10166359 (England and Wales)

PENNPETRO ENERGY PLC

ANNUAL REPORT AND FINANCIAL

STATEMENTS FOR THE 15 MONTH PERIOD

ENDED

31 MARCH 2023

PENNPETRO ENERGY PLC

Annual Report & Financial Statements

For the 15 month period ended 31

March 2023

CONTENTS

Page

COMPANY INFORMATION

Directors

David Lenigas (Executive Chairman)

Olof Nils Rapp (Senior Non-Executive Director)

Thomas Evans (Executive Director)

Andrew Clifford (Non-Executive Director)

Secretary

David Middleburgh (MA Law Trinity Hall Cambridge)

FHF Corporate Finance Limited

Registered Office

20b Wilton Row

London, SW1 7NS

Legal Advisors

UK Legal Advisers

US Legal Advisers

Birketts LLP

Walne Law, PLLC

22 Station Road

4900 Woodway

Suite 975

Houston, Texas

Cambridge

TX 77056

CB1 2JD

Fladgate LLP

Porter Hedges LLP

16 Great Queen Street

1000 Main Street, 36

Fl.

London

Houston, Texas

WC2B 5DG

TX 77002

CMS Cameron McKenna

Nabarro Olswang LLP

Cannon Place

78 Cannon Street

London

EC4N 6AF

Corporate broker

Peterhouse Capital Limited

Zeus Capital

Floor

125 Old Broad Street

80 Cheapside

London

EC2N 1AR

EC2V 6EE

Independent Auditor

Crowe U.K. LLP

55 Ludgate Hill

London

EC4M 7JW

Registrars

Computershare Investor Services plc

The Pavilions

Bridgewater Road

Bristol

BS13 8AE

Communications

Flagstaff Strategic and

Investor Communications

1 King Street

London

EC2V 8AU

Registered Number

10166359

PENNPETRO ENERGY PLC

CHAIRMAN'S STATEMENT

Annual Report & Financial Statements for the

15 month period ended 31 March 2023

Chairman's Statement

Dear Shareholders,

I am pleased to present the annual results for Pennpetro Energy Plc ("Pennpetro") for the period

ended 31 March 2023, as the new Executive Chairman, replacing Olof Rapp who has held the

position on an interim basis since the departure of Keith Edelman. and I thank them both from their

support of the Company.

We have changed the year end this year for the publishing of our Annual Report from a 31

December year end date to 31 March year end date so that all of our subsidiary companies reported

on the same date.

As reported last year after selling oil commercially for only one month from our initial well (COG #1)

in the Gonzales field in Texas, as the world went into lockdown, we suspended all operations and

activities in Texas, in line with the requests of the US Government and Texas State Legislators. The

re-opening of the COG #1 well will be a priority for us this coming year.

Covid put the Company into a difficult position, however I’m please to now report that post the last

two capital raises in April 2023 and July 2023 totalling £1.8m (gross), Pennpetro is in a much

stronger financially position and is now back operating in Texas and is planning a very busy oil

production year ahead.

During the reporting period the Company investigated expanding its operative horizons outside of

Texas by initially agreeing to farm into the onshore Tunisian assets held by Upland Resources

Limited. We outlined this expansionary activity through our RNS which we announced to the LSE

on the 21 July 2022. Upon both Tom Evans and Andy Clifford, the President of our subsidiary

company Nobel Petroleum USA Inc., who had been contracted as the Operator, visiting Tunisia and

engaging with the relevant Tunisian Government authorities, it was evident that there were certain

outstanding issues that Upland had failed to deliver upon resulting in the decision of Pennpetro to

terminating the farm-in.

Texas has always been a Pennpetro focus and during the period the Company signed a

Participation, Development and Option Agreement with Millennium PetroCapital Corporation in

March 2023 regarding certain of their operational assets located adjacent to our own Gonzales

areas. The active area comprises 250,000 acres being the Area of Mutual Interest. This Agreement

has been subsequently expanded upon with Pennpetro taking full ownership of the Chalk Talk #1H,

Chalk Talk #4 and Chalk Talk #3H (including Whistling Starits #5H sidetrack) wells, as announced

on from 27 June 2023.

Additionally, and in a very exciting development for the Company, we also executed on 28 March

2023 a farm-in agreement with UKOG Limited and Horse Hill Developments Limited, both

subsidiaries of UK Oil & Gas Plc, to drill the next infill oil production well at Horse Hill Oil Field – the

Horse Hill 3 well. This field, just to the north of London’s Gatwick Airport, continues to produce 35°

to 41° degree API sweet quality oil from the discovery well, and according to UKOG, the HH-1 well

production to mid-March 2023 totalled over 185,000 barrels. Pennpetro must undertake a new 3D

seismic programme over Horse Hill as a prerequisite to drilling HH-3. The farm-in agreement is not

yet unconditional, but Pennpetro is hopeful that the Horse Hill Development partners will sanction

the Pennpetro involvement.

During the reporting period, the Company expanded its capital base by the placement of 1,166,667

ordinary new shares to raise £350,000 (gross) during March 2022 for additional working capital

purposes, and the appointment of Peterhouse Capital Limited as our corporate broker. We also

agreed the appointment of Zeus Partners as joint broker and financial advisor.

Since the period end, the Company raised £1.5 million (gross) with the issue of 10,000,000 new

shares together with support from existing shareholders as to their contributing shares. This

financing closed on 11 April 2023.

This financing was followed by a further raise for £300,000 in May 2023 with the issuance of

5,800,000 new shares and again with the support from existing shareholders. The Company also

has access to a $20 million financing facility, signed in May 2021, which remains undrawn.

Pennpetro has a lot to get on with operationally this year. Ideally, we would like to see at all of the

Chalk Talk 1 and 4 wells, Chalk Talk #3H well (including the Whistling Straits #5 sidetrack) and City

of Gonzales (COG #1) wells contributing to the Company’s cashflow between now and the end of

2023. We see a lot of expansion potential for oil production in Texas on top of our existing well

portfolio and will endeavour to pursue low-cost oil production as we move forward.

The past few years have been more than challenging for Pennpetro. Tom Evans and his team have

done a remarkable job in keeping the Company alive through very difficult circumstances and I

thank them for their herculean efforts in doing so. I would also like to thank our valued shareholders,

partners and contractors for their assistance over the past few years. Here’s looking forward to a

much more fruitful 2023. Success if all about oil production and we now have at least 4 wells to

bring on line in Texas and potentially a very exciting opportunity of drilling the next Horse Hill

production well in the UK.

David Lenigas

Executive Chairman

18 October 2023

PENNPETRO ENERGY PLC

EXECUTIVE DIRECTOR’S STATEMENT

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023



Executive Director's Statement

The reporting period for 15 months to the 31 March 2023 saw no oil production from Gonzales

County in Texas. Our COG #1 well was shut in due to Covid related shut downs as per US

Government instructions. Production had not been restarted by the end of the period, but plans are

being put in place to look at putting COG #1 back into production by the end of Calendar Year

2023.

On the 16 March 2023 Pennpetro announced that its wholly owned subsidiary, Nobel Petroleum

USA Inc. ("Nobel") has reached an important milestone towards becoming an oil producer again

with the execution of the Participation, Development and Option Agreement and Joint Operating

Agreement with Millennium PetroCapital Corporation ("Millennium") for a proposed 250,000 acre

(1,011 square kilometres) Area of Mutual Interest ("AMI") petroleum joint venture in Gonzales

County, Texas. That announcement followed the earlier RNS, dated 10 October 2022, announcing

the signing of the initial heads of terms agreement with Millennium.

On 28 March 2023, just prior to the end of the reporting period, the Company made a number of

very significant announcements. These included a fresh financing for £1.5 million (gross), the

commitment to participate with Millennium in the Whistling Straits #5H sidetrack well off the Chalk

Talk #3H well and the appointment of Mr David Lenigas as the Company’s new Executive

Chairman.

By the 14 April 2023, the well has been drilled to 10,195 feet MD with a 7,632.22 feet true vertical

depth ("TVD") having reached our target and penetrated the crestal portion of the microfracture

swarm. It was reported that oil shows were seen on the rig’s skimmer tanks from 8,120 feet over

numerous extended intervals with gas flares registering between 129-226 units of gas including C1

through ti C4.

At that time, Nobel was paying 33.33% of the cost to drill and complete this joint development well

connected to the storage tanks for a net 25% working interest (18.75% net revenue interest) as

well as a prospect fee which covers sunk costs relating to leasing, land, legal, 3D seismic licensing,

geological and geophysical analysis.

Millennium, the Whistling Straits #5H well operator attempted to flow the well with a JET pump and

the partners decided that this pump was unsuitable for this well and a down hole ESP pump would

be better suited.

On 27 June 2023, Nobel Petroleum USA Inc. ("Nobel") signed a series of agreements with

Millennium PetroCapital Corporation ("Millennium") to increase its stake in the Whistling Straits

#5H well from a 25% working interest ("WI") to a 100% WI with 75% net revenue interest ("NRI")

and to assume operatorship of the well with immediate effect in addition to 2,036.38 acres of oil

leases.

Nobel also has the exclusive right to acquire a 100% WI in two nearby Chalk Talk wells (Chalk Talk

#1H and Chalk Talk #4H) for no additional costs, if Nobel determines that production can be

restored to one or both wells within a 90 day evaluation period. In August 2023, Nobel exercised

its rights to buy 100% of Chalk Talk #1H and #4H. Initial production rates typically range from 100-

400 barrels of oil per day ("bopd"), based on unfracked analog wells within the Austin Chalk Play

for new wells. The Chalk Talk #1H well has previously produced 55,000 barrels of oil between June

2020 and July 2022 while the Chalk Talk #4H well produced 6,400 barrels of oil between June

2021 and November 2021. Both wells were producing at rates of approximately 15-20 bopd prior

to being shut-in and Nobel hopes to restore production to similar levels or better after a thorough

evaluation and contingent upon a well workover.

PENNPETRO ENERGY PLC

EXECUTIVE DIRECTOR’S STATEMENT

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023



The Company plans to bring on oil production from Chalk Talk #1H, Chalk Talk #3H (Whistling

Straights #5H sidetrack) and COG #1 wells during 2023.

Going back to our City of Gonzales operations, our focus during the latter part of 2021 and 2022

was to continue to develop our proven reserve base at our licences in Gonzales, which had been

previously curtailed by Covid-19 and the ensuing pandemic conditions imposed across all of the

United States.

According to the Group's Competent Person's Report ("CPR"), prepared in December 2017,

Pennpetro had a Working Interest in 2,000 Mbbl of oil and 1,000 MMcf of gas across its Gonzales

leases. On 6 August 2019, Nobel increased its working interest in the portfolio of petroleum

interests from 75% to 100%, thereby its Working Interest is now over 4,000 MBBL (4 millions

barrels) of oil and 2,000 MMcf (2 Bcf) of gas resulting in a substantive uplift in our valuation metric.

Tunisia

In July 2022 the Company farmed into the prospective onshore Saouaf petroleum permit in Tunisia

held by Upland Resources Limited. Unfortunately, post a visit by myself and Andy Clifford to Tunisia

and engaging with the relevant Tunisian Government authorities, it was not possible to continue

with this project due to substantive unresolved Upland Resources limited issues regarding the

veracity of the permit. We elected to terminate our engagement in November. However, Tunisia is

an area to which we may well return in the future as we have built excellent relationships within the

country, which has an attractive suite of under-explored and under-developed opportunities.

United Kingdom - Horse Hill

On the United Kingdom domestic front, it was announced on 28 March 2023 that the Company had

signed an agreement with UKOG Limited and Horse Hill Developments Limited both subsidiaries

of UK Oil & Gas Plc to farm-in and drill the next infill oil production well at the Horse Hill Oil Field

located about 2 km north of Gatwick Airport. The Agreement covers Horse Hill and its surrounding

licences covering an aggregate area of 142.9 square kilometres.

The drilling of a new crestal infill, designated Horse Hill-3, will be undertaken post completion of a

high-definition 3D seismic survey. We will receive a direct licence interest of 49% inclusive

production. UKOG advised in mid-March that continuing commitments and financing costs remain

low, manageable and flexible. The farm-in agreement is not yet unconditional.

Corporate

Pennpetro's Board currently comprises four Directors, who collectively have extensive international

experience and a proven track record in investment, corporate finance and business acquisition,

operation and development and are well placed to implement the Company's business objectives

and strategy highly active plays. The appointment of Andy Clifford in April 2020, a highly seasoned

and experienced oil professional as the President of the Company's operational subsidiary Nobel

Petroleum USA, Inc., together with the recent appointment of David Lenigas as our new Executive

Chairman, emphasises the Company's dedication to its forward development profile.

PENNPETRO ENERGY PLC

EXECUTIVE DIRECTOR’S STATEMENT

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023



Outlook

In line with our strategy, all our operations are in highly active plays where the economics of drilling

and producing remain attractive at sub-US$30 oil prices. With this aim we are taking advantage of

the prior industry downturn to accelerate the positioning of our South Texas leasehold position in

favour of the Austin Chalks and Eagleford Shales. With a strategic foothold in these prolific, low-

cost plays established and a proven management team in place, we will look to further expand our

position in this US onshore sweet spot, as and when management considers it most advantageous

to do so.

For 2022 and early 2023, our main objectives were to exit the prior pandemic issues and to build

upon the initiative that commenced with the completion of our initial well, COG#1-H, and to further

acquire additional land leases.

Finally, I would like to thank the Board, management team and all our advisers for their hard work

over the last fifteen months and also to our shareholders for their continued support.

Thomas Evans

Executive Director

18 October 2023

PENNPETRO ENERGY PLC

OPERATIONS REPORT

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023



Operations Report

Summary

Nobel Petroleum USA, Inc., has operational teams on the ground working from its offices in

Houston. During the period, one new horizontal well in which the Group has an interest commenced

completion activity. The Group was planning to initiate an encompassing 3D seismic survey in 2020

with Dawson Geophysical Company to complement its comprehensive well logs geological

analysis, together with an enhanced programme of additional new petroleum leasing contiguous

to the area, with proposed planning to provide a further number of permitted drilling locations by

year end. However, the onset of COVID-19 curtailed these plans.

In addition, the Company's subsidiary, Pennpetro USA Corp, Inc., through its highly regarded

Houston based technical teams, has continued to examine a number of asset opportunities

encompassing producing hydrocarbons with offsetting strategic leasehold interests capable of both

additional infill and expansionary drilling locations. These activities are completed through the

Company’s operational enterprise, Nobel Petroleum USA, Inc.

As reported on in the Operations report in the previous section, we have acquired 100% ownership

and become operator to the recently drilled Whistling Straights #5 well in Gonzales country Texas,

together with the acquisition and assumption of the operatorship of the Chalk Talk #1-H and #4-H

wells, again both in Gonzales County, Texas. We will be reverting to the ongoing development of

the COG assets once we have completion of the newly acquired assets from Millennium

PetroCapital Corporation.

SOUTH TEXAS

The Company, through its indirect wholly owned subsidiary, Nobel Petroleum USA, Inc., holds

interests in acreage within active oil and gas plays within the County of Gonzales, State of Texas:

The Austin Chalk, and Eagleford Shale horizontal development and vertical development of the

Buda formation. Nobel Petroleum USA, Inc. has observed an increase in the value of its interests

within its project acreage, due in part to uplifting its active equity interests and increased

consolidation of its acreage positions, together with the continued operational successes to the

immediate south of its operational area.

Of particular interest is the recent drilling being undertaken to the southern edge of the Nobel

operational area by the Millennium Group, who have averaged over 400 bpd of oil.

Austin Chalk

The play covers an extensive area with over a million acres yet to be developed and runs all the

way from the Pearsale Field south of Gonzales to the giant Giddings Oil Field, the largest oilfield

found in Texas in the past 50 years to the north of Gonzales, and further north onto the North

Rayou Jack Field. Recently, this play has extended into western Louisiana with a number of major

players including EOR Resources and Marathon acquiring strong acreage positions. The Austin

Chalk overlays the oil rich Eagleford Shale, with both formations capable of interacting with each

other, and is a low permeability fractured reservoir that has been the target for horizontal drilling

since the mid-1980s and consists of interbedded chalks, volcanic ash, and marls. It is located at

drill depths from 7,000 to 8,000 feet. It can be a liquids-rich play, yielding high volumes of oil and

condensate. Initial production rates can range over 1,000 bopd with ultimate reserves exceeding

500 MBO per well.

PENNPETRO ENERGY PLC

OPERATIONS REPORT

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023



Eagleford Shale

The Eagleford continues to prove itself as a world-class crude oil formation having produced in

excess of 2.9 billion barrels of crude oil and condensate. This play is classified as a petroleum

system in that it is a self-sourced reservoir with seals. Migration of Eagleford hydrocarbons was

primarily along bedding planes during the expulsion phase. Absent of traps, hydrocarbons migrated

up-dip or north where vertical natural fractures were encountered. These natural fractures were

associated with the regional fault trends. Here, the hydrocarbons migrated into the extensively

fractured Austin Chalk. Initial production rates with laterals can exceed 1,000 bopd.

Buda Formation

The Buda is a biomicritic limestone lying below the Eagleford Shale and above the Del Rio Shale.

There has been an increase in the focus on, and the development of, the Buda formation by a

number of US operators in South Texas, with a number of horizontal wells having been completed.

It is a development we are following closely.

As previously identified, while the Buda has always been acknowledged as a resource play in

South Texas, it sits at the bottom of our drilling prognosis, as it can be drilled as a separate vertical

completion and added to our overall horizontal programme. Furthermore, its unit spacing can be

brought significantly down to 40 acres, thereby fulfilling a separate in-fill operation alongside our

horizontal drilling focus.

Thomas Evans

Executive Director

18 October 2023

PENNPETRO ENERGY PLC

FINANCIAL REPORT

Annual Report & Financial Statements

For the 15 month ended 31 March 2023

1

Financial Report

The financial results for the group for the 15 Months ended 31 March 2023 are presented below:

The financial results for the 15 Months ended 31 March 2023 show a loss after tax of $318,902

(2021: loss $1,311,707).

The majority of the cost contributing to the Group’s loss for the year included legal and professional

fees, loan arrangement fees, directors’ emoluments and interest charges, which were in line with

the Board’s expectations. This has been partially offset by a gain on loan modification of $497,939.

The Group’s borrowings at 31 March 2023 were $4,018,369 (2021: $4,256,262). In addition, as

reported in the prior year, the repayment date for the loan facility with Petroquest Energy Limited

was extended a further year to 31 December 2024.

The Group had cash balances at 31 March 2023 of $46,792 (2021: $1,828) and short-term

investments of $82,224 (2021: $34,914). The year-on-year movement in cash and short-term

investments was primarily a result of cash raised from equity issues less cash used in operating

activities and development expenditure.

As at 31 March 2023, the Group had $878,000 (2021 $878,000) still available to draw under its

loan facility of $5m with Petroquest Energy Limited.

In addition, the Group had a receivables balance at 31 March 2023 of $315,299 (2021: $309,456).

$100,000 was capitalised during the year to property, plant and equipment in connection with the

Millennium Petrocapital Corporation Participation, Development and Option Agreement. As at 31

March 2023, total property, plant and equipment held by the Group was $1,484,931 (2021:

$1,384,931).

The cumulative drilling-related expenditure capitalised in intangible assets remained at $4,233,890

at 31 March 2023 (2021: $4,233,890).

Thomas Evans

Executive Director

18 October 2023

PENNPETRO ENERGY PLC

STRATEGIC REPORT

Annual Report & Financial Statements For

the 15-month ended 31 March 2023

Strategic Report

The Directors present their strategic report on the group for the 15-Month Period ended 31 March

2023.

Principal Activities

The principal activity of the Group is onshore oil and gas exploration and production in the United

States of America. Pennpetro Energy Plc acts as a holding company and provides direction and

other services to its subsidiaries.

Pennpetro USA Corp., holds 100% of the US operational subsidiary Nobel Petroleum USA, Inc.

(“Nobel USA”), an independent oil and gas production company based in the City of Gonzales,

Gonzales County, Texas, USA. Nobel USA’s core area of business is in the Austin Chalk and

Eagleford Shale oil and gas horizontal formations together with the lower oil and gas reservoir, the

Buda Formation in South Texas, United States.

The review of business and future developments is included in the Executive Directors’ Statement

and the Operations Report. A review of the financial performance and position is included in the

Financial Report.

A summary of the operations conducted by the Group is detailed in both the Executive Directors’

Statement and the Operations Report.

Strategic Approach

The Board’s strategic intent is to maximise shareholder value through the continuing investment

into new wells and leases in proven US onshore formations and participating alongside established

operators in multiple wells, while further reducing costs, where applicable.

The Company provides shareholders with exposure to the high growth associated with the

producing oil and gas sector. This is achieved with a low overhead base.

Key Performance Indicators

The Board monitors the overall performance of the Group by reference to certain key milestones.

The Group considers its financial KPI’s to include:

Key performance indicators

2023

2021

Net cash flows from operating activities

(389,892)

(251,740)

Cash and short-term investments

129,016

36,742

Headroom on loan facilities

878,000

Participation in well drilling programmes are monitored on an individual project basis in terms of

revenue and cost per barrel of oil or Mcf (one thousand cubic feet) of gas, together with the

anticipated payback period on each project.

PENNPETRO ENERGY PLC

STRATEGIC REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

1

Board diversity

Although the Board consisted of four male Directors, the Board supports diversity in the boardroom.

Aside from the Directors, there are no employees in the Company. The Board will pursue an equal

opportunity policy and seek to employ those persons most suitable to delivering value for the

Company.

Corporate responsibility

The Group operates a management system that embodies Environmental, Health, Safety and

Social Responsibility principles.

A number of objectives have been set by the Board to address these principles and the Executive

director is responsible for demonstrating to the Board that these principles are adhered to in its US

Oil and Gas operation.

The policy of the Board of Pennpetro is to be fully accountable for the necessary practices,

procedures and means being in place so as to ensure that each objective is demonstrated and that

continuous improvement practices are operating to ensure that the required practices, procedures

and means are being monitored, refined and optimised as necessary.

The objectives of the Environment, Health, Safety and Social Responsibility Policy include:

• The Group shall manage all operations in a manner that protects the environment and the

health and safety of employees, third parties and the community.

• Risk identification, assessment and prioritisation can reduce risk and mitigate hazards to

employees, third parties, the community and the environment. Management of risk is a

continuous process.

• The use of internationally recognised standards, procedures and specifications for design,

construction and commissioning activities are essential for achieving operational excellence.

• The minimisation of environmental risks and liabilities are integral parts of the Group’s

operations.

• Third parties who provide materials and services or operate facilities on the Group’s behalf

have an impact on Environmental, Health and Safety and Social Responsibility excellence.

It is essential that third-party services are provided in a manner consistent with the Group’s

Policy.

• Preparedness and planning for emergencies are essential to ensuring that all necessary

actions are taken if an incident occurs, to protect employees, third parties, the public, the

environment, the assets and brand of Pennpetro.

• Open and honest communication with the communities, authorities and stakeholders with

which the Group operates builds confidence and trust in the integrity of Pennpetro.

PENNPETRO ENERGY PLC

STRATEGIC REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

1

Corporate responsibility (continued)

• The Group has determined that the greenhouse gas emissions from the operations of the

Company and its subsidiaries are sufficiently low that it does not have responsibility to

produce the disclosures required under the Companies Act 2006 (Strategic Report and

Directors’ Reports) Regulations 2013. The reason for this is that there was only limited

activity from its US based operating subsidiary during the current and prior period.

During 2022, the Group closely monitored the limited drilling, completion and production

operations of its COG#1-H well and there have been no breaches of any applicable Acts recorded

against the Group during the reporting period.

Task Force on Climate-related Financial Disclosures (TCFD)

This section of the report sets out our climate-related disclosures in relation to the four pillars of the

TCFD framework; Governance, Strategy, Risk Mitigation and Metrics & Targets.

The Board of Directors is responsible for oversight of climate related risks and opportunities –

refer to the principal risk exposure on climate related matters on page 16. Climate related risks

and opportunities are reviewed each six months.

The principal focus of environmental risk is around potential flaring gas related issues but is highly

cognisant as to the impact of climate change issues prevailing within the petroleum industry.

The Company’s operational activity is situated in Texas, where weather patterns can influence

activities. The county of Gonzales where activities are located can be impacted by windstorms

and especially hurricanes during certain months of the year. This can lead to flooding of

operational sites as has happened to the Company in the past resulting in severe flooding to

drilling operations, resulting in additional expenditures for water recovery.

The Board of Directors is responsible for identifying and assessing climate related risks. There

is currently no formal process for this, though the Board is considering development of this area

as the Group’s activities are expected to increase in the coming years.

As current onsite operations are limited at present, there have not been significant physical

environmental risks identified. The Board works with the operator at its sites to ensure measures

are in place to mitigate the impact of climate-related risks such as flooding or storm damage.

The Directors also monitor the activities of the Texas petroleum authority – the Texas Railroad

Commission – regarding obligations and regulatory matters with operational requirements on

both a State and Federal perspective such that the Company can be pro-active in complying

with new requirements.

Strategy

Risk Management

Governance

PENNPETRO ENERGY PLC

STRATEGIC REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

1

The Group has limited operational and administrative activity at present and hence the Directors are

in the process of developing climate related metrics and targets appropriate to the current extent of

operations. The Group performs regular checks of air quality operational equipment and analyses the

results against local township vectors.

The Directors have assessed there to be limited Scope 1 and Scope 3 emissions from the Group’s

administrative and operational activities; Scope 3 emissions relating to the supply chain have not

yet been evaluated.

Viability statement

In accordance with provision 31 of the UK Corporate Governance Code (2018), the Board has

assessed the prospects of the Company over a three-year period, taking account of the Company’s

current position and principal risks. For information regarding Group’s going concern position and

funding requirements over the next twelve months, please see the Going Concern section in the

accounts.

Time frame

The Board believes that three years is the most appropriate time frame over which the Board should

assess the long-term viability of the Group. The three years was considered appropriate as this allows

for the time to bring on the planned wells in Texas and undertake further well enhancements on those

wells, in addition to conducting the 3D seismic work on the Horse Hill Project and drilling the Horse

Hill 3 production well. The Group’s current activities, as at the date of this report, do not currently

generate any revenues or positive operating cash flow, though oil production is scheduled to start in

the last quarter of 2023 from its Texas operations. The Group expects to generate modest positive

net cash flow when oil production regularly exceeds 50 barrels of oil per day. Although higher oil

production numbers are targeted, a sustainable minimum production level of 50 bopd (at current oil

prices of approximately US$90 WTI) would represent around US$100,000 per month in revenues

which is more than sufficient to cover costs.

Assessing viability

Apart from the Board anticipating revenues to commence from oil production in the later part of 2023,

the main assumption in the Board making its viability assessment is the ability of the Group to raise

further funds should additional funding be required to drill new wells or acquire new oil projects. The

funding for the Horse Hill project, should the Joint Venture proceed, will come from either surplus

cash flow from Texas oil production, or fresh equity raises, or farming down a percentage of the Horse

Hill 3 drilling costs to a third-party, or a combination of the aforesaid. If the Group was unsuccessful

in raising the funds for the Horse Hill Project, there will be little adverse impact as the project would

not commence. There are no penalties against the Group for not undertaking the Horse Hill Project.

Principal risk

The Directors have carried out an assessment of the principal risks facing the Group as described on

the preceding pages including those that threaten its business model, future performance, solvency

or liquidity. The Directors are confident that they have put in place a strong management team wide-

ranging expertise in oil exploration and development who are capable of dealing with the risk

management in order to safeguard the Group’s assets. The directors are aware that the risks that

could have the most adverse effect are funding and capital markets, oil and gas exploration risks and

production risks and movements in global oil prices.

Metrics and targets

PENNPETRO ENERGY PLC

STRATEGIC REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

1

Confirmation of viability

Taking account of these matters, the Directors have a reasonable expectation that the Group will be

able to continue in operation and meet its liabilities as they fall due over the next three year period,

assuming that the oil production from the oil wells in Texas meet the Company’s expectations. The

Horse Hill Project is something the Company would like to proceed with, however this is still

conditional on the current Horse Hill Development Limited (“HHDL”) partners to approve the deal with

Pennpetro as announced. Should the HHDL partners agree to proceed with the venture, Pennpetro

can then elect to fund the 3D seismic work for a small consideration of approximately £350,000. The

Group could then decide whether to proceed with earning in to the Horse Hill 3 production well for

49% of oil production by spending an estimated £3.5m to £4m that can either be funded from cash

reserves at the time, a fresh equity raise or bringing in a partner or a combination of these funding

measures. The Company’s going concern statement is detailed in note 2.3 to these accounts.

Section 172 statement

Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests

of stakeholders and other matters in their decision making. The Directors continue to have regard

to the interests of the Company’s employees and other stakeholders, the impact of its activities on

the community, the environment and the Company’s reputation for good business conduct, when

making decisions. In this context, acting in good faith and fairly, the Directors consider what is most

likely to promote the success of the Company for its members in the long term. We explain in this

annual report, and referenced herein, how the Board engages with stakeholders.

Promotion of the Company for the benefit of the members as a whole

The Director’s believe they have acted in the way most likely to promote the success of the

Company for the benefit of its members as a whole, as required by s172 of the Companies Act

2006.

The requirements of s172 are for the Directors to:

· Consider the likely consequences of any decision in the long term,

· Act fairly between the members of the Company,

· Maintain a reputation for high standards of business conduct,

· Consider the interests of the Company’s employees,

· Foster the Company’s relationships with suppliers, customers and others, and

· Consider the impact of the Company’s operations on the community and the environment.

The Company is quoted on the London Stock Exchange and its members will be fully aware,

through detailed announcements, shareholder meetings and financial communications, of the

Board’s broad and specific intentions and the rationale for its decisions.

When selecting investments, issues such as the impact on the community and the environment

have actively been taken into consideration.

The Company pays its employees and creditors promptly and keeps its costs to a minimum to

protect shareholders funds. The application of the s172 requirements can be demonstrated in

relation to the some of the key decisions made during 2022 and 2023:

As previously reported herein under Operations, our current focus is on the development of recently

acquired assets from Millennium PetroCapital Corporation.

The Company recognising the global impact of environmental concerns, instigated due diligence

with regard to expanding its experiences and core competencies within the fossil environment and

petroleum drilling to specific green energy initiatives securitised with US intellectual property filings

to be expanded internationally.

PENNPETRO ENERGY PLC

STRATEGIC REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

1

Risks and Uncertainties

The Group’s activities expose it to a variety of risks and uncertainties.

Market risk

The Group operates in an international market for hydrocarbons and is exposed to risk arising from

variations in the demand for and price of the hydrocarbons. Oil and gas prices historically have

fluctuated widely and are affected by numerous factors over which the Group does not have any

control, including world production levels, international economic trends, currency exchange

fluctuations, inflation, speculative activity, consumption patterns and global or regional political

events. The Group will consider hedging against the risks of fluctuating oil prices and currency

exchange once the initial well is in commercial production.

Environmental risk

The Group’s operations are subject to environmental regulation in all the jurisdictions in which it

operates. The Group is unable to predict the effect of additional environmental laws and regulations

which may be adopted in the future, including whether any such laws or regulations would

adversely affect the Group’s operations. There can be no assurance that such new environmental

legislation once implemented will not oblige the Group to incur significant expenses and undertake

significant investments. The Group identifies, assesses and prioritises environmental risks on an

ongoing basis, as part of its management system.

Oil and gas exploration and production risks

Whilst Nobel Petroleum USA, Inc., a Group subsidiary, took over the operatorship during 2019 with

the formal approval of the regulator, the Texas Railroad Commission, and is the Working Interest

owner, the previous operator is still engaged under sub-contracting terms. This allows the Group

to fully integrate its operational teams in Houston.

Although it does not engage in exploration activities, per se, it might engage in some limited

exploration activity if it was in an area offsetting producing assets and the Company decided such

activity was worthwhile on a minimised risk basis to enhance its lease profile. There are significant

risks and hazards inherent in the exploration and production of oil and gas, including environmental

hazards, industrial incidents, labour disputes, fire, drought, flooding and other acts of God. The

occurrence of any of these hazards can delay or interrupt production and increase production costs.

The Group operates a management system that embodies Environmental, Health, Safety and

Social Responsibility principles in order to mitigate these hazards.

There is no guarantee that oil and/or gas will be discovered in any of the Group's existing or future

licences/permitted acreage or that commercial quantities of oil and/or gas can be recovered.

Licences and title

The leases in which the Group has or is seeking to have an interest will be subject to termination

after the primary term of such leases unless there is current production of oil and/or gas in

commercial quantities. If a lease is not extended after the primary term, the Group may lose the

opportunity to develop and discover any hydrocarbon resources on that lease area. The Group

retains the services of a team of experienced land managers who monitor and report on the Group's

portfolio of leases to the Executive director on an ongoing basis. In taking an assignment of an oil

and/or gas lease, the Group would, in accordance with industry practice, rely on the warranty

provisions.

This report was approved by the Board on 18 October 2023 and signed on its behalf:

David Lenigas

Executive Chairman

PENNPETRO ENERGY PLC

1

DIRECTORS’ REPORT

Annual Report & Financial Statements For

the 15-month period ended 31 March 2023

The Directors present their Annual Report and the audited Financial Statements for the 15-month

period ended 31 March 2023.

The Company’s ordinary shares are listed on the London Stock Exchange, on the Official List

pursuant to Chapter 14 of the Listing Rules, which sets out the requirements for Standard Listings.

Organisation Review

The Board is responsible for providing strategic direction for the Group. This incorporates setting

out objectives, management policies and performance criteria. The Board assesses its

performance against these on a monthly basis.

Composition of the Board at 31 March 2023 was one Executive Director, Executive Chairman and

two Non-Executive Directors. During the year, on 28 March 2023, David Lenigas joined the

Company as Executive Chairman, replacing Olof Rapp who had acted in an interim capacity. The

Board believes that the present composition provides an appropriate mix to conduct the Group’s

affairs.

The Board is responsible for monitoring risks and uncertainties faced by the Group. These risks

and uncertainties are detailed in the Strategic Report and note 3 to the financial statements.

The corporate governance arrangement of the Group is disclosed in the Corporate Governance

Report.

Directors and Directors’ interests

The Directors who held office during the year to the date of approval of these financial statements,

together with their beneficial interests in the ordinary shares of the Company, are shown below.

31 March 2023

31 December 2021

Ordinary

(number)

options

(number)

Ordinary

(number)

options

(number)

Olof Rapp

2,000,000

425,000

Thomas Evans

(1)

500,000

5,000,000

425,000

Andy Clifford

1,000,000

(1)

Thomas Martin Evans shares are held by FHF Securities (A’Asia) Limited. FHF assisted the

Company in contributing 4,500,000 shares to the April 2023 placement. The 4,500,000 shares are

under agreement with the Company to be replaced through the mechanism of a new prospectus.

The Directors who held office at 31 March 2023 are summarised as follows:

Name of Director Position

David Lenigas Executive Chairman

Thomas Evans Executive Director

Olof Rapp Senior Non-Executive Director

Andy Clifford Non-Executive Director

Directors’ Remuneration

The Remuneration Committee assesses the appropriateness of the nature and amount of

emoluments of the Directors on a periodic basis by reference to relevant employment market

conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of

a high-quality Board and senior executive team.

The Directors’ remuneration and policies for appointment or replacement of directors are

disclosed in the Directors’ Remuneration Report.

PENNPETRO ENERGY PLC

1

DIRECTORS’ REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

Dividends

The Directors do not recommend the payment of a dividend (2021: $Nil).

Share capital and major shareholdings

The issued share capital of the Company as at 31 March 2023 comprised 84,499,071 Ordinary

shares of 1p (2021: 76,452,106). This increased to 100,299,071 in July 2023 following the share

issues described at note 28 to the financial statements.

The Company has only one class of share capital formed of ordinary shares. All shares forming

part of the ordinary share capital have the same rights and each carry one vote.

As at 14 July 2023 the Company had been notified of the following interests in the Company’s

ordinary share capital:

Number of shares

Percentage (%)

Peel Hunt Holdings Limited

8,238,346

8.21

Global Investment Strategy UK Limited

6,400,000

6.38

Barnard Nominees Limited

6,000,000

5.98

Bank of New York (Nominees) Limited

4,950,000

4.94

Vidicos Nominees Limited

4,193,152

4.18

W B Nominees Limited

3,869,876

3.86

J M Finn Nominees Limited

3,666,666

3.66

Merrill Lynch Professional Clearing Group

Limited

3,333,333

3.32

Griffin Asset Management Limited

3,255,500

3.25

Invictorium Limited

3,200,000

3.19

Mrs. B. Shaw

3,200,000

3.19

FHF Corporate Finance Limited

3,184,560

3.18

Mrs. P. Evans

3,100,000

3.09

To the best of the Directors’ knowledge, no shareholder directly or indirectly exercises, or could

exercise, control over the Company.

Going Concern

The Group’s business activities, together with the factors likely to affect its future development and

performance are set out in the Executive Director’s Statement. In addition, notes 3 and 24 to the

financial statements disclose the Group’s and Company’s objectives, policies and processes for

managing financial risks and capital.

PENNPETRO ENERGY PLC

1

DIRECTORS' REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

Going Concern (continued)

The Directors have prepared cashflow forecasts as part of their assessment of the going concern

position of the Company and Group. The Board of Directors have considered these forecasts and have

a reasonable expectation that the Company and Group has adequate resources to continue in

operational existence through to 30 November 2024 as projected. The forecasts include the Group’s

obligations on funding the initial Millennium well but do not include any planned expenditure in regard to

Horse Hill, as the Directors do not expect any such payments to be required during the going concern

assessment period.

This is subject to material adverse unforeseen events that may occur, including but not limited to oil and

gas prices and further hinderances to operations

The Group completed share issues in April 2023 and July 2023 which raised a total of £1,800,000. As

at 29 September 2023 the group had a cash balance of US$693,438, after paying general administrative

expenses, regulatory fees, costs related to the placings, the final instalment of US$537,557 to Millenium

Petrocapital to complete the acquisitions, and certain down payments for mobilisation of the workover

rig and ancillary equipment.

On 29 June 2022, Petroquest Energy Limited, an unrelated corporate party, extended the repayment

date on the loan owing by Nobel Petroleum LLC. The revised maturity date on the loan is 31 December

2024. Petroquest Energy Limited have further formally confirmed to the Directors that the loan can be

further extended to 31 December 2025 if required.

The Directors have considered the above matters and continue to consider it appropriate to prepare the

Group and Company financial statements on a going concern basis.

Events after the Reporting Period

On 11 April 2023, the Company raised £1,500,000 gross proceeds through the issue of 10,000,000 new

ordinary shares together contributions from existing shareholders of a further 39,526,195 shares at a price of 3p

per share.

On 14 July 2023, the Company raised £300,000 gross proceeds from the issue of 5,800,000 new ordinary

shares together with contributions from existing shareholders of a further 9,200,000 shares at a price of

2p per share.

Provision of Information to Auditor

So far as each of the Directors is aware at the time this report is approved:

• there is no relevant audit information of which the Company's auditor is unaware; and

• the Directors have taken all steps that they ought to have taken to make themselves aware of

any relevant audit information and to establish that the auditor is aware of that information.

Independent Auditor

The auditor, Crowe U.K. LLP will be proposed for reappointment in accordance with section 485 of the

Companies Act 2006. Crowe U.K. LLP has signified its willingness to continue in office as auditor.

This report was approved by the board on 18 October 2023 and signed on its behalf:

David Lenigas

Executive Chairman

PENNPETRO ENERGY PLC



DIRECTORS’ INFORMATION

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

As at the date of this report, the following directors held office in the Company:

Thomas Martin Evans, Executive Director

Thomas Evans started his career as a financial executive with Extel Financial Ltd, moving to equity

sales at Barclays de Zoete Wedd Ltd and RBC Dominion Securities Limited, director CIBC World

Markets Limited prior to founding Bishopsgate Capital Management Ltd in 2000 dealing in

institutional fund management which was merged with Athanor Capital Partners Ltd assuming the

role of Chief Investment Officer, expanding all the combined entities FSA regulated permitted

businesses. Established TME Consulting creating UCITS compliant umbrella structure to be

marketed to both retail and wholesale clients. CEO and founder of the Caplain group created to

acquiring stockbroking and wealth management entities and Aerarius PCC Ltd (Guernsey) fund

structure for European investment strategies.

Olof Nils Anders Rapp, Senior Non-Executive Director

Olof Rapp has vast international experience in the aerospace and automotive sector and has held

leading managerial positions with Rolls- Royce International, Volvo Truck Corporation and VistaJet

International in South America, Middle East and Asia. His last position at Rolls Royce was as

Regional Director, Malaysia, with overall responsibility for Rolls-Royce Plc’s business in Malaysia

and Brunei (Aviation, Marine, Nuclear and Oil & Gas) and represented the company at the highest

level. His last position at Volvo was Managing Director of Volvo Malaysia, where he led a successful

restructuring of the company. Olof serves as a Board Director in Serunai Commerce Sdn Bhd and

is a Senior Advisor to Partners in Performance Pty Ltd. He is also Vice President of the Malaysian

Swedish Business Association.

He was born in Gothenburg, Sweden, and studied International Business at IHM Business School.

Andy C. Clifford, Non-Executive Director

Andy has over 42 years of experience in domestic and international exploration, development and

production and a proven track record of exploration and acquisition success in practically every

important basin in the world and credited with the discovery of over 2 billion BOE of reserves

worldwide, having worked for ExxonMobil, Kuwait Foreign Petroleum, BHP Billiton, Aurora Gas and

Saratoga, where he successfully drilled and completed horizontal wells in SE Louisiana. He is a

frequent speaker and published author on a variety of energy related topics and as able to run the

day to day operations as well as handle the legal, environmental and financial aspects of the

business. He has been actively involved in raising over $400 million of private equity, public equity

and debt since leaving BHP Billiton in 1998. His positions at BHP included VP Strategic Planning

worldwide and VP Exploration Americas and he personally negotiated contracts in many countries

of the world, including Algeria, Congo, Myanmar, Russia, Trinidad and Vietnam, to name a few. He

has rung the opening bell at NYSE and his company won Oil & Gas Investor’s prestigious

Turnaround of the Year Award in 2010. He has a BSc degree in Geology/Geophysics from the

University of London.

David Anthony Lenigas, Executive Chairman

David is a mining engineer (David attended Curtin University Kalgoorlie School of Mines obtaining

a B.Sc. Mining Engineer (Distinction) and has a First-Class Managers Ticket, Western Australia)

with extensive senior corporate experience across stock exchanges in the UK, Australia, Canada,

and South Africa, and has been responsible for raising many millions of dollars both in private equity

and on public stock exchanges. He has been Chairman of various mining and petroleum focused

exploration and development companies with operations in Australia, Spain, UK, Trinidad and the

USA.

1

PENNPETRO ENERGY PLC

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

Annual Report & Financial Statements For

the 15-month period ended 31 March 2023

The Directors are responsible for preparing the Annual Report and the Financial Statements in

accordance with applicable law and regulations. Company law requires the Directors to prepare

financial statements for each financial year. Under that law the Directors have elected to prepare

the Group and Parent Company Financial Statements in accordance with the UK adopted

International Accounting Standards.

Under Company law the Directors must not approve the Financial Statements unless they are

satisfied that they give a true and fair view of the state of affairs of the Company and Group as at

the end of the financial year and of the profit or loss of the Group for that period. In preparing these

Financial Statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether the applicable UK adopted international accounting standards has been

followed subject to any material departures disclosed and explained in the Financial

Statements; and

• prepare the Financial Statements on a 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 the Group 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 Group and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

The maintenance and integrity of the website is the responsibility of the Directors. Legislation in

the United Kingdom governing the preparation and dissemination of the Financial Statements and

other information included in annual reports may differ from legislation in other jurisdictions.

The Company is compliant with the London Stock Exchange regarding the Company’s website.

PENNPETRO ENERGY PLC



CORPORATE GOVERNANCE REPORT

Annual Report & Financial Statements For the

15 month period ended 31 March 2023

The Company recognises the importance of, and is committed to, high standards of corporate

governance.

Corporate Governance Practices

Pennpetro Energy plc has a standard listing on the London Stock Exchange and is thus not

required to comply with the requirements of the U.K. Corporate Governance Code (“the Code”) as

issued by the Financial Reporting Council. The disclosures below are required by the UKLA’s

Disclosure and Transparency Rule 7.

The Board is committed to ensuring the highest standards of corporate governance, and voluntarily

complies with, subject to a small number of exceptions listed below, the supporting principles and

provisions set out in the Code.

The following describes the ways in which the Company does not comply with the detailed

provisions of the Code and the Board’s rationale thereon:

• given the size of the Board and the Company’s current limited operational status, certain

provisions of the Corporate Governance Code (in particular the provisions relating to the

composition of the Board and the division of responsibilities between the Chairman and chief

executive and executive compensation), are not being complied with by the Company as the Board

does not consider these provisions to be appropriate for the Company;

• the Board as a whole will review audit and risk matters, on the basis of adopted terms of reference

governing the matters to be reviewed and the frequency with which such matters are considered.

The Board as a whole will also take responsibility for the appointment of auditors and payment of

their audit fee, monitor and review the integrity of the Company’s financial statements and take

responsibility for any formal announcements on the Company’s financial performance;

• the Board as a whole will be responsible for the appointment of executive and non-executive

Directors. The Company does not currently believe it is necessary to have a separate nominations

committee at this time. The requirement for a nominations committee will be considered on an

ongoing basis;

• the Board believes in the benefits of diversity, including the need for diversity in order to effectively

represent shareholders’ interests. This diversity is not restricted to gender but also includes

geographic location, nationality, skills, age, educational and professional background. The board’s

policy remains that selection should be based on the best person for the role;

• the Board as a whole will consider the Board’s size, structure and composition and the scale and

structure of the Directors’ fees, taking into account the interests of Shareholders and the

performance of the Company;

• the Board does not comply with the provision of the Corporate Governance Code that at least

half of the Board, excluding the Chairman, should comprise non-executive directors determined by

the Board to be sufficiently independent;

• the Company has in place procedures ensuring compliance with the new Market Abuse

Regulation and the Board will be responsible for taking all proper and reasonable steps to ensure

compliance with the Market Abuse Regulation by the Directors; and

• the Company will not seek Shareholder approval at a general meeting in respect of any further

acquisitions it may make, unless it is required to do so for the purposes of facilitating the financing

arrangements or for other legal or regulatory reasons.

PENNPETRO ENERGY PLC



CORPORA TE GOVERNANCE REPORT (continued)

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

The Board of Directors

As at 31 March 2023, the Board of Directors comprised four members: one Executive Director,

Executive Chairman and two Non-Executive Directors. The Executive Chairman, Executive

Director and Non-Executive director have a wealth of experience analytically covering the oil and

gas industry. Similarly, the Senior Non-Executive Director has extensive corporate and financial

experience.

The Company has a policy of appraising Board performance annually and had adopted an internal

policy of regular face to face meetings in which all Board members discuss any issues as and when

they arise in relation to the Board or any individual member's performance.

Board Meetings

The Board ordinarily meets on a bi-monthly basis and as and when further required, providing

effective leadership and overall management of the Group's affairs by reference to those matters

reserved for its decision. This includes the approval of the budget and business plan, major capital

expenditure, acquisitions and disposals, risk management policies and the approval of the financial

statements. Formal agendas, papers and reports are sent to the Directors, in a timely manner, prior

to the Board meetings. Board meetings were mostly held telephonically.

Number held and entitled to

attend

Number actually attended

Thomas Evans

Olof Rapp

Andy Clifford

David Lenigas

Internal Controls

The Board recognises the importance of both financial and non-financial controls and has reviewed

the Group's control environment and any related shortfalls during the year. Since the Group was

established, the Directors are satisfied that, given the current size and activities of the Group,

adequate internal controls have been implemented. Whilst they are aware that no system can

provide absolute assurance against material misstatement or loss, in light of the current activity and

proposed future developments of the Group, continuing reviews of internal controls will be

undertaken to ensure that they are adequate and effective.

Relations with Shareholders

The Board is committed to providing effective communication with the shareholders of the

Company. Significant developments are disseminated through stock exchange announcements

and regular updates on the Company website. The Board views the Annual General Meeting as a

forum for communication between the Group and its shareholders and encourages their

participation in its agenda.

David Lenigas

Executive Chairman

18 October 2023

PENNPETRO ENERGY PLC

DIRECTORS’ REMUNERATION REPORT

Annual Report & Financial Statements For

the 15 month period ended 31 March 2023

The Company’s Remuneration Committee comprises one Senior Non-Executive Director, Olof

Rapp.

Pennpetro’s Remuneration Committee operates within the terms of reference approved by the

Board. In the year to 31 March 2023, the Remuneration Committee documented one review.

The items included in this report are unaudited unless otherwise stated.

Committee’s main responsibilities

• The Remuneration Committee considers the remuneration policy, employment terms and

remuneration of the Executive Director;

• The Remuneration Committee’s role is advisory in nature and it makes recommendations

to the Board on the overall remuneration package for the Executive Director in order to

attract, retain and motivate high quality executives capable of achieving the Company’s

objectives;

• The Remuneration Committee also reviews proposals for any share option plans and other

incentive plans, makes recommendations for the grant of awards under such plans as well

as approving the terms of any performance-related pay schemes;

• The Board’s policy is to remunerate the Company’s executives fairly and in such a manner

as to facilitate the recruitment, retention and motivation of suitably qualified personnel; and

• The Remuneration Committee, when considering the remuneration packages of the

Company’s executives, will review the policies of comparable companies in the industry.

Directors’ remuneration (audited)

Fees and benefits of $146,532 were payable to Directors who held office during the year ended 31

March 2023 (2021: $340,922).

Director Thomas Evans has received a loan of £10,000 which was outstanding as at 31 March 2023.

The loan is repayable within 12 months.

Salary

Valuation of

options

Taxable

benefits

Other

receipts

received

Pension

benefits

2023

Total

Andy Clifford

53,934

Olof Rapp

46,299

David Lenigas

Thomas Evans

46,299

146,532

Salary

Valuation

of Options

Taxable

Benefits

Other

receipts

received

Pension

benefits

2021

Total

Keith Edelman

13,528

27,601

41,129

Thomas Evans

40,306

79,913

120,219

Olof Rapp

40,306

79,913

120,219

Philip Nash

17,558

41,797

59,355

111,698

229,224

340,922

PENNPETRO ENERGY PLC

DIRECTORS’ REMUNERATION REPORT (continued)

Annual Report & Financial Statements

For the 15-month period ended 31 March

2023



The Director's remuneration is disclosed in full in the above table and is not linked to performance.

All Directors’ service contracts are kept available for inspection at the Company’s registered office.

All shares and interests held by the Directors are disclosed in the Directors’ report.

The share options expired on 2 November 2021. No options were exercised.

Total pension entitlements (audited)

The Company currently does not have any pension plans for any of the Directors and does not pay

pension amounts in relation to their remuneration.

The Company has not paid out any excess retirement benefits to any Directors or past Directors.

Payments to past directors (audited)

The Company has not paid any compensation to past Directors.

Payments for loss of office (audited)

No payments were made for loss of office during the year.

Directors’ interests in share warrants (audited)

None of the Directors had interests in share warrants.

Directors’ and Officers’ indemnity insurance

The Company has made qualifying third-party indemnity provisions for the benefit of its Directors

and Officers. These were made during the previous period and remain in force at the date of this

report.

Consideration of shareholder views

The Remuneration Committee considers shareholder feedback received and guidance from

shareholder bodies. This feedback, plus any additional feedback received from time to time, is

considered as part of the Company’s periodic reviews of its policy on remuneration.

Statement of policy on Directors’ remuneration

The Company’s policy is to maintain levels of remuneration so as to attract, motivate, and retain

Directors and Senior Executives of the highest calibre who can contribute their experience to

deliver industry leading performance with the Company’s operations. Currently Director’s

remuneration is not subject to specific performance targets.

In future periods, the Company may implement a remuneration policy so that a meaningful

proportion of Executive remuneration is structured so as to link rewards to corporate and individual

performance, align their interests with those of shareholders and to incentivise them to perform at

the highest levels. The Remuneration Committee considers remuneration policy and the

employment terms and remuneration of the Directors and makes recommendations to the Board

of Directors on the overall remuneration packages for Directors. No Director takes part in any

decision directly affecting their own remuneration.



PENNPETRO ENERGY PLC

DIRECTORS' REMUNERATION REPORT (continued)

Annual Report & Financial Statements

For the 15-month period ended 31 March 2023

Policy for new appointments

Base salary levels will take into account market data for the relevant role, internal relativities, the

individual's experience and their current base salary. Where an individual is recruited at below

market norms, they may be re-aligned over time (e.g. two to three years), subject to performance

in the role. Benefits will generally be in accordance with the approved policy.

For external and internal appointments, the Committee may agree that the Company will meet

certain relocation and/or incidental expenses as appropriate.

Policy on payment for loss of office

Payment for loss of office would be determined by the Remuneration Committee, taking into

account contractual obligations.

Other matters

The Company does not currently have any annual or long-term incentive schemes in place for any

of the Directors and as such there are no disclosures in this respect.

David Lenigas

Executive Chairman

18 October 2023

PENNPETRO ENERGY PLC

AUDIT COMMITTEE REPORT

Annual Report & Financial Statements

For the 15-month period ended 31 March 2023

The Audit Committee comprises two Directors, Olof Rapp and Tom Evans. It oversees the

Company’s financial reporting and internal controls and provides a formal reporting link with the

external auditors. The ultimate responsibility for reviewing and approving the annual report and

accounts and the half-yearly report remains with the Board.

Main Responsibilities

The Audit Committee acts as a preparatory body for discharging the Board’s responsibilities in a

wide range of financial matters by:

• monitoring the integrity of the financial statements and formal announcements relating to

the Company’s financial performance;

• reviewing significant financial reporting issues, accounting policies and disclosures in

financial reports, which are considered to be in accordance with the key audit matters

identified by the external auditors;

• overseeing that an effective system of internal control and risk management systems are

maintained;

• ensuring that an effective whistle-blowing, anti-fraud and bribery procedures are in place;

• overseeing the Board’s relationship with the external auditor and, where appropriate, the

selection of new external auditors;

• approving non-audit services provided by accounting firms; and

• ensuring compliance with legal requirements, accounting standards and the Listing Rules

and the Disclosure and Transparency Rules.

Governance

The Code requires that at least one member of the Audit Committee has recent and relevant

financial experience. Both directors have served in financial executive and managing director roles.

As a result, the Board is satisfied that the Audit Committee has recent and relevant financial

experience.

Members of the Audit Committee are appointed by the Board and whilst shareholders, the

Company believes they are considered to be independent in both character and judgement.

The Company’s external auditor, Crowe U.K. LLP, did not provide any non-audit services in the

period.

The Audit Committee believes that the Company does not require an internal audit function due to

the current size of the organisation and its operations.

Meetings

In the year to 31 March 2023 the two members of the Audit Committee have met twice. The

key work undertaken by the Audit Committee is as follows;

• interview of external auditors and recommendation to the Board;

• review of audit planning and update on relevant accounting developments;

• consideration and approval of the risk management framework, appropriateness of key

performance indicators;

• consideration and review of full-year results;

• review of the effectiveness of the Audit Committee; and

• review of internal controls.

AUDIT COMMITTEE REPORT (continued)

Annual Report & Financial Statements

For the 15-month period ended 31 March

2023

The Code states that the Audit Committee should have primary responsibility for making a

recommendation on the appointment, reappointment or removal of the external auditor.

External auditor

The Audit Committee appointed Crowe U.K. LLP as auditors to the Company, commencing with

the first audit of the year ended 31 December 2018. The external auditor has unrestricted access

to the Audit Committee Chairman. The Committee is satisfied that Crowe U.K. LLP has adequate

policies and safeguards in place to ensure that auditor objectivity and independence are

maintained.

The external auditors report to the Audit Committee annually on their independence from the

Company. In accordance with professional standards, the partner responsible for the audit is

changed every five years. The current auditor, Crowe U.K. LLP were first appointed by the

Company in 2019 following a tender process and therefore the current partner is due to rotate off

the engagement after completing the March 2023 audit. Having assessed the performance

objectivity and independence of the auditors, the Committee will be recommending the

reappointment of Crowe U.K. LLP as auditors to the Company at the 2023 Annual General Meeting.

David Lenigas

Executive Chairman

18 October 2023

Independent auditor’s report to the members of Pennpetro Energy Plc

Opinion

We have audited the financial statements of Pennpetro Energy Plc (the “Parent Company”) and its subsidiaries

(the ‘Group’) for the 15 month period ended 31 March 2023 which comprise the consolidated statement of

comprehensive income, the consolidated and parent company statements of financial position, the

consolidated and parent company statements of changes in equity, the consolidated and parent company

statements of cash flows and notes to the financial statements, including significant accounting policies. The

financial reporting framework that has been applied in their preparation is applicable law and UK-adopted

international accounting standards.

In our opinion the financial statements:

• give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March

2023 and of the Group’s loss for the 15 month period then ended;

• have been properly prepared in accordance with UK-adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and

applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities

for the audit of the financial statements section of our report. We are independent of the group and 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 public interest entities, and we have fulfilled our other

ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the 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 group’s and parent company’s ability to continue to adopt

the going concern basis of accounting included:

• Obtaining management’s assessment of going concern for the period to 30 November 2024.

• As part of our assessment we agreed the starting cash position in the projections to bank records and

considered the impact of the cash raised through equity issues in April 2023 and July 2023.

• Assumptions over parent company expenditure were compared to actual amounts in the period ended

31 March 2023, and expectations of activity in the going concern period. Operating expenditure

assumptions were agreed to supporting documentation where available and challenged for

completeness.

• We considered the commitment to fund drilling costs for the Whistling Straits well as disclosed in note

25 to the financial statements and that this had been addressed in management’s forecast.

• We considered the projected financial performance of the Group and Company and considered

whether they have access to sufficient cash resources to be able to continue as a going concern.

• We reviewed the disclosures made in the financial statements relating to going concern and agreed

these to be consistent with the assessment and our conclusions.

Based on the work we have performed, we have not identified any material uncertainties relating to events or

conditions that, individually or collectively, may cast significant doubt on the group’s or the parent 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.

3

Overview of our audit approach

Materiality

In planning and performing our audit we applied the concept of materiality. An item is considered material if it

could reasonably be expected to change the economic decisions of a user of the financial statements. We

used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified.

Based on our professional judgement, we determined overall materiality for the financial statements as a whole

to be $130,000 (2021 $120,000), based on approximately 2% of total assets. Materiality for the parent company

financial statements as a whole was set at $80,000 (2021: $79,000), based on a percentage of total assets.

We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the

audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for

the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having

regard to the internal control environment. Performance materiality was set at 70% of materiality for the

financial statements as a whole, which equates to $91,000 (2021: $84,000) for the Group and $56,000 (2021:

$55,000) for the parent.

Where considered appropriate performance materiality may be reduced to a lower level, such as, for related

party transactions and directors ’remuneration.

We agreed with the Audit Committee to report to it all identified errors in excess of $6,500 (2021: $3,600).

Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required

on qualitative grounds.

Overview of the scope of our audit

The Company and Group finance function is based in the United Kingdom and a full scope audit was carried

out thereon from our office, and with discussions with management as required and information being

requested from the US where appropriate. This provided us with sufficient evidence for our opinion on the

Group and Company financial statements

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit

of the financial statements of the current period and include the most significant assessed risks of material

misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the

overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming

our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How our scope addressed the key audit matter

Carrying value of producing properties

and capitalised drilling costs and

equipment – see notes 4.2 and 13

The Group’s primary focus is onshore oil

and gas exploration and production in

Texas, USA.

As at 31 March 2023 assets totalling

$5.7m (31 December 2021: $5.6m) were

recognised comprising Petroleum

Leases within property, plant and

equipment of $1.5m (2021: $1.4m -

assessed for impairment under IAS 36)

and Drilling Costs within intangible

assets of $4.2m (2021: $4.2m -

assessed for impairment under IFRS 6).

We considered the risk that these assets

are impaired to be a key audit matter due

to the judgements and estimates

required to be made by management in

making their impairment assessment.

We reviewed management’s assessment which concluded

that there were no indications of impairment.

In considering this assessment we reviewed the following

sources of evidence:

• The primary lease agreements in place supporting the

company’s right of extraction;

• The competent persons report that formed the basis

of the recoverable amount;

• Discussing plans and intentions with management,

reviewing supporting budgets and evidencing

planning work undertaken; and

• Assessing oil price assumptions used when assessing

the commercial potential and likely recoverable

amount.

Key audit matter

How our scope addressed the key audit matter

Carrying value of investments on the

parent company Statement of Financial

Position – see notes 4.2 and 14

Included in the parent company

Statement of Financial Position are

investments in subsidiaries with a value

of $6.4m.

We considered the risk that these

investments are impaired to be a key

audit matter due to the judgements and

estimates required to be made by

management in making their impairment

assessment.

• We obtained management’s assessment of the

recoverable amount of the parent company’s

investment in subsidiaries;

• We assessed the methodology used. This was

intrinsically connected with the valuation of the oil and

gas assets, and we therefore considered whether the

audit procedures set out in the above KAM gave any

indication of impairment to the carrying value of the

investments.

Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole.

They were not designed to enable us to express an opinion on these matters individually and we express no

such opinion.

Other information

The other information comprises the information included in the annual report other than the financial

statements and our auditor’s report thereon. The directors are responsible for the other information contained

within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent

otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our

responsibility is to read the other information and, in doing so, consider whether the other information is

materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or

otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material

misstatements, we are required to determine whether this gives rise to a material misstatement in the financial

statements themselves. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors ’remuneration report to be audited has been properly prepared in

accordance with the Companies Act 2006.

In our opinion based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the

financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors ’report have been prepared in accordance with applicable legal

requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and the parent company and their environment

obtained in the course of the audit, we have not identified material misstatements in the strategic report or the

directors ’report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006

requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the company, or returns adequate for our audit have

not been received from branches not visited by us; or

• the company financial statements and the part of the directors ’remuneration report to be audited 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 the directors for the financial statements

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 Group’s and the Parent

Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern

and using the going concern basis of accounting unless the directors either intend to liquidate the Group or

the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free

from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our

opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in

accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design

procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of

irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,

including fraud is detailed below:

• We gained an understanding of the legal and regulatory framework applicable to the Group and Parent

Company and considered the risk of acts by the Group which were contrary to applicable laws and

regulations, including fraud. The most significant identified was compliance with relevant regulations for

oil and gas companies in the state of Texas, where the Group has the majority of its operations, and

compliance with the UK Companies Act. Our work included enquiry of management, review of legal

invoices and publicly available information on violations and inspections from the relevant authority in

Texas.

• We designed audit procedures to respond to the risk, 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. We considered the risk was greater in areas that involve significant

management estimate or judgement and we designed our procedures accordingly to focus on such areas.

Such procedures included testing of a sample of journal transactions to supporting explanations and

documentation.

Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of

the financial statements may not be detected, even though the audit is properly planned and performed in

accordance with the ISAs (UK). The potential effects of inherent limitations are particularly significant in the

case of misstatement resulting from fraud because fraud may involve sophisticated and carefully organized

schemes designed to conceal it, including deliberate failure to record transactions, collusion or intentional

misrepresentations being made to us.

A further description of our responsibilities for the audit of the financial statements is located on the Financial

Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our

auditor’s report.

Other matters which we are required to address

We were first appointed by the Board on 25 March 2019 to audit the financial statements for the period ending

31 December 2018. Our total uninterrupted period of engagement is five years, covering the periods ending

31 December 2018 to 31 March 2023.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent

Company and we remain independent of the Group and the Parent Company in conducting our audit.

Our audit opinion is consistent with the additional report to the audit committee.

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.

Matthew Stallabrass

Senior Statutory Auditor

For and on behalf of

Crowe U.K. LLP

Statutory Auditor

London

Date: 19 October 2023

PENNPETRO ENERGY PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 15-months ended 31 March 2023

Note

		15 Month	Year ended
		ended 31	31 December
		March 2023	2021
		$	$
Continuing Operations
Revenue		-	-
Administrative expenses	6	(556,494)	(1,021,046)
Operating Loss		(556,494)	(1,021,046)
Gain on loan modification	20	497,939	-
Finance costs	9	(260,347)	(290,661)
Loss before Tax		(318,902)	(1,311,707)
Income tax	10	-	-
Loss for the year attributable to owners of the parent		(318,902)	(1,311,707)
Other Comprehensive Income:
Items that may be reclassified subsequently
to profit or loss
Currency translation differences		50,127	(6,838)
Other Comprehensive Income for the Year		50,127	(6,838)
Total Comprehensive Income for the Year		(268,775)	(1,318,545)
attributable to the owners of the parent
Loss per share attributable to the owners of the parent during the year
Basic (cents per share)	11	(0.39)	(1.72)
Diluted (cents per share)		(0.39)	(1.72)

The notes on pages 42 to 68 form part of these financial statements.

PENNPETRO ENERGY PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the 15-month ended 31 March 2023

Note

		31 March	31 December
		2023	2021
		$	$
ASSETS
Non–Current Assets
Property, plant and equipment	12	1,484,931	1,384,931
Intangible assets	13	4,233,890	4,233,890
Total Non-Current Assets		5,718,821	5,618,821
Current Assets
Trade and other receivables	15	315,299	309,456
Short term investments	16	82,224	34,914
Cash and cash equivalents	17	46,792	1,828
Total Current Assets		444,315	346,198
TOTAL ASSETS		6,163,136	5,965,019
EQUITY AND LIABILITIES
Equity Attributable to Owners of Parent
Share capital	18	1,079,101	979,427
Share premium	18	6,610,719	4,121,700
Convertible reserve		4,172,846	6,021,575
Reorganisation reserve		(6,578,229)	(6,578,229)
Foreign exchange reserve		226,110	133,619
Retained losses		(4,332, 766)	(4,013,864)
Total Equity		1,177,781	664,228
Current Liabilities
Trade and other payables	21	966,986	1,044,529
Borrowings	20	-	4,256,262
Total Current Liabilities		966,986	5,300,79 1
Non- Current Liabilities
Borrowings	20	4,018,369	-
Total Non-Current Liabilities		4,018,369	-
TOTAL EQUITY AND LIABILITIES		6,163,136	5,965,019

These financial statements were approved by the Board of Directors on 18 October 2023 and

signed on its behalf by:

Thomas Evans

Executive Director

Company registration number: 10166359

The notes on pages 42 to 68 form part of these financial statements.

PENNPETRO ENERGY PLC

COMPANY STATEMENT OF FINANCIAL POSITION

For the 15-months ended 31 March 2023

Note

31 March

2023

31 December

2021

ASSETS

Non–Current Assets

Investments in subsidiaries

6,440,980

7,038,631

Property, plant and equipment

Total Non–Current Assets

6,440,980

7,038,631

Current Assets

Trade and other receivables

2,957,318

3,093,418

Short term investments

82,224

34,914

Cash and cash equivalents

Total Current Assets

3,039,542

3,128,332

TOTAL ASSETS

9,480,522

10,166,963

EQUITY AND LIABILITIES

Equity Attributable to Shareholders

Share capital

1,079,101

979,427

Share premium

6,610,719

4,121,700

Convertible reserve

4,172,846

6,021,575

Foreign exchange reserve

(334,293)

575,249

Retained losses

(3,406,463)

(2,866,030)

Total Equity

8,121,910

8,831,921

Current Liabilities

Trade and other payables

1,358,612

1,335,042

Total Current Liabilities

1,358,612

1,335,042

TOTAL EQUITY AND LIABILITIES

9,480,522

10,166,963

The Company has elected to take the exemption under Section 408 of the Companies Act 2006

from presenting the parent company Statement of Comprehensive Income. The loss for the parent

company for the period was $540,433 (2021: $991,451).

These financial statements were approved by the Board of Directors on 18 October 2023 and

were signed on its behalf by:

Thomas Evans

Executive Director

Company registration number: 10166359

The notes on pages 42 to 68 form part of these financial statements.

PENNPETRO ENERGY PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 15-month period ended 31 March 2023

	Share	Share	Convertible	Reorganizatio	Foreign	Share	Retained	Total
Group	Capital	Premium	Reserve	n Reserve	Exchange	based	Losses	Equity
					Reserve	payments
						Reserve
	$	$	$	$	$	$	$	$
Balance at 31 December 2020	979,427	4,121,700	6,021,575	(6,578,22 9)	140,457	838,909	(3,770,29 0)	1,753,549
Loss for the period	-	-	-	-	-	-	(1,311,70 7)	(1,311,70 7)
Foreign currency translation differences	-	-	-	-	(6,838)	-	-	(6,838)
Total comprehensive income for the year	-	-	-	-	(6,838)	-	(1,311,70 7)	(1,318,54 5)
Share based payments	-	-	-	-	-	229,224	-	229,224
Lapse of share options	-	-	-	-	-	(1,068,13 3)	1,068,133	-
Balance at 31 December 2021	979,427	4,121,700	6,021,575	(6,578,22 9)	133,619	-	(4,013,864)	664,228
Loss for the period	-	-	-	-	-	-	(318,902)	(318,902)
Foreign currency translation differences	-	-	-	-	50,127	-	-	50,127
Total comprehensive income for the period	-	-	-	-	50,127	-	(318,902)	(268,775)
Share issue (note 18)	27,419	754,909	-	-	-	-	-	782,328
Exercise of convertible loan notes	72,255	1,734,110	(1,848,729)	-	42,364	-	-	-
(note 18)
Balance at 31 March 2023	1,079,101	6,610,719	4,172,846	(6,578,22 9)	226,110	-	(4,332,766)	1,177,781

The notes on pages 42 to 68 form part of these financial statements.

PENNPETRO ENERGY PLC

COMPANY STATEMENT OF CHANGES IN EQUITY

For the 15-month ended 31 March 2023

Company

Capital

Premium

Convertible

Reserve

Foreign

Exchange

Reserve

Share Based

Payments

Reserve

Retained

Losses

Total

Equity

Balance at 31 December 2020

979,427

4,121,700

6,021,575

648,279

838,909

(2,942,712)

9,667,178

Loss for the period

(991,451)

Foreign currency translation

differences

(73,030)

Total comprehensive income for the

year

(73,030)

(991,451)

(1,064,481)

Share based payments

229,224

Lapse of share options

(1,068,133)

1,068,133

Balance at 31 December 2021

979,427

4,121,700

6,021,575

575,249

(2,866,030)

8,831,921

Loss for the period

(540,433)

Foreign currency translation

differences

(951,906)

Total comprehensive income for the

period

(951,906)

(540,433)

(1,492,339)

Share issue (note 18)

27,419

754,909

782,328

Exercise of convertible loan notes

(note 18)

72,255

1,734,110

(1,848,729)

42,364

Balance at 31 March 2023

1,079,101

6,610,719

4,172,846

(334,293)

(3,406,463)

8,121,910

The notes on pages 42 to 68 form part of these financial statements.

PENNPETRO ENERGY PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 15-month period ended 31 March 2023

	15 Months	Year ended
	ended 31	31 December
	March 2023	2021
	$	$
Cash Flows from Operating Activities
Loss before tax	(318,902)	(1,311,707)
Foreign exchange	778	(8,078)
Result on loan amendment	(497 ,93 9)	-
Finance costs	260,347	290,661
Share base payment charge	-	229,224
Changes to working capital	(555,716)	(799,900)
Increase in trade and other receivables	(5,843)	(511)
Increase in trade and other payables	171,667	548,671
Cash used in operations	(389,892)	(251,740)
Interest paid	-	-
Net Cash used in Operating Activities	(389,892)	(251,740)
Cash Flows from Investing Activities
Purchases of property, plant and equipment	(100,000)	(617)
(Increase)/ decrease of short-term investments	(47,310)	14,238
Net Cash (used in)/ generated from Investing	(147,310)	13,621
Activities
Cash Flows from Financing Activities
Loan repaid	-	(65 ,938)
Proceeds from issues of ordinary shares	582,166	-
Advances received from borrowings	-	304,556
Net Cash generated from Financing Activities	582,166	238,618
Net Increase in Cash and Cash Equivalents	44,964	499
Cash and cash equivalents at the beginning of the period	1,828	1,329
Cash and Cash Equivalents at the End of the Period	46,792	1,828

Non-cash transactions (refer note 18)

Share issue 30 March 2022 - partial exercise of convertible loan for equivalent proceeds of $1,848,729

Share issue July 2022 - settlement of liability through shares for total of $330,267

Share issue November 2022 - settlement of liability through shares for total of $18,533

The notes on pages 42 to 68 form part of these financial statements.

PENNPETRO ENERGY PLC

COMPANY STATEMENT OF CASH FLOWS

For the 15 month period ended 31 March 2023

15 Months

period 31

March 2023

Year ended

31 December

2021

Cash Flows from Operating Activities

Loss before tax

(540,433)

(991,451)

Share based payments

229,224

Unrealised foreign exchange

2,496

(6,838)

(537,937)

(769,065)

Changes to working capital

Increase in trade and other receivables

(134,753)

(31,306)

Increase in trade and other payables

137,834

786,133

Cash used in operations

(534,856)

(14,238)

Net cash used in Operating Activities

(534,856)

(14,238)

Cash Flows from Investing Activities

(Increase)/ decrease of short-term investments

(47,310)

14,238

Net Cash used in Investing Activities

(47,310)

14,238

Cash Flows from Financing Activities

Proceeds from issue of ordinary shares

582,166

Net Cash generated from Financing Activities

582,166

Net movement in Cash and Cash Equivalents

Cash and cash equivalents at the beginning of the

year

Net Decrease in cash and cash equivalents

Cash and Cash Equivalents at the End of the

Year

Non-cash transactions (refer note 18)

Share issue 30 March 2022 - partial exercise of convertible loan for equivalent proceeds of $1,848,729

Share issue July 2022 - settlement of liability through shares for total of $330,267

Share issue November 2022 - settlement of liability through shares for total of $18,533

The Company does not have a bank account and the transactions above are presented as though they were cash

movements.

The notes on pages 42 to 68 form part of these financial statements.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

1. GENERAL INFORMATION

Pennpetro Energy plc (the “Company”) is a public limited company which is listed on the

standard market of the London Stock Exchange and incorporated and domiciled in England

and Wales. Its registered office address is 20b Wilton Row, London, SW1X 7NS.

The consolidated financial statements of the Company consist of the following companies

(together “the Group”):

Pennpetro Energy plc	UK registered company
Pennpetro USA Corp	US registered company
Nobel Petroleum USA Inc	US registered company
Nobel Petroleum LLC	US registered company
Pennpetro Greentec Limited	Cyprus registered company
Pennpetro Greentec UK Limited	UK registered company
Pennpetro Green Energy Limited	UK registered company

The Group is an oil and gas developer with assets in Texas, United States. The Company’s

US-based subsidiaries own a portfolio of leasehold petroleum mineral interests centred on the

City of Gonzales, in southeast Texas, comprising the undeveloped central portion of the

Gonzales Oil Field.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial

statements are set out below.

These policies have been consistently applied to all the years presented, unless otherwise

stated.

2.1.Basis of preparation

These consolidated financial statements have been prepared and approved by the Directors in

accordance with the UK adopted International Accounting Standards.

The financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with the international financial reporting

standards requires the use of certain critical accounting estimates. It also requires management

to exercise its judgement in the process of applying the Group’s accounting policies. The areas

involving a higher degree of judgement or complexity, or areas where assumptions and

estimates are significant to the consolidated financial statements are disclosed in note 4.

The income statement results are for the 15-month period ended 31 March 2023 and hence

are not directly comparable to those for the year ended 31 December 2021. The accounting

reference date was changed to align with that of the Company’s operating subsidiary, Nobel

Petroleum USA LLC.

2.2.Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and all its

subsidiaries (the “Group”).

Subsidiaries include all entities over which the Group is exposed, or has rights, to variable

returns from its involvement with the investee and has the ability to affect those returns through

its power over the investee. The existence and effect of potential voting rights that are currently

exercisable or convertible are considered when assessing whether the Group controls another

entity. Subsidiaries are consolidated from the date on which control commences until the date

that control ceases. Intra-group balances and any unrealised gains and losses on income or

expenses arising from intra-group transactions, are eliminated in preparing the consolidated

financial statements.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3.Going concern

The Directors have prepared cashflow forecasts as part of their assessment of the going

concern position of the Company and Group. The Board of Directors have considered these

forecasts and have a reasonable expectation that the Company and Group has adequate

resources to continue in operational existence through to 30 November 2024 as projected. The

forecasts included the Group’s obligations on funding the initial Millennium well but do not

include any planned expenditure in regard to Horse Hill, as the Directors do not expect any

such payments to be required during the going concern assessment period.

This is subject to material adverse unforeseen events that may occur, including but not limited

to oil and gas prices and further hinderances to operations.

The Group completed share issues in April 2023 and July 2023 which raised a total of

£1,800,000. As at 29 September 2023 the group had a cash balance of US$693,438, after

paying general administrative expenses, regulatory fees, costs related to the placings, the final

instalment of US$537,557 to Millenium Petrocapital to complete the acquisitions, and certain

down payments for mobilisation of the workover rig and ancillary equipment.

On 29 June 2022, Petroquest Energy Limited, an unrelated corporate party, extended the

repayment date on the loan owing by Nobel Petroleum LLC. The revised maturity date on the

loan is 31 December 2024. Petroquest Energy Limited have further formally confirmed to the

Directors that the loan can be further extended to 31 December 2025 if required.

The Directors have considered the above matters and continue to consider it appropriate to

prepare the Group and Company financial statements on a going concern basis.

2.4 New standards, amendments and interpretations adopted by the Group and

Company

The International Accounting Standards Board has issued standards and interpretations

effective for the first time for the financial period beginning 1 January 2022. The Directors

consider their adoption has not had any significant impact on the disclosures or on the amounts

reported in these financial statements:

The Directors have considered IFRS and amendments that are in issue but not yet in effect for

the accounting period. They have assessed that none of these are expected to have a

significant impact on the amounts reported in future periods or to disclosures, other than IAS

1 (amended). This replaces the requirement for entities to disclose their significant accounting

policies with the requirement to disclose their material accounting policy information. The

Directors accordingly anticipate this will result in a reduction in disclosure within the accounting

policy section in future financial statements. The amendment to IAS 1 is effective for periods

beginning on or after 1 January 2023.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.5

Investments in subsidiaries

Investments in subsidiaries are accounted for at cost less impairment.

2.6

Foreign Currency Translation

•

Functional and presentation currency

Items included in each of the financial statements of the Group’s entities are measured

using the currency of the primary economic environment in which the entity operates (the

‘functional currency’). The functional currency of the UK parent entity is pound sterling

and the functional currency of the US subsidiaries is US dollars. The financial statements

are presented in US Dollars, rounded to the nearest dollar, which is the Group’s and

Company’s presentation currency.

•

Transactions and balances

Foreign currency transactions are translated into the functional currency using the

exchange rates prevailing at the dates of the transactions or valuation where such items

are re-measured. Foreign exchange gains and losses resulting from the settlement of

such transactions and from the translation at year-end exchange rates of monetary assets

and liabilities denominated in foreign currencies are recognised in the Statement Of

Comprehensive Income.

•

Group companies

The results and financial position of all the Group entities that have a functional currency

different from the presentation currency are translated into the presentation currency as

follows:

•

assets and liabilities for each Statement of Financial Position presented are translated

at the closing rate at the date of that Statement of Financial Position;

•

income and expenses for each Statement of Comprehensive Income are translated at

average exchange rates (unless this average is not a reasonable approximation of the

cumulative effect of the rates prevailing on the transaction dates, in which case income

and expenses are translated at the dates of the transactions); and

•

all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in

foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement

is neither planned nor likely to occur in the foreseeable future are taken to other comprehensive

income. When a foreign operation is sold, such exchange differences are recognised in the

Statement of Comprehensive Income as part of the gain or loss on sale.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.7

Property, plant and equipment

Following evaluation of successful exploration of wells, if commercial reserves are established

and the technical feasibility of extraction demonstrated, and once a project is sanctioned for

commercial development, then the related capitalised exploration costs are transferred into a

single field cost centre within ‘producing properties’ within property, plant and equipment after

testing for impairment.

The net book values of ‘producing properties’ are depreciated on a unit of production basis at

a rate calculated by reference to proven and probable reserves and incorporating the estimated

future cost of developing and extracting those reserves once production has commenced.

The Petroleum (Mineral lease) expenditure to date is over land that has already had historical

vertical drilled wells and has proven oil reserves. All these costs were therefore immediately

capitalised within property, plant and equipment.

All costs incurred after the technical feasibility and commercial viability of producing

hydrocarbons has been demonstrated, are capitalised within ‘drilling costs and equipment’ on

a well-by-well basis. Subsequent expenditure is capitalised only where it either enhances the

economic benefits of the development/producing asset or replaces part of the existing

development/producing asset. Any costs remaining associated with the part replaced are

expensed.

All property, plant and equipment other than oil and gas assets are stated at historical cost less

depreciation. Historical cost includes expenditure that is directly attributable to the acquisition

of the items.

All other repairs and maintenance are charged to the Statement of Comprehensive Income

during the financial period in which they are incurred.

Depreciation is charged so as to allocate the cost of assets, over their estimated useful lives,

on a straight-line basis as follows:

Office equipment – 4 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each

financial year-end.

Gains and losses on disposal are determined by comparing proceeds with carrying amount.

These are included in the Statement of Comprehensive Income.

2.8

Intangible assets

•

Development expenditure

Expenditure on the drilling of development wells, including service, is capitalised

initially within intangible fixed assets and when the well has formally commenced

commercial production, then it is transferred to property, plant and equipment and is

depreciated from the commencement of production as described in the accounting

policy for property, plant and equipment.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8

Intangible assets (continued)

•

Drilling costs and Petroleum mineral leases

The Group applies the successful efforts method of accounting for oil and gas assets,

having regard to the requirements of IFRS 6 ‘Exploration for and Evaluation of Mineral

Resources’. Costs incurred prior to obtaining the legal rights to explore an area are

expensed immediately to the Statement of Comprehensive Income.

Exploration expenditure incurred in the process of determining exploration targets is

capitalised initially within intangible assets as drilling costs. Drilling costs are initially

capitalised on a well-by-well basis until the success or otherwise has been established.

Drilling costs are written off on completion of a well unless the results indicate that

hydrocarbon reserves exist and there is a reasonable prospect that these reserves are

commercially viable. Drilling costs are subsequently transferred to ‘Drilling

expenditure’ within property, plant and equipment and depreciated over their

estimated useful economic life. All such costs are subject to regular technical,

commercial and management review on at least an annual basis to confirm the

continued intent to develop or otherwise extract value from the discovery. Where this

is no longer the case, the costs are immediately expensed to the Statement of

Comprehensive Income.

2.9

Impairment of Non-Financial Assets

Assets not ready for use are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation or depreciation are reviewed for impairment at each

reporting date. An impairment loss is recognised for the amount by which the asset’s carrying

amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s

fair value less costs to sell and value in use. For the purposes of assessing impairment, assets

are grouped at the lowest levels for which there are separately identifiable cash flows (cash-

generating units). Non-financial assets other than goodwill that suffered impairment are

reviewed for possible reversal of the impairment at each reporting date.

2.10

Financial assets

Classification

Financial assets are recognised when the Group becomes a party to the contractual provisions

of the instrument. At initial recognition, the Group measures its financial assets at amortised

cost which comprise ‘trade and other receivables’ and ‘cash and cash equivalents’.

A financial asset shall be measured at amortised cost if both of the following conditions are

met:

•

the financial asset is held within a business model whose objective is to hold financial

assets in order to collect contractual cash flows; and

•

the contractual terms of the financial asset give rise on specified dates to cash flows that

are solely payments of principal and interest on the principal amount outstanding.

Recognition and measurement

At initial recognition, an entity shall measure a financial asset at its fair value plus transaction

costs that are directly attributable to the acquisition or issue of the financial asset.

At initial recognition, an entity shall measure trade receivables at their transaction price if the

trade receivables do not contain a significant financing component.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.10

Financial assets (continued)

Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from

the asset expire, or it transfers the rights to receive the contractual cash flows on the financial

asset in a transaction in which substantially all the risks and rewards of the ownership of the

financial asset are transferred. Any interest in transferred financial assets that is created or

retained by the Group is recognised as a separate asset or liability.

Derecognition also takes place for certain assets when the Group writes-off balances pertaining

to the assets deemed to be uncollectible.

Impairment of financial assets

IFRS 9 mandates the use of an expected credit loss model to calculate impairment losses

rather than an incurred loss model, and therefore it is not necessary for a credit event to have

occurred before credit losses are recognised. The impairment model applies to the Group’s

financial assets and loan commitments. The Group recognises lifetime expected credit losses

(“ECL”) when there has been a significant increase in credit risk since initial recognition.

However, if the credit risk on the financial instrument has not increased significantly since initial

recognition, the Group measures the loss allowance for that financial instrument at an amount

equal to a lifetime ECL.

The Group is satisfied that the credit risk of its financial assets has not significantly increased

and no provision for losses is required. The Group has concluded this on the basis of ongoing

monitoring of the credit status of bank counterparties and the long-term operating relationships

that the Group has with the other debtor counterparties.

2.11

Short term investments

Short term investments are cash amounts held in bank accounts and deposits by intermediaries

that have been approved by the Directors.

2.12

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and demand deposits with

banks.

2.13

Trade and other payables

Trade and other payables are initially measured at fair value, net of transaction costs that are

directly attributable to the issue of the financial liability and are subsequently measured at

amortised cost using the effective interest method if the time value of money is significant.

2.14

Borrowings

Borrowings are recognised initially at fair value minus transaction costs that are directly

attributable to the issue of the financial liability. Borrowings are subsequently carried at

amortised cost; any difference between the proceeds (net of transaction costs) and the

redemption value is recognised in the Income Statement over the period of the borrowings,

using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to

defer settlement of the liability for at least 12 months after the end of the reporting period.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.15

Share capital

Ordinary shares are classified as equity when there is no obligation to transfer cash or other

assets. Incremental costs directly attributable to the issue of equity instruments are shown in

equity as a deduction from the proceeds, net of tax. Incremental costs directly attributable to

the issue of equity instruments as consideration for the acquisition of a business are included

in the cost of acquisition.

2.16

Reserves

On 17 May 2017 Pennpetro Energy plc (“Pennpetro”) acquired 100% of the issued capital of

Nobel Petroleum UK Limited (“Nobel UK”) in a share for share exchange with the shareholders

of Nobel UK’s parent company at that time, Nobel Petroleum Ireland Limited (“Nobel Ireland”).

This reverse merger was accounted for as a share-based payment transaction which should be

accounted for in accordance with IFRS 2. On the basis of the guidance in para 13A of IFRS 2,

the reverse merger has been treated as a continuation of the Nobel Group into the Pennpetro

Group. The consideration included the issue of new share capital and the issue of a convertible

bond. The total consideration less the share capital in Nobel UK resulted in the creation of the

reorganisation reserve.

The convertible reserve represents the principal value of a mandatory convertible note issued

by Pennpetro Petroleum plc to Nobel Petroleum Ireland Limited in part consideration for the

acquisition of Nobel Petroleum UK under an agreement dated 17 May 2017.

The translation reserve represents effects of currency translation in the year.

2.17

Taxation

The tax expense or credit comprises current and deferred tax. It is calculated using tax rates

that have been enacted or substantively enacted by the Statement of Financial Position date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary

differences arising from differences between the carrying amount of assets and liabilities in the

financial statements and the corresponding tax basis used in the computation of taxable profit.

In principle, deferred tax liabilities are recognised for all taxable temporary differences and

deferred tax assets are recognised to the extent that it is probable that taxable profits will be

available against which deductible temporary differences can be utilised. Such assets and

liabilities are not recognised if the temporary difference arises from goodwill (or negative

goodwill) or from the initial recognition (other than in a business combination) of other assets

and liabilities in a transaction, which affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments

in subsidiaries and associates, and interests in joint ventures, except where the Group is able

to control the reversal of the temporary difference and it is probable that the temporary

difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates

that are expected to apply to the period when the asset is realised, or the liability is settled.

Deferred tax is charged or credited in the Statement of Comprehensive Income, except when

it relates to items credited or charged directly to equity, in which case the deferred tax is also

dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income

taxes levied by the same taxation authority and the Group intends to settle its current tax assets

and liabilities on a net basis.

2.18

Segment Information

Operating segments are reported in a manner consistent with the internal reporting provided to

the chief operating decision-maker (“CODM”), who is responsible for allocating resources and

assessing performance of the operating segments and making strategic decisions. The CODM

is determined to be the board of Directors.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.19

Share based payments

All services received in exchange for the grant of any share-based remuneration are measured

at their fair values. These are indirectly determined by reference to the fair value of the share

options/warrants awarded. Their value is appraised at the grant date and excludes the impact

of any non-market vesting conditions (for example, profitability and sales growth targets).

Share based payments are ultimately recognised as an expense in the Statement of

Comprehensive Income with a corresponding credit to other reserves in equity, net of deferred

tax where applicable. If vesting periods or other vesting conditions apply, the expense is

allocated over the vesting period, based on the best available estimate of the number of share

options/warrants expected to vest. Non-market vesting conditions are included in assumptions

about the number of options/warrants that are expected to become exercisable. Estimates are

subsequently revised, if there is any indication that the number of share options/warrants

expected to vest differs from previous estimates. No adjustment is made to the expense or

share issue cost recognised in prior periods if fewer share options ultimately are exercised than

originally estimated.

Upon exercise of share options, the proceeds received net of any directly attributable

transaction costs up to the nominal value of the shares issued are allocated to share capital

with any excess being recorded as share premium.

Where share options are cancelled, this is treated as an acceleration of the vesting period of

the options. The amount that otherwise would have been recognised for services received over

the remainder of the vesting period is recognised immediately within the Statement of

Comprehensive Income.

3. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including currency

risk and cash flow and interest rate risk), credit risk and liquidity risk.

Market risk

The Group operates in an international market for hydrocarbons and is exposed to risk arising

from variations in the demand for and price of the hydrocarbons. Oil and gas prices historically

have fluctuated widely and are affected by numerous factors over which the Group has no

control, including world production levels, international economic trends, exchange rate

fluctuations, speculative activity and global or regional political events.

Currency risk

The majority of the Group’s purchase transactions and expenditure are denominated in US

dollars. The currencies are stable, and any exchange risk is managed by maintaining bank

accounts denominated in those currencies.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

3. FINANCIAL RISK MANAGEMENT (continued)

Credit risk

The Group’s principal financial assets are cash and cash equivalents, other receivables and

short-term investments.

Credit risk represents the risk of loss the Group would incur if third party operators and

counterparties fail to fulfil their credit obligations. The risk is concentrated between a relatively

small group of operators given the small number of parties involved in oil and gas exploration

and production activities. The Group seeks to mitigate this risk where possible by assessing

the credit quality of the participants and by establishing ongoing and long-term relationships.

The initial credit risk on cash and cash equivalents and short-term investments is limited

because it is the Group’s policy to invest with banks that firstly offer the greatest degree of

security in the view of the Group and, secondly the most competitive interest rates. The credit

risk for short term investments and cash and cash equivalents is considered negligible since

the counterparties are reputable banks.

Other receivables include amounts due from parties that have been involved in the Gonzales

Project since its inception and continue to have an interest in the Group in their capacity as

shareholders in Pennpetro or as lenders to the Group. Other receivables are therefore initially

considered low credit risk.

Other receivables are considered in default if the entity or party has not settled its payment

obligation by the due date set out in the underlying contracts and agreements.

A loss allowance is recognised for expected credit losses on all financial assets held at the

balance sheet date. Given risk mitigation steps undertaken by the Directors, no provision has

been made for losses.

The maximum exposure due to credit risk for the Group on financial assets during the year was

$444,315 (2021: $346,198). All amounts are expected to be received in full and on time.

Liquidity risk

Cash flow forecasting is performed in the operating entities of the Group and aggregated by

Group Finance. Group Finance monitors rolling forecasts of the Group’s liquidity requirements

to ensure it has sufficient cash to meet operational needs, while seeking to maintain sufficient

headroom on its undrawn committed borrowing facilities (note 20) at all times, so that the Group

does not breach borrowing limits or covenants (where applicable) on any of its borrowing

facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant

compliance, compliance with internal Statement of Financial Position ratio targets, and, if

applicable, external regulatory or legal requirements (for example, currency restrictions).

The table below analyses the Group’s non-derivative financial liabilities into relevant maturity

groupings, based on the remaining period at the Statement of Financial Position to the

contractual maturity date. The amounts disclosed in the table are the contractual undiscounted

cash flows.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

3. FINANCIAL RISK MANAGEMENT (continued)

Liquidity risk (continued)

Group	Less than	Between	Between
	1 year	1 and 2 years	2 and 3 years
At 31 March 2023	$	$	$
Borrowings (undiscounted)	-	4,018,369	-
Trade and other payables	966,986	-	-
At 31 December 2021
Borrowings (undiscounted)	4,190,324	-	-
Trade and other payables	1,044,529	-	-

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

4.1.Use of estimates and judgements

The preparation of Financial Statements in conformity with IFRSs requires management to

make judgements, estimates and assumptions that affect the application of policies and

reported amounts of assets and liabilities, income and expenses. The estimates and associated

assumptions are based on historical experience and various other factors that are believed to

be reasonable under the circumstances, the results of which form the basis of making the

judgements about carrying values of assets and liabilities that are not readily apparent from

other sources. 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. In particular, information about significant areas of estimation

uncertainty and critical judgements in applying accounting policies that have the most

significant effect on the amount recognised in the financial statements are described below.

4.2.Critical accounting judgements

• Recoverability of non-producing mineral leases and capitalised drilling costs &

equipment

Management tests annually whether non-producing mineral leases have future economic

value in accordance with the accounting policies. This assessment takes into consideration

the likely commerciality of the asset, the future revenues and costs pertaining and the

discount rates to be applied for the purposes of deriving a recoverable value. In the event

that a lease does not represent an economic drilling target and results indicate that there

is no additional upside, the mineral lease and drilling costs will be impaired. The Directors

have reviewed the estimated value of the licences and have concluded that no impairment

should be recognised. The Directors do not consider that there is a significant risk of

material adjustment to the estimated value of the leases given the underlying value of

proven reserves and the successful testing, trials and completion of the initial well.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

4.1.Critical accounting judgements (continued)

• Impairment of investments, and amounts due from subsidiaries

The Directors have assessed at year end whether there is any indication that the carrying

value of the Company’s investment in its subsidiaries has been impaired, and whether the

amounts due from its subsidiaries are not recoverable. The Directors have determined that

the value of the assets owned by its subsidiaries, namely the mineral leases, the proven oil

and gas reserves and Net Revenue Interests (as described in the section below “Estimated

impairment of producing properties and capitalised drilling costs & equipment”) are

significantly higher than the combined total of the Investment and receivable balances

carried in the Company’s books. The Directors therefore do not consider any impairment is

necessary. The Directors do not consider that there is a significant risk of material

downward adjustment to the estimated levels of proven and probable reserves in the next

12 months but have disclosed this as an area of significant estimation based on the size of

the balance.

• Estimated impairment of producing properties and capitalised drilling costs &

equipment

At 31 March 2023, petroleum mineral leases and capitalised drilling costs & equipment on

petroleum properties have a total carrying value of $5,718,821 (2021: $5,618,821), (notes

12 and 13). Management tests annually whether the assets have future economic value in

accordance with the accounting policies and has placed reliance on the Competent

Persons Report (“CPR”) prepared in December 2017.

All of the mineral leases were offered on an initial term of three years with an option to

extend them by two years. All of the leases covering the initial permit area do not need

renewing whilst there is any production from the permitted area. The initial drilled well

COG#1-H was drilled within the initial term and therefore leases are held pursuant to that

production status.

The recoverable amount of each property has been determined based on a value in use

calculation included in the CPR which requires the use of certain estimates and

assumptions such as long-term commodity prices (i.e., oil and gas prices), pre-tax discount

rates, operating costs, future capital requirements and mineral resource estimates. The

Directors have reviewed these assumptions as at the reporting date and consider them to

remain appropriate. These estimates and assumptions are subject to risk and uncertainty

and therefore a possibility that changes in circumstances will impact the recoverable

amount.

The Directors have utilized information including the CPR prepared in December 2017 in

determining the recoverability of the Company’s Petroleum properties.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

• Estimated impairment of producing properties and capitalised drilling costs &

equipment (continued)

The Directors have utilized information including the CPR prepared in December 2017 in

determining the recoverability of the Company’s Petroleum properties. Key assumptions

made in the CPR report (updated for the Group’s increased Working Interest from 2019 to

100% which consequently increased its Net Revenue Interest increased to 75%) were as

follows:

• The Pennpetro Group owns approximately 1,000 leases on 2,500 acres in

Gonzales, Texas.

• The Group’s Net Working Interests are 4,000 Mbbl of oil and 2,000 MMcf of gas.

• Base case oil sold is assumed at $55 per barrel and gas at $3.20 per thousand

cubic feet.

• The total proved future Net Revenue Interest after costs as per CPR:

Undiscounted $120m.

The Directors are comfortable in relying on the CPR for the following reasons:

- There have been no geological changes or extraction from the area since the date

of the CPR that would significantly have reduced the quantity of hydrocarbons

present.

- The oil sold price used in the CPR of $55 per barrel is lower than current and future

forecast WTI prices. If the projections were updated to the WTI price at the period end

date of $75 per barrel, this would increase the undiscounted net revenue interest to

approximately $180m.

- The WTI price as at 27 September 2023 was $93 (source: Bloomberg markets),

hence there has not been a decline in oil price since the period end.

- Operating costs remain in line with those disclosed in the CPR.

Based on the information provided in the CPR, updated for changes in Net Revenue

Interest and oil price, the Directors have determined that the Company’s oil properties have

not been impaired as at 31 March 2023.

The Directors also do not consider that there is a significant risk of material adjustment to

the estimates used to assess impairment of producing properties and capitalised drilling

costs & equipment in the next 12 months, but have disclosed this as an area of significant

estimation based on the size of the balance.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

4. SEGMENTAL INFORMATION

The Group operates in two geographical areas, the United Kingdom and the United States of

America. Activities in the UK are mainly administrative in nature whilst the activities in the USA

relate to exploration and production from oil and gas wells. The reports reviewed by the Board

of Directors that are used to make strategic decisions are based on these geographical

segments.

15 Month Period to 31 March 2023

			Intra-segment
	USA	UK	balances	Total
	$	$	$	$
Revenue	-	-	-	-
Operating loss	221,531	(540,433)	-	(318,902)
Capital expenditure	100,000	-	-	100,000
Total assets	6,068,526	3,039,542	(2,944,932)	6,163,136
Total liabilities	6,571,675	1,358,612	(2,944,932)	4,985,355

Year ended 31 December 2021

			Intra-segment
	USA	UK	balances	Total
	$	$	$	$
Revenue		-	-
Operating profit/(loss)	(29,595)	(991,451)	-	(1,021,046)
Capital expenditure	617	-	-	617
Total assets	6,050,937	3,128,332	(3,042,414)	5,965,019
Total liabilities	3,593,419	1,335,042	(3,042,414)	5,300,791

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

5. SEGMENTAL INFORMATION (continued)

The amounts provided to the Board of Directors with respect to total assets are measured in a

manner consistent with that of the financial statements. These assets are allocated based on

the operations of the segment and physical location of the asset.

Reportable segments’ assets are reconciled to total assets as follows:

31 March

2023

		31
		December
		2021
	$	$
Segmental assets for reportable segments	6,163,136	5,965,019
Total assets per Statement of Financial Position	6,163,136	5,965,019

6. EXPENSES BY NATURE

Group

15 Month

Period

ended 31

March 2023

Year ended

31 December

2021

Legal, professional and compliance costs

297,290

186,028

Foreign exchange loss

778

22,307

Facility fee

550,033

Other costs

258,426

262,678

Total administrative expenses

556,494

1,021,046

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

7. AUDITOR REMUNERATION

Services provided by the Company’s auditor and its associates

During the period, the Group (including its overseas subsidiaries) obtained the following

services from the Company’s auditor:

		Year ended
	Period ended	31 December 15 Month
	31 March	2021
	2023
	$	$
Fees payable to the Company’s auditor for the audit
of the parent company and consolidated financial
Statements	49,310	38,400
8. STAFF COSTS

Group and Company

		2021
	2023 $	$
Wages and salaries	146,532	114,652
Social security costs	35,437	7,233
Valuation of options	-	229,224
	181,969	351,109
Directors’ Emoluments

2023

			2021
			$
Keith Edelman (resigned on 15	Emoluments	-	13,528
April 2021)	Valuation of options	-	27,601
Olof Rapp	Emoluments	46,299	40,306
	Valuation of options		79,913
Philip Nash (resigned on 8	Emoluments	-	17,558
June 2021)	Valuation of options	-	41,797
Thomas Evans	Emoluments	46,299	40,306
	Valuation of options	-	79,913
Andy Clifford	Emoluments	53,934	-
	Valuation of options	-	-
David Lenigas (appointed on 28	Emoluments	-	-
March 2023)	Valuation of options	-	-
		146,532	340,922
The Group does not employ any full-time employees at its US subsidiaries. Instead, the Group

uses specialist service providers to fulfil its well drilling and land management requirements.

The average monthly number of staff, including the Directors, during the financial year was as

follows:

2023

		2021
Directors	3	3

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

9. FINANCE INCOME AND FINANCE COSTS
	2023	2021
	$	$
Interest expense	260,347	290,661
	260,347	290,661
10. INCOME TAX
The tax charge for the year is $Nil (2021: $Nil). Factors affecting the tax charge for the period
are explained below:	2023	2021
	$	$
Loss for the year before taxation	(318,902)	(1,311,707)
UK Loss before tax multiplied by the UK tax	(60,591)	(249,224)
rate 19% (2021: 19%)
Tax effect of:
Gain on loan modification	(94,608)	-
Unutilised tax losses carried forward	155,199	249,224
	-	-
The Group has UK tax losses of approximately $4,453,643 (2021: $3,913,210) to carry forward
against future profits. The Directors have not recognised a deferred tax asset on the losses to date due to the uncertainty of recovery.
The rate of UK corporation tax increased from 19% to 25% with effect from 1 April 2023.
11. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the following loss and number of shares:	2023	2021
Group:
Loss attributable to equity holders of the parent ($)	318,902	1,311,707
Weighted average number of shares (number)	82,674,357	76,452,106
Loss per share (cents)	(0.39)	(1.72)
There is no difference between the basic and diluted earnings per share as the effect would be to decrease the loss per share.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

12.

PROPERTY, PLANT AND EQUIPMENT

Group

Petroleum

(Mineral

Leases)

Office

equipment

Total

Cost

At 1 January 2021

1,384,314

11,787

1,396,101

Additions

617

Currency translation

(88)

At 31 December 2021

1,384,931

11,699

1,396,630

Additions

100,000

Currency translation

At 31 March 2023

1,484,931

11,699

1,496,630

Accumulated Depreciation

At 1 January 2021

11,787

Charge for the year

Currency translation

(88)

At 31 December 2021

11,699

Charge for the period

Currency translation

At 31 March 2023

11,699

Net Book Amount

At 31 December 2021

1,384,931

At 31 March 2023

1,484,931

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

12.

PROPERTY, PLANT AND EQUIPMENT (continued)

	Office
Company	equipment
	$
Cost
At 1 January 2021	9,478
Additions	-
Currency translation	(88)
At 31 December 2021	9,390
Additions	-
Currency translation	-__
At 31 March 2023	9,390
Accumulated Depreciation
At 1 January 2021	9,478
Charge for the period	-
Currency translation	(88)
At 31 December 2021	9,390
Charge for the period	-
Currency translation	-
At 31 March 2023	9,390
Net Book Amount
At 31 December 2021	-
At 31 March 2023	-

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

13.

INTANGIBLE ASSETS

Group

	Drilling
	costs	Total
	$	$
Cost
At 31 December 2021	4,233,890	4,233,890
Amortisation
At 1 January 2021	-	-
Amortisation charge for the year	-	-
At 31 December 2021	-	-
Amortisation charge for the period	-	-
At 31 March 2023	-	-
Net Book Amount
At 31 December 2021	4,233,890	4,233,890
At 31 March 2023	4,233,890	4,233,890

Drilling costs represents acquired exploration and evaluation assets with an undetermined

useful life and are tested annually for impairment. Drilling costs are capitalised on a well-by-well

basis if the results indicate the existence of a commercially viable level of reserves. No amounts

are pledged as security for liabilities.

At 31 March 2023, the Company held, through its US based subsidiary entities, 100% in the

leasehold petroleum interests centred on the City of Gonzales, southwest Texas.

Impairment review – Intangible assets

The Directors have undertaken a review to assess whether circumstances exist which could

indicate the existence of impairment, considering the following indicators:

•

The Group no longer has title to mineral leases.

•

A decision has been taken by the Board to discontinue exploration due to the absence

of a commercial level of reserves.

•

Sufficient data exists to indicate that the costs incurred will not be fully recovered from

future development and participation.

Following their assessment, the Directors recognised that no impairment charge is necessary.

Further details regarding consideration of the carrying value is contained in note 4.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

14.

INVESTMENTS

Investments in subsidiaries

Company	2023	2021
	$	$
Shares in group undertakings
At 1 January	7,038,631	7,104,824
Foreign exchange movements	(597,651)	(66,193)
At 31 December 2021 and 31 March 2023	6,440,980	7,038,631

The Group comprises of the following subsidiaries:

Pennpetro USA Corp

Registered Office:

8 The Green Ste A, Dover, Delaware 19901, USA

Nature of business:

Oil and Gas

Class of share:

Ordinary shares

% of equity shares held by Company:

100%

Nobel Petroleum USA Inc.

Registered Office:

198 West 13th Street, Wilmington, Delaware

19801, USA

Nature of business:

Oil and Gas

Class of share:

Ordinary shares

% of equity shares held by Company:

100% via Pennpetro USA Corp

Nobel Petroleum LLC

Registered Office:

3867 Plaza Tower DR Baton Rouge, Louisiana

70816-4378, USA

Nature of business:

Oil and Gas

Class of share:

Ordinary shares

% of equity shares held by Company:

100% via Pennpetro USA Corp

Pennpetro Greentec UK Limited

Registered Office:

20b Wilton Row London SW1X 7NS, UK

Nature of business:

Dormant

Class of share:

Ordinary shares (£100)

% of equity shares held by Company:

100%

Pennpetro Green Energy Limited

Registered Office:

20bWilton Row, London SW1X 7NS, UK

Nature of business:

Dormant

Class of share:

Ordinary shares (£100)

% of equity shares held by Company:

100%

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

14.

INVESTMENTS (continued)

Pennpetro Greentec Limited

Registered Office:

1 Kalymnou, Q MERITO, 4th Floor, Agios Nikolaos,

6037 Larnaca, Cyprus

Nature of business:

IP Holding

Class of share:

Ordinary shares (€1,000)

% of equity shares held by Company:

100%

These subsidiary undertakings are included in the consolidation. The proportion of the voting

rights in the subsidiary undertaking held directly by the parent company does not differ from

the proportion of ordinary shares held.

15.

TRADE AND OTHER RECEIVABLES

Group

Company

2023

2021

2023

2021

Amounts owed from group

undertakings

2,944,932

3,079,883

Other receivables

315,299

309,456

12,386

13,535

315,299

309,456

2,957,318

3,093,418

The fair value of all receivables is the same as their carrying values stated above.

Group

The carrying amounts of the Group’s trade and other receivables are denominated in the

following currencies:

2023

2021

UK Pound Sterling

12,386

13,535

US Dollar

302,913

295,921

315,299

309,456

The maximum exposure to credit risk at the reporting date is the carrying value of each class

of receivable mentioned above. With respect to amounts due from Development participants,

each participant has provided a lien over its lease interests and a security interest over its

interest in well assets. The Group does not hold any collateral as security for other receivables.

The impact of a 10% favourable movement in the US Dollar to UK Pound would increase the

carrying value of other receivables denominated in UK Pounds by approximately $1,238 (2021:

$1,353). The impact of a 10% adverse movement in the US Dollar to UK Pound would reduce

the carrying value of other receivables denominated in UK Pounds by approximately $1,238

(2021: $1,353).

Company

The carrying amounts of the Company’s trade and other receivables are denominated in UK

Pound Sterling.

The maximum exposure to credit risk at the reporting date is the carrying value of each class

of receivable mentioned above. The Company does not hold any collateral as security for other

receivables.

The impact of a 10% favourable movement in the US Dollar to UK Pound would increase the

carrying value of other receivables denominated in UK Pounds by $295,731 (2021: $309,341).

The impact of a 10% adverse movement in the US Dollar to UK Pound would reduce the

carrying value of other receivables denominated in UK Pounds by $295,731 (2021: $309,341).

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

16.

SHORT-TERM INVESTMENTS

		Group	Company
	2023	2021	2023	2021
	$	$	$	$
Short-term investments	82,224	34,914	82,224	34,914
Short term investments include $82,224 (2021: $34,914) of cash being held by FHF Corporate

Finance Limited on behalf of Pennpetro. The amount is held in Pounds Sterling.

Group

The carrying amounts of the Group’s short-term investments are denominated in the following

currencies:

2023

		2021
		$
UK Pound Sterling	82,224	34,914
US Dollar	-	-
	82,224	34,914

The maximum exposure to credit risk at the reporting date is the carrying value of the short-

term investment mentioned above. The Group does not hold any collateral as security.

The impact of a 10% favourable movement in the US Dollar to UK Pound would increase the

carrying value of short-term investments denominated in UK Pounds by approximately $8,222

(2021: $3,491). The impact of a 10% adverse movement in the US Dollar to UK Pound would

reduce the carrying value of short-term investments denominated in UK Pounds by

approximately $8,222 (2021: $3,491).

Company

The carrying amounts of the Company’s short-term investments are denominated in UK Pound

Sterling.

17.

CASH AND CASH EQUIVALENTS

	Group		Company
	2023	2021	2023	2021
	$	$	$	$
Cash at bank	46,792	1,828	-	-

At 31 March 2023, the Group held cash of $46,792 (2021: $1,828) in banks with a Fitch credit

rating of A (Stable).

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

18.

SHARE CAPITAL AND PREMIUM

Ordinary shares

Share premium

Group

Number of

Value

Total

At 1 January 2021

and 31 December

2021

76,452,106

764,521

979,427

3,205,116

4,121,700

5,101,127

Share issue

8,046,965

80,470

99,674

2,009,703

2,489,019

2,588,992

At 31 March 2023

84,499,071

844,991

1,079,101

5,214,819

6,610,719

7,690,119

On 16 March 2022 1,166,667 new ordinary shares were issued at a price of 30 pence per

share for cash.

On 30 March 2022 Nobel Petroleum Ireland Limited under their convertible note exercised the

conversion of 5,833,333 new ordinary shares at 25 pence per share.

28 July 2022 - 952,268 shares were issued at a price of 28 pence per share to settle a creditor

balance.

21 November 2022 94,697 shares were issued at a price of 15.8 pence per share to settle a

creditor balance.

In March 2023, the Group received cash of $148.638 in connection with the share issue

completed on 11 April 2023 (note 28). These amounts have been recognized within trade and

other payables.

The convertible loan note was issued by Pennpetro to Nobel Ireland in the Reverse merger of

Nobel UK. This may be converted into 19 million ordinary shares if certain conditions are met,

at a fixed subscription price of 25 pence. The loan note was partially exercised in March 2022

for issued of 5,833,333 shares.

19.

SHARE BASED PAYMENTS

Share options

On 2nd November 2018 the Company granted options under the Pennpetro Energy Plc Option

Share Plan with an exercise price of £0.35p per share over, in aggregate, 1,700,000 ordinary

shares of £0.01 each to Directors Keith Edelman, Phillip Nash, Tom Evans and Olof Rapp,

who each received 425,000 options. The share price of the options granted are linked to the

price of shares issued on listing. Options are granted at 35p, which is a modest premium to

the issue price of the listing share price of 25p.

Weighted average

exercise price

Number of

awards

Exercisable at 1 January 2021

0.35

1,700,000

Awarded

Expired

(1,700,000)

Exercisable at 31 December 2021

The share options expired on 2 November 2021. No share options were exercised by the

Directors.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

20.

BORROWINGS

Group

Company

2023

2021

2023

2021

Current liabilities

Corporate borrowings

4,018,369

4,256,262

As at 31 March 2023, the Group had a $5 million Loan Note arrangement with Petroquest

Energy Limited, with a maturity date of 31 December 2022. In June 2022, Petroquest Energy

Limited agreed to extend the maturity date to 31 December 2024. Petroquest confirmed to the

Directors in July 2023 that if necessary, the maturity date can be further extended at the

Group’s option to 31 December 2025.

The Directors’ assessed the extension of the loan’s maturity to 31 December 2024 to be a

substantial modification under IFRS 9, and a loan modification adjustment has been

recognized in the income statement in connection with this.

The annual interest rate is set at 1% below Barclays Bank base rate and no interest has been

charged to date by the lender. The undiscounted balance drawn against this loan note as at 31

March 2023 was $4,018,369 (2021: $4,190,324). The borrowing facility is secured against

certain petroleum leases owned by the Group. The discounted present value of the loan

as at 31 March 2023 was $3,453,767 (2021: $3,658,987) and reflects an adjustment for

effective interest calculated at 8% per annum over the remaining term of the loan.

The movement in total borrowings in the year was as follows. Borrowings are denominated

partially in US dollars and partially in Pounds Sterling.

	Group		Company
	2023	2021	2023	2021
	$	$	$	$
At 1 January	4,256,262	3,727,995	-	-
Advance	-	304,556	-	-
Interest charge	260,347	290,661	-	-
Net repayment	-	(65,938)	-	-
Adjustment for effective interest	-	2,058	-	-
Loan term modification	(497,939)	-	-	-
adjustment
Foreign currency exchange	(301)	(3,070)	-	-
At 31 December 2021	4,018,369	4,256,262	-	-

And 31 March 2023

The fair value of borrowings equals their carrying amount. Borrowings are denominated in US

dollars.

The net debt position (total borrowings less cash on hand) as at 31 March 2023 is

$3,971,577 (2021: $4,254,434).

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

20.

BORROWINGS (continued)

Group

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

2023

		2021
		$
UK Pound Sterling	304,556	304,556
US Dollar	3,713,813	3,951,706
	4,018,369	4,256,262
The impact of a 10% favourable movement in the US Dollar to UK Pound would increase the

carrying value of borrowings denominated in UK Pounds by approximately $30,455

(2021:$30,455). The impact of a 10% adverse movement in the US Dollar to UK Pound would

reduce the carrying value of the borrowings denominated in UK Pounds by approximately

$30,455 (2021: $30,455).

Company

The company does not carry any borrowings.

21.

TRADE AND OTHER PAYABLES

Group

			Company
	2023	2021	2023	2021
	$	$	$	$
Trade and other payables	881,076	408,726	1,240,006	663,510
Amounts owed to group	-	-	32,696	35,729
undertakings
Accrued expenses	85,910	635,803	85,910	635,803
At 31 December 2021	966,986	1,044,529	1,358,612	1,335,042
And 31 March 2023

Group

The carrying amounts of the Group’s trade and other payables are denominated in the

following currencies:

2023

		2021
		$
UK Pound Sterling	916,986	994,529
US Dollar	50,000	50,000
	966,986	1,044,529
The impact of a 10% favourable movement in the US Dollar to UK Pound would increase the

carrying value of trade and other payables denominated in UK Pounds by approximately

$91,698 (2021: $99,453). The impact of a 10% adverse movement in the US Dollar to UK

Pound would reduce the carrying value of trade and other payables denominated in UK

Pounds by approximately $91,698 (2020: $99,453).

Company

The carrying amounts of the Company’s trade and other payables are denominated in UK

Pound sterling. The carrying amounts of the Company’s US subsidiary companies are

denominated in US Dollars.

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

22.

FINANCIAL INSTRUMENTS BY CATEGORY

23.

		TREASURY POLICY
The	Company	and	Group	operate	informal	treasury	policies	which	include	ongoing
assessments of interest rate management and borrowing policy.										The Board approves all
decisions on treasury policy.
The Group has financed its activities by raising funds through borrowings set out in note 20
above. There are no material differences between the book value and fair value of the financial
assets.
24. CAPITAL MANAGEMENT POLICIES
The Group and Company set the amount of capital in proportion to its overall financing
structure and manage their capital structure and make adjustments to it in the light of changes

in economic conditions and the risk characteristics of the underlying assets.

The Group considers its equity to be its capital.

The Group and Company’s capital management objectives are:

•

to ensure compliance with borrowing covenants;

•

to ensure the Group’s and Company’s ability to continue as a going concern; and

•

to provide an adequate return to shareholders.

In order to maintain or adjust the capital structure, the Group may issue new shares or sell

assets to reduce debts. The Group will continue making interest payments in accordance with

financial and non-financial loan covenants.

The Group applies itself to taking on critically analysed and early productive asset acquisitions

as a forward de-risk strategy to maintain going concern issues.

Group

Company

2023

2021

2023

2021

Assets as per Statement of

Financial Position

Loans and receivables:

Trade and other receivables

(excluding prepayments)

315,299

309,456

2,957,318

3,093,418

Short-term investments

82,224

34,914

82,224

34,914

Cash and cash equivalents

46,792

1,828

444,315

346,198

3,039,542

3,128,332

Liabilities per Statement of

Financial Position

Financial liabilities at amortised

cost:

Borrowings

4,018,369

4,256,262

Trade and other payables

(excluding non-financial liabilities)

966,986

1,044,529

1,358,612

1,335,042

4,985,355

5,300,791

1,358,612

1,335,042

PENNPETRO ENERGY PLC

NOTES TO THE FINANCIAL STATEMENTS

For the 15 month period ended 31 March 2023

25.

CAPITAL COMMITMENTS

As at 31 December 2021, the Group had no capital commitments for drilling and equipment

costs contracted but not provided for. The agreements signed with Millennium PetroCapital

Corporation in March 2023 required a capital commitment of $737,510, which was settled in

April 2023. The agreements signed in 2023 with Horse Hill carry no capital commitments until

that agreement becomes unconditional.

26.

RELATED PARTY TRANSACTIONS

Transactions with Directors

An amount of £10,000 that was previously advanced to Thomas Evans remains outstanding

as at 31 March 2023 (2021: £10,000). The amount is secured against shares held by him in

the Company and is due for repayment within 12 months. No interest has been charged on the

advance.

Thomas Evans is a Director of the following companies which are considered as related

parties:

•

FHF Securities (A’Asia) Limited – a shareholder in Pennpetro with a 0.49%

shareholding in the Company.

•

Nobel Petroleum LLC, which is a 100% directly owned subsidiary of Pennpetro USA

Corp.

•

Nobel Petroleum USA, Inc, which is a 100% owned subsidiary of Pennpetro USA

Corp.

•

Pennpetro USA Corp., which is a 100% owned subsidiary of Pennpetro.

•

Pennpetro Greentec UK Limited, which is a 100% owned subsidiary of Pennpetro.

•

Pennpetro Green Energy Limited, which is a 100% owned subsidiary of Pennpetro.

•

Pennpetro Greentec Limited, which is a 100% owned subsidiary of Pennpetro.

Transactions with Group undertakings

During the year ended 31 March 2023, the Company provided funds to its wholly owned

subsidiary Nobel Petroleum USA of $134,753 (2021: $6,875).

After the foreign exchange losses of $267,965 (2021: gains of $427,692) the total amount due

from the Group as at 31 March 2023 was $2,944,932 (2021: $3,078,144).

All Group transactions were eliminated on consolidation.

27.

ULTIMATE CONTROLLING PARTY

As at 31 March 2023, there was no ultimate controlling party.

28.

EVENTS AFTER THE REPORTING PERIOD

On 11 April 2023, the Company raised £1,500,000 gross proceeds through the issue of

10,000,000 new ordinary shares together with transfers from existing shareholders of a further

39,526,195 existing shares at a price of 3p per share.

On 14 July 2023, the Company raised £300,000 gross proceeds from the issue of 5,800,000

new ordinary shares together with transfers from existing shareholders of a further 9,200,000

existing shares at a price of 2p per share.