Baron Oil PLC Annual Report 2022

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FY2022 Annual Report · Baron Oil PLC

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Annual Report and
Financial Statements
for the year ended 31 December 2022

Contents

Annual Report and Financial Statements 2022

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 Auditor

to the Members of Baron Oil Plc

9. Consolidated Income Statement
for the year ended 31 December 2022

10. Consolidated Statement of Comprehensive Income

for the year ended 31 December 2022

11. Consolidated Statement of Financial Position

as at 31 December 2022

12. Company Statement of Financial Position

as at 31 December 2022

13. Consolidated and Company Statement of Changes in Equity

for the year ended 31 December 2022

14. Consolidated and Company Statement of Cash Flows

for the year ended 31 December 2022

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
Keith Bush, Non-executive Director

Finsgate
5-7 Cranwood Street
London EC1V 9EE

Company Secretary

Geoffrey Barnes

Auditor

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 Ltd
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 2022

Baron Oil Plc (“Baron” or “the Company”) is an independent oil and gas exploration and appraisal company based
in the UK. The Company currently holds interests in 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, and its exploration operations are largely
limited to desk-top studies, therefore there is minimal quantitative climate or related data of substance to report.

NSTA mandatory reporting of Fugitive Methane Emissions, Scope 1 and 2 emissions per barrel of oil equivalent
production and Carbon Intensity Statements are not relevant to the Company at this stage of its development.

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 complies with
regulatory requirements and standards.

3. Chairman’s Statement & Operations Report

Financial Review
The net result for the year was a loss before taxation of £1,387,000, which compares to a loss of £1,127,000 for the
preceding ﬁnancial year; the loss after taxation attributable to Baron Oil shareholders was £1,387,000, compared
to a loss of £1,127,000 in the preceding year, representing a loss of 0.01p per share (2021: loss of 0.012p). It should
be noted that the results for 2021 included a one-off non-cash gain on the deemed disposal of an associated
undertaking amounting to £302,000.

Turnover for the year was £nil (2021: £nil), there being no sales activity during the period.

Exploration and evaluation expenditure incurred included in the Income Statement amounts to £213,000 (2021:
£218,000). The Impairment provision in respect of Peru Block XXI was released and offset against the write off of
the accumulated cost on the project. The Directors judged that no other exploration assets required impairment.

Administration expenses for the year were £1,191,000 (2021: £1,321,000), an overall reduction on the preceding
year of £128,000. This is made up of a number of pluses and minuses. As anticipated last year, administration costs
arising in SundaGas (Timor-Leste Sahul) Pte. Ltd. (“TLS”) have increased from £285,000 previously to £441,000 this
year as we moved to a full 12 month reporting period at the Group level and the Dili ofﬁce in Timor-Leste is now fully
operational. There were also non-recurring support costs of £65,000 in Peru. Directors and UK staff salaries and
related costs are lower than 2021 by £37,000 with the earlier year including a severance payment to a former director.
Finally, there have been no share-based payment charges this year (2021: £286,000).

Throughout 2022, the Pound Sterling weakened considerably against the US Dollar, with an opening rate of $1.35
and a closing rate of $1.21. This has given rise to a gain on holdings of US Dollar denominated balances of £43,000
(2021: gain of £22,000).

At the end of the ﬁnancial year, cash reserves of the Group had increased to £5,807,000 from a level at the preceding
year end of £1,650,000. The proceeds from the issue of new shares in the year amounting to £7,131,000 gross
(£6,619,000 net of costs) bolstered the Company’s cash reserves. The Group’s investment in exploration and evaluation
assets in the UK and Timor-Leste amounted to £806,000 in the period, and £602,000 was repaid to SundaGas Pte Ltd
to settle the outstanding amount of the remaining share of the Timor-Leste Bank Guarantee deposit resulting from the
Company's acquisition of the remaining interest in TLS, as announced on 15 November 2022. In the case of the
guarantee bond held in Peru, this was released in full on the relinquishment of the Block XXI licence resulting in a cash
inﬂow of £128,000. After taking into account these items, operating cash outﬂow amounted to £1,182,000.

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. The Board will continue to take a prudent approach in entering into new capital expenditures
beyond those expected to be committed to existing ventures.

Report On Operations

Introduction
During 2022 both projects were subject to intensive technical work aimed at maturing the assets to “drill ready”
status, which culminated in early 2023 with the publication of two Competent Person’s Reports (“CPRs”) which
validate the projects to the industry standard SPE PRMS Contingent and/or Prospective Resource estimates.

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 at a depth of
around 3,000 metres on the ﬂank of a large faulted structure. The discovery and neighbouring prospects are largely
covered by a 3D seismic survey acquired in 2012.

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

Annual Report and Financial Statements 2022

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.
(“TIMOR GAP”), a subsidiary of the state-owned national oil company, whose share of PSC expenditure is carried until
ﬁrst production.

The technical work programme obligations in the ﬁrst two years of the initial three-year term of the PSC include the
reprocessing of legacy seismic data, aimed at addressing reservoir imaging issues caused by sea-bed topography and
shallow geological features, and for which a US$1 million Bank Guarantee is in place. The commitment within the
PSC for contract year 3 is for the drilling of one appraisal well to the Plover Formation, subject to seismic reprocessing
supporting the presence of a signiﬁcant structure associated with the Chuditch discovery.

2022andsubsequentactivities
The most signiﬁcant component of the technical work programme in 2022 was the delivery of the reprocessed
3D seismic data and its interpretation. The reprocessing was performed to a high standard using the most modern
Pre-Stack Depth Migration ("PSDM") techniques. We have signiﬁcantly improved the subsurface image, enabling for
the ﬁrst time the delineation of the Chuditch discovery and its adjacent prospects. This technical evaluation was
enhanced through the completion of a number of further geological and engineering studies.

In October 2022, Baron announced its preliminary evaluation arising from the reprocessed data. The resultant
mapping indicated a signiﬁcant increase in management’s aggregate Gas-in-Place and Recoverable Gas Resource
estimates for the Chuditch PSC. In particular, it indicated a greater concentration of resources into the Chuditch-1
discovery in a simpliﬁed and robust structure. The understanding of the adjacent prospectivity was also matured,
with three low-risk exploration targets conﬁrmed on the Chuditch trend.

Consultancy group ERC Equipoise Ltd (“ERCE”) was engaged to prepare a CPR to provide an independent assessment
of the Chuditch resources to a SPE PRMS compliant standard. The CPR was released on 28 February 2023. For the
Chuditch-1 discovery, ERCE assessed gross Pmean Contingent Resources of 1.16Tcf of gas. The recognition of the
resources as being Contingent, rather than Prospective, is a major milestone and sets the foundation for the next
stage of the project cycle. This phase will typically include pre-development feasibility studies and preliminary work
on gas sales arrangements alongside the drilling of an appraisal well. Baron believes that the Chuditch-1 Contingent
Resources are potentially sufﬁciently large to be economically viable to be developed standalone or in parallel with
other developments in the region.

In addition, aggregated gross Pmean Prospective Resources attributable to the licence according to the CPR
amounted to 1,562 Bscf gas across three prospects, Chuditch SW, Chuditch NE and Quokka. Geological Chances of
Success (“GCOS”) for these prospects range from 52% to 26%, providing substantial follow on, low risk exploration
potential to any Chuditch-1 development. It is notable that Baron’s in-house probabilistic estimates of aggregated
gross Prospective gas Resources for these prospects, at 2,128 Bscf of gas, are higher that ERCE’s estimates. This
arises mainly through the Company’s preferred use of the latest reprocessed seismic data velocity model to deﬁne
the extent of the prospects.

Detailed tabulations of the resources assessed within the Chuditch PSC and further commentary can be accessed
via the Company’s RNS announcement of 28 February 2023 and the full CPR document which is available on Baron’s
corporate website (www.baronoilplc.com).

Also in October 2022, we announced a six-month extension to Contract Year Two of the Chuditch PSC granted by
the relevant Timor-Leste national authority, Autoridade Nacional do Petróleo e Minerais (“ANPM”). The PSC Contract
now has an expiry date of 18 June 2023.

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

On entry into Contract Year 3 of the PSC, the commitment will be to drill an appraisal well within a 12-month
period. Such an appraisal well would likely be drilled to a total depth of around 3,000 metres and would include a
production test. Recent geopolitical events and post-pandemic supply chain issues have led to considerable
disruption in rig availability and drilling services globally such that a drill deadline of June 2024 could
prove challenging.

There continues to be an excellent working relationship between the Company, the Government Ministry of
Petroleum and Mineral Resources (“MPM”), Autoridade Nacional do Petróleo e Minerais (“ANPM”), the Government
regulatory authority of petroleum and mining, and TIMOR GAP. We meet regularly with all of these bodies and
provide detailed updates around our activities, plans and timelines on the PSC. The Company appreciates the support
that we receive from these various state entities and will continue to work on maintaining these close relationships.

As part of our in-country activities, including the efforts of our local Dili ofﬁces, we are also undertaking various
initiatives to develop the capabilities of the Timorese geological community, through relationships with local
universities, welcoming student interns and sponsoring a new local chapter of the Society of Petroleum Engineers.

More generally in Timor-Leste, there was increased E&P activity during the year as Timor Resources Pty Ltd
commenced an onshore drilling campaign, the ﬁrst in 50 years. In addition, the Greater Sunrise development project
continued to move towards development with negotiations between its many stakeholders. In April, successful
bidders of ﬁve blocks in the Second Licencing Round were announced by the Timor-Leste authorities, including Block
P, which sits between the Chuditch PSC and Greater Sunrise, to a subsidiary of the Italian major ENI.

Throughout the period the Company hosted and kept updated a Virtual Dataroom for the beneﬁt of potentially
interested funding partners for the next phase of the Chuditch project, a process which continues.

United Kingdom Offshore Licence P2478 (“Dunrobin”) (Baron 32% interest)
Background
Innovate Licence P2478, awarded in September 2019, is currently held by a joint operation comprising Reabold
North Sea Limited (“Reabold”, Licence Administrator,
interest 36%), Baron (32%), and Upland Resources
(UK Onshore) Limited (32%). The licence covers blocks 12/27c, 17/5, 18/1 and 18/2 in the Inner Moray Firth area of
the North Sea and contains the Dunrobin and Golspie prospects, in a province where regional and local petroleum
systems are considered by the partners to be proven. Target depths are as shallow as 660 metres subsea and water
depths are less than 100 metres.

The work commitments on the Licence are to undertake reprocessing of legacy 3D and 2D 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 decision whether to proceed beyond the end of the Phase
A evaluation stage of the licence on 14 July 2023.

2022andsubsequentactivities
The key technical work components of the Phase A commitments – those of seismic reprocessing plus geochemical
studies – were delivered during second half of 2022 on time and budget. Detailed seismic attribute analysis, designed
to investigate candidate direct hydrocarbon indicators, followed in early 2023. A thorough revised evaluation of the
prospectivity of P2478 is now ﬁnalised, with the UK’s North Sea Transition Authority (“NSTA”) recording that the
work programme was fully complete during March 2023. Baron maintained direct technical involvement during 2022.

Towards the end of 2022, consultancy group RPS was engaged by the joint operation to prepare a CPR to provide
an independent validation of resource estimates to a SPE PRMS compliant standard. The CPR was announced and
published on Baron’s website on 16 February 2023.

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

Annual Report and Financial Statements 2022

The CPR provided independent conﬁrmation of the Company’s belief that the western part of the Dunrobin complex
had matured into a drillable prospect where a relatively low-cost exploration well can target more than 100 MMbbl of
gross Pmean Prospective Resources with low geological risk. The key points from the CPR can be summarised as follows:

•

201mmboe gross unrisked Pmean Prospective Resources on licence when aggregated;

the Dunrobin West prospect (“Dunrobin West”) estimated to contain 119mmboe gross unrisked Pmean
Prospective Resources aggregated across the Jurassic and Triassic stacked targets;

34% Geological Probability of Success (GPoS) at the Dunrobin West Jurassic primary target, with an estimated
71mmbbl (gross) of Pmean Prospective Resources.

The CPR estimates indicate that Baron’s farm-up arrangement of August 2021 increased the Company’s share of
aggregate net Pmean Prospective Resources on the Licence from 30mmboe to 64mmboe at a capped cost to Baron
of £160,000.

Detailed tabulations of the resources assessed within the P2478 licence, and further commentary, can be accessed
via the Company’s RNS announcement of 16 February 2023 along with the full CPR document, which is available
on Baron’s corporate website (www.baronoilplc.com).

During the ﬁrst quarter of 2023, the Licence Administrator, on behalf of the joint operation, hosted a Virtual
Dataroom in order to attract funding for an exploration well on the Dunrobin West prospect, a process which
continues.

Current gross cost estimates for an exploration well to be drilled to a total depth of approximately 700 metres are
approximately US$10 million on a dry hole basis.

Block XXI, Peru
In April 2022, Baron requested the relinquishment of the legacy Licence Block XXI in Peru. The Licence had been
largely under Force Majeure for a variety of reasons since 2017 and the Company had been frustrated in its attempts
to access the area in order to carry out operations. The Bank Guarantee of US$160,000 was released in full to Baron
in June. We continue to work with the Peruvian authorities to establish and ﬁle an Abandonment Plan. Ongoing
costs are minimal and we hope to complete our withdrawal from Peru by the end of 2023.

New Ventures
In line with our strategy, the Company continued to screen early stage opportunities. In this context, in January 2023
the Company announced that, as a joint venture non-operating partner, it had submitted an application in the UK’s 33rd
Offshore Licensing Round.

Further potential new ventures remain under consideration in both our existing areas of activity and elsewhere.

Corporate
In April 2022, the Company completed an oversubscribed Placing and Subscription of new ordinary shares at 0.06p
to raise £1.65 million (gross). The monies were to be applied to support the Chuditch PSC (Timor-Leste) and P2478
(UK) projects as they moved towards their key milestones.

In November 2022, the Company completed an oversubscribed Placing and Subscription and Rex Retail Offer of
new ordinary shares at 0.12p, double the funding price achieved in April, to raise £5.36 million (gross). These monies
were predominantly raised to support workstreams underpinning the ongoing farm-out discussions and to provide
working capital into 2023.

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

The Company was pleased to announce on 15 November 2022 the appointment of Keith Bush, the former Chief
Executive Ofﬁcer of Cabot Energy Plc (previously known as Northern Petroleum Plc), as an independent Non-
executive Director. Keith has a petroleum engineering background, with signiﬁcant experience in the oil and gas
sector. He is a member of the Audit Committee and Chairman of the Remuneration Committee.

Conclusions
I am pleased to report that Baron’s overriding task during 2022 – to progress our two material projects, Chuditch and
Dunrobin, to their key evaluation points - was achieved, as signalled by the publication of CPRs on both assets in early
2023. This represents the culmination of large volumes of detailed, diligent and high quality technical work carried
out by Baron’s team of global consultants, employees and joint operation partners.

The considerable and potentially transformative value for shareholders in the Company’s assets offshore Timor-Leste
and UK is now clearly deﬁned. We are now directing our efforts onto the drilling decisions to be made in 2023 for
a Chuditch-1 appraisal well and a Dunrobin West exploration well.

In Timor-Leste, the independent assessment of approximately 1.1Tcf of gross Pmean Contingent Resources for the
Chuditch-1 discovery underpins the viability of the project. We are updating the development and gas export option
studies and commencing environmental baseline studies in preparation for a drilling campaign. The Board currently
believes that a single appraisal well may be sufﬁcient to determine commerciality without the need for an immediate
follow-on exploration campaign.

In the UK an exploration well on Dunrobin West will be designed to test gross Pmean Prospective Resources of
71mmbbl in the primary, regionally proven, Jurassic target, and 45mmbbl in the vertically underlying secondary
Triassic target. Due to the shallow target depths, gross drilling costs to test such a substantial volume are likely to
be relatively modest. Success at Dunrobin West would de-risk the potential follow up targets Dunrobin Central &
East plus Golspie, which are directly analogous prospects.

Both assets continue to attract attention via our active farm-out campaigns and presentations at relevant industry
events. In particular, there are a number of ongoing discussions with third parties regarding participation in the
Chuditch appraisal well and future activities. We look forward to updating shareholders on progress as and
when appropriate.

Our search for new venture opportunities to enhance and complement the existing portfolio resulted in an
application as a non-operating partner for a licence in the offshore UK 33rd Round of Licensing and we continue to
actively pursue other material new business opportunities.

We are grateful for the support of our investors through the two funding events in 2022. As a result we have a
well-funded balance sheet covering our current activities and commitments. As at 31 December 2022 we had cash
reserves of £5.8 million (2021: £1.65 million). The addition of Mr Keith Bush as an independent Non-executive
Director in 2022 also strengthens and broadens the Board’s talents as we enter a decisive phase of operations.

John Wakeﬁeld
Non-executiveChairman

22 May 2023

4. Strategic Report

Annual Report and Financial Statements 2022

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 2022.

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 2022 were:

•

to 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 farm-out process to facilitate a drilling
programme in 2023 in accordance with our PSC commitments;

on the 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.

We successfully progressed the Chuditch and Dunrobin assets to their key evaluation points during 2022, signalled
by the publication of CPRs on both assets in early 2023. In particular, the independent assessment of approximately
1.1Tcf of gross Pmean Contingent Resources for the Chuditch-1 discovery underpins the value of the Timor-Leste
project.

The KPIs for 2023 are to:

•

be in a fully informed position to make appropriate drilling decisions on a Chuditch-1 appraisal well and a
Dunrobin West exploration well;

continue to explore funding opportunities with a view to securing ﬁnance to advance these core projects;

support and progress the UK 33rd Round licence application and actively pursue other new ventures;

ensure that the Company remains sufﬁciently funded for current operations and thereafter have plans and
funding arrangements in place prior to making major commitments.

Key risks and uncertainties
Exploration for hydrocarbons is highly speculative and involves signiﬁcant degrees of risk. The Board constantly
monitors the operational and ﬁnancial aspects of the Company’s activities and is responsible for the ongoing review
of business risks and implementation of appropriate internal controls. While risks cannot be eliminated entirely,
internal controls are implemented so as to reasonably minimise losses.

4. Strategic Report (continued)

At present, the Company considers its principal risks to be the following:

Oil & gas market conditions and the availability of project ﬁnance
Both of our key assets require funding from external partners and other sources to progress to the drilling stage.
These inﬂuences may be global, regional or country speciﬁc, any of which could change the nature of the funding
proposition or even the availability/suitability of ﬁnance.

Impact
Without appropriate external funding to undertake drilling commitments, licences may be amended, terminated or
relinquished leading to reductions in value or under certain conditions a permanent loss of value.

Action
The board monitors and will react to changes in market conditions where possible but is careful not to enter into
drilling commitments unless it has reasonable certainty over being able to fulﬁl its commitments.

Exchange rate ﬂuctuations
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. The Company’s Directors and main banking
arrangements continue to be based in the UK and the Group reports in Sterling.

Impact
In 2022, over 70% of Baron’s expenditure was transacted in US Dollars, almost all of it arising from its activities on
the Chuditch Project. For the year as a whole, there was a gain on holdings of US Dollar balances of £43,000
compared to a gain of £22,000 in 2021.

Action
Corporate and capital expenditure budgets are set annually and cash called monthly with up to a two month forecast.
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 lack of production revenues and the modest absolute amount of overall US$
expenditure, the Company has not previously entered into hedging arrangements or structured products.

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 and appraisal phases. Since the award of the Chuditch PSC,
the Group is 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.

4. Strategic Report (continued)

Annual Report and Financial Statements 2022

Action
The Group keeps its sensitivity to ﬂuctuations in oil and gas prices under regular review . 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 guarantee
The Group has given a US$1m performance guarantee in respect of its licence in Timor-Leste. In the event that work
commitments under the Chuditch PSC are not met, then this guarantee is 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.

Action
The Group actively manages its work programme under the PSC to the extent that it is able, 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. As at the end of 2022, the Group’s
cash reserves of £5.8m were primarily spread amongst three large international banks in the UK and Singapore.

Taxation
As the tax legislation in Timor-Leste is developing, tax risks may be substantially greater than typically found in
countries with more developed tax systems. Tax regulation and compliance is subject to review and investigation
by the authorities who may impose severe ﬁnes, penalties and interest charges. It should be noted that the UK Oil
& Gas ﬁscal regime has also become subject to change and uncertainties.

Impact
The uncertainty of interpretation and application, and the evolution, of tax laws in the territories in which we operate
creates a risk of additional and substantial payments of tax or other unintended consequences 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, takes appropriate professional tax advice and works
closely with tax authorities to ensure compliance and active management of its ﬁscal positions.

4. Strategic Report (continued)

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

By order of the Board

John Wakeﬁeld
Non-executiveChairman

22 May 2023

5. Report of the Directors

Annual Report and Financial Statements 2022

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 2022.

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

John Wakefield, Non-executive Chairman
John Wakeﬁeld, aged 68, 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
Petards Group Plc (LSE:PEG.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 60, 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 63, 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.

Keith Bush, Non-executive Director
Keith Bush, aged 53, is an experienced quoted company director having worked for over 30 years in the energy
industry. He has a petroleum engineering background, with signiﬁcant experience in the oil and gas sector. Previously
he has worked for Amerada Hess, Burlington Resources and E.ON Ruhrgas, before joining AIM quoted Northern
Petroleum plc, initially as COO and later as CEO. Keith is currently COO at TelosNRG Limited, an advisory
consultancy which he co-owns. He holds a degree in Physics from the University of Manchester. He was appointed
as a Non-executive Director of Baron in 2022.

Proposed dividend
The Directors do not recommend the payment of a dividend in respect of the ﬁnancial year ended 31 December
2022.

Political and charitable contributions
In the year ended 31 December 2022 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 creditor days as at 31 December 2022 were 16 days (2021: 3 days).

5. Report of the Directors (continued)

Activities and results
A loss of £1,387,000 (2021: £1,127,000), of which £1,387,000 (2021: £1,127,000) was attributable to equity
shareholders, was recorded for the year. Net assets of the Group at 31 December 2022 amounted to £10,088,000
(2021: £4,682,000), of which £10,088,000 (2021: £4,682,000) was attributable to equity shareholders.
No dividends or transfers to reserves are proposed.

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

Issue of shares
The Company issued the following new shares for cash during the year.

(i)

(ii)

2,750,000,000 new ordinary shares of £0.00025 each at £0.0006 per share on 9 May 2022, raising £1,650,000
gross (£1,503,000 net of costs).

117,125,001 new ordinary shares of £0.00025 each at £0.0010 per share on 4 November 2022, raising £117,000
gross (£117,000 net of costs).

(iii) 4,469,522,966 new ordinary shares of £0.00025 each at £0.0012 per share on 29 November 2022, raising

£5,363,000 gross (£5,000,000 net of costs)

See also Events after the Reporting Period below.

The Environment
The Company is ﬁrmly committed to protecting the environment wherever it does business. We will do our 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.

5. Report of the Directors (continued)

Annual Report and Financial Statements 2022

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:

A Yeo
J Ford
J Wakeﬁeld

Options held by the Directors are as follows:

31 December 2022

31 December 2021

No. of
Ordinary
shares

193,000,000
22,500,000
20,000,000

%
Holding

No. of
Ordinary
shares

1.0% 168,850,000
0.1% 22,500,000
0.1% 20,000,000

235,500,000

1.2% 211,350,000

%
Holding

1.5%
0.2%
0.2%

1.9%

A Yeo

J Ford

A Yeo
J Ford

Total

31 December 2022
Number of
options
£0.001(1)

31 December 2021
Number of
options
£0.001(1)

–

125,000,000

Number of
options
£0.001(2)

–

75,000,000

Number of
options
£0.0007(3)

250,000,000
140,000,000

Number of
options
£0.0006(4)

290,000,000
180,000,000

860,000,000

1,060,000,000

(1)

(2)

(3)

(4)

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 67, there have been
no contracts or arrangements of signiﬁcance during the period in which the Directors of the Company were
interested.

Currently there are Appointment Letters and Executive Service Agreements in place with all Directors of the Company
and these contracts are available for inspection at the registered ofﬁce of the Company on request.

5. Report of the Directors (continued)

Remuneration policy
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 ﬁnancial statements 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 two independent Non-executive Directors
with Keith Bush as Chairman; John Wakeﬁeld is the other member. 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 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.

Keith Bush, the Remuneration Committee’s chairman is a Non-executive Director of the Company and is considered
to be independent. The Remuneration Committee’s other member is also an independent Non-executive Director
and the Company therefore fully complies with the QCA Code in this respect.

As the Remuneration Committee’s chairman, Mr Bush consults with the other directors and conducts peer group
reviews. No director can take part in discussions or vote on matters pertaining to their individual performance or
remuneration. In the event of a tied vote, the Remuneration Committee’s independent chairman has the casting vote.
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.

5. Report of the Directors (continued)

Annual Report and Financial Statements 2022

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

Chairman
J Wakeﬁeld
A Yeo
J Ford
K Bush

Base
salary/fee
£

Company
car
£

Benefits
in-kind
£

50,000
167,500
94,250
3,885

315,635

–
11,720
–
–

11,720

–
9,512
–
–

9,512

Year ended
31 December
2022
Total
£

Year ended
31 December
2021
Total
£

50,000
231,309
104,668
3,885

50,000
216,377
82,500
–

Other
£

–
42,577
10,418
–

52,995

389,862

348,877

Refer to note 27 on page 67 for details of related party transactions with companies controlled by Directors.

Other beneﬁts include payments in lieu of holiday, work in excess of contracted hours, and post-termination beneﬁts,
all of which are accrued costs and remain unpaid at 31 December 2022.

The total share based payment vesting charges in respect of Directors’ share options was £nil (2021: £256,000).
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 20 February 2023, the Company issued 62,500,000 new ordinary shares of £0.00025p each following the
exercise of options by a former director, raising new capital of £62,000 gross, £50,000 net of costs.

5. Report of the Directors (continued)

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 15 May 2023 was 18,982,760,428 Ordinary Shares, with each share having equal
voting rights. Baron Oil Plc has 965 registered shareholders.

The shareholding distribution at 15 May 2023 is as follows:

Range

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

No of shares

No of shareholders

9,918,876,540
1,989,415,343
5,466,417,420
715,163,474
892,887,651

18,982,760,428

3
2
12
6
942

965

Significant shareholdings
The Company has been informed that, as of 15 May 2023, 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
Barclays Direct Investing Nominees Limited
HSBC Client Holdings Nominee (UK) Limited
Lawshare Nominees Limited
Vidacos Nominees Limited

% of company

4,944,517,057
2,751,685,751
2,222,673,732
1,029,337,913
960,077,430
875,700,061
777,049,187

26.05
14.50
11.71
5.42
5.06
4.61
4.09

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 Sole Broker. The closing mid-market price
on 15 May 2023 was 0.105p.

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 63.

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.

5. Report of the Directors (continued)

Annual Report and Financial Statements 2022

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

22 May 2023

6. Corporate Governance Statement

The Directors recognise the importance of sound corporate governance. The Company has adopted the 2018 QCA
Corporate Governance Code (“QCA Code”), which the Directors consider appropriate for a company of its size and
nature. The QCA Code takes key elements of good governance and allows companies to apply them in a manner
which is appropriate for the differing needs of small companies. The “Comply or Explain” 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 26 Statement, which can be downloaded from the Company’s website.

The Board
The Board comprises two executive directors and two non-executive directors, 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 the two independent Non-executive Directors with John Wakeﬁeld as
Chairman and Keith Bush as the other member. The Audit Committee meets at least twice a year and the external
auditor has the opportunity to meet with members of the Audit Committee without any executive management
being present. The Audit Committee’s terms of reference include the review of the Interim and Annual Financial
Statements, review of internal controls, risk management and compliance procedures, consideration of the
Company’s accounting policies and all issues with the annual audit.

The Remuneration Committee
The Remuneration Committee is comprised of the two independent Non-executive Directors with Keith Bush as
Chairman and John Wakeﬁeld the other member. 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 meets as required.

Keith Bush, the Remuneration Committee’s chairman is one of the Company’s Non-executive Directors and is
considered to be independent. No Director can take part in discussions or vote on matters pertaining to their
individual performance or remuneration. In the event of a tied vote, the Remuneration Committee’s independent
chairman, Keith Bush has the casting vote. Director remuneration, contracts, grants of options and incentive
arrangements for senior management are matters that are formally reserved for the Board.

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.

Annual Report and Financial Statements 2022

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 auditor
So far as the Directors are aware, there is no relevant audit information of which the Group’s auditor is 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 auditor is aware of that information.

Auditor
Jeffreys Henry LLP has indicated that it will not seek re-appointment as the Company’s auditor at the Annual General
Meeting as, following a business reorganisation, the ﬁrm will provide audit services to clients from another company
in the group, Gravita Audit Limited. A resolution to appoint Gravita Audit Limited as the Company’s auditor will be
proposed at the Annual General Meeting.

By order of the board

John Wakeﬁeld
Non-executiveChairman

22 May 2023

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

Opinion
We have audited the ﬁnancial statements of Baron Oil Plc (‘the Company’) and its subsidiaries (together ‘the Group’)
for the year ended 31 December 2022 which comprise the consolidated income statement, consolidated statement
of comprehensive income, consolidated statement of changes in equity, Company statement of changes in equity,
consolidated statement of ﬁnancial position, Company statement of ﬁnancial position, consolidated statement of
cash ﬂows, Company statement of cash ﬂows and notes to the ﬁnancial statements, including a summary of
signiﬁcant accounting policies. The ﬁnancial reporting framework that has been applied in the preparation of the
Group ﬁnancial statements is applicable law and UK adopted International Accounting Standards (IFRSs). The
ﬁnancial reporting framework that has been applied in the preparation of the parent company ﬁnancial statements
is applicable law and UK adopted International Accounting Standards (IFRSs).

In our opinion:

•

the ﬁnancial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at
31 December 2022 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 (IFRS);

the Company ﬁnancial statements have been properly prepared in accordance with UK-adopted International
Accounting Standards (IFRS); 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.

Our approach to the audit
We tailored the scope of our audit work to ensure we obtained sufﬁcient evidence to support our 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 the Group operates.

As Group auditor we carried out the audit of the Company ﬁnancial statements and, in accordance with ISA (UK) 600,
obtained sufﬁcient appropriate evidence regarding the audit of the Group’s Singaporean and Timor-Leste subsidiaries
SundaGas (Timor-Leste Sahul) Pte Ltd and SundaGas Banda Unipessoal, Lda. These subsidiaries were deemed to be
signiﬁcant to the Group ﬁnancial statements due to their size. The Group audit team directed, supervised and
reviewed the work of the component auditor in Singapore who performed the audit of the subsidiaries in Singapore
and Timor-Leste, which involved issuing detailed instructions and performing a review of key working papers. Audit
work in Singapore and Timor-Leste was performed at materiality levels of £30,000, which was lower than
Group materiality.

Annual Report and Financial Statements 2022

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

We also performed targeted procedures in respect of Gold Oil Peru SAC, which was not identiﬁed as a signiﬁcant
component requiring a full scope 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 judgements, for example in
respect of signiﬁcant accounting estimates that involved making assumptions and considering future events that are
inherently uncertain. 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.

Conclusions relating to going concern
In auditing the ﬁnancial statements, we have concluded that the Directors’ use of the going concern basis of
accounting in the preparation of the ﬁnancial statements is appropriate. Our evaluation of the Directors’ assessment
of the entity’s ability to continue to adopt the going concern basis of accounting included a detailed review of the
Group’s forecasts in comparison to available management accounts at the date of these ﬁnancial statements 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 ﬁnancial statements.

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 were 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.

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

Key audit matters
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.

Key audit matter

How our audit addressed the key audit matter

The Directors’ impairment reviews conclude that an
impairment was not required in respect of the Group’s
Chuditch and Inner Moray Firth exploration assets, or of
the Company’s net investment in subsidiaries, at the
year end.

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

We reviewed the underlying production and licence
contracts and wider available evidence to examine
whether the Group had complied with their minimum
performance conditions and therefore whether there
was evidence of impairment due to non-compliance.

We also reviewed the most recent competent persons’
reports on both of the above projects to understand if
the basis for the Directors’ conclusions was consistent
with the information contained within those reports.

In respect of the Company’s loans to subsidiaries we also
examined the basis for which the loans are presented as
part of the Company’s net investment by reference to
the underlying business model and expectations and
intentions of management.

the Directors’

concluded that

impairment
We
assessment was reasonable and that the Company’s
loans to subsidiaries were fairly presented as part of the
net investment.

Impairment of exploration assets (Group) and net
investment in subsidiaries (Company)
At 31 December 2022 the Group held exploration assets
of £3.7m (2021: £2.7m). The assets represent costs
capitalised associated with the Group’s oil and gas
exploration assets in the UK and Timor-Leste in line with
the Group’s
exploration
expenditure under which costs are capitalised once the
Group secures the rights to explore and that licence
remains in good standing.

accounting policy

for

The Board then perform a review of
impairment
indicators based on the available industry, economic and
resource data available to them.

The company’s net investment in subsidiaries at
31 December 2022 was £5.0m (2021: 3.0m). This
balance relates entirely to the Company’s subsidiaries in
Singapore and Timor-Leste and comprises both equity
investments and loans.

Both entities are solely involved in progressing the
Chuditch project and therefore potential impairment of
the net investment is assessed on the same basis as
impairment of the associated Chuditch exploration asset.

Annual Report and Financial Statements 2022

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

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

£100,000 (2021: £55,000).

How we determined it

Based on 1% of gross assets.

Group

Company

Rationale for benchmark used

The Company principally acts as a
holding company and therefore
gross assets
is an appropriate
measure.

its

The Group’s principal activity is the
furtherance of
exploration
activities and therefore cash and
capitalised exploration assets are
the Group’s key assets. The Group
has no debt and minimal liabilities.
For
reason, a materiality
measure based on gross assets was
considered the most appropriate.

this

We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above
£5,000 for both the Group and Company audits (2021: £2,750) as well as misstatements below those amounts that,
in our view, warranted reporting for qualitative reasons.

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.

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

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.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and 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 Company, or returns adequate for our audit have not
been received from branches not visited by us; or

the 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 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 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:

Annual Report and Financial Statements 2022

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

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, anti-bribery, employment
laws and anti-money laundering regulations.

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 Group and Company ﬁnancial statements to material misstatement,
including obtaining an understanding of how fraud might occur, by:

o 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 the
notes to the 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 the available correspondence with HMRC and the Group’s legal advisors.

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

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: https://www.frc.org.uk/auditors/audit-assurance-ethics/auditors-responsibilities-
for-the-audit. 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 Company
and we remained independent of the Group and the Company in conducting our audit.

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.

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

22 May 2023

9. Consolidated Income Statement
for the year ended 31 December 2022

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
Gain 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 operations
Basic
Diluted

Annual Report and Financial Statements 2022

Notes

9
8
3

3
3

5
5

2022
£’000

–
–

–
(213)
–
(33)
–
(1,191)
43
–

2021
£’000

–
–

–
(218)
(17)
(11)
(7)
(1,321)
22
89

(1,394)

(1,463)

–
–

29
302

(1,394)

(1,132)

(5)
12

(2)
7

(1,387)

(1,127)

–

(1,387)

(1,127)

–

(1,387)

(1,127)

(1,387)
–

(1,387)

(1,127)
–

(1,127)

(0.010p)
(0.010p)

(0.012p)
(0.012p)

10. Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022

Loss on ordinary activities after taxation attributable to the parent

Other comprehensive income: items which may subsequently be
reclassiﬁed to proﬁt or loss:
Exchange difference on translating foreign operations

Total comprehensive loss for the year

Total comprehensive loss attributable to
Owners of the parent

2022
£’000

Restated
2021
£’000

(1,387)

(1,127)

174

(1,213)

(1,094)

(1,213)

(1,094)

11. Consolidated Statement of Financial Position
at 31 December 2022

Annual Report and Financial Statements 2022

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

Currentassets
Trade and other receivables
Performance bond guarantee deposit
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

2022
£’000

Restated
2021
£’000

8
8
9
10
11

13
14
15

18
19
19
19
19

16
16

–
78
3,696
–
–

3,774

101
827
5,807

6,735

10,509

4,730
38,846
332
1,735
(35,555)

10,088

377
14

391

10,509

–
34
2,736
–
–

2,770

54
859
1,650

2,563

5,333

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

4,682

620
12

632

5,333

The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 22 May 2023 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 2022

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

2022
£’000

2021
£’000

8
9
12

13
15

18
19
19
19
19

16
16

–
21
159
5,002

5,182

61
5,625

5,686

10,868

–
33
68
3,029

3,130

46
1,527

1,573

4,703

4,730
38,846
332
(163)
(33,085)

10,660

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

4,596

185
14

199

76
12

10,868

4,703

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 of the Parent Company for the year was £555,000 (2021: loss
of £1,096,000).

The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 22 May 2023 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 2022

Annual Report and Financial Statements 2022

Share
capital
£’000

Share
premium
£’000

Retained
earnings
£’000

Share
option
reserve
£’000

Foreign
exchange
translation
£’000

Total
equity
£’000

1,107

32,156

(33,130)

135

1,528

1,796

GROUP
As at 1 January 2021

Shares issued
(net of transaction costs)

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

1,789

1,905

–
–
–

–

–
–
–

–

(1,127)
–
33

–

(1,094)

As at 1 January 2022

2,896

34,061

(34,224)

Shares issued
(net of transaction costs)

Transactions with owners

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

Total comprehensive income
for the period

1,834

4,785

–
–

–

–
–

–

(1,387)
56

–

(1,331)

As at 31 December 2022

4,730

38,846

(35,555)

–

–
286
(33)

–

253

388

–

–
(56)

–

(56)

332

–

–
–
–

1,561

–

–
–

3,694

(1,127)
286
–

(808)

4,682

6,619

(1,387)
–

174

1,735

(1,213)

10,088

13. Consolidated and Company Statement of Changes in Equity
for the year ended 31 December 2022 (continued)

Share
capital
£’000

Share
premium
£’000

Retained
earnings
£’000

Share
option
reserve
£’000

Foreign
exchange
translation
£’000

Total
equity
£’000

1,107

32,156

(31,523)

135

(163)

1,712

COMPANY
As at 1 January 2021

Shares issued
(net of transaction costs)

Transactions with owners

Proﬁt for the year
Share based payments
Share option reserve released

Total comprehensive income
for the period

1,789

1,905

–
–
–

–

–
–
–

–

(1,096)
–
33

(1,063)

As at 1 January 2022

2,896

34,061

(32,586)

Shares issued
(net of transaction costs)

Transactions with owners

Loss for the year
Share option reserve released

Total comprehensive income
for the period

1,834

4,785

–
–

–

–
–

–

(555)
56

(499)

As at 31 December 2022

4,730

38,846

(33,085)

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

–

–
286
(33)

253

388

–

–
(56)

(56)

332

–

–
–
–

–

(163)

–

–
–

–

3,694

(1,096)
286
–

(810)

4,596

6,619

(555)
–

(555)

(163)

10,660

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 2022

Annual Report and Financial Statements 2022

Operating activities

Investing activities
Return from investment and servicing of ﬁnance
Advances to subsidiary and associated undertakings
Performance bond guarantee deposit returned
Additions to exploration and evaluation assets
Acquisition of tangible assets
Investment in associated undertaking

Financing activities
Net 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

Group
2022
£’000

(1,750)

12
–
128
(806)
(17)
–

(683)

6,619
(29)

6,590

4,157
1,650

5,807

Company
2022
£’000

Restated
Group
2021
£’000

Company
2021
£’000

(582)

(1,179)

(681)

11
(1,848)
–
(91)
–
–

(1,928)

6,619
(11)

6,608

4,098
1,527

5,625

7
323
–
(1,356)
(1)
(93)

(1,120)

2,768
(9)

2,759

460
1,190

1,650

7
(707)
–
(50)
(1)
(1,909)

(2,660)

3,694
(9)

3,685

344
1,183

1,527

14. Consolidated and Company Statement of Cash Flows
for the year ended 31 December 2022 (continued)

Note to the Consolidated and Company Statement of Cash Flows

Group
2022
£’000

Company
2022
£’000

Restated
Group
2021
£’000

Company
2021
£’000

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

(1,387)
33
–
(12)
4
–
–
(74)

Operating cash outﬂows before movements in working capital

(1,436)

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

Net cash outﬂows from operating activities

(47)
(267)

(1,750)

(555)
55
–
(11)
1
–
–
(205)

(715)

22
111

(582)

(1,127)
28
286
(7)
–
(163)
(29)
19

(993)

(743)
557

(1,179)

(1,096)
135
286
(7)
–
–
–
(19)

(701)

6
14

(681)

15. Notes to the Financial Statements

Annual Report and Financial Statements 2022

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

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

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

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

Basis of preparation
The ﬁnancial statements have been prepared in accordance with 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
During the year the Group adopted the following IFRS amendments and standards for the ﬁrst time:

–

Onerous contracts (Amendments to IAS 37)

Property, plant and equipment (Amendments to IAS 16)

Annual Improvements 2018-2020 cycle (IFRS 1, IFRS 9, IFRS 16 and IAS 41), and

References to Conceptual Framework (Amendments to IFRS 3)

15. Notes to the Financial Statements (continued)

1. Signiﬁcant accounting policies (continued)
Details of the impact of these standards on the Group are as follows:

OnerousContracts–CostofFulﬁllingaContract(AmendmentstoIAS37)
IAS 37 deﬁnes an onerous contract as a contract in which the unavoidable costs (costs that the Group has committed
to as part of the contract) of meeting the obligations under the contract exceed the economic beneﬁts expected to
be received under it. The amendments to IAS 37.68A clarify that the costs relating directly to the contract consist
of both:

•

The incremental costs of fulﬁlling that contract- e.g. direct labour and material; and

an allocation of other costs that relate directly to fulﬁlling contracts: e.g. allocation of depreciation charge on
property, plant and equipment used in fulﬁlling the contract.

The Board has assessed that under the revised deﬁnition the Group held no onerous contracts in the current or
comparative periods.

Property,PlantandEquipment:ProceedsbeforeIntendedUse(AmendmentstoIAS16)
The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PP&E any proceeds received
from selling items produced while the entity is preparing the asset for its intended use (for example, the proceeds
from selling samples produced during the testing phase of a manufacturing facility after it is being constructed but
before start of commercial production). The proceeds from selling such samples, together with the costs of producing
them, are now recognised in proﬁt or loss. The Board considers that there is no material impact of this amendment.

AnnualImprovementstoIFRSStandards2018-2020(AmendmentstoIFRS1,IFRS9,IFRS16&IAS41).
•

IFRS 1: Subsidiary as a First-time Adopter (FTA)

•

IFRS 9: Fees in the ‘10 per cent’ Test for Derecognition of Financial liabilities

IAS 41: Taxation in Fair Value Measurements

The Board considers that there is no material impact of this amendment.

ReferencestoConceptualFramework(AmendmentstoIFRS3)
In May 2020, the IASB issued amendments to IFRS 3, which update a reference to the Conceptual Framework for
Financial Reporting without changing the accounting requirements for business combinations. The Board considers
that there is no material impact of this amendment.

a) Newstandards,interpretationsandamendmentsnotyeteffective
The following IFRSs and amendments have been issued by the IASB but are not effective until a future period.

–

IFRS 17 Insurance Contracts and Initial Application of IFRS 17 and IFRS 9, Comparative Information
(Amendments to IFRS 17)

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

Deﬁnition of Accounting Estimates (Amendments to IAS 8)

Deferred Tax Relating to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

IFRS 16 Leases(Amendment, Liability in a Sale and Leaseback) (not yet endorsed by the UK Endorsement Board)

IAS 1 PresentationofFinancialStatements (Amendments to Classiﬁcation of Liabilities as Current or Non-
current) (not yet endorsed by the UK Endorsement Board)

IAS 1 PresentationofFinancialStatements(Amendment to Non-current liabilities with covenants).

The Board is currently assessing the impact of these new amendments on the Group’s ﬁnancial reporting for future
periods. However, the board does not expect any of the above to have a material impact on future results.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

1. Signiﬁcant accounting policies (continued)

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.

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.

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

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

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

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

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

15. Notes to the Financial Statements (continued)

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

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

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

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

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

Property, plant and equipment
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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

1. Signiﬁcant accounting policies (continued)

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.

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)

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 the 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.

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.

Lease accounting
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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

1. Signiﬁcant accounting policies (continued)
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.

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 payables comprise trade and other payables.

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.

The Group determines the classiﬁcation of its ﬁnancial liabilities at initial recognition and re-evaluates 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.

15. Notes to the Financial Statements (continued)

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

Foreign currencies

Functional and presentation currency

i)
Items included in the ﬁnancial statements of the Group are measured using the currency of the primary economic
environment in which the entity operates (the functional currency), which are mainly in Pounds Sterling (£) 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.

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. 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 regular 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)

Annual Report and Financial Statements 2022

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 evaluation asset is a critical accounting judgement in itself.

The Board also assesses potential impairment of the Company’s net investment in subsidiaries by reference to the
same judgements around the circumstances of the Group’s oil and gas exploration projects. At year end the Group’s
exploration assets which the Board reviewed for impairment were carried at £3.7m and the Company’s net
investment in subsidiaries was held at £5.0m. Further details are given in Notes 9 and 12 respectively.

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.

15. Notes to the Financial Statements (continued)

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 East Asia where production,
development and exploration activity is being assessed, South America, which has previously been involved in
production, development and exploration activity but is now being phased out, and the United Kingdom being the
head ofﬁce and where exploration activity is taking place.

Exploration and production year ended 31 December 2022

United
Kingdom
£’000

South
America
£’000

South East
Asia
£’000

Total
£’000

–
–

–

(213)
(33)
(1,191)
43

(1,394)

(5)
12

–
–

–

(138)
(21)
(441)
–

(600)

(4)
–

(604)

(1,387)

–

(604)

(1,387)

4,403
177

4,580

212
–

212

794
21

4,702
5,807

10,509

407
14

421

886
33

Revenue
Cost of sales

Gross proﬁt

Exploration and evaluation expenditure
Property, plant and equipment impairment and depreciation
Administration expenses
Gain on exchange

Loss before interest and taxation

Finance cost
Finance income

Loss before taxation

Income tax expense

Loss after taxation

AAsssseettss aanndd lliiaabbiilliittiieess
Segment assets
Cash and cash equivalents

Total assets

Segment liabilities
Current tax liabilities

Total liabilities

OOtthheerr sseeggmmeenntt iitteemmss
Capital expenditure
Depreciation, amortisation and impairment charges

–
–

–

(67)
(12)
(686)
43

(722)

(1)
11

(712)

–

(712)

298
5,625

5,923

194
14

208

92
12

–
–

–

(8)
–
(64)
–

(72)

–
1

(71)

–

(71)

1
5

1
–

–
–

Annual Report and Financial Statements 2022

15. Notes to the Financial Statements (continued)

2. Segmental information (continued)

Exploration and production year ended 31 December 2021 (restated)

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
Gain 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 costs
Finance income

(Loss)/Proﬁt before taxation

Income tax expense

Loss/(Proﬁt) before taxation

AAsssseettss aanndd lliiaabbiilliittiieess
Segment assets
Cash and cash equivalents

Total assets

Segment liabilities
Current tax liabilities

Total liabilities

OOtthheerr sseeggmmeenntt iitteemmss
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
5

3
–

–
24

–
–

–

(67)
–
–
–
(285)
–
89

(263)

29
302

–
–

–

863
118

981

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)

3,683
1,650

5,333

639
12

651

1,357
35

15. Notes to the Financial Statements (continued)

3. Operating loss

The operating loss is stated after charging:
Auditor’s remuneration

Audit of group and company ﬁnancial statements – current year
Audit of group and company ﬁnancial statements – prior year
Non-audit services: Tax compliance
Non-audit services: Other assurance services

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

2022
£’000

2021
£’000

29
4
2
2
213
–
33
–
(43)
–

25
–
2
1
218
17
11
7
(22)
(89)

Other operating income in 2021 arose on the capitalisation into cost of investment of development costs written
off in prior years in respect of Chuditch, Timor-Leste. This was due to a reconstruction of the balance sheet of
SundaGas (Timor-Leste Sahul) Pty 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) on exchange
Other expenses

2022
£’000

632
–
213
33
410
(43)
149

2021
£’000

521
261
218
35
454
(22)
85

1,394

1,552

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

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:

2022

2021

Group
Number

Company
Number

Group
Number

Company
Number

3
4
2

£’000

206
390
–
47

643

3
–
1

£’000

49
390
–
47

486

Directors
Technical and production
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 and expenses

Bank and other interest received
Interest on lease liability
Other ﬁnance cost

Total

3
–
2

£’000

96
349
286
51

782

3
–
1

£’000

80
349
286
51

766

2022
£’000

2021
£’000

12
(4)
(1)

7
(2)
–

15. Notes to the Financial Statements (continued)

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 18.6% (2021: 22.4%)

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

Tax expense

2022
£’000

2021
£’000

–
–

–

2022
£’000

(1,387)

(258)

163
(76)
171
–

–

–
–

–

2021
£’000

(1,127)

(253)

123
(97)
227
–

–

At 31 December 2022, the Group had estimated tax losses of £36,011,000 (2021 – £32,933,000) to carry forward
against future proﬁts. The potential deferred tax asset on these tax losses at a composite group rate of 29.5% of
£10,636,000 (2021: at 18.1%, £5,964,000) has not been recognised due to uncertainty over the timing and existence
of future taxable proﬁts. The current tax reconciliation has been prepared using a blended rate of 18.6%
(2021: 22.4%) based on prevailing headline taxation rates as applied to the Group’s taxable entities in the year. The
rate assessed for the unrecognised deferred tax asset reﬂects management’s best estimate of the applicable rates
which would apply to oil and gas revenues in the Group’s respective countries of operation.

7. Earnings per share

Loss per ordinary share
– Basic
– Diluted

2022

2021

(0.010p)
(0.010p)

(0.012p)
(0.012p)

Earnings per ordinary share is based on the Group’s loss attributable to controlling interests for the year of £1,387,000
(2021: £1,127,000).

The weighted average number of shares used in the calculation is the weighted average ordinary shares in issue
during the year of 13,784,079,264 (2021: 9,460,727,853).

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.

Annual Report and Financial Statements 2022

15. Notes to the Financial Statements (continued)

8. Property, plant and equipment

Group
Cost
At 1 January 2021
Foreign exchange translation adjustment
Additions

At 1 January 2022
Foreign exchange translation adjustment
Additions
Disposals

At 31 December 2022

Depreciation
At 1 January 2021
Charge for the period

At 1 January 2022
Foreign exchange translation adjustment
Charge for the period
Disposals

At 31 December 2022

Net book value
At 31 December 2022

At 31 December 2021

Equipment and
machinery
£’000

Right of use
assets
£’000

Total
£’000

29
1
1

31
4
17
(34)

29
–

29
5
5
(34)

–
–
45

45
–
62
–

107

2
11

13
1
28
–

29
1
46

76
4
79
(34)

125

31
11

42
6
33
(34)

Included in the above line items are Right of Use assets of £65,000 (2021: £32,000) in respect of a motor vehicle
and an ofﬁce lease.

15. Notes to the Financial Statements (continued)

8. Property, plant and equipment (continued)

Company
Cost
At 1 January 2021
Additions

At 1 January and 31 December 2022

Depreciation
At 1 January 2021
Charge for the period

At 1 January 2022
Charge for the period

At 31 December 2022

Net book value
At 31 December 2022

At 31 December 2021

Equipment and
machinery
£’000

Right of use
asset
£’000

Total
£’000

–
1

–
–

–

45
–

2
11

13
12

45
1

2
11

13
12

Included in the above line items are Right of Use assets of £20,000 (2021: £32,000) in respect of a motor vehicle.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

Intangible ﬁxed assets

Group
Cost
At 1 January 2021
Foreign exchange translation adjustment
Additions
Consolidation of single asset company

At 1 January 2022
Foreign exchange translation adjustment
Additions
Disposals

At 31 December 2022

Impairment
At 1 January 2021
Foreign exchange translation adjustment
Charge for the period

At 1 January 2022
Foreign exchange translation adjustment
Charge for the period
Disposals

At 31 December 2022

Net book value
At 31 December 2022

At 31 December 2021

Exploration
and evaluation
assets
£’000

2,319
17
1,356
1,362

5,054
275
806
(2,439)

3,696

2,301
–
17

2,318
121
–
(2,439)

–

Total
£’000

2,319
17
1,356
1,362

5,054
275
806
(2,439)

3,696

2,301
–
17

2,318
121
–
(2,439)

–

3,696

2,736

3,696

2,736

15. Notes to the Financial Statements (continued)

Intangible ﬁxed assets (continued)

Company
Cost
At 1 January 2021
Additions

At 1 January 2022
Additions
Disposals

At 31 December 2022

Impairment
At 1 January 2021 and 2022
Disposals

At 31 December 2022

Net book value
At 31 December 2022

At 31 December 2021

Exploration
and evaluation
assets
£’000

653
50

703
91
(635)

159

635
(635)

–

159

Total
£’000

653
50

703
91
(635)

159

635
(635)

–

159

Exploration and evaluation assets represent amounts capitalised in progressing the Group’s interest in licences for
the exploration of oil and gas in the UK and Timor-Leste.

The Directors have performed an assessment of impairment as at the balance sheet date in respect of exploration
and evaluation assets, taking account of the facts and circumstances which existed at that date. Impairment reviews
were performed at the Operating Segment level and therefore separate tests were performed for the Chuditch and
Inner Moray Firth P2478 exploration assets. The Directors concluded that the facts did not give rise to an impairment
and therefore no impairment charge has been reﬂected in 2022 (2021: £17,000).

During the previous year, the Group increased its holding in SundaGas (Timor-Leste Sahul) Pty. Ltd (“TLS”) from
33.33% to 100%. As a consequence of the increased holding in TLS, the Company was 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 was relinquished in April 2022.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

10. Goodwill

Group
Cost
At 1 January 2021 and 1 January 2022
Goodwill written off

At 31 December 2022

Impairment
At 1 January 2021 and 1 January 2022
Adjustment on write off of goodwill

At 31 December 2022

Net book value
At 31 December 2022

At 31 December 2021

Goodwill on
consolidation
of subsidiaries
£’000

81
(81)

–

81
(81)

–

The carrying value of goodwill represents the purchase of shares in Gold Oil Peru SAC. This has been written off
during the period as there is no prospect of recovery.

11. Associated undertaking

Group
Gross investment value
At 1 January 2021
Additions
Share of post acquisition net result
Disposal

At 1 January and 31 December 2022

Impairment
At 1 January 2021, 1 January and 31 December 2022

Carrying value
At 31 December 2022

At 31 December 2021

Shares in
associated
undertaking
£’000

151
93
29
(273)

–

Total
£’000

151
93
29
(273)

–

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

During the preceding period, the Company increased its stake in SundaGas (Timor-Leste Sahul) Limited (“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 resulted in a gain on disposal of £302,000 in 2021.

15. Notes to the Financial Statements (continued)

12. Investments

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

At 1 January 2022
Exchange rate adjustment
Net loan movements

At 31 December 2022

Impairment
At 1 January 2021
Charge for the year

At 1 January 2022
Charge for the year

At 31 December 2022

Carrying value
At 31 December 2022

At 31 December 2021

Loans to
group
undertaking
£’000

Shares in
group
undertaking
£’000

Shares in
associated
undertaking
£’000

775
19
–
1,030
–

1,824
205
1,811

3,840

775
124

899
43

942

2,898

925

5,444
–
2,104
–
–

7,548
–
–

7,548

5,444
–

5,444

2,104

195
–
93
–
(288)

–
–
–

–

–
–

–

Total
£’000

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

9,372
205
1,811

11,388

6,219
124

6,343
43

6,386

5,002

3,029

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

The Company makes loans to its subsidiary operations as part of its longer term strategy of undertaking exploration
activities. Whilst the loans are made on informal terms, the Board consider that such loans form part of the
company’s net investment in its subsidiaries and therefore are presented within investments and treated as non-
current. No interest is charged on intercompany loans.

The Company has made provision on the investment in Gold Oil Peru S.A.C. of £6,386,000 (2021: £6,343,000).

Annual Report and Financial Statements 2022

15. Notes to the Financial Statements (continued)

12. Investments (continued)
The Company’s subsidiary undertakings at the year end were as follows:

Subsidiary

SundaGas (Timor-Leste Sahul) Pte. Ltd.
8 Chang Charn Road
#02-01
Link (Thim) Building
Singapore 159637

SundaGas Banda Unipessoal, Lda*
Timor Plaza Pisso 3. #337
Av. President Nicolau Lobato
20 de Setembro, Bebonuk, Dom Aleixo
Dili, Timor-Leste

Gold Oil Peru S.A.C
Jr. General Julian Arias Araguez 250
Miraﬂores, Lima-18, Peru

Place of
incorporation
and operation

Singapore

Proportion of
ownership
interest
%

Proportion
of voting
power held
%

Nature of business

100

Exploration of oil and gas

Timor-Leste

100

Exploration of oil and gas

Peru

100

Exploration of oil and gas

All shareholdings are in ordinary, voting shares.

* A direct subsidiary of SundaGas (Timor-Leste Sahul) Pte. Ltd.

13. Trade and other receivables

Trade receivables
Other receivables
Prepayments and accrued income

2022

2021

Group
£’000

Company
£’000

Group
£’000

Company
£’000

–
24
77

101

–
24
37

–
12
42

–
12
34

15. Notes to the Financial Statements (continued)

14. Bank guarantee bond

Bank guarantee bond at 31 December 2022

2022

2021

Group
£’000

827

Company
£’000

–

Group
£’000

859

Company
£’000

–

The Company’s wholly-owned subsidiary, SundaGas Banda Unipessoal, Lda (“Banda”), has provided a performance
guarantee to Autoridade Nacional do Petróleo e Minerais (“ANPM”) in respect of the offshore Timor-Leste
TL-SO-19-16 Production Sharing Contract (“PSC”). This performance guarantee is secured by a bank guarantee given
by United Overseas Bank Limited of Singapore (“UOB”) backed by a cash deposit of US$1 million. This arrangement
was originally put in place in November 2019 at the outset of the PSC, was extended in November 2022, and now
expires on 1 August 2023. It is anticipated that the bank guarantee will be released following the conclusion of the
current phase of the PSC which is currently 18 June 2023 as the Directors consider that all work commitments to
the end of the current phase will have been met.

The original bond was set up by SundaGas Pte. Ltd (“SGPL”), the former owners of Banda, and has remained in their
name beyond the acquisition of Banda by the Company, so as not to disrupt the contractual position of the PSC. As a
result, the bond will be initially released to SGPL which is contractually bound by the Relationship Agreement that
exists between the parties to account for the funds released to Banda.

As the bond represents a ﬁnancial asset with contractual cash ﬂows, the Directors have had regard to the credit risk
associated with the recovery of the asset. In taking account of the Group’s close working relationship with both
ANPM and SGPL along with the Group’s history of dealings with them, the Directors consider that any credit risk
associated with the bond asset is immaterial and therefore no provision for credit loss has been made.

15. Cash and cash equivalents

Bank current accounts
Bank deposit accounts

2022

Group
£’000

837
4,970

5,807

Company
£’000

655
4,970

5,625

Restated
2021

Group
£’000

238
1,412

1,650

Company
£’000

120
1,407

1,527

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.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

16. Trade and other payables

Trade payables
Other payables
Accruals
Lease ﬁnance liabilities due within 12 months
Taxation

Non-current liabilities
Lease ﬁnance liabilities due after 12 months

2022

2021

Group
£’000

Company
£’000

Group
£’000

Company
£’000

67
–
274
36
14

391

66
–
109
10
14

199

19
495
96
10
12

632

18
–
48
10
12

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

2022

2021

Group
£’000

Company
£’000

Group
£’000

Company
£’000

Current
Non-current

18. Share capital

36
30

10
9

Allotted, called up and fully paid
Equity:18,920,260,428 (2021: 11,583,612,461) ordinary shares of £0.00025 each

10
19

2022
£’000

4,730

10
19

2021
£’000

2,896

The Company issued the following new shares for cash during the year.

(i)

2,750,000,000 new ordinary shares of £0.00025 each at £0.0006 per share on 9 May 2022.

(ii)

117,125,001 new ordinary shares of £0.00025 each at £0.0010 per share on 4 November 2022.

(iii) 4,469,522,966 new ordinary shares of £0.00025 each at £0.0012 per share on 29 November 2022.

Ordinary shares entitle the holder to full rights as to voting, dividends and any distribution upon winding up.

15. Notes to the Financial Statements (continued)

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 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 option reserve released

Share
premium
account
£’000

34,061
–
5,296
(511)
–
–

38,846

34,061
–
5,296
(511)
–

38,846

Share
Option
reserve
£’000

Foreign
exchange
translation
reserve
£’000

388
–
–
–
(56)
–

332

388
–
–
–
(56)

332

1,561
–
–
–
–
174

1,735

(163)
–
–
–
–

(163)

Profit
and loss
account
£’000

(34,224)
(1,387)
–
–
56
–

(35,555)

(32,586)
(555)
–
–
56

(33,085)

Details of options and warrants issued, exercised and lapsed during the year together with options and warrants
outstanding at 31 December 2022 are as follows:

Issue date

Final exercise date

6 August 2019
26 March 2020
26 May 2020
10 November 2020
22 July 2021
22 July 2021
17 December 2021
14 July 2022

6 August 2022
26 March 2023
26 May 2030
10 November 2030
22 July 2031
31 December 2025*
17 December 2031
14 July 2025

Exercise
price

1 January
2022
Number

£0.00080
27,500,000
117,125,001
£0.00100
£0.00100 290,000,000
£0.00100
75,000,000
£0.00070 440,000,000
150,000,000
£0.00070
£0.00060 530,000,000
–
£0.00070

New
Issue
Number

–
–
–
–
–
–
–
175,000,000

Exercised
Number

–
(117,125,001)
–
–
–
–
–
–

Lapsed or
cancelled
Number

31 December
2022
Number

(27,500,000)
–
(165,000,000)
(75,000,000)
–
–
–
–

–
–
125,000,000
–
440,000,000
150,000,000
530,000,000
175,000,000

1,629,625,001

175,000,000

(117,125,001)

(267,500,000) 1,420,000,000

These options have been granted to two external contractors who have been engaged by SundaGas (Timor-Leste Sahul) Pte. Ltd. The ﬁnal
exercise dates of these options was extended during the year from 22 July 2024 to 31 December 2025.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

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 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 2030
22 July 2031
22 July 2024
17 December 2031

Exercise
price

1 January
2021
Number

New
Issue
Number

Exercised
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
£0.00100
75,000,000
£0.00070
£0.00070
£0.00060

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

539,625,001 1,120,000,000

–
–
–
–
–
–
–
–
–

–

Lapsed or
cancelled
Number

31 December
2022
Number

(20,000,000)
(10,000,000)
–
–
–
–
–
–
–

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

(30,000,000) 1,629,625,001

The number of share options which were exercisable at year end was 1,245,000,000 (2021: 1,099,625,001).
The weighted average remaining life of share options at the year end was 7 years (2021: 8 years). The weighted
average exercise price (in pence) applying to share options during the year was as follows:

Opening
Exercised
Lapsed
Cancelled
Issued
Closing

2022

0.08p
0.10p
0.08p
0.10p
0.07p
0.07p

2021

0.12p
–
0.44p
–
0.07p
0.08p

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

14 July
2022

17 December
2021

22 July
2021

26 May
2020

175,000,000 530,000,000 150,000,000 440,000,000 290,000,000
0.05p
0.1p
10 years
0.86%
80%
0%
0.02p

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%
0.017p

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

15. Notes to the Financial Statements (continued)

20. Share based payments (continued)

During the year, as announced on 14 July 2022, the Company awarded 175,000,000 share options to a director of
both SundaGas (Timor-Leste Sahul) Pte. Ltd and SundaGas Banda Unipessoal Lda, the latter being the operator of
the ‘Chuditch’ Timor-Leste TL-SO-19-16 PSC. The share options are exercisable at 0.07p, expire three years from
grant date and will only vest upon Baron Oil making an announcement that the ﬁrst appraisal well on the Chuditch
PSC has spudded, or in certain limited circumstances such as a takeover event. SundaGas (Timor-Leste Sahul) Pte.
Ltd and SundaGas Banda Unipessoal Lda are wholly owned subsidiaries of Baron Oil Plc.

Given that vesting is contingent on the spudding of a well at the Chuditch project and that the occurrence of this
event is dependent, inter alia, on events outside the control of the director, the Board considered that the current
degree of certainty over vesting was such that no share-based payment charges were recorded in respect of these
options during 2022. A detailed summary of the current status and future plans for the Chuditch project are given
in the Chairman’s Statement & Operations Report.

Volatility was determined by reference to the Company’s historical share price volatility over a suitable period.
During the year, and as announced on 12 January 2022, 240,000,000 share options were cancelled.

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
Post termination beneﬁts
Share based payments

2022
£’000

390
–
–

390

2022
£’000

214
17
–

231

2021
£’000

349
53
256

658

2021
£’000

216
–
145

361

Total remuneration in respect of key management personnel amounted to £432,000 (2021: £698,000).

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

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.

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

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 risk as far as possible without unduly affecting the Group’s competitiveness and ﬂexibility. Further
details regarding these policies are set out below:

15. Notes to the Financial Statements (continued)

22. Financial instruments (continued)

Credit risk
The Group’s principal ﬁnancial assets are bank balances and cash, 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 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.

As at 31 December 2022 and 2021 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.

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 2022

UK sterling
US dollar (USD)
Singapore Dollar (SGD)
Peruvian Nuevo Sol (PEN)

31 December 2021

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

Financial assets
on which
interest earned
£’000

Financial assets
on which
interest not earned
£’000

4,802
168
–
–

4,970

397
1,287
4
–

1,688

Financial assets
on which
interest earned
£’000

Financial assets
on which
interest not earned
£’000

780
1,486
–

2,266

123
174
–

297

Total
£’000

5,199
1,455
4
–

6,658

Total
£’000

903
1,660
–

2,563

The Group earned interest on its interest bearing ﬁnancial assets at rates between 1.5% and 4% (2021 0.3% and 1%)
during the period.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

22. Financial instruments (continued)
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 2021 was
prepared under the same assumptions.

Instruments bearing variable interest (£’000)

Change of 1.0% in the interest rate as of

31 December 2022

31 December 2021

Increase
of 1.0%

Decrease
of 1.0%

(50)

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.

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 2022
At 31 December 2022

Average for year ended 31 December 2021
At 31 December 2021

USD

1.24
1.21

1.37
1.35

SGD

1.71
1.62

1.84
1.82

PEN

4.73
4.55

5.27
5.35

15. Notes to the Financial Statements (continued)

22. Financial instruments (continued)
A change in exchange rates on the statement of ﬁnancial position date would increase/(decrease) the equity and net
asset position 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 2021 was prepared under the
same assumptions.

Net assets (£’000)

Change of 10.0% in the GBP/USD rate as of

31 December 2022

31 December 2021

Increase of
10.0%

(279)

Decrease
of 10.0%

340

Increase
of 10.0%

(148)

Decrease
of 10.0%

393

It is considered that there have been no signiﬁcant changes in exchange 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.

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.

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 and natural gas prices is shown below:

Crude oil – WTI
Per barrel – US$
Per barrel – £

Natural gas LNG Japan/Korea Marker (Platts)
Per Million Btu – US$
Per Million Btu – £

31 December
2022

Average
price
2022

31 December
2021

$81
£67

$19
£15

$92
£74

$32
£26

$75
£56

$25
£18

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. However, these prices had no effect on the Group’s
results for 2022, since it had no production.

15. Notes to the Financial Statements (continued)

Annual Report and Financial Statements 2022

22. Financial instruments (continued)

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.

23. Capital commitments
As of 31 December 2022, there were no capital commitments (2021: none).

24. Contingent Liabilities
The Company considers that there are no potential decommissioning costs in respect of abandoned ﬁelds.

25. Events after the reporting period
On 20 February 2023, the Company issued 62,500,000 new ordinary shares of 0.025p each following the exercise
of options by a former director, raising new capital of £62,000 gross, £50,000 net of costs.

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) Pty. Ltd
Gold Oil Peru S.A.C*

Year ended
31 December 2022

Year ended
31 December 2021

Balance
£’000

Loan advance
£’000

Balance
£’000

Loan advance
£’000

2,898
941

1,972
42

926
899

926
124

* The Company has provided for an impairment of £941,000 (2021: £899,000) on the outstanding loans.

Group and company
SundaGas (Timor-Leste Sahul) Pty. Ltd (“TLS”), a wholly-owned subsidiary paid fees amounting to US$285,000
(2021: US$369,000) to SundaGas Pte. Ltd, a company in which Dr. Andrew Butler, a director of TLS, held a signiﬁcant
interest.

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

During the year, key management personnel subscribed for new ordinary shares of £0.00025 each in the Company
as part of placings and subscriptions of new ordinary shares as follows.

Andrew Yeo
Dr Andrew Butler*

Announced 29 April 2022,
at a price of 0.06p per share

16,150,000 shares
–

Announced 16 November 2022,
at a price of 0.12p per share

8,000,000 shares
50,000,000 shares

15. Notes to the Financial Statements (continued)

27. Related party transactions (continued)

During the year, key management personnel were awarded options to subscribe to new ordinary shares of £0.00025
each in the Company as follows.

Dr Andrew Butler*

* Director of SundaGas (Timor-Leste Sahul) Pty. Ltd.

Number

175,000,000

Exercise
price

0.07p

Final exercise
date

14 July 2025

On 25 November 2022, the Company assumed 100% of the collateral for a US$1 million amount (the “Deposit”) in
relation to the performance bank guarantee arrangements connected to the Chuditch PSC (the “Guarantee”), by
providing approximately US$667,000 to SundaGas Pte. Ltd (“SGPL”) to replace the two thirds contribution
(approximately US$667,000) previously made by SGPL, which was the other indirect shareholder in SundaGas Banda
Unipessoal Lda. until 18 June 2021. The relationship agreement between SGPL, its principals and Baron as originally
announced on 18 June 2021 (the “Relationship Agreement”) was also varied so that Baron is entitled to all the beneﬁt
of and rights to the return of the Deposit should it be released or when the Guarantee expires in due course on 1
August 2023. The changes to the provision of the funds for the Deposit and the variations to the Relationship
Agreement were deemed to be related party transactions pursuant to the AIM Rules for Companies.

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.

28. Restatement of comparative ﬁgures
The Directors have reviewed the presentation of the performance bonds deposited with banks as part of the Group’s
exploration activities and have concluded that such deposits should not be considered as cash equivalents. Therefore
the comparative period has been restated to represent this reallocation. Further details of the terms of the
performance bonds held are given in Note 15.

In addition, the Board have reviewed the allocation of certain non-cash items within the cash ﬂow statement have
restated the comparative consolidated cash ﬂow statement accordingly.

The comparative ﬁgures in the Statement of Other Comprehensive Income have also been restated so that
movements in the share-based payment reserve following share option exercises or lapses are presented as an
adjustment between reserves within equity and not within Other Comprehensive Income.

None of the restatements impact on the Earnings Per Share as reported in 2021.

16. Glossary of Technical Terms

Annual Report and Financial Statements 2022

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.

Contingent Resources

High or 3U Estimate

Licence Operator or Administrator

Those quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations by application of
development projects, but which are not currently considered to be
commercially recoverable owing to one or more contingencies

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.

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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