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Cabot Energy Plc Annual Report and Accounts 2018 0

Cabot Energy Plc Annual Report and Accounts 2018

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Production-led growth

Cabot Energy Plc is an oil and gas production and exploration company quoted

on the AIM market of the London Stock Exchange.

The Group focusses on creating predictable production growth in Canada. This is

expected to deliver cashflow and demonstrable value for shareholders in a

reasonable time frame.

Cabot augments its production activity by developing high-impact exploration

and appraisal projects which can be farmed out and developed to generate the

opportunity for high returns on investment.

Strategic Report Governance Financial Statements Supplementary Information

01 2018 Summary 13 Board of Directors and Senior Management

27 Independent Auditor’s Report

76

Unaudited Statement of Net Commercial Oil & Gas Reserve Quantities – Proven and Probable Reserves

02 Chairman’s Statement 14 Corporate Governance Report 34 Consolidated Statement of Comprehensive Income

03 Chief Executive Officer’s Review 16

Corporate Responsibility Overview 35

Consolidated Statement of Financial Position

77 Glossary

06 Group Financial Review 17 The Health, Safety and Environment Committee 36

Company Statement of Financial Position

78 Directors, Offices and Advisers

08 Vision, Group Overview and Business Model 18 The Audit Committee 37

Consolidated Cash Flow Statement

79 Licence Table

09 Strategic Priorities 19 Report on Directors’ Remuneration 38

Consolidated Statement of Changes in Equity

10 Key Performance Indicators 23 Directors’ Report 40 Company Statement of Changes in Equity

11 Risk Management

26 Directors’ Responsibilities in respect of the Annual Report and the Financial Statements

41

Consolidated and Company Statement of Changes in Equity

42 Notes to the Financial Statements

All financial amounts in this report are stated in US Dollars (“USD” or “$”), unless otherwise noted. Millions of US Dollars are abbreviated as “$m”.


Canada Italy

26% increase in Net Proven Plus Probable reserves to 3.6 mmboe (2017: 2.9 mmboe)

Total mean gross prospective resources of 933 mmboe (793 mmboe net to Cabot):

▪ gross 653 mmboe in the Adriatic Cygnus Prospect (513 mmboe net to Cabot); and

▪ gross 280 mmbbl in the Sicily Channel Vesta Prospect (all net to Cabot)

2P net present value (pre-tax), using a 10 per cent discount rate value of $48.3 million or $13.4/boe

339% increase in net 2P reserves plus mid-case contingent and prospective resources of 42.2 mmboe was generated from a basin-wide study and land acquisitions

Significant upgrades to reserves and resources

2018 Summary

Revenue up 154% to $12.2 million

(2017: $4.8 million)

Loss before tax for 2018 of $6.2 million

(2017: loss of $4.0 million)

Administrative expenses of $3.2 million

(2017: $2.9 million)

Acquisition of 25% of the Canadian assets to take the Group’s ownership to 100%

Gross equity raise of $15.5 million in January 2018 and, post period, £2.53 million ($3.4 million) in March 2019

New management and upgraded controls Canadian average annual gross production

up 71% on 2017 to 703 barrels of oil per day

(“bopd”)

Operational progress

Unaudited cash on the balance sheet of $0.9 million as at 31 December 2018

(31 December 2017: $1.8 million)

Overhaul of management team with appointment of Scott Aitken as Chief Executive Officer, Petro Mychalkiw as Chief Financial Officer and Campbell Airlie as Chief Technical Officer

Significant strengthening of all operational and reporting controls to ensure robust internal processes are in place following outcome of strategic, operational and financial review

Performance of the six horizontal wells drilled in the winter of 2017/2018 was assessed to inform the

basis of learning and forward production estimates for these and similar new wells

282 nominal well locations for potential future drilling in Group’s 100% owned Canadian mineral rights

Independent facilities review for all the Group’s main processing and pipelines in the area confirmed

at least 30,000 blpd capacity available for fluids processing and transportation

Southern Adriatic seismic ante-operam largely completed ready to progress permits in Italy once 18-

month Italian government review of hydrocarbon prospecting, exploration and development activities

is completed

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2 Cabot Energy Plc Annual Report and Accounts 2018

Chairman’s Statement “A transitional year led by a new leadership team” Dear Shareholder, 2018 has been a transitional year for Cabot Energy Plc. A new leadership team and Board was appointed during the year. Their full attention is on positioning the Group to achieve its vision of developing production so that Cabot can move towards paying investors a dividend in the future; and investing in high-impact exploration to deliver upside capital growth. The new team’s immediate focus has been to create a stable and sustainable production platform to unlock long-term growth potential.

Market backdrop After the downturn post-2014, the global oil markets recovered significantly until October 2018. They fell sharply during Q4 2018, with West Texas Intermediate closing the year at $45.33 (WTI c. $63 in mid-May 2019). In addition, many Canadian producers saw lower prices in Q4 2018, largely due to widening Edmonton Light Oil price differentials, which has now recovered to the historical range. With Alberta government commitments in place to bolster pipeline capacity, we remain reasonably confident in the outlook for the Edmonton Light Oil price. The state of the industry over the past four years has enforced capital discipline, portfolio realignments and productivity efficiencies. With a forecast increase in demand due to economic activity, oil companies will need to grow their production, cost effectively. As supply increases and oil prices trend towards recovery1, volatility will continue to shape strategy, investment and M&A activity within the industry.

Transitioning to our future Despite the overall strength of the Group’s production and exploration asset base in Canada and Italy, it became apparent soon after I joined the Board that we had to face up to challenges brought on by past operational and financial deficiencies. It is important we do not shy away from these challenges and the CEO’s Review provides more detail around how they are being addressed. For my part, I am pleased to report that the progress achieved at the asset and corporate level in recent months has gone some way to meeting these challenges. However, there is still much to do in 2019 once funding is available before we can safely say that the Group is on a growth trajectory.

Board developments In light of the cost overruns and unobtainable production targets identified in 2018, the Board and the executive management team were restructured over the course of the year. Scott Aitken was appointed Chief Executive Officer, bringing more than 25 years’ experience in the oil and gas industry. Petro Mychalkiw and Campbell Airlie, who were both previously Cabot Non-Executive Directors, were appointed respectively as Chief Financial Officer and Chief Technical Officer. All three of these executives, who were appointed to the leadership team in June 2018, are co-founders of High Power Petroleum LLC, the Company’s supportive majority shareholder. Together they deliver a wealth of experience of successfully working together in operational and

1 EIA, Short Term Energy Outlook (STEO), March 2019

senior executive roles in the oil and gas industry. The quality of the new management team’s experience will underpin the execution of Cabot’s forward strategy. I joined the Board in July 2018 as Interim Independent Non-Executive Chairman, bringing with me over 35 years of oil and gas experience in public and private companies, plus extensive audit committee chair experience. I was delighted to welcome Rachel Maguire to the Board as an Independent Non-Executive Director in November 2018, adding valuable expertise in the field of investor relations, public company reporting and corporate governance.

Rebuilding confidence through renewed discipline in operational and financial processes The Directors believe that Cabot’s assets and reserves remain fundamentally strong, but the new management team needed to first address key areas of business control in order to create the solid platform to realise future growth potential. In the second half of the year, CEO Scott Aitken led a comprehensive strategic, operational and financial review of the business. The CEO’s Review provides more insights into the findings of this review and the actions taken to strengthen the Group’s position. I would like to note here that it identified a significant outstanding Canadian trade payables position reflecting the cost overruns on budgeted activities in addition to unbudgeted work programme activities in 2017 and H1 2018 in Canada. This highlighted the need for new equity funding and negotiations with third party creditors in Canada, both of which were successfully completed. The actions taken in response to this review should provide the Board and shareholders with greater confidence in the Group’s forward-looking targets.

Creating a stable and sustainable platform The Group enters 2019 having established the foundations to underpin a stable and sustainable platform to deliver its strategy of creating predictable production growth. New “survival” working capital funding was achieved in February 2019 via an equity offer. The Board is reasonably confident that the equity proceeds raised, combined with higher than planned revenues from improved crude oil sales prices in 2019 and other planned measures, will be sufficient to see the Group through to the end of June 2019. We are currently addressing new debt financing at the asset level to fund development drilling of our proven and probable reserves, delivering production and cashflow growth. Finally, I would like to thank the executive management team, staff, shareholders and trade creditors for their continued support. Having strengthened internal processes and reporting controls, I am confident that a successful forthcoming debt and a subsequent equity fundraise are both necessary steps that are required to put the Group in a financial position to be able to recommence drilling and unlock the inherent value of its production and development assets.

James Dewar

Interim Independent Non-Executive Chairman

31 May 2019

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Chief Executive Officer’s Review “2018 has been a year of necessary transition, with significant cultural and operational changes implemented through the Group.”

Adopting a managed, lean approach underpins unlocking Cabot’s shareholder potential Since joining as CEO in June 2018, it became clear that the financial planning, reporting and controls processes required immediate upgrade in order to put in place a more robust business environment. This is a key element in equipping the Group to optimise the potential of its strong portfolio of assets from the platform of a managed, lean approach. To that end, I led a comprehensive strategic, operational and financial review of the business to generate a deeper understanding of where the shortfalls were and how the Group can document and unlock the significant potential upside for shareholders.

Establishing a stable and sustainable platform Based on the findings of that review, in the second half of 2018, we implemented the following key priorities:

• Improved the robustness of financial controls, reporting transparency and cost management under a new Chief Financial Officer;

• Completed a forensic assessment of the Group's balance sheet and obligations to third parties;

• Better defined and managed work streams in subsurface and operational planning, driven by the new role of Chief Technical Officer;

• Increased the effectiveness of the integration and communication between the central technical team and the local management teams; and

• Strengthened the Italian asset management team by adding a dedicated Italian-speaking executive.

Immediate results of these efforts were evident, including:

• Reduction in production costs to less than $20/bbl and

achievement of revised production guidance of 700 bopd

for 2018;

• Reduction of $0.7 million and rescheduling of $1.4 million

of legacy Canadian trade creditor payables;

• Increases in Canadian 2P reserves of 26% to 3.6 mmboe,

and gross resources of 339% to 42.2 mmboe with a 282

well location inventory identified;

• Verification of Canadian assets fluids processing and

pipeline transportation capacity in excess of 30,000 blpd;

and

• Increase in Italian offshore mean gross prospective

resources to 933 mmboe (793 mmboe net to Cabot).

The forensic review and subsequent changes we implemented have given management a clear view of the necessary requirements

going forward. It provides us with a stable and sustainable base on which to build the business, focussed on creating predictable production growth in Canada, aligned with world-scale high-impact exploration potential in Italy.

Canadian assets indicate growth potential The Group’s 100% owned and operated production operations in north west Alberta, Canada, extends over 74,000 acres (as at 31 December 2018) and includes extensive processing and storage facilities. Management proactively acquires and releases land to optimise ownership in accordance with subsurface analysis. 31 wells are currently in production and a further 14 existing wells have the potential to be returned to production through intervention and work over operations. Total gross oil production in Canada in 2018 increased 71% to approximately 256,400 bbls gross (2017: 150,000 bbls), at an average of 703 bopd (2017: 411 bopd) with no Lost Time Incidents. As part of the operational review, the new management team prioritised subsurface analysis and planning as a core strength area for the Group, with new workflows and management of deliverables being implemented by CTO Campbell Airlie. Critically, the performance of the six horizontal wells drilled in the winter of 2017/2018 was assessed to inform the basis of learning and forward production estimates for these and similar new wells. The annual reserves and resources report which was independently generated by McDaniel & Associates Consultants Ltd, Calgary and announced on 6 November 2018 showed an increase in gross 2P reserves of 26% to 3.6 mmboe and a net present value (pre-tax), using an NPV10, of the net 2P reserves of $48.3 million (net to the Group), or $13.4/boe. Growth potential was also illustrated by the 339% increase in gross 2P reserves and resources to 42.2 mmboe which was generated from a basin-wide study and land acquisitions. This results in 282 well locations which are able to be drilled in the Group's predominantly 100% owned and operated mineral rights. The Group commissioned a third party, Atlas BA Consulting Inc., to conduct an independent facilities review for all its main processing and pipelines in the area and confirmed a greater than 30,000 blpd capacity available for fluids processing and transportation. The comprehensive cost analysis of our Canadian operations identified significant previous operating and capital expenditure cost over-runs compared with the approved budgets, resulting in significant creditor liabilities and insufficient funds for a 2018 summer work programme. As a result, the 2018 summer work programme was cancelled, with work being restricted to non-discretionary safety and environment-related activities. This resulted in a declining overall production in the second half of 2018.

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Chief Executive Officer’s Review continued Moving forward, a zero-based budgeting structure for new operating and capital expenditures has been implemented. Operational planning, procurement, cost control and reporting systems have now been implemented to the standard required for a multi-well, multi-rig capital expenditure programme in preparation for future funding of drilling activities which we believe will unlock cashflow and demonstrable shareholder value in a reasonable time frame.

Italian assets offer the opportunity for high returns on investment

The Group has a portfolio of 5 exploration permits and 7 applications which have the potential to generate high returns on investment over the medium- to long-term. The portfolio is focussed offshore in southern Adriatic and Sicily Channel.

Cabot made strong progress in Italy in 2018 and we strengthened our Italian operations in July with the appointment of Hugo d'Apice as Business Development Director. Hugo focusses on and manages the operated and non-operated permits held in Italy alongside the subsurface activities to study and explore the prospects and leads. In November 2018, the Group published the results of an independent resources report produced by Lloyds Register Senergy on our 100% owned and operated assets in Italy. These results reinforced the Group’s belief that it has a leading position in Italy with over 1 Bboe identified prospects and discoveries. In particular, our southern Adriatic and Sicily Channel permits provide world-scale exposure to high-impact offshore exploration. The report stated total mean gross prospective resources of 933 mmboe (793 mmboe net to Cabot), split between gross 653 mmboe in the Adriatic Cygnus Prospect (513 mmboe net to Cabot) and gross 280 mmbbl in the Sicily Channel Vesta Prospect (all net to Cabot).

As announced on 14 February 2019, the Italian government signed a decree which enacts the suspension of work on all oil and gas exploration permits or applications for new exploration permits in Italy whilst a review is undertaken.

The suspension will be lifted as soon as consensus is reached on the terms under which the different areas will proceed with oil and gas exploration. In the event that no consensus is reached within 24 months, the suspension will be lifted. The legislation enables the Italian government to reappraise the exploration permits it has granted.

All Cabot’s exploration permits went through a rigorous environmental review and the Group is optimistic for a positive outcome. Cabot is prepared to rapidly progress our permits as soon as the review is completed, whenever that occurs within the next 18 months.

Offshore permits Adriatic: The Group received approval from the Environmental Impact Assessment to conduct a 3D seismic programme over the permit areas. A positive opinion has been received on the pre-seismic ante-operam work subsequently undertaken. Sicily Channel: The EIA and exploration drilling permit have now been received for the Vesta oil prospect. We are in negotiations to secure funding for 100% of the drilling costs for exploration wells in each of the Cygnus and Vesta oil prospects via a farm-out of our permit interests. This would optimise the cost of exploration versus the upside of these prospects. Onshore permits Po Valley Cascina Alberto: The Group previously farmed out the Po Valley Cascina Alberto exploration permit to Shell Italia, whereby the Group has a carry on $4 million of seismic costs and $50 million on the drilling of an exploration well for which Cabot has a 20% carried interest. Shell Italia has made systematic planning progress, engaging with over 100 local communities in advance of their proposed 500 line-km 2D seismic acquisition programme. Finally, Italian government approval of the potential transaction with Rockhopper plc was not received by the long stop date of 31 December 2018. As announced on 3 January 2019, the Group and Rockhopper plc mutually agreed to not proceed with the proposed transaction. As part of the Group’s renewed focus, we are in the process of assessing our strategic options for the onshore Italy assets.

Australian assets The Group held onshore exploration interests in the Otway Basin South Australia. However, we have taken the decision and, as announced on 9 April 2019, reached an agreement with The Department for Energy and Mining of the Government of South Australia to relinquish this onshore exploration permit in order to focus our financial and operational resources on the Group’s core assets.

Edmonton Light Oil price

As first reported by the Group on 20 November 2018, the Group's Canadian crude oil revenues were unexpectedly and adversely impacted by the increased discount of the Edmonton Light Oil contract price from the West Texas Intermediate crude oil benchmark price. Encouragingly, the spread between WTI and Edmonton prices returned to normal historical levels from January 2019 onwards.

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Chief Executive Officer’s Review continued Outlook

In the second half of 2018, the new management team implemented changes to rectify the cost overruns and a lack of robust financial controls that existed prior to my appointment. The majority of the heavy lifting has now been completed which gives the Group a strong and sustainable base on which to develop its strong portfolio of assets. I believe this to be a key step forward towards maximising the potential of the Group. The strength of the underlying assets of the business has been illustrated by the annual increase of 26% in gross Net Proven plus Probable reserves to 3.6 mmboe as well as the 339% increase in gross reserves and resources of the Canadian asset to 42.2 mmboe. In addition, the spread between WTI and Edmonton has been restored to normal historical levels. We also remain optimistic of a positive outcome from the environmental review in Italy and remain committed to progressing our permits with 1 Bn bbls of identified prospects. Looking ahead, it is clear to me that Cabot has exciting future prospects. The Group will be focussing its full attention on

implementing actions to deliver the vision outlined by the Chairman and which we believe is the route to unlocking shareholder value through dividends and capital growth.

Recognising the Italian government’s current moratorium, our near-term Strategy 2020 is to simplify Cabot’s story and focus on Canada. Here, we intend to build a track record of execution and cost control. In the mid-term, our Strategy 2021 and beyond is to build out the Canadian story, creating cashflow in support of a move towards a dividend policy; and to explore upside potential in Italy. We will do this by leveraging our key competitive strengths which are our robust asset portfolio and our intelligent production optimisation.

The immediate next stage of the Group’s development is to pursue joint ventures and debt and equity financing at the asset level. We have engaged a specialist financial advisory firm and we are now in advanced discussions to source Canada asset-level debt finance for the development drilling of Cabot’s proven and probable reserves in Canada so we will be fully funded for the commencement of the 2019 summer work programme. Assuming the necessary funding is obtained, it is expected to support the growth of the business and deliver value to our shareholders, who are patiently supporting the management team through this transition period.

Scott Aitken

Chief Executive Officer

31 May 2019

An aerial view of the Rainbow 13-06 Oil & Gas Processing Facility in north west Alberta

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Group Financial Review “Our focus on systems, processes and robust cost controls has enabled production costs under $20/bbl.” Overview Despite raising net equity of $15.3m in January 2018, the Group’s liquidity position deteriorated significantly over the course of 2018. The Canadian operations generated a 94% increase in gross revenue (total field production) from $6.3m to $12.2m in 2018 (of which 75% was attributable to the Group in 2017 and 100% attributable to the Group in 2018) and improved gross margins. However, the combination of significant Canadian creditor payments in 2018, reflecting the cost over-runs incurred by previous management, declining production in H2 2018, largely due to the forced cancellation of the Canada 2018 summer work programme, and significant negative Edmonton crude volatility in Q4 2018, resulted in a Group cash balance of only $0.9m and net trade creditors of $4.8m at the end of 2018. Whilst Canada production costs per barrel improved significantly year-on-year (from $32/bbl in 2017 to $20/bbl in 2018), crude sales royalties per barrel increased (from $6/bbl in 2017 to $11/bbl in 2018) reflecting non-commercially optimal well designs implemented by previous management in H1 2018.Whilst the Group’s liquidity was challenging during 2018, the Group’s business fundamentals improved year-on-year. Improved production levels, higher full year prices and netbacks were underpinned by a focus on improved operating and corporate cost controls and an overhaul of financial and operating procedures following changes to the Board and executive management in June 2018. Income statement The Group’s Canadian crude oil revenues increased by 154% year-on-year from $4.8m in 2017 to $12.2m in 2018. The Group also earned a small amount of other income in both years. Annual gross oil production (total field production) increased by 71% to approx. 256,000 bbls or 703 bopd (2017: c. 150,000 bbls or 411 bopd) and the Group’s net share increased from 74.5% in 2017 to 99.5% in 2018 as a result of the transaction with H2P which closed in January 2018 (see note 24). Largely due to the forced cancellation of the

planned 2018 summer work programme, as a consequence of the Group’s severe cash constraints, gross oil production in the second half of 2018 at 645 bopd was significantly lower than the first half production of 761 bopd. Whilst both the annual average WTI benchmark price and the Group’s Edmonton sales price (after crude transportation and marketing costs) increased year-on-year from $51/bbl in 2017 to $65/bbl and from $43/bbl to $47/bbl respectively, there was significant WTI and Edmonton price volatility during Q4 2018 due to extended United States Mid-West refinery shut-ins for maintenance and the resulting glut of local Alberta oil supply. As a direct result, the Group’s Edmonton sales price fell sharply to an average in Q4 2018 of only $25/bbl, representing a 45% discount to the WTI benchmark price; this compared with an average 5% discount during 2017. The Group’s Edmonton sales price has since improved significantly (February-April average $55/bbl, a WTI discount of 6%) with a more stable forward price forecast at this time. Excluding the depletion and amortisation expense for the Canadian oil and gas property, plant and equipment (“PP&E”), both gross margin and netback (crude sales price less production costs, expressed per barrel of oil produced - a measure of performance which is not specifically defined under IFRS or other generally accepted accounting principles) improved significantly year-on-year. Production netback excluding depletion and amortisation increased from 9% or $3.70/bbl in 2017 to 31% or $14.69/bbl in 2018, reflecting higher crude sales prices achieved in 2018 and improved economic recovery of fixed costs of production, partly offset by higher repair expenditures and higher crown royalties (predominantly a function of higher production levels and higher selling prices, offset by a well cost recovery factor based upon the well type).

Canada performance Unit 2018 2017 % Change

Average WTI crude price $/bbl 64.73 50.94 27%

Average Edmonton crude price discount to WTI crude price % (17%) (5%) (12pp)

Average Edmonton crude sales price (after transport & marketing costs) $/bbl 47.21 43.06 10%

Annual gross production mbbls 256 150 71%

Average gross production per day bopd 703 411 71%

Annual net production mbbls 255 113 126%

Annual net sales mbbls 257 110 134%

2018 2017 Change

Production netback*: $/bbl $/bbl $/bbl

Crude sales price 47.21 43.06 4.15

Royalties (11.10) (5.77) (5.33)

Repairs (excl. regular, planned maintenance) (1.43) (1.10) (0.33)

Production costs (19.99) (32.49) 12.50

Netback before depletion & amortisation 14.69 3.70 10.99

31% 9% 22pp

Depletion & amortisation (14.12) (10.17) (3.95)

Netback after depletion & amortisation 0.57 (6.47) 7.04

1% (15%) 16pp * Netback is a measure of profitability which is not specifically defined under IFRS or other generally accepted accounting principles. It is a measure of oil and gas sales revenue net of royalties, production and transportation expenses and is commonly used across the oil and gas industry as a benchmark to compare performance between time periods.

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Group Financial Review continued Group administrative expenses increased by 10% from $2.9m in 2017 to $3.2m in 2018. Whilst Board cash compensation during 2017 was reduced (salaries paid to the Board were temporarily reduced during 2017 and substituted with nil-cost options granted), there was a small administrative headcount increase during 2018 and $0.8m was incurred to settle contractual employment liabilities to former Directors. On an ongoing annualised basis Board fees and salaries for the new Board are now $0.3m lower than the previous Board. The Group’s key commercial transaction during the year with its major shareholder H2P, pursuant to which the Group’s working interest in the Canadian assets increased from 75% to 100%, (combined with $12.1m further investment in the Company by H2P which resulted in its shareholding in the Company increasing from

29% to 56%) was accounted for as a business combination and resulted in certain accounting gains and losses being recognised in the Income Statement. The transaction and its impact on the financial statements is described in detail in note 24. Of the Group’s impairment expense of $0.4m in 2018, $0.3m relates to specific Canadian assets. Based upon the Group’s current understanding of new legislation enacted by the Italian government in February 2019, there is no impairment trigger in respect of the Group’s offshore exploration asset carrying values and no impairment expense has been recognised (see note 12). Group earnings before interest, taxation, depletion, depreciation and amortisation (“EBITDA”) improved from a loss of $2.6m in 2017 to a loss of $2.4m in 2018. Adjusted EBITDA (adjusting for non-recurring and exceptional items), improved from a loss of $2.4m in 2017 to a profit of $0.1m in 2018.

2018 2017 Change Group EBITDA Notes $'000 $’000 $'000

Loss from operations (5,996) (3,741) (2,255)

Add back: depletion, depreciation & amortisation 12 & 13 3,636 1,182 2,454

EBITDA * (2,360) (2,559) 199

Adjusting items:

Gain on step acquisition 24 (2,649) - (2,649)

Loss on termination of option 24 2,178 - 2,178

Gain on bargain purchase 5 - (2,035) 2,035

Impairment losses 12 & 13 413 685 (272)

Environmental remediation costs 4 1,264 1,198 66

Restructuring expenses 4 1,049 - 1,049

Business acquisition/disposal expenses 4 215 265 (50)

Adjusted EBITDA * 110 (2,446) 2,556 * EBITDA is a measure of profitability which is not specifically defined under IFRS or other generally accepted accounting principles. It is a measure of a company's operating performance which can be used to compare profitability among companies, as it eliminates the effects of financing, accounting for capital expenditures and taxation.

Balance sheet position The Group’s net current liabilities at 31 December 2018 were US$4.5m (2017: net current liabilities US$6.3m). The Company raised net equity proceeds of $15.3m in January 2018 ($15.5m gross), which were proposed to be invested in the winter and summer work programmes in Canada. Unbudgeted cost over-runs resulted in significant creditor liabilities and the effective cancellation of the summer work programme. The incoming management team therefore conducted a post year end fundraise, see below. The net $12.8m increase in non-current assets and the US$1.7m increase in non-current provisions predominantly reflect the accounting and financial impact of the H2P transaction (see note 24). Cash flows and liquidity Net cash outflows from operating activities reduced from $1.9m in 2017 to $0.1m in 2018, predominantly due to higher sales volumes, realised prices and gross margin, partially offset by higher general and administrative expenses including one-off restructuring expenses and the payment of environmental remediation costs of approximately $1.3m (see note 4). Cash outflows from investing activities increased by $11.6m year-on-year. The $13.1m paid for Canadian property, plant and equipment in 2018 reflected payments for the Canada H1 2018 work programme and the partial settlement of outstanding 2017 Canadian creditors. The Group also

paid $1.2m for ongoing capitalised exploration in Canada and offshore Italy. The Company paid $1.6m of the $1.75m deferred cash consideration, pursuant to the terms of the H2P transaction (see note 24). The Group cash balance at 31 December 2018 was only $0.9m and on 31 December 2018 the Company announced that it was in advanced discussions with the Company's other significant shareholders regarding an equity fundraise to enable the settlement of the overdue Canadian trade creditors and provide short term working capital through to the end of Q1 2019. Post year end In March 2019, the Company raised £2.53m ($3.17m) in gross equity proceeds before expenses from a subscription and open offer, providing sufficient liquidity for the Group to fund the partial settlement of outstanding Canadian and Group trade creditors and to provide short-term working capital. The Company is in advanced discussions to source Canada asset-level debt finance for the development drilling of Cabot’s proven and probable reserves in Canada, commencing with a fully funded 2019 summer work programme.

Petro Mychalkiw

Chief Financial Officer

31 May 2019

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Vision TO DEVELOP PRODUCTION SO THAT CABOT MOVES TOWARDS PAYING INVESTORS A DIVIDEND AND INVESTING IN HIGH-IMPACT EXPLORATION TO DELIVER

UPSIDE CAPITAL GROWTH.

Group Overview CABOT HAS CONVENTIONAL, LIGHT OIL PRODUCTION OPERATIONS IN NORTH WEST ALBERTA, CANADA, PLUS EXPLORATION AND APPRAISAL OPPORTUNITIES IN

ITALY, BOTH OFFSHORE AND ONSHORE.

Canada – production and development The Group’s land strategy has been to establish a production base in north west Alberta, Canada with mineral rights across 74,000 acres (as at 31 December 2018) and extensive processing and storage facilities. The assets are located in the Rainbow Lake, Zama and Virgo areas and consist of 100% owned and operated mineral leases, production facilities, pipeline infrastructure and wells.

Production led growth − financial stability

− core value growth

− within management’s control

Italy – exploration and appraisal Cabot has a portfolio of 100% owned and operated exploration permits and applications which have the potential to generate high returns on investment over the medium- to long-term. The portfolio is focused offshore in the southern Adriatic and onshore in the Po Valley region.

Exploration & appraisal upside − opportunity for significant returns

− step change in value

− farmdown to fund and diversify exploration portfolio

Business Model CABOT DRAWS UPON MULTIPLE RESOURCES AND RELATIONSHIPS TO CREATE VALUE. OUR BUSINESS WORKS ACROSS ALL STAGES OF THE UPSTREAM OIL AND

GAS LIFE CYCLE, FROM EXPLORATION TO PRODUCTION. OUR FOCUS IS ON DELIVERING VALUE GROWTH FOR ALL OUR STAKEHOLDERS.

Canada – production and development Cabot generates revenue through its scalable and repeatable development drilling programme in Canada. Predictable production and cashflow growth are generated from the Group’s existing 100% owned and operated Canadian land position which the Directors believe has a capacity production facility of up to 10,000 barrels of oil per day, creating a future funding source or dividend potential. Macquarie Oil Services Canada Limited is Cabot’s crude oil sales marketeer.

Reserves and Resources 42 mmboe

Reserves 3.6 mmboe

Processing and Pipelines 30,000 blpd

Production profitable at $30/bbl2

Italy – exploration and appraisal The Group aims to amplify shareholder returns by creating high-impact exploration events in Cabot’s leading permit position, which has generated 1 Billion barrels of identified prospects over a 10-year exploration effort. Cabot’s Italian assets have all been subject to rigorous environmental assessments and management are hopeful for a positive outcome from the Italian government’s recently announced review into the suitability of onshore and offshore territories for sustainable hydrocarbon prospecting, exploration and development activities. The Group intends to farm-down the 100% owned and operated Italian permits to secure additional exploration funding and diversify the number of high-impact events, in order to increase the cumulative likelihood of creating a value step-change in the Company’s value for investors.

5 Permits 7 Applications Rigorous environmental assessment & management

2 Edmonton Light Oil sales price

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Strategic Priorities

CABOT SEEKS TO DELIVER GROWTH IN SHAREHOLDER VALUE THROUGH LOW-COST PRODUCTION GROWTH IN CANADA AND A PORTFOLIO APPROACH TO HIGH-IMPACT EXPLORATION. Cabot has a clearly defined growth strategy which has been developed taking into account the market, our unique position and how we create value. Recognising the Italian government’s current moratorium, our near-term Strategy 2020 is to simplify Cabot’s story and focus on Canada. Here, we intend to build a track record of project execution and cost control. In the mid-term, our Strategy 2021 and beyond is to build out the Canadian story, creating cashflow in support of a move towards a dividend policy; and to explore upside potential in Italy.

Robust asset portfolio Cabot’s assets in Canada occupy a dominant basin master land position supported by modern facilities. The value chain is strengthened because the Group’s assets are 100% owned and operated. Italy offers attractive fiscal terms: the offshore assets provide a basin master position whilst the carried exploration onshore assets are adjacent to existing production infrastructure in well-proven petroleum basins. Cabot proactively reviews its asset portfolio on an ongoing basis with a view to increasing opportunities to unlock shareholder value. This may include developing the land bank; securing swaps into other basin master positions; and streamlining licences.

Strong capital discipline As a result of the strategic review mentioned elsewhere in this Report, overheads are now lean. The Group has zero-base budgeted

its operating expenses with a view to reaping the maximum netback cashflow from existing production year-on-year. Cabot’s crude oil production is profitable at approximately $30/bbl3. Cashflow will be invested in additional development drilling programmes. Cabot benefits from low incremental production costs with capital development programmes being profitable at less than $35/bbl³.

Intelligent production optimisation Cabot is focussed on structuring the balance sheet to fund a scalable and repeatable development drilling programme. In Canada, the Group intends to exploit its well inventory by drilling targeted light oil horizontal production wells: facilities and pipelines are already largely in place. When deployed, BlueSpark stimulation technology will help maximise well production and recovery. Cabot offers core strength in subsurface and surface facilities. The new management team has prioritised subsurface analysis and planning, with new workflows and management of deliverables being implemented by the CTO and the subsurface team leader. The drilling, logistics and production performance of the wells drilled in the winter of 2017/18 has created learnings for us going forward. Improved new well planning is based on upgraded and detailed subsurface work, with improved logistical planning for the drilling phase and subsequent completion and tie-in. This leads to high-grading of well locations, improved cost efficiency and lower operational risk.

3 Edmonton Light Oil sales price

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Key Performance Indicators THE BOARD HAS ESTABLISHED KEY PERFORMANCE INDICATORS WHICH, IF DELIVERED AGAINST OVER TIME, WILL ENSURE SUSTAINABLE AND ATTRACTIVE

GROWTH

Health, safety and environment

Measure Performance

No incidents or accidents using the Lost Time Incident measure: an event that results in time lost from work of one day or more. No reportable environmental issues.

There were no fatalities or LTI incidences during the year. Two reportable issues occurred during 2018. One was a spill which involved less than 10m3 and the second a small bush fire adjacent to one of the Group's leases.

Production and reserves – current and future cashflow generation capability

Measure Performance

The level of reserves and resource as reported by or derived from an external reserve consultant and the total production for the year.

Gross 2P reserves increased in absolute terms by 0.8 mmboe from 2.8 mmboe as at 31 December 2017 to 3.6 mmboe as at 31 December 2018 (2017: increase of 0.9 mmboe). Net 2P reserves plus mid-case contingent and prospective resources of 42.2 mmboe were identified following a basin-wide study and land acquisitions. The NPV10 of the 2P reserves is $48.3 million (net to the Group), or $13.4/boe. Average gross production in 2018 was 703 bopd or approximately 256,400 bbls gross in total, compared to 411 bopd in 2017.

Finding and development costs – economic development of reserves

Measure Performance

The total costs incurred in the acquisition and development of reserves during the year, divided by the increase in 2P reserves for that same year, to present a dollar per barrel finding and development cost. This is a non-IFRS measure, but an important measure of the economic growth of the business.

Capital investment in Canada of $8.2 million (see note 13a) produced additional reserves of 1.08 mmboe in 2018 or $8 per 2P barrel of increased reserves (2017: $13).

Following the changes to the Board and senior management team in 2018, the Company intends to review and upgrade its Key Performance Indicators in 2019 to better align with the strategic priorities set out on page 9. These new KPIs will enable the Board to focus on delivering sustainable growth, whilst improving transparency for shareholders.

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Risk Management

THE ENVIRONMENT AND MARKETS IN WHICH WE OPERATE ARE DYNAMIC AND SUBJECT TO CONSTANT CHANGE. WE MUST BE ABLE TO RESPOND TO THESE CHANGES, TAKING

APPROPRIATE LEVELS OF RISK TO PROTECT OUR MARKET POSITION AND TO TAKE ADVANTAGE OF OPPORTUNITIES. We have integrated our risk management processes with our strategy and embedded them throughout the Group, aligning risk management, strategy and performance across all entities, departments and functions. This enables us to make better business decisions. A failure to manage these changes and risks could have an adverse impact on our business and on the achievement of our strategic goals.

Risk Management Framework To understand our risk profile and align it with our objectives and decision-making processes, we operate a global risk framework that ensures we identify risk, set tolerance levels and continually manage risk across our business.

Risk Oversight The Audit Committee monitors the effectiveness of the Group’s risk management and control systems through regular updates from management, reviews of the key findings of the external auditors, and an annual review of the risk management process. Results are reported to the Board, which has overall responsibility for risk management.

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Risk Management continued

Principal Risks

Financial Risk

Impact How we manage it

Liquidity

Insufficient financial resources could result in the delay or curtailment of operations, accelerating the abandonment liability and cessation of going concern.

The Group maintains detailed forecasts of the potential future capital requirements and amends work programmes to match capital resources available. The Group considers all forms of external capital to maintain liquidity.

Capital Discipline

Lack of discipline in the deployment of capital to appropriate projects may result in exposure to unplanned capital outlay.

The Group only pursues projects which are of an appropriate size and risk in relation to the Group’s resources.

Commodity Price

Weak or volatile commodity prices will impact negatively on the Group’s cash flow and increase the financial risks associated with medium to long term projects.

The Group will consider the hedging of future production where appropriate and look to develop and maintain low cost production.

Technical Risk


Subsurface Insufficient or incorrect interpretation of data can lead to the wrong conclusions regarding the subsurface environment.

Robust technical work processes, a full data inventory and technical peer review ensure opportunities are fully evaluated before investment decisions are made.

Reserves

Inaccurate estimates may result in the over or under valuation of an asset and the incorrect allocation of capital.

An internal reserves review is carried out as part of an annual process. External audits are undertaken in accordance with regulatory standards and industry best practice.

Political and Other Risk


Political

Regulatory or legislative uncertainty or changes in the Group’s country of operations may result in project delays or an inability to progress assets in a timely manner. Changes in fiscal policy may negatively affect the profitability or overall economics of a project.

The Group actively engages with government and regulatory bodies in all the countries that it works. The Group’s assessment is that Brexit will have little impact on its business and that should UK Companies no longer be able to hold Italian permits, the permits can be transferred to an Italian registered subsidiary.

Key Management There are currently no long-term contracts in place for key management.

The Group is focussed on achieving a fully-funded business plan.

This Strategic Report, comprising the Chairman’s Statement, Chief Executive Officer’s Review, Group Financial Review, Vision and Group Overview, Business Model, Strategic Priorities, KPIs and Risk Management is approved on behalf of the Board by:

James Dewar


31 May 2019

Health, Safety and Environment Risk


Major Incident

A major incident such as a blow out, significant pipeline leak or fire at a well site, may result in harm to personnel, the environment or damage to infrastructure.

The Group has designed and implemented a Health, Safety and Environmental Management System that is aligned to the principles of ISO 14001 and OHSAS 18001 and enables our staff, contractors and all sub-contractors to work to the principles of our Health, Safety and Environment policy.

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Board of Directors and Senior Management

James Dewar Interim Non-Executive Chairman James joined Cabot in July 2018 as Interim Non-Executive Chairman. James has 37 years’ international business, finance, accounting and commercial experience. His career has included senior roles at Ambit Energy Corporation, Viking services Ltd, Energy World Corporation, Equus Petroleum, Atlantic Energy, East West Petroleum, Dana Gas and BP. James currently serves as an Independent Non-Executive Director and Audit Committee Chair for Lamprell Plc, PICO International Petroleum Corporation and for Cheiron Petroleum Corporation. James is a Chartered Accountant having qualified with EY.

Rachel Maguire Independent Non-Executive Director Rachel Maguire is an entrepreneur who is the founder and CEO of Arko Iris, a business consultancy advising organisations on best practice in stakeholder engagement, corporate governance and corporate responsibility. She is a seasoned professional who brings with her over 20 years’ experience of The City and capital markets. Previous roles include senior management positions at London Stock Exchange including Head of UK Business Development and Head of AIM (UK). Rachel’s client experience includes FTSE 250 companies and global companies including Spectris, internationally-based MHP S.E and Euroclear. Rachel is also an independent trustee at the National Paralympic Heritage Trust where she chairs the Finance & Development Committee. She is a member of the Chartered Institute of Taxation.

Scott Aitken Chief Executive Officer Scott Aitken was appointed Chief Executive Officer in June 2018. He does not sit on the Board of Directors. Scott has more than 25 years’ experience in the oil and gas exploration and production industry, including 15 years as CEO. He co-founded H2P, Cabot’s largest shareholder, alongside Campbell Airlie and Petro Mychalkiw in 2015 as the oil exploration and production subsidiary of pulse-power technology world leader, I-Pulse. Scott started his career as a Petroleum Engineer with ExxonMobil (formerly Mobil) in Aberdeen and went on to work in senior roles, including chief executive officer and regional head at companies with operations in Europe, Africa, Asia, Middle East and North America. He is highly experienced in growing small companies into multi-billion dollar operations through the leverage of technology alongside community partnership. Scott has raised $1 billion capital investment for oil and gas exploration, development and production over the last 15 years, creating ventures in the USA, Canada, Turkey, Caribbean and West Africa, delivering over 100,000 boepd production and 1 billion boe reserves and resources.

Petro Mychalkiw Chief Financial Officer Petro Mychalkiw joined Cabot as a Non-Executive Director in January 2018 and was appointed Chief Financial Officer in June 2018. Petro has 28 years’ experience as a Chartered Accountant and over 13 years’ experience in the natural resources industry. His career has included roles as Chief Financial Officer of Oriel Resources, Equus Petroleum, Orsu Metals Corporation and most recently at I-Pulse Inc., the parent company of H2P. Petro has extensive experience of project financing including resource development projects, acquisition fundraising, debt refinancing and private placings.

Campbell Airlie Chief Technical Officer Campbell Airlie was appointed as a Non-Executive Director in December 2016 and was appointed as Chief Technical Officer in June 2018. Campbell has 38 years’ experience as a petroleum engineer with extensive time spent in upstream field development strategy and implementation. His career has included reservoir and production management and technical excellence roles with Schlumberger, BP, Edinburgh Petroleum Services and most recently as founder and Chief Technical Officer of Seven Energy. Campbell has been a Distinguished Lecturer in Asset Management with the Society of Petroleum Engineers and a visiting lecturer in reservoir engineering and production optimisation at Heriot-Watt University.

Paul Lafferty President – Cabot Energy Inc. Paul joined Cabot in September 2014 as Chief Operating Officer and moved to Calgary in April 2017 after being appointed President of Cabot Energy Inc. He has a facilities engineering background and an extensive background in oil and gas operations. He previously held management positions with Consort Resources, Caledonia Oil and Gas and most recently as General Manager, Operations for E.ON Exploration and Production Ltd. Paul has experience of working in the UK’s North Sea, North Africa, Norway, and North America. He is a Member of the Institute of Measurement and Control and the Engineering Council in the UK.

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Corporate Governance Report IT IS THE BOARD’S ROLE TO ENSURE CABOT IS MANAGED FOR THE LONG-TERM BENEFIT OF ALL SHAREHOLDERS, WITH EFFECTIVE AND EFFICIENT PLANNING, DECISION-MAKING AND

BUSINESS MONITORING. ROBUST CORPORATE GOVERNANCE ENSURES THAT RISK IS REDUCED AND IS IMPORTANT TO THE ACHIEVEMENT OF LONG-TERM GROWTH IN VALUE. Statement of compliance with The Quoted Companies Alliance Corporate Governance Code The Board is committed to a strong culture of corporate governance and welcomes the guidance for small and mid-sized companies published by the Quoted Companies Alliance (“QCA”) in April 2018. As an AIM-listed company on the London Stock Exchange, Cabot has adopted the QCA Corporate Governance Code (“the Code”), which is recognised under London Stock Exchange’s AIM Rules for Companies and sets out 10 principles that should be applied. The Company’s Statement of Compliance with the Code can be found on Cabot’s website at https://www.cabot-energy.com/investors/corporate-governance/ including a short explanation of how the Company applies each of the principles and any departures from the Code. Governance framework

BOARD OF DIRECTORS

The Board reserves key decisions and matters for its own approval, including its core responsibilities of setting the Group’s strategic direction, overseeing the delivery of the agreed strategy, managing risk and establishing the culture, values, standards and approach to responsible business for the Group as a whole. It develops and maintains a formal, rigorous and transparent procedure for recommendations on Board appointments and reviews Board succession plans.

AUDIT COMMITTEE

REMUNERATION COMMITTEE HEALTH, SAFETY AND ENVIRONMENT

COMMITTEE

▪ Oversees internal risk and controls strategy, including whistleblowing arrangements

▪ Reviews the Annual Report and interim financial statements prior to submission to the Board

▪ Reviews reports from the external auditor

▪ Provides recommendations to the Board on the appointment and retention of the auditors and other professional advisers

▪ Reviews the key risks and mitigations

▪ Approves financial policies

▪ Sets, reviews and recommends to the Board the remuneration for Directors and other senior executives

▪ Addresses succession planning and monitors Board performance

▪ Sets overall remuneration strategy and policy for the Group

▪ Promotes a strong safety culture

▪ Provides resources for the HSE management system

▪ Oversees its implementation across all assets

▪ Monitors HSE performance

CHIEF EXECUTIVE OFFICER AND EXECUTIVE DIRECTORS

Overall responsibility for day-to-day management of the business and implementation of approved strategy lies with the CEO, while specific areas of the business are managed by the other Executive Directors.

How the Board operates The Board meets when required and has at least six scheduled meetings per year which are aligned with the financial calendar. The Board meets annually to discuss the Group’s strategy. Members of the Board are elected by a majority vote of shareholders at the first AGM after their initial appointment. One third of Board members must also stand down at each AGM and can offer themselves for re-election. Any Director over the age of 70, or who will pass the age of 70 within the next six months, must stand down and can offer themselves for re-election at the AGM. There are no restrictions on the number of times Directors can be re-appointed. The Group Financial Controller supports the Board by acting as the Company Secretary. Role of the Chair The Board elects the Chair from amongst members that meet the Board’s criteria for an Independent Director following the preparation of a job specification by the Nominations Committee. Cabot currently has an Interim Independent Non-Executive Chair, James Dewar, and a process is in place to recruit a permanent Independent Non-Executive Chair. On the recruitment of a new Independent Non-Executive Chair, James Dewar will become the Senior Independent Director and the Board will revisit the chair and membership of each of the Board committees. The Chair is responsible for the proper and efficient functioning of the Board, including determining the calendar of Board and Committee meetings and the agenda of the Board’s meetings after consultation with the CEO and the Directors. Prior to each meeting, the Chair ensures that Directors receive complete and accurate information and, to the extent appropriate, a copy of any Management presentation to be made at the Board meeting. The Chair also makes sure that there is sufficient time for making decisions. On the completion of each board meeting, minutes are circulated on a timely basis for review and comment by each director, after which these are finalised and approved by the Chair.

https://www.cabot-energy.com/investors/corporate-governance/

https://www.cabot-energy.com/investors/corporate-governance/

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Corporate Governance Report continued Role of the CEO The CEO reports directly to the Board of Directors. The CEO is responsible for the execution and management of the outcome of all Board decisions. The CEO is delegated powers that are not exclusively reserved to the Board or to the Shareholders’ Meeting. The CEO can delegate authority for daily management to subordinate executives but retains ultimate accountability to the Board of Directors for the actions which are conducted during the performance of the role and the actions of delegates. Relationship between the Chair and the CEO A clear division of responsibilities is maintained between the Chair and the CEO. The CEO may not carry out the duties of the Chair and vice versa. The Chair is required to establish close relations with the CEO by giving him support and advice while respecting the executive responsibilities of the CEO. The CEO provides the Chair with all the information he requires to carry out his tasks. Board culture, performance and balance Cabot’s Board culture is one of openness and constructive debate; Directors are able to voice their opinions in a relaxed and respectful environment, allowing coherent, inclusive discussion. When running Board meetings, the Chair maintains a collaborative atmosphere and ensures that all Directors contribute to the debate. The Chair assesses the individual contribution of each of the members of the Board to ensure a well-balanced and committed team. Cabot’s Non-Executive Directors are viewed as independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgment. During the course of the year, gender diversity has been addressed through the appointment of new Non-Executive Directors. The Company believes that once the recruitment of the Non-Executive Chair is complete, the balance of skills on the Board and the Board committees will possess the required level of skills necessary to address the Company’s requirements. Board membership, changes and attendance during the year During 2018 there were a number of changes to the Board. At the 31 December 2018 year end, the Board had five directors, two of whom are regarded as independent: James Dewar, Interim Non-Executive Chairman, and Rachel Maguire, Non-Executive Director. Two of the Executive Directors represent the interests of H2P, the Company’s largest shareholder (see * in the table below). The table below sets out dates of Board appointment and departure together with attendance at Board meetings during the year. This is shown as the number of meetings attended in person or via conference call out of the total number of meetings possible for the individual Director.

Member Number of Board Meetings

James Dewar (appointed 27 July 2018) 10/10

Petro Mychalkiw* (appointed Non-Executive Director on 29 January 2018 and Executive Director on 18 June 2018)

17/17

Campbell Airlie* (a Non-Executive Director since 2016, appointed Executive Director on 18 June 2018) 17/17

Paul Lafferty 17/17

Rachel Maguire (appointed 7 November 2018) 3/3

Iain Lanaghan (resigned 27 July 2018) 7/7

Jonathan Murphy (resigned 27 July 2018) 7/7

Keith Bush (stepped down 18 June 2018) 4/4

Nicholas Morgan (stepped down 18 June 2018) 4/4

Where any Directors are unable to attend a meeting either in person or by conference call, they are encouraged to communicate their opinions and comments on the matters to be considered via the Chair of the Board. As noted above, there were no instances of non-attendance during the year. Communication with Shareholders During the year, members of the leadership team held a number of meetings with shareholders to discuss a range of matters. In particular, topics included the findings of the strategic review and the proactive actions the Company was proposing to address the issues identified, as disclosed in the Company’s news and regulatory announcements. Further detail is included in the Chairman’s Statement and the CEO’s Review on pages 2 and 3 respectively. The Company was pleased to see shareholder support for the post year end “survival” working capital fundraise in March 2019 via an equity offer. Clear communication with shareholders and all stakeholders is an important aspect of the role of the Company’s Board and senior management. In addition to the regulatory forms of communication, including annual and interim reports, plus Regulatory News Service releases, the Board welcomes enquiries from shareholders and strives to produce a timely response. These activities are supported by the Company’s professional advisers. Shareholders are encouraged to attend the Annual General Meeting and other shareholder meetings convened during the year to discuss the Group’s progress.

James Dewar


31 May 2019

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Corporate Responsibility Overview

CORPORATE RESPONSIBILITY IS A KEY ELEMENT OF CABOT’S BUSINESS STRATEGY AND IS VIEWED BY THE BOARD AS IMPORTANT TO THE ACHIEVEMENT OF THE GROUP’S VISION AND

GOALS. WE STRIVE TO CONDUCT ALL OF OUR OPERATIONS IN A RESPONSIBLE AND TRANSPARENT MANNER. WE AIM TO DO THIS BY ADHERING TO THE RELEVANT COMPANY POLICIES

AND THE APPLICABLE LAWS AND REGULATIONS. WE ALSO STRIVE TO ALIGN OUR ACTIVITIES WITH GOOD INDUSTRY CORPORATE RESPONSIBILITY PRACTICE (AS OUTLINED BY IPIECA4).

Governance

Board committee The Health, Safety and Environment Committee is responsible for recommending polices on health, safety and environmental issues to the Board. It:

− promotes a strong safety culture;

− provides resources for the HSE management system; and

− oversees its implementation across all assets. For full details of the principle responsibilities of the Committee, areas of focus in 2018 and performance, please see page 17.

Executive Management CEO, Scott Aitken, is responsible for the Group’s corporate responsibility approach, policies, systems and performance. The management team supports him in this role and is fully committed to ensuring that the related expectations of the Group’s stakeholders are met. Further information is available within the responsibility section of the Group’s website.

Key focus areas The Group approaches corporate responsibility by addressing six key focus areas and setting an overall goal for each one. These are recorded below.

Health and safety

Environment and climate change

Stakeholder engagement

• We will adhere to industry health and safety good practice at all times

• We will ensure effective management of the company’s environmental impacts and address the challenges presented by climate change

• We will conduct all of our stakeholder relations with integrity and transparency

People

Communities

Business conduct

• We will provide workplace working conditions in line with industry good practice and respect and support diversity within the workforce

• We will aim to be a supportive and active member of our local communities, respect human rights and be a good neighbour

• We will adhere to the applicable laws and regulations and the relevant international standards and guidelines

Policy

Health, Safety and Environment Policy Cabot’s HSE Policy sets out the activities the Group expects and the required behaviours. The Policy can be found on the Group’s website at: https://www.cabot-energy.com/about-us/corporate-social-responsibility/#hseq-policy.

Sustainability and Environmental Impact Policy The Group’s Sustainability and Environmental Impact Policy explains how Cabot manages its impact on the environment and the actions it will take to manage environmental and social impacts. The Policy can be found on the Group website at: https://www.cabot-energy.com/about-us/corporate-social-responsibility/#sustainability-environmental-policy.

4 IPIECA is the global oil and gas industry association for advancing environmental and social performance

https://www.cabot-energy.com/about-us/corporate-social-responsibility/#hseq-policy

https://www.cabot-energy.com/about-us/corporate-social-responsibility/#sustainability-environmental-policy

https://www.cabot-energy.com/about-us/corporate-social-responsibility/#sustainability-environmental-policy

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The Health, Safety and Environment Committee THE HEALTH, SAFETY AND ENVIRONMENT COMMITTEE ASSISTS THE BOARD IN FULFILLING ITS OVERSIGHT RESPONSIBILITIES IN REVIEWING THE STRATEGIES, POLICIES, INITIATIVES, RISK EXPOSURE, TARGETS AND PERFORMANCE OF THE GROUP AND, WHERE APPROPRIATE, OF ITS SUPPLIERS AND CONTRACTORS IN RELATION TO HEALTH, SAFETY AND ENVIRONMENT. The principle responsibilities of the Health, Safety and Environment Committee The Health, Safety and Environment (“HSE”) Committee aims to promote a strong safety culture across the whole of the Group. It provides the necessary resources for the Group’s HSE management system and oversees its implementation across all the Group’s assets. The Committee directs Cabot’s HSE strategy and initiatives and tracks conformance to the plan on a continual basis. Formal HSE performance reporting is made to the Board at every scheduled Board meeting. Regular audits are conducted in the field to assure the Committee that the systems of both the Group and our main contractors are managing HSE risks appropriately. These audits are supplemented by regular senior management visits to operational sites, demonstrating a commitment to HSE from the top of the organisation. Robust Crisis Management Plans and location-specific Incident Management Plans are in place to ensure the safety of staff and contractors, minimise damage to the environment and assets, as well as manage potential reputational risk to the Group. These plans are tested regularly with full emergency response exercises involving all parts of the Group. Operations in the field are outsourced to contractors selected through a robust selection process and regularly monitored to ensure they adhere to Cabot’s HSE policies, industry best practice and legal and other requirements in those countries in which the Group operates.

Areas of focus in 2018 The HSE Committee met five times during 2018 and performed the following functions:

− monitored and regularly reviewed the corporate HSE system against the requirements of ISO 14001 and OHSAS 18001 environmental and health and safety standards to ensure the system remained compliant with the principles of the respective standards;

− monitored and regularly reviewed Group operations in Canada with specific HSE reporting systems, incident investigation systems and emergency management plans implemented at each site, interfaced with those of our contractors where appropriate;

− ensured that crisis management and incident response training was given throughout the Group;

− monitored developments in legislative and regulatory requirements through specialist third parties and communicated changes to the wider organisation;

− performed safety management audits at site in Canada;

− supported an asset integrity programme for the main pipelines and key facilities in Canada to ensure risks to people, the environment and production were minimised and to provide a baseline for future maintenance and production assurance for the assets; and

− strengthened the HSE team in Canada by appointing an in-house HSE Manager to oversee the implementation and further development of the HSE Management System and related reporting requirements.

Paul Lafferty

Chairman of the HSE Committee

31 May 2019

2018 Lost Time Incidents

0

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The Audit Committee THIS REPORT SETS OUT THE ACTIVITIES OF THE AUDIT COMMITTEE DURING 2018

The role of the Audit Committee The Audit Committee is governed by terms of reference which are agreed by the Board and subject to annual review. The principal objectives of the Committee are to:

− monitor the integrity of the published financial information of the Group;

− monitor the Group’s internal control procedures and risk management system;

− make recommendations to the Board regarding the appointment, reappointment and removal of external auditors; and

− review whistleblowing arrangements and the Group’s procedures to prevent bribery and corruption, including procurement controls, project management controls, supplier payment procedures and revenue collection.

Areas of focus during 2018 The Committee comprised Iain Lanaghan (resigned 27 July 2018), Jon Murphy (resigned 27 July 2018), Campbell Airlie (resigned from the committee 18 June 2018), James Dewar (appointed 27 July 2018) and Rachel Maguire (appointed 7 November 2018). Iain Lanaghan was the Chairman of the Audit Committee until 27 July 2018, when James Dewar was appointed as the new Chair. The Committee met three times in 2018 to execute its responsibilities, two of which included the new Chair. Meetings focussed on audit planning, risk management, internal controls and the approval of the interim and final results including the key judgements associated with acquisition accounting, asset impairment review assumptions and calculations, creditor completeness reviews and the going concern requirements and statement.

Accounting, tax and financial reporting The Group financial statements and accounting policies are reviewed by the Committee to comply with International Financial Reporting Standards. The annual budget, liquidity risk, changes to the QCA Corporate Governance Code and statutory audit requirements are all considered on an annual basis. As part of the process the Committee considers reports from the external auditors (Deloitte) on the assessment of the internal control environment. Internal controls and risk The Board assigns to the Committee the responsibility of monitoring and improving the Group’s internal controls governing the finances of the business. The system of internal controls is vital in managing the risks that face the Group and safeguarding shareholders’ interests and this has been upgraded in a number of areas since the new management team were appointed in June 2018. It is the Board’s objective to be aware of the risks, to mitigate them where possible, to insure against them where appropriate and to manage the residual risk in accordance with the objectives of the Group. External auditors The Committee reviews the findings of Deloitte and then approves the scope of work to be undertaken for the next financial reporting year, including the associated audit fees. In addition, a review of the effectiveness of the external audit process is undertaken and an annual assessment of the external auditor’s independence is made. Whistleblowing and prevention of bribery and corruption The Committee undertakes a review of whistleblowing policy arrangements and the Group’s procedures to prevent bribery and corruption to assess the effectiveness of the Group’s Anti-Bribery and Corruption Annual Plan. The Committee is pleased to report that no incidents were raised during 2018, nor have any been raised to date in 2019.

James Dewar

Chairman of the Audit Committee

31 May 2019

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Report on Directors’ Remuneration THIS REPORT SETS OUT THE DETAILS OF THE REMUNERATION POLICY FOR THE COMPANY’S DIRECTORS, DESCRIBES ITS IMPLEMENTATION AND DISCLOSES THE AMOUNTS PAID IN

2018. THE REPORT MEETS STATUTORY REQUIREMENTS, IN PARTICULAR THE RELEVANT REGULATIONS ON DIRECTORS’ REMUNERATION REPORTS PURSUANT TO THE COMPANIES ACT

2006 AND PROVISIONS OF THE CODE AS PRESCRIBED FOR AIM QUOTED COMPANIES. ADDITIONAL REMUNERATION DETAILS HAVE BEEN OFFERED VOLUNTARILY. Remuneration Committee membership During 2018 the Remuneration Committee comprised Campbell Airlie (resigned from the committee 18 June 2018), Jonathan Murphy (resigned 27 July 2018), Iain Lanaghan (resigned 27 July 2018), James Dewar (appointed 27 July 2018) and Rachel Maguire (appointed 7 November 2018). Campbell Airlie was the Chairman of the Remuneration Committee until 18 June 2018. James Dewar was appointed Chairman of the Remuneration Committee on 27 July 2018. Remuneration policy The Committee aims to ensure that total remuneration is set at an appropriate level for the Group and its operations. The objectives and core principles of the remuneration policy are to:

− ensure remuneration levels support the Group’s strategy;

− ensure that there is an appropriate link between performance and reward;

− ensure alignment of Directors, senior management and shareholder interests;

− ensure that long-term incentives are linked to shareholder return;

− enable the Group to recruit, retain and motivate individuals with the skills, capabilities and experience to achieve its objectives; and

− strengthen teamwork by enabling all employees to share in the success of the business.

There are four elements of the remuneration package for Executive Directors and senior management:

− basic annual salary;

− benefits in kind;

− discretionary annual bonus; and

− long-term incentive plan.

Remuneration Committee areas of focus during 2018

The Committee met twice during 2018 to determine the remuneration arrangements of the Directors and senior employees.

With the change of the executive management team in June 2018 and the subsequent changes to the Board in July and November 2018, the key Remuneration Committee meeting was held in December 2018 with James Dewar and Rachel Maguire in attendance and Scott Aitken present to represent the executive management team. The impact on the four elements of the remuneration package are noted below.

Basic annual salary An Executive Director’s basic salary and the other fixed elements of pay are usually determined by the Committee at the beginning of

each year with any changes taking effect from 1 January. The individual salaries and benefits of Executive Directors are reviewed and adjusted taking into account individual performance, market factors and sector conditions. With the change of the executive management team in June 2018 and the appointment of Scott Aitken, Campbell Airlie and Petro Mychalkiw as CEO, CTO and CFO respectively, the Remuneration Committee requested an independent remuneration benchmarking report from a leading international professional services firm, to provide the basis for a decision on executive basic annual salary (as well as benefits in kind, a discretionary annual bonus structure and a long-term incentive plan) suitable for an AIM quoted oil and gas company of Cabot’s size and underlying asset value. The intent was to have the annual basic salary for the CEO, CFO and CTO (which was accrued but not paid to these executives in 2018) and the benefits-in-kind apply from 18 June 2018 through to the end of March 2019, with the accruals settled from the cash received from the subscription and open offer in Q1 2019. The Remuneration Committee supported the recommendations of the independent firm and from this, summary contracts of employment were ready to be signed with the three new executives. However, the Remuneration Committee’s recommendations were not supported by the Nominated Advisor. Accordingly, it was agreed with the CEO, CFO and CTO that lower annual salary terms would be implemented on an interim basis and would then be revisited as part of the growth business case funding being sought in Q2 2019. The Remuneration Committee does not believe that the current basic annual salary terms of the executives are sustainable for the quality of the individuals concerned. Currently, there are no formal contracts of employment in place for these three executives and the intention is for such agreements to be entered into when the remuneration terms are revisited.

Benefits in kind Benefits provided to Executive Directors employed prior to 18 June 2018 include critical illness cover, private medical insurance and a pension contribution of 5% of basic annual salary in 2018, all of which are offered to all employees. Executive Directors employed from 18 June 2018 receive a taxable pension allowance of 15% of salary but do not receive critical illness cover or private medical insurance. Discretionary annual bonus Whilst an annual bonus framework exists based on prior year’s practice and the recent input from the international professional services firm, due to the financial circumstances of the Group, no discretionary bonus award was made to the executive team or to staff by the Remuneration Committee for 2018 performance. The same process of establishing a detailed set of agreed criteria to measure 2019 performance by the Executive Directors will be undertaken by the Remuneration Committee and recommended as part of the growth business case funding being sought in 2019.

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Report on Directors’ Remuneration continued

Long-term incentive plan The Group’s long-term incentive plan lapsed in January 2018 following the change of control (see notes 4 & 20) of the Group. A replacement long-term incentive plan is being developed by the Remuneration Committee and recommended as part of the growth business case funding being sought in 2019.

Non-Executive Directors’ fees

The Non-Executive Directors are paid a fee for carrying out their duties and responsibilities as disclosed in the table on page 21. Loss of office payments The Group’s policy for loss of office payments is to provide payment to cover contractual rights. $835,000 loss of office payments were

agreed with Directors in 2018 as disclosed in the table on page 21. At the year end, $330,000 of the $835,000 loss of office payments were still to be paid for the notice periods of former Directors. Report on Directors’ remuneration Scott Aitken, CEO of H2P, Cabot’s parent company, assumed the role of CEO of Cabot Energy Plc on 18 June 2018, replacing Keith Bush. To maintain a majority of Board directors independent of H2P, Scott Aitken has not yet been appointed to the Board of Directors pending the appointment of a Non-Executive Chair. Audited detail of Scott Aitken’s and Keith Bush’s remuneration is presented below; all currency is in US dollars:

Percentage change in remuneration of Director undertaking the role of CEO The percentage change in the remuneration of the CEO compared to the Group average percentage change in respect of the employees from to 2018 is detailed in the table below:

Salary* Benefit Pensions Bonus

Chief Executive Officer (2.6%) (20.3%) 30.2% (100.0%)

Average Employees 11.6% 13.9% 85.7% (100.0%)

*Composite rate for K R Bush (increase of 35.0% over 2017) and S H Aitken (decrease of 34.2% over K R Bush in 2017).

Relative importance of spend on pay The table below shows the Group’s actual spend on all employees relative to capital expenditure as shown on the cash flow statement:

2018 2017 $ million $ million Change

Employee cost 3 2 70%

Capital expenditure 10 4 231%

Year ended 31 December 2018 Year ended 31 December 2017

Compensation

for loss Taxable Compensation

for loss Taxable

Salary of office Bonus benefits Pension Total Salary of office Bonus benefits Pension Total

Group & Company $’000

$’000 $’000 $’000 $’000 $’000 $’000

$’000 $’000 $’000 $’000 $’000

Executive (salaries):

S H Aitken (appointed 18 June 2018) 95 - - - 95 - - - - - -

K R Bush (resigned 18 June 2018) 165 425 - 7 13 610 258 - 64 8 9 339

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Report on Directors’ Remuneration continued Details for each Director’s remuneration are set out in the tables below; all currency is in US dollars:

Year ended 31 December 2018 (audited) Year ended 31 December 2017 (audited)

Compensation

for loss Compensation

for loss

Salary

or fees of

office Bonus Taxable benefits Pension Total

Salary or fees

of office Bonus

Taxable benefits Pension Total

Group & Company $’000

$’000 $’000 $’000 $’000 $’000 $’000

$’000 $’000 $’000 $’000 $’000

Executive Directors (salaries):

C J Airlie (3) 82 - - - - 82 - - - - - - K R Bush (4) 165 425 - 7 13 610 258 - 64 8 9 339 P J Lafferty (1) 300 - - 6 - 306 23 - 61 - - 84 N T Morgan (4) 138 374 - 5 9 526 245 - 61 6 9 321 P Mychalkiw (3) 88 - - - - 88 - - - - - -

773 799 - 18 22 1,612 526 - 186 14 18 744

Non-Executive Directors (fees):

J D Dewar (5) 51 - - - - 51 - - - - - - R Maguire (7) 10 - - - - 10 - - - - - - J D Murphy (6) 51 21 - - - 72 64 - - - - 64 I M Lanaghan (6) 68 15 - - - 83 41 - - - - 41 C J Airlie (3) 28 - - - - 28 - - - - - - P Mychalkiw (2&3) 28 - - - - 28 - - - - - -

236 36 - - - 272 105 - - - - 105

Total 1,009 835 - 18 22 1,884 631 - 186 14 18 849

(1) appointed 24 November 2017 (4) resigned 18 June 2018 (7) appointed 7 November 2018) (2) appointed 29 January 2018 (5) appointed 27 July 2018 (3) executive from 18 June 2018 (6) resigned 27 July 2018 Directors’ salaries were paid in GBP Sterling. The amounts shown above have been translated from GBP at an average exchange rate of US $1.3353 per £1 Pound Sterling (2017: $1.2890).

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Report on Directors’ Remuneration continued An audited table of warrants and options held by Directors serving at 31 December 2018 is set out below: At 1

January 2017

Issued

Exercised

Lapsed

At 1 January

2018

Issued

Exercised

Lapsed

At 31 December

2018 ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s

K R Bush: At 100.0p (exercisable by 30.06.17) 100 - - (100) - - - - - Nil-cost (exercisable by 08.05.25) 210 - (210) - - - - - - Nil-cost (exercisable by 12.07.26) 2,137 - - -

2,137 -

(2,137) - -

Nil-cost (exercisable by 18.01.27) - 719 - -

719 -

(719) - -

Nil-cost (exercisable by 16.08.27) - 3,379 - -

3,379 -

(3,379) - -

2,447 4,098 (210) (100) 6,235 - (6,235) - -

P J Lafferty (appointed 24 November 2017): Nil-cost (exercisable by 12.07.26) 1,274 - - -

1,274 -

(519) - 755


320 - - - 320


1,829 - - -

1,829

1,274 2,149 - - 3,423 - (519) - 2,904

I M Lanaghan: Nil-cost (exercisable by 12.07.26) 89 - - - 89 -

(89) - -

Nil-cost (exercisable by 18.01.27) - 80 - - 80 -

(80) - -

Nil-cost (exercisable by 16.08.27) - 61 - - 61 -

(61) - -

89 141 - - 230 - (230) - -

N T Morgan: Nil-cost (exercisable by 08.05.25) 168 - (168) - - - - - - Nil-cost (exercisable by 12.07.26) 1,798 - - -

1,798 -

(1,798) - -


639 -

(639) - -


2,662 -

(2,662) - -

1,966 3,301 (168) - 5,099 - (5,099) - -

J D Murphy Nil-cost (exercisable by 12.07.26) 179 - - -

179 -

(179) - -


160 -

(160) - -


122 -

(122) - -

179 282 - -

461 -

(461) - -

Total 5,955 9,971 (378) (100) 15,448 - (12,544) - 2,904

Details of when the warrants and options above were granted are disclosed in note 20. This report was approved by the Board on 31 May 2019 and signed on its behalf by James Dewar.

James Dewar

Chairman of the Remuneration Committee

31 May 2019

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Directors’ Report THE DIRECTORS PRESENT THEIR ANNUAL REPORT AND THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018. Principal activity and review of the business The activities of the Group are the exploration, appraisal, development and production of oil and gas assets. The areas of activity during 2018 were Canada, Italy and Australia. The Group’s head office is in the UK. Immediate parent company and ultimate controlling party Following the approval at the General Meeting on 5 January 2018, High Power Petroleum LLC increased its ownership interest in the Company from 29.9% to 58.09% (currently 60.10%) and became the parent company of Cabot Energy Plc. H2P is part of the I-Pulse Inc (“I-Pulse”). Group and as such the Company’s ultimate parent company is I-Pulse Inc, whose registered office is 251 Little Falls Drive, Wilmington, DE 19808 USA (for further information on I-Pulse Inc. see www.ipulse-group.com). Group accounts prepared for H2P and I-Pulse are not publicly available. Results and dividends The Group’s financial statements are set out on pages 34 to 75 and are presented in US Dollars. The Group’s loss for the year was $6.1 million (2017: loss of $3.1 million). The Directors do not recommend the payment of a dividend for the year (2017: nil). Going concern The Group’s business activities, together with the factors likely to affect its future development and performance are set out in the Chairman’s and Chief Executive’s Statements and the Review of Operations. The financial position of the Group, its net cash position and net liabilities are described in the Financial Review and in notes 16 and 17. Further information on the Group’s exposure to financial risks and the management of those risks is provided in note 23. At 31 December 2018 the Group had cash of $0.9 million, trade and other receivables of $0.7 million and trade and other payables of $5.5 million. Since mid-2018 the Group has been paying down a significant outstanding Canadian trade payables position which reflected the cost over-runs on budgeted activities in addition to unbudgeted work programme activities in 2017 and H1 2018 in Canada. The Group’s Canadian subsidiary Cabot Energy Inc. has successfully negotiated with its suppliers to reduce the amounts owed by some $0.7 million and has agreed extended payment terms over 2019. Whilst the independent reserves report announced on 6 November 2018 was a very positive endorsement of the performance and development value of the Group’s Canadian assets, its release coincided with an unprecedented and unexpected increase in the discount of the Group’s Edmonton Light Oil selling price compared to the West Texas Intermediate benchmark price, as announced by the Group on 20 November 2018. Although the update on 1 February 2019 highlighted the temporary success of the Alberta government’s intervention in curtailing production and restoring the discount to normal historic levels since December 2018, the continuing Edmonton Light Oil sales price uncertainty and the Group’s reduced Canada production volumes prevented the Group from accessing debt financing on acceptable terms or trade finance via its crude oil sales marketeer at that time. On 12 February 2019 the Group announced a two-stage funding approach in response to the uncertainty caused by the volatility of the Edmonton oil price in Q4 2018 and in March 2019 the Group successfully completed the first stage of its plan raising $3.2 million before expenses from existing shareholders. The Board is reasonably confident that the equity proceeds raised, combined with higher than planned revenues from improved crude oil sales prices in 2019 and other planned measures, will be sufficient to see the Group through to the end of June 2019. The Directors are currently addressing new debt financing at the asset level to fund development drilling of the Group’s proven and probable reserves, delivering production and cashflow growth. The Board has reviewed and considered the possible outcomes of future operations and forecast cash flows, in conjunction with accounts, budgets and financial plans, and believe that future external capital could be found to allow the Group to continue. This understanding leads the Directors to believe that the Group has sufficient resources to continue in operation at least until 12 months after the date of this document and are managing the Group’s assets to realise further capital to allow the development and growth of the business during that time and beyond. The financial statements are therefore prepared on a going concern basis. Failure to complete a new fundraising by the end of Q2 2019 would indicate the existence of a material uncertainty which would cast significant doubt upon the Group's continued ability to operate as a going concern as it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group and the Company were unable to continue as a going concern.

Directors and their interests The Directors of the Group all served throughout the year, except Keith Bush and Nicholas Morgan who both resigned on 18 June 2018, Jonathan Murphy and Iain Lanaghan who both resigned on 27 July 2018, Petro Mychalkiw who was appointed to the Board on 29 January 2018, James Dewar who was appointed to the Board on 27 July 2018 and Rachel Maguire who was appointed to the Board on 7 November 2018. There are no requirements for Directors to hold shares.

http://www.ipulse-group.com/

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Directors’ Report continued

The Directors’ beneficial interests in the shares of the Group as at the below dates (prior to the share consolidation approved by the General Meeting on 1 March 2019 – see note 25) were:

Name At 31 December 2018 (ordinary 1p shares)

At 31 December 2017 (ordinary 1p shares)

Directors

C J Airlie - -

K R Bush (resigned 18 June 2018) - 800,379

J D Dewar (appointed 27 July 2018) - -

P J Lafferty 1,189,886 571,269

I M Lanaghan (resigned 27 July 2018) - 427,032

R Maguire (appointed 7 November 2018) - -

N T Morgan (resigned 18 June 2018) - 888,237

J D Murphy (resigned 27 July 2018) - 2,403,698

P Mychalkiw (appointed 29 January 2018) - -

Total 1,189,886 5,090,615

Directors have been granted share options exercisable into shares of the Group. Further details of these interests are shown in the Report on Directors’ Remuneration on page 22. Other than as shown above, no Director had any interest in the shares of the Group or any of its subsidiaries at 31 December 2018 or at 31 December 2017. Campbell Airlie retires from office in accordance with Article 108 of the Company’s Articles and, being eligible, offers himself for re-election at the upcoming AGM. James Dewar retires from office in accordance with Article 113 of the Company’s Articles and, being eligible, offers himself for re-election at the upcoming AGM. James Dewar is entitled to a notice period of three months in his service contract. Rachel Maguire retires from office in accordance with Article 113 of the Company’s Articles and, being eligible, offers herself for re-election at the upcoming AGM. Rachel Maguire is entitled to a notice period of three months in her service contract. The Group maintains directors’ and officers’ insurance for the benefit of Directors and Officers of all Group companies and has also indemnified the Directors to the fullest extent possible allowed under the Companies Act 2006 and the Group’s Memorandum and Articles of Association. Directors’ interest in transactions Campbell Airlie and Petro Mychalkiw are also officers of H2P, the Company’s largest shareholder and are therefore not considered independent. No other Director had, during or at the end of the year, a material interest in any other contract which was significant in relation to the Group’s business, except in respect of personal service agreements, and options. Employees The Directors hold regular meetings with employees to update them on all aspects of the business as and when required. The Group operates an equal opportunities policy. The policy provides that full and fair consideration will be given to applications for employment from disabled people and people of any racial background, gender, religious belief or sexual orientation. Existing employees, who become disabled, to the extent that they are unable to perform the tasks they were employed to carry out, will have the opportunity where practical to retrain and continue in employment wherever possible.

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Directors’ Report continued

Substantial interests As at 31 May 2019, the Group has been advised of the following beneficial holdings of three per cent. or more of the issued share capital in accordance with the Transparency Obligations Directive (Disclosure and Transparency Rules) Instrument 2009:

Name Shares % of issued

share capital

High Power Petroleum LLC 19,194,197 60.10

Garraway Capital Management LLP 4,295,728 13.45

D Maritime Limited 1,695,314 5.31

Cavendish Asset Management Limited 1,521,037 4.76

Northeastern Oilfield Services Limited 1,448,687 4.54

Disclosure of information to auditor The Directors who held office at the date of the approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Group’s auditor is unaware and each Director has taken all steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Auditor Deloitte LLP remained as auditor during the year. In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of Deloitte LLP as auditor of the Group is to be proposed at the upcoming AGM.

By order of the Board on 31 May 2019

William Anderson

Secretary to the Board

__________________________________________________________________________________________________


Directors’ Responsibilities in respect of the Annual Report and the Financial Statements The Directors are responsible for preparing the Annual Report, the Strategic Report, the Directors’ Report, the report on Directors’ Remuneration and the Group and Parent Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. As required by the AIM Rules for Companies of the London Stock Exchange, they are required to prepare the Group financial statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 "Reduced Disclosure Framework". Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors are required to:

− select suitable accounting policies and then apply them consistently;

− make judgements and estimates that are reasonable and prudent;

− for the Group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU; and

− prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at

any time the financial position of the Parent Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect 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 the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement We confirm that to the best of our knowledge that:

− the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as whole;

− the strategic report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

− the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company’s position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 31 May 2019 and is signed on its behalf by:

James Dewar


31 May 2019

Petro Mychalkiw

Chief Financial Officer

31 May 2019

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Independent Auditor’s Report to the Members of Cabot Energy Plc Report on the audit of the financial statements

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRCs’) Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty relating to going concern

We draw attention to Note 1 in the financial statements, which indicates that the Group paid down a significant outstanding trade payables position during 2018, arising from cost over-runs on budgeted activities in addition to unbudgeted work programme activities during 2017 and 2018. This has resulted in the Group requiring additional funding in order to continue in operation through the going concern assessment period, which is 12 months from the date of approval of the financial statements. The Group is undertaking a refinancing plan, comprising new debt facilities and a further equity raise, however this financing is not yet committed. The Group incurred a loss before tax of $6.2 million during the year ended 31st December 2018. Due to the level of management judgement in the cash flow forecasts and going concern assessment, we also considered this key audit matter to be a potential area for management bias. Refer to the Chairman’s and Chief Executive Officer’s Statement on pages 2-3 of the Annual Report for further background, as well as the related discussion within in Note 1 to the Financial Statements. In response to this, we:

• Assessed the inputs to the going concern cash flow projection, checking consistency with our knowledge of the business;

• Compared forecasted 2018 revenue and expenditure to actual revenue and expenditure in 2018 to assess the accuracy of management’s budgeting;

• Challenged management’s cash flow forecasts by applying various sensitivities;

• Reviewed the disclosures included within the financial statements; and

• Evaluated the design and implementation of relevant controls over the going concern assessment. No areas of management bias were reported to the audit committee.

Opinion

In our opinion:

• the financial statements give a true and fair view of the state of Cabot Energy Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) affairs as at 31 December 2018 and of the Group’s loss for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;

• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:

• the Consolidated Statement of Comprehensive Income;

• the Consolidated and Parent Company Statements of Financial Position;

• the Consolidated Cash Flow Statement;

• the Consolidated and Parent Company Statements of Changes in Equity;

• the related notes 1 to 25; and

• the financial disclosures in Report on Directors’ Remuneration The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

__________________________________________________________________________________________________


Independent Auditor’s Report to the Members of Cabot Energy Plc As stated in note 1, these events or conditions, along with the other matters as set forth in note 1 to the financial statements, indicate that a material uncertainty exists that may cast significant doubt on the group’s and the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

The key audit matters that we identified in the current year were:

• Going concern (see material uncertainty relating to going concern section)

• Impairment of intangible exploration and evaluation (“E&E”) assets

• Impairment of producing oil and gas assets

• Acquisition of High Power Petroleum (NOP) UK Ltd

Materiality The materiality that we used in the current year was $1,042k (2017: $800k) which was determined on the basis of 2% of Consolidated net assets (2017: 2%).

Scoping

We have performed a full scope audit of all material balances within the Group. All the work was performed by the Deloitte London Group audit team.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of intangible E&E assets

Key audit matter description

IFRS 6 Exploration for and evaluation of mineral resources (“IFRS 6”) sets out the requirements under which an E&E asset is assessed for impairment. As at 31 December 2018 the Group held $24.5m of E&E assets in both Italy and Canada and management has assessed whether, in today’s environment, there are any impairment triggers that require further consideration. Specifically and as set out in Note 1 of the Financial Statements management has considered the impact of the PTESAI Bill passed by the Italian Government in February 2019, which has resulted in all exploration licences in Italy being temporarily suspended for a period of up to 24 months whilst the Government carried out a detailed environmental review. As at the 31 December 2018 there is significant judgement regarding the value attributable to the E&E assets in the Southern Adriatic which make up the majority of the E&E asset balance. Owing to the significant judgements involved in the impairment assessment process, namely ongoing funding issues, political issues in Italy and market capitalisation, we have identified the valuation of these assets as a key audit matter. If the Group’s exploration licences in Italy are not renewed following the completion of the review by the Italian government, then the recoverable amount of the E&E assets will likely need to be fully impaired. The accounting treatment is a critical accounting judgement and a key source of estimation uncertainty. Refer to in Note 1 and Note 12 to the Financial Statements for discussion of the related accounting policy and the impairment charges recorded in the year, respectively.

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Independent Auditor’s Report to the Members of Cabot Energy Plc

Impairment of intangible E&E assets continued

How the scope of our audit responded to the key audit matter

For all licences, we have challenged management’s conclusions as to whether indicators of impairment exist in the following ways:

• Participated in meetings with key operational and finance staff to understand the current status and future intentions for each asset;

• Confirmed whether all assets which remain capitalised are included in future budgets and, if they are not, understanding the basis by which management anticipate being able to recover the amounts that have been capitalised;

• Discussed with management the impact of the PTESAI Bill and their rationale for determining at this stage, there is no indication that the Group’s exploration licences in Italy will not be restored;

• Evaluated the design and implementation of the related controls; and

• Identified any fields where the Group’s licences are at or close to expiry and challenging management’s intention and ability to renew any such license.

Key observations

We concurred with management’s judgement that the E&E assets did not require impairment at 31 December 2018. We considered the disclosures in note 12, relating to the uncertainty as to whether the Italian government will renew the Group’s operating licence, are appropriate.

Impairment of producing oil and gas assets


The Group holds producing oil and gas assets recorded as PP&E totalling $39.2m as at 31 December 2018. IAS 36 Impairment of assets (“IAS 36”) states that PP&E assets must be assessed for indicators of impairment at each reporting period, for all cash-generating units (“CGUs”). Should such indicators exist the recoverable amount of the asset will be compared to the carrying value, and if the carrying value exceeds the recoverable amount, the difference is recorded as an impairment loss. As referenced in Note 1 of the Financial Statements the carrying value of PP&E assets is considered by management as a critical accounting judgement and a key source of estimation uncertainty. Owing to the judgement involved in identifying impairment indicators and determining the recoverable amount of assets, we have identified the accounting treatment as a key audit matter. In the year, the Group has recognised $339k of impairments related to ten single well batteries. Refer to in Note 1 and Note 13 to the Financial Statements for discussion of the related accounting policy and the impairment charges recorded in the year, respectively.


For all CGUs, we have challenged management’s conclusions on the impairment in the following ways:

• Tested management’s assessment of indicators of impairment by considering various sources of internal and external information;

• Where indicates of impairment have been identified, compared management’s recoverable amounts to those shown in the September 2018 Competent Person’s Report (“CPR”) as prepared by an independent firm of reserves engineers, which underpins management’s impairment conclusions. In assessing whether it is appropriate to place reliance on the NPV calculations in the CPR, we have tested the discount rate (see below), oil pricing assumptions, the profile of production costs and royalties. We have also assessed the competence, capability, and objectivity of the firm of independent reserves engineers;

• Worked with internal fair value experts to evaluate the discount rate of 10%;


• For CGUs where the carrying values exceed the recoverable amount we have checked that that the carrying values have been written down to their recoverable amount.

Key observations

We are satisfied that management has appropriately identified indicators of impairments, and where the carrying value of the CGU exceeded their recoverable amount, that these assets have been appropriately impaired.

__________________________________________________________________________________________________



Acquisition of High Power Petroleum (NOP) UK Limited


In January 2018 the Group and the Company acquired 100% of the common shares of High Power Petroleum (NOP) UK Limited ("H2P UK") and its wholly-owned subsidiary High Power Petroleum Canada Limited (“H2P Canada”) (the "Acquisition"). This transaction has been recorded as a business combination, and in accordance with IFRS 3 Business Combinations (“IFRS 3”), the assets acquired and liabilities assumed have been recorded at their fair values, resulting in goodwill of $1.1 million. As referenced in Note 1 of the Financial Statements the estimation of the fair value of businesses acquired is considered by management as a critical accounting judgement and a key source of estimation uncertainty. Further to this the timing of when High Power Petroleum LLC (“H2P LLC”) gained control of Cabot Energy Plc has also been identified as a critical accounting judgement. Owing to the judgement involved in determining fair values of assets acquired and liabilities assumed and the determination of when ownership was achieved, we have identified the accounting treatment of the acquisition as a key audit matter. Refer to the Chairman’s Statement and Chief Executive Officer’s Review on pages 2-5 of the Annual Report for further background, as well as the related accounting policy in Note 1 to the Financial Statements and the related disclosures in Note 24 to the 2018 financial statements.


We have challenged management’s conclusion on the acquisition accounting in the following ways:

• Challenged the conclusion to treat the transaction as a business combination by assessing the presence of inputs, processes, and outputs that characterise a business;

• Evaluated the suitability of management’s model for estimating the fair value of the assets acquired and liabilities assumed;

• Tested the fair value calculation of the abandonment liability assumed by reconciling to third-party reference points published by the Alberta Energy Regulator (“AER”) in Canada;

• Worked with our valuations specialists to test whether that the 10% discount rate is appropriate;

• Considered the fair value calculations by understanding the qualitative factors which resulted in goodwill arising, namely the control premium paid to regain full ownership of the licenses;

• Traced the total consideration paid to actual cash outflows and share issues;


• Reviewed the related disclosures for compliance with IFRS 3.

Key observations The acquisition has been appropriately recorded as a business combination. We are satisfied that the fair values proposed by management are reasonable and the goodwill is supported by the economic circumstances at the time of the transaction. We concur with management’s calculation of the purchase price allocation and that the related disclosures comply with IFRS 3.

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Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group Parent Company

Materiality $1,042k (2017: $800k) $1,031k

Basis for determining materiality 2% of net assets (2017: 2%) 2% of net assets, capped at 99% of Group materiality.

Rationale for the benchmark applied

A significant proportion of Group’s assets are either not producing (exploration portfolio) or undergoing a workover programme and therefore income statement metrics are not considered to represent a stable base, reflecting the underlying value of the Group. We consider net asset levels to be more representative of the value of the asset portfolio and therefore a more important metric to the users of the financial statements. Materiality has increased year on year due to increased net asset position as a result of the acquisition.

As the Parent Company is principally a holding company, net assets was considered the most appropriate benchmark.

Recognising that the success of the Canadian capital programmes is important, we have applied a lower materiality of $240k (2017: $95k) to revenue and production costs. This figure represents 2% of revenue. We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $55k as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

Net assets $38,937k

Group materiality $1,042k

Component materiality (excluding parent) $781.5k

Audit Committee reporting threshold

$55k

Net assets

Group materiality

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An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. We considered there to be two components, London and Calgary, each of which was subject to a full scope audit for Group purposes at component materiality of $781.5k. These two components account for 100% of the Group’s profit before tax and net assets. The Parent Company is part of the London component and all work was performed by the group audit team.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in respect of these matters.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Report on other legal and regulatory requirements

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and of the Parent Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.

http://www.frc.org.uk/auditorsresponsibilities

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Matters on which we are required to report by exception

Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made.

We have nothing to report in respect of this matter.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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.

Paul Barnett For and on behalf of Deloitte LLP Statutory Auditor London, UK 31 May 2019

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Consolidated Statement of Comprehensive Income

for the year ended 31 December 2018

2018 2017 Notes $’000 $’000

Revenue 2 12,204 4,788

Production costs (8,291) (4,448) Depletion and amortisation – property, plant and equipment (3,601) (1,149)

Cost of sales 2 (11,892) (5,597)

Gross profit / (loss) 312 (809) Administrative expenses (3,150) (2,903) Other operating costs 4 (3,216) (1,379) Gain on step acquisition 24 2,649 - Loss on termination of option 24 (2,178) - Gain on bargain purchase 5 - 2,035 Impairment losses 12 & 13 (413) (685)

Loss from operations 2 & 3 (5,996) (3,741) Finance income 9 63 24 Finance costs 8 (290) (274)

Loss before tax (6,223) (3,991) Tax credit 10 117 857

Loss for the year (6,106) (3,134)

(Loss) / income attributable to

Equity shareholders of the Company (6,096) (3,164) Non-controlling interests (10) 30

(6,106) (3,134)

Other comprehensive (loss) / income: Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations (3,867) 3,816

Other comprehensive (loss) / income for the year, net of income tax (3,867) 3,816

Total comprehensive (loss) / income for the year (9,973) 682

Total comprehensive (loss) / income attributable to: Equity shareholders of the Company (9,963) 652 Non-controlling interests (10) 30

(9,973) 682

Loss per share

Basic loss per share on loss for the year 11 (0.9 cents) (1.0 cents)

Diluted loss per share on loss for the year 11 (0.9 cents) (1.0 cents)

All results are from continuing operations. The notes on pages 42 to 75 form part of these financial statements.

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Consolidated Statement of Financial Position

as at 31 December 2018 2018 2017 Notes $’000 $’000

Assets Non-current assets Intangible assets 12 24,502 28,470 Goodwill 12 1,019 - Property, plant and equipment 13 39,309 22,252 Deferred tax assets 19 4,358 5,665

69,188 56,387 Current assets Inventories 15 86 296 Trade and other receivables 16 698 2,340 Cash and cash equivalents 888 1,775

1,672 4,411

Total assets 70,860 60,798

Liabilities Current liabilities Trade and other payables 17 5,724 10,290 Provisions 18 480 438

6,204 10,728 Non-current liabilities Trade and other payables 17 - 29 Provisions 18 10,173 8,430 Deferred tax liabilities 19 2,544 2,674

12,717 11,133

Total liabilities 18,921 21,861

Net assets 51,939 38,937

Capital and reserves Share capital 20 15,807 11,110 Share premium 41,441 23,655 Merger reserve 14,190 14,190 Share incentive plan reserve 183 335 Foreign currency translation reserve (9,029) (5,162) Retained earnings and other distributable reserves (10,645) (5,191)

Equity attributable to owners of the parent 51,947 38,937

Non-controlling interests (8) -

Total equity 51,939 38,937

The notes on pages 42 to 75 form part of these financial statements. These financial statements were approved and authorised for issue by the Board of Directors on 31 May 2019 and were signed on its behalf by:

J D Dewar P Mychalkiw Director Director

REGISTERED NO. 02933545

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Company Statement of Financial Position

as at 31 December 2018 2018 2017 Notes $’000 $’000

Assets Non-current assets Intangible assets 12 b 30 42 Property, plant and equipment 13 b 27 33 Investments 14 25,908 24,920

25,965 24,995 Current assets Trade and other receivables 16 28,318 15,299 Cash and cash equivalents 159 522

28,477 15,821

Total assets 54,442 40,816

Liabilities Current liabilities Trade and other payables 17 2,253 1,879

2,253 1,879

Total liabilities 2,253 1,879

Net assets 52,189 38,937

Capital and reserves Share capital 20 15,807 11,110 Share premium 41,441 23,655 Merger reserve 14,190 14,190 Share incentive plan reserve 183 335 Retained earnings and other distributable reserves (19,432) (10,353)

Equity attributable to owners of the parent 52,189 38,937

The Company reported a loss for the year ended 31 December 2018 of $9,721,000 (2017: profit of $1,041,000). The notes on pages 42 to 75 form part of these financial statements. These financial statements were approved and authorised for issue by the Board of Directors on 31 May 2019 and were signed on its behalf by:

J D Dewar P Mychalkiw Director Director

REGISTERED NO. 02933545

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Consolidated Cash Flow Statement

for the year ended 31 December 2018 2018 2017 Notes $’000 $’000

Cash flows from operating activities Loss before tax for the year (6,223) (3,991) Depletion and amortisation 13 3,601 1,149 Depreciation – non-oil and gas property, plant and equipment 12 & 13 35 33 Impairment losses 12 &13 413 685 Loss on disposal of property, plant and equipment 11 - Decommissioning and abandonment expenditure 18 (437) (241) Business acquisition expenses 4 115 265 Credit arising from bargain purchase of property, plant and equipment 5 - (2,035) Gain on step acquisition (2,649) - Loss on termination of option 2,178 - Finance income 9 (23) (24) Finance costs 8 290 252 Foreign exchange (gain) / loss 8 & 9 (40) 22 Share-based payments 3 & 20 670 251

Net cash outflow before movements in working capital (2,059) (3,634) Decrease / (increase) in inventories 347 (171) Decrease / (increase) in trade and other receivables 1,309 (754) Increase in trade and other payables 280 2,675

Net cash inflow from changes in working capital 1,936 1,750 Interest received 23 24 Interest paid - (4) Taxes paid - -

Net cash outflow from operating activities (100) (1,864)

Cash flows from investing activities Purchase of property, plant and equipment 13 (13,084) (3,462) Purchase of computer software 12b - (53) Expenditure on exploration and evaluation assets 12a (1,188) (659) Business acquisitions 24 (1,633) - Business acquisition expenses 4 (115) (265)

Net cash outflow from investing activities (16,020) (4,439)

Cash flows from financing activities Proceeds from issue of ordinary shares 20 15,544 1,813 Costs and fees associated with the issue of ordinary shares (281) (27) Repayment of government loan 17 - (435) Capital contributions from non-controlling interests 2 12

Net cash inflow from financing activities 15,265 1,363

Net decrease in cash and cash equivalents (855) (4,940) Cash and cash equivalents at start of year 1,775 6,584 Effect of exchange rate movements (32) 131

Cash and cash equivalents at end of year 888 1,775

The Group had one significant non-cash transaction during the year to 31 December 2018 (2017: none), being the issue of ordinary shares in the Company to a value of $7,040,000 as part of the consideration for the acquisition of H2P Canada (see note 24).

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Consolidated Statement of Changes in Equity for the year ended 31 December 2018 Retained Share Foreign earnings Share incentive currency and other Non - Share premium Merger plan translation distributable controlling Total capital account reserve reserve reserve reserves Total interests equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2018 11,110 23,655 14,190 335 (5,162) (5,191) 38,937 - 38,937

Total comprehensive loss for the year - - - - (3,867) (6,096) (9,963) (10) (9,973)

Contributions by and distributions to owners of the Company Issue of shares during the year* 4,517 18,067 - - - - 22,584 - 22,584

Costs and fees associated with share issue - (281) - - - - (281) - (281)

Equity share options exercised 180 (672) 492 - - -

Equity share options lapsed or cancelled (150) 150 - - -

Share-based payments** - - - 670 - - 670 - 670

Total contributions by and distributions to owners of the Company 4,697 17,786 - (152) - 642 22,973 - 22,973

Changes in ownership interests in subsidiaries Capital contributions from non-controlling interests - - - - - - - 2 2

Total changes in ownership interests in subsidiaries - - - - - - - 2 2

At 31 December 2018 15,807 41,441 14,190 183 (9,029) (10,645) 51,947 (8) 51,939

* see note 20 ** see notes 3, 7 & 20

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Consolidated Statement of Changes in Equity for the year ended 31 December 2017 Retained Share Foreign earnings Share incentive currency and other Non - Share premium Merger plan translation distributable controlling Total capital account reserve reserve reserve reserves Total interests equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2017 10,575 22,390 14,190 377 (8,978) (2,306) 36,248 (42) 36,206

Total comprehensive income / (loss) for the year - - - - 3,816 (3,164) 652 30 682

Contributions by and distributions to owners of the Company Issue of shares during the year 521 1,292 - - - - 1,813 - 1,813

Costs and fees associated with share issue - (27) - - - - (27) - (27)

Equity share options exercised 14 - - (285) - 271 - - -

Equity share options lapsed or cancelled - - - (8) - 8 - - -

Share-based payments** - - - 251 - - 251 - 251

Total contributions by and distributions to owners of the Company 535 1,265 - (42) - 279 2,037 - 2,037

Changes in ownership interests in subsidiaries Capital contributions from non-controlling interests - - - - - - - 12 12

Total changes in ownership interests in subsidiaries - - - - - - - 12 12

At 31 December 2017 11,110 23,655 14,190 335 (5,162) (5,191) 38,937 - 38,937

** see notes 3, 7 & 20

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Company Statement of Changes in Equity for the year ended 31 December 2018

Retained Share earnings Share incentive and other Share premium Merger plan distributable capital account reserve reserve reserves Total $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2017 10,575 22,390 14,190 377 (11,673) 35,859

Total comprehensive income for the year - - - - 1,041 1,041

Contributions by and distributions to owners of the Company Issue of shares during the year 521 1,292 - - - 1,813 Costs and fees associated with share issue - (27) - - - (27)

Equity share options exercised 14 - - (285) 271 -

Equity share options lapsed or cancelled - - - (8) 8 - Share-based payments** - - - 251 - 251

Total contributions by and distributions to owners of the Company 535 1,265 - (42) 279 2,037

At 31 December 2017 11,110 23,655 14,190 335 (10,353) 38,937

Total comprehensive income for the year - - - - (9,721) (9,721)

Contributions by and distributions to owners of the Company

Issue of shares during the year* 4,517 18,067 - - - 22,584

Costs and fees associated with share issue - (281) - - - (281)

Equity share options exercised 180 (672) 492 -

Equity share options lapsed or cancelled (150) 150 - Share-based payments** - - - 670 - 670

Total contributions by and distributions to owners of the Company 4,697 17,786 - (152) 642 22,973

At 31 December 2018 15,807 41,441 14,190 183 (19,432) 52,189

* see note 20 ** see notes 3, 7 & 20

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Consolidated and Company Statement of Changes in Equity for the year ended 31 December 2018 The following describes the nature and background to each reserve within owners’ equity:

Share premium Amount subscribed for share capital in excess of nominal value less any costs and fees associated with the issue of shares.

Merger reserve The notional “share premium” on the shares issued in consideration for the takeover of ATI Oil Plc, evaluated at the closing market price on the day of acquisition, 24 June 2009, less the nominal value of those shares issued.

Share incentive plan reserve The share incentive plan reserve captures the equity related element of the expense recognised for the issue of warrants and options, comprising of the cumulative charge to the Statement of Comprehensive Income for IFRS 2 charges for share-based payments less amounts released to retained earnings upon the exercise of warrants or options.

Foreign currency translation reserve Exchange differences arising on consolidating the assets and liabilities of the Group’s non-US Dollar functional currency operations (including comparatives) are recognised through the Consolidated Statement of Other Comprehensive Income.

Retained earnings and other distributable reserves Cumulative net gains and losses recognised in the financial statements plus other distributable reserves relating to the court sanctioned cancellation of the share premium account in July 2009 and the elimination of the previous deferred shares in issue and the cancellation of a proportion of the share premium account as at 31 December 2004 in accordance with the court order dated 31 October 2005.

Non-controlling interests Amounts attributable to minority shareholders of fully consolidated subsidiaries. This represents the equity of Hague and London Oil Plc in Northpet Investments Limited. The Group held 55.9% of the ordinary share capital of Northpet Investments Limited at 31 December 2018 and 31 December 2017.

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Notes to the Financial Statements

for the year ended 31 December 2018 1. Accounting Policies Cabot Energy Plc is a public company, limited by shares, incorporated and domiciled in the United Kingdom and registered in England and Wales under the Companies Act 2006. The nature of the Group’s operations and its principal activities are the exploration and production of oil and gas reserves. For the year ended 31 December 2018 certain subsidiaries of the Company were entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies. Full details of the entitlements to exemption from audit are included in note 14 on investments. The principal accounting policies applied in the preparation of these Company and Group consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation The Company and Group consolidated financial statements have both been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued by the International Accounting Standards Board ("IASB"), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council. The Company Financial Statements have therefore been prepared in accordance with Financial Reporting Standard 101 (FRS 101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payments, financial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, standards not yet effective, impairment of assets and related party transactions. The Company has taken advantage of Section 408(4) of the Companies Act 2006 in not presenting its own profit and loss account. The Company’s loss for the year was $9,721,000 (2017: profit of $1,041,000). The Company and Group have adopted all of the standards and interpretations issued by the IASB and the IFRC that are relevant to its operations. Going concern basis of preparation The Group’s business activities, together with the factors likely to affect its future development and performance are set out in the Chairman’s and Chief Executive’s Statements and the Review of Operations. The financial position of the Group, its net cash position and net liabilities are described in the Financial Review and in notes 16 and 17. Further information on the Group’s exposure to financial risks and the management of those risks is provided in note 23. At 31 December 2018 the Group had cash of $0.9 million, trade and other receivables of $0.7 million and trade and other payables of $5.5 million. Since mid-2018 the Group has been paying down a significant outstanding Canadian trade payables position which reflected the cost over-runs on budgeted activities in addition to unbudgeted work programme activities in 2017 and H1 2018 in Canada. The Group’s Canadian subsidiary Cabot Energy Inc. has successfully negotiated with its suppliers to reduce the amounts owed by some $0.7 million and has agreed extended payment terms over 2019. Whilst the independent reserves report announced on 6 November 2018 was a positive endorsement of the performance and development value of the Group’s Canadian assets, its release coincided with an unprecedented and unexpected increase in the discount of the Group’s Edmonton Light Oil selling price compared to the West Texas Intermediate benchmark price, as announced by the Group on 20 November 2018. Although the update on 1 February 2019 highlighted the temporary success of the Alberta government’s intervention in curtailing production and restoring the discount to normal historic levels since December 2018, the continuing Edmonton Light Oil sales price uncertainty and the Group’s reduced Canada production volumes prevented the Group from accessing debt financing on acceptable terms or trade finance via its crude oil sales marketeer at that time. On 12 February 2019 the Group announced a two-stage funding approach in response to the uncertainty caused by the volatility of the Edmonton oil price in Q4 2018 and in March 2019 the Group successfully completed the first stage of its plan raising $3.2 million before expenses from existing shareholders. The Board is reasonably confident that the equity proceeds raised, combined with higher than planned revenues from improved crude oil sales prices in 2019 and other planned measures, will be sufficient to see the Group through to the end of June 2019. The Directors are currently addressing new debt financing at the asset level to fund development drilling of the Group’s proven and probable reserves, delivering production and cashflow growth. The Board has reviewed and considered the possible outcomes of future operations and forecast cash flows, in conjunction with accounts, budgets and financial plans, and believe that future external capital could be found to allow the Group to continue. This understanding leads the Directors to believe that the Group has sufficient resources to continue in operation at least until 12 months after the date of this document and are managing the Group’s assets to realise further capital to allow the development and growth of the business during that time and beyond. The financial statements are therefore prepared on a going concern basis.

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1. Accounting Policies continued Going concern basis of preparation continued Failure to complete a new fundraising by the end of Q2 2019 would indicate the existence of a material uncertainty which would cast significant doubt upon the Group's continued ability to operate as a going concern as it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group and the Company were unable to continue as a going concern. Functional and presentational currency The functional currency of the Parent Company is considered to be the US Dollar and the Company and Group financial statements have been presented in US Dollars. Changes in accounting policies - Adoption of new and revised standards A. Impact of new International Financial Reporting Standards

There are no new or amended standards or interpretations adopted during the year that have a significant impact on the financial statements. The two new standards adopted are described below:

IFRS 9 “Financial Instruments” superseded IAS 39 “Financial Instruments: Recognition and Measurement” and was effective for annual periods beginning on or after 1 January 2018. IFRS 9 uses a single approach to determine whether a financial asset is classified and measured at amortised cost or fair value. The approach in IFRS 9 is based on how the Group manages its financial instruments and the contractual cash flow characteristics of the financial asset. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9. The application of IFRS 9 did not impact the Group or Company’s classification and measurement of financial assets and liabilities. There was also no impact to the carrying value of any of the Group or Company’s financial assets or liabilities on transition date. The introduction of the new "expected credit loss" impairment model does not impact the Group materially, given the Group sells its products to organizations with negligible historical levels of customer default. IFRS 15 “Revenue from Contracts with Customers” provides a single model for accounting for revenue arising from contracts with customers and was effective for annual periods beginning on or after 1 January 2018. IFRS 15 superseded IAS 18 “Revenue” and IAS 11 “Construction Contracts” and the related interpretations. The implementation of IFRS 15 has not impacted the presentation of the Group’s sales revenue. The Group’s accounting policy under IFRS 15 is that revenue is recognised when the Group satisfies a performance obligation by transferring oil or gas to a customer. The title to oil and gas typically transfers to a customer at the same time as the customer takes physical possession of the oil or gas. Typically, at this point in time, the performance obligations of the Group are fully satisfied. The accounting for revenue under IFRS 15 does not, therefore, represent a substantive change from the Group’s previous accounting policy for recognising revenue from sales to customers.

B. Not yet adopted

At the date of approval of these financial statements, the following standards or Interpretations were in issue but not yet effective:

The IASB has issued IFRS 16 “Leases” which provides a new model for lease accounting in which all leases, other than short term leases and leases of low value assets, will be accounted for by the recognition on the Statement of Financial Position of a right-of-use asset and a lease liability, and the subsequent amortisation of the right-of-use asset over the lease term. IFRS 16 will be effective for annual periods beginning on or after 1 January 2019 and is expected to have a limited effect on the Group’s financial statements, increasing the Group’s recognised assets and liabilities and potentially affecting the presentation and timing of recognition of charges in the Statement of Comprehensive Income. IFRS 16 does not apply to leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources. The Group has decided to apply the exemption contained within IFRS 16 for leases with a lease term of 12 months or less and containing no purchase options. Information on the Group’s leases currently classified as operating leases, which are not recognised on the balance sheet, is provided in note 21. As the Group only has leases with terms less than 12 months and only one of these contains a purchase option to buy an item of plant for $132,000 saving monthly rentals of $5,000 the Directors anticipate that IFRS 16 will have only a limited effect on the Group and Company’s 2019 financial statements. There are no other Standards and Interpretations in issue but not yet adopted that the Directors anticipate will have a material effect on the reported income or net assets of the Group.

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1. Accounting Policies continued Basis of consolidation The consolidated financial statements include the financial statements of the Company, its subsidiaries and interests in joint ventures and associates for the year to 31 December 2018. Subsidiaries The Company determines whether it is a parent by assessing whether it controls one or more investees (potential subsidiaries). The Company considers all relevant facts and circumstances when assessing whether it controls an investee. The Company controls an investee (subsidiary), when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Group financial statements incorporate the assets, liabilities and results of operations of the Company and its subsidiaries. The results of subsidiaries acquired and disposed of during a financial year are included from the effective dates of acquisition to the effective dates of disposal. Where necessary, the accounting policies of the subsidiaries are changed to ensure consistency with the policies adopted by the Group when presenting consolidated financial statements. The accounting policies of the Company are the same as the accounting policies of the Group hereafter referred to as the Group accounting policies. Investments In the Company’s financial statements, investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. Impairments are recognised where the Directors assess that the recoverability of an investment is less than its carrying value. Non-controlling interests For each business combination, the Group elects to measure any non-controlling interests in the acquiree either:

− at fair value; or

− at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in the Statement of Comprehensive Income. Intangible assets Oil and gas assets: exploration and evaluation All expenditures incurred in connection with exploration and evaluation of oil and gas assets (“E&E”), including directly attributable overheads, are capitalised in separate geographical cost pools. Cost pool groupings are based on geological basins and play types. The Group considers that Virgo, Alberta (Canada); Rainbow, Alberta (Canada); South Australia (Australia); French Guiana (France); southern Adriatic (Italy) and Italy (excluding the southern Adriatic); are cost pools. Intangible E&E costs incurred in a geographical area where the Group has no established cost pool are initially capitalised as intangible non-current assets except where they fall outside the scope of IFRS 6 Exploration for and Evaluation of Mineral Resources whereby they are expensed as incurred, subject to other guidance under IFRS. Upon successful conclusion of the appraisal programme and determination that commercial reserves exist, such costs are transferred to tangible non-current assets as property, plant and equipment. E&E costs carried forward are assessed for impairment as described below. Intangible non-current assets are considered for impairment at least annually by reference to the indicators in IFRS 6. Where there is an indication of impairment of an E&E asset which is within a geographic pool where the Group has tangible oil and gas assets with commercial reserves, the exploration asset is assessed for impairment together with all other cash generating units and related tangible and intangible assets in that geographic pool and any balance remaining after impairment is amortised over the Proven and Probable reserves of the pool. When the exploration asset is in an area where the Group has no established pool, the exploration asset is tested for impairment separately and, where determined to be impaired, is written off. Proceeds from the disposal of E&E oil and gas assets are credited against the relevant cost pool. Any overall surplus arising in a cost pool is credited to the Statement of Comprehensive Income.

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for the year ended 31 December 2018 1. Accounting Policies continued Property, plant and equipment Oil and gas assets: development and production Development and production (“D&P”) assets are accumulated on a cash generating unit basis and represent the cost of developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial reserves transferred from intangible E&E assets as outlined above. The net book values of producing assets are depreciated on a cash generating unit basis using the unit of production method, based on entitlement to produce by reference to the ratio of production in the period to the related commercial reserves of the cash generating unit, taking into account any estimated future development expenditures necessary to bring additional reserves into production. An impairment test is performed for D&P assets whenever events and circumstances arise that indicate that the carrying value of development or production phase assets may exceed its recoverable amount. The aggregate carrying value is compared against the expected recoverable amount of the cash generating unit (“CGU”), generally by reference to the present value of the future net cash flows expected to be derived from production of commercial reserves. The recoverable amounts are calculated on the basis of expected future product prices or, if applicable at prices specified in a sale contract, and discounted at a post tax rate of 10% (2017: 10%) per annum, depending on risk considerations on an asset by asset basis. The cash generating unit applied for depletion and impairment test purposes is generally the field, except that a number of field interests may be grouped as a single cash generating unit where the cash flows of each field are in some way interdependent. Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Decommissioning Where a material liability for the removal of production facilities and site restoration at the end of the productive life of a field exists, a provision for decommissioning is recognised. The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements. A property, plant and equipment asset of an amount equivalent to the provision is also created within the relevant CGU and depreciated on a unit of production basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated fixed assets. Period changes in the present value arising from discounting are included in financial costs. Non-oil and gas assets Property, plant and equipment are included in the Statement of Financial Position at cost, less accumulated depreciation and any provisions for impairment. Depreciation The cost of property, plant and equipment, other than costs directly related to oil and gas assets, is written off by equal annual instalments over the expected useful lives of the assets, as follows:

− leasehold improvements, computer hardware and software and office equipment – all four years

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

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for the year ended 31 December 2018 1. Accounting Policies continued Revenue Revenue comprises net invoiced sales of hydrocarbons to customers, excluding value added and similar taxes, but before the deduction of royalties. Also disclosed within production and pre-production segment revenue is income recognised, excluding value added and similar taxes, for charges in respect of fees for acting as operator of both production and pre-production activities, and fees for other related services, to third parties by the Group.

Income recognised, excluding value added and similar taxes, to other companies by the Group in respect of fees for any other services are disclosed within other operating income. Revenue is recognised when the performance obligations associated with the customer contracts are met. For all major customer contracts the performance obligation is met at a point in time rather than over time and occurs when the product leaves the Group’s processing facilities and enters into Plains Pipeline System. Revenue from services provided is recognised once the services have been performed.

Segment reporting In the opinion of the Directors, the Group has one class of business, being the exploration for, and development and production of, oil and gas reserves, and other related activities. The Group’s primary reporting format is determined to be the geographical segment according to the location of the oil and gas asset. Currently the activities of the Group are disclosed within the following geographical segments: Canada, Italy, United Kingdom and Others including Australia and French Guiana.

Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The consideration of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition costs incurred are expensed and included in other operating expenses. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 non-current assets held for sale and discontinued operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the Statement of Comprehensive Income.

Share-based payments - equity settled share-based payments In accordance with IFRS 2 “Share-based payments”, the Group reflects the economic cost of awarding shares and share options to employees, Directors, key suppliers and consultants by recording an expense in the Statement of Comprehensive Income equal to the fair value of the benefit awarded. The expense is recognised in the Statement of Comprehensive Income over the vesting period of the award. An accrual for employer’s National Insurance is made in respect of share options granted to employees that are in profit at the year end.

Fair value is measured by use of a Black Scholes model which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

If a warrant or option is cancelled before the end of its vesting period, the remaining fair value expense not yet charged to the Statement of Comprehensive Income is immediately recognised in full. Upon cancellation of the warrant or option there will also be a transfer of the cumulative charge recognised in respect of the transferred warrants or options out of the share incentive reserve and into retained earnings. Pensions A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in the Statement of Comprehensive Income when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Inventories Inventories comprise oil and gas in tanks and field parts and supplies, all of which are stated at the lower of production cost (including royalties, depletion and amortisation of property, plant and equipment), and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less marketing costs. Lease commitments The annual rentals under operating leases are charged to the Statement of Comprehensive Income on a straight-line basis over the term of the lease.

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for the year ended 31 December 2018 1. Accounting Policies continued Financial instruments Financial assets and financial liabilities are recognised when the Group becomes party to the contractual provisions of the instrument, and comprise cash and cash equivalents, trade and other accounts receivables, and accounts payable and accrued liabilities. Financial assets Financial assets are classified as either measured at amortised cost, or fair value through profit and loss (“FVTPL”) based on the business model in which a financial asset is managed, its contractual cash flow characteristics and when certain conditions are met:

− Amortised cost – Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

− FVTPL – Financial instruments that are not classified as amortised cost. Net gains and losses, including any interest or dividend income, are recognised in net income.

Financial liabilities Financial liabilities are subsequently measured at amortised cost using the effective interest method. The group derecognises financial liabilities only when the Group’s obligations are discharged, cancelled or they expire. The difference between the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. Impairment of financial assets Financial assets are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial asset have been impacted. For financial assets measured at amortised cost, if there is objective evidence of impairment, the impairment is measured as the difference between the present value of estimated future cash flows discounted at the instrument’s original effective interest rate less the carrying value of the financial asset. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held at call with banks. Cash, for the purposes of the Statement of Cash Flows, comprises cash in hand and deposits repayable on demand, based on the relevant exchange rates at the balance sheet date.

Government grants and disclosure of government assistance Government grants received in respect of intangible assets or property, plant and equipment are offset against the costs of the related assets. Government loans received at below market rates of interest are fair valued at the date of inception. The fair value discount element of the loan is offset against the cost of the asset to which it relates as it is treated as a grant. The fair value of the loan is unwound as an implied interest cost over the life of the loan. Share capital Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group’s ordinary shares and unclassified ordinary shares are classed as equity instruments.

Foreign currencies Foreign currency transactions of individual companies within the Group are translated in the individual company’s functional currency at the rates ruling when the transactions occurred. Monetary assets and liabilities denominated in other currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the Statement of Comprehensive Income. The functional currency of the Parent Company is considered to be the US Dollar and the Group financial statements have been presented in US Dollars. On consolidation, assets and liabilities of subsidiaries, associate undertakings and joint ventures which are denominated in other currencies are translated into US Dollars at the rate ruling at the balance sheet date. The Statements of Comprehensive Income and Cash Flows are translated at average rates of exchange prevailing during the year. Exchange differences resulting from the translation at closing rates of net investments in subsidiaries, associate undertakings and joint ventures, together with differences between earnings for the year translated at average and closing rates, are dealt with in the foreign currency translation reserve. Details of the current and prior year exchange rates used in these accounts are disclosed in note 23.

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for the year ended 31 December 2018 1. Accounting Policies continued Taxation The tax expense represents the sum of the tax currently payable and movements in deferred tax. Current tax, including UK Corporation and any overseas tax, is provided for at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted, or substantially enacted, at the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally 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. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. 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. Deferred tax assets and liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet 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 on an undiscounted basis at the tax rates that are expected to apply in the period when the liability is anticipated to be settled or the asset is anticipated to be realised, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the 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.

Critical accounting judgments and key sources of estimation uncertainty The preparation of the consolidated financial statements requires management to make judgements (other than those involving estimates) that have a significant impact on the amounts recognised and to make estimates and assumptions concerning the future that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The resulting accounting estimates may, by definition, differ from the related actual results. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Details of the Group’s significant accounting judgments and critical accounting estimates are set out in these financial statements and include: Critical accounting judgements Going concern basis of preparation The judgement by the Directors that the Group and Company are going concerns is a critical accounting judgement for the basis of preparation of the financial statements. The Directors have noted under the going concern basis of preparation at the start of this note that failure to complete a new fundraising by the end of Q2 2019 would cast significant doubt upon the Group's continued ability to operate as a going concern. However, the Board has reviewed and considered the possible outcomes of future operations and forecast cash flows, in conjunction with accounts, budgets and financial plans, and believe that future external capital could be found to allow the Group to continue. This understanding leads the Directors to believe that the Group has sufficient resources to continue in operation at least until 12 months after the date of this document and are managing the Group’s assets to realise further capital to allow the development and growth of the business during that time and beyond. As a result, the financial statements do not include the adjustments that would result if the Group and the Company were unable to continue as a going concern.

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for the year ended 31 December 2018 1. Accounting Policies continued Carrying value of property, plant and equipment (note 13); and Carrying value of intangible exploration and evaluation assets and goodwill (note 12) Valuation of petroleum and natural gas properties and associated goodwill recognised on acquisition: judgements regarding timing of regulatory approval, the general economic environment and the ability to finance future activities through the issuance of debt or equity has an impact on impairment analysis of property, plant and equipment and of intangible exploration and evaluation assets and goodwill, and hence on their carrying values. All these factors may impact the viability of future commercial production from developed and unproved properties, including major development projects, and therefore there may be a need to recognise an impairment. The timing of an impairment review and the judgement of when there could be a significant change affecting the carrying value of property, plant and equipment or intangible exploration assets and goodwill is a critical accounting judgement in itself. For the 2018 Annual Report and Accounts the Directors have made a specific judgment within regulatory approvals noted above, being that the new Italian legislation enacted on 12 February 2019 to suspend work on all oil and gas exploration permits, for up to 24 months whilst a review is undertaken as part of the PTESAI Bill, to determine which are suitable for sustainable hydrocarbon prospecting, exploration and development activities. Based on current understanding of the legislation, it is highly unlikely to affect the Group’s ability to progress the permits in the long term and therefore does not constitute an impairment trigger. Fair value judgements regarding the fair value of businesses acquired (note 24) When making an acquisition the Directors use their judgment to determine whether the Group has acquired a business or business assets. In accordance with IFRS 3 “Business Combinations”, the Directors use their judgement in arriving at the fair value of the assets and liabilities acquired. As with the judgements regarding oil and gas assets above, the Directors make judgements concerning the regulatory environment, the general economic environment and the ability to finance the continuance and expansion of activities being acquired through the issuance of debt or equity. During the year the Group made one acquisition, the “H2P Canada acquisition” (see note 24), which in the Directors’ judgement was a step acquisition of H2P Canada. Although the acquisition of H2P Canada was partly settled in new ordinary shares of the Company and was linked to the issue of additional ordinary shares as part of a new investment fund raise which took H2P LLC’s holding in the Company over 50%, the Directors made the judgement that this did not constitute a reverse takeover of the Company. In reaching this conclusion the Directors considered:

− the relative sizes of Cabot and H2P Canada;

− the control H2P LLC had over the Company following the Relationship Agreement that was put in place between the Company, H2P LLC and the Company’s Nominated Advisor (“NOMAD”) at the time of the transaction;

− the fact that the consideration shares issued to H2P LLC for the acquisition of H2P Canada did not take H2P LLC’s holding over 50% of the Company’s share capital;

− that the subscription shares which did take H2P LLC’s ownership over 50% were issued as part of a wider fundraise open to new and existing shareholders;

− the presence of two other shareholders controlling nearly 20% of the ordinary shares;

− and the ruling by the AIM market’s regulatory team that the transaction did not constitute a reverse takeover under AIM Rule 14.

Recognition and carrying value of deferred tax assets (note 19) In accordance with IAS 12 “Income Taxes” a deferred tax asset is recognised for deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. The Directors use their judgement in deciding the extent to which it is probable that taxable profits will be available based on estimates of future profits, judgements of fiscal risk and tax planning advice.

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Notes to the Financial Statements for the year ended 31 December 2018

1. Accounting Policies continued

Key sources of estimation uncertainty Going concern basis of preparation The Directors have noted under the going concern basis of preparation at the start of this note that failure to complete a new fundraising by the end of Q2 2019 would indicate the existence of a material uncertainty which would cast significant doubt upon the Group's continued ability to operate as a going concern as it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group and the Company were unable to continue as a going concern. Carrying value of property, plant and equipment (note 13); and Carrying value of intangible exploration and evaluation assets (note 12) Consideration of future cash flows used to assess impairment (see judgements above), includes estimates relating to oil and gas reserves, future production rates, overall costs, discount rates, and oil and natural gas prices. Commercial reserves estimates A number of critical accounting estimates are dependent upon oil and gas reserve estimates. These include the depletion of D&P assets as well as the recoverability of intangible and D&P assets. Oil and gas Proven and Probable reserve estimates: estimation of recoverable reserves includes assumptions regarding commodity prices, exchange rates, production and transportation costs all of which impact future cash flows. It also requires the interpretation of complex geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reservoirs and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Changes in estimated reserves can impact developed and undeveloped property carrying values, asset retirement costs and the recognition of income tax assets, due to changes in expected future cash flows. Management consults third party experts and obtains external technical assurance when making these estimates. Reserve estimates are also integral to the amount of depletion and depreciation charged to income. Subsidiaries may report changes in their reserves from time to time. Only where such changes in a subsidiary’s reserves are material to the Group or have a material impact on the Group financial results does the Group publish revised reserve data. This prevents numerous immaterial changes to Group reserves being announced. Estimation of the fair value of businesses acquired (note 24) The valuation of businesses acquired, like carrying values of oil and gas assets above, includes estimates relating to oil and gas reserves, future production rates, overall costs, discount rates, and oil and natural gas prices. Decommissioning costs (note 18) Asset retirement obligations: the amounts recorded for asset retirement obligations are based on each field’s operator’s best estimate of future costs and the remaining time to abandonment of the oil and gas properties, which may also depend on commodity prices and any future changes to national regulations. Management consults government regulators and/or third party experts when making these estimates. Estimated future costs for decommissioning included in provisions on the Consolidated Statement of Financial Position are discounted at long term, government bond, risk free interest rates. Recognition and carrying value of deferred tax assets (note 19) Estimates of future profits, the tax on which can utilise deductible temporary differences, rely on accurate profit forecasts and tax planning models, which in turn rely on estimates of commercial reserves, decommissioning costs, commodity prices, exchange rates, production and transportation costs, administration costs and the cost and deductibility of interest on debt all of which impact future cash flows.

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for the year ended 31 December 2018 2. Segmental Information During 2018 the Group has maintained the management reporting information, provided to the Chief Executive Officer, with the same geographic reporting segments used in 2017. The United Kingdom is the home of the head office; Italy is involved in exploration and appraisal operations; Canada is involved in production, development and exploration operations; and the “Other incl. Australia and French Guiana” segment comprises exploration operations in Australia and in French Guiana prior to the expiry of the permit in June 2016, plus some pre-licence expenditure in respect of exploration and production possibilities in new countries. The segment disclosures are based on the components of the business that the Chief Executive Officer and Board monitor in making decisions about operating matters. Such components are identified on the basis of internal reports that the Board reviews regularly. Exploration, development and production

2018 Group

United Kingdom

$’000

Italy $’000

Canada $’000

Other Incl. Australia

and French Guiana

$’000 Total $’000

Revenue from external customers Oil - - 12,127 - 12,127 Gas and gas condensate - - 8 - 8 Oil processing and other revenue - - 69 - 69

- - 12,204 - 12,204

Cost of sales Production costs - - (8,291) - (8,291) Depletion and amortisation -plant, property and equipment - - (3,601) - (3,601)

- - (11,892) - (11,892)

Gross profit - - 312 - 312 Administrative expenses (2,059) (66) (993) (32) (3,150) Other operating costs (1,845) (107) (1,264) - (3,216) Gain on step acquisition - - 2,649 - 2,649 Loss on termination of option - - (2,178) - (2,178) Impairment losses - (53) (339) (21) (413)

Loss from operations (3,904) (226) (1,813) (53) (5,996)

Finance income 28 2 33 - 63 Finance costs - (31) (259) - (290)

Loss before tax (3,876) (255) (2,039) (53) (6,223)

Tax credit - 2 115 - 117

Loss for the year (3,876) (253) (1,924) (53) (6,106)

The Group has one material customer in Canada: Macquarie Oil Services Canada Limited (2018 revenue of $12,117,000 / 2017: $4,702,000). Transactions between segments were recorded on an arm’s length basis.

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for the year ended 31 December 2018 2. Segmental Information continued Exploration, development and production

2017 Group

United Kingdom $’000

Italy $’000

Canada $’000

Other Incl. Australia

and French Guiana

$’000 Total

$’000

Revenue from external customers Oil - - 4,722 - 4,722 Gas and gas condensate - - 12 - 12 Oil processing and other fees - - 54 - 54

- - 4,788 - 4,788

Cost of sales Production costs - - (4,448) - (4,448) Depletion and amortisation -property, plant and equipment - - (1,149) - (1,149)

- - (5,597) - (5,597)

Gross (loss) - - (809) - (809) Administrative expenses (2,061) (153) (650) (39) (2,903) Other operating costs (233) (20) (1,224) 98 (1,379) Other operating income - - 2,035 - 2,035 Impairment losses - (1) (663) (21) (685)

(Loss) / profit from operations (2,294) (174) (1,311) 38 (3,741)

Finance income 20 - 4 - 24 Finance costs (9) (63) (202) - (274)

(Loss) / profit before tax (2,283) (237) (1,509) 38 (3,991)

Tax credit - (253) 1,110 - 857

(Loss) / profit for the year (2,283) (490) (399) 38 (3,134)

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for the year ended 31 December 2018 2. Segmental Information continued Assets and liabilities at 31 December 2018

Group United Kingdom

$’000

Italy $’000

Canada $’000

Other Incl. Australia and

French Guiana $’000

Total $’000

Segment assets 221 23,891 41,500 2 65,614 Cash and cash equivalents 159 369 352 8 888 Deferred tax assets - - 4,358 - 4,358

Total assets 380 24,260 46,210 10 70,860

Segment liabilities 1,391 421 14,546 19 16,377 Deferred tax liabilities - 2,544 - - 2,544

Total liabilities 1,391 2,965 14,546 19 18,921

Non controlling interests - - - 8 8

Other segment items Capital expenditure 19 491 9,166 21 9,697

Depreciation, depletion and amortisation (25) - (3,610) - (3,635)

Impairment losses - (53) (339) (21) (413)

Share-based payments 670 670

Assets and liabilities at 31 December 2017

Group United Kingdom

$’000

Italy $’000

Canada $’000

Other Incl. Australia and

French Guiana $’000

Total $’000

Segment assets 348 24,735 28,275 - 53,358 Cash and cash equivalents 521 16 1,218 20 1,775 Deferred tax assets - - 5,665 - 5,665

Total assets 869 24,751 35,158 20 60,798

Segment liabilities 946 383 17,850 8 19,187 Deferred tax liabilities - 2,674 - - 2,674

Total liabilities 946 3,057 17,850 8 21,861

Non controlling interests - - - - -

Other segment items Capital expenditure 69 275 8,444 21 8,809

Depreciation, depletion and amortisation (29) - (1,153) - (1,182)

Impairment losses - (1) (663) (21) (685)

Share-based payments 251 - - - 251

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for the year ended 31 December 2018 3. Loss from Continuing Operations This is stated after charging:

Year ended Year ended 31 December 31 December 2018 2017 Group $’000 $’000

Depreciation of IT systems (note 12b) 12 11 Depreciation of non-oil and gas property, plant and equipment (note 13b) 23 22 Operating lease rentals – land and buildings 219 151 Operating lease rentals – other 36 42

Equity settled share-based payments – National Insurance (note 7) (173) 108 Equity settled share-based payments – IFRS 2 (note 7) 670 251

Administrative expenses – share incentives 497 359

Auditor’s Remuneration Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Audit fees payable to the Company’s auditor for the audit of the Company’s financial statements 129 83 Fees payable to the Company’s auditor and its associates for other services:

- the audit of the Company’s subsidiaries, pursuant to legislation 6 11 - audit related assurance services 15 6 - tax compliance services - 9 - tax advisory services 1 - - other services 8 5

The Company has borne the auditor’s remuneration of its non trading UK subsidiary undertakings.

4. Other Operating Costs Year ended Year ended 31 December 31 December 2018 2017 Group $’000 $’000

Environmental remediation costs and fines 1,264 1,198 Pre-licence costs / (credit) 7 (84) Loss on disposal of property, plant and equipment 11 - Share option costs 670 - Directors’ compensation for loss of office (note 6) 835 - Legal and professional fee – restructuring 214 - Business acquisition expenses

o Rockhopper Civita Limited (Italy) 100 196 o H2P (NOP) UK Limited (Canada) - note 24 115 60 o Other - 9

3,216 1,379

Environmental remediation costs and penalties During 2016 the Group discovered that one of the Rainbow area pipelines acquired in late 2015 had suffered corrosion in the past which had resulted in pinhole leaks. Fluid, mainly salt water, had seeped into the surrounding earth. The Group’s Canadian subsidiary worked with the Alberta Energy Regulator (“AER”) and specialist environmental contractors to clean up and remediate the effects of the leaks. The cost of the on-going clean up and internal pipeline inspections required to restart or maintain operations during 2018 was $865,000 (2017: $1,198,000). The Group is in discussions with the AER regarding potential penalties of up to approximately $0.5 million in relation to the leaks. The Group believes that it has a strong argument to mitigate the expected penalties and has provided $250,000. In addition, the Group incurred $149,000 other minor environmental remediation expenses during the year.

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for the year ended 31 December 2018 4. Other Operating Costs continued Share option costs Following the further investment by H2P in January 2018, H2P became the majority shareholder in the Company causing all outstanding share options to be exercisable with immediate effect. The remaining $670,000 unrecognised fair value of the options due to be charged over the remaining vesting period was recognised in full upon the change in control.

Legal and professional fees Legal and professional expenses incurred in relation to the restructuring of the Board and the executive management team and the implementation of the strategic, operational and financial review. Business acquisition costs Rockhopper Civita Limited On 8 June 2017, the Company announced that, subject to Italian regulatory approval, it would acquire Rockhopper Civita Limited, which owns onshore production and development gas assets in Italy, from Rockhopper Mediterranean Limited, a wholly owned subsidiary of Rockhopper Exploration Plc. As the required regulatory had not occurred by 31 December 2018, on 3 January 2019 the Company announced that both parties had mutually agreed not to proceed with the proposed transaction Legal and professional expenses of $100,000 (2017: $196,000) incurred in relation to the proposed acquisition have been expensed as incurred in accordance with IFRS 3 “Business Combinations”. H2P UK and its 100% subsidiary H2P Canada Legal and professional expenses of $115,000 (2017: $60,000) incurred in relation to the acquisition have been expensed as incurred in accordance with IFRS 3 “Business Combinations”. Further details of the acquisition are disclosed in note 24.

5. Other Operating Income Year ended Year ended 31 December 31 December 2018 2017 Group $’000 $’000

Bargain consideration on purchase of plant property and equipment - 2,035

On 8 March 2017 the Group’s Canadian subsidiary Cabot Energy Inc. acquired a number of Rainbow area leases in north west Alberta, Canada. In accordance with IFRS 3 “Business Combinations”, the assets acquired were recognised at their fair value using an internal financial model based on information from the Group’s due diligence. A discount rate of 10% was used in the fair value calculation. The Group calculated that the fair value of the assets acquired exceeded the cost of purchasing the assets by $2,787,000, the bargain consideration. On acquisition the assets have been included at their fair value in property, plant and equipment and the value of the bargain consideration has been credited to the Statement of Comprehensive Income as part of other operating income. A deferred tax liability of $752,000 in respect of temporary differences arises on the bargain consideration and has been netted from the total shown above. The H2P Canada acquisition in 2018 (note 24) did not result in bargain purchase and as such amount is nil for current year.

6. Directors’ Remuneration Year ended Year ended 31 December 2018 31 December 2017 Group & Company $’000 $’000

Executive salaries 773 526 Non-Executive fees 236 105 Bonus - 186 Compensation for loss of office 835 - Defined contribution pension costs 22 18 Benefits in kind 18 14

Total emoluments 1,884 849

Details for each Director’s remuneration are set out in the tables in the Report on Directors’ Remuneration on pages 19 to 22, which have been audited. The total remuneration of the highest paid Director was $610,000 (2017: $339,000). Directors salaries were paid in GBP Sterling. The amounts shown above have been translated from GBP at an average exchange rate of US $1.3353 per £1 Pound Sterling (2017: $1.2890).

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7. Staff Costs and Numbers (including Directors) Year ended Year ended 31 December 2018 31 December 2017 Group $’000 $’000

Salaries 2,145 1,798 Compensation for loss of office 835 - Social security costs 319 164 Defined contribution pension costs 58 46 Other benefits in kind 54 30

3,411 2,038 Charge for share-based payments (note 3) 670 251 National insurance accrual release on share-based payments (173) 108

3,908 2,397

Based on time writing, a certain element of salaries is capitalised, predominantly at the subsidiary level, to reflect the time spent on capital projects. The amounts shown above include net salary cost to the Group capitalised during the year of $537,000 (2017: $511,000).

The pension cost charge for the year represents contributions payable by the Group to UK defined contribution pension schemes and amounted to $53,000 (2017: $40,000). In addition, the Group made payments to defined contribution schemes for its Canadian employees. Contributions in Canada amounted to $5,000 (2017: $6,000). There were $3,000 (2017: $9,000) outstanding contributions at the end of the financial year. There were no prepaid contributions at either the beginning or end of the financial year. Excluding the Non-Executive Directors, there were 14 (2017: 11) full time members of staff at the end of the year. The average number of persons employed by the Group during the year, including Executive Directors, was made up as follows:

Group 2018 2017

Technical 4 2 Professional 4 3 Operations 3 3 Administration 4 3

15 11

8. Finance Costs Year ended Year ended 31 December 2018 31 December 2017 Group $’000 $’000

Loan interest 3 4 Unwinding of discount on decommissioning provisions (note 18) 259 189 Unwinding of discount on below market interest rate government loans 28 59 Foreign exchange loss - 22

290 274

In 2013 and 2014 the Group received loans from the Italian government. The loans are repayable in five annual instalments and interest is charged at 0.5% per annum. The unwinding of the fair value discount over the life of the loan is shown above as "unwinding of discount on below market interest rate government loans" and the actual interest paid is shown as "loan interest".

9. Finance Income Year ended Year ended 31 December 2018 31 December 2017 Group $’000 $’000

Foreign exchange gain 40 - Bank interest receivable 23 20 Other interest received - 4

63 24

The foreign exchange gain reflects the effect of the movement in Sterling, the Canadian Dollar and Euro against the US Dollar with respect to creditor balances at the start of the year.

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for the year ended 31 December 2018 10. Tax Credit a) Analysis of tax credit Year ended Year ended 31 December 2018 31 December 2017 Group $’000 $’000

Current tax: UK tax - current year - - Tax on overseas operations – current year - - Current tax - adjustment in respect of prior years - -

- - Deferred tax: UK tax - - Overseas tax – origination and reversal of temporary differences (note 19) 117 857

Total tax credit (note 10b) 117 857

During 2018 the Group continued to recognise its Canadian deferred tax assets in respect of tax losses and other temporary differences. $115,000 ($103,000 decrease net of $218,000 adjustments in respect of prior years) was recognised as in the judgement of the Directors it remains probable that the Group’s Canadian subsidiary will be profitable and in a tax paying position in the future and that the losses and other temporary differences will be utilised. During the year, the Group recognised an increase of $2,000 ($61,000 increase for the year less $59,000 adjustments in respect of prior years) in its Italian net deferred tax liability as a result of additional tax losses and recognition of other timing differences. The Group has made taxable losses in its other countries of operation, but has not recognised deferred tax assets for these losses as they are not expected to be recovered in the foreseeable future. For analysis of the tax charge by country of operation please see note 2. For more information on deferred tax see note 19. No income tax charges or credits arises on the Exchange Differences on Translation of Foreign Operations included in the Consolidated Statement of Comprehensive Income.

b) Factors affecting tax credit

The tax credit for the year is higher than the average blended rate of corporation tax in the UK for the period of 19% (2017: 19.5%). The difference is explained below: Year ended Year ended 31 December 2018 31 December 2017 Group $’000 $’000

Group loss before taxation (6,223) (3,991)

Tax on Group loss before taxation at an effective rate of 19% (2017: 19.25%) 1,182 768

Effects of Expenses not deductible for corporate income tax purposes (85) (50) Non-taxable income - 549 Impact of tax losses carried forward and other net movements in deferred tax not recognised (1,145) (357) Effects of different corporate tax rates on UK and overseas earnings 6 146 Adjustment in respect of prior years – deferred tax 159 (199)

Total tax credit for year 117 857

c) Factors that may affect future tax expense

The Group has unrecognised gross corporate income tax and supplementary hydrocarbon tax losses of $50.9 million (2017: $46.7 million) that are available for offset against future taxable profits. Losses that are available for offset against future taxable profits have been recognised as deferred tax assets to the extent that they offset deferred tax liabilities or will be used to offset taxable profits in the foreseeable future. Corporate tax amendments: The UK corporation tax rate reduced from 20% to 19% from 1 April 2017. Another reduction in UK corporation tax to 17% effective from 1 April 2020 was substantially enacted on 6 September 2016. This will reduce the Group’s future tax charge. Since the issue of the last Annual Report, there have been no other significant changes enacted to tax legislation in the Group’s other countries of operation that are currently anticipated to have in the near term a material effect on the Group’s tax position in those jurisdictions.

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Notes to the Financial Statements for the year ended 31 December 2018 11. Basic (Loss) / Earnings per Share Basic losses or earnings per share amounts are calculated by dividing the profit or loss for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted losses or earnings per share amounts are calculated by dividing losses or profits for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of shares that would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. The calculation of the dilutive potential ordinary shares related to employee and director share option plans includes only those warrants and options with exercise prices below the average share trading price for each period. 2018 2017 Group $’000 $’000

Net loss attributable to equity holders used in basic calculation (6,096) (3,164)

Net loss attributable to equity holders used in dilutive calculation (6,096) (3,164)

Number Number ‘000 ‘000

Basic weighted average number of shares 647,385 313,950 Dilutive potential of ordinary shares: Share options exercisable under Company schemes

- -

Diluted weighted average number of shares 647,385 313,950

As the Group made a loss in 2018 there is no dilution in the year from potential ordinary shares (2017: no dilution). Group 2018 2017

Loss per share Basic loss per share on loss for the year (cents) (0.9 cents) (1.0 cents) Diluted loss per share on loss for the year (cents) (0.9 cents) (1.0 cents)

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for the year ended 31 December 2018 12. Intangible Assets a) Exploration and Evaluation Assets Intangible assets consist of the Group's exploration projects which are pending determination of technical feasibility and commercial viability of extracting a mineral resource.

Group

Italy Canada French Guiana

Other incl. Australia Total

$’000 $’000 $’000 $’000 $’000

Cost At 1 January 2018 26,950 3,839 36,312 1,064 68,165 Additions 491 676 - 21 1,188 Fair value adjustment (note 24) - (3,871) - - (3,871) Exchange movement (1,310) (2) (1) (106) (1,419)

At 31 December 2018 26,131 642 36,311 979 64,063

Exploration expenditure written off At 1 January 2018 2,361 - 36,312 1,064 39,737 Impairment losses 53 - - 21 74 Exchange movement (113) - (1) (106) (220)

At 31 December 2018 2,301 - 36,311 979 39,591

Net book value At 31 December 2018 23,830 642 - - 24,472

Fair value adjustments Fair value adjustments in the year arise on the step acquisition of the 25% of the Canadian assets owned by H2P Canada. As there is not currently a market for exploration assets in North West Alberta, the fair market value of the Canadian intangible assets at the time of the acquisition was deemed to be nil and similarly no value was ascribed to the Canadian E&E assets acquired as part of the acquisition (see note 24). Impairment losses The Group tests intangible assets for impairment when there is an indication that assets might be impaired. In performing impairment tests the Group compares the carrying value of intangible assets to their value recoverable amount and also where the Group has tangible oil and gas assets with commercial reserves, the carrying value is compared to the recoverable amount of both intangible and tangible assets. Italy - Following the passage of legislation on 12 February 2019 the Italian government signed a decree which enacted the suspension of work on oil and gas exploration permits or applications for new exploration permits in Italy whilst a review is undertaken. The Ministries of Economic Development and Environment will review all areas in the Italian onshore and offshore territories as part of the PTESAI Bill, to determine which are suitable for sustainable hydrocarbon prospecting, exploration and development activities. The period given for the review is up to 18 months. The suspension will be lifted as soon as consensus is reached on the terms under which the different areas will proceed with oil and gas exploration. In the event that no consensus is reached within 24 months, the suspension will be lifted. The Group’s exploration permits have been through rigorous environmental assessments with no issues noted and the Directors have no reason to believe at this time that the review will result in the permits being revoked. Consequently, the Directors do not believe the review in itself constitutes an asset impairment trigger and the carrying value of the permits in the southern Adriatic have not been impaired based on the potential value of the permits following any successful exploration and appraisal, and the continued level of interest in the permits by industry participants. An additional impairment loss of $53,000 has been recognised against the costs capitalised in respect of the Sicily Channel permits, CR146 and CR149. These permits have only a very limited time remaining in which to drill a well which limit the chances of farming out the costs of drilling. Canada - The Directors have assessed the carrying value of the Canadian E&E assets and have concluded that that there are no facts or circumstances to suggest that the carrying value of the assets exceeds its future recoverable amount. Australia - An additional impairment loss of $21,000 has been recognised against the costs capitalised in respect of the Australian PEL629 licence. As announced on 9 April 2019, the Group reached an agreement post-period with The Department for Energy and Mining of the Government of South Australia to relinquish this onshore exploration permit in order to focus financial and operational resources on the Group’s core assets. Contractual commitments At the year end the contractual commitments for capital expenditure in respect of intangible assets in Italy was $nil (2017: $138,000), of which the Group’s share was $nil (2017: $138,000).

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for the year ended 31 December 2018 12. Intangible Assets continued The comparative tables for 2017 are detailed below:

Group

Italy Canada

French Guiana

Other incl. Australia Total

$’000 $’000 $’000 $’000 $’000

Cost At 1 January 2017 23,398 3,228 36,314 1,120 64,060 Additions 275 363 (2) 23 659 Disposals - - - (157) (157) Exchange movement 3,277 248 - 78 3,603

At 31 December 2017 26,950 3,839 36,312 1,064 68,165

Exploration expenditure written off At 1 January 2017 2,073 - 36,314 1,120 39,507 Disposals - - - (157) (157) Impairment losses 1 - (2) 23 22 Exchange movement 287 - - 78 365

At 31 December 2017 2,361 - 36,312 1,064 39,737

Net book value At 31 December 2017 24,589 3,839 - - 28,428

b) Computer software Computer software Group and Company $’000

Cost At 1 January 2018 494

At 31 December 2018 494

Amortisation At 1 January 2018 452 Charge for the year 12


Net book value At 31 December 2018 30


c) Goodwill Goodwill Group $’000

At 1 January 2018 - Acquisition see (note 24) 1,119 Exchange movement (100)

At 31 December 2018 1,019

Goodwill arising on H2P Canada acquisition Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. The fair values ascribed to the remeasured assets and liabilities acquired were less than the consideration and thus goodwill of $1.119 million was recognised (note 24). The amount of the goodwill recognised in the transaction reflects the importance placed by the Group in avoiding dilution of its ownership of the assets down to 50%, the perceived value and savings available from full control of the operations and ability to fully realise the value added from subsurface evaluations the cost of which would not have been recoverable from H2P under the standard Canadian joint operating agreements in place.

Goodwill is not amortised but is reviewed for impairment at least annually (see note 1).

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for the year ended 31 December 2018 13. Property, Plant and Equipment a) Oil and Gas Assets

Canada Canada Developed Undeveloped Total

Group $’000 $’000 $’000

Cost

At 1 January 2018

39,140 107 39,247

Additions

8,198 282 8,480 Changes in estimates (note 18) (98) - (98) Acquisitions (note 24)

9,597 - 9,597

Fair value adjustment (note 24) 6,520 - 6,520 Exchange movement

(5,066) (20) (5,086)

At 31 December 2018

58,291 369 58,660

Depletion and amortisation

At 1 January 2018

16,938 107 17,045

Charge for the year

3,601 - 3,601 Impairment losses

339 - 339

Exchange movement

(1,581) (9) (1,590)

At 31 December 2018

19,297 98 19,395

Net book value

At 31 December 2018

38,994 271 39,265

Additions Developed additions in the year of $8,198,000 relate to the Rainbow assets as the Group invested in increasing production. Changes in estimates Changes in estimates in the year of $98,000 relates to changes in abandonment liabilities for the Rainbow and Virgo area wells, reflecting increased estimates for changes in the condition of wells and actual costs incurred in abandonment below the original estimates. The Group matches abandonment estimates calculations made by the AER in measuring operators’ liabilities for abandonment in the province (see note 18). Acquisitions Canadian developed acquisitions of $9,597,000 in the year relate to the fair value of Rainbow and Zama assets re-acquired in January 2018, including the associated abandonment liabilities (see note 24). Fair value adjustments Fair value adjustments of $6,520,000 arise on the step acquisition of the Rainbow and Zama assets to align the value of existing assets with the value of the assets acquired (see note 24). 2018 Impairment The Group tests assets for impairment when there is an indication that assets might be impaired. In performing impairment tests the Group compares the carrying value of property, plant and equipment cash generating units and allocated goodwill to their recoverable amount:

− Eight wells which are in the process of being abandoned and have no reserves were fully impaired by $72,000 as a result of writing off increases in their carrying value brought about as a result of the changes in estimates for abandonment.

− One well was impaired by a total of $122,000 to its value in use where capital expenditure was incurred, but reserves did not subsequently increase by enough to pay for the expenditure and one wells was fully impaired by $145,000 following water breakthrough into the well bore.

All impairments were calculated using a value-in-use technique with post-tax cash flows calculated based on proven and probable reserves using a post-tax discount rate of 10%. The oil price per barrel used was a weighted average over the overall life of the field of $77 per barrel (WTI) based on prices ranging from $67 in Q4 2018 to $87 beyond 2032. Contractual commitments At the year end the contractual commitments for capital expenditure in respect of property, plant and equipment was $nil (2017: $nil), of which the Group’s share was $nil (2017: $nil).

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for the year ended 31 December 2018 13. Property, Plant and Equipment continued The comparative tables for 2017 are detailed below:

Canada Canada Developed Undeveloped Total

Group $’000 $’000 $’000

Cost

At 1 January 2017

24,873 57 24,930 Additions

8,064 - 8,064

Changes in estimates (note 18) 260 50 310 Acquisitions 3,581 - 3,581 Exchange movement

2,362 - 2,362

At 31 December 2017

39,140 107 39,247

Depletion and amortisation

At 1 January 2017

14,097 57 14,154 Charge for the year

1,149 - 1,149

Impairment losses

613 50 663 Exchange movement

1,079 - 1,079

At 31 December 2017

16,938 107 17,045

Net book value

At 31 December 2017

22,202 - 22,202

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for the year ended 31 December 2018 13. Property, Plant and Equipment continued b) Non-Oil and Gas Assets

Computer and

office equipment Group $’000

Cost At 1 January 2018 243 Additions 29 Disposals (148) Foreign exchange (3)


Depreciation At 1 January 2018 193 Charge for the year 23 Disposals (137) Foreign exchange (2)




Computer and office equipment

Company $’000

Cost At 1 January 2018 213 Additions 19 Disposals (148)


Depreciation At 1 January 2018 180 Charge for the year 14 Disposals (137)




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for the year ended 31 December 2018 14. Investments

The Company has accounted for its investments in subsidiaries at cost, less any amounts impaired.

Investments in

subsidiaries Company $’000

Cost At 1 January 2018 78,253 Acquisitions 6,612

At 31 December 2018 84,865

Impairment At 1 January 2018 53,333 Impairment 5,624

At 31 December 2018 58,957

Carrying value at 31 December 2018 25,908

Carrying value at 31 December 2017 24,920

The Group’s and Company’s subsidiary undertakings which are included within these consolidated accounts are:

Country of Principal Description and Incorporation / Principal country proportion of registration activity of operation shares held

Company

Northern Petroleum (UK) Limited England & Wales (1) Oil and gas exploration

Italy Ordinary shares of £0.001 – 100%

NP Offshore Holdings (UK) Limited England & Wales (1) Holding company UK Ordinary shares of £1 – 100%

NP Oil & Gas Holdings Limited England & Wales (1) Holding company UK Ordinary shares of £1 – 100%

Northern Petroleum E&P Holdings Limited

England & Wales (1) Holding company UK Ordinary shares of £1 – 100%

H2P (NOP) UK Limited England & Wales (1) Holding company UK Ordinary shares of £1 – 100%

Group

Northpet Investments Limited* England & Wales (1) Oil and gas exploration France (French Guiana)

Ordinary shares of £1 – 55.90%

Cabot Energy Inc. ** Canada (2) Oil and gas exploration,

development and production

Canada (Alberta)

Ordinary shares of $1 – 100%

Ouro Preto Resources Pty Limited ** Australia (3) Oil and gas exploration Australia (South Australia)


NP Netherlands Limited** England & Wales (1) Dormant company UK Ordinary shares of £1 – 100%

Northern Petroleum Limited* England & Wales (1) Dormant company UK Ordinary shares of £1 – 100%

High Power Petroleum Canada B.C Ltd ***

Canada (2) Oil and gas exploration,

development and production

Canada (Alberta)


* Shares held indirectly through its ownership of NP Offshore Holdings (UK) Limited ** Shares held indirectly through its ownership of NP Oil & Gas Holdings Limited *** Shares held indirectly through its ownership of H2P (NOP) UK Limited (1) Registered office: Riverbank House, 2 Swan Lane, London EC4R 3TT (2) Registered office: 900, 600 – 6th Ave SW, Calgary, Alberta T2P 0S5, Canada (3) Registered office: Unit 15, Level 2, 210 Bagot Road, Subiaco, WA 6008, Australia

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14. Investments continued During the year the Company acquired the share capital of H2P (NOP) UK Limited for a consideration of $6,612,000 (see note 24). Impairments booked for the Company’s subsidiary Northern Petroleum (UK) Limited (“NP UK”), were increased by $1,757,000 in the year following the fall in the value of the Euro, the functional currency of NP UK, against the US Dollar in the year, and as a result of its operating losses for the year. Impairments booked for the Company’s subsidiary NP Oil & Gas Holdings Limited (“NP OGH”), which holds the Group’s investments in Canada, were increased by $3,868,000 in the year following the fall in the value of the Canadian Dollar, the functional currency of the Group’s Canadian subsidiaries, against the US Dollar in the year; and as a result of the Canadian subsidiaries’ operating losses for the year. The investment in the Canadian subsidiaries was also impaired in the books of NP OGH. For the year ended 31 December 2018 the following subsidiaries of the Company were entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies: Northern Petroleum (UK) Limited; NP Offshore Holdings (UK) Limited; NP Oil & Gas Holdings Limited; Northpet Investments Limited; and Northern Petroleum E&P Holdings Limited. NP Netherlands Limited and Northern Petroleum Limited were dormant subsidiaries of the Group for the year ended 31 December 2018 and were entitled under sections 394A and 448A of the Companies Act 2006 to exemptions from audit and from preparing and / or filing accounts with Companies House.

15. Inventories 2018 2017 Group $’000 $’000

Crude oil 61 153 Materials, chemicals and consumable supplies 25 143

Total 86 296

The materials, chemicals and consumable supplies inventory at 31 December 2017 was used within production during the 2018 year.

16. Trade and Other Receivables

Group Company 2018 2017 2018 2017 $’000 $’000 $’000 $’000

Current assets Trade receivables 284 1,787 - - Other receivables 150 129 - - VAT recoverable 122 82 59 19 Amounts due from subsidiary undertakings n/a n/a 28,154 15,027 Prepayments and accrued income 142 342 105 253

Total trade and other receivables 698 2,340 28,318 15,299

Current trade and other receivables, and loans have a fair value that approximates to their book value at both balance sheet dates. Other receivables also comprise $150,000 (2017: $129,000) in respect of the consideration to be received in kind for the farm out of the Canadian oil and gas assets to H2P in 2017. Note 23 presents an analysis of the carrying values of the Group’s trade and other receivables and cash and cash equivalents by currency. Of the $284,000 trade receivable at 31 December 2018 (2017: $1,787,000), $165,000 were past due, but not impaired (2017: $373,000). Financial assets that are neither past due or impaired are expected to be fully recoverable in terms of cash or services rendered.

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for the year ended 31 December 2018 17. Trade and Other Payables

Group Company 2018 2017 2018 2017 $’000 $’000 $’000 $’000

Current Liabilities Trade payables 3,242 6,046 229 237 Taxation and social security 27 205 1 280 Italian government loans 311 266 - - Other payables 3 9 3 9 Amounts due to subsidiary undertakings n/a n/a 889 939 Accruals 2,141 3,764 1,131 414

5,724 10,290 2,253 1,879

Non-Current Liabilities Italian government loans - 29 - -

29 - -

Total trade and other payables 5,724 10,319 2,253 1,879

Trade and other payables, except for Italian government loans which were initially held at fair value on receipt and whose fair value discount has been unwound during the year at a market interest rate, are measured at amortised cost and their book value approximates to fair value at 31 December 2018 and 2017.

All current liability trade and other payables are considered due within three months, apart from $31,000 of the Italian government loans which is repayable in twelve months. Note 23 presents analysis of the carrying values of the Group’s trade and other payables by currency and by timing of utilisation.

Changes in Italian government loans Group $’000

At 1 January 2017 586 Repayment of loan – cash (435) Unwinding of timing discount – non cash (note 8) 59 Exchange movement – non cash 85

At 1 January 2018 295 Repayment of loan – cash Loan Interest accrued

- 3

Unwinding of timing discount – non cash (note 8) 28 Exchange movement – non cash (15)


18. Provisions 2018 2017 Group $’000 $’000

At 1 January 2018 8,868 7,221 Acquisitions (note 24) 2,985 794 Unwinding of timing discount 259 189 Change in estimates (note 13a) (98) 310 Additions 62 - Utilised - abandonment expenditure (437) (241) Exchange rate movement (986) 595

At 31 December 2018 10,653 8,868

The amount provided at 31 December 2018 represents the Group’s share of decommissioning liabilities in respect of its Canadian wells. Acquisitions in the year relate to decommissioning liabilities in respect of the H2P Canada assets acquired in January 2018, see note 24. The amounts provided are expected to be paid in years 2019 to 2031 (2019: $480,000, 2020 to 2032: $10,173,000), (2017: 2018: $438,000, 2019 to 2031: $8,430,000). Additions and changes in estimates in the year relate to the abandonment liabilities for Rainbow and Virgo area wells. The Group uses abandonment estimates to match the calculations made by the AER in measuring operators’ liabilities for abandonment in the province. The provisions are calculated using an inflation rate of 2% (2017: 2%), and a discount rate of 2.15% (2017: 2.20%). The carrying values of the Group’s decommissioning provisions are denominated in Canadian Dollars. The Company had $nil, (2017: $nil) provisions at the year end.

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for the year ended 31 December 2018 19. Deferred Taxation

Assets (Canada)

Liabilities (Italy)

Total Assets (Canada)

Liabilities (Italy)

Total

2018 2018 2018 2017 2017 2017 Group $’000 $’000 $’000 $’000 $’000 $’000

Balance at start of year 5,665 (2,674) 2,991 4,968 (2,137) 2,831 Deferred tax liability arising on acquisition (1,081) - (1,081) (752) - (752) Deferred tax movements recognised in statement of profit or loss 115 2 117 1,110 (253) 857 Exchange movement (341) 128 (213) 339 (284) 55

Balance at end of year 4,358 (2,544) 1,814 5,665 (2,674) 2,991

Comprising Other temporary differences – fixed assets (4,968) (5,271) (10,239) (2,285) (5,429) (7,714) Other temporary differences – provisions 2,877 - 2,877 2,394 - 2,394 Tax losses 6,449 2,727 9,176 5,556 2,755 8,311

Deferred tax recognised 4,358 (2,544) 1,814 5,665 (2,674) 2,991

On re-acquisition of a Canadian business in January 2018, the Group recognised a net deferred tax liability of $1,081,000, in respect of a fair value uplift on property, plant and equipment and trading losses (see note 24). At the year end, the Group’s Canadian subsidiary recognised an additional deferred tax asset of $115,000, for net deductible temporary differences which, in the judgement of the Directors, are expected to be utilised to offset future taxable profits in Canada (see note 10). $2,000 was recognised in respect of Italian deductible temporary differences offsetting Italian deferred tax liabilities recognised on southern Adriatic assets acquired in 2009 from ATI Oil Plc. $2,877,000 of the temporary differences are in respect of decommissioning provisions, the actual cost of which is deductible in the years in which it is incurred. Tax losses recognised in Canada ($23,887,000 in 2018; $20,576,000 in 2017) can be carried forward for up to 20 years. The Group’s Canadian losses arose from 2013 onwards. Of the $10,239,000 (2017: $7,714,000) other temporary differences, $5,271,000 (2017: $5,429,000) arises on the assets acquired in Italy as part of the ATI acquisition and $4,968,000 (2017: $2,285,000) arises from assets acquired in Canada. These deferred tax adjustments arising on the fair value of assets acquired are not expected to be settled in cash and will unwind over time as new discoveries are made and, together with existing discoveries, are brought into production. Offsetting deferred tax assets for tax losses have been recognised in Italy of $2,727,000 (2017: $2,755,000). The Company had $nil (2017: $nil) recognised deferred tax liabilities and or assets at the year end. Deferred tax assets have not been recognised in respect of those remaining losses and allowances that are not considered usable to offset taxable profits in future years as they may not be used to offset taxable profits elsewhere in the Group, and they may have arisen in subsidiaries that may be loss making for some time. The gross unrecognised temporary differences comprise:

Group Company 2018 2017 2018 2017 $’000 $’000 $’000 $’000

Other temporary differences – fixed assets 26,556 34,885 1,918 2,333 Tax losses 50,852 46,709 28,477 23,837

Gross unrecognised temporary differences 77,408 81,594 30,395 26,170

Unrecognised tax losses for UK $49,503,000; (2017: $45,253,000), Italy $nil; (2017: $nil) and Australia $1,349,000; (2017: $1,456,000) can be carried forward indefinitely.

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for the year ended 31 December 2018 20. Share Capital

Share issue

On 19 December 2017 the Group announced an equity capital raise comprising a subscription with H2P, a placing of ordinary shares and an open offer on the basis of 1 open offer share for every 8 existing 1 pence ordinary shares. Following shareholder approval at a general meeting on 5 January 2018, the Company raised new finance at a price of 5 pence per new ordinary share through the subscription, placement and open offer. 228,634,406 ordinary shares of 1 pence each were issued at a price of 5 pence per share (aggregate nominal value of $3,105,000). Gross proceeds of the share issue were $15,544,000. 103,796,081 ordinary shares of 1 pence each were issued at a price of 5 pence per share (aggregate nominal value of $1,412,000) as part of the consideration for the H2P Canada acquisition (note 24). The value of the consideration shares issued was $7,040,000. The equity finance raised was to fund the 2018 development programmes in Canada and ongoing working capital requirements.

2018 2017 Group and Company $’000 $’000

Allotted, issued, called up and fully paid 661,986,961 (2017: 315,829,037) ordinary shares of 1p each 9,227 4,530 95,365,660 (2017: 95,365,660) deferred shares of 4p each 6,580 6,580

15,807 11,110

The ordinary shares above all hold the same voting rights and there are no restrictions on the distribution of dividends.

Deferred shares have no voting rights, no rights to receive dividends and have only very limited rights on a return of capital. The deferred shares have not been admitted to trading on AIM or listed on any other stock exchange and are not freely transferable.

Date Type

Shares

1 January 2018 315,829,037 8 January 2018 Consideration shares for acquisition at 5.0 pence each (note 24) 103,796,081 8 January 2018 Subscription and placement at 5.0 pence each 207,200,000 18 January 2018 Open offer at 5.0 pence each 21,634,406 16 May 2018 Options exercise at 1.0 pence each 3,132,227 13 July 2018 Options exercise at 1.0 pence each 10,164,631 24 August 2018 Options exercise at 1.0 pence each 230,579

31 December 2018 661,986,961

Options over the Company’s ordinary shares: Disclosures concerning contingent rights to the allotment of shares in respect of outstanding options held by the Board are given in the Report on Directors’ Remuneration on pages 19 to 22. Details of options issued, extended and exercised during the year, together with options outstanding at 31 December 2018 are as follows:

Exercise

price

At 1 January

2018

New issues

Exercised

Lapsed or cancelled

At 31 December

2018 Issue date Final exercise date pence ‘000s ’000s ‘000s ‘000s ‘000s

8 May 2015 8 May 2025 nil-cost 177.4 - (50.7) - 126.7 12 July 2016 11 July 2026 nil-cost 6,950.7 - (5,295.3) - 1,655.4 19 January 2017 19 January 2027 nil-cost 1,865.0 - (1,597.7) - 267.3 16 August 2017 16 August 2027 nil-cost 9,601.0 - (6,583.7) (691.0) 2,326.3

18,594.1 - (13,527.4) (691.0) 4,375.7

The IFRS 2 fair values of awards granted under the Group’s option schemes have been calculated using a variation of the binomial (Black Scholes) option pricing model that takes into account factors specific to share incentive plans such as the vesting periods, the expected dividend yield on the Company’s shares and expected exercise of share options. The volatility used in the calculations is based on past share price movements and is estimated at 80% (2017: 80%). Risk free investment rates between 0.16% and 1.39% (2017: 0.16% - 1.39%) have also been assumed in the calculations. The weighted average remaining contractual life of all the options outstanding as at 31 December 2018 was eight years and one month. The charge to the Consolidated Statement of Comprehensive Income for the year calculated in accordance with IFRS 2 was $670,000 (2017: $251,000). Following the further investment by H2P in January 2018, H2P’s shareholding in the Company increased to more than 50%. This triggered a change of control clause in the option terms and conditions and resulted in all the outstanding options vesting and becoming exercisable with immediate effect.

__________________________________________________________________________________________________



for the year ended 31 December 2018 21. Commitments Operating leases The Group’s and Company’s commitments for rental payments under non-cancellable operating leases payable as at 31 December 2018 are as follows: 2018 2018 2017 2017 Other operating

leases Land and buildings

Other operating leases

Land and buildings

Group $’000 $’000 $’000 $’000

Payable Within one year - 48 34 98 Between one and five years - - 3 362 After five years - - - 23

- 48 37 483

2018 2018 2017 2017 Other operating

leases Land and buildings

Other operating leases

Land and buildings

Company $’000 $’000 $’000 $’000

Payable Within one year - - 34 7 Between one and five years - - 3 - After five years - - - -

- - 37 7

All leases are operating leases and the relevant annual rentals are charged to the Statement of Comprehensive Income on a straight line basis over the lease term. The Group leases an office in Canada. In January 2019 the Group agreed a new lease for its Canadian office for a term of eleven months at an annual rent of $71,400 Canadian Dollars (2017: $113,000). General renewal clauses exist on all leases.

22. Related Party Transactions The Directors and Mr Scott Aiken (CEO of H2P and Cabot Energy Plc) are considered to represent the Group’s key management and their remuneration is disclosed in note 6. Other than its Directors and CEO, the Group had transactions with one related party, the I-Pulse Inc. Group (I-Pulse Inc. and its subsidiaries). Following the agreement of shareholders at the general meeting held on 5 January 2018, an I-Pulse Inc. 100% owned subsidiary, H2P became the majority shareholder in the Company.

H2P Canada acquisition (note 24) On 5 January 2018, the Company acquired 100% of the common shares of H2P UK and its wholly-owned subsidiary H2P Canada (the "Acquisition") from H2P. Prior to completion of the Acquisition, H2P Canada held a 25% interest in the Canadian assets and an option to acquire a further 25% interest for $4,000,000 consideration (the “H2P Option”), acquired in December 2016. The acquisition was partly settled through the issue of new ordinary share in the Company (valued at $7,040,000 see note 20) and partly in cash ($1,750,000) due to be paid over 12 months. At 31 December 2018 $117,000 of the $1,750,000 was outstanding.

I-Pulse office rent During the year the Group’s head office moved to the I-Pulse offices in London. I-Pulse charged the Company $85,000 (2017: $nil) in office rent for the period from September to December 2018, all of which was outstanding at 31 December 2018.

Blue Spark well stimulation services At 31 December 2018 the Group was still due to receive $150,000 (2017: $150,000) worth of well stimulation services in Canada from another I-Pulse subsidiary.

The Directors consider that related party transactions during the year were conducted on terms equivalent to those that prevail in arms lengths transactions. No Director or member of senior management had, during or at the end of the year, a material interest in any other contract which was significant in relation to the Group’s business, except in respect of personal service agreements and options.

__________________________________________________________________________________________________




22. Related Party Transactions continued Details of transactions and year end balances with Directors and senior management of the Company, or with companies that were at some stage during 2018 related parties, are as follows:

I-Pulse Inc. Group Group $’000

Receivables balance at 31 December 2018 150

Payables balance at 31 December 2018 202

Receivables balance at 31 December 2017 545


Amounts invoiced to Cabot Energy Group in 2018: - billings for services 85 Amounts invoiced by Cabot Energy Group in 2018: - project billings under Joint Operating Agreements -

Amounts invoiced to Cabot Energy Group in 2017: - billings for services 133 Amounts invoiced by Cabot Energy Group in 2017: - project billings under Joint Operating Agreements 1,167

I-Pulse Inc. Group Company $’000

Receivables balance at 31 December 2018 -


Receivables balance at 31 December 2017 -

Payables balance at 31 December 2017 -

Amounts invoiced to Cabot Energy Plc in 2018: - billings for services 85

Amounts invoiced to Cabot Energy Plc in 2017: - billings for services -

__________________________________________________________________________________________________




23. Financial Instruments Financial instruments – risk management

The Group and Company are exposed through their operations to the following financial risks:

− Credit risk

− Cash flow interest rate risk

− Foreign exchange risk

− Liquidity risk

− Price risk

This note describes the Group’s and Company’s objectives, policies and processes for managing those risks and the methods used to measure them. There have been no substantive changes in the Group’s and Company’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments The principal financial instruments used by the Group and Company, from which financial instrument risk can arise are as follows:

− Loans and receivables

− Trade and other receivables

− Cash and cash equivalents

− Trade and other payables

General objectives, policies and processes The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, while retaining responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. Further details regarding these policies are set out below.

Credit risk Credit risk is the risk of financial loss to the Group if a customer or a counter party to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk from credit sales and from cash and cash equivalents via deposits with banks and financial institutions. It is Group policy, implemented locally, to assess the credit risk of new customers and seek external credit ratings where applicable and when available. Potential customers that fail to meet the Group’s benchmark creditworthiness may transact with the business on a prepayment basis. For banks and financial institutions, only independently rated parties with an acceptable credit rating are accepted. The Group does not currently enter into derivatives to manage credit risk, although in certain isolated cases may take steps to mitigate such risks if it is sufficiently concentrated.

Quantitative disclosures of the credit risk exposure in relation to trade and other receivables are disclosed in note 16.

Cash flow interest rate risk The Group is exposed to cash flow interest rate risk from their deposits of cash and cash equivalents with banks. The Group and Company are not at present exposed to cash flow interest rate risk on borrowings as it only has fixed interest debt at a rate of 0.5% per annum from the Italian government.

Interest rates on financial assets and liabilities The Group’s financial assets consist of cash and cash equivalents, trade and other receivables. The interest rate profile at 31 December of these cash and cash equivalents, trade and other receivables was as follows:

Group 2018 2017 Financial assets

on which floating rate interest is earned

Financial assets on which no

Interest is earned Total

Financial assets on which floating rate

interest is earned

Financial assets on which no

Interest is earned Total $’000 $’000 $’000 $’000 $’000 $’000

US Dollar 94 187 281 496 308 804 Canadian Dollar 353 322 675 1,218 1,734 2,952 UK Sterling 68 119 187 31 127 158 Euro 371 70 441 18 171 189 Australian Dollar 2 - 2 12 - 12

Total 888 698 1,586 1,775 2,340 4,115

__________________________________________________________________________________________________




23. Financial Instruments continued Interest rates on financial assets and liabilities continued The financial assets for each currency largely comprise cash on call accounts and placed on money markets on call and short term debtors. In addition the Company charges interest to subsidiaries of the Group on intercompany current account loans in certain circumstances. The Group earned interest on its interest bearing financial assets at rates between 0% and 0.59% (2017: 0% and 0.59%) during the year. All financial assets on which no interest is earned are considered immediately available to turn into cash on demand. If average interest rates, approximately 0.59% in 2018, had been 100% higher (i.e. 1.18%), the Group’s finance income of $23,000 would have been $46,000. Had average interest rates in 2018 been 50% lower, the Group’s finance income would have been $12,000 lower. It is considered that there have been no significant changes in cash flow interest rate risk at the reporting date compared to the previous year end and that therefore this risk has had no material impact on earnings or shareholders’ equity. Foreign exchange risk Foreign exchange risk arises because the Group has operations whose functional currency is different to the Group’s reporting currency, resulting in gains and losses on retranslation into US Dollars. It is the Group’s policy to ensure that individual Group entities enter into local transactions in their functional currency wherever possible and that only surplus funds over and above working capital requirements should be transferred to the treasury of the Parent Company. The Group and Company considers this policy minimises any unnecessary foreign exchange exposure. The following table discloses the exchange rates of the major currencies utilised by the Group and Company:

UK Sterling Euro Canadian Dollar Australian Dollar

Foreign currency units to $1 US Dollar (rounded to two decimal places)

Average for 2018 0.75 0.85 1.30 1.34

At 31 December 2018 0.79 0.87 1.36 1.42

Average for 2017 0.78 0.88 1.30 1.28

At 31 December 2017 0.74 0.83 1.25 1.30

Currency exposures The monetary assets and liabilities of the Group and Company that are not denominated in US Dollars are exposed to currency fluctuations and are shown below at their US Dollar equivalent of local currency balances. UK Sterling Euro Canadian Dollar Australian Dollar Total $’000 $’000 $’000 $’000 $’000

US Dollar equivalent of exposed net monetary assets and liabilities

Group

At 31 December 2018 68 371 353 2 794

At 31 December 2017 31 18 1,218 12 1,279

During the year, the US Dollar strengthened in value against the Canadian Dollar (8.2%), strengthened against the Euro (4.8%) and strengthened against UK Sterling (5.9%), resulting in an overall foreign exchange gain for the year of $40,000, and exchange losses on translation of foreign operations of $3,867,000.

− Had the US Dollar risen in value against the Canadian Dollar by 10% the Group’s overall foreign exchange loss would have been $720,000 higher. Had the US Dollar fallen in value against the Canadian Dollar by 5% the Group’s overall foreign exchange loss would have been $4,668,000 lower.

− Had the US Dollar risen in value against the Euro by 10% the Group’s overall foreign exchange loss would have been $1,179 ,000 higher. Had the US Dollar fallen in value against the Euro by 5% the Group’s overall foreign exchange loss would have been $2,206,000 lower.

− Had the US Dollar risen in value against UK Sterling by 10% the Group’s overall foreign exchange loss would have been $21,000 lower. Had the US Dollar fallen in value against UK Sterling by 5% the Group’s overall foreign exchange loss would have been $55,000 higher.

__________________________________________________________________________________________________



for the year ended 31 December 2018 23. Financial Instruments continued Liquidity risk Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting their financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain readily available cash balances (or agreed facilities) to meet expected requirements. The Group currently has no long term borrowings, other than the loans from the Italian government forwarded under the scheme to encourage oil and gas exploration in Italy. Price risk Oil revenue is subject to energy market price risk. Had average oil prices in 2018 been 10% higher, the Group’s oil revenue of $12,127,000 would have been $1,213,000 higher. Had average oil prices in 2018 been 10% lower, the Group’s oil revenue would have been $1,213,000 lower. Given current production levels it is currently not considered appropriate for the Group and Company to enter into any hedging activities or trade in any financial instruments, such as derivatives. This strategy will be subject to continued review through 2019 and beyond given the Group’s current cash flow. Capital management policies The Group considers its capital to comprise ordinary share capital, share premium, distributable reserves and accumulated retained earnings. In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders, principally though capital growth. In order to achieve and seek to maximise this return objective, the Group may seek to maintain a gearing ratio that balances risks and returns at an acceptable level while also maintaining a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through new share issues, or increases or reductions in debt, the Group considers not only its short term position but also its medium and longer term operational and strategic objectives. There have been no other significant changes to the Group’s capital management objectives, policies and processes during the year nor has there been any change in what the Group considers to be its capital. Financial liabilities The Group’s financial liabilities consist of trade and other payables. The interest rate profile at 31 December of these liabilities was as follows:

2018 2017 Financial

liabilities on which interest

is paid

Financial liabilities on

which no interest is paid Total


which interest is paid


which no interest is paid

Total

$’000 $’000 $’000 $’000 $’000 $’000

Euro 311 149 460 295 88 383 UK Sterling - 666 666 - 671 671 US Dollar - 664 664 - 283 283 Canadian Dollar - 3,931 3,931 - 8,982 8,982 Australian Dollar - 3 3 - - -

Total 311 5,413 5,724 295 10,024 10,319

The Group’s short term creditors are considered payable on demand.

__________________________________________________________________________________________________



for the year ended 31 December 2018 24. Business acquisitions Pursuant to a Share Purchase Agreement (the “SPA”) dated 19 December 2017 between H2P and the Company, the satisfaction of all conditions precedent and the approval by the Company shareholders on 5 January 2018, the Company acquired 100% of the common shares of H2P UK and its wholly-owned subsidiary H2P Canada (the "Acquisition"). Prior to completion of the Acquisition, H2P Canada held a 25% interest in the Canadian assets and an option to acquire a further 25% interest for $4,000,000 consideration (the “H2P Option”), acquired in December 2016. The rationale for the Acquisition was to maximise the cashflow benefits to the Group from the Canadian assets by holding as large a working interest in the assets as possible. The Group believed that allowing the exercise of the H2P option from both a cashflow, and investor relations point of view, was a step backwards for the business in terms of it becoming strongly cashflow positive and growing production. Avoiding the exercise of the option and finding alternative forms of funding elsewhere was a strong preference. The consideration for the Acquisition was a total of $8,790,000, equivalent to H2P’s 50% share of the pre-tax net present value of the Canadian oil & gas proven reserves as at 30 September 2017, as calculated by McDaniel & Associates Ltd less the H2P Option cost and as adjusted for fourth quarter production and reserve additions, settled by the issue of 103,796,081 new ordinary shares, at a price of GBP0.05 per share and deferred cash consideration of $1,750,000 million payable in monthly instalments between February 2018 and January 2019. Under the SPA, the H2P Option was terminated on completion of the Acquisition. The consideration has therefore been allocated between the cost of the H2P Option termination and the cost of the business combination.

Following the completion of the Acquisition, the Group’s working interest in the Canadian assets increased from 75% to 100% and the Group obtained control over the previously held joint operation. The Acquisition has been accounted for as a business combination under IFRS 3, Business Combinations. Having acquired a controlling interest, 100% of the financial results of the Canada operations have been consolidated in the Company’s consolidated financial statements from the SPA economic effective date of 1 January 2018. The assets and liabilities assumed as at January 5, 2018 have been recognised at their respective fair values as shown in the table below. As control was achieved in stages, assets and liabilities recognised as part of the previously held 75% interest have also been remeasured at fair value.

Consideration: 5 January 2018 $’000

Cash 1,750 Shares 7,040

8,790

Consideration split between business combination and loss on option termination:

5 January 2018 $’000

Consideration for the business combination 6,612 Loss on termination of option 2,178

8,790

The consideration agreed exceeded 25% of the adjusted valuation of the assets by $2,178,000. This amount has been recognised in the income statement as the portion of the consideration paid to extinguish the H2P option.

__________________________________________________________________________________________________



for the year ended 31 December 2018 24. Business acquisitions continued Identifiable assets acquired, and liabilities assumed:

5 January 2018 $’000

Property, plant and equipment – oil & gas assets 9,597 Provisions – asset retirement obligation (2,985) Deferred tax liability (1,081) Inventories 152 Trade and other receivables 2 Trade and other payables (192) Goodwill recognised on acquisition 1,119

Consideration for the business combination 6,612

The fair values ascribed to the remeasured assets and liabilities acquired were less than the consideration and thus goodwill of $1,119,000 was recognised. The amount of the goodwill recognised in the transaction reflects the importance placed by the Group in avoiding dilution of its ownership of the assets down to 50%, the perceived value and savings available from full control of the operations and ability to fully realise the value added from subsurface evaluations the cost of which would not have been recoverable from H2P under the standard Canadian joint operating agreements in place.

Remeasurement of previously held interest at fair value: 5 January 2018

Recognised adjustments to

carrying values at remeasurement

$’000

Property, plant and equipment – oil & gas assets 6,520 Intangible assets (3,871)

Gain on step acquisition 2,649

Acquisition costs of $115,000 have been incurred and expensed in the period (see note 4). Of the $1,750,000 deferred cash consideration, $1,633,000 had been settled at 31 December 2018.

The revenue generated, and expenses incurred by the re-acquired 25% of the operation since the date of acquisition (5 January 2018) were $3,051,000 and $3,291,000 respectively. Of the $3,291,000 expenses, $2,073,000 relates to production costs, $900,000 relates to depletion and amortisation of property, plant and equipment, $254,000 relates to other operating expenses and $65,000 relates to finance costs for the unwinding of discount on decommissioning provisions. Cash outflow from the operation post acquisition was $1,495,000 and comprised net revenue and investments in oil and gas assets.

25. Post Balance Sheet Events Between the balance sheet date of 31 December 2018 and the date that the 2018 financial statements have been signed, the following developments have been announced which have a material impact on, or the understanding of, this financial information:

On 12 February 2019 the Company announced an equity capital raise comprising a subscription with H2P and City Financial and an open offer on the basis of 1 open offer share for every 85.97 existing 1 pence ordinary shares. The funds raised were proposed to be used to fund the partial settlement of outstanding balances with trade creditors in Canada and the UK and provide short term working capital for the Group’s immediate needs. A proposed share capital reorganisation to consolidate every 100 existing ordinary shares into one new ordinary share was also announced on 12 February 2019. Following the passing of the resolutions at the General Meeting on 4 March 2019, the Company's 661,987,000 existing ordinary shares were consolidated on the basis of one new ordinary share for every 100 existing ordinary shares and such resulting ordinary shares then sub-divided into one new ordinary share of 1p and one deferred share of 99p. The Company raised new finance of $3,174,000 through the subscription and open offer. A further $205,000 worth of equity was issued in settlement of amounts owed to creditors in Canada. Following the share reorganisation and subscription and open offer, the Company’s issued ordinary share capital comprises 31,935,750 new ordinary shares. The costs associated with the subscription and open offer amounted to $237,000.

__________________________________________________________________________________________________


Unaudited Statement of Net Commercial Oil & Gas Reserve Quantities – Proven and Probable Reserves

At 31 December 2018 Volumes – Group

Reserves mmboe

At 1 January 2018 2.12 Changes during the period: Acquisitions 0.71 Additions 0.62 Revisions of previous estimates 0.39 Production (0.26)

At 31 December 2018 3.58

Notes 1. The Reserve estimates shown in this report are based upon the joint reserve and resource definitions of the Society of Petroleum Engineers,

the World Petroleum Congress, and the American Association of Petroleum Geologists. The classification of reserves has been done in accordance with Canadian Oil and Gas Evaluation Handbook (COGEH) guidelines as referenced in (Canadian) National Instrument 51-101 (NI-51-101).

2. Canadian proven and probable reserves are the most recent estimates as determined during the third quarter of 2018 (2017: third quarter)

in an independent review by McDaniel & Associates Consultants Ltd. of Calgary, Alberta, Canada, adjusted for subsequent production.

__________________________________________________________________________________________________


Glossary

2D

Two dimensional

3D

Three dimensional

2P

Proven plus probable reserves

$

US Dollar

AER

Alberta Energy Regulator

AGM

Annual General Meeting

AIM

The Alternative Investment Market of the

London Stock Exchange plc

bbls

Barrels

Bn bbls

Billion barrels

blpd

Barrels of liquid per day

bcf

Billion cubic feet

Bboe

Billion barrels of oil equivalent

boe

Barrels of oil equivalent

boepd

Barrel(s) of oil equivalent per day

bopd

Barrels of oil per day

Cabot or the Group

The Company and its subsidiaries, Cabot

Energy Plc

CAD$

Canadian dollar

CGU

Cash-generating unit

the Code

UK Corporate Governance Code

CPR

Competent Person’s Report

D&P

Development and production

E&E

Exploration and Evaluation

Edmonton

Edmonton Light Oil

EIA

Environmental Impact Assessment

EU

European Union

FCA

Financial Conduct Authority

GAAP

Generally Accepted Accounting Practice

H2P

High Power Petroleum LLC

H2P Option

An option held by H2P to acquire a further

25% of the Group’s Canadian assets

HSE

Health, Safety and the Environment

IAS

International Accounting Standards

IASB

International Accounting Standards Board

IFRIC

International Financial Reporting

Interpretations Committee

IFRS

International Financial Reporting Standards

ILI

In Line Inspection

Intangible assets

Oil and gas assets at the exploration and

evaluation stage and IT systems

IPIECA

The global oil and gas industry association for advancing environmental and social performance I-Pulse Inc. Group

Cabot Energy Plc’s ultimate parent company

ISO 14001

International Standards Organisation

Environmental Management Standard

ITT

Invitation To Tender

km

Kilometre

KPI

Key Performance Indicator

LTI

Lost Time Incident

mmbbls

Million barrels

mmboe

Million barrels of oil equivalent

Netback

Expressed as gross profit per barrel, a summary of all costs associated with bringing one unit of oil to the marketplace and the revenues from the sale of all the products generated from that same unit NPV(10)

Net present value at a ten per cent. discount

rate

OHSAS 18001

British Standard for Occupational Health and

Safety Management Systems

Parent Company

Cabot Energy Plc

PP&E

Property, plant and equipment

PTESAI

Plan for Sustainable Energy Transition of

Suitable Areas

Probable

Probable reserves are those unproven

reserves which analysis of geological and

engineering data suggests are more likely

than not to be recoverable in this context and

when probabilistic methods are used, there

should be at least 50% probability that the

quantities actually recovered will equal or

exceed the sum of estimated proved plus

probable reserves

Prospect

Potential or actual drilling target that is

defined by seismic data and / or log data with

a sufficient level of detail for the evaluation of

economic viability

Proven

Proven reserves are those quantities of

petroleum which, by analysis of geological

and engineering data, can be estimated with

reasonable certainty to be commercially

recoverable, from a given date forward, from

known reservoirs and under current

economic conditions

Rainbow

The wells, facilities, leases and pipelines

owned by the Group in the Rainbow area of

northwest Alberta, Canada

Reserves

Estimated remaining quantities of oil and

natural gas and related substances

anticipated to be technically and

economically recoverable from known

accumulations, as of a given date

Shell Italia

Shell Italia E&P S.p.A

Virgo

The wells, facilities and leases owned by the

Group in the Virgo area of north west Alberta,

Canada

WTI

West Texas Intermediate – a grade of crude

oil used as a benchmark in oil pricing

__________________________________________________________________________________________________


Directors, Offices and Advisers

Directors and Senior Management

J Dewar Independent Non-Executive Director and acting Chairman

R Maguire Independent Non-Executive Director

S H Aitken Chief Executive Officer

P Mychalkiw Chief Financial Officer

C J Airlie Chief Technical Officer

P J Lafferty President Cabot Energy Inc. Company Secretary

W J Anderson Registered Office c/o Fieldfisher Riverbank House 2 Swan Lane London EC4R 3TT United Kingdom Telephone: +44(0)20 7469 2900 Email: [email protected] Registered Number

02933545

Legal Form

Public limited company

Country of Incorporation of Parent Company

England

Office Locations

Cabot Energy Head Office, London 93-95 Gloucester Place London W1U 6JQ United Kingdom Regional office, Canada Cabot Energy Inc. 900, 600 – 6th Ave SW Calgary, Alberta T2P 0S5 Canada Regional office, Italy Viale di Trastevere 249 00153 Rome Italy Independent Auditor

Deloitte LLP 2 New Street Square London EC4A 3BZ Registrars

Neville Registrars Neville House Laurel Lane, Halesowen West Midlands B63 3DA Bankers

HSBC Bank Plc 8 Canada Square London E14 5GL Lloyds Banking Group 10 Gresham Street London EC2V 7AE ATB Financial 2202 20 Street Nanton, Alberta T0L 1R0

Nominated Adviser and Brokers SP Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London, W1S 2PP GMP FirstEnergy 85 London Wall London EC2M 7AD PR/IR Advisor Luther Pendragon 48 Gracechurch Street London EC3V 0EJ Solicitors Fieldfisher 2 Swan Lane London, EC4R 3TT Lawson Lundell LLP Suite 3700,205 – 5th Avenue S.W. Bow Valley Square 2 Calgary, Alberta T2P 2V7

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Licence Table

Type Interest Operator

Canada Onshore North west Alberta 243 Leases Varied 207/243 Cabot

Italy Onshore Cascina Alberto Permit 20% Shell Italia

Offshore

Southern Adriatic F.R39.NP Permit 100% Cabot F.R40.NP Permit 100% Cabot d149D.R-.NP Application 100% Cabot d60F.R-.NP Application 100% Cabot d61F.R-.NP Application 100% Cabot d65F.R-.NP Application 100% Cabot d66F.R-.NP Application 100% Cabot Sicily Channel C.R.146.NP Permit 100% Cabot C.R149.NP Permit 100% Cabot 24 Application 50% Cabot d30G.R-.NP Application 100% Cabot

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