Jersey Oil and Gas : Annual Report and Financial Statements 2021

Annual Report

Year ended 31 December 2021

CONTENTS

Strategic Report

Strategic Report 03

Our Assets 04

Financial Review 06

Our Stakeholders 07

Risks 09

Our Governance

Board of Directors 12

Corporate Governance 14 Report

Sustainability Report 20

Directors' Report 25

Directors' Responsibilities 27

Audit Committee Report 28

Remuneration Report 29

Independent Auditors' 35 Report

Financial Statements

Consolidated Statement 41 of Comprehensive Income

Consolidated Statement 42 of Financial Position

Consolidated Statement 43 of Changes in Equity

Notes to the Consolidated 44 Financial Statements

Company Statement of 65 Financial Position

Company Statement of 66 Changes in Equity

Notes to the Company 67 Financial Statements

Since 2019 the Group has successfully aggregated a significant oil and gas resource base in the heart of the Central North Sea, the "Greater Buchan Area" ("GBA"). As the sole owner of the GBA, the Group has the control and flexibility to advance a proposed optimal new hub development capable of unlocking substantial long-term shareholder value. To this end, the next major step for JOG is to secure an industry partner(s) in order to move the development into the next phase of activities and secure the necessary regulatory approvals in 2023 for execution of the project.

GBA Focus

• ▪ JOG is actively engaged with multiple counterparties regarding the planned farm-out of an interest in the GBA

• ▪ Work is progressing to assess development concepts to facilitate such a farm-out including the use of existing third-party host infrastructure for future production from the GBA. Such concepts have the potential to enhance overall development economics through the synergies and cost savings associated with utilising common infrastructure

• ▪ The work completed by the Group in 2020-21 on a platform development concept is facilitating an accelerated technical evaluation of various alternative development options

• ▪ Upon selection of the optimal GBA development concept from the wider opportunity set that has now been generated, the project will move into "Front End Engineering & Design" activities along with preparation of the required Field Development Plan for the North Sea Transition Authority ("NSTA")

Supportive Macro Environment

• ▪ Recent geopolitical events, exacerbated by recent under investment in the upstream sector, have led to a material escalation in oil and gas prices that has served to underline the importance of maximising domestic energy supplies

• ▪ The UK North Sea has only a limited number of readily executable oil and gas developments with a resource base in excess of 100 million barrels of oil equivalent such as that offered by the GBA

Attractive Outlook

• ▪ Progressing the GBA development project remains JOG's number one priority

• ▪ Acceleration of the Group's corporate growth strategy, through the execution of potential accretive acquisitions, remains a core objective

• ▪ The Group remains well funded with a cash balance at the end of 2021 of approximately £13 million and with current expenditure primarily related to workstreams that will facilitate securing a successful farm-out

• ▪ Strengthened management team with significant industry experience

CHAIRMAN & CHIEF EXECUTIVE OFFICER'S REPORT

Overview

During 2021 JOG made good progress in advancing its primary objective of unlocking value from the Greater Buchan Area ("GBA") development project. The hard work and effort of our team on multiple work streams has positioned the Group well; defining the unique investment opportunity the GBA offers, with the significant proven oil resources providing attractive economics and flexibility for various development options, in the heart of the Central North Sea.

Portfolio With Scale

The Group has constructed a quality portfolio of assets that form the GBA in the Outer Moray Firth area of the UK North Sea. It represents a near full-cycle portfolio of assets, underpinned by the Buchan Oil field and the J2 and Verbier oil discoveries, along with three high impact and drill-ready exploration prospects; Verbier Deep, Wengen and Cortina.

In addition to contingent oil resources of in excess of 100mmbbls in the planned first phase development of the Greater Buchan Area, our shareholders have ownership of significant resource upside from further development phases and the drill-ready exploration prospects that are proximal to the core project. As an indication of confidence in our ability to deliver value for shareholders, the Group raised £16.61m (gross) through an oversubscribed placing and subscription in March 2021, providing strength and flexibility to advance the project to the next phase.

A standalone GBA platform development concept was prepared and a Concept Select Report ("CSR") submitted to the North Sea Transition Authority ("NSTA"). TheCSR was focused on meeting the NSTA's twin strategic objectives of 'Maximising Economic Recovery' and contributing to the Government target for 'Net Zero' and it was used to launch an industry farm-out process, as a project of this scale requires multiple partners and funding components for successful delivery.

GBA Farm-Out Advancing

The farm-out process is generating interest from a wide variety of producers and infrastructure owners. Initial engagement and screening has led to JOG being actively engaged with multiple serious counterparties of scale, with ongoing due diligence involving two-way collaborative workstreams. Work is progressing to assess various development concepts that can facilitate the farm-out, including using existing third-party host infrastructure and facilities to enhance overall development economics through synergies and cost savings. The associated recoverable volumes from the GBA will naturally be dependent on the development solution that is taken forward. Opportunities to optimise forecast production and capital expenditure requirements represent a core component of the evaluations. The work completed during 2021 on the platform development concept has accelerated the technical evaluation of these further options.

Completing the assessment of the wider set of development solutions for the GBA is naturally an important driver for delivering stakeholder value from the project and a task the Group is working on with pace to progress.

The Group remains well funded with a cash balance at the end of 2021 of approximately £13 million and with current expenditure focused on workstreams that will facilitate securing a successful farm-out.

Positive Macro Environment

It has been a volatile year for sentiment in the oil and gas sector and in the lead up to "COP26" there was much debate about the future of the North Sea. We see the North Sea as a crucible for energy transition where upstream oil and gas can function effectively alongside the advancement of renewable energy, with examples of oil and gas companies leading investments into offshore wind and carbon capture, utilisation and storage ("CCUS") technologies.

Indeed, offshore wind developments, facilitating the decarbonisation of offshore oil and gas infrastructure and regional electrification may likely play an important role in optimising the GBA development plans. We have put net zero considerations at the heart of our business by subscribing to the principles that underpin the North Sea Transition Deal that was announced in March 2021, and which supports the industry's transition to clean, green energy.

Recent geopolitical events have sadly served as a salutary reminder that security of energy supply remains of vital importance as the energy transition is achieved. The reality of underlying supply fundamentals, exacerbated by several years of under investment across the upstream sector and the significant and steady increase in commodity prices have served as a reminder that oil and gas is a vital component of the overall energy mix. Investment in maximising the production of indigenous, low-carbon UK resources remains crucial for security of supply and represents the best way for the UK economy to navigate the energy transition wisely, with JOG having an important part to play in this evolution. Improved commodity prices have bolstered producing company cash positions, serving to improve sector confidence

and provide a helpful backdrop to the on-going GBA farm-out process.

Strong Organisation & Outlook During 2021, JOG made several senior management and Board changes which marked the next phase in the Group's development for delivery on its key strategic ambitions. It was pleasing to be able to welcome Graham Forbes and Richard Smith into the Group as Chief Financial Officer and Chief Commercial Officer, respectively. This, combined with the smooth transition of the Chairman's role from Marcus Stanton to myself (Les Thomas), has strengthened the execution capabilities and leadership of the Group.

We have built a team of experienced professionals, with a demonstrable track record in the industry, a high-quality asset base and a comfortable funding position to work from.

The Group is therefore well positioned for success and on behalf of the Board, we would like to thank our dedicated JOG team for their accomplishments during the year and to recognise and acknowledge the ongoing support we have received from all of our shareholders and stakeholders at large.

Chief Executive Officer 27 April2022

STRATEGIC REPORT

Business Review & Future Activities The principal activity of the Group is that of an upstream oil and gas business in the United Kingdom. The Company is a public limited company incorporated in England and Wales (Company number 07503957) and is quoted in London on the AIM market of the London Stock Exchange plc ("AIM") under the designation JOG. The Company is required by the Companies Act 2006 to set out in this report a review of the business of the Group during the year ended 31 December 2021 and the position of the Group at the end of the year, as well as the principal risks and uncertainties facing the Group. The information that fulfils these requirements, including discussion of the business and future developments, is set out in the Chairman and Chief Executive Officer's joint repott and the Strategic Report.

Business Strategy

The Group has a two-pronged approach to its strategy, which are aimed at delivering strong shareholder returns. The first is a Core Area Strategy, which is focused on the area surrounding our principal assets, UK licences P2498

and P2170 (collectively known as the Greater Buchan Area) to create and increase value in the licences and surrounding areas. The second is the pursuit and execution of asset acquisitions in the UK North Sea area. The continued evolution of the UK North Sea and wider industry environment are expected to result in some interesting acquisition opportunities arising that we, as a Group unencumbered by debt or decommissioning liabilities, may be able to exploit beneficially.

The Greater Buchan Area

During the year, JOG maintained focus on its Core Area Strategy, with the delivery of Concept Select for the GBA and the launch of a farm-out process. Our primary asset is the Buchan oil field which sits across two blocks in the P2498 licence, together with the J2 oil discovery. This licence, together with the P2170 licence, form our core area, referred to as the GBA. Closely integrated into our focus on the core GBA area has been the pursuit and execution last year of both an asset and corporate acquisition in the GBA to give JOG 100% ownership of the GBA. Licence P2170, includes the Verbier oil discovery andsignificant upside potential from three drill-ready prospects, Verbier Deep, Wengen and Cortina.

Further to undertaking a comprehensive technical and economic evaluation of licences P2497 (Zermatt) and P2499 (Glenn), JOG decided not to progress to the next licence phase, which would have required committing to a firm well in each of these two licence areas. Accordingly, the licences were relinquished at the end of Phase A of their Initial Term on 29 August 2021.

UK North Sea Growth Through Acquisitions 2021 ushered in a return of M&A activity across the UK North Sea, with several sizeable third party deals announced throughout the year. Our primary focus is on securing funding and a partner(s) for our flagship GBA Development project, but with increased activity and some motivated sellers, JOG remains active in reviewing a number of potential acquisitions and/or opportunities for possible business combinations.

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