Pennpetro Energy plc

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

Corporate Update and Results for the 6 months

ended 31 December 2022 (Unaudited)

London, 2 May 2023 - Pennpetro Energy plc (LSE: PPP), an independent oil and gas company focusing on production in the Gonzales Oil Field in Texas, USA, announces today its corporate update and the financial results for the six months ended 31 December 2022.

Corporate Update

·    As announced on 16 March 2023, a Participation, Development and Option Agreement and Joint Operating Agreement with Millennium PetroCapital Corporation ("Millennium") for a proposed 250,000 acre (1,011 square kilometres) Area of Mutual Interest ("AMI") petroleum joint venture in Gonzales County, Texas;

·    The £1.54 million capital raising announced 28 March 2023; and

The drilling of the first participation well (Whistling Straits 5H well) with Millennium, which is currently in the "clean-up" phase post drilling the well to Total Depth, as announced on 12 April 2023.

The Company is now in a significantly stronger position than it was on 31 December 2022 and there are plans to grow the Company with potentially further participation wells with Millennium in 2023 and the promising farm-in opportunity to drill the Horse Hill #3 well near Gatwick Airport (as announced on 28 March 2023).

Results for the 6 months ended 31 December 2022 (Unaudited)

Financial summary

·      The financial results for the six months ended 31 December 2022 show a loss after tax of $356,193 (H1 2022: loss $205,000).

·      The Group's borrowings, which were non-current, as at 31 December 2022 were $4,182,794 (H1 2022: $4,257,000).

Operational summary

·      The Farm-In Agreement signed with Upland Resources Limited for the onshore Tunisian Saouaf permit covering 4,004 square kilometers was terminated by the Company post on-site visits by both Tom Evans, the Company's CEO and Andy Clifford, President of Nobel Petroleum USA, Inc., as detailed discussions with both the Tunisian authorities and operational personnel of Upland could not guarantee that all prior obligations regarding the concessional area had been complied with.

·      The East Texas proposed Farm-In Agreement to 300 shallow gas prospects could not be advanced at this time due to impending litigation issues regarding certain areas. Once these issues have been satisfactorily resolved, the agreement can be reinstated.

·      Significant developments in the pursuit of Proprietary Intellectual Property green technologies with international PCT (Patent Cooperation Treaty) being approved and entering the European National-Regional Phase.

Outlook

In line with our strategy, all our operations are in highly active plays where the economics of drilling and producing remain attractive at sub-US$30 oil prices. This highlights the success we have had in taking advantage of the prior industry downturn to accelerate the positioning of our South Texas leasehold position in favour of the Austin Chalk and Eagleford Shale. As prior reported, we have energized our entire portfolio having successfully drilled and test produced oil in the lower lying Buda formation as an economic reserve. With a strategic foothold in these prolific, low-cost plays established, and a proven management team in place, we will look to expand our drill focused activities, initially regarding the re-entering the Austin Chalk formation of the COG#1 well which flowed oil, with a view to placing that formation on full production.

Chairman's Statement

As reported last year after selling oil commercially from our initial well in the Gonzales field, as the world went into lockdown, we suspended all operations and activities in line with the requests of the US Government and Texas State Legislators. Our team in Houston has recommenced discussions with petroleum service contractors with a view to bringing our proposed 2nd and 3rd drilling projects into play.

With operations now being undertaken again, albeit in a more restricted manner, we sought to shape Pennpetro to emerge stronger and better positioned to accelerate its growth profile from these challenging times.

We also took the opportunity to expand our capital base by the placement of 1,166,667 new shares during March 2022 to raise an additional £350,000 in working capital, and also the appointment of Peterhouse Capital Limited as our Corporate Broker. The Board continues to seek accretive options for corporate development.

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

We remain confident in our US petroleum assets and the Board continues to build upon what has been a slightly less challenging year for the Group.

David Lenigas

Executive Chairman

2 May 2023

Chief Executive Officers Statement

Operations

In terms of our operations, prior to the onset of the pandemic restrictions, our focus had been on completing our initial horizontal well and organizing the permitting of our second targeted horizontal well (COG#2-H) situated to the north of COG#1-H. Our operator has filed formal completion certificates with the Texas Railroad Commission confirming that the COG#1-H well was being completed as a producer. As explained, our emphasis has now shifted to the development and drilling of COG#2-H, and our prior stated activity pertaining to the COG#1-H Austin Chalk oil operations, will be held pending post the drilling of COG#2-H well into production. Once the process of water removal from the lower reservoirs of COG#1-H is completed, an operation which we have decided to complete with the lower formation being cased-off and to re-enter and take hydrocarbon production from the upper Austin Chalk, from which we initially took oil.

With the advent of the Russian invasion of Ukraine in February 2022, the energy markets have been placed under extreme pressures, with the price of both Brent and West Texas being constantly in the US$120 zone. Although we expect that prices will retreat from these highs in the short term, any greater unseen forces will see prices escalate again.

In this stabilised oil price environment, Pennpetro has emerged from the oil vicissitudes as a low-cost, primarily asset-backed US onshore oil and gas business, with exciting international interests. Subject to oil prices, market conditions and sentiment, I remain confident that we can deliver our strategy by not only acquiring leases in active and producing US onshore plays and proving up the reserves by drilling new wells, but also by our new strategic acquisition focus on producing assets and directive into green energy initiatives.

This platform is one that has at its core, the active management of all types of risk associated with the oil and gas industry. Broadly speaking, development risk is managed by focusing on proven formations; execution risk is managed by participating in drilling activities with solid experienced industry personnel, which we have in Houston who have an extensive history in South Texas petroleum activities, as well as our operations offsetting those of major industry players; individual well risk is managed by building a diversified portfolio of leases and wells; meanwhile oil price risk is managed by focusing on areas that require relatively low oil prices to breakeven and ensuring our cost base, capital commitments and financing costs remain low, manageable and flexible.

As explained, our domestic US asset acquisition strategies generally only targets producing assets and applying proven horizontal technologies to conventional reserves from a firm productive foundation. This initiative is being driven through our Houston technical office with several asset opportunities having been investigated.

Pennpetro's Board currently comprises four Directors, who collectively have extensive international experience and a proven track record in investment, corporate finance and business acquisition, operation and development and are well placed to implement the Company's business objectives and strategy highly active plays.

We believe the Company's Board and its US management team are strong in terms of having the right mix of industry expertise covering all key areas of the business, including lease acquisition, geology, engineering, and finance.

Oil Price

West Texas Intermediate ("WTI") has continued its strength throughout the period under review averaging US$83.29/bbl. The value of WTI as at 31 Dec 2022 was US$80.16/bbl (source: Bloomberg Markets). We will receive a premium of approximately US$5/bbl for Gonzales crude oil deliveries.

Outlook

In line with our strategy, all our operations are in highly active plays where the economics of drilling and producing remain attractive at sub-US$30 oil prices. This highlights the success we have had in taking advantage of the prior industry downturn to accelerate the positioning of our South Texas leasehold position in favour of the Austin Chalk and Eagleford Shale. With a strategic foothold in these prolific, low-cost plays established and a proven management team in place, we will look to further expand our position in this US onshore sweet spot, as and when management considers it most advantageous to do so.

Finally, I would like to thank the Board, management team and all our advisers for their hard work over the last six months and also to our shareholders for their continued support.

Thomas Evans

Chief Executive Officer

2 May 2023

For further information, please contact:

NOTES TO EDITORS

Pennpetro Energy is an independent oil and gas company focusing on production in the Gonzales Oil Field in Texas, USA. Shares in the company were admitted to the Official List of the London Stock Exchange by way of a Standard Listing on 21 December 2017 with the ticker symbol "PPP". Its wholly owned subsidiary, Nobel Petroleum USA Inc. has a Participation, Development and Option Agreement and Joint Operating Agreement with Texas based Millennium PetroCapital Corporation over a 250,000 acre Area of Mutual Interest in Gonzales County, Texas, aimed at exploiting the prolific proven Austin Chalk oil and gas play. Pennpetro Energy has also recently signed a conditional binding agreement to conduct a new 3D seismic survey on the Horse Hill Oil Field near London's Gatwick Airport which paves the way to drilling the next production well (HH-3) for 49% of the revenue of this proposed well.

Further information on the Company can be found at www.pennpetroenergy.co.uk

IMPORTANT NOTICE - FORWARD-LOOKING STATEMENTS

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. In addition, even if results or developments are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Any forward-looking statements reflect the Group's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance.

Strategic report and business review

To the members of Pennpetro Energy plc

Cautionary statement

This business review has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed.

The business review contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.

This business review has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Pennpetro Energy plc and its subsidiary undertakings when viewed as a whole.

The Group's business model

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

The key elements of Pennpetro's strategy for achieving this goal are:

•     The creation of value through production development success and operational strengths, commencing with the Group's 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.

Summary results for the 2022 interim financial period

A summary of the key financial results is set out in the table below:

Interest

The net interest cost for the Group for the period was $73,000 (2022: $145,000). 

Loss before tax

Loss before tax for the period was $0.3m (2022: $0.2m).

Taxation

Taxation charge was $nil for the period (2022: $nil). 

Earnings per share

Basic and diluted earnings per share for the period were 0.42c loss (2022: 0.26c loss).

Financial position

The Group's balance sheet as at 31 December 2022 can be summarised as set out in the table below:

Cash flow

Net cash outflow for 2022 was $1,000 (2022: $1000). 

Consolidated Income Statement

For the six months ended 31 December 2022

Consolidated Statement of Comprehensive Income

For the six months ended 31 December 2022

Consolidated Balance Sheet

As at 31 December 2022