Company Announcements

19 September 2024

Petrel Resources plc

("Petrel" or "the Company")

Unaudited Interim Statement for the six months ended 30 June 2024

Petrel Resources plc (AIM: PET) today announces unaudited financial results for the six months ended 30^th June 2024.

Chairman's Statement

Petrel is a junior hydrocarbon explorer with interests in Iraq and Ghana. There are now many oil & gas projects available, with promising geology and manageable logistics.

Demand for oil & oil products, as well as LNG, now surpasses preCovid-19 levels. Despite recent softening, prices are reasonable, and the supply-demand balance steadily tightens as majors withdraw from non-core basins, focusing on existing projects - often using cash to pay dividends and buy shares back, rather than make long-term investments.

However, the fiscal terms available from most states reflect those which became normal during times of better market conditions (2004 - 2014), but are sub-optimal for explorers. Many producing countries, including Iraq, are now talking about improved fiscal terms, but these have not yet been implemented. As a result, most successful bidders in international bid-rounds tend to be State Oil Companies, or in some cases majors with excess cash - often bidding uneconomic fiscal terms.

Neither the stock market nor farm-out market have been supportive of juniors or new frontier projects since 2014.

Given the improving supply-demand balance, and the clear need for major new discoveries as existing fields deplete, what explains the negative stance taken in the stock market?

The reason is that official policy (especially in Europe) has been to support a 'Green Transition', and to avoid permitting new projects that might became stranded assets - or lock economies into fossil fuels. 

To some extent, this hard line is being reversed with worries over security of supply following the Ukraine war from 2022 to date. The EU's 'Global Gateway' (initially conceived to boost development, especially in Africa - as a response to China's 'Belt and Road' initiative) has now morphed into a means to secure supplies of 34 critical minerals, of which 17 are 'strategic'.

The USA passed its 'Inflation Reduction Act' in 2022, followed by the EU's Critical Resource Minerals Act in 2024. The directors have been working closely with the EU Commission's Critical Resource Minerals initiative since 2023. The opportunity is infinite, due to the paucity of EU companies experienced in exploration and development especially in developing countries, which require special skills that are not easily developed. Infrastructural investment may be funded up to 50% of total through EU, or Member States' lending bodies at circa 3.3% interest over 20 years. For qualifying 'Green Projects' up to 80% is possible. Typically, for new projects in new areas capex comprises 67% infrastructure, with plant, etc.  making up the 33% balance.

Petrel Resources plc, which is an Irish and EU company, has been encouraged to apply its skills and contacts to help resolving the EU's critical need to reduce dependency on Chinese-controlled mining and processing of strategic raw materials. Given current market conditions, this makes sense for shareholders and the EU.

Accordingly, our team has invested time and effort, over recent months, in researching qualifying projects that fit within the EU's criteria.

Currently, the most advanced opportunities identified  comprise adequate sources of Helium, which is increasingly critical to high-tech and aerospace industries. Though our petroleum contacts, we are aware of bypassed discoveries, in the Former Soviet Union (FSU) and elsewhere, that show large volume, high confidence reserves ideally suited to fulfil EU needs.  Historically, most major Helium (and indeed natural Hydrogen) discoveries have been made - largely by accident - via oil & gas exploration. For reasons of prevailing economics and demand at the time, most of these discoveries have yet to be developed.

In light of current sanctions, it is impractical to develop such Helium (or Cobalt or Lithium) deposits in Russia or Iran.  However, jurisdictions such as Kazakhstan are considered pro-western, and the EU has recently signed a Strategic Cooperation Agreement with the Kazakh government, so this is now an EU priority. The required gas exploration and production skills are closely related to those familiar to our team from the petroleum industry. There seems to be excellent potential opportunities for Petrel in such assets, subject to securing necessary funding.

Initial review work gives our experts confidence in the reserve and resource numbers. Potential offtake agreements - both for the EU, as well as China and India are economic at current prices. Title is an issue in the FSU, though many projects have proved solid and delivered good returns where the operator is well-partnered and pays attention to local community relations. These are Petrel's strengths.  

Based on initial discussions, we do not see offtake, financing, and permitting as insurmountable obstacles in such critical resources.

The EU has funding and needs critical resource minerals. We believe that we have the contacts, skills and experience to deliver them.

Accordingly, it makes sense for Petrel to pivot, at least partially, away from a pure petroleum focus in developing countries, and towards critical resources for which EU support is available.

Financing

The directors and their supporters funded working capital needs, and are prepared to participate in any necessary, future fundings.

The board expects to add another one or more Non-Executive Director with the next major deal.

David Horgan

Chairman

18 September 2024              

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement. In addition, market soundings (as defined in MAR) were taken in respect of the matters contained in this announcement, with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the company and its securities.

ENDS

For further information please visit http://www.petrelresources.com/ or contact: