PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

Share premium

Share premium reserve comprises of a premium arising on the issue of shares. Share issue expenses are expensed through the statement of comprehensive income when incurred.

Capital redemption reserve

On 25 July 2018 the shareholders approved the buy back and cancellation of 16,747,368 shares for nominal consideration from Amira Petroleum N.V., Amira International Holdings Limited and their advisors.  These shares were immediately cancelled upon their repurchase and the nominal value of these shares were transferred into the capital redemption reserve.

Capital conversion reserve fund

The ordinary shares of the company were renominalised from €0.0126774 each to €0.0125 each in 2001 and the amount by which the issued share capital of the company was reduced was transferred to the capital conversion reserve fund.

Share based payment reserve

The share based payment reserve arises on the grant of share options under the share option plan.

Translation Reserve

The translation reserve arises from the translation of foreign operations. A transfer from the translation reserve to retained deficit occurred during the year as a result of the impairment of the related intangible assets.

Retained deficit

Retained deficit comprises of losses incurred in the current and prior years.

PETREL RESOURCES PLC

CONSOLIDATED CASH FLOW STATEMENT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

NOTES:

1.    ACCOUNTING POLICIES

There were no changes in accounting policies from those used to prepare the Group's Annual Report for financial year ended 31 December 2019.  The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

2.    LOSS PER SHARE

Basic loss per share

The earnings and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

Basic and diluted loss per share are the same as the effect of the outstanding share options is anti-dilutive.

3.    GOING CONCERN

The Group incurred a loss for the financial year of €450,685 (2019: loss of €1,959,099) and had net current liabilities of €341,647 (2019: €224,072) and a retained earnings deficit of €23,402,579 (2019 deficit of €23,328,048) at the balance sheet date. These conditions as well as those noted below, represent a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern.

Included in current liabilities is an amount of €677,531 (2019: €587,531) owed to key management personnel in respect of remuneration due at the balance sheet date. Key management have confirmed that they will not seek settlement of these amounts in cash for a period of at least one year after the date of approval of the financial statements or until the Group has generated sufficient funds from its operations after paying its third party creditors.

The Group and Company had a cash balance of €333,900 (2019: €367,777) at the balance sheet date.  The directors have prepared cashflow projections for a period of at least twelve months from the date of approval of these financial statements which indicate that additional finance may be required to fund working capital requirements and develop existing projects. The cashflow projections include any anticipated impacts of the Covid-19 pandemic on the Group and Company. As the Group is not revenue or cash generating it relies on raising capital from the public market. The Group completed capital raisings during the year.

As in previous years the Directors have given careful consideration to the appropriateness of the going concern basis in the preparation of the financial statements and believe the going concern basis is appropriate for these financial statements. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

4.    INTANGIBLE ASSETS

Exploration and evaluation assets relate to expenditure incurred in exploration in Ireland and Ghana. The directors are aware that by its nature there is an inherent uncertainty in Exploration and evaluation assets and therefore inherent uncertainty in relation to the carrying value of capitalized exploration and evaluation assets.

Due to legislative uncertainty since 2017, exacerbated by the Taoiseach's public statements in September 2019 against the issue of new Atlantic oil exploration licenses, Petrel has discontinued farm-out discussions with a gas super-major.  Also, the board reluctantly dropped our 100% owned and operated Frontier Exploration License (FEL) 3/14, despite multiple identified targets. Similarly, the board decided not to apply to convert our prospective Licensing Option (LO) 16/24 into a Frontier Exploration License. Accordingly, the directors have impaired in full all expenditure relating to the above mentioned licenses, resulting in an impairment charge of €51,552 in the current year and €1,613,591 in the prior year. 

During 2018 the Group resolved the outstanding issues with the Ghana National Petroleum Company (GNPC) regarding a contract for the development of the Tano 2A Block. The Group has signed a Petroleum Agreement in relation to the block and this agreement awaits ratification by the Ghanian government.                              

Relating to the remaining exploration and evaluation assets at the financial year end, the directors believe there were no facts or circumstances indicating that the carrying value of the intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangible assets is dependent on the successful discovery and development of economic reserves and is subject to a number of significant potential risks, as set out below:

·    Licence obligations;

·    Funding requirements;

·    Political and legal risks, including title to licence, profit sharing and taxation;

·    Exchange note risk;

·    Political risk;

·    Financial risk management; and

·    Geological and development risks.

Directors' remuneration of €Nil (2019: €30,000) and salaries of €Nil (2019: €15,000) were capitalised as exploration and evaluation expenditure during the financial year.

5.    SHARE CAPITAL

Movements in share capital

On 30 July 2019 a total of 44,788,913 shares were placed at a price of 1.25 cents per share. Proceeds were used to provide additional working capital and fund development costs.

On 26 May 2020 a total of 7,692,308 shares were placed at a price of 3.25 pence per share. Proceeds were used to provide additional working capital and fund development costs.

6.    POST BALANCE SHEET EVENTS

There were no material post balance sheet events affecting the Company or Group.

7.    ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held on 27^th July 2021 in the Hotel Riu Plaza The Gresham, 23 O'Connell Street Upper, Dublin 1, D01 C3W7 at 10.00 am.

8.    GENERAL INFORMATION

The financial information set out above does not constitute the Company's financial statements for the year ended 31 December 2020.  The financial information for 2019 is derived from the financial statements for 2019 which have been delivered to the Companies Registration Office.  The auditors have reported on 2019 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, investment in subsidiaries and amounts due by group undertakings. The financial statements for 2020 will be delivered to the Companies Registration Office.

A copy of the Company's Annual Report and Accounts for 2020 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com.  Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.