Rose Petroleum : Report and Financial Statements to December 2019

Rose

Petroleumplc

Rose Petroleum plc

Annual Report and Financial Statements

For the year ended 31 December 2019

Contents

Directors, Advisers and Officers 02

Chairman's Statement 03

Strategic Report 06

Directors' Report 16

Corporate Governance Statement 18

Statement of Directors' Responsibili7es 19

Independent Auditor's Report 20

Consolidated Income Statement 26

Consolidated Statement of Comprehensive Income 27

Consolidated Balance Sheet 28

Consolidated Statement of Changes in Equity 29

Consolidated Cash Flow Statement 30

Company Balance Sheet 31

Company Statement of Changes in Equity 32

Company Cash Flow Statement 33

Notes to the Financial Statements 34

Important informa7on regarding the

Annual General Mee7ng 72

No7ce of Annual General Mee7ng 73

Annual Report and Accountsfor the year ended 31 December 2019

01

Rose

Petroleumplc

Directors, Advisers and Officers

Directors

RL Grant	Non-Execu&ve Chairman
TH Reynolds	Non-Execu&ve Director
GB Stein	Non-Execu&ve Director
JC Harrington	Chief Execu&ve Officer
CJ Eadie	Chief Financial Officer
Secretary
CJ Eadie

Registered Office
20-22 Wenlock Road
London
N1 7GU
Auditor	Solicitors
RSM UK Audit LLP	Memery Crystal LLP
Central Square, 5th Floor	165 Fleet Street
29 Wellington Street	London
Leeds	EC4A 2DY
LS1 4DL
Registrars	Nominated Adviser
Link Asset Services	Allenby Capital Limited
34 Beckenham Road	5 St Helen's Place
Beckenham	London
Kent	EC3A 6AB
BR3 4TU
Bankers	Broker
Barclays Bank Plc	Turner Pope Investments Ltd
Level 27	Becket House
1 Churchill Place	36 Old Jewry
London	London
E14 5HP	EC2R 8DD
Annual Report and Financial Statementsfor the year ended 31 December 2019

Chairman's Statement

Overview

During these very challenging 7mes, I would first of all like to reiterate that the primary concern of the Company's Board of Directors ("Board") is the safety of all the Group's stakeholders and employees. We truly hope for good health for all.

While the period under review was dominated by a restructuring of the Group, our more recent focus, as a result of the current global turmoil, has been to protect the Group, safeguard its exis7ng asset base and posi7on it for a8rac7ve growth opportuni7es that we expect will arise from the current environment. As part of this process, we have implemented comprehensive cost reduc7ons which will enable the Group to con7nue trading effec7vely. With the con7nued financial support of our brokers and major Shareholder we can now focus our efforts and a8en7on on implemen7ng our growth strategy.

The Group has no debt, very low fixed costs and no near-term capital commitments, and it is my firm belief that the Group is now well posi7oned for the future despite the tremendous economic and financial shockwaves caused by the dual impact of the coronavirus pandemic and the oil price vola7lity.

These factors have already inflicted considerable distress to the U.S. natural resource landscape, but I also believe this distress has created significant opportunity for the Group, as demonstrated by numerous Chapter 11 filings, increased asset sale ac7vity and more a8rac7ve valua7on entry points. Even in this challenging environment we believe that a8rac7ve, value-addi7ve acquisi7ons exist. A disciplined focus on cash genera7on, sustainable and responsible growth, and value to Shareholders will be central to our decision-making.

Group Restructuring and Revised Strategy

The key objec7ves of the Group restructuring were to augment the Board with highly experienced individuals, to reduce the Group's opera7onal cost base, and to define and implement a new strategy to ensure the Group is op7mally posi7oned for success.

The restructuring resulted in the closure of subsidiaries related to legacy ventures in Cuba, Mexico, Germany and the U.S.A. We also conducted an overhaul of our exis7ng asset in the Paradox Basin (the "Paradox", "Paradox acreage" or "Paradox project") in order to reposi7on the asset in such a way as to maximise value for Shareholders over the medium to longer term.

In September 2019, we unveiled the Group's new strategy, which in addi7on to developing the Paradox project, focuses solely on the upstream sector in the Rocky Mountain region of the U.S.A., an area with a significant number of produc7on and development acquisi7on opportuni7es of a scale suited to our strengths and size. Our goal is to produce a 7ght, cost-effec7ve path to near-term cash flow, and we are well underway with efforts to execute this strategy.

In November 2019, the Group announced that it had nego7ated an op7on to acquire a working interest in the 317-acre McCoy lease located in the Denver-Julesburg Basin ("DJ Basin") in Weld County, Colorado, U.S.A. ("McCoy" or "McCoy acquisi7on"). The op7on has since been extended through to the end of December 2020 at no cost to the Group.

Annual Report and Financial Statementsfor the year ended 31 December 2019

03

Rose

Petroleumplc

Chairman's Statement

continued

The DJ Basin is a world-class, liquids-rich resource play with over 4,000 horizontal wells drilled to date. There is significant infrastructure in place with available capacity and ready access to service providers and contractors.

The Group's management team, together with that of our opera7ng partner, has significant experience delivering produc7on from horizontal development in close proximity to the McCoy project. The McCoy project is a low-risk development opportunity and the Board believes that it would complement and balance the Paradox project in the Group's por6olio. Although commodity prices in the spring of 2020 did not support the development of the McCoy project as originally envisaged, rapidly falling capex costs combined with a stabilised oil price will prove beneficial to the development of the project. We believe Great Western Petroleum, the operator of the project, will elect to move forward with drilling in the coming months, and the Group will likely seek to maximise its par7cipa7on in the project if the economics are suppor7ve and appropriate funding can be secured.

In addi7on, the Board believes the current market turmoil should deliver mul7ple a8rac7ve investment opportuni7es within our area of focus, and we are working with both industry and financial partners to iden7fy high value targets which might be added to our por6olio.

Board and Management Changes

Since the last Annual Report, we have made further changes to the structure of the Group's Board to ensure we have the team necessary to deliver our new strategy.

In September 2019, Colin Harrington became the Group's full 7me Chief Execu7ve Officer at which point I moved to the posi7on of non-execu7ve Chairman.

In addi7on, the Group appointed two new independent non-execu7ve Directors to the Board, and Ma8hew Idiens stepped down from the Board in August 2019.

Tom Reynolds was appointed as a Director in April 2019. Tom is a Chartered Engineer with over twenty-five years' experience in the energy sector and specialises in strategic planning, investment management and cross-border merger and acquisi7on transac7ons in the oil and gas, energy and infrastructure sectors.

Gordon Stein joined the Board in September 2019. Gordon has over 26 years of interna7onal experience in the oil and gas sector and has a significant track record of working with AIM quoted natural resources businesses.

Gordon's financial experience and long-standing rela7onships in the sector will be invaluable over the coming months as the Group completes its transforma7on into a geographically-focused upstream par7cipant. As part of the Group's inten7on to bolster its governance framework, Gordon has taken on the roles of Chairman of the Audit and Remunera7on Commi8ees.

I have been delighted by the dynamism and cohesiveness of the new Board and I believe we now have a Board structure that meets all our key criteria:

• • longstanding rela7onships and exper7se in the geographical areas of focus (DJ Basin and the wider Rockies area);

• • significant experience with company turnarounds and special situa7ons (with mul7ple successful exits);

• • successful track record of building and managing both small and large cap companies;

• • a Board that is aligned with our Shareholders (the Board's combined shareholding is over 25% of the Company's issued share capital);

• • access to capital and proven fundraising ability (including non-tradi7onal funding sources); and

• • a strong background in ESG and corporate governance adherence.

Annual Report and Financial Statementsfor the year ended 31 December 2019