FY Results for year ended 31 Dec 2017 & Q1 Update

6 June 2018

PRESIDENT ENERGY PLC

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

Audited Results for the year ended 31 December 2017

and unaudited first quarter 2018 update

President (AIM: PPC), the upstream oil and gas company with a diverse portfolio of production and exploration assets focused primarily in Argentina, is pleased to announce its full year audited results for the year ended 31 December 2017 and a first quarter 2018 update. President Energy will be hosting an analyst and investor conference call at 14:00 (BST). Please find dial-in details at the bottom of the release.

Corporate & Financial Highlights

· A transformational acquisition in late 2017 of Puesto Flores/Estancia Vieja Concessions in the Neuquén Basin from Chevron Argentina SRL producing immediate impact, generating profits, positive cash and real returns to the Group

· Acquisition cost of those concessions estimated to be paid back in less than two years with production there growing and currently at its highest level since purchase by President

· Group turnover in 2018 on course to triple year on year (2017: US$17.95 million), following an 81% increase in 2017 from the previous year (2016: US$9.9 million)

· Exit 2017 Group production over four times the exit 2016 level

· In 2017 the Group recognised a gross loss of US$3.4 million (2016: US$2.7 million) prior to the transformation that will flow from the recent investment decisions

· Strong positive cash generation from core operations in Q1 2018 of US$5 million and remaining robust

· Group net production:

o Full year 2017 increased by 110% to 1,121boepd (2016: 533 boepd) on a like-for-like basis

o Q1 2018 increased by a further 80% to 2,018 boepd over full year 2017 with production building up through the period

o Currently approximately 2,400 boepd, even with certain wells off-line at the new concessions due to the on-going workover programme

· Significant improvement in core operating margin:

o 2017 well operating costs per boe excluding workovers reduced by 26% in Argentina and 27% in the US over 2016; and

o In Q1 2018 costs decreased by a further 14% and 49% respectively

· Group-wide administrative costs reduced by:

o 44% over previous year to US$ 12.90 per boe (2016: US$23.20 per boe); and

o A further 25% to US$9.70 per boe in Q1 2018 and set to further reduce as the year progresses

· Cash at year end 2017 of US$4.0 million (2016: US$17.6 million) after two acquisitions and extensive capex referred to below

· Net debt of US$17.1 million after taking into account US$17.8 million paid for acquisitions and US$12.4 million capex incurred in year (2016:net cash US$8.5 million)

· Group 2P (proven and probable) hydrocarbon reserves as at y/e 2017 increased by 33% to 27.1 mmboe (2016 20.3 mmboe)

Argentina

· All Concessions now operationally profitable and contributing to Group

· At period end and the start of 2018 the Company successfully worked over four wells at Puesto Flores/Estancia Vieja enabling oil to be produced from previously undrilled intervals

· Major seven well work-over programme at Puesto Flores/Estancia Vieja now in progress with a three well drilling campaign in planning and targeted to commence in September

· Puesto Flores gross production as at 31 May 2018 was approximately 1,800 boepd (President 90%, Ediphsa 10%) and continuing to increase even with certain wells off-line for the ongoing work-over programme

· Current Puesto Flores operating field net back of US$36 per barrel

· Newly re-activated Estancia Vieja field to start selling gas in June

· Workover programme at Puesto Guardian in H1 2017 delivered mixed results with field production having at one point during the workover programme reached approximately 900 boepd now stable at 500 boepd

· Puesto Guardian is currently generating field net back contributing to G&A of US$15 per barrel with new development wells projected to be drilled in 2019

· Farmout commenced of exploration assets with early interest encouraging

· On its current businesses, no corporate tax on profits payable until estimated 2021 due to carried forward tax losses

Paraguay

· During the year, additional third-party studies were carried out that further validated President's optimistic view as to the prospectivity of its in-country assets

· The farm-out process continues - encouraging recent interest

Louisiana

· The acquisition of an additional 50% WI (37.5% NRI) in April 2017 and the assumption of operatorship in the Triche Well, East Lake Verret, Louisiana has delivered results substantially beyond initial expectations

· Louisiana contributes profitably to the Group with:

o production revenue increasing in the year 2017 by 33% to US$3.6 million (2016: US$2.7 million) on higher volumes; and

o well operating costs per boe down 27% over previous year and further decreased by 49% in Q1 of 2018

· Louisiana is currently generating strong positive cash generation from core operations of US$245k per month. No corporate tax currently payable as carried forward losses being utilised

Outlook

· With an increasingly capable and strengthened management team, an extensive capex programme targeting proved and probable reserves, the prospects for the present businesses to expand are both real and positive

· The Company will continue to seek the right acquisition to complement its existing portfolio for which patience is required

· President views the rest of 2018 with well-founded optimism from an increasingly strong trading and financial position

Peter Levine, Chairman, commented:

''2017 was a year of transition and the transformation of the Company has been both swift and dramatic. The two acquisitions of producing assets we made, one in the Neuquén Basin, Argentina and the other, smaller, in Louisiana, are delivering results and cash flow above expectations which were fortuitously timed in the light of improving oil prices.

"With strong cash generation from our core operations in Q1 2018 of US$5 million, set to increase as the year progresses, we have now developed into a Group delivering real positive returns for its shareholders with the management and financial resources and commitment to expand further both by acquisition and organically.

"Our roadmap is clear, concentrating on cash flow, profits and margins and we look forward to 2018 with well-founded optimism as the Group goes from strength to strength."

Glossary

Boe barrels of oil equivalent

Bopd barrels of oil per day

Boepd barrels of oil equivalent per day

2P proven and probable hydrocarbon reserves

Conference call dial-in details:

United Kingdom: 08003589473

PIN: 47547253#

Contact:

Chairman's Statement

Summary

2017 was a year of transition and transformation. President entered the year working to optimise the production from its only asset in Argentina at the Puesto Guardian Concession with mixed results. The Group ended the year transformed. By the end of 2017 President was producing four times more than at the same time the previous year end with increased margins primarily as a result of lower unit operating costs. In 2018, President continues to go from strength to strength. With strong positive cash generation from core operations of US$5 million for Q1 2018 there are realistic expectations that such level will increase as the year progresses and as benefit from the year-long capital expenditure programme crystallises.

The results for 2017 portrayed in the light of our unaudited management figures for Q1 2018 show the following:

· A transformational acquisition in late 2017 of Puesto Flores/Estancia Vieja Concessions in the Neuquén Basin from Chevron Argentina SRL producing immediate impact, generating profits, positive cash and real returns to the Group

· Acquisition cost of those concessions estimated to be paid back in less than two years with production there growing and currently at its highest level since purchase by President

· Group turnover in 2018 on course to triple year on year (2017: US$17.95 million), following an 81% increase in 2017 from the previous year (2016: US$9.9 million)

· Exit 2017 Group production over four times the exit 2016 level

· In 2017 the Group recognised a gross loss of US$3.4 million (2016: US$2.7 million) prior to the transformation that will flow from the recent investment decisions

· Strong positive cash generation from core operations in Q1 2018 of US$5 million and remaining robust

· Group net production:

o Full year 2017 increased by 110% to 1,121boepd (2016: 533 boepd) on a like-for-like basis

o Q1 2018 increased by a further 80% to 2,018 boepd over full year 2017 with production building up through the period

o Currently approximately 2,400 boepd , even with certain wells off-line at the new concessions due to the on-going workover programme

· Significant improvement in core operating margin:

o 2017 well operating costs per boe excluding workovers reduced by 26% in Argentina and 27% in the US over 2016; and

o In Q1 2018 costs decreased by a further 14% and 49% respectively

· Group-wide administrative costs reduced by:

o 44% over previous year to US$ 12.90 per boe (2016: US$23.20 per boe); and

o A further 25% to US$9.70 per boe in Q1 2018 and set to further reduce as the year progresses

· Cash at year end 2017 of US$4.0 million (2016: US$17.6 million) after two acquisitions and extensive capex referred to below;

· Net debt of US$17.1 million after taking into account US$17.8 million paid for acquisitions and US$12.4 million capex incurred in year (2016:net cash US$8.5 million)

· Group 2P (proven and probable) hydrocarbon reserves as at y/e 2017 increased by 33% to 27.1 mmboe (2016 20.3 mmboe)

Argentina

Puesto Flores/Estancia Vieja

The fourth quarter of 2017 was a milestone in the Company's future with the acquisition and integration of the Puesto Flores/Estancia Vieja Concession, Rio Negro Province, in the famous Neuquén Basin where the Company is pleased to partner with EDHIPSA, the Rio Negro Provincial energy company which holds a 10% interest in the Concession.

The purchase transformed the financial position and prospects of President and from day one generated positive cash flow with material operating profits. The full benefit of the acquisition and licence extension will be felt in the results for the full year 2018 with payback of the acquisition cost of the asset estimated to be less than two years.

The Concession has added significant value, added reserves to our portfolio and provides substantial running room for growth in both the fields. An early workover programme demonstrated that there were untapped oil bearing intervals in Puesto Flores and shut-in gas in Estancia Vieja. The accelerated programme announced on 16 April 2018 will capitalise on this through workovers, new drilling and gas production. Thus, President is focusing its capital in this area where the return is greatest against other areas of its portfolio. Such cash returns on its current businesses benefit from no corporate tax being paid by President until it is estimated 2021 due to carried forward tax losses.

Puesto Guardian

The first part of the year was spent conducting workovers of certain wells in our Puesto Guardian Concession with mixed results. The reasons for such results were due to both surface and sub-surface issues. With regards to the former, new surface pumps that had been ordered were late being delivered and subsequently proved to be defective. The latter sub-surface issues have led us to conclude that the optimal cost effective way to materially increase production in the Concession is to drill new wells targeting the many proven undeveloped accumulations. This is being planned for 2019 and President remains optimistic as to the opportunities in Puesto Guardian particularly as there is still another 32 years left of the Concession term.

We can therefore afford to be patient but nevertheless, in the meantime, with greater efficiencies and an improved oil price, Puesto Guardian is now operationally profitable at the field level, and is making a solid contribution to the Group.

President has now begun a farmout process of the deeper exploration prospects at the Concession and in the Company's neighbouring two licences of Matorras and Ocultar. At this early stage, interest is encouraging.

Paraguay

· During the year, additional third party studies were carried out that further validated President's optimistic view as to the prospectivity of its in-country assets

· The farm-out process continued with the assistance of third party advisers, albeit initially more slowly than anticipated, but with encouraging interest continuing to be generated from a number of parties

· Irrespective of this current process, the Company is committed to retaining its interests and licences in the Country and in such light is advancing plans towards drilling a well during 2019

Louisiana

The acquisition of an additional 50% WI (37.5% NRI) in April 2017 and the assumption of operatorship in the Triche Well, East Lake Verret, Louisiana has delivered results substantially beyond initial expectations

Louisiana contributed profitably to the Group with:

o production revenue increasing in the year 2017 by 33% to US$3.6 million (2016: US$2.7 million) on higher volumes

o well operating costs per boe down 27% over previous year and further decreased by 49% in Q1 of 2018

Louisiana is currently generating strong positive cash generation from core operations of US$245k per month. No corporate tax is currently payable due to carried forward losses being utilised.

Corporate

In April 2017, the Group acquired for US$2.25 million cash plus a US$400k capped earn out, an operated 50% working interest in the Triche well, Louisiana, taking President's working interest in the well to 62%. With the well performing significantly ahead of expectations and reflecting the higher than expected revenues under President's operatorship the earn out is expected to be completely satisfied in Q3 2018, some two years ahead of schedule, at which time the additional 5% revenue interest will revert to President.

In January 2018, the Group disposed of its entire non-operated, non-core beneficial interest in the East White Lake Field, Louisiana USA as further described in the Directors Report below.

In September 2017 President acquired operatorship and a 100% stake in the Puesto Flores/Estancia Vieja fields, Rio Negro Province, Argentina from Chevron Argentina for US$618k including apportionments. In December, the relevant Concession was extended by the Rio Negro Province for 10 years resulting in a payment to the Province of US$15 million, an obligation to pay a further US$7 million in 2018 in three instalments and the granting of a 10% interest in the Concession to Edhipsa, the Provincial energy company. Of such further monies, US$3.3 million has already been paid in 2018 with the balance payable in Q3 and Q4 2018.

In November/December 2017 a placing supported by major shareholders together with a subsequent open offer to shareholders raised US$15.3 million gross of new money which was utilised to part pay the approximately US$16 million cash due as a result of the acquisition of Puesto Flores/Estancia Vieja from Chevron Argentina and the subsequent grant of a further ten year licence period for the relevant concession.

Also in 2017, the Group entered into its first formal bank lending arrangement, with an US$8 million loan in Argentina. The loan has a 3.5 year term and is repayable in quarterly installments. Repayment commenced in 2018 and by the year end 2018, the capital balance outstanding of such loan is expected to be approximately US$6 million. The long term revolving facility of up to US$15 million granted by a Peter Levine group company, IYA, remains in place; the year-end balance was around US$13.1 million and currently some US$1.5 million remains undrawn as at 30 April 2018.

In April 2018 Rob Shepherd stepped up as from his Non-Executive role to be Group Finance Director with Alex Moody-Stuart formerly of Schlumberger being welcomed as a Non-Executive Director. Taking into account the increase in executive directors, to ensure a balanced Board, Miles Biggins will step down at the forthcoming AGM but will remain the Group's Technical Director.

Financial review of 2017

In 2017, the Group recognised a gross loss of US$3.4 million (2016: loss US$2.7 million) prior to the transformation that will flow from recent investment decisions. Throughout 2017, the Group continued to build for the future growth in Argentina with a major acquisition, higher workover activity and the build-up of the in country capability all of which need to be seen in the context of a full year when the transition will be fully apparent in the returns. After administrative expenses of US$5.3 million (2016: US$4.5 million) are taken in to account, this led to an operating loss before impairment and non-operating gains of US$8.8 million (2016: loss US$7.2 million). The loss for the year from continuing operations of US$8.8 million (2016: loss US$14.0 million loss) was after impairment charges of US$1.3 million (2016: US$ 11.0 million) relating primarily to the impairment of the East White Lake field in the USA in 2017.

Revenue increased by 81% to US$17.9 million (2016: US$9.9 million), reflecting higher sales driven by production offsetting slightly lower average product prices for the year of US$50.62/boe (2016: US$53.51/boe). Overall Group production increased by 110% to 1,121 boepd (2016: 533 boepd) on a like for like basis, which was driven by acquisitions in Argentina and the USA and higher production from the Puesto Guardian field in Argentina.

The Group's primary investment focus during 2017 was on growth through acquisitions in core areas, increasing production in Argentina whist continuing to evaluate farm out opportunities in Paraguay and Argentina. Investment in Property, Plant and Equipment and related Goodwill in the year included US$25.0 million on the acquisition and licence extension in Argentina, US$2.4 million on acquisition of low cost operations in the USA and US$10.3 million (2016: US$ 15.6 million) on capitalised workovers, tangible equipment purchases in Argentina offset by a decrease in the asset abandonment recognition. Intangible Fixed Asset additions amounted to US$0.7 million (2016: US$0.6 million) relating to Paraguay and Argentina.

Conclusion and Prospects

2017 was a year of transition and the transformation of the Company has been both swift and dramatic. The two acquisitions of producing assets we made, one in the Neuquén Basin, Argentina and the other, smaller, in Louisiana, are delivering results and cash flow above expectations which were fortuitously timed in the light of improving oil prices.

With strong cash generation from our core operations in Q1 2018 of US$5 million, set to increase as the year progresses, we have now developed into a Group delivering real positive returns for its shareholders with the management and financial resources and commitment to expand further both by acquisition and organically.

Our roadmap is clear, concentrating on cash flow, profits and margins and we look forward to 2018 with well-founded optimism as the Group goes from strength to strength.

Detailed financial review

In 2017, the Group recognised a gross loss of US$3.4 million (2016: loss US$2.7 million) that is yet to fully reflect the transformation that will flow from recent investment decisions. Throughout 2017, the Group continued to build for the future growth in Argentina with a major acquisition, higher workover activity and the build-up of the in country capability all of which need to be seen in the context of a full year when the transition will be fully apparent in the returns. After administrative expenses of US$5.3 million (2016: US$4.5 million) are taken in to account, this led to an operating loss before impairment and non-operating gains of US$8.8 million (2016: loss US$7.2 million). The loss for the year from continuing operations of US$8.8 million (2016: loss US$14.0 million loss) was after impairment charges of US$1.3 million (2016: US$ 11.0 million) relating primarily to the impairment of the East White Lake field in the USA in 2017 and full impairment of the DP-1002 S/T well in Argentina in 2016.

Revenue increased by 81% to US$17.9 million (2016: US$9.9 million), reflecting higher sales driven by production offsetting slightly lower average product prices for the year of US$50.62/boe (2016: US$53.51/boe). Overall Group production increased by 110% to 1,121 boepd (2016: 533 boepd) on a like for like basis, which was driven by acquisitions in Argentina and the USA and higher production from the Puesto Guardian field in Argentina. Cost of sales of US$21.4 million (2016: US$12.6 million) increased in line with the stepped changes following the acquisitions but fell on a per boe basis reflecting the higher production volumes achieved.

In September 2017, the Group completed the acquisition of the Puesto Flores and Estancia Vieja assets in the Rio Negro Province, Argentina. This together with the higher production from successful workovers on both the Puesto Guardian and Puesto Flores fields increased production in Argentina by 42% to 302,849 boe (2016: 125,135 boe) or 830 boepd (2016: 342 boepd). As well as increasing production, the workovers also informed independently assessed additions to 2P reserves of over 2.0 mmboe representing a reserves replacement ratio of nearly over 7 times production volumes in 2017.

Oil sales in Argentina averaged US$53.41 per bbl (2016: US$57.83 per bbl) as the transition to a fully de-regulated market was only completed in in October. Oil prices are now set to move in line with the prevailing Brent oil price adjusted for locational variations. Well operating costs before workover expenses were managed down during the year to US$41.43/boe (2016: US$55.69/boe) whilst depreciation also fell during the year to US$12.30/boe (2016: US$13.68/boe) as a result of the acquisition and reserves upgrades. With a full year of production from Puesto Flores combined with successful workovers we anticipate this should lead to a further reduction of unit well operating costs in 2018.

In April 2017, The Group completed the acquisition of an incremental interest and operatorship of the Triche well in Louisiana, USA. Consequently, production from the Group's working interest in US operations rose by 52% to 291 boepd (2016: 191 boepd, as adjusted) offsetting the natural decline at East Lake Verret and East White Lake.

Realised prices in the US edged down 5% on the prior year to US$42.11/boe (2016: US$44.51/boe). Cost of Sales increased by 14% to US$2.6 million (2016: US$2.2 million) reflecting the acquisition. However, on a per boe basis, cost of sales from the Group's working interest in US operations decreased to US$24.14/boe (2016: US$32.07/boe as adjusted) primarily due to the additional volumes from the lower unit cost Triche operation.

Despite the price environment, the EBITDA contribution from the US operations rose to US$1.2 million (2016: US$0.8 million) reflecting the acquisition and steps undertaken in 2017 to manage down operational and administrative costs in the Group's US operations.

In line with the investment strategy in Argentina, the growth in Argentine operating and administrative expense reflects the building up of in country capability and pursuit of investment opportunities. While Group-wide administrative expenses outside of Argentina remained flat the increase in overall Group administrative expense to US$5.3 million (2016: US$4.5 million) was driven by this approach.

Total impairment charges during the year of US$1.3 million (2016: US$11.0 million) relate to the impairment of the East White Lake field in the USA. In light of continued poor production performance the non-operated interest in the field was disposed of in 2018. Consequently, the carrying value was impaired in the year in line with the fair value of the disposal proceeds. In 2016, the DP-1002 S/T well drilled in September in Puesto Guardian, Argentina, was fully impaired, US$10.9 million, as the well was rendered incapable of completion for production due to due to service quality issues encountered in drilling operations with the balance of the impairment on the carrying value of the East White Lake field.

With an improving oil price environment carrying through to 2018 there are growing signs that the global E&P sector is emerging from its recent slumber and looking for new opportunities. The Group's timely acquisition of Puesto Flores is evident that we are well placed to build on our positions in Paraguay and Argentina from our portfolio of investment opportunities but also well placed and well-funded should new opportunities arise. To that end the Company announced in February 2018 that it has commenced the relevant processes to obtain a secondary listing of the Company's shares on The Bolsa de Comercio de Buenos Aires (BCBA) - the Argentine Stock Exchange. The secondary listing is expected to take place later in 2018. The primary listing of the Company will remain the AIM market of the London Stock Exchange.

With support from existing and new shareholders, the Company raised US$13.1 million of equity (before expenses) in Q4 2017 to support the ongoing work programme at the recently acquired Puesto Flores and Estancia Vieja fields in Argentina, contributing towards the overall funding package to be paid to the Rio Negro Province in relation to the extension of the Concession for Puesto Flores. Following the completion of the acquisition, the Group announced their first commercial bank loan through the established Argentinian Banks, BACS Banco de Credito y Securitizacion S.A and Banco Hipotecario. The US$8.0 million facility was used to part fund the extension of the concession

Concurrent with the equity fundraising, the Group's loan facility with IYA Limited was restructured such that US$2.2 million of the outstanding principal was capitalised into equity and the remaining facility was extended to US$15.0 million at a 10.5% interest rate with maturity date remaining as the 31 December 2021. Certain clauses in the new loan agreement were amended resulting in the reclassification of the loan to non-current. At the year-end, total borrowings under this facility amounted to US$9.1 million (2016: US$9.1 million). Together, the new equity raise and loan capitalisation represent the US$14.8 million net placing proceeds set out in the Consolidated Statement of Changes in Equity.

The Group's primary investment focus during 2017 was on growth through acquisitions in core areas, increasing production in Argentina whist continuing to evaluate farm out opportunities in Paraguay and Argentina.

Investment in Property, Plant and Equipment and related Goodwill in the year included US$25.0 million on the acquisition and licence extension in Argentina, US$2.4 million on acquisition of low cost operations in the USA and US$10.3 million (2016: US$ 15.6 million) on capitalised workovers and tangible equipment purchases in Argentina, offset by a decrease in the asset abandonment recognition. As in the prior year, the Argentine Peso fell again in value relative to the US dollar, resulting in a reduction in the carrying value of the assets as presented in the Group financial statements.

Intangible Fixed Asset additions amounted to US$0.7 million (2016: US$0.6 million) relating to Paraguay and Argentina. In Paraguay, following encouraging interest in the farm out process the Company is committed to retaining its interests and licences in the Country and in such light is advancing plans towards drilling a well during 2019 The technical evaluation of the Matorras/Occultar block in Argentina was completed following the extension granted in 2017 and a formal farm out process has been launched.

Trade and other payables increased to US$18.1 million (2016: US$10.8 million) largely due to the US$7.0 million licence extension deferred payments due to be settled in 2018. The Group retains a prudent provision for all accrued costs in relation to the DP-1002 well. Notwithstanding this, President having taken expert legal advice considers that its claims against service providers relating to that well on a full liability basis extinguish and exceed the amounts so provided. No benefit from President's potential claims has been taken into account given that legal action is in process.

Year-end cash balances were US$4.0 million (2016: US$17.6 million).

Key Performance Indicators

Key Performance Indicators are used to measure the extent to which Directors and management are reaching key objectives. The principal methods by which the Directors monitor the Group's performance are volumes of net production, well operating costs and the extent of exploration success. The Directors also carry out a regular review of cash available for exploration and development and review actual capital expenditure and operating expenses against forecasts and budgets.

Production in Argentina increased by 42% to 302,849 boe (2016: 125,135 boe) or 830 boepd (2016: 342 boepd) following the acquisition of the Puesto Flores and Estancia Vieja assets in the Rio Negro Province, Argentina and the higher production from successful workovers on both the Puesto Guardian and Puesto Flores fields.

In Argentina, well operating costs before workover expenses were managed down during the year to US$41.43/boe (2016: US$55.69/boe) whilst depreciation also fell during the year to US$12.30/boe (2016: US$13.68/boe) as a result of the acquisition and reserves upgrades.

*Production and reserves for USA reported assets have been changed from an entitlement basis to a working interest basis to better reflect the production managed and controlled from operations on the licence interests.

Production from US operations rose by 52% to 291 boepd (2016: 191 boepd, as adjusted) following the acquisition of an incremental interest and operatorship of the Triche well in Louisiana offsetting the natural decline at East Lake Verret and East White Lake.

In USA, well operating costs rose by 11% to US$1.8 million (2016: US$ 1.6 million) following the Triche acquisition. On a per boe basis, well operating costs fell to US$16.90/boe (2016: US$23.13/boe) on a like for like basis primarily due to the additional volumes from the lower unit cost Triche operation.

Consolidated Statement of Comprehensive Income

Year ended 31 December 2017

Consolidated Statement of Financial Position

31 December 2017

Consolidated Statement of Changes in Equity

Year ended 31 December 2017

Consolidated Statement of Cash Flows

Year ended 31 December 2017

Notes

1. Accounting policies and preparation

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016 but is derived from the 2017 accounts.

A copy of the statutory accounts for the year to 31 December 2016 has been delivered to the Registrar of Companies, and is also available on the Company's web site. Statutory accounts for 2017 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 2016 nor 2017.

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 later in June 2018.

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 2017 financial statements they continue to adopt the going concern basis.

Well operating costs include US$2,566,000 (2016: US$1,670,465) in Argentine non-recurring workover costs expensed in the period.

To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of allocations to operating costs or balance sheet assets. Other expenses are shown net of the effect of allocations US$1.79 million (2016: US$0.75 million).

Insurance proceeds amounting to US$0.585 million were received in 2016 from claims arising in connection with the DP1002 well in Argentina.

At 31 December 2017, 115,176,490 (2016: 105,507,307) 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 2016 or 2017 as with the reported loss they are anti-dilutive.

7. Segment reporting

Segment assets can be reconciled to the Group as follows: