Final Results

Petro Matad Limited ("Petro Matad" or "the Company"), the AIM quoted Mongolian oil company, announces its audited final results for the year ended 31 December 2023. All monetary values are expressed in United States dollars unless otherwise stated.

2023 Operational Highlights

• The Company continued to push the Mongolian government and authorities to register Block XX Exploitation Area as State Special Purpose land and secured Cabinet approval for the certification in July. Continued bureaucratic delays in the government's regulatory processes to complete the certification led the Company to seek local level approvals in parallel.
• The Company raised $6.6 million to finance exploration drilling in Block V and its renewable energy joint venture focused on projects in Mongolia.
• The Velociraptor-1 wildcat well was drilled in Block V in mid-2023. Although the well was plugged and abandoned as a dry hole, it penetrated good quality reservoirs and source rocks and provides an excellent data point to high-grade other exploration areas in Mongolia. The operation also demonstrated that very low-cost exploration drilling can be done in-country with truck mounted equipment and a very small environmental footprint.
• Close cooperation and community support in Block V demonstrated that the Company's community outreach is fit for purpose.
• Petro Matad was chosen as the preferred contractor for the two new Production Sharing Contracts for which it had applied in the Mongolian Exploration Licensing round.
• The company formed the Sunsteppe joint venture with an experienced developer to pursue opportunities in the Mongolian renewable energy sector.

Mid-2024 update

• Local land access approvals are now in hand allowing operations to go ahead on Block XX in 2024 whilst the State Special Purpose Certification process is completed in parallel.
• Preparations are being finalised for completion of the Heron 1 well and the contractor has indicated that it should be ready to mobilise in July.
• Progress is being made on the exclusive green energy development projects that the Sunsteppe joint venture has high-graded at Choir (50MW Battery Storage) and at the major Oyu Tolgoi mine (24MW renewable energy supply for green hydrogen production).

2023 Financial Highlights

• As of 31 December 2023, the Group's cash position was $4.5 million (inclusive of Financial Assets) (31 December 2022: $5.1 million).
• The Group's net loss after tax for the twelve months ended 31 December 2023 was $5.93 million (31 December 2022: loss $2.95 million).
• As announced on 2 February 2023, the Company raised gross proceeds of US$6.6 million from a Capital Raise comprising of the issue of 215,121,952 new Ordinary Shares at a price of 2.5p per share.

Mike Buck, CEO of Petro Matad, said:

"2023 proved to be a frustrating year on Block XX, where the significant step of Cabinet approval of State Special Purpose Certification for the area did not translate into a rapid renewal of Petro Matad's licence to operate. Whilst that certification is still to be finalised and is having to wait until after the imminent Mongolian parliamentary elections, the fact that we were recently able to secure locally approved land use agreements for the areas in which our next operations are planned, ends a very long wait. We share our shareholders' relief and excitement that the completion operations on Heron 1 will go ahead with contractors planned to mobilise in July to prepare the well for production. Negotiations with PetroChina for oil transport, processing, export and sale are ongoing with the support of the industry regulator.

Our shareholders' patience and support are much appreciated as is the dedication and motivation of our staff. The Company will be focussing maximum effort on moving the Heron development forward through the second half of 2024 and I look forward to updating you further."

During 2023 the Company continued with its procurement and planning activities for the development of the Heron discovery in Block XX in eastern Mongolia. Unfortunately, the land access issue remained unresolved during the year which continued to prevent the completion of the Heron-1 well into a production well, installation of the surface infrastructure and first oil. With Petro Matad's land access applications being blocked by refusal at District (Soum) and Provincial (Aimag) levels, the Company sought State Special Purpose certification of Block XX from the Mongolian cabinet to give the Company full rights to access the entirety of the Block XX Exploitation Area for the duration of the Exploitation Licence. This certification process had not been used before for an oil project and this contributed to the bureaucracy moving slowly. However, through continuous lobbying and effort from the Company, Cabinet approval of State Special Purpose designation was secured in July 2023. Whilst this was a major achievement, unfortunately, under legislation introduced in 2017, several further steps were required to be executed by central and provincial authorities and the process continued to be obstructed by the Dornod Province Governor due to a government created partial overlap of the Block XX Special Purpose Area with an Aimag declared protected area. Recognising the difficulties that the regulations were presenting, in parallel, the Company pursued District level land approvals of the three areas within the Exploitation Licence area where its initial development operations are planned. 2023 ended without the Company securing land access but this was remedied at the end of May 2024 when the Company secured District level approvals. The land permits for these areas are valid for 5 years and allow work to go ahead whilst the State Special Purpose Certification process is completed. Discussions with PetroChina Daqing Tamsag (PetroChina), the operator of the producing fields adjacent to Block XX, continued through 2023 covering production operations support, access to oil processing and export facilities for the initial phase of the Heron development.

On the Company's central Mongolian exploration acreage, Block V, the Velociraptor-1 wildcat exploration well was drilled during the second quarter of 2023 but did not encounter any hydrocarbons and was plugged and abandoned. Major Drilling drilled the well to the planned total depth of 1500m and the operation was completed on budget without any environmental or safety incidents occurring. The lack of hydrocarbon indications was disappointing but some very thick and good quality sandstone reservoirs were encountered as predicted by the pre-drill geological model. Good quality source rocks were also penetrated and the well provides important data for future exploration efforts in the region where exploration activity has been very limited to date. The well cost was less than $2 million which is an exceptionally low cost operation considering in particular the remoteness of the location. This operation proved that very low cost exploration drilling can be executed in Mongolia when targets are at depths shallower than 2000m. The Production Sharing Contract (PSC) for Block V is due to expire at the end of July 2024 and the Company's efforts are now focused on completing environmental restoration and compiling all necessary documents for the acreage to be handed back to the State.

The Company submitted applications for two blocks offered in Mongolia's Exploration Licensing round and was selected as the preferred contractor for both areas. The government's approval process for the award of new exploration licences continued through the year.

A Renewable Energy joint venture partnership was set up by Petro Matad and an experienced Mongolian renewables developer, Wolfson LLC, in early 2023. Sunsteppe Renewable Energy (SRE) was very active through the year and has identified several attractive opportunities in battery storage and green energy generation. Two projects were high-graded and SRE secured exclusivity. The permitting and detailed design of both projects is progressing with pace with the potential for revenue generation in 2025. Numerous other initiatives are being generated by the renewables team.

Block XX Exploitation Area - Land access

The land access dispute that prevented the Company's access to the Heron development location continued throughout 2023. This ongoing situation came about due to conflicts in the Mongolian Land Law and local disquiet in Dornod Aimag in which Block XX is located. This Aimag is home to 95% of Mongolia's current oil production and the local communities in the area feel that they have suffered all the impacts of oil exploitation activities since these started up in the late 1990s with little or no benefit to the local community.

The Mongolian government's process to certify Petro Matad's Block XX Exploitation Licence area as Special Purpose land progressed very slowly. During the first quarter of 2023, the relevant ministries prepared the relevant documentation to present to Cabinet to secure approval to certify the Block XX Exploitation Area as a State Special Purpose Area. At the Cabinet meeting on 5 July, the certification of the Block XX Exploitation Area, including the Heron oil discovery, as a State Special Purpose Area was approved and Cabinet instructed officials to conclude the follow up formalities required under the 2017 Regulations on the management of special purpose areas. The Central Land Agency completed registration of the area and issued and signed the key Tripartite Agreement as did the Ministry of Mining and Heavy Industry (MMHI) leaving only the Governor of Dornod Aimag to sign. However, the Governor of Dornod Aimag insisted that compensation payments to the 10 herder families impacted by the certification of the area had to be completed before he would sign. Following a series of meetings, all the herders agreed to be compensated. Under the legislation, compensation payments should be made from the State budget but recognizing that this could be a very slow process, industry regulator the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) and the Company investigated ways to expedite these payments.

While the above issue was being addressed, the Company with the support of MRPAM, discussed with local authorities the potential to secure Soum level land usage permits for three areas within the Exploitation Licence where 2024 operational activities were planned. Whilst the land access issue remained unresolved at year end 2023, the Matad Soum Citizens' Representatives Committee approved the Company's land access request in early 2024. The Soum Governor issued his decree and executed land use agreements valid for 5 years in May 2024. As part of the local level approval, with the support of the Land Agency and MRPAM, Petro Matad paid compensation to the herders whose registered pastures will be impacted by the Block XX Exploitation Area.

2023 Review

HSSE

The Health, Safety, Security, and Environmental Management System (HSSE MS) of the Company is designed to adhere to best practices set by the International Association of Oil and Gas Producers (IOGP)

According to Mongolian national and international best practices, all reported HSSE incidents are thoroughly investigated, documented, and classified in accordance with IOGP guidelines. Moreover, the lessons learned from these incidents are openly shared through the management review process. We are pleased to report that Petro Matad, together with its sub-contractors, adhered to all Mongolian laws and national standards throughout the 2023 operations. Importantly, there were no environmental incidents, lost time incidents, or recordable incidents during the year.

The Company is fully committed to environmental protection and consistently strives to implement all necessary measures to fully comply with national and international best practices, with ISO 14001 serving as the benchmark.

The technical and biological restoration of the Velociraptor-1 wildcat exploration wellsite including the drilling mud sump was carried out by a specialized restoration contractor. The provincial handover committee conducted a formal inspection of the wellsite and signed off that the work had been completed in full compliance with the relevant regulations. Before starting construction of our VR-1 well lease in Block V in 2023, we had relocated and replanted 44 Zag trees in the lease area to another location to ensure their survival. We also worked with local authorities to plant over 670 Zag seedlings on the lease area during the biological restoration with the hope that the area will eventually develop into a Zag forest.

With the necessary approvals, the Company was also able to complete the restoration of the Heron-1 drilling location in preparation for the mobilization of well completion equipment and the installation of the beam pump, tanks and generator.

Social impact

In 2023, Petro Matad successfully implemented projects in Block V within the framework of corporate social responsibility, based upon requests from the local communities in the Guchin-Us and Baruunbayan-Ulaan Soums. The exploration well location and the well supplying the operation with water were located in these districts. Projects such as furnishings for a secondary school, water wells for herders, provision of traditional gers for use in ceremonies and other events, greenhouses, and livestock restocking for low income families were successfully implemented and highly appreciated by local communities. Following the Velociraptor-1 well operations, the Company received letters of gratitude from Guchin-Us and Baruunbayan-Ulaan Soums for the successful implementation of local projects and the safe and environmentally friendly completion of operations.

In December 2023, the Company hosted the Matad District Citizens' Representatives Committee on a visit to the South Gobi where mining and other development projects are providing tangible benefits to the local communities in which they operate. The trip was very successful and at a meeting to conclude the trip in Petro Matad's Ulaanbaatar headquarters the Committee thanked the Company, declared their support for the Company's development activities in Matad and agreed the terms of the Cooperation Agreement which governs community aid expenditure during oil exploitation activities.

Operations

Block XX: The Company continues to ensure that operational contracts and environment permits are in place to get the Heron-1 well onstream. Beam pump unit and related equipment, downhole completion and power generation equipment and power control systems are ready to be mobilised from storage and installed at Heron-1. Production tanks, sourced from PetroChina, will be relocated to the production site where installation fabrication and electrical work will commence once the well is completed. The Company and MRPAM have continued engagement with PetroChina, the operator of the Block XIX exploitation area and facilities located immediately north of Block XX, for co-operation with production operations and contracts to process crude oil at their facilities, crude export and sales at least during the initial phase of the Heron development. All crude oil will be supplied to the Mongol Refinery via pipeline, once the refinery is commissioned. Whilst these facilities continue to be constructed, trucking of Mongolia's oil production to China for refining will continue. The construction of the refinery and pipelines progressed in 2023.

The Company was in discussion with DQE Drilling (DQE), the main provider of drilling services in Mongolia for a multi-well development drilling and completion programme and signed a Memorandum of Understanding (MOU) in 2023. The terms included some deferral of costs to allow a portion of the drilling expenditure to be settled from future production revenue. However, MRPAM insisted that current regulations do not cater for multi-year contracting and accordingly the Company has concluded a Tender inviting all potential contractors to bid on drilling on Block XX. DQE was the lowest bidder and has been chosen to do the work. Final contract negotiations are underway and the Company will seek to incorporate the terms of the previous MOU within the framework of the current regulations.

Block V: The Velociraptor-1 wildcat exploration well located in the Taats Basin of Block V located in central Mongolia was drilled in June/July 2023 and reached a total depth (TD) of 1500m as planned, having encountered more than 350 metres of good quality reservoir sections. Unfortunately, the evaluation of cuttings and wireline logs did not identify any hydrocarbons and the well was plugged and abandoned. The well encountered geological markers close to prognosis at all levels. The primary objective Late Jurassic/Early Cretaceous Undur Formation was encountered at 1170m and had good quality reservoir sands interbedded with shales over a c.200m interval. In the secondary objective Early Cretaceous Shinehudag Formation, three thick sand units were drilled with average porosity of around 18%. The well was drilled by Major Drilling and operations were carried out on time and within budget with the full support and cooperation of the local community. Post-well studies concluded that excellent source rocks were encountered in the well, similar to those encountered in the nearby Snow Leopard-1 well drilled in 2018. The wells proved the presence of both excellent quality source rocks and good quality reservoir units in the Taats Basin and provide excellent data points for the evaluation of similar basins in this part of the country.

The Block V PSC is due to expire at the end of July 2024 and the Company's efforts will now focus on completing and obtaining all required permits and agreements from local authorities and MRPAM for the acreage to be handed back to the State without issue. The Company has fulfilled all of its obligations under the PSC.

2023 Exploration Licencing Round

The Company submitted applications for two blocks offered in the MRPAM promoted Exploration licensing round. Working Groups, comprising experts from MRPAM and MMHI were established and the Company successfully completed negotiations on the terms of the PSC and work programmes for each block. The Company's has focused on blocks in Mongolia that contain extensions of basins proven productive for oil across the international border in China. The government's approval process for the award of new exploration licences continued through 2023 and MRPAM expects awards once the new government is formed after the mid-2024 parliamentary elections.

Renewable Energy Opportunities in Mongolia

The Company's renewable energy vehicle, Sunsteppe Renewable Energy (SRE), made very good progress in 2023. In consultation with the Ministry of Energy, the need for a 50MW/150MWh battery energy storage facility in central Mongolia was defined. SRE's team completed the required feasibility studies and the grid connection study for the project was approved by the National Dispatching Centre. All required documentation was submitted to and accepted by the Technology Committee of the Ministry of Energy which subsequently approved the project. The application for the License to construct is now being prepared. SRE expects that this project can be brought onstream and be generating revenue e in 2025.

A second project involving a utility scale wind farm to supply renewable energy to generate green hydrogen for use at the major Oyu Tolgoi mine operation in the South Gobi is also progressing with a forecast timescale similar to SRE's battery storage project. The project is designed to demonstrate the viability of green hydrogen as a fuel for use in the mining industry in Mongolia and SRE is very excited to be involved. This initiative has the strong support of the Mongolian Government and a memorandum of understanding has been signed with the Ministry of Energy. A Japanese government grant has also been secured to support the project with another grant to be applied for later in 2024.

SRE and Petro Matad will determine, as these two projects proceed towards construction ready status, how best to fund them. Debt funding for similar projects is already established in Mongolia, leaving open the possibility that SRE can aspire to stay involved in the construction phase and establish itself as a key renewable power producer in the country. The potential for renewable energy in Mongolia is huge with solar and wind power set to make up an increasing part of the country's energy mix in the coming decades. This has been embraced by lawmakers, with Mongolia ratifying international conventions including the Paris Agreement. SRE has made good progress so far and has identified several other projects for consideration.

Community Relations

Conclusions

Throughout 2023 the Company vigorously pursued solutions to the Block XX land access issue working closely with MRPAM, MMHI and local communities. The securing of local land approvals in 2024 will now enable the Company to carry out its intended work programme for the year. Preparations to complete Heron-1 and achieve first oil are well advanced. The Velociraptor-1 well operations were completed within budget, without any HSSE incident and with excellent co-operation with the local community which is a significant achievement for the Company's Mongolian staff especially considering the remoteness of the location. The low cost operation demonstrates that extremely cost effective exploration can be conducted in Mongolia. The Block V PSC expires end July 2024 and the acreage will be handed back to the state. The Company is optimistic that its successful applications for two new areas will see the blocks awarded in late 2024 or early 2025. The progress made in the renewable energy sector is very encouraging and could provide a significant growth opportunity for the Company.

Acknowledgements

The Company is very appreciative of the support and collaboration shown by MRPAM and MMHI through the long struggle to secure land access. Petro Matad is confident that the Special Purpose certification of Block XX will finally be resolved and is very happy to have secured local land access approvals to allow work to continue in parallel.

The Directors would like to reiterate their appreciation to the staff of Petro Matad who have continued to work with enthusiasm, diligence, and dedication. Shareholders continued support is also highly appreciated. The Board looks forward to an exciting operational period in 2024.

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2023

Consolidated

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Notes to the Consolidated Financial Statements

For the year ended 31 December 2023

1 Corporate information

Petro Matad Limited (Company) incorporated in the Isle of Man on 30 August 2007 has five wholly owned subsidiaries, which are: Capcorp Mongolia LLC and Petro Matad LLC (both incorporated in Mongolia), Central Asian Petroleum Corporation Limited (Capcorp) and Petromatad Invest Limited (both incorporated in the Cayman Islands), and Petro Matad Energy Limited (incorporated in Isle of Man). Petro Matad Limited owns 50% of Sunsteppe Renewable Energy Pte. Ltd. (formerly known as Petro Matad Singapore Pte. Ltd.), which is incorporated in Singapore, which is owned jointly together with Sunsteppe Energy LLC to pursue renewables energy projects. The Company and its subsidiaries are collectively referred to as the "Group". The Group's principal activity in the course of the financial year consisted of oil exploration and development and investment in renewable projects in Mongolia.

Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding approximately 19.92% of the shareholding at the year end of 2023.

2 Summary of significant accounting policies

• Basis of preparation
• Level 3 inputs are unobservable inputs for the asset or liability.
• Statement of compliance
• Going concern

The Group generated a loss of $5.93 million for year 2023 (2022 Loss: $2.95 million) and experienced net cash outflows from operating activities of $3.49 million (2022 Outflow: $2.73 million). In addition, as outlined in Note 18(b) the Group is required to meet minimum exploration commitments on its Block XX Production Sharing Contract (PSC) of approximately $6.4 million. The Company previously reached an agreement with the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) that this underspent minimum exploration commitment can be transferred to and spent on exploration and appraisal activities during the exploitation period, which has commenced as the application for a 25-year Exploitation Licence (EL) for Block XX was approved in July 2021. The Company raised an additional $6.6 million funds in February 2023, which has provided sufficient working capital to continue operations including the drilling of an exploration well in Block V and investing in renewable energy projects. The Company had planned to commence production operations in 2023 with the completion and production of the Heron-1 discovery well. However, issues not within the Company's control resulted in being unable to access Block XX to undertake planned operations. The relevant government bodies have since designated Block XX as special purpose land. The final steps before total access is granted are the remaining steps under Regulation 287 which directs the procedures to formalize a land as special purpose land. The Company expects these steps to be completed in the near future. The delay in obtaining land access, while unfortunate, has not jeopardised the Company's going concern status. Accordingly, the Company believes that the current cash balance is sufficient to continue operations until at least July 2025. Production operations are expected to commence in the second half of 2024. This production will provide the Company with a revenue source and ensure that the Company remains a going concern. It is also important to note that the Company can access loans up to $1.5 million from Petrovis under an existing loan agreement.

Cumulative expenditures to end 2023 in Block V exceed financial commitments by $5.0 million. The Block V PSC exploration term expires in July 2024, at which point the Block will be relinquished with no outstanding commitments remaining.

Application of new and revised Accounting Standards

Accounting Standards that are mandatorily effective for the current reporting year

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and effective for an accounting period that begins on or after 1 January 2020.

Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial statements, the Group has not applied the new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. Based on a preliminary review of the standards, interpretations and amendments, the Directors do not anticipate a material change to the Group's accounting policies, however further analysis will be performed when the relevant standards are effective.

• Basis of consolidation
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
• Foreign currency translation

Functional and presentation currency

Transactions and balances

Exchange differences are recognised in profit or loss in the period in which they arise except for:

• Exchange differences on transactions entered into to hedge certain foreign currency risks; and

Translation of subsidiaries' functional currency to presentation currency

• Cash and cash equivalents
• Trade and other receivables
• Plant and equipment

Plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value.

Derecognition

Financial instruments

Initial recognition and measurement

Financial instruments are initially measured at fair value plus transaction costs, except where the instruments is classified at 'Fair value through profit or loss' in which case transaction costs are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Classification and subsequent measurement

• Financial assets at fair value through profit and loss or through other comprehensive Income
• Financial Liabilities

Fair value

Derecognition

• Inventory
• Exploration and evaluation expenditure
• Exploration and evaluation assets
• Impairment of tangible and intangible assets other than goodwill

Impairment review for deferred exploration and evaluation assets are carried out on a project-by-project basis, where each project representing a single cash generating unit. An impairment review is undertaken when indicators of impairment arise, typically when one of the following circumstances apply:

• Unexpected geological occurrences that render the resource uneconomic;
• Title to asset is compromised;
• Variations in prices that render the project uneconomic; or
• Variations in the currency of operation.
• Trade and other payables
• Provisions
• Leases

The Group as lessee

At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (ie a lease with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease.

Lease payments included in the measurement of the lease liability are as follows:

• fixed lease payments less any lease incentives;
• the amount expected to be payable by the lessee under residual value guarantees;

The Group as lessor

• Contributed equity
• Revenue

Interest revenue

Revenue is recognised on an accrual basis using the effective interest method.

• Share-based payment transactions
• the extent to which the vesting period has expired; and
• the number of awards that, in the opinion of the Directors of the Group, will ultimately vest.
• Income tax

Current tax

Deferred tax

Current and deferred tax for the year

• Earnings per share
• Costs of servicing equity (other than dividends);
• Significant accounting judgments, estimates and assumptions

Share-based payments

Recovery of the exploration and evaluation assets

Going Concern

3 Operating segments

5 Income tax

Income tax recognised in the statement of profit or loss:

Tax expense/(benefit) comprises:

Petro Matad Limited is subject to Isle of Man income tax at a rate of 0%. As a consequence, no provision for Isle of Man current tax or deferred tax has been made in the Company's accounts.

6 (Loss)/Earnings per share

Cash at bank and in hand earns interest at fixed and floating rates based on prevailing bank rates, and the fair value of the above cash and cash equivalents is $503,000 (2022: $1,476,000) due to the short-term nature of the instruments.

Reconciliation from the net gain/(loss) after tax to the net cash flows from operations:

Non-cash investing and financing activities

There were no non-cash investing or financing activities undertaken in the 2023 financial year or prior year (2022: $0.00).

8 Trade and other receivables

Current

All amounts are recoverable and are not considered past due or impaired.

2022 account receivables include the receivable from TDB Capital for expired bond for which the money was received on 4 January 2023.

9 Prepayments

The Group holds term deposits with an average weighted interest rate of 6.74%. The deposits have maturity dates greater than 3 months. None of these assets had been past due or impaired at the end of the reporting period.

Inventory are mainly consumables, including casing, mud and drilling materials purchased for Block XX.

12 Exploration and evaluation assets

The exploration and evaluation asset arose following the initial acquisition in February 2007 of 50% of Petromatad Invest Limited, together with acquisition on 12 November 2007 of the remaining 50% not already held by the Group, for a consideration of 23,340,000 ordinary shares credited as fully paid up and with an estimated fair value of $0.50 per share, taking into account assets and liabilities acquired on acquisition. This relates to the exploration and evaluation of PSC Block XX.

Management have reviewed for impairment indicators on Block XX and no impairment has been noted.

During 2020, the Company was focused on providing all necessary documentation to the Mongolian regulator in an effort to obtain approval for its Exploitation Licence application, which would then enable development of its 2019 Heron discovery in the northern area of Block XX. The Exploitation Licence was approved on 5 July 2021, which allows the Company to be able to appraise, develop and produce oil from the area for a 25-year term, extendable by up to 10-years (two times 5-years)

13 Property, plant and equipment and Right-of-Use asset

Reconciliation of carrying amounts at the beginning and end of the year:

Trade payables are non-interest bearing and are normally settled within 60 day terms.

15 Issued capital

Ordinary Shares

• On 10 February 2023, the Company concluded a placing by issuing 94,787,994 shares at a price of GBP0.025 per share arranged through its nominated adviser, broker and joint book runner for the purposes of the Placing, Shore Capital Stockbrokers.
• On 10 February 2023, the Company concluded a placing by issuing 67,000,626 shares at a price of GBP0.025 per share arranged through its broker and joint book runner for the purposes of the Placing, Zeus Capital.
• On 10 February 2023, the Company issued 33,333,332 shares through direct subscriptions at a price of GBP0.025 per share.
• On 10 February 2023, the Company issued 20,000,000 shares to shareholders at a price of GBP0.025 per share through a retail offering on the Bookbuild platform.

16 Reserves

A detailed breakdown of the reserves of the Group is as follows:

Nature and purpose of reserves

Merger reserve

Equity benefits reserve

Foreign currency translation reserve

17 Share based payments

• Long Term Equity Incentive Plan (Plan or Group's Plan)
• 25% vest on the first production of oil on a commercial scale, estimated by management as to be achieved prior to 31 December 2024; and
• Option pricing model

No Options have been issued during 2022 and following table summarizes Options granted during 2023, along with relevant details in relation to the grant.

Options granted above are exercisable as follows:

• 33% one year after grant date
• 33% two years after grant date
• 34% three years after grant date
• Movement in Share Options

• Share Options Contractual Life
• Conditional Share Awards pricing model

No awards were granted in 2022 and 2023.

Movement in Conditional Share Awards

• Conditional Share Awards Contractual Life
• Summary of Share Based Payments

A reconciliation of all share-based payments made during the year is as follows:

Exploration expenditure commitments

Petromatad Invest Limited and Capcorp have minimum spending obligations, under the terms of their PSCs on Blocks V and XX with MRPAM.

The amounts set out below do not include general and administrative expenses.

Production Sharing Contract Fees:

Contingencies

On 5 August 2016, Shell through its Affiliate company announced it would be withdrawing from Blocks IV and V in West/Central Mongolia. As part of the negotiations leading to formal Mongolian Government approval of the reassignment of interest from Shell's Affiliate to the Company's Affiliate, Shell agreed to a payment of $5 million to be remitted to the Company's Affiliate upon such government approval being received. A condition to the payment by Shell is that the proceeds are required to be repaid to Shell by the Company in the event a farmout is concluded in future prior to the development of either Block IV or V. Block IV has since been relinquished by the Company in its entirety and Block V will be relinquished in its entirety in July 2024, at which point the conditional payment will no longer be applicable. The $5 million payment was received on 1 February 2017.

19 Related party disclosures

The immediate parent and ultimate controlling party of the Group is Petro Matad Limited.

Equity Interest

Subsidiary Details

Central Asian Petroleum Corporation Limited (Capcorp) was acquired on 12 November 2007. Petro Matad Limited holds 43,340,000 ordinary shares of $0.01 each.

Capcorp Mongolia LLC is 100% owned by Capcorp. Capcorp holds 1,000,000 ordinary shares of MNT150 each.

Petromatad Invest Limited was acquired on 12 November 2007. 25,000 shares of $1 each held by Capcorp was transferred to Petro Matad Limited on 25 November 2019 resulting in Petro Matad Limited holding 50,000 shares of $1 each.

Petro Matad LLC is 100% owned by Petromatad Invest Limited. Petromatad Invest Limited holds 15,000 ordinary shares of MNT10,000 each.

Petro Matad Singapore Pte. Ltd was 100% owned by Petro Matad Limited who held 50,000 ordinary shares of SG$1.On 20 February 2024, the Company transferred 50% of Petro Matad Singapore Pte. Ltd to Sunsteppe Energy LLC and is currently holding 25,000 ordinary shares of SG$1. Petro Matad Singapore Pte. Ltd was also renamed as Sunsteppe Renewable Energy Pte. Ltd.

Petro Matad Energy Limited is 100% owned by Petro Matad Limited. Petro Matad Limited holds 50,000 Ordinary shares of $1 each.

On 13 April 2023, the Company formed Sun Steppe Power LLC, incorporated in Mongolia, which is a 50% owned subsidiary of Petro Matad LLC and 50% owned by Sunsteppe Energy LLC.

Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding approximately 19.92% of the shareholding at year end of 2023.

20 Key management personnel

Details of Directors

Directors

Enkhmaa Davaanyam Non-Executive Chairperson

Timothy Paul Bushell Non-Executive Director

Michael James Buck Chief Executive Officer

Shinezaya Batbold Non-Executive Director

Compensation of Directors

Consolidated

Other key management personnel transactions

There were no other key management personnel transactions during the year (2022: Nil).

21 Financial risk management objectives and policies

The main purpose of these financial instruments is to raise capital for the Group's operations.

Risk Exposures and Responses

Interest rate risk

Sensitivity Analysis

Price risk

Credit risk

There are no significant concentrations of credit risk within the Group.

Maximum exposure to credit risk at reporting date:

Impairment Losses:

None of the Group's receivables are past due at 31 December 2023 (2022: Nil)

Liquidity risk

The remaining contractual maturities of the Group's and parent entity's financial liabilities are:

All of the Group's amounts payable and receivable are current.

Further, the Group has exploration expenditure commitments on its PSCs as disclosed in Note 18(b).

Fair Value of Financial Assets and Liabilities

Fair Value Hierarchy as at 31 December 2023

22 Capital management

The Group is not subject to externally imposed capital requirements.

23 Events after the reporting date

On 20 February 2024, the Company transferred 50% of Petro Matad Singapore Pte. Ltd to Sunsteppe Energy LLC. Petro Matad Singapore Pte. Ltd was also renamed as Sunsteppe Renewable Energy Pte. Ltd. The Company is currently in process of transferring Sun Steppe Power LLC to be a wholly owned subsidiary of Sunsteppe Renewable Energy Pte. Ltd.

The Company has had its application for land access for 2024 operations approved by the Matad District Citizen Representative Hural. A land use agreement enabling access to land for 2024 planned operations is in process of being finalized.

24 Auditors' remuneration

The auditor of Petro Matad Limited is Hall Chadwick (WA) Pty Ltd.

Amounts received or due and receivable by Hall Chadwick (WA) Pty Ltd:

Amounts received or due and receivable by Deloitte Onch Audit LLC for:

Amounts received or due and receivable by Deloitte Infinity Assurance LLP for:

25 Other Information

Registered Office:

Victory House

Douglas

Isle of Man

IM1 1EQ