Kolibri Global Energy Inc.: Exhibit 2.2 - Filed by newsfilecorp.com

The accompanying consolidated financial statements and related financial information are the responsibility of management, and have been prepared in accordance with International Financial Reporting Standards ("IFRS"). They include certain amounts that are based on estimates and judgments relating. Financial information presented elsewhere in this document is consistent with that contained in the consolidated financial statements.

In management's opinion, the consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies adopted by management. If alternate accounting methods exist, management has chosen those policies it deems the most appropriate in the circumstances. Management has established systems of accounting and internal controls that provide reasonable assurance that assets are safeguarded from loss or unauthorized use, and produce reliable accounting records for the preparation of financial information. Policies and procedures are maintained to support the accounting and internal control systems.

The Company retains independent petroleum consultants, Netherland, Sewell & Associates, Inc. to conduct independent evaluations of the Company's oil, natural gas and natural reserves. The independent external auditors, KPMG LLP, have conducted an examination of the consolidated financial statements on behalf of shareholders. The auditors have unrestricted access to the Company and the Audit Committee.

The Board of Directors, currently composed of seven independent directors and one officer/director, carries out its responsibility for the consolidated financial statements principally through its Audit Committee, consisting of three members, all of whom are independent directors. This committee reviews the consolidated financial statements with management and the auditors, as well as recommends to the Board of Directors the external auditors to be appointed by the shareholders at each annual meeting. The audit committee meets at least quarterly to review and approves financial statements prior to their release, and recommends their approval to the Board of Directors.

We have audited the consolidated financial statements of Kolibri Global Energy Inc. (the "Entity"), which comprise:

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2020 and December 31, 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

© 2020 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

We draw attention to Note 2 in the financial statements, which indicates that the Entity has a working capital deficiency at December 31, 2020 and has no available undrawn debt capacity under its credit facility. The Entity's ability to continue as a going concern is dependent upon the lender maintaining the borrowing base limit on the credit facility and the Company's ability to generate net cash from operating activities or raise additional financing to continue to fund its working capital deficiency, debt repayments and capital expenditures.

As stated in Note 2 in the financial statements, these events or conditions, along with other matters as set forth in Note 2 in the financial statements, indicate that a material uncertainty exists that may cast significant doubt on the Entity's ability to continue as a going concern.

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2020. 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.

In addition to the matter described in the "Material Uncertainty related to Going Concern" section of the auditors' report, we have determined the matters described below to be the key audit matters to be communicated in our auditors' report.

We draw attention to note 3, note 4 and note 9 to the financial statements. The Entity identified indicators of impairment at March 31, 2020 and December 31, 2020 and performed an impairment test to estimate the recoverable amount of the cash generating unit ("CGU"). The Entity has recorded an impairment charge of $71.9 million related to the CGU for the year ended December 31, 2020.

The estimated recoverable amount of the CGU involves significant estimates, including:

• The estimate of proved and probable oil and gas reserves and the related cash flows

The estimate of proved and probable oil and gas reserves and the related cash flows requires the expertise of independent third party reserve evaluators and includes significant assumptions related to:

The Entity engages independent third party reserve evaluators to estimate the proved and probable oil and gas reserves and the related cash flows at least annually.

We identified the assessment of the recoverable amount of the CGU as a key audit matter. Significant auditor judgment was required to evaluate the results of our audit procedures regarding the estimate of proved and probable oil and gas reserves and the related cash flows and the discount rates.

The following are the primary procedures we performed to address this key audit matter:

With respect to the estimate of proved and probable oil and gas reserves and the related

• We evaluated the competence, capabilities and objectivity of the independent third party reserve evaluators engaged by the Entity

• We compared forecasted oil and gas commodity prices to those published by other independent third party reserve evaluators

• We compared the 2020 actual production, operating costs, royalty costs and development costs of the Entity to those estimates used in the prior year's estimate of proved oil and gas reserves and the related cash flows to assess the Entity's ability to accurately forecast

• We evaluated the appropriateness of forecasted production and forecasted operating costs, royalty costs and future development costs assumptions by comparing to 2020 actual results. We took into account changes in conditions and events affecting the Entity to assess the adjustments or lack of adjustments made by the Entity in arriving at the assumptions.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

• Evaluating the appropriateness of the Entity's discount rates by comparing the discount rates to market and other external data

• Assessing the reasonableness of the Entity's estimate of the recoverable amount of the CGU by comparing the Entity's estimate to market metrics and other external data.

Management is responsible for the other information. Other information comprises:

• the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors' report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors' report.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines 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, management is responsible for assessing the Entity'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 management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity's financial reporting process.

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 auditors' 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 Canadian generally accepted auditing standards 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 the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

• Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors' report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this auditors' report is David Yung.

(Expressed in thousands of United States dollars, except number of common shares)

		2020			2019
Cash flows from operating activities
Net loss	$	(70,410	)	$	(177	)
Adjustments for:
Depletion, depreciation and amortization		4,614			6,240
Accretion		33			50
Unrealized (gain) loss on risk management contracts		(313	)		749
Stock based compensation (Note 15)		21			149
Unrealized foreign exchange loss		(1	)		2
Amortization of loan acquisition costs		116			113
Impairment of property, plant and equipment (Note 9)		71,923			-
Changes in non-cash working capital (Note 8)		128			(355	)
Net cash from operating activities		6,111			6,771

Cash flows from investing activities
Adjustments (additions) to property, plant and equipment (Note 9)		16			(2,289	)
Change in non-cash working capital (Note 8)		(1,654	)		(188	)
Net cash used in investing activities		(1,638	)		(2,477	)

Cash flows from financing activities
Proceeds from loans and borrowings		303			-
Re-payment of loans and borrowings		(6,834	)		(2,500	)
Lease payments		(112	)		(159	)
Net cash from financing activities		(6,643	)		(2,659	)

Foreign exchange effect on cash and cash equivalents		1			(2	)

Change in cash and cash equivalents		(2,169	)		1,633
Cash and cash equivalents, beginning of year		3,089			1,456
Cash and cash equivalents, end of year	$	920		$	3,089

Kolibri Global Energy Inc. (formerly BNK Petroleum Inc.) (the "Company" or "KEI"), was incorporated under the Business Corporations Act (British Columbia) on May 6, 2008. KEI is an international energy company focused on finding and exploiting energy projects in oil, gas and clean and sustainable energy. Through various subsidiaries, the Company owns and operates energy properties in the United States. The Company continues to utilize its technical and operational expertise to identify and acquire additional projects. The head office of the Company is located at Suite 207, 3623 Old Conejo Road, Newbury Park, CA USA 91320. The Company's shares are traded on the Toronto Stock Exchange under the stock symbol KEI and on the OTCQB under the stock symbol KGEIF.

These consolidated financial statements were authorized for issuance by the Board of Directors on March 11, 2021.

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").

The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments which are measured at fair value.

These consolidated financial statements are presented in US dollars, which is the Company's functional and reporting currency.

The financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

At December 31, 2020, the Company had a working capital deficiency of $3.5 million. The Company received its latest bank borrowing base redetermination on its credit facility in September 2020. As part of the redetermination, the Company will make principal payment reductions of $2.1 million by May 2021 to reduce the borrowing base to $18.6 million. These future principal payments are projected to be funded from cash on hand and adjusted funds flow from operations. The Company has no available undrawn debt capacity under its credit facility. See Note 14 for more information. The credit facility is subject to a semi-annual review and redetermination of the borrowing base. The next redetermination is expected in the second quarter of 2021. There can be no assurance that the borrowing base review will not result in a material reduction in the borrowing base, and that the necessary funds will be available to meet its obligations as they become due.

The Company's current forecast indicates that it will be able to fund the future principal payments from cash and cash equivalents and net cash from operating activities and that it will be in compliance with its debt covenants over the next year. These forecasts are based on current strip prices and the Company's current economic hedges and include a number of significant estimates and judgments that could change in the future.

In addition, the global impact of the COVID-19 virus pandemic has led to a high degree of volatility and uncertainty that continues to impact the energy industry and financial markets. While spot prices have started to recover in early 2021, there is still a great deal of uncertainty about the impact of the pandemic going forward which continues to have a continuing negative impact on the Company's ongoing operations and its ability to raise capital, if required, in the near future or on terms favorable to the Company.

The Company's ability to continue as a going concern is dependent upon the lender maintaining the borrowing base limit on the credit facility and the Company's ability to generate net cash from operating activities or raise additional financing to continue to fund its working capital deficiency, debt repayments and capital expenditures. These matters cause material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.

These financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. If the going concern assumption were not appropriate, adjustments would be necessary in the carrying value of the Company's assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. These adjustments could be material.

The preparation of financial statements requires management to make estimates and use judgment regarding the reported amounts of assets and liabilities, the disclosures of contingencies at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. By their nature, estimates are subject to measurement uncertainty and changes in such estimates in future years could require a material change in the financial statements. Accordingly, actual results may differ from the estimated amounts.

Significant estimates and judgments made by management in the preparation of these consolidated financial statements are as follows:

Development and production assets are assessed for recoverability at a cash generating unit ("CGU") level. The determination of CGUs is subject to management judgments.

Significant judgment is required to assess indicators of impairment or impairment reversal which would require an impairment test. Management considers internal and external sources of information including forecasted oil and gas commodity prices, forecasted production volumes and estimates of recoverable proved and probabe oil and gas reserves to estimate future cash flows. Judgment is required to assess these factors when determining whether an asset has been impaired.

Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. As such income taxes are subject to measurement uncertainty. Deferred income tax assets are assessed by management at the end of the reporting period to determine the likelihood that they will be recovered from future taxable earnings. This requires making assumptions regarding future profitability which impacts the amounts recognized for deferred tax assets.

The Company uses estimates of proved and probable oil and gas reserves and the related cash flows in the calculation of depletion and also for determining the estimated recoverable value based on the greater of fair value less the cost of disposal ("FVLCD") or value in use ("VIU") calculations of its non-financial assets. Estimates of economically recoverable proved and probable oil and gas reserves and their related cash flows are based upon a number of significant assumptions, such as forecasted production volumes, oil and gas commodity prices, operating costs, royalty costs, and future development costs. Changes in forecasted oil and gas commodity price assumptions, production costs or recovery rates may change the economic status of reserves and may ultimately result in a restatement of oil and gas reserves. The discount rate used to calculate the net present value of cash flows may be influenced by changes in the general economic environment which could result in significant changes to the estimated recoverable value.

Independent third-party reserve evaluators are engaged at least annually to estimate proved and probable oil and gas reserves and the related cash flows from the Company's interest in oil and gas properties.

Assumptions that are valid at the time of reserve estimation may change significantly when additional information becomes available.

The provisions for site restoration and abandonment is based on current legal requirements, technology, price levels and expected plans and are based on significant assumptions such as inflation rate and discount rate. Actual costs and cash outflows can differ from estimates because of changes in laws or regulations, market conditions and changes in technology.

The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements, and have been applied consistently by the Company and its subsidiaries.

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Name of company	Ownership Percentage	Country of operation
BNK Petroleum Holding Inc.	100%	United States
BNK Petroleum (US) Inc.	100%	United States
BNK Hidrocarburos, S.L.	100%	Spain
BNK Sedano Hidrocarburos, S.L.	100%	Spain
BNK Canada Holdings, Inc.	100%	Canada
BNK Petroleum (Europe) Cöoperatief U.A.	100%	Netherlands
BNK Petroleum Investments B.V.	100%	Netherlands
BNK Spain Holdings B.V.	100%	Netherlands
BNK Sedano Holdings B.V.	100%	Netherlands

Many of the Company's oil and natural gas activities involve jointly controlled assets. The consolidated financial statements include the Company's share of these jointly controlled assets and a proportionate share of the relevant revenue and related costs.

Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial statements.

Transactions in foreign currencies are translated to United States dollars at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to United States dollars at the period end exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on translation are recognized in finance income or expense in the statement of operations.

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Non-derivative financial instruments are recognized when the Company becomes a party to the contractual provisions of the instruments. The Company uses three measurement categories to value these instruments: amortized cost, fair value through other comprehensive income or fair value through profit or loss. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.

Cash and cash equivalents comprise cash on hand, term deposits with banks, other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management, whereby management has the ability and intent to net bank overdrafts against cash, are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

The Company has the option to record financial instruments at fair value and recognize the change in fair value subsequent to initial recognition into the statement of operations. This option must be designated at the time that the financial asset is initially recognized by the Company. The Company only makes this designation if it has a documented risk management and investment strategy that it uses to make purchase and sale decisions regarding the financial assets. If the Company chooses this option, attributable transaction costs related to the financial instruments are recognized in the statement of operations when incurred. The Company has designated cash and cash equivalents at fair value.

Other non-derivative financial instruments, such as trade and other receivables, loans and borrowings, and trade and other payables, are measured at amortized cost using the effective interest method, less any impairment losses.

The Company has entered into certain financial derivative contracts in order to reduce its exposure to market risks from fluctuations in commodity prices. These instruments are not used for trading or speculative purposes. The Company has not designated its financial derivative contracts as accounting hedges, and thus has not applied hedge accounting, even though the Company considers all commodity contracts to be economic hedges. As a result, all financial derivative contracts are classified at fair value through profit or loss and are recorded on the statement of financial position at fair value. Transaction costs are recognized in profit or loss when incurred.

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects.

Pre-license costs are recognized in the statement of operations as incurred. Exploration and evaluation costs, including the costs of acquiring licenses and directly attributable general and administrative costs, initially are capitalized as either tangible or intangible exploration and evaluation assets according to the nature of the assets acquired. The costs are accumulated in cost centers by well, field or exploration area pending determination of technical feasibility and commercial viability. Exploration and evaluation assets that have finite lives are amortized on a straight-line basis over their useful lives.

Exploration and evaluation assets are assessed for impairment if (i) sufficient data exist to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For purposes of impairment testing, exploration and evaluation assets are allocated to a level which is not larger than an operating segment.

The technical feasibility and commercial viability of extracting a mineral resource is considered to be determinable when proved and/or probable oil and gas reserves are determined to exist. A review of each exploration license or field is carried out, at least annually, to ascertain whether proved and/or probable oil and gas reserves have been discovered. Upon determination of proved and/or probable oil and gas reserves, intangible exploration and evaluation assets attributable to those oil and gas reserves are first tested for impairment and then reclassified from exploration and evaluation assets to a separate category within tangible assets referred to as oil and natural gas interests.

Items of property, plant and equipment, which include oil and gas development and production assets, are measured at cost less accumulated depletion and depreciation and accumulated impairment write-offs. Development and production assets are grouped into CGUs for impairment testing. The Company has grouped its development and production assets into a single CGU. When significant parts of an item of property, plant and equipment, including oil and natural gas interests, have different useful lives, they are accounted for as separate items (major components).

Gains and losses on disposal of an item of property, plant and equipment, including oil and natural gas interests, are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net in the statement of operations.

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of property, plant and equipment are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable oil and gas reserves and bringing in or enhancing production from such oil and gas reserves, and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

The net carrying value of development or production assets is depleted using the unit of production method by reference to the ratio of production in the year to the related proven and probable oil and gas reserves, taking into account future development costs necessary to bring those oil and gas reserves into production. Future development costs are determined taking into account the level of development required to produce the oil and gas reserves and are reviewed by independent third-party reserve evaluators at least annually.

Proved and probable oil and gas reserves are estimated using independent third-party reserve evaluator reports and represent the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible.

For other assets, depreciation is recognized in the statement of operations on a declining balance basis over the estimated useful lives of each part of an item of property, plant and equipment.

The estimated useful lives for other assets for the current and comparative years are as follows:

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Leases are recognized as a right of use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company. The cost of right of use assets includes the amount of lease liabilities recognized and initial direct costs incurred less any lease incentives received. The right of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

The lease liability is measured at the present value of lease payments to be made over the lease term, discounted using the Company's incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily available. Each lease payment is allocated between the repayment of the principal portion of lease liability and the interest portion, which is recorded in accretion expense. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the income statement.

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

The Company recognizes loss allowances for expected credit losses on its financial assets measured at amortized cost. The loss allowance is calculated at an amount equal to expected lifetime expected credit losses.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost the reversal is recognized in the statement of operations.

The carrying amounts of the Company's non-financial assets are reviewed at each reporting date to determine whether there are any external or internal indicators of impairment or impairment reversal. If any such indicators of impairment or impairment reversal exist, the Company performs an impairment test to estimate the asset's or CGU's recoverable amount. E&E assets are assessed for impairment when they are reclassified to property, plant and equipment, as oil and natural gas interests, and also if facts and circumstances suggest that the carrying amount exceeds the estimated recoverable amount.

For the purpose of impairment testing, development and production assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGUs). The estimated recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. At December 31, 2020, the Company has only one CGU, the Tishomingo field in Oklahoma.

In assessing value in use, the estimated recoverable amount is determined based on estimated proved and probable oil and gas reserves and the related cash flows that 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 or CGU. The estimated proved and probable oil and gas reserves and the related cash flows are estimated by the Company's independent third-party reserve evaluators.

Fair value less cost to sell is determined as the amount that would be obtained from the sale of a CGU in an arm's length transaction between knowledgeable and willing parties. The fair value less cost to sell of oil and gas assets is generally determined as the net present value of the estimated future cash flows expected to arise from the continued use of the CGU, including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows are discounted by an appropriate discount rate which would be applied by such a market participant to arrive at a net present value of the CGU.

An impairment charge is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment charges, if any, are recognized on the statement of operations.

Impairment charges, other than those related to goodwill, recognized in prior years are assessed at each reporting date for any indications that the historic charge has decreased or no longer exists. An impairment charge is reversed if there has been a change in the estimates used to determine the estimated recoverable amount. An impairment charge is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation or amortization, if no impairment charge had been recognized.

The grant date fair value of options granted to employees is recognized as compensation expense with a corresponding increase in contributed surplus over the vesting period. When share options are exercised, the previously recognized value in contributed surplus is recorded as an increase to share capital. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest. Warrants denominated in Canadian dollars, that are issued by the Company to purchase common shares are considered derivative financial liabilities and are recognized at fair value with changes subsequent to initial recognition charged to the statement of operations.

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions are not recognized for future operating losses.

The Company's activities give rise to dismantling, decommissioning and site disturbance re-mediation activities. Provision is made for the estimated cost of site restoration and capitalized in the relevant asset category.

Asset retirement obligations are measured at the present value, using a risk free rate, of management's best estimate of expenditure required to settle the present obligation at the balance sheet date. Subsequent to the initial measurement, the obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The increase in the provision due to the passage of time is recognized as finance costs in the statement of operations whereas increases/decreases due to changes in the estimated future cash flows are capitalized. Actual costs incurred upon settlement of the asset retirement obligations are charged against the provision to the extent the provision was established.

Revenue is recognized when the performance obligations are satisfied and revenue can be reliably measured. Revenue is measured at the consideration specified in the contracts and represents amounts receivable for goods or services provided in the normal course of business, net of discounts, customs duties and sales taxes. All revenue is based on variable prices. Performance obligations associated with the sale of crude oil, natural gas, and natural gas liquids are satisfied at the point in time when the products are delivered to and title passes to the customer. Performance obligations associated with processing services, transportation, and marketing services are satisfied at the point in time when the services are provided.

Finance expense comprises interest expense on borrowings, accretion of the discount on ARO, foreign exchange losses and unrealized losses on financial assets. Finance income comprises interest income, realized and unrealized gains on financial assets and foreign exchange gains.

Interest income is recognized as it accrues in the statement of operations, using the effective interest method.

Foreign currency gains and losses, change in the value of financial commodity contracts reported under finance income and expenses, are reported on a net basis.

Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of operations except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Basic earnings per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of dilutive instruments such as options granted to employees.

A number of the Company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The fair value of property, plant and equipment recognized in a business combination and related decommissioning obligation is based on market values. The market value of property, plant and equipment is the estimated amount for which property, plant and equipment could be exchanged on the acquisition date between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of oil and natural gas interests (included in property, plant and equipment) and exploration and evaluation assets is estimated with reference to discounted proved and probable oil and gas reserves and the related cash flows based on independent third-party reserve evaluators reports. The risk-adjusted discount rate is specific to the asset with reference to general market conditions.

Cash and cash equivalents, trade and other receivables, trade and other payables and loans and borrowings

The fair value of cash and cash equivalents, trade and other receivables, trade and other payables and loans and borrowings is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. The fair value of these balances approximate their carrying value due to their short term to maturity or in the case of loans and borrowings, the fair value approximates its carrying value as it bears interest at floating rates and the premium charged was indicative of the Company's current credit premium.

The fair value of forward contracts is derived from quoted prices received from financial institutions and is based on published forward price curves as at the measurement date, using the remaining contracted oil and natural gas volumes.

The fair value of stock options is measured using a Black Scholes option pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), forfeiture rate, weighted average expected life of the instruments (based on historical experience and general option holder behavior) and the risk-free interest rate (based on government bonds).

The Company classifies fair value measurements according to the following hierarchy based on the amount of observable inputs used to value the instrument:

Level 2 fair value measurements are based on valuation models and techniques where the significant inputs are derived from quoted indices.

Level 3 fair value measurements are based on unobservable information. The level 3 fair value measurements pertain to the fair value assigned to property, plant and equipment, intangible exploration assets and other intangible assets acquired in business combinations.

The Company's cash and cash equivalents are classified as Level 1 and the commodity derivative contracts are classified as Level 2.

The Company's activities expose it to a variety of financial risks that arise as a result of its exploration, development, production, and financing activities such as:

This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The Board of Directors oversees management's establishment and execution of the Company's risk management framework. Management has implemented and monitors compliance with risk management policies. The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company's activities.

The Company's accounts receivable are with customers and joint interest partners in the petroleum and natural gas business and are subject to normal credit risks. Concentration of credit risk is mitigated by marketing to numerous purchasers under normal industry sale and payment terms. The Company routinely assesses the financial strength of its customers.

The Company is exposed to certain losses in the event of non-performance by counterparties to commodity price contracts. The Company mitigates this risk by entering into transactions with highly rated financial institutions. At December 31, 2020, financial assets on the statement of financial position are comprised of cash and cash equivalents and trade and other receivables.

The maximum credit exposure at December 31, 2020 is the net carrying amount of cash and cash equivalents and trade and other receivables of $2.5 million. The cash and cash equivalents are held by major international and US based financial institutions. As is common in the petroleum and natural gas industry in the United States, receivables relating to the sale of petroleum are received on or about the 20th day of the following month while receivables relating to the sale of natural gas and NGLs are received on or about 45 days after month-end. The Company markets its production to customers with investment grade credit ratings, if available in the area of production. The $1.6 million balance of trade and other receivables at December 31, 2020 is substantially all trade receivables and the largest amount owed from any one customer is $1.0 million. Subsequent to year end, substantially all of the outstanding trade receivables at December 31, 2020 have been collected. Trade receivables include amounts from joint interest partners relating to their interest in operating costs and capital spent. As the operator of properties, KEI has the ability to not allocate production to joint interest partners who are in default of amounts owing. At December 31, 2020, the estimated credit loss was $50 (2019 - $50).

The components of the trade receivables aging at December 31, 2020 are as follows:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

Typically the Company ensures that it has sufficient cash on demand and cash flow from operations to meet expected operational expenses for a one-year period, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. To achieve this objective, the Company prepares annual capital expenditure budgets, which are regularly monitored and updated as considered necessary. Further, the Company utilizes authorizations for expenditures on both operated and non-operated projects to further manage capital expenditure. The Company also attempts to match its payment cycle with collection of oil revenue on the 20th of each month.

The Company monitors its expected cash inflows from trade and other receivables and its expected cash outflows on trade and other payables and principal debt payments. The Company will make principal debt payments of $2.1 million by May 1, 2021 and will utilize its cash on hand and cash inflows to fund these principal payments as well as its trade payables. The current challenging economic climate may lead to adverse changes in cash flow, working capital levels or debt balances, which may also have a direct impact on the Company's results and financial position. These and other factors may adversely affect the Company's liquidity and the Company's ability to generate profits in the future.

The following are the contractual maturities of financial liabilities, including estimated interest payments at December 31, 2020:

Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and interest rates will affect the Company's income or the value of the financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The Company uses financial derivatives contracts to manage market risks. All such transactions are conducted within risk management tolerances that are reviewed by the Board of Directors.

Expenditures for corporate general and administrative expenses and professional fees are denominated in Canadian dollars. The average exchange rate during the year was 1 Canadian dollar equals $0.7463 USD (2019 - 1 Canadian dollar: $ 0.7536 USD) and the exchange rate at December 31, 2020 was 1 Canadian dollar equals $0.7854 USD (2019 - 1 Canadian dollar: $0.7699 USD).

A 1 percent change in the Canadian dollar against the USD at December 31, 2020 would have changed net income by $1 (2019 - $1). This analysis assumes that all other variables remain constant.

Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for oil and natural gas are impacted by general market conditions in the United States as well as world economic events that dictate the levels of supply and demand.

It is the Company's policy to economically hedge some oil and natural gas sales through the use of various financial derivative forward sales contracts and physical sales contracts. The Company does not apply hedge accounting for these contracts. The Company's production is usually sold using "spot" or near term contracts, with prices fixed at the time of transfer of custody or on the basis of a monthly average market price. The Company, however, may give consideration in certain circumstances to the appropriateness of entering into long term, fixed price marketing contracts. The Company does not enter into commodity contracts other than to meet the Company's expected sale requirements.

The Company has entered into financial commodity contracts which are summarized in the table below. Total volume hedged in the table is the annual volumes and price is the fixed price specified in the financial commodity contracts.

At December 31, 2020, the following financial commodity contracts were outstanding and recorded at estimated fair value:

		Total Volume Hedged (BBLS/MMBTU)	Price
Commodity	Period	Total Volume Hedged (BBLS/MMBTU)	($/BBL or $/MMBTU)
Oil - WTI	January 1, 2021 to December 31, 2021	72,000	$52.66
Oil - WTI	January 1, 2021 to December 31, 2021	60,000	$42.32

The estimated fair value results in a $0.04 million liability as of December 31, 2020 (December 31, 2019: $0.4 million liability) for the financial oil and gas contracts which has been determined based on the prospective amounts that the Company would receive or pay to terminate the contracts, consisting of a current liability of $0.04 million, (December 31, 2019: a current liability of $0.3 million and a long term liability of $0.1 million).

In February 2021, the Company entered into the following additional financial commodity contract:

		Total Volume Hedged (BBLS/MMBTU)	Price
Commodity	Period	Total Volume Hedged (BBLS/MMBTU)	($/BBL or $/MMBTU)
Oil - WTI⁽¹⁾	January 1, 2022 to September 30, 2022	54,000	$55.92

The realized and unrealized gains/losses from the financial commodity contracts are as follows:

The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying oil and natural gas assets. The Company considers its capital structure to include shareholders' equity, loans and borrowings and working capital. In order to maintain or adjust the capital structure, the Company may from time to time issue shares, enter into farm-out agreements and adjust its capital spending to manage current and projected debt levels.

In order to facilitate the management of this ratio, the Company prepares annual capital expenditure budgets, which are updated as necessary depending on varying factors including current and forecast prices, successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. The Company generally acts as the operator of its wells and therefore can monitor and control the amount of capital expenditures it incurs. For non-operated wells, the Company could opt out of participating in its share of the well.

There were no changes in the Company's approach to capital management during the year.

The credit facilities are subject to a semi-annual review of the borrowing base.

Oil, natural gas liquids and natural gas are mostly sold under contracts of varying price and volume terms. Revenues for oil are typically collected on the 20th day of the month following production, while natural gas and NGL revenues are collected by the 45th day of the month following production. The amount of accrued accounts receivable at December 31, 2020 was $1.6 million.

The following table presents the Company's gross oil and gas revenue disaggregated by revenue source:

		Oil and Natural Gas Interests			Processing and Other Equipment		Total
Cost or deemed cost
Balance at January 1, 2019	$	195,066		$	1,355	$	196,421
Additions (a)		2,263			15		2,278
Balance at December 31, 2019	$	197,329		$	1,370	$	198,699
Additions (b)		84			9		93
Impairment		(71,923	)		-		(71,923	)
Balance at December 31, 2020	$	125,490		$	1,379	$	126,869

Accumulated depletion and depreciation
Balance at January 1, 2019	$	36,062		$	1,237	$	37,299
Depletion and depreciation		6,053			38		6,091
Balance at December 31, 2019	$	42,115		$	1,275	$	43,390
Depletion and depreciation		4,471			29		4,500
Balance at December 31, 2020	$	46,586		$	1,304	$	47,890

Net book value
At December 31, 2019	$	155,214		$	95	$	155,309
At December 31, 2020	$	78,904		$	75	$	78,979

(a) Includes non-cash additions of $21 from capitalized stock-based compensation and $(31) from assets related to ARO liabilities.

(b) Includes non-cash additions of $2 from capitalized stock-based compensation and $112 from assets related to ARO liabilities.

After a review of external economic factors and internal factors, the Company identified indicators of impairment at March 31, 2020, due to industry and market conditions, especially the global impact of the COVID-19 pandemic. The Company performed an impairment test which compared the carrying amount of the CGU to the estimated recoverable amount which was based on fair value less costs of disposal (FVLCD). The FVLCD value is classified as a level 3 fair value measurement and was based on proved and probable oil and gas reserves and the related cash flows, discounted at 10% to 20% depending on the various categories of oil and gas reserves. The proved and probable oil and gas reserves and related cash flows were evaluated by independent third-party reserve evaluators as at December 31, 2019 and updated by internal reserve evaluators to March 31, 2020. For the March 31, 2020 impairment test, the estimated recoverable amount was $80.8 million which resulted in an impairment charge of $71.9 million that was recorded on the statement of operations. A 1% change in the discount rate used for the FVLCD value would have changed the estimated recoverable amount by $5.5 million.

The following forecasted oil and gas commodity prices were used for the impairment test at March 31, 2020:

After a review of external economic factors and internal factors, the Company identified that indicators of impairment were present at December 31, 2020, due to industry and market conditions, especially the global impact of the COVID-19 pandemic. The Company performed an impairment test which compared the carrying amount of the CGU to the estimated recoverable amount which was based on FVLCD. The FVLCD is classified as a level 3 fair value measurement and was based on proved and probable oil and gas reserves and the related cash flows, discounted at 10% to 20% depending on the various categories of reserves. The proved and probable oil and gas reserves and related cash flows were evaluated by independent third-party reserve evaluators as at December 31, 2020. There was no impairment charge or reversal of historic impairment charges as a result of the impairment test at December 31, 2020

The following forecasted oil and gas commodity prices were used for the impairment test at December 31, 2020:

As a result, the Company has recorded an impairment charge of $71.9 million related to the CGU for the year ended December 31, 2020.

After a review of external economic factors and internal factors, the Company identified indicators of impairment at December 31, 2019, due to industry and market conditions. The Company performed an impairment test at December 31, 2019. The impairment test compared the carrying amount of the CGU to the estimated recoverable amount which was based on the FVLCD. The FVLCD is classified as a level 3 fair value measurement and was based on proved and probable oil and gas reserves and the related cash flows, discounted at 10% to 20% depending on the various categories of oil and gas reserves. The proved and probable oil and gas reserves and related cash flows were evaluated by independent third-party reserve evaluators as at December 31, 2019. There was no impairment charge as a result of the impairment test at December 31, 2019

The following forecasted oil and gas commodity prices were used at December 31, 2019:

The amount of interest accretion recorded in the statement of operations totaled $7 and $16 for the years ended December 31, 2020 and 2019, respectively.

The provision for income taxes reported differs from the amounts computed by applying the cumulative US federal and state income tax rates to the net loss before tax provision due to the following:

		2020			2019

Net loss	$	(70,410	)	$	(177	)
Statutory tax rate		26.32%			26.32%
		(18,532	)		(46	)
Add (deduct):
Stock-based compensation and other permanent items		5			39
Foreign exchange		(214	)		314
Effect of tax rates in jurisdictions outside the US		20			24
Return to provision		688			139
Other		-			42
Change in US enacted tax rate		-			1,048
Change in unrecognized tax benefit		18,033			(1,560	)
Income tax expense	$	-		$	-

Effective July 1, 2020, the Alberta provincial tax rate reduction was accelerated to 8%.

Deferred tax assets have not been recognized for the following deductible temporary differences:

Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profits will be available against which they can be utilized.

The Company incurs non-operating losses in all jurisdictions. The Company has total non-operating losses carried forward of approximately $191.3 million which may be available to offset future income for income tax purposes expiring over the periods 2029 to 2040. The Company has non-operating losses of approximately $160.8 million in the US, $10.0 million in the Netherlands and $20.6 million in Canada.

The Company has temporary differences associated with its investments in its foreign subsidiaries. The Company has no deferred tax liabilities in respect of these temporary differences.

At December 31, 2020 and 2019, the Company was authorized to issue an unlimited number of common shares. The holders of common shares are entitled to receive dividends if they are declared by the Company and are entitled to one vote per share at meetings of the Company.

		2020			2019
Basic earnings per share

Net loss	$	(70,410	)	$	(177	)

Weighted average number of common shares - basic		232,923			232,923
Net loss per share - basic	$	(0.30	)	$	(0.00	)

Diluted earnings per share

Net loss	$	(70,410	)	$	(177	)

Effect of outstanding options		(a)			(a)

Weighted average number of common shares - diluted		232,923			232,923

Net loss per share - diluted	$	(0.30	)	$	(0.00	)

In June 2017, the Company's US subsidiary obtained a new credit facility from BOK Financial, which is secured by the US subsidiary's interests in the Tishomingo Field. The credit facility expires in June 2022 and is intended to fund the drilling of the Caney wells in the Tishomingo Field.

In September 2020, the credit facility was redetermined at a borrowing base of $22.0 million. Subsequent to the redetermination, the Company made principal payments to reduce the outstanding balance to $20.7 million on December 31, 2020. In accordance with the redetermination, the Company has no available capacity on the credit facility and the borrowing base is automatically reduced by the principal payments as they are paid. In addition, the Company is required to make additional principal payments to reduce the borrowing base to $18.6 million by May 2021. These future principal payments are projected to be funded from cash on hand and adjusted funds flow from operations. The credit facility is subject to a semi-annual review and redetermination of the borrowing base. The next redetermination will be in the second quarter of 2021. Future commitment amounts will be subject to new reserve evaluations and there is no guarantee that the size and terms of the credit facility will remain the same after the borrowing base redetermination. Any redetermination of the borrowing base is effective immediately and if the borrowing base is reduced, the Company has six months to repay any shortfall.

The credit facility has two primary debt covenants. One covenant requires the US subsidiary to maintain a positive working capital balance which includes any unused excess borrowing capacity and excludes the fair value of commodity contracts, the current portion of long-term debt (the "Current Ratio") and certain payables to an operator that are being reduced by the revenue earned from the non-operated well. The second covenant ensures the ratio of outstanding debt and long-term liabilities to an annualized quarterly adjusted EBITDA amount (the "Maximum Leverage Ratio") be no greater than 4 to 1 at any quarter end. Adjusted EBITDA is defined as net income excluding interest expense, depreciation, depletion and amortization expense, and other non-cash and non-recurring charges including severance, stock based compensation expense and unrealized gains or losses on commodity contracts.

The Company was in compliance with both covenants for the quarter ended December 31, 2020. At December 31, 2020, the Current Ratio of the US Subsidiary was 1.97 to 1.0 and the Maximum Leverage Ratio was 2.84 to 1.0 for the three months ended December 31, 2020.

The current global and market volatility, including the continuing uncertainty due to the impact of the COVID-19 pandemic, impacts the ability to prepare financial forecasts. The Company's current forecast indicates that it will be able to fund the future principal payments from cash on hand and funds flow from operations and that it will be in compliance with its debt covenants over the next twelve months. These forecasts are based on current strip prices and the Company's current hedges and they include a significant amount of estimates and judgments that could change in the future. If circumstances change and a covenant violation does occur and the Company does not obtain a waiver, this will represent an event of default under the facility and the lender will have the right to demand repayment of all amounts owed under the facility.

In April 2020, the Company's US subsidiary obtained a loan under the Paycheck Protection Program ("PPP") which is being administered by the Small Business Administration ("SBA"). The loan amount is $0.3 million with a 5-year term at an annual interest rate of 1 percent. All interest payments are deferred for the first ten months after the end of the loan forgiveness period, which is twenty-four weeks from the initiation of the loan. The loan amount may be forgiven if the proceeds are used for eligible expenditures, which include payroll costs, rent expense and utilities, in the twenty-four week forgiveness period. The Company has applied for loan forgiveness for the entire portion of the PPP loan and is awaiting a response from the SBA. In February 2021, the US subsidiary obtained a loan under the PPP2 loan program for an additional $0.3 million. The PPP2 loan has the same terms as the original PPP loan and may also be forgiven if the proceeds are used for eligible expenditures.

At December 31, 2020, loans and borrowings of $20.7 million (December 31, 2019: $27.5 million) are presented net of loan acquisition costs of $0.2 million (December 31, 2019: $0.3 million).

The Company has an option program that entitles officers, directors, employees and certain consultants to purchase common shares in the Company. Options are granted at the market price of the shares at the date of grant, have a five year term and vest over two years.

The number and weighted average exercise prices of share options are as follows:

	December 31, 2020				December 31, 2019

	Number of options			Weighted average exercise price	Number of options			Weighted average exercise price

Outstanding at January 1	5,534,167		$	0.45	9,657,500		$	0.54
Expired/cancelled	(879,167	)		0.49	(4,453,333	)		0.62
Granted	-			-	330,000			0.30
Outstanding at December 31	4,655,000		$	0.45	5,534,167		$	0.45

Exercisable at December 31	4,655,000		$	0.45	5,007,502		$	0.44

The fair value of the stock options was estimated using Black Scholes model with the following weighted average inputs:

The Company's asset retirement obligation (ARO) results from its ownership interest in oil and natural gas assets including well sites and gathering systems. The total future site restoration obligation is estimated based on the Company's net ownership interest in all wells and facilities, estimated costs to reclaim and abandon these wells and facilities and the estimated timing of the costs to be incurred in future years. The Company has estimated the net present value of ARO to be $1,269 as at December 31, 2020 (2019 - $1,130) based on an undiscounted total future liability of $1,435 (2019 - $1,404). These payments are expected to be made over the next 12 years with the majority of costs to be incurred between 2023 and 2032. The discount factor, which is the risk-free rate related to the liability, is 1.46% (2019: 2.31%) and the inflation rate was 2.07% (2019: 1.92%).

The Urraca concession application in Spain outlined the annual work programs in each year of the five year concession term, including the drilling of a total of nine wells on the concession. However, the concession application stipulated that failure to drill the required wells in the time indicated in the concession application would not constitute a default of the concession requirements if required permits are not approved by the government in a timely fashion. A failure to meet work commitments without obtaining an extension, suspension, or another arrangement may result in the loss of the applicable concession. The Company understands that there may be circumstances in which a failure to meet work commitments could result in liability in regard to the unperformed current year work commitments. The five year term of the Urraca concession expired in 2016. The Company has filed the relinquishment request and is awaiting the government's response. Due to the impact of the COVID-19 pandemic in Spain, government offices were closed for a portion of 2020 which resulted in an extended delay of the process.

Key management personnel includes the Board of Directors and executive officers of the Company. Key management personnel compensation is comprised of the following:

The Company's consolidated statements of operations is prepared primarily by nature of expense with the exception of employee compensation costs, which are included in both production and operating expenses and general and administrative expenses. The compensation costs include employees' salary and benefit costs.

The following table details the amount of total compensation costs included in production and operating expenses and general and administrative expenses on the statements of operations:

The Company defines its reportable segments based on the countries where it conducts business.

Year Ended December 31, 2020
		United States			Canada and Other			Total

Oil and natural gas revenues, net of royalties	$	9,580		$	-		$	9,580
Other income		2			-			2
		9,582			-			9,582

Production and operating expenses		2,755			-			2,755
Depletion, depreciation and amortization		4,614			-			4,614
General and administrative expenses		2,339			520			2,859
Stock-based compensation		11			10			21
Impairment of PP&E		71,923			-			71,923
		81,642			530			82,172

Finance income		3,541			1			3,542
Finance expense		(1,362	)		-			(1,362	)
Net loss	$	(69,881	)		(529	)	$	(70,410	)

Property plant and equipment	$	78,973			6		$	78,979
Total assets	$	82,015			169		$	82,184

Capital expenditures	$	(16	)	$	-		$	(16	)

Year Ended December 31, 2019
		United States			Canada and Other			Total

Oil and natural gas revenues, net of royalties	$	17,402		$	-		$	17,402
Other income		9			-			9
		17,411			-			17,411

Production and operating expenses		3,763			-			3,763
Depletion, depreciation and amortization		6,240			-			6,240
General and administrative expenses		3,192			687			3,879
Stock-based compensation		54			95			149
		13,249			782			14,031

Finance income		-			-			-
Finance expense		(3,557	)		-			(3,557	)
Net income (loss)	$	605			(782	)	$	(177	)

Property plant and equipment	$	155,303			6		$	155,309
Total assets	$	161,018			190		$	161,208

Capital expenditures	$	2,289		$	-		$	2,289

"Wolf Regener"		"Gary Johnson"

Wolf Regener		Gary Johnson
President & Chief Executive Officer		Chief Financial Officer & Vice President

		December 31,			December 31,
		2020			2019

Assets
Cash and cash equivalents	$	920		$	3,089
Trade and other receivables (Note 6)		1,607			2,198
Deposits and prepaid expenses		575			513
		3,102			5,800

Non-current assets
Property, plant and equipment (Note 9)		78,979			155,309
Right of use assets (Note 10)		103			99

Total Assets	$	82,184		$	161,208

Liabilities
Trade and other payables	$	4,371		$	6,424
Current portion of loans and borrowings (Note 14)		2,084			1,500
Current lease payable		66			105
Fair value of commodity contracts (Note 6)		37			253
		6,558			8,282

Non-current liabilities
Loans and borrowings (Note 14)		18,665			25,664
Asset retirement obligations (Note 16)		1,269			1,130
Lease payable		44			-
Fair value of commodity contracts (Note 6)		-			97
		19,978			26,891

Equity
Share capital (Note 12)		289,622			289,622
Contributed surplus		22,948			22,925
Deficit		(256,922	)		(186,512	)
		55,648			126,035
Total Equity and Liabilities	$	82,184		$	161,208

"David Neuhauser"		"Eric Brown"
David Neuhauser		Eric Brown
Director		Director

		2020			2019

Revenue
Oil and natural gas revenues, net of royalties (Note 7)	$	9,580		$	17,402
Other income		2			9
		9,582			17,411
Expenses
Production and operating expenses		2,755			3,763
Depletion, depreciation and amortization (Notes 9,10)		4,614			6,240
General and administrative expenses		2,859			3,879
Stock based compensation (Note 15)		21			149
Impairment of property, plant and equipment (Note 9)		71,923			-
		82,172			14,031

Finance income
Realized gain on risk management contracts (Note 6)		3,228			-
Unrealized gain on risk management contracts (Note 6)		313			-
Foreign exchange gain		1			-
		3,542			-
Finance expense
Interest on loans and borrowings		1,329			1,999
Realized loss on risk management contracts (Note 6)		-			759
Unrealized loss on risk management contracts (Note 6)		-			749
Accretion		33			50
		1,362			3,557

Net loss and comprehensive loss		(70,410	)		(177	)

Basic and diluted net loss per share (Note 13)	$	(0.30	)	$	(0.00	)

	Number of common shares		Share capital		Contributed Surplus		Deficit			Total Equity

Balance at January 1, 2019	232,922,625	$	289,622	$	22,755	$	(186,335	)	$	126,042
Stock based compensation (Note 15)	-		-		170		-			170
Net loss for the year	-		-		-		(177	)		(177	)
Balance at December 31, 2019	232,922,625	$	289,622	$	22,925	$	(186,512	)	$	126,035

Balance at January 1, 2020	232,922,625	$	289,622	$	22,925	$	(186,512	)	$	126,035
Stock based compensation (Note 15)	-		-		23		-			23
Net loss for the year	-		-		-		(70,410	)		(70,410	)
Balance at December 31, 2020	232,922,625	$	289,622	$	22,948	$	(256,922	)	$	55,648

	Current	30 - 60 days	60 - 90 days	More than 90 days	Total

Trade and other receivables	$ 1,307	$ 124	$ 99	$ 77	$ 1,607

		Carrying amount			2021			2022			2023		2024		2025
Liabilities
Fair value of commodity contracts	$	(37	)	$	(37	)	$	-		$	-	$	-	$	-
Loans and borrowings		(20,749	)		(2,084	)		(18,362	)		-		-		(303	)
Trade and other payables		(4,371	)		(4,371	)		-			-		-		-
	$	(25,157	)	$	(6,492	)	$	(18,362	)	$	-	$	-	$	(303	)

	WTI	Henry Hub	NGL
Year	$/bbl	$/Mmbtu	$/bbl
2020	25.00	2.00	5.75
2021	37.00	2.50	8.51
2022	48.00	2.75	11.04
2023	48.96	2.81	11.26
2024	49.94	2.86	11.49
2025	50.94	2.92	11.72
2026	51.96	2.98	11.95
2027	53.00	3.04	12.19
2028	54.06	3.10	12.43
2029	55.14	3.16	12.68
2030 (a)	56.24	3.22	12.94

		Right of Use Assets
Initial recognition at January 1, 2019	$	248
Depreciation		(149	)
Balance at December 31, 2019	$	99
Additions		118
Depreciation		(114	)
Balance at December 31, 2020		103

		2020			2019
Deferred income tax liabilities:
Property, plant and equipment/exploration and evaluation assets	$	(15,651	)	$	(33,330	)
Commodity contracts		-			-
Deferred tax assets:
Commodity contracts		10			92
Asset retirement obligations		334			297
Loss carry-forward		15,307			32,941
	$	-		$	-

Range of exercise prices	Number of outstanding stock options		Weighted average exercise price	Weighted average contractual life ( years)
$0.50 to $0.75	1,455,000		0.57	2.3
$0.32 to $0.49	2,570,000		0.41	0.4
$0.30 to $0.31	630,000		0.30	2.0
	4,655,000	$	0.45	1.2

		2020		2019

Fair value at grant date (per option)	$	-	$	0.16

Volatility (%)		-		76.99
Forfeiture rate (%)		-		5%
Option life (years)		-		5
Risk-free interest rate (%)		-		1.89

		Year Ended December 31,
		2020		2019

Short-term employee benefits	$	663	$	1,258
Share-based payments		23		134
	$	686	$	1,392

	WTI	Henry Hub	NGL
Year	$/bbl	$/Mmbtu	$/bbl
2021	46.00	3.00	14.72
2022	48.00	3.00	15.36
2023	53.00	3.00	16.96
2024	54.06	3.06	17.30
2025	55.14	3.12	17.64
2026	56.24	3.18	18.00
2027	57.37	3.25	18.36
2028	58.52	3.31	18.73
2029	59.69	3.38	19.10
2030	60.88	3.45	19.48
2031 (a)	62.10	3.51	19.87

	WTI	Henry Hub	NGL
Year	$/bbl	$/Mmbtu	$/bbl
2020	61.00	2.80	14.03
2021	65.00	3.00	14.95
2022	67.00	3.25	15.41
2023	68.34	3.32	15.72
2024	69.71	3.38	16.03
2025	71.10	3.45	16.35
2026	72.52	3.52	16.68
2027	73.97	3.59	17.01
2028	75.45	3.66	17.35
2029	76.96	3.73	17.70
2030 (a)	78.50	3.81	18.06