Nostra Terra Oil & Gas
Annual Report 2022

Plain-text annual report

Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 ANNUAL REPORT AND ACCOUNTS 2022 Registration number: 05338258 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 24. Contingent liabilities and guarantees The Group has no contingent liabilities in respect of legal claims arising from the ordinary course of business and it is not anticipated that any material liabilities will arise from contingent liabilities other than those provided for. 25. Ultimate controlling party The company is quoted on the AIM market of the London Stock Exchange. At the date of the annual report there was no one controlling party. 26. Events after the reporting period There were no significant events. Contents Company Information Chairman’s Report Chief Executive Officer’s Report Strategic Report Directors’ Report Directors’ Information Corporate Governance Report Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated and Company Statement of Cash Flows Notes to the Financial Statements Page 1 2 3 5 8 12 13 16 22 23 24 25 26 27 28 29 www.ntog.co.uk Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Company Information Directors Stephen Staley (Non-Executive Chairman) Matt Lofgran (Chief Executive Officer) John Stafford (Non-Executive Director) Secretary Paul Welch (Non-Executive Director) D&A Secretarial Services Limited Registered office Salisbury House, London Wall, Registered number London EC2M 5PS Auditor 05338258 (England and Wales) MAH, Chartered Accountants nd Floor 2 154 Bishopsgate Nominated adviser London EC2M 4LN Beaumont Cornish Limited Building 3 566 Chiswick High Road Broker London W4 5YA Novum Securities Limited nd Floor, Lansdowne House 2 57 Berkeley Square Solicitors London W1J 6ER Druces LLP Salisbury House London Wall, Bankers London EC2M 5PS Barclays Bank plc 1 Churchill Place Canary Wharf Registrars London E14 5HP Share Registrars Ltd The Courtyard 17 West Street Farnham Website Surrey GU9 7DR www.ntog.co.uk 1 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Chairman’s Report 2022 – Good progress in line with strategy I am pleased to present Nostra Terra Oil & Gas Company PLC’s annual 2022. report for the year ending 31 December The past year saw the start, but sadly not the end, of the Russian invasion of Ukraine. The sanctions and boycotts on Russian oil and the end of most covid-related restrictions on travel and work meant high oil prices in early 2022 and for much of the year. However, the continuing Chinese lockdowns served to act as something of a damper on the global demand for goods, in turn reducing demand and hence the price of hydrocarbons. At the end of 2022, the WTI spot benchmark stood at around $79. As planned, Nostra Terra took advantage of the generally strong oil prices during the year to consolidate production and to invest further into our existing acreage. Strong cash flows meant that we were able to drill both the Fouke #2 (East Texas) and the Grant East #1 (Permian Basin) wells without diluting existing shareholders. The Fouke well has been a good producer, though the Grant East well suffered from completion problems. Also, in line with our strategy for 2022, further workovers on existing wells took place during the year. These have supported our production volumes and our revenues. All in all, 2022 provided the Company with the highest production and revenues since it was founded. Toward the close of the year, this was a contributing factor to the increase in the borrowing base of the senior facility provided to Nostra Terra by WAFD from $3,350,000 to $4,350,000, though increases in interest rates globally also led to an increase in the interest rate associated with this facility. , and at the time of writing, we await the outcome of the Texas Railroad Commission’s Field After the year-end Allowable Hearing on the Fouke Wells in the Pine Mills Field, East Texas. Our request to allow production at significantly higher daily rates from these wells was unopposed; success would mean we can continue to benefit from the full achievable flow rates of these prolific wells. as the Company’s auditors. Jeffrey no longer had sufficient capacity to service Nostra Terra and a number of others of its clients’ needs In March 2023, we replaced Jeffrey Henry LLP with MAH, Chartered Accountants Henry LLP and so had to withdraw from providing audit services to several companies. As always, Nostra Terra continues to actively seek out and assess new opportunities both in the US and further afield. Thank you for your continuing support throughout the last year. Non-Executive Chairman Dr Stephen Staley 1 June 2023 2 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Chief Executive Officer’s Report 2022 was a record year of production and revenue for Nostra Terra, while keeping costs relatively flat, resulting in a significant increase in gross profit. The Company remained focused on growth without any dilution to shareholders. At the beginning of the year, we brought on a new well in Pine Mills (32.5% working interest). Following this, the Company drilled a new well on the newly acquired Grant East Lease (100% working interest). Both of these were funded from existing resources. Revenues for the year were $4,021,000, an increase of 76% from $2,282,000 in 2021, reflecting a combination of a 19% increase in production sales and an improving commodity price environment (average $91.17 per barrel sold in 2022 compared to $61.45 in 2021). Gross profit before non-cash items (depreciation, depletion, and amortization) was $2,242,000, vastly improved from a gross loss of $574,000 in 2021. The Board continues to focus on its stated aim of increasing cashflow and reserves for the year ended 2023. United States ’ All of Nostra Terra lifting costs and longer-life reserves than unconventional ones. s operations in the US target conventional reservoirs (i.e., not shale), typically with lower Area East Texas West Texas South Texas 2022 Production (Barrels sold) 37,341 3,681 3,076 Percentage of Portfolio by sales 84.4% 8.4% 7.2% East Texas (33- 100% WI) ’ Nostra Terra s core asset is the Pine Mills field (100% WI) providing stable production. In 2022 production from ’ the area accounted for 84% of the Company s sales (50-75% WI). Production remained stable throughout the year Company’s from the core producing wells, while the focus was on growing production in the new farmout area. “ ” At the beginning of 2022, the Fouke 2 (32.5% WI) well was drilled and put into production. The well was then tested and flowed at a rate of 145 bopd over a 24-hour period with a 0% watercut and placed into continuous production. This production rate exceeded that of the offset Fouke 1 well by 77% because the Fouke 1 had been limited by field rules ( the test rate of the Fouke 2, the operator requested a substantial increase in the field allowable rate so that both wells can be produced at higher and more efficient rates. The hearing took place in April of 2023 and a decision is expected to be handed down during Q3 2023. Until a decision by the Texas Railroad Commission is made the operator continues to produce both wells above the current allowable cap, to obtain sufficient technical information to support the increased field allowable. ) to 82 bopd per well. As a result of the past performance of the Fouke 1 and allowable 3 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Chief Executive Officer’s Report (continued) West Texas (50 – 100% WI) ’ In 2022 production from the area accounted for 8.4% of the Company s sales (50-75% WI). In April 2022, the Company announced the Grant East lease acquisition (100% WI) and preparations to drill. Drilling took place in May 2022. The well encountered 24 feet of gross reservoir section in the Upper Clear Fork and 108 feet of gross reservoir section in the Lower Clear Fork, which compares favourably with the NTOG-operated wells on an adjoining lease. However, during the completion operations the fracture stimulation propagated out of zone and intersected a deeper water bearing horizon that produced at high water rates, rendering the well uneconomic to produce. The Company has completed a technical study of the completion operations and this information will be used in future operations to improve the completion results. The well was funded from existing resources, thus avoiding dilution to shareholders. South Texas (100% WI) In 2020 the Company acquired the Caballos Creek asset, comprising two leases. There are no current plans for expansion in this area. Production from this area accounted for 7.2% of Company sales. Senior Lending Facility In December 2022, the Company completed a redetermination of its Senior Lending Facility, resulting in a significant increase in the Borrowing Base. The Borrowing Base was increased from $2,350,000 at the end of 2021 to US$4,350,000 based upon a combination of increased production volumes, reserves, pricing and subsequent cashflows. The size of the Facility and Borrowing Base will continue to be reassessed at least twice yearly. The interest rate ending December 2022 was 6.5% The Facility is not restricted to any geographical region. Nostra Terra can deploy funds from the Facility for operational purposes and acquisitions in its current areas of operation or in other areas of the world, should the opportunity arise. Outlook The Company enjoyed a record year for revenue and cashflow. Two wells were drilled during the year using existing resources, while debt levels were reduced. The Company plans to continue to pursue opportunities both within and outside the existing asset portfolio where we believe value can be created for shareholders. We’re grateful for the support of our shareholders throughout the year. On behalf of the entire team at Nostra Terra, we thank you and look forward to continued success in the future. Chief Executive Officer Matt Lofgran 1 June 2023 4 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Strategic Report Nostra Terra Oil and Gas Company plc (“the Company”) and its subsidiaries (collectively “the Group”) The directors present their Strategic Report for Principal activity The group’s principal activity is the exploitation of hydrocarbon resources covering the year ended 31 December 2022. Our strategy , focusing currently on the USA. 1 Grow Production and Reserves from Permian Basin and Pine Mills 2 Increase cashflows 3 Make acquisitions that are accretive to shareholders 4 Use technical advances to extract further value from maturing assets 5 Develop strategic partnerships that allow the Company to leverage our existing assets to generate returns or create value through new opportunities Our business model Nostra Terra is focused on achieving profitable and sustainable growth within established hydrocarbon provinces. We see the scope for sustained profitable growth throughout many well-established hydrocarbon systems. Our business model is to continue upgrading our exploration and production portfolio by identifying, screening, and investing in a diverse portfolio of upstream assets, targeting the most attractive opportunities. We focus on conventional reservoirs where assets have lower lifting costs and long-life reserves. Review of business, future developments, trading outlook, and future strategy are also noted in the Chairman’s Report on page 2 and the Chief Executive Officer’s Report on The results for the year and the financial position of the Company and the Group are shown in the financial statements. They page 3. Growth opportunities Nostra Terra is focused on existing, proven basins with conventional reservoirs in Texas, USA. The Company is also pursuing growth opportunities outside the USA. Key Themes for 2022 • • • • • Russia invades Ukraine, highlighting the importance of energy security. An effective end to the global Covid crisis, China excepted. Doing more with less: investors were focused on cash flows - putting capital to work in short cycle, infrastructure-led opportunities. An increasing focus on ESG, with larger oil companies increasing investment in projects focusing on the environment. Reduced funding for long lead time projects. Key performance indicators At this stage in the Company’s development, the directors regul arly monitor key performance indicators primarily: production rates, operating costs, general administrative expenses cash flows and bank balances;, which are tightly controlled;. 2022 $’000 2021 $’000 Cash and cash equivalents Administrative expenses 132 1,074 BOE 45 908 BOE Production (net) 44,097 37,126 5 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Strategic Report (continued) Principal risks and uncertainties Managing Our Risk Company. The Company maintains a Risk Register as a part of the Board’ Risk management is at the core of achieving our strategy and delivering long-term value to shareholders. The Board, its committees, and the executive team are actively engaged in setting the risk agenda and managing risks and opportunities of the s fiduciary and oversight responsibilities. Definition of Risk includes both “upside” (opportunity) and “downside” (threat) risks. Threats A risk is defined here as a potential future event that may influence the achievement of business objectives. This sources and can be directly related to the Company’s operational and commercial activities and support and opportunities can come from various functions, or they can arise externally: from suppliers, regulators, competitors; from the economic environment or political climate. Risk Management The Company is acutely aware of the oil and gas activity risks. Such risks range from global commercial risks, such as stock market volatility and commodity pricing, to geopolitical risks in terms of market access, tariffs and contractual relationships through to operational risks. In addressing the latter, ensuring the safety of our personnel and subcontracting staff and protecting the environment in which we work are paramount. The key risk in development and production is the technical risk of not finding and producing sufficient hydrocarbons to be economic, While the US mid-continent is a proven hydrocarbon region and is seeing resurgence through the application of new drilling and well completion technologies, there are also environmental and economic risks, as there are in any hydrocarbon region. Further information relating to risk can be found on note 20 of these accounts. Companies Act S.172 The Directors acknowledge their duty under s.172 of the Companies Act 2006 and consider that they have, individually and together, acted in the way that, in good faith, would most likely promote the company's success for the benefit of its members as a whole. In doing so, they have had regard (amongst other matters) to: the likely consequences of any decision in the long term. The Group’s long • • • • • -term strategic objectives, including progress made during the year and principal risks to these objectives, are shown in the strategic report and the interests of the Company’s employees. Our employees are fundamental to us achieving our long the key performance indicators. the impact of the Company’s ope strategic objectives. -term rations on the community and the environment. The Group operates honestly and transparently. We consider the impact on the environment on our day-to-day operations and how we can minimise this. the desirability of the Company maintaining a reputation for high standards of business conduct. We will behave responsibly, operating within the high standard of business conduct and good corporate governance. the need to act fairly as between members of the Company. We will behave responsibly towards our shareholders and treat them fairly and equally so they may benefit from the successful delivery of our strategic objectives. 6 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Strategic Report (continued) This Strategic Report was approved by the board of directors on 1 June 2023 and signed on behalf of the board by: Chief Executive Officer Matt Lofgran 7 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Directors’ Report The directors present their annual report and audited financial statements for the year ended 31 December 2022. The review of business and future developments has been undertaken in the strategic report for the year ending 31 December 2022. Listing The Company’s ordinary shares have been quoted on the AIM market of the London Stock Exchange since 20 July is the Company’s nominated advisor and Company’s broker. 2007. Beaumont Cornish Limited Novum Securities Limited is the The closing mid-market price at 31 December 2022 was 0.28p (2020: 0.32p). Results and dividends The loss for the year ended 31 December 2022 was $546,000, (2021: $1,088,000). No dividends will be distributed for the year ended 31 December 2022 (2021: $nil). Directors The following directors have held office for the year ended 31 December 2022: M B Lofgran J Stafford S Staley P Welch (appointed 4 February 2022) ’ remuneration for the years ended 31 December 2022 and 2021 are summarised as follows: The directors M B Lofgran S Staley J Stafford Total P Welch 31 December 2021: M B Lofgran S Staley Total J Stafford Salary $ 275,000 - - 275,000 - Salary $ 219,333 - 219,333 - Fees $ - 48,780 37,107 41,400 127,287 Fees $ - 68,795 41,227 110,072 Share-based payments $ 2022 Total $ 2,721 - - - 2,721 Share-based payments $ 3,743 6,485 5,188 15,416 277,721 48,780 37,107 41,400 405,008 2021 Total $ 223,076 75,280 46,465 344,821 There were no benefit-in-kind payments during the year. More detail on the share options issued to Directors’ during the year are disclosed within note together with the outstanding options and warrants at the year-end, please refer to note 23. the share-based payment 8 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Directors’ Report (continued) , the directors’ beneficial interests in the ompany’s issued share capital were as follows: At 31 December 2022 Number of ordinary shares of 0.1 p each 31.12.22 C Percentage of issued share capital Number of ordinary shares of 0.1 p each 31.12.21 Percentage of issued share capital M B Lofgran 50,705,463 J Stafford 2,500,000 S Staley 8,166,667 P Welch - Remuneration Committee and Policy 6.79% 0.33% 1.09% - 50,705,463 2,500,000 8,166,667 - 7.2% 0.4% 1.2% - directors’ remuneration. The group’s policy is to pay competitive but The Remuneration Committee takes into account both group and individual performance, market value, and sector conditions in determining executive affordable salaries compared with peer companies in the oil and gas sector, until the group has established a good position with acreage, assets, income and cash at hand. All current salaries are without pension or benefits. Substantial shareholders As at 22 May 2023, the Company was aware of the following interests in its issued share capital: Number of ordinary shares of 0.1 p each Percentage of issued share capital Interactive Investor Services Nominees Limited HSDL Nominees Limited Miton UK Microcap Trust PLC M Lofgran Hargreaves Lansdown (Nominees) Limited J Bolitho Discovery Energy Limited (E Ainsworth) HSDL Nominees Limited Barclays Direct Investing Nominees Limited Interactive Investor Services Nominees Limited Events after the reporting period 95,281,619 66,179,715 65,764,138 50,705,463 45,104,360 44,000,000 33,253,802 29,191,128 28,775,928 27,369,176 12.76% 8.87% 8.81% 6.79% 6.04% 5.89% 4.45% 3.91% 3.85% 3.67% Refer to note 26 for details. Publication of accounts on company website website. The directors are responsible for the website’s The company publishes the financial statements on its maintenance and integrity, and their responsibility also extends to the financial statements contained therein. 9 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Directors’ Report (continued) Indemnity of officers The group may purchase and maintain, for any director or officer, insurance against any liability. The group maintains appropriate insurance cover against legal action brought against its directors and officers. Financial instruments The group does not have formal policies on interest rate risk or foreign currency risk. The group would be exposed to foreign currency risk on sales and purchases that are denominated in a currency other than United States Dollars ($). The group maintains a natural hedge that minimises its foreign exchange exposure by matching foreign currency income with foreign currency costs. For the time being, the group does not consider it necessary to enter into foreign exchange contracts to manage its foreign currency risk, given the nature of its business. Going concern The directors believe that, based on the forecasts and projections they have prepared, the resources available will be sufficient for the Company and its subsidiaries to continue as a going concern for the foreseeable future when taking into account proceeds generated from production. Going concern is discussed more fully in note 1. The Directors have concluded that the Group will have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts. Statement of 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 year. Under that law, the directors are required to prepare the Group and Company financial statements in accordance with 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 and Company for that period. • In preparing these financial statements, the Directors are required to: • • • select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether the UK adopted International Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. 10 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Directors’ Report (continued) Statement of directors’ responsibilities (continued) The Directors are responsible for keeping accounting records that are sufficient to show and explain the Group’s and Company’s transactions. These records must disclose with reasonable accuracy at any time the financial position of the Group and Company and to enable the Directors to ensure that any financial statements prepared comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud, error, non-compliance with law and regulations and other irregularities. included on the Company’s website. Legislation in the United The Directors are responsible for the maintenance and integrity of the corporate and financial information Kingdom governing the preparation and The Company is compliant with AIM Rule 26 regarding the Company’s website. dissemination of financial statements may differ from legislation in other jurisdictions. Statement as to disclosure of information to auditors Each of the persons who is a Director at the date of approval of this annual report confirms that: so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is • • unaware; and himself/herself aware of any relevant audit information and to establish that the Company’s auditor is the Director has taken all the steps that he ought to have taken as a Director in order to make aware of that information. Auditors MAH, Chartered Accountants were appointed as auditor and have expressed their willingness to continue in office as auditor and will be proposed for reappointment at the next Annual General Meeting. This report was approved by the board of directors on 1 June 2023 and signed on behalf of the board by: Chief Executive Officer Matt Lofgran 11 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Directors’ Information Dr Stephen Staley Non-Executive Chairman Dr Stephen Staley (63) has 39 years of wide-ranging management, technical and commercial experience in the international oil, gas and power sectors. Steve was until October 2019 the CEO, director and co- founder of Upland Resources Limited, a London-listed oil & gas company currently with assets onshore and offshore UK and onshore Tunisia. Until March 2022 he was also non-executive chairman of Predator Oil & Gas Holdings PLC, an oil & gas company on the Standard List of the London Stock Exchange. He is a non-executive director of 88 Energy Ltd, which is listed on both AIM and the ASX and chairman of Elephant Oil Corp. He has also co-founded and floated two further London-listed oil & gas companies and was both a technical consultant to, and non-executive director of, Cove Energy plc the highly successful East Africa focused explorer. Prior to this he has worked for companies including Cinergy Corp. and Conoco. He holds a BSc (Hons.) in Geophysics from Edinburgh University, a PhD in Petroleum Geology from Sheffield University and an MBA from Warwick University. He is a Fellow of the Geological Society and a member of the EAGE, the PESGB and The Arctic Club. Matt Lofgran Chief Executive Officer – Matt Lofgran (47) has wide experience of business development in the energy, real estate and communications sectors. Prior to becoming CEO of Nostra Terra in July 2009, he was with Robson Energy, LLC, latterly as Vice President of International Business Development. In this capacity, he launched the oil and gas, field services and coal divisions, and was responsible for extending Robson Energy’s activities into Mexico. Mr Lofgran holds a Bachelor of Business Management degree from the University of Phoenix and a Global MBA from Thunderbird School of Global Management. Mr Lofgran is also a Director of Elephant Oil Corp. John Stafford Non-Executive Technical Director ) has over 35 years’ experience in the oil & gas industry. As Vice President of Operations at Gulf – John Stafford (62 2017, he oversaw 40,000 bopd, having joined that Company as Manager, Keystone (LSE: GKP) 2014 Geology & Geophysics in early 2009. John is a geoscientist, with specialist expertise in oil field development and reserve certification and reporting. Mr Stafford has worked with well-known companies in the oil and gas industry, such as ECL, Schlumberger and PGS, managing projects in integrated field management and all aspects of reserves certification and reporting. This includes the production of Competent Persons Reports. John has further experience of fractured reservoir development and risk management. Paul Welch Non-Executive Director Paul (61) is an international energy executive with over 30 years of industry experience having worked for Shell Oil Company and several large independents including Hunt Oil Company, Pioneer Natural Resources and as CEO of AIM listed explorer Chariot Limited (previously Chariot Oil and Gas Limited) (AIM: CHAR) (2009-2012) and CEO of Sea Dragon Energy (2013-2015) which in October of 2015 became SDX Energy plc (AIM: SDX) (2015- 2019) following the merger with Madison PetroGas. He was subsequently appointed CEO of Cosimo Holdings Ltd in 2019, a private oil and gas company. He is currently Chairman and Executive Director of ACP Energy, a company formed to make acquisitions in the energy sector and recently admitted to the Main Market in London. Master’s Paul graduated from the Colorado School of Mines with both a Bachelor and Engineering. He also holds an MBA in Finance from the Southern Methodist University (SMU) in Dallas, Texas. degrees in Petroleum 12 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Corporate Governance Report As an AIM-quoted company, the Company is required to apply a recognised corporate governance code, QCA Corporate Governance Code (the “QCA Code”). demonstrating how the Group complies with such corporate governance code and where it departs from it. The directors have formally taken the decision to apply the The Board recognises the principles of the QCA Code, which focus on the creation of medium to long-term value for shareholders without stifling the entrepreneurial spirit in which small to medium sized companies, such as Nostra Terra, have been created. QCA Principles The Board recognises the importance of corporate governance, and we therefore apply the QCA code. QCA Code Principle Disclosure Nostra Terra Reference 1 2 3 4 5 6 7 8 9 10 Establish a strategy and business model which promote long-term value for shareholders. See Strategic Report of this 2022 Annual the Chief Executive Officer’s Statement Report Seek to understand and meet shareholder needs and expectations. See this 2022 Annual Report of Take into account wider stakeholder and social responsibilities and their implications for long term success. Embed effective risk management, considering both opportunities and threats throughout the organisation. Detailed within AIM Rule 26, available to view via www.ntog.co.uk See note 20 of this 2022 Annual Report Maintain the board as a well-functioning balanced team led by the Chair. See the Corporate Governance Report of this 2022 Annual Report Ensure that between them the directors have the necessary up to date experience, skills and capabilities. Evaluate the Board performance based on clear and relevant objectives, seeking continuous improvement. Detailed within AIM Rule 26, available to view via www.ntog.co.uk Nostra Terra’s board is small and extremely focused on implementing the Company’s strategy. Given the size and nature of Nostra Terra, the Board does not consider it appropriate to have a formal performance evaluation procedure in place. As described and recommended in Principle 7 of the QCA Code, the board will closely monitor the situation as it grows. Promote a corporate culture that is based on ethical values and behaviours. Detailed within AIM Rule 26, available to view via www.ntog.co.uk Maintain governance structures and processes that are fit for purpose and support good decision making by the Board. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. Detailed within AIM Rule 26, available to view via www.ntog.co.uk See the Corporate Governance Report of this 2022 Annual Report 13 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Corporate Governance Report (continued) Accountability The Board of Directors The board comprises one executive director and three non-executive directors. The non-executive directors are considered independent. It meets at least four times a year, as issues arise which require board attention. The board has a formal schedule of matters specially referred to it for decision. • The directors are responsible for: • • • Management structure and appointments Consideration of strategy and policy Approval of major capital investments and transactions Significant financing matters The board has Audit, Remuneration and Nomination Committees, the roles and responsibilities of which are discussed below. Audit Committee The Audit Committee comprises Stephen Staley as Chairman, and John Stafford. Both have considerable and relevant financial experience. The Audit Committee has terms of reference agreed by the board and meets at least twice a year. opportunity for reporting by the Company’s auditors, and • The committee provides an is responsible for: • • Monitoring, in discussion with the auditors, the integrity of the financial statements and announcements Reviewing the Company’s internal financial controls and risk management of the Company Reviewing and monitoring the external auditor’s independence, and the objectivity and effectiveness of systems the audit process, taking into consideration relevant UK and other professional and regulatory requirements The Audit Committee is also responsible for making recommendations to the board to be put to shareholders for auditors and to approve the external auditors’ remuneration and terms of engagement. Other responsibilities their approval in general meeting in relation to the appointment, reappointment and removal of the external arrangements by which the Group’s staff will be able to raise concerns about possible include considering annually whether there is a need for an internal audit function and making a recommendation to the board, and reviewing improprieties in matters of financial reporting or other matters related to the Group. Remuneration and Nomination Committees The Remuneration and Nomination Committees, which meet at least twice a year, consist of Stephen Staley as Chairman and John Stafford. Based on the terms of reference approved by the board, the Remuneration Committee is responsible for: • • • • • • Determining and agreeing with the board the framework or broad policy for the remuneration of the Chief Executive Officer and other members it is designated to consider Setting the remuneration for all executive directors and the Company Secretary Recommending and monitoring the level and structure of remuneration for senior management Determining targets for any performance-related pay schemes operated by the Group Determining the policy and scope of pension arrangements for each executive director Ensuring that contractual terms on termination and any payments made are fair to the individual and the Company. 14 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Corporate Governance Report (continued) Remuneration and Nomination Committees (continued) The Remuneration Committee determines the terms and conditions of service of executive directors. This includes agreeing the policy for authorising claims for expenses from the Chief Executive Officer and, within the terms of the agreed policy, recommending the total individual remuneration package of any executive director including, where appropriate, bonuses, incentive payments and share options. The Nomination Committee is responsible for ensuring all director appointments are considered by the Committee before their formal recommendation to the board for approval. Shareholder Relations Communications with shareholders are very important and are given a priority. The Company maintains a website, information about the Company’s activities and annual and interim www.ntog.co.uk, to improve information flow to shareholders and potential investors. It contains, inter alia, reports. Shareholders are welcome to make enquiries on any matters relating to the business and to their shareholdings. The Company encourages shareholders to attend the Annual General Meeting, at which they will be given the opportunity to put questions to the chairman and other members of the board. All regulatory information is published via a Regulatory Information Service before anywhere else. Internal Financial Control The board is responsible for establishing and maintaining the Company’s system of internal the Company’s assets and to ensure the reliability of controls and for reviewing their effectiveness. They are designed to safeguard the financial information for both internal use and external publication. The controls, that include financial, operational and compliance matters and management, are reviewed on an ongoing basis. A system of internal control can provide only reasonable, and not absolute, assurance that material financial irregularities will be detected or that risk of failure to achieve business objectives is eliminated. The board has considered the need for an internal audit function but because of the size and nature of its operations does not consider it necessary at this time. Non-Executive Chairman Dr Stephen Staley 1 June 2023 15 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Independent Auditor’s Report To the members of Nostra Terra Oil and Gas Company plc Opinion We have audited the financial statements of Nostra Terra Oil & Gas Company Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2022 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The16 financial reporting framework that has been applied in the preparation of the financial statements is applicable law and UK adopted International Accounting Standards. p’s and of the parent company’s affairs as at 31 December In our opinion the financial statements, and of the group’s loss for the year then ended; give a true and fair view of the state of the grou 2022 • • • have been properly prepared in accordance with UK adopted International Accounting Standards; and have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical of the financial statements section of our report. We are independent of the company in accordance with the 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. Material uncertainty related to going concern We draw attention to note 1 in the financial statements, which indicate that the incurred group loss of $546k during the year ended 31 December 2022 and, at that date, the net current liabilities of $389k and net liabilities of $1,083k. As stated in note 1, these events or conditions indicate that a material uncertainty exists that may cast s ability to continue as a going concern. Our opinion is not modified in respect significant doubt on the company ’ ’ of this matter. In auditing the financial statements, we have concluded that the director accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors ’ ’ s use of the going concern basis of assessment of the entity s ability to continue to adopt the going concern basis of accounting included a critical assessment on budgets, including challenging models and undertaking stress tests, and a detailed discussion with management on the key cashflow pinch points, including loan repayments and funding available to the Group. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. An overview of the scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgments, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. 16 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Independent Auditor’s Report (continued) To the members of Nostra Terra Oil and Gas Company plc How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate. ’ The Group financial statements are a consolidation of 3 reporting units, comprising the Group s operating businesses and holding companies. ’ We performed audits of the complete financial information of Nostra Terra Oil & Gas Company Plc, New Horizons Energy LLC and Buccaneer Operating LLC which were individually financially significant and accounted for 100% s absolute loss before tax (i.e. the sum of the numerical values of the Group s revenue and 100% of the Group ’ without regard to whether they were profits or losses for the relevant reporting units). 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. This is not a complete list of all risks identified by our audit. Key audit matters Carrying value of producing oil and gas assets How our audit addressed the key audit matter Carrying value of producing oil and gas assets The Group holds multiple leases over producing oil and gas assets (wells) which are recorded as both tangible and intangible assets. Carrying values at the year-end are: • • Intangibles: $2,224k (2021: $2,014k) Tangibles: $1,308k (2021: $918k) We have understood and assessed the methodology used in the capitalisation of these assets. A review of the producing wells was undertaken with a view of identifying any indication of impairment. This entailed comparing oil reserves and net present values from the independent reserves report produced by APN Consultants LLC to the asset carrying values, and a detailed review of producing wells. 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. 17 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Independent Auditor’s Report (continued) To the members of Nostra Terra Oil and Gas Company plc Our application of materiality (continued) Based on our professional judgment, we determined materiality for the financial statements as a whole as follows: Group financial statements Company financial statements Overall materiality $60,000 $58,000 How we determined it 1.5% of revenue 2.5% of net assets Rationale for benchmark applied The Group has invested heavily in leases and equipment in the past years to drive revenue growth and profits. As such we believe that revenue is the primary measure used by the shareholders in assessing the performance of the Group, and is a generally accepted auditing benchmark. As the company is a holding company, we believe net assets is the primary measure used by the shareholders in assessing the performance of the Company and is a generally accepted auditing benchmark. For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between $55,000 and $58,000. Other information ’ The other information comprises the information included in the annual report other than the financial statements s report thereon. The directors are responsible for the other information contained within the and our auditor annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • ’ the information given in the strategic report and the directors report for the financial year for which the • financial statements are prepared is consistent with the financial statements; and ’ the strategic report and the directors report have been prepared in accordance with applicable legal requirements. 18 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Independent Auditor’s Report (continued) To the members of Nostra Terra Oil and Gas Company plc Matters on which we are required to report by exception ’ In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the 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 as set out on pages 10-11, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. ’ ’ In preparing the financial statements, the directors are responsible for assessing the group s and parent company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from s report that includes our opinion. material misstatement, whether due to fraud or error, and to issue an auditor ’ 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. 19 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Independent Auditor’s Report (continued) To the members of Nostra Terra Oil and Gas Company 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 focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the Group, including AIM rules and the Companies Act 2006. we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. ’ We assessed the susceptibility of the Group s financial statements to material misstatement, including obtaining • an understanding of how fraud might occur, by: making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; • considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations. • To address the risk of fraud through management bias and override of controls, we: • • • performed analytical procedures to identify any unusual or unexpected relationships; tested journal entries to identify unusual transactions; assessed whether judgements and assumptions made in determining the accounting estimates set out in Note 2 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; There are inherent limitations in our audit procedures described above. The more removed those laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. 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 s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Reporting Council ’ auditor s report. 20 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Independent Auditor’s Report (continued) To the members of Nostra Terra Oil and Gas Company plc Use of this report ’ This report is made solely to the company s members, as a body, in accordance with Chapter 3 of Part 16 of the ’ Companies Act 2006. Our audit work has been undertaken so that we might state to the company ’ s members those ’ matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company members as a body, for our audit work, for this report, or for the opinions we have formed. s Senior Statutory Auditor Mohammed Haque For and on behalf of MAH, Chartered Accountants Statutory Auditor nd Floor, 154 Bishopsgate, 2 London EC2M 4LN 1 June 2023 21 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Consolidated Income Statement For the year ended 31 December 2022 Continuing operations REVENUE COST OF SALES Production costs Exploration Well impairment Total cost of sales Depletion, depreciation, amortisation GROSS PROFIT Share based payment Administrative expenses Foreign exchange gain/(loss) OPERATING LOSS Finance costs Other income/(charges) LOSS BEFORE TAX Income tax LOSS FOR THE YEAR ATTRIBUTABLE TO: Owners of the company EARNINGS PER SHARE Notes 2022 $’000 2021 $’000 4,021 2,282 (1,779) - (897) (3,215) (539) 806 (156) (1,074) 26 (398) (1,708) - - (2,108) (400) 174 (68) (908) (130) (932) (199) 51 (546) (175) 19 (1,088) - (546) - (1,088) (546) (1,088) 7 5 6 8 Continued operations Basic & diluted (cents per share) 10 (0.07) (0.16) The accompanying accounting policies and notes are an integral part of these financial statements 22 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Consolidated Statement of Comprehensive Income For the year ended 31 December 2022 LOSS FOR THE PERIOD OTHER COMPREHENSIVE INCOME: 2022 $’000 (546) 2021 $’000 (1,088) Currency translation differences Total comprehensive income for the year TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO: - (546) (546) - (1,088) (1,088) Owners of the company The accompanying accounting policies and notes are an integral part of these financial statements 23 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Consolidated Statement of Financial Position As at 31 December 2022 Notes 2022 $’000 2021 $’000 ASSETS NON-CURRENT ASSETS Intangible assets Total non-current assets Property, plant and equipment, Oil and gas assets CURRENT ASSETS Trade and other receivables Deposits and prepayments Other assets Total current assets Cash and cash equivalents LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings Total current liabilities Lease liabilities NET CURRENT LIABILITIES NON-CURRENT LIABILITIES Decommissioning liabilities Borrowings Total non-current liabilities Lease liabilities NET LIABILITIES EQUITY Share capital Share premium Share based payment reserve Translation reserve Total equity Retained losses 11 12 15 16 17 18 13 17 18 13 19 2,224 3,532 1,308 2,014 2,932 918 558 66 - 756 132 1,051 94 1,145 - (389) 340 3,886 4,226 - (1,083) 8,142 22,115 423 (676) (1,083) (31,087) 348 16 - 409 45 948 518 1,466 - (1,057) 302 2,459 2,761 - (886) 8,087 21,976 306 (676) (886) (30,579) The financial statements were approved and authorised for issue by the Board of Directors on 1 June 2023 and were signed on its behalf by: M B Lofgran Director Company registration number: 05338258 The accompanying accounting policies and notes are an integral part of these financial statements 24 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Company Statement of Financial Position As at 31 December 2022 Notes 2022 $’000 2021 $’000 ASSETS NON-CURRENT ASSETS Fixed asset investments Intangible assets Total non-current assets Property, plant and equipment, Oil and gas assets CURRENT ASSETS Trade and other receivables Total current assets Cash and cash equivalents LIABILITIES CURRENT LIABILITIES Trade and other payables Total current liabilities Borrowings NET CURRENT LIABILITIES NON-CURRENT LIABILITIES Decommissioning liabilities Total non-current liabilities Borrowings NET LIABILITIES EQUITY Share capital Share premium Share based payment reserve Translation reserve Total equity Retained losses 14 11 12 15 16 17 18 17 18 19 - 305 449 144 22 39 17 - 345 457 112 9 25 16 2,842 2,936 94 518 1,262 1,780 (2,897) (1,755) 22 152 130 13 409 396 (2,600) (1,707) 8,142 22,115 423 (676) (2,600) (32,604) 8,087 21,976 306 (676) (1,707) (31,400) The parent company’s loss for the financial year was $1,242,000 (2021: $1,310,000). The financial statements were approved and authorised for issue by the Board of Directors on 1 June 2023 and were signed on its behalf by: M B Lofgran Director Company registration number: 05338258 The accompanying accounting policies and notes are an integral part of these financial statements 25 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Consolidated Statement of Changes in Equity For the year ended 31 December 2022 Share capital Deferred shares Share premium $’000 $’000 $’000 Share option reserve $’000 Translation reserve Retained losses $’000 $’000 1,369 6,549 21,508 142 (676) (29,491) Total $’000 (599) - - 169 - - - - - - - - - 529 (61) - - - - - - - - - - - - 1,538 - 6,549 - 21,976 164 306 - (676) - (30,579) (1,088) (1,088) (1,088) (1,088) - - - 698 (61) - 164 (886) - - 55 - - - - - - - - - 139 - - - 1,593 - 6,549 - 22,115 - - - - (38) 155 423 - - - - - (546) (546) (546) (546) - - 38 194 - - - (676) - (31,087) 155 (1,083) As at 1 January 2021 Loss for the year Total comprehensive loss for the year Shares issued Cost of shares issued Exercise of warrants Share based As at 31 payments December 2021 Loss for the year Total comprehensive loss for the year Shares issued Cost of shares issued Expired options & warrants Share based As at 31 payments December 2022 The accompanying accounting policies and notes are an integral part of these financial statements. Share capital is the amount subscribed for shares at nominal value. Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of share issue expenses. Share issue expenses in the year comprise costs incurred in respect of the issue of new shares. Share based payment reserve is a reserve used to recognize the cost and equity associated with the fair value of issues of share options and warrants. Translation reserves arose due to the adoption of US dollars as the presentational currency at the start of a prior accounting period. Retained loss represents the cumulative losses of the company attributable to owners of the company. 26 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Company Statement of Changes in Equity For the year ended 31 December 2022 Share capital Deferred shares Share premium $’000 $’000 $’000 Share option reserve $’000 Translation reserve Retained losses Total $’000 $’000 $’000 1,369 6,549 21,508 142 (676) (30,090) (1,198) - - 169 - - - - - - - - - 529 (61) - - - - - - - - - - - (1,310) (1,310) (1,310) (1,310) - - - 698 (61) - - 1,538 - 6,549 - 21,976 164 306 - (676) - (31,400) 164 (1,707) - - 55 - - - - - - - - - 139 - - - 1,593 - 6,549 - 22,115 - - - - (38) 155 423 - - - - - (1,242) (1,242) (1,242) (1,242) - - 38 194 - - - (676) - (32,604) 155 (2,600) As at 1 January 2021 Loss for the year Total comprehensive loss for the year Shares issued Cost of shares issued Exercise of warrants Share based As at 31 payments December 2021 Loss for the year Total comprehensive loss for the year Shares issued Cost of shares issued Expired options & warrants Share based As at 31 payments December 2022 The accompanying accounting policies and notes are an integral part of these financial statements. Share capital is the amount subscribed for shares at nominal value. Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of share issue expenses. Share issue expenses in the year comprise costs incurred in respect of the issue of new shares. Share based payment reserve is a reserve used to recognize the cost and equity associated with the fair value of issues of share options and warrants. Translation reserves arose due to the adoption of US dollars as the presentational currency at the start of a prior accounting period. Retained loss represents the cumulative losses of the company attributable to owners of the company. 27 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Consolidated and Company Statement of Cash Flows For the year ended 31 December 2022 LOSS FOR THE YEAR ADJUSTMENTS FOR: Depreciation Amortisation Depletion Well impairment Foreign exchange Share based payments Other income Operating cash flows Decrease/(increase) in receivables (Increase)/decrease in other assets (Decrease)/increase in payables (Increase)/decrease in deposits & prepayments Interest paid Net cash generated / (used) in operating activities Cash flows from investing activities: Purchase of plant and equipment Purchase of intangibles Disposals Increase in decommissioning liabilities Net cash used in investing activities Cash flows from financing activities Shares issued Costs of shares issued Net borrowing Finance costs Lease payments Net cash from / (used) in financing activities Net (decrease)/increase in cash and cash equivalents GROUP 2022 $’000 2021 $’000 COMPANY 2022 $’000 2021 $’000 (546) (1,088) (1,242) (1,310) 299 202 38 897 26 156 (51) 1,021 (211) - 105 (50) 199 846 (719) (1,318) 40 38 (1,959) 194 - 1,003 (199) (16) 982 208 173 38 - - 68 (21) (622) 66 - 285 26 175 (70) (346) (160) - 36 (470) 794 (61) (29) (175) (16) 513 18 40 8 - 28 156 - (992) (13) - 1,543 - 26 564 (50) - - 9 (41) 194 - (690) (26) - (522) 13 40 - - - 68 - (1,189) 98 - 852 - 110 (129) (49) - - 9 (40) 794 (61) (452) (110) - 171 87 (27) 1 2 Cash and cash equivalents at the beginning of the Cash and cash equivalents at the end of the year year 45 132 72 45 16 17 14 16 The accompanying accounting policies and notes are an integral part of these financial statements. 28 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements For the year ended 31 December 2022 General Information report. The principal activity of the group is described in the directors’ report. Nostra Terra Oil and Gas Company plc (Nostra Terra) 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 the company information page of this annual 1. Summary of significant accounting policies The financial statements are presented in United States Dollars, rounded to the nearest $’000, as that is the currency of the primary environment in which the Group operates. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation These financial statements have been prepared in accordance with UK adopted International Financial Reporting Standards and IFRIC interpretations issued by the International Accounting Standards Board (IASB) (IFRS) 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 preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Going concern The financial statements have been prepared on the assumption that the group is a going concern. When assessing The Group’s business activities, together the foreseeable future, the directors have looked at a period of 12 months from the date of approval of this report. position are set out in the Chief Executive Officer’s report and Directors’ report. In addition, note 20 to the financial with the factors likely to affect its future development, performance and statements includes the group’s objectives, policies and pr ocesses for managing its capital, its financial risk The Group’s forecasts and projections, taking account of reasonable possible changes in trading performance, management objectives and its exposures to credit risk and liquidity risk. to the Group’s abi show that the group should be able to operate within the level of its current cash resources, however a material uncertainty exists in relation lity to repay its liabilities as they become due. We note that as at the balance sheet date, the group has net current liabilities of $389k and net liabilities of $1,083k. After making enquiries, the directors have a reasonable expectation that the company and group have adequate resources to continue in operational existence for the foreseeable future. They continue to adopt the going concern exists which may cast significant doubt on the Group’s ability to continue operating as a going concern. basis in preparing the annual report and financial statements, however as noted above a material uncertainty 29 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) New standards, amendments and interpretations adopted by the Group and Company The following IFRS or IFRIC interpretations were effective for the first time for the financial year beginning 1 January 2022. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements: Standards /interpretations Application Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 IFRS 3 amendments Interest rate benchmark reform Business Combinations IAS 16 amendments Property, Plant and Equipment IAS 37 Amendments Provisions, Contingent Liabilities and Contingent Assets N/A Annual Improvements to IFRS Standards 2018-2020 Cycle New standards, amendments and interpretations not yet adopted Standards /interpretations Application IAS 1 amendments IAS 1 amendments IAS 8 amendments IAS 12 amendments IFRS 16 amendments IFRS 17 Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current and Non-Current Liabilities with Covenants Date: Effective 1 January 2024 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies: Effective 1 January 2023 Changes in Accounting Estimates and Errors: Definition of Accounting estimates: Effective 1 January 2023 Deferred Tax related to Assets and Liabilities arising from a Single Transaction: Effective 1 January 2023 Lease Liability in a Sale and Leaseback: Effective 1 January 2024 Insurance Contracts: Effective 01 January 2023 There are no IFRS’s or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company or Group. Basis of consolidation Where the company has the power, either directly or indirectly, to govern the financial and operating policies of ts present the results of the company and its subsidiaries (“the Group”) as if they another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statemen formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities The consolidated financial statements incorporate the results of business combinations using the purchase are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases. 30 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Subsidiaries The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Goodwill acquisition over the fair value of the group’s share of the net Goodwill represents the excess of the cost of an subsidiaries is included in ‘intangible assets’. Separately recognised goodw identifiable assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of ill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The group allocates goodwill to each business segment in each country in which it operates. Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or recognised for the amount by which the asset’s changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing carrying amount exceeds its recoverable amount. The recoverable impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash- generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimated 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 years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried art a revalued amount in which case the reversal of impairment loss is treated a revaluation increase. 31 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Property, plant and equipment Tangible non-current assets are stated at historical cost less depreciation. Historical cost includes expenditure that Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, is directly attributable to the acquisition of the items. only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life: The assets’ residual values an Plant and machinery of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the d useful economic lives are reviewed, and adjusted if appropriate, at each statement asset’s carrying amount is greater than its estimated r over 7 years – ecoverable value. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other (losses) or gains in the income statement. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings. Investments Investments are stated at cost less provision for any impairment value. Cash and cash equivalents Included in the statement of financial position comprise cash at bank and in hand and other short-term highly liquid investments with original maturities of three months or less. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Trade 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. Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the year of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. 32 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Functional currency translation (i) Functional and presentation currency Items included in the financial statements of the group are measured using the currency of the primary economic ts are presented in United States Dollars (US$), which is the group’s presentation currency. environment in which the entity operates (the functional currency), which is mainly United States Dollars (US$). The financial statemen (ii) Transactions and balances Foreign currency transactions are translated into the presentational currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. (iii) Group Companies All consolidated entities are presented in US$ and so no translation is required on consolidation. Share capital 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 the proceeds. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differed from net profit as reported in the income statement items that are never taxable or deductible. The entity’s liability for current ta because it excludes items of income or expense that are taxable or deductible in other years and it further excludes x is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date. Deferred tax 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 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 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. 33 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Financial instruments Financial assets and financial liabilities are initially classified as measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss when the group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows expire, or the group no longer retains the significant risks or rewards of ownership of the financial asset. Financial assets are classified dependent on the group’s business model for managing the financial and the cash Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. flow characteristics of the asset. Financial liabilities are classified and measured at amortised cost except for trading liabilities, or where designated at original recognition to achieve more relevant presentation. The group classifies its financial assets and liabilities into the following categories: Financial assets at amortised cost The group’s financial assets at amortised cost comprise trade and other receivables. These represent debt instruments with fixed or determinable payments that represent principal or interest and where the intention is to hold to collect these contractual cash flows. They are initially recognised at fair value, included in current and non-current assets, depending on the nature of the transaction, and are subsequently measured at amortised cost using the effective interest method less any provision for impairment. Impairment of trade and other receivables In accordance with IFRS 9 an expected loss provisioning model is used to calculate an impairment provision. We have implemented the IFRS 9 simplified approach to measuring expected credit losses arising from trade and other receivables, being a lifetime expected credit loss. This is calculated based on an evaluation of our historic experience plus an adjustment based on our judgement of whether this historic experience is likely reflective of our view of the future at the balance sheet date. In the previous year the incurred loss model is used to calculate the impairment provision. Financial liabilities at amortised cost Financial liabilities at amortised cost comprise finance lease obligations and trade and other payables. They are classified as current and non-current liabilities depending on the nature of the transaction, are subsequently measured at amortised cost using the effective interest method. Financial assets at fair value through profit and loss The group holds a derivative against the price of oil held for operation purposes. These are recognised and measured at fair value using the most recent available market price with gains and losses recognised immediately in the profit and loss. alue measurement of the group’s financial and non The fair v - financial assets and liabilities utilises market ble the inputs used in the valuation technique utilised are (the ‘fair observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observa value hierarchy’). 34 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Financial assets at fair value through profit and loss (continued) Level 1 Quoted prices in active markets Level 2 Observable direct or indirect inputs other than Level 1 inputs Level 3 Inputs that are not based on observable market data The group measures financial instruments relating to platform holdings at fair value using Level 1. The company provides financial guarantees to licensed banks for credit facilities extended to a subsidiary company. The fair value of such financial guarantees is not expected to be significantly different as the probability of the subsidiary company defaulting on the credit lines is remote. Oil and gas assets The group applies the successful efforts method of accounting for oil and gas assets and has adopted IFRS 6 Exploration for and evaluation of mineral resources. Exploration and evaluation (“E&E”) assets Under the successful efforts method of accounting, all licence acquisition, exploration and appraisal costs are initially capitalised in well, field or specific exploration cost centres as appropriate, pending determination. Expenditure incurred during the various exploration and appraisal phases is then written off unless commercial reserves have been established or the determination process has not been completed. Pre-licence costs Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income statement as they are incurred. Exploration and evaluation (“E&E”) costs Costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right to explore, together with the directly related costs of technical services and studies, seismic acquisition, exploratory drilling and testing are Tangible assets used in E&E activities (such as the group’s drilling rigs, seismic equipment and other property, capitalised as intangible E&E assets. plant and equipment used by the company’s exploration function) are classified as property, plant and equipment. However, to the extent that such a tangible asset is consumed in developing an intangible E&E asset, the amount reflecting that consumption is recorded as part of the cost of the intangible asset. Such intangible costs include directly attributable overheads, including the depreciation of property, plant and equipment utilised in E&E activities, together with the cost of other materials consumed during the exploration and evaluation phases. E&E costs are not amortised prior to the conclusion of appraisal activities. Treatment of E&E assets at conclusion of appraisal activities Intangible E&E assets relating to each exploration licence/prospect are carried forward until the existence (or otherwise) of commercial reserves has been determined, subject to certain limitations including review for indications of impairment. If commercial reserves are discovered the carrying value, after any impairment loss of the relevant E&E assets, is then reclassified as development and production assets. If, however, commercial reserves are not found, the capitalised costs are charged to expense after conclusion of appraisal activities. 35 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Development and production assets Development and production assets are accumulated generally on a field-by-field basis and represent the cost of developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial reserves transferred from intangible E&E assets as outlined above. The cost of development and production assets also includes the cost of acquisitions and purchases of such assets, directly attributable overheads and the cost of recognising provisions for future restoration and decommissioning. Decommissioning liability Where a material liability for the removal of production facilities and site restoration at the end of the productive life of the assets exist, a provision for decommissioning liability is recognised. The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements. An intangible asset of an amount equivalent to the provision is recognised and depreciated on a unit production basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated intangible asset. Period changes in the present value arising from discounting are included in depletion, depreciation and amortisation cost in cost of sales. Commercial reserves Commercial reserves are proven and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. Depletion, amortisation and impairment of oil and gas assets All expenditure carried within each field is amortised from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, on a field-by-field basis. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs to access the related commercial reserves. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively. Where there has been a change in economic conditions that indicates a possible impairment in an oil and gas asset, scounted future cash flows based on management’s expectations of future oil and gas prices and future costs. the recoverability of the net book value relating to that field is assessed by comparison with the estimated di Any impairment identified is charged to the income statement as additional depletion and amortisation. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that would have been charged since the impairment. 36 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Depletion, amortisation and impairment of oil and gas assets All expenditure carried within each field is amortised from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, on a field-by-field basis. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs to access the related commercial reserves. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively. Where there has been a change in economic conditions that indicates a possible impairment in an oil and gas asset, discounted future cash flows based on management’s expectations of future oil and gas prices and future costs. the recoverability of the net book value relating to that field is assessed by comparison with the estimated Any impairment identified is charged to the income statement as additional depletion and amortisation. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that would have been charged since the impairment. Share-based compensation ee and suppliers’ services received in exchange for the grant of the options is The fair value of the employ recognised as an expense. The total amount to be expensed over the vesting year 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. The fair value of share-based payments recognised in the statement of comprehensive income is measured by use instruments. The expected life used in the model is adjusted; based on management’s best estimate, for the effects of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity factor used in the calculation is based on management’s best estimate of future share price behaviour and is of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage selected based on past experience, future expectations and benchmarks against peer companies in the industry. The Group does not operate any cash-settled share-based payments and as such are not affected by the amendments to IFRS 2 Revenue recognition Share-based payments. – Revenue comprises the fair value of the consideration received or receivable in relation to the proceeds by the prospects which the company has a working interest in. Revenue is shown net of value-added tax, returns, rebates is despatched and received by the customers. The directors consider this the point when the Company’s and discounts and after eliminating sales within the group. Revenue is recognised when the oil and gas produced performance obligation is satisfied. The directors consider that revenue generation is exclusively for oil production in the US and so no further segmentation is required. 37 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) Leased assets The Group as a lessee A lease is defined as ‘a contract, or part of a contract, that conveys for a period of time in exchange for consideration’. the right to use an asset (the underlying asset) • To apply this definition the Group assesses whether the contract meets three key evaluations which are whether: • • the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract assess whether it has the right to direct ‘how and for what purpose’ the asset is used the Group has the right to direct the use of the identified asset throughout the period of use. The Group throughout the period of use. Measurement and recognition of leases as a lessee At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments Group’s incremental borrowin unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the g rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities have been included in trade and other payables. 38 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 1. Summary of significant accounting policies (continued) 2. Critical accounting estimates and judgements The preparation of consolidated financial statements requires the group to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below: Impairment of property, plant and equipment Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that epared on the basis of management’s assumptions the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is determined based on value in use calculations pr and estimates. Recoverability of exploration and evaluation costs E&E assets are assessed for impairment when circumstances suggest that the carrying amount may exceed its recoverable value including decommissioning costs. This assessment involves judgment as to (i) the likely future commerciality of the asset and when such commerciality should be determined, and (ii) future revenues and costs pertaining to the asset in question, and the discount rate to be applied to such revenues and costs for the purpose of deriving a recoverable value. Share-based payments s out the group’s accounting policy on share Note 1 set -based payments, specifically in relation to the share options and warrants that the company has granted. The key assumptions underlying the fair value of such share-based payments are discussed in note 23. The fair value amounts used by the group have been derived by external consultants using standard recognised valuation techniques. 39 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 3. Segmental analysis In the opinion of the directors, the group has one class of business, being the exploitation of hydrocarbon The group’s primary reporting format is determined by geographical resources. hydrocarbon assets. The group’s reportable segments under IFRS 8 in the year are as follows: segment according to the location of the United Kingdom - being the location of the head office. • US Mid-Continent properties at year end included the following: • • • East Texas: 100% working interest in the Pine Mills oilfield East Texas: 32.5% working interest in the Cypress farmout area of Pine Mills West Texas: 50-100% working interest leases located in the Permian Basin The chief operating decision maker’s internal report for the year ended 31 December 20 South Texas: 100% working interest in the Caballos Creek oilfield location of the oil properties as disclosed in the below table: SEGMENTAL RESULTS US mid-continent 2022 $’000 22 is based on the Head office 2022 $’000 Total 2022 $’000 Revenue Operating profit (loss) before depreciation, well impairment, share- based payment charges, restructuring costs and gain (loss) on sale of assets and foreign exchange: Depreciation of tangibles Amortisation of intangibles Exploration Well impairment Share based payments Operating profit/ (loss) Realised exchange loss Finance expense Profit/ (loss) before taxation Other income (expense) SEGMENTAL ASSETS Property, plant and equipment Intangible assets Cash and cash equivalents Trade and other receivables - 4,021 (1,087) 1,130 - - - - (156) (1,215) 28 (299) (202) - (897) (156) (398) 26 (27) (1,242) - (199) (546) 51 - - 17 39 22 1,308 2,224 132 4,288 624 4,021 2,217 (299) (202) - (897) - 817 (2) (172) 696 51 1,308 2,224 115 4,249 602 40 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 3. Segmental analysis (continued) The chief operating decision maker’s internal report for the year ended location of the oil properties as disclosed in the below table (restated): SEGMENTAL RESULTS US mid-continent 2021 $’000 31 December 2021 is based on the Head office 2021 $’000 Total 2021 $’000 Revenue Operating profit (loss) before depreciation, well impairment, share- based payment charges, restructuring costs and gain (loss) on sale of assets and foreign exchange: Depreciation of tangibles Amortisation of intangibles Exploration Well impairment Share based payments Operating profit/ (loss) Realised exchange loss Finance expense Profit/ (loss) before taxation Other income (expense) SEGMENTAL ASSETS Property, plant and equipment Intangible assets Cash and cash equivalents Trade and other receivables 2,282 616 (209) (173) - - - 232 (2) (65) 167 - 2,014 918 9 3,296 355 - 2,282 (970) (354) - - - - (68) (1,166) (128) (209) (173) - - (68) (934) (130) (110) (1,255) 21 (175) (1,088) 21 - - 36 45 9 2,014 918 45 3,341 364 41 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 4. Employees and Directors Directors’ fees Directors’ remuneration Social security costs 2022 $’000 2021 $’000 127 275 416 14 2022 Number 110 219 348 19 2021 Number The average monthly number of employees (including directors) during the year was as follows: Directors 4 3 Directors’ remuneration Other than the directors, the group had no other employees. Total remuneration paid to directors during the The director’s emoluments and other benefits for the year ended 31 December 20 year was as listed above. M B Lofgran 5. Finance expense 22 is as follows: 2022 $’000 2021 $’000 275 219 2022 $’000 2021 $’000 Finance expense 199 175 Finance expense relates to interest charged on borrowings. Further details for which can be found in note 18. 6. Other income Other income/ (charge) 2022 $’000 51 51 2021 $’000 19 19 Other income relates to sundry income received from operating oil wells in addition to the oil sales. 42 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 7. Operating loss The operating loss the year ended 31 December is stated after after charging/ (crediting) Depreciation of property, plant and equipment Amortisation of intangibles Well impairment The analysis of administrative expenses in the consolidated income statement by nature of expense: Directors’ remuneration Depreciation on ROU asset Directors’ fees Social security costs Travelling and entertainment Accountancy fees Auditors’ remuneration Legal and professional fees Bad debt costs Other expenses 8. Income tax The income tax charge for the year was as follows: Current tax Corporation tax TOTAL Overseas corporation tax Loss before tax Loss on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 19% (2021:19%) Effects of: Non-deductible expenses Other tax adjustments CURRENT TAX CHARGE Foreign tax 2022 $’000 Restated 2021 $’000 299 202 897 275 - 14 127 23 81 218 27 - 1,074 309 209 173 - 219 16 19 110 35 44 183 6 - 908 276 2022 $’000 2021 $’000 - - - - - - - - (546) (1,088) (104) (207) 30 74 - - - 207 - - At 31 December 2022, the Company had an estimated excess management expenses to carry forward of $5,942,883 (2021: $5,552,821). The deferred tax asset at 19% (2021: 19%) on these tax losses of $1,129,000 (2021: $1,055,000) has not been recognised due to the uncertainty of recovery. The current US corporate tax rate is 21%. 43 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 9. Loss of Parent Company presented as part of these financial statements. The parent company’s loss for the financial As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not year was $1,242,000 (2021: $1,310,000). 10. Earnings per share The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares in issue during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The group had ge market price of the group’s ordinary shares during the year, and two classes of dilutive potential ordinary shares, being those share options granted to employees and suppliers where the exercise price is less than the avera warrants granted to directors and one former adviser. 2022 2021 Details of the adjusted earnings per share are set out below: GROUP shareholders ($’000) Loss attributable to ordinary (546) (1,088) Weighted average number of shares CONTINUED OPERATIONS: BASIC AND DILUTED EPS – LOSS (cents) 732,742,452 692,287,657 (0.07) (0.16) The diluted loss per share is the same as the basic loss per share as the loss for the year has an antidilutive effect. Gross profit/(loss) before depreciation, depletion, amortisation and impairment EPS on gross profit before depreciation, depletion, amortisation and impairment (cents) RECONCILIATION FROM GROSS LOSS TO GROSS PROFIT BEFORE DEPLETION, DEPRECIATION, AMORTISATION AND IMPAIRMENT Gross profit/(loss) ADD BACK: Exploration Well impairment Depletion, depreciation and amortisation Gross profit before depletion, depreciation, amortisation and impairment 2022 $’000 2,242 0.30 806 - 897 539 2,242 44 Restated 2021 $’000 574 0.08 174 - - 400 574 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 11. Intangible assets GROUP COST At 1 January 2021 Additions Disposals At 31 December 2021 Additions Disposals At 31 December 2022 PROVISON At 1 January 2021 Charge for the year Impairment Disposals At 31 December 2021 Charge for the year Impairment Disposals At 31 December 2022 CARRYING VALUE At 31 December 2022 At 31 December 2021 Exploration & evaluation assets $’000 Development & production assets $’000 Licences $’000 1,939 2,823 10 - 1,949 - (10) 1,939 1,939 - - - 1,939 - - - 1,939 150 - 2,973 1,319 - 4,292 796 173 - - 969 202 897 - 2,068 Total $’000 5,286 160 - 5,446 1,319 (10) 6,755 3,259 173 - - 3,432 202 897 - 4,531 - 2,224 2,224 10 2,004 2,014 524 - - 524 - - 524 524 - - - 524 - - - 524 - - The Group assesses at each reporting date whether there is an indication that the intangible assets may be impaired, by considering the net present value of discounted cash flows forecasts. If an indication exists an impairment review is carried out by reference to available engineering information. At the year-end, $897,000 (2021: $nil) was provided for the well at Grant East #1. Amortisation, impairment charges and any profit or loss on disposal of the capitalised intangible costs is included within cost of sales in the consolidated income statement. 45 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 11. Intangible assets (continued) COMPANY COST At 1 January 2021 Additions Disposals At 31 December 2021 Additions Disposals At 31 December 2022 PROVISON At 1 January 2021 Charge for the year Impairment Disposals At 31 December 2021 Charge for the year Impairment Disposals At 31 December 2022 CARRYING VALUE At 31 December 2022 Development & production assets $’000 398 - - 398 - - 398 13 40 - - 53 40 - - 93 Total $’000 398 - - 398 - - 398 13 40 - - 53 40 - - 93 305 305 At 31 December 2021 345 345 The Company assesses at each reporting date whether there is an indication that the intangible assets may be impaired, by considering the net present value of discounted cash flows forecasts. If an indication exists an impairment review is carried out by reference to available engineering information. At the year-end, $nil (2021: $nil) was provided. Amortisation, impairment charges and any profit or loss on disposal of the capitalised intangible costs is included within cost of sales in the consolidated income statement. 46 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 Office space – right of use $’000 Plant & equipment – oil and gas assets $’000 12. Property, plant and equipment GROUP COST At 1 January 2021 Additions Adjustment on translation to IFRS 16 Disposals At 31 December 2021 Additions Disposals At 31 December 2022 DEPRECIATION At 1 January 2021 Charge for the year Disposals At 31 December 2021 Charge for the year Disposals At 31 December 2022 CARRYING VALUE At 31 December 2022 At 31 December 2021 48 - - - 48 - - 48 32 16 - 48 - - 48 - - Total $’000 1,270 346 - - 1,616 719 (30) 2,305 490 208 - 698 299 - 997 1,222 346 - - 1,568 719 (30) 2,257 458 192 - 650 299 - 949 1,308 1,308 918 918 Depreciation charges are included within cost of sales in the Consolidated Income Statement. In addition, the directors are of the opinion that no impairment should be provided. 47 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 12. Property, plant and equipment (continued) COMPANY COST At 1 January 2021 Additions Adjustment on translation to IFRS 16 Disposals At 31 December 2021 Additions Disposals At 31 December 2022 DEPRECIATION At 1 January 2021 Charge for the year Disposals At 31 December 2021 Charge for the year Disposals At 31 December 2022 CARRYING VALUE At 31 December 2022 At 31 December 2021 Plant & equipment – oil and gas assets $’000 Total $’000 79 49 - - 128 50 178 - 3 13 - 16 18 - 34 144 112 79 49 - - 128 50 178 - 3 13 - 16 18 - 34 144 112 Depreciation charges are included within cost of sales in the Consolidated Income Statement. In addition, the directors are of the opinion that no impairment should be provided. 48 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 13. Leases Lease liabilities are presented in the statement of financial position as follows: 2022 $’000 2021 $’000 Current – Non-current – within 1 year – within 1 2 years - - - - - - The Group has a lease for the office space in Dallas, Texas, USA. The lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see Note 12). The lease term ended on 31 December 2021. The company has entered into a new short term lease effective from 1 January 2022. Included within the interest expense is $nil (2021: $1k) which relates to the unwinding on the lease liability. The Group does not hold any other office leases. 14. Fixed Asset Investments COMPANY COST At 1 January 2021 Additions Reductions At 31 December 2021 Additions Disposals At 31 December 2022 PROVISON At 1 January 2021 Charge for the year Reductions At 31 December 2021 Charge for the year At 31 December 2022 CARRYING VALUE At 31 December 2022 At 31 December 2021 Investment in subsidiaries $’000 Loans to subsidiaries $’000 Total $’000 1 - - 1 1 1 - - 1 1 - - 15,434 15,435 - - 15,434 - - 15,435 15,434 15,435 (15,434) (15,435) - - (15,434) - - (15,435) (15,434) (15,435) - - - - 49 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 14. Fixed Asset Investments (continued) In the opinion of the directors, the aggregate value of the company’s investment in subsidiary undertakings is Historically, loans to participating interests are reported as in increase in the Company’s investment in not less than the amount included in the statement of financial position. the joint venture, but have been provided for. As the Group acquired 100% shareholding in the joint venture in 2017 this balance had been transferred to loan to subsidiaries. The details of the subsidiaries held at 31 December 2022 are as set out below: Shareholding Country of incorporation Nature of business New Horizon Energy 1 LLC (NHE) Buccaneer Operating, LLC (Buccaneer) 15. Trade and other receivables CURRENT 100% 100% USA USA Oil & gas exploration Oil & gas exploration GROUP 2022 $’000 2021 $’000 COMPANY 2022 $’000 2021 $’000 Trade and other receivables Other taxes and receivables 52 558 506 271 348 77 - 22 22 - 9 9 The directors consider the carrying value of the receivables to approximate their fair value. 16. Cash and cash equivalents GROUP 2022 $’000 2021 $’000 COMPANY 2022 $’000 2021 $’000 Bank current accounts 132 45 17 16 17. Trade and other payables CURRENT Trade payables Accruals and deferred income Other taxes payables Decommissioning liability GROUP 2022 $’000 2021 $’000 COMPANY 2022 $’000 2021 $’000 777 273 1,051 1 340 783 146 948 19 302 2,771 70 2,842 1 22 1,243 - 1,262 19 13 Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going expenses. The directors consider that the carrying amount of trade and other payables approximates their fair value. 50 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 17. Trade and other payables (continued) Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going expenses. The directors consider that the carrying amount of trade and other payables approximates their fair value. and an inflation factor of 3%. This is comparable to the Group’s options at the time of the well in Included in trade payables is the decommissioning liability, this has been calculated at a discount rate of 10% -service dates. 18. Financial liabilities - borrowing Maturity of the borrowings is as follows: Repayable within one year Bank loan Repayable after one year Other loans Bank loan Other loans GROUP 2022 $’000 2021 $’000 COMPANY 2022 $’000 2021 $’000 - 94 3,756 3,980 130 202 316 2,459 2,977 - - 94 - 224 130 202 316 396 914 - include a facility where the loans are secured against the group’s interest in its assets. At the year Borrowings end the outstanding balance was $3,756k (2021: $2,459k). Interest is currently charged for any day per annum at 6.50%. In September 2021 the facility was extended by three years to 29 January 2025 and the nominal facility size was increased to $10 million. The Borrowing Base has been increased to US$4,350,000 based on improved production and cashflow during 2022. The size of the Facility and Borrowing Base will be reassessed at least twice yearly. The Board anticipates the Facility and Borrowing Base will increase as the Company's production and reserves increase. Borrowings also include an unsecured loan with a balance at year-end of $Nil (2021: $202k). Interest is charged at 12% per annum and loan is fully repayable within the year. The group also has a loan agreement in place with related parties, with a total outstanding balance as at the year- end of $224k (2021: $316k). Further details can be found in Note 22. 19. Share capital Number Class Nominal value 2022 $’000 2021 $’000 746 million (2021: 703 million restated) Ordinary 0.1 1,593 1,538 4,110 million (2021: 4,110 million) Deferred 0.098p 6,549 6,549 During the year there were a number of share issues: • • – 1 April 2022 – warrants. 1 June 2022 24,000,000 new ordinary shares issued at 0.35p per share in respect of exercise of 19,000,000 new ordinary shares issued at 0.35p per share in respect of exercise of warrants. 51 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 20. Risk and sensitivity analysis The group’s activities expose it to a variety of financial risks: interest rate risk, liquidity risk, foreign currency risk, capital risk and credit risk. The group’s activities also expose it to environment risk. The group’s overall risk management programme focuses on unpredictability and seeks to non-financial risks: market, legal and 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. Capital risk The group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Market risk The group also faces risks in conducting operations in US mid-continent, which include but are not limited to: Fluctuations in the global economy could disrupt the group’s ability to operate its business in the US • Mid-Continent and could discourage foreign and local investment and spending, which could adversely affect its production. Environmental risk The group faces environmental risks in conducting operations in the US Mid-Continent which include but are not • limited to: additional costs, which might hinder the group’s ability to operate its business. If the group is found not to be in compliance with applicable laws or regulations, it could be exposed to Credit risk The group’s principal financial assets are bank balances and cash, trade and other receivables. The group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. Volatility of crude oil prices A material part of the group’s revenue will be derived from the sale of oil that it expects to produce. A or extended decline in prices for crude oil and refined products could adversely affect the group’s revenues, cash substantial d ability to finance its planned capital expenditure. West Texas Intermediate (“WTI”) oil flows, profitability an prices ranged from $73.17 to $120.93 in 2022 and $47.20 to $85.39 in 2021. The group had no hedging activity during 2022. Interest rate risk The group does not hedge this risk. At 31 December 2022, the group had borrowings of $3,980 (2021: $2,977k), with total interest for the year of $199k (2021: $175k). A 100-basis point change in the rates will increase finance costs by $38k. 52 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 20. Risk and sensitivity analysis (continued) Liquidity risk The group expects to fund its exploration and development programme, as well as its administrative and operating expenses throughout 2022, principally using existing working capital and expected proceeds from the sale of future crude oil production. The group had a bank balance of approximately $132,000 at 31 December 2022 (2021: $45,000). Cash flow risk The group expects to have sufficient working capital to continue operations and to remain cash flow positive through 2022. This will be continuously monitored and reviewed by the directors through the inclusion of regular cash flow forecasts in management reports. 21. Financial commitments Capital commitments The group had no material capital commitments at the year-end. 22. Related party transactions Group No related party transactions other than those highlighted below. Company At the year end, the Company owed its subsidiaries $2,246,000 (2021: $727,000) in respect of intercompany loans that are unsecured and interest-free. The Company has the following loans outstanding with related parties: Discovery Energy Ltd Discovery Energy Ltd previously had a common director with the Company, E Ainsworth. At the year end, the balance outstanding owed to Discover Energy Limited was $224k (2021: $316k). Interest charged in the year was $17k (2021: $27k). The loan is unsecured, bears interest at the rate of 8% per annum. 53 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 23. Share-based payments The group has a share-ownership compensation scheme for senior executives of the group whereby senior executives may be granted options to purchase ordinary shares in company. The group has previously issued warrants to senior executives as a welcome incentive and to third parties as consideration for their services. A share-based payment charge of $155,000 (2021: $68,287) for share options was expensed during the year. Date of grant Restated At 31.12.21 Granted Exercised Expired At 31.12.22 Exercise price pence Exercise/ vesting date From To Warrants 07/02/17 750,000 08/04/20 73,611,000 02/09/20 3,000,000 25/09/20 196,000,000 08/01/21 Options 108,000,000 29/10/14 675,000 21/07/17 2,666,666 21/07/17 2,666,667 21/07/17 2,666,667 04/06/18 9,500,000 29/09/20 5,000,000 29/09/20 5,000,000 29/09/20 5,000,000 29/09/20 29/09/20 733,333 733,333 29/09/20 733,334 29/09/20 1,666,666 29/09/20 1,666,667 29/09/20 1,666,667 29/09/20 1,333,333 29/09/20 1,333,333 29/09/20 1,333,334 - - - - - - - - - - - - - - - - - - - - - - (750,000) - 2.55 06/02/17 06/02/22 - 73,611,000 0.60 08/04/20 08/04/23 (3,000,000) (43,000,000) (153,000,000) - - 0.60 0.35 02/09/20 02/09/22 25/09/20 25/09/22 108,000,000 0.85 08/01/21 08/01/23 - 675,000 - - - 9,500,000 0.4 3 4.5 6 5 29/10/14 28/10/24 21/07/17 21/07/22 21/07/17 21/07/22 21/07/17 21/07/22 04/06/18 03/06/25 5,000,000 0.5 29/09/20 29/09/27 5,000,000 0.75 29/09/20 29/09/27 5,000,000 733,333 1 0.5 29/09/20 29/09/27 29/09/20 29/09/27 733,333 0.75 29/09/20 29/09/27 733,334 1,666,666 1 0.5 29/09/20 29/09/27 29/09/20 29/09/27 1,666,667 0.75 29/09/20 29/09/27 1,666,667 1,333,333 1 0.5 29/09/20 29/09/27 29/09/20 29/09/27 1,333,333 0.75 29/09/20 29/09/27 1,333,334 1 29/09/20 29/09/27 (2,666,666) (2,666,667) (2,666,667) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 54 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 23. Share-based payments (continued) The total number of options and warrants outstanding at 31 December 2022 and 31 December 2021 are as Total at 31 December 2022: 217,986,000 follows: Total at 31 December 2021: 425,736,000 (restated) The number of options and warrants outstanding to the directors at the year-end were as follows: Warrants Options Director 2022 2021 2022 2021 Total Warrants & Options 2021 2022 M Lofgran S Staley Total J Stafford 16,000,000 2,000,000 18,000,000 - 16,000,000 2,000,000 1,800,000 - 21,600,000 5,000,000 38,100,000 5,500,000 27,600,000 5,000,000 38,100,000 5,500,000 43,600,000 7,000,000 50,100,000 56,100,000 5,500,000 37,600,000 7,000,000 5,500,000 The estimated fair value of the warrants issued in previous years was calculated by applying the Black-Scholes option pricing model. Volatility is based on historic share prices of the Company. The assumptions used in the calculation were as follows (the warrants issued on 8 April 2020 were to subscribers of shares in a fundraising and are not considered to be share based payments): 23 June 2015 7 Feb 2017 25 Sep 2020 02 Sep 2020 8 Jan 2021 Warrants Share price at grant date Exercise price Option life in years Risk free rate Expected volatility Expected dividend yield Fair value of option/warrant Weighted average remaining life (years) 1.60p 8.77p 2.53p 0.23p 2.55p 0.6p 0.3p 0.35p 0.53p 0.85p 5 years 5 years 2 years 2 years 2 years 1% 50% 0% 1% 50% 1% 50% 0% 0% 1% 50% 0% 0.5% 50% 0% 0.24p 1.08p 0.01p 0.07p 0.07p - - - - - 55 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 23. Share-based payments (continued) Options 28 Oct 2014 21 July 2017 21 July 2017 21 July 2017 4 June 2018 – Service providers Share price at grant date Exercise price Option life in years Risk free rate Expected volatility Expected dividend yield Fair value of option/warrant Weighted average remaining life (years) Options Share price at grant date Exercise price Option life in years Risk free rate Expected volatility Expected dividend yield Fair value of option/warrant Weighted average remaining life (years) 2.65p 1.55p 1.55p 1.55p 2.50p 0.4p 3p 4.5p 6p 5.p 10 years 5 years 5 years 5 years 2 years 1% 50% 0% 1% 50% 0% 1% 50% 0% 1% 50% 0% 1% 50% 0% 0.13p 0.52p 0.35p 0.25p 0.87p 1.83 - - - - 4 June 2018 - Directors 29 Sep 2020 29 Sep 2020 29 Sep 2020 2.50p 5.p 0.38p 0.5p 0.38p 0.75p 0.38p 1p 7 years 7 years 7 years 7 years 1% 50% 0% 1% 50% 0% 1% 50% 0% 1% 50% 0% 1.85p 0.16p 0.50p 0.26p 2.43 4.75 4.75 4.75 56 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Nostra Terra Oil and Gas Company Annual Report and Accounts 2022 Notes to the Financial Statements (continued) For the year ended 31 December 2022 24. Contingent liabilities and guarantees The Group has no contingent liabilities in respect of legal claims arising from the ordinary course of business and it is not anticipated that any material liabilities will arise from contingent liabilities other than those provided for. 25. Ultimate controlling party The company is quoted on the AIM market of the London Stock Exchange. At the date of the annual report there was no one controlling party. 26. Events after the reporting period There were no significant events. Contents Company Information Chairman’s Report Chief Executive Officer’s Report Strategic Report Directors’ Report Directors’ Information Corporate Governance Report Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated and Company Statement of Cash Flows Notes to the Financial Statements Page 1 2 3 5 8 12 13 16 22 23 24 25 26 27 28 29 www.ntog.co.uk 

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