GROWTH THROUGH. Chariot Oil & Gas Limited. Annual Report and Accounts 2012

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1 GROWTH THROUGH Exploration

2 Chariot At a glance is an independent oil and gas exploration company focused offshore West Africa with a portfolio of assets located in the under-explored regions of See more Namibia page 14, Mauritania See more and Morocco page 18. See more page 16 Chariot holds significant acreage positions in these highly prospective regions which we consider to be: Frontier Region Namibia Licences in three geologically distinct basins Maturing exploration portfolio 8,000km 2 3D seismic all areas Proprietary data from two most recent wells Giant prospects to explore and drill within existing portfolio Proven Region Mauritania Acreage acquired adjacent to other major explorers Oil shows in licence area; block adjacent to three recent discoveries 3,500km 2 3D seismic acquisition completed Giant play potential Emerging Region Morocco Acreage proximal to oil and gas/condensate fields Increasing industry interest Giant lead potential

3 Highlights During and Post Period Namibia Farm-out agreements with BP and AziNam approved by Namibian Ministry back costs received Completed and safely operated drilling of Tapir South well in Northern Area well plugged and abandoned as dry Drilling of Kabeljou-1 well in Southern Area, completed in partnership with Petrobras (Operator) and BP well plugged and abandoned as dry but subsequent well analyses by Chariot have strengthened case for significant new play in Southern Area Completed 3,500km 2 3D seismic acquisition, processing and interpretation in Central Area two petroleum systems with 19 targets identified Resource update on Zamba prospect gross mean prospective resources of 375mmbls identified Partnering programme in Northern Area initiated Mauritania Acquired Block C19 offshore Mauritania balanced risk portfolio with acreage located in a proven petroleum region with multiple play types Expedited exploration programme completed 3,500km² 3D seismic survey within seven months of gazettal Three canyon head leads identified from legacy 2D seismic data Morocco Acquired Loukos, Casablanca/Safi and Rabat Deep licences offshore Morocco, an emerging petroleum province further mitigating risk profile with multiple target potential Identified a lead in Rabat Deep from legacy 2D data with gross mean prospective resource estimate of 400mmbbls Corporate Placing in March 2012 raised US$48.7m (gross) Board changes in December 2012 Cash position of US$68.3m at 31 December 2012 Contents Overview Highlights 01 Growth through exploration 02 Experienced E&P team 04 Business Review Chairman s statement 06 Chief Executive s review 09 Operations overview 12 Namibia 14 Mauritania 16 Morocco 18 Corporate Governance Corporate Social Responsibility 20 Board of Directors 22 Senior Management 24 Directors remuneration report 26 Corporate governance statement 28 Report of the Directors 29 Financial Statements Independent auditors report 32 Consolidated statement of comprehensive income 33 Consolidated statement of changes in equity 34 Consolidated statement of financial position 35 Consolidated cash flow statement 36 Notes forming part of the financial statements 37 Overview Business Review Corporate Governance Financial Statements The last year has been one of significant operational and exploration development for Chariot. While the results of the drilling campaign were disappointing, the participation in two wells, accumulation of 7,000km 2 of 3D seismic and early entry into two new regions reflects the ability of the Chariot team and its commitment to taking the Company forward. Over the coming year, we will continue to develop our portfolio and manage risk whilst applying capital discipline throughout all of our projects. LARRY BOTTOMLEY Chief Executive Officer Over the next few pages we explain our investment case. 02 Read our overview and outlook 04 Discover why our team is well positioned to deliver in our core areas 01

4 Overview Growth through exploration Chariot has acquired significant acreage positions in relatively under explored regions; securing large equity positions allows sufficient head room for partner participation. Outlook Debt free with all contractual commitments fully funded through to end of 2014 Forward plan for Namibian Southern Block 2714A, expected 2Q 2013 Partnering process to be initiated on Namibian Central Area prospects in 3Q 2013 Chariot is an independent AIM listed oil and gas exploration company. It is the 8th largest acreage holder offshore West Africa and has doubled its portfolio over the last year to ~60,000km 2. Chariot s assets lie in highly prospective regions frontier, proven and emerging basins providing the company with an inventory of prospects with giant potential. Balancing the portfolio Namibia Chariot was one of the first oil and gas explorers to secure its licence areas offshore Namibia. As a result of this early entrance, Chariot holds a significant acreage position totalling 30,504km² and its four licences are strategically located across three geologically distinct basins. Mauritania The Company holds a 90% interest in Block C19 offshore Mauritania through its wholly owned subsidiary Chariot Oil & Gas Investments (Mauritania) Limited. This acquisition was in line with Chariot s strategy of looking to unlock further potential in West African deep water assets and balancing the portfolio with acreage in a proven hydrocarbon province. 3D seismic data from Block C19, Mauritania to be processed and ready for interpretation in 4Q 2013, resource update expected 1Q 2014 Third party drilling activity will further assist in prospect selection 3D seismic acquisition to be designed for Namibian Southern Area 2714B, intended to commence in D seismic acquisition survey to be designed for Morocco following resource update from reprocessing of 11,000km of legacy 2D seismic data Evaluation of new ventures, will continue to seek value add opportunities Drilling planned offshore Namibia, Mauritania and Morocco in 2014, 2015 and 2016 respectively, subject to partner participation and rig availability Morocco Following its entry into Mauritania in April 2012, the Company further expanded its asset base with the acquisition of a 75% interest in blocks Loukos, Casablanca/Safi and Rabat Deep offshore Morocco in October Morocco is an area of increasingly high interest to the oil and gas industry. It is still a relatively under-explored region, but has proven oil reserves and working petroleum systems. Chariot continues to seek out value add opportunities to further de-risk its portfolio. 02

5 GIANT POTENTIAL Material stakes in prospects identified with potential to create transformational value Investment Case Focused Strategy Explore in new or emerging provinces Take large equity positions in the early phases of exploration Manage risk through: Levered partners Portfolio diversity Application of technology DIVERSE PORTFOLIO Licences in three countries across six basins, with assets at varied stages of maturity Quality Exploration Portfolio Eight blocks, three countries ~60,000km 2 (gross) acreage Giant potential prospect inventory MANAGING RISK Track record of securing industry funding Licences in proven, emerging and frontier provinces Doubled portfolio over the last year Overview Business Review Corporate Governance Financial Statements Ensure capital discipline Commitments Fully Funded All contractual commitments funded through 2014 Planned Work Programmme fully funded through 2013 US$68.3m 2012 year-end cash position Partnering in Northern Area, Namibia, initiated Partnering in Central blocks, Namibia, 3Q Approaches on Mauritania and Morocco Experienced E&P Team Track record of accessing quality acreage ahead of the industry Over 200 years of combined E&P experience E&P operations experience in 31 countries Over 40 discoveries; 14 major discoveries Acquired 11,500km 2 of 3D in three years Successfully operated an ultra deep water well Multiple Value Triggers Namibia Mauritania Morocco 2013 HRT wells, Partnering Tullow wells; 3D Cairn, Kosmos wells 2014 N+C Drilling 2714B 3D Partnering Genel, Plains wells; 3D B Drilling Drilling Partnering 03

6 Overview Experienced E&P team Chariot s strength lies with its in-house technical team which has a reputation for accessing quality acreage ahead of the industry. 24 Read about our Senior Management 31 Countries with operator exploration experience within the Chariot team 11 Countries with operator development and production experience within the Chariot team 04

7 200+ Over 200 years of combined experience in Exploration, Development and Production. 40+ Over 40 discoveries, with 14 major discoveries. Chariot s Experienced E&P Team MATTHEW TAYLOR Director of Exploration Matthew is a petroleum geologist who has worked in the industry for over 30 years. He began his career with BNOC in 1980, moving to BP in 1984 and subsequently held senior geologist posts with BHP Petroleum and Triton Energy. Further to this Matthew consulted and advised a range of clients including Chevron, Dana Petroleum and Marathon Oil on New Venture projects, both identifying targets and providing detailed prospect and basin evaluations and opportunity assessments. Subsequent to this, he played a major role in the acquisition of exploration acreage in Namibia, Oman, Senegal, Togo and Western Europe whilst working for Hunt Oil. JULIA KEMPER Principal Geophysicist Julia has more than 25 years of experience in the oil and gas industry having worked as a geophysicist for both BP and Shell and more recently as senior geophysicist with Hunt Oil and MND Exploration and Production. She has been involved in all aspects of geophysical work throughout her career and has been a formative part of, and had key roles in, new venture divisions. Julia specialises in the development, interpretation and evaluation of 2D and 3D seismic programmes as well as the assessment of new opportunities. She has a long track record of working in Namibia and her knowledge of the country contributed to securing the offshore acreage for Hunt Oil in Overview Business Review Corporate Governance Financial Statements IAN THOMAS Senior Staff Geophysicist Ian has a strong technical and commercial background with over 30 years of global experience as a geophysicist. His geological and geophysical skills have been applied across a diverse range of assets and he has identified, evaluated and successfully promoted business opportunities in Venezuela, Colombia, North Africa, Kazakhstan and the UK. He started his career with Cities Service, subsequently working for RTZ, Elf and Ultramar, with key roles in the formation of successful farm-in groups, bidding rounds, focused interpretations and new venture analysis. In 1992 he moved to Nimir where he built up their worldwide exploration and production portfolio and from there joined Silverstone Energy (now Bridge Energy) which made three commercial discoveries during his tenure. 05

8 Business review Chairman s statement Philip Loader, Chairman of, discusses Chariot s operational progress last year, the steps made in broadening the portfolio and the Company s corporate governance. It is with pleasure that I report on the Company s year-end results, my first as Chairman, the position of which I was delighted to accept in December The past year was an operational one for Chariot and we fulfilled a number of our strategic and exploration objectives. We completed the acquisition, processing and interpretation of our 3,500km² seismic programme in the Central area of Namibia; participated in two wells offshore Namibia; secured significant acreage positions in two new regions of interest; and completed the acquisition of a 3,500km² survey offshore Mauritania. Whilst the results of the Namibian drilling campaign were disappointing, this activity has enabled us to improve our understanding of the petroleum geology within Namibia and this will inform our forward programme. We have also been able to position ourselves as an early entrant into areas which we believe have the potential for giant opportunities. Frontier Explorer Namibia Chariot has been at the forefront of exploration activity offshore Namibia. Only 11 exploration wells have been drilled offshore Namibia to date, just four of which were in deep water on a coastline over 1,000km in length. In April to mid-may 2012, the Company successfully operated, safely and within budget, the Tapir South deep water well in its Northern Area, which reflected positively on the capability of the Chariot team. Following the completion of BP s farm-in to Southern Block 2714A, Chariot participated in a second well, Kabeljou-1, which was drilled in late July to early September. Whilst the wells were unsuccessful and plugged and abandoned, the information and knowledge we have now gained provides significant insight to the additional prospectivity within our acreage. Leading up to and concurrent with drilling, Chariot acquired, processed and interpreted substantial amounts of seismic data. As a result, Chariot now holds the most extensive deep water well database and what we believe to be the second largest 3D seismic database in the country which is invaluable to the continued development of our Namibian portfolio. Extensive deep water well and seismic database offshore Namibia Accessed significant acreage positions in underexplored regions with proven petroleum systems Continuous pipeline of activity over coming years 06

9 This past year has seen the Company take some bold steps forward which have served to further develop our asset base on a number of levels. We now have a strong foothold in three very interesting geological provinces for oil and gas exploration and have created a portfolio that contains a variety of regional plays. 12 Read our Operations overview Broadening the portfolio and managing risk In addition to this exploration activity, we have also broadened and diversified our portfolio through the acquisition of Block C19 offshore Mauritania and the Loukos, Casablanca/Safi and Rabat Deep licences offshore Morocco. Highlights Fulfilled a number of strategic and exploration objectives throughout the year Hold significant acreage positions in areas that we believe have the potential for giant opportunities Strong working relationships with the Governments and Ministries in the countries in which we operate Independent Corporate Governance committee formed to continue to ensure clarity and transparency in decision making Fully funded to carry out our stated work programme through 2013 and all licence commitments are funded through 2014 Overview Business Review Corporate Governance Financial Statements We have continued to build on our ability to identify underexplored, highly prospective regions and access significant acreage positions within these areas prior to other competitors and in advance of incurring high costs of entry and high premium agreements. Mauritania and Morocco are of specific interest to Chariot as they are both relatively immature from an exploration perspective but have proven petroleum systems. This is where we see the greatest opportunity for transformational growth. The entry and participation of several major oil companies within both Mauritania and Morocco in recent months highlights Chariot s capacity to successfully execute this component of its strategy. The increased industry interest endorses both regions as highly prospective whilst indicating an appetite for increasing exploration activity, the results of which will continue to enhance the geological understanding of these basins and also our assets. These acquisitions also contribute to balancing the risk profile of Chariot s portfolio. Namibia is a frontier hydrocarbon province with very early stage exploration; Morocco is an emerging hydrocarbon province, however our acreage is located adjacent to historic oil production and gas condensate discoveries, and in Mauritania we have moved into an area which is a proven hydrocarbon province with current production. We also now have a range of exploration maturity within our asset base and have constructed a continuous pipeline of activity in the coming years. Regional relationships Chariot considers its working relationships to be of utmost importance and key to long term success. The Company has developed and continues to maintain close working relationships with the Governments and Ministries in all the countries in which we operate and it is a pleasure to work alongside them. This cooperation ensures our operations can be carried out smoothly and I would like to thank the Governments and Ministry of Mines and Energy of Namibia, Mauritania and Morocco, as well as the State Oil Companies NAMCOR, SMH and ONYHM for their continued support which is invaluable to Chariot s progress To view our Mauritanian acquisition To view our Moroccan acquisition 07

10 Business review Chairman s statement Continued Board members LARRY BOTTOMLEY Chief Executive Officer GEORGE CANJAR Senior Independent Non-Executive Director HEINDRICH NDUME Non-Executive Director PHILIP LOADER Non-Executive Chairman MARK REID Chief Financial Officer ADONIS POUROULIS Non-Executive Director ROBERT SINCLAIR Non-Executive Director Governance There were a number of changes to our Board in December 2012 with Larry Bottomley appointed as Chief Executive Officer of the Company, myself as Non-Executive Chairman and Adonis Pouroulis moving to Non-Executive Director. Paul Welch and James Burgess stepped down from the Board, Heindrich Ndume became a Non-Executive Director and we welcomed Mark Reid to the Board as Chief Financial Officer. Alongside this re-organisation, an independent Corporate Governance Committee was created which consists of the Independent Directors and is chaired by George Canjar who is now the Senior Independent Non-Executive Director. The Company, where practicable, is dedicated to ensuring that it maintains the strictest corporate governance standards and this new committee allows for a healthy combination of key experience and independence necessary to continue to ensure clarity and transparency in all decision making. Financial Review The Group is debt free and held cash balances of US$68.3m at 31 December 2012 (31 December 2011: US$129.0m). The Group incurred a loss of US$88.6m for the year ended 31 December 2012 (ten months ended 31 December 2011: US$9.2m) which included an impairment charge of US$80.8m for the Tapir South well. Share based payments charges of US$1.8m for the year ended 31 December 2012 were lower than the US$2.4m for the ten months ended 31 December 2011 primarily due to fewer unvested share awards being in existence during the year. Other administrative expenses at US$7.5m for the year ended 31 December 2012 were higher than the US$5.6m for the ten months ended 31 December 2011 primarily due to a shorter accounting period to 31 December 2011 and organisational restructuring costs incurred during the year ended 31 December For more information on our Corporate Governance Finance income for the year ended 31 December 2012 comprises interest on cash balances of US$0.9m (ten months ended 31 December 2011: US$0.9m) and exchange gains on foreign currency cash balances of US$0.7m (ten months ended 31 December 2011: US$Nil). In the ten months ended 31 December 2011 an exchange loss on foreign currency cash balances of US$2.1m was included in finance expense. Board expertise breakdown Exploration Oil and Gas Finance Africa 5/7 5/7 4/7 4/7 Capitalised exploration costs in the year of US$128.6m (31 December 2011: US$15.4m) were funded by existing cash, US$48.7m gross share placing proceeds received in March 2012, the receipt of the BP farm-out cash relating to back costs and working capital movements. Chariot is fully funded to carry out our stated work programme through to the end of 2013 and all contractual commitments in all of our licences are funded through to Conclusion This past year has seen the Company take some bold steps forward which have served to further develop our asset base on a number of levels. We now have a strong foothold in three very interesting geological provinces for oil and gas exploration and have created a portfolio that contains a variety of regional plays; exploration success in any of these regions has the potential to deliver transformational value to the stakeholders in Chariot. We look forward to continuing our work and taking these assets through the value curve. Philip Loader Chairman 19 March

11 Business review Chief executive s review Chariot s strategy remains centred around creating transformational growth through the discovery and development of new hydrocarbon provinces. Our Namibian assets are now part of a more diversified West African portfolio and we are pleased with our new early entrant positions in Mauritania and Morocco. The Company accumulated a significant amount of data during the last year. The well information from our Namibian drilling campaign, although unsuccessful, has materially improved our understanding of the petroleum systems in Namibia, and the extensive 3D seismic data in the Namibian Central blocks has led to the description of the giant potential that exists in this area. The additional assets in offshore Mauritania and Morocco included legacy data which allowed the Company to acquire an extensive 3D seismic programme in Mauritania. The improvement in understanding that these datasets have resulted in, and the broadening of the Chariot portfolio, means this has been a very interesting and exciting time to become CEO of Chariot. I look forward to progressing the exploration portfolio which will expose our shareholders to giant potential in the success case. Overview Business Review Corporate Governance Financial Statements Highlights Significant work programmes to be carried out across the portfolio over the coming year Material improvements in the understanding of the petroleum systems in Namibia Focused strategy and clear approach to executing Company goal Seeking to leverage third party partnering and achieving best optionality Third party activity will help inform prospect selection for drilling 09

12 Business Review Chief executive s RevIEW Continued our strategy Chariot is focused on the exploration of new and emerging hydrocarbon provinces where the scope for giant discoveries still exists. Chariot s assets are early stage but located in proven basins with high future potential. Strategy 1 Explore in new 2 Take large equity 3 Manage risk through 4 Apply capital or emerging positions in the discipline Levered partnering hydrocarbon early phases of provinces exploration Portfolio diversity Application of technology Objective Create transformational stakeholder value through the discovery of material accumulations of hydrocarbons Risk Management and Capital Discipline Chariot has a track record of success in securing industry funding with three successful farm-outs to date; Petrobras, BP and AziNam. Having secured large equity positions and diversified into frontier, proven and emerging basins, Chariot will seek to use its early mover advantage to continue to farm-down its assets. This will ensure capital discipline, reduce risk exposure and provide additional finance for the further exploration and development of its portfolio. Growth through exploration Chariot s strategy The goal of the Company is to create transformational value through the discovery of material accumulations of hydrocarbons. In order to achieve this growth through exploration, the Company will take large equity positions in the early phases of exploration in new or emerging hydrocarbon provinces. To mitigate risk, we will develop these assets through levered partnering, portfolio diversity and the application of technology, all elements of which are evident in our current asset base. This approach ensures that the Company applies capital discipline throughout its projects. Levered Partnering As mentioned above, the Company aims to manage risk by leveraging all of its equity positions and securing partnerships to share in the costs and rewards of exploration going forward. This not only provides industry validation as to the quality of an asset, but it also means 10 that we are able to use the additional capital, through the recovery of back costs, and payment of seismic or drilling contributions, to build the portfolio in other areas. We executed this successfully in the farm-out of block 2714A to Petrobras, which covered the costs of 3D seismic in the block, and BP which carried the majority of Chariot s costs on the Kabeljou-1 well. Continuing with this methodology, the Company will be looking to execute the partnering process in its Namibian Northern and Central Areas this year. A data room has already opened for the Zamba prospect in the Northern Area and, should the partnering process be successful, the Company will be looking to drill this 375mmbbls gross mean prospective resource prospect in In order to achieve the best optionality for the Company and to minimise its exposure to risk, Chariot considers it critical to ensure that its prospects are assessed and evaluated to the best of the Company s abilities prior to farm-out. In the Central Area, third party drilling activity will be taking place in adjoining acreage during 1H of this year on similar prospects to some of those within our acreage. As such, the Company considers it prudent to await these drilling results in order to inform our prospect selection. The data room for the Central Blocks, therefore, is anticipated to open in 3Q this year and, should the Company be successful in the partnering process, it will be looking to drill in 2014, subject to rig availability. The Company also has the intention to partner in Mauritania and Morocco prior to drilling: in Mauritania following the interpretation of its 3,500km 2 seismic programme which is expected at year end 2013; and then in Morocco after reprocessing and interpreting its legacy 2D data across all blocks and subsequent design of any follow-on 3D seismic programme that may be required to fully describe the potential and secure favourable commercial terms.

13 Track record of accessing quality acreage ahead of the industry Building on our work to date and moving forward In terms of our upcoming activity, we have multiple value triggers within our longer term exploration programme and, within the nearer term, there will be regional third party news flow which will provide important information for the Company to incorporate into the understanding of the various petroleum systems and the development of its portfolio. Whilst there is no drilling planned this year, the team will be carrying out a significant amount of work in order to prepare its various assets for their next stages of development. This will include: 11,000 km of 2D reprocessing and interpretation offshore Morocco, which will result in a prospective resource update in 3Q 2013 and be followed by the design of a 3D seismic programme receipt of the Pre Stack Depth Migration (PSDM) of the 3,500km 2 of 3D seismic data acquired offshore Mauritania with a subsequent resource update and initiation of partnering programme in 1H 2014 the partnering process initiation in the Central Area offshore Namibia in 3Q 2013, already underway for the Northern Area the final evaluation of Kabeljou-1 well and forward plan for Southern Block 2714A to be agreed with our partners in 2Q 2013 the planning of 3D seismic acquisition in the Southern Area in 4Q 2013, intended to commence in 2014, further to the identification of an interesting new play in this region All this additional work will serve to de risk and mature our portfolio towards partnering and drilling. 3 under-explored, highly prospective regions Alongside this activity, there will be several significant drilling programmes taking place this year in close proximity to our licences which have the potential to de-risk our prospects. HRT will be testing the deeper petroleum systems with three wells in Namibia. This activity will provide important information in the de-risking and targeting of prospects in the Central Blocks as well as help to outline the 3D seismic design of 2714B. In Mauritania, Tullow, Dana and Petronas will be commencing a four well drilling programme, two of which we believe will have read through potential into our Block. In Morocco, the drilling campaigns of Cairn and Kosmos will also provide near term activity that will inform the potential of both proven and new play systems which extend into Chariot acreage. The Chariot team Our in-house team has a track record of successful partnering and securing industry funding, as evidenced by our farm-outs with Petrobras, BP and AziNam and we also have a proven ability to acquire exploration acreage ahead of our competitors. Our exploration team has extensive experience worldwide, having been involved in exploration operations in 31 different countries worldwide, including Namibia, Mauritania and Morocco. The team has been involved in over 40 discoveries to date, 14 of which were major. We are looking to replicate this success with Chariot. New Ventures Over the last 12 months we have doubled our acreage and we will continue to seek to add further opportunities to our asset base. We follow a stringent methodology in order to assess potential acreage and will continue to use this going forward. As noted, the focus is on regions that are under-explored but have working petroleum systems, though we will also consider niche opportunities that will provide the Company with competitive advantage. Looking Forward We consider Chariot s portfolio to hold giant prospectivity which has the potential to create transformational value. The Company is dedicated to delivering on its strategy and will be using the significant data accumulated this year to develop its asset portfolio. The Company will seek to balance risk through the validation and support of third party leveraged partnerships which in turn will enable the Company to guard its capital and continue to build the exploration portfolio. There are multiple value triggers that will occur during the course of the year with regional third party drilling activity providing read through to the Chariot portfolio as well as developments within our own programme. The Company will seek partners to support the continuation of its drilling campaign offshore Namibia in 2014, the commencement of drilling offshore Mauritania in 2015 and in Morocco in With careful planning, an exceptional team and high quality acreage, the Company intends to capitalise on our early mover position and to maximise value from our assets. I would like to thank our shareholders for their continued support and the Chariot team for their ongoing hard work. I look forward to reporting on our progress over the coming months. Larry Bottomley Chief Executive Officer 19 March 2013 Overview Business Review Corporate Governance Financial Statements 11

14 Business Review Operations overview Identifying prospectivity in under-explored yet highly promising basins. Namibia Overview 1811 A&B 2312A&B 2412A&B(N/2) Botswana 2714A 2714B South Africa Licences in three geologically distinct basins Maturing exploration portfolio 8,000km2 3D seismic all areas Proprietary data from two most recent wells Giant prospects to explore and drill within existing portfolio Frontier Region Total area covered 30,504 km2 14 To view our Namibia operations review MAURITANIA Morocco Overview creage acquired adjacent A to other major explorers Oil shows in licence area; block adjacent to three recent discoveries 3,500km2 3D seismic acquisition completed Giant play potential C19 Senegal Mali Proven Region Total area covered 12,175 km2 16 To view our Mauritania operations review MOROCCO Spain Rabat Deep Loukos Overview creage proximal to oil and gas/ A condensate fields Increasing industry interest Giant lead potential Casablanca Total area covered 16,207 km2 Safi Algeria 12 Emerging Region 18 To view our Morrocco operations review

15 10 Read about our strategy Licence 1Q Q Q Q H H Northern Area Central Area Third Party Activity Partnering process Southern Area Final well Forward plan for analysis expected 2714A to be decided from operator by partners HRT 3 well drilling campaign ACCESSING NEW VENTURES Prospect selection and initiation of partnering programme Design 3D seismic programme for 2714B Potential drilling with a partner Potential drilling with a partner 2714B 3D seismic acquisition Repsol drilling campaign Potential BP-Serica drilling campaign Well partnering and potential drilling Overview Business Review Corporate Governance Financial Statements Licence 1Q Q Q Q H H C19 Processing and interpretation of Partnering Potential 3,500km 2 3D seismic process drilling with a partner Third Party Activity Tullow-Dana four well drilling campaign Potential Kosmos drilling Licence 1Q Q Q Q H H Rabat Deep Loukos Cassablanca / Safi Process and interpretation of >11,000km legacy 2D seismic Design 3D seismic programme Aquire 3D seismic Well partnering and potential drilling Third Party Activity Cairn, Genel, Galp, Kosmos, Plains drilling 13

16 Business Review Namibia Frontier Region Chariot was one of the first oil and gas explorers to secure its licence areas offshore Namibia. As a result of this early entrance, Chariot holds a significant acreage position totalling 30,504km² and its four licences are strategically located across three geologically distinct basins. Asset Licence Operator Interest % Northern Area Chariot holds a 100% interest in Blocks 1811A & B in the Northern Area. Chariot drilled and successfully operated the Tapir South well in April to mid-may This drilling targeted two reservoir systems. The lower reservoir was encountered with good quality thick sands but the upper reservoir was poorly developed. The shallower source kitchen to the south was insufficiently mature to generate hydrocarbons, while the deeper source kitchen was clearly ineffective as Tapir South had no significant hydrocarbons. The well was plugged and abandoned. Following the completion of the Tapir South well, Chariot undertook a petrophysical and seismic processing project to identify where oil charged sands might exist and, with the benefit of the calibration data from the well, seismic attributes have been revealed supporting the case for hydrocarbon charge into Tapir North. This is a stratigraphic trap and there is concern regarding seal failure updip to the east but leakage in this direction provides charge access to the adjacent Zamba prospect, the ultimate trap for migrating hydrocarbons. Zamba is a large four-way dip closure, interpreted to have a karstified carbonate target, with a salt seal and which is on trend and analogous with recent Angolan discoveries. As a result of the post-well analysis, the Zamba prospect is now a priority target. The prospective resource volume has been reworked for the Zamba main prospect, with gross mean unrisked potential resources of 375mmbbls, with an upside of 540mmbbls should the wider Zamba complex, which would combine a variety of reservoirs within the area, be successful. Forward Plan The partnering process has been initiated in the Northern Area and updates on this will be provided as appropriate. Should this be successful, the Company plans to drill this prospect with a partner in Central Area Status Phase Block 1811A&B 14 Enigma 100 Exploration 5,481 Licence Area km 2 Block 2312A&B N/2 of Block 2412A&B 19 Enigma 90 Exploration 16,801 Block 2714A 20 Enigma 25 Exploration 5,481 Block 2714B 15 Enigma 100 Exploration 2,741 Chariot holds a 90% interest and operatorship in the Central Area and is partnered by AziNam (10% interest) following the transfer of this interest from PGS to its associate company. In the Central Area, the 3,500km² of 3D seismic data has been mapped and interpreted and the prospect and lead inventory initially defined from 2D data has been updated to reflect the new features and attributes that have been identified further to this work. 1811A&B 2312A&B 2412A&B(N/2) 2714A 2714B 8,000km 2 3D seismic across all areas plus two wells in Namibia. 100% 90% Ownership of Northern Blocks Ownership of Central Blocks 14

17 The opportunity we see Chariot has been at the forefront of oil and gas exploration activity offshore Namibia having acquired 8,000km 2 of 3D seismic data and participated in two exploration wells. Namibia is a frontier region in which only 11 wells have been drilled offshore, four of those in the deep water, with Chariot operating the only ultra-deep water well to date. As a result, Chariot has the most extensive deep water well database within Namibia and the second largest 3D seismic database. From this we have accumulated a huge amount of proprietary information which, post the drilling of its wells this year, has enabled the Company to discriminate The Central Area has two petroleum systems a structurally deeper system which has synrift and deep marine source rocks that could potentially charge reservoirs interpreted as shallow water facies (reef and shelf edge plays); and a structurally shallower system, with deep water facies including a deep water source rock that has the potential to charge into clastic systems in basin floor fans and canyons that sit directly above this source system. Chariot has undertaken an evaluation of this area and has identified 19 targets that fall in 13 prospect areas in these two petroleum systems. The prospective resources associated with these targets range from 150mmbbls 1.1 billion barrels ( Bbbls ). The principal prospect in the deeper petroleum system has a gross mean prospective resource of 1.1Bbbls; and the main prospect in the shallower petroleum system has a gross mean prospective resource of 571mmbbls. Forward Plan Await the outcome of third party drilling in the area as this activity will target these source and reservoir systems and will therefore have a significant impact on which prospect is selected for drilling. Once these third party results are understood, Chariot intends to initiate a partnering process, secure a partner and if that is successful potentially drill in this area in Southern Area both a deep and a shallow petroleum system. The shallow system has not been explored in Namibia and is potentially very exciting with our new data demonstrating mature, world class, oil prone source rocks. Over the coming year, Chariot will apply this new information to its asset portfolio and use the results of third party drilling in close proximity to our acreage in order to develop its prospect inventory in both the deeper and shallower petroleum systems and mature targets for drilling. Chariot holds a 25% interest in 2714A (Petrobras 30% and operatorship, BP 45%) and a 100% equity in 2714B. In the Southern Area of Namibia, Chariot participated in the Kabeljou-1 well in late July to early September 2012 which drilled a large four-way dip closure and encountered poor to fair reservoirs in the target interval. No commercial hydrocarbons were found but significant shows were encountered above the section in the shallower source rocks that exist within the area. Chariot s analysis of the well results has highlighted significant potential and prospectivity of a shallower play in block 2714B which is supported by seismic facies which show characteristics of canyon head reservoirs. A 3D seismic survey is being planned to understand this potential in greater detail. MATTHEW TAYLOR Director of Exploration Key Licence Features Prospect portfolio includes several large structural traps and combination structural/ stratigraphic closures in three different geological settings. Prolific hydrocarbon generation is proven in the Orange basin with the giant Kudu gas field, demonstrably sourced from an oil prone, but locally over mature source rock. Extensive seabed gas hydrates, gas chimneys and other direct hydrocarbon indicators ( DHIs ), all positive indicators of both gas and oil generation. Past drilling, even where unsuccessful, has revealed interbedded sandstone and shale intervals providing multiple sealed reservoir target levels for future exploration. Despite poor trap development on the shelf, discoveries have been made and oil shows encountered, proving a petroleum charge system. 25% Ownership of Southern Block 2714A Overview Business Review Corporate Governance Financial Statements Forward Plan Third party drilling in the area will be important as this will provide information on the effectiveness of the source in the deeper petroleum system and the charge risk on deeper, onlap traps that occur in 2714B below the canyon heads. Further to the results of the drilling, Chariot will determine whether to focus the 3D programme on the canyon heads only or whether to extend the survey to cover the deeper onlap play. Final evaluation of the well results from the Kabeljou-1 well is still underway by Petrobras and an update to the prospect inventory in 2714A is pending further to the completion of this work which is expected at the end of March An update on the well evaluation results will be provided in due course followed by the forward plan as agreed with the partners in the block, expected in 2Q % Ownership of Southern Block 2714B 15

18 Business Review Mauritania Proven Region Mauritania is already a proven oil producing region with multiple discoveries made to date, further field developments are planned in the area and several wells are scheduled for drilling by other industry players this year. Asset Licence Operator Interest % Block C19 C19 Chariot Oil & Gas Investments (Mauritania) Limited Status Phase Licence Area km 2 90 Exploration 12,175 Chariot holds a 90% interest and operatorship in Block C19 which spans 12,175km 2 (gross) offshore Mauritania. The Company is partnered with Société Mauritanienne des Hydrocarbures (SMH), the National Oil Company of Mauritania, which will participate with a 10% carried interest. Licence overview In Mauritania, Chariot s Block C19 is located in an established oil producing region and whilst relatively still immature, holds giant play potential. The producing Chinguetti field to the south demonstrates that a petroleum system exists within this region and Block C19 is located 40km north west of an oil discovery in the Aigrette well. Within the Block itself there are extensive natural slicks indicating oil seepage and two wells have been drilled, both of which had good oil shows. On the legacy 2D data, Chariot has identified three deepwater fan and canyon head plays which are analogous to the nearby Banda and Tiof fields, with Banda having reported resources in the region of 300mmboe. C19 3,500km 2 3D seismic acquisition programme already completed, interpretation underway. 90% Interest and operatorship of Block C19 16 Geoceltic seismic vessel shooting 3D across block C19

19 The opportunity we see Mauritania is a proven petroleum province which offers a favourable working environment, fair fiscal terms and a developed, stable resource sector. Historically the exploration in the offshore region has concentrated in the salt basin and discoveries of both oil and gas have been found there. The extra attraction of exploring the northern extension of this basin beyond the mobile salt is twofold. Firstly, the large proportion of gas found in the salt basin reflects the deeper burial there, so in the Chariot acreage the source rocks are predicted to be generating oil rather than gas. A Jurassic arch runs through the central part of Block C19 and to the south and north of this are depocentres in which Cretaceous, Lower Tertiary and Upper Tertiary fan systems have been deposited. These fan systems are proven effective with the discoveries to the south in both Cretaceous and Upper Tertiary fans and occur in the southern part of Chariot s acreage, with three canyon head leads (as mentioned above), identified on the legacy 2D seismic data. These leads and play types have been targeted by the 3,500km² 3D survey undertaken in the south-western area of the block, the acquisition of which was completed in January The final volumes of the Pre Stack Depth Migration on this data is expected in November 2013 which will result in a resource update in 1Q In Mauritania there will also be extensive third party drilling activity during the course of this year and specific wells will target turbidite reservoirs that make up potential targets in Block C19. Further drilling is planned in 2014 in the ultra deepwater area which will also have some read through into the Chariot portfolio. Forward Plan Chariot has already received industry interest in its Mauritanian acreage and a partnering process will be initiated for drilling as soon as possible. Should this process be successful, it is anticipated that drilling will commence in Location of participating majors regionally Dana Petroleum Kosmos Energy Tullow Oil Petronas Carigali Chariot Oil & Gas Total Secondly, away from the complexities of the salt, the reservoirs will be simpler and the traps have the potential to be larger. The source rock within the Block has been modelled to be oil generating which is supported by the legacy wells of RAB-1A and AKZ-1A. Giant deep water canyon head, channel and fan plays have been identified on legacy 2D seismic which are analogous to the nearby Banda field (~300mmboe) and Tiof discovery. Block adjacent to three recent discoveries The recent 3,500km 2 seismic programme acquired data over these leads and the Company will process the data carefully through to November this year. The data will then be interpreted in detail in order to develop prospects to drill with a partner in IAN THOMAS Senior Staff Geophysicist Key Licence Features Block C19 is a highly attractive addition to Chariot s existing offshore West Africa portfolio. Mauritania lies on the margin of the Central Atlantic, the oldest segment of the Atlantic which began opening in Triassic times. Exploration has been sporadic in this basin but has resulted in several oil and gas discoveries that are under development by Tullow as well as the producing Chinguetti field. Good quality oil is sourced from prolific Cenomanian-Turonian age source rocks (the same as the source for the Ghanaian oil fields) and is contained in Tertiary age deep marine sandstones sealed by shales. At this stage of prospectivity development, Chariot has identified several potential target levels and a fairway for trapping geometries likely to be largely stratigraphic but with structural potential. Other operators in the region include Dana, Tullow Oil, Petronas and Kosmos. As in Namibia, Mauritania offers a favourable working environment, fair fiscal terms and a developed, stable resource sector. Overview Business Review Corporate Governance Financial Statements 17

20 Business Review Morocco Emerging Region Following its entry into Mauritania, Chariot further expanded its asset base with the acquisition of a 75% interest and operatorship in blocks Loukos, Casablanca/Safi and Rabat Deep offshore Morocco which together span 16,207km 2 (gross). Morocco is an area of increasing interest to the oil and gas industry not only from a geologic perspective, but also through its competitive fiscal terms, supportive regulatory framework and excellent state oil company, ONHYM, with whom Chariot is partnered. Asset Licence Operator Interest % Loukos Loukos Chariot Oil & Gas Investments (Morocco) Limited Casablanca/Safi Casablanca/Safi Chariot Oil & Gas Investments (Morocco) Limited Rabat Deep Rabat Deep Chariot Oil & Gas Investments (Morocco) Limited Status Phase 75 Exploration 1, Exploration 3,500 Licence Area km 2 75 Exploration 10,782 Rabat Deep Casablanca Safi Loukos Licence overview In its offshore Moroccan licences, Chariot s blocks are located near to historic onshore oil production, current onshore gas production and oil and gas condensate discoveries both onshore and offshore. The northern margin of Morocco is also thought to be geologically analogous to the conjugate Nova Scotia basin where significant discoveries have been made and where super majors are currently undertaking extensive exploration programmes. Chariot secured acreage in the northern part of Morocco prior to the entry of a number of other industry players and, whilst the Moroccan margin is relatively underexplored, the multiple play fairways and giant potential that Chariot has identified within its licences from 2D data are supported by success in the conjugate basin. The Rabat Deep, Casablanca and Loukos licences are located over a Palaeozoic basin on which sits a Jurassic carbonate platform and an outboard Cretaceous deepwater basin. As a consequence, there are Palaeozoic plays, Jurassic carbonate plays and Cretaceous clastic plays. A biogenic gas play within the Pliocene foredeep to the Atlas fold belt is also present. The source rock in the Jurassic is modelled to be oil generating in Rabat Deep; there are extensive slicks and seeps on the block and seismic direct hydrocarbon indicators on the legacy 2D seismic data. To the north of the Loukos block, there are thermogenic gas discoveries both offshore and onshore and immediately to the east is the Pliocene biogenic gas play that is currently in production. Some 60km to the east of the Chariot acreage are Jurassic oil fields that were produced in the late 50s and 60s. These were sourced from the Jurassic and reservoired in the Jurassic and demonstrate that the hydrocarbon system works. 34 wells have been drilled since 1968, 29 of which were drilled prior to Location of participating majors regionally Repsol Chariot Oil & Gas Chevron Triangle Plains Kosmos Energy Cairn Energy Genel Galp 16,207km 2 of acreage offshore Morocco acquired in the Central Atlantic passive margin. 18

21 The opportunity we see To encourage foreign investment, the hydrocarbon law in Morocco was amended in 1992 and 2000, providing oil and gas investors with some of the most attractive fiscal terms available internationally. Morocco is an emerging oil and gas province and Chariot s acreage is surrounded by gas production onshore, historic oil production onshore and gas condensate discoveries both onshore and offshore. Within our licence areas we have identified multiple plays and potential that is demonstrated by nearby discoveries and in the discoveries and production on the conjugate margin in Nova Scotia. 75% As in Namibia and Mauritania, there is a lot of third party activity that will be occurring in Morocco during the course of this year. A number of wells are expected by these third parties, and this drilling will target the Cretaceous deepwater systems and the Jurassic carbonate play that will have a read through to our Jurassic carbonate lead. The Jurassic carbonate bank lead identified in Rabat Deep covers an area of 107 km² and currently has a gross mean prospective resource estimate of 392mmbbls. Forward Plan Reprocess and interpret the 11,000km of legacy 2D data which will inform the understanding of the hydrocarbon systems and allow Chariot to design a 3D programme in 3Q this year before going to tender. The acquisition of this seismic is intended for 1Q 2014, leading to partnering and potential drilling in Matthew Taylor Director of Exploration Interest in blocks Loukos, Casablanca/Safi and Rabat Deep In our licence areas Mesozoic source rocks are modelled to be oil generating present day and this is corroborated by well defined natural oil slicks and seismic DHIs within the block area. From the legacy 2D seismic data Chariot has identified a large carbonate bank structure in the Rabat Deep licence, analogous to the Deep Panuke Field offshore Nova Scotia. Deep Panuke lies on the conjugate margin to Morocco and is a giant field. Also identified on the legacy 2D data set in the Rabat Deep block is a salt basin with mobile salt structures draped by basinal sediments and seismic facies indicating turbidite sands in potential trapping geometries. The Company will continue to reprocess the existing seismic data in order to develop its forward programme in the latter part of this year. As in Mauritania, the giant potential of this area is reflected in an increasing industry interest with recent farm-ins to the region by Plains, Genel, Cairn and the acquisition of acreage by Chevron. JULIA KEMPER Principal Geophysicist Key Licence Features Chariot s Loukos, Casablanca/Safi and Rabat Deep blocks offshore northern Morocco are part of the Central Atlantic passive margin. The Atlantic margin geology is superimposed upon pre-existing Palaeozoic basins which are prolific hydrocarbon producers to the east in Algeria and which are proven effective in parts of Morocco. Results of offshore pre-2003 drilling included the discovery of the Cap Juby field in Jurassic carbonate reservoirs, and oil and gas shows in several other wells in Jurassic to Tertiary carbonate and clastic reservoirs. Post 2003 discoveries include that of a significant gas discovery by Repsol, in the Anchois-1 well in Miocene clasticsl, in close proximity to Chariot s acreage. Regional source rocks are recognised in the Jurassic and Cretaceous as well as in the Palaeozoic, and hydrocarbon discoveries in Morocco and have been tied geochemically to all of these source rock levels. Chariot s acreage offers the potential for prospectivity in several of the proven plays in Morocco including very large Palaeozoic structures, large Jurassic carbonate features that may be reefal, Cretaceous sandstone plays and Tertiary shallow gas targets. Overview Business Review Corporate Governance Financial Statements 19

22 Corporate Governance Corporate Social Responsibility Chariot supports the growing awareness of social, environmental and ethical matters when considering business practices. This statement provides an outline of the policies in place that guide the Group and its employees when dealing with social, environmental and ethical matters in the workplace. Code of Conduct Chariot maintains and requires the highest ethical standards in carrying out its business activities in regard to dealing with gifts, hospitality, corruption, fraud, the use of inside information and whistle-blowing. Chariot has a zero tolerance policy towards bribery. Equal Opportunity and Diversity Chariot promotes and supports the rights and opportunities of all people to seek, obtain and hold employment without discrimination. It is our policy to make every effort to provide a working environment free from bullying, harassment, intimidation and discrimination on the basis of disability, nationality, race, sex, sexual orientation, religion or belief. Employee Welfare Chariot aims to assist employees at all levels to improve their professional abilities and to develop their skills. The Group will practice manpower and succession planning in regard to the number and type of personnel resources that will be required in the future. Individual career progression activities are developed with this in mind. Joint Venture Partners, Contractors and Suppliers Chariot is committed to being honest and fair in all its dealings with partners, contractors and suppliers. The Group has a policy to provide clarity and protection, within its terms of business, to ensure the delivery and receipt of products and services at agreed standards. Procedures are in place to ensure that any form of bribery or improper behaviour is prevented from being conducted on Chariot s behalf by joint venture partners, contractors and suppliers. Chariot also closely guards information entrusted to it by joint venture partners, contractors and suppliers, and seeks to ensure that it is never used improperly. Operating Responsibly and Continuous Improvement Chariot is committed to a proactive quality policy to ensure that stakeholders are satisfied with its results and the way in which the business operates and to promote continuous improvement in the overall operation of the Group. In pursuit of these objectives, Chariot will use recognised standards and models as benchmarks for its management systems. Our Goals high ethical standards honest and fair in all manners of business Implement and maintain management systems for sustainable environmental and socio-economic development Dolphins spotted from Geoceltic seismic vessel offshore Mauritania, Dec

23 Minimising the impact of our operations on the environment is of primary importance to us Environmental and Socio-economic Policy Chariot adopts an environmental policy which sets standards that meet or exceed industry guidelines and host government regulations. This is reviewed on a regular basis. Wherever we operate we will develop, implement and maintain management systems for sustainable development that will strive for continual improvement. Prior to any seismic acquisition programmes and in preparation for the drilling of any exploratory wells, Chariot will employ environmental consultants to carry out area specific Environmental Impact Assessments ( EIAs ) which are approved by the relevant ministries. Chariot intends to carry out all necessary requirements to ensure that the environment in and around its areas of interest is maintained to the highest standard. During its last two seismic acquisition programmes, Chariot employed marine mammal observers to travel on board the seismic vessels. These observers were able to compile marine mammal and bird count statistics which will assist in the preparation of future EIAs. With regards to preparation for drilling exploratory wells, Chariot will use its Environmental Management Plan which will be implemented from preparatory stage to well completion. Whilst drilling is underway, an Oil Spill Response and Emergency Response plan will be put in place. From a discovery, an Environmental Management System will be developed to co-ordinate and monitor environmental activities and report the performance over the lifetime of the field from discovery to development, through to abandonment. Social impacts will also form part of these assessments and preliminary work in this area will consider the local communities and the local economic effects on a progressive and permanent level. It is Chariot s aim to ensure that all the likely environmental and socioeconomic impacts will be managed with skill, care and diligence in accordance with professional standards. Chariot is committed to maintaining and regularly reviewing its Health and Safety and Environmental (HSE) policies. Overview Business Review Corporate Governance Financial Statements Chariot maintains a zero tolerance policy towards bribery 21

24 Corporate Governance Board of Directors Chariot s board are committed to high standards of corporate governance. Name and Title PHILIP LOADER Non-Executive Chairman LARRY BOTTOMLEY Chief Executive Officer MARK REID Chief Financial Officer Biography Philip has over 27 years experience in the upstream oil and gas industry and his core strengths lie in international exploration and business development. He is currently Senior Vice President of Exploration for Mubadala Oil & Gas, accountable for their exploration inventory across the Eastern Hemisphere. Larry has worked in the oil and gas industry for over 30 years and has a significant track record of building exploration and production businesses on the international stage, delivering transformational growth and shareholder value. Mark has over 20 years of experience in financial services and investment banking. Before joining Chariot he was CFO at Aurelian Oil & Gas Plc and prior to that Head of Oil & Gas at the London office of BNP Paribas Fortis. Year Appointed Appointed NED 2010, Chairman 2012 Appointed NED 2011, CEO Experience Philip began his career as a geophysicist in 1983 and throughout his career has evaluated numerous opportunities across the globe. He has a wealth of experience in Africa, having made discoveries in Tunisia, Algeria and Equatorial Guinea. Prior to Mubadala, Philip worked for Anadarko Petroleum Corporation for over 10 years, latterly as Vice President of International Exploration where he oversaw exploration related activities in a variety of international provinces. Philip holds a BSc (Hons) in Geology from the University of Manchester, an MSc DIC in Petroleum Geology (Geophysics) from Imperial College, University of London and an MBA from Henley Management College. Larry has worked across a broad spectrum of exploratory and business development roles worldwide, in senior management roles with Perenco SA, Hunt Oil, Triton Energy and BP. He has a strong background in integrated geosciences, team management and relationship building and a key aspect of his work has been in the creation, development and delivery of significant drilling programmes that have led to the discovery and development of giant oil fields. He has also held senior positions for National Australia Bank s Oil & Gas team and in Ernst & Young s Corporate Finance business where he provided M&A and corporate finance services to clients worldwide for over eight years. Committee Membership Nomination Committee Corporate Governance Committee Audit Committee Remuneration Committee Independent Yes Not applicable Not applicable Previous sector experience TRITON 22

25 Board diversity Board composition 5 2 Non-Executive Executive ADONIS POUROULIS Non-Executive Director Adonis, one of the founders of Chariot and its Namibian 100% owned operating subsidiary Enigma, is a mining entrepreneur whose expertise lies in the discovery and exploration of natural resources. 5 2 Non-Independent Independent GEORGE CANJAR Senior Independent Non-Executive Director George has 30 years of experience in the oil industry and began his career at Shell having graduated with a Bachelor of Science in Geologic Engineering from the Colorado School of Mines. Board tenure years 2-3 years Board Nationality HEINDRICH NDUME Non-Executive Director Heindrich is a Namibian national with mining exploration experience throughout sub-saharan Africa years ROBERT SINCLAIR Non-Executive Director Robert is Managing Director of the Guernsey based Artemis Trustees Limited and a Director of a number of investment fund management companies and investment funds associated with Artemis Trustees Limited. Overview Strategic Overview Business Review Corporate Governance Financial Statements Adonis is also Chairman of Petra Diamonds Ltd, a pan-african diamond mining company which he founded and listed on London s AIM market in 1997 and which moved to the Main Market in Petra is now South Africa s second largest independent diamond producers. He has been influential in the listing of a number of other companies onto AIM and has been instrumental in structuring and raising funds to help finance early stage exploration and mining projects across Africa. George is currently Director of Global Unconventional Business Development for Hess Corporation. He started his career spending 17 years with Royal Dutch/Shell Oil, followed by Carrizo Oil & Gas as Vice President of Exploration and Development and more recently he was Executive Vice President and Chief Operating Officer for Davis Petroleum Corporation. His career has spanned a broad spectrum of the E&P sector involving all petroleum engineering and exploration disciplines as well as a variety of corporate activity. His expertise lies in deal structuring, portfolio development, risk analysis and strategic modelling in addition to being the operational catalyst for bringing successful projects to first production. Heindrich has played a unique role within the development of Namibia s mining and energy strategies, including acting as National Energy Council Secretary and World Energy Council Representative for the Namibian Ministry of Mines and Energy. Heindrich was one of the founding shareholders of Enigma. Robert is Chairman of Schroder Oriental Income Fund Limited, a Director of Picton Property Income Limited and Chairman of its Audit Committee. He is a Fellow of the Institute of Chartered Accountants in England and Wales and is resident in Guernsey. Robert represents the interests of Westward Investments Limited, a major shareholder of Chariot. Remuneration Committee Corporate Governance Committee Nomination Committee Audit Committee Remuneration Committee Audit Committee Remuneration Committee Nomination Committee No Yes No No 23

26 Corporate Governance Senior management Matthew Taylor Director of Exploration Ian Thomas Senior Staff Geophysicist Matthew is a petroleum geologist who has worked in the industry for over 30 years. He began his career with BNOC in 1980, moving to BP in 1984 and subsequently held senior geologist posts with BHP Petroleum and Triton Energy. Further to this Matthew consulted and advised a range of clients including Chevron, Dana Petroleum and Marathon Oil on New Venture projects, both identifying targets and providing detailed prospect and basin evaluations and opportunity assessments. Subsequent to this, he played a major role in the acquisition of exploration acreage in Namibia, Oman, Senegal, Togo and Western Europe whilst working for Hunt Oil. 30 Years experience Julia Kemper Principal Geophysicist Ian has a strong technical and commercial background with over 30 years of global experience as a geophysicist. His geological and geophysical skills have been applied across a diverse range of assets and he has identified, evaluated and successfully promoted business opportunities in Venezuela, Colombia, North Africa, Kazakhstan and the UK. He started his career with Cities Service, subsequently working for RTZ, Elf and Ultramar, with key roles in the formation of successful farm-in groups, bidding rounds, focused interpretations and new venture analysis. In 1992 he moved to Nimir where he built up their worldwide exploration and production portfolio and from there joined Silverstone Energy (now Bridge Energy) which made three commercial discoveries during his tenure. 30 Years experience Anthony Jervis Senior Geoscientist Julia has more than 25 years of experience in the oil and gas industry having worked as a geophysicist for both BP and Shell and more recently as senior geophysicist with Hunt Oil and MND Exploration & Production. She has been involved in all aspects of geophysical work throughout her career and has been a formative part of, and had key roles in, new venture divisions. Julia specialises in the development, interpretation and evaluation of 2D and 3D seismic programmes as well as the assessment of new opportunities. She has a long track record working in Namibia and her knowledge of the country contributed to securing the offshore acreage for Hunt Oil in Years experience Anthony has been a geoscientist for over ten years and has worked across a variety of disciplines including petrophysics and wellsite operations, seismic interpretation, play fairway analysis, prospect generation and evaluation in Australasia, Africa, Europe and the Middle East. He began his career working in development, exploration and operations teams for Santos Ltd, moving onto Gaffney, Cline and Associates where he led detailed field reviews, CPRs and Reserve audits for independents, majors and NOCs. In 2009 he joined AWE Ltd as Senior Geoscientist where he assessed new venture projects including exploration, pre-developments and corporate acquisitions, led a successful licence round and was a member of their peer review team. 10 Years experience 24

27 04 Discover our E&P team s global expertise Alex Green Commercial Manager Alex has over 20 years experience in the business development, commercial and financial aspects of the upstream oil and gas sector. Alex began his career as a Petroleum Economist for Clyde Petroleum where he was responsible for developing the company s corporate model and running the evaluation of acquisition opportunities. He subsequently worked as a Corporate Planner for BG Plc. later moving to become Commercial Manager and then Group Economics Manager for Paladin Resources. At Paladin, Alex led successful joint venture negotiations, coordinated and negotiated oil and gas sales agreements for the group and ran the financial and commercial analysis within the company s business development team. He also played a key role in developing internal and external financial models. 20 Years experience Martin Richards Engineering Manager Robert Mwanachilenga Namibia Country Manager and Senior Staff Drilling Engineer Robert has been in the oil and gas industry for 20 years, with experience in a variety of international roles. Prior to joining Chariot, Robert worked for the National Petroleum Corporation of Namibia ( NAMCOR ) as Acting Managing Director, having also held roles within the Company as Engineering Manager and Development Engineer. He started his career as Field Engineer with DST in Lingen, Germany. He subsequently worked for Global Marine and later Petrobras before joining NAMCOR. Robert is a member of the Society of Petroleum Engineers, the Association for the Advancement of Cost Engineers International and the Engineering Council of Namibia. 20 Years experience Siegfried Baumgartner Namibia Senior Exploration Advisor Overview Business Review Corporate Governance Financial Statements Martin has worked in the oil and gas industry for over 30 years and has an in-depth experience of all aspects of subsurface management, reservoir engineering and petroleum economics. He has worked as both a Chief and Senior Reservoir Engineer for a variety of companies, including Petro-Canada, Suez Oil Company, Deminex and Mobil. He has particular expertise in operational and functional reservoir management, leading multi-disciplinary reservoir studies, asset management and reserves reporting. Martin has had numerous exploration and drilling successes to date. 30 Years experience Siegfried holds a Masters degree in Geology from the Ludwig-Maximilians-Universität in Munich and a BSc Degree in Computer Science from the Control Data Institute in Munich. He has approximately 30 years of international experience in the oil and computer industry. He is a member of the American Association of Petroleum Geologists ( AAPG, active member), the Geological Society of Namibia (life member), the Petroleum User Group ( ESRI ) and the Scientific Society of Namibia. Prior to joining the Group, Siegfried also worked for NAMCOR. 30 Years experience 25

28 Corporate Governance Directors Remuneration Report Remuneration Committee The Group s Remuneration Committee comprises of George Canjar (Chairman), Adonis Pouroulis, Robert Sinclair and Philip Loader. The purpose of the Remuneration Committee is to: make recommendations to the Board on an overall remuneration policy for Executive Directors and other senior executives in order to retain, attract and motivate high quality executives capable of achieving the Group s objectives; and demonstrate to shareholders that the remuneration of the Executive Directors of the Group is set by a committee whose members have no personal interest in the outcome of their decision, and who will have due regard to the interests of the shareholders. Procedures for developing policy and fixing remuneration The Board fixes executive remuneration and ensures that no Director is involved in deciding his or her own remuneration. The Committee is authorised to obtain outside professional advice and expertise. The Remuneration Committee is authorised by the Board to investigate any matter within its terms of reference and it is authorised to seek any information that it requires from any employee. Details of the remuneration policy The fees to be paid to the Directors are recommended by the Remuneration Committee and are subject to approval by the full Board. Directors service agreements Service agreements for Directors are terminable by either party on notice periods varying between six and 12 months. Directors remuneration The following remuneration comprising Directors fees and benefits in kind that were payable to Directors during the year: Fees/basic salary Performance cash bonus Benefits in kind 1 Pension contribution Payments in lieu of notice/compromise payment Year ended 31 December 2012 Total Ten months ended 31 December 2011 Total P Loader L Bottomley M Reid A Pouroulis G Canjar R Sinclair H Ndume P Welch , J Burgess Total 1, ,703 1,426 (1) Comprises private health insurance. (2) M Reid was appointed as a Director on 19 December Amounts included above are in respect of services for the period December (3) P Welch and J Burgess resigned on 19 December

29 Directors interests in shares The Directors who held office at the end of the year had the following interests in the issued share capital of the Group: 31 December December 2011 P Loader L Bottomley 1 40,393 M Reid 2 A Pouroulis 3 21,665,971 21,565,971 G Canjar R Sinclair 200, ,000 H Ndume 4 20,107,426 20,107,426 Total 42,013,790 41,873,397 (1) Includes 20,104 held by P Bottomley the spouse of L Bottomley. (2) Prior to being appointed as a Director, M Reid was granted 1,023,008 deferred share awards under the employee long term incentive plan (see note 20). These shares will vest in equal instalments over a three year period. (3) 21,565,971 shares are held by Westward Investments Limited a company which is owned by a discretionary trust of which A Pouroulis is one of a number of beneficiaries. (4) Shares are held by Protech Namibia (Pty) Limited of which H Ndume is the sole registered shareholder. Share options The Group operates a share option scheme pursuant to which Directors and senior executives may be granted options to acquire ordinary shares in the Company at a fixed option exercise price. Overview Business Review Corporate Governance Financial Statements Further details of the share option scheme can be found in note 20. Directors share options The Directors who held office at the reporting date and who had interests in the share option scheme are: Options held at 31 December 2011 Options held at 31 December 2012 Exercise price (p) Exercisable from Expiry date P Loader 250, , /08/ /08/2020 L Bottomley 250, , /09/ /09/2021 A Pouroulis 100, , /05/ /05/2018 G Canjar 250, , /06/ /06/2020 R Sinclair 100, , /05/ /05/2018 H Ndume 250, , /05/ /05/2018 Total 1,200,000 1,200,000 By order of the Board George Canjar Chairman of the Remuneration Committee 19 March

30 Corporate Governance Corporate Governance Statement The UK Corporate Governance Code s shares are traded on AIM and as such, Chariot is not subject to the requirements of the UK Corporate Governance Code, nor is it required to disclose its specific policies in relation to corporate governance. The Directors, however, support high standards of corporate governance and, so far as is practicable, will progressively adopt best practices in line with the UK Corporate Governance Code. To this end, in January 2013 the Board of Directors revised the composition of the Committees below and established a Corporate Governance Committee comprised of George Canjar (Chairman) and Philip Loader and appointed George Canjar to the position of Senior Independent Non-Executive Director. The Corporate Governance Committee will provide oversight on all material corporate governance issues affecting the Group and will make recommendations to the Board. Workings of the Board and its Committees The Board of Directors The Board meets frequently to consider all aspects of the Group s activities. A formal schedule of matters reserved for the Board has been issued and approved and includes overall strategy and approval of major capital expenditure. The Board consists of the Chairman, the Chief Executive Officer, Chief Financial Officer and Non-Executive Directors. All Directors have access to the advice and services of the Company Secretary and the Group s professional advisers. Philip Loader and George Canjar are independent Non-Executive Directors. Remuneration Committee The Remuneration Committee comprises George Canjar (Chairman), Adonis Pouroulis, Robert Sinclair and Philip Loader. Its terms of reference are discussed in the Directors Remuneration Report. The Remuneration Committee met twice during the year ended 31 December Audit Committee The Audit Committee comprises Robert Sinclair (Chairman), George Canjar and Philip Loader. It meets at least twice each year and at any other time when it is appropriate to consider and discuss audit and accounting related issues. The Audit Committee is responsible for monitoring the quality of any internal controls and for ensuring that the financial performance of the Group is properly monitored, controlled and reported on. It also meets the Group s external auditors and reviews reports from the external auditors relating to accounts and any internal control systems. The Audit Committee met three times during the year ended 31 December Nomination Committee The Nomination Committee comprises Philip Loader (Chairman), George Canjar and Robert Sinclair. The Committee is responsible for reviewing the structure, size and composition of the Board, preparing a description of the role and capabilities required for a particular appointment and identifying and nominating candidates to fill Board positions, as and when they arise. The Nomination Committee met twice during the year ended 31 December Relations with shareholders Communication with shareholders is given a high priority by the Board of Directors which takes responsibility for ensuring that a satisfactory dialogue takes place. Directors plan to meet with the Company s institutional shareholders following the announcement of interim and final results and at other appropriate times. The Directors are also in regular contact with stockbrokers analysts. The Company has developed a website containing investor information to improve communication with individual investors and other interested parties. Internal control The Directors acknowledge their responsibility for the Group s system of internal controls and for reviewing its effectiveness. The system of internal control is designed to safeguard the Group s assets and interests and to help ensure accurate reporting and compliance with applicable laws and regulation. Despite the inherent limitations in any system of internal control the Board considers that the Group s existing systems operated effectively throughout the year. 28

31 Report of the Directors The Directors present their report together with the audited financial statements for the year ended 31 December Results and dividends The results for the year are set out on page 33. The Directors do not recommend payment of a final dividend (31 December 2011: US$Nil). Principal activity The principal activity of the Group is oil and gas exploration. Going concern The Directors consider that the Group has adequate financial resources to enable it to continue in operation for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements. Business review and principal risks and uncertainties A full review of the Group s activities during the year, recent events, and expected future developments is contained within the Chairman s Statement. These pages also form part of this Directors Report. The Group is subject to various risks including those which derive from the nature of its oil and gas exploration activities. The following list sets out the Group s principal risks and uncertainties and also provides details as to how these are managed. Funding and financing risk The nature of the Group s business of exploring in deep offshore regions means that there are significant costs associated with seismic and drilling campaigns. The Group manages this risk in a number of ways. Firstly the Group closely monitors its cash position and each month produces updated cash flow forecasts to help it determine whether it has sufficient financial resources to fund its short and medium term operations. The Group also ensures that it always has adequate levels of cash on deposit with varying terms of maturity to match with when significant items of expenditure become due. In addition the Group is continually seeking to reduce its exposure to large expensive projects by engaging with farm-in partners with a view to reducing its equity stakes in the licences in which it operates. To date, the Group has been successful in both managing its cash position and bringing large well-funded partners into its licences. Overview Business Review Corporate Governance Financial Statements Exploration risk There is no assurance that the Group s exploration activities will be successful. Recognising this, the Group continually seeks to manage this risk by managing its funding and financing risk as described above and in particular by bringing farm-in partners who have demonstrable technical skills and experience in similar projects worldwide. The Group has so far been successful with this strategy by introducing to its licences strong industry partners such as BP, Petrobras and PGS. Furthermore, the Group seeks to employ individuals with strong technical skills and experience in the areas in which it operates. This is evidenced by the fact that a number of the Group s Board and Senior Technical team have previously worked both offshore and onshore in Namibia and throughout West and North Africa. Operating risk The nature of oil and gas operations means that the Group is exposed to risks as a result of equipment failure, well blowouts, fire, pollution and bad weather. In order to mitigate these risks the Group ensures that it adopts best in class industry operating and safety standards, it has sufficient levels of relevant insurance cover and it only works with fellow operators and world-class contractors who can demonstrate similar high standards of safety, operating and financial capability. Environmental risk The Group is extremely conscious of the environmental risks that are inherent in the oil and gas industry and in particular those that exist as a result of operating offshore. Given this, the Group works closely with the relevant ministries to ensure that all relevant Environmental Impact Studies are undertaken in advance of any proposed seismic or other offshore operations that are undertaken and that best in class industry environmental standards and practices are adopted by the Group in all of its operations. Furthermore, during seismic acquisition programmes the Group routinely deploys marine mammal observers on vessels who are empowered to stop or modify the seismic programme if they deem necessary. Whilst the Group can never fully mitigate against the cost and implications of future changes in environmental legislation and regulation, its strong working relationship with the governments in the countries that it operates places it in a strong position to be able to work through any potential significant changes that could arise in the future. 29

32 Corporate Governance Report of the Directors (CONTINUED) Key performance indicators The Group has certain Key Performance Indicators ( KPIs ) which seek to align its performance with the interests of its key stakeholders. These KPIs cover share price performance versus peers, management of cash resources and working capital, efficient growth of resource base, conversion of resources to reserves, capital expenditure versus budget and maintaining high HSE standards. Financial instruments Details of the use of financial instruments by the Group are contained in note 19 to the financial statements. Directors The Directors of the Company during the year were: Philip Loader (Non-Executive Chairman) Larry Bottomley (Chief Executive Officer) Mark Reid (Chief Financial Officer) Appointed 19 December 2012 Adonis Pouroulis (Non-Executive Director) George Canjar (Senior Non-Executive Director) Robert Sinclair (Non-Executive Director) Heindrich Ndume (Non-Executive Director) Paul Welch (Chief Executive Officer) Resigned 19 December 2012 James Burgess (Executive Director) Resigned 19 December 2012 Details of Directors interests in shares and share options are disclosed in the Directors Remuneration Report. Directors responsibilities The Directors are responsible for preparing the Directors Report and the financial statements for the Group in accordance with applicable Guernsey law and regulations. Guernsey legislation requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. International Accounting Standard 1 requires that the financial statements present fairly for each financial year the Group s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board s Framework for the preparation and presentation of financial statements. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the Directors to: consistently select and apply appropriate accounting policies; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity s financial position and financial performance; and prepare the financial statements on a going concern basis unless, having assessed the ability of the Group to continue as a going concern, management either intends to liquidate the entity or to cease trading, or have no realistic alternative to do so. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group s website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 30

33 Auditors All of the current Directors have taken all the steps they ought to have taken to make themselves aware of any information needed by the Company s auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware. BDO LLP have expressed their willingness to continue in office and a resolution to re-appoint them as auditors will be proposed at the next general meeting. By order of the Board Robert Sinclair Director 19 March 2013 Overview Business Review Corporate Governance Financial Statements 31

34 FINANCIAL STATEMENTs Independent Auditors Report to the Members of We have audited the financial statements of for the year ended 31 December 2012 which comprise the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of financial position, the consolidated statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by European Union. This report is made solely to the Company s members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, Our audit work is undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the directors and auditor As explained more fully in the Directors Responsibilities Statement within the Directors Report, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing. Those standards require us to comply with the Auditing Practices Board s (APB s) Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non financial information in the Chairman s Statement, Chief Executive s Review, Review of Operations and the Report of Directors to identify material inconsistencies with the audited financial statements. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report. Opinion on the financial statements In our opinion the financial statements: give a true and fair view of the state of the Group s affairs as at 31 December 2012 and of its loss for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion: proper accounting records have not been kept by the Company; or the financial statements are not in agreement with the accounting records; or we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit. BDO LLP 55 Baker Street London W1U 7EU 19 March 2013 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127) 32

35 Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2012 Notes Year ended 31 December 2012 US$000 Ten months ended 31 December 2011 US$000 Share based payments 20 (1,793) (2,382) Impairment of exploration asset 11 (80,853) Other administrative expenses (7,476) (5,554) Total operating expenses (90,122) (7,936) Loss from operations 4 (90,122) (7,936) Finance income 7 1, Finance expense 7 (2,109) Loss for the period before taxation (88,561) (9,159) Tax expense 9 Loss for the period and total comprehensive loss for the period (88,561) (9,159) attributable to equity owners of the parent Loss per ordinary share attributable to the equity holders of the parent basic and diluted 10 US$(0.45) US$(0.05) All amounts relate to continuing activities. The notes on pages 37 to 47 form part of these financial statements. Overview Business Review Corporate Governance Financial Statements 33

36 FINANCIAL STATEMENTs Consolidated Statement of changes in equity for the Year Ended 31 December 2012 Share capital US$000 Share premium US$000 Contributed equity US$000 Share based payment reserve US$000 Foreign exchange reserve US$000 Retained deficit US$000 Total attributable to equity holders of the parent US$000 As at 1 March , , ,278 (1,241) (38,345) 102,705 Total comprehensive loss for the period (9,159) (9,159) Issue of capital , ,005 Issue costs (6,262) (6,262) Share based payments 2,382 2,382 Transfer of reserves due to issue of LTIPS (382) Transfer of reserves due to exercised options (889) 889 As at 31 December , , ,389 (1,241) (46,615) 236,671 Total comprehensive loss for the year (88,561) (88,561) Issue of capital ,450 48,737 Issue costs (1,994) (1,994) Share based payments 1,793 1,793 Transfer of reserves due to issue of LTIPS 14 1,327 (1,341) As at 31 December , , ,841 (1,241) (135,176) 196,646 The following describes the nature and purpose of each reserve within owners equity. Share capital Share premium Contribution equity Share based payments reserve Retained deficit Foreign exchange Reserve Amount subscribed for share capital at nominal value. Amount subscribed for share capital in excess of nominal value. Amount representing equity contributed by the shareholders. Amount representing the cumulative charge recognised under IFRS2 in respect of share options and LTIP schemes. Cumulative net gains and losses recognised in the financial statements. Foreign exchange differences arising on translating into the reporting currency. The notes on pages 37 to 47 form part of these financial statements. 34

37 Consolidated Statement of Financial Position as at 31 December 2012 Notes 31 December 2012 US$ December 2011 US$000 Non-current assets Exploration and appraisal costs ,639 88,889 Property, plant and equipment Total non-current assets 137,521 89,110 Current assets Trade and other receivables 13 2,922 20,465 Inventory 14 7,153 4,678 Cash and cash equivalents 15 68, ,990 Total current assets 78, ,133 Total assets 215, ,243 Current liabilities Trade and other payables 16 19,207 6,572 Total current liabilities 19,207 6,572 Total liabilities 19,207 6,572 Net assets 196, ,671 Capital and reserves attributable to equity holders of the parent Share capital 17 3,758 3,457 Share premium 323, ,885 Contributed equity Share based payment reserve 4,841 4,389 Foreign exchange reserve (1,241) (1,241) Retained deficit (135,176) (46,615) Total equity 196, ,671 The notes on pages 37 to 47 form part of these financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 19 March Overview Business Review Corporate Governance Financial Statements Philip Loader Chairman 35

38 FINANCIAL STATEMENTs Consolidated Cash Flow Statement for the Year Ended 31 December 2012 Year ended 31 December 2012 US$000 Ten months ended 31 December 2011 US$000 Operating activities Loss for the period before taxation (88,561) (9,159) Adjustments for: Finance income (1,561) (886) Finance expense 2,109 Depreciation Gain on sale of property, plant and equipment (5) Share based payments 1,793 2,382 Impairment of exploration asset 80,853 Net cash outflow from operating activities before changes in working capital (7,289) (5,388) Increase in trade and other receivables (1,614) (720) Increase in trade and other payables 1, Increase in inventories (2,475) (4,678) Net cash outflow from operating activities (9,753) (10,439) Investing activities Finance income Payments in respect of property, plant and equipment (848) (19) Farm-in proceeds 33,379 Payments in respect of intangible assets (131,815) (9,324) Proceeds from disposal of property, plant and equipment 30 Net cash outflow used in investing activities (98,399) (8,427) Financing activities Issue of ordinary share capital 48, ,005 Issue costs (1,994) (6,262) Net cash inflow from financing activities 46, ,743 Net (decrease) / increase in cash and cash equivalents in the period (61,409) 121,877 Cash and cash equivalents at start of the period 128,990 9,222 Effect of foreign exchange rate changes on cash and cash equivalent 676 (2,109) Cash and cash equivalents at end of the period 68, ,990 The notes on pages 37 to 47 form part of these financial statements. 36

39 Notes forming part of the financial statements for the year ended 31 December General information is a company incorporated and domiciled in Guernsey with registration number The address of the registered office is PO Box 282, Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3RH. The Group s administrative and head office is in Guernsey. The nature of the Company s operations and its principal activities are set out in the Director s Report and in the Review of Operations. 2 Accounting policies Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations, as issued by the International Accounting Standards Board (IASB), as adopted by the European Union. In accordance with the provisions of section 244 of the Companies (Guernsey) Law, 2008, the Group has chosen to only report the Group s consolidated position hence separate Company only financial statements are not presented. The financial statements are prepared under the historical cost accounting convention on a going concern basis. In the comparative period the Group changed its financial year end for administration purposes from 28 February to 31 December giving rise to a 10 month period. As a result financial information for the income statement and cash flow movements are not directly comparable. Going concern The Directors are of the opinion that the Group has adequate financial resources to enable it to undertake its planned programme of exploration and appraisal activities over the forthcoming twelve months. New Accounting Standards The Group has adopted the following amendment which is effective for the first time this year. The adoption of this amendment has had no material effect on the Group s accounting policies. Overview Business Review Corporate Governance Financial Statements International Accounting Standards (IAS/IFRS) Effective period commencing on or after IAS 12 Amendment Recovery of Underlying Assets 1 January 2012 Certain new standards, amendments to standards and interpretations to existing standards have been published that are mandatory for the Group s accounting periods beginning after 1 January 2013 or later periods to which the Group has decided not to adopt early when early adoption is available. The implementation of these standards and amendments is expected to have no material effect on the Group s accounting policies. These are: International Accounting Standards (IAS/IFRS) Effective period commencing on or after IFRS 7 Amendment Transfer of Financial Asset 1 July 2012 IFRS 1 Amendment Severe hyperinflation and removal of fixed dates 1 July 2012 IAS 1 Amendment Presentation of Items of Other Comprehensive Income 1 July 2012 IFRS 10 Consolidated Financial Statements 1 January 2013 IFRS 11 Joint Arrangements 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 Fair Value Measurement 1 January 2013 IAS 27 Separate Financial Statements 1 January 2013 IAS 28 Investments in Associates and Joint Ventures 1 January 2013 IAS 19 Employee Benefits 1 January 2013 IFRS 7 Amendment Disclosures Offsetting Financial Assets and Financial Liabilities 1 January 2013 IFRS 1 * Amendment Government Loans 1 January 2013 Improvements to IFRS ( Cycle) 1 January 2013 IFRS 10, 11 and 12 * Amendments Transition Guidance 1 January 2013 IFRIC 20 Interpretation Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 IAS 32 Amendment Offsetting Financial Assets and Financial Liabilities 1 January 2014 IFRS 10,12 and IAS 27 * Amendments Investment Entities 1 January 2014 IFRS 9 * Financial Instruments 1 January 2015 * Not yet endorsed by the European Union 37

40 FINANCIAL STATEMENTs Exploration and appraisal costs All expenditure relating to the acquisition, exploration, appraisal and development of oil and gas interests, including an appropriate share of directly attributable overheads, is capitalised within cost pools. The Board regularly reviews the carrying values of each cost pool and writes down capitalised expenditure to levels it considers to be recoverable. Costs pools are determined on the basis of geological principles. The Group currently has five cost pools being Northern, Central and Southern Blocks in Namibia, Mauritania and Morocco. In addition where exploration wells have been drilled, consideration of the drilling results is made for the purposes of impairment of the specific well costs. If the results sufficiently enhance the understanding of the reservoir and its characteristics it may be carried forward when there is an intention to continue exploration and drill further wells on that target. Where farm-in transactions occur which include elements of cash consideration, for amongst other things the re-imbursement of past costs, this cash consideration should be credited to the relevant accounts within the cost pools where the farm in assets were located. Any amounts of farm in cash consideration in excess of the value of the historic costs in the cost pools should be treated as a credit to the Statement of Comprehensive Income. Inventories The Group s share of any material and equipment inventories is accounted for at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Taxation Income tax expense represents the sum of the current tax and deferred tax charge for the period. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that have been enacted or substantially enacted and are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Foreign currencies Transactions in foreign currencies are translated into US Dollars at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into US Dollars at the closing rates at the reporting date and the exchange differences are included in the statement of comprehensive income. The functional and presentational currency of the parent and all group companies is the US Dollar. Property, plant and equipment and depreciation Property, plant and equipment are stated at cost or fair value on acquisition less depreciation and impairment. Depreciation is provided on a straight line basis at rates calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful life. Property, plant and equipment are depreciated using the straight line method over their estimated useful lives over a range of two and a half to five years. The carrying value of property, plant and equipment is assessed annually and any impairment charge is charged to the statement of comprehensive income. Operating Leases Rent paid on operating leases is charged to the statement of comprehensive income statement on a straight line basis over the term of the lease. 38

41 Share based payments Where equity settled share options are awarded to employees or Directors, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated income statement over the remaining vesting period. Where shares already in existence have been given to employees by shareholders, the fair value of the shares transferred is charged to the consolidated statement of comprehensive income and recognised in reserves as Contribution Equity. Basis of consolidation Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ( the Group ) as if they formed a single entity. Intercompany transactions and balances between the group companies are therefore eliminated in full. Financial instruments The Group s financial assets consist of a bank current account or short term deposits at variable interest rates and other receivables. Any interest earned is accrued and classified as finance income. Trade and other receivables are stated initially at fair value and subsequently at amortised cost. The Group s financial liabilities consist of trade and other payables. The trade and other payables are stated initially at fair value and subsequently at amortised cost. Jointly controlled operations Jointly controlled operations are those in which the Group has certain contractual agreements with other participants to engage in joint activities that do not create an entity carrying on a trade or business on its own. The Group includes its share of assets, liabilities, and cash flows in joint arrangements, measured in accordance with the terms of each arrangement, which is usually pro rata to the Group s interest in the jointly controlled operations. The Group conducts its exploration, development and production activities jointly with other companies in this way. Critical accounting estimates and judgements The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. If these estimates and assumptions are significantly over or under stated, this could cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The areas where this could impact the Group are: i. Recoverability of intangible assets Expenditure is capitalised as intangible assets by reference to appropriate cost pools, and is assessed for impairment when circumstances suggest that the carrying amount may exceed its recoverable value. This assessment involves judgement as to: (i) the likely future commerciality of the asset and when such commerciality should be determined; (ii) future revenues and costs pertaining to any asset based on proved plus probable, prospective and contingent resources; and (iii) the discount rate to be applied to such revenues and costs for the purpose of deriving a recoverable value. ii. Treatment of farm-in transactions All farm-in transactions are reflected in these financial statements in line with the accounting policy on Exploration and Appraisal Costs. Farm-in transactions are recognised in the financial statements if they are legally complete during the period under review or, if all key commercial terms are agreed and legal completion is only subject to administrative approvals which are obtained within the post balance sheet period or are expected to be obtained within a reasonable timeframe thereafter. iii. Share based payments In order to calculate the charge for share-based compensation as required by IFRS 2, the Group makes estimates principally relating to the assumptions used in its option-pricing model as set out in note 20. Overview Business Review Corporate Governance Financial Statements 39

42 FINANCIAL STATEMENTs 3 Segmental analysis The Group has two reportable segments being exploration of oil and gas and head office costs. The operating results of each of these segments are regularly reviewed by the Board of Directors in order to make decisions about the allocation of resources and assess their performance. 31 December 2012 Exploration of Oil and Gas US$000 Head Office US$000 Total US$000 Share based payment (1,793) (1,793) Administrative expenses (539) (6,937) (7,476) Impairment of exploration asset (80,853) (80,853) Finance income 1,561 1,561 Loss after taxation (81,392) (7,169) (88,561) Additions to non-current assets 128, ,451 Total assets 146,224 69, ,853 Total liabilities (16,701) (2,506) (19,207) Net assets 129,523 67, , December 2011 Exploration of Oil and Gas US$000 Head Office US$000 Total US$000 Share based payment (2,382) (2,382) Administrative expenses (777) (4,777) (5,554) Net finance expense (1,223) (1,223) Loss after taxation (777) (8,382) (9,159) Additions to non-current assets 15, ,395 Total assets 113, , ,243 Total liabilities (5,105) (1,467) (6,572) Net assets 108, , ,671 4 Loss from operations 31 December December 2011 Loss from operations is stated after charging: Impairment of exploration asset 80,853 Operating lease office rental Depreciation Share based payments share option scheme Share based payments long term incentive scheme 1,456 1,627 Auditors remuneration: Fees payable to the Company s auditors for the audit of the Company s annual accounts Audit of the Company s subsidiaries pursuant to legislation Fees payable to the Company s auditors for the review of the Company s interim accounts 11 Total payable Leases commitments 31 December December 2011 Not later than one year Later than one year and not later than five years 1,754 Total 2, The leases are operating leases in relation to the offices in the UK, Namibia and Mauritania. 40

43 6 Employment costs Employees 31 December December 2011 Wages and salaries 2,924 2,559 Pension costs Share based payments 1,463 1,756 Sub-total 4,554 4,422 Capitalised to exploration costs (1,216) (1,093) Total 3,338 3,329 Key Management Personnel 31 December December 2011 Wages and salaries 1,843 1,416 Pension costs Payments in lieu of notice / Compromise payment 846 Share based payments Sub-total 3,033 2,052 Capitalised to exploration costs (517) (626) Total 2,516 1,426 The Directors are the key management personnel of the Group. Details of the Directors emoluments and interest in shares are shown in the Directors Remuneration Report. 7 Finance income and expense Finance income 31 December December 2011 Bank interest receivable Foreign exchange gain 676 Total 1, Overview Business Review Corporate Governance Financial Statements Finance expense 31 December December 2011 Foreign exchange loss 2,109 Total 2,109 8 Investments The Company s wholly owned subsidiary undertakings at 31 December 2012 and 31 December 2011, excluding dormant entities, were: Subsidiary undertaking Principal activity Country of incorporation Chariot Oil & Gas Investments (Namibia) Limited Holding company Guernsey Chariot Oil & Gas Investments (Mauritania) Limited 1 Oil and gas exploration Guernsey Chariot Oil & Gas Investments (Morocco) Limited 1 Oil and gas exploration Guernsey Chariot Oil & Gas Statistics Limited Service company UK Enigma Oil & Gas Exploration (Proprietary) Limited 2 Oil and gas exploration Namibia 1 Incorporated in the year ended 31 December Indirect shareholding of the Company. 41

44 FINANCIAL STATEMENTs 9 Taxation The Company is tax resident in Guernsey, where corporate profits are taxed at zero per cent. No taxation charge arises in Namibia or Mauritania as the relevant subsidiaries have recorded taxable losses for the year. Factors affecting the tax charge for the current year The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in Guernsey applied to losses for the year are as follows: 31 December December 2011 Tax reconciliation Loss on ordinary activities for the year before tax (88,561) (9,159) Loss on ordinary activities at the standard rate of corporation tax in Guernsey of 0% (31 December 2011: 0%) Difference in tax rates in local jurisdictions at the applicable tax rate (162) (230) of 35% (31 December 2011: 35%) Deferred tax effect not recognised Total taxation charge The Company had tax losses carried forward on which no deferred tax asset is recognised. Deferred tax not recognised in respect of losses carried forward in Namibia total US$1,957,003 (31 December 2011: US$1,563,387). Deferred tax assets were not recognised as there is uncertainty regarding the timing of future profits against which these assets could be utilised. 10 Loss per share The calculation of basic loss per ordinary share is based on a loss of US$88,561,000 (31 December 2011: loss of US$9,159,000) and on 196,527,961 ordinary shares (31 December 2011: 177,122,359), being the weighted average number of ordinary shares in issue during the year. Potentially dilutive options are detailed in note 20, however these do not have any dilutive impact as the Group reported a loss for the year consequently a separate diluted loss per share has not been presented. 11 Exploration and appraisal costs 31 December December 2011 Balance brought forward 88,889 92,661 Additions 128,603 15,376 Farm-in proceeds (19,148) Impairment (80,853) Net book value 136,639 88,889 As at 31 December 2012 the net book values of the five cost pools are Northern Block offshore Namibia US$33.3m (31 December 2011: US$29.4m), Central Block offshore Namibia US$40.8m (31 December 2011: US$27.8m), Southern Block offshore Namibia US$42.0m (31 December 2011: US$31.7m), Mauritania US$20.3m (31 December 2011: US$nil) and Morocco US$0.2m (31 December 2011: US$nil). The impairment is in respect of drilling the Tapir South Well in the Northern Block offshore Namibia. 42

45 12 Property, plant and equipment Fixtures, fittings and equipment 31 December 2012 Fixtures, fittings and equipment 31 December 2011 Cost Brought forward Additions Disposals (87) Carried forward 1, Depreciation Brought forward Charge Disposals (61) Carried forward Net book value Trade and other receivables 31 December December 2011 Other receivables and prepayments 2,922 20,465 US$nil (31 December 2011: US$19,148,000) of the other receivables and prepayments balance relates to back costs to be recovered from a farm-in partner. Overview Business Review Corporate Governance Financial Statements 14 Inventory 31 December December 2011 Wellheads and casing 7,153 4, Cash and cash equivalents 31 December December 2011 Analysis by currency US Dollar 61, ,872 Sterling 6,274 27,072 Namibian Dollar Mauritanian Ouguiya 35 68, ,990 At 31 December 2012 the US Dollar cash balance contains US$10.0m and US$1.0m of cash deposits that are secured against bank guarantees given in respect of work to be carried out respectively on the Mauritanian and Moroccan licences. In March 2013 US$7.5m of the cash secured against the bank guarantee in respect of the Mauritanian licence was approved to be released by the Mauritanian Energy Ministry. 43

46 FINANCIAL STATEMENTs 16 Trade and other payables 31 December December 2011 Trade payables 6,790 2,142 Accruals 12,417 4,430 19,207 6, Share capital 31 December 2012 Number 31 December 2012 Authorised 31 December 2011 Number 31 December 2011 Ordinary shares of 1p each * 400,000,000 7, ,000,000 7, December 2012 Number Allotted, called up and fully paid 31 December December 2011 Number 31 December 2011 Ordinary shares of 1p each 200,641,135 3, ,649,221 3,457 * The authorised and initially allotted and issued share capital on admission (19 May 2008) has been translated at the historic rate of US$:GBP of The shares issued since admission have been translated at the date of issue, or in the case of the LTIP, the date of grant. Details of the ordinary shares issued are in the table below: Date Description Price US$ No of shares 28 February 2011 Opening Balance 144,833,578 7 March 2011 Issue of shares as part of LTIP ,142 1 April 2011 Issue of capital at ,958,376 3 June 2011 Issue of shares as part of LTIP ,000 8 August 2011 Issue of shares as part of LTIP ,000 1 September 2011 Exercise of options at , November 2011 Issue of shares as part of LTIP , December ,649, January 2012 Issue of shares as part of LTIP ,333 6 February 2012 Issue of shares as part of LTIP ,750 7 February 2012 Issue of shares as part of LTIP ,450 9 March 2012 Issue of shares as part of LTIP ,599 9 March 2012 Issue of shares as part of LTIP , March 2012 Issue of shares at 1.70 in Placing ,110, June 2012 Issue of shares as part of LTIP , June 2012 Issue of shares as part of LTIP , July 2012 Issue of shares as part of LTIP , November 2012 Issue of shares as part of LTIP , December ,641,135 44

47 18 Related party transactions Key management personnel comprises the Directors and details of their remuneration are set out in note 6 and the Directors Remuneration Report. Westward Investments Limited is a company where Robert Sinclair is a Director and which is owned by a discretionary trust of which Adonis Pouroulis is one of a number of beneficiaries. During the year ended 31 December 2012 Westward received administrative services from an employee of Chariot for which Westward incurred fees payable to Chariot of US$15,083 (31 December 2011: US$10,088). The amount outstanding as at 31 December 2012 is US$2,559 (31 December 2011: US$983). Benzu Resources Limited, is a company where Adonis Pouroulis is a Director. During the year ended 31 December 2012 Benzu received administrative services from an employee of Chariot for which Benzu incurred fees payable to Chariot of US$15,352 (31 December 2011: US$10,088). The amount outstanding as at 31 December 2012 is US$10,719 (31 December 2011: US$983). Pursuant to an agreement dated 1 October, 2007, Artemis Trustees Limited, a company where Robert Sinclair is a Director and ultimately a shareholder, was appointed by the Company to provide administration secretarial services. In the year ended 31 December 2012 the Company incurred fees relating to these services totalling US$21,789 (31 December 2011: US$92,045). The amount outstanding as at 31 December 2012 is US$Nil (31 December 2011: US$15,816). Pella Ventures Limited, a company of which Robert Sinclair is a Director provided administrative services to Chariot. During the year ended 31 December 2012 the fees payable by the Company totalled US$Nil (31 December 2011 US$159,965). The amount outstanding as at 31 December 2012 is US$Nil (31 December 2011: US$Nil). During the year ended 31 December 2012, Helios Oil and Gas Limited ( Helios ), a company where Adonis Pouroulis is a Director, paid Chariot US$4,759 (31 December 2011 US$97,442) in relation to the reimbursement of costs incurred by Chariot on its behalf. In addition Chariot paid Helios US$143,525 (31 December 2011 US$Nil) in relation to the reimbursement of costs incurred by Helios on its behalf. The amount outstanding from Helios as at 31 December 2012 is US$4,759 (31 December 2011: US$1,188). 19 Financial instruments The Board of Directors determine, as required, the degree to which it is appropriate to use financial instruments or other hedging contracts or techniques to mitigate risk. Throughout the year ending 31 December 2012 no trading in financial instruments was undertaken (31 December 2011 Nil). There is no material difference between the book value and fair value of the Group cash balances, short term receivables and payables. Overview Business Review Corporate Governance Financial Statements Market risk Market risk arises from the Group s use of interest bearing and foreign currency financial instruments. It is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), and foreign exchange rates (currency risk). Throughout the year the Group has held surplus funds on deposit, principally with its main relationship bank Barclays, on fixed short to medium term deposits covering periods of one month to 12 months. The Group does not undertake any form of speculation on long term interest rates or currency movements, therefore it manages market risk by maintaining a short term investment horizon and placing funds on deposit to optimise short term yields where possible, but moreover to ensure that it always has sufficient cash resources to meet payables and other working capital requirements when necessary. As such market risk is not viewed as a significant risk to the Group. The Directors have not disclosed the impact of interest rate sensitivity analysis on the Group s financial assets and liabilities at the year end as the risk is not deemed to be material. Currency risk The Group has very limited currency risk in respect of items denominated in foreign currencies. Currency risk comprises of transactional exposure in respect of operating costs and capital expenditure incurred in currencies other than the functional currency of operations. This transactional risk is managed by the Group holding the majority of its funds in US Dollars to recognise that US Dollars is the trading currency of the industry, with an appropriate balance maintained in Sterling, Namibian Dollars and Mauritanian Ouguiya to meet other non-us Dollar industry costs and ongoing corporate and overhead commitments. At the year end, the Group had cash balances of US$68.3m (31 December 2011: US$129.0m) as detailed in note 15. Other than the non-us Dollar cash balances described in note 15, no other financial instrument is denominated in a currency other than US Dollars. A 10% adverse movement in exchange rates would lead to a foreign exchange loss of US$641,000, and a 10% favourable movement in exchange rates would lead to a corresponding gain, the effect on net assets would be the same as the effect on profits (31 December 2011 US$2,712,500). Capital In managing its capital, the Group s primary objective is to maintain a sufficient funding base to enable it to meet its working capital and strategic investment needs. The Group currently holds sufficient capital to meet its ongoing needs for at least the next 12 months. 45

48 FINANCIAL STATEMENTs Liquidity risk The Group s practice is to regularly review cash needs and to place excess funds on fixed term deposits for periods not exceeding 12 months with institutions that are rated no lower than A by Standard and Poor s. This process enables the Group to optimise the yield on its cash resources whilst ensuring that it always has sufficient liquidity to meet payables and other working capital requirements when these become due. The Group has sufficient funds to continue operations for the forthcoming year and has no perceived liquidity risk. Credit risk The Group s policy is to perform appropriate due diligence on any party with whom it intends to enter into a contractual arrangement. Where this involves credit risk, the Company will put in place measures that it has assessed as prudent to mitigate the risk of default by the other party. This would consist of instruments such as bank guarantees and letters of credit or charges over assets. A Group company currently acts as Operator in a Joint Venture relationship on one of the Group s licences and therefore from time to time is owed money from its Joint Venture partner. The Joint Venture partner, which has a 10% interest in the Licence, is an entity which is 48% owned by one of the world s largest and most financially robust seismic and geoscience companies. As such the Group has not put in place any particular Credit Risk measures in this instance as the Directors view the risk of default on any payments due from the Joint Venture partner as being very low. 20 Share based payments Share Option Scheme During the year, the Company operated the Chariot Oil & Gas Share Option Plan ( Share Option Scheme ). The Company recognised total expenses (all of which related to equity settled share-based payment transactions) under the plan of: 31 December December 2011 Share Option Scheme The options expire if they remain unexercised after the exercise period has lapsed. For options valued using the Black-Scholes model there are no market performance conditions or other vesting conditions attributed to the options. The following table sets out details of all outstanding options granted under the Share Option Scheme. 31 December 2012 Number of Options 31 December 2011 Number of Options Outstanding at beginning of period 5,400,000 5,650,000 Granted during the period 250,000 Exercised during the period (500,000) Outstanding at the end of the period 5,400,000 5,400,000 Exercisable at the end of the period 5,150,000 3,650,000 The range of the exercise price of share options exercisable at the year-end falls between US$0.40 (25p) US$2.09 (130p) (2011 US$0.42 (26p) US$2.09 (130p)). The estimated fair values of options which fall under IFRS 2, and the inputs used in the Black-Scholes model to calculate those fair values are as follows: Date of grant Estimated fair value Share price Exercise price Expected volatility Expected life Risk free rate Expected dividend 27 March % 10 years 4.94% 0% 13 November % 5 years 4.3% 0% 15 January % 5 years 4.3% 0% 1 June % 5 years 4.3% 0% 17 August % 5 years 4.3% 0% 1 September % 5 years 4.3% 0% Expected volatility was determined by calculating the annualised standard deviation of the daily changes in the share price. Long term incentive scheme ( LTIP ) The Plan provides for the awarding of shares to employees for nil consideration. The award will lapse if an employee leaves employment. The shares will vest in equal instalments over a three year period. The Group recognised a charge under the plan for the year to 31 December 2012 of US$1,456,000 (31 December 2011: US$1,627,000). 46

49 The following table sets out details of all outstanding share awards under the LTIP: 31 December 2012 Number of awards 31 December 2011 Number of awards Outstanding at beginning of period 1,867,327 1,674,094 Granted during the period 5,347, ,100 Shares issued for no consideration during the period (881,514) (357,267) Lapsed during the period (68,000) (3,600) Outstanding at the end of the period 6,265,174 1,867,327 Exercisable at the end of the period 130, , Contingent liabilities From the 30 December 2011 the Namibian tax authorities introduced a withholding tax of 25% on all services provided by non- Namibian entities which are received and paid for by Namibian residents. As at 31 December 2012, based upon independent legal and tax opinions, the Group has no withholding tax liability. Any subsequent exposure to Namibian withholding tax will be determined by how the relevant legislation evolves in the future and the contracting strategy of the Group, in licences where it operates, and the contracting strategy of its partners, in licences where it does not operate. Overview Business Review Corporate Governance Financial Statements 47

50 Advisers Registered Office PO Box 282 Regency Court Glategny Esplanade St Peter Port Guernsey GY1 3RH Channel Islands Registration Number Nominated Adviser and Joint Broker RBC Europe Limited Thames Court One Queenhithe London EC4V 4DE United Kingdom Joint Broker Jefferies International Ltd Vintners Place 68 Upper Thames Street London EC4V 3BJ United Kingdom Bankers Barclays Bank Plc. PO Box 41 Le Marchant House Le Truchot St Peter Port Guernsey GY1 3BE Channel Islands Auditors BDO LLP 55 Baker Street London W1U 7EU United Kingdom Financial Public Relations Adviser FTI Consulting Holborn Gate 26 Southampton Buildings London WC2A 1PB United Kingdom Legal Advisers As to British Law Memery Crystal LLP 44 Southampton Buildings London WC2A 1AP United Kingdom As to Namibian Law Lorentz Angula Inc. Windhoek 3rd floor LA Chambers Ausspann Plaza Windhoek Namibia As to Guernsey Law Babbé PO Box Smith Street St Peter Port Guernsey GY1 4BL Channel Islands As to Moroccan and Mauritanian Law Allen & Overy Twin Center Tour A 7th floor Corner of Boulevard Zerktouni and Massira Al Khadra Casablanca Morocco Company Secretary International Administration Group (Guernsey) Limited PO Box 282 Regency Court Glategny Esplanade St Peter Port Guernsey GY1 3RH Channel Islands Registrars and Receiving Agents Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom 48

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52 Registered Offce: PO Box 282 Regency Court Glategny Esplanade St Peter Port Guernsey GY1 3RH Channel Islands