Salinas Energy Limited proposes to acquire all the shares and assets of unlisted Neon Energy Pty Ltd (Neon) through a principally share based transaction with Neon’s shareholders.

Neon is a Perth based company which has built a portfolio of highly prospective oil and gas interests in Southeast Asia. Neon has a 100% working interest in a Production Sharing Contract (Block 120) offshore Vietnam in a highly competitive exploration trend and is currently in negotiations concerning other exploration interests in the region.

The transaction will result in: • Salinas diversifying outside of California and balancing its existing profitable production with growth opportunities in Southeast Asia which offer significant exploration upside. • Salinas becoming an Operator in Vietnam with a 100% working interest in a Production Sharing Contract containing an existing oil discovery and a diverse range of prospects with the potential to host very large reserves of oil and gas. • Strengthening of the Company’s corporate presence and management team through the appointment of Dr Alan Stein, Mr John Lander and Mr Ken Charsinsky to the Salinas Board. • Access to a unique and extensive oil and gas database covering many of the oil and gas provinces of Australasia and Southeast Asia that will support further growth in the region. • A return in the near term to drilling and production enhancements associated with low risk oil projects in California including the large Paris Valley oil field redevelopment project.

Transaction Summary Salinas proposes to acquire approximately 40% of Neon’s issued capital for A$1.5 million cash and the remaining Neon shareholders will receive three (3) Salinas shares for each Neon share resulting in the issue of 44,763,600 Salinas shares valuing the total consideration for Neon at approximately A$5.7 million. Approximately 75% of the new Salinas shares to be issued pursuant to this transaction will be escrowed for 12 months. Total shares on issue post completion of the transaction will be approximately 282 million shares.

In addition, Salinas will issue to Neon option holders up to 9.4 million options over Salinas shares exercisable at $0.20 on or before 31 August 2012, which equates to a 1:1 exchange of existing Neon options. These options will be subject to a twelve month vesting period. Salinas also proposes to issue up to 15 million management options to the new Salinas management group of which half will be exercisable at $0.20 per share and half will be exercisable at $0.40 per share on terms and conditions in accordance with the Salinas Employee Share Option Plan.

The transaction is subject only to Salinas’ shareholder approval and is expected to complete by mid October 2009.

Board and Management Changes

Tags: Neon Energy Pty Ltd, Salinas Energy Limited