Union Jack Oil
Annual Report 2021

Plain-text annual report

PRODUCTION, DRILLING, DEVELOPMENT AND INVESTMENT IN THE UNITED KINGDOM HYDROCARBON SECTOR 2021 UNION JACK OIL plc ANNUAL REPORT AND FINANCIAL STATEMENTS Directors, Officers and Advisers DIRECTORS David Bramhill Executive Chairman Joseph O’Farrell Executive Graham Bull Non-Executive Raymond Godson Non-Executive COMPANY OFFICE 6 Charlotte Street, Bath BA1 2NE, England Telephone: +44 (0) 1225 428139 Fax: +44 (0) 1225 428140 Email: info@unionjackoil.com Web: www.unionjackoil.com REGISTERED NUMBER 07497220 SECRETARY AND REGISTERED OFFICE BANKERS Matthew Small 6 Charlotte Street, Bath BA1 2NE, England REGISTRARS Royal Bank of Scotland plc 8-9 Quiet Street, Bath BA1 2JN, England NOMINATED ADVISER AND BROKER Computershare Investor Services PLC The Pavilions, Bridgwater Road, Bristol BS13 8AE, England SP Angel Corporate Finance LLP Prince Frederick House, 35-39 Maddox Street, London W1S 2PP, England AUDITOR BDO LLP 55 Baker Street, London W1U 7EU, England SOLICITORS Osborne Clarke 2 Temple Back East, Temple Quay, Bristol BS1 6EG, England Union Jack Oil plc is primarily an onshore oil and gas company with a focus on production, drilling, development and investment in the United Kingdom hydrocarbon sector. The issued share capital is traded on the AIM Market of the London Stock Exchange (Ticker: UJO). Our strategy is the appraisal and exploitation of the assets currently owned. Simultaneous with this process, the Company’s management expects to continue to use its expertise to acquire further licence interests over areas where there is a short lead-time between the acquisition of the interest and either exploration drilling or initial production from any oil or gas fields that may be discovered. “Fully funded for all G&A, OPEX and CAPEX costs for the foreseeable future” Contents BUSINESS AND STRATEGY FINANCIAL STATEMENTS Chairman’s Statement Strategic Report Licence Interests GOVERNANCE Directors’ Report Corporate Governance Report Independent Auditor’s Report on the Financial Statements 2 10 18 20 23 36 Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Statement of Cash Flows Principal Accounting Policies Notes to the Financial Statements ANNUAL GENERAL MEETING Notice of Annual General Meeting 41 42 43 44 45 46 54 73 1 Business and Strategywww.unionjackoil.com CHAIRMAN’S STATEMENT I am pleased to present to the shareholders of Union Jack Oil plc (“Union Jack” or the “Company”), the Annual Report and Financial Statements for the year ended 31 December 2021. After several years of consistent determination and promising results, Union Jack is now witnessing a sea change in its business and prospects, where production from Wressle has materially transformed the financial position of our Company. Cash balances remain at a high level and, with expected substantial future revenues, the Company is currently funded for all G&A, OPEX and contracted or planned CAPEX costs, including any budgeted drilling activities for at least the next 12 months. Union Jack’s focused strategy has been vindicated and, coupled with the Board’s consistent objective to build a sustainable UK onshore production and development hydrocarbon company, is now well within our field of vision. Our belief is that the upside opportunities at the Wressle project make it an exceptional conventional development where revenue potential is expected to help fund the growth of Union Jack over the next decade and beyond. During April 2022, we announced that landmark production of net total revenues from Wressle had reached US$5,000,000 following the successful proppant squeeze and coiled tubing operations completed in late August 2021. At West Newton, our other flagship project, following independent laboratories’ reviews and investigation of extensive data by technical consultants, we are greatly encouraged and look forward positively to the commencement of further drilling operations in due course. Our view remains buoyant on the prospect of being able to deliver a successful development at West Newton. Substantial progress was made during 2021 and has continued into 2022. This progress, coupled with a robust oil price and Wressle oil production, have generated considerable revenues and, given the Board’s expectation of ongoing future material cashflows, we believe it is now appropriate to initiate plans for a Capital Reduction to allow for the payment of a dividend or to implement a share-buy- back programme to reward our shareholders. Further information can be found on our informative website www.unionjackoil.com, launched during 2021, presenting a professional information package on our projects, designed to inform shareholders and attract new investors to the Company. In addition, Union Jack hosts an active twitter account (@unionjackoilplc). 2 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Chairman’s Statement OPERATIONAL HIGHLIGHTS • Successful proppant squeeze and coiled tubing exercise at Wressle resulted in an instantaneous flow rate of over 1,000 barrels of high-quality oil per day ("bopd") being achieved with zero water cut • Wressle-1 pressure test analysis by ERCE indicates potential flow rates of between 1,200 to 1,500 bopd are achievable • Wressle Revised Field Development Plan submitted to the North Sea Transition Authority ("NSTA") for approval • Results from West Newton EWT confirm substantial hydrocarbon discoveries within the Kirkham Abbey formation • Independent RPS Group (“RPS”) review predicts initial average production rates of up to 35.6 million cubic feet of gas and 1,000 bopd from a horizontally drilled well at West Newton • Planning granted at West Newton for both A and B site works and three year permit extension • Completion of purchase of a further 15% interest in PEDL253 containing the Biscathorpe Prospect, bringing Union Jack’s interest to 45% • Carbon Intensity Study on Biscathorpe Project rated AA by Gaffney Cline • Purchase of a 2.5% royalty interest in the North Sea Claymore, Piper and Scapa oilfields • Appeal against planning refusal at Biscathorpe submitted to Planning Inspectorate WRESSLE DEVELOPMENT PEDL180 AND PEDL182 (40%) Wressle has quickly exceeded our pre-production expectations of 500 bopd and continues to outperform since the resumption of production following the successful proppant-squeeze and coiled-tubing operation during August 2021. Instantaneous rates of over 1,000 bopd have been achieved. Early restrictions on production rates are being successfully addressed through ongoing modifications to the site facilities, including installation of a secondary separator and progressive upgrades to the gas incineration system which have culminated in the installation of a larger capacity enclosed ground incineration unit. FINANCIAL HIGHLIGHTS • Oil revenues increased by over 1,000% during 2021 • Maiden gross profit on oil sales achieved • Cash balances and near-term receivables of £7,545,575 as at 9 May 2022 • The Company is currently funded for all operational and contracted or planned CAPEX costs, including any budgeted drilling activities for at least the next 12 months • Debt free • Early settlement payment made to Calmar LP in respect of deferred consideration on acquisition of 25% interests in PEDL180 and PEDL182, containing the Wressle development • Company solicitors progressing legal work on Capital Reduction to enable the Company to execute a share-buy-back programme or dividend payment. Appropriate resolutions relating to this are included in the Notice of Annual General Meeting for shareholders to consider Further work is planned in the near-future which is designed to improve the site facilities, that will allow an increase in production rates in due course. Production from Wressle is currently averaging over 300 bopd from the Ashover Grit reservoir net to Union Jack based on our 40% interest. Since production commenced at Wressle-1 in early 2021, the cumulative production of high-quality oil is in-excess of 150,000 barrels with no formation water produced to date. 3 Business and Strategywww.unionjackoil.comChairman’s Statement “Union Jack’s mission and focus is to minimise the carbon footprint generated by its hydrocarbon developments in the most efficient way possible, whilst continuing to contribute positively to the growing demand for energy and hydrocarbon products in the supply chain” Gross and Net Volumes of Wressle Hydrocarbons Attributable to Union Jack Gross Volumes Net Volumes Attributable to Union Jack's 40% interest OIL MMSTB GAS BCF OIL EQUIV MMBOE OIL MMSTB GAS BCF OIL EQUIV MMBOE 2P Ashover Grit and Wingfield Flags 2C Penistone Flags Broughton North Mean Unrisked Prospective Resources Source: CPR by ERCE (2016) 0.62 1.53 0.51 0.20 2.00 0.51 0.65 1.86 0.60 0.25 0.61 0.20 0.08 0.80 0.20 0.26 0.75 0.24 When the planned gas monetisation project is complete, it is expected that the overall oil and gas production rate will be able to increase significantly. Pressure test analyses conducted by ERCE, an independent petroleum consultant, indicated potential flow rates for Wressle-1 of between 1,200-1,500 bopd. The likely preferred gas monetisation approach is to export the gas via a short pipeline of approximately 600 metres into the local gas distribution network. This will require normal planning and Environmental Agency (“EA”) regulatory consents and is likely to be completed in time for winter demand. This export route will also be available in the longer term for the development of the Penistone Flags reservoir where detailed work is underway to develop the material Contingent Resources of 1.86 million barrels of oil equivalent (“boe”) gross. During April 2022, the Operator submitted a revised Field Development Plan (“FDP”) to the NSTA for approval. The FDP, if and when approved by the NSTA, would be a significant milestone for Union Jack. During the remainder of 2022, and assuming receipt of all regulatory approvals, ongoing major development works at Wressle will include: • Completion of the installation of the permanent production facilities • Implementation of the gas to grid development to monetise the gas and provide optimum oil production • Advancement of the development plan and consenting process to enable production from the Penistone Flags reservoirs Environmental monitoring throughout the Wressle operation has shown no measurable impact on surface or groundwater quality, no related seismicity and that noise has been within the permitted levels. 4 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Chairman’s Statement Union Jack has independently commissioned Gaffney Cline, an international energy consultancy, to deliver an updated Reserves and Resources Report prepared in accordance with the Petroleum Resources Management System (“PRMS”), a standard developed by the Society of Petroleum Engineers. intervals. Recoveries confirmed the presence of good quality gas with indicated methane content of approximately 90%, ethane of approximately 4.5% and heavier end gases present in lesser concentrations. Following operations at WNB-1Z, equipment was mobilized to WNA-2 to resume well testing. The Gaffney Cline report will: • Incorporate 1P/2P/3P reserve volumes for the Ashover Grit and Wingfield Flags reservoirs • Highlight and discuss any additional potential reservoirs • Generate an indicative 2C production profile for the Penistone Flags reservoir • Prepare a 2P+2C production profile that will illustrate future field potential The Board has increasing confidence that the Gaffney Cline Report, which will be published in due course, will highlight the material upside potential of this economically attractive conventional hydrocarbon development. WEST NEWTON APPRAISAL PEDL183 (16.665%) PEDL183 is located onshore UK, north of the River Humber, also encompassing the town of Beverley, East Yorkshire. The licence area is within the western sector of the Southern Zechstein Basin. Union Jack entered into a farm-in during 2018 with Rathlin Energy (UK) Limited (“Rathlin”) the Operator, and since that time the West Newton A-2 (“WNA-2”) and West Newton B -1Z (“WNB-1Z”) drilling programmes have yielded substantial hydrocarbon discoveries. Throughout 2021, the focus was on operations and data acquisition from the West Newton A and West Newton B well sites and advancing a forward plan for the West Newton A development. After extensive planning in early 2021, completion and testing operations were initiated on the WNB-1Z well. WNB-1Z was drilled in late 2020 and reached a total depth of 2,114 metres. Test operations commenced in May 2021 and focused on the Kirkham Abbey Formation and, completing and testing the lower section, before moving onto the upper section. A total of 44 metres was perforated in the target zone. During testing operations, both liquid hydrocarbons and gas were recovered to the surface from the two The WNA-2 well was drilled and cased to a total depth of 2,061 metres during the spring of 2019 and initial completion operations were undertaken during the summer of 2019. The original testing programme was suspended when both oil and gas were encountered in the target formation, as opposed to the predominant gas saturation anticipated in the original testing programme. The operations were suspended to allow the redesign of the test programme to efficiently and safely evaluate the potential oil column. Following approval, testing operations commenced in September 2021. During these operations, both gas and liquid hydrocarbons were recovered to surface. The gas samples were similar to those recovered from other wells, including WNB-1Z and WNA-1, and are consistent with the initial tests performed at WNA-2. Following the completion of the West Newton EWT, the Operator commissioned RPS, a highly regarded independent consultant to produce a review that assessed well productivity potential from the West Newton project and the investigation of optimised drilling and well completion methodologies. The RPS review concluded that the Kirkham Abbey reservoir could deliver substantially higher production rates from horizontal wells as compared to vertical wells. The review also concluded that, based on RPS modelling, most of the acid stimulation carried out during the EWT interacted with only a small section of the perforated intervals due to the permeability contrast across the Kirkham Abbey formation. The highlights of the RPS review are as follows: • Predicted initial average production rates of up to 35.6 million cubic feet of gas per day (5,900 barrels of oil equivalent per day) from a horizontally drilled well situated within the gas zone, based on the data from the WNA-2 well • Indication of initial average potential production rates of up to 1,000 barrels of oil per day from a horizontally drilled well situated in the oil zone based on data from the WNA-2 well 5 Business and Strategywww.unionjackoil.comChairman’s Statement Fluid analysis performed by Applied Petroleum Technology (UK) Limited (“APT”) confirms that hydrocarbon liquids recovered to surface are low specific gravity, low viscosity, light oil or condensate with an API gravity ranging from 45.9 to 49 degrees and that gas recovered to surface is good quality with a high thermal value. During the 2021 completion operations at WNB-1Z and WNA-2, a significant amount of reservoir data including fluid and gas samples, pressure data, and flow data was acquired. Following an extensive investigative programme conducted on both sides of the Atlantic by industry leading geological and geochemical consultancies, this information is being utilised to determine optimum drilling, completion and development designs for the Kirkham Abbey reservoir. This information gathering exercise will also help determine the next steps in the future development and exploration programmes. Analysis and re-evaluation of well data and seismic information continues to support our belief that the West Newton project represents a significant resource of high- quality light oil and natural gas, and that the West Newton area has the potential to be a significant hydrocarbon producer. In preparation for a decision on a potential development of the West Newton discoveries, the Operator submitted a revised planning application for the development of the West Newton A site to the East Riding of Yorkshire Council (“ERYC”). This was approved by the ERYC Planning Committee by a vote of ten to one during March 2022. The development plan that was approved includes the drilling, completion, and associated production from an additional four wells from the current surface location, plus an extension of the permit period at the West Newton B site for an additional three years. KEDDINGTON PEDL005(R) (55%) AND FISKERTON AIRFIELD EXL294 (20%) The producing Keddington oilfield is located along the highly prospective East Barkwith Ridge, an east-west structural high on the southern margin of the Humber Basin. A subsurface review conducted by the Operator has highlighted a viable target to the east of the field, with up to 180,000 barrels of incremental oil production. With planning consent already in place, Keddington presents an opportunity to increase oil production via a relatively inexpensive development side-track from one of the existing wells. In addition, near-field exploration targets exist at Keddington South and Louth, with Mean Prospective Resources of 635,000 and 600,000 barrels of oil in place respectively. Fiskerton Airfield oilfield has continued production during the period. Focus remains on maximising production from existing wells and cost management. 6 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Chairman’s Statement BISCATHORPE PEDL253 (45%) AND NORTH KELSEY PEDL241 (50%) PEDL253 is situated within the proven hydrocarbon fairway of the South Humber Basin and is on-trend with the Keddington oilfield, Saltfleetby gasfield and the Louth and North Somercotes Prospects. While drilling the B-2 well there were hydrocarbon shows indicated by elevated gas readings and sample fluorescence, observed over the entire interval from the top of the Dinantian to the Total Depth of the well, with a total of 68 metres interpreted as being oil-bearing in the petrophysical analysis. A geochemical analysis of the gas data and hydrocarbons extracted from drill cuttings was commissioned by the Joint Venture participants and carried out by APT. The results of this analysis confirm a hydrocarbon column of 33-34 API gravity oil in the Dinantian Carbonate and a proven live oil column, comparable with that produced at the nearby Keddington oilfield. Following the results of the APT exercise, a probabilistic assessment of the Dinantian oil volumes was modelled with volumetric assumptions as being “filled to spill” with resulting gross Mean Stock Tank Oil in Place (“STOIIP”) calculated to be 24.3 mmbo with an upside case of 36 mmbo. In addition to the Dinantian, there remains the original target within the Westphalian where evidence for a thickened sandstone reservoir exists. The Operator has estimated, in accordance with the PRMS Standard, that the gross Mean Prospective Resources within the Westphalian are 3.95 mmbo, with an upside case of 6.69 mmbo. Economic modelling demonstrates that the Westphalian target is economically robust, especially in the current oil price environment. Union Jack’s technical team believe that Biscathorpe remains one of the largest unappraised onshore discoveries within the UK. During November 2021, a planning application for a side- track drilling operation, associated testing and long-term production at the Biscathorpe site was refused by the Lincolnshire County Council Planning Committee. The decision on a future development at Biscathorpe will now be decided by the Planning Inspectorate, to whom appeal documentation was submitted in April 2022. North Kelsey is a conventional oil exploration prospect on trend with, and analogous to the Wressle development, which lies approximately 15 kilometres to the northwest. The prospect has been mapped from 3-D seismic data and has the potential for oil in four stacked Upper Carboniferous targets. The Operator estimates that gross Prospective Resources range from 4.46 to 8.47 mmbo, with a Mean Resource of 6.47 mmbo. An application to extend the existing planning consent to drill the North Kelsey-1 well was refused by the Lincolnshire County Council Planning Committee in March 2022. An appeal is expected to be made in the near-future against this decision. OTHER LICENCE INTERESTS Union Jack has interests in a number of other non-core projects, namely PEDL118 (Dukes Wood), PEDL203 (Kirklington), PEDL201 (Widmerpool Gulf ), PEDL181 (Humber Basin) and PEDL209 (Laughton). These licence interests have all been fully impaired and are at various stages of relinquishment with the exception of Dukes Wood and Kirklington where the geothermal upside potential is being investigated. 7 Business and Strategywww.unionjackoil.comChairman’s Statement NORTH SEA ROYALTIES CORPORATE AND FINANCIAL During March 2021, the Company purchased a 2.5% royalty interest over the Claymore, Piper and Scapa oilfields located in the Central North Sea from Cambridge Petroleum Royalties for a consideration of £93,610, including working capital adjustments. The Company benefits from an indirect contractual exposure to North Sea oil and gas production revenues without any ongoing capital investment, decommissioning or joint venture operating costs. Included within this transaction is the right to receive income from the Claymore/Piper Complex for the rest of its operating life, estimated independently to be at least the next 15 years, at no additional capital or operating cost to Union Jack. Management viewed this initial purchase as an attractive, cash generating and high yielding investment, consistent with Union Jack’s wider strategy and objective to explore alternative financial instruments to generate revenues, whilst remaining within the UK hydrocarbon sector. This transaction has generated an accrued income of more than £170,000 to date. These monies are being held in escrow by the Operator, Repsol Sinopac until a Royalty Manager is appointed. The significant revenues received from Wressle have already transformed the financial well-being of the Company and significantly strengthened its balance sheet. During March 2021, the Company consolidated its ordinary shares on a 200 for one basis and the new issued share capital was 99,079,532, each with a nominal value, post- consolidation of 5 pence. During September 2021, £3,000,000 was raised before expenses, further bolstering our cash reserves, ensuring that Union Jack continued to retain its “going concern” status in its accounts. The Company remains debt free and had cash balances and short-term receivables at 9 May 2022, of £7,545,575. The Company is currently funded for all operational and all contracted or planned CAPEX costs, including any budgeted drilling activities for at least the next 12 months. Revenues from oil sales of £1,894,875 reported in 2021, compared to £158,004 during 2020, have had a dramatic effect on our Income Statement, resulting in the Company reporting a gross profit for the first time. Net revenues of £2,877,081 registered to date during 2022 already comfortably exceed the revenues for 2021. During the period the Company has been in direct discussions with Repsol Sinopac and the other royalty holders with a view to advancing the potential acquisition of further royalty interests and accelerating the payment of the amounts already generated. Subsequent to the year end, in March 2022 early settlement of £2,083,333 was made to Calmar LP in respect of the prudent deferred consideration on acquisition of 25% interests in PEDL180 and PEDL182 containing the Wressle development. During 2021, the Company agreed to a share swap in the shares of its holding in Elephant Oil Limited, a UK registered unquoted company in exchange for shares in a new entity, Elephant Oil Corp., registered in Nevada, in the United States of America. Elephant Oil Corp. has applied for its shares to be traded on NASDAQ in the near-future. 8 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Chairman’s Statement Post year end, and given the current stage of the Company’s development and its improved cash position, a decision was made by the Board to undertake a Capital Reduction exercise to allow the payment of a cash dividend to shareholders or enable a share-buy-back programme. Appropriate resolutions are included in the Notice of Annual General Meeting for shareholders to consider. I would like to take this opportunity to thank our shareholders for their continued support, as well as my colleagues, co-directors and advisers who all provide invaluable advice and continue to champion the development of the UK onshore hydrocarbon industry for the benefit of Union Jack, its shareholders and the wider economy. NET ZERO CARBON POLICY The UK is committed by law to reach Net Zero carbon emissions by 2050. Union Jack, by its own policy and strategy, are not the operator of any of its projects or assets. Therefore, the Company will only work with operators who have a firm commitment to safety, environmental and social responsibility in all aspects of their operations. Regardless of the fact that the Company has chosen not to be an operator, we are subject to the same scrutiny as any other hydrocarbon producer. We remain pro-active in the quest for Net Zero and to demonstrate this Union Jack commissioned Gaffney Cline, an international energy consultancy to conduct Carbon Intensity studies on Biscathorpe (PEDL253) and West Newton (PEDL183), two of our core projects. The results of these studies were highly encouraging with Gaffney Cline concluding that both sites achieved an AA rating for Carbon Intensity. Union Jack’s focus is to minimise emissions and the carbon footprint generated by its hydrocarbon interests in the most efficient way possible, whilst continuing to contribute positively to the growing demand for energy and hydrocarbon products in the supply chain. As the demand for energy increases post COVID-19 and the global economy recovers, hydrocarbons will continue to play an important part in ensuring the energy security of the UK. Union Jack’s development interests are located close to areas with a high demand for energy and as a consequence, the Company believes that locally produced hydrocarbons provide the benefit of displacing, to some extent, imported hydrocarbons. Union Jack supports the operators’ strategies that mitigate the effects of climate change and will continue to align itself with the best standards of Carbon Management Practice wherever possible. OUTLOOK My confidence in Union Jack’s future remains highly positive. During 2021 and to date, the Company has advanced a number of its key projects, especially at Wressle which, as stated earlier, have been transformational financially with substantial revenues and indications that the Wressle journey has only just commenced. The latest results at West Newton are highly encouraging regarding the prospects of the significant hydrocarbon discoveries made to date and their development potential, following an extensive testing and investigative programme conducted on both sides of the Atlantic by industry leading geological and geochemical consultancies. I remain confident that future news arising from our well- balanced portfolio containing relevant components of production, development, appraisal and exploration will continue to vindicate the Board’s unflinching optimism in respect of our Company’s focused strategy. In closing, I believe our Company is in sound financial health with a robust balance sheet. Union Jack continues to be debt free, with significant cash reserves and substantial future revenues expected. The Company is currently funded for all G&A, OPEX, and contracted or planned CAPEX costs, including any budgeted drilling activities, for at least the next 12 months. The future of Union Jack remains bright. David Bramhill Executive Chairman 16 May 2022 9 Business and Strategywww.unionjackoil.comSTRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2021 STRATEGY Our strategy is the appraisal and exploitation of the assets currently owned. Simultaneous with this process, the Company’s management expects to continue to use its expertise and cash resources to acquire further licence interests in the UK over areas where there is a short lead time between the acquisition of the interest and either exploration drilling or initial production from any oil or gas fields that may be discovered. BUSINESS REVIEW Union Jack Oil plc is a UK registered company, focused on the exploration for, and future development of hydrocarbon projects. A review of the Company’s operations during the year ended 31 December 2021 and subsequent to the date of this report is contained in the Chairman’s Statement and this Strategic Report. The loss for the year amounted to £853,013 (2020: £1,865,515). The loss for the year includes impairments to Property, Plant and Equipment of which total costs are £156,995 (2020: £106,714). These impairments are in relation to PEDL118, £67,598 (2020: £59,627) and PEDL203, £83,057 (2020: £47,087). The loss for the year includes impairments to Intangible Assets of which total costs are £6,340 (2020: nil). These impairments are in relation to PEDL181, £4,204 and PEDL201, £2,136. Administrative expenses amounted to £1,740,962 (2020: £1,590,576). The increase in this cost was due to additional technical work in respect of Wressle, West Newton, Biscathorpe, and Keddington, undertaken by the Company’s external consultants. Cash and cash equivalents at year end amounted to £5,977,541 (2020: £7,269,014). Total assets at year end amounted to £24,472,708 (2020: £21,340,804). Non-current assets at year end amounted to £16,392,416 (2020: £13,725,734). Intangible Assets totalled £8,525,373 (2020: £6,134,717). Expenditure included £500,000 for a further 15% interest in Biscathorpe and completion and testing operations at West Newton. Tangible assets totalled £7,575,525 (2020: £6,452,287). Expenditure included the proppant squeeze and site enhancement at Wressle. The Company’s Income Statement reports revenues of £1,894,875 (2020: £158,004) in respect of production income from Wressle, Keddington oilfield and the Fiskerton Airfield oilfield. The directors do not recommend the payment of a dividend (2020: £nil). In September 2021, 13,636,364 new ordinary shares were issued for cash at a price of 22 pence per ordinary share, raising £3,000,000 before expenses of £312,484 by way of a placing and subscription. The enlarged issued share capital following the issue of the new ordinary shares described above is 112,715,896 ordinary shares of 5 pence each and 831,680,400 deferred shares of 0.225 pence each. FUTURE DEVELOPMENTS The directors intend to continue with the Company’s stated strategy, reviewing the licence interests held in respect of future viability, any potential impairment indicators that may arise during the year and adjusting immediately to any changes that may be required in the operation of the licence interests held. The Company holds a number of key, quality project interests, namely, Wressle, West Newton and Biscathorpe, Keddington and North Kelsey, where development, appraisal and exploration plans are in place for the future benefit of stakeholders and the Company. The directors will continue to investigate further acquisition opportunities as and when they arise. 10 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report FOR THE YEAR ENDED 31 DECEMBER 2021 KEY PERFORMANCE INDICATORS The Company has made good progress during the year ended 31 December 2021. In respect of 2021 traditional KPIs are not deemed appropriate to the Company. Performance is measured by monitoring exploration costs and ensuring sufficient funds are available to meet project commitments. The 2022 Financial Statements will show a full year’s production from Wressle and focus will be changed to traditional KPIs and not E&E expenditure. The directors were successful in raising funds to ensure the Company is adequately funded to meet all of its current commitments. In January 2021, the Company acquired a further 15% economic interest in PEDL253 containing the Biscathorpe Prospect from Humber Oil & Gas Limited for a cash consideration of £500,000. In addition, a contingent cash payment of £500,000 will be made to Humber Oil & Gas Limited following receipt of planning consents for drilling the Biscathorpe-2Z side-track, testing and subsequent production in the event of drilling success. The Company, following this transaction, now holds a 45% interest in PEDL253. In February 2021, the Company concluded a transaction to acquire a further 30% interest in PEDL241 containing the North Kelsey Prospect with Egdon Resources U.K. Limited. The cash consideration was £100,000 and all previous arrangements in respect of the previous farm-in for a 10% interest from Egdon Resources U.K. Limited during March 2013, were nullified. Following this transaction the Company and Egdon hold a 50% interest each in the licence. In February 2021, the Company announced that following re-perforation of the Wressle-1 conventional oil well, communication was made with the Ashover Grit reservoir interval and free-flow of good quality oil had commenced. The well has been placed on continuous test production and, subsequent to the proppant squeeze, Wressle is now producing between 760 – 800 bopd. During March 2021, the Company acquired a 2.5% cash generating royalty in the Central North Sea Claymore, Piper and Scapa oilfields from Cambridge Petroleum Royalties Limited for a cash consideration of £93,610 (US$130,000). To date, the exploration, development and production activities of the Company’s assets have continued in line with plans and with minimal impact from COVID-19. Further events which took place after the Balance Sheet date are described in the Directors’ Report and note 24. 11 Business and Strategywww.unionjackoil.comStrategic Report FOR THE YEAR ENDED 31 DECEMBER 2021 SECTION 172 STATEMENT All large companies must include a separate statement within their Strategic Report that explains how the directors have had regard to broader stakeholder interests when performing their duty under section 172 of the Companies Act 2006 to promote the success of the Company for the benefit of its members as a whole. The past few years have seen intense focus and debate on UK corporate governance. A decline in public trust in business has been caused in part by high-profile business failures, accusations of excessive executive pay, unethical tax avoidance by multinational businesses and deteriorating relationships with employees over pay and contractual terms. These factors have led to Prime Ministerial statements, select committee inquiries, public consultations, a Government white paper and, ultimately, to changes in legislation, stock exchange rules and governance codes. Many of the matters noted have resulted from decisions made in the board room and their effects have been felt by the employees, pension scheme members, customers, suppliers and other stakeholders, as well as shareholders, the interests of all of whom the directors have a statutory duty to consider when making a decision. Under section 172, directors have a duty to promote the success of the Company for the benefit of the members as a whole and, in doing so, they should have regard to (amongst other matters) six specified areas that relate, by-and-large, to wider stakeholder interests. Act fairly as between members of the Company Interests of employees Duty to promote the success of the Company for the benefit of its members as a whole, having regard to: Likely consequence of any decision in the long term Foster business relationships with suppliers, customers and others Maintain a reputation for high standards of business conduct Impact of operations on the community and the environment 12 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report FOR THE YEAR ENDED 31 DECEMBER 2021 Likely consequences of any decision in the long-term The Company has a clear aim which is to build a safe, sustainable and successful conventional onshore hydrocarbon exploration, development and production business. The Company’s activities of investment in licence interests to explore and/or produce oil and/or gas are in general focused on the longer term. This is particularly the case given that the Company itself is not an operator of any of the oil or gas fields in which it has an interest, which means that the Board is able to focus on longer term strategic decisions rather than day-to-day operating decisions. The Company undertakes its strategic acquisitions in conjunction with three JOA partners, Egdon Resources plc, Rathlin Energy (UK) Limited and Europa Oil & Gas Limited (the “JOA Partners”). Through its financing activities, the Board has ensured that the Company is well capitalised and has cash resources for all of its current and anticipated capital requirements, to ensure that the Company has a viable operating plan for the long-term. Stakeholder identification and engagement The Company recognises the importance of fostering strong relationships with its stakeholders in order to create sustainable long-term value, and the Board encourages active dialogue and transparency with all its stakeholder groups. Business decisions are made with the needs of the Company’s key stakeholders in mind, the Company has identified external and internal stakeholder groups which are principally relevant to the proper discharge of the duty of the directors under section 172(1) to promote the success of the Company. Customers and Suppliers The Company does not deal directly with customers or suppliers in relation to the oil and gas fields, save for its relationship with the JOA Partners who operate the relevant fields. The Company’s strategy in respect of its customers and suppliers is to ensure a sustainable relationship with its JOA Partners. The Company has implemented this strategy in the following ways: • The Board ensures that there is a direct relationship at Board level with the Company’s partners • The Board is careful to select JOA and other partners with experience, resources and similar values to the Company • The Board only invests in interests in licences where the Company has a degree of influence over the manner in which the operations of that block are operated • The Board is mindful in its decisions of the indirect impact that the Company’s decisions may have through the activities of its operators and other partners on suppliers, customers and others • The Board maintains good relations with its suppliers by adhering to a strict policy of settling all invoices in a timely manner Regulators The Company is subject to a variety of laws and regulations that involve matters central to the business. In particular, site operations are also subject to scrutiny by the North Sea Transition Authority, the Environment Agency and the Health and Safety Executive before commencement. In response to regulation in this area, the Board ensures that the Company is partnered with JOA partners that adhere diligently to all requirements for a safe working environment via the Operators. For example, the JOA Partners ensure that all site personnel are subject to all health and safety measures which include induction courses before admission to site and the mandatory wearing of safety equipment in order to ensure the wellbeing of site staff and visitors. As an AIM quoted company, the Company is subject to various governance regimes. Please see “The need to act fairly as between members of the Company” section within this Strategic Report for further information. 13 Business and Strategywww.unionjackoil.comStrategic Report FOR THE YEAR ENDED 31 DECEMBER 2021 Shareholders The Company recognises the importance of active shareholder engagement, to enable the views of the Company’s wider shareholder base to be considered as part of the Board’s decision making process. The Board has implemented this strategy in the following ways: • The Board is very active in encouraging and participating in direct dialogue with shareholders in order to ensure the Company’s shareholders are kept regularly updated and are able to discuss strategy and performance directly with the Board (subject always to compliance with legal and regulatory requirements, including the Market Abuse Regulations (“MAR”)). This also allows the Board to obtain a clear understanding of shareholders’ motivations and concerns • The Board facilitates direct communication with shareholders through the timely release of regulatory news, via a regulatory information service, which can be accessed through various channels, including the London Stock Exchange website www.londonstockexchange.com and the Company’s website www.unionjackoil.com • The Board also seeks to keep its shareholders informed of current developments and performance via interviews and speaking events at various conferences • The Executive Chairman and the Company’s Nominated Adviser and Public Relations consultants manage investor communications. For example, there has been recent investor speculation around junior hydrocarbon companies and the Board recognises the particular importance of regular, clear and timely communications with shareholders, to ensure that they are kept updated of major developments and potential risks in respect of the Company and the Industry in a timely manner The Board also believes that shareholders are seeking a return on their investment primarily through capital appreciation as a result of exploration and appraisal success. As a result, the Company ensures that work programmes are fully funded and utilises the Board’s technical expertise to reduce or mitigate the risk of exploration. Employees The Company directly employs four people. Given the nature of the Company’s business, it has very few employees and the majority are themselves directors. As part of its strategy, the Board recognises that the Company’s employees are, nevertheless, critical to the success of the Company and takes steps to ensure that the interests of employees are protected, for example: • The Company ensures that the employees possess a variety of complementary experiences and skill sets, including experience of industry-specific technical, financial and public capital markets sectors • The Company has a Remuneration Committee to review the executive directors’ remuneration package • The Board determine the non-executive directors’ remuneration package 14 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report FOR THE YEAR ENDED 31 DECEMBER 2021 Impact on the environment and the community Environment, communities and supply chains The Company is committed to the highest standards of health, safety and environmental protection. These aspects command equal prominence with other business considerations and the Board is committed to operating the Company in a sustainable way. In particular, the Board is keenly aware of the local environment and the inhabitants in which the Company’s licence interests are situated. The need to act fairly as between members of the Company As an AIM quoted company, Union Jack is subject to governance requirements and rules (including the AIM Rules for Companies and MAR) which are intended to ensure that shareholders are treated fairly. The Board takes its obligations to comply with these requirements seriously and has regular contact with its experienced professional advisers to ensure that these requirements are satisfied. The directors all hold shares in the Company and their interests are therefore aligned to those of the other shareholders. For example, the Company chooses to produce oil and gas in the UK, instead of importing from overseas. This has resulted in local employment, a stream of tax revenues and direct investment into the surrounding communities. The onshore oil and gas industry has an excellent record in relation to health, safety and the protection of the environment. The industry is also regulated by a number of statutory bodies including the Environment Agency in England and is recognised as being robust. Please refer to “Regulators” within this Strategic Report for further details. The desirability of the Company maintaining a reputation for high standards of business conduct The Company has adopted various strategies and governance structures. The Board believes that its reputation for high standards of business conduct will follow from ensuring that appropriate governance structures are in place and from taking the right decisions, as noted within this Strategic Report. These strategies also ensure the continued success of the Company’s business model and response to specific risks. 15 Business and Strategywww.unionjackoil.comStrategic Report FOR THE YEAR ENDED 31 DECEMBER 2021 PRINCIPAL RISKS AND UNCERTAINTIES As with the majority of companies within the energy sector, the business of oil and gas exploration and development includes varying degrees of risk. These risks broadly include operating reliance on third parties, the ability to monetise discoveries and the risk of cost overruns. There are also specific political, regulatory and licensing risks attached to various projects as well as issues of commerciality, environmental, economic, competition, reliance on key personnel, contractor and judicial factors. Commodity prices will have an impact on potential revenues and forward investment decisions by the Operator on the projects invested in, as the economics may be adversely affected. However, onshore development costs are lower than for offshore developments. The Company does not use hedging facilities. The Company holds adequate Directors’ Insurance cover and the Company is covered by the Operator’s insurance during drilling and other operational situations. The Board, in its opinion, has mitigated risks as far as reasonably practicable. The principal risks to the Company as well as the mitigation actions are set out below. Strategic: A weak or poorly executed development process fails to create shareholder value This risk is mitigated through performing a detailed technical review, both internally by management and externally by advisers before an investment decision is taken, for each investment which includes a valuation exercise on the potential return on monies spent. The amount of interest acquired in each project is dependent upon the Company’s financial capability to fulfil its obligation. The Company’s technical management team is highly skilled with many years’ industry experience. Operational: Operational events can have an adverse effect The main risk is the potential failure to obtain planning permission in respect of the Company’s licence interests. This risk is mitigated by the appointment of specialist professional entities who work together to compile planning applications designed to achieve a positive result. A further potential risk is the reliance upon the Operators, Egdon Resources U.K. Limited, Rathlin Energy (UK) Limited and Europa Oil & Gas Limited and their ability to determine timetables and priorities which are beyond the control of the Company. External Risk: Lack of growth caused by political, industry or market factors The Company operates exclusively within the United Kingdom (“UK”) and the Board considers that the UK onshore hydrocarbon arena offers excellent value under a regime with a very clearly spelt out protocol giving the opportunity to develop assets unhindered. As mentioned in this review, oil and gas price volatility can cause concern. However, onshore developments can continue as planned in most cases as development costs are lower than for offshore. The oil price environment is always being monitored, however, the Company’s key assets are cashflow positive at a breakeven oil price of approximately US$18. Lack of control over key assets is mitigated by the fact that our Operators of choice, Egdon Resources U.K. Limited, Europa Oil & Gas Limited and Rathlin Energy (UK) Limited have a very transparent operating protocol and all partners are involved, both formally and informally, with offering input to the ongoing development of the projects in which they are involved. The Company’s in- house technical team capabilities are further supported by external consultants involved at all times and whom together participate in regular technical meetings. The future ramifications of Brexit remain unknown, however, the directors are of the opinion that there is no reason to believe there will be any effect in respect of the Company’s going concern status for the foreseeable future. Union Jack has considered the potential effects of the Russian and Ukrainian conflict on its business and have concluded that there will not be any near-term negative impact to the Company. 16 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report FOR THE YEAR ENDED 31 DECEMBER 2021 Financial Risk: The lack of ability to meet financial obligations The main risk is the lack of funds being available to pay for our future project commitments. All expenditure associated with exploration and development assets is forecast and budgeted at least 12 months in advance. The Company raises its funds through the financial market by share issues and does not become involved in derivatives and borrowing to fund its financial obligations. Further comment in respect of Financial Risk Management Objectives and Policies, Cash Flow Risk, Credit Risk, and Liquidity Risk are also covered within this Strategic Report. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Company’s activities expose it to a number of financial risks including liquidity risk, oil price risk, credit risk, and cash flow risk. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors, which provide written principles on the use of financial derivatives to manage these risks. The Company does not use derivative financial instruments for speculative purposes. LIQUIDITY RISK In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Company uses its existing cash funds. OIL PRICE RISK The Company is exposed to oil price risk associated with sales of oil from production. The Company does not currently consider it necessary to use hedging instruments to manage its exposure to this risk. CREDIT RISK The Company’s principal financial assets are its cash balances. The credit risk on liquid funds is limited because the counterparty is a bank with high credit-rating. CASH FLOW RISK During the year, the Company’s activities did not expose it to financial risks of changes in foreign currency exchange rates. GOING CONCERN The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement and this Strategic Report. The directors’ forecasts demonstrate that the Company will meet its day-to-day working capital and share of estimated project costs over the forecast period being at least 12 months from the sign- off of these financial statements. The principal risk to the Company’s working capital position is drilling cost overruns. The Company has sufficient funding to meet planned drilling expenditures and a level of contingency. Taking account of these risks, sensitised forecasts show that the Company is able to operate within the level of funds currently held at the date of approval of these financial statements. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. APPROVAL OF THE BOARD This Strategic Report contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. While the directors believe the expectation reflected within the Annual Report to be reasonable in light of the information available up to the time of their approval of this report, the actual outcome may be materially different owing to factors either beyond the Company’s control or otherwise within the Company’s control, for example owing to a change of plan or strategy. Accordingly, no reliance may be placed on the forward- looking statements. On behalf of the Board David Bramhill Executive Chairman 16 May 2022 17 Business and Strategywww.unionjackoil.comUNION JACK’S CURRENT LICENCE INTERESTS PEDL183 West Newton 16.665% PEDL180 PEDL182 Wressle Discovery Broughton North 3 PEDL253 Biscathorpe 4 PEDL005(R) Keddington Oilfield Louth North Somercotes EXL294 Fiskerton Oilfield PEDL241 North Kelsey PEDL118 Dukes Wood PEDL203 Kirklington 1 2 5 6 7 8 9 PEDL201 Widmerpool Gulf 26.25% PEDL181 Humber Basin 40% 45% 55% 20% 50% 16.67% 12.5% 10% 10 PEDL209 Laughton 18 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC PEDL183 West Newton PEDL146 PEDL183 WEST NEWTON A-1 NORTH SEA PEDL182 Broughton North PEDL180 PEDL182 Wressle Oilfield PL162 PEDL182 PEDL173 PEDL180 PEDL241 North Kelsey PEDL181 Humber Basin EXL288 1 6 1 L D E P 8 8 2 L X E TRUMFLEET PL161 HATFIELD PEDL209 Laughton 9 6 1 L D E P HATFIELD PL162 PEDL181 PEDL241 PEDL043 PEDL043 PEDL209 PEDL140 ML004 ML004 BECKINGHAM CORRINGHAM ML004 PEDL012 PEDL200 PEDL 210 PEDL006 PEDL 210 WEST FIRSBY PEDL006 COLD HANWORTH EAST GLENTWORTH PEDL253 SOUTH LEVERTON ML007 SCAMPTON NORTH SCAMPTON PEDL007 BOTHAMSALL NEWTON-ON-TRENT NETTLEHAM PEDL210 PL179 FARLEYS WOOD ML003 PEDL130 PEDL090 EGMANTON WHISBY BECKERING STAINTON WELTON EXL294 PEDL005(R) North Somercotes Prospect PEDL005 PEDL005 PEDL005 SALTFLEETBY PEDL005(R) Keddington Oilfield PEDL005(R) Louth Prospect PEDL253 Biscathorpe EAKRING KIRKLINGTON PEDL 118 PEDL 203 PEDL202 PEDL118 Dukes Wood PEDL203 Kirklington PEDL255 PEDL208 PEDL254 PEDL204 PL220 PEDL201 REMPSTONE PL220 PEDL201 Widmerpool Gulf EXL294 Fiskerton Oilfield 10km Gas Field Oil Field/Discovery Prospect 19 PEDL021 GOODWORTH PL116 HUMBLY GROVE PL233 PL249 STOCKBRIDGE PEDL070 AVINGTON DL004 ALBURY BROCKHAM PL235 PALMERS WOOD ML021 PEDL246 BLETCHINGLEY ML018 PL182 EXL189 EXL189 PEDL137 PEDL143 PEDL246 PEDL235 PEDL243 PEDL231 PEDL234 PEDL244 PL240 HORNDEAN PL211 PEDL126 PEDL233 SINGLETON PL205 STORRINGTON PL241 LIDSEY Business and Strategywww.unionjackoil.com DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2021 The directors present their report together with the financial statements for the year ended 31 December 2021. The directors have chosen, in accordance with section 414C(11) of the Companies Act 2006, to set out in the Company’s Strategic Report information required by Schedule 7 to the Accounting Regulations to be contained in the Directors’ Report. This information includes future developments of the Company and the risks associated with the use of financial instruments. DIRECTORS The directors in office at the end of the year, and their interests in the shares of the Company as at 1 January 2021 and 31 December 2021, were as shown in the table below: ORDINARY SHARES 31 December 2021 1 January 2021 416,646 1,897,914 242,058 20,000 416,646 1,686,914 242,058 20,000 D Bramhill J O’Farrell R Godson G Bull In September 2021, Joseph O’Farrell purchased 211,000 new ordinary shares at a price of 23.62 pence each. Directors who served during the year are as follows: David Bramhill (Executive Chairman) Joseph O’Farrell (Executive Director) Raymond Godson (Non-executive Director) Graham Bull (Non-executive Director) DIRECTORS’ REMUNERATION The remuneration of the directors in office at the year end 31 December 2021 was as follows: D Bramhill J O’Farrell R Godson G Bull D Bramhill J O’Farrell R Godson G Bull SALARIES AND FEES 2020 £ 2021 £ 287,083 120,000 40,000 40,000 215,000 85,000 37,500 37,000 OPTIONS 2021 1,200,000 700,000 300,000 550,000 2020 1,200,000 700,000 300,000 550,000 Directors’ remuneration is disclosed in note 3 of these financial statements. No options were granted to directors or officers during 2021. Further information in respect of options can be found in note 14(c) within the Notes to the Financial Statements section. Copies of the Service Agreements in respect of David Bramhill and Joseph O’Farrell are available for inspection at the Company’s Registered Office. Copies of the Letters of Appointment in respect of Graham Bull and Raymond Godson are available for inspection at the Company’s Registered Office. 20 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Directors’ Report FOR THE YEAR ENDED 31 DECEMBER 2021 DIRECTORS’ RESPONSIBILITIES STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021 The directors are responsible for preparing the Annual Report and 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 have elected to prepare the Company financial statements in accordance with UK adopted international accounting standards (IFRSs) in conformity with the requirements of the Companies Act 2006. 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 Company and of the profit or loss of the Company for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether they have been prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. ANNUAL GENERAL MEETING The Annual General Meeting of the Company will be held on 23 June 2022, in accordance with the Notice of Annual General Meeting on page 73. Details of the resolutions to be passed are included in this notice. 21 Governancewww.unionjackoil.comDirectors’ Report FOR THE YEAR ENDED 31 DECEMBER 2021 EVENTS AFTER THE BALANCE SHEET DATE CAPITAL STRUCTURE Details of the issued share capital, together with details of the movements in the Company’s issued share capital during the year, are shown in note 14(a). DISCLOSURE OF INFORMATION TO THE AUDITOR The directors at the date of the approval of this Annual Report confirm that: • • so far as the directors are aware, there is no relevant audit information of which the Company’s auditor is unaware; and the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. AUDITOR A resolution to reappoint BDO LLP will be proposed at the forthcoming Annual General Meeting. COMPANY NAME AND REGISTERED NUMBER The registered number of Union Jack Oil plc is 07497220. On behalf of the Board David Bramhill Executive Chairman 16 May 2022 The following events have taken place after the year end: In January 2022, the Company received a positive independent review from RPS Group, a leading global company offering services within the energy sector in respect of West Newton flow rate potential. The RPS review indicated that initial average production rates of up to 35.6 million cubic feet of gas per day from a horizontally drilled well situated in the gas zone could be achieved, based on the data from the West Newton A-2 well. The study also indicated initial average production rates of up to 1,000 bopd from a horizontally drilled well situated in the oil zone, based on data from the West Newton A-2 well. In January 2022, the Company announced a summary of the results of an analysis of the bottom hole pressure data acquired from the Wressle-1 well during December 2021. The interpretation was completed by ERCE, an independent energy consultancy, on behalf of the Wressle Joint Venture partners. Results demonstrated the significant potential of the Wressle-1 well and the production rates that could be achieved once the surface facilities are optimised and a gas monetisation scheme is in place. During January 2022, the Company announced the intention of the operator of PEDL253 to appeal against the refusal of planning permission by Lincolnshire County Council, for a side track drilling operation, associated testing and long-term oil production. During March 2022, planning for the extension for PEDL241 was refused by the Lincolnshire County Council. The Joint Venture Partners are considering an appeal. During March 2022, planning for the drilling of additional wells and production at West Newton A site was approved by the East Riding of Yorkshire Council. Separately, permission was granted for a time extension to allow further exploratory drilling at West Newton B site. During March 2022, settlement of £2,083,333 for the consideration payment of a 25% interest in PEDL180 and PEDL182 was made to Calmar LLP. During April 2022, the Company announced a US$5 million net landmark reached in revenues generated from the Ashover Grit reservoir at the Wressle-1 well. 22 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2021 CORPORATE GOVERNANCE REPORT The Company’s securities are traded on the Alternative Investment Market (“AIM”) of the London Stock Exchange. The London Stock Exchange has recently introduced changes to the AIM rules requiring all AIM listed companies to adopt and comply with a recognised corporate governance code. The Corporate Governance Report has been prepared by David Bramhill, the Executive Chairman of the Company, and has been approved by the Company’s Board of directors (the “Board”) in accordance with the recommendations of the QCA Corporate Governance Code 2018 (the “Code”), which the Company has adopted as its code of governance. This statement explains how the 10 principles of the Code are applied by the Company, and where the Company departs from the Code, an explanation of the reasons for doing so is provided. QCA Code Recommendation Application by the Company 1. Principle 1 Establish a strategy and business model which promotes long-term value for shareholders. The Board must be able to express a shared view of the Company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the Company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the Company from unnecessary risk and securing its long-term future. The primary objective of the Company is to build a safe, sustainable and successful conventional onshore hydrocarbon exploration, development and production business, which the Board seeks to deliver through the acquisition of, and subsequent investment in, carefully selected licence interests. The Company undertakes this in conjunction with three JOA partners, Egdon Resources plc, Rathlin Energy (UK) Limited and Europa Oil & Gas Limited. The Company’s strategy is the appraisal and exploitation of the assets currently owned. Simultaneous with this process, the Board expects to continue to use its expertise and cash resources to acquire further licence interests and production in the UK. The Board is optimistic about the prospect of delivering shareholder value in the medium to long-term via the acquisition and increased interest in various high impact licence areas with proven reserves, contingent resources and drill-ready prospects. The Board is acutely aware of the risks associated with hydrocarbon exploration, development and production and seeks to mitigate the risk of exploration by having interests in a portfolio of petroleum licences thereby not being overly exposed to any single asset. The Company’s strategy is underpinned by a well-balanced and diverse onshore UK asset portfolio, ensuring the relevant components of production, development, appraisal and discovery are all in place, as is adequate and prudently sourced funding for the Company’s commitments going forward. 23 Governancewww.unionjackoil.comCorporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 2. Principle 2 Seek to understand and meet shareholders’ needs and expectations. Directors must develop a good understanding of the needs and expectations of all elements of the Company’s shareholder base. The Board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions. Since the Company’s incorporation in January 2011, members of the Board have been very active in encouraging and participating in direct dialogue with shareholders in order to ensure the Company’s shareholders are kept regularly updated and are able to discuss strategy and performance directly with the Board (subject always to compliance with legal and regulatory requirements, including the Market Abuse Regulations (“MAR”)). This also allows the Board to obtain a clear understanding of shareholders’ motivations and concerns. Direct communication with shareholders is achieved primarily through the timely release of regulatory news, via a regulatory information service, which can be accessed through various channels, including the London Stock Exchange website www.londonstockexchange.com and the Company’s website www.unionjackoil.com. In addition to the dissemination of regulatory news, the Company also seeks to keep its shareholders informed of current developments and performance via interviews and speaking events at various conferences. All shareholders are encouraged to attend the Company’s Annual General Meeting (“AGM”), where the directors are available to answer questions. Investors also have access to current information on the Company through its website and via genuine enquiries sent to: info@unionjackoil.com. Investor communications are managed by the Executive Chairman, in conjunction with the Company’s Nominated Adviser. Due to investor speculation around junior hydrocarbon companies, the Board recognises the particular importance of regular, clear and timely communications with shareholders, to ensure that they are kept abreast of major developments and potential risks in respect of the Company and the industry without delay. Management believes that shareholders are seeking a return on their investment primarily through capital appreciation as a result of exploration and appraisal success. Management prudently manages the Company to ensure that work programmes are fully funded and uses the Board’s technical expertise to reduce or mitigate the risk of exploration. 24 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 3. Principle 3 Take into account wider stakeholder and social responsibilities and their implications for long-term success. Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The Board needs to identify the Company’s stakeholders and understand their needs, interests and expectations. Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups. The Board is keenly aware of the local environment and the inhabitants in which the Company’s licence interests are situated. While the Company does not manage these relationships directly on a day-to-day basis, the Board works with the Company’s JOA partners to ensure that any queries or concerns any community members may have are swiftly addressed and, at the same time, all community members are treated with the respect and attention they deserve. The JOA partnerships act, via the Operators, to the highest standards and operate in a safe and conscientious manner in respect of site safety and environmental policies. Site operations are subject to scrutiny by the North Sea Transition Authority, Environment Agency and the Health and Safety Executive before commencement. The Operator adheres diligently to all requirements for a safe working environment. All site personnel are subject to all Health and Safety measures which include induction courses before admission to site and the mandatory wearing of safety equipment in order to ensure the wellbeing of site staff and visitors. As set out above, due to the specific nature of the Company’s business, the Company currently relies on three key JOA partners, Egdon Resources U.K. Limited, Rathlin Energy (UK) Limited and Europa Oil & Gas Limited, who manage and operate the Company’s licence interests on its behalf. The Company takes its relationship with its JOA partners and its third party professional advisers (both of whom it sees as its key stakeholders) very seriously and the Board continues to discuss any issues and queries the Company’s JOA partners may have in an open, direct and constructive manner. The Company also acknowledges the importance of maintaining good relations with its suppliers and creditors and it adheres to a strict policy of settling all invoices in a timely manner. 25 Governancewww.unionjackoil.comCorporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 4. Principle 4 Embed effective risk management, considering both opportunities and threats, throughout the organisation. The Board needs to ensure that the Company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy. Setting strategy includes determining the extent of exposure to the identified risks that the Company is able to bear and willing to take (risk tolerance and risk appetite). The management of the business and the execution of the Company’s strategy are subject to a number of risks. The Board ensures risks are mitigated as far as reasonably practicable by performing a detailed review of the issues pertaining to each significant decision. Significant decisions are reviewed by the Board having consulted the Company’s professional third party advisers (be they legal, financial or technical). The Board convenes on a regular basis, either by telephone or in person on a formal basis to discuss risk management as explained in Principle 5. As with the majority of companies within the energy sector, the business of oil and gas exploration and development includes varying degrees of risk. These risks include operating reliance on third parties, the ability to monetise discoveries, the price of products and the costs of exploration and/or production. The principal risks to the Company as well as the mitigation actions by the Board are set out below: Strategic risk: a weak or poorly executed acquisition and development process fails to create shareholder value. This risk is mitigated through performing a detailed technical review, both internally by management and externally by advisers, for each investment which includes valuation exercises on the potential return on capital invested. Operational risk: operational events can have an adverse effect. The main risk is the potential failure to obtain planning permission in respect of the Company’s licence interests. This risk is mitigated by the appointment of specialist professional entities who work together to compile planning applications designed to achieve a positive result. On-site operational risks are managed by the site Operators, Egdon Resources U.K. Limited, Rathlin Energy (UK) Limited and Europa Oil & Gas Limited, who have, to date, safety records of the highest standard. External Risk: lack of growth caused by political, industry or market factors. The Company operates exclusively within the UK and the Board considers that the UK onshore hydrocarbon arena offers political security and excellent value under a regime with a very clearly spelt out protocol giving the opportunity to develop assets unhindered. The future ramifications of Brexit remain unknown, however, the directors are of the opinion that there is no reason to believe there will be any effect in respect of the Company’s going concern status for the foreseeable future. Financial Risk: the lack of ability to meet financial obligations. The Company has historically raised its funds through equity capital markets by share issues and has not been involved in derivative instruments and debt financing to meet its financial obligations. Product Price Risk: due to the nature of the periodic fluctuation of oil prices, any such adverse fluctuation could potentially have an impact on the Company’s resulting return to its shareholders. The Company also holds Directors’ and Officers’ Liability Insurance cover and the Company is covered by the Operators’ insurance policies during drilling and other operational situations for specific projects. 26 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 5. Principle 5 Maintain the Board as a well-functioning, balanced team led by the Chairman. The Board members have a collective responsibility and legal obligation to promote the interests of the Company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board. The Board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight. The Board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a Board judgement. The Board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. Directors must commit the time necessary to fulfil their roles. The Board consists of two executive directors, David Bramhill and Joseph O’Farrell, and two non-executive directors, Graham Bull and Raymond Godson, who are responsible for the management of the Company. Raymond Godson and Graham Bull are classified as independent directors. Although Ray Godson and Graham Bull hold shares and options in the Company, these are considered to be de minimus and are not deemed to affect their independent thought and judgement. No members of the Board have other commitments that would prevent them from spending as much time as required to ensure the aims and best interests of the Company are met. Any changes to directors’ commitments and interests will be reported to and, where appropriate, agreed with the rest of the Board. The Board meets formally in person and by telephone multiple times throughout the year, attendance of which has always been 100% since the Company’s incorporation. The Board also holds regular informal project appraisal and strategy discussions, and meets every quarter, on a formal basis, to review trading performance, budgets, ensure adequate funding, set and monitor strategy, examine acquisition opportunities and assess risks on an ongoing basis in respect of operational projects. The directors encourage a collaborative Board culture to ensure that each decision reached is always in the Company’s and its shareholders’ best interests and that any one individual opinion never dominates the decision making process. The Board seeks, so far as possible, to achieve decisions by consensus and all directors are encouraged to use their independent judgement and to challenge all matters whether strategic or operational. To date all decisions have been unanimous. The Company’s two non-executive directors hold shares and options in the Company. The Board is satisfied that these shareholdings and options are not “significant”. Therefore, such shareholdings do not contravene the provisions of the Code. During 2021, the Board held six meetings, either by telephone or in person. Board Member Board Meetings Attended (6 held in the period) Audit Committee (2 held in the period) Remuneration Committee (2 held in the period) D Bramhill J O’Farrell G Bull R Godson 6 6 6 6 – – 2 2 – – 2 2 There are no mandatory hours for directors to be available for Company business. The executive directors and non-executive directors are available for any Company business when it may arise. The Board delegates certain decisions to an Audit Committee and a Remuneration Committee. The Audit Committee has joint responsibility for reviewing the year end accounts with the Auditor. The Remuneration Committee reviews the remuneration of the executive directors on an annual basis. Both committees are dedicated to establish and maintain robust internal financial control systems for the Company. 27 Governancewww.unionjackoil.comCorporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 6. Principle 6 Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities. The Board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The Board should understand and challenge its own diversity, including gender balance, as part of its composition. The Board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board. As companies evolve, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change. The current Board composition of the Company and each director’s experience is set out in this report. The Board’s view is that the directors have a variety of complementary experiences and skillsets, including experience of industry-specific technical, financial and public capital markets sectors. An overview of the directors are as follows: David Bramhill, Executive Chairman, 71 Mr Bramhill has over 40 years’ experience in the natural resources industry. Mr Bramhill has directed and managed several energy companies and was the former managing director of OilQuest Resources plc, subsequently acquired by EnCore Oil plc. Mr Bramhill was an executive director at the time of Nighthawk Energy plc’s AIM flotation in March 2007 and a non-executive Chairman of Wessex Exploration plc when that company floated on AIM in March 2011. He resigned from these companies in 2010 and 2012 respectively. Mr Bramhill had previously consulted in an engineering capacity for over 20 years on projects for Shell, ExxonMobil, Petrofina, BP and numerous other international energy companies. Joseph O’Farrell, Executive Director, 70 Mr O’Farrell has over 30 years’ corporate experience in the hydrocarbon and mining industry. He has managed several energy companies and is a former director of OilQuest Resources plc and Nighthawk Energy plc, having been a director of these two companies at the time of their respective flotations on AIM. He has assisted a number of companies working in conjunction with corporate advisers in pre-IPO fundraising and project acquisition. Graham Bull, Non-Executive Director, 76 Mr Bull is a geologist with 51 years’ of international oil and gas industry exploration experience. Following graduation from the University of Leicester in 1968 with a BSc Hons Geology he worked in Canada and held positions with Chevron, Dome Petroleum, Siebens Oil and Gas and Poco Petroleum and also provided exploration expertise to a Canadian drilling fund. He returned to the UK in 1982 taking the position as Chief Geologist to Sovereign Oil and Gas plc. In addition, Mr Bull has operated as a geological adviser for EnCore Oil plc (formerly OilQuest Resources plc), Premier Oil plc, Cirque Energy and DSM Energy. He is currently an exploration geological consultant working on Northwest Europe offshore and onshore United Kingdom and other international areas. Mr Bull is a member of the Petroleum Exploration Society of Great Britain, the American Association of Petroleum Geologists and a Fellow of the Geological Society of London. Mr Bull is the Chairman of the Remuneration Committee and a member of the Audit Committee. 28 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 6. Principle 6 (continued) Raymond Godson, Non-Executive Director, 78 Mr Godson is a chartered accountant with 43 years’ experience in the provision of oil and gas related services to energy companies. Mr Godson joined the Rio Tinto group in 1973 where he spent 16 years rising to become the financial and commercial director of the oil and gas subsidiary RTZ Oil & Gas Limited. In 1988 he joined Teredo Petroleum PLC (“Teredo”) where he became the managing director in 1992. Following the takeover of Teredo in 1993, he became a full time accountant in general practice, where the majority of his business has been oil and gas related. Mr Godson acted as Company Secretary for Fusion Oil & Gas plc from IPO to its takeover by Sterling Energy Plc. He was subsequently company secretary for both Ophir Energy Plc and Aurelian Oil & Gas Plc. He is currently an executive director of Montrose Industries Limited. Mr Godson is the Chairman of the Audit Committee and a member of the Remuneration Committee. The directors are mindful of the need to ensure the Company has in place a diverse Board that encompasses the right skills required to ensure the Company’s continued success, including creating an atmosphere of constructive challenge and consensus for any decision reached. As such, and given the current size of the Company, the Board is of the opinion its composition and skillset is sufficient to maintain and drive the long-term success for the Company’s shareholders. Each director takes his continued professional and technical development seriously, so in order to ensure the Board keeps abreast of the current challenges faced by the industry the Company operates in, the directors attend both trade shows and technical sessions during the course of any given year. The Board ensures it is well advised and supported by utilising a range of external experts in various fields, and employs accountants, legal counsel, a Company Secretary and a Nominated Adviser, in accordance with the AIM rules. On the industry specific front, it also employs three technical consultancies: Sotwell Exploration Ltd, Calderdale Geoscience Limited and Oil & Gas Advisers Limited. Sotwell Exploration Ltd and Calderdale Geoscience Limited are responsible for supplying technical advice on specific projects. Both companies work closely with non-executive director, Graham Bull and are responsible, on a permanent basis, for updating and reviewing independently all technical information provided to the Company on its key projects. Oil & Gas Advisers Limited provides a financial overview in respect of due diligence on potential project acquisitions and ongoing economics of our key projects. Matthew Small is Company Secretary and, via an established accounting entity, Berkeley Hall Marshall Limited, represents the Company as de facto financial controller, working closely with the Executive Chairman and the Audit and Remuneration Committees. 29 Governancewww.unionjackoil.comCorporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company While the Board is very much aware of the needs of the Company in ensuring effectiveness of Board performance and the periodic refreshment of the composition of the Board, the Board believes that due to the Company’s current size and its current corporate culture of constructive challenge and consensus on each decision reached, the procedures already in place are sufficient for monitoring Board performance and no external performance reviews are required at this time. This will be kept under review. The Board is also of the opinion that the Company has appropriate measures in place to ensure any refreshment of the Board occurs in a timely manner, and always with the best interests of the shareholders in mind. 7. Principle 7 Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. The Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors. The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team. It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for the board. No member of the Board should become indispensable. 30 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 8. Principle 8 Promote a corporate culture that is based on ethical values and behaviours. The Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage. The policy set by the Board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the Company. The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the Company. The corporate culture should be recognisable throughout the disclosures in the Annual Report, website and any other statements issued by the Company. The directors recognise that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board seeks to embody and promote a corporate culture that is based on sound ethical values as it believes the tone and culture set by the Board impacts all aspects of the Company, including the way that employees and other stakeholders behave. The Company has adopted a share dealing code which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of MAR. The Board believes that, as evidenced through the disclosures made throughout this statement, its corporate governance regime and culture are at the core of its operations and are appropriate given the current size of the Company. Furthermore, through its interaction with its stakeholders and in the communities in which it operates (described above), it maintains a collaborative and constructive dialogue that embodies a dynamic, accessible, open door and vibrant corporate culture. The Company’s corporate culture is monitored/assessed regularly, taking on board immediately any changes made by AIM Rule 26 and where advisers may advise. All financial transactions are reviewed independently by Berkeley Hall Marshall Limited. An anti-bribery policy is in place. As such, and taking into account the Board interaction with each of its professional advisers described above, the Board is satisfied that its governance regime is more than adequate given the size of the Company, its shareholder base and business pipeline. 31 Governancewww.unionjackoil.comCorporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 9. Principle 9 Maintain governance structures and processes that are fit for purpose and support good decision- making by the Board. The Company should maintain governance structures and processes in line with its corporate culture and appropriate to its: • size and complexity; and • capacity, appetite and tolerance for risk. The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Company. As disclosed throughout this statement, the Company maintains and employs robust corporate governance practices to support an effective and collaborative Board, always working in the best interests of its shareholders. The roles of the individual Board members are as follows: • The Executive Chairman, David Bramhill, is responsible for running the business of the Board, ensuring strategic focus and direction and for managing investor communications • The Executive Director, Joseph O’Farrell, is responsible for assisting the Executive Chairman to execute the Board’s strategy and coordinating corporate finance activities • The Non-Executive Director, Graham Bull, is a petroleum geologist and is responsible for identifying and evaluating potential projects and to provide technical oversight of the Company’s existing projects. Mr Bull chairs the Remuneration Committee • The Non-Executive Director, Raymond Godson, is a Chartered Accountant who has abundant experience in the oil & gas industry. Mr Godson chairs the Audit Committee Two Board committees are in place to ensure control over the Company’s financial reporting processes and directors’ remuneration. Details of the two Board committees are as follows: The Audit Committee The Audit Committee comprises Raymond Godson, who acts as its Chairman, and Graham Bull. The Audit Committee is responsible for considering a wide range of financial matters which include the reviewing of Half Yearly and Annual Reports, discussions with the Auditor, share placing agreements and the oversight of internal controls and new accounting standards relevant to the Company. This Committee also provides a forum for reporting by the Company’s auditor. The executive directors may attend meetings by invitation. 32 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 9. Principle 9 (continued) The Remuneration Committee The Remuneration Committee comprises Graham Bull, who acts as its Chairman, and Raymond Godson. The current executive director remuneration package comprises basic salary and share options. Directors’ remuneration for the year is noted in the Directors’ Report in the Company’s Annual Report. The remuneration of non-executive directors is determined by the executive directors. Due to the size of the Company, it is not considered necessary to have a separate Nominations Committee at this time. Instead this role is fulfilled by the Board as a whole. The Board also reserves to itself the process by which a new director is appointed. Each committee has access to such resources, information and advice as it deems necessary, at the cost of the Company, to enable the committee to discharge its duties. The Board intends that the Company’s governance structures will evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Company. 33 Governancewww.unionjackoil.comCorporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 QCA Code Recommendation Application by the Company 10. Principle 10 As set out above, the Company ensures: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. A healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the Company. In particular, appropriate communication and reporting structures should exist between the Board and all constituent parts of its shareholder base. This will assist: • the communication of shareholders’ views to the Board; and • the shareholders’ understanding of the unique circumstances and constraints faced by the Company. It should be clear where these communication practices are described (Annual Report or website). • a printed Annual and Half Year Report is delivered to each shareholder, and also made available on the Company’s website • all RNS announcements are released in a timely manner, while also ensuring all announcements are drafted in a clear and concise fashion In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting. The outcome of all shareholder votes are disclosed in a clear and transparent manner via a RNS. The Company includes historical Annual Reports, Notices of General Meetings and RNS announcements over the last five years on its website. The Company also lists contact details on its website, should shareholders wish to communicate with the Board. The Company intends to include, where relevant, in its Annual Report, any matters of note arising from the Audit or Remuneration Committees. A Remuneration or Audit Committee report is not included separately within these financial statements. All relevant information has been included where required. Shareholders are actively encouraged to both attend the Company’s Annual General Meeting and throughout the year to contact the Chairman to discuss any queries or concerns they may have. Given the size of the Company, the Board is of the opinion that no formal communication structures are required at this time. The Company does however: • ensure continued disclosure of all items in conjunction with AIM Rule 26 on its website • disclose the results of all shareholder votes once held, in conjunction with the Company’s Annual General Meeting • keep in constant communication and dialogue with its key stakeholders and JOA partners through an accessible and open-door policy, with the Executive Chairman acting as the key conduit. For avoidance of doubt, it is important to note that any conversations shareholders and the Executive Chairman may have are always conducted in accordance of what is permissible under MAR The Company’s communication practices are set out on its website at: www.unionjackoil.com/aim-rule-26/ 34 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report FOR THE YEAR ENDED 31 DECEMBER 2021 THE BOARD AUDIT COMMITTEE During the year the Board of Union Jack Oil plc consisted of two executive directors and two non-executive directors as disclosed within the Directors, Officers and Advisers section of this report, who were responsible for the proper management of the Company. The Board met in person or by telephone, as permitted by the current Articles of Association, eight times during the year. In addition, the Board held numerous project appraisal and strategy discussions during the year. The Board will meet at least four times in the coming year to review trading performance and budgets, ensure adequate funding, set and monitor strategy, examine acquisition opportunities and report to shareholders. The Board has a formal schedule of matters specifically reserved to it for decisions. REMUNERATION COMMITTEE The Remuneration Committee comprises Graham Bull, who acts as its Chairman, and Raymond Godson. The current executive director remuneration package comprises basic salary and share options. Directors’ remuneration for the year is noted in the Directors’ Report and shown in note 3 on page 56. Those disclosures form part of this report and are disclosed within the Directors’ Report, and note 3 within the Notes to the Financial Statements section of this Annual Report. The remuneration of non-executive directors is determined by the Board. The Audit Committee comprises Raymond Godson, who acts as its Chairman, and Graham Bull. The Audit Committee is responsible for considering a wide range of financial matters, which include the reviewing of Half Yearly and Annual Reports, discussions with the Auditor, share placing agreements and the oversight of internal controls and new accounting standards relevant to the Company. This Committee also provides a forum for reporting by the Company’s auditor. The executive directors may attend meetings by invitation. INTERNAL FINANCIAL CONTROL The directors are responsible for establishing and maintaining the Company’s internal financial control systems. These are designed to meet the particular needs of the Company and the risks to which it is exposed, and by their nature can provide reasonable but not absolute assurance against material misstatement or loss. The key procedures that the directors have established to provide effective internal financial controls are: • Identification of Business Risks The Board is responsible for identifying the major business risks faced by the Company and for determining the appropriate course of action to manage these risks • Investment Appraisal Capital expenditure is regulated by authorisation limits. For expenditure beyond the specified limits including investments in exploration projects, detailed proposals are submitted to the Board for review and sign-off. • Financial Reporting The Company has a comprehensive system for reporting financial results to the Board • Audit Committee The Audit Committee considers and determines relevant action in respect of any control issues raised by the external auditor 35 Governancewww.unionjackoil.com INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS TO THE MEMBERS OF UNION JACK OIL PLC OPINION ON THE FINANCIAL STATEMENTS In our opinion: • the financial statements give a true and fair view of the state of the Company’s affairs as at 31 December 2021 and of the Company’s loss for the year then ended; • • the financial statements have been properly prepared in accordance with UK adopted international accounting standards; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 We have audited the financial statements of Union Jack Oil plc (the ‘Company’) for the year ended 31 December 2021 which comprise the Income Statement, the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flows and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and UK adopted accounting standards. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. INDEPENDENCE We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. CONCLUSIONS RELATING TO GOING CONCERN In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: • Reviewing the Company’s cash flow forecasts for the period to 30 June 2023 and considering the completeness and accuracy of the future cash flows by assessment against historical spend and known contractual arrangements. We reviewed the Company’s project commitments and verified that these were included in the cash flow forecast • Considering the reasonableness of assumptions used by the directors in the preparation of the cash flow forecast which included comparing the 2021 actual results to the 2021 forecast • Performing sensitivity analysis on the base case scenario prepared by the directors including oil price sensitivities, production sensitivities and assumptions around investing activities • Reviewing the adequacy of disclosures made within the financial statements on the going concern basis of preparation Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. OVERVIEW Key audit matters Carrying value of the oil and gas assets 2021 ✓ 2020 ✓ Materiality Company financial statements as a whole £230,000 (2020: £136,000) based on 1% of total assets (2020: 1% of three-year average total assets). AN OVERVIEW OF THE SCOPE OF OUR AUDIT Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the directors that may have represented a risk of material misstatement. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, 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) that 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. 36 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Independent Auditor’s Report on the Financial Statements TO THE MEMBERS OF UNION JACK OIL PLC Key audit matter How the scope of our audit addressed the key audit matter Carrying value of the oil and gas assets Refer to the Accounting Policies and notes 7 and 8. The Company’s oil and gas assets are classified as intangible assets where the Company has exploration and evaluation interests (“E&E”) and as property, plant and equipment where the Company has development and producing interests (“D&P”). In respect of both the Company’s E&E and D&P assets, the directors are required to assess annually for any indicators of impairment of the assets. If an indicator of impairment is identified the directors are required to perform an assessment of the carrying value of the assets. In the prior year, the directors identified that the Duke’s Wood and Kirklington assets were considered to be impaired due to the uncertainty in respect of the future oil production from the licences. There were no further impairment indicators identified on any of the other assets. Given the significance of the assets on the Company’s Balance Sheet and the significant judgement involved in the assessment of potential indicators of impairment, we determined that there is an increased risk of material misstatement, and therefore, we consider this to be a key audit matter. Our response to the risk In respect of both the E&E assets and the D&P assets we evaluated the directors' impairment review for each of the assets held. We challenged the considerations made as to whether or not there were any indicators of impairment identified in accordance with the requirements of the relevant accounting standards. Our specific audit procedures for the E&E assets included obtaining and challenging the directors’ assessment of impairment indicators under IFRS 6 Exploration and Evaluation of Mineral Resources. This included: • verifying of the licence status to publicly available information in order to confirm the legal title and validity of each of the licences. • • reviewing approved budget forecasts and minutes of management and Board meetings to confirm the Company’s intention to continue exploration work on the licences. reviewing available technical documentation and discussion of results and operations with management in order to obtain an understanding of management’s expectation of commercial viability Our specific audit testing for the D&P assets included: • assessing the appropriateness of the cash generating unit classification and the impairment considerations against the provisions of IAS 36 Impairment of Assets. • verifying the licence status to publicly available information in order to confirm legal title and validity of each of the licences. • assessing available market data on oil prices and the impact on the Company’s assets to assess whether there are indicators of impairment. • undertaking an assessment of whether there were further internal potential impairment indicators identified (i.e. obsolescence from internal reporting such as minutes of meetings) or external potential indicators of impairment (i.e. the market capitalisation of the Company, economic trends in interest rates etc.) Key observations: Based on our procedures performed we consider the assumptions used in the impairment indicator assessment of the oil and gas assets to be appropriate. 37 Governancewww.unionjackoil.comIndependent Auditor’s Report on the Financial Statements TO THE MEMBERS OF UNION JACK OIL PLC OUR APPLICATION OF MATERIALITY We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Company Financial Statements 2021 £230,000 2020 £136,000 1% of total assets calculated based on draft figures at the planning stage of our audit 1% of total assets averaged over the last three reporting periods. We consider total assets to be the relevant benchmark as the Company generates minimal revenue and total assets are likely to be the primary focus for the users of the financial statements given the majority of the Company’s activities are in exploration and development phase. In FY20, a three-year average of total assets was used as there was significant fund raises in the year that inflated the FY20 asset balance. In FY21, there were no significant fund raises that occurred and as such, the Company’s total asset balances is the most appropriate benchmark. This is in line with the materiality benchmark used in 2019. The majority of the Company’s activities are in the exploration and development phase and total assets are likely to be the primary focus for the users of the financial statements. As the Company’s cash balance has increased significantly as a result of a fund raising, an average of the last three years total asset balances is the most appropriate benchmark. £172,000 £102,000 75% of materiality. The level of performance materiality was set after considering a number of factors including the expected value of known and likely misstatements and management’s attitude towards proposed misstatements. 75% of materiality. The level of performance materiality was set after considering a number of factors including the expected value of known and likely misstatements and management’s attitude towards proposed misstatements. Materiality Basis for determining materiality Rationale for the benchmark applied Performance materiality Basis for determining performance materiality SPECIFIC MATERIALITY As a result of production at Wressle commencing in the period and the Company having increased income statement activity, we also determined that for the Income Statement, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined materiality for these items based on 2% of total expenditure of £57,000 (2020: none). We further applied a performance materiality level of 75% of specific materiality of £43,000 (2020: none) to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. REPORTING THRESHOLD We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £5,000 (2020: £2,700). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. 38 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Independent Auditor’s Report on the Financial Statements TO THE MEMBERS OF UNION JACK OIL PLC OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the Annual Report and the Financial Statements other than the financial statements and our Auditor’s Report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. 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. OTHER COMPANIES ACT 2006 REPORTING Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic Report and Directors’ Report 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 In the light of the knowledge and understanding of the 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. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit RESPONSIBILITIES OF DIRECTORS As explained more fully in the Directors’ Responsibilities Statement, 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 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 Company or to cease operations, or have no realistic alternative but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 39 Governancewww.unionjackoil.comIndependent Auditor’s Report on the Financial Statements TO THE MEMBERS OF UNION JACK OIL PLC EXTENT TO WHICH THE AUDIT WAS CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD – we reviewed minutes from Board meetings of those charges with governance to identify any instances of non-compliance with laws and regulations; and 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: • We obtained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates, through discussion with Directors and our knowledge of the industry; • We considered the significant laws and regulations of the UK to be those relating to the industry including, Oil & Gas Regulation, the financial reporting framework, tax legislation and the AIM listing rules. • We held discussions with Directors to consider any known or suspected instances of non-compliance with laws and regulations or fraud identified by them; • We assessed the susceptibility of the Company’s Financial Statements to material misstatement, including how fraud might occur by obtaining an understanding of the controls that the Company has established to address risks identified by the entity, or that otherwise seek to prevent, deter or detect fraud. We considered the significant fraud risk areas to be in relation to revenue recognition and management override of controls; • We addressed the fraud risk in relation to revenue recognition by, testing a sample of revenue transactions to supporting documentation, including testing revenue transactions in the period proceeding and preceding year end to assess that they were recorded in the correct period. • We addressed the risk of management override of internal controls, including testing a risk based selections of journals and evaluating whether there was evidence of bias in the Directors’ estimates (Refer to the ‘key audit matters’ section) that represented a material misstatement due to fraud. Specifically: – we tested the appropriateness of journal entries made through the year by applying specific criteria to detect possible irregularities and fraud; – we assessed whether the judgements made in accounting estimates were indicative of a potential bias (refer to key audit matters above); – we also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s Report. USE OF OUR REPORT This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Jill MacRae (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, United Kingdom 16 May 2022 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 40 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021 Revenue Cost of sales - operating costs Cost of sales - depreciation Notes 31.12.21 £ 31.12.20 £ 1,894,875 (377,153) (735,160) 158,004 (286,892) (57,715) Gross profit / (loss) 782,562 (186,603) Administrative expenses (excluding impairment charge) Impairment Total administrative expenses Operating loss Finance income Royalty income Loss before taxation Taxation Loss for the financial year Attributable to: Equity shareholders of the Company Loss per share Basic and diluted loss per share (pence) 2 2 4 4 5 6 (1,740,962) (1,590,576) (156,995) (106,714) (1,897,957) (1,697,290) (1,115,395) (1,883,893) 112,611 149,771 18,378 – (853,013) (1,865,515) – – (853,013) (1,865,515) (853,013) (1,865,515) (0.83) (2.23) The accompanying accounting policies and notes form an integral part of these financial statements. 41 Financial Statementswww.unionjackoil.com STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 Notes 31.12.21 £ 31.12.20 £ Loss for the financial year (853,013) (1,865,515) Items which will not be reclassified subsequently to profit or loss Other comprehensive profit / (loss) 10 54,420 (83,190) Total comprehensive loss for the financial year (798,593) (1,948,705) The accompanying accounting policies and notes form an integral part of these financial statements. 42 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC BALANCE SHEET AS AT 31 DECEMBER 2021 Assets Non-current assets Exploration and evaluation assets Property, plant and equipment Investments Loan receivables Current assets Inventories Loan receivables Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Non-current liabilities Provisions Total liabilities Net assets Notes 31.12.21 £ 31.12.20 £ 7 8 10 11 11 12 13 20 21 8,525,373 7,575,525 291,518 – 6,134,717 6,452,287 137,098 1,001,632 16,392,416 13,725,734 8,829 1,028,110 1,065,812 5,977,541 – 8,993 337,063 7,269,014 8,080,292 7,615,070 24,472,708 21,340,804 2,390,603 2,447,727 1,876,758 803,772 4,267,361 3,251,499 20,205,347 18,089,305 7,507,076 21,528,077 638,586 (9,468,392) 6,825,258 19,522,379 411,467 (8,669,799) 20,205,347 18,089,305 Capital and reserves attributable to the Company’s equity shareholders Share capital Share premium Share-based payments reserve Accumulated deficit Total equity 14(a) 15 15 15 The financial statements of Union Jack Oil plc, registered number 07497220, were approved and authorised for issue by the Board of Directors on 16 May 2022 and were signed on its behalf by: David Bramhill Director The accompanying accounting policies and notes form an integral part of these financial statements. 43 Financial Statementswww.unionjackoil.com STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Share-based Share capital £ Share premium £ payment Accumulated deficit £ reserve £ Total £ Balance at 1 January 2021 6,825,258 19,522,379 411,467 (8,669,799) 18,089,305 Loss for the financial year Other comprehensive profit Total comprehensive loss for the year Contributions by and distributions to owners Issue of share capital Share issue costs Share-based payments Total contributions by and distributions to owners – – – – – – – – – (853,013) (853,013) 54,420 54,420 (798,593) (798,593) 681,818 – – 2,318,182 (312,484) – – – 227,119 – – – 3,000,000 (312,484) 227,119 681,818 2,005,698 227,119 (798,593) 2,116,042 Balance at 31 December 2021 7,507,076 21,528,077 638,586 (9,468,392) 20,205,347 Balance at 1 January 2020 5,731,508 14,205,000 167,466 (6,721,094) 13,382,880 Loss for the financial year Other comprehensive loss Total comprehensive loss for the year Contributions by and distributions to owners Issue of share capital Share issue costs Share-based payments Total contributions by and distributions to owners – – – – – – – – (1,865,515) (1,865,515) (83,190) (83,190) – (1,948,705) (1,948,705) 1,093,750 – – 5,906,250 (588,871) – – – 244,001 – – – 7,000,000 (588,871) 244,001 1,093,750 5,317,379 244,001 (1,948,705) 4,706,425 Balance at 31 December 2020 6,825,258 19,522,379 411,467 (8,669,799) 18,089,305 The accompanying accounting policies and notes form an integral part of these financial statements. 44 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 Cash flow from operating activities Cash flow from investing activities Purchase of intangible assets Purchase of property, plant and equipment Loan advanced Purchase of investments Interest received Notes 31.12.21 £ 31.12.20 £ 16 7 8 11 10 4 (646,726) (1,412,801) (2,277,224) (1,022,055) – (100,000) 67,016 (2,874,060) (389,330) (1,000,000) (100,000) 7,754 Net cash used in investing activities (3,332,263) (4,355,636) Cash flow from financing activities Proceeds on issue of new shares Cost of issuing new shares 14(a) 14(a) 3,000,000 (312,484) 7,000,000 (588,871) Net cash generated from financing activities 2,687,516 6,411,129 Net increase / (decrease) in cash and cash equivalents (1,291,473) 642,692 Cash and cash equivalents at beginning of financial year 7,269,014 6,626,322 Cash and cash equivalents at end of financial year 13 5,977,541 7,269,014 The accompanying accounting policies and notes form an integral part of these financial statements. 45 Financial Statementswww.unionjackoil.com PRINCIPAL ACCOUNTING POLICIES The Company has sufficient funding to meet planned expenditures and a level of contingency. Taking account of the risks, the stress test shows that the Company is able to operate within the level of funds currently held at the date of approval of these financial statements. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements. REVENUES The Company’s revenue is derived from selling goods, and revenue is recognised at the point in time when the performance obligation to supply oil has been satisfied, i.e. when control of goods has passed to the customer. This is when oil sold is delivered to a third-party storage on behalf of the customer. Transaction prices are agreed in writing in advance of sales and do not include any variable elements, including the oil price. As the product sold is clearly identifiable, there is a single performance obligation in each case to which the transaction price is allocated. There are no volume rebates offered and nor are there any payments in the nature of financing arrangements. ROYALTIES The Company does not believe the ownership of royalties meet the definition of a revenue contract, given there are no contracts with the customer, or performance obligations to fulfil, and the Company has no input in the running of the Piper, Claymore and Scapa oilfields. As a result, revenue is recognised as other income. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand and deposits held at call with banks. Union Jack Oil plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 6 Charlotte Street, Bath BA1 2NE, England. The nature of the Company’s operations and its principal activities are set out in the Chairman’s Statement, Strategic Report and the Directors’ Report. These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates. BASIS OF PREPARATION The annual financial statements of Union Jack Oil plc (“the Company”) have been prepared in accordance with UK adopted international accounting standards (“IFRS”) applied in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (“IASB”) and the IFRS Interpretations Committee. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 31 December 2021 and subject to adoption by the UK Endorsement Board (“UKEB”). The financial statements have been prepared under the historical cost convention except for the valuation of investments that have been measured at fair value through other comprehensive income. The principal accounting policies set out below have been consistently applied to all periods presented. GOING CONCERN The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement and this Strategic Report. The directors’ forecasts demonstrate that the Company will meet its day-to-day working capital and share of estimated project costs over the forecast period being at least 12 months from the sign-off of these financial statements. There are a number of risks to the Company’s working capital position, which have been identified by the directors and its independent advisor, OGA, namely: (i) timing of incurred costs; (iii) scope of work programmes undertaken; and (iii) realised oil price. The impact of those risks on the Company’s working capital position has been assessed under a range of differing scenarios, with the most adverse, given the current operating environment and stage of development that the Company’s assets are at, being identified as being the basis for evaluating the impact for the Going Concern assessment using the worst case “stress test.” 46 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Principal Accounting Policies FINANCIAL INSTRUMENTS Recognition and Derecognition Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and Initial Measurement of Financial Assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 9, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Financial assets are classified into the following categories: • amortised cost • • fair value through profit or loss (“FVTPL”) fair value through other comprehensive income (“FVOCI”) In the periods presented the Company does not have any financial assets categorised as FVTPL. The classification is determined by both: • • the entity’s business model for managing the financial asset the contractual cash flow characteristics of the financial asset Subsequent Measurement of Financial Assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions: • • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Company’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Financial assets at Fair Value through Other Comprehensive Income (“FVOCI”) The Company accounts for financial assets at FVOCI if the assets meet the following conditions: • they are held under a business model whose objective it is “hold to collect” the associated cash flows and sell • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding The Company’s investments are classified as financial assets at FVOCI based on the fair value hierarchy groups listed in note 17. The fair value of quoted securities are based on published market prices (Level 1 inputs). The fair value of the unquoted securities are based on Level 3 inputs. Classification and Measurement of Financial Liabilities The Company’s financial liabilities include trade and other payables. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs. Subsequently, financial liabilities are measured at amortised cost using the effective interest method. All interest-related charges are included within finance costs or finance income. Impairment of Financial Assets In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model to be applied. The expected credit loss model requires the Company to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. IFRS 9 requires the Company to recognise a loss allowance for expected credit losses on trade receivables. In particular, IFRS 9 requires the Company to measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses (“ECL”) if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. However, if the credit risk on a financial instrument has not increased significantly since initial recognition, the Company is required to measure the loss allowance for that financial instrument at an amount equal to 12 months ECL. 47 Financial Statementswww.unionjackoil.comPrincipal Accounting Policies INTANGIBLE ASSETS – EXPLORATION AND EVALUATION ASSETS Costs (including research costs) incurred prior to obtaining the legal rights to explore an area will be expensed immediately to the Income Statement, as these are classified as pre-licence costs. Expenditure incurred on the acquisition of a licence interest will initially be capitalised on a licence-by-licence basis. Costs will be held within exploration and evaluation costs until such a time as the exploration phase on the licence area is complete or commercial reserves have been discovered. Exploration expenditure incurred in the process of determining exploration targets will be capitalised initially within intangible assets as exploration and evaluation costs. Exploration costs will initially be capitalised whilst exploration and evaluation activities are continuing, and until the success or otherwise has been established. The success or failure of each exploration/evaluation effort will be judged generally on a licence-by-licence basis. Capitalised costs will be written off on completion of exploration and evaluation activities unless the results indicate that hydrocarbon reserves exist and that these reserves are commercially viable. All such costs will be subject to regular technical, commercial and management review for indicators of impairment which includes confirming the continued intent to develop or otherwise extract value from the licence, prospect or discovery. Where this is no longer the case, the costs will be immediately expensed. Following evaluation of successful exploration wells, if commercial reserves are established and the technical feasibility of extraction is demonstrated, and once a project is sanctioned for commercial development, then the related capitalised exploration/evaluation costs will be transferred into a single field cash generating unit within development/ producing assets after testing for impairment, within Property, Plant and Equipment. Where results of exploration drilling indicate the presence of hydrocarbons which are ultimately not considered commercially viable, all related costs will be written off to the Income Statement. INTANGIBLE ASSETS – ROYALTIES Royalties are classified as intangible assets by the Company. The Company considers the substance of the royalty to be economically similar to holding a direct interest in the underlying asset. Existence risk (the commodity physically existing in the quantity demonstrated), production risk (that the operator can achieve production and operate a commercially viable project), timing risk (commencement and quantity produced, determined by the operator) and price risk (returns vary depending on the future commodity price, driven by future supply and demand) are all risks which the Group participates in on a similar basis to an owner of the underlying licence. Furthermore, in the royalty, there is only a right to receive cash to the extent there is a production and there are no interest payments, minimum payment obligations or means to enforce production or guarantee repayment. These are accounted for as intangible assets under IAS 38 and accordingly are amortised over their useful economic life. 48 PROPERTY, PLANT AND EQUIPMENT – DEVELOPMENT AND PRODUCTION ASSETS Development and Production (“D&P”) assets are accumulated into cash generating units ("CGU") and represent the cost of developing the commercial reserves and bringing them into production together with the Exploration and Evaluation (“E&E”) expenditures previously transferred from E&E assets as outlined in the policy above. All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons have been demonstrated will be capitalised within development/producing assets on a field-by-field basis. Subsequent expenditure will be capitalised only where it either enhances the economic benefits of the development/producing asset or replaces part of the existing development/producing asset. On acquisition of a D&P asset from a third party, the asset will be recognised in the financial statements on signature of the sale and purchase agreement, subject to satisfaction of any substantive conditions within the agreement. Costs relating to each CGU are depleted on a unit of production method based on the commercial Proven and Probable Reserves for that CGU. Development assets are not depreciated until production commences. The depreciation calculation takes account of the residual value of site equipment and the estimated future costs of development of recognised Proven and Probable Reserves, based on current price levels. Changes in reserve quantities and cost estimates are recognised prospectively. DECOMMISSIONING AND SITE RESTORATION PROVISIONS Licensees have an obligation to restore fields to a condition acceptable to the relevant authorities at the end of their commercial lives. Provision for decommissioning and reinstatement is recognised in full as a liability and an asset when the obligation arises. The asset is included within exploration and evaluation assets or property, plant and equipment as is appropriate. The liability is included within provisions. The amount recognised is the estimated cost of decommissioning and reinstatement, discounted where appropriate to its net present value, and is reassessed each year in accordance with local conditions and requirements. Revisions to the estimated costs of decommissioning and reinstatement which alter the level of the provisions required are also reflected in adjustments to the decommissioning and reinstatement asset. ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Principal Accounting Policies CONTINGENT LIABILITIES Contingent consideration payable in respect of the Company’s interest in certain licences is considered to be a contingent liability, which is not recognised due to the lack of estimation certainty of both the timing and amount payable. These will be recognised as a provision when it is possible to accurately estimate costs and the timing is known. IMPAIRMENT The carrying amounts of non-current assets are reviewed for impairment, under IAS 36 for Production and Development assets and IFRS 6 for Exploration and Evaluation assets, if events or changes in circumstances indicate the carrying value may not be recoverable. If there are indicators of impairment, such as a well not encountering commercial quantities of oil or a site being shut-in, an exercise is undertaken to determine whether the carrying values are in excess of their recoverable amount. Such review is undertaken on an asset by asset basis, except where such assets do not generate cash flows independent of other assets, in which case the review is undertaken at the cash generating unit level on a field-by-field basis. For intangible exploration and evaluation assets potential industry-specific impairment triggers may include the short term expiry of a licence, lack of budgeted spend, or the lack of potential for commercial development of the asset, and more general triggers would include external sources such as significant changes in the industry or internal evidence such as changes in expectation of an asset’s economic performance. The potential recoverable value of such assets is assessed by the directors based on their knowledge of the assets and available information. The Company’s cash-generating units are the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a reversal of the conditions that originally resulted in the impairment. This reversal is recognised in the Income Statement and is limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised in the prior years. The recoverable amount of assets is the higher of their value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairments are recognised in the Income Statement to the extent that the carrying amount exceeds the assets’ recoverable amount. The revised recoverable amounts are amortised in line with the Company’s accounting policies. JOINT ARRANGEMENTS, FARM-IN AND PROFIT SHARING AGREEMENTS The Company is party to a joint arrangement when there is a contractual agreement that sets out the terms of the relationship over the relevant activities of the Company and at least one other party. Management has a legal degree of control over these joint operating arrangements through Joint Operating Agreements. The Company classifies its interests in joint arrangements as joint operations: where the Company has both the rights to assets and obligations for the liabilities of the joint arrangement. The Company accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations. The Company accounts for its own assets, liabilities and cash flows measured in accordance with the terms of the production sharing agreement and the accounting treatment reflects the agreement’s commercial effect. The Company’s revenue and cost of sales include revenues and operating costs associated with the Company’s interest. Where the percentage ownership in joint arrangements changes during a reporting period, the arrangement is reassessed to ensure it is still appropriately classified, and the Company’s share of income and expenses is adjusted prospectively from the date of change. 49 Financial Statementswww.unionjackoil.comPrincipal Accounting Policies CURRENT TAX Current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Balance Sheet date. DEFERRED TAX Deferred tax is the tax expected to be payable or recoverable 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 Balance Sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of 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 assets is reviewed at each Balance Sheet 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 is realised based on tax laws and rates that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. 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. EQUITY INSTRUMENTS An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. The equity instrument in respect of the Company is in relation to the issue of ordinary shares. SHARE-BASED PAYMENTS AND WARRANTS Equity-settled share-based payments in respect of warrants and options issued by the Company are measured at the fair value of the equity instruments at the grant date, on the basis that this is immaterially different from the fair value of the services provided. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 14(b) and 14(c). The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Company’s estimate of the number of equity instruments that will eventually vest. At each Balance Sheet date, the Company revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the Income Statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves. When a share-based payment or warrant expires, the cumulative expense recognised in the share based payment reserve is reclassified to the relevant component of equity in line with the original recognition of the expense. 50 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Principal Accounting Policies ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS The Company has adopted the following standards, amendments to standards and interpretations which are effective for the first time this year. The impact is shown below: New and revised International Financial Reporting Standards Effective Date: Annual periods beginning on or after: Impact on the Company Various Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 1 January 2021 Interest Rate Benchmark Reform – Phase 2 No material impact Applicable International Financial Reporting Standards will be those endorsed by the UK Endorsement Board (UKEB). Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these financial statements, the following could potentially have a material impact on the Company’s financial statements going forward: New and revised International Financial Reporting Standards Effective Date: Annual periods beginning on or after: UKEB adopted Various Amendments to 1 January 2022 No • • • IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets • Annual Improvements 2018-2020 IAS 12 Amendments to IAS 12: Deferred Tax relating to Assets and Liabilities arising from a Single Transaction 1 January 2023 IAS 1 Amendments to IAS 1: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current 1 January 2024 No No New and revised International Financial Reporting Standards which are not considered to potentially have a material impact on the Company’s financial statements going forward have been excluded from the above. Management anticipates that all relevant pronouncements will be adopted in the Company's accounting policies for the first period beginning after the effective date of the pronouncement. There are no other standards and interpretations in issue but not yet adopted that the directors anticipate will have a material effect on the reported income or net assets of the Company. 51 Financial Statementswww.unionjackoil.com Principal Accounting Policies CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company’s accounting policies, which are described in this note, the directors are required to make judgements regarding the choice and application of accounting policies, as well as estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The following are the critical judgements and estimates that the directors have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements: CRITICAL ESTIMATES Share-based Payments and Warrants In determining the fair value of warrants and options and the related charges to the Income Statement, the Company makes assumptions about future events and market conditions. The fair value is determined using a valuation model which is dependent on estimates, including the future volatility of the Company’s share price and the expected life of the share-based payments. This is determined by using historic data from similar companies and historic trends on exercising share-based payments by holders. See note 14(b) and 14(c). Exploration and Evaluation Costs The Company’s accounting policy leads to the development of tangible and intangible fixed assets, where it is considered likely that the amount will be recoverable by future exploitation or sale, or alternatively where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This requires management to make assumptions as to the future events and circumstances, especially in relation to whether an economically viable extraction operation can be established. Such estimates are subject to change and following initial capitalisation, should it become apparent that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to the Income Statement. Decommissioning and Reinstatement Provisions Management use independent estimates for future decommissioning expenditure. Discount rates of 0.94% and inflation rates of 2% are used to determine appropriate decommissioning provisions. These may change as a result of revisions to the estimated timing and future cost of decommissioning. Carrying Value of Property, Plant and Equipment The Company assesses at each reporting period whether there is any indication that these assets may be impaired as indicated in note 8. If such indication exists, the Company estimates the recoverable amount of the asset. The recoverable amount is assessed by reference to the higher of ‘value in use’ (being the net present value of expected future cash flows of the relevant cash generating unit) and ‘fair value less cost to sell’. The Company considers the quantities of the Proven and Probable Reserves, future production levels and future oil prices as well as other IAS 36 criteria in their assessment of indicators of impairment. The directors do not believe there are any indicators of impairment in respect of the assets. 52 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Principal Accounting Policies Depreciation Production assets are depreciated on a unit of production method based on the commercial proven reserves for each separate asset. Development assets are not depreciated until production commences. The unit of production rate calculation for the depreciation of costs takes into account expenditures incurred to date. Reserve Estimates Reserves are estimates of the amount of product that can be economically and legally extracted from the Company’s properties. In order to calculate the reserves, estimates and assumptions are required about a range of geological, technical and economic factors, including quantities, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and/or grade of reserves requires the size, shape and depth of fields to be determined by analysing geological data such as drilling samples. This process may require complex and difficult geological judgements and calculations to interpret the data. Given that the economic assumptions used to estimate reserves change from year to year, and because additional geological data is generated during the course of operations, estimates of reserves may change from year to year. Changes in reported reserves may affect the Company’s financial results and financial position in a number of ways, including the following: • Asset carrying values may be affected by possible impairment due to adverse changes in estimated future cash flows; • Depreciation, depletion and amortisation charged in the Income Statement may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change. Judgements in Applying Accounting Policies and Key Sources of Estimation Uncertainty – Impairment Management is required to assess the Exploration and Evaluation assets and the Development and Production assets for indicators of impairment. Note 7 discloses the carrying value of the Exploration and Evaluation assets. Note 8 discloses the carrying value of the Development and Production assets. Impairment is considered on a licence-by-licence basis. In assessing the need to impair Exploration and Evaluation assets and Development and Production assets the Board makes assumptions about the future progress and likely successful outcome of exploration and drilling activities as well as the estimated level of reserves and resources and the discount rate. Due diligence is performed at the outset of the investment before an investment is made. At an early stage of exploration of each investment the need for impairment is determined through monitoring market and industry conditions, competent person reports on each prospect and any available information from each licence’s main Operator. In the case of those licences where drilling has commenced and management is committed to further exploration and evaluation with sufficient financial resources available to do so, impairment is not recognised unless technical analysis confirms that commercially viable hydrocarbons are insufficient to recover costs incurred. Judgements in Applying Accounting Policies and Key Sources of Estimation Uncertainty – Investments The Company’s investments in equity instruments are not held for trading. Instead they are for medium to long-term strategic purposes and as such these investments are held at Fair Value Through Other Comprehensive Income (“FVTOCI”). Management assesses these assets for any indication of change in their fair value by reviewing the market value of the relevant companies and therefore the value of the underlying asset. Expected credit loss model IFRS 9 requires the Company to make assumptions when implementing the forward-looking expected credit loss model. This model is required to be used to assess the loan to Egdon Resources plc for impairment, the royalties due, and trade receivables. Arriving at the expected credit loss allowance involved considering different scenarios for the recovery of receivables, the possible credit losses that could arise and the probabilities for these scenarios. The risks considered included exploration project risk, country risk, expected future oil prices, and the value of the potential reserves. 53 Financial Statementswww.unionjackoil.comNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 1 BUSINESS AND OPERATING SEGMENTS The Company is considered to have two operating segments, being the exploration and evaluation of, and the development and production of hydrocarbon discoveries onshore United Kingdom. For the year ending 31 December 2021 Exploration Development and Evaluation and Production £ £ Corporate £ Total £ – Revenue – Operating expenses – Depreciation (6,340) Impairment – Other administrative expenses Profit / (Loss) from continuing operations before tax (6,340) – Finance income Royalty income – Loss for the year (6,340) 1,894,875 (377,153) (735,160) (150,655) – 631,907 – – 631,907 – – – – (1,740,962) (1,740,962) 112,611 149,771 (1,478,580) 1,894,875 (377,153) (735,160) (156,995) (1,740,962) (1,115,395) 112,611 149,771 (853,013) For the year ending 31 December 2020 Revenue Operating expenses Depreciation Impairment Other administrative expenses Loss from continuing operations before tax Finance income Loss for the year For the year ending 31 December 2021 Exploration Development and Evaluation and Production £ £ Corporate £ Total £ – – – – – – – – 158,004 (286,892) (57,715) (106,714) – (293,317) – (293,317) – – – – (1,590,576) (1,590,576) 18,378 (1,572,198) 158,004 (286,892) (57,715) (106,714) (1,590,576) (1,883,393) 18,378 (1,865,515) Exploration Development and Evaluation and Production £ £ Corporate £ Total £ Non-current assets Current assets Non-current liabilities Current liabilities 8,525,373 278,635 (609,448) (35,261) 7,575,525 720,561 (1,267,310) (2,291,014) 291,518 7,081,096 – (64,328) 16,392,416 8,080,292 (1,876,758) (2,390,603) Net assets 8,159,299 4,737,762 7,308,286 20,205,347 54 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 1 BUSINESS AND OPERATING SEGMENTS (CONTINUED) For the year ending 31 December 2020 Exploration Development and Evaluation and Production £ £ Corporate £ Total £ Non-current assets Current assets Non-current liabilities Current liabilities 6,134,717 11,856 (382,331) (142,606) 6,452,287 95,293 (421,441) (2,149,885) 1,138,730 7,507,921 – (155,236) 13,725,734 7,615,070 (803,772) (2,447,727) Net assets 5,621,636 3,976,254 8,491,415 18,089,305 2 OPERATING LOSS Operating loss is stated after charging: Impairment charge on Intangible Assets Impairment charge on Property,Plant and Equipment Depletion of producing assets Staff costs (see note 3) Fees payable to the Company’s auditor for: – The audit of these financial statements – Tax compliance services 31.12.21 £ 31.12.20 £ 6,340 150,655 735,160 748,471 39,500 6,437 – 106,714 57,715 636,211 37,000 6,437 The impairment charges of £156,995 (2020: £106,714) are £150,655 in respect of Property, Plant and Equipment, PEDL118 and PEDL203 and £6,340 in respect of Intangible Assets, PEDL181 and PEDL201. The impairment shown for 2020 in last year’s Annual Report and Financial Statements was in respect of Property, Plant and Equipment PEDL181 and PEDL203. 55 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 3 EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS The aggregate payroll cost in the year of the employees, all of whom are directors, was as follows: Salaries Share-based payment expense Social security costs 31.12.21 £ 31.12.20 £ 487,083 199,050 62,338 375,000 214,312 46,899 748,471 636,211 During 2020, the Remuneration Committee met to discuss and review the salaries of the Executive Directors and remuneration structure. A number of surveys published by established accounting companies relating to Executive Director salaries and benefits were reviewed by the Remumeration Committee and as a result it was established that the base salaries of both David Bramhill and Joe O’Farrell were significantly below those indicated in the Lower Quartile of AIM salaries as published within the AIM Remuneration documents reviewed. The remuneration Committee also took into consideration that there was no end of year bonus payments, pension, Company vehicle or health insurance provisions. The Remuneration Committee recommended that the Executive Directors salaries were to be brought in line with those in their peer group. The number of persons employed by the Company was 4 (2020: 4). Details of each director’s emoluments are included in the Directors’ Report and within this note. The salaries, fees and share-based payments of individual directors were as follows: Year ended December 2021 D Bramhill J O’Farrell R Godson G Bull Year ended December 2020 D Bramhill J O’Farrell R Godson G Bull Salaries £ 287,083 120,000 40,000 40,000 Share-based payment expense £ 77,267 49,664 22,114 50,005 Total £ 364,350 169,664 62,114 90,005 487,083 199,050 686,133 Salaries £ 215,000 85,000 37,500 37,500 375,000 Share-based payment expense £ 86,007 54,035 23,190 51,080 Total £ 301,007 139,035 60,690 88,580 214,312 589,312 The emoluments of the highest paid director were £287,083 (2020: £215,000). Share-based payments are non-cash remuneration by way of share options in the Company. No share options were granted to the directors or officers in 2021. 56 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 3 EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS (CONTINUED) Directors’ share options outstanding at 31 December 2021 and at 31 December 2020: D Bramhill J O’Farrell R Godson G Bull No share options were granted during 2021 Directors’ share options granted 2020: 2021 2020 1,200,000 700,000 300,000 550,000 1,200,000 700,000 300,000 550,000 D Bramhill J O’Farrell R Godson G Bull Number Grant date Exercise price Vesting date 600,000 400,000 150,000 400,000 19.07.19 06.08.19 19.07.19 19.07.19 53p 53p 53p 53p 19.07.22 06.08.22 19.07.22 19.07.22 F Lang resigned as a non-executive director in 2019. During 2018, F Lang was awarded 150,000 options at an exercise price of 22 pence (based on post-share consolidation figures), with a vesting date of 04.12.21. F Lang has been allowed to retain his options which are exercisable under the same terms as outlined in the option agreement and as disclosed within note 14 (c). The accounting charge relating to these options in 2021 was £5,956. 57 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 4 OTHER INCOME Finance Income Bank interest Loan interest receivable Royalty Income Royalties 5 TAXATION Current tax UK Corporation Tax Adjustment in respect of prior periods Total UK Corporation Tax charge 31.12.21 £ 31.12.20 £ 516 112,095 112,611 7,754 10,624 18,378 31.12.21 31.12.20 £ 149,771 £ – 31.12.21 £ 31.12.20 £ – – – – – – The differences between the current tax shown above and the amount calculated by applying the standard rate of UK Corporation Tax for oil and gas companies of 40% (2020: 40%) to the loss before tax is as follows: Loss on ordinary activities before tax Tax on Company loss on ordinary activities at standard UK corporation tax rate of 40% (2020: 40%) Effects of: Expenses not deductible for tax purposes Impairment of intangible assets not deductible for tax purposes Losses carried forward Current tax charge for year is £nil (2020: £nil). 31.12.21 £ 31.12.20 £ (853,013) (1,865,515) (341,205) (746,206) 69,080 62,798 (209,327) 622 42,686 (702,898) A deferred tax asset of £3,597,062 (2020: £3,387,735) relating to the carry forward of losses from trading and pre-trading expenditure has not been recognised in the year as at present it is not envisaged that any tax will become payable in the foreseeable future against which those losses could be utilised as deductions. The Company has total carried forward losses of £9,468,392 (2020: £8,669,799). 58 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 6 LOSS PER SHARE The Company has issued warrants and options over ordinary shares which could potentially dilute the basic loss per share in the future. Further details are given in note 14(b) and 14(c). Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. During the current and prior year, the Company had warrants and options in issue as detailed in note 14(b) and 14(c). At 31 December 2021, the Company had 30,373 (2020: 30,373) warrants in issue and 3,200,000 (2020: 3,200,000) options in issue. These warrants and options have not been taken into account when calculating the diluted loss per share as their impact was anti-dilutive. Therefore, the basic and diluted loss per share are the same. Loss per share 2021 Pence 2020 Pence Loss per share from continuing operations (0.83) (2.23) The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows: 2021 £ 2020 £ Loss used in the calculation of total basic and diluted loss per share (853,013) (1,865,515) Number of shares 2021 2020 Weighted average number of ordinary shares for the purposes of basic and diluted loss per share 102,628,722 83,539,914 As detailed in note 14, the Company has 831,680,400 (2020: 831,680,400) deferred shares. These have not been included within the calculations of basic shares above on the basis that IAS 33 defines an ordinary share as an equity instrument that is subordinate to all other classes of equity instruments. Any residual interest in the assets of the Company would not currently, on liquidation, go to the deferred shareholders, hence they are not currently considered subordinate. These deferred shares have not been taken into account when calculating the diluted loss per share as their impact was anti-dilutive. The Company issued 13,636,364 new ordinary shares during the year (2020: 21,875,000). 59 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 7 INTANGIBLE ASSETS 31.12.21 Exploration and evaluation £ 31.12.21 Royalty £ 31.12.21 Total £ 31.12.20 Total £ Cost At 1 January Transfer to development and production assets Costs incurred in the year 6,134,717 – 6,134,717 6,726,743 (18,092) 2,333,835 93,610 (18,092) 2,427,445 (5,646,086) 5,054,060 At 31 December 8,450,460 93,610 8,544,070 6,134,717 Depreciation and impairment At 1 January Amortisation charge for the year Costs impaired At 31 December Net book value At 31 December At 1 January – – 6,340 – 12,357 – 6,340 12,357 – 12,357 6,340 18,697 – – – – 8,444,120 6,134,717 81,253 – 8,525,373 6,134,717 6,134,717 6,726,743 Additions to exploration and evaluation costs represent exploration and appraisal costs incurred in the year in respect of unproven properties and provisions recognised for decommissioning and restoration liabilities. Furthermore in the year, the Company acquired a 2.5% cash generating royalty interest that is part of the royalty unit over 20% of the revenues from oil and gas production from the Claymore, Piper and Scapa oilfields located in the Central North Sea, known collectively as the Claymore and Piper Complex, for a total consideration of £93,610. The royalty purchase included the right to accrued income of £124,316 for the years 2017 to 2020, inclusive. This income is included in the royalty income figure for 2021 being the year that the Company became entitled to the income, and is also included as a current asset within other receivables (see note 12). The royalty is being amortised over its useful economic life. The directors have reviewed whether there were any potential indicators for impairment evidence for each of the assets. If an indicator was identified, the directors considered the potential value of the projects and licences. The directors have also considered the likely opportunities for realising the value of licences and have concluded that the likely value of each exploration area is individually in excess of its carrying amount. The total impairment charge for 2021 was £6,340 (2020: £nil) with regard to PEDL181, £4,204 and PEDL201, £2,136. Included in the above intangible asset additions during the year are amounts arising in relation to changes in decommissioning and restoration provisions (note 21). 60 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 7 INTANGIBLE ASSETS (CONTINUED) Intangible assets (less any impairment and provisions) comprise amounts capitalised as follows: West Newton Biscathorpe North Kelsey Louth Extension Royalty PEDL183 PEDL253 PEDL241 PEDL339 31.12.21 £ 31.12.20 £ 5,184,442 2,992,694 266,984 – 81,253 3,755,301 2,136,834 225,306 17,276 – Licence interest in PEDL339, Louth Extension has been relinquished. Any drilling target at Louth can be reached from PEDL005(R). Monies spent on PEDL339 have been re-allocated to PEDL005(R). 8 PROPERTY, PLANT AND EQUIPMENT Cost At 1 January Transfer from exploration and evaluation assets Additions At 31 December Depreciation and impairment At 1 January Depreciation charge for the year Costs impaired At 31 December Net book value At 31 December At 1 January 31.12.21 £ 31.12.20 £ 6,698,650 18,092 1,990,961 663,234 5,646,086 389,330 8,707,703 6,698,650 246,363 735,160 150,655 81,934 57,715 106,714 1,132,178 246,363 7,575,525 6,452,287 6,452,287 581,300 61 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 8 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Development and Production assets comprise amounts capitalised as follows: Wressle Fiskerton Airfield Keddington PEDL180 EXL294 PEDL005(R) 31.12.21 £ 6,176,515 373,582 1,025,428 31.12.20 £ 5,646,086 208,218 597,983 7,575,525 6,452,287 The Board has assessed the Development and Production assets as at 31 December 2021 and has identified indicators of impairment as set out in IAS36 Impairment of assets in respect of PEDL118 Dukes Wood and PEDL203 Kirklington, respectively. This impairment amounts to a total of £150,655 (2020: £106,714). The total impairment charge for these assets was PEDL118, £67,598 (2020: £59,627) and PEDL203, £83,057 (2020: £47,087). Licence interest in PEDL339, Louth Extension has been relinquished. Any drilling target at Louth can be reached from PEDL005(R). Monies spent on PEDL339 have been reallocated to PEDL005(R). There were no indicators for impairment on any other assets. JOINT OPERATIONS 9 The Company is party to 12 joint arrangements which carry out exploration and development of hydrocarbons in the United Kingdom. The joint operations in which the Company held an interest as at 31 December 2021 are as below: Proportion of Proportion of ownership interest ownership interest 2020 2021 40% 16.665% 26.25% 55% 45% 50% 35% 16.67% 16.67% 20% 12.5% 10% 40% 16.665% 26.25% 55% 30% 20% 35% 16.67% 16.67% 20% 12.5% 10% Principal place of business England England England England England England England England England England England England Licence Name PEDL180/182 PEDL183 PEDL201 PEDL005(R) PEDL253 PEDL241 PEDL339 PEDL118 PEDL203 EXL294 PEDL181 PEDL209 Wressle/Broughton North West Newton Widmerpool Gulf Keddington Biscathorpe North Kelsey Louth Extension (relinquished) Dukes Wood Kirklington Fiskerton Airfield Humber Basin Laughton 62 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 10 INVESTMENTS Investments in equity instruments designated as at FVTOCI Shares 2021 £ 2020 £ 291,518 137,098 These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the directors of the Company have elected to designate these investments in equity instruments as at FVTOCI as they believe that recognising short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Company’s strategy of holding these investments for long-term purposes and realising their performance potential in the future. Measurement criteria for investments are given in note 17. At 1 January Additions Changes in fair value of investments At 31 December 31 December 2021 £ 31 December 2020 £ 137,098 100,000 54,420 120,288 100,000 (83,190) 291,518 137,098 Elephant Oil Corp The Company was the beneficial holder of 169,959 (2020: 169,959) ordinary shares of Elephant Oil Limited, a company registered in England and Wales. During 2021, shareholders in Elephant Oil Limited agreed to a share-swap in a new entity, Elephant Oil Corp, registered in Nevada, United States of America (USA). Union Jack Oil plc received one third of a share in the common stock of Elephant Oil Corp for each ordinary share held in Elephant Oil Limited, resulting in the issue of 56,650 ordinary shares to the Company, representing a 0.46% interest (2020: nil) in Elephant Oil Corp. The principal activity of Elephant Oil Corp is the exploration and evaluation of hydrocarbon assets in West Africa. Elephant Oil Corp intends to apply for admission on NASDAQ, a USA trading market during 2022. The value of the Elephant Oil Corp shares in the share-swap agreement was US$2.25, and on this basis the Company has revalued its holding to £93,043. UK Oil & Gas plc The Company is the beneficial owner of 9,731,834 (2020: 9,731,834) ordinary shares in UK Oil & Gas plc (“UKOG”), a company registered in England and Wales, which represents a 0.06% (2020: 0.078%) interest in that company at year end. The principal activity of UKOG is the exploration and evaluation of hydrocarbon assets. The investment in UKOG was revalued at the year end to the value of £9,975 (0.1025 pence per share). Egdon Resources plc The Company is the beneficial owner of 13,000,000 (2020: 5,000,000) ordinary shares in Egdon Resources plc (“Egdon”), a company registered in England and Wales, which represents a 2.52% (2020: 1.52%) interest in that company at year end. Payment for the 8,000,000 new shares acquired was by means of a subscription at a price of 1.25 pence per Subscription Share, for total consideration of £100,000. In addition each Subscription Share was granted a right to subscribe for 0.5 of a new Ordinary Share at a price of 2.5 pence per share, exercisable at any time until the date of the second anniversary of their issue. The principal activity of Egdon is the production and exploration of hydrocarbons onshore UK. The investment in Egdon was revalued at the year end to the value of £188,500 (1.45 pence per share). The change in valuation for the above investments are reported in the Statement of Comprehensive Income on page 42. 63 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 11 LOAN RECEIVABLES Amounts falling due within 1 year Amounts falling due after 1 year 31.12.21 £ 1,028,110 – 31.12.20 £ 8,992 1,001,632 1,028,110 1,010,624 Summary of loan arrangements: During 2020, a loan was issued to Egdon Resources plc with an 18 month term. The loan accrues interest at 11% per annum with repayments of interest commencing during 2021. The loan is secured against an unencumbered 25% interest in PEDL180 and PEDL182, including the Wressle development project and associated infrastructure. The expected credit losses on the loan have been assessed as disclosed in note 18. 12 TRADE AND OTHER RECEIVABLES The average credit period on sales of goods is 30 days. No interest is charged on outstanding trade receivables. The Company measures the loss allowance for trade receivables at an amount equal to 12 months ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. The Company has recognised no loss allowance for the trade receivables as there has been no historical experience to indicate that these receivables are not recoverable. All outstanding trade receivables have been received prior to the Balance Sheet date. The Company has other receivables of £149,771 which are accrued royalty income. The company is in advanced negotiation to facilitate the payment through the arrangement of a manager to administer historic and then current and future funds. Therefore through the Company’s formal process of assessment it does not consider that it would be appropriate or necessary to make any credit loss adjustment. There has been no change in the estimation techniques or significant assumptions made during the current reporting period. Trade receivables Other debtors VAT Prepayments 13 CASH AND CASH EQUIVALENTS Cash at bank 31.12.21 £ 667,329 149,771 80,782 167,930 31.12.20 £ 95,293 – 187,596 54,174 1,065,812 337,063 31.12.21 £ 31.12.20 £ 5,977,541 7,269,014 Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets is equal to their fair value. 64 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 14(a) SHARE CAPITAL Allotted and issued: Number Class Nominal value 31.12.21 £ 31.12.20 £ 112,715,896 (31 December 2020: 99,079,532) 831,680,400 (31 December 2020: 831,680,400) Total Ordinary 5p 5,635,795 4,953,977 Deferred 0.225p 1,871,281 1,871,281 7,507,076 6,825,258 Ordinary shares hold voting rights and are entitled to any distributions made on winding up. Deferred shares do not hold voting rights and are not entitled to distributions made on winding up. Allotments during the year In September 2021, 13,636,364 new ordinary shares were issued for cash at 22 pence per share, raising approximately £3,000,000 before expenses of £312,484 by way of a placing and subscription. 14(b) SHARE-BASED PAYMENTS – WARRANTS Details of the number of warrants and the weighted average exercise price (WAEP) outstanding during the year are as follows: Year ended December 2021 Number of warrants Outstanding and exercisable at the beginning of the year Outstanding and exercisable at the end of the year 30,373 30,373 Year ended December 2020 Number of warrants Outstanding and exercisable at the beginning of the year Outstanding and exercisable at the end of the year 30,373 30,373 WAEP £ 0.6 0.6 WAEP £ 0.6 0.6 The fair values of warrants in issue are calculated using the Black-Scholes model. The inputs into the model are as follows: Date of grant Number in issue at 31 December 2021 Share price at date of grant Exercise price Expected volatility Expected life (years) Risk-free rate Expected dividend yield Fair value at date of grant Earliest vesting date Expiry date During the year nil warrants expired (2020: nil). 04.12.12 30,373 60p 50p 69% 5.0 0.8464% 0% £11,099 20.12.12 20.12.22 65 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 14(c) SHARE-BASED PAYMENTS – OPTIONS No options were granted to directors of the Company during 2021. Options are Issued with an exercise price equating to the mid-market closing price on the date of Issue. Options have a vesting period of 3 years and are subject to a further condition that the options can only be exercised if the share price is at a 30% premium to the exercise price. Details of the number of options and the weighted average exercise price (WAEP) outstanding during the year are as follows: Year ended December 2021 Number of options Outstanding at the beginning of the year Granted during 2021 Outstanding at the end of the year Exercisable at the end of the year 3,200,000 – 3,200,000 – Year ended December 2020 Number of options Outstanding at the beginning of the year Granted during 2020 Outstanding at the end of the year Exercisable at the end of the year 3,200,000 – 3,200,000 – WAEP £ 0.374 – 0.374 – WAEP £ 0.374 – 0.374 – The fair values of options in issue are calculated using the Black-Scholes model. The inputs into the model are as follows: Date of grant 06.08.19 19.07.19 04.12.18 07.11.18 18.07.18 Number in issue at 31 December 2021 Share price at date of grant Exercise price Expected volatility Expected life (years) Risk-free rate Expected dividend yield Fair value at date of grant Earliest vesting date Expiry date 400,000 0.53p 0.53p 70% 6.5 0.3161% 0% £133,497 06.08.22 06.08.29 1,300,000 0.53p 0.53p 70% 6.5 0.5187% 0% £435,086 19.07.22 19.07.29 150,000 22p 22p 63% 6.5 0.8840% 0% £19,491 04.12.21 04.12.28 450,000 22p 22p 62% 6.5 1.1035% 0% £58,106 07.11.21 07.11.28 900,000 18p 18p 55% 6.5 0.9427% 0% £85,822 18.07.21 18.07.28 The Company recognised total expenses in the Income Statement of £227,119 in relation to share options accounted for as equity-settled share-based payment transactions during the year (2020: £244,001). Expected volatility was determined based on a historic 5-year volatility of the Company. 66 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 15 RESERVES The nature and purpose of each reserve within equity is as follows: Share capital – represents the nominal value of shares issued. Share premium – represents the amount subscribed for share capital in excess of nominal value, less related share issue costs. Share-based payment reserve – represents the cumulative cost of warrants and options issued in return for professional services. Accumulated deficit – represents cumulative profits or losses, and all other net gains and losses and transactions with owners not recognised elsewhere. 16 RECONCILIATION OF LOSS TO CASH GENERATED FROM OPERATIONS Loss before taxation Depletion of producing assets Impairment of intangibles Share-based payments Finance income Royalty income (Increase) in inventories (Increase) in trade and other receivables Increase / (decrease) in trade and other payables 31.12.21 £ 31.12.20 £ (853,013) 735,160 156,995 227,119 (112,611) (149,771) (1,865,515) 57,715 106,714 244,001 (18,378) – 3,879 (1,475,463) (8,829) (550,868) (90,908) – (156,866) 219,528 Cash used in operations (646,726) (1,412,801) 67 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 17 FINANCIAL INSTRUMENTS Classification of measurement of financial instruments The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement. The Company holds investments at fair value through other comprehensive income. Investments in listed shares are a level 1 valuation. Investments in unlisted shares are a level 3 valuation as the quoted price is not available. The tables below set out the Company’s accounting classification of each class of its financial assets and liabilities. Financial assets measured at fair value At 31 December 2021 Investments: FVOCI At 31 December 2020 Investments: FVOCI Financial assets measured at amortised cost At 31 December 2021 Loan receivables Trade receivables Cash and cash equivalents Within 1 Month – 667,329 5,977,541 At 31 December 2020 Loan receivables Trade receivables Cash and cash equivalents Total carrying value Within 1 Month – 95,293 7,269,014 7,364,307 Level 1 198,475 Level 3 93,043 £ Total 291,518 97,098 40,000 137,098 Within 2 Months to 1 Year Within 1 to 2 years 1,028,110 – – – – – – Within 2 Months to 1 Year Within 1 to 2 years 1,001,623 – – 8,993 – – 8,993 1,001,632 8,374,923 £ Total 1,028,110 667,329 5,977,541 7,672,980 Total 1,010,616 95,293 7,269,014 Total carrying value 6,644,870 1,028,110 All of the above financial assets’ carrying values approximate to their fair values at 31 December 2021 and 31 December 2020 given their nature and short times to maturity. 68 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 17 FINANCIAL INSTRUMENTS (CONTINUED) Financial liabilities measured at amortised cost At 31 December 2021 Trade payables Other payables Accruals Total carrying value At 31 December 2020 Trade payables Other payables Accruals Total carrying value £ 242,910 2,080,000 67,693 2,390,603 190,926 2,180,000 76,801 2,447,727 All of the above financial liabilities’ carrying values approximate to their fair values at 31 December 2021 and 31 December 2020 given their nature and short times to maturity. 18 FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT The principal financial risks to which the Company is exposed are: liquidity risk, oil price risk and credit risk. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Credit risk The Company measures credit risk on trade receivables using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. The Company has recognised no loss allowance for the trade receivables as there has been no historical experience to indicate that these receivables are not recoverable. All outstanding trade receivables have been received prior to the balance sheet date and the credit risk is believed to be unchanged from previous years. The Company has other receivables which are accrued royalty income. The company is in advanced negotiation to facilitate the payment through the arrangement of a manager to administer historic and then current and future funds. The credit risk is not considered to have changed since initial recognition. Included within the Company’s receivables is a non-current loan with a maturity date of May 2022. The Company consider the loan has not been subject to an increase in credit risk since initial recognition. Under IFRS 9 the 12 month expected credit losses have been considered on all of these receivables and these assessments resulted in no credit losses being recognised after taking into consideration the credit risk associated with the loan, trade and other receivables. The Company’s credit risk is otherwise largely attributable to its cash balances and such risk is limited because the third party is an international bank of which the latest Standard & Poors rating is BBB. The Company’s total credit risk amounts to the total of the sum of the receivables, cash and cash equivalents. At the year end this amounted to £8,091,826 (2020: £8,616,702). 69 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 18 FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT (CONTINUED) Liquidity risk In managing liquidity risk, the main objective of the Company is to ensure that it has the ability to pay all of its liabilities as they fall due. The Company monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due. The table below shows the undiscounted cash flows on the Company’s financial liabilities as at 31 December 2021 and 31 December 2020 on the basis of their earliest possible contractual maturity. At 31 December 2021 Trade payables Other payables Accruals At 31 December 2020 Trade payables Other payables Accruals Oil price risk Total £ Within 2 months £ Within Greater than 6 months £ 2-6 months £ 242,910 2,080,000 67,693 242,910 – 61,093 2,080,000 6,600 2,390,603 304,003 2,086,600 – – 190,926 2,180,000 76,801 190,926 100,000 40,601 – – 36,200 – 2,080,000 – 2,447,727 331,527 36,200 2,080,000 The Company is exposed to oil price risk associated with sales of oil from production. The Company does not currently consider it necessary to use hedging instruments to manage its exposure to this risk. Capital management The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, add shareholder value and to maintain an optimal capital structure to reduce the cost of capital. The Company defines capital as being share capital plus reserves as disclosed in the Balance Sheet. The Board of Directors monitors the level of capital as compared to the Company’s commitments, and adjusts the level of capital as is determined to be necessary, by issuing shares. The Company is not subject to any externally imposed capital requirements. 19 FINANCIAL COMMITMENTS The Company had no financial commitments as at 31 December 2021 or 31 December 2020, other than those recognised in the Financial Statements and where Authority for Expenditure has been agreed with the Operator. 70 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 20 TRADE AND OTHER PAYABLES Trade payables Other payables Accruals 31.12.21 £ 31.12.20 £ 242,910 2,080,000 67,693 190,926 2,180,000 76,801 2,390,603 2,447,727 Other payables consist of £2,080,000 to be paid to Calmar LP on commercial production from the Wressle discovery. Early settlement of this consideration was made to Calmar LP during March 2022. 21 PROVISIONS As at 1 January 2020 Adjustment to provision estimates Accretion of provision At 31 December 2020 Adjustment to provision estimates Accretion of provision At 31 December 2021 At 31 December 2020 Decommissioning and reinstatement provision £ 620,686 171,178 11,908 803,772 1,059,010 13,976 1,876,758 803,772 A provision has been made for decommissioning costs on productive fields. A provision has also been made for reinstatement costs relating to exploration and evaluation assets where work performed to date gives rise to an obligation, principally for site restoration. Assumptions, based on the current economic environment, have been made which the directors believe are a reasonable basis upon which to estimate the future liability. This estimate will be reviewed regularly to take into account any material changes to assumptions. Actual costs will depend on a number of factors, including future market prices and any variation in the extent of decommissioning and reinstatement to be performed. Decommissioning and reinstatement costs are currently expected to be utilised between 2021 and 2041. Provisions created during the year, based on an independent review, relate to obligations in respect of Keddington, Fiskerton Airfield, Dukes Wood, Kirklington, Wressle and West Newton assets. No provisions have been utilised during the year. 71 Financial Statementswww.unionjackoil.com Notes to the Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 22 CONTINGENT LIABILITIES In respect of PEDL253 a contingent cash payment of £500,000 is due to Humber Oil & Gas Limited following receipt of planning consents for drilling the Biscathorpe-2Z side-track, testing and subsequent production in the event of drilling success. 23 RELATED PARTY TRANSACTIONS Details of key management personnel remuneration are disclosed in note 3. Key management comprises only the directors. Charnia Resources (UK), an entity owned by Graham Bull, non-executive director, was paid £120,721 (2020: £120,290) in respect of consulting fees. £12,031 was outstanding at the year end (2020: £12,028). Jayne Bramhill, spouse of David Bramhill, received the sum of £12,000 (2020: £12,000) from the Company in respect of IT maintenance and administration costs. No amounts were outstanding at the year end (2020: £nil). Raymond Godson, non-executive director is also a director of Montrose Industries Limited whom hold an interest in PEDL253 containing the Biscathorpe Prospect. Raymond Godson takes no part in any decision making in respect of PEDL253 and is excluded from any board meetings relating to PEDL253 financial matters. A transaction between Montrose Industries Limited and Union Jack took place in June 2020 in respect of a 3% acquisition on PEDL253. The transaction in 2021 between the Company and Humber Oil & Gas Limited did not directly involve Montrose Industries Limited. 24 EVENTS AFTER THE BALANCE SHEET DATE The following events have taken place after the year end: In January 2022, the Company received a positive independent review from RPS Group, a leading global company offering services within the energy sector in respect of West Newton flow rate potential. The RPS review indicated that initial average production rates of up to 35.6 million cubic feet of gas per day from a horizontally drilled well situated in the gas zone could be achieved, based on the data from the West Newton A-2 well. The study also indicated initial average production rates of up to 1,000 bopd from a horizontally drilled well situated in the oil zone, based on data from the West Newton A-2 well. In January 2022, the Company announced a summary of the results of an analysis of the bottom hole pressure data acquired from the Wressle-1 well during December 2021. The interpretation was completed by ERCE, an independent energy consultancy, on behalf of the Wressle Joint Venture partners. Results demonstrated the significant potential of the Wressle-1 well and the production rates that could be achieved once the surface facilities are optimised and a gas monetisation scheme is in place. During January 2022, the Company announced the intention of the operator of PEDL253 to appeal against the refusal of planning permission by Lincolnshire County Council, for a side track drilling operation, associated testing and long-term oil production. During March 2022, planning for the extension for PEDL241 was refused by the Lincolnshire County Council. The Joint Venture Partners are considering an appeal. During March 2022, planning for the drilling of additional wells and production at West Newton A site was approved by the East Riding of Yorkshire Council. Separately, permission was granted for a time extension to allow further exploratory drilling at West Newton B site. During March 2022, settlement of £2,083,333 for the consideration payment of a 25% interest in PEDL180 and PEDL182 was made to Calmar LLP. During April 2022, the Company announced a US$5 million net landmark reached in revenues generated from the Ashover Grit reservoir at the Wressle-1 well. 72 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC ANNUAL GENERAL MEETING NOTICE OF Notice is hereby given that the Annual General Meeting (the “AGM”) of Union Jack Oil plc (the “Company”) will be held at the offices of Osborne Clarke, 2 Temple Back East, Temple Quay, Bristol BS1 6EG on 23 June 2022 at 11.00 a.m. to consider and, if thought fit, pass the following resolutions, of which resolutions numbered 1 to 7 will be proposed as ordinary resolutions and resolutions numbered 8 and 9 will be proposed as special resolutions: ORDINARY RESOLUTIONS 1 Report and accounts To receive the audited annual accounts of the Company for the year ended 31 December 2021, together with the Directors’ Report and the Auditor’s Report on those annual accounts. 2 Re-election of director retiring by rotation To re-elect David Bramhill as a director, who retires by rotation in accordance with the Company’s Articles of Association. 2 Re-election of director retiring by rotation To re-elect Graham Bull as a director, who retires by rotation in accordance with the Company’s Articles of Association. 4 Re-appointment of auditor To re-appoint BDO LLP as auditor of the Company to hold office from the conclusion of this AGM until the conclusion of the next general meeting at which accounts are laid before the Company. 5 Auditor’s remuneration To authorise the directors to determine the remuneration of the auditor. 6 Directors’ authority to allot shares That, in substitution for any equivalent authorities and powers granted to the directors prior to the passing of this resolution, the directors be and they are generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the Company to allot shares in the Company, and to grant rights to subscribe for or to convert any security into shares in the Company (“Relevant Securities”) up to an aggregate nominal amount of £2,817,897 (representing approximately 50% of the issued share capital of the Company at the date of this notice) provided that, unless previously revoked, varied or extended, this authority shall expire on the conclusion of the next AGM of the Company, except that the Company may at any time before such expiry make an offer or agreement which would or might require Relevant Securities to be allotted after such expiry and the directors may allot Relevant Securities in pursuance of such an offer or agreement as if this authority had not expired. 7 Directors' authority to repurchase shares That the Company be and is hereby unconditionally and (c) the maximum price which may be paid for an Ordinary Share shall be the higher of: (i) 105% of the average of the middle market quotations for an Ordinary Share derived from the London Stock Exchange Daily Official List for the five business days immediately prior to the day on which the share is contracted to be purchased, and (ii) an amount equal to the higher of the price of: (A) the last independent trade of an Ordinary Share; and (B) the highest current independent bid for an Ordinary Share, as derived from the London Stock Exchange Trading System; and (d) this authority shall, unless previously renewed, revoked or varied, expire on the earlier of the date falling 15 months after the date of the passing of this resolution and the conclusion of the next Annual General Meeting, but the Company may enter into a contract for the purchase of Ordinary Shares before the expiry of this authority which would or might be completed (wholly or partly) after its expiry. SPECIAL RESOLUTIONS 8 Directors’ power to issue shares for cash That, conditional upon the passing of resolution number 6, the directors be and they are empowered pursuant to Section 570(1) of the Act to allot equity securities (as defined in Section 560(1) of the Act) of the Company, and/ or by way of a sale of treasury shares (in accordance with Section 573 of the Act), wholly for cash pursuant to the authority of the directors under Section 551 of the Act conferred by resolution 6 above as if Section 561(1) of the Act did not apply to such allotment provided that the power conferred by this resolution shall be limited to the allotment of equity securities up to an aggregate nominal value equal to £2,817,897 (representing approximately 50% of the issued share capital of the Company at the date of this notice) and, unless previously revoked, varied or extended, this power shall expire on the conclusion of the next AGM of the Company, except that the Company may before the expiry of this power make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such an offer or agreement as if this power had not expired. 9 Cancellation of share premium That, subject to the confirmation of the court, the entire amount standing to the credit of the share premium account of the Company be and is cancelled. generally authorised for the purposes of Section 701 of the Act to make market purchases (within the meaning of Section 693(4) of the Act) of its ordinary shares of 5 pence each (“Ordinary Shares”) provided that: (a) the maximum number of Ordinary Shares authorised to be purchased is 11,271,589; By order of the Board Matthew Small Company Secretary Dated: 16 May 2022 (b) the minimum price which may be paid for any such Ordinary Share is 5 pence; Registered Office: 6 Charlotte Street, Bath BA1 2NE 73 Annual General Meetingwww.unionjackoil.com Notice of Annual General Meeting EXPLANATORY NOTES RELATING TO RESOLUTIONS Resolution 1 - Report and accounts All quoted companies are required by law to lay their annual accounts before a general meeting of the Company, together with the directors' reports and auditors' report on the accounts. At the AGM, the directors will present these documents to the shareholders for the financial year ended 31 December 2021. Resolutions 2 and 3 - Re-election of directors These resolutions concern the re-election of David Bramhill and Graham Bull who are retiring at the meeting by rotation in accordance with the Company's articles of association. Resolutions 4 and 5 - Auditors Resolution 4 concerns the re-appointment of BDO LLP as auditors until the conclusion of the next general meeting at which accounts are laid, that is, the next Annual General Meeting. Resolution 5 authorises the directors to fix the auditors' remuneration. Resolution 6 – Directors' authority to allot shares This resolution grants the directors authority to allot shares in the capital of the Company and other relevant securities up to an aggregate nominal value of £2,817,897, representing approximately 50% of the nominal value of the issued ordinary share capital of the Company as at the date of this AGM notice. Unless revoked, varied or extended, this authority will expire at the conclusion of the next AGM of the Company. Resolution 7 – Authority to repurchase shares This resolution authorises the board to make market purchases of up to 11,271,589 ordinary shares (representing approximately 10% of the Company's issued ordinary shares as at the date of this AGM notice). Shares so purchased may be cancelled or held as treasury shares. The authority will expire at the end of the next Annual General Meeting of the Company or 15 months from the passing of the resolution, whichever is the earlier. The minimum price that can be paid for an ordinary share is 5p being the nominal value of an ordinary share. The maximum price that can be paid is 5% over the average of the middle market prices for an ordinary share, derived from the Daily Official List of the London Stock Exchange, for the five business days immediately before the day on which the share is contracted to be purchased. The directors have not previously sought to obtain authority from shareholders to buy back shares, however, given the current stage of the Company's development and its cash position, the directors now consider that it is appropriate to obtain such authority to make market purchases in the future should they consider that it would promote the success of the Company for the benefit of its members as a whole. The directors have no current plans to utilise this authority and there is no guarantee that the Company will buy back shares at any time. The Company will only be able to take advantage of the authority granted under this resolution if Resolution 9 is passed and the cancellation of the Company's share premium account is approved by the court. Resolution 8 – Directors' power to issue shares for cash This resolution authorises the directors to allot equity securities for cash other than in accordance with the statutory pre-emption rights (which require a company to offer all allotments for cash first to existing shareholders in proportion to their holdings). The authorisation is limited to a maximum nominal amount of £2,817,897, representing approximately 50% of the nominal value of the issued ordinary share capital of the Company as at the date of this AGM notice. Unless revoked, varied or extended, this authority will expire at the conclusion of the next AGM of the Company. The Company may hold any shares it buys back “in treasury” and then sell them at a later date for cash rather than simply cancelling them. Any such sales are required to be made on a pre-emptive, pro-rata basis to existing shareholders unless shareholders agree by special resolution to disapply such pre-emption rights. Accordingly, in addition to giving the directors power to allot unissued ordinary shares on a non pre-emptive basis, resolution 8 will also give directors power to sell ordinary shares held in treasury on a non- pre-emptive basis, subject always to the limitations noted above. The directors consider that the power proposed to be granted by resolution 8 is necessary to retain flexibility, although they do not have any intention at the present time of exercising such power. Resolution 9 – Cancellation of share premium As at 31 December 2021, the Company had an accumulated deficit (negative distributable reserves) of £9,458,889. This is normal for a Company in Union Jack's position, reflecting a number of years of investment in exploration assets. A company which has negative distributable reserves on its balance sheet is not permitted under law either to pay a dividend or to buy back its shares. However, as at 31 December 2021, the Company had share premium of £21,528,077 on its balance sheet. 74 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notice of Annual General Meeting EXPLANATORY NOTES RELATING TO RESOLUTIONS (CONTINUED) Given the Company's recent progress in its business and operations, the directors now consider that it is appropriate to cancel the amounts standing to the credit of the Company's share premium account. The consequence of this is that the balance arising upon the proposed cancellation of the share premium account will create positive distributable reserves which will eliminate the accumulated deficit on the Company's profit and loss account and create distributable reserves which may be used in the future for the purpose of either (a) paying dividends or (b) (subject to the passing of Resolution 7) making market purchases of the Company's shares. The cancellation of the Company's share premium account requires the approval of the Court. The Company intends to apply to the Court following the AGM. The Court will need to be satisfied that the interests of the Company's creditors will not be prejudiced as a result of the proposed cancellation of share premium. The Court may require the Company to put in place protection for the benefit of the Company's creditors at the date of the Court application. The board anticipates that the Company will provide such protection as so required. The board reserves the right to abandon or to discontinue (in whole or in part) any application to the Court in the event that the Board considers that the terms on which the cancellation would be (or would be likely to be) confirmed by the Court would not be in the best interests of the Company and/or the shareholders as a whole. The directors will, prior to the making of any application to the Court for the approval of the Cancellation, undertake a careful review of the Company’s liabilities (including contingent liabilities) and consider the Company’s ability to satisfy the Court that, as at the date (if any) on which the Court Order relating to the cancellation and the statement of capital in respect of the cancellation have both been registered by the Registrar of Companies at Companies House and the Cancellation therefore becomes effective, the Company’s creditors will be sufficiently protected. NOTES 1 Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), only those members registered in the register of members of the Company at 6.00 p.m. on 21 June 2022 (or if the AGM is adjourned, 48 hours before the time fixed for the adjourned AGM) shall be entitled to attend and vote at the AGM in respect of the number of shares registered in their name at that time. In each case, changes to the register of members after such time shall be disregarded in determining the rights of any person to attend or vote at the AGM. 2 A member who is entitled to attend, speak and vote at the AGM may appoint a proxy to attend, speak and vote instead of him. A member may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares (so a member must have more than one share to be able to appoint more than one proxy). A proxy need not be a member of the Company but must attend the AGM in order to represent you. A proxy must vote in accordance with any instructions given by the member by whom the proxy is appointed. Appointing a proxy will not prevent a member from attending in person and voting at the AGM (although voting in person at the AGM will terminate the proxy appointment). A proxy form is enclosed. The notes to the proxy form include instructions on how to appoint the Chairman of the AGM or another person as a proxy. You can only appoint a proxy using the procedures set out in these notes and in the notes to the proxy form. 3 To be valid, a Proxy Form, and the original or duly certified copy of the power of attorney or other authority (if any) under which it is signed or authenticated, should reach the Company’s registrar, Computershare Investor Services PLC of The Pavilions, Bridgwater Road, Bristol BS99 6ZY, by no later than 11.00 a.m. on 21 June 2022. A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice. If you do not have a proxy form and believe that you should have one, or if you require additional forms, please contact Computershare Investor Services PLC on 0370 702 0000. 75 Annual General Meetingwww.unionjackoil.comNotice of Annual General Meeting NOTES (CONTINUED) 4 CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM and any adjournment by using the procedures described in the CREST manual (euroclear.com/ crest). CREST personal members or other CREST-sponsored members and those CREST members who have appointed a voting service provider should refer to their CREST sponsor or voting service provider, who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST proxy instruction) must be properly authenticated in accordance with Euroclear’s specifications and must contain the information required for such instructions, as described in the CREST manual. All messages relating to the appointment of a proxy or an instruction to a previously appointed proxy must be transmitted so as to be received by Computershare (ID: 3RA50) by 11.00 a.m. on 21 June 2022. It is the responsibility of the CREST member concerned to take such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers, are referred, in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings. The Company may treat a CREST proxy instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 5 In the case of joint holders of shares, the vote of the first named in the register of members who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of other joint holders. 6 A member that is a company or other organisation not having a physical presence cannot attend in person but can appoint someone to represent it. This can be done in one of two ways: either by the appointment of a proxy (described in notes 4 and 5) or of a corporate representative. Members considering the appointment of a corporate representative should check their own legal position, the Company’s Articles of Association and the relevant provision of the Companies Act 2006. 7 Copies of the executive directors’ service contracts with the Company and letters of appointment of the non-executive directors are available for inspection at the registered office of the Company during the usual business hours on any weekday (Saturday, Sunday or public holidays excluded) from the date of this notice until the conclusion of the AGM. 76 ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Union Jack Oil plc 6 Charlotte Street, Bath BA1 2NE, England Telephone: +44 (0) 1225 428139 Fax: +44 (0) 1225 428140 Email: info@unionjackoil.com Web: www.unionjackoil.com 

Continue reading text version or see original annual report in PDF format above