SOLO.L Regulatory News (SOLO)

Solo Oil plc

Executive Chairman

Alastair Ferguson

+44 (0) 20 7440 0642

Strand Hanson

Nominated & Financial Adviser

Rory Murphy / James Spinney / Ritchie Balmer

+44 (0) 20 7409 3494

Shore Capital

Broker

Jerry Keen

Buchanan

Financial PR

Ben Romney / Chris Judd / James Husband

 +44 (0) 20 7408 4090

+44 (0) 20 7466 5000

2018

2017

Notes

£000

£000

Revenue from contracts with customers

4

-

614

Gain on sale of investment

4

1,758

-

Proceeds from shares held for trading

4

2,461

-

Cost of sales

(2,442)

-

Gross profit

1,777

614

Administrative expenses

(1,974)

(1,261)

Operating expenses

(181)

(87)

Operating loss

5

(378)

(734)

Impairment charge

(692)

(300)

Amortisation charge

12

-

(484)

Investment revenues

57

66

Finance costs

7

(41)

(126)

Fair value through profit and loss

8

(529)

-

Foreign Exchange Losses

(84)

(81)

Loss before taxation

(1,667)

(1,659)

Income tax expense

9

-

-

Loss and total comprehensive income for the year

(1,667)

(1,659)

Other comprehensive income

Decrease in value of available for sale assets

-

(577)

Total comprehensive income for the year attributable to equity shareholders of the parent

(1,667)

(2,236)

Earnings per share (pence)

Basic and diluted

10

(0.33)

(0.43)

2018

2017

Notes

£000

£000

Non-current assets

Intangible assets

11

15,119

13,816

Oil & gas properties

12

194

194

Available for sale assets

14

-

3,226

Investments

13

2,903

-

18,216

17,236

Current assets

Shares held for trading

13

1,523

-

Trade and other receivables

16

716

1,395

Cash and cash equivalents

2,999

396

5,238

1,791

Total assets

23,454

19,027

Current liabilities

Trade and other payables

18

548

324

Borrowings

17

-

1,080

Provisions

19

184

-

732

1,404

Net current assets

4,506

387

Total liabilities

732

1,404

Net assets

22,722

17,623

Equity

Called up share capital

20

1,264

785

Share premium account

20

37,316

31,749

Deferred share capital

20

1,831

1,831

Share based payments

21

1,135

1,129

AFS reserve

-

(693)

Retained earnings

(18,824)

(17,178)

Total equity

22,722

17,623

2018

2017

Notes

£000

£000

£000

£000

Cash flows from operating activities

Cash absorbed by operations

27

(266)

(794)

Net cash outflow from operating activities

(266)

(794)

Investing activities

Purchase of intangible assets

(1,341)

(2,080)

Proceeds on disposal of investments

-

(1,276)

Interest received

57

66

Net cash used in investing activities

(1,284)

(3,290)

Financing activities

Proceeds from issue of shares

5,431

3,200

Share issue costs

(311)

(274)

Finance costs

-

(126)

Repayment of borrowings

(967)

1,080

Net cash generated from financing activities

4,153

3,880

Net increase/(decrease) in cash and cash equivalents

2,603

(204)

Cash and cash equivalents at beginning of year

396

600

Cash and cash equivalents at end of year

2,999

396

The above Cash Flow should be read in conjunction with the accompanying notes.

Share capital

Share premium account

Deferred share capital

Share based payments

AFS reserve

Retained earnings

Total

Notes

£000

£000

£000

£000

£000

£000

£000

Balance at 1 January 2017

699

27,559

1,831

933

(116)

(15,519)

15,387

Year ended 31 December 2017:

Loss and total comprehensive income for the year

-

-

-

-

-

(1,659)

(1,659)

Issue of share capital

86

4,464

-

-

-

-

4,550

Share-based payment charge

-

-

-

196

-

-

196

Cost of share issue

-

(274)

-

-

-

-

(274)

Decrease in value of available for sale assets

-

-

-

-

(577)

-

(577)

Balance at 31 December 2017

785

31,749

1,831

1,129

(693)

(17,178)

17,623

Year ended 31 December 2018:

Loss and total comprehensive income for the year

-

-

-

-

-

(1,667)

(1,667)

Issue of share capital

479

5,567

-

-

-

-

6,046

Share-based payment charge

-

-

-

27

-

-

27

Transfers

-

-

-

-

693

-

693

Release of expired share options

-

-

-

(21)

-

21

-

Balance at 31 December 2018

1,264

37,316

1,831

1,135

-

(18,824)

22,722

1

Accounting policies

Company information

Solo Oil plc ("Solo", the "Company", or together with its subsidiary, the "Group") is a public listed company incorporated in England & Wales. The address of its registered office 1 Park Row, Leeds, United Kingdom, LS1 5AB. The Company's ordinary shares are traded on the AIM Market operated by the London Stock Exchange. The financial statements of Solo Oil plc for the year ended 31 December 2018 were authorised for issue by the Board on 28 June 2019 and the balance sheet signed on the Board's behalf by Mr Fergusson and Mr Reynolds.

Investing policy

Solo's investing policy is to acquire a diverse portfolio of direct and indirect interests in exploration, development and production oil and gas assets, and any other subsurface gas assets of potential commercial significance, located worldwide but predominantly in the Americas, Europe or Africa.

The Company may invest by way of outright acquisition or by the acquisition of assets, including the intellectual property, of relevant business, partnerships or joint venture arrangements. Such investments may result in the Company acquiring the whole part of a company or project (which in the case of an investment in a company may be private or listed on a stock exchange, and which may be pre-revenue), may constitute a minority stake in the company or project in question and may take the form of equity, joint venture debt, convertible instruments, license rights, or other financial instruments as the Directors deem appropriate.

Solo intends to be a long-term investor and the Directors will place no minimum or maximum limit on the length of time that any investment may be held.

There is no limit on the number of projects into which the Company may invest, nor the proportion of the Company's gross assets that any investment may represent at any time and the Company will consider possible opportunities anywhere in the world.

All of Solo's assets will be held in its own name, or through wholly owned subsidiaries.

Statement of compliance with IFRS

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Company are set out below.

Accounting convention

The financial statements have been prepared on the historical cost basis, except for the measurement to fair value of assets and financial instruments as described in the accounting policies below, and on a going concern basis.

The financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds (£'000) unless otherwise stated.

1

Accounting policies

Going concern

The Directors noted the losses that the Company has made for the Year Ended 31 December 2018. The Directors have prepared cash flow forecasts for the period ending 30 June 2020 which take account of the current cost and operational structure of the Company.

The cost structure of the Company comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Company to operate within its available funding.

These forecasts, demonstrate that the Company has sufficient cash resources available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements. Accordingly, the financial statements have been prepared on a going concern basis.

It is the prime responsibility of the Board to ensure the Company remains a going concern. At 31 December 2018 the Company had cash and cash equivalents of £2,999,056 and borrowings of £nil. The Company has minimal contractual expenditure commitments and the Board considers the present funds sufficient to maintain the working capital of the Company for a period of at least 12 months from the date of signing in the Annual Report and Financial Statements. For these reasons the Directors adopt the going concern basis in the preparation of the Financial Statements.

Revenue recognition

Revenue is recognised to the extent that the right to consideration is obtained in exchange for performance. Payment received in advance of performance is deferred on the balance sheet as a liability and released as services are performed or products are exchanged as per the agreement with the customer.

Revenue is generated from one main source of income currently. In the current year, revenue is being generated from the Company's Farm-in interests, on an accrued monthly basis, along with associated costs.

Revenue from the production of gas, in which the Company has an interest with other producers, is recognised based on the Company's working interest and the terms of the relevant production sharing contracts. Differences between gas lifted and sold and the Company's share of production are not significant.

Intangible assets

Externally acquired intangible assets comprising deferred exploration and evaluation expenditure are initially recognised at cost in compliance with IFRS 6 "Exploration for an evaluation of mineral resources."

The Company follows the successful efforts method of accounting for exploration and evaluation expenditure. All license, acquisition, exploration and evaluation costs are capitalised in cost centres by area of interest pending determination of the commercial viability of the relevant product.

Borrowings

Borrowings are recognised initially at fair value, net of any applicable transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method (if applicable).

Interest on borrowings is accrued as applicable to that class of borrowing.

1

Accounting policies

Impairment of tangible and intangible assets

At each balance sheet date the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If there is such indication then an estimate of the asset's recoverable amount is performed and compared to the carrying amount.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted at their present value. Where the asset does not generate cash flows that are independent from other assets, the Group estimated the recoverable amount of the cash-generating unit to which the asset belongs.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the assets is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease,

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Available for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group's available-for-sale assets include unlisted securities. These available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. Interest calculated using the effective interest method and dividends are recognised in profit or loss within finance income.

Fair value measurement

IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.

1

Accounting policies

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when the Company has become a party to the contractual provisions of the instrument.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, cash at bank and short term deposits with banks and similar financial institutions.

Trade and other receivables

Trade and other receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Financial liability and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

Trade and other payables

Trade and other payables are non interest bearing and are stated at their nominal value.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial assets at fair value through profit or loss

Financial assets are classified as at FVTPL when the financial asset is held for trading. This is the case if:

· the asset has been acquired principally for the purpose of selling in the near term, or

· on initial recognition it is part of a portfolio of identified financial instruments that the company manages together and has a recent actual pattern of short-term profit taking, or

· it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Interest and dividends are included in 'Investment income' and gains and losses on remeasurement included in 'other gains and losses' in the statement of comprehensive income.

Equity reserves

Share capital is determined using the nominal value of shares that have been issued.

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

The share based payment reserve represents the cumulative amount which has been expensed in the income statement in connection with share based payments, less any amounts transferred to retained earnings on the exercise of share options.

Available for Sale Financial Asset reserve represents the market value movement of AFS investments.

Retained earnings includes all current and prior period results as disclosed in the income statement.

1

Accounting policies

Taxation

The tax expense represents the sum of the current tax and deferred tax.

Current tax

The current tax is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

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 bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit not the accounting profit.

Provisions

Provisions are recognised for liabilities of uncertain timings or amounts that have arisen as a result of past transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability.

Share-based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value of goods and services received. Equity-settled share-based payments are measured at a fair value at the date of grant except if the value of the service can be reliably established. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest.

Foreign exchange

Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in the income statement for the period.

1

Accounting policies

Oil and gas properties and other property, plant and equipment

(i) Initial recognition

Oil and gas properties and other property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the decommissioning obligation and, for qualifying assets (where relevant), borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalised value of a finance lease is also included within property, plant and equipment.

When a development project moves into the production stage, the capitalisation of certain construction/development costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to oil and gas property asset additions, improvements or new developments.

(ii) Depreciation/amortisation

Oil and gas properties are depreciated/amortised on a unit-of production basis over the total proved developed and undeveloped reserves of the field concerned, except in the case of assets whose useful life is shorter than the lifetime of the field, in which case the straight-line method is applied. Rights and concessions are depleted on the unit-of-production basis over the total proved developed and undeveloped reserves of the relevant area.

The unit-of production rate calculation for the depreciation/amortisation of field development costs takes into account expenditures incurred to date, together with sanctioned future development expenditure. An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss and other comprehensive income when the asset is derecognised.

The asset's residual values, useful lives and methods of depreciation/amortisation are reviewed at each reporting period and adjusted prospectively.

(iii) Major maintenance, inspection and repairs

Expenditure on major maintenance refits, inspections or repairs comprises the cost of replacement assets or parts of asset, inspection costs and overhaul costs. Where an asset, or part of an asset that was separately depreciated and is now written off is replaced and it is probably that future economic benefits associated with the item will flow to the Company, the expenditure will be capitalised. Where part of the asset replaced was not separately considered as a component and therefore not depreciated separately, the replacement value is used to estimate the carrying amount of the replaced asset(s) and is immediately written off. Inspection costs associated with major maintenance programmes are capitalised and amortised over the period of the next inspection. All other day-to-day repairs and maintenance costs are expensed as incurred.

1

Accounting policies

Provision for rehabilitation / Decommissioning Liability

The Company recognises a decommissioning liability where it has a present legal or constructive obligation as a result of past events, and it is probably that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of obligation can be made.

The obligation generally arises when the asset is installed or the ground/environment is disturbed at the field location. When the liability is initially recognised, the present value of the estimated costs is capitalised by increasing the carrying amount of the related oil and gas assets to the extent that it is incurred by the development/construction of the field. Any decommissioning obligations that arise through the production of inventory are expensed when the inventory item is recognised in cost of goods sold.

Changes in the estimated timing or cost of decommissioning are dealt with prospectively by recording an adjustment to the provision and a corresponding adjustment to oil and gas assets. Any reduction in the decommissioning liability and, therefore, any deduction from the asset to which it relates, may not exceed the carrying amount of that asset. If it does, any excess over the carrying value is taken immediately to the statement of profit or loss and other comprehensive income.

2

Adoption of new and revised standards and changes in accounting policies

In the current year, the following new and revised Standards and Interpretations have been adopted by the company and have an effect on the current period or a prior period or may have an effect on future periods:

IFRS 15, Revenue from Contracts with Customers has been adopted in the current year. IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The entity adopted IFRS 15 using the full retrospective method of adoption. The effect of the transition on the current period has not been disclosed as the entity has adopted practical expedient 1 and 4 permitted by IFRS 15. The entity did not apply any of the other available optional practical expedients.

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement and impairment.

The entity has applied IFRS 9 retrospectively, with the initial application date of 1 January 2018 and adjusting the comparative information for the period beginning 1 January 2017.

Standards which are in issue but not yet effective

At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not yet been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

Effective from:

IFRS 16

Leases

1 January 2019

IFRS 9 (amendments)

Prepayment features with negative compensation

1 January 2019

IAS 28 (amendments)

Long-term interests in associates and joint ventures

1 January 2019

Annual improvements to IFRS Standards 2015-2017 Cycle

Amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes, IAS 23 Borrowing Costs

1 January 2019

3

Critical accounting estimates and judgements

The company makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Useful lives of intangible assets and property, plant and equipment

Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are based on judgement and experience and periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the income statement in specific periods.

Share-based payments

The Company utilised an equity-settled share-based remuneration scheme for employees. Employee services received, and the corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant, excluding the impact of any non-market vesting conditions. The fair value of share options are estimated by using Black-Scholes valuation method as at the date of grant. The assumptions used in the valuation are described in Note 22 and include, among others, the expected volatility, expected life of the options and number of options expected to vest.

Deferred taxation

Deferred tax assets are recognised when it is judged more likely than not that they will be recovered.

Hydrocarbon reserve and resource estimates

Hydrocarbon reserves are estimates of the amount of hydrocarbons that can be economically and legally extracted from the Company's oil and gas properties. The Company estimates its commercial reserves and resources based on information compiled by appropriately qualified persons relating to the geological and technical data on the size, depth, shape and grade of the hydrocarbon body and suitable production techniques and recovery rates. Commercial reserves are determined using estimates of oil and gas in place, recovery factors and future commodity prices, the latter having an impact on the total amount of recoverable reserves and the proportion of the gross reserves which are attributable to the host government under the terms of the Production-Sharing Agreements. Future development costs are estimated using assumptions as to the number of wells required to produce the commercial reserves, the cost of such wells and associated production facilities, and other capital costs. The current long-term gas price assumption used in the estimation of commercial reserves currently held by the Company is US$3/MMTBU. The carrying amount of oil and gas development and production assets at 31 December 2018 is shown in note 11.

The Company estimates and reports hydrocarbon reserves in line with the principles contained in the SPE Petroleum Resources Management Reporting System (PRMS) framework. As the economic assumptions used may change and as additional geological information is obtained during the operation of a field, estimates of recoverable reserves may change. Such changes may impact the Company's financial position and results which include:

· The carrying value of exploration and evaluation assets; oil and gas properties; property and plant and equipment may be affected due to changes in estimated future cash flows

· Depreciation and amortisation charges in the income statement may change where such charges are determined using the Units of Production (UOP) method, or where the useful life of the related assets change

· Provisions for decommissioning may require revision - where changes to the reserve estimates affect expectations about when such activities will occur and the associated cost of these activities.

3

Critical accounting estimates and judgements

Exploration and evaluation expenditures

The application of the Company's accounting policy for exploration and evaluation expenditure requires judgement to determine whether future economic benefits are likely, from either future exploitation or sale, or whether activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The determination of reserves and resources is itself an estimation process that involves varying degrees of uncertainty depending on how the resources are classified. These estimates directly impact when the Company defers exploration and evaluation expenditure. The deferral policy requires management to make certain estimates and assumptions about future events and circumstances, in particular, whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of the expenditure is unlikely, the relevant capitalised amount is written off in the income statement and in the period when the new information becomes available.

Units of production (UOP) depreciation of oil and gas assets

Oil and gas properties are depreciated using the UOP method over total proved development and undeveloped hydrocarbon reserves. This results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining production from the field.

The life of each item, which is assessed at least annually, has regard to both its physical life limitations and present assessments of economically recoverable reserves of the field at which the asset is located. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditure. The calculation of the UOP rate of depreciation/amortisation will be impacted to the extent that actual production in the future is different from current forecast production based on total proved reserves, or future capital expenditure estimates change. Changes to the proved reserves could arise due to changes in the factors or assumptions used in estimating reserves, including:

· The effect on proved reserves of differences between actual commodity prices and commodity price assumptions

· Unforeseen operational issues

Recoverability of oil and gas assets

The Company assesses each asset or cash generating unit (CGU) each reporting period to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs of disposal (VLCD) and value in use (VIU). The assessments require the use of estimates and assumptions such as long-term oil prices (considering current and historical prices, price trends and related factors), discount rates, operating costs, future capital requirements, decommissioning costs, exploration potential reserves (see(a) Hydrocarbon reserves and resource estimates above) and operating performance (which includes production and sales volumes). These estimates and assumptions are subject to risk and uncertainty. Therefore, there is possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs.

4

Revenue

An operating segment is a distinguishable component of the Company that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Company's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.

The Company's current revenue from customers is all generated in Tanzania from oil & gas production in accordance with its farm-in/profit sharing agreements, within Tanzania. However with this segment only in its second period of production, and with the only major related transactions being the carrying value of the oil & gas properties assets as described in Note 13, no further segmental analysis is deemed useful to disclose currently. This year's revenue from this segment was £nil (2017:£614,000).

During the current year, the company disposed of its entire 15% interest in Horse Hill Developments Limited ("HHDL") to UK Oil and Gas plc ("UKOG") for a total cash consideration of £4.5 million together with a simultaneous purchase of 234,042,221 new ordinary share in UKOG equivalent to a 4.2% interest in UKOG at the time of the transaction.

For a total consideration of £4.5 million UKOG agreed to acquire Solo's 15% shareholding and loan in HHDL. With an effective date of 28 August 2018, the total consideration was satisfied through the issue of 234,042,221 new ordinary shares in UKOG. This resulted in a gain recognised of £1.758m in the current year.

Subject to further acquisitions, the Company expects to further reviews its segmental information during the forthcoming financial year and update accordingly.

In respect of the total assets, £5,069,000 (2017:£1,566,000) arise in the UK and £nil (2017:£nil) arise in Canada, £18,385,000 in Tanzania (2017:£17,156,000), and £nil arise in Nigeria (2017:£nil).

5

Operating loss

2018

2017

£000

£000

Operating loss for the year is stated after charging/(crediting):

Exchange losses

84

81

Fees payable to the company's auditor for the audit of the company's financial statements

14

15

Depreciation of oil and gas property

-

484

Impairment of intangible assets

692

300

Share-based payments

27

196

Directors remuneration

580

537

Directors pension contribution

-

12

Salaries and national insurance

114

101

6

Employees

The average number of employees (excluding executive directors) was:

2018

2017

1

1

6

Employees

2018

2017

£000

£000

Their aggregate remuneration comprised :

Wages and salaries

40

40

Directors remuneration

607

641

Salary and fees

Share-based payments

Pension contributions

Total

£000

£000

£000

£000

Year ended 31 December 2018

Neil Ritson (resigned 6 August 2018)

99

-

-

99

Don Strang (resigned 26 November 2018)

45

-

-

45

Dan Maling (resigned 7 February 2019)

220

-

-

220

Fergus Jenkins (including termination provision)

90

-

-

90

Jon FitzPatrick (appointed 2 May 2018)

107

27

-

134

Alastair Ferguson (appointed 6 August 2018)

19

-

-

19

Tom Reynolds (appointed 4 December 2018)

-

-

-

-

580

27

-

607

Salary and fees

Share-based payments

Pension contributions

Total

£000

£000

£000

£000

Year ended 31 December 2017

Neil Ritson

125

46

-

171

Don Strang

19

38

-

57

Dan Maling

180

60

-

240

Fergus Jenkins (including termination provision)

213

46

12

271

537

190

12

739

7

Finance costs

2018

2017

£000

£000

Interest on convertible loan notes

50

12

Finance fees

-

114

Total interest expense

50

126

Exchange differences on financing transactions

(9)

-

41

126

8

Other gains and losses

2018

2017

£000

£000

Amounts written off fair value through profit/loss of investments held for trading

(529)

-

9

Income tax expense

2018

2017

£000

£000

UK corporation tax on profits for the current period

-

-

Total UK current tax

-

-

The charge for the year can be reconciled to the loss per the income statement as follows:

2018

2017

£000

£000

Loss before taxation

(1,667)

(1,659)

The reason for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows:

Expected tax credit based on a corporation tax rate of 19.00%

(317)

(315)

Effect of expenses not deductible in determining taxable profit

243

94

Income not taxable

(347)

-

Change in unrecognised deferred tax assets

243

-

Deferred tax adjustments in respect of prior years

(199)

-

Future income tax benefit not brought into account

377

221

Taxation charge for the year

-

-

9

Income tax expense

No deferred tax asset has been recognised because there is uncertainty of the timing of suitable future profits against which they can be recovered.

10

Loss per share

The calculation of loss per share is based on the loss after taxation divided by the weighted average number of shares in issue during the year.

2018

2017

£000

£000

Number of shares

Weighted average number of ordinary shares for basic loss per share (000)

509,360

384,700

Earnings

Continuing operations

Loss for the period from continued operations

(1,667)

(1,659)

Earnings per share for continuing operations

Basic and diluted loss per share (pence)

(0.33)

(0.43)

As inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive, as such, a diluted loss per share is not included.

11

Intangible assets

Deferred exploration and evaluation expenditure

£000

Cost

At 1 January 2017

14,394

Additions

2,080

At 1 January 2018

16,474

Additions

1,341

Foreign currency adjustments

(38)

At 31 December 2018

17,777

Impairment

At 1 January 2017

2,358

Charge for the year

300

At 1 January 2018

2,658

At 31 December 2018

2,658

Carrying amount

At 31 December 2018

15,119

At 31 December 2017

13,816

The additions to deferred exploration and evaluation expenditure during the period relate mainly to the completion of drilling operations for the Ntorya-2 appraisal and subsequent testing of the well.

Following a review of the carrying value and future prospects for Solo's assets no impairment has been recongnised as the carrying value is deemed appropriate based on the future outlook. As at 31 December 2017 the Ausable Reef intangible was fully impaired with a resulting impairment charge of £0.30 million charged to the profit and loss in 2017.

12

Oil & Gas properties

2018

2017

£000

£000

Cost

At 1 January 2018 and 31 December 2018

953

953

Accumulated depreciation

At 1 January 2018

759

275

Charge for the year

-

484

At 31 December 2018

759

759

Carrying value

At 31 December 2018

194

194

At 31 December 2017

194

678

The Oil & Gas properties comprise the 7.55% participating interest in the Kiliwani North Development Licence, in Tanzania.

Accumulated amortisation has been calculated on a units of production basis. As there was no production during 2018, the amortisation charge for the year is nil.

Impairment Review

The Directors have carried out an impairment review as at 31 December 2018, and determined that an impairment charge is not currently required. The Directors based this assessment on continuing operational work schedules that are ongoing to improve operational efficiencies and production.

13

Investments

Current

Non-current

2018

2017

2018

2017

£000

£000

£000

£000

Investments held at fair value through other comprehensive income

-

-

-

3,226

Investments held at fair value through profit or loss

-

-

2,903

-

Investments held for trading through profit and loss

1,523

-

-

-

1,523

-

2,903

3,226

The company has not designated any financial assets that are not classified as held for trading as financial assets at fair value through profit or loss.

13

Investments

Investments comprise of the acquisition of UKOG 234,042,221 new ordinary shares equivalent to a 4.2% interest at the time of acquisitions which was purchased on the completion of the sale and purchase agreement ("SPA") to dispose of its entire 15% interest in Horse Hill Developments Limited ("HHDL") to UKOG.

These shares are held for trading and traded at the discretion of the board of directors.

Solo acquired a further 5% interest in Helium One on 22 January 2018 through a final subscription amount of £276,569. Helium one owns exploration licences in a number of highly prospective, and extremely rare, helium properties in Tanzania. The conditions precedent to the Sale and Purchase Agreement ("SPA") have now been fulfilled, including the consent of other shareholders and the payment by Solo of the cash consideration of £650,000. Testing at the Horse Hill-1 oil discovery is expected to commence in early second quarter and is anticipated to lead to a declaration of commerciality at the Portland Sandstone reservoir level where initial testing in 2016 showed a potentially commercial rate of 320 barrels oil per day ("bopd") on pump. Additional testing of the Kimmeridge Limestone reservoirs will be undertaken in a test program expected to last approximately 150 days in total. Solo will now hold a 15% interest in HHDL equivalent to a 9.75% interest in the Horse Hill licences, PEDL137 and PEDL246, and the Horse Hill oil discovery

14

Available for sale assets

2018

2017

£000

£000

Investment in listed and unlisted securities

Valuation at beginning of the year

3,226

1,181

Additions at cost

277

2,626

Disposal

(600)

(4)

Transfers to investments

(2,903)

-

Decrease in value of investments - Burj Africa

-

(577)

Valuation at the end of the year

-

3,226

The available for sale investments splits are as below:

Non-current assets - listed

-

-

Non-current assets - unlisted

-

3,226

-

3,226

Available for sale-investments comprise investments in unlisted securities and are held by the Company as a mix of strategic and short term investment.

On 28 August 2018 Solo disposed of its interest in Horse Hill Development Limited.

The remaining assets held for sale are no longer being held for sale and have therefore been reclassified at their carrying value to investments.

15

Subsidiary company

The only subsidiary of Solo Oil Plc is Solo Oil International Limited a wholly-owned, UK incorporated micro-entity, which is dormant, and has been since incorporation with an issued share capital of £1.

16

Trade and other receivables

2018

2017

£000

£000

Trade receivables

294

336

Other receivables

300

282

Loan to Horse Hill Developments Ltd

-

749

Loan to Helium One Ltd

100

-

Prepayments

22

28

716

1,395

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

17

Borrowings

2018

2017

£000

£000

Convertible Loan Note

First tranche drawn down of US $1.5m

-

1,080

The repayment terms of the convertible loan from Riverfort Global Ltd are:

Each tranche carries an 18 month term with each tranche having a 3 month repayment holiday followed by repayment of 10% of the gross amount of principal per month such that 30% of the gross principal remains outstanding at the end of 12 months.

The convertible loan has an interest rate charge of 8% per annum of gross amount provided and is unsecured.

The first tranche of gross US $1.5m was drawn down in November 2017. On 18 June 2018 an exercise for conversion of US $116,168 into equity as received with a resulting allotment of 3,394,747 new ordinary shares at a conversion price of 2.56p per share. On 3rd July, there was an allotment of 6,046,887 new ordinary shares at a conversion price of 2.18p per share. On 13th July, there was a further allotment of 3,058,641 new ordinary shares at a conversion price of 2.06p per share.

The convertible loan was repaid in full during 2018, resulting in a nil balance at 31 December 2018.

18

Trade and other payables

Current

2018

2017

£000

£000

Trade payables

171

163

Accruals

93

128

Other payables

284

33

548

324

The directors consider that the carrying amount of trade payables approximates to their fair value.

19

Provisions for liabilities

2018

2017

£000

£000

PAYE Settlement

184

-

Analysis of provisions

Provisions are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

Current liabilities

184

-

Movements on provisions:

PAYE Settlement

£000

At 1 January 2018

-

Additional provisions in the year

184

Utilisation of provision

-

At 31 December 2018

184

The provision relates to the amounts owed by Daniel Maling, former Managing Director for the PAYE on the share settled transactions. If this remains unpaid by Daniel Maling this will be due to HMRC on 6th July 2019.

20

Share capital

Number of shares

Nominal value

£000

a)

Called up, allotted, issued and fully paid: Ordinary shares of 0.2p each

As at 31 December 2017

392,337,800

785

27 February 2018 - placing for cash at 0.35p

57,142,857

114

9 March 2018 - placing for share of HHDL at 0.351p

9,973,011

20

18 June 2018 - allotment for Convertible Loan Note at 0.256p

3,394,747

7

3rd July 2018 - allotment for convertible loan note at 0.218p

6,046,887

13

11th July 2018 - allotment for convertible loan note at 0.206p

3,058,641

6

6 August 2018 - placing for cash at 0.225p

107,310,847

215

12 September 2018 - placing for cash at 0.2p

52,439,328

105

As at 31 December 2018

631,704,118

1,265

2018

2017

£000

£000

b)

Deferred shares

Deferred shares of 265,324,634 at 0.69 pence each

1,831

1,831

c)

Total Share options in issue

During the year no options were granted (2017:nil).

As at 31 December 2018, the unexercised options in issue were restated as:

Exercise Price (original)

Amended

Expiry Date

Amended

Original Options in Issue

31 December 2018

0.5p

10p

31 December 2020

10,200,000

204,000,000

0.5p

10p

31 December 2020

3,425,000

68,500,000

0.3p

6p

31 December 2020

5,000,000

100,000,000

0.35p

7p

31 October 2021

10,625,000

212,500,000

29,250,000

585,000,000

d)

Total warrants in issue

1,597,658 warrants lapsed in the year and no warrants were issued, cancelled or exercised during the year (2017: nil).

As at 31 December 2018 there were 3,547,129 at 2.25p outstanding (31 December 2017 3,500,000 at 7.25p and 1,597,658 at 24p and 13.8p.)

21

Share based payment

The Company used the Black-Scholes model to determine the value of the options and the inputs were as follows:

Issue 12/02/2018

Share price at grant (pence)

0.032

Fair Value at grant (pence)

0.0109

Expected volatility (%)

82.2%

Expected life (years)

3 years

Risk free rate (%)

0.61%

Expected dividends (pence)

nil

Expected volatility was determined by using the Company's share price for the preceding 12 months.

The total share-based payment expense in the year for the Company was £27,000 in relation to issue of options (2017: £196,000) and £nil finance charges in relation to warrants (2017: nil).

Employee Benefit Trust

The Company established on 7 December 2012, an employee benefit trust called the Solo Oil Employee Benefit Trust ("EBT") to implement the use of the Company's existing share incentive plan over 5% of the Company's issued share capital from time to time in as efficient a manner as possible for the beneficiaries of that plan. The EBT is a discretionary trust for the benefit of directors and employees of the Company and its subsidiaries.

No further subscriptions for shares in the Company has been made by the EBT during the years ended 31 December 2018 and 2017.

22

Financial instruments

The Company is exposed through its operations to one or more of the following financial risk:

· Fair value or cash flow interest rate risk

· Foreign currency risk

· Liquidity risk

· Credit risk

· Market risk

· Expected credit losses

Policy for managing these risks is set by the Board. The policy for each of the above risks is described in more detail below.

Fair value and cashflow interest rate risk

Generally the Company has a policy of holding debt at a floating rate. The directors will revisit the appropriateness of this policy should the Company's operations change in size or nature. Operations are not permitted to borrow long-term from external sources locally.

Foreign currency risk

Foreign exchange risk arises because the Company has operations located in various parts of the world whose functional currency is not the same as the functional currency in which the company's investments are operating. The Company's net assets are exposed to currency risk giving rise to gains or losses on retranslation into sterling. Only in exceptional circumstances will the Company consider hedging its net investments in overseas operations as generally it does not consider that the reduction in volatility in consolidated net assets warrants the cash flow risk created from such hedging techniques.

22

Financial instruments

Liquidity risk

The liquidity risk of each entity is managed centrally by the treasury function. Each operation has a facility with treasury, the amount of the facility being based on budgets. The budgets are set locally and agreed by the board annually in advance, enabling the cash requirements to be anticipated. Where facilities of entities need to be increased, approval must be sought from the finance director. Where the amount of the facility is above a certain level agreement of the board is needed.

All surplus cash is held centrally to maximise the returns on deposits through economies of scale. The type of cash instrument used and its maturity date will depend on the forecast cash requirements.

Credit risk

The Company is mainly exposed to credit risk from credit sales. It is Company policy, implemented locally, to access the credit risk of new customers before entering contracts. Such credit ratings are taken into account by local business practices.

The Company does not enter into complex derivatives to manage credit risk, although in certain isolated cases may take steps to mitigate such risks if it is sufficiently concentrated.

Market risk

As the company is now investing in listed companies, the market risk will be that of finding suitable investments for the company to invest in and the returns that those investments will return given the markets that in which investments are made.

Expected credit losses

Allowances are recognised as required under the IFRS 9 impairment model and continue to be carried until there are indicators that there is no reasonable expectation of recovery.

For trade and other receivables which do not contain a significant financing component, the company applies the simplified approach. This approach requires the allowance for expected credit losses to be recognised at an amount equal to lifetime expected credit losses. For other debt financial assets the company applies the general approach to providing for expected credit losses as prescribed by IFRS 9, which permits for the recognition of an allowance for the estimated expected loss resulting from default in the subsequent 12-month period. Exposure to credit loss is monitored on a continual basis and, where material, the allowance for expected credit losses is adjusted to reflect the risk of default during the lifetime of the financial asset should a significant change in credit risk be identified.

The majority of the company's financial assets are expected to have a low risk of default. A review of the historical occurrence of credit losses indicates that credit losses are insignificant due to the size of the company's clients and the nature of the services provided. The outlook for the oil and gas industry is not expected to result in a significant change in the company's exposure to credit losses. As lifetime expected credit losses are not expected to be significant the company has opted not to adopt the practical expedient available under IFRS 9 to utilise a provision matrix for the recognition of lifetime expected credit losses on trade receivables. Allowances are calculated on a case-by-case basis based on the credit risk applicable to individual counterparties.

22

Financial instruments

Exposure to credit risk is continually monitored in order to identify financial assets which experience a significant change in credit risk. In assessing for significant changes in credit risk the company makes use of operational simplifications permitted by IFRS 9. The company considers a financial asset to have low credit risk if the asset has a low risk of default; the counterparty has a strong capacity to meet its contractual cash flow obligations in the near term; and no adverse changes in economic or business conditions have been identified which in the longer term may, but will not necessarily, reduce the ability of the counterparty to fulfil its contractual cash flow obligations. Where a financial asset becomes more than 30 days past its due date additional procedures are performed to determine the reasons for non-payment in order to identify if a change in the exposure to credit risk has occurred.

Should a significant change in the exposure to credit risk be identified the allowance for expected credit losses is increased to reflect the risk of expected default in the lifetime of the financial asset. The company continually monitors for indications that a financial asset has become credit impaired with an allowance for credit impairment recognised when the loss is incurred. Where a financial asset becomes more than 90 days past its due date additional procedures are performed to determine the reasons for non-payment in order to identify if the asset has become credit impaired.

The company considers an asset to be credit impaired once there is evidence that a loss has been incurred. In addition to recognising an allowance for expected credit loss, the company monitors for the occurrence of events that have a detrimental impact on the recoverability of financial assets. Evidence of credit impairment includes, but is not limited to, indications of significant financial difficulty of the counterparty, a breach of contract or failure to adhere to payment terms, bankruptcy or financial reorganisation of a counterparty or the disappearance of an active market for the financial asset.

A financial asset is only written off when there is no reasonable expectation of recovery.

23

Related party transactions

The Company had the following amounts outstanding from its investee companies (Note 14) at 31 December:

2018

2017

£000

£000

Horse Hill Development Ltd ("Horse Hill")

-

749

Helium One

100

-

The investment in Horse Hill was disposed of in full on 28 August 2018 therefore there is no loan outstanding at 31 December 2018.

There were no transactions between the parent and its dormant subsidiary, which are related parties, during the year. Details of director's remuneration, being key personnel, are given in Note 7.

The company entered into transactions with the following related parties during the current year:

2018

2017

£000