FULLTEXT DEL 2 AV 2
Årsredovisning 2025
PAGE 43
Report to Shareholders | December 31, 2025
Key audit matter How our audit addressed the key audit matter
Impact of oil and gas reserves on oil and gas
properties for the Agbami field cash generating unit
(CGU)
Refer to note 2 – Basis of preparation, note 3 – Material
accounting policies, and note 5 – Oil and gas properties to the
consolidated financial statements.
The Company had $1,413.5 million of net oil and gas properties
as at December 31, 2025. Depletion expense was
$207.9 million for the year then ended. Oil and gas properties
are depleted using the Unit of Production (UoP) method over
total estimated proved and probable oil and gas reserves.
Oil and gas properties are grouped for recoverability
assessment purposes into cash generating units (CGUs). At
each reporting period, management assesses its CGUs to
determine whether any indication of impairment exists. Where
an indicator of impairment exists, with reference to total proved
and probable oil and gas reserves, a formal estimate of the
recoverable amount is made, which is considered to be the
higher of the fair value less costs to dispose and value in use.
An impairment loss is recognized if the carrying amount of the
CGU exceeds its estimated recoverable amount.
As at December 31, 2025, management determined there was
an indicator of impairment in relation to the Agbami field CGU
as a result of a combination of increased costs and lower oil
prices.
Management calculated the recoverable amount of the Agbami
field CGU using a fair value less costs to dispose cashflow
model, which is based on the discounted future after tax net
cash flows of proved and probable oil and gas reserves. The
proved and probable oil and gas reserves are prepared by
management’s experts.
The significant assumptions used by management to determine
the recoverable amount of the Agbami field CGU include the
quantity of proved and probable oil and gas reserves, future
Our approach to addressing the matter included the following
procedures, among others:
The work of management’s experts was used in
performing the procedures to evaluate the reasonableness
of the proved and probable oil and gas reserves used to
determine the depletion expense and the recoverable
amount of oil and gas properties in the Agbami field CGU.
As a basis for using this work, the competence,
capabilities and objectivity of management’s experts was
evaluated, the work performed was understood and the
appropriateness of the work as audit evidence was
evaluated. The procedures performed also included
evaluation of the methods and assumptions used by
management’s experts, tests of the data used by
management’s experts and an evaluation of their findings.
Professionals with specialized skill and knowledge in the
field of petroleum engineering and reserves estimation
assisted in this evaluation.
Tested how management determined the recoverable
amount of the Agbami field CGU and depletion expense,
which included the following:
Evaluated the appropriateness of the methods used
by management in making these estimates.
Tested the data used in determining these estimates.
Evaluated the reasonableness of significant
assumptions used by management in developing the
underlying estimates, including:
o quantity of proved and probable oil and gas
reserves, operating and capital costs by
considering the past performance of the
Agbami field CGU, and whether these
assumptions were consistent with evidence
obtained in other areas of the audit;
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Report to Shareholders | December 31, 2025
Key audit matter How our audit addressed the key audit matter
commodity prices, operating and capital costs and discount
rates.
During the year ended December 31, 2025, management
recorded an impairment charge of $105.3 million on the oil and
gas properties related to the Agbami field CGU.
We considered this a key audit matter due to (i) the significant
judgment by management, including the use of management’s
experts, when developing the expected future cash flows to
determine the recoverable amount and the proved and probable
oil and gas reserves; (ii) a high degree of auditor judgment,
subjectivity and effort in performing procedures relating to the
significant assumptions; and (iii) the audit effort involved the
use of professionals with specialized skill and knowledge in the
field of valuation and petroleum engineering and reserves
estimation.
o future commodity prices by comparing those
prices with other reputable third party
industry sourced commodity prices; and
o the discount rate, through the assistance of
professionals with specialized skill and
knowledge in the field of valuation.
Recalculated the UoP rates used to calculate depletion
expense for the Agbami field CGU.
Other information
Management is responsible for the other information. The other information comprises the Management's
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the Report to
Shareholders, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
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Report to Shareholders | December 31, 2025
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard. When we read the information, other than the
consolidated financial statements and our auditor’s report thereon, included in the Report to Shareholders,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
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Report to Shareholders | December 31, 2025
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Company as a basis for forming an opinion on the
consolidated financial statements. We are responsible for the direction, supervision and review of the
audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
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Report to Shareholders | December 31, 2025
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Khurram Asghar.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Calgary, Alberta, Canada
February 24, 2026
===== SIDA 48 =====
PAGE 48
Report to Shareholders | December 31, 2025
(Expressed in millions of United States dollars)
CONSOLIDATED BALANCE SHEET
As at Note
December 31,
2025
December 31,
2024
ASSETS
Non-current assets
Oil and gas properties 5 1,413.5 -
Intangible exploration assets 6 43.7 29.3
Other tangible fixed assets 3.7 3.2
Equity investment in joint venture 7 - 328.4
Equity investments in associates 8 142.2 177.6
1,603.1 538.5
Current assets
Inventories 9 94.2 -
Investment held for sale 10 - 7.0
Loan to associated company 26 - 4.3
Trade and other receivables 11 77.7 4.0
Derivative financial instruments 29 2.2 -
Cash and cash equivalents 12 174.7 61.4
348.8 76.7
Total assets 1,951.9 615.2
LIABILITIES AND EQUITY
Equity attributable to common shareholders
Share capital 13 1,536.2 1,195.8
Contributed surplus 95.5 87.4
Treasury share account - (0.4)
Deficit (865.8) (734.0)
Total equity attributable to common shareholders 765.9 548.8
Non-current liabilities
Financial liabilities 15 265.2 2.6
Provisions 14 271.3 49.2
Deferred tax liabilities 24 281.8 -
818.3 51.8
Current liabilities
Financial liabilities 15 68.6 0.7
Trade and other payables 16 150.8 9.7
Current tax liabilities 24 48.5 -
Provisions 14 99.8 4.2
367.7 14.6
Total liabilities 1,186.0 66.4
Total liabilities and equity attributable to common shareholders 1,951.9 615.2
The notes are an integral part of the consolidated financial statements.
Approved on behalf of the Board:
“MICHAEL EBSARY” “OLIVER QUINN”
MICHAEL EBSARY, DIRECTOR OLIVER QUINN, DIRECTOR
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PAGE 49
Report to Shareholders | December 31, 2025
(Expressed in millions of United States dollars)
CONSOLIDATED STATEMENT OF NET INCOME
OR LOSS AND OTHER COMPREHENSIVE
INCOME OR LOSS
For the years ended Note
December 31,
2025
December 31,
2024
Oil and gas sales 19 559.9 -
Net revenue 559.9 -
Commodity risk management contracts 29 2.2 -
Revenue 562.1 -
Cost of Sales
Movements on overlift/underlift balances (46.3) -
Production costs 20 (166.6) -
Depletion costs 5 (207.9) -
Impairment charges 5 (105.3) -
(526.1) -
Gross profit 36.0 -
General and administrative expenses (36.4) (32.4)
Operating loss (0.4) (32.4)
Finance income 22 4.1 7.6
Finance expense 23 (47.8) (4.9)
Net financial items (43.7) 2.7
Share of profit from investment in joint venture 7 2.9 226.0
Share of loss from investments in associates 8 (2.9) (38.7)
Reversal of impairment/ (impairment) of investment in joint venture 7 55.9 (436.7)
Income/ (loss) before tax 11.8 (279.1)
Income tax 24 (43.4) -
Net loss attributable to common shareholders (31.6) (279.1)
Total comprehensive loss (31.6) (279.1)
Net loss attributable to common shareholders per share
Basic 25 (0.05) (0.62)
Diluted 25 (0.05) (0.62)
Weighted average number of shares outstanding for the purpose of
calculating earnings per share
Basic 25 624,464,015 449,431,803
Diluted 25 624,464,015 449,431,803
The notes are an integral part of the consolidated financial statements.
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PAGE 50
Report to Shareholders | December 31, 2025
(Expressed in millions of United States dollars)
CONSOLIDATED STATEMENT OF EQUITY
For the years ended Note
December 31,
2025
December 31,
2024
Share capital: 13(A)
Balance, beginning of the year 1,195.8 1,265.3
Share issuance to BTG Oil & Gas under Amalgamation Agreement 13 353.2 -
Exercise of Share Options 13 0.4 0.5
Settlement of Restricted Share Units 13 1.1 0.5
Settlement of Performance Share Units 13 2.5 1.1
Weighted average value of shares cancelled 13 (16.8) (71.6)
Balance, end of the year 1,536.2 1,195.8
Contributed surplus:
Balance, beginning of the year 87.4 61.6
Excess of weighted value of shares cancelled 13 8.1 25.8
Balance, end of the year 95.5 87.4
Treasury account:
Balance, beginning of the year (0.4) -
Shares purchased 13 (8.3) (46.2)
Shares cancelled 13 8.7 45.8
Balance, end of the year - (0.4)
Deficit:
Balance, beginning of the year (734.0) (432.3)
Dividends 13 (100.2) (22.6)
Net income attributable to common shareholders (31.6) (279.1)
Balance, end of the year (865.8) (734.0)
Total equity attributable to common shareholders
Balance, end of the year 765.9 548.8
The notes are an integral part of the consolidated financial statements.
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Report to Shareholders | December 31, 2025
CONSOLIDATED STATEMENT
OF CASH FLOWS
(Expressed in millions of United States dollars)
For the years ended Note
December 31,
2025
December 31,
2024
Cash flows generated by/ (used in):
Operations:
Profit/ (loss) before tax 11.8 (279.1)
Adjustments for:
(Reversal of) impairment of investment in joint venture 7 (55.9) 436.7
Share of loss from investments in associates 8 2.9 38.7
Share of profit from investment in joint venture 7 (2.9) (226.0)
Unrealized result on commodity risk management contracts 29 (2.2) -
Net financial items 22/23 43.7 (2.7)
Depletion, depreciation and amortisation 5 209.0 -
Impairment charges 5 105.3 -
Taxes 24 (135.9) -
Other 2.8 (1.3)
Net cash generated/ (used) in operating activities before working capital 178.6 (33.7)
Changes in working capital 31 94.0 (14.8)
Net cash generated / (used) in operating activities 272.6 (48.5)
Investing:
Investments in oil and gas properties and intangible exploration assets 5/6 (75.6) (7.7)
Investments in other fixed assets (0.4) -
Distribution received from joint venture 7 60.0 36.0
Distribution received from associates 8 31.6 -
Equity investment in associates 8 - (88.6)
Loan repaid by / (provided to) associated company 26 4.5 (1.0)
Interest income received 4.2 7.6
Cash acquired from Meren Coop consolidation 4 380.4 -
Net cash generated/ (used) in investing activities 404.7 (53.7)
Financing:
Repayment RBL Facility (420.0) -
Repayment of principal portion of lease commitments 15 (0.7) (0.5)
Dividends paid to shareholders 13 (100.2) (22.6)
Repurchase of share capital 13 (8.3) (45.3)
Interest expense paid (34.8) -
Net cash used in financing activities (564.0) (68.4)
Effect of exchange rate changes on cash and
cash equivalents denominated in foreign currency - -
Increase/ (decrease) in cash and cash equivalents 113.3 (170.6)
Cash and cash equivalents, beginning of the year 12 61.4 232.0
Cash and cash equivalents, end of the year 12 174.7 61.4
The notes are an integral part of the consolidated financial statements.
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Report to Shareholders | December 31, 2025
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31, 2025, and December 31, 2024
(Expressed in millions of United States dollars unless otherwise indicated)
1. Incorporation and nature of business:
Meren Energy Inc. (collectively with its subsidiaries, “MER” or “Meren” or the “Company” or the “Group”) was incorporated on March 29, 1993,
under the laws of British Columbia and is an international oil and gas exploration and production company based in Canada with oil and gas
interests in Africa. The Company’s registered address is 25th Floor, 666 Burrard Street, Vancouver, B.C., Canada V6C 2X8. The Company changed
its name to Meren Energy Inc. on May 14, 2025, and was previously called Africa Oil Corp.
2. Basis of preparation:
A. Statement of compliance:
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (“IFRS Accounting Standards”). The policies applied in these consolidated financial statements are
based on IFRS Accounting Standards issued and outstanding as at February 24, 2026, the date the Board of Directors approved the statements.
B. Basis of measurement:
The consolidated financial statements have been prepared on the historical cost basis. Where there are assets and liabilities calculated on a
different basis, this fact is disclosed in the material accounting policy. The Company uses the full cost method of accounting for exploration costs.
Identifiable assets acquired and liabilities assumed in the transaction with BTG Oil & Gas were measured at its acquisition date fair value based
on guidance in IFRS 13 as per note 4. Certain comparative figures have been reclassified to conform with the financial statements presentation
in the current year following completion of the transaction with BTG. The Company has changed the presentation of its share of profit from
investment in joint venture and associated companies in the Consolidated Statement of Net Income or Loss and Other Comprehensive Income
or Loss. The Company has also changed the presentation of interest income received in the Consolidated Statement of Cash Flows.
C. Functional and presentation currency:
These consolidated financial statements are presented in United States (US) dollars. The functional currencies of the Company’s individual
entities are US dollars, which represents the currency of the primary economic environment in which the entities operate.
The consolidated financial statements are expressed in millions of US dollars unless otherwise indicated.
D. Use of estimates and judgements:
The preparation of financial statements in conformity with IFRS Accounting Standards requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Information about significant areas of estimation and critical judgements in applying accounting policies that have the most significant effect
on the amounts recognized in the consolidated financial statements are noted below, with further details of the assumptions contained in the
relevant note.
i. Classification of joint arrangements
These consolidated financial statements include transactions of non-operated Production Sharing Agreements (“PSAs”). The PSA transactions
include the Group’s proportionate share of the PSAs assets, liabilities and expenses, with items of a similar nature on a line-by-line basis, from
the date that participation in the PSA arrangements commenced.
The Group has applied judgment in determining that it has joint control over the PSAs. This determination recognizes that all major decisions
outside the original scope of the operations require unanimous approval by at least the Group and one or more of the PSAs partners.
The Group has determined that the relevant activities for its joint arrangements are those relating to the operating and capital decisions of
the arrangement, such as approval of the capital expenditure program for each year and appointing, remunerating and terminating the key
management personnel or service providers of the joint arrangement. The considerations made in determining joint control are similar to those
necessary to determine control over subsidiaries.
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Report to Shareholders | December 31, 2025
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Classifying the arrangement requires the Group to assess its rights and obligations arising from the arrangement. Specifically, the Group
considers:
● The structure of the joint arrangement – whether it is structured through a separate vehicle;
● When the arrangement is structured through a separate vehicle, the Group also considers the rights and obligations arising from;
» The legal form of the separate vehicle;
» The terms of the contractual arrangement; and
» Other facts and circumstances (when relevant).
As the Group has a proportionate share of the rights to the PSAs’ assets and the obligations for the PSAs’ liabilities, it classifies these interests
as a Joint Operation under IFRS 11, and presents its proportionate share of the assets, liabilities, revenues and expenses on a line-by-line basis
in the consolidated financial statements.
This assessment often requires significant judgement, and a different conclusion on joint control and also whether the arrangement is a joint
operation or a joint venture, may materially impact the accounting.
If the Group did not have both joint control and a proportionate share of the rights to the PSAs’ assets and obligations for the PSAs’ liabilities, it
would present only its net investment in the PSAs and its proportionate share of the PSAs’ net income in the consolidated financial statements.
ii. Accounting for leases and joint operations
Where the Group participates in a joint operation, either as a lease operator or non-operator party, determining whether to recognize and
whether to measure a lease obligation involves judgement and requires identification of which entity has primary responsibility for the lease
obligations entered into in relation to the joint operation’s activities.
Where the joint operation (including all parties to that arrangement) has the right to control the use of the identified asset and all parties have
a legal obligation to make payments to the third-party supplier, each joint operation participant would recognize its proportionate share of the
lease related balances. This may arise where all parties to an unincorporated joint operation sign the lease agreement, or the joint operation is
some sort of entity or arrangement that can sign in its own name.
However, where the Group is the lead operator and the sole signatory such that it is the one with the legal obligation to pay the third-
party supplier, it would recognize 100% of the lease-related balances on its balance sheet. The Group would then need to assess whether
the arrangement with the non-operator parties contains a sublease. This assessment would be based on the terms and conditions of each
arrangement and may be impacted by the legal jurisdiction in which the joint arrangement operates.
Regardless of whether there is a sublease or not, the Group, in case it acts as the lead operator, would continue to recognize the lease liability
for as long as it remains a party to the arrangement with the third-party supplier and has primary obligation to the lease payments.
iii. Valuation of investments:
An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an
associate or a joint venture. Investments in associates or joint ventures are initially recorded at cost. On acquisition of the investment in an
associate or a joint venture, any excess of the cost of the investment over the share of the net fair value of the identifiable assets and liabilities
of the investee is recognized as notional goodwill, which is included within the carrying amount of the investment. Significant assumptions
developed by management used to determine the fair value of the non-current assets include estimates for the quantity of proved and probable
oil and gas reserves, future commodity prices, operating and capital costs as well as discount rates. The proved and probable oil and gas reserves
are prepared by the investee’s independent petroleum engineers (management’s experts).
Where contingent consideration has been recognized in an investment in an associate or joint venture, any revisions to the contingent
consideration estimates after the date of acquisition, which have been considered as changes in estimates in accordance with IAS 8, are
accounted for on a prospective basis. Any change in the liability as a result of the revised cash flows is adjusted to the cost of the asset and,
in accordance with paragraph 37 of IAS 8, recognized as part of the associate or joint venture carrying amount rather than in profit or loss.
iv. Recoverability of oil and gas properties
The Group assesses each asset or cash generating unit (CGU) (excluding goodwill, which is assessed annually regardless of indicators) each
reporting period to determine whether any indication of impairment exists. Where an indicator of impairment exists, with reference to total
proved and probable oil and gas reserves (‘2P’), a formal estimate of the recoverable amount is made, which is considered to be the higher of
the fair value less costs to dispose and value in use. The assessments require the use of estimates and assumptions such as long-term oil prices,
future production volumes, discount rates, operating costs, development costs, decommissioning costs, reserve volumes (see Hydrocarbon
reserve and resource estimates) and operating performance (which includes production and sales volumes). These estimates and assumptions
are subject to risk and uncertainty and changes in assumptions used in determining the recoverable amount could affect the carrying value of
the related assets.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable
and willing parties. Fair value for oil and gas properties is generally determined as the present value of estimated future cash flows arising
from the continued use of the assets, which includes estimates such as the future development costs and eventual disposal, using assumptions
that an independent market participant may take into account. Fair value for oil and gas properties is determined using a discounted cash flow
model. Cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset/CGU. Significant assumptions developed by management used to determine the fair value of the non-
current assets include estimates for the quantity of proved and probable oil and gas reserves, future commodity prices, operating and capital
costs as well as discount rates. The proved and probable oil and gas reserves are prepared by the Company’s independent petroleum engineers
(management’s experts).
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Report to Shareholders | December 31, 2025
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
v. Impairment of joint ventures and associates
The amounts for investments in joint ventures and associates represents the Company’s equity interest in other entities, where there is either
joint control or significant influence. The Company assesses investments in associates for impairment whenever changes in circumstances
or events indicate that the carrying value may not be recoverable. The process of determining whether there is an objective evidence of
impairment considering circumstances or events which indicate that the carrying value may not be recoverable or calculating the recoverable
amount requires judgement.
An area in which the Company applied judgement prior to the completion of the transaction with BTG Oil & Gas to consolidate its interest
in Meren Coop relates to the equity investment in joint venture. On acquisition, judgements and estimates were used in determining fair
values on acquisition for the purposes of the notional purchase price allocation. Subsequently, in assessing whether there were any indicators
of impairment the Company considered any effects of Meren Coop’s forward sales, the loan facility, and any operational and contractual
implications on the future dividend stream when assessing for impairment indicators.
An area in which the Company has applied judgement relates to the equity investments in associates. In assessing whether there are any
indicators of impairment the Company considered the movements in share price of the associates listed on public markets, the results of
exploration and appraisal activities and future plans for the operations.
vi. Hydrocarbon reserve and resource estimates
Oil and gas production assets, including facilities, are depleted on a units-of-production (“UoP”) basis at a rate calculated by reference to total
proved and probable oil and gas reserves (“2P”) determined in accordance with Canadian National Instrument 51-101, Standards of Disclosure
for Oil and Gas Activities (“NI 51-101”) and incorporating the estimated future development cost of developing and extracting reserves.
The process of estimating reserves is complex. It requires significant judgments and decisions based on available geological, geophysical,
engineering, and economic data. 2P reserves are determined using estimates of oil and gas in place, recovery factors, operating expenses, future
development costs and future commodity prices; the latter having an impact on the total amount of recoverable reserves and the proportion
of the gross reserves which are attributable to the host government under the terms of the Production-Sharing Agreements. The Company’s
reserves are evaluated annually and reported to the Company by its independent petroleum engineers (management’s experts).
The current long-term Brent oil price assumption used in the estimation of proved and probable oil and gas reserves is based on independent
petroleum engineers long-term oil price forward curve.
As the economic assumptions used may change and, as additional geological information is obtained during the operation of a field, estimates
of recoverable reserves may change.
vii. Units-of-production depreciation of oil and gas properties
Oil and gas properties are depleted using the UoP-method over total estimated proved and probable oil and gas reserves and incorporating the
estimated future development cost of developing and extracting reserves. This results in a depletion charge that is proportional to the depletion
of the anticipated remaining production from the field.
The life of each item, which is assessed at least annually, has regard to both its physical life limitations and present assessments of economically
recoverable reserves of the field at which the asset is located. These calculations require the use of estimates and assumptions, including the
amount of recoverable reserves.
The calculation of the UoP-rate of depreciation could be impacted to the extent that actual production in the future is different from current
forecast production based on total estimated proved and probable oil and gas reserves, or change in future development cost estimates.
Changes to proved and probable oil and gas reserves could arise due to changes in the factors or assumptions used in estimating reserves,
including the effect on proved and probable oil and gas reserves of differences between actual commodity prices and commodity price
assumptions or unforeseen operational issues.
viii. Exploration and evaluation costs
Exploration and evaluation costs are initially capitalized as intangible exploration assets with the intent to establish commercially viable
reserves. The Company is required to make significant estimates and judgements about the future events and circumstances regarding whether
the carrying amount of intangible exploration assets exceeds its recoverable amount (see note 6).
The carrying amounts of the Company’s exploration and evaluation costs are reviewed at each reporting date to determine whether there is any
indication of impairment. Exploration and evaluation assets are assessed for impairment if facts and circumstances suggest that the carrying
amount exceeds the recoverable amount. Should the carrying amount exceed the recoverable amount, an impairment loss is recognized.
Significant assumptions developed by management used to determine the recoverable amount include estimates for the quantity of contingent
resources, future commodity prices, production forecasts, operating expenses, development costs, the likelihood of a successful farm out
process, the timing of financial investment decision (“FID”) and the discount rate. The contingent resources and production rates are prepared
by the Company’s independent petroleum engineers (management’s experts).
Exploration and evaluation assets are assessed if facts and circumstances suggest that an impairment loss recognized in prior periods may no
longer exist or may have decreased. An impairment reversal is recognized if there has been an increase in the asset’s recoverable amount since
the last impairment loss was recognized.
The changing worldwide demand for energy could result in a change in the assumptions used to determine the recoverable amount and
could affect estimating the future cash flows which could impact the carrying amount of the Company’s intangible exploration assets. The
timing of when global energy markets transition from carbon-based sources to alternative energy sources is highly uncertain. Environmental
considerations are built into our estimates through the use of significant assumptions in estimating fair value including future commodity prices
and discount rates. The energy transition could impact the future prices of commodities and discount rates used to appraise oil and gas projects.
Pricing assumptions used in the determination of recoverable amounts incorporate market expectations and the evolving worldwide demand
for energy.
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Report to Shareholders | December 31, 2025
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
ix. Provision for site restoration:
Amounts used in recording a provision for site restoration are based on current legal and constructive requirements, current technology, price
levels for the removal of facilities and plugging and abandoning of wells. Due to changes to these items, the future cash outflows in relation
to the site decommissioning and restoration can be difficult to determine. To reflect the effects due to changes in legislation requirements,
technology and price levels, the carrying amounts of site restoration provisions are reviewed on a regular basis.
On fields where the Group is required to contribute to site restoration costs, a provision is recorded to recognize the future commitment. An
asset is created, as part of oil and gas interests, to represent the discounted value of the anticipated site restoration liability and depleted over
the life of the field on a unit of production basis. The corresponding accounting entry to the creation of the asset recognizes the discounted
value of the future liability. The discount applied to the anticipated site restoration liability is subsequently released over the life of the field
and is charged to finance expense. Changes in site restoration costs and reserves are treated prospectively and consistent with the treatment
applied upon initial recognition (see note 14).
x. Revenue recognition
Judgement is required in determining when and how much revenue to recognize from contracts with customers. While the Group has determined
that all revenue from contracts with customers is earned at a point in time, there is judgement involved in this consideration. Contractual
arrangements for the sale of different products or with different terms may result in revenue being recognized over time.
There is also judgement involved in assessing whether the Group is the principal or agent in revenue transactions. In determining that the Group
is acting as principal, the terms of the agreements were carefully considered and it was concluded that the Group controls the product before
it is transferred to the customer. In alternate arrangements, the Group could be determined to be acting as agent.
Under the terms of existing contracts, the Group has determined that shipping or transportation services are not being provided to the
customer, and that the only performance obligations are for the sale of crude oil and natural gas. Judgement is required in determining whether
shipping is being provided as a service, and this impacts on the identification of performance obligations, whether all performance obligations
are recognized at a point in time or over time, and the overall timing of revenue recognition.
Finally, judgement is required to determine whether the contractual arrangements contain only variable consideration, or also embedded
derivatives, and if variable consideration, whether to exercise the constraint.
xi. Taxes
Judgement is required to determine which arrangements are considered to be a tax on income as opposed to production costs. Judgement is
also required to determine whether deferred tax assets are recognized in the statement of financial position. Deferred tax assets, including
those arising from tax losses carried forward, require management to assess the likelihood that the Group will generate sufficient taxable
earnings in future periods in order to utilize recognized deferred tax assets.
To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realize the net deferred
tax assets recorded at the reporting date could be impacted. In addition, future changes in tax laws in the jurisdictions in which the Group
operates could limit the ability of the Group to obtain tax deductions in future periods.
xii. Share based compensation
The estimated fair value of Performance share units (“PSUs”) is calculated based on non-market performance conditions set by the Company
which are initially determined at the time of grant. The Company assesses the progress of reaching the individual performance conditions during
each reporting period. PSUs cliff vest three years from the date of grant, at which time the Board of Directors will assign a performance multiple
ranging from nil to 200% to determine the ultimate vested number of PSUs. The awards are revalued every quarter based on the Company’s
share price and an estimate of the performance conditions at the quarter end. It is anticipated that PSU settlements will be made by issuing
shares from treasury or cash, at the discretion of the Board of Directors (see note 21).
The estimated fair value of the Restricted share units (“RSUs”) is initially determined at the time of grant. The awards are revalued every quarter
based on the Company’s share price. RSUs may be settled in shares issued from treasury or cash, at the discretion of the Board of Directors
(see note 21).
xiii. Contingencies
Contingencies are subject to measurement uncertainty as the related financial impact will only be confirmed by the outcome of a future event.
The assessment of contingencies requires the application of judgements and estimates including the determination of whether a present
obligation exists, and the reliable estimation of the timing and amount of cash flows required to settle the contingencies.
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Report to Shareholders | December 31, 2025
xiv. Going concern
These consolidated financial statements for the year ended December 31, 2025, have been prepared on a going concern basis, which assumes
that the Company will be able to realize its assets and discharge its liabilities in the normal course of business as they become due.
3. Material accounting policies:
The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements and have
been applied consistently by the Company and its subsidiaries.
A. Basis of consolidation:
i. Subsidiaries:
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are
taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
ii. Jointly controlled operations and jointly controlled assets:
Interests in joint arrangements are classified as either joint operations or joint ventures, depending on the rights and obligations of the parties
to the arrangement. Joint operations arise when the Company has rights to the assets and obligations for the liabilities of the arrangement. The
Company recognizes its share of assets, liabilities, revenues and expenses of a joint operation. A significant portion of the Company’s operating
cash flows is derived through joint operations which are involved in the development and production of crude oil and gas in Nigeria. Joint
ventures arise when the Company has rights to the net assets of the arrangement. Joint ventures are accounted for under the equity method.
iii. Transactions eliminated on consolidation:
Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in
preparing the consolidated financial statements.
B. Equity method:
Investments in joint ventures and associates are accounted for using the equity method. Investments of this nature are recorded at original cost.
Investments in joint ventures or associates which arise from a loss in control of a subsidiary are recorded at fair value on the date of the loss
of control. The investment is adjusted at each reporting date for the Company’s share of the profit or loss of the investment after the date of
acquisition. The investor’s share of the profit or loss of the investee is also recognized in the Company’s Statement of Net Income or Loss and
Other Comprehensive Income or Loss. Distributions received reduce the carrying amount of the investment.
The Company assesses its investments in joint ventures and associates for an objective evidence of impairment considering circumstances
or events which indicate that the carrying value may not be recoverable. If such circumstances or events exist, the carrying amount of the
investment is compared to its recoverable amount. The recoverable amount is the higher of the investment’s fair value less costs to dispose and
its value in use. The investment is written down to its recoverable amount when its carrying amount exceeds the recoverable amount.
C. Business combinations
Business combinations are accounted for using the acquisition method as at acquisition date, which is the date on which control is transferred
to the Group. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value
and the amount of any previously held interest in the acquiree.
Under the acquisition method the identifiable assets acquired, liabilities assumed and non-controlling interest, if any, are recognized and
measured at their fair value at the date of acquisition. Fair value for oil and gas properties is generally determined as the present value of
estimated future cash flows arising from the continued use of the assets using a discounted cash flow model. Any excess of the purchase price
plus any non-controlling interest over the value of the net assets acquired is recognized as goodwill. Any deficiency of the purchase price over
the value of the net assets acquired is credited to net earnings. When a business combination is achieved in stages, the Company re-measures
its pre-existing interest at the acquisition date fair value and recognizes the resulting gain or loss, if any, in the Statement of Net Income or
Loss and Other Comprehensive Income or Loss. Contingent consideration transferred in a business combination is measured at fair value on
the date of acquisition.
Acquisition related costs are expensed as incurred and included in general and administrative expenses, except if related to the issue of debt
or equity securities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
D. Oil and gas properties
Oil and gas properties are aggregated exploration and evaluation tangible assets, and development expenditures associated with the production
of proved and probable oil and gas reserves. Development expenditure on the construction, installation or completion of infrastructure facilities
such as platforms, pipelines and the drilling of development wells, including unsuccessful development or delineation wells, is capitalized
within ‘Oil and gas properties’. These assets are depreciated/amortized on a UoP basis over the 2P reserves of the field concerned from the
commencement of production, taking into account future development expenditures necessary to bring those reserves into production.
i. Initial recognition
Oil and gas properties are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset
comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the
decommissioning obligation and, for qualifying assets, borrowing costs.
Qualifying assets are those that necessarily take a substantial period of time to build and from which future benefits accrue to the Group.
Capitalization continues up to the date that all the substantial activities necessary to get the asset ready for its intended use are complete.
Capitalized expenditure relating to the Group’s carried interest is recorded in line with the Group’s accounting policy.
The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. The carrying amount of the
replaced part is derecognized.
When a development project moves into the production stage, the capitalization of certain construction/development costs ceases and costs are
expensed, except for costs which qualify for capitalization relating to oil and gas property asset additions, improvements or new developments.
ii. Depletion
Oil and gas properties are depleted from the commencement of production, on a UoP basis, which is the ratio of oil and gas production in the
period to the estimated quantities of the 2P reserves at the end of the period plus the production in the period, on a field-by-field basis.
Facilities included in oil and gas production assets are depreciated on a UoP basis over the economic useful life of the field concerned. Costs
used in the UoP calculation comprise the net carrying amount of capitalized costs plus the estimated future field development costs.
Changes in the estimates of reserves or future field development costs are dealt with prospectively. Oil and gas volumes are considered
produced once they have been measured through meters at custody transfer or sales transaction points at the outlet valve on the field storage
tank. Rights and concessions are depleted on the UoP basis over the total proved and probable oil and gas reserves of the relevant area.
iii. Maintenance, inspection and repairs
Expenditure on major maintenance refits, inspections or repairs comprises the cost of replacement assets or parts of assets, inspection costs
and overhaul costs. Where an asset or part of an asset, that was separately depreciated and is now written off, is replaced and it is probable that
future economic benefits associated with the item will flow to the Group, the expenditure is capitalized. Where part of the asset replaced was
not separately considered as a component and therefore not depreciated separately, the replacement value is used to estimate the carrying
amount of the replaced asset(s) which is immediately written off. Inspection costs associated with major maintenance programs are capitalized
and amortized over the period to the next inspection. All other day-to-day repairs and maintenance costs are expensed as incurred.
iv. Disposal/ sale of assets
Net proceeds from any disposal of oil and gas interests are recorded as a gain or loss on disposal recognized in the Statement of Net Income
or Loss and Other Comprehensive Income or Loss to the extent that the net proceeds exceed or are less than the appropriate portion of the
net capitalized costs of the asset.
E. Recoverability of oil and gas properties
The Group assesses each asset or cash generating unit (CGU) (excluding goodwill, which is assessed annually regardless of indicators) each
reporting period to determine whether any indication of impairment exists. Where an indicator of impairment exists, with reference to total
proved and risk-adjusted probable reserves, a formal estimate of the recoverable amount is made, which is considered to be the higher of
the fair value less costs to dispose and value in use. The assessments require the use of estimates and assumptions such as long-term oil
prices (considering current and historical prices, price trends and related factors), discount rates, operating costs, future capital requirements,
decommissioning costs, exploration potential, reserves (see Hydrocarbon reserve and resource estimates above) and operating performance
(which includes production and sales volumes). These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a
possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable
and willing parties. Fair value for oil and gas properties is generally determined as the present value of estimated future cash flows arising from
the continued use of the assets, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions
that an independent market participant may take into account. Cash flows are discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset/CGU.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
F. Intangible exploration assets
i. Pre-exploration expenditures:
Costs incurred prior to obtaining the legal rights to explore an area are recognized in the Statement of Net Income or Loss and Other
Comprehensive Income or Loss as incurred.
ii. Exploration expenditures:
Exploration expenditures include costs associated with the acquisition of a license interest, directly attributable general and administrative
costs, expenditures incurred in the process of determining oil and gas exploration targets, and exploration drilling costs. All exploration
expenditures with common geological structures and shared infrastructure are accumulated together within intangible exploration assets. The
Company does not aggregate exploration expenditures above the segment level for the purpose of impairment testing. Costs are not depleted
until such time as the exploration phases on the license area are complete, the license area is relinquished, or commercially viable reserves have
been discovered and extraction of those reserves is determined to be technically feasible.
If commercial reserves are established and technical feasibility for extraction demonstrated, then the related capitalized intangible exploration
costs are transferred into a CGU within oil and gas interests subsequent to determining that the assets are not impaired (see “Impairment”
below). Where results of exploration drilling indicate the presence of hydrocarbons which are ultimately not considered commercially viable, all
related costs are recognized in the Statement of Net Income or Loss and Other Comprehensive Income or Loss.
Net proceeds from any disposal or farmout of an intangible exploration asset are recorded as a reduction in intangible exploration assets.
iii. Development and production costs:
All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons has been demonstrated are capitalized
within oil and gas interests on a CGU basis.
G. Impairment:
i. Financial assets carried at amortized cost:
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset
is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash
flows of that asset.
The Company recognizes loss allowances for expected credit losses (“ECLs”) on its financial assets measured at amortized cost. Due to the
nature of its financial assets, the Company measures loss allowances at an amount equal to expected lifetime ECLs.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and
the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively
in groups that share similar credit risk characteristics.
All impairment losses are recognized in the Statement of Net Income or Loss and Other Comprehensive Income or Loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For
financial assets measured at amortized cost the reversal is recognized in the Statement of Net Income or Loss and Other Comprehensive
Income or Loss.
ii. Non-financial assets:
The carrying amounts of the Company’s non-financial assets, including the Company’s equity investments, other than oil and gas properties,
intangible exploration assets, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any
indication of impairment or reversals of impairment.
Intangible exploration assets are assessed for impairment when they are reclassified to property and equipment, as oil and gas properties,
and also if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. If any such indication exists, then the
asset’s recoverable amount is estimated. For goodwill and other intangible assets that have indefinite lives or that are not yet available for use,
an impairment test is completed each reporting period.
For the purpose of impairment testing, assets are grouped together into a CGU. The recoverable amount of an asset or a CGU is the greater
of its value in use and its fair value less costs to dispose.
In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. Value in use is generally computed by reference
to the present value of the future cash flows expected to be derived from production of 2P reserves. In determining fair value less costs
to dispose, recent market transactions are taken into account, if available, and a post-tax discount rate is applied. In the absence of such
transactions, an appropriate valuation model is used.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses
are recognized in the Statement of Net Income or Loss and Other Comprehensive Income or Loss. Impairment losses recognized in respect of
CGU’s are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the
other assets in the unit (group of units) on a pro rata basis.
If there is an indicator that a previous impairment may no longer exist or may have decreased, the recoverable amount of the relevant asset
or its CGU is calculated and compared against the carrying amount. The impairment is reversed to the extent that the asset or its CGU’s
recoverable amount does not exceed the carrying amount that would have been determined if no impairment had been recognized. An
impairment reversal is recognized in the Statement of Net Income or Loss and Other Comprehensive Income or Loss.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount
may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less
costs to sell), the asset is written down accordingly.
H. Leases
Leases are accounted for by recognising a right-of-use asset and a lease liability except for:
● Leases of low value assets; and
● Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, discounted using the
interest rate implicit in the lease or if that rate cannot be readily determined the discount rate is determined by reference to the Company’s
incremental borrowing rate on commencement of the lease. Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
● amounts expected to be payable under any residual value guarantee;
● the exercise price of any purchase option granted in favour of the Company if it is reasonably certain to assess that option;
● any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being
exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
● lease payments made at or before commencement of the lease;
● initial direct costs incurred; and
● the amount of any provision recognized where the Company is contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and
are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over
the remaining economic life of the asset if this is judged to be shorter than the lease term.
When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted using a revised discount rate. In this case an equivalent adjustment is made to the carrying
value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying
amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.
I. Investments held for sale
Investments held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental
costs directly attributable to the disposal of an asset. The criteria for held for sale classification is regarded as met only when the sale is highly
probable, and the asset or disposal group is available for immediate sale in its present condition. The Company has committed to the plan to
dispose of the asset and the disposal is expected to be completed within one year from the date of the classification.
J. Inventories
Inventories mainly comprise materials. These are stated at the lower of cost and net realizable value. Purchase cost includes costs of bringing
material inventory to their present location and condition, including freight and handling charges. Cost is determined using the weighted
average method. Net realizable value is the estimated selling price in the ordinary course of business, less selling expenses.
If carrying value exceeds the net realizable amount, a write down is recognized. The write-down may be reversed in a subsequent period if the
circumstances which caused it no longer exist.
K. Trade receivables
Trade receivables are amounts due from customers for crude oil and gas sold or services performed in the ordinary course of business and
represent the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the
consideration is due). Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective
interest method, less any allowance for expected credit losses.
L. Cash and cash equivalents
Cash and cash equivalents includes cash on hand and deposits held with financial institutions with maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
M. Financial instruments:
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial
assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has
transferred substantially all risks and rewards of ownership. Financial assets and liabilities are offset and the net amount is reported in the
Balance Sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or
realize the asset and settle the liability simultaneously.
At initial recognition, the Company classifies its financial instruments either as fair value through profit and loss, fair value through other
comprehensive income or at amortized cost depending on the purpose for which the instruments were acquired. The Company has instruments
recognized at fair value through profit and loss and amortized cost.
Financial assets and liabilities at amortized cost:
Financial assets and liabilities at amortized cost include accounts receivable, loans receivable, accounts payable and debt and are initially
recognized at the amount required to be received or paid, less, when material, a discount to reduce the receivables or payables to fair value.
Subsequently, these assets and liabilities are measured at amortized cost using the effective interest method. Financial assets and liabilities
are classified as current assets and liabilities if payment is due within twelve months. Otherwise, they are presented as non-current assets and
liabilities.
Financial assets at fair value through profit or loss (FVTPL):
Financial assets measured at FVTPL are assets which do not qualify as financial assets at amortized cost or at fair value through other
comprehensive income.
N. Derivative financial instruments and hedge accounting
The Group is exposed to certain risks relating to its ongoing business operations. The primary risk managed using derivative instruments is
commodity price risk. The Group uses forward commodity contracts and derivative financial instruments to hedge its commodity price risk.
On the forward commodity contracts, hedge accounting is not considered applicable as the own-use exception applies: the Group does not enter
into physical oil contracts other than to meet the Group’s expected sales requirements. These arrangements therefore fall outside the scope
of IFRS 9 and are classified as normal sales contracts that are accounted for on an accrual basis.
The Group’s derivative financial instruments are initially recognized at fair value on the date on which the derivative contracts are entered into
and are subsequently remeasured at fair value, with subsequent changes in fair value recognized in profit and loss. Derivatives are carried as
financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
O. Provisions:
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably,
and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
liability. Provisions are not recognized for future operating losses.
i. Provision for site restoration:
On fields where the Group is required to contribute to site restoration costs, a provision is recorded to recognize the future commitment,
which is recorded at the discounted value of the future liability. The discount applied to the anticipated site restoration liability is subsequently
released over the life of the field and is charged to finance expense. Changes in site restoration costs and reserves are treated prospectively
and consistent with the treatment applied upon initial recognition.
The corresponding accounting entry to the creation of the liability is the recognition of an asset, as part of oil and gas interests, to represent
the discounted value of the anticipated site restoration liability and depleted over the life of the field on a unit of production basis.
ii. Contingent Consideration:
The amount recognized as contingent consideration is the best estimate of the consideration required to settle the obligation at the reporting
date, taking into account the risks and uncertainties surrounding the obligation.
The provision for contingent consideration is partly related to the initial acquisition of 50% interest in Meren Coop. At the date of this acquisition,
an estimate of the fair value of the contingent consideration was determined and included as part of the cost of the acquisition. Subsequent to
this acquisition, contingent consideration is accounted for as a financial liability in line with IFRS 9. Until completion of the transaction with BTG
Oil & Gas to consolidate its interest in Meren Coop, the change in the liability, as a result of the revised cash flows, was adjusted to the cost of
the investment and recognized as part of the investment’s carrying amount rather than in profit or loss.
The provision for contingent consideration is also partly related to the Amended and Restated Joint Sale Agreement with Petrobras International
Braspetro B.V. (“Petrobras”) dated October 31, 2018, relating to the acquisition of the remaining 50% in Meren Coop.
The estimates involved in assessing the value of the contingent consideration include the expected timing of payments, the expected
settlement value, the likelihood of settlement and the probability of the assessed outcomes occurring. There is significant judgement used in
the determination of these estimates.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
iii. Performance share units (“PSUs”):
The Company has a long-term incentive plan (see note 21). Eligible plan participants may be granted PSUs. PSUs are accounted for as cash-
based awards and recorded as a liability. The estimated fair value of the awards is initially determined at the time of grant. The awards are
revalued every quarter based on the Company’s share price and the change is recorded as share-based compensation in the Statement of
Net Income or Loss and Other Comprehensive Income or Loss. The estimated fair value of the awards is calculated based on non-market
performance conditions set by the Company which are initially determined at the time of grant. The Company assesses the progress of reaching
the individual performance conditions during each reporting period. PSUs cliff vest three years from the date of grant and the estimated fair
value of the grant will be expensed evenly throughout the remaining vesting period. PSUs may be settled in shares issued from treasury or cash,
at the discretion of the Board of Directors.
iv. Restricted share units (“RSUs”):
The Company has a long-term incentive plan (see note 21). Eligible plan participants may be granted RSUs. RSUs are accounted for as cash-
based awards and recorded as a liability. The estimated fair value of the awards is initially determined at the time of grant. The awards are
revalued every quarter based on the Company’s share price and the change is recorded as share-based compensation in the Statement of Net
Income or Loss and Other Comprehensive Income or Loss. RSUs granted to Non-Executive Directors cliff vest three years from the date of
grant. The estimated fair value of RSUs are expensed evenly throughout the remaining vesting period. RSUs may be settled in shares issued
from treasury or cash, at the discretion of the Board of Directors.
P. Long term debt:
Long-term debt is initially measured at fair value less transaction costs that are directly attributable to the acquisition or issue of the debt.
Subsequently, long-term debt is measured at amortized cost using the effective interest method. Long-term debt is classified as current if the
liability is due to be settled within twelve months from the reporting date. All other debt is classified as non-current.
Q. Trade and other payables
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade
payables are presented as current liabilities, unless payment is not due within 12 months after the reporting period. They are recognized initially
at their fair value and subsequently measured at amortized cost using the effective interest method.
R. Dividends
Dividend liabilities are recognized when the Company’s shareholders have the right to receive the payment when the dividend is approved by
the Board of Directors of the Company.
S. Sales of crude oil and natural gas
Revenue from contracts with customers is recognized when or as the Group satisfies a performance obligation by transferring a promised
good or service to a customer. A good or service is transferred when the customer obtains control of that good or service. As such, revenue
is recognized when control of the goods or service transfers to the customer, it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured.
The measurement of revenue, when a performance obligation is satisfied, is based on the amount of the transaction price (excluding estimates
of variable consideration that are constrained) that is allocated to that performance obligation, excluding discounts, sales taxes, excise duties
and similar levies.
The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. If the Group acts
in the capacity of an agent rather than as the principal in a transaction, then the revenue recognized is the net amount of commission made by
the Group. The Group has concluded that it is acting as a principal in all of its revenue arrangements, as described below:
Revenue from the sale of crude oil and natural gas is recognized when control of the goods transfers to the customer. The transfer of control
of the crude oil and natural gas sold usually coincides with title passing to the customer and the customer taking physical possession. This
generally occurs when the product is physically transferred into a vessel, pipe or other delivery mechanism.
Crude oil transaction prices under forward contracts are based on a contract price for the Dated Brent component plus or minus a differential.
In most of the Group’s oil offtake contracts, the Dated Brent component of the forward price at the time of entering the contract is not fixed
but determined on or around the date of the lifting for spot cargos either on an average monthly basis, 5-days after bill of lading date or similar
pricing mechanism. If the Group wants to utilize the oil offtake contract for commodity risk management, it can either fix the Dated Brent
component or utilize a trigger pricing mechanism. For the trigger pricing mechanism, when the forward price curve falls below a certain trigger
price for a certain month, this mechanism provides an irrevocable instruction to an offtaker to fix the Dated Brent price component of a cargo.
The trigger price is based on a percentage of the Brent forward curve at the time the instruction was given for the month of the expected lifting.
If the forward price curve does not fall below that threshold, the respective cargo is sold at spot.
The performance obligation is satisfied and payment is due upon delivery, FOB, to the buyer. At this point in time, at the bill of lading date, a
trade receivable is recognized and there are generally 30 days between revenue recognition and payment. There are no obligations for returns,
refunds, warranties nor other obligations when control has been transferred. The Group principally satisfies its performance obligations at a
point in time.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Revenue from crude oil transactions not covered under oil offtake contracts, arises from the production and lifting of crude oil on an entitlements
basis. Under the entitlements method, revenue reflects the Group’s share of production under the terms of the relevant production sharing
contracts, regardless of which participant has actually made the sale and invoiced the production. This is achieved by applying the following
approach in dealing with imbalances between actual sales and entitlements.
● Crude oil entitlement underlifts are recognized at the market price of oil at the balance sheet date. The excess of product sold during the
period over the participant’s ownership share of production is recognized by the Group (acting as underlifter) as an asset in trade and other
receivables with a corresponding credit to cost of sales. The Group’s underlift receivable is the right to receive additional oil from future
production without the obligation to fund the production of that additional oil.
● Crude oil entitlement overlifts are treated as a purchase of crude oil by the overlifter from the underlifter and are also recognized at the
market price of oil at the balance sheet date. The excess of product purchased during the period over the participant’s ownership share of
production is recognized by the Group (acting as overlifter) as a liability in trade and other payables with a corresponding charge to cost of
sales. An overlift liability is the obligation to deliver oil out of the Group’s equity share of future production.
Revenues resulting from the production of oil under PSAs is recognized for those amounts relating to the Group’s cost recoveries and the
Group’s share of the remaining production.
T. Royalties
Obligations arising from royalty arrangements and other types of taxes that do not satisfy the criteria of IAS 12 ‘Income Taxes’ are accrued
or paid and included in production costs. This is considered to be the case when the royalties are imposed under government authority and
the amount payable is based on physical quantities produced or as a percentage of revenue, rather than taxable income. In some cases, the
equivalent amount of royalties is also presented in revenues to differentiate between the portion of revenue lifted by the operator on behalf of
the Group to settle the Group’s royalty liabilities and the associated royalties as part of production costs. In cases where the Group itself pays
for the royalties in cash, these are included in production costs as a single line item.
U. Production costs
The costs of producing oil are charged to the income statement in the period in which they are incurred. Production costs include movements
in underlift and overlift balances.
V. Employee benefits
Employee benefits are recognized as they accrue in the Statement of Net Income or Loss and Other Comprehensive Income or Loss, based on
the terms of employment.
W. Finance income and expenses:
Finance income and expenses are recognized as they accrue in the Statement of Net Income or Loss and Other Comprehensive Income or Loss,
using the effective interest method.
X. Income tax:
Income tax expense comprises current and deferred tax. Income tax expense is recognized in the Statement of Net Income or Loss and Other
Comprehensive Income or Loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
● temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss.
● temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to
control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future;
● taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.
On May 23, 2023, the International Accounting Standards Board (“IASB”) issued an amendment to IAS 12 Income Taxes in response to International
Tax Reform and specifically the Pillar Two Global Anti-Base Erosion Rules (“Pillar Two Rules”) published by the Organization for Economic Co-
operation and Development (“OECD”). The Amendments introduce a mandatory temporary exception to the accounting for deferred taxes
arising from the jurisdictional implementation of the Pillar Two model rules; and disclosure requirements for affected entities to help users of
the financial statements better understand an entity’s exposure to Pillar Two income taxes arising from that legislation, particularly before its
effective date. The Company adopted the mandatory temporary exception immediately. The remaining disclosure requirements have no effect
on the Company’s consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Y. Earnings per share:
Basic earnings per share is calculated by dividing net income/(loss) attributable to the common shareholders by the weighted average number
of Common Shares outstanding during the year. Diluted earnings per share is determined by adjusting the net income/(loss) attributable to the
common shareholders and the weighted average number of Common Shares outstanding for the effects of dilutive instruments such as options
and Long Term Incentive Plans (“LTIP”) granted to employees. The weighted average number of diluted shares is calculated in accordance
with the treasury stock method. The treasury stock method assumes that the proceeds received from the exercise of all potentially dilutive
instruments are used to repurchase Common Shares at the average market price. The PSUs are considered to be contingently issuable and
are included in the calculation of diluted EPS as if the conditions of the contingency are deemed to have been met based on the information
available at the end of the reporting period. PSUs are only included in the diluted EPS calculation if the effect is dilutive. RSUs are included in
full in the diluted EPS calculation only if the effect is dilutive.
Z. Foreign currency
Monetary assets and liabilities denominated in foreign currencies are translated into US dollars at exchange rates prevailing at the balance
sheet date and non-monetary assets and liabilities are translated at rates in effect on the date of the transaction. Revenues and expenses are
translated at exchange rates at the date of transaction. Exchange gains or losses arising from translation are included in the Statement of Net
Income or Loss and Other Comprehensive Income or Loss.
AA. New and amended standards adopted by the Company:
The Company has applied the following standards and amendments for the first time for its annual reporting period commencing January 1,
2025:
● IAS 21 - Lack of Exchangeability. The amendments help entities to determine whether a currency is exchangeable into another currency, and
which spot exchange rate to use when it is not. There was no material impact to the Company’s financial statements.
AB. New standards and interpretations not yet adopted:
Certain new accounting standards and amendments to accounting standards have been published that are not mandatory for December 31,
2025, reporting periods and have not been early adopted by the Company. The Company’s assessment of the impact of these new standards
and amendments is set out below:
● IFRS 18 Presentation and Disclosure in Financial Statements - on April 9, 2024, the International Accounting Standards Board (IASB) issued
IFRS 18 Presentation and Disclosure in Financial Statements, which aims to improve how companies communicate their financial statements,
with a focus on information about financial performance in the statement of profit or loss.
The standard adds new subtotals, categories for income and expenses, and mandates disclosure of management performance measures.
It also enhances rules around aggregation and disaggregation. Adoption is retrospective, and the Corporation is currently assessing system
changes, preparing draft disclosures, and planning comparative restatements ahead of the January 1, 2027, effective date;
● Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9 and IFRS 7 (effective for annual
periods beginning on or after January 1, 2026);
● Annual improvements to IFRSs: Volume 11 (effective for annual periods beginning on or after January 1, 2026);
● IFRS 19 Subsidiaries without Public Accountability: Disclosures (effective for annual periods beginning on or after January 1, 2027).
Apart from IFRS 18, these amendments are not expected to have a material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
4. Business combination:
On March 19, 2025, the Company completed the transaction with BTG Oil & Gas to consolidate its interest in Meren Coop. The transaction
was originally announced on June 24, 2024. The acquisition increased the Company’s ownership in core cash generating assets and brought
in a new, strategically aligned cornerstone investor, BTG Pactual. It is also expected to enable enhanced shareholder returns and the creation
of a materially stronger growth proposition. The acquisition was completed by way of amalgamation whereby BTG Oil & Gas exchanged its 50
percent interest in Meren Coop, held through its fully owned subsidiary BTG Pactual Holding S.à.r.l., in exchange for 239,828,655 newly issued
shares in the Company. The primary assets acquired are an indirect 8% interest in Petroleum Mining License ("PML") 52 as well as Petroleum
Prospecting License (“PPL”) 2003 and an indirect 16% interest in PMLs 2, 3 and 4 as well as PPL 261. PML 52 and PPL 2003 are operated by
affiliates of Chevron and covers part of the producing Agbami field. PMLs 2, 3 and 4 and PPL 261 are operated by affiliates of TotalEnergies
and contain the producing Akpo and Egina fields as well as the Preowei and Egina South discoveries.
The acquisition date for accounting purposes corresponds to the completion of the transaction on March 19, 2025. The acquisition is regarded
as a business combination and has been accounted for using the acquisition method of accounting in accordance with IFRS 3. A final purchase
price allocation (“PPA’’) has been performed to allocate the consideration to fair value of assets acquired and liabilities assumed. The PPA is
performed as of the acquisition date. The closing share price of CAD 2.09 and closing USD/CAD currency exchange rate of 1.4193 on March 19,
2025, were used as a basis for measuring the value of the consideration, as set forth below, and includes the Company’s previously held 50%
interest in Meren Coop prior to March 19, 2025.
Expressed in millions of United States dollars
Value of share consideration to BTG Oil & Gas 353.2
Value of previous interest held in Meren Coop 327.8
Total value of consideration 681.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Each identifiable asset and liability is measured at its acquisition date fair value based on guidance in IFRS 13. Trade receivables are recognized
at gross contractual amounts due, as they relate to large and credit-worthy customers. Historically, there has been no significant uncollectible
trade receivables in Meren Coop.
The following table shows the initial purchase price allocation as included in the Company’s Report to Shareholders as per March 31, 2025, as
well as the final purchase price allocation. The recognized amounts of assets and liabilities assumed as at the date of acquisition as reflected in
the final purchase price allocation include some updates compared to the initial purchase price allocation based on new information regarding
income taxes and information received from the operators related to site restoration provision, impacting the purchase price allocation as of
the acquisition date and this final purchase price allocation is in line with the preliminary purchase price allocation as included in the Company’s
Report to Shareholders as per June 30, 2025, and September 30, 2025.
The recognized amounts of assets and liabilities assumed as at the date of acquisition were as follows:
Final purchase price allocation
Initial purchase
price allocation
Final purchase
price allocation Variance
Assets acquired
Oil and gas properties 1,476.2 1,538.1 61.9
Inventories 95.4 95.4 -
Indemnity asset (note 14) 21.6 21.6 -
Trade and other receivables 233.5 233.5 -
Cash and cash equivalents (1) 380.4 380.4 -
Total assets acquired 2,207.1 2,269.0 61.9
Liabilities assumed
Non-current financial liabilities 451.5 451.5 -
Non-current provisions 165.4 132.2 (33.2)
Deferred tax liabilities 343.3 374.3 31.0
Current financial liabilities 298.5 298.5 -
Trade and other payables 164.6 164.6 -
Current tax liabilities 48.2 112.3 64.1
Current provisions (note 14) 54.6 54.6 -
Total liabilities assumed 1,526.1 1,588.0 61.9
Net assets and liabilities recognized 681.0 681.0 -
Value of share consideration to BTG Oil & Gas 353.2 353.2 -
Value of previously held interest in Meren Coop (note 7) 327.8 327.8 -
Total value of consideration 681.0 681.0 -
(1) Cash and cash equivalents includes $59.1 million of cash held in the amalgamated company.
In the period from the acquisition date to December 31, 2025, the revenue and loss included in the Consolidated Statement of Net Income or
Loss and Other Comprehensive Income or Loss relating to the acquired entities was $562.1 million and $53.7 million respectively. Acquisition-
related costs for the year ended December 31, 2024, and the year ended December 31, 2025, were included in general and administrative
expenses and amounted to $6.9 million and $9.0 million, respectively.
If the acquisition had taken place on January 1, 2025, the estimated revenue and loss of the combined Group for the year ended December
31, 2025, would have been approximately $885.6 million and $82.7 million respectively. In determining these amounts, management assumed
that no material fair value adjustments would have been required if the acquisition had occurred on January 1, 2025. These figures may not be
indicative of the results that would have been achieved if the acquisition had actually taken place on January 1, 2025.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
5. Oil and gas properties:
Nigeria
Costs
At January 1, 2025 -
Acquired under amalgamation 1,538.1
Remeasurement of site restoration provisions 119.4
Additions 69.2
At December 31, 2025 1,726.7
Depletion and impairments
At January 1, 2025 -
Depletion (207.9)
Impairment charges (105.3)
At December 31, 2025 (313.2)
Oil and gas properties as at December 31, 2025 1,413.5
As at December 31, 2025, oil and gas properties amounted to $1,413.5 million and related to the licenses PML 52 (covering part of the Agbami
field), PML 2 (Akpo field), PML 3 (Egina field) and PML 4 (Preowei Field) in Nigeria. Future development costs of $511.8 million were included in
determination of the depletion expense for the year ended December 31, 2025.
The Company recognized a change in estimate of $119.4 million in oil and gas properties which related for $122.9 million to the remeasurement
of the site restoration provisions acquired under the amalgamation in accordance with IAS 37 and for $3.5 million negative to the periodic re-
assessment of variables such as projected decommissioning cost per well, discount rates and economic lives of the fields (see note 14).
The Company carries out impairment tests of individual cash-generating units when impairment triggers are identified.
As at December 31, 2025, the Company determined that there was an indicator of impairment in respect of its oil and gas properties related to
the Agbami field CGU, reflecting a more conservative oil price and cost outlook compared to prior assumptions. This assessment was driven by
recent oil price volatility and updated cost forecasts. A significant portion of the revised cost outlook relates to planned long-term life-extension
activities required to enable the Agbami FPSO to continue operating reliably and safely through the end of the current license period. The
impairment does not reflect any adverse change in reservoir performance, reserves classification or the operational integrity of the Agbami field.
The Company calculated the recoverable amount of the CGU using a fair value less costs to dispose discounted cash flow model. The recoverable
amount was determined using discounted future after tax net cash flows of proved and probable oil and gas reserves using forecast prices and
costs prepared by management’s expert at December 31, 2025.
It was determined that the carrying value exceeded the recoverable value of $298.0 million and non-cash impairment charges of $105.3 million
were recognized on the Group’s oil and gas properties related to the CGU.
The applied discount rate has been determined to be in line with the discount rate applied on March 19, 2025, when the Company acquired its
additional interest in Meren Coop.
Future commodity prices is a key assumption and has significant impact on the net present value. Forecasted oil and gas prices are based
on management’s estimates and available market data. Information about market prices in the near future can be derived from the futures
contract market. The information about future prices is less reliable on a long-term basis, as there are fewer observable market transactions
going forward. In assessing value in use, oil prices for the period up to 2036 are based on Brent prices as forecasted by Independent Qualified
Reserve Engineers (IQRE) Analysis, ranging from $63/bbl to $86/bbl, and on management’s long-term price assumptions thereafter (2%
inflation from 2036 onwards).
Operating and capital costs are calculated based on various technical assumptions, such as expected production profiles and the best estimate
of the related cost. The long-term inflation rate is assumed to be 2%.
A change in the future operating and capital costs by 5% would impact the impairment recognized by approximately $20.0 million.
A change in the future oil price by 5% would impact the impairment recognized by approximately $22.0 million.
A change in the discount rate by 1% would impact the impairment recognized by approximately $12.0 million.
Actual outcomes may differ from these illustrative impairment sensitivities, as changes in individual assumptions are typically accompanied by
management actions and adjustments to development and operating plans.
Changes in input factors, either positive or negative would likely significantly change the actual impairment amount compared to the illustrative
sensitivities above.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Material contractual commitments
In accordance with the terms of the production sharing contracts entered into by the Group along with other partners in respect of its oil
fields and blocks, the Group has certain minimum exploration and development commitments with estimated capital expenditures in oil and
gas properties of $0.3 billion as at December 31, 2025, $0.2 billion as at December 31, 2026, $0.1 billion as at December 31, 2027, and $0.1
billion as at December 31, 2028.
6. Intangible exploration assets:
Intangible exploration assets
Equatorial Guinea South Africa Total
At January 1, 2024 13.4 5.7 19.1
Additions 4.5 5.7 10.2
At December 31, 2024 17.9 11.4 29.3
Additions 6.6 7.8 14.4
At December 31, 2025 24.5 19.2 43.7
As at December 31, 2025, the carrying amount of the Company’s intangible exploration assets in Equatorial Guinea was $24.5 million and
related to its 80% interest in Blocks EG-18 and EG-31 (as at December 31, 2024 – $17.9 million).
As at December 31, 2025, the carrying amount of the Company’s intangible exploration assets in South Africa was $19.2 million for its 18.0%
(as at December 31, 2024 – 17.0%) participating interest in the Block 3B/4B Exploration Right (as at December 31, 2024 - $11.4 million).
On July 26, 2024, the Company signed an agreement with Eco to acquire an additional 1.0% interest in Block 3B/4B from Azinam Limited, Eco
(Atlantic) Oil and Gas Ltd.’s (“Eco”) wholly owned subsidiary, in exchange for all common shares and warrants over common shares held by the
Company in Eco. On January 13, 2025, the Company announced that it had completed this transaction. The Company’s interest in Block 3B/4B
increased by 1.0% to 18.0% and the Company ceased to be a shareholder in Eco. The fair value of the Company’s investment in Eco on the day
of the transaction was $8.0 million, which has been recorded as an addition to intangible exploration assets.
As at December 31, 2025, no intangible exploration assets have been transferred to oil and gas properties as commercial reserves have not
been established and technical feasibility for extraction has not been demonstrated.
7. Equity investment in joint venture:
Meren Coöperatief U.A (previously known as Prime Oil and Gas Coöperatief U.A.) (“Meren Coop”):
On March 19, 2025, the Company announced the completion of the amalgamation with BTG Oil & Gas (“the amalgamation) to consolidate the
remaining 50% interest in Meren Coop in exchange for 239,828,655 common shares issued in Meren. Following completion of the amalgamation,
Meren Coop is fully consolidated by the Company as from March 19, 2025 (see note 4).
The following table shows the Company’s carrying value of the non-controlling 50% interest in Meren Coop as at December 31, 2025, and
December 31, 2024. The carrying value as per March 19, 2025, of $327.8 million has been assigned to the fair value of assets acquired and
liabilities assumed as per note 4.
December 31,
2025
December 31,
2024
Balance, beginning of the period 328.4 572.5
Share of joint venture profit 2.9 226.0
Distributions received from Meren Coop (60.0) (36.0)
Revaluation of contingent consideration 0.6 2.6
Reversal of impairment / (Impairment) 55.9 (436.7)
Impact of amalgamation (327.8) -
Balance, end of the period - 328.4
In the period up to and including March 19, 2025, the Company recognized an income of $2.9 million, relating to its investment in Meren Coop
(year ended December 31, 2024 - $226.0 million).
In the period up to and including March 19, 2025, Meren Coop made one distribution of $120.0 million gross, with a net payment to the Company
of $60.0 million. In the year ended December 31, 2024, Meren Coop made one distribution of $72.0 million gross, with a net payment to the
Company of $36.0 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
As at December 31, 2024, management determined there was an objective evidence of impairment in relation to the Company’s shareholding
in Meren Coop as a result of the significant decrease in the Meren share price between June 24, 2024, when the Company announced the
Proposed Reorganization and December 31, 2024. The fair value of the 50% shareholding in Meren Coop decreased as the fair value considers
the number of Meren shares that were agreed in relation to the purchase of the additional interest in Meren Coop and the trading value
of Meren shares, as this is an observable fair value input under IFRS Accounting Standards. As at December 31, 2024, the fair value of the
Company’s existing shareholding in Meren Coop was calculated to be $328.4 million based on the implied value of the Proposed Reorganization,
resulting in a non-cash impairment loss on the investment in Meren Coop of $436.7 million for the year ended December 31, 2024. As at March
19, 2025, management determined there was an objective evidence of impairment reversal based on the Meren share price when the Company
announced the completion of the amalgamation. The fair value of the 50% shareholding in Meren Coop was calculated to be $327.8 million,
resulting in a non-cash impairment reversal on the investment in Meren Coop of $55.9 million for the three months ended March 31, 2025.
The following tables summarizes Meren Coop’s financial information for the period up to and including March 19, 2025, and the year ended
December 31, 2024. Following completion of the amalgamation on March 19, 2025, Meren Coop is fully consolidated by the Company.
Meren Coop’s Statement of Net Income and Comprehensive Income
Period ended Year ended
March 19,
2025
December 31,
2024 (1)
Revenue 323.5 782.7
Cost of Sales
Production costs (2) (187.4) (48.3)
Depletion costs (71.3) (372.0)
(258.7) (420.3)
Gross profit 64.8 362.4
Other operating income (3) - 329.7
General and administrative expenses (6.2) (28.2)
Operating profit 58.6 663.9
Finance income 2.4 6.4
Finance expense (4) (21.3) (97.8)
Net financial items (18.9) (91.4)
Profit before tax 39.7 572.5
Income tax (5) (34.0) (120.5)
Net income and comprehensive income for the period 5.7 452.0
Proportionate share of Meren Coop’s profit and comprehensive income for the period 2.9 226.0
Proportionate share of Meren Coop’s net income 2.9 226.0
(1) Certain comparative figures have been reclassified to conform with the presentation of the Company’s Consolidated Statement of Net Income or
Loss and Other Comprehensive Income or Loss following completion of the amalgamation.
(2) As at March 19, 2025, Meren Coop was in a lower net underlift position compared to December 31, 2024. This resulted in a loss of $133.1 million in
the Statement of Net Income and Comprehensive Income for the period ended March 19, 2025 (year ended December 31, 2024 – profit of $171.2
million) included in production costs.
(3) Other operating income in the year ended December 31, 2024, relates to the release of the previously recognized $305.3 million provision for the
security deposit received from Equinor during 2021 and the recognition of an additional $24.4 million receivable pursuant to the Securitization
Agreement.
(4) Finance expense is primarily made up of interest expenses incurred on external facilities and accretion expenses incurred on the decommissioning
liability. Finance costs for the period ended March 19, 2025, also included a $3.7 million accounting loss on a purchased Asian put option and a zero-
premium Asian Dated Brent Collar (year ended December 31, 2024 – $7.1 million accounting loss on a purchased Asian Dated put options).
(5) In the period ended March 19, 2025, there is a tax charge of $34.0 million (year ended December 31, 2024 - $120.5 million). The tax charge is
primarily made up of Corporate Income tax and Education tax, withholding tax on dividends of ten percent and deferred income tax. Other operating
income of $329.7 million in the year ended December 31, 2024, was subject to ten percent Capital Gains Tax in Nigeria lowering the effective tax
rate for the year.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Supplementary information: Meren Coop’s Statement of Cash Flows
Period ended Year ended
March 19,
2025
December 31,
2024 (1)
Cash flows generated by/ (used in)
Profit before tax 39.7 572.5
Adjustments for:
Depletion costs 71.3 372.0
Net financial items 18.9 91.4
Taxes (47.7) (201.4)
Change in provision for security deposit received - (305.3)
Other (1.0) 1.3
Cash generated from operating activities before working capital 81.2 530.5
Changes in working capital (8.2) 11.6
Net cash generated from operating activities 73.0 542.1
Expenditures on oil and gas properties (22.6) (152.5)
Interest income received 2.2 5.1
Net cash used in investing activities (20.4) (147.4)
Distributions paid to shareholders (120.0) (72.0)
Interest expense paid (10.8) (71.9)
Derivatives - (3.2)
Net cash used in financing activities (130.8) (147.1)
Foreign exchange variation on cash and cash equivalents - (0.3)
Total cash flow (78.2) 247.3
Cash and cash equivalents, beginning of the period 399.5 152.2
Cash and cash equivalents, end of the period 321.3 399.5
(1) Certain comparative figures have been reclassified to conform with the presentation of the Company’s Consolidated Statement of Cash Flows
following completion of the amalgamation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
8. Equity investments in associates:
The Company holds the following equity investments in associates:
Africa Energy
Corp.
Eco (Atlantic) Oil
and Gas Ltd
Impact Oil
and Gas Ltd Total
Shares held at December 31, 2025 55,396,483 - 449,464,396
Ownership at December 31, 2025 11.6% - 39.5%
At January 1, 2024 24.8 7.6 102.3 134.7
Share of loss from equity investments (42.1) (0.6) (16.1) (58.8)
Reversal of impairment of equity investments 20.1 - - 20.1
Additional investments - - 88.6 88.6
Reclassification to Investment held for sale - (7.0) - (7.0)
At December 31, 2024 2.8 - 174.8 177.6
Share of loss from equity investments (0.4) - (2.5) (2.9)
Loss on dilution of equity investments (0.9) - - (0.9)
Distribution received - - (31.6) (31.6)
At December 31, 2025 1.5 - 140.7 142.2
In the year ended December 31, 2025, the Company recognized a loss of $3.8 million (year ended December 31, 2024 – loss of $38.7 million).
The Company also recognized a gain of $0.9 million in the year ended December 31, 2025, on the shares in Eco (Atlantic) Oil and Gas Ltd
classified as Investment held for sale, resulting in a total loss from investments in associates of $2.9 million in the year ended December 31,
2025.
As at December 31, 2025, the Company determined that there were no indicators of impairment for its investments in Africa Energy Corp. or
Impact Oil and Gas Ltd.
A. Africa Energy Corp. (“Africa Energy”):
Africa Energy is an oil and gas exploration company with an interest in South Africa.
As at December 31, 2025, the market value of the Company’s investment in Africa Energy was $4.5 million based on the share price of CAD
0.11 (as at December 31, 2024 - $5.8 million). The carrying value is less than the market value from significant impairments recognized by
Africa Energy.
On March 31, 2025, Africa Energy announced the closing of a private placement of common shares, including the issue of common shares for
debt. Meren did not participate in this private placement and as a result its shareholding in Africa Energy has been reduced from 19.7% as at
December 31, 2024, to 11.6% as at December 31, 2025.
B. Eco (Atlantic) Oil and Gas Ltd. (“Eco”):
On July 26, 2024, the Company signed an agreement with Eco to acquire an additional 1.0% interest in Block 3B/4B from Azinam Limited, Eco’s
wholly owned subsidiary, in exchange for all common shares and warrants over common shares held by the Company in Eco. Following the
announcement of this transaction, the investment in Eco was reclassified to an investment held for sale (see note 10). On January 13, 2025,
the Company announced the completion of this transaction.
C. Impact Oil and Gas Ltd (“Impact”):
Impact is an oil and gas exploration company with interests in Namibia and South Africa.
On January 10, 2024, the Company announced a strategic farmout agreement between its investee company Impact, and TotalEnergies, that
allows the Company to continue its participation in the Venus oil development project and the follow-on exploration and appraisal campaign on
Blocks 2913B and 2912 with no upfront costs. At the date hereof, Impact has a 9.5% interest in Blocks 2912 and 2913B that is fully carried
for all joint venture costs, with no cap, through to first commercial production. This agreement provides Impact with a full interest-free carry
loan over all of Impact’s remaining development, appraisal and exploration costs on the Blocks from January 1, 2024 (“Effective Date”), until the
date on which Impact receives the first sales proceeds from oil production on the Blocks (“First Oil Date”). On and from the First Oil Date, the
carry is repayable to TotalEnergies in kind from 60% of Impact’s after-tax cash flow, net of all joint venture costs, including capital expenditures.
During the repayment of the carry, Impact will pool its entitlement barrels with those of TotalEnergies for more regular off-takes and a more
stable cashflow profile and will also benefit from TotalEnergies’ marketing and sales capabilities.
On January 29, 2025, Impact distributed $31.6 million net to the Company’s shareholding.
The following tables summarize Impact’s financial information, based on a best estimate basis, for the year ended December 31, 2025, and
December 31, 2024. The Company is not aware of any material changes to the financial information.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Balance Sheet
As at
December 31,
2025
December 31,
2024
Cash and cash equivalents included in current assets 40.7 125.1
Other current assets 0.4 1.7
Non-current assets (1) 317.1 316.5
Current liabilities (1.4) (0.8)
Non-current liabilities (0.6) -
Net assets of Impact 356.2 442.5
Percentage ownership 39.5 39.5
Proportionate share of Impact's net assets 140.7 174.8
Statement of Net Loss and Comprehensive Loss from continuing operations
For the years ended
December 31,
2025
December 31,
2024
Net loss and comprehensive loss from continuing operations (6.3) (40.8)
Proportionate share of Impact’s loss (2.5) (16.1)
(1) As at December 31, 2025, the carrying value of non-current assets included a fair value adjustment of $190.0 million (as at December 31, 2024 -
$96.4 million).
9. Inventories:
Inventories relate to well supplies and operational spare parts to be used in the oil production process in Nigeria.
10. Investment held for sale:
On July 26, 2024, the Company signed an agreement with Eco to acquire an additional 1.0% interest in Block 3B/4B from Azinam Limited, Eco’s
wholly owned subsidiary, in exchange for all common shares and warrants over common shares held by the Company in Eco. Following the
announcement of this transaction, the investment in Eco was reclassified to an investment held for sale. On January 13, 2025, the Company
announced the completion of this transaction with the result that the Company is no longer a shareholder in Eco.
11. Trade and other receivables:
December 31,
2025
December 31,
2024
Trade receivables 5.6 -
Underlift position 12.2 -
Short-term receivables with partners 32.7 -
Prepaid expenses and accrued income 2.5 2.4
Other receivables 24.7 1.6
Total accounts receivable and prepaid expenses 77.7 4.0
The excess of product sold during the period over the participant’s ownership share of production is recognized by the Group as an underlift
asset with a corresponding credit to production costs. An underlift receivable is the right to receive oil out of the Group’s equity share of future
production.
The short-term receivables with partners mainly relate to the Group’s share in the receivables of its joint operations in Nigeria.
Other receivables include an indemnity asset of $21.6 million recognized under the deed of indemnity entered into between the Company and
BTG Oil & Gas (see note 14).
As at December 31, 2025, and December 31, 2024, all receivables are due within one year and no provision for expected credit losses has been
recognised.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
12. Cash and cash equivalents:
Cash and cash equivalents include short-term deposits made for varying periods of between one day and three months, depending on the
immediate cash requirements of the Group, and earn interest at varying rates.
13. Share capital:
A. The Company is authorized to issue an unlimited number of common shares with no par value.
B. Issued:
December 31, 2025 December 31, 2024
Shares Amount Shares Amount
Balance, beginning of the period 439,078,170 1,195.8 463,831,871 1,265.3
Share issuance to BTG Oil & Gas under amalgamation
Agreement 239,828,655 353.2 - -
Exercise of Share Options 367,600 0.4 647,000 0.5
Settlement of Restricted Share Units 836,323 1.1 271,063 0.5
Settlement of Performance Share Units 1,974,498 2.5 577,968 1.1
Cancellation of shares repurchased (6,176,053) (16.8) (26,249,732) (71.6)
Balance, end of the period 675,909,193 1,536.2 439,078,170 1,195.8
The Company launched a share buyback program on December 6, 2024, that ended on December 5, 2025, under which 2.5 million Meren
common shares were repurchased during the year ended December 31, 2024, of which 2.2 million Meren common shares were cancelled during
the year ended December 31, 2024. In the three months ended March 31, 2025, a total of 5.9 million Meren common shares were repurchased
and 6.2 million Meren common shares were cancelled during the three months ended March 31, 2025. Following March 31, 2025, no further
shares were purchased in the period to December 31, 2025. The Company launched a new share buyback program on December 8, 2025, under
which no Meren common shares have been repurchased during 2025.
The balance of share capital has been reduced by determining the average per-share amounts in the share capital account, before cancellation
of shares repurchased, and applying this to the numbers of shares cancelled. The difference between the reduction in share capital and the
amount paid for shares repurchased has been added to the balance of contributed surplus.
In the year ended December 31, 2025, the Board of Directors approved and paid four dividends of $0.0371 per share for a total amount of
$100.2 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
14. Provisions:
Site
restoration
Contingent
consideration
Share-based
compensation Others Total
At January 1, 2024 5.5 37.8 14.1 - 57.4
Charges - - 1.5 - 1.5
Unwinding of discount 0.2 2.6 - - 2.8
Settlements - - (8.3) - (8.3)
At December 31, 2024 5.7 40.4 7.3 - 53.4
Acquired under amalgamation 129.4 54.6 - 2.8 186.8
Changes in estimates 119.4 - - - 119.4
Charges - - 6.3 1.4 7.7
Unwinding of discount 9.2 2.9 - - 12.1
Settlements - - (8.3) - (8.3)
At December 31, 2025 263.7 97.9 5.3 4.2 371.1
Non-current 5.7 40.4 3.1 - 49.2
Current - - 4.2 - 4.2
At December 31, 2024 5.7 40.4 7.3 - 53.4
Non-current 263.7 - 3.4 4.2 271.3
Current - 97.9 1.9 - 99.8
At December 31, 2025 263.7 97.9 5.3 4.2 371.1
A. Site restoration
The provision for site restoration amounted to $263.7 million as per December 31, 2025 (as at December 31, 2024 - $5.7 million). The fair
value of the provision for site restoration mainly relates to Nigeria and was based on the estimated future cash flows to decommission the oil
and gas properties at the end of their useful life. The discount rate used to determine the net present value of the decommissioning obligation
was 4.8% (as at December 31, 2024 – 3.5%) based on a risk-free rate with a similar maturity to that of the timing of the expected cash flows
and a long-term inflation rate of 2.3% (as at December 31, 2024 – 2%).
The site restoration provisions acquired under the amalgamation represents the present value of decommissioning costs relating to the acquired
oil and gas properties, which are expected to be incurred up to the economic cut-off dates of the Agbami, Akpo and Egina fields. These provisions
have been calculated based on the cash flow estimates as provided by the operators of the fields. The fair value of the site restoration
provisions acquired on amalgamation totalling $129.4 million have been calculated using a credit-adjusted discount rate in accordance with IFRS
3, which has subsequently been re-measured using a risk-free rate in accordance with IAS 37 resulting in a change in estimate of $122.9 million.
The undiscounted costs at December 31, 2025, are estimated to be approximately $0.6 billion, net to the Company, and include the costs of
physical well abandonment and site remediation. The costs are expected to be incurred up to the economic cut-off dates of the Agbami, Akpo
and Egina fields, ranging from 2043 to 2044, which is when the producing oil and gas properties are expected to cease operations. In the year
ended December 31, 2025, the Group revised its provision for decommissioning liabilities downwards by $3.5 million resulting from periodic
re-assessment of projected decommissioning cost per well, discount rates and economic lives of the fields.
An increase in the inflation rate by 1% would increase the site restoration provision recognized by approximately $53.1 million.
A decrease in the discount rate of 1% would increase the site restoration provision recognized by approximately $49.3 million.
B. Contingent consideration
Under the Meren Coop Sale and Purchase Agreement completed on January 14, 2020, a deferred payment of $118.0 million, subject to
adjustment, may be due to the seller contingent upon the timing of the final PML 52 tract participation in the Agbami field. The signing
of the Securitization Agreement by Meren Coop in 2021 led to the Company reassessing its view of the likelihood of making a contingent
consideration payment to the seller. The signing of the Securitization Agreement by Meren Coop does not constitute a redetermination of the
tract participation and therefore does not trigger the payment of a contingent consideration under the Sale and Purchase Agreement but, at
the Company’s discretion, could trigger discussions with the seller. The outcome of this process is uncertain. In 2021, the Company recorded
$32.0 million as contingent consideration and increased this to $40.4 million as at December 31, 2024, and to $43.4 million in the year ended
December 31, 2025. The deferred payment is expected to be due in the three months ended March 31, 2026, and has therefore been presented
as a short term provision as per December 31, 2025.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
On June 25, 2021, Meren Nigeria 52 Limited (previously named Prime 127 Nigeria Limited) (“Meren 52”), a subsidiary of Meren Coop, signed a
securitization agreement with two of the unit parties, Equinor and Chevron (the “Securitization Agreement”), whereby Equinor agreed to pay
a security deposit to the two other JV parties to secure future payments due under that Securitization Agreement, pending a comprehensive
resolution being reached among all unit parties in respect of the tract participation in the Agbami field by December 27, 2024. In accordance
with the Securitization Agreement, on June 29, 2021, Meren 52 received from Equinor its portion of the security deposit in the form of a cash
payment of $305.3 million. Meren 52 received an additional payment of $24.4 million on January 31, 2025, pursuant to the Securitization
Agreement. Given no comprehensive resolution was reached by December 27, 2024, Meren 52 has recognized its portion of the security
deposit and the additional receivable under the Securitization Agreement as other operating income on December 27, 2024. The process of
implementing a new tract participation by the parties is ongoing and is subject to government approval. The parties will continue discussions to
seek final resolution of the formal redetermination of the Agbami tract participation in respect of the period after December 27, 2024, however
there is no certainty that such ongoing discussions will result in a final resolution.
Under the amended joint sale agreement between (among others) BTG Holding and the seller dated October 31, 2018, the seller could
potentially claim that, given an additional payment has been received under the securitization agreement, this triggers a payment obligation
of $54.6 million, exclusive of interest, capital taxes and certain deductions, contingent upon various criteria, with the outcome of this potential
claim uncertain. Management considers the likelihood of any interest being payable to be unlikely. The Company has recorded an indemnity
asset of $21.6 million under the deed of indemnity entered into between a subsidiary of the Company and BTG Oil & Gas on February 19, 2025,
for any costs suffered or incurred above $33.0 million post completion of the amalgamation, with the deed of indemnity backed by a $22.0
million letter of credit granted in favour a subsidiary of the Company. The letter of credit will remain in place for an initial period of two years
and if a claim is not resolved in two years or is made after the two year period BTG Oil & Gas has undertaken to extend or reinstate the letter
of credit.
15. Financial liabilities:
Reserves Based
Lending Facility Lease Liability Total
At January 1, 2024 - - -
Initial recognition of IFRS 16 lease liability - 3.7 3.7
Repayments - (0.4) (0.4)
At December 31, 2024 - 3.3 3.3
Acquired under amalgamation 750.0 - 750.0
Initial recognition of IFRS 16 lease liability - 1.1 1.1
Repayments (420.0) (0.6) (420.6)
At December 31, 2025 330.0 3.8 333.8
Non-current - 2.6 2.6
Current - 0.7 0.7
At December 31, 2024 - 3.3 3.3
Non-current 262.3 2.9 265.2
Current 67.7 0.9 68.6
At December 31, 2025 330.0 3.8 333.8
A. Reserves Based Lending Facility
On amalgamation the Company acquired a Reserves Based Lending Facility (“RBL”) of $800.0 million of which $750.0 million was drawn. On
October 28, 2025, the Company voluntarily cancelled $100.0 million of its RBL commitments resulting in a remaining total commitment
of $700.0 million. The total amount that can be drawn under the RBL is limited to the Borrowing Base Amount (“BBA”), which is subject to
redeterminations on March 31 and September 30 of each year, limited by aggregate commitments. As of December 31, 2025, the BBA was
$468.4 million, which will amortize as the RBL moves towards final maturity. The RBL matures on June 20, 2029, but amortizes each quarter
as per the lower of commitments and the BBA.
The principal bore interest at Term SOFR + 4.00% until June 2025 and bears interest of Term SOFR + 4.25% until June 2027, then Term SOFR
+ 4.50% until final maturity on June 20, 2029. In addition, commitment fees of 40% of the margin are payable on the undrawn but available
portion of the RBL, and commitment fees of 20% of the margin are payable on the unavailable portion of the RBL.
The RBL perimeter remains at the Meren Coop level - Meren Coop is the borrower, and Meren 52 Nigeria Limited and Meren 234 Nigeria Limited
(previously named Prime 130 Nigeria Limited) (“Meren 234”) are the guarantors. The main security package is comprised of security over the
shares, production assets, contracts and rights of the Nigerian entities - Meren 52 and Meren 234. In addition, RBL lenders have security over
cash and cash equivalents held in project accounts, receivables against cargos sold and all relevant insurance policies of the three entities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
All financial and liquidity covenants covered by the RBL are restricted to these three entities. The Meren Coop entities shall ensure that total net
debt to adjusted EBITDAX on each quarter is no greater than 3.0:1, that the historic debt service cover ratio for the preceding year is greater
than 1.20:1, and that on each quarter of each year during each of the four successive quarters there are or will be sufficient funds available to
the group to meet all relevant expenditure to be incurred in each of these four successive quarters as they fall due. The Company has been in
compliance with the covenants in the year ended December 31, 2025.
In the event that the BBA reduces to an amount below the outstanding RBL balance, the Company would be required to repay the difference
immediately.
B. Corporate Facility
On May 22, 2025, the Company cancelled its $65.0 million Corporate Facility.
16. Trade and other payables:
December 31,
2025
December 31,
2024
Short-term payables with partners 97.9 -
Crude oil overlift payable 26.1 -
Accruals 24.0 7.7
Other payables 2.8 2.0
Total trade and other payables 150.8 9.7
The short-term payables with partners mainly relate to the Group’s share in the payables of its joint operations in Nigeria.
The Group’s excess of crude oil purchased during the year over its entitlement share of production, is recognized as a crude oil overlift payable
balance with a corresponding charge to cost of sales. An overlift liability is the obligation to deliver oil out of the Group’s equity share of future
production.
All trade and other payables are due within one year.
17. Commitments and contingencies:
A. Contingent consideration:
For information on the contingent consideration in relation to the historical acquisition of Meren Coop, refer to Note 14B.
B. Withdrawal from Kenya:
On May 23, 2023, the Kenya entities along with TotalEnergies submitted withdrawal notices to the remaining joint venture party on Blocks
10BB, 13T and 10BA in Kenya, to unconditionally and irrevocably, withdraw from the entirety of the JOAs and PSCs for these concessions. The
Company concurrently submitted notices to Ministry of Energy and Petroleum, requesting the government’s consent to transfer all of its rights
and future obligations under the PSCs to its remaining joint venture party. Government consent to the transfer was received on September
18, 2025, and the Company subsequently transferred all of its rights and future obligation of Blocks 10BB, 13T and 10BA to its remaining joint
venture party with effect on and from June 30, 2023. In accordance with the JOA and PSC the Company retains economic participation for
activities prior to June 30, 2023, which might result in additional costs for the Company. The Company continues to monitor the claim made
against the operator by local communities in relation to past operations which may relate to the period prior to June 30, 2023. No provision has
been recognized for this as at December 31, 2025.
C. Securities and guarantees
Under the conditions of the RBL facility, the main security package is comprised of security over the shares, production assets, contracts and
rights of the Nigerian entities Meren 52 and Meren 234, cash and cash equivalents in the amount of $152.9 million as per December 31, 2025,
that are held within the project accounts in Nigeria and The Netherlands, proceeds from the oil cargos sold and proceeds from the intercompany
receivables between the Company and the Nigerian entities. Further, any and all claims relating to, and all returns of premium in respect of, all
relevant insurance policies have been secured.
D. Commitments from forward sales
The Group uses a mix of financial derivatives and physical forward sales contracts to manage its commodity price risk and ensure stability in
cash flows. Its strategy is to hedge between 70-100% of its post-tax net entitlement production for the next 12-months. As at December 31,
2025, two cargos of the Group’s expected lifted entitlement production for 2026 are covered by forward contracts. The average cargo lifted is
for 1 million barrels of oil. The Group’s triggers for these two cargos covered by forward contracts have been triggered at an average of $62.1
per barrel.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
18. Segment information:
The Group operates within several geographical areas. All revenue and therefore gross profit as reported by the Company is currently derived
from operations in Nigeria.
For segment information about oil and gas properties and intangible exploration assets, see note 5 and 6.
19. Net Revenue:
Revenue for the years ended December 31, 2025, and December 31, 2024, is comprised of the following:
For the years ended
December 31,
2025
December 31,
2024
Oil revenue 545.5 -
Gas revenue 14.4 -
Total net revenue 559.9 -
In the year ended December 31, 2025, total revenue amounted to $559.9 million (year ended December 31, 2025 - nil), of which $545.5 million
related to the Group’s sales of crude oil to customers. Under the conditions of the Offtake Agreement, an aggregate of at least 90% of the
Group’s cargos is required to be delivered to one of the lenders.
In the year ended December 31, 2025, the Group was allocated 8 oil liftings, with a total sales volume of 8 million barrels at an average realized
oil price of USD $68.2/bbl.
Prior to March 19, 2025, the Company equity accounted for its investment in Meren Coop and therefore no revenue has been reported before
this date. See note 7 for further details.
20. Production costs:
Production costs for the years ended December 31, 2025, and December 31, 2024, is comprised of the following:
For the years ended
December 31,
2025
December 31,
2024
Cost of operations 114.3 -
Royalties 29.4 -
Others 22.9 -
Total production costs 166.6 -
Cost of operations mainly relate to lifting costs from personnel, material and services from third parties.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
21. Share based compensation:
In the year ended December 31, 2025, the Company recognized a total of $6.3 million in share-based compensation expense relating to the
Long-Term Incentive Plan (“LTIP”) and Stock Option Plan (year ended December 31, 2024 – $1.5 million).
A. Share purchase options:
At the 2016 Annual General and Special Meeting the Company’s shareholders approved the terms of the stock option plan (the “Stock Option
Plan”). The Stock Option Plan provided that the aggregate number of Common Shares which could be reserved for issuance as incentive share
purchase options could not exceed 3.5% of the Common Shares outstanding, and option exercise prices would reflect current trading values of
the Company’s shares. The term of any option granted under the Stock Option Plan was fixed by the Board of Directors and could not exceed
five years from the date of grant. The Company ceased awarding share purchase options under the Stock Option Plan in 2021 and did not issue
any share purchase options between 2022 and 2025. Instead, the Company now awards PSUs to executives and staff under the Company’s
LTIP. Refer to note 21B for further information on the Company’s PSUs.
The Company’s outstanding share purchase options are as follows:
December 31, 2025 December 31, 2024
Number of
options
Weighted
average
exercise price
(CAD$)
Number of
options
Weighted average
exercise price
(CAD$)
Outstanding, beginning of the year 457,616 1.23 1,104,616 1.20
Forfeited - - - -
Exercised (435,000) 1.21 (647,000) 1.17
Balance, end of the year 22,616 1.61 457,616 1.23
The following table summarizes information regarding the Company’s share purchase options outstanding and exercisable at December 31,
2025:
Weighted Average Exercise price
(CAD$/share) Number outstanding Number exercisable
Weighted average remaining
contractual life in years
1.61 22,616 22,616 0.63
In the year ended December 31, 2025, the Company did not recognize a share based payment expense (year ended December 31, 2024 - nil),
related to share purchase options.
B. Performance share units (“PSUs”):
On April 19, 2016, the shareholders of the Company approved a new long term incentive plan which was subsequently amended and restated
following shareholder approval on April 20, 2022. Under the terms of the LTIP, eligible plan participants may be granted PSUs and RSUs. The
LTIP provides that an aggregate number of Common Shares which may be reserved for issuance in respect of grants of RSUs and PSUs shall not
exceed 28,256,682 shares, which represents approximately 4% of the issued and outstanding Common Shares of the Company as at December
31, 2025. PSUs are notional share instruments which track the value of the Common Shares and are subject to non-market performance
conditions related to key strategic, financial and operational milestones. PSUs cliff vest three years from the date of grant, at which time the
Board of Directors will assign a performance multiple ranging from nil to 200% to determine the ultimate vested number of PSUs. PSUs are
awarded to executives and from 2022 are awarded to staff, replacing share options. They may be settled in shares issued from treasury or
cash, at the discretion of the Board of Directors.
The Company’s PSUs outstanding are as follows:
December 31,
2025
December 31,
2024
Number of PSUs Number of PSUs
Outstanding, beginning of the year 7,609,689 7,122,839
Granted 6,242,388 3,968,993
Forfeited (811,168) -
Vested (4,445,461) (3,482,143)
Balance, end of the year 8,595,448 7,609,689
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
In the year ended December 31, 2025, 4,445,461 PSUs vested in which 2,471,228 PSUs were settled for a cash payment of $3.8 million and
the remaining were settled via the issuance of Common Shares of the Company (year ended December 31, 2024 - $5.3 million).
The Company accounts for PSUs as share-based awards whereby the estimated fair value of the grant is expensive throughout the remaining
vesting period. In the year ended December 31, 2025, the Company recognized $4.9 million in share-based compensation expenses relating to
the PSUs (year ended December 31, 2024 - $0.9 million) with the increase mainly caused by accelerated charges and changes in the expected
outcome of performance multiples.
C. Restricted share units (“RSUs”):
RSUs granted to Non-Executive Directors cliff vest three years from the date of grant. The estimated fair value of RSUs are expensed evenly
throughout the remaining vesting period. RSUs are no longer awarded to executives, and only PSU’s are awarded. RSUs may be settled in shares
issued from treasury or cash, at the discretion of the Board of Directors.
The Company’s RSUs outstanding are as follows:
December 31,
2025
December 31,
2024
Number of RSUs Number of RSUs
Outstanding, beginning of the year 1,174,553 1,278,318
Granted 969,068 541,621
Vested (1,383,688) (645,386)
Balance, end of the year 759,933 1,174,553
In the year ended December 31, 2025, 1,383,688 RSUs vested with 547,365 being settled for a cash payment of $0.8 million and the remaining
were settled via the issuance of Common Shares of the Company (year ended December 31, 2024 - $0.6 million).
The Company accounts for RSUs as share-based awards whereby the estimated fair value of the grant is expensed evenly throughout the
remaining vesting period. In the year ended December 31, 2025, the Company recognized $1.4 million in share-based compensation relating to
the RSUs (year ended December 31, 2024 - $0.6 million) with the increase mainly caused by accelerated charges.
22. Finance income:
For the years ended
December 31,
2025
December 31,
2024
Interest income on cash and cash equivalents 3.9 7.1
Interest income from associated companies 0.2 0.5
Total finance income 4.1 7.6
23. Finance expense:
For the years ended
December 31,
2025
December 31,
2024
Interest expense on RBL 30.4 -
Commitment fees 4.3 3.4
Unwinding of site restoration provision 9.2 0.2
Others 3.9 1.3
Total finance expense 47.8 4.9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
24. Income tax:
For the years ended
December 31,
2025
December 31,
2024
Current tax expense 135.9 -
Deferred tax income (92.5) -
Total income tax 43.4 -
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of Canada as follows:
The tax rate consists of the combined federal and provincial statutory tax rates for the Company for the years ended December 31, 2025,
and December 31, 2024. The differences between the actual income tax expense and the expected Canadian federal and provincial statutory
corporate income tax expense/ (recovery) related to the withholding tax on distributed dividends, education tax in Nigeria, income from result
in Joint Venture that is not taxable and non taxable expense from over/underlift movements.
For the years ended
December 31,
2025
December 31,
2024
Net profit/ (loss) and comprehensive profit/ (loss) 11.8 (279.1)
Combined federal and provincial statutory income tax rate 27.0% 27.0%
Expected expense/ (recovery) 3.2 (75.4)
Foreign rate differences 0.6 0.1
Expenses not deductible for tax purposes 9.0 0.4
Creation of unrecorded tax losses 12.1 7.4
Non-deductible withholding tax on dividend 18.5 -
Education tax and Naseni fee 15.1 -
Equity earnings (15.1) (48.9)
Tax charge 43.4 -
The Company has estimated non-capital losses carried forward of $180.1 million in Canada which expire from 2026 through 2045. The
Company has estimated capital losses carried forward of $12.9 million in Canada. The Company has estimated deductible temporary differences
of $114.1 million in Canada.
At December 31, 2025, the Group has estimated losses carried forward of $1.3 billion that are indefinitely available for offsetting against future
taxable profits in The Netherlands.
At December 31, 2025, resulting from the absence of projected taxable profits in the near foreseeable future in both Canada and The
Netherlands, the Company did not recognize a deferred tax asset (as at December 31, 2024 - nil).
Specification of deferred tax assets and tax liabilities
As at
Accelerated
allowances
At January 1, 2025 -
Acquired under amalgamation 374.3
Deferred tax credit (92.5)
At December 31, 2025 281.8
As at
December 31,
2025
December 31,
2024
Deferred tax assets
Temporary differences 5.4 -
5.4 -
Deferred tax liabilities
Accelerated allowances 287.2 -
287.2 -
Total deferred tax 281.8 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
This specification of deferred tax assets and tax liabilities does not agree to the face of the balance sheet due to the netting off of balances in
the balance sheet when they relate to the same jurisdiction.
Deferred tax liabilities are mainly recognised for the timing difference of depreciation on the Group’s Nigerian assets for tax purposes
(accelerated) compared to accounting purposes. Of the deferred tax liabilities as at 31 December 2025 of $281.8 million, $57.9 million is
expected to be reversed within 12 months.
No deferred tax liabilities were recognised for temporary differences associated with investments in subsidiaries because the Group is in a
position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the
foreseeable future.
Pillar Two income taxes
The Group is subject to the global minimum top-up tax (‘Pillar Two’) legislation, which has entered into force on 31 December 2023 and is
effective as of January 1, 2024, onwards. The Group is active in Canada, United Kingdom, The Netherlands, Nigeria, Equatorial Guinea and South
Africa.
Based on the Pillar Two legislation, the Group is subject to an additional top-up tax for the difference between the effective tax rate per tax
jurisdiction as calculated under Pillar Two and a minimum tax rate of 15%.
The Group makes use of the so-called transitional CbCR safe harbour rules, using the (provisional) 2025 Country-by Country report and
underlying financial statements. These rules are expected to apply for all countries where the Group operates.
The Qualified Domestic Minimum Top-up Tax (‘QDMTT’) will be applicable in Canada and the Income Inclusion Rule (‘IRR’) will be applicable with
respect to the countries where the Group operates. No top-up tax is included in consolidated tax expense since the safe harbour rules are met.
Each of the subsidiaries is legally responsible for the minimum top-up taxes payable in the jurisdiction in which they operate. The Company is
liable for the minimum top-up taxes under the IRR and charges this back to the respective subsidiaries.
The Group has applied the temporary mandatory exemption under IFRS to recognise and disclose deferred tax assets and liabilities related to
Pillar Two income taxes and recognises income tax in the reporting period in which it is payable or refundable.
25. Net loss per share:
For the years ended December 31, 2025 December 31, 2024
Weighted Average Weighted Average
Net loss
Number of
shares
Per share
amounts Net loss
Number
of shares
Per share
amounts
Basic loss per share
Net loss attributable to common
shareholders (31.6) 624,464,015 (0.05) (279.1) 449,431,803 (0.62)
Effect of dilutive securities - - - - -
Dilutive loss per share (31.6) 624,464,015 (0.05) (279.1) 449,431,803 (0.62)
In the year ended December 31, 2025, the Company used an average market price of CAD $1.83 per share (year ended December 31, 2024 – all
potential dilutive shares were considered antidilutive as the Company reported a loss) to calculate the dilutive effect of share purchase options.
Dilutive securities include share purchase options, RSUs and PSUs as the inclusion of these reduces the net income per share. In the year ended
December 31, 2025, 2,707 options, 715,525 RSUs and 7,003,347 PSUs, were anti-dilutive and were not included in the calculation of dilutive
income per share (year ended December 31, 2024, 200,636 options, 1,174,553 RSUs and 5,655,586 PSUs, were anti-dilutive and were not
included in the calculation of dilutive income per share). PSU’s are awarded a performance multiple ranging from nil to 200% which leads to an
increase in the dilutive and anti-dilutive potential of these instruments.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
26. Related party transactions:
A. Transactions with Africa Energy:
On December 19, 2022, Africa Energy announced that it had secured a $5.0 million promissory note of which $2.0 million was provided by the
Company and the remaining by other parties. On November 7, 2023, the promissory note provided by the Company and other parties to Africa
Energy was increased by $3.3 million with $1.5 million of the increase provided by the Company by the end of the year ended December 31,
2024. No funds were provided during 2025, $0.8 million was provided in the year ended December 31, 2024. The note was unsecured and
matured on March 31, 2025, when the principal and accrued interest was repaid by Africa Energy in full. The note carried an annual interest
rate of 15%. In the three months ended March 31, 2025, interest on the note amounted to $0.2 million (year ended December 31, 2024 - $0.5
million).
B. Transactions with Eco:
On July 26, 2024, the Company signed an agreement with Eco to acquire an additional 1.0% interest in Block 3B/4B from Azinam, in exchange
for all common shares and warrants over common shares held by the Company in Eco. On January 13, 2025, the Company announced that
it had completed this transaction. The Company’s interest in Block 3B/4B increased by 1.0% to 18.0% and the Company ceased to be a
shareholder in Eco. Meren will benefit from the carry agreed between Eco, TotalEnergies and QatarEnergy for this incremental interest.
C. Transactions with Impact:
On January 29, 2025, Impact distributed $31.6 million net to the Company’s shareholding.
D. Transactions with BTG Oil & Gas:
On March 19, 2025, the Company completed the transaction with BTG Oil & Gas to consolidate its interest in Meren Coop (see note 4). The
Company has recorded an indemnity asset of $21.6 million recognized under the deed of indemnity entered into between the Company and
BTG Oil & Gas (see note 14).
E. Remuneration of Directors and Senior Management:
Remuneration of Non-Executive Directors and Senior Management includes all amounts earned and awarded to the Company’s Board of
Directors and Senior Management. Senior Management includes the Company’s President and Chief Executive Officer, Chief Financial Officer,
Chief Commercial and Operations Officer, Chief Operating Officer (position removed in 2025), Chief Technical Officer (position removed in
2025), Chief Legal Officer and Chief Human Resources Officer.
Directors’ fees include Board and Committee Chair retainers. Management’s short-term wages and benefits include salary, benefits, bonuses and
any other cash-based compensation earned or awarded during the year. Share-based compensation includes expenses related to the Company’s
Share Option Plan as well as the LTIP.
For the years ended
December 31,
2025
December 31,
2024
Non-Executive Directors' fees 0.7 0.5
Non-Executive Directors' share-based compensation 1.4 0.6
Managements’ short-term wages and benefits 7.1 7.3
Managements’ share-based compensation 3.5 0.5
12.7 8.9
27. Subsidiaries
The Company has the following wholly owned subsidiaries; Meren Nigeria 234 Ltd. (Nigeria), Meren Nigeria 52 Ltd. (Nigeria), Meren Coöperatief
U.A. (Netherlands), Meren International Holdings B.V. (Netherlands), Meren Turkana B.V. (Netherlands), Africa Oil Kenya B.V. (Netherlands),
Meren Holdings B.V. (Netherlands), Africa Oil Alpha B.V (Netherlands), Africa Oil Beta B.V (Netherlands), Meren Centric B.V (Netherlands), Africa
Oil Turkana Ltd. (Kenya), Centric Energy (Kenya) Ltd. (Kenya), Meren Services Limited (England & Wales), Meren Nigeria Overseas Corp. (British
Columbia) and Meren SA Energy Corp. (British Columbia).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
28. Capital management:
The Company’s objective when managing capital structure is to maintain balance sheet strength in order to ensure the Company’s strategic
exploration, appraisal and business development objectives are met while providing an appropriate return to shareholders relative to the risk
of the Company’s underlying assets.
The Company manages its capital structure and makes adjustments to it based on changes in economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust the capital structure, the Company may issue additional shares, issue debt, execute working
interest farm-out arrangements and revise its capital expenditures program. In addition, the Company manages its cash and cash equivalents
balances based on forecasted capital outlays and foreign exchange risks in order to ensure that the risk of negative foreign exchange effects
are minimized while ensuring that interest yields on account balances are appropriate. The Company considers its capital structure to include
shareholder’s equity, debt and working capital. The Company does not have externally imposed capital requirements.
29. Financial risk management:
The Company’s activities expose it to a variety of financial risks that arise as a result of its operating, exploration, appraisal and financing
activities such as:
● credit risk;
● liquidity risk; and
● market risk.
This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes
for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these
consolidated financial statements.
A. Credit risk:
Credit risk is the risk of loss if counterparties do not fulfill their contractual obligations. The majority of the Company’s credit exposure relates
to amounts due from the Company’s joint ventures and amounts receivable from the sale of crude oil. Approximately 90% of the Company’s
crude oil is sold to customers rated A+/Aa2 by S&P/Moody’s. All other oil sales are made to companies that are either investment grade, are a
subsidiary of an investment grade entity, or have its payment obligations supported by a letter of credit or guarantee issued by an investment
grade entity. The risk of the Company’s joint venture parties defaulting on their obligations per their respective joint operating and farmout
agreements is mitigated as there are contractual provisions allowing the Company to default joint venture parties who are non-performing and
reacquire any previous farmed out working interests. The maximum exposure for the Company is equal to the sum of its cash and accounts
receivable. As at December 31, 2025, the Company held $15.9 million (as at December 31, 2024 - $1.1 million) of cash in financial institutions
outside of Canada, the Netherlands and the UK. The Company held no cash (as at December 31, 2024 – $20.9 million) in short-term deposits in
countries outside of Canada, the Netherlands and the UK with lending banks with stable credit ratings.
B. Liquidity risk:
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Liquidity describes a company’s
ability to access cash. Companies operating in the upstream oil and gas industry, during the exploration and development phase, require
sufficient cash in order to fulfill their work commitments in accordance with contractual obligations, deliver stated shareholder returns, and to
be able to potentially acquire strategic oil and gas assets.
The Company will potentially issue equity and debt and enter into farmout agreements with joint venture parties to ensure the Company has
sufficient available funds to meet current and foreseeable financial requirements. The Company actively monitors its liquidity to ensure that its
cash flows and working capital are adequate to support these financial obligations and the Company’s capital programs.
At December 31, 2025, the Company had $174.7 million of cash and cash equivalents and $468.4 million of the RBL available which provides
the liquidity to fund operations and allows for increased liquidity if required for operations and acquisitions. The RBL matures on June 20, 2029,
but amortizes each quarter as per the lower of commitments and the BBA.
The Company will also adjust the pace of its exploration and appraisal activities and any M&A activity to manage its liquidity position. The existing
cash balance, the undrawn amounts under both facilities and cash flow from operations, are sufficient to fund the Company’s obligations as
they become due.
In relation to the amounts drawn under the RBL as at December 31, 2025, the Company has no liabilities that mature on June 30, 2026, based
on the currently approved BBA profile, subject to the results of the next redetermination. An amount of $67.7 million will mature between six
months and one year, $108.0 million will mature between one year and two years with the remaining balance of $154.3 million due between
two and five years (as at December 31, 2024 – no maturities of its material contractual liabilities in excess of six months).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet
date to the contractual maturity date. The Group has further financial liabilities in relation to interest on the RBL. The size of these interest
payments depends on the outstanding loan balance of the RBL and the applicable SOFR interest rate.
December 31,
2025
December 31,
2024
Non-current
Repayment within 1-2 years:
- Reserve based lending facility (1) 124.6 -
- Lease liability 1.2 0.7
Repayment within 2-5 years:
- Reserve based lending facility (1) 162.5 -
- Lease liability 1.7 1.9
290.0 2.6
Current
Repayment within 6 months:
- Reserve based lending facility (1) 13.2
- Lease liability 0.4 0.3
- Short-term payables with partners 97.9 -
- Other payables 2.8 2.0
Repayment after 6 months:
- Reserve based lending facility (1) 79.3 -
- Lease liability 0.5 0.4
194.1 2.7
(1) Includes estimated interest payments related to the RBL facility. Payments were estimated based on the interest rate at December 31, 2025, and
the estimated average outstanding loan balance of each period under the existing RBL, see note 15.
C. Market risk:
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and share prices, will
affect the Company’s income or the value of the financial instruments.
i. Foreign currency exchange rate risk:
The Company is exposed to changes in foreign exchange rates as expenses in international subsidiaries, oil and gas expenditures, or financial
instruments may fluctuate due to changes in rates. The Company’s exposure to foreign currency exchange risk is mitigated by the fact that
the Company sources the majority of its capital projects and expenditures in US dollars. The Company has not entered into any instruments to
manage foreign exchange risk.
ii. Interest rate risk:
The RBL has a variable interest rate, that is referenced to Secured Overnight Financing Rate (“SOFR”) and exposes the Company to interest
rate risk when drawn.
Management considers the Group’s exposure to interest rate risk to be related to the remaining RBL principal amounts of $330.0 million. As
such, the Group has substantial floating-rate borrowings which are partially offset by cash held at variable rates. Therefore, a change in interest
rates at the reporting date is likely to affect profit and loss of the Group. The Group’s financing agreements make reference to SOFR. Also refer
to note 15 to these consolidated financial statements.
The following table demonstrates the sensitivity of the Group’s profit before tax from a reasonably possible change in interest rates of the
floating rate borrowings (with all other variables held constant). The impact on equity is the same as the impact on profit before tax.
Increase/ (decrease) in interest rates
Effect on profit before tax
increase/ (decrease)
For the year ended December 31, 2025
+2.5% (9.0)
-2.5% 9.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
iii. Commodity price risk:
The Company has a direct interest in three producing fields within PMLs 2, 3 and 52, all with significant levels of production. Its strategy is to
hedge between 70-100% of its post-tax net entitlement production for the next 12-months. Physical sales are with counterparties including
oil supermajors. The counterparties are part of groups with investment grade credit ratings.
Of the cargoes expected for the year ended December 31, 2026, 2 cargoes have the trigger price mechanism activated at an average price of
$62.1/bbl.
As at 31 December 2025, the Company holds derivatives, as outlined in the tables below, that are designated as a financial asset at fair value
through profit or loss. These derivatives were all entered into in 2025. As such, any gains or losses arising from changes in the fair value of these
derivative are taken directly to profit or loss.
Term bbl Sold put
$/bbl
Bought put
$/bbl
Sold call
$/bbl
Sold swap
$/bbl
FV at
December 31,
2025/ $’m
Asian Dated Brent Zero
cost collar
January 1, 2026, to
March 31, 2026 300,000 - 60.00 67.15 - 0.4
Asian Dated Brent Swap June 1, 2026, to
September 30, 2026 600,000 - - - 63.58 2.0
Asian Dated Brent three
-way put spread
October 1. 2026 to
December 31, 2026 450,000 45.00 60.00 65.78 - (0.2)
Total 2.2
Crude oil price sensitivity
The table below summarizes the impact on profit before tax for changes in crude oil prices. The analysis is based on the assumption that the
average crude oil price moves 25% resulting in a change of approximately $17.0/bbl, with all other variables held constant. Reasonably possible
movements in crude oil prices were determined based on a review of the last years’ historical prices and economic forecasters’ expectations.
Increase/ (decrease) in crude oil prices
Effect on profit before tax
increase/ (decrease)
For the year ended December 31, 2025
Increase $17.0/bbl 35.2
Decrease $17.0/bbl (35.2)
30. Financial assets and liabilities:
The accounting policies for financial assets and liabilities have been applied to the line items below:
Assets
December 31, 2025 Total Amortised cost Fair value through
profit and loss
Trade and other receivables (1) 63.0 63.0 -
Derivative financial instruments 2.2 - 2.2
Cash and cash equivalents 174.7 174.7 -
239.9 237.7 2.2
December 31, 2024
Loan to associated company 4.3 4.3 -
Trade and other receivables (1) 1.6 1.6 -
Cash and cash equivalents 61.4 61.4 -
67.3 67.3 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
Liabilities
December 31, 2025 Total Amortised cost
Reserve based lending facility 330.0 330.0
Lease liability 3.8 3.8
Trade and other payables (2) 100.7 100.7
434.5 434.5
December 31, 2024
Lease liability 3.3 3.3
Trade and other payables (2) 2.0 2.0
5.3 5.3
(1) Underlift position and prepayments are not included in trade and other receivables as not deemed to be financial instruments.
(2) Crude oil overlift payable and accruals are not included in trade and other payables as not deemed to be financial instruments.
The fair value of cash and cash equivalents, trade and other receivables, and trade and other payables approximate their carrying value due to
the short-term maturity of these instruments.
The fair value of the reserve based lending facility approximates its carrying value due to the fact that the facility has a variable interest rate,
that is referenced to SOFR.
For financial assets measured at fair value in the balance sheet, the following fair value measurement hierarchy is used:
● Level 1: based on quoted prices in active markets;
● Level 2: based on inputs other than quoted prices as within level 1, that are either directly or indirectly observable;
● Level 3: based on inputs which are not based on observable market data.
Based on this hierarchy, financial assets and liabilities measured at fair value can be detailed as follows:
● Derivative financial instruments - $2.2 million – level 2.
Assessment of the significance of a particular input to the fair value measurement requires judgement and may affect the placement within
the fair value hierarchy level.
31. Supplementary information:
The following table reconciles the changes in non-cash working capital as disclosed in the consolidated statement of cash flows:
For the years ended
December 31,
2025
December 31,
2024
Relating to
Changes in current assets 181.5 (1.5)
Changes in current liabilities (87.5) (13.3)
Changes in non-cash working capital 94.0 (14.8)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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Report to Shareholders | December 31, 2025
32. Subsequent events:
In January 2026, Meren and its JV Parties in PML 2/3 successfully executed an amendment to the gas sale agreement that includes a revised
index for gas pricing, locking a long-term gas price that is more reflective of the current LNG economics compared to 2018 when the contract
was initially signed. The amendment also includes a mechanism for the sellers to recover the historical difference between the interim gas price
adjustment and the new index, starting from 2020 when the previous index ceased to be published. This historical amount will be recovered
through an upward adjustment to the netback pricing that includes the handling fee for the gas sold.
On February 24, 2026, the Company’s Board declared the first quarterly dividend in 2026 of approximately $25.1 million ($0.0371 per share)
payable in April 2026 to shareholders of record at the close of business on March 20, 2026.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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