GROWTH THROUGH EXPLORATION

Transcription

1 GROWTH THROUGH EXPLORATION C R O O D NN R OR ND CCO N Annual Report and Accounts

2 INTRODUCTION FRO C O O R ON DURING AND POST PERIOD Under a new Executive Management Team, this year has seen significant technical and strategic developments and we have made substantial progress in the evaluation of the prospectivity of our assets. There has been a shift in focus towards mitigated risk and capital discipline, the framework of which has seen Chariot successfully diversify its portfolio into a new, highly prospective frontier province offshore Brazil and secure a partner in the seismic phase of exploration offshore Mauritania. We have managed our portfolio in a way which will enable us to capitalise on a lower risk, fast follower positioning, aspiring to zero cost exploration and allowing for optimum target maturation prior to drilling. Chariot has a strong balance sheet and is able to fund all of its commitments and work programmes beyond We look forward to the year ahead, where partnering for drilling will be key for the testing of our assets through the drill bit. RR O O Chief ecutive Officer EMERGING REGION MOROCCO OF D N R R D 11,000km of legacy 2D data across all licences reprocessed and interpreted OR FO O N N Licence extensions secured for Loukos and Casablanca / Safi C D C N D Casablanca / Safi relinquished following extended technical evaluation; election to enter into First Renewal Phase, Loukos C NC N D Mohammedia Reconnaissance licence signed, encompassing further potential identified in Rabat Deep and Loukos R N R N N D Seismic partnering process initiated ESTABLISHED REGION MAURITANIA C C ON ND ROC N Completion of 3,500km 2 3D seismic acquisition and processing in Block C-19 R D R N R N Seismic farm-out completed with Cairn Energy Plc ( Cairn ) with Chariot retaining 55% equity and operatorship of Block C-19, recovering most back costs COR OR HIGHLIGHTS DURING AND POST PERIOD US$26m RECEIVED US$26m received following Mauritanian Government approvals on Cairn s farm-in US$56.7m YEAR END CASH BALANCE Fully funded for all current commitments through to the end of 2015 with a cash position of US$56.7m at 31 December 2013

3 FRONTIER REGION NAMIBIA FAST FOLLOWER POSITIONING Licence extensions obtained for Southern Block 2714A and Central Blocks NEW LICENCE GRANTED New licence granted for Southern Block 2714B, recouping all of the original licence area in a new First Exploration Phase, until 31 May 2017 APPLICATION OF TECHNOLOGY Principal Prospect B prioritised in Central Blocks: 469mmbbls gross mean prospective oil resource with 22% chance of geologic success significant follow on potential in multiple fairways in the success case PARTNERING INITIATED Partnering process initiated in Central Blocks 2D SEISMIC COMPLETED Completion of 2,128km 2D seismic 2714B, fulfilling all commitments BOARD STRENGTHENED with the appointment of George Canjar as Non-Executive Chairman; Matthew Taylor as Technical Director; Bill Trojan and Dave Bodecott as Non-Executive Directors FRONTIER REGION BRAZIL RISK DIVERSIFICATION Broadened Atlantic margins portfolio through successful bids on four offshore exploration blocks in the frontier Barreirinhas Basin EIA COMMENCED Commenced Environmental Impact Assessment ( EIA ) work to prepare for D seismic acquisition CONTENTS STRATEGIC REPORT At a Glance 02 Our Strategy 03 Investment Case: Why Chariot? 04 The Portfolio Theme 06 Chairman s Statement 08 Chief Executive Officer s Review 10 Chief Financial Officer s Review 14 Operations Overview 16 OPERATIONS Morocco 18 Mauritania 20 Namibia 22 Brazil 24 Risk Management 26 Corporate Social Responsibility 28 GOVERNANCE Board of Directors 30 Senior Management Team 32 Directors Remuneration Report 34 Corporate Governance Statement 37 Report of the Directors 38 FINANCIAL STATEMENTS Independent Auditor s Report to the 40 Members of Consolidated Statement 41 of Comprehensive Income Consolidated Statement 42 of Changes in Equity Consolidated Statement 43 of Financial Position Consolidated Cash Flow Statement 44 Notes Forming Part of the 45 Financial Statements Advisors 58 STRATEGIC REPORT OPERATIONS GOVERNANCE FINANCIAL STATEMENTS Annual Report and Accounts

4 STRATEGIC REPORT AT A GLANCE WHERE WE OPERATE Chariot is an independent AIM-listed Atlantic margins oil and gas exploration company with the goal of discovering material accumulations of hydrocarbons in order to deliver transformational value. Over the last 18 months it has diversified its portfolio to encompass the giant potential, underexplored deepwater offshore Morocco, Mauritania, Namibia and Brazil which opens the Company up to a range of risk and maturity across each of its assets. 31 countries with operator exploration experience within the Chariot team 11 countries with operator development and production experience within the Chariot team 200+ Over 200 years of combined experience in exploration, development and production 40+ The team has participated in over 40 discoveries, with 14 major discoveries GIANT POTENTIAL WITH A BALANCE OF RISK AND EXPLORATION MATURITY BRAZIL Giant lead potential p24 Frontier region MOROCCO Prospective resources 568mmbbls+ 517bcf + * Emerging region p18 MAURITANIA Prospective resources 500mmbbls+ * Established region p20 NAMIBIA Prospective resources 1.5bnbbls+ * Frontier region p22 p16 See the Operations Overview for more detail * gross mean prospective resources, based on 2D (leads) and 3D (prospects) data respectively 02 Annual Report and Accounts 2013

5 OUR STRATEGY GROWTH THROUGH EXPLORATION STRATEGIC REPORT GOAL Chariot s goal is to create transformational stakeholder value through the discovery of material accumulations of hydrocarbons. STRATEGY Execute the programme on our current acreage on an accelerated basis Access new exploration opportunities to grow using capital discipline Maintain portfolio diversity and management Carry out exploration and drilling programme on existing portfolio Identify and acquire exploration opportunities in new and emerging basins Undertake levered partnering at investment phases of the exploration programme Mature additional leads and prospects to ready-to-drill status Create transformational shareholder value by the early monetisation of discoveries Take operated positions in the early phases to maintain control over destiny Leverage exploration expertise and industry reputation Positioning the portfolio as a fast follower Implement risk management systems throughout the development of the portfolio STRATEGY PILLARS New team Underpinned by a drive for risk management whilst implementing the work programme A new Executive Management Team and additional technical Board members focused on delivering the Company goal Risk diversification and balancing of the portfolio Two tier partnering process with farm-out at all phases of significant investment Application of technology and portfolio management Fast follower, operated positioning in frontier basins Funded through to 2015 A cash position of US$56.7m at 31 December 2013 DELIVERING ON OUR STRATEGY: ACHIEVEMENTS 2013 TO DATE 2013 Q1 Q2 Q3 Q4 New management team 3,500km 2 3D seismic acquisition completed, Mauritania Successful bids on licences in Barreirinhas Basin, offshore Brazil Licence extensions offshore Namibia and Morocco to incorporate third party drilling activity into evaluation of portfolio New licence granted offshore Namibia (2714B) following third party drilling campaign allowing the Company to investigate the shallower petroleum system potential Seismic farm-out with Cairn (35%) on Block C-19, Mauritania all back costs received rospect identified as priority drilling prospect, Central Blocks, Namibia 469mmbbls of gross mean prospective resource of oil potential, 22% CoS Data room opened for partnering process, Central Blocks 11,000km 2D seismic interpretation completed Morocco: Casablanca / Safi relinquished, entry into First Renewal Phase on Loukos Commencement of 2D seismic in Block 2714B, Namibia 2014 Q1 Completion of 2D seismic Block 2714B, Namibia Mohammedia Reconnaissance licence acquired offshore Morocco, encompassing extended Jurassic and Pliocence potential identified in Loukos and Rabat Deep Bill Trojan and Dave Bodecott joined the Board as Non-Executive Directors Matthew Taylor joined the Board as Technical Director Annual Report and Accounts

6 STRATEGIC REPORT INVESTMENT CASE: WHY CHARIOT? A PIPELINE OF DRILLING OPPORTUNITIES FOR LONG TERM SUSTAINABLE GROWTH Chariot represents an opportunity to invest in the underexplored but highly prospective regions of the Atlantic margins that sit outside of the traditional, more densely explored parts of the fairway. With its assets in frontier, emerging and established hydrocarbon provinces, Chariot has balanced its risk profile and secured acreage in areas that have established petroleum systems with the potential to hold giant discoveries. Through careful management, expert technical evaluation and a maintained capital discipline, the Company has the ability to sustain regular drilling activity in the coming years with the opportunity for ongoing growth and long term value creation. Diversified risk 8 licence regions Giant potential 2bnbbls+ gross mean prospective resources Highly experienced Board, management and operational team PORTFOLIO High quality, high potential, large scale opportunities Eight licence regions, of which Chariot is operator in all but one Total resource exposure of 2bnbbls+ in prospects and leads slated for drilling Exposure to Morocco, Mauritania, Namibia and Brazil, chasing 500mmbbls+ prospects and leads with transformational potential TEAM Underpinned by an exceptional team focused on risk management New Executive Management Team with a refocusing of the strategy on risk management Top quality geotechnical team, exemplified in Cairn farm-out Zero cost exploration aspiration and capital discipline underpins all activity VALUE CREATION Near term value add opportunities Commitments and planned work programme fully funded Key catalysts: 2014: Partnering in all regions 2015: Drilling Multiple opportunities for closeology impact with numerous third party drilling campaigns p16 OUR OPERATIONS p32 OUR TEAM FUTURE FOCUS 2014 Debt free with all contractual commitments fully funded through to the end of ,700km 2 3D seismic campaign to kick off in Morocco (Q2 2014) Seismic partnering process to continue on Morocco and commence on Brazil (Q4 2014) Analysis of 2D data offshore 2714B, Namibia, to determine design of 3D seismic programme (Q4 2014) Forward programme for 2714A, Namibia, to be confirmed with partners Petrobras and BP Drilling partnering process to continue on Central Blocks, Namibia, and commence on C-19, Mauritania (Q2 2014) and Northern Blocks, Namibia (post third party drilling) A steady pipeline of drill ready prospects: Namibia now; Mauritania in Q2 2014; Morocco in 2015; and Brazil in This provides the Company with the option, subject to partnering, to drill one well per year for the foreseeable future 04 Annual Report and Accounts 2013

7 STRATEGIC ADVANTAGE IN GIANT POTENTIAL REGIONS STRATEGIC REPORT Using its portfolio management and long licence terms, Chariot has been able to take advantage of growing industry interest in the highly prospective regions in which it holds acreage and to strategically position itself as a fast follower rather than a play opener. 6 1 At the same time as using its own technical evaluation, the team has been able to benefit from information provided by increased third party drilling activity in region. This allows it to identify and further mature prospects within proven petroleum systems and to better understand new and unproven plays. With up to 15 wells being drilled in the next two years, Chariot will be able to de-risk its assets and guard its capital for drilling these giant potential frontier regions with an improved chance of success Morocco 2 Third party drilling planned for the year ahead Play Openers Fast Followers 2003 September 2011 February 2011 December 2012 May 2012 August 2012 October 2012 December 2013 January 2013 July 2013 October 1. Repsol 2. Teredo 3. Kosmos Energy 4. Genel Energy 5. Cairn Energy 6. Chariot Oil & Gas 7. Galp Energia 8. Chevron 9. Freeport McMoRan 3. BP (Farm-in to Kosmos acreage) FAST FOLLOWER POSITIONING: LOW COST ACCESS, GIANT UPSIDE POTENTIAL IN DE-RISKED FRONTIER REGIONS Lifecycle of the value drivers and risks in a typical basin Chariot Positioning Value potential Cumulative reserve Access cost Risk Play Openers Fast Followers Gatherers Niche Annual Report and Accounts

8 STRATEGIC REPORT THE PORTFOLIO THEME Chariot s focus on the Atlantic margins allows it to benefit from comparative studies of the conjugate margins of our portfolio. The development of the North, South and Central Atlantic margins share similar geological histories, with the exact timing and nature of sedimentation impacting upon the key components of the petroleum systems in each. MOROCCO / MAURITANIA p18 p20 For more information Late Jurassic Nova Scotia Reserve 4TCF and associated liquids Panuke Deep (Encana) Sable (ExxonMobil, Shell) BP and Shell have committed US$2bn to deepwater exploration The opening of the Central Atlantic and the development of the Mauritanian and Moroccan margins commenced in the Triassic with the separation of Africa from the Iberian and North American plates. Triassic salt was deposited in this area, followed by the deposition of a carbonate shelf during the Jurassic and a switch to NAMIBIA p22 For more information Early Cretaceous Uruguay BP, BG, Total, Tullow, Petrobras, YPF Round II deepwater exploration commitment US$1.56bn The South Atlantic was born in the Early Cretaceous with the asymmetric breakup of Africa and South America. This led to passive margin clastic deposition throughout the Cretaceous and Tertiary offshore Namibia and Uruguay. These margins are to BRAZIL p24 For more information Mid Cretaceous Brazil Barreirinhas Subsequent rifting through the Middle Cretaceous allowed for the complete opening of the Atlantic Ocean in the present day Equatorial regions and creation of sedimentary basins in Equatorial Brazil and Ghana. Recent success in the Upper Cretaceous marine 06 Annual Report and Accounts 2013

9 Discoveries Exploration targets CHARIOT S PORTFOLIO EMERGING AND ESTABLISHED BASINS MOROCCO AND MAURITANIA STRATEGIC REPORT Morocco / Mauritania siliciclastic deposition in the Cretaceous. Together these set up the key petroleum systems elements (source, reservoir and seal) along with a means to develop structural traps via rift block faulting and the movement of salt. Exploration of these plays is progressing in Nova Scotia, Morocco and Mauritania (note the US Atlantic margin is subject to a drilling moratorium). Morocco and Mauritania lie in the Central Atlantic which rifted in the Triassic and became established as a passive margin in the Jurassic. As a consequence of this common geological development, these countries have similar petroleum systems with potential in the Jurassic carbonate platform and in the subsequent Cretaceous and Tertiary-aged deepwater turbidite systems. The region has become an area of increasing industry interest over the last few years, in part due to the successes on the conjugate margin in Nova Scotia. The Company s success in securing acreage in Morocco and Mauritania highlights Chariot s capability to recognise potential ahead of the industry as an early entrant. Chariot has also been able to shift its positioning to that of a fast follower due to this heightened industry activity which offers additional risk management and mitigation. Namibia FRONTIER BASINS NAMIBIA AND BRAZIL Namibia and the Barreirinhas region of Brazil are both considered frontier basins in the context of their highly underexplored status. the south of the salt basins and significant investment in exploration is now being focused on both the syn-rift Early Cretaceous play (e.g. Kudu field) and drift phase plays of the Late Cretaceous. Ghana Jubilee 370mmbbls TEN mmbbls Both areas lie within the South Atlantic but not within the Aptian Salt Basin which has been relatively intensely explored. In the absence of salt, structural trap development is limited and so these parts of the South Atlantic have seen comparatively little exploration. Nevertheless enough wells have been drilled to demonstrate that world class source rocks and excellent Cretaceous-aged deepwater turbidite reservoir rocks are present. With the availability of high quality 3D seismic, operators prepared to invest in large 3D surveys can identify the stratigraphic traps which were effectively invisible to the industry in the past. Offshore Namibia, recent exploration well information has heightened industry interest and de-risked prospectivity in the region. In Brazil, the Barreirinhas Basin saw significant industry competition in Round 11 (2013) because this region is conjugate to Ghana, where the giant Jubilee and TEN discoveries have been made in the same play systems that Chariot and other industry players are targeting. play systems in Ghana (e.g. Jubilee field) have attracted significant interest in the equivalent section of the Barreirinhas Basin and other equatorial basins in Brazil. Annual Report and Accounts

10 STRATEGIC REPORT CHAIRMAN S STATEMENT Over the course of the last year, Chariot has made fundamental changes to the core of its business strategy and Executive Management Team. The Company s primary goal remains the same and it continues to develop its portfolio towards the discovery of material accumulations of hydrocarbons. The path to delivery of that goal has been further protected by an increased focus on capital discipline and risk management. This is underpinned by a focus on portfolio balance, optimisation of early positioning, efficient investment recovery and targeted partnering leverage that will enable Chariot to execute its ongoing exploration programme. As a result, the Company is now driven by a long term, sustainable business model that will retain considerable upside for shareholders, at the same time as balancing risk through committed portfolio diversification. Strategic positioning within the Atlantic margins ortfolio diversification Over the course of the last 18 months, Chariot has diversified its Namibian focus towards a broader Atlantic margins theme, with the portfolio now spread across the established, emerging and frontier provinces of Namibia, Mauritania, Morocco and, more recently, the Barreirinhas Basin offshore Brazil. These regions are underexplored, with high volume prospectivity already identified. The potential exists not only in locally proven play types but also in significant analogue discoveries on the corresponding conjugate margins. Examples include recent Nova Scotia discoveries comparative with offshore Morocco and the producing Jubilee project offshore Ghana relative to the Company s Brazilian acreage. As a result, Chariot now has a wider collection of opportunities covering a range of geographies and exploration maturity within its portfolio. This balance provides a solid platform for a sustained growth rate combined with a high level of optionality as the programme progresses. Fast follower In line with the Company s strategy, Chariot s in-house team acquired and operated large equity positions in these underexplored, highly prospective regions at low cost with minimal commitment. During the course of 2013, the Company used this early entrant vantage point to reposition itself from being a play opener to that of a fast follower. This meant that, using its re-awarded and extended licence periods in Namibia and its long exploration permits offshore Morocco, Mauritania and Brazil, it could combine its proprietary data with that of the information from growing third party activity in close proximity to work up optimum prospects for drilling. This ensures that, in these underexplored regions, stakeholders are exposed to the highest chance of success with a lower capital expenditure and better risk mitigation. There has been a notable growth of industry interest within the regions in which Chariot holds acreage over the last year and, with numerous drilling campaigns planned for the year ahead, the Company will seek to continue to profit from this strategic positioning going forward. 08 Annual Report and Accounts 2013

11 STRATEGIC REPORT Leveraged partnering, capital discipline and portfolio management In addition to positioning itself as a fast follower, the Company has also focused its strategy on delivering leveraged partnerships to reduce risk and cost exposure and to accelerate its work programmes. The key benefits of partnering are not only to share in the costs and risk of exploration, and to benefit from the experiences and alternate viewpoint that partners bring, but also to provide critical third party validation to the asset. Through the farm-out of Block C-19, Mauritania, to Cairn, as announced in August 2013, the Company recovered the costs of its 3,500km 2 3D seismic campaign as well as a share of other back costs. This means that Chariot now holds a 55% interest in a transformational opportunity that it continues to operate. This zero cost exploration aspiration exemplifies the Company s shift of focus to capital discipline. Using the abilities of its technical team, it will continue to develop its opportunities to the standard sought by the key industry players in order to partner across the portfolio. In addition, the Company continually evaluates an opportunity s risk versus value at each stage of its development, ensuring that the portfolio is managed in line with its potential to deliver transformational growth. Governance Behind the adjustment of the Company s strategic outlook has been a new Executive Management Team and a significantly strengthened Board. We were disappointed to lose Philip Loader in June 2013 owing to the requirements of his new position at Woodside Petroleum Ltd. We thank him for his contribution to the Company s development and we wish him the best in his future ventures. It was at this time that I moved from being Senior Independent Non-Executive Director to become Non-Executive Chairman. I welcomed the opportunity to be more directly involved in working with the exemplary management and exceptional technical staff. I look forward to working with all stakeholders to deliver the clear potential of Chariot s portfolio and reach its goal of transformational growth. In June 2013 we also welcomed Matthew Taylor, who had been Director of Exploration of the Company for four years, to the Board as Technical Director, joining Mark Reid (CFO) and Larry Bottomley (CEO) to make up the Executive Management Team. Matthew has over 30 years of experience in the exploration and production sector and has and continues to provide invaluable understanding and knowledge of the portfolio and the geological make-up of the regions in which we work. Post period, in February 2014, we welcomed geologists Bill Trojan and Dave Bodecott to the Board, both of whom have significant industry experience and whose independent insight will further enhance the Board s decision-making and strategic planning. In addition, their in-depth knowledge specific to the regions where we hold acreage, combined with their considerable experience in exploration projects, will prove invaluable to the ongoing development and maturation of the Company s portfolio. As a result of this evolution, we believe that a good balance of corporate focused and technically minded contributors to the Board has been achieved and will continue to drive the Company towards delivering shareholder value. Regional relationships Building and maintaining strong relationships within the countries where we work is of the utmost importance to Chariot. Throughout the year we have held regular technical and operating meetings with the state oil companies, relevant ministries and service companies within each of the regions in which we hold acreage. This ensures that all parties involved in our operations are kept aware of our plans and progress. The value implication of this can be seen through the licence extensions that the Company obtained offshore Namibia and Morocco in H1 of In sharing the Company s development and technical progress within each of its licences, it was able to secure and extend potentially valuable contract areas with the support of the appropriate governing bodies. This ensured that in collaboration with our partners, Chariot can optimally mature the assets prior to entering the next phase of exploration. We would like to thank the Governments and Energy Ministries of Morocco, Mauritania, Namibia and Brazil for their continued support and cooperation as well as the state oil companies with which we are partnered ONHYM, SMH and NAMCOR for their ongoing technical insight and collaboration. Conclusion The last year has seen some important changes to Chariot s Executive Management and structure with a shift in the strategy towards more active portfolio risk management and capital discipline. Chariot has rebuilt its foundations to sustain regular drilling activity in the coming years, giving its stakeholders the opportunity for ongoing growth and long term value creation. Using this strength, the heightened industry interest in our assets and our continued technical excellence, we look forward to securing partnerships that will enable the Company to test its prospects with the drill bit. All of Chariot s commitments are fully funded beyond 2014 and we will continue to pursue our zero cost exploration ambition to drive the Company forward. GEORGE CANJAR Chairman 18 March 2014 Annual Report and Accounts

12 STRATEGIC REPORT CHIEF EXECUTIVE OFFICER S REVIEW Chariot is an exploration company that seeks transformational growth through the discovery of material hydrocarbon accumulations for the benefit of all stakeholders. Since joining the Company in 2011, I have worked with the team to develop a diversified and balanced portfolio of highly prospective opportunities and the Company now holds acreage that has a range of risk and maturity. In order for this to be realised, we have developed an in-house skillset that has demonstrated the ability to identify and mature assets. We have the capacity to describe our assets for the purpose of securing partners who will provide funding, additional technical insight and validation in carrying the prospects through to drilling. Chariot has a track record for securing leveraged partnerships and we are focused on delivering partners to see our prospectivity tested across the portfolio. Technical developments As well as the strategic developments that the Company has built on over the last year it has also made significant advances in its technical analysis in all of its regions of interest. Further to adding another new venture to the portfolio offshore Brazil, a substantial amount of data has been acquired, processed and interpreted during the course of this year which has enhanced the Company s understanding of its assets and developed the case for further exploration development. Concurrent to this, the Company has leveraged its strong relationships for data sharing and has been able to integrate the information from third party activity into the understanding of its portfolio. In combining this additional insight into our own database we have been able to maximise the value associated with our assets in order to provide the best description of our acreage for obtaining partnerships to carry the programme forward. 10 Annual Report and Accounts 2013

13 CHARIOT S ABILITY TO IDENTIFY AND ACCESS HIGH QUALITY, HIGH POTENTIAL ACREAGE HAS BEEN EXEMPLIFIED IN THE LAST 18 MONTHS, WITH MAJORS AND LARGE INDEPENDENTS ESTABLISHING ACREAGE POSITIONS IN THE REGIONS IN WHICH CHARIOT OPERATES. 15 Up to 15 third party wells will be drilled during the course of the next two years 55% The Company now holds a 55%, near zero cost operated position in Mauritania, with 3,500km 2 of 3D proprietary data STRATEGIC REPORT Growing industry interest hot acreage Chariot s ability to identify and access high quality, high potential acreage has been e emplified in the last months with majors and large independents establishing acreage positions in the regions in which Chariot operates. This not only validates the team s capabilities and the prospectivity associated with the regions but also provides multiple value triggers with up to 15 third party wells being drilled during the course of the next two years. Within the portfolio, Chariot has identified a variety of play fairways, both proven and new. This increased third party drilling activity will test some of these plays, allowing Chariot to identify and further its understanding on the working of the petroleum systems without having to test through the drill bit. This will support Chariot in targeting those prospects that it has de-risked as far as possible within the proven play systems and allow for a further understanding of the new and unproven plays. The potential read-through that this may provide ensures that Chariot guards its capital for drilling these higher risk opportunities as a fast follower with an improved chance of success. Partnering the key to drilling It is the quality of the assets and the technical analysis that will be the key driver towards gaining a partner for drilling in the coming year. It is through this partnering that Chariot aims to validate the potential of its assets, improve the quality of the technical description through the contributions of these partners and fund its drilling activities, and we will not look to drill without this endorsement from within the industry. With leveraged partnering being fundamental to the Company s business, it has spent a significant amount of time analysing this process and over the course of the last year has developed its partnering strategy to that of a two-tier process. Going forward, the Company will look to partner firstly during the 3D seismic phase and secondly for drilling. This should reduce the Company s risk and cost exposure but not limit the opportunity for transformational growth as Chariot has entered each of its licences with significant equity interest and operatorship. As a consequence, the Company will retain significant equity in the licences at the exploration drilling phase. This has been implemented offshore Mauritania where the team successfully partnered with Cairn at the seismic level, as announced in August The Company now holds a 55%, near zero cost operated position in country, with 3,500km 2 of 3D proprietary data. A second tier partnering process to secure an additional partner and help fund drilling is anticipated to commence in Q2 2014, following the interpretation of the 3D data, at which point an audited resource update is expected to be released. Highlights ignificant amount of data evaluated and integrated into portfolio, maturing drillable prospects Good neighbours in region indicate high quality potential Increased third party activity will allow for de-risking of Chariot assets prior to testing with the drill bit Leveraged partnering to reduce Company s risk exposure without diminishing opportunity for transformational growth Highly capable team with ability to identify prospective acreage ahead of the industry Annual Report and Accounts

14 STRATEGIC REPORT CHIEF EXECUTIVE OFFICER S REVIEW (continued) During the course of 2014 the Company has initiated first tier partnering based on legacy 2D data on its Moroccan acreage and will look to commence this process for its Brazilian acreage in Q A 3D seismic programme will be initiated during or shortly after these processes, which, once interpreted and drilling prospects are identified, will be used for the purpose of securing partners for drilling in a second tier partnering process, anticipated to commence in In terms of partnering offshore Namibia, in the Central Blocks the Company is currently undergoing a process based on its 3D data interpretation and information from third party drilling and the market will be updated with its progress as appropriate. In its Northern Blocks, the Zamba prospect has been identified as a priority drilling target. In line with its strategy of leveraging third party information at no cost, the Company will await the implications of third party drilling due in Q2 2014, which should indicate the possibility for long range hydrocarbon migration, prior to deciding on its ongoing activity on the licence. Other upcoming activity As well as these partnering processes, the Company will continue its own in-house technical evaluation of its assets at the same time as integrating crucial information that will be provided in the numerous third party drilling programmes in close proximity to its acreage. This will include: The acquiring and processing of 1,700km 2 of 3D seismic offshore Morocco. Part of this survey will further the understanding of the Mio-Pliocene and Jurassic play potential in Loukos and Mohammedia Reconnaissance and the remainder will focus on the Jurassic carbonate play in Rabat Deep where a prospect is already defined and the 3D data is primarily intended to optimally locate a well The final PSDM interpretation of the 3,500km 2 seismic data offshore Mauritania in order to mature prospects for drilling in Block C-19 The processing and interpretation of 2,128km of 2D seismic in Block 2714B, Namibia to identify key areas of interest for a future 3D seismic programme The completion of the EIA process offshore Brazil which will be followed by an 800km 2 3D seismic programme In terms of third party drilling and implications during the course of 2014/2015: The Pliocene, Jurassic and Early Cretaceous plays will be tested offshore Morocco in more than ten wells Five wells will test the slope fan, stratigraphic trap and turbidite channel plays offshore Mauritania The deeper petroleum system and long range migration will be tested offshore Namibia at Welwitschia in Q In Brazil, over 8,000km 2 of 3D seismic data will be acquired and nine wells drilled testing the Barreirinhas Basin within the next four years with one well immediately adjacent to Chariot acreage With the combination of successful partnering, the continued application of technology and the evaluation and integration of third party activity, it is anticipated that the Company will drill at least three wells within the next three years 12 Annual Report and Accounts tier partnering Leveraged partnering to be initiated across the entire portfolio in 2014 at all major phases of investment: 3D and drilling

15 OUR SKILLS AND CAPABILITIES ARE RECOGNISED THROUGHOUT THE INDUSTRY, WITH A TRACK RECORD OF SUCCESSFUL PARTNERING TO DATE. STRATEGIC REPORT The Chariot team Behind the exceptional work that has been carried out across the Chariot portfolio is a highly knowledgeable, driven and competent team. Having a combined experience of more than 200 years, its members have been party to the identification, development and operations of several major discoveries worldwide for a variety of super majors, majors and large independents. Capitalising on this previous experience, the team is not only capable of seeking highly prospective acreage and maturing it through to drilling but it also understands the high standard of description that is necessary to present to potential partners. All of our technical evaluation and data rooms are managed in-house, ensuring the effective communications of first rate, fully informed descriptions. Our skills and capabilities are recognised throughout the industry, with a track record of successful partnering to date. During the last 18 months, the Company s portfolio has doubled in size. In order to maintain the momentum of exploration activity and the high calibre of work, we have expanded the technical team accordingly. Importantly, this has been managed in such a way that the Company will maintain G&A capped at 2013 levels. Following Matthew Taylor s appointment to the Board, Chariot welcomed Duncan Wallace as Exploration Manager to manage the exploration activity and its development across all of the portfolio. Duncan has a wide variety of technical and managerial experience and has overseen the full cycle of exploration in a new country, from office set-up and team recruitment, seismic acquisition and processing, to prospect maturation, well planning, drilling, appraisal and development. During the period, he was also joined by an additional two geologists and a further senior geophysicist. Using this skillset the Company will not only continue its progression but also its portfolio management, ensuring that all forward programmes have an appropriate balance of risk and reward. It is a pleasure to be a part of this exciting team as we mature our assets for drilling. I would like to thank all of the Chariot staff for their hard work and efforts over the course of the last year. New ventures Chariot will continue to scope out early entrant, low cost, giant opportunities in the long term, however its near term focus is to progress and de-risk its existing assets through continued technical analysis and partnering. Looking forward With its highly experienced team, the focused strategy, risk management, capital discipline and careful planning, the Company has developed the portfolio while repositioning itself to capitalise on third party participation. The Company now holds a balanced portfolio, not only in terms of geological diversification but also in the exploration maturity of each of its assets. As a result, Chariot has a pipeline of giant drilling opportunities and anticipates drilling, subject to the securing of partners, a minimum of three wells within the next three years. The year ahead is an exciting one. The coming months will be focused on the progression of our portfolio towards the first and second tiers of farm-out, advancing our assets towards the drilling phase and I look forward to reporting on our progress. LARRY BOTTOMLEY Chief Executive Officer 18 March 2014 Doubled During the last 18 months, the Company s portfolio has doubled in size 3 wells Chariot has a pipeline of giant drilling opportunities and anticipates drilling, subject to the securing of partners, a minimum of three wells within the next three years Annual Report and Accounts

16 STRATEGIC REPORT CHIEF FINANCIAL OFFICER S REVIEW The Group remains debt free as at 31 December 2013 and, using strict capital discipline, it will continue to invest in its portfolio and business activities during 2014 and beyond. US$37.6m During 2013 the Group invested US$37.6m into its exploration portfolio US$26m Amount recovered from the successful farm-out of 35% of Block C-19, Mauritania, to Cairn US$56.7m year end cash position Funding and liquidity As at 31 December 2013 During 2013 the Group continued with the development of its portfolio and business by investing US$37.6m into its exploration portfolio and administration activities (31 December 2012: US$142.4m). Despite this significant investment, the Group s cash balances only reduced by US$11.6m to US$56.7m as at 31 December 2013 (31 December 2012: US$68.3m) due to the recovery of circa US$26m from the successful farm-out of 35% of Block C-19, Mauritania, to Cairn. This recovery of previously invested amounts into our portfolio is in line with one of the Group s strategic objectives of aiming for zero cost exploration and this is something that it will continue to strive to achieve going forward. The Group remains debt free as at 31 December 2013 and, using strict capital discipline, it will continue to invest in its portfolio and business activities during 2014 and beyond. As at 31 December 2013, US$16.0m (31 December 2012: US$11.0m) of the Group s US$56.7m (31 December 2012: US$68.3m) cash balances were held as security against licence work commitment bank guarantees. 14 Annual Report and Accounts 2013

17 STRATEGIC REPORT Financial performance Year ended 31 December 2013 The Group s loss after tax for the year to 31 December 2013 was US$10.5m, which is US$78.1m lower than the US$88.6m loss incurred for the year ended 31 December This US$78.1m reduction in the year on year loss is mainly due to the one-off US$80.9m impairment charge recognised for the Tapir South well in the year to 31 December Share based payments of US$2.2m for the year ended 31 December 2013 were US$0.4m higher than the US$1.8m for the year to 31 December This increase was mainly due to the year ended 31 December 2013 reflecting the full year effect of an award of deferred shares made to staff in Q Other administrative expenses of US$6.0m for the year ended 31 December 2013 were US$1.5m lower than the US$7.5m incurred for the year to 31 December This US$1.5m reduction was due to the nonrecurrence in 2013 of certain organisational restructuring costs that were incurred in 2012, a higher proportion of salaries being time-written to the Group s oil and gas exploration and appraisal assets in 2013 and the impact of various cost saving initiatives that were implemented throughout the Group during Finance income of US$0.8m for the year ended 31 December 2013 comprises interest on cash balances which, as a result of lower average cash balances during 2013, is slightly lower than the US$0.9m achieved for the year ended 31 December Finance income for the year ended 31 December 2012 also included US$0.7m of exchange gains on foreign currency balances. For the year ended 31 December 2013, the Group incurred exchange losses of US$1.2m and these are included separately within Finance expense. As a result of the successful farm-out of 35% of Block C-19, offshore Mauritania, to Cairn, the Group incurred a US$1.7m Capital Gains Tax liability in Mauritania and this is the significant majority of the US$1.8m tax expense in the year to 31 December 2013 (31 December 2012: US$Nil). Exploration and appraisal assets As at 31 December 2013 During the year to 31 December 2013, the Group s exploration and appraisal assets reduced by US$8.3m to US$128.3m from US$136.6m as at 31 December The reason for this reduction was that the circa US$26m receipt for the farm-out of 35% of Block C-19, offshore Mauritania to Cairn is netted off against the US$18.1m of portfolio expenditure incurred in the year. The make-up of this US$18.1m of 2013 portfolio expenditure is broadly split as follows: in Mauritania, US$8.9m was incurred completing the acquisition and processing, significantly advancing the interpretation, of the 3,500km 2 3D survey undertaken on the block; in Namibia, US$5.1m was incurred across all the Group s licences, however the majority of this related to the commencement of a 2,128km 2D seismic survey in the 2714B Southern Block; in Brazil, US$2.7m was incurred to cover the signing bonuses for the four new licences awarded at the 11th Bidding Round, the acquisition of existing legacy seismic data relating to the Group s licences and the establishment of the Group s office and business in country; and in Morocco the Group incurred US$1.4m acquiring and interpreting 11,000km of legacy 2D data to better understand the prospectivity in its blocks and to identify areas for its 3D programme planned for Other assets and liabilities As at 31 December 2013 The Group s inventory balance of US$7.2m as at 31 December 2013 is unchanged from 31 December As at 31 December 2013, the Group s net balance of Current trade and other receivables and Current trade and other payables shows a net current liability position of US$4.4m. As at 31 December 2012, this net current liability position was higher at US$16.3m. Outlook As highlighted above, with US$56.7m of cash balances as at 31 December 2013, the Group is well funded to continue investing in its portfolio throughout 2014 and beyond. In Morocco, the Group will carry out a 1,700km 2 3D survey on its Rabat Deep, Loukos and Mohammedia Reconnaissance licences. This survey aims to identify locations for potential drilling with a partner in 2015/2016. The Group will also complete the interpretation of its 3,500km 2 3D survey in Mauritania and will look to introduce a drilling partner to fund its share of a well in In Namibia, the Group will continue with its well partnering process for the Central Blocks and will also complete the acquisition, processing and interpretation of a 2,128km 2D seismic survey in its 2714B Southern Block with a view to highlighting potential areas of prospectivity for a follow on 3D survey with a partner in Finally, in Brazil, the Group will undertake the necessary environmental approval processes to enable it to complete, with a partner, its 768km 2 3D survey licence commitment during MARK REID Chief Financial Officer 18 March 2014 Annual Report and Accounts

18 STRATEGIC REPORT OPERATIONS OVERVIEW his year has seen significant technical development with the reprocessing and analysis of over 11,000km of 2D seismic data in Morocco, the acquisition and ongoing interpretation of 3,500km2 of 3D data offshore Mauritania and the integration of information from our two wells and other drilling results in Namibia. As part of our acquisition of the Brazil licences, we have also accumulated a significant data set in that country The technical team has focused its skillset on extracting maximum value from this extensive database to mature and de-risk the exciting prospects and leads it has identified across the Chariot acreage. MOROCCO EMERGING REGION Mohammedia Reconnaissance Offshore FAST FOLLOWER IN A HOT BASIN Drill ready 2015 Acreage proximal to oil and gas / condensate fields Operator, 75% equity position Tier 1 Partnering 2014 Remaining commitments: 1,700km2 3D, to commence April mmbbls+ & 517bcf+* multiple prospect and lead potential Industry activity: >ten NFW over the next two years MAURITANIA ZERO COST OPTION IN AN ESTABLISHED BASIN ESTABLISHED REGION Drill ready Q Oil shows in licence area; block adjacent Operator, 55% equity position Tier 2 Partnering 2014 No remaining commitments 500mmbbls+* multiple lead potential Industry activity: five NFW wells over the next two years C-19 We have worked hard to develop a balanced, high quality portfolio such that the Company can select optimal prospects from a range of candidates, dropping those which do not attain our quality criteria. This ongoing process has already assembled a range of high graded prospects which we look forward to testing with the drill bit. MATTHEW TAYLOR Technical Director Loukos Offshore Rabat Deep Offshore NAMIBIA FRONTIER REGIONS UNDEREXPLORED FRONTIER PROVINCE WITH GIANT POTENTIAL North Drill ready 2014 Licences in three geologically distinct basins with proven petroleum system elements Operator, large equity positions Tier 2 Partnering 2014 No remaining commitments 1.5bnbbls+* multiple prospect potential Industry activity: securing acreage ahead of the play opening exploration wells; Welwitschia spud ~April 2014 Central South BRAZIL BAR-M-292 BAR-M-293 BAR-M-313 BAR-M Annual Report and Accounts 2013 FAST FOLLOWER WITH A LOW COST SEISMIC OPTION Drill ready 2016 Conjugate basin to Ghana / Côte d Ivoire Operator, 100% equity position Tier 1 Partnering 2014 Remaining commitments: 768km2 3D Giant lead potential Industry activity: nine deepwater wells over the next four years, one play opener in the adjacent block

19 STRATEGIC REPORT p18 For more information LICENCE Q 2Q 3Q 4Q H 2H Rabat Deep Loukos Mohammedia Reconnaissance Third Party Activity Acquire 3D seismic Seismic farm-out process Genel drilling; Kosmos / BP drilling; Cairn drilling Process and interpret 3D seismic Galp drilling Kosmos drilling Plains drilling Kosmos drilling Freeport McMoRan drilling Well partnering and potential drilling p20 For more information LICENCE Q 2Q 3Q 4Q H 2H C-19 Third Party Activity Interpretation of 3,500km 2 3D seismic Tullow-Dana four well drilling campaign Well partnering process Potential Kosmos drilling Potential drilling with a partner Potential Total drilling p22 For more information LICENCE Q 2Q 3Q 4Q H 2H Northern Area Central Area Southern Area Third Party Activity Partnering process Central Blocks 2714B 2D seismic acquisition Repsol drilling campaign 2714B 2D seismic processing and interpretation Potential drilling with a partner 2714B Potential acquisition of 3D seismic programme Well partnering and potential drilling Potential Pan-Continental-Tullow drilling; Eco Atlantic drilling p24 For more information LICENCE Q 2Q 3Q 4Q H 2H BAR-M-292, 293, Third Party Activity EIA to be carried out Seismic farm-out process 3D seismic acquisition Well partnering BG EIA to be carried out BG 3D seismic acquisition BG drilling *gross mean prospective resources, based on 2D (leads) and 3D (prospects) data respectively Annual Report and Accounts

20 OPERATIONS MOROCCO EMERGING REGION LICENCE LOCATIONS Loukos Offshore Rabat Deep Offshore Mohammedia Reconnaissance Offshore Morocco Spain Algeria Chariot holds a 75% equity interest and operatorship across the Loukos, Rabat Deep and Mohammedia Reconnaissance areas in the north near shore of Morocco with a total area of circa 16,500km 2. Geologically, Morocco is a region of great interest as it allows the Company to expose itself to the testing of multiple high potential proven and new play fairways, notably those that are geologically analogous to the giant discoveries of Nova Scotia on the conjugate margin. Contract Area Acquired Ongoing Commitments 2D 3D Rabat Deep ,000km 2D 3 3D acquisition Q Loukos km 2 3D 3 3D acquisition Q Mohammedia Reconnaissance km 2 3D 3 3D acquisition Q Drill Ready (Subject to Partnering) Anticipated 2015 Anticipated 2015 Anticipated 2015 Commercially, Morocco has some of the most competitive fiscal terms in the world that are supported by a robust regulatory framework and highly regarded state oil company, ONHYM, with whom Chariot is partnered (25% carried interest during the Exploration Phase). Since Chariot s entry into the region, multiple industry players have also recognised the potential offshore and the Company expects more than ten wells to be drilled along the margin over the course of the next two years. During 2013, the team reprocessed and interpreted 11,000km of 2D seismic data across its acreage which markedly improved its understanding of the assets and resulted in a shift in its positioning in country: Chariot retained its acreage in the Rabat Deep licence area; elected to enter the next phase of exploration in the Loukos licence area; and relinquished the Casablanca / Safi licence as this acreage was deemed to be too high risk to justify further investment by the Company. In 2014, it applied for and was awarded the Mohammedia Reconnaissance licence area (subject to final approval from the relevant authorities). 568mmbbls+ of gross mean prospective resources 18 Annual Report and Accounts 2013

21 SINCE CHARIOT S ENTRY INTO THE REGION, MULTIPLE INDUSTRY PLAYERS HAVE ALSO RECOGNISED THE POTENTIAL OFFSHORE AND THE COMPANY EXPECTS MORE THAN TEN WELLS TO BE DRILLED ALONG THE MARGIN IN THE NEXT TWO YEARS. In the Loukos licence, the team has identified a significant Mio-Pliocene lead that extends into the Mohammedia Reconnaissance licence area. This is a large, attribute-supported shallow water gas lead that could provide, in the success case, near term production. In the Rabat Deep acreage, the Company has identified a further two plays. Firstly, the source rock is modelled to be oil generating adjacent to a large 149km 2 four-way dip faulted carbonate structure with a gross mean prospective resource potential (based on 2D seismic) of 568mmbbls. This prospect is supported by extensive on-block oil slicks, seeps and seismic Direct Hydrocarbon Indicators ( DHIs ). An additional six leads within the Jurassic have also been identified meaning that the Company is exposed to significant follow-on potential. The Jurassic has seen light oil production onshore, adjacent to Chariot s acreage position, whilst Jurassic carbonates host one of the largest fields in the conjugate Nova Scotia Basin. Secondly, the team has identified a Cretaceous play in the salt basin, with salt structures and turbidite seismic facies. Cretaceous age sands contain much of the hydrocarbons found to date in the Nova Scotia Basin and deepwater sands of this age now form a primary focus for major industry players not only in the Nova Scotia Basin but also in Morocco. The Company will analyse and integrate the outcomes of near term drilling resulting from this focused effort to develop its understanding of the risk and reward characteristics of the play in Rabat Deep. Post period, the Mohammedia Reconnaissance licence was obtained to secure potential in both the Jurassic play (seen by the interpretation team to extend from Rabat Deep) and the Mio-Pliocene play (extending from Loukos). Forward plan Chariot will acquire 1,700km 2 of 3D seismic over its Moroccan acreage in Q In Rabat Deep, this seismic will be used to identify the best well location for the drilling of the Jurassic carbonate prospect. In terms of Loukos and Mohammedia Reconnaissance, this data will be used to further mature and develop the prospectivity of the Mio-Pliocene play as well as the Jurassic play that extends into Mohammedia from Rabat Deep. Concurrent to this seismic acquisition, Chariot has initiated its first tier farm-out in order to gain a partner to share in the costs for the 3D programmes. Following its interpretation, the team will be looking to secure a drilling partner, the intent being to drill offshore Morocco in Remaining commitments: following the completion of the 1,700km 2 3D seismic acquisition all licence commitments will be satisfied. Key licence features The Central Atlantic rifted in Triassic times and accumulated a salt basin through to early Jurassic times, succeeded by a Jurassic carbonate platform and then clastic dominated sedimentation during the Cretaceous and continuing to the present day 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 Offshore Morocco is underexplored in terms of drilling with only 34 wells having been drilled since 1968, 29 of which were drilled prior to These were primarily aimed at testing Jurassic carbonate objectives on the shelf Results of pre-2003 drilling included the discovery of the Cap Juby field and oil and gas shows were encountered in several other wells. Analysis of the success and failures of these wells has indicated that several viable petroleum systems exist with good hydrocarbon potential in the sedimentary basins Post 2003 discoveries include that of a significant gas discovery by Repsol, in the Anchois-1 well, in close proximity to Chariot s acreage Chariot s acreage offers the potential for prospectivity in several of the proven plays in Morocco, including large Jurassic carbonate features that may be reefal, Cretaceous sandstone plays and Tertiary shallow gas targets OPERATIONS New licence area Mohammedia Reconnaissance awarded in ,000km During 2013, the team reprocessed and interpreted 11,000km of 2D seismic data LICENCE INTEREST Loukos Rabat Deep Mohammedia Reconnaissance Operator Chariot Licence area 16,591km 2 (gross) Chariot 75% ONHYM 25% Annual Report and Accounts

22 OPERATIONS MAURITANIA ESTABLISHED REGION LICENCE LOCATION C-19 Mauritania Mali Drill Ready Contract Area Acquired Ongoing Commitments 2D 3D (Subject to Partnering) C None 3 3 Q Following the recent partnering with Cairn, the Company holds 55% equity and operatorship of Block C-19, with Cairn holding 35% and the state oil company, SMH, retaining the remaining 10% carried portion. The block is located in the offshore and spans 12,175km 2 (gross) with water depths of circa 5m to 2,100m. Mauritania is an established oil producing region with multiple discoveries to date and most recently a new oil play in the Late Cretaceous has been proven in the Frégate prospect. Further field developments as well as several wells are scheduled for drilling this year by third parties, which the Company will use to further its knowledge and understanding of its own licence prospectivity. 4 discoveries in the vicinity of Block C-19; two wells in the block with significant oil shows 3,500km 2 Since acquiring its acreage in June 2012, Chariot has completed a 3,500km 2 3D seismic survey LICENCE INTEREST C-19 Operator Chariot Licence area 12,175km 2 (gross) Chariot 55% Cairn 35% SMH 10% 20 Annual Report and Accounts 2013

23 MAURITANIA IS AN ESTABLISHED OIL PRODUCING REGION WITH MULTIPLE DISCOVERIES TO DATE AND MOST RECENTLY A NEW OIL PLAY IN THE LATE CRETACEOUS HAS BEEN PROVEN IN THE FRÉGATE PROSPECT. As well as the producing Chinguetti field that lies to the south of Chariot s acreage, there are seven wells in the vicinity of Block C-19, with four discoveries (Aigrette, Pelican, Cormoran and Frégate) and two wells in the block with significant oil shows. Within the block itself there is proof of working petroleum systems in the Cretaceous, Neogene and Palaeogene, with source rocks modelled to be oil generating. There are also extensive natural slicks indicating oil seepage. From the fast track data of its 3,500km 2 3D seismic campaign, Chariot has identified giant deepwater canyon head, channel and fan plays. In December 2013, the team received the final PSDM and it is anticipated that the team will be able to mature the current leads into prospects. This analysis will be completed by Q2 2014, at which point Mauritania will be drill ready, subject to partnering and securing a rig. Forward plan Chariot aims to complete the interpretation of the final PSDM data from the 3,500km 2 seismic programme during the course of Q Once this is complete, the Company will release a resource update and open up a second tier data room in order to secure an additional partner for drilling in Remaining commitments: there are no remaining commitments within this phase of exploration. Key licence features Mauritania lies on the margin of the Central Atlantic, the oldest segment of the Atlantic which began opening in Triassic times Plate reconstructions show this part of the Atlantic opening at the same time as the Tethyan Ocean (an ancient ocean now largely closed with relics along the Alpine foldbelt) and the Gulf of Mexico Exploration has been sporadic in this basin but has resulted in several oil and gas discoveries that are reportedly under development by Tullow as well as the producing Chinguetti field Good quality oil is sourced from prolific Cenomanian uronian age source rocks (the same as the source for the hanaian oil fields and is contained in Tertiary and Cretaceous age deep marine sandstones sealed by shales OPERATIONS 500mmbbls+ of gross mean prospective resources 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 Geoceltic seismic vessel shooting 3D across Block C-19 The quality of the source rock and of identified reservoirs as well as the size of analogue trap types means the potential prospectivity in C-19 is giant Annual Report and Accounts

24 OPERATIONS NAMIBIA FRONTIER REGION LICENCE LOCATIONS Block 1811A&B Northern Blocks Block 2312A&B, N/2 of Block 2412A&B Central Blocks Block 2714A Block 2714B Southern Blocks Namibia Botswana South Africa Chariot s acreage offshore Namibia is divided into three geologically distinct basins in the North, Centre and South, spanning a total of four licences across an area of approximately 33,000km 2 (gross). As a frontier province, Chariot entered Namibia as a play opener and, having acquired, processed and interpreted 8,000km 2 of 3D seismic and drilled two deepwater exploration wells, it has secured one of the largest databases of seismic and well data across the region. In the last two years, five wells have been drilled in the deepwater and, whilst there has been no commercial discovery, these have proved that all the components needed for a working petroleum system are present. This has not only been very positive for the prospectivity of Chariot s licences but it has also heightened third party interest in the region with key industry players farming into assets in the offshore during and post period. Contract Area Northern Blocks 1811A&B Central Blocks 2312A&B, N/2 2412A&B Acquired Ongoing Commitments 2D 3D Drill Ready (Subject to Partnering) 2008 None Partnering process to recommence post third party drilling 2008 None Partnering process underway LICENCE INTEREST Northern Blocks Operator Chariot Licence area 5,867km 2 Chariot 100% Southern Block 2714A Southern Block 2714B 2008 None 3 3 Kabeljou-1 well informed further exploration potential in Block 2714B 2013 None 3 2D processing underway Anticipated 2016 Central Blocks Operator Chariot Licence area 16,801km 2 (gross) Chariot 90% AziNam 10% Southern Block 2714A Operator Petrobras Licence area 5,482km 2 (gross) Chariot 25% BP 45% Petrobras 30% Southern Block 2714B Operator Chariot Licence area 5,463km 2 (gross) Chariot 85% Namcor 10% Quiver 5% (BEE) 22 Annual Report and Accounts 2013

25 Central Blocks Chariot holds a 90% interest and operatorship in the Block 2312A&B and the northern halves of Block 2412A&B in partnership with AziNam (10%) following the transfer of this interest from PGS to its associate company. Following the interpretation of its 3,500km 2 3D seismic campaign, the Company identified significant potential in both the shallower and deeper petroleum systems that exist offshore Namibia. The Company requested and was awarded a licence extension to allow sufficient time to integrate the additional information from third party drilling which occurred in close proximity to its acreage during Using proprietary well data and the information provided from these additional wells the team was able to substantially de-risk the shallower petroleum system, which is now a priority focus. In September 2013, at the same time as initiating a partnering process, we released a resource update, highlighting the potential of this shallower petroleum system where the Upper Cretaceous turbidite clastic reservoirs have been identified in a variety of stratigraphic and structural traps, with the potential for oil charge from locally mature marine source rocks. The importance of Chariot s acreage position in the Central Blocks is that if its principal drilling candidate, Prospect B, which has been audited with an unrisked gross mean prospective oil resource of 469mmbbls and geologic success of 22% proves the play to be effective, it will unlock a further five prospects of similar size and de-risk an additional six leads, ranging from 213mmbbls-1,487mmbbls. Forward plan A partnering process is underway and the market will be updated with its progress as appropriate. Remaining commitments: there are no remaining commitments within this phase of exploration. 469mmbbls unrisked gross mean prospective oil resource of Prospect B Southern Blocks Chariot holds a 25% equity interest in Block 2714A with Petrobras (operator) holding 30% and BP, 45%. In 2013, having seen significant potential highlighted through proprietary well information on Block 2714A, the Company applied for and was re-awarded Block 2714B with an 85% operating interest, carrying the state oil company, NAMCOR, and Quiver (a BEE) 10% and 5% respectively. Using the information provided from the dry Kabeljou-1 well, which Chariot participated in with Petrobras and BP in 2012, the partnership was able to demonstrate that an excellent source rock exists in the shallower petroleum system offshore Namibia. Whilst this was marginally mature in the well, the increased depth of burial in Block 2714B suggests that this will be mature for oil generation with the potential to charge deepwater canyon head, channel and fan plays identified on legacy, sparse 2D data. In order to gain a more accurate understanding of the prospectivity within this acreage, Chariot has accelerated its work programme in this region and completed its work commitments for the entire four year period by acquiring a 2,128km 2D seismic programme. Using this data, Chariot aims to identify specific areas of interest for designing a 3D programme which will be used to define candidates for drilling. Forward plan In Block 2714B, key areas of high potential deepwater canyon head, channel and fan plays, similar to that of the Central Blocks, will be interpreted from the recent 2D data acquisition, due to be completed in Q A forward plan will then be decided for the acquisition of a 3D seismic survey. Chariot sees high potential in its southern acreage, and whilst it cannot comment on its partners participation plans, it will look to pursue the high potential identified in the shallower petroleum system, as well as to further analyse the opportunities presented in the deeper petroleum system on the blocks. Remaining commitments: there are no remaining commitments in Blocks 2714A and 2714B within their respective phases of exploration. Northern Blocks In the north, Chariot holds 100% interest in Blocks 1811A&B. In 2012 the Company drilled and successfully operated the Tapir South well. Whilst the well was dry and subsequently plugged and abandoned, the Company believes that there remains turbidite clastic and sub-salt carbonate potential in the block. The well encountered excellent reservoir and fluid inclusions which indicate an oil charge that pre-dates structural formation. Following the completion of the Tapir South well, Chariot undertook a petro-physical and seismic processing analysis to identify where oil charged sands might exist. Using this analysis, the Company identified that there is a case for hydrocarbon charge in the Company s Tapir North prospect, which is an attribute supported turbidite clastic prospect adjacent to the mapped source kitchen. This, however, is a stratigraphic trap and there is a risk that seal may not be present updip to the east. Importantly, this does mean that there is a possibility for long range migration into the Zamba prospect, which is now a drill ready, priority target. The Zamba Main prospect is deemed to contain a gross mean unrisked prospective resource of 375mmbbls, with an upside of 540mmbbls should the wider Zamba complex, which would combine a variety of reservoirs within the area, be successful. Whilst this prospect is drill ready, Chariot is aware that third party drilling, due in Q2 2014, may have implications for de-risking this prospect and as such will await these results prior to determining the forward programme. Forward plan The Zamba prospect is drill ready and Chariot will await third party drilling results, which will provide an indication of the possibility for long range hydrocarbon migration, prior to determining its forward plans. Remaining commitments: there are no remaining commitments in this licence period. OPERATIONS Annual Report and Accounts

26 OPERATIONS BRAZIL FRONTIER REGION LICENCE LOCATIONS Brazil BAR-M-292 BAR-M-293 BAR-M-313 BAR-M-314 In May 2013 Chariot was successful in bidding for exploration blocks in the Barreirinhas Basin offshore Brazil. Chariot now holds 100% interest and operatorship in four shallow water exploration licences, BAR-M-292; BAR-M-293; BAR-M-313; and BAR-M-314. Combined, these span a region of 768km 2 and the blocks are located approximately 70km offshore in water depths ranging from 85m to 1,700m. Contract Area BAR-M-292, 293, 313, 314 Acquired Ongoing Commitments 2D 3D km 2 3D 3 EIA process initiated Drill Ready (Subject to Partnering) Anticipated 2016 The Barreirinhas Basin lies on the north eastern coast of Brazil along the transform margin that is conjugate to the Atlantic offshore basins in Côte d Ivoire and Ghana which have seen recent significant oil and gas discoveries. The acquisition of these licences exemplified Chariot s ability to identify high potential, low cost options in underexplored regions. Qualifying as a shallow water operator, Chariot sought out the regions in which the deepwater petroleum systems extended into those blocks that were deemed by the ANP to be in the shallow water. This meant that whilst super majors and majors made extremely competitive bids and well commitments on deepwater acreage adjacent, Chariot was able to win its shallow water acreage for a minimum signature bonus and a seismic option. LICENCE INTEREST BAR-M-292 BAR-M-293 BAR-M-313 BAR-M-314 Chariot 100% Operator Chariot Licence area 768km 2 24 Annual Report and Accounts 2013

27 THE ACQUISITION OF THESE LICENCES EXEMPLIFIED CHARIOT S ABILITY TO IDENTIFY HIGH POTENTIAL, LOW COST OPTIONS IN UNDEREXPLORED REGIONS. Since the acquisition, Chariot has initiated an EIA process in order to progress towards its 3D seismic commitment, which it anticipates commencing in On the legacy 2D datasets Chariot has identified on-block evidence for sufficient burial of the Cenomanian-Turonian source rock for hydrocarbon generation, supported by potential seismic DHIs. Further to this, a large roll-over structure has been identified with deepwater turbidite seismic facies and fan entry points. Whilst this is a frontier province with only three deepwater wells to date, the same plays have been proven in the giant discoveries on the conjugate margin in Ghana and the deepwater play components (source, reservoir and seal) have been demonstrated in wells drilled adjacent to Chariot s acreage. Forward plan The Company will continue to progress the EIA process in order to prepare its acreage for the 800km 2 3D seismic campaign. A first tier partnering process will commence in Q4 2014, with 3D expected in Following the acquisition, processing and interpretation of this data, the Company will look to commence its second tier farm out process in order to gain a partner for drilling in Lençóis Maranhenses, Maranhão State, Brazil Scarlet Ibis, Parnaíba River Delta, Brazil Key licence features Chariot s blocks of interest are located in the north-eastern sector of the offshore Brazil continental margin in the Barreirinhas Basin The Barreirinhas Basin lies along the transform margin that is conjugate to equivalent basins in Côte d Ivoire and Ghana, where the Jubilee, Mahogany and Tweneboa oil and gas fields have been discovered in recent years. Evidence suggests that these same petroleum systems are present offshore Brazil, making this a giant potential frontier and emerging basin Source, reservoir and seal play components have been demonstrated in wells within close proximity to the Chariot licences. There is evidence of burial of the Cenomanian- uronian source rock sufficient for oil generation on the block, with oil shows in wells and seismic DHIs supporting this. Turbidite seismic facies have been identified on legacy 2D seismic as well as a large roll-over structure In order to investigate this potential further, the Company is planning a 3D seismic programme which is anticipated to take place early 2015 OPERATIONS Remaining commitments: 768km 2 of 3D seismic data acquisition MATTHEW TAYLOR Technical Director 18 March 2014 CONJUGATE to the proven basins in Côte d Ivoire and Ghana 768km 2 Total area of Chariot s four shallow water exploration licences Annual Report and Accounts

28 OPERATIONS RISK MANAGEMENT Underpinning all of Chariot s activity is a focus on managing risk with a number of steps that are focused on balancing the Company s risk exposure and guarding its capital. This is intended to ensure that the Company is able to sustain its development in order to carry out its drilling campaigns and deliver on its goal of discovering material hydrocarbon accumulations. CHARIOT MANAGES ITS RISK THROUGH: Capital discipline Chariot is dedicated to applying capital discipline in all that it does. All projects are carefully analysed and an opportunity s risk versus value is measured at each stage of its development, ensuring that the portfolio is managed in line with its potential to deliver transformational growth. Portfolio diversity In order to balance its risk, Chariot has developed its portfolio from a Namibian focus to that of the broader Atlantic margins, which now encompasses Morocco, Mauritania and Brazil. This provides a diversity in the asset base with a range of risk as well as a range of exploration maturity. This balance creates a solid platform for a sustained growth rate combined with a high level of optionality as the programme progresses. Levered partnering As part of its zero cost exploration focus, Chariot looks to secure partners at each significant phase of investment. Through this partnering Chariot aims to validate the potential of its assets, improve the quality of the technical description through the contributions of these partners and fund its drilling activities. The Company will not look to drill without this endorsement from within the industry. Strategic positioning Chariot aims to identify high potential underexplored regions ahead of the industry, acquiring large equity positions at low cost with minimal commitment. As industry interest increases within these areas, Chariot uses its vantage point to position itself as a fast follower rather than a play opener, allowing it to use its own technical evaluation, as well as the integration of information from the outcome from third party activity. This enables the Company to de-risk its assets as far as possible prior to drilling, ensuring stakeholders are exposed to the highest chance of success with a lower capital expenditure. Experienced team Chariot has an exceptional team with over 200 years of combined experience having worked for a variety of super majors, majors and large independents. The team is able to draw on this experience enabling it to carry out the Company s strategy: to successfully identify highly prospective, underexplored acreage and describe it to the high standard necessary to present to potential partners. All of our technical evaluation and data rooms are managed in-house, ensuring the effective communications of first rate, fully informed descriptions. Our skills and capabilities are recognised throughout the industry, with a track record of successful partnering to date. Application of technology Chariot uses proven and leading-edge technologies and its technical capabilities to mature its portfolio. It also uses its fast follower position to learn from third party drilling activity and integrates this learning into its understanding of its acreage. The combination of this ensures that the Company is able to de-risk its portfolio as far as possible and mature targets for drilling in order to gain partners to test its prospects through the drill bit. RISK MANAGEMENT FRAMEWORK BOARD REVIEW AND CONFIRMATION Review and confirmation by the Board NON-EXECUTIVE TECHNICAL DIRECTORS PROCESS Risks and mitigation validated with the Executive Committee and presented to the Non-Executive Technical Directors for review EXECUTIVE MANAGEMENT ONGOING REVIEW AND CONTROL There is ongoing review of the risks and implementation of mitigation actions by the Executive Management SENIOR MANAGEMENT OF GROUP FUNCTIONS IDENTIFY Senior management identify the key risks and develop mitigation actions SENIOR MANAGEMENT OF OPERATING COMPANIES IDENTIFY Local management access risks and suggest mitigation actions 26 Annual Report and Accounts 2013

29 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. RISK DESCRIPTION MITIGATION 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. 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 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. OPERATIONS EXPLORATION RISK OPERATING RISK ENVIRONMENTAL RISK There is no assurance that the Group s exploration activities will be successful. The nature of oil and gas operations means that the Group is exposed to risks such as equipment failure, well blowouts, fire, pollution and bad weather. 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. 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 in 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, PGS and Cairn Energy. 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, throughout West and North Africa and in Brazil. 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. 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 in which it operates places it in a good position to be able to work through any potential significant changes that could arise in the future. Annual Report and Accounts

30 OPERATIONS 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. Environmental Impact Assessments 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 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 all seismic acquisition programmes, Chariot employs marine mammal observers to travel on board the seismic vessels. These observers compile marine mammal and bird count statistics which will assist in the preparation of future EIAs. 28 Annual Report and Accounts 2013

31 Environmental Management Plan 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. At the point of 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. 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. Environmental and Socioeconomic 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 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 all seismic acquisition programmes, Chariot employs marine mammal observers to travel on board the seismic vessels. These observers 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. At the point of 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. OPERATIONS Pelican in Walvis Bay, Namibia Annual Report and Accounts

32 GOVERNANCE BOARD OF DIRECTORS Name and title GEORGE CANJAR Non-Executive Chairman LARRY BOTTOMLEY Chief ecutive Officer MARK REID Chief Financial Officer MATTHEW TAYLOR Technical Director Biography George has 30 years of experience in the oil industry and began his career at Shell, having graduated with a BSc in Geologic Engineering from the Colorado School of Mines. He is currently Director of Global Unconventional Business Development for Hess Corporation. 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. Matthew is a petroleum geologist who has worked in the industry for over 30 years. Year appointed Non-Executive Director 2010 Non-Executive Chairman 2013 Appointed NED 2011, CEO Experience George 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. 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. Before joining Chariot, Mark was CFO at Aurelian Oil & Gas Plc and prior to that Head of Oil & Gas at the London office of BNP Paribas Fortis. He has also held senior positions for National Australia Bank s Oil & Gas team as well as within Ernst & Young s Corporate Finance sector where he provided M&A and corporate finance services to clients worldwide for a period of eight years. Matthew began his career with BNOC in 1980, moving to BP in 1984 and subsequently held senior geologist posts with BHP Petroleum and Triton Energy. He has also 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 working for Hunt Oil. Committee membership Audit Commitee Nomination Committee Remuneration Committee Independent Yes Not applicable Not applicable Not applicable Sector experience TRITON 30 Annual Report and Accounts 2013

33 BOARD COMPOSITION Independent: 3 Executive: 3 Non-Independent: 6 Non- Executive: 6 ADONIS POUROULIS Non-Executive Director ROBERT SINCLAIR Non-Executive Director HEINDRICH NDUME Non-Executive Director WILLIAM TROJAN Non-Executive Director DAVID BODECOTT 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. 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. Heindrich is a Namibian national with mining exploration experience throughout sub-saharan Africa. William has 36 years of experience in the oil and gas industry and has extensive experience in deepwater exploration within the Atlantic margins. David has worked in the oil and gas industry for 40 years Adonis is also Chairman of Petra Diamonds Limited, 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 producer. 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. Robert is Chairman of Schroder Oriental Income Fund Limited, Chairman of Sirius Real Estate Limited, a Director of Picton Property Income Limited and Chairman of its Audit Committee and a Director of Secure Property Development & Investment PLC. He is a fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Chartered Accountants of Scotland, and is resident in Guernsey. Robert represents the interests of Westward Investments Limited, a major shareholder of Chariot. 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, which is now a 100% subsidiary of Chariot. William began his career at Shell and, during his 19 years there, held a variety of senior positions, specialising in the strategic direction of exploration programmes, new business concepts, strategies and work processes. Subsequent to his time at Shell, William became Vice President of Worldwide Deepwater Exploration for Phillips Petroleum Company in 2000 where he managed a new exploration programme focused primarily on West Africa, Brazil and the Gulf of Mexico. Following the merger with Conoco, William continued to specialise in West Africa, responsible for bid rounds in new venture evaluations, seismic and drilling operations. A highly experienced geologist, he co-founded AIM-listed Rockhopper Exploration Plc in 2004 and, in 2007, became the company s Exploration Director. During this time, he built a highly skilled technical team in preparation for the 2010/2012 drilling campaign that delivered the Sea Lion discovery and appraisal success. David left Rockhopper in 2013 to continue with the consultancy work that he conducted between 1981 and 2007 and to work on new opportunities. His most recent consulting work has been in Denmark, Greenland, the Falkland Shelf, Southeast Asia, the North Sea and the West Shetlands; with many previous projects in West Africa including Mauritania, Senegal, Guinea- Bissau, Ghana, Nigeria, Gabon, Angola, Kenya and Tanzania. GOVERNANCE Audit Committee Remuneration Committee Audit Committee Remuneration Committee Nomination Committee No No No Yes Yes Annual Report and Accounts

34 GOVERNANCE SENIOR MANAGEMENT TEAM DUNCAN WALLACE Exploration Manager ALEX GREEN Commercial Manager JULIA KEMPER Principal Geophysicist JULIA WEBB Corporate Communications Manager Duncan is a geologist with over ten years of experience working in exploration and production. After graduating with an MSc from Imperial College he joined Perenco as an exploration geologist and has held a wide variety of technical and management positions in his career, ranging from onshore and offshore exploration studies, field development, production, operations and new ventures. He recently returned to the UK following a four year tenure as Country Manager for Perenco in Brazil, where he had the responsibility to oversee a full cycle of exploration in a new country, from office setup and team recruitment, to seismic acquisition and processing, exploration studies and well planning, to the drilling of two deepwater exploration wells. Subsequent to this, Duncan was the New Ventures Exploration Manager, with global responsibility for the identification and evaluation of new acreage and farm-in opportunities. Alex has over 20 years of 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. 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 Julia has six years of experience in corporate communications and joined Chariot in 2010, having previously worked for a number of the African focused natural resource and energy companies within the Pella Resources Group. During this time she has been involved in a variety of marketing activities throughout the UK, Europe, US and Africa, developing the Company s corporate profile. She develops the team s communication strategy, providing a channel of communication between the Company, investors, analysts and the press. She has headed up and organised a number of investor roadshows and conferences, manages special events, has participated in the organisation of fundraisings as well as playing a key role in internal communications. 32 Annual Report and Accounts 2013

35 AN EXCEPTIONAL TEAM FOCUSED ON RISK MANAGEMENT JULIAN MAURICE- WILLIAMS Group Financial Controller ROBERT MWANACHILENGA Country Manager and Senior Staff Drilling Engineer, Namibia TATIANA MENEZES Environmental Compliance and Office Manager, Brazil MOHAMED ETHMANE DIOUDIA Country Manager, Mauritania Julian is a Chartered Accountant with nine years of experience in the oil and gas sector. Prior to joining Chariot in 2012 he was a manager within BDO LLP s natural resources department in London where his client portfolio included Main Market, AIM and ASX quoted oil and mining companies with exploration and production assets primarily in Africa, the Former Soviet Union, South America, Australia and Asia. 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 the Deutsche Schachtbauund Tiefbohrgesellschaft mbh (DSTmbH) 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 of the Advancement of Cost Engineers International and the Engineering Council of Namibia. Before joining Chariot in 2013, Tatiana held a number of different positions in the energy sector and more specifically, as an environmental co-ordinator and liaison officer. Her previous role as Environmental Coordinator at Perenco Petróleo e Gás do Brasil Limited saw her acquire the environmental licence and anuencias or technical consents for offshore drilling activities in the Espírito Santo Maritime Basin whilst also being the main contact with the Environmental Brazilian Organisation, IBAMA. During her time at Perenco, Tatiana was also responsible for contracting environmental companies as part of the tendering process and played an integral role in the start-up of the company in Brazil. Tatiana has also worked as an environmental assistant at Galp Energia, co-ordinating the environmental permits and monitoring the environmental project implementation in the countries within the influence area for various seismic activities. Mohamed has worked for over ten years as Finance, Commercial and then General Manager for a local company, Groupe MiIP- SOFAPOP, representing various large multinational companies, such as Yamaha and Daewoo, from Japan, France, China and Spain. During this time, he acquired a strong knowledge of all logistics and Mauritanian administration aspects. Subsequent to this, he worked for six years as Country Manager for several mining and oil exploration companies in Mauritania, participating actively in negotiations for oil and mining permits. In 2012 he joined Chariot Oil & Gas where he is responsible for the Company s local activities, including governmental and local partner relations and its exploration operations in country. GOVERNANCE Annual Report and Accounts

36 GOVERNANCE DIRECTORS REMUNERATION REPORT Remuneration Committee The Group s Remuneration Committee comprises George Canjar (Chairman), Adonis Pouroulis and Robert Sinclair. 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 three and 12 months. Directors remuneration The following remuneration comprises Directors fees and benefits in kind that were paid to Directors during the year: Fees / basic salary Performance cash bonus Benefits in kind (1) Pension contribution Year ended 31 December 2013 Total Year ended 31 December 2012 Total G Canjar L Bottomley M Reid (2) M Taylor (3) A Pouroulis R Sinclair H Ndume P Loader (4) P Welch (5) 1,494 J Burgess (5) 516 Total 1, ,686 2,703 (1) Comprises private health insurance. (2) M Reid was appointed as a Director on 19 December Amounts included above for the year ended 31 December 2012 are in respect of services for the period December (3) M Taylor was appointed as a Director on 28 June Amounts included above are in respect of services for the period 28 June 31 December (4) P Loader resigned on 28 June (5) P Welch and J Burgess resigned on 19 December Annual Report and Accounts 2013

37 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 2012 G Canjar 159,000 L Bottomley (1) 431,113 40,393 M Reid (2) 159,000 M Taylor (3) 770,321 A Pouroulis (4) 21,665,971 21,665,971 R Sinclair 412, ,000 H Ndume (5) 20,107,426 20,107,426 Total 43,704,831 42,013,790 (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 vest in equal instalments over a three year period from the date of grant. (3) M Taylor was appointed as a Director on 28 June Prior to being appointed as a Director, he was granted 658,805 deferred share awards under the employee long term incentive plan (see note 20). These shares vest in equal instalments over a three year period from the date of grant. On 21 October 2013, he exercised 326,602 deferred shares plus an additional 114,978 tax deferred shares totalling 441,580 shares. (4) 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. (5) 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. Further details of the share option scheme can be found in note 20. The Directors who held office at the reporting date and who had interests in the share option scheme are: Options held at 31 December 2012 Cancelled during the year Granted during the year Options held at 31 December 2013 Exercise price (p) Exercisable from Expiry date L Bottomley 250, , /9/2013 1/9/2021 L Bottomley 2,750,000 2,750, /12/ /12/2023 M Taylor (1) 1,000,000 1,000, /1/ /1/2020 A Pouroulis 100,000 (100,000) /5/ /5/2018 G Canjar 250,000 (250,000) /6/2012 1/6/2020 R Sinclair 100,000 (100,000) /5/ /5/2018 H Ndume 250,000 (250,000) /5/ /5/2018 Total 1,950,000 (700,000) 2,750,000 4,000,000 GOVERNANCE (1) M Taylor was appointed as a Director on 28 June Annual Report and Accounts

38 GOVERNANCE DIRECTORS REMUNERATION REPORT (continued) Non-Executive Directors Restricted Share Units ( RSU ) The Group operates an RSU scheme pursuant to which Non-Executive Directors may be awarded shares for nil consideration. The awards vest in equal instalments over a three year period on the anniversary of the grant date. Further details of the RSU scheme can be found in note 20. The Directors who held office at the reporting date and who had interests in the RSU scheme are: RSU held at 31 December 2012 Granted during the year RSU held at 31 December 2013 Grant date Expiry date A Pouroulis 18,533 18,533 20/9/ /9/2023 G Canjar 51,265 51,265 20/9/ /9/2023 G Canjar 159, ,000 24/9/ /9/2023 R Sinclair 18,533 18,533 20/9/ /9/2023 R Sinclair 212, ,000 24/9/ /9/2023 H Ndume 46,332 46,332 20/9/ /9/2023 Total 505, ,663 By order of the Board GEORGE CANJAR Chairman of the Remuneration Committee 18 March Annual Report and Accounts 2013

39 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. Given the departure of Philip Loader on 28 June 2013, a new Senior Independent Non-Executive Director and Corporate Governance Committee member will be appointed during 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, Chief Executive Officer, Chief Financial Officer, Technical Director and Non-Executive Directors. All Directors have access to the advice and services of the Company Secretary and the Group s professional advisors. Subsequent to their appointment on 19 February 2014, William Trojan and David Bodecott joined George Canjar as independent Non-Executive Directors. Remuneration Committee The Remuneration Committee comprises George Canjar (Chairman), Adonis Pouroulis and Robert Sinclair. 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), Adonis Pouroulis and George Canjar. 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 GOVERNANCE Nomination Committee The Nomination Committee comprises George Canjar (Chairman) 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 once 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. Annual Report and Accounts

40 GOVERNANCE 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 41. The Directors do not recommend payment of a final dividend (31 December 2012: 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 Report of the Directors. The Group is subject to various risks including those which derive from the nature of its oil and gas exploration activities. The Risk Management Statement sets out the Group s principal risks and uncertainties and also provides details as to how these are managed. 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, securing additional finance when required 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: George Canjar (Non-Executive Chairman) Larry Bottomley (Chief Executive Officer) Mark Reid (Chief Financial Officer) Matthew Taylor (Technical Director) Appointed 28 June 2013 Adonis Pouroulis (Non-Executive Director) Robert Sinclair (Non-Executive Director) Heindrich Ndume (Non-Executive Director) Philip Loader (Non-Executive Chairman) Resigned 28 June 2013 On 19 February 2014, William Trojan and David Bodecott were appointed as Non-Executive Directors. Details of Directors interests in shares, share options, LTIPs and RSUs 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. 38 Annual Report and Accounts 2013

41 The Directors have elected to prepare the financial statements in accordance with IFRS as adopted by the European Union. 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. 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. GOVERNANCE By order of the Board MARK REID Chief Financial Officer 18 March 2014 Annual Report and Accounts

42 FINANCIAL STATEMENTS INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF CHARIOT OIL & GAS LIMITED We have audited the financial statements of for the year ended 31 December 2013 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 the Guernsey (Companies) Law, 2008 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 has been 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. Directors responsibility for the financial statements As explained more fully in the statement of directors responsibilities, the Directors are responsible for the preparation of the financial statements in accordance with Guernsey (Companies) Law, 2008 and International Financial Reporting Standards (IFRS) as adopted by European Union and for being satisfied that they give a true and fair view in accordance with IFRS as adopted by the European Union. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with relevant legal and regulatory requirements and International Standards on Auditing (as issued by the International Federation of Accountants (IFAC)). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor s judgement, including the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the Auditor considers the internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design appropriate audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We read the other information contained in the Annual Report and Accounts and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises the Chairman s Statement, the Chief Executive Officer s Review, the Review of Operations, the Chief Financial Officer s Review and the Report of the Directors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on financial statements In our opinion: give a true and fair view of the state of the Group s affairs as at 31 December 2013 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 Chartered Accountants London, United Kingdom 18 March 2014 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 40 Annual Report and Accounts 2013

43 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 Notes Year ended 31 December 2013 Year ended 31 December 2012 Share based payments 20 (2,219) (1,793) Impairment of exploration asset 11 (80,853) Other administrative expenses (6,008) (7,476) Total operating expenses (8,227) (90,122) Loss from operations 4 (8,227) (90,122) Finance income ,561 Finance expense 7 (1,177) Loss for the year before taxation (8,646) (88,561) Tax expense 9 (1,809) Loss for the year and total comprehensive loss for the year (10,455) (88,561) attributable to equity owners of the parent Loss per ordinary share attributable to the equity holders of the parent basic and diluted 10 US$(0.05) US$(0.45) All amounts relate to continuing activities. The notes on pages 45 to 57 form part of these financial statements. FINANCIAL STATEMENTS Annual Report and Accounts

44 FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013 Share capital Share premium Contributed equity Share based payment reserve Foreign exchange reserve Retained deficit Total attributable to equity holders of the parent As at 1 January , , ,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 Total comprehensive loss for the year (10,455) (10,455) Share based payments 2,219 2,219 Transfer of reserves due to issue of LTIPS (927) Transfer of reserves due to cancelled / lapsed (2,259) 2,259 share options As at 31 December , , ,874 (1,241) (143,372) 188,410 The following describes the nature and purpose of each reserve within owners equity. Share capital Share premium Contributed equity Share based payments reserve Foreign exchange reserve Retained deficit 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 option, LTIP and RSU schemes. Foreign exchange differences arising on translating into the reporting currency. Cumulative net gains and losses recognised in the financial statements. The notes on pages 45 to 57 form part of these financial statements. 42 Annual Report and Accounts 2013

45 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013 Notes 31 December December 2012 Non-current assets Exploration and appraisal costs , ,639 Property, plant and equipment Total non-current assets 128, ,521 Current assets Trade and other receivables 13 1,614 2,922 Inventory 14 7,234 7,153 Cash and cash equivalents 15 56,684 68,257 Total current assets 65,532 78,332 Total assets 194, ,853 Current liabilities Trade and other payables 16 6,019 19,207 Total current liabilities 6,019 19,207 Total liabilities 6,019 19,207 Net assets 188, ,646 Capital and reserves attributable to equity holders of the parent Share capital 17 3,776 3,758 Share premium 324, ,668 Contributed equity Share based payment reserve 3,874 4,841 Foreign exchange reserve (1,241) (1,241) Retained deficit (143,372) (135,176) Total equity 188, ,646 The notes on pages 45 to 57 form part of these financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 18 March GEORGE CANJAR Chairman FINANCIAL STATEMENTS Annual Report and Accounts

46 FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013 Year ended 31 December 2013 Year ended 31 December 2012 Operating activities Loss for the year before taxation (8,646) (88,561) Adjustments for: Finance income (758) (1,561) Finance expense 1,177 Depreciation Share based payments 2,219 1,793 Impairment of exploration asset 80,853 Net cash outflow from operating activities before changes in working capital (5,659) (7,289) Decrease / (increase) in trade and other receivables 1,360 (1,614) (Decrease) / increase in trade and other payables (1,520) 1,625 Increase in inventories (81) (2,475) Net cash outflow from operating activities (5,900) (9,753) Investing activities Finance income Payments in respect of property, plant and equipment (80) (848) Farm-in proceeds 26,400 33,379 Payments in respect of intangible assets (31,574) (131,815) Net cash outflow used in investing activities (4,496) (98,399) Financing activities Issue of ordinary share capital 48,737 Issue costs (1,994) Net cash inflow from financing activities 46,743 Net decrease in cash and cash equivalents in the year (10,396) (61,409) Cash and cash equivalents at start of the year 68, ,990 Effect of foreign exchange rate changes on cash and cash equivalent (1,177) 676 Cash and cash equivalents at end of the year 56,684 68,257 The notes on pages 45 to 57 form part of these financial statements. 44 Annual Report and Accounts 2013

47 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. At 31 December 2013 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 Report of the Directors and the Operations Overview. 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. 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 12 months. New Accounting Standards The following new standards and amendments to standards are mandatory for the first time for the Group for the financial year beginning 1 January The implementation of these standards and amendments to standards has had no material effect on the Group s accounting policies. International Accounting Standards (IAS/IFRS) Effective year commencing on or after IAS 1 (Amendment) Presentation of items of other comprehensive income 1 July 2012 IFRS 13 Fair value measurement 1 January 2013 IAS 19 (Amendment 2011) Employee benefits 1 January 2013 IFRS 7 (Amendment 2011) Disclosures offsetting financial assets 1 January 2013 and financial liabilities IAS 16 (improvements) Classification of servicing equipment 1 January 2013 Certain new standards and amendments to standards have been published that are mandatory for the Group s accounting periods beginning after 1 January 2014 or later years 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 year commencing on or after IAS 32 (Amendment 2011) Offsetting financial assets and financial liabilities 1 January 2014 IFRS 11 Joint arrangements 1 January 2014* IFRS 10 Consolidated financial statements 1 January 2014* IFRS 12 Disclosure of interest in other entities 1 January 2014* IAS 27 (Amendment 2011) Separate financial statements 1 January 2014* IAS 28 (Amendment 2011) Investments in associates and joint ventures 1 January 2014* IFRIC 21 Levies 1 January 2014 IFRS 9 Financial instruments n/a * Effective date 1 January 2014 for the EU. 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. Annual Report and Accounts

48 FINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Accounting policies continued The Board regularly reviews the carrying values of each cost pool and writes down capitalised expenditure to levels it considers to be recoverable. Cost pools are determined on the basis of geographic principles. The Group currently has six cost pools being Northern, Central and Southern Blocks in Namibia, Mauritania, Morocco and Brazil. 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 reimbursement of past costs, this cash consideration is 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 is treated as a credit to the Consolidated Statement of Comprehensive Income. Any Capital Gains Tax payable in respect of a farm-in transaction is recognised in the Consolidated 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 year. 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 substantively 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 Consolidated Statement of Comprehensive Income, 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 Consolidated 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 years. The carrying value of property, plant and equipment is assessed annually and any impairment charge is charged to the Consolidated Statement of Comprehensive Income. 46 Annual Report and Accounts 2013

49 Operating leases Rent paid on operating leases is charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the term of the lease. Share based payments Where equity settled share awards are awarded to employees or Directors, the fair value of the awards at the date of grant is charged to the Consolidated Statement of Comprehensive Income 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 awards that eventually vest. Market vesting conditions are factored into the fair value of the awards 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 awards are modified before they vest, the increase in the fair value of the awards, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income 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 Contributed 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 understated, 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 an intangible asset 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. FINANCIAL STATEMENTS Annual Report and Accounts

50 FINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Accounting policies continued 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 year 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 pricing model as set out in note Segmental analysis The Group has two reportable segments being exploration for 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 2013 Exploration for Oil and Gas Head Office Total Share based payment (2,219) (2,219) Administrative expenses (956) (5,052) (6,008) Impairment of exploration asset Finance income Finance expense (1,177) (1,177) Tax expense (1,702) (107) (1,809) Loss after taxation (2,658) (7,797) (10,455) Additions to non-current assets 18, ,125 Total assets 136,103 58, ,429 Total liabilities (3,152) (2,867) (6,019) Net assets 132,951 55, , December 2012 Exploration for Oil and Gas Head Office Total 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 Finance expense Tax expense 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, , Annual Report and Accounts 2013

51 4 Loss from operations 31 December December 2012 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 1,891 1,456 Share based payments restricted share unit scheme 25 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 Total payable Leases commitments 31 December December 2012 Not later than one year Later than one year and not later than five years 1,230 1,754 Total 1,787 2,052 The leases are operating leases in relation to the offices in the UK, Namibia, Mauritania and Brazil. 6 Employment costs Employees 31 December December 2012 Wages and salaries 2,941 2,924 Pension costs Share based payments 1,387 1,463 Sub-total 4,497 4,554 Capitalised to exploration costs (1,669) (1,216) Total 2,828 3,338 Key management personnel 31 December December 2012 Wages and salaries 1,657 1,843 Pension costs Payments in lieu of notice / Compromise payment 846 Share based payments Sub-total 2,518 3,033 Capitalised to exploration costs (452) (517) Total 2,066 2,516 FINANCIAL STATEMENTS 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. Annual Report and Accounts

52 FINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Finance income and expense Finance income 31 December December 2012 Bank interest receivable Foreign exchange gain 676 Total 758 1,561 Finance expense 31 December December 2012 Foreign exchange loss 1,177 Total 1,177 8 Investments The Company s wholly owned subsidiary undertakings at 31 December 2013 and 31 December 2012, excluding dormant entities, were: Finance income Subsidiary undertaking Principal activity Country of incorporation Chariot Oil & Gas Investments (Namibia) Limited Holding company Guernsey Chariot Oil & Gas Investments (Mauritania) Limited Oil and gas exploration Guernsey Chariot Oil & Gas Investments (Morocco) Limited Oil and gas exploration Guernsey Chariot Oil & Gas Statistics Limited Service company UK Enigma Oil & Gas Exploration (Proprietary) Limited (1) Oil and gas exploration Namibia Chariot Oil & Gas Investments (Brazil) Limited (2) Holding company Guernsey Chariot Brasil Petróleo e Gás Ltda (3) Oil and gas exploration Brazil Chariot Oil & Gas Finance (Brazil) Limited (1, 3) Service company Guernsey (1) Indirect shareholding of the Company. (2) Company dormant prior to 1 January (3) Incorporated in the year ended 31 December Taxation At 31 December 2013 and at 31 December 2012 the Company is tax resident in Guernsey, where corporate profits are taxed at zero per cent. No taxation charge arises in Namibia, Morocco and the UK as the relevant subsidiaries have recorded taxable losses for the year. In Mauritania there is a Capital Gains Tax payable of US$1,702,000 due to the farm-out of 35% of licence C-19 offshore Mauritania to Capricorn Mauritania Limited, a wholly owned subsidiary of Cairn Energy Plc, which completed on 11 October In Brazil there were taxable profits due to interest received on cash balances resulting in a tax charge payable of US$107, Annual Report and Accounts 2013

53 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 2012 Tax reconciliation Loss on ordinary activities for the year before tax (8,646) (88,561) Loss on ordinary activities at the standard rate of corporation tax in Guernsey of 0% (31 December 2012:0%) Difference in tax rates in local jurisdictions at the applicable tax rate (192) (162) of 35% (31 December 2012:35%) Deferred tax effect not recognised Mauritanian Capital Gains Tax of 10% (31 December 2012:10%) 1,702 Total taxation charge 1,809 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 total US$2.3m (31 December 2012: US$2.0m). 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$10,455,000 (31 December 2012: loss of US$88,561,000) and on 200,913,999 ordinary shares (31 December 2012: 196,527,961) being the weighted average number of ordinary shares in issue during the year. Potentially dilutive share awards 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 2012 Balance brought forward 136,639 88,889 Additions 18, ,603 Farm-in proceeds (26,400) Impairment (80,853) Net book value 128, ,639 As at 31 December 2013 the net book values of the six cost pools are Northern Blocks offshore Namibia US$33.6m (31 December 2012: US$33.3m), Central Blocks offshore Namibia US$42.4m (31 December 2012: US$40.8m), Southern Blocks offshore Namibia US$45.2m (31 December 2012: US$42.0m), Mauritania US$2.8m (31 December 2012: US$20.3m), Morocco US$1.6m (31 December 2012: US$0.2m) and Brazil US$2.7m (31 December 2012: US$Nil). Farm-in proceeds are in relation to the farm-out of 35% of licence C-19 offshore Mauritania to Capricorn Mauritania Limited, a wholly owned subsidiary of Cairn Energy Plc, which completed on 11 October The impairment in 2012 is in respect of drilling the Tapir South Well in the Northern Blocks offshore Namibia. FINANCIAL STATEMENTS Annual Report and Accounts

54 FINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Property, plant and equipment Fixtures, fittings and equipment 31 December 2013 Fixtures, fittings and equipment 31 December 2012 Cost Brought forward 1, Additions Carried forward 1,665 1,585 Depreciation Brought forward Charge Carried forward 1, Net book value Trade and other receivables 31 December December 2012 Other receivables and prepayments 1,614 2, Inventory 31 December December 2012 Wellheads and casing 7,234 7, Cash and cash equivalents 31 December December 2012 Analysis by currency US Dollar 43,389 61,854 Brazilian Real 12,606 Sterling 633 6,274 Namibian Dollar Mauritanian Ouguiya ,684 68,257 As at 31 December 2013 the cash balance of US$56.7m (31 December 2012: US$68.3m) contains the following cash deposits that are secured against bank guarantees given in respect of exploration work to be carried out: 31 December December 2012 Brazilian licences 12,160 Mauritanian licence 2,500 10,000 Moroccan licences 1,000 1,000 Namibian 2714B licence ,960 11,000 The funds are freely transferrable but alternative collateral would need to be put in place to replace the cash security. 52 Annual Report and Accounts 2013

55 16 Trade and other payables 31 December December 2012 Trade payables 1,976 6,790 Accruals 4,043 12,417 6,019 19, Share capital 31 December 2013 Number 31 December 2013 Authorised 31 December 2012 Number 31 December 2012 Ordinary shares of 1p each* 400,000,000 7, ,000,000 7, December 2013 Number Allotted, called up and fully paid 31 December December 2012 Number 31 December 2012 Ordinary shares of 1p each* 201,789,805 3, ,641,135 3,758 * The authorised and initially allotted and issued share capital on admission (19 May 2008) has been translated at the historic rate of US$:GBP of The shares issued since admission have been translated at the date of issue and not subsequently retranslated. Details of the ordinary shares issued are in the table below: Date Description Price US$ No of shares 1 January 2012 Opening Balance 181,649, 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 FINANCIAL STATEMENTS Annual Report and Accounts

56 FINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Share capital continued Date Description Price US$ No of shares 1 January 2013 Opening Balance 200,641, April 2013 Issue of shares as part of LTIP , April 2013 Issue of shares as part of LTIP , April 2013 Issue of shares as part of LTIP , April 2013 Issue of shares as part of LTIP , April 2013 Issue of shares as part of LTIP ,000 2 October 2013 Issue of shares as part of LTIP ,768 2 October 2013 Issue of shares as part of LTIP ,881 2 October 2013 Issue of shares as part of LTIP ,676 8 October 2013 Issue of shares as part of LTIP ,000 8 October 2013 Issue of shares as part of LTIP ,443 8 October 2013 Issue of shares as part of LTIP ,055 8 October 2013 Issue of shares as part of LTIP ,304 8 October 2013 Issue of shares as part of LTIP ,000 8 October 2013 Issue of shares as part of LTIP , October 2013 Issue of shares as part of LTIP , October 2013 Issue of shares as part of LTIP , October 2013 Issue of shares as part of LTIP , October 2013 Issue of shares as part of LTIP , October 2013 Issue of shares as part of LTIP , October 2013 Issue of shares as part of LTIP , October 2013 Issue of shares as part of LTIP , December ,789, 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 ( Westward ) 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 2013 Westward received administrative services from an employee of Chariot for which Westward incurred fees payable to Chariot of US$14,845 (31 December 2012: US$15,083). The amount outstanding as at 31 December 2013 is US$2,611 (31 December 2012: US$2,559) Benzu Resources Limited ( Benzu ), is a company where Adonis Pouroulis is a Director. During the year ended 31 December 2013 Benzu received administrative services from an employee of Chariot for which Benzu incurred fees payable to Chariot of US$14,845 (31 December 2012: US$15,352). The amount outstanding as at 31 December 2013 is US$10,446 (31 December 2012: US$10,719) Pursuant to an agreement dated 1 October 2007, Artemis Trustees Limited, a company where Robert Sinclair is a Director and ultimately a shareholder, was appointed by the Company to provide administration secretarial services. In the year ended 31 December 2013 the Company incurred fees relating to these services totalling US$Nil (31 December 2012: US$21,789). The amount outstanding as at 31 December 2013 is US$Nil (31 December 2012: US$Nil) Pella Resources Limited ( Pella ), is a company where Robert Sinclair and Adonis Pouroulis are Directors. During the year ended 31 December 2013 Pella received administrative services from an employee of Chariot for which it incurred fees payable to Chariot of US$75,699 (31 December 2012: US$Nil). The amount outstanding as at 31 December 2013 is US$4,580 (31 December 2012: US$Nil) During the year ended 31 December 2013, Helios Oil and Gas Limited ( Helios ), a company where Adonis Pouroulis is a Director, paid Chariot US$Nil (31 December 2012: US$4,759) in relation to the reimbursement of costs incurred by Chariot on its behalf. In addition Chariot paid Helios US$Nil (31 December 2012: US$143,525) in relation to the reimbursement of costs incurred by Helios on its behalf. The amount outstanding from Helios as at 31 December 2013 is US$Nil (31 December 2012: US$4,759) 54 Annual Report and Accounts 2013

57 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 2013 no trading in financial instruments was undertaken (31 December 2012: US$Nil). There is no material difference between the book value and fair value of the Group cash balances, short term receivables and payables. 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 banks Barclays and BNP Paribas, on fixed short to medium term deposits. 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 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 Brazilian Real, Sterling, Namibian Dollars and Mauritanian Ouguiya to meet other non-us Dollar industry costs and on-going corporate and overhead commitments. At the year end, the Group had cash balances of US$56.7m (31 December 2012: US$68.3m) as detailed in note 15. Other than the non-us Dollar cash balances described in note 15, no other material 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$1,330,000 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 2012: US$641,000). 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 on-going needs for at least the next 12 months. Liquidity risk The Group s practice is to regularly review cash needs and to place excess funds on fixed term deposits for periods 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. The Group currently acts as Operator in two Joint Venture relationships on two of the Group s licences and therefore from time to time is owed money from its Joint Venture partners. The Joint Venture partner, which has a 10% interest in the Central Blocks in Namibia, is an entity which is 48% owned by one of the world s largest and most financially robust seismic and geoscience companies. The Joint Venture partner, which has a 35% interest in the Mauritanian licence, is an entity which is wholly owned by a FTSE 250 company. 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. FINANCIAL STATEMENTS Annual Report and Accounts

58 FINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 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 2012 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 2013 Number of Options 31 December 2012 Number of Options Outstanding at the beginning of the year 5,400,000 5,400,000 Granted during the year 2,750,000 Lapsed during the year (3,450,000) Cancelled during the year (700,000) Outstanding at the end of the year 4,000,000 5,400,000 Exercisable at the end of the year 1,250,000 5,150,000 The range of the exercise price of share options exercisable at the year end falls between US$0.41 (25p) US$2.06 (125p) (31 December 2012: US$0.40 (25p) 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% 22 April % 5 years 1.5% 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 2013 of US$1,891,000 (31 December 2012: US$1,456,000). 56 Annual Report and Accounts 2013

59 The following table sets out details of all outstanding share awards under the LTIP: 31 December 2013 Number of awards 31 December 2012 Number of awards Outstanding at the beginning of the year 6,265,174 1,867,327 Granted during the year 2,251,638 5,347,361 Shares issued for no consideration during the year (1,148,670) (881,514) Lapsed during the year (481,504) (68,000) Outstanding at the end of the year 6,886,638 6,265,174 Exercisable at the end of the year 1,176, ,142 Non-Executive Directors Restricted Share Unit Scheme ( RSU ) The plan provides for the awarding of shares to Non-Executive Directors for nil consideration. An award can be Standalone or Matching. Standalone share awards are one-off awards to Non-Executive Directors which will vest in equal instalments over a three year period and will lapse if not exercised prior to stepping down from the Board. Matching share awards will be granted equal to the number of existing Chariot shares purchased by the Non-Executive Director in each calendar year capped at the value of their gross annual fees for that year. The shares will vest in equal instalments over a three year period and will lapse if not exercised prior to stepping down from the Board or if the original purchased shares are sold prior to the vesting of the relevant Matching award. Any potential Matching awards not granted in a calendar year shall be forfeited and shall not roll over to subsequent years. The Group recognised a charge under the plan for the year to 31 December 2013 of US$25,000 (31 December 2012: US$Nil). The following table sets out details of all outstanding share awards under the RSU: 31 December 2013 Number of awards 31 December 2012 Number of awards Outstanding at the beginning of the year Granted during the year 505,663 Outstanding at the end of the year 505,663 Exercisable at the end of the year 21 Contingent liabilities From 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 2013, based upon independent legal and tax opinions, the Group has no withholding tax liability (31 December 2012: US$Nil). 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. 22 Events after the reporting period On 18 March 2014 the Company announced that its wholly-owned subsidiary, Chariot Oil & Gas Investments (Morocco) Limited, has entered into a petroleum agreement with the Government of the Kingdom of Morocco for a 75% interest and operatorship in the offshore Mohammedia Reconnaissance licence. This agreement remains subject to approval from the authorities and, once complete, Chariot will be partnered with the Office National des Hydrocarbures et des Mines (ONHYM), the national oil company of Morocco, which will participate with a 25% carried interest. FINANCIAL STATEMENTS Annual Report and Accounts

60 ADVISORS Registered Office PO Box 282 Regency Court Glategny Esplanade St Peter Port Guernsey GY1 3RH Channel Islands Registration Number Nominated Advisor and Joint Broker RBC Europe Limited Thames Court One Queenhithe London EC4V 4DE United Kingdom Joint Broker Jefferies International Limited 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 Advisor FTI Consulting 200 Aldersgate Aldersgate Street London EC1A 4HD United Kingdom Legal Advisors 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 As to Brazilian Law Veirano Advogados Av. Presidente Wilson º andar Rio de Janeiro RJ Brazil 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 58 Annual Report and Accounts 2013

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62 Registered Office PO Box 282 Regency Court lategny splanade St Peter Port uernsey GY1 3RH Channel Islands www chariotoilandgas com 1 Annual Report and Accounts 2013