) (e) (f) (g) the warranties of the Vendor set forth in the Agreement being true, correct and not misleading in any material respect on or as of the Closing Date; the warranties of the Purchaser set forth in the Agreement being true, correct and not misleading in any material respect on or as of the Closing Date; no material adverse change to the assets which are the subject of the Disposal having occurred between the date of the Agreement and the Closing Date; the relevant approvals of the government of Egypt and GANOPE in respect of the Disposal having been obtained; Groundstar having waived its pre-emptive rights in relation to the Disposal; no action or proceeding being pending or threatened by any person to enjoin, restrict or prohibit the Disposal or the rights of the Vendor in the WKO Concession; and the Vendor and the Purchaser having performed and complied with all obligations and covenants required by the Agreement to be performed or complied with prior to the Closing Date. If any of the above conditions is not satisfied or otherwise waived in accordance with the terms of the Agreement on or before 31 October 2010, the Agreement will have no further force and effect and none of the parties to the Agreement will have any liability in respect of the Agreement save in respect the provisions in the Agreement relating to definitions, confidentiality, notices and governing law and dispute resolution. Subject to fulfillment or waiver of the other conditions (as the case may be), completion of the Agreement will take place on the fifth business day following the date on which the relevant approvals of the government of Egypt and GANOPE in respect of the Disposal having been obtained. INFORMATION ON THE ASSETS SUBJECT OF THE DISPOSAL In May 2006, the Vendor obtained the approval of the President of Egypt for entering into the Concession Agreement relating to the petroleum exploration and exploitation in relation to Block 3 WKO. Subsequent to the execution of the Concession Agreement, the Vendor and Groundstar entered into the WKO JOA in November 2006 to jointly develop and produce crude oil in the oil field of Block 3 WKO located in the Western Desert, Egypt. The Vendor and Groundstar have participating interests of 40% and 60% in Block 3 WKO respectively. Pursuant to the WKO JOA, the Vendor has assigned the operatorship to Groundstar and Groundstar is the operator of Block 3 WKO. Groundstar is responsible for the initial costs for the exploration of Block 3 WKO in the amount of US$7,000,000 (equivalent to approximately HK$54,600,000) and the excess will be borne by Groundstar as to 60% and by the Vendor as to 40%. The profits derived from Block 3 WKO will first be used for covering the operating and development costs and any surplus will be shared at a pre-agreed proportion between the Vendor and Groundstar on one hand and the Government of Egypt on the other hand. Between the Vendor and Groundstar, the profits are shared in the proportion of 40:60. As announced by the Company on 26 January 2010, the Vendor and Groundstar entered into the Asset Exchange Agreement pursuant to which the Vendor agreed to exchange its 20% participating interest in Block 3 WKO for Groundstar s 20% participating interest in Block 2 WEEM, subject to approval of the relevant regulatory authorities in Egypt. Completion of the Asset Exchange 3

4 Agreement is expected to take place before the end of August 2010 and in the event that the relevant regulatory approval is not obtained within 60 days from 20 September 2010, the Asset Exchange Agreement will be terminated. The assets to be sold by the Vendor to the Purchaser are the Vendor s 20% participating interest in the WKO Concession and the WKO JOA. Upon completion of the Asset Exchange Agreement and the Agreement, the Group will have no interest in the WKO JOA. As at 31 December 2009, the value of the Group s 40% participating interest in the WKO JOA as recorded in the consolidated financial statements is HK$72,083,000. There were no results recognized in the Group s consolidated financial statements for the WKO JOA for the two financial years ended 31 December 2009 as Groundstar was responsible for the exploration costs of Block 3 WKO. REASONS FOR THE DISPOSAL The Group is currently holding two exploration assets : 60% working interest in the WEEM Concession and 20% working interest in the WKO Concession (assuming completion of the Asset Exchange Agreement having been taken place). In respect of Block 2 WEEM, the Group is the operator and has in the third exploratory wells discovered high quality light crude oil (38 API gravity). This discovery marks a significant progress in this exploration block. Not only does this discovery differentiates the WEEM Concession from other green fields, it also endorses the original belief of the Group that light crude oil does exist in the WEEM Concession when the Group invested in it a few years ago. The data collected from this well has enhanced the understanding over the stratigraphy or the geological structure of the area. The Group believes that the discovery and the data collected will help to define the next drilling location with a better chance. In the case of establishing commercial production, the WEEM Concession is located within a few kilometres of the Esh el Mehhaha oil production facilities with an export pipeline to the coast. This is one of the reasons why the Group has decided to invest in the onshore blocks along the Gulf of Suez so that it may tap into the existing infrastructure at time of production for a better project return. In Block 3 WKO, the operator Groundstar has acquired 700 kilometres 2D seismic data. We believed further seismic data acquisition may be required. According to the terms of the WKO Concession, Groundstar and the Vendor are obligated to drill two exploratory wells by September Groundstar has spent the initial exploration costs of US$7,000,000 (equivalent to approximately HK$54,600,000) in accordance with the WKO JOA. With effect from January 2010, any cost incurred in connection with Block 3 WKO is shared between the Vendor and Groundstar in the proportion of 20: 80. Due to the rough geographical surface and long distance away from major roads and oil pipeline network, the drilling and exploration cost per well will be higher than those of Block 2 WEEM. No exploratory well has been drilled in this block. By entering into the Agreement, the Group can consolidate its resources in developing Block 2 WEEM which is a matured exploration block. Having considered the exploratory risk and benefits as outlined above and the fact that the Group is the operator in Block 2 WEEM but not in Block 3 WKO, the Board (including the independent non-executive Directors) is of the view that the entering into of the Agreement is on normal commercial terms and the terms of the Agreement are fair and reasonable and in the interest of the shareholders of the Company and the Company as a whole. POSSIBLE FINANCIAL EFFECT OF THE DISPOSAL 4

5 The Company is expected to have a loss on the Disposal of approximately HK$20 million, which is expected to be recognised in the Company s consolidated income statement for the year ending 31 December The estimated loss is arrived by subtracting the carrying value of the assets as at 31 December 2009 in the financial statements of the Company which is approximately HK$36,041,500 (i.e. 50% of HK$72,083,000, which is the value of the Group s 40% participating interest in the WKO Concession as at 31 December 2009), by the consideration to be received from the Purchaser under the Agreement, after deduction of and the relevant costs and expenses for the Disposal (including the professional fees incurred for legal and taxation issues). Subject to the advice to be obtained, the corporate tax in Australia is assumed to be zero. The Group acquired the 40% participating interest in the WKO Concession through the acquisition of the holding company of the Vendor. The Group issued certain number of Shares to the sellers of the holding company of the Vendor as consideration in As at the date of the Agreement, the Vendor has spent not more than HK$400,000 in respect of Block 3 WKO in accordance with the WKO JOA. The Group intends to apply the net proceeds of approximately HK$15 millions from the Disposal in its exploratory activities in Block 2 WEEM and/or as additional working capital of the Company. GENERAL The Company is an investment holding company listed on the Stock Exchange with its subsidiaries principally engaged in the provision of financial services and oil and gas exploration and production. As the relevant applicable ratios under Chapter 14 of the Listing Rules are 5% or more but less than 25%, the transaction contemplated under the Agreement constitutes a discloseable transaction for the Company under the Listing Rules. DEFINITIONS In this announcement, unless the context otherwise requires, the following expressions will have the following meaning: Agreement Asset Exchange Agreement Block 2 WEEM Block 3 WKO the agreement dated 18 May 2010 entered into between the Vendor, the Purchaser and the Guarantor, particulars of which are set out in the paragraph headed The Agreement of this announcement the agreement dated 25 January 2010 entered into between the Vendor and Groundstar, pursuant to which the Vendor agreed to exchange its 20% participating interest in Block 3 WKO for Groundstar s 20% participating interest in Block 2 WEEM. Further details relating to the Asset Exchange Agreement are set out in the Company s announcement dated 26 January 2010 an onshore exploration block known as Block 2 West Esh E1 Mallaha located in the Eastern Desert, Egypt an onshore exploration block known as Block 3 West Kom Ombo located in the Western Desert, Egypt 5

6 Board Closing Date Company connected person(s) Directors Disposal Egypt GANOPE Groundstar Group Guarantor Hong Kong HK$ Listing Rules PRC Purchaser Shareholder(s) Shares the board of Directors the date on which completion of the Agreement will take place Karl Thomson Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange has the meaning ascribed to it under Chapter 1 of the Listing Rules and as extended by Chapter 14A of the Listing Rules the directors of the Company the proposed disposal by the Vendor to the Purchaser its 20% participating interest in the WKO Concession and the WKO JOA pursuant to the terms and conditions of the Agreement the Arab Republic of Egypt Ganoub El Wadi Petroleum Holding Company, one of the principal entities under the Ministry of Petroleum and established in accordance with the prime minister decree no. 1755/2002 to manage and supervise all the petroleum activities for concessions located under latitude line N 28 in Egypt Groundstar Resources Egypt (Barbados) Inc., a company established under the laws of [Egypt] the Company and its subsidiaries Energean E&P Holdings Limited, a company incorporated under the laws of Cyprus the Hong Kong Special Administrative Region of the PRC Hong Kong dollars, the lawful currency of Hong Kong the Rules Governing the Listing of Securities on the Stock Exchange the People s Republic of China, which, for the purpose of this announcement, excludes Hong Kong, Macau Special Administrative Region of the PRC and Taiwan Aegean Energy (Egypt) Limited, a company incorporated under the laws of the Republic of Cyprus holder(s) of the Shares shares of HK$0.1 each in the issued capital of the Company 6

7 Stock Exchange US$ Vendor WEEM Concession WKO Concession WKO JOA The Stock Exchange of Hong Kong Limited United States dollar, the lawful currency of the United States of America Pan Pacific Petroleum Egypt Pty Limited, a company incorporated under the laws of Australia and a whollyowned subsidiary of the Company the Concession Agreement for Petroleum Exploration and Exploitation between Egypt, GANOPE and one of subsidiaries of the Group in relation to Block 2 WEEM approved on 30 May 2006 by the President of Egypt the Concession Agreement for Petroleum Exploration and Exploitation between Egypt, GANOPE and the Vendor in relation to Block 3 WKO approved on 30 May 2006 by the President of Egypt the joint operating agreement entered into between Groundstar and the Vendor on 28 November 2006 in respect of the WKO Concession % per cent. For the purpose of this announcement, the exchange rate of US$1.00 = HK$7.8 have been used for currency translation, where applicable. Such exchange rates are for illustration purposes and does not constitute a representation that any amount in US$ or HK$ have been, could have been or may be converted at such rate. By order of the Board Karl Thomson Holding Limited Lam Kwok Hing Chairman Hong Kong, 18 May 2010 As at the date of this announcement, the executive Directors are Mr. Lam Kwok Hing and Mr. Nam Kwok Lun, and the independent non-executive Directors are Mr. Chen Wei-ming, Eric, Mr. Kwan Wang Wai, Alan and Mr. Ng Chi Kin, David. 7