27 September 2022

Petrel Resources plc

("Petrel" or "the Company")

Unaudited Interim Statement for the six months ended 30 June 2022

Petrel Resources plc (AIM: PET) today announces unaudited financial results for the six months ended 30^th June 2022.

Petrel is a hydrocarbon explorer with interests in Iraq, and Ghana.

Highlights

• Petrel's Iraqi business is being re-built  although as explained below our Iraqi Director, Riadh Ani has had to resign - but requires formation of a Government for the Company to progress new funding.

• An updated Merjan oil field development proposal has been submitted to the Ministry.

• Iraqi oil output recovered to 4.65 million barrels daily in August 2022.

• Ratification discussions on Tano 2A block underway with Ghanaian authorities - though acreage adjustments likely.

• Board considers there are new expansion opportunities presented by oil price and demand recovery.

Prior to the recent elections, the Iraqi authorities had suggested that Petrel initially target "exploration of blocks in the western desert of Iraq, and present past studies done on the Merjan-Kifl-West Kifl discoveries, and Petrel's work on the Mesozoic and Paleozoic plays in the Western Desert".  Our updated development proposal requires an operating Iraqi Government in order to proceed.

Following the C-19 pandemic, Petrel Resources plc restored contacts with the Ghanaian authorities to update the acreage to be explored, and resuscitate the ratification of our signed Petroleum Agreement on Tano 2A Block.  Slowness in ratification of signed contracts had constrained the development of Ghana's oil and gas industry.  The current Ghanaian government has indicated its determination to recover momentum.  Ghanaian fiscal terms are competitive, while West African infrastructure steadily improves.

Financial markets and farm-out interest in petroleum had been depressed since the oil price war starting in 2014, and continuing periodically until 2022.  This had constrained our options for early seismic or wells in Ghana.  But recent oil & price surges show that major new investment is required to service global demand.  Petrel Resources hopes to participate in the coming boom.

Despite challenges, Iraq offers the best petroleum commercial opportunity.  Iraqi geology is unsurpassed.  Oil demand reaches new records - despite high prices constraining demand - especially in gas.  But barriers to rapid expansion are above-the-ground issues of logistics and contractual weaknesses, rather than lack of geological potential.  The solution is to align interests, so that capital, technology contracts must be updated for effective exploration and development.

Many Iraqi decision-makers have reached similar conclusions: they want to increase output to rival Saudi capacity of circa 13mmbod.  Unfortunately, the success of patriotic candidates in the 2021 elections has not yet led to an effective Government - without which there cannot be democratically-supported policy reforms. 

But Iraqi oil output has recovered to pre C-19 pandemic levels.  The Baghdad authorities are restoring control over the regions, vindicating Petrel's longstanding stance of respecting the sovereignty of the elected Government.  Recovering oil & gas demand and prices have opened room to update fiscal terms and development plans.  Some western majors, ignorant of prevailing circumstances, had bid over-optimistically on service contracts from 2009, and then found it hard to operate effectively.  Many of these have departed during the recent oil price war and pandemic.

TotalEnergies has withdrawn from Kurdistan, but continues elsewhere in Iraq.  Chinese NOCs continue to expand.  Iraq is not for the faint of heart, but there is considerable upside to be realised provided the elected government implements necessary reforms.

For several years after the 2003 Iraqi invasion, there was a perception that contractors close to western governments, and later super-majors, would dominate Iraqi oil exploration and development.  Iraqis had other ideas, however: they want partners, rather than bosses.

Iraq is sovereign, but so is finance.  The investment dollar is an orphan.  It seeks out return, and works to minimise risk - though resolute investors will carry risk if fairly compensated. 

Any investment can be considered to be worth the discounted Present Value of all cash flows (in and out).  Calculations are sensitive to timing and the discount rate.  Foreigners always see higher risks than locals do.

The more uncertainty (political, tax, operational) the higher the discount rate, & the lower the Present Value.

For capitalism to work, it must reward all the key players, whose interests should be aligned - rather than in conflict.

The biggest challenge facing Petrel in this new era is not operating conditions, access to technology or community relations.  The biggest challenge facing agile industry players is outdated contracts and fiscal terms.  The strong resurgence in demand and price will smoothen necessary reforms.

Our Iraqi Director, Riadh Ani has helped maintain strong relationships with Ministry of Oil officials, even during the darkest hours of sanctions, invasion, conflict, and Covid-19.  He has now regretfully decided to resign with immediate effect as a Non-Executive Director in order to enter public service.  Our loss will be society's gain, and we wish him the very best success in this next challenge.  Riadh's insights and introductions will help Petrel in Iraq for years to come.

Petrel Resources plc Interests (as of May 2022):

Ghana

Tano 2A Petroleum Agreement: 30% Petrel Working Interest.  Awaiting ratification, then exploration periods of 3 years initial term + 2 extension periods of 3.5 years.

Iraq

Western Desert Block 6:  100% Petrel Interest.  Awaiting ratification since 2002.  30 year term, or until early pay-out.

Prior Technical Cooperation Agreement (TCA studies, with 50% Itochu interest) on the Merjan oil-field.

What should Iraq's oil policy be now?

Unfortunately, the combination of suspicion of foreign oil companies, sanctions, and wars (including internal sectarian conflict and resistance since 2003) have held back Iraq's development, including the building of necessary oil and other infrastructure.  Iraq's government earnings and economy remains dependent on oil.

Have Service Contracts achieved their objectives for companies and Iraq?  No: even at its pre-C-19 peak of c.4.7 million barrels of oil daily (mmbod) output, Iraq fell short of its 6 to 9 mmbod 1989 plan, and the high hopes of rivalling Saudi Arabia.  There is insufficient incentive for contractors to boost production, and recoveries - while the Ministry of Oil has been hollowed out by sanctions and wars, and now unable to fill the gap.

Should the Federal Ministry of Oil negotiate Production Sharing Agreements? 

Yes: this would better align the interests of the parties, and create more wealth, value-added in downstream industries like refined products and petrochemicals, infrastructure and employment for Iraq.

The success of Qatar in LNG - or even the Emirates and Oman show what can be done with more pragmatism.

Future

Petrel is confident that necessary funding will be available for medium term ongoing activities.

David Horgan

Chairman

26 September 2022              

For further information please visit http://www.petrelresources.com/  or contact:

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement. In addition, market soundings (as defined in MAR) were taken in respect of the matters contained in this announcement, with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR.  This inside information is set out in this announcement.  Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the company and its securities.

ENDS

For further information please visit http://www.petrelresources.com/  or contact: