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Lynden Energy Corp.2 0 0 8 A n n u A l R e p o R t

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Lynden Energy Corp. is a Canadian based petroleum and natural gas company with operations presently concentrated on natural gas prospects in the Paradox Basin, Utah.

The Company’s Paradox Basin Project lease holdings cover in excess of 110,000 gross acres.

We are committed to the ongoing pursuit of high potential targets.

Monetary aMounts in this annual report are in Canadian dollars unless otherwise noted.

Lynden is committed to unlocking the potential of its substantial assets in the Paradox Basin, Utah.

At the core of Lynden’s success is its committed management team and experienced board of directors.

During the year Lynden raised in excess of $25 million in equity financing.

2 ASSET BASE 3 FINANCIAL CAPABILITIES 4 A GREAT TEAM01 Overview

02 Letter from the CEO

06 Milestones – Fiscal 2008

08 Paradox Basin, Utah

11 Management Discussion and Analysis

20 Auditors’ Report

21 Consolidated Financial Statements

25 Notes to Consolidated Financial Statements

37 Corporate Information

THE BUSINESS OF NATURAL GAS

We believe that natural gas exploration and development can create significant value.

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Colin watt, president and Ceolynden enerGy Corp.

“We remain focused on long-term growth and will continue working to translate this into increased value for our shareholders.”

Colin Watt, President and CEO

It brings me great pleasure to give you an update on Lynden Energy’s accomplishments over the past year. Fiscal 2008 was a year of significant activity and we have made progress on many fronts, in particular on our Paradox Basin Project, the enhancement of our management team and board of directors, and the improvement of our financial position. These accomplishments leave us well prepared to take on new challenges and opportunities in 2009.

paradox Basin, utahafter having acquired a large acreage position at the low end of the price cycle, in 2008 we focused on unlocking the value of our paradox Basin lease holdings. in this area we see the potential for two distinct shale resource plays, along with conventional opportunities. i am pleased to report that we have made significant progress towards our objectives during the year, with many notable achievements, including:

• TheacquisitionoftheSouthernProspectArea

• Drillingfivenewverticalwellstargetingboththeshalesand conventional zones

• FormationoftheAbajoGasTransmissionCompany,LLC

• Completionofa21.5mileburiedhigh-volumegaspipeline

• Increasedunderstandingofthegeological/depositionalmodel

initial results from our ongoing testing support our belief that the shales may have potential for large scale development. Commingling production from multiple conventional zones might

also be effectively accomplished in certain areas of our lease holdings.Aspartofourongoingevaluationwork,re-entryandnew wells began being tied into sales in July 2007 resulting in net sales of $628,202 during the 2008 fiscal year.

strong teamMuch of our success this year has been built on the important contributions from our recently expanded board of directors.in april 2008, Mr. richard andrews of Calistoga, California joined the company’s board and was appointed Chairman. Mr. andrews, who has extensive experience in advising and raising funds for resource companies, also became the Chief executive officer of our wholly owned u.s. subsidiary, which holds our interest in the paradox Basin project.

earlier in the year, dr. robert Bereskin of salt lake City, utah joined theboardofdirectors.Dr.Bereskinhas25yearsofexperienceinthe petroleum and natural gas industry and his recent consulting workhasfocusedonunconventionalgas-bearingshalereservoirswithseveralinternationalanddomesticexploration/exploitationefforts. since joining our team, dr. Bereskin has played an important role for lynden in the oversight of the paradox Basin project.

a strengthened Balance sheet in order to fund our ongoing operations in the paradox Basin, we raised$25.9millionthroughequityprivateplacementsduringtheyear.Inadditiontostrengtheningourcashpositionto$8.5millionat June 30, 2008, through these private placements Macquarie

TO OUR FELLOW ShAREhOLDERS:

LyndEn EnErgy | AnnUAL rEPorT 2008 » LET TEr To SHArEHoLdErS

Bank limited and clients of Blackrock Capital Management inc. became significant shareholders in the company.

Strategyfor2009together with the paradox Basin project operator, we will continue tobuilduponour2008accomplishmentsin2009.Inparticular,ourparadox Basin project plans include:

•Continuingtotestandoptimizeproductionfromour existing wells

• Expandingourknowledgeofthegeology,structuralsettingand depositional model

• Designinga2009explorationanddevelopmentprogram

in addition, we will continue to evaluate additional petroleum and natural gas opportunities in order to expand our asset base.

summaryWeremainfocusedonlong-termgrowthandwillcontinueworkingto translate this into increased value for our shareholders. we will continue to seek high potential targets through the application of innovative advanced technologies and new concepts.

on behalf of the Board of directors i would like to thank our shareholders for their continued support of lynden energy.

LyndEn EnErgy | AnnUAL rEPorT 2008 » LET TEr To SHArEHoLdErS

Unlocking the Potential.

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2008 was a year of significant progress. our 21.5 mile natural gas pipeline in the northern Prospect Area is now in operation.

The Northern Prospect Area pipeline was laid out as a central trunk line through core lease holdings.

southern prospect area gas pipeline complete

» 07.07

MILESTONES – FISCAL 2008

southern prospect area acquisition

» 07.07Firstwelloffivespuddedin new well program

» 10.07FormationofAbajoGas transmission Company, llC

» 09.07name change to lynden energy Corp.

» 01.0821.5mileNorthernprospect area gas pipeline completed

» 04.08Completion program on AnteaterState1-21X,ExplorerState#1-16,andChanticleerState1-32begins

» 05.08Raider#1-17reaches target depth and stimulation work begins

» 06.08

LyndEn EnErgy | AnnUAL rEPorT 2008 » MiLESTonES - FiSCAL 2008 LyndEn EnErgy | AnnUAL rEPorT 2008 » MiLESTonES - FiSCAL 2008

8 9

UTAHCOLORADO

Green River

Lisbon

NorthernProspect Area

SouthernProspect Area

12 mi

Uncompahgre Uplift

Northwest

Colorado River

Transcolorado

RMNG

TCP

northern Prospect Area wells, pipelines and area of core lease holdings

Raider #1-17

Jefferson State #4-1

Monticello

Explorer State #1-16

Chanticleer #1-32

2 mi

S.P. Meyer # 1

LYNDEN NPA 10”

Northwest 26”

ENCANA 10”

UGS 4”

LYNDEN WELL

191

491Anteater State #1-21X

NThe Paradox Basin Project includes two large contiguous prospect areas.

The Paradox Basin

The operator’s exploitation program is based on commingling production from multiple zones.

ThE PARADOx BASIN PROjECT

the paradox Basin, located primarily in southeast utah and southwest Colorado, is a significant petroleum and natural gas producing basin in the continentalUnitedStates.Well-knownlargefieldsintheParadoxBasininclude, among others, the Greater aneth, andy’s Mesa and lisbon. the majority of historical exploration and production from the basin has involved oil production from algal mounds. new exploration models, based primarily on the commingling of multiple, previously bypassed, gas zones were applied to the basin on a larger scale beginning in 2004.

recognizing the potential in the south central area of the paradox Basin, LyndenanditsTexas-basedpartnerandoperatorbegansignificantleasinginlate2005.Theleasinghasbeencarriedoutintwolargeprospectareas,or areas of mutual interest, and allow knowledge obtained during the course of operations to be jointly leveraged across the prospect areas in the future.

the paradox Basin project now includes two contiguous oil and gas prospectareastotaling1,525,000acres.The900,000acreNorthern

ProspectAreaincludesleasescoveringinexcessof100,000acres,whereLyndenhasa55%beforepayoutworkinginterest(41.25%afterpayoutworkinginterest)inan80%netrevenueinterest.Thecontiguous625,000acreSouthernProspectAreaincludesleasescoveringinexcessof10,000acres,whereLyndenhasa25%beforepayoutworkinginterest(23.75%afterpayoutworkinginterest)inan85%to87%netrevenue interest.

shalesOverthepastthreeyears,throughnumerousre-entryandnewwells,wehave tested the potential of both the Gothic and hovenweep shales and demonstrated the presence of producible shale gas from these zones.

Theshallow(5,500to6,500feet)GothicandHovenweepshalesarebelieved to be widespread and present throughout much of our over 110,000grossacreposition.Thewidespreadandshallownatureofthese zones suggests the potential for a regionally extensive shale gas resource play where significant economies of scale can be realized.

LyndEn EnErgy | AnnUAL rEPorT 2008 » PAr AdoX BASin LyndEn EnErgy | AnnUAL rEPorT 2008 » PAr AdoX BASin

the potential of these shale zones is supported by tests of the Gothic shale in both vertical and horizontal wells reported by a senior rocky Mountain producer operating nearby.

the Gothic and hovenweep shales have the potential to be exploited either through horizontal wells or through the commingling of shale gaswithotherupholeconventionalParadoxFormationReservoirsinvertical wells.

Conventional Zonesthe operator’s exploitation program is based on commingling production frommultiplezonesoftheParadoxFormationstratigraphicsequence,apractice successfully pursued by other operators in the Basin. through numerouscompletionsinmanyre-entryandnewwells,severalgasbearing zones have been identified and tested uphole above the Gothic and hovenweep shales. important controlling geological features have been identified, and this knowledge combined with ongoing interpretation of seismic and geophysical data is expected to lead to thedesignofamulti-wellprograminareaswheremultipleconventionalopportunities are interpreted to be vertically stacked.

infrastructureprimary transportation alternatives in the paradox Basin project areas are the encana and northwest pipelines. in addition, in 2008 we completeda21.5mileNorthernProspectAreaPipelineanda4milesouthern prospect area pipeline, both of which connect with the encana pipeline.

our pipeline assets are held in a utah based natural gas transmission company, abajo Gas transmission Company, llC. these assets provide an important strategic advantage in the area and have been laidoutascentraltrunklinessuchthattie-instonewwellscouldbeeasily accomplished.

Throughits43.806%interestinAbajo,Lyndenisentitledtoaneffective55%interestintheNorthernProspectAreagatheringsystemanda25%effectiveinterestintheSouthernProspectAreagatheringsystem.

LyndEn EnErgy | AnnUAL rEPorT 2008 » MAnAgEMEnT diSCUSSion And AnALySiS 11

Two distinct shaleresource plays and multiple conventional opportunities.

the following discussion and analysis of the consolidated results of operationsandfinancialcondition(“MD&A”)forLyndenEnergyCorp.(formerlyLyndenVenturesLtd.)(the“Company”)shouldbereadinconjunction with the audited consolidated financial statements for the year ended June 30, 2008 and related notes thereto. the financial informationinthisMD&AisderivedfromtheCompany’sauditedconsolidated financial statements prepared in accordance with Canadian generallyacceptedaccountingprinciples.ReferencesinthisMD&AtotheCompanyincludeitssubsidiaries.TheeffectivedateofthisMD&Ais october 23, 2008.

ForthepurposesofthisMD&A,thefollowingtermsaredefined as follows:

Fiscal 2008 year ended June 30, 2008Fiscal 2007 year ended June 30, 2007

Q1/2008 three months ended september 30, 2007Q2/2008 ThreemonthsendedDecember31,2007Q3/2008 ThreemonthsendedMarch31,2008Q4/2008 three months ended June 30, 2008

ThisMD&Amaycontainforwardlookingstatementsbasedonassumptionsand judgments of management regarding events or results that may prove to be inaccurate as a result of risk factors beyond its control. actual results may differ materially from the expected results.

all monetary transactions are expressed in Canadian dollars unless otherwise stated.

description of Business

the Company is in the business of acquiring, exploring and developing petroleum and natural gas rights and properties. the Company has various working interests in the paradox Basin project, located in the state of utah, usa and has a working interest in the Bittern lake project, located in the province of alberta, Canada. there are no other operating segments.

the Company is a reporting issuer in British Columbia, ontario and AlbertaanditssharesarelistedontheTSXVentureExchangeunderthesymbolLVL.

OnJanuary17,2008,theCompanychangeditsnametoLyndenEnergyCorp. in order to better reflect the nature of its ongoing business.

the Company’s general and administrative expenditures are related to the level of financing and exploration and development activities that are being conducted, which may in turn depend on the Company’s recent exploration and development activities and prospects, as well as general market conditions relating to the availability of funding for early stage exploration and development natural resource companies. as a result, the Company does not acquire properties or conduct explorationanddevelopmentworkonitspropertiesonapre-determinedbasis. thus, there may not be predictable or observable trends in the Company’s business activities and comparisons of financial operating results with prior years may not be meaningful.

risks and uncertaintiesthe Company’s principal activity of petroleum and natural gas exploration and development is considered to be inherently risky. Companies in this industry are subject to many and varied kinds of risks, including but not limited to, environmental, commodity price, political and economic, with some of the most significant risks being:

substantial expenditures are required to explore for petroleum 1.and natural gas reserves and there is no assurance that the Company will discover economic reserves;

the junior resource market, where the Company raises funds, is 2. extremely volatile and there is no guarantee that the Company will be able to raise funds as it requires them;

although the Company has taken steps to verify title to the 3. petroleum and natural gas properties it has an interest in or is earning into, there is no guarantee that the property will not be subject to title disputes or undetected defects; and

Management discussion and Analysis

For THE yEAr EndEd JUnE 30, 2008

LyndEn EnErgy | AnnUAL rEPorT 2008 » MAnAgEMEnT diSCUSSion And AnALySiS12 LyndEn EnErgy | AnnUAL rEPorT 2008 » MAnAgEMEnT diSCUSSion And AnALySiS 13

the Company is subject to the laws and regulations relating to 4. environmental matters, including provisions relating to reclamation, discharge of hazardous material and other matters. the Company’s explorationanddevelopmentactivitiesareconductedbypartnersand/or operators who are in compliance with applicable environmental protection legislation. the Company is not aware of any existing environmental problems related to its properties that may cause material liability to the Company.

PETROLEUM AND NATURAL GAS PROjECTS

paradox Basin, utahthe paradox Basin project includes two contiguous petroleum and naturalgasprospectareastotaling1,525,000acres.The900,000acre northern prospect area includes leases covering in excess of 100,000acres.TheCompanyhasa55%beforepayoutworkinginterest(41.25%afterpayoutworkinginterest)inan80%netrevenueinterestintheNorthernProspectArea.The625,000acreSouthernProspectAreaincludesleasescoveringinexcessof15,000acres.TheCompanyhasa25%beforepayoutworkinginterest(23.75%afterpayoutworkinginterest)inan85%to87%netrevenueinterestinthesouthern prospect area.

Theoperator,amiddletierTexas-basedpetroleumandnaturalgascompany, is targeting gas production from dark, organic shales and from and other paradox Basin reservoirs. the operator’s exploitation program is based on commingling production from multiple zones, a practice successfully pursued by other operators in the Basin.

the paradox Basin, located primarily in southeast utah and southwest Colorado, is a significant petroleum and natural gas producing basin in thecontinentalUnitedStates.Well-knownlargefieldsintheParadoxBasin include, among others, the Greater aneth, andy’s Mesa and lisbon. the majority of historical exploration and production from the basin has involved oil production from algal mounds. new exploration models, based primarily on the commingling of multiple, previously bypassed, gas zones were applied to the basin on a larger scale beginning in 2004.

other major players within and adjacent to the paradox Basin project prospect area include encana, Cabot oil and Gas, and Bill Barrett Corporation/TheWilliamsCompanies.

DuringFiscal2008theCompanycontinuedtoexpanditsParadoxBasinProject.Approximately$20,900,000wasspent,madeupof1)theUSDollar(“USD”)$5millionacquisitionoftheSouthernProspectArea,2)capitalcontributionsinAbajoofUSD$5,135,000,and3)approximately$10,500,000ofdirectexpendituresontheproject.Ofthe$10,500,000ofdirectexpenditures,approximately$6,500,000was

spent in the northern prospect area and approximately $4,000,000 was spent in the southern prospect area.

InQ2/2008,theCompanycompletedtheacquisitionofa25%beforepayoutworkinginterest(23.75%afterpayoutworkinginterest)inthesouthern prospect area from a company associated with the operator oftheParadoxBasinProjectbypayingUSD$5million.Includedintheacquisitionwerethreerecentlyre-enteredwells(TankCanyon#1-19,BradfordCanyon#1-10andMontezuma#1)wheretheoperatorperformed completions similar to those carried out in the northern prospect area. the acquisition also provided the Company exposure toleasescovering15,000acresandtheestablishmentofasecondlarge area of mutual interest where knowledge obtained during the course of the paradox Basin project operations might be leveraged in the future.

InQ2/2008,theCompanyparticipatedintheformationofaUtah,USAbased natural gas transmission company, abajo Gas transmission Company,LLC(“Abajo”)alongwithitsParadoxBasinpartners.Abajoholds ownership of the gas gathering systems in the northern and southern prospect areas of the paradox Basin project. through its interestinAbajo,theCompanyisentitledto55%oftherevenuesandexpenses attributable to the construction, operation, maintenance and expansion of the gas gathering system in the northern prospect Areaand25%oftherevenuesandexpensesattributabletotheconstruction, operation, maintenance and expansion of the gas gathering system in the southern prospect area. Both pipelines were designed toaccommodateadditionalfuturewellsbeyondthepreviouslyshut-inwells. when construction began, the pipelines were laid out as central trunklinessuchthattie-instonewwellscouldbeeasilyaccomplished.

InQ2/2008,theCompanymadeaninitialcapitalcontributionofUSD$2,935,000fora43.806%interestinAbajo.TheCompany’sinitialinterest and capital contribution in abajo was calculated based on the expected relative costs of construction of the each of the southern and NorthernProspectAreapipelines.InQ4/2008,theCompanymadeanadditional capital contribution in the amount of usd$2,200,000 resulting inaninterestinAbajoof47.99%.Theadditionalcapitalcontributionwas necessary as a result of higher than expected costs for the construction of the northern prospect area pipeline. the costs of the pipeline increased primarily due to slower than expected construction as a result of bedrock problems and of severe winter conditions. the cost of the pipeline also increased as a result of an increase in the length(from15milesto21miles)andspecificationsofthepipelineinorder to receive all of the necessary stakeholder approvals.

in october 2007, a five new well program was initiated to build upon the successes and knowledge obtained in the two northern prospect re-entrywells(S.P.Meyer#1andJeffersonState#4-1)andthethree

SouthernProspectre-entrywells.Thenewwellswouldalsoprovidean opportunity to run modern downhole logs and to obtain sidewall core samples which can assist in the identification of potentially productive zones, the design of completion methods, and in the overall understanding of the depositional model.

OneSouthernProspectnewwellwasdrilled,theMontezuma#2X,which reached target depth in november 2007. the Montezuma #2Xisatwinofanhistoricalwell,theMontezuma#1,thathadbeenre-enteredbytheoperatorinearly2007.AftercompletingmultiplezonesintheMontezuma#1andencounteringsignificantgas,amechanical problem prevented sustained production. numerous completionshavenowbeencarriedoutontheMontezuma#2X,however, to date, the promising results observed in the Montezuma #1havenotbeenreplicated.ThetimeandcosttodrilltheMontezuma#2Xwasgreaterthanexpected,againduetoseverewinterconditions,but also due to slower than expected drilling from the approved contractor.DuringFiscal2008,theoperatoralsotested,throughthere-entryoftheMontezuma#1,anup-holezoneidentifiedintheloggingoftheMontezuma#2X.Resultsfromthiszonedidnotmeritthetie-inoftheMontezuma#1.

InFiscal2008,theoperatoralsocompletedthere-entryofaSouthernProspectAreawell(Spur#1-34)originallydrilledinthe1980’s.Numerouszones were tested and the well was tied in January 2008 and has produced low volumes on a sustained basis.

three of the four new northern prospect area wells, the anteater state #1-21X,theExplorerState#1-16andtheChanticleer#1-32,weredrilled in an interpreted core area likely possessing geological and structuralsimilaritieswiththeSPMeyer#1well.TheAnteaterState#1-21Xisapproximately1.3milestothenortheast,theExplorerState#1-16isapproximately5.1milesnorthwest,andtheChanticleer1-32isapproximately0.5milestothesoutheastoftheS.P.Meyer#1.Thetime and cost to drill the three wells was greater than expected for the same reasons described above.

InitialcompletionoftheAnteaterState#1-21X,theExplorerState#1-16andtheChanticleer#1-32wellsbeganinlateApril/earlyMayin order to coincide with the completion of the northern prospect area pipeline, which was completed in late april. the lowermost of the two targeted shale zones and several uphole conventional pennsylvanian zones have been fracture stimulated and completed ineachofthewells.InadditiontotheS.P.Meyer#1whichhasproducedfromup-holePennsylvanianhorizonsonasustainedbasissincebeingtied-in,theAnteaterState#1-21X,theExplorerState#1-16andtheChanticleer#1-32havebeentiedintotheNorthernProspectarea pipeline and have produced intermittently during the course of the ongoing completion program.

DrillingoftheNorthernProspectAreaRaider#1-17exploratorywell,locatedapproximately9.8milesnorth-westoftheS.P.Meyer#1,wascompletedinearlyMay.TheRaider#1-17,whichisproximaltotwo1950’swellsthatencounteredsignificantgas,hasthepotentialof opening up an additional area of focus in the northern prospect area. Both targeted shale zones have been fracture stimulated and completedintheRaider#1-17,whichhasbeentiedintotheNorthernprospect area pipeline and has produced on sustained basis.

the ongoing completion program is expected to continue through Q1/2009andQ2/2009.Theprimaryfocusoftheongoingprogramwillbetotestup-holezonesoftheParadoxFormationstratigraphicsequence not yet completed in the northern prospect new wells. Theoperatorwillalsobepurchasing,re-processingandinterpretingadditional seismic data and undertaking other efforts to better understand the geology, structural setting and depositional model. it is expected that results from these efforts will allow for the design ofanewdrillingprogramtocommenceinthespringof2009.Theoperator will also undertake operations to optimize production from all of the wells.

DuringFiscal2008,theCompanyreceived$860,193(2007-$Nil)inpetroleumandnaturalgas(“P&NG”)sales,incurredroyaltiesof$149,365(2007-$Nil),andincurredtransportationandmarketingcostsof$82,626(2007-$Nil).ThetransportationandmarketingcostswerepaidtoAbajoatmarketrates.ThemajorityoftheP&NGsales were from the sale of natural gas.

each of the wells tied into the pipeline contributed to the sales during Fiscal2008.However,theS.P.MeyerandtheTankCanyonwellswerethe primary contributors to sales while the other wells contributed to sales intermittently.

Based on an interpretation of the information available as at the dateofthepreparationofthefinancialstatementsforFiscal2008,Management has determined that the paradox Basin project is still inthepre-productionstage.Accordingly,the$400,498ofnetP&NGrevenues(revenueslessroyaltiesandtransportationandmarketingcosts)receivedduringQ4/2008werecreditedtopropertyandequipment.Thedeterminationthattheprojectisinthepre-productionstage is in contrast to the determination made in the reporting of Q1/2008,Q2/2008andQ3/2008wherethenetP&NGrevenuestotaling $227,704 were reported as income. this change will result intheQ1/2008,Q2/2008andQ3/2008financialstatementsbeingrevisedatthetimeoffilingtheQ1/2009,Q2/2009andQ3/2009financialstatementstoshowthenetP&NGrevenuescreditedtoproperty and equipment.


Bittern lake, albertathe Company has an agreement with Canadian spirit resources inc. (“CSRI”)underwhichtheCompanyandCSRIhaveagreedtoacquire,explore and develop petroleum and natural gas rights in central alberta. during the year ended June 30, 2006, the Company earned a50%workinginterestintheBitternLakeProjectbyincurringexpendituresof$2.5million.

Thejointventurelandsarecomprisedofthreesections(1,920hectares)ofland in the form of petroleum and natural gas leases in the Bittern lake areaofAlberta.InlateSeptemberandearlyOctober2005,CSRIdrilledand completed one horseshoe Canyon well. Based on the completion results of the first well, Csri drilled three additional wells on the same section. after initial positive indications from the first completed well, formation water increased and the well was shut in. a second well was completedinFebruary2006tofurtherevaluatethisplayandwasalsosubsequently shut in.

OnMay1,2008,theCompanysoldpetroleumandnaturalgasrightsin certain formations in one section and the four standing horseshoe Canyonwellsfor$25,467incashanda2.5%overridingroyaltyontherightssold.AsatJune30,2008,theCompanywrote-downthecarryingvalueofthepropertyto$1.

results of operationsTheCompanyreportedalossof$3,052,556(2007-$3,732,162)andalosspershareof$0.06(2007-$0.16)fortheyearendedJune30,2008.Thelargestcomponentsofthelosswerestock-basedcompensationof$2,327,727(2007-$1,184,499)andwrite-downofpropertyof$428,129(2007-$2,326,759).

General and administrativeDifferencesingeneralandadministrativeexpensesduringFiscal2008 comparedtoFiscal2007included:

Administrativefeesincreasedby$22,000inFiscal2008because•of the increased business and financing activities. the fees comprise accounting, secretarial and general administrative services.

Ofthe$118,975(2007-$10,675)inconsultingfeesincurred•

duringFiscal2008,$70,301(2007-$10,675)werepaid to an

individual for strategic advisory services. the Company engaged

theconsultantonamonthtomonthbasisatUSD$5,000permonth.

TheCompanyalsopaidaone-timefeeofUSD$25,000.Also

includedwerefeesof$25,282(2007-$Nil)paidtotheChairman

of the Board of directors.

Filing,listingandtransferagentfeeswere$13,008higherin• Fiscal

2008 due to transfer agent costs incurred in conjunction with completing five private placements and higher listing fees.

Foreigncurrencytranslationrelatestotheimpactoffluctuations•intheCanadian/USDollarexchangeratesonUSDdenominatedpurchasesaswellascashheldinUSD.ForFiscal2008,themajorityofthe$41,139foreigncurrencylossesrelatetolosseson the translation of the usd property and equipment, the usd abajo investment and losses on cash held in usd as a result of the increasing value of the Canadian dollar against the usd.

Officeandmiscellaneouswere$22,100higherinFiscal2008• mainlyduetoanincreaseininsurancecostsof$15,500.The Company’s general office costs have also increased in conjunction with its increased business activity.

Professionalfeesincludeauditandaccountingof$60,796(2007• -$37,384)andlegalof$19,457(2007-$11,614)forFiscal2008. Both audit and accounting fees and legal fees increased primarily due to increased business activity and increased complexity of the Company’s operations.

the Company uses the fair value based method of accounting for all •stock-basedawards.Asaresult,everytimetheCompanygrantsoramends stock options, a charge to operations and a corresponding credit to shareholders’ equity must be made. the Company calculatesthecompensationcostbyusingtheBlack-Scholesoptionpricingmodel.TheCompanygranted2,305,000(2007–1,560,000)stockoptionsinFiscal2008resultingincompensationexpenseof$2,327,727(2007–$1,184,499).

TheCompanyincurredtravelcostsof$90,928(2007-$43,264)•duringFiscal2008.TheamountisdoubleFiscal2007andcorresponds with the Company’s efforts to raise equity financing and management travelling to the paradox Basin project and to several meetings with the operator.

other itemsthe Company has earned interest income as a result of investing •cash on hand in guaranteed investment certificates. the Company earned$253,306moreininterestincomeduringFiscal2008asthe Company had considerably more cash on hand from private placements.

AsatJune30,2008,theCompanyhasa47.99%interestin• abajo. the Company accounts for this investment using the equity method. TheCompany’sshareofAbajo’slosswas$54,574(2007-$Nil)forFiscal2008.

FourthQuarterOperationsDuringQ4/2008,theCompanyincurredalossof$1,338,846(Q4/2007-$3,524,869).LargerexpensesincurredandsignificantdiscrepanciesbetweenQ4/2008andQ4/2007areasfollows:

TheCompanygranted875,000(2007–1,560,000)stockoptions•whichresultedin$948,752(2007-$1,184,499)ofcompensationexpense.

the Company wrote down the carrying value of its Bittern • lake propertyby$428,129(2007-$2,326,759)to$1(2007-$518,800).

FinancialCondition,LiquidityandCapitalResources AsatJune30,2008,theCompanyhadworkingcapitalof$8,396,934comparedtoworkingcapitalof$2,873,709asatJune30,2007.This$5,523,225increaseinworkingcapitalisdirectlyrelatedto$25,870,981ofequityfinancing(netofcosts)completedduringFiscal2008.

MajorsourcesofcashduringFiscal2008were1)issuanceof32,819,592commonsharesfornetproceedsof$25,870,981pursuanttoprivateplacements($2,911,500ofsharesubscriptionsrelatingtotheseprivateplacementswerereceivedpriortoJuly1,2007);2)exerciseof3,900warrantsinto3,900commonsharesforproceedsof$4,875;3)exerciseof99,000stockoptionsinto99,000commonsharesforproceedsof$66,000;4)interestincomeof$275,322;and5)petroleumandnaturalgassalesof$628,202netofroyaltiesandtransportation and marketing costs.

MajorusesofcashduringFiscal2008were1)$14,373,257ofexploration,development and land acquisition costs incurred on the Company’s petroleumandnaturalgasprojects;2)$5,144,722investmentrelatedtotheformationofAbajo;and3)approximately$500,000ofgeneraland administrative expenditures.

Current working capital will be principally used for the advancement of the paradox Basin project. it is expected that results from the ongoing completion program will allow for the design of a new drill program, the cost of which is presently unknown, to commence in the spring of 2009.TheCompanymayneedtoseekadditionalfundingincalendar2009tofundcapitalexpendituresontheParadoxBasinProjectandtofund general and administrative expenses.

the Company does not anticipate additional significant expenditures on the Bittern lake project in the near term.

FinancialInstrumentsthe Company’s financial instruments consist of cash, receivables and accounts payable and accrued liabilities.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. the Company’s cash and receivables are exposed to credit risk. the credit risk on cash is small because the counterparties are highly rated banks. the majority of the Company’s receivables are with customers in the petroleum and natural gas industry and are subject to normal industry credit risks. the Company generally extends unsecured credit to these customers and therefore the collection of accounts receivable may be affected by changes in economic or other conditions. the Company believes the risk is mitigated by the size and reputation of the companies to which they extend credit. the Company has not experienced any material credit loss in the collection of accounts receivable to date.

the Company is exposed to financial risk arising from fluctuations in foreign exchange rates and the degree of volatility of those rates. the Company does not use derivative instruments to reduce its exposure to foreign currency risks.

the Company has not hedged any of its petroleum and natural gas sales.

Off-BalanceSheetArrangementsTheCompanyhasnotengagedinanyoff-balancesheetarrangementssuch as obligations under guarantee contracts, a retained or contingent interest in assets transferred to an unconsolidated entity, any obligation under derivative instruments or any obligation under a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company or engages in leasing or hedging services with the Company.


For the Years Ended june 30 2008 2007 2006

FINANCIAL RESULTS

loss $ 3,052,556 $ 3,732,162 $ 675,743

Basic and diluted loss per common share $ (0.06) $ (0.16) $ (0.04)

FINANCIAL POSITION

working capital $ 8,396,934 $ 2,873,709 $ 1,615,350

total assets $ 39,645,052 $ 13,275,234 $ 12,266,539

share capital $ 36,977,799 $ 13,601,031 $ 12,129,695

share subscriptions $ - $ 2,911,500 $ -

deficit $ 9,575,494 $ 6,522,938 $ 2,790,776

Fiscal Quarter Ended Interest Income Earnings/(Loss)Basic & Diluted

Earnings/(Loss)/Share

June 30, 2008 $ 44,358 $ (1,288,121) $ (0.02)

March31,20081 $ 58,261 $ 31,111 $ -

December31,20071 $ 76,920 $ (965,788) $ (0.02)

september 30, 20071 $ 95,783 $ (829,758) $ (0.02)

June 30, 2007 $ 2,100 $ (3,524,869) $ (0.15)

March31,2007 $ 331 $ (39,810) $ -

December31,2006 $ 2,930 $ (165,628) $ (0.01)

september 30, 2006 $ 16,655 $ (1,855) $ -

selected annual information the following selected financial data has been prepared in accordance with Canadian generally accepted accounting principles and should be read in conjunction with the Company’s audited financial statements. all dollar amounts are in Canadian dollars.

Themostsignificantcomponentofthelossesreportedfor2008,2007and2006isstock-basedcompensationof$2,327,727,$1,184,499and$436,966respectivelyfromthegrantingofstockoptions.Also,theCompanywrote-downitsBitternLakepropertyby$428,129and$2,326,759in2008and2007respectively.TheCompanyhasincurredapproximately$500,000,$220,000and$210,000ingeneralandadministrativeexpendituresin2008,2007and 2006 respectively. the large increase in general and administrative expenditures is a direct reflection of the increase in the complexity of the Company’s business operations. the Company’s share capital and total assets have increased over the last three years as the Company has issued shares to fund its petroleum and natural gas exploration projects. the increase in the Company’s working capital corresponds with the equity financings the Company has completed over the past three years.

summary of Quarterly informationthe following selected financial data has been prepared in accordance with Canadian generally accepted accounting principles and should be read in conjunction with the Company’s audited financial statements. all dollar amounts are in Canadian dollars.

1ThelossesintheseperiodshavebeenrevisedtocorrespondwithcreditingofthenetP&NGrevenuesagainstthepropertyandequipment.Thesechangesresultedinanincreasetolossandadecreasetopropertyandequipmentof$2,156and$12,689forQ1/2008andQ2/2008respectivelyandadecreasetoearningsandadecreasetopropertyandequipmentof$35,880forQ3/2008.TheserevisionswillbereportedinthecomparativeQ1/2008,Q2/2008andQ3/2008financialstatementsatthetimeoffilingtheQ1/2009,Q2/2009andQ3/2009financialstatements.

Thequarterlyearnings/lossesvaryconsiderablymainlyduetoforeigncurrencyfluctuations,grantingofstockoptionsandwrite-downofpetroleumandnaturalgaspropertyinterests.TheCompany’sgeneralandadministrativeexpendituresgenerallyfluctuatewiththelevelofactivityonitsprojectsand/orfinancingactivitiesthatarebeingundertaken.ThemajorityofthelossforthethreemonthsendedJune30,2008relatestostock-basedcompensationof$948,742pursuanttothegrantingofstockoptionsandthewrite-downoftheBitternLakepropertyof$428,129.ThemajorityofthelossforthethreemonthsendedDecember31,2007andSeptember30,2007relatestostock-basedcompensationof$586,172and$792,803respectivelypursuantto the granting of stock options. the loss for the three months ended June 30, 2007 is much larger compared to other quarters primarily due to the issuanceofstockoptionsandwrite-downoftheBitternLakeproperty.InterestincomefellconsiderablyfromSeptember30,2006toJune30,2007asthe Company was spending its cash on the paradox Basin project. the Company’s interest income increased considerably in the four fiscal quarters of 2008 due to closing five private placements and having cash on hand to invest in guaranteed investment certificates.

related party transactionsDuringFiscal2008,administrativefeesof$98,000(2007-$76,000) were paid or accrued to a company owned by Mr. Colin watt, the Company’s president, Ceo and a director. Mr. watt’s company provides the services of several employees that provide accounting, secretarial and administrative services to the Company.

DuringFiscal2008,legalfeesof$51,412(2007-$10,019)werepaidoraccruedtoalegalfirminwhichMr.RonPaton,adirectoroftheCompany,isanassociatecounsel.Ofthisamount,$18,040(2007–$10,019)waschargedtolegalfeesand$33,372(2007-$Nil)waschargedtosharecapitalasshareissuance costs.

DuringFiscal2008,consultingfeesof$8,960(2007-$Nil)werepaidoraccruedtoacompanyownedbyMr.BobBereskin,adirectoroftheCompany.Ofthisamount,$2,087(2007–$Nil)waschargedtoconsultingfeesand$6,873(2007-$Nil)waschargedtoproperty,plantandequipmentasconsulting fees.

DuringFiscal2008,consultingfeesof$2,749(2007-$Nil)werepaidoraccruedtoacompanyownedbyMr.JohnMcLennan,adirectoroftheCompany.Ofthisamount,$305(2007–$Nil)waschargedtoconsultingfeesand$2,444(2007-$Nil)waschargedtoproperty,plantandequipmentas consulting fees.

DuringFiscal2008,consultingfeesof$25,282(2007-$10,675)werepaidoraccruedtoMr.RichardAndrews,adirectorandChairmanoftheBoardofDirectorsoftheCompany.TheconsultingfeespaidtoMr.AndrewsduringFiscal2007constitutedarelatedpartytransactionbecauseatthetimeofthepaymentsoraccruals,Mr.Andrewswasashareholderwhocontrolledordirectedmorethan10%oftheCompany’scommonshares.


1Thesewarrantswillexpire,subjecttoTSXVentureExchangeapproval,onJuly12,2011iftheCompanybecomesaTSXVentureExchangeTier1issuer.Also,ifthedailytradingpriceoftheCompany’scommonsharesisatleast$2.50on20consecutivedays,thewarrantswillbedeemedtobeexercisedon the 20th day, subject to receipt of required regulatory approvals, if any.

Changes in accounting policiesinvestments over which the Company exerts significant influence are accounted for using the equity method. under this method, the Company’s share of the earnings and losses is included in operations and its investment therein is adjusted by a like amount. the Company records a gain on deemed disposition of investment when its ownership interest is diluted as a result of share issuances by the investee company, and the Company’s proportionateshareoftheissuanceisgreaterthanthecostbaseoftheinvestment.TheCompanydoesnotreceiveanycashproceeds(norisrequired to make any payments) from these transactions. where in management’s opinion there has been a loss in value that is other than a temporary decline, the carrying value is reduced to estimated realizable value.

outstanding share dataas at october 23, 2008, the Company had the following securities issued and outstanding:

Number Exercise Price Expiry Date

Common shares 57,972,251 n/a n/a

warrants 6,393,250 $1.25 July9,2009

warrants1 3,420,046 $1.25 July12,2009

warrants 2,048,700 $1.50 September21,2009

warrants 224,050 $1.50 October12,2009

warrants 2,500,000 $1.00/$1.25 April15,2009/2010

warrants 2,786,250 $1.75/$2.00 June11,2009/2010

stock options 400,000 $0.51 July21,2010

stock options 450,000 $0.75 August7,2010

stock options 9,000 $0.75 September1,2010

stock options 1,545,000 $1.00 June5,2012

stock options 790,000 $1.30 July22,2012

stock options 640,000 $1.30 October14,2012

stock options 875,000 $1.40 April27,2013

Fully Diluted 80,053,547

EffectiveJuly1,2007,theCompanyadoptedtheCanadianInstituteof CharteredAccountantsnewHandbookSections1530“ComprehensiveIncome”(“HB1530”),3855“FinancialInstruments–RecognitionandMeasurement”(“HB3855”),3861“FinancialInstruments–DisclosureandPresentation”(“HB3861”)and3865“Hedges”(“HB3865”).

the objective of these new standards is to account for more assets andliabilitiesatfairvalueincludingnon-financialderivatives.Therewereno transitional adjustments in respect to these standards that were recorded to opening asset and liability balances and accumulated other comprehensiveincome(loss).Adescriptionofthenewaccountingrulesis provided in note 3 of the audited consolidated financial statements for the year ended June 30, 2008.

EffectiveJuly1,2008,theCompanyadoptedtheCICAHandbookSection1535“CapitalDisclosures”(“HB1535”).Theobjectiveofthisnew standard is to disclose information concerning the Company’s capital and how it is managed. the adoption of this standard is not expected to impact the Company’s financial position, operations or cash flows.

EffectiveJuly1,2008,theCompanyadoptedtheCICAHandbookSections3862“FinancialInstruments–Disclosures”(“HB3862”)and3863“FinancialInstruments–Presentation”(“HB3863”).Theobjectiveof these new standards is to provide more information for users of the Company’s financial statements to understand the significance of financial instruments to the Company’s financial position, performance andcashflows.ThesenewstandardswillsupersedeHB3861“FinancialInstruments–DisclosureandPresentation”.Theadoptionof these standards is not expected to impact the Company’s financial position, operations or cash flows.

EffectiveJuly1,2008,theCompanyadoptedtheCICAHandbookSection1400“GeneralStandardsofFinancialStatementPresentation”(“HB1400”).Theobjectiveofthisstandardistoincluderequirementsto assess an entity’s ability to continue as a going concern and disclose any material uncertainties that cast doubt on its ability to continue as a going concern. this new standard is not expected to impact the Company’s future financial results.

EffectiveJuly1,2008,theCompanyadoptedtheCICAHandbookSection3064“GoodwillandIntangibleAssets”(“HB3064”).HB3064replacesCICAHandbookSection3062“GoodwillandOtherIntangibleAssets”(“HB3062”)andCICAHandbookSection3450“ResearchandDevelopmentCosts”.HB3064establishesstandardsfortherecognition,measurement, presentation and disclosure of goodwill and intangible assets subsequent to initial recognition. standards concerning goodwill are unchanged from the standards included in the previous hB 3062.

the Company is currently evaluating the impact of the adoption of this new standard on its consolidated financial statements.

In2006,theCanadianAccountingStandardsBoard(“AcSB”)publisheda new strategic plan that will significantly affect financial reporting requirements for Canadian companies. the acsB strategic plan outlinestheconvergenceofCanadianGAAPwithInternationalFinancialReportingStandards(“IFRS”)overanexpectedfiveyeartransitionalperiod.InFebruary2008theAcSBannouncedthat2011isthechangeoverdateforpubliclyaccountablecompaniestouseIFRS,replacing Canada’s own Gaap. the changeover date applies to interim and annual financial statements relating to fiscal years beginning on orafterJanuary1,2011.FortheCompany,thetransitiondateofJuly1,2011willrequiretherestatementforcomparativepurposesofamountsreportedbytheCompanyfortheyearendedJune30,2011.WhiletheCompanyhasbegunassessingtheadoptionofIFRSfor2011,thefinancialreportingimpactofthetransitiontoIFRScannotbereasonably estimated at this time.

directors and officers

Richard Andrews director, Chairman

Colin Watt director, president and Ceo

Robert Bereskin director

Ron Paton director

john McLennan director

Laurie Sadler ChiefFinancialOfficer

onJuly23,2007,Dr.Robert(Bob)BereskinjoinedtheCompany’sBoardofDirectors.Dr.Bereskinhasover25yearsexperienceinthe petroleum and natural gas industry and is currently an adjunct professor at the university of utah. his consulting work over the lastdozenyearshasfocusedonunconventionalgas-bearingshalereservoirs in both the united states and Canada, where he has assisted withseveralinternationalanddomesticexploration/exploitationefforts.

on april 28, 2008, Mr. richard andrews joined the Company’s Board of directors and was appointed Chairman. Mr. andrews also separately joined the Board of directors and was appointed Chairman and Chief executive officer of the Company’s wholly owned u.s. subsidiary, which holds the Company’s interest in the paradox Basin project. Management believes that Mr. andrews’ extensive experience in advising and raising funds for resource companies is well suited to the paradox Basin project and to future advancement of corporate objectives.

additional informationadditional information relating to the Company’s operations and activities can be found by visiting the Company’s website at www.lyndenenergy.com or by visiting sedar at www.sedar.com.

20 21LyndEn EnErgy | AnnUAL rEPorT 2008 » AUdiTorS’ rEPorT

LYNDEN ENERGY CORP. (formerly Lynden Ventures Ltd.)

Consolidated Balance Sheets (CDN $)

disclosure and internal Controls and proceduresOnNovember23,2007,theCanadianSecuritiesAdministrators(the“CSA”)issuedanoticetoupdatemarketparticipantsonthestatusoftheinitiativetorepealandreplaceMultilateralInstrument52-109CertificationofDisclosureinIssuers’AnnualandInterimFilingsandthe related forms and companion policy. this notice stipulated that the amendedversionofMI52-109willnolongerrequiretheCEOandCFOof a venture issuer to certify that they have designed and evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting. also on this date, certain securities jurisdictions(BC,Alberta,Ontario)issuedexemptiverelieforderstopermit a venture issuer to file interim and annual certificates for periods endingonorafterDecember31,2007inaformthatreflectstheproposedchangestoMI52-109.

due to the size and operations of the Company, Management is limited in its ability to design, implement and evaluate effective disclosure controls and procedures and internal controls over financial reporting on a cost effective basis. in particular, appropriate segregation of duties is an issue due to the size of the Company. Management tries to mitigate these risks by implementing and reviewing compensatory controls on an ongoing basis.

as such, Management has exercised reasonable diligence to ensure that there are appropriate information systems, procedures, and controls to ensure the integrity of the financial statements and has exercised reasonable diligence to ensure that there are appropriate information systems, procedures, and controls to ensure that information used internally and disclosed externally is complete and reliable.

we have audited the consolidated balance sheets of lynden energy Corp.(formerlyLyndenVenturesLtd.)asatJune30,2008and2007the consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. these financial statements are the responsibility of the Company’s management. our responsibility is to express an opinion on these financial statements based on our audits.

we conducted our audits in accordance with Canadian generally accepted auditing standards. those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. an audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

in our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2008 and 2007 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

DAVIDSON&COMPANYLLPCharteredAccountants|Vancouver,Canadaoctober 20, 2008

Auditors’ reportTo THE SHArEHoLdErS oF LyndEn EnErgy CorP.(ForMErLy LyndEn VEnTUrES LTd.)

Consolidated Financial StatementsFor THE yEArS EndEd JUnE 30, 2008 And 2007

ASSETS june 30, 2008 june 30, 2007

Current assets

Cash $ 8,558,978 $ 3,371,579

receivables 475,260 3,659

prepaid expenses - 5,223

$ 9,034,238 $ 3,380,461

Deferred financing costs 99,373 -

Investment (note 4) 5,090,148 -

Property and equipment (note 5) 24,501,844 9,894,773

$ 38,725,603 $ 13,275,234

LIABILITIES AND ShAREhOLDERS' EQUITY

Current liabilities

accounts payable and accrued liabilities $ 736,677 $ 506,752

Asset retirement obligations (note 6) 27,006 23,589

763,683 530,341

Shareholders’ equity

Sharecapital(note7) 37,187,034 13,601,031

share subscriptions - 2,911,500

Contributed surplus 10,350,380 2,755,300

deficit (9,575,494) (6,522,938)

37,961,920 12,744,893

$ 38,725,603 $ 13,275,234

Nature of operations (note 1)

Approved by the Directors:

Colin watt richard andrews

LyndEn EnErgy | AnnUAL rEPorT 2008 » MAnAgEMEnT diSCUSSion And AnALySiS

LyndEn EnErgy | AnnUAL rEPorT 2008 » noTES To ConSoLidATEd FinAnCiAL STATEMEnTS22 23LyndEn EnErgy | AnnUAL rEPorT 2008 » MAnAgEMEnT diSCUSSion And AnALySiS

LYNDEN ENERGY CORP. (formerly Lynden Ventures Ltd.) Consolidated Statements of Shareholders’ Equity (CDN $)

LYNDEN ENERGY CORP. (formerlyLyndenVenturesLtd.)

Consolidated Statements of Operations (CDN $)

Consolidated Financial Statements

Consolidated Financial Statements

For THE yEArS EndEd JUnE 30, 2008 And 2007 For THE yEArS EndEd JUnE 30, 2008 And 2007

year ended june 30, 2008

year ended june 30, 2007

ExPENSES

accretion and amortization $ 3,595 $ 732

administrative fees 98,000 76,000

Consulting fees 118,975 10,675

Filing,listingandtransferagentfees 27,380 14,372

Foreigncurrencytranslation 41,139 18,048

office and miscellaneous 44,147 22,047

professional fees 80,253 48,998

promotion 13,031 8,784

Stock-basedcompensation(note8) 2,327,727 1,184,499

travel 90,928 43,264

(2,845,175) (1,427,419)

OThER ITEMS

interest income 275,322 22,016

Equitylossoninvestment(note4) (54,574) -

Write-downofproperty(note5) (428,129) (2,326,759)

(207,381) (2,304,743)

Loss and comprehensive loss for the year $ (3,052,556) $ (3,732,162)

Basic and diluted loss per common share $ (0.06) $ (0.16)

Weighted average number of common shares outstanding 49,065,728 23,715,072

Common Shares

Number AmountShare

SubscriptionsContributed

Surplus Deficit Total

BALANCE AT jUNE 30, 2006 23,565,923 $ 12,129,695 $ - $ 1,570,801 $ (2,790,776) $ 10,909,720

Common shares issued for cash:

exercise of warrants 1,471,336 1,471,336 - - - 1,471,336

share subscriptions received - 2,911,500 - - 2,911,500

Stock-basedcompensation - - - 1,184,499 - 1,184,499

loss for the year - - - - (3,732,162) (3,732,162)

BALANCE AT jUNE 30, 2007 25,037,259 13,601,031 2,911,500 2,755,300 (6,522,938) 12,744,893

Common shares issued:

Privateplacementsforcash(note7) 31,617,452 23,686,096 (2,911,500) 5,626,954 - 26,401,550

units and shares issued to agents 1,202,140 979,325 - - - 979,325

share issue costs on private placements - (1,195,281) - (314,613) - (1,509,894)

exercise of warrants 3,900 4,875 - - - 4,875

exercise of stock options 99,000 110,988 - (44,988) - 66,000

Stock-basedcompensation(note8) - - - 2,327,727 - 2,327,727

loss for the year - - - - (3,052,556) (3,052,556)

BALANCE AT jUNE 30, 2008 57,959,751 $ 37,187,034 $ - $ 10,350,380 $ (9,575,494) $ 37,961,920

24 25LyndEn EnErgy | AnnUAL rEPorT 2008 » ConSoLidATEd FinAnCiAL STATEMEnTSLyndEn EnErgy | AnnUAL rEPorT 2008 » ConSoLidATEd FinAnCiAL STATEMEnTS

LYNDEN ENERGY CORP. (formerlyLyndenVenturesLtd.)

Consolidated Statements of Cash Flows (CDN $)year ended

june 30, 2008year ended

june 30, 2007

CASh PROVIDED BY (USED FOR):

Operating activities

loss for the year $ (3,052,556) $ (3,732,162)

items not involving cash:

accretion, amortization and depletion 3,595 732

Stock-basedcompensation 2,327,727 1,184,499

equity loss on investment 54,574 -

Write-downofproperty 428,129 2,326,759

Changesinnon-cashoperating

working capital items:

receivables (63,771) 1,736

prepaid expenses 5,223 4,118

accounts payable and accrued liabilities 56,423 26,843

(240,656) (187,475)

Financing activities

Common shares issued for cash 26,472,425 1,471,336

share subscriptions received - 2,911,500

share issue costs (530,569) -

deferred financing costs (99,373) -

25,842,483 4,382,836

Investing activities

purchase of investment (5,144,722) -

purchase of property and equipment (15,269,706) (3,781,215)

(20,414,428) (3,781,215)

Change in cash during the year 5,187,399 414,146

Cash, beginning of year 3,371,579 2,957,433

Cash, end of year $ 8,558,978 $ 3,371,579

Supplementalcashflowinformation(note12)

1. NATURE OF OPERATIONS LyndenEnergyCorp.(“theCompany”)isapubliccompanycontinuedundertheBusinessCorporationsAct(BritishColumbia).TheCompany’sbusiness is to acquire, explore and develop petroleum and natural gas properties.TheCompany’scommonsharestradeontheTSXVentureExchange(“TSX-V”)underthesymbolLVL.DuringtheyearendedJune 30, 2008, the Company changed its name to lynden energy Corp. in order to better reflect the nature of its ongoing business.

the Company is in the process of exploring and developing its oil and gas interests and has not yet determined whether the properties contain reserves that are economically recoverable. the recoverability of the amounts shown for oil and gas interests and related deferred exploration costs are dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of the reserves and upon future profitable production.

2. SIGNIFICANT ACCOUNTING POLICIESthese consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“CanadianGAAP”).

principles of consolidationa)

the consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, lynden exploration Ltd.andLyndenUSAInc.Allinter-companytransactionsareeliminated on consolidation. in accordance with accounting Guideline 15–ConsolidationofVariableInterestEntities,allentitiessubjectto control by the Company on a basis other than ownership of voting interests must be consolidated in the Company’s financial statements. the Company does not have any variable interest entities.

use of estimatesb)

the preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. significant estimates used herein includestock-basedcompensation,futureincometaxes,assetretirement obligations and the value of the oil and gas property interests. actual results could differ from these estimates.

Foreigncurrencytranslationc)

the monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchangeatthebalancesheetdatewhilenon-monetaryassetsand liabilities are translated at historical rates. revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. exchange gains and losses arising on translation are included in the statement of operations.

deferred financing costsd)

Costs directly identifiable with the raising of capital will be charged against the related capital stock. Costs related to shares not yet issued are recorded as deferred financing costs. these costs will be deferred until the issuance of the shares to which the costs relate, at which time the costs will be charged against the related capital stock or charged to operations if the shares are not issued.

investmente)

investments over which the Company exerts significant influence are accounted for using the equity method. under this method, the Company’s share of the earnings and losses is included in operations and its investment therein is adjusted by a like amount. the Company records a gain on deemed disposition of investment when its ownership interest is diluted as a result of share issuances by the investee company, and the Company’s proportionate share of the issuance is greater than the cost base of the investment. the Company does not receive any cash proceeds(norisrequiredtomakeanypayments)fromthesetransactions. where in management’s opinion there has been a

notes to Consolidated Financial StatementsJUnE 30, 2008 (Cdn $)

Consolidated Financial StatementsFor THE yEArS EndEd JUnE 30, 2008 And 2007

LyndEn EnErgy | AnnUAL rEPorT 2008 » noTES To ConSoLidATEd FinAnCiAL STATEMEnTS26 LyndEn EnErgy | AnnUAL rEPorT 2008 » noTES To ConSoLidATEd FinAnCiAL STATEMEnTS 27

loss in value that is other than a temporary decline, the carrying value is reduced to estimated realizable value

property and equipmentf)

property and equipment is recorded at cost and amortized over the estimated useful lives of the assets on the following basis: Computer software 100%decliningbalance Computer hardware 30%decliningbalanceperannum Petroleum and natural gas properties the Company follows the full cost method of accounting for exploration and development expenditures whereby all costs relating to the acquisition of, exploration for and development of petroleumandnaturalgas(“P&NG”)reservesarecapitalized.such costs include lease acquisitions, geological and geophysical, lease rentals on undeveloped properties, drilling bothproductiveandnon-productivewells,productionequipment,and overhead charges directly related to acquisition, exploration and development activities. proceeds received from disposals of properties and equipment are credited against capitalized costs unless the disposal would alter the rate of depletion and amortization by more than 20 percent, in which case a gain or loss on disposal is recorded. upon commencement of commercial production all costs of acquisition,explorationanddevelopmentofP&NGreserves,associated tangible plant and equipment costs, asset retirement obligations and estimated costs of future development of proved undevelopedreservesaredepletedand/oramortizedbytheunitof production method based on estimated gross proved reserves before royalties as determined by independent evaluators. natural gas reserves are converted to equivalent units using their relative energy content of six thousand cubic feet of natural gas to one barrel of oil. the costs of acquiring and evaluating unproved properties are excluded from costs subject to depletion calculations. these properties are assessed annually to ascertain whether impairment has occurred. when proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to the costs subject to depletion. P&NGassetsareevaluatedannuallytodeterminethatthecosts are recoverable and do not exceed the fair value of the properties. the costs are assessed to be recoverable if the sum of the undiscounted cash flows expected from the production of

proved reserves plus the lower of cost and market of unproved propertiesexceedthecarryingvalueoftheP&NGassets.IfthecarryingvalueoftheP&NGassetsisnotassessedtoberecoverable, an impairment loss is recognized to the extent that the carrying value exceeds the sum of the discounted cash flows expected from the production of proved and probable reserves and the lower of cost and market of unproved properties. the cash flows are estimated using future product prices and costs andarediscountedusingtherisk-freeinterestrate. CostsincurredforinitialnewP&NGpropertyinvestigationwhereno acquisition occurs are expensed as incurred.

Comparative figures g) Certain comparative figures have been reclassified to conform with the current years presentation.

asset retirement obligations h) the Company recognizes the fair value of a liability for an asset retirement obligation in the year in which it is incurred when a reasonable estimate of fair value can be made. the carrying amountoftherelatedlong-livedassetisincreasedbythesameamount of the liability. Changes in the liability for an asset retirement obligation due to the passage of time will be measured by applying an interest method of allocation. the amount will be recognized as an increase in the liability and an accretion expense in the statement of operations. Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as an increase or a decrease to the carrying amountoftheliabilityandtherelatedlong-livedasset.

loss per sharei)

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common shares. the treasury stock method is used to determine the dilutive effect ofstockoptions,warrantsandotherdilutiveinstruments.Fortheyearspresented,thiscalculationprovedtobeanti-dilutive.

income taxes j)

Futureincometaxesrelatetotheexpectedfuturetaxconsequences of differences between the carrying amount of balance sheet itemsandtheircorrespondingtaxvalues.Futuretaxassets,

if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assetswillberealized.Futureincometaxassetsandliabilitiesare adjusted for the effects of changes in tax laws and rates on the date of enactment or substantive enactment. to the extent that the Company does not consider it more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.

Stock-basedcompensationk)

the Company uses the fair value based method to account for stock-basedtransactionswithemployees,non-employeesanddirectors. accordingly, the fair value of the stock options at the dateofgrantisamortizedonastraight-linebasisoverthevestingperiod. the Company estimates the fair value of each stock optionatthedateofgrantusingtheBlack-Scholesoptionpricingmodel. any consideration paid on exercise of stock options together with the related portion of contributed surplus is credited to share capital.

3. ChANGES IN ACCOUNTING POLICIESAccountingPoliciesImplementedonJuly1,2007

Financialinstruments a) EffectiveJuly1,2007theCompanyadoptedtheCanadianInstituteofCharteredAccountants(“CICA”)newHandbookSections1530“ComprehensiveIncome”(“HB1530”),3855“FinancialInstruments–RecognitionandMeasurement”(“HB3855”),3861“FinancialInstruments–DisclosureandPresentation”(“HB3861”)and3865“Hedges”(“HB3865”). the objective of these new standards is to account for more assetsandliabilitiesatfairvalue,includingderivatives(note10). HB1530establishesstandardsforreportinganddisplayofcomprehensiveincome(loss).Comprehensiveincome(loss)isdefinedasnetincome(loss)plusothercomprehensiveincome(loss).Othercomprehensiveincome(loss)comprisesrevenues,expenses, gains and losses that are excluded from net income (loss),suchas,unrealizedgainsandlossesofavailable-for-salesecurities. HB3855establishesstandardsforrecognizingandmeasuringfinancial assets, financial liabilities and derivatives. HB3861establishesstandardsforpresentationoffinancialinstruments and derivatives, and identifies the information that should be disclosed about them.

these standards require that financial assets be classified as eithertrading,available-for-sale,held-to-maturityorloansandreceivables and financial liabilities be classified as either trading or otherfinancialliabilities.Fairvalueisusedforinitialmeasurementforallclasses.Fairvalueisusedforsubsequentmeasurementforallclassesexceptforavailable-for-saleassets(whereequityinstruments do not have a quoted market price in an active market), loans and receivables and other financial liabilities where amortized cost using the effective interest method is used. AsatJuly1,2007andJune30,2008,theCompany’sfinancialinstruments consisted of cash, receivables and accounts payable and accrued liabilities. these financial instruments are classified as follows: Cash–heldfortrading Receivables–loansandreceivables Accountspayableandaccruedliabilities–otherfinancialliability Duetotheirimmediateorshort-termnature,thefairvaluesofthese financial instruments approximate their fair values. AsatJuly1,2007,therewerenoavailable-for-saleassets,derivative financial instruments or other financial instruments held-for-trading.Accordingly,therewerenotransitionaladjustments in respect to these standards that were recorded to opening asset and liability balances and accumulated other comprehensiveincome(loss). Gains and losses associated with items designated as trading are recorded in operations, separate from any interest or dividends earned on these items. Gains and losses associated with items designatedasavailable-for-salearerecordedasunrealizedwithinothercomprehensiveincome(loss)untilsuchtimetheitemisdisposed of or incurs a decline in fair value that is on an other than temporary basis, at which time any gains or losses are then realized and reclassified to operations. HB3865establishesstandardsforwhenandhowhedgeaccounting may be applied. hedging is an activity designed to modify an entity’s exposure to one or more risks by creating an offset between changes in the fair value of, or the cash flowsattributableto,thehedgeditemandthehedgingitem(orchanges resulting from a particular risk exposure relating to those items). the Company has not undertaken hedging activities in the past or during the year ended June 30, 2008 and therefore the adoptionofHB3865didnothaveanyimpactontheCompany’sfinancial position, operations or cash flows.


FutureChangesinAccountingPolicies

EffectiveJuly1,2008theCompanywilladopttheCICAb) HandbookSection1535“CapitalDisclosures”(“HB1535”).the objective of this new standard is to disclose information concerning the Company’s capital and how it is managed. the adoption of this standard is not expected to impact the Company’s financial position, operations or cash flows.

EffectiveJuly1,2008theCompanywilladopttheCICAc) HandbookSections3862“FinancialInstruments–Disclosures”(“HB3862”)and3863“FinancialInstruments–Presentation”(“HB3863”).Theobjectiveofthesenewstandardsistoprovidemore information for users of the Company’s financial statements to understand the significance of financial instruments to the Company’s financial position, performance and cash flows. these newstandardswillsupersedeHB3861“FinancialInstruments–DisclosureandPresentation”.Theadoptionofthesestandardsis not expected to impact the Company’s financial position, operations or cash flows.

EffectiveJuly1,2008,theCompanywilladopttheCICAd) HandbookSection1400“GeneralStandardsofFinancialStatementPresentation”(“HB1400”).Theobjectiveofthisstandard is to include requirements to assess an entity’s ability to continue as a going concern and disclose any material uncertainties that cast doubt on its ability to continue as a going concern. this new standard is not expected to impact the Company’s future financial results.

EffectiveJuly1,2008,theCompanywilladopttheCICAe) HandbookSection3064“GoodwillandIntangibleAssets”(“HB3064”).HB3064replacesCICAHandbookSection3062“GoodwillandOtherIntangibleAssets”(“HB3062”)andCICAHandbookSection3450“ResearchandDevelopmentCosts”.HB3064 establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets subsequent to initial recognition. standards concerning goodwill are unchanged from the standards included in the previous hB 3062. the Company is currently evaluating the impact of the adoption of this new standard on its consolidated financial statements.

In2006,theCanadianAccountingStandardsBoard(“AcSB”)f) published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. the acsB strategic plan outlines the convergence of Canadian Gaap withInternationalFinancialReportingStandards(“IFRS”)overanexpectedfiveyeartransitionalperiod.InFebruary2008the

AcSBannouncedthat2011isthechangeoverdateforpubliclyaccountablecompaniestouseIFRS,replacingCanada’sownGaap. the date is for interim and annual financial statements relatingtofiscalyearsbeginningonorafterJanuary1,2011.FortheCompany,thetransitiondateofJuly1,2011willrequirethe restatement for comparative purposes of amounts reported bytheCompanyfortheyearendedJune30,2011.WhiletheCompanyhasbegunassessingtheadoptionofIFRSfor2011,thefinancialreportingimpactofthetransitiontoIFRScannotbereasonably estimated at this time.

4. INVESTMENTOnOctober5,2007,theCompanyparticipatedintheformationofa utah, usa based natural gas transmission company, abajo Gas TransmissionCompany,LLC(“Abajo”),alongwithitsParadoxBasinpartners.TheCompanypurchaseda43.806%interestinAbajothroughaninitialcapitalcontributionof$2,879,822(USD$2,935,000)andmadeanadditional$2,264,900(USD$2,200,000)investmentinAbajo,increasingitsinterestinAbajoto47.99%.Abajoholdsownership of the gas gathering systems in the northern and southern ProspectAreasoftheCompany’sParadoxBasinProject(note5).ThroughitsinterestinAbajo,theCompanyisentitledto55%oftherevenues and expenses attributable to the construction, operation, maintenance and expansion of the gas gathering system in the NorthernProspectAreaand25%intheSouthernProspectArea.the Company exerts significant influence over abajo, and as such, the investment in abajo is accounted for using the equity method.

TheCompany’sshareofAbajo’snetlossfromOctober5,2007toJune30,2008was$54,574.

5.PropertyandEquipment

CostAccumulatedAmortization

Net Book Value at june 30, 2008

Petroleum and natural gas properties $ 24,500,170 $ - $ 24,500,170

Computer hardware 2,814 1,140 1,674

Computer software 620 620 -

$ 24,503,604 $ 1,760 $ 24,501,844

CostAccumulatedAmortization

Net Book Value at june 30, 2007

Petroleum and natural gas properties $ 9,892,071 $ - $ 9,892,071

Computer hardware 2,814 422 2,392

Computer software 620 310 310

$ 9,895,505 $ 732 $ 9,894,773

USA CANADA

Paradox Basin Bittern Lake Total

Balance at june 30, 2006 $ 6,494,780 $ 2,799,590 $ 9,294,370

Acquisition and expenditures 6,680,341 45,969 6,726,310

Sale of 25% working interest in the Paradox Basin -

Northern Prospect (3,801,850) - (3,801,850)

Write-down of property - (2,326,759) (2,326,759)

Balance at june 30, 2007 9,373,271 518,800 9,892,071

Acquisition and expenditures 15,755,100 10,758 15,765,858

Partial sale of property - (25,467) (25,467)

Refund of abandonment deposit - (58,000) (58,000)

Disposition of asset retirement obligation (17,961) (17,961)

Write-down of property - (428,129) (428,129)

Petroleum & natural gas sales (860,193) (860,193)

Royalties 149,365 149,365

Transportation & marketing costs 82,626 - 82,626

Balance at june 30, 2008 $ 24,500,169 $ 1 $ 24,500,170

petroleum and natural Gas properties


USA

paradox Basina)

TheCompanyhasa55%beforepayoutworkinginterest(41.25%afterpayout)inan80%netrevenueinterestintheParadoxBasinProject–NorthernProspectAreaconsistingofpetroleumandnatural gas leases located in the paradox Basin, utah. TheCompanyhasa25%beforepayoutworkinginterest(23.75%afterpayoutworkinginterest)inan85%to87%netrevenueinterestintheParadoxBasinProject–SouthernProspectAreaconsisting of petroleum and natural gas leases located in the paradox Basin, utah. during the year ended June 30, 2008, the Company received $628,202(2007-$Nil)ofnetrevenuefromsalesofpetroleumand natural gas from its paradox Basin project. testing on the paradox Basin project is ongoing and consequently it has beendeterminedthattheParadoxBasinProjectisinthepre-production stage. as such, the net revenues have been credited to the capitalized costs as at June 30, 2008.

CANADA

Bittern lake b) TheCompanyhasa50%workinginterestincertainpetroleumand natural gas rights in the Bittern lake area of central alberta. OnMay1,2008,theCompanysoldcertainpetroleumandnaturalgasrightsfor$25,467incashanda2.5%overridingroyalty on the rights sold. during the year ended June 30, 2008, theCompanywrote-downthecarryingvalueofthepropertyby$428,129(2007-$2,326,759)to$1.

6. ASSET RETIREMENT OBLIGATIONSthe total asset retirement obligations were estimated by management based on the Company’s net ownership interest in all wells, estimated costs to reclaim and abandon the wells and the estimated timing of the costs to be incurred in future periods. the Company has estimated the total undiscounted amount of future cash flows to settle the obligations tobe$68,250asatJune30,2008(2007-$141,000).Thesepaymentsareexpectedtobemadeoverthenext16to17years.TheCompanyusedacreditadjustedriskfreediscountrateof8.3%andaweighted-averageinflationrateof2.0%tocalculatethepresentvalueof the asset retirement obligations.

7. ShARE CAPITAL

authorizeda) an unlimited number of common shares without par value. an unlimited number of preference shares without par value.

during the years ended June 30, 2008 and 2007, the Company b) completed the following private placements:

OnJuly9,2007,theCompanyclosedanon-brokeredprivatei. placementforgrossproceedsof$10,000,000.Thesefundswereraisedthroughtheissuanceof12,500,000unitsatapriceof $0.80 per unit. each unit is comprised of one common share andone-halfofonecommonsharepurchasewarrant.Thetotalproceeds were allocated to common shares in the amount of$7,854,451andtowarrantsintheamountof$2,145,549,based on their relative fair values on the date of closing. as at June30,2007,theCompanyhadcollected$2,911,500insharesubscriptions for this private placement. each whole warrant entitles the holder to purchase one additional commonshareatanexercisepriceof$1.25percommonshareexpiringonJuly9,2009. Thefairvaluesofthewarrantsweredeterminedtobe$0.61perwarrantbasedonacalculationusingtheBlack-Scholesoptionpricingmodelassumingnoexpecteddividends,arisk-freeinterestrateof4.66%,anexpectedstockpricevolatilityof102.42%andanexpectedlifeoftwoyears. the Company incurred total issuance costs on the private placementof$728,502,whichwereallocatedtocommonsharesintheamountof$572,198andtowarrantsintheamountof

Balance at june 30, 2006 $ -

liabilities incurred 23,589

Balance at june 30, 2007 23,589

liabilities incurred 18,811

disposition of liabilities (17,961)

accretion expense 2,567

Balance at june 30, 2008 $ 27,006

$156,304basedontheirrelativefairvalues.Ofthesecosts,$39,302wasincurredincash,$440,000wasincurredthroughtheissuanceof550,000commonsharesand$249,200wasincurredthroughtheissuanceof311,500unitswiththesameterms as those issued in the private placement.

OnJuly11,2007,theCompanyclosedanon-brokeredprivateii. placementforgrossproceedsof$5,348,000.Thesefundswereraisedthroughtheissuanceof6,521,952unitsatapriceof$0.82perunit.Eachunitiscomprisedofonecommonshareandone-halfof one common share purchase warrant. the total proceeds were allocatedtocommonsharesintheamountof$4,165,798andtowarrantsintheamountof$1,182,202,basedontheirrelativefairvalues on the date of closing. each whole warrant entitles the holder to purchase one additional commonshareatanexercisepriceof$1.25percommonshareexpiringonJuly12,2011iftheCompanybecomesaTSX-VTier1issuer,otherwisethewarrantsexpireonJuly12,2009.However,if over a period of 20 consecutive trading days between the date that is 4 months following the closing date and the expiry of the warrants, the daily trading price of the Company’s common sharesexceeds$2.50oneachofthose20consecutivedays,thewarrants will be deemed to be exercised on the 20th day, subject to receipt of required regulatory approvals, if any. the fair values of the warrants were determined to be $0.64 per warrantbasedonacalculationusingtheBlack-Scholesoptionpricingmodelassumingnoexpecteddividends,arisk-freeinterestrateof4.63%,anexpectedstockpricevolatilityof102.42%andanexpected life of two years. the Company incurred total issuance costs on the private placementof$299,247,whichwereallocatedtocommonsharesintheamountof$233,097andtowarrantsintheamountof$66,150based on their relative fair values. of these costs, $38,372 was incurredincashand$260,875wasincurredthroughtheissuanceof318,140unitswiththesametermsasthoseissuedintheprivate placement.

OnSeptember21,2007,theCompanyclosedthefirstpartofaiii. non-brokeredprivateplacementforgrossproceedsof$4,507,140.Thesefundswereraisedthroughtheissuanceof4,097,400unitsatapriceof$1.10perunit.Eachunitiscomprisedofonecommonshareandone-halfofonecommonsharepurchasewarrant.Thetotal proceeds were allocated to common shares in the amount of$3,649,879andtowarrantsintheamountof$857,261,basedon their relative fair values on the date of closing.

each whole warrant entitles the holder to purchase one additional commonshareatanexercisepriceof$1.50percommonshareexpiringonSeptember21,2009. Thefairvaluesofthewarrantsweredeterminedtobe$0.56perwarrantbasedonacalculationusingtheBlack-Scholesoptionpricingmodelassumingnoexpecteddividends,arisk-freeinterestrateof4.14%,anexpectedstockpricevolatilityof95.71%and an expected life of two years. the Company incurred total issuance costs on the private placement of $328,483, which were allocated to common shares in the amount of$266,005andtowarrantsintheamountof$62,478basedontheir relative fair values. all of these costs were incurred in cash.

OnOctober10,2007,theCompanyclosedthesecondpartiv. (note7(b)(iii))ofthe$1.10non-brokeredprivateplacementbyissuing448,100unitsforgrossproceedsof$492,910.Eachunitiscomprisedofonecommonshareandone-halfofonecommonshare purchase warrant. the total proceeds were allocated to commonsharesintheamountof$399,927andtowarrantsintheamountof$92,983,basedontheirrelativefairvaluesonthedateof closing. each whole warrant entitles the holder to purchase one additional commonshareatanexercisepriceof$1.50percommonshareexpiringonOctober12,2009. Thefairvaluesofthewarrantsweredeterminedtobe$0.56perwarrantbasedonacalculationusingtheBlack-Scholesoptionpricingmodelassumingnoexpecteddividends,arisk-freeinterestrateof4.36%,anexpectedstockpricevolatilityof95.19%andanexpected life of two years. the Company incurred total issuance costs on the private placement of$9,801,whichwereallocatedtocommonsharesintheamountof$7,952andtowarrantsintheamountof$1,849basedontheirrelative fair values. all of these costs were incurred in cash.

OnApril16,2008,theCompanyclosedanon-brokeredprivatev. placementforgrossproceedsof$1,750,000.Thesefundswereraisedthroughtheissuanceof2,500,000unitsatapriceof$0.70per unit. each unit is comprised of one common share and one common share purchase warrant. the total proceeds were allocatedtocommonsharesintheamountof$1,312,785andtowarrantsintheamountof$437,215,basedontheirrelativefairvalues on the date of closing. each whole warrant entitles the holder to purchase one additional


commonshareatanexercisepriceof$1.00untilApril15,2009and$1.25untilApril15,2010. Thefairvaluesofthewarrantsweredeterminedtobe$0.38perwarrantbasedonacalculationusingtheBlack-Scholesoptionpricingmodelassumingnoexpecteddividends,arisk-freeinterestrateof2.71%,anexpectedstockpricevolatilityof80.77%andanexpectedlifeoftwoyears. TheCompanyincurredtotalissuancecostsontheprivateplacementof$78,191,whichwereallocatedtocommonsharesintheamountof$58,656andtowarrantsintheamountof$19,535basedontheirrelativefairvalues.Allofthesecostswereincurredincash.

OnJune12,2008,theCompanyclosedanon-brokeredprivateplacementforgrossproceedsof$7,215,000.Thesefundswereraisedthroughvi. theissuanceof5,550,000unitsatapriceof$1.30perunit.Eachunitiscomprisedofonecommonshareandone-halfofonecommonsharepurchasewarrant.Thetotalproceedswereallocatedtocommonsharesintheamountof$6,303,256andtowarrantsintheamountof$911,744,based on their relative fair values on the date of closing. Eachwarrantentitlestheholdertopurchaseoneadditionalcommonshareatanexercisepriceof$1.75untilJune11,2009and$2.00untilJune11,2010. Thefairvaluesofthewarrantsweredeterminedtobe$0.46perwarrantbasedonacalculationusingtheBlack-Scholesoptionpricingmodelassumingnoexpecteddividends,arisk-freeinterestrateof3.4%,anexpectedstockpricevolatilityof84.8%andanexpectedlifeoftwoyears. TheCompanyincurredtotalissuancecostsontheprivateplacementof$65,670,whichwereallocatedtocommonsharesintheamountof$57,371andtowarrantsintheamountof$8,299basedontheirrelativefairvalues.Ofthesecosts,$36,420wasincurredincashand$29,250wasincurredthroughtheissuanceof22,500unitswiththesametermsasthoseissuedintheprivateplacement.

c) warrants

WarrantsWeighted-average

exercise priceWeighted-average

remaining life (years)

Balance at june 30, 2006 14,615,440 $0.95 0.7

exercised (1,471,336) 1.00

expired (10,121,977) 0.89

Balance at june 30, 2007 3,022,127 1.25 0.8

exercised (3,900) 1.25

expired (3,018,227) 1.25

issued 17,384,796 1.36

Balance at june 30, 2008 17,384,796 $1.36 1.3

warrants exercisable and outstanding are as follows:

1Thesewarrantswillexpire,subjecttoTSX-Vapproval,onJuly12,2011iftheCompanybecomesaTSX-VTier1issuer.Also,ifthedailytradingpriceoftheCompany’scommonsharesisatleast$2.50on20consecutivedays,thewarrantswillbedeemedtobeexercisedonthe20thday,subjecttoreceipt of required regulatory approvals, if any.

8. STOCk OPTIONS

stock options outstandinga)

the Company has a stock option plan whereby a maximum of10%oftheissuedandoutstandingcommonsharesoftheCompanymaybereserved for issuance pursuant to the exercise of stock options. the term of the stock options granted are fixed by the board of directors and are not to exceed five years. the exercise prices of the stock options are determined by the board of directors but shall not be less than the closing price of the Company’s common shares on the day preceding the day on which the directors grant the stock options, less any discount permitted bytheTSX-V.Thestockoptionsvestimmediatelyonthedateofgrantexceptforstockoptionsgrantedtoinvestorrelationsconsultantswhichvestover a twelve month period.

Expiry Date Exercise Price 2008

July9,2009 $1.25 6,405,750

1July12,2009 $1.25 3,420,046

September21,2009 $1.50 2,048,700

October12,2009 $1.50 224,050

April15,2009/April15,2010 $1.00/$1.25 2,500,000

June11,2009/June11,2010 $1.75/$2.00 2,786,250

17,384,796

SharesWeighted-average

exercise priceWeighted-average

remaining life (years)

Balance at june 30, 2006 950,000 $ 0.64 4.1

Cancelled (7,000) 0.75

Granted 1,560,000 1.00

Balance at june 30, 2007 2,503,000 0.86 4.2

exercised (99,000) 0.67

Granted 2,305,000 1.34

Balance at june 30, 2008 4,709,000 $1.10 3.8

LyndEn EnErgy | AnnUAL rEPorT 2008 » noTES To ConSoLidATEd FinAnCiAL STATEMEnTS34 35LyndEn EnErgy | AnnUAL rEPorT 2008 » noTES To ConSoLidATEd FinAnCiAL STATEMEnTS

b) Stock-basedcompensation DuringtheyearendedJune30,2008,theCompanygranted2,305,000stockoptionswithacompensationcostof$2,327,727.TheCompanycalculatedthecompensationcostbyusingtheBlack-Scholesoptionpricingmodelassumingaweightedaveragerisk-freeinterestrateof3.99%,adividendyieldofnil,anexpectedvolatilityoftheCompany’ssharepriceof103%andexpectedlifeofthestockoptionsof5years.Theweightedaveragefairvalueofstockoptionsgrantedwas$1.01peroption. DuringtheyearendedJune30,2007,theCompanygranted1,560,000stockoptionswithacompensationcostof$1,184,499.TheCompanycalculatedthecompensationcostbyusingtheBlack-Scholesoptionpricingmodelassumingaweightedaveragerisk-freeinterestrateof4.6%,adividendyieldofnil,anexpectedvolatilityoftheCompany’ssharepriceof99%andexpectedlifeofthestockoptionsof5years.Theweightedaverage fair value of stock options granted was $0.76 per option.

9. RELATED PARTY TRANSACTIONS

related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. the following is a summary of the related party transactions that occurred throughout the year ended June 30:

paidoraccrued$98,000(2007-$76,000)foradministrativefeestoacompanycontrolledbythePresidentandCEOoftheCompany; a)

paidoraccrued$18,040(2007-$10,019)forlegalfeestoalegalfirmwhereadirectoroftheCompanyisanassociatecounsel; b)

paidoraccrued$33,372(2007-$Nil)forshareissuecosts(legalfees)toalegalfirmwhereadirectoroftheCompanyisanassociatecounsel; c)

paidoraccrued$9,316(2007-$Nil)forconsultingfees,whichareincludedinpropertyandequipment,tocompaniescontrolledbydirectorsofd) the Company;

paidoraccrued$27,674(2007-$Nil)forconsultingfeestoadirectorandcompaniescontrolledbydirectorsoftheCompany;and e)

paidoraccrued$Nil(2007-$10,675)forconsultingfeestoashareholderwhocontrolledordirectedmorethan10%oftheCompany’scommonshares. f)

Accountspayableandaccruedliabilitiesinclude$48,964(2007-$16,152)owingtodirectorsandcompaniescontrolledbydirectorsasatJune30,2008.

10. FINANCIAL INSTRUMENTS

a financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party. a financial asset is any asset that is i) cash; ii) a contractual right to receive cash or another financial asset from another party; iii) a contractual right to exchange financial instruments with another party under conditions that are potentially favorable to the entity; or iv) an equity instrument of another entity. a financial liability is any liability that is a contractual obligation to i) deliver cash or another financial asset to another party; or ii) exchange financial instruments with another party under conditions that are potentially unfavorable to the entity. an equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

the Company’s financial instruments consist of cash, receivables and accounts payable and accrued liabilities.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. the Company’s cash and receivables are exposed to credit risk. the credit risk on cash is small because the counterparties are highly rated banks. the majority of the Company’s receivables are with customers in the petroleum and natural gas industry and are subject to normal industry credit risks. the Company generally extends unsecured credit to these customers and therefore the collection of accounts receivable may be affected by changes in economic or other conditions. the Company believes the risk is mitigated by the size and reputation of the companies to which they extend credit. the Company has not experienced any material credit loss in the collection of accounts receivable to date.

the Company is exposed to financial risk arising from fluctuations in foreign exchange rates and the degree of volatility of those rates. the Company does not use derivative instruments to reduce its exposure to foreign currency risks.

the Company has not hedged any of its petroleum and natural gas sales.

11. INCOME TAxES

the reported income tax recovery differs from the amount computed by applying the Canadian basic statutory rate to the loss before income taxes. the reasons for this difference and the related tax effect are as follows:

2008 2007

potential income tax recovery based on reported loss $ 1,001,544 $ 1,310,734

Effectofnon-deductibleexpenses (934,038) (1,233,962)

share issuance costs 155,996 60,924

Unrecognizedbenefitofnon-capitallosses (223,502) (137,696)

$ - $ -

2008 2007

Futureincometaxassets

Non-capitallossescarriedforward $ 617,000 $ 737,000

other assets 566,000 881,000

Valuationallowanceforfutureincometaxassets (1,183,000) (1,618,000)

$ - $ -

significant components of the Company’s future tax assets are as follows:

Expiry Date Exercise Price 2008

July21,2010 $0.51 400,000

July25,2010 $0.51 -

August7,2010 $0.75 450,000

September1,2010 $0.75 9,000

June5,2012 $1.00 1,545,000

July22,2012 $1.30 790,000

October14,2012 $1.30 640,000

April27,2013 $1.40 875,000

4,709,000

stock options exercisable and outstanding are as follows:

LyndEn EnErgy | AnnUAL rEPorT 2008 » noTES To ConSoLidATEd FinAnCiAL STATEMEnTS36

june 30, 2008 june 30, 2007

CANADA $ 1,675 $ 521,502

UNITED STATES OF AMERICA 24,500,169 9,373,271

24,501,844 9,894,773

13. SEGMENTED INFORMATION

the Company currently operates in one reportable operating segment, being the acquisition, exploration and development of petroleum and natural gas properties. the Company operates in two reportable geographic segments, being Canada and the united states of america. the Company’s capital assets in geographic locations are as follows:

12. SUPPLEMENTAL CASh FLOW INFORMATION

2008 2007

Cash paid for interest $ - $ -

Cash paid for income taxes - -

net revenues credited to property and equipment included in receivables 407,830 -

purchases of property and equipment included in payables 638,928 465,426

share issue costs paid in shares and units 979,325 -

Stock-basedcompensationtransferredto share capital on exercise of stock options 44,988 -

asset retirement obligations included in property and equipment 850 23,589

Solda25%interestinpropertyinexchangefordebtandexpenses - 3,801,850

allocation of share subscriptions to common shares 2,911,500 -

allocation for warrants on issuance of units 5,312,341 -

Officers and Directors

richard andrews: Chairman and directorColin watt: president, Ceo and directorrobert Bereskin: directorJohn Mclennan: directorron paton: directorLaurieSadler: ChiefFinancialOfficer

Office

lynden energy Corp.3rdFloor,157AlexanderStreetVancouver,BCCanadaV6A1B8

Phone:604-629-2991Fax:604-602-9311

E-mail:[email protected] website: www.lyndenenergy.com

Transfer Agent

Computershare trust Company of Canada510BurrardStreet,2ndFloorVancouver,BritishColumbiaV6C3B9

Trading Symbol

TSxV: LVL

Corporate information

Printed in Canada.

TheCompanyhasaccumulatednon-capitallossesofapproximately$600,000whichmaybedeductedinthecalculationoftaxableincomeinfutureyears. the losses expire on various dates to 2028.

Duetotheuncertaintysurroundingtherealizationofincometaxassetsinfutureyears,theCompanyhasa100%valuationallowanceagainstitspotential future income tax assets.

W W W . l Y n D e n e n e R G Y . C o M

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