PA RESOURCES¤mmor/Årsstämma 2016/Annual Report... · On 7 April 2015 Gunvor exercised its security under the terms of the RBL ... (RBL) facility. Preparations were made for the

PA RESOURCES

Annual Report 2015

PA RESOURCES ANNUAL REPORT 2015 2

CONTENT BOARD OF DIRECTORS´ REPORT 2015 3

Company development 3

The group´s business activities 3

Key events by region 5

Financial summary 6

Risks and uncertainties 9

Subsequent events 11

Board of Directors 12

Proposed distribution of earnings 12

FINANCIAL REPORTS 13

Group

5 year summary 13

Key ratio definition 13

Income statement 14

Statement of comprehensive income 14

Statement of financial position (Non-going concern) 15

Statement of financial position (Going concern) 16

Statement of changes in equity 17

Statement of cash flow statement 18

Parent company

Income statement 19

Statement of comprehensive income 19

Statement of financial position (Non-going concern) 20

Statement of financial position (Going concern) 21

Statement of changes in equity 22

Statement of cash flow statement 23

Group and Parent company

Notes 24

BOARD ASSURANCE 62

AUDITOR´S REPORT 63


BOARD OF DIRECTORS` REPORT 2015 PA Resources AB (publ), corporate identity number 556488-2180

COMPANY DEVELOPMENT

Following the failure of the Azurite field in the Republic of Congo to deliver the expected production

levels during 2011-2013 PA Resources has been burdened with an unsustainably high level of debt.

Subsequent capital raises and refinancing have been aimed towards reducing the debt burden and

supplying the necessary capital for the company to invest in its development portfolio for future

production and cash flows. In 2013 and 2014 the company entered into farm-out agreements for its

key development assets in order to raise cash and reduce its investment needs. The drop in oil price,

which commenced during the summer of 2014, together with Enquest’s reversal of the Tunisia farm-

out in January 2015 resulted in a situation where the company was unable to service its debts.

Between October 2014 and March 2015 PA Resources negotiated a potential refinancing plan

together with its major creditors and shareholders. Following lack of progress in the discussions the

company filed for corporate reorganisation on the 26 March 2015. The reorganisation process is

described in more detail below. In parallel with the reorganisation process the board of directors

initiated a strategic review process which was completed in November 2015 also described in more

detail below. Following the corporate reorganisation and the strategic review the company still

stands without long-term financing and has decided to sell its assets. As a result the board of

directors has concluded that the company’s financial statements can no longer be prepared under

the assumption of a going concern.

THE GROUP’S BUSINESS ACTIVITIES

Production and Sales

During the year, oil was produced from five fields of which three were located in Tunisia – where the

Didon field is the largest – and the Aseng and Diega fields in Equatorial Guinea. The fields in

Equatorial Guinea contributed to the production during the first quarter after which the ownership

was transferred to Gunvor and deconsolidated from PA Resources (see Enforcement of RBL-security).

Total production of oil amounted to 613,300 barrels (1,147,000) which is an average of 1,700 barrels

per day on a working interest basis (3,100). In total 640,500 barrels of oil (964,400) was sold during

2015 to an average price of USD 53 per barrel (96).

Loss of control subsidiary

On 7 April 2015 Gunvor exercised its security under the terms of the RBL-loan to take over the shares

in Osborne Resources Ltd. Osborne Resources Ltd held PA Resources interest in Block I in Equatorial

Guinea including the producing fields Aseng and Alen. Following the transaction PA Resources no

longer has any interests in Equatorial Guinea. The transaction resulted in a net capital gain of SEK 285

million. On the same day as Gunvor exercised its security, Gunvor also petitioned for bankruptcy in

PA Resources AB. Gunvor recalled the petition on 15 April 2015.

Employees

The average number of employees was 107 (121), of these 90 (99) were men and 17 (22) were

women. See more in Note 10, Employees, salaries and other remuneration.

Remuneration to group management

Remuneration of the CEO and other group management is comprised of fixed salary, variable

remuneration, other benefits and pensions as detailed in Note 11, Remuneration and other benefits;


Board of Directors and Group Management of the Parent Company. The guidelines for remuneration

of management were adopted by the 2015 Annual General Meeting.

Disputes

At the time of the annual report there are no material disputes between PA Resources and other

parties.

Delistings

PA Resources AB’s share has been listed on the Nasdaq Stockholm exchange since 2006. As part of

the agreements with the major creditors signed under the corporate reorganisation the company

agreed to seek a delisting when appropriate. On the 23 November 2015 the application for delisting

was filed and the last day for trading was 15 January 2016. As an event after the closing date PA

Resources delisted its SEK denominated bond also listed in the Nasdaq Stockholm exchange. Last day

of trading was 1 February 2016 and application to delist was submitted 25 January 2016. For more

information see Note 28, Significant events after the closing date.

Corporate Reorganisation

The 26 March 2015 PA Resources AB filed for corporate reorganisation at the Stockholm District

Court in accordance with the company reorganisation act (1996:764). The application was approved

the 27 march 2015. Lars Söderqvist, lawyer at Hökerberg & Söderqvist KB was appointed as

administrator of the reorganisation by the court. On 15 April 2015 a creditors meeting was held

following which the court allowed the reorganisation to continue until 29 June 2015. On 25 June

2015 PA Resources AB filed a petition to extend the corporate reorganisation. On 9 July the

Stockholm District approved the petition extending the corporate reorganisation by a further three

months until 28 September 2015. On 9 September 2015 PA Resources published the reorganisation

plan prepared by the company and the administrator. At the same time a request for composition

proceedings was handed in to the Stockholm District Court which subsequently set the date to the 2

October 2015. On the 29 September 2015 the holders of both the SEK- and NOK-denominated bonds

voted to adopt the proposed composition plan subject to subsequent approval by the court. On 2

October 2015 a qualified majority of creditors voted for the proposed composition plan which was

also adopted by the court. PA Resources also submitted a request for termination of the

reorganisation which was approved and as the composition became final and binding on the 24

October 2015 the corporate reorganisation was terminated.

The composition plan, approved by the creditors and adopted by the Stockholm District Court, split

the creditors into three groups. The first group are the individual creditors with claims below SEK

100,000 which are to receive full payment of their claims by the 26 March 2016. The second group;

creditors with claims exceeding SEK 100,000 and without agreements with the company, are entitled

to repayment of SEK 100,000 and 25% of their claim exceeding SEK 100,000 by the 26 March 2016.

The total amount due to these two groups of creditors amounts to approximately SEK 3 million. The

third group consists of a number of major creditors including the bondholders, Gunvor Group and

Murphy Oil Corporation. These creditors have, through bilateral agreements with the company,

agreed to receive repayment of their claims over a longer period of time from the company’s

available cash flow as defined by the composition plan. Any outstanding claims on the company still

not repaid by the 27 December 2017 and exceeding the book value of the company’s assets at that

time, will be converted to equity through an offset issue. The creditors with outstanding claims at

this time will, irrespective of the value of the claims, receive 95% of the company’s share capital after

the conversion.


Strategic Review Process

During the second quarter the board of directors initiated a review process to explore the company’s

strategic options going forward. The process included evaluating three main options, securing long

term funding of the group, exploring the possibility of a corporate transaction/M&A and as a third

option the divestment of business areas or individual assets. The review process was managed by an

internal project office which prepared the necessary marketing documents and materials. The review

was finalised in November 2015 concluding that a sale of the company’s assets was the only viable

alternative and the board instructed the management to proceed with a sale. See more under

Subsequent events.

Financial statements prepared as a non-going concern

The company has since the middle of 2014 been working to secure long-term financing for the

company’s operations and development projects. Following the corporate reorganisation and the

strategic review the company still stands without long-term financing and has decided to sell its

assets. As a result the board of directors has concluded that the company’s financial statements can

no longer be prepared under the assumption of a going concern. The consequences of the changes in

accounting principles are outlined in Note 2, Accounting principles etc.

KEY EVENTS BY REGION

West Africa

Block I, including PA Resources interest in the Aseng and Alen producing fields as well as the Diega

discovery, in Equatorial Guinea was deconsolidated as per 31 March 2015 following Gunvor Group’s

decision to enforce its security under the terms of the Reserve Based Lending (RBL) facility.

Preparations were made for the drilling of the Baobab Marine-1 exploration well on the Mer

Profonde Sud licence in the Republic of Congo (Brazzaville). Drilling took place during the first quarter

of 2016.

North Africa

A cost cutting program was implemented on the Didon field reducing operating expenditure by over

20% compared to 2014.

A revised development plan for the Zarat field was submitted to La Direction de L’Energie (DGE) on

24 July 2015. The Development plan was the result of two years of work conducted by a joint PA

Resources and L’Enterprise Tunisienne d’Activites Petrolieres (ETAP) team.

The infrastructure upgrade program on the DST fields continued and included a well work over on

the Douleb field, the conversion of a producer to an injector well.

Force Majeur was declared on the Makhtar and Jelma exploration licenses in July 2015 as a result of

the adjacent mountain areas being declared a military zone.

The North Sea

On the 12/06 license in Denmark the drilling of the Lille John-2 appraisal well was completed with oil

encountered in the Miocene sandstone reservoir as expected. A drill stem test flowed at rates of up

to 1,400 barrels per day of 35○ API oil. The results of the well were evaluated and incorporated in an

updated development concept including both the Lille John and Border Tuck discoveries under the

name “Robin Hood”. The license partnership is targeting a 2016 declaration of commerciality in line

with license requirements.


FINANCIAL SUMMARY

One-off items

There have been a number of significant transactions affecting PA Resources in 2015, thus the 2015

year-end report include several non-recurring and non-cash, one-off items. These items are

described below and in Note 4, Segment information.

Jan-Dec

SEK 000,000s 2015 Accounted for in Income Statement

Profit for the period 779

Whereof one-off items

Final computation terminated farm out agreement 124 Other income

Reversed provisions 89 Other income

Enforcement of the RBL security 285 Capital gain

Market valuation E&E and O&G assets -1,969 Impairment losses

Exchange losses (net) -21 Other financial items (negative)

Expensed interest-bearing debt -42 Other financial items (negative)

Recognised fair value in connection with the composition plan 2,061 Other financial items (positive)

Revaluation tax provision 38 Income tax

Reversed deferred taxes in connection with market valuation of E&E and O&G assets

444 Income tax

Profit for the period excluding one-off items -230

Revenue and gross profit

Revenue amounted to SEK 242 million (603) and decreased as result of the deconsolidation of Aseng

and Alen, and lower sales price compared with the corresponding period a year ago. Revenue was

positively impacted by currency effects from the strengthened USD. Production costs including direct

production taxes of SEK -6 million (-10) amounted to SEK -184 million (-187) and decreased mainly as

a result of the RBL enforcement counteracted by the terminated farm-out agreement. Depletion of

oil and gas assets amounted to SEK -40 million (-195) and decreased mainly as a result of the book

values relating to the Didon field being impaired in the fourth quarter 2014 and of the RBL

enforcement. Gross profit amounted to SEK 17 million (222).

EBITDA and operating profit

EBITDA amounted to SEK 425 million (-481) and the EBITDA margin was 176 (-80) percent. EBITDA

was positively impacted by other income of SEK 222 million (46) mainly effects from provisions and

final computation of the impact of the terminated farm-out agreement. EBITDA was also positively

impacted by a capital gain of SEK 285 million (0) from enforcement of the RBL security by Gunvor

Group. Impairment losses amounted to SEK -1,969 million (-1,991) and is a result from assessed

market valuation of PA Resources exploration and evaluation assets and its oil and gas properties

including abandonment costs. For more information, see note 14, Exploration and evaluation assets

and Oil and gas properties. Operating profit amounted to SEK -1,590 million (-2,667).


Net financial items, tax and profit for the period

Net financial items for the Group amounted to SEK 1,864 million (-365) for the period. Interest

expense was SEK -102 million (-256). Other financial expenses amounted to SEK -74 million (-25) and

was negatively affected by expensed interest-bearing debt of SEK -42 million (0). Currency effects on

net financial items amounted to SEK -21 million (-87). Other financial income amounted to SEK 2,061

million (0) and is entirely attributable to the recognised fair value of interest-bearing loans and

borrowings and other liabilities in connection with the composition plan. Adjusted for currency

effects and other financial income, net financial items amounted to SEK -175 million (-278). Reported

tax amounted to SEK 504 million (74) and paid tax amounted to SEK -18 million (-165). Reported tax

including a reversal of deferred tax liabilities amounted to SEK 444 million in connection with market

valuation of Exploration and evaluation assets as well as Oil and gas assets. 2014 included SEK 137

million from reversal of deferred taxes with respect to impaired fixed assets. Profit for the period

amounted to SEK 779 million (-2,957).

Enforcement of RBL security

As per 7 April Gunvor Group, PA Resources´ largest creditor and shareholder demanded repayment

of amounts due under the RBL facility. PA Resources also received notice that Gunvor Group had

taken action to enforce its security under the RBL, shares in its wholly-owned subsidiary, Osborne

Resources Ltd. Osborne owns interests in Equatorial Guinea, the producing Aseng and Alen fields,

and the Block I exploration interest. The effect of this enforcement action is that Osborne is no

longer a subsidiary of PA Resources and has become a subsidiary of Gunvor Group.

As a result of the enforcement Osborne´s balance sheet was deconsolidated as per 31 March 2015.

Group´s profit and loss on a row by row basis includes revenue and expenses from Osborne for

January to March. Further to the enforcement the RBL facility including accrued interest is to be

considered repaid in full and the transaction resulted in a net capital gain of SEK 285 million.

Cash Flow and investments

The Group’s operating cash flow for the period was SEK -86 million (-108). Cash flow from investing

activities for the period amounted to SEK -40 million (-101). Cash flow from financing activities

amounted to SEK 41 million (-55).

Financial Position

As per 31 December 2015 the book value of the Group’s net borrowings was SEK 32 million,

compared to SEK 2,468 million at year-end 2014. Net borrowings decreased mainly as a result of the

recognised fair value of the interest-bearing debt followed the agreed composition plan in the third

quarter. For more information, see note 19, Interest-bearing loans and borrowings. The decrease is

also a result of the enforced RBL security. The facility, including accrued interest, of approximately

SEK 762 (USD 88.4 million) was considered repaid in the first quarter 2015. PA Resources

shareholder´s equity amounted to SEK -12 million compared to SEK -810 million at year-end 2014 and

increased mainly from the recognised fair value of the existing interest-bearing debt followed the

agreed composition plan, negatively counteracted by asset market valuation. Equity also increased

from the capital gain as a result of the enforced RBL security. Cash and cash equivalents amounted to

SEK 67 million compared with SEK 148 million at year-end 2014.


Financing

PA Resources reached during the second quarter an agreement with its major creditors to provide

the company with funding. The funding which PA Resources secured during the reorganization

enables the Group to borrow money through the issue of Reorganisation Notes with a principal

amount up to 15 MUSD in aggregate. The reorganization Notes have a subscription price of 50% of

their face value, which means that the maximum amount of funds that can be received is 7,5 MUSD.

For more information, see note 19, Interest-bearing loans and borrowings.

Parent Company

Operating profit amounted to SEK -42 million (-199). Net financial items for the period amounted to

SEK 1,181 million (-2,459), and included a capital gain of SEK 427 million from the enforcement of the

RBL security. Net financial items was negatively affected by a net impairment charge of SEK 955

million (1,125) for receivables from subsidiaries and of SEK 195 million (1,730) for shares in

subsidiaries as a result of a market valuation in PA Resources´ Exploration- and evaluation assets as

well as Oil- and gas assets. The finance net was positively affected by the recognised fair value of

liabilities to an amount of SEK 1,909 million (0). Previous year included SEK 232 million from a

dividend received from affiliates.

Equity amounted to SEK 11 million compared to SEK -1,128 million at year-end 2014 and increased

mainly from the other financial income as a result of the recognised fair value of liabilities and the

gain from the enforced RBL security. The share capital as per 31 December 2015 was distributed

among 113,167,992 shares. In connection with the annual general meetings on 28 July 2015, the

decision was to reduce the share capital to SEK 11,316,799.20 for covering of losses. It was further

decided at the extraordinary general meeting on 27 October 2015, to reduce the share capital to SEK

800,000 for covering of losses. Both reductions were made without redemption of shares. New share

quota value is SEK 800,000 / 113,167,992.

Balance Sheet for Liquidation Purposes

Total shareholders’ equity in the parent company amounted to SEK -1,128 million at year-end 2014,

which was less than one-half of the registered share capital of SEK 1,415 million. As a consequence,

the company’s board of directors resolved to prepare a balance sheet for liquidation purposes. The

balance sheet showed, after adjustments, that shareholders’ equity was still less than one-half of the

registered share capital. At an Extraordinary General Meeting held on 27 February 2015 the

shareholders resolved, as recommended by the board, that PA Resources would not be liquidated,

but carry on its business. The Companies Act stipulates that a new general meeting of shareholders

shall be held within eight months at which the shareholders shall resolve on the issue of liquidation

once again. In conjunction with the new general meeting the board of directors shall prepare a new

balance sheet for liquidation purposes. If this new balance sheet does not show that the company’s

shareholder’s equity has been restored and amounts to at least the registered share capital then the

company is required to go into liquidation. At the Extra General Meeting held on the 27 October

2015, PA Resources´ board of directors presented a new balance sheet for liquidation purposes per

30 September 2015 in which the equity had been restored and as a result the meeting voted to

continue operations.


RISKS AND UNCERTAINTIES

Operational Risks

Varying production levels

PA Resources produces at a limited number of fields. This means that natural decline in production

and production disruptions at individual wells or facilities can have a negative impact on total

production levels and revenue. In conjunction with work on producing oil fields, production levels

may be subject temporarily to negative impact.

Fluctuations in the price of oil and gas

The world market price of oil and gas fluctuates from day to day and is influenced by a wealth of

factors outside of PA Resources’ control, including the global economic trend, government and

central bank measures, geopolitical unrest, weather, availability of oil, investment costs and access to

alternative energy sources. In the long term, demand for oil and gas can also be influenced by the

climate debate and the endeavour to reduce carbon emissions to the atmosphere. Major price

fluctuations are negative since lower revenues and increased uncertainty impact the size of

investments.

PA Resources was impacted by the effect of falling oil prices during 2015 as the Brent benchmark fell

by almost 30% from USD 51.8 per barrel in January to USD 36.5 at the end of December.

Natural disasters

PA Resources’ existing or future production facilities may be impacted by natural disasters. Should

such an event occur, existing oil production may be negatively affected or even cease. Natural

disasters can have a devastating effect on the activities of the company, wiping out large values. In

addition, natural disasters can mean a stop in production with accompanying major costs for

restoring production as well as a period with no or partial sales revenue.

Accidents, damage & delays

The Group may also suffer accidents and damage to facilities, environmental damage or personal

injuries. For example, fires, explosions, blowouts, accidental leaks and shipping accidents can occur.

Delays can arise due to bad weather, poorly performed work by external partners, changes in

government requirements and delayed deliveries of equipment.

Geological risks

All estimations of oil and gas reserves and resources involve a certain degree of uncertainty. The risk

exists that the estimated volumes will not accord with reality. The probability of discoveries of oil or

gas varies. If a well proves to be dry, there will be no return on the investment. Even if an oil

discovery is made, the qualities of the bedrock may prevent production.

Shared Ownership and partnership

PA Resources has shared ownership in several licences in partnership with other companies. In a

partnership, it may be difficult to influence how operations on the licence are conducted, especially

where PA Resources isn’t the operator. If a partner doesn’t meet its obligations, PA Resources may,

among other things, risk losing its rights or income, or be forced to take on obligations or costs to

cover that partner’s obligations.

PA Resources was financially impacted by Enquest’s decision to pull out of the farm-out deal in

Tunisia in January 2015.


Financial Risks

Financing and Liquidity Risks

PA Resources is in need of refinancing for maintenance, development and exploration of the Group’s

licences and discoveries. In addition, the Group needs a liquidity reserve for the management of

current payment obligations in operating activities, planned investments and amortisations.

Refinancing risk is defined as the risk that financing or refinancing is troublesome or costly to secure.

PA Resources’ business activities are capital intensive. Field exploration and development requires

access to financing as a supplement to cash flow from operations. The ability to make investments

may be impaired if the cash flow were to be insufficient or external sources of capital limited. If the

Group is unable to meet its amortisation or interest payments fall due and unable to renegotiate or

refinance the loans there is a risk of a new issue of shares. If a new issue of shares cannot be

performed the company could become subject to a reconstruction process or be placed into

receivership.

PA Resources´ strategy according to completed review process is to sale the company´s assets in

order to repay outstanding debt to its creditors in accordance with agreed composition plan. If the

transactions cannot be completed and thus PA Resources cannot repay debt to its creditors in

accordance with the composition plan there is a risk that the company is placed into receivership. For

more information, see Subsequent events.

Other Financial Risk

Through its operations, PA Resources is exposed to the majority of financial risks, including interest

risk, credit risk and currency risk as well as transaction risk and translation risk. Read more in Note

26, Financial risk.

Political Risks

Political and economic instability and corruption

PA Resources conducts business activities in countries where corruption exists and a substantial level

of risk exists in respect of political instability. The concept, political instability, comprises financial

vulnerability and vulnerability to unrest. Unrest, political and economic instability in society, can

hinder the company from conducting business, cause production interruptions, delays and pose a

threat to safety among other items.

Negative Changes to fiscal terms

PA Resources’ operations are affected by the applicable tax rules of each country in which the Group

operates. Tax often comprises various combinations of royalties, discounts on oil produced, income

tax, investment subsidies, stamp duty and capital gains tax. Oil producing developing countries have

had a tendency to raise these taxes in pace with rises in oil prices, which can negatively impact

earnings and cash flow.


SUBSEQUENT EVENTS

PA Resources delist its share

PA Resources share´s last day of trading at Nasdaq Stockholm was 15 January 2016. The decision

notified by Nasdaq was based on PA Resources application to delist submitted 20 November 2015.

PA Resources delist its SEK denominated bond

PA Resources SEK denominated bond´s last day of trading at Nasdaq Stockholm was 1 February 2016.

The decision notified by Nasdaq was based on PA Resources application to delist submitted 25

January 2016.

Drilling Results on Baobab Marine-1 Well at Mer Profonde Sud

During February 2016 final results came from the Baobab Marine-1 commitment well drilled in the

Mer Profonde Sud Block offshore the Republic of Congo. Although good quality sands were present,

no hydrocarbons were encountered, suggesting lack of communication with the known oil source.

PA Resources divests its North Sea portfolio

As per 5 February 2016 PA Resources signed an agreement with Petrogas E&P regarding the sale of

its affiliates PA Resources UK Ltd and PA Resources Denmark ApS including the Danish license 12/06

which holds the Broder Tuck and Lille John discoveries, as well as its exploration licences in the UK,

Germany and the Netherlands. PA Resources completed the transaction with Petrogas E&P

announced as per 24 March 2016 and payment for the transaction has been received. Included in the

transaction is also a highly uncertain and contingent consideration based on future oil price

development. The consideration is not included in the 2015 valuation of PA Resources' net assets.

PA Resources divests its North Africa portfolio

As per 9 May 2016 PA Resources AB announced that its wholly owned subsidiaries, PA Resources

Tunisia Limited, Hydrocarbures Tunisie Didon Limited, Hydrocarbures Didon Jersey Limited and

Hydrocarbures Tunisie Corporation, executed a sale and purchase agreement with ETAP, The

Tunisian national oil company, to sell their entire licence interests onshore and offshore Tunisia, to

ETAP. The transaction is expected to complete within the next month.

Use of proceeds from divested assets

Followed above divestments PA Resources will have no assets left. The proceeds from the sale will be

used to repay creditors in accordance with the reorganisation plan adopted in October 2015. As per

release date of this annual report category B** has been repaid in full while category A* has agreed

to delay part of payment until completion of the North Africa transaction, but is expected to

ultimately receive full payment. Category C *** are expected to receive a significantly lower

proportion than its nominal values. The liabilities are thus recognised at the values expected to be

paid. Given that the transaction in North Africa completes there will also be sufficient funds to

implement the solvent wind down, which given above is the Board´s intention to suggest for the

shareholders.

* Category A (Reorganisation notes) is described in detail in section 8.4.3.1 and 6.7 of the Reorganisation Plan.

** Category B (Creditors with principal claims below 100 000 SEK as well as above 100 000 SEK without specific agreement) is described in

detail in sections 8.4.3.1, 8.2 and 8.3 of the Reorganisation Plan. Category B does not include bondholders as explained in section 6.4.

*** Category C (Creditors above 100 000 SEK with specific agreements) is described in detail in section 8.4 in the Reorganisation plan.


BOARD OF DIRECTORS

The Board of Directors in PA Resources AB as per signing of the Annual report:

Catharina Nystedt-Ringborg (Director as of 27 October 2015)

Mark McAllister

Paul Waern (Chairman as of 28 July 2015)

The Board of Directors in PA Resources AB during 2015/2016:

Garrett Soden (Director from 27 October 2015 until 2 February 2016)

Jérôme Schurink (Chairman and director until 11 April 2015)

Nils Björkman (Director until 28 July 2015)

Philippe Probst (Director until 28 July 2015)

Philippe R. Ziegler (Director until 28 July 2015)

Tomas Hedström (Director from 28 July until 27 October 2015)

PROPOSED DISTRIBUTION OF EARNINGS

The Board of Directors proposes that the Non-restricted equity of the Parent company of SEK

9,987,000 including the Profit for the year of SEK 1,139,271,000 to be carried forward.


FINANCIAL REPORTS 5 YEAR SUMMARY – GROUP

31 Dec 2015 ** 31 Dec

2014 31 Dec

2013 31 Dec

2012 31 Dec

2011

Average production barrels/day 1,700 3,100 5,000 7,900 8,600

Revenue* SEK 000,000s 242 603 1,049 1,847 1,450

EBITDA* SEK 000,000s 425 -481 -494 1,185 889

EBITDA margin* 176% -80% -47% 64% 61%

Operating profit* SEK 000,000s -1,590 -2,667 -1,234 -1,134 -1,933

Operating margin* -658% -442% -118% -61% -133%

Equity/assets ratio Neg neg 33% 25% 32%

Debt/equity ratio Neg neg 100% 165% 141%

*In connection with a change of accounting policies (see Note 2) EBITDA, the EBITDA margin,

operating profit, the operating margin have been adjusted retrospectively.

**2015 accounts prepared under the assumption of a non-going concern.

KEY RATIO DEFINITIONS

EBITDA is defined as operating profit excluding total depreciation, amortisation and impairment.

Operating profit is defined as operating revenue less operating expenses (including depreciation,

amortisation and impairment).

Operating margin is defined as operating profit after depreciation and amortisation as a percentage

of total revenue.

Equity/assets ratio is defined as the Group’s reported equity as a percentage of total assets.

Debt/equity ratio is defined as the Group’s interest-bearing liabilities less cash and cash equivalents

in relation to adjusted equity.


INCOME STATEMENT – GROUP

SEK 000,000s Notes 2015 * 2014

Revenue 2 242 603

Production costs 2, 5 -184 -187

Depletion oil and gas properties 2, 14 -40 -195

Gross profit 2 17 222

Other income 4 222 46

Capital gain 4 285 -

Termination farm-out agreement 4 - -826

Impairment losses 14, 15, 16 -1,969 -1,991

General, administration and depreciation expenses 6, 7, 8, 9, 10, 11 -145 -118

Operating profit 2 -1,590 -2,667

Financial income 12 2,061 3

Financial expenses 12 -197 -368

Total financial items 1,864 -365

Profit before tax 275 -3,032

Income tax 2, 13 504 74

Profit for the period 779 -2,957

Profit for the year and earnings per share are attributable to owners of the parent.

STATEMENT OF COMPREHENSIVE INCOME – GROUP

Jan-Dec Jan-Dec

SEK 000,000s Notes 2015 * 2014

Profit for the year 779 -2,957

Other comprehensive income

Items that may be reclassified into profit or loss

Exchange differences during the period 101 353

Items reclassified into profit or loss

Accumulated exchange differences reclassified into profit and loss

-81 -

Other comprehensive income for the year 20 353

Total comprehensive income for the year 799 -2,605

Total comprehensive income is attributable to the owners of the parent.

*2015 accounts prepared under the assumption of a non-going concern.


STATEMENT OF FINANCIAL POSITION – GROUP (NON-GOING CONCERN)

31 Dec

SEK 000,000s Notes 2015

ASSETS

Exploration and evaluation assets & Oil and gas properties 14, 16 140

Machinery and equipment 15 4

Financial assets 22 1

Deferred tax assets 13 9

Inventory 17 40

Accounts receivable and other receivables 18 50

Tax assets 13 13

Cash and cash equivalents 67

TOTAL CURRENT ASSETS 324

EQUITY

Equity attributable to owners of the parent

Share capital 1

Other capital contributions 6,464

Reserves -706

Retained earnings and profit for the year -5,770

TOTAL EQUITY -12

LIABILITIES

Provisions 20 98

Deferred tax liabilities 13 -

Tax liabilities 13 29

Interest-bearing loans and borrowings 19 99

Accounts payable and other liabilities 21 111

TOTAL CURRENT LIABILITIES 336

TOTAL EQUITY AND CURRENT LIABILITIES 324

PLEDGED ASSETS 24 46

CONTINGENT LIABILITIES 24 -


STATEMENT OF FINANCIAL POSITION – GROUP (GOING CONCERN)

31 Dec

SEK 000,000s Notes 2014

ASSETS

Exploration and evaluation assets 14, 16 2,510

Oil and gas properties 14, 16 642

Machinery and equipment 15 8

Financial assets 22 1

Total non-current assets 3,162

Inventory 17 37

Accounts receivable and other receivables 18 205

Current tax assets 13 10


Total current assets 399

TOTAL ASSETS 3,561

EQUITY


Share capital 1,415

Other capital contributions 5,050

Reserves -725

Retained earnings and profit for the year -6,549

Total equity -810

LIABILITIES

Deferred tax liabilities 13 543

Provisions 20 662

Other non-interest bearing liabilities 21 30

Total non-current liabilities 1,235

Provisions 20 1

Current tax liabilities 13 88

Current interest-bearing loans and borrowings 19 2,468

Accounts payable and other liabilities 21 578

Total current liabilities 3,135

TOTAL EQUITY AND LIABILITIES 3,561




STATEMENT OF CHANGES IN EQUITY – GROUP


SEK 000,000s Notes Share capital Other capital contribution Reserves

Retained earnings and profit for the

year Total

Balance at 1 January 2014 1,415 5,050 -1,078 -3,592 1,795

Total comprehensive income for the period

353 -2,957 -2,605

Closing balance at 31 december 2014 1,415 5,050 -725 -6,549 -810

Balance at 1 January 2015 1,415 5,050 -725 -6,549 -810

Total comprehensive income for the period 20 779 799

Transactions with shareholders

Reduction share capital -1,414 1,414 -

Closing balance at 31 december 2015 1 6,464 -706 -5,770 -12

The share capital as per 31 December 2015 was distributed among 113,167,992 shares. In connection

with the annual general meetings on 28 July 2015, the decision was to reduce the share capital to

SEK 11,316,799.20 for covering of losses. It was further decided at the extraordinary general meeting

on 27 October 2015, to reduce the share capital to SEK 800,000 for covering of losses. Both

reductions were made without redemption of shares. New share quota value is SEK 800,000 /

113,167,992. No dividend was decided on for the 2014 financial year or previous financial years. The

Board of Directors proposes to the Annual General Meeting that no dividend be paid for the 2015

financial year. Reserves pertain to effects from translation of operations in foreign currency.


STATEMENT OF CASH FLOW – GROUP

Jan-Dec Jan-Dec

SEK 000,000s Notes 2015 2014

Cash flow from operating activities

Income after financial items* 2 275 -3,032

Adjustments for non-cash items

Depreciation, amortisation and impairment losses 14, 15, 16 2,014 2,186

Termination farm-out agreement 4 - 826

Capital gain 4 -285 -

Recognition of debt at fair value 2 -2,064 -

Change over- / or underlift position 2 38 25

Other items including accrued interest and exchange differences 175 216

Income tax paid -18 -165

Total cash flow from operating activities

before changes in working capital 135 56

Change in receivables 44 139

Change in liabilities -265 -303

Cash flow from changes in working capital -221 -164

Cash flow from operating activities -86 -108

Cash flow from investing activities

Proceeds from farm-out - 65

Investments in exploration and evaluation assets 14 -36 -139

Investments in oil and gas properties 14 -4 -25

Investments in machinery and equipment 15 -0 -2

Cash flow from investing activities -40 -101

Cash flow from financing activities

Loans raised 41 182

Amortisation of debt - -237

Cash flow from financing activities 41 -55

Cash flow for the year -85 -264

Cash and cash equivalents at the beginning of period 148 403

Exchange rate difference in cash and cash equivalents 4 9

Cash and cash equivalents at end of period 67 148

* The amount includes interest received at SEK 0 million (1), of which SEK 0 million (0) is attributable

to current operations, and SEK 0 million (1) to financing activities and interest paid at SEK 0 million

(63), of which SEK 0 million (0) is attributable to current operations and SEK 0 (63) to financing

activities.


INCOME STATEMENT – PARENT COMPANY

Jan-Dec Jan-Dec

SEK 000,000s Notes 2015 * 2014

Other income 4 42 15

Termination farm-out agreement 4 - -168

General, administration and depreciation expenses 6, 7, 8, 9, 10, 11 -84 -47

Operating profit -42 -199

Result from participations in Group companies 25 -723 -2,623

Financial income and similar 12 2,061 460

Financial expenses and similar 12 -157 -297

Total financial items 1,181 -2,459

Profit before tax 1,139 -2,659

Income tax 13 - 0

Profit for the year 1,139 -2,658

STATEMENT OF COMPREHENSIVE INCOME – PARENT COMPANY

Jan-Dec Jan-Dec

SEK 000,000s Notes 2015 2014

Profit for the year 1,139 -2,658

Other comprehensive income

Total items that may be reclassified into profit or loss - -

Total comprehensive income for the year 1,139 -2,658

*2015 accounts prepared under the assumption of a non-going concern.


BALANCE SHEET – PARENT COMPANY (NON-GOING CONCERN)

31 Dec

SEK 000,000s Notes 2015

ASSETS

Shares in subsidiaries 23 28

Receivables Group companies 22 98

Tax assets 13 0

Other receivables 18 1

Prepaid expenses and accrued income 18 1


TOTAL CURRENT ASSETS 134

Share capital 1

Statutory reserve -

Total restricted equity 1

Share premium reserve -

Profit/loss brought forward and profit for the year 10

Total non-restricted equity 10

TOTAL SHAREHOLDER`S EQUITY 11

Accounts payable 21 4

Other liabilities 21 1

Interest-bearing loans and liabilities 19 99

Accrued expenses and prepaid income 21 19

TOTAL CURRENT LIABILITIES 123

TOTAL SHAREHOLDERS' EQUITY AND CURRENT LIABILITIES 134




BALANCE SHEET – PARENT COMPANY (GOING CONCERN)

31 Dec

SEK 000,000s Notes 2014

ASSETS

Shares in subsidiaries 23 241

Receivables Group companies 22 808

Total non-current assets 1,050

Current tax assets 13 0

Other receivables 18 2

Prepaid expenses and accrued income 18 1


Total current assets 92

TOTAL ASSETS 1,141

SHAREHOLDERS' EQUITY

Share capital 1,415

Statutory reserve 115

Total restricted equity 1,530

Share premium reserve -

Profit/loss brought forward and profit for the year -2,658

Total non-restricted equity -2,658

Total shareholders' equity -1,128

LIABILITIES

Liabilities Group companies 22 22

Accounts payable 21 1

Other liabilities 21 0

Current interest-bearing loans and liabilities 19 2,191

Accrued expenses and prepaid income 21 56

Total current liabilities 2,270

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1,141




STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY

Restricted equity Non-restricted equity

SEK 000,000s Notes Share capital Statutory Reserve

Other capital contribution

Retained earnings

Profit for the year Total

Balance at 1 January 2014 1,415 985 2,888 -1,199 -2,559 1,530

Transfer of previous year´s result -870 -2,888 1,199 2,559 -

Total comprehensive income for the year -2,658 -2,658

Closing balance at 31 December 2014 1,415 115 - - -2,658 -1,128

Balance at 1 January 2015 1,415 115 - - -2,658 -1,128

Transfer of previous year´s result -115 -2,543 2,658 -0

Total comprehensive income for the period

1,139 1,139

Transactions with shareholders

Reduction share capital -1,414 1,414 -

Closing balance at 31 December 2015 1 - - -1,130 1,139 11


STATEMENT OF CASH FLOW – PARENT COMPANY

Jan-Dec Jan-Dec

SEK 000,000s Notes 2015 2014

Cash flow from operating activities

Income after financial items* 1,139 -2,659

Adjustments for non-cash items

Termination farm-out agreement 4 - 168

Impaiment losses participations in Group companies 25 195 1,730

Impaiment losses Intercompany receivables 25 955 1,125

Capital gain -427 -

Recognition of debt at fair value -1,912 -

Dividend recieved - -232

Other items including accrued interests and exchange gains and losses (net)

-79 -167

Income tax paid - -

Total cash flow from operating activities

before changes in working capital -129 -35

Change in receivables 9 -22

Change in liabilities 59 -40

Cash flow from changes in working capital 68 -62

Cash flow from operating activities -61 -97

Cash flow from investing activities

Loans given to subsidiaries -61 -123

Cash flow from investing activities -61 -123

Cash flow from financing activities

Loans raised 41 182

Amortisation of debt - -237

Cash flow from financing activities 41 -55

Cash flow for the year -81 -275

Cash and cash equivalents at the beginning of period 88 363

Cash and cash equivalents at end of the year 7 88

* The amount includes interest received at SEK 0 million (1), of which SEK 0 million (0) is attributable

to current operations, and SEK 0 million (1) to financing activities and interest paid at SEK 0 million

(49), of which SEK 0 million (0) is attributable to current operations and SEK 0 million (49) to financing

activities.


NOTES

1 Company information 25

2 Accounting principles etc 25

3 Acquisitions of operations and licence shares 36

4 Segment information 37

5 Production costs 38

6 Total general, administration and depreciation expenses 38

7 Other expenses 38

8 Remunerations to auditors 39

9 Leasing 39

10 Employees, salaries and remuneration 39

11 Remuneration and other benefits; Board of Directors and

senior executives of the Parent company 41

12 Financial income and expenses 42

13 Income tax 42

14 Exploration and evaluation assets and oil and gas properties 44

15 Machinery and equipment 46

16 Impairment testing exploration and evaluation assets and

oil and gas properties 47

17 Inventories 48

18 Accounts receivables and other receivables 49

19 Interest-bearing loans and borrowings 49

20 Provisions 51

21 Accounts payable and other liabilities 52

22 Financial instruments 52

23 Shares in subsidiaries 56

24 Pledged assets and contingent liabilities 57

25 Result from participations in Group companies 57

26 Financial risk 58

27 Related party disclosure 60

28 Significant events after the closing date 61


NOTE 1 COMPANY INFORMATION

The Parent company PA Resources AB (publ) is a Swedish limited company domiciled in Stockholm

(corporate identity number 556488-2180). The Group’s business consists of either that itself or in

collaboration with others pursue prospecting business, extract oil and gas and own and administer,

which includes buying and selling, concessions, stocks and shares in companies who pursue

prospecting- and extracting business and be engaged in other activities thereto. The Parent

company’s functional currency, and the currency in which the accounts are presented, is Swedish

kronor (SEK). This annual report and the consolidated accounts of PA Resources AB (publ) for the

year ending 31 December 2015 were approved for publication by the Board of Directors on 9 June

2016 and will be submitted for adoption at the Annual General Meeting on 30 June 2016.

NOTE 2 ACCOUNTING PRINCIPLES ETC

Note 2.1 Description of significant accounting prinNote 2.1 Description of significant accounting prinNote 2.1 Description of significant accounting prinNote 2.1 Description of significant accounting principlesciplesciplesciples

The sections within this Annual Report which are classified as formal financial reports according to

IFRS are:

• the consolidated Income Statement, Statement of Comprehensive Income, Statement of Financial

Position, Statement of Changes in Equity and Statement of Cash Flows

• the Parent company’s Income Statement, Statement of Comprehensive Income, Balance Sheet,

Statement of Changes in Equity and Statement of Cash Flows

• the notes to the financial reports

Non-going concern

The company has since the middle of 2014 been working to secure long-term financing for the

company’s operations and development projects. Following the corporate reorganisation and the

strategic review the company still stands without long-term financing and has decided to sell its

assets. As a result the board of directors has concluded that the company’s financial statements,

effective 31 December 2015, can no longer be prepared under the assumption of a going concern.

Following the decision to prepare the accounts without the assumption of a going concern PA

Resources values its exploration and evaluation assets and its oil and gas properties including

abandonment costs at the lowest of either carrying value or fair value less cost to sell (FVLCS).

Market valuation of the assets are based on sales values net of transaction costs. Provision for

abandonment earlier accounted for as provision are, as a consequence of not applying going

concern, now included net in evaluation and exploration assets & oil and gas properties. Further,

according to the strategic review process described under Board of Director´s report, the conclusion

is to sale all of the company´s assets and in such case IFRS 5 is not applicable. PA Resources AB

accounts for its participations in group companies in accordance with what is expected to be

obtained through the sale, net.

As per 2 October, 2015 a qualified majority of the company’s creditors choose to support the

proposed composition plan put forward by PA Resources AB and the administrator at the

composition proceedings at the Stockholm District Court. Following the decision of the board to

prepare the Annual report in accordance with a non-going concern, PA Resources, effective 31

December, 2015 has derecognised its interest-bearing loans and borrowings accounted for at

amortised cost and thereafter recognised its interest-bearing loans and borrowings at fair value and

in accordance with the terms of the adopted composition plan.


The PA Resources group´s and parent company´s financial statements are as per December 31, 2015

prepared on a non-going concern basis, whereas all earlier periods are prepared under the

assumption of a going concern. As a result of the non-going concern assumption all non-current

assets and liabilities have been reclassified to current assets and liabilities in both the PA Resources

group´s and parent company´s statement of financial position ending 31 December 2015. The

changed assumption does not impact the net result or the cash flow statement in any of the previous

or current periods. No retrospective changes have been made.

Basis for preparation of the financial statements

Except for what is described above under “Non-going concern”, the consolidated financial

statements are based on historical acquisition costs except in the case of financial instruments, which

could be reported at fair value. Group´s outstanding under- / overlift positions of hydrocarbons are

valued at the balance sheet date and recognised as if the positions have been sold. Valuations are

performed either with Brent spot price at the balance sheet date taking eventual discount or

premium into consideration or with prevailing contract prices. Unless otherwise indicated, all

amounts are reported in thousands of Swedish kronor (SEK million).

Statement of conformity with regulations applied

The consolidated financial statements and the financial statements for the Parent company have

been prepared in accordance with International Financial Reporting Standards (IFRS) including

interpretation statements issued by the International Financial Reporting Interpretations Committee

(IFRIC ) and in accordance with Swedish laws. Since the Parent company is a company within the EU,

only IFRS adopted by the EU are applied. In addition, the Annual Accounts Act and the Swedish

Financial Reporting Board’s recommendation RFR 1, Supplementary Accounting Rules for the Group

have been applied. The financial statements for the Parent company have been prepared applying

recommendation RFR 2, Accounting for Legal Entities, statements from the Swedish Financial

Reporting Board and the Annual Accounts Act.

Consolidated financial statements

Basis of consolidation

The consolidated financial statements encompass the Parent company and its subsidiaries. The

financial reports for the Parent company and the subsidiaries included in the consolidated financial

statements cover the same period and have been prepared in accordance with the same accounting

principles as applied for the Group.

All intra-group transactions and accounts, as well as gains and losses on transactions between Group

companies are eliminated entirely.

A subsidiary or its assets and liabilities are included in the consolidated financial statements from the

acquisition date, which is the day a controlling influence in the subsidiary arises, and are included in

the consolidated financial statements until the day the controlling influence ceases. Controlling

influence means the right to formulate the subsidiary’s operational and financial strategies with a

view to obtaining financial benefits.

Acquisitions of operations are reported in the consolidated financial statements using the purchase

method of accounting. The purchase method of accounting means, among other things, that the

acquisition cost of the shares is distributed to the assets, commitments taken over and liabilities

acquired at the acquisition date based on their fair values at the time. If the acquisition cost exceeds

the fair value of the acquired company’s net assets, the excess value is first allocated to acquired oil

and gas properties and thereafter, any difference is recognised as goodwill. If the acquisition cost is


lower than the fair value of the acquired company’s net assets, the difference is reported directly in

the income statement.

Segment reporting

Followed that PA Resources´ share is delisted, the company is no longer obliged to apply IFRS 8.

Further PA Resources´ group management has changed its way of analysing and monitoring the

company´s performance, the internal reporting, effective 31 December 2015, is made and monitored

by the management in form of one single segment containing all of PA Resources´ assets. Earlier

segment structure based on geographical regions is no longer valid from an IFRS 8 perspective.

Therefore PA Resources no longer show its Income statement and Balance sheet compiled per

geographical regions.

Translation of foreign currency

Functional currency and reporting currency

The functional currency of each unit within the Group is determined by reference to the economic

environment in which the units carry on their respective operations. Monetary receivables and

liabilities in each subsidiary that are expressed in foreign currencies are translated into the functional

currency at the exchange rate in force on the balance sheet date. All translation differences are

reported in the income statement. The Group continuously analyses circumstances that could

indicate a change in the functional currency from local currency to USD in the Group’s subsidiaries.

Translation of foreign operations

The consolidated financial statements of PA Resources are presented in Swedish kronor (SEK), which

is the Parent company’s functional and reporting currency.

Assets and liabilities in other functional currencies are translated into SEK at the exchange rate

effective on the balance sheet date. Income statements are translated at the average exchange rate

for the year. Translation differences arising on the translation of foreign operations are reported

directly against equity in the statement of comprehensive income.

Exchange rates

The following exchange rates were used in the preparation of the financial statements:

Closing day rate 31 Dec 2015

Average rate Jan-Dec 2015

Closing day rate 31 Dec 2014

Average rate Jan-Dec 2014

1 EUR in SEK 9.14 9.36 9.52 9.10

1 USD in SEK 8.35 8.44 7.81 6.86

1 TND in SEK 4.15 4.30 4.19 4.04

1 NOK in SEK 0.96 1.05 1.05 1.09

1 GBP in SEK 12.38 12.90 12.14 11.29

1 DKK in SEK 1.22 1.25 1.28 1.22

New accounting policy – Exchange gains/losses

PA Resources decided in the first quarter 2015 to change accounting policy for exchange gains/losses

earlier presented in operating profit now in net financial items. The changed accounting policy does

not impact the net result in any of the previous and current periods. It did not either impact the split

between operating- and non-operating result. Even though the previously applied policy, as

presented in the income statement were in full compliance with IFRS, the assessment is now that the

new presentation and changed policy provide a better presentation and more relevant information

for the reader. PA Resources is doing this on a voluntary basis and there are no historical errors. PA


Resources has changed the accounting policies in accordance with IAS 8 - Accounting Policies,

Changes in Accounting Estimates and Errors.

Revenue recognition

Group revenue primarily refers to revenue from sales of oil. Revenue is based on sales which are

primarily managed by yearly contracts signed with a small number of major international oil and gas

companies in which oil sold is priced at the applicable world market price less any discounts and plus

any premiums due to the quality of the oil and gas equivalents. Pricing occurs during a

predetermined time period prior to and following the day on which physical delivery is made from

vendor to vendee. Interest income is recognized in accordance with the effective rate method and

primarily refers to interest income from cash and cash equivalents and receivables. The majority of

the Parent company’s revenue is made up of sales of services to other companies within the Group.

Production costs (Direct production taxes)

Current license terms for some producing oil fields require direct production taxes (royalties) to be

paid.

Remunerations to employees, Board of Directors and senior executives

Short-term remunerations

Salaries, other remuneration and benefits as well as social security contributions are reported as

personnel expenses in the income statement when they arise.

Post-employment remunerations

Pension costs for defined-contribution plans are reported as personnel expenses in the income

statement. The defined-contribution plans are the only pension schemes in place within PA

Resources. More information regarding the expenses during the financial year is provided in Note 10,

Employees, salaries and other remuneration.

Recognition of exploration and evaluation assets as well as oil and gas properties

Except for what is described above under Non-going concern, Expenditures for exploration and

evaluation of oil and gas properties are reported according to the Full Cost Method. All costs

attributable to exploration, drilling and evaluation of such interests are capitalised in full. The

expenditures are accumulated separately for each licence right and the capitalisation of exploration

and evaluation assets, or alternatively oil and gas properties depends on the development phase that

has been reached.

The balance sheet item exploration and evaluation assets refer to acquired licence/concession rights

and other capitalised exploration and evaluation expenditure.

When PA Resources appraises and assesses an exploration permit as profitable a plan for

development is applied for. On receiving the plan for development, the asset is reclassified under oil

and gas properties and, in conjunction with reclassification, the assets are tested for any possible

need for impairment, for the purpose of ascertaining their value. If the asset is relinquished to the

government authorities or is assessed as unprofitable, the asset is expensed by PA Resources

through recognition as an impairment loss in profit or loss.

The balance sheet item, oil and gas properties, refers both to reclassified exploration and evaluation

assets as well as capitalised development expenses. Depreciation commences for the actual asset in

conjunction with the start of production. Assets are regularly tested for any possible need for


impairment and where a need is identified, the asset is expensed through recognition as an

impairment loss in profit or loss.

Joint arrangements

PA Resources has interests in licences in the North Africa, West Africa and the North Sea and

recognises investments in joint operations (exploration and evaluation assets as well as oil and gas

properties) by reporting its share of related expenses, assets, liabilities and cash flows under the

respective items in the Group’s financial statements. For those licences that are not deemed to be a

joint arrangement under the definition in IFRS 11 because there is no joint control, PA Resources

recognises its share of related expenses, assets, liabilities and cash flows on a line-by-line-basis in the

financial statements in accordance with applicable IFRS.

Farm-out accounting

Farm-outs are accounted for in accordance with the principles of IFRS 6 with respect to exploration

and evaluation assets. PA Resources recognises cash payments received directly against the asset

and retains the recorded portion of the asset less any cash received. This entails that no revenue is

recognised in connection with the farm-out unless the cash received exceeds the book value of the

farmed out asset. No entries at the transaction date are made regarding any future payments. In

case where a farm-out pertains to PA Resources’ oil and gas assets, accounting is performed in

accordance with IAS 16. Accordingly, PA Resources derecognises the carrying amount of the asset

attributable to the proportion farmed out and recognises any future payments on the balance sheet.

After recording any cash received as part of the transaction, a gain or loss is recognised in the income

statement. After the completed transaction, PA Resources tests its cash generating units for

impairment. Impairment losses are charged to the income statement.

Depletion oil and gas properties

Depletion of oil and gas properties commences in conjunction with the start of production and are

calculated using the Unit of Production Method and are depleted in line with the year’s production in

relation to the estimated total proven and probable reserves of oil and gas. Technical installations

and equipment are linear depreciated over the assets’ expected useful life. The estimated useful life

is ten years for technical installations and five years for equipment.

Recognition of machinery and equipment

Machinery and equipment is valued at cost after a deduction for accumulated depreciation and any

impairment losses. Linear depreciation is applied over the assets’ expected useful life. The estimated

useful life for machinery and equipment is 3–5 years.

Impairment losses

Except for what is described above under Non-going concern, PA Resources regularly assesses its

exploration and evaluation assets as well as its oil and gas properties for any need for impairment.

This is performed in conjunction with each balance sheet date or if there are events or changes in

circumstances that indicate that carrying values of assets may not be recoverable.

Such indicators include changes in the Group’s business plans, relinquished licences, changes in raw

materials prices leading to lower revenues and, for oil and gas properties, downward revisions of

estimated reserve quantities.

Testing for impairment losses is performed for each cash generating unit, which corresponds to

licence right, production sharing agreement or equivalent owned by PA Resources. A cash generating

unit thus usually corresponds to each acquired asset in each country in which PA Resources carries

on exploration and development operations. Impairment testing means that the balance sheet item


amount for each cash generating unit is compared to the recoverable amount for the assets, which is

the higher of the fair value of the assets less sales expenses and the value in use. The value in use of

the assets is based on the present value of future cash flows discounted by weighted average cost of

capital (WACC ); see also Note 16 Impairment testing exploration and evaluation assets and oil and

gas properties. An impairment loss is recorded when an asset’s or a cash generating unit’s recorded

value exceeds the value in use. Impairment losses are charged to the income statement.

Reversal of impairment losses

At least once every year an assessment is made as to whether there are any indications that

impairment losses reported previously are no longer justified or have reduced in extent. If such

indications exist, a new calculation of the recoverable amount is made. A previously recognised

impairment loss is reversed only to the extent that the asset’s reported value after reversal does not

exceed the reported value the asset would have had if the impairment loss had never been

recognised.

If this is the case, the book value of the asset is increased to its recoverable amount. After a reversal

the depreciation charge is adjusted in future periods to distribute the asset’s revised book value over

its expected remaining useful life.

Inventory

Outstanding inventory consist of other supplies and materials and is valued at the lower of cost and

net realizable value. When assessing obsolescence of inventory items, consideration is given to the

age of the inventory, the material and the rate of turnover. Any impairment of the inventory affects

operating profit.

Under- or overlift positions of hydrocarbons

PA Resources’ under- or overlift position of hydrocarbons is reported as if they had been sold at the

balance sheet date. Valuation is performed either based on the Brent spot price at the respective

balance sheet date taking any discounts or premiums into consideration, or according to the

prevailing contract price. An underlift position is included in Accounts receivable and other

receivables, while an overlift position is included in Accounts payable and other liabilities. A change

in the under- or overlift position is reflected in the income statement as Revenue.

Financial instruments

PA Resources’ financial instrument assets comprise accounts receivable and other receivables, other

financial non-current assets and cash and cash equivalents.

The assets can, on occasion, also comprise derivatives for which hedging has been performed by the

Group with respect to matching the interest-bearing liability to the corresponding asset’s currency

risk. Financial instrument liabilities comprise interest-bearing loans and borrowings and the short-

term portion thereof, derivatives, for which hedging has been performed, as well as accounts

payable and other liabilities.

Recognition and derecognition in the balance sheet

PA Resources reports a financial asset or a financial liability in the balance sheet when the company

becomes a party to the instrument’s contractual terms. The company derecognises a financial

liability or part thereof when the obligation stated in the relevant contract is fulfilled or otherwise

terminated.

PA Resources currently reports all its financial instruments gross, but net reporting is possible where

there is a legal right of offset. Recognition and Derecognition in the balance sheet are reported on


the transaction date, which is the day on which PA Resources undertakes to acquire or sell the

financial instrument in question.

Classification by means of measurement

Initial measurement

PA Resources initially recognises its financial instruments at fair value plus a supplement for directly

attributable transaction expenses, usually the transaction price. This principle is applied to all

financial instruments apart from those in the category financial assets or liabilities carried at fair

value through profit or loss, which are recognised at fair value excluding transaction expenses.

Except for what is described above under Non-going concern, this category comprises only

derivatives.

PA Resources classifies its financial instruments in the following categories based on the purpose for

which the instrument was acquired. This classification generally forms a basis for how the financial

instrument is measured after it is first reported. On each closing date the company tests all its

financial assets for impairment, apart from those in the category financial assets or liabilities carried

at fair value through profit or loss.

In the Parent company the same measurement principles are applied, subject to the restrictions

contained in Chapter 4 § 14 of the Swedish Annual Accounts Act; at present these restrictions result

in no differences between the Parent company and the Group.

After initial recognition, the company’s financial instruments are reported as described below.

Subsequent measurement

Financial assets measured at fair value through profit or loss

In this category PA Resources classifies derivatives with a positive fair value as a separate

subcategory. These are continually measured at fair value with changes in value through profit or

loss. At present PA Resources has no hedging instruments that are identified as effective, and instead

reports all its positive derivatives in this subcategory. PA Resources held no assets or liabilities under

this category at year-end or at the end of the preceding year.

Loans and receivables

PA Resources classifies mainly receivables generated by the company in its operations in this

category, but acquired receivables can also be included. At present it contains deposits for leased

drilling equipment, accounts receivable, receivables from partners, accrued interest income, accrued

income from oil inventories and cash and cash equivalents. These are measured at amortised cost,

using the effective interest method established at the time of acquisition.

Where accounts receivable are concerned, provision for impairment is made if there is objective

evidence that the Group will not receive the amount due according to the original terms of the

receivables. Impairment of accounts receivable is reported in the operating result.

Available-for-sale financial assets

PA Resources sees this category as a residual category containing long-term assets not classified in

any other category. For the current year, as well as for the comparative period, there are no assets in

this category.

The assets are measured at fair value directly through other comprehensive income, except where

impairment is applied. No impairment was applied during the year and any change in value is

recognised in other comprehensive income.


Financial liabilities measured at fair value through profit or loss

In this category PA Resources classifies derivatives with a negative fair value as a separate

subcategory. These are continually measured at fair value with changes in value through profit or

loss. At present PA Resources has no hedging instruments that are identified as effective, and instead

reports all its negative derivatives in this subcategory. Except for what is described above under Non-

going concern, PA Resources held no assets or liabilities under this category at year-end or at the end

of the preceding year.

Other financial liabilities

Except for what is described above under Non-going concern, PA Resources includes in this category

Interest-bearing loans and borrowings, which are measured at amortised cost using the effective

interest method which is the category’s main assessment method. Within this category, secured

loans can be measured at fair value. However, at present there are no loans that are secured. The

company also places in this category accounts payable, the short-term portion of interest-bearing

loans and borrowings as well as other financial liabilities such as liabilities to partners as well as

accrued interest expenses and accrued exploitation and drilling expenses.

Compound financial instruments

A compound financial instrument contains both a liability component and an equity component,

which are each classified separately. PA Resources reports its convertible debentures in this way,

with the liability component reported under Interest-bearing loans and borrowings within the

category Other financial liabilities.

Measurement of fair value

PA Resources bases the fair value of financial instruments depending on available market data at

time of valuation. Data are categorised into three categories; Level 1: quoted prices in active

markets. Level 2: valuation based on observable market data. Level 3: valuation techniques incorpor-

ating information other than observable market data. The reported value – after any impairment – of

accounts receivable and accounts payable is assumed to equate to their fair value, since these entries

are short-term in nature.

Embedded derivatives

An embedded derivative is a contract with derivative-like properties, but which forms part of another

contract. An embedded derivative is to be distinguished from the host contract and recognised as a

separate derivative where the economic properties and risks are not closely related to those of the

host contract. PA Resources holds embedded derivatives in its bond loans, known as call options,

which means that the company can call for early redemption at a value in excess of the nominal

amount. However, these are considered to be closely related, and as a result they are not reported

separately.

Borrowing costs

Borrowing costs are capitalised when these refer to the purchase, construction or production of

assets which necessarily take considerable time to complete for their intended use or sale.

Capitalisation only takes place if it is assessed that this will involve probable economic advantage.

Interest on loans referring to the acquisition and development of oil and gas properties, for which

the borrowing costs can be included in the acquisition value, is capitalised during the period of time

necessary to finalise the work and complete the asset for its intended use. Capitalisation of interest

expenditures is begun when an acquisition is made and when investment and development costs

arise, either in the oil and gas properties where the Group is operator or as allocated through


invoices from operators of oil and gas properties in which the Group is a partner. The interest is

capitalized throughout the development phase until the asset is finally ready to start production.

Other loan expenses are distributed over the terms of the loans using the effective interest method.

Provisions

Except for what is described above under Non-going concern, provisions are reported in the balance

sheet where there is a formal or informal commitment as a result of an event that has occurred and

it is likely that an outflow of resources will be required in order to settle the commitment and the

amount can be reliable estimated. The amount is discounted to present value in those cases where

the time effect in each provision is significant.

In some oil fields, where the Group has an obligation to contribute to, for example restoration of the

environment, dismantling, removal, clean-up and similar actions around the drilling sites both

onshore and offshore, provisions are reported based on the present values of the expenses expected

to be required to discharge the obligations, using estimated cash flows. The discount rate used

considers the time value of money and the risk specifically attributable to the provision, as assessed

by the market. Provisions for asset retirement obligations are revised on a continual basis depending

on future changes in estimated cash flows, the discount rate and risks attributable to the provision.

An obligation arises either at the time when an oil field is acquired or when the Group starts to utilise

these and as a counterpart to the provision an asset is recorded as one part of the Group’s total oil

and gas properties. The asset is depreciated over the life of the oil field based on the oil field’s

production.

Income tax

Income tax consists of current tax and deferred tax. Income taxes are recorded in the income

statement when they refer to income statement items. Income taxes referring to items in other

comprehensive income are recorded in total other comprehensive income and recorded directly

against equity when the underlying transaction is recorded directly against equity.

Current tax

Current tax is tax that is to be paid or received for the current year, applying the tax rates and the tax

legislation used and in force on the balance sheet date.

This includes adjustment of current tax attributable to previous periods. Current tax receivables and

liabilities for current and prior periods are valued at the amount expected to be recovered from or

paid to the tax authorities. Taxes on oil production are paid in accordance with local legal and fiscal

terms in each country and these terms can vary within each country depending on which oil field

they relate to. The tax is calculated on taxable profit for each individual oil field at the current local

tax rates. Current tax receivables and liabilities attributable to each company are reported net in the

balance sheet.

Deferred tax

Deferred tax is calculated based on temporary differences between the fiscal and book values of

assets and liabilities. Deferred tax assets are recognised for all deductible temporary differences,

carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that

taxable profit will exist against which the deductible temporary differences and the carry-forward of

unused tax losses can be utilised. However, if the deferred income tax arises from initial recognition

of an asset or liability in a transaction other than a business combination that at the time of the

transaction affects neither accounting nor taxable profit nor loss, it is not recognised.


The recorded values of deferred tax assets are tested as of each balance sheet date and reduced if

there is no longer a probability that there will be sufficient taxable profit to utilise the deferred tax

assets against.

Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period

when the asset is realised or the liability is settled, based on tax rates and tax laws that have been

enacted or exist in practice at the balance sheet date. Deferred tax assets and liabilities are reported

net in the balance sheet provided that the tax payment will be made at the net amount.

Leasing as lessee

The Group’s lease agreements where all risks and benefits associated with the ownership do not

accrue to the Group are classified as operating leases. The Group has only assets that are reported as

operating leases. Lease payments are recorded as costs in the income statement and are distributed

linearly over the term of the agreement. See Note 9 Leasing.

Cash flow statement

The cash flow statement shows cash receipts and cash payments and the indirect method has been

used. In addition to cash and bank balances, short-term deposits with an original term of less than

three months are classified as cash and cash equivalents, exposed to insignificant in fluctuations in

value.

Contingent liabilities

A contingent liability is recognised when there is a possible obligation relating to past events, the

existence of which is confirmed only by the occurrence or non-occurrence of one or more uncertain

future events not wholly within the control of the enterprise, or when there is an obligation which is

not recognised as a liability or a provision because it is unlikely that an outflow of resources will be

required to settle the obligation.

Parent company’s accounting principles

The Swedish Financial Reporting Board’s recommendation RFR 2, Accounting for Legal Entities, was

applied in the preparation of the Parent company’s financial statements. With the exception of those

cases stated below, the Parent company applies the same accounting principles as the Group. In the

Parent company, shares in subsidiaries are reported at acquisition value with a deduction for

possible impairment losses. Also in the Parent company, shareholders’ contributions to subsidiaries

are recorded as an increase in the value of the shares in the subsidiary on the grounds of increased

value within the subsidiary.

These shareholders’ contributions are eliminated against the subsidiaries’ equity in the consolidated

financial statements.

Note 2.2 ChangesNote 2.2 ChangesNote 2.2 ChangesNote 2.2 Changes, , , , amendments and interpretations amendments and interpretations amendments and interpretations amendments and interpretations in accounting principles and disclosuresin accounting principles and disclosuresin accounting principles and disclosuresin accounting principles and disclosures

The same accounting principles have been applied in this Annual Report as in the Annual Report for

the financial year 2014, except for the changes specified above as well as the Annual improvements

to IFRS Improvements Cycles 2010-2012 and 2011-2013. The adoption of these amendments did not

have any impact on the consolidated financial statements of the Group. Furthermore, the

assumption of applying non-going concern meant changes described above.

During the year the Group did not apply in advance any new or amended standards and

interpretations from IFRIC adopted by the EU. The comments below pertain only to the standars,

amendments and interpretations that have not yet entered into force, but are deemed to be relevant

for PA Resources.


IFRS 9 Financial instruments, the standard addresses the classification, measurement and recognition

of financial assets and financial liabilities. Effective from 1 January 2018.

IFRS 15 Revenue from contract with customers, the standard addresses revenue recognition and

establishes principles for reporting useful information to users of financial statements. Effective from

1 January 2018.

IFRS 16 Leases, this standard will replace IAS 17 “Leases” and requires assets and liabilities arising

from all leases, with some exceptions, to be recognised on the balance sheet. Effective from 1

January 2019.

Note 2.4 Critical accounting principles,Note 2.4 Critical accounting principles,Note 2.4 Critical accounting principles,Note 2.4 Critical accounting principles, estimates and assumptionsestimates and assumptionsestimates and assumptionsestimates and assumptions

In the course of preparing the financial statements, the management of PA Resources has to make

estimates and assumptions that will affect recorded asset and liability items as well as revenue and

expense items. Uncertainties in estimates and assumptions could have an effect on reported values

of assets, liabilities and consolidated results. Estimates and assumptions are reviewed regularly on

the basis of historical experience and other factors, including expectations of future events. The main

estimates and assumptions are shown below:

Estimates and assumptions of oil and gas reserves

Accounting for oil and gas discoveries is subject to accounting rules that are unique to the oil and gas

industry. The accounting principles and areas which require the most significant estimates and

assumptions when preparing the consolidated financial statements relate to oil and natural gas

accounting, including estimates of and assumptions concerning reserves. The valuation of oil and gas

properties is based on estimates and assumptions concerning both proven and probable oil reserves

at the time of acquisition of the oil fields and the expected oil that can be produced yearly. Estimates

and assumptions of proven and probable oil reserves are performed with the aid of third party

valuations and reserves are adjusted annually in the light of the volume of oil and gas produced as

well as new discoveries made during the year. However, there is always a certain amount of

uncertainty surrounding the valuations performed, and should there be any new estimates and

assumptions showing a decrease in oil reserves or if the oil production does not encounter

potentially economically profitable oil and gas quantities there is a significant risk that the recorded

oil and gas properties for specific wells will have to be impaired. This is assessed in impairment

testing.

The results of third-party appraisals are analysed and an assessment performed of any discrepancies

identified between estimated proven and probable oil and gas reserves compared with Group

internal appraisals. Assessments are performed by the management in respect of how the appraisals

are utilised.

Impairment testing of exploration and evaluation assets as well as oil and gas properties as well as

assumptions concerning provisions for asset retirement obligations



abandonment costs at the lowest of either carrying value or fair value less cost to sell (FVLCS).

Market valuation of the assets are based on sales values net of transaction costs. Included in the

North Sea transaction is also a highly uncertain and contingent consideration based on future oilprice


Provision for abandonment earlier accounted for as provision are, as a consequence of not applying

going concern, now included net in evaluation and exploration assets & oil and gas properties.

Further, according to the strategic review process described under Board of Director´s report, the


conclusion is to sale all of the company´s assets and in such case IFRS 5 is not applicable. PA

Resources AB accounts for its participations in group companies in accordance with what is expected

to be obtained through the sale, net.

For information on the reported values of total exploration and evaluation assets as well as oil and

gas properties on the balance sheet date refer to Note 14 Exploration and evaluation assets as well

as oil and gas properties and Note 16 Impairment testing of exploration and evaluation assets as well

as oil and gas properties.

Estimation of and assumptions concerning taxes

In order to determine current tax receivables and liabilities and capitalisation of provisions for

deferred tax assets and liabilities, significant estimates and assumptions have to be made by the

management. This process includes analyzing the tax result of each of the legal entities in which PA

Resources conducts its business. The process includes analysing exposure to current tax and

establishing temporary differences that arise because certain assets and liabilities are valued in

different ways in the financial statements and in the income declarations.

The management also has to assess the probability that deferred tax assets can be realised against

future taxable revenues as well as repayments of accrued exploration expenses. The actual outcome

could differ from these assessments, for example depending on future changes in business

conditions and investment decisions, currently unknown changes in fiscal legislation or as a result of

the final examination by tax authorities or courts of law of tax declarations submitted. For

information on the reported values of total current tax and total deferred tax receivables and tax

liabilities on the balance sheet date refer to Note 13 Income tax.

Note 2.5 Significant judgments in the application of the Group’s accounting principles

Subsidiaries’ assets and liabilities in foreign currencies as at the balance sheet date are translated

from the functional currency of the unit concerned into the Group’s reporting currency (SEK). The

company assesses annually whether the subsidiaries’ functional currency is affected by any changes

in the local economic environments in which the subsidiaries conduct their business. During the

current financial year, none of PA Resources units changed its functional currency. PA Resources

applies non-going concern, for more information, see 2.1 Description of significant accounting

principles.

NOTE 3 ACQUISITIONS OF OPERATIONS AND LICENSE SHARES

During the 2015 and 2014 financial years no acquisitions or divestments were made of companies or

of shares in companies. In 2015 Gunvor exercised its security under the terms of the RBL-loan to take

over the shares in Osborne Resources Ltd. Osborne Resources Ltd held PA Resources` interest in

Block I in Equatorial Guinea including the producing fields Asend and Alen. Following the

enforcement PA Resources no longer has any interest in Equatorial Guinea.

In 2015, PA Resources was awarded Block 21/24 in UK´s 28th Licensing Round.

At year-end 2014 the farm out agreements of 70 percent interest in each of the Didon field and Zarat

license were terminated. Further to the termination, PA Resources accounts for the legal entity

Hydrocarbures Tunisie Didon Ltd, holding 70 percent of the Didon field. As a result, PA Resources

Group is the sole holder of the Didon field as well as the Zarat licence.


In 2014, the Group disposed its interest in the Netherlands offshore Blocks Q7 and Q10a to Tulip Oil.

Furthermore, PA Resources was awarded license P 2184 including Blocks 22/18c and 22/19d in UK´s

28th Seaward Licensing Round.

NOTE 4 SEGMENT INFORMATION

PA Resources´ group management has changed its way of analysing and monitoring the company´s

performance. Effective 31 December 2015, internal reporting is made and monitored by the

management in form of one single segment containing all of PA Resources´ assets. Earlier segment

structure based on geographical regions is no longer valid from an IFRS 8 perspective. Therefore PA

Resources no longer show its Income statement and Balance sheet compiled per geographical

regions.

Other income

Other external income pertains mainly to sales of services to external companies. 2015 included SEK

124 million (0) from final computation of the impact of the terminated farm-out agreement and SEK

89 million (31) from reversed provisions. Other internal income and expenses pertains mainly to

services to other companies within the group.

Capital gain

As a result of the enforcement of the RBL security, Osbornes Resources Ltd´s balance sheet was

deconsolidated as per 31 March 2015. Group´s profit and loss on a row by row basis includes revenue

and expenses from Osborne for January to March. Further to the enforcement the RBL facility

including accrued interest is to be considered repaid in full and the transaction resulted in a net

capital gain of SEK 285 million (0).

Termination farm-out agreement

According to the terminated farm out agreements in 2014 of 70 percent interest in each of the Didon

field and the Zarat license to EnQuest, PA Resources reversed the remuneration retained in escrow

awaiting a letter of non-objection from the Tunisian authorities. Further to the termination PA

Resources included 70 percent of Zarat in its exploration and evaluation assets and 70 percent of

Didon in its Oil and gas assets. Didon was valuated to zero in accordance with made impairment

tests. Abandonment provision as well as deferred taxes was adjusted accordingly with respect to

both Didon and Zarat. Out of total amount below, SEK -168 million belongs to PA Resources AB.

Jan-Dec

SEK 000,000s 2014

Terminated upfront payment -180

Adjustment abandonment provision -259

Adjusted deferred taxes -372

Other -15

Total -826


NOTE 5 PRODUCTION COSTS

The parent company has no production costs.

Group

Jan-Dec Jan-Dec

SEK 000,000s 2015 2014

Cost of operations -178 -176

Direct production taxes -6 -10

Total production costs -184 -187

NOTE 6 G&A

Group Parent

Jan-Dec Jan-Dec Jan-Dec Jan-Dec

SEK 000,000s Notes 2015 2014 2015 2014

Other external expenses 7, 8, 9 -65 -51 -74 -30

Other internal expenses 7 - - - -1

Personnel expenses 10, 11 -75 -66 -10 -16

Depreciation machinery and equipment 16 -2 -1 - -

Impairment losses machinery and equipment 16 -3 - - -

Total general, administration and depreciation expenses

-145 -118 -84 -47

NOTE 7 OTHER EXPENSES

Group Parent


SEK 000,000s 2015 2014 2015 2014

External consultants -81 -29

-68 -24

Rent & Office -14 -13

-5 -5

Travel expenses -2 -3

-1 -1

License related expenses -5 -22

- -1

Activated work - own account 44 28

- 1

Other internal expenses - -

- -1

Exchange gain/loss - -

- -

Other -8 -12 - -1

Total other expenses -65 -51 -74 -31


NOTE 8 REMUNERATION TO AUDITORS

Group Parent


SEK 000,000s with one decimal 2015 2014 2015 2014

Ernst & Young AB, audit referred to audit engagement 2.6 2.6

1.8 2.0

Ernst & Young AB, audit outside audit engagement 1.6 -

1.6 -

Ernst & Young, tax consultancy - 0.1

- 0.1

Ernst & Young AB, other services 0.3 0.1

0.3 0.1

PricewaterhouseCoopers, audit referred to audit engagement

0.1 0.1

- -

Moore Stephens (Chantrey Vellacott), audit referred to audit engagement 0.4 0.5 - -

Moore Stephens (Chantrey Vellacott), other services - 0.0 - -

Total 5.0 3.5 3.7 2.2

NOTE 9 LEASING

The Group’s lease agreements where all risks and benefits associated with the ownership do not

accrue to the Group are classified as operating leases. All the Group’s leased assets during the year

are classified as operating leases. The Group utilises premises, garages, company cars, computers

and machinery through operating lease agreements. Leasing costs amounted to SEK 12 million (19)

for the 2015 financial year. Future payment commitments for lease agreements within the Group are

stated in the table below:

2015

Operating leases (SEK 000,000s) Premises Production/ related Other Total

Maturity year 2016 1 - 0 1

Maturity year 2017 – 2020 - - 0 0

Maturity year 2021 and after - - - -

2014

Operating leases (SEK 000,000s) Premises Production/ related Other Total

Maturity year 2015 2 - 0 3

Maturity year 2016 – 2019 4 - 0 4

Maturity year 2020 and after - - - -

NOTE 10 EMPLOYEES, SALARIES AND OTHER REMUNERATION

Jan-Dec 2015 Jan-Dec 2014

Average number of employees

Of which men in percent

Average number of employees

Of which men in percent

Parent company 6 83 8 63

Subsidiaries 101 84 113 83

Group Total 107 84 121 82

Of which Sweden 6 83 8 63

Of which United Kingdom 15 80 20 70

Of which Tunisia 86 85 93 86

Group Total 107 84 121 82


Average number of persons broken down for Board of Directors and Group Management


SEK 000,000s Number Of which men in percent

Number Of which men in percent

Parent company

Board of Directors 5 100 6 100

Group management 2 100 2 100

Group Total

Board of Directors 5 100 6 100

Group management 6 100 6 100

Salaries, remuneration, social contributions and pension costs


SEK 000,000s Salaries and other remuneration

Social security contributions

Of which pension costs

Salaries and other remuneration

Social security contributions

Of which pension costs

Sweden (Parent company) 6 3 1 11 4 1

Subsidiaries 54 8 3 43 5 3

Group Total 60 11 4 53 8 5

Total salaries and other compensation includes salaries, directors' fees and other compensation. PA

Resources has a defined-contribution pension plan.


NOTE 11 REMUNERATION AND OTHER BENEFITS; BOARD OF DIRECTORS OF THE PARENT COMPANY AND

SENIOR EXECUTIVES OF THE GROUP

Jan-Dec 2015

SEK 000,000s with one decimal Salary/

Board fees Remunerations Other benefits Pension costs

Other remunerations

Total

Jérôme Schurink (Former Chairman of the Board)

0.1 - -

- - 0.1

Nils Björkman (Board member) 0.1 -

- - - 0.1

Paul Waern (Chairman of the Board) 0.5

- - - - 0.5

Philippe Probst (Board member) 0.1

- - - - 0.1

Philippe Ziegler (Board member) 0.1

- - - - 0.1

Mark McAllister (President & CEO) 3.7 - 0.1 0.6 - 4.3

Other Group Management 14.3 - 0.2 1.5 0.1 16.2

Jan-Dec 2014

SEK 000,000s with one decimal Salary/

Board fees Remunerations Other benefits Pension costs

Other remunerations

Total

Sven A. Olsson (Former Chairman of the Board)

0.1 - -

- - 0.1

Jérôme Schurink (Chairman of the Board) 0.4 -

- - - 0.4

Nils Björkman (Board member) 0.3 -

- - - 0.3

Paul Waern (Board member) 0.3

- - - - 0.3

Philippe Probst (Board member) 0.3

- - - 0.0 0.3

Philippe Ziegler (Board member) 0.3

- - - - 0.3

Mark McAllister (President & CEO) 3.4 - 0.1 0.5 - 3.9

Other Group Management 12.9 - 0.2 1.4 4.2 18.8

The CEO had a base salary of GBP 0.3 million (0.3), approximately SEK 3.7 million, in 2015. Other

Group Management consists of five persons. All pension costs for CEO and the management team

are defined contribution based. Other benefits relates to company car benefits or compensation for

company cars.

The long term incentive programs introduced for 2014 was cancelled early 2015. No payments were

made under the program and there is no outstanding liability arising from this program. The short

term incentive program extended by the board in 2014 from 12 months to 18 months, i.e. to include

also the second quarter 2015, was cancelled as well in 2015. No payments were made under the

program and there is no outstanding liability arising from this program. At the Extra General Meeting

held 27 October 2015 it was decided to approve the Board´s proposal to introduce a Management

Incentive program. The incentive program is part of the reorganisation plan, presented to PA

Resources´ creditors and is also a presumption to conclude the reorganisation of the company.

Compensation to board members 2015 represent 75 percent of board fees as decided by the Annual

General Meeting 2015 and 25 percent of the fees decided by the Annual General Meeting 2014. The

CEO receives no board fee.


NOTE 12 FINANCIAL INCOME AND EXPENSES

Exchange gains and losses are reported net in the income statement for the Group and Parent

company. Other financial items within Total financial income for year 2015 are entirely attributable

to the recognised fair value of interest-bearing loans and borrowings and other liabilities in

connection with the composition plan.

Group Parent


SEK 000,000s 2015 2014 2015 2014

Interest income 1 3 124 103

Exchange gains - - 29 324

Other financial items 2,061 0 1,909 34

Total financial income (net) 2,061 3 2,061 460

Interest expense -102 -256 -96 -236

Exchange losses -21 -87 - -

Other financial items -74 -25 -61 -61

Total financial expenses (net) -197 -368 -157 -297

Of the year´s total financial income in the Parent company, SEK 123 million (952) refers to income

from Group companies.

Of the year´s total financial expenses in the Parent company, SEK 0 million (580) refers to expenses

from Group companies.

NOTE 13 INCOME TAX

The tax charge for the years 2015 and 2014 pertains to the components reported in the tables below.

The tables also show deferred tax assets and liabilities as at 31 December 2015 and 2014. The Group

operates in a number of countries and tax systems that have different corporate tax rates to those in

Sweden. The corporate tax rates within the Group vary between 22 percent and 75 percent.

Group Parent


Current income tax (SEK 000,000s) 2015 2014 2015 2014

Current income tax relating to:

Current income tax

Current income tax for the year -4 -92 - -

Adjustment of income tax prior year - 10 - -

-4 -82 - -

Deferred income tax

Origin and reversal of temporary differences 470 160 0 0

Adjustment of deferred income tax prior year 38 -3 - -

508 156 0 0

Total income tax reported in the income statement 504 74 0 0


Group Parent


Reconciliation of effective income tax (SEK 000,000s) 2015 2014 2015 2014

Profit before tax 275 -3,032 1,139 -2,659

Income tax expense according to applicable tax rate 22.0 percent (22.0 percent) in Sweden

-61 667 -251 585

Adjustment for tax conditions and tax rates in other countries 335 446 - -

Tax effect Termination farm-out agreement Tunisia 17 -366 - -37

Non-deductible income statement items tax effect -16 -1,272 -263 -670

Non-taxable income statement items 108 1,251 - 82

Tax effect RBL enforcement 90 - 94 -

Tax effect Fair valuation debt 453 - 420

Temporary differences and deficiencies for which deferred income tax has not been accounted for

-339

-620 -

-

De-recognition deferred tax assets in prior year -122 -92 - -

Non-recognized deferred tax asstes on current year's loss - 53 - 40

Adjustment of income tax prior year 38 7 - -

Other 0 0 - -

Total income tax 504 74 0 0

Group balance

sheet Group income

statement

Parent balance sheet

Parent income statement

31 Dec 31 Dec Jan-Dec

Jan-Dec

31 Dec 31 Dec Jan-Dec

Jan-Dec

Deferred tax liabilities (net) (SEK 000,000s)

2015 2014 2015 2014

2015 2014 2015 2014

Deferred tax referred to participating interests in oil fields

- 535 453 200

- - - -

Deferred tax referred to oil sales 0

2 2 15

- - - -

Deferred tax referred to convertible bond - - - 0

- - - 0

Tax losses carry forward -15 -0 15 -81

- - - -

Deferred tax on other temporary differences

6 6 - 21

- - - -

Total deferred tax liabilities (net) -9 543

- -

Deferred tax income, net

470

156

-

-

0

Deferred tax expenses, net

Accumulated losses carried forward in the Group amounted to SEK 2,039 million (1,909), and in the

Parent company to SEK 320 million (736).


NOTE 14 EXPLORATION AND EVALUATION ASSETS AND OIL AND GAS PROPERTIES

Group Group

SEK 000,000s Exploration and

evaluation assets Oil and gas properties

Exploration and evaluation assets & Oil and gas

properties

At 1 January 2014 4,760 5,337 -

Investments 139 25 -

Termination farm-out agreement 15 2,589 -

Disposals -141 -3,790 -

Reclassifications -70 92 -

Exchange rate differences 913 1,061 -

At 31 December 2014 5,616 5,514 -

Investments - - 40

Disposals - - -1,320

Reclassifications -5,616 -5,514 11,130

Exchange rate differences - - 642

At 31 December 2015 - - 10,491

Depreciation, amortisation and write-downs

At 1 January 2014 -1,109 -4,643 -

Termination farm-out agreement - -2,589 -

Depreciation charge for the year - -195 -

Write-downs for the year -1,701 -290 -

Disposals 129 3,790 -

Reclassifications - -1 -

Exchange rate differences -424 -946 -

At 31 December 2014 -3,105 -4,872 -

Revaluation asset retirement obligations - - -546

Depreciation charge for the year - - -40

Write-downs for the year - - -1,969

Disposals - - 615

Reclassifications 3,105 4,872 -7,977

Exchange rate differences - - -434

At 31 December 2015 - - -10,352

Net book value:

At 31 December 2014 2,510 642 -

At 31 December 2015 - - 140



abandonment costs at the lowest of either carrying value or fair value less cost to sell (FVLCS), see

note 2 Accounting principles etc. Exploration and evaluation assets as well as oil and gas properties

have been combined into one category named exploration and evaluation assets & oil and gas

properties. Provision for abandonment earlier accounted for as provisions are, as a consequence of


not applying going concern, now included net in evaluation and exploration and evaluation assets &

oil and gas properties.

Assessed market valuation, see Note 16 Impairment testing exploration and evaluation assets & oil

and gas properties, impacted income statement with net SEK -1,969 million accounted for as

impairment losses.

The preceding year´s impairment losses in exploration and evaluation assets as well as in oil and gas

properties, totalling SEK 1,991 million was attributable to; impairment test due to significant fall in

current and expected oil prices of SEK 1,957 million. Other impairment losses recognised in 2014

totalling SEK 34 million pertain to the disposal of Q7/Q10a in the North Sea region of SEK 18 million

and to a write-down of SEK 16 million in the North Africa region.

In 2014 a receivable of SEK 22 million was reclassified from accounts receivable and other receivables

to exploration and evaluation assets. The accounting effect from the terminated farm-out agreement

in Tunisia was a net increase of SEK 2 million in exploration and evaluation assets and SEK 0 million in


For more information, see Note 16 Impairment testing of exploration and evaluation assets & oil and

gas properties. During the year as well as for the preceding year no borrowing costs have been

capitalized. The Parent company has no exploration and evaluation and evaluation assets & oil and

gas properties.


NOTE 15 MACHINERY AND EQUIPMENT

Group Parent

SEK 000,000s Machinery and equipment Machinery and equipment

At 1 January 2014 31 1

Additions 2 -

Termination farm-out agreement 13 -

Disposals -6 -

Exchange rate differences 6 -

At 31 December 2014 46 1

Additions 0 -

Disposals -7 -

Exchange rate differences 3 -

At 31 December 2015 42 1

Depreciation, amortisation and write-downs

At January 1 2014 -27 -1

Termination farm-out agreement -11 -

Depreciation charge for the year -1 -

Disposals 6 -

Reclassifications 1 -

Exchange rate differences -5 -

At 31 December 2014 -38 -1

Depreciation charge for the year -2 -

Write-downs for the year -3 -

Disposals 7 -

Exchange rate differences -2 -

At 31 December 2015 -38 -1

Net book value:

At 31 December 2014 8 -

At 31 December 2015 4 -


NOTE 16 IMPAIRMENT TESTING EXPLORATION AND EVALUATION ASSETS AND OIL AND GAS PROPERTIES

Financial year 2015 (Non-going concern)



abandonment costs at the lowest of either carrying value or fair value less cost to sell (FVLCS), see

note 2 Accounting principles etc. Exploration and evaluation assets as well as oil and gas properties

have been combined into one category named exploration and evaluation assets & oil and gas

properties. Provision for abandonment earlier accounted for as provisions are, as a consequence of

not applying going concern, now included net in evaluation and exploration and evaluation assets &


Market valuation of the assets are based on sales values net of transaction costs and impacted

income statement with net SEK -1,969 million accounted for as impairment losses.

Financial year 2014 (Going concern)

The cash generating units correspond to licence rights, production sharing agreements or equivalents

owned by PA Resources. A cash generating unit thus usually corresponds to each acquired asset in

each country in which PA Resources carries on exploration and production operations.

A period of use from 2015 through 2044 has been utilised for assessment of the value-in-use per

cash generating unit.

The method of testing for impairment of assets in production is to calculate the present value of

future estimated cash flows which are compared to the book values. The main variables used are as

follows:

• Discount rate before tax, interval of 9.0%–11.0%

• Tax rate: 40%–75%

• Royalty rate: 2%–16%

• Oil price is expressed in the forward price curve for oil with an opening price of USD 55 per barrel

of oil, which thereafter increases to USD 68 per barrel of oil. From 2018 onwards, a 2.5% price

inflation is applied.

• Forecast period: Estimated cash flows based on management expectations for the period 2015-

2044.

Each of the company’s core assets are evaluated by applying the most current knowledge of

production profile estimates, operating cost profiles, investment costs and macroeconomic factors in

a Discounted Cash Flow model, taking in to account the fiscal terms of each individual licence. For

less mature assets, in certain cases, valuations are based on a price multiple for risked estimated

volumes in place.

Discounted cash flows or multiple valuations generate asset values that are put in relation to current

carrying amounts (book values), whereby an assessment is made whether any impairment is

required.

The assumptions used for both methods have been based partly on historical experience of previous

years’ impairment testing processes and partly on external sources in the form of technical data,

industry information, third party valuations, etc. The book values for exploration and evaluation


assets as well as oil and gas properties per operating segment for which impairment testing was

performed are shown below.

The large impairment needs are due to the revaluation of the Company’s assets based on a

significantly lower oil price outlook following the steep decline during the second half of 2014.

Exploration and evaluation assets as well as oil and gas properties per operating segment for

impairment testing

31 Dec 2014

SEK 000,000s North Africa

West Africa North Sea Other Total

Non-current assets for write-down assessment

2,734 1,878 531 - 5,143

Write-downs for the year -1,084 -819 -88 - -1,991

Total (net) 1,651 1,059 442 - 3,152

See Note 14, Exploration and evaluation assets and oil and gas properties, for information about

impairment losses for 2014. Impairment tests on other assets showed that the calculated value-in-

use per cash generating unit was higher than the book value.

NOTE 17 INVENTORIES

Group

SEK 000,000s 31 Dec 2015 31 Dec 2014

At 1 of January 41 15

Acquired on acquisition - 24

Purchase - -

Used in production - -1

Exchange differences -1 3

At 31 December before adjustment for obsolescence 40 41

Provisions for obsolescence - -4

At 31 December 40 37

The Parent company has no inventory.


NOTE 18 ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

Group Parent

SEK 000,000s 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014

Accounts receivable non-interest bearing 4 32 - -

Receivables against other related parties 2 17 - -

Other current receivables 27 85 1 2

Prepaid insurance premium 4 0

- 0

Prepaid leasing fees - - - -

Prepaid rent 1 1 0 0

Accrued interest income - 1 - 1

Prepaid license costs 0 0 - -

Other prepaid expenses and accrued income 1 16 0 0

Accrued income over/- or underlift position 10 53 - -

Total accounts receivable and other receivables 50 205 1 4

Accounts receivable are not interest-bearing and are generally due for payment within 30–60 days.

Other receivables and accrued income are generally due in 15–90 days.

NOTE 19 INTEREST-BEARING LOANS AND BORROWINGS

As per 2 October, 2015 a qualified majority of the company’s creditors choose to support the

proposed composition plan put forward by PA Resources AB and the administrator at the

composition proceedings at the Stockholm District Court. Following the decision of the board to

prepare the Annual report in accordance with a non-going concern, PA Resources, effective 31

December, 2015 has derecognised its interest-bearing loans and borrowings accounted for at

amortised cost and thereafter recognised its interest-bearing loans and borrowings at fair value and

in accordance with the terms of the adopted composition plan. Total amount accounted for as

Current interest-bearing loans and borrowings in accordance with the composition plan, as per 31

December 2015, amounted to SEK 99 million. For more information, see Note 2 Accounting principles

etc.

Reorganisation notes

PA Resources reached during the second quarter an agreement with its major creditors to provide

the company with funding. The funding, which PA Resources secured during the reorganisation

enables the Group to borrow money through the issue of Reorganisation Notes for a principal

amount up to 15 MUSD in aggregate. The Reorganisation Notes have a subscription price of 50% of

their face value, which means that the maximum amount of funds that can be received is 7.5 MUSD.

The Reorganisation Notes are issuable in tranches, with the issue of each tranche being subject to

the satisfaction of certain conditions. As per 31 December 2015, Reoganisation Notes with an

aggregate principal amount of 10 MUSD have been issued. The Reorganisation Notes bear an interest

at a rate of 5% per year on its face value, compounded monthly. The Reorganisation Notes have

priority over PA Resources´ existing interest-bearing loans and borrowings.

Working capital facility

On 31 March 2014, PA Resources agreed with its main shareholder, Gunvor S.A., to interim financing

via a working capital facility of maximum USD 50 million. Per 31 December 2015, USD 28 million (28)

had been drawn on this facility. The Group has pledged the shares of one of its Tunisian subsidiaries,

in which some of the Group´s assets are held, as security for the facility.


Followed the agreed composition plan, the WCF security cash flow will be distributed as follows:

(i) amounts up to and including 10 MUSD: 25% goes to Gunvor and 75% goes to PA Resources for

further distribution according to the composition plan,

(ii) amounts in excess of 10 MUSD up to and including 28 MUSD: 100% goes to Gunvor,

(iii) amounts in excess of 28 MUSD: 100% goes to PA Resources for further distribution according to

the composition plan.

Also in accordance with the composition plan an interest rate shall be payable of 3% a year, as from

27 March 2015, until payment is made. According to the composition plan interest is subordinate to

the principal amount, i.e. interest is paid from Available cash flow after that the principal has been

paid in full. Outstanding claims for principal and accrued interest shall be converted to shares in PAR

no later than 27 December 2017.

Bond loans

PA Resources has two bond loans: NOK 675 million (675) nominal and SEK 750 million (750) nominal.

Both bonds are issued by the Parent company and both are unsecured. The NOK is not listed on any

exchange, whereas the SEK bond is listed on Nasdaq Stockholm, though delisted at 1 February 2016.

For more information see Note 28, Significant events after the closing date. Followed the agreed

composition plan interest shall be payable in accordance with the plan at a rate of 3% a year, as from

27 March 2015, until payment is made. According to the composition plan interest is subordinate to

the principal amount, i.e. interest is paid from Available cash flow after that the principal has been

paid in full. Outstanding claims for principal and accrued interest shall be converted to shares in PAR

no later than 27 December 2017. In accordance with the agreed composition plan all Financial

covenants earlier attached to both the SEK- and NOK bonds were removed.

Reserve based lending facility

As per 7 April Gunvor Group, PA Resources´ largest creditor and shareholder demanded repayment

of amounts due under the RBL facility. PA Resources also received notice that Gunvor Group had

taken action to enforce its security under the RBL, shares in its wholly-owned subsidiary, Osborne

Resources Ltd. Osborne owns interests in Equatorial Guinea, the producing Aseng and Alen fields,

and the Block I exploration interest. The effect of this enforcement action is that Osborne is no

longer a subsidiary of PA Resources and has become a subsidiary of Gunvor Group. For more

information, see Board of Director´s report.

Amortised interest-bearing loans and borrowings

During 2015 no interest-bearing loans and borrowings was amortised. During 2014 PA Resources

repaid the remaining SEK 93 million of the convertible bond loan. In addition, NOK 135 million was

amortised according to plan on an amortising bond loan with an original nominal value of NOK 900

million.

Overdraft facilities

Neither the Group nor the Parent company has any overdraft facilities as per 31 December 2015

(2014).


Current interest-bearing loans and borrowings as per 31 December 2014.

Group Parent

SEK 000,000s 31 Dec 2014 31 Dec 2014

Current Interest-bearing loans and borrowings

Bond 675 MNOK nominal 684 684

Bond 750 MSEK nominal 737 737

Working capital facility 28 MUSD 219 219

Reserved based lending facility 84.5 MUSD 660 391

Deferred interest payments 168 160

Total 2,468 2,191

NOTE 20 PROVISIONS

SEK 000,000s 1 jan 2015

Acquired Utilized Time

Value Paid

Exchange difference

Revaluated

Group as per 31 Dec

2015

Whereof short-

term

Whereof referred to

Parent company

Asset retirement obligation costs

535 - - 13 - -2 -546 - - -

Tax related provisions 118 - - - - 7 -38 87 - -

Other provisions 10 - - - - 1 0 11 1 -

Total 663 - - 13 - 5 -583 98 1 -

Asset retirement obligation costs

191 295 - 9 - 40 - 535 - -

Tax related provisions 51 - - - - 10 57 118 - -

Other provisions 10 - -1 - - 2 0 10 1 -

Total 252 295 -1 9 - 52 57 663 1 -

Asset retirement obligations

Asset retirement obligations are up to year-end 2014 reported as provisions based on the present

value of the costs which are expected to be required to fulfill the obligation, using the estimated cash

flows. The discount rate used takes into account the time value of money and the risk specifically

relating to the liability, as assessed by the market. Reported asset retirement obligations relate to the

Group’s oil and gas properties in region North and West Africa. Main part of the outflow for asset

retirement obligations is expected to occur in the first half of 2020. Acquired asset retirement

obligation for 2014 in the above table origins from the terminated farm out agreement.

Revaluated asset retirement obligation for 2015 entirely origins from a reclassification to exploration

and evaluation assets & oil and gas properties, as a consequence of not applying going concern. For

more information, see Note 2, Accounting principles etc.

Tax-related provisions

As at 31 December 2015, tax-related provisions amounted to SEK 87 million (118) and relate to

estimated income tax costs and tax surcharges attributable to subsidiaries in region North and West

Africa. The sum reserved was reported as an income tax expense in the income statement and as a

provision in the balance sheet.


NOTE 21 ACCOUNTS PAYABLE AND OTHER LIABILITIES

Group Parent


Accounts payable non-interest bearing 9 100 4 1

Liabilities Group companies - - - 22

Liabilities against other related parties 12 8 - -

Other current liabilities 24 112 1 0

Accrued vacations pay 0 1

0 1

Accrued interest expenses 0 48 0 48

Accrued operating and drilling costs 53 46 - -

Other accrued expenses and prepaid income 12 262 19 7

Total accounts payable and other liabilities 111 578 24 79

Accounts payable and other short-term liabilities are not interest-bearing, have a short expected

term and are recognised at the nominal amount with no discounting. Accounts payable usually fall

due within 30 days and other short-term liabilities within a year.

NOTE 22 FINANCIAL INSTRUMENTS

Financial assets and liabilities by valuation category – Group

SEK 000,000s Loans end

receivables


Financial liabilities at

fair value

Total carrying amount

Fair value Level

Fair value*

2015

Financial assets

Current assets

Other financial assets 1 - - 1 1 Level 3

Accounts receivable and other receivables 16 - - 16 16 **

Cash and cash equivalents 67 - - 67 67 **

Total 84 - - 84 84

Financial liabilities

Current liablities

Current interest bearings loans and liabilities - - 99 99 99 ***

Accounts payable and other liabilities - 74 - 74 74 **

Total - 74 99 173 173


Loans end receivables



fair value


Fair value Level

Fair value*

2014

Financial assets

Non-current assets

Other financial assets 1 - - 1 1 Level 3

Total 1 - - 1 1

Current assets

Accounts receivable and other receivables 102 - - 102 102 **


Total 250 - - 250 250


Non-current liabilities

Interest bearings loans and borrowings - - - - - Level 2

Other non-interest bearing liabilities - 30 - 30 30 **

Total - 30 - 30 30

Current liablities

Current interest bearings loans and liabilities - 2,468 - 2,468 1,441

Level 1/2

Accounts payable and other liabilities - 202 - 202 202 **

Total - 2,670 - 2,670 1,643

* For a definition of the levels in the fair value hierarchy that fair value is attributable to, see Note 2

Accounting principles etc, section ”Financial instruments, Fair value measurement.”

** For these items, book value is considered to approximate fair value.

*** Interest-bearing loans and borrowings are accounted for at fair value and in accordance with the

agreed composition plan, see Note 2 Accounting principles etc.

Financial assets comprise deposits for leased drilling equipment. Accounts receivable and receivables

from partners are not discounted due to their short term. Accrued interest income and accrued oil

income are also included. Cash and cash equivalents comprise liquid funds.

Non-current liabilities and current liabilities comprise long- and short-term interest-bearing loans and

borrowings. Accounts payable and payables to partners are not interest-bearing and are not

discounted due to their short term. Accrued interest expense and accrued exploitation and drilling

expenses are also included.

Valuation method for fair value

For 2014 fair value of the Group’s interest-bearing borrowings and loans was determined using DCF

method by using discount rate that reflects the issuers borrowing rate as at the end of the reporting

period. For 2015, see above.


Financial assets and liabilities by valuation category – Parent company


receivables



fair value


Fair value Level

Fair value*

2015

Financial assets

Current assets

Receivables Group companies 98 - - 98 98 Level 3


Total 104 - - 104 104


Current liablities

Account payables - 4 - 4 4 **

Current interest bearings loans and liabilities - - 99 99 99 ***

Accrued expenses and prepaid oncome - 0 - 0 0 **

Total - 4 99 103 103

2014

Financial assets

Non-current assets

Receivables Group companies 808 - - 808 808 Level 3

Total 808 - - 808 808

Current assets

Prepaid expenses and accrued income 1 - - 1 1 **


Total 88 - - 88 88


Current liablities

Liabilities Group companies - 22 - 22 22 Level 3

Account payables - 1 - 1 1 **

Current interest bearings loans and liabilities - 2,191 - 2,191 1,164 Level 2

Accrued expenses and prepaid income - 48 - 48 48 **

Total - 2,262 - 2,262 1,235

* For a definition of the levels in the fair value hierarchy that fair value is attributable to, see Note 2,

Accounting policies, section ”Financial instruments, Fair value measurement.”

** For these items, the book value is considered to approximate fair value.

*** Interest-bearing loans and borrowings are accounted for at fair value and in accordance with the

agreed composition plan, see Note 2 Accounting principles etc.

Financial assets comprise interest-bearing receivables from Group companies. Receivables from

partners are not discounted due to their short term. Accrued interest income is also included. Cash

and cash equivalents comprise liquid funds.


Current liabilities comprise interest-bearing loans and borrowings. Accounts payable and payables to

partners are not interest-bearing and are not discounted due to their short term. Interest-bearing

liabilities to Group companies and accrued interest expenses are also included.

Valuation method fair value

For 2014 fair value of the Group’s interest-bearing borrowings and loans was determined using DCF

method by using discount rate that reflects the issuers borrowing rate as at the end of the reporting

period. For 2015, see above.

Result from financial assets and liabilities by valuation category – Group


receivables Other financial

liabilities

Total result from financial

assets and liabilities

Result from non-financial


Total result

2015

Net financial items

Interest (income/expenses) 0 -102 -101 -101

Changes in value (net gains/losses) - 2,000 2,000 -13 1,987

Exchange rate changes (net gains/losses) 8 -29 -21 -21

Total 8 1,870 1,877 -13 1,864

2014

Net financial items

Interest (income/expenses) 0 -253 -253 - -253

Changes in value (net gains/losses) - -15 -15 -10 -25

Exchange rate changes (net gains/losses) 17 -104 -87 - -87

Total 17 -373 -356 -10 -365

Financial assets and liabilities had no impact on the Group’s operating profit as set out in the

statement above.

Result from financial assets and liabilities by valuation category - Parent company


receivables Other financial

liabilities

Total result from financial


Result from non-financial


Total result

2015

Net financial items

Interest (income/expenses) 123 -96 27 27

Changes in value (net gains/losses) 1,849 1,849 1,849

Exchange rate changes (net gains/losses) 63 -34 29 29

Total 186 1,719 1,905 - 1,905

2014

Net financial items

Interest (income/expenses) 100 -234 -134 - -134

Changes in value (net gains/losses) - -15 -15 -11 -27

Exchange rate changes (net gains/losses) 291 33 324 - 324

Total 391 -216 175 -11 163

Financial assets and liabilities had no impact on the Parent company’s operating profit as set out in

the statement above.


NOTE 23 SHARES IN SUBSIDIARIES

The Parent company’s shares in the respective segments/region are categorised below.

As a result of the enforcement of the RBL security, Osborne Resources Ltd´s balance sheet as well as

PA Resources AB´s shares in the company was deconsolidated as per 31 March 2015.

Subsidiary

Corporate identity number Domicile Legal entity Currency Share of equity

Book value in parent

company (SEK 000,000s)

Segment North Africa

Hydrocarbures Tunisie Didon Ltd

C61581 Malta Limited

company EUR 100 0

Hydrocarbures Tunisie El Bibane Ltd

54230F Jersey Limited

company GBP 100 0

Hydrocarbures Tunisie Corp 79423B Bahamas Limited

company USD 100 0

PA Resources Overseas Ltd 3,313,969 Great Britain Limited

company GBP 100 0

PA Resources Tunisia Pty Ltd

002410102 Australia Limited

company AUD 100

Segment West Africa

PA Energy Congo Ltd 1,015,422 Br. Virgin

Islands Limited

company USD 100 0

Pa Resources Congo Sa 09 B 846 Republic of

Congo Limited

company CFA 100

Segment North Sea

PA Resources Denmark ApS 31080037 Denmark Limited

company DKK 100 0

PA Resources UK Ltd 5152884 Great Britain Limited

company GBP 100 28

PA Resources North Sea Ltd

5470844 Great Britain Limited

company GBP 100

PA resources E&P Services LTD

07824915 Great Britain Limited

company GBP 100 0

Total 28

Parent company acquisitions in shares in subsidiaries.

Parent company acquisitions in shares in subsidiaries (SEK 000,000s)

At 1 January 2015 acquisition cost 241

Capital contribution -

Enforcement of RBL security -18

Impairment losses -195

Reversed impairment losses -

At 31 December 2015 acquisition cost 28


Note 24 Pledged assets and contingent liabilities

Group Parent


Shares in subsidiaries 100 725 28 18

Total pledged assets 100 725 28 18

Total contingent liabilities - - - -

As per 31 December 2015, pledged assets amounted to SEK 100 million for the Group and SEK 28

million for the parent company. The decrease compared to year-end 2014 is associated with lower

assets values as a result of the changed valuation principles. The decrease is also related to the

enforcement of the RBL security and transfer of shares in Osborne Resources Ltd to Gunvor Group.

The contingent liability amounted to SEK 0 million for both Group and the parent company. Total

pledged assets and contingent liabilities for the Group and the parent company as per 31 December

2015 compared with 31 December 2014 is shown in the table above. Liabilities with pledged

collateral see Note 19, Interest-bearing loans and borrowings.

Note 25 Result from participations in Group companies

2015 the Parent company wrote down intra-Group receivables amounting to net SEK -955 million

and shares in subsidiaries of SEK -195 million as a result of market valuation in PA Resources´

Exploration and evaluation assets & Oil and gas properties. Result from participations in group

companies includes a capital gain of SEK 427 million from the enforcement of the RBL security.

During 2014 the Parent company wrote down intra-Group receivables amounting to SEK 1,125

million and shares in subsidiaries of SEK 1,730 million mainly due to the impairment loss from the

significant fall in oil prices and the terminated farm out agreement in Tunisia. The Parent company

received dividend from subsidiaries totalling SEK 232 million.

Parent

Jan-Dec Jan-Dec

SEK 000,000s 2015 2014

Impairment losses Intercompany receivables -955 -1,125

Impairment losses participations in Group companies -195 -1,730

Dividend received -

232

Enforcement RBL security 427 -

Result from participations in Group companies -723 -2,623


NOTE 26 FINANCIAL RISK

In its operations, PA Resources is exposed to various types of financial risk. Financial risk arises when

refinancing and credit risks as well as changes in interest rates and exchange rates affect the Group’s

operating profit, cash flow and value. Financial risk is managed and controlled in accordance with the

strategy adopted by the company’s Board of Directors.

Financing and Liquidity risk

PA Resources’ operations require funding for maintenance, development and exploration of the

Group’s licenses and assets. Refinancing risk is defined as the risk that financing or refinancing is

troublesome or costly to secure. At the start of 2015 PA Resources was unable to service its debts

and as a result came to an agreement with its creditors to defer payments while exploring

refinancing options. The failure to reach a refinancing solution resulted in the board of directors

applying for financial reorganisation. The Group’s total outstanding interest-bearing loans and

borrowings amounted to SEK 99 million (2,468) on 31 December 2015. For more information, see

Note 19, Interest-bearing loans and borrowings.

Fall due profile on PA Resources Group financial liabilities

31 Dec 2015 31 Dec 2014

SEK 000,000s < 1 year 1-2 years 2-5 years >5 years < 1 year 1-2 years 2-5 years >5 years

Interest-bearing loans and borrowings 99 - - - 1,434 1,394 - -

Accounts payable and other liabilities 111 - - - 100 - - -

Total 210 - - - 1,534 1,394 - -

The table above shows for current period values recognised at fair value and in accordance with the

composition plan. For previous period the table shows future undiscounted cash flows. The variable

interest rate on liabilities are as per 31 December 2014 are assumed until maturity.

Non-going concern

Effective December 31, 2015 the board of PA Resources adopted the assumption of a non-going

concern in preparing the Annual report. The decision was based on the absence of agreed financing

for 2016 and beyond, for. For more information, see Note 2, Accounting principles etc.

Oil price risk

The price of oil and gas is set in the world market and to a significant extent is dependent on various

factors that the Group is unable to affect. Oil and gas prices have fluctuated substantially over the

last few years and many indicators point to continuing volatility in the future. In 2015, PA Resources

conducted no hedging of its production and, at year-end, PA Resources held no financial derivatives

for hedging oil prices. Under the assumption of constant 2015 production, 613 (1,147) kbbl and that

the average USD/SEK exchange rate for the year of 8.44 (6.86) remains the same, a movement in the

oil price of USD 10 per barrel has a positive/negative effect on the Group’s revenues of SEK 52 million

(79).

Interest rate risk

Interest rate risk is the risk of market interest rates moving in such a manner that PA Resources’ net

interest expense is negatively affected. The effect of a change in interest rates on the Group’s

operating profit depends on the loans and the investments fixed term and on the proportions of

variable and fixed interest rates. Normally, the interest rates of interest-bearing liabilities vary from

fixed interest to 3-month interest rates. Followed the agreement with creditors to defer payments


including interest as well as the approved and adopted composition plan, no interests have been

paid during the 2015.

Foreign currency risk

PA Resources is exposed to fluctuations in the foreign exchange markets, as fluctuations in exchange

rates can negatively affect operating profit, cash flow and equity. The majority of PA Resources’

assets are attributable to international oil and gas discoveries valued in USD and which generate

revenues in USD. The Group can hedge these assets naturally by borrowing in USD. The Group has

not utilized any currency swap contracts in current or previous year.

Transaction risk

Transaction exposure arises in cash flow when invoicing or the costs of invoiced goods and services

are not in local currency. The majority of PA Resources’ revenues and expenses are in USD - the

former from the sale of oil and gas in the international market, and the latter through operating

costs, rental costs, etc. Discrepancies - mainly pertaining to costs in local currencies in the Group’s

subsidiaries - affect the Group’s operating profit. Expected or budgeted flows are not hedged at

present.

Translation risk

Exchange rate changes affect PA Resources in conjunction with the translation of the income

statements of foreign subsidiaries to SEK, as the Group’s operating profit is affected and when net

assets in foreign subsidiaries are translated to SEK which can negatively affect the Group’s equity. PA

Resources does not hedge its translation exposure, and fluctuating foreign exchange rates could

negatively affect the operating profit and financial position of the Group.

Credit risk

Credit risks in financial operations

Credit risk exposure arises from the investment of cash and cash equivalents and from counterparty

risk attributable to trading in derivatives. PA Resources strives to establish ISDA agreements with its

counterparties in transactions with derivatives, which means that if a counterparty enters into

liquidation, liabilities are offset against assets. At the balance sheet date, 31 December 2015, cash

and cash equivalents and financial investments amounted to SEK 67 million (148).

Credit risks in operations

PA Resources is also exposed to the risk of not receiving payment from customers for deliveries of oil

and gas. The Group normally delivers oil in large quantities in liftings, whereby a tanker load,

depending on the oilfield, corresponding to between 60,000 and 950,000 barrels, is delivered against

payment within 15–45 days. These deliveries are made only to a small number of recognised

creditworthy parties, primarily major international oil and gas companies and traders. The Group’s

deliveries are governed by annual contracts, and Group policy is to check the creditworthiness of all

customers who wish to do business on credit. In addition, receivable balances are monitored on an

ongoing basis, with the result that the Group’s exposure to bad debts is minor. In past years the

Group has had only very few minor bad debt losses, and had none whatsoever during the past year.

Given its customer structure and past experience, the Group has assessed that credit insurance need

not be taken out.


Below is an analysis of the Group’s total outstanding accounts receivable and other receivables over

time as per balance sheet date, along with provisions for bad debts. As at 31 December 2015, total

provisions for bad debts amounted to SEK 1 million (1).

Group

SEK 000,000s 2015 2014

Receivables past due but not recognised as impairment losses:

Total exposure Fair value

Total exposure

Fair value

Not overdue 45 45 204 204

past due < 30 days 0 0 - -

past due 30 - 60 days 1 1 0 0

past due 60 - 90 days 3 3 - -

past due 90 - 120 days - - - -

past due > 120 days 1 1 1 1

Total 50 50 205 205

Group

Provisions for bad debts (SEK 000,000s) 2015 2014

Ingoing balance amount as per 1 January -1 -1

Reversed provisions 0 -

Exchange differences -0 0

Total provisions as per 31 December -1 -1

NOTE 27 RELATED PARTY DISCLOSURE

Transactions entered into between the Group, independently of one another, and related parties “at

arm’s length” are described below:

Related party transactions between the Parent company PA Resources AB and its subsidiaries and

between the subsidiaries themselves relate both to third party costs which are invoiced on in full

without any surcharge and to general costs and payroll costs in the home country which are invoiced

on the basis of established Transfer Pricing Agreements within the Group. Investments in subsidiaries

are primarily financed via external borrowing by the Parent company. Outstanding loans between

the Parent company and subsidiaries are regulated on the basis of established Transfer Pricing

Agreements and loan agreements within the Group. For information on the Group companies and

the Parent company’s shareholding in subsidiaries refer to Note 23, Shares in subsidiaries.

Gunvor Group´s ownership in PA Resources was 29.7 percent as per 31 December 2015. The

company serves as an off-taker of crude oil and PA Resources has a Working capital facility with the

company, see note 19, Interest-bearing loans and borrowings. The trading of crude oil and the terms

of the Working capital facility is in accordance with market conditions.

During the financial year the usual directors’ fees as resolved by the Annual General Meeting were

paid to the Board. In addition, Board members were reimbursed for expenses. For further

information on salaries, directors’ fees, pension expenses, sharebased remuneration and other

benefits to related parties refer to Note 11, Remuneration and other benefits: Board of Directors and

senior executives of the Parent company.


NOTE 28 SIGNIFICANT EVENTS AFTER THE CLOSING DATE

PA Resources delist its share

PA Resources share´s last day of trading at Nasdaq Stockholm was 15 January 2016. The decision

notified by Nasdaq was based on PA Resources application to delist submitted 20 November 2015.

PA Resources delist its SEK denominated bond

PA Resources SEK denominated bond´s last day of trading at Nasdaq Stockholm was 1 February 2016.

The decision notified by Nasdaq was based on PA Resources application to delist submitted 25

January 2016.

Drilling Results on Baobab Marine-1 Well at Mer Profonde Sud

During February 2016 final results came from the Baobab Marine-1 commitment well drilled in the

Mer Profonde Sud Block offshore the Republic of Congo. Although good quality sands were present,

no hydrocarbons were encountered, suggesting lack of communication with the known oil source.

PA Resources divests its North Sea portfolio

As per 5 February 2016 PA Resources signed an agreement with Petrogas E&P regarding the sale of

its affiliates PA Resources UK Ltd and PA Resources Denmark ApS including the Danish license 12/06

which holds the Broder Tuck and Lille John discoveries, as well as its exploration licences in the UK,

Germany and the Netherlands. PA Resources completed the transaction with Petrogas E&P

announced as per 24 March 2016 and payment for the transaction has been received. Included in the

transaction is also a highly uncertain and contingent consideration based on future oilprice


PA Resources divests its North Africa portfolio

As per 9 May 2016 PA Resources AB announced that its wholly owned subsidiaries, PA Resources

Tunisia Limited, Hydrocarbures Tunisie Didon Limited, Hydrocarbures Didon Jersey Limited and

Hydrocarbures Tunisie Corporation, executed a sale and purchase agreement with ETAP, The

Tunisian national oil company, to sell their entire licence interests onshore and offshore Tunisia, to

ETAP. The transaction is expected to complete within the next month.

Use of proceeds from divested assets

Followed above divestments PA Resources will have no assets left. The proceeds from the sale will be

used to repay creditors in accordance with the reorganisation plan adopted in October 2015. As per

release date of this annual report category B** has been repaid in full while category A* has agreed

to delay part of payment until completion of the North Africa transaction, but is expected to

ultimately receive full payment. Category C *** are expected to receive a significantly lower

proportion than its nominal values. The liabilities are thus recognised at the values expected to be

paid. Given that the transaction in North Africa completes there will also be sufficient funds to

implement the solvent wind down, which given above is the Board´s intention to suggest for the

shareholders.

* Category A (Reorganisation notes) is described in detail in section 8.4.3.1 and 6.7 of the Reorganisation Plan.

** Category B (Creditors with principal claims below 100 000 SEK as well as above 100 000 SEK without specific agreement) is described in

detail in sections 8.4.3.1, 8.2 and 8.3 of the Reorganisation Plan. Category B does not include bondholders as explained in section 6.4.

*** Category C (Creditors above 100 000 SEK with specific agreements) is described in detail in section 8.4 in the Reorganisation plan.


BOARD ASSURANCE The Board of Directors and President & CEO declare that the consolidated financial statements have

been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by

the EU, and give a true and fair view of the Group’s financial position and results of operations. The

Annual Report has been prepared in accordance with generally accepted accounting principles and

gives a true and fair view of the Parent company’s financial position and results of operations. The

statutory Administration Report of the Group and the Parent company provides a fair review of the

Group’s and the Parent company’s operations, financial position and results of operations and

describes material risks and uncertainties facing the Parent company and the companies included in

the Group.

Stockholm 9 June 2016

Paul Waern

Chairman of the Board

Catharina Nystedt-Ringborg Mark McAllister

Board member President & CEO

Our audit opinion, which was issued on June 9, 2016, is modified.

We have neither recommended nor not recommended that the income statement and balance sheet

for the parent company and the group are adopted.

Ernst & Young AB

Björn Ohlsson

Authorised Public Accountant


AUDITOR´S REPORT

Documents

PA RESOURCES¤mmor/Årsstämma 2016/Annual Report... · On 7 April 2015 Gunvor exercised its security under the terms of the RBL ... (RBL) facility. Preparations were made for the