JX Energy Ltd. — Annual Report 2020

Jul 8, 2021

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Persta Resources Inc.

(incorporated under the laws of Alberta with limited liability)

(Stock Code: 3395)

ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED DECEMBER 31, 2020

The board (the ‘‘Board’’) of directors (the ‘‘Directors’’) of Persta Resources Inc. (the ‘‘Company’’) is pleased to announce the audited financial results of the Company for the year ended December 31, 2020 (the ‘‘Year End Results’’). This announcement is issued by the Company pursuant to Rule 13.09 of the Rules Governing the Listing of the Securities on The Stock Exchange of Hong Kong Limited and the Insider Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

Reference is made to the announcements of the Company dated March 19, 2021, March 26, 2021, March 29, 2021, March 31, 2021, April 16, 2021, April 30, 2021, May 17, 2021, May 28, 2021, June 15, 2021, June 22, 2021 and June 29, 2021 (collectively, the ‘‘Announcements’’) in relation to, among other things, the delay in the publication of the audited Year End Results and the despatch of the annual report for the year ended December 31, 2020. Unless otherwise specified, terms used herein have the same meanings as the Announcements.

As disclosed in the Announcements, until the Required Documents have been filed, the Company intends to continue to satisfy the provisions of the alternative information guidelines specified in NP 12-203 by issuing bi-weekly default status reports in the form of further announcements for so long as the Company remains in default of the financial statement filing requirement. In the event that the Company does not file the Required Documents on or before July 16, 2021, the ASC may impose an issuer cease trade order on the outstanding securities of the Company.

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The Board and its audit and risk committee have reviewed the Year End Results. Please see the attached announcement for further information.

By Order of the Board Persta Resources Inc. Yongtan Liu Chairman

Calgary, July 8, 2021 Hong Kong, July 8, 2021

As at the date of this announcement, the Board comprises of two executive Directors, being Mr. Yongtan Liu and Mr. Pingzai Wang; and three independent non-executive Directors, namely Mr. Richard Dale Orman, Mr. Peter David Robertson and Mr. Larry Grant Smith.

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Persta Resources Inc.

ANNUAL FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

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STATEMENT OF FINANCIAL POSITION

As at December 31, 2020

(Expressed in Canadian dollars)

Note Assets Current assets: Cash and cash equivalents 7 Accounts receivable 8 Prepaid expenses and deposits Total current assets Exploration and evaluation assets 9 Property, plant and equipment 10 Right of use assets 11 Total Assets Liabilities and Shareholders’ Equity Current liabilities: Accounts payable and accrued liabilities 12 Current portion of long term debt 13 Current portion of lease liabilities 11 Decommissioning liabilities 14 Total current liabilities Other liabilities 15 Lease liabilities 11 Long term debt 13 Decommissioning liabilities 14 Total liabilities	As at December 31, 2020 1,071,573 1,986,850 480,793 3,539,216 6,974,847 31,797,573 2,355,297 44,666,933 8,898,738 23,790,351 582,211 205,836 33,477,136 351,408 2,049,417 1,885,600 1,741,996 39,505,557	As at December 31, 2019 1,060,752 1,789,983 608,391
		3,459,126 18,543,990 34,650,210 2,410,471
		59,063,797
		7,099,021 22,133,799 608,219 264,450
		30,105,489 812,656 2,055,532 601,846 1,819,949
		35,395,472

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Note Shareholders’ equity: Share capital 16 Warrants 16 Contributed surplus 16 Accumulated deficit Total shareholders’ equity Total Liabilities and Shareholders’ Equity Going concern 3 Commitments 28 Subsequent events 29	As at December 31, 2020 213,426,683 647,034 358,042 (209,270,383) 5,161,376 44,666,933	As at December 31, 2019 210,366,683 647,034 73,895 (187,419,287) 23,668,325 59,063,797

The accompanying notes form part of these annual financial statements.

Approved on behalf of the Board

Yongtan Liu, Director Peter Robertson, Director

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STATEMENT OF LOSS AND COMPREHENSIVE LOSS

For the year ended December 31, 2020

(Expressed in Canadian dollars)

Note Revenue Commodity sales from production 17 Trading revenue 17 Other income 17 Royalty expense Total net revenue Expenses Operating costs General and administrative costs Depletion, depreciation and amortization 10,11 Impairment losses and write-offs 18 Total expenses Loss from operations Finance expenses 22 Loss before taxes Income taxes 23 Loss and comprehensive loss Loss per share Basic and diluted 24

Year ended December 31, 2020 2019 13,268,893 13,626,747 8,613 629,807 213,376 77,967 (751,433) (2,446,729) 12,739,449 11,887,792 (10,874,481) (7,592,649) (3,145,830) (4,190,887) (5,578,329) (5,165,339) (9,725,995) (41,142,293) (29,324,635) (58,091,168) (16,585,186) (46,203,376) (5,265,910) (4,262,858) (21,851,096) (50,466,234) — — (21,851,096) (50,466,234) (0.07) (0.17)

The accompanying notes form part of these annual financial statements.

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STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the year ended December 31, 2020

(Expressed in Canadian dollars)

Note Balance as at January 1, 2020 16 Shares issued for cash Share-based expenses Contributed surplus 13 Loss for the year Balance as at December 31, 2020 Balance as at January 1, 2019 16 Shares issued for cash Contributed surplus 13 Loss for the year Balance as at December 31, 2019	Share Capital 210,366,683 3,060,000 — — — 213,426,683 204,366,683 6,000,000 — — 210,366,683	Warrants 647,034 — — — — 647,034 647,034 — — — 647,034	Contributed Surplus 73,895 — 123,200 160,947 — 358,042 — — 73,895 — 73,895	Accumulated Deficit (187,419,287) — — — (21,851,096) (209,270,383) (136,953,053) — — (50,466,234) (187,419,287)	Total Equity 23,668,325 3,060,000 123,200 160,947 (21,851,096) 5,161,376 68,060,664 6,000,000 73,895 (50,466,234) 23,668,325

The accompanying notes form part of these annual financial statements.

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STATEMENT OF CASH FLOWS

For the year ended December 31, 2020

(Expressed in Canadian dollars)

Note Cash provided by (used in): Operations Net loss Items not involving cash: Depletion, depreciation and amortization Share-based expenses Non-cash finance expenses Unrealized foreign exchange loss Impairment losses and write-offs Funds from operations Changes in non-cash working capital 7 Total cash used in operations Investing Expenditures on property, plant and equipment, net Expenditures on exploration and evaluation assets, net Net cash generated from (used in) investing

Year ended December 31, 2020 2019 (21,851,096) (50,466,234) 5,578,329 5,165,339 123,200 — 1,356,869 3,789,954 297 17,928 9,725,995 41,142,293 (5,066,406) (350,720) 453,827 (1,047,119) (4,612,579) (1,397,839) 560,450 836,516 (167,684) (3,477,201) 392,766 (2,640,685)

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Note Financing Proceeds from debt Proceeds from share issurance Principal portion of lease payments Interest portion of lease payments Repayment of bank loan Net cash from financing Increase (decrease) in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplementary information: Interest paid

Year ended December 31, 2020 2019 2,000,000 675,000 3,060,000 6,000,000 (593,473) — (235,596) — — (4,164,243) 4,230,931 2,510,757 11,118 (1,527,767) (297) (17,190) 1,060,752 2,605,709 1,071,573 1,060,752 3,200,384 154,727

The accompanying notes form part of these annual financial statements.

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NOTES TO THE FINANCIAL STATEMENTS

For the year ended December 31, 2020

(Expressed in Canadian dollars unless otherwise indicated)

1 CORPORATE INFORMATION

Persta Resources Inc. (the ‘‘Company’’ or ‘‘Persta’’) was incorporated in Calgary, Alberta, Canada under the Business Corporations Act (Alberta) in 2005. Persta is an exploration and development company pursuing petroleum and natural gas production in Alberta, Canada. The Company’s registered office is located at 15th Floor, Bankers Court, 850-2nd Street SW, Calgary, Alberta, T2P 0R8, Canada, and its head office is located at Suite 3600, 888-3rd Street SW, Calgary, Alberta, T2P 5C5, Canada.

Pursuant to an initial public offering on March 10, 2017, the Company’s shares were listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) and traded under the stock code of ‘‘3395’’. The Company has been a reporting issuer under the Securities Act (Alberta) since October 2, 2018.

2 BASIS OF PREPARATION

(a) Statement of compliance

The financial statements set out in this report have been prepared in accordance with all applicable International Financial Reporting Standards (‘‘IFRSs’’), as issued by the International Accounting Standards Board (‘‘IASB’’). The IASB has issued a number of new and revised IFRSs effective January 1, 2020. For the purpose of preparing these financial statements, the Company has adopted all applicable new and revised IFRSs for the years ended December 31, 2020 and 2019 (refer to Note 4).

The financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange.

The accounting policies set out below have been applied consistently in all years presented in the financial statements. See Notes 4(r) and 4(s).

(b) Basis of measurement

The financial statements are prepared on the historical cost basis except for the forward contracts for trading of natural gases during the year were measured at fair value as explained in accounting policies set out in Note 4. No outstanding forward contracts as at December 31, 2020.

(c) Functional and presentation currency

The financial statements are presented in Canadian dollars (‘‘C$’’), which is the Company’s functional currency.

(d) Use of estimates and judgments

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in Note 5.

The financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharges its liabilities and commitments in the normal course of business.

3 GOING CONCERN

These financial statements have been prepared on a going concern basis. As at December 31, 2020, the Company’s current liabilities exceeded its current assets by C$29.9 million, the Company incurred a loss of C$21.9 million, had a net cash used in operating activities of C$4.6 million for the year ended December 31, 2020, and has drawn C$24 million on its subordinated debt facility of C$26 million. Additional draws on the subordinated debt facility are subject to approval of the lender.

As at December 31, 2020, the Company was in compliance with all covenants associated with the subordinated debt. However, there is no genuine possibility that the Company will succeed in compliance with the net debt to TTM EBITDA, working capital and net debt to total proved reserves covenants (as defined in Note 13) as at March 31, 2021 and thereafter. Accordingly, the debt is classified as a current liability as at December 31, 2020. As at March 31, 2021, the Company was not in compliance with those financial covenants and therefore the debt was due on demand. On June 30, 2021, the Company has received a waiver in respect of this covenant breach.

These events and conditions may cast significant doubt the Company’s ability to continue as a going concern and the Company may not be able to generate sufficient cash flows from its operations and have sufficient working capital to pay its debts and financial obligations as and when they fall due.

For the purpose of assessing going concern of the Company and the use of it for the preparation of the financial statements, the directors of the Company prepared a cash flow projection covering a period of 24 months from the end of the reporting period to December 31, 2022. The directors of the Company, when preparing the cash flow projection, has taken account of the following facts and measures:

• On June 30, 2021, the Company and lender agreed to restructure the loan agreement (the ‘‘2021 Restructuring’’). Under the terms of the Restructuring, financial covenants in respect of net debt to total proved reserves and net debt to TTM EBITDA (as defined in Note 13) have been waived for the remainder of 2021, and will be reinstated starting March 31, 2022. Financial covenants in respect of working capital have been eliminated for the remainder of the loan. A funding covenant has been added whereby the Company must secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before September 30, 2021. The Company must make a C$2.2 million principal payment on or before August 31, 2021 and a C$2.2 million principal payment on or before September 30, 2021 (together, the ‘‘2021 Principal Payments’’).

To satisfy the C$8 million funding and 2021 Principal Payments covenants, the Company plans to complete an equity placing of 70 million common shares to be issued at a minimum of HK$0.80 per share for gross proceeds of a minimum of C$8.96 million. The placing is subject to Stock Exchange and shareholder approval which will be sought at a meeting of shareholders anticipated to occur in August 2021.

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The global impact of COVID-19 has resulted in significant volatility in global stock and commodity markets and has created a great deal of uncertainty in the global economy. These factors may have a negative impact on the Company’s operations and its ability to raise financing to meet its debt covenants. If the Company is in breach of any covenants in future periods, the lender will have the right to demand repayment of all amounts owed under the subordinated debt.

The Company’s ability to continue as a going concern is dependent upon the successful implementation of the measure mentioned above that enable the Company to generate sufficient cash flow from operations, obtain equity financing, dispose of assets or other arrangements to fund operating, investing and financing activities. In any event the Company fails to comply with the covenants associated with the subordinated debt in the future, there are no assurances that any waivers will be obtained or transactions will be completed, on terms acceptable to the Company. If these financial covenants are not met or a waiver is not obtained by lenders, the subordinated debt facility may become due on demand. These conditions indicate a material uncertainty exists which may cast significant doubt on the Company’s ability to continue as a going concern. Notwithstanding this, based on the cash flow projection, the directors of the Company consider that it is appropriate to prepare the financial statements on a going concern basis.

Should the use of the going concern basis in preparation of the financial statements be determined to be not appropriate, adjustments would have to be made to write down the carrying amounts of the Company’s assets to their realizable values, to provide for any further liabilities which might arise and to reclassify non-current assets and noncurrent liabilities as current assets and current liabilities, respectively. The effects of these adjustments have not been reflected in the consolidated financial statements. If the Company is unable to continue as a going concern, it may be forced to seek relief under applicable bankruptcy and insolvency legislation.

4 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies have been applied consistently in all years presented in these financial statements.

(a) Joint arrangements

Joint arrangements are contractual arrangements classified as either joint operations or joint ventures. Joint operations exist when the Company has rights to the assets and obligations for the liabilities, relating to an arrangement. As such, the financial statements only include the Company’s share of its assets, liabilities and transactions associated with its joint operations.

(b) Revenue recognition

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Depending on the terms of the contract and the laws that apply to the contract, control of the goods or service may be transferred over time or at a point in time. Control of the goods or service is transferred over time if the Company’s performance:

• . provides all of the benefits received and consumed simultaneously by the customer;

• . creates or enhances an asset that the customer controls as the Company performs; or

• . does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

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If control of the goods or services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods or service.

When the contract contains a financing component which provides the customer a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amounts receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Company and the customer at contract inception. Where the contract contains a financing component which provides a significant financing benefit to the Company, revenue recognized under that contract includes the interest expense accreted on the contract liability under the effective interest method. For contracts where the period between the payment and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in IFRS 15.

Sales of crude oil, natural gas and natural gas liquids

Revenue from the sale of crude oil and natural gas is recognized when title to the products passes to the purchasers based on volumes delivered at contracted delivery points and prices and are recorded gross of transportation charges incurred by the Company. The costs associated with the delivery, including transportation and production-based royalty expenses, are recognized in the same period in which the related revenue is earned and recorded.

Trading revenue

Trading revenue is realized when the Company purchases natural gas on the open market to meet its forward sale obligations. It is measured at the fair value of the consideration received or receivable, net of the costs incurred to purchase the natural gas.

Other income

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

(c) Finance income and expenses

Finance income is comprised of interest income. Finance expenses are recognized as the interest accrues, using the effective interest method. The effective interest method uses the rate that discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

Finance expense comprises interest expense and other fees on the bank loan and various other loans, amortization of debt issue costs, accretion of the discount on decommissioning liabilities, commitment charges and foreign exchange gains and losses on foreign currency transactions.

(d) Financial instruments

The Company recognizes financial assets and financial liabilities on the statements of financial position when the Company becomes a party to the contract. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or when the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized from the financial statements when the liability is extinguished either through settlement of or release from the obligation of the underlying liability.

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Financial assets, financial liabilities and derivatives are measured at fair value on initial recognition. Measurement in subsequent periods depends on the financial instrument’s classification, as described below.

(i) Financial assets

• . Amortized cost

A financial asset is measured at amortized cost if the objective of the business model is to hold the financial asset for the collection of the cash flows; and all contractual cash flows represent only principal and interest on that principal. All financial liabilities are measured at amortized cost using the effective interest method except for liabilities incurred for the purposes of selling or repurchasing in the short-term liabilities, if they are held-for trading and those that meet the definition of a derivative.

• . Fair value through other comprehensive income (‘‘FVTOCI’’)

A financial asset shall be measured at FVTOCI if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and the contractual terms of the financial asset give rise on specified dates to cash flows that are Solely Payment of Principal and Interest (‘‘SPPI’’) on the principal amount outstanding.

• . Fair value through profit or loss (‘‘FVTPLs’’)

All financial assets that do not meet the definition of being measured at amortized cost or FVTOCI are measured at FVTPL, this includes all derivative financial assets. A financial liability is classified as measured at FVTPL if it is held-for-trading, a derivative, or designated as FVTPL on initial recognition. For financial assets and liabilities, the Company may make an irrevocable election to designate an asset at FVTPL. If the election is made it is irrevocable, meaning that asset, liability, or group of financial instruments must be recorded at FVTPL until that asset, liability or group of financial instruments are derecognized.

Financial assets and liabilities are offset and the net amount is reported on the balance sheet when there is a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

Commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of commodity in accordance with the Company’s expected purchase, sale or usage fall within the normal purchase or sale exemption and are accounted for as executory contracts.

• . Impairment of financial assets

Financial assets are assessed with an expected credit loss (‘‘ECL’’) model. The new impairment model applies to financial assets measured at amortized cost, a lease receivable, a contract asset or a loan commitment and a financial guarantee contract.

The Company recognises loss allowances for ECL on trade receivables and financial assets at amortised cost. ECLs are measured on either of the following bases:

• . 12-months ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

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• . Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive. The shortfall is then discounted at an approximation to the assets’ original effective interest rate.

The Company measured loss allowances for trade receivables using HKFRS 9 simplified approach and has calculated ECLs based on lifetime ECLs. The Company has established a provision matrix that is based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

For other debt financial assets, ECLs are based on lifetime ECLs except when there has not been a significant increase in credit risk since initial recognition, in which case the allowance will be based on the 12-months ECLs.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information analysis, based on the Company’s historical experience and informed credit assessment and including forward-looking information.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to action such as realising security (if any is held); or the financial asset is more than 90 days past due.

The Company writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, for example when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over 12 months past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

(ii) Financial liabilities

The Company classifies its financial liabilities, depending on the purpose for which the liabilities were incurred. Financial liabilities at FVTPL are initially measured at fair value and financial liabilities at amortised costs are initially measured at fair value, net of directly attributable costs incurred.

. Financial liabilities at FVTPL

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL.

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Financial liabilities are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in profit or loss.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial liability at FVTPL, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited.

Financial liabilities may be designated upon initial recognition as at FVTPL if the following criteria are met: (i) the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the liabilities or recognising the gains or losses on them on a different basis; (ii) the liabilities are part of a Company of financial liabilities which are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management strategy; or (iii) the financial liability contains an embedded derivative that would need to be separately recorded.

Subsequent to initial recognition, financial liabilities at FVTPL are measured at fair value, with changes in fair value recognised in profit or loss in the period in which they arise, except for the gains and losses arising from the Company’s own credit risk which are presented in other comprehensive income with no subsequent reclassification to the statement of profit or loss. The net fair value gain or loss recognised in the statement of profit or loss does not include any interest charged on these financial liabilities.

. Financial liabilities at amortised cost

Financial liabilities at amortised cost including trade and other payables, borrowings, certain preference shares and the debt element of convertible loan notes issued by the Company are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised in profit or loss.

Gains or losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

. Effective Interest methods

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability, or where appropriate, a shorter period.

. Lease arrangements

The Company applies judgement when reviewing each of its contractual arrangements to determine whether the arrangement contains a lease. Contractual arrangements containing a lease are then subject to various areas of judgement including the lease term and discount rate.

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(e) Exploration and evaluation assets

Exploration and evaluation (‘‘E&E’’) assets include costs capitalized by the Company in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. E&E expenditures, including the costs of acquiring licences and directly attributable general and administrative costs (‘‘G&A’’), geological and geophysical costs, other direct costs of exploration (drilling, trenching, sampling and evaluating the technical feasibility and commercial viability of extraction) and appraisal are accumulated and capitalized as E&E assets. Costs incurred before the Company has obtained the legal rights to explore an area are expensed.

E&E assets are initially capitalized as intangible assets and are not amortized. E&E assets are assessed for impairment when facts and circumstances indicate that the carrying amount may exceed the recoverable amount. An impairment loss is recognized in profit or loss and separately disclosed.

Once the technical feasibility and commercial viability is determined, E&E assets attributable to that area are assessed for impairment with any impairment loss recognized in profit or loss. The remaining carrying value of the relevant E&E assets is then reclassified as development and production assets within property, plant and equipment. Technical feasibility and commercial viability is generally considered to be determined when proved plus probable reserves are determined to exist and commercial production of oil and gas has commenced on the licence or field.

For divestitures of E&E assets, a gain or loss is recognized in profit or loss for the difference between the net disposal proceeds and the carrying amount of the asset. Exchanges of properties are measured at fair value, unless the transaction lacks commercial substance or fair value cannot be reliably measured. Where the exchange is measured at fair value, a gain or loss is recognized in profit or loss.

(f) Property, plant and equipment

Property, plant and equipment (‘‘PP&E’’) of the Company consists of development and production assets and office equipment.

Development and production assets

Development and production assets are carried at cost less accumulated depletion, depreciation, amortization and impairment losses. The cost of a development and production asset includes the initial purchase price and directly attributable expenditures to develop, construct and complete an asset. These costs include property acquisitions, development drilling, completion, gathering and infrastructure, asset retirement costs and transfers from E&E assets. Any costs directly attributable to bringing the asset to the location and condition necessary to operate as intended by management, and which result in an identifiable future benefit, are capitalized, including directly attributable G&A costs. Improvements that increase the capacity or extend the useful lives of related assets are also capitalized.

For divestitures of properties, a gain or loss is recognized in profit or loss for the difference between the net disposal proceeds and the carrying amount of the asset. Exchanges of properties are measured at fair value, unless the transaction lacks commercial substance or fair value cannot be reliably measured. Where the exchange is measured at fair value, a gain or loss is recognized in profit or loss.

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(g) Impairments

Development and production assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed the recoverable amount. For the purposes of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ‘‘cash-generating unit’’ or ‘‘CGU’’).

The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs of disposal (‘‘FVLCD’’).

Value in use is estimated by consideration of the following:

• (i) net present value of the proved plus probable reserves as determined annually by independent reservoir engineers using future prices and costs using a pre-tax discount rate; and

• (ii) management’s estimate of net present value of additional asset development not included in (i) above, using a pre-tax discount rate.

FVLCD is estimated by consideration of the following:

• (i) net present value of proved plus probable reserves as determined annually by independent reservoir engineers using future prices and costs using a pre-tax discount rate;

• (ii) management’s estimate of fair value of undeveloped land;

• (iii) a review of the values indicated by the metrics of recent market transactions of similar assets within the oil and gas industry; and

• (iv) management’s estimate of additional fair value from asset development not included in (i) above.

An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

(h) Reversal of impairment

An impairment loss may be reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and depletion, if no impairment loss had been recognized and circumstances indicate the loss no longer exists or is decreased. An impairment loss reversal is recognized in profit or loss.

(i) Depletion and depreciation

Depletion of development and production assets is provided using the unit-of-production method based on production volumes before royalties in relation to total estimated proved plus probable reserves as determined annually by independent reservoir engineers using future prices and costs. Natural gas reserves and production are converted at the energy equivalent of six thousand cubic feet to one barrel of oil.

Calculations for depletion and depreciation are based on total capitalized costs plus estimated future development costs of proved plus probable reserves.

Depreciation of other assets is provided for on a 20%–100% declining balance basis.

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(j) Decommissioning liability

The Company records a liability for the legal obligation associated with the retirement of long-lived tangible assets at the time the liability is incurred, normally when a long-lived tangible asset is purchased or developed, discounted to its present value using a risk-free interest rate. On recognition of the liability there is a corresponding increase in the carrying amount of the related asset known as the decommissioning liability cost, which is depleted on a unit-of-production basis over the life of the estimated proved plus probable reserves, before royalties. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to profit or loss in the period. The decommissioning liability obligation can also increase or decrease due to changes in estimates of timing of cash flow, changes in the original estimated undiscounted cost or changes in the discount rate. The decommissioning liability obligation is re-measured at each reporting date using the risk-free rate in effect at that time and the changes in fair value are capitalized as property, plant and equipment. Actual costs incurred upon settlement of the obligations are charged against the liability.

(k) Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.

The Company may incur various costs when issuing or acquiring its own equity instruments. Those costs might include registration and other regulatory fees, amounts paid to legal, accounting and other professional advisers, printing costs and stamp duties. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. Costs related to a planned equity offering not completed at the financial statement date are recorded as deferred financing costs until the offering is either completed or abandoned. The costs of an equity transaction that is abandoned are recognized as an expense.

(l) Income taxes

Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in shareholders’ equity, in which case the income tax is recognized directly in shareholders’ equity.

Current income taxes payable are based on taxable earnings for the year. Taxable earnings differs from profit before income taxes as reported in the statement of loss and other comprehensive loss because of items of income or expense that are taxable or deductible in different years and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the end of the reporting period. Current taxes are recognized in profit or loss.

The Company follows the statement of financial position method of accounting for income taxes. Under this method, deferred income taxes are recorded for the effect of any temporary difference between the accounting and income tax basis of an asset or liability.

Deferred income tax is calculated using the enacted or substantively enacted income tax rates expected to apply when the assets are realized or the liabilities are settled. The effect of a change in the enacted or substantively enacted tax rates is recognized in profit or loss or shareholders’ equity depending on the item to which the adjustment relates.

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Deferred tax assets are recognized only to the extent that it is probable that future taxable earnings will be available against which the assets can be utilized. Deferred tax assets are reduced to the extent that it is not probable that sufficient tax earnings will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset only when a legally enforceable right of offset exists and the deferred tax assets and liabilities arose in the same tax jurisdiction and relate to the same taxable entity.

(m) Related party transactions

• (a) A person, or a close member of that person’s family, is related to the Company if that person:

• (i) has control or joint control over the Company;

• (ii) has significant influence over the Company; or

• (iii) is a member of the key management personnel of the Company or the Company’s parent.

• (b) An entity is related to the Company if any of the following conditions applies:

• (i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

• (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

• (iii) Both entities are joint ventures of the same third party.

• (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

• (v) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company.

• (vi) The entity is controlled or jointly-controlled by a person identified in (a).

• (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

• (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to the Company’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

(n) Cash and cash equivalents

Cash and cash equivalents can consist of cash in bank and short-term highly liquid investments with original maturities of three months or less.

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(o) Loss per share

Basic loss per share is calculated by dividing the loss attributable to the shareholders of the Company by the weighted average number of shares outstanding during the period. Diluted loss per share is determined by adjusting the loss attributable to shareholders and the weighted average number of shares outstanding for the effects of all potential shares, which is comprised of any outstanding awards, options or warrants.

(p) Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This policy is applied to new and existing contracts as at or after January 1, 2019.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-ofuse asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant, and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the minimum lease payments that are not yet paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for that asset. Generally, the Company uses its incremental borrowing rate as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in estimate of the amount expected to be payable under a residual value guarantee, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leased assets that have a lease term of 12 months or less and leases of low-value assets defined as leases with an annual obligation of C$5,000 or less. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(q) Share-based payments

The Company applies the fair-value method for valuing share option grants. Under this method, compensation cost attributable to all share options granted are measured at fair value at the grant date and expensed over the vesting period with a corresponding increase to contributed surplus. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest. Upon the exercise of the share options, consideration received, together with the amount previously recognized in contributed surplus, is recorded as an increase to share capital.

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(r) Adoption of new and revised standards and interpretations

The following new IFRS standards and interpretations were adopted by the Company on January 1, 2020:

Amendments to International Accounting Definition of Material Standard (‘‘IAS’’) 1 and IAS 8 Amendments to IFRS 3 Definition of a Business Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform Amendments to IFRS 3 Revised Conceptual Framework for Financial Reporting

There have been no new IFRSs or IFRIC interpretations that have a material impact on the Company’s results and financial position for the year ended December 31, 2020. The Company has not early applied any new or amended IFRSs that is not yet effective for the year ended December 31, 2020.

(s) Standards issued but not yet effective

Amendments to IAS 1 Classification of Liabilities as Current or Non-current, and Presentation of Financial Statements — Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause[4] Amendment to IAS 1 Disclosure of Accounting Policies[4] Amendments to IAS 16 Proceeds before Intended Use[2] Amendments to IFRS 16 COVID-19-Related Rent Concessions[1] Amendments to IFRS 16 2021 Amendments to IFRS16, COVID-19 Related Rent Concessions beyond 30 June 2021[5] Amendments to IAS 37 Onerous Contracts — Cost of Fulfilling a Contract[2] Amendments to IAS 8 Definition of Accounting Estimates[4] Amendments to IAS 12 Amendments to IAS 12, Recognition of Deferred Tax Liabilities and Deferred Tax Assets[4] Amendments to IFRS 3 Reference to the Conceptual Framework[3] Amendments to IAS 39, IFRS 4, IFRS 7, Interest Rate Benchmark Reform — Phase 2[1] IFRS 9 and IFRS 16 Amendments to IFRS 1, IFRS 9, IFRS 16 Annual Improvements to IFRSs 2018–2020[2] and IAS 41

• (1) Effective for annual periods beginning on or after 1 January 2021.

• (2) Effective for annual periods beginning on or after 1 January 2022.

• (3) Effective for business combinations for which the date of acquisition is on or after the beginning of the first annual period beginning on or after 1 January 2022.

• (4) Effective for annual periods beginning on or after 1 January 2023.

• (5) Effective for annual periods beginning on or after 1 April 2021.

The Company is not yet in a position to state whether these new pronouncements will result in substantial changes to the Company’s accounting policies and financial statements.

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5 SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of IFRS accounting policies and reported amounts of assets and liabilities and income and expenses. Accordingly, actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Critical judgments in applying accounting policies

The following are critical judgments that management has made in the process of applying the Company’s IFRS accounting policies that have the most significant effect on the amounts recognized in the financial statements:

(i) Identification of CGUs

The Company’s assets are aggregated into CGUs for the purpose of calculating impairment based on their ability to generate largely independent cash inflows. CGUs have been determined based on similar geological structure, shared infrastructure, geographical proximity, operating structure, commodity type and similar exposures to market risks. By their nature, these assumptions are subject to management’s judgment and may impact the carrying value of the Company’s assets in future periods.

(ii) Identification of impairment indicators

IFRS requires the Company to assess, at each reporting date, whether there are any indicators that its assets may be impaired. The Company is required to consider information from both external sources (such as a negative downturn in commodity prices and significant adverse changes in the technological, market, economic or legal environment in which the entity operates) and internal sources (such as downward revisions in reserves, significant adverse effect on the financial and operational performance of a CGU and evidence of obsolescence or physical damage to the asset). By their nature, these assumptions are subject to management’s judgment and may impact the carrying value of the Company’s assets in future periods.

(iii) Lease arrangements

The Company applies judgement when reviewing each of its contractual arrangements to determine whether the arrangement contains a lease. Contractual arrangements containing a lease are then subject to various areas of judgement including the lease term and lessee incremental borrowing rate.

Key sources of estimation uncertainty

The following are the key assumptions concerning the sources of estimation uncertainty for the year ended December 31, 2020 that have a significant risk of causing adjustments to the carrying amounts of assets and liabilities:

(i) Reserves

Reported recoverable quantities of proved and probable reserves requires estimation regarding production profile, commodity prices, exchange rates, remediation costs, timing and amount of future development costs, and production, transportation and marketing costs for future cash flows. It also requires interpretation of geological and geophysical models in order to make an assessment of the size, shape, depth and quality of the reservoir, and the anticipated recoveries. The economical, geological and technical factors used to estimate reserves may change from period to period. Changes in reported reserves can impact the carrying values of the Company’s petroleum and natural gas properties and equipment, the calculation of depletion and depreciation, the provision

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for decommissioning obligations, and the recognition of deferred tax assets due to changes in expected future cash flows. The recoverable quantities of reserves and estimated cash flows from Persta’s petroleum and natural gas interests are evaluated by independent reserve engineers at least annually.

The Company’s petroleum and natural gas reserves represent the estimated quantities of petroleum, natural gas and NGLs which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be economically recoverable in future years from known reservoirs and which are considered commercially producible. Such reserves may be considered commercially producible if management has the intention of developing and producing them and such intention is based upon (i) a reasonable assessment of the future economics of such production; (ii) a reasonable expectation that there is a market for all or substantially all the expected petroleum and natural gas production; and (iii) evidence that the necessary production, transmission and transportation facilities are available or can be made available. Reserves may only be considered proved and probable if supported by either production or conclusive formation tests. Persta’s oil and gas reserves are determined in accordance with the standards contained in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook.

(ii) Decommissioning obligations

The Company estimates future remediation costs of production facilities, well sites and gathering systems at different stages of development and construction of assets. In most instances, removal of assets occurs many years into the future. This requires an estimate regarding abandonment date, environmental and regulatory legislation, the extent of reclamation activities, the engineering methodology for estimating cost, technologies in determining the removal cost and liability-specific discount rates to determine the present value of these cash flows.

(iii) Impairment of non-financial assets

For the purposes of determining the extent of any impairment or its reversal, estimates must be made regarding future cash flows taking into account key assumptions including future petroleum and natural gas prices, expected forecasted production volumes and anticipated recoverable quantities of proved and probable reserves. These assumptions are subject to change as new information becomes available. Changes in economic conditions can also affect the rate used to discount future cash flow estimates. Changes in the aforementioned assumptions could affect the carrying amount of the Company’s assets, and impairment charges and reversals will affect income or loss.

(iv) Going concern assumption

The directors of the Company have prepared the financial statements on the assumption that the Company will be able to operate as a going concern in the foreseeable future, which is a critical judgement that has the most significant effect on the amounts recognized in the financial statements. The assessment of the going concern assumption involves making a judgement by the directors about the future outcome of events or conditions which are inherently uncertain. The directors consider that, after taking into account of all major events or conditions, which may give rise to business risks, that individually or collectively may cast significant doubt upon the going concern assumption as set out in Note 3 to the financial statements, the Company has the capability to continue as a going concern.

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(v) Taxes

The Company files corporate income tax, goods and service tax and other tax returns with various provincial and federal taxation authorities in Canada. There can be differing interpretations of applicable tax laws and regulations. The resolution of any differing tax positions through negotiations or litigation with tax authorities can take several years to complete. The Company does not anticipate that there will be any material impact upon the results of its operations, financial position or liquidity.

Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in income or loss both in the period of change, which would include any impact on cumulative provisions, and in future periods.

Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse and a judgment as to whether or not there will be sufficient taxable profits available to offset the tax assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. Estimates of future taxable income are based on forecasted funds from operations. During the years ended December 31, 2020 and 2019, the Company has not recorded any deferred tax assets or liabilities due to the uncertainty of future taxable profits.

(vi) Share-based expenses

All equity-settled, share-based awards issued by the Company are recorded at fair value using the Black-Scholes option-pricing model. In assessing the fair value of equity-based compensation, estimates have to be made regarding the expected volatility in share price, option life, dividend yield, risk-free rate and estimated forfeitures at the initial grant date.

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6 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES BY CATEGORY

The carrying amounts presented in the statement of financial position related to the following categories of financial assets and financial liabilities:

C$ Financial assets Financial assets measured at amortised cost: Cash and cash equivalents Accounts receivable Prepaid expenses and deposits Financial liabilities Financial liabilities measured at amortised cost: Accounts payable and accrued liabilities Long term debt Lease liabilities Decommissioning liabilities Other liabilities	As at December 31, 2020 1,071,573 1,986,850 480,793 3,539,216 8,898,738 25,675,951 2,631,628 1,947,832 351,408 39,505,557	As at December 31, 2019 1,060,752 1,789,983 608,391
		3,459,126
		7,099,021 22,735,645 2,663,751 2,084,399 812,656
		35,395,472

Due to their short term nature, the carrying value of above balances approximates to its fair value.

7 CASH AND CASH EQUIVALENTS

(a) Cash and cash equivalents

C$ Deposits with banks and other financial institutions Cash on hand Cash and cash equivalents in the statement of financial position and statement of cash flows	As at December 31, 2020 1,069,568 2,005 1,071,573	As at December 31, 2019 1,054,708 6,044
		1,060,752

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(b) Supplementary cash flows information

C$ Change in non-cash working capital: Accounts receivable Prepaid expenses and deposits Accounts payable and accrued liabilities Lease liabilities(1) Change in non-cash working capital included in investing and financing activities Change in non-cash working capital included in operating activities	Year Ended December 31, 2020 2019 196,867 593,921 (127,598) (188,353) (1,338,468) 2,352,535 — 390,114 (1,269,199) 3,148,217 1,723,026 (4,195,336) 453,827 (1,047,119)

(1) Lease liabilities classified as financing activities for the year ended December 31, 2020

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(c) Reconciliation of liabilities arising from financing activities

C$ At January 1, 2019 Changes from financing cash flows: Proceeds from debt Repayment of debt Debt interest payment Capitalised debt issue costs Principal repayment of lease liabilities Interest repayment of lease liabilities Changes from financing cash flows Other charges: Interest expenses Accrued and unpaid debt interest Capitalised debt issue costs Change in deferred debt costs Accretion expense Fair value adjustment Other charges As December 31, 2019 At January 1, 2020 Changes from financing cash flows: Proceeds from debt Interest paid Principal repayment of lease liabilities Interest repayment of lease liabilities Changes from financing cash flows Other charges: Lease additions Interest expenses Accrued and unpaid debt interest Change in deferred debt costs Accretion expense Fair value adjustment Other charges At December 31, 2020	Lease liabilities 3,053,865 — — — — (390,114) (257,846) (647,960) 257,846 — — — — — 257,846 2,663,751 2,663,751 — — (593,472) (235,596) (829,068) 561,349 235,596 — — — — 796,945 2,631,628	Shareholder loans — 675,000 — — — — — 675,000 — — — — 741 (73,895) (73,154) 601,846 601,846 2,000,000 — — — 2,000,000 — — — — 92,391 (160,947) (68,556) 2,533,290	Subordinated debt 18,899,702 — — (79,505) 1,000,000 — — 920,495 79,505 2,578,600 (1,000,000) 655,497 — — 2,313,602 22,133,799 22,133,799 — (3,200,385) — — (3,200,385) — 3,200,385 356,699 652,163 — — 4,209,247 23,142,661	Bank loan 4,164,243 — (4,164,243) (90,521) — — — (4,254,764) 90,521 — — — — — 90,521 — — — — — — — — — — — — — — —	Total 26,117,810 675,000 (4,164,243) (170,026) 1,000,000 (390,114) (257,846) (3,307,229) 427,872 2,578,600 (1,000,000) 655,497 741 (73,895) 2,588,815 25,399,396 25,399,396 2,000,000 (3,200,385) (593,472) (235,596) (2,029,453) 561,349 3,435,981 356,699 652,163 92,391 (160,947) 4,937,636 28,307,579

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8 ACCOUNTS RECEIVABLE

C$ Trade receivables Other receivables Total	As at December 31, 2020 1,680,327 306,523 1,986,850	As at December 31, 2019 1,716,964 73,019
		1,789,983

(a) Aging analysis of trade receivables

As at December 31, 2020 and 2019, the aging analysis of trade receivables (included in accounts receivable), based on the invoice date (or date of revenue recognition, if earlier) and net of allowance for doubtful debts, is as follows:

C$ Within 1 month	As at December 31, 2020 1,680,327	As at December 31, 2019 1,716,964

Trade receivables are generally collected within 25 days from the date of billing.

(b) Impairment of accounts receivable

Impairment losses in respect of trade and other receivables are recorded using an allowance account unless the Company determines that recovery of the amount is remote, in which case the impairment loss is written off against account receivables directly. No accounts receivable are considered individually nor collectively to be impaired. No material balances of trade or other receivables are past due, and no impairment loss has been recognized for the years ended December 31, 2020 and 2019.

9 EXPLORATION AND EVALUATION ASSETS

C$ Balance, beginning of year Additions Transfer to PP&E (Note 10) Cost recovery (Note 26) Write-offs (Note 18) Impairment (Note 18) Balance, end of year	As at December 31, 2020 18,543,990 167,684 (7,400,192) — (741,451) (3,595,184) 6,974,847	As at December 31, 2019 43,484,822 1,278,860 — (298,659) (623,720) (25,297,313) 18,543,990

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Exploration and evaluation (‘‘E&E’’) assets consist of undeveloped lands, unevaluated seismic data and unevaluated drilling and completion costs on the Company’s exploration projects which are pending the determination of proven or probable reserves in sufficient quantity to warrant commercial development. Transfers are made to property, plant and equipment (‘‘PP&E’’) as proven or probable reserves are determined. E&E assets are expensed due to uneconomic drilling and completion activities and write-offs of lease expiries. Impairment is assessed based on the recoverable amount compared with the asset’s carrying amount to measure the amount of the impairment (refer to Note 18).

For the year ended December 31, 2020, general and administrative (‘‘G&A’’) costs of C$0.16 million (2019: C$0.35 million) were capitalized and included in E&E additions as they were directly attributable to exploration and development activities. For the year ended December 31, 2020, the Company wrote-off C$0.74 million (2019: C$0.62 million) of E&E assets attributable to land lease expiries.

At December 31, 2020, the Company’s E&E assets in respect of its Basing, Voyager and Dawson CGUs was comprised solely of undeveloped lands in which the Company holds a right to explore for, and produce petroleum and natural gas.

Pursuant to the Jixing Gas Handling ad Voyager Compression Agreements (as defined in Note 26), past costs incurred by the Company in respect of the Voyager gas gathering system and pipeline projects are to be repaid by Jixing. During 2019 E&E past costs totaling C$0.3 million were received from Jixing. As at December 31, 2020, all E&E past costs have been received in full.

PP&E transfer

With the commissioning of production operations at Voyager in the second quarter, at June 30, 2020 the Company initially transferred C$6.8 million of E&E assets to PP&E, comprised of development and production costs incurred for Voyager. C$0.6 million of Voyager E&E assets were subsequently transferred to PP&E in the fourth quarter of 2020. In accordance with the Company’s accounting policy, all costs were assessed for impairment at the date of transfer to PP&E. As natural gas prices in the western Canadian market strengthened throughout the year, no indications of impairment were identified for the 2020 Voyager PP&E transfers.

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10 PROPERTY, PLANT AND EQUIPMENT

C$ Balance, January 1, 2019 Additions Change in decommissioning obligations Cost recovery (Note 26) Depletion and depreciation Impairment (Note 18) Balance, December 31, 2019 Balance, January 1, 2020 Additions Change in decommissioning obligations Transfer from E&E (Note 9) Cost recovery (Note 26) Depletion and depreciation Impairment (Note 18) Balance, December 31, 2020	Cost 152,811,966 35,856 (141,736) (999,170) — — 151,706,916 151,706,916 1,764,681 (97,972) 7,400,192 (1,568,373) — — 159,205,444	Accumulated Depletion, Depreciation and Impairment (97,313,501) — — — (4,521,945) (15,221,260) (117,056,706) (117,056,706) — — — — (4,961,805) (5,389,360) (127,407,871)	Net Book Value 55,498,465 35,856 (141,736) (999,170) (4,521,945) (15,221,260) 34,650,210 34,650,210 1,764,681 (97,972) 7,400,192 (1,568,373) (4,961,805) (5,389,360) 31,797,573

Substantially all of PP&E consists of development and production assets. During the years ended December 31, 2020 and 2019, the Company’s PP&E additions were comprised of expenditures at Basing. With the commissioning of production operations at Voyager in the second quarter, on June 30, 2020 the Company initially transferred C$6.8 million of E&E assets to PP&E, comprised of development and production costs incurred for Voyager. The Company subsequently transferred an additional C$0.6 million of E&E assets to PP&E. Included in PP&E additions for the year ended December 31, 2020 are G&A costs of C$0.2 million (2019: C$nil) which were capitalized in accordance with the Company’s accounting policies.

Pursuant to the Jixing Gas Handling and Voyager Compression Agreements (as defined in Note 26), past costs incurred by the Company in respect of the Voyager gas gathering system and pipeline projects are to be repaid by Jixing. During the year ended December 31, 2020, a total of C$1.6 million of past costs in respect of PP&E were repaid by Jixing. During 2019 PP&E past costs totaling C$1.0 million was received from Jixing. As at December 31, 2020, all past costs have been received in full.

Depletion, depreciation and impairment charges

Depletion and depreciation, impairment of PP&E, and any reversal thereof, are recognized as separate line items in the statement of loss and other comprehensive loss. The depletion calculation for the year ended December 31, 2020 includes estimated future development costs of C$6.1 million (2019: C$6.02 million) associated with the development of the Company’s proved plus probable reserves. Impairment is assessed based on the recoverable amount compared with the asset’s carrying amount to measure the amount of the impairment (refer to Note 18).

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11 RIGHT OF USE ASSETS AND LEASE LIABILITIES

(a) Right of use assets

C$ On January 1, 2019 Initial recognition Amortization At December 31, 2019 At January 1, 2020 Additions Amortization At December 31, 2020 (b) Lease liabilities C$ On January 1, 2019 Initial recognition Lease payment At December 31, 2019 At January 1, 2020 Additions Lease payment At December 31, 2020	Oil and Gas Production 338,418 (203,051) 135,367 135,367 540,266 (168,123) 507,510 Oil and Gas Production 338,418 (196,990) 141,428 141,428 540,265 (172,471) 509,222	Office Space 2,715,447 (440,343) 2,275,104 2,275,104 — (440,343) 1,834,761 Office Space 2,715,447 (193,124) 2,522,323 2,522,323 — (413,754) 2,108,569	Vehicles — — — — 21,084 (8,058) 13,026 Vehicles — — — — 21,084 (7,247) 13,837	Total 3,053,865 (643,394) 2,410,471 2,410,471 561,350 (616,524) 2,355,297 Total 3,053,865 (390,114) 2,663,751 2,663,751 561,349 (593,472) 2,631,628

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Future lease payments are due as follows:

C$ As at December 31, 2020 Within 1 year 1 to 2 years 3–5 years Over 5 years Total C$ As at December 31, 2019 Within 1 year 1 to 2 years 3–5 years Over 5 years Total 12 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES C$ Trade payables Accrued liabilities Total trade payables and accrued liabilities Capital payables Other payables Total	Future lease payments 812,417 1,596,144 830,580 — 3,239,141 Future lease payments 773,940 1,231,080 1,231,080 102,590 3,338,690	Interest 230,206 300,803 76,504 — 607,513 Interest 165,721 354,658 146,961 7,599 674,939 As at December 31, 2020 394,767 3,133,307 3,528,074 5,111,454 259,210 8,898,738	Present value 582,211 1,295,341 754,076 —
			2,631,628
			Present value 608,219 876,422 1,084,119 94,991
			2,663,751
			As at December 31, 2019 770,398 1,534,885
			2,305,283 4,408,190 385,548
			7,099,021

All trade payables, accrued liabilities, capital payables and other payables are expected to be settled within one year or are payable on demand. For the years ended December 31, 2020 and 2019, capital payables are primarily comprised of costs incurred pursuant to the Contract (as defined below). For the years ended December 31, 2020 and 2019, other payables are primarily comprised of office renovation and rent inducement expenditures.

During the year ended December 31, 2017, the Company entered into the Master Turnkey Drilling and Completion Contract (the ‘‘Contract’’) with an arm’s length private company. Based on the Contract, the Company shall pay the invoices either within 90 days from the date of the invoice, or by installments as follows: (i) 15% due six months from the date of invoice, (ii) 35% due 12 months from the date of invoice and (iii) 50% due 24 months from the date of

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invoice. Any invoice balance outstanding for more than 90 days will bear interest at 4.24% per annum, calculated annually and prorated for the number of months outstanding with no compounding. For the year ended December 31, 2020, the Company accrued interest of C$0.14 million (2019: C$0.26 million) in respect of the Contract. The outstanding balances are unsecured. The Company has committed to use the services of the private company to drill and complete a minimum of five wells or certain penalties would be incurred should the Company fail to do so. There were no penalties incurred up to December 31, 2020.

Aging analysis of trade payables and accrued liabilities

As at December 31, 2020 and 2019, the aging analysis of trade payables and accrued liabilities is as follows:

C$ Within 1 month 1 to 3 months Over 3 months but within 6 months Total LONG TERM DEBT C$ Shareholder loans (net) Subordinated debt Accrued and unpaid interest on subordinated debt Less: deferred financing costs Total Current Long term	As at December 31, 2020 2,639,607 563,342 325,125 3,528,074 As at December 31, 2020 2,533,290 23,578,600 356,699 (792,638) 25,675,951 23,790,351 1,885,600	As at December 31, 2019 1,714,784 590,499 — 2,305,283 As at December 31, 2019 601,846 21,000,000 2,578,600 (1,444,801) 22,735,645 22,133,799 601,846

13 LONG TERM DEBT

(a) Subordinated debt

On May 16, 2018, the Company completed a subordinated debt (the ‘‘SubDebt’’) financing with an arm’s length lender (the ‘‘SubLender’’) totaling C$25 million. The SubDebt has a term of 60 months and bears interest at 12% per annum (the ‘‘Base Interest’’), compounded and payable monthly. The SubDebt is secured by a general security agreement over all present and after-acquired property of the Company subject to the fixed and floating first priority held by the Lender. An exit fee of C$0.75 million is payable when the SubDebt facility is repaid or at maturity on May 16, 2023. As further defined below, the SubDebt is subject to financial and operating covenants. In connection with the SubDebt, the Company sold 8 million share purchase warrants to the SubLender for C$0.75 million. The Company completed an initial draw of C$20.0 million from the SubDebt at closing.

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During 2018 and 2019 the Company and SubLender completed four amending agreements (the ‘‘Amending Agreements’’) to the SubDebt. Pursuant to the Amending Agreements, certain covenants were amended and/or waived, and monthly Base Interest payments totaling C$2.6 million were accrued, but not paid to the SubLender during 2019 (‘‘2019 Deferred Interest’’). Pursuant to the Amending Agreements the Company incurred fees of C$1 million. These fees were capitalised as an increase of the SubDebt principal, such that the total amount owed under the SubDebt increased to C$21 million, and the total SubDebt available (subject to SubLender approval) increased to C$26 million. In total, C$1.25 million in costs have been incurred in relation to the SubDebt. These costs have been capitalised in long term debt, and amortised over the maturity of the SubDebt.

As at December 31, 2019 and March 31, 2020, the Company was not in compliance with its net debt to total proved reserves covenant (as defined below) and therefore the debt was due on demand. Accordingly, the SubDebt was classified as a current liability as at December 31, 2019.

On April 28, 2020, the Company and lender agreed to restructure the loan agreement (the ‘‘2020 Restructuring’’). Under the terms of the 2020 Restructuring, the SubLender waived the December 31, 2019 and March 31, 2020 covenant breaches, and waived financial covenants in respect of working capital, net debt to total proved reserves and net debt to trailing twelve months earnings before interest, taxes and depreciation (‘‘TTM EBITDA’’) for the remainder of 2020. Pursuant to the 2020 Restructuring, the SubDebt was subject to the following covenants for 2020: (a) the Company must secure additional capital in the form of new equity and/ or subordinate debt for a cumulative amount equal to or greater than C$2 million on or before June 30, 2020 (‘‘2020 Funding Covenant’’) and; (b) measured at the end of each fiscal quarter maintaining the Company’s Alberta Energy liability management ratio above 2.0/1.0 (‘‘LMR Covenant’’).

Under the terms of the 2020 Restructuring, the following covenants are effective for the fiscal quarter ending March 31, 2021 and for all periods thereafter until the SubDebt is repaid in full: (a) net debt to TTM EBITDA not to exceed 4.5:1.0 for each fiscal quarter ending March 31, 2021 through December 31, 2021 and not to exceed 4.0:1.0 for the fiscal quarter ending March 31, 2022 and at all times thereafter; and (b) net debt to total proved reserves ratio not to exceed 0.75:1/0 as at March 31, 2021 and at all time thereafter; and (c) working capital of not less than 1.2:1.0 as at March 31, 2021 and at all times thereafter; and (d) the LMR Covenant.

Under the terms of the SubDebt and 2020 Restructuring Agreements, net debt is defined as the consolidated debt of the Company, less cash held, and excluding debt defined as capital payables (Note 12). TTM EBITDA is defined as the annualized earnings before deduction of interest expenses/income, income taxes, depletion and depreciation, write-offs, unrealized hedging gains/losses and share-based compensation for the four most recent fiscal quarters. Working capital is defined as the ratio of current assets to current liabilities. Current assets include the current assets as per the Company’s financial statements excluding any unrealized hedging gains. Current liabilities include the current liabilities as per the Company’s financial statements excluding any unrealized hedging losses, and excluding any amounts held in current liabilities for the SubDebt principal amount owing (amounts held in current liabilities for the SubDebt accrued and unpaid interest are included).

Pursuant to the 2020 Restructuring, starting April 1, 2020 the Company will incur an additional 2% per annum interest charge, which is due until the TTM EBITDA ratio is below 3.0 (the ‘‘PIK Interest’’). PIK Interest fees will be paid-in-kind, with the fee being added to the principal of the loan on a monthly basis. The PIK Interest does not create any incremental cash obligations until the loan balance is repaid. A further 2% per annum additional interest is also due effective April 1, 2020 (the ‘‘Penalty Interest’’). The Penalty Interest is to be paid in cash monthly, and is due while the balance of the loan exceeds C$20 million. There is also an instalment payment plan whereby the Company would be required to make monthly payments if the amount of the loan exceeds C$20 million after July 1, 2021, or if the loan exceeds C$15 million after January 1, 2022. The Company further agreed to re-price the 8 million warrants previously issued to the lender, subject to shareholder

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approval. This repricing is subject to shareholder and Stock Exchange approval, as at December 31, 2020 and up to the date of these financial statements, the Company has not yet set a date for the shareholder meeting to approve the repricing of the warrants.

As at December 31, 2020, the Company was in compliance with all covenants associated with the subordinated debt. However, there is no genuine possibility that the Company will succeed in compliance with the net debt to TTM EBITDA, working capital and net debt to total proved reserves covenants as at March 31, 2021 and thereafter. Accordingly, the debt is classified as a current liability as at December 31, 2020. As at March 31, 2021, the Company was not in compliance with those financial covenants and therefore the debt was due on demand.

On June 30, 2021, the Company and lender agreed to restructure the loan agreement (the’’2021 Restructuring’’). Under the terms of the 2021 Restructuring, the lender waived financial covenants in respect of net debt to total proved reserves and net debt to TTM EBITDA for the remainder of 2021. Financial covenants in respect of working capital have been eliminated for the remainder of the loan term. Pursuant to the 2021 Restructuring, the SubDebt is subject to the following covenants for 2021 (a) the Company must secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before September 30, 2021 (‘‘2021 Funding Covenant’’) and; (b) measured at the end of each fiscal quarter maintaining the Company’s Alberta Energy liability management ratio above 2.0/1.0 (‘‘LMR Covenant’’); and (c) a C$2.2 million principal payment on or before August 31, 2021 and a C$2.2 million principal payment on or before September 30, 2021 (together, the ‘‘2021 Principal Payments’’). Pursuant to the 2021 Restructuring, the PIK Interest and Penalty Interest payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million.

(b) Shareholder loans

On December 23, 2019, Jixing advanced C$0.675 million to the Company (the ‘‘2019 Shareholder Loan’’). The full proceeds of the 2019 Shareholder Loan were applied to amounts due in respect of the Contract (refer to Note 12). The 2019 Shareholder Loan has a term of two years, is unsecured, non-interest bearing, carries no covenants, and is repayable at any time at the Company’s sole discretion. In calculating the C$0.6 million fair value of the 2019 Shareholder Loan as at December 31, 2019, the Company applied an effective interest rate of 5.97%, comprised of 4% base plus 1.97% Canadian Dealer Offered Rate (‘‘CDOR’’). The residual of C$0.07 million was recorded to Contributed Surplus (refer to Note 16). On April 27, 2021 the Company and Jixing agreed to extend the term of the 2019 Shareholder Loan one year to December 23, 2022.

On June 2, 2020, a Persta director advanced C$2 million to the Company (the ‘‘2020 Shareholder Loan’’). The proceeds of the 2020 Shareholder Loan were used for working capital and general corporate purposes. The 2020 Shareholder Loan has a term of two years, is unsecured, non-interest bearing, carries no covenants, and is repayable at any time at the Company’s sole discretion. In calculating the C$1.85 million fair value of the 2020 Shareholder Loan as at June 2, 2020, the Company assumed an effective interest rate of 4% per annum base plus one month CDOR, over the term of the 2020 Shareholder Loan. On this basis the effective rate was 4.28% per annum, comprised of 4% base plus 0.28% CDOR. The residual of C$0.16 million was recorded to Contributed Surplus (refer to Note 16).

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14 DECOMMISSIONING LIABILITIES

C$ Balance, beginning of year Liabilities settled Change in estimate Accretion expense (Note 22) Balance, end of year Current Long term	As at December 31, 2020 2,084,399 (58,614) (97,972) 20,019 1,947,832 205,836 1,741,996	As at December 31, 2019 2,192,981 — (141,736) 33,154 2,084,399 264,450 1,819,949

The total future decommissioning obligations were estimated based on the Company’s net ownership interest in petroleum and natural gas assets including well sites, gathering systems and facilities, the estimated costs to abandon and reclaim the petroleum and natural gas assets and the estimated timing of the costs to be incurred in future periods. As at December 31, 2020, the Company estimated the total undiscounted amount of cash flows required to settle its decommissioning obligations to be approximately C$2.6 million which will be incurred between 2021 and 2067. The majority of these costs will be incurred by 2037. As at December 31, 2020, an average risk free rate of 1.1% (2019: 1.67%) and an inflation rate of 0.7% (2019: 1.35%) were used to calculate the decommissioning obligations.

15 OTHER LIABILITIES

C$ Accrued compensation per Phantom Unit Plan1 Capital payables Other payables Total	As at December 31, 2020 258,944 — 92,464 351,408	As at December 31, 2019 216,955 191,674 404,027
		812,656

• (1) In December 2019, the directors agreed that upon ceasing to be a member of the Board the cash redemption value of their Phantom Units would be paid by the Company not less than 366 days after the Director Termination Date. As at December 31, 2020 and 2019, the Phantom Unit Plan amounts owing are held as other liabilities. In prior years, the cash redemption value of the Phantom Units was due on the Director Termination Date. Refer to Note 20 for additional disclosures in respect of the Phantom Unit Plan.

For the years ended December 31, 2020 and 2019, other payables are primarily comprised of office renovation and rent inducement expenditures. Capital payables are comprised of cost associated with the Contract (refer to Note 12).

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16 SHARE CAPITAL

(a) Authorized:

The Company is authorized to issue an unlimited number of common shares.

(b) Issued:

Balance at January 1, 2019 Shares issued for cash Balance at December 31, 2019 Shares issued for cash Balance at December 31, 2020	Common Shares 278,286,520 23,600,000 301,886,520 60,000,000 361,886,520	Amount C$ 204,366,683 6,000,000
		210,366,683 3,060,000
		213,426,683

On December 23, 2020, the Company completed a private placement issuing 60 million shares at a price of HK$0.30 per share for gross proceeds of HK$18 million (C$3.06 million). On May 14, 2019, the Company completed a private placement issuing 23.6 million shares at a price of HK$1.50 per share for gross proceeds of HK$35.4 million (C$6.0 million).

(c) Warrants:

On August 13, 2018, the Company issued 8 million warrants to the lender of the subordinated debt facility for total consideration of C$0.75 million. The warrants have an exercise price of HK$3.16 per warrant and a term of 5 years. Pursuant to the Restructuring (see Note 13), the Company has agreed to re-price the 8 million share purchase warrants previously issued to the lender. This re-pricing is subject to Stock Exchange and shareholder approval. The new exercise price of the warrants will be calculated based on the volume weighted average price of the Common Shares on the Stock Exchange for the five trading days immediately preceding the date on which the re-pricing of the exercise price of the warrants is approved by the shareholders. As at December 31, 2020 and up to the date of these financial statements, the Company has not yet set a date for the shareholder meeting to approve the repricing of the warrants.

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(d) Stock options and share-based expenses:

The Company has a stock option plan which was approved and adopted by the shareholders of the Company by ordinary resolution passed on June 8, 2018 (the ‘‘Option Plan’’). The Option Plan is a rolling plan and provides that the number of common shares issuable under the Option Plan, together with all of the Company’s other previously established or proposed share compensation arrangements, may not exceed 10% of the total number of issued and outstanding common shares, on a non-diluted basis, as of the date on which the Option Plan is approved by the shareholders. The exercise price of each option equals the volume-weighted average market price for the five days preceding the issue date of the Company’s stock on the date of grant and the option’s maximum term is ten years. Options granted vest 1/3 on each of the first, second and third anniversaries from the date of grant.

HK$ except number of options amounts Balance, January 1, 2020 Granted Balance, December 31, 2020	Number of Options — 3,780,000 3,780,000	Exercise Price — $0.52
		$0.52

The average trading price of the Company’s common shares was HK$0.51 per share for the year ended December 31, 2020. The following table summarizes stock options outstanding and exercisable at December 31, 2020:

Exercise Price (HK$) $0.52	Amount Outstanding at Period End 3,780,000	Remaining Contractual Life 4.36 years	Weighted Average Exercise Price (HK$) $0.52	Amount Exercisable at Period End —	Weighted Average Exercise Price (HK$) —

The fair value of options granted during the year ended December 31, 2020 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and resulting values:

Exercise price per option Risk-free interest rate Estimated hold period prior to exercise Expected volatility Forfeiture rate Dividend per share Fair value per option HK$:C$ foreign exchange rate Fair value per option	Year ended December 31, 2020 HK$0.52 0.68% 5 137.4% — — HK$0.44 0.18 C$0.08

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(e) Contributed surplus:

As at December 31, 2020, contributed surplus is comprised of the difference between the deemed fair value and gross value of the Shareholder Loans (refer to Note 13) at the date of initial recognition, and share-based expenses incurred during the year. As at December 31, 2019, contributed surplus is comprised of the difference between the deemed fair value and gross value of the 2019 Shareholder Loan (refer to Note 13) at the date of initial recognition.

17 REVENUE AND SEGMENT INFORMATION

Segment information

The Company’s Chief Executive Officer (chief operating decision maker) reviews the financial information in order to make decisions about resources to be allocated to the segment and to assess its performance. No operating segment identified by the Board of Directors has been aggregated in arriving at the reporting segments of the Company. For management’s purpose, the Company has only one reportable operating segment, which is the oil and gas division. The division is principally engaged in oil and gas production, development, exploration and natural gas trading in western Canada for the years ended December 31, 2020 and 2019.

The Company’s resources are integrated and as a result, no discrete operating segment financial information is available. Since this is the only reportable and operating segment of the Company, no further analysis thereof is presented. Tor the years ended December 31, 2020 and 2019, the revenue of the Company is generated from oil and gas production, natural gas trading and other income comprised of over-riding royalty payments and income generated from sources outside normal operations including rental income and subsidies.

Revenue summary

C$ Commodity sales from production Natural gas, natural gas liquids and condensate Crude oil Total commodity sales from production Trading revenue Natural gas trading revenue Natural gas trading cost Total trading revenue Other income Total other income	Year Ended December 31, 2020 2019 12,419,834 11,714,035 849,059 1,912,712 13,268,893 13,626,747 212,600 1,039,043 (203,987) (409,236) 8,613 629,807 213,376 77,967

The Company sells its products pursuant to variable-price contracts. The transaction price for variable price contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Commodity prices are based on

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market indices that are determined on a monthly or daily basis. The contracts generally have a term of one year or less, whereby delivery takes place throughout the contract period. Revenues are typically collected on the 25th day of the month following production.

Trading revenue is realized when the Company purchases natural gas on the open market to meet its forward sale obligations. It is measured at the fair value of the consideration received or receivable, net of the costs incurred to purchase the natural gas.

Other income is comprised of over-riding royalty payments and income generated from sources outside normal operations including rental income and subsidies. Over-riding royalty payments are periodically received from arm’s length entities, whereby the Company receives a portion of oil and natural gas revenues generated from wells in which it holds a royalty interest. For the year ended December 31, 2020, the Company received payroll subsidies totaling C$0.1 million from the Government of Canada for COVID-19 relief, C$0.07 million from over-riding royalties and C$0.04 million of rental income. For the year ended December 31, 2019, other income was primarily comprised of over-riding royalties.

Information about major customers

During the year ended December 31, 2020 the Company had four active customers (2019: four active customers), of which one customer exceeded 10% of the Company’s revenues (2019: two customers). The Company’ largest customer accounted for 84% of revenues (2019: 76%), the second largest customer accounted for 9% of revenues (2019: 14%), the third largest customer accounted for 6% of revenues (2019: 9%) and the fourth largest customer accounting for 1% of revenues (2019: 1%).

Geographical information

The Group’s revenue from external customers and non-current assets are all located in Canada.

Timing of revenue recognition

For the years ended December 31, 2020 and 2019, all of the Company’s revenues and commodity sales from production is recognized at a point in time.

18 IMPAIRMENT LOSSES AND WRITE-OFFS

C$ E&E write-offs (Note 9) E&E impairment (Note 9) PP&E impairment (Note 10) Total	Year ended December 31, 2020 2019 741,451 623,720 3,595,184 25,297,313 5,389,360 15,221,260 9,725,995 41,142,293	Year ended December 31, 2020 2019 741,451 623,720 3,595,184 25,297,313 5,389,360 15,221,260 9,725,995 41,142,293
		41,142,293

Impairment is assessed based on the recoverable amount compared with the asset’s carrying amount to measure the amount of the impairment. In addition, where a non-financial asset does not generate largely independent cash inflows, the Company is required to perform its test at cash generating unit (‘‘CGU’’), which is the smallest identifiable grouping of assets that generates largely independent cash inflows. E&E write-offs consist of land lease expires incurred during the period.

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E&E impairment

On March 31, 2020, the Company identified indicators of impairment in its E&E assets in the Dawson CGU attributable to declines in commodity prices. The Company calculated the recoverable amount of the Dawson E&E CGU as the capitalized value of its undeveloped lands. Based on the assessment as at March 31, 2020, the carrying amount of the Company’s E&E assets in respect of the Dawson GCU was higher than the recoverable amount and the Company recognized an E&E impairment loss of C$0.1 million (2019: C$nil).

At December 31, 2020, the Company identified indicators of impairment in its E&E assets in the Basing CGU attributable to declines in commodity prices and regional well performance. At December 31, 2020, the Company assessed the recoverable amount of the Basing E&E CGU as the capitalized value of its undeveloped lands. Based on the assessment as at December 31, 2020, the carrying amount of the Company’s E&E assets in respect of the Basing GCU was higher than the recoverable amount and the Company recognized an E&E impairment loss of C$3.5 million (2019: C$nil).

At December 31, 2019, the Company identified indicators of impairment in its E&E assets in the Voyager CGU attributable to declines in commodity prices. The recoverable amount of the Voyager CGU was estimated based upon the higher of the value in use or fair value less costs of disposal. The Company calculated the recoverable amount of the Voyager CGU based on forecasted cash flows from proved plus probable reserves using a 12% before-tax discount rate with future development costs as obtained from the independent reserve report dated December 31, 2019, and escalated prices as detailed below. Based on the assessment as at December 31, 2019, the carrying amount of the Company’s Voyager CGU was higher than the recoverable amount and the Company recognized an impairment loss of C$25.3 million.

PP&E impairment

At March 31, 2020, the Company identified indicators of impairment in its PP&E assets in the Basing and Dawson CGU’s attributable to declines in commodity prices. The recoverable amount of the Basing and Dawson CGU’s was estimated based upon the higher of the value in use or fair value less costs of disposal. In each case, fair value less costs of disposal was used. In determining fair value, forecasted cash flows from proved plus probable reserves using a before-tax discount rate of 10% and 12%, with future development costs as obtained from the independent reserve report dated December 31, 2019, and escalated prices as detailed below. Based on the assessment, the carrying cost of the Basing CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$0.5 million. Based on the assessment, the carrying cost of the Dawson CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$0.1 million.

At December 31, 2020, the Company identified indicators of impairment in its PP&E assets in the Basing and Voyager CGU’s attributable to declines in commodity prices and well performance. The recoverable amount of the Basing and Voyager CGU’s was estimated based upon the higher of the value in use or fair value less costs of disposal. In each case, fair value less costs of disposal was used. The Company calculated the recoverable amount of the Basing and Voyager CGU’s based on forecasted cash flows from proved plus probable reserves using a 10% and 12% before-tax discount rate with escalated prices and future development costs as obtained from the independent reserve report. Based on the assessment, the carrying amount of the Company’s Basing CGU million was lower than its recoverable amount and no impairment was required. Based on the assessment, the carrying amount of the Voyager CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$4.8 million.

At December 31, 2019, the Company identified indicators of impairment in its PP&E assets in the Basing and Dawson CGU’s attributable to declines in commodity prices. The recoverable amount of the Basing and Dawson CGU’s was estimated based upon the higher of the value in use or fair value less costs of disposal. In each case, FVLCD was used. The Company calculated the recoverable amount of the Basing and Dawson CGU’s based on forecasted cash

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flows from proved plus probable reserves using a 12% before-tax discount rate. Based on the assessment, the carrying amount of the Basing CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$15.2 million. The carrying amount of the Dawson CGU was lower than its recoverable amount and no impairment loss was required.

The Company utilized the following benchmark prices to determine the forecast prices in the FVLCD calculations:

For the year ended December 31, 2020 Remainder 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030(1) 2031(1)	As at December 31, 2020 Edmonton Oil AECO Gas (C$/Bbl) (C$/mmbtu) — — 52.36 2.58 56.44 2.50 59.96 2.40 62.18 2.44 63.48 2.49 64.8 2.49 66.14 2.54 67.52 2.59 68.93 2.65 70.3 2.70 +2.0%/yr +2.0%/yr	As at March Edmonton Oil (C$/Bbl) 30.28 46.51 54.77 62.26 69.66 71.07 72.59 74.15 75.74 77.35 +2.0%/yr —	31, 2020 AECO Gas (C$/mmbtu) 1.95 2.25 2.35 2.45 2.55 2.65 2.70 2.76 2.81 2.87 +2.0%/yr —

(1) Approximate percentage change in each year thereafter after to the end of the reserve life.

For the year ended December 31, 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030(1)	As at December 31, 2019 Edmonton Oil AECO Gas (C$/Bbl) (C$/mmbtu) 71.71 2.10 74.03 2.35 76.92 2.55 80.13 2.65 82.69 2.75 85.26 2.58 87.82 2.91 90.14 2.97 92.09 3.03 94.08 3.09 +2.0%/yr +2.0%/yr

(1) Approximate percentage change in each year thereafter after to the end of the reserve life.

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19 PERSONNEL COSTS, REMUNERATION POLICY AND AUDITORS’ REMUNERATION

C$ Salaries, wages and other benefits (net of recoveries) Retirement benefits contribution Total	Year Ended December 31, 2020 2019 1,638,654 1,582,959 32,048 28,641 1,670,702 1,611,600	Year Ended December 31, 2020 2019 1,638,654 1,582,959 32,048 28,641 1,670,702 1,611,600
		1,611,600

The Company’s remuneration and bonus policies are determined by the performance of individual employees. The emolument of the executives are recommended by the remuneration committee of the Company, having regard to the Company’s operating results, the executives’ duties and responsibilities within the Company and comparable market statistics.

During the year ended December 31, 2020, the Company recovered C$0.1 million of salary expenditures from Jixing (2019: C$nil) pursuant to the Jixing Gas Handling and Voyager Compression Agreements as disclosed in Note 26b.

Phantom Unit Plan for independent non-executive directors

The Company has in place a phantom unit plan for its independent non-executive directors effective March 10, 2017 and applied retrospectively started from February 26, 2016 (the ‘‘Phantom Unit Plan’’). In order for the eligible directors to receive the phantom units issued under the Phantom Unit Plan (the ‘‘Phantom Units’’), they need to complete a participation form prior to the commencement of each fee period (i.e. twelve-month period commencing January 1 and ending on December 31). Since 2016, all independent non-executive directors agreed to receive 60% of their C$100,000 annual fee (‘‘Independent Directors’ Fee’’) in the form of phantom units, and the remainder in cash. For the years ended December 31, 2020 and 2019, the Independent Directors Fee was paid quarterly as C$10,000 in cash and C$15,000 under the Phantom Unit Plan (the ‘‘Phantom Fee’’), with each independent non-executive director annually receiving C$40,000 in cash and C$60,000 in Phantom Units.

Under the terms of the Phantom Unit Plan, the Company calculates the Phantom Units dividing the Phantom Fee by the weighted average-trading price of the Company’s common shares for the five days preceding each quarter end multiplied by the number of Phantom Units awarded during the quarter. For the years ended December 31, 2020 and 2019, total compensation accrued for each director under the Phantom Unit Plan is based on the total number of units awarded in the preceding quarters multiplied by the weighted average-trading price of the Company’s common shares for the five days preceding the period end.

During the year ended December 31, 2020, the Company incurred C$0.04 million of directors’ compensation per the Phantom Unit Plan (2019: recovery of C$0.16 million). The recovery in 2019 is a result of the decrease in the trading price of the Company’s common shares during the year. As at December 31, 2020, the accrued compensation for independent non-executive directors per the Phantom Unit Plan was C$0.26 million (2019: C$0.22 million).

In December 2019, the directors agreed that upon ceasing to be a member of the Board (the ‘‘Director Termination Date’’), the cash redemption value of their Phantom Units is calculated as the number of units redeemed multiplied by the trading price of the Company’s shares at the Director Termination Date. The directors agreed that this value would be paid by the Company not less than 366 days after the Director Termination Date. In prior years, the cash redemption value of the Phantom Units was due on the Director Termination Date.

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Auditors’ remuneration

Auditors’ remuneration incurred during the years ended December 31, 2020 and 2019 is as follows:

C$ Audit Services Non-Audit Services	Year ended December 31, 2020 2019 252,000 181,500 — 25,512

20 DIRECTORS’ EMOLUMENTS

Directors’ emoluments disclosed pursuant to section 383(1) of the Companies Ordinance (Cap. 622 of the Laws of Hong Kong) and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation is as follows:

Year Ended December 31, 2020:

C$ Executive directors Pingzai Wang1 Yongtan Liu2 Non-executive director Yuan Jing3 Independent non-executive directors Richard Orman4 Bryan Pinney4 Peter Robertson4 Total	Directors’ Fees — — — 53,996 53,996 53,996 161,988	Salaries, allowances and benefits in kind 275,000 — — — — — 275,000	Discretionary bonuses — — — — — — —	Retirement scheme contributions — — — — — — —	Share-based payments 48,889 — — — — — 48,889	Total Emoluments 323,889 — — 53,996 53,996 53,996
						485,877

• (1) Pingzai Wang was appointed Chief Executive Officer of the Company on March 4, 2020, and appointed as executive director of the Company on July 1, 2020. The amounts disclosed above for Mr. Wang are total of all emoluments he received during the year ended December 31, 2020.

• (2) Yongtan Liu does not receive any emoluments from the Company for his services. Refer to Note 26 for additional disclosures in respect of transactions with Mr. Liu and his affiliated entities.

• (3) Yuan Jing does not receive any emoluments from the Company for his services, and ceased to be a Nonexecutive director of the Company on July 1, 2020.

• (4) Each of the independent non-executive directors’ compensation is C$0.1 million per year, C$0.04 million paid in cash quarterly (C$10,000 per quarter), and C$0.06 million paid in Phantom Units quarterly (C$15,000 per quarter) for total gross compensation of C$0.3 million for the three independent non-executive directors. The

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directors’ fees reflect the adjustment for the fair value of the Phantom Unit component as described in Note 19. During the year ended December 31, 2020, the Company recovered C$0.14 million of directors’ compensation per the Phantom Unit Plan as a result of the decrease in the trading price of the Company’s common shares. After giving effect to this recovery, the Company incurred total independent non-executive directors’ compensation expense of C$0.16 million for the year ended December 31, 2020.

For the year ended December 31, 2020, there was no amount paid or payable by the Company to the directors (except the directors’ compensation per the Phantom Unit Plan) or any of the five highest paid individuals as set out in Note 21 below as an inducement to join or upon joining the Company or as compensation for loss of office. There was no arrangement under which a director has waived or agreed to waive any remuneration during the year ended December 31, 2020.

Year Ended December 31, 2019:

C$ Executive director Le Bo1 Yongtan Liu1 Non-executive director Yuan Jing2 Independent non-executive directors Richard Orman3 Bryan Pinney3 Peter Robertson3 Total	Directors’ Fees (Recovery) — — — (12,229) (12,229) (12,229) (36,687)	Salaries, allowances and benefits in kind 426,667 — — — — — 426,667	Discretionary bonuses — — — — — — —	Retirement scheme contributions — — — — — — —	Share-based payments — — — — — — —	Total Emoluments (Recovery) 426,667 — — (12,229) (12,229) (12,229) 389,980

• (1) On December 18, 2019, Le Bo ceased to be a director of the Company. On the same date Yongtan Liu was appointed executive director and Chairman of the Company. Refer to Note 26 for additional disclosures in respect of transactions with Mr. Liu and affiliated entities.

• (2) Yuan Jing did not receive any emoluments from the Company for his services.

• (3) Each of the independent non-executive directors’ compensation is C$0.1 million per year, C$0.04 million paid in cash quarterly (C$10,000 per quarter), and C$0.06 million paid in Phantom Units quarterly (C$15,000 per quarter) for total gross compensation of C$0.3 million for the three independent non-executive directors. The directors’ fees reflect the adjustment for the fair value of the Phantom Unit component as described in Note 19. During the year ended December 31, 2019, the Company recovered C$0.34 million of directors’ compensation per the Phantom Unit Plan as a result of the decrease in the trading price of the Company’s common shares. The recovery was reduced by the C$0.12 million of cash compensation paid during the year, for a net recovery of C$0.037 million for the year ended December 31, 2019.

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For the year ended December 31, 2019, there was no amount paid or payable by the Company to the directors (except the directors’ compensation per the Phantom Unit Plan) or any of the five highest paid individuals as set out in Note 21 below as an inducement to join or upon joining the Company or as compensation for loss of office. There was no arrangement under which a director has waived or agreed to waive any remuneration during the year ended December 31, 2019.

21 INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, Pingzai Wang is a director the Company as at December 31, 2020 and Le Bo was a director of the Company during 2019. Their emoluments are disclosed in Note 20, the aggregate of the emoluments in respect of the other four individuals for each respective year is as follows:

C$ Salaries and other emoluments Share-based compensation Bonus Total	Year ended December 31, 2020 2019 1,134,246 985,413 74,311 — — — 1,208,557 985,413	Year ended December 31, 2020 2019 1,134,246 985,413 74,311 — — — 1,208,557 985,413
		985,413

The emoluments of the above four individuals with the highest annual emoluments are within the following bands:

Hong Kong dollars Nil–1,000,000 1,000,001–1,500,000 1,500,001–2,000,000 2,000,001–2,500,000 2,500,001–3,000,000 3,500,001–4,000,000 4,500,001–5,000,000	Year ended December 31, 2020 2019 — — 1 3 2 1 — — 1 — — — — —

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22 FINANCE EXPENSES

C$ Interest expense and financing costs: Subordinated debt (Note 13) Right of use assets and leases (Note 11) Commitment charges(1) Capital payables (Note 12) Other financing costs and bank charges Accretion expenses: Decommissioning liabilities (Note 14) Shareholder loans (Note 13) Amortization of debt issuance costs Loss (gain) on foreign exchange Total finance expenses	Year Ended December 31, 2020 2019 3,707,083 3,033,662 235,596 257,846 569,202 — 136,625 264,850 2,533 — 20,019 33,154 92,392 — 502,163 655,417 297 17,929 5,265,910 4,262,858	Year Ended December 31, 2020 2019 3,707,083 3,033,662 235,596 257,846 569,202 — 136,625 264,850 2,533 — 20,019 33,154 92,392 — 502,163 655,417 297 17,929 5,265,910 4,262,858
		4,262,858

(1) For the year ended December 31, 2020, commitment charges are comprised of subordinated debt restructuring costs, termination fees incurred following the Company’s cancellation of a warrant subscription agreement with an arms’ length subscriber and costs associated with the Company’s PSG facility (Note 27).

23 INCOME TAXES

The provision for income taxes differs from the result that would have been obtained by applying the combined federal and provincial tax rates to the loss before income taxes. The difference results from the following items:

C$ Loss before income taxes Combined Federal and Provincial tax rate Expected tax benefit Increase in taxes resulting from: Non deductible expenses Change in unrecognized deferred tax assets Change in enacted tax rate and others Income tax expense	Year ended December 31, 2020 2019 (21,851,096) (50,466,234) 24.0% 26.5% (5,244,263) (13,373,552) 29,848 7,442 2,039,169 9,801,114 3,175,246 3,564,996 — —

During the year ended December 31, 2020, the blended statutory tax rate was 24% (2019: 26.5%). In the second quarter of 2019, the Alberta corporate income tax rate was reduced from 12 percent to eight percent over a four year period. The rate was reduced from 12% to 11% effective July 1, 2019 and will be further reduced by 1% on January 1 for each of the next three years until it reaches 8% on January 1, 2022.

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Deferred tax assets have not been recognised for the following deductible temporary differences

C$ PP&E and E&E assets Decommissioning obligations Non-capital losses and other Lease liabilities Share issue costs Total	Year ended December 31, 2020 2019 84,502,615 65,185,062 1,947,832 2,084,398 30,566,426 25,126,686 2,631,628 2,663,751 2,181,831 2,955,635 121,830,332 98,015,532	Year ended December 31, 2020 2019 84,502,615 65,185,062 1,947,832 2,084,398 30,566,426 25,126,686 2,631,628 2,663,751 2,181,831 2,955,635 121,830,332 98,015,532
		98,015,532

At December 31, 2020, the Company has approximately C$122 million of tax deductions, which include loss carry forwards of approximately C$34 million that will begin to expire in 2037.

Inquiries from regulatory bodies may also arise in the normal course of business, to which the Company responds as required. There can be no assurance that any particular claim will be resolved in the Company’s favour or that such claims may not have a material adverse effect on Persta. In June 2019 the Company received a Notice of Collection (‘‘NOC’’) from the Canada Revenue Agency (‘‘CRA’’). The NOC stated that there was a balance owing to the CRA of approximately C$7.8 million for non-resident Withholding Taxes (‘‘WHT’’) resulting from common shares issued to settle approximately C$56.2 million of debt held by a foreign company controlled by a Persta director who is not a resident of Canada.

In August 2019, the Company filed a Notice of Objection (‘‘NOO’’) in respect of this matter which was accepted by the CRA on September 2, 2019, initiating an administrative appeals process where the CRA reviewed the evidence the Company had provided in support of its position that the NOC was issued in error and no WHT were due in respect of the debt settlement.

On February 3, 2020, the Company received written confirmation that the CRA was vacating its previous assessment and eliminating all assessed withholding tax and associated interest and penalties relating to the debt settlement. As it was the Company’s view that the NOO would be successful, a provision was not previously recorded in the Company’s financial statements. Therefore, there was no impact to the financial statements relating to this matter for the years ended December 31, 2020 and 2019.

24 LOSS PER SHARE

C$ except share amounts Loss and comprehensive loss Weighted average number of common shares Loss per share — basic and diluted	Year Ended December 31, 2020 2019 (21,851,095) (50,466,234) 303,365,972 293,263,443 (0.07) (0.17)

There were 3.78 million options and 8 million warrants excluded from the weighted-average share calculations for the year ended December 31, 2020 because they were anti-dilutive (2019: 8 million warrants excluded).

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25 DIVIDEND

The Board did not approve the payment of a dividend for the years ended December 31, 2020 and 2019.

26 RELATED PARTY TRANSACTIONS

(a) Transactions with key management personnel

Key management compensation for the year ended December 31, 2020 totaled C$1.6 million (2019: C$1.6 million).

(b) Transactions with directors

Directors’ Fees and Phantom Unit Plan

Each of the independent non-executive directors’ compensation is C$0.1 million per year, C$0.04 million paid in cash quarterly (C$10,000 per quarter), and C$0.06 million paid in Phantom Units quarterly (C$15,000 per quarter) for total gross compensation of C$0.3 million for the three independent non-executive directors. The directors’ fees reflect the adjustment for the fair value of the Phantom Unit component as described in Note 19. During the year ended December 31, 2020, the Company recovered C$0.14 million of directors’ compensation per the Phantom Unit Plan as a result of the decrease in the trading price of the Company’s common shares. After giving effect to this recovery, the Company incurred total independent non-executive directors’ compensation expense of C$0.16 million for the year ended December 31, 2020 (2019: recovery of C$0.037 million). As at December 31, 2020, the accrued compensation for independent non-executive directors per the Phantom Unit Plan was C$0.26 million (2019: C$0.22 million).

Jixing Gas Handling and Voyager Compression Agreements

On May 9, 2019, the Company entered into a gas handling agreement with Jixing Energy (Canada) Ltd. (‘‘Jixing’’) (collectively the ‘‘Jixing Gas Handling Agreement’’). Jixing is a private Canadian company controlled by Yongtan Liu, who was appointed as director and Chairman of the Company on December 18, 2019. Under the terms of the Jixing Gas Handling Agreement, the Company will transport its gas from the Voyager area through Jixing’s gas gathering system. The agreement has a term of May 9, 2019 to December 31, 2044, however the Company’s obligations commenced with the commissioning of production operations at Voyager on June 29, 2020. For the year ended December 31, 2020, the Company paid Jixing C$1.4 million pursuant to this agreement.

On November 1, 2019, the Company and Jixing entered into a gas compression agreement (the ‘‘Jixing Voyager Compression Agreement’’). The agreement has a term of November 1, 2019 to December 31, 2026, however the Company’s obligations commenced with the commissioning of production operations at Voyager on June 29, 2020. For the year ended December 31, 2020, the Company paid Jixing C$1.1 million pursuant to this agreement.

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Under the terms of the Jixing Gas Handling and Jixing Voyager Compression Agreements the Company will pay the following tariffs to Jixing annually from 2021 to 2044:

C$ 2021 2022 2023 2024 2025 2026 2027–2044	Monthly Gas Handling 265,385 327,892 405,150 501,875 618,219 765,740 433,438	Monthly Compression 146,000 146,000 146,000 146,000 146,000 146,000 —	Total Monthly 411,385 473,892 551,150 647,875 764,219 911,740 433,438	Total Annual 4,936,620 5,686,704 6,613,800 7,774,500 9,170,628 10,940,880 5,201,256

Pursuant to the Jixing Gas Handling and Voyager Compression Agreements, past costs incurred by the Company in respect of the Voyager gas gathering system and pipeline projects will be repaid by Jixing, along with annual charges of overhead and administrative costs incurred by the Company on behalf of Jixing. During 2020, the Company recovered C$1.72 million from Jixing, comprised of C$1.57 million in PP&E past costs and C$0.15 million of overhead and administrative expenses. In 2019, the Company recovered C$1.3 million, comprised of C$1.0 million in PP&E past costs and C$0.3 million of E&E past costs. As at December 31, 2020, all past costs associated with the Voyager gas gathering system and pipeline projects have been paid in full by Jixing.

Prior to December 18, 2019, Jixing was not a related party to the Company, the terns of the agreements were determined through arm’s length negotiations, giving reference to the prevailing market rates quoted on normal commercial terms by providers of similar services in the same or nearby geographical regions.

Shareholder Loans

On December 23, 2019, Jixing advanced C$0.675 million to the Company (the ‘‘2019 Shareholder Loan’’). The full proceeds of the 2019 Shareholder Loan were applied to amounts due in respect of the Contract (refer to Note 12). The 2019 Shareholder Loan has a term of two years, is unsecured, non-interest bearing, carries no covenants, and is repayable at any time at the Company’s sole discretion. In calculating the C$0.6 million fair value of the 2019 Shareholder Loan as at December 31, 2019, the Company applied an effective interest rate of 5.97%, comprised of 4% base plus 1.97% Canadian Dealer Offered Rate (‘‘CDOR’’). The residual of C$0.07 million was recorded to Contributed Surplus (refer to Note 16). On April 27, 2021 the Company and Jixing agreed to extend the term of the 2019 Shareholder Loan one year to December 23, 2022. Such transactions are fully exempted from the connected transaction requirements under Rule 14A.90 of the Listing Rules.

On June 2, 2020, a Persta director advanced C$2 million to the Company (the ‘‘2020 Shareholder Loan’’). The proceeds of the 2020 Shareholder Loan were used for working capital and general corporate purposes. The 2020 Shareholder Loan has a term of two years, is unsecured, non-interest bearing, carries no covenants, and is repayable at any time at the Company’s sole discretion. In calculating the C$1.85 million fair value of the 2020 Shareholder Loan as at June 2, 2020, the Company assumed an effective interest rate of 4% per annum base plus one month CDOR, over the term of the 2020 Shareholder Loan. On this basis the effective rate was 4.28% per annum, comprised of 4% base plus 0.28% CDOR. The residual of C$0.16 million was recorded to Contributed Surplus (refer to Note 16). Such transactions are fully exempted from the connected transaction requirements under Rule 14A.90 of the Listing Rules.

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27 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Overview

The Company has exposure to credit risk, liquidity and market risk from its use of financial instruments. This note presents information about the Company’s exposure to each of the risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities.

(a) Credit risk

The Company’s credit risk on cash arises from possible default of the counterparty. The Company limits its exposure to counterparty credit risk on cash by only dealing with financial institutions with high credit ratings.

Credit risk on trade and other receivables is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from purchasers of the Company’s crude oil and natural gas and joint venture partners. The Company seeks to manage its credit risk on trade and other receivables by trading with third party customers it considers to be creditworthy. As at December 31, 2020, the Company’s accounts receivables consisted of C$1.7 million (2019: C$1.7 million) due from purchasers of the Company’s crude oil and natural gas and C$0.3 million (2019: C$0.07 million) of other receivables.

Receivables from purchasers of the Company’s crude oil and natural gas when outstanding are normally collected on the 25th day of the month following production. The carrying amount of accounts receivable and cash balances represents the maximum credit exposure. The Company has determined that no allowance for doubtful accounts was necessary as at December 31, 2020. The Company has also not written off any receivables during the years ended December 31, 2020 and 2019 as accounts receivables were subsequently collected in full. There are no material financial assets that the Company considers past due and at risk of collection. As at December 31, 2020 and 2019, all of the trade receivables were less than 90 days old.

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity is to ensure, to the extent possible, that it will have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions. The Company will attempt to match its payment cycle with collection of crude oil and natural gas revenues on the 25th of each month. The Company prepares annual budgets and updates forecasts for operating, financing and investing activities on an ongoing basis to ensure it will have sufficient liquidity to meet its liabilities when due (see Note 3).

The current challenging economic climate may lead to adverse changes in cash flow, working capital levels or debt balances, which may also have a direct impact on the Company’s results and financial position. These and other factors may adversely affect the Company’s liquidity and the Company’s ability to generate profits in the future.

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The following are the contractual maturities of financial liabilities as at December 31, 2020:

C$ Accounts payable and accrued liabilities Other liabilities Lease liabilities Shareholder loans1 Subordinated debt2 Total	Carrying amount 8,898,738 351,408 2,631,628 2,533,290 23,142,661 37,557,725	Total 8,898,738 351,408 3,239,141 2,675,000 23,935,299 39,099,586	1 year or less 8,898,738 — 812,417 — — 9,711,155	1–3 years — 351,408 1,596,144 2,675,000 23,935,299 28,557,851	4+ years — — 830,580 — —
					830,580

• (1) Gross value of shareholder loans as per Note 13

• (2) Subordinated debt plus accrued and unpaid interest as per Note 13 which matures on May 15, 2023

The following are the contractual maturities of financial liabilities as at December 31, 2019:

C$ Accounts payable and accrued liabilities Other liabilities Lease liabilities Shareholder loan1 Subordinated debt2 Total	Carrying amount 7,099,021 812,656 2,663,751 601,846 22,133,799 33,311,073	Total 7,099,021 812,656 3,338,690 675,000 23,578,601 35,503,968	1 year or less 7,099,021 — 773,940 — — 7,872,961	1–3 years — 547,806 1,231,080 675,000 — 2,453,886	4+ years — — 1,333,670 — 23,578,601
					24,912,271

• (1) Gross value of shareholder loan as per Note 13

• (2) Subordinated debt plus accrued and unpaid interest as per Note 13

(c) Market risk

Market risk is the risk that changes in market metrics, such as commodity prices, foreign exchange rates and interest rates that will affect the Company’s valuation of financial instruments, the debt levels of the Company, as well as its profit and cash flow from operations. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

Commodity price risk

Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for crude oil and natural gas are impacted by not only the relationship between the Canadian and United States dollar but also world economic events that dictate the levels of supply and demand. The Company has taken advantage of the low price environment and purchased from the market to fulfill the committed forward contracts for natural gas, saving operating costs and arbitraging from the price difference. The Company did not enter into any financial derivatives for the years ended December 31, 2020 and 2019.

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Interest rate risk

As at December 31, 2020, the Company’s debts are comprised of shareholder’s loans, SubDebt and amounts owing under the Contract (refer to Note 12), which all carry a fixed interest rate. As at December 31, 2020 and 2019, the Company has no variable rate borrowings. As such, a one percent change in prevailing interest rates would not change the Company’s net loss for the years ended December 31, 2020 and 2019.

Foreign currency risk

The Company manages foreign exchange risk by monitoring foreign exchange rates and evaluating their effects on using Canadian or Hong Kong vendors as well as timing of transactions. The Company recognizes a foreign exchange gain/loss based on the revaluation of monetary items held in Hong Kong Dollars and the value changes with the fluctuation in the HKD/CAD exchange rates. As at December 31, 2020 and 2019, the Company’s overall net exposure to foreign exchange risk is as follows:

Expressed in C$ HKD Cash and cash equivalents HKD Trade and other receivables HKD Trade and other payables Overall net exposure	Year Ended December 31, 2020 2019 47,564 142,342 — — (145,339) (39,279) (97,775) 103,062

Changes in the HKD/CAD foreign exchange rate of less than 10% would not materially change the Company’s financial statements for the years ended December 31, 2020 and 2019.

(d) Capital management

The Company’s general policy is to maintain an appropriate capital base in order to manage its business in the most effective manner with the goal of increasing the value of its assets and thus its underlying share value. The Company’s objectives when managing capital are to maintain financial flexibility in order to preserve its ability to meet financial obligations; to maintain a capital structure that allows the Company to favor the financing of its growth strategy using internally-generated cash flow and its debt capacity; and to optimize the use of its capital to provide an appropriate investment return to its shareholders.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying crude oil and natural gas assets. The Company considers its capital structure to include shareholders’ equity, shareholder loans, subordinated debt, other liabilities and working capital. To assess capital and operating efficiency and financial strength, the Company continually monitors its net debt.

The Company has not paid nor declared any dividends since its inception.

As part of its capital management process, the Company prepares budgets and forecasts, which are used by management and the Board of Directors to direct and monitor the strategy and ongoing operations and liquidity of the Company. Budgets and forecasts are subject to significant judgment and estimates relating to activity levels, future cash flows and the timing thereof and other factors which may or may not be within the control of the Company.

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The following represents the capital structure of the Company:

C$ Long term debt (excluding current portion as per Note 13) Other liabilities Lease liabilities Net working capital deficit Net debt Shareholders’ equity Total	As at December 31, 2020 1,885,600 351,408 2,631,628 29,937,920 34,806,556 5,161,376 39,967,932	As at December 31, 2019 601,846 812,656 2,663,751 26,646,363
		30,724,616 23,668,325
		54,392,941

(e) Performance services guarantee (‘‘PSG’’) facility

On April 25, 2018, the Company obtained a PSG facility from Economic Development Canada (‘‘EDC’’) totaling C$4.4 million. On July 30, 2020 the aggregate PSG was reduced to C$1.85 million. Under the terms of the PSG facility, EDC will guarantee qualifying letters of credit (‘‘L/C’’) on behalf of the Company. Previously, these L/ C’s were cash collateralized, following approval by the EDC the requirement of the Company to hold cash to underwrite the L/C is relieved for the duration of the PSG approval. Under the terms of the PSG facility, the L/C guarantee period is the lesser of one year or the term of the L/C if less than 12 months. The guarantee can be renewed annually for long term L/C’s subject to subsequent approval by the EDC. As at December 31, 2020, the Company has PSG coverage for the following L/C’s:

Amount	Expiry
C$1,392,000	June 14, 2022
C$408,158	March 31, 2022

For the year ended December 31, 2020, the Company incurred fees totaling C$0.1 million (2019: C$0.07 million) in relation to the PSG facility.

The PSG facility has a 12 month term and must be renewed annually. The current term expires on July 30, 2021, and the Company has applied for renewal. If the facility is not approved for renewal, the PSG coverage will terminate at the expiry of the existing L/C’s and the Company will seek alternative insurance arrangements to guarantee the L/C’s or cash collateralize them.

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28 COMMITMENTS

Commitments and contingencies exist under various agreements and operations in the normal course of the Company’s business. The following table outlines the Company’s commitments as at December 31, 2020:

C$ Transportation commitment Jixing agreements (Note 26b) PSG facility1 (Note 27) Total	Total 36,028,217 133,544,375 1,800,158 171,372,750	Less than 1 year 6,658,160 4,936,625 1,800,158 13,394,943	1–3 years 12,401,713 20,075,000 — 32,476,713	4–5 years 12,359,083 20,111,500 — 32,470,583	After 5 years 4,609,261 88,421,250 —
					93,030,511

• (1) The PSG facility commitment will only be due if the facility is not renewed and the L/C’s are cash collateralized by the Company (see Note 27).

Transportation Commitment:

The Company entered into a take or pay firm service transportation agreement with committed transportation volumes as below:

Description Persta Existing FT-R with NGTL Persta New FT-R with NGTL	Volume (MMcf/d) 8.00 102.00	Effective date 2013-11-01 2018-12-01	Expiring date 2021-10-31 2026-12-31	Duration 8 years 8 years

The firm service transportation agreements cover the period from November 1, 2013 to December 31, 2026 (the firm service fee varies and is subject to review by the counter-party on an annual basis). The amounts presented in the Commitments table above for the transportation service commitment fee is based on fixed transportation capacity as per these agreements and management’s best estimate of future transportation charges.

29 SUBSEQUENT EVENTS

COVID-19

The global impact of the outbreak of COVID-19 has resulted in significant volatility in global stock markets and has forecasted a great deal of uncertainty as to the health of the global economy. In addition, there has been a significant drop in the price of oil in global and Canadian markets. These factors may have a negative impact on the Company’s operations and its ability to raise financing in the near future or on terms favourable to the Company. The potential impact that COVID-19 will have on the Company’s business or financial results cannot be reasonably estimated at this time.

SubDebt Restructuring

On June 30, 2021, the Company and lender agreed to restructure the loan agreement (the’’2021 Restructuring’’). Under the terms of the 2021 Restructuring, the lender waived financial covenants in respect of net debt to total proved reserves and net debt to TTM EBITDA for the remainder of 2021. Financial covenants in respect of working capital have been eliminated for the remainder of the loan term. Pursuant to the 2021 Restructuring, the SubDebt is subject to the following covenants for 2021 (a) the Company must secure additional capital in the form of new equity for a

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cumulative amount equal to or greater than C$8 million on or before September 30, 2021 (‘‘2021 Funding Covenant’’) and; (b) measured at the end of each fiscal quarter maintaining the Company’s Alberta Energy liability management ratio above 2.0/1.0 (‘‘LMR Covenant’’); and (c) a C$2.2 million principal payment on or before August 31, 2021 and a C$2.2 million principal payment on or before September 30, 2021 (together, the ‘‘2021 Principal Payments’’). Pursuant to the 2021 Restructuring, the PIK Interest and Penalty Interest payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million.

Equity Placing

On June 8, 2021 the Company entered into a subscription agreement with Dalian Yongli Petrochemical Ltd. (‘‘Dalian’’), pursuant to which the Company has conditionally agreed to allot and issue, and Dalian has conditionally agreed to subscribe for 20 million common shares at a price of HK$0.80 per common share.

As Dalian is a connected person (as defined in the Listing Rules) of the Company, the subscription agreements and the transactions contemplated thereunder constitute connected transactions of the Company under Chapter 14A of the Listing Rules and are subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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Persta Resources Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS For the three months and year ended December 31, 2020

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MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (‘‘MD&A’’) of Persta Resources Inc. (‘‘Persta’’ or the ‘‘Company’’) should be read in conjunction with the Company’s audited financial statements and notes thereto for the years ended December 31, 2020 and 2019 (the ‘‘Financial Statements’’). All amounts in this MD&A are stated in thousands of Canadian dollars (‘‘C$ 000’’) unless indicated otherwise.

FORWARD LOOKING INFORMATION

Certain statements in this MD&A are forward-looking statements that are, by their nature, subject to significant risks and uncertainties and the Company hereby cautions investors about important factors that could cause the Company’s actual results to differ materially from those projected in a forwardlooking statement. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as ‘‘will’’, ‘‘expect’’, ‘‘anticipate’’, ‘‘estimate’’, ‘‘believe’’, ‘‘going forward’’, ‘‘ought to’’, ‘‘may’’, ‘‘seek’’, ‘‘should’’, ‘‘intend’’, ‘‘plan’’, ‘‘projection’’, ‘‘could’’, ‘‘vision’’, ‘‘goals’’, ‘‘objective’’, ‘‘target’’, ‘‘schedules’’ and ‘‘outlook’’) are not historical facts, are forward-looking and may involve estimates and assumptions and are subject to risks (including the risk factors detailed in this MD&A), uncertainties and other factors some of which are beyond the Company’s control and which are difficult to predict. Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

Since actual results or outcomes could differ materially from those expressed in any forward-looking statements, the Company strongly cautions investors against placing undue reliance on any such forward-looking statements. Statements relating to ‘‘reserves’’ or ‘‘resources’’ are deemed to be forward-looking statements, as they involve the implied assessment, based on estimates and assumptions that the resources and reserves described can be profitably produced in the future. Further, any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

All forward-looking statements in this MD&A are expressly qualified by reference to this cautionary statement.

NON-IFRS FINANCIAL MEASURES

The financial information contained herein has been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) and sometimes referred to in this MD&A as Generally Accepted Accounting Principles (‘‘GAAP’’) as issued by the International Accounting Standards Board (‘‘IASB’’).

This MD&A also includes references to financial measures commonly used in the oil and natural gas industry. These financial measures are not defined by IFRS as issued by IASB and, therefore, are referred to as non-IFRS measures. The non-IFRS measures used by the Company may not be

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comparable to similar measures presented by other companies. See ‘‘Non-IFRS Financial Measures’’ of this MD&A for information regarding the following non-IFRS financial measures used in this MD&A: ‘‘operating netback’’ and ‘‘adjusted EBITDA’’.

FUTURE PROSPECTS

The Company acquired Petroleum and Natural Gas Licenses for Basing, Voyager and Kaydee in the Alberta Foothills, Dawson near Peace River and Progress-Montney in northern Alberta between 2006 and 2018. Approximately 90% of the Company’s revenue is generated from the Basing area. Voyager is geologically analogous and located approximately 30 kilometers (‘‘km’’) from Basing.

The Company commenced de-watering at its Voyager area on June 29, 2020, recovering the fluid which was injected into the wells during their completion. As water impedes the flow of gas, production is anticipated to increase as completion fluid is still being recovered from the wells.

In the third quarter of 2020 the Company initiated facility enhancements and well workovers to increase and stabilize production. Two compressors were installed at Basing, allowing additional production from three wells. Since the successful completion of these operations at the end of October 2020, the Company’s production has increased from approximately 12,000 mcf/d to approximately 15,000 mcf/d as of the date of this MD&A. The Company is encouraged by the strengthening market for Western Canadian gas which exceeded C$4.00/gigajoule (‘‘GJ’’) periodically year to date 2021, representing 5-year highs. As the spot price for Western Canadian gas changes daily, there is no guarantee the Company will sell its gas in the future for currently forecast prices.

Please refer to ‘‘Events after the Reporting Period’’ in this MD&A for additional disclosures in respect of the impact of the outbreak of novel coronavirus disease (the ‘‘COVID-19’’).

Selected Annual Information

Average Daily Production Natural gas (mcf/d) Crude oil (bbls/d) NGLs and condensate (bbls/d) Total production (boe/d) Average Daily Trading Natural gas (boe/d) Total Sales Volume (boe/d)	2020 13,341 45 94 2,363 44 2,406	Year ended December 31, 2019 2018 2017 10,465 12,521 15,879 80 75 70 83 91 140 1,907 2,208 2,856 226 190 194 2,133 2,398 3,050	2016 20,147 61 161
			3,579
			—
			3,579

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Financial C$ 000s except share amounts Production revenue Net trading revenue Royalties Operating costs Operating netback(1) Net loss Net working capital(2) Total assets Long term debt(2) Capital expenditures(3) Loss per share (basic and diluted)	2020 13,269 9 (751) (10,874) 1,653 (21,851) (29,938) 44,667 (1,886) 1,932 0.07	Year ended December 31, 2019 2018 2017 13,627 15,364 21,443 630 661 1,241 (2,447) (1,164) (2,793) (7,593) (5,353) (5,746) 4,217 9,509 13,645 (50,466) (7,279) (11,637) (26,646) (1,646) (22,252) 59,064 103,582 111,091 (602) (23,064) — 1,315 5,415 28,719 0.17 0.03 0.04	2016 23,706 — (1,780) (6,327) 15,599 (2,286) 5,122 91,431 (30,350) 1,412 0.01

• (1) Operating netback is defined as revenue less royalties, trading cost and operating costs. Operating netback is a non-IFRS financial measure. See ‘‘Non-IFRS Financial Measures’’ for further information.

• (2) Net working capital consists of current assets less current liabilities. As at December 31, 2020, 2019 and 2017, net working capital includes C$24 million of long term debt which has been reclassified as current, as the Company was not in compliance with certain covenants of its subordinated debt facility at March 31, 2021 (2019: C$22 million, 2017: C$22 million.

• (3) Capital expenditures consist of total expenditures for property, plant and equipment plus exploration and evaluation assets, excluding changes in non-cash working capital.

Summary

The Company’s total production has declined since 2016. In 2017 the market price for natural gas in western Canada materially declined and the market has remained below historical averages subsequently. In response, the Company has strategically shut-in wells during periods of low natural gas prices and purchased gas on the open market to meet its forward sales obligations.

The Company’s revenues have declined since 2016, attributable to both lower production and commodity prices experienced in recent years. In 2019 operating costs increased as the Company’s gas transport obligations commenced in the fourth quarter of 2018. These obligations are fixed and provide Persta with transport capacity of up to 110 MMcf/d. The Company is actively seeking to transfer its unused capacity to other producers in the area, which will reduce its monthly burden in the short-term, while taking back the capacity in the future when the Company’s production increases. In 2020 operating costs increased with the start of production at Voyager and commencement of the Jixing Gas Handling and Voyager Compression agreements (refer to Note 26 of the Financial Statements).

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The Company’s net loss in 2020 is attributable to lower net revenues, higher operating and finance costs and C$9.7 million of impairment losses and write-offs recognised during the year (2019 impairment: C$41 million). These impairment losses are non-cash charges resulting from assessments which indicated the carrying costs of the Company’s assets exceed their estimated future recoverable amounts, which have been negatively impacted by the decline in commodity prices over the past three years.

As at December 31, 2020, net working capital includes C$24 million of long term debt which has been reclassified as current, as the Company was not in compliance with certain covenants of its subordinated debt facility at March 31, 2021 (2019: C$22.1 million).

Selected Quarterly Information

Average Daily Production Natural gas (mcf/d) Crude oil (bbls/d) NGLs and condensate (bbls/d) Total production (boe/d) Average Daily Trading Natural gas (boe/d) Financial C$’000s except share amounts Production revenue Net trading revenue Royalties Operating costs Operating netback(1) Net loss Net working capital(2) Total assets Capital expenditures(3) Loss per share (basic & diluted)	Q4 2020 14,158 78 106 2,544 88 4,309 11 (609) (3,756) (44) (13,009) (29,938) 44,667 1,349 0.04	Q3 2020 12,977 56 85 2,304 42 2,991 (2) (202) (3,534) (747) (3,460) (5,135) 54,601 400 0.01	Q2 2020 14,357 0 92 2,485 30 2,740 (1) 847 (1,824) 1,761 (1,569) (4,111) 56,162 128 0.01	Q1 2020 14,490 48 92 2,554 12 3,229 — (788) (1,760) 681 (3,813) (28,122) 57,283 20 0.01	Q4 2019 11,912 80 113 2,178 48 4,897 12 (1,119) (1,510) 2,280 (34,671) (26,646) 59,064 575 0.12	Q3 2019 6,238 74 45 1,159 598 1,582 399 (456) (1,919) (395) (3,041) (5,880) 92,233 192 0.01	Q2 2019 6,717 76 59 1,255 367 2,082 249 (214) (1,811) 306 (10,744) (3,441) 94,131 143 0.03	Q1 2019 17,023 90 114 3,041 39 5,065 (30) (658) (2,353) 2,025 (2,010) (6,446) 103,665 405 0.01

• (1) Operating netback is defined as revenue less royalties, trading cost and operating costs. Operating netback is a non-IFRS financial measure. See ‘‘Non-IFRS Financial Measures’’ for further information.

• (2) Net working capital consists of current assets less current liabilities. As at December 31, 2020, net working capital includes C$24 million of long term debt which has been reclassified as current, as the Company was not in compliance with certain covenants of its subordinated debt facility at March 31, 2021.

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• (3) Capital expenditures consist of total expenditures for property, plant and equipment plus exploration and evaluation assets, excluding changes in non-cash working capital.

Summary

The Company’s total production is impacted by seasonal fluctuations experienced in western Canada. During the Canadian winter (October–March), demand for gas is highest as it is used for heating and power generation. The market price for natural gas is cyclical and follows demand, with prices generally strongest in the winter, and weakest in summer. During summer the Company has strategically shut-in wells during periods of low natural gas prices and purchased gas on the open market to meet its forward sales obligations. The Company’s revenues have been strongest during the first and fourth quarters of both 2019 and 2020, and weakest in the second and third quarters, reflecting the demand cycle.

In the third quarter of 2020, operating costs increased with the start of production at Voyager and commencement of the Jixing Gas Handling and Voyager Compression agreements (refer to Note 26 of the Financial Statements).

The Company’s higher net loss experienced in the second and fourth quarters of 2019, and the fourth quarter of 2020 is attributable to impairment losses and write-offs recognised during these periods. These impairment losses are non-cash charges resulting from assessments which indicated the carrying costs of the Company’s assets exceed their estimated future recoverable amounts, which have been negatively impacted by the decline in commodity prices over the past three years.

As at December 31, 2020, net working capital includes C$24 million of long term debt which has been reclassified as current, as the Company was not in compliance with certain covenants of its subordinated debt facility at March 31, 2021 (2019: C$22.1 million).

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RESULTS OF OPERATIONS

Daily Production and Sales Volumes

Boe Conversions — Per barrel of oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent (6:1). Barrel of oil equivalents (‘‘boe’’) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, as the value ratio between natural gas and crude oil based on current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Production Natural gas (mcf/d) Oil (bbl/d) NGLs (bbl/d) Condensate (bbl/d) Total production (boe/d) Trading Natural gas (mcf/d) Total trading (boe/d) Total sales volume (boe/d)	Three months ended December 31, 2020 2019 Change 14,158 11,912 19% 78 80 (3%) 32 35 (7%) 74 78 (5%) 2,544 2,178 17% 526 286 84% 88 48 84% 2,631 2,226 18%	Year ended December 31, 2020 2019 Change 13,341 10,465 27% 45 80 (43%) 30 29 4% 64 54 19% 2,363 1,907 24% 261 1,354 (81%) 44 226 (81%) 2,406 2,133 13%

Total sales volume for the three months and year ended December 31, 2020 was 18% and 13% higher respectively, than the comparative periods in 2019. Voyager entered production in the third quarter of 2020 and infield compression was added at Basing and Voyager in the fourth quarter increasing gas production over 2019.

During periods of low natural gas prices, the Company strategically shut-in in its production and purchased gas on the open market to meet its forward sales obligations. The 81% year-over-year decrease in trading volumes over 2019 reflects the stronger gas price experienced throughout 2020, which resulted in fewer days where production was shut-in.

Natural gas liquids (‘‘NGLs’’) and condensate production are by-products of natural gas. The amount of NGL and condensate production varies for each well, and their production rates as a percentage of natural gas production can change over time. Notwithstanding the increase in natural gas production in

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2020, NGL and condensate production for the three months and year December 31, 2020 was consistent with the comparative periods in 2019, as the new production added during 2020 was from wells which yield a lower percentage of liquids.

Oil production for the three months ended December 31, 2020 was consistent with the same period in 2019. Oil production for the year ended December 31, 2020 was 43% lower than 2019, as the Company shut-in production in March in response to the collapse in oil prices following the onset of the COVID19 endemic. The wells remained shut-in through the second quarter of 2020, and resumed production in July 2020.

Revenue

C$’000s Production Natural gas Crude oil NGLs Condensate Total production revenue Trading Natural gas trading revenue Natural gas trading cost Total trading revenue Other income Total revenue	Three months ended December 31, 2020 2019 Change 3,563 3,888 (8%) 331 511 (35%) 57 40 42% 358 458 (22%) 4,309 4,897 (12%) 116 64 81% (105) (54) 97% 11 12 (3%) 97 34 186% 4,417 4,943 (11%)	Year ended December 31, 2020 2019 Change 11,095 10,119 10% 849 1,913 (56%) 153 194 (21%) 1,172 1,402 (16%) 13,269 13,627 (3%) 213 1,039 (80%) (204) (409) (50%) 9 630 (99%) 213 78 174% 13,491 14,335 (6%)

Production revenue for the three months and year ended December 31, 2020 decreased 12% and 3% respectively over comparative periods in 2019 as increases in natural production and pricing was offset by significantly lower NGL, condensate and oil prices realized in 2020. Crude oil prices have declined materially in 2020, as global demand collapsed in response to the COVID-19 epidemic. Pricing for NGL and condensate, which are correlated to crude oil, declined as well. While oil, NGL and condensate prices have increased from their March 2020 lows, they are forecast to remain below historical averages due to the continuing effects of the COVID-19 epidemic.

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Trading revenue for the three months ended December 31, 2020 was consistent with the comparative period in 2019. Trading revenues for the years ended December 31, 2020 were 78% lower than the comparative period in 2019, consistent with the 81% reduction in trading volume over the same period.

The increase in other income in both the three months and year ended December 31, 2020 over the same periods in 2019 is attributable to payroll subsidies received from the Government of Canada for COVID-19 relief.

Commodity prices

Natural gas (C$/mcf) Average market price (AECO) Average forward sales price Average trading price Average trading cost price Average sales price Crude oil (C$/bbl) Average market price (Edmonton Par) Average sales price Sales/market differential NGLs (C$/bbl) Average market price (Propane/Butane) Average sales price Sales/market differential Condensate (C$/bbl) Average market price (Pentane Plus) Average sales price Sales/market differential	Three months ended December 31, 2020 2019 Change 2.77 2.42 14% 2.00 2.18 (8%) 2.41 2.67 (10%) 2.17 2.17 0% 2.65 2.51 6% 50.12 68.06 (26%) 46.14 69.51 (34%) (9%) 2% 16.35 31.09 (47%) 19.27 34.64 (44%) 15% 10% 53.33 69.44 (23%) 52.73 71.29 (26%) (1%) 3%	Year ended December 31, 2020 2019 Change 2.19 1.66 32% 1.98 2.24 (11%) 2.23 1.95 14% 2.14 1.76 22% 2.21 2.05 8% 45.28 69.16 (35%) 51.04 65.36 (22%) 11% (6%) 15.27 20.59 (26%) 13.99 18.41 (24%) (9%) (12%) 48.93 69.98 (30%) 50.02 71.21 (30%) 2% 2%

Realized gas price sales for the three months ended December 31, 2020 averaged C$2.65/mcf, 6% higher than the same period in 2019. Realized gas sales price for the year ended December 31, 2020 averaged C$2.20/mcf, 8% higher than the prior year. The increase in realized pricing throughout 2020 is primarily attributable to stronger AECO market pricing.

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In periods of extreme weakness in the AECO market, the Company shut-in its production and traded gas on the spot market to meet its forward sales obligations. The average trading price is a function of the gains realized on the quantity and price of gas traded over a given time to meet its forward sales obligations, and therefore not directly comparable to prior periods.

NGL production is tied to natural gas production. The Company’s natural gas wells produce varying amounts of NGLs (propane and butane), which are sold at different prices in the market. As some wells are shut-in, the NGL production matrix is impacted, resulting in a changing realized price dependent on the composition of NGLs. Generally the more butane produced, the higher the realized price for NGLs. For the year ended December 31, 2020, realized NGL prices were 9% lower than the market price, as the Company’s NGLs were largely comprised of propane until the fourth quarter of 2020, when the Company resumed production from two wells in the Basing area which are butane weighted. This is reflected in the realized NGL price for the fourth quarter of 2020 which was 15% higher than the average market price.

The Company’s realized condensate prices for both the three months and year ended December 31, 2020 were consistent with the average market prices over the same periods. The Company’s realized crude oil prices for the three months and year ended December 31, 2020 were 9% lower, and 11% higher respectively than the average market prices over the same periods. Variations from the benchmark are a function of product sales occurring periodically over the quarter and year, compared to the average daily reference price.

Royalties

C$’000s Natural gas, NGLs and condensate Crude oil Total royalties Effective average royalty rate	Three months ended December 31, 2020 2019 Change 532 939 (43%) 76 180 (58%) 609 1,119 (46%) 14% 23% (38%)	Year ended December 31, 2020 2019 Change 603 1,813 (67%) 148 634 (77%) 751 2,447 (69%) 6% 18% (68%)

In Alberta, royalties are set by a sliding scale formula containing separate elements that account for market price and well production. Royalty rates will fluctuate to reflect changes in production rates, market prices and cost allowances. On a ‘‘per-well’’ basis, for both the three months and year ended December 31, 2020 the Company’s base royalty rate for natural gas ranged from 5% to 21%, the base royalty rate for NGLs (propane and butane) was 30% and the base royalty rate for condensate and crude oil was 40%. Effective royalty rates can differ from the base rates if the production qualifies for any cost allowances which offset the base amount payable. In the second quarter of 2020, the Company received a Gas Cost Allowance (‘‘GCA’’) credit of C$1 million, following a government re-assessment

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of the 2019 royalties paid by the Company. During 2019 the Company did not receive any CGA allowances, which were approved following the re-assessment. The Company has further been authorized for GCA of approximately C$90k per month for the remainder of 2020. In June 2020, the Company also received C$82k for oil cost allowances in respect of prior periods.

As a result of these credits, the Company’s effective royalty rate for the year ended December 31, 2020 was 6%, compared to 18% in 2019. The Company forecasts its effective royalty rate will range between 15-20% for 2021, reflecting GCA and new production from Voyager which benefits from the Modernizing Alberta’s Royalty Framework, under which a company will pay a flat royalty of 5% on a well’s early production until the well’s total revenue from all hydrocarbon products equals the drilling and completion cost allowance.

Operating Costs

C$’000s Natural gas, NGLs and condensate Crude oil Total operating costs Unit Cost (C$/boe) Natural gas, NGLs and condensate Crude oil Average cost	Three months ended December 31, 2020 2019 Change 3,691 1,411 162% 65 99 (34%) 3,756 1,510 149% 16.27 18.92 (14%) 13.17 4.81 174% 16.05 18.02 (11%)	Year ended December 31, 2020 2019 Change 10,655 7,227 47% 219 366 (40%) 10,874 7,593 43% 12.56 12.28 2% 13.17 12.19 8% 12.57 12.27 2%

Total operating costs (‘‘opex’’) for natural gas, NGLs and condensate for the three months and year ended December 31, 2020 were 149% and 43% higher respectively than the comparative periods in 2019. 2020 operating costs have increased from new gas transport and compression obligations tariff pursuant to the Jixing Gas Handling and Voyager Compression Agreements (as defined in Note 26 of the Financial Statements), which commenced with the commissioning of Voyager in June 2020.

2020 crude oil opex for both the three months and year ended December 31, 2020 were lower than the comparative periods reflecting lower production throughout the current year. For the year ended December 31, 2020, opex on an average unit cost basis was C$12.57/boe, consistent with 2019 average cost of C$12.27/boe. This reflects the fixed nature of the majority of the Company’s opex.

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General and Administrative Costs (‘‘G&A’’)

C$ 000s Staff costs Accounting, legal and consulting fees Office Share-based expense Other Total G&A costs Capitalized staff costs	Three months ended December 31, 2020 2019 Change 202 223 (9%) 657 629 4% 29 9 222% 46 — 100% 26 165 (84%) 961 1,026 (6%) — 103 (100%)	Year ended December 31, 2020 2019 Change 1,440 1,612 (11%) 1,336 1,783 (25%) 99 106 (7%) 123 — 100% 148 690 (79%) 3,146 4,191 (25%) 341 243 40%

Total general and administrative (‘‘G&A’’) costs for the three months and year ended December 31, 2020 were 6% and 25% lower respectively than the comparative periods in 2019. Staff cost reductions were primarily realized from a 40% reduction in headcount, which is estimated to reduce staff costs by approximately C$500k on an annualized basis. Lower accounting, legal and consulting fees were realized for the year ended 2020, reflecting the successful cost reduction activities undertaken by the Company this year.

Other costs include memberships, insurance, travel and accommodation, the reduction over the comparative period is due to lower travel and accommodation expenditures. Capitalized G&A costs are comprised of qualifying expenditures in respect of geological and geophysical activities, changes over the comparative periods are a function of qualifying activity incurred during that time.

Pursuant to the Jixing Gas Handling and Voyager Compression Agreements (as defined in Note 26 of the Financial Statements), which commenced with the commissioning of Voyager in June 2020, the Company can recover general and administrative costs incurred by the Company on behalf of Jixing, including allocation of staff costs, office and other expenditures as appropriate. A total of C$0.16 million of costs were recovered by the Company in 2020.

The Company uses the fair-value method for the determination of non-cash related share-based payments expense. During the second quarter of 2020, 3.78 million stock options were granted to employees at an exercise price of HK$0.52 per option. This was the initial award of options issued under the Company’s stock option plan. Pursuant to this initial grant, the Company recognized C$46k of share-based expense in the fourth quarter of 2020 (2019: C$nil) and C$123k for the year ended December 31, 2020 (2019: C$nil).

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Finance Expenses

C$ 000s Interest expense and financing costs: Subordinated debt Right of use assets and leases Commitment charges Capital payables Other financing costs and bank charges Accretion expenses: Decommissioning liabilities Shareholder loans Amortization of debt issuance costs Loss (gain) on foreign exchange Total finance expenses	Three months ended December 31, 2020 2019 Change 997 669 49% 67 64 4% 49 — 100% 137 265 (48%) 7 — 100% 2 4 (44%) 27 — 100% 126 279 (55%) 2 3 (26%) 1,413 1,283 10%	Year ended December 31, 2020 2019 Change 3,707 3,034 22% 236 258 (9%) 569 — 100% 137 265 (48%) 3 — 100% 20 33 (40%) 92 — 100% 502 655 (23%) — 18 (100%) 5,266 4,263 24%

For the three months and year ended December 31, 2020, interest expense was incurred from the Company’s subordinated debt and capitalized leases. Following the restructuring of the Company’s subordinated debt in April 2020, the annualized interest rate increased from 12% to 16%. The rate can be reduced to 12% if the Company achieves certain benchmarks in future periods.

Commitment charges are primarily attributable to one-time fess of C$352k pursuant to the cancellation of a warrant subscription agreement on January 24, 2020. For the three months and year ended December 31, 2020, accretion expenses were incurred from decommissioning liabilities and shareholder loans.

Amortization of debt issuance costs includes legal fees, commissions and commitment fees which were incurred for the closing and subsequent amendments to the subordinated debt facility (refer to Note 13 to the Financial Statements for additional information). These costs are capitalized against the debt, and amortized over the term.

The increase in total finance expenses for both the three months and year ended December 31, 2020 over the comparative periods in 2019 is attributable to the C$352k termination fee and additional interest incurred from the subordinated debt.

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Depletion, Depreciation and Amortization (‘‘DD&A’’)

C$’000s except per unit costs Depletion Depreciation Amortization of right of use assets Total DD&A Per boe	Three months ended December 31, 2020 2019 Change 1,746 1,428 22% 72 8 802% 145 161 (10%) 1,963 1,597 23% 8.39 7.97 5%	Year ended December 31, 2020 2019 Change 4,864 4,490 8% 97 32 205% 617 643 (4%) 5,578 5,165 8% 6.45 7.42 (13%)

Depletion, depreciation and amortization (‘‘DD&A’’) expense is comprised of depletion incurred from production of the Company’s developed assets, the depreciation expense comprised of the depreciation of fixed assets including office furniture, office equipment, vehicles, computer hardware and computer software and amortization of capitalized leases carried as right of use assets.

Depletion is a function of both production and the capitalized value of assets subject to depletion. The decrease in DD&A on a per boe basis for the year ended December 31, 2020 over the comparative period in 2019 is attributable to the lower book value of PP&E following the C$15 million impairment incurred in 2019.

Impairment Losses and Write-offs

C$’000s E&E write-offs E&E impairment PP&E impairment Total impairment and write-offs	Three months ended December 31, 2020 2019 Change 523 — 100% 3,459 25,684 (87%) 4,743 7,396 (36%) 8,725 33,080 (74%)	Year ended December 31, 2020 2019 Change 741 624 19% 3,595 25,297 (86%) 5,389 15,221 (65%) 9,726 41,142 (76%)

Impairment is incurred if the estimated recoverable amount of an asset exceeds its carrying amount. In addition, where a non-financial asset does not generate largely independent cash inflows, the Company is required to perform its test at a cash generating unit (‘‘CGU’’), which is the smallest identifiable grouping of assets that generates largely independent cash inflows. E&E write-offs are attributable to land lease expires, when a lease term is completed the Company writes-off any remaining capitalized value in respect of the asset. Refer to Note 4 in the Financial Statements for additional disclosures in respect of the Company’s significant accounting policies.

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E&E impairment

On March 31, 2020, the Company identified indicators of impairment in its E&E assets in the Dawson CGU attributable to declines in commodity prices. The Company calculated the recoverable amount of the Dawson E&E CGU as the capitalized value of its undeveloped lands. Based on the assessment as at March 31, 2020, the carrying amount of the Company’s E&E assets in respect of the Dawson GCU was higher than the recoverable amount and the Company recognized an E&E impairment loss of C$0.1 million (2019: C$nil).

At December 31, 2020, the Company identified indicators of impairment in its E&E assets in the Basing CGU attributable to declines in commodity prices and regional well performance. At December 31, 2020, the Company assessed the recoverable amount of the Basing E&E CGU as the capitalized value of its undeveloped lands. Based on the assessment as at December 31, 2020, the carrying amount of the Company’s E&E assets in respect of the Basing GCU was higher than the recoverable amount and the Company recognized an E&E impairment loss of C$3.5 million (2019: C$nil).

At December 31, 2019, the Company identified indicators of impairment in its E&E assets in the Voyager CGU attributable to declines in commodity prices. The recoverable amount of the Voyager CGU was estimated based upon the higher of the value in use or fair value less costs of disposal. The Company calculated the recoverable amount of the Voyager CGU based on forecasted cash flows from proved plus probable reserves using a 12% before-tax discount rate with future development costs as obtained from the independent reserve report dated December 31, 2019, and escalated prices as detailed in Note 18 of the Financial Statements. Based on the assessment as at December 31, 2019, the carrying amount of the Company’s Voyager CGU was higher than the recoverable amount and the Company recognized an impairment loss of C$25.3 million.

PP&E impairment

At March 31, 2020, the Company identified indicators of impairment in its PP&E assets in the Basing and Dawson CGU’s attributable to declines in commodity prices. The recoverable amount of the Basing and Dawson CGU’s was estimated based upon the higher of the value in use or fair value less costs of disposal. In each case, fair value less costs of disposal was used. In determining fair value, forecasted cash flows from proved plus probable reserves using a before-tax discount rate of 10% and 12%, with future development costs as obtained from the independent reserve report dated December 31, 2019, and escalated prices as detailed in Note 18 of the Financial Statements. Based on the assessment, the carrying cost of the Basing CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$0.5 million. Based on the assessment, the carrying cost of the Dawson CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$0.1 million.

At December 31, 2020, the Company identified indicators of impairment in its PP&E assets in the Basing and Voyager CGU’s attributable to declines in commodity prices and well performance. The recoverable amount of the Basing and Voyager CGU’s was estimated based upon the higher of the value in use or fair value less costs of disposal. In each case, fair value less costs of disposal was used.

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The Company calculated the recoverable amount of the Basing and Voyager CGU’s based on forecasted cash flows from proved plus probable reserves using a 10% and 12% before-tax discount rate with escalated prices and future development costs as obtained from the independent reserve report. Based on the assessment, the carrying amount of the Company’s Basing CGU million was lower than its recoverable amount and no impairment was required. Based on the assessment, the carrying amount of the Voyager CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$5.3 million.

At December 31, 2019, the Company identified indicators of impairment in its PP&E assets in the Basing and Dawson CGU’s attributable to declines in commodity prices. The recoverable amount of the Basing and Dawson CGU’s was estimated based upon the higher of the value in use or fair value less costs of disposal. In each case, value in use was used. The Company calculated the recoverable amount of the Basing and Dawson CGU’s based on forecasted cash flows from proved plus probable reserves using a 12% before-tax discount rate. Based on the assessment, the carrying amount of the Basing CGU was higher than its recoverable amount and the Company recognized an impairment loss of C$15.2 million. The carrying amount of the Dawson CGU was lower than its recoverable amount and no impairment loss was required.

Loss and Comprehensive Loss

C$’000s Loss and comprehensive loss Total loss and comprehensive loss	Three months ended December 31, 2020 2019 Change (13,009) (34,672) (62%) (13,009) (34,672) (62%)	Year ended December 31, 2020 2019 Change (21,851) (50,466) (57%) (21,851) (50,466) (57%)

Loss and comprehensive loss for the three months and year ended December 31, 2020 was 62% and 57% lower respectively than the comparative periods in 2019, primarily attributable to higher impairment losses and write-offs incurred in 2019.

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CAPITAL EXPENDITURES

C$’000s PP&E Production facilities Workovers G&A costs capitalized Office and other Total PP&E E&E Assets G&A costs capitalized Other Total E&E Total PP&E and E&E Change in non-cash working capital Total	Year ended December 31, 2020 2019 Change 781 36 2069% 791 — 100% 176 — 100% 17 — 100% 1,765 36 4802% 165 346 (52%) 3 933 (100%) 168 1,279 (87%) 1,932 1,315 47% 757 (2,624) (129%) 2,689 (1,309) 305%

2020 total PP&E and E&E capital expenditures (‘‘capex’’) was C$1.9 million, 47% higher than the previous year. 2020 PP&E production facilities capex consists of infield compression at Basing, and well workovers were undertaken at Voyager and Dawson to enhance and optimize production. The Company capitalized a total of C$0.35 million of G&A during 2020, C$0.18 million in PP&E and C$0.17 million in E&E in accordance with the Company’s accounting policies (refer to Note 4 in the Financial Statements).

LIQUIDITY AND CAPITAL RESOURCES

Capital management

The Company’s general policy is to maintain an appropriate capital base in order to manage its business in the most effective manner with the goal of increasing the value of its assets and thus its underlying share value. The Company’s objectives when managing capital are to maintain financial flexibility in order to preserve its ability to meet financial obligations; to maintain a capital structure that allows the Company to favor the financing of its growth strategy using internally-generated cash flow and its debt capacity; and to optimize the use of its capital to provide an appropriate investment return to its shareholders.

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The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying crude oil and natural gas assets. The Company considers its capital structure to include shareholders’ equity, shareholders’ loans, subordinated debt, other liabilities and working capital. To assess capital and operating efficiency and financial strength, the Company continually monitors its net debt. As disclosed in Note 3 of the Company’s Financial Statements, the Company’s future viability is dependent on its ability to source additional capital on acceptable terms.

Capital structure of the company

The Company’s capital structure is as follows:

C$’000s Long term debt(1) Other liabilities Lease liabilities Net working capital deficit(2) Net debt Shareholders’ equity(3) Total capital Gearing ratio(4)	As at December 31, 2020 1,886 351 2,632 29,938 34,807 5,161 39,968 87%	As at December 31, 2019 602 813 2,664 26,646
		30,725 23,668
		54,393
		56%

Notes:

• (1) This is the fair value of the long term debt.

• (2) Net working capital consists of current assets less current liabilities.

• (3) As at December 31, 2020 and the date of this MD&A, the Company has 361,886,520 common shares issued and outstanding and 8 million warrants issued with a strike price of HK$3.16 per warrant and 3.78 million stock options issued with a strike price of HK$0.52 per option.

• (4) Gearing Ratio is defined as net debt as a percentage of total capital.

The 2020 working capital deficit includes C$24 million of long term debt (2019: C$22.1 million) which has been reclassified as current as at December 31, 2020 and 2019 as the Company was not in compliance with certain covenants of its subordinated debt facility at March 31, 2021.

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Performance services guarantee (‘‘PSG’’) facility

On April 25, 2018, the Company obtained a PSG facility from Economic Development Canada (‘‘EDC’’) totaling C$4.4 million. On June 28, 2019 the aggregate PSG was reduced to C$2.5 million. Under the terms of the PSG facility, EDC will guarantee qualifying letters of credit (‘‘L/C’’) on behalf of the Company. Previously, these L/C’s were cash collateralized, following approval by the EDC the requirement of the Company to hold cash to underwrite the L/C is relieved for the duration of the PSG approval. Under the terms of the PSG facility, the L/C guarantee period is the lesser of one year or the term of the L/C if less than 12 months. The guarantee can be renewed annually for long term L/C’s subject to subsequent approval by the EDC. As at December 31, 2020, the Company has PSG coverage for the following L/C’s:

Amount Expiry C$1,392,000 June 14, 2022 C$408,158 March 31, 2022

For the year ended December 31, 2020, the Company incurred fees totaling C$0.1 million (2019: C$0.07 million) in relation to the PSG facility.

Capital resources

The Company operates in a capital intensive industry. The Company’s liquidity requirements arise principally from the need for financing the expansion of its exploration and development activities, acquisition of land leases and petroleum and natural gas licences. The Company’s principal sources of funds have been proceeds from bank borrowings, equity financings, shareholder loans and cash generated from operations. The Company’s liquidity primarily depends on its ability to generate cash flow from its operations and to obtain external financing to meet its debt obligations as they become due, as well as the Company’s future operating and capital expenditure requirements.

On December 23, 2020 the Company issued 60 million common shares at a price of HK$0.30 per share for gross proceeds of HK$18 million (approximately C$3 million assuming HK$:C$ exchange rate of 0.16:1) (the ‘‘Subscription’’). Net proceeds from the Subscription were used for the expansion of its existing business and general working capital.

At December 31, 2020, the Company had a working capital deficiency of C$30 million and has drawn C$24 million on its subordinated debt of C$26 million, which is subject to certain covenants. As at December 31, 2020, the Company was in compliance with all covenants associated with the subordinated debt. Subsequently the Company was not in compliance with the net debt to TTM EBITDA, working capital and net debt to total proved reserves covenants (as defined in Note 13 of the Financial Statements) and therefore the debt was due on demand. Accordingly, the debt is classified as a current liability as at December 31, 2020. Subsequent to December 31, 2020, the Company has received a waiver in respect of this covenant breach.

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On June 30, 2021, the Company and lender agreed to restructure the loan agreement (the ‘‘2021 Restructuring’’). Under the terms of the Restructuring, financial covenants in respect of net debt to total proved reserves and net debt to TTM EBITDA have been waived for the remainder of 2021, and will be reinstated starting March 31, 2022. Financial covenants in respect of working capital have been eliminated for the remainder of the loan. A funding covenant has been added whereby the Company must secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before September 30, 2021. The Company must make a C$2.2 million principal payment on or before August 31, 2021 and a C$2.2 million principal payment on or before September 30, 2021 (together, the ‘‘2021 Principal Payments’’).

To satisfy the C$8 million funding and 2021 Principal Payments covenants, the Company has arranged an equity placing of 70 million common shares to be issued at a minimum of HK$0.80 per share for gross proceeds of a minimum of C$8.96 million. The placing is subject to Stock Exchange and shareholder approval which will be sought at a meeting of shareholders anticipated to occur in August 2021.

The global impact of COVID-19 has resulted in significant volatility in global stock markets and has forecasted a great deal of uncertainty as to the health of the global economy. These factors may have a negative impact on the Company’s operations and its ability to raise financing to meet its covenants. If the Company is in breach of any covenants in future periods the lender will have the right to demand repayment of all amounts owed under the subordinated debt.

The Company’s ability to continue as a going concern is dependent upon the ability to generate positive cash flow from operations, equity and/or debt financing, disposing of assets or other arrangements to fund future development capital and ongoing operations. There are no assurances that any transactions will be completed on terms acceptable to the Company. These conditions cause material uncertainty which casts significant doubt on the Company’s ability to continue as a going concern.

Use of proceeds from the Subscription

C$’000

Business objective as stated in the announcement(1) Expansion of existing business(3) General working capital Total	% of total net proceeds 33% 67% 100%	Planned use of net proceeds from the Closing Date to December 31, 2020(2) Actual use of net proceeds during the period from the Closing Date to December 31, 2020(2) Proceeds unused 1,000.0 1,000.0 — 2,000.0 2,000.0 — 3,000.0 3,000.0 —	Planned use of net proceeds from the Closing Date to December 31, 2020(2) Actual use of net proceeds during the period from the Closing Date to December 31, 2020(2) Proceeds unused 1,000.0 1,000.0 — 2,000.0 2,000.0 — 3,000.0 3,000.0 —
			—

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Notes:

• (1) Refer to the Company’s announcement dated October 26, 2020.

• (2) The Subscription was closed on December 23, 2020 (the ‘‘Closing Date’’).

• (3) Activities associated with the expansion of existing business includes facility optimisation and production debottlenecking to enhance natural gas production from the Company’s Basing area.

SHARES, WARRANTS AND STOCK OPTIONS OUTSTANDING

Common Shares

On December 23, 2020, the Company completed a private placement issuing 60 million shares at a price of HK$0.30 per share for gross proceeds of HK$35.4 million (approximately C$3.0 million). On May 14, 2019, the Company completed a private placement issuing 23.6 million shares at a price of HK$1.50 per share for gross proceeds of HK$35.4 million (approximately C$6.0 million). As at December 31, 2020 and as at the date of this MD&A, the Company has 361,886,520 common shares outstanding (2019: 301,886,520).

Warrants

On August 13, 2018, the Company issued 8.0 million warrants for total consideration of C$0.75 million. The warrants have an exercise price of HK$3.16 per warrant and a term of 5 years. No warrants have been exercised for the years ended December 31, 2020 and 2019 and up to the date of the MD&A. As at December 31, 2020 and as at the date of this MD&A, the Company has 8 million warrants outstanding (2019: 8 million).

Stock Options

The Company has a stock option plan which was approved and adopted by the shareholders of the Company by ordinary resolution passed on June 8, 2018 (‘‘Stock Option Plan’’). On May 18, 2020, the Company issued 3.78 million options with an exercise price of HK$0.52 per option and a term of 5 years. The options vest equally over a 3 year period, with the first tranche vesting on the first anniversary of the award, and the second and third tranches vesting equally on the second and third anniversary respectively. As at December 31, 2020 and as at the date of this MD&A, the Company has 3.78 million options outstanding (2019: 3.78 million).

COMMITMENTS

Commitments and contingencies exist under various agreements and operations in the normal course of the Company’s business. Refer to Note 28 of the Financial Statements for disclosure of the Company’s commitments and contingencies.

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DIVIDEND

The Board did not approve the payment of a dividend for the years ended December 31, 2020 and 2019.

RELATED PARTY TRANSACTIONS

Refer to Note 26 of the Financial Statements for disclosure of the Company’s related party transactions.

OFF-BALANCE SHEET TRANSACTIONS

The Company was not involved in any off-balance sheet transactions during the years ended December 31, 2020 and 2019.

PLEDGED ASSETS

As disclosed in this MD&A, all assets are pledged in support of the Company’s debt arrangements and there are no other pledges.

CONTINGENT LIABILITIES

As at December 31, 2020 and up to the date of this MD&A, the Company had no material undisclosed contingent liabilities.

SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES

Save as disclosed in this MD&A, the Company has neither any other significant investments nor significant acquisitions and disposals of the relevant subsidiaries, associates and joint ventures during the year ended December 31, 2020 and up to the date of this MD&A.

FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

Save as disclosed in this MD&A, the Company did not have other plans for material investments or capital assets as of the date of this announcement, as pursuant to paragraphs 32(4) and 32(9) of Appendix 16 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’).

EVENTS AFTER THE REPORTING PERIOD

COVID-19

The global impact of COVID-19 has resulted in significant volatility in global stock markets and has forecasted a great deal of uncertainty as to the health of the global economy. In addition, there has been a significant drop in the price of oil in global and Canadian markets. These factors may have a negative impact on the Company’s operations and its ability to raise financing in the near future or on terms favourable to the Company. The potential impact that COVID-19 will have on the Company’s business or financial results cannot be reasonably estimated up to the date of this announcement.

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SubDebt Restructuring

On June 30, 2021, the Company and lender agreed to restructure the loan agreement (the ‘‘2021 Restructuring’’). Under the terms of the 2021 Restructuring, the lender waived financial covenants in respect of net debt to total proved reserves and net debt to TTM EBITDA for the remainder of 2021. Financial covenants in respect of working capital have been eliminated for the remainder of the loan term. Pursuant to the 2021 Restructuring, the SubDebt is subject to the following covenants for 2021 (a) the Company must secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before September 30, 2021 (‘‘2021 Funding Covenant’’) and; (b) measured at the end of each fiscal quarter maintaining the Company’s Alberta Energy liability management ratio above 2.0/1.0 (‘‘LMR Covenant’’); and (c) a C$2.2 million principal payment on or before August 31, 2021 and a C$2.2 million principal payment on or before September 30, 2021 (together, the ‘‘2021 Principal Payments’’). Pursuant to the 2021 Restructuring, the PIK Interest and Penalty Interest payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million.

Equity Placings

On June 8, 2021 the Company entered into a subscription agreement with Dalian Yongli Petrochemical Ltd. (‘‘Dalian’’), pursuant to which the Company has conditionally agreed to allot and issue, and Dalian has conditionally agreed to subscribe for 20 million common shares at a price of HK$0.80 per common share.

As Dalian is a connected persons (as defined in the Listing Rules) of the Company, the subscription agreements and the transactions contemplated thereunder constitute connected transactions of the Company under Chapter 14A of the Listing Rules and are subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

FINANCIAL RISK MANAGEMENT

The board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board has implemented and monitors compliance with risk management policies. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities. The Company’s financial risks are discussed in Note 27 of the Financial Statements. The Company holds a number of financial instruments, the most significant of which are accounts receivable, accounts payable and accrued liabilities, cash and cash equivalents, subordinated debt and shareholder loans. Due to their near term maturities, accounts receivable, accounts payable and accrued liabilities, cash and cash equivalents and shareholder loan are recorded at fair value. The subordinated debt is recorded at amortized cost.

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The Company did not enter into any financial derivatives contracts for years ended December 31, 2020 and 2019. For the year ended December 31, 2020, the Company experienced a foreign exchange loss of C$0.5k (2019: loss of C$18k). These foreign exchange losses are related to the revaluation of monetary items held in Hong Kong Dollars and the value changes with the fluctuation in the Hong Kong Dollars/ Canadian Dollars exchange rates. The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates for the monetary assets and liabilities denominated in the currencies other than the functional currencies to which they relate. The Company has not hedged its exposure to currency fluctuation and the Company currently does not have a foreign currency hedging policy, however, management closely monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

Periodically, the Company has entered into fixed price physical commodity contracts to manage commodity risk. These contracts are considered normal sales contracts and are not recorded at fair value in the financial statements. During the year ended December 31, 2020, the Company entered into the following fixed price physical commodity contracts to forward sell natural gas at a fixed daily volume and fixed price per gigajoule (‘‘GJ’’):

Commodity	Term	Quantity	Price
Natural gas	January 1, 2020 to October 31, 2020	2,000 GJ/day	C$1.80 per GJ
Natural gas	January 1, 2020 to October 31, 2020	1,000 GJ/day	C$1.7925 per GJ
Natural gas	January 1, 2020 to October 31, 2020	5,000 GJ/day	C$1.80 per GJ
Natural gas	May 1, 2020 to October 31, 2020	2,000 GJ/day	C$2.085 per GJ

Subsequent to the completion of these contracts, the price for natural gas in western Canada has strengthened and the Company has not entered into any additional contracts up to the date of this MD&A. The Company continually monitors the market for its products and will manage commodity risk in the future through the use of fixed physical and/or derivative contracts in periods of pricing weakness.

RELATIONSHIPS WITH STAKEHOLDERS

The Company has actively cultivated, established, and maintained positive relationships with First Nations and all individuals and other enterprises who are proximate to, or interested in, the Company’s projects. The Company provides project updates and meets with the local community on a regular basis to discuss its current and anticipated operations to pro-actively manage any potential concerns or issues. The Company also works closely with stakeholders at the municipal, provincial, and federal level to ensure that the regulatory authorities are aware of the Company’s adherence to all requisite rules, regulations, and laws which pertain the Company’s activities.

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HUMAN RESOURCES

The Company had 6 employees as at December 31, 2020 (2019: 10). The employees of the Company are employed under employment contracts which set out, among other things, their job scope and remuneration. Further details of their employment terms are set out in the employee handbook of the Company. The Company determines the employees’ salaries based on their job nature, scope of duty, and individual performance. The Company also provides reimbursements, allowances for site visits and a discretionary annual bonus for the employees. Employee compensation for the year ended December 31, 2020 totaled C$1.3 million (2019: C$1.6 million).

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of IFRS accounting policies and reported amounts of assets and liabilities and income and expenses. Accordingly, actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next twelve months are described in Note 5 of the Financial Statements.

CHANGES IN ACCOUNTING POLICIES

The financial statements have been prepared in accordance with all applicable IFRSs as issued by the IASB. The IASB has issued a number of new and revised IFRSs effective January 1, 2020. For the purpose of preparing the financial statements, the Company has adopted all applicable new and revised IFRSs for the years ended December 31, 2020 and 2019 (refer to Notes 4(r) and 4(s) of the Financial Statements).

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

For the period starting January 1, 2020 and ending December 31, 2020, Mr. Le Bo until March 4, 2020 and subsequently Mr. Pingzai Wang in the capacity as Chief Executive Officer (‘‘CEO’’), and Mr. Jesse Meidl, Chief Financial Officer (‘‘CFO’’) of the Company have designed, or caused to be designed under their supervision, disclosure controls and procedures (‘‘DC&P’’) to provide reasonable assurance that: (i) material information relating to the Company is made known to the Company’s CEO and CFO by others, particularly during the period in which the annual and quarterly filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in securities legislation.

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For the period starting January 1, 2020 and ending December 31, 2020, Mr. Le Bo until March 4, 2020 and subsequently Mr. Pingzai Wang and Mr. Jesse Meidl, in their capacity as CEO and CFO of the Company respectively, have designed or caused to be designed under their supervision, internal controls over financial reporting (‘‘ICFR’’) to provide reasonable assurance that all assets are safeguarded, transactions are appropriately authorized and to facilitate the preparation of relevant, reliable and timely information. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objective of the control system is met and it should not be expected that the disclosure and internal controls and procedures will prevent all errors or fraud. In reaching a reasonable level of assurance, management necessarily is required to apply its judgment in evaluating the cost/benefit relationship of possible controls and procedures.

On March 4, 2020, Mr. Le Bo resigned as CEO of the Company, on the same date, Mr. Pingzai Wang was appointed as CEO of the Company. Mr. Wang was previously the Vice President, Exploration of the Company and has been an employee of Persta since 2006. Other the appointment of Mr. Wang, there were no changes made to Persta’s internal controls over financial reporting during the period beginning on January 1, 2020 and ending on December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Management has concluded that Persta’s internal control over financial reporting was effective as of December 31, 2020. This assessment was based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

RISK FACTORS AND RISK MANAGEMENT

The Board has established a framework for identifying, evaluating and managing key risks faced by the Company. The Board, through the Audit and Risk Committee, reviews annually the effectiveness of the internal control system of the Company, considering factors such as:

• . changes, since the last annual review, in nature and extent of significant risks, and the Company’s ability to respond to changes in its business and the external environment;

• . the scope and quality of management’s ongoing monitoring of risks and of the internal control systems;

• . the extent and frequency of communication of monitoring results to the board which enables it to assess control of the Company and the effectiveness of risk management;

• . the adequacy of resources, staff qualifications and experience and training programmes;

• . budget of the Company’s accounting and financial reporting functions; communication of the monitoring results to the Board that enables it to assess control of the Company and the effectiveness of the risk management;

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• . significant control failings or weaknesses that have been identified during the period. Also, the extent to which they have caused unforeseeable outcomes or contingencies that had or might have, a material impact on the Company’s financial performance or condition; and

• . the effectiveness of the Company’s processes for financial reporting and compliance with applicable listing rules and securities laws.

The liquidity position of Persta would be expected to be improved by a material increase in future commodity prices and an increase in proved and probable reserves based on the Company’s drilling program. The Company is involved in regular discussions with its lender and is continually pursuing other financing opportunities such as alternative debt arrangements, joint venture opportunities, property acquisitions or divestitures and other recapitalization opportunities and is taking steps to manage its spending and leverage including the implementation of cost reduction and capital management initiatives. If the Company is unable to obtain additional financing or come to some other arrangement with its lender, it will be required to curtail certain capital expenditure activities and/or possibly be required to liquidate certain assets. Ongoing exploration and development of Persta’s properties will require substantial additional capital investment. Failure to secure additional financing, and/or secure other funds from asset sales, would result in a delay or postponement of development of these prospective properties. There can be no assurance that additional financing will be available or that, if available, will be on terms favourable or acceptable to Persta.

Persta monitors and complies with current government regulations that affect its activities, although operations may be adversely affected by changes in government policy, regulations, royalty regime or taxation. In addition, Persta maintains a level of liability, business interruption and property insurance which is believed to be adequate for the Company’s size and activities, but is unable to obtain insurance to cover all risks within the business or in amounts to cover all possible claims. See ‘‘Forward-Looking Information’’ in this MD&A and ‘‘Risk Factors’’ in the Company’s Annual Information Form (‘‘AIF’’) for the year ended December 31, 2020. The AIF is available at www.sedar.com.

IMPACT OF NEW ENVIRONMENTAL REGULATIONS

The oil and gas industry is currently subject to regulation pursuant to a variety of provincial and federal environmental legislation, all of which is subject to governmental review and revision from time to time. Such legislation provides for, among other things, restrictions and prohibitions on the spill, release or emission of various substances produced in association with certain oil and gas industry operations, such as sulphur dioxide and nitrous oxide. In addition, such legislation sets out the requirements with respect to oilfield waste handling and storage, habitat protection and the satisfactory operation, maintenance, abandonment and reclamation of well and facility sites. Compliance with such legislation can require significant expenditures and a breach of such requirements may result in suspension or revocation of necessary licenses and authorizations, civil liability and the imposition of material fines and penalties.

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The use of fracture stimulations has been ongoing safely in an environmentally responsible manner in western Canada for decades. With the increase in the use of fracture stimulations in horizontal wells there is increased communication between the oil and natural gas industry and a wider variety of stakeholders regarding the responsible use of this technology. This increased attention to fracture stimulations may result in increased regulation or changes of law which may make the conduct of the Company’s business more expensive or prevent the Company from conducting its business as currently conducted. Persta focuses on conducting transparent, safe and responsible operations in the communities in which its people live and work.

NON-IFRS FINANCIAL MEASURES

This MD&A or documents referred to in this MD&A make reference to the terms ‘‘operating netback’’ and ‘‘adjusted EBITDA’’ which are not recognized measures under IFRS, and do not have a standardized meaning prescribed by IFRS. Accordingly, the Company’s use of these terms may not be comparable to similarly defined measures presented by other companies. Management considers operating netback an important measure to evaluate the Company’s operational performance, as it demonstrates its field level profitability relative to current commodity prices. Management uses adjusted EBITDA to measure the Company’s efficiency and its ability to generate the cash necessary to fund a portion of its future growth expenditures or to repay debt. Investors are cautioned that the nonIFRS measures should not be construed as an alternative to net income determined in accordance with IFRS as an indication of the Company’s performance.

Operating netback

C$’000s Commodity sales from production Net trading revenue Royalties Operating costs Operating netback	Three months ended December 31, 2020 2019 Change 4,309 4,897 (12%) 12 12 (1%) (609) (1,119) (46%) (3,756) (1,510) 149% (44) 2,280 (102%)	Year ended December 31, 2020 2019 Change 13,269 13,627 (3%) 9 630 (99%) (751) (2,447) (69%) (10,874) (7,593) 43% 1,653 4,217 (61%)

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Adjusted EBITDA

C$’000s Commodity sales from production Net trading revenue Royalties Operating costs General and administrative costs Other income Adjusted EBITDA	Three months ended December 31, 2020 2019 Change 4,309 4,897 (12%) 12 12 (1%) (609) (1,119) (46%) (3,756) (1,510) 149% (915) (1,026) (11%) 97 34 186% (862) 1,288 (167%)	Year ended December 31, 2020 2019 Change 13,269 13,627 (3%) 9 630 (99%) (751) (2,447) (69%) (10,874) (7,593) 43% (3,146) (4,191) (25%) 213 78 173% (1,280) 104 (3,125%)

OTHER INFORMATION

DIVIDEND AND DIVIDEND POLICY

The Company has not paid any dividends since incorporation and does not currently have a fixed dividend policy. The Board of Directors will determine any future dividend policy on the basis of, among others things, the results of operations, cash flows and financial conditions, operating and capital requirements, the rules promulgated by the regulators affecting dividends in both Canada and Hong Kong, the Stock Exchange, the amount of distributable profits and other relevant factors.

Subject to the Business Corporations Act (Alberta), the Directors may from time to time declare and authorise payment of such dividends as they may deem advisable, including the amount thereof and the time and method of payment provided that the record date for the purpose of determining shareholders entitled to receive payment of the dividend must not precede the date on which the dividend is to be paid by more than 50 days.

A dividend may be paid wholly or partly by the distribution of cash, specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways. No dividend may be declared or paid in money or assets if there are reasonable grounds for believing that the Company is insolvent or the payment of the dividend would render the Company insolvent.

FINAL DIVIDEND

The Board does not recommend the payment of a final dividend for the year ended December 31, 2020 (year ended December 31, 2019: nil).

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ANNUAL GENERAL MEETING

As of the date of this announcement, the Company has not fixed a date for its annual general meeting (‘‘AGM’’). When a date is selected, the notice of the AGM, which constitutes part of a circular to shareholders, and proxy form, together with the annual report, will be despatched to shareholders in due course.

CORPORATE GOVERNANCE PRACTICES

The Company is committed to maintaining high standards of corporate governance to safeguard the interests of shareholders and to enhance corporate value and accountability. The Board has adopted the principles and the code provisions of the Corporate Governance Code (the ‘‘CG Code’’) contained in Appendix 14 to the Listing Rules to ensure that the Company’s business activities and decision making processes are regulated in a proper and prudent manner. For the year ended December 31, 2020 (the ‘‘Year’’), the Company has complied with the CG Code.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the ‘‘Model Code’’) as its code of conduct regarding dealings in the securities of the Company by the Directors and the Company’s senior management who, because of his/her office or employment, is likely to possess inside information in relation to the Company’s securities. Upon specific enquiry, all Directors confirmed that they have complied with the Model Code during the Year. In addition, the Company is not aware of any non-compliance of the Model Code by the senior management of the Company during the Year.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

The Company has allotted and issued 60,000,000 new shares of the Company on December 22, 2020 (Hong Kong time) pursuant to the subscription of new shares under general mandate, details of which are set out in the announcements of the Company dated October 27, 2020, November 30, 2020, December 16, 2020 and December 23, 2020.

Save as disclosed above, the Company has not purchased, redeemed or sold any of its listed securities during the Year.

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MATERIAL DIFFERENCES BETWEEN UNAUDITED AND AUDITED ANNUAL RESULTS

Since the financial information contained in the unaudited annual results announcement was neither audited nor agreed with BDO Limited as at the date of its publication and subsequent adjustments have been made to such information, shareholders and potential investors of the Company are advised to pay attention to certain differences between the financial information of the unaudited and audited annual results of the Company. Set forth below are principal details and reasons for the material differences in such financial information in accordance with Rule 13.49(3)(ii)(b) of the Listing Rules.

C$’000 Note Statement of Loss and Comprehensive Loss Depletion, depreciation and amortization 1 Impairment losses and write-offs 2 Loss and comprehensive loss 3 Statement of Financial Position Non-current assets Property, plant and equipment 1, 2 Current liabilities Current portion of long term debt 4 Non-current liabilities Long term debt 4 Notes:	2020 Unaudited Annual Results 5,152 12,670 24,291 29,280 23,143 2,533	2020 Audited Annual Results 5,578 9,726 21,851 31,798 23,790 1,886	Difference 426 (2,944) (2,440) 2,517 648 (648)

• (1) The calculation of depletion in the audited annual results was revised for updated production and reserve data obtained after the issue of the unaudited annual results.

• (2) The Company assumed a 12% pre-tax discount rate in its calculation of impairment for all CGUs as disclosed in the unaudited annual results. The impairment loss as disclosed in the audited annual results assume a pre-tax discount rate of 10% for certain CGUs, supported by benchmarking with rates assumed by comparable companies as at December 31, 2020.

• (3) The reduction in loss and comprehensive loss as disclosed in the audited annual results is attributable lower impairment loss as described in 2 above.

• (4) Current portion of long term debt as per the audited annual results includes shareholder loans which were due to mature on December 23, 2021 and held as non-current liabilities in the unaudited annual results. Subsequent to period end, on April 27, 2021 the Company and shareholder agreed to extend the term of the loan one year to December 23, 2022.

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REVIEW OF ANNUAL RESULTS

The annual results announcement of the Company for the year ended December 31, 2020, was reviewed by the audit and risk committee of the Company and approved by the Board. The financial figures in respect of the Company’s financial statements for the year ended December 31, 2020 as set out in the announcement in relation to the annual results for the year ended December 31, 2020 have been compared to the amounts set out in the Company’s financial statements for the Year and the amounts were found to be in agreement save as disclosed in ‘‘MATERIAL DIFFERENCES BETWEEN UNAUDITED AND AUDITED ANNUAL RESULTS’’ above.

As at the date of this announcement, the Audit and Risk Committee, which consists of three members, all of whom are independent non-executive Directors, has reviewed the Company’s Audited Year End Results. The Audit and Risk Committee is of the opinion that such financial statements comply with (i) the applicable IFRSs, including all applicable individual IFRSs, IASs and interpretations issued by the IASB; and (ii) the Listing Rules and the Stock Exchange’s legal requirements, and that adequate disclosures have been made.

EXTRACT OF INDEPENDENT AUDITORS’ REPORT

The following is an extract of the independent auditor’s report on the Company’s audited financial statements for the Year. The report includes paragraphs of material uncertainty related to going concern, without modification:

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (‘‘IFRSs’’) issued by the International Accounting Standard Board and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

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Material Uncertainty Related To Going Concern

We draw attention to Note 3 to the financial statements, which indicates that as at December 31, 2020, the Company’s current liabilities exceeded its current assets by C$29.9 million, incurred a loss of C$21.9 million and had a net cash used in operations of C$4.6 million for the year ended December 31, 2020. These conditions, along with other matters as set forth in Note 3 to the financial statements, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

PUBLICATION OF INFORMATION

This announcement is published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.persta.ca).

This announcement is prepared in both English and Chinese and in the event of inconsistency, the English text of this announcement shall prevail over the Chinese text.

SELECTED ABBREVIATIONS

In this MD&A, the abbreviations set forth below have the following meanings:

Crude oil and natural gas liquids

Bbls/d or Bbl/d barrels of oil per day Bbls or Bbl barrels of oil or barrel of oil Boe barrel of oil equivalent Boe/d barrel of oil equivalent per day C$/Bbl Canadian dollars per barrel of oil C$/Boe Canadian dollars per barrel of oil equivalent Mbbls or Mbbl thousand barrels Mboe thousand barrels of oil equivalent Mbpd thousand barrels per day MMbbls million barrels of oil MMbbls/d million barrels of oil per day MMboe million barrels of oil equivalent MMboe/d million barrels of oil equivalent per day US$/Bbl US dollars per barrel of oil

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Natural gas

Bcf billion cubic feet Bcm billion cubic meters Cf cubic feet C$/Mcf Canadian dollars per thousand cubic feet C$/MMbtu Canadian dollars per million British thermal units GJ gigajoule GJ/d gigajoules per day Mcf thousand cubic feet Mcf/d thousand cubic feet per day Mcfe thousand cubic feet of gas equivalent Mcfe/d thousand cubic feet of gas equivalent per day MMbtu million British thermal units MMcf million cubic feet MMcf/d million cubic feet per day MMcfe million cubic feet of gas equivalent MMcfe/d million cubic feet of gas equivalent per day tcf trillion cubic feet US$/MMbtu US dollars per million British thermal units

Other

km kilometres km[2] square kilometres m metres m[3] cubic meters mg milligrams oC degrees Celsius

CONVERSION FACTORS — IMPERIAL TO METRIC

Bbl = 0.1590 cubic metres (m[3] ) Mcf = 0.0283 cubic metres (10[3] m[3] ) acres = 0.4047 hectares (ha) Btu = 1054.615 joules (J) feet (ft) = 0.3048 metres (m) miles (mi) = 1.6093 kilometres (km) pounds (Lb) = 0.4536 kilograms (kg)

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