Notes:

1.    INFORMATION

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

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

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

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

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

3.    LOSS PER SHARE

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

4.    INTANGIBLE ASSETS

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

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

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

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

· Licence obligations;

· Funding requirements;

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

· Exchange rate risk;

· Financial risk management;

· Geological and development risks;

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

5.    SHARE CAPITAL

Movements in issued share capital

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

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

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

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

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

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

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

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

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

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

6.    POST BALANCE SHEET EVENTS

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

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

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