Petrel Resources Regulatory News (PET)

21st September 2020

Petrel Resources plc

("Petrel" or "the Company")

Interim Statement for the six months ended 30 June 2020

Petrel Resources plc (AIM: PET) today announces financial results for the six months ended 30th June 2020.

Petrel is a hydrocarbon explorer with interests in Iraq, Ghana and offshore Ireland. The world oil and gas industry has taken a public relations hammering in recent times yet world demand continues, and will continue, to grow. Society is very dependent on oil, gas and petrochemicals.

As an example, the world in 2020 relies on sterile plastic packaging for syringes, PPE, etc.

Our daily lives are improved by a multitude of hydrocarbon based products. Renewables are growing and will continue to grow, but for the coming decades, oil and gas will be the dominant source of energy. This will require new discoveries, Petrel will play a part in this.

Petrel has three areas of interest. Iraq, where we have had a presence since 1999, Ghana, where discussions are ongoing since 2008 and offshore Ireland, where Petrel operated in the 1980s and re-entered six years ago.

Iraq

Petrel is active once more in Iraq after a hiatus since 2010 due to political and financial instability. We negotiated a large exploration block, Block 6, in the Western Desert in 2005. Nothing has happened there in the recent past. In discussions in early 2020, before the Covid-19 pandemic, with Ministry officials we renewed our Block 6 interest and re-presented the technical slides done by the Company on the Merjan-Kefl-West Kifl oil discoveries which remain undeveloped. We did extensive work under a Technical Co-operation Agreement on possible ways to develop these discoveries.

With appropriate terms and pipeline access, the Merjan oil-field seems poised for early development: it was discovered, as an oil reservoir, by Mobil in 1982, but work did not proceed, mainly for political reasons. Petrel's work on Merjan did not suggest that the area was gas-prone. The discovery well - Me-1- was located using 2D seismic on a Jurassic reef. No reef or oil was found in the Jurassic, but the well discovered oil in the Upper Cretaceous Hartha Formation. Recent analysis of 3D data focusses on the Jurassic seismic feature, and does not discuss the nature of any hydrocarbons in the well or the area. The Hartha reservoir in the well tested oil and water, without a significant flow of gas.

Given the scope to reduce emissions through gas development, we should also bear Iraq's gas potential in mind: a staggering 16 billion cm (0.6 tcf) of gas are flared yearly (including valuable liquids), which is about half Iraq's gas output. We proposed gas and condensate recovery on Subba & Luhais, at various times, from 2004 through 2010, but the necessary legal framework was not then in place. With appropriate terms and infrastructure, gas economics are also attractive.

As lowest cost oil producer Iraq is well poised to benefit from the development of the oil market. Their output can easily double in size.

Tano 2A Offshore Block - Ghana

Petrel holds a 30% interest in the Tano 2A block (Clontarf 60% and local interests 10%) Negotiations began in 2008, were finalised in 2010 and ratification was expected shortly thereafter. The saga has dragged on for close to a decade. In the past year high level contacts were reopened. A series of meetings proposed for March 2020 were cancelled indefinitely due to the pandemic.

Despite low oil prices, offshore Ghana remains attractive with good geology and acceptable financial terms. In recent weeks the country is re-opening from lockdown so the cancelled meetings are expected to occur by year end.

Offshore Ireland

This is sad scene. State policy has effectively stymied offshore exploration. All new licences are banned and while existing licences may proceed it is highly probable that any discovery will not be commercialised, it will likely take years to get an exploration permit, if ever, and maybe decades to get planning permission in the face of a small vociferous objecting minority

Petrel holds a 10% working interest in Licence FEL 11/18 in the Porcupine. Excellent work has been done by the operator Woodside Petroleum but it is difficult to see how Woodside will commit the tens of millions to drill.

Tamraz Group

The acquisition of a 29% stake by the Tamraz group in July 2019 was widely welcomed by shareholders followed by approval to go to 51%.

The new investors were unable to complete the purchase of the additional shares while the ownership of most of the 29% became uncertain. High Court proceedings stopped any dealings in shares held by the Tamraz Group. This position persists though there is ongoing contact.

Future

Petrel is well funded for ongoing activities. The focus is once again Iraq.

John Teeling

Chairman

18th September 2020

Market Abuse Regulation (MAR) Disclosure

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. In addition, market soundings (as defined in MAR) were taken in respect of the matters contained in this announcement, with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the company and its securities.

ENDS

For further information please visit http://www.petrelresources.com/ or contact:

Notes:

1. INFORMATION

The financial information for the six months ended 30 June 2020 and the comparative amounts for the six months ended 30 June 2019 are unaudited.

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The interim financial statements have been prepared applying the accounting policies and methods of computation used in the preparation of the published consolidated financial statements for the year ended 31 December 2019.

The interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2019, which are available on the Company's website www.petrelresources.com

The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.

2. No dividend is proposed in respect of the period.

3. LOSS PER SHARE

Basic and diluted loss per share are the same as the effect of the outstanding share options is anti-dilutive.

4. INTANGIBLE ASSETS

Exploration and evaluation assets relate to expenditure incurred in exploration in Ireland and Ghana. The directors are aware that by its nature there is an inherent uncertainty in Exploration and evaluation assets and therefore inherent uncertainty in relation to the carrying value of capitalized exploration and evaluation assets.

Due to legislative uncertainty since 2017, exacerbated by the Taoiseach's public statements in September 2019 against the issue of new Atlantic oil exploration licences, Petrel has discontinued farm-out discussions with a gas super-major. Also, the board reluctantly dropped our 100% owned and operated Frontier Exploration Licence (FEL) 3/14, despite multiple identified targets. Similarly, the board decided not to apply to convert our prospective Licensing Option (LO) 16/24 into a Frontier Exploration Licence. Accordingly, the directors have impaired in full all expenditure relating to the above mentioned licences, resulting in an impairment charge of €1,613,591 in the prior year.

Petrel continues as a 10% working interest partner with Woodside in Frontier Exploration Licence (FEL) 11/18, in the Irish Atlantic's Porcupine Basin.

Relating to the remaining exploration and evaluation assets at the financial year end, the directors believe there were no facts or circumstances indicating that the carrying value of the intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangible assets is dependent on the successful discovery and development of economic reserves and is subject to a number of significant potential risks, as set out below:

· Licence obligations;

· Funding requirements;

· Political and legal risks, including title to licence, profit sharing and taxation;

· Exchange rate risk;

· Financial risk management;

· Geological and development risks;

Directors' remuneration of €Nil (2019: €30,000) and salaries of €Nil (2019: €15,000) were capitalised as exploration and evaluation expenditure during the financial year.

5. SHARE CAPITAL

Movements in issued share capital

On 30 July 2019 a total of 44,788,913 shares ("tranche 1 shares") were placed at a price of 1.25 cents per share. Proceeds were used to provide additional working capital and fund development costs.

*On 21 November 2019 the company held an Extraordinary General Meeting and received shareholder approval for the following transaction:

"64,035,976 Ordinary Shares of 1.25 cent each were to be issued to the Tamraz group at the placing price of 1.25 cent each."

These shares (known as the "tranche 2 shares") were issued and allotted to the Tamraz group on 21 November. The share certificates were retained by the Company until payment was received from the Tamraz group.

It became known to Petrel that prior to 31 December 2019 the Tamraz group had offered the tranche 1 shares in Petrel as collateral to lenders. This was in breach of lock in terms which were attached to those shares. In addition during December part of the tranche 1 shares were transferred to a third party, further breaching the terms of the lock in agreement in relation to those shares.

The Tamraz group also failed to pay proceeds due in relation to the tranche 2 shares within the timeline required by Petrel. As a result of these factors the tranche 2 shares were considered forfeited and were cancelled by the Group subsequent to year end.

Although the shares were not legally cancelled until after year end, they are considered to be forfeited as of year-end given the circumstances noted above and in particular, the fact that Tamraz were considered to be in default of funding arrangements and lock in terms.

Had these circumstances been known to the Group on 21 November 2019 the shares would not have been allotted or issued. The Group did not suffer any economic loss due to the transaction as they were able to cancel the tranche 2 shares. As a result the shares are considered to be economically forfeited at year end and have been deducted from share capital on the balance sheet.

On 18 May 2020 the Company announced that the tranche 2 shares have now been cancelled.

On 26 May 2020 a total of 7,692,308 shares were placed at a price of 3.25 pence per share. Proceeds were used to provide additional working capital and fund development costs.

6. POST BALANCE SHEET EVENTS

There are no material post balance sheets events affecting the Group.

7. The Interim Report for the six months to 30th June 2020 was approved by the Directors on 18th September 2020.

8. The Interim Report will be available on the Company's website at www.petrelresources.com.