PPC.L Regulatory News (PPC)

13 May 2015

PRESIDENT ENERGY PLC

("President", "the Company", or "the Group")

Results for the year ended 31 December 2014

President (AIM: PPC), the oil and gas exploration and production company focused on Paraguay and Argentina, announces its full year audited results for the year ended 31 December 2014.

Corporate & Financial Highlights

· Profit for the year from continuing operations US$14.5 million (2013: US$1.7 million loss) reflecting the significant fair value gain on Argentine acquisition

· Revenue of US$12.6 million (2013: US$13.4 million), reflecting lower average oil price of US$81/boe (2013: US$86/boe)

· Group 2P reserves increased by 114% to 14.4 mmboe (2013: 6.8 mmboe)

· Net assets increased by 68% to US$160.4 million (2013: US$95.7 million)

· Group production remained stable at 426 boepd (2013: 428 boepd)

· Cash balances of US$1.5 million at the year end, US$14 million fund raise completed in March 2015 and IYA loan facility of US$15 million extended until 31 December 2016

· Conservative approach taken with non-cash impairment of Australia PEL 82 licence US$11.5 million

Operational Highlights

Paraguay

· Paraguay drilling programme leads to identification of two petroleum systems and logged hydrocarbon accumulations in the Icla, Santa Rosa and Sara reservoirs

· Farm-in to third concession in Paraguay as operator, the Hernandarias Concession, for a capped carry consideration of US$17 million to earn 80% working interest, of which 40% now earned

Argentina

· Acquired remaining 50% not already owned in Puesto Guardian Concession with operatorship for an acquisition cost of US$1.04 per barrel of 2P oil reserve

· Excellent deal is reflected in the one off gain of US$29.3 million on the income statement

· Post-acquisition Gaffney Cline & Associates ("GCA") report showed:

o 2P oil reserves 14.1 mmbbls, of which 1P reserves increases by 390% to 9.1 mmbbls

o 2P oil reserves valued by GCA at NPV10 US$297 million (before corporate taxes)

Outlook

· 607 km 2D seismic survey underway to high grade three key prospect areas in the Hernandarias Concession, Paraguay, with results of the seismic work expected mid-2015

· Scale of Paraguay opportunity such that President will, from a position of strength, look to engage with an industry partner in 2H 2015

· Argentina multi aspect work programme begun with well workovers and planned drilling of new production wells as second phase

· In May 2015 commenced Farm-out of a significant deep Paleozoic Gas Prospect at Martinez Del Tineo field in the Puesto Guardian Concession (GCA in 2012, assessed at 570 Bcf and 14.5 mmbbls condensate)

Commenting on today's announcement, Peter Levine, Chairman said:

"Notwithstanding the turbulent current oil price environment, we are confident that it will be another year of progress for President in both our principal areas, Paraguay and Argentina. The achievements of 2014 have left us well placed for the important work still to do in both countries, with our first priority being to continue our focus on both exploration and production whilst maintaining cost control.

President is very fortunate to have a good reserve base, providing significant scope for production growth as well as opportunities that offer company-making potential in both Paraguay and the deep gas prospect in Argentina. Accordingly we are looking forward with confidence to a year of tangible progress.

Finally I would like to express gratitude to all our hard working management and employees and our supportive shareholders. Thank you most sincerely."

Contact

The following financial statements are extracted from the Company's audited consolidated accounts for the year ended 31 December 2014. These accounts will be included in full in the Company's Annual Report which will be posted to shareholders in May 2015 and will be made available on the Company's website www.presidentenergyplc.com at the same time.

Chairman's Statement

Summary

2014 was a defining year for President Energy plc's ("President") Paraguayan Concessions, leading to the identification of two petroleum systems and logged hydrocarbon accumulations in the Icla, Santa Rosa and Sara reservoirs. President drilled the first well on its Paraguayan operated acreage, having entered the country only 18 months previously. The timescale to reach this juncture and the subsequent drilling of two exploration wells in a remote location, with no local oil industry support services, was in itself a significant achievement. The 2014 drilling campaign has substantially de-risked the Paraguayan acreage and gives us great confidence that future drilling and testing will demonstrate commercial flowrates.

In August 2014 President farmed into a third concession in Paraguay as operator, the Hernandarias Concession, for a capped carry consideration of US$17.0 million to earn 80% working interest. The Hernandarias Concession adds a further 18,507 km2 of highly prospective acreage to the 8,000 km2 in each of the Pirity and Demattei Concessions. At the date of this report, new 2D seismic data acquisition had begun on the Hernandarias Concession. The scale of the acreage and the opportunity that has now been created across President's three operated concessions in Paraguay is such that President will, from a position of strength, look to engage with an industry partner in 2015.

In Argentina substantial progress was made on the path towards realising significant value for shareholders as President acquired the remaining 50% it did not own of the Puesto Guardian Concession. The opportunistic acquisition, for a modest consideration, has provided President with further substantial 2P reserves, thereby increasing the company's core valuation, and importantly the operatorship of the licence. The subsequent confirmation of the underlying reserves and the fair value gain reflected on the income statement highlights the quality of this transaction for shareholders, with an acquisition cost of US$1.04 per barrel of 2P oil reserves. This excellent value accretive deal is reflected in the one off gain of US$29.3 million on the income statement.

In December 2014 an independent reserve report on President's Argentinian assets was published by Gaffney Cline & Associates ("GCA") which assessed 2P reserves of 14.1 mmbbls, of which 1P reserves constitute 9.1 mmbbls, with further 2C upside of 5.7 mmbbls which will migrate to the 2P category on the expected licence extension to 2050. The confirmed 1P reserves represent a 390% increase on President's pre-acquisition Argentina reserves with the 2P oil reserves at Puesto Guardian being valued by GCA at NPV10 US$297 million (before corporate taxes). In addition, President now has complete ownership of the deep Paleozoic gas prospect, as outlined in the 2012 GCA Report, for which a farm-out process is due to commence in May 2015. Management are now focused on turning this reserve potential into realised value and, since the acquisition, the underlying technical work has been carried out to define a development programme of workovers and the drilling of new locations to unlock this reserve base.

Louisiana continues to provide a solid platform for the Group through ongoing cash generation that covers the majority of the group's corporate cost structure.

Paraguay

President Energy has secured a basin controlling position through the 2012 farm-in to the Pirity (PPC 64% WI) and Demattei Concessions (PPC 10.125% WI with the right to earn up to 60%) and the subsequent farm-in to the Hernandarias Concession in 2014 (PPC 40% WI with the right to earn up to 80%). The combined acreage of 34,000 km2 benefits from both an extension of the deeper Paleozoic and Silurian petroleum systems, from which the prolific Bolivian producing gas condensate fields are generated, and the shallower Cretaceous petroleum system evidenced across the border in Argentina.

Following the 2013 acquisition of 793 km2 of 3D and over 1,000 km of 2D, President undertook the first drilling campaign in Paraguay for 30 years to target the deeper Paleozoic structures on the Pirity Block. President successfully drilled the Jacaranda and Lapacho wells which proved the existence of the Devonian and Silurian Paleozoic petroleum systems in the Pirity basin and made logged hydrocarbon discoveries in the Sara, Santa Rosa and Icla reservoirs. The Jacaranda well proved the existence of the Devonian Petroleum System and provided evidence that the oil window extends down to 4,000m. The follow-on Lapacho well identified, through a full suite of electrical logs and side wall cores, a light oil discovery in the Icla (24m interval) sands before being deepened to find the gas condensate window below 4,060m in the Santa Rosa and Sara sands. Despite limitations to the well testing operations on both the Sara/Santa Rosa and Icla tests which prevented the Company making a demonstration of commercial flow rates, the drilling program has substantially de-risked the Paraguayan acreage.

The majority of the Paleozoic prospectivity in President's operated acreage of 34,000 km2 lies in the Hernandarias Concession where the Santa Rosa and Sara target intervals can be reached at much shallower depths, improving reservoir porosities, much enhancing the liquids fraction in the overall hydrocarbon mix and thereby benefiting from materially improved economics.

To build on the success of the 2014 drilling operations President is continuing its exploration programme in the Pirity basin with a 607 km 2D seismic survey, which is currently underway, to high grade three key prospect areas in the Hernandarias Concession. Results of the seismic work are expected in mid-2015. The seismic survey is focused on three significant leads over which President has already had the benefit of previous seismic data; namely Boqueron with a possible 160 km2 trap area, Labon with a possible 35 km2 trap area and Tuna with a possible 40 km2 trap area. All leads are considered on present information to contain the Devonian and Silurian packages identified in the Jacaranda and Lapacho wells, albeit at shallower depths of between 2,000-3,000m.

In February 2015 a dispute arose with President's partner in the Pirity Concession regarding the 2014 drilling campaign; however this has now been amicably resolved.

Argentina

In Argentina President took advantage of the need for the incumbent operator to raise finance for its operations outside of South America by acquiring the remaining 50% not already owned and operatorship of the Puesto Guardian concession. This acquisition has significantly increased President's reserve base and aligned President's ownership across its three NW Basin concessions including the 100% owned Mattoras and Ocultar exploration licences.

The consideration paid for the deal, at US$1.04 per 2P barrel, is such that a one off gain of US$29.3 million is recognised in the income statement as part of the IFRS 3 fair value accounting process. The fair value calculation is underpinned by the independently assessed reserves as disclosed in the December 2014 GCA reserve report which identifies 14.1 mmbbls of 2P reserves, of which 9.1 mmbbls are in the proved 1P category. The report highlights the significant potential for further production with only 8% of the current 1P reserves being within the producing category. This suggests there is significant potential for further production from the Proved Reserves as well as from the further 8.4 mmbbls of Probable and Possible (P2 + P3) Oil Reserves.

Since acquiring full ownership and operatorship of the Puesto Guardian Concession, President has expeditiously carried out reprocessing of seismic and reservoir engineering analysis. As a result of this work, the Company is now embarking on a multi aspect work programme on the Concession commencing with well work-overs and with drilling of new production wells in a second phase. The projected uplift in production will benefit from the Government's recently announced incentive scheme of an additional US$3 per barrel realisation price for each increased barrel produced over existing production.

In conjunction with this and having assumed operatorship and full control, the Company has commenced the farm-out of a significant deep Paleozoic Gas Prospect at the Martinez Del Tineo field in the Puesto Guardian Concession. GCA had previously assessed that this prospect had unrisked recoverable Best Estimate Prospective Resources of 570 Bcf of gas and 14.5 mmbbls, as of 31 October 2011.

The Phase 2 programme is currently targeted to commence during the latter part of 2015 subject to project finance being in place. This Phase consists of up to 17 new wells to be drilled targeting proved oil reserves. The well locations have already been identified and once Phase 1 is delivering the anticipated increases in production, President will consider in more detail various financing options which it believes may be available. Current projections are that US$25m-US$30m of development finance will be required at which point the Phase 2 new well programme will become self-funding.

Application is being made, under new government legislation relating to unconventional hydrocarbons, to obtain extended licence terms over President's Concessions. Under the new legislation, tight reservoirs, such as the carbonates and low permeability sand units in President's Concessions, qualify for these new extended licence terms. If granted, the end date of the Puesto Guardian Concession would become 2050. If the extension is granted, the Company's current 3P oil reserves of 17.5 mmbbls (over 14 million of which are in the 2P category), would be highly likely to be increased by a further 16.5 mmbbls to approximately 34 mmbbls, due to the transfer from Contingent Resources into Reserves. It is hoped that such applications will be approved before the end of 2015.

Louisiana

The producing East White Lake ("EWL") and East Lake Verret ("ELV") fields continue to provide a robust cash flow base that covers the majority of the Group's overhead. Production in the year was 222 boepd (2013: 236 bopd) with a continued bias to oil at 87% of production (2013: 88%). The Eagle Crest well at ELV was brought onstream at no cost to the Company. The well was farmed out in return for a full carry of costs, a 3% gross overriding royalty and a further 12% working interest on payout of a capped level of drilling costs. The well came onstream in August 2014 and payout is expected to occur by mid-2015.

President continues to benefit from the accrued tax losses on its Louisiana operations which means that the effective Federal and State corporate tax rate remains zero.

Australia

Whilst no longer a core asset for President, the Company continues to believe in the value of the PEL 82 licence where further reprocessing and studies completed in 2014 identified 250 Bcf (P50) of conventional Prospective Resources and unconventional P90-P10 Prospective Resources of 460 Bcf - 1.98 Tcf, with upside from analogous plays to 10.6 Tcf.

Active discussions with potential farm-in partners have currently been placed on hold while the South Australia state conducts a review into unconventional drilling activity. An application has been made to extend the licence term from the current September 2015 for an initial six months, followed by a further six months. In view of the current hiatus President has taken the conservative view of impairing US$11.5 million of intangible asset value. This is not a reflection of any change in the prospective value of the licence but a conservative approach to the Group financial statements.

The South Australia state review is expected to complete shortly and the farm-out efforts will resume.

Corporate

In February 2014 President raised US$50.8 million from new and existing shareholders, including US$9.2 million from the International Finance Corporation ("IFC"), following their initial subscription in December 2013, to fund the Paraguayan drilling programme.

President is grateful for the ongoing support of all its shareholders including both private and larger shareholders such as PLLG Investments Limited, the IFC and UK institutions. This support was further demonstrated post year-end with a raise of US$14.0 million to fund President through 607km of 2D seismic acquisition on the Hernandarias Concession in Paraguay and an initial workover programme in Argentina.

On 10th June 2014 President announced the acquisition of a further 5% in the Pirity Concession through the acquisition of the entire issued share capital of the Paraguayan company LCH S.A. As a result of the acquisition President increased its working interest in the Pirity Concession to 64%.

On 30th July 2014 President announced the acquisition of the remaining 50% not already owned in the Puesto Guardian Concession in Argentina, together with operatorship.

To reflect the lower oil price environment, President has undertaken an exercise in reducing its overhead cost base. To this end President announced post year-end changes to the structure of the Board with John Hamilton (CEO), Richard Hubbard (COO) and Mike Cochran (Non-Executive Director) stepping down to allow for a more focused Board structure. We are grateful to each of them for their valued contributions in the past and wish them well in the future.

Financial Review

In 2014 the Company recognised a gross profit of US$3.1 million (2013: US$5.3 million) due to the lower oil price environment, however, this was offset by a reduction in administrative expenses to US$5.4 million (2013: US$7.6 million), leading to an equivalent Operating Loss before impairment of US$2.3 million (2013: US$2.3 million). Profit for the year from continuing operations of US$14.5 million (2013: US$1.7 million loss) reflects the significant fair value gain made on the acquisition of the remaining 50% of the Puesto Guardian Concession in the year of US$29.3 million; partially offset by US$11.9 million of impairments which predominantly reflects the write down of the PEL 82 licence, Australia, of US$11.5 million.

Revenue reduced against the prior year by 6% to US$12.6 million (2013: US$13.4 million), reflecting falling average oil prices for the period to US$81/boe (2013: US$86/boe) while group production remained stable at an average of 426 boepd (2013: 428 boepd).

The key investment events of 2014 were the drilling programme in Paraguay, where US$54.3 million was invested, the acquisition of LCH S.A for US$7.1 million and the acquisition of the remaining 50% not already owned in the Puesto Guardian concession for US$8.5 million which has led to a significant gain when measuring the fair value of the deal of US$29.3 million.

Production and reserves

Reserve movements in Argentina are a consequence of the acquisition of the remaining 50% not already owned in the Puesto Guardian concession and the subsequent independent reserve report. In the USA updated operator reports are the trigger for the upward revisions.

Peter Levine

Chairman

12 May 2015

Detailed Financial Review

In 2014 the Group recognised a gross profit of US$3.1 million (2013: US$5.3 million) due to the lower oil price environment. However, this was offset by a reduction in administrative expenses to US$5.4 million (2013: US$7.6 million), leading to an equivalent Operating Loss before impairment of US$2.3 million (2013: US$2.3 million). Profit for the year from continuing operations of US$14.5 million (2013: US$1.7 million loss) reflects the significant fair value gain made on the acquisition of the remaining 50% in Puesto Guardian of US$29.3 million; partially offset by US$11.9 million of impairments which predominantly reflects the write down of the PEL 82 licence in Australia of US$11.5 million.

Revenue reduced against the prior year by 6% to US$12.6 million (2013: US$13.4 million), reflecting lower average oil prices for the period of US$81/boe (2013: US$86/boe) while Group production remained stable at an average of 426 boepd (2013: 428 boepd). Cost of sales of US$9.5 million (2013: US$8.1 million) are up 17% due to an increase in well operating costs to US$6.5 million (2013: US$5.4 million) and a higher depreciation charge of US$3.1 million (2013: US$2.8 million). The increase in well operating costs is attributable to recognising the 100% share of Puesto Guardian in 2H 2014 and also an increase in the USA relating to workover costs on East Lake Verret and the ending of severance tax holidays on certain wells.

Production in Argentina increased to 74,856 bbls (2013: 69,908 bbls) due to the consolidation of the remaining 50% not already owned in the Puesto Guardian Concession from 29 July 2014. Gross field production for 2014 was 304 bopd (2013: 383 bopd). Having taken over operatorship and carried out the required technical work President is undertaking a workover programme in 2015 to increase production.

The producing East White Lake and East Lake Verret fields, USA, continue to provide a robust cash flow base that covers the majority of the Group overhead. Production in the year was 222 boepd (2013: 236 boepd) and generated an EBITDA contribution of US$4.4 million (2013: US$6.0 million). The reduced contribution is a consequence of a falling average oil price of US$85/boe (2013: US$95/boe) and increased well operating costs as described above.

Administrative expenses have fallen 29% to US$5.4 million (2013: US$7.6 million), reflecting the capitalisation of costs relating to the Paraguay drilling programme into intangible assets. The main components of administrative expenses are staff costs of US$4.7 million (2013: US$4.4 million) and share-based payments of US$1.2 million (2013: US$1.3 million). The staff costs in 2014 reflect a period of intense capital activity in Paraguay and as oil prices fell during the second half of 2014 the Group's cost base has been reduced to reflect the new environment.

Other gains in the year form a substantial portion of the income statement for 2014. These one off gains are derived from the fair value exercise of the newly acquired 50% interest in the Puesto Guardian concession under IFRS 3. The valuation of the underlying assets acquired was based on the independent reserves report from Gaffney Cline and Associates ("GCA") which included an increase in 2P reserves to 14.1 mmbbls (compared to 2013 gross reserve numbers for the field of 12.8 mmbbls). The gain of US$29.3 million reflects the bargain purchase gain on acquisition of US$22.6 million and the gain on the required revaluation of the existing 50% held by President in the Puesto Guardian concession of US$6.7 million (note 7).

Gains have been offset by an impairment charge of US$11.9 million of which US$11.5 million relates to the PEL 82 licence in Australia. Whilst President continues to explore the opportunity for future investment with potential farm-in partners it is considered conservative in the current oil price environment and in view of the current review in South Australia relating to unconventional drilling activity, to remove this asset from the balance sheet.

The key feature of the year from an operational and financial perspective was the Paraguay exploration drilling programme. In February 2014 President raised US$48.0 million, net of expenses, from new and existing shareholders, including US$9.2 million from the International Finance Corporation ("IFC"), following their initial subscription in December 2013, to fund the Paraguayan drilling programme. The 2014 investment in Paraguay of US$54.3 million formed the largest portion of the US$55.0 million intangible asset additions leading to an increase in intangible assets by 75% to US$102.9 million (2013: US$58.7 million). This increase in intangible assets incorporates the effects of an addition of US$7.1 million relating to the LCH S.A acquisition (see below), the transfer of US$5.0 million to property, plant and equipment, the impairment of the carrying value of PEL 82, Australia, of US$11.5 million and an unsuccessful exploration well in Louisiana of US$0.4 million. The transfer of US$5.0 million to property, plant and equipment represents the previous carrying value of the Martinez del Tineo field on the Puesto Guardian Concession, Argentina; as part of the acquisition of the remaining 50% and assumption of operatorship the field has undergone a full remapping and study exercise which has led to its inclusion in the 2015 workover programme and prominence in the GCA independent reserve report.

On 10th June 2014 President announced the acquisition of a further 5% in the Pirity Concession through the acquisition of the entire issued share capital of the Paraguayan company LCH S.A. As a result of the acquisition President increased its working interest in the Pirity Concession to 64%. The acquisition consideration comprised 10,206,858 President ordinary shares (calculated at 35p), US$250,000 cash, 4,252,858 warrants and further deferred shares in the event of a commercial discovery on the licence (note 26). The LCH acquisition is reflected as an increase in intangible assets of US$7.1 million.

Property, Plant and Equipment have increased 151% to US$87.1 million (2013: US$34.7 million) reflecting the impact of the Puesto Guardian acquisition. The acquisition leads to an increase in the property, plant and equipment carrying value of US$13.0 million for the revaluation to fair value of the existing 50% owned by the Group and US$43.3 million for the fair value of the newly acquired 50%. As described above there is also a transfer of US$5.0 million from intangible assets.

Receivables of US$14.3 million (2013: US$5.4 million) and payables of US$11.9 million (2013: US$7.5 million) reflect year-end timing differences for prepayment balances of US$9.6 million, including funds held in escrow, and accrued expenses for the Paraguay drilling programme of US$7.1 million.

Loan balances of US$9.6 million at the year-end reflect drawings under the US$15 million IYA loan facility, the term of which has been extended to 30 December 2016.

Year-end cash balances of US$1.5 million (2013: 10.0 million) reflect the US$48.0 million equity raise, net of expenses, and the loan drawing of US$9.6 million against an active investment programme in Paraguay, the acquisition of LCH S.A and the acquisition of the remaining 50% in Puesto Guardian. These investments are illustrated in the year-end balance sheet with net assets of US$160.4 million (2013: US$95.7 million)

Consolidated Statement of Comprehensive Income

Year ended 31 December 2014

Consolidated Statement of Financial Position

31 December 2014

Consolidated Statement of Changes in Equity

Year ended 31 December 2014

Attributable to the owners of the Company

Consolidated Statement of Cash Flows

Year ended 31 December 2014

Notes

1 Accounting policies and basis of preparation

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013 but is derived from the 2014 accounts.

A copy of the statutory accounts for the year to 31 December 2013 has been delivered to the Registrar of Companies, and is also available on the Company's web site. Statutory accounts for 2014 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a 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 section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2013 nor 2014.

Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRS. The Annual Report, containing full financial statements that comply with IFRS, will be sent out to shareholders in May 2015.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, in the preparation of the 2014 financial statements they continue to adopt the going concern basis.

To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of capitalising relevant costs to the balance sheet assets. Other expenses are shown net of the effect of US$3.1 million (2013: US$2.1 million) being capitalised and are therefore displaying a negative balance for the year.

At 31 December 2014, 21,838,269 (2013: 15,833,098) weighted potential ordinary shares in the Company which underlie the Company's share option and share warrant awards and may dilute earnings per share in the future, have been included in the calculation of diluted earnings per share. No dilution per share was calculated for 2013 as with the reported loss they are anti-dilutive.

7. Acquisition in Argentina

On 29 July 2014, the Group completed the acquisition of the remaining 50% interest in the Puesto Guardian Concession in Argentina. The purchase gives President complete ownership and operational control of Puesto Guardian. Whilst being relatively dormant under the Seller's tenure, Puesto Guardian has significant potential for production and reserves growth, and will benefit from President's active control and operation.

The fair value of the Property, Plant & Equipment comprises materials of US$0.3 million and US$42.9 million of value determined by the valuation of the reserves confirmed on the field by the Gaffney Cline & Associates report dated 5th December 2014. The fair value was determined using a discounted cash flow model reflecting management's view on future prices, timing of capital expenditures and production, discount rate and tax implications.

The fair value of the current assets includes trade receivables with a fair value of US$1.6 million, cash acquired of US$0.3m and operational inventory with a fair value of $0.2 million.

The fair value of the current liabilities is made up of mainly trade payables US$0.9 million due at acquisition. Included in non-current liabilities are the fair value future abandonment liabilities, determined in line with the Group accounting policy, amounting to US$0.8 million.

The fair value of deferred taxation has been determined by reference to timing differences between the assets acquired and liabilities assumed, and the tax bases of these items.

Deferred consideration amounting to US$1.9 million was payable in 2015 and 2016. Following further negotiations, this was settled for a cash payment of US$0.5 million in 2014 with reduced deferred consideration of US$0.2m due in 2015. A royalty interest that had been agreed was also cancelled. The acquisition consideration above reflects these further negotiations.

A bargain purchase gain arose due to the opportunity to acquire the assets quickly and without a formal sales process.

Acquisition-related costs included in administrative expenses and operating costs amounts to US$112,750.

The additional 50% interest in Puesto Guardian contributed US$ 1.6 million revenue and a cash operating profit of US$ 0.2 million to the Group for the period between the date of acquisition and the balance sheet date.

If the acquisition of the interest had been completed on the first day of the financial year, Group revenues for the period would have been US$ 4.1 million and the Group cash operating profit would have been US$ 1.2 million.

8.  Segment reporting

Segment assets can be reconciled to the Group as follows:

9. Going concern

The Group's cash position at the year-end is US$1.5 million (2013: US$10.0 million). A further US$14.0 million was raised in March 2015 to fund the acquisition of new seismic lines on the Hernandarias concession in Paraguay and an initial workover programme in Argentina.

The term of the existing US$15.0 million loan facility has been extended to 31 December 2016. At the year-end there was US$9.6 million drawn under the loan facility and the Group was in a net current liabilities position. Following the February 2015 equity raise the loan was paid down to US$8.6 million drawn.

The Group is reliant on production revenues from existing producing wells. The principal uncertainty in the Group's forecasts and projections relates to the level of future production and consequent revenues and the estimates of future drilling costs. The Group consults with industry specialists to ensure operational projections are accurate.

The Directors believe that the Group will be able to operate within its existing committed funding and to meet all commitments as they fall due. The Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

10. Subsequent events

On 15th January 2015, John Hamilton, Dr Richard Hubbard and Michael Cochran stood down from their respective roles with immediate effect. Peter Levine became Executive Chairman and Chief Executive and Miles Biggins assumed the role of Chief Operating Officer. On 4th February 2015 the Company announced the appointment of Rt Hon. Alistair Burt MP as Non-Executive Director with immediate effect.

In March 2015, the Company announced a placing of 29,668,627 new ordinary shares at 12.5p per share which were admitted to trading on 6th March 2014. Following shareholder approval a further 43,139,023 new ordinary shares were issued at 12.5p per share which were admitted to trading on 23rd March 2015. The shares were granted a warrant on the basis of 1 warrant for every placing share. The warrants will be freely transferable, have an exercise price of 18.75 pence per share and may be exercised during a three year period. The placing raised US$14.0 million to fund an acquisition of new seismic lines on the Hernandarias concession in Paraguay and an initial workover programme in Argentina. As part of the placing the term of the existing US$15.0 million loan facility has been extended to 31 December 2016.

In March 2015, the Company received the decree signed by the President of Paraguay to assign the first 40%, of up to 80%, of the Hernandarias Concession. President has US$15.4 million remaining to spend of US$17 million to earn the full 80% farm-in entitlement.

Glossary