AOGL.L Regulatory News (AOGL)

Mayan Energy Ltd / Index: AIM / Epic: MYN/ ISIN: VGG6622A1057 / Sector: Oil and Gas

29 June 2018

Mayan Energy Ltd ('Mayan' or 'the Company')

Final Results for the Year Ended 31 December 2017

Mayan Energy Ltd (AIM: MYN), the AIM listed oil and gas company, is pleased to announce its final results for the year ended 31 December 2017. The full audited Report and Accounts for the period under review will be available on the Company's website today at www.Mayanenergy.com and are being posted to Shareholders. Extracts are set out below.

Highlights

· Delivering on strategy to build a portfolio of highly cash generative, U.S. onshore oil and gas assets with multiple development opportunities complemented by key investments in high potential oil and gas projects

· 2017 represents a year of transition for Mayan following management changes, a review of the legacy asset base which resulted in decisions to pursue, monetise or dispose of certain assets and the acquisition of interests in Texan oil & gas fields along with other complementary assets.

· Acquired a 60% working interest ("WI") with a 45% net revenue interest ("NRI") in the 105.7 gross acre Stockdale Oil Field lease, located in Wilson County, Texas and a 75% WI and a 52.5% NRI in two leases at Forest Hill, Wood County, Texas:

o Restored production at wells across each field through the implementation of a low cost, low risk workover and well stimulation programme

o A combined total of 272 gross/137 net barrels of oil per day from five wells on Stockdale and Forest Hill was reported post period end

o Gas discovery at Stockdale Morris 1 well provides significant upside production potential at Stockdale field

o Post period end acquired interests in 12 additional well bores including seven vertical wells at Stockdale and three horizontal and two vertical Austin Chalk wells, Texas - further increases pipeline of development opportunities

· Regained 100% working interest of Zink Ranch field in Osage County, Oklahoma where preparations are underway for a five well workover programme, targeting 80-100 net barrels of oil per day in the mid-term.

· Invested US$1,505,000 into Deloro Energy LLC ("Deloro") to gain exposure to the Asphalt Ridge Heavy Oil Project in Utah that is being developed by TSX listed Petroteq Energy

o Mayan has a 17.1% interest in Deloro which holds an approximate 8.2% equity interest (15.1% diluted) in Petroteq through its holding of 6,000,000 Shares and 6,000,000 Warrants 

· Acquired a 3.29% interest in Georgian focused Block Energy, which was admitted to AIM post period end ahead of commencement of development of portfolio of oil and gas licences in the Republic of Georgia

· Significantly strengthened balance sheet following 33% reduction in group debt as a result of cash settlements at a discount, or settlements in equity and the divestment of non-core assets

Eddie Gonzalez, CEO, said, "This has been a highly active year for Mayan as we firstly worked to streamline and rationalise our legacy assets and cost base before refocusing our portfolio towards de-risked US onshore opportunities that are easily accessible, economically viable and which importantly provide significant scope to scale up production. In line with this, the year under review has seen us firstly acquire wells on the Forest Hill and Stockdale Fields, before embarking on a programme targeting a rapid increase in production via low cost workovers of existing well bores. 

"We have a strategy in place that is deliverable and a team that can execute it. Together with the multiple opportunities we have identified across our portfolio, we will look to replicate this success many times over as we look to hit our near-term production target of 300- 500 bopd and in the process transform Mayan into a highly cash generative US focused oil and gas company that is primed for growth." 

**ENDS**

For further information visit www.Mayan energy.com or contact the following:

Jon Belliss Novum Securities Limited +44 20 7399 9400

Chairman's Statement - Mayan Energy 2018

While 2017 can be characterised as a year of considerable change at Mayan, most of which was deliberate and necessary to create a platform for sustainable growth, what has not changed is our objective to build a highly cash generative US onshore focused oil and gas company. Thanks to the work we have undertaken both during and after the year under review, including the successful implementation of low cost and low risk development programmes to scale up production across our asset base, we are well on the way to achieving our objective.

At the beginning of the period our focus was centred on dealing with several legacy issues and ensuring we had the right team in place at Board, management and operational levels so that we were in a position in the second half of the year to kick on with our growth strategy. This is focused on acquiring underperforming US onshore assets, enhancing production by deploying the expertise of our new team, utilising the specialised technology we have at our disposal, and reinvesting the cash flows generated into further growth opportunities. 

Considerable progress has been made. Over the course of the year, as well as divesting several assets that were no longer deemed economically sensible to progress, we set about building a portfolio of multiple producing wells and development opportunities which matched our investment criteria: undervalued and underdeveloped projects where production can be optimised effectively and economically by the Group. Notably, we re-gained full ownership of Zink Ranch and entered into agreements to secure material working interests in a portfolio of wells on the Stockdale and Forest Hill Fields in Texas. In addition, during the year we invested in value accretive opportunities including a 17.6% (17.1% post second round funding) interest in Deloro Energy which provides Mayan with exposure to the Asphalt Ridge Heavy Oil Sands Project in Utah where production is due to commence shortly; and a 3.29% interest in Georgian focused Block Energy Plc, which was recently admitted to AIM. The underlying thread that connects our portfolio of assets and investments is that they all represent advanced opportunities that are easily accessible, economically viable and have high potential.

We have been working hard to realise this high potential at the earliest opportunity. Following the acquisition, we successfully restored production at wells on both Stockdale and Forest Hill by implementing a workover and well stimulation programme. As part of the programme, we committed to investing in technology and techniques to best enhance production and identify new horizons. We have been delighted with the results. First sales from Stockdale were secured just over a month after commencing work and post-period end in May 2018 we reported a combined total of 272 gross / 137 net barrels of oil per day ('bopd') was being produced from five wells on the Stockdale and Forest Hill Fields in Texas. With further activity planned, including a workover programme at Zink Ranch targeting 100bopd, we are closing in on the medium-term 300-500 bopd net production target we set ourselves during the course of the year.

Outside our Texas and Oklahoma assets, our acquisition in November 2017 of an initial 17.6% stake (post-period end this has been reduced to 17.1%) in Deloro Energy which exposes Mayan to the Asphalt Ridge Heavy Oil Sands Project in Utah, promises to generate near term value for Mayan. The Asphalt Ridge Project is currently being developed by TSX listed Petroteq Energy using Petroteq's patented environmentally friendly heavy oil processing and extraction technology. There is significant value to be unlocked at Asphalt Ridge, which has an 87 Million Stock Tank Barrels contingent resource in place, and work is underway as part of a multi-phase development to produce 1,000 bopd in 2018 and increasing this to 5,000+ bopd by 2019. 

As mentioned earlier, several appointments were made in 2017 that have been key to the progress we have made. Among these is Mr David Khan who was appointed as an in-country technical advisor to the Company. David's expertise and experience in US oil and gas operations has been invaluable in supporting our CEO Mr Eddie Gonzalez in the development of the US onshore portfolio as well as in the identification of high potential investment opportunities. 

Financial Review

The Company has reported a gross loss for the year of US$3,836,000. This loss, along with a reduction in the Company's gross assets from 2016, can largely be attributed to the impact of impairments against the Company's US based assets in particular Shoats Creek. This gives rise to a loss per share of US$ 1.86 cents. Turnover was also reduced compared with the prior year given the Company's scaled down production at Shoats Creek however the Directors are confident that production from the Company's Texan fields will replace this in 2018.

Based on our growing track record of delivering on our targets, during the year we were able to raise £4.086 million through a combination of brokered and internally organised fund raises and placings. Just before period-end we raised £2 million through a placing involving private investors; testament to the progress the Company has made over the period. The funds raised have been invaluable in supporting the development of our US portfolio of assets and enabling us to make crucial investments in exciting opportunities. 

Outlook

This year has not been without significant challenges and accordingly, some difficult decisions had to be made regarding Mayan's portfolio and strategy, including the post period end decision to relinquish our interest in the Shoats Creek Field in Louisiana. However, Mayan has emerged the stronger for it and is now equipped with a prospective cohort of onshore assets in Texas and Oklahoma that is bolstered by several strategic investments. The success we have achieved recently across our US portfolio in our view justifies the actions we took to streamline Mayan's portfolio of assets. 

We continue to work hard to monetise our existing assets, as evidenced by the strong production growth we recently reported in Texas. At the same time, we are keen to replicate the success we have enjoyed here elsewhere, notably at Zink Ranch. Today, Mayan has a rapidly improving revenue and cash flow profile, a growing portfolio of low cost development opportunities, and a first-rate team in place that has proven itself capable of delivering. We have an excellent platform for future growth and as a result, I firmly believe that Mayan is well on the way to becoming the highly cash flow generative oil and gas company we set out to build. 

Having taken over the role of Chairman of Mayan midway through the year, I would like to take this opportunity to sincerely thank our shareholders for their commitment to Mayan, and to welcome all those who joined us this year. 2017 marked the beginning of a new chapter in Mayan's history and a notable sense of renewed optimism for the future of the Company has emerged, supported by the significant progress that has been achieved on the ground. We are well positioned for continued growth and I hope that you share the optimism I have for Mayan's future success. 

Charlie Wood

Non-Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

YEAR ENDED 31 DECEMBER 2017

The Financial Statements were approved and authorised for issue by the Board of Directors on 29 June 2018 and were signed on its behalf by

Eddie Gonzalez

Chief Executive Officer

The accounting policies and Notes on pages 16 to 38 form part of these Financial Statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2017

CONSOLIDATED CASH FLOW STATEMENT

YEAR ENDED 31 DECEMBER 2017

Major Non-Cash Transactions

Share Issue costs of US$ 325,000 were settled through share based payments.

Part of the payment for the Deloro acquisition was settled through the issuance of shares valuing

$US 509,000.

Creditors of USD$ 510,000 were settled through the issue of equity.

The accounting policies and notes on pages 16 to 38 form part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

YEAR ENDED 31 DECEMBER 2017

1. General Information

The principal activity of Mayan Energy Limited ('The Group') during the year was as an oil & gas exploration and production business focussed in the United States of America. The Group was incorporated in the British Virgin Islands on 13 May 2010 as a private limited company with the name Everest Energy Limited. As at the year end, the Group was domiciled in the British Virgin Islands and listed on the AIM market of the London Stock Exchange. 

No new standards, amendment or interpretation, effective for the first time for the year beginning on or after 1 January 2017 have had a material impact on the Group.

At the date of authorisation of these financial statements, the following standards and interpretations, were in issue but not yet effective, and have not been early adopted by the Group:

*Effective dates provided are the IASB effective dates. EU effective dates are yet to be confirmed.

Whilst the Directors do not anticipate the adoption of these standards and interpretation in future reporting periods will have a material impact on the Group's financial statements, they have yet to complete their full assessment in relation to the impact of IFRS 9 and IFRS 15.

2. Summary of significant accounting policies

2.1. Basis of Preparation

The Consolidated Financial Statements have been prepared under the historical cost convention, as modified for financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations, as adopted by the EU. 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. 

The Consolidated Financial Statements are presented in thousands of US Dollars (US$ 000's). 

Basis of Consolidation

The consolidated Financial Statements consolidate the Financial Statements of Mayan Energy Limited and the Financial Statements of its subsidiary undertakings made up to 31 December 2017. 

Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. 

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in the Statement of Comprehensive Income. Any investment retained is recognised at fair value at the date when control is lost. 

The group comprises of the following entities:

*An LLC is not a corporation, but is a legal form of company that affords limited liability to Northcote, its owner and general manager. 

**An LP is not a corporation, but is a legal form of partnership that affords the partners limited liability and is managed by a general manager.

Registered office for Cayman registered company: Nemours Chambers, Road Town, Tortola, VG1110 BVI

Registered office for USA registered companies: 8588 Katy Fwy, Suite 226, Houston, TX 77024

Registered office for Mexico registered companies: Rio Panuco 43, Col. Cuauhtemoc, Mexicom D.F. 06500

Except for entities connected with the Groups Shoats Creek, Texas and Oklahoma assets, the majority of the US Companies are dormant and it is the Group's intention to move to liquidate them or strike them off in the near term.  

A) Going Concern

The financial statements have been prepared assuming the Group will continue as a Going Concern. This assessment has been made on the Group's economic prospects in its financial forecasts. In assessing whether the going concern assumption is appropriate the Directors have taken into account all available information for the foreseeable future; in particular for the 12 months from the date of approval of the financial statements. This includes:

· future cash flows based on management prepared forecasts;

· consideration of Oil and Gas sales from recently commissioned sites, and consideration as to the timing of production and cashflow receipts;

· the ability to raise funds on the market; and

· successful settlement of unpaid payroll taxes.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, therefore, can continue to adopt the going concern basis of preparation in these financial statements. 

The Financial Statements do not include any adjustments that may be required should the Group be unable to continue as a going concern. Going concern has been referred to in the auditor's report as a material uncertainty.

B) Operating segments

Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision Maker ("CODM"). The CODM is responsible for allocating resources and assessing performance of the operating segments, whilst it is the Directors of the Group that make the strategic decisions and have been designated as the CODM.

C) Financial assets

The Group has classified all of its financial assets as loans and receivables or available for sale financial investments. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets. The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the Statement of Financial Position. Loans and receivables are initially recognised at fair value plus transaction costs and are subsequently carried at amortised cost using the effective interest method, less provision for impairment. 

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset, or a group of financial assets, is impaired. A financial asset, or a group of financial assets, is impaired, and impairment losses are recognised, only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event"), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated. 

The criteria that the Group uses to determine whether there is objective evidence of an impairment loss include:

· significant financial difficulty of the issuer or obligor; and

· a breach of contract, such as a default or delinquency in interest or principal repayments. 

The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset's original effective interest rate. The asset's carrying amount is reduced, and the loss is recognised in the Statement of Comprehensive Income. 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the Statement of Comprehensive Income. 

Available for sale financial assets

Available for sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Available for sale financial assets are carried at fair value with changes recognised in other comprehensive income.

D) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions, which are readily convertible to known amounts of cash. Cash equivalents are highly liquid amounts that are readily convertible to a known amount of cash. 

E) Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method. 

F) Equity

Equity comprises the following:

· "Share premium" represents the premium paid on Ordinary Shares issued of no par value

· "Foreign currency translation reserve" includes movements that relate to the retranslation of the subsidiaries whose functional currencies are not the US Dollar. 

· "Reverse acquisition reserve" represents the reserve created in respect of the reverse acquisition difference between the equity structure of the legal parent and the acquired entity. 

· "Retained earnings" represents retained profits or losses. 

G) Related Parties

Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their close family members) or other entities and include entities which are under significant influence of related parties of the Group where those parties are individuals, and any entity that is a related party of the Group. 

H) Foreign Currency Translation

Functional and presentational currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The Financial Statements are presented in US Dollars (US$). The parent company's functional currency is Pounds Sterling (£) and the subsidiary entities functional currency is US Dollars (US$). On consolidation of entities with a non-US Dollar presentational currency, their statements of financial position are translated into US Dollar at the closing rate and income and expenses at the average monthly rate. Share capital is translated into the presentational currency of the Group (US$) using the exchange rate prevailing at the dates of the transactions. 

All resulting exchange differences arising in the period are recognised in other comprehensive income, and cumulatively in the Group's translation reserve. Such translation differences are reclassified to profit or loss in the period in which any such foreign operation is disposed of. 

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the Consolidated Statement of Comprehensive Income. 

I) Share based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The equity-settled share-based payments are expensed to the consolidated statement of comprehensive income. 

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received on a straight line basis over the vesting period based on the Group's estimate of shares that will eventually vest, except where it is in respect to costs associated with the issue of equity, in which case it is charged to the share premium account. 

J) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured and when it is probable that future economic benefit will flow to the entity. The Group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. 

Revenue represents the sale value of the Group's share of oil and the income from technical services to third parties. Revenues are recognised when crude oil has been lifted and title passed to the buyer or when services are rendered. 

K) Taxation

Income tax expense represents the sum of the current tax payable and deferred tax. The current tax payable is based on taxable profit for the year. Taxable profit or loss differs from net profit or loss as reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. 

Tax is charged or credited in the consolidated statement of comprehensive income, except when it relates to items charged or credited directly to equity or in other comprehensive income, in which case the tax is also dealt with in equity or other comprehensive income respectively. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit or loss. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on tax rates and laws substantively enacted by the reporting date. Deferred tax assets and liabilities are offset when there exists a legal and enforceable right to offset and 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. 

L) Business combinations

Except as described below, the acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the criteria for recognition under IFRS 3 (Revised) are recognised at their fair value at the acquisition date. Acquisition costs are expensed. 

Mayan Energy Limited (formerly Northcote Energy Limited) was incorporated as an investment vehicle focussed on the completion of a natural resources acquisition. 

On 14 January 2014, the Company acquired 100% of the issued share capital of Northcote Energy Limited, Cayman Islands ("Northcote CI"), a US focussed on-shore oil and gas Group, for a consideration of US$ 10.4 million to be satisfied by the issue of 645,084,519 new Shares to the Sellers.

In accordance with IFRS 3 (Revised) the acquisition represented a reverse acquisition. As a reverse acquisition, the acquisition date fair value of the consideration transferred by Northcote Energy Limited was based on the number of equity instruments that Northcote CI would have had to issue to the owners of Northcote Energy Limited to give the owners of Northcote Energy Limited the same percentage of equity interests that result from the reverse acquisition. 

The cost of the combination was calculated using the fair value of all the pre-acquisition issued equity instruments of Northcote Energy Limited at the date of acquisition. The fair value of the share consideration was based on the latest share transaction of Northcote Energy CI from October 2012 of £0.17 immediately prior to the acquisition. Goodwill of US$ 1,273,000 was expensed immediately on acquisition and all the acquisition related costs were also expensed in accordance with IFRS 3 (Revised).

M) Property, plant and equipment - ("D&P Assets")

Capitalisation

D&P Assets are accumulated into single field cost centres and represent the cost of developing the commercial reserves and bringing them into production. From time to time different scenarios occur that call for specific policy guidance. 

The following specific policies are applied by the Group:

· CGUs ("Cash Generating Units") - The Group has defined its CGUs as assets or groups of assets representing the smallest identifiable segments generating cash flows that are largely independent of cash flows from other assets or groups of assets. As defined, each CGU includes the relevant properties, wells, facilities, pipelines and other key components of the included operations. 

· Dry Hole Costs - Dry hole costs are included in the capitalised costs of the field and would therefore be included in any impairment tests conducted, as described below. 

· Water Injection/Disposal Wells - The Group may convert an existing well into a water injection or disposal well. At the time of conversion, all costs associated with the asset are transferred to facility costs. Any capitalisable costs incurred thereafter will be included as facility costs. 

· Allocated Costs - Costs such as G&G, Seismic, Capitalised General and Administrative costs, financing costs, etc. which may cover multiple countries, business segments, CGUs or other assets will be allocated to the appropriate CGUs during the period in which the costs were incurred. 

Depreciation, Depletion and Amortisation ("DDA")

Asset costs relating to each CGU, which include the components of properties, wells, facilities, pipelines and other, are depreciated, depleted or amortised on a unit of production method based on the commercial proven and probable reserves for that CGU. 

D&P assets are depreciated over the relevant net production within the corresponding CGU. As noted above, asset costs associated with E&E projects, even though the assets may or may not have reserves associated with them, and are within a CGU with active producing operations, are not amortised until such costs are analysed for impairment and then transferred to D&P phase. 

The DDA calculation takes into account the estimated future costs of development for recognised proven and probable reserves for each field based on current price levels and escalated annually based on projected cost inflation rates. Changes in reserve quantities and cost estimates are recognised prospectively from the last reporting date. 

Impairment of D&P Assets

A review is performed for any indication that the value of the Group's D&P assets may be impaired such as:

· significant changes with an adverse effect in the market or economic conditions; or

· obsolescence or physical damage of an asset; an asset becoming idle or plans to dispose of the asset before the previously expected date; or

· evidence is available from internal reporting that indicates that the economic performance of an asset is or will be worse than expected. 

For D&P assets when there are such indications, an impairment test is carried out at a CGU level. 

When an impairment is identified, the depletion is charged through the statement of comprehensive income if the net book value of capitalised costs relating to the cash generating unit exceeds the associated estimated future discounted cash flows of the related commercial oil reserves. 

The Group accounts for D&P assets in accordance with the provisions of IAS 16 following the full cost accounting principles. The Group will continue to monitor the application of its policy with respect to any future guidance on accounting for oil and gas activities which may be issued. 

Workovers/overhauls and maintenance

From time to time a workover, overhaul or maintenance of existing D&P assets is required, which normally fall into one of two distinct categories. The type of workover dictates the accounting treatment and recognition of the related costs:

Capitalisable costs

Costs will be capitalised where the performance of an asset is improved, where an asset being overhauled is being changed from its initial use, the assets useful life is being extended, or the asset is being modified to assist the production of new reserves. The asset will then be subject to depreciation. 

· If the workover is being performed on an asset which has been the subject of a previous workover, the net book value of costs previously capitalised will be derecognised and charged to cost of sales at the same time as the subsequent capitalisable workover expenditures are being recognised as part of the asset's revised carrying value. 

· If the workover replaces parts, equipment or components of an asset or group of assets, and these replacement items qualify for capitalisation, then the original cost of those parts or equipment, including related installation and set up costs that were capitalised as part of the original asset, will be derecognised and charged to cost of sales in the consolidated statement of comprehensive income. In the event that the original cost of parts, equipment or components being replaced are not reasonably identifiable, the cost of the new items, adjusted for inflation, may be deemed adequate for consideration as the original cost. 

Non-capitalisable costs

Expense type workover costs are costs incurred such as maintenance type expenditures, which would be considered day-to-day servicing of the asset. These types of expenditures are recognised within cost of sales in the consolidated statement of comprehensive income as incurred. Expense workovers generally include work that is maintenance in nature and generally will not increase production capability through accessing new reserves, producing from a new zone or significantly extend the life or change the nature of the well from its original production profile.

Decommissioning

Provision is made for the cost of decommissioning assets at the time when the obligation to decommission arises. Such provision represents the estimated discounted liability (the discount rate used currently being at 10%, (2016: 10%) for costs which are expected to be incurred in removing production facilities and site restoration at the end of the producing life of each field. 

A corresponding item of property, plant and equipment is also created at an amount equal to the provision. This is subsequently depreciated as part of the capital costs of the production facilities. Any change in the present value of the estimated expenditure attributable to changes in the estimates of the cash flow or the current estimate of the discount rate used are reflected as an adjustment to the provision and property, plant and equipment. The unwinding of the discount is recognised as a finance cost. 

N) Critical Accounting Estimates and Judgements

Use of Estimates and Judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year involves judgement as to the:

· likely commerciality of the asset;

· proven, probable and possible ('P') reserves which are estimated using standard recognised evaluation techniques;

· future revenues and estimated development costs pertaining to the asset;

· discount rate to be applied for the purposes of deriving a recoverable value; and

· value ascribed to contingent resources associated with the asset.

O) Carrying value of Property, Plant and Equipment (Note 10)

At 31 December 2017, mineral leases and capitalised daily costs and equipment on producing properties have a total carrying value of US$ 990,000 (2016: US$ 2,554,000). Management tests annually whether the assets have future economic value in accordance with the accounting policies. These assets are also subject to an annual impairment review.

The recoverable amount of each property has been determined based on a value in the calculation which requires the use of certain estimates and assumption such as long-term commodity prices (i.e. oil and gas prices - at present assets are calculated assuming an oil price of $50), discount rate, operating costs, future capital requirements and resource estimates. These estimates and assumptions are subject to risk and uncertainty. Therefore there is a possibility that changes in circumstances will impact the recoverable amount. 

P) Decommissioning provision (Note 16)

The Group has decommissioning obligations in respect of its interests. The full extent to which a provision is required depends on the legal requirements at the time of decommissioning, the costs and timing of any decommissioning works and the discount rate applied to such costs. 

The decommissioning provision is updated each year to reflect management's best estimates based on the current economic environment of the key assumptions used. Actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required, which will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This in turn will depend upon future oil and gas prices, which are inherently uncertain. 

Q) Share based payments (Note 14)

The Group has made awards of options and warrants over its unissued capital. The valuation of these options and warrants involves making a number of estimates relating to price volatility, future dividend yields, expected life and forfeiture rates. 

R) Payroll tax provision (Note 16)

The Group has incurred payroll tax liabilities dating back to 2014, which is included in trade and other payables and provisions.

The Group has estimated the additional amounts which will be payable to the US State in terms of penalties and interest in terms of the penalties due as follows:

· Failure to file (25%)

· Failure to deposit (10%)

· Interest on payable (0.5% per month)

S) Available for sale financial assets (Note 12)

Available for sale financial assets have a carrying value of $1,626,000 at 31 December 2017 following equity share acquisitions in the year. An impairment charge of $Nil (2016: $Nil) has been recognised in the year.

The Group follows the guidance of IAS 39 to determine when an available-for-sale equity investment is impaired. This determination requires significant judgement. In making this judgement, the Company evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of the short-term business outlook for the investee, including factors such as industry and sector performance and operational and financing cash flow. Some available for sale financial assets are valued using the cost model. This is because there is no identifiable inputs can be obtained. Management have considered external indicators such as commodity prices, investment performance and demand for the underlying commodity.

Management has concluded that there is no requirement to impair the carrying value of available for sale financial assets based on its valuation of the equity instruments held.

3. Finance income and Finance costs

4. Segmental analysis

As the Group made investments during the year in order to commence the establishment of a strategic portfolio of investments in listed and unlisted entities in the oil and gas sector, the Directors believe the operations of the Group now comprise two operating segments. The other segment comprising the production, development and sale of hydrocarbons and related activities in the USA.

Information per the segments reportable to the Chief Operating Decision Maker are as follows:

The comparative segmental analysis related to one segment only being the production, development and sale of hydrocarbon and related activities in the USA. As said, this is the same as the information in the prior year primary statements and supporting notes. As such no separate analysis is shown here.

5. Earnings per Share

Basic earnings per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. 

In accordance with International Accounting Standard 33 'Earnings per share', no diluted earnings per share is presented as the Group is loss making. 

6. Expenses by nature

The Group's operating loss is stated after charging:

During the year a number of creditor balances were settled for less than their stated amount with the balance going against the individual expense line to which it originally related.

7. Staff Costs (including Directors)

The Group employed 5 members of staff, including 3 directors (2016: 9 and 4 respectively). 

Staff costs includes an expense for payroll taxes payable of $163,000 which relates to previous periods.

Key management of the Group are considered to be the Directors and the remuneration of those in office during the year was as follows:

8. Financial Risk Management

The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme seeks to minimise potential adverse effects on the Group's financial performance. Risk management is carried out by the Board. 

(a) Market Risk

Foreign exchange risk

The Group operates principally in the US, but is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the British Pound. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities. 

As at 31 December 2017 the exposure to this risk is not considered material to the Group's operations and thus the Directors consider that, for the time being, no hedging or other arrangements are necessary to mitigate this risk and as a result of this not being considered material no disclosure has been made in this respect. 

Oil price risk

While the return on the Group's operations and investments is US$ denominated, changes in Oil and Gas prices impact on the viability of its operations and also the ease with which the Group can raise capital. 

(b) Credit Risk

The Group has policies in place to ensure that sales of products are made to customers with appropriate credit worthiness. The Group limits credit risk by assessing creditworthiness of potential counterparties before entering into transactions with them and continuing to evaluate their credit-worthiness after transactions have been initiated. 

Where appropriate, the use of prepayment for product sales limits the exposure to credit risk. There is no difference between the carrying amount of trade and other receivables and the maximum credit risk exposure. 

Credit risk also arises from cash and cash equivalents. The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. The Group will only keep its holdings of cash and cash equivalents with institutions which have a minimum credit rating of 'B'.

(c) Liquidity Risk

Management of liquidity risk is achieved by monitoring budgets and forecasts against actual cash flows. Where the group entered into borrowings during the year, management monitored the repayment and servicing of these arrangements against the contractual terms and reviewed cash flows to ensure that sufficient cash reserves were maintained. 

(d) Capital Risk Management

The Directors determine the appropriate capital structure of the Group, specifically, how much is raised from shareholders (equity) and how much is borrowed from financial institutions (debt), in order to finance the Group's business strategy. 

The Group's policy as to the level of equity capital and reserves is to ensure that it maintains a strong financial position and gearing ratio which provides financial flexibility to continue as a going concern and to maximise shareholder value. The capital structure of the Group consists of shareholders' equity together with net debt (where relevant). The Group's funding requirements are met through a combination of debt, equity and operational cash flow. 

(e) Fair Value Estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

· Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

· Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

· Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The fair values for the Group's assets and liabilities are not materially different from their carrying values in the financial statements.

The following table presents the Company's financial assets that are measured at fair value:

The Company does not have any liabilities measured at fair value. There have been no transfers in to or transfers out of fair value hierarchy levels in the period.

(i) Financial instruments in level 1

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in Level 1.

(ii) Financial instruments in level 2

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. 

(iii) Financial instruments in level 3

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The Company has valued all level 3 financial instruments at cost. Cost is considered to represent fair value given the proximity of the current period acquisitions to the reporting date, together with a lack of sufficient appropriate information on which to base an alternative valuation technique. As a result, there is no sensitivity of any management estimates on the carrying value of the financial instruments. 

The following table presents the changes in level 3 instruments for the year.

9. Taxation

Taxation reconciliation

The charge/(credit) for the year can be reconciled to the loss per the consolidated statement of comprehensive income:

The deferred tax asset has not been provided for because of uncertainty over the timing of future taxable profits against which the losses may be offset.

10. Property, plant & equipment

Impairment

At year end, Management review each exploration project for any indication of impairment. Indications would include sustained changes in the oil and gas price outlook, written off wells, changes in management's development plan and the relinquishment of development acreage. The principle influences on management's decision to impair the properties are described below:

Oil price

Compared to pre-2014 values, present prices continued to be under pressure. At the same time however, there has been a on income in prices to around the US$ 60-70 bopd range. The Group acquired the majority of its properties based on valuations when oil prices were consistently in excess of US$ 100/bbl, which with the benefit of hindsight were then at historic market peaks.

Development plan

The value of any proven Oil & Gas asset is a function of both its current production but also in the extraction of proven but as yet unproduced reserves.

During 2017 the Group divested several assets that were no longer deemed economically viable to progress and set about building a portfolio of multiple producing wells and development opportunities in underdeveloped projects where production can be optimised effectively and economically by the Company.

The Group re-gained full ownership of Zink Ranch and entered into agreements to secure material working interests in a portfolio of wells on the Stockdale and Forest Hill Fields in Texas, the latter two being the immediate focus for the Group with a plan to implement a workover and well stimulation programme. As part of the programme, the Group intend to invest in technology and techniques to best enhance production and identify new horizons.

Capital constraint

The Group only has a finite amount of capital available, management therefore prioritised capital allocation to new opportunities at Forrest Hill and Stockdale as they offered the prospect of more attractive returns than investing in attempting to put proven reserves elsewhere into production. The impairment provision in the year was charged against the following properties:

11. Trade and other receivables

• Trade and other receivables are stated at fair values, which as at the year-end equate to their carrying values. As at the year-end trade and other receivables were not past due, were not impaired and were all denominated in US$.

• In June 2017, the company invested £300,000 into Block Energy plc ("Block Energy"), at the time a NEX listed oil and gas company with interests primarily in Georgia. This included a £210,000 (US$ 284,000) investment via a Secured Convertible Loan Note with a 10% flat coupon with conversion to equity at a 10% discount to any price at which Block Energy's shares are listed or admitted to trading on any stock exchange other than NEX. 

12. Available for sale financial assets

The company made two investments during the financial year:

• In June 2017, invested £300,000 into Block Energy plc ("Block Energy"), at the time a NEX listed oil and gas company with interests primarily in Georgia. Investment consisted of a £90,000 (US$ 121,000) equity investment via a placing of new shares at £0.0085 per Block Energy Share which will result in Mayan acquiring a 2.47% equity interest in Block Energy. In addition, a £210,000 (US$ 284,000) investment via a Secured Convertible Loan Note with a 10% flat coupon with conversion to equity at a 10% discount to any price at which Block Energy's shares are listed or admitted to trading on any stock exchange other than NEX. 

• In November 2017, invested US$1,505,000 into Deloro Energy LLC ("Deloro"). The investment consisted of US$ 1,005,000 paid in cash and US$500,000 settled by way of 64,102,564 Mayan Ordinary shares. Deloro, is a newly formed private company which has been established to acquire a 49% interest in the Asphalt Ridge heavy oil project in Utah, USA ('Asphalt Ridge') which is being 'spun out' of TSX listed Petroteq Energy Inc ("Petroteq"). 

13. Trade and other payables

14. Share based payment

The following is a summary of the share options and warrants outstanding and exercisable as at 31 December 2017 and 31 December 2016 and changes during the period:

The above is expressed in GB£ pence and not US$ cents due to the terms of the options and warrants.

\* This represents the amount post share consolidation.

The following share options or warrants were outstanding in respect of the ordinary shares:

1) Director options granted 01.09.2016 vests after 01.09.2021 on condition that the Director remain employed. It has subsequently been cancelled.

New options and warrants have been valued using the Black-Scholes valuation method and the assumptions used are detailed below. The expected future volatility has been determined by reference to the historical volatility:

Current year:

The Group recognised US$324,817 (2016: $US828,000) relating to equity-settled share based payment transactions during the year which was charged to share premium.

For the share options and warrants outstanding as at 31 December 2017, the weighted average remaining contractual life was 2.33 years (2016: 2.65).

15. Share capital

16. Provisions

The provision in respect of Plug & Abandonment represents the present value of the decommissioning of up to 44 (2016: 118) existing producing and currently shut-in well bores. Decommissioning is due to take place from 2018 to 2027 (2016: 2017 to 2027). The provisions are made using the Group's internal estimates that Management believes form a reasonable basis for the expected future costs of decommissioning.

The provision in respect of payroll interest and liabilities relates to fines and penalties due on unpaid payroll taxes.

Other provisions includes amounts expected to be settled with Springer Drilling Partners LP ($150,000) and Wind River Designs Inc ($25,000) subsequent to the year end.

17. Contingent liabilities

As at the Consolidated Statement of Financial Position date, there were no contingent liabilities.

18. Capital Commitments

There were no capital commitments authorised by the Directors or contracted other than those provided for in these financial statements for at 31 December 2017 (31 December 2016: None). 

19. Ultimate Controlling party

As at the Consolidated Statement of Financial Position date, the Directors believe that there is no ultimate controlling party. 

20. Related party transactions

The following transactions were undertaken with related parties:

Director's remuneration has been disclosed in Note 7.

21. Events after the reporting date

Capital Raise

On 25 June 2018 the Group announced that it has raised £850,000 (before expenses) with institutional and private investors through a Company arranged subscription of 141,666,666 new ordinary shares of no par value each at a price of 0.6p per share (the "Subscription Price"). The purpose of the capital raise was to finance the acquisition of a 60% interest in a further 12 wells in the Stockdale and Austin Chalk Fields in Wilson County Texas for $605,000 (50% cash and 50% Mayan Ordinary shares) and to fund ongoing working capital.

Block Energy

On 11 June 2018, Block Energy commenced trading on AIM at an issue price of 4 pence. At the date of admission, Mayans investment in Block was valued 13.5% higher than the original investment made in June 2017.

Relinquishment of Shoats Creek

In May 2018 Mayan announced that it had relinquished its 50% working interest in Shoats Creek. The decision followed an evaluation by Mayan based on both external and internal developments impacting Shoats Creek as well as an assessment of the potential to realize a positive outcome for shareholders through continued investment in this asset. While the decision to exit Shoats Creek is based entirely on considerations specific to that field, the decision taken by the Board was made easily given the level of success the Group is enjoying at Stockdale and Forest Hill Fields. The relinquishment also protected the Group from potentially significant Plug & Abandonment ('P&A') liabilities associated with abandoned well bores at Shoats Creek.

Deloro

In May 2018, Deloro's investment in Asphalt Ridge was structured directly with the TSX and OTC listed entity, Petroteq Energy Inc via the issue of listed equity and unlisted warrants in the company. The Group's equity interest in Deloro is 17.3%.

Auditors' Report

The comparative figures for the financial year ended 31 December 2017 are not the Company's statutory accounts for that financial year but the consolidated accounts. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not give any reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006, relating to the accounting records of the company.