Baron Oil PLC Annual Report 2020

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FY2020 Annual Report · Baron Oil PLC

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Annual Report and
Financial Statements
for the year ended 31 December 2020

Contents

Annual Report and Financial Statements 2020

Section

1. Corporate Information

2. Corporate Statement

3. Chairman’s Statement & Operations Report

4. Strategic Report

5. Report of the Directors

6. Corporate Governance Statement

7. Statement of Directors’ Responsibilities

In respect of the Strategic Report, the Report of the Directors,
and the Financial Statements

8. Report of the Independent Auditors

to the Members of Baron Oil Plc

9. Consolidated Income Statement
for the year ended 31 December 2020

10. Consolidated Statement of Comprehensive Income

for the year ended 31 December 2020

11. Consolidated Statement of Financial Position

as at 31 December 2020

12. Company Statement of Financial Position

as at 31 December 2020

13. Consolidated and Company Statement of Changes in Equity

for the year ended 31 December 2020

14. Consolidated and Company Statement of Cash Flows

for the year ended 31 December 2020

15. Notes to the Financial Statements

16. Glossary of Technical Terms

Page

1. Corporate Information

Advisers & General Information

Directors

Registered Ofﬁce

John Wakeﬁeld, Non-executive Chairman
Andrew Yeo, Chief Executive Ofﬁcer
Jonathan Ford, Technical Director

Finsgate
5-7 Cranwood Street
London EC1V 9EE

Company Secretary

Geoffrey Barnes

Auditors

Solicitors

Nominated advisor
and joint broker

Joint broker

Registrars

Jeffreys Henry LLP
Finsgate
5-7 Cranwood Street
London EC1V 9EE

Armstrong Teasdale Limited
200 Strand
London WC2R 1DJ

Allenby Capital Limited
5 St Helen’s Place
London EC3A 6AB

Turner Pope Investments (TPI) LImited
8 Frederick’s Place
London EC2R 8AB

Computershare Investor Services (Ireland) Limited,
3100 Lake Drive
Citywest Business Campus
Dublin 24
D24 AK82
Ireland

Communications

Website www.baronoilplc.com

Company number:

05098776 (England and Wales)

2. Corporate Statement

Annual Report and Financial Statements 2020

Baron Oil Plc (“Baron” or “the Company”) is an independent oil and gas exploration
company headquartered in London. The Company currently holds interests in exploration
acreage in SE Asia (Timor-Leste), Latin America (Peru) and the UK. Shares in the company
are quoted in the UK on the AIM market of the London Stock Exchange – (BOIL.L).

The Company’s objective is to deliver shareholder value through generating substantial
increases in net asset value. We aim to achieve this by acquiring signiﬁcant equity interests
in potentially large oil & gas prospects where there is the opportunity for high impact
exploration and appraisal activity at low entry costs.

The Company is committed to safeguarding the environment and minimising risk to its
employees, contractors and the communities in which it works. Through developing
sustainable long-term relationships with its partners and the community, Baron aims to
conduct business and enhance value in a responsible manner.

3. Chairman’s Statement & Operations Report

Financial and Financial Results
The net result for the year was a loss before taxation of £920,000, which compares to a loss of £1,674,000 for the
preceding ﬁnancial year; the loss after taxation attributable to Baron Oil shareholders was £920,000, compared to
a loss of £1,674,000 in the preceding year.

Turnover for the year was £nil (2019: £nil), there being no sales activity during the period.

Exploration and evaluation expenditure written off included in the Income Statement amounts to £145,000. This
arises from expenditure of £114,000 in Peru on Block XXI, £29,000 in technical consultancy costs and £2,000 relating
to the relinquished P2470 licence.

Shortly after the period end on 31 January 2021, licence P1918 (Colter) and the nearby onshore licences PEDL330
and PEDL345 were relinquished. All expenditure on these licences was written off in the year, however as these
prospects had already been fully impaired in 2019, there was no impact on the Income Statement. Impairment
provisions in respect of Peru Block XXI were reduced by £133,000, this being attributable to exchange rate
ﬂuctuations on the translation of US Dollar based Peruvian assets. The directors judged that no other exploration
assets required impairment.

Administration expenditure for the year was £710,000, compared to £442,000 in the preceding year, excluding the
effects of exchange rate movements. Directors and employee costs (less £81,000 of share based charges) amounted
to £374,000; listing, compliance and other professional fees were £198,000; and other overheads £55,000. The
increase in Directors and employee cash costs are largely due to a temporary reduction in directors’ contracted
salaries in 2019.

During 2020, the Pound Sterling/US Dollar exchange rate was highly volatile, but a strengthening of the Pound
towards the end of the year gave rise to an overall exchange gain of £157,000 (loss of £41,000 in 2019) on the
Group’s holding of US Dollar assets.

At the end of the ﬁnancial year, free cash reserves of the Group had increased to £1,190,000 from a level at the
preceding year end of £347,000. The proceeds of new share issues in the year amounting to £2,500,000 gross
(£2,295,000 net of costs) bolstered the Company’s cash reserves; excluding this, the overall cash outﬂow amounted
to £1,452,000, consisting of £518,000 of investment in SundaGas (Timor-Leste Sahul) Pte.Ltd, exploration and
evaluation activity of £145,000, and £789,000 of operating cash outﬂow. During March and April 2021, the
Company undertook a further capital raise with a new ordinary share Placing and Subscription of £3,000,000 gross
(£2,768,000 net).

The Group continues to take a conservative view of its asset impairment policy, giving it a Statement of Financial
Position that consists largely of net current assets and what the Board considers to be a realistic value for its
exploration assets. Given limited cash resources, the Board will take a prudent approach in entering into new capital
expenditures beyond those expected to be committed to existing ventures.

Report On Operations

Introduction
It is hard to believe that we have now lived with the consequences of the COVID-19 pandemic for more than
18 months. We were fortunate enough to enter 2020 without any immediate drilling commitments and instead
were able to focus on desktop studies to advance our projects whilst maintaining control over costs.

The funding of the Chuditch Carry Agreement was a key milestone in March 2020 as it not only secured a substantial
asset but was achieved in the early stages of the pandemic.

3. Chairman’s Statement & Operations Report (continued)

Annual Report and Financial Statements 2020

A number of board changes were announced in October 2020, triggered by the retirement of Executive Chairman,
Dr Malcolm Butler. John Wakeﬁeld was appointed as Independent Non-executive Chairman, Jon Ford changed his
role to Technical Director, and Andrew Yeo became Chief Executive of the Company.

Southeast Asia: Timor-Leste Tl-S0-19-16 PSC (“Chuditch PSC” or “PSC”)
(Baron25%effectiveinterest,risingto63.75%post-reportingperiod)

During 2020 Baron acquired a 33.33% interest in the shares of SundaGas Timor-Leste (Sahul) Pte. Ltd. (“TLS”), the
parent company of the Timor-Leste subsidiary, SundaGas Banda Unipessoal Lda. (“Banda”), which is the Operator
of and 75% interest holder in the offshore Timor-Leste TL-SO-19-16 PSC. Banda had put in place the required
US$1 million Bank Guarantee (Baron assuming its share of US$0.333 million) against the initial work commitment,
which included the reprocessing of legacy seismic data for the ﬁrst two years of the Initial Term of the PSC. Subject
to satisfactory results from the reprocessing and other technical work, the subsequent commitment is for a well to
be drilled in the third year of the Initial Term.

The Chuditch PSC is located approximately 185 kilometres south of Timor-Leste, 100 kilometres east of the producing
Bayu-Undan ﬁeld, 50 kilometres south of the Greater Sunrise potential development, and covers approximately
3,571km2 in water depths of 50-100 metres. The Shell operated Chuditch-1 discovery in 1998, which was drilled in
64 metres water depth in a total of 25 days for around US$8 million, encountered a 25 metre gas column in Jurassic
Plover Formation reservoir sandstones on the ﬂank of what is interpreted to be a large faulted structure. The Chuditch
area was largely covered by part of a regional 3D survey which was acquired by a previous operator in 2012.

The initial work programme is designed to extract the maximum information from existing seismic data, utilising the
technical expertise of the TLS team and incorporating a training programme for Timor-Leste nationals. There are
issues with sea-bed topography and shallow geological features that impact the existing seismic image at the
reservoir level local to the Chuditch area and a pre-stack depth migration (“PSDM”) processing routine, tailored to
resolve these issues, is necessary. Although the work carried out previously by Shell determined that there were low
reservoir, seal and hydrocarbon charge risks, such modern processing is necessary to deﬁne the size and shape of the
accumulation, which impacts the gas volumes in place and the location of potential future wells. In particular, new
advances in seismic processing technology enable a considerably enhanced subsurface image to be achieved in areas
with complex seabeds and shallow geology. Accessing the original raw acquisition data for the existing seismic
volumes was therefore critical for this programme. A combination of COVID-19 lockdowns and data access issues
meant that at the 2020 year end TLS had yet to receive these key data for either 3D or 2D seismic. Despite this, the
TLS team was able to perform baseline geological and geophysical studies and establish an initial presence in Dili,
the capital of Timor-Leste.

Since the beginning of 2021 we are pleased to report that considerable progress has been made on the Chuditch PSC
project, building on the background work carried out during 2020:

•

in January 2021, we announced a signiﬁcant upgrade in TLS’s non-SPE PRMS compliant gross volumes, based
on the interpretation of legacy 2D (unreprocessed) seismic, well and regional data:

Mean gas initially in place volumes to 4,703 BCF (from 2,320 BCF)

Mean prospective resources to 3,527 BCF (from 1,508 BCF)

Inclusion of a signiﬁcant new lead within the licence area, Chuditch North East;

in February 2021, Autoridade Nacional do Petróleo e Minerais (“ANPM”, the Timor-Leste state oil and gas
regulatory authority) granted a year’s extension to Contract Year 1 of the PSC to enable the timely completion
of the committed work programme, in particular the seismic reprocessing project;

3. Chairman’s Statement & Operations Report (continued)

•

in April 2021, we announced the completion of an Earn In and executed a seismic licensing and reprocessing
contract:

increasing our interest in TLS from 33.33% to 85%, thereby increasing Baron’s effective interest in the
Chuditch PSC from 25% to 63.75%;

net share of non-SPE PRMS compliant Mean prospective resources increased from 882 BCF to 2,248 BCF
(375 MMBOE);

Baron agreed to fund the remainder of the Chuditch PSC work programme to November 2022, estimated
to be US$3.5 million. We successfully raised gross proceeds of £3 million by the issue of new shares to
enable us to commit to this programme;

Spectrum Geo Australia Pty Ltd., a wholly owned subsidiary of TGS-NOPEC Geophysical Company ASA
(“TGS”), was engaged for the licensing and reprocessing of 1,270km2 of 3D seismic data covering the
Chuditch-1 discovery and adjacent prospects.

Obtaining a material interest in a very large potential asset and getting the seismic reprocessing back on track is
judicious as we are seeing a convergence of events which together have the potential to make the Chuditch PSC an
outstanding asset for the Company:

•

an acceleration in Timor-Leste regional hydrocarbon exploitation, including drilling activity and planned
extensions of existing infrastructure;

exposure to the SE Asia liquid natural gas (“LNG”) market, where future demand is forecast to exceed supply;

a sufﬁcient level of prospective resources to attract the interest of major regional gas players and other potential
funding partners.

The seismic reprocessing results are likely to be delivered across the period from 4th quarter 2021 to 2nd quarter
2022. Seismic data interpretation, geological and other studies will occur in parallel ahead of a decision by Q4 2022
on whether to enter the drilling phase, with the potential for a high impact drilling programme in 2023.

The recent uptick in oil & gas activity in Timor-Leste follows the Santos US$1.25 billion acquisition of ConocoPhillips’
northern Australia and Timor-Leste assets, completed in May 2020. This package delivered Santos operatorship of
a portfolio of natural gas assets (Bayu-Undan and Barossa), partnerships with some of SE Asia’s largest LNG players,
power generators and utility companies, and a strategic holding in LNG infrastructure of pipelines and the Darwin
LNG plant located at Wickham Point, Northern Territories, Australia. This interconnected system, centred on Bayu-
Undan (the only producing ﬁeld currently in Timor-Leste), is key to the evacuation and monetisation of gas from the
Timor Sea area. The Chuditch PSC lies only 100 kilometres east of these facilities.

Santos and its partners have so far committed to expenditure of more than US$4.5 billion to extend the life of
existing ﬁelds and pipelines, bring new ﬁelds onstream, and increase capacity at the Darwin LNG plant from around
4 million tonnes per annum (mtpa) to 10mtpa. There are also moves being made by ENI (operator of the Evans
Shoal and Blackwood gas ﬁelds) and Santos to cooperate in offshore developments in northern Australia and
Timor-Leste, the sharing of infrastructure, and CO2 capture and storage with a Joint Memorandum of Understanding
being announced in May 2021.

In the context of these ongoing activities, the Chuditch PSC is well placed to beneﬁt from these activities, in terms
of future operational synergies and commercial development of gas in the event of drilling success at Chuditch.

3. Chairman’s Statement & Operations Report (continued)

Annual Report and Financial Statements 2020

Peru: Block XXI, Onshore Licence (Baron 100%)
Baron has a 100% operated interest in onshore Block XXI, in the Sechura Desert of northern Peru. As indicated
in March 2021, the Company intends to make a decision on the drilling of the El Barco-3X project during the
second half of 2021. We maintain a preference for bringing in a drilling partner with operator capabilities as we
believe this represents the best way to develop and monetise any discovery. However, strict COVID restrictions
remain in place throughout Peru, which prevents any progress in relation to the drilling project, and it is unclear
when and how quickly oil and gas exploration activity will be allowed to recommence. Currently the licence
remains in Force Majeure.

Our application for a three year extension option to the licence, a prerequisite for attracting a drilling partner, given
that we currently have only six months to drill and evaluate well results once Force Majeure is lifted, is currently being
assessed by Perupetro, the Peru state regulatory authority. Once approved, this will trigger a prescribed Government
process which, if successful, should allow a way forward for the project. In the Piura area where the proposed well
is situated, we are required to undertake workshops with the local communities of Belisario and El Barco ahead of
any drilling authorisation.

United Kingdom Offshore Licence P2478 (Baron 15%)
Innovate Licence P2478, awarded in September 2019, is held by Corallian Energy Limited (Operator, 45%), Upland
Resources (UK Onshore) Limited (40%) and Baron (15%). The licence’s current modest work commitment is to
undertake reprocessing of legacy 2D and 3D seismic data and perform other studies in order to reduce risk and reﬁne
volumetric estimates ahead of making a “drill or drop” decision before the end of Phase A of the licence period in
July 2023.

Covering blocks 12/27c, 17/5, 18/1 and 18/2 in the Inner Moray Firth area of the North Sea, the licence contains the
Dunrobin prospect which consists of large shallow rotated fault blocks which are mapped mostly on 3D seismic
data including Direct Hydrocarbon Indicators. The prospect is understood to be one of the few remaining targets with
Pmean prospective resources of the order of 100 MMBOE yet to be drilled in the North Sea.

In April 2020, the joint venture partners signed a Work Sharing and Conﬁdentiality Agreement with a large European
E&P Company (“Interested Party”) for licence P2478. Under the terms of the agreement the Interested Party
completed its own regional technical work and shared its data and interpretations over the area with Corallian and
its partners in February 2021. The technical studies delivered by the Interested Party conﬁrmed and enhanced our
geological understanding and corroborated our view of Dunrobin as a potentially attractive and substantial target.
The results are being incorporated into the ongoing work programme which includes preparations for the seismic
reprocessing in order to reduce further the pre-drill risk on the prospect.

Other United Kingdom Licences
In keeping with its revised strategy to focus on high potential impact projects, and by way of the normal course of
portfolio management, Baron has relinquished its interests in all other United Kingdom Licences.

3. Chairman’s Statement & Operations Report (continued)

Conclusions
Over the next 12 months our focus – both operational and ﬁnancial – will be on driving the Chuditch PSC forward.
Through the operator SundaGas Banda we have already engaged TGS, and will be working with them to undertake
the critical 3D seismic reprocessing which will provide an up-to-date assessment of the true potential of the Chuditch
discovery and offset prospects.

Notwithstanding the expected beneﬁts of global economic recovery as normality gradually returns, SE Asia gas
prices are already ahead of pre-COVID levels. An acceleration in Timor-Leste’s oil & gas activity is expected and the
Chuditch PSC with its potential Mean gross prospective resources of 3,527 BCF of gas is sufﬁcient to get noticed. The
Earn In increased Baron’s net share of estimated non-SPE PRMS compliant Mean gas prospective resources to
2,248BCF (equivalent to 375MMBOE).

Activity in Peru is likely to remain subdued in the short term.

In the UK, we expect to see activity on P2478 once the results of the regional technical work have been incorporated
into the ongoing work programme. Whilst we only have a modest 15% interest, it remains a signiﬁcant opportunity.

The Company continues to screen opportunities for acquiring signiﬁcant equity interests in high potential impact
exploration and appraisal activity at low entry costs.

As for the next twelve months, our current commitments are fully funded and we look forward to executing on our
ambitious plans.

I would like to thank my colleagues and partners for their warm welcome and hard work in ensuring that Baron is
well-placed to evaluate the potential of its Chuditch asset during the current year as well as consider opportunities
for our other and future assets in due course.

John Wakeﬁeld
Non-executiveChairman

26 May 2021

4. Strategic Report

Annual Report and Financial Statements 2020

The directors now present their strategic report with the ﬁnancial statements of Baron Oil Plc (“the Company”) and
its subsidiaries (collectively “the Group”) for the year ended 31 December 2020.

Principal activities
The principal activity of the Group is that of oil and gas exploration.

Business review
A review of the Group’s business during the ﬁnancial period and its likely development is given in the Chairman’s
Statement & Operations Report.

Key performance indicators (KPIs)
The KPIs for 2020 included the management of cash resources; concluding the Chuditch PSC agreements; and drilling
the El-Barco well in Peru; the results for which are as follows:

•

The board took an early view that activities would be negatively impacted by the onset of the COVID-19
pandemic, particularly around drill site access in Peru. We therefore focused efforts on desk top studies to
advance our projects whilst maintaining control over costs. We ended the year, having made a £0.518 million
investment in SundaGas (Timor-Leste Sahul) Pte.Ltd, with free cash reserves (net of the Peru Performance
Bond) of £1.19 million (£0.347 million: 2019).

• We concluded the Chuditch Agreements which resulted in Baron acquiring a 33.33% shareholding in TLS. A
combination of COVID-19 lockdowns and data access issues meant that we were unable to advance to an
independent assessment of the resources of the Chuditch-1 discovery and surrounding structures, but in January
2021 we were able to announce a signiﬁcant upgrade in estimated non-SPE PRMS compliant gross volumes
based on the interpretation of legacy 2D seismic, well and regional data. Since then we have been granted a
year’s extension to Contract Year 1 of the PSC licence term and increased our shareholding in TLS to 85% by
way of an Earn In.

•

Tight COVID restrictions in Peru throughout the year prevented any progress towards the drilling of the El
Barco-3x well. However, the licence currently remains in good standing despite being in Force Majeure.

The KPIs for 2021 are operational:

•

Progress existing ventures to deliver on Baron’s strategic objectives;

In particular, work closely with the TLS team and TGS to ensure that the Chuditch reprocessing project extracts
the maximum information from the existing seismic data, delivers on time and satisﬁes the PSC work
commitment;

Continue to screen and bring forward new opportunities which are consistent with Baron’s new asset criteria.

Key risks and uncertainties
Exploration for hydrocarbons is speculative and involves signiﬁcant degrees of risk. The key risks and their impact to
the Group are summarised below along with the impact on the Group and the action that the Board takes to minimise
those risks.

Oil and Gas prices
The Group’s results and activities are and will be inﬂuenced by oil and gas prices which are dependent on a number
of factors impacting both world and regional supply and demand. Due to these factors, oil and gas prices may be
subject to signiﬁcant ﬂuctuations from year to year. While we are not insulated from any particular oil price shock,
it should be noted that the Group’s assets are all in the pre-production exploration phase. Following the award of
the Chuditch PSC and the Earn In, the Group is now more heavily weighted towards gas where regional markets
play a greater role in pricing.

4. Strategic Report (continued)

Impact
Oil and gas prices can ﬂuctuate widely and could have a material impact on the Group’s asset values, revenues,
earnings and cash ﬂows. In addition, price increases could cause supply or capacity constraints in areas such as
specialist staff or equipment.

Action
The Group keeps under regular review its sensitivity to ﬂuctuations in oil and gas prices. As we do not have any
assets in production at the current time, the Group has no need to hedge oil or gas prices. However, in the future
we may enter into a hedge programme for oil or gas where the Board determines it is in the Group’s interest to
provide greater certainty over future cash ﬂows.

COVID-19
There is growing optimism that the worst may be behind us in terms of the COVID-19 pandemic with experience,
vaccination, seasonality, and acquired immunity all playing a part. However, it remains unclear how long and in what
form business conﬁdence will return. This is not just a case of economics.

Impact
Drilling activity requires site access and the provision of services which remain adversely affected by the pandemic,
which is particularly the case for our Peru project.

Action
The Group’s proposed work programme for the next 12 months is funded. There is no obligation to drill before 2023
in Timor-Leste or the UK. In Peru, until COVID-19 restrictions are lifted little progress can be made; thereafter,
permitting requirements will need to be in place before drilling can commence.

Performance guarantees
The Group has given performance guarantees in respect of its licence in Peru and the PSC in Timor-Leste. In the
event that work commitments under the licences are not met, then these guarantees are likely to be called in.

Impact
In the event that the Group forfeits a deposit under any guarantee, this will lead to a permanent reduction in asset
value. The Peru guarantee sums are shown as cash not available on the Consolidated and Company Statement of
Cash Flows; for Timor-Leste they are shown as a receivable since the Company’s interest in SundaGas (Timor-Leste
Sahul) Pte.Ltd is not consolidated.

Action
The Group actively manages its work programmes under the licences to the extent that it is able to, paying close
attention to milestones and expiry dates, in order to minimise the risk that licence commitments are not met.

Liquidity
The Group is exposed to liquidity risks, including the risk that ﬁnancial assets cannot readily be converted to cash
without the loss of value.

Impact
Failure to manage ﬁnancing risks could have a material impact on the Group’s cash ﬂows, earnings and ﬁnancial
position as well as reducing the funds available to the Group for working capital, capital expenditure, acquisitions,
future dividends and other general corporate purposes.

Action
The Group manages liquidity risk by maintaining adequate levels of cash balances.

4. Strategic Report (continued)

Annual Report and Financial Statements 2020

Taxation
As the tax legislation in South America and Timor-Leste is developing, tax risks are substantially greater than typically
found in countries with more developed tax systems. Tax law is evolving and is subject to different and changing
interpretations, as well as inconsistent enforcement. Tax regulation and compliance is subject to review and
investigation by the authorities who may impose severe ﬁnes, penalties and interest charges.

Impact
The uncertainty of interpretation and application, and the evolution, of tax laws create a risk of additional and
substantial payments of tax by the Group, which could have a material adverse effect on the Group’s cash ﬂows,
earnings and ﬁnancial position.

Action
The Group makes every effort to comply with tax legislation. The Group takes appropriate professional tax advice
and works closely with the tax authorities to ensure compliance.

Currency
Currency risk arises because the Group has operations whose functional currency is not the same as the functional
currency that the Group operates under. It is the Group’s policy to ensure that individual Group entities enter into
local transactions in their functional currency wherever possible.

Impact
With the addition of Baron’s interest in the Chuditch PSC, alongside Peru, some 60% of Baron’s expenditure is now
transacted in US Dollars. The Company, its directors and main banking arrangements continue to be based in the UK
and reports in Sterling.

Action
Corporate and capital expenditure budgets are set annually, partly by the Group and partly at the asset level, and
reviewed regularly. Due to the nature of the project arrangements, typically monthly cash calls with a two month
forecast, monies are held in US Dollars in the UK and transferred overseas as required. It is the Group’s policy to look
to cover up to 12 months expenditure in any given currency at or around the level of the agreed budget. Due to the
relatively modest amount of overall expenditure, the Company has not previously entered into any hedging
arrangements or structured products.

S172 Companies Act 2006
Refer to the statement, Directors’ duties – S172 Companies Act 2006 Directors’ duties to promote the long-term
success of the Company, on page 18.

By order of the Board

John Wakeﬁeld
Non-executiveChairman

26 May 2021

5. Report of the Directors

The directors submit their report together with the audited ﬁnancial statements of Baron Oil Plc (“the Company”)
and its subsidiaries (collectively “the Group”), for the year ended 31 December 2020.

Directors
The following are biographical details of the directors of Baron Oil Plc.

John Wakefield, Non-executive Chairman
John Wakeﬁeld, aged 66, is an experienced quoted company director, corporate ﬁnancier and nominated adviser.
He qualiﬁed as a solicitor with McKenna & Co and lectured in law at the University of Newcastle before moving into
corporate ﬁnance. He is currently a NED at Drumz plc (LSE:DRUM.L) and has been a member of the AIM Advisory
Group, chairman of the London Stock Exchange Regional Advisory Group for the South West, and chairman of South
West Angel and Investor Network Limited (SWAIN). He holds a Bachelor of Civil Law degree from Oxford.

Andrew Yeo, Chief Executive Officer
Andy Yeo, aged 58, has signiﬁcant expertise in the oil and gas sector, having had a variety of roles including private
equity and operational and ﬁnancial experience in exploration and production activities as CFO of Wessex Exploration
PLC. In addition, he brings more than 20 years’ experience in multi-discipline corporate advisory services, having
worked for UBS and ABN AMRO Hoare Govett before becoming a founder member of Evolution Securities, where
he was a board member and executive director.

Jonathan Ford, Technical Director
Jon Ford, aged 61, has more than 39 years’ experience in the upstream oil and gas industry in a variety of roles in
petroleum geoscience and senior management. Following an initial 10 years with BP in the UK, the Netherlands,
Italy and Indonesia, Jon has worked worldwide in the junior sector as a senior technical manager for listed oil
companies including Clyde Petroleum, Paladin Resources and Stratic Energy, and advised multiple clients as a
consultant. Jon has a BSc in Geology & Geophysics from Durham University and is a Fellow of the Geological Society.

Dr Malcolm Butler resigned from the Board on 30 October 2020.

Proposed dividend
The directors do not recommend the payment of a dividend in respect of the ﬁnancial year ended 31 December
2020.

Policy and practice on payment of creditors
The Group and Company policy, in relation to all of its suppliers, is to settle the terms of payment when agreeing
the terms of the transactions and to abide by those terms. The Group and the Company do not follow any code or
statement on payment policy. The creditor days as at 31 December 2020 were 12 days (2019: 18 days).

5. Report of the Directors (continued)

Annual Report and Financial Statements 2020

Activities and results
A loss of £920,000 (2019: £1,674,000), of which £920,000 (2019: £1,674,000) was attributable to equity
shareholders, was recorded for the year. Net assets of the Group at 31 December 2020 amounted to £1,796,000
(2019: £455,000), of which £1,796,000 (2019: £455,000) was attributable to equity shareholders. No dividends or
transfers to reserves are proposed.

Details of the Group’s affairs and the development of its various activities during the period, important events since
the period end, and details of the Company’s plans for the next year are given in the Chairman’s Statement &
Operations Report.

Issue of shares
During the year, the Company issued 2,500,000,000 Ordinary Shares of 0.025p each, raising £2,500,000 gross
(£2,295,000 net of costs), see also Events after the Reporting Period below.

The Environment
The Company is ﬁrmly committed to protecting the environment wherever it does business. We will do our utmost
to minimise the impact of the business on the environment. Both the Company and its employees will try to be
recognised by regulatory agencies, environmental groups and governments where we do business for our efforts to
safeguard the environment.

Community
The directors believe it is the Group’s responsibility as a good corporate citizen to improve the quality of life in the
communities in which it does business. Where possible, the Group will seek to contribute towards local cultural and
educational organisations.

Future outlook
Details of the Group’s affairs and the development of its various activities during the period, important events since
the period end, and details of the Company’s plans for the next year are given in the Chairman’s Statement &
Operations Report.

Directors’ interests
The interests of the directors who were in ofﬁce at the year end, and their families, in the issued share capital of the
Company are as follows:

M Butler (resigned 30 October 2020)
A Yeo
J Ford

31 December 2020

31 December 2019

No. of
Ordinary
shares

–
106,250,000
7,500,000

%
Holding

No. of
Ordinary
shares

– 26,000,000
2.4% 56,250,000
–
0.2%

113,750,000

2.6% 82,250,000

%
Holding

1.4%
2.9%
–

4.3%

5. Report of the Directors (continued)

Options held by the directors are as follows:

M Butler (resigned 30 October 2020)

A Yeo

J Ford

Total

31 December 2020
Number of
options
£0.0035(1)

31 December 2019
Number of
Options
£0.0035(1)

–

20,000,000

Number of
options
£0.00435(2)

Number of
Options
£0.00435(2)

–

10,000,000

Number of
options
£0.0044(3)

Number of
Options
£0.0044(3)

10,000,000

Number of
options
£0.001(4)

125,000,000

Number of
options
£0.001(5)

75,000,000

Number of
Options
£0.001(4)

–

Number of
Options
£0.001(5)

–

210,000,000

40,000,000

(1)

(2)

(3)

(4)

(5)

Each £0.0035 option grants the holder the right to subscribe for one Ordinary Share at £0.0035 per share, and were granted under one
option contract exercisable at any time prior to 7 July 2020.

Each £0.00435 option grants the holder the right to subscribe for one Ordinary Share at £0.00435 per share, and are granted under one
option contract exercisable at any time prior to 27 November 2021.

Each £0.0044 option grants the holder the right to subscribe for one Ordinary Share at £0.0044 per share, and are granted under one option
contract exercisable at any time prior to 3 December 2021.

Each £0.001 option grants the holder the right to subscribe for one Ordinary Share at £0.001 per share, and are granted under one option
contract exercisable at any time prior to 26 May 2030.

Each £0.001 option grants the holder the right to subscribe for one Ordinary Share at £0.001 per share, and are granted under one option
contract exercisable at any time prior to 10 November 2030.

Except as shown in note 27 to the Financial Statements (Related Party Transactions) on page 62, there have been
no contracts or arrangements of signiﬁcance during the period in which the directors of the Company were interested.

Currently there are service contracts in place with all directors of the Company and the contracts are available for
inspection at the registered ofﬁce of the Company on request.

Remuneration policy
The Remuneration Committee takes into account both Company and individual performance, market value and
sector conditions in determining director and senior employee remuneration. The Company maintains a policy of
paying fair salaries compared with peer companies in the independent oil and gas sector. All current salaries are
without pension beneﬁts.

The Remuneration Committee has reviewed the incentive opportunities available for the management team. It
identiﬁed four main elements of the Remuneration Package for Executives: Base Salary, Beneﬁts, Share Options and
Discretionary Bonuses. As part of these arrangements the Company has created an Enterprise Management Incentive
(EMI) share option scheme. The EMI is an HMRC approved tax efﬁcient option scheme that enables companies to
attract and retain key staff by rewarding them with equity participation in the business.

5. Report of the Directors (continued)

Annual Report and Financial Statements 2020

Salaries and beneﬁts
Basic salaries are reviewed annually or when individuals change positions or responsibility or the Company’s position
changes. Details of salaries plus non-cash beneﬁts paid during the year are shown below.

Chairman
M Butler (resigned 30 October 2020)
J Wakeﬁeld (appointed 30 October 2020)

Executive Directors
A Yeo
G Barnes (resigned 31 March 2019)
J Ford (Non-executive until 30 October 2020)

2020
(£)

2019
(£)

73,493
8,333

164,497
–
36,667

61,333
–

97,000
19,000
15,000

282,990

192,333

Refer to note 27 on page 62 for details of related party transactions with companies controlled by directors.

The share options held by the directors are disclosed above and no pension contributions were made during the
period for the directors. The directors did not receive any other emoluments, compensation or cash or non-cash
beneﬁts other than that disclosed above.

Employees
The Group seeks to keep employees informed and involved in the operations and progress of the business by means
of regular staff meetings by country open to all employees and directors.

The Group operates an equal opportunities policy. The policy provides that full and fair consideration will be given
to disabled applications for employment and that existing employees who become disabled will have the opportunity
to retrain and continue in employment wherever possible.

Events after the Reporting Period
On 26 March 2021, the Company issued 1,525,000,000 new ordinary shares of 0.025p each, followed by a further
issue of 4,475,000,000 new ordinary shares of 0.025p each on 14 April 2021. The two share issues combined was
for new capital of £3,000,000 gross, £2,768,000 net of costs. It is intended that the proceeds of the placing and
subscription are used to increase its equity stake in SundaGas (Timor-Leste Sahul) Pte.Ltd (“SundaGas TLS”), to fund
the Company’s share of the ongoing TL-SO-19-16 PSC (“Chuditch PSC”) work programme in Timor-Leste as well as
providing additional working capital.

On 23 April 2021, the Company increased its shareholding in SundaGas TLS from 33.3% to 85% at a cost of
£890,000. The sole asset of SundaGas TLS is its 100% shareholding in SundaGas Banda Unipessoal Lda., Operator
of the Chuditch PSC, in which it holds a 75% interest.

Financial Review

Liquidity & Share Trading
The Board believes that liquidity is important in attracting both small and institutional investors to Baron.

5. Report of the Directors (continued)

Shares in Issue and Shareholders Profile
The number of shares in issue at 17 May 2021 was 10,426,406,576 Ordinary Shares, each share having equal voting
rights. Baron Oil Plc has 1,136 shareholders.

The shareholding distribution at 17 May 2021 is as follows:

Range

>10%
5-10%
1-5%
0.5-1%
<0.5%

No of shares

No of shareholders

5,767,084,556
601,133,174
1,964,321,182
770,095,547
1,323,775,117

10,426,409,576

4
1
8
10
1,113

1,136

Significant shareholdings
The Company has been informed that, as of 17 May 2021, the following shareholders owned 3% or more of the
issued share capital of the Company:

Name

Hargreaves Lansdown (Nominees) Limited
JIM Nominees Limited
Interactive Investor Services Nominees Limited
HSDL Nominees Limited
Barclays Direct Investing Nominees Limited
Vidacos Nominees Limited

% of company

2,052,791,885
1,387,257,471
1,272,482,050
1,054,553,150
601,133,174
519,844,524

19.69%
13.31%
12.20%
10.11%
5.77%
4.99%

Listing
The Company’s ordinary shares have been traded on the AIM market of the London Stock Exchange since 14 July
2004. Allenby Capital Limited is the Company’s Nominated Adviser and Joint Broker; Turner Pope Investments (TPI)
Limited is the Company’s other Joint Broker. The closing mid-market price on 17 May 2021 was 0.1p.

Financial instruments
Details of the ﬁnancial risk management objectives and policies, and details on the use of ﬁnancial instruments by
the Company and its subsidiary undertakings, are provided in note 22 to the ﬁnancial statements on page 57.

Going concern
The directors have prepared a cash ﬂow forecast covering a period extending beyond 12 months from the date of
these ﬁnancial statements which contains certain assumptions about the development and strategy of the business.
The directors are aware of the risks and uncertainties facing the business but the assumptions used are the directors’
best estimate of its future development.

After considering the forecasts and the risks, the directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt
the going concern basis of accounting in preparing the annual ﬁnancial statements.

The ﬁnancial statements do not include any adjustments that would result if the Group was unable to continue as
a going concern.

5. Report of the Directors (continued)

Annual Report and Financial Statements 2020

Publication on company’s website
Financial statements are published on the Company’s website (www.baronoilplc.com). The maintenance and integrity
of the website are the responsibility of the directors. The directors’ responsibility also extends to the ﬁnancial
statements contained therein. Legislation in the United Kingdom governing the preparation and dissemination of
ﬁnancial statements may differ from legislation in other countries.

Indemnity of ofﬁcers
The Group may purchase and maintain, for any director or ofﬁcer, insurance against any liability and the Group does
maintain appropriate insurance cover against legal action brought against its directors and ofﬁcers.

By order of the Board

Geoffrey Barnes
Secretary

26 May 2021

6. Corporate Governance Statement

The directors recognise the importance of sound corporate governance. The Company has adopted the 2018 QCA
Corporate Governance Code (“QCA Code”), which the directors consider appropriate for a company of its size and
nature. The QCA Code takes key elements of good governance and allows companies to apply them in a manner
which is appropriate for the differing needs of small companies. The “Comply or Explain” regime allows companies to
inform shareholders where policies differ from the norm and why. The details of the Company’s policies in this respect
are set out in its AIM Notice 50 Statement, which can be downloaded from the Company’s website.

The Board
The Board comprises two executive directors and one non-executive director, details of whom are contained in the
Report of the Directors included in this report.

The Board meets at least four times a year.

The Board is responsible for the strategy, review and approval of acquisition opportunities, capital expenditures,
budgets, trading performance and all signiﬁcant ﬁnancial and operational issues.

The Audit Committee
The Audit Committee is comprised of two directors with John Wakeﬁeld as Chairman and Jon Ford as the other member.
The Audit Committee meets at least twice a year and the external auditors have the opportunity to meet with members
of the Audit Committee without any executive management being present. The Audit Committee’s terms of reference
include the review of the Interim and Annual Financial Statements, review of internal controls, risk management and
compliance procedures, consideration of the Company’s accounting policies and all issues with the annual audit.

The Remuneration Committee
The Remuneration Committee is comprised of three directors with John Wakeﬁeld as Chairman and Jon Ford and Andy
Yeo as the other members. The Remuneration Committee determines the contract terms, remuneration and other
beneﬁts of the directors and senior employees. The Remuneration Committee meets as required, but at least twice a year.

The Nominations Committee
Due to the small size of the Group, it is not considered necessary to have a Nominations Committee at this time in
the Company’s development and the Board reserves to itself the process by which a new director is appointed.

Communications
The Company provides information on Group activities by way of press releases, Interim and Annual Financial
Statements and also its website (www.baronoilplc.com). The Company’s website is updated regularly and contains all
operational reports, press releases and Interim and Annual Financial Statements.

Internal control
The Board has the overall responsibility for identifying, evaluating and taking the necessary action to manage the risks
faced by the Company and the Group. The process of internal control is not to eliminate risk, but to manage the risk
to reasonably minimise loss.

Directors’ duties – S172 Companies Act 2006 Directors’ duties to promote the
long-term success of the Company
The directors behave and carry out their activities to promote long-term success of the Group for the beneﬁt of the
Company’s shareholders, employees, suppliers and other stakeholders. They engage with shareholders, employees,
suppliers and other stakeholders to reﬂect their insights and views when making decisions on strategy; delivering
operational effectiveness; making plans; driving initiatives; and committing to deliver outcomes that enhance social
value. The culture and values promoted by the directors create a focus across the Group on observing and maintaining
the highest standards of business conduct whilst promoting the long-term success of the Company.

Annual Report and Financial Statements 2020

7. Statement of Directors’ Responsibilities
in respect of the Strategic Report, the Report of the Directors and the Financial Statements

Directors’ responsibilities
The directors are responsible for preparing the annual report and the ﬁnancial statements in accordance with
applicable law and regulations.

Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial period in accordance with
applicable law and International Financial Reporting Standards (“IFRS”) as adopted by the European Union. Under
Company law the directors must not approve the ﬁnancial statements unless they are satisﬁed that they give a true
and fair view of the state of affairs of the Group and Company and of the proﬁt or loss of the Group for that year.
The directors are also required to prepare the ﬁnancial statements in accordance with the rules of the London Stock
Exchange for companies trading securities on the AIM market.

In preparing those ﬁnancial statements, the directors are required:

•

to select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether ﬁnancial statements have been prepared in accordance with IFRS as adopted by the European
Union subject to any material departures disclosed and explained in the ﬁnancial statements;

prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Group
and the Company will continue in business.

The directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at
any time the ﬁnancial position of the Company and the Group and to enable them to ensure that the ﬁnancial
statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and the Group and to prevent and detect fraud
and other irregularities.

Statement of disclosure to auditors
So far as the directors are aware, there is no relevant audit information of which the Group’s auditors are unaware,
and they have taken all steps that they ought to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that the Group auditors are aware of that information.

Auditors
A resolution for the reappointment of Jeffreys Henry LLP as auditors will be proposed at the forthcoming Annual
General Meeting.

By order of the board

John Wakeﬁeld
Non-executiveChairman

26 May 2021

8. Report of the Independent Auditors
to the Members of Baron Oil Plc

Opinion
We have audited the ﬁnancial statements of Baron Oil PLC (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 31 December 2020 which comprise the consolidated income statement, consolidated statement
of comprehensive income, consolidated statement of changes in equity, company statement of changes in equity,
consolidated statement of ﬁnancial position, company statement of ﬁnancial position, consolidated statement of
cash ﬂows, company statement of cash ﬂows and notes to the ﬁnancial statements, including a summary of
signiﬁcant accounting policies. The ﬁnancial reporting framework that has been applied in the preparation of the
group ﬁnancial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The ﬁnancial reporting framework that has been applied in the preparation of the parent
company ﬁnancial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union.

In our opinion:

•

the ﬁnancial statements give a true and fair view of the state of the group’s and of the parent company’s affairs
as at 31 December 2020 and of the group’s loss for the year then ended;

the group ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;

the parent company ﬁnancial statements have been properly prepared in accordance with IFRS’s as adopted by
the European Union; and

the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the ﬁnancial statements section of our report. We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the ﬁnancial statements in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulﬁlled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis
for our opinion.

Conclusions relating to going concern
In auditing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the ﬁnancial statements is appropriate. Our evaluation of the directors’ assessment
of the entity’s ability to continue to adopt the going concern basis of accounting included a detailed review of the
Group’s forecasts in comparison to available management accounts at the date of these ﬁnancials to assess the
reasonability of the estimates made. We have further performed a sensitivity analysis to conclude on the degree to
which current cash reserves will be able to sustain the Group for at least a further twelve months from the date of
these ﬁnancials.

Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or
conditions that, individually or collectively, may cast signiﬁcant doubt on the Group’s ability to continue as a going
concern for a period of at least twelve months from when the ﬁnancial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.

Annual Report and Financial Statements 2020

8. Report of the Independent Auditors (continued)
to the Members of Baron Oil Plc

Our audit approach

Overview
Keyauditmatters
Key audit matters are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the
ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material misstatement
(whether or not due to fraud) we identiﬁed, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters. This is not a complete list of all risks identiﬁed by
our audit.

•

Impairment of intangible exploration and evaluation assets.

Impairment of parent company investment in associate and recoverability of loan to associate.

These are explained in more detail below

Auditscope
• We conducted audits of the Group and Parent Company ﬁnancial information of Baron Oil Plc.

• We performed speciﬁed procedures over certain account balances and transaction classes at other Group

companies.

•

Taken together, the Group companies over which we performed our audit procedures accounted for 100% of
the absolute proﬁt before tax (i.e. the sum of the numerical values without regard to whether they were proﬁts
or losses for the relevant reporting units) and 100% of revenue.

Key audit matters

Key audit matter

How our audit addressed the key audit matter

Carrying value of intangible assets – Group financial
statements
The Company had intangibles of £18k at the year ended
31 December 2020. (31 December 2019: £5k). The total
value of exploration and evaluation costs expensed
during the period is £145k. A reduction in impairment of
£59k was considered at year end due to currency
exchange translation.

IFRS 6 Exploration for and Evaluation of Mineral
Resources sets out the requirement under which an E&E
asset is assessed for impairment.

The impairment review performed by directors shows
that an impairment was not required for Inner Moray
Firth project at the end of the reporting period.

We have assessed and understood the methodology
used by the directors in this analysis and determined it
to be reasonable.

Intangibles are only assessed for impairment when
indicators of impairment exist.

The Group continues farm-in discussions on Block XXI
to ﬁnance drilling within six months of the end of Force
Majeure on the licence.

We have assessed the ongoing projects’ viability and
ensure that they met the criteria deﬁned in the
accounting standards.

8. Report of the Independent Auditors (continued)
to the Members of Baron Oil Plc

Key audit matter

How our audit addressed the key audit matter

Impairment of the parent company investment in
and loan to associate
The Company had investment in an associate of £194k
at the end of the reporting period. During the current
period, the Company made a loan to associate of £323k.

The Directors have conﬁrmed that the investment in and
loan to associate were adequately recognised and
disclosed, with no impairment being recognised at the
end of the reporting period.

We have
assessed the methodology used by
management to estimate the recoverable amount of the
investment and the loan.

We have assessed the reasonableness of the key
assumptions used in management’s estimates of the
recoverable value.

We have assessed the recoverability of loan provided to
associate in line with the contractual agreement any
related conditions and obligations, to ensure appropriate
value is disclosed at the end of the reporting period.

Based on the audit work performed, we are satisﬁed that
management have performed the impairment review
appropriately and in accordance with the relevant
accounting standards.

Our application of materiality
The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in aggregate on the ﬁnancial statements as a whole.

Based on our professional judgment, we determined materiality for the ﬁnancial statements as a whole as follows:

Overall materiality

Group ﬁnancial statements

Company ﬁnancial statements

£52,000 (31 December 2019:
£43,000).

£50,000 (31 December 2019:
£42,000).

How we determined it

Based on 5% of loss before tax.

Rationale for benchmark applied

We believe the most adequate basis
for materiality is based on loss
before tax as a primary measure
used by shareholders in assessing
the performance of the Group. This
is a generally accepted auditing
benchmark.

We believe the most adequate basis
for materiality is based on loss
before tax as a primary measure
used by shareholders in assessing
the performance of the Company.
This is a generally accepted auditing
benchmark.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components is ranged from £6,000 and £52,000.

We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above
£2,600 (Group audit) (31 December 2019: £2,150) and £2,500 (Company audit) (31 December 2019: £2,100) as
well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

Annual Report and Financial Statements 2020

8. Report of the Independent Auditors (continued)
to the Members of Baron Oil Plc

An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
ﬁnancial statements. In particular, we looked at where the directors made subjective judgments, for example in
respect of signiﬁcant accounting estimates that involved making assumptions and considering future events that are
inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
ﬁnancial statements as a whole, taking into account the structure of the Group and the Company, the accounting
processes and controls, and the industry in which they operate.

The Group ﬁnancial statements are a consolidation of 2 reporting units, comprising the Group’s operating businesses
and holding companies.

We performed audits of the complete ﬁnancial information of the Group and Parent Company of Baron Oil Plc
reporting units, which were individually ﬁnancially signiﬁcant and accounted for 100% of the Group’s revenue and
100% of the Group’s absolute proﬁt before tax (i.e. the sum of the numerical values without regard to whether they
were proﬁts or losses for the relevant reporting units). We also performed speciﬁed audit procedures over goodwill
and other intangible assets, as well as certain account balances and transaction classes that we regarded as material
to the Group at the 2 reporting units.

The Group engagement team performed all audit procedures, with the exception of the audit of Gold Oil Peru S.A.C
which were performed by a component auditor in Peru.

Other information
The directors are responsible for the other information. The other information comprises the information included
in the annual report, other than the ﬁnancial statements and our auditor’s report thereon. Our opinion on the
ﬁnancial statements does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the ﬁnancial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the ﬁnancial statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

•

the information given in the strategic report and the directors’ report for the ﬁnancial year for which the ﬁnancial
statements are prepared is consistent with the ﬁnancial statements; and

the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.

8. Report of the Independent Auditors (continued)
to the Members of Baron Oil Plc

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and parent company and its environment obtained in
the course of the audit, we have not identiﬁed material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:

•

adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or

the parent company ﬁnancial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration speciﬁed by law are not made; or

we have not received all the information and explanations we require for our audit.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 19, the directors are responsible
for the preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the preparation of ﬁnancial statements that
are free from material misstatement, whether due to fraud or error.

In preparing the ﬁnancial statements, the directors are responsible for assessing the group’s and parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the ﬁnancial statements
Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂuence the
economic decisions of users taken on the basis of these ﬁnancial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations, was as follows:

the senior statutory auditor ensured the engagement team collectively had the appropriate competence,
capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;

we identiﬁed the laws and regulations applicable to the company through discussions with directors and other
management.

we focused on speciﬁc laws and regulations which we considered may have a direct material effect on the
ﬁnancial statements or the operations of the company, including taxation legislation, data protection,
anti-bribery, employment, environmental, health and safety legislation and anti-money laundering regulations.

•

Annual Report and Financial Statements 2020

8. Report of the Independent Auditors (continued)
to the Members of Baron Oil Plc

•

we assessed the extent of compliance with the laws and regulations identiﬁed above through making enquiries
of management and inspecting legal correspondence.

identiﬁed laws and regulations were communicated within the audit team regularly and the team remained alert
to instances of non-compliance throughout the audit; and

we assessed the susceptibility of the company’s ﬁnancial statements to material misstatement, including
obtaining an understanding of how fraud might occur, by:

making enquiries of management as to where they considered there was susceptibility to fraud, their
knowledge of actual, suspected and alleged fraud;

considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and
regulations.

To address the risk of fraud through management bias and override of controls, we:

•

performed analytical procedures to identify any unusual or unexpected relationships;

tested journal entries to identify unusual transactions;

assessed whether judgements and assumptions made in determining the accounting estimates set out in note
2 of the Group ﬁnancial statements were indicative of potential bias;

investigated the rationale behind signiﬁcant or unusual transactions.

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures
which included, but were not limited to:

agreeing ﬁnancial statement disclosures to underlying supporting documentation;

reading the minutes of meetings of those charged with governance;

enquiring of management as to actual and potential litigation and claims;

reviewing correspondence with HMRC and the group’s legal advisors.

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations
are from ﬁnancial transactions, the less likely it is that we would become aware of noncompliance. Auditing standards
also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the
directors and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may
involve deliberate concealment or collusion.

A further description of our responsibilities for the audit of the ﬁnancial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.

Other matters that we are required to address
The non-audit services prohibited by the FRC’ Ethical Standard were not provided to the group or the parent company
and we remain independent of the group and the parent company in conducting our audit. Our audit opinion is
consistent with the additional report to the audit committee.

8. Report of the Independent Auditors (continued)
to the Members of Baron Oil Plc

Use of this report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.

Sanjay Parmar
Senior Statutory Auditor
For and on behalf of
Jeffreys Henry LLP (Statutory Auditors)
Finsgate 5-7 Cranwood Street
London EC1V 9EE

26 May 2021

9. Consolidated Income Statement
for the year ended 31 December 2020

Revenue

Cost of sales

Gross proﬁt

Exploration and evaluation expenditure
Intangible asset impairment
Property, plant and equipment impairment and depreciation
Receivables and inventory impairment
Administration expenses
Loss on exchange

Operating loss

Loss from associated undertaking

Loss before interest and taxation

Finance cost
Finance income

Loss on ordinary activities before taxation

Income tax expense

Loss on ordinary activities after taxation

Dividends

Loss for the year

Loss on ordinary activities after taxation is attributable to:
Equity shareholders
Non-controlling interests

Earnings per ordinary share – continuing
Basic
Diluted

Annual Report and Financial Statements 2020

Notes

2020
£’000

2019
£’000

–

(145)
59
(2)
74
(710)
(157)

(881)

(44)

(925)

–
5

–

(160)
(1,047)
–
16
(442)
(41)

(1,674)

–

(1,674)

(1)
1

(920)

(1,674)

–

(920)

(1,674)

–

(920)

(1,674)

(920)
–

(920)

(1,674)
–

(1,674)

(0.023p)
(0.023p)

(0.099p)
(0.099p)

10
9
3

5
5

10. Consolidated Statement of Comprehensive Income
for the year ended 31 December 2020

Loss on ordinary activities after taxation attributable to the parent

Other comprehensive income:
Release of option reserve
Exchange difference on translating foreign operations

Total comprehensive loss for the year

Total comprehensive loss attributable to owners of the parent

Notes

2020
£’000

(920)

41
(115)

(994)

2019
£’000

(1,674)

–
(69)

(1,743)

11. Consolidated Statement of Financial Position
at 31 December 2020

Annual Report and Financial Statements 2020

Assets
Noncurrentassets
Property plant and equipment
– oil and gas assets
– others
Intangibles
Goodwill
Associated undertaking

Currentassets
Trade and other receivables
Cash and cash equivalents

Total assets

Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital
Share premium account
Share option reserve
Foreign exchange translation reserve
Retained earnings

Total equity

Currentliabilities
Trade and other payables
Taxes payable

Non-currentliabilities
Lease ﬁnance

Total equity and liabilities

Notes

2020
£’000

2019
£’000

9
9
10
11
12

14
15

18
19
19
19
19

16
16

–
43
18
–
151

212

376
1,311

1,687

1,899

–
–
5
–
–

49
472

521

526

1,107
32,156
135
1,528
(33,130)

1,796

482
30,507
74
1,643
(32,251)

455

58
16

1,899

64
7

–

526

The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 26 May 2021 and were
signed on its behalf by:

John Wakeﬁeld
Director

Company number: 05098776

Andrew Yeo
Director

12. Company Statement of Financial Position
at 31 December 2020

Assets
Noncurrentassets
Property plant and equipment
– oil and gas assets
– others
Intangibles
Investments

Currentassets
Trade and other receivables
Cash and cash equivalents

Total assets

Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital
Share premium account
Share option reserve
Foreign exchange translation reserve
Retained earnings

Total equity

Currentliabilities
Trade and other payables
Taxes payable

Non-currentliabilities
Lease ﬁnance

Total equity and liabilities

Notes

2020
£’000

2019
£’000

9
10
13

14
15

18
19
19
19
19

16
16

–
43
18
195

256

375
1,183

1,558

1,814

–
–
5
25

46
336

382

412

1,107
32,156
135
(163)
(31,523)

1,712

482
30,507
74
(163)
(32,261)

(1,361)

58
15

1,814

1,766
7

1,773

–

412

The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 26 May 2021 and were
signed on its behalf by:

John Wakeﬁeld
Director

Company number: 05098776

Andrew Yeo
Director

13. Consolidated and Company Statement of Changes in Equity
for the year ended 31 December 2020

Annual Report and Financial Statements 2020

Share
capital
£’000

Share
premium
£’000

Retained
earnings
£’000

Share
option
reserve
£’000

Foreign
exchange
translation
£’000

30,237

(30,577)

1,712

GROUP
As at 1 January 2019

Shares issued

Transactions with owners

Loss for the year attributable
to equity shareholders
Foreign exchange
translation adjustments

Total comprehensive income
for the period

As at 1 January 2020

Shares issued

Transactions with owners

Loss for the year attributable
to equity shareholders
Share based payments
Share option reserve released
Foreign exchange
translation adjustments

Total comprehensive income
for the period

344

138

–

482

625

–
–
–

–

270

–

(1,674)

–

(1,674)

30,507

(32,251)

1,670

–
(21)
–

–

(21)

–

(920)
–
41

–

(879)

As at 31 December 2020

1,107

32,156

(33,130)

–

–
102
(41)

–

135

Total
equity
£’000

1,790

408

(1,674)

–

(69)

(1,743)

1,643

–

–
–
–

(115)

1,528

455

2,295

(920)
81
–

(115)

(954)

1,796

13. Consolidated and Company Statement of Changes in Equity
for the year ended 31 December 2020

Share
capital
£’000

Share
premium
£’000

Retained
earnings
£’000

Share
option
reserve
£’000

Foreign
exchange
translation
£’000

30,237

(30,510)

(163)

COMPANY
As at 1 January 2019

Shares issued

Transactions with owners

Loss for the year

Total comprehensive income
for the period

As at 1 January 2020

Shares issued

Transactions with owners

Proﬁt for the year
Share based payments
Share option reserve released

Total comprehensive income
for the period

344

138

–

482

625

–
–
–

–

270

–

(1,751)

30,507

(32,261)

1,670

–
(21)
–

(21)

–

697
–
41

738

As at 31 December 2020

1,107

32,156

(31,523)

Share capital is the amount subscribed for shares at nominal value.

Total
equity
£’000

(18)

408

(1,751)

(1,361)

2,295

697
81
–

778

1,712

–

–
102
(41)

135

–

(163)

–

–
–
–

–

(163)

Share premium represents the excess of the amount subscribed for share capital over the nominal value of those
shares net of share issue expenses.

Retained earnings represents the cumulative loss of the group attributable to equity shareholders.

Foreign exchange translation occurs on consolidation of the translation of the subsidiaries balance sheets at the
closing rate of exchange and their income statements at the average rate.

14. Consolidated and Company Statement of Cash Flows
for the year ended 31 December 2020

Annual Report and Financial Statements 2020

Operating activities

Investing activities
Return from investment and servicing of ﬁnance
Advances to subsidiary and associated undertakings
Acquisition of intangible assets
Investment in associated undertaking

Financing activities
Proceeds from issue of share capital
Lease ﬁnancing

Net cash inﬂow

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

Reconciliation to Consolidated Statement
of Financial Position
Cash not available for use

Cash and cash equivalents as shown in the
Consolidated Statement of Financial Position

Group
2020
£’000

(919)

5
(323)
(14)
(195)

(527)

2,295
(6)

843

347

1,190

Company
2020
£’000

(797)

5
(441)
(14)
(195)

(645)

2,295
(6)

847

336

1,183

Group
2019
£’000

(724)

1
–
(1,047)
–

(1,046)

408
–

Company
2019
£’000

(563)

1
(155)
(1,047)
–

(1,201)

408
–

(1,362)

(1,356)

1,709

347

1,692

336

121

–

1,311

1,183

125

472

–

336

14. Consolidated and Company Statement of Cash Flows
for the year ended 31 December 2020

Group
2020
£’000

Company
2020
£’000

Group
2019
£’000

Company
2019
£’000

Operating activities
Loss for the year attributable to controlling interests
Depreciation, amortisation and impairment charges
Share based payments
Finance income shown as an investing activity
Proﬁt on disposal of subsidiary undertaking
Income from associated undertaking
Foreign exchange translation

(920)
(57)
81
(5)
–
44
(52)

Operating cash outﬂows before movements in working capital

(909)

(Increase)/decrease in receivables
Tax paid
Decrease in payables

(4)
–
(6)

697
90
81
(5)
(1,679)
–
30

(786)

(5)
–
(6)

Net cash outﬂows from operating activities

(919)

(797)

(1,674)
1,047
–
(1)
–
–
(4)

(632)

454
–
(546)

(724)

(1,751)
1,240
–
(1)
–
–
23

(489)

456
–
(530)

(563)

15. Notes to the Financial Statements

Annual Report and Financial Statements 2020

General Information
Baron Oil Plc is a company incorporated in England and Wales and quoted on the AIM market of the London Stock
Exchange. The address of the registered ofﬁce is disclosed on page 2 of the ﬁnancial statements. The principal activity
of the Group is described in the Strategic Report in section 4 on page 9.

1. Signiﬁcant accounting policies
The principal accounting policies applied in the preparation of these consolidated ﬁnancial statements are set out
below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Going concern basis
The directors have prepared a cash ﬂow forecast covering a period extending beyond 12 months from the date of
these ﬁnancial statements which contains certain assumptions about the development and strategy of the business.
The directors are aware of the risks and uncertainties facing the business but the assumptions used are the directors’
best estimate of its future development.

The ﬁnancial statements do not include any adjustments that would result if the Group was unable to continue as
a going concern.

Basis of preparation
The ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs)
and IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The ﬁnancial
statements have been prepared under the historical cost convention. The principal accounting policies adopted are
set out below.

Changes in accounting policies and disclosures

Adoption of new and revised standards
There are no IFRSs or IFRIC interpretations that are effective for the ﬁrst time for the ﬁnancial period beginning
January 2020 that would be expected to have a material impact on the Company.

The Group has adopted the following accounting pronouncements, which have become effective this year, and are
as follows:

IFRS 16 – Leases
IAS 28 – Investments in Associates

The following new standards, amendments to standards and interpretations have been issued, but are not effective
for the ﬁnancial period beginning 1 January 2020 and have not been early adopted. The Directors anticipate that the
adoption of these standard and the interpretations in future periods will have no material impact on the ﬁnancial
statements of the Company.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)
The new standards include:

IFRS 3
IAS 1
IAS 8
IFRS 9
IAS 39
IFRS 17
Amendments to conceptual framework(1)

Business Combinations (amendments)(1)
Presentation of Financial Statements (amendments)(1 & 3)
Accounting Policies, Changes in Accounting Estimates and Errors(1)
Financial instruments (amendments)(1)
Financial instruments(1)
Insurance Contracts(1 & 2)

(1) Effective for annual periods beginning on or after 1 January 2020

(2) Effective for annual periods beginning on or after 1 January 2021

(3) Effective for annual periods beginning on or after 1 January 2022

The directors anticipate that the adoption of these standards and interpretations in future periods will have no
material effect on the ﬁnancial statements of the group.

Basis of consolidation
The consolidated ﬁnancial statements include the ﬁnancial statements of the Company and its subsidiaries and
associated undertakings.

Subsidiaries
Subsidiaries are all entities over which Baron Oil Plc has the power to govern the ﬁnancial and operating policies
generally accompanying a shareholding of more than one half of the voting rights, or where Baron Oil Plc exercises
effective operational control. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date
that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of
an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the acquisition. Identiﬁable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at
the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the
fair value of the Group’s share of the identiﬁable net assets acquired is recorded as goodwill. If the cost of acquisition
is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the
income statement.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity method.

The carrying amount of the investment in associates and joint ventures is increased or decreased to recognise the
Group’s share of the proﬁt or loss and other comprehensive income of the associate and joint venture, adjusted
where necessary to ensure consistency with the accounting policies of the Group.

Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated
to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset
is also tested for impairment.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

1. Signiﬁcant accounting policies (continued)

Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identiﬁable assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in ‘intangible assets’. Separately recognised goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses
on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are expected to beneﬁt from the business combination
in which the goodwill arose. The Group allocates goodwill to each business segment in each country in which it operates.

Impairment of non-financial assets
Assets that have an indeﬁnite useful life, for example goodwill, are not subject to amortisation and are tested
annually for impairment.

At each statement of ﬁnancial position date, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash ﬂows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset
with an indeﬁnite useful life is tested for impairment annually and whenever there is an indication that the asset may
be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current
market assessments of the time value of money and the risks speciﬁc to the asset for which the estimates of future
cash ﬂows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the
impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-
generating unit) in prior periods. A reversal of an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a
revaluation increase.

Intangible Assets
Oilandgasassets:explorationandevaluation
The Group has continued to apply the ‘successful efforts’ method of accounting for Exploration and Evaluation
(“E&E”) costs, having regard to the requirements of IFRS 6 ‘Exploration for the Evaluation of Mineral Resources’.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)
The successful efforts method means that only the costs which relate directly to the discovery and development of
speciﬁc oil and gas reserves are capitalised. Such costs may include costs of licence acquisition, technical services
and studies, seismic acquisition; exploration drilling and testing but do not include costs incurred prior to having
obtained the legal rights to explore the area. Under successful efforts accounting, exploration expenditure which is
general in nature is charged directly to the income statement and that which relates to unsuccessful drilling
operations, though initially capitalised pending determination, is subsequently written off. Only costs which relate
directly to the discovery and development of speciﬁc commercial oil and gas reserves will remain capitalised and to
be depreciated over the lives of these reserves. The success or failure of each exploration effort will be judged on a
well-by-well basis as each potentially hydrocarbon-bearing structure is identiﬁed and tested. Exploration and
evaluation costs are capitalised within intangible assets. Capital expenditure on producing assets is accounted for
in accordance with SORP ‘Accounting for Oil and Gas Exploration’. Costs incurred prior to obtaining legal rights to
explore are expensed immediately to the income statement.

All lease and licence acquisition costs, geological and geophysical costs and other direct costs of exploration,
evaluation and development are capitalised as intangible or property, plant and equipment according to their nature.
Intangible assets comprise costs relating to the exploration and evaluation of properties which the directors consider
to be unevaluated until reserves are appraised as commercial, at which time they are transferred to tangible assets
as ‘Developed oil and gas assets’ following an impairment review and depreciated accordingly. Where properties
are appraised to have no commercial value, the associated costs are treated as an impairment loss in the period in
which the determination is made.

Costs are amortised on a ﬁeld by ﬁeld unit of production method based on commercial proven and probable reserves,
or to the expiry of the licence, whichever is earlier.

The calculation of the ‘unit of production’ amortisation takes account of the estimated future development costs
and is based on the current period and un-escalated price levels. Changes in reserves and cost estimates are
recognised prospectively.

E&E costs are not amortised prior to the conclusion of appraisal activities.

Property, plant and equipment
Oilandgasassets:developmentandproduction
Development and production (“D&P”) assets are accumulated on a well by well basis and represent the cost of
developing the commercial reserves discovered and bringing them into production, together with the E&E
expenditures incurred in ﬁnding commercial reserves transferred from intangible E&E assets as outlined above. The
carrying values of producing assets are depreciated on a well by well basis using the unit of production method based
on entitlement to provide by reference to the ratio of production in the period to the related commercial reserves
of the well, taking into account any estimated future development expenditures necessary to bring additional non
producing reserves into production.

An impairment test is performed for D&P assets whenever events and circumstances arise that indicate that the
carrying value of development or production phase assets may exceed its recoverable amount. The aggregate carrying
value is compared against the expected recoverable amount of each well, generally by reference to the present value
of the future net cash ﬂows expected to be derived from production of commercial reserves.

The cost of the workovers and extended production testing is capitalised within property, plant and equipment as
a D&P asset.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

1. Signiﬁcant accounting policies (continued)

Decommissioning
Site restoration provisions are made in respect of the estimated future costs of closure and restoration, and for
environmental rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of
residual materials and remediation of disturbed areas) in the accounting period when the related environmental
disturbance occurs. The provision is discounted where material and the unwinding of the discount is included in
ﬁnance costs. Over time, the discounted provision is increased for the change in present value based on the discount
rates that reﬂect current market assessments and the risks speciﬁc to the liability. At the time of establishing the
provision, a corresponding asset is capitalised where it gives rise to a future beneﬁt and depreciated over future
production from the ﬁeld to which it relates. The provision is reviewed on an annual basis for changes in cost
estimates, discount rates or life of operations. Any change in restoration costs or assumptions will be recognised as
additions or charges to the corresponding asset and provision when they occur. For permanently closed sites, changes
to estimated costs are recognised immediately in the income statement.

Nonoilandgasassets
Non oil and gas assets are stated at cost of acquisition less accumulated depreciation and impairment losses.
Depreciation is provided on a straight-line basis at rates calculated to write off the cost less the estimated residual
value of each asset over its expected useful economic life. The residual value is the estimated amount that would
currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected
at the end of its useful life.

Buildings, plant and equipment unrelated to production are depreciated using the straight-line method based on
estimated useful lives.

The annual rate of depreciation for each class of depreciable asset is:

Equipment and machinery 4-10 years

The carrying value of tangible ﬁxed assets is assessed annually and any impairment is charged to the income
statement.

Investments
Investments are stated at cost less provision for any impairment in value.

Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. A provision for impairment is established when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Signiﬁcant ﬁnancial difﬁculties of the debtor, probability that the debtor will enter bankruptcy or
ﬁnancial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable
is impaired.

Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the statement of ﬁnancial position.

Inventories
Inventories, including materials, equipment and inventories of gas and oil held for sale in the ordinary course of
business, are stated at weighted average historical cost, less provision for deterioration and obsolescence or, if lower,
net realisable value.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)

Revenue
Oil and gas sales revenue is measured at the fair value of the consideration received or receivable and represents
amounts receivable for the Group’s share of oil and gas supplied in the period. Revenue is shown net of value-added
tax, returns, rebates and discounts and after eliminating sales within the Group. Revenue is recognised when the oil
and gas produced is despatched and received by the customers.

Taxation
Incometax
Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable proﬁt or loss for the year. Taxable proﬁt or loss differs from proﬁt or
loss as reported in the same income statement because it excludes items of income or expense that are taxable or
deductible in other periods and it further excludes items that are never taxable or deductible. The Company’s liability
for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of
ﬁnancial position date.

Deferredtax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the ﬁnancial
statements and the corresponding tax bases used in the computation of taxable proﬁt, and is accounted for using
the statement of ﬁnancial position liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable proﬁts will
be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable proﬁt nor the
accounting proﬁt.

The carrying amount of deferred tax is reviewed at each statement of ﬁnancial position date and reduced to the
extent that it is no longer probable that sufﬁcient taxable proﬁts will be available to allow all or part of the asset to
be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realised. Deferred tax is charged or credited to income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.

Trade and other payables
Trade payables are not interest bearing and are stated at their nominal value. Trade and other payables are initially
recognised at fair value. They are subsequently measured at amortised cost using the effective interest method
unless the effect of discounting would be immaterial, in which case they are stated at cost.

Fair values
The carrying amounts of the ﬁnancial assets and liabilities such as cash and cash equivalents, receivables and payables
of the Group at the statement of ﬁnancial position date approximated their fair values, due to relatively short term
nature of these ﬁnancial instruments.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

1. Signiﬁcant accounting policies (continued)

Share-based compensation
The fair value of the employee and suppliers services received in exchange for the grant of the options is recognised
as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value
of the options granted, excluding the impact of any non-market vesting conditions (for example, proﬁtability and
sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that
are expected to vest. At each statement of ﬁnancial position date, the entity revises its estimates of the number of
options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income
statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value)
and share premium when the options are exercised.

Share based payments (Note 20)
The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes
model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The
expected life used in the model is adjusted based on management’s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used
in the calculation is based on management’s best estimate of future share price behaviour and is selected based on
past experience, future expectations and benchmarked against peer companies in the industry.

Equity instruments
Ordinary shares are classiﬁed as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net
of tax, from proceeds.

Financial assets
On initial recognition, ﬁnancial assets are classiﬁed as either ﬁnancial assets at fair value through the statement of
proﬁt or loss, held-to-maturity investments, loans and receivables ﬁnancial assets, or available-for-sale ﬁnancial
assets, as appropriate.

Loans and receivables
The Group classiﬁes all its ﬁnancial assets as trade and other receivables. The classiﬁcation depends on the purpose
for which the ﬁnancial assets were acquired.

Trade receivables and other receivables that have ﬁxed or determinable payments that are not quoted in an active
market are classiﬁed as loans and receivables ﬁnancial assets. Loans and receivables ﬁnancial assets are measured
at amortised cost using the effective interest method, less any impairment loss.

The Group’s loans and receivables ﬁnancial assets comprise other receivables (excluding prepayments) and cash and
cash equivalents included in the Statement of Financial Position.

Financial liabilities
Financial liabilities are recognised when, and only when, the Group becomes a party to the contracts which give rise
to them and are classiﬁed as ﬁnancial liabilities at fair value through the proﬁt and loss or loans and payables as
appropriate. The Group’s loans and payable comprise trade and other.

When ﬁnancial liabilities are recognised initially, they are measured at fair value plus directly attributable transaction
costs and subsequently measured at amortised cost using the effective interest method other than those categorised
as fair value through income statement.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)
Fair value through the income statement category comprises ﬁnancial liabilities that are either held for trading or
are designated to eliminate or signiﬁcantly reduce a measurement or recognition inconsistency that would otherwise
arise. Derivatives are also classiﬁed as held for trading unless they are designated as hedges. There were no ﬁnancial
liabilities classiﬁed under this category.

The Group determines the classiﬁcation of its ﬁnancial liabilities at initial recognition and re-evaluate the designation
at each ﬁnancial year end.

A ﬁnancial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

When an existing ﬁnancial liability is replaced by another from the same party on substantially different terms, or
the terms of an existing liability are substantially modiﬁed, such an exchange or modiﬁcation is treated as a
de-recognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognised in the income statement.

Provisions
Provisions are recognised when the Company has a present obligation as a result of a past event, and it is probable
that the Company will be required to settle that obligation. Provisions are measured at the directors’ best estimate
of the expenditure required to settle the obligation at the statement of ﬁnancial position date, and are discounted
to present value where the effect is material.

Financial instruments
Non-derivative ﬁnancial instruments comprise investments in equity and debt securities, trade and other receivables,
cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative ﬁnancial instruments are recognised initially at fair value plus, for instruments not at fair value
through proﬁt or loss, any directly attributable transactions costs, except as described below. Subsequent to initial
recognition non-derivative ﬁnancial instruments are measured as described below.

A ﬁnancial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the Group’s contractual rights to the cash ﬂows from the ﬁnancial assets expire
or if the Group transfers the ﬁnancial assets to another party without retaining control or substantially all risks and
rewards of the asset. Regular purchases and sales of ﬁnancial assets are accounted for at trade date, i.e. the date that
the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations
speciﬁed in the contract expire or are discharged or cancelled.

Foreign currencies

Functional and presentation currency

i)
Items included in the ﬁnancial statements of the Group are measured using the currency of the primary economic
environment in which the entity operates (the functional currency), which are mainly in Pounds Sterling (£), US
Dollars (USD), and Peruvian Nuevo Sol (PEN). The ﬁnancial statements are presented in Pounds Sterling (£), which
is the Group’s presentation currency.

Transactions and balances

ii)
Foreign currency transactions are translated into the presentational currency using exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

1. Signiﬁcant accounting policies (continued)

iii) Group companies
The results and ﬁnancial position of all Group entities (none of which has the currency of a hyper-inﬂationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:

(a) assets and liabilities for each statement of ﬁnancial position presented are translated at the closing rate at the

date of that statement of ﬁnancial position;

(b)

income and expenses for each income statement are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the transactions); and

(c)

all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and
of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’
equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity
are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing rate.

Management of capital
The Group’s policy is to ensure that it will always have sufﬁcient cash to allow it to meet its liabilities when they
become due. The principal liabilities of the Group arise in respect of committed expenditure in respect of its ongoing
exploration work. To achieve this aim, it seeks to raise new equity ﬁnance and debt sufﬁcient to meet the next phase
of exploration and where relevant development expenditure.

The Board receives cash ﬂow projections on a monthly basis as well as information on cash balances. The Board will
not commit to material expenditure in respect of its ongoing exploration work prior to being satisﬁed that sufﬁcient
funding is available to the Group to ﬁnance the planned programmes.

Dividends cannot be issued until there are sufﬁcient reserves available.

Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated ﬁnancial statements requires management to make estimates and assumptions
concerning the future that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the ﬁnancial statements and the reported amounts of revenues and expenses
during the reporting periods. The resulting accounting estimates will, by deﬁnition, differ from the related
actual results.

Carrying value of intangible exploration and evaluation assets
Valuation of oil and gas properties: judgements regarding timing of regulatory approval, the general economic
environment, and the ability to ﬁnance future activities has an impact on the impairment analysis of intangible
exploration and evaluation assets. All these factors may impact the viability of future commercial production from
unproved properties, and therefore may be a need to recognise an impairment. The timing of an impairment review
and the judgement of when there could be a signiﬁcant change affecting the carrying value of the intangible
exploration and and evaluation asset is a critical accounting judgement in itself.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)

Commercial reserves estimates
Oil and gas reserve estimates: estimation of recoverable reserves include assumptions regarding commodity prices,
exchange rates, discount rates, production and transportation costs all of which impact future cashﬂows. It also
requires the interpretation of complex geological and geophysical models in order to make an assessment of the size,
shape, depth and quality of reservoirs and their anticipated recoveries. The economic, geological and technical factors
used to estimate reserves may change from period to period. Changes in estimated reserves can impact developed
and undeveloped property carrying values, asset retirement costs and the recognition of income tax assets, due to
changes in expected future cash ﬂows. Reserve estimates are also integral to the amount of depletion and
depreciation charged to income.

Decommissioning costs
Asset retirement obligations: the amounts recorded for asset retirement obligations are based on each ﬁeld’s
operator’s best estimate of future costs and the remaining time to abandonment of oil and gas properties, which
may also depend on commodity prices.

2. Segmental information
In the opinion of the Directors the Group has one class of business, being the exploration for, and development and
production of, oil and gas reserves, and other related activities.

The Group’s primary reporting format is determined to be the geographical segment according to the location of the
oil and gas asset. There are currently three geographic reporting segments: South America, which has been involved
in production, development and exploration activity, South East Asia where production, development and
exploration activity is being assessed, and the United Kingdom being the head ofﬁce and where exploration activity
is taking place.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

United
Kingdom
£’000

South
America
£’000

South East
Asia
£’000

2. Segmental information (continued)

Exploration and production year ended 31 December 2020

Revenue – oil

Cost of sales

Gross proﬁt

Operating (loss)/proﬁt

Income from associated undertaking

Loss before interest and taxation

Finance cost
Finance income

(Loss)/proﬁt before taxation
Income tax expense

Loss/(Proﬁt) after taxation

Assets and liabilities
Segment assets
Cash and cash equivalents

Total assets

Segment liabilities
Current tax liabilities

Total liabilities

Other segment items
Capital expenditure
Depreciation, amortisation and impairment charges

–

(31)
–
(2)
–
(706)
(157)

(896)

–

(896)

–
5

(891)
–

(891)

113
1,183

1,296

81
15

59
–

–

(114)
59
–
74
(4)
–

–

–
–

15
–

1
128

129

6
1

–
2

Total
£’000

–

(145)
59
(2)
74
(710)
(157)

(881)

(44)

(925)

–
5

(920)
–

(920)

588
1,311

1,899

87
16

103

–

–
–
–
–
–
–

–

(44)

–
–

(44)
–

(44)

474
–

474

–
–

–

–
(133)

59
(131)

15. Notes to the Financial Statements (continued)

2. Segmental information (continued)

Exploration and production year ended 31 December 2019

United
Kingdom
£’000

South
America
£’000

South East
Asia
£’000

Revenue – oil

Cost of sales

Gross proﬁt

Exploration and evaluation expenditure
Intangible asset impairment
Receivables and inventory impairment
Administration expenses
Proﬁt on exchange

Operating loss

Finance costs
Finance income

Loss before taxation

Income tax expense

Loss before taxation

Assets and liabilities
Segment assets
Cash and cash equivalents

Total assets

Segment liabilities
Current tax liabilities

Total liabilities

Other segment items
Capital expenditure
Depreciation, amortisation and impairment charges

3. Operating loss

–

15
(1,108)
–
(442)
(41)

(1,576)

–
1

(1,575)

–

(1,575)

46
336

382

62
–

1,047
1,108

–

(133)
61
16
–
–

(56)

(1)
–

(57)

–

(57)

8
136

144

2
7

–
(77)

–

(42)
–
–
–
–

(42)

–
–

(42)

–

(42)

–
–

–

–
–

–

–
–

Total
£’000

–

(160)
(1,047)
16
(442)
(41)

(1,674)

(1)
1

(1,674)

–

(1,674)

54
472

526

64
7

1,047
1,031

The loss on ordinary activities before taxation is stated after charging:
Auditors’ remuneration
Group – audit
Company – audit
Group – other non-audit services
Company – other non-audit services

Exploration and evaluation expenditure
Impairment of intangible assets
Depreciation of property, plant and equipment
Impairment of foreign tax receivables
(Gain)/loss on exchange

2020
£’000

2019
£’000

32
32
2
2
145
(59)
2
(74)
157

26
21
5
5
160
1,047
–
(16)
41

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

3. Operating loss (continued)
The analysis of development and administrative expenses in the consolidated income statement by nature of
expense is:

Employee beneﬁt expense
Share based payments
Exploration and evaluation expenditure
Depreciation, amortisation and impairment charges
Legal and professional fees
Loss on exchange
Other expenses

2020
£’000

374
81
145
(131)
198
157
57

881

2019
£’000

258
–
160
1,031
133
41
51

1,674

4. Staff numbers and cost
The average number of persons employed by the Group (including directors) during the year, analysed by category,
were as follows:

Directors
Administration

Total

The aggregate payroll costs of these persons were as follows:

Wages and salaries
Directors’ fees, salaries and beneﬁts
Share based payments
Social security costs

5. Finance income

Bank and other interest received
Finance cost

Total

Income tax expense

The tax charge on the loss on ordinary activities was:-
UK Corporation Tax – current
Foreign taxation

2020
Number

2019
Number

3
1

£’000

52
283
81
39

455

3
1

£’000

43
192
–
23

258

2020
£’000

2019
£’000

5
–

1
(1)

–

2020
£’000

2019
£’000

–
–

–

–
–

–

15. Notes to the Financial Statements (continued)

Income tax expense (continued)

The total charge for the year can be reconciled to the accounting proﬁt as follows:

Loss before tax
Continuing operations

Tax at composite group rate of 19% (2019: 19%)

Effects of:
Losses not subject to tax
Movement on capital allowances
Increase in tax losses
Foreign taxation

Tax expense

2020
£’000

(920)

(174)

340
(126)
(40)
–

–

2019
£’000

1,674

(318)

221
(153)
250
–

–

At 31 December 2020, the Group has tax losses of £28,990,000 (2019 – £28,208,000) to carry forward against
future proﬁts. The deferred tax asset on these tax losses at 19% of £5,508,000 (2019: at 19%, £5,359,000) has not
been recognised due to the uncertainty of the recovery.

7. Proﬁt/(loss) for the period
As permitted by section 408 of the Companies Act 2006, the Parent Company’s income statement has not been
included in these ﬁnancial statements. The loss for the ﬁnancial year is made up as follows:

Parent company’s proﬁt/(loss)

8. Earnings per share

Loss per ordinary share
– Basic
– Diluted

2020
£’000

697

2019
£’000

(1,751)

2020

2019

(0.023p)
(0.023p)

(0.099p)
(0.099p)

Earnings per ordinary share is based on the Group’s loss attributable to controlling interests for the year of £920,000
(2019: £1,674,000).

The weighted average number of shares used in the calculation is the weighted average ordinary shares in issue
during the year.

Weighted average ordinary shares in issue during the year
Weighted average potentially dilutive options and warrants issued

3,988,470,466
373,396,517

1,685,313,686
82,150,685

Weighted average ordinary shares for diluted earnings per share

4,361,866,983

1,767,464,371

Due to the Group’s results, the diluted earnings per share was deemed to be the same as the basic earnings per share
for that year.

2020
Number

2019
Number

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

9. Property, plant and equipment

Development and Equipment and
machinery
production costs
£’000
£’000

Right for use
asset
£’000

Total
£’000

Group
Cost
At 1 January 2019
Foreign exchange translation adjustment

At 1 January 2020
Foreign exchange translation adjustment
Expenditure

At 31 December 2020

Depreciation
At 1 January 2019
Foreign exchange translation adjustment

At 1 January 2020
Foreign exchange translation adjustment
Charge for the period

At 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

Company
Cost
At 1 January 2019 and 2020
Expenditure

At 31 December 2020

Depreciation
At 1 January 2019 and 2020
Charge for the period

At 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

–
–

–
–
–

–

–
–

–
–
–

–

–
–

–

–
–

–

34
(4)

30
(1)
–

34
(4)

30
(1)
–

–

–
–

–

–
–

–

–
–

–
–
45

–
–

–
–
2

–

–
45

–
2

–

34
(4)

30
(1)
45

34
(4)

30
(1)
2

–

–
45

–
2

–

Included in the above line items is a right-of-use asset of £43,000 (2019: nil) in respect of a motor vehicle.

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet.
The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any
initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of
the lease, and any lease payments made in advance of the lease commencement date.

The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.

On the statement of ﬁnancial position, right-of-use assets have been included in property, plant and equipment.

15. Notes to the Financial Statements (continued)

10. Intangible ﬁxed assets

Group
Cost
At 1 January 2019
Foreign exchange translation adjustment
Expenditure

At 1 January 2020
Foreign exchange translation adjustment
Expenditure
Disposals

At 31 December 2020

Impairment
At 1 January 2019
Charge for the period

At 1 January 2020
Charge for the period
Disposals

At 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

Company
Cost
At 1 January 2019
Expenditure

At 1 January 2020
Expenditure
Disposals

At 31 December 2020

Impairment
At 1 January 2019
Charge for the year

At 1 January 2020
Charge for the year
Disposals

At 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

Exploration
and evaluation
costs
£’000

Licence
£’000

–
–
–

–
–
–
–

–

–
–

–
–
–

–

2,486
(61)
1,047

3,472
(59)
14
(1,108)

2,319

2,420
1,047

3,467
(59)
(1,107)

2,301

Exploration
and evaluation
costs
£’000

Licence
£’000

–
–

–
–
–

–

–
–

–
–
–

–

701
1,047

1,748
14
(1,109)

653

635
1,108

1,743
–
(1,108)

635

Total
£’000

2,486
(61)
1,047

3,472
(59)
14
(1,108)

2,319

2,420
1,047

3,467
(59)
(1,107)

2,301

Total
£’000

701
1,047

1,748
14
(1,109)

653

635
1,108

1,743
–
(1,108)

635

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

10. Intangible ﬁxed assets (continued)
The exploration and evaluation costs above represent the cost in acquiring, exploring and evaluating the company’s
and group’s assets.

The impairment of all intangible assets has been reviewed, giving rise to the following impairment charges, or
reduction in impairment charges.

Block XXI Peru: this licence was fully impaired in 2018.

UK offshore block P1918 (“Colter”): the drilling of an exploration well commenced on 6 February 2019 and was
completed on 25 February 2019, with a further side-track well being drilled, completing on 8 March 2019. This
licence continued into the second term with effect from 1 February 2020 but the Company has now written off this
asset against the impairment provision, as the licence, along with related licences PEDL330 and PEDL 345, were
relinquished on 31 January 2021.

11. Goodwill

Group
Cost

At 1 January 2019, 1 January and 31 December 2020

Impairment

At 1 January 2019, 1 January and 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

The carrying value of goodwill represents the purchase of shares in Gold Oil Peru SAC.

Goodwill on
Consolidation
of subsidiaries
£’000

–

15. Notes to the Financial Statements (continued)

12. Associated undertaking

Group
Grossinvestmentvalue
At 1 January 2019 and 2020
Additions
Share of post acquisition net result

At 31 December 2020

Impairment

At 1 January 2019 and 2020, and 31 December 2020

Carryingvalue
At 31 December 2020

At 31 December 2019

Shares in
associated
undertaking
£’000

–
195
(44)

151

–

151

–

Total
£’000

–
195
(44)

151

–

151

–

On 27 April 2020, the Group acquired a 33.33% interest in SundaGas (Timor-Leste Sahul) Pte. Ltd, incorporated in
Singapore at a gross cost of £195,000. In accordance with IAS28, the Group accounts for its investment in this
company using the equity method.

13. Investments

Company
Cost
At 1 January 2019
Exchange rate adjustment
Net loan movements

At 1 January 2020
Additions
Exchange rate adjustment
Net loan movements
Disposals

At 31 December 2020

Impairment
At 1 January 2019
Charge/(release) for the year

At 1 January 2020
Charge/(release) for the year

At 31 December 2020

Carryingvalue
At 31 December 2020

At 31 December 2019

Loans to
group
undertaking
£’000

Shares in
group
undertaking
£’000

Shares in
associated
undertaking
£’000

555
(23)
155

687
–
(30)
118
–

775

555
132

687
88

775

–

5,469
–
–

5,469
–
–
–
(25)

5,444

5,444
–

5,444

–

–
–
–

–
195
–
–
–

195

–
–

–

195

–

Total
£’000

6,024
(23)
155

6,156
195
(30)
118
(25)

6,414

5,999
132

6,131
88

6,219

195

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

13. Investments (continued)
The Company elects to recognise the investment in associate in respect of SundaGas (Timor-Leste Sahul) Pte. Ltd.
under the cost model.

On 27 April 2020, the Group acquired a 33.33% interest in SundaGas (Timor-Leste Sahul) Pte. Ltd, incorporated
Singapore at a gross cost of £195,000.

The cost of investment related to Gold Oil Caribbean Limited is shown as a disposal as the company is considered
to have been dissolved.

The company has made provision on the investment in Gold Oil Peru S.A.C. of £6,219,000 (2019: £6,131,000).

The Company’s subsidiary undertakings at the year end were as follows:

Subsidiary/controlled entity

Gold Oil Peru S.A.C

Place of
incorporation
and operation

Proportion of
ownership
interest
%

Proportion
of voting
power held
%

Peru

100

Method used
to account for
investment

Nature of
business

equity
method

Exploration of
oil and gas

All shareholdings are in ordinary, voting shares.

The Company’s associated undertaking at the year end was as follows:

Associated entity

SundaGas (Timor-Leste Sahul)
Pte. Ptd.

Place of
incorporation
and operation

Singapore

Proportion of
ownership
interest
%

Proportion
of voting
power held
%

33.33

Method used
to account for
investment

Nature of
business

equity
method

Exploration
of oil and gas

All shareholdings are in ordinary, voting shares.

The results of subsidiaries is as follows:

Gold Oil Peru S.A.C
Aggregate capital and reserves
Proﬁt/ (Loss) for the year

14. Trade and other receivables

Trade receivables
Other receivables
Amounts owed by associate undertaking
Prepayments and accrued income

2020
£’000

1,714
(117)

2019
£’000

1,947
(65)

2020

2019

Group
£’000

Company
£’000

Group
£’000

Company
£’000

–
10
323
43

376

–
9
323
43

375

–
8
–
41

–
8
–
38

15. Notes to the Financial Statements (continued)

15. Cash and cash equivalents

Bank current accounts
Bank deposit accounts

2020

2019

Group
£’000

265
1,046

1,311

Company
£’000

265
918

1,183

Group
£’000

335
137

472

Company
£’000

335
1

336

Bank deposit accounts comprise cash held by the Group and short-term bank deposits with an original maturity of
three months or less and earn interest at respective short-term deposit rates. The carrying amount of these assets
approximates to their fair value.

As at 31 December 2020, bank deposits included £121,000 (2019: £125,000) that is being held as a guarantee until
the Group fulﬁlls certain licence commitments in Peru and is not available for use. This is not considered to be liquid
cash and has therefore been excluded from the cash ﬂow statement.

16. Trade and other payables

Trade payables
Amounts owed to subsidiary undertakings
Accruals and deferred income
Lease ﬁnance liability due within 12 months
Taxation

Non-current liabilities
Lease ﬁnance liability due after 12 months

2020

2019

Group
£’000

Company
£’000

Group
£’000

Company
£’000

13
–
35
9
16

12
–
37
9
15

32
–
32
–
7

–

2020
£’000

9
29

29
1,705
32
–
7

1,773

–

2019
£’000

–
–

–

17. Finance lease
Lease liabilities are presented in the statement of ﬁnancial position as follows:

Current
Non-current

At the commencement date, the Group measures the lease liability at the present value of the lease payments
unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the
Group’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of ﬁxed payments (including in
substance ﬁxed), variable payments based on an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is
remeasured to reﬂect any reassessment or modiﬁcation, or if there are changes in in-substance ﬁxed payments.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

17. Finance lease (continued)
When the lease liability is remeasured, the corresponding adjustment is reﬂected in the right-of-use asset, or proﬁt
and loss if the right-of-use asset is already reduced to zero.

Interest payable and similar charges include interest payable, ﬁnance charges on shares classiﬁed as liabilities and
ﬁnance leases recognised in proﬁt or loss using the effective interest method, unwinding of the discount on provisions,
and net foreign exchange losses that are recognised in the proﬁt and loss account.

On the statement of ﬁnancial position, lease liabilities have been included in current and non-current liabilities.

18. Share capital

Allotted,calledupandfullypaid
Equity: 4,426,409,576 (2019: 1,926,409,576) ordinary shares of £0.00025 each

2020
£’000

1,107

2019
£’000

482

The Company issued 2,500,000,000 new ordinary shares of £0.00025 each for cash at £0.001 per share.

19. Share premium and reserves

Group
At beginning of the year
Loss for the year attributable to controlling interests
Issue of new shares
Share issue costs
Share-based payments
Share option reserve released
Foreign exchange translation adjustments

Company
At beginning of the year
Proﬁt for the year
Issue of new shares
Share issue costs
Share-based payments
Share option reserve released

Share
premium
account
£’000

30,507
–
1,875
(205)
(21)
–
–

32,156

30,507
–
1,875
(205)
(21)
–

32,156

Share
Option
reserve
£’000

Foreign
exchange
translation
reserve
£’000

74
–
–
–
102
(41)
–

135

74
–
–
–
102
(41)

135

1,643
–
–
–
–
–
(115)

1,528

(163)
–
–
–
–
–

(163)

Profit
and loss
account
£’000

(32,251)
(920)
–
–
–
41
–

(33,130)

(32,261)
697
–
–
–
41

(31,523)

15. Notes to the Financial Statements (continued)

19. Share premium and reserves (continued)
Details of options and warrants issued, exercised and lapsed during the year together with options outstanding at
31 December 2020 are as follows:

Issue date

7 July 2017
27 November 2018
3 December 2018
6 August 2019
26 March 2020
26 May 2020
10 November 2020

Final exercise date

7 July 2020
27 November 2021
3 December 2021
6 August 2022
26 March 2023
26 May 2030
10 November 2030

Exercise
price

1 January
2020
Number

New
Issue
Number

Exercised
Number

Lapsed
Number

31 December
2020
Number

–
£0.00350 41,000,000
–
£0.00435 20,000,000
–
£0.00440 10,000,000
–
£0.00080 27,500,000
–
£0.00100
117,125,001
– 290,000,000
£0.00100
75,000,000
–
£0.00100

– 41,000,000
–
–
–
–
–
–

–
– 20,000,000
10,000,000
–
27,500,000
–
–
117,125,001
– 290,000,000
75,000,000
–

98,500,000 482,125,001

– 41,000,000 539,625,001

Details of options and warrants issued, exercised and lapsed during the year together with options outstanding at
31 December 2019 are as follows:

Issue date

7 July 2017
27 November 2018
3 December 2018
6 August 2019

Final exercise date

7 July 2020
27 November 2021
3 December 2021
6 August 2022

Exercise
price

1 January
2019
Number

New
Issue
Number

Exercised
Number

Lapsed
Number

31 December
2019
Number

£0.00350 41,000,000
£0.00435 20,000,000
£0.00440 10,000,000
£0.00080

–
–
–
– 27,500,000

71,000,000 27,500,000

–
–
–
–

–

– 41,000,000
– 20,000,000
– 10,000,000
– 27,500,000

– 98,500,000

20. Share based payments
The fair values of the options and warrants granted have been calculated using Black-Scholes model assuming the
inputs shown below:

Grant date

Number of options or
warrants granted
Share price at grant date
Exercise price at grant date
Option life
Risk free rate
Expected volatility
Expected dividend yield
Fair value of option

10 November
2020

26 May
2020

26 March
2020

6 August
2019

3 December
2018

27 November
2018

75,000,000 290,000,000 117,125,001 27,500,000 10,000,000 20,000,000
0.435p
0.435p
3 years
0.85%
75%
0%
0.11p

0.05p
0.1p
10 years
0.86%
80%
0%
0.02p

0.08p
0.1p
10 years
0.86%
80%
0%
0.03p

0.44p
0.44p
3 years
0.85%
75%
0%
0.11p

0.06p
0.08p
3 years
0.86%
80%
0%
0.01p

0.08p
0.1p
3 years
0.86%
80%
0%
0.02p

The warrants and options will not normally be exercisable during a closed period, and furthermore can only be
exercisable if the performance conditions are satisﬁed. Warrants and options, which have vested immediately before
either the death of a participant or his ceasing to be an eligible employee by reason of injury, disability, redundancy
or dismissal (otherwise than for good cause) shall remain, exercisable (to the extent vested) for 12 months after
such cessation, and all non-vested options shall lapse.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

21. Directors’ emoluments

Directors’ remuneration
Compensation for loss of ofﬁce
Share based payments

Highest paid director emoluments and other beneﬁts are as listed below.

Remuneration
Share based payments

2020
£’000

283
–
73

356

2020
£’000

164
31

195

2019
£’000

198
10
–

208

2019
£’000

103
–

103

22. Financial instruments
The Group’s activities expose it to a variety of ﬁnancial risks: credit risk, cash ﬂow interest rate risk, foreign currency
risk, liquidity risk, price risk and capital risk. The Group’s activities also expose it to non-ﬁnancial risks: market risk.
The Group’s overall risk management programme focuses on unpredictability and seeks to minimise the potential
adverse effects on the Group’s ﬁnancial performance. The Board, on a regular basis, reviews key risks and, where
appropriate, actions are taken to mitigate the key risks identiﬁed.

Financial instruments – Risk Management
The Group is exposed through its operations to the following risks:

•

Credit risk

Cash ﬂow interest rate risk

Foreign Exchange Risk

Liquidity risk

Price risk

Capital risk

Market risk

In common with all other businesses, the Group is exposed to risks that arise from its use of ﬁnancial instruments.
This note describes the Group’s objectives, policies and processes for managing those risks and the methods used
to measure them. Further quantitative information in respect of these risks is presented throughout these
ﬁnancial statements.

There have been no substantive changes in the Group’s exposure to ﬁnancial instrument risks, its objectives, policies
and processes for managing those risks or the methods used to measure them from previous periods unless otherwise
stated in this note.

15. Notes to the Financial Statements (continued)

22. Financial instruments (continued)

Principal financial instruments
The principal ﬁnancial instruments used by the Group, from which ﬁnancial instrument risk arises are as follows:

•

Loans and receivables

Trade and other receivables

Cash and cash equivalents

Short term investments

Trade and other payables

General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies
and, whilst retaining responsibility for them, it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the Group’s ﬁnance function. The Board receives
regular updates from the Executive Directors through which it reviews the effectiveness of the processes put in place
and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies
that seek to reduce as far as possible without unduly affecting the Group’s competitiveness and ﬂexibility. Further
details regarding these policies are set out below:

Credit risk
The Group’s principal ﬁnancial assets are bank balances and cash, trade and other receivables. The credit risk on
liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-
rating agencies. The Group’s credit risk is primarily attributable to its trade. The amounts presented in the statement
of ﬁnancial position are net of allowance for doubtful receivables. An allowance for impairment is made where there
is an identiﬁed loss event which, based on previous experiences, is evidence of a reduction in the recoverability of
the cash ﬂows. The Group has no signiﬁcant concentration of credit risk, with exposure spread over a number of
counterparties and customers.

As at 31 December 2020 and 2019 there were no trade receivables.

Cash flow interest rate risk
The Group is exposed to cash ﬂow interest rate risk from its deposits of cash and cash equivalents with banks. The
cash balances maintained by the Group are proactively managed in order to ensure that the maximum level of
interest is received for the available funds but without affecting the working capital ﬂexibility the Group requires.

The Group is not at present exposed to cash ﬂow interest rate risk on borrowings as it has no signiﬁcant debt. No
subsidiary company of the Group is permitted to enter into any borrowing facility or lease agreement without the
prior consent of the Company.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

22. Financial instruments (continued)

Interest rates on financial assets
The Group’s ﬁnancial assets consist of cash and cash equivalents, loans, trade and other receivables. The interest rate
proﬁle at period end of these assets was as follows:

31 December 2020

UK sterling
US dollar (USD)
Peruvian Nuevo Sol (PEN)

31 December 2019

UK sterling
US dollar (USD)
Peruvian Nuevo Sol (PEN)

Financial assets
on which
interest earned
£’000

Financial assets
on which
interest not earned
£’000

401
638
–

1,039

139
185
1

325

Financial assets
on which
interest earned
£’000

Financial assets
on which
interest not earned
£’000

–
125
–

125

329
53
14

396

Total
£’000

540
823
1

1,364

Total
£’000

329
178
14

521

The Group earned interest on its interest bearing ﬁnancial assets at rates between 0.3% and 1% (2019 0.1% and 1%)
during the period.

A change in interest rates on the statement of ﬁnancial position date would increase/(decrease) the equity and the
anticipated annual income or loss by the theoretical amounts presented below. The analysis is made on the
assumption that the rest of the variables remain constant. The analysis with respect to 31 December 2019 was
prepared under the same assumptions.

Instruments bearing variable interest (£’000)

Change of 1.0% in the interest rate as of

31 December 2020

31 December 2019

Increase
of 1.0%

Decrease
of 1.0%

(10)

Increase
of 1.0%

Decrease
of 1.0%

(1)

It is considered that there have been no signiﬁcant changes in cash ﬂow interest rate risk at the reporting date
compared to the previous period end and that therefore this risk has had no material impact on earnings or
shareholders’ equity.

15. Notes to the Financial Statements (continued)

22. Financial instruments (continued)

Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional
currency is not the same as the functional currency in which other Group companies are operating. Although its
geographical spread reduces the Group’s operation risk, the Group’s net assets arising from such overseas operations
are exposed to currency risk resulting in gains and losses on retranslation into Sterling. Only in exceptional
circumstances will the Group consider hedging its net investments in overseas operations, as generally it does not
consider that the reduction in foreign currency exposure warrants the cash ﬂow risk created from such hedging
techniques. It is the Group’s policy to ensure that individual Group entities enter into local transactions in their
functional currency wherever possible and that only surplus funds over and above working capital requirements
should be transferred to the parent company treasury. The Group considers this policy minimises any unnecessary
foreign exchange exposure.

In order to monitor the continuing effectiveness of this policy the Board, through its approval of both corporate and
capital expenditure budgets and review of the currency proﬁle of cash balances and management accounts, considers
the effectiveness of the policy on an ongoing basis.

The following table discloses the major exchange rates of those currencies utilised by the Group:

Average for year ended 31 December 2020
At 31 December 2020

Average for year ended 31 December 2019
At 31 December 2019

USD

1.29
1.36

1.28
1.32

PEN

4.47
4.88

4.28
4.37

Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the ﬁnance charges and principal
repayments on its debt instruments. It is the risk that the Group will encounter difﬁculty in meeting its ﬁnancial
obligations as they fall due.

The Group’s policy is to ensure that it will always have sufﬁcient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain readily available cash balances (or agreed facilities) to meet
expected requirements for a period of at least 60 days. The Group currently has no long term borrowings.

Price risk
Oil and gas sales revenue is subject to energy market price risk.

Given current production levels, it is not considered appropriate for the Group to enter into any hedging activities
or trade in any ﬁnancial instruments, such as derivatives. This strategy will continue to be subject to regular review.

It is considered that price risk of the Group at the reporting date has not increased compared to the previous
period end.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2020

22. Financial instruments (continued)

Volatility of oil and gas prices
A material part of the Group’s revenue will be derived from the sale of oil and gas that it expects to produce. A
substantial or extended decline in prices for oil and gas and reﬁned products could adversely affect the Group’s
revenues, cash ﬂows, proﬁtability and ability to ﬁnance its planned capital expenditure. The movement of crude oil
prices is shown below:

Per barrel – US$
Per barrel – £

31 December
2020

48
36

Average
price
2019

56
44

31 December
2018

61
46

Oil and gas prices are dependent on a number of factors impacting world supply and demand. Due to these factors,
prices may be subject to signiﬁcant ﬂuctuations from year to year. The Group’s normal policy is to sell its products
under contract at prices determined by reference to prevailing market prices on international exchanges. However,
these prices had no effect on on the Group’s results for 2020, since it had no production.

Capital risk
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order
to provide returns for shareholders and beneﬁts to other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.

Market risk
The market may not grow as rapidly as anticipated. The Group may lose customers to its competitors. The Group’s
major competitors may have signiﬁcantly greater ﬁnancial resources than those available to the group. There is no
certainty that the group will be able to achieve its projected levels of sales or proﬁtability.

23. Capital commitments
As of 31 December 2020, there were no capital commitments (2019: none).

24. Contingent Liabilities
The Group and the Company have given guarantees of US$160,000 (31 December 2019: – US$160,000) to Perupetro
SA to fulﬁl licence commitments for Block XXI. The Company considers that there are no potential decommissioning
costs in respect of abandoned ﬁelds.

25. Events after the reporting period
On 26 March 2021, the Company issued 1,525,000,000 new ordinary shares of 0.025p each, followed by a further
issue of 4,475,000,000 new ordinary shares of 0.025p each on 14 April 2021. The two share issues combined was
for new capital of £3,000,000 gross, £2,768,000 net of costs. It is intended that the proceeds of the placing will be
used to increase its equity stake in SundaGas (Timor-Leste Sahul) Pte.Ltd (“SundaGas TLS”) and to fund the
Company’s share of the ongoing TL-SO-19-16 PSC (“Chuditch PSC”) work programme in Timor-Leste, and provide
additional working capital.

15. Notes to the Financial Statements (continued)

26. Ultimate controlling party
Baron Oil Plc is listed on the AIM market operated by the London Stock Exchange. At the date of the Annual Report
in the directors’ opinion there is no controlling party.

27. Related party transactions

Company
During the year, the Company advanced loans to its subsidiaries. The details of the transactions and the amount owed
by the subsidiaries at the year end were.

Gold Oil Peru S.A.C *

Year ended
31 December 2020

Year ended
31 December 2019

Balance
£’000

775

Loan advance/
(repayment)
£’000

Balance
£’000

688

Loan
advance
£’000

133

* The company has provided for an impairment of 775,000 (2019: £688,000) on the outstanding loans.

Group and company
The company paid £17,096 (2019: £9,915) for services rendered by Tedstone Oil and Gas Limited, a company
controlled by Mr J Ford, a director.

The company paid £nil (2019:£2,250) for services rendered by Langley Associates Limited, a company controlled by
Mr G Barnes, a director until 31 March 2019.

The Company was owed £322,718 (2019: £Nil) by its associate undertaking, SundaGas (Timor-Leste Sahul) Pty. Ltd.,
which is interest-free and repayable on demand within the terms of the contractual agreement between the parties.

The directors’ aggregate remuneration and any associated beneﬁts in respect of qualifying services is disclosed in
note 21.

During the year, Mr A Yeo and Mr J Ford respectively subscribed for 50,000,000 and 7,500,000 new ordinary shares
in the Company at a price of 0.1p per new ordinary share as part of a placing of new ordinary shares that was
announced by the Company on 14 February 2020.The aggregate number and percentage of shares held directly and
indirectly by directors are disclosed in the report of directors.

Annual Report and Financial Statements 2020

[THIS PAGE INTENTIONALLY LEFT BLANK]

16. Glossary of Technical Terms

BCF

Billion cubic feet.

Geological chance of success

The estimated probability that exploration activities will conﬁrm the
existence of a signiﬁcant accumulation of potentially recoverable petroleum.

GIIP

Mean

MMBBLS

MMBOE

Prospective Resources

SPE PRMS

Volume of natural gas initially in-place in a reservoir.

Reﬂects an unrisked median or best case volume estimate of resource
derived using probabilistic methodology. This is the mean of the probability
distribution for the resource estimates and is often not the same as 2U as
the distribution can be skewed by high resource numbers with relatively
low probabilities.

Million barrels of oil.

Million barrels of oil equivalent. Volume derived by dividing the estimate
of the volume of natural gas in billion cubic feet by six in order to convert
it to an equivalent in million barrels of oil and, where relevant, adding this
to an estimate of the volume of oil in millions of barrels.

Quantities of petroleum that are estimated to exist originally in naturally
occurring reservoirs, as of a given date. Crude oil in-place, natural gas in-
place, and natural bitumen in-place are deﬁned in the same manner.

The Society of Petroleum Engineers’
(“SPE”) Petroleum Resources
Management System (“PRMS”) is a system developed for consistent and
reliable deﬁnition, classiﬁcation, and estimation of hydrocarbon resources
prepared by the Oil and Gas Reserves Committee of SPE and approved by the
SPE Board in June 2018 following input from six sponsoring societies: the
World Petroleum Council, the American Association of Petroleum Geologists,
the Society of Petroleum Evaluation Engineers, the Society of Exploration
Geophysicists, the European Association of Geoscientists and Engineers, and
the Society of Petrophysicists and Well Log Analysts. Quantities of petroleum
estimated, as of a given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects. The total
quantity of petroleum that is estimated to exist originally in naturally
occurring reservoirs, as of a given date. Crude oil in-place, natural gas in-place,
and natural bitumen in-place are deﬁned in the same manner.

SPE PRMS Unrisked Prospective
Resources

Denotes the unrisked estimate qualifying as SPE PRMS Prospective
Resources.

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