PANR Pantheon Resources Plc

18^th March 2024

Pantheon Resources plc

Interim Results (unaudited) for the six months ended 31 December 2023

Pantheon Resources plc (AIM: PANR) ("Pantheon" or "the Company"), the oil and gas company with a 100% working interest in the Kodiak and Ahpun projects, collectively spanning 193,000 contiguous acres in close proximity to pipeline and transportation infrastructure on Alaska's North Slope, announces its interim results for the six months ended 31 December 2023 (the "Period"), together with operational highlights for the half year and the period beyond.

Highlights

Operational and Corporate

·    Received an Independent Expert Report on the Kodiak project by Netherland, Sewell & Associates, Inc. ("NSAI"), estimating an aggregate 2C Contingent Recoverable Resource of 963 million barrels ("mmbbls") of marketable liquids

·    Re-entered, fracked and tested the topset sands (previously referred to as 'the SMD') in the vertical portion of the Alkaid-2 well. Following incorporation of pressure-volume-temperature ("PVT") analysis results from GeoMark, the flow rate was calculated to be 50-140 barrels per day ("bpd") of marketable liquids, substantially exceeding pre-test estimates. Additionally:

o  Successfully executed new frac design with - improved frac efficiency

o  Confirmed the producibility of and fluid composition in the topset horizon

o  Confirmed materially superior reservoir quality compared to deeper Alkaid ZOI horizon

·    Contracted engineering and environmental consultants to support the Company to secure a hot-tap into the TAPS pipeline, as a precursor to project development

·    Submitted winning bids for an additional 66,240 acres of leases at the December 2023 annual lease sales, strategically securing what Pantheon believes to be some of the highest quality areas of the Kodiak and Ahpun Fields at the shallowest depths. This is expected to result in a material upgrade to NSAI's independent resource estimates for Kodiak

·    Appointed two new, independent non-executive directors; (i) Allegra Hosford Scheirer who has deep geological experience, including in Alaska, and (ii) Linda Havard who has several decades experience in financial/CFO roles, including 15 years in the oil and gas industry

·    Established a Houston office and commenced work towards a US stock market listing in 2025

·    Satisfied the September and December 2023 quarterly convertible bond repayments in cash, funded through private placements of shares to long term supportive holders and exercise the Company's right to make the March 2024 payment with shares to enhance liquidity

Financial

·    After tax loss for the period $5.7 million (2022: $1.6 million). Impacted by $3.8 million charge from mark to market revaluation of derivative component and interest expenses attributable to the Convertible Bond

·    G&A higher at $4.0 million (2022: $3.7 million), reflecting the growth in the organisation as it progresses towards FID and project development

·    Cash on hand 31 December 2023: $0.2 million (2022: $16.3 million). Additionally, fixed term cash deposits on hand of $7.0 million (matured 8 January 2024)

·    Cash on hand 15 March 2024: $8.7 million

The Company is planning to host an Investor Meet Company webinar in early April 2024 to provide a Company update, including the status of development planning. Details will be released as soon as the date is finalised.

David Hobbs, Executive Chairman of Pantheon Resources, commented:

"Pantheon has made great progress during the six months to 31 December 2023 and so far this year on a number of levels. Our testing of the shallower topsets in the Alkaid-2 wellbore was a great success, exceeding our expectations and validating the effectiveness of the revised frac design. Such engineering improvements are extremely positive for Ahpun development economics, helping to steer our focus towards the Ahpun topsets to benefit from the material improvement in reservoir quality and the superior GOR (gas oil ratio) compared to the deeper ZOI horizon tested previously.

"We were the successful bidder for an additional 66,240 acres of leases at the State of Alaska's December 2023 lease sale. These new leases, immediately to the east of Ahpun and updip to the west and north west of Kodiak include some of the highest quality areas of the two fields, at the shallowest depths. It was crucial that we secured the best acreage in our fields to leverage the great strategic advantage of having proprietary use of the 3D seismic before it starts to become public, commencing in 2024.

"We will remain disciplined in our approach, focused on what moves us towards achieving Pantheon's strategic goal of delivering sustainable market recognition of $5-$10 per barrel of 1C/1P recoverable resources with minimum dilution of shareholder value.

"The Independent Expert Report from NSAI received in Q3 2023 estimated nearly one billion barrels of marketable liquids on our 100% owned Kodiak project, prior to the award of the additional acreage. It was a key step on the path to delivering our strategic goal, having such a well respected reserves auditor validate Pantheon's confidence in its geological model and assessment of the scale of the recoverable resource. It opened up avenues for engagement with potential vendors, offtakers and other industry participants.

"We expect more resource upgrades to come, with NSAI currently updating its resource estimates for Kodiak to include the new acreage. We hope to receive this updated report at or near the end of Q1 2024. NSAI is also working on a resource estimate at Ahpun, targeted for completion at or near the end of Q2 2024. As we confirmed on 5^th March 2024, the Company is engaged in discussions with key stakeholders in Alaska to provide natural gas to Southcentral Alaska on terms that allow all parties to achieve their objectives, maintaining energy security over the coming decades.

"We would like to thank our shareholders for their support as we progress closer towards the development of our world class assets, targeting Final Investment Decision ("FID") for Ahpun by the end of 2025, subject to regulatory approvals, and for Kodiak in 2028. We're working relentlessly to optimise a funding platform for the Ahpun development and we look forward to providing the promised preliminary update over the coming weeks, with a goal of finalising our strategy by the end of Q2 2024."

Further information, please contact:

Notes to Editors

Pantheon Resources plc is an AIM listed Oil & Gas company focused on developing the Ahpun and Kodiak fields located on state land on the Alaska North Slope ("ANS"), onshore USA, where it has a 100% working interest in c. 193,000 acres. In December 2023, Pantheon was the successful bidder for an additional 66,240 acres with very significant resource potential, contiguous to the Ahpun and Kodiak projects. Following the issue of the new leases, which are expected to be formally awarded in summer 2024 upon payment of the balance of the application monies, the Company will have a 100% working interest in c. 259,000 acres. Certified contingent resources attributable to these projects exceeds 1 billion barrels of marketable liquids, located adjacent to Alaska's Trans Alaska Pipeline System ("TAPS").

Pantheon's stated objective is to demonstrate sustainable market recognition of a value of $5-$10/bbl of recoverable resources by end 2028. This is based on targeting Final Investment Decision ("FID") on the Ahpun field by the end of 2025, subject to regulatory approvals, building production to at least 20,000 barrels per day of marketable liquids into the TAPS main oil line, and applying the resultant cashflows to support the FID on the Kodiak field by the end of 2028.

A major differentiator to other ANS projects is the close proximity to existing roads and pipelines which offers a significant competitive advantage to Pantheon, allowing for materially lower infrastructure costs and the ability to support the development with a significantly lower pre-cashflow funding requirement than is typical in Alaska.

The Company's project portfolio has been endorsed by world renowned experts. Netherland, Sewell & Associates ("NSAI") estimate a 2C contingent recoverable resource in the Kodiak project that total 962.5 million barrels of marketable liquids and 4,465 billion cubic feet of natural gas. NSAI is currently working on updated estimates for the Kodiak Field to incorporate the additional acreage and for the Ahpun Field.  

COMPANY STATEMENT

FOR THE PERIOD ENDED 31 DECEMBER 2023

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Company Statement

Pantheon's strategic goal remains to bring the Ahpun field onstream as quickly as possible on the way to delivering sustainable market recognition of $5-$10 per barrel of 1C/1P recoverable resources to our shareholders by developing our world class assets - Ahpun (Final Investment Decision "FID" targeted for 2025) and Kodiak (FID targeted for 2028) - and with minimum shareholder dilution. The focus is on ways to do it quicker, cheaper and/or deliver a higher value outcome.

Highlights

During the final six months calendar year 2023 and the subsequent period in 2024, Pantheon achieved significant progress in delivering this goal:

·    Netherland Sewell and Associates ("NSAI") issued its Independent Expert Report ("IER") on the Kodiak field in August 2023, with an aggregate best estimate recoverable contingent resources of 963 million barrels ("mmbbls") of marketable liquids and 4,465 billion cubic feet of gas ("bcf").

·    The Company re-entered, fracked and tested the topset sands (previously referred to as the 'SMD') in the vertical portion of the Alkaid-2 well (above the deeper Alkaid ZOI horizon which was separately tested in late 2022/early 2023). Following incorporation of PVT analysis results from GeoMark, the flow rate was calculated to be 50-140 barrels per day ("bpd") of marketable liquids, substantially exceeding pre-test estimates.

·    The data gathered from the recompletion suggests that the operation achieved a frac efficiency estimated at 50% (vs c.20% in the lateral that was tested in the deeper ZOI horizon in the same wellbore in late 2022 and early 2023). Furthermore, the pressure transient analysis of the data from the downhole gauges supports a greatly improved estimate of matrix permeability in this interval, even despite it being located on the feather edge of the Ahpun topset reservoir, of 0.02-0.12 milliDarcies.

·    Based on these results, engineering and environmental consultants were contracted to help progress the Company to first production at Ahpun, by commencing the process to secure a hot tap into the TAPS main oil line.

·    Addition of two non-executive Directors to the Board-Allegra Hosford Scheirer and Linda Havard.

o  Allegra is a physical science Research Scientist with the Basin and Petroleum System Modelling Group at Stanford and has a PhD from MIT.

o  Linda has more than 35 years of experience as a financial and operating executive in public companies and professional services firms, including 15 years in the oil and gas industry. Linda has an MBA from UCLA.

·    In December 2023, Pantheon successfully bid for 66,240 acres covering the full extent (including all of the areas interpreted as containing higher quality oil reservoirs) of both Ahpun and Kodiak, materially increasing the contained resource potential across both projects.

·    Opening of Houston office and are proceeding with the work necessary for a US stock market listing in 2025, including the appointment of Tony Larkin to manage the project and promotion of Josh McIntyre to the role of Group Financial Controller.

·    In addition to the $22 million of funding in May 2023 to ensure continued operation through to the end of 30 June 2024, Pantheon funded the September and December 2023 quarterly convertible loan repayments through placements of shares to long term supportive holders, including IPGL Limited, which now has an interest over more than 7% of the shares in issue. The March 2024 quarterly repayment was made with shares to enhance liquidity, given the acquisition of key leases in December 2023.

Ongoing activity in 2024

Following the success of the Ahpun topset horizon test in late 2023 and given the quality of core data in the Pipeline State #1 well, the Company has redirected SLB's modelling of the Ahpun field development to prioritise development wells in the Ahpun field topset sands. This work is underway.

Until that work is completed, Pantheon continues development planning  based on 2 mmbbl EUR (estimated ultimate recovery) per well and an IP30 flow rate of 4,000 bpd of marketable liquids with first year average production of 2,000 bpd. This is based on the modelled development well design of 10,000 feet lateral length, the improved frac design, and recognising the improved reservoir and fluid characteristics in the Ahpun topset reservoirs. Projections for estimated cumulative cashflows and funding requirements (estimated at $120 million to first production) reinforce the robustness of the Ahpun development strategy and the ability to deploy cashflows from the initial wells to fund the expansion to a multi-rig programme and to fund the Kodiak Field development after its FID (targeted by the end of 2028).

NSAI is continuing to update its analysis on Kodiak to include the new leases, with an update expected around the end of March 2024.Its initial assessment of Ahpun is expected around the end of June 2024.

The Company continues to work on financing initiatives with a goal to minimise shareholders' equity dilution while ensuring the financial strength to build the professional organisation necessary to deliver projects of the size, scale and complexity of Ahpun and Kodiak. Pantheon continually updates its development plans and forecasts with new data from both internal analysis and that of SLB and other consultants, while seeking to minimise the footprint, of both surface facilities and total resource development, such that development consents will minimise delays to key approvals. It is a tremendous advantage that Pantheon's assets are located exclusively on State of Alaska land and adjacent to pipeline and road transportation infrastructure, but this does not eliminate the need to work with the Army Corps of Engineers for permits covering wetland fill and the Federal Government for common carrier pipeline access. Pantheon has retained experienced engineering, regulatory and environmental experts to ensure that our plan meets all requirements and best practices, including the intention to be a zero emissions operator by 2030.

NSAI Initial Kodiak Report

Pantheon received an IER prepared by NSAI on the Lower Basin Floor Fan reservoir of the Company's Kodiak project in Q3 2023. A summary of the resource estimate is outlined below.

Gross 100% Working Interest Contingent Resources

* Pantheon addition of oil & NGL columns

Successful Bidder at State of Alaska's North Slope Areawide Lease Sale in December 2023

On 13 December 2023, Pantheon was named as the successful bidder on 66,240 acres, covering substantially all of the anticipated remaining conventional reservoir potential in the Kodiak Field, where the Company expects reservoir quality to improve as they become shallower to the north and west of the existing leases. In addition, the leases covering the potential eastern extent of the Ahpun Field (including what is prognosed to be higher quality, shallower reservoirs) covers the resources that are assessed as economically developable using current technologies. The new acreage contains material resource potential, and classification of the potentially recoverable resources will be determined in the coming months in consultation with NSAI and SLB.

¹ Estimated based on 16.67% State royalty for Western Kodiak Leases and 12.5% State royalty for the Eastern Ahpun Leases. All subject to 1 % Overriding Royalty Interest ("ORRI") in favour of eSeis.

² Company estimates of TRR are based on 8% recovery factor ("RF") in tight formations and up to 20% in formations exceeding the conventional threshold. No resources are attributed to natural gas because there is currently no market on the North Slope and any gas not used for fuel is modelled to be reinjected into the reservoir.

NGL and Condensates stripped from the production stream are not explicitly recognised within these figures pending GeoMark reservoir fluid composition analysis. Until GeoMark's analysis is received, the basis of estimation is consistent with the SLB reservoir modelling report released on 8^th December, 2022.

³ COS is the Geological Chance of Success - the probability that hydrocarbons will be encountered and capable of flowing to surface. The target formations in the western leases covering the extension of the Kodiak field are the same horizons encountered in the Pipeline State, Talitha-A and Theta West-1 wells, resulting in a high COS. The eastern Ahpun leases exhibit the seismic characteristics indicating hydrocarbon pay but cannot be confirmed until penetrated by a well.

⁴ The Kodiak volumes have been estimated deterministically and the Ahpun volumes have been estimated probabilistically. The totals do not represent the statistical addition of these estimates.

Pantheon's lease acquisition strategy is now complete. These latest awards protect the development schedules for Ahpun and Kodiak to the extent possible by ensuring the full fields can be included in requests for development consents from the State of Alaska. The immediate focus remains on the development of Ahpun with FID planned by the end of 2025 and appraisal of the full potential of Kodiak to support its FID in 2028.

Financing

The Company intends to provide an update on its overall financing initiatives over the coming weeks. As previously disclosed, Pantheon is in discussions with vendors, offtakers and other parties about the potential to provide non equity finance the Company in order to progress its project development at minimal equity dilution to shareholders. As previously discussed, Pantheon estimates $120 million is required to get to first production, comprised of three wells conservatively at $20 million each, $20 million to upgrade facilities, $20 million for a hot-tap into TAPS and $20 million for three years G&A. Whilst some of these components will change higher or lower, for example G&A as the Company builds its team and incurs costs associated with a US listing, at a combined level the Company remains comfortable that $120 million remains a conservative and achievable estimate.

Heading into Q2 of 2024, Pantheon is proceeding with determination, doing the small but necessary steps to advance its exciting projects towards its stated objectives of FID, project development and value recognition. Management believe the project resource potential to be of a size and scale that is material by any global standard and are extremely pleased to have been able to strategically retain a 100% working interest in all of it. Management fully recognise that financing the development of such large developments is a key hurdle and are working diligently on that objective, recognising that once achieved, the pathway to commercialisation becomes clearer for all to see, and would be expected to see significant value recognition accrete to shareholders thereafter. The Board is determined in its efforts to achieve these goals.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31 DECEMBER 2023

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 31 DECEMBER 2023

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2023

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 31 DECEMBER 2023

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(1)   Closing cash balance excludes US$7,000,000 fixed term deposit (included above in Financial Investments - Fixed Term cash deposit and Certificate of deposit) which matured 8^th January 2024.

RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

FOR THE PERIOD ENDED 31 DECEMBER 2023

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NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2023

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1.      Accounting policies

A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set out below.

1.1.   Basis of preparation

The financial statements have been prepared on a going concern basis using the historical cost convention and in accordance with the UK Adopted International Accounting Standards ("IAS's") and in accordance with the provisions of the Companies Act 2006.

This interim report has been prepared on a basis consistent with the Group's expected accounting policies for the year ending 30 June 2024. These accounting policies are the same as those set out in the Group's Annual Report and Financial Statements for the year ended 30 June 2023, which are available from the registered office or the company's website (www.pantheonresources.com).

The Group financial information is presented in US Dollars and is unaudited. The interim financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.  The comparative figures for the year ended 30 June 2023 have been taken from the Group's statutory accounts for that financial year, which have been reported on by the Group's auditors and delivered to the Registrar of Companies. 

1.2.   Basis of consolidation

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. Goodwill arising on acquisitions is capitalised and subject to impairment review, both annually and when there are indications that the carrying value may not be recoverable.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. All the companies over which the Company has control apply, where appropriate, the same accounting policies as the Company.

1.3.   Foreign currency translation

(i)   Functional and presentational currency

The financial statements for the Group and the Company are presented in US Dollars ("$") and this is the Group's Presentation currency. The Functional currency of all entities within the Group, excluding the Parent Company, is $USD. The Functional currency of the Parent Company is £GBP.

(ii)  Transactions and balances

Transactions in foreign currencies are translated into US dollars at the spot rate. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. The resulting exchange gain or loss is dealt with in the income statement.

The assets, liabilities of the Parent Company are translated into US dollars at the rates of exchange ruling at the year end. The results of the Parent Company are translated into US dollars at the average rates of exchange during the year. Exchange differences resulting from the retranslation of currencies are treated as movements on reserves.

1.4.   Cash and cash equivalents

The company considers all highly liquid investments, with a maturity of 90 days or less to be cash equivalents, carried at the lower of cost or market value.

1.5.   Going concern

In June 2023 Pantheon communicated to shareholders via RNS and accompanying webinar, its aggressive strategy to target sustainable market value  recognition  of $5 - $10 per barrel of 1P/1C recoverable resource by the end of 2028, FID (Final Investment Decision) on the Ahpun project by the end of 2025, and FID on the Kodiak project by the end of 2028. Executing such a strategy requires significant additional capital, most of which the Company seeks to access through non equity sources. This process is presently underway. In November 2023 the Company published a stock exchange announcement, supported by a webinar, which provided detail of the estimated $120 million capital required to achieve first production at Ahpun and the Company's strategy to secure such funding. This sum included the drilling of 3 new wells, a hot-tap into the TAPS pipeline, upgrading production facilities and several years of G&A.  In accessing additional capital, Pantheon's stated goal is to achieve this in the least dilutive manner for shareholders, minimising the use of equity capital  by prioritising three main alternate funding sources: (i) vendor financing (ii) offtaker financing and (iii) reserve based lending. Pantheon is presently in discussions with multiple parties, including vendors and potential offtakers with respect to these potential non-equity financing alternatives. 

As reported to shareholders, the Group will need to secure additional funding for general working capital, capital commitments, to cover future liabilities as they fall due and to continue to progress its key projects as planned. The Group seeks to secure such funding by Q2 or Q3 2024, in the least dilutive manner for shareholders, ideally through one of the non equity funding sourced discussed above. The auditors made reference to this material uncertainty within their audit report within the 30 June 2023 annual financial statements.

In Q3 2023, Netherland Sewell & Associates estimated a 2C Contingent Resource for Pantheon's Kodiak project totalling 962.5 million barrels of marketable liquids. The directors believe the enormous size of the resource already appraised on Pantheon's acreage provides the potential for 1,000 - 2,000 wells. Whilst in absolute terms this would entail cumulative investment estimated in the billions of dollars over the lifetime of the project, Pantheon estimates c.$300 million on the Ahpun development (plus potentially $50 million of Kodiak appraisal costs) as the maximum cumulative cash requirement. Once in full development, it is believed that production revenues have the potential to self finance a great majority of the future development costs as is often the case in such developments. Recent modelling by SLB predicts potential for significant improvement in well performance over its original estimates.

The Group has no contractual obligation to drill any future wells and the only obligation is to suspend the Talitha-A test well, the estimated cost of which ($0.7m) has already been provided for in the financial accounts. Given the quality of the assets, the directors are confident in their ability to raise capital as and when required. Accordingly, the financial statements have been prepared on a going concern basis.

1.6.   Revenue

During the year ended 30 June 2023 oil sales commenced as a result of long term production testing at the Alkaid-2 well. These sales were considered to be non-recurring because it only occurred during the testing phase and production and thus production revenues stopped once flow testing operations ended. During the period to 31 December, 2023. A modest revenue was recorded during the short testing period for the short flow test of the shallower SMD horizon. Once in production, revenue from contracts with customers will be recognised in accordance with IFRS15 Revenue from Contacts with Customers, at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods.

Contract balances

A contract asset is the right to consideration in exchange for goods transferred to the customer. If the Group performs by transferring goods to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. The Group does not have any contract assets as performance and a right to consideration occurs within a short period of time and all rights to consideration are unconditional.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

1.7.   Deferred taxation

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and expected to apply when the related deferred tax is realised, or the deferred liability is settled.

Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilized.

1.8.   Exploration and evaluation costs and developed oil and gas properties

The Group follows the 'successful efforts' method of accounting for exploration and evaluation costs. At the point of production, all costs associated with oil, gas and mineral exploration and investments are classified into and capitalised on a 'cash generating unit' ("CGU") basis, in accordance with IAS 36. Costs incurred include appropriate technical and administrative expenses but not general corporate overheads. If an exploration project is successful, the related expenditures will be transferred to Developed Oil and Gas Properties and amortised over the estimated life of the commercial reserves on a 'unit of production' basis.

The recoverability of all exploration and evaluation costs is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of the reserves and future profitable production or proceeds from the disposition thereof. All balance sheet carrying values are reviewed for indicators of impairment at least twice yearly. The prospect acreage is classified into discrete "prospects" or CGU's. When production commences the accumulated costs for the specific CGU is transferred from intangible fixed assets to tangible fixed assets i.e., 'Developed Oil & Gas Properties' or 'Production Facilities and Equipment', as appropriate. Amounts recorded for these assets represent historical costs and are not intended to reflect present or future values.

1.9 Impairment of exploration costs and developed oil and gas properties, depreciation of assets,  plug & abandonment and goodwill

In accordance with IFRS 6 'Exploration for and Evaluation of Mineral Resources' (IFRS 6), exploration and evaluation assets are reviewed for indicators of impairment. Should indicators of impairment be identified an impairment test is performed.

In accordance with IAS 36, the Group is required to perform an "impairment test" on assets when an assessment of specific facts and circumstances indicate there may be an indication of impairment, specifically to ensure that the assets are carried at no more than their recoverable amount. Where an impairment test is required, any impairment loss is measured, presented and disclosed in accordance with IAS 36.

Exploration and evaluation costs

All exploration and evaluation assets relate to the Group's Alaskan operations. The Alaskan leasehold assets were fair valued as at the date of acquisition of Great Bear and the carrying value at 31 December 2023 represents the cost of acquisition (plus the fair value adjustment, in accordance with IFRS) and any capitalised costs incurred subsequent to the acquisition.

Decommissioning Charges

Decommissioning costs will be incurred by the Group at the end of the operating life of some of the Group's facilities and properties. The Group assesses its decommissioning provision at each reporting date. The ultimate decommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing, extent and amount of expenditure may also change - for example, in response to changes in reserves or changes in laws and regulations or their interpretation. Therefore, significant estimates and assumptions are made in determining the provision for decommissioning. As a result, there could be significant adjustments to the provisions established which would affect future financial results. The provision at reporting date represents management's best estimate of the present value of the future decommissioning costs required.

For all wells the Group has adopted a Decommissioning Policy in which all decommissioning costs are recognise immediately when a well is either completed, abandoned, suspended or a decision taken that the well will likely be plugged and abandoned in due course. For completed or suspended wells, the decommissioning charge is recorded against the capitalised amount and subsequently depleted over the useful life of well using unit of production method.

1.10     Financial instruments

Recognition and derecognition 

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. 

Financial assets, if/where applicable, are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. 

A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. 

Classification and measurement of financial liabilities 

The Group's financial liabilities include borrowings (convertible bond debt), trade and other payables and embedded derivative financial instruments. 

Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. 

Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated which are carried subsequently at fair value with gains or losses recognised in profit or loss. 

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or fair value gains/(losses) on derivative financial instruments. 

Embedded derivative financial instruments

A borrowing arrangement structured as a convertible bond repayable in stock over 20 quarterly instalments, in addition to the right of the lender to voluntarily convert part or all of the outstanding principal prior to the maturity date of the bond, has embedded in it a derivative. This is considered to be a separable embedded derivative of a loan instrument.

At the date of issue, the fair value of the embedded derivative is estimated by considering the derivative as a series of individual components with modelling of the fixed and floating legs to determine a repayment schedule and derive a net present value for the forward contract embedded derivative.

This amount is recognised separately as a financial liability or financial asset and measured at fair value through the income statement. The residual amount of the loan is then recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.

IFRS 9 Expected Credit Loss Model

IFRS 9 requires that credit losses on financial assets are measured and recognised using the "expected credit loss" (ECL) approach. Other than cash, the only other financial assets held is a $0.4m in drilling deposits lodged with the state of Alaska. These drilling deposits are to cover future obligations to the state of Alaska for Great Bear Pantheon to perform dismantle, removal and restoration activities at Alkaid #2.  Funds held by the state of Alaska are considered to have virtually no risk of credit loss. 

2.      Loss per share

The calculation above for the loss per share has been calculated by dividing the loss for the period by the weighted average number of ordinary shares in issue of 859,268,187 (December 2022: 764,186,409; June 2023: 791,082,592). As the Group recorded a loss for the period, the diluted loss per share has been made to equal the basic loss per share.

3.      Non-current assets

In January 2019, the Group acquired 100% of the share capital of Great Bear Petroleum Ventures I LLC and Great Bear Petroleum Ventures II LLC companies (collectively, "Great Bear"). The principal assets of Great Bear are leases with the rights to explore for hydrocarbons in the State of Alaska. At the period end the exploration and evaluation assets all relate to the Alaskan operation; Alaskan assets $292.2m (December 2022: $274.3m).

Exploration and evaluation assets are constantly reviewed for indicators of impairment. If an indicator of impairment is found an impairment test is required, where the carrying value of the asset is compared with its recoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell and value in use. The directors are satisfied that no impairments are required for the current period end.

Property, plant and equipment

4.      Share Capital

During the period in September 2023, the Company issued 11,905,370 new ordinary shares via a private placement.

As at 31 December, 2023 the company had on issue 919,111,769 shares.

As at 31 December, 2023 the Company also has the following options and warrants:

·    4,825,000 share options and 4,802,922 warrants; all with a £0.30 exercise price and all expiring September 2024. The warrants are identical to the share options except are convertible into non-voting shares on a 1:1 basis.

·    7,000,000 share options with an exercise price of £0.27, expiring July 2030.

·    12,430,000 share options with an exercise price of £0.33, expiring January 2031.

·    21,380,000 share options with an exercise price of £0.67, expiring January 2027.

5.      Unsecured Convertible Bond

In December 2021, the Company issued $55 million worth of senior unsecured convertible bonds to a fund advised by Heights Capital Ireland LLC, a global equity and equity-linked focused investor. After settlement of the 13^th December 2023 convertible bond repayment, the remaining notional principal outstanding is $29.4million.

The Convertible Bonds have a maturity of 5 years, a coupon of 4.0% per annum and are repayable in 20 quarterly repayments ("amortisations") of principal and interest over the 5 year term of the convertible bond, with the last repayment due in December 2026. Such quarterly amortisations are repayable at the Company's option, in either cash at face value, or in ordinary shares ("stock") at the lower of the conversion price (presently USD$0.9096 per share) or a 10% discount to the arithmetic average of the daily volume weighted average prices ("VWAP") in the 10 or 3 day trading period prior to pricing date. Additionally, the bondholder has the option to partially convert the convertible bond at their discretion. A full summary of the terms of Convertible Bonds is detailed in the Company's RNS dated 7 December, 2021.                                                                                                                                                                                                                                                                          

The bond agreement contains embedded derivatives in conjunction with an ordinary bond. As a result, and in accordance with the accounting standards, the convertible bonds are shown in the Consolidated Statement of Financial Position, in two separate components, namely Convertible Bond - Debt and Convertible Bond - Derivative. At the time of recognition (Dec 2021) the $55m bonds were split, $39,175,363 for the Debt Component and $15,824,637 for the Derivative Component.

In order to value the derivative component, Pantheon engaged a third party expert valuation specialist group to perform the valuations, who determined that the valuation of the instrument required a Monte-Carlo simulation of share price outcomes over the 5 year life to determine the ultimate value of the conversion option. This produced a calculated Effective Interest Rate ("EIR") of 20.41%. These amounts will be revalued every balance date with the differences being accounted for in the consolidated statement of comprehensive income.For the period end date of 31 December  2023, the third party expert valuation group performed their Monte-Carlo simulation and valuation calculations to determine the new value for the equity component to be $1,614,192. The resulting movement of was posted to the consolidated statement of comprehensive income to the account "Revaluation of derivative liability".

As at 31 December 2023 eight quarterly repayments (amortisations) have been made. For the first six repayments ordinary shares were issued in full settlement of the principal and interest amortisations. The two amortization repayments during the period were paid in cash, however that same amount of cash was raised via private placements with IPGL Limited, an existing supportive long-term shareholder. Hence, the funds raised were directly allocated to these two payments, resulting in a cash-neutral position for the Company.

At 31 December 2023 the Unsecured Convertible Bond is shown in the Consolidated Statement of Financial Position in the following categories;

6.      Approval by Directors

The interim report for the six months ended 31 December 2023 was approved by the Directors on the 17th March 2024.

7.      Availability of Interim Report

The interim report will be made available shortly on the Company's website (www.pantheonresources.com), with further copies available on request from the Company's registered office.

8.      Contingent liability

Pursuant to IAS 37, a contingent liability is either: (1) a possible obligation arising from past events whose existence will be confirmed only by the occurrence or non-occurrence of some uncertain future event not wholly within the entity's control, or (2) a present obligation that arises from a past event but is not recognized because either: (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or (ii) the amount of the obligation cannot be measured with sufficient reliability.

Kinder Morgan Treating L.P. ("Kinder Morgan") initiated a dispute over an East Texas gas treating agreement between Kinder Morgan and Vision Operating Company, LLC ("VOC"). VOC ceased making payments to the service provider in July 2019. The service provider subsequently issued a demand to VOC and, in February 2021, served Pantheon Resources plc with a petition, seeking to recover not less than $3.35m in respect of this VOC contract. Pantheon held ownership of less than 0.1% of VOC via a 66.6% interest in Vision Resources LLC. Both Vision Resources LLC and VOC filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Southern District of Texas Houston Division in April 2020.

No Pantheon entity is a signatory to the gas treating agreement and none are named in the agreement. Pantheon has taken legal advice on the matter and believes it has no liability to the service provider. Accordingly, Pantheon does not consider a provision should be included with the final statements and will contest any claim made.

In, July 2021, the court dismissed Kinder Morgan's claims against Pantheon Resources plc. Kinder Morgan has also asserted the same claims against two subsidiaries, Pantheon Oil & Gas, LP and Pantheon East Texas, LLC. Pantheon Oil & Gas, LP and Pantheon East Texas, LLC are contesting these claims.

9.       Subsequent events

Updated project modelling

The Company has a long term contract with SLB to dynamically model the entire project area including Ahpun and Kodiak.  This project is expected to continue for the foreseeable future. The Company will report on any significant results as they become available.

Appointment of Independent non executive director

On 1 January 2024, Pantheon appointed Linda Havard as an Independent Non-Executive Director. Linda has more than 35 years' experience as a financial and operating executive in public oil and gas and entertainment companies as well as professional services firms. She most recently served as Chief Financial Officer of Gensler, the world's largest architecture and design firm. Previously, she served for six years as Chief Financial Officer at the global law firm of Orrick, Herrington & Sutcliffe, 13 years as Executive Vice President and Chief Financial Officer of Playboy Enterprises and 15 years at ARCO (now BP Amoco), where she headed Corporate Planning and Investor Relations, among other senior positions.

Linda holds an MBA in Finance from the University of California at Los Angeles and a PhD (honoris causa) in Business from the Chicago School of Professional Psychology. She is a member of the Atlanta Federal Reserve Board CFO Panel, the International Women's Forum, and the Governing Body of the CFO Executive Summit. 

Linda is Chair of the Finance, Audit and Risk Committee

Other key appointments

Pantheon has appointed Tony Larkin, to project manage the Company's US stock market listing process. Tony is a qualified Chartered Accountant with over 25 years investment banking experience.

Commissioning of Independent Expert Reports on the Kodiak project

Pantheon has formally appointed Netherland Sewell & Associates, an independent and highly reputable resource reporting firm, for the preparation of an updated Independent Experts Reports over its Kodiak project, estimated to be completed at or near end March 2024.

Completion of equity fundraising - private placement

In November 2023 Pantheon announced the intention to issue 16,286,343 New Ordinary Shares at a price of £0.208 per share, to raise a total of approximately US$4.15m. The placement was on deferred settlement terms which completed in January 2024. The placement was to two long term supportive shareholders. Related to this fundraising, David Hobbs, Chairman, acquired $250,000 of shares indirectly by acquiring New Ordinary Shares with an aggregate value of $250,000 at the Placement Price from one of the subscribers, immediately following closing of the Placement.

Payment of quarterly amortization of convertible loan

In March 2024, Pantheon announced that it elected to pay (i) the quarterly principal repayment of US$2.45 million and (ii) the interest payment of US$0.294 million (collectively, the "Quarterly Repayment") in respect of its senior unsecured convertible bonds due 2026 (the "Convertible Bonds"), through the issuance of 8,820,315 new shares.

GLOSSARY