Pennpetro Energy : Accounts for the Period Ended 31 December 2019

10166359 (England and Wales)

PENNPETRO ENERGY PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 DECEMBER 2019

CONTENTS

Page

Company Information 2

Chairman'sStatement 3

ExecutiveDirector'sStatement 4

Operations Report 7

Financial Report 9

Strategic Report 10

Directors'Report 15

Directors'Information 18

Statement ofDirectors'Responsibilities 20

Corporate Governance Report 21

Directors'Remuneration Report 23

Audit Committee Report 26

Report of the Independent Auditor 28

Consolidated Statement of Comprehensive Income 33

Consolidated Statement of Financial Position 34

Company Statement of Financial Position 35

Consolidated Statements of Changes in Equity 36

Company Statements of Changes in Equity 37

Consolidated Statements of Cash Flows 38

Company Statements of Cash Flows 39

Notes to the Financial Statements 40

COMPANY INFORMATION

Directors

Keith Edelman(Non-Executive Chairman)

Olof Nils Rapp(Senior Non-Executive Director)

Thomas Evans(Executive Director)

Philip Nash(Non-Executive Director)

Secretary

David Middleburgh (MA Law Trinity Hall Cambridge) FHF Corporate Finance Limited

Technical Advisor

Eur. Ing. Dr. Michael Smith, FIMMM, C.Eng.

Registered OfficeLegal Advisors

1/88 Whitfield Street

London

W1T 4EZ

UK Legal AdvisersBirketts LLP

22 Station Road Suite 975 Cambridge CB1 2JD UK

US Legal AdvisersWalne Law, PLLC 4900 Woodway Houston, Texas TX 77056 USA

Fladgate LLP

16 Great Queen Street London

WC2B 5DG UK

CMS Cameron McKenna Nabarro Olswang LLP Cannon Place

78 Cannon Street London

EC4N 6AF UK

Independent AuditorRegistrarsCommunicationsRegistered Number

Crowe U.K. LLP Statutory Auditor St Bride's House 10 Salisbury Square London

EC4Y 8EH

Porter Hedges LLP

1000 Main Street, 36thFl. Houston, Texas

TX 77002 USA

Computershare Investor Services plc The Pavilions

Bridgewater Road Bristol

BS13 8AE

Instinctif Partners 65 Gresham Street London

EC2V 7QN 10166359

CHAIRMAN'SSTATEMENT

Annual Report & Financial Statements For the year ended 31 December 2019

I am pleased to present the annual results for Pennpetro Energy PLC("Pennpetro")for the year ended 31 December 2019.

As was reported last year, in line with theCompany'sstrategy to grow its interests in the petroleum sector in the USA Pennpetro USA Corp.,("Pennpetro USA")was incorporated as an acquisition vehicle to pursue the opportunities that were being brought to the Company. Pennpetro USA is headquartered in Houston, Texas and has been examining various complimentary asset opportunities, not only in the South Texas area but we also examined assets that BP were looking to release in their Lower 48 sale and in particular the Scoop assets in Oklahoma. Ultimately, we decided not to pursue any of these opportunities. However, with relationships having been developed with excellent oil teams in Houston, we have been concentrating on central upper Gulf Coast with a number of opportunities being presented.

Due to rationalisation on holding interests to streamline accounting procedure so as not to have to undergo duplication, NobelUK'sUS-based subsidiaries have been transferred to Pennpetro USA, our direct US subsidiary, which now owns the portfolio of leasehold petroleum mineral interests centred on the City of Gonzales, in southeast Texas, comprising the undeveloped central portion of the Gonzales Oil Field. The petroleum assets include approximately 1,000 leases covering 2,500 acres of land and contain proven oil condensates. The original Competent Persons Report("CPR")prepared in advance of the acquisition estimated that, as a result of the acquisition, Pennpetro Group would have a Working Interest in the portfolio of petroleum mineral leases of 2,000 MBBL of oil and 1,000 MMcf of gas. Most recently, Nobel has again increased its working interest in the portfolio of petroleum interests from 75% to 100%, thereby its Working Interest is now over 4,000 MBBL of oil and 2,000 MMcf of gas.

The most recent CPR prepared in December 2017, estimated that theGroup'sthen 50% working interest basis undiscounted Net Revenue Interest in the Gonzales petroleum leases amounted to $62 million; with the recent increase to a 100% Working Interest and further undiscounted Net Revenue Interest, this has now increased to over $120 million.

Moving on to our oil assets, our US-operating teams concentrated on the development of the Buda formation which was encountered during the drilling of our initial well, and as previously advised, was significant in providing drill proven reserves over our lease holdings.

During 2019, our US operations encountered electricity delivery issues due to redevelopment work required for the City of Gonzales electrical grid system. This resulted in delays and several stop-starts to our operations. We successfully replaced damaged jet pumping units and ancillary power units and resumed pumping from the well in the latter part of 2019. In April 2020, the Covid-19 pandemic caused us to put our operations in Gonzales on hold.

We continue to monitor the situation in Gonzales and whilst there is still a degree of uncertainty, with recent coronavirus issues, we plan to re-enter the completed horizontal 3,300-foot lateral extension portion of the initial well COG#1, with a focus on pumping from reservoirs in the Austin Chalk formation.

Our aims for the second half of 2020 are to recommence operations, move into commercial production and also plan for a second horizontal well.

In addition, the Company recognising the global impact of environmental concerns, has instigated due diligence with regard to expanding its experiences and core competencies within the fossil environment and petroleum drilling to specific green energy initiatives securitised with US intellectual property filings to be expanded internationally.

We remain confident in our petroleum assets, our US operations and the Board, to continue to build upon what has been a very busy year for the Group.

Keith Edelman

Non-Executive Director, Chairman 30 June 2020

EXECUTIVE DIRECTOR'SSTATEMENT

Annual Report & Financial Statements

For the year ended 31 December 2019

Pennpetro'sintention is to become an active independent North American development production company.

The key elements ofPennpetro'sstrategy for achieving this goal are:

• •The creation of value through production development success and operational strengths, commencing with the Group's City of Gonzales Lease("COGLA")assets.

• •Focusing on commercialisation and monetisation of oil and gas discoveries, and potentially utilising cash flows from initial projects to fund the acquisition or development of future projects.

• •Active asset portfolio management.

• •Positioning the Company as a competent partner of choice to maximise opportunities and value throughout the E&P lifecycle.

• •Asset acquisitions of producing hydrocarbons and suitable green energy technologies.

Our focus during 2019 was to continue to develop our proven reserve base at our licences in Gonzalez.

According to the Group's Competent Person's Report ("CPR"), prepared in December 2017, Pennpetro had a Working Interest in 2,000 Mbbl of oil and 1,000 MMcf of gas across its Gonzalez leases. Most recently, Nobel has increased its working interest in the portfolio of petroleum interests from 75% to 100%, thereby its Working Interest is now over 4,000 MBBL of oil and 2,000 MMcf of gas resulting in a substantive uplift in our valuation metric.

The low oil price environment since mid-2014 presented the opportunity to acquire leases in our core areas of focus, most notably the prolific Austin Chalk and Eagleford Shale in South Texas. To this, we have been able to add additional reserves from the Buda Formation from the drilling of an initial horizontal well, which as prior reported we have now completed with the operator having advised the Texas Railroad Commission, the local authority, that the well is designated as a discovery and commercial unit. Commercial quantities of test hydrocarbons have been sold from this well. The submersible jet pumping unit to the well required significant remedial work as the unit supplied by the vendor was found to have certain issues with regard to thedeliverability'sof electrical input through the provided electrical circuit boards resulting in operational impairment. This work unfortunately caused significant delays to the Buda oil recovery operations, as the well was required to be suspended on a number of occasions.

Having regard that the Buda oil formation water resulting from prior extensive flooding would need some time to be pumped out and regain pressure thereby recommencing hydrocarbon deliverability from that reservoir, it was decided that as the Buda operations had achieved the important positive result of confirming that this reservoir was now drill confirmed to be active over the acreage and a confirmed secondary recovery reserve, that it was time to clean out and re-enter our initial objective, the Austin Chalk formation which we had drilled out to 3,300 feet horizontally and which had tested positive for both oil and gas recovery. The Austin Chalk formation was drilled out at approximately 7,200 feet sub-surface, whereas the Buda was intersected at 8,500 feet sub-surface. This will require that we case-off the lower Buda formation until needed to deplete in the future and initiate a work-over rig operation to re-enter and clean out the horizontally drilled formation leg to initiate hydrocarbon recovery from this proven oil interval.

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