Baron Oil Regulatory News (BOIL)

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Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

11 September 2020

Baron Oil Plc

("Baron" or "the Company")

Interim Results for the six months ended 30 June 2020

Baron Oil Plc (AIM:BOIL), the AIM-quoted oil and gas exploration company focused on opportunities in SE Asia, Latin America and the UK, announces its unaudited interim financial information and results for the six months ended 30 June 2020.

Operations

Timor-Leste

· Work on the Chuditch PSC has been progressed as far as possible in the absence of the original raw seismic data. SundaGas has written to ANPM requesting a satisfactory response and remedy of the situation.

Peru

· As soon as free movement in Peru is restored the Company intends to push on with the drilling of the El-Barco-3X well. Assuming that COVID restrictions are lifted by the end of the calendar year, between May and August 2021 is a realistic target.

UK

· Inner Moray Firth - On licence P2478 (the Dunrobin Prospect), the original seismic field data has been located, copied and is being validated. We look forward to receiving the results of the studies being carried out by the large European exploration and production company in due course.

· Dorset - The Joint Venture has agreed to relinquish Licence P1918 (the Colter Prospect); work on PEDL330 & PEDL 345 continues.

Financial

· £2,500,000 (gross) Placing and Subscription at 0.1p per share was announced on 14 February 2020.

· Available cash balance (excluding monies held as security for bank guarantees in Peru and Timor-Leste) at 30 June 2020 of £1,798,000 (30 June 2019: £605,000; 31 December 2019: £347,000).

· Net loss after finance costs and tax of £703,000 (June 2019: net loss of £307,000; 2019 year: net loss of £1,674,000), representing a loss of 0.02p per share (June 2019: 0.02p; year to 31 December 2019: 0.01p).

· On 22 April 2020, the Company acquired a 33.33% interest in SundaGas (Timor-Leste Sahul) Pte. Ltd at a cost of US$188,000, which is fully impaired under associated company accounting rules. Baron also paid a further US$333,000 in respect of a guarantee bond deposit which is included in receivables.

· The increase in administration expenses is largely accounted for by higher professional fees related to fund raising activities which includes legal, registrar and corporate advisory costs. In addition, there is a non-cash charge of £63,000 in respect of share-based payments arising on the issue of Placing warrants and options.

Malcolm Butler, Executive Chairman commented…

"There are encouraging signs that industry activity is beginning to move again, although oil and gas prices remain depressed. We are pleased that the seismic data on the Dunrobin area has finally been located, enabling reprocessing work to take place. Once the COVID issues have been resolved, we believe the drilling of El Barco-3X should be able to move forward. The situation in Timor-Leste is very frustrating but we will keep shareholders informed of progress."

For further information, please contact:

TL-SO-19-16 Production Sharing Contract ("Chuditch PSC"), offshore Timor-Leste - Indirect 25% interest

As outlined in Baron's AGM statement in June, since signing the Chuditch PSC in November 2019, SundaGas has progressed the project as far as possible in the absence of the original raw seismic acquisition data to which it is entitled under the terms of the Chuditch PSC. SundaGas has still not received these data.

The Board believes that the failure of Timor-Leste's public institution responsible for managing and regulating petroleum and mining activities, Autoridade Nacional do Petróleo e Minerais ("ANPM"), to provide these data is the result of a conflicting seismic licensing and revenue sharing agreement, including the Kyranis 3D volume recorded in 2012 over the Chuditch area, understood to have been signed between ANPM and TGS, a provider of multi-client seismic data, an agreement of which SundaGas had no knowledge at the time of the signing of the Chuditch PSC.

Baron supports SundaGas in its efforts to work constructively with ANPM and others to make progress with the Chuditch PSC. However, in order to fulfil the agreed specific technical aims of the data reprocessing and its national training commitment, which were previously agreed to by all parties, it is crucial for SundaGas to access the original raw seismic data and be able to closely direct the reprocessing work. Various seismic products within Timor-Leste offshore now being marketed by TGS to third parties will neither satisfy the Chuditch PSC obligations nor provide the detailed local analyses required.

It should be noted that ANPM has also failed to take steps to provide other necessary data required to fulfil the Chuditch PSC obligations, such as raw 2D seismic data, that do not fall within their agreement with TGS. This means that SundaGas has been unable to make further progress in relation to the Chuditch PSC's 2020 work programme. SundaGas considers that these issues indicate that ANPM is in breach of contract of the Chuditch PSC and is failing to fulfil its obligations under Timor-Leste Petroleum Law. Accordingly, SundaGas has also informed its partner in the Chuditch PSC, TIMOR GAP, that it is unable to submit a 2021 work programme and budget at this time.

During the first two years of the initial three-year term of the Chuditch PSC, there is an obligation to reprocess 800 sq. kilometres of 3D seismic and 2,000 line kilometres of 2D seismic data and, if justified by the results of the reprocessing, drill a well during the third year. The Board believes that, with ten months having already elapsed since signing the Chuditch PSC, it will be difficult, once the data access issues referred to above have been satisfactorily resolved, to complete the required work programme on the Chuditch PSC in sufficient time for a drilling decision to be made.

Since June 2020, SundaGas has received no response or feedback from ANPM on these specific matters. In seeking to expedite a resolution to the situation, SundaGas has written to ANPM requesting a satisfactory response and remedy of the data access issues, the absence of which would mean that the project could not move forward.

Peru - Block XXI, Onshore Licence - 100% interest

We continue to pursue efforts to drill the proposed 1,850 metre El Barco-3X well to test for low-risk gas in the Mancora Sands and higher-risk oil and gas in fractured basement, but progress has been severely hampered by the ongoing COVID-19 issues. The Piura region is one of the most infected areas in Peru and current restrictions suggest that it will not open up for meetings until early 2021. The local settlements of El Barco and Belisario remain COVID free, since they have closed access to both villages. The Company is required to hold three workshops to present its drilling and environmental plans in Piura and in the villages and has to complete negotiations to gain access to the site with the local community President. None of this can take place until free movement is allowed. Taking into account these issues, our current indicative target for drilling El Barco-3X is between May and August 2021.

Block XXI will remain in Force Majeure until the Company is able to conclude the workshops and reach agreement regarding access to the site with the local community. Baron will have approximately six months left in which to drill when Force Majeure is lifted. The pre-COVID estimate for site preparation and drilling of El Barco-3X was US$1.2 million and updated estimates have been requested from four drilling companies. The Company's aim continues to be to bring in a new drilling and equity partner, but the previous negotiations with an interested company based in Piura have been interrupted by the COVID situation and have not yet been able to be resumed. Meanwhile, the continuing focus is on ensuring that the licence remains in good order and working with Perupetro to confirm the three-year extension option for Block XXI, contingent on the drilling of El-Barco-3X.

UK - Inner Moray Firth, Offshore Licence P2478 - Baron 15% interest

Further to the update made in our 2020 AGM statement, Corallian Energy Limited, the Operator of Licence P2478 which contains the large Dunrobin and smaller Golspie prospects, has informed the Joint Venture that the original seismic field data necessary to perform specialised reprocessing has recently been located and copied and is now being validated. Once this has been checked and loaded, reprocessing work will be able to take place. The initial Exclusivity period of the Work Sharing and Confidentiality Agreement, which was signed with a large European exploration and production company in April 2020, currently expires at the end of September 2020 and we look forward to receiving the results of the studies undertaken in due course.

UK - Dorset, Offshore Licence P1918; Onshore Licences PEDL330 & PEDL345 - Baron 8% interest

Licence P1918: The Joint Venture has agreed that in the present oil price environment any development of the Colter South discovery is sub-commercial and it has therefore been decided to give notice to the UK Oil & Gas Authority to relinquish the licence at the expiry date of the second term on 31 January 2021.

PEDL330 & PEDL345: The prospectivity of these onshore Licences, to the south of Wytch Farm oilfield, remains under evaluation in order to inform a decision on whether to request an extension of the licences beyond the current term expiry date of 20 July 2021.

1. General Information

Baron Oil Plc is a company incorporated in England and Wales and quoted on the AIM Market of the London Stock Exchange. The registered office address is Finsgate, 5-7 Cranwood Street, London EC1V 9EE.

The principal activity of the Group is that of oil and gas exploration and production.

These financial statements are a condensed set of financial statements and are prepared in accordance with the requirements of IAS 34 and do not include all the information and disclosures required in annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 December 2019. The financial statements for the half period ended 30 June 2020 are unaudited and do not comprise statutory financial statements within the meaning of Section 435 of the Companies Act 2006.

Statutory financial statements for the year ended 31 December 2019, prepared under IFRS, were approved by the Board of Directors on 28 April 2020 and delivered to the Registrar of Companies.

2. Basis of Preparation

This consolidated interim financial information have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and on the historical cost basis, using the accounting policies which are consistent with those set out in the Company's Annual Report and Financial Statements for the year ended 31 December 2019. This interim financial information for the six months to 30 June 2020, which complies with IAS 34 'Interim Financial Reporting', was approved by the Board on 10 September 2020.

3. Accounting Policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the period ended 31 December 2019, as described in those annual financial statements.

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the period. The nature of estimation means that actual outcomes could differ from those estimates. Estimates and assumptions used in the preparation of the financial statements are continually reviewed and revised as necessary. Whilst every effort is made to ensure that such estimates and assumptions are reasonable, by their nature they are uncertain, and as such, changes in estimates and assumptions may have a material impact in the financial statements.

i) Carrying value of property, plant and equipment and of intangible exploration and evaluation fixed assets.

Valuation of petroleum and natural gas properties: consideration of impairment includes estimates relating to oil and gas reserves, future production rates, overall costs, oil and natural gas prices which impact future cash flows. In addition, the timing of regulatory approval, the general economic environment and the ability to finance future activities through the issuance of debt or equity also impact the impairment analysis. All these factors may impact the viability of future commercial production from developed and unproved properties, including major development projects, and therefore the need to recognise impairment.

ii) Commercial reserves estimates

Oil and gas reserve estimates: estimation of recoverable reserves include assumptions regarding commodity prices, exchange rates, discount rates, production and transportation costs all of which impact future cashflows. It also requires the interpretation of complex geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reservoirs and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Changes in estimated reserves can impact developed and undeveloped property carrying values, asset retirement costs and the recognition of income tax assets, due to changes in expected future cash flows. Reserve estimates are also integral to the amount of depletion and depreciation charged to income.