Baron Oil PLC Annual Report 2021

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FY2021 Annual Report · Baron Oil PLC

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Annual Report and
Financial Statements
for the year ended 31 December 2021

Contents

Annual Report and Financial Statements 2021

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 2021

10. Consolidated Statement of Comprehensive Income

for the year ended 31 December 2021

11. Consolidated Statement of Financial Position

as at 31 December 2021

12. Company Statement of Financial Position

as at 31 December 2021

13. Consolidated and Company Statement of Changes in Equity

for the year ended 31 December 2021

14. Consolidated and Company Statement of Cash Flows

for the year ended 31 December 2021

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 broker

Registrars

Communications

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

Armstrong Teasdale Limited
38-43 Lincoln’s Inn Fields
London
WC2A 3PE

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

Share Registrars Limited,
3 The Millennium Centre
Crosby Way
Farnham
Surrey
GU9 7XX

IFC Advisory Limited
Birchin Court
20 Birchin Lane
London
EC3V 9DU

Website

www.baronoilplc.com

Company number:

05098776 (England and Wales)

2. Corporate Statement

Annual Report and Financial Statements 2021

Baron Oil Plc (“Baron” or “the Company”) is an independent oil and gas exploration company based in the UK. The
Company currently holds interests in exploration acreage in SE Asia (Timor-Leste) 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.

The Board is aware of its burgeoning responsibilities for environmental reporting and has taken steps to inform itself
of best practice such as following guidance from the UK’s North Sea Transition Authority (“NSTA”, formerly the Oil
and Gas Authority). The Company currently does not produce oil or gas, nor does it have active exploration
operations, therefore there are no quantitative climate or related data to report. Should the Company become
involved in oil and gas developments it intends to adopt best practice carbon intensity reporting and prioritise those
developments which are consistent with a lower carbon strategy and compliance with regulatory requirements and
standards.

3. Chairman’s Statement & Operations Report

Financial and Financial Results
The net result for the year was a loss before taxation of £1,127,000, which compares to a loss of £920,000 for the
preceding ﬁnancial year; the loss after taxation attributable to Baron Oil shareholders was £1,127,000, compared to
a loss of £920,000 in the preceding year.

Turnover for the year was £nil (2020: £nil), there being no sales activity during the period.

Exploration and evaluation expenditure written off included in the Income Statement amounts to £218,000.
Impairment provisions in respect of Peru Block XXI were increased by £17,000, this being attributable to exchange
rate ﬂuctuations on the translation of US Dollar based Peruvian assets, together with a further £7,000 impairment
of a related tax receivable. The directors judged that no other exploration assets required impairment.

The rise in Administration expenses for the year to £1,321,000 (2020: £710,000) requires explanation. The largest
impact of £285,000 is due to the consolidation of SundaGas (Timor-Leste Sahul) Pte. Ltd. (“TLS”) for a nine month
period having been previously accounted for as an associated undertaking. It also includes a rise of £205,000 for non-
cash share-based payments arising on the grant of options and ﬁnally we incurred additional non-recurring UK costs
of £75,000 relating to consultancy arrangements and thereafter completion of notice of a former director. Overall,
there have been no material changes to our budgets. It is worth noting that we anticipate a further rise in TLS
expenses in 2022, again budgeted, as we move to a full 12 month reporting period at the group level and the Dili ofﬁce
in Timor-Leste is now fully operational.

During 2021, the Pound Sterling/US Dollar exchange rate was relatively stable, with an overall exchange gain of
£22,000 (loss of £157,000 in 2020) on the Group’s holding of US Dollar assets.

In April 2021, the Company increased its stake in TLS to a controlling interest of 85% at a cash cost of US$1,243,000;
and acquired the remaining 15% on 17 June 2021 in exchange for the issue of 1,157,202,885 ordinary shares in the
Company. Baron was not required to make any further contribution to the bank guarantee deposit. The full value of
the guarantee deposit of US$1,000,000 is now consolidated, with US$667,000 shown as a payable to SundaGas
Pte. Ltd.

There is a gain of £302,000 arising on the deemed disposal of the interest in the associated undertaking under IFRS3
that arises on the acquisition of the remaining equity in TLS.

TLS is regarded as a single asset company under IFRS3 and its consolidation for the ﬁrst time gives rise to the creation
of an intangible oil and gas asset amounting to £1,362,000. In addition, evaluation and development expenditure
on the asset by the Group during the period amounts to a further £1,307,000, with the total carrying value of this
asset being £2,669,000 at 31 December 2021.

At the end of the ﬁnancial year, free cash reserves of the Group had increased to £1,650,000 from a level at the
preceding year end of £1,190,000. The proceeds of placings and subscription of new shares in the year amounting
to £3,000,000 gross (£2,768,000 net of costs) bolstered the Company’s cash reserves. The Group’s investment in
intangible assets in the UK and Timor-Leste amounted to £2,465,000 in the period, including the cost of acquiring
TLS, plus a further non-capitalised exploration and evaluation activity of £218,000, and £1,072,000 of operating cash
outﬂow. In April 2022, the Company undertook a further capital raise with a new ordinary share Placing and
Subscription of £1,650,000 gross, (£1,505,000 net of costs).

The Group continues to take a conservative view of its asset impairment policy, giving it a Statement of Financial
Position that consists of signiﬁcant 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.

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

Annual Report and Financial Statements 2021

Report On Operations

Introduction
Baron reset its strategy in 2021 to focus on owning signiﬁcant equity interests in high impact oil and gas exploration
and appraisal activities. In pursuit of these goals, we have delivered signiﬁcant increases in our stakes in both the
Timor-Leste Chuditch PSC (from 25% to 75%) and the UK P2478 licence (from 15% to 32%) during the year, whilst
subsequent to the year-end taking steps to relinquish Block XXI in Peru.

We currently have two major projects progressing towards key evaluation points, both of which are material in terms
of potential value, equity interest and prospective resources, with relatively short timelines to potential drill decisions.
It is timely that we are bringing these projects forward when issues of energy security and structural imbalances in
Liquiﬁed Natural Gas (“LNG”), amongst other factors, has led to a sustained period of high prices for oil and gas.

Southeast Asia: Timor-Leste TL-SO-19-16 PSC (“Chuditch PSC” or “PSC”); (Baron 75% interest)
Background

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 potential Greater Sunrise development and covers approximately
3,571 km2 in water depths of 50-100 metres. The Chuditch-1 discovery well, drilled by Shell in 1998 in 64 metres
water depth, encountered a 25 metre gas column in Jurassic Plover Formation sandstone reservoirs on the ﬂank of
what is interpreted to be a large faulted structure, at a depth of around 3,000 metres. The Chuditch trend is largely
covered by part of a regional 3D seismic survey which was acquired by a previous operator in 2012.

Baron holds a 75% working interest and operates the PSC through its wholly owned subsidiary company SundaGas
Banda Unipessoal Lda. (“Banda”), with the remaining 25% held by TIMOR GAP Chuditch Unipessoal Lda., a subsidiary
of the state-owned national oil company, whose share of PSC expenditure is carried until ﬁrst production.

The work programme obligations in the ﬁrst two years of the initial three year term of the PSC (to be completed by
18 December 2022) include the reprocessing of legacy seismic data. 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. Banda has in place a US$1 million Bank Guarantee against the initial work commitment, of which Baron
posted its initial share of US$0.333 million in April 2021, with US$0.667 million remaining in place from SundaGas
Pte. Ltd. (“SGPL”), the original parent company prior to the increase in Baron’s interest.

The initial work programme is designed to address issues with sea-bed topography and shallow geological features
that signiﬁcantly impact the existing seismic image at the reservoir level local to the Chuditch area and create
artifacts that seismic processing technologies have hitherto been unable to remove. A pre-stack depth migration
(“PSDM”) processing routine has been tailored to resolve these issues, utilising new algorithms that address areas of
complex seabed and shallow geology. Although computationally intensive and time-consuming, this work is
expected to result in a considerably enhanced subsurface image, critical for the deﬁnition of the size and shape of
the accumulation, which impacts the gas volumes in place and the location of potential future wells.

2021andsubsequentactivities

Signiﬁcant progress was made on Chuditch during the year, which included the progressive increase in Baron’s
interest in SundaGas (Timor-Leste Sahul) Pte. Ltd. (“TLS”) from 33.33% to 100%. TLS is the parent company of
Banda, the Timor-Leste registered subsidiary, which is the operator of and 75% interest holder in the offshore Timor-
Leste TL-SO-19-16 PSC.

In February, AutoridadeNacionaldoPetróleoeMinerais (“ANPM”), the Timor-Leste state oil and gas regulatory
authority, granted Banda an extension to Contract Year One of the PSC to enable the timely completion of the
committed work programme, in particular the seismic reprocessing project. This means that the PSC is currently in
Contract Year Two, with Year Three commencing on 19 December 2022.

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

In April, Baron announced the completion of an earn in, supported by a £3 million (gross) fund raise, increasing the
Company’s interest in TLS from 33.33% to 85%. Baron agreed to fund the remainder of the Chuditch PSC work
programme to November 2022, estimated to be US$3.5 million.

In June, Baron announced an alignment of interests in relation to the Chuditch PSC, by way of a share exchange,
whereby the Company agreed to acquire the remaining 15% of TLS from SGPL in exchange for the issue of 9.99%
of Baron’s enlarged share capital. Through this share exchange, Baron secured full control of the operating company
of the PSC and alignment with the Banda technical and commercial personnel who continue to drive the Chuditch
project forward.

In July, the Company announced the results of a review of prospective resources by THREE60 Energy Asia Sdn. Bhd.
(“THREE60 Energy”), an independent consultancy specialising in petroleum reservoir assessment and asset
evaluation, for the Chuditch PSC:

•

independent review of the Chuditch PSC, validated to SPE PRMS 2018 industry standards, indicates aggregate
gross Mean Prospective Resources of 3,368 Bscf of gas and 30 MMbbl of condensate, equivalent to a total of
591 MMBOEs for the Chuditch-1 discovery and neighbouring prospects and leads;

subsurface risks for prospects and lead are estimated to be low, since they share analogous geological
characteristics to the Chuditch-1 and other gas discoveries in adjacent Timor-Leste and Australian waters;

the High Estimate of aggregate gross Prospective Resources equivalent to 1,156 MMBOE may reﬂect the
potential for a single, large accumulation.

In September, a farmout initiative was launched running in parallel with the seismic reprocessing and other technical
and commercial studies. This initiative is ongoing and is expected to accelerate as technical studies near completion
and uncertainties around the Chuditch project are reduced.

In December, interim 3D seismic PSDM products were received from the processing contractor TGS-NOPEC, showing
encouraging improvements in subsurface imaging. Iterative processing and interpretation feedback has subsequently
continued, including the delivery of further interim steps. In-house interpretation of the reprocessed 3D seismic
data is expected to commence in June 2022 and we look forward to updating shareholders on the results of the ﬁnal
3D PSDM data thereafter.

A decision on whether to enter the drilling phase, with the potential for a high impact drilling programme in 2023,
is scheduled to be taken in Q4 2022 following receipt and Interpretation of the ﬁnal seismic reprocessing
data volumes.

In parallel with the 3D seismic reprocessing project, additional geological and engineering studies have been
completed or are ongoing, including:

extensive 2D regional seismic interpretation and mapping and petroleum systems modelling exercises to provide
a regional context of the Chuditch trend;

a revised petrophysical evaluation of the Chuditch-1 discovery, conﬁrming the quality of Chuditch reservoirs as
potentially gas productive;

a well engineering study to provide preliminary designs and indicative costs for a Chuditch appraisal well and
a step-out exploration well; and

a facilities and gas export engineering study, evaluating the layout and costs of inﬁeld facilities required for a
future Chuditch LNG development, the various pipeline and standalone options for gas export, and the
treatment and storage of carbon dioxide.

•

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

Annual Report and Financial Statements 2021

This work culminated in an update announcement and live investor presentation in late January 2022 which was
attended by more than 100 participants. The presentation, which is available on the Baron website, covered a wide
range of topics including:

•

an updated technical overview;

a description of the overall commercial context;

options for potential future gas export strategies via pipeline to LNG facilities, or standalone solutions such as
a Floating Liqueﬁed Natural Gas (FLNG) facility;

preliminary concepts for the handling of carbon dioxide and CCS (carbon capture and storage); and

a preliminary design for a Chuditch appraisal well, with an indicative dry hole cost estimate in the range of
US$15-$20 million.

At the regulatory level, Banda continues to enjoy a strong and constructive relationship with ANPM. An operational
ofﬁce was opened in Dili in early 2022 and the recruitment of a ﬁt-for-purpose local management and technical
team was completed during Q2 2022.

Post the reporting period ANPM announced the results of the Second Timor-Leste Licensing Round. Baron, having
studied the available acreage in the round, did not submit a bid, believing that Chuditch represents the current
highest value opportunity in offshore Timor-Leste. The Company is encouraged by the award to ENI Australia B.V,
a subsidiary of the Italian major oil company, of Block P which neighbours the Chuditch PSC area. Santos NA Timor-
Leste Pty Ltd was awarded Block R.

United Kingdom Offshore Licence P2478 “Dunrobin”; (Baron 32%)
Background

Innovate Licence P2478, awarded in September 2019, is currently held by Corallian Energy Limited (“Corallian”,
Licence Administrator, interest 36%), Baron (32%), and Upland Resources (UK Onshore) Limited (32%).

The work commitments on the Licence are to undertake reprocessing of legacy 2D and 3D seismic data and perform
other studies in order to better understand the subsurface risks, reduce the range of volumetric uncertainty, as well
as providing drilling location candidates 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 candidate direct hydrocarbon indicators. Regional and local petroleum systems are considered by the
Joint Venture Partners to be proven. Well costs are expected to be modest at c.£7 million (gross) as the prospect lies
in shallow water of less than 100 metres and the total drilling depth of the well is prognosed to be approximately
660 metres. Dunrobin is evaluated by Baron to contain estimated gross mean prospective resources of the order of
100 MMbbl (a non-SPE PRMS Standard estimate).

2021andsubsequentactivities

In Q1 2021, the Joint Venture Partners received the results of technical studies from a large European E&P company
under a work sharing agreement signed in 2020, which enhanced the partners’ understanding of the petroleum
geology and corroborated their view of Dunrobin as a potentially attractive and substantial target.

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

In August, in order to build on the work already undertaken and to accelerate progress, a Farm-Up Agreement was
signed with existing partners Corallian and Upland whereby Baron increased its interest in the Licence from 15% to
32% in exchange for agreeing to pay 100% of the costs of the remaining Phase A work commitments up to a cap of
£160,000 (the “Agreement”). Other costs are borne by all partners proportionate to their revised interests. Corallian
remains the Licence Administrator with Baron assuming the role of technical overseer of the remaining Phase A work
commitments. No consideration was payable to Corallian or Upland under the Agreement. Formal consent for the
transfer of interests was received from the UK’s Oil and Gas Authority, now renamed the North Sea Transition
Authority (“NSTA”), in October 2021.

Work on the outstanding Phase A technical work commitments with Baron’s direct technical involvement
commenced during Q4 2021. The key components, that of 3D and 2D seismic reprocessing plus geochemical studies,
are expected to be delivered early in Q3 2022 with the interpretation anticipated to be available in Q4 2022. The
Board believes this will provide the partners sufﬁcient time to mature the Dunrobin prospect ahead of the July 2023
“drill or drop” decision and, potentially, to engage with prospective drilling and funding partners.

Baron is encouraged by the UK government’s recent updated policy paper (British Energy Security Strategy, 7 April
2022) which has the potential to revive the business and regulatory hydrocarbon exploration environment in the UK
North Sea and so have a positive impact on the chances of the Dunrobin prospect being drilled.

Block XXI, Peru – Request for Relinquishment of Licence; (Baron 100%)
In April 2022, Baron announced that, through its fully owned subsidiary, Gold Oil Peru SAC, it had requested the
relinquishment of its legacy Licence Block XXI (“Licence”) in Peru. The Licence has been largely under Force Majeure
(“FM”) for a variety of reasons since 2017 and Baron has been frustrated in its attempts to access the area in order
to carry out operations. With no certainty around pathways or timelines to drilling the Company took the decision
to relinquish the Licence and will ultimately withdraw from Peru.

Under the terms of the Licence Agreement, if the Licence is currently under FM and has remained so for a continuous
period of more than 12 months, as is the case, the Licence holder may ask Perupetro SA (the Peruvian national Oil
& Gas Agency and Licensing Authority) to release the licensee’s Bank Guarantee, which in our case is US$160,000.
Thereafter, there will be a requirement to establish and ﬁle an Abandonment Plan for approval by the
relevant authorities.

New Ventures
The Company continues to screen early stage opportunities for acquiring signiﬁcant equity interests in high impact
exploration and appraisal activity at low entry costs. In this context, the opportunity to participate in new licence
rounds or to make out of round applications ﬁts well with our overall strategy.

Conclusions
Baron is in its best shape for many years. We have worked hard to pivot the Company towards assets where we have
signiﬁcant interests in meaningful and active opportunities. Our task over the next year or so is to progress our two
major projects through the key evaluation points with a view to unlocking value for shareholders. On the back of our
recent oversubscribed £1.65 million (gross) fund raise in April 2022, we have funding to get these activities to their
next decision points.

Currently, the oil and gas industry tailwinds are highly favourable and seem likely to be sustained across the medium
term, whether that be driven by energy security, the unique position of gas as the transition fuel or structural issues
over the supply of LNG, especially in Asia. It is worth noting that Shell in its annual LNG Outlook 2022 now predicts
that the growing supply-demand gap for LNG will appear by 2025, some ﬁve years earlier than originally expected,
despite production increases set for an 80% rise by 2040. Chuditch, with the potential for ﬁrst gas in 2026 and
located at the gateway to Asian energy markets, looks to be in an enviable position.

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

Annual Report and Financial Statements 2021

We are fortunate to be bringing Chuditch forward at a time when, after two years of COVID induced inactivity, we
are beginning to detect recovery in the farmout market. Our plans for Chuditch have advanced throughout 2021 and
we are about to take the major step of receiving the ﬁnal reprocessed 3D seismic data from TGS-NOPEC to allow
a comprehensive interpretation of the subsurface. We believe we have a high quality value proposition to offer at
Chuditch, where we have a 75% interest in a gas discovery and associated prospectivity considered to be relatively
low cost and low risk, with aggregate gross prospective resources currently in the range of up to 1,156 MMBOE (High
Estimate).

In addition, we have accelerated the maturation and increased our equity in the Dunrobin prospect in UK Licence
P2478 as the follow up to Chuditch. Here, the outlook has been transformed since the beginning of 2022, led by rising
oil prices and the recent publication of the UK government’s updated security strategy which has the potential to
revive activity in the UK North Sea. The technical work underway is aimed at providing a potential drilling location
candidate ahead of making a “drill or drop” decision by July 2023. Dunrobin is currently evaluated by Baron to
contain estimated gross mean prospective resources of the order of 100 MMbbl (a non-SPE PRMS Standard estimate).

Baron is highly encouraged by the progress being made with our Chuditch and Dunrobin projects against the
backdrop of robust price and demand scenarios for LNG-scale gas in the Asia-Paciﬁc region and oil in the North Sea.
Combined, we see considerable potential for shareholder value in these key assets and the Company is focussed on
delivering that value through 2022 and beyond.

John Wakeﬁeld
Non-executiveChairman

30 May 2022

4. Strategic Report

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 2021.

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 2021 were all 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.

We successfully advanced our Chuditch and Dunrobin projects and are now approaching an exciting stage on each
of them which are expected to result in decision points in the near to medium term. On Chuditch, the TGS
reprocessing work on the legacy seismic data is nearing completion and ﬁnal delivery of the data will allow the
interpretation to begin with a view to reaching a drilling decision in line with our commitments under the PSC.

On Dunrobin, we are similarly engaged on completing 3D and 2D seismic reprocessing which is expected to be
completed early in Q3 2022 with the Interpretation anticipated to be available in Q4 2022.

In Peru, following ﬁve years of stagnation and after careful interpretation of all the available data, we concluded that
the best option was to apply for Licence Block XXI to be relinquished, thereby saving costs in order to focus our
resources on our high impact ventures.

The KPIs for 2022 are similarly operational:

•

complete the analysis of seismic reprocessing and other technical studies so as to be in a position to make a
decision whether to drill on Chuditch by Q4 2022 and to advance a farmout process to facilitate a drilling
programme in 2023 in accordance with our PSC commitments;

on P2478 Dunrobin prospect, complete the seismic reprocessing and other technical studies in good time for
subsequent analysis and interpretation so as to satisfy our Licence commitment with a “drill or drop” decision
in advance of the July 2023 deadline;

continue to review and access potentially high impact new ventures that meet our investment 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.

4. Strategic Report (continued)

Annual Report and Financial Statements 2021

Oil and Gas prices
The Group’s results and activities are 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, 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-cash ﬂow exploration phase. Following Baron taking an increased interest in the
Chuditch PSC, the Group is now much more heavily weighted towards gas where regional markets play a much
greater role in pricing.

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.

Performance guarantees
The Group has given performance guarantees in respect of its licence in Timor-Leste and Peru. 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 guarantee sum in Timor-Leste and Peru are shown as a cash not available for use in the Statement
of Financial Position.

Action
The Group actively manages its work programmes under the licenses to the extent that it is able to, paying close
attention to milestones and expiry dates, in order to minimise the risk these 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,
dividends and other general corporate purposes.

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

4. Strategic Report (continued)

Taxation
As the tax legislation in 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
Given the Company's increased interest in the Chuditch PSC, 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 the
PLC reports in Sterling.

Action
Corporate and capital expenditure budgets are set annually, partly by the Group but also 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.

By order of the Board

John Wakeﬁeld
Non-executiveChairman

30 May 2022

5. Report of the Directors

Annual Report and Financial Statements 2021

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 2021.

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

John Wakefield, Non-executive Chairman
John Wakeﬁeld, aged 67, is an experienced quoted company director and corporate ﬁnancier having previously
worked at several nominated adviser ﬁrms. 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 59, 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 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. He was appointed as a Non-executive Director of Baron in 2018 and assumed
the role of Chief Executive Ofﬁcer in 2020.

Jonathan Ford, Technical Director
Jon Ford, aged 62, has more than 40 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.

Proposed dividend
The directors do not recommend the payment of a dividend in respect of the ﬁnancial year ended 31 December
2021.

Political and charitable contributions
In the year ended 31 December 2021 the Group made no charitable or political donations.

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 creditors days as at 31 December 2021 were 3 days (2020: 12 days).

Activities and results
A loss of £1,127,000 (2020: £920,000), of which £1,127,000 (2020: £920,000) was attributable to equity
shareholders, was recorded for the year. Net assets of the Group at 31 December 2021 amounted to £4,682,000
(2020: £1,796,000), of which £4,682,000 (2020: £1,796,000) 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.

5. Report of the Directors (continued)

Issue of shares
During the year, the Company issued 6,000,000,000 new Ordinary Shares of 0.025p each for cash, raising
£3,000,000 gross (£2,768,000 net of costs). In addition, the Company issued a further 1,157,202,885 new ordinary
shares of 0.025p each in exchange for the remaining 15% of the issued share capital of SundaGas (Timor-Leste Sahul)
Pte. Ltd (see note 13) at a value of £926,000. 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 upmost
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:

31 December 2021

31 December 2020

No. of
Ordinary
shares

168,850,000
22,500,000
20,000,000

%
Holding

No. of
Ordinary
shares

1.5% 106,250,000
0.2% 7,500,000
–
0.2%

211,350,000

1.9% 113,750,000

%
Holding

2.4%
0.2%
–

2.6%

A Yeo
J Ford
J Wakeﬁeld

5. Report of the Directors (continued)

Options held by the directors are as follows:

A Yeo

J Ford

A Yeo
J Ford

Total

Annual Report and Financial Statements 2021

31 December 2021
Number of
Options
£0.00435(1)

31 December 2020
Number of
Options
£0.00435(1)

–

10,000,000

Options
£0.001(2)

125,000,000

Number of
Options
£0.001(3)

75,000,000

Number of
Options
£0.0007(4)

250,000,000
140,000,000

Number of
Options
£0.0007(4)

–
–

Options
£0.0006(5)

Options
£0.0006 (5)

290,000,000
180,000,000

–
–

1,060,000,000

210,000,000

(1)

(2)

(3)

(4)

(5)

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 £0.001 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. These options were cancelled and rescinded on 12 January 2022.

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. These options were cancelled and rescinded on 12 January 2022.

Each £0.0007 option grants the holder the right to subscribe for one Ordinary Share at £0.0007 per share, and are granted under one
option contract exercisable at any time prior to 22 July 2031.

Each £0.0006 option grants the holder the right to subscribe for one Ordinary Share at £0.0006 per share, and are granted under one option
contract exercisable at any time prior to 17 December 2031.

Except as shown in note 27 to the Financial Statements (Related Party Transactions) on page 66, 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.

5. Report of the Directors (continued)

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.

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.

Base
salary/fee
£

Company
car
£

Benefits-
in-kind
£

Other
£

Total
£

Year ended
31 December
2020
Total
£

Chairman
–
M Butler (resigned 30 October 2020)
50,000
J Wakeﬁeld (appointed 30 October 2020)
A Yeo
160,000
J Ford (Non-executive until 30 October 2020) 82,500

–
–
12,524
–

292,500

12,524

–
–
9,527
–

9,527

–
–
34,3261
–

–
50,000
216,377
82,500

73,493
8,333
164,497
36,667

34,326

348,877

282,990

1 Includes adjustment of £34,326 relating to a previous period

Refer to note 27 on page 66 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 19 April 2022, the Company announced that through its wholly-owned subsidiary, Gold Oil Peru SAC, it has
requested the relinquishment of its legacy Licence Block XXI in Peru. Under the terms of the Licence Agreement, if
the Licence is under Force Majeure status and has remained so for a continuous period of more than 12 months, as
is the case, the Licence holder may ask Perupetro SA (the Peruvian national Oil & Gas Agency and Licensing
Authority) to release the licensee’s Bank Guarantee, which in this case is US$160,000. Thereafter, there will be a
requirement to establish and ﬁle an Abandonment Plan for approval by the relevant authorities. The withdrawal
from Block XXI will ultimately lead to the Group’s withdrawal from Peru.

5. Report of the Directors (continued)

Annual Report and Financial Statements 2021

On 9 May 2022, the Company issued 2,750,000,000 new ordinary shares of 0.025p each raising new capital of
£1,650,000 gross, £1,505,000 net of costs. It is intended that the proceeds of the Placing and Subscription will be
used primarily to fund the Company’s ongoing TL-SO-19-16 PSC (“Chuditch PSC”) work programme in Timor-Leste
and the Company’s UK P2478 licence project in the Inner Moray Firth. The balance will be directed to cover the
Company's general and administrative expenses and related working capital, the evaluation of new ventures and
the costs of withdrawal from Peru.

Financial Review

Liquidity & Share Trading
The Board believes that high liquidity is important in attracting both small and institutional investors to Baron.
During the last ﬁnancial period Baron has had a high stock liquidity on the E&P sector on AIM.

Shares in Issue and Shareholders Profile
The number of shares in issue at 23 May 2022 was 14,333,612,461 Ordinary Shares, each share having equal voting
rights. Baron Oil Plc has 1,011 shareholders.

The shareholding distribution at 23 May 2022 is as follows:

Range

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

No of shares

No of shareholders

4,848,483,659
4,915,014,704
3,017,822,969
583,886,573
968,404,556

14,333,612,461

2
5
10
6
988

1,011

Significant shareholdings
The Company has been informed that, as of 23 May 2022, the following shareholders owned 3% or more of the
issued share capital of the Company:

Name

Hargreaves Lansdown (Nominees) Limited
Interactive Investor Services Nominees Limited
HSDL Nominees Limited
JIM Nominees Limited
Vidacos Nominees Limited
HSBC Client Holdings Nominee (UK) Limted
Barclays Direct Investing Nominees Limited
Rene Nominees (IOM) Limited

% of company

2,957,508,067
1,890,975,592
1,314,099,504
1,168,958,313
837,121,680
808,471,910
786,363,297
583,221,443

20.63%
13.19%
9.17%
8.16%
5.84%
5.64%
5.49%
4.07%

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 Broker. The closing mid-market price on
23 May 2022 was 0.08p.

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 61.

5. Report of the Directors (continued)

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.

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 bought against its directors and ofﬁcers.

By order of the Board

Geoffrey Barnes
Secretary

30 May 2022

6. Corporate Governance Statement

Annual Report and Financial Statements 2021

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” maxim 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 independent 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
As an AIM quoted company, the preparation of a Remuneration Committee report is not an obligation, although the
Company includes a commentary on its remuneration policy within its annual report and accounts and within its
corporate governance statement. The Company seeks to provide information that is appropriate to its size and
organisation. The Remuneration Committee is comprised of its three Directors with John Wakeﬁeld as Chairman;
Andy Yeo and Jon Ford are the other members. The Remuneration Committee is responsible for the development
of policy on Executive, Non-executive and senior management remuneration.

Rather than having formal terms of reference the Remuneration Committee operates a Remuneration Policy which
is to provide a remuneration package which will attract and retain individuals with the ability and experience required
to manage the Company. The Remuneration Committee takes into account both Company and individual
performance, market value and sector conditions in determining remuneration. This includes benchmarking against
the Company’s key performance indicators (KPIs). 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. Notice
periods for Executive Directors are 12 months.

In 2020, the Remuneration Committee 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.

Base salaries are reviewed annually or when individuals change positions or responsibility, or the Company’s situation
changes. The Remuneration Committee meets as required, but at least twice a year.

John Wakeﬁeld, the Remuneration Committee’s chairman is the Company’s Non-executive Chairman and is
considered to be independent. The Remuneration Committee’s other members are not independent directors as
envisaged by the QCA Code and the Company therefore does not currently fully comply with the QCA Code in this
respect. However, no Director can take part in discussions or vote on matters pertaining to their individual
performance or remuneration.

6. Corporate Governance Statement (continued)

As Remuneration Committee’s chairman, Mr Wakeﬁeld consults with the other directors and conducts peer group
reviews. Given that any director whose remuneration is under discussion is not able to vote, under the current
composition of the Remuneration Committee it is likely that there will be two directors involved in the decision to
adopt the Remuneration Committee’s recommendations with regard to the remuneration of the other director and,
in the event of a tied vote, Remuneration Committee’s independent chairman, John Wakeﬁeld has the casting vote.
In this way, the Board considers that the Remuneration Committee is able to resist inappropriate demands from
executive directors and senior management.

Director remuneration, contracts, grants of options and incentive arrangements for senior management are matters
that are formally reserved for the Board. The Remuneration Committee makes recommendations which are
considered and adopted by the Board as a whole. The Board considers that its Remuneration Committee and
Remuneration Policy are appropriate to the Company’s current size, organisation and level of operations.

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, which also uses third party external communications consultants, 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 acknowledge their duty under s.172 of the Companies Act 2006 and consider that they have, both
individually and together, acted in the way that, in good faith, would be most likely to promote the success of the
Company for the beneﬁt of its members as a whole. In doing so, they have had regard (amongst other matters) to:

the likely consequences of any decision in the long term. The Group’s long-term strategic objectives, including
progress made during the year and principal risks to these objectives, are shown in the strategic report and the
key performance indicators.

the interests of the Company’s employees. Our employees are fundamental to us achieving our long-term
strategic objectives.

the impact of the Company’s operations on the community and the environment. The Group operates honestly
and transparently. We consider the impact on the environment on our day-to-day operations and how we can
minimise this.

the desirability of the Company maintaining a reputation for high standards of business conduct. Our intention
is to behave in a responsible manner, operating within the high standard of business conduct and good corporate
governance.

the need to act fairly as between members of the Company. Our intention is to behave responsibly towards our
shareholders and treat them fairly and equally so that they may beneﬁt from the successful delivery of our
strategic objectives.

•

Annual Report and Financial Statements 2021

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 UK adopted International Accounting Standards. 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 UK adopted International Accounting
Standards 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
Due to change in nature and structure of the Group, advantage has been taken of Section 3.15 of the 2016 Ethical
Standards, allowing the audit engagement partner to continue in his role for the audit for the year ended 31
December 2021.

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

30 May 2022

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 2021 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 and Company ﬁnancial statements is applicable law and UK adopted International Accounting Standards.

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 2021 and of the group’s loss for the year then ended;

the group ﬁnancial statements have been properly prepared in accordance with UK adopted International
Accounting Standards;

the parent company ﬁnancial statements have been properly prepared in accordance with UK adopted
International Accounting Standards; 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 director’s 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 2021

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.

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 loss 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 Group had intangibles of £2.7 million at the year
ended 31 December 2021 (31 December 2020: £18k).
The total value of exploration and evaluation costs
expensed during the period is £218K. An increase in
impairment of £17k 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 the 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.

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 subsidiaries
The Company had investment in subsidiary of £2.1m at
the end of the reporting period. During the current
period, the Company made a loan to subsidiary of £603k
resulting in a year end balance of £925k.

The Directors have conﬁrmed that the investment in and
loan to subsidiary 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 and their perspective 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
subsidiary in line with 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

£55,000 (31 December 2020:
£52,000).

£55,000 (31 December 2020:
£50,000).

How we determined it

Based on 5% of loss before tax.

Rationale for benchmark applied

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

We believe the most adequate basis
is for materiality is based on loss
before tax is 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 £43,000 and £55,000.

We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above
£2,750 (Group audit) (31 December 2020: £2,600) and £2,750 (Company audit) (31 December 2020: £2,500) as well
as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

Annual Report and Financial Statements 2021

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 3 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 3 reporting units.

The Group engagement team performed all audit procedures, with the exception of the audit of Gold Oil Peru
S.A.C and SundaGas (Timor-Leste Sahul) Pte. Ltd, which were performed by component auditors in Peru and
Singapore, respectively.

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 21, 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 2021

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 1
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’s 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

30 May 2022

9. Consolidated Income Statement
for the year ended 31 December 2021

Annual Report and Financial Statements 2021

Revenue

Cost of sales

Gross proﬁt

Exploration and evaluation expenditure
Intangible asset impairment
Property, plant and equipment depreciation
Receivables impairment
Administration expenses
Gain/(loss) on exchange
Other operating income

Operating loss

Income from associated undertaking
Gain on disposal of 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

Notes

2021
£’000

2020
£’000

–

(218)
(17)
(11)
(7)
(1,321)
22
89

(1,463)

29
302

(1,132)

(2)
7

(1,127)

–

(1,127)

–

(1,127)

(1,127)
–

(1,127)

–

(145)
59
(2)
74
(710)
(157)
–

(881)

(44)
–

(925)

–
5

(920)

–

(920)

–

(920)

(920)
–

(920)

(0.012p)
(0.012p)

(0.023p)
(0.023p)

10
9
3

3
3

12
12

5
5

10. Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021

Loss on ordinary activities after taxation attributable to the parent

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

Total comprehensive loss for the year

Total comprehensive loss attributable to owners of the parent

Notes

2021
£’000

(1,127)

33
33

(1,061)

2020
£’000

(920)

41
(115)

(994)

11. Consolidated Statement of Financial Position
at 31 December 2021

Annual Report and Financial Statements 2021

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

Currentassets
Trade and other receivables
Cash and cash equivalents

Total assets

Equity and liabilities
Capitalandreservesattributabletoownersoftheparent
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

2021
£’000

2020
£’000

9
9
10
11
12

14
15

18
19
19
19
19

16
16

–
34
2,736
–
–

2,770

54
2,509

2,563

5,333

–
43
18
–
151

212

376
1,311

1,687

1,899

2,896
34,061
388
1,561
(34,224)

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

4,682

1,796

620
12

632

5,333

58
16

1,899

The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 30 May 2022 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 2021

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

Currentassets
Trade and other receivables
Cash and cash equivalents

Total assets

Equity and liabilities
Capitalandreservesattributabletoownersoftheparent
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

2021
£’000

2020
£’000

9
10
13

14
15

18
19
19
19
19

16
16

–
33
68
3,029

3,130

46
1,527

1,573

4,703

–
43
18
195

256

375
1,183

1,558

1,814

2,896
34,061
388
(163)
(32,586)

4,596

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

1,712

76
12

4,703

58
15

1,814

The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 30 May 2022 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 2021

Annual Report and Financial Statements 2021

Share
capital
£’000

Share
premium
£’000

Retained
earnings
£’000

Share
option
reserve
£’000

Foreign
exchange
translation
£’000

GROUP
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

As at 1 January 2021

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

482

625

–
–
–

–

1,107

1,789

–
–
–

–

30,507

(32,251)

1,670

–
(21)
–

–

(21)

–

(920)
–
41

–

(879)

32,156

(33,130)

1,905

–
–
–

–

(1,127)
–
33

–

(1,094)

As at 31 December 2021

2,896

34,061

(34,224)

–

–
102
(41)

–

135

–

–
286
(33)

–

253

388

1,643

–

–
–
–

(115)

1,528

–

–
–
–

1,561

Total
equity
£’000

455

2,295

(920)
81
–

(115)

(954)

1,796

3,694

(1,127)
286
–

(808)

4,682

13. Consolidated and Company Statement of Changes in Equity
for the year ended 31 December 2021

Share
capital
£’000

Share
premium
£’000

Retained
earnings
£’000

Share
option
reserve
£’000

Foreign
exchange
translation
£’000

Total
equity
£’000

COMPANY
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

As at 1 January 2021

Shares issued

Transactions with owners

Loss for the year
Share based payments
Share option reserve released

Total comprehensive income
for the period

482

625

–
–
–

–

1,107

1,789

–
–
–

–

30,507

(32,261)

1,670

–
(21)
–

(21)

–

697
–
41

738

32,156

(31,523)

1,905

–
–

–

(1,096)
–
33

(1,063)

As at 31 December 2021

2,896

34,061

(32,586)

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

–

–
102
(41)

135

–

–
286
(33)

253

388

(163)

(1,361)

–

–
–
–

–

(163)

–

–
–
–

–

(163)

2,295

697
81
–

778

1,712

3,694

(1,096)
286
–

(810)

4,596

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 2021

Annual Report and Financial Statements 2021

Operating activities

Investing activities
Return from investment and servicing of ﬁnance
Advances to subsidiary and associated undertakings
Performance bond guarantee deposit
Acquisition of intangible assets
Acquisition of tangible assets
Investment in associated undertaking
Disposal of 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 Statement
of Financial Position

Group
2021
£’000

(576)

7
323
(742)
(2,415)
(1)
(93)
272

Company
2021
£’000

(681)

7
(707)
–
(50)
(1)
(1,909)
–

(2,649)

(2,660)

3,694
(9)

460

1,190

1,650

3,694
(9)

344

1,183

1,527

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

859

–

121

–

2,509

1,527

1,311

1,183

14. Consolidated and Company Statement of Cash Flows
for the year ended 31 December 2021

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

Group
2021
£’000

(1,127)
28
286
(7)
–
(302)
(29)
19

Operating cash outﬂows before movements in working capital

(1,132)

(Increase)/decrease in receivables
Increase/(decrease) in payables

Net cash outﬂows from operating activities

(1)
557

(576)

Company
2021
£’000

Group
2020
£’000

Company
2020
£’000

(1,096)
135
286
(7)
–
–
–
(19)

(701)

6
14

(681)

(920)
(57)
81
(5)
–
–
44
(52)

(909)

(4)
(6)

(919)

697
90
81
(5)
(1,679)
–
–
30

(786)

(5)
(6)

(797)

15. Notes to the Financial Statements

Annual Report and Financial Statements 2021

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 10.

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 UK adopted International Accounting Standards
and IFRIC interpretations issued by the International Accounting Standards Board (IASB) 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 UK adopted International Accounting Standards or IFRIC interpretations that are effective for the ﬁrst
time for the ﬁnancial period beginning January 2021 that would be expected to have a material impact on the
Company.

The following new standards, amendments to standards and interpretations have been issued, but are not effective
for the ﬁnancial period beginning 1 January 2021 and have not been early adopted.

15. Notes to the Financial Statements (continued)

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

IFRS 16 Leases (amendments)(1 & 2)
IAS 39
IFRS 9
IFRS 7
IFRS 4
IFRS 3
IAS 37
IFRS 17
IAS 1
IAS 8

Financial instruments recognition and measurement(1)
Financial instruments (amendments)(1)
Financial instruments disclosures (amendments)(1)
Insurance contracts(1)
Business combinations(2)
Provisions, contingent liabilities and contingent assets(2)
Insurance contracts(2)
Presentation of ﬁnancial statements(3)
Accounting policies, changes in accounting estimates and errors(3)

(1)

(2)

(3)

Effective for annual periods beginning on or after 1 January 2021

Effective for annual periods beginning on or after 1 January 2022

Effective for annual periods beginning on or after 1 January 2023

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, except where the
acquired business is identiﬁed as a single asset company, in which case the excess is recorded as an intangible ﬁxed
asset. 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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

1. Signiﬁcant accounting policies (continued)

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.

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.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)

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’.

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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

1. Signiﬁcant accounting policies (continued)
The cost of the workovers and extended production testing is capitalised within property, plant and equipment as
a D&P asset.

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. Bank deposits that are held as guarantees until
the Group fulﬁls certain commitments are not available for use and are not considered to be liquid cash (see note 15).

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)

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.

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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

1. Signiﬁcant accounting policies (continued)

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.

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.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)

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.

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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

1. Signiﬁcant accounting policies (continued)

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 (£) and
US Dollars (USD). 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.

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.

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)

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.

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.

Annual Report and Financial Statements 2021

15. Notes to the Financial Statements (continued)

2. Segmental information (continued)

Exploration and production year ended 31 December 2021

United
Kingdom
£’000

South
America
£’000

South East
Asia
£’000

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
Other operating income

Operating (loss)/proﬁt

Income from associated undertaking
Gain on disposal of associated undertaking

–

(50)
–
(11)
–
(1,031)
22
–

(1,070)

–
–

–

(101)
(17)
–
(7)
(5)
–
–

(130)

–
–

Loss before interest and taxation

(1,070)

(130)

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

(2)
7

(1,065)

–

(1,065)

2,816
1,527

4,343

94
12

106

50
11

–
–

(130)

–

(130)

4
124

128

3
–

–
24

–

(67)
–
–
–
(285)
–
89

(263)

29
302

–
–

–

4
858

862

542
–

542

1,307
–

Total
£’000

–

(218)
(17)
(11)
(7)
(1,321)
22
89

(1,463)

29
302

(1,132)

(2)
7

(1,127)

–

(1,127)

2,824
2,509

5,333

639
12

651

1,357
35

15. Notes to the Financial Statements (continued)

United
Kingdom
£’000

South
America
£’000

South East
Asia
£’000

–

–
(31)
–
(2)
–
(706)
(157)

(896)

–

(896)

–
5

(891)

–

(891)

113
1,183

1,296

81
15

59
–

–

–
(114)
59
–
74
(4)
–

–

–
–

–

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)

2. Segmental information (continued)

Exploration and production 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)/proﬁt

Income from associated undertaking

Loss before interest and taxation

Finance costs
Finance income

(Loss)/Proﬁt before taxation

Income tax expense

Loss/(Proﬁt) 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

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

3. Operating loss

The operating loss is stated after charging:
Auditors’ remuneration
Company – audit
Other group entities – audit
Group and 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
Other operating income

2021
£’000

2020
£’000

25
14
3
218
17
11
7
(22)
(89)

28
4
2
145
(59)
2
(74)
157
–

Other operating income arises on the capitalisation into cost of investment of development costs written off in
prior years in respect of Chuditch, Timor-Leste. This is due to a reconstruction of the balance sheet of SundaGas
(Timor-Leste Sahul) Pte. Ltd (“TLS”) when the Group took majority control in TLS.

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
(Gain)/loss on exchange
Other expenses

2021
£’000

521
261
218
35
454
(22)
85

1,552

2020
£’000

374
81
145
(131)
198
157
57

881

15. Notes to the Financial Statements (continued)

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

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

Loss before tax
Continuing operations

Tax at composite group rate of 22.4% (2020: 19%)

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

Tax expense

2021
Number

2020
Number

3
2

£’000

96
349
286
51

782

2021
£’000

7
(2)

3
1

£’000

52
283
81
39

455

2020
£’000

5
–

2021
£’000

2020
£’000

–
–

–

2021
£’000

(1,127)

(253)

123
(97)
227
–

–

–
–

–

2020
£’000

(920)

(174)

340
(126)
(40)
–

–

At 31 December 2021, the Group has tax losses of £32,933,000 (2020 – £28,990,000) to carry forward against
future proﬁts. The deferred tax asset on these tax losses at a composite group rate of 18.1% of £5,964,000 (2020:
at 19%, £5,508,000) has not been recognised due to the uncertainty of the recovery.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

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 (loss)/proﬁt

8. Earnings per share

Loss per ordinary share
– Basic
– Diluted

2021
£’000

(1,096)

2020
£’000

697

2021

2020

(0.012p)
(0.012p)

(0.023p)
(0.023p)

Earnings per ordinary share is based on the Group’s loss attributable to controlling interests for the year of £1,127,000
(2020: £920,000).

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

9,460,727,853
1,986,979,453

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

Weighted average ordinary shares for diluted earnings per share

11,447,707,306

4,361,866,983

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.

2021
Number

2020
Number

15. Notes to the Financial Statements (continued)

9. Property, plant and equipment

Group
Cost
At 1 January 2020
Foreign exchange translation adjustment
Expenditure

At 1 January 2021
Foreign exchange translation adjustment
Expenditure

At 31 December 2021

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

At 1 January 2021
Charge for the period

At 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Company
Cost
At 1 January 2020
Expenditure

At 1 January 2021
Expenditure

At 31 December 2021

Depreciation
At 1 January 2020
Charge for the period

At 1 January 2021
Charge for the period

At 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Equipment and
machinery
£’000

Right for use
asset
£’000

Total
£’000

30
(1)
–

29
1
1

30
(1)
–

29
–

–

–
–

–
1

–
–

–

–
–
45

45
–
–

–
–
2

2
11

–
45

45
–

–
2

2
11

30
(1)
45

74
1
1

30
(1)
2

31
11

–
45

45
1

–
2

2
11

Included in the above line items are right-of-use assets of £32,000 (2020: £43,000) 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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

9. Property, plant and equipment (continued)
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.

10. Intangible ﬁxed assets

Group
Cost
At 1 January 2020
Foreign exchange translation adjustment
Expenditure
Disposals

At 1 January 2021
Foreign exchange translation adjustment
Expenditure
Consolidation of single asset company

At 31 December 2021

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

At 1 January 2021
Charge for the period

At 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Exploration
and evaluation
costs
£’000

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

2,319
17
1,356
1,362

5,054

3,467
–
(59)
(1,107)

2,301
17

2,318

2,736

Total
£’000

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

2,319
17
1,356
1,362

5,054

3,467
–
(59)
(1,107)

2,301
17

2,318

2,736

15. Notes to the Financial Statements (continued)

10. Intangible ﬁxed assets (continued)

Company
Cost
At 1 January 2020
Expenditure
Disposals

At 1 January 2021
Expenditure

At 31 December 2021

Impairment
At 1 January 2020
Disposals

At 1 January 2021

At 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Exploration
and evaluation
costs
£’000

1,748
14
(1,109)

653
50

703

Total
£’000

1,748
14
(1,109)

653
50

703

1,743
(1,108)

635

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 above impairment charges, or reduction
in impairment charges.

During the year, the Group increased its holding in SundaGas (Timor-Leste Sahul) Pte. Ltd (“TLS”) from 33.33% to
100%. As a consequence of the increased holding in TLS, the company is now consolidated into the Group Income
Statement and Statement of Financial Position. As TLS is a single asset company in pre-production phase, it is
included as an oil and gas asset purchase rather than as a business combination, and its carrying value is included in
intangible assets.

Block XXI Peru: this licence was fully impaired in 2018 and the process for relinquishment commenced in May 2022.

UK offshore block P1918 (“Colter”): this licence continued into the second term with effect from 1 February 2020
but the Company has 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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

11. Goodwill

Group
Cost

At 1 January 2020, 1 January and 31 December 2021

Impairment

At 1 January 2020, 1 January and 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

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

12. Associated undertaking

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

At 1 January 2021
Additions
Share of post acquisition net result
Disposal

At 31 December 2021

Impairment
At 1 January 2020 and 1 January 2021
Charge for the year

At 31 December 2021

Carryingvalue
At 31 December 2021

At 31 December 2020

Goodwill on
Consolidation
of subsidiaries
£’000

–

Total
£’000

–
195
(44)

151
93
29
(273)

–

–
–

–

Shares in
associated
undertaking
£’000

–
195
(44)

151
93
29
(273)

–

–
–

–

151

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

During the period, the Company increased its stake in TLS from 33.33% to 100%. In accordance with IFRS3, this is
treated as an effective disposal of the interest in the associated undertaking requiring a remeasurement of its cost
to fair value. This results in a gain on disposal of £302,000.

15. Notes to the Financial Statements (continued)

13. Investments

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

At 1 January 2021
Exchange rate adjustment
Additions
Net loan movements
Disposals

At 31 December 2021

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

At 1 January 2021
Charge/(release) for the year

At 31 December 2021

Carryingvalue
At 31 December 2021

At 31 December 2020

Loans to
group
undertaking
£’000

Shares in
group
undertaking
£’000

Shares in
associated
undertaking
£’000

687
(30)
–
118
–

775
19
–
1,030
–

1,824

687
88
–

775
124

899

925

–

5,469
–
–
–
(25)

5,444
–
2,104
–
–

7,548

5,444
–
–

5,444
–

5,444

2,104

–

–
–
195
–
–

195
–
93
–
(288)

–

–
–
–

–
–

–

195

Total
£’000

6,156
(30)
195
118
(25)

6,414
19
2,197
1,030
(288)

9,372

6,131
88
–

6,219
124

6,343

3,029

195

The Company elected 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 in
Singapore at a gross cost of £195,000. On the 20 April 2021, the Group increased its interest to 85% at a cost of
£890,000 and, on 17 June 2021, acquired the remaining 15% at a cost of £926,000 in the form of an equity exchange.

The cost of investment related to Gold Oil Caribbean Limited was shown as a disposal in 2020 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 £6,343,000 (2020: £6,219,000).

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

Subsidiary/controlled entity

Gold Oil Peru S.A.C

SundaGas (Timor-Leste Sahul)
Pte. Ltd.

Place of
incorporation
and operation

Peru

Singapore

Proportion of
ownership
interest
%

Proportion
of voting
power held
%

100

Method used
to account for
investment

equity
method
equity
method

Nature of
business

Exploration of
oil and gas
Exploration of
oil and gas

All shareholdings are in ordinary, voting shares.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

13. Investments (continued)
The results of subsidiaries is as follows:

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

SundaGas (Timor-Leste Sahul) Pte. Ltd.
Aggregate capital and reserves
Proﬁt/(Loss) for the year

14. Trade and other receivables

Other receivables
Amounts owed by associated undertaking
Prepayments and accrued income

15. Cash and cash equivalents

Bank current accounts
Bank deposit accounts

2021
£’000

1,615
(106)

702
(353)

2021

2020

Group
£’000

Company
£’000

12
–
42

12
–
34

Group
£’000

10
323
43

376

2021

2020

Group
£’000

238
2,271

2,509

Company
£’000

120
1,407

1,527

Group
£’000

265
1,046

1,311

2020
£’000

1,714
117

–
–

Company
£’000

9
323
43

375

Company
£’000

265
918

1,183

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 2021, bank deposits included £859,000 (2020: £121,000) that are being held as a guarantee
until the Group fulﬁlls certain licence commitments in Peru (US$160,000) and Timor-Leste (US$1,000,000) 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
Other payables
Accruals and deferred income
Capitalised lease liability due within 12 months
Taxation

Non-current liabilities
Capitalised lease liability due after 12 months

2021

2020

Group
£’000

Company
£’000

Group
£’000

Company
£’000

19
495
96
10
12

632

18
–
48
10
12

13
–
36
9
16

12
–
37
9
15

15. Notes to the Financial Statements (continued)

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

Current
Non-current

2021
£’000

10
19

2020
£’000

9
29

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.

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: 11,583,612,461 (2020: 4,426,409,576) ordinary shares of £0.00025 each

2021
£’000

2,896

2020
£’000

1,107

The Company issued 6,000,000,000 new ordinary shares of £0.00025 each for cash at £0.0005 per share during the
year. A further 1,157,202,885 new ordinary shares were issued at £0.0008 per share in exchange for the remaining
15% of the issued share of SundaGas (Timor-Leste Sahul) Pte. Ltd (see note 13).

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

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
Loss for the year
Issue of new shares
Share issue costs
Share-based payments
Share option reserve released

Share
premium
account
£’000

32,156
–
1,500
(231)
636
–
–

34,061

32,156
–
1,500
(231)
636
–

34,061

Share
Option
reserve
£’000

Foreign
exchange
translation
reserve
£’000

135
–
–
–
286
(33)
–

388

135
–
–
–
286
(33)

388

1,528
–
–
–
–
–
33

1,561

(163)
–
–
–
–
–

(163)

Profit
and loss
account
£’000

(33,130)
(1,127)
–
–
–
33
–

(34,224)

(31,523)
(1,096)
–
–
–
33

(32,586)

Details of options and warrants issued, exercised and lapsed during the year together with options and warrants
outstanding at 31 December 2021 are as follows:

Issue date

27 November 2018
3 December 2018
6 August 2019
26 March 2020
26 May 2020 *
10 November 2020 *
22 July 2021
22 July 2021
17 December 2021

Final exercise date

27 November 2021
3 December 2021
6 August 2022
26 March 2023
26 May 2030
10 November 2020
22 July 2031
22 July 2024
17 December 2031

Exercise
price

1 January
2021
Number

20,000,000
£0.00435
10,000,000
£0.00440
27,500,000
£0.00080
£0.00100
117,125,001
£0.00100 290,000,000
75,000,000
£0.00100
–
£0.00070
–
£0.00070
–
£0.00060

New
Issue
Number

–
–
–
–
–
–
440,000,000
150,000,000
530,000,000

Exercised
Number

Lapsed
Number

– 20,000,000
10,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

31 December
2021
Number

–
–
27,500,000
117,125,001
290,000,000
75,000,000
440,000,000
150,000,000
530,000,000

539,625,001

1,120,000,000

– 30,000,000 1,629,625,001

Options for 365,000,000 ordinary shares granted on 26 May and 10 November 2020 of which 240,000,000 were cancelled on 12 January
2022. The balance of 125,000,000 options were retained by Dr Malcolm Butler, the former Chairman of the Company, who retired on
30 October 2020.

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 and warrants
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 2020
26 March 2023
26 May 2030
10 November 2020

Exercise
price

£0.00350
£0.00435
£0.00440
£0.00080
£0.00100
£0.00100
£0.00100

1 January
2020
Number

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

New
Issue
Number

–
–
–
–
117,125,001
290,000,000
75,000,000

Exercised
Number

Lapsed
Number

– 41,000,000
–
–
–
–
–
–
–
–
–
–
–
–

31 December
2020
Number

–
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

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

17 December
2021

22 July
2021

10 November
2020

530,000,000 150,000,000 440,000,000 75,000,000
0.08p
0.1p
10 years
0.86%
80%
0%
0.03p

0.07p
0.07p
10 years
0.86%
80%
0%
0.03p

0.06p
0.06p
10 years
0.86%
80%
0%
0.025p

0.07p
0.07p
3 years
0.86%
80%
0%
0.02p

26 May
2020

26 March
2020

6 August
2019

290,000,000 117,125,001 27,500,000
0.06p
0.08p
3 years
0.86%
80%
0%
0.01p

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

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 (or such longer period as the Remuneration Committee of the Company may determine in its absolute
discretion). All non-vested options shall lapse.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2021

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

2021
£’000

349
53
256

658

2021
£’000

216
145

361

2020
£’000

283
–
73

356

2020
£’000

164
31

195

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 2021 and 2020 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 2021

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 2021

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

31 December 2020

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

Financial assets
on which
interest earned
£’000

Financial assets
on which
interest not earned
£’000

780
1,486
–

2,266

123
174
–

297

Financial assets
on which
interest earned
£’000

Financial assets
on which
interest not earned
£’000

401
638
–

1,039

139
185
1

325

Total
£’000

903
1,660
–

2,563

Total
£’000

540
823
1

1,364

The Group earned interest on its interest bearing ﬁnancial assets at rates between 0.3% and 1% (2020 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 2020 was
prepared under the same assumptions.

Instruments bearing variable interest (£’000)

Change of 1.0% in the interest rate as of

31 December 2021

31 December 2020

Increase
of 1.0%

Decrease
of 1.0%

(10)

Increase
of 1.0%

Decrease
of 1.0%

(10)

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 2021
At 31 December 2021

Average for year ended 31 December 2020
At 31 December 2020

USD

1.37
1.35

1.29
1.36

PEN

5.27
5.35

4.47
4.88

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
Potential oil and gas sales revenue is subject to energy market price risk.

Given that the Company currently does not have production, 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 2021

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 future
substantial or extended decline in prices for oil and gas and reﬁned products could adversely affect the Group’s
future 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
2021

75
56

Average
price
2021

67
49

31 December
2020

48
36

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 2021, 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.

23. Capital commitments
As of 31 December 2021, there were no capital commitments (2020: none).

24. Contingent Liabilities
The Group have given guarantees totalling US$1,160,000 (31 December 2020 – US$160,000) to licensing authorities
in Timor-Leste and Peru. See also note 25 regarding the relinquishment of the licence in Peru. The Company considers
that there are no potential decommissioning costs in respect of abandoned ﬁelds.

25. Events after the reporting period
On 19 April 2022, the Company announced that through its wholly-owned subsidiary, Gold Oil Peru SAC, it has
requested the relinquishment of its legacy Licence Block XXI in Peru. Under the terms of the Licence Agreement, if
the Licence is under Force Majeure status and has remained so for a continuous period of more than 12 months, as
is the case, the Licence holder may ask Perupetro SA (the Peruvian national Oil & Gas Agency and Licensing
Authority) to release the licensee’s Bank Guarantee, which in this case is US$160,000. Thereafter, there will be a
requirement to establish and ﬁle an Abandonment Plan for approval by the relevant authorities. The withdrawal
from Block XXI will ultimately lead to the Group’s withdrawal from Peru.

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.

SundaGas (Timor-Leste Sahul) Pte. Ltd
Gold Oil Peru S.A.C *

Year ended
31 December 2021

Year ended
31 December 2020

Balance
£’000

Loan advance
£’000

Balance
£’000

Loan advance
£’000

926
899

926
124

–
775

–
87

The company has provided for an impairment of £899,000 (2020: £775,000) on the outstanding loans.

Group and company
The company paid £nil (2020: £17,096) for services rendered by Tedstone Oil and Gas Limited, a company controlled
by Mr J Ford, a director.

At 31 December 2020. the Company was owed £322,718 by its then associate undertaking, SundaGas (Timor-Leste
Sahul) Pte. Ltd. (“TLS”), which is interest-free and repayable on demand within the terms of the contractual
agreement between the parties. The Company acquired a controlling interest in TLS during the year, and the
receivable is now disclosed under loans to subsidiaries above.

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

During the year, the directors subscribed for new ordinary shares in the Company at a price of 0.05p per new ordinary
share as part of a placing of new ordinary shares that was announced by the Company on 24 March 2021 as follows.

Andrew Yeo
Jon Ford
John Wakeﬁeld

62,600,000 shares
15,000,000 shares
20,000,000 shares

In June 2021, the Company agreed to acquire the remaining 15% of SundaGas Timor-Leste (Sahul) Pte. Ltd. (“TLS”)
which the Company did not own in exchange for the issuance of 1,157,202,885 new ordinary shares in the Company
to SundaGas Pte. Ltd (“SGPL”) (the “Share Exchange”). TLS is 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 (the “Chuditch PSC”). SGPL is the parent company of SundaGas Resources Pte. Ltd. (“SGR”),
which was the holder of the 15% interest in TLS acquired by Baron pursuant to the Share Exchange.

Through the Share Exchange, the Company became the sole shareholder of TLS, which provided a 75% effective
interest in the Chuditch PSC. The Company’s responsibility to carry SGR’s share of ﬁnancial contributions until the
end of the PSC’s Firm Commitment Period in November 2022 was extinguished following completion of the Share
Exchange. Under the terms of an Amended Services Agreement between SGPL and TLS (which was extended to the
end of December 2022), SGPL will continue to be paid fees for management and administrative services.

As SGPL through its subsidiary SGR held more than 10% of TLS’s ordinary shares immediately before the Share
Exchange, the Share Exchange was deemed to be a related party transaction pursuant to rule 13 of the AIM Rules
for Companies.

16. Glossary of Technical Terms

Annual Report and Financial Statements 2021

BSCF

Billion standard cubic feet of natural gas.

Geological chance of success

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

GIIP

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

High or 3U Estimate

Licence Operator or Administrator

Denotes the high estimate qualifying as Prospective Resources. Reﬂects a
volume estimate that there is a 10% probability that the quantities actually
recovered will equal or exceed the estimate.

The Company nominated to carry out operational activities. In the context
of the UK jurisdiction, during the initial Phase A of a licence the nominated
Company is termed a licence administrator.

MMBBL

Million barrels of oil or condensate.

MMBOE, Oil equivalent

Prospective Resources

SPE PRMS 2018

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 or condensate, 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 2018 Prospective
Resources.

16. Glossary of Technical Terms (continued)

Mean

PSC

PSDM

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.

Production Sharing Contract.

Pre-Stack Depth Migration version of processed seismic data.

TGS-NOPEC

TGS-NOPEC Geophysical Company.

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